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United States
Washington, D.C. 20549
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended March 31, 2005 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For transition period from to |
COMMISSION FILE NUMBER 0-5734
OHIO (State or other jurisdiction of incorporation or organization) | 34-0907152 (I.R.S. employer identification number) | |
6065 Parkland Boulevard, Mayfield Heights, Ohio (Address of principal executive offices) | 44124 (Zip Code) |
Registrant’s telephone number, including area code: (440) 720-8500
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K Annual Report or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
The aggregate market value of Common Shares held by non-affiliates as of September 30, 2004 (the last business day of the registrant’s most recently completed second fiscal quarter) was $479,229,575 computed on the basis of the last reported sale price per share ($17.29) of such shares on the NASDAQ National Market.
As of June 24, 2005, the Registrant had the following number of Common Shares outstanding: 30,418,714
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 28, 2005 are incorporated by reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 2005.
AGILYSYS, INC.
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Item 1. Business.
Overview
History and Significant Events
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Industry
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Products and Services Distributed and Sources of Supply
Inventory
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Customers
Uneven Sales Patterns and Seasonality
Backlog
Competition
Growth through Acquisitions
Employees
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Markets
Access to Information
Item 2. Properties.
Type of | Approximate | Leased or | ||||||||||
Location | facility | square footage | owned | |||||||||
Solon, Ohio | Distribution | 224,600 | Leased | |||||||||
Solon, Ohio | Office facility | 102,500 | Owned | |||||||||
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 4A. Executive Officers of the Registrant.
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Name | Age | Current Position | Other Positions | |||||
Arthur Rhein | 59 | Chairman of the Board, President and Chief Executive Officer of the company since April 30, 2003. | President and Chief Executive Officer of the company from April 2002 to April 2003. Prior to 2001 to March 31, 2002, President and Chief Operating Officer. | |||||
Robert J. Bailey | 48 | Executive Vice President since May 2002. | Prior to 2001 to May 2002, Senior Vice President, Marketing of the company’s Computer Systems Division. | |||||
Peter J. Coleman | 50 | Executive Vice President since May 2002. | Prior to 2001 to May 2002, Senior Vice President, Sales of the company’s Computer Systems Division. | |||||
Martin F. Ellis | 40 | Executive Vice President, Treasurer and Chief Financial Officer since June 3, 2005 | Executive Vice President, Corporate Development and Investor Relations from July 2003 to June 3, 2005. Prior to July 2003, Senior Vice President, Principal, and Head of Corporate Finance for Stern Stewart & Co. | |||||
Edward J. Gaio | 51 | Vice President and Controller of the company since April 2001. | Prior to 2001 to April 2001, Controller. | |||||
Richard A. Sayers II | 54 | Executive Vice President, Chief Human Resources Officer since May 2002. | Prior to 2001 to May 2002, Senior Vice President, Corporate Services. | |||||
Kathryn K. Vanderwist | 45 | Vice President, General Counsel and Assistant Secretary since April 2001. | Prior to 2001 to April 2001, General Counsel and Assistant Secretary. | |||||
Lawrence N. Schultz | 57 | Secretary of the company since 1999. | Prior to 2001 to present, Partner of the law firm of Calfee, Halter & Griswold LLP. (1) | |||||
(1) | The law firm of Calfee, Halter & Griswold LLP serves as counsel to the company. |
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Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. |
Year ended March 31, 2005 | ||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||
quarter | quarter | quarter | quarter | Year | ||||||||||||||||
Dividends declared per common share | $0.03 | $0.03 | $0.03 | $0.03 | $0.12 | |||||||||||||||
Price range per common share | $11.32-$13.87 | $10.75-$17.29 | $15.72-$17.93 | $15.94-$20.05 | $10.75-$20.05 | |||||||||||||||
Closing price on last day of period | $13.79 | $17.29 | $17.14 | $19.66 | $19.66 | |||||||||||||||
Year ended March 31, 2004 | ||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||
quarter | quarter | quarter | quarter | Year | ||||||||||||||||
Dividends declared per common share | $0.03 | $0.03 | $0.03 | $0.03 | $0.12 | |||||||||||||||
Price range per common share | $7.31-$10.41 | $8.25-$9.97 | $9.16-$11.50 | $11.18-$13.81 | $7.31-$13.81 | |||||||||||||||
Closing price on last day of period | $8.45 | $8.77 | $11.15 | $11.79 | $11.79 | |||||||||||||||
As of June 24, 2005, there were 30,418,714 common shares of Agilysys, Inc. outstanding, and there were 2,432 shareholders of record. The closing price of the common shares on June 7, 2005, was $16.03.
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Item 6. Selected Financial Data.
For the year ended March 31 | ||||||||||||||||||||||
(In thousands, except per share data and number of employees) | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
Operating results | ||||||||||||||||||||||
Continuing operations (a)(b) | ||||||||||||||||||||||
Net sales | $ | 1,622,925 | $ | 1,403,216 | $ | 1,171,631 | $ | 1,294,322 | $ | 1,431,838 | ||||||||||||
Income (loss) before income taxes (c)(d)(e) | $ | 41,240 | $ | 26,708 | $ | (31,484 | ) | $ | 4,944 | $ | (15,724 | ) | ||||||||||
Provision for income taxes | $ | 15,725 | $ | 9,684 | $ | (11,739 | ) | $ | 1,618 | $ | (3,713 | ) | ||||||||||
Income (loss) from continuing operations | $ | 20,362 | $ | 11,524 | $ | (26,060 | ) | $ | (2,911 | ) | $ | (18,316 | ) | |||||||||
(Loss) income from discontinued operations, net of taxes | $ | (877 | ) | $ | (2,861 | ) | $ | 18,777 | $ | (4,136 | ) | $ | 52,892 | |||||||||
Cumulative effect of change in accounting principle, net of taxes (f) | $ | — | $ | — | $ | (34,795 | ) | $ | — | $ | — | |||||||||||
Net income (loss) (a)(b)(c)(d)(e)(f) | $ | 19,485 | $ | 8,663 | $ | (42,078 | ) | $ | (7,047 | ) | $ | 34,576 | ||||||||||
Per share data | ||||||||||||||||||||||
Income (loss) from continuing operations (a)(b)(c)(d)(e) | ||||||||||||||||||||||
Basic | $ | 0.72 | $ | 0.42 | $ | (0.96 | ) | $ | (0.11 | ) | $ | (0.68 | ) | |||||||||
Diluted | $ | 0.69 | $ | 0.41 | $ | (0.96 | ) | $ | (0.11 | ) | $ | (0.68 | ) | |||||||||
Cash dividends per share | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 | $ | 0.12 | ||||||||||||
Book value per share (g) | $ | 11.54 | $ | 11.14 | $ | 10.88 | $ | 12.56 | $ | 13.18 | ||||||||||||
Price range of common shares | ||||||||||||||||||||||
High | $ | 20.05 | $ | 13.81 | $ | 15.50 | $ | 14.94 | $ | 16.13 | ||||||||||||
Low | $ | 10.75 | $ | 7.31 | $ | 5.40 | $ | 7.40 | $ | 9.13 | ||||||||||||
Weighted average shares outstanding | ||||||||||||||||||||||
Basic | 28,101 | 27,744 | 27,292 | 27,040 | 26,793 | |||||||||||||||||
Diluted | 36,990 | 27,956 | 27,292 | 27,040 | 26,793 | |||||||||||||||||
Financial position | ||||||||||||||||||||||
Total assets | $ | 815,158 | $ | 759,662 | $ | 773,883 | $ | 916,937 | $ | 1,183,610 | ||||||||||||
Long-term obligations | $ | 59,624 | $ | 59,503 | $ | 130,995 | $ | 179,000 | $ | 390,999 | ||||||||||||
Mandatorily Redeemable Convertible Trust Preferred Securities (h) | $ | 125,317 | $ | 125,425 | $ | 143,675 | $ | 143,675 | $ | 143,750 | ||||||||||||
Shareholders’ equity | $ | 332,453 | $ | 308,990 | $ | 298,550 | $ | 340,697 | $ | 354,257 | ||||||||||||
Other comparative data | ||||||||||||||||||||||
Average total number of employees (a) | 1,386 | 1,365 | 1,126 | 1,253 | 1,314 | |||||||||||||||||
Net sales per employee (a) | $ | 1,171 | $ | 1,028 | $ | 1,041 | $ | 1,033 | $ | 1,090 | ||||||||||||
Gross margin percent of net sales (a) | 12.8% | 12.9% | 12.7% | 13.2% | 12.4% | |||||||||||||||||
Operating expense percent of net sales (a)(b)(c) | 10.2% | 10.3% | 13.4% | 12.0% | 12.4% | |||||||||||||||||
Net income (loss) percent of net sales (a)(b)(c)(d)(e)(f) | 1.2% | 0.6% | -3.6% | -0.5% | 2.4% | |||||||||||||||||
(a) | The sale of the company’s Industrial Electronics Division (“IED”) and the related discontinuation of the operations of Aprisa, Inc. in February 2003 represent a disposal of a “component of an entity” as defined in FASB Statement 144,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Accordingly, 2001 and 2002 have been restated to reflect the results of operations of IED and Aprisa, Inc. as discontinued operations, and to exclude employees that were related to these businesses. (See note 3 to the consolidated financial statements contained in Part IV hereof.) | |
(b) | In 2004, the company included the results of operations of both Kyrus Corporation and Inter-American Data, Inc. from their respective dates of acquisition. | |
(c) | In 2005, the company recorded restructuring charges of $0.5 million ($0.3 million, after taxes) primarily for ongoing accretion of lease expense for facilities closed in earlier years. In 2004, the company recorded restructuring charges of $2.5 million ($1.6 million, after taxes) for facility closures, change in company name, and other costs associated with the 2003 reorganization. In March 2003, the company recorded restructuring charges of $20.7 million ($13.0 million, after taxes) for the impairment of facilities and other assets and for severance costs incurred in connection with downsizing the company’s corporate structure. In 2001, the company recognized a non-cash write-down of $14.2 million ($10.8 million, after taxes) for the abandonment of certain information technology system assets. | |
(d) | In March 2003, the company recognized an impairment charge of $14.6 million ($9.2 million, after taxes) on an available-for-sale investment. | |
