Jack Henry & Associates

2 0 0 8 A N N U A L R E P O R T

®

Y
H
K
J

:

q
a
d
s
a
N

JACK HENRY & ASSOCIATES HAS
ESTABLISHED A CORPORATE CULTURE
THAT VALUES QUALITY PRODUCTS
AND SERVICES, CUSTOMER
SATISFACTION, AND INTEGRITY-BASED
BUSINESS RELATIONSHIPS, WHILE
CONSISTENTLY GENERATING RETURNS
FOR OUR SHAREHOLDERS.

T A B L E O F C O N T E N T S

Financial Highlights

Shareholders’ Letter

Jack Henry & Associates, Inc.
Overview

Jack Henry Banking™
Overview

Symitar® Overview

ProfitStars® Overview

Financials

1

2

5

9

12

14

16

(In millions except per share data)

2008

2007

2006

REVENUE

2008

2007

2006

NET INCOME

2008

2007

2006

F I N A N C I A L H I G H L I G H T S

$1,021

$999

$906

$743

$667

$591

2008

2007

2006

TOTAL ASSETS

$104

$105

$90

2008

2007

2006

$601

$598

$575

STOCKHOLDERS’ EQUI TY

$1. 16

$1. 14

$0. 96

2008

2007

2006

$0.28

$0.24

$0. 20

DILUTED EAR NIN GS per share

DI VI DEN DS DECLARED per share

JACK HENRY & ASSOCIATES’ CORPORATE MISSION IS...To protect and increase

the value of our stockholders’ investment by providing quality products

and services to our customers.

In accomplishing this we feel it is

important to: CONCENTRATE our activities on what we know best -

information systems and services for financial institutions, PROVIDE

outstanding commitment and service to our customers so that the

perceived value of our products and services will be consistent with the

real value, and MAINTAIN a work environment that is personally,

professionally, and financially rewarding for our employees.

0
1

T O O U R S H A R E H O L D E R S ;

FISCAL YEAR 2008 MARKED OUR 32ND YEAR IN
BUSINESS, 22ND YEAR AS A PUBLIC COMPANY,
AND ANOTHER YEAR OF COMPANY-WIDE PROGRESS
AND SOLID FINANCIAL RESULTS WITH REVENUE,
EARNINGS PER SHARE, AND OPERATING CASH
FLOW REACHING RECORD HIGHS.

Despite the global credit crisis, the weakening
U.S. economy, and the related effects on our
financial institution customers, our conservative
business principles, recurring revenue, long-term
contracts, large customer base, and broad
product offering have enabled us to continue
to generate solid financial results.

Jack Henry & Associates has prospered in a
competitive business environment by narrowly
focusing on our core competency – providing the
technology financial institutions need to attract
and serve customers, aggressively compete,
control operating costs, and improve operating
efficiencies.

As we enter a new fiscal year we continue to

During the fiscal year ended June 30, 2008 total

focus on four primary growth drivers:

•
Increase market share by aggressively earning
new traditional and nontraditional clients and cross
selling additional products and services to our
existing clients.

• Add new products and services that enable
financial institutions to capitalize on business
opportunities and resolve specific operational
issues.

•
Increase recurring revenue by optimizing
outsourcing opportunities, transaction-based
processing fees, and ongoing software maintenance
and support fees.

Pursue disciplined acquisitions that

•
complement our internal growth and continue our
focused diversification.

revenue increased to a record $742.9 million,
representing an increase of 11 percent over last
year’s revenue. Net income was $104.2 million or
$1.16 per diluted share, as compared to net income
of $104.7 million or $1.14 per diluted share reported
in fiscal year 2007. We generated strong cash flow
from operating activities of $181.0 million, return on
assets was 10.3 percent, and return on equity was
17.4 percent.

Our revenue mix for the year consisted of $73.6

million in software license fees or 10 percent of
total revenue, $580.3 million in support and services
or 78 percent of total revenue, and $89.0 million in
hardware sales or 12 percent of total revenue.

Recurring revenue, which provides the financial

stability to support our ongoing growth, was
approximately 70 percent in fiscal year 2008,
compared to 66 and 64 percent in fiscal years 2007
and 2006, respectively.

Backlog, which consists of contracted sales of
products and services that were not delivered by
fiscal year-end, reached $257.4 million, an eight
percent increase over the $239.3 million reported
last year.

0
2

H I G H L I G H T S
Despite the challenging business environment, we
continued to generate solid financial performance
during fiscal year 2008. We generated industry-
leading organic revenue growth of 9 percent and
industry-leading profitability with a 22 percent
operating margin. We also experienced significant
growth in our payments business which now
represents 18 percent of the company’s total fiscal
year revenue and an increase of 29 percent over
fiscal year 2007. Each of our three divisions also
realized important milestones and capitalized
on their respective growth opportunities during
the year.

JACK HENRY BANKING
As a leading provider of core information and
transaction processing solutions for banks, Jack
Henry Banking continued to capitalize on the broad
appeal of our products and services. Our core
banking systems, which have replaced every major
competitive solution marketed today, enabled our
ongoing expansion in two key markets – recently
chartered de novo banks and mid-tier banks. We
added 30 de novo banks to our customer roster
during the fiscal year and our technology platforms
now support approximately 20 percent of mid-tier
banks with assets ranging from $1 billion to $50
billion. During fiscal year 2008, we added our
largest in-house customer based on asset size and
completed our largest outsourcing transaction ever.
We also continued to capitalize on the outsourcing
trend with 27 of our in-house bank customers
electing to migrate to our outsourcing offering.

ACQUISITIONS
During fiscal year 2008 we acquired two companies,
marking our 16th and 17th acquisitions since we
adopted our focused diversification strategy.
Both acquisitions support our strategy to acquire
companies with innovative solutions we can cross
sell to our core bank and credit union customers,
and that expand the products our ProfitStars
division can sell to virtually any financial services
organization regardless of core processing platform.

GLADIATOR TECHNOLOGY SERVICES, INC.
On July 1, 2007 we acquired Gladiator Technology
Services, a leading provider of technology security
monitoring solutions and related consulting services
that enable financial institutions to safeguard
their information and transaction processing
infrastructures and comply with the related
regulatory requirements. These monitoring
services include network intrusion prevention,
firewalls, server intrusion prevention and event
logging, risk and vulnerability assessments,
compliance and regulatory solutions, e-mail filtering
and encryption services, and the development of
information security, network, and Internet policies.
These security services support more than 500
financial institutions including numerous Jack
Henry & Associates customers.

AU DIOTEL CORPORATION
On October 1, 2007 we acquired AudioTel
Corporation, a provider of remittance, merchant
capture, check imaging, document imaging and
management, telephone and Internet banking
solutions, and Web site design and hosting services.
AudioTel supports more than 1,000 financial
institutions with these back-office and retail bank-
ing solutions and has consistently been on the
forefront of the payment processing industry. In
addition to the synergies we identified among our
respective product lines, this acquisition adds more
products and services to our ProfitStars division
than any other previous acquisition.

0
3

We recognize that our customers, associates,
and shareholders are responsible for our success
– past, present, and future – so we would like to
formally thank our customers for their business,
loyalty, and guidance; our associates for their
commitment to our customers and mission;
and our shareholders for their confidence in our
company.

JACK PRIM
Chief Executive Officer

TONY WORMINGTON
President

KEVIN WILLIAMS
Chief Financial Officer & Treasurer

SYM ITAR
As a leading provider of core information and
transaction processing solutions for credit unions of
all asset sizes and as the first technology partner to
replace every major competitive core processing
solution, Symitar continued to capitalize on its
market acceptance and signed its 500th credit
union to the Episys core platform. Symitar
continued its dominance among credits unions
with more than $25 million in assets and now
serves more than 30 percent of the credit unions
that have more than a billion dollars in assets –
more than twice the market share of its closest
competitor. Symitar also continues to enjoy the
highest customer retention rate of any major core
data processor in the credit union space.

PROFITSTARS
As a leading provider of specialized products and
services that diverse financial services organizations
and businesses outside the financial industry use
to generate revenue, increase security, and reduce
operational risks and costs, ProfitStars continued to
capture new market share during fiscal year 2008.
More than 600 non-core customers contracted for
ProfitStars’ solutions, representing an 18 percent
increase over fiscal year 2007 signings. More than
4,500 individual contracts with varied revenue
implications were signed which represents a 63
percent increase over the prior fiscal year. Profit-
Stars continued to experience tremendous growth
with its Remote Deposit Capture solution.
Approximately 800 banks and more than 14,000
of their merchant customers now use this system
to electronically deposit the checks received as
payment for goods and services. The related
transaction volumes also increased 271 percent
over fiscal year 2007 volumes. ProfitStars’ diverse
customer base now consists of approximately 1,300
Jack Henry Banking and Symitar core customers,
and more than 6,900 non-core customers, including
the top 15 domestic banks.

0
4

JACK HENRY & ASSOCIATES

WA S FOUNDED IN 1976 TO PROVID E DATA PROCESSING SOLUT IONS FOR COMMU NIT Y

BANKS. TODAY, OUR COMPA N Y IS RECOGNIZE D AS A FINANCIALLY SOUND, CUST OMER-

FOCU SED TECHN OLOG Y PA RT N ER PROV IDING QUALITY PR ODU CTS T HAT MEE T T HE

EVOLVI NG NEE D S OF FIN AN CI AL SERVICE S ORGANIZ AT IONS AND SE RV ICE LEV E LS T HAT

CONSISTENTLY EXCEE D OUR CUST OME RS’ E XPE CTAT IONS.

OUR SOLUTIONS ARE NOW MANAGING MISSION-CRITICAL BUSINESS

INFORMATION, PROCESSING TRANSACTIONS, AND AUTOMATING

BUSINESS PROCESSES FOR MORE THAN 8,800 DIVERSE CUSTOMERS

INCLUDING FINANCIAL INSTITUTIONS OF ALL ASSET SIZES AND CHARTERS,

AS WELL AS BUSINESSES OUTSIDE THE FINANCIAL SERVICES INDUSTRY.

C O M P E T I T I V E A D V A N T A G E
We fully understand the importance of providing
consistent, outstanding service based on more than
three decades of experience providing financial
institutions with mission-critical technology
platforms. In fact, we consider the ability to provide
premier customer service to be our primary
sustainable competitive advantage. Our company
is committed to providing service levels that
consistently exceed customer expectations and
produce rewarding levels of customer satisfaction
and retention rates.

Our customer support infrastructure incorporates:
• Exacting service standards,
• Best practices methodology developed and
refined through our day-to-day experience
supporting more than 8,800 diverse customers,

• Comprehensive change management and

control services,

• Proven conversion and installation services,
• Initial and ongoing education,
• Superior support staff available 24/7/365,
• Bank and credit union knowledgeable account

managers,

• Sophisticated support tools, resources, and

technology,

• Leading-edge research and development, and
• Product-specific focus groups and users’

meetings.

Our products and services are delivered through
three brands.

JACK HENRY BANKING is a leading provider of
core processing solutions and the integrated
automation banks need to process business
information and financial transactions. Jack Henry
Banking supports approximately 1,600 banks
ranging from recently chartered de novo institutions
to multi-billion dollar mid-tier banks with three
functionally distinct core systems and more than
100 integrated complementary products and
services.

SYMITAR is a leading provider of core processing
solutions and the integrated automation credit
unions need to process business information and
financial transactions. Symitar supports more than
700 credit unions of all asset sizes with two
functionally distinct core systems and approximately
50 integrated complementary products and services.

PROFITSTARS is a leading provider of specialized
products and services that financial services
organizations of all asset sizes and charters, and
diverse businesses outside the financial industry
use to generate revenue, increase security, reduce
operational risks, and control operating costs.
ProfitStars’ products and services have been
implemented by more than 8,200 diverse customers
and enabled our entry into nontraditional markets
that extend well beyond our core bank and credit
union customer bases.

Within each of these brands, the functionality

of our products and exacting service standards
attract prospective customers, foster long-term
customer relationships, and have enabled us to
capture substantial market share.

0
6

We methodically and regularly measure our service
levels using comprehensive annual surveys,
including executive and operations versions, and
more than 50,000 random surveys initiated by the
customer service requests we receive each year.
The results of this year’s survey process once again
confirmed that our service levels exceeded our
customers’ expectations and generated satisfaction
levels we believe to be among the highest in the
industry. In addition to our overall survey process,
dedicated surveys are also used to grade specific
aspects of our customer experience including
product implementation, education, and consulting
services.

competitive advantage, and our reputation and
ongoing success are based on doing whatever it
takes to maintain industry-leading levels of
customer satisfaction. We maintain a strict focus
on customer care, continually invest in our support
infrastructure, enforce exacting service standards,
formally measure the results with a comprehensive
survey process, and continually refine our service
methodology.

HAVE FUN: We recognize and respect that it is the
collective, day-to-day contribution of our associates
that enables Jack Henry & Associates to keep our
corporate promises to do the right thing and do

G U I D I N G P R I N C I P L E S

WE HAVE CONSISTENTLY MAINTAINED THE FOCUSED WORK ETHIC
AND IDEALS FOSTERED BY OUR CO-FOUNDERS – JACK HENRY
AND JERRY HALL – MORE THAN 30 YEARS AGO. THE TIME-TESTED
FUNDAMENTALS GUIDING OUR COMPANY ARE: DO THE RIGHT THING,
DO WHATEVER IT TAKES, AND HAVE FUN.

DO THE RIGHT THING: Products and services that
meet users’ functional requirements and responsive
service are expected in the competitive markets
we serve. In addition to providing production-
proven products and service levels that consistently
exceed our customers’ expectations we are
committed to establishing and maintaining
integrity-based business relationships. Doing the
right thing is often not the easiest thing but this
long-standing corporate commitment ultimately
benefits every financial services organization and
corporate entity that does business with us.
Applying this practical business acumen and the
highest business ethics to every business
relationship is a hallmark of our corporate culture
and success.

DO WHATEVER IT TAKES: In 1976 our founders made
a commitment to exceed each customer’s service-
related expectations and that commitment to
customer care continues today. We consider
outstanding service to be our primary sustainable

whatever it takes to maintain the industry’s highest
levels of customer satisfaction. We also rely on our
associates to develop quality solutions for our
customers’ business opportunities and challenges,
to aggressively earn and support new customers,
and to ultimately sustain our competitive distinction
and industry-leading position. Retaining and
recruiting outstanding associates is a mission-
critical component of our ongoing success, so we
dedicate significant effort and resources to
maintaining a work environment that is
professional, financially rewarding, and enjoyable.
Competitive salaries, excellent benefits, a work
environment that encourages collaboration,
comfortable facilities, appropriate business tools,
comprehensive initial and ongoing training,
benevolent and morale-building activities and
events, ongoing communication opportunities with
executive management, and a formal annual
employee satisfaction survey encourage the work
ethic and atmosphere established by our founders.

0
7

Despite three decades of unprecedented
technological innovations and advances and the
growing complexity of the financial services
industry, these three simple tenets have enabled
our company to:

• Develop a well-conceived and well-executed

business strategy that is governed by
conservative business principles and proven
performance management; and
• Maintain a solid balance sheet.

• Prosper in a competitive and consolidating

business environment;

• Earn a large and growing customer base;
• Capture substantial market share;
• Establish a corporate culture that values

integrity-based business relationships and
recognizes customer service as our sustainable
competitive advantage;

• Provide and support an extensive line of

products and services that support technology-
dependent and growing businesses;
• Provide rewarding opportunities for our

workforce;

During fiscal year 2009 we will continue to leverage
our proven technology platforms and company-
wide commitment to customer care to retain and
expand our existing customer relationships, and
increase our market share by attracting and
earning new customers in our traditional and new
markets.

Detailed information about Jack Henry &
Associates is available at www.jackhenry.com.

HIGHLIGHTS

SOLID, HIGH-PERFORMANCE COMPANY
Industry-leading organic growth – 9 percent
Industry-leading profitability – 22 percent operating margins

STRONG GROWTH IN PAYMENTS BUSINESS
Payments represent 18 percent of total revenue – growing 29+ percent per year

SIG NIFICANT AND GROWING RECURRING REVENUE
Currently 70 percent of total revenue and growing

RESPONDING TO ECONOMIC DOWNTURN
Our conservative business principles, recurring revenue, long-term contracts, large client base, and broad product
offering will reduce dependence on license fees

0
8

JACK HENRY BANKING

OUR ORIGINAL BUSI NE SS LIN E WAS FOUNDE D IN 1976 IN RE SPONSE T O T HE GROWING

DEMAND FOR OFF-THE -SHELF BA N KIN G SOFT WARE . MORE T HAN T HRE E DE CADE S LAT ER,

JACK HENRY BAN KIN G IS A LEAD IN G PR OV IDER OF T HE INT EGRATE D A UT OMAT ION

BANKS NEED TO PROCESS BU SIN ESS INFORMATION AND FINANCIAL T RANSACT IONS.

