Item 10. Directors, Executive Officers andCorporate Governance.

A biography for each of our directors and, if applicable, arrangements under which a director was appointed to the board of directors or information regarding any involvement in certain legal or administrative proceedings is provided. Additional information about the experiences, qualifications, attributes, or skills of each director in support of his service on the board of directors is also provided.

(Term to Expire in 2013)

Managing Director of MAK Capital Fund, L.P., a value-oriented hedge fund, since 2005. Portfolio manager and analyst at Green Cay Asset Management from 2002 to 2004. As Managing Director of MAK Capital, the Company’s largest shareholder, Mr. Cueva is uniquely qualified to represent the interests of the Company’s shareholders. Additionally, Mr. Cueva’s qualifications and experience include capital markets, investment strategy, and financial management.

Chairman of the Board of Directors of the Company since October 2008. Retired Vice President, American Division, National Semiconductor, a producer of semiconductors and a leader in analog power management technology, from 1996 to February 1998. Mr. Kolerus served as Chairman of the Board of Directors of National Semiconductor Japan Ltd., from 1995 to 1998, and Chairman of the Board of Directors of ACI Electronics, LLC, from 2004 to 2008. Mr. Kolerus has extensive experience in engineering, global operations, private and public companies, software and hardware technology companies, government contracting, capital markets, financial management, and the technology industry. Mr. Kolerus’ prior experiences as a board chairman uniquely qualify him to lead the board of directors as its Chairman.

Retired from Accenture, a consulting firm (formerly known as Andersen Consulting), in August 2000. Mr. Lauer held numerous operational positions covering regional, national, and global responsibilities during his 31-year career, most recently serving as Managing Partner Global Human Performance Services and Managing Partner Change Management Global Communications and High Tech Industries. Mr. Lauer’s career in the information technology industry provided him with extensive experience and qualifications in global business operations, corporate and organizational restructurings, management of professional services personnel, and the development, implementation and deployment of large-scale business application software solutions in numerous industry verticals.

Founder and currently a principal of CapitalWorks, LLC, a private equity group, since 1999. Mr. McCreary has served in numerous managing partner positions in investment banking firms and as a partner in a large regional corporate law firm. Mr. McCreary has extensive experience and qualifications in law, corporate governance, financial strategy, capital markets, investment strategy and mergers and acquisitions, and governance of portfolio companies.

(Term to Expire in 2014)

President and Chief Executive Officer of the Company since October 2011. Interim President and Chief Executive Officer since May 2011. Principal and Chief Investment Officer with Arcadia Capital Advisors, LLC, an investment management company making active investments in public companies, from April 2008 to May 2011. President and Chief Executive Officer of Engyro Corporation, an enterprise software company offering solutions in systems management, from January 2005 to August 2007. Previously a director of Entrust, Inc., I-many, Inc., and NaviSite, Inc. As a former President of a division of a publicly-held software company and as a Chief

Executive Officer of a private software company, Mr. Dennedy has experience in the technology industry. In addition, Mr. Dennedy has extensive experience in investment strategy, capital structure, financial strategy, mergers and acquisitions, and significant public company leadership and board experience.

Chief Ethics and Legal Officer, Executive Vice-President of Acxiom Corporation, a marketing technology and services company, since 1999. Prior to joining Acxiom, Mr. Jones was a partner with the Rose Law Firm in Little Rock, Arkansas, where he specialized in problem solving and business litigation for 19 years, representing a broad range of business interests. Previously he was a director of Entrust, Inc. He is a 1980 graduate of the University of Arkansas School of Law and holds a bachelor's degree in public administration from the University of Arkansas. As the Chief Legal Officer of a technology company, Mr. Jones has extensive experience with legal, privacy, and security matters. He has also led the strategy and execution of mergers and alliances and international expansion efforts.

Chief Executive Officer of BeyondTrust, a security software company, since October 2008. Founder and a Managing Partner of MV Advisors, LLC, a strategic block investment firm that provides focused investment and strategic guidance to small and mid-cap technology companies, from 2006 to 2008. Director of Steel Excel Inc., and previously Director of Edgar Online, Inc. and Aspyra, Inc. Mr. Mutch has been an operating executive and investor in the technology industry for over 25 years and has a long, sustained track record of creating shareholder value through both activities. As a Chief Executive Officer of an IT company, Mr. Mutch has extensive experience in the technology industry, restructuring, financial management and strategy, capital markets, sales management, and marketing.

The following are biographies for each of our current, non-director executive officers. The biography for Mr. Dennedy, our President and Chief Executive Officer, and a director, is provided above.

~~Forward Looking Information~~

~~This Annual Report~~The Code of Business Conduct adopted by our board of directors applies to all directors, officers, and employees of the Company and incorporates additional ethics standards applicable to our Chief Executive Officer, Chief Financial Officer, and other ~~publicly~~senior financial officers of the Company, and any person performing a similar function. The Code of Business Conduct is reviewed annually by the Audit Committee, and recommendations for change are submitted to the board of directors for approval. The Code of Business Conduct is available ~~documents,~~on our website at www.agilysys.com, under Investor Relations. The Company has in place a hotline available for use by all employees, as described in the Code of Business Conduct. Any employee can anonymously report potential violations of the Code of Business Conduct through the hotline, which is managed by an independent third party. Reported violations are promptly reported to and investigated by the Company. Reported violations are addressed by the Company and, if related to accounting, internal accounting controls, or auditing matters, the Audit Committee. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ listing standards concerning any amendments to, or waivers from, any provision of the Code of Business Conduct.

Section 16(a) of the Securities Exchange Act requires the Company’s directors and certain of its executive officers and persons who beneficially own more than 10% of the Company’s common shares to file reports of and changes in ownership with the SEC. Based solely on the Company’s review of copies of SEC filings it has received or filed, the Company believes that each of its directors, executive officers, and beneficial owners of more than 10% of the shares satisfied the Section 16(a) filing requirements during fiscal year 2013, with one exception: on July 31, 2012, Mr. Jones was granted 8,055 shares of restricted stock following his election to the board of directors. The Form 4 to report such grant was inadvertently filed one day late on August 3, 2012.

Item 11. Executive Compensation.

None of the members of the Compensation Committee during fiscal year 2013 or as of the date of this report is or has been an officer or employee of the Company, and none of our executive officers served on the compensation committee (or other committee serving an equivalent function) or board of any company that employed any member of our Compensation Committee or our directors.

During fiscal year 2013, compensation for non-employee directors consisted of the following:

We also reimburse our directors for reasonable out-of-pocket expenses in connection with attendance at board of directors and committee meetings.

The fiscal year 2013 equity award for each director, other than Mr. Jones, consisted of 9,383 restricted shares, based on a $7.46 grant date price, and was granted under the 2011 Stock Incentive Plan. The restricted shares vested on March 31, 2013 and provided for pro-rata vesting upon retirement prior to March 31, 2013. The grant was made in June 2012, to the then current non-employee directors; however, Mr. Cueva declined the award given the significant ownership in the Company by his firm, MAK Capital. The award for Mr. Jones consisted of 8,055 restricted shares, based on a $8.69 grant date price, and was made in July 2012 at the time of his first election to the board. Mr. Jones’ restricted shares also vested on March 31, 2013.

Our directors are subject to share ownership guidelines that require ownership of either (i) three times the director’s respective annual cash retainer within two years of service and six times the director’s respective annual cash retainer within four years of service; or (ii) 15,000 shares within the first two years following the director’s election to the board of directors and 45,000 shares within four years of election. We pay no additional fees for board or committee meeting attendance. Mr. Dennedy ceased receiving compensation for his service as a director upon his appointment as an executive officer in July 2011, and all compensation received by Mr. Dennedy thereafter was for his service as an executive officer.

This Compensation Discussion and Analysis (the “CD&A”) describes our executive compensation philosophy and programs during fiscal year 2013. Executive compensation arrangements with our Named Executive Officers are governed by the Compensation Committee (the “Committee”). In this CD&A, you will find detailed compensation information for our Named Executive Officers, which consist of our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”), and our three other most highly compensated executive officers during fiscal year 2013, as listed below:

On July 1, 2013, the Company completed the sale of the Retail Solutions Group to Kyrus Solutions, Inc. As a result of the sale, Mr. Civils became an employee of Kyrus Solutions, Inc. and is no longer an employee of the Company.

As discussed in the CD&A contained in the Proxy Statement for our 2012 Annual Meeting of Shareholders, in fiscal year 2012 the Company substantially reduced compensation costs for key executive positions following the sale of its Technology Services Group business unit (“TSG”) in August 2011, which resulted in a smaller, refocused Company and new leadership in key executive positions with comparatively lower compensation arrangements to reflect the smaller, refocused Company. In fiscal year 2013, the Committee continued the compensation programs put in place in fiscal year 2012 with even more emphasis on pay for financial performance for the CEO and CFO.

Compensation Focus for Fiscal Year 2013. In response to current executive compensation trends, and after considering the results of our 2012 vote on Named Executive Officer compensation, which confirmed the Company’s philosophy and objectives relative to our executive compensation program, the Compensation Committee continued efforts to maintain reduced compensation expense and link executive pay to performance by:

Performance Linked Compensation. Our Compensation Committee set fiscal year 2013 compensation, including financial and business targets for performance-based compensation, for our Named Executive Officers to continue to emphasize pay for performance by comprising the fiscal year’s total compensation opportunity of 22%, on average, of annual cash incentive based on goals focused on significant improvements over fiscal year 2012 results for revenue, gross profit and adjusted operating income.

Our CEO's targeted pay was approximately 74% performance-based, and between 50% and 60% for each of our other Named Executive Officers targeted pay was performance-based, tied directly to annual goals or long-term equity awards, the value of which is tied directly to an increase in share price. As discussed below, targeted annual goals were primarily based on improvements over fiscal year 2012 results for revenue, gross profit and adjusted operating income, and, for Mr. Civils, significant business unit improvements.

Our operating results for fiscal year 2013 significantly outperformed our plan. Total net revenue increased 13%, and adjusted operating income increased $15.6 million year over year to $7.6 million from an adjusted operating loss of $7.9 million in fiscal year 2012. As a result, annual incentive payouts ranged from 123% to 146% of target for the Named Executive Officers.

Chief Executive Officer Compensation. Mr. Dennedy became our CEO in May 2011 with a compensation package that included a base salary that was set significantly lower, 26%, than his predecessor’s salary and an annual incentive target that was set at a significantly higher percentage, at 100% percent of salary versus 85%. His compensation remained unchanged in fiscal year 2012.

Mr. Dennedy’s compensation package for fiscal year 2013 continued to reflect the Compensation Committee’s ongoing commitment to link pay to performance and to maintain reduced compensation costs, as evidence by the following for Mr. Dennedy:

Chief Financial Officer Compensation. Mr. Ellis was appointed our CFO during fiscal year 2012 and his initial compensation package was similarly set to achieve the Compensation Committee’s goals of reducing compensation cost and emphasizing by for performance with a base salary that was set 8% lower than his predecessor’s salary and an annual incentive target that was set at a higher percentage, 60% percent of salary versus 50%. In October 2012, Mr. Ellis was appointed to the additional office of Chief Operating Officer, and the Compensation Committee increased his base salary and target annual incentive to reflect his additional responsibilities.

Mr. Ellis’ compensation package for fiscal year 2013, including the ~~documents incorporated herein and therein by reference, contain, and our officers and representatives may from time~~compensation related to ~~time make, “forward-looking statements” within~~his additional role as Chief Operating Officer, continued to reflect the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar referencesCompensation Committee’s ongoing commitment to ~~future periods. These statements are not guarantees of future~~link pay to performance and ~~involve risks, uncertainties,~~to maintain reduced compensation costs, as evidence by the following for Mr. Ellis:

Our Compensation Committee adopted its pay philosophy, objectives, and structure for Named Executive Officers to achieve financial and business goals and create long-term shareholder value. Our Compensation Committee reaffirmed the pay philosophy, objectives, and structure for fiscal year 2013.

Compensation Philosophy and Objectives. Our Compensation Committee’s pay philosophy is to pay a base salary and provide target annual cash incentives and long-term equity incentives, each at the 50th percentile of comparative peer group compensation, and to annually review these compensation components based on peer group comparisons and tie compensation to our business strategy. The Compensation Committee’s objective is to establish an overall compensation package to:

Compensation Structure. Our compensation structure is comprised of:

Annual Goal Setting. Annual goals for our Named Executive Officers are tied to our financial, strategic, and operational goals and include business specific financial targets relating to our goals. Each Named Executive Officer’s annual incentive goals are established by our Compensation Committee, with input from our CEO (other than for himself). At fiscal year-end, the Compensation Committee evaluates the performance of each Named Executive Officer and determines an appropriate award based on established goals, with input from our CEO (other than for himself) on individual goals. Our Compensation Committee establishes our CEO’s annual incentive goals and determines his appropriate award based on established goals.

Variable Pay at Risk. Our philosophy drives the provision of greater at-risk pay to our Named Executive Officers, and variable pay at risk comprised approximately 74% of target annual compensation for our CEO and between 50% and 60% for other Named Executive Officers. Our Named Executive Officers have significant opportunities for long-term, equity-based incentive compensation, higher than for annual cash incentive compensation in most cases, as our philosophy is to tie a significant portion of compensation to the long-term performance of our common shares. As a result, significant emphasis is placed on long-term shareholder value creation, thereby minimizing excessive risk taking by our executives.

Competitive Market Assessments. During fiscal year 2012, Towers Watson provided the Compensation Committee with two competitive market assessments, one in March and one in August, which updated the March assessment to adjust for expected revenues of the smaller Company after the closing of the TSG sale. The assessments evaluated compensation levels for the Company’s top eight executive positions, including the Named Executive Officers. The assessments compared published survey compensation data for both general industry and the high technology services industry to current compensation levels for the Company’s executives. Competitive compensation levels in these industries were gathered for base salary, annual incentive, total cash compensation, long-term incentive, and total direct compensation. The purpose of the assessments was to compare current market data to our current compensation, which was based on prior benchmarking performed by the Company, where compensation levels were benchmarked to separate, defined peer group companies for corporate executives and each business unit executive. Towers advised that an assessment using the general and high technology services industries data provides more representative and relevant comparisons given the size of the Company. As further detailed below, the assessments showed that all elements of the Company’s overall compensation fell between the 25^th and 50^th percentiles within both the general and high technology services industries. Typically, an individual position is considered to be paid at market if it is within 15% (above or below) the competitive median and the assessments showed that the Company had individuals above, within, and below that range.

During fiscal year 2013, the Compensation Committee believed that the Towers Watson assessments performed in fiscal year 2012, without any update, remained useful for purposes of determining Named Executive Officer compensation, and, as a result, the Compensation Committee did not request or review any additional assessments in fiscal year 2013.

Tally Sheets. Our Compensation Committee analyzes tally sheets at the beginning of the fiscal year to review overall compensation and pay mix for each Named Executive Officer. Tally sheets include a three-year look-back of total compensation, including annual cash compensation, long-term incentive awards granted and earned, and benefits and perquisites. Tally sheets also include a cumulative inventory of equity grants by fiscal year, including the value of outstanding equity at the Company’s current stock price and the value received for prior vesting and exercises of equity. The tally sheets bring together, in one place, all elements of Named Executive Officers’ actual compensation and information about wealth accumulation so that our Compensation Committee can analyze the individual elements and mix of compensation and the aggregate total amount of annual and accumulated compensation. Tally sheets are also used by the Compensation Committee to evaluate internal pay equity among the Named Executive Officers and to determine the impact of employment termination or change of control events. In support of the philosophy of rewarding future performance, the Compensation Committee does not consider prior pay outcomes in setting future pay levels. Rather, tally sheets are used by the Compensation Committee to review compensation as compared to expectations, and our Compensation Committee determined that annual compensation set for our Named Executive Officers for fiscal year 2013 was consistent with expectations and with the established compensation philosophy and pay mix guidelines driven by that philosophy.

Salary. For fiscal year 2013, salary comprised 27% of total target compensation for our CEO and between 40% and 50% for our other Named Executive Officers. Since all of the Named Executive Officers, other than Mr. Dennedy and Mr. Civils, had been first hired by the Company during fiscal year 2012 or 2013, the Compensation Committee considered the competitive market assessments provided by Towers Watson in fiscal year 2012 in determining the initial salaries for the newly hired Named Executive Officers, as well as their previous salary levels and prior experience. The Compensation Committee further considered the competitive market assessments provided by Towers Watson in determining fiscal year 2013 salaries for all the Named Executive Officers. For purposes of the assessments, Mr. Civils was matched to survey benchmarks based upon responsibilities, and market-competitive salaries were determined by regressing the benchmark to Mr. Civil's business unit revenue responsibilities.

The survey data included values at the 25^th, 50^th (market median), and 75^th percentiles. Based on the assessment, at the beginning of fiscal year, salaries for the Named Executive Officers ranged between 27% below and 2% above median, which was considered competitive. As such, salary increases for fiscal year 2013 were made based on individual responsibilities and performance, and increases averaged 6%, ranging from 2% to 14%.

Mr. Ellis' annual salary was increased from $285,000 to $300,000 in November 2012 following his appointment to the additional office of Chief Operating Officer based on the Compensation Committees assessment of the additional responsibilities required by his new position.

Annual Incentives. For fiscal year 2013, annual goals were set at the beginning of the fiscal year. The discussion below, which specifically relates to the table below under “Fiscal Year 2013 Payouts,” provides details regarding fiscal year 2013 annual incentive performance metrics, levels, and payouts for the Named Executive Officers. As discussed below, annual goals for Mr. Civils were changed during the fiscal year as a result of ~~new information,~~the Company's decision to sell the RSG business.

Performance Metrics. The Compensation Committee set corporate performance metrics for fiscal year 2013 annual incentives to require target level improvements over fiscal year 2012 results of 138% for adjusted operating income, 3.4% for gross profit and 8.2% for revenue. These levels were set based on the Company's overall operating plan and expected growth and operating improvements in the two business units. Target level improvements for RSG, which Mr. Civils managed, were set at 64% for adjusted operating income. Target level improvements over fiscal year 2012 results for adjusted operating income were significant because the Company had negative adjusted operating income in fiscal year 2012. Adjusted operating income is calculated as operating income excluding amortization of intangibles, stock based compensation expense and non-recurring charges. The Company believes adjusted operating income is a profitability measure and a key driver of value, focusing on sales, product mix, margins, and expense management. Adjusted operating income was selected as an annual goal component for all Named Executive Officers given the desire to balance sales and margins, as both are manageable by our Named Executive Officers, and replaced the EBITDA component used in prior fiscal years.

For the corporate Named Executive Officers, including Messrs. Dennedy, Ellis, Badger and Steinberg, adjusted operating income goals related to the consolidated Company results, and for Mr. Civils, the adjusted operating income goal related to RSG. The Compensation Committee believed that revenue and gross profit goals were less important for Mr. Civils as long as the adjusted operating income goal was achieved, and, accordingly, Mr. Civils only performance metric was achievement of targeted adjusted operating income for RSG.

Performance percentages for payouts (with proportionate payouts between the target and maximum achievement levels) were based on varying levels of achievement of fiscal year 2013 budgeted results, as set forth below. Additional detail about threshold and maximum incentives are disclosed in the Grants of Plan-Based Awards for Fiscal Year 2013 table.

The Compensation Committee believed that the plan involved moderate difficulty at the threshold level, a high degree of difficulty at the 100% target level, given continuing competition and pricing pressure in the market, and significant difficulty at the maximum level, requiring significant improvement over fiscal year 2012 results, in each case relative to future ~~events, or otherwise.~~

3

~~Part I~~

expectations at the time the levels were set. Threshold levels were based on achievement necessary to successfully execute a minimum level of the operating plan.

MBO’s. In addition to objective performance metrics, management by objective goals (“MBOs”) comprised from 25% to 50% of the annual incentive of Named Executive Officers other than Messrs. Dennedy and Ellis. However, MBOs could only be earned in the event that threshold adjusted operating income targets were achieved in order to place greater weight on objective performance metrics. MBOs represent individual performance-based goals, with both quantitative and qualitative measures, relative to individual responsibilities and emphasize the importance of specific tasks and company-wide initiatives. The Compensation Committee believed that MBOs were appropriate for executives whose impact on shareholder value was less direct than the CEO and CFO. The Compensation Committee has discretion in deciding whether each MBO was achieved and in determining the level of achievement, and thus payout, for the MBO components. Achievement of MBOs results in a payout ranging from a minimum of 80% for partial achievement to 100% for maximum achievement, and Named Executive Officers are eligible for proportionate payouts between the minimum and maximum achievement levels, and there is no payout for MBOs below the minimum achievement level. Consistent with the other elements of compensation, MBOs were established at the beginning of year when the outcome for the fiscal year was substantially uncertain. Fiscal year 2013 MBO goals and payout allocations for the Name Executive Officers were as follows:

Weight differences between initiatives among the Named Executive Officers corresponded to importance of each initiative in respect of the overall Company operating plan.

Mr. Civils’ MBOs were changed during the fiscal year when the Company decided to implement a ~~leading provider~~process to sell the RSG business. Given the significant amount of ~~innovative technology solutions~~time and effort required by Mr. Civils in connection with the sale of RSG, the Compensation Committee concluded that it was in the Company’s best interest to focus his incentives towards successful completion of the sale.

Annual Incentive Levels. For all Named Executive Officers, fiscal year 2013 target annual incentives were set as a percentage of salary, with the percentage correlating to the overall competitive total target compensation level for each executive. Target annual incentives were set at 88% of salary for Mister. Dennedy and 75% for Mr. Ellis, as opposed to approximately 50-75% of salary for other executives, to increase the performance-based nature of their total compensation due to their greater ability to influence corporate goals and initiatives. Annual incentives comprised 23% of total target compensation for Mr. Dennedy and 32% for Mr. Ellis, and approximately 25% for our other Named Executive Officers. As with salaries, the Compensation Committee considered the competitive market assessments provided by Towers Watson in fiscal year 2012 in evaluating current annual incentive levels and for determining fiscal year 2013 levels. Target levels were based on survey data from companies of comparable revenue and were interpolated for each executive based on calculated competitive salaries, as described above.

The survey data included values at the 25^th, 50^th (market median), and 75^th percentiles and, on average, current target annual incentive percentages of salary were aligned with market median, and total target cash compensation (salary and annual incentive) was in the competitive range for the ~~hospitality~~positions evaluated, ranging from 21% below to 16% above market median. As such, increased annual incentive opportunities for Named Executive Officers other than Messrs. Dennedy and ~~retail markets including property~~Ellis were a factor of increased salary, as discussed above, as annual incentives as a percentage of salary approximated current levels. Mr. Dennedy's annual incentive as a percentage of salary was reduced from 100% to 88% to set his total target cash compensation in line with market median. Mr. Ellis' annual incentive as a percentage of salary was set higher than market median to heavily weight performance, given his ability to influence corporate goals and ~~lodging~~initiatives.

Mr. Ellis target annual incentive as a percentage of his salary was increased from 60% to 75% in October 2012 when he was appointed to the additional office of Chief Operating Officer based on the Compensation Committees assessment of the scope and amount of additional responsibilities required by his new position and to further weight performance given his additional ability to influence corporate goals and initiatives.

Fiscal Year 2013 Payouts. The chart below sets forth the fiscal year 2013 annual incentive opportunity for each Named Executive and the components, weightings, and actual annual incentive payouts based on the Compensation Committee’s review of the achievement of the performance measures. At the corporate level, target levels of revenue, gross profit and adjusted operating income were substantially exceeded, resulting in corresponding payouts for those components. At the business segment level, Mr. Civils exceeded the target levels of adjusted operating income. The attainment by each Named Executive Officer of their respective MBOs is reflected in the table below.

Long-Term Incentives. As with the annual incentives, the Compensation Committee approved fiscal year 2013 long-term incentive (“LTI”) awards at the beginning of year when the outcome for the fiscal year was substantially uncertain. LTI awards to Named Executive Officers consisted of stock-settled appreciation rights (“SSARs”) and restricted shares, both with three-year vesting schedules, pursuant to the Company's shareholder-approved 2011 Stock Incentive Plan. The Committee considered various LTI award alternatives. While annual incentives targeted specific performance goals, the focus on LTI awards was to link compensation directly to shareholder gains and to improve retention of key management ~~inventory~~during the Company's time of transition. SSARs provided the direct link between compensation and ~~procurement, point-of-sale (POS), document management, mobile, wireless~~shareholder gains in a less dilutive manner than with stock options, and ~~other types~~the three-year vesting schedule also enhances retention. Restricted shares also tie compensation to shareholder gains and highly bolster retention over the vesting period.

LTI awards comprised 50% of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting or subscription services. Our customers include retailers, casinos, resorts, cruise and other hospitality and retail customers, andtotal target compensation for Mr. Dennedy to directly link a significant portion of his pay, when combined with his annual incentive, to performance and comprised between 25% and 35% for our ~~consolidated~~other Named Executive. As with salaries and annual incentives, the Compensation Committee considered the competitive market assessments provided by Towers Watson in fiscal year 2012 in evaluating current LTI levels and for determining fiscal year 2013 LTI levels. The Compensation Committee also received input and recommendations from our CEO regarding each Named Executive Officer's relative ability to influence results in a business segment or in the corporate office. Target levels were based on survey data from companies of comparable revenue, as described above. The data included LTI values at the 25^th, market median, and 75^th percentiles, and LTI's as a percentage of base salary at those values. Other than for the CEO, current LTI values and as a percentage of salary were in the competitive range for the positions evaluated, ranging from 8% below to 15% above market median. Mr. Dennedy's LTI as a percentage of base salary was 25% lower than market, which the Compensation Committee viewed as outside the competitive range and inconsistent with our goal to heavily link Mr. Dennedy's compensation to shareholder gains. In addition, Mr. Dennedy's total target compensation, having been largely determined at the time of his prior appointment as interim CEO, was below the market median, and thus the Committee increased Mr. Dennedy's LTI as a percentage of salary to overweight his LTI but still keep his total target compensation at the market median.

The Compensation Committee also set Mr. Steinberg's LTI as a percentage of salary higher than the market median in order to place significant emphasis on long-term shareholder value creation given his role as Chief Technology Officer in developing the Company's next generation of products and solutions.

Based on the competitive assessments, input and recommendations, the Compensation Committee set the 2013 LTI awards for each Named Executive Officer as follows:

All SSARs and restricted shares vest in one-third increments on March 31, 2013, 2014 and 2015. The SSARs were granted at an exercise price $7.46 per share, and $8.64 for Mr. Steinberg (the closing price of the common shares on the grant date), have a seven-year term, and are settled in common shares upon exercise.

In addition to the restricted shares granted to Mr. Steinberg as part of his annual compensation, upon his initial hiring by the Company in May 2012, Mr. Steinberg received additional grants of 55,455 shares of restricted stock as a sign-on bonus and to replace unvested equity lost by him upon leaving his prior employer. 20,000 of such shares vest in one- third increments on March 31, 2013, 2014 and 2015; 16,840 of such share vest on on the second anniversary of his date of hire; 887 of such shares vest on the third anniversary of his date of hire; and 17,728 of such shares vest upon the successful development and sale of our next generation property management system.

Additional Compensation – Executive Benefits. We provide executive benefits to our Named Executive Officers including additional life and long-term disability insurance plans. From time to time, Named Executive Officers also may participate in supplier sponsored events. Executive benefits are further described in the Summary Compensation Table. We believe these benefits enhance the competitiveness of our overall executive compensation package. We have, however, limited executive benefits offered to reduce compensation costs. Additionally, welfare benefits offered to our Named Executive Officers are the same level of benefits offered to all Company employees, except that we pay for the cost of physicals to promote the health and well-being of our executives.

The material termination and change of control provisions of various agreements are summarized below for each Named Executive Officer and are covered in more detail in the Termination and Change of Control table and accompanying discussion.

Employment Agreements. All of the Named Executive Officers entered into an employment agreement with the Company, all with substantially the same terms except as described below. Upon termination without cause, we must pay severance equal to one year's salary and target annual incentive, and continue health benefits for the severance period. If the executive's position is ~~derived from contract support, maintenance~~changed such that his or her responsibilities are substantially lessened or, for Mr. Civils, if the executive is required to relocate to a facility more than 50 miles away (a “change in position”), the executive may terminate his or her employment within 30 days of the change in position, and the termination will be deemed to be a termination without cause and the executive is entitled to his or her severance benefits. None of the Named Executive Officers is entitled to excise tax gross-up payments. In consideration of the severance benefits, each employment agreement contains a 12-month non-solicitation provision, an indefinite confidentiality provision, and a 12-month non-compete provision that is automatically triggered if termination is for cause or voluntary and may be enforced by the Company if termination is without cause or for a change in position. Our Compensation Committee believes that the terms of these employment agreements enhance our ability to retain our executives and contain severance costs by providing reasonable severance benefits competitive with market practice. Severance costs are contained by limiting pay to one year, limiting personal benefits, not providing accelerated vesting for awards under the agreements, and ~~professional services.~~

~~We operate extensively throughout North America, with additional sales~~narrowly defining a voluntary termination that triggers severance benefits. Additionally, the Company benefits greatly from the non-competition, non-disclosure, and ~~support offices~~non-solicitation clauses contained in the ~~United Kingdom~~employment agreements. Except for Messrs. Dennedy and ~~Asia. Agilysys has~~Badger, the employment agreements do not contain a change of control provision. For each of Messrs. Dennedy and Badger, if there is a change of control within two ~~operating segments: Hospitality Solutions Group (HSG)~~years after April 1, 2012, and ~~Retail Solutions Group (RSG).~~

~~Reference herein to any particular year or quarter refers to periods~~October 31, 2011, respectively,(the dates of their employment agreements), and within the ~~fiscal year ended March 31. For example, fiscal 2012 refers~~same two-year period his employment with the Company or its successor is terminated without cause, then he will be paid severance equal to two years of each of his base salary and target annual incentive. This change in control benefit enhances our ability to maintain a shareholder focused approach to change of control situations and provides these executives reasonable support following both a change of control and termination (commonly called a “double trigger” requirement). The Compensation Committee

believes these payments are reasonable, particularly in light of the double trigger requirement, and consistent with market practice for such positions.

Accelerated Vesting.None of the employment agreements discussed above provide for accelerated vesting of equity. Under our 2011 Stock Incentive Plan, the only plan for which any of the Named Executive Officers have unvested equity, vesting is accelerated upon the actual occurrence of a change in control for all stock options, SSARs, and restricted shares (including performance shares). The Compensation Committee believes that during a change of control situation, a stable business environment is in the shareholders’ best interests, and accelerated vesting provisions provide stability. The accelerated vesting provisions are applicable to all employees who receive equity awards, not just executive management.

Clawback – Recoupment of Bonuses, Incentives, and Gains. Under the Company’s “clawback” policy, if the board of directors determines that our financial statements are restated due directly or indirectly to fraud, ethical misconduct, intentional misconduct, or a breach of fiduciary duty by one or more executive officers or vice presidents, then the board of directors will have the sole discretion to cancel any stock-based awards granted and to take such action, as permitted by law, as it deems necessary to recover all or a portion of any bonus or incentive compensation paid and recoup any gains realized in respect of equity-based awards, provided recoveries cannot extend back more than three years. Additionally, under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financial statements due to material noncompliance with any financial reporting requirements as a result of misconduct, our CEO and CFO must reimburse us for any bonus or other incentive-based or equity-based compensation received during the 12 months following the first public issuance of the non-complying document, and any profits realized from the sale of our securities during those 12 months.

