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Form 8-K HENRY JACK & ASSOCIATES For: Aug 16

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August 17, 2016 6:02 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 16, 2016
JACK HENRY & ASSOCIATES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
0-14112
43-1128385
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

663 Highway 60, P.O. Box 807, Monett, MO 65708
(Address of Principle Executive Offices)
(Zip Code)

417-235-6652
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a.-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02
Results of Operations and Financial Condition.
On August 16, 2016, Jack Henry & Associates, Inc. issued a press release announcing fiscal 2016 fourth quarter results, the text of which is attached hereto as Exhibit 99.1.

Item 9.01
Financial Statements and Exhibits.
(d)    Exhibits    
99.1 Press release dated August 16, 2016.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
JACK HENRY & ASSOCIATES, INC.
 
 
 
(Registrant)
 
 
 
 
Date:
August 16, 2016
 
/s/ Kevin D. Williams
 
 
 
Kevin D. Williams
 
 
 
Chief Financial Officer and Treasurer



JKHY Fiscal 2016 Gross Profit Increases 8%
August 16, 2016


Jack Henry & Associates, Inc.
Analyst & IR Contact:
Kevin D. Williams
 663 Highway 60, P.O. Box 807
 
Chief Financial Officer
 Monett, MO 65708
 
(417) 235-6652

FOR IMMEDIATE RELEASE

JACK HENRY & ASSOCIATES ENDS FISCAL 2016
WITH 8% INCREASE IN GROSS PROFIT

Monett, MO, August 16, 2016 - Jack Henry & Associates, Inc. (NASDAQ: JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, today announced fiscal 2016 results.
Revenue for the quarter ended June 30, 2016 increased to $367.0 million, a 10% increase over the fourth quarter of fiscal 2015. Gross profit also increased 10% to $161.7 million, and net income increased 39% to $84.3 million, or $1.06 per diluted share.
For the year ended June 30, 2016, the Company generated $1,354.6 million of revenue, an 8% increase over fiscal 2015. Gross profit increased 8% to $581.0 million, and net income increased 18% to $248.9 million, or $3.12 per diluted share.
According to David Foss, President and CEO, “As we close the books on FY’16 we are pleased to report another year of record revenue and earnings.  The sales teams for all three of our marketed brands ended their year ahead of plan which should position us well for next year.  Additionally, our employee engagement and customer satisfaction scores both continue to be very solid as we enter FY’17. "
Operating Results
Revenue, cost of sales, and gross profit results for the quarter and fiscal year-to-date periods were as follows:
Revenue, Cost of Sales, and Gross Profit (Unaudited)
 
 
 
 
 
 
 
 
 
(In Thousands)
Three Months Ended
June 30,
% Change
 
Year Ended
June 30,
% Change
 
2016

 
2015

 
 
2016

 
2015

 
Revenue
 
 
 
 
 
 
 
 
 
License
$
511

 
$
1,072

(52
)%
 
$
3,041

 
$
2,635

15
 %
Percentage of Total Revenue
<1%

 
<1%

 
 
<1%

 
<1%

 
Support and Service
353,364

 
318,635

11
 %
 
1,300,978

 
1,200,652

8
 %
Percentage of Total Revenue
96
%
 
95
%
 
 
96
%
 
96
%
 
Hardware
13,095

 
14,006

(7
)%
 
50,627

 
52,903

(4
)%
Percentage of Total Revenue
4
%
 
4
%
 
 
4
%
 
4
%
 
Total Revenue
366,970

 
333,713

10
 %
 
1,354,646

 
1,256,190

8
 %
 
 
 
 
 
 
 
 
 
 
Cost of Sales
 
 
 
 
 
 
 
 
 
