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, 1996
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, 1997
Common Stock, $.01 par value 11,960,566
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, 1996
and 1995 (Unaudited) 3
Condensed Consolidated Balance Sheets -
December 31, 1996, (Unaudited) and June
30, 1996 4-5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended December 31,
1996 and 1995 (Unaudited) 6
Notes to the Condensed Consolidated Financial
Statements 7
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8-9
Part II. OTHER INFORMATION
None 9
Part I. Financial Information
Item 1. Financial Statements
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Share Data)
December 31,
1996 June 30,
(Unaudited) 1996
ASSETS
Current assets:
Cash $ 5,557 $ 4,952
Held-to-maturity securities 7,160 3,128
Receivables 9,279 15,990
Income taxes receivable 48 889
Prepaid expenses and other 3,426 3,187
Total current assets $25,470 $28,146
Property and equipment, net $17,628 $13,612
Other assets:
Intangible assets, net of amortization $16,275 $16,805
Computer software 1,306 1,375
Investments and other 707 463
Total other assets $18,288 $18,643
Total assets
$61,386 $60,401
December 31,
1996 June 30,
(Unaudited) 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,103 $ 2,238
Accrued expenses 1,871 2,945
Deferred revenue 13,073 16,068
Total current liabilities $17,047 $21,251
Deferred income taxes 1,732 1,732
Total liabilities $18,779 $22,983
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;
11,970,546 issued @ 12/31/96
11,867,593 issued @ 6/30/96 $ 120 $ 119
Less Treasury Stock 9,980 shares 388 -
Additional paid-in capital 12,529 10,711
Retained earnings 30,346 26,588
Total stockholders' equity $42,607 $37,418
Total liabilities and
stockholders' equity $61,386 $60,401
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<S><C>
Quarter Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
Revenues:
Software licensing & installation $ 5,388 $ 4,035 $11,221 $ 8,877
Maintenance/support & service 6,730 5,550 13,007 11,001
Hardware sales & commissions 9,230 6,934 15,470 12,791
Total revenues $21,348 $16,519 $39,698 $32,669
Cost of sales:
Cost of hardware $ 6,399 $ 4,431 $10,717 $ 8,438
Cost of services 4,775 3,839 8,800 7,743
Total cost of sales $11,174 $ 8,270 $19,517 $16,181
Gross profit $10,174 $ 8,249 $20,181 $16,488
48% 50% 51% 50%
Operating expenses:
Selling and marketing $ 2,147 $ 1,807 $ 4,349 $ 3,639
Research and development 705 471 1,228 925
General and administrative 1,482 1,543 2,863 2,761
Total operating expenses $ 4,334 $ 3,821 $ 8,440 $ 7,325
Operating income $ 5,840 $ 4,428 $11,741 $ 9,163
Other income (expense):
Interest and dividend income, net $ 207 $ 124 $ 384 $ 287
Other, net 55 (51) 129 25
Total other income $ 262 $ 73 $ 513 $ 312
Income before income taxes $ 6,102 $ 4,501 $12,254 $ 9,475
Provision for income taxes 2,324 1,742 4,673 3,621
Net income from continuing operations $ 3,778 $ 2,759 $ 7,581 $ 5,854
Net loss from discontinued operations 150 - 150 -
Net income $ 3,628 $ 2,759 $ 7,431 $ 5,854
Earnings per share from cont. oper. $ .30 $ .22 $ .60 $ .47
Net loss per share from discnt. oper. .01 - .01 -
Earnings per share $ .29 $ .22 $ .59 $ .47
Weighted average shares outstanding 12,750 12,447 12,721 12,394
</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)
(Unaudited)
Six Months Ended
December 31,
1996 1995
Cash flows - operating activities:
Cash received from customers $44,235 $39,752
Cash paid to suppliers and employees (27,520) (26,157)
Interest and dividends received 363 348
Income taxes paid (4,519) (3,216)
Other, net 1 50
Net cash flow provided by operating
activities $12,560 $10,777
Cash flows from discontinued operations (283) -
Cash flows from investing activities:
Proceeds on sale of property & equipment $ 7 $ 2
Capital expenditures (4,941) (3,211)
Short-term investment activity, net (4,012) 2,000
Long-term investment activity, net 2 (3)
Software development (85) (215)
Acquisition costs, net (314) (5,501)
Net cash used in investing activities $(9,343) $(6,928)
Cash flows from financing activities:
Proceeds from issuance of common stock
upon exercise of stock options $ 929 $ 312
Dividends paid (1,673) (1,350)
Payment of acquired long term debt (131) -
Purchase of treasury stock (1,454) (873)
Net cash used in financing activities $(2,329) $ (1,911)
Net increase (decrease) in cash $ 605 $ 1,938
Cash at beginning of period 4,952 3,423
Cash at end of period $ 5,557 $ 5,361
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 throughout
the United States 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 maintenance and
support 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, 1996.