Stock Ownership Guidelines. To underscore the importance of strong alignment between the interests of management and shareholders, the board of directors approved stock ownership guidelines for directors and executives, with our CEO having the highest ownership requirement. Director and executive compensation is designed to provide a significant opportunity to tie individual rewards to long-term Company performance. The objective of our stock ownership guidelines is to support this overall philosophy of alignment and to send a positive message to our shareholders, customers, suppliers, and employees of our commitment to shareholder value. Each director and executive officer is expected to maintain minimum share ownership of either: (i) a multiple of base salary or director annual retainer listed below, or (ii) the number of shares listed below:

Stock ownership that is included toward attainment of the guidelines includes (i) shares held of record or beneficially owned, either directly or indirectly; (ii) shares acquired upon exercise of stock options or SSARs; (iii) vested restricted or deferred shares; (iv) phantom or deferred share units held in a deferred compensation plan; and (v) shares or deferred shares acquired by dividend reinvestment. Directors and executives are expected to attain the specified target ownership levels within both two and four years from the later of the effective date of this policy or becoming a director or an executive, and remain at or above that level until retirement. Annually, the board of directors reviews progress toward achieving these ownership levels. Director and executives who have not attained the specified ownership guidelines will be required to hold 75% of shares acquired upon exercise of stock options and SSARs or vesting of performance or restricted shares until they meet their target ownership level. If ownership guidelines are not met within two and four years, our Compensation Committee has the right to pay an executive’s annual incentives in shares until ownership guidelines are achieved.

Impact of Tax and Accounting Considerations. In general, the Compensation Committee considers the various tax and accounting implications of the pay mechanisms used to provide pay to our Named Executive Officers, including the accounting cost associated with long-term incentive grants, when determining compensation. Section 162(m) of the Internal Revenue Code generally prohibits any publicly held corporation from taking a federal income tax deduction for pay to the chief executive officer and the three other highest compensated executive officers (other than the chief financial officer) in excess of $1 million in any taxable year. Exceptions are made for certain qualified performance-based pay. It is the Compensation Committee’s objective to maximize the effectiveness of our executive pay plans in this regard. The pay instruments used, including salaries, annual incentives, and equity, are tax deductible to the extent that they are performance-based or less than $1 million for such Named Executive Officer in a given year.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on that review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included the Company’s 2013 Annual Report on Form 10-K for the fiscal year ended March 31, ~~2012.~~

~~History~~2013 and ~~Significant Events~~

~~Organized in 1963~~the Proxy Statement for its 2013 Annual Meeting of Shareholders.

During fiscal year 2012, the Compensation Committee retained Towers Watson as ~~Pioneer-Standard Electronics, Inc., an Ohio corporation, we changed our name~~compensation consultant for executive compensation matters. All fees paid to Agilysys, Inc., in 2003. Our principal executive offices are located at 425 Walnut Street, Suite 1800, Cincinnati, Ohio, 45202 and our corporate services are located at 1000 Windward Concourse, Alpharetta, Georgia, 30005. We began operations as a distributor of electronic components and, later, enterprise computer solutions. Exiting the formerTowers Watson in fiscal ~~2003 with the sale of our Industrial Electronic Division, we used the proceeds to reduce debt, fund growth of our enterprise solutions business~~year 2012 were for executive compensation consultation. The Compensation Committee did not retain a compensation consultant for fiscal year 2013.

The following table and ~~acquire businesses focused on higher-margin and more specialized solutions for the hospitality and retail industries. With the~~related notes provide information regarding fiscal ~~2004 acquisition of Kyrus Corporation, we became the leading provider of IBM retail solutions and services in the supermarket, chain drug, general-retail and hospitality segments. In that same~~ year ~~with the acquisition of Inter-American Data, Inc., we became the leading developer and provider of technology solutions for property and inventory management in the casino and resort industries.~~

In 2007, we divested KeyLink Systems and exited the enterprise computer distribution business. We used the proceeds from that sale to return cash to shareholders and fund a number of acquisitions that broadened our solutions and capabilities portfolios. In calendar 2007, we acquired InfoGenesis and Visual One Systems Corp., significantly expanding our specialized offerings to the hospitality industry through enterprise-class, point-of-sale (POS) and software solutions tailored for a variety of applications in cruise, golf and spa, gaming, lodging, resort and catering. These offerings feature highly intuitive, secure and robust solutions, easily scalable across multiple departments or property locations. In fiscal 2008, we began reporting three primary operating segments: Hospitality Solutions Group (HSG), Retail Solutions Group (RSG) and Technology Solutions Group (TSG).

In fiscal 2012, we sold our TSG segment and restructured the business model to focus on higher-margin opportunities in the hospitality and retail sectors, which also hold greater potential for profitable growth. In that same year, we reduced our real-estate footprint and lowered overhead costs by relocating corporate services from Solon, Ohio to Alpharetta, Georgia, which moved senior management closer to our operating units.

~~Today, we are focused on providing end-to-end solutions that utilize state-of-the-art technology to enhance guest experiences~~2013 compensation for our ~~customers wishing to promote their respective brands. We help~~Named Executive Officers, including our ~~customers win the guest recruitment battle~~CEO and in turn, grow revenue, reduce costs and increase efficiency. This is accomplished by developing and deploying intuitive solutions that increase speed and accuracy, enabling more effective management, intelligent upselling, reduced shrinkage, improved brand recognition and better control of the customer relationship. Our strategy is to increase the proportion of revenue we derive from ongoing support and maintenance agreements, software as a subscription service, cloud applications and professional services.

~~Products, Support and Professional Services~~

We are a leading developer and marketer of end-to-end technology solutions for the hospitality and retail industries, including hardware and software products; support, maintenance and subscription services; and professional services. Areas of specialization are point-of-sale, property management, inventory and procurement, mobile and wireless solutions designed to streamline operations, improve efficiency and enhance the guest experience.

4

~~To align with our strategic restructuring in fiscal 2012 and enhance transparency into the business, we commenced presenting revenue and costs of goods sold in three categories:~~

~~Products (hardware and software)~~

~~Support, maintenance and subscription services~~

~~Professional services~~

~~Total revenue from continuing operations for these three specific areas of offerings follows:~~

   For The Year Ended March 31,
(In thousands)    2012    2011    2010
Products
   $ 105,141       $ 104,769       $ 103,501
Support, maintenance and subscription services
   73,171       70,729       63,218
Professional services
   30,577       27,183       26,787
Total
   $ 208,889       $ 202,681       $ 193,506

~~Products:~~ ~~Products revenue includes resold hardware and proprietary and remarketed software that are deployed as an integral component of the solutions we provide. Our proprietary product suite is comprised of:~~

~~Property Management Systems (“PMS”)~~

•

~~Agilysys Lodging Management System~~^® (LMS) is web-enabled and runs 24/7 to automate every aspect of hotel operations in properties of 1,000 rooms or more. Its foundation expands to incorporate modules for sales and catering, activities scheduling, attraction ticketing and more.

Agilysys Visual One™ PMS is installed in hotels ranging from 50-1,500 rooms. For complex resorts that require an enterprise-wide system, Visual One provides an integrated solution with interfaces to leading global distribution systems (GDSs) and other Agilysys products.

~~Agilysys Guest Express Kiosk module is a self-service kiosk system for both the LMS PMS~~CFO and the Visual One PMS that expedites front desk check-in and check-out. Using the Guest Express Kiosk module, hotel guests can check in, encode a room key, check out and obtain a receipt — all without having to wait in line at the front desk.

~~Point-of-Sale~~

~~Agilysys InfoGenesis™ POS is award-winning, enterprise level software primarily~~other three most highly compensated executive officers whose total compensation exceeded $100,000 for ~~food and beverage products. The software is centralized and designed~~fiscal year 2013.

17

Summary Compensation Table for ~~24/7 environments where reliability and availability are critical. The solution is built on an open system platform using industry-standard hardware, operating system and database platforms.~~

Fiscal Year 2013

~~Agilysys MPOS is a handheld point-of-sale solution that integrates with InfoGenesis POS to enable guest service in any location.~~

~~Agilysys eMenu, an online ordering application, enables our customers to capitalize on the popularity of Web and kiosk ordering while maintaining their existing company brand and workflow.~~

~~Agilysys eCash takes traditional cashless payment and stored value card capabilities and integrates them directly with InfoGenesis POS, increasing customers’ payment options.~~



Name and Principal Position	Year	Salary ($)(1)	Bonus ($)(2)	Stock Awards ($)(3)	Option Awards ($)(3)	Non-Equity Incentive Plan Compen-sation Earnings ($)(4)	Change in Pension Value and Non- qualified Deferred Compen- sation Earnings ($)	All Other Compen- sation ($)(5)	Total ($)
James H. Dennedy	FY13	400,000	—	379,997	380,309	509,784	—	20,481	1,690,571
President and	FY12	309,928	—	311,640	—	369,045	—	10,780	1,001,393
Chief Executive Officer

Robert R. Ellis	FY13	290,934	—	85,499	85,566	327,718	—	11,186	800,903
Senior Vice President, Chief Operating Officer, Chief	FY12	131,705	—	123,199	81,335	88,591	—	3,520	428,350
Financial Officer and Treasurer

Kyle C. Badger	FY13	250,000	—	62,500	62,548	153,921	—	37,796	566,765
Senior Vice President, General									—
Counsel and Secretary

Paul A. Civils	FY13	260,000	—	84,499	84,566	180,470	—	21,319	630,854
Senior Vice President and	FY12	255,000	—	82,874	82,877	129,082	—	22,656	572,489
General Manager

Larry Steinberg	FY13	201,511	39,550	574,750	95,660	148,972	—	7,646	1,068,089
Senior Vice President, Chief
Technology Officer

~~InfoGenesis POS, eMenu and eCash are available through either traditional software licensing or via subscription.~~

~~Inventory & Procurement~~

Agilysys Stratton Warren System (SWS) integrates with all leading financial and POS software products. The software manages the entire procurement process via e-commerce, from the point of business development to managing enterprise-wide backend systems and daily operations.

•

~~Agilysys Eatec~~^®, along with its core purchasing, inventory, recipe, forecasting, production and sales analysis functions, is unique in offering catering, restaurant, buffet management and nutrition modules in a single web-enabled solution.

5

•

~~Agilysys EatecTouch is an optional software applet that operates on any Windows~~^®~~-based POS terminal, providing users with access to the Eatec application from any terminal location.~~

•

~~Agilysys EatecPocket is a Microsoft~~^® ~~Windows~~^® Mobile compatible application designed to work on a handheld wireless device, enabling users to perform inventory transactions. The software incorporates a barcode scanner for mobile updates of the database.

~~Eatec and Stratton Warren System solutions are available either through traditional software licensing or via subscription.~~

~~Document Management~~

Agilysys DataMagine™ provides a U.S.-patented imaging module and archiving solution that allows users to capture and retrieve documents and system-generated information. DataMagine integrates with all Agilysys products, adding functionality and increasing benefit to customers.

~~Activities~~

Agilysys GolfPro is a module that offers golf property managers complete pro shop management. Tee time scheduling, member profile/billing, tournament management and Web and e-mail access are bundled into one solution.

Agilysys Spa Management software covers all aspects of running a spa business, from scheduling guests for services to managing staff schedules. The software also integrates with Agilysys PMS solutions.

•

~~Agilysys LMS ARTS~~^® interfaces with hotel guest data, allowing reservationists to pre-plan activities when booking a guest’s room. The application also places canceled activities back into inventory for resale, resulting in optimum property utilization and profitability.

Agilysys Visual One Activities software streamlines the management of all of the amenities and activities a property has to offer. Staff can easily schedule and personalize reservations for guests; activities then appear on itinerary/confirmations.

~~Support, Maintenance and Subscription Services:~~Contracted technical support, maintenance and subscription services are a significant portion of our consolidated revenue. Growth has been driven by a strategic focus on developing and promoting these offerings, which typically generate higher profit margins than products revenue. In addition to our deliberate positioning, market demand for proper maintenance and updates that enhance reliability, as well as the desire for flexibility in purchasing options, are reinforcing this trend. Our commitment to exceptional service has enabled us to become a trusted partner with customers who wish to optimize the level of service they provide to their guests and maximize commerce opportunities both on- and off-premise.

~~Professional Services:~~We have industry-leading expertise in designing, implementing, integrating and installing customized solutions into both legacy and newly created platforms. For existing enterprises, we seamlessly integrate new systems; and for start-ups and fast-growing customers, we become a partner that can manage large-scale rollouts and tight construction schedules. Extensive experience ranges from staging equipment to phased rollouts and training staff in a manner that saves time and money for our customers.

Prior to the divestiture of TSG operations, we resold IT products and services from the Hewlett-Packard Company (HP), International Business Machines Corporation (IBM), Oracle Corporation (Oracle) and other original equipment manufacturers (OEMs). Operating results from the former TSG are reported as components of discontinued operations.

We have maintained our strong relationship with IBM Retail Services and intend to continue to be a leading provider of related solutions and services in the supermarket, drug chain, general-retail and other hospitality segments.

~~Segment Reporting~~

Subsequent to the sale of our TSG business in fiscal 2012, we were left with two remaining reportable business segments: HSG and RSG. Prior to that, we had been reporting three business segments: HSG, RSG and TSG. See Note 16 to Consolidated Financial Statements titled~~Business Segments~~ ~~for a discussion of our segment reporting.~~

~~Hospitality Solutions Group (HSG)~~

HSG develops, markets and sells property and lodging management, point-of-sale, and inventory and procurement applications to operate hotel, casino, destination resort, cruise line and foodservice management establishments in the hospitality industry. We offer solutions that provide comprehensive control of the customer’s property operations — from reservations, check in, point-of-sale and other guest-engagement activities to inventory and procurement management and document management.

6

~~Retail Solutions Group (RSG)~~

RSG is one of the largest North American systems integrators of retail point-of-sale, self-service and wireless solutions with proprietary business consulting, implementation and hardware maintenance and support services. Our extensive experience in all phases of wireless infrastructure and integration with legacy systems enables our customers to capture the promise of today’s mobile technology. Our mobile solutions extend the customer’s operations to portable devices, increasing customer satisfaction and productivity with integrated software that reduces security exposure. We also sell POS and mobile POS (MPOS) solutions to facilitate the check-out process as well as other self-service capabilities.

Our RSG expertise encompasses a suite of support and professional services including consultation, analysis, design, installation and implementation, as well as onsite maintenance and ongoing help-desk support. Our comprehensive portfolio of support services provides total lifecycle management for our customers’ in-store solutions to help increase their return on investment and lower their total cost of ownership.

~~Representative Agilysys clients include:~~


~~Ameristar Casinos, Inc.~~ (1)	For Mr. Steinberg, salary is from start date through March 31, 2013.

	~~Copper Mountain~~		~~Royal Caribbean International~~
~~Banner Health~~ (2)	For Mr. Steinberg, amount consists of hiring bonus.

	~~The Cosmopolitan of Las Vegas~~		~~Royal Lahaina Resort~~
~~Bed Bath & Beyond~~ (3)	Stock Awards include grants of restricted shares and performance shares. Option Awards include SSAR grants. Amounts disclosed do not represent the economic value received by the Named Executive Officers. The value, if any, recognized upon the exercise of a SSAR will depend upon the market price of the shares on the date the SSAR is exercised. The value, if any, recognized for restricted and performance shares will depend upon the market price of the shares upon vesting. In accordance with SEC rules, the values for restricted and performance shares and SSARs are equal to the aggregate grant date fair value for each award computed in accordance with FASB ASC Topic 718. The values for restricted and performance shares are based on the closing price on the grant date. The values for SSARs are based on the Black-Scholes option pricing model. A discussion of the assumptions used in determining these valuations is set forth in Note 14 of the Notes to Consolidated Financial Statements of the Company’s 2013 Annual Report. For Stock Awards, the amounts shown represent grants of restricted shares to each Named Executive Officer as part of the executive's annual long-term equity grant and for Mr. Steinberg includes grants of restricted shares as a long-term inducement award upon his hire.

	~~CSU Fullerton Auxiliary Services Corporation~~		~~Rudy’s Country Store & BBQ~~
~~Benchmarc Restaurants~~ (4)	Amounts represent annual incentive payments received in 2013 and 2012 based on pre-set incentive goals established at the beginning of each fiscal year and tied to the Company’s financial, strategic, and operational goals.

~~Delhaize America~~		~~Sandals Emerald Bay~~
~~BJ’s Wholesale Club~~ (5)	All other compensation includes the following compensation, calculated based on the aggregate incremental cost to the Company of the benefits noted:

18

All Other Compensation for Fiscal Year 2013



Name	401(k) Company Match ($)	Executive Life Insurance ($)	Relocation ($)(a)	Severance ($)	Gross-ups ($)	All Other ($)(b)	Total ($)
J. Dennedy	9,139	1,654	7,755	—	—	1,933	20,481
R. Ellis	8,931	754	—	—	—	1,501	11,186
K. Badger	8,891	909	27,149	—	—	847	37,796
P. Civils	6,514	6,295	—	—	—	8,510	21,319
L. Steinberg	5,771	993	—	—	—	882	7,646

	~~Helzberg Diamonds~~		~~Sands Casino Resort Bethlehem~~
~~Black Rock Resort~~ (a)	Messrs. Dennedy and Badger received travel and relocation assistance during their transition to the Company's corporate offices, including expenses for travel, temporary housing, car rental, moving, and incidentals. Amount disclosed represents actual cost to the Company, or amount reimbursed to the executive officer, for such expenses.

(b) Includes executive long-term disability coverage for each executive and an auto allowance for Mr. Civils.

Grants of Plan-Based Awards

The following table and related notes summarize grants of equity and non-equity incentive compensation awards to our Named Executive Officers for fiscal year 2013. All equity awards were made under the Company’s 2011 Stock Incentive Plan.

19

Grants of Plan-Based Awards for Fiscal Year 2013



Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1)			Estimated Future Payouts Under Equity Incentive Plan Awards ($)			All Other Stock Awards Number of Shares of Stock (#)(2)	All Other Option Awards: Number of Securities Underlying Options (#)(3)	Exercise or Base Price of Option Awards ($/share)	Grant Date Fair Value of Stock and Option Awards ($)(4)
		Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)
James H. Dennedy	6/12/12							50,938	78,350	7.46	760,306
	3/20/12	315,000	350,000	525,000

Robert R. Ellis	6/12/12							11,461	17,628	7.46	171,065
	3/20/12	153,900	171,000	256,500
	11/8/12	202,500	225,000	337,500

Kyle C. Badger	6/12/12							8,378	12,886	7.46	125,048
	3/20/12	112,500	125,000	187,500

Paul A. Civils	6/12/12							11,327	17,422	7.46	169,065
	3/20/12	128,700	143,000	214,500

Larry Steinberg (5)	5/9/12							48,794	17,513	8.64	670,410
	5/9/12	108,882	120,980	181,470	—	17,728	17,728

	~~Ho-Chunk Gaming~~		~~SAVOR~~
~~Boyd Gaming Corporation~~ (1)	Amounts shown in the columns under Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent fiscal year 2013 annual threshold, target, and maximum cash-based annual incentives granted under the annual incentive plan. Total threshold, target, and maximum payouts were conditioned on achievement of weighted goals based on revenue, gross profit, adjusted operating income, and achievement of individual MBOs as applicable for each Named Executive Officer. For Mr. Ellis, the non-equity incentive award on November 8, 2012 replaced the award o March 20, 2012, upon his being appointed to the additional office of Chief Operating Officer. Fiscal year 2013 payouts for each Named Executive Officer pursuant to these awards are shown in the Summary Compensation Table above in the column titled Non-Equity Incentive Plan Compensation. Threshold, target, and maximum amounts represent annualized award amounts. Actual payouts for fiscal year 2013 for Mr. Steinberg were pro-rated based on his hire date. Further explanation of potential and actual payouts by component is set forth in the Compensation Discussion and Analysis – Annual Incentives.

	~~The Landmark London Hotel~~
(2)	The ~~Sea Pines Resort~~share amounts shown represent grants of restricted shares to each Named Executive Officer as part of the executive's annual long-term equity grant and for Mr. Steinberg includes grants of restricted shares as a long-term inducement award upon his hire.


~~BR Guest Hospitality~~ (3)	The share amounts represent SSARs granted at the fair market value of the shares on the grant date as fiscal year 2013 long-term incentive awards. The SSARs are exercisable in thirds beginning on March 31, 2013. All SSARs have a seven-year term.

	~~Maryland Live! Casino~~		~~Sephora~~
(4)	The ~~Breakers Palm Beach~~ dollar amount shown for each equity grant represents the grant date fair value of the SSARs and restricted shares, calculated in accordance with FASB ASC Topic 718. The actual value, if any, recognized upon the exercise of a SSAR or vesting of restricted shares will depend upon the market price of the shares on the date the SSAR is exercised or restricted shares vest.

		~~Norwegian Cruise Line~~		~~Sugar Factory~~
~~The Broadmoor~~ (5)	For Mr. Steinberg, grants were approved on March 29, 2012, effective as of his date of hire on May 9, 2012.

20

Outstanding Equity Awards

The following table and related notes summarize the outstanding equity awards held by the Named Executive Officers as of March 31, 2013.

Outstanding Equity Awards at 2013 Fiscal Year-End



Name (1)	Grant Date	Option Awards				Stock Awards
		Number of Securities Underlying Unexercised Options (#)		Option Exercise Price ($)	Option Date Expiration	Number of Shares of Stock That Have Not Vested (#)(3)	Market Value of Shares of Stock That Have Not Vested ($)(4)
		Exercisable	Unexercisable (2)	Option Exercise Price ($)	Option Date Expiration	Number of Shares of Stock That Have Not Vested (#)(3)	Market Value of Shares of Stock That Have Not Vested ($)(4)
James H. Dennedy	6/12/2012	26,116	52,234 (a)	7.46	6/12/2019	33,959 (e)	337,552

Robert R. Ellis	10/10/2011	10,700	5,350 (b)	8.14	10/10/2018	5,379 (f)	53,467
	6/12/2012	5,876	11,752 (b)	7.46	06/12/2019	7,641 (f)	75,952

Kyle C. Badger	10/31/2011	7,462	3,732 (c)	8.49	10/31/2018	3,556 (g)	35,347
	6/12/2012	4,295	8,591 (c)	7.46	6/12/2019	5,586 (g)	55,525

Paul A. Civils	7/28/2006	8,000		15.85	7/28/2016
	5/21/2007	12,000		22.21	5/21/2017
	5/23/2008	12,000		9.82	5/23/2018
	11/13/2008	40,000		2.51	11/13/2018
	5/22/2009	15,700		6.83	5/22/2016
	6/7/2010	40,000		6.20	6/7/2017
	8/11/2011	11,882	5,941	7.42	8/11/2018	3723	37,007
	6/12/2012	5,807	11,615	7.46	6/12/2019	7,552	75,067

Larry Steinberg	5/9/2012	5,837	11,676 (d)	8.64	5/9/2019	56,167 (h)	558,300

	~~Oxford Casino~~
(1)	For Mr. Civils, all unvested SSARs were forfeited upon separation, and unexercised SSARs expired 90 days after separation.


(2)	As of March 31, 2013, the vesting schedule for the time-vested SSARs was as follows:


(a)	26,117 on March 31, 2014 and 2015


(b)	11,226 on March 31, 2014 and 5,876 on March 31, 2015


(c)	8,027 on March 31, 2014 and 4,296 on March 31, 2015


(d)	5,838 on March 31, 2014 and 2015


(3)	As of March 31, 2013, the vesting schedule for the time-vested stock awards was as follows:


(e)	16,979 on March 31, 2014 and 16,980 March 31, 2015


(f)	9,199 on March 31, 2014 and 3,821 on March 31, 2015


(g)	6,349 on March 31, 2014 and 2,793 on March 31, 2015


(h)	10,356 on March 31, 2014, 16,840 on May 9, 2014, 10,356 on March 31, 2015; 887 on May 9, 2015; and 17,728 upon the successful development and sale of our next generation property management system.


(4)	Calculated based on the closing price of the shares on March 28, 2013 of $9.94 per share.

Option Exercises and Stock Vested

The following table and related notes summarize the exercise of stock options and/or SSARs and the vesting of other stock awards by the Named Executive Officers during fiscal year 2013.

21

Option Exercises and Stock Vested for Fiscal Year 2013



Name	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)	Number of Shares Acquired on Vesting (#)(1)	Value Realized on Vesting ($)(2)
James H. Dennedy	—	—	23,979	224,911
Robert R. Ellis	—	—	9,198	91,428
Kyle C. Badger	—	—	6,348	63,099
Paul A. Civils	—	—	7,498	74,350
Larry Steinberg	—	—	10,355	102,929


(1)	Includes partial vesting of time-vested restricted shares granted in 2012 and 2013.


(2)	The ~~Venetian Resort Hotel Casino~~
~~Cannizaro House~~		~~Pinehurst Resort~~	~~Vail Resorts~~
~~Casino del Sol~~		~~Rack Room Shoes~~	~~Valley View Casino & Hotel~~
~~Charming Charlie~~		~~Rosen Hotels & Resorts~~	~~Wakefern Food Corp~~value realized on vesting of stock awards is determined by multiplying the number of shares underlying the stock awards by the closing price of the shares on the vesting date of the awards.

~~Industry~~

Termination and ~~Markets~~

Change of Control

The ~~hospitality~~following table and ~~retail industries encompass a wide variety of market sectors and customers. We operate extensively throughout North America, with additional sales and support offices~~discussion summarize certain information related to the total potential payments which would have been made to the Named Executive Officers in the ~~United Kingdom, Singapore and Hong Kong. Sales to customers outside~~event of termination of their employment with the ~~United States represent less than 10% of our total revenue.~~

~~The hospitality industry is made up~~Company, including in the event of a ~~number~~change of ~~defined markets including lodging, casinos, cruise ships, resorts and spas, franchise operators, restaurant chains, stadiums, arenas and other customer-service providers.~~ control, effective March 31, 2013, the last business day of fiscal year 2013.

Employment Agreements - Fiscal Year 2013 Active Named Executive Officers. The ~~industry is highly fragmented. For example, in the lodging segment, no single hotel brand accounts for more than 4% of all hotel rooms in the United States. According to~~~~Smith Travel Research~~, the U.S. lodging industry generated $108 billion in room revenue in calendar 2011, with an average of approximately 60% of 4.9 million available rooms occupied. This compares with 57.5% in 2010 and a market-cycle peak occupancy rate of 63.1% in 2006.

~~The hospitality industry is economically sensitive. Business and destination-resort travel~~Named Executive Officers are correlated with the economic conditions in their respective markets. Competition is intense for consumer spending, and hospitality industry participants are seeking ways to enhance the experience of their guests. We are seizing this opportunity by providing guests connectivity and intuitive engagement tools, enabling our customers to enhance their brands and better manage their operations’ growth and profitability. In addition to product solutions that are designed and customized to meet unique facility or multi-facility needs, we also provide an array of support and subscription options for maintaining systems and professional services for implementation and rollouts.

We have a significant customer base in the commercial casino and gaming sector. Roughly one-quarter of the U.S. adult population visits a casino at least once a year. Amenities in contemporary casinos extend well beyond gaming to include a variety of entertainment and leisure options as well as modern convention centers and meeting facilities to attract the business market. International gaming markets are growing rapidly both in size and new jurisdictions. Asian gaming markets are reporting robust growth. In 2006, gross gaming revenue in Macau surpassed that of the Las Vegas Strip — with a significant number of U.S.-based operators seeking to open new properties in the region. As the market-share leader in providing Property Management Systems (PMS) to casinos on the Las Vegas Strip, we are well positioned to benefit from these strong and long-standing relationships as our customer base expands into international markets. Additionally, as modern facilities evolve toward cashless operations and digital track-and-log of unique guest behavior, we are able to provide the requisite technologies and expertise to satisfy their needs.

~~We also have expertise in serving the unique needs of Cruise ship operators. According to the~~~~Cruise Industry Overview — 2011 State of the Cruise Industry~~ ~~report, the cruise industry is the fastest growing category in the leisure travel market. In 2011, the industry~~

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anticipated a total of 16 million passengers, a 6.6% increase from 2010. In addition, 14 new ships were introduced, featuring such modern amenities as planetariums, golf simulators, water parks, ice-skating rinks and rock-climbing walls. The current order book, which extends through 2014, includes 26 new builds.

Similarly, the modern retail industry is rapidly transitioning to a higher level of engagement with customers. Retailers selling directly to consumers include: purveyors of softlines, such as clothing, accessory/shoe and department stores; and hardlines, such as home improvement, home furnishings and electronics; as well as staples such as groceries. Integrating our innovative technology with marketing is allowing Retail Solutions customers to enjoy the benefits of gift cards and loyalty programs. Other solutions such as mobile POS enable them to reduce wait times, increase accuracy and accelerate management reporting. For rapidly expanding retailers and retailers that are engaged in large store-wide POS technology refreshment, we manage large-scale implementation and roll-out — including procurement, staging and installation, post-sale service and maintenance contracts — to ensure a reliable and secure environment.

~~Customers~~

Our customers include large, medium-sized and boutique companies, and divisions or departments of large corporations in the hospitality and retail industries. We concentrate on serving the needs of customers in a range of customer-focused settings where brand differentiation is important, particularly in the lodging, casino, destination resort, cruise line, foodservice and retail industries where competition for guest recruitment is intense.

~~Currently, our customer base is highly fragmented, with no single customer representing more than 10% of consolidated revenue from continuing operations.~~

~~Seasonality~~

Prior to the sale of TSG, we traditionally had experienced a seasonal increase in sales during our fiscal third quarter ending December 31. The HSG and RSG operating units have traditionally experienced a seasonal decrease in revenue during our fiscal first quarter ending June 30. Although we are unable to predict whether uneven sales patterns will continue over the long term, we believe this particular pattern is moderating as a result of exiting the TSG business. For example, third-quarter revenue from continuing operations was 25%, 29% and 31% of annual revenue for fiscal years 2012, 2011 and 2010, respectively. In addition, occasionally the timing of large one-time orders such as those associated with substantial retail product rollouts will create volatility in our quarterly results.

~~Competition~~

We face a competitive market environment for the solutions we provide. Competition exists with respect to developing and maintaining relationships with customers, pricing for products and solutions, levels of support and customer service. We compete with a number of other solution providers and, occasionally, with some of our own suppliers in the RSG business segment.

Within HSG, we compete with other full-service providers that sell and service bundled POS and PMS solutions comprised of hardware, software, support and services. These companies, some of which are much larger than we are, include MICROS Systems, Inc., NCR, Par Technology, Multi-System, Inc., and Infor. We also compete with software companies like IDeaS Revenue Solutions, POSitouch, Northwind and Xpient Solutions and, to a lesser extent, hardware vendors such as IBM, HP, Dell, Casio, and Toshiba. In addition, we compete with PMS systems that are designed and maintained in-house by large hotel chains.

RSG’s competitive market place is highly fragmented and regionalized. We compete primarily with regional integrators, regional and national Value Added Resellers Solution Providers and niche vendors.

~~Environmental Matters~~

We believe we are in compliance in all material respects with all applicable environmental laws. Presently, we do not anticipate that such compliance will have a material effect on capital expenditures, earnings or competitive position with respect to any of our operations.

~~Employees~~

~~As of June 1, 2012, we had 751 employees. We are not~~each a party to an employment agreement with the Company. If we terminate any ~~collective bargaining agreements, have had no strikes~~of the Named Executive Officers employment without cause, he will receive his base salary and applicable health benefits for 12 months and his target annual incentive following termination. If the Company changes his position such that his compensation or ~~work stoppages~~responsibilities are substantially lessened, or, for Mr. Civils, if he is required to relocate more than 50 miles away, he may terminate his employment within 30 days of the change in position and ~~consider~~will receive his severance benefits. If he is terminated for cause or voluntarily terminates his employment for any reason other than a change in position, he is prohibited for a one-year period following termination (the “Noncompetition Period”) from being employed by, owning, operating, controlling, or being connected with any business that competes with the Company. If any of these executives is terminated without cause or terminates his employment due to change in position, we may, in our ~~employee relations~~sole discretion, elect to pay his severance benefits for all or any part of the Noncompetition Period, which payments are in lieu of the severance payments and benefits coverage described above and, so long as we make such payments, he will be ~~good.~~

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~~Access~~bound by the non-competition provisions described above. Each executive's agreement also contains an indefinite non-disclosure provision for the protection of the Company's confidential information and one-year non-solicitation and non-compete provisions. For each of Messrs. Dennedy and Badger, if there is a change of control within two years after April 1, 2012, and October 31, 2011, respectively, (the dates of their employment agreement), and within the same two-year period his employment with the Company or its successor is terminated without cause, then he will be paid severance equal to ~~Information~~

~~Our~~two years of each of his base salary and target annual ~~reports on Form 10-K, quarterly reports on Form 10-Q,~~incentive.