(e) | In 2004 and 2003, the company repurchased certain of its Senior Notes, which resulted in a pre-tax charge of $8.5 million ($5.4 million, after taxes) and $1.2 million ($0.7 million, after taxes), respectively, associated with the premium paid and the write-off of related financing costs. | |
(f) | On April 1, 2002, the company adopted FASB Statement 142,Goodwill and Other Intangible Assets, which requires that amortization of goodwill be replaced with an annual test for goodwill impairment (more often if indicators of impairment exist). The adoption of Statement 142 resulted in a charge of $34.8 million, net of taxes, which was recorded as a cumulative effect of a change in accounting principle. (See note 5 to the consolidated financial statements contained in Part IV hereof.) | |
(g) | Book value per share is determined by dividing shareholders’ equity by shares outstanding less subscribed-for shares and unvested restricted shares. | |
(h) | On June 15, 2005, the company completed the redemption of its Mandatorily Redeemable Convertible Trust Preferred Securities (“Securities”). Securities with a carrying value of $105.4 million were redeemed for cash at a total cost of $109.0 million. In addition, 398,324 Securities with a carrying value of $19.9 million were converted into common shares of the company. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
Results of Operations
2005 Compared with 2004
Net Sales and Operating Income
Year ended March 31 | Increase (decrease) | |||||||||||||||||
(Dollars in thousands) | 2005 | 2004 | $ | % | ||||||||||||||
Net sales | $ | 1,622,925 | $ | 1,403,216 | $ | 219,709 | 15.7 % | |||||||||||
Cost of goods sold | 1,415,477 | 1,222,314 | 193,163 | 15.8 % | ||||||||||||||
Gross margin | 207,448 | 180,902 | 26,546 | 14.7 % | ||||||||||||||
Gross margin percentage | 12.8 | % | 12.9 | % | ||||||||||||||
Operating expenses | ||||||||||||||||||
Selling, general, and administrative expenses | 164,470 | 142,436 | 22,034 | 15.5 % | ||||||||||||||
Restructuring charges | 515 | 2,516 | (2,001 | ) | (79.5)% | |||||||||||||
Operating income | $ | 42,463 | $ | 35,950 | $ | 6,513 | 18.1 % | |||||||||||
Operating income percentage | 2.6 | % | 2.6 | % | ||||||||||||||
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Other (Income) Expenses
Year ended | Favorable | |||||||||||||||||
March 31 | (Unfavorable) | |||||||||||||||||
(Dollars in thousands) | 2005 | 2004 | $ | % | ||||||||||||||
Other (income) expenses | ||||||||||||||||||
Other income, net | $ | (1,984 | ) | $ | (6,687 | ) | $ | (4,703 | ) | (70.3)% | ||||||||
Interest income | (3,310 | ) | (2,250 | ) | 1,060 | 47.1% | ||||||||||||
Interest expense | 6,517 | 10,318 | 3,801 | 36.8% | ||||||||||||||
Loss on retirement of debt, net | — | 7,861 | 7,861 | 100.0% | ||||||||||||||
Total other (income) expenses | $ | 1,223 | $ | 9,242 | $ | 8,019 | 86.8% | |||||||||||
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Income Taxes
2004 Compared with 2003
Net Sales and Operating Income
Increase | ||||||||||||||||||
Year ended March 31 | (decrease) | |||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | $ | % | ||||||||||||||
Net sales | $ | 1,403,216 | $ | 1,171,631 | $ | 231,585 | 19.8% | |||||||||||
Cost of goods sold | 1,222,314 | 1,022,378 | 199,936 | 19.6% | ||||||||||||||
Gross margin | 180,902 | 149,253 | 31,649 | 21.2% | ||||||||||||||
Gross margin percentage | 12.9 | % | 12.7 | % | ||||||||||||||
Operating expenses | ||||||||||||||||||
Selling, general, and administrative expenses | 142,436 | 135,991 | 6,445 | 4.7% | ||||||||||||||
Restructuring charges | 2,516 | 20,697 | (18,181 | ) | -87.8% | |||||||||||||
Operating income (loss) | $ | 35,950 | $ | (7,435 | ) | $ | 43,385 | 583.5% | ||||||||||
Operating income percentage | 2.6 | % | -0.6 | % | ||||||||||||||
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Other (Income) Expenses
Year ended | Favorable | |||||||||||||||||
March 31 | (unfavorable) | |||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | $ | % | ||||||||||||||
Other (income) expenses | ||||||||||||||||||
Other income, net | $ | (6,687 | ) | $ | (966 | ) | $ | 5,721 | 592.2% | |||||||||
Interest income | (2,250 | ) | (1,205 | ) | 1,045 | 86.7% | ||||||||||||
Interest expense | 10,318 | 10,456 | 138 | 1.3% | ||||||||||||||
Loss on retirement of debt, net | 7,861 | 1,164 | (6,697 | ) | -575.3% | |||||||||||||
Investment impairment | — | 14,600 | 14,600 | 100.0% | ||||||||||||||
Total other (income) expenses | $ | 9,242 | $ | 24,049 | $ | 14,807 | 61.6% | |||||||||||
Income Taxes
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Off-Balance Sheet Arrangements
Contractual Obligations
Payments due by fiscal year | ||||||||||||||||||||
More | ||||||||||||||||||||
(Dollars in thousands) | Less than | 1 to 3 | 3 to 5 | than | ||||||||||||||||
Contractual obligations | Total | 1 year | years | years | 5 years | |||||||||||||||
Senior Notes | $ | 59,388 | $ | — | $ | 59,388 | $ | — | $ | — | ||||||||||
Mandatorily Redeemable Convertible Trust Preferred Securities(1) | 125,317 | 125,317 | — | — | — | |||||||||||||||
Capital leases | 528 | 272 | 256 | — | — | |||||||||||||||
Operating leases(2) | 39,895 | 7,301 | 9,695 | 6,991 | 15,908 | |||||||||||||||
Total contractual obligations | $ | 225,128 | $ | 132,890 | $ | 69,339 | $ | 6,991 | $ | 15,908 | ||||||||||
(1) | The Mandatorily Redeemable Convertible Trust Preferred Securities (“Securities”) had an initial due date of March 31, 2028. However, on June 15, 2005, the company completed the redemption of its Securities. Since the entire security obligation was settled in 2006, the March 31, 2005 outstanding balance has been classified as “less than 1 year.” |
(2) | Lease obligations are presented net of contractually binding sub-lease arrangements. |
The company anticipates that cash on hand, funds from continuing operations, the revolving credit agreement, and access to capital markets will provide adequate funds to finance acquisitions, capital spending and working capital needs and to service its obligations and other commitments arising during the foreseeable future.
Liquidity and Capital Resources
Overview
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Mandatorily Redeemable Convertible Trust Preferred Securities
Senior Notes
Revolving Credit Facility
Cash Flow
Increase | |||||||||||||
Year ended March 31 | (decrease) | ||||||||||||
(Dollars in Thousands) | 2005 | 2004 | $ | ||||||||||
Net cash provided by (used for) continuing operations: | |||||||||||||
Operating activities | $ | 91,888 | $ | (21,962 | ) | $ | 113,850 | ||||||
Investing activities | (1,846 | ) | (52,118 | ) | 50,272 | ||||||||
Financing activities | 302 | (100,041 | ) | 100,343 | |||||||||
Cash flows provided by (used for) continuing operations | 90,344 | (174,121 | ) | 264,465 | |||||||||
Net cash provided by discontinued operations | 1,633 | 5,481 | (3,848 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | $ | 91,977 | $ | (168,640 | ) | $ | 260,617 | ||||||
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Critical Accounting Policies, Estimates & Assumptions
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Recently Issued Accounting Standard
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Cancellation of Subscribed-for Shares
Business Combinations
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Discontinued Operations
Restructuring Charges
Goodwill
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Investments
Risk Control and Effects of Foreign Currency and Inflation
Risks Relating to the Company
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Risks associated with the indirect distribution of the company’s products and services may materially adversely affect the company’s financial results.
The market for the company’s products and services is affected by rapidly changing technology and inventory obsolescence and if the company fails to anticipate and adapt to such changes and protect against inventory obsolescence, the company’s results of operations may suffer.
Market factors could cause a decline in spending for information technology, adversely affecting our financial results.
The company’s business could be materially adversely affected as a result of the risks associated with acquisitions and investments.
Management has identified material weaknesses in the company’s disclosure controls and procedures and its internal control over financial reporting, which, if not remedied effectively, could result in a material misstatement of the company’s reported results.
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Forward Looking Information
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. | Change in and Disagreements With Accountants on Accounting and Financial Disclosures. |
Item 9A. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.The company’s management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. The company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely
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Item 9B. Other Information.
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Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. |
Item 13. Certain Relationships and Related Transactions.
Item 14. Principal Accountant Fees and Services.
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Item 15. Exhibits, Financial Statement Schedules.
Report of Independent Registered Public Accounting Firm | |
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting | |
Consolidated Statements of Operations for the years ended March 31, 2005, 2004, and 2003 | |
Consolidated Balance Sheets as of March 31, 2005 and 2004 | |
Consolidated Statements of Cash Flows for the years ended March 31, 2005, 2004, and 2003 | |
Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2005, 2004, and 2003 | |
Notes to the Consolidated Financial Statements |
Schedule II — Valuation and Qualifying Accounts
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or notes thereto.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Agilysys, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, on June 29, 2005.
