FY 11 | A
mIssIon sTaTemenT
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 is consistent with the real value.
• Maintain a work environment that is personally, professionally, and financially rewarding for our employees.
guIdIng prIncIples
We have maintained the focused work ethic and ideals established by our co-founders – Jack Henry and Jerry Hall
– 35 years ago. The time-tested fundamentals guiding our company are:
•
•
•
Do the right thing,
Do whatever it takes, and
Have fun.
Table of Contents
Financial Highlights .........................................01
Performance Graph ..........................................18
Shareholders’ Letter .........................................02
Selected Financial Data ....................................19
Jack Henry & Associates, Inc. Overview ............06
Management’s Discussion and Analysis ...........19
Jack Henry Banking Overview ..........................08
Symitar Overview .............................................10
ProfitStars Overview ........................................12
iPay Technologies Overview .............................14
Market for Registrant’s Common Equity ...........17
Quantitative and Qualitative
Disclosures about Mark Risk .............................35
Financial Statements and
Supplementary Data ........................................36
Quarterly Financial Information .......................63
fInancIal HIgHlIgHT s
(In millions except per share)
FY 11 | 01
$967
$837
$746
$137
$118
$103
$1.59
$1.38
$1.22
2009
2010
2011
2009
2010
2011
2009
2010
2011
Revenue
Net Income
Diluted Earnings per share
$1,561
$1,506
$1,051
$880
$750
$627
$0.40
$0.36
$0.32
2009
2010
2011
2009
2010
2011
2009
2010
2011
Total Assets
StockHolder’s Equity
Dividends Declared per share
To our sHareHolders,
fiscal year 2011 marked our 35th year in business, 25th year as a public company, and another year of company-
wide progress and solid financial performance with revenue, earnings, and operating cash flow reaching record
highs. our company continued to prosper in a highly competitive and consolidating industry by providing
high-quality banking and business solutions and service levels that exceed customer expectations. and we
effectively responded to the challenging economy by maintaining our proven business strategy and conservative
business principles and performance management.
during fiscal year 2011 (ended June 30), total revenue increased to a record $967 million. net income was $137
million or $1.59 per diluted share, as compared to net income of $118 million or $1.38 per diluted share reported
in fiscal year 2010. We generated strong cash flow from operating activities of $240 million, return on assets
was nine percent, and return on equity was 17 percent. We generated excellent profitability with a 22 percent
operating margin.
our revenue mix for the year consisted of $53 million in software license fees or six percent of total revenue, $852
million in support and services or 88 percent of total revenue, and $62 million in hardware sales or six percent of
total revenue.
recurring revenue, which provides the financial stability to support our ongoing growth, was approximately 80
percent in fiscal year 2011, compared to 78 and 75 percent in fiscal years 2010 and 2009, respectively. We expect
all three components of our recurring revenue – software maintenance fees, outsourcing services, and electronic
payment processing – to continue to increase.
Backlog, which consists of contracted sales of products and services that were not delivered by fiscal year-end,
reached $359 million, a nine percent increase over the $329 million reported last year.
our ability to reduce operating expenses once again positively impacted the year’s financial performance and
we continue to evaluate practical near- and long-term opportunities to contain costs. despite our strategic
focus on expense reduction, we determined it was appropriate to restore our associates’ salaries – our largest
expense – which had been reduced as an alternative to layoffs. staff reductions would have negatively impacted
the specialized workforce we need as the economy recovers and product sales and implementations return to
historic levels.
FY 11 | 03
Jack Prim
We also completed the integration of our three most recent acquisitions during the
fiscal year. goldleaf financial solutions, Inc., which was acquired in october 2010, was
integrated into our profitstars brand. pemco Technologies, which was acquired in october
2010, was rebranded as JHa payment processing solutions™ (pps). ipay Technologies,
which was acquired in June 2010, established our fourth primary brand. each of these
acquisitions expanded our product and service offering with proven solutions, added
loyal customers to our client roster, generated cross-sales opportunities among our
respective customer bases, increased our market presence and potential, and diversified
our revenue stream. We are pleased with the performance of each of these acquisitions
and the increased value that they provide to our customers and shareholders.
as we enter a new fiscal year, we will continue to refine our proven business strategy
as necessary and maintain our company-wide focus on providing the high quality
products and services our diverse customers and prospects need to attract and serve
their customers, successfully compete in their markets, control operating costs, and
improve operations. We believe we have significant opportunities to continue to grow
our business organically, particularly with our electronic payment processing business.
our strategic and financial position combined with our customers’ loyalty, our associates’
dedication to our mission, and our shareholders’ commitment to our company give
us confidence in our ability to continue to execute in an economic environment that
remains challenging and uncertain.
Jack Prim, Chief Executive Officer
Tony Wormington, President
Kevin Williams, Chief Financial Officer & Treasurer
TONY WOrmiNGTON
kEViN WiLLiamS
THIngs You mIgHT noT knoW
aBOUT Jack HENrY & aSSOciaTES
Jack Henry Banking is the primary technology provider for more than 18 percent of u.s. banks.
symitar is the primary technology provider for 10 percent of credit unions.
profitstars has client relationships with 60 percent of u.s. banks and 18 percent of credit unions.
profitstars has client relationships with 56 of the largest 100 banks, including five of the top 10,
and 60 of the largest 100 credit unions, including seven of the top 10.
ipay has client relationships with more than 25 percent of u.s. banks and 23 percent of credit unions.
outsourcing continued to be the delivery method of choice in fY11:
• 70 percent of new core bank clients chose outsourced delivery
• 26 existing core bank clients elected to migrate from in-house processing to outsourcing
• 40 percent of our core bank client base is now outsourced
• 51 percent of our new core credit union clients chose outsourced delivery
• 7 existing core credit union clients elected to migrate from in-house processing to outsourcing
• 26 percent of our core credit union client base is now outsourced
on behalf of our outsourced clients, our five data centers collectively:
• Processed 10.5+ million deposit/loan accounts daily
• Processed 33+ million checks monthly
• Processed 20+ million ATM and debit “on-us” transactions monthly
• Processed 15+ million incoming ACH transactions monthly
• Generated 2+ million paper statements and 213,000+ electronic statements monthly
FY 11 | 05
during the past 20 years as consolidation has reduced the total number of financial institutions by approximately half,
Jack Henry & associates has continued to show strong revenue growth.
Compound Annual Growth Rate (CAGR) 21%
Total Financial Institutions
JHA Revenue
28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
$967,000
$870,000
$820,000
$770,000
$720,000
$670,000
$620,000
$570,000
$520,000
$470,000
$420,000
$370,000
$320,000
$270,000
$220,000
$170,000
$120,000
$70,000
$20,000
Jack HenrY & assocIaTes
Jack Henry & associates was founded in 1976 to support community banks with in-house data processing systems.
Today, Jack Henry & associates is a financially sound, service-focused company that sells and supports more
than 250 products and services that financial institutions of all asset sizes and charters, diverse business outside
the financial industry, and other technology providers need to capitalize on business opportunities and solve
operational challenges. We deliver our technology-driven products and services through four primary brands:
• Jack Henry Banking – Our original business line provides community and mid-tier banks with core and complementary solutions
that process financial transactions and automate information management and business processes.
• Symitar – Founded in 1985 and acquired by Jack Henry & Associates in 2000, Symitar provides credit unions of all sizes with core
and complementary solutions that process financial transactions and automate information management and business processes.
• ProfitStars – Founded in 2006 to consistently brand the specialized products and services assembled through our focused
diversification acquisition strategy, ProfitStars provides financial services organizations of all asset sizes and charters, and diverse
businesses outside the financial industry with highly specialized financial performance, imaging and payments processing,
information security and risk management, and retail delivery solutions.
•
iPay Technologies – Founded in 2001 and acquired by Jack Henry & Associates in 2010, iPay Technologies provides consumer and
small business electronic bill payment solutions and person-to-person electronic payment services to community and mid-tier banks,
credit unions of all sizes, and other companies that provide information processing and online banking solutions.
each brand shares a fundamental commitment to provide high quality business solutions, service levels that
consistently exceed customer expectations, full integration of appropriate solutions and practical new technologies,
customer-driven enhancements, and integrity-based business relationships.
We currently serve more than 11,300 diverse customers. The quality of our solutions, our high service levels, and
the fundamental way we do business typically foster long-term and highly referenceable customer relationships,
attract prospective customers, and have enabled us to capture substantial market share.
our primary competitive advantage is the level of customer service we provide. our support infrastructure and strict
service standards provide service levels we believe to be the highest in the markets we serve, resulting in high levels
of customer satisfaction and retention. We accurately measure customer satisfaction using comprehensive annual
surveys and more than 80,000 random surveys initiated by the service requests we received this year. dedicated
surveys are also used to grade specific aspects of our customer experience, including product implementation,
education, and consulting services. The results of this year’s surveys once again confirmed that our service quality
exceeded our customers’ expectations. our continuous survey process also helps us identify specific opportunities
to enhance our support infrastructure and enhance the day-to-day service experience we provide.
Through internal product development, disciplined acquisitions, and alliances with companies offering niche
solutions that complement our proprietary solutions we regularly introduce new products and services that
expand our offering and generate new cross-sales opportunities within and among our four brands.
despite the growing complexity of the markets and businesses we serve, the rapid advances in the technologies
powering our solutions, and our highly competitive business environment, our consistent business strategy and
conservative business principles have enabled us to:
FY 11 | 07
• Prosper in our consolidating and competitive industry.
• Provide and support an extensive and growing product and service offering.
• Earn a large, loyal customer base.
• Capture substantial market share.
• Maintain a corporate culture that values integrity-based business relationships and recognizes premier customer service
as our primary competitive advantage.
• Provide rewarding opportunities for our workforce.
• Maintain a strong balance sheet.
• Produce consistent returns for our stockholders.
We believe we are strategically and financially positioned to continue our progress and performance by focusing on
six primary growth drivers:
• Maintaining our levels of customer satisfaction and retention by delivering high-quality business solutions and exceptional customer service.
•
Increasing market share with targeted sales efforts.
• Expanding our existing customer relationships by cross selling additional products and services.
•
Introducing new products and services that enhance our customers’ existing technology platforms and leverage advancing technologies.
Increasing recurring revenue by optimizing outsourcing opportunities, transaction-based processing fees, and ongoing software
•
maintenance and support fees.
• Pursuing disciplined acquisitions that complement our internal growth, continue our focused diversification, add proven solutions that
expand our existing offering, and expand our presence in the markets we serve.
Jack Henry & Associates, Inc.
Banks
Credit
Unions
iPay Technologies
JHA Banking
ProfitStars
iPay Technologies
Symitar
Securities
Firms
Insurance
Companies
Healthcare
Non-Profits
Retailers
Public
Sector
Utilities Manufacturing
/Processing
Jack HenrY BankIng ™
Jack Henry Banking is a leading provider of the core and complementary solutions banks need to process financial
transactions, automate business processes, and manage mission-critical information. We now serve as the primary
technology partner for approximately 1,500 banks ranging from community banks to multi-billion dollar mid-tier
banks and multi-bank holding companies. our nationwide customer base includes more than 20 percent of mid-
tier banks with assets ranging from $1 billion to $30 billion.
our technology platforms have been selected to replace every major competitive alternative marketed today
and enable diverse banks to implement solutions tailored to support their unique operating environments and
evolving business strategies. Jack Henry Banking provides:
• Three highly scalable, functionally distinct core systems.
• More than 100 complementary solutions that enhance our core system functionality and enable banks to respond to unique
business opportunities and operational issues.
•
In-house, outsourced, and hosted delivery alternatives.
• State-of-the-art integration.
• Connectivity between our core and complementary solutions and third-party products.
• Scalable hardware platforms.
