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, 2000
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) Identification 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 ($.01 par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
As of August 23, 2000, Registrant had 42,916,735 shares of Common Stock
outstanding ($.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 $1,346,405,912 (based on the average of the
reported high and low sales prices on NASDAQ on such date).
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 2000 and of the registrant's Notice of Annual
Meeting of Stockholders and Proxy Statement for its Annual Meeting of
Stockholders, as described in the Footnotes to the Table of Contents
included herewith, are incorporated herein by reference into Parts II and
III of this Report.
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE REFERENCE (1)
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 12
ITEM 3. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. MARKET FOR REGISTRANT'S COMMONS EQUITY AND RELATED STOCKHOLDER MATTERS
12
ITEM 6. SELECTED FINANCIAL DATA 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (2) 19
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (3) 37
ITEM 11. EXECUTIVE COMPENSATION (4) 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (5)
37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 37
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
37
</TABLE>
(1) Certain information is incorporated by reference, as indicated
below, from the Annual Report to Stockholders for the fiscal year
ended June 30, 2000 (the "Annual Report") and the Company's Notice
of Annual Meeting of the Stockholders and Proxy Statement (the
"Proxy Statement").
(2) Annual Report, page 19 under the section entitled "Quarterly
Financial Information."
(3) Proxy Statement sections entitled "Election of Directors" and
"Executive Officers and Significant Employees."
(4) Proxy Statement sections entitled "Executive Compensation",
"Compensation Committee Report" and "Company Performance."
(5) Proxy Statement sections entitled "Stock Ownership of Certain
Stockholders" and "Election of Directors."
PART I
ITEM 1. BUSINESS
Jack Henry & Associates, Inc. ("JHA" or the "Company") is a leading provider
of integrated computer systems to banks with under $10.0 billion of total
assets, which we refer to as community banks, as well as credit unions and
other financial institutions in the United States. We offer a complete,
integrated suite of data processing system solutions to improve our
customers' management of their entire back-office and customer interaction
processes. We believe our solutions enable our customers to provide better
service to their customers and compete more effectively against larger banks
and alternative financial institutions. Our customers either install and
use our systems in-house or outsource these operations to us on a turn-key
basis. We perform data conversion, hardware and software installation and
software customization for the implementation of our systems and
applications. We also provide continuing customer maintenance and support
services to ensure proper product performance and reliability, which
provides us with continuing client relationships and recurring revenue. For
our customers who prefer not to acquire hardware and software, we provide
turn-key outsourcing services through nine data centers and 14 item
processing centers located across the United States.
Our gross revenue has grown from $94.5 million in fiscal 1996 to $225.3
million in fiscal 2000, representing a compound annual growth rate over this
five-year period of 24.3%. Net income from continuing operations has grown
from $13.9 million in fiscal 1996 to $34.4 million in fiscal 2000, a
compound annual growth rate of 25.4%.
INDUSTRY BACKGROUND
According to the Automation in Banking 2000 report, all financial
institutions, including both the largest banks in the United States and our
target market of community banks and credit unions, increased spending on
hardware, software, services and telecommunications to $36.0 billion in 1999
from $22.3 billion in 1995, representing a compound annual growth rate of
12.7%. An industry survey shows that 93% of community financial
institutions believe upgrading technology is the most important issue to
their continued success. We believe that the market opportunity for
providers of hardware and software systems, maintenance, support and related
outsourcing services targeted toward community banks and credit unions will
continue to grow as a result of the competitive pressure on financial
institutions.
There are approximately 8,600 commercial banks and 11,000 credit unions in
the United States. Our primary market has historically been commercial
banks with less than $10.0 billion in assets, of which there were
approximately 8,500 at December 31,1999. As of December 31, 1999, community
banks had aggregate assets of approximately $1.9 trillion. Consolidation
within the financial services industry has resulted in a 3.9% compound
annual decline in the population of community banks and a 1.6% compound
annual decline in their aggregate assets between 1994 and 1999. As the
result of two of our recent acquisitions, we have also begun serving credit
unions in the United States. These are cooperative, not-for-profit
financial institutions organized to promote savings and provide credit to
their members. As of December 31, 1999, there were 10,628 federally insured
credit unions in the United States. Although the number of these credit
unions has declined at a 2.4% compound annual rate between 1994 and 1999,
their aggregate assets have increased at a 7.3% compound annual rate to
$411.4 billion in 1999.
We believe that community banks and credit unions play an important role
with the communities and customers they serve. Typically, customers of
community banks and credit unions rely on these financial institutions
because of their ability to provide personalized, relationship-based service
and their focus on local community and business needs. We believe these
core strengths will allow community banks and credit unions to effectively
compete with larger banks and alternative financial institutions. In order
to succeed and to maintain strong customer relationships, we believe
community banks and credit unions must continue to:
* focus on their primary products and services;
* respond rapidly to customer demand for new products and
services;
* implement advanced technologies, such as Internet banking,
for interfacing with and marketing to
their customers;
* use advanced technologies in back-office operations to
improve operating efficiency and control
costs while increasing service and lowering costs to their
customers; and
* integrate products and services into their core service
offerings and data processing infrastructure,
to provide the same wide range of services as are offered by
larger banks.
In 1999, approximately 66% of commercial banks utilized in-house hardware
and software systems to perform all of their core systems and data
processing functions. Off-site data processing centers provided systems
services on an outsourced basis for the remaining 34% of banks. Since the
mid-1980s, banks have tended to shift their data processing requirements
in-house from outsourcing such functions to third-party data centers. Of
the community banks in the United States with in-house installations,
approximately 66%, 7%, and 21% utilize IBM, NCR and Unisys hardware,
respectively. No other hardware platform had more than a 5% share of the
market.
The Internet is becoming a powerful and efficient medium for the delivery of
financial services, including Internet banking, bill payment, bill
presentment and other services for individuals, and cash management and
other services for the commercial customers of financial institutions.
Financial institutions provide Internet banking solutions to retain
customers, attract new customers, reduce operating costs, and gain
non-interest sources of revenue. According to industry sources, over 60 of
the 100 largest banks in the United States offer Internet banking. By
contrast, approximately 10% of community banks currently offer Internet
banking. We believe that community financial institutions risk losing
customers to larger or alternative financial institutions if they do not
offer Internet banking services.
OUR SOLUTION
We are a single-source provider of a comprehensive and flexible suite of
integrated products and services that address the information technology and
data processing needs of community financial institutions. Our business
derives revenues from three primary sources:
* software licensing and installation services;
* maintenance/support and services; and
* hardware sales.
We develop software applications designed primarily for use on hardware
supporting the IBM OS/400 and UNIX operating systems. Our product and
service offerings are centered on four proprietary software applications,
each comprising the core data processing and information management
functions of a community bank or credit union. Key functions of each of our
core software applications include deposits, loans, and general ledger. Our
software applications make extensive use of parameters allowing our
customers to tailor the software to their needs. Our software applications
are designed to provide maximum flexibility in meeting our customer data
processing requirements within a single, integrated system. Our core
proprietary software applications are:
* our Silverlake system, which operates on the IBM AS/400 and
is used primarily by banks with total assets up to $10.0
billion;
* our CIF 20/20 system, which operates on the IBM AS/400 and
is used primarily by banks with total assets up to $300.0
million;
* our Core Director system, which operates on hardware
supporting a UNIX operating system and is used by banks
employing client-server technology; and
* our Symitar system, which operates on the IBM RS/6000 with
a UNIX operating system and is used by credit unions.
To complement our core software applications, we provide a variety of
ancillary products and services for use on an in-house or an outsourced
basis by community financial institutions.
We believe that our solution provides strategic advantages to our customers
by enabling them to:
* IMPLEMENT ADVANCED TECHNOLOGIES WITH FULL FUNCTIONALITY.
Our comprehensive suite of products and services is
designed to meet our customers' information technology
needs through custom-tailored solutions using proprietary
software products. Our clients can either perform these
functions themselves on an in-house basis through the
installation of our hardware and software systems or
outsource those functions to us.
* RAPIDLY DEPLOY NEW PRODUCTS AND SERVICES. Once a community
financial institution has implemented our core software,
either in-house or on an outsourced basis, we can quickly
and efficiently install additional applications and
functions. This allows our customers to rapidly deploy new
products and services.
* FOCUS ON CUSTOMER RELATIONSHIPS. Our products and services
allow our customers to stay focused on their primary
business of gaining, maintaining and expanding their
customer relationships while providing the latest financial
products and services.
* ACCESS OUTSOURCING SOLUTIONS TO IMPROVE OPERATING
EFFICIENCY. Customers utilizing our outsourcing solutions
benefit from access to all of our products and services
without having to maintain personnel to develop, update and
run these systems and without having to make large up-front
capital expenditures to implement these advanced technologies.
OUR STRATEGY
Our objective is to grow our revenue and earnings internally, supplemented
by strategic acquisitions. The key components of our business strategy are to:
* PROVIDE HIGH-QUALITY, VALUE-ADDED PRODUCTS AND SERVICES TO
OUR CLIENTS. We compete on the basis of providing our
customers with the highest-value products and services in
the market. We believe we have achieved a reputation as a
premium product and service provider.
* CONTINUE TO EXPAND OUR PRODUCT AND SERVICE OFFERINGS. We
continually upgrade our core software applications and
expand our complementary product and service offerings to
respond to technological advances and the changing
requirements of our clients. For example, we offer a
turn-key Internet banking solution that enables community
financial institutions to rapidly deploy sophisticated new
products and services. Our integrated solutions enable our
customers to offer competitive services relative to larger
banks and alternative financial institutions. We intend to
continue to expand our range of Internet banking and other
products and services as well as provide additional
services such as network services and computer facilities
design.
* EXPAND OUR EXISTING CUSTOMER RELATIONSHIPS. We seek to
increase the information technology products and services
we provide to those customers that do not utilize our full
range of products and services. In this way, we are able
to increase revenues from current customers with minimal
additional sales and marketing expenses.
* EXPAND OUR CUSTOMER BASE. We seek to establish long-term
relationships with new customers through our sales and
marketing efforts and selected acquisitions. As of June
30, 2000, we had over 2,850 customers, up from 950 in 1995.
* BUILD RECURRING REVENUE. We enter into contracts with
customers to provide services that meet their information
technology needs. We provide ongoing software maintenance
and support for our in-house customers. Additionally, we
provide data processing for our outsourcing customers and
ATM transaction switching services, both on contracts that
typically extend for periods of five years.
* MAXIMIZE ECONOMIES OF SCALE. We strive to develop and
maintain a sufficiently large client base to create
economies of scale, enabling us to provide value-priced
products and services to our clients while expanding our
operating margins.
* ATTRACT AND RETAIN CAPABLE EMPLOYEES. We believe that
attracting and retaining high-quality employees is
essential to our continued growth and success. Our
corporate culture focuses on the needs of employees, a
strategy that we believe has resulted in low employee
turnover. In addition, we use employee stock options to
serve as a strong incentive and retention tool.
OUR ACQUISITIONS
To complement and accelerate our internal growth, we selectively acquire
companies that provide us with one or more of the following:
* new customers;
* products and services to complement our existing offerings;
* additional outsourcing capabilities; and
* entry into new markets related to community financial
institutions.