HIGHLIGHTS

BROAD PRODUCT APPEAL
Core systems have been selected to replace every major competitive
alternative marketed today

DIVERSE CUSTOMER BASE
Continued expansion in the de novo market
Continued expansion in the mid-tier market – now supporting approximately 20 percent
of mid-tier banks with assets ranging from $1 billion to $50 billion

CAPITALIZING ON OUTSOURCING TREND
Twenty-seven banks automated by our technology platforms migrated from in-house
processing to our outsourcing offering

SIGNIFICANT WINS
Added our largest in-house customer based on asset size
Completed our largest outsourcing transaction ever

WE NOW SERVE AS THE PRIMARY TECHNOLOGY
PARTNER FOR APPROXIMATELY 1,600 BANKS
RANGING FROM RECENTLY CHARTERED
DE NOVO INSTITUTIONS TO MULTI-BILLION
DOLLAR MID-TIER BANKS.

Our broad product and service offering enables
banks to execute their business strategies with
technology platforms tailored to support unique
growth, service, operational, and performance
goals. Our banking solutions encompass three
functionally distinct core systems, more than 100
complementary solutions, in-house and outsourced
delivery alternatives, and contemporary yet proven
technology. Our support infrastructure also enables
us to support today’s complex banking platforms
as a single point of contact, ongoing service, and
accountability.

Our three CORE BANKING PLATFORMS
are the SilverLake System®, a highly customizable
IBM® Power™ System-based solution for commercial
banks; CIF 20/20®, a parameter-driven IBM Power
System-based solution; and Core Director®,
a Windows®-based client/server solution. Our
customers have selected these core systems to
replace every major competitive alternative
marketed today.

Our integrated complementary products and
services enhance the functionality of these core
systems and enable banks to respond to specific
business opportunities and challenges with
proven solutions. Our BEST-OF-SUITE
COMPLEMENTARY SOLUTIONS support
business intelligence and bank management, retail
delivery and business banking, electronic funds
transfer and Internet banking, risk management
and protection, item and document imaging, and
professional services and education.

During fiscal year 2008 we continued to
capitalize on the broad appeal of our core and
complementary solutions.

OUR EXPANSION IN THE MID-TIER
MARKET CONTINUED AND
OUR TECHNOLOGY PLATFORMS
NOW SUPPORT APPROXIMATELY
20 PERCENT OF MID-TIER
BANKS WITH ASSETS RANGING
FROM $1 BILLION TO
$50 BILLION.

We also continued our expansion in the de novo
market and launched our De Novo University, a
formal training curriculum and implementation
methodology exclusively for start-up banks. This
comprehensive program streamlines bank openings,
optimizes bankers’ time, and reduces training-
related travel and expense.

We continued to expand our product and
service offering with the introduction of nine new
complementary solutions during the year and
expanded the vast majority of our existing customer
relationships with cross sales of these solutions.

1
0

Synergy™ Express, one of our most noteworthy

complementary product additions, addresses the
demand for delivering software as a service (SaaS)
and for technology that can increase banks’
operating efficiencies while reducing operating
costs. Synergy Express leverages our Synergy
Enterprise Content Management (ECM) platform,
which was previously only available for in-house
installation, to provide a fully managed service for
document, report, and check image storage,
archival, and retrieval. Synergy Express eliminates
the capital expenditures required for in-house
system installations, eliminates ongoing operation
and maintenance costs, streamlines the entire
content management process, provides state-of-
the-art security, and provides compliance with
related regulatory requirements.

During the fiscal year, 27 banks using our
technology platforms migrated from in-house
processing to our outsourcing offering. More than
520 banks, representing combined assets of more
than $115 billion, have chosen to outsource their
information processing to Jack Henry Banking.
On behalf of these banks we process approximately
nine million deposit/loan accounts each day and
more than 30 million checks each month.

During fiscal year 2009 we will continue to
leverage our core and complementary solutions,
service standards, and market presence and
reputation to retain and expand our existing
customer relationships and earn new core
customers.

Detailed information about Jack Henry Banking

is available at www.jackhenrybanking.com.

WE CONTINUED TO CAPITALIZE
ON THE GROWING TREND WITHIN
OUR CUSTOMER BASE AS
AN INCREASING NUMBER OF
BANKS MIGRATED FROM OUR
IN-HOUSE PROCESSING
SOLUTIONS TO OUR OUTSOURCED
ALTERNATIVES.

1
1

SYMITAR A JACK HENRY COMPANY

SYMITAR WA S FOUN D ED IN 1985 AN D ACQUIRE D BY JACK HE NRY & ASSOCIATE S IN 2000.

TODAY, SYMITAR IS A LEA DI N G PROVI DER OF CORE PROCESSING SOLUT IONS FOR

CREDIT UNION S OF ALL ASSET SIZES, PROVIDING E NTE RPRISE-WIDE A UT OMAT ION T O

MORE THAN 700 CR ED IT UN I ON S AN D MOR E T HAN 30 PE RCE NT OF T HE 127 CRE DIT UNIONS

WITH ASSETS EXCE ED I NG $1 BILLION AS OF JUNE 30, 2008.

HIGHLIGHTS

INDUSTRY LEADERSHIP
Signed 500th credit union to the Episys core
platform, continuing the company’s dominance
among credits unions with more than $25 million
in assets and its commitment to organic growth

MARKET ACCEPTANCE
Symitar is the first technology partner to replace
every major competitive core processing solution

LARGE CREDIT UNIONS
Now serves more than 30 percent of the credit
unions that have more than $1 billion dollars in
assets – more than twice the market share of its
closest competitor

INTEGRATION
Has signed more than 20 third-party vendors to
its Vendor Integration Program – an innovative
program that enables providers of niche solutions
to integrate their complementary products and
services to Episys, significantly expediting product
deployment and optimizing operating efficiencies

Our core processing systems enable diverse credit
unions to implement HIGHLY CUSTOMIZED
TECHNOLOGY PLATFORMS to support their
unique and evolving business strategies. Our
credit union solutions encompass two functionally
distinct core systems, approximately 50 comple-
mentary products and services, in-house and
outsourced alternatives, contemporary technology,
and the infrastructure necessary to serve each
credit union as a single point of contact, support,
and accountability.

Our two core platforms are Episys®, a highly
customizable IBM Power™ System-based solution;
and Cruise®, a Windows-based client/server
solution for smaller credit unions.

fact that more than 500 diverse credit unions have
now evaluated core systems and ultimately
selected Episys as an unprecedented endorsement
of the system’s functionality and the fundamental
way we conduct business. Episys has been
selected by our customers to replace every major
competitive system.

Symitar has experienced tremendous growth
since being acquired by Jack Henry & Associates.
During the 15 years between 1985 when the
company was founded and the June 2000
acquisition, Symitar earned 237 Episys customers.
During the eight years since the acquisition
SYMITAR HAS MORE THAN DOUBLED ITS
CLIENT BASE.

OUR INTEGRATED COMPLEMENTARY SOLUTIONS ENHANCE THE FUNCTIONALITY OF

THESE CORE SYSTEMS AND ENABLE CREDIT UNIONS TO RESPOND TO EVOLVING MEMBER

AND MARKET DEMANDS, EXPEDITE SPEED-TO-MARKET WITH COMPETITIVE OFFERINGS, AND

ADDRESS SPECIFIC OPERATIONAL ISSUES WITH PROVEN PRODUCTS AND SERVICES.

Our complementary solutions support business
intelligence and profitability, retail delivery,
electronic funds transfer and Internet banking, risk
management and security, item and document
imaging, and professional services and education.
We also provide a suite of proprietary strategic
and operational impact solutions that enhance the
functionality provided by the Episys system.

During fiscal year 2008 Symitar continued to
generate market-leading growth by signing more
new customers than any other provider of core
processing solutions. We added 26 credit unions to
our customer roster with the average asset size of
these new customers being more than double the
average asset size of the new customers added
during fiscal year 2007. The average net gain
among Symitar’s top competitors during this period
was less than one according to data published by
the National Credit Union Association (NCUA).
During the fiscal year we also reached an
important milestone with the addition of our 500th
Episys customer. Episys now has the largest user
base in the industry achieved entirely through
organic growth following competitive evaluations
rather than through the acquisition and conversion
of competitive customer bases. We consider the

Our retention rate among Episys customers
also provides a rewarding point of competitive
distinction considering only five credit unions have
elected to replace the system with a competitive
alternative in Symitar’s 23-year history.

During fiscal year 2008 we expanded many of
our customer relationships through record cross
sales of our complementary solutions, and we
introduced a number of new complementary
products and services.

During fiscal year 2009 we will continue to
focus on maintaining Symitar’s industry leadership
with a strict focus on product and service quality,
ongoing enhancements to our core and
complementary solutions, and the addition of high-
demand complementary products and services.
We will continue to evaluate and refine our business
processes to improve our operating efficiencies
and ensure we continue to meet our customers’
expectations.

Detailed information about Symitar is available

at www.symitar.com.

1
3

PROFITSTARS A JACK HENRY COMPANY

WE INITIAT ED OUR FOCUSED D IVE RSI FICATION ST RATE GY IN 2004 AND BE GAN ACQUIRING

COMPAN IES AN D PROD UCT S THAT BR OADE N OUR MARKE T RE ACH WIT H SPECIALIZ E D

SOLUTIONS THAT W E CA N SELL TO VIRTUA LLY ANY FINANCIAL SE RV ICE S ORGANIZ AT I ON

REGARDLESS OF ASSET SIZE , CHA RTER , OR CORE PR OCE SSING PLATFOR M.

HIGHLIGHTS

FIN ANCIAL YEAR 2008 CONTRACTING
620 non-core customers signed ProfitStars contracts –
representing an 18 percent increase over fiscal year 2007

More than 4,500 individual contracts signed with varied
revenue implications – representing a 63 percent increase
over fiscal year 2007

DIVERSE CUSTOMER BASE
More than 8,200 total direct customers – includes approximately
1,300 Jack Henry Banking and Symitar core customers, and
more than 6,900 non-core customers

Products currently installed in top 15 domestic banks

BROAD PRODUCT AND SERVICE SUITE
Revenue and growth solutions

Risk mitigation and control solutions

Cost control solutions

REMOTE DEPOSIT CAPTURE
Supporting approximately 800 banks

Supporting more than 14,000 merchants and in excess
of 60,000 locations

Transaction volume increased 271 percent over the
fiscal year 2007 volume

WE ALSO SELL SELECT PRODUCTS AND SERVICES TO BUSINESSES

OUTSIDE THE FINANCIAL INDUSTRY, AND ARE CAPITALIZING ON CROSS-SALE

OPPORTUNITIES WITH OUR CORE BANK AND CREDIT UNION CUSTOMERS AND AMONG

THE ACQUIRED COMPANIES’ RESPECTIVE CUSTOMER BASES.

In February 2006 ProfitStars was established as
Jack Henry & Associates’ third primary brand
encompassing the acquired products and services.
Today, ProfitStars provides more than 60 HIGHLY
SPECIALIZED SOLUTIONS that enable diverse
businesses to generate new revenue and growth
opportunities, mitigate and control financial and
operational risks, and contain operating costs.
These top-of-mind business objectives and
challenges can be addressed by implementing
ProfitStars’ solutions individually or in combination
as comprehensive solution suites.

ProfitStars’ REVENUE AND GROWTH

SOLUTIONS include business intelligence, sales
automation, enterprise profitability, enterprise
payments, insurance services, net interest margin
improvement, Internet and telephone banking, and
online account creation solutions. Our RISK
MITIGATION AND CONTROL SOLUTIONS
include enterprise information security monitoring,
enterprise risk management, identity management
and control, and business continuity and disaster
recovery solutions. The ProfitStars’ COST
CONTROL SOLUTIONS include check and
document imaging, enterprise content management,
network services, identity management and
control, regulatory reporting, and ATM channel
management solutions.

During fiscal year 2008 two additional companies

were acquired to expand ProfitStars’ product
offering and customer base. Gladiator Technology
Services, Inc. safeguards the information and
transaction processing infrastructures of more than
500 financial institutions with industry-leading
technology security monitoring solutions and
related consulting services. AudioTel Corporation
supports more than 1,000 financial institutions with
proven back-office and retail delivery solutions
including remittance, merchant capture, check
imaging, document imaging and management,

telephone and Internet banking solutions, and Web
site design and hosting services.

During the year we also focused on new sales
opportunities both inside and outside the financial
industry, and cross-sales opportunities among
ProfitStars’ existing customers. In addition to the
financial services industry, which represents our
primary market, we are aggressively marketing the
ProfitStars solutions to other diverse entities and
industries including capital markets, healthcare,
insurance, non-profit organizations, the public
sector, utilities, retail, distribution, and
manufacturing and processing.

Through a combination of acquisitions and
targeted sales initiatives, ProfitStars’ solutions are
now supporting more than 8,200 domestic and
international financial services organizations and
other businesses outside the financial industry.
During fiscal year 2008, 620 new non-core customers
signed contracts for ProfitStars’ solutions. Our
roster of ProfitStars customers now includes 42 of
the largest 50 domestic banks including all of the
top 15 banks, 29 of the 50 largest credit unions, and
a growing number of diverse corporate entities.
During fiscal year 2009 we will maintain our

strict focus on product quality and customer
satisfaction and continue to identify opportunities
to leverage ProfitStars’ solutions to support top-of-
mind business goals and challenges. We will
continue to pursue acquisitions of specialized
solutions that expand our product offering and
customer base, generate additional sales and
cross-sales opportunities, and exploit new markets.

Detailed information about ProfitStars is

available at www.profitstars.com.

1
5

FISCAL YEAR 2008

F I N A N C I A L S

17

18

19

32

36

37

38

39

40

41

59

Market for Common Stock and Related Shareholder Matters

Performance Graph

Selected Financial Data

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Income

Consolidated Balance Sheets

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flow

Notes to Consolidated Financial Statements

Quarterly Financial Information

MARKET FOR R EG I STR ANT' S COMMON EQUITY, REL ATED STOCKHOLDER MATTERS

AND ISSUER PU R CHASE S OF E QUITY SECURI TI ES

The Company's common stock is quoted on the NASDAQ Global Select Market (“NASDAQ”), formerly known as 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 NASDAQ.

Fiscal 2008

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Fiscal 2007

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

High

Low

$ 27.48

$ 21.62

26.11

29.24

27.50

High

22.22

24.34

23.39

Low

$ 26.75

$ 23.54

24.67

23.20

22.20

20.57

21.02

17.40

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, 2008

and 2007 are as follows:

Fiscal 2008

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Fiscal 2007

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Dividend

$ 0.075

0.075

0.065

0.065

Dividend

$ 0.065

0.065

0.055

0.055

The declaration and payment of any future dividends will continue to be at the discretion of our Board of Directors and will depend upon,

among other factors, our earnings, capital requirements, contractual restrictions, and operating and financial condition. The Company does

not currently foresee any changes in its dividend practices.

Information regarding the Company's equity compensation plans is set forth under the caption "Equity Compensation Plan Information" in the

Company's definitive Proxy Statement and is incorporated herein by reference.

On August 21, 2008, there were approximately 50,000 holders of the Company’s common stock. On that same date the last sale price of

the common shares as reported on NASDAQ was $20.10 per share.

1
7

PERFORMANCE G R AP H

The following chart presents a comparison for the five-year period ended June 30, 2008, of the market performance of the Company’s
common stock with the S&P 500 Index and an index of peer companies selected by the Company:

COMPAR ISON OF 5 YEAR CUMU L ATI VE TOTAL RE TUR N

$180

$160

$140

$120

$100

$80

$60

$40

$20

$0

KEY

JACK HEN RY & ASSOCIATES, INC.

S&P 500

NEW PEER GROUP ( 1 )

OLD PEER GROU P ( 2 )

$100 invested on 6/30/03 in stock and index-including reinvestment of dividends. Fiscal year ending June 30.

Copyright 2008, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

6/03

6/04

6/05

6/06

6/07

6/08

This comparison assumes $100 was invested on June 30, 2003, and assumes reinvestments of dividends. Total returns are calculated
according to market capitalization of peer group members at the beginning of each period. Peer companies selected are in the business of
providing specialized computer software, hardware and related services to financial institutions and other businesses. In fiscal year 2008,
we changed our peer group of companies used for this analysis to align with peer companies selected by our Compensation Committee for
use in determining compensation for executive management. Companies in the new peer group (1) are Affiliated Computer Services, Inc.,
Bottomline Technology, Inc., Cerner Corp., DST Systems, Inc., Euronet Worldwide, Inc., Fair Isaac Corp., Fidelity National Financial, Inc., Fiserv,
Inc., Goldleaf Financial Solutions, Inc., Metavante Technologies, Inc., Online Resources Corp., S1 Corp., SEI Investments Company,
Telecommunications Systems, Inc., and Tyler Technologies Corp.

