Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

	Reports of Independent Registered Public Accounting Firm	36
	Management's Annual Report on Internal Control over Financial Reporting	38
	Financial Statements
	Consolidated Statements of Income,
	Years Ended June 30, 2016, 2015, and 2014	39
	Consolidated Balance Sheets,
	June 30, 2016 and 2015	40
	Consolidated Statements of Changes in Stockholders' Equity,
	Years Ended June 30, 2016, 2015, and 2014	41
	Consolidated Statements of Cash Flows,
	Years Ended June 30, 2016, 2015, and 2014	42
	Notes to Consolidated Financial Statements	43

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.

In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, changes in stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Jack Henry & Associates, Inc. and its subsidiaries at June 30, 2016, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, 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 opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated 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 the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A 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 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri

August 29, 2016

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 sheet of Jack Henry & Associates, Inc. and subsidiaries (the "Company") as of June 30, 2015, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2015. 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, 2015, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

/s/Deloitte & Touche LLP

Kansas City, Missouri

September 11, 2015

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, as such term is defined in Exchange Act Rule 13a-15(f). 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 of the Company; 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 of the Company are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. All internal controls, no matter how well designed, have inherent limitations. Therefore, even where internal control over financial reporting is determined to be effective, it can provide only reasonable assurance. Projections of any evaluation of effectiveness to future periods are subject to the risk controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

As of June 30, 2016, 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 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded the Company’s internal control over financial reporting as of June 30, 2016 was effective.

The Company’s internal control over financial reporting as of June 30, 2016 has been audited by the Company’s independent registered public accounting firm, as stated in their report appearing in this Item 8.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
	Year Ended
	June 30,
	2016				2015				2014
REVENUE
License	$	3,041			$	2,635			$	2,184
Support and service	1,300,978				1,200,652				1,112,331
Hardware	50,627				52,903				58,658
Total revenue	1,354,646				1,256,190				1,173,173
COST OF SALES
Cost of license	1,197				1,187				908
Cost of support and service	737,108				680,750				634,756
Cost of hardware	35,346				38,399				43,708
Total cost of sales	773,651				720,336				679,372
GROSS PROFIT	580,995				535,854				493,801
OPERATING EXPENSES
Selling and marketing	90,079				89,004				85,443
Research and development	81,234				71,495				66,748
General and administrative	67,514				64,364				53,312
Gain on disposal of a business	(19,491		)		(6,874		)		—
Total operating expenses	219,336				217,989				205,503
OPERATING INCOME	361,659				317,865				288,298
INTEREST INCOME (EXPENSE)
Interest income	307				169				377
Interest expense	(1,430		)		(1,594		)		(1,105		)
Total interest income (expense)	(1,123		)		(1,425		)		(728		)
INCOME BEFORE INCOME TAXES	360,536				316,440				287,570
PROVISION FOR INCOME TAXES	111,669				105,219				100,855
NET INCOME	$	248,867			$	211,221			$	186,715
Basic earnings per share	$	3.13			$	2.60			$	2.20
Basic weighted average shares outstanding	79,416				81,353				84,866
Diluted earnings per share	$	3.12			$	2.59			$	2.19
Diluted weighted average shares outstanding	79,734				81,601				85,396

See notes to consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
	June 30, 2016				June 30, 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	70,310			$	148,313
Receivables, net	253,923				245,387
Income tax receivable	15,636				2,753
Prepaid expenses and other	56,588				69,096
Deferred costs	35,472				27,950
Total current assets	431,929				493,499
PROPERTY AND EQUIPMENT, net	298,564				296,332
OTHER ASSETS:
Non-current deferred costs	99,799				96,423
Computer software, net of amortization	222,115				191,541
Other non-current assets	70,461				52,432
Customer relationships, net of amortization	104,085				122,204
Other intangible assets, net of amortization	35,706				34,038
Goodwill	552,853				550,366
Total other assets	1,085,019				1,047,004
Total assets	$	1,815,512			$	1,836,835
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	14,596			$	9,933
Accrued expenses	85,411				78,962
Accrued income taxes	—				5,543
Deferred income tax liability	—				7,034
Notes payable and current maturities of long term debt	200				2,595
Deferred revenues	343,525				339,544
Total current liabilities	443,732				443,611
LONG TERM LIABILITIES:
Non-current deferred revenues	177,529				192,443
Non-current deferred income tax liability	188,601				150,223
Debt, net of current maturities	—				50,102
Other long-term liabilities	9,440				8,922
Total long term liabilities	375,570				401,690
Total liabilities	819,302				845,301
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—				—
Common stock - $0.01 par value; 250,000,000 shares authorized; 102,903,971 shares issued at June 30, 2016; 102,695,214 shares issued at June 30, 2015	1,029				1,027
Additional paid-in capital	440,123				424,536
Retained earnings	1,431,192				1,266,443
Less treasury stock at cost 24,208,517 shares at June 30, 2016; 21,842,632 shares at June 30, 2015	(876,134		)		(700,472		)
Total stockholders' equity	996,210				991,534
Total liabilities and equity	$	1,815,512			$	1,836,835

See notes to consolidated financial statements

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands, Except Share and Per Share Data)
	Year Ended June 30,
	2016				2015				2014
PREFERRED SHARES:	—				—				—
COMMON SHARES:
Shares, beginning of year	102,695,214				102,429,926				101,993,808
Shares issued for equity-based payment arrangements	121,348				172,661				344,372
Shares issued for Employee Stock Purchase Plan	87,409				92,627				91,746
Shares, end of year	102,903,971				102,695,214				102,429,926
COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of year	$	1,027			$	1,024			$	1,020
Shares issued for equity-based payment arrangements	1				2				3
Shares issued for Employee Stock Purchase Plan	1				1				1
Balance, end of year	$	1,029			$	1,027			$	1,024
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year	$	424,536			$	412,512			$	400,710
Shares issued upon exercise of stock options	696				640				606
Tax withholding related to share based compensation	(2,590		)		(7,951		)		(6,598		)
Shares issued for Employee Stock Purchase Plan	5,710				4,880				4,283
Tax benefits from share-based compensation	1,051				4,343				3,420
Stock-based compensation expense	10,720				10,112				10,091
Balance, end of year	$	440,123			$	424,536			$	412,512
RETAINED EARNINGS:
Balance, beginning of year	$	1,266,443			$	1,131,632			$	1,016,168
Net income	248,867				211,221				186,715
Dividends	(84,118		)		(76,410		)		(71,251		)
Balance, end of year	$	1,431,192			$	1,266,443			$	1,131,632
TREASURY STOCK:
Balance, beginning of year	$	(700,472	)		$	(577,781	)		$	(402,082	)
Purchase of treasury shares	(175,662		)		(122,691		)		(175,699		)
Balance, end of year	$	(876,134	)		$	(700,472	)		$	(577,781	)
TOTAL STOCKHOLDERS' EQUITY	$	996,210			$	991,534			$	967,387
Dividends declared per share	$	1.06			$	0.94			$	0.84

