FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 0-14112 JACK HENRY & ASSOCIATES, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 43-1128385 ---------------------------- --------------- (State or other jurisdiction I.R.S. Employer of incorporation) Identification No.) 663 Highway 60, P. O. Box 807, Monett, MO 65708 ------------------------------------------------ (Address of principal executive offices) (Zip Code) 417-235-6652 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at January 31, 2002 ---------------------------- ------------------------------- Common Stock, $.01 par value 89,345,895
JACK HENRY & ASSOCIATES, INC. CONTENTS Page No. -------- PART I. FINANCIAL INFORMATION Item I - Financial Statements Condensed Consolidated Balance Sheets - December 31, 2001, (Unaudited) and June 30, 2001 3 - 4 Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2001 and 2000 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2001 and 2000 (Unaudited) 6 Notes to the Condensed Consolidated Financial Statements (Unaudited) 7 - 11 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition 11 - 15 Item 3 - Quantitative and Qualitative Disclosure about Market Risk 16
Part I. Financial Information Item 1. Financial Statements JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data) December 31, 2001 June 30, (Unaudited) 2001 -------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 36,832 $ 18,589 Investments, at amortized cost 997 985 Trade receivables 91,338 116,573 Income taxes receivable - 537 Prepaid cost of product 17,641 17,191 Prepaid expenses and other 11,755 17,425 Deferred income taxes 750 750 -------- -------- Total $ 159,313 $ 172,050 PROPERTY AND EQUIPMENT $ 205,631 $ 176,193 Accumulated depreciation 47,436 37,754 -------- -------- $ 158,195 $ 138,439 OTHER ASSETS: Goodwill $ 31,830 $ 29,348 Other intangible assets, net of amortization 68,116 72,041 Computer software, net of amortization 5,965 5,806 Prepaid cost of product 14,870 12,007 Other non-current assets 4,222 3,430 -------- -------- Total $ 125,003 $ 122,632 -------- -------- Total assets $ 442,511 $ 433,121 ======== ========
December 31, 2001 June 30, (Unaudited) 2001 -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 9,236 $ 17,846 Accrued expenses 8,463 9,595 Accrued income taxes 2,345 - Current portion of long-term debt 87 87 Deferred revenues 66,606 79,490 -------- -------- Total $ 86,737 $ 107,018 LONG-TERM DEBT 184 228 DEFERRED REVENUES 19,261 15,514 DEFERRED INCOME TAXES 7,372 7,857 -------- -------- Total liabilities $ 113,554 $ 130,617 STOCKHOLDERS' EQUITY: Preferred stock - $1 par value; 500,000 shares authorized; none issued - - Common stock - $0.01 par value; 250,000,000 shares authorized; 89,646,205 issued @ 12/31/01 88,846,710 issued @ 6/30/01 $ 896 $ 888 Less treasury stock at cost; 318,549 shares @ 12/31/01 0 shares @ 6/30/01 (6,708) - Additional paid-in capital 156,053 145,211 Retained earnings 178,716 156,405 -------- -------- Total stockholders' equity $ 328,957 $ 302,504 -------- -------- Total liabilities and stockholders' equity $ 442,511 $ 433,121 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended Six Months Ended December 31, December 31, ------------------ -------------------- 2001 2000 2001 2000 ------ ------ ------- ------- <S> <C> <C> <C> <C> REVENUES Licensing and installation $22,874 $24,536 $ 45,144 $ 48,048 Support and services 41,888 32,266 83,494 62,712 Hardware sales 26,783 23,930 49,039 46,980 ------ ------ ------- ------- Total $91,545 $80,732 $177,677 $157,740 COST OF SALES Cost of hardware 18,371 15,635 33,250 31,604 Cost of services 34,163 30,330 66,367 56,737 ------ ------ ------- ------- Total $52,534 $45,965 $ 99,617 $ 88,341 ------ ------ ------- ------- GROSS PROFIT $39,011 $34,767 $ 78,060 $ 69,399 43% 43% 44% 44% OPERATING EXPENSES Selling and marketing 6,975 5,743 13,544 13,398 Research and development 3,543 2,828 6,453 5,211 General and administrative 8,657 6,363 16,162 12,269 ------ ------ ------- ------- Total $19,175 $14,934 $ 36,159 $ 30,878 ------ ------ ------- ------- OPERATING INCOME $19,836 $19,833 $ 41,901 $ 38,521 OTHER INCOME (EXPENSE) Interest income 571 388 1390 948 Interest expense (41) (96) ( 88) (775) ------ ------ ------- ------- Total $ 530 $ 292 $ 1,302 $ 173 ------ ------ ------- ------- INCOME BEFORE INCOME TAXES $20,366 $20,125 $ 43,203 $ 38,694 PROVISIONS FOR INCOME TAXES 7,332 7,245 15,553 13,930 ------ ------ ------- ------- NET INCOME $13,034 $12,880 $ 27,650 $ 24,764 ====== ====== ======= ======= Diluted net income per share $ .14 $ .14 $ .30 $ .27 ====== ====== ======= ======= Diluted weighted average shares outstanding 92,247 91,667 92,485 90,379 ====== ====== ======= ======= Basic net income per share $ .15 $ .15 $ .31 $ .29 ====== ====== ======= ======= Basic weighted average shares outstanding 88,982 86,517 88,967 85,413 ====== ====== ======= ======= The accompanying notes are an integral part of these condensed consolidated financial statements. </TABLE>
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Six Months Ended December 31, ----------------------- 2001 2000 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 27,650 $ 24,764 Adjustments to reconcile net income to cash from operating activities: Depreciation 9,921 5,233 Deferred income taxes (57) 1,301 Other (486) (83) Changes in: Trade receivables 25,235 14,206 Prepaid expenses and other (3,113) (5,716) Accounts payable (8,610) (1,952) Accrued expenses (1,442) (1,900) Accrued income taxes (including tax benefit from exercise of stock options) 6,284 8,765 Deferred revenues (9,137) (5,193) -------- -------- Net cash from operating activities $ 49,550 $ 44,104 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures $ (23,145) $(28,656) Computer software developed/purchased (402) (607) Payment for acquisition, net (2,923) - Purchase of investment (996) - Proceeds from maturity of investments 1,000 - Other, net 30 (92) -------- -------- Net cash from investing activities $ (26,436) $(29,355) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock upon exercise of stock options $ 6,830 $ 9,861 Proceeds from sale of common stock, net 391 60,922 Short-term borrowings, net - (70,500) Principal payments on notes payable (45) (80) Purchase of treasury stock (6,708) - Dividends paid (5,339) (4,306) -------- -------- Net cash from financing activities $ (4,871) $ (4,103) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS $ 18,243 $ 10,646 Cash and cash equivalents at beginning of period 18,589 5,186 -------- -------- Cash and cash equivalents at end of period $ 36,832 $ 15,832 ======== ======== Net cash paid for income taxes was $9,312 and $3,338 for the six months ended December 31, 2001 and 2000, respectively. The Company paid interest of $72 and $1,048 for the six months ended December 31, 2001 and 2000, respectively. The accompanying notes are an integral part of these condensed consolidated financial statements.
JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Summary of Significant Accounting Policies Description of the Company - Jack Henry & Associates, Inc. ("JHA" or the "Company") is a computer software company which has developed or acquired several banking and credit union software systems. The Company's revenues are predominately earned by marketing those systems to financial institutions nationwide along with computer equipment (hardware) and by providing the conversion and software customization services for a financial institution to install a JHA software system. JHA also provides continuing support and services to customers using the systems either in-house or outsourced. Consolidation - The consolidated financial statements include the accounts of JHA and all of its wholly-owned subsidiaries and all significant intercompany accounts and transactions have been eliminated. Comprehensive Income - Comprehensive income for each of the six-month periods ended December 31, 2001 and 2000, equals the Company's net income. Common Stock Split - Prior period share and per share data have been adjusted for the 100% stock dividend paid March 2, 2001. Reclassification - Where appropriate, prior period's financial information has been reclassified to conform with the current period's presentation. Other Significant Accounting Policies - The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Annual Report on Form 10-K ("Form 10-K") for the fiscal year ended June 30, 2001. 2. New Accounting Standard Statement of Financial Accounting Standards("SFAS")No.144, Accounting for the Impairment or Disposal of Long-Lived Assets, was issued in August 2001. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion). The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001 (July 1, 2002 for JHA), and interim periods within those fiscal years, with early application encouraged. Management has not completed the process of evaluating the impact that this statement will have on the Company's consolidated financial position or results of operations. 3. Interim Financial Statements The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America applicable to interim consolidated financial statements, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and accompanying notes which are included in its Form 10-K, for the year ended June 30, 2001. In the opinion of management of the Company, the accompanying condensed consolidated financial statements reflect all adjustments necessary (consisting solely of normal recurring adjustments) to present fairly the financial position of the Company as of December 31, 2001 and the results of its operations for the three and six month periods then ended and its cash flows for the six months ended December 31, 2001. The results of operations for the period ended December 31, 2001 are not necessarily indicative of the results to be expected for the entire year. 4. Additional Interim Footnote Information The following additional information is provided to update the notes to the Company's annual consolidated financial statements for developments during the six months ended December 31, 2001: Stock Repurchase Program On September 21, 2001, the Board of Directors approved a program to repurchase up to 3.0 million shares of common stock. To date 318,549 shares have been purchased for $6.7 million. Acquisition of System Legacy Solutions, Inc. (SLS) On December 1, 2001, the Company acquired all the outstanding shares of SLS for $3.0 million in cash. SLS provides technology to convert data from legacy systems into formats that can be used by newer technologies. The purchase price for SLS was allocated to the assets and liabilities acquired based on then estimated fair values at the acquisition date, resulting in allocation to goodwill of $2.48 million and to software $.45 million, which is being amortized on a straight-line basis over 10 years. 5. Shares used in computing net income per share (In Thousands) Three Months Ended Six Months Ended December 31, December 31, --------------- ----------------- 2001 2000 2001 2000 ------ ------ ------ ------ Weighted average number of common shares outstanding - basic 88,982 86,517 88,967 85,413 Common stock equivalents 3,265 5,150 3,518 4,966 ------ ------ ------ ------ Weighted average number of common and common equivalent shares outstanding - diluted 92,247 91,667 92,485 90,379 ====== ====== ====== ====== Per share information is based on the weighted average number of common shares outstanding for the periods ended December 31, 2001 and 2000. Stock options have been included in the calculation of income per share to the extent they are dilutive. Reconciliation from basic to diluted weighted average shares outstanding is the dilutive effect of outstanding stock options. 