EX-99.3 5 l27903aexv99w3.htm EX-99.3 EX-99.3
 

Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information for Agilysys, Inc. (“Agilysys” or “Company”) set forth below gives effect to the acquisition of Innovative Systems Design, Inc. (d/b/a Innovativ Systems Design, Inc.) (“Innovativ”) using the purchase method of accounting after giving effect to the adjustments described in the accompanying notes. The unaudited pro forma condensed combined statement of operations includes only the results of continuing operations and excludes such impacts as nonrecurring items related to the acquisition and synergy and related cost savings associated with the integration of the acquisition.
The unaudited pro forma condensed combined statements of operations for the fiscal year ended March 31, 2007 gives effect to the acquisition as if it occurred on April 1, 2006 by combining the results for the fiscal year ended March 31, 2007 of Agilysys with the results for the fiscal year ended December 31, 2006 of Innovativ. The unaudited pro forma condensed combined balance sheet as of March 31, 2007 gives effect to the acquisition of Innovativ as if it occurred on that date.
The Company has accounted for the acquisition as a purchase under accounting principles generally accepted in the United States. Under the purchase method of accounting, the assets and liabilities of Innovativ will be recorded as of the acquisition date at their respective fair values and consolidated with those of the Company.
The Company has not yet completed its analysis of the fair value of the acquired assets and liabilities, including an evaluation of acquired intangible assets. Accordingly, the allocation of the acquisition cost to the assets acquired and liabilities assumed is subject to modification in the future, which will include the identification of intangible assets.
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements used in the preparation of such pro forma financial information. The Company’s historical financial statements used in the preparation of the unaudited pro forma condensed combined financial information were filed with the Securities and Exchange Commission on Form 10-K for the fiscal year ended March 31, 2007. Innovativ’s historical financial statements used in the preparation of the unaudited pro forma condensed combined financial information are included as exhibits 99.1 and 99.2 to this Form 8-K/A.
The unaudited pro forma condensed combined financial information, including the notes thereto, are not necessarily indicative of what the actual financial results would have been had the transaction taken place on the dates indicated and do not purport to indicate the results of future operations. The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of filing this Form 8-K/A.
The unaudited condensed combined pro forma financial information is prepared in accordance with Article 11 of Regulation S-X.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2007
(In Thousands, Except Share and Per Share Information)
                                 
    Historical Statements of              
    Operations for the Twelve              
    Months Ended              
    March 31     December 31              
    2007     2006     Pro Forma        
    Agilysys     Innovativ     Adjustments     Pro Forma  
Net sales
   $ 474,570     $ 234,642             $ 709,212  
Cost of goods sold
     353,863       182,304               536,167  
 
                          
Gross margin
     120,707       52,338               173,045  
Operating expenses
                                
Selling, general, and administrative expenses
     133,185       25,695               158,880  
Restructuring credits
     (2,531 )     —               (2,531 )
 
                          
Operating (loss) income
     (9,947 )     26,643               16,696  
Other (income) expense
                                
Other expense, net
     6,025       234               6,259  
Interest (income) expense, net
     (2,402 )     (267 )   $ 5,250 [a]       2,581  
 
                          
(Loss) income before income tax benefit (expense)
     (13,570 )     26,676               7,856  
Income tax benefit (expense)
     1,935       (209 )     (10,541)[b]       (8,815 )
 
                     2,116 [c]       2,116  
 
                          
(Loss) income from continuing operations
   $ (11,635 )   $ 26,467             $ 1,157  
 
                          
(Loss) income per share — basic and diluted
                               
(Loss) income from continuing operations
   $ (0.38 )                   $ 0.04  
 
Weighted average shares outstanding
                               
Basic
     30,683,766                       30,683,766  
Diluted
     30,683,766                       31,232,333  
See notes to unaudited pro forma condensed combined financial information.

