10-Q 1 d465521d10q.htm 10-Q 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2012

OR

 

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

FOR THE TRANSITION PERIOD FROM             TO 

Commission file number: 333-183494-06

 

 

 

LOGO

INFOR, INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE   01-0924667
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

641 AVENUE OF THE AMERICAS

NEW YORK, NEW YORK

  10011
(Address of principal executive offices)   (Zip Code)

(678) 319-8000

(Registrant’s telephone number, including area code)

 

 

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨     Accelerated filer                  ¨
Non-accelerated filer  x     Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The number of shares of our common stock outstanding on January 4, 2013 was 1,000, par value $0.01 per share.

 

 

 


Table of Contents

INFOR, INC.

Form 10-Q

Index

 

PART I.

   FINANCIAL INFORMATION      3   

Item 1.

   Financial Statements (unaudited)      3   
   Condensed Consolidated Balance Sheets at November 30, 2012 and May 31, 2012      3   
   Condensed Consolidated Statements of Operations for the three and six months ended November 30, 2012 and 2011      4   
   Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended November 30, 2012 and 2011      5   
   Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2012 and 2011      6   
   Notes to Condensed Consolidated Financial Statements      7   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      37   

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk      54   

Item 4.

   Controls and Procedures      55   

PART II.

   OTHER INFORMATION      56   

Item 1.

   Legal Proceedings      56   

Item 1A.

   Risk Factors      56   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      56   

Item 3.

   Defaults Upon Senior Securities      56   

Item 4.

   Mine Safety Disclosures      56   

Item 5.

   Other Information      56   

Item 6.

   Exhibits      56   
   SIGNATURES      57   

 

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Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q for the Quarter Ended November 30, 2012, contains forward-looking statements within the meaning of securities laws. The forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “forecast,” “project,” “should” and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements about our future performance, the continuation of historical trends, the sufficiency of our sources of capital for future needs, the effects of acquisitions, the outcome of pending litigation and the expected impact of recently issued accounting pronouncements. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. The forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those anticipated in the forward-looking statements; including those that are discussed under Risk Factors in documents we have filed with the U.S. Securities and Exchange Commission (SEC), including our Registration Statement on Form S-4, filed with the SEC on August 23, 2012, and those that may be discussed in this Quarterly Report under Part II, Item 1A, Risk Factors.

Given these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements included in this Quarterly Report. The forward-looking statements included in this Quarterly Report reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

 

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INFOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts which are actuals)

(unaudited)

 

     November 30,
2012
    May 31,
2012
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 238.5      $ 384.4   

Accounts receivable, net

     366.5        412.6   

Prepaid expenses

     91.7        100.1   

Income tax receivable

     20.5        36.0   

Other current assets

     20.8        20.7   

Deferred tax assets

     11.7        11.4   
  

 

 

   

 

 

 

Total current assets

     749.7        965.2   

Property and equipment, net

     67.3        63.3   

Intangible assets, net

     1,181.5        1,257.3   

Goodwill

     4,134.1        4,011.4   

Deferred tax assets

     69.7        75.1   

Other assets

     55.5        44.5   

Deferred financing fees, net

     153.5        138.2   
  

 

 

   

 

 

 

Total assets

   $ 6,411.3      $ 6,555.0   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 50.8      $ 49.5   

Income taxes payable

     35.3        18.7   

Accrued expenses

     389.3        434.5   

Deferred tax liabilities

     51.2        45.8   

Deferred revenue

     673.2        851.9   

Current portion of long-term obligations

     91.2        90.8   
  

 

 

   

 

 

 

Total current liabilities

     1,291.0        1,491.2   

Long-term debt

     5,275.9        5,267.8   

Deferred tax liabilities

     175.4        179.8   

Other long-term liabilities

     220.9        215.3   
  

 

 

   

 

 

 

Total liabilities

     6,963.2        7,154.1   
  

 

 

   

 

 

 

Commitments and contingencies (Note 14)

    

Stockholders’ deficit

    

Common stock, $0.01 par value; 1,000 shares authorized; 1,000 shares issued and outstanding at November 30, 2012 and May 31, 2012

     —          —     

Additional paid-in capital

     1,237.0        1,234.2   

Accumulated other comprehensive income (loss)

     62.3        (38.1

Accumulated deficit

     (1,851.2     (1,795.2
  

 

 

   

 

 

 

Total stockholders’ deficit

     (551.9     (599.1
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 6,411.3      $     6,555.0   
  

 

 

   

 

 

 

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements

 

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INFOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

(unaudited)

 

     Three Months Ended     Six Months Ended  
     November 30,     November 30,  
     2012     2011     2012     2011  

Revenues:

        

License fees

   $ 120.6      $ 119.5      $ 221.4      $ 212.4   

Product updates and support fees

     363.0        321.1        720.1        621.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     483.6        440.6        941.5        834.2   

Consulting services and other fees

     198.9        200.3        372.8        368.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     682.5        640.9        1,314.3        1,202.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Cost of license fees (1)

     20.2        22.2        37.8        40.7   

Cost of product updates and support fees (1)

     63.6        66.2        125.9        128.0   

Cost of consulting services and other fees (1)

     150.0        153.3        290.1        286.2   

Sales and marketing

     114.1        107.3        212.6        200.2   

Research and development

     85.1        83.3        167.8        150.2   

General and administrative

     50.7        68.8        100.8        120.2   

Amortization of intangible assets and depreciation

     68.8        85.9        141.8        162.4   

Restructuring costs

     4.1        11.5        9.6        52.4   

Acquisition related and other costs

     12.7        5.6        14.6        18.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     569.3        604.1        1,101.0        1,158.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     113.2        36.8        213.3        43.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net:

        

Interest expense, net

     103.4        119.7        211.6        236.7   

Loss on extinguishment of debt

     1.8        —          1.8        8.7   

Other (income) expense, net

     25.0        (45.9     20.8        (28.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     130.2        73.8        234.2        216.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax

     (17.0     (37.0     (20.9     (172.6

Income tax provision (benefit)

     5.7        10.9        35.1        (25.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (22.7   $ (47.9   $ (56.0   $ (146.8
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Excludes depreciation and amortization of intangible assets which are separately stated below

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements

 

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INFOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(unaudited)

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
     2012     2011     2012     2011  

Net loss

   $ (22.7     $  (47.9)      $ (56.0   $ (146.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

        

Unrealized gain (loss) on foreign currency translation, net of tax

     38.2        (116.3     100.9        (112.2

Defined benefit plan funding status, net of tax

     (0.2     0.1        (0.5     0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     38.0        (116.2     100.4        (112.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 15.3        $(164.1)      $ 44.4      $ (258.9
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements

 

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INFOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

     Six Months Ended
November 30,
 
     2012     2011  

Cash flows from operating activities:

    

Net loss

   $ (56.0   $ (146.8

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     141.8        162.4   

Provision for doubtful accounts and billing adjustments

     2.7        4.1   

Provision for sales allowances

     2.4        1.3   

Deferred income taxes

     (6.0     (39.4

Non-cash (gain) loss on foreign currency

     20.9        (28.5

Non-cash interest

     11.7        28.6   

Non-cash loss on extinguishment of debt

     1.3        7.5   

Stock-based compensation expense

     2.8        0.3   

Changes in operating assets and liabilities (net of effects of acquisitions):

    

Prepaid expenses and other assets

     (1.0     12.4   

Accounts receivable, net

     55.4        19.0   

Income tax receivable/payable

     34.6        (26.4

Deferred revenue

     (200.9     (129.2

Accounts payable, accrued expenses and other liabilities

     (58.0     (27.7
  

 

 

   

 

 

 

Net cash used in operating activities

     (48.3     (162.4
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisitions, net of cash acquired

     (39.8     (1,501.6

Change in restricted cash

     1.8        (3.1

Purchases of property, equipment and software

     (18.1     (8.8
  

 

 

   

 

 

 

Net cash used in investing activities

     (56.1     (1,513.5
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of stock

     —          480.0   

Payments on capital lease obligations

     (0.7     (0.5

Proceeds from issuance of debt

     2,778.9        2,063.8   

Payments on long-term debt

     (2,801.6     (845.5

Deferred financing fees

     (27.6     (84.0
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (51.0     1,613.8   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     9.5        (13.8
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (145.9     (75.9

Cash and cash equivalents at the beginning of the period

     384.4        337.0   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 238.5      $ 261.1   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

    

Assets acquired in acquisitions, net of cash acquired

   $ 51.0      $ 2,467.2   

Liabilities assumed in acquisitions

   $ 11.2      $ 965.9   

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements

 

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INFOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of Business and Basis of Presentation

Infor, Inc. is a global provider of enterprise business applications software and services focused primarily on medium and large enterprises. We provide industry-specific enterprise resource planning (ERP) software products to companies in the manufacturing, distribution, healthcare, public sector, automotive, service industries, equipment services, management and rental (ESM&R), consumer products & retail and hospitality industries. We serve customers in three geographic regions: the Americas; Europe, Middle East and Africa (EMEA); and Asia-Pacific, including Australia and New Zealand (APAC). We offer a broad range of software applications and industry-specific solutions that we believe help our customers improve their business processes and reduce costs, resulting in better business or operational performance. Our solutions help automate and integrate critical business processes which enable our customers to better manage their suppliers, partners, customers and employees. Augmenting our vertical-specific applications, we have horizontal software applications, including our customer relationship management (CRM), enterprise asset management (EAM), financial applications, human capital management (HCM), and supply chain management (SCM) suites which, in addition to our proprietary light-weight middleware solution ION, can be integrated with our enterprise software applications and sold across verticals. In addition to providing software products, we help our customers implement and use our applications effectively through our consulting services. We also provide on-going support and maintenance services for our customers through our maintenance and support programs.

The predecessor to Infor Global Solutions Intermediate Holdings Ltd. (IGS Intermediate Holdings) was formed in 2002 with the acquisition of certain assets of Systems & Computer Technology Corporation and completed through a series of subsequent acquisitions. On June 7, 2006, IGS Intermediate Holdings was formed as a Cayman Islands exempted company. The majority of IGS Intermediate Holdings’ stock is indirectly owned by Golden Gate Capital. IGS Intermediate Holdings operates through a variety of direct and indirect wholly owned subsidiaries throughout the world.

Infor, Inc. was formed on June 8, 2009, as Steel Holdings, Inc. by Golden Gate Capital. Steel Holdings acquired SoftBrands, Inc. (SoftBrands) on August 13, 2009. Steel Holdings changed its name to GGC Software Holdings, Inc. (GGC Holdings) on April 25, 2011. GGC Holdings acquired Lawson Software, Inc. (Lawson) on July 5, 2011. Both SoftBrands and Lawson were publicly traded companies. We have maintained the SoftBrands and Lawson brands.

On April 5, 2012, we completed the combination of GGC Holdings and its subsidiaries with the operating subsidiaries of IGS Intermediate Holdings (such subsidiaries prior to the combination defined here as Infor Global Solutions) and the operations of these entities were merged together under GGC Holdings (the Infor Combination). Both Infor Global Solutions and GGC Holdings were under common control of Golden Gate Capital, and accordingly the financial statements contained herein are presented on a consolidated basis as if Infor Global Solutions and GGC Holdings were combined from the date of inception of common control. Financial statements and financial information presented for prior years have been retrospectively adjusted to furnish comparative information for periods during which the entities were under common control. On April 26, 2012, we formally changed the name of GGC Software Holdings, Inc. to Infor, Inc. In addition, in the first quarter of fiscal 2013, we changed the name of Lawson Software, Inc. to Infor (US), Inc. Transactions between Infor, Inc. and its subsidiaries, including subsidiaries obtained through the combining of GGC Holdings and Infor Global Solutions, have been eliminated for presentation.

