SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _____________
Commission Number 0-14112
JACK HENRY & ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1128385
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization) Identifica-
tion No.)
663 Highway 60, P. O. Box 807, Monett, MO 65708
(Address of principal executive offices)
Registrant's telephone number
including area code: (417) 235-6652
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
As of August 12, 1997, Registrant had 18,753,044 shares of Common Stock
outstanding ($.01 par value). On that date, the aggregate market value of the
Common Stock held by persons other than those who may be deemed affiliates of
Registrant was $312,000,000 (based on the average of the reported high and low
sales prices on NASDAQ on such date).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
The below indicated portions of the Jack Henry & Associates, Inc. definitive
Proxy Statement for the 1997 Annual Meeting of Stockholders (the "Proxy
Statement") are incorporated by reference into Part III of this Report.
CROSS REFERENCE SHEET
Part of
Form 10-K Proxy Statement
Part III, Item 10 "Election of Directors" and
"Executive Officers and
Significant Employees"
Part III, Item 11 "Executive Compensation";
"Compensation Committee
Report"; and "Company
Performance"
Part III, Item 12 "Stock Ownership of Certain
Stockholders" and
"Election of Directors"
PART I
ITEM 1. BUSINESS
INTEGRATED BANKING SOFTWARE SYSTEMS
OVERVIEW -- Jack Henry & Associates, Inc. ("JHA" or the "Company") provides
integrated computer systems for in-house and service bureau data processing to
banks and other financial institutions. JHA has developed several banking
applications software systems which it markets, along with the computer
hardware, to financial institutions throughout the United States. JHA also
performs data conversion, software installation and software customization for
the implementation of its systems, and provides continuing customer mainte-
nance/support services after the systems are installed.
MARKETS AND COMPETITION -- JHA's primary market consists of the approximately
9,500 commercial banks in the United States with less than $10 billion in total
assets. Community banks account for approximately 9,400 of that number. The
population of community banks decreased by 3% in 1996. In 1996, statistics
reported in "Automation in Banking 1997" showed that financial institutions
spent approximately $22 billion on hardware, software, services and telecommuni-
cations. In-house vendors have 58% of the commercial banks as customers.
Centralized off-site service bureaus provide data processing for 37% of the
banks, down from two-thirds in the mid 80's. Many organizations provide data
processing to banks through a service bureau approach. Some service bureaus are
affiliated with large financial institutions which may have other relationships
with potential bank customers, but this is less prevalent than in the past.
Typically, a bank which is making a data processing decision will consider both
service bureau and in-house alternatives.
Of the small-to-mid-size banks with in-house installations, 44% utilize IBM
hardware, 24% NCR and 22% Unisys Corporation, respectively. All other vendors
were under 5% shares of the in-house community bank market. In 1996, eight of
the top ten software providers in this market, ranked by number of installed
customers, offered their products on IBM hardware. According to that survey,
JHA had the most installed customers (approximately 1260 at 12-31-96) of the IBM
providers. Only one other software provider had a larger customer base than
JHA. Although the top ten software providers accounted for about 86% of in-
house systems installed, the study identified 20 other software vendors in this
arena. That number has been declining in recent years.
JHA believes that the primary competitive factors in software selection are
comprehensiveness of applications, features and functions, flexibility and ease
of use, customer support, references of existing customers, and hardware
preferences and pricing. The price of the software and the related services is
also a significant competitive factor which may be determinative, particularly
for smaller banks. Management believes that JHA's results and the size of its
customer base indicate that JHA generally compares favorably in the competitive
factors. However, the in-house banking software industry contains several such
companies, based upon the size of their respective customer bases. Over half of
the most successful competitors utilize IBM hardware.
PRODUCTS AND SERVICES -- JHA's business and operations include three major
categories which are software and installation, maintenance/support and
hardware. Software includes the development and licensing of applications
software systems and the conversion, installation and customization services
required for the customer's installation of the systems. Maintenance/support
consists of the ongoing services to assist the customer in operating the systems
and to modify and update the software to meet changes in banking. Hardware
relates to the sale (often referred to as remarketing) of both the computer
equipment and the equipment maintenance on which the JHA software systems
operate. Also, included in hardware is the resale of forms and supplies during
the last three years. The following table illustrates the significance of each
of these three areas, expressed as a percentage of total revenues:
<TABLE>
<S><C>
Year Ended June 30,
1997 1996 1995
Software licensing and installation 28% 27% 33%
Maintenance/support and services 33% 33% 23%
Hardware sales 39% 40% 44%
Total Revenues 100% 100% 100%
</TABLE>
JHA's primary banking software systems are CIF 20/20(TM) and the Silverlake
System(R). CIF 20/20 is the latest version of a series of systems that has
evolved from JHA's original system which was first installed in 1977. It is
written using RPG/400 to take advantage of the relational data base features and
functions of the IBM AS/400(TM). CIF/36, CIF/34 and CIF/32 are all predecessors
of this software system, which ran on IBM System 36, 34 and 32 hardware. CIF
20/20 operates on IBM AS/400 and IBM System 36 hardware and is designed
primarily for financial institutions with total assets ranging up to $300
million. The Silverlake System was developed (rather than having been migrated
from equipment with other architecture) by JHA in 1986 and 1987 to take
advantage of the relational data base characteristics of IBM System 38 and
AS/400 hardware. It is designed generally for somewhat larger banks than CIF
20/20 and multi-bank groups ranging up to $10 billion in total assets. The
computer equipment now being offered extends this system into the low end of the
large bank arena, previously limited to "mainframe" computer systems. JHA is
one of the few vendors that offers its customers truly native software products
for use on the AS/400.
Each of the systems consists of several, fully integrated, applications software
modules, such as Deposits, Loans, and General Ledger, and the Customer
Information File (which is a centralized file containing customer data for all
applications). The systems make extensive use of parameters established by the
customer. The systems can be interfaced with (connected to) a variety of
peripheral devices used in bank operations including teller machines, on-line
teller terminals and magnetic character readers. JHA software is designed to
provide maximum flexibility in meeting a bank's data processing requirements
within a single system, minimizing data entry.
JHA devotes significant effort and expense to develop and continually upgrade
and enhance its software. Upgrades and enhancement efforts are directed
primarily through prioritized lists prepared by its national users organization
and in response to changes in the banking environment. Bank regulation, by
federal and state banking agencies, has a significant impact on JHA's software
since JHA must maintain its systems in compliance with those regulations. JHA's
research and development expenditures were $2,019,000, $2,047,000 and $1,264,000
in FY '97, '96 and '95, respectively. Portions of the expenditures are required
to be capitalized when incurred and then amortized to expense in subsequent
periods. Including the effect of this amortization, the amount of research and
development costs charged to expense in those years is $2,045,000, $1,775,000
and $1,114,000, respectively.
The Company licenses CIF 20/20 and the Silverlake System under standard license
agreements which provide the customer with a fully-paid, nonexclusive,
nontransferable right to use the software for a term of 25 years on a single
computer and for a single financial institution location upon payment of the
license fee. Generally, license fees are payable 25% upon execution of a
license agreement, 65% upon delivery of the software, and the balance at the
installation of the last application module. The Company provides a limited
warranty for its unmodified software for a period of 60 days from delivery.
Under the warranty, the Company will correct any program errors at no additional
charge to the customer.
JHA claims a proprietary interest in its software programs, documentation,
methodology and know-how. It also utilizes copyright protection, trademark
registration, trade secret laws and contract restrictions to protect its
interest in these products.
JHA also provides data conversion and software installation services to assist
its customers in implementing their JHA software system. JHA provides these
services on an hourly or a fixed-fee basis, depending on the customers'
preference. After a customer installation is complete, the customer is
encouraged (but not required) to contract with JHA for software mainte-
nance/support. These services, which are provided for an annual fee include
updates of the software to meet regulatory requirements and telephone support to
assist the customer in operating the system. JHA also offers maintenance
services for hardware, providing customers who have contracted for this service
with "one-call" system support covering hardware, system software and
applications software. The hardware maintenance contract is between JHA and its
customer. The actual hardware maintenance is performed by the hardware
manufacturer under a contract between the manufacturer and JHA.
JHA also offers emergency facilities backup to its CIF 20/20 customers using its
Bank Business Recovery Services ("BBRS"). This is a self-contained unit
containing the computer equipment needed to provide bank data processing. It
can be driven to a subscriber's location in the event their equipment is
destroyed in a fire or natural disaster.
Silverlake System(R) is a registered trademark of Jack Henry & Associates, Inc.
CIF 20/20(TM) is a trademark of Jack Henry & Associates, Inc. AS/400(TM) is a
trademark of International Business Machines Corporation.
Hardware manufacturers enter into marketing and other arrangements with software
companies, such as JHA, because each depends upon the products of the other.
These arrangements generally include financial incentives paid by the
manufacturer to the software company. They may be structured as hardware
commissions based upon hardware sold by the manufacturer in conjunction with the
company's software or as a remarketer arrangement. A remarketer arrangement
allows the software company to purchase hardware from the manufacturer at a
discount and sell (remarket) it to customers along with the company's software.
Remarketer arrangements usually require the software company to assume more of
the marketing and customer contact responsibilities. The margin earned by a
remarketer on hardware it sells is generally greater than the amounts received
on commission arrangements. Only a minor portion of JHA s revenues are realized
from commission arrangements. Remarketer arrangements are generally not
exclusive. All of the major hardware manufacturers, except one, have more than
one software company as remarketers of their hardware in the banking industry.