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Termination and Change of Control



Voluntary Termination or Termination for Cause ($)(1)	James Dennedy	Robert Ellis	Kyle Badger	Paul Civils	Larry Steinberg
Base and Incentive	—	—	—	—	—
Accelerated Vesting	—	—	—	—	—
Termination without Cause or by Employee for Change in Position ($)(1)
Base & Incentive	750,000	525,000	375,000	403,000	360,000
Health Insurance (2)	12,955	13,149	12,955	8,714	11,015
Accelerated Vesting	—	—	—	—	—
	_______	_______	_______	_______	_______
Total	762,955	538,149	387,955	411,714	371,015
Change of Control ($)(3)
Base & Incentive	1,500,000	—	750,000	—	—
Health Insurance	—	—	—	—	—
Accelerated Vesting/SSARs (4)	129,540	38,775	26,717	43,777	15,179
Accelerated Vesting/Stock (4)	337,552	129,419	90,871	112,074	558,300
	_______	_______	_______	_______	_______
Total	1,967,092	168,194	867,588	155,851	573,479
Death or Disability ($)(5)
Accelerated Vesting/SSARs (4)	129,540	38,775	26,717	43,777	15,179
Accelerated Vesting/Stock (4)	337,552	129,419	90,871	112,074	558,300
	_______	_______	_______	_______	_______
Total	467,092	168,194	117,588	155,851	573,479

(1)

“Cause” is defined as (i) breach of employment agreement or any other duty to the Company, (ii) dishonesty, fraud, or failure to abide by the published ethical standards, conflicts of interest, or material breach of Company policy, (iii) conviction of a felony crime or crime involving misappropriation of money or other Company property, (iv) misconduct, malfeasance, or insubordination, or (v) gross failure to perform (not including failure to achieve quantitative targets). Mr. Dennedy has 30 days to cure a breach of his employment agreement, any duty to the Company, or a material breach of Company policy. A “change in position” is the substantial lessening of compensation or responsibilities or, for Mr. Civils, the requirement to relocate to a facility more than 50 miles away. After a change in position, the executive has 30 days to notify the Company of his termination of employment. A “voluntary termination” includes death, disability, or legal incompetence.


(2)	Health Insurance consists of health care and dental care benefits. The amount reflects 12 months of benefits for the Named Executive Officers that participate in the Company's plans. These benefits have been calculated based on actual cost to us for fiscal year 2013.


(3)	Messrs. Dennedy and Badger are the only Named Executive Officers with change of control provisions.

(4)

SSARs and restricted shares vest upon a change of control. For SSARs (except as qualified below) the value of accelerated vesting is calculated using the closing price of $9.94 per share on March 28, 2013 less the exercise price per share for the total number of SSARs accelerated. The potential payment from the accelerated SSARs includes only the proceeds from the exercise of SSARs with an exercise price less than $9.94 since there would be no proceeds upon the exercise of “underwater” SSARs. The value of restricted shares upon vesting reflects that same $9.94 closing price. Values represent potential vesting under a hypothetical change of control situation on March 31, 2013.


(5)	All SSARs and restricted shares vest upon death or disability.

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Item 12. Security Ownership of CertainBeneficial Owners and Management and RelatedShareholder Matters.

BENEFICIAL OWNERSHIP OF COMMON SHARES

The following table shows the number of common shares beneficially owned as of July 19, 2013 by (i) each current ~~reports on Form 8-K~~director; (ii) our Named Executive Officers; (iii) all directors and ~~any amendments~~executive officers as a group; and (iv) each person who is known by us to ~~these reports are available free~~beneficially own more than 5% of ~~charge through~~ our ~~corporate website,http://www.agilysys.com, as soon as reasonably practicable after such material is electronically filed with, or furnished~~common shares.



Name	Common Shares	Shares Subject to Exercisable Options	Restricted Shares (1)	Total Shares Beneficially Owned (1)	Percent of Class (2)
Directors
R. Andrew Cueva (3)	5,284,648	—	—	5,284,648	24.0
Jerry C. Jones	8,055	—	5,654	13,709	*
Keith M. Kolerus	112,348	22,500	5,654	140,502	*
Robert A. Lauer	69,441	22,500	5,654	97,595	*
Robert G. McCreary, III (4)	48,599	22,500	5,654	76,753	*
John Mutch	43,433	—	5,654	49,087	*
Named Executive Officers
Kyle C. Badger	23,063	11,757	16,411	51,231
Paul A. Civils (4)	11,941	145,389	11,275	168,605	*
James H. Dennedy	146,142	26,116	59,269	231,527	1.0
Robert R. Ellis	39,671	16,576	25,540	81,787	*
Larry Steinberg	10,355	5,837	68,283	84,475	*
All directors and Executive Officers	5,797,696	273,175	209,048	6,279,919
Other Beneficial Owners
MAK Capital One, LLC et al 590 Madison Avenue, 9^th Floor New York, New York 10022	7,056,934 (4)				32.0
Dimensional Fund Advisors LP 6300 Bee Cave Road Palisades West, Building One Austin, Texas 78746	1,846,222 (5)				8.3
The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, Pennsylvania 19355	1,150,798 (6)				5.2
Black Rock, Inc. 40 East 52^nd Street New York, New York 10022	1,222,240 (7)				5.5


(1)	Beneficial ownership of the shares comprises both sole voting and dispositive power, or voting and dispositive power that is shared with a spouse, except for restricted shares for which individual has sole voting power but no dispositive power until such shares vest.


(2)	* indicates beneficial ownership of less than 1% on July 19, 2013.

(3)

Comprised entirely of shares beneficially owned by MAK Capital Fund L.P. and excludes shares beneficially owned by Paloma International L.P. Mr. Cueva may be deemed to share beneficial ownership in shares that MAK Capital Fund L.P. may be deemed to beneficially own; however, Mr. Cueva disclaims beneficial ownership of the shares, except to the extent of his pecuniary interest in MAK Capital Fund L.P.’s interest in such shares. The inclusion in this table of the shares beneficially owned by MAK Capital Fund L.P. shall not be deemed an admission by Mr. Cueva of beneficial ownership of all of the reported shares.


(4)	For Mr. Civils, amounts are as of July 1, 2013.

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(5)

As reported on a Schedule 13D/A dated May 31, 2011. MAK Capital One LLC has shared voting and dispositive power with respect to all of the shares. MAK Capital One LLC serves as the investment manager of MAK Capital Fund LP (“MAK Fund”). MAK GP LLC is the general partner of MAK Fund. Michael A. Kaufman, managing member and controlling person of MAK GP LLC and MAK Capital One LLC, has shared voting and dispositive power with respect to all of the shares. MAK Fund and R. Andrew Cueva have shared voting and dispositive power with respect to 5,284,648 shares. Paloma International L.P. (“Paloma”), through its subsidiary Sunrise Partners Limited Partnership, and S. Donald Sussman, controlling person of Paloma, have shared voting and dispositive power with respect to 1,772,286 shares. The principal business address of MAK Capital One LLC, MAK GP LLC and Messrs. Kaufman and Cueva is 590 Madison Avenue, 9^th Floor, New York, New York 10022. The principal address of MAK Fund is c/o Dundee Leeds Management Services Ltd., 129 Front Street, Hamilton, HM 12, Bermuda. The principal address of Paloma and Sunrise Partners Limited Partnership is Two America Lane, Greenwich, Connecticut 06836-2571. The principal business address for Mr. Sussman is 6100 Red Hook Quarters, Suites C1-C6, St. Thomas, US Virgin Islands 00802-1348.

On May 31, 2011, MAK Fund, Paloma and Computershare Trust Company, N.A. (the “Trustee”) entered into an Amended and Restated Voting Trust Agreement (the “Revised Voting Trust Agreement”) to clarify the Securities and Exchange Commission (SEC). The information posted on our website is not incorporated into this Annual Report on Form 10-K (Annual Report). Reports, proxy and information statements, and other information regarding issuers that file electronically, are maintainedeffect on the ~~SEC website,http://www.sec.gov~~.

~~Item 1A. Risk~~

~~Factors.~~

~~Risks Relating to Our Business~~

~~Continuing challenging global economic conditions could adversely affect our business and financial results.~~

The continued global economic downturn has significantly adversely affected global economic conditions. Our revenue and profitability depend significantly on general economic conditions and the level of capital available to our customers. Our business trends and revenue growth continue to be affectedvoting trust created by the ~~challenging economic climate. These difficult economic conditions and~~Voting Trust Agreement dated as of December 31, 2009, were the ~~uncertainty about future economic conditions may adversely affect our customers’ level of spending, ability~~reporting persons (named above) to obtain financing for purchases, ability to make timely payments to us and adoption of new technologies, which could require us to increase our allowance for doubtful accounts, negatively impact our days sales outstanding, lead to increased price competition and adversely affect our results of operations.

~~Our future success will depend on our ability to develop new products, product upgrades and services that achieve market acceptance.~~

Our business is characterized by rapid and continual changes in technology and evolving industry standards. We believe that in order to remain competitive in the future we will need to continue to develop new products, product upgrades and services, requiring the investment of significant financial resources. If we fail to accurately anticipate our customer’s needs and technological trends,beneficially own one-third or are otherwise unable to complete the development of a product or product upgrade on a timely basis, we will be unable to introduce new products or product upgrades into the market on a timely basis, if at all, and our business and operating results would be materially and adversely affected.

~~The development process for most new products and product upgrades is complicated, involves a significant commitment of time and resources and is subject to a number of risks and challenges including:~~

~~Managing the length~~more of the ~~development cycle for new products and product enhancements, which has frequently been longer than we originally expected;~~

~~Adapting to emerging and evolving industry standards and to technological developments by our competitors and customers; and~~

~~Extending the operation of our products and services to new and evolving platforms, operating systems and hardware products, such as mobile devices.~~

If we are not successful in managing these risks and challenges, or if our new products, product upgrades, and services are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.

~~We face extensive competition in the markets in which we operate, and our failure to compete effectively could result in price reductions and/or decreased demand for our products and services.~~

Several companies offer products and services similar to ours. The rapid rate of technological change in the hospitality market makes it likely we will face competition from new products designed by companies not currently competing with us. We believe our competitive ability depends on our product offerings, our experience in the hospitality industry, our product development and systems integration capability, and our customer service organization. There is no assurance, however, we will be able to compete effectively in the hospitality technology market in the future.

~~If we fail to meet our customers’ performance expectations, our reputation may be harmed, causing us to lose customers or exposing us to legal liability.~~

Our ability to attract and retain customers depends to a large extent on our relationships with our customers and our reputation for high quality professional services and integrity. As a result, if a customer is not satisfied with our services or solutions, our reputation may be damaged. Moreover, if we fail to meet our clients’ performance expectations, we may lose clients and be subject to legal liability, particularly if such failure adversely impacts our clients’ businesses.

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In addition, many of our projects are critical to the operations of our customers’ businesses. While our contracts typically include provisions designed to limit our exposure to legal claims relating to our products and services, these provisions may not adequately protect us or may not be enforceable in all cases. The general liability insurance coverage that we maintain, including coverage for errors and omissions, is subject to important exclusions and limitations. We cannot be certain that this coverage will continue to be available on reasonable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim. A successful assertion of one or more large claims against us that exceeds our available insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our profitability.

~~We are subject to pricing pressures for our products and services which could cause us to lose market share and decrease revenue and profitability.~~

We compete for customers based on several factors, including price. In some cases, we may have to reduce our pricing to obtain business. If we are not able to maintain favorable pricing for our products and services, our gross profit and our profitability could suffer.

~~Our cloud-based solutions present execution and competitive risks.~~

Our solutions offered in the cloud accessible via the web without hardware installation or software downloads present new and difficult technology challenges. These offerings depend on integration of third-party hardware, software and cloud hosting vendors working together with our products. As a result, we may be subject to claims if customers experience service disruptions, breaches or other quality issues related to our cloud-based solutions.

~~Actual or perceived security vulnerabilities in our software products may result in reduced sales or liabilities.~~

Our software may be used in connection with processing sensitive data (e.g., credit card numbers), and is sometimes used to store such data. It may be possible for the data to be compromised if our customer does not maintain appropriate security procedures. In those instances, the customer may attempt to seek damages from us. While we believe that all of our current software complies with applicable industry security requirements and that we take appropriate security measures to reduce the possibility of breach through our support and other systems, we cannot assure that our customers’ systems will not be breached, or that all unauthorized access can be prevented. If a customer, or other person, seeks redress from usCompany’s outstanding voting securities as a result of a ~~security breach, our business could be adversely affected.~~

~~Hosting of software applications presents increased security risks.~~

As we expand our software hosting capabilities and offer more of our software applications to our customers on a hosted basis, our responsibility for data and system security with respect to data held in our hosting centers increases significantly. While we believe that our current software applications comply with applicable laws and industry security requirements, and while we believe that we use appropriate security measures to reduce the possibility of unauthorized access or misuse of datadecrease in the ~~hosting center, we cannot provide absolute assurance that our hosted systems~~total number of voting securities outstanding. In such event, regardless of the reporting persons’ economic interest in the Company, its voting power will ~~not~~ be ~~breached,~~effectively limited to no more than 23% or ~~that all unauthorized access can be prevented. If~~27% of the voting securities in the event of a ~~security breach were to occur,~~shareholder vote on (i) a ~~customer, regulatory agency,~~merger, consolidation, conversion, sale or disposition of stock or assets or other ~~person could seek redress from us,~~business combination which ~~could adversely affect our business.~~

~~Additionally, as we expand our software hosting capabilities and offer more~~requires approval of ~~our software applications to our customers on~~two-thirds of the Company’s voting power (a “Strategic Transaction”) or (ii) a hosted basis, our potential liability increases significantly. Specifically, an outage in our data centers can affect numerous customers. While we believe that our data centers have been designed and engineered to reducetransaction other than a Strategic Transaction which requires approval of two-thirds of the ~~likelihood of outages, we cannot provide assurance that our hosted systems will not suffer from unanticipated outages~~Company’s voting power (an “Other Transaction”), respectively. In connection with a Strategic Transaction or ~~deficient performance. If an unanticipated outage were to occur, a customer could suffer economic damages and seek redress from us, which could adversely affect our business.~~

~~We may not be able to enforce or protect our intellectual property rights.~~

~~We rely on a combination of copyright, patent, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We cannot be certain that~~Other Transaction, the ~~steps we have taken will prevent unauthorized use of our technology. Any failure to protect our intellectual property rights~~reporting persons would ~~diminish or eliminate the competitive advantages that we derive from our proprietary technology.~~

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~~We may be subject to claims of infringement of third-party intellectual property rights.~~

While we do not believe that our products and services infringe any patents or other intellectual property rights, from time to time, we receive claims that we have infringed the intellectual property rights of others. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are found liable, we could be obligated to pay significant damages or enter into license agreements.

~~We are subject to litigation, which may be costly.~~

As a company that does business with many customers, employees and suppliers, we are subject to litigation. The results of such litigation are difficult to predict, and we may incur significant legal expenses if any such claim were filed. While we generally take steps to reduce the likelihood that disputes will result in litigation, litigation is very commonplace and could have an adverse effect on our business.

~~If we acquire new businesses, we may not be able to successfully integrate them or attain the anticipated benefits.~~

~~As part of our operating history and growth strategy, we have acquired other businesses. In the future, we may~~ continue to seek acquisitions. We can provide no assurance that we will be able to identify and acquire targeted businesses or obtain financing for such acquisitions on satisfactory terms. The process of integrating acquired businesses into our operations may result in unforeseen difficulties and may requirepossess the total voting power only over a disproportionate amount of resources and management attention. If integration of our acquired businesses is not successful, we may not realize the potential benefits of an acquisition or suffer other adverse effects.

~~Our dependence on certain strategic partners makes us vulnerable to the extent we rely on them.~~

~~We rely on a concentrated~~ number of ~~vendors for~~voting securities that would equal the majority of our hardware and for certain software and related services needs. We do not have long term agreements with many of these vendors. If we can no longer obtain these hardware, software or services needs from our major suppliers duetotal voting power it would possess were it to mergers, acquisitions or consolidation within the marketplace, material changes in their partner programs, their refusal to continue to supply to us on reasonable terms or at all, and we cannot find suitable replacement suppliers, it may have a material adverse impact on our future operating results and gross margins.

~~If we fail to retain key employees, our business may be harmed.~~

Our success depends on the skill, experience and dedication of our employees. If we are unable to retain and attract sufficiently experienced and capable personnel, especially in product development, sales and management, our business and financial results may suffer. For example, if we are unable to retain and attract a sufficient number of skilled technical personnel, our ability to develop high quality products and provide high quality customer service may be impaired. Experienced and capable personnel in the technology industry remain in high demand, and there is continual competition for their talents. When talented employees leave, we may have difficulty replacing them, and our business may suffer. There can be no assurance that we will be able to successfully retain and attract the personnel that we need.

~~Our profitability is partly dependent upon restructuring and executing planned cost savings.~~

To allow us to operate more efficiently and control costs, we have incurred restructuring charges related to the consolidation and streamlining of various functions of our workforce. As part of our restructuring efforts, we incurred severance costs, lease termination costs and exit costs. We may not realize the expected benefits of these initiatives and may incur additional restructuring costs in the future. In addition, we could experience delays, business disruptions, unanticipated employee turnover and increased litigation-related costs in connection with our restructuring efforts. The complex nature of these restructuring initiatives could cause difficulties or delays in the implementation of any such initiative or the impacthold only one-third of the restructuring initiatives may not be immediately apparent. There can be no assurance that our estimates of the savings achievable by these initiatives will be realized, which could have an adverse impact on our financial condition or results of operations.

~~If we fail to maintain an effective system of internal controls, we may not be able to detect fraud, which could have a material adverse effect on our business.~~

While we believe our internal control over financial reporting is effective, a controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that control issues and instances of fraud, if any, within our company have been detected.

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~~We have encountered risks associated with maintaining large cash balances.~~

While we have attempted to invest our cash balances in investments generally considered to be relatively safe, we nevertheless confront credit and liquidity risks. Bank failures could result in reduced liquidity or the actual loss of money held in deposit accounts in excess of federally insured amounts, if any.

~~We may incur additional goodwill and intangible asset impairment charges that adversely affect our operating results.~~

We review our goodwill and other intangible asset balances for impairment on at least an annual basis. During the fourth quarter of fiscal 2012, we concluded that certain software developed technology within HSG was no longer available for sale. As a result we recorded an impairment charge of $9.7 million, which impacted HSG’s operations. In fiscal 2011, we recognized non-cash impairment charges for goodwill and intangible assets totaling $1.0 million. Our future operating results and the market price of our common stock could be materially adversely affected if we are required to further write down the carrying value of goodwill and/or other intangible assets associated with any of our reporting units in the future.

~~We may have exposure to greater than anticipated tax liabilities.~~

Some of our products and services may be subject to sales taxes in states where we have not collected and remitted such taxes from our customers. We have reserves for certain state sales tax contingencies based on the likelihood of obligation. These contingencies are included in “Accrued liabilities” in our Consolidated Balance Sheets. We believe we have appropriately accrued for these contingencies. In the event that actual results differ from these reserves, we may need to make adjustments, which could materially impact our financial condition and results of operations.

~~Risks Relating to the Industries We Serve~~

~~Our business depends to a significant degree on the hospitality and retail industries, and a weakening could adversely affect our business and results of operations.~~

Because our customer base is concentrated in the hospitality and retail industries, our business is largely dependent on the health of those industries. Our sales are dependent in large part on the health of the hospitality and retail industries, which in turn is dependent on the domestic and international economy. Instabilities or downturns in the hospitality and retail industries could disproportionately impact our revenue, as clients may exit the industry or delay, cancel or reduce planned expenditures for our products. A general downturn in the hospitality and retail industries could disproportionately impact our revenue, as clients may exit the industry or delay, cancel or reduce planned expenditures for our products.

~~Higher oil and gas prices worldwide could have a material adverse impact on the hospitality industry, and indirectly, on our business.~~

Material increases in oil and gas prices tend to reduce discretionary spending by consumers, such as on travel and dining, as well as on retail spending generally. Reductions in discretionary spending by consumers adversely affect our customers and, indirectly, our business. Moreover, increases in oil and gas prices also directly adversely affect our customer base in other ways. For example, oil and gas price increases can result in higher ingredient and food costs for our restaurant customers.

~~Consolidation in the industries that we serve could adversely affect our business.~~

Customers that we serve may seek to achieve economies of scale and other synergies by combining with or acquiring other companies. Many of the industries that we serve have experienced recent consolidations, including the hotel, casino, quick serve restaurant and grocery industries. Although recent consolidations in these industries have not materially adversely affected our business, there is no assurance that future consolidation will not have such affect. For example, if one of our current customers merges or consolidates with a company that relies on another provider’s products or services, it could decide to reduce or cease its purchases of products or services from us, which could have an adverse effect our business.

~~Risks Relating to Our Stock~~

~~Our stock has been volatile and we expect that it will continue to be volatile.~~

Our stock price has been volatile, and we expect it will continue to be volatile. For example, during the year ended March 31, 2012, the trading price of our common stock ranged from a high of $10.00 to a low of $4.43.voting securities. The ~~volatility of our stock price may be due~~

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to factors other than those specific to our business, such as economic news or other events generally affecting the trading markets. Additionally, our ownership base has been and may continue to be concentrated in a few shareholders, which could increase the volatility of our common share price over time.

Our largest shareholder, MAK Capital, currently holds approximately 31% of our common shares, which could impact corporate policy and strategy, and MAK Capital’s interests may differ from those of other shareholders.

Pursuant to the approval by shareholders of a control share acquisition proposal, MAK Capital holds approximately 31% of our outstanding common shares. As a significant shareholder whose responses could potentially affect the interests of Agilysys and the other shareholders, our Board may consider MAK Capital’s potential response to a particular decision of the Board in considering the range of possible corporate policies and strategies in the future, potentially influencing corporate policy and strategic planning.

~~MAK entered into a~~Revised Voting Trust Agreement ~~with Computershare,~~will become effective if and when the number of shares owned by the reporting persons equals or exceeds one-third of the voting securities then outstanding as ~~trustee, which~~a result of a decrease in the total number of voting securities outstanding. Until such time, the Voting Trust Agreement will remain in full force and effect.

The Voting Trust Agreement provides that, for ~~both strategic and other~~ transactions requiring at least two-thirds of the voting power to approve, ~~the trustee~~Trustee will vote shares as follows: (i) for a ~~certain percentage~~Strategic Transaction, vote shares that exceed 20% of ~~MAK Capital’s~~the outstanding shares in favor of, against, or abstaining from voting in the same proportion as all other shares voted by shareholders (including ~~MAK Capital’s~~reporting persons’ shares that do not ~~being~~exceed the 20% threshold); and (ii) for Other Transactions, vote shares that exceed 25% of the outstanding shares in favor of, against, or abstaining from voting in the same proportion as all other shares voted by shareholders (including reporting persons’ shares that do not exceed the ~~trustee)~~25% threshold). ~~If the~~The Voting Trust Agreement ~~as amended, that MAK entered into with Computershare were~~terminates (i) if the vote necessary to ~~terminate for any reason, MAK Capital would have a level of control that would highly influence the approval or disapproval~~approve all forms of transactions ~~requiring under Ohio law~~is lowered to the ~~approval~~affirmative vote of ~~two-thirds~~holders of ~~the outstanding common shares, such as a business combination, or majority share acquisition involving the issuance of common~~ shares entitling ~~the holders~~them to exercise ~~one-sixth or more~~at least a majority of the voting power ~~of Agilysys, each of which requires approval by two-thirds of~~on the outstanding common shares. MAK Capital might also be able to initiate or substantially assist any such transaction. Even with the limitations on MAK Capital’s voting power imposed by the Voting Trust Agreement, as amended, it would be more difficult for the other shareholdersproposal to approve such ~~a transaction~~transactions (from two-thirds); (ii) if MAK ~~Capital opposed it,~~Fund and ~~MAK Capital’s interests may differ from those~~Paloma are no longer members of ~~other shareholders.~~

~~Item 1B. Unresolved~~

~~Staff Comments.~~

~~None.~~

~~Item 2. Properties.~~

Agilysys’ corporate services are located in Alpharetta, Georgia where we lease approximately 23,000 square feet of office space. In addition, we lease approximately 27,000 square feet of office space in Las Vegas, Nevada and 77,500 square feet of warehouse and office space in Taylors, South Carolina. Our major leases contain renewal options for periods of up to 10 years. We believe that our current facilities and office space are sufficient to meet our needs and do not anticipate any difficulty securing additional space as needed.

~~Item 3. Legal~~

~~Proceedings.~~

~~We are involved in legal actions that arise in the ordinary course of business. It is the opinion of management that the resolution of any current pending litigation will not have~~ a ~~material adverse effect on our financial position or results of operations.~~

On April 6, 2012, Ameranth, Inc. filed a complaint against us for patent infringement in the United States District Court for the Southern District of California. The complaint alleges, among other things, that point-of-sale and property management and other hospitality information technology products, software, components and/or systems sold by us infringe three patents owned by Ameranth purporting to cover generation and synchronization of menus, including restaurant menus, event tickets, and other products across fixed, wireless and/or internet platforms as well as synchronization of hospitality information and hospitality software applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and attorneys fees. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter.

~~Item 4. Mine~~

~~Safety Disclosures.~~

~~Not applicable.~~

13

~~Part II~~

~~Item 5.~~

~~Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.~~

Our common shares, without par value, are traded on the NASDAQ Stock Market LLC under the symbol “AGYS”. The high and low sales prices for the common shares for each quarter during the past two fiscal years are presented in the table below.

Fiscal 2012    High    Low
Fourth quarter
   $ 9.60       $ 6.92
Third quarter
   $ 9.00       $ 6.50
Second quarter
   $ 10.00       $ 6.60
First quarter
   $ 8.62       $ 4.43
Fiscal 2011    High    Low
Fourth quarter
   $ 6.50       $ 4.74
Third quarter
   $ 7.45       $ 4.66
Second quarter
   $ 8.31       $ 4.30
First quarter
   $ 12.50       $ 6.09

~~The closing price of the common shares on June 1, 2012, was $7.25 per share. There were 1,999 shareholders of record.~~

We did not pay dividends in fiscal 2012 or fiscal 2011 and are unlikely to do so in the foreseeable future. The current policy of the Board of Directors is to retain any available earnings for use in the operations of our business.

~~Repurchase of Common Shares~~

~~The following table sets forth repurchases during the fourth quarter of fiscal 2012:~~

      Total Number
of Shares
Purchased (1)    Average
Price Paid
Per Share    Total Number of
Shares Purchased
as Part of Publicly
Announced Plans (2)    Maximum Number of
Shares That May Yet
Be Purchased Under
the Plans
January 1-31
   112,957       $ 8.07       112,957       16,087
February 1-29
   16,087       $ 8.31       16,087       —
March 1-31
   5,924       $ 8.99       —       —
Total
   134,968       $ 8.14       —       —

~~(1)~~

The total number of shares includes shares purchased under our share repurchase plan described below and shares surrendered by employees to Agilysys to satisfy tax withholding obligations in connection with the vesting of restricted stock total 5,924 shares in March 2012, which do not count against shares authorized under the share repurchase plan.

~~(2)~~

In August 2011, we announced that our Board of Directors provided authorization to repurchase up to 1.6 million of our common shares. As of March 31, 2012, we had repurchased all our common shares under this plan. No repurchases of common shares were made by us or on our behalf during fiscal 2011.

14

~~Shareholder Return Performance Presentation~~

The following chart compares the value of $100 invested in our common shares, including reinvestment of dividends, with a similar investment in the Russell 2000 Index (the “Russell 2000”) and with the companies listed in the SIC Code 5045-Computer and Computer Peripheral Equipment and Software for the period March 31, 2007 through March 31, 2012. The stock price performance in this graph is not necessarily indicative of the future performance of our common shares.

~~Comparison of 5 Year Cumulative Total Return~~

~~INDEXED RETURNS~~

      Fiscal Years Ended March 31,
Company Name / Index    Base Period 2007    2008    2009    2010    2011    2012
Agilysys, Inc.
   $ 100.00       $ 51.97       $ 19.68       $ 51.69       $ 26.57       $ 41.61
Russell 2000
   $ 100.00       $ 87.01       $ 54.38       $ 88.51       $ 111.34       $ 111.13
Peer Group
   $ 100.00       $ 80.67       $ 60.08       $ 87.11       $ 107.02       $ 95.98

~~This performance graph shall not be deemed “filed”~~“group” for purposes of Section 1813(d) of the Securities Exchange Act, ~~of 1934, as amended or incorporated by reference into~~then the Voting Trust Agreement terminates with respect to any of ~~our filings under the Securities Act of 1933, as amended,~~MAK Fund and Paloma that beneficially owns not more than 20% of the ~~Exchange Act, except as shall be expressly set forth by specific reference in such filing.~~

15

outstanding shares; (iii) on February 18, 2020, or February 18, 2025 if MAK Fund continues to hold 20% of the outstanding shares; or (v) if another person or entity holds greater than 20% of the outstanding shares that are not subject to a similar voting agreement.

~~Item 6.~~

~~Selected Financial Data.~~

The following selected consolidated financial and operating data was derived from our audited consolidated financial statements and the current and prior period operating results of TSG have been classified within discontinued operations for all periods presented as discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The selected financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and Item 7 contained in Part II of this Annual Report.

   For the year ended March 31,
(In thousands, except per share data)    2012 2011 2010 2009 2008
Operating results

Net revenue
   $ 208,889    $ 202,681    $ 193,506    $ 220,888    $ 214,601
Gross profit
   79,836    75,639    74,008    86,099    75,690
Operating loss
   (41,190 ) (21,625 ) (14,880 ) (184,371 ) (29,777 )
Loss from continuing operations, net of taxes
   (34,239 ) (22,975 ) (7,630 ) (178,644 ) (13,331 )
Income (loss) from discontinued operations, net of taxes
   11,456    (32,500 ) 11,177    (105,490 ) 16,990
Net (loss) income
   $ (22,783 ) $ (55,475 ) $ 3,547    $ (284,134 ) $ 3,659
Per share data (1)

Basic and diluted

Loss from continuing operations
   $ (1.53 ) $ (1.01 ) $ (0.34 ) $ (7.91 ) $ (0.47 )
Income (loss) from discontinued operations
   0.51    (1.43 ) 0.49    (4.67 ) 0.60
Net (loss) income
   $ (1.02 ) $ (2.44 ) $ 0.15    $ (12.58 ) $ 0.13
Weighted-average shares outstanding Basic and diluted
   22,432    22,785    22,627    22,587    28,252
Balance sheet data at year end

Cash and cash equivalents
   $ 97,587    $ 74,354    $ 65,535    $ 36,451    $ 70,596
Working capital
   76,286    83,005    88,978    72,150    90,536
Total assets (2)
   204,139    312,398    330,449    374,436    695,871
Total debt
   994    1,906    819    623    987
Total shareholders’ equity
   114,438    148,104    198,924    192,717    479,465

~~(1)~~(6)

~~When~~As reported on a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive. In addition, when a loss from continuing operations is reported, adjusting the denominator of diluted earnings per share would also be anti-dilutiveSchedule 13G/A dated February 8, 2013. Dimensional Fund Advisors LP has sole voting power with respect to ~~the loss per share, even if the entity has net income after adjusting for a discontinued operation. Therefore, for the fiscal years ended March 31, 2012, 2011~~1,819,350 shares and ~~2010, basic weighted-average shares outstanding were used in calculating the diluted net loss per share.~~

sole dispositive power with respect to 1,846,222 shares.

