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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 (FEE REQUIRED)
For the fiscal year ended June 30, 1995
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 ($.01 par value)
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
As of September 1, 1995 Registrant had 11,695,054 shares of Common Stock
outstanding ($.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 $128,061,000 (based on the average of the reported high and low
sales prices on NASDAQ on such date).
Silverlake System is a registered trademark of Jack Henry & Associates, Inc.
CIF 20/20TM is a trademark of Jack Henry & Associates, Inc. AS/400TM is a
trademark of International Business Machines Corporation.
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. ( )
DOCUMENTS INCORPORATED BY REFERENCE
The below indicated portions of the Jack Henry & Associates, Inc. definitive
Proxy Statement for the 1995 Annual Meeting of Stockholders (the "Proxy State-
ment") are incorporated by reference into Part III of this Report.
CROSS REFERENCE SHEET
Part of
Form 10-K Proxy Statement
Part III, Item 10 "Election of Directors" and
"Executive Officers and
Significant Employees"
Part III, Item 11 "Executive Compensation";
"Compensation Committee
Report"; and "Company Perfor-
mance"
Part III, Item 12 "Stock Ownership of Certain
Stockholders" and
"Election of Directors"
PART I
Item 1. Business
INTEGRATED BANKING SOFTWARE SYSTEMS
OVERVIEW _ Jack Henry & Associates, Inc. ("JHA" or the "Company") provides
integrated computer systems for in-house data processing to banks and other
financial institutions. JHA has developed several banking applications software
systems which it markets, along with the computer hardware, to financial
institutions throughout the United States and overseas. JHA also performs data
conversion, software installation and software customization for the implementa-
tion of its systems, and provides continuing customer maintenance/support
services after the systems are installed.
MARKETS AND COMPETITION _ JHA's primary market consists of the approximately
12,800 commercial banks and other financial institutions in the United States
with less than $10 billion in total assets. Community banks and other financial
institutions (assets under $250 million) account for approximately 12,500 of
that number. The population of community banks decreased by 3% in 1994. In
1994, statistics reported in "Automation in Banking 1995" showed that small
financial institutions spent approximately $23 billion on hardware, software,
services and telecommunications. In-house vendors have 49% of the commercial
banks as customers. Centralized off-site service bureaus provide data process-
ing for 45% of those banks, down from two-thirds in the mid 80's. Many organi-
zations provide data processing to banks through a service bureau approach.
Some service bureaus are affiliated with large financial institutions which may
have other relationships with potential bank customers, but this is less
prevalent than in the past. Typically, a bank which is making a data processing
decision will consider both service bureau and in-house alternatives.
Of the small-to-midsize banks with in-house installations, 42% utilize IBM
hardware. Unisys Corporation and NCR have 28% and 19%, respectively. All other
vendors are well under 10% shares of the in-house community bank market. In
1994, five of the top ten software providers in this market, ranked by number of
installed customers, utilized IBM hardware. According to that survey, JHA had
the most installed customers (approximately 950 at 12-31-94) of the IBM provid-
ers. Two other software providers had larger customer bases than JHA, but both
of them enjoyed a more exclusive and less competitive relationship with their
hardware supplier. Although the top ten software providers accounted for about
88% of in-house systems installed, the study identified 20 other software
vendors in this arena. That number has been declining in recent years.
JHA believes that the primary competitive factors in software selection are
comprehensiveness of applications, features and functions, flexibility and ease
of use, customer support, references of existing customers, and hardware
preferences and pricing. The price of the software and the related services is
also a significant competitive factor which may be determinative, particularly
for smaller banks. Management believes that JHA's results and the size of its
customer base indicate that JHA generally compares favorably in the competitive
factors. However, the in-house banking software industry contains several such
companies, based upon the size of their respective customer bases. Half of the
most successful competitors utilize IBM hardware.
PRODUCTS AND SERVICES _ JHA's business and operations include three major
categories which are software and installation, maintenance/support and hard-
ware. Software includes the development and licensing of applications software
systems and the conversion, installation and customization services required for
the customer's installation of the systems. Maintenance/support consists of the
ongoing services to assist the customer in operating the systems and to modify
and update the software to meet changes in banking. Hardware relates to the
sale (often referred to as remarketing) of both the computer equipment and the
equipment maintenance on which the JHA software systems operate. The following
table illustrates the significance of each of these three areas, expressed as a
percentage of total revenues:
Year Ended June 30,
1995 1994 1993
Software and Installation 33% 34% 29%
Maintenance/Support 23% 18% 18%
Hardware 44% 48% 53%
Total Revenues 100% 100% 100%
JHA's primary banking software systems are CIF 20/20TM and the Silverlake
System. CIF 20/20 is the latest version of a series of systems that has evolved
from JHA's original system which was first installed in 1977. It is written
using RPG/400 to take advantage of the relational data base features and
functions of the IBM AS/400TM. CIF/36, CIF/34 and CIF/32 are all predecessors
of this software system, which ran on IBM System 36, 34 and 32 hardware. CIF
20/20 operates on IBM AS/400 and IBM System 36 hardware and is designed primari-
ly for financial institutions with total assets ranging up to $200 million. The
Silverlake System was developed (rather than having been migrated from equipment
with other architecture) by JHA in 1986 and 1987 to take advantage of the
relational data base characteristics of IBM System 38 and AS/400 hardware. It
is designed generally for somewhat larger banks than CIF 20/20 and multi-bank
groups in the asset range of $100 million to $10 billion. The computer equip-
ment now being offered extends this system into the low end of the large bank
arena, previously limited to "mainframe" computer systems. JHA is one of the
few vendors that offers all its new customers truly native software products for
use on the AS/400.
Each of the systems consists of several, fully integrated, applications software
modules, such as Deposits, Loans, and General Ledger, and the Customer Informa-
tion File (which is a centralized file containing customer data for all applica-
tions). The systems make extensive use of parameters established by the
customer. The systems can be interfaced with (connected to) a variety of
peripheral devices used in bank operations including teller machines, on-line
teller terminals and magnetic character readers. JHA software is designed to
provide maximum flexibility in meeting a bank's data processing requirements
within a single system, minimizing data entry.
JHA devotes significant effort and expense to develop and continually upgrade
and enhance its software. Upgrades and enhancement efforts are directed
primarily through prioritized lists prepared by its national users organization
and in response to changes in the banking environment. Bank regulation, by
federal and state banking agencies, has a significant impact on JHA's software
since JHA must maintain its systems in compliance with those regulations. JHA's
research and development expenditures were $1,264,000, $914,000 and $974,000 in
FY '95, '94 and '93, respectively. Certain of the expenditures are required to
be capitalized when incurred and then amortized to expense in subsequent
periods. Including the effect of this amortization, the amount of research and
development costs charged to expense in those years is $1,114,000, $952,000 and
$823,000, respectively.
The Company licenses CIF 20/20 and the Silverlake System under standard license
agreements which provide the customer with a fully-paid, nonexclusive, nontrans-
ferable right to use the software for a term of 25 years on a single computer
and for a single financial institution location upon payment of the license
fee. Generally, license fees are payable 25% upon execution of a license
agreement, 65% upon delivery of the software, and the balance at the
installation of the last application module. The Company provides a limited
warranty for its unmodified software for a period of 60 days from delivery.