See notes to consolidated financial statements.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
	Year Ended
	June 30,
	2016				2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	248,867			$	211,221			$	186,715
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	50,571				54,155				52,935
Amortization	79,077				64,841				54,836
Change in deferred income taxes	37,524				29,443				12,752
Excess tax benefits from stock-based compensation	(1,306		)		(4,343		)		(3,406		)
Expense for stock-based compensation	10,720				10,112				10,091
(Gain)/loss on disposal of assets and businesses	(16,888		)		(5,046		)		(784		)
Changes in operating assets and liabilities:
Change in receivables	(13,735		)		(21,346		)		7,498
Change in prepaid expenses, deferred costs and other	(29,577		)		(33,858		)		(28,565		)
Change in accounts payable	4,663				(583		)		(1,252		)
Change in accrued expenses	7,460				14,483				(6,364		)
Change in income taxes	(16,624		)		14,146				5,251
Change in deferred revenues	4,364				40,565				51,952
Net cash from operating activities	365,116				373,790				341,659
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	(8,275		)		—				(27,894		)
Capital expenditures	(56,325		)		(54,409		)		(33,185		)
Proceeds from the sale of businesses	34,030				8,135				—
Proceeds from the sale of assets	2,844				182				7,781
Internal use software	(11,826		)		(14,020		)		(16,288		)
Computer software developed	(96,411		)		(76,872		)		(62,194		)
Net cash from investing activities	(135,963		)		(136,984		)		(131,780		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities	100,000				90,000				25,000
Repayments on credit facilities	(152,500		)		(50,783		)		(47,158		)
Debt acquisition costs	—				(901		)		—
Purchase of treasury stock	(175,662		)		(122,691		)		(175,699		)
Dividends paid	(84,118		)		(76,410		)		(71,251		)
Excess tax benefits from stock-based compensation	1,306				4,343				3,406
Proceeds from issuance of common stock upon exercise of stock options	697				642				609
Minimum tax withholding payments related to share based compensation	(2,590		)		(7,951		)		(6,598		)
Proceeds from sale of common stock	5,711				4,881				4,284
Net cash from financing activities	(307,156		)		(158,870		)		(267,407		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(78,003	)		$	77,936			$	(57,528	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	148,313			$	70,377			$	127,905
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,310			$	148,313			$	70,377

See notes to consolidated financial statements

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), 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.

PRIOR PERIOD RECLASSIFICATION

Certain amounts included within the consolidated statements of income and the consolidated statement of cash flows for the year ended June 30, 2015 have been reclassified to separately disclose the gain on disposal of businesses and proceeds from the sale of businesses. This adjustment resulted in disclosures on disposal of a business as a separate line to the consolidated statements of income and increased general and administrative operating expense by $6,874 for June 30, 2015. This new line only included gains on the sales of businesses. All other gains and losses on assets are still included in the line items to which they relate. There was no change in total operating expenses. The adjustment also resulted in a separate line on the consolidated statements of cash flows for proceeds from the sale of businesses and decreased proceeds from sale of assets by $8,135 for June 30, 2015. There was no change to net cash from investing activities or total cash flows.

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 arrangements, support and service fees (non-software) and hardware sales. There are no rights of return, condition of acceptance or price protection in the Company’s sales contracts.

License Arrangements: For software license agreements, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, the fee is fixed or determinable and collection is probable. For arrangements where the fee is not fixed or determinable, revenue is deferred until payments become due. The Company’s software license agreements generally include multiple products and services or “elements.” Generally, none of these elements are deemed to be essential to the functionality of the other elements.

For multiple element arrangements, which contain software elements and non-software elements, we allocate revenue to the software deliverables and the non-software deliverables as a group based on the relative selling prices of all of the deliverables in the arrangement. For our non-software deliverables, we allocate the arrangement consideration based on the relative selling price of the deliverables using estimated selling price ("ESP"). For our software elements, we use vendor-specific objective evidence ("VSOE") for this allocation when it can be established and ESP when VSOE cannot be established.

The selling price for each element is based upon the following selling price hierarchy: VSOE if available, third party evidence ("TPE") if VSOE is not available, or ESP if neither VSOE or TPE are available. Generally, we are not able to determine TPE because our go-to-market strategy differs from that of our peers and our offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality cannot be obtained. ESP is determined after considering both market conditions (such as the sale of similar products in the market place) and entity-specific factors (such as pricing practices and the specifics of each transaction).

For our non-software deliverables, a delivered item is accounted for as a separate unit of accounting if the delivered item has standalone value and if the customer has a general right of return relative to the delivered item, delivery or performance of the undelivered item is probable and substantially within our control.

For our software licenses and related services, including the software elements of multiple-element software and non-software arrangements, 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. VSOE of fair value is determined for implementation services based on a rate per hour for stand-alone professional services and the estimated hours for the bundled implementation, if the hours can be reasonably estimated. VSOE of fair value is determined for post-contract support ("PCS") based upon the price charged when sold separately. For a majority of the elements within our software arrangements, we have determined that VSOE cannot be established; therefore, revenue on our software arrangements is generally deferred until the only remaining element is post-contract support ("PCS"). At that point, the entire arrangement fee is recognized ratably over the remaining PCS period, assuming that all other criteria for revenue recognition have been met. The amounts deferred are included in the balance sheet as deferred revenue and recognized as Bundled Products & Services revenue within Support & Service revenue in the consolidated statements of income.