When evaluating acquisition opportunities, we focus on companies with a
strong employee base and management team and excellent customer
relationships. Since fiscal 1995, we have completed the following
acquisitions:
FISCAL
YEAR COMPANY PRODUCTS AND SERVICES
2000 Symitar Data processing systems and services for
credit unions
2000 Sys-Tech Uninterruptible power supply systems and
computer facilities design
2000 BancData Systems Outsourcing services
2000 Open Systems Group UNIX-based data processing systems for banks
1999 Peerless Group Data processing systems for banks and
credit unions
1999 Digital Data Services Outsourcing services
1999 Hewlett Computer Services Outsourcing services
1998 Vertex Teller software
1998 Financial Software Systems Payroll software
1998 GG Pulley Image and item processing products and
services
1997 Liberty Banking Services Outsourcing services
1996 Central Interchange ATM network services
1995 Liberty Data processing systems for banks and
outsourcing services
1995 Sector Data processing systems for banks
1995 Commlink ATM network services
OUR PRODUCTS AND SERVICES
Changing technologies, business practices and financial products have
resulted in issues of compatibility, scalability and increased complexity
for the hardware and software used in many financial institutions. We have
responded to these issues by developing a fully integrated suite of products
and services consisting of core software systems, hardware and complementary
products and services. These address virtually all of a community bank or
credit union's customer interaction, back-office data and information
processing needs.
We provide our full range of products and services to financial institutions
through both in-house and outsourced delivery models. For those customers
who prefer to purchase systems for their in-house facilities, we contract to
sell computer hardware, license core and complementary software and contract
to provide installation, training and ongoing maintenance and support and
other services.
We also offer our full suite of software products and services on an
outsourced basis to customers who do not wish to maintain, update and run
these systems or to make large up-front capital expenditures to implement
these advanced technologies. Our principal outsourcing service is the
delivery of mission-critical data processing services using our data centers
located within the United States. We provide our outsourcing services
through an extensive national data and service center network, comprised of
nine host data centers and 14 item centers. We monitor and maintain our
network on a seven-day,24-hour basis. Customers typically pay monthly fees
on multi-year service contracts for these services.
HARDWARE SYSTEMS
Our software operates on a variety of hardware systems. We have entered
into remarketing agreements with IBM, NCR and other hardware providers that
allow us to purchase hardware at a discount and sell (remarket)it to our
customers together with our software applications. We currently sell the
IBM AS/400, which is IBM's premier mid-range hardware system, the IBM
RS/6000, NCR servers and reader/sorters, and BancTec reader/sorters.
We have a long-term strategic relationship with IBM, dating to the initial
design of our first core software applications more than 20 years ago. In
addition to our remarketing agreement with IBM, which we renew annually, we
have been named a ""Premier Business Partner''of IBM for the last eight
consecutive years. Our relationship with IBM provides us with a substantial
and ongoing source of revenue.
Our remarketing strategy was expanded in 1999 to include IBM and NCR
hardware products utilizing UNIX operating systems to allow us to respond to
customer demand for alternative hardware products and sell our core software
applications to a broader-based market.
CORE SOFTWARE APPLICATIONS
Each of our core software systems consists of several fully-integrated
application modules, such as deposits, loans, general ledger, and the
customer information file, which is a centralized file containing customer
data for all applications. We custom-tailor these modules utilizing
parameters determined by our customer. The applications can be connected to
a wide variety of peripheral hardware devices used in bank operations. Our
software is designed to provide maximum flexibility in meeting our
customers' data processing requirements within a single system to minimize
data entry.
For our customers who choose to acquire in-house capabilities, we generally
license our core system under standard license agreements which provide the
customer with a fully-paid, nonexclusive, nontransferable right to use the
software for a term of up to 25 years on a single computer and at a single
location. These same systems can be delivered on an outsourced basis as
well. We provide a limited warranty for unmodified software, typically for
a period of 60 days from installation. Under the warranty, we will correct
any program errors at no additional charge to the customer.
Our core software applications are differentiated broadly by size of
customer, scalability, customizable functionality, customer competitive
environment and, to a lesser extent, cost. Our core applications include:
* our Silverlake system, which operates on the IBM AS/400 and
is used primarily by banks with total assets up to $10.0
billion;
* our CIF 20/20 system, which operates on the IBM AS/400 and
is used primarily by banks with total assets up to $300.0
million;
* our Core Director system, which operates on hardware
supporting a UNIX operating system and is used by banks
employing client-server technology; and
* our Symitar system, which operates on the IBM RS/6000 with
a UNIX operating system and is used by credit unions.
COMPLEMENTARY PRODUCTS AND SERVICES
To complement our core software applications, we provide a number of
ancillary products and services, including:
Vertex Teller Automation System is an online teller automation
system that enables tellers to process transactions more efficiently
and with greater accuracy.
Streamline Platform Automation is a fully-automated new account
origination solution that integrates new customer data, including
signature cards, disclosure statements, and loan applications into
the core customer data file systems on a real-time basis.
Alliance Check Image Solutions allows our customers to create and
store digital check images for inclusion in monthly statements and
to facilitate their customer support services.
Silhouette Document Imaging utilizes digital storage and retrieval
technology to provide online instant access to document images, such
as loan documents and signature cards.
PinPoint Report Retrieval enables system-wide storage and retrieval
of computer-generated reports for simplified information access.
NetTeller and MemberConnect- Web provides Internet-based home
banking and commercial cash management. See "Online Banking'' below.
InTouch Voice Response provides a fully-automated interactive voice
response system for 24-hour telephone-based banking and customer
service.
Centurion Disaster Recovery provides multi-tiered disaster recovery
protection, including comprehensive disaster planning and procedures.
TimeTrack Payroll System:00 is a fully-integrated payroll accounting
and human resources software system.
FormSmart provides day-to-day operating forms, year-end tax forms
and other printing and office supplies.
CommLink ATM & Transaction Processing Solutions provides national
switching and processing services for ATM, debit card transactions
and point-of-sale transactions.
Other software products such as proof of deposit, secondary market
loan servicing, account reclassification, and investment sweeps
further complement our core systems.
INSTALLATION AND TRAINING
Virtually all of our customers contract with us for installation and
training services in connection with their purchase of in-house systems.
The complete installation process of a core system typically requires six to
nine months of planning, design, data conversion, hardware set-up and
testing. At the culmination of this installation process, one of our
installation teams travels to our customer's facilities to ensure the smooth
transfer of data to the new system. Installation fees are charged
separately to our customers on both fixed fee and hourly charge models, with
full pass-through to our customers of travel and other expenses.
Installation services are also required in connection with new outsourcing
customers, and are billed separately at the time of installation.
Both in connection with installation of new systems and on an ongoing basis,
our customers need, and we provide, extensive training services and programs
related to our products and services. Training can be provided in our
regional training centers, at meetings and conferences or onsite at our
customers' locations, and can be customized to meet our customers'
requirements. The large majority of our customers' acquire training
services from us, both to improve their employees' proficiency and
productivity and to make full use of the functionality of our systems.
Generally, training services are paid for on an hourly basis, however, we
have recently been successful in marketing annual subscriptions for training
services, representing blocks of training time that can be used by our
customers in a flexible fashion.
MAINTENANCE AND SUPPORT
Following the installation of our hardware and software systems at a
customer site, we provide ongoing maintenance and product support services
to assist our customers to operate the systems and to periodically update
the software. We also offer maintenance services for hardware, primarily
through our hardware suppliers, providing customers who have contracted for
this service with ""one-call''system support covering hardware and software
applications.
Support is provided through a 24-hour telephone service available to our
customers seven days a week. Most questions and problems can be resolved
quickly by our experienced support staff. For more complicated issues, our
staff, with our customers' permission, can log on to our customers' systems
remotely. We maintain our customers' software largely through releases
which contain improvements and incremental additions. Updates also are
issued when required by changes in applicable laws and regulations. We
provide maintenance and support services on our core systems as well as our
complementary software products.
Nearly all of our in-house customers purchase maintenance and support
services from us. These services are a significant source of recurring
revenue, are contracted for on an annual basis and are typically priced at
approximately 18% of the particular software product's license fee. These
fees may be increased as our customers' asset base increases and as they
increase the level of functionality of their system by purchasing additional
complementary products. Maintenance and support fees are generally paid in
advance for the entire year, with proration for new contracts which start
during the year. Each contract automatically renews annually unless we or
our customer gives notice of termination at least 60 days prior to
expiration. Identical maintenance and support is provided to our outsourced
customers, but are not separately priced in their overall monthly fees.
ONLINE BANKING
We provide a suite of fully integrated Internet products and services that
enables community financial institutions to offer Internet banking and
e-commerce solutions to their customers. Our offerings include:
NetTeller, an Internet-based home banking system for individual
customers and commercial cash management for business customers of
community banks;
MemberConnect-Web, an Internet-based home banking system for credit
union members;
Bill Pay, which allows customers to pay bills online through a
third-party provider. We are currently developing our own bill
payment system; and
NetHarbor, which provides our customers with a custom-branded web
portal that enables them to provide their customers with a variety
of customized information and e-commerce opportunities, including
user-defined content such as local or special interest events,
weather, financial news and other information and online shopping
and e-commerce through our relationship with OLB.com. We also plan
for NetHarbor to provide online stock trading and market information
through our relationship with Q4i.com before the end of calendar
year 2000.
RESEARCH AND DEVELOPMENT
We devote significant effort and expense to develop new software and service
products and continually upgrade and enhance our existing offerings.
Typically, we upgrade our core software applications and ancillary services
once per year. We believe that our research and development efforts are
highly efficient because of the extensive experience of our research and
development staff and because our product development is highly
customer-driven. Through our regular contact with customers at user group
meetings, sales contacts and through our ongoing maintenance services, our
customers inform us of the new products and functionalities they desire.
SALES AND MARKETING
Our primary markets consist of community banks and credit unions. We have
not devoted significant marketing and sales efforts to other financial
institutions such as thrifts. Historically, we have primarily and most
successfully marketed to banks with up to $3.0 billion in total assets and
credit unions of all sizes.
Our sales efforts are conducted by a dedicated field sales force, an inside
sales team and a technical sales support team, all of which are overseen by
regional sales managers. Our dedicated field sales force is responsible for
pursuing lead generation activities and representing the majority of our
products and solutions to current and prospective clients. Our inside sales
force sells certain complementary products to our existing customers. All
sales force personnel have responsibility for a specific territory. The
sales support team writes business proposals and contracts and prepares
responses to request-for-proposals regarding our software and hardware
solutions. All of our sales professionals receive a base salary and
performance-based commission compensation.
Our marketing effort consists of attendance at trade shows, printed media
advertisement placements, internally developed and managed marketing
campaigns. We also conduct a number of field and national user group
meetings each year that enable us to keep in close contact with our
customers and demonstrate new products and services to them.
We have 33 installations in the Caribbean primarily through the marketing
efforts of our wholly-owned foreign sales subsidiary, Jack Henry
International Limited. Our international sales have historically accounted
for substantially less than 5% of our revenues.
BACKLOG
Our backlog consists of contracted in-house products and services (prior to
delivery)and the minimum amounts due on the remaining portion of outsourcing
contracts, which are typically for five-year periods. Our backlog at June
30, 2000 was $43.0 million for in-house products and services and $61.4
million for outsourcing services, with a total backlog of $104.4 million.
Our backlog is subject to seasonal variations and can fluctuate quarterly
due to various factors, including slower contract processing rates during
the summer months.