• Production-proven change management, conversion, and installation service.
• The support infrastructure required to serve our customers as a single point of contact, support, and accountability 24/7/365.
•
Initial and ongoing education.
• Professional services.
• Regional and national user meetings and educational conferences.
• Forms and operating supplies.
• Marketing support.
• Operational assessments.
• Regulatory compliance.
DETaiLED iNfOrmaTiON aBOUT Jack HENrY BaNkiNG aND iTS PrODUc T aND
SErVicE OffEriNG iS aVaiLaBLE aT WWW.JackHENrYBaNkiNG.cOm.
FY 11 | 09
“I have always considered Jack Henry Banking to be more like a partner to our bank rather than just a provider of
bank products and services. as an administrator of systems and services, you need a company with people that you
can rely on or lean on when making the hard decisions to keep a community bank competing and progressing with
technology. Jack Henry Banking has provided us with the tools and opportunities to succeed.”
Randy Miller, Senior Vice President
First State Bank of Middlebury
Middlebury, Indiana
“Jack Henry Banking allows american Business Bank to remain competitive with the larger banks by offering the same types
of products and services. Jack Henry continues to acquire businesses which allow our bank to remain on the cutting-edge.
Jack Henry Banking provides more of a partnership relationship to our bank rather than just a vendor relationship.”
Debbie Dair, Senior Vice President
American Business Bank
Los Angeles, California
“The Bank of southside Virginia purchased its first banking software package from Jack Henry in the early ’80s. since its
inception, I have noticed that the company’s philosophy – “do the right Thing, do whatever it Takes, and Have fun” – is
believed, enforced, and practiced. Thirty years later, they still provide the quality service standards that the company’s
founders, Jack Henry and Jerry Hall, implemented. We value our relationship and commend them for superior products
supported by their professional personnel.”
Carol C. Chappell, First Vice President and Cashier
The Bank of Southside Virginia
Carson, Virginia
“Jack Henry Banking offers all of the products and services we need and they are fully integrated to the core system, saving
time, creating more efficiency in daily operations, and preventing the frustration and costs associated with interfaces.
It is a partnership. We have a relationship where we can work together to solve a problem rather than finger point.”
Susan W. Barrett, CPA, Senior Vice President & Operations Officer
the little bank, Inc.
Greenville, North Carolina
sYmITar™
symitar is a leading provider of the core and complementary solutions credit unions of all asset sizes need to
process financial transactions and automate information management and business processes. symitar is the
primary technology partner for more than 700 credit unions, including 58 of the 167 credit unions with assets
exceeding $1 billion as of June 30, 2011. Throughout symitar’s 27-year history, its flagship episys® system has
maintained a 98 percent customer retention rate which we consider to be a strong endorsement of our product
and service quality and business practices.
our technology platforms enable diverse credit unions to implement solutions customized to support their
dynamic operating environments and business strategies. symitar provides: Three highly scalable, functionally
distinct core systems.
• Two highly scalable, functionally distinct core systems.
• More than 50 complementary solutions and back-office efficiency tools that enhance our core system functionality and enable credit
unions to respond to unique business opportunities and operational issues.
•
In-house, outsourced, and hosted delivery alternatives.
• State-of-the-art integration.
• Connectivity between our core and complementary solutions and third-party products.
• Scalable hardware platforms.
• Production-proven change management, conversion, and installation services.
• The support infrastructure required to serve our customers as a single point of contact, support, and accountability 24/7/365.
•
Initial and ongoing education.
• Professional services.
• Regional and national user meetings and educational conferences.
• Forms and operating supplies.
• Marketing support.
• Operational assessments.
• Regulatory compliance.
deTaIled InformaTIon aBouT sYmITar and ITs producT
and serVIce offerIng Is aVaIlaBle aT WWW.sYmITar.com.
FY 11 | 11
“as the result of our conversion to symitar, we were able to improve member service while reducing our member
service staff by more than 10 percent. during the years since our conversion, we have found symitar’s software
development to be innovative and their customer focus has been excellent. We are very pleased with the results
that we have been able to achieve because of our partnership with symitar.”
Jim Jordan, Chief Executive Officer
Schools Financial Credit Union
Sacramento, California
“switching to symitar has proved to be one of the best business decisions I’ve made during my almost 30 years in
the credit union business. I have dealt with various data processors over the years and I have found symitar to be
a leader when staying on the cutting-edge of new technology. Whether I’m dealing with tech support, my rep, or
looking for upgrades and new products, I am always dealt with on a personal and professional level.”
Rick Williams, President/Chief Executive Officer
HealthCare Assoc. FCU
Cincinnati, Ohio
“symitar’s commitment to customer service and client satisfaction differentiates them from the competition.
Their employees are not just committed to performing their duties, they genuinely care about the client’s
needs. everyone within the organization has the same level of commitment in meeting customers’ needs and
ensuring their satisfaction. This commitment empowers their customers with confidence and provides them with
competitive advantages.”
Karl Mann, Vice President Information Technology
Associated Credit Union
Norcross Georgia
“symitar’s flexibility allows us to be quicker to market with products, more adaptable to changes in the
industry, and gives us an edge over our competition. symitar continues to develop new products and offer
new technologies that keep our organization on the leading-edge of financial services. also, symitar’s ease
of customization has helped our organization become much more efficient and productive. symitar is an
outstanding vendor and partner. They demonstrate integrity in all they do, from their sales presentations,
to their contracts, to their installations, and ongoing support.”
Marty O’Connell, SVP/CIO
66 Federal Credit Union
Bartlesville, Oklahoma
profITsTars®
The profitstars division of Jack Henry & associates is a leading software, solutions, and technology innovator. It
supports financial institutions that range from the largest institutions in the world to the smallest community
institutions as well as businesses outside the financial industry. profitstars’ solutions strategically complement its
customers’ existing technology platforms with proven financial performance, imaging and payments processing,
information security and risk management, and retail delivery solutions. These products and services have been
implemented by approximately 12,000 domestic and international customers including the banks and credit
unions served by Jack Henry Banking, symitar, and ipay Technologies; 56 of the largest 100 banks; and 60 of the
largest 100 credit unions. profitstars’ client roster also includes securities firms, insurance companies, healthcare
providers, non-profit organizations, the public sector, utilities, retailers, and manufacturing and processing entities.
These specialized solutions, which were assembled through 18 strategic acquisitions, enable its customers to
capitalize on specific revenue and growth opportunities, mitigate and control financial and operational risks, and
contain operating costs with:
• Financial performance solutions.
•
•
Imaging and payment processing solutions.
Information security and risk management solutions.
• Retail delivery solutions.
•
In-house, outsourced, and hosted delivery.
• Production-proven change management, conversion, and installation.
• Hardware.
•
Initial and ongoing education.
• 24/7/365 support.
• Regulatory compliance.
• Forms and operating supplies.
• Marketing support.
• National user meetings and educational conferences.
• Professional services.
We continue to establish strategic partnerships with Independent sales organizations (Isos) and Value added
resellers (Vars) that have the expertise to sell select profitstars solutions in new markets and specific segments
of our nontraditional markets. These third-party sales initiatives are natural extensions of profitstars’ direct sales
initiatives, and are an increasingly important component of the sales model targeting businesses outside the
financial industry.
deTaIled InformaTIon aBouT profITsTars and ITs producT
and serVIce offerIng Is aVaIlaBle aT WWW.profITsTars.com
FY 11 | 13
“The decision to do business with a software partner is often driven by software features, but with profitstars, the people
behind the product make the difference. They are part of our team in supporting our valuable customer relationships.”
Daniel Robbins, Senior Vice President – Director of Retail Support
Atlantic Southern Bank
Macon, Georgia
“These products have helped keep us relevant within our customer base and have ultimately allowed us to continue
growing our deposit base and profits. all of the profitstars team members that support us are responsive, professional,
knowledgeable, and we enjoy our long-standing relationship with each of them.”
Robert Rothrock, Senior Vice President
NexBank, SSB
Dallas, Texas
“relationships mean a lot to us, whether they are with our customers or our vendors. We strive to have strong
relationships that enable us to do business smoothly and with ease. profitstars gives that same ‘community’ feel that
we look to achieve. They work with us as a partner toward a common goal.”
Ellen M. May, IT Manager
Cayuga Lake National Bank
Union Springs, NY
“The companies that JHa has purchased and placed under the profitstars umbrella provide us with the technology to
take our customer and profit management to the next level. By utilizing rpm, margin maximizer, and synapsys® we are
able to make better pricing decisions based upon the entire customer relationship, not only from a profitability and
roe standpoint but also by taking into consideration other pertinent information captured in synapsys. our holding
company – Westar Bank Holding company, Inc. – was just named the best performing community bank between $500
million and $5 billion in assets for 2010 and I believe that our profitstars tools contributed to our strong performance.”
Anita G. Werner, Vice President/CRM Program Manager
Bank of the West
El Paso, Texas
ipaY TecHnologIes
ipay Technologies is a leading provider of consumer and small business electronic bill payment solutions and
person-to-person electronic payment services to community and mid-tier banks, credit unions of all sizes, and
other technology providers. Through strategic partnerships with more than 50 providers of information processing
and online banking solutions, ipay supports more financial institutions with online bill payment solutions than any
other provider in the united states. We currently serve more than 3,700 domestic financial institutions, including
approximately 40 percent of the community banks and more than half of the credit unions that offer electronic bill
payment services.
our highly configurable electronic payments platform and turnkey online bill payment solutions, which can be
integrated with any online banking platform, include:
• Consumer online bill pay.
• Small business online bill pay.
• Person-to-person payments.
• Bill presentment.
• Remittance solutions.
• Alternative payments.
• Account-to-account transfers.
• Expedited bill pay.
• Online invoicing.
• Turnkey implementations and operations.
• End-user service and support.
deTaIled InformaTIon aBouT ipaY and ITs serVIce offerIng
Is aVaIlaBle aT WWW.IpaYTecHnologIes.com.
FY 11 | 15
“I have worked with a variety of technology companies in the financial services marketplace. Without hesitation, the
staff at ipay and their commitment to the customer experience is unmatched. I continue to be extremely impressed
with ipay’s attention to anticipating our needs as a partner. We couldn’t be happier with how our teams and solutions
complement one another.”
Paul Walker, Vice President, Sales and Marketing
Q2 eBanking
Austin, Texas
“ipay’s technology and customer service is comparable to none. Their customer support and consistent technological
advances stay ahead of the competition. The ipay teams are both knowledgeable and professional and it is, and
continues to be, an exceptional business. anyone who has had to work with vendors knows the angst to finding
the company they can depend on to provide exceptional service and ipay has proven over and over again that it is
outstanding in all categories.”
Romaine Russo, Assistant Vice President, Electronic Banking
QNB Bank
Quakertown, Pennsylvania
“What differentiates ipay’s technology from the competition? I can say confidently that it is the service. I used to sell
products to credit unions and ipay was great to work with. They made the installation and implementation so easy. I
began working at alabama Telco credit union in 2006 and when we began looking at bill payment providers I stated,
‘There is only one option – ipay.’”
Stanton Davis, Vice President
Alabama Telco Credit Union
Birmingham, Alabama
“ipay has enabled us to offer a bill payment solution to our members that is very easy-to-use and interfaces with our
core processor. The customer service has always been exceptional and we consider ipay a valued business partner.”
Laura H. Ryll, Executive Vice President/Chief Operating Officer
Gwinnett Federal Credit Union
Lawrenceville, Georgia
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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.
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2011
High
$34.17
33.94
29.97
26.30
Low
$28.45
28.96
25.35
23.19
Fiscal 2010
High
$26.50
24.88
24.75
24.66
Low
$22.55
21.01
22.22
19.56
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, 2011 and 2010 are as follows:
Fiscal 2011
Fiscal 2010
$0.105
0.105
0.095
0.095
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
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.
