UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 2006
JACK HENRY & ASSOCIATES, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 0-14112 43-1128385
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
663 Highway 60, P.O. Box 807, Monett, MO 65708
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (417) 235-6652
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a.-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4 (c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On February 1, 2006, Jack Henry & Associates, Inc. issued a press
release announcing 2006 second quarter results, the text of which is
attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
99.1 Press release dated February 1, 2006
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
(Registrant)
Date: February 1, 2006 By: /s/ Kevin D. Williams
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Kevin D. Williams
Chief Financial Officer
EXHIBIT 99.1
Company: Jack Henry & Associates, Inc. Analyst Contact: Kevin D. Williams
663 Highway 60, P.O. Box 807 Chief Financial Officer
Monett, MO 65708 (417) 235-6652
IR Contact: Jon Seegert
FOR IMMEDIATE RELEASE Director of Investor Relations
--------------------- (417) 235-6652
JACK HENRY & ASSOCIATES FISCAL 2006 SECOND QUARTER
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NET INCOME INCREASES 22%
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Monett, MO. February 1, 2006 - Jack Henry & Associates, Inc. (Nasdaq: JKHY),
a leading provider of integrated technology solutions that performs data
processing for financial institutions, today announced second quarter fiscal
2006 results with an 8% increase in revenue, an increase of 20% in gross
profit and a 22% increase in net income over the second quarter of fiscal
2005. For the first six months of fiscal 2006 revenue increased 9%, with an
increase of 16% in gross profit and an increase of 19% in net income over
the same six months in fiscal 2005.
For the quarter ended December 31, 2005, the company generated total revenue
of $147.4 million compared to $136.0 million in the same quarter a year ago.
Gross profit increased to $65.5 million compared to $54.7 million in the
second quarter of last fiscal year. Net income totaled $21.6 million, or
$0.23 per diluted share, compared to $17.7 million, or $0.19 per diluted
share in the same quarter a year ago.
For the first half of fiscal 2006, total revenue of $284.4 million was
generated compared to $260.1 million for the first half of fiscal 2005.
Gross profit increased to $122.0 million compared to $105.3 million during
the same period last fiscal year. Net income for the first half of fiscal
2006 was $41.1 million, or $0.44 per diluted share, compared to $34.4
million, or $0.37 per diluted share for the same six months in fiscal 2005.
According to Jack Prim, CEO, "We are pleased with the overall performance in
the quarter. Our license fees revenues were the third highest in company
history, even as the core system delivery preference in our banking business
continues to be for outsourcing. Consistent with this shift in delivery
preference, support and service revenues and margins showed strong
improvements and hardware revenues, our lowest margin revenue component,
were down in the quarter. All of these factors contributed to the 22%
increase in net income and reinforces our previous statements that for those
who take the long term view of our company these trends are very positive.
Additionally, our acquired companies continue to grow in importance and have
contributed higher revenues year to date than projected at our analyst
meeting last May."
Operating Results
"We have continued to experience strong demand for all the components that
make up our recurring revenue which include outsourcing, in-house
maintenance and ATM/Debit card processing," stated Tony Wormington,
President. "As these offerings continue to grow they also expand our gross
margins through additional leverage of the existing infrastructure. In
addition to this our managers continue to focus on improving margins through
the control of operating costs. We believe the ability to leverage the vast
experience and commitment of our managers and associates with the lessons
learned during the past 30-years in business will continue to allow us to
recognize near-and long-term revenue growth and margin expansion."
License revenue for the second quarter was $20.8 million, or 14% of second
quarter total revenue, compared to $22.2 million, or 16% of the second
quarter total revenue a year ago. Support and service revenue increased to
$106.5 million, or 72% of total revenue in second quarter of fiscal 2006
from $87.7 million, or 65% of total revenue for the same period a year ago.
Hardware sales in the second quarter of fiscal 2006 decreased to $20.1
million, or 14% of total revenue, from $26.1 million, or 19% of total
revenue in the second quarter of last fiscal year.