6. Business Segment Information The Company is a leading provider of integrated computer systems that perform data processing (available for in-house or outsourced installations) for banks and credit unions. The Company evaluates the performance of the banking and credit union segments and allocates resources to them based on various factors, including prospects for growth, return on investment and return on revenues. (In Thousands) Three Months Ended Six Months Ended December 31, December 31, --------------- ----------------- 2001 2000 2001 2000 ------ ------ ------- ------- Revenues: Bank systems and services $77,260 $69,541 $150,431 $139,940 Credit union systems and services 14,285 11,191 27,246 17,800 ------ ------ ------- ------- Total $91,545 $80,732 $177,677 $157,740 ====== ====== ======= ======= Gross Profit: Bank systems and services $34,657 $30,952 $ 68,830 $ 65,541 Credit union systems and services 4,354 3,815 9,230 3,858 ------ ------ ------- ------- Total $39,011 $34,767 $ 78,060 $ 69,399 ====== ====== ======= ======= 7. Goodwill and Other Intangible Assets The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective July 1, 2001. Under SFAS No. 142, goodwill and tradenames are no longer amortized but reviewed for impairment annually, or more frequently if certain indicators arise. The Company completed the transitional impairment test for tradenames with indefinite useful lives during the quarter ended September 30, 2001, and for goodwill during the quarter ended December 31, 2001, and has determined that no impairment exists. Had the Company been accounting for its goodwill and tradenames under SFAS No. 142 for all periods presented, the Company's net income and net income per share would have been adjusted as follows: (In Thousands, Except Per Share Data) Three Months Ended Six Months Ended December 31, December 31, --------------- ----------------- 2001 2000 2001 2000 ------ ------ ------ ------ Reported net income $13,034 $12,880 $27,650 $24,764 Goodwill and tradenames amortization, net of tax - 277 - 553 ------ ------ ------ ------ Adjusted net income $13,034 $13,157 $27,650 $25,317 ====== ====== ====== ====== Reported diluted net income per share $ .14 $ .14 $ .30 $ .27 Goodwill and tradenames amortization, net of tax - - - .01 ------ ------ ------ ------ Adjusted diluted net income per share $ .14 $ .14 $ .30 $ .28 ====== ====== ====== ====== Reported basic net income per share $ .15 $ .15 $ .31 $ .29 Goodwill and tradenames amortization, net of tax - - - .01 ------ ------ ------ ------ Adjusted basic net income per share $ .15 $ .15 $ .31 $ .30 ====== ====== ====== ====== Changes in the carrying amount of goodwill for the six months ended December 31, 2001, by reportable segments, are as follows: (In Thousands) Banking Credit Systems Union Systems and and Services Services Total ------ ------ ------ Balance, July 1, 2001 $10,820 $18,528 $29,348 Goodwill acquired during the period $ 2,482 - $ 2,482 ------ ------ ------ Balance, December 31, 2001 $13,302 $18,528 $31,830 ====== ====== ====== Information regarding our other intangible assets is as follows: (In Thousands) December 31, 2001 June 30, 2001 ------------------------------ ------------------------------- Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net ------ ------ ------ ------ ------ ------ Customer Relation- ships $87,089 ($22,672) $64,417 $90,612 ($22,270) $68,342 Tradenames 3,915 (216) 3,699 3,915 (216) 3,699 ------ ------ ------ ------ ------ ------ Totals $91,004 ($22,888) $68,116 $94,527 ($22,486) $72,041 Tradenames have been determined to have indefinite lives and therefore as of July 1, 2001 are no longer amortized. Customer relationships have lives ranging from 3 to 20 years. Amortization expense for other intangible assets was $1,528 and $2,345 for the three month and $3,305 and $4,679 for the six month periods ended December 31, 2001 and 2000, respectively.
Item 2. - Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS Background and Overview The Company is a leading provider of integrated computer systems to banks with under $10 billion of total assets, credit unions and other financial institutions in the United States. We offer a complete, integrated suite of data processing system solutions to improve our customers' management of their entire back-office and customer interaction processes. We believe our solutions enable our customers to provide better service to their customers and compete more effectively against larger banks and alternative financial institutions. Our customers either install and use our systems in-house or outsource these operations to us. We perform data conversion, hardware and software installation and software customization for the implementation of our systems and applications. We also provide continuing customer support services to ensure proper product performance and reliability, which provides us with continuing client relationships and recurring revenue. A detailed discussion of the major components of the results of operations for the three and six month periods ended December 31, 2001, as compared to the same period in the previous year follows (In Millions, Except Per Share Data): Revenues Revenues increased 13% to $91.5 for the three months ended December 31, 2001 from $80.7 for the same period last year. Non-hardware revenues increased 14% to $64.8, accounting for 71% of second quarter 2002 revenues, compared to $56.8 in the second quarter a year ago, representing 70% of revenue. The Support and services revenues increased 30% to $41.9 for the three months ended December 31, 2001 compared to $32.3 in the same period in the previous year. Licensing and installation revenues decreased 7% from $24.6 for the three months ended December 31, 2000 to $22.9 for the three months ended December 31, 2001. Hardware sales grew 12% to $26.8 or 29% of total revenues for the second quarter compared to $23.9 or 30% of total revenues in the same period in the previous year. For the