Effective January 1, 1997, JHA renewed its industry remarketer (IR) agreement
with IBM that has a two year term. The Company continues to operate under the
IBM Business Partner marketing program.
The IR agreement allows JHA to sell IBM's newest mid-range computer system, the
AS/400, along with its banking software system. It also allows JHA to provide
upgraded and additional equipment to its existing IBM customers. IBM hardware
maintenance will also continue to be offered to customers, providing "one-call"
customer support service for hardware, system software and applications software
support.
MARKETING -- JHA markets its products throughout the United States using sales
representatives who are employed by and work directly for JHA. The Company
offers both Silverlake System, CIF 20/20 and its other ancillary products
through the efforts of its company sales representatives.
JHA's primary market is commercial banks. JHA has not devoted significant
marketing and sales efforts to other financial institutions such as savings and
loans or credit unions. JHA does have some savings and loan and savings bank
customers, but most of them operate more like a commercial bank than a
traditional thrift institution. With its current range of products, JHA systems
are appropriate for all but the largest regional money center banks. Most of
the sales effort and success has been in banks from $2 million to $2 billion in
total assets.
JHA also has a few installations in the Caribbean and one in West Africa through
the marketing efforts of its small foreign sales corporation, Jack Henry
International Limited ("JHI"). JHI's international sales have historically
accounted for substantially less than 5% of JHA's revenues.
The Company's backlog of business was $29,671,000 at June 30, 1997. Backlog at
August 31, 1997 was $27,900,000.
OTHER INFORMATION
SUBSIDIARIES
From July 1, 1994 through June 30, 1997, the Company has had the following
subsidiaries and affiliates:
<TABLE>
<S><C>
Company Effective Dates Percent Ownership Comments
Jack Henry Interna- July '86 - Present 100% Markets USA products
tional, Ltd. outside the U.S.
Silverlake System June '89 - March '96 25% Marketed, installed,
Sdn Bhd and supported the
Asian Pacific Ver-
sion of Silverlake
System
BankVision Software, August '93 - Present 100% Markets banking
Ltd. products outside the
U.S.
CommLink Corp. July '94 - Present 100% Markets ATM
switching products
and services
Liberty Software, June '95 - June '96 100% Marketed Liberty
Inc. system throughout
the U.S.
Central September 95 - June 100% Marketed ATM
Interchange, Inc. 96 switching products
and services
Liberty Banking September 96 - June 100% Marketed service
Services, Inc. 97 bureau in Rocky
Mountain region
</TABLE>
CORPORATE HISTORY
JHA was incorporated in Missouri in 1977 and was privately held until November
1985 when it sold 725,000 shares of its common stock to the public (along with
375,000 shares sold by stockholders). JHA also reincorporated in Delaware at
that time. The Company became subject to periodic reporting and certain other
requirements of the Securities Exchange Act of 1934 as a result of that initial
public stock offering. The common stock was then qualified for quotation on the
National Market System of the NASDAQ interdealer quotation system. The
Company's stock symbol is JKHY.
The Company paid a 50% stock dividend March 3, 1992, March 8, 1993, and March
13, 1997. It also paid a 33 1/3% stock dividend March 10, 1994. These combined
with new shares issued under stock options exercised and shares issued to
purchase businesses have increased the total number of shares of common stock
outstanding to 18,753,044 as of August 12, 1997.
EMPLOYEES
As of August 1, 1997, the Company had 447 full-time employees. The Company's
employees are not covered by a collective bargaining agreement and there have
been no labor-related work stoppages. The Company considers its employee
relations to be good.
ITEM 2. PROPERTIES
The Company owns approximately 52 acres located in the town of Monett, MO on
which it maintains four existing office buildings and a maintenance building.
It also owns a building in Houston, TX which houses its CommLink unit. The
Company owns an office building in Angola, IN. Office space owned totals
approximately 59,000 square feet. Leased office facilities in various cities in
the United States totals approximately 47,000 square feet.
The Company owns four aircraft which are utilized for business purposes. Many
of the Company's customers are located in communities which do not have easily
accessible commercial airline service. The Company uses its airplanes in
connection with installation, maintenance and sales of its systems.
Transportation costs for installation and other customer services are billed to
the Company's customers. The Company leases property, which includes real
estate, a hangar, and related facilities at the Monett, MO municipal airport.
In addition, JHA leases a smaller plane for shorter flights and fewer
passengers.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ - National Market System under the symbol JKHY. The
following table shows the reported closing sales prices for the common stock
during the last two fiscal years. Prices and cash dividends have been adjusted
for stock dividends as appropriate.
FISCAL 1997
HIGH LOW
First Quarter $24.08 $16.67
Second Quarter 27.83 20.25
Third Quarter 27.17 20.63
Fourth Quarter 24.75 17.50
Fiscal 1996
First Quarter $13.83 $ 9.50
Second Quarter 17.00 12.67
Third Quarter 17.17 13.58
Fourth Quarter 23.17 16.25
A cash dividend of $.0333 per share was paid September 23, 1994 and December 15,
1994. Cash dividends of $.0383 per share were paid March 15, 1995, May 26,
1995, September 22, 1995 and December 12, 1995. Cash dividends of $.0467 per
share were paid March 14, 1996, May 29, 1996, September 24, 1996 and December
10, 1996. A cash dividend of $.053 was paid March 13, 1997 and $.055 was paid
May 28, 1997. Further, a cash dividend of $.055 per share was declared on
August 26, 1997, payable September 23, 1997 to stockholders of record on
September 8, 1997.
The Company established a practice of paying quarterly dividends at the end of
FY 1990. Payment of dividends will continue to be at the discretion of the
Board of Directors and will depend, among other factors, upon the earnings,
capital requirements, and operating and financial condition of the Company. The
Company does not foresee any changes in its dividend practices in the immediate
future.
As of August 20, 1997, there were 5,389 holders of the Company's common stock.
On that same date the last sale price of the common shares as reported on NASDAQ
was $24.625 per share.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Information
(In Thousands, Except Per Share Information)
<TABLE>
<S><C>
YEAR ENDED JUNE 30,
INCOME STATEMENT DATA 1997 1996 1995 1994 1993
Gross revenue (1) $82,600 $67,558 $46,124 $38,390 $32,589
Income from continuing opera- $15,755 $12,268 $ 7,978 $ 6,259 $ 5,272
tions
Income (loss) from discontinued
operations (net of applicable
income taxes) (2) $ (450) $(2,620) - - $ 101
Extraordinary income from
Unisys settlement - - - - $ 886
Net income $15,305 $ 9,648 $ 7,978 $ 6,259 $ 6,259
Income (loss) per share (3):
Continuing operations $ .83 $ .65 $ .44 $ .35 $ .30
Discontinued operations $ (.03) $ (.14) - - $ .01
Extraordinary income - - - - $ .05
Net income $ .80 $ .51 $ .44 $ .35 $ .36
Dividends declared per share $ .20 $ .17 $ .15 $ .13 $ .11
JUNE 30,
BALANCE SHEET DATA 1997 1996 1995 1994 1993
Working capital $15,490 $ 6,895 $ (666) $11,181 $ 7,394
Total assets $82,069 $60,401 $58,721 $38,347 $29,908
Long-term debt - - - - -
Stockholders' equity $52,782 $37,418 $29,484 $23,650 $17,639
</TABLE>
Notes:
(1) Gross revenue includes software licensing and installation revenues;
support revenues; and hardware sales; less sales returns and allowances.
(2) Income and losses from any discontinued operations is reported as such
from the appropriate date in each respective case.
(3) Per share data have been adjusted to reflect the 50% stock dividends paid
in prior years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
Introduction - All of the revenues (and costs and expenses) in the statement of
operations relate to JHA's continuing operations, i.e., the installation and
support of banking software systems that JHA developed and the marketing of the
JHA software along with computer hardware manufactured by others to provide a
complete data processing system for in-house or outsourced operations in finan-
cial institutions.
Total revenues, presented in the statement of operations, include software
licensing and installation revenues; maintenance/support and services revenues;
and hardware sales and commissions which includes revenues from the sale of
forms and supplies.
Business operations for FY '97 and '96 continues to reflect JHA's success in its
market niche. JHA s approach of expanding its product and service offerings to
provide a top quality, comprehensive data processing installation for its
customers helps to drive their success. Results of operations for JHA's banking
system business in each of the last two fiscal years are discussed separately
below.
FY '97
REVENUE - The Company continued great strides forward with each major component
of revenue contributing to the record $82,600,000, - a 22% increase.
Increased demand for the Company s flagship products continued to be a driving
force in the revenue growth. Other significant growth contributors were
electronic transaction fees, service bureau and customer support fees - all
increasing at similar levels.
COST OF SALES - Cost of sales increased 22%, equaling the rate of revenue
growth. Cost of hardware increased 26% while cost of services only increased
18%.
GROSS PROFIT - Gross profit increased 22%, consistent with the revenue increase.
This change helped to keep the gross margin at 50%, the same level as last year.
OPERATING EXPENSES - The 17% increase in operating expenses was favorable when
compared to the revenue and gross profit increase. The selling and marketing
increase (21%) was directly related to the increase in revenues.
OTHER INCOME - Other income rose 27% over last year, primarily due to the
increased amount of invested funds throughout the current year than during last
year.
DISCONTINUED OPERATIONS - The Company incurred a $450,000 loss from discontinued
operations, down significantly from last year. Due to a planned sale not
closing, the Company is further evaluating its options regarding BankVision.
