[AGILYSYS LOGO]
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
AGILYSYS, INC. REPORTS FISCAL 2006 FIRST-QUARTER RESULTS
- Consolidated Sales Increase 6 Percent to $410 Million
- Net Income of $0.01 per Diluted Share
- Non-GAAP Net Income Reaches $0.15 per Diluted Share, Excluding
Restructuring and Loss on Redemption of Convertible Trust Preferred
Securities
CLEVELAND - Aug. 4, 2005 - Agilysys, Inc. (Nasdaq: AGYS), a leading provider of
enterprise computer technology solutions, today announced fiscal 2006 unaudited
first-quarter results for the three months ended June 30, 2005. Consolidated
sales for the first quarter were $410.0 million, an increase of 6.0 percent
compared with sales of $386.7 million for the first quarter last year.
First-quarter sales of hardware products were $329.8 million, up 4.7 percent
from $314.9 million last year. Software sales were $58.9 million, up 14.4
percent from $51.5 million a year ago, and services sales were $21.3 million, up
4.9 percent from $20.3 million last year.
Gross margin for the first quarter was 12.4 percent of sales, compared with 12.6
percent in the first quarter last year. Selling, general and administrative
expenses were $41.2 million, or 10.1 percent of sales, compared with $39.0
million, or 10.1 percent of sales, in the prior year.
The company reported first-quarter net income of $290,000, or $0.01 per diluted
share. Excluding a $2.4 million restructuring charge and a non-recurring $4.8
million loss on redemption of the company's Convertible Trust Preferred
Securities, the company would have reported non-generally accepted accounting
principles (non-GAAP) net income of $4.6 million, or $0.15 per diluted share,
compared with non-GAAP net income of $4.0 million, or $0.14 per diluted share,
in the first quarter last year.
Arthur Rhein, chairman, president and chief executive officer of Agilysys, said,
"I am pleased with our strong operating performance in the first quarter of
fiscal 2006. Our results reflect sales growth in each of our major product
categories, continued execution of our strategic plan and a focus on improving
operational efficiency."
COMPANY REPORTS $2.4 MILLION RESTRUCTURING CHARGE
During the quarter Agilysys initiated a plan to consolidate a portion of its
operations to reduce costs and increase future operating efficiencies. As part
of this restructuring effort, the company initiated the exit of certain leased
facilities and headcount reduction. The company also executed a senior
management consolidation of responsibilities. Restructuring charges increased
$2.2 million during the quarter compared with last year, which reflects
headcount reduction in the first quarter this year. The company has not recorded
a liability for costs relating to the exit of certain leased facilities since
the company had not ceased using such properties as of June 30, 2005. The
company expects to record an additional restructuring charge of approximately
$2.3 million in the second quarter ending September 30, 2005.
Cost savings expected to be realized in fiscal 2006 as a result of the
restructuring initiative are approximately $6 million. None of these cost
savings were realized in the first quarter of fiscal 2006.
REDEMPTION OF CONVERTIBLE TRUST PREFERRED SECURITIES
As part of its strategy to increase both financial flexibility and shareholder
value, on June 15, 2005 the company completed the redemption of its 6.75 percent
Convertible Trust Preferred Securities ("Trust Preferred Securities"). As of
March 31, 2005, the carrying value of the Trust Preferred Securities was $125.3
million. Holders of the Trust Preferred Securities were required to accept a
cash payment or to convert into common shares of Agilysys by June 15, 2005.
Trust Preferred Securities with a carrying value of $105.4 million were redeemed
for cash at a total cost of $109.0 million, which included accrued interest of
$1.5 million and a 2.025 percent premium of $2.1 million. Agilysys funded the
redemption with existing cash balances. In addition, 398,324 Trust Preferred
Securities with a carrying value of $19.9 million were converted into common
shares of the company, resulting in the issuance of 1.3 million common shares.
The company incurred a loss of $4.8 million in the first quarter of fiscal 2006
as a result of the redemption of the Trust Preferred Securities. As part of the
loss, the company wrote off deferred financing fees of $2.7 million. The
financing fees, incurred at the time of issuing the Trust Preferred Securities,
were being amortized over a 30-year period ending on March 31, 2028, which was
the maturity date of the Trust Preferred Securities. The write off of deferred
financing fees, together with the $2.1 million premium on redemption described
above, resulted in the loss of $4.8 million.