COMPETITION
The market for companies that provide technology solutions to community
financial institutions is competitive and fragmented, and we expect
continued competition from both existing competitors and companies that
enter our existing or future markets. Some of our current competitors have
longer operating histories, larger customer bases and greater financial and
other resources. The principal competitive factors affecting the market for
our services include comprehensiveness of the applications, features and
functionality, flexibility and ease of use, customer support, references
from existing customers and price. We compete with large vendors that offer
transaction processing products and services to financial institutions,
including Bisys, Inc., AllTel Information Services, Fiserv, Inc. and
Marshall and Ilsley Corporation. In addition, we compete with a number of
providers that offer one or more specialized products or services. There
has been significant consolidation among providers of information technology
products and services to financial institutions, and we believe this
consolidation will continue in the future.
INTELLECTUAL PROPERTY, PATENTS AND TRADEMARKS
Although we believe that our success depends upon our technical expertise
more than on our proprietary rights, our future success and ability to
compete depends in part upon our proprietary technology. We have already
registered or filed applications for our primary trademarks. None of our
technology is patented. Instead we rely on a combination of contractual
rights and copyrights, trademarks and trade secrets to establish and protect
our proprietary technology. We generally enter into confidentiality
agreements with our employees, consultants, resellers, customers and
potential customers. We restrict access to and distribution of our source
code and further limit the disclosure and use of other proprietary
information. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain or use our
products or technology. We cannot be sure that the steps taken by us in
this regard will be adequate to prevent misappropriation of our technology
or that our competitors will not independently develop technologies that are
substantially equivalent or superior to our technology.
GOVERNMENT REGULATION
The financial services industry is subject to extensive and complex federal
and state regulation. Our current and prospective customers, which consist
of financial institutions such as community banks and credit unions, operate
in markets that are subject to substantial regulatory oversight and
supervision. We must ensure that our products and services work within the
extensive and evolving regulatory requirements applicable to our customers,
including those under the federal truth-in-lending and truth-in-deposit
rules, usury laws, the Equal Credit Opportunity Act, the Fair Housing Act,
the Electronic Funds Transfer Act, the Fair Credit Reporting Act, the Bank
Secrecy Act and the Community Reinvestment Act. The compliance of our
products and services with these requirements depends on a variety of
factors including the particular functionality, the interactive design and
the classification of customers. Our customers must assess and determine
what is required of them under these regulations and they contract with us
to ensure that our products and services conform to their regulatory needs.
It is not possible to predict the impact that any of these regulations could
have on our business in the future.
We are not chartered by the Office of the Comptroller of Currency, the Board
of Governors of the Federal Reserve System, the National Credit Union
Administration or other federal or state agencies that regulate or supervise
depository institutions or other providers of financial services. The
services provided by our OutLink Data Centers are subject to examination by
the Federal depository institution regulators under the Bank Service Company
Act. On occasion these services are also subject to examination by state
banking authorities.
We provide outsourced data and item processing through our geographically
dispersed OutLink Data Centers, electronic transaction processing through
CommLink ATM and Transaction Processing Solutions, Internet banking through
NetTeller online banking, and bank business recovery services through
Centurion Disaster Recovery. As a service provider to financial
institutions, our operations are governed by the same regulatory
requirements as those imposed on financial institutions. We are subject to
periodic review by federal depository institution regulators who have broad
supervisory authority to remedy any shortcomings identified in such reviews.
The privacy requirements in Title V of the Gramm-Leach-Bliley Act ("the
Act") adopted in November of 1999 represent a significant change in the
federal legal framework governing how providers of financial services in
this country interact with their customers. Proposed regulations
implementing Title V establish standards for financial institutions relating
to administrative, technical and physical safeguards for customer records
and information. Financial institutions will be required to evaluate their
controls on access to customer information and their policies for encrypting
customer information while it is being transmitted or stored on networks to
which unauthorized persons may have access. As a software company that
provides services to financial institutions, we are likely to be covered
under these regulations and may have to adopt additional safeguards within
our software to ensure that we and our customers are in compliance with the
Act.
EMPLOYEES
As of June 30, 2000, we had 1,589 full time employees. Our employees are
not covered by a collective bargaining agreement and there have been no
labor-related work stoppages. We consider our relationship with our
employees to be good.
RISK FACTORS
The Company's business and the results of its operations are affected by
numerous factors and uncertainties, some of which are beyond their control.
The following is a description of some of the important risk factors and
uncertainties that may cause the actual results of the Company's operations
in future periods to differ materially from those currently expected or
desired.
WE MAY NOT BE ABLE TO CONTINUE OR EFFECTIVELY MANAGE OUR RAPID GROWTH. We
have grown at a rapid pace, both internally and through acquisitions. Our
expansion has and will continue to place significant demands on our
administrative, operational, financial and management personnel and systems.
We cannot assure you that we will be able to enhance and expand our product
lines, manage costs, adapt our infrastructure and modify our systems to
accommodate future growth.
IF WE FAIL TO ADAPT OUR PRODUCTS AND SERVICES TO CHANGES IN TECHNOLOGY, WE
COULD LOSE EXISTING CUSTOMERS AND BE UNABLE TO ATTRACT NEW BUSINESS. The
markets for our software and hardware products and services are
characterized by changing customer requirements and rapid technological
changes. These factors and new product introductions by our existing
competitors or by new market entrants could reduce the demand for our
existing products and services and we may be required to develop or acquire
new products and services. Our future success is dependent on our ability
to enhance our existing products and services in a timely manner and to
develop or acquire new products and services. If we are unable to develop
or acquire new products and services as planned, or fail to achieve timely
market acceptance of our new or enhanced products and services, we may incur
unanticipated expenses, lose sales or fail to achieve anticipated revenues.
ACQUISITIONS MAY BE COSTLY AND DIFFICULT TO INTEGRATE. We recently have
acquired several businesses and will continue to explore possible business
combinations in the future. We may not be able to successfully integrate
acquired companies. We may encounter problems in connection with the
integration of new businesses including: financial control and computer
system compatibility; unanticipated costs; unanticipated quality or customer
problems with acquired products or services; diversion of management's
attention; adverse effects on existing business relationships with suppliers
and customers; loss of key employees; and significant amortization expenses
related to goodwill and other intangible assets. Without additional
acquisitions, we may not be able to grow and to develop new products and
services as quickly as we have in the past to meet competitive challenges.
If our integration strategies fail, our business, financial condition and
results of operations could be materially and adversely affected.
IF OUR STRATEGIC RELATIONSHIP WITH IBM WERE TERMINATED, IT COULD HAVE A
NEGATIVE IMPACT ON THE CONTINUING SUCCESS OF OUR BUSINESS. We have
developed a strategic relationship with IBM. As part of this collaborative
relationship, we market and sell IBM hardware and equipment to our customers
under an industry remarketer agreement and resell maintenance on IBM
hardware products to our customers. Much of our software is designed to be
compatible with the IBM hardware that is run by a majority of our customers.
If IBM were to terminate or fundamentally modify our strategic
relationship, our relationship with our customers and our revenues and
earnings would suffer. We could also lose software market share or be
required to redesign existing products or develop new products that would be
compatible with the hardware used by our customers.
COMPETITION MAY RESULT IN PRICE REDUCTIONS AND DECREASED DEMAND FOR OUR
PRODUCTS AND SERVICES. We expect that competition in the markets we serve
will remain vigorous. We compete on the basis of product quality,
reliability, performance, ease of use, quality of support and pricing. We
cannot guarantee that we will be able to compete successfully with our
existing competitors or with companies that may enter our markets in the
future. Certain of our competitors have strong financial, marketing and
technological resources and, in some cases, a larger customer base than we
do. They may be able to adapt more quickly to new or emerging technologies
or to devote greater resources to the promotion and sale of their products
and services.
THE LOSS OF KEY EMPLOYEES COULD ADVERSELY AFFECT OUR BUSINESS. We depend to
a significant extent on the contributions and abilities of our Chairman and
Chief Executive Officer Michael Henry, our President and Chief Operating
Officer Michael Wallace, our Chief Financial Officer Terry Thompson and
various other members of our senior management. Our Company has grown
significantly in recent years and our management remains concentrated in a
small number of key employees. If we lose one or more of our key employees,
we could suffer a loss of sales and delays in new product development, and
management resources would have to be diverted from other activities to
compensate for this loss. We do not have employment agreements with any of
our executive officers.
CONSOLIDATION OF FINANCIAL INSTITUTIONS COULD REDUCE THE NUMBER OF OUR
CUSTOMERS AND POTENTIAL CUSTOMERS. Our primary market consists of
approximately 8,500 community banks and 11,000 credit unions. The number of
community banks and credit unions has decreased as a result of mergers and
acquisitions and is expected to continue to decrease as more consolidation
occurs, which will reduce our number of potential customers. As a result of
this consolidation, some of our existing customers could terminate, or
refuse to renew their contracts with us and potential customers could break
off negotiations with us.
THE SERVICES WE PROVIDE TO OUR CUSTOMERS ARE SUBJECT TO GOVERNMENT
REGULATION THAT COULD HINDER OUR ABILITY TO DEVELOP PORTIONS OF OUR BUSINESS
OR IMPOSE ADDITIONAL CONSTRAINTS ON THE WAY WE CONDUCT OUR OPERATIONS. The
financial services industry is subject to extensive and complex federal and
state regulation. As a supplier of services to financial institutions, some
of our operations are examined by the Office of the Comptroller of the
Currency, the Federal Reserve Board and the Federal Deposit Insurance
Corporation, among other regulatory agencies. These agencies regulate
services we provide and the manner in which we operate, and we are required
to comply with a broad range of applicable laws and regulations. In
addition, existing laws, regulations and policies could be amended or
interpreted differently by regulators in a manner that has a negative impact
on our existing operations or that limits our future growth or expansion.
Our customers are also regulated entities, and the form and content of
actions by regulatory authorities could determine both the decisions they
make concerning the purchase of data processing and other services and the
timing and implementation of these decisions. The development of financial
services over the Internet has raised concerns with respect to the use,
confidentiality and security of private customer information. Regulatory
agencies, Congress and state legislatures are considering numerous
regulatory and statutory proposals to protect the interests of consumers and
to require compliance by the industry with standards and policies that have
not been defined.
AS TECHNOLOGY BECOMES LESS EXPENSIVE AND MORE ADVANCED, PURCHASE PRICES OF
HARDWARE MAY DECLINE AND OUR REVENUES AND PROFITS FROM REMARKETING
ARRANGEMENTS MAY DECREASE. Computer hardware technology is rapidly
developing. Hardware manufacturers are producing less expensive and more
powerful equipment each year, and we expect this trend to continue into the
future. As computer hardware becomes less expensive, revenues and profits
derived from our hardware remarketing may decrease and become a smaller
portion of our revenues and profits.
AN OPERATIONAL FAILURE IN OUR OUTSOURCING FACILITIES COULD CAUSE US TO LOSE
CUSTOMERS. Damage or destruction that interrupts our provision of
outsourcing services could damage our relationship with certain customers
and may cause us to incur substantial additional expense to repair or
replace damaged equipment. Although we have installed back-up systems and
procedures to prevent or reduce disruption, we cannot assure you that we
will not suffer a prolonged interruption of our transaction processing
services. In the event that an interruption of our network extends for more
than several hours, we may experience data loss or a reduction in revenues
by reason of such interruption. In addition, a significant interruption of
service could have a negative impact on our reputation and could lead our
present and potential customers to choose service providers other than us.