For arrangements that include specified upgrades, such upgrades are accounted for as a separate element of the arrangement. For those specified upgrades for which VSOE of fair value cannot be determined, revenue related to the software elements within the arrangement is deferred until such specified upgrades have been delivered.

Total revenue recognized ratably related to our Bundled Products & Services was $94,391, $62,888, and $60,685 for the years ended June 30, 2016, 2015, and 2014, respectively.

Support and Service Fee Revenue (Non-software): Maintenance support revenue contracted for outside of a license arrangement is recognized pro-rata over the contract period, typically one year.

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. The revenue related to these hardware sales is recorded gross. The Company also remarkets maintenance contracts on hardware to our customers. Hardware maintenance revenue is recognized ratably over the agreement period.

Revenue-based taxes collected from customers and remitted to governmental authorities are presented on a net basis (i.e. excluded from revenues).

DEFERRED COSTS

Costs for certain software and hardware maintenance contracts with third parties, which are prepaid, are recognized ratably over the life of the maintenance contract, generally one to five years, with the related revenue amortized from deferred revenues.

Direct and incremental costs associated with arrangements subject to Accounting Standards Codification ("ASC") 985-605 (for which VSOE of fair value cannot be established) are deferred until the only remaining element in the revenue arrangement is PCS at which point the costs are recognized ratably over the remaining PCS period with the related revenue. Deferred direct and incremental costs associated with arrangements not subject to ASC 985-605 consist primarily of certain up-front costs incurred in connection with our software hosting arrangements and are recognized ratably over the contract period which typically ranges from 5-7 years. These costs include commissions, costs of third-party licenses and the direct costs of our implementation services, consisting of payroll and other fringe benefits.

DEFERRED REVENUES

Deferred revenues consist primarily of prepaid annual software support fees, deferred bundled software arrangements revenue, and prepaid hardware maintenance fees. Deferred bundled software arrangements revenue and hardware maintenance contracts may be recognized over multiple years; therefore, the related deferred revenue and maintenance are classified as current or non-current in accordance with the terms of the contract. Software and hardware deposits received are also reflected as deferred revenues.

The vast majority of our maintenance (PCS) renews annually and runs from July 1 to June 30. Renewal billings are submitted to customers each June and the Company has the right to bill at that date; therefore we include those billings as gross in deferred revenue and as a receivable on our balance sheet at the end of each fiscal year.

COMPUTER SOFTWARE DEVELOPMENT

The Company capitalizes new product development costs incurred for software to be sold 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. 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. All of this amortization expense is included within Cost of support and service.

The Company capitalizes development costs for internal use software beginning at the start of application development. Amortization begins on the date the software is placed in service and the amortization period is based on estimated useful life.

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.

ACCOUNTS RECEIVABLE

Receivables are recorded at the time of billing. A reasonable estimate the realizability of customer receivables is made through the establishment of an allowance for doubtful accounts, which is estimated based on a combination of write-off history, aging analysis, and any specifically known collection issues.

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is stated at cost and depreciated 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 three to twenty years.

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 ending June 30, 2016, 2015, and 2014 equals the Company’s net income.

REPORTABLE SEGMENT INFORMATION

In accordance with U.S. GAAP, the Company's operations are classified as two reportable 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 facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At June 30, 2016, there were 24,209 shares in treasury stock and the Company had the remaining authority to repurchase up to 5,782 additional shares. The total cost of treasury shares at June 30, 2016 is $876,134. During fiscal 2016, the Company repurchased 2,366 treasury shares for $175,662. At June 30, 2015, there were 21,843 shares in treasury stock and the Company had authority to repurchase up to 8,148 additional shares.

Dividends declared per share were $1.06, $0.94, and $0.84 for the years ended June 30, 2016, 2015, and 2014, respectively.

EARNINGS 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 and restricted stock (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 benefit 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

The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers in May 2014. The new standard will supersede much of the existing authoritative literature for revenue recognition. In August 2015, the FASB also issued ASU No. 2015-14 which deferred the effective date of the new standard by one year. The standard and related amendments will be effective for the Company for its annual reporting period beginning July 1, 2018, including interim periods within that reporting period. Along with the deferral of the effective date, ASU No. 2015-14 allows early application as of the original effective date. Entities are allowed to transition to the new standard by either recasting prior periods or recognizing the cumulative effect as of the beginning of the period of adoption. In March 2016, the FASB issued ASU No. 2016-08, which addresses principal versus agent considerations under the new revenue standard. ASU No. 2016-10 and ASU No. 2016-12 issued in April and May 2016 also address specific aspects of the new standard. The Company is currently evaluating the newly issued guidance, including which transition approach will be applied and the estimated impact it will have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This ASU requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability (same treatment as debt discounts). ASU No. 2015-03 will be effective for the Company in its fiscal year ended June 30, 2017. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company currently classifies debt issuance costs as an asset, and will adopt these changes beginning July 1, 2016.

ASU No. 2015-17 was issued by the FASB in November 2015 as part of the Simplification Initiative. This ASU eliminates the requirement to separate deferred income tax liabilities and assets into non-current and current amounts. ASU No. 2015-17 is effective for the Company for its annual reporting period beginning July 1, 2017 and early adoption is permitted. In the third quarter of fiscal 2016, management elected to early adopt and all deferred income tax assets and liabilities are reported as non-current. At March 31, 2016, the current portion of our deferred income tax liability was $7,034. Prior periods were not retrospectively adjusted.

The FASB issued ASU No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information regarding leasing arrangements. ASU No. 2016-02 will be effective for Jack Henry's annual reporting period beginning July 1, 2019 and early adoption is permitted. The Company is currently assessing the impact this new standard will have on our consolidated financial statements.

The FASB issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting in March 2016. The new standard will simplify several aspects of the accounting for share-based payment transactions, including reporting of excess tax benefits and shortfalls, application of forfeiture rates, statutory minimum withholding considerations, and classification within the statement of cash flows. ASU No. 2016-09 is effective for the Company’s annual reporting period beginning July 1, 2017 and early adoption is permitted. The Company is currently evaluating the newly issued guidance, including the estimated impact it will have on our consolidated financial statements. The Company currently anticipates the changes will be adopted in the first quarter of the annual reporting period beginning July 1, 2016.

