FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
(Address of principal executive offices)
(Zip Code)
417-235-6652
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1995
Common Stock, $.01 par value 11,746,481
JACK HENRY & ASSOCIATES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item I - Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1995, (Unaudited) and June
30, 1995 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1995 and 1994 (Unaudited) 5
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended September 30,
1995 and 1994 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 9
Part II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of
Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
September 30,
1995 June 30,
(Unaudited) 1995
ASSETS
Current assets:
Cash $ 5,012 $ 3,423
Short-term investments 3,609 4,650
Receivables 6,778 16,740
Prepaid expenses and other 2,893 2,661
Total current assets $18,292 $27,474
Property and equipment, net 11,917 10,302
Other assets:
Intangible assets, net of amortization $17,789 $17,790
Computer software 1,778 1,740
Investments and other 1,643 1,415
Marketable equity securities 3 -
Total other assets $21,213 $20,945
Total assets
$51,422 $58,721
September 30,
1995 June 30,
(Unaudited) 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,918 $ 5,124
Accrued expenses 1,562 2,468
Income taxes 1,654 -
Accrued acquisition costs 500 5,398
Deferred revenue 13,114 15,150
Total current liabilities $18,748 $28,140
Deferred income taxes 1,097 1,097
Total liabilities $19,845 $29,237
Stockholders' equity:
Preferred stock - $1.00 par value;
500,000 shares authorized;
none issued - -
Common stock - $0.01 par value;
30,000,000 shares authorized;
11,744,148 issued @ 9/30/95
11,732,028 issued @ 6/30/95 $ 118 $ 117
Additional paid-in capital 9,095 9,425
Retained earnings 22,364 19,942
Total stockholders' equity $31,577 $29,484
Total liabilities and
stockholders' equity $51,422 $58,721
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<S><C>
Quarter Ended
September 30,
1995 1994
Revenues:
Software licensing & installation $ 4,842 $ 3,513
Maintenance/support & service 5,451 2,557
Hardware sales & commissions 5,857 3,579
Total revenues $16,150 $ 9,649
Cost of sales:
Cost of hardware 4,007 2,654
Cost of services 3,904 1,925
Total cost of sales 7,911 4,579
Gross profit $ 8,239 $ 5,070
51% 53%
Operating expenses
Selling and marketing 1,832 1,160
Research and development 454 281
General and administrative 1,218 995
Total operating expenses 3,504 2,436
Operating income $ 4,735 $ 2,634
Other income (expense):
Interest and dividend income 163 163
Other, net 76 6
Total other income 239 169
Income before income taxes $ 4,974 $ 2,803
Provision for income taxes 1,879 972
Net income $ 3,095 $ 1,831
Net income per share $ .25 $ .15
Weighted Average Shares Outstanding 12,342 11,957
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Three Months Ended
September 30,
1995 1994
Cash flows - operating activities:
Cash received from customers $24,093 $14,255
Cash paid to suppliers and employees (14,856) (8,072)
Interest and dividends received, net 191 163
Income taxes paid, net (105) (219)
Other, net 69 4
Net cash flow provided by operating
activities $ 9,392 $ 6,131
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 2 $ 1
Capital expenditures (1,978) (589)
Short-term investment activity, net 1,023 (2,001)
Long-term investment activity, net - (19)
Software development (101) (48)
Payment of long-term debt - -
Acquisition costs, net (5,514) (1,370)
Net cash used in investing activities $(6,568) $(4,026)
Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options $ 229 $ 26
Dividends paid (673) (584)
Purchase of Treasury Stock (791) -
Net cash used in financing activities $(1,235) $ (558)
Net increase (decrease) in cash $ 1,589 $ 1,547
Cash at beginning of period 3,423 1,942
Cash at end of period $ 5,012 $ 3,489
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Description of the Company - Jack Henry & Associates, Inc. ("JHA" or the
"Company") is a computer software company which has developed several banking
software systems. It markets those systems to financial institutions worldwide
along with the computer equipment (hardware) and provides the conversion and
software customization services necessary for a financial institution to install
a JHA software system. It also provides continuing support and maintenance
services to customers using the system. The Company also processes ATM transac-
tions for financial institutions in the U.S. All of these related activities
are considered a single business segment.
