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 SECURI-
TIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 January 31,1996
Common Stock, $.01 par value 11,757,081
JACK HENRY & ASSOCIATES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item I - Financial Statements
Condensed Consolidated Statements of
Income for the Quarter and Six Months
Ended December 31, 1995
and 1994 (Unaudited) 3
Condensed Consolidated Balance Sheets -
December 31, 1995, (Unaudited) and June
30, 1995 4-5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended December 31,
1995 and 1994 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7-8
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 9-11
Part II. OTHER INFORMATION
None 11
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<S><C>
Quarter Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Revenues:
Software licensing & installation $ 4,035 $ 4,113 $ 8,877 $ 7,626
Maintenance/support & service 5,550 2,486 11,001 5,043
Hardware sales & commissions 6,934 4,806 12,791 8,385
Total revenues $16,519 $11,405 $32,669 $21,054
Cost of sales:
Cost of hardware $ 4,431 $ 3,421 $ 8,438 $ 6,075
Cost of services 3,839 1,942 7,743 3,867
Total cost of sales $ 8,270 $ 5,363 $16,181 $ 9,942
Gross profit $ 8,249 $ 6,042 $16,488 $11,112
50% 53% 50% 53%
Operating expenses:
Selling and marketing $ 1,807 $ 1,448 $ 3,639 $ 2,608
Research and development 471 266 925 547
General and administrative 1,543 1,254 2,761 2,249
Total operating expenses $ 3,821 $ 2,968 $ 7,325 $ 5,404
Operating income $ 4,428 $ 3,074 $ 9,163 $ 5,708
Other income (expense):
Interest and dividend income, net $ 124 $ 193 $ 287 $ 356
Other, net (51) (21) 25 (15)
Total other income $ 73 $ 172 $ 312 $ 341
Income before income taxes $ 4,501 $ 3,246 $ 9,475 $ 6,049
Provision for income taxes 1,742 1,241 3,621 2,213
Net income $ 2,759 $ 2,005 $ 5,854 $ 3,836
Net income per share (Note 4) $ .22 $ .17 $ .47 $ .32
Weighted average shares outstanding 12,447 12,047 12,394 12,008
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
December 31,
1995 June 30,
(Unaudited) 1995
ASSETS
Current assets:
Cash $ 5,361 $ 3,423
Short-term investments 2,590 4,650
Receivables 6,160 16,740
Prepaid expenses and other 3,069 2,661
Total current assets $17,180 $27,474
Property and equipment, net $12,825 $10,302
Other assets:
Intangible assets, net of amortization $17,839 $17,790
Computer software 1,767 1,740
Investments and other 1,003 1,415
Total other assets $20,609 $20,945
Total assets
$50,614 $58,721
December 31,
1995 June 30,
(Unaudited) 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,210 $ 5,124
Accrued expenses 2,264 2,468
Income taxes 210 -
Accrued Acquisition costs 500 5,398
Deferred revenue 11,767 15,150
Total current liabilities $15,951 $28,140
Deferred income taxes 986 1,097
Total liabilities $16,937 $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;
11,757,081 issued @ 12/31/95
11,732,028 issued @ 6/30/95 $ 118 $ 117
Additional paid-in capital 9,113 9,425
Retained earnings 24,446 19,942
Total stockholders' equity $33,677 $29,484
Total liabilities and
stockholders' equity $50,614 $58,721
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)
(Unaudited)
Six Months Ended
December 31,
1995 1994
Cash flows - operating activities:
Cash received from customers $39,752 $22,691
Cash paid to suppliers and employees (26,157) (14,732)
Interest and dividends received 348 353
Income taxes paid (3,216) (1,826)
Other, net 50 14
Net cash flow provided by operating
activities $10,777 $ 6,500
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 2 $ 3
Capital expenditures (3,211) (1,570)
Short-term investment activity, net 2,000 (1,503)
Long-term investment activity, net (3) (32)
Software development (215) (88)
Acquisition costs, net (5,501) (1,370)
Net cash used in investing activities $(6,928) $(4,560)
Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options $ 312 $ 58
Dividends paid (1,350) (1,168)
Purchase of Treasury Stock (873) 0
Net cash used in financing activities $(1,911) $ (1,110)
Net increase (decrease) in cash $ 1,938 $ 830
Cash at beginning of period 3,423 1,942
Cash at end of period $ 5,361 $ 2,772
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 along with
the computer equipment (hardware) and provides the conversion and software
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. 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 December 31, 1995, and the results of its operations and its cash
flows for the quarter and six-month period then ended.
The results of operations for the periods ended December 31, 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 quarter ended
December 31, 1995:
None.
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 quarters and six month periods ended December 31, 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
proprietary applications software, which operates on IBM computers, is offered
under two systems: CIF 20/20TM 1, typically for banks with less than $200
million in assets, and the Silverlake System(R) 2, for banks with assets of
$100 million to $10 billion. Domestically, JHA frequently sells hardware with
its software products. It also provides customer support and related services.