Under the warranty, the Company will correct any program errors at no
additional charge to the customer.
JHA claims a proprietary interest in its software programs, documentation,
methodology and know-how. It also utilizes copyright protection, trademark
registration, trade secret laws and contract restrictions to protect its
interest in these products.
JHA also provides data conversion and software installation services to assist
its customers in implementing their JHA software system. JHA provides these
services on an hourly or a fixed-fee basis, depending on the customers' prefer-
ence. After a customer installation is complete, the customer is encouraged
(but not required) to contract with JHA for software maintenance/support. These
services, which are provided for an annual fee include updates of the software
to meet regulatory requirements and telephone support to assist the customer in
operating the system. JHA also offers maintenance services for hardware,
providing customers who have contracted for this service with "one-call" system
support covering hardware, system software and applications software. The
hardware maintenance contract is between JHA and its customer. The actual
hardware maintenance is performed by the hardware manufacturer under a contract
between the manufacturer and JHA.
JHA also offers emergency facilities backup to its CIF 20/20 customers using its
Emergency Mobile Processing Unit ("EMPU"). This is a self-contained unit
containing the computer equipment needed to provide bank data processing. It
can be driven to a subscriber's location in the event their equipment is
destroyed in a fire or natural disaster.
Hardware manufacturers enter into marketing and other arrangements with software
companies, such as JHA, because each depends upon the products of the other.
These arrangements generally include financial incentives paid by the manufac-
turer to the software company. They may be structured as hardware commissions
based upon hardware sold by the manufacturer in conjunction with the company's
software or as a remarketer arrangement. A remarketer arrangement allows the
software company to purchase hardware from the manufacturer at a discount and
sell (remarket) it to customers along with the company's software. Remarketer
arrangements usually require the software company to assume more of the market-
ing and customer contact responsibilities. The margin earned by a remarketer on
hardware it sells is generally greater than the amounts received on
commission-type arrangements. Remarketer arrangements are generally not
exclusive. All of the major hardware manufacturers, except one, have more than
one software company as remarketers of their hardware in the banking industry.
Effective January 1, 1995, JHA renewed its industry remarketer (IR) agreement
with IBM that has a one year term. The Company continues to operate under the
IBM Business Partner marketing program.
The IR agreement allows JHA to sell IBM's newest mid-range computer system, the
AS/400, along with its banking software system. It also allows JHA to provide
upgraded and additional equipment to its existing IBM customers. IBM hardware
maintenance will also continue to be offered to customers, providing "one-call"
customer support service for hardware, system software and applications software
support.
MARKETING _ JHA markets its products throughout the United States using sales
representatives who are employed by and work directly for JHA. The Company
offers both Silverlake System and CIF 20/20 through the efforts of its company
sales representatives.
JHA's primary market is commercial banks. JHA has not devoted significant
marketing and sales efforts to other financial institutions such as savings and
loans or credit unions. JHA does have some savings and loan and savings bank
customers, but most of them operate more like a commercial bank than a tradi-
tional thrift institution. With its current range of products, JHA systems are
appropriate for all but the largest regional money center banks. Most of the
sales effort and success has been in banks from $2 million to $2 billion in
total assets.
BankVision, operating as a separate subsidiary, has installations in Colombia,
Indonesia, the Caribbean and the Philippines. During 1995 and the near term,
BankVision's primary focus will be on Colombia and surrounding areas in Latin
America. A combination of direct sales representatives and independent distrib-
utors is used to market BankVision's product for the international bank market-
place.
JHA also has a few installations in the Caribbean and one in West Africa through
the marketing efforts of its small foreign sales corporation, Jack Henry
International Limited ("JHI"). JHI's international sales have historically
accounted for substantially less than 5% of JHA's revenues. During FY 90, JHI
was instrumental in the formation of a 25% owned affiliate, Silverlake System
Sdn Bhd ("SSSB") based in Kuala Lampur, Malaysia. SSSB is currently working
with IBM Malaysia and is modifying the Silverlake System for operation in that
country. The modified Silverlake System will be known as the Asian Pacific
Version of Silverlake System. SSSB is in the process of installing the Asian
Pacific Version of Silverlake System in a major Malaysian bank. SSSB has agreed
to pay JHI 50% of all software revenues for the right to license the Asian
Pacific Version of Silverlake System in Malaysia and certain other countries in
the Far East.
The Company's backlog of business was $16,374,000 at June 30, 1995. This was
the largest backlog at any quarter end in JHA's history. Backlog at August 31,
1995 was $7,940,000.
OTHER INFORMATION
SUBSIDIARIES
From July 1, 1992 through June 30, 1995, the Company has had the following
subsidiaries and affiliates:
Company Effective Dates Percent Ownership Comments
Jack Henry July '86 - Present 100% Markets
International, Ltd. USA prod-
ucts outside
the U.S.
Silverlake System June '89 - Present 25% Markets,
Sdn Bhd installs and
supports the
Asian
Pacific
Version of
Silverlake
System
BankVision August '93 - Present 100% Markets
Software, Ltd. banking
products
outside the
U.S.
CommLink Corp. July `94 - Present 100% Markets ATM
switching
products and
services
Liberty June 30, 1995 100% Markets
Software, Inc. Liberty
system
throughout
the U.S.
Corporate History
JHA was incorporated in Missouri in 1977 and was privately held until November
1985 when it sold 725,000 shares of its common stock to the public (along with
375,000 shares sold by stockholders). JHA also reincorporated in Delaware at
that time. The Company became subject to periodic reporting and certain other
requirements of the Securities Exchange Act of 1934 as a result of that initial
public stock offering. The common stock was then qualified for quotation on the
National Market System of the NASDAQ interdealer quotation system. The
Company's stock symbol is JKHY.
A 50% stock dividend paid March 3, 1992, another 50% stock dividend paid March
8, 1993 and a 33 1/3% stock dividend paid March 10, 1994 combined with new
shares issued under stock options exercised have increased the total number of
shares of common stock outstanding to 11,695,054 as of September 1, 1995.
Employees
As of August 17, 1995, the Company had 295 full-time employees. The Company's
employees are not covered by a collective bargaining agreement and there have
been no labor-related work stoppages. The Company considers its employee
relations to be good.
Item 2. Properties
The Company owns approximately 52 acres located in the town of Monett, Missouri
on which it maintains three existing office buildings totaling 20,900 square
feet and a maintenance building.
The Company owns three aircraft which are utilized for business purposes. Many
of the Company's customers are located in communities which do not have adequate
commercial airline service. The Company uses its airplanes in connection with
installation, maintenance and sales of its systems. Transportation costs for
installation and other customer services are billed to the Company's customers.
The Company leases property, which includes real estate, a hangar, and related
facilities at the Monett, Missouri municipal airport. In addition, JHA leases a
smaller plane for shorter flights and fewer passengers.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters To A Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ - National Market System under the symbol JKHY. The
following table shows the reported closing sales prices for the common stock
during the last two fiscal years. Prices have been adjusted for stock dividends
as appropriate.
