Agilysys Announces Unaudited Fiscal 2010 Fourth-Quarter and Full-Year Financial Results

Jun 03, 2010, 08:09 ET from Agilysys

CLEVELAND, June 3 /PRNewswire-FirstCall/ --

  • Fiscal 2010 Earnings of $0.15 Per Diluted Share Compared With Loss of $12.58 in Fiscal 2009
  • SG&A Expenses Decreased $31.7 Million in Fiscal 2010, or 16%, From Fiscal 2009
  • Cash Increased $29.3 Million to $65.5 Million in Fiscal 2010

Agilysys, Inc. (Nasdaq: AGYS), a leading provider of innovative IT solutions, today announced unaudited financial results for the fiscal 2010 fourth quarter and full year ended March 31, 2010.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030915/AGLSLOGO )

Fourth-Quarter 2010 Unaudited Results of Operations

Year-over-year revenue declined in the fourth quarter of fiscal 2010. The company reported revenue of $135.8 million, which was 13% lower than the $155.5 million reported in last year's comparable quarter. The lower revenue reflected weaker-than-anticipated demand in the company's Technology Solutions Group.

Sales of hardware, software and services declined 13%, 25% and 3%, respectively, compared with the fourth quarter of fiscal 2009. Gross margin expanded to 26.4% of sales, compared with 25.7% of sales in the fiscal 2009 fourth quarter. The improvement in gross margin resulted primarily from a larger proportion of sales being derived from proprietary services and the company's higher-margin Hospitality and Retail Solutions Groups. A decline in vendor incentives tempered the favorable margin impact from the change in sales mix during the period.

Selling, general and administrative (SG&A) expense was $42.6 million for the quarter, a decrease of $4.8 million from the prior year, primarily due to lower compensation and intangible amortization.

Operating loss for the quarter narrowed to $6.9 million, a notable improvement from the operating loss reported in last year's fourth quarter of $97.5 million. Quarterly results for the prior year included charges related to restructuring and asset impairment ("Charges") totaling $90.1 million, compared with $0.1 million in the current year. Adjusted EBITDA (operating income plus depreciation and amortization), excluding Charges, was a loss of $3.6 million for the quarter, compared with a loss of $0.9 million a year ago.

The net loss from continuing operations for the quarter was $0.5 million, or a loss of $0.02 per share, compared with a net loss from continuing operations of $114.6 million, or a loss of $5.07 per share, in the prior-year fourth quarter.

"Despite the very difficult market environment and lower sales levels experienced throughout the fiscal year, we made significant progress in resetting the cost structure and making select, but important, investments in the company," said Martin Ellis, president and chief executive officer. "Moreover, our focus on working capital management and strong cash generation position us very well to advance our growth strategy of developing higher-value solutions with more proprietary software and services."

Fiscal 2010 Unaudited Results of Operations

Full-year revenue in fiscal 2010 decreased 12.4% to $640.4 million from $730.7 million in fiscal 2009 due to the weak economic environment and lower levels of corporate IT spending. Hardware sales, which comprised 69% of total sales, declined 5%, while sales of software and services were down 9% and 33%, respectively, compared with the prior fiscal year.

As a result of the lower sales, full-year gross profit declined $34.6 million, or 17.6%, to $161.5 million, versus $196.1 million in fiscal 2009. Gross margin as a percentage of sales was 25.2% in fiscal 2010, compared with 26.8% last year. Gross margin was negatively impacted by lower vendor rebates and lower selling margins.

SG&A expense decreased $31.7 million, or 16%, to $167.2 million, compared with $198.9 million in the prior fiscal year. The decrease was primarily due to cost-reduction efforts, lower intangible amortization and lower variable compensation.

The operating loss for the year was $6.8 million, compared with the operating loss of $275.4 million in fiscal 2009. Charges related to restructuring and asset impairment totaled $272.7 million in the prior year, versus $1.1 million in the current year. Adjusted EBITDA, excluding Charges, was $10.1 million for fiscal 2010, compared with $24.3 million a year ago. The decrease was due to lower sales and lower gross margin, reflecting a challenging IT demand environment for most of the year.