AGILYSYS, INC. | |
/s/ ARTHUR RHEIN | |
Arthur Rhein | |
Chairman, President, Chief Executive | |
Officer and Director |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of June 29, 2005.
Signature | Title | |||
/s/ ARTHUR RHEIN Arthur Rhein | Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ MARTIN F. ELLIS Martin F. Ellis | Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) | |||
/s/ CHARLES F. CHRIST Charles F. Christ | Director | |||
/s/ CURTIS J. CRAWFORD Curtis J. Crawford | Director | |||
/s/ THOMAS A. COMMES Thomas A. Commes | Director | |||
/s/ HOWARD V. KNICELY Howard V. Knicely | Director | |||
/s/ KEITH M. KOLERUS Keith M. Kolerus | Director | |||
/s/ ROBERT A. LAUER Robert A. Lauer | Director | |||
/s/ ROBERT G. MCCREARY, III Robert G. McCreary, III | Director | |||
/s/ THOMAS C. SULLIVAN Thomas C. Sullivan | Director |
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AGILYSYS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
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The consolidated financial statements of Agilysys, Inc. and subsidiaries have been prepared by the company, which is responsible for their integrity and objectivity. These statements have been prepared in accordance with U.S. generally accepted accounting principles and include amounts that are based on informed judgments and estimates. The company also prepared the other information in the annual report and is responsible for its accuracy and consistency with the consolidated financial statements.
/s/ ARTHUR RHEIN | |
Arthur Rhein | |
Chairman, President and Chief Executive | |
Officer | |
/s/ MARTIN F. ELLIS | |
Martin F. Ellis | |
Executive Vice President, Treasurer and | |
Chief Financial Officer |
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The management of Agilysys Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of the company’s internal control over financial reporting as of March 31, 2005 based on the framework inInternal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management has concluded that the company did not maintain effective internal control over financial reporting as a result of the two material weaknesses discussed below.
• | Vendor Debits Process — Inadequate controls over the preparation and review of the reconciliation of the subsidiary ledger to the general ledger for vendor debits combined with inadequate controls over determining the appropriate reserve for collectibility of vendor debits resulted in a material weakness in internal control over the vendor debits process. These control deficiencies resulted in adjustments impacting the vendor debit and vendor debit reserve accounts. Vendor debits are transactional discounts on purchases from major suppliers. The vendor debit process is manually intensive, involves thousands of individual transactions and the vendor debit subsidiary ledger does not interface with the general ledger. | |
Management has performed a review of its internal control processes and procedures surrounding the Vendor Debits Process. As a result of this review, management is in the process of remediating the deficiencies described above. Additional review and approval of the vendor debit reconciliation and reserve analysis has been added. Furthermore, management is evaluating all systems and procedures relative to the vendor debit process with the objective of implementing automated and preventive controls and other process improvements. | ||
• | Financial Statement Close Process — Inadequate controls over the Financial Statement Close Process resulted in several control deficiencies that, when aggregated, constitute a material weakness in internal control over the Financial Statement Close Process. The control deficiencies resulted from inadequate controls over the reconciliation of vendor rebates, recognition of equity income related to an unconsolidated entity, recognition of revenue, accrual of liabilities for employee incentives, valuation of service parts inventory within the retail hardware services business, amounts due to vendors within the retail hardware services business, accrual of liabilities for the long-term incentive compensation plan and accrual of the obligation for the supplemental executive retirement plan (“SERP”). These control deficiencies resulted in adjustments impacting the related accounts. | |
Management has performed a review of the company’s internal control processes and procedures surrounding the Financial Statement Close Process. As a result of this review, the company will be taking the following steps to remediate the deficiencies: |
1. | To address inadequate controls over the reconciliation of vendor rebates, recognition of equity income related to an unconsolidated entity, recognition of revenue, and accrual of liabilities for employee incentives, a more comprehensive reconciliation and review process will be implemented to ensure the related controls, as designed, are operating effectively and the related financial statement accounts are accurately stated. | |
2. | To address inadequate controls over the valuation of service parts inventory and amounts due to vendors within the retail hardware services business, management has conducted a comprehensive review of the company’s hardware services business’s accounting processes and systems and is currently designing and implementing systems and procedures with the objective of implementing automated and preventive controls to mitigate the risk of control deficiencies. | |
3. | To address the inadequate controls over the accrual of liabilities for the long-term incentive compensation plan, management will review on a monthly basis actual operating performance versus plan requirements and record an additional accrual as required. For the accrual of the obligation for the SERP, management will provide to the Finance department written communication of any changes to the SERP. Such communications will be reviewed and assessed for the appropriate accounting and reporting requirements. The company will maintain evidence as to |
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the effective operation of the new processes and controls so that management is able to assess the operating effectiveness of the company’s controls. |
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The Board of Directors and Shareholders of
We have audited the accompanying consolidated balance sheets of Agilysys, Inc. and subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15 (a). 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.
/S/ ERNST & YOUNG LLP
Cleveland, Ohio
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on Internal Control Over Financial Reporting
The Board of Directors and Shareholders of
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting included elsewhere herein, that Agilysys, Inc. and subsidiaries did not maintain effective internal control over financial reporting as of March 31, 2005, because of the material weaknesses identified in management’s assessment, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Agilysys, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.
• | Vendor Debits Process — Inadequate controls over the preparation and review of the reconciliation of the subsidiary ledger to the general ledger for vendor debits combined with inadequate controls over determining the appropriate reserve for collectibility of vendor debits resulted in a material weakness in internal control over the vendor debits process. These control deficiencies resulted in adjustments impacting the vendor debit and vendor debit reserve accounts. Vendor debits are transactional discounts on purchases from major suppliers. The vendor debit process is manually intensive, involves thousands of individual transactions and the vendor debit subsidiary ledger does not interface with the general ledger. | |
• | Financial Statement Close Process — Inadequate controls over the Financial Statement Close Process resulted in several control deficiencies that, when aggregated, constitute a material weakness in internal control over the Financial Statement Close Process. The control deficiencies resulted from |
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inadequate controls over the reconciliation of vendor rebates, recognition of equity income related to an unconsolidated entity, valuation of service parts inventory within the retail hardware services business, accrual of liabilities for employee incentives, amounts due to vendors within the retail hardware services business, accrual of liabilities for the long-term incentive compensation plan, accrual of the obligation for the supplemental executive retirement plan, and recognition of revenue. These control deficiencies resulted in adjustments impacting the related accounts. |
/S/ ERNST & YOUNG LLP
Cleveland, Ohio
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Agilysys, Inc. and Subsidiaries
Year ended March 31 | |||||||||||||
(In thousands, except share and per share data) | 2005 | 2004 | 2003 | ||||||||||
Net sales | $ | 1,622,925 | $ | 1,403,216 | $ | 1,171,631 | |||||||
Cost of goods sold | 1,415,477 | 1,222,314 | 1,022,378 | ||||||||||
Gross margin | 207,448 | 180,902 | 149,253 | ||||||||||
Operating expenses | |||||||||||||
Selling, general, and administrative expenses | 164,470 | 142,436 | 135,991 | ||||||||||
Restructuring charges | 515 | 2,516 | 20,697 | ||||||||||
Operating income (loss) | 42,463 | 35,950 | (7,435 | ) | |||||||||
Other (income) expenses | |||||||||||||
Other income, net | (1,984 | ) | (6,687 | ) | (966 | ) | |||||||
Interest income | (3,310 | ) | (2,250 | ) | (1,205 | ) | |||||||
Interest expense | 6,517 | 10,318 | 10,456 | ||||||||||
Loss on retirement of debt, net | — | 7,861 | 1,164 | ||||||||||
Investment impairment | — | — | 14,600 | ||||||||||
Income (loss) before income taxes | 41,240 | 26,708 | (31,484 | ) | |||||||||
Provision for income taxes | 15,725 | 9,684 | (11,739 | ) | |||||||||
Distributions on Mandatorily Redeemable Convertible Trust Preferred Securities, net of taxes | 5,153 | 5,500 | 6,315 | ||||||||||
Income (loss) from continuing operations | 20,362 | 11,524 | (26,060 | ) | |||||||||
(Loss) income from discontinued operations, net of taxes | (877 | ) | (2,861 | ) | 18,777 | ||||||||
Income (loss) before cumulative effect of change in accounting principle | 19,485 | 8,663 | (7,283 | ) | |||||||||
Cumulative effect of change in accounting principle, net of $1,900 in taxes | — | — | (34,795 | ) | |||||||||
Net income (loss) | $ | 19,485 | $ | 8,663 | $ | (42,078 | ) | ||||||
Earnings per share — basic | |||||||||||||
Income (loss) from continuing operations | $ | 0.72 | $ | 0.42 | $ | (0.96 | ) | ||||||
(Loss) income from discontinued operations | (0.03 | ) | (0.10 | ) | 0.69 | ||||||||
Income (loss) before cumulative effect of change in accounting principle | 0.69 | 0.32 | (0.27 | ) | |||||||||
Cumulative effective of change in accounting principle | — | — | (1.27 | ) | |||||||||
Net income (loss) | $ | 0.69 | $ | 0.32 | $ | (1.54 | ) | ||||||
Earnings per share — diluted | |||||||||||||
Income (loss) from continuing operations | $ | 0.69 | $ | 0.41 | $ | (0.96 | ) | ||||||
(Loss) income from discontinued operations | (0.02 | ) | (0.10 | ) | 0.69 | ||||||||
Income (loss) before cumulative effect of change in accounting principle | 0.67 | 0.31 | (0.27 | ) | |||||||||
Cumulative effective of change in accounting principle | — | — | (1.27 | ) | |||||||||
Net income (loss) | $ | 0.67 | $ | 0.31 | $ | (1.54 | ) | ||||||
Weighted average shares outstanding | |||||||||||||
Basic | 28,100,612 | 27,743,769 | 27,291,683 | ||||||||||
Diluted | 36,989,981 | 27,955,865 | 27,291,683 |
See accompanying notes to the consolidated financial statements.