six months ended December 31, 2001, total revenues grew 13% to $177.7 compared to $157.7 in the first half of fiscal 2001. Non-hardware revenues increased 16% to $128.6 compared to $110.8, and support and services rose 33% to $83.5 with licensing and installation revenues decreasing 6% at $45.1. For the six months ended December 31, 2001, hardware sales increased 4% to $49.0 compared to $47.0 a year ago. Support and services revenue growth for the three and six months ended December 31, 2001 is attributable to continuing growth in both in-house and outsourcing services, much of which is recurring revenue. We believe that the decline in licensing and installation revenue is due to customers postponing investments this fall, as a result of general weakness in the economy and the tragic events of September 11th. The increase in hardware sales for the three and six months ended December 31, 2001 is primarily due to hardware upgrades and new hardware related to complementary software products. Our backlog increased at December 31, 2001 to $132.1 ($52.3 in-house and $79.8 outsourcing) from $128.9 ($49.8 in-house and $79.1 outsourcing) at September 31, 2001 and $110.8 ($44.7 in-house and $66.1 outsourcing) at December 31, 2000. Backlog at January 31, 2002 was $134.4 ($56.7 in-house and $77.7 outsourcing) Cost of Sales Cost of sales increased 14% for the three months ended December 31, 2001. Cost of services increased 12%, while the cost of hardware increased 17% over the same three month period last year. Cost of sales increased 13% for the first six months of fiscal 2002. Cost of services increase 17%, while the cost of hardware increased 5% over the same six months last year. For the three and six months period ended December 31, 2001 cost of sales has increased consistently with the increase in revenue along with the cost of services increasing consistently with non-hardware revenues. Cost of hardware increased more than the increase in hardware revenue, due to reduced incentives from hardware suppliers. Incentives from suppliers are adjusted during the fourth calendar quarter annually based on prior year volumes. Gross Profit Gross profit was up 12% for the three months ended December 31, 2001 to $39.0 or 43% of total revenues, compared to $34.8 or 43% of revenues in the second quarter a year ago. Non-hardware margin was flat at 47% for this quarter and the same quarter last year. Hardware margin was 31% compared to 35% in the second quarter a year ago, due to reduced incentives from hardware suppliers. For the six months ended December 31, 2001, gross profit was up 12% to $78.1 or 44% of revenues compared to $69.4, also 44% of the revenues for the same period last year. Non-hardware margin was 48% or $62.3 in the first half of fiscal 2002, compared to 49% or $54.0 for the same period last year. Hardware margin was 32% or $15.8 for the first six months this fiscal year compared to 33% or $15.4 for the same six months last year. Operating Expenses Total operating expenses increased 28% in the three months ended December 31, 2001 compared to the same period in the prior year. Selling and marketing expenses increased 21%, research and development expenses increased 25% and general and administrative expenses increased 36% in the same three month period. Total operating expenses increased 17% in the six months ended December 31, 2001 compared to the same period in the prior year. Selling and marketing increased 1%, research and development increased 24% and general and administrative increased 32% compared to the same six month period last year. Selling and marketing expense increased for the second quarter, but remained fairly flat for the first half of the fiscal year 2002. The fluctuation is attributable to the sales of different product mix and incentives. Research and development increased due to the new imaging products being available in the first half of fiscal year 2002. The direct costs associated with the development of our new imaging products, which were in general availability in October 2001 are now expensed as incurred and are no longer being capitalized as they were in fiscal 2001 during the development stage of the products. General and administrative expenses increased primarily due to employee benefits and depreciation expense. Depreciation and amortization expenses were higher due to capital investments made in fiscal 2001 for infrastructure expansion. Other Income (Expense) Other income for the three months ended December 31, 2001 reflects a significant increase of 81% when compared to the same period last year. Interest expense was half of last years' expense while interest income increased 45%. The net increase in other income of $1.1 for the first half of fiscal 2002 is primarily due to net interest expense last year from short-term borrowing compared to net interest income this year from cash investments. Net Income Net income for the second quarter was $13.0, or $.14 per diluted share compared to $12.9, or $.14 per diluted share in the same period last year. Net income for the first half of fiscal 2002 was $27.6, or $.30 per diluted share compared to $24.7, or $.27 per diluted share in the same period last year. Business Segment Discussion Revenues in the bank systems and services business segment increased 11% from $69.5 to $77.3 for the three months ended December 31, 2000 and 