For the first half of fiscal 2006, license revenue decreased to $37.8
million, or 13% of total revenue, compared to $41.7 million, or 16% of the
total revenue a year ago. Support and service revenue contributed 73% to
total revenue, or $205.9 million of the total revenue for the first six
months of the current fiscal year compared to $171.4 million, or 66% of
total revenue for the first six months of the prior fiscal year. Hardware
sales for the first half of fiscal 2006 were $40.7 million compared to $47.0
million for the same period last year. Hardware revenue was 14% of total
revenue for fiscal 2006 and 18% of revenue year to date in fiscal 2005.
Cost of sales for the second quarter remained nearly even at $81.9 million
for the three months ended December 31, 2005 from $81.2 million for the same
three months ended December 31, 2004. Second quarter gross profit increased
20% to $65.5 million with a 44% gross margin, compared to $54.7 million and
a 40% gross margin for the same period a year ago.
Cost of sales for the six months ended December 31, 2005 increased 5%, to
$162.4 million from $154.7 million for the same period ended December 31,
2004. Gross profit for the first half of fiscal 2006 increased 16% to
$122.0 million with a 43% gross margin, compared to $105.3 million or a 40%
gross margin for the first half of fiscal 2005.
Gross margin on license revenue for the second quarter and the first half of
fiscal 2006 was 95% compared to 92% a year ago for the same periods due to a
reduction in license revenue delivered through reseller agreements.
"We continue to obtain additional gross margin leverage primarily through
our outsourcing and electronic payment infrastructures as well as other
areas due to process improvement and revised procedures," stated Kevin
Williams, CFO of Jack Henry & Associates. "Also positively impacting our
gross margins is the continued decrease in hardware revenues as a percentage
of total revenue."
Support and service gross margin increased to 38% in the second quarter of
fiscal 2006 from 31% a year ago. Support and service gross margin increased
to 37% in the first six months of fiscal 2006 from 32% for the first six
months in fiscal 2005 mainly due to revenue growth for the quarter and first
half of the fiscal year increasing at a much faster rate than costs, as we
are able to leverage our resources and control costs. Hardware gross
margins were lower for the second quarter at 28% compared to 29% for the
same quarter last year and remained even 27% for both fiscal years primarily
due to sales mix along with reduced vendor rebates received on hardware sold
in the current year.
Operating expenses increased 17% for the second quarter of fiscal 2006
compared to the same quarter a year ago primarily due to employee related
expenses from increased headcount, depreciation expense, acquisitions and
increased expenses associated to our annual National User Group Meeting.
Selling and marketing expenses rose 3% in the current year second quarter to
$12.3 million, or 8% of total revenue, from $11.9 million or 9% of total
2005 second quarter revenue. Research and development expenses increased
19% to $8.0 million from $6.7 million, while remaining at 5% of total
revenue for the second quarters in fiscal 2006 and 2005. General and
administrative costs increased 37% to $11.1 million or 8% of revenue, in the
second quarter of fiscal year 2006, from $8.1 million, or 6% of revenue for
the same quarter a year ago.
Operating expenses increased 12% for fiscal 2006 year to date compared to
the same period a year ago primarily due to employee related expenses from
increased headcount, depreciation expense, acquisitions and increased
expenses associated with out banking and credit union annual National User
Group Meetings. Selling and marketing expenses rose 5% in the same period to
$23.7 million, or 8% of total revenue from $22.7 million or 9% of total
revenue. Research and development expenses increased 15% to $14.8 million
from $12.9 million, while remaining at 5% of total revenue for the first six
months in fiscal 2006 and 2005. General and administrative costs increased
21% to $18.9 million or 7% of revenue for the first half of fiscal 2006 from
$15.6 million, or 6% of revenue for the same period a year ago.
Operating income increased 22% to $34.1 million, or 23% of second quarter
revenue, compared to $28.0 million, or 21% of revenue in the second quarter
of fiscal 2005. Provision for income taxes is 37.0% for the second quarter
in fiscal 2006 compared to 37.5% last year due to changes in the effective
state tax rates. Second quarter net income totaled $21.6 million, or $0.23
per diluted share, compared to $17.7 million, or $0.19 per diluted share in
the second quarter of fiscal 2005.