.ITEM 2. PROPERTIES
We own approximately 132 acres located in Monett, Missouri on which we
maintain six office buildings. We also own buildings in Houston, Texas;
Allen, Texas; Albuquerque, New Mexico; Angola, Indiana; Lenexa, Kansas and
Shawnee, Kansas. Our owned facilities represent approximately 280,000
square feet of office space. We have 35 leased office facilities in 20
states which total approximately 195,000 square feet.
We own five aircraft that are utilized for business purposes. Many of our
customers are located in communities that do not have an easily accessible
commercial airline service. We primarily use our airplanes in connection
with installation and sales of systems. Transportation costs for
installation and other customer services are billed to our customers. We
lease property, including real estate and related facilities, at the Monett,
Missouri municipal airport.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various routine legal proceedings and claims arising in
the ordinary course of business. We do not expect that the results in any of
these legal proceedings will have a material adverse effect on our business,
financial condition, results of operations or cash flows.
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 quoted on the Nasdaq National Market under the
symbol "JKHY". The following table sets forth, for the periods indicated,
the high and low sales price per share of the common stock as reported by
the Nasdaq National market. All prices have been adjusted to give effect to
the 2 for 1 split of the common stock which occurred on March 2, 2000.
FISCAL 2000 HIGH LOW
First Quarter $22.69 $15.50
Second Quarter 28.25 16.38
Third Quarter 40.00 24.13
Fourth Quarter 53.00 30.00
Fiscal 1999
First Quarter $25.13 $17.38
Second Quarter 27.50 15.19
Third Quarter 25.06 16.00
Fourth Quarter 20.38 13.22
The Company established a practice of paying quarterly dividends at the end
of fiscal 1990 and has paid dividends with respect to every quarter since
that time. Quarterly dividends per share paid on the common stock for the
two most recent fiscal years ended June 30, 2000 and 1999, as adjusted to
reflect the 2 for 1 stock split in March 2000, are as follows:
FISCAL 2000 DIVIDEND
First Quarter $.0400
Second Quarter .0400
Third Quarter .0500
Fourth Quarter .0500
Fiscal 1999
First Quarter $.0325
Second Quarter .0325
Third Quarter .0400
Fourth Quarter .0400
The declaration and payment of any future dividends will continue to be at
the discretion of our board of directors and will depend, among other
factors, upon our earnings, capital requirements, contractual restrictions,
and operating and financial condition. The Company does not currently
foresee any changes in our dividend practices.
On August 30, 2000, there were 18,022 holders of the Company's common
stock. On that same date the last sale price of the common shares as
reported on NASDAQ was $45.00 per share.
On June 1, 2000, the Company issued 388,712 shares of fully paid
non-assessable common stock to the shareholders of Sys-Tech, Inc. of Kansas
and 28,700 shares of fully paid non-assessable common stock to the
shareholders of Big Sky Marketing, Inc., as total consideration for a
transaction whereby all of the outstanding capital stock of Sys-Tech, Inc.
of Kansas and Big Sky Marketing, Inc. (collectively referred to as Sys-Tech)
were acquired by merger. These shares were issued under the exemption
provided by Section 4(2) and 4(6) of the Securities Act and Rule 506
thereunder.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Information (*)
(In Thousands, Except Per Share Information)
<TABLE>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30,
INCOME STATEMENT DATA 2000 1999 1998 1997 1996
Revenue (1) $225,300 $193,527 $148,235 $126,256 $94,499
Income from continuing operations $ 34,350 $ 32,726 $ 24,205 $ 18,492 $13,886
Loss from discontinued operations (2) $ (332) $ (758) $ (668) $ (450) $(2,620)
Net income $ 34,018 $ 31,968 $ 23,537 $ 18,042 $11,266
Diluted earnings per share (3):
Income from continuing operations $ .81 $ .77 $ .58 $ .46 $ .36
Loss from discontinued operations $ (.01) $ (.02) $ (.02) $ (.01) $ (.07)
Net income $ .80 $ .75 $ .57 $ .45 $ .29
Dividends declared per share (3) $ .18 $ .15 $ .12 $ .10 $ .08
JUNE 30,
BALANCE SHEET DATA 2000 1999 1998 1997 1996
Working capital $(47,140) $ 24,133 $ 35,758 $ 16,387 $ 2,876
Total assets $321,082 $177,823 $133,830 $100,476 $ 67,488
Long-term debt $ 320 $ 211 $ 654 $ 651 $ 3,504
Stockholders' equity $154,545 $115,798 $ 83,591 $ 60,549 $ 32,230
</TABLE>
* Selected financial information for all periods have been restated to
include Sys-Tech, Inc., which was acquired on June 1, 2000. The acquisition
was accounted for as a pooling of interests and therefore all periods have
been adjusted to reflect the acquisition as if it had occurred at the
beginning of the earliest period reported.
(1) Revenues include software licensing and installation revenues;
maintenance/support and service revenues; and hardware sales; less
sales returns and allowances.
(2) Income and losses from discontinued operations in connection with
our former BankVision subsidiary.
(3) Prior period amounts have been adjusted to reflect the 100% stock
dividend paid March, 2000 and the 50% stock dividend paid March, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the consolidated financial statements and
related notes included elsewhere in this report.
OVERVIEW
We provide integrated computer systems for in-house and outsourced data
processing to community banks, credit unions and other financial
institutions. We have developed and acquired banking application software
systems that we market, together with compatible computer hardware, to
financial institutions throughout the United States. We also perform data
conversion and software installation for the implementation of our systems
and provide continuing customer maintenance and support services after the
systems are installed. For our customers who prefer not to make an up-front
investment in software and hardware, we provide our full range of products
and services on an outsourced basis through our nine data centers and 14
item processing centers located across the United States.
We derive revenues from three primary sources:
- sales of software licenses and installation services;
- maintenance, support and outsourcing service fees; and
- hardware sales.
Over the last five fiscal years, our revenues have grown from $94.5 million
in fiscal 1996 to $225.3 million in fiscal 2000. Income from continuing
operations has grown from $13.9 million in fiscal 1996 to $34.4 million in
fiscal 2000. This growth has resulted primarily from internal expansion
supplemented by strategic acquisitions, allowing us to develop new products
and expand the number of customers who use our core software systems to
approximately 2,400 as of June 30, 2000.
Since July 1994, we have completed 15 strategic acquisitions. Ten of these
acquisitions were accounted for using the purchase method of accounting and
our consolidated financial statements include the results of operations of
the acquired companies from the dates of their respective acquisitions. The
remaining five acquisitions were accounted for as poolings-of-interests. The
comparisons set forth below reflect the fact that the consolidated financial
statements for fiscal years 2000, 1999 and 1998 have been restated to
include all acquisitions accounted for as poolings-of-interests as if each
had occurred at the beginning of the earliest period reported.
The Company's operations are classified as one business segment in the
current year. The recent acquisition of Symitar Systems, Inc. entrenches
the Company more significantly into the credit union marketplace. Even
though the Company's credit union activities were immaterial relative to
segment reporting in the current year, it could become more significant, and
thus be reported as a separate segment in the future.
Software sales and installation revenue includes the licensing of
application software systems and the conversion and installation services
required for the customer's installation of the systems. We license our
proprietary software products under standard license agreements which
typically provide the customer with a non-exclusive, non-transferable right
to use the software for a term of up to 25 years on a single computer and
for a single financial institution location upon payment of the license fee.
Generally, 25% of license fees are payable upon execution of the license
agreement, 65% upon delivery of the software and the balance at the
installation of the last application module. We recognize 100% of software
license revenue upon delivery of the software and documentation. We
recognize installation services each month as services are performed under
hourly contracts and at the completion of the installations under fixed fee
contracts.
Maintenance and support fees are generated from ongoing services to assist
the customer in operating the systems and to modify and update the software
and from providing outsourced data processing services. Revenues from
software maintenance are generated pursuant to annual agreements and are
recognized ratably over the life of the agreements. Outsourcing services are
performed through data centers. Revenues from outsourced data processing are
derived from monthly usage fees typically under five-year service contracts
with our customers. We recognize the revenues under these outsourcing
contracts as services are performed.
Cost of services represents direct costs associated with conversion and
installation efforts, ongoing maintenance and support for our in-house
customers and operation of our centers providing services for our outsourced
customers. These costs are recognized as they are incurred.
We have entered into remarketing agreements with several hardware
manufacturers under which we sell computer hardware and related services to
our customers along with our banking software systems. Revenues from
hardware sales are recognized when the manufacturers ship the hardware. Cost
of hardware consists of the direct costs of purchasing the equipment from
the manufacturers. These costs are recognized at the same time as the
related revenue.
RESULTS OF OPERATIONS
FISCAL 2000 COMPARED TO FISCAL 1999
REVENUE - Revenues increased by 16.4% from $193.5 million in fiscal 1999 to
$225.3 million in fiscal 2000. Software licensing and installation increased
22.3%; maintenance/support and service revenues increased 36.8% and hardware
sales decreased 6.6% compared to fiscal 1999. The changes in revenues from
the prior year are a direct result of the Y2K induced slow down of system
sales during the first half of fiscal 2000, the significant increase in
post-Y2K demand for our products and services and the contribution of $21.1
million from our Open System Group, which we refer to as OSG, that we
acquired in September 1999.
COST OF SALES - Cost of sales increased 18.6% from $107.2 million in fiscal
1999 to $127.2 million in fiscal 2000, compared to a 16.4% increase in
revenues. Cost of hardware decreased 6.6% compared with the 6.6% decrease
in hardware revenue. Cost of services increased 44.8% compared to the 31.0%
increase in non-hardware revenues, with the most significant increase in
costs resulting from the addition of OSG.
GROSS PROFIT - Gross profit increased 13.7% from $86.3 million in fiscal
1999 to $98.1 million in fiscal 2000. The gross margin percentage for fiscal
2000 was 43.5%, down from 44.6% during 1999, primarily because of changes in
sales mix due to the impact of Y2K.
OPERATING EXPENSES - Operating expenses increased 28.8% from $36.6 million
in fiscal 1999 to $47.1 million in fiscal 2000. Selling and marketing
expenses increased 35.5%, research and development increased 54.8% and
general and administrative expenses increased 15.7% during fiscal 2000.
These expenses grew more rapidly than revenue because, despite the impact of
Y2K referred to above, we continued operations and staffing levels necessary
to meet anticipated demand in the second half of fiscal 2000. The most
significant increase was in research and development, a large portion of
which was a result of the continued development of our Internet-related
products.
OTHER INCOME (EXPENSE) - Other income decreased 60.0% from $1.9 million in
fiscal 1999 to $775,000 in fiscal 2000. The $1.1 million gain on sale in
September 1999 of a stock investment acquired in the Peerless acquisition in
large part offset the increase in interest expense of $1.8 million and the
decrease in interest income of $756,000 from cash investments in fiscal 2000
compared to fiscal 1999.
PROVISION FOR INCOME TAXES - The provision for income taxes was $17.4
million, or 33.6% of income from continuing operations before income taxes
in fiscal 2000, compared with $18.9 million, or 36.6% of income from
continuing operations before income taxes in fiscal 1999. This decrease in
the effective tax rate reflects benefits derived from our tax planning
efforts to reduce state income taxes.
INCOME FROM CONTINUING OPERATIONS - Income from continuing operations
increased 5.0% from $32.7 million, or $.77 per diluted share in fiscal 1999
to $34.4 million, or $.81 per diluted share in fiscal 2000.
DISCONTINUED OPERATIONS - We incurred a $332,000 loss from discontinued
operations in fiscal 2000, all of which was realized in the three months
ended September 30, 1999. This was $426,000 less than the loss from
discontinued operations for fiscal 1999.