NOTE 2. FAIR VALUE OF FINANCIAL INSTRUMENTS

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 and liabilities. The fair value of long term debt also approximates carrying value as estimated using discounted cash flows based on the Company’s current incremental borrowing rates.

The Company's estimates of the fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in valuation, gives the highest priority to quoted prices in active markets, and requires that observable inputs be used in the valuations when available. The three levels of the hierarchy are as follows:

Level 1: inputs to the valuation are quoted prices in an active market for identical assets

Level 2: inputs to the valuation include quoted prices for similar assets in active markets that are observable either directly or indirectly

Level 3: valuation is based on significant inputs that are unobservable in the market and the Company's own estimates of assumptions that we believe market participants would use in pricing the asset

Fair value of financial assets, included in cash and cash equivalents, and financial liabilities is as follows:

		Estimated Fair Value Measurements												Total Fair
		Level 1				Level 2				Level 3				Value
June 30, 2016
Financial Assets:
Money market funds		$	35,782			$	—			$	—			$	35,782
Financial Liabilities:
Revolving credit facility		$	—			$	—			$	—			$	—
June 30, 2015
Financial Assets:
Money market funds		$	98,888			$	—			$	—			$	98,888
Financial Liabilities:
Revolving credit facility		$	—			$	50,000			$	—			$	50,000

NOTE 3. PROPERTY AND EQUIPMENT

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

	June 30,
	2016				2015				Estimated Useful Life
Land	$	24,987			$	24,987
Land improvements	25,470				25,428				5 - 20 years
Buildings	146,464				144,414				20 - 30 years
Leasehold improvements	46,897				32,169				5 - 30 years	(1)
Equipment and furniture	337,565				327,949				3 - 10 years
Aircraft and equipment	37,967				37,695				5 - 10 years
Construction in progress	7,373				23,563
	626,723				616,205
Less accumulated depreciation	328,159				319,873
Property and equipment, net	$	298,564			$	296,332

(1) Lesser of lease term or estimated useful life

Property and equipment included $651 and $1,343 that was in accrued liabilities at June 30, 2016 and 2015, respectively. Also, the Company acquired $4,344 of computer equipment through capital leases for the year ended June 30, 2015. There were no acquisitions through capital leases in fiscal 2016. These amounts were excluded from capital expenditures on the statements of cash flows.

NOTE 4. OTHER ASSETS

Goodwill

The carrying amount of goodwill for the years ended June 30, 2016 and 2015, by reportable segments, is as follows:

	June 30,
Bank systems and services	2016				2015
Beginning balance	$	420,795			$	423,190
Goodwill, acquired during the year	6,099				—
Goodwill, written off related to sale	(3,612		)		(2,395		)
Ending balance	$	423,282			$	420,795
Credit Union systems and services
Beginning balance	$	129,571			$	129,571
Goodwill, acquired during the year	—				—
Ending balance	$	129,571			$	129,571

The Goodwill acquired during the year was a result of our purchase of Bayside Business Solutions, Inc. The goodwill of $6,099 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 Bayside Business Solutions, together with the value of Bayside Business Solutions’ assembled workforce. Goodwill from this acquisition has been allocated to our banking segment.

During the year the Company sold its Alogent business (Alogent) to Antelope Acquisition Co., an affiliate of Battery Ventures. Alogent was included in our banking segment. Goodwill allocated to the carrying amount of the net assets sold was calculated based on the relative fair values of the business disposed and the portion of the reporting unit that was retained.

Other Intangible Assets

Information regarding other identifiable intangible assets is as follows:

	June 30, 2016
	Gross Carrying Amount				Accumulated Amortization			Net
Customer relationships	$	266,545			(162,460	)		$	104,085
Computer software	$	474,738			(252,623	)		$	222,115
Other intangible assets:
Purchased software	43,692				(17,475	)		26,217
Trade names	12,802				(3,313	)		9,489
Other intangible assets, total	$	56,494			(20,788	)		$	35,706
	June 30, 2015
	Gross Carrying Amount				Accumulated Amortization			Net
Customer relationships	$	276,337			(154,133	)		$	122,204
Computer software	$	416,674			(225,133	)		$	191,541
Other intangible assets:
Purchased software	32,192				(7,818	)		24,374
Trade names	12,498				(2,834	)		9,664
Total	$	44,690			(10,652	)		$	34,038

Customer relationships have lives ranging from 5 to 20 years.

Computer software includes cost of software to be sold, leased, or marketed of $108,991 and costs of internal-use software of $113,124 at June 30, 2016.

Computer software includes the unamortized cost of commercial software products developed or acquired by the Company, which are capitalized and amortized over useful lives ranging from 5 to 10 years. Amortization expense for computer software totaled $54,810, $43,798, and $37,720 for the fiscal years ended June 30, 2016, 2015, and 2014, respectively. There were no material impairments in any of the fiscal years presented.

Our other intangible assets have useful lives ranging from 3 to 20 years.

Amortization expense for all intangible assets was $79,077, $64,841, and $54,836 for the fiscal years ended June 30, 2016, 2015, and 2014, respectively. The estimated aggregate future amortization expense for each of the next five years for all intangible assets remaining as of June 30, 2016, is as follows:

Years Ending June 30,	Computer Software				Customer Relationships				Other Intangible Assets				Total
2017	$	53,326			$	13,097			$	10,968			$	77,391
2018	46,062				12,509				7,400				65,971
2019	37,781				12,244				3,660				53,685
2020	27,091				10,074				939				38,104
2021	11,742				8,430				642				20,814

NOTE 5. DEBT

The Company’s outstanding long and short term debt is as follows:

	June 30,				June 30,
	2016				2015
LONG TERM DEBT
Revolving credit facility	$	—			$	50,000
Capital leases	—				816
	—				50,816
Less current maturities	—				714
Debt, net of current maturities	$	—			$	50,102

SHORT TERM DEBT
Capital leases	$	200			$	1,881
Current maturities of long-term debt	—				714
Notes payable and current maturities of long term debt	$	200			$	2,595

The following table summarizes the annual principal payments required as of June 30, 2016:

Years ended June 30,
2017	$	200
	$	200

Capital leases

The Company has entered into various capital lease obligations for the use of certain computer equipment. The Company currently has short term capital lease obligations totaling $200 at June 30, 2016. Included in property and equipment are assets under capital leases totaling $2,329, which have accumulated depreciation totaling $898.