$0.095
0.095
0.085
0.085
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 19, 2011, there were approximately 42,000 holders of the Company’s common stock. On that same date
the last sale price of the common shares as reported on NASDAQ was $25.88 per share.
FY 11 | 17
PERFORMANCE GRAPH
The following chart presents a comparison for the five-year period ended June 30, 2011, 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:
This comparison assumes $100 was invested on June 30, 2006, 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. Companies in the peer group are Bottomline Technology,
Inc., Cerner Corp., DST Systems, Inc., Euronet Worldwide, Inc., Fair Isaac Corp., Fidelity National Financial, Inc.,
Fiserv, Inc., Online Resources Corp., S1 Corp., SEI Investments Company, Telecommunications Systems, Inc., and
Tyler Technologies Corp.
SELECTED FINANCIAL DATA
(1) Revenue includes license sales, support and service revenues, and hardware sales, less returns
and allowances.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and the
consolidated financial statements and related notes included elsewhere in this report.
Overview
JHA provides 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 six data centers in five physical locations and six item-processing centers located
throughout the United States.
We derive revenues from three primary sources:
software license fees;
ongoing outsourcing fees, transaction processing fees, and support and
service fees, which include implementation services; and
hardware sales, which include all non-software remarketed products.
Over the last five fiscal years, our revenues have grown from $666,467 in fiscal 2007 to $966,897 in fiscal 2011.
Income from continuing operations has grown from $105,644 in fiscal 2007 to $137,471 in fiscal 2011. This growth
has resulted primarily from internal expansion supplemented by strategic acquisitions, allowing us to develop and
acquire new products and services for approximately 11,300 customers who utilize our software systems or services
as of June 30, 2011.
FY 11 | 19
Our three most recent acquisitions were completed in fiscal 2010. 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.
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.
A detailed discussion of the major components of the results of operations follows. All dollar amounts are in
thousands and discussions compare fiscal 2011 to fiscal 2010 and compare fiscal 2010 to fiscal 2009.
Results of Operations
FISCAL 2011 COMPARED TO FISCAL 2010
In fiscal 2011, revenues increased 16% or $130,311 compared to the prior year due primarily to strong organic
growth and the prior year acquisitions of Goldleaf Financial Solutions, Inc. (“GFSI”), PEMCO Technology Services,
Inc. (“PTSI”) and iPay Technologies Holding Company, LLC (“iPay”). During fiscal 2011, the Company’s management
continued to focus on cost management that, when combined with the growth in revenue, resulted in a 17% increase
in net income.
Slow recovery from the US financial crisis remains a primary concern as it continues to threaten our customers
and our industry. The profits of many financial institutions remain low and this has resulted in some reduction of
demand for new products and services. During the past two years, a number of financial institutions have failed or
been subject to government intervention. To date, such actions have not materially impacted our revenue or results
of operations.
In each of the past two years, approximately 1% of all financial institutions in the United States have closed or
merged due to regulatory action. We believe that the number of regulatory actions will continue to decline through
fiscal 2012, absent a significant downturn in the economy. The increase in bank failures and forced consolidations
has been offset to some extent by a general decline in the level of acquisition activity among financial institutions.
A consolidation can benefit us when a newly combined institution is processed on our platform, or elects to move
to one of our platforms, and can negatively impact us when a competing platform is elected. Consolidations and
acquisitions also positively impact our financial results in the short-term due to early termination fees which are
generally provided for in multi-year outsourced contracts. These fees are primarily generated when an existing
outsourced client is acquired by another financial institution and can vary from period to period based on the number
and size of clients that are acquired and how early in the contract term the contract is terminated. We generally
do not receive contract termination fees when a financial institution is subject to a government action or from a
customer that has selected in-house processing.
Despite the difficult economic climate, we remain cautiously optimistic, with increasing portions of our business
coming from recurring revenue, increases in backlog and an encouraging sales pipeline. Our customers will continue
to face regulatory and operational challenges which our products and services address, and in these times they
have an even greater need for some of our solutions that directly address institutional profitability and efficiency.
We continue to have a strong balance sheet, access to extensive lines of credit, and an unwavering commitment
to superior customer service, and we believe that we are well positioned to address current opportunities as well
as those which will arise as the economic recovery strengthens. Our cautious optimism was expressed through our
acquisitions of GFSI, PTSI and iPay during fiscal 2010 and these acquisitions, the three largest in our Company’s
history, combined with our existing solutions present us with opportunities to extend our customer base and produce
returns for our stockholders.
REVENUE
License Revenue
License
Percentage of total revenue
$
53,067
6%
$
52,225
6%
2%
Year ended June 30,
% Change
2011
2010
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.
The increase in license revenue for the current year is primarily due to increased organic revenue from our Alogent®
products (our suite of deposit and image capture products targeted at large financial institutions) and an additional
quarter of revenues from GFSI (acquired in the second quarter of fiscal 2010).
This increase has been partially offset by decreases in our core software and imaging software license revenues,
for which the average deal size was smaller compared to a year ago. We believe our customers are continuing to
postpone major capital investments in technology, including software, due to the slowly recovering economy. In
addition, our customers are increasingly electing to contract for our products via outsourced delivery rather than a
traditional license agreement. Our outsourced delivery does not require our customers to make a large, up-front
capital investment in license fees.
Support and Service Revenue
Year ended June 30,
% Change
2011
2010
Support and service
Percentage of total revenue
$
852,253
88%
$
720,504
86%
18%
Year Over Year Change
$ Change
% Change
In-House Support & Other Services
Electronic Payment Services
Outsourcing Services
Implementation Services
Total Increase
$
16,286
93,870
15,574
6,019
$
131,749
6%
43%
10%
9%
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 electronic payment services. There was strong
growth in all support and service revenue components in fiscal 2011.
In-house support and other services revenue increased as the acquisition of GFSI contributed additional revenue
of $5,648 compared to a year ago. Additionally, annual maintenance fees have increased as our customers’ assets
have grown and revenue from our complementary products has grown as the total number of supported in-house
customers has grown.
Electronic payment services includes ATM, debit and credit card transaction processing, online bill payment services,
remote deposit capture and transaction processing services, with revenues being primarily derived from transaction
fees typically under five-year service contracts with our customers. Electronic payment services continued to
experience the largest percentage revenue growth. The revenue growth is attributable to the acquisitions of GFSI,
PTSI and iPay, which combined to add $68,663 during the current year, and organic revenue growth within electronic
payment services, excluding the effects of the acquisitions, continues to be strong with an increase of 12% over the
prior fiscal year.
Outsourcing services are performed through our data and item processing centers, with revenues primarily derived
from monthly usage or transaction fees typically under five-year service contracts with our customers. Outsourcing
services for banks and credit unions continue to drive revenue growth as customers continue to choose outsourcing
for the delivery of our solutions. We expect the trend towards outsourced product delivery to benefit outsourcing
services revenue for the foreseeable future.
FY 11 | 21
The increase in implementation services revenue is primarily related to acquisition related revenues of $2,683 for
GFSI (acquired in the second quarter of fiscal 2010) and increased revenue from merger conversions of $3,754 for
existing customers that acquired other financial institutions.
Hardware Revenue
Year ended June 30,
% Change
2011
2010
Hardware
Percentage of total revenue
61,577
6%
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.
63,857
8%
$
-4%
$
‘Hardware revenue decreased slightly due to a decrease in the number of hardware systems and components
delivered compared to last year. Hardware revenue has been generally commensurate with the trends in license
revenue; however, we expect the overall decreasing trend in hardware sales to continue due to the trend towards
outsourcing contracts, which typically do not include hardware.
COST OF SALES AND GROSS PROFIT
Cost of license represents the cost of software from third party vendors through remarketing agreements associated
with license fee revenue. 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, electronic
payment services and direct operating costs. These costs are recognized as they are incurred. Cost of hardware
consists of the direct and indirect 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
2011
2010
Cost of License
Percentage of total revenue
License Gross Profit
Gross Profit Margin
$
6,285
1%
$
46,782
88%
Cost of support and service
Percentage of total revenue
$
515,917
53%
Support and Service Gross Profit
Gross Profit Margin
$
336,336
39%
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
$
45,361
5%
$
16,216
26%
$
567,563
59%
$
399,334
41%
$
5,827
1%
$
46,398
89%
$
438,476
52%
$
282,028
39%
$
47,163
6%
$
16,694
26%
$
491,466
59%
$
345,120
41%
8%
1%
18%
19%
-4%
-3%
15%
16%
Cost of license depends greatly on third party reseller agreement software vendor costs. During the current year,
these costs have increased as a percentage of license revenue as complementary software sales that have
associated third party vendor costs have increased.
Cost of support and service increased for the year commensurate with the increase in support and services revenue.
Support and service gross profit has increased over the prior year as a result of the acquisitions of GFSI, PTSI and
iPay, which combined to contribute additional support and service gross profit of $38,177 over last year. Support
and service gross profit margin remained consistent year over year with the additional combined margins for GFSI
and iPay of 45% being offset by lower margins achieved for PTSI of 30%.
Cost of hardware has fluctuated in line with hardware revenue for the current year.
OPERATING EXPENSES
Selling and Marketing
Year ended June 30,
% Change
2011
2010
Selling and marketing
Percentage of total revenue
$
68,061
7%
$
60,875
7%
12%
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.
FY 11 | 23
For the 2011 fiscal year, selling and marketing expenses increased primarily due to increasing personnel costs,
including commission expenses, for the additional employees acquired in the fiscal 2010 acquisitions, which
added $6,001 to this line during the current year. Selling and marketing expenses have remained consistent as a
percentage of total revenue due to the continued focus on cost management throughout the Company.
Research and Development
Year ended June 30,
% Change
2011
2010
Research and development
Percentage of total revenue
$
63,395
7%
$
50,820
6%
25%
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 increased due to the acquisitions in fiscal 2010 and increased personnel,
consultant, and independent contractor costs compared to the same period a year ago. This also caused the
increase from 6% of total revenue in fiscal 2010 to 7% in fiscal 2011.
General and Administrative
Year ended June 30,
% Change
2011
2010
General and administrative
Percentage of total revenue
$
51,561
5%
$
51,172
6%
1%
General and administrative costs include all expenses related to finance, legal, human resources, plus all
administrative costs.
General and administrative expenses increased slightly for the year due to additional personnel and other costs
from the prior year acquisitions. This increase was partially offset by one-time acquisition transaction costs incurred
in fiscal 2010 of $4,237 with no comparable costs in fiscal 2011.
INTEREST INCOME (EXPENSE)
Interest income decreased 22% from $161 to $125 due primarily to lower interest rates on invested balances.
Interest expense increased from $1,618 to $8,930 due to increased borrowings made in the fourth quarter of fiscal
2010 to consummate the acquisition of iPay.
PROVISION FOR INCOME TAXES
The provision for income taxes was $70,041 or 33.8% of income before income taxes in fiscal 2011 compared with
$62,926 or 34.8% of income before income taxes fiscal 2010. The decrease in the effective tax rate was primarily
due to the extension of the Research and Experimentation Credit (“R&E Credit”), effective January 1, 2010, as
well as the increase in the applicable deduction percentage for Domestic Production Activities (IRC Section 199),
effective for fiscal 2011.
NET INCOME
Net income increased, moving from $117,870, or $1.38 per diluted share in fiscal 2010 to $137,471, or $1.59 per
diluted share in fiscal 2011.
FISCAL 2010 COMPARED TO FISCAL 2009
In fiscal 2010, revenues increased 12% or $90,993 compared to the prior year due primarily to the current year
acquisition of GFSI, PTSI and iPay. During fiscal 2010, the Company’s management engaged in various cost-
cutting efforts that, when combined with the growth in revenue, resulted in a 14% increase in net income.