~~(2)~~

(7)

As reported on a Schedule 13G/A dated February 20, 2013. The ~~decrease in assets from fiscal 2008~~Vanguard Group, Inc. has sole voting and shared dispositive power with respect to ~~2009 is primarily due~~31,558 shares and sole dispositive power with respect to ~~a goodwill impairment charge of $246.3 million and a finite intangible impairment charge of $3.8 million. The decrease in assets from fiscal 2011 to 2012 is due to the sale of TSG.~~

16

~~Item 7.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

In “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), management explains the general financial condition and results of operations for Agilysys and subsidiaries including:

—

~~what factors affect our business;~~

1,119,240 shares.

—
(8)	~~what our earnings~~As reported on a Schedule 13G/A dated February 4, 2013. BlackRock, Inc. has sole voting and ~~costs were;~~ dispositive power with respect to all of the shares.

—

~~why those earnings and costs were different from the year before;~~

—

~~where the earnings came from;~~

—

~~how our financial condition was affected; and~~

—

~~where the cash will come from to fund future operations.~~

The MD&A analyzes changes in specific line items in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows and provides information that management believes is important to assessing and understanding our consolidated financial condition and results of operations. The discussion should be read in conjunction with the Consolidated Financial Statements and related Notes that appear in Item 15 of this Annual Report titled, “Financial Statements and Supplementary Data.” Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” on page 3 and Item 1A “Risk Factors” in Part I of this Annual Report for additional information concerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in Agilysys.

~~Overview~~

Agilysys is a leading provider of innovative technology solutions for the hospitality and retail markets. Our intuitive solutions include property and lodging management, inventory and procurement, point-of-sale (POS), document management, mobile, wireless and other types of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting services. Our customers include retailers, casinos, resorts, restaurants and other customer-facing service providers, and a significant portion of our consolidated revenue is derived from contract support, maintenance agreements and professional services.

We operate extensively throughout North America, with additional sales and support offices in the United Kingdom and Asia. We have two operating segments: Hospitality Solutions Group (HSG) and Retail Solutions Group (RSG).

Our top priority is increasing shareholder value by improving operating and financial performance and profitability growing the business through superior products and services. To that end, we expect to invest a certain portion of our cash on hand to develop and market new software products, to fund enhancements to existing software products, to expand our customer breadth, both geographically and vertically, and to make select acquisitions.

The primary objective of our ongoing strategic planning process is to create shareholder value by exploiting growth opportunities and strengthening our competitive position within the specific technology solutions and in the end markets we service. The plan builds on our existing strengths and targets industry leading growth and peer beating financial and operating results driven by new technology trends and market opportunities. Industry leading growth and peer beating financial and operational results will be achieved through tighter coupling and management of operating expenses of the business and sharpening the focus of our investments to concentrate on growth opportunities with the highest return by seeking the highest margin revenue opportunities in the markets in which we compete.

~~Our strategic plan specifically focuses on:~~

~~Strong customer focus, with clear and realistic service commitments.~~

25

EQUITY COMPENSATION PLAN INFORMATION

~~Growing sales of our proprietary offerings: products, support, maintenance and subscription services and professional services.~~

~~Diversifying our customer base across geographies and industries.~~

~~Capitalizing on our intellectual property and emerging technology trends.~~

~~Revenue — Defined~~

As required by the SEC, we separately present revenue earned as either products revenue, support, maintenance and subscription services revenue or professional services revenue in our Consolidated Statements of Operations. In addition to the SEC requirements, we may, at times, also refer to revenue as defined below. The terminology, definitions, and applications of terms we use to describe our revenue may be different from those used by other companies and caution should be used when comparing these financial measures to those of other companies. We use the following terms to describe revenue:

~~Revenue — We present revenue net of sales returns and allowances.~~

17

~~Products revenue — Revenue earned from the sales of hardware equipment and proprietary and remarketed software.~~

~~Support, maintenance and subscription services revenue — Revenue earned from the sale of proprietary and remarketed ongoing support, maintenance and subscription or hosting services.~~

~~Professional services revenue — Revenue earned from the delivery of implementation, integration and installation services for proprietary and remarketed products.~~

~~Matters Affecting Comparability~~

On August 1, 2011, we completed the sale of our Technology Solutions Group (“TSG”) business to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together “OnX”). For financial reporting purposes, TSG’s operating results for fiscal 2012 through the completion of the sale and for the fiscal 2011 and fiscal 2010 periods presented were classified within discontinued operations. Accordingly, the discussion and analysis presented below, including comparisons to prior year periods, reflects the continuing business of Agilysys.

~~Results of Operations~~

~~Fiscal 2012 Compared with Fiscal 2011~~

~~Net Revenue and Operating Loss~~

The following table ~~presents our consolidated revenue and operating results for the fiscal years ended March 31, 2012 and 2011:~~

   Year ended March 31, Increase (decrease)
(Dollars in thousands)    2012 2011 $ %
Net revenue:

Products
   $ 105,141    $ 104,769    $ 372    0.4%
Support, maintenance and subscription services
   73,171    70,729    2,442 �� 3.5%
Professional services
   30,577    27,183    3,394    12.5%
Total
   208,889    202,681    6,208    3.1%
Cost of goods sold:

Products
   83,550    80,090    3,460    4.3%
Support, maintenance and subscription services
   25,706    25,507    199    0.8%
Professional services
   19,797    21,445    (1,648 ) (7.7)%
Total
   129,053    127,042    2,011    1.6%
Gross profit
   79,836    75,639    4,197    5.5%
Gross profit margin
   38.2%    37.3%
Operating expenses:

Product development
   30,309    27,531    2,778    10.1%
Sales and marketing
   24,006    22,212    1,794    8.1%
General and administrative
   32,889    37,121    (4,232 ) (11.4)%
Depreciation of fixed assets
   4,602    3,914    688    17.6%
Amortization of intangibles
   3,686    5,122    (1,436 ) (28.0)%
Asset impairments and related charges
   9,681    959    8,722    nm
Restructuring and related charges
   15,853    405    15,448    nm
Operating loss
   $ (41,190 ) $ (21,625 ) $ (19,565 ) 90.5%
Operating loss percentage
   (19.7)%    (10.7)%

~~nm — not meaningful.~~

18

~~The following table presents the percentage relationship of our Consolidated Statement of Operations line items~~provides certain information with respect to ~~our consolidated net revenues for the periods presented:~~

   Year ended March 31,
          2012     2011
Net revenue:

Products
   50.3%    51.7%
Support, maintenance and subscription services
   35.0    34.9
Professional services
   14.7    13.4
Total net revenue
   100.0    100.0
Cost of goods sold:

Products
   40.0    39.5
Support, maintenance and subscription services
   12.3    12.6
Professional services
   9.5    10.6
Total cost of goods sold
   61.8    62.7
Gross profit
   38.2    37.3
Operating expenses:

Product development
   14.5    13.6
Sales and marketing
   11.5    11.0
General and administrative
   15.7    18.3
Depreciation of fixed assets
   2.2    1.9
Amortization of intangibles
   1.8    2.5
Asset impairments and related charges
   4.6    0.5
Restructuring and related charges
   7.6    0.2
Operating loss
   (19.7 ) (10.7 )

19

~~The following table presents our revenue and operating results by business segment for the fiscal years ended March 31, 2012 and 2011:~~

   Year ended March 31, Increase (decrease)
(Dollars in thousands)    2012 2011 $ %
Hospitality (HSG)

Revenue from external customers:

Products
   $ 25,148    $ 35,306    $ (10,158 ) (28.8)%
Support, maintenance and subscription services
   48,072    45,053    3,019    6.7%
Professional services
   13,155    13,650    (495 ) (3.6)%
Total revenue from external customers
   86,375    94,009    (7,634 ) (8.1)%
Gross profit
   $ 55,354    $ 54,669    $ 685    1.3%
Gross profit margin
   64.1%    58.2%
Operating (loss) income
   $ (6,552 ) $ 5,836    $ (12,388 ) (212.3)%
Retail (RSG)

Revenue from external customers:

Products
   $ 79,993    $ 69,463    $ 10,530    15.2%
Support, maintenance and subscription services
   25,099    25,676    (577 ) (2.2)%
Professional services
   17,422    13,533    3,889    28.7%
Total revenue from external customers
   122,514    108,672    13,842    12.7%
Gross profit
   $ 24,482    $ 20,970    $ 3,512    16.7%
Gross profit margin
   20.0%    19.3%
Operating income
   $ 5,481    $ 3,164    $ 2,317    73.2%
Total reportable business segments

Total revenue from external customers
   $ 208,889    $ 202,681    $ 6,208    3.1%
Gross profit
   $ 79,836    $ 75,639    $ 4,197    5.5%
Gross profit margin
   38.2%    37.3%
Operating (loss) income
   $ (1,071 ) $ 9,000    $ (10,071 ) (111.9)%
Corporate/Other

Gross profit
   $ —    $ —    $ —
Operating loss
   $ (40,119 ) $ (30,625 ) $ (9,494 ) (31.0)%
Total Company

Total revenue from external customers
   $ 208,889    $ 202,681    $ 6,208    3.1%
Gross profit
   $ 79,836    $ 75,639    $ 4,197    5.5%
Gross profit margin
   38.2%    37.3%
Operating loss
   $ (41,190 ) $ (21,625 ) $ (19,565 ) 90.5%

~~nm — not meaningful~~

20

~~Net revenue.~~ Total net revenue increased $6.2 million or 3.1% during fiscal 2012 compared to fiscal 2011. Products revenue, support, maintenance and subscription services revenue and professional services revenue increased $0.4 million, $2.4 million and $3.4 million, respectively.

HSG’s revenue decreased $7.6 million or 8.1% in fiscal 2012 compared to fiscal 2011. The decrease in products revenue of approximately $10.1 million was driven by lower volumes in our remarketed products as well as a decline in perpetual software licenses with a shift in strategy to focus on selling subscription based services revenue which is typically recognized over a five year period. In addition, products revenue was negatively impacted by the errors identified in the manner in which we recognized revenue for certain software license and professional services arrangements in prior periods. The out of period impact for errors accumulated prior to fiscal 2012 was approximately $1.0 million (see Note 2,~~Summary of Significant Accounting Policies,~~ in the Consolidated Financial Statements). The $3.0 million or 6.7% increase in support, maintenance and subscription services in fiscal 2012 was the result of growth in both subscription based revenue and ongoing support from traditional proprietary products.

RSG’s revenue increased $13.8 million or 12.7 % in fiscal 2012 compared to fiscal 2011. The increase in products and professional services revenue of approximately $10.5 million or 15.2 % and $3.9 million or 28.7%, respectively, are the result of higher volumes associated with several multi-location, multi-year contracts for remarketed products. We experienced a decline in support, maintenance and subscription services revenue of approximately $0.6 million or 2.2 % as a result of not renewing certain support contracts that were less accretive to gross profit than desired.

~~Gross profit and gross profit margin.~~ Our total gross profit increased $4.2 million or 5.5% for fiscal 2012 and total gross profit margin increased 90 basis points. Products gross profit decreased $3.1 million and gross profit margin decreased 300 basis points. Support, maintenance and subscription services gross profit increased $2.2 million and gross margin percentage increased 90 basis points. Professional services gross margin increased $5.0 million and gross profit margin increased 1,410 basis points.

HSG’s gross profit increased $0.7 million or 1.3% for fiscal 2012 and gross profit margin improved 590 basis points to 64.1% in fiscal 2012 from 58.2% in fiscal 2011. This is primarily due to professional services gross profit margin improvement of 2,070 basis points as a result of efficient management of project labor within implementation services. In addition, products gross profit margin improved 80 basis points as a result of selling higher margin opportunities. The support, maintenance and subscription services gross profit margin declined less than 100 basis points as a result of additional labor resources being dedicated to product enhancement.

RSG’s gross profit increased $3.5 million or 16.7% for fiscal 2012 and gross profit margin increased 70 basis points to 20.0% in fiscal 2012 compared with 19.3% in fiscal 2011. This is primarily due to higher professional service margins yielding an improvement of 1,040 basis points as a result of improved labor efficiencies. The support gross profit margins increased approximately 130 basis points in line with our continued strategic initiatives focused on more profitable revenue streams. Products gross profit margin declined less than 100 basis points consistent with price compression associated with remarketed products in the market.

~~Operating expenses~~

Operating expenses, excluding the one-time charges for asset impairments and related charges and restructuring and related charges, decreased $0.4 million or 0.4% in fiscal 2012 compared with fiscal 2011. On a segment basis, HSG and RSG increased $2.1 million and $0.6 million, respectively, and Corporate decreased $3.1 million.

~~Product development.~~ Product development includes all costs associated with research and development. Product development increased $2.8 million or 10.1% in fiscal 2012 compared with fiscal 2011. Product development expenses increased $2.0 million in HSG and $0.8 million in RSG in fiscal 2012 compared to fiscal 2011. This increase at both segments is driven by the continued investment in internal resources to enhance the existing products and develop our future platforms as well as at RSG by the incremental costs associated with employee incentives due to over-achievement of operating unit targets.

~~Sales and marketing.~~ Sales and marketing increased $1.8 million or 8.1% in fiscal 2012 compared with fiscal 2011. Sales and marketing expenses increased $1.1 million in HSG and $0.7 million in RSG in fiscal 2012 compared to fiscal 2011. This increase in HSG is a result of investment in domestic and international sales resources as well, as a one-time specific bad debt expense of $0.4 million. The increase in RSG is associated with employee incentives due to over-achievement of operating unit targets.

~~General and administrative.~~ General and administrative decreased $4.2 million or 11.4% in fiscal 2012 compared to fiscal 2011. General and administrative expenses decreased $1.1 million in HSG, $1.2 million in RSG and $1.9 million in Corporate. HSG and RSG expenses decreased as a result of lower employee related costs created by efficiencies in back-office processes. The Corporate savings are a result of the restructuring and moving the corporate services from Solon, Ohio to Alpharetta, Georgia as well as certain one-time professional fees incurred in 2011 that did not repeat in fiscal 2012 associated with the post-implementation efforts of the Oracle ERP system.

21

~~Depreciation of fixed assets.~~ Depreciation of fixed assets increased $0.7 million on a consolidated basis driven by the $0.3 million for leasehold improvements at our new corporate services offices in Alpharetta, Georgia and $0.3 million for additional depreciation related to the asset retirement obligation.

~~Amortization of intangibles.~~ ~~Amortization of intangibles decreased $1.4 million or 28.0% in fiscal 2012. This decrease is due to certain internal use software reaching their useful lives in fiscal 2011.~~

~~Asset impairments and related charges.~~ We recorded asset impairments and related charges of $9.7 million and $1.0 million in fiscal 2012 and fiscal 2011, respectively. During the fourth quarter of 2012, it was determined that certain developed technologies would no longer be offered for sale. As a result, we have impaired the entire remaining assets of $8.6 million, and the accrued estimated costs associated with a transition plan for all of the ~~existing customers off~~Company's equity compensation plans in effect as of ~~this platform~~March 31, 2013.

All related person transactions with the Company require the prior approval of ~~$1.1 million. In fiscal 2011, we concluded that certain internally developed software within HSG was no longer being sold. As~~or ratification by our Audit Committee. The board of directors adopted Related Person Transaction Procedures to formalize the procedures by which our Audit Committee reviews and approves or ratifies related person transactions. The procedures set forth the scope of transactions covered, the process for reporting such transactions, and the review process. Covered transactions include any transaction, arrangement, or relationship with the Company in which any director, executive officer, or other related person has a ~~result, we recorded an impairment charge~~direct or indirect material interest, except for business travel and expense payments, share ownership, and executive compensation approved by the board of $0.1 million. Also in fiscal 2011, we concluded that we were no longer using certain indefinite-lived intangible assets related to HSG trade names. Accordingly, we recorded an impairment charge of $0.9 million.

~~Restructuring and related charges.~~ We recorded restructuring and related charges of $15.9 million and $0.4 million during fiscal 2012 and 2011, respectively. Under the fiscal 2012 restructuring plan we recorded restructuring charges comprised of primarily $3.5 million of lease termination and related facility closing costs and $8.0 million of severance and related benefits in each segment. In addition, we incurred accelerated depreciation of $4.4 million of property and equipment that was duedirectors. Transactions are reportable to the ~~relocation~~Company’s General Counsel, who will oversee the initial review of the reported transaction and notify the Audit Committee of transactions within the scope of the procedures, and the Audit Committee will determine whether to approve or ratify the transaction. Through our Nominating Committee, we make a formal yearly inquiry of all of our ~~previous corporate services in Solon, Ohio to Alpharetta, Georgia,~~executive officers and ~~closing our facilities in Emeryville, California~~directors for purposes of disclosure of related person transactions, and ~~Frederick, Maryland in the fourth quarter of fiscal 2012. Our restructuring actions~~any such newly revealed related person transactions are ~~discussed further in the subsection of this MD&A titled,~~~~Restructuring and Related Charges~~ ~~and in Note 4~~conveyed to the ~~Consolidated Financial Statements titled,~~~~Restructuring~~Audit Committee. All officers and ~~Related Charges~~.

directors are charged with updating this information with our internal legal counsel.

NASDAQ listing standards provide that at least a majority of the members of the board of directors must be independent, meaning free of any material relationship with the Company, other than his relationship as a director. The ~~restructuring charges recorded in fiscal 2011~~Guidelines state that the board of directors should consist of ~~settlement costs~~a substantial majority of ~~$0.4 million related~~independent directors. A director is not independent if he fails to satisfy the ~~payment of an obligation~~standards for director independence under ~~Agilysys’ nonqualified executive retirement defined benefit pension plan for an executive officer (the “SERP”) who was part~~NASDAQ listing standards, the rules of the ~~fiscal 2009 restructuring actions.~~

~~Other (Income) Expenses~~

   Year ended March 31, (Unfavorable) favorable
(Dollars in thousands)    2012 2011 $ %
Other (income) expenses

Interest income
   $ (103 ) $ (73 ) $ 30    41.1%
Interest expense
   978    1,297    319    24.6%
Other expense (income), net
   181    (2,294 ) (2,475 ) (107.9)%
Total other expenses (income), net
   $ 1,056    $ (1,070 ) $ (2,126 ) (198.7)%

~~Interest income.~~ ~~Interest income increased slightly during fiscal 2012 compared to fiscal 2011 as~~SEC, and any other applicable laws, rules, and regulations. During the board of directors’ annual review of director independence, the board of directors considers transactions, relationships, and arrangements, if any, between each director or a ~~result~~director’s immediate family members and the Company or its management. In June 2013, the board of ~~interest earned from the investment in treasury notes with the cash proceeds from the sale of TSG during the third quarter of fiscal 2012.~~

~~Interest expense.~~ Interest expense consists of costs associated with our Credit Facility, the amortization of deferred financing fees, loans on corporate-owned life insurance policies, and capital leases. Interest expense decreased $0.3 million in fiscal 2012 compared to fiscal 2011 due to the termination of the Credit Facility. We terminated the Credit Facility in July 2011 and immediately expensed approximately $0.4 million in unamortized deferred financing fees related to the former Credit Facility.

~~Other (income) expenses, net.~~ In fiscal 2012, the $0.2 million of other expense primarily consists of losses recognized as a result of movements in foreign currencies relative to the U.S. dollar. In fiscal 2011, the $2.3 million in other income primarily included a gain of $2.1 million recorded on the $2.2 million in proceeds received as a death benefit from certain corporate-owned life insurance policies.

22

~~Income Taxes~~

~~The following table compares our income tax (benefit) expense and effective tax rates for the fiscal years ended March 31, 2012 and 2011:~~

   Year ended March 31,    (Unfavorable)
favorable
(Dollars in thousands)    2012 2011    $    %
Income tax (benefit) expense
   $ (8,007 ) $ 2,420       $ 10,427       nm
Effective tax rate
   (19.0)%    (11.8)%

~~nm — not meaningful~~

~~We recorded an effective tax rate benefit from continuing operations of 19.0% in fiscal 2012 compared with an effective tax rate expense of 11.8% in fiscal 2011.~~

For the years ended March 31, 2012 and 2011, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations and recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance. Other items effecting the rate in the fiscal 2012 include foreign and state taxes, a decrease in unrecognized tax benefits attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences. In fiscal 2011, an increase in the valuation allowance was recorded due to the correction of an error, as more fully described in Note 2 to the Consolidated Financial Statements titled,~~Summary of Significant Accounting Policies~~. Other items effecting the rate in fiscal 2011 include non-taxable life insurance proceeds, a decrease in unrecognized tax benefits attributable to the expiration of statute of limitations, and other U.S. permanent book to tax differences.

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction in unrecognized tax benefits may occur in the range of zero to $0.2 million based on the outcome of tax examinationsdirectors performed its annual director independence review and as a result of such review determined that each of R. Andrew Cueva, Jerry Jones, Keith M. Kolerus, Robert A. Lauer, Robert G. McCreary, III, and John Mutch qualify as independent directors. Mr. Dennedy is not independent because of his service as President and CEO.

Item 14. Principal Accountant Fees andServices.

The Audit Committee reviewed the ~~expiration~~fees of ~~various statutes~~Ernst & Young LLP (“E&Y”), our Independent Accountant for first two quarters of ~~limitations. We are routinely audited; due to the ongoing nature~~fiscal year 2012, and of ~~current examinations in multiple jurisdictions, other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.~~

23

~~Fiscal 2011 Compared with Fiscal 2010~~

~~Net Revenue and Operating Loss~~

~~The following table presents~~PricewaterhouseCoopers LLP ("PwC"), our ~~consolidated revenue and operating results for the fiscal years ended March 31, 2011 and 2010:~~

   Year ended March 31, (Decrease) increase
(Dollars in thousands)    2011 2010 $ %
Net revenue:

Products
   $ 104,769    $ 103,501    $ 1,268    1.2%
Support, maintenance and subscription services
   70,729    63,218    7,511    11.9%
Professional services
   27,183    26,787    396    1.5%
Total
   202,681    193,506    9,175    4.7%
Cost of goods sold:

Products
   80,090    80,825    (735 ) (0.9)%
Support, maintenance and subscription services
   25,507    23,148    2,359    10.2%
Professional services
   21,445    15,525    5,920    38.1%
Total
   127,042    119,498    7,544    6.3%
Gross profit
   75,639    74,008    1,631    2.2%
Gross profit margin
   37.3%    38.2%
Operating expenses:

Product development
   27,531    28,241    (710 ) (2.5)%
Sales and marketing
   22,212    20,334    1,878    9.2%
General and administrative
   37,121    31,116    6,005    19.3%
Depreciation of fixed assets
   3,914    3,260    654    20.1%
Amortization of intangibles
   5,122    4,878    244    5.0%
Asset impairments and related charges
   959    236    723    nm
Restructuring and related charges
   405    823    (418 ) nm
Operating loss
   $ (21,625 ) $ (14,880 ) $ (6,745 ) nm
Operating loss percentage
   (10.7)%    (7.7)%

~~nm — not meaningful.~~

24

~~The following table presents the percentage relationship of our Consolidated Statement of Operations line items to our consolidated net revenues for the periods presented:~~

   Year ended March 31,
          2011     2010
Net revenue

Products
   51.7%    53.5%
Support maintenance and subscription services
   34.9    32.7
Professional services
   13.4    13.8
Total net revenue
   100.0    100.0
Cost of goods sold:

Products
   39.5    41.8
Support, maintenance and subscription services
   12.6    12.0
Professional services
   10.6    8.0
Total cost of goods sold
   62.7    61.8
Gross profit
   37.3    38.2
Operating expenses:

Product development
   13.6    14.6
Sales and marketing
   11.0    10.5
General and administrative
   18.3    16.1
Depreciation of fixed assets
   1.9    1.7
Amortization of intangibles
   2.5    2.5
Asset impairments and related charges
   0.5    0.1
Restructuring and related charges
   0.2    0.4
Operating loss
   (10.7 ) (7.7 )

25

~~The following table presents our revenue and operating results by business segment for the fiscal years ended March 31, 2011 and 2010:~~

   Year ended March 31, (Decrease) increase
(Dollars in thousands)    2011 2010 $ %
Hospitality (HSG)

Revenue from external customers:

Products
   $ 35,306    $ 31,283    $ 4,023    12.9%
Support, maintenance and subcription services
   45,053    39,021    6,032    15.5%
Professional services
   13,650    12,851    799    6.2%
Total revenue from external customers
   $ 94,009    $ 83,155    $ 10,854    13.1%
Gross profit
   $ 54,669    $ 51,463    $ 3,206    6.2%
Gross profit margin
   58.2%    61.9%
Operating income
   $ 5,836    $ 7,800    $ (1,964 ) 25.2%
Retail (RSG)

Revenue from external customers:

Products
   $ 69,463    $ 72,218    $ (2,755 ) (3.8)%
Support, maintenance and subcription services
   25,676    24,197    1,479    6.1%
Professional services
   13,533    13,936    (403 ) (2.9)%
Total revenue from external customers
   $ 108,672    $ 110,351    $ (1,679 ) (1.5)%
Gross profit
   $ 20,970    $ 23,326    $ (2,356 ) (10.1)%
Gross profit margin
   19.3%    21.1%
Operating income
   $ 3,164    $ 5,873    $ (2,709 ) 46.1%
Total reportable business segments

Total revenue from external customers
   $ 202,681    $ 193,506    $ 9,175    4.7%
Gross profit
   $ 75,639    $ 74,789    $ 850    1.1%
Gross profit margin
   37.3%    38.6%
Operating income
   $ 9,000    $ 13,673    $ (4,673 ) 34.2%
Corporate/Other

Gross profit
   $ —    $ (781 ) $ 781    (100.0)%
Operating loss
   $ (30,625 ) $ (28,553 ) $ (2,072 ) (7.3)%
Total Company

Total revenue from external customers
   $ 202,681    $ 193,506    $ 9,175    4.7%
Gross profit
   $ 75,639    $ 74,008    $ 1,631    2.2%
Gross profit margin
   37.3%    38.2%
Operating loss
   $ (21,625 ) $ (14,880 ) $ (6,745 ) nm

~~nm — not meaningful~~

26

~~Net revenue.~~ Total revenue increased $9.2 million or 4.7% during fiscal 2011. Products revenue increased $1.3 million while support, maintenance and subscription services revenue increased $7.5 million and professional services revenue decreased $0.4 million.

HSG’s revenue increased $10.9 million or 13.1% in fiscal 2011 compared to fiscal 2010. HSG’s support, maintenance and subscription services revenue increased $6.0 million as a result of improved demand associated with our proprietary products, particularly in the food services market. Products revenue also increased approximately $4.0 million or 12.9% associated with increased volume in remarketed products, which also drove the professional services increase of $0.8 million or 6.2%.

RSG’s revenue decreased $1.7 million or 1.5% in fiscal 2011 compared to the prior year due to a decline in products revenue and professional services revenue of $2.8 million or 3.8% and $0.4 million or 2.9%, respectively, which were offset by an increase in support, maintenance and subscription services revenue of $1.5 million or 6.1%. The decrease in RSG’s products revenue is primarily due to a large customer order in fiscal 2010 that did not repeat in fiscal 2011 which also drove the lower professional services revenue. The increase in support, maintenance and subscription services revenue was driven by new hardware maintenance accounts, increased service parts sales, transition of software maintenance customers from warranty to support, and the addition of stores to existing accounts.

~~Gross profit and gross profit margin.~~ ~~Our total gross profit increased $1.6 million or 2.2% and total gross profit margin decreased 90 basis points~~Independent Accountant for fiscal 2011. Products gross profit increased $2.0 million and the gross profit margin increased 160 basis points. Support, maintenance and subscription services gross profit increased $5.2 million and the gross profit margin increased 50 basis points. Professional services revenue gross profit decreased $5.5 million and the gross profit margin decreased 2,090 basis points.

HSG’s gross profit increased $3.2 million or 6.2% and gross profit margin decreased 370 basis points to 58.2% in fiscal 2011 from 61.9% in fiscal 2010. Products gross profit margin decreased 370 basis points due to revenue mix being more heavily weighted to remarketed products. In addition, we were unfavorably impacted by the $0.7 million of amortization expense associated with Guest 360™ software, which was made available for sale in June 2010. Professional services gross profit margin also declined 1,530 basis points, driven by the remarketed product professional services which yielded lower margins. Support, maintenance and subscription services gross profit margin decreased 120 basis points as a result of additional labor dedicated to products enhancement.

RSG’s gross profit decreased $2.4 million or 10.1% and gross profit margin decreased 180 basis points to 19.3% in fiscal 2011 compared with 21.1% in fiscal 2010, primarily due to decline in professional services margin of 2,650 basis points as a result of warranty coverage on third party/proprietary software sold and ramp up costs associated with a major customer project. Support, maintenance and subscription services gross profit margin increased 90 basis points with the continued strategic initiatives focused on more profitable revenue streams. Products gross profit margin remained relatively flat in line with the mix of products revenue.

~~Operating expenses~~

Operating expenses, excluding the one-time charges for asset impairments and related charges and restructuring and related charges, increased $8.1 million, or 9.2% in fiscal 2011 compared with fiscal 2010. On a segment basis, HSG, RSG and Corporate increased $4.3 million, $0.4 million and $3.4 million, respectively.

~~Product development.~~ Product development decreased $0.7 million or 2.5% in fiscal 2011 compared with fiscal 2010. Product development expenses increased $1.6 million in HSG and decreased $2.3 million in RSG in fiscal 2011 compared to fiscal 2010. This increase in HSG is primarily driven by expensed maintenance costs totaling approximately $3.3 million related to HSG’s Guest 360™ software product. The decrease within RSG was due to a streamlining of internal resources as well as reductions in third party labor costs.

~~Sales and marketing.~~ Sales and marketing increased $1.9 million or 9.2% in fiscal 2011 compared with fiscal 2010. Sales and marketing expenses increased $1.0 million in HSG and $0.9 million in RSG in fiscal 2011 compared to fiscal 2010. The primary driver in both HSG and RSG are increased payroll-related costs for incentive compensation in fiscal 2011 compared with the prior year ~~due to the higher sales volume in fiscal 2011, as well as, the mix of performance to plan in different reportable business segments and product groups.~~

~~General and administrative.~~ General and administrative increased $6.0 million or 19.3% in fiscal 2011 compared to fiscal 2010. On a segment basis expenses increased $2.1 million in HSG, $1.6 million in RSG and $2.3 million in Corporate. The increase in general and administrative expenses was primarily due to higher professional fees of $4.1 million across all segments and Corporate. Of this increase in professional fees in fiscal 2011, $2.8 million related to the post-implementation efforts of the Oracle ERP system, which was implemented in April 2010. In addition, fiscal 2010 professional fees include the application of $1.6 million of the total $3.9 million in proceeds received from the settlement of the litigation with the former CTS shareholders as reimbursement for reasonable attorney fees paid by Agilysys, which lowered expenses in fiscal 2010.

27

~~Depreciation of fixed assets.~~ Depreciation of fixed assets increased $0.6 million or 20.1% on a consolidated basis in fiscal 2011 compared to fiscal 2010 as a result of additional investment in fixed assets for normal business operations.

~~Amortization of intangibles.~~ ~~Amortization of intangibles increased $0.2 million or 5.0% on a consolidated basis in fiscal 2011 compared to fiscal 2010 due to the additional amortization associated with the Oracle ERP System.~~

~~Asset impairments and related charges.~~ Asset impairments and related charges increased $0.7 million in fiscal 2011 compared to fiscal 2010. We recorded asset impairment charges of $1.0 million and $0.2 million in fiscal 2011 and fiscal 2010, respectively. During the second quarter of fiscal 2011, we concluded that certain software developed technology within HSG was no longer being sold. As a result, we recorded an impairment charge of $0.1 million, which impacted HSG. During the fourth quarter of fiscal 2011, we concluded that it was no longer using certain indefinite-lived intangible assets related to HSG trade names. Accordingly, we recorded an impairment charge of $0.9 million, which impacted HSG. During fiscal 2010, we recorded asset impairment charges of $0.2 million, primarily related to capitalized software property and equipment that management determined was no longer being used to operate the business.