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, 1996, 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, 1996, 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, 1996, 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, 1996:
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, 1996 and
1995.
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 integrated computer systems that perform data processing (available for in-
house or service bureau installations) for banks and related financial institu-
tions. The Company was founded in 1976. Its proprietary applications software,
which operates on IBM computers, is offered under two systems: CIF 20/20 1,
typically for banks with less than $300 million in assets, and the Silverlake
System 2, for banks with assets up to $10 billion. Domestically, JHA fre-
quently sells hardware with its software products. It also provides customer
support and related services. The Company's software systems have been in-
stalled at over 1260 banks and financial institutions.
A detailed discussion of the major components of the results of operations for
the quarter and the six months ended December 31, 1996, as compared to the same
periods in the previous year follows.
Revenues
1CIF 20/20 is a trademark of Jack Henry & Associ-
ates, Inc.
2Silverlake System is a registered trademark of
Jack Henry & Associates, Inc.
Revenues increased 29% to $21,348,000 in the quarter ended December 31, 1996.
Software licensing and installation increased 34%. Maintenance, support and
service revenues increased 21%. Hardware sales were up 33% from last year's
quarter. The Company's non-hardware products and services (higher margin sales)
increased 26% over last year.
Six month revenues this year were $39,698,000, up 22% over the last year's
corresponding period. Each of the three major revenue categories increased by
18% or more with the largest increase (26%) in software and installation and the
smallest in maintenance, support and service revenues.
The backlog of sales at December 31, 1996, was $20,465,000. Backlog at
January 30, 1997 was $22,870,000.
Cost of Sales
The 35% increase in cost of sales for the second quarter of FY '97 is rela-
tively 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 24% primarily due to
growth in the Company's core business, less than the 26% increase in non-hard-
ware revenues.
Cost of sales increased 21% for the first six months of fiscal '97, relatively
consistent with the 22% increase in revenues. Cost of hardware increased 27%
while cost of services increased 14%.
Gross Profit
Gross profit increased to $10,174,000 in the second quarter ended December 31,
1996, a 23% increase over last year. The gross margin percentage was 48% of
sales compared to 50% last year.
The six month gross profit this year was up 22% at $20,181,000. The gross
margin percentage for the first six months was 51%, similar to last year's rate.
Operating Expenses
Total operating expenses increased 13% in the quarter ended 12/31/96. This
provides a favorable picture, considering gross profit increased 23%. Thus, the
Company continues to gain efficiencies through growth. Selling expenses
increased 19% while research and development expenses increased 50%. General
and administrative expenses decreased by 4%.
The $8,440,000 in the first six months of fiscal '97 for operating expenses
was a 15% increase. Since gross profit increased 22%, this continues to reflect
the Company's ability to leverage more to the bottom line as revenues increase.
Other Income and Expense
Other income for the quarter ended December 31, 1996, was up when compared to
the same period last year. This results from increased interest income because
the Company had more cash invested and an increase in other, net. The year-to-
date increase is due to the same reasons as the second quarter.
Net Income
Net income from continuing operations for the second quarter was $3,778,000,
or $.30 per share, an increase of 36%, compared to $2,759,000, or $.22 per share
in the same period last year.
Net income from continuing operations for the six months ended December 31,
1996 was $7,581,000, or $.60 per share (up 28%), compared to $5,854,000, or $.47
per share.
FINANCIAL CONDITION
Liquidity
The Company's cash and held-to-maturity securities increased to $12,717,000 at
December 31, 1996, up from $8,080,000 at June 30, 1996.
JHA has available credit lines totaling $2,215,000, although the Company
expects their use to be minimal during FY '97. 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 $4,941,000 for the
quarter ended December 31, 1996, were made for expansion of its facilities and
additional equipment. These were funded from cash generated by operations. The
consolidated capital expenditures of JHA could exceed $5,500,000 for FY '97.
The Company paid a $.07 per share cash dividend on December 10, 1996 to
stockholders of record November 19, 1996 which was funded from working capital.
In addition, the Company's Board of Directors, subsequent to December 31, 1996,
declared a quarterly cash dividend of $.08 per share on its common stock payable
March 13, 1997 to stockholders of record on February 21, 1997. This will be
funded out of working capital. Further, the Company's Board of Directors
declared a 50% stock dividend on its common stock, effectively a 3 for 2 split,
to be paid March 13, 1997 to stockholders of record February 24, 1997.
CONCLUSION
JHA's results of operations and its financial position continued to be quite
favorable during the quarter ended December 31, 1996. 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 it serves.
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 14, 1997 /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board and
Chief Executive Officer
Date: February 14, 1997 /s/ Terry W. Thompson
Terry W. Thompson
Vice President and
Chief Financial Officer
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