The US financial crisis is a primary concern at this time as it affects our customers and our industry. The profits of
many financial institutions have decreased and this has resulted in some reduction of demand for new products and
services. We remain cautiously optimistic, however, with increasing portions of our business coming from recurring
revenue, increases in backlog and an encouraging sales pipeline in specific areas. Our customers will continue to
face regulatory and operational challenges which our products and services address, and in these times they have
an even greater need for some of our solutions that directly address institutional profitability and efficiency. We
face these times with a strong balance sheet and an unwavering commitment to superior customer service, and
we believe that we are well positioned to address current opportunities as well as those which will arise when the
economic rebound strengthens. Our cautious optimism has been expressed through our acquisitions of GFSI, PTSI
and iPay during the year ended June 30, 2010. These are the three largest acquisitions in our Company’s history
and present us with opportunities to extend our customer base and produce returns for our stockholders.
REVENUE
License Revenue
Year Ended June 30,
% Change
2010
2009
License
Percentage of total revenue
$
52,225
6%
$
58,434
8%
-11%
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.
The decrease in license revenue for the current year is due mostly to decreases in complementary product license
revenue compared to the prior year. Overall, license revenue from our core software products were up 16% from the
prior year. In addition, our acquisition of GFSI in October added $5,638 in license revenue during fiscal 2010. These
gains were more than offset by decreases in license revenue for most of our complementary software products.
These decreases in complementary software product license revenue result from the recent economic downturn, as
we have seen some of our customers postpone making non-essential capital investments in technology, including
software. In addition, our customers are often electing to contract for our products via outsourced delivery rather
than a traditional license agreement. Our outsourced delivery does not require our customers to make a large,
up-front capital investment in license fees or hardware.
Support and Service Revenue
Year Ended June 30,
% Change
2010
2009
Support and service
Percentage of total revenue
$
720,504
$
614,242
+17%
86%
82%
FY 11 | 25
Year Over Year Change
$ Change
% Change
In-House Support & Other Services
$
17,952
EFT Support
Outsourcing Services
Implementation Services
Total Increase
67,451
15,223
5,636
$
106,262
7%
45%
11%
10%
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 support and service revenue components in fiscal 2010. In-house support and other
services increased mostly as a result of the acquisition of GFSI, which added revenue of $15,527 since acquisition.
EFT support experienced the largest percentage growth. Most of the revenue growth in EFT is attributable to the
acquisition of GFSI, PTSI and iPay. Combined, the acquisitions added $55,020 to this line during the current year.
However, organic revenue growth within EFT support continues to be strong with an increase of 8% over the prior
fiscal year.
Outsourcing services for banks and credit unions continue to drive revenue growth as customers continue to choose
outsourcing for the delivery of our solutions. We expect the trend towards outsourced product delivery to benefit
outsourcing services revenue for the foreseeable future.
The increase in implementation services revenue is primarily related to the acquisition of GFSI, which added $4,452
in implementation revenue for the current year.
Hardware Revenue
Year Ended June 30,
% Change
2010
2009
Hardware
Percentage of total revenue
$
63,857
8%
$
72,917
10%
-12%
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 decreased mainly due to a decrease in the number of hardware systems and components
delivered in the current year compared to a year ago. Hardware revenue has been generally commensurate with
the trends in license revenue; however, while hardware revenue has benefitted from the acquisition of GFSI, it has
not benefitted to the same degree as license revenue. GFSI added hardware revenue of $1,301 since its acquisition.
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
2010
2009
Cost of License
Percentage of total revenue
License Gross Profit
Gross Profit Margin
$
5,827
1%
$
6,885
1%
$
46,398
89%
$
51,549
88%
Cost of support and service
Percentage of total revenue
$
438,476
52%
$
385,837
52%
Support and Service Gross Profit
Gross Profit Margin
$
282,028
39%
$
228,405
37%
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
$
47,163
6%
$
53,472
7%
$
16,694
26%
$
19,445
27%
$
491,466
59%
$
446,194
60%
$
345,120
41%
$
299,399
40%
-15%
-10%
+14%
+23%
-12%
-14%
+10%
+15%
The current year decrease in cost of license is generally commensurate with the related trends in license revenue.
Cost of license depends greatly on third party reseller agreement software vendor costs. During the current year,
these costs have decreased as a percentage of license revenue as complementary software sales that have
associated third party vendor costs have decreased.
Cost of support and service increased for the year commensurate with the increase in support and services revenue.
Combined, the companies acquired during fiscal 2010 added $50,480 to this line. Support and services gross profit
margin has increased for the year due to cost control measures undertaken by the Company and as EFT support
services, with higher margins than other components of Support and services revenue, have become a larger
percentage of that revenue line.
Cost of hardware has fluctuated in line with hardware revenue for the current year, with slightly leaner margins
resulting from a shift in sales mix.
OPERATING EXPENSES
Selling and M arketing
Year Ended June 30,
% Change
2010
2009
Selling and marketing
Percentage of total revenue
$
60,875
7%
$
54,931
7%
+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.
FY 11 | 27
For the 2010 fiscal year, selling and marketing expenses increased primarily due to current year acquisitions,
which added $10,272 to this line during the current year. The acquisition-related increases were partially offset by
decreases in selling and marketing personnel costs throughout the rest of the Company, which were the result of
cost-cutting measures undertaken by management.
Research and Development
Year Ended June 30,
% Change
2010
2009
Research and development
Percentage of total revenue
$
50,820
6%
$
42,901
6%
+18%
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 increased for the current year due primarily to current year acquisitions,
which added $8,126 in expense during fiscal 2010.
General and Administrative
Year Ended June 30,
% Change
2010
2009
General and administrative
Percentage of total revenue
$
51,172
6%
$
43,681
6%
+17%
General and administrative costs include all expenses related to finance, legal, human resources, plus all
administrative costs. General and administrative expenses increased for the year due to current year acquisitions,
including costs directly related to the acquisition transactions. Combined, the acquired companies added $7,700
of general and administrative costs during fiscal 2010, including $4,237 of one-time acquisition transaction costs.
INTEREST INCOME (EXPENSE)
Interest income decreased 79% from $781 to $161 due primarily to lower interest rates on invested balances.
Interest expense increased 19% from $1,357 to $1,618 due to primarily to borrowings made in the fourth quarter of
fiscal 2010 to consummate the acquisition of iPay.
PROVISION FOR INCOME TAXES
The provision for income taxes was $62,926 or 34.8% of income before income taxes in fiscal 2010 compared with
$54,208 or 34.5% of income before income taxes fiscal 2009. The increase was primarily due to the expiration of
the Research and Experimentation Credit (“R&E Credit”), effective January 1, 2010, as well as increases in the
rate at which deferred tax liabilities are expected to reverse in future years. These increases were mostly offset by
additional benefits received through an extensive analysis of the Domestic Production Activities Deduction (IRC
Section 199).
NET INCOME
Net income increased, moving from $103,102, or $1.22 per diluted share in fiscal 2009 to $117,870, or $1.38 per
diluted share in fiscal 2010.
Business Segment Discussion
Bank Systems and Services
Revenue
Gross Profit
$746,892
$315,994
11%
12%
$672,282
$283,100
9%
14%
$617,711
$247,812
2011
% Change
2010
% Change
2009
Gross Profit Margin
42%
42%
40%
In fiscal 2011, revenue increased 11% overall in the bank systems and services business segment compared to the
prior year. The increase is due primarily to the acquisitions of GFSI and iPay, which added $40,150 of additional
revenue in fiscal 2011, mainly in support and services in the bank systems and services business segment which
increased 14% over the prior year, coupled with electronic payment services organic revenue growth of nearly 12%
over the prior year. Gross profit margin remained consistent year over year, with GFSI and iPay margins performing
within expectations.
In fiscal 2010, revenue increased 9% overall in the bank systems and services business segment compared to the
prior year. Most of the increase is due to the acquisition of GFSI, which added $44,794 of revenue in fiscal 2010.
In addition, EFT support experienced organic revenue growth of nearly 10% over the prior year and Data Center
Maintenance had organic growth of 12% within the bank systems and services business segment. Gross profit
margin increased from the prior year primarily due to cost control measures, particularly related to personnel costs,
undertaken by management during fiscal 2010.
Credit Union Systems and Services
2011
% Change
2010
% Change
2009
Revenue
Gross Profit
$220,005
$83,340
34%
34%
$164,304
$62,020
28%
20%
$127,882
$51,587
Gross Profit Margin
38%
38%
40%
In fiscal 2011, revenues in the credit union systems and services business segment increased 34% from fiscal
2010. All components of revenue increased, particularly support and service revenue, which increased by 38%
over the prior year. This was due primarily to the acquisitions of PTSI and iPay, which added revenue of $38,482
to current year revenue, and electronic payment services which experienced 11% organic revenue growth. Gross
profit margins have remained constant as a result of strong iPay margins being offset by slightly lower margins from
the PTSI products.
In fiscal 2010, revenues in the credit union systems and services business segment increased 28% from fiscal
2009. Support and service revenue, which is the largest component of total revenues for the credit union segment,
experienced strong growth in most revenue components. In particular, EFT Support experienced 163% revenue
growth over the prior year due primarily to the acquisition of PTSI, which added revenue of $33,839 to fiscal 2011
revenue. Gross profit margins decreased from the prior year as license revenue, which carries the largest margins,
decreased as a percentage of total revenue.
Liquidity and Capital Resources
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 $63,125 at June 30, 2011 from $125,518 at June 30, 2010.
The decrease is primarily due to the repayment of long and short term debt in the year.
The following table summarizes net cash from operating activities in the statement of cash flows:
FY 11 | 29
Net income
Non-cash expenses
Change in receivables
Change in deferred revenue
Change in other assets and liabilities
Year ended June 30,
2011
2010
2009
$
137,471
116,788
940
19,487
(34,554)
$
117,870
92,317
(1,539)
10,775
(725)
$
103,102
74,397
21,214
21,943
(14,068)
Net cash from operating activities
$
240,132
$
218,698
$
206,588
Cash provided by operations increased 10% for the fiscal year ended June 30, 2011 compared to the prior fiscal
year. This increase is primarily attributable to the increase in net income, which grew through continued strong
organic growth and the incremental earnings provided by the fiscal 2010 acquisitions.
Cash used in investing activities for the fiscal year ended June 2011 included capital expenditures on facilities and
equipment of $32,085, including computer equipment purchases and the final costs relating to the construction of
our new Branson, Missouri and Springfield, Missouri facilities. Other major uses of cash included $26,954 for the
development of software. Cash used in investing activities for the fiscal year ended June 2010 was $505,715 and
includes a net cash outlay for acquisitions of $426,652, capital expenditures of $54,509, and capitalized software
development of $25,586.
Net cash from financing activities for the current fiscal year includes $229,455 net repayment on our credit facilities
and the payment of dividends of $34,391. Cash used was partially offset by net proceeds of $20,359 from the
exercise of stock options, the sale of common stock (through the employee stock purchase plan) and excess tax
benefits from stock option exercises. During fiscal 2010, net cash from financing activities for the current fiscal year
was $294,284 and includes $303,160 net borrowing on our credit facilities, proceeds of $28,522 from the exercise
of stock options and the sale of common stock (through the employee stock purchase plan) and $661 excess tax
benefits from stock option exercises. Cash from financing activities was partially offset by the payment of dividends
of $30,461 and debt acquisition costs of $7,598.