Consolidation - The consolidated financial statements include the accounts of
JHA and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in the consolidation.
Other Significant Accounting Policies - The accounting policies followed by
the Company are set forth in Note 1 to the Company's consolidated financial
statements included in its Annual Report on Form 10-K ("Form 10-K") for the
fiscal year ended June 30, 1995.
2. Interim Financial Statements
The accompanying condensed financial statements have been prepared in accor-
dance with the instructions to Form 10-Q of the Securities and Exchange Commis-
sion and in accordance with generally accepted accounting principles applicable
to interim financial statements, and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements should be read in conjunction
with the audited consolidated financial statements and accompanying notes of the
Company for the year ended June 30, 1995, which are included in its Form 10-K.
In the opinion of management of the Company, the accompanying condensed
financial statements reflect all adjustments necessary (consisting solely of
normal recurring adjustments) to present fairly the financial position of the
Company as of September 30, 1995 and the results of its operations and its cash
flows for the three month period then ended.
The results of operations for the period ended September 30, 1995, are not
necessarily indicative of the results to be expected for the entire year.
3. Additional Interim Footnote Information
The following additional information is provided to update the notes to the
Company's annual financial statements for developments during the three months
ended September 30, 1995:
Effective September 1, 1995, the Company exercised its option, and purchased
all the outstanding stock of Central Interchange, Inc.(CII). CII's primary
offering is the processing of ATM transactions for financial institutions in the
Midwest. The initial consideration paid to CII's stockholder (who now works for
JHA) was $250,000 in Company stock. Additional payments may be made over the
next two years, based on CII's average annual net income.
As of August 31, 1995, the Company had a $419,206 note receivable amount on
its books. CII's results of operations have been included in these statements
for all activity subsequent to September 1, 1995. The stock transaction was
accounted for as a purchase.
4. Income Per Share Information
Earnings per common share are computed by dividing income by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding for the three month period ended September 30, 1995 and 1994.
Item 2. - Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Background and Overview
Jack Henry & Associates, Inc. ("JHA" or the "Company"), is a leading provider of
in-house integrated computer systems that perform data processing for banks and
related financial institutions. The Company was founded in 1976. Its propri-
etary applications software, which operates on IBM computers, is offered under
two systems: CIF 20/20(TM), typically for banks with less than $200 million in
assets, and the Silverlake System(R), for banks with assets of $100 million to
$3 billion. Domestically, JHA frequently sells hardware with its software prod-
ucts. It also provides customer support and related services. The Company's
software systems have been installed at over 1240 banks and financial institu-
tions worldwide.
A detailed discussion of the major components of the results of operations for
the quarter ended September 30, 1995, as compared to the same period in the
previous year follows.
Revenues
Revenues increased 67% to $16,150,000 in the quarter ended September 30, 1995.
Software licensing and installation increased 38%. Maintenance, support and
service revenues increased 113% with Liberty contributing a significant portion
of the increase. Hardware sales were up 64% from last year's quarter. Overall,
revenues continue to be strong as a result in growth in the Company's core
business plus contributions from the June acquisitions of SECTOR and Liberty.
The Company's non-hardware products and services (higher margin sales) increased
70% over last year.
The backlog of sales at September 30, 1995 was $8,913,000, up from $6,739,000
last year. This is down from the record June 30, 1995 level, and is consistent
with management's expectations for the first quarter. Backlog at October 26,
1995 was $9,010,000.
Cost of Sales
The 73% increase in cost of sales for the first quarter of FY '96 is relative-
ly consistent with the increase in revenues. A large portion of the increase
results from the increase in hardware revenues and the related increase in cost
of hardware sales. Cost of services increased significantly due to growth in
the Company's core business plus the increase in costs as a result of the SECTOR
and Liberty acquisitions.
Silverlake System(R) is a registered trademark of Jack Henry & Associates, Inc.