Hereafter, any reference to Infor, we, our, us or the Company refers to the combined company and the consolidated financial statements thereof presented under common control and references to Lawson refers to Lawson Software, Inc. (now known as Infor (US), Inc.).

Basis of Presentation

Our Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP) as set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) and consider the various staff accounting bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (SEC). Our Condensed Consolidated Financial Statements include the accounts of Infor and our wholly owned and majority-owned subsidiaries operating in the Americas, EMEA and APAC. All significant intercompany accounts and transactions have been eliminated.

The unaudited Condensed Consolidated Financial Statements and Notes are presented as permitted by FASB requirements for quarterly reports and do not contain all the information and disclosures included in our annual Financial Statements and related Notes as required by GAAP. The Condensed Consolidated Balance Sheet data as of May 31, 2012, and other amounts presented herein as of

 

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May 31, 2012, or for the year then ended, were derived from our audited financial statements. The accompanying Condensed Combined Financial Statements reflect all adjustments, in the opinion of management, necessary to fairly state our financial position, results of operations and cash flows for the periods presented. These adjustments consist of normal and recurring items. The results of operations for our interim periods are not necessarily indicative of results to be achieved for any future interim period or for our full fiscal year. The accompanying interim Condensed Consolidated Financial Statements should be read in conjunction with our Financial Statements and related Notes for the fiscal year ended May 31, 2012, included in our Registration Statement on Form S-4, filed with the SEC on August 23, 2012.

Business Segments

We view our operations and manage our business as three reportable segments: License, Maintenance, and Consulting. We determine our reportable operating segments in accordance with the provisions in the FASB guidance on segment reporting, which establishes standards for, and requires disclosure of, certain financial information related to reportable operating segments and geographic regions. Factors used to identify our reportable operating segments include the financial information regularly utilized for evaluation by our chief operating decision-maker (CODM) in making decisions about how to allocate resources and in assessing our performance. We have determined that our CODM, as defined by this segment reporting guidance, is our Chief Executive Officer. See Note 15, Segment and Geographic Information.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires us to make certain estimates, judgments and assumptions. These estimates, judgments and assumptions are based upon information available to us at the time that they are made and are believed to be reliable. These estimates, judgments and assumptions can affect the reported amounts of our assets and liabilities as of the date of the financial statements as well as the reported amounts of our revenues and expenses during the periods presented. On an on-going basis we evaluate our estimates and assumptions, including, but not limited to, those related to revenue recognition, allowance for doubtful accounts and sales returns, fair value of stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, restructuring obligations, contingencies and litigation, among others. We believe these estimates and assumptions are reasonable under the circumstances and they form a basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Differences between these estimates, judgments or assumptions and actual results could materially impact our financial statements. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

Fiscal Year

Our fiscal year is from June 1 through May 31. Unless otherwise stated, references to the years 2013 and 2012 relate to our fiscal years ended May 31, 2013 and 2012, respectively. References to future years also relate to our fiscal years ending May 31.

2. Summary of Significant Accounting Policies

Except to the extent updated or described below, a detailed description of our significant accounting policies can be found in our Financial Statements for our fiscal year ended May 31, 2012, which are included in the Registration Statement on Form S-4 that we filed with the SEC on August 23, 2012. The following Notes should be read in conjunction with such policies and other disclosures contained therein.

Revenue Recognition

We generate revenues primarily by licensing software, providing product updates and support and providing consulting services to our customers. We record revenues in accordance with the guidance provided by ASC 985-605, Software—Revenue Recognition, ASC 605, Revenue Recognition, as well as Technical Practice Aids issued from time to time by the American Institute of Certified Public Accountants. Revenue is recorded net of applicable taxes.

Our license fees are primarily from sales of perpetual software licenses granting customers use of our software products and access to software products through our Software-as-a-Service (SaaS) offering. License fees are recognized when the following criteria are met: 1) there is persuasive evidence of an arrangement, 2) the software product has been delivered, 3) the fees are fixed or determinable, and 4) collectability is reasonably assured. SaaS revenue is recognized over the committed service period once the services commence. SaaS revenues are included in license fees revenues in our Condensed Consolidated Statements of Operations and were approximately $10.5 million and $5.3 million in the second quarter of fiscal 2013 and 2012, respectively, and $21.1 million and $6.2 million in the first six months of fiscal 2013 and 2012, respectively.

 

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Allowances for Doubtful Accounts, Cancellations and Billing Adjustments

We have established an allowance for estimated billing adjustments and an allowance for estimated amounts that will not be collected. We record provisions for billing adjustments as a reduction of revenue and provisions for doubtful accounts as a component of general and administrative expense in our Condensed Consolidated Statements of Operations. We review specific accounts, including significant accounts with balances past due over 90 days, for collectability based on circumstances known at the date of the financial statements. In addition, we maintain reserves based on historical billing adjustments and write-offs. These estimates are reviewed periodically and consider specific customer situations, historical experience and write-offs, customer credit-worthiness, current economic trends and changes in customer payment terms. A considerable amount of judgment is required in assessing these factors. If the factors utilized in determining the allowance do not reflect future performance, a change in the allowance would be necessary in the period such determination is made which would affect future results of operations. Accounts receivable are charged against the allowance when we determine it is probable the receivable will not be recovered.

The following is a rollforward of our allowance for doubtful accounts:

 

(in millions)       

Balance, May 31, 2012

   $ 18.1   

Provision

     2.7   

Write-offs and recoveries

     (4.8

Currency translation effect

     0.6   
  

 

 

 

Balance, November 30, 2012

   $ 16.6   
  

 

 

 

Sales Allowances

We do not generally provide a contractual right of return. However, in the course of arriving at practical business solutions to various claims arising from the sale of our products and delivery of our solutions, the Lawson business we acquired in fiscal 2012 has allowed for sales allowances. We record a provision against revenue for estimated sales allowances on license and consulting revenues in the same period the related revenues are recorded or when current information indicates additional allowances are required. These estimates are based on historical experience determined by analysis of claim activities, specifically identified customers and other known factors. If the historical data utilized does not reflect expected future performance, a change in the allowances would be recorded in the period such determination is made affecting current and future results of operations. The balance of our sales reserve is reflected in deferred revenue on our Condensed Consolidated Balance Sheets.

The following is a rollforward of our sales reserve:

 

(in millions)       

Balance, May 31, 2012

   $ 9.6   

Provision

     2.4   

Write-offs

     (2.6

Currency translation effect

     0.7   
  

 

 

 

Balance, November 30, 2012

   $ 10.1   
  

 

 

 

Foreign Currency

The functional currency of our foreign subsidiaries is typically the applicable local currency. The translation from the respective foreign currencies to United States Dollars (U.S. Dollar) is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for income statement accounts using a weighted average exchange rate during the period. Gains or losses resulting from such translation are included as a separate component of accumulated other comprehensive income. Gains or losses resulting from foreign currency transactions are included in foreign currency income or loss except for the effect of exchange rates on long-term inter-company transactions considered to be a long-term investment, which are accumulated and credited or charged to other comprehensive income.

Transaction gains and losses are recognized in our results of operations based on the difference between the foreign exchange rates on the transaction date and on the reporting date. We recognized net foreign exchange losses of $25.1 million for the three months ended November 30, 2012, and net foreign exchange gains of $45.9 million for the comparable three months ended November 30, 2011. In the first six months of fiscal 2013 and 2012 we recognized net foreign currency exchange losses of $20.9 million and net foreign currency exchange gains of $28.5 million, respectively. The foreign currency exchange gains and losses are included as a component of other (income) expense, net, in the accompanying Condensed Consolidated Statements of Operations.

 

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Certain transaction gains and losses are generated from inter-company balances that are not considered to be long-term in nature that will be settled between subsidiaries. The inter-company balances are a result of normal transfer pricing transactions among various operating subsidiaries, as well as certain loans initiated between subsidiaries. The proceeds from these loans were primarily used to fund various acquisitions. We also recognize transaction gains and losses from revaluing debt denominated in Euros and held by subsidiaries whose functional currency is the U.S. Dollar. See Note 11, Debt. Unlike translation gains and losses which occur by revaluing a subsidiary’s financial statements into our reporting currency, the transaction gains or losses recognized when revaluing this debt affects functional currency cash flows and is included in determining net income or loss for the period in which exchange rates change. Changes in exchange rates create unrealized gains and losses at each reporting date until the balances are settled and recognized in our results of operations. When the balances are settled, the unrealized gains and losses become realized.

Adoption of New Accounting Pronouncements

On June 1, 2012, we adopted the FASB amended guidance on fair value measurements. This guidance provides a consistent definition of fair value and ensures that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards. This guidance further explains how to measure fair value and clarifies the related disclosure requirements particularly for level 3 fair value measurements. The guidance does not require additional fair value measurements and was not intended to establish valuation standards or affect valuation practices outside of financial reporting. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows.

Recent Accounting Pronouncements — Not Yet Adopted

In December 2011, the FASB provided further guidance relating to the presentation of comprehensive income. This guidance deferred the effective date pertaining to the requirement to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. This requirement was originally issued in the FASB’s June 2011 amendments to existing guidance on the presentation of comprehensive income and was to be effective for fiscal years ending after December 15, 2012 (our fiscal year 2013), and interim and annual periods thereafter. This deferral will allow the FASB time to re-deliberate and reconsider operational concerns relating to the presentation of reclassifications out of accumulated other comprehensive income. Other than a change in presentation, we do not expect the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

3. Acquisitions

Fiscal 2013

In the first six months of fiscal 2013, we made two acquisitions for a combined cash purchase price of $39.8 million, net of cash acquired. We have included the results of the acquired companies in our Condensed Consolidated Financial Statements from the applicable acquisition dates. These acquisitions were not significant individually or in the aggregate and their results were not material to Infor’s results for the three and six month periods ended November 30, 2012.

Our estimates of fair value and resulting allocation of purchase price related to certain of these acquisitions are preliminary as of November 30, 2012. We are in the process of finalizing the valuation of certain assets and liabilities, primarily income tax liabilities, and as a result the final allocation of the adjusted purchase price may differ from the information presented in these unaudited Condensed Consolidated Financial Statements.

Lawson – Fiscal 2012

On July 5, 2011, we completed our acquisition of Lawson through Infor’s acquisition of all of Lawson’s outstanding common stock. Lawson is a global provider of business application software, consulting and maintenance to customers primarily in healthcare, services, trade and manufacturing/distribution industries. The results of operations of Lawson have been included in our results of operations from the date of acquisition. The cash purchase consideration totaled approximately $1,958.2 million. The excess of the consideration transferred over the fair values of the net assets acquired and liabilities assumed was recorded as goodwill, which represents operating efficiencies expected to be realized.

 

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The following table summarizes our allocation of the Lawson purchase consideration:

 

(in millions)       

Cash

   $ 476.0   

Accounts receivable, net

     105.6   

Identified intangible assets:

  

Existing technology

     300.0   

Existing customer relationships

     614.4   

Tradenames

     25.4   

Goodwill

     1,168.0   

Deferred tax liability, net

     (239.2

Deferred revenue

     (182.0

Long-term debt

     (258.0

All other tangible liabilities, net

     (52.0
  

 

 

 

Total fair value of purchase consideration

   $ 1,958.2   
  

 

 

 

The gross contractual accounts receivable at the acquisition date was $109.2 million and our best estimate of the contractual cash flows not expected to be collected at that date was $3.6 million. The acquired intangible assets relating to Lawson’s existing technology, existing customer relationships and tradenames are being amortized over their weighted average estimated useful lives of approximately six years, twelve years and three years, respectively. We have determined that the goodwill arising from the acquisition of Lawson will not be deductible for tax purposes.