~~Restructuring and related charges.~~ Restructuring charges decreased $0.4 million in fiscal 2011 compared to fiscal 2010. We recorded restructuring charges of $0.4 million and $0.8 million during fiscal 2011 and 2010, respectively. The restructuring charges recorded in fiscal 2011 consist of settlement costs of $0.4 million related to the payment of an obligation under our nonqualified executive retirement defined benefit pension plan for an executive officer (the “SERP”) who was part of the fiscal 2009 restructuring actions. The fiscal 2010 restructuring charges primarily consist of settlement costs related to the payment of obligations under the SERP to two executive officers who were part of the restructuring actions taken in fiscal 2009.

~~Other Expenses (Income)~~

   Year ended March 31, Favorable (unfavorable)
(Dollars in thousands)    2011 2010 $ %
Other (income) expenses

Interest income
   $ (73 ) $ (29 ) $ 44    151.7%
Interest expense
   1,297    1,013    (284 ) (28.0)%
Other (income) expenses, net
   (2,294 ) (687 ) 1,607    233.9%
Total other (income) expenses, net
   $ (1,070 ) $ 297    $ 1,367    460.3%

~~Interest income.~~ The favorable change in interest income from fiscal 2010 to fiscal 2011 was due to investing our excess cash balances in interest-bearing accounts with banks in fiscal 2011. In fiscal 2009, we adopted a more conservative investment strategy and maintained this strategy throughout fiscal 2010 and 2011.

~~Interest expense.~~ Interest expense consists of costs associated with our credit facility, the amortization of deferred financing fees, loans on corporate-owned life insurance policies, and capital leases. Interest expense increased $0.3 million in fiscal 2011 compared to fiscal 2010. We executed the credit facility on May 5, 2009. Prior to that date, we did not have an active credit facility in place since January 20, 2009.

~~Other (income) expenses, net.~~ In fiscal 2011, the $2.3 million in other income primarily included a gain of $2.1 million recorded on the $2.2 million in proceeds received as a death benefit from certain corporate-owned life insurance policies. In fiscal 2010, the $0.7 million in other income primarily included $0.8 million in gains incurred related to corporate-owned life insurance policies, which are held to satisfy our obligations under the SERP and other employee benefit plans.

~~Income Taxes~~

~~The following table compares our income tax benefit and effective tax rates for the fiscal years ended March 31, 2011 and 2010:~~

   Year ended March 31, Favorable
(unfavorable)
(Dollars in thousands)    2011    2010 $ %
Income tax expense (benefit)
   $ 2,420       $ (7,547 ) $ (9,967 )
Effective tax rate
   (11.8)%       49.7%

28

We recorded an effective tax rate from continuing operations of (11.8)% in fiscal 2011 compared with an effective tax rate expense of 49.7% in fiscal 2010. For the year ended March 31, 2011, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations and recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance. In addition, an increase in the valuation allowance was recorded due to the correction of an error, as more fully described in Note 2 to the Consolidated Financial Statements title,~~Summary of Significant Accounting Policies~~. Other items effecting the rate include non-taxable life insurance proceeds, a decrease in unrecognized tax benefits attributable to the expiration of statute of limitations, and other U.S. permanent book to tax differences. For the year ended March 31, 2010, the effective tax rate was different than the statutory rate due primarily to the intra-period tax allocation rules associated with the discontinued operations. Other items effecting the rate include non-taxable life insurance proceeds and other U.S. permanent book to tax differences. The rate is also negatively impacted as a result of an inter-company loan settlement which resulted in a net zero impact when viewed with discontinued operations, but an unfavorable impact in continuing operations.

~~Discontinued Operations~~

On May 28, 2011, Agilysys entered into a definitive agreement to sell the TSG business for an aggregate purchase price of $64.0 million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the purchase agreement, we entered into a transition services agreement with OnX, under which we provided certain transitional administrative and supportive services to OnX through January 31, 2012. On July 28, 2011, our shareholders approved the sale and the transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG, along with the gain on sale, have been reported as a component of discontinued operations in our Consolidated Statements of Operations for the periods presented. In addition, the assets and liabilities of the TSG business are classified as discontinued operations in our Consolidated Balance Sheets for the periods presented.

Upon the close of the transaction, the aggregate purchase price of $64.0 million was reduced by the payment of agreed-upon fees of $3.3 million for severance costs, $2.4 million for transaction fees, $1.3 million for third-party services in support of the transition and $1.2 million for a working capital adjustment resulting in net proceeds received by us of $55.8 million. Additional information regarding the discontinued operations is provided in Note 3 to the Consolidated Financial Statements titled,~~Discontinued Operations~~.

~~Restructuring and Related Charges~~

We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable. In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in the acceleration of depreciation and amortization of certain assets.

~~Fiscal 2012 Restructuring Activity~~

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon, Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of TSG. In addition, we also announced in the first quarter of fiscal 2012 that our former President and Chief Executive Officer was stepping down. These restructuring actions were mostly completed by March 31, 2012 and have impacted or will impact approximately 130 employees. We recorded $11.0 million in restructuring charges during fiscal 2012, primarily comprised of severance and related benefits, with $2.0 million, $0.6 million, and $8.4 million related to HSG, RSG and Corporate/Other, respectively. Included in the $8.4 million restructuring charge for Corporate/Other is a $2.1 million one-time lease termination fee for the Solon, Ohio facility. As of March 31, 2012, we had approximately $5.8 million accrued for fiscal 2012 restructuring activity. We expect to incur approximately $0.6 million in additional restructuring charges for severance and related benefits, and facilities related to these restructuring actions during the first half of fiscal 2013. In addition, we incurred accelerated depreciation of $4.4 million of property and equipment that was due to the relocation of our previous corporate services in Solon, Ohio to Alpharetta, Georgia, and

29

closing our facilities in Emeryville, California and Frederick, Maryland in the fourth quarter of fiscal 2012. As a result of taking these restructuring actions, we expect to realize between $14.0 million and $16.0 million in cost savings, of which approximately half has been recognized in the fiscal 2012 run rate. The remaining savings are expected to be primarily realized during fiscal 2013.

~~Fiscal 2009 Restructuring Activity~~

During fiscal 2009, we took steps to realign our cost and management structure. Since 2009, we have incurred charges totaling $19.0 million related to restructuring actions taken in fiscal 2009 and previously disclosed, which includes $0.5 million, $0.4 million and $0.8 million in fiscal years 2012, 2011 and 2010, respectively, which related to Corporate/Other. As of March 31, 2012, we had approximately $0.5 million recorded for fiscal 2009 restructuring activity. We expect to incur minimal additional restructuring charges between fiscal 2013 and ~~fiscal 2014 for ongoing facility obligations.~~

~~Liquidity and Capital Resources~~

~~Overview~~

Our operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures, and payments of principal and interest on indebtedness outstanding, which primarily consists of lease and rental obligations at March 31, 2012. We believe that cash flow from operating activities, cash on hand of $97.6 million as of March 31, 2012 and access to capital markets will provide adequate funds to meet our short-and long-term liquidity requirements. Additional information regarding our financing arrangements is provided in Note 7 to Consolidated Financial Statements titled,~~Financing Arrangements~~.

~~As of March 31, 2012 and 2011, our total debt was approximately $1.0 million and $1.9 million, respectively, comprised of capital lease obligations in both periods.~~

~~At March 31, 2012, 100% of our cash and cash equivalents were deposited in bank accounts. Therefore, we believe that credit risk is limited with respect to our cash and cash equivalents balances.~~

~~Revolving Credit Facility~~

We executed a Loan and Security Agreement dated May 5, 2009, the Credit Facility, with Bank of America, N.A., as agent for the lenders. Our obligations under the Credit Facility were secured by our assets (as defined in the Credit Facility). The Credit Facility provided $50 million of credit for borrowings and letters of credit and would mature May 5, 2012. The Credit Facility established a borrowing base for availability of loans predicated on the level of our accounts receivable meeting banking industry criteria. The aggregate unpaid principal amount of all borrowings, to the extent not previously repaid, was repayable at maturity. Borrowings also were repayable at such other earlier times as may have been required under or permitted by the terms of the Credit Facility. LIBOR loans bear interest at LIBOR for the applicable interest period plus an applicable margin ranging from 3.0% to 3.5%. Base rate loans (as defined in the Credit Facility) bear interest at the Base Rate (as defined in the Credit Facility) plus an applicable margin ranging from 2.0% to 2.5%. Interest was payable on the first of each month in arrears. There were no premiums or penalties for prepayment of borrowings under the Credit Facility.

The Credit Facility contained normal mandatory repayment provisions, representations, and warranties and covenants for a secured credit facility of this type. The Credit Facility also contained customary events of default upon the occurrence of which, among other remedies, the Lenders may terminate their commitments and accelerate the maturity of indebtedness and other obligations under the Credit Facility.

~~The Credit Facility also contained a loan covenant that restricts total capital expenditures from exceeding $10.0 million in any fiscal year. During~~ the third quarter and year-end of fiscal ~~2010, management determined that in the fourth quarter, we would exceed the $10.0 million covenant limit~~year 2012. Fees for fiscal 2010 due to capitalized labor related to the development of our proprietary property management system software, Guest 360™, as well as the acceleration of the time line related to the internal implementation of the Oracle ERP system. On January 20, 2010, we obtained a waiver from the Lender increasing the covenant restriction from $10.0 million to $15.0 million for fiscal 2010. The loan covenant restricting total capital expenditures reverted back to the $10.0 million limit for the fiscal 2011services rendered by E&Y and ~~for the remaining fiscal years under the Credit Facility’s term.~~

~~On July 29, 2011, we terminated the Credit Facility in conjunction with the sale of TSG.~~

30

~~Cash Flow~~

   Year ended March 31,
(In thousands)    2012 2011 2010
Net cash provided by (used in) continuing operations:

Operating activities
   $ 5,301    $ (8,914 ) $ (1.979 )
Investing activities
   60,339    (4,796 ) 2,373
Financing activities
   (15,413 ) (608 ) (9,631 )
Effect of foreign currency fluctuations on cash
   5    403    414
Cash flows provided by (used in) continuing operations
   50,232    (13,915 ) (8,823 )
Net operating and investing cash flows (used in) provided by discontinued operations
   (26,999 ) 22,734    37,907
Net increase in cash and cash equivalents
   $ 23,233    $ 8,819    $ 29,084

~~Cash flow provided by (used in) operating activities from continuing operations.~~ The $5.3 million in cash provided by operating activities in fiscal 2012 was comprised of $34.2 million in losses from continuing operations, offset by $32.8 million in non-cash adjustments to the net loss from continuing operations, and a $6.7 million benefit from changes in operating assets and liabilities. Significant non-cash adjustments to the losses from continuing operations were $9.7 million in asset impairments and related charges, $10.5 million in depreciation and amortization expenses, $10.0 million in restructuring and related charges, net of payments and $2.9 million in share-based compensation expense. Significant changes in operating assets and liabilities primarily consisted of a $6.0 million increase in accounts payable, a $4.4 million increase in deferred revenue, a $4.8 million increase in inventories and a $1.5 million increase in income taxes payable. Included in the changes to operating assets and liabilities was the payment of $5.0 million for employee related benefit plans. The improvement driven by deferred revenue is the result of increased sales in ongoing maintenance, support and subscription revenue, mainly within the HSG operating segment. The benefit from taxes payable (receivable) was primarily the result of a $1.0 million income tax refund received during fiscal 2012.

The $8.9 million in cash used in operating activities in fiscal 2011 was comprised of $23.0 million in losses from continuing operations and $2.1 million of changes to operating assets and liabilities, partially offset by $16.2 million in non-cash adjustment to the loss from continuing operations. Significant non-cash adjustments to the loss from continuing operations were $11.2 million in depreciation and amortization, $4.4 million in deferred income taxes and $2.8 million in share-based compensation, partially offset by $2.1 million gain on redemption of corporate-owned life insurance policies. Significant changes in operating assets and liabilities consisted of a $20.5 million decrease in accounts payable and a $2.5 million decrease in accrued liabilities. This is offset by a $10.3 million decrease in accounts receivable, a $7.6 million increase in income taxes payable (receivable) and a $2.9 increase in deferred revenue. The movement in accounts receivable and in accounts payable is primarily is a result of settling intercompany balances between continuing operations and discontinued operations. The $7.6 million benefit in income taxes was primarily a result of income tax refunds received during fiscal 2011.

The $2.0 million in cash used in operating activities in fiscal 2010 was comprised of $7.6 million loss from continuing operations and $1.4 million in changes to operating assets and liabilities, and $4.2 million in non-cash adjustments to loss from continuing operations. Significant non-cash adjustments to loss from continuing operations were $9.9 million in depreciation and amortization expenses, $3.4 million in deferred tax expense and $1.9 million in share-based compensation expense, partially offset by $2.5 million in gains on the redemption of the investment in The Reserve Fund’s Primary Fund and $0.8 million in gains on corporate-owned life insurance policies. Significant changes in operating assets and liabilities primarily consisted of a $5.9 million decrease in accounts receivable and a $3.3 decrease in inventories, a $9.8 million increase in accounts payable and a $4.8 increase in deferred revenue, offset by a $17.3 million decrease in accrued liabilities and a decrease $9.0 million change in income taxes payable (receivable). The decrease in accounts receivable was driven by a significant improvement in days’ sales outstanding from 80 days at March 31, 2009 to 66 days at March 31, 2010. The increase in accounts payable reflected the termination and payment of our inventory financing agreement that was previously used to finance inventory purchases in May 2009 and that was recorded as a financing activity. The reduction in accrued liabilities was mainly a result of payments made in fiscal 2010 against amounts accrued with respect to restructuring actions taken in fiscal 2009, including $12.0 million in cash paid to settle employee benefit plan obligations.

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~~Cash flow provided by (used in) investing activities from continuing operations.~~ In fiscal 2012, the $60.3 million in cash provided by investing activities was primarily comprised of $55.8 million in net proceeds received from the sale of TSG and $9.2 million in proceeds from our investment in marketable securities, which were used to settle employee benefit obligations, partially offset by $4.9 million used for the purchase of software, property and equipment. The $4.9 million in capital expenditures was primarily capitalized product development expense and the build out of corporate facilities space in Alpharetta, Georgia.

In fiscal 2011, the $4.8 million in cash used in investing activities was primarily comprised of $16.0 million in proceeds received from the redemption of certain corporate-owned life insurance policies, which were offset by $1.1 million of additional investments in corporate-owned life insurance policies, $13.7 million of additional investments in marketable securities, and $6.1 million for the purchase of software, property and equipment. The proceeds from the redemption of certain corporate-owned life insurance policies was used to settle employee benefit plan obligations during fiscal 2011 and the remainder was invested in marketable securities. The $6.1 million in capital expenditures in fiscal 2011 primarily consisted of amounts capitalized with respect to our development of enhancements related to the property management software, Guest360™ and additional costs related to the implementation of the Oracle ERP software.

The $2.4 million in cash provided by investing activities in fiscal 2010 represented $4.8 million in proceeds received as a distribution of our investment in The Reserve Fund’s Primary Fund and $12.5 million in proceeds from borrowings against corporate-owned life insurance policies, partially offset by $1.7 million in additional investments in corporate-owned life insurance policies and $13.2 million for the purchase of software, property and equipment. We used the proceeds from amounts borrowed against corporate-owned life insurance policies to settle employee benefit plan obligations during fiscal 2010. The $13.3 million in capital expenditures in fiscal 2010 primarily consisted of amounts capitalized with respect to our development of the property management software, Guest360™, and implementation of the Oracle ERP software.

~~Cash flow used in financing activities from continuing operations.~~ The $15.4 million used in financing activities was comprised of $13.2 million for repurchases of our common shares, $1.4 million for the repurchases of our common shares to satisfy employee tax withholding on the vesting or exercise of stock compensation awards and $1.0 million for payments on capital lease obligations.

The $0.6 million in cash used in financing activities in fiscal 2011 represented $0.4 million in principal payments on capital lease obligations and $0.2 million related to shares withheld for income taxes on the vesting or exercise of stock compensation awards.

The $9.6 million in cash used for financing activities in fiscal 2010 were primarily comprised of $6.6 million in payments on our previous inventory financing agreement, $1.6 million paid for debt financing costs related to our current Credit Facility, and $1.4 million in dividends paid.

~~Investments~~

~~The Reserve Fund’s Primary Fund~~

At September 30, 2008, Agilysys had $36.2 million invested in The Reserve Fund’s Primary Fund. Due to liquidity issues associated with the bankruptcy of Lehman Brothers, Inc., the Primary Fund temporarily ceased honoring redemption requests, but the Board of Trustees of the Primary Fund subsequently voted to liquidate the assets of the fund and approved a distribution of cash to the investors. To date we have received $35.8 million of the investment, recorded $3.0 million in impairment of the investment and $2.6 million in gains related to the investment for funds received after the impairment charge. In fiscal 2010, the remaining uncollected balance totaling $0.4 million was classified within Other (income) expense, net in the Consolidated Statements of Operations.

~~Investments in Corporate-Owned Life Insurance Policies and Marketable Securities~~

Agilysys invests in corporate-owned life insurance policies and marketable securities primarily to satisfy future obligations of certain employee benefit plans. Certain of these corporate-owned life insurance policies were held in a Rabbi Trust and were classified within “Other non-current assets” in the Consolidated Balance Sheets. Our investment in corporate-owned life insurance policies was recorded at their cash surrender value, which approximates fair value, at the balance sheet date. In additions, certain of these corporate-owned life insurance policies are endorsement split-dollar life insurance arrangements. We entered into a separate agreement with each of the former executives covered by these arrangements whereby we split a portion of the policy benefits with the former executive’s designated beneficiary.

Agilysys’ investment in marketable equity securities are held within the Rabbi Trust and classified as available for sale. However, these investments are restricted by the terms of the Rabbi Trust agreement and may only be used to satisfy the benefit obligations of our nonqualified benefit plans or to satisfy the obligations of our general creditors under an insolvency. Additional information regarding the investments in corporate-owned life insurance policies and marketable securities is provided in Note 11,~~Employee Benefit Plans,~~~~in our Consolidated Financial Statements.~~

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~~Off-Balance Sheet Arrangements~~

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources.

~~Contractual Obligations~~

~~The following table provides aggregate information regarding our contractual obligations as of March 31, 2012.~~

(In thousands)    Total    2013    2014-
2015    2016-
2017    Thereafter
Operating leases (1)
   $ 11,821       $ 3,265       $ 4,354       $ 2,200       $ 2,002
Restructuring liabilities
   6,299       5,447       852       —       —
SERP liability (2)
   3,323       3,323       —       —       —
Capital leases
   1,073       709       364       —       —
Asset retirement obligation
   680       180       —       500       —
Total contractual obligations
   $ 23,196       $ 12,924       $ 5,570       $ 2,700       $ 2,002

~~(1)~~

Operating lease obligations are presented net of contractually binding sub-lease arrangements. Additional information regarding our operating lease obligations is contained in Note 12 to Consolidated Financial Statements titled,~~Commitments and Contingencies~~.

~~(2)~~

~~The SERP liability is fully funded by a Rabbi Trust. Additional information regarding SERP is contained in Note 11 to Consolidated Financial Statements titled,~~~~Employee Benefit Plans~~.

At March 31, 2012, we had a $2.0 million liability reserve for unrecognized income tax positions which is not reflected in the table above. The timing of potential cash outflows related to the unrecognized tax positions is not reasonably determinable and therefore, is not scheduled. Substantially all of this reserve is included in Other non-current liabilities and Deferred income taxes — non-current. Additional information regarding unrecognized tax positions is contained in Note 10 to Consolidated Financial Statements titled,~~Income Taxes~~.

We believe that cash on hand, funds from continuing operations, and access to capital markets will provide adequate funds to finance capital spending and working capital needs and to service our obligations and other commitments arising during the foreseeable future.

~~Critical Accounting Policies, Estimates & Assumptions~~

MD&A is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities. We regularly evaluate our estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, restructuring, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our most significant accounting policies relate to the sale, purchase, and promotion of our products and services. The policies discussed below are considered by management to be critical to an understanding of our Consolidated Financial Statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. No significant adjustments to our accounting policies were made in fiscal 2012. Specific risks for these critical accounting policies are described in the following paragraphs.

~~For all of these policies, management cautions that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.~~

~~Revenue recognition.~~ We derive revenue from the sale of products (i.e., server, storage, and point of sale hardware, and software), support, maintenance and subscription services and professional services. Revenue is recorded in the period in which the goods are delivered or services are rendered and when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price to the customer is fixed or determinable, and collectibility is

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reasonably assured. We reduce revenue for estimated discounts, sales incentives, estimated customer returns, and other allowances. Discounts are offered based on the volume of products and services purchased by customers. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.

We frequently enter into multiple-element arrangements with customers including hardware, software, professional consulting services and maintenance support services. For arrangements involving multiple deliverables, when deliverables include software and non-software products and services, we evaluate and separate each deliverable to determine whether it represents a separate unit of accounting based on the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in our control.

For arrangements entered into or materially modified after April 1, 2011, consideration is allocated to each unit of accounting based on the unit’s relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when we sell the deliverable separately and is the price actually charged by us for that deliverable. VSOE is established for our software maintenance services and we use TPE or BESP to establish selling prices for our non-software related services. BESP is primarily used for elements that are not consistently priced within a narrow range or TPE is not available. We determine BESP for a deliverable by considering multiple factors including product class, geography, average discount, and management’s historical pricing practices. Amounts allocated to the delivered hardware and software elements are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained. Delivery and acceptance generally occur in the same reporting period. For arrangements entered into prior to April 1, 2011, we have not applied BESP. In such arrangements, if we have the requisite evidence of selling price for the undelivered elements but not for the delivered elements, we apply the residual method to allocate arrangement consideration.

In situations where our solutions contain software that is more than incidental, revenue related to the software and software-related elements is recognized in accordance with authoritative guidance on software revenue recognition. For the software and software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is determined by VSOE. If we cannot objectively determine the fair value of any undelivered element included in such multiple-element arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. When the fair value of a delivered element has not been established, but fair value exists for the undelivered elements, we use the residual method to recognize revenue. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered elements and is recognized as revenue.

Revenue recognition for complex contractual arrangements, especially those with multiple elements, requires a significant level of judgment and is based upon a review of specific contracts, past experience, the selling price of undelivered elements when sold separately, creditworthiness of customers, international laws and other factors. Changes in judgments about these factors could impact the timing and amount of revenue recognized between periods.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer’s final acceptance of the arrangement have been fulfilled. A majority of our hardware sales involves shipment directly from its suppliers to the end-user customers. In these transactions, we are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and bears credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.

We offer proprietary software as well as remarketed software for sale to our customers. We offer our customers the right to license the software under a variety of models. Our customers can license our software under a perpetual model or a subscription model. For subscription arrangements, we allow customers the right to use software, receive unspecified products as well as unspecified upgrades and enhancements and entitle the customer to receive hosting services for a specified term. The subscription revenue is generally recognized ratably over the term of the arrangement, typically three to five years. Revenue from subscription service arrangements is included in Support, maintenance and subscription services in the Consolidated Statements of Operations. A

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majority of our software sales do not require significant production, modification, or customization at the time of shipment (physically or electronically) to the customer. Substantially all of our software license arrangements do not include acceptance provisions. As such, revenue from both proprietary and remarketed software sales is typically recognized when the software has been shipped. For software delivered electronically, delivery is considered to have occurred when the customer either takes possession of the software via downloading or has been provided with the requisite codes that allow for immediate access to the software based on the U.S. Eastern time zone time stamp.

We also offer proprietary and third-party services to our customers. Proprietary services generally include: consulting, installation, integration and training. Many of our software arrangements include consulting services sold separately under consulting engagement contracts. When the arrangements qualify as service transactions, consulting revenue from these arrangements are accounted for separately from the software revenue. The significant factors considered in determining whether the revenue should be accounted for separately include the nature of the services (i.e., consideration of whether the services are essential to the functionality of the software), degree of risk, availability of services from other vendors, timing of payments, and the impact of milestones or other customer acceptance criteria on revenue realization. If there is significant uncertainty about the project completion or receipt of payment for consulting services, the revenue is deferred until the uncertainty is resolved.

For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, we estimate proportional performance using the hours incurred as a percentage of total estimated hours to complete the project consistent with the percentage-of-completion method of accounting. Accordingly, revenue for these contracts is recognized based on the proportion of the work performed on the contract. If there is no sufficient basis to measure progress toward completion, the revenue is recognized when final customer acceptance is received. Adjustments to contract price and estimated service hours are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of collections on uncompleted contracts in excess of related revenue is shown as a current liability.

If an arrangement does not qualify for separate accounting of the software and consulting services, then the software revenue is recognized together with the consulting services using the percentage-of-completion or completed contract method of accounting. Contract accounting is applied to arrangements that include: milestones or customer-specific acceptance criteria that may affect the collection of revenue, significant modification or customization of the software, or provisions that tie the payment for the software to the performance of consulting services.

We also offer proprietary and third-party support to our customers. Support generally includes: support and maintenance of software and hardware products and subscription services. Revenue relating to proprietary support services is recognized evenly over the coverage period of the underlying agreement within support, maintenance and subscription revenue. In instances where we offer third-party support contracts to our customer, the supplier is the primary obligor in the transaction although we bear credit risk in the event of nonpayment by the customer. Since we are acting as an agent or broker with respect to such sales transactions, we report revenue at the time of the sale, only in the amount of the “commission” (equal to the selling price less the cost of sale) received rather than reporting revenue in the full amount of the selling price with separate reporting of the cost of sale.

~~Allowance for Doubtful Accounts.~~ We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk, as well as historical trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

~~Inventories.~~ Inventories are stated at the lower of cost or market, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to lower of cost or market, if necessary, are based upon contractual provisions governing turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

~~Income Taxes.~~ Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized

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is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recorded a valuation allowance of $78.7 million as of March 31, 2012 and $33.8 million as of March 31, 2011, related to substantially all of our deferred income tax assets in jurisdictions where there is uncertainty as to the ultimate realization of a benefit from those assets. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the tax valuation allowance would decrease tax expense in the period such determination was made.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 10 to Consolidated Financial Statements titled,~~Income Taxes~~.

~~Goodwill and Long-Lived Assets.~~ Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is measured for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. We conduct our annual goodwill impairment test on February 1^st ~~of each fiscal year. The fair values of the reporting units are estimated using a combination of an income approach and a market approach, weighted 80% and 20%, respectively.~~

The income approach is based on projected future debt-free cash flow that is discounted to present value using factors that consider the timing and risk of the future cash flows. This approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow performance. The income approach is based on a reporting unit’s projection of operating results and cash flows that is discounted using a weighted-average cost of capital. The projection is based upon our best estimate of projected economic and market conditions over the related period including growth rates, estimate of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures, and changes in future working capital requirements based on management projections.

The market approach is based on direct transactional evidence, or where such transactional evidence does not exist, the observed earnings and revenue trading multiples, or “equity value,” or “enterprise value” of comparable “peer group” companies is used. The reporting units are assessed based on qualitative and quantitative comparisons against the peer group, including size, expected growth, profitability, and product diversification. This approach provides that if the respective reporting unit is comparable to the peer group, then a similar multiple of equity value is a reasonable indication of the value of the reporting unit.

We believe this methodology provides reasonable estimates of a reporting unit’s fair value and that this estimate is consistent with how a market participant would view the reporting unit’s fair value. Fair value computed by this methodology is arrived at using a number of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows, comparable marketplace data within a consistent industry grouping, and the cost of capital. We weigh the income approach more heavily than the market approach in its analysis because management believes that there is not a strong comparability with the peer group companies, and therefore, the income approach provides a better measure of fair value. There are inherent uncertainties, however, related to these factors and to management’s judgment in applying them to this analysis. Nonetheless, we believe that this method provides a reasonable approach to estimate the fair value of its reporting units. Our goodwill and long-lived assets are described further in Note 6 to Consolidated Financial Statements titled,~~Goodwill and Intangible Assets~~.

~~Restructuring Charges.~~ We recognize restructuring charges when a plan that materially changes the scope of our business, or the manner in which that business is conducted, is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable. Our restructuring reserves principally include estimates related to employee separation costs and the consolidation and impairment of facilities that will no longer be used in continuing operations. Actual amounts could be different from those estimated. Facility reserves are calculated using a present value of future minimum lease payments, offset by an estimate for future sublease income provided by external brokers. Present value is calculated using a credit-adjusted risk-free rate with a maturity equivalent to the lease term.

~~Share-Based Compensation.~~ We have a stock incentive plan under which we may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, time-vested restricted shares, restricted share units, performance-vested

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~~restricted shares, and performance shares. Shares issued pursuant to awards under this plan may be made out of treasury or authorized but unissued shares.~~

We record compensation expense related to stock options, stock-settled stock appreciation rights, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and stock-settled appreciation right awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares. Additional information regarding the assumptions used to value share-based compensation awards is provided in Note 14 to the accompanying Consolidated Financial Statements titled,~~Share-Based Compensation~~.

~~Adopted and Recently Issued Accounting Pronouncements.~~ In May 2011, the FASB issued authoritative guidance to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio and application of premiums and discounts in a fair value measurement. The amendments also require additional disclosures concerning the valuation processes used, sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only. We adopted the provisions of this guidance on March 31, 2012, as required. The adoption of this guidance did not have any impact on our financial position, results of operations, cash flows, or related disclosures.

In October 2009, the FASB issued authoritative guidance on revenue arrangements with multiple deliverable elements (e.g., hardware with services), which was effective for us on April 1, 2011 for new revenue arrangements or material modifications to existing arrangements. The guidance amends the criteria for separating consideration in arrangements with multiple deliverable elements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable based on: 1) vendor-specific objective evidence; 2) third-party evidence; or 3) best estimated selling price. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands the required disclosures related to revenue arrangements with multiple deliverable elements. Entities may elect to adopt the guidance through either prospective application for revenue arrangements entered into, or materially modified, after the effective date, or through retrospective application to all revenue arrangements for all periods presented. We adopted the provisions of this guidance on April 1, 2011, as required. The adoption of this guidance did not have a material impact on our financial position, results of operations, cash flows, or related disclosures.

In October 2009, the FASB issued authoritative guidance on revenue arrangements that include software elements, which was effective for us on April 1, 2011. The guidance changes revenue recognition for tangible products containing software elements and non-software elements as follows: 1) the tangible product element is always excluded from the software revenue recognition guidance even when sold together with the software element; 2) the software element of the tangible product element is also excluded from the software revenue guidance when the software and non-software elements function together to deliver the product’s essential functionality; and 3) undelivered elements in a revenue arrangement related to the non-software element are also excluded from the software revenue recognition guidance. Entities must select the same transition method and same period for the adoption of both this guidance and the guidance on revenue arrangements with multiple deliverable elements. We adopted the provisions of this guidance on April 1, 2011, as required. The adoption of this guidance did not have a material impact on our financial position, results of operations, cash flows, or related disclosures.