The Company's software systems have been installed at over 1240 banks and
financial institutions worldwide.
A detailed discussion of the major components of the results of operations for
the quarter and the six months ended December 31, 1995, as compared to the same
periods in the previous year follows.
Revenues
Revenues increased 45% to $16,519,000 in the second quarter ended December 31,
1995. Software licensing and installation was basically flat. Maintenance,
support and service revenues increased 123% to $5,555,000, growing with new
customer additions and the Liberty acquisition. Hardware sales were $6,934,000,
up 44% from last year. Overall, revenues continue to be strong because demand
for the Company's products and services remains high.
The six months ended December 31, 1995, had a 55% increase in revenues over
the same period a year earlier. Software licensing and installation revenues
are up 16% over Fiscal year '95's second quarter. This increase is complimented
by the 118% growth in maintenance/support and service revenue and 53% increase
in hardware sales over the same period last year.
The $11,437,000 backlog of sales at December 31, 1995, is up 42% from last
year's $8,048,000.
1CIF 20/20 is a trademark of Jack Henry & Associ-
ates, Inc.
2Silverlake System is a registered trademark of
Jack Henry & Associates, Inc.
Cost of Sales
The 54% increase over last year's quarter in cost of sales is consistent with
the increase in revenues.
Cost of sales increased 63% in the six months ended December 31, 1995,
compared to the same period a year ago. This increase is considering the mix of
revenues experienced in this period.
Gross Profit
Gross profit increased to $8,249,000 and $16,488,000, respectively, in the
second quarter and the six months ended December 31, 1995. This represents a
37% and 48% increase over the same periods last year. These are less than the
respective sales increases, but very consistent when the mix in sales is
considered. The gross margin percentage was 50% of sales this year compared to
53% for both periods last year. Generally, this percentage will fluctuate with
hardware sales - as they go up it will trend downward and vice versa.
Operating Expenses
Total operating expenses increased 29%. This is a favorable picture, since
gross profit increased 37%, thus the Company continues to gain efficiencies
through growth. Selling expenses increased 25%; research and development
increased 77%; and general and administrative expenses increased 23%. Overall,
the increases are attributable to the significant growth in Company revenues.
Operating expenses for the six months ended December 31, 1995, also experi-
enced increases in all areas when compared to the same period a year ago.
Again, these increases are generally related to the overall growth in the
Company's revenues.
Other Income and Expense
Other income for the quarter ended December 31, 1995, reflects a net 36%
decrease when compared to the same period last year. This is attributable to
the sizable decrease in interest and dividend income. The Company had a lower
interest income due to its expenditures for acquisitions during the last 7
months which lowered funds available to invest.
The six months ended December 31, 1995, also experienced a net decrease, when
compared to the same period a year ago, for the same reasons as noted above.
These would have been an increase had the Company not paid out in excess of
$12.3 million related to acquisitions since June 1, 1995.
Net Income
Net income for the second quarter was $2,759,000, or $.22 per share, compared
to $2,005,000, or $.17 per share, in the same quarter last year.
Net income for the six months ended December 31, 1995, was $5,854,000, or $.47
per share compared to $3,836,000, or $.32 per share, in the same period last
year.
FINANCIAL CONDITION
Liquidity
The Company's cash and short-term investments were $7,951,000 at December 31,
1995, basically unchanged from June 30, 1995.
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 $1,233,000 for the
second quarter ended December 31, 1995, were made for additional equipment.
These were funded from cash generated by operations. The consolidated capital
expenditures of JHA total $3,211,000 for the six months ended December 31, 1995.
The Company paid a $.0575 per share cash dividend on December 12, 1995 to
stockholders of record November 21, 1995 which was funded from working capital.
In addition, the Company's Board of Directors, subsequent to December 31, 1995,
declared a quarterly cash dividend of $.07 per share on its common stock payable
March 14, 1996 to stockholders of record on February 22, 1996. This will be
funded out of working capital.
CONCLUSION
JHA's results of operations continued to be quite favorable during the quarter
and six months ended December 31, 1995. This is a result of the commitment of
the Company and each associate to deliver quality products and services to the
markets served.
PART II. OTHER INFORMATION
None.
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: February 13, 1996 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board and
Chief Executive Officer
Date: February 13, 1996 /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. 1995 10-K and is qualified in its entirety by reference to such
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,361
<SECURITIES> 2,590
<RECEIVABLES> 6,160
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,180
<PP&E> 18,423
<DEPRECIATION> 5,598
<TOTAL-ASSETS> 50,614
<CURRENT-LIABILITIES> 15,951
<BONDS> 0
<COMMON> 118
0
0
<OTHER-SE> 33,559
<TOTAL-LIABILITY-AND-EQUITY> 50,614
<SALES> 16,519
<TOTAL-REVENUES> 16,519
<CGS> 8,270
<TOTAL-COSTS> 3,821
<OTHER-EXPENSES> (73)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,501
<INCOME-TAX> 1,742
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<NET-INCOME> 2,759
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