Fiscal 1995 High Low
First Quarter $ 9.50 $ 7.50
Second Quarter 10.25 8.13
Third Quarter 11.75 8.75
Fourth Quarter 15.25 10.00
Fiscal 1994 High Low
First Quarter $11.81 $ 8.63
Second Quarter 12.75 10.88
Third Quarter 11.81 10.25
Fourth Quarter 10.75 6.50
The Company paid cash dividends of $.045 per share (split adjusted) May 25,
1993, September 23, 1993, December 16, 1993 and March 10, 1994. A 33 1/3% stock
dividend was paid March 10, 1994. A cash dividend of $.05 per share was paid
May 27, 1994, September 23, 1994 and December 15, 1994. Cash dividends of
$.0575 per share were paid March 15, 1995 and May 26, 1995. Further, a cash
dividend of $.0575 per share was declared on August 25, 1995, payable September
22, 1995 to stockholders of record on September 8, 1995.
The Company established a practice of paying quarterly dividends at the end of
FY 1990. Payment of dividends will continue to be at the discretion of the
Board of Directors and will depend, among other factors, upon the earnings,
capital requirements, and operating and financial condition of the Company. The
Company does not foresee any changes in its dividend practices in the immediate
future.
As of August 29, 1995, there were 5,157 holders of the Company's common stock.
Item 6. Selected Financial Data
Selected Financial Information
(In Thousands, Except Per Share Information)
YEAR ENDED JUNE 30,
INCOME STATEMENT DATA 1995 1994 1993 1992 1991
Gross revenue (1) $46,124 $38,390 $32,589 $23,896 $20,737
Income from continuing operations $ 7,978 $ 6,259 $ 5,272 $ 3,892 $ 2,181
Income from discontinued FinSer operations
(net of applicable income taxes)(2)
- - $ 101 $ 67 -
Extraordinary income from Unisys settlement - - $ 886 - -
NET INCOME $ 7,978 $ 6,259 $ 6,259 $ 3,959 $ 2,181
INCOME PER SHARE(3):
CONTINUING OPERATIONS $ .66 $ .52 $ .45 $ .35 $ .20
EXTRAORDINARY INCOME - - $ .08 - -
NET INCOME $ .66 $ .52 $ .54 $ .36 $ .20
DIVIDENDS DECLARED PER SHARE(3) $ .22 $ .19 $ .17 $ .14 $ .08
JUNE 30,
BALANCE SHEET DATA 1995 1994 1993 1992 1991
Working capital $(666) $11,181 $ 7,394 $ 6,236 $ 3,413
Total assets $58,721 $38,347 $29,908 $22,078 $17,615
Long-term debt - - - - -
Stockholders' equity $29,484 $23,650 $17,639 $12,393 $ 9,164
Notes:
(1) Gross revenue includes software licensing and installation revenues;
support revenues; and hardware sales and commissions; less all sales returns
and allowances.
(2) FinSer Capital Corporation and its subsidiaries ("FinSer") were included by
the Company up through and including June 30, 1990. FinSer's financial
results for its operations since that period are reported as discontinued
operations.
(3) Prior year numbers have been adjusted to reflect the 50% stock dividends
paid March 3, 1992, the 50% stock dividend paid March 8, 1993 and the
33 1/3% stock dividend paid March 10, 1994.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Introduction - All of the revenues (and costs and expenses) in the statement of
operations relate to JHA's continuing operations, i.e., the installation and
support of banking software systems that JHA developed and the marketing of the
JHA software along with computer hardware manufactured by others to provide a
complete data processing system for in-house operation in financial institu-
tions.
Total revenues, presented in the statement of operations, include software
licensing and installation revenues; maintenance/support and services revenues;
and hardware sales and maintenance revenues.
Business operations for FY '95 and '94 reflect the continued focus on JHA's
IBM-based software systems. Results of operations for JHA's banking system
business in each of the last two fiscal years are discussed separately below.
FY '95
REVENUE:
Revenues increased 20% to $46,124,000, establishing a new record for the fifth
straight year. Each of the major revenue components were higher than the
previous year's mark. JHA's domestic products and services continued their
strong growth fueled by continued strong demand for the Company's quality
offerings. The Company's size and reputation for quality products and services
continues to enhance its position in the marketplace.
All major revenue categories experienced gains as a result of growth in both the
Company's domestic products - CIF 20/20 and Silverlake System. CommLink's
revenues from its ATM transaction switching contributed significantly to the
growth in maintenance/support and service revenues.
Growth is expected in each category of revenues. The Company's new check
imaging product and the recent SECTOR and Liberty acquisitions plus continued
growth in domestic product sales are expected to enhance all categories.
CommLink is expected to enhance the software and installation and the mainte-
nance/support and service categories.
COST OF SALES:
The 12% increase in cost of sales was quite favorable relative to the 20%
increase in sales. Hardware costs increased approximately one and one-half
percent more than the related revenue increase. This was consistent with
expectations. The cost of services increase of 15% was significantly better
than the 28% increase in non-hardware revenues.
GROSS PROFIT:
Gross profit increased 30% above last year's level. The gross margin percentage
increased to 50%, up from 47% last year. This result is very consistent with
expectations considering the sales mix.
OPERATING EXPENSES:
Operating expenses increased 26% over last year's total. All the Company's
operating units contributed to this increase.
OTHER INCOME (EXPENSE):
The decrease was due to the Company returning to a more normal level of Other,
net because of a significant one-time gain last year as a result of collecting
amounts previously deemed uncollectible.
FY '94
REVENUE:
Revenues for Fiscal '94 for the fourth year in a row established a new record,
increasing 18 percent. Each major revenue component increased over the previous
year. This marks the fourth consecutive year in which each revenue component
increased over the previous year, some quite significantly. The Company's
domestic offerings, CIF 20/20 and Silverlake System, were each contributors to
the growth. The overall increase was fueled by the continued strong demand for
JHA's products.
Software and installation increased 41% over last year. Both domestic products
were contributors to the increase, with Silverlake providing a larger absolute
and percentage increase. Also, BankVision Software, Ltd., which operates as a
subsidiary of the Company, added $1.9 million in international sales of its
products and services. Sales of the domestic products are expected to grow at a
slower rate in the future while sales of BankVision offerings are expected to
accelerate.
Maintenance/support and service revenue increased 16%. This should continue to
grow as software licenses, both CIF 20/20 and Silverlake, are sold, but at a
somewhat slower rate. Further, this revenue component should be aided by the
continued upgrading of existing customers to the latest version of our CIF 20/20
software. BankVision contributed only slightly in this category. Its contribu-
tions should increase in the future, and the CommLink acquisition (July 1994),
should further enhance these revenues.
The number of sales, size and the mix of sales contributed to the 6% increase in
hardware sales. Hardware sales would be expected to grow only slightly, if any,
in the future, as a result of the continued reduction in price of hardware
relative to the computer power purchased.
COST OF SALES:
Cost of sales experienced a 10% increase over Fiscal '93. The 7% cost of
hardware sold increase was quite consistent with the increase in hardware
sales. The Company continued to maintain its margin percentage. However,
margins are expected to decline slightly in the future. The cost of services
only increased 19%, much less than the 32% increase in software/installation
and maintenance revenues.
