UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 28, 1999
JACK HENRY & ASSOCIATES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 0-14112 43-1128385
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
663 Highway 60, P.O. Box 807, Monett, MO 65708
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (417) 235-6652
ITEM 5. OTHER EVENTS.
On September 8, 1999, through a wholly-owned subsidiary, Jack Henry &
Associates, Inc. ( JKHY ), a Delaware corporation (the Company) acquired certain
assets comprising BancTec Financial Systems (BFS) a unit of BancTec, Inc.
(BancTec) for $50,000,000 in cash and the assumption of approximately $5,475,000
of liabilities, subject to possible post-closing adjustment. The acquisition
was accounted for using the purchase method of accounting.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Item 7 of the Company s Current Report on Form 8-K dated September 8, 1999, is
hereby amended as set forth below. The exhibits referenced therein are not
amended hereby.
As previously reported on a Current Report on Form 8-K dated September 8, 1999,
the Company acquired certain assets of BancTec effective September 1, 1999 in
exchange for $50,000,000 and the assumption of certain liabilities. As a result
of the transaction, BFS became part of Open Systems Group (OSG), a wholly owned
subsidiary of the Company.
(a) Audited financial statements of businesses acquired.
Independent Auditors Report
Balance Sheet as of August 31, 1999
Statement of Operations for the twelve months ended August 31, 1999
Statement of Changes in Equity for the twelve months ended August
31, 1999
Statement of Cash Flows for the twelve months ended August 31, 1999
Notes to Financial Statements
(b) Pro Forma Unaudited Financial Information
Consolidated Statement of Income, Year Ended June 30, 1999
Consolidated Statement of Income, Three Months Ended September 30,
1999
(c) Exhibits
Independent Auditors Consent
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 28, 1999 JACK HENRY & ASSOCIATES, INC.
(Registrant)
By: /S/ Michael E. Henry
Michael E. Henry
Chairman of the Board
Index to Financial Statements of Business Acquired
Independent Auditors Report F-2
Audited Financial Statements:
Balance Sheet as of August 31, 1999 F-3
Statement of Operations for the twelve months ended August 31, 1999 F-4
Statement of Changes in Equity for the twelve months ended
August 31, 1999 F-5
Statement of Cash Flows for the twelve months ended August 31, 1999 F-6
Notes to Financial Statements F-7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Jack Henry & Associates, Inc.:
We have audited the accompanying balance sheet of BancTec Financial Systems, a
unit of BancTec, Inc. (the Company ), as of August 31, 1999, and the related
statements of operations, equity, and cash flows for the twelve months ended
August 31, 1999. 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 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 financial statements present fairly, in all material
respects, the financial position of BancTec Financial Systems at August 31,
1999, and the results of its operations and its cash flows for the twelve months
ended August 31, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared from the separate
records maintained by BancTec Financial Systems and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if BancTec Financial Systems had been operated as an unaffiliated
company. Portions of certain expenses represent allocations made from BancTec,
Inc. for items applicable to BancTec, Inc. as a whole.
/s/ DELOITTE & TOUCHE LLP
December 22, 1999
St. Louis, Missouri
BANCTEC FINANCIAL SYSTEMS
BALANCE SHEET
AUGUST 31, 1999
(In Thousands)
ASSETS
Current Assets:
Accounts Receivable, less allowance for
doubtful accounts of $1,713 $ 6,926
Inventory, less reserve for obsolescence of $336 712
Prepaid Expenses and Other 309
Deferred Income Taxes 919
Total $ 8,866
Property and Equipment, net 2,127
Goodwill, net 19,266
Total Assets $30,259
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable $ 512
Accrued Expenses 1,926
Deferred Revenues 3,684
Total $ 6,122
Deferred Income Taxes 919
Total Liabilities 7,041
Equity 23,218
Total Liabilities and Equity $30,259
See notes to financial statements.
BANCTEC FINANCIAL SYSTEMS
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1999
(In Thousands)
REVENUE
Software and installations $ 9,147
Maintenance and other services 20,338
Hardware 10,679
Total $40,164
COST OF SALES
Software and installations $ 7,602
Maintenance and support 11,620
Hardware 8,160
Total $27,382
GROSS PROFIT $12,782
OPERATING EXPENSES
Product development $ 2,875
Selling 6,170
General and administrative 4,298
Total $13,343
LOSS FROM OPERATIONS BEFORE INCOME TAXES $ (561)
PROVISION FOR INCOME TAXES -
NET LOSS $ (561)
See notes to financial statements.