FY '96
REVENUE - Total revenues which set another new record were $67,558,000, up 46%
over last year. Each major component of revenue increased significantly above
the previous year's mark. The Company has had six consecutive years of each
revenue component increasing and establishing new record levels.
Increased demand for the Company's application software was the driving force
for software and installation revenues. Acquisitions provided $10,900,000 of
the increase with additional demand and increased electronic transaction fees
the next most significant contributors to the maintenance/support and service
increase. Hardware revenues experienced increases primarily as a result of
increased demand and increased forms and supply sales through acquisitions.
Each major component of revenue is expected to increase, but not necessarily at
the same rate as the past year. Also, over the longer term, the hardware
component of revenue could become a smaller and smaller portion.
COST OF SALES - Cost of sales increased 46%, consistent with the revenue
increase. Each major component had an increase with the most significant
increase occurring in cost of services. Acquisitions during the last 13 months
contributed $6,800,000 to the cost of services increase.
GROSS PROFIT - Overall gross profit increased 47%, in line with the increase
in total revenues. Further, the gross margin percentage was at 50%, unchanged
from last year's rate.
OPERATING EXPENSES - The 30% increase in operating expenses was quite low
compared to the 47% increase in gross profit. This strongly supports the
Company's ability to leverage more profit to the bottom line as it continues
growing. Selling and marketing costs experienced the largest increase. This
increase in spending is directly related to the increase in revenues and the
resulting gross profit.
OTHER INCOME - The overall level of other income is down from last year due
primarily to lower levels of invested funds during the current year and higher
cash outlays for acquisitions.
FINANCIAL CONDITION
Liquidity - JHA's liquidity position (cash plus short-term investments minus
working capital borrowings) at June 30, 1997 increased significantly from last
year. The total was $13,867,000 versus $8,080,000 last year. The Company
generated significantly higher cash flows from operations, but the additional
outlays for capital expenditures (some of which resulted from acquisitions) and
dividends held liquidity growth to its current level. Working capital more than
doubled from $6,895,000 last year to $15,490,000 in the current year.
The Company believes its liquid assets on hand and those generated from
operations are sufficient to meet its cash requirements for FY '98. Cash and
investments are expected to increase during the first quarter of FY '98 as the
annual software maintenance billings in trade receivables at June 30, 1997 are
collected. The Company expects to utilize its $4,000,000 credit line minimally
during the next fiscal year.
Capital Requirements and Resources - JHA generally uses existing resources and
funds generated from operations to meet its capital requirements. Capital
expenditures of $10,313,000 were made for expansion of facilities and additional
equipment to provide for the Company's current and future growth. The most
significant individual outlays were for upgrades and additions to the corporate
aircraft. The Company has no long-term debt and anticipates capital
expenditures could approach $6,000,000 during the next fiscal year. These will
be funded from funds generated by operations.
Subsequent to June 30, 1997, the Company's Board of Directors declared a cash
dividend of $.055 per share on its common stock payable on September 23, 1997 to
stockholders of record as of September 8, 1997. Current funds from operations
should be adequate for this purpose. The Board has indicated that it plans to
continue paying dividends so long as the Company's financial picture continues
to be favorable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Independent Auditors'Report..............................................12
Independent Accountants'Report...........................................13
Financial Statements:
Consolidated Statements of Income,
Years Ended June 30, 1997, 1996 and 1995......................14
Consolidated Balance Sheets,
June 30, 1997 and 1996........................................15
Consolidated Statements of Changes in Stockholders' Equity,
Years Ended June 30, 1997, 1996 and 1995......................16
Consolidated Statements of Cash Flows,
Years Ended June 30, 1997, 1996 and 1995......................17
Notes to Consolidated Financial Statements....................18
Financial Statement Schedules:
There are no schedules included because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Jack Henry & Associates, Inc.:
We have audited the accompanying consolidated balance sheet of Jack Henry &
Associates, Inc. and its subsidiaries (the "Company") as of June 30, 1997 and
the related consolidated statement of income, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at June 30, 1997 and
the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
August 15, 1997
St Louis, Missouri
Independent Accountants Report
Board of Directors
Jack Henry & Associates, Inc.
Monett, Missouri
We have audited the accompanying consolidated balance sheet of JACK HENRY &
ASSOCIATES, INC. AND SUBSIDIARIES as of June 30, 1996, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the two years in the period ended June 30, 1996. These
financial statements are the responsibility of the Company s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JACK HENRY &
ASSOCIATES, INC. AND SUBSIDIARIES as of June 30, 1996, and the results of its
operations and its cash flows for each of the two years in the period ended June
30, 1996, in conformity with generally accepted accounting principles.
Baird Kurtz & Dobson
August 22, 1996
Joplin, Missouri
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
<TABLE>
<S><C>
YEAR ENDED JUNE 30,
1997 1996 1995
REVENUES
Software licensing & installation $ 22,955 $ 18,111 $ 15,063
Maintenance/support & service 27,433 22,595 10,458
Hardware 32,212 26,852 20,603
Total $ 82,600 $ 67,558 $ 46,124
COST OF SALES
Cost of hardware $ 22,397 $ 17,764 $ 15,181
Cost of services 18,679 15,829 7,765
Total $ 41,076 $ 33,593 $ 22,946
GROSS PROFIT $ 41,524 $ 33,965 $ 23,178
OPERATING EXPENSES
Selling and marketing $ 9,162 $ 7,573 $ 5,395
Research and development 2,045 1,775 1,114
General and administrative 6,076 5,411 4,866
Total $ 17,283 $ 14,759 $ 11,375
OPERATING INCOME FROM CONTINUING OPERATIONS $ 24,241 $ 19,206 $ 11,803
Percent of total revenue 29.3% 28.4% 25.6%
OTHER INCOME
Interest, net $ 660 $ 541 $ 746
Other, net 186 126 93
Total $ 846 $ 667 $ 839
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES $ 25,087 $ 19,873 $ 12,642
PROVISION FOR INCOME TAXES 9,332 7,605 4,664
INCOME FROM CONTINUING OPERATIONS $ 15,755 $ 12,268 $ 7,978
LOSS FROM DISCONTINUED OPERATIONS $ 450 $ 2,620 $ -
NET INCOME $ 15,305 $ 9,648 $ 7,978
Income from continuing operations per share $ .83 $ .65 $ .44
Loss from discontinued operations per share $ .03 $ .14 -
Net income per share $ .80 $ .51 $ .44
Weighted average shares outstanding 19,072 18,726 18,074
</TABLE>
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<S><C>
JUNE 30,
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 7,948 $ 4,952
Investments 5,919 3,128
Trade receivables 22,703 15,990
Income taxes receivable 1,982 889
Prepaid expenses and other 4,177 3,187
Total $42,729 $28,146
PROPERTY AND EQUIPMENT, net $21,869 $13,612
OTHER ASSETS:
Intangible assets, net of amortization $15,469 $16,805
Computer software 1,226 1,375
Other non-current assets 776 463
Total $17,471 $18,643
Total assets $82,069 $60,401
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,911 $ 2,238
Accrued expenses 3,648 2,945
Deferred revenues 20,680 16,068
Total $27,239 $21,251
DEFERRED INCOME TAXES 2,048 1,732
Total liabilities $29,287 $22,983
STOCKHOLDERS' EQUITY:
Preferred stock; $1 par value; 500,000 shares authorized;
none issued - -
Common stock; $.01 par value; 30,000,000 shares authorized;
shares issued 1997 - 18,532,719; 1996 - 11,867,593 185 119
Less treasury shares; 1997 - 15,410 (293) -
Additional paid-in capital 14,744 10,711
Retained earnings 38,146 26,588
Total stockholders' equity $52,782 $37,418
Total liabilities and stockholders' equity $82,069 $60,401
</TABLE>
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
<TABLE>
<S><C>
YEAR ENDED JUNE 30,
1997 1996 1995
PREFERRED SHARES (500,000 AUTHORIZED): - - -
COMMON SHARES (30,000,000 AUTHORIZED):
Shares, beginning of year 11,867,593 11,732,028 11,674,404
Shares issued upon exercise of stock options 618,750 133,242 57,624
Shares issued for Employee Stock Purchase 1,659 2,323 -
Plan
Shares issued for acquisitions 56,144 - -
Stock dividend 5,988,573 - -
18,532,719 11,867,593 11,732,028
Less: Held in treasury (15,410) - -
Shares, end of year 18,517,309 11,867,593 11,732,028
COMMON STOCK - PAR VALUE $.01 PER SHARE:
Balance, beginning of year $ 119 $ 117 $ 117
Shares issued upon exercise of stock options 5 2 -
Shares issued for acquisitions 1 - -
Stock dividend 60 - -
Balance, end of year $ 185 $ 119 $ 117
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $10,711 $ 9,425 $ 9,099
Shares issued upon exercise of stock options 2,788 (37) 244
Shares issued due to Employee Stock Purchase 42 63 -
Plan
Shares issued for acquisitions (306) - -
Stock dividend (60) - -
Sale of treasury stock (451) - -
Tax benefit on exercise of options 2,020 1,260 82
Balance, end of year $14,744 $ 10,711 $ 9,425
TREASURY STOCK:
Balance, beginning of year $ - $ - $ -
Purchases of treasury stock (7,469) (1,604) -
Sales of treasury stock 6,871 1,604 -
Shares issued for acquisitions 305 - -
Balance, end of year $ (293) $ - $ -
RETAINED EARNINGS:
Balance, beginning of year $26,588 $19,942 $14,478
Retained deficit of acquired business (116) - -
Net income 15,305 9,648 7,978
Dividends paid (1997 - $.28; 1996 - $.26 per
share; 1995 - $.22 per share) (3,631) (3,002) (2,514)
Balance, end of year $38,146 $26,588 $19,942
TOTAL STOCKHOLDERS' EQUITY $52,782 $37,418 $29,484
</TABLE>
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
YEAR ENDED JUNE 30,
1997 1996 1995
CASH FLOWS - OPERATING ACTIVITIES:
Cash received from customers $ 80,673 $ 68,726 $44,102
Cash paid to suppliers and employees (53,922) (47,637) (30,683)
Interest received 755 619 823
Income taxes paid, net (7,875) (6,637) (4,613)
Other, net (151) (400) 28
Net cash provided by continuing operating
activities $ 19,480 $ 14,671 $ 9,657
CASH FLOWS FROM DISCONTINUED OPERATIONS $ (819) $ (151) $ -
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment $ 13 $ 15 $ 40
Capital expenditures (10,313) (5,017) (2,647)
Purchases of investments (5,887) (2,057) (4,154)
Proceeds from sales of investments 3,002 4,500 9,233
Purchases of customer contracts (33) (6,767) (5,349)
Computer software development (191) (441) (241)
Advances to affiliates - - (15)
Business acquisition, net of cash acquired (282) - (2,773)
Net cash used in investing activities $(13,691) $ (9,767) $(5,906)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable $ (129) - -
Proceeds from issuance of common stock
upon exercise of stock options 1,532 1,382 244
Dividends paid (3,631) (3,002) (2,514)
Purchases of treasury stock (5,392) (1,604) -
Proceeds from sales of treasury stock 5,646 - -
Net cash used in financing activities $ (1,974) $ (3,224) $(2,270)
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 2,996 $ 1,529 $ 1,481
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,952 3,423 1,942
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,948 $ 4,952 $ 3,423
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS AND 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. The Company's
revenues are predominately earned by marketing those systems to financial
institutions nationwide along with the computer equipment (hardware) and by
providing 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.