CIF 20/20(TM) is a trademark of Jack Henry & Associates, Inc.
Gross Profit
Gross profit increased to $8,239,000 in the first quarter ended September 30,
1995, a 63% increase over last year. The gross margin percentage was 51% of
sales compared to 53% last year. The relative mix of the core business and new
acquisitions contributed to this being below last year's level.
Operating Expenses
Total operating expenses increased 44%. This is a favorable picture, since
gross profit increased 63%. Thus, the Company continues to gain efficiencies
through growth. Selling expenses increased 58% while research & development and
general & administrative expenses increased 62% and 22%, respectively.
Other Income and Expense
Other income for the quarter ended September 30, 1995 reflects a net increase
when compared to the same period last year.
Net Income
Net income from continuing operations for the first quarter was $3,095,000, or
$.25 earnings per share compared to $1,831,000, or $.15 earnings per share in
the same period last year.
FINANCIAL CONDITION
Liquidity
The Company's cash and held-to-maturity securities increased to $9,624,000 at
September 30, 1995, from $9,488,000 at June 30, 1995. During the quarter the
Company paid out a net of $5,092,000 as a result of the Liberty acquisition.
Customer payments and Company profitability more than offset these payments to
help improve the Company's net working capital position.
JHA has available credit lines totaling $2,215,000, although the Company
expects their use to be minimal during FY '96. The Company currently has no
short-term or long-term debt obligations.
Capital Requirements and Resources
JHA generally uses existing resources and funds generated from operations to
meet its capital requirements. Capital expenditures totaling $1,978,000 for the
quarter ended September 30, 1995, were made for additional equipment. These
were funded from cash generated by operations. The consolidated capital
expenditures of JHA could exceed $2,500,000 for FY '96.
The Company paid a $.0575 per share cash dividend on September 22, 1995 to
stockholders of record September 8, 1995 which was funded from working capital.
In addition, the Company's Board of Directors, subsequent to September 30, 1995,
declared a quarterly cash dividend of $.0575 per share on its common stock
payable December 12, 1995 to stockholders of record on November 21, 1995. This
will be funded out of working capital.
CONCLUSION
JHA's results of operations and its financial position continued to be quite
favorable during the quarter ended September 30, 1995. This reflects the
continuing attitude of cooperation and commitment by each employee, management's
ongoing cost control efforts and commitment to deliver top quality products and
services to the markets served.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Stockholders of Jack Henry & Associates, Inc. was
held on October 31, 1995, for the purpose of electing a board of directors and
approving the adoption of the 1995 Non-Qualified Stock Option Plan. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities and
Exchange Act of 1934 and there was no solicitation in opposition to management's
solicitations. Management's nominees for director, all incumbents, were elected
with the number of votes for and withheld as indicated below:
For Withheld
John W. Henry 10,640,073 30,286
Jerry D. Hall 10,640,289 30,070
Michael E. Henry 10,640,289 30,070
James J. Ellis 10,639,973 30,386
Burton O. George 10,640,089 30,270
George R. Curry 10,638,589 31,770
Michael R. Wallace 10,640,589 29,770
William W. Caraway 10,627,151 43,208
Also approved was the adoption of the 1995 Non-Qualified Stock Option Plan with
the number of votes for, against and withheld as indicated below:
For Against Withheld
10,006,036 612,299 52,024
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
19.1 (a) Exhibits
None.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated July 17, 1995, to report the acquisition of
the Community Banking Business (CFI) unit of Broadway & Seymour, Inc. ("BSI")
under Item 2. CFI financial statements as of June 30, 1995 were filed with the
8-K and pro forma financial information were filed under cover of a Form 8-KA on
September 15, 1995 pursuant to Item 7(a)(4) of Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
behalf by the undersigned thereunto duly authorized.
JACK HENRY & ASSOCIATES, INC.
Date: November 14, 1995 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Chief Executive Officer
Date: November 14, 1995 /s/ Terry W. Thompson
Terry W. Thompson
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JACK HENRY &
ASSOCIATES, INC. 1ST QUARTER 10-Q FOR 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
</LEGEND>
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