The following unaudited pro forma financial information is based on the historical financial information of Infor and Lawson giving effect to the acquisition as if it had occurred on June 1, 2010, the beginning of the fiscal year prior to the year of acquisition and applying certain assumptions and pro forma adjustments. These pro forma adjustments primarily relate to the amortization of acquired intangibles, interest expense and the estimated impact on our income tax provision. We believe that the assumptions used and the adjustments made are reasonable given the information available to us as of the date of this quarterly report. This pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the acquisition occurred at such earlier time or of the results that may be achieved in the future. In addition, these pro forma financial statements do not reflect the realization of any cost savings that we may achieve from operating efficiencies, synergies or other restructuring activities that may result from the acquisition.

The following summarizes the unaudited pro forma financial information of Infor and Lawson for applicable periods as if the acquisition closed on June 1, 2010:

 

(in millions)    Six Months Ended
November 30, 2011
 

License fees

   $ 222.7   

Product updates and support fees

     724.9   
  

 

 

 

Software revenues

     947.6   

Consulting services and other fees

     391.5   
  

 

 

 

Total revenues

   $ 1,339.1   
  

 

 

 

Operating income

   $ 97.9   
  

 

 

 

Other Acquisitions – Fiscal 2012

We completed four additional acquisitions in fiscal 2012 which were not significant, either individually or in the aggregate. The total cash purchase price of these acquisitions was $29.3 million, net of cash acquired.

4. Goodwill

The change in the carrying amount of our goodwill by reportable segment for the six months ended November 30, 2012, was as follows:

 

(in millions)    License      Maintenance      Consulting      Total  

Balance, May 31, 2012

   $ 784.8       $ 2,961.4       $ 265.2       $ 4,011.4   

Goodwill acquired

     20.2         2.2         1.0         23.4   

Currency translation effect

     19.0         73.8         6.5         99.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, November 30, 2012

   $ 824.0       $ 3,037.4       $ 272.7       $ 4,134.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Goodwill acquired during the first six months of fiscal 2013 totaled $23.4 million related to our acquisitions. See Note 3, Acquisitions.

In accordance with the FASB guidance related to goodwill and other intangible assets, we are required to assess the carrying amount of our goodwill for potential impairment annually or more frequently if events or a change in circumstances indicate that impairment may have occurred. We conduct our annual impairment test in the second quarter of each fiscal year as of September 30. We believe that our reportable segments are also representative of our reporting units for purposes of our goodwill impairment testing. Beginning in fiscal 2012, we allocated our goodwill to each of these reporting units based upon their relative fair values. For purposes of allocating our recorded goodwill to our reporting units, we estimated their fair values using a combination of an income approach (discounted cash flow method) and a market approach (market transaction method).

Testing for goodwill impairment is a two-step process. The first step screens for potential impairment, and if there is an indication of possible impairment, the second step must be completed to measure the amount of impairment loss, if any. The first step of the goodwill impairment test used to identify potential impairment compares the fair value of a reporting unit with the carrying value of its net assets. If the fair value of the reporting unit is less than the carrying value of the reporting unit, the second step of the goodwill impairment test would be performed to measure the amount of impairment loss we would be required to record, if any. The second step, if required, would compare the implied fair value of our recorded goodwill with the current carrying amount. If the implied fair value of our goodwill is less than the carrying value, an impairment charge would be recorded as a charge to our operations.

As a result of the change in our reportable segments, we performed a Step 1 goodwill impairment assessment as of June 1, 2011. No impairment was indicated at that time. In addition, we conducted our most recent annual impairment assessment in the second quarter of fiscal 2013. We performed a Step 1 goodwill impairment assessment as of September 30, 2012. This assessment did not indicate any potential impairment for any of our reporting units and no further testing was required. We believe there was no impairment of our goodwill and none of our three reporting units was at risk of impairment as of November 30, 2012. We have no accumulated impairment charges related to our goodwill.

5. Fair Value

Fair Value Hierarchy

The FASB has established guidance on financial assets and liabilities and nonfinancial assets and liabilities that are recognized at fair value on a recurring basis and guidance for nonfinancial asset and liabilities that are recognized at fair value on a nonrecurring basis. This guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as an “exit price” which represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in valuing an asset or liability. The above mentioned guidance also requires the use of valuation techniques to measure fair values that maximize the use of observable inputs and minimize the use of unobservable inputs. As a basis for considering such assumptions and inputs, the guidance establishes a fair value hierarchy which identifies and prioritizes three levels of inputs to be used in measuring fair value.

The three levels of the fair value hierarchy are as follows:

 

Level 1       Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2       Inputs other than the quoted prices in active markets that are observable either directly or indirectly including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3       Unobservable inputs that are supported by little or no market data, are significant to the fair values of the assets or liabilities, and require the reporting entity to develop its own assumptions.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. In addition, the fair value of liabilities should include consideration of non-performance risk including the Company’s own credit risk.

 

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We measure certain financial assets at fair value including our cash equivalents. The following table summarizes the fair value of our financial assets that were accounted for at fair value on a recurring basis, by level within the fair value hierarchy, as of November 30, 2012, and May 31, 2012:

 

                                                                   
    November 30, 2012  
    Fair Value Measurements Using Inputs Considered as         
(in millions)   Level 1      Level 2      Level 3      Fair Value  

Assets

          

Cash equivalents

  $ 17.1       $ —         $ —         $ 17.1   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total

  $ 17.1       $ —         $ —         $ 17.1   
 

 

 

    

 

 

    

 

 

    

 

 

 
    May 31, 2012  
    Fair Value Measurements Using Inputs Considered as         
(in millions)   Level 1      Level 2      Level 3      Fair Value  

Assets

          

Cash equivalents

  $ 150.1       $ —         $ —         $ 150.1   
 

 

 

    

 

 

    

 

 

    

 

 

 

Total

  $ 150.1       $ —         $ —         $ 150.1   
 

 

 

    

 

 

    

 

 

    

 

 

 

Cash equivalents include funds held in money market instruments and are reported at their current carrying value which approximates fair value due to the short-term nature of these instruments and are included in cash and cash equivalents on our Condensed Consolidated Balance Sheets. Our money market instruments are valued using quoted market prices and are included in Level 1 inputs.

We have had no transfers of assets/liabilities into or out of Levels 1, 2 or 3 during fiscal 2013 or fiscal 2012.

In addition to the financial assets and liabilities included in the above table, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable GAAP. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods) and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, non-financial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. As of November 30, 2012, we had not recorded any impairment related to such assets and had no other material nonfinancial assets or liabilities requiring adjustments or write-downs to their current fair value.

We elected not to apply the FASB guidance, as allowed, related to the fair value option for financial assets and liabilities to any of our currently eligible financial assets or liabilities. As of November 30, 2012, our material financial assets and liabilities not carried at fair value include accounts receivable, accounts payable and long-term debt, which are recorded at their current carrying values.

Fair Value of Financial Instruments

As of November 30, 2012, and May 31, 2012, the current carrying amount of our financial instruments including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are deemed to approximate fair value due to their short periods to maturity.

Fair Value of Long-Term Debt

For our long-term debt we used recent market transactions and related market quotes of our long-term debt’s November 30, 2012 bid and ask pricing (Level 2 on the fair value hierarchy) to estimate fair value of our long-term debt for disclosure purposes. At November 30, 2012, and May 31, 2012, the total carrying value of our long-term debt was approximately $5,367.1 million and $5,358.6 million, respectively, and the estimated fair value of our long-term debt was approximately $5,634.7 million and $5,445.5 million, respectively.

 

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6. Accounts Receivable, Net

Accounts receivable, net is comprised of the following for the periods indicated:

 

     November 30,     May 31,  
(in millions)    2012     2012  

Accounts receivable

   $ 324.8      $ 367.4   

Unbilled accounts receivable

     58.3        63.3   

Less: allowance for doubtful accounts

     (16.6     (18.1
  

 

 

   

 

 

 

Accounts receivable, net

   $ 366.5      $ 412.6   
  

 

 

   

 

 

 

Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date.

7. Intangible Assets

Our intangible assets subject to amortization were as follows for the periods indicated:

 

     November 30, 2012      May 31, 2012       
     Gross                    Gross                    Estimated
     Carrying      Accumulated             Carrying      Accumulated             Useful Lives
(in millions)    Amounts      Amortization      Net      Amounts      Amortization      Net      (in years)

Customer contracts and relationships

   $ 1,776.4       $ 872.3       $ 904.1       $ 1,730.1       $ 773.1       $ 957.0       2 - 15

Acquired and developed technology

     1,001.9         743.2         258.7         965.4         688.3         277.1       2 - 10

Tradenames

     136.1         117.4         18.7         134.2         111.0         23.2       2 - 20
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total

   $ 2,914.4       $ 1,732.9       $ 1,181.5       $ 2,829.7       $ 1,572.4       $ 1,257.3      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

The following table presents amortization expense recognized in our Condensed Consolidated Statements of Operations, by asset type, for the periods indicated:

 

     Three Months Ended      Six Months Ended  
     November 30,      November 30,  
(in millions)    2012      2011      2012      2011  

Customer contracts and relationships

   $ 40.3       $ 43.8       $ 80.7       $ 84.2   

Acquired and developed technology

     17.3         29.0         40.5         55.6   

Tradenames

     2.6         0.8         5.2         1.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 60.2       $ 73.6       $   126.4       $   141.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

The estimated future annual amortization expense related to these intangible assets as of November 30, 2012, was as follows:

 

(in millions)       

Fiscal 2013 (remaining 6 months)

   $ 118.6   

Fiscal 2014

     222.5   

Fiscal 2015

     197.0   

Fiscal 2016

     172.7   

Fiscal 2017

     126.1   

Fiscal 2018

     77.2   

Thereafter

     267.4   
  

 

 

 

Total

   $ 1,181.5   
  

 

 

 

 

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8. Accrued Expenses

Accrued expenses consisted of the following for the periods indicated:

 

(in millions)    November 30,
2012
     May 31,
2012
 

Accrued compensation and employee benefits

   $ 150.8       $ 179.6   

Accrued taxes other than income

     26.3         25.2   

Accrued royalties and partner commissions

     36.8         45.3   

Accrued litigation

     6.8         8.7   

Accrued professional fees

     10.4         11.2   

Accrued subcontractor expense

     6.4         7.8   

Accrued interest

     78.5         78.0   

Accrued restructuring

     23.0         23.3   

Accrued retirement obligation

     8.7         7.6   

Deferred rent

     9.8         9.4   

Accrued other

     31.8         38.4   
  

 

 

    

 

 

 

Accrued expenses

   $ 389.3       $ 434.5   
  

 

 

    

 

 

 

9. Stock Compensation

We account for share-based payments, including grants of employee stock awards, in accordance with ASC 718, Compensation—Stock Compensation, which requires that share-based payments (to the extent they are compensatory) be recognized in our results of operations based on their fair values and the estimated number of shares we ultimately expect will vest.