GROSS PROFIT:
The gross profit percentage increased to 47% up from 43% last year. This is
consistent with expectations when the mix of sales is more heavily weighted
toward software and services, both much more profitable than hardware. Overall
gross profit increased 28% over 1993.
OPERATING EXPENSES:
Operating expenses increased $2.3 million, or 34% above FY '93. This is more
than the 18% revenue increase, but only slightly more than the 28% increase in
gross profit. BankVision contributed 60% of the increase. Operating expenses
for the Company's core business increased only 15%, comparing favorably to its
own gross profit increase of 18%. The core business continues to gain efficien-
cies and leverage more profit to the bottom line as it grows. The sell-
ing/marketing and general/administrative categories experienced the largest
increases. The increases were primarily in salaries (additional personnel),
commissions (due to higher sales productivity) and benefits and travel.
OTHER INCOME (EXPENSE):
The increase was due to an increase in interest income as a result of more
investment funds available throughout the year combined with a one-time increase
in other income as a result of collecting amounts previously deemed uncollect-
ible.
FINANCIAL CONDITION
Liquidity - JHA's liquidity position (cash plus short-term investments minus
working capital borrowings) at June 30, 1995, has decreased to $8,073,000 from
$11,671,000. The decrease is due primarily to improved profitability and
operating results; increased sales of the Company's software systems; and
reductions in expenses offset by outlays for acquisitions in June 1995. The
Company's negative working capital of $666,000 primarily results from the June
1995 acquisitions. Related cash payouts of $7 million in June 1995 and an
additional $5.4 million in accrued acquisition costs were the most significant
contributors.
The Company believes that its liquid assets on hand and those being generated by
its operations are sufficient to meet its cash needs and requirements for FY
'95. Further, it believes that cash and short-term investments will increase
significantly during the first quarter of FY '96 due to the payments from annual
software maintenance billings that are a major part of the $16,740,000 trade
receivables at June 30, 1995. JHA has available lines of credit totaling
$2,215,000, although the Company expects its use of these lines to be minimal
during the next fiscal year.
Capital Requirements and Resources - JHA generally uses existing resources and
funds generated from operations to meet its capital requirements. In the
current fiscal year, capital expenditures of $2,647,000 were made for expansion
of facilities and additional equipment and were funded from cash generated by
operations. The most significant expenditures were for upgrades and additions
related to the Company's aircraft. The Company currently has no long-term debt.
The Company anticipates capital expenditures to be approximately $2,000,000
within the next 12 months. These expenditures will be funded from funds
generated by operations.
Subsequent to June 30, 1995, the Company's Board of Directors declared a cash
dividend of $.0575 per share on its common stock payable on September 22, 1995
to stockholders of record as of September 8, 1995. The Board has indicated that
it plans to continue paying dividends so long as the Company's financial picture
continues to be favorable. The Company believes it has sufficient funds for
this purpose without incurring any debt.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Independent Accountants' Report 13
Financial Statements:
Consolidated Statements of Income,
Years Ended June 30, 1995, 1994 and 1993 14
Consolidated Balance Sheets,
June 30, 1995 and 1994 15
Consolidated Statements of Changes in Stockholders' Equity,
Years Ended June 30, 1995, 1994 and 1993 16
Consolidated Statements of Cash Flows,
Years Ended June 30, 1995, 1994 and 1993 17
Notes to Consolidated Financial Statements 18
Financial Statement Schedules:
There are no schedules included because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
Independent Accountants' Report
Board of Directors
Jack Henry & Associates, Inc.
Monett, Missouri
We have audited the accompanying consolidated balance sheets of JACK HENRY &
ASSOCIATES, INC. AND SUBSIDIARIES as of June 30, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of JACK HENRY &
ASSOCIATES, INC. AND SUBSIDIARIES as of June 30, 1995 and 1994, and the results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1995, in conformity with generally accepted accounting princi-
ples.
BAIRD, KURTZ & DOBSON
August 11, 1995
Joplin, Missouri
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
YEAR ENDED JUNE 30,
1995 1994 1993
REVENUE
Software licensing & installation $15,063 $13,177 $ 9,321
MAINTENANCE/SUPPORT & SERVICE 10,458 6,821 5,871
HARDWARE SALES & COMMISSIONS 20,603 18,392 17,397
TOTAL REVENUES $46,124 $38,390 $32,589
COST OF SALES
COST OF HARDWARE $15,181 $13,750 $12,885
COST OF SERVICES 7,765 6,763 5,694
TOTAL COST OF SALES $22,946 $20,513 $18,579
GROSS PROFIT $23,178 $17,877 $14,010
OPERATING EXPENSES
SELLING AND MARKETING $ 5,395 $ 4,679 $ 3,703
RESEARCH AND DEVELOPMENT 1,114 952 823
GENERAL AND ADMINISTRATIVE 4,866 3,404 2,222
TOTAL OPERATING EXPENSES $11,375 $ 9,035 $ 6,748
OPERATING INCOME FROM CONTINUING OPERATIONS $11,803 $ 8,842 $ 7,262
Percent of total revenue 25.6% 23.0% 22.3%
OTHER INCOME (EXPENSE)
INTEREST AND DIVIDEND INCOME - NET $ 746 $ 612 $ 539
OTHER, NET 93 350 88
TOTAL OTHER INCOME $ 839 $ 962 $ 627
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $12,642 $ 9,804 $ 7,889
PROVISION FOR INCOME TAXES (Note 7) 4,664 3,545 2,617
INCOME FROM CONTINUING OPERATIONS $ 7,978 $ 6,259 $ 5,272
INCOME FROM DISCONTINUED FINSER OPERATIONS $ - $ - $ 101
EXTRAORDINARY INCOME - UNISYS SETTLEMENT, NET (Note 11) - - 886
NET INCOME $ 7,978 $ 6,259 $ 6,259
INCOME FROM CONTINUING OPERATIONS PER SHARE $ .66 $ .52 $ .45
EXTRAORDINARY INCOME PER SHARE $ - $ - $ .08
NET INCOME PER SHARE $ .66 $ .52 $ .54
AVERAGE SHARES OUTSTANDING 12,049 12,007 11,557
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30,
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 3,423 $ 1,942
HELD-TO-MATURITY SECURITIES (NOTE 3) 4,650 9,729
TRADE RECEIVABLES 16,740 11,384
PREPAID EXPENSES AND OTHER 2,661 2,126
TOTAL CURRENT ASSETS $27,474 $25,181
PROPERTY AND EQUIPMENT, NET (NOTE 4) $10,302 $ 7,022
OTHER ASSETS:
INTANGIBLE ASSETS, NET OF AMORTIZATION (NOTE 5) $17,790 $ 3,238
COMPUTER SOFTWARE (NOTE 5) 1,740 1,196
HELD-TO-MATURITY SECURITIES (NOTES 3 AND 6) 1,415 677