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Agilysys, Inc. and Subsidiaries
March 31 | |||||||||||
(In thousands, except share and per share data) | 2005 | 2004 | |||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 241,880 | $ | 149,903 | |||||||
Accounts receivable, net of allowance of $5,867 in 2005 and $3,829 in 2004 | 263,986 | 295,272 | |||||||||
Inventories, net of allowance of $4,686 in 2005 and $8,425 in 2004 | 47,305 | 52,236 | |||||||||
Deferred income taxes | 9,379 | 9,255 | |||||||||
Prepaid expenses | 1,991 | 2,234 | |||||||||
Assets of discontinued operations | 702 | 5,451 | |||||||||
Total current assets | 565,243 | 514,351 | |||||||||
Goodwill | 173,774 | 179,975 | |||||||||
Intangible assets, net of amortization of $2,864 in 2005 | 5,796 | — | |||||||||
Investments | 19,785 | 18,819 | |||||||||
Other assets | 20,241 | 11,396 | |||||||||
Property and equipment | |||||||||||
Land | 480 | 480 | |||||||||
Buildings and building improvements | 12,742 | 12,502 | |||||||||
Furniture and equipment | 58,016 | 56,486 | |||||||||
Software | 32,743 | 31,845 | |||||||||
Leasehold improvements | 7,099 | 7,591 | |||||||||
111,080 | 108,904 | ||||||||||
Accumulated depreciation and amortization | 80,761 | 73,783 | |||||||||
Property and equipment, net | 30,319 | 35,121 | |||||||||
Total assets | $ | 815,158 | $ | 759,662 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 228,775 | $ | 208,115 | |||||||
Accrued liabilities | 38,178 | 39,047 | |||||||||
Mandatorily Redeemable Convertible Trust Preferred Securities | 125,317 | — | |||||||||
Liabilities of discontinued operations | 1,767 | 4,006 | |||||||||
Total current liabilities | 394,037 | 251,168 | |||||||||
Long-term debt | 59,624 | 59,503 | |||||||||
Deferred income taxes | 11,657 | 4,426 | |||||||||
Other non-current liabilities | 17,389 | 10,150 | |||||||||
Mandatorily Redeemable Convertible Trust Preferred Securities | — | 125,425 | |||||||||
Shareholders’ Equity | |||||||||||
Serial preferred shares, without par value; authorized 5,000,000; issued and outstanding — zero | — | — | |||||||||
Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 28,820,531 and 32,115,614 shares outstanding in 2005 and 2004, respectively, including zero and 3,589,940 subscribed-for shares in 2005 and 2004, and net of 46,442 and 53,273 shares in treasury in 2005 and 2004, respectively | 8,564 | 9,553 | |||||||||
Capital in excess of stated value | 88,927 | 126,070 | |||||||||
Retained earnings | 235,749 | 219,594 | |||||||||
Unearned employee benefits | — | (42,325 | ) | ||||||||
Unearned compensation on restricted stock awards | (873 | ) | (2,499 | ) | |||||||
Accumulated other comprehensive income (loss) | 84 | (1,403 | ) | ||||||||
Total shareholders’ equity | 332,451 | 308,990 | |||||||||
Total liabilities and shareholders’ equity | $ | 815,158 | $ | 759,662 | |||||||
See accompanying notes to the consolidated financial statements.
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Agilysys, Inc. and Subsidiaries
Year ended March 31 | |||||||||||||||
(In thousands) | 2005 | 2004 | 2003 | ||||||||||||
Operating activities: | |||||||||||||||
Net income (loss) | $ | 19,485 | $ | 8,663 | $ | (42,078 | ) | ||||||||
Loss (gain) from discontinued operations | 877 | 2,861 | (18,777 | ) | |||||||||||
Cumulative effect of change in accounting principle | — | — | 34,795 | ||||||||||||
Income (loss) from continuing operations | 20,362 | 11,524 | (26,060 | ) | |||||||||||
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities (net of effects from business acquisitions): | |||||||||||||||
Gain on buyback of Convertible Trust Preferred Securities | — | (734 | ) | — | |||||||||||
Gain on sale of investments | — | (906 | ) | — | |||||||||||
Loss on buyback of Senior Notes | — | 8,595 | 1,788 | ||||||||||||
Investment impairment | — | — | 14,600 | ||||||||||||
Gain on disposal of property and equipment | (12 | ) | (59 | ) | — | ||||||||||
Depreciation | 4,178 | 4,617 | 8,829 | ||||||||||||
Amortization | 7,417 | 5,329 | 7,994 | ||||||||||||
Deferred income taxes | 5,157 | 284 | (5,545 | ) | |||||||||||
Changes in working capital | |||||||||||||||
Accounts receivable | 31,179 | (93,895 | ) | 37,036 | |||||||||||
Inventory | 4,931 | 2,762 | 25,860 | ||||||||||||
Accounts payable | 20,660 | 44,526 | 1,941 | ||||||||||||
Accrued liabilities | (1,131 | ) | (4,163 | ) | (6,098 | ) | |||||||||
Other working capital | 36 | (515 | ) | 1,607 | |||||||||||
Other | (889 | ) | 673 | 1,374 | |||||||||||
Total adjustments | 71,526 | (33,486 | ) | 89,386 | |||||||||||
Net cash provided by (used for) operating activities | 91,888 | (21,962 | ) | 63,326 | |||||||||||
Investing activities: | |||||||||||||||
Acquisition of businesses, less cash acquired | — | (66,653 | ) | — | |||||||||||
Proceeds from sale of business | — | 12,670 | 226,649 | ||||||||||||
Purchases of property and equipment | (1,951 | ) | (1,555 | ) | (8,404 | ) | |||||||||
Proceeds from sale of property and equipment | 105 | 111 | 1,389 | ||||||||||||
Proceeds from sale of investments | — | 3,309 | — | ||||||||||||
Net cash (used for) provided by investing activities | (1,846 | ) | (52,118 | ) | 219,634 | ||||||||||
Financing activities: | |||||||||||||||
Buyback of Convertible Trust Preferred Securities | — | (16,973 | ) | — | |||||||||||
Buyback of Senior Notes | — | (79,800 | ) | (19,942 | ) | ||||||||||
Dividends paid | (3,330 | ) | (3,517 | ) | (3,350 | ) | |||||||||
Issuance of common stock | 4,006 | 869 | 2,151 | ||||||||||||
Repurchase of common stock | — | (480 | ) | — | |||||||||||
Revolving credit borrowings | — | — | 7,780 | ||||||||||||
Revolving credit payments | — | — | (7,780 | ) | |||||||||||
Accounts receivable securitization financing borrowings | — | — | 17,600 | ||||||||||||
Accounts receivable securitization financing payments | — | — | (46,600 | ) | |||||||||||
Other | (374 | ) | (140 | ) | (653 | ) | |||||||||
Net cash provided by (used for) financing activities | 302 | (100,041 | ) | (50,794 | ) | ||||||||||
Cash flows provided by (used for) continuing operations | 90,344 | (174,121 | ) | 232,166 | |||||||||||
Cash flows provided by discontinued operations | 1,633 | 5,481 | 64,977 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 91,977 | (168,640 | ) | 297,143 | |||||||||||
Cash and cash equivalents at beginning of year | 149,903 | 318,543 | 21,400 | ||||||||||||
Cash and cash equivalents at end of year | $ | 241,880 | $ | 149,903 | $ | 318,543 | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||||||
Cash payments for interest | $ | 14,507 | $ | 19,659 | $ | 15,145 | |||||||||
Cash payments for income taxes, net of refunds received | $ | 7,205 | $ | 1,329 | $ | 3,614 | |||||||||
Distributions on Convertible Trust Preferred Securities | $ | 8,463 | $ | 8,466 | $ | 12,123 | |||||||||
Change in value of available-for-sale securities, net of taxes | $ | — | $ | — | $ | (955 | ) |
See accompanying notes to the consolidated financial statements.
