Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

	Reports of Independent Registered Public Accounting Firm	35
	Management's Annual Report on Internal Control over Financial Reporting	37
	Financial Statements
	Consolidated Statements of Income,
	Years Ended June 30, 2017, 2016, and 2015	38
	Consolidated Balance Sheets,
	June 30, 2017 and 2016	39
	Consolidated Statements of Changes in Stockholders' Equity,
	Years Ended June 30, 2017, 2016, and 2015	40
	Consolidated Statements of Cash Flows,
	Years Ended June 30, 2017, 2016, and 2015	41
	Notes to Consolidated Financial Statements	42

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 sheets 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, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2017 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, 2017, 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 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 audits 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 audits 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide 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 25, 2017

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 statements of income, changes in stockholders’ equity, and cash flows of Jack Henry and Associates, Inc. and subsidiaries (the “Company”) for the year 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 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. 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 audit provides a reasonable basis for our opinion.

In our opinion, such 2015 consolidated financial statements present fairly, in all material respects, the results of the operations and the cash flows of Jack Henry & Associates, Inc. and subsidiaries for the year 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, 2017, 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, 2017 was effective.

The Company’s internal control over financial reporting as of June 30, 2017 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,
	2017				2016				2015
REVENUE
License	$	2,385			$	3,041			$	2,635
Support and service	1,384,338				1,300,978				1,200,652
Hardware	44,394				50,627				52,903
Total revenue	1,431,117				1,354,646				1,256,190
COST OF SALES
Cost of license	730				1,197				1,187
Cost of support and service	786,143				737,108				680,750
Cost of hardware	32,161				35,346				38,399
Total cost of sales	819,034				773,651				720,336
GROSS PROFIT	612,083				580,995				535,854
OPERATING EXPENSES
Selling and marketing	93,297				90,079				89,004
Research and development	84,753				81,234				71,495
General and administrative	69,601				67,514				64,364
Gain on disposal of businesses	(3,270		)		(19,491		)		(6,874		)
Total operating expenses	244,381				219,336				217,989
OPERATING INCOME	367,702				361,659				317,865
INTEREST INCOME (EXPENSE)
Interest income	248				307				169
Interest expense	(996		)		(1,430		)		(1,594		)
Total interest income (expense)	(748		)		(1,123		)		(1,425		)
INCOME BEFORE INCOME TAXES	366,954				360,536				316,440
PROVISION FOR INCOME TAXES	121,161				111,669				105,219
NET INCOME	$	245,793			$	248,867			$	211,221
Basic earnings per share	$	3.16			$	3.13			$	2.60
Basic weighted average shares outstanding	77,856				79,416				81,353
Diluted earnings per share	$	3.14			$	3.12			$	2.59
Diluted weighted average shares outstanding	78,255				79,734				81,601

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, 2017				June 30, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	114,765			$	70,310
Receivables, net	276,923				253,923
Income tax receivable	20,135				15,636
Prepaid expenses and other	66,894				56,588
Deferred costs	41,314				35,472
Total current assets	520,031				431,929
PROPERTY AND EQUIPMENT, net	282,934				298,564
OTHER ASSETS:
Non-current deferred costs	96,847				99,799
Computer software, net of amortization	247,317				222,115
Other non-current assets	82,525				70,461
Customer relationships, net of amortization	90,433				104,085
Other intangible assets, net of amortization	36,393				35,706
Goodwill	552,465				552,853
Total other assets	1,105,980				1,085,019
Total assets	$	1,908,945			$	1,815,512
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,841			$	14,596
Accrued expenses	81,574				85,411
Notes payable and current maturities of long-term debt	—				200
Deferred revenues	382,777				343,525
Total current liabilities	471,192				443,732
LONG-TERM LIABILITIES:
Non-current deferred revenues	128,607				177,529
Non-current deferred income tax liability	219,541				188,601
Debt, net of current maturities	50,000				—
Other long-term liabilities	7,554				9,440
Total long-term liabilities	405,702				375,570
Total liabilities	876,894				819,302
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—				—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,083,299 shares issued at June 30, 2017; 102,903,971 shares issued at June 30, 2016	1,031				1,029
Additional paid-in capital	452,016				440,123
Retained earnings	1,585,278				1,431,192
Less treasury stock at cost 25,660,212 shares at June 30, 2017; 24,208,517 shares at June 30, 2016	(1,006,274		)		(876,134		)
Total stockholders' equity	1,032,051				996,210
Total liabilities and equity	$	1,908,945			$	1,815,512