In December 2011, the FASB, issued authoritative guidance which modifies the disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. This guidance is effective for reporting periods beginning on or after January 1, 2013, and is not expected to have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

In September 2011, the FASB issued authoritative guidance which modifies the process of testing goodwill for impairment. The update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would not be required to calculate the fair value of a reporting unit unless the entity determines it is more likely than not, based on a qualitative assessment, the fair value of goodwill is less than its carrying amount. The guidance also includes a number of events and circumstances to consider in conducting the qualitative assessment. This guidance is effective for

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~~fiscal years beginning on or after December 15, 2011, and is not expected to have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.~~

In June 2011, the FASB issued authoritative guidance which modifies the requirements for presenting net income and other comprehensive income and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment requires presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In December 2011, the FASB issued amendments to the guidance to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income in all periods presented. This guidance is effectivePwC for fiscal years 2013 and ~~interim periods beginning on or after December 15, 2011. We do not expect this guidance to have a significant impact on our consolidated financial position results~~2012 were:

“Audit Fees” consist of ~~operations, cash flows or related disclosures.~~

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on its financial position, results of operations, cash flows, or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

~~Item 7A.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

~~We have assets, liabilities, and cash flows in foreign currencies creating foreign exchange risk. We sell products and~~fees billed for professional services internationally and enter into transactions denominated in foreign currencies. As a result, we are subject to the variability that arises from exchange rate movements. For the fiscal years 2012, 2011 and 2010, revenue from international operations was 5%, 6% and 5%, respectively of total revenue. The effects of foreign currency on operating results did not have a material impact on our results of operationsprovided for the ~~2012, 2011, or 2010 fiscal years. At March 31, 2012, a hypothetical 10% weakening~~annual audit of ~~the U.S. dollar would not materially affect~~ our financial ~~statements.~~

~~We believe that inflation has had a nominal effect on our results of operations in fiscal years 2012, 2011, and 2010 and do not expect inflation to be a significant factor in fiscal 2013.~~

Until July 2011, we maintained a $50.0 million Loan and Security Agreement with Bank of America, N.A., as lender, dated May 5, 2009 (“Credit Facility”). We terminated the Credit Facility in July 2011 in conjunction with the sale of TSG. As a result of the proceeds that we received from the sale of TSG, we determined that we no longer required the liquidity provided by the Credit Facility. As a result of the termination of the Credit Facility, we expensed approximately $0.4 million in unamortized deferred financing fees that related to the Credit Facility during the second quarter of fiscal 2012.

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~~Item 8. Financial~~

~~Statements and Supplementary Data.~~

~~Agilysys, Inc. and Subsidiaries~~

~~ANNUAL REPORT ON FORM 10-K~~

~~Year Ended March 31, 2012~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~


	~~Page~~
~~Report of Independent Registered Public Accounting Firm — PricewaterhouseCoopers LLP~~		40
~~Report of Independent Registered Public Accounting Firm — Ernst & Young LLP~~		41
~~Consolidated Balance Sheets as of March 31, 2012 and 2011~~		42
~~Consolidated Statements of Operations for the years ended March 31, 2012, 2011, and 2010~~		43
~~Consolidated Statements of Cash Flows for the years ended March 31, 2012, 2011 and 2010~~		44
~~Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2012, 2011 and 2010~~		45
~~Notes to Consolidated Financial Statements~~		46
~~Schedule II — Valuation and Qualifying Accounts for the years ended March 31, 2012, 2011 and 2010~~		77

39

~~Report of Independent Registered Public Accounting Firm~~

~~The Board of Directors and Shareholders~~

~~of Agilysys, Inc. and Subsidiaries:~~

~~In our opinion, the consolidated balance sheet and the related consolidated~~ statements, of operations, cash flows and shareholders’ equity listed in the accompanying index present fairly, in all material respects, the financial position of Agilysys, Inc. and its subsidiaries at March 31, 2012, and the results of their operations and their cash flows for the year ended March 31, 2012 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index for the year ended March 31, 2012 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2012, based on criteria established in~~Internal Control — Integrated Framework~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, 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. Ourannual 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~~

~~Atlanta, Georgia~~

~~June 12, 2012~~

40

~~Report of Ernst & Young LLP, Independent Registered Public Accounting Firm~~

~~The Board of Directors and Shareholders~~

~~of Agilysys, Inc. and Subsidiaries~~

We have audited the accompanying consolidated balance sheet of Agilysys, Inc. and subsidiaries as of March 31, 2011, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the two years in the period ended March 31, 2011. Our audits also included the accompanying financial statement schedule listed in the index at Item 15(a)(2) as of March 31, 2011 and 2010. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Agilysys, Inc. and subsidiaries at March 31, 2011, and the consolidated results of their operations and their cash flows for each of the two years in the period ended March 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule as of March 31, 2011 and 2010, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

~~/s/ ERNST & YOUNG LLP~~

~~Cleveland, Ohio~~

~~June 14, 2011,~~

~~Except for the effects of reclassifications and discontinued operations~~

~~described in Notes 2 and 3, as to which the date is~~

~~June 12, 2012~~

41

~~Agilysys, Inc. and Subsidiaries~~

~~Consolidated Balance Sheets~~

   As of March 31,
(In thousands, except share and per share data)    2012 2011
ASSETS

Current assets

Cash and cash equivalents
   $ 97,587    $ 74,354
Accounts receivable, net of allowance of $632 and $661, respectively
   32,531    31,926
Inventories, net of allowance of $1,066 and $1,851, respectively
   15,710    10,921
Prepaid expenses
   2,975    2,829
Other current assets
   5,492    7,747
Assets of discontinued operations — current
   —    102,015
Total current assets
   154,295    229,792
Property and equipment, net
   16,504    24,855
Goodwill
   15,198    15,211
Intangible assets, net of amortization of $21,560 and $20,068, respectively
   14,135    22,535
Other non-current assets
   4,007    11,709
Assets of discontinued operations — non-current
   —    8,296
Total assets
   $ 204,139    $ 312,398
LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accounts payable
   $ 24,938    $ 17,852
Deferred revenue
   28,441    23,995
Accrued liabilities
   23,983    14,936
Capital lease obligations — current
   647    999
Liabilities of discontinued operations — current
   —    89,005
Total current liabilities
   78,009    146,787
Deferred income taxes — non-current, net
   5,135    3,894
Capital lease obligations — non-current
   347    907
Other non-current liabilities
   6,210    11,972
Liabilities of discontinued operations — non-current
   —    734
Commitments and contingencies (see Note 12)

Shareholders’ equity:

Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 21,875,850 and 23,022,398 shares outstanding at March 31, 2012 and 2011, respectively
   9,482    9,482
Treasury shares (9,730,981 and 8,584,433 at March 31, 2012 and 2011, respectively)
   (2,919 ) (2,575 )
Capital in excess of stated value
   (16,032 ) (5,421 )
Retained earnings
   123,876    146,659
Accumulated other comprehensive income (loss)
   31    (41 )
Total shareholders’ equity
   114,438    148,104
Total liabilities and shareholders’ equity
   $ 204,139    $ 312,398

~~See accompanying notes to consolidated financial statements.~~

42

~~Agilysys, Inc. and Subsidiaries~~

~~Consolidated Statements of Operations~~

   Year Ended March 31,
(In thousands, except per share data)    2012 2011 2010
Net revenue:

Products
   $ 105,141    $ 104,769    $ 103,501
Support, maintenance and subscription services
   73,171    70,729    63,218
Professional services
   30,577    27,183    26,787
Total net revenue
   208,889    202,681    193,506
Cost of goods sold:

Products, inclusive of developed technology amortization
   83,550    80,090    80,825
Support, maintenance and subscription services
   25,706    25,507    23,148
Professional services
   19,797    21,445    15,525
Total cost of goods sold
   129,053    127,042    119,498
Gross profit
   79,836    75,639    74,008
Operating expenses:

Product development
   30,309    27,531    28,241
Sales and marketing
   24,006    22,212    20,334
General and administrative
   32,889    37,121    31,116
Depreciation of fixed assets
   4,602    3,914    3,260
Amortization of intangibles
   3,686    5,122    4,878
Asset impairments and related charges
   9,681    959    236
Restructuring and related charges
   15,853    405    823
Operating loss
   (41,190 ) (21,625 ) (14,880 )
Other (income) expenses:

Interest income
   (103 ) (73 ) (29 )
Interest expense
   978    1,297    1,013
Other expenses (income), net
   181    (2,294 ) (687 )
Loss before income taxes
   (42,246 ) (20,555 ) (15,177 )
Income tax (benefit) expense
   (8,007 ) 2,420    (7,547 )
Loss from continuing operations
   (34,239 ) (22,975 ) (7,630 )
Income (loss) from discontinued operations, net of taxes
   11,456    (32,500 ) 11,177
Net (loss) income
   $ (22,783 ) $ (55,475 ) $ 3,547
(Loss) earnings per share — basic and diluted:

Loss from continuing operations
   $ (1.53 ) $ (1.01 ) $ (0.34 )
Income (loss) from discontinued operations
   0.51    (1.43 ) 0.49
Net (loss) income
   $ (1.02 ) $ (2.44 ) $ 0.15
Weighted average shares outstanding:

Basic and diluted
   22,432    22,785    22,627

~~See accompanying notes to consolidated financial statements.~~

43

~~Agilysys, Inc. and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~

   Year Ended March 31,
(In thousands)    2012 2011 2010
Operating activities

Net (loss) income
   $ (22,783 ) $ (55,475 ) $ 3,547
Income (loss) from discontinued operations
   11,456    (32,500 ) 11,177
Loss from continuing operations
   (34,239 ) (22,975 ) (7,630 )
Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities and related charges:

Restructuring and related charges
   15,853    405    823
Payments and settlements for restructuring charges
   (5,896 ) (1,610 ) (8,812 )
Asset impairments and related charges
   9,681    959    236
Depreciation
   4,602    3,914    3,260
Amortization
   5,910    7,343    6,619
Share based compensation
   2,896    2,812    1,947
Loss on sale of securities
   148    —    91
Deferred income taxes
   62    4,449    3,383
Change in cash surrender value of corporate-owned life insurance policies
   (371 ) 179    (802 )
Gain on redemption of investment in The Reserve Fund’s Primary Fund
   —    (147 ) (2,505 )
Gain on redemption of corporate-owned life insurance policies
   (46 ) (2,065 ) —
Excess tax benefit from exercise of stock options
   —    —    (9 )
Changes in operating assets and liabilities:

Accounts receivable
   (621 ) 10,256    5,925
Inventories
   (4,789 ) (859 ) 3,261
Accounts payable
   5,994    (20,477 ) 9,788
Deferred revenue
   4,418    2,865    4,796
Accrued liabilities
   (24 ) (2,499 ) (17,255 )
Income taxes payable (receivable)
   1,464    7,562    (9,021 )
Other changes, net
   259    974    3,926
Net cash provided by (used in) operating activities from continuing operations
   5,301    (8,914 ) (1,979 )
Net cash (used in) provided by operating activities from discontinued operations
   (26,999 ) 23,697    105,903
Net cash (used in) provided by operating activities
   (21,698 ) 14,783    103,924
Investing activities

Proceeds from the sale of TSG
   55,840    —    —
Proceeds from sale of marketable securities
   9,237    14    61
Proceeds from redemption of/borrowings against corporate-owned life insurance policies
   347    15,980    12,500
Capital expenditures
   (4,920 ) (6,077 ) (13,203 )
Additional investments in marketable securities
   (53 ) (13,731 ) (45 )
Additional investments in corporate-owned life insurance policies
   (112 ) (1,129 ) (1,712 )
Proceeds from The Reserve Fund’s Primary Fund
   —    147    4,772
Net cash provided by (used in) investing activities from continuing operations
   60,339    (4,796 ) 2,373
Net cash used in investing activities from discontinued operations
   —    (914 ) (103 )
Net cash provided by (used in) investing activities
   60,339    (5,710 ) 2,270
Financing activities

Purchase of treasury stock
   (13,173 ) —    —
Exercise of employee stock options
   210    —    89
Repurchase of common shares to satisfy employee tax withholding
   (1,449 ) (238 ) —
Principal payment under long-term obligations
   (1,001 ) (370 ) (216 )
Floor plan financing agreement, net
   —    —    (6,575 )
Proceeds from borrowings under credit facility
   —    15,235    5,077
Principal payments under credit facility
   —    (15,235 ) (5,077 )
Debt financing costs
   —    —    (1,578 )
Excess tax benefit from exercise of stock options
   —    —    9
Dividends paid
   —    —    (1,360 )
Net cash used in financing activities from continuing operations
   (15,413 ) (608 ) (9,631 )
Net cash used in financing activities from discontinued operations
   —    (49 ) (67,893 )
Net cash used in financing activities
   (15,413 ) (657 ) (77,524 )
Effect of exchange rate changes on cash
   5    403    414
Cash flows provided by (used in) continuing operations
   50,232    (13,915 ) (8,823 )
Cash flows (used in) provided by discontinued operations
   (26,999 ) 22,734    37,907
Net increase cash and cash equivalents
   23,233    8,819    29,084
Cash and cash equivalents at beginning of year
   74,354    65,535    36,451
Cash and cash equivalents at end of year
   $ 97,587    $ 74,354    $ 65,535

~~See accompanying notes to consolidated financial statements.~~

44

~~Agilysys, Inc. and Subsidiaries~~

~~Consolidated Statements of Shareholders’ Equity~~

Common Shares
Capital in
excess of
stated
value

Retained
earnings

Accumulated
other
comprehensive
income (loss)
Total
Issued In Treasury
(In thousands, except per share data) Shares Stated value Shares Stated value
Balance at March 31, 2009
31,524    $ 9,457    (8,897 ) $ (2,669 ) $ (11,128 ) $ 199,947    $ (2,890 ) $ 192,717
Cash dividends ($0.06 per share)
—    —    —    —    —    (1,360 ) —    (1,360 )
Non-cash share based compensation expense
—    —    —    —    1,588    —    —    1,588
Restricted shares issued
70    21    197    59    758    —    —    838
Shares issued upon exercise of stock options
13    4    25    8    77    —    —    89
Tax deficit related to exercise of stock options
—    —    —    —    (65 ) —    —    (65 )
Comprehensive income:

Net income
—    —    —    —    —    3,547    —    3,547
Unrealized translation adjustment
—    —    —    —    —    —    1,320    1,320
Unrealized loss on securities
—    —    —    —    —    —    91    91
Net actuarial gains and prior service cost on curtailment of defined benefit pension plans, net of $104 in taxes
—    —    —    —    —    —    159    159
Total comprehensive income
5,117
Balance at March 31, 2010
31,607    $ 9,482    (8,675 ) $ (2,602 ) $ (8,770 ) $ 202,134    $ (1,320 ) $ 198,924
Non-cash share based compensation expense
—    —    —    —    2,553    —    —    2,553
Restricted shares issued
—    —    110    33    1,028    —    —    1,061
Shares issued upon exercise of stock options and SSARs
—    —    23    6    (6 ) —    —    —
Shares withheld for taxes upon exercise of stock options and SSARs or vesting of restricted shares
—    —    (42 ) (12 ) (226 ) —    —    (238 )
Comprehensive loss:

Net loss
—    —    —    —    —    (55,475 ) —    (55,475 )
Unrealized translation adjustment
—    —    —    —    —    —    565    565
Net actuarial gains and prior service cost on defined benefit pension plans, net of $467 in taxes
—    —    —    —    —    —    714    714
Total comprehensive loss
(54,196 )
Balance at March 31, 2011
31,607    $ 9,482    (8,584 ) $ (2,575 ) $ (5,421 ) $ 146,659    $ (41 ) $ 148,104
Purchase of treasury shares
—    —    (1,600 ) (481 ) (12,692 ) (13,173 )
Non-cash share based compensation expense
—    —    —    —    2,368    —    —    2,368
Restricted shares issued
—    —    130    39    1,050    —    —    1,089
Shares issued upon exercise of stock options and SSARs
—    —    595    179    31    —    —    210
Shares withheld for taxes upon exercise of stock options and SSARs or vesting of restricted shares
—    —    (272 ) (81 ) (1,368 ) —    —    (1,449 )
Comprehensive loss:

Net loss
—    —    —    —    —    (22,783 ) —    (22,783 )
Unrealized translation adjustment
—    —    —    —    —    —    76    76
Unrealized loss on securities
—    —    —    —    —    —    (4 ) (4 )
Total comprehensive loss
(22,711 )
Balance at March 31, 2012
31,607    $ 9,482    (9,731 ) $ (2,919 ) $ (16,032 ) $ 123,876    $ 31    $ 114,438

~~See accompanying notes to consolidated financial statements.~~

45

~~Agilysys, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(Table amounts in thousands, except per share data)~~

~~NATURE OF OPERATIONS~~

1.

~~NATURE OF OPERATIONS~~

We are a leading provider of innovative technology solutions for the hospitality and retail markets including property and lodging management, inventory and procurement, point-of-sale (POS), document management, mobile, wireless and other types of guest-engagement software. We also provide support, maintenance, resold hardware products and software hosting services. Our customers include retailers, casinos, resorts, cruise and other hospitality and retail customers, and a significant portion of our consolidated revenue is derived from contract support, maintenance agreements and professional services.

Our principal executive offices are located at 425 Walnut Street, Suite 1800, Cincinnati, Ohio, 45202; and our corporate services are located at 1000 Windward Concourse, Alpharetta, Georgia, 30005. We operate extensively throughout North America, with additional sales and support offices in the United Kingdom and Asia. Agilysys has two operating segments: Hospitality Solutions Group (HSG) and Retail Solutions Group (RSG).

~~Reference herein to any particular year or quarter refers to periods within the fiscal year ended March 31. For example, fiscal 2012 refers to the fiscal year ended March 31, 2012.~~

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

2.

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Principles of consolidation.~~ The consolidated financial statements include the accounts of Agilysys, Inc. and subsidiaries. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated. Unless otherwise indicated, amounts in Notes to Consolidated Financial Statements refer to continuing operations.

~~Use of estimates.~~ Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

~~Cash and cash equivalents.~~ We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty.

~~Allowance for doubtful accounts.~~ We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk we perform periodic credit evaluations of our customers.

~~Inventories.~~ Our inventories are comprised of finished goods. Inventories are stated at the lower of cost or market, net of related reserves. The cost of inventory is computed using a weighted-average method. Our inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or market, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. We provide a reserve for obsolescence, which is calculated based on several factors, including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

~~Goodwill.~~ Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is subject to impairment testing at least annually. Goodwill is measured for impairment on an annual basis, or in interim periods if indicators of potential impairment exist. We conduct our annual goodwill impairment test on February 1^st ~~of each fiscal year. The fair values of the reporting units were estimated using a combination of an income approach and a market approach, weighted 80% and 20%, respectively.~~

46

The income approach is based on projected future debt-free cash flow that is discounted to present value using factors that consider the timing and risk of the future cash flows. This approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating and cash flow performance. The income approach is based on a reporting unit’s projection of operating results and cash flows that is discounted using a weighted-average cost of capital. The projection is based upon our best estimate of projected economic and market conditions over the related period including growth rates, estimate of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures, and changes in future working capital requirements based on management projections.

The market approach is based on direct transactional evidence, or where such transactional evidence does not exist, the observed earnings and revenue trading multiples, or “equity value,” or “enterprise value” of comparable “peer group” companies is used. The reporting units are assessed based on qualitative and quantitative comparisons against the peer group, including size, expected growth, profitability, and product diversification. This approach provides that if the respective reporting unit is comparable to the peer group, then a similar multiple of equity value is a reasonable indication of the value of the reporting unit.

We believe this methodology provides reasonable estimates of a reporting unit’s fair value and that this estimate is consistent with how a market participant would view the reporting unit’s fair value. Fair value computed by this methodology is arrived at using a number of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows, comparable marketplace data within a consistent industry grouping, and the cost of capital. We weigh the income approach more heavily than the market approach in its analysis because management believes that there is not a strong comparability with the peer group companies, and therefore, the income approach provides a better measure of fair value. There are inherent uncertainties, however, related to these factors and to management’s judgment in applying them to this analysis. Nonetheless, we believe that this method provides a reasonable approach to estimate the fair value of its reporting units. Additional information regarding our goodwill and impairment analyses is provided in Note 6,~~Goodwill and Intangible Assets~~~~, and Note 15,~~~~Fair Value Measurements.~~

~~Intangible assets.~~ Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Purchased intangible assets relating to customer relationships and supplier relationships are being amortized using an accelerated or straight-line method, which reflects the period the asset is expected to contribute to the future cash flows. Our finite-lived intangible assets are being amortized over periods between two and eight years. We have an indefinite-lived intangible asset relating to purchased trade names. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value.

Customer relationships are amortized over estimated useful lives between two and seven years; non-competition agreements are amortized over estimated useful lives between two and eight years; developed technology is amortized over estimated useful lives between three and eight years; supplier relationships are amortized over estimated useful lives between two and eight years. Additional information regarding our intangible assets and impairment analyses is provided in Note 6, Goodwill~~and Intangible Assets, and Note 15,~~~~Fair Value Measurements~~.

~~Long-lived assets.~~ Property and equipment are recorded at cost. Major renewals and improvements are capitalized, as are interest costs on capital projects. Minor replacements, maintenance, repairs, and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, which make up less than one percent of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements — 7 to 30 years; furniture — 7 to 10 years; equipment — 3 to 10 years; software — 3 to 10 years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project’s completion. Capitalized project expenditures are not depreciated until the underlying project is completed.

We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets. During fiscal 2010, we recorded asset impairment charges of $0.2 million, primarily related to capitalized software property and equipment that management determined was no longer being used to operate the business. As of March 31, 2012 and 2011, we concluded that there were no additional impairments or triggering events.

47

~~Foreign currency translation.~~ The financial statements of our foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenue and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders’ equity in the Consolidated Balance Sheets. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations. Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.

~~Revenue recognition.~~ We derive revenue from the sale of products (i.e., server, storage, and point of sale hardware, and software), support, maintenance and subscription services and professional services. Revenue is recorded in the period in which the goods are delivered or services are rendered and when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. We reduce revenue for estimated discounts, sales incentives, estimated customer returns, and other allowances. Discounts are offered based on the volume of products and services purchased by customers. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold. Revenue is recorded net of any applicable taxes collected and remitted to governmental agencies.

We frequently enter into multiple-element arrangements with customers including hardware, software, professional consulting services and maintenance support services. For arrangements involving multiple deliverables, when deliverables include software and non-software products and services, we evaluate and separate each deliverable to determine whether it represents a separate unit of accounting based on the following criteria: (a) the delivered item has value to the customer on a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in our control.

For arrangements entered into or materially modified after April 1, 2011, consideration is allocated to each unit of accounting based on the unit’s relative selling prices. In such circumstances, we use a hierarchy to determine the selling price to be used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party evidence of selling price (TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when we sell the deliverable separately and is the price actually charged by us for that deliverable. VSOE is established for our software maintenance services and we use TPE or BESP to establish selling prices for our non-software related services. BESP is primarily used for elements that are not consistently priced within a narrow range or TPE is not available. We determine BESP for a deliverable by considering multiple factors including product class, geography, average discount, and management’s historical pricing practices. Amounts allocated to the delivered hardware and software elements are recognized at the time of sale provided the other conditions for revenue recognition have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained. Delivery and acceptance generally occur in the same reporting period. For arrangements entered into prior to April 1, 2011, we have not applied BESP. In such arrangements, if we have the requisite evidence of selling price for the undelivered elements but not for the delivered elements, we apply the residual method to allocate arrangement consideration.

In situations where our solutions contain software that is more than incidental, revenue related to the software and software-related elements is recognized in accordance with authoritative guidance on software revenue recognition. For the software and software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is determined by VSOE. If we cannot objectively determine the fair value of any undelivered element included in such multiple-element arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. When the fair value of a delivered element has not been established, but fair value exists for the undelivered elements, we use the residual method to recognize revenue. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered elements and is recognized as revenue.

~~Revenue recognition for complex contractual arrangements, especially those with multiple elements, requires a significant level of judgment and is based upon a~~ review of ~~specific contracts, past experience,~~ the selling price of undelivered elements when sold separately, creditworthiness of customers, international laws and other factors. Changes in judgments about these factors could impact the timing and amount of revenue recognized between periods.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer’s final acceptance of the arrangement have been fulfilled. A majority of our hardware sales involves shipment directly from

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its suppliers to the end-user customers. In these transactions, we are responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and bears credit risk if the customer does not pay for the goods. As the principal contact with the customer, we recognize revenue and cost of goods sold when we are notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination or upon installation at the customer site.

We offer proprietary software as well as remarketed software for sale to our customers. We offer our customers the right to license the software under a variety of models. Our customers can license our software under a perpetual model for an upfront fee or a subscription model. For subscription arrangements, we allow customers the right to use software, receive unspecified products as well as unspecified upgrades and enhancements and entitle the customer to receive hosting services for a specified term. The subscription revenue is generally recognized ratably over the term of the arrangement, typically three to five years. Revenue from subscription service arrangements is included in Support, maintenance and subscription services in the Consolidated Statements of Operations. A majority of our software sales do not require significant production, modification, or customization at the time of shipment (physically or electronically) to the customer. Substantially all of our software license arrangements do not include acceptance provisions. As such, revenue from both proprietary and remarketed software sales is typically recognized when the software has been shipped. For software delivered electronically, delivery is considered to have occurred when the customer either takes possession of the software via downloading or has been provided with the requisite codes that allow for immediate access to the software based on the U.S. Eastern time zone time stamp.

We also offer proprietary and third-party services to our customers. Proprietary services generally include: consulting, installation, integration and training. Many of our software arrangements include consulting services sold separately under consulting engagement contracts. When the arrangements qualify as service transactions, consulting revenue from these arrangements are accounted for separately from the software revenue. The significant factors considered in determining whether the revenue should be accounted for separately include the nature of the services (i.e., consideration of whether the services are essential to the functionality of the software), degree of risk, availability of services from other vendors, timing of payments, and the impact of milestones or other customer acceptance criteria on revenue realization. If there is significant uncertainty about the project completion or receipt of payment for consulting services, the revenue is deferred until the uncertainty is resolved.

For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, we estimate proportional performance using the hours incurred as a percentage of total estimated hours to complete the project consistent with the percentage-of-completion method of accounting. Accordingly, revenue for these contracts is recognized based on the proportion of the work performed on the contract. If there is no sufficient basis to measure progress toward completion, the revenue is recognized when final customer acceptance is received. Adjustments to contract price and estimated service hours are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of collections on uncompleted contracts in excess of related revenue is shown as a current liability.

If an arrangement does not qualify for separate accounting of the software and consulting services, then the software revenue is recognized together with the consulting services using the percentage-of-completion or completed contract method of accounting. Contract accounting is applied to arrangements that include: milestones or customer-specific acceptance criteria that may affect the collection of revenue, significant modification or customization of the software, or provisions that tie the payment for the software to the performance of consulting services.

We also offer proprietary and third-party support to our customers. Support generally includes: support and maintenance of software and hardware products and subscription services. Revenue relating to proprietary support services is recognized evenly over the coverage period of the underlying agreement within support, maintenance and subscription revenue. In instances where we offer third-party support contracts to our customer, the supplier is the primary obligor in the transaction although we bear credit risk in the event of nonpayment by the customer. Since we are acting as an agent or broker with respect to such sales transactions, we report revenue at the time of the sale, only in the amount of the “commission” (equal to the selling price less the cost of sale) received rather than reporting revenue in the full amount of the selling price with separate reporting of the cost of sale.

~~Comprehensive (loss) income.~~ Comprehensive (loss) income is the total of net (loss) income, as currently reported under GAAP, plus other comprehensive (loss) income. Other comprehensive (loss) income considers the effects of additional transactions and economic events that are not required to be recorded in determining net (loss) income, but rather are reported as a separate component of shareholders’ equity.

~~Fair value measurements~~. We measure the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant

49

~~event occurs. In determining fair value of financial assets and liabilities, we use various valuation techniques. Additional information regarding fair value measurements is provided in Note 15,~~~~Fair Value Measurements~~.

~~Investments in corporate-owned life insurance policies and marketable securities.~~ Agilysys invests in corporate-owned life insurance policies and marketable securities primarily to satisfy future obligations of our employee benefit plans, including a benefit equalization plan (“BEP”) and supplemental executive retirement plan (“SERP”). Certain of these corporate-owned life insurance policies were held in a Rabbi Trust and were classified within “Other non-current assets” in the Consolidated Balance Sheets. Our investment in corporate-owned life insurance policies were recorded at their cash surrender value, which approximates fair value, at the balance sheet date.

Certain of these corporate-owned life insurance policies are endorsement split-dollar life insurance arrangements. We entered into a non-cancelable separate agreement with each of the former executives covered by these arrangements whereby we must maintain the life insurance policy for the specified amount and split a portion of the policy benefits with the former executive’s designated beneficiary.

Our investment in marketable equity securities are held within the Rabbi Trust and classified as available for sale. However, these investments are restricted by the terms of the Rabbi Trust agreement and may only be used to satisfy the benefit obligations of our nonqualified benefit plans or to satisfy the obligations of our general creditors under an insolvency.

~~Additional information regarding the investments in corporate-owned life insurance policies and marketable securities is provided in Note 11,~~~~Employee Benefit Plans~~.

~~Income Taxes.~~ Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

We recognize the tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from uncertain tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold. Interest related to uncertain tax positions is recognized as part of the provision for income taxes and is accrued beginning in the period that such interest would be applicable under relevant tax law until such time that the related tax benefits are recognized. Our income taxes are described further in Note 10,~~Income Taxes~~.

~~Recently adopted and new accounting standards.~~ In May 2011, the FASB issued authoritative guidance to conform existing guidance regarding fair value measurement and disclosure between GAAP and International Financial Reporting Standards. The clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosure of quantitative information about unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial instruments that are managed within a portfolio and application of premiums and discounts in a fair value measurement. The amendments also require additional disclosures concerning the valuation processes used, sensitivity of the fair value measurement to changes in unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use and the categorization by level in the fair value hierarchy for items required to be measured at fair value for disclosure purposes only. We adopted the provisions of this guidance on March 31, 2012, as required. The adoption of this guidance did not have any impact on our financial position, results of operations, cash flows, or related disclosures.

In October 2009, the FASB issued authoritative guidance on revenue arrangements with multiple deliverable elements (e.g., hardware with services), which was effective for us on April 1, 2011 for new revenue arrangements or material modifications to existing arrangements. The guidance amends the criteria for separating consideration in arrangements with multiple deliverable elements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable based on: 1) vendor-specific objective evidence; 2) third-party evidence; or 3) best estimated selling price. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands the required disclosures related to revenue

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arrangements with multiple deliverable elements. Entities may elect to adopt the guidance through either prospective application for revenue arrangements entered into, or materially modified, after the effective date, or through retrospective application to all revenue arrangements for all periods presented. We adopted the provisions of this guidance on April 1, 2011, as required. The adoption of this guidance did not have a material impact on our financial position, results of operations, cash flows, or related disclosures.

In October 2009, the FASB issued authoritative guidance on revenue arrangements that include software elements, which was effective for us on April 1, 2011. The guidance changes revenue recognition for tangible products containing software elements and non-software elements as follows: 1) the tangible product element is always excluded from the software revenue recognition guidance even when sold together with the software element; 2) the software element of the tangible product element is also excluded from the software revenue guidance when the software and non-software elements function together to deliver the product’s essential functionality; and 3) undelivered elements in a revenue arrangement related to the non-software element are also excluded from the software revenue recognition guidance. Entities must select the same transition method and same period for the adoption of both this guidance and the guidance on revenue arrangements with multiple deliverable elements. We adopted the provisions of this guidance on April 1, 2011, as required. The adoption of this guidance did not have a material impact on our financial position, results of operations, cash flows, or related disclosures.

In December 2011, FASB, issued authoritative guidance which modifies the disclosure requirements for offsetting financial instruments and derivative instruments. The update requires an entity to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. This guidance is effective for reporting periods beginning on or after January 1, 2013, and is not expected to have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

In September 2011, the FASB issued authoritative guidance which modifies the process of testing goodwill for impairment. The update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would not be required to calculate the fair value of a reporting unit unless the entity determines it is more likely than not, based on a qualitative assessment, the fair value of goodwill is less than its carrying amount. The guidance also includes a number of events and circumstances to consider in conducting the qualitative assessment. This guidance is effective for fiscal years beginning on or after December 15, 2011, and is not expected to have a material impact on our consolidated financial position, results of operations, cash flows or related disclosures.