Agilysys shareholders will benefit by both the elimination of the annual
distribution on the Trust Preferred Securities, which amounted to approximately
$5.2 million annually, net of tax, and the elimination of 6.7 million shares of
dilution. After the redemption and conversion to common shares, Agilysys will
have approximately 30.4 million common shares issued and outstanding.
ACQUISITION OF THE CTS CORPORATIONS
During the first quarter of fiscal 2006 Agilysys completed its acquisition of
The CTS Corporations for $27.5 million and began the process of integrating CTS
into the company's professional services operation. The transaction, which
closed on May 31, 2005, enhances the Agilysys offering of comprehensive storage
solutions. The acquisition of CTS provides Agilysys a strong foundation to
capitalize on current industry trends around storage products and services.
USE OF NON-GAAP FINANCIAL MEASURES
The non-GAAP operating results provided above are "non-GAAP financial measures"
under the rules of the Securities and Exchange Commission. The company believes
that the non-GAAP financial information is useful to investors to assist them in
assessing and understanding the company's operating performance and underlying
trends in its business, as management considers the charges and losses referred
to above to be outside the company's core operating results. This non-GAAP
financial information supplements, and is not intended to represent a measure of
performance in accordance with U.S. GAAP. Accompanying this release is a tabular
reconciliation of the differences between the non-GAAP measures with the most
comparable financial measure calculated and presented in accordance with U.S.
GAAP.
UPDATED BUSINESS OUTLOOK
Agilysys also provided its business outlook for fiscal 2006 including the
results of its Convertible Trust Preferred Securities redemption.
For fiscal 2006, the company currently estimates sales to grow approximately
five to seven percent over fiscal 2005 sales of $1.62 billion. Full-year gross
margin is expected to be approximately 12.4 percent of sales and selling,
general and administrative expenses are anticipated to be approximately 9.5
percent of sales for fiscal 2006.
Fiscal 2006 net income is expected to be in the range of $0.80 to $0.88 per
diluted share, including the impact of the restructuring charges discussed above
and the loss on the Convertible Trust Preferred Securities redemption and the
associated diluted share count impact.
Agilysys also expects to incur fiscal 2006 capital expenditures between $2 and
$4 million, depreciation and amortization of approximately $10 million, and
interest expense will be offset by interest and other income, assuming no
additional retirement of its Senior Notes.
CONFERENCE CALL INFORMATION
A conference call to discuss the first quarter results is scheduled for 10 a.m.
ET on Thursday, August 4, 2005. The conference call will be broadcast live over
the Internet and a replay will be accessible on the investor relations page of
the company's Web site: www.agilysys.com. A taped replay of the conference call
will be available from 12 noon ET on Tuesday, August 4, 2005, through midnight
ET on Tuesday, August 16, 2005, accessible by dialing 877-344-7529 or
412-317-0088 (passcode #375532).
FORWARD-LOOKING LANGUAGE
Portions of this release, particularly the statements made by management and
those that are not historical facts, are forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on current
assumptions and expectations, and are subject to risks and uncertainties, many
of which are beyond the control of Agilysys. Many factors could cause Agilysys
actual results to differ materially from those anticipated by the
forward-looking statements. These factors include those referenced in the Annual
Report on Form 10-K or as may be described from time to time in Agilysys
subsequent SEC filings.
Potential factors that could cause actual results to differ materially from
those expressed or implied by such statements include, but are not limited to,
those relating to Agilysys anticipated revenue gains, sales volume, margin
improvements, cost savings, and new product introductions.
Other associated risks include geographic factors, political and economic risks,
the actions of Agilysys competitors, changes in economic or industry conditions
or in the markets served by Agilysys, and the ability to appropriately integrate
acquisitions, strategic alliances, and joint ventures.