We utilize the Option-Pricing Method to estimate the fair value of our equity awards. This approach models the various classes of equity securities as a series of call options on the total equity of the Company. The exercise prices of the call options were derived based on the distribution waterfall of the issuing entity. Assumptions utilized under the Option–Pricing Method include: (a) stock price, derived from the estimated fair value of the Company’s total equity, (b) time to expiration, derived from the expected time to a potential liquidity event, (c) risk- free interest rate, derived from the U.S. Treasury rate over the expected time to expiration, (d) expected dividend yield and (e) expected volatility of the total equity value. In estimating the fair value of our equity awards granted in fiscal 2012 we used the following assumptions; expected term of 1.25 years, risk-free interest rate of 0.22%, expected dividend yield of 0.0%, and expected volatility of 75.0%. We have made no significant equity grants in fiscal 2013.

Pursuant to applicable FASB guidance related to share-based awards, we have reflected stock compensation expense related to our parent companies’ equity grants within our results of operations with an offset to additional paid-in capital. The following table presents stock compensation expense recognized in our Condensed Consolidated Statements of Operations, by category, for the periods indicated:

 

     Three Months Ended
November 30,
     Six Months Ended
November 30,
 
(in millions)    2012      2011      2012      2011  

Selling and marketing expense

   $ 0.5       $ 0.1       $ 0.8       $ 0.1   

Research and development expense

     0.3         —           0.6         —     

General and administrative expense

     0.7         0.1         1.4         0.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1.5       $ 0.2       $ 2.8       $ 0.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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10. Restructuring Charges

We have recorded restructuring charges related to our acquisitions and in the ordinary course of business to eliminate redundancies, improve our operational efficiency and reduce our operating costs. These cost reduction measures included workforce

reductions relating to restructuring our workforce, the exiting of certain leased facilities and the consolidation of space in certain other facilities. In accordance with applicable FASB guidance, our restructuring charges are broken down into acquisition related and other restructuring costs. These restructuring charges represent severance associated with redundant positions and costs related to redundant office locations. No business activities of the companies that we have acquired were discontinued. The employees terminated were typically from all functional areas of our operations.

Fiscal 2013 Restructuring Charges

We have incurred restructuring costs totaling $13.3 million during the first six months of fiscal 2013 including $13.1 million in employee severance costs for personnel in product development and general and administrative functions and $0.2 million related to exited facilities. We made cash payments of approximately $3.0 million during the first six months of fiscal 2013 related to these actions. We expect to complete the majority of these restructuring activities in the remainder of fiscal 2013.

Fiscal 2013 Acquisition-Related Charges

During fiscal 2013, we incurred acquisition-related restructuring costs related to operations we acquired in the first six months of fiscal 2013. These restructuring charges included approximately $0.1 million in employee severance costs for personnel, primarily in general and administrative functions and $0.1 million in accruals for costs related to facilities exited during fiscal 2013. During the first six months of fiscal 2013 we made no cash payments related to these actions. We expect to complete the majority of the personnel actions related to these restructuring activities in fiscal 2013.

Fiscal 2012 Restructuring Charges

During fiscal 2012, we incurred restructuring costs related to employee severance costs for personnel in sales and marketing, customer support, consulting services, product development and general and administrative functions. During the first six months of fiscal 2013 we recorded restructuring cost reversals of $3.0 million and we made cash payments of approximately $6.9 million related to these actions. These restructuring charges also included accruals for costs related to facilities exited during fiscal 2012. Cash payments during the first six months of fiscal 2013 related to these exited facilities were $0.3 million. We expect to complete the majority of these restructuring activities in fiscal 2013.

Fiscal 2012 Acquisition-Related Charges

During fiscal 2012, we incurred acquisition-related restructuring costs primarily related to our acquisition of Lawson. These charges included employee severance costs for personnel, primarily in general and administrative functions and consulting services. During the first six months of fiscal 2013 we recorded restructuring cost reversals of $0.9 million and we made cash payments of $3.4 million related to these severance actions. These restructuring charges also included accruals for costs related to facilities exited during fiscal 2012. During the first six months of fiscal 2013 we recognized $0.3 million in additional facility expenses and made cash payments related to these exited facilities of $1.0 million. We expect to complete the majority of the personnel actions related to these restructuring activities in fiscal 2013 and to make payments related to exited facilities through July 2017.

Previous Restructuring Charges and Acquisition-Related Charges

Prior to fiscal 2012, we had completed a series of acquisitions as well as certain restructuring activities. In the first six months of fiscal 2013 we recorded net restructuring cost reversals of $0.4 million related to these severance actions and exited facilities and we made net cash payments of $0.7 million related to these previous actions. The remaining accruals associated with these prior restructuring charges relate primarily to lease obligations associated with the closure of redundant offices acquired in prior business combinations, as well as contractual payment obligations of severed employees. Actions related to these restructuring activities have been completed.

The following table sets forth the reserve activity related to our restructuring plans for the six-month period ended November 30, 2012. The adjustments to costs in the tables below consists of adjustments to the accrual that were accounted for as an adjustment to current period earnings (Expense) or adjustments to the accrual that were related to the impact of fluctuations in foreign currency exchange rates (Foreign Currency Effect):

 

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                Adjustment to Costs                       Total  
    Balance                 Foreign           Balance     Total Costs     Expected  
    May 31,     Initial           Currency     Cash     November 30,     Recognized     Program  
(in millions)   2012     Costs     Expense     Effect     Payments     2012     to Date     Costs  

Fiscal 2013 restructuring

               

Severance

  $ —        $ 13.1     $ (0.3   $ 0.3     $ (2.8   $ 10.3     $ 12.8     $ 12.8  

Facilities and other

    —          0.2       0.4       0.2       (0.2     0.6       0.6       0.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fiscal 2013 restructuring

    —          13.3       0.1       0.5       (3.0     10.9       13.4       13.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fiscal 2013 acquisition-related

               

Severance

    —          0.1       —          (0.1     —          —          0.1       0.1  

Facilities and other

    —          0.1       —          —          —          0.1       0.1       0.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fiscal 2013 acquisition-related

    —          0.2       —          (0.1     —          0.1       0.2       0.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fiscal 2012 restructuring

               

Severance

    15.2       —          (3.0     0.5       (6.9     5.8       17.6       17.6  

Facilities and other

    0.3       —          —          —          (0.3     —          0.9       0.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fiscal 2012 restructuring

    15.5       —          (3.0     0.5       (7.2     5.8       18.5       18.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fiscal 2012 acquisition-related

               

Severance

    5.1       —          (0.9     0.4       (3.4     1.2       40.4       40.4  

Facilities and other

    2.5       —          0.3       0.1       (1.0     1.9       3.7       3.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fiscal 2012 acquisition-related

    7.6       —          (0.6     0.5       (4.4     3.1       44.1       44.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Previous restructuring

               

Severance

    0.2       —          —          (0.2     —          —          75.7       75.7  

Facilities and other

    0.2       —          0.4       1.0       (0.2     1.4       7.3       7.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total previous restructuring

    0.4       —          0.4       0.8       (0.2     1.4       83.0       83.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Previous acquisition-related

               

Severance

    0.3       —          (0.3     —          0.2       0.2       13.9       13.9  

Facilities and other

    6.7       —          (0.5     (0.7     (0.7     4.8       26.3       26.3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total previous acquisition-related

    7.0       —          (0.8     (0.7     (0.5     5.0       40.2       40.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total restructuring

  $ 30.5     $ 13.5     $ (3.9   $ 1.5     $ (15.3   $ 26.3     $ 199.4     $ 199.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The remaining reserve accruals related to severance and current facilities costs are included in accrued expenses with the long-term facilities cost reserve included in other long-term liabilities on our Condensed Combined Balance Sheets.

11. Debt

The following table summarizes our long-term debt balances for the periods indicated:

 

     November 30, 2012     May 31, 2012  
(in millions)    Amount     Effective
Rate
    Amount     Effective
Rate
 

Infor first lien Term B due April 5, 2018

   $ —          —     $ 2,770.0        6.250

Infor first lien Term B-1 due October 5, 2016

     370.0        5.750     400.0        5.750

Infor first lien Term B-2 due April 5, 2018

     2,793.1        5.250     —          —  

Infor first lien Euro Term due April 5, 2018

     322.7        6.750     309.1        6.750

Infor 9.375% senior notes due April 1, 2019

     1,015.0        9.375     1,015.0        9.375

Infor 10.0% senior notes due April 1, 2019

     324.4        10.000     309.1        10.000

Infor 11.5% senior notes due July 15, 2018

     560.0        11.500     560.0        11.500

Debt discounts

     (18.1       (4.6  
  

 

 

     

 

 

   

Total long-term debt

     5,367.1          5,358.6     

Less: current portion

     91.2          90.8     
  

 

 

     

 

 

   

Total long-term debt - non-current

   $ 5,275.9        $ 5,267.8     
  

 

 

     

 

 

   

The weighted average interest rate at November 30, 2012, and May 31, 2012, was 7.1% and 7.6%, respectively.

 

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The following table summarizes our future repayment obligations on the principal debt balances for all of our borrowings as of November 30, 2012:

 

(in millions)       

Fiscal 2013 (remaining 6 months)

   $ 45.6   

Fiscal 2014

     91.2   

Fiscal 2015

     111.2   

Fiscal 2016

     131.2   

Fiscal 2017

     131.2   

Fiscal 2018

     2,975.5   

Thereafter

     1,899.3   
  

 

 

 

Total

   $ 5,385.2   
  

 

 

 

As of November 30, 2012, we were in compliance with all applicable covenants included in the terms of our credit facilities and the indentures that govern our senior notes.

Senior Notes Exchange Offer

On August 23, 2012, we filed a Registration Statement on Form S-4 with the SEC which included an exchange offer related to our 9.375%, 10.0% and 11.5% senior notes (Exchange Offer). The Form S-4 became effective on September 6, 2012. Under the terms of the Exchange Offer, holders of Infor’s senior notes could exchange their original 9.375%, 10.0% and 11.5% senior notes (Original Notes) for an equal principal amount of 9.375%, 10.0% and 11.5% senior notes (Exchange Notes) which were registered with the SEC. The terms of the Exchange Notes are substantially identical to those of the Original Notes, except the transfer restrictions, registration rights and certain additional interest provisions relating to the Original Notes do not apply to the Exchange Notes. The Exchange Offer expired on October 10, 2012. As of that date, 95.5% of the Original Notes were exchanged for applicable Exchange Notes.

Credit Facilities

On April 5, 2012, we entered into a secured credit agreement with certain banks which consists of a secured term loan facility and a secured revolving credit facility (the Credit Agreement).

The secured revolving credit facility (the Revolver) has a maximum availability of $150.0 million. We have made no draws against the Revolver and no amounts are currently outstanding. However, $4.8 million of letters of credit have reduced the amount available under the Revolver to $145.2 million. Pursuant to the Credit Agreement there is an undrawn line fee of 0.50% and the Revolver matures on March 31, 2017. Amounts under the Revolver may be borrowed to finance working capital needs and for general corporate purposes.

Interest on the term loans borrowed under the secured term loan facility (the Term Loans) is payable quarterly, in arrears. Quarterly principal payment amounts are set for each of the Term Loans with balloon payments at the applicable maturity dates. The Term Loans are subject to mandatory prepayments in the case of certain situations.

The credit facilities are guaranteed by Infor and certain of our domestic subsidiaries, and are secured by liens on substantially all of the assets of Infor, Lawson and the other guarantors. Under the Credit Agreement we are required to maintain a total leverage ratio not to exceed certain levels as of the last day of each fiscal quarter. We are subject to certain other customary affirmative and negative covenants as well.