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,
	2017				2016				2015
PREFERRED SHARES:	—				—				—
COMMON SHARES:
Shares, beginning of year	102,903,971				102,695,214				102,429,926
Shares issued for equity-based payment arrangements	98,781				121,348				172,661
Shares issued for Employee Stock Purchase Plan	80,547				87,409				92,627
Shares, end of year	103,083,299				102,903,971				102,695,214
COMMON STOCK - PAR VALUE $0.01 PER SHARE:
Balance, beginning of year	$	1,029			$	1,027			$	1,024
Shares issued for equity-based payment arrangements	1				1				2
Shares issued for Employee Stock Purchase Plan	1				1				1
Balance, end of year	$	1,031			$	1,029			$	1,027
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year	$	440,123			$	424,536			$	412,512
Shares issued for equity-based payment arrangements	(1		)		696				640
Tax withholding related to share based compensation	(5,479		)		(2,590		)		(7,951		)
Shares issued for Employee Stock Purchase Plan	6,244				5,710				4,880
Tax benefits from share-based compensation	—				1,051				4,343
Stock-based compensation expense	11,129				10,720				10,112
Balance, end of year	$	452,016			$	440,123			$	424,536
RETAINED EARNINGS:
Balance, beginning of year	$	1,431,192			$	1,266,443			$	1,131,632
Net income	245,793				248,867				211,221
Dividends	(91,707		)		(84,118		)		(76,410		)
Balance, end of year	$	1,585,278			$	1,431,192			$	1,266,443
TREASURY STOCK:
Balance, beginning of year	$	(876,134	)		$	(700,472	)		$	(577,781	)
Purchase of treasury shares	(130,140		)		(175,662		)		(122,691		)
Balance, end of year	$	(1,006,274	)		$	(876,134	)		$	(700,472	)
TOTAL STOCKHOLDERS' EQUITY	$	1,032,051			$	996,210			$	991,534
Dividends declared per share	$	1.18			$	1.06			$	0.94

See notes to consolidated financial statements.

JACK HENRY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
	Year Ended
	June 30,
	2017				2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	245,793			$	248,867			$	211,221
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	49,677				50,571				54,155
Amortization	90,109				79,077				64,841
Change in deferred income taxes	30,940				37,524				29,443
Other	—				—				(4,343		)
Expense for stock-based compensation	11,129				10,720				10,112
(Gain)/loss on disposal of assets and businesses	4,771				(16,888		)		(5,046		)
Changes in operating assets and liabilities:
Change in receivables	(22,499		)		(13,735		)		(21,346		)
Change in prepaid expenses, deferred costs and other	(25,088		)		(29,577		)		(33,858		)
Change in accounts payable	(7,812		)		4,663				(583		)
Change in accrued expenses	(4,454		)		7,460				14,483
Change in income taxes	(6,444		)		(16,624		)		14,146
Change in deferred revenues	(8,800		)		4,364				40,565
Net cash from operating activities	357,322				366,422				373,790
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	—				(8,275		)		—
Capital expenditures	(41,947		)		(56,325		)		(54,409		)
Proceeds from the sale of businesses	5,632				34,030				8,135
Proceeds from the sale of assets	968				2,844				182
Internal use software	(16,608		)		(11,826		)		(14,020		)
Computer software developed	(89,631		)		(96,411		)		(76,872		)
Net cash from investing activities	(141,586		)		(135,963		)		(136,984		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities	80,000				100,000				90,000
Repayments on credit facilities	(30,200		)		(152,500		)		(50,783		)
Debt acquisition costs	—				—				(901		)
Purchase of treasury stock	(130,140		)		(175,662		)		(122,691		)
Dividends paid	(91,707		)		(84,118		)		(76,410		)
Other	—				—				4,343
Proceeds from issuance of common stock upon exercise of stock options	1				697				642
Minimum tax withholding payments related to share based compensation	(5,480		)		(2,590		)		(7,951		)
Proceeds from sale of common stock	6,245				5,711				4,881
Net cash from financing activities	(171,281		)		(308,462		)		(158,870		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	44,455			$	(78,003	)		$	77,936
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	70,310			$	148,313			$	70,377
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	114,765			$	70,310			$	148,313

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.