Revolving credit facility

The revolving credit facility provides for borrowings of up to $300,000, which may be increased by the Company at any time until maturity to $600,000. The credit facility bears interest at a variable rate equal to (a) a rate based on LIBOR or (b) an alternate base rate (the highest of (i) the Prime Rate for such day, (ii) the sum of the Federal Funds Effective Rate for such day plus 0.50% and (iii) the Eurocurrency Rate for a one month Interest Period on such day for dollars plus 1.0%), plus an applicable percentage in each case determined by the Company's leverage ratio. The credit facility is 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, 2016, the Company was in compliance with all such covenants. The revolving loan terminates February 20, 2020 and at June 30, 2016 there was no outstanding balance.

Other lines of credit

The Company renewed an unsecured bank credit line on March 3, 2014 which provides for funding of up to $5,000 and bears interest at the prime rate less 1%. The credit line was renewed through April 30, 2017. At June 30, 2016, no amount was outstanding.

Interest

The Company paid interest of $1,320, $1,111, and $620 during the years ended June 30, 2016, 2015, and 2014, respectively.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Litigation

We are subject to various routine legal proceedings and claims, including the following:

In 2013 a patent infringement lawsuit entitled DataTreasury Corporation v. Jack Henry & Associates, Inc. et. al. was filed against the Company, several subsidiaries and a number of customer financial institutions in the US District Court for the Eastern District of Texas. The complaint seeks damages, interest, injunctive relief, and attorneys' fees for the alleged infringement of two patents, as well as trebling of damage awards for alleged willful infringement. We believe we have strong defenses and have defended the lawsuit vigorously. A part of that defense has been the filing of challenges to the validity of plaintiff's patents in post-grant proceedings at the Patent Trial and Appeal Board ("PTAB") of the U.S. Patent and Trademark Office. On April 29 and July 8, and September 1 2015, the PTAB issued decisions holding that all relevant claims of the plaintiff's patents are unpatentable and invalid. DataTreasury has appealed the PTAB decisions to the U.S. Court of Appeals for the Federal Circuit. At this stage, we cannot make a reasonable estimate of possible loss or range of loss, if any, arising from this lawsuit.

Property and Equipment

The Company had no material commitments at June 30, 2016 to purchase property and equipment. There were $13,089 material commitments at June 30, 2015, mainly related to the purchase of aircraft.

Leases

The Company leases certain property under operating leases which expire over the next 14 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. Certain leases on real estate are subject to annual escalations for increases in operating expenses and property taxes.

As of June 30, 2016, net future minimum lease payments are as follows:

Years Ending June 30,	Lease Payments
2017	$	9,515
2018	8,519
2019	5,967
2020	4,865
2021	3,587
Thereafter	16,921
Total	$	49,374

Rent expense was $10,167, $9,547, and $8,609 in 2016, 2015, and 2014 respectively.

NOTE 7. INCOME TAXES

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

	Year Ended June 30,
	2016				2015				2014
Current:
Federal	$	66,574			$	70,555			$	77,937
State	7,571				5,221				10,166
Deferred:
Federal	34,355				28,018				10,636
State	3,169				1,425				2,116
	$	111,669			$	105,219			$	100,855

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

	June 30,
	2016				2015
Deferred tax assets:
Contract and service revenues and costs	$	69,597			$	68,503
Expense reserves (bad debts, insurance, franchise tax and vacation)	14,770				14,612
Net operating loss carryforwards	3,543				3,682
Other, net	2,090				1,493
Total gross deferred tax assets	90,000				88,290
Valuation allowance	(608		)		(650		)
Net deferred tax assets	89,392				87,640
Deferred tax liabilities:
Accelerated tax depreciation	(40,857		)		(32,331		)
Accelerated tax amortization	(160,719		)		(142,776		)
Contract and service revenues and costs	(76,417		)		(69,790		)
Total gross deferred liabilities	(277,993		)		(244,897		)
Net deferred tax liability	$	(188,601	)		$	(157,257	)

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

	Year Ended June 30,
	2016			2015			2014
Computed "expected" tax expense	35.0	%		35.0	%		35.0	%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal income tax benefits	1.9	%		1.4	%		2.8	%
Research and development credit	(2.5	)%		(1.5	)%		(0.8	)%
Domestic production activities deduction	(1.9	)%		(2.0	)%		(2.2	)%
Tax over book basis in subsidiary stock	(1.7	)%		—	%		—	%
Other (net)	0.2	%		0.4	%		0.3	%
	31.0	%		33.3	%		35.1	%

As of June 30, 2016, we have $6,048 of gross net operating loss (“NOL”) carryforwards pertaining to the acquisition of Goldleaf Financial Solutions, Inc., which are expected to be utilized after the application of IRC Section 382. Separately, as of June 30, 2016, we have state NOL carryforwards with a tax-effected value of $1,470. The federal and state losses have varying expiration dates, ranging from 2016 to 2035. Based on state tax rules which restrict our utilization of these losses, we believe it is more likely than not that $608 of these losses will expire unutilized. Accordingly, a valuation allowance of $608 and $650 has been recorded against these assets as of June 30, 2016 and 2015, respectively.

The Company paid income taxes of $90,307, $61,885, and $83,014 in 2016, 2015, and 2014 respectively.

At June 30, 2016, the Company had $7,421 of gross unrecognized tax benefits, $5,986 of which, if recognized, would affect our effective tax rate. At June 30, 2015, the Company had $7,104 of unrecognized tax benefits, $5,193 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of $1,178 and $1,120 related to uncertain tax positions at June 30, 2016 and 2015, respectively. The income tax provision included interest expense and penalties (or benefits) on unrecognized tax benefits of $47, $(155), and $582 in the years ending June 30, 2016, 2015, and 2014, respectively.