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Agilysys, Inc. and Subsidiaries
Stated | Capital in | Unearned | Accumulated | ||||||||||||||||||||||||||||||
value of | excess of | Unearned | compensation | other | |||||||||||||||||||||||||||||
Common | common | stated | Retained | employee | on restricted | comprehensive | |||||||||||||||||||||||||||
(In thousands, except per share data) | shares | shares | value | earnings | benefits | stock | income (loss) | Total | |||||||||||||||||||||||||
Balance at April 1, 2002 | 31,782 | $9,452 | $133,932 | $ | 259,876 | $ | (56,115 | ) | $ | (3,289 | ) | $ | (3,159 | ) | $ | 340,697 | |||||||||||||||||
Net loss | — | — | — | (42,078 | ) | — | — | — | (42,078 | ) | |||||||||||||||||||||||
Unrealized translation adjustment | — | — | — | — | — | — | (100 | ) | (100 | ) | |||||||||||||||||||||||
Unrealized loss on securities, net of $6.1 million in taxes | — | — | — | — | — | — | (10,968 | ) | (10,968 | ) | |||||||||||||||||||||||
Reclassification of unrealized losses into earnings, net of $5.4 million in taxes | — | — | — | — | — | — | 10,013 | 10,013 | |||||||||||||||||||||||||
Total comprehensive loss | (43,133 | ) | |||||||||||||||||||||||||||||||
Shares transferred from Trust | (376 | ) | (113 | ) | (3,085 | ) | — | 3,198 | — | — | — | ||||||||||||||||||||||
Value change in subscribed-for shares | — | — | (22,618 | ) | — | 22,618 | — | — | — | ||||||||||||||||||||||||
Cash dividends ($0.12 per share) | — | — | — | (3,350 | ) | — | — | — | (3,350 | ) | |||||||||||||||||||||||
Shares issued upon exercise of stock options | 275 | 83 | 2,068 | — | — | — | — | 2,151 | |||||||||||||||||||||||||
Tax benefit related to exercise of stock options | — | — | 273 | — | — | — | — | 273 | |||||||||||||||||||||||||
Restricted stock awards | 376 | 113 | 3,085 | — | — | (3,198 | ) | — | — | ||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 1,912 | — | 1,912 | |||||||||||||||||||||||||
Balance at March 31, 2003 | 32,057 | 9,535 | 113,655 | 214,448 | (30,299 | ) | (4,575 | ) | (4,214 | ) | 298,550 | ||||||||||||||||||||||
Net income | — | — | — | 8,663 | — | — | — | 8,663 | |||||||||||||||||||||||||
Unrealized translation adjustment | — | — | — | — | — | — | 2,811 | 2,811 | |||||||||||||||||||||||||
Unrealized gain on securities, net of $1.0 million in taxes | — | — | — | — | — | — | 1,894 | 1,894 | |||||||||||||||||||||||||
Reclassification of unrealized gains into earnings, net of $1.0 million in taxes | — | — | — | — | — | — | (1,894 | ) | (1,894 | ) | |||||||||||||||||||||||
Total comprehensive income | 11,474 | ||||||||||||||||||||||||||||||||
Value change in subscribed-for shares | — | — | 12,026 | — | (12,026 | ) | — | — | — | ||||||||||||||||||||||||
Cash dividends ($0.12 per share) | — | — | — | (3,517 | ) | — | — | — | (3,517 | ) | |||||||||||||||||||||||
Shares issued upon exercise of stock options | 112 | 34 | 835 | — | — | — | — | 869 | |||||||||||||||||||||||||
Tax benefit related to exercise of stock options | — | — | 18 | — | — | — | — | 18 | |||||||||||||||||||||||||
Purchase of treasury shares | (53 | ) | (16 | ) | (464 | ) | — | — | — | — | (480 | ) | |||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 2,076 | — | 2,076 | |||||||||||||||||||||||||
Balance at March 31, 2004 | 32,116 | 9,553 | 126,070 | 219,594 | (42,325 | ) | (2,499 | ) | (1,403 | ) | 308,990 | ||||||||||||||||||||||
Net income | — | — | — | 19,485 | — | — | — | 19,485 | |||||||||||||||||||||||||
Unrealized translation adjustment | — | — | — | — | — | — | 1,487 | 1,487 | |||||||||||||||||||||||||
Total comprehensive income | 20,972 | ||||||||||||||||||||||||||||||||
Shares returned to Trust | 39 | 12 | 318 | — | (330 | ) | — | — | — | ||||||||||||||||||||||||
Retirement of subscribed-for shares | (3,629 | ) | (1,089 | ) | (41,566 | ) | — | 42,655 | — | — | — | ||||||||||||||||||||||
Cash dividends ($0.12 per share) | — | — | — | (3,330 | ) | — | — | — | (3,330 | ) | |||||||||||||||||||||||
Shares issued upon exercise of stock options | 327 | 98 | 3,908 | — | — | — | — | 4,006 | |||||||||||||||||||||||||
Tax benefit related to exercise of stock options | — | — | 295 | — | — | — | — | 295 | |||||||||||||||||||||||||
Forfeiture of restricted stock award | (39 | ) | (12 | ) | (319 | ) | — | — | 331 | — | — | ||||||||||||||||||||||
Tax benefit related to forfeiture of restricted stock | — | — | 115 | — | — | — | — | 115 | |||||||||||||||||||||||||
Issuance of treasury shares | 7 | 2 | 106 | — | — | — | — | 108 | |||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | 1,295 | — | 1,295 | |||||||||||||||||||||||||
Balance at March 31, 2005 | 28,821 | $8,564 | $88,927 | $235,749 | $ | — | $ | (873 | ) | $ | 84 | $ | 332,451 | ||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
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Agilysys, Inc. and Subsidiaries
(Table amounts in thousands, except per share data and note 16)
1.
Operations.Agilysys, Inc. and its subsidiaries (the “company” or “Agilysys”) distributes and resells a broad range of enterprise computer systems products, including servers, storage, software and services. These products are sold to resellers and commercial end-users. The company has operations in North America and strategic investments in the United States and Europe.
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2005 | 2004 | ||||||||||||||||
Carrying | Fair | Carrying | Fair | ||||||||||||||
value | value | value | value | ||||||||||||||
Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 241,880 | $ | 241,880 | $ | 149,903 | $ | 149,903 | |||||||||
Accounts receivable | 263,986 | 263,986 | 295,272 | 295,272 | |||||||||||||
Liabilities: | |||||||||||||||||
Accounts payable | $ | 228,775 | $ | 228,775 | $ | 208,115 | $ | 208,115 | |||||||||
Senior Notes | 59,388 | 62,004 | 59,388 | 65,500 | |||||||||||||
Mandatorily Redeemable Convertible Trust Preferred Securities | 125,317 | 150,381 | 125,425 | 123,500 | |||||||||||||
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For the year ended March 31 | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Net income (loss), as reported | $ | 19,485 | $ | 8,663 | $ | (42,078 | ) | ||||||
Compensation cost based on fair value method, net of taxes | (1,908 | ) | (3,564 | ) | (3,365 | ) | |||||||
Pro forma net income (loss) | $ | 17,577 | $ | 5,099 | $ | (45,443 | ) | ||||||
Earnings (loss) per share — basic | |||||||||||||
As reported | $ | 0.69 | $ | 0.32 | $ | (1.54 | ) | ||||||
Pro forma | 0.63 | 0.19 | (1.67 | ) | |||||||||
Earnings (loss) per share — diluted | |||||||||||||
As reported | $ | 0.67 | $ | 0.31 | $ | (1.54 | ) | ||||||
Pro forma | 0.61 | 0.18 | (1.67 | ) | |||||||||
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2.
In accordance with FASB Statement 141,Business Combinations, the company allocates the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair values of the net assets acquired is recorded as goodwill. In 2004, the company acquired two businesses, Kyrus Corporation (“Kyrus”) and Inter-American Data, Inc. (“IAD”).
Kyrus Corporation
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Inter-American Data, Inc.
3.
During 2003, the company announced its strategic transformation to focus solely on its enterprise computer systems business. The transformation included the sale of substantially all of the assets and liabilities of the company’s Industrial Electronics Division (“IED”), which distributed semiconductors, interconnect, passive and electromechanical components, power supplies and embedded computer products in North America. In connection with the sale of IED, the company discontinued the operations of Aprisa, Inc. (“Aprisa”), which was an internet-based start up corporation that created customized software for the electronic components market. The disposition of IED and discontinuance of Aprisa represented a disposal of a component of an entity as defined by FASB Statement 144,Accounting for the Impairment or Disposal of Long-Lived Assets. The company continues to incur certain costs related to IED and Aprisa, which are reported as loss from discontinued operations.
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4.
Continuing Operations
Severance | |||||||||||||
and other | |||||||||||||
employment | |||||||||||||
costs | Facilities | Total | |||||||||||
Balance at April 1, 2003 | $ | 5,731 | $ | 6,097 | $ | 11,828 | |||||||
Additions | — | 2,066 | 2,066 | ||||||||||
Accretion of lease obligations | — | 450 | 450 | ||||||||||
Payments | (5,706 | ) | (2,819 | ) | (8,525 | ) | |||||||
Balance at March 31, 2004 | 25 | 5,794 | 5,819 | ||||||||||
Accretion of lease obligations | — | 427 | 427 | ||||||||||
Payments | (25 | ) | (851 | ) | (876 | ) | |||||||
Adjustments | — | 88 | 88 | ||||||||||
Balance at March 31, 2005 | $ | — | $5,458 | $5,458 | |||||||||
Discontinued Operations
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Severance | |||||||||||||||||
and other | |||||||||||||||||
employment | |||||||||||||||||
costs | Facilities | Other | Total | ||||||||||||||
Balance at April 1, 2003 | $ | 7,332 | $ | 5,785 | $ | 274 | $ | 13,391 | |||||||||
Additions | — | 545 | — | 545 | |||||||||||||
Accretion of lease obligations | — | 162 | — | 162 | |||||||||||||
Payments | (7,308 | ) | (3,232 | ) | (219 | ) | (10,759 | ) | |||||||||
Balance at March 31, 2004 | 24 | 3,260 | 55 | 3,339 | |||||||||||||
Accretion of lease obligations | — | 96 | — | 96 | |||||||||||||
Payments | (24 | ) | (1,295 | ) | — | (1,319 | ) | ||||||||||
Adjustments | — | (422 | ) | (55 | ) | (477 | ) | ||||||||||
Balance at March 31, 2005 | $ | — | $1,639 | $ | — | $ | 1,639 | ||||||||||
5.
Goodwill
2005 | 2004 | ||||||||
Beginning of year | $ | 179,975 | $ | 117,545 | |||||
Goodwill adjustment — Kyrus (note 2) | (753 | ) | 26,557 | ||||||
Goodwill adjustment — IAD (note 2) | (5,547 | ) | 35,742 | ||||||
Impact of foreign currency translation | 99 | 131 | |||||||
End of year | $ | 173,774 | $ | 179,975 | |||||
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Intangible Assets
Gross | Net | ||||||||||||
carrying | Accumulated | carrying | |||||||||||
amount | amortization | amount | |||||||||||
Amortized intangible assets: | |||||||||||||
Customer relationships | $ | 5,300 | $ | (2,418 | ) | $ | 2,882 | ||||||
Non-competition agreements | 910 | (151 | ) | 759 | |||||||||
Developed technology | 1,470 | (266 | ) | 1,204 | |||||||||
Patented technology | 80 | (29 | ) | 51 | |||||||||
7,760 | (2,864 | ) | 4,896 | ||||||||||
Unamortized intangible assets: | |||||||||||||
Trade names | 900 | NA | 900 | ||||||||||
Total intangible assets | $ | 8,660 | $ | (2,864 | ) | $ | 5,796 | ||||||
There were no intangible assets at March 31, 2004. Amortization expense relating to intangible assets for the years ended March 31, 2005 and 2004 was $2.9 million and zero, respectively. The estimated amortization expense relating to intangible assets for each of the five succeeding fiscal years is as follows: 2006 - $2.0 million, 2007 - $1.2 million, 2008 - $0.7 million, 2009 - $0.5 million, and 2010 - $0.3 million.