In previous fiscal years, the old peer group (2) consisted of Cerner Corp., Computer Sciences Corp., Euronet Worldwide Inc., Fair Isaac Corp.,
Fidelity National Financial, Fiserv Inc., Marshall & Ilsley Corp., National Datacomputer Com, and SEI Investments Company.

SELECTED FI NAN CI AL DATA (In Thousands - Except Per-Share Data)

Income Statement Data

Revenue(1)

2008

$ 742,926

Income from continuing operations

$ 105,287

Diluted net income per share,
continuing operations

Dividends declared per share

$

$

1.17

0.28

Balance Sheet Data

Working capital

Total assets

Long-term debt

Stockholders’ equity

$ (11,418)

$1,021,044

$

24

$ 601,451

2007

$ 666,467

$ 105,644

$

$

1.15

0.24

$ 19,908

$ 999,340

$

128

$ 598,365

2006

$ 590,877

$ 90,863

$

$

0.97

0.20

$ 42,918

$ 906,067

$

421

$ 575,212

2005

$ 535,191

$ 76,050

$

0.82

$

0.17

$ 13,710

$ 814,153

$

–

$ 517,154

Y EAR ENDED JU NE 30

2004

$ 467,415

$ 62,315

$

$

0.68

0.15

$ 85,818

$ 653,614

$

–

$ 442,918

NOTE: Operating results for fiscal 2007, 2006 and 2005 have been restated to conform to the current presentation with regard to the Company’s reporting of certain operations

which were sold during fiscal 2008. Such operations have been classified as discontinued. See Note 12 to the consolidated financial statements.

(1)Revenueincludeslicensesales,supportandservicerevenues,andhardwaresales,lessreturnsandallowances.

1
8

MANAGEM ENT’ S DISCU SSI ON AND AN ALYSIS OF

FINANCIAL CONDI TI ONS AND R E SULTS OF OPERATION S

Overview

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and the consolidate financial
statements and related notes included elsewhere in this report.

BACKGROUND AND OVERVIEW
We provide integrated computer systems for in-house and outsourced data processing to commercial banks, credit unions and other financial
institutions. We have developed and acquired banking and credit union application software systems that we market, together with compatible
computer hardware, to these financial institutions. We also perform data conversion and software implementation services for our systems
and provide continuing customer support services after the systems are implemented. For our customers who prefer not to make an up-front
capital investment in software and hardware, we provide our full range of products and services on an outsourced basis through our eight
data centers in six physical locations and 20 item processing centers located throughout the United States.

A detailed discussion of the major components of the results of operations follows. All amounts are in thousands and discussions compare
fiscal 2008 to fiscal 2007 and compare fiscal 2007 to fiscal 2006.

We derive revenues from three primary sources:

• software licenses;
• support and service fees, which include implementation services; and
• hardware sales, which includes all non-software remarketed products.

Over the last five fiscal years, our revenues have grown from $467,415 in fiscal 2004 to $742,926 in fiscal 2008. Net income has grown
from $62,315 in fiscal 2004 to $104,222 in fiscal 2008. This growth has resulted primarily from internal expansion supplemented by
strategic acquisitions, allowing us to develop and acquire new products and services for approximately 2,300 customers who utilize our core
software systems as of June 30, 2008.

Since the start of fiscal 2004, we have completed 16 acquisitions. All 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 their respective
acquisition dates.

License revenue represents the sale and delivery of application software systems contracted with us by the customer. We license our
proprietary software products under standard license agreements that typically provide the customer with a non-exclusive, non-transferable
right to use the software on a single computer and for a single financial institution location.

Support and services fees are generated from implementation services contracted with us by the customer, ongoing support services to assist
the customer in operating the systems and to enhance and update the software, and from providing outsourced data processing services and
Electronic Funds Transfer (“EFT”) support services. Outsourcing services are performed through our data and item processing centers.
Revenues from outsourced item and data processing and EFT support services are primarily derived from monthly usage or transaction fees
typically under five-year service contracts with our customers.

Cost of license fees represents the third party vendor costs associated with license fee revenue.

Cost of services represents costs associated with conversion and implementation efforts, ongoing support for our in-house customers,
operation of our data and item processing centers providing services for our outsourced customers, EFT services, and direct operation costs.

We have entered into remarketing agreements with several hardware manufacturers under which we sell computer hardware and related
services to our customers. Cost of hardware consists of the direct and related costs of purchasing the equipment from the manufacturers and
delivery to our customers.

1
9

We have two business segments: bank systems and services and credit union systems and services. The respective segments include all
related license, support and service, and hardware sales along with the related cost of sales.

Results of Operations

FISCAL 2008 COMPARED TO FISCAL 2007
Fiscal 2008 showed strong growth in support and service revenues, tempered somewhat by leaner gross and operating margins. As a result,
an 11% increase in total revenue yielded income from continuing operations that was flat in comparison to fiscal 2007.

REVENUE

License Revenue

Year Ended June 30

License

Percentage of total revenue

2008

$ 73,553

10%

2007

$ 76,403

11%

% Change

-4%

License revenue represents the delivery and acceptance of application software systems contracted with us by the customer. We license our
proprietary software products under standard license agreements that typically provide the customer with a non-exclusive, non-transferable
right to use the software on a single computer and for a single financial institution location.

License revenue decreased by $2,850 compared to last fiscal year mainly due to a decrease in the number of new license agreements and
an overall decrease in the average transaction size in comparison to the prior fiscal year. When compared with last year, many of our software
solutions experienced a decrease in license revenue. Those products that had the most significant decreases included Yellow Hammer Fraud
Detective™ (our fraud detection/prevention solution), Silverlake® (our flagship core software solution for larger banks), and Synergy
(our enterprise content management solution). A significant portion of the decrease in license revenue can be attributed to the continuing
shift in demand by banks and credit unions toward our outsourcing services from an in-house delivery. While many products had decreases
in revenue during the current fiscal year, some products did very well, including Episys®, our flagship core processing system aimed at larger
credit unions, and Yellow Hammer™ BSA, our new compliance and risk mitigation solution.

% Change

+ 16%

Support and Service
Revenue

Support and service

Percentage of total revenue

Year Over Year Change

In-House Support & Other Services

EFT Support

Outsourcing Services

Implementation Services

Year Ended June 30

2008

$ 580,334

78%

$

$

Change

32,685

30,601

11,467

3,859

2007

$ 501,722

75%

% Change

15%

29%

10%

6%

Total Increase

$

78,612

Support and service revenues are generated from implementation services (including conversion, installation, configuration and training),
annual support to assist the customer in operating their systems and to enhance and update the software, outsourced data processing
services and EFT support services (including ATM and debit card transaction processing, online bill payment services, remote deposit capture
and Check 21 transaction processing services).

2
0

There was strong growth in all of the support and service revenue components. In-house support and other services increased partially as a
result of increased implementations of recently acquired products. In addition, because annual maintenance fees are based on supported
institutions’ asset size, in-house support revenues increase as our customers’ assets grow. EFT support, which includes ATM/debit card
processing, on-line bill pay, remote deposit capture and Check 21 transaction processing services, experienced the largest percentage growth
due to increased customer activity and expansion of our customer base. Outsourcing services for banks and credit unions also continue to
drive revenue growth at a strong pace as we add new bank and credit union customers and increase volume. Implementation services
revenue increased during the year partially due to implementations of newly acquired or developed software products, as well as an increase
in merger conversions for existing customers that acquired other financial institutions.

Hardware Revenue

Year Ended June 30

Hardware

Percentage of total revenue

2008

$ 89,039

12%

2007

$ 88,342

13%

% Change

+ 1%

The Company has entered into remarketing agreements with several hardware manufacturers under which we sell computer hardware,
hardware maintenance and related services to our customers. Revenue related to hardware sales is recognized when the hardware is
shipped to our customers.

Hardware revenue increased slightly in the current fiscal year because a small decrease in the sale of major hardware components was offset
by slight increases in revenue from the sale of financial institution forms and supplies and from hardware maintenance contracts.

COST OF SALES AND GROSS PROFIT
Cost of license represents the cost of software from third party vendors through remarketing agreements. These costs are recognized when
license revenue is recognized. Cost of support and service represents costs associated with conversion and implementation efforts, ongoing
support for our in-house customers, operation of our data and item centers providing services for our outsourced customers, EFT processing
services and direct operating costs. These costs are recognized as they are incurred. Cost of hardware consists of the direct and related
costs of purchasing the equipment from the manufacturers and delivery to our customers. These costs are recognized at the same time as
the related hardware revenue is recognized. Ongoing operating costs to provide support to our customers are recognized as they are incurred.

Cost of Sales and Gross Profit

Year Ended June 30

% Change

Cost of License

Percentage of total revenue

License Gross Profit

Gross Profit Margin

Cost of Support and Service

Percentage of total revenue

Support and Service Gross Profit

Gross Profit Margin

Cost of Hardware

Percentage of total revenue

Hardware Gross Profit

Gross Profit Margin

TOTAL COST OF SALES

Percentage of total revenue

TOTAL GROSS PROFIT

Gross Profit Margin

$

$

2008

6,698

<1%

66,855

91%

$ 364, 140

49%

$ 216, 194

37%

$

64,862

9%

$

24,177

27%

$ 435,700

59%

$ 307,226

41%

$

$

2007

4,277

<1%

72,126

94%

$ 309, 919

47%

$ 191, 803

38%

$

65,469

10%

$

22,873

26%

$ 379,665

57%

$ 286,802

43%

+57%

-7%

+17%

+13%

-1%

+6%

+15%

+7%

2
1

Cost of license increased for the fiscal year due to greater third party reseller agreement software vendor costs. Gross profit margin on license
revenue decreased because a larger percentage of the revenue from licenses was attributable to these sales under reseller agreements where
the gross margins are significantly lower than on our owned products. Cost of support and service increased for the year primarily due to
additional personnel costs, costs related to the expansion of infrastructure (including depreciation, amortization, and maintenance contracts)
and increases in the direct costs of providing services (such as transaction processing charges and the cost of third party maintenance) as
compared to last year. These increases were commensurate with the increase in support and service revenue. The gross profit margin
decreased to 37% from 38% in support and service. Cost of hardware decreased for the year. Hardware gross profit margin increased
slightly due to sales mix.

OPERATING EXPENSES

Selling and Marketing

Year Ended June 30

Selling and marketing

Percentage of total revenue

2008

$

55,916

8%

2007

$ 50,195

8%

% Change

+ 11%

Dedicated sales forces, inside sales teams, technical sales support teams and channel partners conduct our sales efforts for our two market
segments, and are overseen by regional sales managers. Our sales executives are responsible for pursuing lead generation activities for new
core customers. Our account executives nurture long-term relationships with our client base and cross sell our many complementary
products and services.

For the 2008 fiscal year, the selling and marketing expenses increase was due to growth in personnel costs, particularly commission
expenses on sales of services, which resulted from increased services revenue. Selling and Marketing expenses remained steady for both
years at 8% of total revenue.

Research and
Development

Research and development

Percentage of total revenue

Year Ended June 30

2008

$

43,326

6%

2007

$ 35,962

5%

% Change

+ 20%

We devote significant effort and expense to develop new software, service products and continually upgrade and enhance our existing offerings.
Typically, we upgrade our various core and complementary software applications once per year. We believe 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.

Research and development expenses grew primarily due to employee costs associated with an 11% increase in headcount for ongoing
development of new products and enhancements to existing products. In addition, recent acquisitions have research and development
expenses that exceed the average for the remainder of the Company, which has contributed to the increase from the prior fiscal year.
Research and development expenses increased slightly to 6% of total revenue from 5% in fiscal 2007.

General and
Administrative

General and administrative

Percentage of total revenue

Year Ended June 30

2008

$

43,775

6%

2007

$ 40,617

6%

% Change

+ 8%

2
2

General and administrative costs include all expenses related to finance, legal, human resources, plus all administrative costs. General and
administrative expense increased primarily due to employee costs associated with a 4% increase in headcount and to an increase in
professional services fees (fees for accounting, legal and business consultants). Also impacting the increase was growth in travel and lodging
expenses (including the cost of aircraft fuel). General and administrative costs remained at 6% of total revenue for both fiscal years.

INTEREST I NCOM E (E XP E NSE )

Interest income decreased 37% from $3,406 to $2,145 due primarily to lower average invested balances coupled with lower interest rates on
invested balances. Interest expense increased 10% from $1,757 to $1,928 due to higher average outstanding borrowings on the revolving
bank credit facilities.

PROVISION FOR I NCOM E TAX E S

The provision for income taxes was $59,139 or 36.0% of income before income taxes in fiscal 2008 compared with $56,033 or 34.7% of
income before income taxes fiscal 2007. The increase was due to the renewal of the Research and Experimentation Credit (“R&E Credit”),
during fiscal year 2007, retroactive to January 1, 2006. Renewal of this credit had a significant tax benefit in fiscal year 2007 since retroactive
renewal required the recording of an additional six months of credit during fiscal year 2007 related to fiscal year 2006. In addition, the R&E
Credit expired as of December 31, 2007, which also contributed to the increase in the tax rate for the current fiscal year.

INCOME FR OM CONTI NU I NG OPE RATI ON S

Income from continuing operations remained relatively flat, moving from $105,644, or $1.15 per diluted share in fiscal 2007 to $105,287,
or $1.17 per diluted share in fiscal 2008.

DISCONTINU E D OPE RATI ONS

Loss on discontinued operations, net of taxes, was $1,065 for fiscal 2008. The loss included a loss on the sale of Banc Insurance Services,

Inc. and Banc Insurance Agency, Inc. of $2,718, and a $1,457 loss on the operations of the two companies. The income tax benefit on the

loss amount was $3,110. The loss on operations of the disposed companies for fiscal 2007 included a loss from operations of $1,474,

netted with the income tax benefit of $511.

FISCAL 2007 COMPARE D TO FI SCAL 2006

Fiscal 2007 showed strong growth in support and service revenues and improved gross and operating margins, tempered somewhat by
decreases in software license revenues. This performance allowed us to leverage a 13% increase in total revenue to a 16% increase in net
income.

REVENUE

License Revenue

Year Ended June 30

License

Percentage of total revenue

2007

$

76,403

11%

2006

$ 84,014

14%

% Change

-9%

License revenue represents the delivery and acceptance of application software systems contracted by us with the customer. We license our
proprietary software products under standard license agreements that typically provide the customer with a non-exclusive, non-transferable
right to use the software on a single computer and for a single financial institution location.

2
3

License revenue decreased by $7,611 compared to last fiscal year mainly due to a decrease in the number of new license agreements and
an overall decrease in the average transaction size in comparison to the prior fiscal year. When compared with last year, many of our software
solutions experienced a decrease in license revenue. Those products that had the most significant decreases included Yellow Hammer Fraud
Detective™ (our fraud detection/prevention solution), Silverlake® (our flagship core software solution for larger banks), NetTeller Online
Banking™ (our bank-branded internet banking solution), and Episys® (our flagship core software solution for larger credit unions). A significant
portion of the decrease in license revenue can be attributed to the continuing shift in demand from banks and credit unions toward our
outsourcing services from an in-house delivery, which do not require software license agreements. Another contributing factor is the market
penetration we have with several of our products including Episys and NetTeller which has caused us to anticipate reduced license sales for
these products compared to prior years.

% Change

+ 18%

Support and Service
Revenue

Support and service

Percentage of total revenue

Year Over Year Change

In-House Support & Other Services

EFT Support

Outsourcing Services

Implementation Services

Year Ended June 30

2007

$ 501,722

75%

$

$

Change

21,111

28,879

15,957

11,442

2006

$ 424,333

72%

% Change

11%

38%

16%

24%

Total Increase

$

77,389

Support and service revenues are generated from implementation services (including conversion, installation, configuration and training),
annual support to assist the customer in operating their systems and to enhance and update the software, outsourced data processing
services and EFT support services.

There was strong growth in all of the support and service revenue components. In-house support and other services increased partially as a
result of increased implementations of recently acquired products. In addition, because annual maintenance fees are based on supported
institutions’ asset size, in-house support revenues increase as our customers’ assets grow. EFT support, which includes ATM/debit card
processing, online bill pay, remote deposit capture and Check 21 transaction processing services, experienced the largest percentage and
dollar growth. Outsourcing services for banks and credit unions also continue to drive revenue growth at a strong pace as we add new bank
and credit union customers and increase volume. Implementation services revenue increased during the year primarily due to an increase in
the number of in-house implementations, as well as an increase in merger conversions for existing customers that acquired other financial
institutions.

Hardware Revenue

Year Ended June 30

Hardware

Percentage of total revenue

2007

$ 88,342

13%

2006

$ 82,530

14%

% Change

+ 7%

The Company has entered into remarketing agreements with several hardware manufacturers under which we sell computer hardware,
hardware maintenance and related services to our customers. Revenue related to hardware sales is recognized when the hardware is
shipped to our customers.