Cost of License
325

 
185

76
 %
 
1,197

 
1,187

1
 %
Cost of Support and Service
195,878

 
176,826

11
 %
 
737,108

 
680,750

8
 %
Cost of Hardware
9,067

 
10,288

(12
)%
 
35,346

 
38,399

(8
)%
Total Cost of Sales
205,270

 
187,299

10
 %
 
773,651

 
720,336

7
 %
 
 
 
 
 
 
 
 
 
 
Gross Profit
 
 
 
 
 
 
 
 
 
License Gross Profit
186

 
887

(79
)%
 
1,844

 
1,448

27
 %
License Gross Profit Margin
36
%
 
83
%
 
 
61
%
 
55
%
 
Support and Service Gross Profit
157,486

 
141,809

11
 %
 
563,870

 
519,902

8
 %
Support and Service Gross Profit Margin
45
%
 
45
%
 
 
43
%
 
43
%
 
Hardware Gross Profit
4,028

 
3,718

8
 %
 
15,281

 
14,504

5
 %
Hardware Gross Profit Margin
31
%
 
27
%
 
 
30
%
 
27
%
 
Total Gross Profit
$
161,700

 
$
146,414

10
 %
 
$
580,995

 
$
535,854

8
 %
Gross Profit Margin
44
%
 
44
%
 
 
43
%
 
43
%
 
•
For the fourth quarter of fiscal 2016, the bank systems and services segment revenue increased 8% to $272.7 million with a gross margin of 43% from $253.7 million with a gross margin of 43% in the same quarter last year.  The credit union systems

Page 1
JKHY Fiscal 2016 Gross Profit Increases 8%
August 16, 2016


and services segment revenue increased 18% to $94.3 million with a gross margin of 47% for the fourth quarter of fiscal 2016 from $80.0 million and a gross margin of 47% in the same period a year ago.
•
Bank systems and services segment revenue for fiscal 2016 increased 4% to $996.7 million from $962.7 million a year ago. Gross margins in each period were 41% and 42%, respectively. Credit union systems and services segment revenue increased 22% to $358.0 million with a gross margin of 48% from $293.5 million with a gross margin of 46% last fiscal year.
Operating Expenses and Operating Income
Operating income increased 30% to $116.5 million, or 32% of fourth quarter fiscal 2016 revenue, compared to $89.4 million, or 27% of revenue in the fourth quarter of fiscal 2015.
For the twelve month period ending June 30, 2016, operating income increased 14% to $361.7 million, a 27% operating margin on total revenue, from $317.9 million, or 25% of revenue, in fiscal 2015.
(Unaudited, In Thousands)
Three Months Ended
June 30,
% Change
 
Year Ended
June 30,
% Change
 
2016

 
2015

 
 
2016

 
2015

 
Selling and Marketing
$
23,365

 
$
23,492

(1
)%
 
$
90,079

 
$
89,004

1
%
Percentage of Total Revenue
6
%
 
7
%
 
 
7
%
 
7
%
 
 
 
 
 
 
 
 
 
 
 
Research and Development
23,964

 
19,501

23
 %
 
81,234

 
71,495

14
%
Percentage of Total Revenue
7
%
 
6
%
 
 
6
%
 
6
%
 
 
 
 
 
 
 
 
 
 
 
General and Administrative
17,357

 
14,049

24
 %
 
67,514

 
64,364

5
%
Percentage of Total Revenue
5
%
 
4
%
 
 
5
%
 
5
%
 
 
 
 
 
 
 
 
 
 
 
Gain on disposal of a business
(19,491
)
 
—

—
 %
 
(19,491
)
 