Full-year net income from continuing operations was $3.6 million, or $0.15 per diluted share, for fiscal 2010. Net income included a $5.2 million income tax benefit recorded for losses that were carried back to offset prior years' taxable income and reversal of prior-year reserves. This compares with the net loss from continuing operations of $282.2 million, or a loss of $12.49 per share, last year.

Accounts Receivable and Cash

The accounts receivable portfolio improved significantly in fiscal 2010. Days sales outstanding declined from 88 days at fiscal year-end 2009 to 69 days at fiscal year-end 2010, resulting in a $49.5 million reduction in accounts receivable. In addition, the average age of trade receivables improved by 6 days. Strong accounts receivable and working capital management contributed to cash on hand growing $29.3 million in fiscal 2010, reaching $65.5 million at March 31, 2010.

Business Outlook

Ellis continued: "We are a leaner and more focused company. Our investments in infrastructure and product development were sustained throughout the recession and are expected to make important contributions to future success. Subsequent to the end of the fiscal year, we went live on our new integrated Oracle ERP platform, which will further improve financial reporting, internal controls and operating efficiencies, as well as enhance customer service."

"HSG and RSG continue to gain traction, while demand in TSG remains uncertain in the short-term. Longer–term, we expect to benefit from broader demand for IT products and services. We intend to provide more comprehensive guidance as the demand environment becomes clearer," Ellis concluded.

The outlook for cash-flow generation remains strong and the company expects to generate $10 million to $15 million in cash flow in fiscal 2011. The company also expects to incur capital expenditures of approximately $10 million and depreciation and amortization of approximately $12.5 million.

The company will file its Form 10-K with the SEC next week.

Conference Call Information

A conference call will be held today at 11:00 a.m. ET. A slide deck, which will be the basis for the review, will accompany the conference call. Both the slide deck and the conference call can be accessed via the Investor Relations section of www.agilysys.com. In addition, a replay of the call will be archived on the website.

Forward-Looking Language

This release contains certain management expectations, which may constitute forward-looking information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the Private Securities Reform Act of 1995. Forward-looking information speaks only as to the date of this presentation and may be identified by use of words such as "may," "will," "believes," "anticipates," "plans," "expects," "estimates," "projects," "targets," "forecasts," "continues," "seeks," or the negative of those terms or similar expressions. Many important factors could cause actual results to be materially different from those in forward-looking information including, without limitation, competitive factors, disruption of supplies, changes in market conditions, pending or future claims or litigation, or technology advances. No assurances can be provided as to the outcome of cost reductions, business strategies, future financial results, unanticipated downturns to our relationships with customers, and macroeconomic demand for IT products and services, unanticipated difficulties integrating acquisitions, new laws and government regulations, interest rate changes, consequences of MAK Capital's shareholder-approved control share acquisition proposal, and unanticipated deterioration in economic and financial conditions in the United States and around the world or the consequences. We do not undertake to update or revise any forward-looking information even if events make it clear that any projected results, actions, or impact, express or implied, will not be realized.

Other potential risks and uncertainties that may cause actual results to be materially different from those in forward-looking information are described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC), under Item 1A, "Risk Factors." Copies are available from the SEC or the Agilysys website.

Use of Non-GAAP Financial Information

To supplement the unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP in this presentation, certain non-GAAP financial measures as defined by the SEC rules are used. Management believes that such information can enhance investors' understanding of the company's ongoing operations. The non-GAAP measures included in this presentation have been reconciled to the comparable GAAP measures within an accompanying table, shown on the last page of this presentation.

About Agilysys, Inc.

Agilysys is a leading provider of innovative IT solutions to corporate and public-sector customers, with special expertise in select markets, including retail and hospitality. The company uses technology — including hardware, software and services — to help customers resolve their most complicated IT needs. The company possesses expertise in enterprise architecture and high availability, infrastructure optimization, storage and resource management, identity management and business continuity; and provides industry-specific software, services and expertise to the retail and hospitality markets. Headquartered in Cleveland, Agilysys operates extensively throughout North America, with additional sales and support offices in the United Kingdom, Singapore and Hong Kong.