6.
At March 31, 2005 and 2004, the company’s investments consisted of the following:
2005 | 2004 | ||||||||
Magirus AG | $ | 14,737 | $ | 13,771 | |||||
Other non-marketable equity securities | 5,048 | 5,048 | |||||||
Total | $ | 19,785 | $ | 18,819 | |||||
Magirus AG
Other Non-Marketable Equity Securities
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Sale of Investment
7.
Capital Leases
Amount | |||||
Year ending March 31: | |||||
2006 | $ | 272 | |||
2007 | 178 | ||||
2008 | 78 | ||||
2009 | — | ||||
2010 | — | ||||
Total minimum lease payments | 528 | ||||
Less: amount representing interest | (26 | ) | |||
Present value of minimum lease payments | $ | 502 | |||
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Operating Leases
Continuing | Discontinued | ||||||||||||
operations | operations | Total | |||||||||||
Year ending March 31: | |||||||||||||
2006 | $ | 6,359 | $ | 942 | $ | 7,301 | |||||||
2007 | 4,659 | 625 | 5,284 | ||||||||||
2008 | 3,938 | 473 | 4,411 | ||||||||||
2009 | 3,301 | 466 | 3,767 | ||||||||||
2010 | 2,785 | 439 | 3,224 | ||||||||||
Thereafter | 15,739 | 169 | 15,908 | ||||||||||
Total minimum lease payments | $ | 36,781 | $ | 3,114 | $ | 39,895 | |||||||
8.
The following is a summary of long-term obligations at March 31, 2005 and 2004:
2005 | 2004 | |||||||
Senior Notes, due August 2006 | $ | 59,388 | $ | 59,388 | ||||
Capital lease obligations | 502 | 399 | ||||||
59,890 | 59,787 | |||||||
Less: current maturities of long-term obligations | (266 | ) | (284 | ) | ||||
$ | 59,624 | $ | 59,503 | |||||
Revolving Credit Agreement
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9.
In 1998, Pioneer-Standard Financial Trust (the “Pioneer-Standard Trust”) issued 2,875,000 shares relating to $143.7 million of 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (the “Trust Preferred Securities”). The Pioneer-Standard Trust, a statutory business trust, is a wholly-owned consolidated subsidiary of the company, with its sole asset being $148.2 million aggregate principal amount of 6.75% Junior Convertible Subordinated Debentures of Agilysys, Inc. due March 31, 2028 (the “Trust Debentures”). The company has executed a guarantee with regard to the Trust Preferred Securities. The guarantee, when taken together with the company’s obligations under the Trust Debentures, the indenture pursuant to which the Trust Debentures were issued and the applicable trust document, provide a full and unconditional guarantee of the Pioneer-Standard Trust’s obligations under the Trust Preferred Securities. The Trust Preferred Securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 6.75%, carry a liquidation value of $50 per share and are convertible at the option of the holder into the company’s Common Shares at any time prior to the close of business on March 31, 2028. After March 31, 2003, the Trust Preferred Securities were redeemable, at the option of the company, for a redemption price of 103.375% of par reduced annually by 0.675% to a minimum of $50 per Trust Preferred Security. As of March 31, 2005, the Trust Preferred Securities were redeemable at the option of the company for a redemption price of 102.025%. The redemption price will be reduced to 100% of par by March 31, 2008.
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10.
The components of income (loss) before income taxes from continuing operations and income tax provision are as follows:
2005 | 2004 | 2003 | |||||||||||||
Income (loss) before income taxes | |||||||||||||||
Domestic | $ | 41,346 | $ | 27,257 | $ | (29,381 | ) | ||||||||
Foreign | (106 | ) | (549 | ) | (2,103 | ) | |||||||||
Total | $ | 41,240 | $ | 26,708 | $ | (31,484 | ) | ||||||||
Provision for income taxes | |||||||||||||||
Current | |||||||||||||||
Federal | $ | 9,362 | $ | 7,886 | $ | (3,510 | ) | ||||||||
State and local | 889 | 60 | 131 | ||||||||||||
Foreign | 121 | 127 | 180 | ||||||||||||
Total | 10,372 | 8,073 | (3,199 | ) | |||||||||||
Deferred | |||||||||||||||
Federal | 6,325 | 856 | (6,949 | ) | |||||||||||
State and local | (3,216 | ) | 992 | (380 | ) | ||||||||||
Foreign | 2,244 | (237 | ) | (1,211 | ) | ||||||||||
Total | 5,353 | 1,611 | (8,540 | ) | |||||||||||
Provision for income taxes | $ | 15,725 | $ | 9,684 | $ | (11,739 | ) | ||||||||
2005 | 2004 | 2003 | ||||||||||
Statutory rate | 35.0 | % | 35.0 | % | (35.0 | )% | ||||||
Provision (benefit) for state taxes | 4.8 | (1.3 | ) | (6.5 | ) | |||||||
Change in valuation allowance | (3.0 | ) | 3.9 | 3.6 | ||||||||
Settlement of income tax audits | (0.5 | ) | (2.4 | ) | — | |||||||
Foreign rate differential | — | 0.3 | (0.9 | ) | ||||||||
Meals & entertainment | 1.4 | 1.6 | 0.7 | |||||||||
Equity investment and other, net | 0.4 | (0.8 | ) | 0.8 | ||||||||
Effective rate | 38.1 | % | 36.3 | % | (37.3 | )% | ||||||
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2005 | 2004 | |||||||||
Deferred tax assets: | ||||||||||
Capitalized inventory costs | $ | 291 | $ | 257 | ||||||
Accrued liabilities | 4,433 | 1,615 | ||||||||
Allowance for doubtful accounts | 2,055 | 1,415 | ||||||||
Inventory valuation reserve | 3,618 | 3,581 | ||||||||
Restructuring reserve | 2,052 | 2,212 | ||||||||
Federal domestic net operating losses | 1,119 | 8,841 | ||||||||
Foreign net operating losses | 1,696 | 1,370 | ||||||||
Property and equipment | 2,240 | 1,181 | ||||||||
State net operating losses | 7,188 | 8,363 | ||||||||
Other | 626 | 461 | ||||||||
25,318 | 29,296 | |||||||||
Less: valuation allowance | (7,309 | ) | (8,363 | ) | ||||||
Total | $ | 18,009 | $ | 20,933 | ||||||
Deferred tax liabilities: | ||||||||||
Deferred revenue | $ | 203 | $ | 331 | ||||||
Software amortization | 2,719 | 3,044 | ||||||||
Goodwill and other intangible assets | 15,826 | 12,460 | ||||||||
Other | 349 | 270 | ||||||||
Total | $ | 19,097 | $ | 16,105 | ||||||
Total deferred tax assets (liabilities) | $ | (1,088 | ) | $ | 4,828 | |||||
11.
The company maintains 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, with the company matching a percentage thereof. The company may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and company matching contributions were $2.9 million, $2.2 million, and $2.3 million for 2005, 2004, and 2003, respectively.
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12.
The company is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. The company provides 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 the company’s 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 matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the company.
13.
The company is a leading distributor and premier reseller of enterprise computer technology solutions. The company is principally engaged in the distribution and reselling of three specific product areas: server and storage hardware, software, and services. These technology solutions are offered to two primary customer groups, value-added resellers, which often are privately held with annual sales ranging from approximately $10 million to $400 million, and end-user customers, which range from medium to large corporations as well as the public sector.
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For the year ended March 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Hardware | $ | 1,321,831 | $ | 1,134,762 | $ | 969,629 | ||||||
Software | 221,718 | 211,974 | 172,558 | |||||||||
Services | 79,376 | 56,480 | 29,444 | |||||||||
Total | $ | 1,622,925 | $ | 1,403,216 | $ | 1,171,631 | ||||||
14.
Capital Stock
Subscribed-for Shares
Shareholder Rights Plan
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15.
The following data show the amounts used in computing earnings (loss) per share from continuing operations and the effect on income (loss) and the weighted average number of shares of dilutive potential common stock.
For the year ended March 31 | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
Numerator: | ||||||||||||||
Income (loss) from continuing operations — basic | $ | 20,362 | $ | 11,524 | $ | (26,060 | ) | |||||||
Distributions on convertible preferred shares, net of taxes | 5,153 | — | — | |||||||||||
Income (loss) from continuing operations — diluted | $ | 25,515 | $ | 11,524 | $ | (26,060 | ) | |||||||
Denominator: | ||||||||||||||
Weighted average shares outstanding — basic | 28,101 | 27,744 | 27,292 | |||||||||||
Effect of dilutive securities: | ||||||||||||||
Stock options and unvested restricted stock | 928 | 212 | — | |||||||||||
Convertible preferred shares | 7,961 | — | — | |||||||||||
Weighted average shares outstanding — diluted | 36,990 | 27,956 | 27,292 | |||||||||||
Earnings (loss) per share from continuing operations | ||||||||||||||
Basic | $ | 0.72 | $ | 0.42 | $ | (0.96 | ) | |||||||
Diluted | $ | 0.69 | $ | 0.41 | $ | (0.96 | ) | |||||||
Diluted earnings (loss) per share is computed by sequencing each series of potential issuance of common shares from the most dilutive to the least dilutive. Diluted earnings (loss) per share is determined as the lowest earnings or highest (loss) per incremental share in the sequence of potential common shares.