(6,874
)
184
%
Total Operating Expenses
45,195

 
57,042

(21
)%
 
219,336

 
217,989

1
%
Operating Income
$
116,505

 
$
89,372

30
 %
 
$
361,659

 
$
317,865

14
%
Operating Margin
32
%
 
27
%
 
 
27
%
 
25
%
 
•
The increase in research and development costs was mostly due to increased headcount and related personnel costs. Disposals of assets during the fourth quarter also contributed to the increase.
•
In fiscal 2016, the Company sold its Alogent business, resulting in a gain totaling $19,491. Alogent contributed revenue of $28,422 and $27,206 in fiscal years 2016 and 2015, respectively.
•
In fiscal 2015, we had a gain totaling $6,874 due to the sale of the TeleWeb™ suite of Internet and mobile banking software products. The fiscal 2015 gain was previously included in general and administrative expense.
Net Income
Fourth quarter net income totaled $84.3 million, or $1.06 per diluted share, compared to $60.5 million, or $0.75 per diluted share in the fourth quarter of fiscal 2015, for an increase in net income of 39% and an increase in diluted earnings per share of 42%.
Net income for the fiscal year ending June 30, 2016 totaled $248.9 million, compared to $211.2 million for last year, an increase of 18%. Diluted earnings per share increased 21% to $3.12 from $2.59 for the prior year.
(Unaudited, In Thousands,
Except Per Share Data)
Three Months Ended
June 30,
% Change
 
Year Ended
June 30,
% Change
 
2016

 
2015

 
 
2016

 
2015

 
Income Before Income Taxes
$
116,106

 
$
89,101

30
%
 
$
360,536

 
$
316,440

14
%
Provision for Income Taxes
31,836

 
28,562

11
%
 
111,669

 
105,219

6
%
Net Income
$
84,270

 
$
60,539

39
%
 
$
248,867

 
$
211,221

18
%
Diluted net income per share
$
1.06

 
$
0.75

42
%
 
$
3.12

 
$
2.59

21
%
•
Provision for income taxes increased 11% in the fourth quarter compared to the same quarter in fiscal 2015, but was 27.4% of income before income taxes this quarter compared to 32.1% of income before income taxes for the same period in fiscal 2015. The drop in effective tax rate for the quarter was due primarily to a significant difference in the book versus tax basis in Alogent stock sold in the fourth quarter of fiscal 2016.

Page 2
JKHY Fiscal 2016 Gross Profit Increases 8%
August 16, 2016


•
Provision for income taxes increased 6% for fiscal 2016, although the effective rate decreased to 31.0% of income before income taxes from 33.3% for the twelve months ending June 30, 2015. The decrease in the effective tax rate was primarily due to the sale of subsidiary stock, as well as the retroactive extension of the Research and Experimentation Credit ("R&E Credit") to January 1, 2015 during fiscal 2016.
Balance Sheet and Cash Flow Review
•
At June 30, 2016, cash and cash equivalents decreased to $70.3 million from $148.3 million at June 30, 2015.
•
Trade receivables totaled $253.9 million at June 30, 2016, an increase from $245.4 million at June 30, 2015.
•
Current and long term debt decreased from $52.7 million a year ago to $0.2 million at June 30, 2016.
•
Current deferred revenue increased to $343.5 million at June 30, 2016, compared to $339.5 million a year ago.
•
Stockholders' equity increased to $996.2 million at June 30, 2016, compared to $991.5 million a year ago.
Cash provided by operations totaled $365.1 million in fiscal 2016 compared to $373.8 million last fiscal year. The following table summarizes net cash (in thousands) from operating activities:
(Unaudited, In Thousands)
Year Ended June 30,
 
2016
 
2015
Net income
$
248,867

 
$
211,221

Depreciation
50,571

 
54,155

Amortization
79,077

 
64,841

Other non-cash expenses
30,050

 
30,166

Change in receivables
(13,735
)
 
(21,346
)
Change in deferred revenue
4,364

 
40,565

Change in other assets and liabilities
(34,078
)
 
(5,812
)
Net cash provided by operating activities
$
365,116

 
$
373,790

Cash used in investing activities for fiscal 2016 totaled $136.0 million, compared to $137.0 million for fiscal 2015 and included the following:
(Unaudited, In Thousands)
Year Ended June 30,
 