FISCAL 1999 COMPARED TO FISCAL 1998
REVENUE - Revenues increased by 30.6% from $148.2 million in fiscal 1998 to
$193.5 million in fiscal 1999. Above average demand for our core software
products and related hardware resulting from the preparation for Y2K was a
major factor driving revenue growth in fiscal 1999. Each line item of
revenues grew in fiscal 1999 compared with the previous fiscal year, with
the largest increase in maintenance/support and service. Sales of
complementary products and services, which are primarily provided to
customers utilizing our core software products, provided a significant
amount of revenue during 1999. Acquisitions, electronic transaction fees,
outsourcing fees, Internet banking, form sales and customer support fees
also contributed to the significant growth in total revenues during that year.
COST OF SALES - Cost of sales increased by 32.4% from $81.0 million in
fiscal 1998 to $107.2 million in fiscal 1999, compared to a 30.6% increase
in revenues in fiscal 1999 compared to the previous year. Cost of hardware
increased 26.1% compared to the 21.2% increase in hardware revenue due to
product mix of hardware sold. Cost of services increased 39.6% compared to a
37.2% increase in its related components of revenue in fiscal 1999.
GROSS PROFIT - Gross profit increased 28.3% from $67.2 million in fiscal
1998 to $86.3 million in fiscal 1999. The gross margin percentage for fiscal
1999 was 44.6%, a small decrease from the gross margin in fiscal 1998.
OPERATING EXPENSES - Operating expenses increased 18.1% from $31.0 million
in fiscal 1998 to $36.6 million in fiscal 1999, compared to a 28.3% increase
in gross profit in fiscal 1999 compared with fiscal 1998. The increase in
operating expenses reflects efficiencies realized as part of our overall
growth. Selling and marketing expenses decreased 7.2% from $15.1 million in
fiscal 1998 to $14.0 million in fiscal 1999. This decrease reflects the
change in product mix, with a higher percentage of revenues being generated
by non-commission sources, such as customer support fees. Research and
development expenses increased 24.5% from $4.2 million in fiscal 1998 to
$5.2 million in fiscal 1999, directly related to continued development and
refinement of new and existing products, particularly Internet products.
General and administrative expenses increased 48.6% from $11.7 million in
fiscal 1998 to $17.3 million in fiscal 1999, principally due to increased
requirements caused by our overall growth. Excluding the one-time
acquisition costs for the Peerless transaction of $2.2 million, general and
administrative expenses increased 29.7% in fiscal 1999 compared with fiscal
1998, while gross profits increased 28.3%.
OTHER INCOME (EXPENSE) - Other income increased 15.7% from $1.6 million in
fiscal 1998 to $1.9 million in fiscal 1999, primarily due to the increased
amount of cash and interest-bearing investments in fiscal 1999 compared to
fiscal 1998.
PROVISION FOR INCOME TAXES - The provision for income taxes increased 37.9%
from $13.7 million in fiscal 1998 to $18.9 million in fiscal 1999. The
overall tax rate of 36.6% in fiscal 1999 was relatively unchanged from that
in 1998.
INCOME FROM CONTINUING OPERATIONS - Income from continuing operations
increased 35.2% from $24.2 million, or $.58 per diluted share, in fiscal
1998 to $32.7 million, or $.77 per diluted share, in fiscal 1999.
DISCONTINUED OPERATIONS - We incurred a $758,000 loss from discontinued
operations in fiscal 1999, compared to a $668,000 loss from discontinued
operations in fiscal 1998. We continued to honor prior commitments to
existing customers while anticipating final resolution regarding our
discontinued operation which was realized in the first quarter of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
JHA has historically generated positive cash flow from operations and has
generally used existing resources and funds generated from operations to
meet capital requirements. During fiscal 2000, capital expenditures totaled
$32.6 million which was used to expand and purchase additional equipment.
These were funded from cash generated by operations and additional
short-term borrowings. Acquisition costs totaling $93.3 million in fiscal
2000, connected with the purchase of our Open Systems Group from BancTec,
Inc., Symitar Systems, Inc. and BancData Solutions, Inc., were funded with
approximately $30.7 million in cash from operations and $62.6 million of
short-term borrowings.
Our cash and cash equivalents increased to $5.2 million at June 30, 2000,
from $3.4 million at June 30, 1999. Net cash from continuing operations was
$48.9 million for the year ended June 30, 2000, $37.8 million for the year
ended June 30, 1999 and $26.3 million for the year ended June 30, 1998. The
cash used in investing activities during fiscal 2000 was primarily
attributable to acquisition costs of $93.3 million. The cash used in the
year ended June 30, 1999 was primarily attributable to capital expenditures
of $38.9 million. The cash used in the year ended June 30, 1998 was
primarily attributable to capital expenditures of $9.9 million.
Cash provided by financing activities was $69.4 million for the year ended
June 30, 2000. Cash used for financing activities was $2.0 million for the
year ended June 30, 1999 and $2.7 million for the year ended June 30, 1998.
JHA currently has two bank credit lines upon which it can draw an aggregate
amount at any one time outstanding of $83.0 million. The major credit line
provides for funding of up to $75.0 million and bears interest at variable
LIBOR-based rates (7.63% at June 30, 2000). On June 30, 2000, a total of
$70.5 million was outstanding under this credit line with approximately $4.5
million available. On September 7, 2000, the aggregate amount available
under this credit line will be reduced to $50.0 million. The second credit
line provides for funding of up to $8.0 million and bears interest at the
prime rate (9.5% at June 30, 2000).
Subsequent to June 30, 2000, the company completed a secondary offering of
1.5 million shares of its common stock at $43.00 per share less a 5%
underwriters' discount and offering expenses paid by the Company. The net
proceeds of approximately $60.5 million was used to retire all outstanding
debt as of that date, and the balance will be used for working capital,
capital expenditures, other general corporate purposes and potential future
acquisitions.
Subsequent to June 30, 2000, the Company's Board of Directors declared a
cash dividend of $.05 per share on its common stock payable on September 21,
2000 to stockholders of record on September 7, 2000. Current funds from
operations are 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities''. SFAS
No.133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No.133, as amended by SFAS No.137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. This new
standard is not anticipated to have a material impact on the Company's
financial position and results of operations.
The Securities and Exchange Commission ("SEC'') issued Staff Accounting
Bulletin ("SAB'') No.101, "Revenue Recognition in Financial Statements'', on
December 3, 1999. SAB No.101, as amended, provides the SEC Staff's views on
selected revenue recognition issues and is effective no later than the
fourth fiscal quarter for years beginning after December 15, 1999, which for
the Company is the beginning of its fourth quarter of fiscal 2001. The
Company has not completed the process of evaluating the impact that will
result from adopting SAB No.101 and therefore, is unable to determine the
impact that the adoption will have on its financial position and results of
operations.
FORWARD LOOKING STATEMENTS
The Management's Discussion and Analysis of Financial Condition and Results
of Operations and other portions of this report contain forward-looking
statements within the meaning of federal securities laws. Actual results
are subject to risks and uncertainties, including both those specific to the
Company and those specific to the industry, which could cause results to
differ materially from those contemplated. The risks and uncertainties
include, but are not limited to, the matters detailed herein at "Risk
Factors", above. Undue reliance should not be placed on the forward-looking
statements. The Company does not undertake any obligation to publicly
update any forward-look statements.
ITEM 7A. QUANTITATIVES AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market risk refers to the risk that a change in the level of one or more
market prices, interest rates, indices, volatilities, correlations or other
market factors such as liquidity, will result in losses for a certain
financial instrument or group of financial instruments. We are currently
exposed to credit risk on credit extended to customers, interest risk on
investments in U.S. government securities and long-term debt. We actively
monitor these risks through a variety of controlled procedures involving
senior management. We do not currently use any derivative financial
instruments. Based on the controls in place, credit worthiness of the
customer base and the relative size of these financial instruments, we
believe the risk associated with these instruments will not have a material
adverse affect on our consolidated financial position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Independent Auditors' Report........................................20
Financial Statements:
Consolidated Statements of Income,
Years Ended June 30, 2000, 1999 and
1998.....................................................21
Consolidated Balance Sheets,
June 30, 2000 and 1999...................................22
Consolidated Statements of Changes in Stockholders'
Equity, Years Ended June 30, 2000, 1999 and 1998.........23
Consolidated Statements of Cash Flows,
Years Ended June 30, 2000, 1999 and 1998.................24
Notes to Consolidated Financial Statements...............25
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.
Supplementary Data:
The information required by this item is contained under the caption
Quarterly Financial Information on page 19 of the 2000 Annual Report.