News releases and other information on the company are available on the Internet at: http://www.agilysys.com.

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

March 31,

Twelve Months Ended

March 31,

(In thousands, except share and per-share data)

2010

2009

2010

2009

Net sales:

(Unaudited)

(Unaudited)

Products

$ 104,004

$ 122,620

$ 520,747

$ 553,312

Services

31,827

32,835

119,684

177,408

Total net sales

135,831

155,455

640,431

730,720

Cost of goods sold:

Products

88,232

103,130

429,218

462,248

Services

11,772

12,386

49,686

72,379

Total cost of goods sold

100,004

115,516

478,904

534,627

Gross margin

35,827

39,939

161,527

196,093

Selling, general and administrative expenses

42,562

47,321

167,248

198,867

Asset impairment charges

55

86,213

293

231,856

Restructuring charges

78

3,871

823

40,801

Operating loss

(6,868)

(97,466)

(6,837)

(275,431)

Other (income) expense:

Other (income) expense, net

(883)

2,651

(6,194)

7,180

Interest income

(4)

(3)

(13)

(524)

Interest expense

297

93

970

1,196

Loss before income taxes

(6,278)

(100,207)

(1,600)

(283,283)

Income tax (benefit) expense

(5,769)

14,385

(5,176)

(1,096)

(Loss) income from continuing operations

(509)

(114,592)

3,576

(282,187)

Income (loss) from discontinued operations, net of taxes

9

804

(29)

(1,947)

Net (loss) income

$   (500)

$(113,788)

$  3,547

$(284,134)

Earnings per share – basic:

(Loss) income from continuing operations

$   (0.02)

$   (5.07)

$   0.16

$   (12.49)

Income (loss) from discontinued operations

0.04

(0.00)

(0.09)

 Net (loss) income

$   (0.02)

$   (5.03)

$   0.16

$   (12.58)

Earnings per share – diluted:

(Loss) income from continuing operations

$   (0.02)

$   (5.07)

$   0.15

$   (12.49)

Income (loss) from discontinued operations

0.04

(0.00)

(0.09)

 Net (loss) income

$   (0.02)

$   (5.03)

$   0.15

$   (12.58)

Weighted average shares outstanding

Basic

22,628,788

22,604,561

22,626,586

22,586,603

Diluted

22,628,788

22,604,561

23,087,742

22,586,603

Cash dividends per share

$    0.03

$   0.06

$    0.12

AGILYSYS, INC.

BUSINESS SEGMENT INFORMATION

(In thousands)

Three Months Ended Mar. 31, 2010

Twelve Months Ended Mar. 31, 2010

Reportable Segments

Reportable Segments

HSG

RSG

TSG

Corp/

Other

Consolidated

HSG

RSG

TSG

Corp/

Other

Consolidated

Total net revenue

$ 21,311

$25,185

$89,335

$     —

$ 135,831

$83,136

$110,818

$446,477

$     —

$ 640,431

Gross margin

$ 13,374

$ 5,840

$16,613

$     —

$  35,827

$51,463

$ 23,326

$ 87,501

$  (763)

$ 161,527

Gross margin percentage

62.8%

23.2%

18.6%

26.4%

61.9%

21.0%

19.6%

25.2%

Operating income (loss)

$  2,487

$   974

$(1,130)

$(9,199)

$(6,868)

$ 8,690

$  6,662

$ 10,951

$(33,140)

$  (6,837)

Other income expenses, net

(883)

(883)

(6,194)

(6,194)

Interest expense, net

293

293

957

957

Income (loss) from continuing operations before income taxes

$ 2,487

$   974

$(1,130)

$ (8,609)

$ (6,278)

$ 8,690

$  6,662

$ 10,951

$(27,903)

$  (1,600)

Non-cash charges:

 Depreciation and Amortization(1)