CONSOLIDATION
The consolidated financial statements include the accounts of JHA and its
wholly-owned subsidiaries: Jack Henry International, Ltd., BankVision Software,
Ltd. and CommLink Corp. All significant intercompany accounts and transactions
have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company's various sources of revenue and the methods of revenue recognition
are as follows:
SOFTWARE LICENSING FEES - Initial licensing fees are recognized upon
delivery of the unmodified software. Monthly software usage charges are
recognized ratably over the contract period.
SOFTWARE INSTALLATION AND RELATED SERVICES - Fees for these services are
recognized as the services are performed on hourly contracts and at
completion on fixed-fee contracts.
PRODUCT MAINTENANCE/SUPPORT FEES - Fees from these contracts are recognized
ratably over the life of the contract.
HARDWARE - Revenues from sales of hardware and IBM system software are
recognized upon shipment by the supplier. Hardware maintenance revenues
are also included. Costs of items purchased and remarketed are reported
as cost of hardware in cost of sales.
DEFERRED REVENUES
Deferred revenues consist primarily of prepaid annual software and hardware
maintenance fees. Nonrefundable software and hardware deposits and payments
received prior to delivery are reflected as deferred revenues.
COMPUTER SOFTWARE DEVELOPMENT
The Company capitalizes new product development costs incurred from the point at
which technological feasibility has been established through the point at which
customer installations begin. The capitalized costs, which include salaries and
related expenses, equipment/facility costs and other direct expenses, are
amortized to expense on a straight line basis over the estimated product life
(generally five years).
INCOME PER SHARE
Per share information is based on the weighted average number of common shares
outstanding during the year. Stock options have been included in the
calculation of income per share to the extent they are dilutive.
The Company paid a 50% stock dividend March 13, 1997. The number of weighted
average shares outstanding and per share data were retroactively restated for
this stock dividend.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
INVESTMENTS
The Company invests its excess cash in U.S. government securities and money
market accounts.
Debt securities for which the Company has the positive intent and ability to
hold until maturity are classified as held-to-maturity and are carried at
historical cost adjusted for amortization of premiums and accretion of
discounts. Premiums and discounts are amortized and accreted, respectively, to
interest income using the level-yield method over the period to maturity.
Interest on investments in debt securities is included in income when earned.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated principally using the
straight-line method over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Intangible assets consist primarily of excess purchase price over the fair value
of net assets acquired, software maintenance/support contracts and marketing
agreements acquired in business acquisitions. The amounts are amortized over an
estimated economic benefit period, generally five to fifteen years.
The excess of purchase price over the net assets of entities acquired is
amortized using the straight-line method over periods of up to 15 years from
acquisition date.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is likely that a deferred tax asset will not be realized.
NOTE 2: INVESTMENTS
The amortized cost and approximate fair values of held-to-maturity securities at
June 30, 1997 and 1996 are as follows:
<TABLE>
<S><C>
(In thousands)
Amortized Gross Gross Approximate
1997: Cost Unrealized Unrealized Fair
Gains Losses Value
U.S. treasury notes $5,808 $ 5 $ - $5,813
Accrued interest 111 - - 111
Total $5,919 $ 5 $ - $5,924
1996:
U.S. treasury notes $ 3,047 $ 2 $ (25) $ 3,024
Accrued interest $ 81 $ - $ - $ 81
Total $ 3,128 $ 2 $ (25) $ 3,105
</TABLE>
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values for held-to-maturity securities are based on quoted market prices
(See Note 2). For all other financial instruments, including amounts receivable
and payable, fair values approximate carrying value.
NOTE 4: PROPERTY AND EQUIPMENT
The classification of property and equipment, together with their estimated
useful lives is as follows:
June 30, Estimated
1997 1996 useful life
(In thousands)
Land $ 434 $ 434
Land Improvements 519 316 5-20 years
Buildings 3,735 2,265 25-30 years
Equipment and furniture 14,580 10,263 5-8 years
Aircraft 10,472 6,215 8-10 years
$29,740 $19,493
Less accumulated depreciation 7,871 5,881
$21,869 $13,612
NOTE 5: OTHER ASSETS
Following is an analysis of intangible assets:
<TABLE>
<S><C>
Year ended June 30,
1997 1996
(In thousands)
Balance, beginning of year $16,805 $17,790
Excess purchase price over net assets acquired 318 1,869
Writeoff of BankVision goodwill - (1,142)
Amortization (1,654) (1,712)
Balance, end of year $15,469 $16,805
</TABLE>
Computer software includes the unamortized costs of software products developed
by the Company which were required to be capitalized by generally accepted
accounting principles. The costs are amortized over an estimated economic
benefit period, generally five years. Following is an analysis of the computer
software costs:
<TABLE>
<S><C>
Year ended June 30,
1997 1996
(In thousands)
Balance, beginning of year $1,375 $1,740
Costs of software development capitalized 191 441
Cost of software written off - BankVision - (461)
Amortization (340) (345)
Balance, end of year $1,226 $1,375
/TABLE
<PAGE>
NOTE 6: LINES OF CREDIT
The Company has a line of credit with First State Bank of Purdy at June 30, 1997
for $4 million as described below. It also had lines of credit with the same
bank at June 30, 1996 totaling $2.2 million. There were no amounts outstanding
under the lines at June 30, 1997 or 1996. Utilization of the lines was minimal
during each of the last three fiscal years.
The line of credit is payable upon demand or March 31, 1998, and is secured by
$1 million of investments with the remainder unsecured. Borrowings under the
line bear interest at a floating prime rate, 8.5% at June 30, 1997.
NOTE 7: INCOME TAXES
The provision for income taxes (benefit) on income from continuing operations
consists of the following:
<TABLE>
<S><C>
Year ended June 30,
1997 1996 1995
(In thousands)
Current:
Federal $8,184 $6,588 $3,936
State 832 593 418
Foreign - - (60)
Deferred:
Federal 291 374 335
State 25 50 35
$9,332 $7,605 $4,664
Effective tax rate 37% 38% 37%
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on the
balance sheets were:
<TABLE>
<S><C>
Year ended June 30,
1997 1996
(In thousands)
Deferred tax assets:
Carryforward (operating loss, capital
loss, credits, etc.) $ 126 226
Other, net 437 290
$ 563 $ 516
Deferred tax liabilities:
Excess tax depreciation (2,207) (1,500)
Excess tax amortization (404) (748)
(2,611) (2,248)
Net deferred tax liability $(2,048) $(1,732)
</TABLE>
The following analysis reconciles the statutory federal income tax rate to the
effective income tax rates reflected above:<PAGE>
<TABLE>
<S><C>
Year ended June 30,
1997 1996 1995
Computed "expected" tax expense
(benefit) 35% 35% 34%
Increase (reduction) in taxes resulting
from:
State income taxes, net of federal
income tax benefits 3% 3% 2%
Research & Development Credit (1%) - -
Nondeductible excess purchase price - 1% 1%
Other - (1%) -
37% 38% 37%
</TABLE>
The Company has available at June 30, 1997, unused operating loss carryforwards
of $719,000 which expire between 2007 and 2010. There are also capital loss
carryforwards of $331,000 which expire in 1999.
NOTE 8: INDUSTRY AND SUPPLIER CONCENTRATIONS
The Company sells its products to banks and financial institutions throughout
the United States and generally does not require collateral. Adequate reserves
(which are insignificant) are maintained for potential credit losses.
