February 29, 2008 - Jack Henry & Associates (JKHY-NASDAQ) provides integrated in-house and outsourced computer systems to banks and credit unions. Products include core processing systems, electronic funds transfer (EFT) systems, automated teller machine networking products, digital check and document imaging and storage systems, Internet banking tools, and customer relationship management (CRM) software. The company's Symitar division offers service bureau, data processing, and other software for credit unions, while its ProfitStar brand offers revenue management products.

Helping those banks certainly helps Jack Henry's bottom line. The company showed solid earnings growth over the last 5 years, increasing eps, on average, 12% a year. 2007 finished with $1.14 a share, up from 96 cents in 2006 and 81 cents in 2005. Analysts are looking for $1.28 this year. Over the next 5 years, predictions are for annual average growth of 13.5% with revenues increasing by 12% a year, on average, in the same time period. Support and service sales are 75% of revenues.

The company has contracts that usually run for several years so investors can count on certain core revenues being there. Backlog is growing for the company as banks and credit unions order more services and hardware, specifically for in-house support, electronic funds transfer and ATM/Debit card switch services.

Once the economic slump is passed, JKHY should benefit from increases in information technology spending which banks and credit unions usually deploy when times are better. With good cash flow, the company will most likely add new acquisitions which offer more services or niche banking products. If the economy doesn't turn around, the company still has contracts in place which will help it through the difficult times. Even in the current environment the company hasn't seen any slow down in spending for its services.

Some more numbers: Current assets equal current liabilities. Market cap is $2.2 billion on 87.3 million shares. Net profit margin is 15.7%. Revenues were $668 million last year with predictions of $765 million this year. There is an annual dividend of 26 cents a share. There is no debt on the balance sheet.

Jack Henry is to the banking industry what Levi Strauss was to the miners: an important element of success. Banks and credit unions, particularly the thousands of small ones, need the efficiencies that JKHY provides. Doing it in-house for them is too expensive. The future looks bright for JKHY, as long as the economy doesn't go into total meltdown, or for that matter, the banking industry, caused by too many credit problems.

- Company Web site: www.jackhenry.com

- Ted Allrich