In June 2011, the FASB issued authoritative guidance which modifies the requirements for presenting net income and other comprehensive income and requires that all non-owner changes in shareholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment requires presentation of each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income and a total amount for comprehensive income. In December 2011, the FASB issued amendments to the guidance to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income in all periods presented. This guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011. We do not expect this guidance to have a significant impact on our consolidated financial position results of operations, cash flows or related disclosures.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on its financial position, results of operations, cash flows, and related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

~~Reclassifications.~~ As a result of our reorganization in fiscal 2012, revenue and cost of goods sold are being reported in three categories: Products, Support, maintenance and subscription services and Professional services. In addition, operating expenses are differentiated in the following subcategories: Product development, Sales and marketing and General and administrative. The fiscal 2011 and 2010 financial statement presentation of revenue and costs of sales were reclassified (no impact on total gross margin) in order to conform to our current period reporting presentation as well as operating expenses (no impact on total operating expenses). Certain fiscal 2010 amounts related to corporate-owned life insurance policies were reclassified to conform to current period reporting presentation (no impact on income from continuing operations or cash flows (used for) provided by operations).

~~Correction of Error.~~ In the third quarter of fiscal 2012, we identified errors in the manner in which we recognized revenue for certain software license and professional service arrangements in prior periods. We re-assessed our accounting for contracts relating to such arrangements. Upon completion of such evaluation, it was determined that the previous accounting treatment did not take into account all the necessary revenue recognition criteria related to pricing concessions, implied postcontract support, professional services that were essential to the functionality of the software, application of contract accounting and specified enhancements, and

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certain billing errors. As a result, we determined that certain previously recognized revenue should instead have been deferred and recognized in future periods when the applicable criteria related to the above considerations have been met.

In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of the errors and concluded that the errors were not material to any of our previously issued financial statements. Correction of the errors is also not material to the fiscal 2012 results. As permitted by the accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we elected to present revised financial information as of and for the interim periods ended June 30, 2011 and September 30, 2011, and will revise our previously issued fiscal year 2012 interim financial statements ~~to correct the effect of these errors when such financial statements are~~ included in future filings. The adjustments to the quarter ended June 30, 2011 are comprised of (a.) the out of period impact for errors accumulated prior to fiscal 2012 of $1.0 million of corrections to revenue from continuing operationsquarterly reports, and $1.1 million of corrections to the loss from continuing operations and (b.) $0.3 million to revenue from continuing operations and $0.3 million to loss from continuing operations to revise the financial statements for revenue recognized in the quarter ended June 30, 2011 that should have been deferred to future periods. The adjustments to the quarter ended September 30, 2011 represent the revision to the financial statements for similar matters arising in the quarter.

~~The following tables present the effect of this revision on our Condensed Consolidated Statements of Operations for all periods affected:~~

   Quarter Ended June 30, 2011 Quarter Ended September 30, 2011
(In thousands except per share amounts)
As
Previously
Reported
Adjustment
As
Revised

As
Previously
Reported
Adjustment
As
Revised

Net revenue
   $ 53,886    $ (1,295 ) $ 52,591    $ 53,587    $ (902 ) $ 52,685
Costs of goods sold.
   34,359    144    34,503    31,972    (286 ) 31,686
Net loss from continued operations
   (5,440 ) (1,439 ) (6,879 ) (3,238 ) (316 ) (3,554 )
Loss per share for continuing operations — Basic and diluted
   (0.24 ) (0.06 ) (0.30 ) (0.14 ) (0.02 ) (0.16 )

~~The following table presents the effect this revision had on the Condensed Consolidated Balance Sheet at June 30, 2011 and September 30, 2011:~~

   As of June 30, 2011    As of September 30, 2011
(In thousands)
As
Previously
Reported
   Adjustment
As
Revised
   As
Previously
Reported    Adjustment
As
Revised

Current assets
   $ 117,239       $ (1,099 ) $ 116,140       $ 153,052       $ (1,537 ) $ 151,515
Current liabilities
   64,855       340    65,195       58,713       218    58,931
Shareholder’s equity
   145,079       (1,439 ) 143,640       145,244       (1,756 ) 143,488

~~The revision did not have an effect on our operating cash flows for the three months ended June 30, 2011 or the six months ended September 30, 2011.~~

During the first quarter of fiscal 2011, we recorded an adjustment to increase income tax expense by $3.8 million. The adjustment increased our valuation allowance against our U.S. deferred tax assets and represents a correction of an error. In fiscal 2009, we erroneously considered the tax effect of indefinite-lived intangible assets as a source of future taxable income, when we established a significant U.S. valuation allowance against our U.S. deferred tax assets. Income (loss) before income taxes did not change. Net loss increased by $3.8 million, or $0.17 per share, due to this adjustment. Management performed an evaluation under Staff Accounting Bulletin No. 108 and concluded the effect of this adjustment was immaterial to prior years’ financial statements as well as the full-year fiscal 2011 financial statements.

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~~DISCONTINUED OPERATIONS~~

3.

~~DISCONTINUED OPERATIONS~~

~~Sale of Assets and Operations of TSG — Fiscal 2012~~

In May 2011, we sold our TSG business for an aggregate purchase price of $64.0 million in cash, subject to a possible downward adjustment based on final working capital, to OnX Enterprise Solutions Limited and its subsidiary OnX Acquisition LLC (together, “OnX”), a leading IT solutions provider based in Toronto, Canada. In addition to the purchase agreement, we entered into a transition services agreement (“TSA”) with OnX, under which we provided certain transitional administrative and supportive services to OnX through January 31, 2012. In July 2011, our shareholders approved the sale and the transaction closed on August 1, 2011, the date on which certain other contingencies specified in the sale agreement were satisfied. The sale of TSG represented a disposal of a component of an entity. As such, the operating results of TSG, along with the gain on sale, have been reported as a component of discontinued operations in the Consolidated Statements of Operations for the periods presented. In addition, the assets and liabilities of the TSG business are classified as discontinued operations in the Consolidated Balance Sheets as of March 31, 2012 and 2011.

Upon the close of the transaction, the aggregate purchase price of $64.0 million was reduced by the payment of agreed-upon fees of $3.3 million for severance costs, $2.4 million for transaction fees, $1.3 million for third-party services in support of the transition and $1.2 million working capital adjustment, resulting in net proceeds received by us of $55.8 million.

~~Components of Results of Discontinued Operations~~

~~For the fiscal years ended March 31, 2012, 2011 and 2010 the income (loss) from discontinued operations was comprised of the following:~~

(In thousands)    2012 2011 2010
Discontinued operations:

Net revenue
   $ 123,807    $ 474,051    $ 440,814
(Loss) income from operations of TSG
   $ (1,781 ) $ (32,732 ) $ 13,548
Gain on sale of TSG
   19,486    —    —
Income (loss) on sale of TSG
   17,705    (32,732 ) 13,548
Income tax expense (benefit)
   6,249    232    (2,371 )
Income (loss) from discontinued operations
   $ 11,456    $ (32,500 ) $ 11,177

~~RESTRUCTURING AND RELATED CHARGES~~

4.

~~RESTRUCTURING AND RELATED CHARGES~~

We recognize restructuring charges when a plan that materially changes the scope of our business or the manner in which that business is conducted is adopted and communicated to the impacted parties, and the expenses have been incurred or are reasonably estimable. In addition, we assess the property and equipment associated with the related facilities for impairment. The remaining useful lives of property and equipment associated with the related operations are re-evaluated based on the respective restructuring plan, resulting in the acceleration of depreciation and amortization of certain assets.

~~Fiscal 2012 Restructuring Activity~~

In the first quarter of fiscal 2012, we announced restructuring actions, including the relocation of our corporate services from Solon, Ohio to Alpharetta, Georgia, designed to better align those services with our operating units and reduce costs following the sale of TSG. In addition, we also announced in the first quarter of fiscal 2012 that our former President and Chief Executive Officer was stepping down. These restructuring actions were mostly completed by March 31, 2012 and have impacted or will impact approximately 130 employees. We recorded $11.0 million in restructuring charges during fiscal 2012, primarily comprised of

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severance and related benefits, with $2.0 million, $0.6 million, and $8.4 million related to HSG, RSG and Corporate/Other, respectively. Included in the $8.4 million restructuring charge for Corporate/Other is a $2.1 million one-time lease termination fee for the Solon, Ohio facility. In addition, we incurred accelerated depreciation of $4.4 million of property and equipment that was due to the relocation of our previous corporate services in Solon, Ohio to Alpharetta, Georgia, and closing our facilities in Emeryville, California and Frederick, Maryland in the fourth quarter of fiscal 2012. As of March 31, 2012, we had approximately $5.8 million recorded for fiscal 2012 restructuring activity. We expect to incur approximately $0.6 million in additional restructuring charges for severance and related benefits, and facilities related to these restructuring actions during the first half of fiscal 2013. As a result of taking these restructuring actions, we expect to realize between $14.0 million and $16.0 million in cost savings, of which approximately half has been recognized in the fiscal 2012 run rate. The remaining savings are expected to be realized during fiscal 2013.

~~Fiscal 2009 Restructuring Activity~~

During fiscal 2009, we took steps to realign our cost and management structure. Since 2009, we have incurred charges totaling $19.0 million related to restructuring actions taken in fiscal 2009 and previously disclosed, which includes $0.5 million, $0.4 million and $0.8 million in fiscal years 2012, 2011 and 2010, respectively, which related to Corporate/Other. As of March 31, 2012, we had approximately $0.5 million recorded for fiscal 2009 restructuring activity. We expect to incur minimal additional restructuring charges between fiscal 2013 and fiscal 2014 for ongoing facility obligations.

~~Following is a reconciliation of the beginning and ending balances of the restructuring liability which excludes the $4.4 million of related charges associated with the accelerated depreciation:~~

      Severance
and Other
Employment
Costs Facilities Other SERP Total
Balance at March 31, 2009
   $ 8,846    $ 1,042    $ 39    $ —    $ 9,927
Additions
   (92 ) 94    —    821    823
Settlement of benefit plan obligations
   —    —    —    (821 ) (821 )
Payments
   (7,465 ) (456 ) (39 ) —    (7,960 )
Adjustments
   —    (31 ) —    (31 )
Balance at March 31, 2010
   $ 1,289    $ 649    $ —    $ 1,938
Additions
   (35 ) 57    383    405
Settlement of benefit plan obligations
   —    —    (383 ) (383 )
Payments
   (965 ) (262 ) —    (1,227 )
Balance at March 31, 2011
   $ 289    $ 444    $ —    $ 733
Additions
   7,996    3,466    11,462
Payments
   (2,778 ) (3,118 ) (5,896 )
Balance at March 31, 2012
   $ 5,507    $ 792    $ —    $ 6,299

Approximately $4.9 million of the severance and other employment costs will be paid in fiscal 2013 and the remaining $0.6 million will be paid in fiscal 2014. Approximately $0.6 million of facilities obligations will be paid during fiscal 2013 and the remaining $0.2 million will be paid in fiscal 2014.

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~~PROPERTY AND EQUIPMENT, NET~~

5.

~~PROPERTY AND EQUIPMENT, NET~~

~~Property and equipment at March 31, 2012 and 2011 is as follows:~~

   Year ended March 31
(In thousands)    2012 2011
Furniture and equipment
   $ 13,273    $ 40,573
Software
   17,224    49,548
Leasehold improvements
   4,754    8,841
Project expenditures not yet in use
   173    668
   35,424    99,630
Accumulated depreciation and amortization
   (18,920 ) (74,775 )
Property and equipment, net
   $ 16,504    $ 24,855

Total depreciation expense on property and equipment was $9.0 million, $3.9 million, and $3.3 million during fiscal 2012, 2011, and 2010, respectively. Total amortization expense on capitalized internal-use software was $2.5 million, $3.9 million and 3.5 million during fiscal 2012, 2011, and 2010, respectively.

~~Assets under capital leases are included in property and equipment categories above. Total assets under capital leases at March 31, 2012 and 2011 are as follows:~~

   Year Ended March 31,
(In thousands)    2012 2011
Capital leases
   $ 2,500    $ 3,067
Less accumulated depreciation
   (920 ) (862 )
Assets under capital lease, net
   $ 1,580    $ 2,205

~~GOODWILL AND INTANGIBLE ASSETS~~

6.

~~GOODWILL AND INTANGIBLE ASSETS~~

Agilysys allocates the cost of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the cost over the fair value of the identified net assets acquired is recorded as goodwill.

~~Goodwill~~

Agilysys tests goodwill for impairment at the reporting unit level upon identification of impairment indicators, or at least annually. A reporting unit is the operating segment or one level below the operating segment (depending on whether certain criteria are met). Goodwill was allocated to our reporting units that are ~~anticipated to benefit from the synergies of the business combinations generating the underlying goodwill. As discussed in Note 16,~~~~Business Segments,~~ ~~Agilysys has two operating segments.~~

~~We conducted our annual goodwill impairment test on February 1, 2012, 2011 and 2010. As a result of this analysis, we concluded that no impairment indicators existed.~~

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~~The changes in the carrying amount of goodwill for the years ended March 31, 2012 and 2011 are as follows:~~

(In thousands)    HSG RSG Total
Balance at March 31, 2010
   $ 135,097    $ 24,912    $ 160,009
Accumulated impairment losses as of March 31, 2010
   (120,087 ) (24,912 ) (144,999 )
   15,010    —    15,010
Impact of foreign currency translation
   201    —    201
Balance at March 31, 2011
   $ 15,211    $ —    $ 15,211
Impact of foreign currency translation
   (13 ) —    (13 )
Balance at March 31, 2012
   $ 15,198    $ —    $ 15,198

~~Intangible Assets~~

~~The following table summarizes our intangible assets at March 31, 2012, and 2011:~~

   2012 2011
(In thousands)    Gross
carrying
amount Accumulated
amortization Net
carrying
amount Gross
carrying
amount Accumulated
amortization Net
carrying
amount
Amortized intangible assets:

Customer relationships
   $ 12,475    $ (9,979 ) $ 2,496    $ 12,475    $ (9,060 ) $ 3,415
Non-competition agreements
   2,910    (2,162 ) 748    2,910    (1,901 ) 1,009
Developed technology
   19,578    (10,683 ) 8,895    16,312    (9,027 ) 7,285
Patented technology
   80    (80 ) —    80    (80 ) —
Project expenditures not yet in use
   945    —    945    1,685    —    1,685
Accumulated impairment
   (9,493 ) 1,344    (8,149 ) (59 ) —    (59 )
   26,495    (21,560 ) 4,935    33,403    (20,068 ) 13,335
Unamortized intangible assets:

Trade names
   10,100    N/A    10,100    10,100    N/A    10,100
Accumulated impairment
   (900 ) N/A    (900 ) (900 ) N/A    (900 )
   9,200    N/A    9,200    9,200    N/A    9,200
Total intangible assets
   $ 35,695    $ (21,560 ) $ 14,135    $ 42,603    $ (20,068 ) $ 22,535

During the fourth quarter of 2012, it was determined that certain developed technologies would no longer be offered for sale. As a result, we have impaired the entire remaining assets of $8.6 million, including $0.5 million of tangible assets, and accrued the estimated costs associated with a transition plan for all of the existing customers off of this platform of $1.1 million. During the second quarter of fiscal 2011, we concluded that certain software developed technology within HSG was no longer being sold. As a result we recorded an impairment charge of $0.1 million, which impacted HSG. During the fourth quarter of fiscal 2011, we concluded that it was no longer using certain indefinite-lived intangible assets related to an HSG trade name. Accordingly, we recorded an impairment charge of $0.9 million, which impacted HSG. The total asset impairments and related charges during fiscal 2012, 2011, and 2010 of $9.7 million, $1.0 million and $0.2 million, respectively, were classified within “Asset impairments and related charges” in our Consolidated Statements of Operations.

Amortization expense relating to intangible assets was $1.2 million for the fiscal years ended March 31, 2012 and 2011 and $1.4 million for the fiscal year ended March 31, 2010. Amortization expense relating to developed technology software intangible assets was $1.7 million for the fiscal years ended March 31, 2012 and 2011, respectively, and $1.3 million for the fiscal year ended March 31, 2010, and is classified in Products cost of goods sold.

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The remaining estimated amortization expense relating to intangible assets is $1.9 million, $1.2 million and $0.9 million for fiscal 2013, 2014 and 2015, respectively. There is currently no amortization expense relating to intangibles for fiscal 2016 and 2017. Project expenditures not yet in use are not amortized until the underlying project is completed.

~~FINANCING ARRANGEMENTS~~

7.

~~FINANCING ARRANGEMENTS~~

~~The following is a summary of long-term obligations at March 31, 2012, and 2011:~~

      2012 2011
Capital lease obligations
   $ 994    $ 1,906
Less: current maturities
   (647 ) (999 )
Long -term capital lease obligations
   $ 347    $ 907

~~Capital Leases~~

Agilysys leases certain equipment under capital leases expiring in various years through fiscal 2015. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the shorter of their related lease terms or their estimated productive lives.

Assets recorded under capital leases were $2.5 million and $3.1 million, as of March 31, 2012 and 2011, respectively. Accumulated depreciation related to assets recorded under capital leases was $0.9 million as of March 31, 2012 and 2011. Depreciation of assets under capital leases is included in depreciation expense.

~~Minimum future lease payments under capital leases as of March 31, 2012, are as follows:~~

Amount

Fiscal year ending March 31,

2013
   $ 709
2014
   231
2015
   133
Total minimum lease payments
   $ 1,073
Less: amount representing interest
   (79 )
Present value of minimum lease payments
   $ 994

Interest rates on capitalized leases vary from 3.4% to 35.6% and are imputed based on the lower of our incremental borrowing rate at the inception of each lease or the lessor’s implicit rate of return.

~~Revolving Credit Agreement~~

On May 5, 2009, Agilysys executed a Loan and Security Agreement (the “Credit Facility”) with Bank of America, N.A., as agent for the lenders from time to time party thereto, which replaced a previous credit facility that was terminated on January 20, 2009. The Credit Facilitynormally provided ~~$50 million of credit (which could be increased to $75 million by a $25 million “accordion provision”) for borrowings and letters of credit maturing May 5, 2012.~~

In July 2011, we terminated the Credit Facility in conjunction with the sale of TSG. As a result of the proceeds we received from the sale of TSG, we determined that we no longer required the liquidity provided by the Credit Facility. In addition, as a result of the termination of the Credit Facility, we expensed approximately $0.4 million in unamortized deferred financing fees that related to the Credit Facility in fiscal 2012.

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~~SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION~~

8.

~~SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION~~

~~Supplemental disclosures of cash flow information:~~

   Year ended March 31,
(In thousands)    2012 2011 2010
Cash payment for interest
   $ 446    $ 686    $ 410
Cash refunds from income tax, net
   (1,434 ) (8,579 ) (3,695 )
Acquisition of property and equipment under lease obligations
   273    2,323    —
Asset retirement obligation
   680    —    —

~~ADDITIONAL BALANCE SHEET INFORMATION~~

9.

~~ADDITIONAL BALANCE SHEET INFORMATION~~

~~Additional information related to the Consolidated Balance Sheets is as follows:~~

(In thousands)    2012    2011
Other non-current assets:

Corporate owned life insurance policies
   $ 3,458       $ 3,323
Marketable securities restricted in Rabbi Trust
   —       7,950
Other
   549       436
Total
   $ 4,007       $ 11,709
Accrued liabilities:

Salaries, wages, and related benefits
   $ 7,397       $ 4,943
BEP obligations
   2,948       —
SERP obligations
   3,323       5,675
Restructuring liabilities
   5,447       475
Other taxes payable
   1,976       1,226
Income taxes payable
   322       265
Other
   2,570       2,352
Total
   $ 23,983       $ 14,936
Other non-current liabilities:

Income taxes payable/uncertain tax positions
   $ 3,135       $ 4,954
BEP obligations
   —       5,629
Deferred rent
   2,013       712
Restructuring liabilities
   852       258
Other
   210       419
Total
   $ 6,210       $ 11,972

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~~INCOME TAXES~~

~~10.~~

~~INCOME TAXES~~

~~For the year ended March 31, income from continuing operations before income taxes consisted of the following:~~

(In thousands)    2012 2011 2010
(Loss) income before income taxes

United States
   $ (42,946 ) $ (21,664 ) $ (16,129 )
Foreign
   700    1,109    952
Total loss from continuing operations before income taxes
   $ (42,246 ) $ (20,555 ) $ (15,177 )

~~For the year ended March 31, income tax (benefit) expense consisted of the following:~~

(In thousands)    2012 2011 2010
Income tax (benefit) expense

Current

Federal
   $ (8,133 ) $ (2,022 ) $ (12,277 )
State and local
   31    (250 ) 912
Foreign
   33    243    435
Deferred

Federal
   61    3,874    3,383
State and local
   10    575    —
Foreign
   (9 ) —    —
Total (benefit) income tax expense
   $ (8,007 ) $ 2,420    $ (7,547 )

The following table presents the principal components of the difference between the effective tax rate for continuing operations to the U.S. federal statutory income tax rate for the years ended March 31:

(In thousands)    2012 2011 2010
Income tax (benefit) provision at the statutory rate of 35%
   $ (14,786 ) $ (7,194 ) $ (5,312 )
Provision (benefit) for state taxes
   73    18    29
Impact of foreign operations
   279    200    (1,216 )
Nontaxable proceeds
   —    (723 ) (805 )
Note settlement
   —    —    1,652
Change in valuation allowance
   8,345    9,431    (2,780 )
Change in liability for unrecognized tax benefits
   (1,536 ) (311 ) (295 )
Meals & entertainment
   177    628    283
Other
   (559 ) 371    897
Expense (benefit) for income taxes
   $ (8,007 ) $ 2,420    $ (7,547 )

Our tax provision includes a provision for income taxes in certain foreign jurisdictions where subsidiaries are profitable, but only a minimal benefit is reflected related to U.S. and certain foreign tax losses due to the uncertainty of the ultimate realization of future

59

benefits from these losses. The 2012 tax benefit differs from the statutory rate primarily due to the intra-period tax allocation rules associated with the discontinued operations and recognition of net operating losses as deferred tax assets were offset by increases in the valuation allowance. Other items effecting the rate in the current year include foreign and state taxes, a decrease in unrecognized tax benefits attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences. The 2011 tax provision differs from the statutory rate primarily due to the intra-period tax allocation rules associated with the discontinued operations and recognition of net operating losses as deferred tax assets were offset by increases in the valuation allowance. Other items effecting the rate in 2011 non-taxable life insurance proceeds, a decrease in unrecognized tax benefits attributable to expiration of statute of limitations, and other U.S. permanent book to tax differences . The 2010 tax benefit differs from the statutory rate primarily due to the intra-period tax allocation rules associated with the discontinued operations. Other items effecting the rate include non-taxable life insurance proceeds and other U.S. permanent book to tax differences. The rate is also negatively impacted as a result of an inter-company loan settlement which resulted in a net zero rate impact when viewed with discontinued operations, but an unfavorable impact in continuing operations.

~~Deferred tax assets and liabilities as of March 31, 2012 and 2011 are as follows:~~

(In thousands)    2012 2011
Deferred tax assets:

Accrued liabilities
   $ 4,433    $ 4,689
Allowance for doubtful accounts
   180    216
Inventory valuation reserve
   437    712
Restructuring reserve
   1,228    288
Federal losses and credit carryforwards
   54,047    6,913
Foreign net operating losses
   12,149    364
State losses and credit carryforwards
   332    3,072
Deferred compensation
   2,908    4,645
Deferred revenue
   19    18
Goodwill and other intangible assets
   6,090    9,225
Other
   130    4,198
   81,953    34,340
Less: valuation allowance
   (78,682 ) (33,786 )
Total
   3,271    554
Deferred tax liabilities:

Property and equipment & software amortization
   3,261    516
Indefinite-lived goodwill & intangible assets
   4,043    3,971
Other
   —    38
Total
   7,304    4,525
Total deferred tax liabilities
   $ (4,033 ) $ (3,971 )

At March 31, 2012, we had $153.4 million of a federal net operating loss carryforward that expires, if unused, in fiscal year 2032. Included in this net operating loss is $0.6 million of excess income tax benefit related to restricted stock and the exercise of stock options. Our Hong Kong subsidiary has $2.0 million of net operating loss carryforwards that can be carried forward indefinitely. At March 31, 2012 we also had $201.7 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2013 through 2032.

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We recorded valuation allowances related to certain deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2012, the total valuation allowance against deferred tax assets of $78.7 million was mainly comprised of a valuation allowance of $78.4 million for federal and state deferred tax assets, and a valuation allowance of $0.3 million associated with deferred tax assets in Hong Kong that, in all likelihood, will not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, we will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Based on the level of historical taxable income over the periods for which the deferred tax assets are deductible, management believes that it is more-likely-than-not that we will not realize the benefits of these deductible differences.

We did not provide taxes on undistributed earnings of foreign subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of the deferred tax liabilities, if any, associated with these undistributed earnings is not practicable.

We use the with-and-without approach for ordering tax benefits derived from the share-based payment awards. Using the with-and-without approach, actual income taxes payable for the period are compared to the amount of tax payable that would have been incurred absent the deduction for employee share-based payments in excess of the amount of compensation cost recognized for financial reporting. As a result of this approach, tax net operating loss carryforwards not generated from share-based payments in excess of cost recognized for financial reporting are considered utilized before the current period’s share-based deduction. We did not recognize any tax benefits during 2012 and 2011 for stock-based compensation.

~~We recorded a liability for unrecognized tax positions. The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:~~

(In thousands)    2012 2011 2010
Balance at April 1
   $ 4,123    $ 4,456    $ 5,651
Additions:

Relating to positions taken during current year
   1    879    53
Relating to positions taken during prior year
   47    260    629
Reductions:

Relating to tax settlements
   (293 ) (678 ) (1,084 )
Relating to positions taken during prior year
   (47 ) (164 ) (133 )
Relating to lapse in statute
   (958 ) (630 ) (660 )
Balance at March 31
   $ 2,873    $ 4,123    $ 4,456

~~As of March 31, 2012, we had a liability of $2.9 million related to uncertain tax positions, the recognition of which would affect our effective income tax rate.~~

Although the timing and outcome of tax settlements are uncertain, it is reasonably possible that during the next 12 months a reduction in unrecognized tax benefits may occur in the range of zero to $0.2 million based on the outcome of tax examinations and as a result of the expiration of various statutes of limitations. We are routinely audited and are currently under examination in multiple state jurisdictions, other changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. As of March 31, 2012, we had approximately $1.3 million of interest and penalties accrued. We recognize interest and penalty expense or (benefit) of $(0.6) million, less than $0.1 million and $0.3 million for the years end March 31, 2012, 2011 and 2010, respectively. As of March 31, 2012 and 2011, we had approximately $1.3 million and $2.0 million of interest and penalties accrued, respectively.

In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2009, U.S federal tax years are

61

open from 2006 forward due to attribute carryforwards. The statute of limitations is open from 2000 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2007 are open for examination by certain foreign taxing authorities.

~~EMPLOYEE BENEFIT PLANS~~

~~11.~~

~~EMPLOYEE BENEFIT PLANS~~

~~401(k) Plan~~

We maintain profit-sharing and 401(k) plans for employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, and we match $1.00 for every $1.00 on the first 1% of the employee’s pre-tax contributions and $0.50 for every $1.00 up to the next 5% of the employee’s pre-tax contributions. We may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Effective September 7, 2009, we suspended the employer match contributions to the 401(k) plan. On January 1, 2011, we reinstated the matching contribution to the 401(k) plan. Total profit sharing and Agilysys matching contributions were $1.7 million, $0.4 million, and $0.9 million in fiscal 2012, 2011, and 2010, respectively.

~~Benefit Equalization Plan (“BEP”)~~

Previously, Agilysys provided the BEP for certain covered employees. The BEP was a non-qualified defined contribution plan, which provides for employee deferrals and employer retirement deferrals so that the total retirement deferrals equal amounts that would have been contributed to our 401(k) plan if it were not for limitations imposed by income tax regulations. The benefit obligation related to the BEP was $2.7 million and $5.6 million, at March 31, 2012 and 2011, respectively. We suspended matching contributions to the BEP effective September 7, 2009 and reinstated those matching contributions effective January 1, 2011. However, since the matching contribution to the BEP only applies once participants have met the 401(k) plan contribution limit and no participant reached that limit in the fourth quarter of fiscal 2011, no employer matching contributions were made to the BEP during fiscal 2011. Contribution expense for the BEP was $0.3 million in fiscal 2010. On March 31, 2011, we terminated the BEP. Due to limitations imposed by income tax regulations, account balances were distributed to remaining participants in April 2012.

~~Supplemental Executive Retirement Plan (“SERP”)~~

Previously, Agilysys provided the SERP for certain former officers of Agilysys. The SERP was a non-qualified defined benefit pension plan designed to provide retirement benefits for the plan participants. The projected benefit obligation recognized by Agilysys related to the SERP was $3.3 million and $5.7 million, at March 31, 2012 and 2011, respectively. The accumulated benefit obligation related to the SERP was $3.3 million and $5.7 million, at March 31, 2012, and 2011, respectively. The annual expense for the SERP was $0.1 million, $0.5 million, and $0.7 million, in fiscal 2012, 2011, and 2010, respectively.

On March 25, 2011, we terminated the SERP. As a result of the termination, the SERP incurred a non-cash curtailment charge of $37,000, which is included within “General, and administrative” in the Consolidated Statements of Operations. In addition, the plan incurred a curtailment gain of $1.2 million, which reduced the projected benefit obligation to an amount equal to the accumulated benefit obligation at March 31, 2011. Of the $1.2 million curtailment gain, $0.8 million was due to the reduction in service for a current officer of Agilysys and $0.4 million was due to the change in the discount rate from the Moody’s Aa long-term corporate bond yield as shown in the table above to the applicable IRS interest rate of 2.16% for plan termination liabilities.

~~The significant assumptions used to determine the projected benefit obligation, accumulated benefit obligation, and the annual expense for the SERP as of the March 31~~^st ~~measurement date are presented below:~~

   Year ended March 31,
      2012    2011    2010
Discount rate
   4.22%       5.30%       5.62%
Rate of annual compensation increases
   3.00%       3.00%       3.00%

The discount rate represents the Moody’s Aa long-term corporate bond yield as of the our fiscal year-end, which management believes reflects a rate of return on high-quality fixed-income investments currently available and expected to be available during the period to maturity of the SERP obligations. For the fiscal year ended March 31, 2012, the discount rate and rate of annual

62

compensation increases in the table above were used to value the projected benefit obligation, accumulated benefit obligation, and the annual expense prior to considering the effect of the plan curtailment discussed above.

A former officer of Agilysys who was part of the restructuring actions taken in the third quarter of fiscal 2009 (discussed below) was eligible for early retirement and elected to receive his benefit of approximately $2.5 million in the form of a lump sum distribution in December 2011. Due to limitations imposed by income tax regulations, the remaining SERP obligations of $3.2 million, along with the additional service credit obligation related to the SERP of $0.1 million, was distributed to participants in April 2012.

Certain participants in the SERP were eligible for early retirement under the terms of the SERP and elected to receive lump sum distributions from the plan and the additional service credits liability. In fiscal 2010, we funded the payments by taking loans totaling $12.5 million against the cash surrender value of the corporate-owned life insurance policies that informally fund the SERP. We had no obligation to repay these loans and did not repay them.

We did not incur curtailment charges related to the SERP in fiscal 2010. However, in fiscal 2010, we incurred non-cash settlement charges of $0.8 million pertaining to the payment of SERP benefits to the two former officers who elected lump sum distributions. These non-cash settlement charges are included within “Restructuring charges” in the Consolidated Statements of Operations.