Such information is hereby incorporated by reference.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Jack Henry & Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Jack Henry &
Associates, Inc. and Subsidiaries (the "Company") as of June 30, 2000 and
1999, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended June
30, 2000. 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Jack Henry & Associates,
Inc. and Subsidiaries at June 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended June 30, 2000 in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
August 24, 2000
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
<TABLE>
<S> <C> <C> <C>
YEAR ENDED JUNE 30,
2000 1999 1998
REVENUES
Software licensing and installation $ 57,688 $ 47,181 $ 39,484
Maintenance/support and service 97,519 71,278 46,835
Hardware sales 70,093 75,068 61,916
Total $225,300 $193,527 $148,235
COST OF SALES
Cost of hardware 51,045 54,661 43,335
Cost of services 76,139 52,582 37,674
Total $127,184 $107,243 $ 81,009
GROSS PROFIT $ 98,116 $ 86,284 $ 67,226
OPERATING EXPENSES
Selling and marketing 19,015 14,030 15,124
Research and development 8,022 5,183 4,163
General and administrative 20,069 17,347 11,675
Total $ 47,106 $ 36,560 $ 30,962
OPERATING INCOME FROM CONTINUING OPERATIONS $ 51,010 $ 49,724 $ 36,264
Percent of total revenue
22.6% 25.7% 24.5%
OTHER INCOME (EXPENSE)
Interest income 863 1,619 1,319
Interest expense (1,910) (93) (34)
Other, net 1,802 363 348
Total $ 755 $ 1,889 $ 1,633
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 51,765 $ 51,613 $ 37,897
PROVISION FOR INCOME TAXES 17,415 18,887 13,692
INCOME FROM CONTINUING OPERATIONS $ 34,350 $ 32,726 $ 24,205
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES 332 758 668
NET INCOME $ 34,018 $ 31,968 $ 23,537
Diluted earnings per share:
Income from continuing operations $ .81 $ .77 $ .58
Loss from discontinued operations .01 .02 .02
Net income $ .80 $ .75 $ .57
Diluted weighted average shares outstanding 42,639 42,641 41,593
Basic earnings per share:
Income from continuing operations $ .84 $ .81 $ .61
Loss from discontinued operations .01 .02 .02
Net income $ .83 $ .79 $ .59
Basic weighted average shares outstanding 40,883 40,337 39,770
</TABLE>
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
<TABLE>
<S> <C> <C>
JUNE 30,
ASSETS 2000 1999
CURRENT ASSETS:
Cash and cash equivalents $ 5,186 $ 3,376
Investments, at amortized cost 946 6,702
Trade receivables 73,940 51,602
Income taxes receivable 3,478 1,178
Prepaid cost of product 10,645 6,306
Prepaid expenses and other 8,980 8,403
Deferred income taxes 825 629
Total $104,000 $ 78,196
PROPERTY AND EQUIPMENT 118,749 85,367
Accumulated depreciation 25,464 19,175
$ 93,285 $ 66,192
OTHER ASSETS:
Intangible assets, net of amortization 109,282 25,181
Computer software 5,813 3,015
Prepaid cost of product 7,694 3,618
Other non-current assets 1,008 1,621
Total $123,797 $ 33,435
Total assets $321,082 $177,823
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,255 $ 5,036
Short-term borrowings 70,500 399
Accrued expenses 9,750 8,484
Current portion of long-term debt 123 16
Deferred revenues 61,512 40,128
Total $151,140 $ 54,063
LONG-TERM DEBT 320 211
DEFERRED REVENUES 9,945 4,536
DEFERRED INCOME TAXES 5,132 3,215
Total liabilities $166,537 $ 62,025
STOCKHOLDERS' EQUITY:
Preferred stock - $1 par value; 500,000 shares authorized; none issued - -
Common stock - $.01 par value; 50,000,000 shares authorized;
shares issued 2000 - 41,357,852; 1999 - 20,517,090 414 205
Additional paid-in capital 43,753 32,210
Retained earnings 110,378 83,383
Total stockholders' equity $154,545 $115,798
Total liabilities and stockholders' equity $321,082 $177,823
</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> <C> <C>
YEAR ENDED JUNE 30,
2000 1999 1998
PREFERRED SHARES (500,000 AUTHORIZED): - - -
COMMON SHARES (50,000,000 AUTHORIZED):
Shares, beginning of year 20,517,090 20,194,870 20,023,689
Shares issued upon exercise of options 500,792 314,277 104,465
Shares issued for Employee Stock
Purchase Plan 11,466 7,943 5,926
Shares issued for acquisitions - - 60,790
Stock dividend 20,328,505 - -
Shares, end of year 41,357,853 20,517,090 20,194,870
COMMON STOCK - PAR VALUE $.01 PER SHARE:
Balance, beginning of year $ 205 $ 202 $ 200
Shares issued upon exercise of options 5 3 2
Other 1 - -
Stock dividend 203 - -
Balance, end of year $ 414 $ 205 $ 202
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $ 32,210 $ 26,267 $22,467
Shares issued upon exercise of options 6,394 3,264 1,620
Shares issued for Employee Stock
Purchase Plan 488 312 176
Shares issued for acquisitions - 150 1,228
Stock dividend (203) - -
Tax benefit on exercise of options 4,864 2,217 776
Balance, end of year $ 43,753 $ 32,210 $26,267
TREASURY STOCK:
Balance, beginning of year $ - $ - $ (293)
Purchases of treasury stock - (5) -
Sales of treasury stock - 5 -
Shares issued for acquisitions - - 293
Balance, end of year $ - $ - $ -
RETAINED EARNINGS:
Balance, beginning of year $ 83,383 $ 57,122 $38,175
Net loss for the three months ended
September 30, 1999 - Sys-Tech, Inc. 264 - -
Retained deficit of acquired businesses - (19) (62)
Net income 34,018 31,968 23,537
Dividends (2000 - $.18 per share;
1999 - $.145 per share ; 1998 - $.12
per share) (7,287) (5,688) (4,528)
Balance, end of year $110,378 $ 83,383 $57,122
TOTAL STOCKHOLDERS' EQUITY $154,545 $115,798 $83,591
</TABLE>
See notes to consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
YEAR ENDED JUNE 30,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 34,350 $ 32,726 $ 24,205
Adjustments to reconcile income from
continuing operations to cash from
operating activities
Depreciation and amortization 15,473 7,901 6,362
Provision for deferred income taxes 2,400 221 478
Gain on sale of investments (1,105) - -
Other 175 157 89
Changes in:
Trade receivables (11,870) (8,540) (12,215)
Prepaid expenses and other (9,451) (6,397) (2,814)
Accounts payable 3,080 (3,308) 1,532
Accrued expenses (1,781) 2,716 155
Income taxes 2,483 805 890
Deferred revenues 15,106 11,568 7,625
Net cash from continuing operations $ 48,860 $37,849 $ 26,307
CASH FLOWS FROM DISCONTINUED OPERATIONS $ 700 $ (608) $ (1,075)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (32,619) (38,884) (9,949)
Purchases of investments (946) (6,708) (3,177)
Proceeds from sale of investments 3,605 - -
Proceeds from maturity of investments 6,702 3,100 5,800
Purchase of customer contracts - (7,105) -
Computer software developed/acquired (875) (867) (281)
Business acquisition costs, net of
cash acquired (93,280) (5,905) (1,046)
Other, net (6) (241) (346)
Net cash from investing activities $(117,419) $(56,610) $ (8,999)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock
upon exercise of stock options 6,399 3,267 1,463
Proceeds from sale of common stock 488 462 201
Dividends paid (7,287) (5,688) (4,528)
Short-term borrowings, net 70,101 (2) 200
Principal payments on long-term debt (296) (27) (71)
Net cash from financing activities $ 69,405 $ (1,988) $(2,735)
Net cash activity for the three months
ended September 30, 1999 - Sys-Tech, Inc $ 264 $ - $ -
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 1,810 $(21,357) $13,498
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,376 24,733 11,235
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,186 $ 3,376 $ 24,733
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 or acquired 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. JHA also provides continuing support and maintenance
services to customers using the systems.
CONSOLIDATION
The consolidated financial statements include the accounts of JHA and all of
its wholly-owned subsidiaries and all significant intercompany accounts and
transactions have been eliminated.
POOLING OF INTERESTS TRANSACTIONS
The consolidated financial statements for all periods presented have been
restated to include Peerless Group, Inc. ("Peerless"), acquired on December
16, 1998, and Sys-Tech, Inc. ("Sys-Tech"), acquired on June 1, 2000. These
acquisitions were accounted for as poolings of interests and therefore all
periods have been adjusted to reflect the acquisitions as if they had
occurred at the beginning of the earliest period reported (see Note 13).
Prior to the consummation of the Sys-Tech acquisition, Sys-Tech's year end
was September 30. Therefore, the consolidated statements of income and cash
flows for the years ended June 30, 1998 and 1999 reflect the results of
operations and cash flows for the Company for the years then ended combined
with Sys-Tech for the years ended September 30, 1998 and 1999, respectively.
The consolidated balance sheet as of June 30, 1999 reflects the financial
position of the Company on that date combined with the financial position of
Sys-Tech as of September 30, 1999. As a result of the Company and Sys-Tech
having different fiscal year ends, Sys-Tech's results of operations for the
three month period ended September 30, 1999 has been included in the
consolidated statements of income for the year ended June 30, 1999.
Revenues, net loss from operations and net loss of Sys-Tech for the three
month period ended September 30, 1999 were $1,402,000,$378,000 and
$264,000,respectively.
COMMON STOCK SPLIT
On January 31, 2000, the Company's Board of Directors declared a 100% stock
dividend on its common stock, effectively a 2 for 1 stock split. The stock
dividend was paid March 2, 2000 to stockholders of record at the close of
business on February 17, 2000. All per share and shares outstanding data in
the consolidated statements of income and the notes to the consolidated
financial statements have been retroactively restated to reflect the stock
split.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
MAINTENANCE/SUPPORT FEES - Fees from these contracts are recognized
ratably over the life of the contract.
HARDWARE - Revenues from sales of hardware are recognized upon direct
shipment by the supplier to the Company's customers. Costs of items
purchased and remarketed are reported as cost of hardware in cost of sales.
PREPAID COST OF PRODUCT
Costs for these contracts are recognized ratably over the life of the
contract, generally one to five years, with the related revenue amortized
from deferred revenues.
DEFERRED REVENUES
Deferred revenues consist primarily of prepaid annual software maintenance
fees and prepaid hardware maintenance fees. Some hardware maintenance
contracts are multi-year, therefore the deferred revenue and prepaid cost of
product are classified in accordance with the terms of the contract.
Software and hardware deposits are also 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 based on estimated revenues 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 diluted income per share to the extent they are dilutive.
Reconciliation from basic to diluted weighted average shares outstanding is
the dilutive effect of outstanding stock options (See Note 10).
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
INVESTMENTS
The Company invests its cash that is not required for current operations
primarily in U.S. government securities.
The Company has the positive intent and ability to hold its debt securities
until maturity and accordingly, these securities 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. The held-to-maturity
securities typically mature in less than one year. 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 of excess purchase price over the fair value of
net assets acquired, customer relationships, software and trade names
acquired in business acquisitions. The amounts are amortized over an
estimated economic benefit period, generally five to twenty years using the
straight-line method.
The Company reviews its long-lived assets and identifiable intangibles for
impairment whenever events or changes in circumstances have indicated that
the carrying amount of its assets might not be recoverable.
COMPREHENSIVE INCOME
Comprehensive income for each of the three years ended June 30, 2000 equals
the Company's net income.
BUSINESS SEGMENT INFORMATION
The Company is a leading provider of financial data processing systems for
financial institutions. In accordance with SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information," 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 institutions
industry. Revenue by type of product and service is presented on the face of
the statements of income.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In October, 1997, the Accounting Standards Executive Committee of the
American Institute of Public Accountants ("AcSEC") issued Statement of
Position ("SOP") 97-2, "Software Revenue Recognition". The Company adopted
SOP 97-2 effective July 1, 1998. SOP 97-2 generally requires revenue earned
on software arrangements involving multiple elements to be allocated to each
element based on the relative fair values of the elements. In March 1998,
AcSEC issued SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2, Software Recognition", which deferred portions of SOP 97-2 for one
year. Revenues in fiscal year 1999 from the sales of software are
recognized in accordance with the enacted portions of SOP 97-2 and revenues
in fiscal 2000 from the sale of software are recognized in accordance with
SOP 98-4. These adoptions did not have a material impact on revenue
recognition or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. This new
standard was adopted July 1, 2000 and did not have a material impact on the
Company's financial position and results of operations.
The Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," on
December 3, 1999. SAB No. 101, as amended, provides the SEC Staff's views
on selected revenue recognition issues and is effective no later than the
fourth fiscal quarter for years beginning after December 15, 1999, which for
the Company is the beginning of its fourth quarter of fiscal year 2001. The
Company has not completed the process of evaluating the impact that will
result from adopting SAB No. 101 and therefore, is unable to determine the
impact that the adoption will have on its financial position and results of
operations.
RECLASSIFICATION
Where appropriate, prior years' financial information has been reclassified
to conform with the current years' presentation. The statements of cash
flows are prepared using the indirect method, which represents a
reclassification of the 1998 presentation for which the direct method was
utilized.
NOTE 2: INVESTMENTS
The amortized cost of held-to-maturity securities at June 30, 2000 and 1999
are included in the following table. Fair market values of these securities
did not differ significantly from amortized cost due to the nature of the
securities and minor interest rate fluctuations during the periods.
<TABLE>
<S> <C> <C>
(In Thousands)
Year Ended June 30,
2000 1999
U.S. treasury notes $ 946 $6,583
Accrued interest - 119
Total $ 946 $6,702
</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, short-term borrowings and long-term debt, fair
values approximate carrying value, based on the short-term nature of the
assets and liabilities and the variability of the interest rates on the
borrowings.