At June 30, 2011, the Company had negative working capital of $26,561; however, the largest component of
current liabilities was deferred revenue of $276,837, which primarily relates to our annual in-house maintenance
agreements. The cash outlay necessary to provide the services related to these deferred revenues is significantly
less than this recorded balance. In addition, we continue to have access to unused lines of credit in excess of
$160,000 and continue to generate substantial cash inflows from operations. Therefore, we do not anticipate any
liquidity problems arising from this condition.
US financial markets and many of the largest US financial institutions have been shaken by negative developments
over the last three years in the mortgage markets and the general economy. While the effects of these events
continue to impact our customers, we have not experienced any significant issues with our current collection efforts,
and we believe that any future impact to our liquidity would be minimized by our access to available lines of credit.
The Company generally uses existing resources and funds generated from operations to meet its capital
requirements. Capital expenditures in the fiscal year were made primarily for additional equipment, new facilities,
and the improvement of existing facilities. These additions were funded from cash generated by operations.
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, 2011, there were 14,407 shares in treasury stock and the Company had
the remaining authority to repurchase up to 5,584 additional shares. The total cost of treasury shares at June 30,
2011 is $309,585. There were no repurchases of treasury stock in fiscal 2011 or 2010.
On August 19, 2011, the Company’s Board of Directors declared a cash dividend of $0.105 per share on its
common stock payable on September 28, 2011, to stockholders of record on September 8, 2011. 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 has a bank credit facility agreement that includes a revolving loan, a term loan and a bullet term loan.
Revolving credit facilities
The revolving loan allows short-term borrowings of up to $150,000, which may be increased by the Company at any time
until maturity to $250,000. The revolving loan terminates June 4, 2015. At June 30, 2011, no amount was outstanding.
Term loan
The term loan has an original principal balance of $150,000, with quarterly principal payments of $5,625 beginning
on September 30, 2011, and the remaining balance due June 4, 2015. At June 30, 2011, the outstanding balance
was bearing interest at a rate of 2.25%. Of the $150,000 outstanding, $22,500 will be maturing within the next
twelve months.
Bullet term loan
The bullet term loan had an original principal balance of $100,000. The full balance, which would have been due on
December 4, 2010, was paid in full on July 8, 2010.
Each of the above loans bear interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate
(the greater of (a) the Federal Funds Rate plus 0.5%, (b) the Prime Rate or (c) LIBOR plus 1.0%), plus an applicable
percentage in each case determined by the Company’s leverage ratio. The loans are secured by pledges of capital
stock of certain subsidiaries of the Company. The loans are also guaranteed by certain subsidiaries of the Company.
The credit facility is subject to various financial covenants that require the Company to maintain certain financial ratios
as defined in the agreement. As of June 30, 2011, the Company was in compliance with all such covenants.
Capital leases
The Company has entered into various capital lease obligations for the use of certain computer equipment. At June
30, 2011, $3,016 was outstanding, all of which will be maturing in the next twelve months. Included in property and
equipment are assets under capital leases totaling $5,540, which have accumulated depreciation totaling $365.
Other lines of credit
The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at
the prime rate less 1% (2.25% at June 30, 2011). The credit line was renewed through April 29, 2012. At June 30,
2011, no amount was outstanding.
The Company renewed a bank credit line on March 7, 2011 which provides for funding of up to $8,000 and bears
interest at the Federal Reserve Board’s prime rate (3.25% at June 30, 2011). The credit line expires March 7, 2012
and is secured by $1,000 of investments. At June 30, 2011, no amount was outstanding.
Off Balance Sheet Arrangements and Contractual Obligations
At June 30, 2011 the Company’s total off balance sheet contractual obligations were $36,887. This balance consists
of $26,187 of long-term operating leases for various facilities and equipment which expire from 2012 to 2017 and
the remaining $10,700 is for purchase commitments related to property and equipment. The table excludes $9,399
of liabilities for uncertain tax positions as we are unable to reasonably estimate the ultimate amount or timing
of settlement.
FY 11 | 31
Contractual obligations by
period as of June 30, 2011
Less than
1 year
1-3 years
3-5 years
More than
5 years
TOTAL
Operating lease obligations
Capital lease obligations
Notes payable, including
accrued interest
Purchase obligations
$
7,185
3,016
$
10,511
-
$
7,004
-
$
1,487
-
$
26,187
3,016
23,087
10,700
45,431
-
82,508
-
-
-
151,026
10,700
Total
$43,988
$55,942
$89,512
$1,487
$190,929
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable
Revenue Arrangements, which is effective for arrangements beginning or changed during fiscal years starting after
June 15, 2010. This new standard eliminates the use of the residual method of revenue recognition and requires
the allocation of consideration to each deliverable using the relative selling price method. This new guidance did
not have a material impact on revenue recognition because nearly all of the Company’s revenue arrangements are
subject to Accounting Standards Codification (“ASC”) Topic 985. Such arrangements are considered out of scope
for this ASU.
In October 2009, the FASB also issued ASU No. 2009-14, Software: Certain Revenue Arrangements that Include
Software Elements, which is also effective for arrangements beginning or changed during fiscal years starting after
June 15, 2010. This revision to Software (Topic 985) drops from its scope all tangible products containing both
software and non-software components that operate together to deliver the product’s functions. The majority of the
Company’s software arrangements are not tangible products with software components; therefore, this update did
not materially impact the company.
The FASB issued ASU No. 2011-04, Fair Value Measurement in May 2011, which is effective for the Company
beginning July 1, 2012 and is to be applied prospectively. The updated explanatory guidance on measuring fair
value will be adopted by the Company at that time and is not expected to have a significant impact on our fair value
calculations. No additional fair value measurements are required as a result of the update.
The FASB also issued ASU No. 2011-05, Comprehensive Income in June 2011, which is effective for the Company
beginning January 1, 2012 and will be applied retrospectively. The updated guidance requires non-owner changes
in stockholders’ equity to be reported either in a single continuous statement of comprehensive income or in two
separate but consecutive statements, rather than as part of the statement of changes in stockholders’ equity. No
changes in disclosure will be required as a result of the update.
Critical Accounting Policies
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 generally accepted accounting principles and with guidance provided
within Staff Accounting Bulletins issued by the Securities and Exchange Commission. 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.
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 Generally accepted
accounting principles require 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. When 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 following the
residual method allowed by current accounting pronouncements. 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, implementation, and
configuration of our systems and for training of our customer’s employees. 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 within U.S. GAAP. To the extent hardware revenue is part of such an arrangement
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. 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.
FY 11 | 33
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.
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, liabilities for uncertain tax positions require 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. The
Company’s most recent assessment indicates that no reporting units are currently at risk of impairment; however,
significant changes in the estimates and assumptions used in purchase accounting and goodwill impairment testing
could have a material effect on the consolidated financial statements.
Forward Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and the assumptions upon which those
statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements may appear throughout this report, including without limitation, in Management’s
Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements generally
are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” and similar expressions. Forward-
looking statements are based on current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of
risks and uncertainties that could cause actual results and events to differ materially from such forward-looking
statements is included in the section titled “Risk Factors” (Part I, Item 1A of the Jack Henry & Associates, Inc. Form
10-K for the year ended June 30, 2011). We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events, or otherwise.
QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 outstanding debt. We do not currently use any derivative financial instruments. We actively monitor
these risks through a variety of controlled procedures involving senior management.
Based on the controls in place and the credit worthiness of the customer base, we believe the credit risk associated
with the extension of credit to our customers will not have a material adverse effect on our consolidated financial
position or results of operations.
Based on our outstanding debt with variable interest rates as of June 30, 2011, a 1% increase in our borrowing rate
would increase annual interest expense in fiscal 2012 by approximately $1,500.
FY 11 | 35
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
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, 2011, 2010, and 2009
Consolidated Balance Sheets, June 30, 2011 and 2010
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended June 30, 2011, 2010 and 2009
Consolidated Statements of Cash Flows,
Years Ended June 30, 2011, 2010 and 2009
Notes to Consolidated Financial Statements
37
38
39
40
41
42
43
44
FINANCIAL STATEMENT SCHEDULES
There are no schedules included because they are not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Jack Henry & Associates, Inc.
Monett, Missouri
We have audited the accompanying consolidated balance sheets of Jack Henry & Associates, Inc. and subsidiaries
(the “Company”) as of June 30, 2011 and 2010, and the related consolidated statements of income, changes in
stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2011. 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 consolidated financial statements present fairly, in all material respects, the financial position
of Jack Henry & Associates, Inc. and subsidiaries as of June 30, 2011 and 2010, and the results of their operations
and their cash flows for each of the three years in the period June 30, 2011, in conformity with accounting principles
generally accepted in the United States of America.
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, 2011, 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 29, 2011 expressed an unqualified opinion on the Company’s
internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Kansas City, Missouri
August 29, 2011
FY 11 | 37
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
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.
Management’s annual report on internal control over financial reporting now includes an assessment of the internal
control over financial reporting of iPay Technologies Holding Company, LLC, acquired on June 4, 2010, which was
excluded from the fiscal 2010 annual report on internal control over financial reporting. Integration of the wholly-
owned subsidiary was completed during the fourth quarter of the year ended June 30, 2011 and is not considered
to have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.
As of the end of the Company’s 2011 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, 2011 was effective.
The Company’s internal control over financial reporting as of June 30, 2011 has been audited by the Company’s
independent registered public accounting firm, as stated in their report appearing on the next page.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING 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, 2011, 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 preparation 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, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the
Committee of 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, 2011 of the Company and our
report dated August 29, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
Kansas City, Missouri
August 29, 2011
FY 11 | 39
FY 11 | 41
FY 11 | 43
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
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 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 also
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 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 period. Actual results could differ from
those estimates.
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. Accounting principles
generally accepted in the Unites States of America (“U.S. GAAP”) generally require 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. 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.
Arrangements with customers that include significant customization, modification, or production of software are
accounted for under contract accounting, with the revenue being recognized using the percentage-of-completion method.
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.
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. To the extent hardware revenue is part of such
an arrangement 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. 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
U.S. GAAP. 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 $1,000 at both June 30, 2011 and 2010. 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.
FY 11 | 45
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 those with an indefinite life (such as goodwill), 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 other indefinite-lived intangible assets 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, 2011, 2010, and 2009 equals the Company’s net income.
Business Segment Information
In accordance with U.S. GAAP, the Company’s operations are classified as two business segments: bank systems
and services and credit union systems and services (see Note 13). 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, 2011, there were 14,407 shares in treasury stock and the Company had
the remaining authority to repurchase up to 5,584 additional shares. The total cost of treasury shares at June 30,
2011 is $309,585. There were no repurchases of treasury stock in fiscal 2011 or 2010.
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.
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 is measured based on the
largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and
penalties expense are recognized on the full amount of deferred benefits for uncertain tax positions. Our policy is to
include interest and penalties related to unrecognized tax benefits in income tax expense.
Recent Accounting Pronouncements
In October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13, Multiple-Deliverable
Revenue Arrangements, which is effective for arrangements beginning or changed during fiscal years starting after
June 15, 2010. This new standard eliminates the use of the residual method of revenue recognition and requires
the allocation of consideration to each deliverable using the relative selling price method. This new guidance did
not have a material impact on revenue recognition because nearly all of the Company’s revenue arrangements are
subject to Accounting Standards Codification (“ASC”) Topic 985. Such arrangements are considered out of scope
for this ASU.
In October 2009, the FASB also issued ASU No. 2009-14, Software: Certain Revenue Arrangements that Include
Software Elements, which is also effective for arrangements beginning or changed during fiscal years starting after
June 15, 2010. This revision to Software (Topic 985) drops from its scope all tangible products containing both
software and non-software components that operate together to deliver the product’s functions. The majority of the
Company’s software arrangements are not tangible products with software components; therefore, this update did
not materially impact the company.