16.
The company has a stock incentive plan. Under the plan, the company may grant stock options, stock appreciation rights, restricted shares, restricted share units, and performance shares for up to 3.2 million shares of common stock. For stock option awards, the exercise price is equal to the market price of the company’s stock on the date of grant. The maximum term of the options is 10 years, and they vest ratably
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Stock Options
For the year ended March 31 | ||||||||||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
average | average | average | ||||||||||||||||||||||
Number of | exercise | Number of | exercise | Number of | exercise | |||||||||||||||||||
shares | price | shares | price | shares | price | |||||||||||||||||||
Outstanding at April 1 | 3,306,195 | $ | 12.35 | 3,464,832 | $ | 12.23 | 3,861,534 | $ | 12.00 | |||||||||||||||
Granted | 593,500 | 13.76 | 295,900 | 7.93 | 874,000 | 14.29 | ||||||||||||||||||
Exercised | (326,826 | ) | 12.26 | (111,937 | ) | 7.76 | (275,274 | ) | 8.12 | |||||||||||||||
Cancelled/expired | (50,736 | ) | 12.88 | (328,235 | ) | 12.96 | (616,014 | ) | 12.85 | |||||||||||||||
Forfeited | — | — | (14,365 | ) | 14.09 | (379,414 | ) | 13.17 | ||||||||||||||||
Outstanding at March 31 | 3,522,133 | $ | 12.59 | 3,306,195 | $ | 12.35 | 3,464,832 | $ | 12.23 | |||||||||||||||
Options exercisable at March 31 | 2,581,904 | $ | 12.58 | 2,336,059 | $ | 12.51 | 2,063,592 | $ | 12.07 | |||||||||||||||
Weighted average fair value of options granted | $ | 6.09 | $ | 3.84 | $ | 6.94 |
The fair market value of each option granted is estimated on the grant date using the Black-Scholes method. The following assumptions were made in estimating fair value:
For the year ended March 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Dividend yield | 0.9% | 1.0% | 1.0% | |||||||||
Risk-free interest rate | 3.7% | 3.3% | 3.8% | |||||||||
Expected life | 5.8 years | 6 years | 6 years | |||||||||
Expected volatility | 45.9% | 48.4% | 48.4% | |||||||||
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Options outstanding | Options exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Weighted | average | Weighted | ||||||||||||||||||
average | remaining | average | ||||||||||||||||||
Exercise price range | Number | exercise price | contractual life | Number | exercise price | |||||||||||||||
$ 6.15 - $ 7.69 | 13,500 | $ | 7.02 | 4.3 | 13,167 | $ | 7.02 | |||||||||||||
$ 7.69 - $ 9.23 | 603,166 | 8.38 | 5.2 | 394,401 | 8.56 | |||||||||||||||
$ 9.23 - $10.76 | 52,500 | 9.31 | 7.3 | 52,500 | 9.31 | |||||||||||||||
$10.76 - $12.30 | 325,500 | 12.08 | 2.7 | 313,200 | 12.07 | |||||||||||||||
$12.30 - $13.84 | 1,879,800 | 13.45 | 6.4 | 1,344,800 | 13.35 | |||||||||||||||
$13.84 - $15.38 | 647,667 | 14.64 | 6.4 | 463,836 | 14.65 | |||||||||||||||
3,522,133 | 2,581,904 | |||||||||||||||||||
Restricted Shares
For the year ended March 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Outstanding at April 1 | 579,655 | 783,511 | 648,978 | |||||||||
Awarded | — | — | 375,800 | |||||||||
Vested | (203,856 | ) | (203,856 | ) | (241,267 | ) | ||||||
Canceled | (38,800 | ) | — | — | ||||||||
Outstanding at March 31 | 336,999 | 579,655 | 783,511 | |||||||||
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17.
Year ended March 31, 2005 | ||||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||||
quarter | quarter | quarter | quarter | Year | ||||||||||||||||||
Net sales | $ | 386,672 | $ | 364,410 | $ | 515,684 | $ | 356,159 | $ | 1,622,925 | ||||||||||||
Gross margin | 48,665 | 48,340 | 65,804 | 44,639 | 207,448 | |||||||||||||||||
Income (loss) from continuing operations | $ | 4,014 | $ | 3,837 | $ | 14,458 | $ | (1,947 | ) | $ | 20,362 | |||||||||||
Loss from discontinued operations | (164 | ) | (96 | ) | (229 | ) | (388 | ) | (877 | ) | ||||||||||||
Net income (loss) | $ | 3,850 | $ | 3,741 | $ | 14,229 | $ | (2,335 | ) | $ | 19,485 | |||||||||||
Per share data: | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.14 | $ | 0.13 | $ | 0.51 | $ | (0.07 | ) | $ | 0.72 | |||||||||||
Loss from discontinued operations | — | — | — | (0.01 | ) | (0.03 | ) | |||||||||||||||
Net income (loss) | $ | 0.14 | $ | 0.13 | $ | 0.51 | $ | (0.08 | ) | $ | 0.69 | |||||||||||
Diluted | ||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.14 | $ | 0.13 | $ | 0.42 | $ | (0.07 | ) | $ | 0.69 | |||||||||||
Loss from discontinued operations | — | — | — | (0.01 | ) | (0.02 | ) | |||||||||||||||
Net income (loss) | $ | 0.14 | $ | 0.13 | $ | 0.42 | $ | (0.08 | ) | $ | 0.67 | |||||||||||
Year ended March 31, 2004 | ||||||||||||||||||||||
First | Second | Third | Fourth | |||||||||||||||||||
quarter | quarter | quarter | quarter | Year | ||||||||||||||||||
Net sales | $ | 279,593 | $ | 292,683 | $ | 459,363 | $ | 371,577 | $ | 1,403,216 | ||||||||||||
Gross margin | 34,927 | 34,714 | 59,426 | 51,835 | 180,902 | |||||||||||||||||
(Loss) income from continuing operations | $ | (708 | ) | $ | (3,046 | ) | $ | 9,120 | $ | 6,158 | $ | 11,524 | ||||||||||
Loss from discontinued operations | (749 | ) | (333 | ) | (458 | ) | (1,321 | ) | (2,861 | ) | ||||||||||||
Net (loss) income | $ | (1,457 | ) | $ | (3,379 | ) | $ | 8,662 | $ | 4,837 | $ | 8,663 | ||||||||||
Per share data: | ||||||||||||||||||||||
Basic | ||||||||||||||||||||||
(Loss) income from continuing operations | $ | (0.02 | ) | $ | (0.11 | ) | $ | 0.33 | $ | 0.22 | $ | 0.42 | ||||||||||
Loss from discontinued operations | (0.03 | ) | (0.01 | ) | (0.02 | ) | (0.05 | ) | (0.10 | ) | ||||||||||||
Net (loss) income | $ | (0.05 | ) | $ | (0.12 | ) | $ | 0.31 | $ | 0.17 | $ | 0.32 | ||||||||||
Diluted | ||||||||||||||||||||||
(Loss) income from continuing operations | $ | (0.02 | ) | $ | (0.11 | ) | $ | 0.29 | $ | 0.21 | $ | 0.41 | ||||||||||
Loss from discontinued operations | (0.03 | ) | (0.01 | ) | (0.01 | ) | (0.04 | ) | (0.10 | ) | ||||||||||||
Net (loss) income | $ | (0.05 | ) | $ | (0.12 | ) | $ | 0.28 | $ | 0.17 | $ | 0.31 | ||||||||||
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18.
Acquisition of The CTS Corporations
Redemption of Mandatorily Redeemable Convertible Trust Preferred Securities
Table of Contents
Balance at | Charged to | Deductions — | ||||||||||||||
beginning of | costs and | net write-offs/ | Balance at | |||||||||||||
Classification | period | expenses | payments | end of period | ||||||||||||
2005 | ||||||||||||||||
Allowance for doubtful accounts | $ | 3,829 | $ | 4,262 | $ | (2,224 | ) | $ | 5,867 | |||||||
Inventory valuation reserve | $ | 8,425 | $ | 3,878 | $ | (7,617 | ) | $ | 4,686 | |||||||
Restructuring reserves | $ | 5,819 | $ | 515 | $ | (876 | ) | $ | 5,458 | |||||||
2004 | ||||||||||||||||
Allowance for doubtful accounts | $ | 2,969 | $ | 3,364 | $ | (2,504 | ) | $ | 3,829 | |||||||
Inventory valuation reserve | $ | 4,525 | $ | 5,930 | $ | (2,030 | ) | $ | 8,425 | |||||||
Restructuring reserves | $ | 11,828 | $ | 2,516 | $ | (8,525 | ) | $ | 5,819 | |||||||
2003 | ||||||||||||||||
Allowance for doubtful accounts | $ | 3,156 | $ | 3,709 | $ | (3,896 | ) | $ | 2,969 | |||||||
Inventory valuation reserve | $ | 5,097 | $ | 3,224 | $ | (3,796 | ) | $ | 4,525 | |||||||
Restructuring reserves | $ | 1,473 | $ | 20,697 | $ | (10,342 | ) | $ | 11,828 |
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Agilysys, Inc.