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 related to our Bundled Products & Services was $117,046, $94,391, and $62,888 for the years ended June 30, 2017, 2016, and 2015, 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, as we are the primary obligor in the contract with the customer. 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 of 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, 2017, 2016, and 2015 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, 2017, there were 25,660 shares in treasury stock and the Company had the remaining authority to repurchase up to 4,330 additional shares. The total cost of treasury shares at June 30, 2017 is $1,006,274. During fiscal 2017, the Company repurchased 1,452 treasury shares for $130,140. At June 30, 2016, there were 24,209 shares in treasury stock and the Company had authority to repurchase up to 5,782 additional shares.

EARNINGS PER SHARE

Per share information is based on the weighted average number of common shares outstanding during the year. Stock options and restricted stock 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. This standard is part of an effort to create a common revenue standard for U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS). The new standard will supersede much of the existing authoritative literature for revenue recognition. The new model enacts a five-step process for achieving the core principle, which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB also issued ASU No. 2015-14 which deferred the effective date of the new standard by one year, but allows early application as of the original effective date. We do not intend to adopt the provisions of the new standard early, so 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. 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, ASU No. 2016-12, and ASU No. 2016-20 also address specific aspects of the new standard. 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. The Company is currently evaluating the newly issued guidance, including which transition approach will be applied, and continuing to assess all potential impacts of the standard. We expect the adoption of this standard to have a significant impact on our revenue recognition currently subject to Accounting Standards Codification (ASC) Topic 985. We are currently in the process of implementing and testing new software to assist in applying the five-step model to our various revenue streams and comparing the results to our current accounting practices. One of the most significant expected impacts relates to the recognition of license and implementation revenue on our multi-element arrangements. We expect to recognize license and install revenue at the time of the install completion, rather than over the maintenance period of the software on our multi-element agreements. We expect revenue related to hardware, Outlink contracts, payment processing, and professional services to remain substantially unchanged.

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 ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, in March 2016. The new standard is intended to simplify several aspects of the accounting and presentation of share-based payment transactions, including reporting of excess tax benefits and shortfalls, statutory minimum withholding considerations, and classification within the statement of cash flows. The standard allows a one-time accounting policy election to either account for forfeitures as they occur or continue to estimate them. ASU No. 2016-09 is effective for the Company’s annual reporting period beginning July 1, 2017. Management elected to early adopt this standard as of July 1, 2016 and has elected to continue our current practice of estimating forfeitures. The adoption of this standard had the following impacts on our condensed consolidated financial statements.

•

Condensed consolidated statements of income- The new standard requires that the tax effects of share-based compensation be recognized in the provision for income taxes. Previously, these amounts were recognized in additional paid-in capital. Net tax benefits related to share-based compensation awards of $2,638 for the year ended June 30, 2017 were recognized as reductions of income tax expense. These tax benefits reduced our effective income tax rate for the year-to-date period by 0.72%, and caused an increase in basic and diluted earnings per share of $0.03 for the year ended June 30, 2017. In addition, in calculating potential common shares used to determine diluted earnings per share, generally accepted accounting principles require us to use the treasury stock method. The new standard requires that assumed proceeds under the treasury stock method be modified to exclude the amount of excess tax benefits that would have been recognized in additional paid-in capital. These changes were applied on a prospective basis.

•

Condensed consolidated statements of cash flows- The Company elected to apply the presentation requirements for cash flows related to excess tax benefits retrospectively; however, fiscal 2015 was not restated due to immateriality. The restatement for fiscal 2016 resulted in an increase to both net cash provided by operations and net cash used in financing of $1,306 for the year ended June 30, 2016. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented on our consolidated cash flows statements since such cash flows have historically been presented as a financing activity.