The FASB issued ASU No. 2011-04, Fair Value Measurement in May 2011, which is effective for the Company
beginning July 1, 2012 and is to be applied prospectively. The updated explanatory guidance on measuring fair
value will be adopted by the Company at that time and is not expected to have a significant impact on our fair value
calculations. No additional fair value measurements are required as a result of the update.
The FASB also issued ASU No. 2011-05, Comprehensive Income in June 2011, which is effective for the Company
beginning January 1, 2012 and will be applied retrospectively. The updated guidance requires non-owner changes
in stockholders’ equity to be reported either in a single continuous statement of comprehensive income or in two
separate but consecutive statements, rather than as part of the statement of changes in stockholders’ equity. No
changes in disclosure will be required as a result of the update.
NOTE 2: FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values for held-to-maturity securities are based on quoted market prices. For cash equivalents, amounts
receivable or payable and short-term borrowings, fair values approximate carrying value, based on the short-term
nature of the assets. The fair value of long term debt also approximates carrying value as estimated using discounting
cash flows based on the Company’s current incremental borrowing rates or quoted prices in active markets.
NOTE 3: PROPERTY AND EQUIPMENT
The classification of property and equipment, together with their estimated useful lives is as follows:
June 30,
2011
2010
Estimated Useful Life
Land
Land improvements
Buildings
Leasehold improvements
Equipment and furniture
Aircraft and equipment
Construction in progress
Less accumulated depreciation
Property and equipment, net
$
$
25,011
25,882
137,580
24,440
230,346
41,605
8,972
493,836
223,650
270,186
5-20 years
20-30 years
5-20 years (1)
5-8 years
6-12 years
24,911
19,838
103,744
21,012
211,698
40,192
53,596
474,991
200,321
274,670
$
$
(1) Lesser of lease term or estimated useful life
The Company had material commitments to purchase property and equipment related to the construction of new
facilities, totaling $1,622 and $4,153 at June 30, 2011 and 2010, respectively. Property and equipment included
$332 and $723 that was in accrued liabilities at June 30, 2011 and 2010, respectively. Also, the Company acquired
$6,020 and $8,896 of computer equipment through capital leases for the years ended June 30, 2011 and 2010,
respectively. These amounts were excluded from capital expenditures on the statement of cash flows.
FY 11 | 47
NOTE 4: OTHER ASSETS
Goodwill
Changes in the carrying amount of goodwill for the years ended June 30, 2011 and 2010, by reportable segments, are:
Banking
Systems
and Services
Credit Union
Systems and
Services
Total
Balance, as of July 1, 2009
Goodwill acquired during the year
Balance, as of June 30, 2010
Goodwill acquired during the year
Balance, as of June 30, 2011
$
$
$
267,602
136,347
403,949
-
403,949
24,798
104,773
129,571
-
129,571
$
$
$
292,400
241,120
533,520
-
533,520
The banking systems and services segment additions for fiscal 2010 relate primarily to the acquisitions of iPay and
GFSI. The credit union systems and services segment additions for fiscal 2010 relate to the acquisitions of iPay and
PTSI. See Note 12 for further details.
Trade names & Customer relationships
Information regarding other identifiable intangible assets is as follows:
June 30,
Carrying
Amount
2011
Accumulated
Amortization
Net
Carrying
Amount
2010
Accumulated
Amortization
Net
Customer relationships
$
278,617
$
(99,484)
$
179,133
$
279,273
$
(82,945)
$
196,328
Trade names
11,064
(467)
10,597
11,064
(249)
10,815
Totals
$
289,681
$
(99,951)
$
189,730
$
290,337
$
(83,194)
$
207,143
Most of our trade name assets have been determined to have indefinite lives and are not amortized. Customer
relationships have lives ranging from five to 20 years.
Computer software
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:
Carrying
Amount
Accumulated
Amortization
Total
Balance, July 1, 2009
Acquired software
Capitalized development cost
Disposals
Amortization expense
Balance, June 30, 2010
Capitalized development cost
Disposals
Amortization expense
Balance, June 30, 2011
$
129,271
$
(46,592)
$
82,679
30,801
25,586
(783)
-
184,875
(4,870)
-
16
(17,782)
(69,228)
25,931
25,586
(767)
(17,782)
115,647
26,954
(2,371)
-
209,458
$
-
1,795
(31,189)
(98,622)
$
26,954
(576)
(31,189)
110,836
$
Amortization expense for all intangible assets was $48,602, $34,919, and $25,288 for the fiscal years ended June
30, 2011, 2010, and 2009, respectively. The estimated aggregate future amortization expense for each of the next
five years for all intangible assets remaining as of June 30, 2011, is as follows:
Year
Software
Customer
Relationships
2012
2013
2014
2015
2016
29,543
23,541
19,629
13,575
6,263
16,169
14,805
14,805
14,050
13,427
Total
45,712
38,346
34,434
27,625
19,690
NOTE 5: DEBT
The Company’s outstanding long and short term debt is as follows:
June 30,
2011
2010
LONG TERM DEBT
Long term revolving credit facility
Term loan
Capital leases
Other borrowings
Less current maturities
Long-term debt, net of current maturities
$
-
150,000
-
1,015
151,015
23,076
127,939
$
$
$
120,000
150,000
5,689
2,244
277,933
5,201
272,732
SHORT TERM DEBT
Bullet term loan
Capital Leases
Current maturities of long-term debt
Other borrowings
Notes payable and current maturities of long term debt
-
3,016
23,076
-
26,092
$
100,000
-
5,201
762
105,963
$
FY 11 | 49
The following table summarizes the annual principal payments required as of June 30, 2011:
Years ended June 30,
2012
2013
2014
2015
2016
Thereafter
26,092
22,879
22,552
22,508
60,000
-
$
154,031
The Company has a bank credit facility agreement that includes a revolving loan, a term loan and a bullet term loan.
Revolving Credit Facilities
The long term revolving loan allows for borrowings of up to $150,000, which may be increased by the Company at any
time until maturity to $250,000. The revolving loan terminates June 4, 2015. At June 30, 2011, no amount was outstanding.
Term Loan
The term loan has an original principal balance of $150,000, with quarterly principal payments of $5,625 beginning
on September 30, 2011, and the remaining balance due June 4, 2015. At June 30, 2011, the outstanding balance
was bearing interest at a rate of 2.25%. Of the $150,000 outstanding, $22,500 will be maturing within the next
twelve months.
Bullet Term Loan
The bullet term loan had an original principal balance of $100,000. The full balance, which would have been due on
December 4, 2010, was paid in full on July 8, 2010.
Each of the above loans bear interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base
rate (the greater of (a) the Federal Funds Rate plus 0.5%, (b) the Prime Rate or (c) LIBOR plus 1.0%), plus an
applicable percentage in each case determined by the Company’s leverage ratio. The loans are secured by pledges
of capital stock of certain subsidiaries of the Company. The loans are also guaranteed by certain subsidiaries of
the Company. The credit facility is subject to various financial covenants that require the Company to maintain
certain financial ratios as defined in the agreement. As of June 30, 2011, the Company was in compliance with all
such covenants.
Capital Leases
The Company has entered into various capital lease obligations for the use of certain computer equipment. At June
30, 2011, $3,016 was outstanding, all of which will be maturing in the next twelve months. Included in property and
equipment are assets under capital leases totaling $5,540, which have accumulated depreciation totaling $365.
Other Lines of Credit
The Company has an unsecured bank credit line which provides for funding of up to $5,000 and bears interest at
the prime rate less 1% (2.25% at June 30, 2011). The credit line was renewed through April 29, 2012. At June 30,
2011, no amount was outstanding.
The Company renewed a bank credit line on March 7, 2011 which provides for funding of up to $8,000 and bears
interest at the Federal Reserve Board’s prime rate (3.25% at June 30, 2011).The credit line expires March 7, 2012
and is secured by $1,000 of investments. At June 30, 2011, no amount was outstanding.
Interest
The Company paid interest of $8,000, $759, and $1,606 in 2011, 2010, and 2009 respectively. During fiscal 2011,
the Company incurred a total of $8,930 of interest expense.
NOTE 6: LEASE COMMITMENTS
The Company leases certain property under operating leases which expire over the next 7 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.
Lease Payments
As of June 30, 2011, net future minimum lease payments are as follows:
Years Ending June 30,
2012
2013
2014
2015
2016
Thereafter
Total
7,185
5,672
4,839
3,966
3,038
1,487
26,187
$
$
Rent expense was $8,985, $9,733, and $8,314 in 2011, 2010, and 2009, respectively.
NOTE 7: INCOME TAXES
The provision for income taxes from continuing operations consists of the following:
Year ended June 30,
2011
2010
2009
Current:
Federal
State
Deferred:
Federal
State
$
43,334
6,180
$
39,994
6,238
$
39,616
7,527
18,276
2,251
70,041
$
14,327
2,367
62,926
$
7,345
(280)
54,208
$
FY 11 | 51
The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:
Deferred tax assets:
Deferred revenue
Expense reserves (bad debts, insurance,
franchise tax and vacation)
Net operating loss carryforwards
Other, net
Deferred tax liabilities:
Accelerated tax depreciation
Accelerated tax amortization
Other, net
June 30,
2011
2010
$
5,372
$
3,875
8,086
11,097
1,122
25,677
6,730
12,222
514
23,341
(29,971)
(81,265)
(18,713)
(129,949)
(17,425)
(73,355)
(16,307)
(107,087)
Net deferred tax liability before valuation allowance
(104,272)
(83,746)
Valuation allowance
Net deferred tax liability
(306)
(306)
$
(104,578)
$
(84,052)
The deferred taxes are classified on the balance sheets as follows:
2011
2010
Deferred income taxes (current)
Deferred income taxes (long-term)
$
(15,274)
(89,304)
(104,578)
$
$
$
(10,449)
(73,603)
(84,052)
The following analysis reconciles the statutory federal income tax rate to the effective income tax rates reflected above:
Computed "expected" tax expense
Increase (reduction) in taxes resulting from:
State income taxes,
net of federal income tax benefits
Research and development credit
Permanent book/tax differences
Section 199 - prior year benefits
Deferred tax adjustments
Valuation Allowance
Other (net)
Year Ended June 30,
2011
2010
2009
35.0%
35.0%
35.0%
2.6%
-2.0%
-2.0%
-0.2%
0.5%
0.0%
-0.1%
2.5%
-0.7%
-0.9%
-1.8%
0.7%
0.0%
0.0%
2.7%
-3.0%
-0.4%
0.0%
0.0%
0.2%
0.0%
33.8%
34.8%
34.5%
An adjustment was made during fiscal 2011 to reflect a $3,802 reduction to the net deferred tax liability assumed
upon the acquisition of iPay in fiscal 2010. Further details are provided in Note 12.
As of June 30, 2011, we have $24,876 of net operating loss (“NOL”) carryforwards pertaining to the acquisition of
GFSI, which are expected to be utilized after the application of IRC Section 382. Separately, as of June 30, 2011,
we had state NOL carryforwards of $2,379. These losses have varying expiration dates, ranging from 2012 to 2029.
Based on state tax rules which restrict our usage of these losses, we believe it is more likely than not that $306
of these losses will expire unutilized. Accordingly, a valuation allowance of $306 has been recorded against these
assets as of June 30, 2011 and 2010.
The Company paid income taxes of $60,515, $42,116, and $62,965 in 2011, 2010, and 2009, respectively.
At June 30, 2010, the Company had $7,187 of unrecognized tax benefits. At June 30, 2011, the Company had $8,897 of
unrecognized tax benefits, of which, $6,655, if recognized, would affect our effective tax rate. We had accrued interest and
penalties of $1,030 and $890 related to uncertain tax positions at June 30, 2011 and 2010, respectively.