Hardware revenue increased mainly due to an increase in the number of hardware systems and components delivered in the year compared
to last fiscal year. In particular, there has been a significant increase in revenue from hardware components used
in our remote deposit capture product for imaging and exchanging of checks.

2
4

COST OF SALES AND GROSS PROFIT
Cost of license represents the cost of software from third party vendors through remarketing agreements. These costs are recognized when
license revenue is recognized. Cost of support and service represents costs associated with conversion and implementation efforts, ongoing
support for our in-house customers, operation of our data and item centers providing services for our outsourced customers, EFT processing
services and direct operating costs. These costs are recognized as they are incurred. Cost of hardware consists of the direct and related costs
of purchasing the equipment from the manufacturers and delivery to our customers. These costs are recognized at the same time as the
related hardware revenue is recognized. Ongoing operating costs to provide support to our customers are recognized as they are incurred.

Cost of Sales and Gross Profit

Year Ended June 30

% Change

Cost of License

Percentage of total revenue

License Gross Profit

Gross Profit Margin

Cost of Support and Service

Percentage of total revenue

Support and Service Gross Profit

Gross Profit Margin

Cost of Hardware

Percentage of total revenue

Hardware Gross Profit

Gross Profit Margin

TOTAL COST OF SALES

Percentage of total revenue

TOTAL GROSS PROFIT

Gross Profit Margin

$

$

2007

4,277

<1%

72,126

94%

$ 309, 919

47%

$ 191, 803

38%

$

65,469

10%

$

22,873

26%

$ 379,665

57%

$ 286,802

43%

$

$

2006

2,717

<1%

81,297

97%

$ 270, 485

46%

$ 153, 848

36%

$

60,658

10%

$

21,872

27%

$ 333,860

57%

$ 257,017

43%

+57%

-11%

+15%

+25%

+8%

+5%

+14%

+12%

Cost of license increased for the fiscal year due to greater third party reseller agreement software vendor costs. Gross profit margin on license
revenue decreased because a larger percentage of the revenue from licenses was attributable to these sales under reseller agreements
where the gross margins are significantly lower than on our owned products. Cost of support and service increased for the year primarily due
to additional personnel costs (including an 8% increase in headcount), costs related to the expansion of infrastructure (including depreciation,
amortization, and maintenance contracts) and increases in the direct costs of providing services (such as transaction processing charges) as
compared to last year. The gross profit margin increased to 38% from 36% in support and service, primarily due to a shift in sales mix toward
services with higher margins, such as our EFT Support services. Cost of hardware increased for the year, in line with the increase in hardware
sales. Hardware gross profit margin decreased slightly due to lower vendor rebates received during the year compared to the prior year.
Incentives and rebates received from vendors fluctuate quarterly and annually due to changing thresholds established by the vendors.

OPERATI NG EXPENSES

Selling and Marketing

Year Ended June 30

Selling and marketing

Percentage of total revenue

2007

$

50,195

8%

2006

$ 49,126

8%

% Change

+ 2%

2
5

Dedicated sales forces, inside sales teams, technical sales support teams and channel partners conduct our sales efforts for our market
segments, and are overseen by regional sales managers. Our sales executives are responsible for pursuing lead generation activities for new
core customers. Our account executives nurture long-term relationships with our client base and cross sell our many complementary
products and services.

For the 2007 fiscal year, the selling and marketing expenses increase was due to growth in personnel costs, particularly commission
expenses. Selling and Marketing expenses remained steady for both years at 8% of total revenue.

Research and
Development

Research and development

Percentage of total revenue

Year Ended June 30

2007

$

35,962

5%

2006

$ 31,874

5%

% Change

+ 13%

We devote significant effort and expense to develop new software, to service products and to continually upgrade and enhance our existing
offerings. Typically, we upgrade our various core and complementary software applications once per year. We believe 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.

Research and development expenses grew primarily due to employee costs associated with a 13% increase in headcount for ongoing
development of new products and enhancements to existing products. Research and development expenses remained at 5% of total revenue
for both fiscal years.

General and
Administrative

General and Administrative

Percentage of total revenue

Year Ended June 30

2007

$

40,617

6%

2006

$ 35,196

6%

% Change

+ 15%

General and administrative costs include all expenses related to finance, legal, human resources, plus all administrative costs. General and
administrative expense increased primarily due to employee costs associated with a 3% increase in headcount and increased expenses related
to stock options. In addition, during the first half of fiscal 2006, a new accounting system was being actively developed and a percentage of
salaries were being capitalized. Also impacting the increase was growth in overhead related costs such as insurance, depreciation and
amortization, professional services and maintenance contracts. General and administrative costs remained at 6% of total revenue for both
fiscal years.

INTEREST INCOM E (E XP EN SE)

Interest income increased 65% from $2,066 to $3,406 due primarily to larger invested balances coupled with higher interest rates on
invested balances. Interest expense increased 30% from $1,355 to $1,757 due to borrowings on the revolving bank credit facilities.

PROV ISION FOR I NCOM E TAXE S

The provision for income taxes was $56,033 or 34.7% of income before income taxes in fiscal 2007 compared with $50,669 or 35.8% of
income before income taxes fiscal 2006. The decrease in the percentage for fiscal 2007 is primarily due to the renewal of the Research and
Experimentation Credit retroactive to January 1, 2006, which required the recording of an additional six months of credit during fiscal year 2007
related to fiscal year 2006. This created a significant tax benefit (approximately $3,000 additional benefit over the prior year) for fiscal 2007.

2
6

INCOME FR OM CONTI NU I NG OPE RATI ON S

Income from continuing operations increased 16% from $90,863, or $0.97 per diluted share in fiscal 2006 to $105,643, or $1.16 per diluted

share in fiscal 2007.

BUSINESS SE G M E NT DISCUSSI ON

Bank Systems and Services

2008

% Change

2007

% Change

2006

Revenue

Gross Profit

Gross Profit Margin

$ 616,390

$ 255,870

42%

+11%

+5%

$ 555,861

$ 244,788

44%

+15%

+14%

$ 481,558

$ 215,387

45%

In fiscal 2008, the revenue increase in the bank systems and services business segment is primarily due to continued growth in support and
service revenue, particularly EFT support which experienced 29% revenue growth and in-house support which experienced 16% revenue
growth. The growth in these components was partially offset by a 13% decrease in license revenue. Gross profit margin decreased as the
mix of revenue shifted away from license revenue (which carries the largest margins) toward support and service revenue. Hardware revenue
decreased by 2%; however, a shift in sales mix during fiscal 2008 compared to fiscal 2007 led to a slightly higher hardware margin.

In fiscal 2007, the revenue increase in the bank systems and services business segment was primarily due to continued growth in support
and service revenue, particularly EFT support which experienced 40% revenue growth. Gross profit margin remained flat as growth
generated by increasing EFT support revenue, which carries higher margins than other components of support and service revenue, was
offset by decreasing license profit margin. Profit from license revenue decreased due to both a decrease in revenue and to an increase in the
number of sales that were subject to third party seller agreements. Hardware revenue increased by 11%; however, lower vendor rebates
during fiscal 2007 compared to fiscal 2006 led to a slightly lower hardware margin.

Credit Union Systems & Services

2008

% Change

2007

% Change

2006

Revenue

Gross Profit

Gross Profit Margin

$ 126,536

$

51,356

41%

+14%

+22%

$ 110,606

$

42,014

38%

+1%

+1%

$ 109,319

$

41,630

38%

In fiscal 2008, revenues in the credit union systems and services business segment increased 14% from fiscal 2007. All revenue components
within the segment experienced growth during fiscal 2008. License revenue generated the largest dollar growth in revenue as Episys®, our
flagship core processing system aimed at larger credit unions, experienced strong sales throughout the year. Support and service revenue,
which is the largest component of total revenues for the credit union segment, experienced growth in EFT support (34%) and in in-house
support (10%). Gross profit in this business segment increased $9,344 in fiscal 2008 compared to fiscal 2007, due primarily to the increase
in license revenue, which carries the highest margins.

In fiscal 2007, revenues in the credit union systems and services business segment increased slightly from fiscal 2006. This increase is
mainly due to growth in support and service revenue, mostly offset by decreases in license and hardware revenue. Support and service
revenue, which is the largest component of total revenues for the credit union segment, experienced growth in EFT support (26%) and in
outsourcing revenue (24%). Gross profit in this business segment remained flat in fiscal 2007 compared to fiscal 2006.

2
7

LIQUIDITY AND CAP I TAL R E SOUR CES

We have historically generated positive cash flow from operations and have generally used funds generated from operations and short-term
borrowings on our revolving credit facility to meet capital requirements. We expect this trend to continue in the future.

The Company's cash and cash equivalents decreased to $65,565 at June 30, 2008 from $88,617 at June 30, 2007.

The following table summarizes net cash from operating activities in the statement of cash flows:

Net income

Non-cash expenses

Change in receivables

Chance in deferred revenue

Change in other assets and liabilities

Year Ended June 30

2008

2007

2006

$ 104,222

$ 104,681

$

89,923

70,420

(2,913)

5,100

4,172

56,348

(28,853)

24,576

17,495

52,788

30,413

10,561

(14,247)

Net cash from operating activities

$ 181,001

$ 174,247

$ 169,438

Cash provided by operations increased $6,754 to $181,001 for the fiscal year ended June 30, 2008 as compared to $174,247 for the fiscal
year ended June 30, 2007. This increase is primarily attributable to an increase in expenses that do not have a corresponding cash outflow,
such as depreciation and amortization, as a percentage of total net income.

Cash used in investing activities for the fiscal year ended June 2008 was $102,148 and includes payments for acquisitions of $48,109, plus
$1,215 in contingent consideration paid on prior years’ acquisitions. During fiscal 2007, payments for acquisitions totaled $34,006, plus
$5,301 paid on earn-outs and other acquisition adjustments. Capital expenditures for fiscal 2008 were $31,105 compared to $34,202 for
fiscal 2007. Cash used for software development in fiscal 2008 was $23,736 compared to $20,743 during the prior year.

Net cash used in financing activities for the current fiscal year was $101,905 and includes the repurchase of 4,200 shares of our common
stock for $100,996, the payment of dividends of $24,683 and $429 net repayment on our revolving credit facilities. Cash used in financing
activities was partially offset by proceeds of $20,394 from the exercise of stock options and the sale of common stock and $3,809 excess tax
benefits from stock option exercises. During fiscal 2007, net cash used in financing activities included the repurchase of our common stock
for $98,413 and the payment of dividends of $21,685. As in the current year, cash used in fiscal 2007 was partially offset by proceeds from
the exercise of stock options and the sale of common stock of $29,212, $4,640 excess tax benefits from stock option exercises and $19,388
net borrowings on revolving credit facilities.

At June 30, 2008, the Company had negative working capital of $11,418; however, the largest component of current liabilities was deferred
revenue of $212,375. The cash outlay necessary to provide the services related to these deferred revenues is significantly less than this
recorded balance. Therefore, we do not anticipate any liquidity problems to result from this condition.

U.S. financial markets and many of the largest U.S. financial institutions have recently been shaken by negative developments in the home
mortgage industry and the mortgage markets, and particularly the markets for subprime mortgage-backed securities. While we believe it is
too early to predict what effect, if any, these developments may have, we have not experienced any significant issues with our current collec-
tion efforts, and we believe that any future impact to our liquidity would be minimized by our access to available lines of credit.

2
8

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may
finance its share repurchases with available cash reserves of short-term borrowings on its existing credit facility. The share repurchase program
does not include specific price targets or timetables and may be suspended at any time. At June 30, 2007, there were 7,101 shares in
treasury stock and the Company had the remaining authority to repurchase up to 2,890 shares. On February 4, 2008, the Company’s Board
of Directors approved a 5,000 share increase to the stock repurchase authorization. On August 25, 2008, subsequent to the fiscal year 2008
ending, the Company’s Board of Directors approved an additional 5,000 share increase to the stock repurchase authorization. During fiscal
2008, the Company repurchased 4,200 shares for $100,996. The total cost of treasury shares at June 30, 2008 is $251,180. At June 30,
2008, there were 11,301 shares in treasury stock and the Company had the authority to repurchase up to 3,690 additional shares.

Subsequent to June 30, 2008, the Company’s Board of Directors declared a cash dividend of $.075 per share on its common stock payable
on September 19, 2008, to stockholders of record on September 5, 2008. Current funds from operations are adequate for this purpose.
The Board has indicated that it plans to continue paying dividends as long as the Company’s financial picture continues to be favorable.

The Company renewed a bank credit line on April 28, 2008 which provides for funding of up to $5,000 and bears interest at the bank’s prime
rate less 1% (4.00% at June 30, 2008). The credit line matures on April 29, 2010. At June 30, 2008, no amount was outstanding. The
Company renewed a credit line on March 7, 2008 which provides for funding of up to $8,000 and bears interest at the Federal Reserve Board’s
prime rate (5.00% at June 30, 2008). The credit line expires March 7, 2009 and is secured by $1,000 of investments. There were no
outstanding amounts at June 30, 2008.

An unsecured revolving bank credit facility allows short-term borrowings of up to $150,000, which may be increased by the Company at any
time until maturity to $225,000. The unsecured revolving bank credit facility bears interest at a rate equal to (a) LIBOR or (b) an alternate
base rate (the greater of (a) the Federal Funds Rate plus ½% or (b) the Prime Rate), plus an applicable percentage in each case determined
by the Company’s leverage ratio. The unsecured revolving credit line terminates May 31, 2012. At June 30, 2008, the outstanding revolving
bank credit facility balance was $70,000. This outstanding balance bears interest at a weighted average rate of 3.11%.

The Company has entered into various capital lease obligations for the use of certain computer equipment. Included in property and
equipment are related assets of $1,169, less accumulated depreciation of $651. At June 30, 2008, $201 was outstanding, of which $177
was included in current maturities. Maturities of capital lease payments by fiscal year are $177 in fiscal 2009 and $24 in fiscal 2010.

CONTRACTUAL OBLI G ATI ON S AND OTHE R COMM ITMEN TS

At June 30, 2008 the Company’s total off balance sheet contractual obligations were $30,240. This balance consists of $28,496 of long-
term operating leases for various facilities and equipment which expire from 2008 to 2017 and the remaining $1,744 is for purchase
commitments related to property and equipment. The Company also has contingent earn-out obligations of up to $12,752 to the sellers in
an acquisition completed during fiscal year 2005 and an acquisition completed in fiscal 2008. These amounts are payable over the next two
years based upon net operating income achieved by the individual acquired business units. The table excludes $4,793 of liabilities under the
Financial Accounting Standards Board’s Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” as we are unable to reasonably
estimate the ultimate amount or timing of settlement.

Contractual obligations by
period as of June 30, 2008

Less Than
1 Year

1–3 Years

3–5 Years

More than
5 Years

TOTAL

Operating lease obligations

$

8,389

$

10,393

$

4,623

$

5,091

$

28,496

Capital lease obligations

Note payable
including accrued interest

Purchase obligations

177

70,183

1,744

24

–

–

–

–

–

–

–

–

201

70,183

1,744

Total

$

80,493

$

10,417

$

4,623

$

5,091

$ 100,624

2
9

RECENT ACCOU NTI NG PR ONOUNCE ME N TS

In September 2006, the FASB issued Statement on Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).
SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value
measurements. SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for the Company beginning July 1, 2008.
We do not anticipate that the adoption of this Standard will have a material impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including and
amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing
standards which require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure its
financial assets and liabilities. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings
and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company
has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items
for which fair value has been elected are reported as a cumulative adjustment to retained earnings. Subsequent to the adoption of SFAS 159,
changes in fair value are recognized in earnings. SFAS 159 is effective for the Company beginning July 1, 2008. The adoption of this
Standard did not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS 141(R)”) which replaces SFAS No. 141. SFAS 141(R)
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquire and the goodwill acquired. The Statement also establishes
disclosure requirements which will enable users of the financial statements to evaluate the nature and financial effects of the business
combination. SFAS 141(R) is effective for the Company on July 1, 2009. SFAS 141(R) will have an impact on the Company’s accounting for
business combinations on a prospective basis once adopted; however, the materiality of that impact cannot be determined.

CRITICAL ACCOU NTI NG POLI CI E S

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S.
GAAP”). The significant accounting policies are discussed in Note 1 to the consolidated financial statements. The preparation of consolidated
financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, as well as disclosure of contingent assets and liabilities. We base our estimates and judgments upon
historical experience and other factors believed to be reasonable under the circumstances. Changes in estimates or assumptions could result
in a material adjustment to the consolidated financial statements.