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
Recurring Fair Value Measurements		Level 1				Level 2				Level 3				Value
June 30, 2017
Financial Assets:
Money market funds		$	68,474			$	—			$	—			$	68,474
Certificate of Deposit		$	—			$	2,001			$	—			$	2,001
Financial Liabilities:
Revolving credit facility		$	—			$	50,000			$	—			$	50,000
June 30, 2016
Financial Assets:
Money market funds		$	35,782			$	—			$	—			$	35,782
Certificate of Deposit		$	—			$	1,000			$	—			$	1,000
Financial Liabilities:
Revolving credit facility		$	—			$	—			$	—			$	—

Non-Recurring Fair Value Measurements
June 30, 2017
Long-lived assets held for sale (a)		$	—			$	1,300			$	—			$	1,300

(a) In accordance with ASC Subtopic 360-10, long-lived assets held for sale with a carrying value of $4,575 were written down to their fair value of $1,300, resulting in an impairment totaling $3,275, which was included in earnings for the period. These assets are expected to be disposed of by sale within the twelve months of June 30, 2017.

NOTE 3. PROPERTY AND EQUIPMENT

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

	June 30,
	2017				2016				Estimated Useful Life
Land	$	24,987			$	24,987
Land improvements	25,362				25,470				5 - 20 years
Buildings	143,350				146,464				20 - 30 years
Leasehold improvements	47,291				46,897				5 - 30 years	(1)
Equipment and furniture	332,465				337,565				3 - 10 years
Aircraft and equipment	38,522				37,967				4 - 10 years
Construction in progress	15,971				7,373
	627,948				626,723
Less accumulated depreciation	345,014				328,159
Property and equipment, net	$	282,934			$	298,564

(1) Lesser of lease term or estimated useful life

Property and equipment included $534 and $651 that was in accrued liabilities at June 30, 2017 and 2016, respectively. These amounts were excluded from capital expenditures on the statements of cash flows.

In fiscal 2017, we recorded an impairment loss on one of our facilities of $3,275 due to damage caused by water intrusion around the facility's windows and roof. The impairment loss is included in the caption "Cost of support and service" in our consolidated statements of income and is included in our Bank segment.

NOTE 4. OTHER ASSETS

Goodwill

The carrying amount of goodwill for the years ended June 30, 2017 and 2016, by reportable segments, is as follows:

	June 30,
Bank systems and services	2017				2016
Beginning balance	$	423,282			$	420,795
Goodwill, acquired during the year	—				6,099
Goodwill, written-off related to sale	(388		)		(3,612		)
Ending balance	$	422,894			$	423,282
Credit Union systems and services
Beginning balance	$	129,571			$	129,571
Goodwill, acquired during the year	—				—
Ending balance	$	129,571			$	129,571

The Goodwill written-off during fiscal 2017 was a result of our sale of our Regulatory Filing products to Fed Reporter on May 1, 2017. Goodwill allocated to the carrying amount of the net assets sold (mainly computer software) was calculated based on the relative fair values of the business disposed and the portion of the reporting unit that was retained.

The goodwill acquired during fiscal 2016 of $6,099 was a result of our purchase of Bayside Business Solutions, Inc. The goodwill 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 Bank segment.

During fiscal 2016 the Company sold its Alogent business (Alogent) to Antelope Acquisition Co., an affiliate of Battery Ventures. Alogent was included in our Bank 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, 2017
	Gross Carrying Amount				Accumulated Amortization				Net
Customer relationships	$	262,693			$	(172,260	)		$	90,433
Computer software	$	543,913			$	(296,596	)		$	247,317
Other intangible assets:	$	71,190			$	(34,797	)		$	36,393
	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:	$	56,494			$	(20,788	)		$	35,706

Customer relationships have lives ranging from 5 to 20 years.

Computer software includes cost of software to be sold, leased, or marketed of $117,065 and costs of internal-use software of $130,252 at June 30, 2017. At June 30, 2016, costs of software to be sold, leased, or marketed totaled $108,991, and costs of internal-use software totaled $113,124.