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2007
(In Thousands)
                                 
    Historical     Pro Forma        
    Agilysys     Innovativ     Adjustments     Pro Forma  
ASSETS
                                
Current assets
                                
Cash and cash equivalents
   $ 604,667     $ 9,782     $ (100,000 ) [d]   $ 514,449  
 
                     (2,621 ) [e]     (2,621 )
 
                     (1,288 ) [f]     (1,288 )
Accounts receivable, net
     116,735       35,559               152,294  
Inventories, net
     9,922       762               10,684  
Deferred income taxes
     3,092       —               3,092  
Prepaid expenses and other current assets
     3,494       284               3,778  
Assets of discontinued operations-current
     206       59               265  
 
                        
Total current assets
     738,116       46,446       (103,909 )     680,653  
Goodwill
     93,197       —       83,179  [g]     176,376  
 
                              
Intangible assets, net
     8,716       —               8,716  
Investments
     11,231       —               11,231  
Other non-current assets
     30,701       487               31,188  
Property and equipment, net
     17,279       1,332               18,611  
 
                        
Total assets
   $ 899,240     $ 48,265     $ (20,730 )   $ 926,775  
 
                        
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
Current liabilities
                                
Accounts payable
   $ 84,286     $ 25,634               109,920  
Income taxes payable
     134,607       —               134,607  
Accrued liabilities
     32,189       1,738       (48 ) [f]     33,879  
Current portion of LT debt
     116       —               116  
Liabilities of discontinued operations-current
     162       —               162  
 
                        
Total current liabilities
     251,360       27,372       (48 )     278,684  
Deferred income taxes
     62       —               62  
Other non-current liabilities
     20,751       1,240       (1,240 ) [f]     20,751  
Liabilities of discontinued operations-noncurrent
     223       211               434  
Shareholders’ Equity
     626,844       19,442       (19,442 ) [h]     626,844  
 
                        
Total liabilities and shareholders’ equity
   $ 899,240     $ 48,265     $ (20,730 )   $ 926,775  
 
                        
See notes to unaudited pro forma condensed combined financial information.

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NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
1. Purchase Price
Agilysys acquired all of the outstanding shares of Innovativ for $100 million, which was funded by cash. The acquisition price is subject to a working capital adjustment. Additionally, Agilysys will pay an earn-out of two dollars for every dollar of EBITDA greater than $50 million in cumulative EBITDA over the first two years after closing. The earn-out will be limited to a maximum payout of $90 million. The working capital adjustment and potential earn-out payment by Agilysys are considered to be contingent elements of the acquisition that are not recognized until the contingencies have been resolved (i.e. the closing working capital has been established and the earn-out target has been met). Accordingly, the working capital adjustment and potential earn-out payment of up to $90 million has not been recognized in the allocation of the purchase price to the net assets acquired in the accompanying unaudited pro forma condensed combined financial information
2. Nonrecurring Events in Historical Financial Statements
The historical financial statements of the Company for the fiscal year ended March 31, 2007 that are included in the unaudited pro forma condensed combined statement of operations include the following nonrecurring events:
•   $4.9 million restructuring credit for the reversal of a restructuring liability that was established in fiscal 2003 for a previously exited facility.
•   $5.9 million impairment charge for the write-down of the Company’s equity method investment.
3. Pro forma adjustments
Pro forma adjustments to the unaudited pro forma condensed combined statement of operations for the fiscal year ended March 31, 2007 are as follows:
     
[a] To reduce the interest income of Agilysys for the cash used in the acquisition of Innovativ assuming the acquisition had occurred at the beginning of the period presented.
 
     
[b] To increase the historical income tax expense of Innovativ as if they were treated as a C-Corporation, using the statutory rate of 40.3%.
 
     
[c] Reflects the tax effect of the pro forma adjustments calculated at the statutory rate of 40.3% for the fiscal year ended March 31, 2007.
Pro forma adjustments to the unaudited pro forma condensed combined balance sheet as of March 31, 2007 are as follows:
      [d] To reflect the reduction of cash for the purchase price of Innovativ.
 
      [e] To reflect cash paid for transaction related costs.
 
      [f] To reflect cash paid for remaining severance obligations of Innovativ prior to close of the acquisition.

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[g] To reflect goodwill resulting from the acquisition of Innovativ from the initial purchase price allocation assuming the acquisition had occurred on March 31, 2007. The Company has not yet completed its analysis of the fair value of the acquired assets and liabilities, including an evaluation of acquired intangible assets. Accordingly, the allocation of the acquisition cost to the assets acquired and liabilities assumed is subject to modification in the future, which will include the identification of intangible assets.
 
      [h] To eliminate the historical equity of Innovativ as part of the acquisition.

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