A reconciliation of the unrecognized tax benefits for the years ended June 30, 2011 and 2010 follows:
Balance at July 1, 2009
Additions for current year tax positions
Reductions 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
Balance at June 30, 2010
Additions for current year tax positions
Reductions for current year tax positions
Additions for prior year tax positions
Reductions for prior year tax positions
Settlements
Unrecognized
Tax Benefits
$ 5,518
691
(39)
2,049
(298)
-
(734)
7,187
1,338
-
599
-
-
Reductions related to expirations of statute of limitations
Balance at June 30, 2011
(227)
8,897
$
During the fiscal year ended June 30, 2010, the Internal Revenue Service commenced an examination of the
Company’s U.S. federal income tax returns for fiscal years ended June 2008 through 2009 that is anticipated to
be completed by the end of calendar year 2011. At this time, it is anticipated that the examination will not result in
a material change to the Company’s financial position. The U.S. federal and state income tax returns for June 30,
2008 and all subsequent years still remain subject to examination as of June 30, 2011 under statute of limitations
rules. We anticipate potential changes resulting from our IRS examination and expiration of statutes of limitations
could reduce the unrecognized tax benefits balance by $3,000 - $4,000 within twelve months of June 30, 2011.
NOTE 8: INDUSTRY AND SUPPLIER CONCENTRATIONS
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 30 days from date of billing. Reserves (which
are insignificant at June 30, 2011, 2010 and 2009) 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 BASED COMPENSATION PLANS
Our pre-tax operating income for the years ended June 30, 2011, 2010 and 2009 includes $4,723, $3,251 and
$2,272 of stock-based compensation costs, respectively. Total compensation cost for the years ended June 30,
2011, 2010 and 2009 includes $4,209, $2,347, and $1,620 relating to the restricted stock plan, respectively.
FY 11 | 53
1996 SOP and 2005 NSOP
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”).
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.
The 2005 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, 2011, there were 480 shares available for future
grants under the plan.
A summary of option plan activity under the plans is as follows:
Number of
Shares
Weighted
Average
Exercise Price
Aggregate
Intrinsic Value
Outstanding July 1, 2008
Granted
Forfeited
Exercised
Outstanding June 30, 2009
Granted
Forfeited
Exercised
Outstanding June 30, 2010
Granted
Forfeited
Exercised
Outstanding June 30, 2011
Vested and Expected to Vest June 30, 2011
Exercisable June 30, 2011
3,977
50
(19)
(248)
3,760
50
(71)
(1,842)
1,897
-
(47)
(860)
990
990
990
$17.42
17.45
20.77
12.28
17.75
23.65
26.64
16.70
18.58
-
27.84
21.46
$15.65
$15.65
$15.65
$14,216
$14,216
$14,216
There were no options granted during fiscal 2011. The weighted-average fair value of options granted during fiscal
2010 and fiscal 2009 was $8.90 and $7.87, respectively. The only options granted during fiscal years 2010 and 2009
were to non-employee members of the Company’s board of directors.
The assumptions used in estimating fair value and resulting compensation expenses at the grant dates are as follows:
Weighted Average Assumptions:
Expected life (years)
Volatility
Risk free interest rate
Dividend yield
Year Ended June 30,
2010
2009
6.67
33%
3.0%
1.52%
3.72
30%
1.4%
1.72%
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.
As of June 30, 2011, there was no unrecognized compensation costs related to stock options since all options have
now vested. The weighted average remaining contractual term on options currently exercisable as of June 30, 2011
was 2.75 years.
Following is an analysis of stock options outstanding and exercisable as of June 30, 2011:
Range of
Weighted-Average Remaining
Weighted-Average
Exercise Prices
Shares
Contractural Life in Years
Exercise Price
Outstanding
Exercisable
Outstanding
Outstanding
Exercisable
$10.84 - $11.50
$11.51 - $18.55
$18.56 - $21.53
$21.54 - $23.40
$23.41 - $23.65
$23.66 - $24.97
$24.98 - $25.00
$25.01 - $25.65
$25.66 - $25.72
$25.73 - $28.52
$ 10.84 - $28.52
531
122
143
85
50
1
2
5
1
50
990
531
122
143
85
50
1
2
5
1
50
990
1.78
4.56
2.01
2.37
8.37
0.38
0.41
0.35
0.15
6.34
2.75
$
10.84
$
10.84
17.43
20.05
22.37
23.65
24.97
25.00
25.65
25.72
28.52
17.43
20.05
22.37
23.65
24.97
25.00
25.65
25.72
28.52
$
15.65
$
15.65
The income tax benefits from stock option exercises totaled $2,298, $4,666 and $1,233 for the years ended June
30, 2011, 2010 and 2009, respectively.
The total intrinsic value of options exercised was $6,342, $12,694 and $1,999 for the fiscal years ended June 30,
2011, 2010 and 2009, respectively.
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.
FY 11 | 55
The following table summarizes non-vested share awards as of June 30, 2011, as well as activity for the year then ended:
Weighted
Average Grant
Date Fair
Value
Shares
Non-vested shares at July 1, 2009
Granted
Vested
Forfeited
Non-vested shares at June 30, 2010
Granted
Vested
Forfeited
Non-vested shares at June 30, 2011
267
139
(19)
-
387
102
(59)
(14)
416
$
$
21.66
22.59
22.36
-
21.96
24.54
23.75
21.88
22.34
The non-vested share awards 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, 2011, there was $3,860 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 1.49 years.
An amendment to the Restricted Stock Plan was adopted by the Company on August 20, 2010, for its executive
officers. Unit awards will be made to employees remaining in continuous employment throughout the performance
period and vary based on the Company’s percentile ranking in Total Shareholder Return (“TSR”) over the
performance period compared to a peer group of companies. TSR is defined as the change in the stock price
through the performance period plus dividends per share paid during the performance period, all divided by the
stock price at the beginning of the performance period. It is the intention of the Company to settle the unit awards
in shares of the Company’s stock.
The following table summarizes non-vested unit awards as of June 30, 2011, as well as activity for the year then ended:
Non-vested shares at July 1, 2010
Granted
Vested
Forfeited
Non-vested shares at June 30, 2011
Weighted
Average Grant
Date Fair
Value
-
15.77
-
-
15.77
$
Units
-
293
-
-
293
The assumptions used in this model to estimate fair value and resulting values are as follows:
Weighted Average Assumptions at measurement date:
Volatility
Risk free interest rate
Dividend yield
Stock Beta
37%
0.9%
1.60%
0.89
At June 30, 2011, there was $3,389 of compensation expense that has yet to be recognized related to non-vested
restricted stock unit awards, which will be recognized over a weighted-average period of 2.20 years.
NOTE 10: EARNINGS PER SHARE
The following table reflects the reconciliation between basic and diluted net income per share:
Net Income
Year Ended June 30,
2011
137,471
$
2010
117,870
$
2009
103,102
$
Common share information:
Weighted average shares outstanding for basic EPS
Dilutive effect of stock options and restricted stock
Shares for diluted EPS
85,948
739
86,687
84,558
823
85,381
84,118
712
84,830
Basic Earnings per Share
$
1.60
$
1.39
$
1.23
Diluted Earnings per Share
$
1.59
$
1.38
$
1.22
Per share information is based on the weighted average number of common shares outstanding for each of the
fiscal years. Stock options and restricted stock have been included in the calculation of income per share to the
extent they are dilutive. Stock options and restricted stock to purchase approximately 12 shares for fiscal 2011, 602
shares for fiscal 2010, and 1,267 shares for fiscal 2009, were not dilutive and therefore, were not included in the
computations of diluted income per common share amounts.
NOTE 11: EMPLOYEE BENEFIT PLANS
The Company established an employee stock purchase plan in 2006. The plan allows the majority of employees
the opportunity to directly purchase shares of the Company at a 15% discount. The plan does not meet the criteria
as a non-compensatory plan. As a result, the Company records 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, 2011, 2010 and 2009 was $434, $345 and $333 respectively.
The Company has a defined contribution plan 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. In order to receive matching contributions, 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
$11,076, $9,369, and $8,341 for fiscal 2011, 2010, and 2009, respectively.
NOTE 12: BUSINESS ACQUISITIONS
Fiscal 2010 Acquisitions:
iPay Technologies Holding Company, LLC
On June 4, 2010, the Company acquired all of the equity interests of iPay, a provider of online bill payment solutions
for both banks and credit unions, for $301,143 paid in cash. The cash used for this acquisition was funded primarily
through borrowings on available lines of credit and certain term notes issued concurrent with the acquisition.
The acquisition of iPay expanded the Company’s presence in the growing electronic payments industry, strengthened
the Company’s electronic payments offering, and increased recurring revenue.
Through the Company’s measurement period evaluation of the preliminary purchase price allocation, we identified
a $2,817 decrease in the current deferred tax liability assumed, a $985 decrease in the long term deferred tax
liability assumed and a $216 increase in accrued expenses assumed, with a corresponding $3,586 decrease in
the goodwill arising from the acquisition. The measurement period adjustment was attributable to new information
gathered related to the deferred tax liability of iPay in preparation of its final tax return. The measurement period
adjustment was made retrospectively on the acquisition date, June 4, 2010, and did not impact the consolidated
income statement.
FY 11 | 57
Management has completed the purchase price allocation of iPay and its assessment of the fair value of acquired
assets and liabilities assumed. The recognized amounts of identifiable assets acquired and liabilities assumed,
based upon their fair values as of June 4, 2010, updated for the retrospective adjustment, are set forth below:
The goodwill of $188,759 arising from this acquisition consists largely of the growth potential, synergies and
economies of scale expected from combining the operations of the Company with those of iPay, together with
the value of iPay’s assembled workforce. Goodwill from this acquisition has been allocated between our Banking
Systems and Services and our Credit Union Systems and Services segments based upon the extent to each
segment is expected to benefit from the synergies of the combination. Approximately 80% of the goodwill is expected
to be deductible for income tax purposes.
The fair value of current assets acquired included accounts receivable of $1,403, all of which was deemed to be collectible.
During fiscal year 2010, the Company incurred $2,280 in costs related to the acquisition of iPay. These costs
included fees for legal, accounting, valuation and other professional fees. These costs were included within general
and administrative expenses.
The results of iPay’s operations included in the Company’s consolidated statement of operations from the acquisition
date to June 30, 2010 included revenue of $3,526 and after-tax net income of $38.
PEMCO Technology Services, Inc.
On October 29, 2009, the Company acquired all of the issued and outstanding shares of PTSI, a provider of
payment processing solutions primarily for the credit union industry, for $61,841 paid in cash. The cash used for this
acquisition was funded using borrowings against available lines of credit.
The acquisition of PTSI broadened the Company’s product offerings within its electronic payments business and
expanded the Company’s presence in the credit union market beyond its core client base.
The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as of
October 29, 2009 are set forth below:
Current assets (inclusive of cash acquired of $2,275)
Long-term assets
Identifiable intangible assets
Total liabilities assumed
Total identifiable net assets
Goodwill
Net assets acquired
$
9,448
1,222
34,912
(3,572)
42,010
19,831
61,841
$
The goodwill of $19,831 arising from this acquisition consists largely of the synergies and economies of scale
expected from combining the operations of the Company with those of PTSI, together with the value of PTSI’s
assembled workforce. All of the goodwill from this acquisition was assigned to the Credit Union Systems and Services
segment. The Company and the former shareholder of PTSI jointly made an Internal Revenue Code 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 goodwill for tax purposes.
The fair value of current assets acquired includes accounts receivable of $4,686, all of which was deemed collectible.
During fiscal 2010, the Company incurred $249 in costs related to the acquisition of PTSI. These costs included
fees for legal, accounting, valuation and other professional fees. These costs were included within general and
administrative expenses.