A reconciliation of the unrecognized tax benefits for the years ended June 30, 2016 and 2015 follows:

	Unrecognized Tax Benefits
Balance at July 1, 2014	$	7,834
Additions for current year tax positions	1,351
Reductions for current year tax positions	(56		)
Additions for prior year tax positions	483
Reductions for prior year tax positions	(998		)
Reductions related to expirations of statute of limitations	(1,510		)
Balance at June 30, 2015	7,104
Additions for current year tax positions	1,581
Reductions for current year tax positions	(56		)
Additions for prior year tax positions	507
Reductions for prior year tax positions	(38		)
Reductions related to expirations of statute of limitations	(1,677		)
Balance at June 30, 2016	$	7,421

During the period ended June 30, 2016, the Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for fiscal years ended June 30, 2014 and 2015. The examination is ongoing. At this time, it is anticipated that the examination will not result in a material change to the Company’s financial statements.

The U.S. federal and state income tax returns for June 30, 2013 and all subsequent years remain subject to examination as of June 30, 2016 under statute of limitations rules. We anticipate that potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $1,500 - $3,000 within twelve months of June 30, 2016.

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, 2016, 2015, and 2014) 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 negative impact on the operations of the Company.

NOTE 9. STOCK-BASED COMPENSATION

Our pre-tax operating income for the years ended June 30, 2016, 2015, and 2014 includes $10,720, $10,112, and $10,091 of equity-based compensation costs, respectively, of which $9,712, $9,251, and $9,335 relates to the restricted stock plans, respectively. The income tax benefits from stock option exercises and restricted stock vests totaled $1,051, $4,343, and $3,420 for the years ended June 30, 2016, 2015, and 2014, respectively.

2005 NSOP and 1996 SOP

The Company previously issued options to employees under the 1996 Stock Option Plan (“1996 SOP”) and 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, 3 months after retirement, one year after death or 10 years after the date of grant. The plan terminated by its terms on October 29, 2006. No options previously granted under the 1996 SOP remain outstanding and vested at June 30, 2016.

The 2005 NSOP was adopted by the Company on September 23, 2005, for its outside directors. Generally, options are exercisable beginning 6 months after grant at an exercise price equal to 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.

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

	Number of Shares			Weighted Average Exercise Price				Aggregate Intrinsic Value
Outstanding July 1, 2013	144			21.79
Granted	—			—
Forfeited	—			—
Exercised	(19	)		18.42
Outstanding July 1, 2014	125			22.29
Granted	—			—
Forfeited	—			—
Exercised	(25	)		19.17
Outstanding July 1, 2015	100			23.07
Granted	—			—
Forfeited	—			—
Exercised	(50	)		23.99
Outstanding June 30, 2016	50			$	22.14			$	3,256
Vested June 30, 2016	50			$	22.14			$	3,256
Exercisable June 30, 2016	50			$	22.14			$	3,256

There were no options granted during any period presented. Compensation cost related to outstanding options has now been fully recognized. The weighted average remaining contractual term on options currently exercisable as of June 30, 2016 was 2.57 years.

The total intrinsic value of options exercised was $3,011, $1,044, and $704 for the fiscal years ended June 30, 2016, 2015, and 2014, respectively.

Restricted Stock Plan and 2015 Equity Incentive Plan

The Restricted Stock Plan was adopted by the Company on November 1, 2005, for its employees. The plan expired on November 1, 2015. Up to 3,000 shares of common stock were available for issuance under the plan. The 2015 Equity Incentive Plan was adopted by the company on November 10, 2015 for its employees. Up to 3,000 shares of common stock are available for issuance under the 2015 Equity Incentive 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 3 years to 7 years from grant date.

The following table summarizes non-vested share awards activity:

Share awards	Shares			Weighted Average Grant Date Fair Value
Outstanding July 1, 2013	252			25.92
Granted	30			54.13
Vested	(143	)		24.41
Forfeited	(1	)		22.17
Outstanding July 1, 2014	138			33.56
Granted	12			57.77
Vested	(71	)		35.69
Forfeited	(7	)		46.39
Outstanding July 1, 2015	72			34.28
Granted	22			66.31
Vested	(24	)		43.45
Forfeited	(12	)		23.82
Outstanding June 30, 2016	58			$	44.95

The non-vested share awards do not participate in dividends during the restriction period. As a result, the weighted-average fair value of the non-vested share awards was 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, consistent with the methodology for calculating compensation expense on such awards.

At June 30, 2016, there was $913 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 0.69 years.

An amendment to the Restricted Stock Plan was adopted by the Company on August 20, 2010. Unit awards were 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. Certain Restricted Stock Unit awards are not tied to performance goals, and for such awards, vesting occurs over a period of 1 to 3 years.

The following table summarizes non-vested unit awards as of June 30, 2016, as well as activity for the year then ended:

Unit awards	Shares			Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value
Outstanding July 1, 2013	814			23.08
Granted	164			48.21
Vested	(168	)		15.77
Forfeited	(101	)		15.77
Outstanding July 1, 2014	709			31.66
Granted	178			53.62
Vested	(277	)		19.69
Forfeited	(111	)		22.74
Outstanding July 1, 2015	499			48.13
Granted	130			75.99
Vested	(99	)		44.09
Forfeited	(101	)		45.89
Outstanding June 30, 2016	429			$58.06			$37,415

The Company utilized a Monte Carlo pricing model customized to the specific provisions of the Company’s plan design to value unit awards subject to performance targets on the grant dates. The weighted average assumptions used in this model to estimate fair value at the grant dates are as follows:

	Year Ended June 30,
	2016			2015			2014
Volatility	15.6	%		17.8	%		21.6	%
Risk free interest rate	1.06	%		1.06	%		0.91	%
Dividend yield	1.5	%		1.5	%		1.6	%
Stock Beta	0.741			0.765			0.837

For the year ended June 30, 2016, 118 unit awards were granted and measured using the above assumptions. The remaining 12 unit awards granted are not subject to performance targets, and therefore the estimated fair value at measurement date is valued in the same manner as restricted stock award grants.