Refinancing Amendment

On September 27, 2012, we entered into the Refinancing Amendment No. 1 (the Amendment) to the Credit Agreement. The Amendment provided for the refinancing of the then outstanding principal balance of our Tranche B Term Loan of $2,763.0 million with a new $2,793.1 million term loan (the Tranche B-2 Term Loan). Interest on the Tranche B-2 Term Loan is based, at our option, on a LIBOR rate, plus a margin of 4.0% per annum, with a LIBOR floor of 1.25%, or an alternate base rate, plus a margin. This is a reduction in our effective rate related to this term loan as compared to the Tranche B Term Loan which was based on a LIBOR rate plus a margin of 5.0% per annum. The Tranche B-2 Term Loan matures on April 5, 2018, which is the same as the original Tranche B Term Loan maturity date. Pursuant to the terms of the Credit Agreement, the Tranche B-2 Term Loan is guaranteed by Infor and certain of our domestic subsidiaries, and is secured by liens on substantially all of the assets of Infor, Infor (US), Inc. and the Guarantor Subsidiaries.

 

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Proceeds from the Tranche B-2 Term Loan were used to refinance the outstanding principal of our Tranche B Term Loan, together with accrued and unpaid interest and applicable fees, including a prepayment premium of 1.0% of the principal amount thereof, in accordance with the terms of the Credit Agreement.

Recapitalization of Debt Structure

On April 5, 2012, we completed the Infor Combination. As part of these transactions, investment funds affiliated with Golden Gate Capital and Summit Partners invested $550.0 million in Infor Enterprise Applications, LP (Infor Enterprise), of which $325.0 million was contributed as equity to Infor, Inc., and $225.0 million was used to repay a portion of the Lux PIK Term Loan (discussed below). Additionally, $344.0 million owed to Infor Lux Bond Company (Lux Bond Co), Infor’s parent, by Infor was forgiven and contributed as capital. In addition, we successfully refinanced our debt structure by entering into a new credit agreement, which consists of a new secured term loan facility and a new secured revolving credit facility, and issuing new senior notes. Proceeds from the borrowings under our new credit facilities, issuance of the notes and the additional equity investments were used to repay the outstanding balances related to our prior credit facilities and to pay related fees and expenses.

Senior Notes

Our senior notes bear interest at the applicable rates per annum which is payable semi-annually in cash in arrears. The senior notes are general unsecured obligations of Infor and are guaranteed by Infor and certain of our wholly owned domestic subsidiaries. Under the indentures governing the senior notes, we are subject to certain customary affirmative and negative covenants.

Deferred Financing Fees

As of November 30, 2012, deferred financing fees, net of amortization, of $153.5 million are reflected on our Condensed Consolidated Balance Sheets in deferred financing fees, net. For the three months ended November 30, 2012 and 2011, we amortized $5.8 million and $8.3 million, respectively, in deferred financing fees which are included in interest expense, net in our Condensed Consolidated Statements of Operations. For the first six months of fiscal 2013 and 2012 we amortized $11.0 million and $16.4 million, respectively, in deferred financing fees.

In conjunction with the September 27, 2012, Amendment to our Credit Agreement, we evaluated the refinancing transactions in accordance with ASC 470-50-40 Debt—Modifications and Extinguishments—Derecognition to determine if the refinancing of our Tranche B Term Loan was a modification or extinguishment of the original term loan. Each lender involved in the refinance Amendment was analyzed to determine if their participation in the refinancing should be accounted for as a modification or an extinguishment. As a result of our assessment, the participation of certain lenders was determined to be modifications and applicable amounts of the unamortized deferred financing fees continue to be capitalized and amortized over the term of the refinanced debt. In the second quarter of fiscal 2013 we capitalized an additional $27.6 million of fees paid to creditors, including the 1.0% prepayment premium, as deferred financing fees related to the modifications. These fees also include costs associated with lenders participating in the financing for the first time. These amounts have been reflected as cash flows from financing activities on our Condensed Consolidated Statements of Cash Flows. The participation of the remaining lenders was determined to be extinguishments. As a result, in the current quarter, $1.3 million of the unamortized balance of the applicable deferred financing fees were expensed and recorded in our results of operations as a component of loss on extinguishment of debt in our Condensed Consolidated Statements of Operations. In addition, we expensed $11.9 million in third-party costs incurred related to the modifications which were included in acquisition related and other costs in our Condensed Consolidated Statements of Operations in the second quarter of fiscal 2013.

Parent Company PIK Term Loan

In addition to the debt held by Infor and its affiliates discussed above, Lux Bond Co, Infor’s parent, holds a PIK Term Loan (Lux PIK Term Loan). The Lux PIK Term Loan, dated March 2, 2007, had an original principal balance of $235.0 million.

In conjunction with our debt recapitalization, a portion of the outstanding balance of the Lux PIK Term Loan was repaid on April 5, 2012, through the use of capital contributed by Golden Gate Capital. The principal balance as of May 31, 2012, was $161.4 million. In addition, at that time certain provisions of the Lux PIK Term Loan agreement were amended. The maturity date for the Lux PIK Term Loan was extended to April 15, 2017, at which date any outstanding principal and accrued and unpaid interest are due. In addition, under certain circumstance, prepayment penalties may be imposed if the Lux PIK Term Loan is repaid prior to its maturity date. As of April 5, 2012, the Lux PIK Term Loan bears interest at a fixed rate of 13.375% per year and accrues quarterly. Accrued but unpaid interest is to be added to the principal balance. At the election of Lux Bond Co, interest may be paid quarterly and the fixed rate will be reduced by 50 basis points per year. For fiscal 2013, Lux Bond Co has elected to pay interest quarterly. In the first six

 

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months of fiscal 2013 we funded quarterly interest payments of $10.0 million that were due related to the Lux PIK Term Loan through affiliate loans to Lux Bond Co. In addition, subsequent to quarter end, on December 31, 2012, the quarterly interest payment that was due of $5.3 million was partially funded through an additional affiliate loan to Lux Bond Co. Future quarterly interest payments along with the repayment of the remaining principal balance at maturity may also be funded through additional loans to Lux Bond Co. As of November 30, 2012, the total balance outstanding was $161.4 million which did not include any accrued interest as this was funded during the quarter.

Shares of certain subsidiaries of IGS Intermediate Holdings stock were pledged as collateral for the Lux PIK Term Loan. On April 5, 2012, in conjunction with our debt recapitalization, all pledged collateral was released. No other pledge of assets exists either prior to or after the Infor Combination.

Under applicable guidance from the SEC (SAB Topic 5-J), a parent’s debt, related interest expense and allocable deferred financing fees are to be included in a subsidiary’s financial statements under certain circumstances. We have considered these circumstances and determined that Infor does not meet any of the applicable criteria related to the PIK Term Loan and accordingly we have not reflected the PIK Term Loan in our consolidated financial statements for any of the periods presented. The exclusion of the PIK Term Loan in our financial statements does not impact our debt covenant calculations under our credit facilities as the impact of the PIK Term Loan is not to be included in such calculations. While not contractually required to do so, we believe that our voluntary servicing of the Lux PIK Term Loan will not materially impact our ability to service our own debt and that our cash flows from operations, together with our cash and cash equivalents, will be sufficient to meet our debt service obligations for the foreseeable future.

12. Income Taxes

Income taxes have been provided in accordance with ASC 740, Income Taxes. Subsequent to the Infor Combination closing on April 5, 2012, the Company was included in the GGC Software Parent, Inc. consolidated federal income tax return. Interim period income tax benefits and expenses are measured using an estimated annual effective tax rate. For the six-month periods ended November 30, 2012 and 2011, our estimated global effective tax rates were (167.9)% and 14.9%, respectively, after considering those entities for which no tax benefit from operating losses is expected to occur during the respective year as a result of such entities requiring a full valuation allowance against current year losses. We estimate our annual effective tax rate for the periods presented and make any necessary changes to adjust the rate for the applicable interim period based upon the annual estimate. The estimated annual tax rate may fluctuate due to changes in forecasted annual operating income, acquisitions, changes in the jurisdictional mix of the forecasted annual operating income, positive or negative changes to the valuation allowance for net deferred tax assets, changes to actual or forecasted permanent book to tax differences, impacts from future tax settlements with state, federal or foreign tax authorities or impacts from enacted tax law changes. We identify items which are unusual and nonrecurring in nature and treat these as discrete events. The tax effect of discrete items is recorded entirely in the interim period in which the discrete event occurs.

Our income tax benefit and overall effective tax rates were as follows for the periods indicated:

 

     Three Months Ended
November 30,
    Six Months Ended
November 30,
 
(in millions, except percentages)    2012     2011     2012     2011  

Income tax provision (benefit)

   $ 5.7      $ 10.9      $ 35.1      $ (25.8

Effective income tax rate

     (33.5 )%      (29.5 )%      (167.9 )%      14.9

The change in the effective tax rates for the three and six-month periods ended November 30, 2012, compared to the three and six months ended November 30, 2011, was primarily due to the change in earnings levels as a result of the acquisition of Lawson, a shift in the jurisdictional mix of operating income in the respective periods, the establishment of a valuation allowance for nondeductible interest under IRC Section 163(j), Subpart F inclusions, foreign subsidiary net operating losses not providing benefits, the recorded liabilities for unrecognized tax benefits related to uncertain tax positions in various jurisdictions, customer withholding tax, and a tax law change in Australia, Sweden and the United Kingdom. The current effective tax rate for the three-month period ended November 30, 2012, reflects increases in Subpart F inclusions, tax law changes in Sweden and the United Kingdom, withholding taxes, the recorded liabilities for unrecognized tax benefits related to uncertain tax positions in various jurisdictions, increases in the valuation allowances recorded for various foreign subsidiary net operating losses in the current period and a shift in the jurisdictional mix of operating income in the respective periods.

Domestically, we file a federal income tax return and generally file state income tax returns in each jurisdiction in which we do business. The statutes of limitations for these returns, with some exceptions, run through 2016. We are generally no longer subject to tax examination domestically for years prior to fiscal year 2008. We are currently subject to federal income tax examinations. We are also currently under examination in a number of state jurisdictions. Management believes that we have adequately provided for any uncertain tax positions that may be addressed in these examinations.

 

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Internationally, we file income tax returns in each jurisdiction in which we do business. The statutes of limitations for these returns, with some exceptions, run through 2017. We are generally no longer subject to tax examination internationally for years prior to fiscal year 2006. We are currently under examination in a number of international jurisdictions. Management believes that we have adequately provided for any uncertain tax positions that may be addressed in these examinations.

While management believes we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax regulations. Additionally, the recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently includes subjectivity. Accordingly, additional provisions on tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.

During the upcoming twelve months ending November 30, 2013, we expect a net reduction of approximately $18.1 million of unrecognized tax benefits, primarily due to the expiration of statutes of limitation in the various jurisdictions.

During the six-month period ended November 30, 2012, we recorded additional valuation allowances totaling $29.3 million that were recorded against deferred tax assets at various domestic and foreign legal entities. Based on estimates of future profitability in some of these jurisdictions, we believe that a valuation allowance continues to be required based on the current level of uncertainty regarding the ability to realize some of the deferred tax assets. We continue to monitor and weigh both positive and negative evidence related to the future ability to realize these assets. If it is determined that the evidence indicates that it is more likely than not that we will not be able to realize the deferred tax assets in the future, an adjustment to the deferred tax asset valuation allowance would be recorded in the period when such determination is made.