Computer software includes the unamortized cost of commercial software products developed or acquired by the Company, which are capitalized and amortized over useful lives generally ranging from 5 to 10 years. Amortization expense for computer software totaled $60,880, $54,810, and $43,798 for the fiscal years ended June 30, 2017, 2016, and 2015, 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 $90,109, $79,077, and $64,841 for the fiscal years ended June 30, 2017, 2016, and 2015, respectively. The estimated aggregate future amortization expense for each of the next five years for all intangible assets remaining as of June 30, 2017, is as follows:

Years Ending June 30,	Computer Software				Customer Relationships				Other Intangible Assets				Total
2018	$	60,412			$	12,220			$	12,779			$	85,411
2019	52,157				11,978				8,462				72,597
2020	41,555				10,074				2,962				54,591
2021	24,874				8,430				641				33,945
2022	9,522				7,811				613				17,946

NOTE 5. DEBT

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

	June 30,				June 30,
	2017				2016
LONG-TERM DEBT
Revolving credit facility	$	50,000			$	—

SHORT-TERM DEBT
Capital leases	$	—			$	200

The following table summarizes the future annual principal payments required for all outstanding debt as of June 30, 2017:

Fiscal years ended June 30,
2020	50,000
	$	50,000

Capital leases

The Company had previously entered into various capital lease obligations for the use of certain computer equipment, but has no capital lease obligations at June 30, 2017. At June 30, 2016, the Company had capital lease obligations totaling $200 and property and equipment included assets under capital leases totaling $2,329, with 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, 2017, the Company was in compliance with all such covenants. The revolving loan terminates February 20, 2020 and at June 30, 2017 there was a $50,000 outstanding balance.

Other lines of credit

The Company renewed an unsecured bank credit line on April 24, 2017 which provides for funding of up to $5,000 and bears interest at the prime rate less 1.0%. The credit line was renewed through April 30, 2019. At June 30, 2017, no amount was outstanding.

Interest

The Company paid interest of $767, $1,320, and $1,111 during the years ended June 30, 2017, 2016, and 2015, respectively.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Property and Equipment

The Company had no material commitments at June 30, 2017 to purchase property and equipment. There were also no material commitments at June 30, 2016.

Leases

The Company leases certain property under operating leases which expire over the next 13 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, 2017, net future minimum lease payments are as follows:

Years Ending June 30,	Lease Payments
2018	$	10,945
2019	8,172
2020	6,675
2021	4,578
2022	3,317
Thereafter	14,304
Total	$	47,991

Rent expense was $10,195, $10,167, and $9,547 in 2017, 2016, and 2015 respectively.

NOTE 7. INCOME TAXES

The provision for income taxes consists of the following:

	Year Ended June 30,
	2017				2016				2015
Current:
Federal	$	80,752			$	66,574			$	70,555
State	9,469				7,571				5,221
Deferred:
Federal	25,756				34,355				28,018
State	5,184				3,169				1,425
	$	121,161			$	111,669			$	105,219

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

	June 30,
	2017				2016
Deferred tax assets:
Contract and service revenues and costs	$	54,908			$	69,597
Expense reserves (bad debts, insurance, franchise tax and vacation)	14,648				14,770
Net operating loss carryforwards	3,547				3,543
Other, net	2,119				2,090
Total gross deferred tax assets	75,222				90,000
Valuation allowance	(357		)		(608		)
Net deferred tax assets	74,865				89,392
Deferred tax liabilities:
Accelerated tax depreciation	(36,994		)		(40,857		)
Accelerated tax amortization	(178,999		)		(160,719		)
Contract and service revenues and costs	(78,413		)		(76,417		)
Total gross deferred liabilities	(294,406		)		(277,993		)
Net deferred tax liability	$	(219,541	)		$	(188,601	)