At June 30, 2016, there was $9,822 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 1.09 years.

The fair value of restricted shares at vest date totaled $8,677, $20,275, and $16,070 for the years ended June 30, 2016, 2015, and 2014, respectively.

NOTE 10. EARNINGS PER SHARE

The following table reflects the reconciliation between basic and diluted earnings per share.

	Year Ended June 30,
	2016				2015				2014
Net Income	$	248,867			$	211,221			$	186,715
Common share information:
Weighted average shares outstanding for basic earnings per share	79,416				81,353				84,866
Dilutive effect of stock options and restricted stock	318				248				530
Weighted average shares outstanding for diluted earnings per share	79,734				81,601				85,396
Basic earnings per share	$	3.13			$	2.60			$	2.20
Diluted earnings per share	$	3.12			$	2.59			$	2.19

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 earnings per share to the extent they are dilutive. The two-class method for computing EPS has not been applied because no outstanding awards participate in dividends. There were no anti-dilutive stock options and restricted stock excluded for fiscal 2016, no shares excluded for fiscal 2015, and 24 shares excluded for fiscal 2014.

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, 2016, 2015 and 2014 was $1,008, $861 and $756, 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 $16,794, $15,378, and $13,617 for fiscal 2016, 2015 and 2014, respectively.

NOTE 12. BUSINESS ACQUISITION

Bayside Business Solutions, Inc.

Effective July 1, 2015, the Company acquired all of the equity interests of Bayside Business Solutions, an Alabama-based company that provides technology solutions and payment processing services primarily for the financial services industry, for $10,000 paid in cash. This acquisition was funded using existing operating cash. The acquisition of Bayside Business Solutions expanded the Company’s presence in commercial lending within the industry.

Management has completed a purchase price allocation of Bayside Business Solutions 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 July 1, 2015 are set forth below:

Current assets	$	1,922
Long-term assets	253
Identifiable intangible assets	5,005
Total liabilities assumed	(3,279		)
Total identifiable net assets	3,901
Goodwill	6,099
Net assets acquired	$	10,000

The goodwill of $6,099 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 Bayside Business Solutions, together with the value of Bayside Business Solutions’ assembled workforce. Goodwill from this acquisition has been allocated to our Banking Systems and Services segment. The goodwill is not expected to be deductible for income tax purposes.

Identifiable intangible assets from this acquisition consist of customer relationships of $3,402, $659 of computer software and other intangible assets of $944. The weighted average amortization period for acquired customer relationships, acquired computer software, and other intangible assets is 15 years, 5 years, and 20 years, respectively.

Current assets were inclusive of cash acquired of $1,725. The fair value of current assets acquired included accounts receivable of $178. The gross amount of receivables was $178, none of which was expected to be uncollectible.

During fiscal year 2016, the Company incurred $55 in costs related to the acquisition of Bayside Business Solutions. These costs included fees for legal, valuation and other fees. These costs were included within general and administrative expenses.

The results of Bayside Business Solutions’ operations included in the Company’s consolidated statement of income for the twelve months ended June 30, 2016 included revenue of $4,273 and after-tax net income of $303.

The accompanying consolidated statements of income for the fiscal year ended June 30, 2016 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to both the current and prior periods of our consolidated financial statements and pro forma financial information has not been provided.

Banno, LLC

Effective March 1, 2014, the Company acquired all of the equity interests of Banno, an Iowa-based company that provides Web and transaction marketing services with a focus on the mobile medium, for $27,910 paid in cash. This

acquisition was funded using existing operating cash. The acquisition of Banno expanded the Company’s presence in online and mobile technologies within the industry.

During fiscal year 2014, the Company incurred $30 in costs related to the acquisition of Banno. These costs included fees for legal, valuation and other fees. These costs were included within general and administrative expenses. The results of Banno's operations included in the Company's consolidated statements of income for the year ended June 30, 2016 included revenue of $6,393 and after-tax net loss of $1,289. For the year ended June 30, 2015, our consolidated statements of income included revenue of $4,175 and after-tax net loss of $1,784 attributable to Banno. The results of Banno’s operations included in the Company’s consolidated statement of operations from the acquisition date to June 30, 2014 included revenue of $848 and after-tax net loss of $1,121.

The accompanying consolidated statements of income for the twelve month period ended June 30, 2016 do not include any revenues and expenses related to this acquisition prior to the acquisition date. The impact of this acquisition was considered immaterial to both the current and prior periods of our consolidated financial statements and pro forma financial information has not been provided.

NOTE 13. REPORTABLE SEGMENT INFORMATION

The Company is a provider of integrated computer systems that perform data processing (available for in-house installations or outsourced services) for banks and credit unions. The Company’s operations are classified into two reportable 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.

	Year Ended
	June 30, 2016
	Bank				Credit Union				Total
REVENUE
License	$	2,536			$	505			$	3,041
Support and service	960,738				340,240				1,300,978
Hardware	33,394				17,233				50,627
Total revenue	996,668				357,978				1,354,646
COST OF SALES
Cost of license	1,058				139				1,197
Cost of support and service	564,851				172,257				737,108
Cost of hardware	23,159				12,187				35,346
Total cost of sales	589,068				184,583				773,651
GROSS PROFIT	$	407,600			$	173,395			580,995
OPERATING EXPENSES									219,336
INTEREST INCOME (EXPENSE)									(1,123		)
INCOME BEFORE INCOME TAXES									$	360,536

	Year Ended
	June 30, 2015
	Bank				Credit Union				Total
REVENUE
License	$	1,727			$	908			$	2,635
Support and service	922,545				278,107				1,200,652
Hardware	38,457				14,446				52,903
Total revenue	962,729				293,461				1,256,190
COST OF SALES
Cost of license	832				355				1,187
Cost of support and service	533,407				147,343				680,750
Cost of hardware	27,831				10,568				38,399
Total cost of sales	562,070				158,266				720,336
GROSS PROFIT	$	400,659			$	135,195			535,854
OPERATING EXPENSES									217,989
INTEREST INCOME (EXPENSE)									(1,425		)
INCOME BEFORE INCOME TAXES									$	316,440