We have identified several critical accounting estimates. An accounting estimate is considered critical if both: (a) the nature of the estimates
or assumptions is material due to the levels of subjectivity and judgment involved, and (b) the impact of changes in the estimates and
assumptions would have a material effect on the consolidated financial statements.

Revenue Recognition
We recognize revenue in accordance with the provisions of Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended
by SOP 98-9, “Software Revenue Recognition, with Respect to Certain Transactions,” and clarified by Staff Accounting Bulletin (“SAB”) 101,
“Revenue Recognition in Financial Statements,” SAB 104, “Revenue Recognition,” and Emerging Issues Task Force Issue No. 00-21 (“EITF
00-21”), “Accounting for Revenue Arrangements with Multiple Deliverables.” The application of these pronouncements requires judgment,
including whether a software arrangement includes multiple elements, whether any elements are essential to the functionality of any other
elements, and whether vendor-specific objective evidence (“VSOE”) of fair value exists for those elements. Customers receive certain
elements of our products over time. Changes to the elements in a software arrangement or in our ability to identify VSOE for those elements
could materially impact the amount of earned and unearned revenue reflected in the financial statements.

3
0

License Fee Revenue. For software license agreements that do not require significant modification or customization of the software, the
Company recognizes software license revenue when persuasive evidence of an arrangement exists, delivery of the product has occurred, the
license fee is fixed and determinable and collection is probable. The Company’s software license agreements generally include multiple
products and services or “elements.” None of these elements alone are deemed to be essential to the functionality of the other elements.
SOP 97-2, as amended by SOP 98-9, generally requires revenue earned on software arrangements involving multiple elements to be allocated
to each element based on VSOE of fair value. Fair value is determined for license fees based upon the price charged when sold separately.
In the event that we determine that VSOE does not exist for one or more of the delivered elements of a software arrangement, but does exist
for all of the undelivered elements, revenue is recognized the residual method allowed by SOP 98-9. Under the residual method, a residual
amount of the total arrangement fee is recognized as revenue for the delivered elements after the established fair value of all undelivered
elements has been deducted.

Support and Service Fee Revenue. Implementation services are generally for installation, training, implementation, and configuration. These
services are not considered essential to the functionality of the related software. VSOE of fair value is established by pricing used when these
services are sold separately. Generally revenue is recognized when services are completed. On certain larger implementations, revenue is
recognized based on milestones during the implementation. Milestones are triggered by tasks completed or based on direct labor hours.

Maintenance support revenue is recognized pro-rata over the contract period, typically one year. VSOE of fair value is determined based on
contract renewal rates.

Outsourced data processing services and ATM, debit card, and other transaction processing services revenues are recognized in the month the
transactions were processed or the services were rendered.

Hardware Revenue: Hardware revenue is recognized upon delivery to the customer, when title and risk of loss are transferred. In most cases,
we do not stock in inventory the hardware products we sell, but arrange for third-party suppliers to drop-ship the products to our customers
on our behalf. Some of our hardware revenues are derived under “arrangements” as defined by SOP 97-2. To the extent hardware revenue
is subject to SOP 97-2 and is not deemed essential to the functionality of any of the other elements to the arrangement, it is recognized
based on VSOE of fair value at the time of delivery. For these transactions, the Company follows the guidance provided in Emerging Issues
Task Force Issue (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Based upon the indicators provided
within this consensus, the Company records the revenue related to our drop-ship transactions at gross and the related costs are included in
cost of hardware. The Company also remarkets maintenance contracts on hardware to our customers. Hardware maintenance revenue is
recognized ratably over the agreement period.

Depreciation and Amortization Expense
The calculation of depreciation and amortization expense is based on the estimated economic lives of the underlying property, plant and
equipment and intangible assets, which have been examined for their useful life and determined that no impairment exists. We believe it is
unlikely that any significant changes to the useful lives of our tangible and intangible assets will occur in the near term, but rapid changes in
technology or changes in market conditions could result in revisions to such estimates that could materially affect the carrying value of these
assets and the Company’s future consolidated operating results. All long lived assets are tested for valuation and potential impairment on a
scheduled annual basis.

Capitalization of Software Development Costs
We capitalize certain costs incurred to develop commercial software products and to develop or purchase internal-use software. Significant
estimates and assumptions include: determining the appropriate period over which to amortize the capitalized costs based on the estimated
useful lives, estimating the marketability of the commercial software products and related future revenues, and assessing the unamortized cost
balances for impairment. For commercial software products, determining the appropriate amortization period is based on estimates of future
revenues from sales of the products. We consider various factors to project marketability and future revenues, including an assessment of
alternative solutions or products, current and historical demand for the product, and anticipated changes in technology that may make the
product obsolete. A significant change in an estimate related to one or more software products could result in a material change to our results
of operations.

3
1

Estimates Used to Determine Current and Deferred Income Taxes
We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and
expense for tax and financial statement purposes. We also must determine the likelihood of recoverability of deferred tax assets, and adjust
any valuation allowances accordingly. Considerations include the period of expiration of the tax asset, planned use of the tax asset, and
historical and projected taxable income as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Valuation allowances are
evaluated periodically and will be subject to change in each future reporting period as a result of changes in one or more of these factors.
Also, FIN 48 requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each
tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax
rate and consequently, affect our financial results.

Assumptions Related to Purchase Accounting and Goodwill
We account for our acquisitions using the purchase method of accounting. This method requires estimates to determine the fair values of
assets and liabilities acquired, including judgments to determine any acquired intangible assets such as customer-related intangibles, as well
as assessments of the fair value of existing assets such as property and equipment. Liabilities acquired can include balances for litigation and
other contingency reserves established prior to or at the time of acquisition, and require judgment in ascertaining a reasonable value. Third
party valuation firms may be used to assist in the appraisal of certain assets and liabilities, but even those determinations would be based on
significant estimates provided by us, such as forecasted revenues or profits on contract-related intangibles. Numerous factors are typically
considered in the purchase accounting assessments, which are conducted by Company professionals from legal, finance, human resources,
information systems, program management and other disciplines. Changes in assumptions and estimates of the acquired assets and liabilities
would result in changes to the fair values, resulting in an offsetting change to the goodwill balance associated with the business acquired.

As goodwill is not amortized, goodwill balances are regularly assessed for potential impairment. Such assessments require an analysis of
future cash flow projections as well as a determination of an appropriate discount rate to calculate present values. Cash flow projections are
based on management-approved estimates, which involve the input of numerous Company professionals from finance, operations and program
management. Key factors used in estimating future cash flows include assessments of labor and other direct costs on existing contracts,
estimates of overhead costs and other indirect costs, and assessments of new business prospects and projected win rates. Significant
changes in the estimates and assumptions used in purchase accounting and goodwill impairment testing can have a material effect on the
consolidated financial statements.

FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, the matters discussed in 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 in “Risk Factors” in Item 1A of this report. Undue reliance should not be placed on the forward-looking statements.
The Company does not undertake any obligation to publicly update any forward-looking statements.

Potential risks and uncertainties which could adversely affect the Company include: the financial health of the financial services industry, our
ability to continue or effectively manage growth, adapting our products and services to changes in technology, changes in our strategic
relationships, price competition, loss of key employees, consolidation in the banking or credit union industry, increased government regulation,
network or internet security problems, operational problems in our outsourcing facilities and others listed in “Risk Factors” at Item 1A.

QUANTITATI V E AND QUALI TATI V E DISCL OSURES 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 and interest risk on investments in U.S. government securities. 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 effect on our consolidated financial position or results of operations.

3
2

FINANCIAL STATE M ENTS AND SU PPL EM EN TARY DATA

34

35

36

37

38

39

40

41

Report of Independent Registered Public Accounting Firm

Management’s Annual Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

FINANCIAL STATEMENTS

Consolidated Statements of Income, Years Ended June 30, 2008, 2007, and 2006

Consolidated Balance Sheets, Years Ended June 30, 2008 and 2007

Consolidated Statements of Changes in Stockholders’ Equity, Years Ended June 30, 2008, 2007, and 2006

Consolidated Statements of Cash Flow, Years Ended June 30, 2008, 2007, and 2006

Notes to Consolidated Financial Statements

FINANCIAL STATE M ENT SCHE DU LES

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
3

REPORT OF I NDE PE NDEN T R E G I STERE D PUBL IC ACCOUNTIN G FIRM

To the Board of Directors and Stockholders of

Jack Henry & Associates, Inc.

Monett, Missouri

We have audited the accompanying balance sheets of Jack Henry & Associates, Inc. and subsidiaries (the “Company”) as of June 30, 2008

and 2007, and the related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June

30, 2008. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2008 and

2007, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2008, in conformity with

accounting principles generally accepted in the United States of America.

As discussed in Note 12 to the financial statements, the Company discontinued the insurance agency outsourcing component of its

operations in June 2008 when it sold Banc Insurance Services, Inc. and Banc Insurance Agency, Inc. on June 30, 2008. The loss on sale

and results prior to the sale are included in loss from discontinued operations in the accompanying financial statements.

As discussed in Note 7 to the financial statements, in fiscal 2008 the Company changed its method of accounting for income taxes to

conform to FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.”

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s

internal control over financial reporting as of June 30, 2008, based on the criteria established in Internal Control—Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2008 expressed an

unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

St. Louis, Missouri

August 27, 2008

3
4

MANAGEM E NT’ S ANN U AL R E PORT ON IN TERNAL CONTROL

OV ER FINANCI AL R E PORTI NG

The management of Jack Henry & Associates, Inc. is responsible for establishing and maintaining adequate internal control over financial

reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in

accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes policies and procedures pertaining to the maintenance of records that, in

reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance transactions are recorded

as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the

United States of America, and receipts and expenditures are being made only in accordance with authorizations of management and the

directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or

disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. All internal

controls, no matter how well designed, have inherent limitations. Therefore, even where internal control over financial reporting is determined

to be effective, it can provide only reasonable assurance. Projections of any evaluation of effectiveness to future periods are subject to the

risk controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures

may deteriorate.

As of the end of the Company’s 2008 fiscal year, management conducted an assessment of the effectiveness of the Company’s internal

control over financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of

Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined the Company’s

internal control over financial reporting as of June 30, 2008 was effective.

The Company’s internal control over financial reporting as of June 30, 2008 has been audited by the Company’s independent registered

public accounting firm, as stated in their report appearing on the next page, which expresses an unqualified opinion on the effectiveness of

the Company’s internal control over financial reporting as of June 30, 2008.

3
5

REPORT OF I NDE PE NDEN T R E G I STERE D PUBL IC ACCOUNTIN G FIRM

To the Board of Directors and Stockholders of

Jack Henry & Associates, Inc.

Monett, Missouri

We have audited the internal control over financial reporting of Jack Henry & Associates, Inc. and subsidiaries (the “Company”) as of June 30,

2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the

Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for

its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on

Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting

based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting

was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing

the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides

a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive

and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and

other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for

external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes

those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit prepa-

ration of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company

are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance

regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material

effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management

override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any

evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may

become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our

opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2008, based on the

criteria established in Internal Control—Integrated Framework issued by the Committee on Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated

financial statements as of and for the year ended June 30, 2008 of the Company and our report dated August 27, 2008 expressed an

unqualified opinion and includes explanatory paragraphs relating to a change in accounting for income taxes and discontinued operations.

/s/ DELOITTE & TOUCHE LLP

St. Louis, Missouri

August 27, 2008

3
6

JACK HENRY & ASSOCI ATE S, I NC. AN D SUBSI DI ARIE S

CONSOLIDATE D STATE M E NTS OF IN COM E (In Thousands - Except Per-Share Data)

REVENUE

License
Support and service
Hardware

Total

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware
Total

GROSS PROFIT

OPERATING EXPENSES

Selling and marketing
Research and development
General and administrative
Total

OPERATING INCOME

INTEREST INCOME (EXPENSE)
Interest income
Interest expense
Total

$

2008
73,553
580,334
89,039
742,926

6,698
364,140
64,862
435,700

$

2007
76,403
501,722
88,342
666,467

$

Y EAR ENDE D JUNE 30
2006
84,014
424,333
82,530
590,877

4,277
309,919
65,469
379,665

2,717
270,485
60,658
333,860

307,226

286,802

257,017

55,916
43,326
43,775
143,017

164,209

2,145
(1,928)
217

50,195
35,962
40,617
126,774

160,028

3,406
(1,757)
1,649

49,126
31,874
35,196
116,196

140,821

2,066
(1,355)
711

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

164,426

161,677

141,532

PROVISION FOR INCOME TAX ES

INCOME FROM CONTINUING OPERATIONS

DISCONTINUED OPERATIONS (Note 12)

Loss from operations of discontinued component
(including loss on disposal of $2,718)
Income tax benefit

Loss on discontinued operations

NET INCOME

Continuing operations
Discontinued operations
Diluted net income per share

Diluted weighted average shares outstanding

Continuing operations
Discontinued operations
Basic net income per share

Basic weighted average shares outstanding

See notes to consolidated financial statements.

59,139

105,287

(4,175)
3,110
(1,065)

56,033

105,644

(1,474)
511
(963)

$ 104,222

$ 104,681

$

$

$

$

1.17
(0.01)
1.16

89,702

1.19
(0.01)
1.18

88,270

$

$

$

$

1.15
(0.01)
1.14

92,032

1.17
(0.01)
1.16

90,155

50,669

90,863

(1,464)
524
(940)

89,923

0.97
(0.01)
0.96

93,787

0.99
(0.01)
0.98

91,484

$

$

$

$

$

3
7

JACK HENRY & ASSOCI ATE S, I NC. AN D SUBSIDIARI ES

CONSOLIDATE D B ALANCE SHEE TS (In Thousands - Except Per-Share Data)

Y EAR ENDE D JUN E 30

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Investments, at amortized cost
Receivables
Prepaid expenses and other
Prepaid cost of product
Deferred income taxes

Total current assets

PROPERTY AND EQUIPMEN T, net

OTHER ASSETS:

Prepaid cost of product
Computer software, net of amortization
Other non-current assets
Customer relationships, net of amortization
Trade names
Goodwill

Total other assets

Total assets

LIABIL ITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued expenses
Accrued income taxes
Note payable and current maturities of capital leases
Deferred revenues

Total current liabilities

LONG-TERM LIABILITIES:

Deferred revenues
Deferred income taxes
Other long-term liabilities, net of current maturities
Total long-term liabilities

Total liabilities

STOCKHOLDE RS’ EQUITY

$

2008

65,565
997
213,947
25,143
19,515
4,590
329,757

239,005

9,584
74,943
10,564
63,819
3,999
289,373
452,282

$

1,021,044

$

6,946
35,996
15,681
70,177
212,375
341,175

11,219
61,710
5,489
78,418

419,593

$

$

$

2007

88,617
989
209,242
24,130
24,147
3,260
350,385

249,882

15,009
59,190
10,754
61,248
4,009
248,863
399,073

999,340

11,481
34,920
17,882
70,503
195,691
330,477

16,865
53,290
343
70,498

400,975

Preferred stock - $1 par value; 500,000 shares authorized, none issued
Common stock - $0.01 par value; 250,000 shares authorized;

Shares issued at 06/30/08 were 97,702,098
Shares issued at 06/30/07 were 96,203,030

Additional paid-in capital
Retained earnings
Less treasury stock at cost

11,301,045 shares at 06/30/08,
7,100,967 shares at 06/30/07

Total stockholders’ equity

–

–

977
291,120
560,534

(251,180)
601,451

962
262,742
484,845

(150,184)
598,365

Total liabilities and stockholders’ equity

$

1,021,044

$

999,340

3
8

See notes to consolidated financial statements.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In Thousands - Except Per-Share Data)

PREFERRED SHARES:

COMMON SHARES:

Y EAR EN DED JUNE 30

2008
–

2007
–

2006
–

Shares, beginning of year
Shares issued upon exercise of stock options
Shares issued for Employee Stock Purchase Plan

Shares, end of year

96,203,030
1,443,071
55,997
97,702,098

93,955,663
2,218,395
28,972
96,203,030

92,050,778
1,869,659
35,226
93,955,663

COMMON STOCK – PAR VALUE $0.01 PER SHARE:

Balance, beginning of year
Shares issued upon exercise of stock options
Shares issued for Employee Stock Purchase Plan

Balance, end of year

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year
Shares issued upon exercise of stock options
Shares issued for Employee Stock Purchase Plan
Tax benefit on exercise of stock options
Stock-based compensation expense

Balance, end of year

RETAI NED EARNI NGS:

Balance, beginning of year
Net income
FASB Interpretation No.48 transition amount
Dividends (2008 - $0.28 per share;
2007 - $0.24 per share; 2006 - $0.20 per share)

Balance, end of year

TREASURY STOCK:

Balance, beginning of year
Purchase of treasury shares

Balance, end of year

TOTAL STOCKHOLDERS’ EQUITY

See notes to consolidated financial statements.