Operating income increased 19% to $64.6 million, or 23% of year to date
revenue, compared to $54.2 million, or 21% of revenue year to date in fiscal
2005. Provision for income taxes is 37.0% year to date fiscal 2006 compared
to 37.5% year to date in fiscal 2005 due to changes in the effective state
tax rates. Year to date net income totaled $41.1 million, or $0.44 per
diluted share, compared to $34.4 million, or $0.37 per diluted share in the
prior year.
For the second quarter of 2006, the bank systems and services segment
revenue increased 6% to $117.8 million, with a gross margin of 45% from
$111.3 million and a gross margin of 43% in the same quarter a year ago.
The credit union systems and services segment revenue increased 20% to $29.6
million with a gross margin of 42% for the second quarter of 2005 from $24.7
million and a gross margin of 29% in the same period a year ago. The credit
union segment gross profit rose 72% primarily due to the significant
increase in support and services revenue and maintaining cost controls.
For the six months ended December 31, 2005, the bank systems and services
segment revenue increased 9% to $229.3 million, with a gross margin of 44%
from $211.1 million and a gross margin of 42% a year ago. The credit union
systems and services segment revenue increased 13% to $55.1 million for the
first half of fiscal 2006, with a gross margin of 40% from $49.0 million and
gross margin of 33% in the same period a year ago.
Balance Sheet, Cash Flow, and Backlog Review
At December 31, 2005, cash, cash equivalents, and investments increased to
$40.9 million from $23.5 million compared to December 31, 2004. Trade
receivables increased 17%, or $14.9 million, to $102.8 million compared to
a year ago. The increase is primarily due to the increase in annual
maintenance billings for newly installed core and complementary customers,
increased customers and volume of transactions processed. Note payable
increased from none a year ago to $25.0 at December 31, 2005. Deferred
revenue increased $13.1 million or 12% to $122.8 million at December 31,
2005 compared to a year ago. Stockholders' equity grew 13% to $547.4
million at December 31, 2005, from $482.4 million a year ago.
Backlog, which is a measure of future business and revenue, increased 10%
from year-ago levels and increased 4% from September 2005. December 31,
2005 backlog total is $213.8 million ($63.8 million in-house and $150.0
million outsourcing). Backlog at December 31, 2004, was $194.5 million
($68.4 million in-house and $126.1 million outsourcing) and at September 30,
2005, was $205.8 million ($63.4 million in-house and $142.4 million
outsourcing).
Cash flow from operations increased to $107.0 million for the first half of
fiscal 2006 from $94.2 million for the same period in fiscal 2005. For the
current year, cash flow from operations consisted of $41.1 million net
income, depreciation and amortization expense of $21.3 million, plus a
combined increase of $3.3 million in deferred income taxes, the gain on
disposal of property and equipment and stock-based compensation expense.
The balance consists of the change in receivables of $107.3 million less the
change of $15.0 million for prepaid and accrued expenses, and accounts
payable, less the $52.0 million change in deferred revenues and plus the
change in income taxes of $1.0 million. For fiscal year 2005, cash flow
from operations consisted of $34.4 million net income, depreciation and
amortization expense of $18.8 million, plus a combined increase of $4.0
million in deferred income taxes and the loss on disposal of property and
equipment. The balance consists of the change in receivables of $88.2
million less the change of $7.0 million for prepaid and accrued expenses,
accounts payable, and income taxes, less the change of $44.2 million in
deferred revenues.
Net cash used in investing activities for the current year was $45.8
million and included mainly capital expenditures of $18.7 million, payment
for Profitstar acquisition of $19.2 million, and capitalized software
development of $8.1 million. In the first half of fiscal 2005, net cash used
in investing activities of $136.6 million and consisted mainly of $109.9
million for payment of acquisitions, $23.6 million in capital expenditures
and $3.2 million for capitalized software development.
Net cash from financing activities used cash of $34.6 million and included a
net repayment of the credit facility of $20.0 million, payment of dividends
of $8.2 million and the purchase of treasury stock of $12.6 million. Cash
used was offset by proceeds of $6.2 million from the exercise of stock
options and sale of common stock. For the first half of fiscal 2005, cash
used in financing activities was $7.2 million for dividends paid, offset by
$10.0 million for a note payable and the proceeds from the exercise of stock
options and sale of common stock of $8.3 million.