MARKETABLE EQUITY SECURITIES (NOTE 3) - 1,033
TOTAL OTHER ASSETS $20,945 $ 6,144
TOTAL ASSETS $58,721 $38,347
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 5,124 $ 2,086
ACCRUED EXPENSES 2,468 1,541
ACCRUED ACQUISITION COSTS (NOTE 12) 5,398 -
DEFERRED REVENUE 15,150 10,373
TOTAL CURRENT LIABILITIES $28,140 $14,000
DEFERRED INCOME TAXES (NOTE 7) 1,097 697
TOTAL LIABILITIES $29,237 $14,697
STOCKHOLDERS' EQUITY (NOTE 8):
PREFERRED STOCK; $1 PAR VALUE; 500,000 SHARES AUTHORIZED; NONE ISSUED
- -
COMMON STOCK; $.01 PAR VALUE; 30,000,000 SHARES AUTHORIZED; SHARES ISSUED 1995 -
11,732,028; 1994 - 11,674,404 117 117
ADDITIONAL PAID-IN CAPITAL 9,425 9,099
NET UNREALIZED LOSS ON NONCURRENT EQUITY SECURITIES - (44)
RETAINED EARNINGS 19,942 14,478
TOTAL STOCKHOLDERS' EQUITY $29,484 $23,650
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,721 $38,347
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED JUNE 30,
PREFERRED SHARES: 1995 1994 1993
500,000 SHARES AUTHORIZED - - -
COMMON SHARES ISSUED:
30,000,000 SHARES AUTHORIZED
BALANCE AT BEGINNING OF YEAR 11,674,404 8,489,684 5,617,050
SHARES ISSUED UPON EXERCISE OF STOCK OPTIONS 57,624 114,804 50,126
SHARES ISSUED UPON ACQUISITION OF BANKVISION - 167,979 -
STOCK DIVIDEND (NOTE 1) - 2,901,937 2,822,508
BALANCE AT END OF YEAR 11,732,028 11,674,404 8,489,684
COMMON STOCK - PAR VALUE $.01 PER SHARE:
Balance at beginning of year $ 117 $ 85 $ 56
SHARES ISSUED UPON EXERCISE OF STOCK OPTIONS - 1 1
SHARES ISSUED UPON ACQUISITION OF BANKVISION - 2 -
STOCK DIVIDEND - 29 28
BALANCE AT END OF YEAR $ 117 $ 117 $ 85
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year $ 9,099 $ 7,158 $ 6,736
SHARES ISSUED UPON EXERCISE OF STOCK OPTIONS 244 615 125
SHARES ISSUED UPON ACQUISITION OF BANKVISION - 1,158 -
TAX BENEFIT ON EXERCISE OF OPTIONS AND
SUBSEQUENT SALE OF STOCK 82 168 297
BALANCE AT END OF YEAR $ 9,425 $ 9,099 $ 7,158
TREASURY STOCK:
Balance at beginning of year $ - $ - $ (415)
SHARES ISSUED UPON EXERCISE OF STOCK OPTIONS - - 415
BALANCE AT END OF YEAR $ - $ - $ -
NET UNREALIZED LOSS ON EQUITY SECURITIES $ - (44) -
RETAINED EARNINGS:
Balance at beginning of year $14,478 $10,396 $ 6,016
NET INCOME 7,978 6,259 6,259
DIVIDENDS PAID (1995 - $.22 PER SHARE; 1994 - $.23 PER SHARE;
1993 - $.22 PER SHARE (2,514) (2,177) (1,879)
BALANCE AT END OF YEAR $19,942 $14,478 $10,396
TOTAL STOCKHOLDERS' EQUITY $29,484 $23,650 $17,639
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
YEAR ENDED JUNE 30,
1995 1994 1993
CASH FLOWS - OPERATING ACTIVITIES:
Cash received from customers $ 44,102 $ 37,648 $ 32,908
Cash paid to suppliers and employees (30,683) (28,882) (23,887)
Interest and dividends received 828 542 595
Interest paid (5) (32) (6)
Income taxes paid, net (4,613) (2,708) (2,964)
Other, net 28 273 2
Net cash provided by continuing
operating activities $ 9,657 $ 6,841 $ 6,648
CASH FLOWS FROM DISCONTINUED OPERATIONS - $ - $ 101
CASH FLOWS FROM EXTRAORDINARY ITEMS,
NET (NOTE 11) - $ - 886
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property
& equipment $ 40 $ 32 $ 58
Capital expenditures (2,647) (2,425) (3,698)
Purchase of available-for-sale
securities (Note 3) (2,001) (8,669) (2,500)
Proceeds from sale of
available-for-sale
securities (Note 3) 3,994 3,716 4,141
Proceeds from maturities of
held-to-maturity securities 3,000 - -
Purchase of held-to-maturity
securities (1,000) - -
Purchase of trading securities (1,153) - -
Proceeds from sale of trading
securities 2,239 - -
Purchase of customer contracts (5,349) - (1,670)
Computer software development (241) (48) (230)
Collection of long-term trade
receivable (Note 11) - - 1,916
Collection from affiliates - 64 -
Advances to affiliates (15) (112) (1,045)
Acquisition costs, net (2,773) 32 -
Net cash used in investing
activities $ (5,906) $ (7,410) $ (3,028)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable
and line of credit $ - (800) -
Proceeds from issuance of common stock
upon exercise of stock options 244 616 541
Dividends paid (2,514) (2,148) (1,851)
Net cash used in financing
activities $ (2,270) $ (2,332) $ (1,310)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 1,481 $ (2,901) $ 3,297
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 1,942 4,843 1,546
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,423 $ 1,942 $ 4,843
The accompanying notes are an integral part of these consolidated financial
statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Company
Jack Henry & Associates, Inc. ("JHA" or the "Company") is a computer software
company which has developed several banking software systems. It markets those
systems to financial institutions nationwide along with the computer equipment
(hardware) and provides the conversion and software customization services
necessary for a financial institution to install a JHA software system. It also
provides continuing support and maintenance services to customers using the
system. All of these related activities are considered a single business
segment.
Consolidation
The consolidated financial statements include the accounts of JHA and its
wholly-owned subsidiaries, Jack Henry International, Ltd. and BankVision
Software, Ltd. All significant intercompany accounts and transactions have been
eliminated in the consolidation.
Affiliated companies in which the Company has a 50%-or-less interest are
reflected in these consolidated financial statements using the equity method of
accounting. Operations in which the company has an investment of less than 20%
are reported using the cost method of accounting.
Revenue Recognition
The Company's various sources of revenue and the methods of revenue recognition
are as follows:
Software license fees - Initial license fees are recognized upon delivery of
the unmodified software. Monthly software usage charges are recognized
ratably over the contract period.
Software installation and related services - Fees for these services are
recognized as the services are performed on hourly contracts and at completion
on fixed-fee contracts.
Product maintenance/support fees - Fees from these contracts are recognized
ratably over the life of the contract.
Hardware sales - Commissions and revenue from hardware sales are recognized
when the hardware is shipped by the manufacturer.
Deferred Revenue
Nonrefundable software deposits and payments received prior to the delivery of
the software are reflected as deferred revenue until delivery. Similarly,
nonrefundable hardware deposits and payments received prior to the delivery of
hardware are reflected as deferred revenue until shipment. Deferred revenue
also includes annual software and hardware maintenance fees that are prepaid.