Another former officer received a lump sum distribution in fiscal 2011 and we funded this payment with certain death benefit proceeds from corporate-owned life insurance policies. Accordingly, we classified approximately $2.5 million of the SERP liability within current “Accrued liabilities” in the Consolidated Balance Sheets as of March 31, 2010. Additional information related to the classification of the current and long-term portion of the SERP and additional service credits liabilities is presented in Note 9. In conjunction with this distribution, we incurred non-cash settlement charges of $0.4 million, which are included within “Restructuring charges” in the Consolidated Statements of Operations.

In conjunction with the BEP and SERP obligations, Agilysys invested in corporate-owned life insurance policies primarily to satisfy future obligations of these plans. These corporate-owned life insurance policies were held in a Rabbi Trust and were classified within “Other current assets” and “Other non-current assets” in the Consolidated Balance Sheets. The investment in corporate-owned life insurance policies was recorded at the cash surrender value, which approximates fair value, at the balance sheet date. The aggregate cash surrender value of these life insurance policies was $12.8 million (net of the policy loans totaling $12.5 million described above) at March 31, 2010. In fiscal 2011, we surrendered the company-owned life insurance policies held within the Rabbi Trust, receiving proceeds of $13.7 million, which was equal to their net cash surrender value on the surrender date. These proceeds were re-invested in marketable equity securities, which were also held within the Rabbi Trust and are intended to satisfy the future obligations of the BEP and SERP. Also in fiscal 2011, we recorded $2.2 million in proceeds as a death benefit from the corporate-owned life insurance policies and recognized a gain of $2.1 million, which is classified within “Other (income) expenses, net” in the Consolidated Statements of Operations. At March 31, 2012 and 2011, the marketable securities held in the Rabbi trust had a fair value of $4.4 million and $13.7 million, respectively.

~~Endorsement Split-Dollar Life Insurance~~

Agilysys provides certain former executives with life insurance benefits through endorsement split-dollar life insurance arrangements. We entered into a separate agreement with each of the former executives covered by these arrangements whereby we must maintain the life insurance policy for the specified amount and split a portion of the policy benefits with the former executive’s designated beneficiary. In fiscal 2012, we received $0.3 million for the redemption of several of the corporate-owned life insurance policies. At March 31, 2010, we recognized a charge of $0.3 million related to these benefit obligations based on estimates developed by management by evaluating actuarial information and including assumptions with respect to discount rates and mortality. The expense associated with these benefits was classified within “General, and administrative” in our Consolidated Statements of Operations. The related liability, which was $0.2 million and $0.3 million at March 31, 2012 and 2011, respectively, was recorded within “Other non-current liabilities” in our Consolidated Balance Sheets. The aggregate cash surrender value of the underlying corporate-owned split-dollar life insurance contracts, which were classified within “Other non-current assets” in our Consolidated Balance Sheets, was $3.5 million (net of policy loans of $0.2 million) and $3.3 million (net of policy loans of $0.2 million) at March 31, 2012 and 2011, respectively.

Changes in the cash surrender value of these policies related to gains and losses incurred on these investments are classified within “Other (income) expenses, net” in the accompanying Consolidated Statements of Operations. We recorded a gain of $0.4 million in fiscal 2012, a loss of $0.2 million in fiscal 2011 and a gain of $0.8 million in fiscal 2010 related to the corporate-owned life insurance policies.

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~~COMMITMENTS AND CONTINGENCIES~~

~~12.~~

~~COMMITMENTS AND CONTINGENCIES~~

~~Operating Leases~~

We lease certain facilities and equipment under non-cancelable operating leases which expire at various dates through fiscal 2022 and require us to pay a portion of the related operating expenses such as maintenance, property taxes, and insurance. Certain facilities and equipment leases contain renewal options for periods up to ten years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Certain facilities leases have free or escalating rent payment provisions. Rent expense under such leases is recognized on a straight-line basis over the lease term.

The following is a schedule by year of future minimum rental payments required under operating leases, excluding the related operating expenses, which have initial or remaining non-cancelable lease terms in excess of a year as of March 31, 2012:

      Amount
Fiscal year ending March 31,

2013
   $ 3,265
2014
   2,458
2015
   1,896
2016
   1,290
2017
   910
Thereafter
   2,002
Total minimum lease payments
   $ 11,821

Total minimum future rental payments have been reduced by $0.3 million of sublease rentals estimated to be received in the future under non-cancelable subleases. Rental expense for all non-cancelable operating leases amounted to $4.1 million, $5.3 million, and $6.5 million for fiscal 2012, 2011, and 2010, respectively.

As of March 31, 2011, we had minimum purchase commitments under a product procurement agreement with Arrow totaling $330 million. The majority of this obligation was assumed by OnX, the buyer of TSG. We completed our portion of the minimum purchase commitment of $20.0 million during fiscal 2012.

~~Asset Retirement Obligations~~

An asset retirement obligation liability represents the estimated costs to bring certain office buildings that we lease back to their original condition after the termination of the lease. In instances where our lease agreements either contain make-whole provisions or subject us to remediation costs, we establish an asset retirement obligation liability with a corresponding leasehold improvement asset. The asset retirement obligation is included in “Accrued liabilities” and “Other non-current liabilities” in the Consolidated Balance Sheets. As of March 31, 2012, the current and long-term portion of the asset retirement obligation liability was $0.2 million and $0.5 million, respectively.

~~Legal Contingencies~~

Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

On April 6, 2012, Ameranth, Inc. filed a complaint against us for patent infringement in the United States District Court for the Southern District of California. The complaint alleges, among other things, that point-of-sale and property management and other hospitality information technology products, software, components and/or systems sold by us infringe three patents owned by

64

Ameranth purporting to cover generation and synchronization of menus, including restaurant menus, event tickets, and other products across fixed, wireless and/or internet platforms as well as synchronization of hospitality information and hospitality software applications across fixed, wireless and internet platforms. The complaint seeks monetary damages, injunctive relief, costs and attorneys fees. We dispute the allegations of wrongdoing and intend to vigorously defend ourselves in this matter.

~~Other Contingencies~~

At September 30, 2008, Agilysys had $36.2 million invested in The Reserve Fund’s Primary Fund. Due to liquidity issues associated with the bankruptcy of Lehman Brothers, Inc., the Primary Fund temporarily ceased honoring redemption requests, but the Board of Trustees of the Primary Fund subsequently voted to liquidate the assets of the fund and approved a distribution of cash to the investors. To date we have received $35.8 million of the investment, recorded $3.0 million in impairment of the investment and $2.6 million in gains related to the investment for funds received after the impairment charge. In fiscal 2010, the remaining uncollected balance totaling $0.4 million was classified within Other (income) expense, net in the Consolidated Statements of Operations.

~~(LOSS) EARNINGS PER SHARE~~

~~13.~~

~~(LOSS) EARNINGS PER SHARE~~

~~The following data shows the amounts used in computing (loss) earnings per share and the effect on income and the weighted average number of shares of dilutive potential common shares.~~

   Year ended March 31,
(In thousands except per share data)    2012 2011 2010
Numerator:

Loss from continuing operations — basic and diluted
   $ (34,239 ) $ (22,975 ) $ (7,630 )
Income (loss) from discontinued operations — basic and diluted
   11,456    (32,500 ) 11,177
Net (loss) income — basic and diluted
   $ (22,783 ) $ (55,475 ) $ 3,547
Denominator:

Weighted average shares outstanding — basic and diluted
   22,432    22,785    22,627
(Loss) earnings per share — basic and diluted:

Loss from continuing operations
   $ (1.53 ) $ (1.01 ) $ (0.34 )
Income (loss) from discontinued operations
   0.51    $ (1.43 ) 0.49
Net (loss) income
   $ (1.02 ) $ (2.44 ) $ 0.15

Basic (loss) earnings per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding. The outstanding shares used to calculate the weighted average basic shares excludes 49,000, 85,000, and 187,000 of restricted shares and performance shares (including reinvested dividends) at March 31, 2012, 2011, and 2010, respectively, as these shares were issued but were not vested and, therefore, not considered outstanding for purposes of computing basic earnings per share at the balance sheet dates. When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive. In addition, when a loss from continuing operations is reported, adjusting the denominator of diluted earnings per share would also be anti-dilutive to the loss per share, even if the entity has net income after adjusting for a discontinued operation. Therefore, for the fiscal years ended March 31, 2012, 2011 and 2010, basic weighted-average shares outstanding were used in calculating the diluted net income (loss) per share.

~~SHARE-BASED COMPENSATION~~

~~14.~~

~~SHARE-BASED COMPENSATION~~

On July 28, 2011, Agilysys’ shareholders approved the 2011 Stock Incentive Plan (the “2011 Plan”). Under the 2011 Plan, we may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights (“SSARs”), restricted shares, and restricted share units for up to 3.0 million common shares. The maximum aggregate number of restricted shares or restricted share

65

units that may be granted under the 2011 Plan is 1.0 million. The maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year is 400,000 shares, and the maximum number of shares subject to stock options or SSARs that may be granted to an individual in a calendar year is 800,000 shares.

For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant. The maximum term of stock option and SSAR awards is seven years from the date of grant. Stock option and SSARs awards vest over a period established by the Compensation Committee of the Board of Directors. SSARs may be granted in conjunction with, or independently from, a stock option granted under the 2011 Plan. SSARs granted in connection with ~~a stock option are exercisable only~~statutory and regulatory filings. “Audit-Related Fees” generally include fees for employee benefits plan audits, business acquisitions, and accounting consultations. “Tax Fees” include tax compliance and tax advice services. “All Other Fees” generally relate to ~~the extent that the stock option~~services provided in connection with non-audit acquisition activities.



Ohio		34-0907152
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

425 Walnut Street, Suite 1800, Cincinnati, Ohio		45202
(Address of principal executive offices)		(Zip Code)



Title of each class		Name of each exchange on which registered
Common Shares, without par value		The NASDAQ Stock Market LLC




	~~Page~~
~~PART I~~
~~ITEM 1.~~		~~Business~~		4
~~ITEM 1A.~~		~~Risk Factors~~		9
~~ITEM 1B.~~		~~Unresolved Staff Comments~~		13
~~ITEM 2.~~		~~Properties~~		13
~~ITEM 3.~~		~~Legal Proceedings~~		13
~~ITEM 4.~~		~~Mine Safety Disclosures~~		13
~~PART II~~
~~ITEM 5.~~		~~Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities~~		14
~~ITEM 6.~~		~~Selected Financial Data~~		16
~~ITEM 7.~~		~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		17
~~ITEM 7A.~~		~~Quantitative and Qualitative Disclosures about Market Risk~~		38
~~ITEM 8.~~		~~Financial Statements and Supplementary Data~~		39
~~ITEM 9.~~		~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~		77
~~ITEM 9A.~~		~~Controls and Procedures~~		77
~~ITEM 9B.~~		~~Other Information~~		77
PART III
ITEM 10.		Directors, Executive Officers and Corporate Governance		78	4
ITEM 11.		Executive Compensation		78	7
ITEM 12.		Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		78	24
ITEM 13.		Certain Relationships and Related Transactions, and Director Independence		78	27
ITEM 14.		Principal Accountant Fees and Services	28
		78
PART IV
ITEM 15.		Exhibits and Financial Statement Schedules	29

78SIGNATURES		30

~~SIGNATURES~~



Name	Age	Current Position	Previous Positions
Robert R. Ellis	39	Senior Vice President and Chief Financial Officer since October 2011, Treasurer since January 2012, and Chief Operating Officer since October 2012.	Vice President of Accounting and Financial Operations and Principal Accounting Officer at Radiant Systems, Inc. from 2007 to October 2011. Corporate Controller and director at Radiant from 2003 to 2007.
Kyle C. Badger	45	Senior Vice President, General Counsel and Secretary since October 2011.	Executive Vice President, General Counsel and Secretary at Richardson Electronics, Ltd. from 2007 to October 2011. Senior Counsel at Ice Miller LLP from 2006 to 2007. Partner at McDermott, Will & Emery LLP from 2003 to 2006.
Larry Steinberg	45	Senior Vice President and Chief Technology Officer since June 2012.	Senior Vice President, Technology for us in May 2012. Principal Development Manager, Microsoft Corporation from August 2009 to April 2012, and Principal Architect from June 2007 to July 2009. Founder and Chief Technology Officer of Engyro Corporation from March 1995 to May 2007.
Janine K. Seebeck	37	Vice President and Controller since November 2011.	Vice President of Finance, Asia Pacific, at Premiere Global Services, Inc. from 2008 to April 2011. Vice President, Corporate Controller at Premiere from 2002 to 2008.



Director	Fees Earned or Paid in Cash ($)(1)	Stock Awards ($)(2)	Total ($)
R. Andrew Cueva	50,000	—	50,000
Jerry Jones	35,000	70,000	105,000
Keith M. Kolerus	82,500	70,000	152,500
Robert A. Lauer	55,000	70,000	125,000
Robert G. McCreary, III	35,000	70,000	105,000
John Mutch	47,500	70,000	117,500



þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Component	Threshold		Maximum
Component	Payout (% of target incentive)	Required Achievement of Performance Measures (%)	Payout (% of target incentive)	Required Achievement of Performance Measures (%)
Revenue	90	97.7	150	108.3
Gross Profit	90	92.6	150	101.9
Adjusted Operating Income	90	83.3	150	283.3
Adjusted Operating Income-RSG	90	83.3	150	283.3

~~Item 1. Business.~~

Executive	MBO	% of MBOs
Kyle C. Badger	Process improvements and efficiency gains with respect to customer contract creation	20
	and review process
	Review, update and implement the Company’s records retention policy	20
	Review and update the Company’s intellectual property strategy	20
	Complete new master agreements for certain major customers	20
	Complete new agreements for certain key vendors	20
Paul A. Civils	Cooperate with the RSG sale process	100
Larry Steinberg	Accomplish development objectives for property management system (PMS) software	26
	Remain within PMS software development budget	26
	Meet product development schedule for certain point of sale product improvements	20
	Improve in-market product quality by establishing a new product engineering process	18
	Implement customer advisory boards for certain products	10



	Performance Metrics				Annual Incentive
Target Incentive as a % of salary	Component	Weight	Target	Actual	Target (1)		Payout (1)
James H. Dennedy – 88%	Revenue: AGYS	25%	$216.0M	$234.2M		$87,500		$131,250
	Gross Profit: AGYS	40%	$86.4M	$89.3M		$140,000		$210,000
	AOI: AGYS	35%	$3.0M	$6.6M		$122,500		$168,534
Total						$350,000		$509,784

Robert R. Ellis – 75%	Revenue: AGYS	25%	$216.0M	$234.2M	$56,250		$84,375
	Gross Profit: AGYS	40%	$86.4M	$89.3M	$90,000		$135,000
	AOI: AGYS	35%	$3.0M	$6.6M	$78,750		$108,343
Total					$225,000		$327,718

Kyle C. Badger– 50%	Revenue: AGYS	15%	$216.0M	$234.2M	$18,750		$28,125
	Gross Profit: AGYS	20%	$86.4M	$89.3M	$25,000		$37,500
	AOI: AGYS	15%	$3.0M	$6.6M	$18,750		$25,796
	MBO	50%			$62,500		$62,500
Total					$125,000		$153,921

Paul A. Civils – 55%	AOI: RSG	75%	$11.0M	$11.0M	$107,250		$144,720
	MBO	25%			$35,750		$35,750
Total					$143,000		$180,470

Larry Steinberg - 60%	Revenue: AGYS	15%	$216.0M	$234.2M	$18,147		$27,221
	Gross Profit: AGYS	20%	$86.4M	$89.3M	$24,196		$36,294
	AOI: AGYS	15%	$3.0M	$6.6M	$18,147		$24,967
	MBO	50%			$60,490		$60,490
Total					$120,980		$148,972


(1)	Pro-rated from hire date for Mr. Steinberg. See Grants of Plan-Based Awards table for annualized award amounts.



Name	Percent of Salary (%)	Total LTIP Value ($)	SSARs Granted (#)	Restricted Shares Granted (#)
James H. Dennedy	190	760,000	78,350	50,938
Robert R. Ellis	60	171,000	17,628	11,461
Kyle C. Badger	50	125,000	12,886	8,378
Paul A. Civils	65	169,000	17,422	11,327
Larry Steinberg	85	191,279	17,513	11,067



Title	Multiple of Director Annual Retainer and Executive Base Salary		Number of Shares
Title	2 Years	4 Years	2 Years	4 Years
Director	3x	6x	15,000	45,000
CEO	2.5x	5x	125,000	250,000
Senior Vice President	0.5x	2x	15,000	75,000
LTIP Participants	—	0.5x	2,500	15,000


	For The Year Ended March 31,

(In thousands)	2012		2011		2010
Products	$	105,141	$	104,769	$	103,501
Support, maintenance and subscription services		73,171		70,729		63,218
Professional services		30,577		27,183		26,787
Total	$	208,889	$	202,681	$	193,506



Fiscal 2012	High		Low
Fourth quarter	$	9.60	$	6.92
Third quarter	$	9.00	$	6.50
Second quarter	$	10.00	$	6.60
First quarter	$	8.62	$	4.43

Fiscal 2011	High		Low
Fourth quarter	$	6.50	$	4.74
Third quarter	$	7.45	$	4.66
Second quarter	$	8.31	$	4.30
First quarter	$	12.50	$	6.09



	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (2)		Maximum Number of Shares That May Yet Be Purchased Under the Plans
January 1-31		112,957	$	8.07		112,957		16,087
February 1-29		16,087	$	8.31		16,087		—
March 1-31		5,924	$	8.99		—		—
Total		134,968	$	8.14		—		—


			Fiscal Years Ended March 31,

Company Name / Index	Base Period 2007		2008		2009		2010		2011		2012
Agilysys, Inc.	$	100.00	$	51.97	$	19.68	$	51.69	$	26.57	$	41.61
Russell 2000	$	100.00	$	87.01	$	54.38	$	88.51	$	111.34	$	111.13
Peer Group	$	100.00	$	80.67	$	60.08	$	87.11	$	107.02	$	95.98


	For the year ended March 31,

(In thousands, except per share data)	2012			2011			2010			2009			2008
Operating results
Net revenue	$	208,889		$	202,681		$	193,506		$	220,888		$	214,601
Gross profit		79,836			75,639			74,008			86,099			75,690
Operating loss		(41,190	)		(21,625	)		(14,880	)		(184,371	)		(29,777	)
Loss from continuing operations, net of taxes		(34,239	)		(22,975	)		(7,630	)		(178,644	)		(13,331	)
Income (loss) from discontinued operations, net of taxes		11,456			(32,500	)		11,177			(105,490	)		16,990
Net (loss) income	$	(22,783	)	$	(55,475	)	$	3,547		$	(284,134	)	$	3,659
Per share data (1)
Basic and diluted
Loss from continuing operations	$	(1.53	)	$	(1.01	)	$	(0.34	)	$	(7.91	)	$	(0.47	)
Income (loss) from discontinued operations		0.51			(1.43	)		0.49			(4.67	)		0.60
Net (loss) income	$	(1.02	)	$	(2.44	)	$	0.15		$	(12.58	)	$	0.13
Weighted-average shares outstanding Basic and diluted		22,432			22,785			22,627			22,587			28,252
Balance sheet data at year end
Cash and cash equivalents	$	97,587		$	74,354		$	65,535		$	36,451		$	70,596
Working capital		76,286			83,005			88,978			72,150			90,536
Total assets (2)		204,139			312,398			330,449			374,436			695,871
Total debt		994			1,906			819			623			987
Total shareholders’ equity		114,438			148,104			198,924			192,717			479,465


	Year ended March 31,						Increase (decrease)

(Dollars in thousands)	2012			2011			$			%
Net revenue:
Products	$	105,141		$	104,769		$	372			0.4%
Support, maintenance and subscription services		73,171			70,729			2,442	��		3.5%
Professional services		30,577			27,183			3,394			12.5%
Total		208,889			202,681			6,208			3.1%
Cost of goods sold:
Products		83,550			80,090			3,460			4.3%
Support, maintenance and subscription services		25,706			25,507			199			0.8%
Professional services		19,797			21,445			(1,648	)		(7.7)%
Total		129,053			127,042			2,011			1.6%
Gross profit		79,836			75,639			4,197			5.5%
*Gross profit margin*		*38.2%*			37.3%
Operating expenses:
Product development		30,309			27,531			2,778			10.1%
Sales and marketing		24,006			22,212			1,794			8.1%
General and administrative		32,889			37,121			(4,232	)		(11.4)%
Depreciation of fixed assets		4,602			3,914			688			17.6%
Amortization of intangibles		3,686			5,122			(1,436	)		(28.0)%
Asset impairments and related charges		9,681			959			8,722			nm
Restructuring and related charges		15,853			405			15,448			nm
Operating loss	$	(41,190	)	$	(21,625	)	$	(19,565	)		90.5%
Operating loss percentage		*(19.7)%*			(10.7)%




	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by shareholders (2000 Stock Option Plan for Outside Directors and 2000, 2006, and 2011 Stock Incentive Plans)	1,432,619	$10.92	3,004,302

Equity compensation plans not approved by shareholders	—	—	—

Total	1,432,619	$10.92	3,004,302


	Year ended March 31,						(Unfavorable) favorable

(Dollars in thousands)	2012			2011			$			%
Other (income) expenses
Interest income	$	(103	)	$	(73	)	$	30			41.1%
Interest expense		978			1,297			319			24.6%
Other expense (income), net		181			(2,294	)		(2,475	)		(107.9)%
Total other expenses (income), net	$	1,056		$	(1,070	)	$	(2,126	)		(198.7)%


	Year ended March 31,					(Unfavorable) favorable

(Dollars in thousands)	2012			2011		$		%
Income tax (benefit) expense	$	(8,007	)	$	2,420	$	10,427		nm
Effective tax rate		(19.0)%			(11.8)%


	Year ended March 31,						(Decrease) increase

(Dollars in thousands)	2011			2010			$			%
Net revenue:
Products	$	104,769		$	103,501		$	1,268			1.2%
Support, maintenance and subscription services		70,729			63,218			7,511			11.9%
Professional services		27,183			26,787			396			1.5%
Total		202,681			193,506			9,175			4.7%
Cost of goods sold:
Products		80,090			80,825			(735	)		(0.9)%
Support, maintenance and subscription services		25,507			23,148			2,359			10.2%
Professional services		21,445			15,525			5,920			38.1%
Total		127,042			119,498			7,544			6.3%
Gross profit		75,639			74,008			1,631			2.2%
*Gross profit margin*		37.3%			38.2%
Operating expenses:
Product development		27,531			28,241			(710	)		(2.5)%
Sales and marketing		22,212			20,334			1,878			9.2%
General and administrative		37,121			31,116			6,005			19.3%
Depreciation of fixed assets		3,914			3,260			654			20.1%
Amortization of intangibles		5,122			4,878			244			5.0%
Asset impairments and related charges		959			236			723			nm
Restructuring and related charges		405			823			(418	)		nm
Operating loss	$	(21,625	)	$	(14,880	)	$	(6,745	)		nm
Operating loss percentage		*(10.7)%*			(7.7)%


	Year ended March 31,						Favorable (unfavorable)

(Dollars in thousands)	2011			2010			$			%
Other (income) expenses
Interest income	$	(73	)	$	(29	)	$	44			151.7%
Interest expense		1,297			1,013			(284	)		(28.0)%
Other (income) expenses, net		(2,294	)		(687	)		1,607			233.9%
Total other (income) expenses, net	$	(1,070	)	$	297		$	1,367			460.3%


	Year ended March 31,					Favorable (unfavorable)

(Dollars in thousands)	2011		2010			$			%
Income tax expense (benefit)	$	2,420	$	(7,547	)	$	(9,967	)
Effective tax rate		(11.8)%		49.7%



(In thousands)	Total		2013		2014- 2015		2016- 2017		Thereafter
Operating leases (1)	$	11,821	$	3,265	$	4,354	$	2,200	$	2,002
Restructuring liabilities		6,299		5,447		852		—		—
SERP liability (2)		3,323		3,323		—		—		—
Capital leases		1,073		709		364		—		—
Asset retirement obligation		680		180		—		500		—
Total contractual obligations	$	23,196	$	12,924	$	5,570	$	2,700	$	2,002



Fiscal Year	Audit Fees ($)	Audit-Related Fees ($)	Tax Fees ($)	All Other Fees ($)
2013	633,400	103,000	—	—
2012	1,166,869	151,530	46,239	—


	As of March 31,

(In thousands, except share and per share data)	2012			2011
ASSETS
Current assets
Cash and cash equivalents	$	97,587		$	74,354
Accounts receivable, net of allowance of $632 and $661, respectively		32,531			31,926
Inventories, net of allowance of $1,066 and $1,851, respectively		15,710			10,921
Prepaid expenses		2,975			2,829
Other current assets		5,492			7,747
Assets of discontinued operations — current		—			102,015
Total current assets		154,295			229,792
Property and equipment, net		16,504			24,855
Goodwill		15,198			15,211
Intangible assets, net of amortization of $21,560 and $20,068, respectively		14,135			22,535
Other non-current assets		4,007			11,709
Assets of discontinued operations — non-current		—			8,296
Total assets	$	204,139		$	312,398
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	24,938		$	17,852
Deferred revenue		28,441			23,995
Accrued liabilities		23,983			14,936
Capital lease obligations — current		647			999
Liabilities of discontinued operations — current		—			89,005
Total current liabilities		78,009			146,787
Deferred income taxes — non-current, net		5,135			3,894
Capital lease obligations — non-current		347			907
Other non-current liabilities		6,210			11,972
Liabilities of discontinued operations — non-current		—			734
Commitments and contingencies (see Note 12)
Shareholders’ equity:
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,606,831 shares issued; and 21,875,850 and 23,022,398 shares outstanding at March 31, 2012 and 2011, respectively		9,482			9,482
Treasury shares (9,730,981 and 8,584,433 at March 31, 2012 and 2011, respectively)		(2,919	)		(2,575	)
Capital in excess of stated value		(16,032	)		(5,421	)
Retained earnings		123,876			146,659
Accumulated other comprehensive income (loss)		31			(41	)
Total shareholders’ equity		114,438			148,104
Total liabilities and shareholders’ equity	$	204,139		$	312,398


	Common Shares										Capital in excess of stated value			Retained earnings			Accumulated other comprehensive income (loss)			Total
	Issued				In Treasury
(In thousands, except per share data)	Shares		Stated value		Shares			Stated value
Balance at March 31, 2009		31,524	$	9,457		(8,897	)	$	(2,669	)	$	(11,128	)	$	199,947		$	(2,890	)	$	192,717
Cash dividends ($0.06 per share)		—		—		—			—			—			(1,360	)		—			(1,360	)
Non-cash share based compensation expense		—		—		—			—			1,588			—			—			1,588
Restricted shares issued		70		21		197			59			758			—			—			838
Shares issued upon exercise of stock options		13		4		25			8			77			—			—			89
Tax deficit related to exercise of stock options		—		—		—			—			(65	)		—			—			(65	)
Comprehensive income:
Net income		—		—		—			—			—			3,547			—			3,547
Unrealized translation adjustment		—		—		—			—			—			—			1,320			1,320
Unrealized loss on securities		—		—		—			—			—			—			91			91
Net actuarial gains and prior service cost on curtailment of defined benefit pension plans, net of $104 in taxes		—		—		—			—			—			—			159			159
Total comprehensive income																					5,117
Balance at March 31, 2010		31,607	$	9,482		(8,675	)	$	(2,602	)	$	(8,770	)	$	202,134		$	(1,320	)	$	198,924
Non-cash share based compensation expense		—		—		—			—			2,553			—			—			2,553
Restricted shares issued		—		—		110			33			1,028			—			—			1,061
Shares issued upon exercise of stock options and SSARs		—		—		23			6			(6	)		—			—			—
Shares withheld for taxes upon exercise of stock options and SSARs or vesting of restricted shares		—		—		(42	)		(12	)		(226	)		—			—			(238	)
Comprehensive loss:
Net loss		—		—		—			—			—			(55,475	)		—			(55,475	)
Unrealized translation adjustment		—		—		—			—			—			—			565			565
Net actuarial gains and prior service cost on defined benefit pension plans, net of $467 in taxes		—		—		—			—			—			—			714			714
Total comprehensive loss																					(54,196	)
Balance at March 31, 2011		31,607	$	9,482		(8,584	)	$	(2,575	)	$	(5,421	)	$	146,659		$	(41	)	$	148,104
Purchase of treasury shares		—		—		(1,600	)		(481	)		(12,692	)								(13,173	)
Non-cash share based compensation expense		—		—		—			—			2,368			—			—			2,368
Restricted shares issued		—		—		130			39			1,050			—			—			1,089
Shares issued upon exercise of stock options and SSARs		—		—		595			179			31			—			—			210
Shares withheld for taxes upon exercise of stock options and SSARs or vesting of restricted shares		—		—		(272	)		(81	)		(1,368	)		—			—			(1,449	)
Comprehensive loss:
Net loss		—		—		—			—			—			(22,783	)		—			(22,783	)
Unrealized translation adjustment		—		—		—			—			—			—			76			76
Unrealized loss on securities		—		—		—			—			—			—			(4	)		(4	)
Total comprehensive loss																					(22,711	)
Balance at March 31, 2012		31,607	$	9,482		(9,731	)	$	(2,919	)	$	(16,032	)	$	123,876		$	31		$	114,438


	Quarter Ended June 30, 2011									Quarter Ended September 30, 2011

(In thousands except per share amounts)	As Previously Reported			Adjustment			As Revised			As Previously Reported			Adjustment			As Revised
Net revenue	$	53,886		$	(1,295	)	$	52,591		$	53,587		$	(902	)	$	52,685
Costs of goods sold.		34,359			144			34,503			31,972			(286	)		31,686
Net loss from continued operations		(5,440	)		(1,439	)		(6,879	)		(3,238	)		(316	)		(3,554	)
Loss per share for continuing operations — Basic and diluted		(0.24	)		(0.06	)		(0.30	)		(0.14	)		(0.02	)		(0.16	)


	As of June 30, 2011							As of September 30, 2011

(In thousands)	As Previously Reported		Adjustment			As Revised		As Previously Reported		Adjustment			As Revised
Current assets	$	117,239	$	(1,099	)	$	116,140	$	153,052	$	(1,537	)	$	151,515
Current liabilities		64,855		340			65,195		58,713		218			58,931
Shareholder’s equity		145,079		(1,439	)		143,640		145,244		(1,756	)		143,488



	Severance and Other Employment Costs			Facilities			Other			SERP			Total
Balance at March 31, 2009	$	8,846		$	1,042		$	39		$	—		$	9,927
Additions		(92	)		94			—			821			823
Settlement of benefit plan obligations		—			—			—			(821	)		(821	)
Payments		(7,465	)		(456	)		(39	)		—			(7,960	)
Adjustments		—			(31	)					—			(31	)
Balance at March 31, 2010	$	1,289		$	649					$	—		$	1,938
Additions		(35	)		57						383			405
Settlement of benefit plan obligations		—			—						(383	)		(383	)
Payments		(965	)		(262	)					—			(1,227	)
Balance at March 31, 2011	$	289		$	444					$	—		$	733
Additions		7,996			3,466									11,462
Payments		(2,778	)		(3,118	)								(5,896	)
Balance at March 31, 2012	$	5,507		$	792					$	—		$	6,299


	Year ended March 31

(In thousands)	2012			2011
Furniture and equipment	$	13,273		$	40,573
Software		17,224			49,548
Leasehold improvements		4,754			8,841
Project expenditures not yet in use		173			668
		35,424			99,630
Accumulated depreciation and amortization		(18,920	)		(74,775	)
Property and equipment, net	$	16,504		$	24,855



	2012			2011
Capital lease obligations	$	994		$	1,906
Less: current maturities		(647	)		(999	)
Long -term capital lease obligations	$	347		$	907



	Amount
Fiscal year ending March 31,
2013	$	709
2014		231
2015		133
Total minimum lease payments	$	1,073
Less: amount representing interest		(79	)
Present value of minimum lease payments	$	994