About Jack Henry & Associates
Jack Henry & Associates, Inc. provides integrated computer systems and
processes ATM and debit card transactions for financial institutions. Jack
Henry markets and supports its systems throughout the United States and has
over 8,600 customers nationwide. For additional information on Jack Henry,
visit the company's web site at www.jackhenry.com. The company will hold a
conference call on February 2; at 7:45 a.m. Central Time and investors are
invited to listen at www.jackhenry.com.
Statements made in this news release that are not historical facts are
forward-looking information. Actual results may differ materially from
those projected in any forward-looking information. Specifically, there are
a number of important factors that could cause actual results to differ
materially from those anticipated by any forward-looking information.
Additional information on these and other factors, which could affect the
Company's financial results, are included in its Securities and Exchange
Commission (SEC) filings on Form 10-K, and potential investors should review
these statements. Finally, there may be other factors not mentioned above
or included in the Company's SEC filings that may cause actual results to
differ materially from any forward-looking information.
Condensed Consolidated Statements of Income
(In Thousands, Except Per Share Data - unaudited)
Three Months Ended Six Months Ended
December 31, % Change December 31, % Change
-------------------- -------- -------------------- --------
2005 2004 2005 2004
-------- -------- -------- --------
REVENUE
License $ 20,836 $ 22,148 -6% $ 37,744 $ 41,699 -9%
Support and service 106,524 87,726 21% 205,925 171,374 20%
Hardware 20,057 26,086 -23% 40,731 46,983 -13%
-------- -------- -------- --------
Total 147,417 135,960 8% 284,400 260,056 9%
COST OF SALES
Cost of license 1,061 1,734 -39% 1,912 3,343 -43%
Cost of support and service 66,356 60,946 9% 130,593 116,976 12%
Cost of hardware 14,517 18,531 -22% 29,857 34,426 -13%
-------- -------- -------- --------
Total 81,934 81,211 1% 162,362 154,745 5%
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GROSS PROFIT 65,483 54,749 20% 122,038 105,311 16%
Gross Profit Margin 44% 40% 43% 40%
OPERATING EXPENSES
Selling and marketing 12,300 11,920 3% 23,740 22,652 5%
Research and development 8,003 6,741 19% 14,752 12,883 15%
General and administrative 11,130 8,127 37% 18,935 15,592 21%
-------- -------- -------- --------
Total 31,433 26,788 17% 57,427 51,127 12%
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OPERATING INCOME 34,050 27,961 22% 64,611 54,184 19%
INTEREST INCOME (EXPENSE)
Interest income 425 359 18% 868 818 6%
Interest expense (132) (14) >100% (307) (17) >100%
-------- -------- -------- --------
Total 293 345 -15% 561 801 -30%
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INCOME BEFORE INCOME TAXES 34,343 28,306 21% 65,172 54,985 19%
PROVISION FOR INCOME TAXES 12,707 10,614 20% 24,114 20,619 17%
-------- -------- -------- --------
NET INCOME $ 21,636 $ 17,692 22% $ 41,058 $ 34,366 19%
======== ======== ======== ========
Diluted net income per share $ 0.23 $ 0.19 $ 0.44 $ 0.37
======== ======== ======== ========
Diluted weighted avg shares
outstanding 93,637 92,957 93,818 92,721
======== ======== ======== ========
Consolidated Balance Sheet Highlights
(In Thousands-unaudited) Dec 31 % Change
---------------------- --------
2005 2004
-------- --------
Cash, cash equivalents and investments $ 40,910 $ 23,512 74%
Receivables 102,841 87,921 17%
TOTAL ASSETS 765,878 661,588 16%
Accounts payable and accrued expenses $ 29,067 $ 39,529 -26%
Note Payable 25,000 - -
Deferred revenue 122,811 109,742 12%
STOCKHOLDERS' EQUITY 547,362 482,362 13%
(THIRTY)