	Year Ended
	June 30, 2014
	Bank				Credit Union				Total
REVENUE
License	$	1,514			$	670			$	2,184
Support and service	853,500				258,831				1,112,331
Hardware	42,657				16,001				58,658
Total revenue	897,671				275,502				1,173,173
COST OF SALES
Cost of license	555				353				908
Cost of support and service	492,777				141,979				634,756
Cost of hardware	31,866				11,842				43,708
Total cost of sales	525,198				154,174				679,372
GROSS PROFIT	$	372,473			$	121,328			493,801
OPERATING EXPENSES									205,503
INTEREST INCOME (EXPENSE)									(728		)
INCOME BEFORE INCOME TAXES									$	287,570

	Year Ended June 30,
	2016				2015				2014
Depreciation expense
Bank systems and services	$	47,076			$	50,154			$	48,382
Credit Unions systems and services	3,495				4,001				4,553
Total	$	50,571			$	54,155			$	52,935
Amortization expense
Bank systems and services	$	58,914			$	47,502			$	39,152
Credit Unions systems and services	20,163				17,339				15,684
Total	$	79,077			$	64,841			$	54,836
Capital expenditures
Bank systems and services	$	54,529			$	53,730			$	32,736
Credit Unions systems and services	1,796				679				449
Total	$	56,325			$	54,409			$	33,185

	June 30,				June 30,
	2016				2015
Property and equipment, net
Bank systems and services	$	269,020			$	263,231
Credit Union systems and services	29,544				33,101
Total	$	298,564			$	296,332
Intangible assets, net
Bank systems and services	$	682,229			$	664,231
Credit Union systems and services	232,530				233,918
Total	$	914,759			$	898,149

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

Dividends

On August 19, 2016, the Company's Board of Directors declared a cash dividend of $0.28 per share on its common

stock, payable on September 27, 2016 to shareholders of record on September 7, 2016.

QUARTERLY FINANCIAL INFORMATION

(unaudited)

	For the Year Ended June 30, 2016
	Quarter 1				Quarter 2				Quarter 3				Quarter 4				Total
REVENUE
License	$	1,604			$	634			$	292			$	511			$	3,041
Support and service	307,746				320,219				319,649				353,364				1,300,978
Hardware	12,268				12,019				13,245				13,095				50,627
Total revenue	321,618				332,872				333,186				366,970				1,354,646
COST OF SALES
Cost of license	181				498				193				325				1,197
Cost of support and service	174,714				181,989				184,527				195,878				737,108
Cost of hardware	8,768				7,958				9,553				9,067				35,346
Total cost of sales	183,663				190,445				194,273				205,270				773,651
GROSS PROFIT	137,955				142,427				138,913				161,700				580,995
OPERATING EXPENSES
Selling and marketing	21,751				22,231				22,732				23,365				90,079
Research and development	18,554				18,862				19,854				23,964				81,234
General and administrative	17,113				16,547				16,497				17,357				67,514
Gain on disposal of a business	—				—				—				(19,491		)		(19,491		)
Total operating expenses	57,418				57,640				59,083				45,195				219,336
OPERATING INCOME	80,537				84,787				79,830				116,505				361,659
INTEREST INCOME (EXPENSE)
Interest income	113				91				54				49				307
Interest expense	(220		)		(276		)		(486		)		(448		)		(1,430		)
Total interest income (expense)	(107		)		(185		)		(432		)		(399		)		(1,123		)
INCOME BEFORE INCOME TAXES	80,430				84,602				79,398				116,106				360,536
PROVISION FOR INCOME TAXES	29,064				25,254				25,515				31,836				111,669
NET INCOME	$	51,366			$	59,348			$	53,883			$	84,270			$	248,867
Basic earnings per share	$	0.64			$	0.75			$	0.68			$	1.07			$	3.13
Basic weighted average shares outstanding	80,545				79,473				78,805				78,841				79,416
Diluted earnings per share	$	0.64			$	0.74			$	0.68			$	1.06			$	3.12
Diluted weighted average shares outstanding	80,735				79,770				79,167				79,261				79,734

	For the Year Ended June 30, 2015
	Quarter 1				Quarter 2				Quarter 3				Quarter 4				Total
REVENUE
License	$	503			$	491			$	569			$	1,072			$	2,635
Support and service	288,216				296,905				296,896				318,635				1,200,652
Hardware	12,755				13,898				12,244				14,006				52,903
Total revenue	301,474				311,294				309,709				333,713				1,256,190
COST OF SALES
Cost of license	409				308				285				185				1,187
Cost of support and service	165,090				170,377				168,457				176,826				680,750
Cost of hardware	9,385				9,574				9,152				10,288				38,399
Total cost of sales	174,884				180,259				177,894				187,299				720,336
GROSS PROFIT	126,590				131,035				131,815				146,414				535,854
OPERATING EXPENSES
Selling and marketing	21,663				22,175				21,674				23,492				89,004
Research and development	16,791				17,681				17,522				19,501				71,495
General and administrative	16,510				18,388				15,417				14,049				64,364
Gain on disposal of a business	—				(6,874		)		—				—				(6,874		)
Total operating expenses	54,964				51,370				54,613				57,042				217,989
OPERATING INCOME	71,626				79,665				77,202				89,372				317,865
INTEREST INCOME (EXPENSE)
Interest income	57				28				33				51				169
Interest expense	(266		)		(337		)		(669		)		(322		)		(1,594		)
Total interest income (expense)	(209		)		(309		)		(636		)		(271		)		(1,425		)
INCOME BEFORE INCOME TAXES	71,417				79,356				76,566				89,101				316,440
PROVISION FOR INCOME TAXES	25,329				25,474				25,854				28,562				105,219
NET INCOME	$	46,088			$	53,882			$	50,712			$	60,539			$	211,221
Basic net income per share	$	0.56			$	0.66			$	0.63			$	0.75			$	2.60
Basic weighted average shares outstanding	82,195				81,432				80,880				80,904				81,353
Diluted net income per share	$	0.56			$	0.66			$	0.63			$	0.75			$	2.59
Diluted weighted average shares outstanding	82,589				81,634				81,094				81,086				81,601