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

	Year Ended June 30,
	2017			2016			2015
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	2.6	%		1.9	%		1.4	%
Research and development credit	(2.0	)%		(2.5	)%		(1.5	)%
Domestic production activities deduction	(2.1	)%		(1.9	)%		(2.0	)%
Tax over book basis in subsidiary stock	—	%		(1.7	)%		—	%
Tax effects of share-based payments	(0.7	)%		—	%		—	%
Other (net)	0.2	%		0.2	%		0.4	%
	33.0	%		31.0	%		33.3	%

As of June 30, 2017, we have $5,193 of gross federal 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, 2017, we have state NOL carryforwards with a tax-effected value of $1,731. The federal and state losses have varying expiration dates, ranging from fiscal year 2017 to 2036. Based on state tax rules which restrict our utilization of these losses, we believe it is more likely than not that $357 of these losses will expire unutilized.

Accordingly, a valuation allowance of $357 and $608 has been recorded against these assets as of June 30, 2017 and 2016, respectively.

The Company paid income taxes, net of refunds, of $96,074, $90,307, and $61,885 in 2017, 2016, and 2015 respectively.

At June 30, 2017, the Company had $5,449 of gross unrecognized tax benefits, $3,990 of which, if recognized, would affect our effective tax rate. At June 30, 2016, the Company had $7,421 of unrecognized tax benefits, $5,986 of which, if recognized, would affect our effective tax rate. We had accrued interest and penalties of $995 and $1,178 related to uncertain tax positions at June 30, 2017 and 2016, respectively. The income tax provision included interest expense and penalties (or benefits) on unrecognized tax benefits of $(105), $47, and $(155) in the years ending June 30, 2017, 2016, and 2015, respectively.

A reconciliation of the unrecognized tax benefits for the years ended June 30, 2017 and 2016 follows:

	Unrecognized Tax Benefits
Balance at July 1, 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
Additions for current year tax positions	1,457
Reductions for current year tax positions	—
Additions for prior year tax positions	23
Reductions for prior year tax positions	(766		)
Settlements	(1,040		)
Reductions related to expirations of statute of limitations	(1,646		)
Balance at June 30, 2017	$	5,449

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 was completed during the quarter ending December 31, 2016. The closing of the examination did not result in a material change to the Company’s financial statements.

The U.S. federal and state income tax returns for June 30, 2014 and all subsequent years remain subject to examination as of June 30, 2017 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 $500 - $1,500 within twelve months of June 30, 2017.

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, 2017 and 2016) are maintained for potential credit losses.

In addition, some of the Company’s key solutions are dependent on technology manufactured by IBM Corporation and Microsoft. Termination of the Company’s relationship with either IBM or Microsoft 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, 2017, 2016, and 2015 includes $11,129, $10,720, and $10,112 of equity-based compensation costs, respectively, of which $9,861, $9,712, and $9,251 relates to the restricted stock plans, respectively. The income tax benefits from stock option exercises and restricted stock vests totaled $2,638, $1,051, and $4,343 for the years ended June 30, 2017, 2016, and 2015, respectively.

2015 Equity Incentive Plan and 2005 Non-Qualified Stock Option Plan

On November 10, 2015, the Company adopted the 2015 Equity Incentive Plan ("2015 EIP") for its employees and non-employee directors. The plan allows for grants of stock options, stock appreciation rights, restricted stock shares or units, and performance shares or units. The maximum number of shares authorized for issuance under the plan is 3,000. For stock options, terms and vesting periods of the options were determined by the Compensation Committee of the Board of Directors when granted. The option period must expire not more than ten years from the options grant date. The options granted under this plan are exercisable beginning three years after grant at an exercise price equal to 100% of the fair market value of the stock at the grant date. The options terminate upon surrender of the option, ninety days after termination of employment, upon the expiration of one year following notification of a deceased optionee, or 10 years after grant.

The Company previously issued options to outside directors under the 2005 Non-Qualified Stock Option Plan (“2005 NSOP”). No additional stock options may be issued under this plan.

The 2005 NSOP was adopted by the Company on September 23, 2005, for its outside directors. Generally, options were 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 were reserved for issuance under this plan with a maximum of 100 for each director.