$

$

$

$

$

$

$

$

$

962
14
1
977

262,742
19,151
1,228
6,555
1,444
291,120

484,845
104,222
(3,850)

(24,683)
560,534

(150,184)
(100,996)
(251,180)

601,451

$

$

$

$

$

$

$

$

$

939
23
–
962

224,195
28,557
632
8,355
1,003
262,742

401,849
104,681

–

(21,685)
484,845

(51,771)
(98,413)
(150,184)

598,365

$

$

$

$

$

$

$

$

$

920
19
–
939

195,878
19,909
694
7,260
454
224,195

330,308
89,924

–

(18,383)
401,849

(9,952)
(41,819)
(51,771)

575,212

3
9

JACK HENRY & ASSOCI ATE S, I NC. AN D SUBSIDIARI ES

CONSOLIDATE D STATE M ENTS OF CASH FLOWS (In Thousands)

2008

2007

2006

Y EAR ENDED JU NE 30

$

104,222

$

104,681

$

89,923

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income

Adjustments to reconcile net income from operations
to cash from operating activities:
Depreciation
Amortization
Deferred income taxes
Expense for stock-based compensation
Loss on property and equipment

(including 6/30/08 loss on discontinued operations)

Other, net

Changes in operating assets and liabilities, net of acquisitions:

Receivables
Prepaid expenses, prepaid cost of product, and other
Accounts payable
Accrued expenses
Income taxes
Deferred revenues

40,195
21,811
5,320
1,444

1,683
(33)

(2,913)
9,670
(4,951)
541
(1,088)
5,100

36,427
14,527
4,239
1,003

167
(15)

(28,853)
(2,987)
(3,050)
5,667
17,865
24,576

Net cash from operating activities

181,001

174,247

CASH FLOWS FROM INVESTING ACTIVI TIES:

Payment for acquisitions, net of cash acquired
Capital expenditures
Purchase of investments
Proceeds from sale of property and equipment
Proceeds from investments
Computer software developed
Other, net

Net cash from investing activities

CASH FLOWS FROM FINAN CING ACTIVITI ES:

Proceeds from issuance of common stock upon

exercise of stock options

Proceeds from sale of common stock, net
Borrowings under lines of credit
Repayments under lines of credit
Excess tax benefits from stock-based compensation
Purchase of treasury stock
Dividends paid

Net cash from financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUI VAL ENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YE AR

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

4
0

(49,324)
(31,105)
(1,975)
2,098
2,000
(23,736)
(106)

(102,148)

19,165
1,229
145,097
(145,526)
3,809
(100,996)
(24,683)

(101,905)

(23,052)

88,617

65,565

$

$

$

(39,307)
(34,202)
(3,603)
25
4,810
(20,743)
109

(92,911)

28,580
632
115,595
(96,207)
4,640
(98,413)
(21,685)

(66,858)

14,478

74,139

88,617

$

$

$

33,442
10,332
8,291
454

269
–

30,413
(18,624)
(1,636)
3,450
2,563
10,561

169,438

(20,745)
(45,396)
(4,519)
4,255
5,037
(16,079)
257

(77,190)

19,928
694
108,062
(102,942)
4,743
(41,819)
(18,383)

(29,717)

62,531

11,608

74,139

$

$

$

JACK HENRY & ASSOCI ATE S, I NC. AN D SUBSIDI ARIES

NOTE S TO CONSOLI DATE D FI NAN CI AL STATE ME N TS (In Thousands - Except Per-Share Data)

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Company
Jack Henry & Associates, Inc. and Subsidiaries (“JHA” or the “Company”) is a leading provider of integrated computer systems and services
that has developed and acquired a number of banking and credit union software systems. The Company's revenues are predominately earned
by marketing those systems to financial institutions nationwide together with computer equipment (hardware) and by providing the conversion
and software implementation services for financial institutions to utilize JHA software systems, and by providing other related services. JHA
provides continuing support and services to customers using in-house or outsourced systems.

Consolidation
The consolidated financial statements include the accounts of JHA and all of its subsidiaries, which are wholly-owned, and all significant
intercompany accounts and transactions have been eliminated.

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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting

Revenue Recognition
The Company derives revenue from the following sources: license fees, support and service fees and hardware sales. There are no rights of
return, condition of acceptance or price protection in the Company’s sales contracts.

License Fee Revenue: For software license agreements that do not require significant modification or customization of the software, the
Company recognizes software license revenue when persuasive evidence of an arrangement exists, delivery of the product has occurred, the
license fee is fixed and determinable and collection is probable. The Company’s software license agreements generally include multiple
products and services or “elements.” None of these elements are deemed to be essential to the functionality of the other elements. Statement
of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended, generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on vendor-specific objective evidence (“VSOE”) of fair value. Fair value is determined
for license fees based upon the price charged when sold separately or, if the product is not yet sold separately, the price determined by
management with relevant authority. In the event that we determine that VSOE does not exist for one or more of the delivered elements of a
software arrangement, but does exist for all of the undelivered elements, revenue is recognized using the residual method allowed by SOP
98-9, “Software Revenue Recognition, with Respect to Certain Transactions”. Under the residual method, a residual amount of the total
arrangement fee is recognized as revenue for the delivered elements after the established fair value of all undelivered elements has been
deducted.

Support and Service Fee Revenue: Implementation services are generally for installation, training, implementation, and configuration. These
services are not considered essential to the functionality of the related software. VSOE of fair value is established by pricing used when these
services are sold separately or, if the services are not yet sold separately, the price determined by management with relevant authority.
Generally revenue is recognized when services are completed. On certain larger implementations, revenue is recognized based on milestones
during the implementation. Milestones are triggered by tasks completed or based on direct labor hours.

Maintenance support revenue is recognized pro-rata over the contract period, typically one year. VSOE of fair value is determined based on
contract renewal rates.

Outsourced data processing and ATM, debit card, and other transaction processing services revenue is recognized in the month the
transactions are processed or the services are rendered.

4
1

Hardware Revenue: Hardware revenue is recognized upon delivery to the customer, when title and risk of loss are transferred. In most cases,
we do not stock in inventory the hardware products we sell, but arrange for third-party suppliers to drop-ship the products to our customers
on our behalf. Some of our hardware revenues are derived under “arrangements” as defined by SOP 97-2. To the extent hardware revenue
is subject to SOP 97-2 and is not deemed essential to the functionality of any of the other elements to the arrangement, it is recognized
based on VSOE of fair value at the time of delivery. For these transactions, the Company follows the guidance provided in Emerging Issues
Task Force Issue (“EITF”) No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.” Based upon the indicators provided
within this consensus, the Company records the revenue related to our drop-ship transactions at gross and the related costs are included in
cost of hardware. The Company also remarkets maintenance contracts on hardware to our customers. Hardware maintenance revenue is
recognized ratably over the agreement period.

Prepaid Cost of Product
Costs for remarketed hardware and software maintenance contracts, which are prepaid, 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 support fees and prepaid hardware maintenance fees. Hardware maintenance
contracts are multi-year; therefore, the deferred revenue and maintenance are classified in accordance with the terms of the contract.
Software and hardware deposits received 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 the product is ready for general availability. Software development costs that are capitalized are evaluated on a
product-by-product basis annually and are assigned an estimated economic life based on the type of product, market characteristics, and
maturity of the market for that particular product. The Company’s amortization policy for these capitalized costs is to amortize the costs in
accordance with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”. Generally, these
costs are amortized based on current and estimated future revenue from the product or on a straight-line basis, whichever yields greater
amortization expense.

Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents.

Investments
The Company invests its cash that is not required for current operations primarily in U.S. government securities and money market accounts.
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.

The amortized cost of held-to-maturity securities is $997 and $989 at June 30, 2008 and 2007, respectively. Fair 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.

4
2

Property and Equipment and Intangible Assets
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 consist of goodwill, customer relationships, computer software, and trade names acquired in business acquisitions in
addition to internally developed computer software. The amounts are amortized, with the exception of goodwill and trade names, 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 intangible assets with finite lives for impairment whenever events or changes in
circumstances have indicated that the carrying amount of its assets might not be recoverable. The Company evaluates goodwill and trade
names for impairment of value on an annual basis as of January 1 and between annual tests if events or changes in circumstances indicate
that the asset might be impaired.

Comprehensive Income
Comprehensive income for each of the years ended June 30, 2008, 2007 and 2006 equals the Company's net income.

Business Segment Information
In accordance with SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information”, the Company's operations are
classified as two business segments: bank systems and services and credit union systems and services (see Note 14). Revenue by type of
product and service is presented on the face of the consolidated statements of income. Substantially all the Company’s revenues are derived
from operations and assets located within the United States of America.

Common Stock
The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may
finance its share repurchases with available cash reserves or short-term borrowings on its existing credit facility. The share repurchase
program does not include specific price targets or timetables and may be suspended at any time. At June 30, 2007, there were 7,101 shares
in treasury stock and the Company had the remaining authority to repurchase up to 2,890 shares. On February 4, 2008, the Company’s
Board of Directors approved a 5,000 share increase to the stock repurchase authorization. On August 25, 2008, subsequent to the fiscal year
2008 ending, the Company’s Board of Directors approved an additional 5,000 share increase to the stock repurchase authorization. During
fiscal 2008, the Company repurchased 4,200 shares for $100,996. The total cost of treasury shares at June 30, 2008 is $251,180. At June
30, 2008, there were 11,301 shares in treasury stock and the Company had the authority to repurchase up to 3,690 additional shares.

Income per Share
Per share information is based on the weighted average number of common shares outstanding during the year. Stock options have been
included in the calculation of income per diluted share to the extent they are dilutive. The difference between basic and diluted weighted
average shares outstanding is the dilutive effect of outstanding stock options (see Note 10).

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 would be established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will
not be realized.

On July 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”) –
“Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” which provides a financial statement recognition
threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. Under FIN 48, the Company recognizes
the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based upon the technical merits of the position. The tax benefits recognized in the financial statements from such a position
should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

4
3

Recent Accounting Pronouncements
In September 2006, the FASB issued Statement on Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).
SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and requires enhanced disclosures about fair value
measurements. SFAS 157 does not require any new fair value measurements. SFAS 157 is effective for the Company beginning July 1, 2008.
We do not anticipate that the adoption of this Standard will have a material impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including and amendment
of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards which
require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure its financial assets
and liabilities. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be
deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar in-
struments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair
value has been elected are reported as a cumulative adjustment to retained earnings. Subsequent to the adoption of SFAS 159, changes in
fair value are recognized in earnings. SFAS 159 is effective for the Company beginning July 1, 2008. The adoption of this Standard did not
have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS 141(R)”) which replaces SFAS No. 141. SFAS 141(R)
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquire and the goodwill acquired. The Statement also establishes disclo-
sure requirements which will enable users of the financial statements to evaluate the nature and financial effects of the business combination.
SFAS 141(R) is effective for the Company on July 1, 2009. SFAS 141(R) will have an impact on the Company’s accounting for business
combinations on a prospective basis once adopted; however, the materiality of that impact cannot be determined.

NOTE 2: FAIR VAL UE OF FI NAN CI AL IN STRUMEN TS

Fair values for held-to-maturity securities are based on quoted market prices. For all other financial instruments, including amounts receivable
or payable and short-term and long-term borrowings, 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.

4
4

NOTE 3: PROPE RTY AND E QUI PM EN T

The classification of property and equipment, together with their estimated useful lives is as follows:

Land

Land improvements

Buildings

Leasehold improvements

Equipment and furniture

Aircraft and equipment

Construction in progress

Less accumulated depreciation

Property and equipment, net

(1)Lesserofleasetermorestimatedusefullife

Y EAR ENDED JU NE 30

2008

2007

Estimated
Useful Life

$

24,411

$

24,421

5-20 YRS

25-30 YRS

5-10 YRS (1)

5-8 YRS

8-10 YRS

19,826

97,594

21,995

179,613

38,874

4,995

387,308

148,303

19,809

96,722

20,838

155,455

42,152

7,497

366,894

117,012

$ 239,005

$ 249,882

The Company had no material commitments to purchase property and equipment at June 30, 2008 or 2007. At June 30, 2008, property and
equipment included $455 that was in accrued liabilities. This amount was excluded from capital expenditure on the statement of cash flows.

NOTE 4: OTHER ASSE TS

Changes in the carrying amount of goodwill for the years ended June 30, 2008 and 2007, by reportable segments, are:

Balance, as of July 1, 2006

Goodwill acquired during the year

Balance, as of June 30, 2007

Goodwill acquired during the year

Balance, as of June 30, 2008

Banking Systems

Credit Union
& Services Systems & Services

Total

$ 187,740

$

24,798

$ 212,538

36,325

224,065

40,510

–

24,798

–

36,325

248,863

40,510

$ 264,575

$

24,798

$

289,373

The Banking Systems and Services segment additions for fiscal 2008 relate primarily to the acquisitions of Gladiator Technology Services, Inc.
and AudioTel Corporation. The additions for fiscal 2007 relate to the acquisition of Margin Maximizer, Inc. See Note 13-Business Acquisitions
for further details.

4
5

Information regarding other identifiable intangible assets is as follows:

Customer relationships

Trade names

Totals

Carrying
Amount

Accumulated
Amortization

126,245

$

(62,426)

3,999

–

130,244

$

(62,426)

$

$

$

$

Y EAR ENDE D JUNE 30

2008

Net

Carrying
Amount

Accumulated
Amortization

63,819

$

115,369

$

(54,121)

3,999

4,009

–

67,818

$

119,378

$

(54,121)

$

$

2007

Net

61,248

4,009

65,257

Trade names have been determined to have indefinite lives and are not amortized. Customer relationships have lives ranging from five to
20 years.

Computer software includes the unamortized cost of software products developed or acquired by the Company, which are capitalized and
amortized over useful lives ranging from five to ten years.

Following is an analysis of the computer software capitalized:

Balance, July 1, 2006

Acquired software

Capitalized development cost

Amortization expense

Balance, June 30, 2007

Acquired software

Capitalized development cost

Disposals

Amortization expense

Balance, June 30, 2008

Carrying
Amount

Accumulated
Amortization

Total

$

54,109

$

(10,269)

$

43,840

2,515

20,743

–

77,367

5,728

23,736

(2,199)

–

–

–

(7,908)

(18,177)

–

–

1,993

(13,505)

2,515

20,743

(7,908)

59,190

5,728

23,736

(206)

(13,505)

$

104,632

$

(29,689)

$

74,943

Amortization expense for all intangible assets was $21,811, $14,527 and $10,332 for the fiscal years ended June 30, 2008, 2007, and
2006, respectively. The estimated aggregate future amortization expense for each of the next five years for all intangible assets remaining
as of June 30, 2008, is as follows:

Year

2009

2010

2011

2012

2013

Customer relationships

8,368

8,236

7,673

6,647

5,282

Software

14,337

13,236

12,516

8,328

2,244

Total

22,705

21,472

20,189

14,975

7,526

4
6

NOTE 5: DEB T

The Company renewed a bank credit line on April 28, 2008 which provides for funding of up to $5,000 and bears interest at the bank’s prime
rate less 1% (4.00% at June 30, 2008). The credit line matures on April 29, 2010. At June 30, 2008, no amount was outstanding.

The Company renewed a credit line on March 7, 2008 which provides for funding of up to $8,000 and bears interest at the Federal Reserve
Board’s prime rate (5.00% at June 30, 2008). The credit line expires March 7, 2009 and is secured by $1,000 of investments. There were
no outstanding amounts at June 30, 2008.

An unsecured revolving bank credit facility allows short-term borrowings of up to $150,000, which may be increased by the Company at any
time until maturity to $225,000. The unsecured revolving bank credit facility bears interest at a rate equal to (a) LIBOR or (b) an alternate
base rate (the greater of (a) the Federal Funds Rate plus ½% or (b) the Prime Rate), plus an applicable percentage in each case determined
by the Company’s leverage ratio. The unsecured revolving credit line terminates May 31, 2012. At June 30, 2008, the outstanding revolving
bank credit facility balance was $70,000. This outstanding balance bears interest at a weighted average rate of 3.11%. This credit line is
subject to various financial covenants that require the Company to maintain certain financial ratios as defined in the agreement. As of June
30, 2008, the Company was in compliance with all such covenants.

The Company has entered into various capital lease obligations for the use of certain computer equipment. Included in property and equipment
are related assets of $1,169, less accumulated depreciation of $651. At June 30, 2008, $201 was outstanding, of which $177 was included
in current maturities. Maturities of capital lease payments by fiscal year are $177 in fiscal 2009 and $24 in fiscal 2010.

The Company paid interest of $2,521, $1,975, and $1,439 in 2008, 2007, and 2006 respectively. During fiscal 2008, the Company incurred
a total of $2,306 of interest, $378 of which was capitalized.