2016
 
2015
Payment for acquisitions, net of cash acquired
$
(8,275
)
 
$
—

Capital expenditures
(56,325
)
 
(54,409
)
Proceeds from the sale of businesses
34,030

 
8,135

Proceeds from the sale of assets
2,844

 
182

Internal use software
(11,826
)
 
(14,020
)
Computer software developed
(96,411
)
 
(76,872
)
Net cash from investing activities
$
(135,963
)
 
$
(136,984
)
•
$8.3 million, net of cash acquired, was used for the acquisition of Bayside Business Solutions.
•
The $56.3 million in capital expenditures was mainly for the purchase of computer equipment and aircraft.
•
The $34.0 million of proceeds from the sale of businesses was related to the sale of Alogent. The prior year's $8.1 million in proceeds related to the sale of the TeleWeb™ suite of Internet and mobile banking software products.
Financing activities used cash of $307.2 million for fiscal 2016 and $158.9 million in fiscal 2015.

Page 3
JKHY Fiscal 2016 Gross Profit Increases 8%
August 16, 2016


(Unaudited, In Thousands)
Year Ended June 30,
 
2016
 
2015
Borrowings on credit facilities
$
100,000

 
$
90,000

Repayments on credit facilities
(152,500
)
 
(50,783
)
Debt acquisition costs
—

 
(901
)
Purchase of treasury stock
(175,662
)
 
(122,691
)
Dividends paid
(84,118
)
 
(76,410
)
Net cash from issuance of stock and tax related to stock-based compensation
5,124

 
1,915

Net cash from financing activities
$
(307,156
)
 
$
(158,870
)

According to Kevin Williams, CFO, “Our capitalized software decreased significantly this quarter on a sequential basis, as we wrapped up some major projects and are in the process of starting new ones. We will continue to invest primarily in the areas of electronic payments, mobile offerings and other new products; along with other offerings that will drive additional future revenue and provide a solid return for our investors. The sale of Alogent discussed above did drive a large gain in the quarter and added $.22 to EPS (net of related expenses) for the quarter and fiscal year, however the loss of the revenue will create a head wind for us next fiscal year. Quarterly revenue headwinds will be Q’1: $6,425, Q’2: $8,251, Q’3: $7,657 and Q’4: $6,089 for the total fiscal year impact of $28,422. We continue to have a strong cash position and balance sheet for potential acquisitions, stock buy-backs, dividends, and continued investment in the company.”
Quarterly Conference Call
The company will hold a conference call on August 17, 2016; at 7:45 a.m. Central Time and investors are invited to listen at www.jackhenry.com.
About Jack Henry & Associates
Jack Henry & Associates, Inc. (NASDAQ: JKHY) is a leading provider of technology solutions and payment processing services primarily for the financial services industry. Its solutions serve approximately 10,600 customers nationwide, and are marketed and supported through three primary brands. Jack Henry Banking® supports banks ranging from community banks to multi-billion dollar institutions with information processing solutions.  Symitar® is the leading provider of information processing solutions for credit unions of all sizes. ProfitStars® provides highly specialized products and services that enable financial institutions of every asset size and charter, and diverse corporate entities to mitigate and control risks, optimize revenue and growth opportunities, and contain costs.  Additional information is available at www.jackhenry.com.
Statements made in this news release that are not historical facts are forward-looking information. Actual results may differ materially from those projected in any forward-looking information. Specifically, there are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Additional information on these and other factors, which could affect the Company's financial results, are included in its Securities and Exchange Commission (SEC) filings on Form 10-K, and potential investors should review these statements. Finally, there may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ materially from any forward-looking information.