In addition, the Company purchases most of its computer equipment (hardware) for
resale in relation to installation of JHA software systems from one supplier.
There are a limited number of hardware suppliers for these required materials.
NOTE 9: STOCK OPTION PLANS
The Company has two stock option plans: the 1996 Stock Option Plan ("1996 SOP")
and the Non-Qualified Stock Option Plan ("NSOP").
The 1996 SOP was adopted by the Company October 29, 1996, for its employees.
This plan replaced the terminating 1987 SOP. Terms of the options are
determined by the Compensation Committee of the Board of Directors when granted.
Shares of common stock are reserved for issuance under this plan at the time of
each grant which must be at or above fair market value at the grant date. The
options terminate upon termination of employment, three months after retirement,
one year after death or ten years after grant.
The NSOP was adopted by the Company on October 31, 1995 for its outside
directors. Options are exercisable in four equal annual installments beginning
six months after grant at a price equal to 100% of the fair market value of the
stock at the grant date. The options terminate when director status ends, upon
surrender of the option or ten years after grant. A total of 300,000 shares of
common stock have been reserved for issuance under this plan with a maximum of
75,000 for each director.
A summary of the activity of all of the Company's stock option plans is:
<TABLE>
<S><C>
Year ended June 30,
1997 1996 1995
Options outstanding, beginning of
year: 1,352,612 1,027,278 856,164
Options issued 64,500 530,500 230,000
Options exercised (679,125) (205,166) (58,886)
Options terminated (18,750) - -
Increase in options outstanding due
to 50% stock dividend 676,304 - -
Options outstanding, end of year: 1,395,541 1,352,612 1,027,278
Currently exercisable 1,358,042 975,611 853,278
Range of exercise price for $ 1.25 $ 1.875 $ 1.875
options outstanding
to $27.00 to $26.875 to $13.20
Range of exercise price for $ 1.25 $ 1.25 $ 3.50
options exercised
to $17.917 to $9.75 to $3.97
</TABLE>
As permitted under SFAS 123, the Company has elected to continue to follow APB
25 in accounting for stock-based awards to employees. Under APB 25, the Company
generally recognizes no compensation expense with respect to such awards, Since
the exercise price of the stock options awarded are equal to the fair market
value of the underlying security on the grant date.
Pro forma information regarding net income and earnings per share is required by
SFAS 123 for awards granted after December 31, 1994 as if the Company had
accounted for its stock-based awards to employees under the fair value method of
SFAS 123. The fair value of the Company s stock-based awards to employees was
estimated as of the date of the grant using a Black-Scholes option pricing
model.
The Company s pro forma information for continuing operations follows:
1997 1996
<TABLE>
<S><C>
Net income As reported $ 15,755 $ 12,268
Pro forma $ 15,524 $ 10,382
Primary income per share As reported $ .83 $ .65
Pro forma $ .81 $ .55
Assumptions
Expected life (years) 2.16 2.16
Volatility 40% 40%
Risk free interest rate 6.1% 5.9%
Dividend yield .7% .7%
</TABLE>
<TABLE>
<S><C>
Range of Exercise Shares Weighted-Average Weighted-Average
Prices Remaining Exercise Price
Contractual Life
OPTIONS OUTSTANDING:
$ 1 to 6 327,269 5.0 years $ 3.48
7 to 12 335,547 7.6 7.28
13 to 18 668,225 8.5 15.40
19 to 24 42,000 9.3 20.80
25 to 30 22,500 9.3 27.00
$ 1 to 30 1,395,541 7.5 $11.00
OPTIONS EXERCISABLE:
$ 1 to 6 327,269 $ 3.48
7 to 12 320,548 7.21
13 to 18 668,225 15.40
19 to 24 19,500 19.22
25 to 30 22,500 27.00
$ 1 to 30 1,358,042 N/A $10.84
OPTIONS CANCELED:
FYE 1996
$ 7 to 12 3,750 N/A $9.75
FYE 1997
$13 to 18 15,000 N/A $17.92
</TABLE>
NOTE 10: EMPLOYEE BENEFIT PLANS
Stock Purchase Plan - The Company established an employee stock purchase plan on
January 1, 1996. The plan allows the majority of employees the opportunity to
directly purchase shares of the Company. Purchase prices for all participants
are based on the closing bid price on the last business day of the month.
401(k) Employee Stock Ownership Plan - The Company has a 401(k) Employee Stock
Ownership Plan ("ESOP") covering substantially all employees of the Company and
its subsidiaries. As of July 1, 1987, the plan was amended and restated to
include most of the existing ESOP provisions and to add salary reduction
contributions allowed under Section 401(k) of the Internal Revenue Code and to
require employer matching contributions. The Company has the option of making a
discretionary contribution to the Plan, however, none have been made for any of
the three most recent fiscal years. The total expense related to the plan was
$617,000, $549,000, and $441,000 for 1997, 1996, and 1995, respectively.
NOTE 11: RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO NET CASH
PROVIDED BY CONTINUING OPERATING ACTIVITIES
A reconciliation of income from continuing operations to net cash provided by
continuing operating activities is as follows:
<TABLE>
<S><C>
Year ended June 30,
1997 1996 1995
(In thousands)
Income from continuing operations $15,755 $12,268 $7,978
Adjustments to reconcile income from
continuing operations to net cash provided by
operating activities:
Depreciation and amortization 4,071 3,562 2,077
Provision for deferred income taxes 316 424 370
(Gain)loss on sale of fixed assets (4) 3 1
Realized gains on investments - - (24)
Other, net 91 81 78
(Increase) decrease in assets:
Trade receivables (5,759) 760 (2,617)
Prepaid expenses and other (987) (1,424) (248)
Increase (decrease) in liabilities:
Accounts payable 601 (2,903) 1,757
Accrued expenses 523 1,825 139
Income taxes 38 (843) (401)
Deferred revenues 4,603 918 547
Total adjustments $ 3,493 $2,403 $ 1,679
Net cash provided by continuing operating $19,248 $14,671 $9,657
activities
</TABLE>
NOTE 12: DISCONTINUED OPERATIONS
In the last quarter of 1996, the Company decided to discontinue the operations
of its BankVision Software, Ltd. subsidiary (BankVision) which it planned to
sell by December 31, 1996. The estimated loss on disposal recorded in 1996
consisted of the following:
Estimated loss on sale, net of applicable income tax benefit $2,390,000
Operating losses from April 1, 1996 through June 30, 1996, net of
income tax benefit of $78,000 $ 130,000
Estimated operating losses from July 1, 1996 to anticipated dispos-
al date, net of income tax benefit of $38,000 $ 100,000
$2,620,000
The planned sale of BankVision was not concluded as of June 30, 1997. Thus,
additional losses of $450,000 were reported for the discontinued BankVision unit
for the year then ended. The Company is pursuing its alternatives regarding
BankVision and plans to have a satisfactory resolution before June 30, 1998.
NOTE 13: BUSINESS ACQUISITIONS
The Company acquired all the outstanding shares of Liberty Banking Services,
Inc. on September 1, 1996 for $2,000,000 in Company stock. The transaction was
accounted for as a pooling of interests.
The Company purchased the remaining shares in Central Interchange, Inc. that it
didn't already own (81%) on September 1, 1995 for $250,000 in stock. This and
subsequent transactions noted below were accounted for using the purchase method
of accounting.
On June 30, 1995, the Company acquired all the outstanding shares of Liberty
Software, Inc. common stock and customer contracts for $12,000,000 cash.
Effective July 1, 1994, the Company acquired all of the outstanding stock of
CommLink Corp. The initial consideration paid to CommLink's stockholders was
$2,526,000 in cash. Additional payments were made over the subsequent two
years, based on CommLink's results.
The consolidated operations of the Company include the operations of the
acquirees from their acquisition dates for acquisitions accounted for as
purchases and from the beginning of the year for the acquisition accounted for
as a pooling of interests. Prior year financial statements have not been
restated for the effect of the pooling transaction because of the insignificance
of the related amounts. Unaudited Pro Forma consolidated operations assuming
these acquisitions were made at the beginning of the year are shown below:
<TABLE>
<S><C>
1997 1996 1995
(In thou-
sands)
Net revenues $82,777 $67,661 $67,455
Income from continuing operations $15,770 $12,262 $ 8,173
Loss from discontinued operations $ 450 $ 2,620 $ -
Net income $15,320 $ 9,642 $ 8,173
Income from continuing operations per share $ .83 $ .65 $ .45
Net income per share $ .80 $ .51 $ .45
</TABLE>
The Pro Forma results are not necessarily indicative of what would have occurred
had
the acquisitions been on these dates, nor are they necessarily indicative of
future operations. Pro Forma data reflect the adjusted amortized excess
purchase price over net assets acquired. No adjustments were made to reflect
the combined impact of operations on income tax expense of the separate
companies.
NOTE 14: SUBSEQUENT EVENT
On July 10, 1997, the Company acquired G.G. Pulley & Associates, Inc., a New
Mexico corporation ("Pulley"), through a Merger Agreement effective July 1, 1997
(the "Merger"). Pulley is a privately owned company engaged in the business of
writing and selling item processing software, reselling item processing hardware
(reader/sorters) and providing related services to community banks. Pursuant to
the Merger, all outstanding shares of the capital stock of Pulley were converted
into shares of JHA common stock. A total of 222, 469 shares of common stock of
JHA were issued in the Merger and were valued at $22.475 per share, which
represents the average of the closing bid and ask prices for JHA common stock
for the five trading days ending June 23, 1997. Based upon that valuation, the
aggregate value of the JHA common stock received by Pulley shareholders was
approximately $5,000,000. This transaction will be accounted for as a pooling of
interests.