The results of PTSI’s operations included in the Company’s consolidated statement of operations from the
acquisition date to June 30, 2010 included revenue of $33,738 and after tax net income of $3,289.
Goldleaf Financial Solutions, Inc.
On October 1, 2009, the Company acquired all of the issued and outstanding shares of GFSI, a provider of
integrated technology and payment processing solutions to financial institutions of all sizes. According to the
terms of the merger agreement, each share of GFSI stock issued and outstanding was converted into the right to
receive $0.98 in cash, for a total cash outlay of $19,085. The acquisition of GFSI has broadened the Company’s
market presence, strengthened our competitive position by diversifying our product and service offerings and
provided significant cost synergies to the combined organization. In addition to the cash paid to acquire the
outstanding shares of GFSI, the Company also paid $48,532 in cash at closing to settle various outstanding
obligations of GFSI, resulting in a total cash outlay of $67,617. This cash outlay was funded using existing
operating cash.
The recognized amounts of identifiable assets acquired and liabilities assumed, based upon their fair values as
of October 1, 2009 are set forth below:
Current assets (inclusive of cash acquired of $1,319)
Long-term assets
Identifiable intangible assets
Total liabilities assumed
Total identifiable net assets
Goodwill
Net assets acquired
$ 12,952
7,466
39,845
(25,727)
34,536
33,081
67,617
$
The goodwill of $33,081 arising from the acquisition consists largely of the synergies and economies of scale
expected from combining the operations of the Company with those of GFSI, together with the value of GFSI’s
assembled workforce. All of the goodwill was assigned to the Banking Systems and Services segment. None of
this goodwill is expected to be deductible for income tax purposes.
The fair value of current assets acquired includes trade accounts receivable with a fair value of $8,089. The
gross amount receivable is $8,769, of which $680 was expected to be uncollectible. In addition, the Company
acquired an investment in direct financing leases, which includes lease payments receivable of $4,210, all of
which was assumed to be collectible.
During fiscal 2010, the Company incurred $1,708 in costs related to the acquisition of GFSI. These costs included
fees for legal, accounting, valuation and other professional fees. These costs were included within general and
administrative expenses.
The results of GFSI’s operations included in the Company’s consolidated statement of operations from the
acquisition date to June 30, 2010 included revenue of $44,794 and after tax net income of $1,204.
The accompanying consolidated statements of income for the fiscal years ended June 30, 2011, 2010 and 2009
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. In addition, 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.
FY 11 | 59
NOTE 13: BUSINESS SEGMENT INFORMATION
The Company is a 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 Company measures the
performance of its segments on gross profit.
For the Year Ended June 30, 2011
Credit Union
Total
Bank
REVENUE
License
Support and service
Hardw are
Total revenue
COST OF SALES
Cost of license
Cost of support and service
Cost of hardw are
Total cost of sales
$
37,424
665,297
44,171
746,892
$
15,643
186,956
17,406
220,005
$
53,067
852,253
61,577
966,897
5,008
394,040
31,850
430,898
1,277
121,877
13,511
136,665
6,285
515,917
45,361
567,563
GROSS PROFIT
$
315,994
$
83,340
399,334
OPERATING EXPENSES
INTEREST INCOME (EXPENSE)
INCOME BEFORE INCOME TAXES
183,017
(8,805)
$
207,512
For the Year Ended June 30, 2010
Credit Union
Total
Bank
$
38,117
585,470
48,695
672,282
$
14,108
135,034
15,162
164,304
$
52,225
720,504
63,857
836,586
4,732
348,489
35,961
389,182
1,095
89,987
11,202
102,284
$
283,100
$
62,020
5,827
438,476
47,163
491,466
345,120
162,867
(1,457)
$
180,796
For the Year Ended June 30, 2009
Credit Union
Total
Bank
$
45,169
514,748
57,794
617,711
$
13,265
99,494
15,123
127,882
$
58,434
614,242
72,917
745,593
6,113
321,489
42,297
369,899
772
64,348
11,175
76,295
6,885
385,837
53,472
446,194
299,399
141,513
(576)
$
157,310
REVENUE
License
Support and service
Hardw are
Total revenue
COST OF SALES
Cost of license
Cost of support and service
Cost of hardw are
Total cost of sales
GROSS PROFIT
OPERATING EXPENSES
INTEREST INCOME (EXPENSE)
INCOME BEFORE INCOME TAXES
REVENUE
License
Support and service
Hardw are
Total revenue
COST OF SALES
Cost of license
Cost of support and service
Cost of hardw are
Total cost of sales
OPERATING EXPENSES
INTEREST INCOME (EXPENSE)
INCOME BEFORE INCOME TAXES
Depreciation expense, net
Bank systems and services
Credit Unions systems and services
Total
Amortization expense, net
Bank systems and services
Credit Unions systems and services
Total
Capital expenditures
Bank systems and services
Credit Unions systems and services
Total
GROSS PROFIT
$
247,812
$
51,587
For the Year Ended June 30,
2011
2010
2009
$
$
38,830
3,082
41,912
$
$
35,507
13,095
48,602
$
$
23,730
8,355
32,085
$
$
34,497
2,092
36,589
$
$
27,675
7,244
34,919
$
$
51,392
3,117
54,509
$
$
36,816
2,043
38,859
$
$
22,779
2,509
25,288
$
$
30,752
810
31,562
FY 11 | 61
For the Year Ended June 30,
2011
2010
Property and equipment, net
Bank systems and services
Credit Unions systems and services
Total
Intangible assets, net
Bank systems and services
Credit Unions systems and services
Total
$
$
235,929
34,257
270,186
$
$
594,507
239,579
834,086
$
$
241,596
33,074
274,670
$
$
611,245
245,065
856,310
The Company has not disclosed any additional asset information by segment, as the information is not produced
internally and its preparation is impracticable.
NOTE 14: SUBSEQUENT EVENTS
In accordance with ASC Topic 855, Subsequent Events, the Company has evaluated any significant events occurring
from the date of these financial statements through the date they were issued. The effects of any such events upon
conditions existing as of the balance sheet date have been reflected within the financial statements to the extent
that the effects were material. Any significant events occurring after the balance sheet date that do not relate to
conditions existing as of that date are disclosed below.
On August 19, 2011, the Company’s Board of Directors declared a quarterly cash dividend of $0.105 per share of
common stock, payable on September 28, 2011 to shareholders of record on September 8, 2011.
QUARTERLY FINANCIAL INFORMATION (unaudited)
QUARTERLY FINANCIAL INFORMATION (unaudited)
REVENUE
License
Support and service
Hardware
Total revenue
COST OF SALES
Cost of license
Cost of support and service
Cost of hardware
Total cost of sales
Quarter 1
For the Year Ended June 30, 2011
Quarter 2
Quarter 4
Quarter 3
Total
$
9,459
210,610
14,753
234,822
$
15,460
212,378
14,797
242,635
$
13,025
210,074
17,086
240,185
$
15,123
219,191
14,941
249,255
$
53,067
852,253
61,577
966,897
1,178
125,806
10,805
137,789
2,079
126,857
10,880
139,816
1,145
131,010
12,740
144,895
1,883
132,244
10,936
145,063
6,285
515,917
45,361
567,563
GROSS PROFIT
97,033
102,819
95,290
104,192
399,334
OPERATING EXPENSES
Selling and marketing
Research and development
General and administrative
Total operating expenses
16,362
15,390
12,506
44,258
16,979
15,837
15,014
47,830
16,929
15,716
12,142
44,787
17,791
16,452
11,899
46,142
68,061
63,395
51,561
183,017
OPERATING INCOME
52,775
54,989
50,503
58,050
216,317
INTEREST INCOME (EXPENSE)
Interest income
Interest expense
Total interest income (expense)
17
(2,892)
(2,875)
32
(2,487)
(2,455)
61
(1,710)
(1,649)
15
(1,841)
(1,826)
125
(8,930)
(8,805)
INCOME BEFORE INCOME TAXES
49,900
52,534
48,854
56,224
207,512
PROVISION FOR INCOME TAXES
18,129
16,489
15,773
19,650
70,041
NET INCOME
$
31,771
$
36,045
$
33,081
$
36,574
$
137,471
Diluted net income per share
Diluted weighted average shares
outstanding
Basic net income per share
Basic weighted average shares
outstanding
$
0.37
$
0.42
$
0.38
$
0.42
$
1.59
86,147
86,523
86,972
87,090
86,687
$
0.37
$
0.42
$
0.38
$
0.42
$
1.60
85,469
85,770
86,218
86,335
85,948
FY 11 | 63
QUARTERLY FINANCIAL INFORMATION (unaudited)
REVENUE
License
Support and service
Hardware
Total revenue
COST OF SALES
Cost of license
Cost of support and service
Cost of hardware
Total cost of sales
Quarter 1
For the Year Ended June 30, 2010
Quarter 2
Quarter 4
Quarter 3
Total
$
11,402
155,926
15,003
182,331
$
12,013
184,143
14,705
210,861
$
16,391
182,090
17,068
215,549
$
12,419
198,345
17,081
227,845
$
52,225
720,504
63,857
836,586
1,120
95,810
11,010
107,940
1,091
110,026
10,664
121,781
1,804
114,667
12,565
129,036
1,812
117,973
12,924
132,709
5,827
438,476
47,163
491,466
GROSS PROFIT
74,391
89,080
86,513
95,136
345,120
OPERATING EXPENSES
Selling and marketing
Research and development
General and administrative
Total operating expenses
12,125
10,148
10,181
32,454
14,866
12,339
14,512
41,717
16,765
14,001
12,088
42,854
17,119
14,332
14,391
45,842
60,875
50,820
51,172
162,867
OPERATING INCOME
41,937
47,363
43,659
49,294
182,253
INTEREST INCOME (EXPENSE)
Interest income
Interest expense
Total interest income (expense)
41
(90)
(49)
4
(143)
(139)
9
(186)
(177)
107
(1,199)
(1,092)
161
(1,618)
(1,457)
INCOME BEFORE INCOME TAXES
41,888
47,224
43,482
48,202
180,796
PROVISION FOR INCOME TAXES
15,614
17,247
11,847
18,218
62,926
NET INCOME
$
26,274
$
29,977
$
31,635
$
29,984
$
117,870
Diluted net income per share
Diluted weighted average shares
outstanding
Basic net income per share
Basic weighted average shares
outstanding
$
0.31
$
0.35
$
0.37
$
0.35
$
1.38
84,823
85,224
85,480
85,998
85,381
$
0.31
$
0.36
$
0.37
$
0.35
$
1.39
83,870
84,341
84,694
85,325
84,558
Board of dIrecTors
michael e. Henry
Chairman
Jack Henry & Associates
Monett, Missouri
John f. “Jack” prim
Chief Executive Officer
Jack Henry & Associates
Monett, Missouri
Jerry d. Hall
Vice Chairman and Executive Vice President
Jack Henry & Associates
Monett, Missouri
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
marla k. shepard
President and Chief Executive Officer
California Coast Credit Union
San Diego, California
eXecuTIVe offIcers
michael e. Henry
Chairman
John f. “Jack” prim
Chief Executive Officer
Tony l. Wormington
President
Jerry d. Hall
Vice Chairman and 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 on Thursday, November
17 at 11:00 a.m. Central at Jack Henry & Associates’ Corporate Headquarters,
Monett, Missouri.
form 10-k
A copy of the company’s Form 10-K is available upon request to the Chief
Financial Officer at the corporate headquarters address or from our website
at www.jackhenry.com.
Transfer agenT
and regIsTrar
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940
FY 11 | 65
663 Highway 60
p.o. Box 807
monett, mo 65708
417-235-6652
417-235-4281 – fax
www.jackhenry.com