Page 4
JKHY Fiscal 2016 Gross Profit Increases 8%
August 16, 2016


Condensed Consolidated Statements of Income (Unaudited)
 
 
 
 
 
 
 
 
 
 
(In Thousands, Except Per Share Data)
Three Months Ended June 30,
 
% Change
 
Year Ended June 30,
 
% Change
 
2016
 
2015
 
 
 
2016
 
2015
 
 
REVENUE
 
 
 
 
 
 
 
 
 
 
 
License
$
511

 
$
1,072

 
(52
)%
 
$
3,041

 
$
2,635

 
15
 %
Support and service
353,364

 
318,635

 
11
 %
 
1,300,978

 
1,200,652

 
8
 %
Hardware
13,095

 
14,006

 
(7
)%
 
50,627

 
52,903

 
(4
)%
Total
366,970

 
333,713

 
10
 %
 
1,354,646

 
1,256,190

 
8
 %
COST OF SALES
 
 
 
 
 
 
 
 
 
 
 
Cost of license
325

 
185

 
76
 %
 
1,197

 
1,187

 
1
 %
Cost of support and service
195,878

 
176,826

 
11
 %
 
737,108

 
680,750

 
8
 %
Cost of hardware
9,067

 
10,288

 
(12
)%
 
35,346

 
38,399

 
(8
)%
Total
205,270

 
187,299

 
10
 %
 
773,651

 
720,336

 
7
 %
GROSS PROFIT
161,700

 
146,414

 
10
 %
 
580,995

 
535,854

 
8
 %
Gross Profit Margin
44
%
 
44
%
 
 
 
43
%
 
43
%
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Selling and marketing
23,365

 
23,492

 
(1
)%
 
90,079

 
89,004

 
1
 %
Research and development
23,964

 
19,501

 
23
 %
 
81,234

 
71,495

 
14
 %
General and administrative
17,357

 
14,049

 
24
 %
 
67,514

 
64,364

 
5
 %
Gain on disposal of a business
(19,491
)
 
—

 
—
 %
 
(19,491
)
 
(6,874
)
 
184
 %
Total
45,195

 
57,042

 
(21
)%
 
219,336

 
217,989

 
1
 %
OPERATING INCOME
116,505

 
89,372

 
30
 %
 
361,659

 
317,865

 
14
 %
INTEREST INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
 
 
Interest income
49

 
51

 
(4
)%
 
307

 
169

 
82
 %
Interest expense
(448
)
 
(322
)
 
39
 %
 
(1,430
)
 
(1,594
)
 
(10
)%
Total
(399
)
 
(271
)
 
47
 %
 
(1,123
)
 
(1,425
)
 
(21
)%
INCOME BEFORE INCOME TAXES
116,106

 
89,101

 
30
 %
 
360,536

 
316,440

 
14
 %
PROVISION FOR INCOME TAXES
31,836

 
28,562

 
11
 %
 
111,669

 
105,219

 
6
 %
NET INCOME
$
84,270

 
$
60,539

 
39
 %
 
$
248,867

 
$
211,221

 
18
 %
Diluted net income per share
$
1.06

 
$
0.75

 
 
 
$
3.12

 
$
2.59

 
 
Diluted weighted average shares outstanding
79,261

 
81,086

 
 
 
79,734

 
81,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheet Highlights (Unaudited)
 
 
 
 
 
 
 
 
 
 
(In Thousands)
 
 
 
 
 
 
June 30,
 
% Change
 
 
 
 
 
 
 
2016
 
2015
 
 
Cash and cash equivalents
 
 
 
 
 
 
$
70,310

 
$
148,313

 
(53
)%
Receivables
 
 
 
 
 
 
253,923

 
245,387

 
3
 %
Total assets
 
 
 
 
 
 
1,815,512

 
1,836,835

 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
 
 
 
 
 
$
100,007

 
$
88,895

 
13
 %
Current and long term debt
 
 
 
 
 
 
200

 
52,697

 
(100
)%
Deferred revenue
 
 
 
 
 
 
521,054

 
531,987

 
(2
)%
Stockholders' Equity
 
 
 
 
 
 
996,210

 
991,534

 
—
 %


Page 5

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