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On January 31, 1997, the audit committee of the Board of Directors recommended
that the Company consider engaging a larger accounting firm as independent
public accountants for the fiscal year ended June 30, 1997. A letter formally
dismissing the Company s prior independent public accountants (Baird, Kurtz &
Dobson) was sent March 10, 1997. On May 5, 1997, the Company engaged Deloitte &
Touche LLP to serve as its independent public accountants.
Baird, Kurtz & Dobson s report on the financial statements of the Company for
the fiscal years ending June 30, 1995 and June 30, 1996 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. During the two fiscal years
ended June 30, 1996 and the subsequent interim period preceding its dismissal,
there were no disagreements with Baird, Kurtz & Dobson on any matter of
accounting principles or practices, financial statement disclosures or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Baird, Kurtz & Dobson would have caused that firm to make reference in
connection with its report to the event or subject matter of the disagreement.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information under the captions "Election of Directors" and "Executive
Officers and Significant Employees" in the Company's Proxy Statement which is
incorporated herein by reference.*
ITEM 11. EXECUTIVE COMPENSATION
See the information under the captions "Executive Compensation"; "Compensation
Committee Report"; and "Company Performance" in the Company's Proxy Statement
which is incorporated herein by reference.*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information under the captions "Stock Ownership of Certain Stockholders"
and "Election of Directors" in the Company's Proxy Statement which is
incorporated herein by reference.*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
*Incorporated by reference pursuant to Rule 12b-23 and General Instruction G(3)
to Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this Report:
(1) Financial Statements:
The following Consolidated Financial Statements of the Company and its
subsidiaries and the Reports of Independent Accountants thereon appear under
Item 8 of this Report:
- Independent Accountants' Report.
- Consolidated Statements of Income for the Years Ended June 30, 1997, 1996
and 1995
- Consolidated Balance Sheets as of June 30, 1997 and 1996.
- Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended June 30, 1997, 1996 and 1995.
- Consolidated Statements of Cash Flows for the Years Ended June 30, 1997,
1996 and 1995.
- Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules:
The following Financial Statement Schedules filed as part of this Report appear
under Item 8 of this Report:
There are no schedules included because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
(3) List of Exhibits
(3) Articles of Incorporation and Bylaws
Except as otherwise specifically noted, the following documents are
incorporated by reference as exhibits hereto pursuant to Rule 12b-32:
3.1 Certificate of Incorporation attached as Exhibit 3.1 to the
Company's Registration Statement on Form S-1, filed November 17, 1985.
3.2 Certificate of Amendment of Certificate of Incorporation
attached as Exhibit 4 to the Company's Quarterly Report on Form 10-Q
for the Quarter ended December 31, 1987.
3.3 Certificate of Amendment of Certificate of Incorporation
attached as Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the Year Ended June 30, 1993.
3.4 Amended and Restated Bylaws attached as Exhibit A to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
March 31, 1996.
3.5 Certificate of Amendment of Certificate of Incorporation
(attached hereto).
(10) Material Contracts
Except as otherwise noted, the following material contracts are
incorporated herein by reference as Exhibits hereto pursuant to Rule
12b-32:
10.1 The Company's 1987 Stock Option Plan, as amended as of October
27, 1992 attached as Exhibit 19.1 to the Company's Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1992.
10.2 The Company's Non-Qualified Stock Option Plan, as amended as of
October 26, 1993, attached as Exhibit 19.2 to the Company's Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1993.
10.3 The Company's 1995 Non-Qualified Stock Option Plan, attached as
Exhibit 10.3 to the Company s Annual Report on Form 10-K for the Year
Ended June 30, 1996.
10.4 IBM Remarketer Agreement dated May 21, 1992, attached as Exhibit
10.1 to the Company's Annual Report on Form 10-K for the Year Ended
June 30, 1992.
10.5 Purchase Agreement for CommLink Corp. dated July 27, 1994, the
CommLink Stock Purchase Option dated February 28, 1992 and the Option
Modification dated October 14, 1993, all attached as Exhibit 2 to the
Company's Current Report on Form 8-K dated July 27, 1994.
10.6 Stock Purchase Agreement for Liberty Software, Inc.
dated June 30, 1995, attached as Exhibit 2 to the Company's Current
Report on Form 8-K dated June 30, 1995.
10.7 Marketing Agreement and Master Agreement, each dated June 30,
1995 between the Company and Broadway & Seymour, Inc., attached as
Exhibit 10 to the Company's Current Report on Form 8-K dated June 30,
1995.
10.8 Form of Indemnity Agreement which has been entered into as of
August 27, 1996 between the Company and each of its Directors,
attached as Exhibit 10.8 to the Company s Annual Report on Form 10-K
for the Year Ended June 30, 1996.
10.9 The Company s 1996 Stock Option Plan (attached hereto).
(21) Subsidiaries of the Registrant
A list of the Company's subsidiaries is attached hereto as Exhibit 21.
(23) Consents of Experts and Counsel
Consents of Independent Accountants are attached hereto as Exhibit 23A
and 23B.
(b) Reports on Form 8-K:
The following report on Form 8-K was filed during the last quarter of
the period covered by this report: Change in Registrant's Accountant
dated May 8, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 26th day of September,
1997.
JACK HENRY & ASSOCIATES, INC., Registrant
By /s/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
/s/ Michael E. Henry Chairman of the September 26, 1997
Michael E. Henry Board and Chief
Executive Officer
/s/ Michael R. Wallace President, Chief September 26, 1997
Michael R. Wallace Operating Officer
and Director
/s/ John W. Henry Vice Chairman, Senior September 26, 1997
John W. Henry Vice President and
Director
/s/ Jerry D. Hall Executive Vice September 26, 1997
Jerry D. Hall President and
Director
/s/ Terry W. Thompson Vice President, September 26, 1997
Terry W. Thompson Treasurer and
Chief Financial
Officer
(Principal
Accounting
Officer)
/s/ James J. Ellis Director September 26, 1997
James J. Ellis
/s/ Burton O. George Director September 26, 1997
Burton O. George<PAGE>
/s/ George R. Curry Director September 26, 1997
George R. Curry
Exhibit 21
JACK HENRY & ASSOCIATES, INC.
MONETT, MO 65708
LIST OF SUBSIDIARIES AT 6/30/97
Jack Henry International, Ltd.
Monett, Missouri
BankVision Software, Ltd.
Monett, Missouri
CommLink Corp.
Houston, Texas
Exhibit 3.5
State of Delaware
Certificate of Amendment of
Certificate of Incorporation
First: That at a meeting of the Board of Directors of Jack Henry & Associates,
Inc., resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and requesting that the stockholders consider same. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended
as follows:
Article Ten shall be deleted in its entirety and the following substituted in
lieu thereof:
TENTH: The board of directors of the corporation is expressly authorized to
make, alter or repeal the bylaws of the corporation. The bylaws of the
corporation may also be adopted, altered, amended or repealed by the affirmative
vote of the holders of two-thirds of the corporations stock entitled to vote.
New Articles Sixteen and Seventeen are hereby inserted as follows:
SIXTEENTH: Any action required or permitted to be taken by the stockholders of
the corporation must be taken at an annual or special meeting of the
stockholders and may not be taken by any consent in writing in lieu of a meeting
of such stockholders.
SEVENTEENTH: The Board of Directors of the corporation, when evaluating any
offer of another party to (I) purchase or exchange any securities or property
for any outstanding equity securities of the corporation, (ii) merge or
consolidate the corporation with another corporation, or (iii) purchase or
otherwise acquire all or substantially all of the properties and assets of the
corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the corporation and its
stockholders, give due consideration to all relevant factors, including without
limitation: (a) not only the price or other consideration being offered in
relation to the then current market price of the corporations outstanding shares
of capital stock, but also the Board of Directors estimate of the future value
of the corporation as an independent going concern and the unrealized value of
its property and assets; (b) the financial and managerial resources and future
prospects of the other party; and the possible social, legal, environmental
and economic effects of the transaction on the business of the corporation and
its subsidiaries and on the employees, customers and creditors of the
corporation and its subsidiaries and the effects on the communities in which the
corporations offices are located. In evaluating any such offer on the basis of
the foregoing factors, the directors shall be deemed to be performing their duly
authorized duties and acting in good faith and in the best interests of the
corporation within the meaning of Section 145 of the General Corporation Law of
Delaware, as it may be amended from time to time.
Second: That thereafter, pursuant to resolution of its Board of Directors, an
annual meeting of the stockholders of said corporation was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required
by statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
In Witness Whereof, said Jack Henry & Associates, Inc. Has caused this
certificate to be signed by Michael R. Wallace, its President, and Janet E.
Gray, its Secretary, this 3rd day of December, 1996.
By: Michael R. Wallace, President
Attest: Janet E. Gray, Secretary
Exhibit 10.9
JACK HENRY & ASSOCIATES, INC.
1996 STOCK OPTION PLAN
PURPOSES OF THE PLAN
This 1996 Stock Option Plan (the Plan) is intended to promote the interests of
JACK HENRY & ASSOCIATES, INC. (JHA) by providing a method whereby those
employees of JHA or its subsidiaries who are primarily responsible for the
management, growth and financial success of JHA and its subsidiaries may be
offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest in JHA
and remain in the service and employ of JHA or its subsidiaries.
ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors (the Board) of JHA. The
Board, however, may at any time appoint a committee (Committee) of two (2) or
more non-employee directors and delegate to such Committee one or more of the
administrative powers allocated to the Board under the provisions of the Plan,
including (without limitation) the power to determine the person or persons to
be granted options under the Plan, the number of shares to be covered by such
options, whether such options are to be incentive stock options (Incentive
Option) under Section 422A of the Internal Revenue Code of 1986, as amended (the
Code) or non-qualified options not intended to meet the requirements of Section
422A, and the time or times at which options are to be exercisable. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board may also at any
time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.
References to the Committee in various sections of the Plan shall be of no force
or effect unless the Committee is at the time responsible for the administration
of the section of the Plan which includes the reference to the Committee. The
Board is authorized (subject to the provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding options as it may deem
necessary or advisable. Decisions of the Board or the Committee, as the case may
be, shall be final and binding on all parties who have an interest in the Plan
or any outstanding option.
All determinations made and other actions taken by the Board or Committee shall
be made by the affirmative vote of a majority of the members of the Board or
Committee, but any determination or action reduced to writing and signed by a
majority of the members of the Board or Committee shall be fully as effective as
if it had been made or taken by a majority vote at a meeting duly called and
held.
ELIGIBILITY FOR OPTION GRANTS
The persons who shall be eligible to receive options pursuant to the Plan are
such employees of JHA, any Subsidiary Corporation of JHA (Subsidiary
Corporation) or any Affiliated Company of JHA, as hereinafter defined, including
employees who are members of the Board of JHA, as the Board or Committee shall
from time to time select. As used herein, the term Subsidiary Corporation shall
be defined as set forth in Section 425(f) of the Code.
The Board or Committee shall have full authority to determine the number of
shares to be covered by granted options, whether options are to be Incentive
Options under Section 422A of the Code or non-qualified options not intended to
meet the requirements of Section 422A, the time or times at which options are to
be exercisable, and such other terms and conditions as may be applicable to such
options.
STOCK SUBJECT TO THE PLAN
The stock issuable under the Plan shall be shares of JHA authorized but unissued
or reacquired Common Stock par value $.01 (Common Stock). The aggregate number
of shares which may be issued under the Plan shall not exceed One Million Five
Hundred Thousand (1,500,000) shares. The total number of shares issuable under
the Plan shall be subject to adjustment from time to time in accordance with
subsection (c) below.
Should an option expire, be surrendered in whole or in part or terminate for any
reason without being exercised, then the shares subject to the portion of the
option expired, surrendered or not so exercised shall be available for
subsequent option grants under the Plan; provided, however, shares subject to
any option or portion thereof surrendered in accordance with Section 7 of the
Plan shall not be available for subsequent option grants under the Plan.
In the event any change is made to the Common Stock issuable under the Plan
(whether by reason of merger, consolidation, reorganization, recapitalization,
or exchange of shares or by stock dividend, stock split, combination of shares,
or other change in capital structure effected without receipt of consideration),
then unless such change results in the termination of all outstanding options
pursuant to the provisions of Section 7 of the Plan, such adjustments shall be
made in the maximum number and/or class of shares issuable under the Plan and in
the number, class of shares and/or the option price per share of the stock
subject to each outstanding option as may be determined by the Board to be
appropriate in order to prevent the dilution of benefits hereunder or under
outstanding options.
TERMS AND CONDITIONS OF OPTIONS
Option Agreements. The granting of an option hereunder shall occur at the time
the Board or Committee adopts a resolution granting an option pursuant to this
Plan or at such later date as may be specified by the Board or the Committee in
such resolution (the Grant Date). Options granted pursuant to the Plan shall be
evidenced by instruments in such form and containing such terms and conditions
as the Board shall from time to time authorize; provided, however, that each
such instrument shall comply with and incorporate the terms and conditions
specified in this Section 5.
Option Price
The option price per share shall be fixed by the Board or Committee, but in no
event shall the option price per share be less than one hundred percent (100%)
of the fair market value of a share of Common Stock on the date of the option
grant.
The option price shall become immediately due upon exercise of the option and
shall be payable in one of the alternative forms specified below:
full payment by certified check payable to JHA;
full payment in shares of Common Stock having a fair market value on the
Exercise Date (as such term is defined below) equal to the option price; or
any combination of certified check payable to JHA and/or shares of Common
Stock valued at fair market value on the Exercise Date, equal in the aggregate
to the option price.
For purposes of this subsection (2), the Exercise Date shall be the date on
which written notice of the exercise of the option is delivered to JHA, together
with payment of the option price for the purchased shares.
The fair market value of a share of Common Stock on any relevant date under
subsections (1) and (2) above (and for all other valuation purposes under the
Plan) shall be determined in accordance with the following provisions:
If the Common Stock is not at the time listed or admitted to trading on any
stock exchange, but is traded in the over-the-counter market, the fair market
value shall be the mean between the last reported bid price and the last
reported asked price (or, if such information is available, the mean between the
last reported high and low sales prices) of one share of Common Stock on the
valuation date in the over-the-counter market, as such prices are reported by
the National Association of Securities Dealers, Inc. through its NASDAQ system
or any successor system. If there are no reported bid and asked prices or high
and low sales prices reported on the valuation date, then the mean between the
last reported bid price and last reported asked price (or, if such information
is available, the mean between the last reported high and low sales prices) on
the last date preceding the valuation date for which such quotations or prices
existed shall be determinative of fair market value.
If the Common Stock is at the time listed or admitted to trading on any stock
exchange, then the fair market value shall be the mean between the last reported
high and low sales prices of one share of Common Stock on the valuation date on
the stock exchange determined by the Board or Committee to be the primary market
for the Common Stock, as such price is officially quoted on the composite tape
of transactions on such exchange. If there is no reported sale of Common Stock
on such exchange on the valuation date, then the fair market value shall be the
mean between the last reported high and low sales prices on the exchange on the
last date preceding the valuation date for which such quotations exist.
If the Common Stock at the time is neither listed nor admitted to trading on any
stock exchange nor traded in the over-the-counter market, then the fair market
value shall be determined by the Board after taking into account such factors as
the Board shall deem appropriate, including valuations of the stock performed by
independent appraisers selected by the Board.
Term and Exercise of Options. Each option granted under the Plan shall become
exercisable at such time or times and upon fulfillment of such conditions as are
determined by the Board and for such period of time thereafter and for such
number of shares as shall be determined by the Board or Committee and set forth
in the instrument evidencing such option. However, no option granted under the
Plan shall have a term in excess of ten (10) years from the grant date.
Assignability. For the first six (6) months after the date of grant, no option
granted under the Plan shall be transferable by the optionee other than by will
or by the laws of descent and distribution. Following the first six (6) months
after the date of grant, options may be transferred during the lifetime of an
optionee, to any Permitted Transferee. Permitted Transferees shall include
members of the immediate family of the optionee, any charity qualified under 501
(c) (3) of the Internal Revenue Code and any trust established for the benefit
of the optionee or the optionees immediate family members. For this purpose,
immediate family member shall mean the optionees spouse, children, step-
children, grandchildren and step-grandchildren and any partnership, corporation,
limited liability company or other entity, all the beneficial interests in which
are held by the optionee or immediate family members. Permitted Transferees may
only transfer options to other Permitted Transferees of the optionee. JHA may
disregard any transfer of an option which has not been properly registered with
JHA or its agents. In the event of a death of a Permitted Transferee who held
options at death, such options shall thereafter be exercisable, as provided in
subsection (f)(3), by such person(s) entitled to do so under the will of the
Permitted Transferee, or by the legal representative of the Permitted
Transferee.
Employment Status. For purposes of Section (f) of this Section 5, an optionee
shall be deemed to be an employee of JHA if such optionee is employed by i) JHA;
ii) a Parent Corporation (as that term is defined in Section 425(e) of the Code)
of JHA (Parent Corporation); iii) a Subsidiary Corporation of JHA; or iv) any
corporation in which JHA directly or indirectly owns stock possessing at least
twenty percent (20%) of the total combined voting power of all classes of
stock:, or any partnership in which JHA directly or indirectly owns at least
twenty percent (20%) of the capital interest or profits interest (Affiliated
Company) (JHA and all such other companies are sometimes hereinafter referred to
as the employer corporation); provided, however, that if an optionee is employed
by an Affiliated Company, no shares of stock acquired by such optionee upon
exercise of an Incentive Option will be eligible to qualify for tax treatment
under Section 422A of the Code unless such optionee was employed by JHA, a
Subsidiary Corporation or a Parent Corporation of JHA on the date such Incentive
Option was granted and such optionee acquires such stock by exercising such
Incentive Option not later than three (3) months from the date such optionee is
last employed by JHA, a Subsidiary Corporation or a Parent Corporation of JHA.
Effect of Termination of Employment
In the event the employment of an employee to whom an option has been granted
under the Plan shall be terminated other than by reason of permanent disability
within the meaning of Section 22 (e) (3) of the Code, retirement pursuant to any
retirement plan of any employer corporation, or by death, then any outstanding
options granted to such employee under the Plan shall terminate and cease to be
exercisable by the employee or any Permitted Transferee immediately upon the
date of such termination of employment (but in any event not later than the
termination date of the option). Options granted under the Plan shall not be
affected by any change of duties or position so long as the optionee continues
to be in the employ of JHA. The option agreements may contain such provisions as
the Board shall approve with reference to the effect of approved leaves of
absence.