These annual maintenance fees are then recorded as income on a prorata basis
over the life of the contracts.
Hardware Revenues and Related Costs
The Company records the revenue from hardware, IBM system software sales and
hardware maintenance revenue in hardware revenues. The costs of these items
purchased and remarketed are reported as cost of hardware in cost of sales.
Research and Product Development
The Company capitalizes new product development costs incurred from the point at
which technological feasibility has been established through the point at which
regular customer installations begin. The capitalized costs, which include
salaries and related expenses, equipment/facility costs and other direct
expenses, are then amortized to expense on a straight line basis over the
estimated product life (generally five years).
Income Per Share
Per share information is based on the weighted average number of common shares
outstanding during the year. Stock options have been included in the calcula-
tion of income per share to the extent they are dilutive.
On January 24, 1992, the Company declared a 50% stock dividend (a total of
1,872,350 shares), paid March 3, 1992 to stockholders of record February 14,
1992. On February 8, 1993, the Company declared a second 50% stock dividend (a
total of 2,822,508 shares), paid March 8, 1993, to stockholders of record
February 22, 1993. On February 7, 1994, the Company declared a 33 1/3% stock
dividend (a total of 2,901,937 shares), paid March 10, 1994, to stockholders of
record February 22, 1994. Each stock dividend has been accounted for in a
manner similar to a stock split. The number of weighted average shares out-
standing and per share data were retroactively restated for these stock divi-
dends.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
Short-term Investments
The Company invests its excess cash in U.S. government securities, bonds issued
by housing authorities and other municipal agencies and brokerage house money
market accounts. Equity investments held with short-term objectives are carried
at the lower of cost or market at the balance sheet date, with that determina-
tion made by aggregating all marketable equity securities. Gains and losses on
sales of securities, included in other income, are determined on a specific
identification basis.
Accounts Receivable
The Company sells its products to banks and financial institutions throughout
the United States, Latin America and the Pacific Rim, and generally does not
require collateral. Adequate reserves (which are insignificant) are maintained
for potential credit losses.
Property and Equipment
Property and equipment are carried at cost and depreciated principally using the
straight-line method over the estimated useful lives of the assets.
Excess of Cost Over Fair Value of Net Assets Acquired
The excess of purchase price over the net assets of entities acquired in prior
years is being amortized using the straight-line method over periods of up to 15
years from acquisition date.
Reclassification
Certain prior year numbers have been reclassified to be consistent with the
current year presentation.
NOTE 2: MARKETING AGREEMENTS WITH HARDWARE MANUFACTURERS
The Company has a marketing arrangement with IBM Corporation. This Industry
Remarketer agreement allows the Company to purchase hardware and system software
from IBM and remarket it to customers along with the Company's applications
software.
NOTE 3: INVESTMENTS
As of July 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities. SFAS 115 requires classifying securities into one of three catego-
ries: trading, available-for-sale, or held-to-maturity. The effect of adoption
was not material. For presentation purposes on the Consolidated Statements of
Cash Flows all prior year purchases and liquidation of investment items are
presented as available-for-sale securities.
The amortized cost and approximate fair value of held-to-maturity securities at
June 30, 1995 are as follows:
(In thousands)
Amortized Gross Gross Approximate
Cost Unrealized Unrealized Fair
Gains Losses Value
U.S. treasury notes $5,545 $ 17 $ (34) $5,528
Accrued interest 105 - - 105
$5,650 $ 17 $ (34) $5,633
MATURITIES OF HELD-TO-MATURITY SECURITIES
AT JUNE 30, 1995 ARE:
(IN THOUSANDS)
APPROXIMATE
AMORTIZED FAIR
COST VALUE
DUE IN ONE YEAR OR LESS, NET $4,650 $4,617
DUE AFTER ONE YEAR, NET $1,000 $1,016
$5,650 $5,633
THE AMORTIZED COST AND APPROXIMATE FAIR
VALUE OF INVESTMENTS IN SECURITIES AT JUNE
30, 1994 ARE AS FOLLOWS:
(IN THOUSANDS)
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
U.S. TREASURY NOTES $ 9,598 $ 11 $ (175) $ 9,434
ACCRUED INTEREST $ 131 - - $ 131
COMMON STOCKS $ 1,077 $ 29 $ (73) $ 1,033
$10,806 $ 40 $ (248) $10,598
CLASSIFICATION OF INVESTMENT SECURITIES AT
JUNE 30, 1994 ARE:
(IN THOUSANDS)
APPROXIMATE
AMORTIZED FAIR
COST VALUE
SHORT-TERM INVESTMENTS $ 9,729 $ 9,565
MARKETABLE EQUITY SECURITIES $ 1,077 $ 1,033
$10,806 $10,598
Net realized gains on trading securities included in net income were $7,000,
$33,000 and $2,000 for 1995, 1994 and 1993, respectively. Net realized gains
resulting from sales of available-for-sale securities were $17,000, $0 and $0
for 1995, 1994 and 1993, respectively.
NOTE 4: PROPERTY AND EQUIPMENT
The classification of property and equipment, together with their estimated
useful lives is as follows:
June 30, Estimated
1995 1994 useful lives
(In thousands)
Land $ 433 $ 97
Land improvements 308 304 5-20 years
Buildings 2,053 1,054 25-30 years
Equipment and furniture 7,652 5,108 5-8 years
Aircraft 4,684 4,350 8-10 years
$15,130 $10,913
Less accumulated depreciation 4,828 3,891
$10,302 $ 7,022
NOTE 5: OTHER ASSETS
Intangible assets consist of identified intangible assets, including excess
purchase price over net assets acquired, software maintenance/support contracts
and marketing agreements acquired in business acquisitions. The amounts are
being amortized over a estimated economic benefit period, generally five to
fifteen years.
Following is an analysis of intangible assets:
Year ended June 30,
1995 1994
(In thousands)
Balance, beginning of year $ 3,238 $2,465
Excess purchase price over net assets acquired 15,345 1,543
Amortization (793) (770)
Balance, end of year $17,790 $3,238
COMPUTER SOFTWARE includes the unamortized costs of software products developed
by the Company which were required to be capitalized by generally accepted
accounting principles. The costs are amortized over an estimated economic
benefit period, generally five years. Following is an analysis of the computer
software costs:
Year ended June 30,
1995 1994
(In thousands)
Balance, beginning of year $1,196 $ 350
Costs of software development capitalized 241 48
Cost of software acquired 639 1,106
Amortization (336) (308)
Balance, end of year $1,740 $1,196
NOTE 6: LINES OF CREDIT
The Company has lines of credit with First State Bank of Purdy totaling
$2,215,000 as detailed below. There were no amounts outstanding under the lines
at June 30, 1995 or June 30, 1994. Utilization of the above lines was very
minimal during each of the last two fiscal years.
One line is $1,000,000 secured by $1,000,000 held-to-maturity securities payable
upon demand or March 31, 1996. Another line is unsecured for $215,000 payable
upon demand or December 15, 1995. The last line is unsecured for $1,000,000
payable upon demand or March 31, 1996. All the above have a floating prime
interest rate which was 9% at June 30, 1995.