BANCTEC FINANCIAL SYSTEMS
STATEMENT OF CHANGE IN EQUITY
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1999
(In Thousands)
Balance, September 1, 1998 $28,130
Net Loss (561)
Distribution to BancTec, Inc, net (4,351)
Balance, August 31, 1999 $23,218
See notes to financial statements
BANCTEC FINANCIAL SYSTEMS
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1999
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (561)
Adjustments to reconcile net loss to cash flows
from operating activities:
Depreciation 1,393
Amortization 1,548
Changes in:
Accounts receivable 2,243
Inventory 1,378
Prepaid expenses and other 60
Accounts payable (447)
Accrued expenses (357)
Deferred revenues 370
Net Cash From Operating Activities $ 5,627
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures $ (1,276)
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to BancTec, Inc, net $ (4,351)
CHANGE IN CASH -
CASH, SEPTEMBER 1, 1998 -
CASH, AUGUST 31, 1999 $ -
See notes to financial statements.
BANCTEC FINANCIAL SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1-SUMMARY OF ACCOUNTING POLICIES
Description of Business
BancTec Financial Systems ( BFS or the Company ), a unit of BancTec, Inc.
(BancTec ), provides a broad range of products and services, including hardware,
software and account processing capabilities at six data center operations to
over 800 community banks throughout the United States and the Caribbean.
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.
Inventories
Inventories consist of finished goods acquired under reseller agreements and are
valued at the lower of cost or market. Cost is determined using the first-in,
first-out and weighted average methods. Valuation reserve has been recorded to
adjust the net book value of inventory to the net realizable value for
impairment or obsolescence of specific items.
Deferred Revenues
Certain of the Company s contracts permit the Company to bill the customer in
advance of the time revenue is recognized. Deferred revenue represents billings
in excess of revenue recognized. Revenue is recognized ratably over the contract
period as the services are performed, which usually occurs within one year of
billing.
Revenue Recognition
The Company s revenue recognition policies for its principal sources of revenue
are:
Equipment and software sales-Revenue from sales of established products
is recognized upon shipment of completed product in conformity with
certain provisions of AICPA Statement of Position ( SOP ) 97-2,
Software Revenue Recognition. Revenue for new products is generally
recognized at the time of acceptance by the customer. All customer
contracts costs, including equipment and software, are charged to cost
of sales at the time the related revenue is recognized.
Maintenance-Revenue from maintenance contracts is recognized ratably
over the term of the contract. The excess of annual maintenance revenue
billed to the customers over revenue recognized to date is shown as
deferred revenue.
Data Centers-The Company owns and operates six service bureau
facilities that provide check and data processing services. The
Company enters into multi-year contracts with customers to provide such
services. Revenue from the related contracts is recognized as services
are provided.
BANCTEC FINANCIAL SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
PRODUCT DEVELOPMENT
Company sponsored software product development costs are expensed as incurred
until technological feasibility has been established. Subsequent to that time,
the software product development costs are capitalized in conformity with
Statement of Financial Accounting Standards ( SFAS ) No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed. At
August 31, 1999, there were no capitalized software costs recorded in other
assets. Software costs are amortized on a straight-line basis over a three year
period. The amount of software development costs amortized to expense for the
twelve month period ended August 31, 1999 was $60.
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 of excess purchase price over the fair value of net
assets acquired in business acquisitions. The excess of cost over net assets
of acquired businesses is amortized over 10 to 20 years.
The Company evaluates the recoverability of goodwill and other long-lived assets
by measuring the carrying value of the assets against the estimated undiscounted
future cash flows associated with them. At the time such evaluations indicate
that the future undiscounted cash flows of certain long-lived assets are not
sufficient to recover the carrying value of such assets, the assets are adjusted
to their fair values.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards ( SFAS )
No. 130, Reporting Comprehensive Income, which established standards for the
reporting and display of comprehensive income and its components. Comprehensive
income (loss) for the twelve months ended August 31, 1999 equals the Company s
net income (loss).