NOTE 6: LEASE COMM I TM E NTS

The Company leases certain property under operating leases which expire over the next 10 years, but certain of the leases contain options to
extend the lease term. All lease payments are based on the lapse of time but include, in some cases, payments for operating expenses and
property taxes. There are no purchase options on real estate leases at this time, but most real estate leases have one or more renewal
options. Certain leases on real estate are subject to annual escalations for increases in operating expenses and property taxes.

As of June 30, 2008, net future minimum lease payments are as follows:

YEARS ENDING JUNE 3O,

2009

2010

2011

2012

2013

Thereafter

Total

Lease Payments

$

8,389

6,183

4,210

2,548

2,075

5,091

$

28,496

Rent expense was $7,895, $5,797, and $5,372 in 2008, 2007, and 2006, respectively.

4
7

NOTE 7: INCOM E TAXE S

The provision for income taxes from continuing operations consists of the following:

Current:

Deferred:

Federal

State

Federal

State

Y EAR EN DED JU NE 30

2008

2007

2006

$

48,472

$

46,369

$

38,880

5,347

5,425

3,498

4,972

348

4,080

159

7,831

460

$

59,139

$

56,033

$

50,669

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

Y EAR EN DED JU NE 30

Deferred tax assets:

Deferred revenue

$

Expense reserves (bad debts, insurance, franchise tax and vacation)

Capital loss carryforward

Other, net

Deferred tax liabilities:

Accelerated tax depreciation

Accelerated tax amortization

Other, net

2008

6,286

2,670

2,168

2,580

13,704

(20,105)

(45,359)

(5,360)

(70,824)

$

2007

–

2,688

–

1,087

3,775

(23,597)

(30,208)

–

(53,805)

Net deferred tax liability

$

(57,120)

$

(50,030)

The deferred taxes are classified on the balance sheets as follows:

Deferred income taxes (current)

Deferred income taxes (long-term)

2008

4,590

(61,710)

(57,120)

$

$

Y EAR EN DED JU NE 30

2007

3,260

(53,290)

(50,030)

$

$

4
8

The following analysis reconciles the statutory federal income tax rate to the effective income tax rates reflected above:

Y EAR EN DED JUNE 30

Computed “expected” tax expense (benefit)

Increase (reduction) in taxes resulting from:

State income taxes, net of federal income tax benefits

Research and development credit

Permanent book/tax differences

Other (net)

2008

35.0%

2.3%

-1.0%

-0.3%

0.0%

36.0%

2007

35.0%

2.3%

-2.7%

0.0%

0.1%

34.7%

2006

35.0%

2.0%

-1.0%

-0.5%

0.3%

35.8%

The effective income tax rate for fiscal year 2008 increased from the fiscal year 2007 tax rate due to the renewal of the Research and
Experimentation Credit (“R&E Credit”), during fiscal year 2007, retroactive to January 1, 2006. Renewal of this credit had a significant tax
benefit in fiscal year 2007 since retroactive renewal required the recording of an additional six months of credit during fiscal year 2007
related to fiscal year 2006. In addition, the R&E Credit expired as of December 31, 2007, which also contributed to the increase in the tax
rate for fiscal year 2008.

As of June 30, 2007, the Company had net operating loss carryforwards of $1,623 (from acquisitions). All of that amount was used in the
Company’s June 30, 2007 federal income tax returns. The Company paid income taxes of $51,709, $28,887, and $34,301 in 2008, 2007,
and 2006, respectively. As of June 30, 2008, the Company has a capital loss carryforward of $5,858 which expires June 30, 2013.

Effective July 1, 2007, the Company adopted the provisions of FIN 48, which prescribes a comprehensive model for how a company should
recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on
a tax return. Though the validity of any tax position is a matter of tax law, the body of statutory, regulatory and interpretive guidance on the
application of the law is complex and often ambiguous. Because of this, whether a tax position will ultimately be sustained may be uncertain.
Under FIN 48, the impact of an uncertain tax position that is more likely than not of be sustained upon audit by the relevant taxing authority
must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be
recognized if the position has less than a 50% likelihood of being sustained. Also, under FIN 48, interest and penalties expense are recognized
on the full amount of deferred benefits for uncertain tax positions.

Adopting FIN 48 had the following impact on our financial statements: decreased retained earnings by $3,850 and increased long term
liabilities by $3,850.

At June 30, 2008, the Company had $4,055 of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate. Our
policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2008, we had accrued
interest and penalties of $738 related to uncertain tax positions.

4
9

A reconciliation of the unrecognized tax benefits for the year ended June 30, 2008 follows:

Balance, at July 1, 2007

Additions for current year tax positions

Additions for prior year tax positions

Reductions for prior year tax positions

Settlements

Reductions related to expirations
of statute of limitations

Unrecognized
Tax Benefits

$

5,838

671

–

(2,131)

–

(323)

Balance, at June 30, 2008

$

4,055

During the fiscal year ended June 30, 2008, the Internal Revenue Service concluded its examination of the Company’s U.S. federal income tax
returns for fiscal years ended June 2005 through 2006. However, the U.S. federal and state income tax returns for these two fiscal years and
all subsequent fiscal years still remain subject to examination as of June 30, 2008 under statute of limitations rules. We anticipate potential
changes of up to $500 could reduce the unrecognized tax benefits balance within twelve months of June 30, 2008.

NOTE 8: INDU STRY AND SU PP LI E R CONCENTRATION S

The Company sells its products to banks, credit unions, and financial institutions throughout the United States and generally does not require
collateral. All billings to customers are due net 30 days from date of billing. Reserves (which are insignificant at June 30, 2008 and 2007)
are maintained for potential credit losses.

In addition, the Company purchases most of its computer hardware and related maintenance for resale in relation to installation of JHA
software systems from two suppliers. There are a limited number of hardware suppliers for these required items. If these relationships were
terminated, it could have a significant negative impact on the future operations of the Company.

NOTE 9: STOCK B ASE D COM PE NSATION PL AN S

The Company previously issued options to employees under the 1996 Stock Option Plan (“1996 SOP”) and currently issues options to outside
directors under the 2005 Non-Qualified Stock Option Plan (“2005 NSOP”).

1996 SOP
The 1996 SOP was adopted by the Company on October 29, 1996, for its employees. Terms and vesting periods of the options were
determined by the Compensation Committee of the Board of Directors when granted and for options outstanding include vesting periods up to
four years. Shares of common stock were reserved for issuance under this plan at the time of each grant, which must be at or above fair
market value of the stock at the grant date. The options terminate 30 days after termination of employment, three months after retirement,
one year after death or 10 years after the date of grant. In October 2002, the stockholders approved an increase in the number of stock
options available from 13.0 million to 18.0 million shares. The plan terminated by its terms on October 29, 2006, although options previously
granted under the 1996 SOP are still outstanding and vested.

5
0

THE 2005 NSOP
The NSOP was adopted by the Company on September 23, 2005, for its outside directors. Generally, options are exercisable beginning six
months after grant at an exercise price equal to 100% of the fair market value of the stock at the grant date. For individuals who have served
less than four continuous years, 25% of all options will vest after one year of service, 50% shall vest after two years, and 75% shall vest after
three years of service on the Board. The options terminate upon surrender of the option, upon the expiration of one year following notification
of a deceased optionee, or 10 years after grant. 700 shares of common stock have been reserved for issuance under this plan with a
maximum of 100 for each director. As of June 30, 2008, there were 580 shares available for future grants under the plan.

A summary of option plan activity under the plans is as follows:

Outstanding July 1, 2005

Granted

Forfeited

Exercised

Outstanding June 30, 2006

Granted

Forfeited

Exercised

Outstanding June 30, 2007

Granted

Forfeited

Exercised

Outstanding June 30, 2008

Vested and Expected to Vest June 30, 2008

Exercisable June 30, 2008

Number of
Shares

Weighted
Average
Exercise Price

9,766

$

14.55

Aggregate
Intrinsic Value

40

(236)

(1,870)

7,700

30

(123)

(2,218)

5,389

50

(8)

(1,454)

3,977

3,977

3,938

18.47

21.23

10.58

15.34

21.79

21.22

12.90

16.24

28.52

24.64

13.38

17.42

17.42

17.36

$

$

$

$

$

$

20,101

20,101

20,054

The weighted-average fair value of options granted during fiscal 2008, fiscal 2007 and fiscal 2006 was $11.83, $10.43, and $10.13,
respectively. The only options granted during fiscal years 2008, 2007 and 2006 were to non-employee members of the Company’s board of
directors. The assumptions used in estimating fair value and resulting compensation expenses are as follows:

Weighted Average Assumptions:

Expected life (years)

Volatility

Risk free interest rate

Dividend yield

Y EAR ENDED JUNE 30

2008

2007

2006

7.41

28%

4.1%

0.98%

7.41

37%

4.7%

0.96%

7.65

42%

4.4%

0.89%

5
1

The option pricing model assumptions such as expected life, volatility, risk-free interest rate, and dividend yield impact the fair value estimate.
These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some
of the assumptions were based on or determined from external data (for example, the risk-free interest rate) and other assumptions were
derived from our historical experience with share-based payment arrangements (e.g., volatility, expected life and dividend yield).
The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

Our pre-tax operating income for the years ended June 30, 2008, 2007 and 2006 includes $1,444, $1,003 and $454 of stock-based
compensation costs, respectively. The total cost for the year ended June 30, 2008 includes $871 relating to the restricted stock plan.
There was no such cost for 2007 or 2006.

As of June 30, 2008, there was $109 of total unrecognized compensation costs related to stock options that have not yet vested. These
costs are expected to be recognized over a weighted average period of 0.89 years. The weighted average remaining contractual term on
options currently exercisable as of June 30, 2008 was 3.14 years.

Following is an analysis of stock options outstanding and exercisable as of June 30, 2008:

Range of Exercise Prices

Shares

Weighted-Average in Remaining
Contractual Life in Years

Weighted-Average
Exercise Price

Outstanding

Exercisable

Outstanding

Outstanding

Exercisable

$ 8.77 – $ 10.13

$ 10.14 – $ 10.84

$ 10.85 – $ 16.49

130

913

66

130

913

66

$ 16.50 – $ 16.88

1,472

1,471

$ 16.89 – $ 21.25

$ 21.26 – $ 25.65

$ 25.66 – $ 28.63

$ 28.64 – $ 29.23

$ 29.24 – $ 29.63

$ 29.64 – $ 30.00

552

407

400

24

10

3

539

402

380

24

10

3

0.89

4.78

3.61

1.76

4.12

3.78

3.67

2.75

2.43

2.93

$

9.22

$

10.84

12.74

16.88

19.79

23.33

27.56

28.94

29.63

30.00

9.22

10.84

12.74

16.88

19.83

23.35

27.50

28.94

29.63

30.00

$ 6.03 – $ 31.00

3,977

3,938

3.19

$

17.42

$

17.36

Cash received from stock option exercises for the year ended June 30, 2008 was $19,165. The income tax benefits from stock option
exercises totaled $6,555 for the year ended June 30, 2008.

The total intrinsic value of options exercised was $18,010, $22,643 and $19,622 for the fiscal years ended June 30, 2008, 2007 and
2006, respectively.

5
2

Restricted Stock Plan
The Restricted Stock Plan was adopted by the Company on November 1, 2005, for its employees. Up to 3,000 shares of common stock are
available for issuance under the plan. Upon issuance, shares of restricted stock are subject to forfeiture and to restrictions which limit the sale or
transfer of the shares during the restriction period. The restrictions will be lifted over periods ranging from three to seven years from grant date.
On certain awards, the restrictions may be lifted sooner if certain targets for shareholder return are met. As of June 30, 2008, 133 shares of
restricted stock have been issued, however, none of these shares have vested.

The following table summarizes non-vested share awards as of June 30, 2008, as well as activity for the year then ended:

Non-vested shares at July 1, 2007

Granted

Vested

Forfeited

Non-vested shares at June 30, 2008

Shares

Weighted Average
Grant Date Fair Value

–

133

–

(3)

130

$

$

–

24.86

–

24.50

24.87

The non-vested shares will be non-voting and will not participate in dividends during the restriction period. As a result, the weighted-average
fair value of the non-vested share awards is based on the fair market value of the Company’s equity shares on the grant date, less the present
value of the expected future dividends to be declared during the restriction period.

At June 30, 2008, there was $2,429 of compensation expense that has yet to be recognized related to non-vested restricted stock share
awards, which will be recognized over a weighted-average period of 2.87 years.

NOTE 10: E AR NI NG S PE R SHAR E

The following table reflects the reconciliation between basic and diluted net income per share:

Income from continuing operations
Discontinued operations

Net income

Common share information:

Weighted average shares outstanding for basic EPS
Dilutive effect of stock options

Shares for diluted EPS
Basic earnings per share:

Income from continuing operations
Discontinued operations

Basic earnings per share
Diluted earnings per share:

Income from continuing operations
Discontinued operations

Basic earnings per share

2008
$ 105,287
(1,065)
$ 104,222

2007
105,644
(963)
104,681

$

$

Y EAR ENDE D JUNE 30
2006
90,863
(940)
89,923

$

$

88,270
1,432
89,702

1.19
(0.01)
1.18

1.17
(0.01)
1.16

$

$

$

$

90,155
1,877
92,032

1.17
(0.01)
1.16

1.15
(0.01)
1.14

$

$

$

$

91,484
2,303
93,787

0.99
(0.01)
0.98

0.97
(0.01)
0.96

$

$

$

$

5
3

Stock options to purchase approximately 536 shares for fiscal 2008, 772 shares for fiscal 2007, and 1,505 shares for fiscal 2006, were not
dilutive and therefore, were not included in the computations of diluted income per common share amounts.

NOTE 11: EM PLOY E E B E NE FI T PLANS

The Company established an employee stock purchase plan in 2006. The plan originally allowed the majority of employees the opportunity to
directly purchase shares of the Company at a 5% discount. On October 30, 2007, the shareholders approved an amendment to the plan that
increased the discount to 15% beginning January 1, 2008. With this amendment, the plan no longer met the criteria as a non-compensatory
plan. As a result, beginning January 1, 2008, the Company began recording the total dollar value of the stock discount given to employees
under the plan as expense. Total expense recorded by the Company under the plan for the year ended June 30, 2008 was $125.

The Company has a defined contribution plans for its employees, the 401(k) Retirement Savings Plan (the “Plan”). The plan is subject to the
Employee Retirement Income Security Act of 1975 (“ERISA”) as amended. Under the Plan, the Company matches 100% of full time employee
contributions up to 5% of compensation subject to a maximum of $5 per year. Employees must be 18 years of age and be employed for at
least six months. The Company has the option of making a discretionary contribution; however, none has been made for any of the three
most recent fiscal years. The total matching contributions for the Plan were $7,937, $7,148, and $6,530 for fiscal 2008, 2007, and 2006,
respectively.

NOTE 12: DISCONTI NU E D OPE R ATI ON S

On June 30, 2008, the Company sold its insurance agency outsourcing business, Banc Insurance Services, Inc. (“BIS”) and Banc Insurance
Agency, Inc. (“BIA”), to the division’s management team and a private equity group for a nominal amount. The transaction resulted in an
pre-tax loss of $2,718.

In accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets,” the results of operations
of this business for the current and prior periods have been reported as discontinued operations. The divesture of this business was made as
a result of poorer than expected operating results.

The insurance agency outsourcing business provided turnkey outsourced insurance agency solutions for financial institutions. Operations of
the business, which were formerly included in the Bank Systems and Services segment, are summarized as follows:

Revenue

Loss before income taxes

Income tax benefit

Net loss from discontinued operations

Less loss on disposal, net of income taxes

2008

$

1,680

$

(1,457)

536

(921)

(144)

Y EAR EN DED JU NE 30
2006

$

1,328

(1,464)

524

(940)

–

2007

1,595

(1,474)

511

(963)

–

Loss on discontinued operations

$

(1,065)

$

(963)

$

(940)

5
4

Assets and liabilities of the insurance agency outsourcing business before disposal, were as follows:

Cash

Accounts receivable

Other assets

Property and equipment, net

Total assets

Accounts payable and other

Total liabilities

June 30, 2008

$

$

656

688

90

1,007

2,441

194

194

In connection with the sale, the Company accrued $471 lease loss, net of estimated subleases.

NOTE 13: B U SI NE SS ACQU I SI TI ON S

Fiscal 2008 Acquisitions:
On July 1, 2007, the Company acquired all of the capital stock of Gladiator Technology Services, Inc. (“Gladiator”). Gladiator is a provider of
technology security services for financial institutions. The purchase price for Gladiator, $17,425 paid in cash, was allocated to the assets and
liabilities acquired based on then-estimated fair values at the acquisition date, resulting in an allocation of $(729) to working capital, $799 to
property and equipment, $4,859 to customer relationships, and $12,496 to goodwill. The acquired goodwill has been allocated to the banking
systems and services segment. The Company and the former shareholders of Gladiator jointly made an IRC Section 338(h)(10) election for this
acquisition. This election allows treatment of this acquisition as an asset acquisition, which permits the Company to amortize the customer
relationships and goodwill for tax purposes.