NOTE 7: INCOME TAXES
The provision for income taxes (benefit) on income from continuing operations
consists of the following:
Year ended June 30,
1995 1994 1993
(In thousands)
Current:
Federal $3,936 $2,740 $2,385
STATE 418 278 266
FOREIGN (60) 72 -
DEFERRED:
FEDERAL 335 405 (32)
STATE 35 50 (2)
$4,664 $3,545 $2,617
EFFECTIVE TAX RATE 37% 36% 33%
THE TAX EFFECTS OF TEMPORARY DIFFERENCES RELATED TO DEFERRED TAXES SHOWN ON THE
BALANCE SHEETS WERE:
YEAR ENDED JUNE 30,
1995 1994
(IN THOUSANDS)
DEFERRED TAX ASSETS:
CARRYFORWARD (OPERATING LOSS, CAPITAL LOSS, CREDITS,
ETC.) $ 412 534
OTHER, NET 145 101
$ 557 $ 635
DEFERRED TAX LIABILITIES:
EXCESS TAX DEPRECIATION (962) (558)
EXCESS TAX AMORTIZATION (692) (774)
$(1,654) $(1,332)
NET DEFERRED TAX LIABILITIES $(1,097) $ (697)
The following analysis reconciles the statutory federal income tax rate of 34%
to the effective income tax rates reflected above:
Year ended June 30,
1995 1994 1993
Computed "expected" tax expense
(benefit) 34% 34% 34%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal income tax bene
fits
2% 3% 3%
Research & Development Credit - (1%) (1%)
Nondeductible excess purchase price 1% 1% -
Other - (1%) (3%)
37% 36% 33%
The Company has available at June 30, 1995, unused operating loss carryforwards
of $720,000 which expire between 2007 and 2009. There are also capital loss
carryforwards of $331,000 which expire in 1999.
NOTE 8: STOCK OPTION PLANS
The Company has two stock option plans: the 1987 Stock Option Plan ("1987 SOP")
and the Non-Qualified Stock Option Plan ("NSOP").
The 1987 SOP was adopted by the Company on May 18, 1987, for its employees.
Terms of the options, which may be qualified or nonqualified options, are
determined by the Board of Directors when granted. Shares of common stock are
reserved for issuance
under this plan at the times of grant. The options terminate upon termination
of employment, three months after retirement, one year after death or ten years
after the grant. On August 11, 1992, options on shares at $7.00 and $7.70 per
share (split-adjusted) were granted to several key employees. Options on
212,000 (318,000 split-adjusted) shares were exercisable immediately and 268,000
(402,000 split-adjusted) shares were exercisable in appropriate numbers over the
next 5 years.
The NSOP was adopted by the Company on November 18, 1985 for its outside
directors. Options are exercisable in four equal annual installments beginning
one year after grant at a price not less than 110% of the fair market value of
the stock at grant.
The options terminate when director status ends, upon surrender of the option or
six years after grant. A total of 120,000 shares of common stock have been
reserved for issuance under this plan with a maximum of 18,000 for each direc-
tor.
A summary of the activity of all of the Company's stock option plans is:
Year ended June 30,
1995 1994 1993
Options outstanding, beginning of year:
CURRENTLY EXERCISABLE 493,498 286,350 68,425
NOT YET EXERCISABLE 362,666 411,000 121,500
856,164 697,350 189,925
ACTIVITY DURING THE YEAR:
OPTIONS ISSUED, CURRENTLY EXERCISABLE 230,000 10,500 212,000
OPTIONS ISSUED, NOT YET
EXERCISABLE - 33,500 268,000
OPTIONS EXERCISED (58,886) (115,766) (212,425)
OPTIONS TERMINATED - - -
INCREASE IN OPTIONS OUTSTANDING DUE TO 50% STOCK
DIVIDENDS - - 239,850
INCREASE IN OPTIONS OUTSTANDING DUE TO 33% STOCK
DIVIDEND - 230,580 -
171,114 158,814 507,425
OPTIONS OUTSTANDING, END OF YEAR:
CURRENTLY EXERCISABLE 853,278 493,498 286,350
NOT YET EXERCISABLE 174,000 362,666 411,000
1,027,278 856,164 697,350
RANGE OF EXERCISE PRICE $ 1.875 $ .60 $ .79
TO $13.20 TO $13.20 TO $7.70
NOTE 9: 401(k) EMPLOYEE STOCK OWNERSHIP PLAN
The Company has a 401(k) Employee Stock Ownership Plan ("ESOP") covering
substantially all employees of the Company and its subsidiaries. As of July 1,
1987, the Plan was amended and restated to include most of the existing ESOP
provisions and to add salary reduction contributions allowed under Section
401(k) of the Internal Revenue Code and to require employer matching contribu-
tions. The Company has the option of making a discretionary contribution to the
Plan, however, none have been made for any of the three most recent fiscal
years.
NOTE 10: RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
The reconciliations of income from continuing operations to net cash provided by
operating activities as follows:
Year ended June 30,
1995 1994 1993
(In thousands)
Net income from continuing operations $7,978 $6,259 $5,272
ADJUSTMENTS TO RECONCILE INCOME FROM CONTINUING OPERATIONS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,077 1,843 1,597
PROVISION FOR DEFERRED INCOME TAXES 370 455 (34)
(GAIN)LOSS ON SALE OF FIXED ASSETS 1 4 (13)
REALIZED (GAIN) ON INVESTMENTS (24) (33) (32)
OTHER, NET 78 (71) 58
(INCREASE) DECREASE ASSETS:
RECEIVABLES - TRADE, CURRENT AND LONG-TERM (2,313) (3,131) (2,255)
RECEIVABLES - AFFILIATES AND OTHER (304) 29 111
PREPAID EXPENSES AND OTHER (248) (293) (971)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE 1,757 (727) 383
ACCRUED EXPENSES 139 61 74
INCOME TAXES (401) 179 -
DEFERRED REVENUE 547 2,266 2,458
TOTAL ADJUSTMENTS $1,679 $ 582 $1,376
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES $9,657 $6,841 $6,648
NOTE 11: LITIGATION
On December 30, 1992, the Company entered into an out-of-court settlement
agreement with Unisys Corp ("Unisys") resolving litigation between the parties.
Under the terms of the settlement agreement, Unisys paid $3,464,000 in cash to
the Company and $536,000 in disputed counterclaims alleged by Unisys against the
Company were eliminated. The settlement exceeded by approximately $1,590,000
the Company's net receivable from Unisys. The effect, net of litigation
expenses and income taxes of approximately $498,000, was $886,000, or $.10 per
share. This is included in the Company's results for its fiscal year ended June
30, 1993 as an extraordinary item.
NOTE 12: BUSINESS ACQUISITIONS
On June 30, 1995, the Company acquired all the outstanding shares of Liberty
Software, Inc. common stock and customer contracts for a total purchase consid-
eration of $12,000,000 cash. The total outlay will be made over a period of
approximately 10 months. Approximately $5.4 million remains to be paid at June
30, 1995.