Business Segment Information
The Company adopted SFAS No. 131, Disclosure About Segments of an Enterprise
and Related Information, which establishes standards for the disclosure
required related to segments of an enterprise.
The Company is a provider of financial data processing systems for financial
institutions. In accordance with SFAS No. 131, the Company s operations are
classified as one business segment. The financial performance and productivity
of the Company is monitored as a single unit as all products and services relate
to one line of business, providing comprehensive services for data processing to
the financial institution industry. Revenue by type of product and service is
presented on the face of the statement of operations.
BANCTEC FINANCIAL SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
Income Taxes
The operating results of the Company are included in the consolidated federal
tax return of BancTec. The provision for income taxes was calculated using a
stand-alone allocation method, that is, as if the Company filed on a separate
return basis. Deferred tax liabilities and assets are recognized for the tax
effects of differences between the financial statement and tax bases of assets
and liabilities.
Recent Accounting Pronouncements
In March, 1998, Accounting Standards Executive Committee of the American
Institute of Public Accountants issued SOP 98-4, Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition , which deferred
portions of SOP 97-2 for one year. Revenues for the twelve months ended August
31, 1999, from the sales of software, are recognized in accordance with the
enacted portions of SOP 97-2 and the Company s management anticipates that the
adoption of SOP 98-4 will not have a material impact on the Company s results of
operations.
NOTE 2-PROPERTY AND EQUIPMENT
The classification of property and equipment is as follows:
Leasehold improvements $ 79
Computer equipment 5,378
Equipment and furniture 2,983
$ 8,440
Less accumulated deprecia 6,313
$ 2,127
NOTE 3-GOODWILL
Goodwill $ 28,013
Less accumulated amortization 8,747
$ 19,266
NOTE 4-ACCRUED EXPENSES
The detail of accrued expenses is as follows:
Salaries, wages and other compensation $ 1,237
Accrued cost of services 302
Other 387
$ 1,926
BANCTEC FINANCIAL SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 5-INCOME TAXES
The tax effects of temporary differences related to deferred taxes shown on the
balance sheet were:
Gross deferred tax assets:
Net operating loss carryforwards $ 271
Expense reserves (bad debts, inventory, insurance,
vacation, etc.) 928
Total gross deferred tax assets 1,199
Deferred tax asset valuation allowance (280)
Net deferred tax asset 919
Gross deferred tax liabilities:
Excess tax depreciation $ (58)
Excess tax amortization (861)
Total gross deferred tax liability (919)
Net deferred tax asset $ -
The valuation allowance was adjusted to $280. Given the Company s losses in the
twelve months ended August 31, 1999, and in previous periods, it was determined
that a full valuation allowance continued to be necessary as of August 31, 1999.
The Company did not receive or pay income taxes during the twelve months ended
August 31, 1999. Net operating loss carryforwards of $753 expire through the
year 2014.
NOTE 6-INTERCOMPANY TRANSACTIONS
As a unit of BancTec, the Company receives administrative support from BancTec.
This support includes billing and collecting of accounts receivable, accounts
payable processing, payroll and fringe benefits administration and marketing
support. As a result of this assistance, BancTec allocates a proportionate
share of expenses to each of its participating business units and records the
amounts in an intercompany account. The Statement of Operations of the Company
includes the expenses allocated from BancTec in amounts that management believes
are reasonable. The allocated amounts for the twelve months ended August 31,
1999, to Product Development, Selling
<PAGE>
and General and Administrative expenses
were $1,237, $653, and $1,479, respectively. The intercompany balances are
included as equity on the Balance Sheet and the Statement of Changes in Equity.
BANCTEC FINANCIAL SYSTEMS
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 7-INDUSTRY AND SUPPLIER CONCENTRATIONS
The Company sells its products to banks and financial institutions throughout
the United States and generally does not require collateral. Reserves are
maintained for potential credit losses.
In addition, the Company purchases most of its computer equipment (hardware) and
related maintenance for resale in relation to installation of BFS software
systems from a few suppliers. There are a limited number of hardware suppliers
for these required materials.
NOTE 8-COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain real estate facilities and equipment for various
operations under non-cancelable operating leases expiring through year 2005.