Following the Infor combination transaction that occurred on April 5, 2012, the Company is evaluating various tax structuring alternatives to rationalize various legal entities and reduce our overall global tax liability. While the Company has not finalized any specific plans at this time, we expect to finalize such plans during the second half of fiscal 2013. At that time, the Company expects to evaluate the impact of any restructuring actions on the realizability of available deferred tax assets in the various jurisdictions in which we operate.

The American Taxpayer Relief Act of 2012 was signed into law by President Obama on January 2, 2013 and included retroactive extensions through December 31, 2013, of certain business tax provisions that had expired, including the controlled foreign corporation look-through exception to the U.S. subpart F anti-deferral rules. As the exception had not been signed into law as of November 30, 2012, our estimated annual effective tax rate for the period presented does not reflect the benefit of the controlled foreign corporation look-through exception. As a result, the legislation will be treated as a type 2 subsequent event and the related tax benefit will be recorded in our fiscal third quarter. We are in the process of measuring the impact of the legislation on both the third quarter and full year fiscal 2013 tax expense. While this analysis is expected to be completed in the third quarter, we expect that the application of the controlled foreign corporation look-through exception may materially affect our tax expense for the third quarter and full year fiscal 2013

13. Comprehensive Income (Loss)

Comprehensive income (loss) is the change in equity of a business enterprise from non-stockholder transactions impacting stockholders’ deficit that are not included in the statement of operations and are reported as a separate component of stockholders’ deficit. Other comprehensive income (loss) includes net income or loss, the change in foreign currency translation adjustments, net of tax, and changes in defined benefit plan obligations, net of tax.

We report accumulated other comprehensive income (loss) as a separate line item in the stockholders’ deficit section of our Condensed Consolidated Balance Sheets. We report the components of comprehensive income (loss) on our Condensed Consolidated Statements of Comprehensive Income (Loss).

Total accumulated other comprehensive income (loss) and its components were as follows for the periods indicated:

 

(in millions)    November 30,
2012
    May 31,
2012
 

Foreign currency translation adjustment, net of tax

   $ 73.3      $ (27.6

Funded status of pension plan, net of tax benefit of $2.2 million and $2.2 million, respectively

     (11.0     (10.5
  

 

 

   

 

 

 

Accumulated other comprehensive income (loss)

   $ 62.3      $ (38.1
  

 

 

   

 

 

 

 

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14. Commitments and Contingencies

Leases

We have cancelable and non-cancelable operating leases, primarily related to rental of office space, certain office equipment and automobiles. We have also entered into certain capital lease commitments for buildings, automobiles, computers and operating equipment. Aggregate property acquired through capital leases and the associated depreciation of these assets is included in property and equipment, net on our Condensed Consolidated Balance Sheets. The current portion of capital lease obligations is included in accrued expenses and the long-term portion of capital lease obligations is included in other long-term liabilities on our Condensed Consolidated Balance Sheets. Total rent expense for operating leases was $14.6 million and $17.4 million for the three-month periods ended November 30, 2012 and 2011, respectively. For the first six months of fiscal 2013 and 2012, total rent expense for operating leases was $28.7 million and $32.3 million, respectively.

Litigation

From time to time, we are subject to litigation in the normal course of business. We accrue for litigation exposure when a loss is probable and estimable. Accrued litigation as of November 30, 2012, and May 31, 2012, was $6.9 million and $8.9 million, respectively. While the outcome of these claims cannot be predicted with certainty, we are of the opinion that based on information presently available, the resolution of any such legal matters existing as of November 30, 2012, will not have a material adverse effect on our financial position, results of operations, or cash flows.

Patent Infringement Lawsuit by ePlus

On May 19, 2009, ePlus sued a number of defendants, including Lawson, alleging infringement of three separate United States patents. Prior to trial, the district court excluded all of ePlus’ evidence of damages, and as a result, only liability issues were submitted to the jury. On January 27, 2011, a jury found that Lawson’s S3 Procurement System, when used in combination with certain complementary Supply Chain Management products we offer, namely Requisition Self Service (RSS), RSS and Procurement Punchout (Punchout), and/or RSS, Punchout and Electronic Data Interface (EDI), as well as its M3 e-Procurement System, infringed two of the ePlus patents. No damages were awarded to ePlus. Following the jury verdict, Lawson developed a design-around product, Requisition Center (RQC), which was intended to be a non-infringing replacement of RSS. Since May 18, 2011, Lawson has made RQC available free of charge to all of its customers that had a product configuration that included RSS. On May 23, 2011, the Court entered an injunction prohibiting Lawson from licensing, servicing, or supporting our S3 Procurement System, when used in combination with RSS, RSS and Punchout and/or RSS, Punchout and EDI, and its M3 e-Procurement System, in the United States, although the effect of such injunction was stayed for six-months for certain of our health care customers. Lawson took an appeal to the United States Court of Appeals for the Federal Circuit as to the liability issues and one aspect of the injunction; ePlus filed a cross-appeal as to damages.

In September 2011, ePlus initiated contempt proceedings alleging that Lawson was not compliant with the injunction for, inter alia, releasing RQC which ePlus claims is not more than colorably different from RSS and also infringes its patents. In the contempt proceeding, which is currently on-going before the same district court judge who presided over the underlying jury trial, ePlus is seeking, among other things, monetary damages as a remedy for Lawson’s alleged violation of the court’s injunction order, and a ruling that would enjoin further sales or servicing of the RQC product. We are vigorously defending this matter because we believe Lawson has meritorious defenses, including: (i) that the product modifications render the current product more than colorably different from the adjudged infringing products, making contempt inappropriate; and (ii) that the modified product does not infringe the claims of the patents-in-suit that were alleged and proved to be infringed by the original products. If Lawson prevails on either defense, the contempt proceeding will be dismissed in its favor.

On November 21, 2012, the United States Court of Appeals for the Federal Circuit decided the direct appeal, affirming-in-part, reversing-in-part, vacating-in-part, and remanding the case to the District Court. The jury’s verdict of liability on one method claim (applicable to two of Lawson’s accused configurations) was affirmed; all other liability findings were reversed, including the two system claims that are directed to the making, using and selling of specific types of procurement systems. The Circuit Court did not reverse the trial court’s rulings against ePlus on damages. The case was remanded for consideration of changes that are required to be made to the injunction in light of the liability rulings in Lawson’s favor. The District Court has not yet rendered any substantive

 

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rulings as to the effect of the Federal Circuit’s decision on: the existing injunction; and (ii) the pending contempt proceeding. On December 21, 2012, ePlus filed a Petition in the Federal Circuit seeking rehearing of the liability rulings against it in the Court’s November 21, 2012 decision; the Petition did not address the damages issues, making final ePlus’s non-entitlement to infringement damages.

Given the inherent unpredictability of judicial proceedings, as well as the right of either party to appeal an unfavorable decision, we cannot at this time predict whether, or to what extent, the injunction will continue in effect, or the eventual outcome of the contempt proceeding. Additionally, three of the five patent claims that the jury found Lawson to infringe have been found invalid in a final determination by the Board of Patent Appeals and Interferences (BPAI), including the one infringed claim that survived direct appeal. That administrative determination is being appealed by ePlus to the United States Court of Appeals for the Federal Circuit (Lawson is not a party to that case, but may benefit from its outcome). An affirmance of the BPAI’s decision would provide Lawson with a basis to seek the vacation of any injunction, and the dismissal of any contempt proceeding, as a matter of law. The results of that pending appeal cannot be predicted.

Because patent litigation is time-consuming and costly to defend, we will continue to incur significant costs defending this case until its ultimate resolution in the District Court and an appeal by the losing party. If ePlus prevails in the contempt proceeding or a subsequent new trial or infringement, we could be required to disgorge some portion of our revenues derived from conduct found by the District Court to be infringing, such as the servicing of some particular product configurations, and we could be prohibited from any such future servicing of such configurations (during the life of the single patent still at issue) unless we were able to reach agreement with ePlus on a license to operate under its patents.

We are subject to various other legal proceedings and the risk of litigation by employees, customers, patent owners, suppliers, stockholders or others through private actions, class actions, administrative proceedings or other litigation. While the outcome of these claims cannot be predicted with certainty, we are of the opinion that, based on information presently available, the resolution of any such legal matters existing as of November 30, 2012, will not have a material adverse effect on our financial position, results of operations or cash flows.

Guarantees

We typically grant our customers a warranty that guarantees that our product will substantially conform to Infor’s current specifications for 90 days from the delivery date. We also indemnify our customers from third-party claims of intellectual property infringement relating to the use of our products. Infor’s standard software license agreements contain liability clauses that are limited in amount. We account for these clauses under ASC 460, Guarantees. We have not previously incurred costs to settle claims or paid awards under these indemnification obligations. Accordingly, we have not recorded any liabilities related to these agreements as of November 30, 2012, and May 31, 2012.

15. Segment and Geographic Information

We are a global provider of enterprise business applications software and services focused primarily on medium and large enterprises. We provide industry-specific ERP software products to companies in the manufacturing, distribution, healthcare, public sector, automotive, service industries, ESM&R, consumer products & retail and hospitality industries. We serve customers in the Americas, EMEA and APAC geographic regions.

Segment Information

We view our operations and manage our business as three reportable segments: License, Maintenance, and Consulting. See Note 1, Nature of Business and Basis of Presentation – Business Segments. It is around these three key sets of business activities that we have organized our business and established budgets, forecasts and strategic objectives, including go-to-market strategies. Within our organization, multiple sets of information are available reflecting various views of our operations including vertical, geographic and/or functional information. However, the financial information provided to and used by our CODM to assist in making operational decisions, allocating resources and assessing performance reflects revenues, cost of revenues and sales margin for these three segments.

LicenseOur License segment develops, markets and distributes enterprise software including the following types of software: enterprise human capital management, financial management, business intelligence, asset management, enterprise performance management, supply chain management, service management, manufacturing operations, business project management and property management for hospitality companies. License revenues include license fees which primarily consist of fees resulting from products licensed to customers on a perpetual basis. Product license fees result from a customer’s licensing of a given software product for the first time or with a customer’s licensing of additional users for previously licensed products. License revenues also include revenues related to our SaaS offerings.

 

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Maintenance Our Maintenance segment provides software updates and product support including when and if available upgrades, release updates, regulatory updates and patches, access to our knowledge base and technical support team, technical advice and application management. Generally, these services are provided under annual contracts. Infor’s maintenance agreements are comprehensive customer support programs which entitle customers to various levels of support to meet their specific needs. Infor’s maintenance and customer support offerings are delivered through our global support organization operating from our support centers around the world. Maintenance revenues include product updates and support fees revenues which represent the ratable recognition of fees to enroll and renew licensed products in our maintenance programs. These fees are typically charged annually and are based on the license fees initially paid by the customer. These revenues can fluctuate based on the number and timing of new license contracts, renewal rates and price increases.

ConsultingOur Consulting segment provides software implementation, customization, integration, training and other consulting services related to Infor’s software products. Services in this segment are generally provided under time and materials contracts, and in certain situations, under fixed-fee or maximum-fee contracts. Infor’s consulting offerings range from initial assessment and planning of a project to the actual implementation and post implementation of a project, including optimizing a customer’s use of our software as well as training and learning tools designed to help customers become proficient in using Infor’s software quickly and effectively. Consulting services and other revenue include consulting services and other fees revenues from services provided to customers who have licensed Infor’s products.