Exhibit No. | Description | |
3(a) | Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 3.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, (File No. 000-05734). | |
3(b) | Amended Code of Regulations, as amended, of Agilysys, Inc., which is incorporated by reference to Exhibit 3.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 000-05734). | |
4(a) | Rights Agreement, dated as of April 27, 1999, by and between the company and National City Bank, which is incorporated herein by reference to Exhibit 1 to the company’s Registration Statement on Form 8-A (File No. 000-05734). | |
4(b) | Indenture, dated as of August 1, 1996, by and between the company and Star Bank, N.A., as Trustee, which is incorporated herein by reference to Exhibit 4(g) to the company’s Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 000-05734). | |
4(c) | Share Subscription Agreement and Trust, effective July 2, 1996, by and between the company and Wachovia Bank of North Carolina, N.A., which is incorporated herein by reference to Exhibit 10.1 to the company’s Registration Statement on Form S-3 (Reg. No. 333-07665). | |
4(d) | Certificate of Trust of Pioneer-Standard Financial Trust, dated March 23, 1998, which is incorporated herein by reference to Exhibit 4(l) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
4(e) | Amended and Restated Trust Agreement among Pioneer-Standard Electronics, Inc., as Depositor, Wilmington Trust company, as Property Trustee and Delaware Trustee, and the Administrative Trustees named therein, dated as of March 23, 1998, which is incorporated herein by reference to Exhibit 4(m) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
4(f) | Junior Subordinated Indenture, dated March 23, 1998, between the company and Wilmington Trust, as trustee, which is incorporated herein by reference to Exhibit 4(n) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
4(g) | First Supplemental Indenture, dated March 23, 1998, between the company and Wilmington Trust, as trustee, which is incorporated herein by reference to Exhibit 4(o) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
4(h) | Form of 6 3/4% Convertible Preferred Securities, which is incorporated herein by reference to Exhibit 4(m) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). |
Table of Contents
Exhibit No. | Description | |
4(i) | Form of Series A 6 3/4% Junior Convertible Subordinated Debentures, which is incorporated herein by reference to Exhibit 4(o) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
4(j) | Guarantee Agreement, dated March 23, 1998, between the company and Wilmington Trust, as guarantee trustee, which is incorporated herein by reference to Exhibit 4(r) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
*10(a) | Amended and Restated Employment Agreement, dated April 27, 1999, by and between the company and John V. Goodger, which is incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734). | |
*10(b) | The company’s 1982 Incentive Stock Option Plan, as amended, which is incorporated by reference to Exhibit 10(e) to the company’s Annual Report on Form 10-K for the year ended March 31, 1997 (File No. 000-05734). | |
*10(c) | The company’s Amended and Restated 1991 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.1 to the company’s Form S-8 Registration Statement (Reg. No. 033-53329). | |
*10(d) | The company’s Amended 1995 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 99.1 to the company’s Form S-8 Registration Statement (Reg. No. 333-07143). | |
*10(e) | Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.5 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734). | |
*10(f) | Pioneer-Standard Electronics, Inc. 1999 Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.6 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734). | |
*10(g) | Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan, which is incorporated herein by reference to Exhibit 10(o) to the company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 000-05734). | |
*10(h) | Pioneer-Standard Electronics, Inc. Benefit Equalization Plan, which is incorporated herein by reference to Exhibit 10(p) to the company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 000-05734). | |
*10(i) | Form of Option Agreement between Pioneer-Standard Electronics, Inc. and the optionees under the Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.7 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734). |
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Exhibit No. | Description | |
*10(j) | Employment agreement, effective April 24, 2000, between Pioneer-Standard Electronics, Inc. and Steven M. Billick, which is incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-05734). | |
*10(k) | Five-Year Credit Agreement, dated as of September 15, 2000, among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the Lenders, and Bank One, Michigan as Agent, Banc One Capital Markets, Inc. as Lead Arranger and Sole Book Runner, KeyBank National Association as Syndication Agent, and ABN AMRO Bank, N.V., as Documentation Agent, which is incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-05734). | |
10(l) | 364-Day Credit Agreement, dated as of September 15, 2000, among Pioneer-Standard Electronics, Inc., the Lenders, Bank One, Michigan as Agent, Banc One Capital Markets, Inc. as Lead Arranger and Sole Book Runner, KeyBank National Association, as Syndication Agent, and ABN AMRO Bank, N.V., as Documentation Agent, which is incorporated herein by reference to Exhibit 10.5 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-05734). | |
*10(m) | Pioneer-Standard Electronics, Inc. Senior Executive Disability Plan, effective April 1, 2000, which is incorporated herein by reference to Exhibit 10(v) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734). | |
*10(n) | Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(w) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734). | |
*10(o) | Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(x) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734). | |
*10(p) | Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(y) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734). | |
*10(q) | Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(z) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734). | |
10(r) | Receivables Purchase Agreement, dated as of October 19, 2001, among Pioneer-Standard Electronics Funding Corporation, as the Seller, Pioneer-Standard Electronics, Inc., as the Servicer, Falcon Asset Securitization Corporation and Three Rivers Funding Corporation, as Conduits, Bank One, NA and Mellon Bank, N.A., as Managing Agents and the Committed purchasers from time to time parties hereto and Bank One, NA as Collateral Agent, which is incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 000-05734). |
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Exhibit No. | Description | |
10(s) | Receivables Sales Agreement, dated as of October 19, 2001, among Pioneer-Standard Electronics, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Illinois, Inc. and Pioneer-Standard Electronics, Ltd., as Originators and Pioneer-Standard Funding Corporation, as Buyer, which is incorporated herein by reference to Exhibit 10.2 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 000-05734). | |
10(t) | Amendment No. 1 to Receivables Purchase Agreement, dated as of January 29, 2002, by and among Pioneer-Standard Funding Corporation, as Seller, Pioneer-Standard Electronics, Inc. as Servicer, Falcon Asset Securitization Corporation and Three Rivers Funding Corporation, as Conduits, certain Committed Purchasers, Bank One, NA and Mellon Bank, N.A. as Managing Agents, and Bank One, as Collateral Agent, which is incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 000-05734). | |
10(u) | Third Amendment to Five-Year Credit Agreement, dated as of January 29, 2002, by and among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the various lenders and Bank One, Michigan as Agent, which is incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 000-05734). | |
*10(v) | Amendment to the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan dated January 29, 2002, which is incorporated herein by reference to Exhibit 10(x) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734). | |
10(w) | Fourth Amendment to Five-Year Credit Agreement, dated as of May 6, 2002, by and among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the various lenders and Bank One, Michigan as LC Issuer and Agent, which is incorporated herein by reference to Exhibit 10(y) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734). | |
*10(x) | Amended and Restated Employment agreement, effective April 1, 2002, between Pioneer-Standard Electronics, Inc. and James L. Bayman which is incorporated herein by reference to Exhibit 10(z) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734). | |
*10(y) | Employment agreement, effective April 1, 2002, between Pioneer-Standard Electronics, Inc. and Arthur Rhein which is incorporated herein by reference to Exhibit 10(aa) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734). | |
10(z) | Fifth Amendment to Five-Year Credit Agreement, Dated as of December 20, 2002, by and among Pioneer-Standard Electronics, Inc., the Foreign Subsidiary Borrowers, the various lenders and Bank One, N.A., as successor by merger to Bank One, Michigan as LC Issuer and as Agent, which is incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2002 (File No. 000-05734). |
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Exhibit No. | Description | |
10(aa) | Purchase Agreement dated as of January 13, 2003 by and between Arrow Electronics, Inc., Arrow Europe GmbH, Arrow Electronics Canada Ltd., and Pioneer-Standard Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Electronics, Ltd., Pioneer-Standard Canada Inc, which is incorporated herein by reference to Exhibit 2.1 to the company’s Form 8-K, filed March 17, 2003 (File No. 000-05734). | |
10(bb) | Three Year Credit Agreement among Pioneer-Standard Electronics, Inc., as Borrower,various financial institutions, as Lenders, Key Corporate Capital, Inc., as Lead Arranger, Book Runner and Administrative Agent, U.S. Bank National Association, as Syndication Agent, and Harris Trust and Savings Bank, as Documentation Agent dated as of April 16, 2003, which is incorporated by reference to Exhibit 10(bb) to the company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734). | |
*10(cc) | Amended and Restated Employment Agreement between Pioneer-Standard Electronics, Inc. and Arthur Rhein, effective April 1, 2003, which is incorporated by reference to Exhibit 10(cc) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734). | |
*10(dd) | Amendment No. 1 to Employment Agreement, between Pioneer-Standard Electronics, Inc. and Steven M. Billick, effective April 1, 2002, which is incorporated by reference to Exhibit 10(dd) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734). | |
*10(ee) | Amendment No. 1 to Change of Control Agreement and Non-Competition Agreement, dated as of January 30, 2003, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated by reference to Exhibit 10(ee) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734). | |
*10(ff) | Amendment No. 1 to Change of Control Agreement and Non-Competition Agreement, dated as of January 30, 2003, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated by reference to Exhibit 10(ff) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734). | |
*10(gg) | Employment Agreement dated June 30, 2003 between Martin F. Ellis and Pioneer-Standard Electronics (n/k/a Agilysys, Inc.), which is incorporated by reference to Exhibit 10(gg) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2004 (File No. 000-05734). | |
*10(hh) | Change of Control Agreement dated June 30, 2003 by and between Martin F. Ellis and Pioneer-Standard Electronics (n/k/a Agilysys, Inc.), which is incorporated by reference to Exhibit 10(hh) to the Company’s Annual Report on Form 10-K for the year ended March 31, 2004 (File No. 000-05734). | |
21 | Subsidiaries of the Registrant. | |
23 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. | |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. |
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Exhibit No. | Description | |
32.1 | Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | |
99(a) | Certificate of Insurance Policy, effective November 1, 1997, between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc., which is incorporated herein by reference to Exhibit 99(a) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734). | |
99(b) | Forms of Amended and Restated Indemnification Agreement entered into by and between the company and each of its Directors and Executive Officers, which are incorporated herein by reference to Exhibit 99(b) to the company’s Annual Report on Form 10-K for the year ended March 31, 1994 (File No. 000-05734). |
* Denotes a management contract or compensatory plan or arrangement.