On October 1, 2007, the Company acquired all of the capital stock of AudioTel Corporation (“AudioTel”). AudioTel is a provider of remittance,
merchant capture, check imaging, document imaging and management, and telephone and internet banking solutions. The purchase price for
AudioTel, $32,092 paid in cash, was preliminarily allocated to the assets and liabilities acquired based upon then-estimated fair values at the
acquisition date, resulting in an allocation of $(2,634) to working capital, $528 to property and equipment, $6,017 to customer relationships,
$5,728 to capitalized software, $(4,346) to deferred taxes, and $26,799 to goodwill. The acquired goodwill has been allocated to the banking
systems and services segment and is non-deductible for tax purposes. Contingent purchase consideration of up to $3,000 may be due based
on AudioTel’s operating income over the two-year period ending September 30, 2009. This additional purchase price, if any, will be payable on
or before November 15, 2009.

Fiscal 2007 Acquisition:
On November 1, 2006, the Company acquired all of the capital stock of Margin Maximizer Group, Inc., which does business as US Banking
Alliance (“USBA”). USBA is a leading provider of loan and deposit pricing software and related consulting services to banks and credit unions.
The purchase price for USBA, $34,006 paid in cash, was allocated to the assets and liabilities acquired based on then estimated fair values at
the acquisition date, resulting in an allocation of $(2,147) to working capital, $69 to property and equipment, $2,515 to capitalized software,
$4,705 to customer relationships, and $28,864 to goodwill. The capitalized software and customer relationships have weighted-average
useful lives of approximately 5 years. The acquired goodwill has been allocated to the bank systems and services segment. The Company and
the former shareholders of Margin Maximizer Group, Inc. jointly made a Section 338(h)(10) election for this acquisition. This election allows
treatment of this acquisition as an asset acquisition, which permits the Company to amortize the capitalized software, customer relationships
and goodwill for tax purposes. The results of USBA’s operations have been included with the Company’s from the date of acquisition,
November 1, 2006, to the end of the period.

5
5

Fiscal 2006 Acquisition:
On November 1, 2005, the Company acquired all of the capital stock of Profitstar, Inc. (“Profitstar”). Profitstar is a leading provider of asset/
liability management, risk management, profitability accounting and financial planning software and related services to banks, credit unions
and other financial institutions. The purchase price for Profitstar, $19,317 paid in cash, was allocated to the assets and liabilities acquired
based on then estimated fair values at the acquisition date, resulting in an allocation of ($599) to working capital, $1,233 to deferred tax liability,
$1,871 to capitalized software, $1,420 to customer relationships, and $19,698 to goodwill. The acquired goodwill has been allocated to the
bank segment. On August 15, 2006, the Company and the former shareholders of Profitstar, Inc. jointly made a IRC Section 338(h)(10)
election for this acquisition. This election allows treatment of this acquisition as an asset acquisition, which permits the Company to amortize
the capitalized software, customer relationships and goodwill for tax purposes. This election increased goodwill by a net of $720 due to the
elimination of previously recorded deferred tax liabilities and to additional consideration paid to the former shareholders of Profitstar, Inc.

Fiscal 2005 Acquisitions:
On March 2, 2005, the Company acquired all of the membership interests in Tangent Analytics, LLC, (“Tangent”), a developer of business
intelligence software systems. The purchase price for Tangent before any earn-out payments, $4,000 paid in cash, was allocated to the assets
and liabilities acquired based on then estimated fair values at the acquisition date, resulting in an allocation of ($140) to working capital,
$89 to deferred tax liability, $241 to capitalized software and $4,128 to goodwill. Contingent purchase consideration was due based upon
Tangent’s earnings before interest, depreciation, taxes and amortization. In fiscal 2008, 2007 and 2006, $917, $3,125 and $958,
respectively, was paid to the former members of Tangent based upon Tangent’s earnings before interest, depreciation, amortization and taxes
in full settlement of this contingent consideration. These amounts were included in goodwill. The acquired goodwill has been allocated to
the bank segment and is deductible for federal income tax.

Effective January 1, 2005, the Company acquired all of the membership interests in RPM Intelligence, LLC, doing business as Stratika
(“Stratika”). Stratika provides customer and product profitability solutions for financial institutions. The purchase price for Stratika before
any earn-out payments, $6,241 paid in cash, was allocated to the assets and liabilities acquired based on then estimated fair values at the
acquisition date, resulting in an allocation of $9 to working capital, $156 to deferred tax liability, $422 to capitalized software and $5,963 to
goodwill. Contingent purchase consideration of up to $9,752 may be paid over the next year based upon the net operating income of Stratika.
In fiscal 2006, $248 was paid to the former members of Stratika as part of this contingent consideration. This amount was included in
goodwill. No amount was paid as part of this contingent consideration during fiscal 2007. The acquired goodwill has been allocated to the
bank segment and is deductible for federal income tax.

The accompanying consolidated statements of income for the fiscal year ended June 30, 2008, 2007 and 2006 do not include any revenues
and expenses related to these acquisitions prior to the respective closing dates of each acquisition. The following unaudited pro forma
consolidated financial information is presented as if these acquisitions had occurred at the beginning of the periods presented.
this unaudited pro forma financial information is provided for illustrative purposes only and should not be relied upon as necessarily being
indicative of the historical results that would have been obtained if these acquisitions had actually occurred during those periods, or the
results that may be obtained in the future as a result of these acquisitions.

In addition,

Pro Forma (unaudited)

Revenue

Gross profit

Income from continuing operations

Earnings per share-continuing operations
Diluted shares

Earnings per share-continuing operations
Basic shares

5
6

$

$

$

$

$

2008

746,041

308,565

105,373

1.17
89,702

1.19
88,270

$

$

$

$

$

2007

685,647

298,488

107,296

1.17
92,032

1.19
90,155

Y EAR EN DED JUNE 30

$

$

$

$

$

2006

616,537

273,688

94,041

1.00
93,787

1.03
91,484

NOTE 14: B U SI NE SS SE G M ENT I N FORMATION

The Company is a leading provider of integrated computer systems that perform data processing (available for in-house or service bureau

installations) for banks and credit unions. The Company’s operations are classified into two business segments: bank systems and services

(“Bank”) and credit union systems and services (“Credit Union”). The Company evaluates the performance of its segments and allocates

resources to them based on various factors, including prospects for growth, return on investment, and return on revenue. The following

amounts have been adjusted to exclude discontinued operations (See Note 12):

YEAR EN DED JUN E 30, 2008

REVENUE

License
Support and service
Hardware

Total

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware

Total

$

Bank
52,528
495,687
68,175

Credit Union
21,025
$
84,647
20,864

616,390

126,536

$

5,376
305,640
49,504

360,520

1,322
58,500
15,358

75,180

Total
73,553
580,334
89,039

742,926

6,698
364,140
64,862

435,700

GROSS PROFIT

$

255,870

$

51,356

$

307,226

REVENUE

License
Support and service
Hardware

Total

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware

Total

YEAR EN DED JUN E 30, 2007

$

Bank
60,683
425,912
69,266

555,861

4,103
255,743
51,227

311,073

Credit Union
15,720
$
75,810
19,076

110,606

174
54,176
14,242

68,592

$

Total
76,403
501,722
88,342

666,467

4,277
309,919
65,469

379,665

GROSS PROFIT

$ 244,788

$

42,014

$

286,802

REVENUE

License
Support and service
Hardware

Total

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware

Total

GROSS PROFIT

YEAR ENDED JUN E 30, 2006

$

Bank
66,165
352,882
62,511

Credit Union
17,849
$
71,451
20,019

481,558

109,319

$

1,671
219,402
45,098

266,171

1,046
51,083
15,560

67,689

Total
84,014
424,333
82,530

590,877

2,717
270,485
60,658

333,860

$

215,387

$

41,630

$

257,017

5
7

Depreciation expense, net

Bank systems and services

Credit Union systems and services

Total

Amortization expense, net

Bank systems and services

Credit Union systems and services

Total

Capital expenditures, net

Bank systems and services

Credit Union systems and services

Total

Property and equipment, net

Bank systems and services

Credit Union systems and services

Total

Identified intangible assets, net

Bank systems and services

Credit Union systems and services

Total

Y EAR ENDED JU NE 30

2006

30,818

2,624

33,442

8,421

1,911

10,332

$

$

$

$

12,070

2,457

14,527

33,510

$

43,681

692

1,715

34,202

$

45,396

2008

2007

$

37,970

$

34,219

2,225

2,208

$

40,195

$

36,427

$

19,580

2,231

$

21,811

$

30,994

111

$

31,105

$

$

$

$

YE AR ENDED JUNE 30

2008

2007

$ 208,288

$ 217,195

30,717

32,687

$ 239,005

$ 249,882

$ 385,671

$ 321,096

46,463

52,214

$ 432,134

$ 373,310

The Company has not disclosed any additional asset information by segment, as the information is not produced internally and its
preparation is impracticable.

NOTE 15: SU B SE QUE NT E V ENTS

On August 25, 2008, the Company’s Board of Directors declared a quarterly cash dividend of $.075 per share of common stock, payable
on September 19, 2008 to shareholders of record on September 5, 2008.

Also on August 25, 2008, the Company’s Board of Directors increased its stock repurchase authorization by 5.0 million shares bringing the
total authorized repurchase since 2001 to 20.0 million shares.

5
8

QUARTERLY FI NAN CI AL I NFORM ATION (unaudited)

YEAR EN DED JUNE 30, 2008

REVENUE

License
Support and service
Hardware

$

Quarter 1
13,522
137,912
23,442

$

Quarter 2
23,294
144,979
23,596

$

Quarter 3
18,441
148,772
20,267

$

Quarter 4
18,296
148,671
21,734

$

Total

174,876

191,869

187,480

188,701

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware

770
87,206
17,298

1,770
88,781
16,352

1,739
93,871
14,875

2,419
94,282
16,337

Total

105,274

106,903

110,485

113,038

Total
73,553
580,334
89,039

742,926

6,698
364,140
64,862

435,700

GROSS PROFIT

69,602

84,966

76,995

75,663

307,226

OPERATING EXPENSES

Selling and marketing
Research and development
General and administrative

Total

OPERATING INCOME

INTEREST INCOME (EXPENSE)
Interest income
Interest expense

Total

INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES

PROVISION FOR INCOME TAX ES

INCOME FROM CONTINUING OPERATIONS

DISCONTINUED OPERATIONS
Loss from operations of

discontinued operations

Income tax benefit

Loss of discontinued

operations

NET INCOME

Continuing operations
Discontinued operations
Diluted net income per share

Diluted weighted average shares outstanding

Continuing operations
Discontinued operations
Basic net income per share

$

$

$

$

$

13,680
9,959
9,808

33,447

36,155

1,349
(83)

1,266

37,421

13,658

23,763

(352)
128

(224)

23,539

0.26
(0.00)
0.26

90,833

0.27
(0.00)
0.26

$

$

$

$

$

13,803
11,404
13,463

38,670

46,296

339
(104)

235

46,531

17,101

29,430

(440)
161

(279)

29,151

0.32
(0.00)
0.32

90,922

0.33
(0.00)
0.33

13,597
11,340
9,514

34,451

42,544

267
(583)

(316)

42,228

15,430

26,798

(293)
107

(186)

26,612

0.30
(0.00)
0.30

88,907

0.31
(0.00)
0.30

$

$

$

$

$

14,836
10,623
10,990

36,449

39,214

190
(1,158)

(968)

38,246

12,950

25,296

(3,090)
2,714

55,916
43,326
43,775

143,017

164,209

2,145
(1,928)

217

164,426

59,139

105,287

(4,175)
3,110

(376)

(1,065)

24,920

$

104,222

0.29
(0.00)
0.28

88,145

0.29
(0.00)
0.29

$

$

$

$

1.17
(0.01)
1.16

89,702

1.19
(0.01)
1.18

$

$

$

$

$

Basic weighted average shares outstanding

89,168

89,393

87,615

86,902

88,270

5
9

QUARTER LY FI NANCI AL I NFORM ATI ON (unaudited)

YEAR ENDED JU NE 30, 2007

REVENUE

License
Support and service
Hardware

$

Quarter 1
15,539
115,206
19,499

$

Quarter 2
21,173
123,874
21,836

$

Quarter 3
15,345
129,842
23,276

$

Quarter 4
24,346
132,800
23,731

$

Total

150,244

166,883

168,463

180,877

COST OF SALES

Cost of license
Cost of support and service
Cost of hardware

Total

GROSS PROFIT

OPERATING EXPENSES

Selling and marketing
Research and development
General and administrative

Total

OPERATING INCOME

INTEREST INCOME (EXPEN SE)
Interest income
Interest expense

Total

INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES

PROVISION FOR INCOME TAX ES

INCOME FROM CONTINUING OPERATIONS

DISCONTINUED OPERATIONS
Loss from operations of

discontinued operations

Income tax benefit

Loss of discontinued

operations

NET INCOME

Continuing operations
Discontinued operations
Diluted net income per share

Diluted weighted average shares outstanding

Continuing operations
Discontinued operations
Basic net income per share

556
72,575
13,702

86,833

63,411

11,768
8,516
9,906

30,190

33,221

1,556
(216)

1,340

34,561

12,960

21,601

(302)
113

(189)

772
76,942
15,977

93,691

73,192

12,822
8,989
11,407

33,218

39,974

406
(299)

107

40,081

12,045

28,036

(355)
107

(248)

$

$

$

$

$

21,412

$

27,788

0.23
(0.00)
0.23

92,893

0.24
(0.00)
0.24

$

$

$

$

0.30
(0.00)
0.30

92,246

0.31
(0.00)
0.31

$

$

$

$

$

869
78,388
17,424

96,681

71,782

12,294
9,004
9,378

30,676

41,106

658
(439)

219

41,325

14,732

26,593

(331)
118

(213)

26,380

0.29
(0.00)
0.29

91,753

0.30
(0.00)
0.29

Total
76,403
501,722
88,342

666,467

4,277
309,919
65,469

379,665

2,080
82,014
18,366

102,460

78,417

286,802

13,311
9,453
9,926

32,690

45,727

786
(803)

(17)

45,710

16,296

29,414

(486)
173

(313)

50,195
35,962
40,617

126,774

160,028

3,406
(1,757)

1,649

161,677

56,033

105,644

(1,474)
511

(963)

$

$

$

$

$

29,101

$

104,681

0.32
(0.00)
0.32

91,237

0.33
(0.00)
0.33

$

$

$

$

1.15
(0.01)
1.14

92,032

1.17
(0.01)
1.16

Basic weighted average shares outstanding

91,056

90,211

89,893

89,459

90,155

6
0

B O A R D O F D I R E C T O R S

E X E C U T I V E O F F I C E R S

MICHAEL E. HENRY
Chairman
Jack Henry & Associates
Monett, Missouri

JOHN F. “JACK” PRIM
Chief Executive Officer
Jack Henry & Associates
Monett, Missouri

JERRY D. HALL
Executive Vice President
Jack Henry & Associates
Monett, Missouri

JAMES J. ELLIS
Managing Partner
Ellis/Rosier Financial Services
Dallas, Texas

MATTHEW C. FLANIGAN
Senior Vice President
and Chief Financial Officer
Leggett & Platt, Incorporated
Carthage, Missouri

CRAIG R. CURRY
Chairman of the Board
Central Bank
Lebanon, Missouri

WESLEY A. BROWN
Managing Director
St. Charles Capital, LLC.
Denver, Colorado

MICHAEL E. HENRY
Chairman

JOHN F. “JACK” PRIM
Chief Executive Officer

TONY L. WORMINGTON
President

JERRY D. HALL
Executive Vice President

KEVIN D. WILLIAMS
Chief Financial Officer and Treasurer

MARK S. FORBIS
Vice President and Chief Technology Officer

ANNUAL MEETING
The annual meeting of shareholders will be held

at 11:00 a.m. Central on November 13, 2008 at

Jack Henry & Associates’ Corporate Headquar-

ters, Monett, MO.

FORM 10-K
A copy of the Company’s Form 10-K is avail-

able upon request to the Chief Financial Offi-

cer at the corporate headquarters address or

from our Website at www.jackhenry.com.

MARLA K. SHEPARD
President and Chief Executive Officer
California Coast Credit Union
San Diego, California

TRANSFER AGENT
AND REGISTRAR
Computershare

114 W. 11th Street

Suite 150

Kansas City, MO 64105

816-442-8030

J A C K H E N R Y & A S S O C I A T E S I N C .

663 Highway 60
PO Box 807
Monett, MO 65708

417-235-6652

fax 417-235-4281

www.jackhenry.com