HENRY JACK & ASSOCIATES INC (JKHY) SPO
|Company Name||HENRY JACK & ASSOCIATES INC|
|Company Address||PO BOX 807
663 HWY 60
MONETT, MO 65708-0807
|CEO||Michael E. Henry|
|Employees (as of 6/30/2000)||1589|
|State of Inc||DE|
|Fiscal Year End||6/30|
|Exchange||Nasdaq National Market|
|Shares Over Alloted||0|
|Shareholder Shares Offered||1,800,000|
|Lockup Period (days)||180|
|Quiet Period Expiration||9/5/2000|
We estimate that the net proceeds to Jack Henry & Associates from our sale of the 1,500,000 shares of common stock in this offering will be approximately $60.7 million after deducting underwriting discounts and commissions and estimated offering expenses payable by Jack Henry & Associates. We will not receive any proceeds from the sale of shares by the selling stockholders. We intend to use these net proceeds for the repayment of debt, working capital, capital expenditures and other general corporate purposes. We plan to repay all debt outstanding under our $75.0 million bank credit facility, which outstanding debt is approximately $46.5 million at the time of completion of this offering. This debt had an effective interest rate of 7.63% at June 30, 2000, and the credit facility matures on June 15, 2001. We also may use a portion of the net proceeds to acquire, invest or joint venture in software businesses, software products and outsourcing operations that are complementary to our business. We currently have no commitments or agreements with respect to any acquisition, investment or joint venture. Pending the uses described above, we will invest the net proceeds in short-term, interest-bearing, investment-grade securities or guaranteed obligations of the U.S. government.
The market for companies that provide technology solutions to community financial institutions is competitive and fragmented, and we expect continued competition from both existing competitors and companies that enter our existing or future markets. Some of our current competitors have longer operating histories, larger customer bases and greater financial and other resources. The principal competitive factors affecting the market for our services include comprehensiveness of the applications, features and functionality, flexibility and ease of use, customer support, references from existing customers and price. We compete with large vendors that offer transaction processing products and services to financial institutions, including Bisys, Inc., AllTel Information Services, Fiserv, Inc. and Marshall and Ilsley Corporation. In addition, we compete with a number of providers that offer one or more specialized products or services. There has been significant consolidation among providers of information technology products and services to financial institutions, and we believe this consolidation will continue in the future.
OVERVIEW Jack Henry & Associates, Inc. is a leading provider of integrated computer systems to banks with under $10.0 billion of total assets, which we refer to as community banks, as well as 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 on a turn-key basis. We perform data conversion, hardware and software installation and software customization for the implementation of our systems and applications. We also provide continuing customer maintenance and support services to ensure proper product performance and reliability, which provides us with continuing client relationships and recurring revenue. For our customers who prefer not to acquire hardware and software, we provide turn-key outsourcing services through nine data centers and 14 item processing centers located across the United States. Our gross revenue has grown from $67.2 million in fiscal 1995 to $193.5 million in fiscal 1999, representing a compound annual growth rate over this five-year period of 30.3%. Net income from continuing operations has grown from $9.1 million in fiscal 1995 to $32.7 million in fiscal 1999, a compound annual growth rate of 37.7%. INDUSTRY BACKGROUND According to the Automation in Banking 1999 report, all financial institutions, including both the largest banks in the United States and our target market of community banks and credit unions, increased spending on hardware, software, services and telecommunications to $32.0 billion in 1998 from $19.9 billion in 1994, representing a compound annual growth rate of 12.6%. An industry survey shows that 93% of community financial institutions believe upgrading technology is the most important issue to their continued success. We believe that the market opportunity for providers of hardware and software systems, maintenance, support and related outsourcing services targeted toward community banks and credit unions will continue to grow as a result of the competitive pressure on financial institutions. There are approximately 8,600 commercial banks and 11,000 credit unions in the United States. Our primary market has historically been commercial banks with less than $10.0 billion in assets, of which there were approximately 8,500 at December 31, 1999. As of December 31, 1999, community banks had aggregate assets of approximately $1.9 trillion. Consolidation within the financial services industry has resulted in a 3.9% compound annual decline in the population of community banks and a 1.6% compound annual decline in their aggregate assets between 1994 and 1999. As the result of two of our recent acquisitions, we have also begun serving credit unions in the United States. These are cooperative, not-for-profit financial institutions organized to promote savings and provide credit to their members. As of December 31, 1999, there were 10,628 federally insured credit unions in the United States. Although the number of these credit unions has declined at a 2.4% compound annual rate between 1994 and 1999, their aggregate assets have increased at a 7.3% compound annual rate to $411.4 billion in 1999. We believe that community banks and credit unions play an important role with the communities and customers they serve. Typically, customers of community banks and credit unions rely on these financial institutions because of their ability to provide personalized, relationship-based service and their focus on local community and business needs. We believe these core strengths will allow community banks and credit unions to effectively compete with larger banks and alternative financial institutions. In order to succeed and to maintain strong customer relationships, we believe community banks and credit unions must continue to: - focus on their primary products and services; - respond rapidly to customer demand for new products and services; - implement advanced technologies, such as Internet banking, for interfacing with and marketing to their customers; - use advanced technologies in back-office operations to improve operating efficiency and control costs while increasing service and lowering costs to their customers; and - integrate products and services into their core service offerings and data processing infrastructure, to provide the same wide range of services as are offered by larger banks. In 1998, approximately 60% of commercial banks utilized in-house hardware and software systems to perform all of their core systems and data processing functions. Off-site data processing centers provided systems services on an outsourced basis for the remaining 40% of banks. Since the mid-1980s, banks have tended to shift their data processing requirements in-house from outsourcing such functions to third-party data centers. Of the community banks in the United States with in-house installations, approximately 42%, 24%, and 21% utilize IBM, NCR and Unisys hardware, respectively. No other hardware platform had more than a 6% share of the market. The Internet is becoming a powerful and efficient medium for the delivery of financial services, including Internet banking, bill payment, bill presentment and other services for individuals, and cash management and other services for the commercial customers of financial institutions. Financial institutions provide Internet banking solutions to retain customers, attract new customers, reduce operating costs, and gain non-interest sources of revenue. According to industry sources, over 60 of the 100 largest banks in the United States offer Internet banking. By contrast, approximately 10% of community banks currently offer Internet banking. We believe that community financial institutions risk losing customers to larger or alternative financial institutions if they do not offer Internet banking services.
|Auditor||Deloitte & Touche LLP|
|Company Counsel||Shughart Thomson and Kilroy, P.C|
|Lead Underwriter||Prudential Securities Inc|
|Transfer Agent||UMB Bank, N.A|
|Underwriter||A.G. Edwards and Sons, Inc|
|Underwriter||CIBC World Markets Corp|
|Underwriter||George K. Baum and Co.|
|Underwriter||Robert W. Baird & Co. Incorporated|
|Underwriter Counsel||Brown and Wood LLP|
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