The Company s total rent expense for the twelve months ended August 31, 1999
was $750.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of August 31, 1999 in the aggregate
are:
2000 $ 432
2001 375
2002 374
2003 177
2004 152
Thereafter 38
Total minimum future rent payments $1,548
Indebtedness
BancTec had incurred corporate indebtedness from a commercial lender under
which BancTec granted a general lien on all domestic assets, which included
those of the Company. Pursuant to the sale of the certain assets comprising
the Company (see Note 10), BancTec negotiated with the lender to remove the
lien from those specific assets associated with the Company.
NOTE 9-EMPLOYEE BENEFIT PLAN
The Company s employees are eligible to participate in the BancTec Employee s
Savings Plan which allows all full-time and part-time U.S. employees to make
contributions defined by Section 401(k) of the Internal Revenue Code. The cost
of administering this plan and additional discretionary contributions are the
expense of BancTec and included in the allocations to the Company, See Note 6.
NOTE 10 -SUBSEQUENT EVENT
On September 8, 1999, BancTec completed the sale of certain assets comprising
the Company to Jack Henry & Associates, Inc ( JHA ) through its wholly owned
subsidiary, Open Systems Group ( OSG ), for $50,000 in cash and the assumption
of approximately $5,475 in liabilities, subject to possible post-closing
adjustment (the Purchase Price ). The acquisition was completed pursuant to
the Agreement for Purchase and Sale of Assets dated as of September 1, 1999 by
and among BancTec, JHA and OSG.
(b) Pro Forma Unaudited Financial Information
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
BANCTEC FINANCIAL SYSTEMS
PROFORMA STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1999
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<S><C>
BFS JKHY ProForma Adjusted
REVENUE Adjustments ProForma
Software and installation $ 9,147 $ 47,181 $ 56,328
Maintenance and other services 20,338 69,065 89,403
Hardware 10,679 68,251 78,930
Total $40,164 $184,497 $224,661
COST OF SALES
Cost of services 19,222 $ 50,811 $ 70,033
Cost of hardware 8,160 48,644 56,804
Total $27,382 $ 99,455 $126,837
GROSS PROFIT $12,782 $ 85,042 $ 97,824
OPERATING EXPENSES
Research and development $ 2,875 $ 5,073 $ 7,948
Selling 6,170 13,638 19,808
General and administrative 4,298 16,925 (43) 21,180
Total $13,343 $ 35,636 $ 48,936
LOSS FROM OPERATIONS $ (561) $ 49,406 $ 48,888
OTHER EXPENSE:
Interest income $ - $ 1,571 $ 1,571
Interest expense - (1,625) (1,625)
Other expense - 370 370
Total $ - $ 1,941 $ 316
INCOME (LOSS) FROM OPERATIONS $ (561) $ 51,347 $ 49,204
PROVISION FOR INCOME TAXES 18,821 (788) 18,033
INCOME (LOSS) FROM OPERATIONS $ (561) $ 32,526 $ 31,171
LOSS FROM DISCONTINUED OPERATIONS - 758 758
Net income $ (561) $ 31,768 $ 30,413
Diluted earnings per share:
Income from continuing operations $ 1.54 $ 1.47
Loss from discontinued operations .04 .04
Net income $ 1.50 $ 1.43
Diluted weighted average shares outstanding 21,112 21,112
Basic earnings per share:
Income from continuing operations $ 1.63 $ 1.55
Loss from discontinued operations .04 .04
Net income $ 1.59 $ 1.51
Basic weighted average shares outstanding 19,960 19,960
</TABLE>
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
BANCTEC FINANCIAL SYSTEMS
PROFORMA STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<S><C>
BFS JKHY ProForma Adjusted
REVENUE Adjustments ProForma
Software and installation $ 416 $ 11,539 $ 11,955
Maintenance and other services 3,016 20,188 23,204
Hardware 65 10,638 10,703
Total $ 3,497 $ 42,365 $ 45,862
COST OF SALES
Cost of services $ 3,141 $ 14,757 $ 17,898
Cost of hardware - 7,425 7,425
Total $ 3,141 $ 22,182 $ 25,323
GROSS PROFIT $ 356 $ 20,183 $ 20,539
OPERATING EXPENSES
Research and development 432 1,659 2,091
Selling and marketing 925 3,334 4,259
General and administrative 396 3,638 (8) 4,026