2001, respectively. Gross profit increased 12% from $30.9 in the second quarter of the previous year to $34.7 in the current second quarter, while gross margins stayed the same at 45% for current second quarter compared to the same quarter in the previous year. Gross margins remained unchanged primarily due to sales mix. Revenues in the credit union systems and services business segment increased 28% from $11.2 to $14.3 for the three months ended December 31, 2000 and 2001, respectively. Gross profit increased 14% from $3.8 in the second quarter of the previous year to $4.4 in the current second quarter, while gross margins decreased slightly in the current second quarter compared to the same quarter in the previous year to 31% from 34% due to sales mix. Revenues in the bank systems and services business segment increased 7% from $139.9 to $150.5 for the six months ended December 31, 2000 and 2001, respectively. Gross profit increased 5% from $65.5 for the six months ended December 31, 2000 to $68.8 for the six months ending December 31, 2001. Gross margins decreased slightly from 47% last year to date, to 46% in the first half of fiscal year 2002. Revenues in the credit union systems and services business segment increased 53% from $17.8 to $27.2 for the six months ended December 31, 2000 and 2001, respectively. Gross profit increased 139% from $3.8 in the six month period of the previous year to $9.2 in the current six month period, while gross margins increased from 22% to 34% for the six months ended December 31, 2000 and 2001, respectively. Increase in gross margin is primarily due to significant increase in revenue which allows better utilization of resources. FINANCIAL CONDITION Liquidity The Company's cash and cash equivalents and investments increased to $37.8 at December 31, 2001, from $19.6 at June 30, 2001. JHA has available credit lines totaling $58.0, although the Company expects additional borrowings to be minimal during fiscal year 2002. Capital Requirements and Resources JHA generally uses existing resources and funds generated from operations to meet its capital requirements. Capital expenditures totaling $23.1 and $28.7 for the six month periods ended December 31, 2001 and 2000, respectively, were made for expansion of facilities and additional equipment. These were funded from cash generated by operations. The consolidated capital expenditures of JHA, excluding acquisition costs, could exceed $50.0 for fiscal year 2002. The Company paid a $.03 per share cash dividend on December 4, 2001 to stockholders of record on November 20, 2001 which was funded from operations. In addition, the Company's Board of Directors, subsequent to December 31, 2001, declared a quarterly cash dividend of $.035 per share on its common stock payable February 28, 2002 to stockholders of record on February 13, 2002. This dividend will be funded by cash generated from operations. Forward Looking Statements The Management's Discussion and Analysis of Results of Operations and Financial Condition and other portions of this report contain forward- looking statements within the meaning of federal securities laws. Actual results are subject to risks and uncertainties, including both those specific to the Company and those specific to the industry, which could cause results to differ materially from those contemplated. The risks and uncertainties include, but are not limited to, the matters detailed at Risk Factors in its Annual Report on Form 10-K for the fiscal year ended June 30, 2001. Undue reliance should not be placed on the forward-looking statements. The Company does not undertake any obligation to publicly update any forward-look statements. CONCLUSION JHA's results of operations and its financial position continued to be favorable during the six months ended December 31, 2001. This reflects the continuing attitude of cooperation and commitment by each employee, management's ongoing cost control efforts and commitment to deliver top quality products and services to the markets it serves. Item 3. Quantitative and Qualitative Disclosure about Market Risk Market risk refers to the risk that a change in the level of one or more market prices, interest rates, indices, volatilities, correlations or other market factors such as liquidity, will result in losses for a certain financial instrument or group of financial instruments. We are currently exposed to credit risk on credit extended to customers, interest risk on investments in U.S. government securities and long-term debt. We actively monitor these risks through a variety of controlled procedures involving senior management. We do not currently use any derivative financial instruments. Based on the controls in place, credit worthiness of the customer base and the relative size of these financial instruments, we believe the risk associated with these exposures will not have a material adverse effect on our consolidated financial position or results of operations.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on behalf of the undersigned thereunto duly authorized. JACK HENRY & ASSOCIATES, INC. Date: February 14, 2002 /s/ Michael E. Henry ----------------- -------------------- Michael E. Henry Chairman of the Board Chief Executive Officer Date: February 14, 2002 /s/ Kevin D. Williams ----------------- -------------------- Kevin D. Williams Treasurer and Chief Financial Officer