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

	Number of Shares			Weighted Average Exercise Price				Aggregate Intrinsic Value
Outstanding July 1, 2014	125			$	22.29
Granted	—			—
Forfeited	—			—
Exercised	(25	)		19.17
Outstanding July 1, 2015	100			23.07
Granted	—			—
Forfeited	—			—
Exercised	(50	)		23.99
Outstanding July 1, 2016	50			22.14
Granted	32			87.27
Forfeited	—			—
Exercised	(10	)		28.52
Outstanding June 30, 2017	72			$	50.04			$	3,859
Vested and Expected to Vest June 30, 2017	72			$	50.04			$	3,859
Exercisable June 30, 2017	40			$	20.55			$	3,333

There were 32 options granted in fiscal 2017, and no options granted during either of the two prior years presented. The weighted-average fair value at the grant date of options granted during fiscal 2017 was $15.78.

The Company utilized a Black-Scholes option pricing model to estimate fair value of the stock option grants at the grant date. All 32 options granted during fiscal 2017 were granted on July 1, 2016. Assumptions such as expected life, volatility, risk-free interest rate, and dividend yield impact the fair value estimate. These assumptions are subjective and generally require significant analysis and judgment to develop. The risk free interest rate used in our estimate was determined from external data, while volatility, expected life, and dividend yield assumptions were derived from our historical experience with share-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. The assumptions used in estimating fair value and resulting compensation expenses at the grant dates are as follows:

Expected Life (years)	6.50
Volatility	19.60	%
Risk free interest rate	1.24	%
Dividend yield	1.28	%

At June 30, 2017, there was $334 of compensation cost yet to be recognized related to outstanding options. The weighted average remaining contractual term on options currently exercisable as of June 30, 2017 was 1.88 years.

The total intrinsic value of options exercised was $747, $3,011, and $1,044 for the fiscal years ended June 30, 2017, 2016, and 2015, 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 EIP 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 5 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, 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 July 1, 2016	58			44.95
Granted	17			87.27
Vested	(38	)		37.00
Forfeited	(1	)		65.52
Outstanding June 30, 2017	36			$	73.66

The non-vested share awards granted prior to July 1, 2016 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. The 17 non-vested share awards granted during the year ending June 30, 2017 do participate in dividends during the restriction period. The weighted-average fair value of such participating awards was based on the fair market value on the grant date.

At June 30, 2017, there was $1,094 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 0.96 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, 2017, as well as activity for the year then ended:

Unit awards	Shares			Weighted Average Grant Date Fair Value			Aggregate Intrinsic Value
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 July 1, 2016	429			58.06
Granted	130			77.75
Vested	(136	)		50.12
Forfeited	(37	)		54.30
Outstanding June 30, 2017	386			$67.84			$40,043

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,
	2017			2016			2015
Volatility	16.0	%		15.6	%		17.8	%
Risk free interest rate	0.93	%		1.06	%		1.06	%
Dividend yield	1.3	%		1.5	%		1.5	%
Stock Beta	0.684			0.741			0.765

For the year ended June 30, 2017, 85 unit awards were granted and measured using the above assumptions. The remaining 45 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, 2017, there was $9,887 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 1.04 years.

The fair value of restricted shares and units at vest date totaled $15,085, $8,677, and $20,275 for the years ended June 30, 2017, 2016, and 2015, respectively.

NOTE 10. EARNINGS PER SHARE

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

	Year Ended June 30,
	2017				2016				2015
Net Income	$	245,793			$	248,867			$	211,221
Common share information:
Weighted average shares outstanding for basic earnings per share	77,856				79,416				81,353
Dilutive effect of stock options and restricted stock	399				318				248
Weighted average shares outstanding for diluted earnings per share	78,255				79,734				81,601
Basic earnings per share	$	3.16			$	3.13			$	2.60
Diluted earnings per share	$	3.14			$	3.12			$	2.59

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 contain non-forfeitable rights to participate in dividends. There were 32 anti-dilutive stock options and restricted stock excluded for fiscal 2017, 0 shares excluded for fiscal 2016, and 0 shares excluded for fiscal 2015.