The measure we use to assess our reportable segments’ operating performance is sales margin. Reportable segment sales margin includes segment revenues net of direct controllable costs. Segment revenues include adjustments to increase revenues that would have been recognized if we had not adjusted certain deferred revenue balances related to acquisitions to their fair values at the time of the acquisition as required by GAAP. Segment costs represent those cost of resources dedicated to each segment, direct sales costs, and allocation of certain operating expenses. Segment costs exclude any allocation of depreciation and amortization related to our acquired intangible assets or restructuring costs.

We do not have any intercompany revenue recorded between reportable segments. The accounting policies for our reportable segments are the same as those used in our Consolidated Financial Statements. We do not assess or report assets or capital expenditures by reportable segment. For disclosure of goodwill by reportable segment see Note 4, Goodwill.

The following table presents financial information for our reportable segments for the periods indicated:

 

(in millions, except percentages)    Reportable Segment  

Three Months Ended

   License     Maintenance     Consulting     Total  

November 30, 2012

        

Revenues

   $ 124.1      $ 363.5      $ 200.4      $ 688.0   

Cost of revenues

     18.0        63.6        150.4        232.0   

Direct sales costs

     95.0        —          —          95.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 11.1      $ 299.9      $ 50.0      $ 361.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     8.9     82.5     25.0     52.5

November 30, 2011

        

Revenues

   $ 124.9      $ 361.4      $ 201.0      $ 687.3   

Cost of revenues

     20.2        66.2        154.3        240.7   

Direct sales costs

     87.6        —          —          87.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 17.1      $ 295.2      $ 46.7      $ 359.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     13.7     81.7     23.2     52.2

 

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Table of Contents
(in millions, except percentages)    Reportable Segment  

Six Months Ended

   License     Maintenance     Consulting     Total  

November 30, 2012

        

Revenues

   $ 229.7      $ 721.2      $ 375.7      $ 1,326.6   

Cost of revenues

     33.2        125.9        290.9        450.0   

Direct sales costs

     177.4        —          —          177.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 19.1      $ 595.3      $ 84.8      $ 699.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     8.3     82.5     22.6     52.7

November 30, 2011

        

Revenues

   $ 224.9      $ 689.6      $ 369.8      $ 1,284.3   

Cost of revenues

     36.7        128.0        288.1        452.8   

Direct sales costs

     164.6        —          —          164.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 23.6      $ 561.6      $ 81.7      $ 666.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     10.5     81.4     22.1     51.9

The following table presents a reconciliation of our reportable segment revenues, net of the reversal of purchase accounting revenue adjustments, and our reportable segment sales margin to total consolidated revenues and consolidated loss before income tax benefit for the periods indicated:

 

     Three Months Ended     Six Months Ended  
     November 30,     November 30,  
(in millions)    2012     2011     2012     2011  

Reportable segment revenues

   $ 688.0      $ 687.3      $ 1,326.6      $ 1,284.3   

Purchase accounting revenue adjustments (1)

     (5.5     (46.4     (12.3     (82.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 682.5      $ 640.9      $ 1,314.3      $ 1,202.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Reportable segment sales margin

   $ 361.0      $ 359.0      $ 699.2      $ 666.9   

Other unallocated costs and operating expenses (2)

     174.9        224.8        334.5        408.2   

Amortization of intangible assets and depreciation

     68.8        85.9        141.8        162.4   

Restructuring

     4.1        11.5        9.6        52.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     113.2        36.8        213.3        43.9   

Total other expense, net

     130.2        73.8        234.2        216.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

   $ (17.0   $ (37.0   $ (20.9   $ (172.6
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Adjustments to decrease reportable segment revenue for revenue that we would have recognized had we not adjusted acquired deferred revenue as required by GAAP.
(2) Other unallocated costs and operating expenses include certain sales and marketing expenses, research and development, general and administrative, acquisition related and other costs, as well as adjustments for deferred costs recognized related to acquired deferred revenue.

Geographic Information

The following table presents our revenues summarized by geographic region, based on the location at which each sale originates, for the periods indicated:

 

(in millions)    Geographic Region  

Three Months Ended

   Americas      EMEA      APAC      Total  

November 30, 2012

           

License fees

   $ 72.4       $ 35.9       $ 12.3       $ 120.6   

Product updates and support fees

     222.3         109.2         31.5         363.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     294.7         145.1         43.8         483.6   

Consulting services and other fees

     90.5         89.3         19.1         198.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 385.2       $ 234.4       $ 62.9       $ 682.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

November 30, 2011

           

License fees

   $ 61.2       $ 43.0       $ 15.3       $ 119.5   

Product updates and support fees

     191.3         101.7         28.1         321.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     252.5         144.7         43.4         440.6   

Consulting services and other fees

     90.5         90.0         19.8         200.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 343.0       $ 234.7       $ 63.2       $ 640.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(in millions)    Geographic Region  

Six Months Ended

   Americas      EMEA      APAC      Total  

November 30, 2012

           

License fees

   $ 131.0       $ 69.5         20.9       $ 221.4   

Product updates and support fees

     441.5         215.9         62.7         720.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     572.5         285.4         83.6         941.5   

Consulting services and other fees

     176.0         158.5         38.3         372.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 748.5       $ 443.9       $ 121.9       $ 1,314.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

November 30, 2011

           

License fees

   $ 112.4       $ 73.1       $ 26.9       $ 212.4   

Product updates and support fees

     364.4         201.3         56.1         621.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     476.8         274.4         83.0         834.2   

Consulting services and other fees

     168.0         161.1         38.9         368.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 644.8       $ 435.5       $ 121.9       $ 1,202.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents our long-lived tangible assets, consisting of property and equipment net of accumulated depreciation, summarized by geographic region:

 

     Geographic Region  
(in millions)    Americas      EMEA      APAC      Total  

November 30, 2012

   $ 39.1       $ 24.7       $ 3.5       $ 67.3   

May 31, 2012

   $ 35.2       $ 24.7       $ 3.4       $ 63.3   

The following table sets forth our revenues by country for the periods indicated:

 

     Three Months Ended      Six Months Ended  
(in millions)    November 30,      November 30,  

Revenues

   2012      2011      2012      2011  

United States

   $ 329.5       $ 311.1       $ 640.2       $ 581.3   

All other countries

     353.0         329.8         674.1         620.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 682.5       $ 640.9       $ 1,314.3       $ 1,202.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues attributable to the United States, our county of domicile, and foreign countries are based on the country in which the sales originate.

The following table sets forth long-lived tangible assets by country at the dates indicated:

 

(in millions)    November 30,      May 31,  

Long-Lived Tangible Assets

   2012      2012  

United States

   $ 38.3       $ 34.6   

Germany

     9.5         8.3   

United Kingdom

     6.2         6.3   

All other countries

     13.3         14.1   
  

 

 

    

 

 

 

Total long-lived tangible assets

   $ 67.3       $ 63.3   
  

 

 

    

 

 

 

Only those countries in which revenues or long-lived assets exceed 10% of our consolidated revenues or long-lived assets are reflected in the above tables. In those fiscal periods when a country’s revenues or long-lived tangible assets are less than 10% of the consolidated totals, applicable amounts are included in “all other countries.”

 

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16. Related Parties

During fiscal 2012, we received additional equity investments from Golden Gate Capital and Summit Partners, our two largest investors. In conjunction with the acquisition of Lawson on July 5, 2011, Golden Gate Capital contributed $480.0 million in additional equity to the Company. In addition, in conjunction with the recapitalization of our debt structure on April 5, 2012, investment funds affiliated with Golden Gate Capital and Summit Partners contributed $250.0 million and $300.0 million, respectively, in Infor Enterprise Applications, LP (Infor Enterprise), as affiliate of the parent company of Infor, of which $325.0 million was contributed as equity to Infor, and $225.0 million was used to repay a portion of the Lux PIK Term Loan.

On April 5, 2012, we entered into an advisory agreement with Summit Partners, L.P. pursuant to which we retained Summit Partners to provide advisory services relating to financing and strategic business planning, acquisitions and investments, analysis and oversight, executive recruiting, certain other services and reasonable out-of-pocket expenses. This advisory agreement is for an initial term of ten years with the annual management fee payable to Summit Partners on a quarterly basis. This advisory agreement is substantially similar to our existing arrangement with Golden Gate Capital. Under the Golden Gate Capital and Summit Partners advisory agreements, the total contractual annual management fee due is approximately $7.0 million which is payable to Golden Gate Capital and Summit Partners based on their pro rata ownership percentage of Infor Enterprise as defined in the applicable agreements.

Golden Gate Capital

During the first six months of fiscal 2013 and 2012, we recognized as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations $2.9 million and $5.2 million, respectively, for Golden Gate Capital management fees and expenses rendered in connection with acquisitions, debt refinancing and other advisory services. At November 30, 2012, all fees were paid. We capitalized as deferred financing fees $9.9 million during the first six months of fiscal 2012 for fees and expenses paid to Golden Gate Capital in connection with acquisitions and debt refinancing. In addition, we paid and expensed buyer transaction fees of $5.7 million to Golden Gate Capital in connection with our acquisition of Lawson in the first six months of fiscal 2012. We did not capitalize or expense any similar fees in the first six months of fiscal 2013.

In the normal course of business, we may sell or purchase products and services to companies owned by Golden Gate Capital. Sales to Golden Gate Capital-owned companies were approximately $0.9 million and $0.9 million in the first six months of fiscal 2013 and 2012, respectively. In addition, we have made payments to companies owned by Golden Gate Capital of approximately $0.3 million in the first six months of fiscal 2013 with no similar payments in the first six months of fiscal 2012.

Summit Partners

During the first six months of fiscal 2013, we recognized $1.0 million as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations for Summit Partners management fees and expenses rendered in connection with acquisitions, debt refinancing and other advisory services, all of which were paid at November 30, 2012. We had no sales to, nor did we make any payments to, companies owned by Summit Partners in the first six months of fiscal 2013 or the corresponding prior period.

Due to/from Affiliate

Infor, through certain of our subsidiaries, had loans outstanding to Lux Bond Co. These loans originated through various financing activities of Infor. These affiliate loans bore interest at a rate of LIBOR plus 8.0% per annum. In conjunction with the recapitalization of our debt structure on April 5, 2012, the outstanding balance due to Lux Bond Co was contributed as equity and was no longer outstanding as of May 31, 2012. For the first six months of fiscal 2012 we recorded interest expense related to the affiliate loans of $9.7 million with no interest expense recorded in fiscal 2013.

In addition, Infor, through certain of our subsidiaries, had receivables from Lux Bond Co of $32.2 million and $21.4 million as of November 30, 2012, and May 31, 2012, respectively. These receivables arose primarily due to the payment of deferred financing fees and interest related to Lux Bond Co debt by Infor and are included in other assets on our Condensed Consolidated Balance Sheets. We consider these receivables to have future probable economic benefit and that they will be paid in accordance with the underlying affiliate agreements. During the first six months of fiscal 2013 we recorded interest income of $0.8 million related to the affiliate receivables with no interest income recorded in fiscal 2012.

 

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Table of Contents

17. Supplemental Guarantor Financial Information

The 9.375%, 10.0% and 11.5% senior notes issued by Infor (US), Inc. are fully and unconditionally guaranteed except for certain customary automatic release provisions, jointly and severally, by Infor, its parent company, and substantially all of its existing and future 100% owned domestic subsidiaries (collectively the Guarantor Subsidiaries). See Note 11, Debt. Its other subsidiaries (collectively, the Non-Guarantor Subsidiaries) are not guarantors of our borrowings. The indentures governing the notes limit, among other things, the ability of Infor, Inc. and the Guarantor Subsidiaries to incur additional indebtedness; declare or pay dividends, redeem stock or make other distributions to stockholders; make investments; create liens or use assets as security in other transactions; merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; enter into transactions with affiliates; and sell or transfer certain assets.