$ 1,029

$   55

$   839

$  1,266

$  3,189

$ 4,337

$   198

$ 6,418

$  4,876

$  15,829

 Asset impairment

$    —

$   —

$    55

$    —

$     55

$   90

$    —

$    55

$    148

$    293

 Restructuring charges

$    —

$   —

$    —

$    78

$     78

$   —

$    —

$    —

$    823

$    823

Total

$ 1,029

$   55

$   894

$  1,344

$  3,322

$ 4,427

$   198

$ 6,473

$  5,847

$  16,945

Three Months Ended Mar. 31, 2009

Twelve Months Ended Mar. 31, 2009

Reportable Segments

Reportable Segments

HSG

RSG

TSG

Corp/

Other

Consolidated

HSG

RSG

TSG

Corp/

Other

Consolidated

Total net revenue

$ 23,565

$19,981

$111,909

$     —

$  155,455

$99,636

$122,159

$508,925

$     —

$ 730,720

Gross margin

$ 14,084

$ 4,317

$ 23,279

$ (1,741)

$   39,939

$58,004

$ 27,748

$108,489

$  1,852

$ 196,093

Gross margin percentage

59.8%

21.6%

20.8%

25.7%

58.2%

22.7%

21.3%

26.8%

Operating (loss)

$ (8,455)

$  (878)

$(73,681)

$ (14,452)

$ (97,466)

$(114,053)

$(16,963)

$(88,177)

$ (56,238)

$(275,431)

Other income expenses, net

2,651

2,651

7,180

7,180

Interest expense, net

90

90

672

672

Income (loss) from    continuing operations  before income taxes

$ (8,455)

$  (878)

$(73,681)

$ (17,193)

$(100,207)

$(114,053)

$(16,963)

$(88,177)

$ (64,090)

$(283,283)

Non-cash charges:

 Depreciation and   Amortization(1)

$  1,194

$   (28)

$  4,126

$  1,166

$  6,458

$   5,931

$   129

$ 16,673

$  4,366

$  27,099

 Asset impairment

$ 11,637

$     2

$ 74,574

$     —

$ 86,213

$ 122,488

$ 24,912

$ 84,456

$     —

$ 231,856

 Restructuring charges

$     —

$    —

$     —

$  3,871

$  3,871

$      —

$    —

$ 23,573

$ 17,228

$  40,801

Total

$ 12,831

$   (26)

$ 78,700

$  5,037

$ 96,542

$ 128,419

$ 25,041

$124,702

$  21,594

$ 299,756

(1) Does not include the amortization of deferred financing fees totaling $139 and $0 for the three months ended March 31, 2010 and 2009, respectively, and $485 and $584 for the twelve months ended March 31, 2010 and 2009, respectively.

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

March 31,

2010

March 31,   2009

ASSETS

(Unaudited)

Current assets:

Cash and cash equivalents

$  65,535

$36,244

Accounts receivable, net

104,808

151,944

Inventories, net

14,446

27,216

Deferred income taxes, net

144

6,836

Prepaid expenses and other current assets

5,047

4,564

Income taxes receivable

10,394

3,871

Assets of discontinued operations – current

1,075

Total current assets

200,374

231,750

Goodwill

50,418

50,382

Intangible assets, net

32,510

36,659

Deferred income taxes—non-current

899

511

Other non-current assets

18,175

29,008

Assets of discontinued operations—non-current

56

Property and equipment, net

27,995

26,070

Total assets

$  330,371

$374,436

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$   70,171

$28,042

Floor plan financing in default

74,159

Deferred revenue

23,810

18,709

Accrued and other current liabilities

17,705

37,807

Capital Leases—current

311

238

Liabilities of discontinued operations – current

1,176

Total current liabilities

111,997

160,131

Other non-current liabilities

19,450

21,588

Shareholders' equity:

Common shares, without par value, at $0.30 stated value; authorized 80,000,000 shares; 31,606,831 and 31,523,218 shares issued in 2010 and 2009, respectively

9,482

9,457

Treasury stock (8,674,788 shares in 2010 and 8,896,778 in 2009)

(2,602)

(2,669)

Capital in excess of stated value

(8,770)

(11,128)

Retained earnings

202,134

199,947

Accumulated other comprehensive loss

(1,320)

(2,890)

Total shareholders' equity

198,924

192,717

Total liabilities and shareholders' equity

$  330,371

$374,436

AGILYSYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended March 31,

(In thousands)

2010

2009

Operating activities:

(Unaudited)

Net income (loss)

$   3,547

$(284,134)

 Add: Loss from discontinued operations

29

1,947

Income (loss) from continuing operations

3,576

(282,187)

Adjustments to reconcile net (loss) income from continuing operations to net cash used for operating activities (net of effects from business acquisitions):

Asset impairment charges

293

249,983

Impairment of investment in The Reserve Fund's Primary Fund

3,001

Gain on redemption of investment in The Reserve Fund's Primary Fund

(2,505)

Gain on cost investment

(56)

Loss on sale of securities

91

Loss on disposal of property and equipment

494

Depreciation

3,914

4,032

Amortization

12,400

23,651

Deferred income taxes

6,596

(7,035)

Stock-based compensation

2,426

457

Excess tax benefit from exercise of stock options

(9)

Change in cash surrender value of company owned life insurance policies

(802)

4,610

Changes in operating assets and liabilities:

Accounts receivable

49,481

14,909

Inventories

12,839

(1,763)

Accounts payable

41,889

(68,809)

Accrued liabilities

(15,213)

(23,520)

Income taxes payable

(9,021)

14,483

Other changes, net

365

(1,808)

Other non-cash adjustments

(2,396)

(10,849)

Total adjustments

100,348

201,780

Net cash provided by (used for) operating activities

103,924

(80,407)

Investing activities:

Proceeds from (claim on) The Reserve Fund's Primary Fund

4,772

(5,268)

Proceeds from redemption of cost basis investment

9,513

Proceeds from borrowings against corporate-owned life insurance policies

12,500

Additional investments in corporate-owned life insurance policies

(1,712)

(5,996)

Proceeds from sale of marketable securities

61

81

Additional investments in marketable securities

(45)

(4)

Acquisition of businesses, net of cash acquired

(2,381)

Purchase of property and equipment

(13,306)

(7,056)

Net cash provided by (used for) investing activities

2,270

(11,111)

Financing activities:

Floor plan financing agreement, net

(74,468)

59,607

Proceeds from borrowings under credit facility

5,077

Principle payments under credit facility

(5,077)

Debt financing costs

(1,578)

Dividends paid

(1,360)

(2,718)

Issuance of common shares

89

Excess tax benefit from exercise of stock options

9

Principal payment under long-term obligations

(216)

(67)

Net cash (used for) provided by financing activities

(77,524)

56,822

Effect of exchange rate changes on cash

695

911

Cash flows provided by (used for) continuing operations

29,365

(33,785)

Cash flows of discontinued operations—operating

(74)

94

Net increase (decrease) in cash

29,291

(33,691)

Cash at beginning of period

36,244

69,935

Cash at end of period

$   65,535

$ 36,244

AGILYSYS, INC.

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited)

Three Months Ended

March 31,

Twelve Months Ended

March 31,

(In thousands)

2010

2009

2010

2009

(Unaudited)

(Unaudited)

(Unaudited)

Net (loss) income

$    (500)

$ (113,788)

$  3,547

$(284,134)

Plus:

   Interest expense, net

293

90

957

672

   Income tax (benefit) expense

(5,769)

14,385

(5,176)

(1,096)

   Depreciation and amortization expense(a)

3,189

6,458

15,829

27,099

   Other (income) expenses, net

(883)

2,651

(6,194)

7,180

   (Income) loss from discontinued operations

(9)

(804)

29

1,947

Adjusted EBITDA from continuing operations

$  (3,679)

$  (91,008)

$  8,992

$(248,332)

(a)Depreciation and amortization expense excludes amortization of deferred finance costs totaling $139 and $0 for the three months ended Mar. 31, 2010 and 2009, respectively, and $485 and $584 for the twelve months ended Mar. 31, 2010 and 2009, respectively; as such costs are already included in interest (income) expense, net.

Investor Contact:

Curtis Stout

Vice President and Treasurer

Agilysys, Inc.

440-519-8635

curtis.stout@agilysys.com

Media Contact:

Maureen Morreale

Senior Communications Manager

Agilysys, Inc.

440-519-8161

maureen.morreale@agilysys.com

SOURCE Agilysys



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