Total $ 1,752 $ 8,631 $ 10,375
LOSS FROM OPERATIONS $ (1,397) $ 11,552 $ 10,163
OTHER EXPENSE:
Interest income $ 344 $ 344
Interest expense (94) (271) (365)
Other expense $ (4) 1,330 1,326
Total $ (4) $ 1,580 $ 1,305
INCOME (LOSS) FROM OPERATIONS $ (1,401) $ 13,132 $ 11,468
PROVISION FOR INCOME TAXES 4,330 (549) 3,781
INCOME (LOSS) FROM OPERATIONS $ (1,401) $ 8,802 $ 7,687
LOSS FROM DISCONTINUED OPERATIONS - 332 332
Net income $ (1,401) $ 8,470 $ 7,355
Diluted earnings per share:
Income from continuing operations $ .42 $ .36
Loss from discontinued operations .02 .02
Net income $ .40 $ .34
Diluted weighted average shares outstanding 20,799 20,799
Basic earnings per share:
Income from continuing operations $ .44 $ .40
Loss from discontinued operations .02 .02
Net income $ .42 $ .38
Basic weighted average shares outstanding 20,119 20,119
</TABLE>
JACK HENRY &ASSOCIATES, INC. AND SUBSIDIARIES
BANCTEC FINANCIAL SYSTEMS
NOTES TO UNAUDITED PROFORMA FINANCIAL INFORMATION
DESCRIPTION OF THE COMPANY
Jack Henry & Associates, Inc. ( JKHY ) is a computer software company which has
developed several banking software systems. The Company s revenues are
predominantly earned by marketing those systems to financial institutions
nationwide along with the computer (hardware) and by providing the conversion
and software customization services necessary for a financial institution to
install JKHY software systems. JKHY also provides continuing support and
maintenance services to customers using the system. JKHY also processes ATM
transactions for financial institutions in the U.S.
BancTec Financial Systems ( BFS ), provides a broad range of products and
services, including hardware, software and account processing capabilities at
six data center operations to over 800 community banks throughout the United
States and the Caribbean.
OTHER SIGNIFICANT ACCOUNTING POLICIES
The Accounting polices followed by JKHY are set forth in Note 1 to the Companys
consolidated financial statements included in its Annual Report on Form 10-K
for the fiscal year ended June 30, 1999.
The accounting policies followed by BFS are set forth in the audited financial
statements as part of this Form 8-K filing, under Item 7, part (a).
PROFORMA ADJUSTMENTS
The ProForma Statement of Income for the year ended June 30, 1999, includes the
Statement of Income for JKHY for the fiscal year ended June 30, 1999, as
reported in its Annual Report on Form 10-K, and the audited Statement of
Operations for BFS for the twelve months ended August 31, 1999. The ProForma
Statement of Income for the three months ended September 30, 1999, includes the
Statement of Income for JKHY for the quarter ended September 30, 1999, as
reported in its quarterly report on Form 10-Q, (includes the operations of BFS
for the month ended September 30, 1999), and the operations of BFS for the two
months ended August 31, 1999. Adjustment include amortization expense for the
acquired goodwill of BFS, offset by the reduction of goodwill amortized for
prior acquisitions of BFS not included in the acquired balance sheet. Interest
expense has been adjusted to reflect the debt incurred at an assumed interest
rate as if the acquisition had occurred as of the beginning of the earliest
period reported. Income taxes have been adjusted to reflect the effective tax
rate as if the acquisition had occurred as of the beginning of the earliest
period reported.
(c) Exhibits
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-65231, 33-65251, 33-69299 and 33-16989 of Jack Henry & Associates, Inc., on
Form S-8, of our report dated December 22, 1999, related to the financial
statements of BancTec Financial Systems, a unit of BancTec, Inc., as of and for
the twelve months ended August 31, 1999, appearing in the Current Report on Form
8K/A of Jack Henry & Associates, Inc., dated December 28, 1999.
Deloitte & Touche LLP
St. Louis, Missouri
December 28, 1999