In addition, this release contains time-sensitive information and reflects
management's best analysis only as of the date of this release. Agilysys does
not undertake any obligation to publicly update or revise any forward-looking
statements to reflect future events, information or circumstances that arise
after the date of this release. Information on the potential factors that could
affect Agilysys actual results of operations is included in its filings with the
Securities and Exchange Commission, including, but not limited to, its Annual
Report on Form 10-K for the fiscal year ended March 31, 2005. Interested persons
can obtain it free at the Securities and Exchange Commission's Web site,
www.sec.gov.
ABOUT AGILYSYS, INC.
Agilysys is one of the foremost distributors and premier resellers of enterprise
computer technology solutions. It has a proven track record of delivering
complex server and storage hardware, software and services to resellers, large
and medium-sized corporate customers, as well as public-sector clients across a
diverse set of industries. In addition, the company provides customer-centric
software applications and services focused on the retail and hospitality
markets. Headquartered in Mayfield Heights, Ohio, Agilysys has sales offices
throughout the United States and Canada. For more information, visit
www.agilysys.com.
Analysts/Investor Contact: Martin Ellis
Executive Vice President, Treasurer and
Chief Financial Officer
Agilysys, Inc.
440-720-8682
martin.ellis@agilysys.com
Media Contact: Julie Young
Director, Corporate Communications
Agilysys, Inc.
440-720-8602
julie.young@agilysys.com
# # #
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
June 30
-------------------------------
(In thousands, except share and per share data) 2005 2004
------------ ------------
Net sales $ 409,954 $ 386,672
Cost of goods sold 359,196 338,007
------------ ------------
Gross margin 50,758 48,665
Operating expenses
Selling, general and administrative expenses 41,239 38,950
Restructuring charges 2,424 189
------------ ------------
Operating income 7,095 9,526
Other (income) expense
Other income, net (362) (239)
Interest income (1,471) (352)
Interest expense 1,607 1,641
Loss on redemption of Mandatorily Redeemable Convertible
Trust Preferred Securities 4,811 -
------------ ------------
Income before income taxes 2,510 8,476
Provision for income taxes 1,177 3,102
Distributions on Mandatorily Redeemable Convertible Trust
Preferred Securities, net of taxes 900 1,360
------------ ------------
Income from continuing operations 433 4,014
Loss from discontinued operations, net of taxes 143 164
------------ ------------
Net income $ 290 $ 3,850
============ ============
Earnings per share - basic and diluted
Income from continuing operations $ 0.01 $ 0.14
Loss from discontinued operations - -
------------ ------------
Net income $ 0.01 $ 0.14
============ ============
Weighted average shares outstanding
Basic 28,901,927 28,014,938
Diluted 29,827,852 28,418,415
Cash dividends per share $ 0.03 $ 0.03
See accompanying notes to unaudited condensed consolidated financial statements.
AGILYSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts at June 30, 2005 are Unaudited)
June 30 March 31
(In thousands, except share and per share data) 2005 2005
--------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 139,262 $ 241,880
Accounts receivable, net 283,964 263,986
Inventories, net 53,219 47,305
Deferred income taxes 10,396 9,379
Prepaid expenses 1,290 1,991
Assets of discontinued operations 648 702
--------- ---------
Total current assets 488,779 565,243
Goodwill 197,417 173,774
Intangible assets, net 5,239 5,796
Investments 19,974 19,785
Other assets 19,049 20,241
Property and equipment, net 29,836 30,319
--------- ---------
Total assets $ 760,294 $ 815,158
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 273,442 $ 228,775
Accrued liabilities 40,423 38,178
Mandatorily Redeemable Convertible Trust Preferred Securities - 125,317
Liabilities of discontinued operations 1,378 1,767
--------- ---------
Total current liabilities 315,243 394,037
Long-term debt 59,641 59,624
Deferred income taxes 11,835 11,657
Other non-current liabilities 18,614 17,389
Shareholders' equity
Common stock, at $0.30 stated value; 30,434,014 and 28,820,531 shares
outstanding at June 30, 2005 and March 31 2005, respectively, net of