NOTE 4: PROPERTY AND EQUIPMENT
The classification of property and equipment, together with their estimated
useful lives is as follows:
(In thousands)
Year Ended June 30,
<TABLE>
<S> <C> <C> <C>
2000 1999 Estimated useful
life
Land $4,602 $2,830
Land improvements 3,795 1,154 5-20 years
Buildings 29,810 16,444 25-30 years
Equipment and furniture 55,412 34,809 5-8 years
Aircraft 21,915 18,957 8-10 years
Construction in process 3,215 11,173
$118,749 $85,367
Less accumulated depreciation 25,464 19,175
Property & equipment, net $ 93,285 $ 66,192
</TABLE>
NOTE 5: OTHER ASSETS
Intangible assets relate to acquisitions and consist of the following:
(In Thousands)
<TABLE>
<S> <C> <C>
Year ended June 30,
2000 1999
Goodwill $ 32,355 $11,351
Customer relationships 90,612 25,970
Tradenames 3,915 -
$126,882 $37,321
Less accumulated amortization 17,600 12,140
Balance, end of year $109,282 $25,181
</TABLE>
Computer software includes the unamortized cost of software products
developed or acquired by the Company which were required to be capitalized
by accounting principles generally accepted in the United States of America.
Following is an analysis of the computer software costs:
(In Thousands)
<TABLE>
<S> <C> <C>
Year ended June 30,
2000 1999
Balance, beginning of year $3,015 $2,838
Acquired software 3,000 352
Capitalized development costs 875 515
$6,890 $3,705
Less amortization 1,077 690
Balance, end of year $5,813 $3,015
</TABLE>
NOTE 6: LINES OF CREDIT AND LONG-TERM DEBT
LINES OF CREDIT
JHA currently has two bank credits lines upon which it can draw an aggregate
amount at any one time outstanding of $83.0 million. The major unsecured
credit line entered into on September 7, 1999, as amended, provides for
funding up to $75.0 million and bears interest at variable LIBOR-based rates
(7.63% at June 30, 2000, and weighted average interest of 6.72% for the year
ended June 30, 2000) and is due June 15, 2001. On June 30, 2000, a total of
$70.5 million was outstanding under this credit line with approximately $4.5
million available. On September 7, 2000, the aggregate amount available
under this credit line will be reduced to $50.0 million. The second credit
line provides for funding of up to $8.0 million and bears interest at the
prime rate (9.5% at June 30, 2000), and is secured by $1 million of
investments with the remainder unsecured. There were no amounts outstanding
under this line of credit at June 30, 2000 or 1999.
Sys-Tech had a line of credit with a maximum loan amount of $400,000,
bearing interest at the lender's prime rate plus one-half (10.0% throughout
June 30, 1999). Amounts outstanding were none and $399,000 as of June 30,
2000 and 1999, respectively. The line was secured by the accounts
receivable and other current assets of Sys-Tech. Subsequent to the
acquisition of Sys-Tech and prior to June 30, 2000, the line was repaid and
canceled.
LONG-TERM DEBT
The Company has notes payable which were incurred by its BancData Solutions,
Inc. subsidiary (See Note 13), bearing interest at 10%, payable monthly.
The notes are secured by equipment. Sys-Tech had a note payable with an
original loan amount of $400,000, bearing interest at 10%, payable monthly,
due August 4, 2001. The note was secured by specific real estate. The note
was repaid subsequent to the acquisition of Sys-Tech and prior to June 30,
2000.
(In Thousands)
Year ended June 30,
<TABLE>
<S> <C> <C>
2000 1999
Long-term debt $ 443 $ 227
Less current maturities 123 16
$ 320 $ 211
</TABLE>
Future maturities of long-term debt as of June 30, 2000 is as follows:
(In Thousands)
<TABLE>
<S> <C>
2001 $ 123
2002 86
2003 88
2004 95
2005 51
$ 443
</TABLE>
The Company paid interest of $1,600,000, $93,000 and $34,000 in 2000, 1999
and 1998, respectively.
NOTE 7: INCOME TAXES
The provision for income taxes on income from continuing operations consists
of the following:
(In Thousands)
<TABLE>
<S> <C> <C> <C>
Year ended June 30,
2000 1999 1998
Current:
Federal $14,050 $16,860 $12,044
State 965 1,806 1,170
Deferred:
Federal 1,900 204 431
State 500 17 47
$17,415 $18,887 $13,692
Effective Rate 34% 37% 36%
</TABLE>
The tax effects of temporary differences related to deferred taxes shown on
the balance sheets were:
(In Thousands)
<TABLE>
<S> <C> <C>
Year ended June 30,
2000 1999
Deferred tax assets:
Carryforwards (operating losses, capital losses,
credits, etc.) $ 615 $ 342
Expense reserves (bad debts, insurance, franchise tax,
vacation, etc.) 825 629
Intangible assets 1,548 1,236
2,988 2,207
Deferred tax liabilities:
Accelerated tax depreciation (6,173) (4,104)
Accelerated tax amortization (1,060) (674)
Other, net (62) (15)
(7,295) (4,793)
Net deferred tax liability $(4,307) $(2,586)
</TABLE>
The deferred taxes are classified on the balance sheet as follows:
(In Thousands)
Year ended June 30,
<TABLE>
<S> <C> <C>
2000 1999
Deferred Income taxes (current) $ 825 $ 629
Deferred income taxes (long-term) (5,132) (3,215)
$ (4,307) $ (2,586)
</TABLE>
The following analysis reconciles the statutory federal income tax rate to
the effective income tax rates reflected above:
<TABLE>
<S> <C> <C> <C>
Year ended June 30,
2000 1999 1998
Computed "expected" tax expense (benefit) 35% 35% 35%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal income tax benefits 2% 3% 3%
Research and development credit (1%) - (1%)
Other (2%) (1%) (1%)
34% 37% 36%
</TABLE>
Net operating loss carryforwards of $847,000 (from acquisitions) expire
through the year 2014. The Company paid income taxes of $13,280,000,
$13,988,000 and $10,601,000 in 2000, 1999 and 1998, respectively.
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 at June 30, 2000 and 1999) 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 JHA
software systems from one supplier. There are a limited number of hardware
suppliers for these required materials. If this relationship were
terminated, it could have a significant negative impact on the future
operations of the Company.
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 on 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 and for options outstanding include vesting periods up to 2 1/2
years. 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 30 days after termination of employment,
three months after retirement, one year after death or ten years after
grant. As of June 30, 2000, there were 1,696,000 shares available for
future grants under the plan from the original 6,500,000 shares approved by
the stockholders.
The NSOP was adopted by the Company on October 31, 1995, for its outside
directors. Options are exercisable 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 600,000 shares of common stock
have been reserved for issuance under this plan with a maximum of 150,000
for each director.
A summary of the activity of all of the Company's stock option plans is:
<TABLE>
<S> <C> <C> <C>
Year ended June 30,
2000 1999 1998
Options outstanding, beginning of year:
4,338,380 4,322,184 3,120,260
Options granted 3,062,500 694,774 1,434,854
Options exercised (708,196) (645,778) (208,930)
Options forfeited (62,900) (32,800) (24,000)
Options outstanding, end of year: 6,629,784 4,338,380 4,322,184
Currently exercisable 3,810,384 3,322,406 3,038,268
Weighted-average exercise price for $20.25 $10.79 $ 8.32
options outstanding
Weighted-average exercise price for options $31.50 $21.31 $12.55
granted
Weighted-average exercise price for $ 9.44 $ 5.19 $ 6.07
options exercised
Weighted-average fair value of $13.67 $ 9.61 $ 4.93
options granted
</TABLE>
Following is an analysis of stock options outstanding (O) and exercisable
(E) as of June 30, 2000:
<TABLE>
<S><C>
RANGE OF EXERCISE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
PRICES SHARES REMAINING CONTRACTUAL EXERCISE PRICE
</TABLE> LIFE IN YEARS
<TABLE>
<S> <C> <C> <C> <C> <C>
O E O O E
$ 2 to 7 1,177,100 1,177,100 4.61 $ 4.61 $ 4.61
7 to 12 1,504,100 1,504,100 6.74 10.83 10.83
12 to 30 1,465,584 1,129,184 8 33 19.27 19.68
30 to 35 2,386,000 - 9.76 33.75 -
35 to 46 97,000 - 9.83 40.62 -
$ 2 to 46 6,629,784 3,810,384 7.85 $10.79 $ 9.35
</TABLE>
OPTIONS FORFEITED
<TABLE>
<S> <C> <C> <C> <C>
FISCAL YEAR RANGE OF EXERCISE SHARES WEIGHTED-AVERAGE
PRICE EXERCISE PRICE
2000 $ 8 to 34 62,900 $12.04
1999 $12 to 22 32,800 $18.71
1998 $12 to 13 24,000 $12.07
</TABLE>
As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company has elected to continue to follow Accounting Principles Board
("APB") No. 25, "Accounting for Stock Issued to Employees", in accounting
for stock-based awards to employees. Under APB No. 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 No. 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 No. 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:
Year ended June 30,
2000 1999 1998
<TABLE>
<S> <C> <C> <C>
Net income As reported $ 34,350 $ 32,726 $ 24,205
Pro forma $ 26,503 $ 27,453 $ 22,150
Diluted earnings per share As reported $ .81 $ .77 $ .58
Pro forma $ .62 $ .64 $ .53
Basic earnings per share As reported $ .84 $ .81 $ .61
Pro forma $ .65 $ .68 $ .56
</TABLE>
Assumptions:
<TABLE>
<S> <C> <C> <C>
Expected life (years) 2.95 2.97 2.16
Volatility 56% 56% 40%
Risk free interest rate 6.2% 5.0% 6.1%
Dividend yield .36% .35% .35%
</TABLE>
NOTE 10: EARNINGS PER SHARE
The following table reflects a reconciliation between Basic EPS and Diluted
EPS:
(In Thousands, Except Per Share Data)
Year ended June 30,
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 1999 1998
Income Shares Per Share Income Shares Per Share Income Shares Per Share
Amount Amount Amount
Basic Earnings Per Share:
Income available to
Stockholders $34,018 40,883 $0.83 $31,968 40,337 $0.79 $23,537 39,770 $0.59
Effect of dilutive Securities:
Employee benefit plans -- 1,756 $0.03 -- 2,304 $0.04 -- 1,823 $0.02
Diluted Earnings Per Share:
Income available to
common stockholders $34,018 42,639 $0.80 $31,968 42,641 $.075 $23,537 41,593 $0.57
</TABLE>
NOTE 11: 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 ("ESOP") - The Company has a 401(k)
Employee Stock Ownership Plan (the "Plan") 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 matches 100% of employee contributions up to 5% of compensation
subject to a maximum of $5,000. The Company has the option of making a
discretionary contribution to the Plan, however, none has been made for any
of the three most recent fiscal years. The Company assumed responsibility
for the Peerless Employee 401(k) Plan as of the acquisition date, and merged
it into the Plan as of December 31, 1999. The Company assumed
responsibility for the Symitar Employee 401(k) Plan as of the acquisition
date (See Note 13), and will merge it into the Plan as of December 31, 2000.
The total expense related to the Plans was $2,430,000, $1,321,000 and
$952,000 for 2000, 1999 and 1998, respectively.
NOTE 12: DISCONTINUED OPERATIONS
In the last quarter of 1996, the Company discontinued 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:
<TABLE>
<S> <C>
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
disposal date, net of income tax benefit of $38,000 100,000
$2,620,000
</TABLE>
On September 7, 1999, the Company completed the sale of BankVision for
$1,000,000. Under the terms of the agreement, the purchaser, made a $500,000
down payment and executed promissory notes to pay $250,000 (plus interest)
in each of the next two years. The net assets of the subsidiary, as of that
date, approximately equal the sales proceeds, and as a result, the
transaction had minimal effect on its financial results for fiscal year
2000. Total loss from discontinued operations was $332,000, $758,000 and
$668,000 for the years ended June 30, 2000, 1999 and 1998, respectively.