If an employee holding an option which has not expired or terminated shall
become permanently disabled within the meaning of Section 22(e) (3) of the Code,
then the employee shall have a period of one (1) year from the date of cessation
of employee status during which to exercise such option or options for the
number of shares for which such option or options are exercisable on the date of
cessation of employee status, but in no event shall such options be exercisable
after the specified expiration date of the option term. Upon the expiration of
such limited period of exercisability, or (if earlier) upon the expiration of
the option term, the option shall terminate and cease to be exercisable.
If an employee holding an option which has not expired or terminated shall
retire pursuant to any retirement plan of any employer corporation, then the
employee shall have a period of three (3) months from the date of cessation of
employee status during which to exercise such option or options for the number
of shares for which such option or options are exercisable on the date of
cessation of employment status, but in no event shall such options be
exercisable after the specified expiration date of the option. Upon the
expiration of such limited period of exercisability, or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
exercisable.
If a person holding an option which has not expired or terminated shall die,
then the estate of the decedent or the person or persons to whom his or her
rights under the option were transferred by will or by the laws of descent and
distribution shall have a period of one (1) year from the date of death during
which to exercise such option or options for the number of shares as to which
the decedent could have exercised such option at the time of his or her death,
but in no event shall such options be exercisable after the specified expiration
date of the option term. Any such exercise shall be effected by written notice
to the Board from the persons entitled to exercise the option and the person or
persons giving the same shall furnish to the Board such other documents or
papers as the Board may reasonably require, including, without limitation,
evidence of the authority of such person or persons to exercise the option and
evidence satisfactory to the Board that any death taxes payable with respect to
such shares have been paid or provided for. Upon the expiration of such limited
period of exercisability, or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
Stockholder Rights. An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and been
issued a stock certificate for the purchased shares. Upon exercise of the
option, payment of the option price and issuance of the stock certificate, the
option holder shall have all of the rights of a stockholder with respect to such
shares including voting and dividend rights, subject only to the provisions of
this Plan and other instruments implementing the provisions hereof.
INCENTIVE OPTIONS.
The additional terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Options which are specifically
designated as non-qualified options when issued under the Plan shall not be
subject to such additional terms and conditions.
Dollar Limitation. The aggregate fair market value (determined as of the
respective date or dates of grant) of the Common Stock with respect to which
Incentive Options granted under the Plan (or any other plan of JHA or its parent
or subsidiary corporations) are exercisable for the first time by any optionee
during any calendar year shall not exceed One Hundred Thousand Dollars
($100,000) or such greater amount as may be permitted under subsequent
amendments to Section 422A of the Code.
Ten Percent (10%) Shareholder. If any employee to whom an Incentive Option is to
be granted pursuant to the provisions of the Plan is on the date of grant the
owner of stock (as determined under Section 425(d) of the Code) possessing more
than 10% of the total combined voting power of all classes of stock of JHA or
any one of its Parent or Subsidiary Corporations, then the following special
provisions shall be applicable to the Incentive Option granted to such
individual:
The option price per share of the Common Stock subject to such Incentive Option
shall not be less than one hundred ten percent (110%) of the fair market value
of one share of Common Stock on the date of grant; and
No such Incentive Option shall have a term in excess of five (5) years from the
date of grant.
Assignability. During the lifetime of the optionee, the Incentive Option shall
be exercisable only by the optionee and shall not be assignable or transferable
by the optionee otherwise than by will or by the laws of descent and
distribution.
Except as modified by the preceding provisions of this Section 6, all the
provisions of the Plan shall be applicable to Incentive Options granted
hereunder.
SURRENDER AND TERMINATION OF OPTIONS.
If either JHA or its stockholders enter into an agreement to dispose of all or
substantially all of the assets of JHA or fifty percent (50%) or more of the
outstanding voting stock of JHA by means of a sale, merger, reorganization or
liquidation, then the Board shall have the discretionary authority, exercisable
upon such terms and conditions as it deems appropriate, to authorize the
surrender of all unexercised options in exchange for a cash distribution equal
in amount to the difference between I) the fair market value at the authorized
surrender date of the shares for which the surrendered option or portion thereof
is at the time exercisable, and ii) the aggregate option price payable for such
shares.
If, in connection with any such sale, merger, reorganization or liquidation,
provision is made for each outstanding option to either be assumed by the
successor corporation (or parent thereof) or be replaced with a comparable
option to purchase shares of the capital stock of the successor corporation (or
parent thereof), each person holding unexercised options shall be entitled to
have such options assumed by the successor corporation (or parent thereof) or
replaced with a comparable option, as the case may be. The determination of
option comparability will be made by the Board, and its determination shall be
final, binding and conclusive.
Upon consummation of such sale, merger, reorganization or liquidation, all
outstanding options under the Plan shall terminate and cease to be exercisable,
unless assumed by the successor corporation (or parent thereof).
The grant of options under the Plan shall in no way restrict or affect the right
of JHA or its stockholders to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
CANCELLATION AND NEW GRANT OF OPTIONS.
The Board shall have the authority to effect, at any time and from time to time,
with the consent of the affected option holders, the cancellation of any or all
outstanding options under the Plan and to grant in substitution therefor new
options under the Plan covering the same or different numbers of shares of
Common Stock but having an option price per share not less than one hundred
percent (100%) of fair market value on the new grant date.
AMENDMENT OF THE PLAN.
The Board shall have the exclusive power and authority to amend or modify the
Plan in any or all respects whatsoever; provided, however, that no such
amendment or modification shall, without the consent of the option holders,
adversely affect rights and obligations with respect to options at the time
outstanding under the Plan; and provided, further, that the Board shall not,
without the approval of the stockholders of JHA, I) increase the maximum number
of shares issuable under the Plan, except for permissible adjustments under
Section 4(c); ii) materially modify the eligibility requirements for the grant
of options under the Plan; or iii) make any other changes in the Plan which
require stockholder approval pursuant to Section 422A of the Internal Revenue
Code.
EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective upon the later of I) November 1, 1996 or ii)
the date the Plan shall have been approved by the JHA stockholders. The Board or
Committee may grant options under the Plan at any time after the effective date
and before the date fixed herein for termination of the Plan. The JHA 1987 Stock
Option Plan shall terminate upon the effective date of this Plan, provided that
all options then outstanding under the 1987 Stock Option Plan shall thereafter
continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
Unless sooner terminated by the Board or otherwise, the Plan shall terminate
upon the earlier of I) the tenth (10th) anniversary of the effective date of the
Plan, or ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise or surrender of options granted
hereunder. If the date of termination is determined under clause (I) above, then
options outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
Options may be granted under this Plan to purchase shares of Common Stock in
excess of the number of shares then available for issuance under the Plan,
provided I) an amendment to increase the maximum number of shares issuable under
the Plan is adopted by the Board prior to the initial grant of any such option
and is thereafter approved by the stockholders of JHA, and ii) each option so
granted is not to become exercisable, in whole or in part, at any time prior to
the obtaining of such stockholder approval.
USE OF PROCEEDS.
The proceeds received by JHA from the sale of shares pursuant to options granted
under the Plan shall be used for general corporate purposes.
STOCK RESERVE.
JHA shall, at all times during the term of this Plan, reserve and keep available
such number of shares of stock as will be sufficient to satisfy the requirements
of this Plan. Such obligation to reserve shares of stock shall apply only with
respect to options actually outstanding under this Plan and not with respect to
the total number of shares available under this Plan for which options have not
been granted.
LISTING, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS.
Each option shall be subject to the requirement that if at any time the Board
shall determine, in its discretion, that the listing of the shares subject to
the option upon any securities exchange or the registration or qualification of
such shares under any state or federal securities or other law or regulation, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such option
or the issue or purchase of the shares thereunder, no such option may be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board, and the option holder will supply JHA with such
certificates, representations and information as JHA shall request and shall
otherwise cooperate with JHA in obtaining such listing, registration,
qualification, consent or approval. In the case of officers and other persons
subject to Section 16(b) of the Securities Exchange Act of 1934, the Board may
at any time impose any limitations upon the exercise of an option which, in the
Boards discretion, are necessary or desirable to permit transactions hereunder
by such persons to comply with Section 16(b) and the rules and regulations
thereunder. If JHA, as part of an offering of securities or otherwise, finds it
desirable because of federal or state regulatory requirements to reduce the
period during which any options may be exercised, the Board may, in its
discretion and without the option holders consent, so reduce such period on not
less than fifteen (15) days written notice to the option holders.
Exhibit 23A
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in the Registration Statements of
Jack Henry & Associates, Inc. on Form S-8 (File Nos. 33-65231, 33-65251 and 33-
16989) of our report dated August 15, 1997 appearing in the Annual Report on
Form 10-K of Jack Henry & Associates, Inc. for the year ended June 30, 1997.
Deloitte & Touche LLP
St Louis, Missouri
September 24, 1997
Exhibit 23B
Consent of Independent Accountants
Board of Directors
Jack Henry & Associates, Inc.
We consent to incorporation by reference in the Registration Statements on Form
S-8 of JACK HENRY & ASSOCIATES, INC. (File Nos. 33-65231 and 33-65251) of our
report dated August 22, 1996, relating to the consolidated balance sheet of JACK
HENRY & ASSOCIATES, INC. AND SUBSIDIARIES as of June 30, 1996, and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the two years in the period ended June 30, 1996, which report
appears in the June 30, 1997 annual report on Form 10-K of JACK HENRY &
ASSOCIATES, INC.
Baird, Kurtz & Dobson
Joplin, Missouri
September 23, 1997 <PAGE>
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