1,125 and 46,442 shares in treasury at June
2005 and March 31, 2005, respectively 9,032 8,564
Capital in excess of stated value 111,760 88,927
Retained earnings 235,174 235,749
Unearned compensation on restricted stock awards (843) (873)
Accumulated other comprehensive (loss) income (162) 84
--------- ---------
Total shareholders' equity 354,961 332,451
--------- ---------
Total liabilities and shareholders' equity $ 760,294 $ 815,158
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
AGILYSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
June 30
-------------------------
(In thousands) 2005 2004
--------- ---------
Operating activities:
Net income $ 290 $ 3,850
Add: Loss from discontinued operations 143 164
--------- ---------
Income from continuing operations 433 4,014
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities (net of effects from business
acquisition):
Loss on redemption of Convertible Trust Preferred Securities 4,811 -
Loss on disposal of plant and equipment 1 34
Depreciation 971 1,027
Amortization 1,269 1,153
Deferred income taxes (1,150) 2,169
Changes in working capital
Accounts receivable (16,040) 21,392
Inventory (5,914) 2,149
Accounts payable 43,577 29,581
Accrued liabilities 2,302 (6,494)
Other working capital 818 383
Other non-cash adjustments (487) (3,005)
--------- ---------
Total adjustments 30,158 48,389
--------- ---------
Net cash provided by operating activities 30,591 52,403
Investing activities:
Acquisition of business, net of cash acquired (27,784) -
Proceeds from sale of property and equipment - 105
Additions to property and equipment (310) (228)
--------- ---------
Net cash used for investing activities (28,094) (123)
Financing activities:
Redemption of Convertible Trust Preferred Securities (107,536) -
Dividends paid (866) (748)
Proceeds from issuance of common stock 3,843 875
Other (78) (72)
--------- ---------
Net cash (used for) provided by financing activities (104,637) 55
Cash flows (used for) provided by continuing operations (102,140) 52,335
Cash flows (used for) provided by discontinued operations (478) 3,698
--------- ---------
Net (decrease) increase in cash (102,618) 56,033
Cash at beginning of period 241,880 149,903
--------- ---------
Cash at end of period $ 139,262 $ 205,936
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
AGILYSYS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three months ended
June 30
-----------------------------------
(In thousands, except per share data) 2005 2004
--------------- --------------
Net income, as reported $ 290 $ 3,850
Non-GAAP adjustments
Restructuring charges, net of $1.0 million and $70,000
in taxes, respectively 1,450 120
Loss on redemption of Mandatorily Redeemable Convertible
Trust Preferred Securities, net of $1.9 million in taxes 2,876 -
----------- -----------
Non-GAAP net income $ 4,616 $ 3,970
=========== ===========
Earnings per share - diluted, as reported $ 0.01 $ 0.14
Non-GAAP adjustments
Restructuring charges 0.05 -
Loss on redemption of Mandatorily Redeemable Convertible
Trust Preferred Securities 0.09 -
----------- -----------
Non-GAAP earnings per share - diluted $ 0.15 $ 0.14
=========== ===========
The following table sets forth the computation of non-GAAP earnings per share -
diluted:
Reconciliation of earnings per share - diluted
Numerator:
Non-GAAP net income, as determined above $ 4,616 $ 3,970
Distributions on Mandatorily Redeemable Convertible Trust
Preferred Securities, net of taxes 900(a) -
----------- -----------
Non-GAAP net income - diluted $ 5,516 $ 3,970
Denominator:
Weighted average shares outstanding - diluted 29,827,852 28,418,415
Dilutive effect of Mandatorily Redeemable Convertible Trust
Preferred Securities 6,588,258(a) -
----------- -----------
Non-GAAP weighted average shares outstanding - diluted 36,416,110 28,418,415
Non-GAAP earnings per share - diluted $ 0.15 $ 0.14
(a) Diluted earnings per share is determined as the lowest earnings per
incremental share in the sequence of potential common shares.
Approximately 6.6 million shares issuable upon conversion of the
Mandatorily Redeemable Convertible Trust Preferred Securities at June
30, 2005 were not included in determining GAAP earnings per share -
diluted, because their effect was anti-dilutive. However, due to the
increase in non-GAAP net income, the potential shares had a dilutive
effect when determining non-GAAP earnings per share - diluted.