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, 2017, 2016 and 2015 was $1,102, $1,008 and $861, 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 eligible 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 $17,550, $16,794, and $15,378 for fiscal 2017, 2016 and 2015, 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 Bank 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, 2017 included revenue of $6,536 and after-tax net income of $1,307. For the

twelve months ended June 30, 2016, Bayside Business Solutions' contributed $4,273 to revenue, and after-tax net income of $303.

The accompanying consolidated statements of income 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 leading provider of technology solutions and payment processing services primarily for financial services organizations. 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, 2017
	Bank				Credit Union				Total
REVENUE
License	$	1,928			$	457			$	2,385
Support and service	1,025,378				358,960				1,384,338
Hardware	28,457				15,937				44,394
Total revenue	1,055,763				375,354				1,431,117
COST OF SALES
Cost of license	627				103				730
Cost of support and service	605,414				180,729				786,143
Cost of hardware	20,281				11,880				32,161
Total cost of sales	626,322				192,712				819,034
GROSS PROFIT	$	429,441			$	182,642			612,083
OPERATING EXPENSES									244,381
INTEREST INCOME (EXPENSE)									(748		)
INCOME BEFORE INCOME TAXES									$	366,954

	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

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 18, 2017, the Company's Board of Directors declared a cash dividend of $0.31 per share on its common stock, payable on September 28, 2017 to shareholders of record on September 8, 2017.

Change in Reportable Segments

Beginning in the first quarter of fiscal 2018, JHA intends to make a change to the reportable segment structure. The current Bank and Credit Union segments will be replaced by four new segments: Payments, Core Software, Complementary Software, and Corporate/ Other. The proposed change is being made based on the view of our new Chief Operating Decision Maker, David Foss, that the Company could be more effectively managed using a product-centric approach as opposed to the customer-centric approach that had been previously used.

QUARTERLY FINANCIAL INFORMATION

(unaudited)

	For the Year Ended June 30, 2017
	Quarter 1				Quarter 2				Quarter 3				Quarter 4				Total
REVENUE
License	$	694			$	849			$	516			$	326			$	2,385
Support and service	333,046				337,515				342,769				371,008				1,384,338
Hardware	11,288				10,189				10,482				12,435				44,394
Total revenue	345,028				348,553				353,767				383,769				1,431,117
COST OF SALES
Cost of license	252				59				280				139				730
Cost of support and service	185,892				191,269				198,844				210,138				786,143
Cost of hardware	8,619				6,818				7,603				9,121				32,161
Total cost of sales	194,763				198,146				206,727				219,398				819,034
GROSS PROFIT	150,265				150,407				147,040				164,371				612,083
OPERATING EXPENSES
Selling and marketing	22,127				21,903				23,571				25,696				93,297
Research and development	19,739				20,873				20,801				23,340				84,753
General and administrative	16,982				18,989				16,223				17,407				69,601
Gain on disposal of businesses*	—				36				(2,286		)		(1,020		)		(3,270		)
Total operating expenses	58,848				61,801				58,309				65,423				244,381
OPERATING INCOME	91,417				88,606				88,731				98,948				367,702
INTEREST INCOME (EXPENSE)
Interest income	108				60				42				38				248
Interest expense	(142		)		(184		)		(278		)		(392		)		(996		)
Total interest income (expense)	(34		)		(124		)		(236		)		(354		)		(748		)
INCOME BEFORE INCOME TAXES	91,383				88,482				88,495				98,594				366,954
PROVISION FOR INCOME TAXES	29,139				29,668				28,451				33,903				121,161
NET INCOME	$	62,244			$	58,814			$	60,044			$	64,691			$	245,793
Basic earnings per share	$	0.79			$	0.76			$	0.77			$	0.83			$	3.16
Basic weighted average shares outstanding	78,413				77,814				77,597				77,602				77,856
Diluted earnings per share	$	0.79			$	0.75			$	0.77			$	0.83			$	3.14
Diluted weighted average shares outstanding	78,844				78,180				77,932				78,064				78,255

*Gain on disposal of business was included in general and administrative expenses within the financial statements previously filed in the Company's Quarterly Reports on Form 10-Q.

	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 businesses	—				—				—				(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 net income 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 net income 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