Effective July 1, 1994, the Company acquired all of the outstanding stock of
CommLink Corp. The initial consideration paid to CommLink's stockholders was a
total of $2,526,000 in cash. Additional payments may be made over the subse-
quent two years, based on CommLink's average annual net income. Pro Forma data
for 1993 reflects the Pro Forma results of the Company including its August 6,
1993 acquisition of BankVision Software, Ltd. Each transaction has been
accounted for as a purchase.
The consolidated operations of the Company include the operations of the
acquirees from their acquisition date. Since CommLink was acquired July 1,
1994, its results are included in the Company's financial statements for the
entire year. Unaudited Pro Forma consolidated operations assuming the Liberty
purchase was made at the beginning of the year are shown below:
1995 1994 1993
(In thousands)
Net sales $67,455 $63,543 $34,153
Income before extraordinary item $ 8,173 $ 8,142 $ 4,648
Net income $ 8,173 $ 8,142 $ 5,534
Net income per share $ .68 $ .66 $ .48
The Pro Forma results are not necessarily indicative of what would have occurred
had
the acquisition been on that date, nor are they necessarily indicative of future
operations. Pro Forma data reflect the adjusted amortized excess purchase price
over net assets acquired. No adjustment was made to reflect the combined impact
of operations on income tax expense of the separate companies.
ITEM 9. 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
Officers and Significant Employees" in the Company's Proxy Statement which is
incorporated herein by reference.*
Item 11. Executive Compensation
See the information under the captions "Executive Compensation"; "Compensation
Committee Report"; and "Company Performance" in the Company's Proxy Statement
which is incorporated herein by reference.*
Item 12. Security Ownership of Certain Beneficial Owners and Management
See the information under the captions "Stock Ownership of Certain Stockholders"
and "Election of Directors" in the Company's Proxy Statement which is incorpo-
rated herein by reference.*
Item 13. Certain Relationships and Related Transactions
None.
*Incorporated by reference pursuant to Rule 12b-23 and General Instruction G(3)
to Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this Report:
(1) Financial Statements:
The following Consolidated Financial Statements of the Company and its subsid-
iaries and the Reports of Independent Accountants thereon appear under Item 8 of
this Report:
- Independent Accountants' Report.
- Consolidated Statements of Income for the Years Ended June 30, 1995, 1994
and 1993.
- Consolidated Balance Sheets as of June 30, 1995 and 1994.
- Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended June 30, 1995, 1994 and 1993.
- Consolidated Statements of Cash Flows for the Years Ended June 30, 1995,
1994 and 1993.
- Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules:
The following Financial Statement Schedules filed as part of this Report appear
under Item 8 of this Report:
There are no schedules included because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
(3) List of Exhibits
(3) Articles of Incorporation and Bylaws
The following documents are incorporated by reference as exhibits hereto
pursuant to Rule 12b-32:
(i) The articles of incorporation and bylaws attached as Exhibits
3.1 and 3.2 to the Company's Registration Statement on Form
S-1, filed November 17, 1985 (the "S-1");
(ii) Certificate of Amendment of Certificate of Incorporation at-
tached as Exhibit 4 to the Company's Quarterly Report on Form
10-Q for the Quarter Ended December 31, 1987;
(iii) The Bylaw Amendment attached as Exhibit (3.1) to the Company's
Annual Report on Form 10-K for the Year Ended June 30, 1989;
and
(iv) The 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.
(10) Material Contracts
The following material contracts are incorporated by reference as
exhibits hereto pursuant to Rule 12b-32:
(i) The Agreement dated May 11, 1989, attached as Exhibit 10-1 to
the Company's Quarterly Report on Form 10-Q
for the Quarter Ended March 31, 1989;
(ii) 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;
(iii) 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;
(iv) 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;
(v) The Fremont Software, Inc. Acquisition Agreement dated December
17, 1992, attached as Exhibit 2 to the
Company's Current Report of
Form 8-K dated December 17, 1992;
(vi) The Stock Exchange Agreement among the Company and the Share
holders of BankVision Software, Ltd.
dated August 6, 1993,
attached as Exhibit 2 to the Company's
Current Report on Form 8-K dated August 6, 1993.
(vii) The Purchase Agreement for CommLink Corp. dated July 27, 1994,
the CommLink Stock Purchase Option
dated February 28, 1992 and the Option
Modification dated October 14,
1993, all attached as Exhibit 2 to the
Company's Current Report on Form 8-K
dated July 27, 1994.
(viii) The Stock Purchase Agreement for Liberty Software,
Inc. dated June 30, 1995, attached as
Exhibit 2 to the Company's Current
Report on Form 8-K dated June 30, 1995;
and
(ix) The Marketing Agreement and Master Agreement, each dated June
30, 1995 between the Company and
Broadway & Seymour, Inc. attached as
Exhibit 10 to the Company's Current
Report on Form 8-K dated June 30, 1995.
(22) Subsidiaries of the Registrant
A list of the Company's subsidiaries is attached hereto as Exhibit
22.
(24) Consents of Experts and Counsel
Consent of Independent Accountants is attached hereto as Exhibit 24.
(b) Reports on Form 8-K:
The Company filed a Form 8-K dated June 30, 1995 to report the
acquisition of Liberty Software, Inc. under Item 2. The foregoing Form 8-K was
amended to include financial statements on September 15, 1995.
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 27th day of September,
1995.
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 27, 1995
Michael E. Henry Board and Chief
Executive Officer
/s/ Michael R. Wallace President, Chief September 27, 1995
Michael R. Wallace Operations Officer
and Director
/s/ John W. Henry Senior Vice President September 27, 1995
John W. Henry and Director
/s/ Jerry D Hall Executive Vice September 27, 1995
Jerry D. Hall President and
Director
/s/ William W. Caraway Senior Vice President September 27, 1995
William W. Caraway and Director
/s/ Terry W. Thompson Vice President, September 27, 1995
Terry W. Thompson Treasurer and
Chief Financial
Officer
(Principal
Accounting
Officer)
/s/ James J. Ellis Director September 27, 1995
James J. Ellis
/s/ Burton O. George Director September 27, 1995
Burton O. George
/s/ George R. Curry Director September 27, 1995
George R. Curry
Exhibit 22
Jack Henry & Associates, Inc.
List of Company's Subsidiaries
Jack Henry International, Ltd.
Monett, Missouri
417-235-6652 (FAX) 417-235-8406
BankVision Software, Ltd.
Monett, Missouri
417-235-6652 (FAX) 417-235-8406
CommLink Corp.
Houston, Texas
713-894-3400 (FAX) 713-894-3434
Liberty Software, Inc.
Charlotte, North Carolina
704-372-4281 (FAX) 704-344-3545
Exhibit 24
Consent of Independent Accountants
Board of Directors
Jack Henry & Associates, Inc.
We consent to incorporation by reference in the Registration Statements on
Form S-8 of JACK HENRY & ASSOCIATES, INC. (File Nos. 33-11866 and 33-34244) of
our report dated August 11, 1995, relating to the consolidated balance sheets of
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARY as of June 30, 1995 and 1994, and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows and the related consolidated financial statement schedules for
each of the three years in the period ending June 30, 1995, which report appears
in the June 30, 1995 annual report on Form 10-K of JACK HENRY & ASSOCIATES, INC.
Baird, Kurtz & Dobson
Joplin, Missouri
September 27, 1995