NOTE 13: BUSINESS ACQUISITIONS
POOLING OF INTERESTS TRANSACTIONS:
The Company acquired all the outstanding shares of Peerless on December 16,
1998, for approximately $36,000,000 (1,654,000 shares) in Company stock.
Prior years consolidated financial statements have been restated for the
effect of this pooling transaction. The following table presents a
reconciliation of revenue and net income previously reported by the Company
and Peerless to those presented in the accompanying consolidated financial
statements.
(In Thousands)
<TABLE>
<S> <C> <C>
Three Months Ended
September 30, 1998 Fiscal 1998
Revenues:
JHA $ 40,728 $113,423
Peerless 8,921 29,124
Combined $ 49,649 $142,547
Net Income
JHA $ 8,296 $ 21,569
Peerless 497 1,713
Combined $ 8,793 $ 23,282
</TABLE>
On June 1, 2000, the Company acquired all the outstanding shares of Sys-Tech
for approximately $16,000,000 (417,000 shares) in Company stock.
Prior years' consolidated financial statements have been restated for the
effect of this pooling transaction. The following table presents a
reconciliation of revenue and net income previously reported by the Company,
and Sys-Tech to those presented in the accompanying consolidated financial
statements.
(In Thousands)
<TABLE>
<S> <C> <C> <C>
Nine Months Ended
March 31, 2000 Fiscal 1999 Fiscal 1998
Revenues:
JHA $150,239 $184,504 $142,547
Sys-Tech 5,692 9,023 5,688
Combined $155,931 $193,527 $148,235
Net Income
JHA $ 22,588 $ 31,768 $ 23,282
Sys-Tech (4) 200 255
Combined $ 22,584 $ 31,968 $ 23,537
</TABLE>
PURCHASE TRANSACTIONS:
On September 8, 1999, the Company's wholly-owned subsidiary Open System
Group, Inc. ("OSG"), completed the acquisition of BancTec, Inc.'s community
banking business, providing software, account processing capabilities and
data center operations to over 800 community banks throughout the United
States and the Caribbean. Revenues from these acquired community banking
operations total approximately $17,000,000 and $43,000,000 for the six
months ended June 30, 1999 and calendar 1998, respectively. The total value
of the transaction was approximately $56,136,000, of which $50,000,000 was
in cash, the assumption of approximately $5,475,000 liabilities and $661,000
in transaction costs. The Company allocated the purchase price to the
assets and liabilities acquired based on their estimated fair value at the
acquisition date, resulting in allocations of $39,000,000, $5,315,000 and
$1,000,000 to acquired customer relationships, goodwill and software,
respectively. The customer relationships, goodwill and software are being
amortized on a straight-line basis over 20, 20 and 10 years, respectively.
The purchase price was paid with approximately $25,000,000 in cash from
operations and $25,000,000 in proceeds from a line of credit with a
commercial lender (See Note 6).
On April 1, 2000, the Company acquired all the outstanding shares of
BancData Solutions, Inc. ("BDS"), for $5,000,000 in cash. BDS is a provider
of a variety of service bureau options to community banks, primarily in
southern California. Their systems are AS/400 based and are already using
the JHA core application system. The excess purchase price over the fair
value of tangible net assets acquired of $3,963,000 was allocated to customer
relationships and is being amortized on a straight-line basis over 20 years.
On June 7, 2000, the Company completed the acquisition of Symitar Systems,
Inc. ("Symitar"), a provider of in-house data processing solutions for
credit unions. Symitar provides 237 credit unions throughout the United
States with its comprehensive line of software and services that run on the
IBM RS/6000. Revenues from these operations totaled approximately
$33,000,000 and $36,000,000 for years ended December 31, 1999 and 1998,
respectively. The purchase price of $44,000,000 in cash was paid with
proceeds from a line of credit with a commercial lender (See Note 6).
The purchase price for Symitar was allocated to the assets and liabilities
acquired based on their estimated fair values at the acquisition date,
resulting in allocation to acquired customer relationships of $21,800,000,
tradename of $3,900,000, goodwill of $15,689,000 and software of $2,000,000
which are being amortized on a straight-line basis over 20, 20, 20 and 10
years, respectively.
The three acquisitions discussed above were accounted for using the purchase
method. Accordingly, the accompanying consolidated statements of income do
not include any revenues and expenses related to these acquisitions prior to
their respective closing dates.
The following unaudited proforma condensed information is presented as if
the OSG and Symitar acquisitions had occurred at the beginning of the
earliest period presented. The pro forma results for BDS were not included
as amounts are not material.
Year Ended June 30,
(In Thousands, Except
Per Share Data)
<TABLE>
<S> <C> <C>
2000 1999
Revenues $253,106 $274,682
Income from continuing operations 30,478 33,205
Net income 30,146 32,447
Diluted Earnings Per Share:
Income from continuing operations $ .71 $ .78
Net income $ .71 $ .76
</TABLE>
NOTE 14: SUBSEQUENT EVENTS
On August 16, 2000, the Company completed a secondary offering of 1.5
million shares of its common stock at $43.00 per share less a 5%
underwriters discount and offering expenses paid by the Company. The net
proceeds of approximately $60.5 million was used to retire all outstanding
short-term borrowings under lines of credit as of that date, and the balance
will be used for working capital, capital expenditures, potential future
acquisitions and other general corporate purposes.
The following table sets forth our cash and cash equivalents, short-term
borrowings, including current portion of long-term debt, long-term debt,
stockholders equity and capitalization at June 30, 2000: on a historical
basis; and on a pro forma basis as adjusted to give effect to the
application of the net proceeds received by the Company in this offering as
repayment of short-term borrowings.
(In Thousands)
June 30, 2000
<TABLE>
<S> <C> <C>
Actual Proforma
Cash and cash equivalents $ 5,186 $ 5,186
Short-term borrowings, including current portion of long-term debt $ 70,623 $ 10,091
Long-term debt $ 320 $ 320
Stockholders' Equity:
Preferred stock; $1 par value per share; 500,000 shares
authorized; none issued - -
Common stock: $.01 par value per share; 50,000,000 shares
authorized; 41,357,852 issued actual; 42,857,852 shares
issued pro forma 414 429
Additional paid-in capital 43,753 104,270
Retained earnings 110,378 110,378
Total stockholders' equity $154,545 $215,077
Total capitalization $154,865 $215,397
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information under the captions "Election of Directors" and
"Executive Officer and Significant Employees" in the Company's definitive
Proxy Statement which is incorporated herein by reference.*
ITEM 11. EXECUTIVE COMPENSATION
See the information under captions "Executive Compensation", "Compensation
Committee Report" and "Company Performance" in the Company's definitive
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 definitive Proxy
Statement which is incorporated herein by reference.*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information under the caption "Certain Relationships and Related
Transactions" in the Company's definitive Proxy Statement which is
incorporated herein by reference.*
*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 part of this Report:
The following Consolidated Financial Statements of the Company and its
subsidiaries and the Report of Independent Auditors' thereon appear under
Item 8 of this Report:
Independent Auditors' Report.
Consolidated Statements of Income for the Years Ended June 30,
2000, 1999 and 1998.
Consolidated Balance Sheets as of June 30, 2000 and 1999.
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended June 30, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows for the Years Ended June
30, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
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.
Except as otherwise specifically noted, the following documents are
incorporated by reference as exhibits hereto pursuant to Rule 12b-32:
Exhibit No. Description
3.1.1 Certificate of Incorporation, attached as Exhibit 3.1 to
the Company's Registration Statement on Form S-1, filed
November 17, 1985.
3.1.2 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.
3.1.3 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.
3.1.4 Certificate of Amendment of Certificate of
Incorporation, attached as Exhibit 3.5 to the Company's
Annual Report on Form 10-K for the year ended June 30,
1997.
3.1.5 Certificate of Amendment of Certificate of
Incorporation, attached as Exhibit 3.6 to the
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1998.
3.2.1 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.
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; renewed for a two year
term on January 1, 1997.
10.5 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.
10.6 The Company's 1996 Stock Option Plan, attached as
Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the Year Ended June 30, 1997.
10.7 Agreement and Plan of Merger regarding acquisition of
Peerless Group, Inc. dated August 18, 1998, attached as
Exhibit 10.7 to the Company's Annual Report on Form 10-K
for the year ended June 30, 1998.
10.11 Line of Credit Agreement dated September 7, 1999,
between the Company and Commerce Bank, N.A., attached as
Exhibit 10.11 to the Company's current report on Form
8-K filed September 20, 1999.
10.12 Agreement for Sale and Purchase of Assets dated
September 1, 1999, by and among the Company, Open
Systems Group, Inc. and BancTec, Inc. attached as
Exhibit 2.1 to the Company's current report on Form 8-K
filed September 20, 1999.
10.13 Agreement and Plan of Merger regarding acquisition of
Sys-Tech, Inc. of Kansas and Big Sky Marketing, Inc.
dated June 1, 2000, attached as Exhibit 2.1 to the
Company's current report on Form 8-K filed June 14, 2000.
10.14 Stock Purchase Agreement dated May 14, 2000, between the
Company and the Stockholders of Symitar Systems, Inc.,
attached as Exhibit 2.1 to the Company's current report
on Form 8-K filed June 19, 2000.
10.15 Line of Credit Loan Modification Agreement dated June 6,
2000 between the Company and Commerce Bank, N.A.
attached as Exhibit 10.11 to the Company's current
report on Form 8-K filed June 19, 2000.
21.2 A list of the Company's subsidiaries , attached as
Exhibit 21 to Amendment No. 1 to the Company's
Registration Statement on Form S-1, filed August 4, 2000.
23.1 Consent of Independent Auditors' is attached as Exhibit 23.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the last quarter of the
period covered by this report:
On June 14, 2000 the Company filed a report on Form 8-K regarding
the Company's acquisition of Sys-Tech, Inc. of Kansas and Big Sky
Marketing, Inc.
On June 19, 2000 the Company filed a report on Form 8-K regarding
the Company's acquisition of 100% of the common stock of Symitar
Systems, Inc.
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 25th
day of September, 2000
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 25, 2000
Michael E. Henry Board and Chief
Executive Officer
and Director
/s/ Michael R. Wallace President, Chief September 25, 2000
Michael R. Wallace Operating Officer
and Director
/s/ John W. Henry Vice Chairman, Senior September 25, 2000
John W. Henry Vice President and
Director
/s/ Jerry D. Hall Executive Vice September 25, 2000
Jerry D. Hall President and
Director
/s/ Terry W. Thompson Vice President, September 25, 2000
Terry W. Thompson Treasurer and
Chief
Financial
Officer
(Principal
Accounting
Officer)
/s/ James J. Ellis Director September 25, 2000
James J. Ellis
/s/ Burton O. George Director September 25, 2000
Burton O. George
/s/ George R. Curry Director September 25, 2000
George R. Curry
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
of the Jack Henry & Associates, Inc. 1996 Stock Option Plan on Form S-8
(File Nos. 33-65231, 33-65251 and 33-16989) of our report dated August 24,
2000 appearing in the Annual Report on Form 10-K of Jack Henry & Associates,
Inc. for the year ended June 30, 2000.
/s/ Deloitte & Touche LLP
St Louis, Missouri
September 25, 2000