The following tables set forth requisite financial information of Infor, Infor (US), Inc., the Guarantor Subsidiaries and Non-Guarantor Subsidiaries including our Condensed Consolidating Balance Sheets as of November 30, 2012, and May 31, 2012, our Condensed Consolidating Statements of Operations and our Condensed Consolidating Statements of Comprehensive Income (Loss) for our fiscal quarter and six-month periods ended November 30, 2012 and 2011, and our Condensed Consolidating Statements of Cash Flows for the six months ended November 30, 2012 and 2011.

Condensed Consolidating Balance Sheets

 

     November 30, 2012  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Eliminations     Total
Consolidated
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

   $ —        $ 21.6     $ 39.8     $ 177.1      $ —        $ 238.5  

Accounts receivable, net

     —          64.5       80.8       221.2        —          366.5  

Prepaid expenses

     —          15.7       44.1       31.9        —          91.7  

Income tax receivable

     0.3       1.7       6.3       12.1        0.1       20.5  

Other current assets

     —          0.2       1.2       19.4        —          20.8  

Deferred tax assets

     —          —          4.7       11.7        (4.7     11.7  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     0.3       103.7       176.9       473.4        (4.6     749.7  

Property and equipment, net

     —          10.8       27.6       28.9        —          67.3  

Intangible assets, net

     —          576.6       164.5       440.4        —          1,181.5  

Goodwill

     —          634.0       1,634.3       1,865.8        —          4,134.1  

Deferred tax assets

     0.3       —          26.8       69.7        (27.1     69.7  

Other assets

     —          19.7       22.2       13.6        —          55.5  

Deferred financing fees, net

     —          153.5       —          —           —          153.5  

Affiliate receivable

     —          4,282.2       251.1       424.9        (4,958.2     —     

Investment in subsidiaries

     —          —          774.1       19.4        (793.5     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 0.6     $ 5,780.5     $ 3,077.5     $ 3,336.1      $ (5,783.4   $ 6,411.3  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

             

Current liabilities:

             

Accounts payable

   $ —          6.5     $ 18.0     $ 26.3      $ —        $ 50.8  

Income taxes payable

     —          5.2       0.3       29.7        0.1       35.3  

Accrued expenses

     —          108.5       79.0       201.8        —          389.3  

Deferred tax liabilities

     —          41.1       —          14.8        (4.7     51.2  

Deferred revenue

     —          167.6       262.2       243.4        —          673.2  

Current portion of long-term obligations

     —          91.2       —          —           —          91.2  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     —          420.1       359.5       516.0        (4.6     1,291.0  

Long-term debt

     —          5,275.9       —          —           —          5,275.9  

Deferred tax liabilities

     —          141.9       —          60.6        (27.1     175.4  

Affiliate payable

     88.3       129.2       3,334.1       1,406.6        (4,958.2     —     

Other long-term liabilities

     —          14.7       52.1       154.1        —          220.9  

Losses in excess of investment in subsidiaries

     464.2       262.9       —          —           (727.1     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities

     552.5       6,244.7       3,745.7       2,137.3        (5,717.0     6,963.2  

Total stockholders’ equity (deficit)

     (551.9     (464.2     (668.2     1,198.8        (66.4     (551.9
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 0.6     $ 5,780.5     $ 3,077.5     $ 3,336.1      $ (5,783.4   $ 6,411.3  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     May 31, 2012  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Eliminations     Total
Consolidated
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

   $ —        $ 138.9     $ 25.5     $ 220.0      $ —        $ 384.4  

Accounts receivable, net

     —          87.1       90.0       235.5        —          412.6  

Prepaid expenses

     —          17.3       44.4       38.4        —          100.1  

Income tax receivable

     0.4       17.7       6.4       11.5        —          36.0  

Other current assets

     —          2.0       0.4       18.3        —          20.7  

Deferred tax assets

     —          —          4.7       11.4        (4.7     11.4  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     0.4       263.0       171.4       535.1        (4.7     965.2  

Property and equipment, net

     —          17.1       17.5       28.7        —          63.3  

Intangible assets, net

     —          620.5       196.2       440.6        —          1,257.3  

Goodwill

     —          611.4       1,634.3       1,765.7        —          4,011.4  

Deferred tax assets

     0.3       —          35.3       75.3        (35.8     75.1  

Other assets

     —          1.4       29.4       13.7        —          44.5  

Deferred financing fees, net

     —          137.9       0.3       —           —          138.2  

Affiliate receivable

     0.5       4,218.8       255.6       402.9        (4,877.8     —     

Investment in subsidiaries

     —          —          726.0       18.0        (744.0     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 1.2     $ 5,870.1     $ 3,066.0     $ 3,280.0      $ (5,662.3   $ 6,555.0  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

             

Current liabilities:

             

Accounts payable

   $ —        $ 19.5     $ 3.8     $ 26.2      $ —        $ 49.5  

Income taxes payable

     —          —          —          18.7        —          18.7  

Accrued expenses

     —          119.9       103.8       210.8        —          434.5  

Deferred tax liabilities

     —          41.1       —          9.4        (4.7     45.8  

Deferred revenue

     —          214.1       291.8       346.0        —          851.9  

Current portion of long-term obligations

     —          90.8       —          —           —          90.8  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     —          485.4       399.4       611.1        (4.7     1,491.2  

Long-term debt

     —          5,267.8       —          —           —          5,267.8  

Deferred tax liabilities

     —          168.6       —          47.0        (35.8     179.8  

Affiliate payable

     88.5       108.7       3,290.7       1,389.9        (4,877.8     —     

Other long-term liabilities

     —          16.3       47.5       151.5        —          215.3  

Losses in excess of investment in subsidiaries

     511.8       335.1       —          —           (846.9     —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities

     600.3       6,381.9       3,737.6       2,199.5        (5,765.2     7,154.1  

Total stockholders’ equity (deficit)

     (599.1     (511.8     (671.6     1,080.5        102.9       (599.1
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 1.2     $ 5,870.1     $ 3,066.0     $ 3,280.0      $ (5,662.3   $ 6,555.0  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

29


Table of Contents

Condensed Consolidating Statements of Operations

 

      Three Months Ended November 30, 2012  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Total
Consolidated
 

Revenues:

            

License fees

   $ —          21.8     $ 43.5     $ 55.3     $ —        $ 120.6  

Product updates and support fees

     —          77.4       128.7       156.9       —          363.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     —          99.2       172.2       212.2       —          483.6  

Consulting services and other fees

     —          34.8       41.4       122.7       —          198.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          134.0       213.6       334.9       —          682.5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of license fees

     —          2.2       10.2       7.8       —          20.2  

Cost of product updates and support fees

     —          8.2       23.5       31.9       —          63.6  

Cost of consulting services and other fees

     —          26.5       32.4       91.1       —          150.0  

Sales and marketing

     —          17.5       41.9       54.7       —          114.1  

Research and development

     —          13.7       31.4       40.0       —          85.1  

General and administrative

     —          6.3       20.5       23.9       —          50.7  

Amortization of intangible assets and depreciation

     —          26.9       16.0       25.9       —          68.8  

Restructuring costs

     —          0.4       0.3       3.4       —          4.1  

Acquisition related and other costs

     —          12.6       0.1       —          —          12.7  

Affiliate (income) expense, net

     —          22.0       (13.1     (8.9     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     —          136.3       163.2       269.8       —          569.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     —          (2.3     50.4       65.1       —          113.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net:

            

Interest expense, net

     —          104.2       (0.8     —          —          103.4  

Affiliate interest (income) expense, net

     —          (77.7     57.7       20.0       —          —     

Loss on extinguishment of debt

     —          1.8       —          —          —          1.8  

Other (income) expense, net

     —          —          2.0       23.0       —          25.0  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     —          28.3       58.9       43.0       —          130.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax benefit

     —          (30.6     (8.5     22.1       —          (17.0

Income tax provision (benefit)

     (1.4     (14.1     0.3       20.9       —          5.7  

Equity in (earnings) loss of subsidiaries

     24.1       7.6       (16.4     (0.8     (14.5     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (22.7   $ (24.1   $ 7.6     $ 2.0     $ 14.5     $ (22.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

30


Table of Contents
      Three Months Ended November 30, 2011  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Total
Consolidated
 

Revenues:

            

License fees

   $ —        $ 18.0     $ 37.7     $ 64.5     $ (0.7   $ 119.5  

Product updates and support fees

     —          50.4       125.1       145.6       —          321.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     —          68.4       162.8       210.1       (0.7     440.6  

Consulting services and other fees

     —          41.6       42.5       119.8       (3.6     200.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          110.0       205.3       329.9       (4.3     640.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of license fees

     —          2.6       10.7       9.8       (0.9     22.2  

Cost of product updates and support fees

     —          9.2       23.1       33.9       —          66.2  

Cost of consulting services and other fees

     —          25.9       30.3       99.3       (2.2     153.3  

Sales and marketing

     —          19.1       35.3       52.9       —          107.3  

Research and development

     —          13.8       31.4       38.1       —          83.3  

General and administrative

     —          21.7       18.6       29.7       (1.2     68.8  

Amortization of intangible assets and depreciation

     —          30.9       22.0       33.0       —          85.9  

Restructuring costs

     —          7.1       (0.1     4.5       —          11.5  

Acquisition related and other costs

     —          5.6       —          —          —          5.6  

Affiliate (income) expense, net

     —          2.0       (6.3     4.3       —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     —          137.9       165.0       305.5       (4.3     604.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     —          (27.9     40.3       24.4       —          36.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net:

            

Interest expense, net

     —          36.4       53.3       30.0       —          119.7  

Affiliate interest (income) expense, net

     —          —          3.5       (3.5     —          —     

Loss on extinguishment of debt

     —          —          —          —          —          —     

Other (income) expense, net

     —          7.0       (57.0     4.1       —          (45.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     —          43.4       (0.2     30.6       —          73.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

     —          (71.3     40.5       (6.2     —          (37.0

Income tax provision (benefit)

     (0.1     (30.8     16.6       25.2       —          10.9  

Equity in (earnings) loss of subsidiaries

     48.0       7.5       1.3       (1.1     (55.7     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (47.9   $ (48.0   $ 22.6     $ (30.3   $ 55.7     $ (47.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

31


Table of Contents
      Six Months Ended November 30, 2012  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Total
Consolidated
 

Revenues:

            

License fees

   $ —        $ 41.7     $ 79.8     $ 99.9     $ —        $ 221.4  

Product updates and support fees

     —          152.7       257.2       310.2       —          720.1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     —          194.4       337.0       410.1       —          941.5  

Consulting services and other fees

     —          66.8       81.3       224.7       —          372.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          261.2       418.3       634.8       —          1,314.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of license fees

     —          3.9       19.1       14.8       —          37.8  

Cost of product updates and support fees

     —          17.3       46.9       61.7       —          125.9  

Cost of consulting services and other fees

     —          53.5       64.5       172.1       —          290.1  

Sales and marketing

     —          32.3       76.4       103.9       —          212.6  

Research and development

     —          28.4       62.4       77.0       —          167.8  

General and administrative

     —          14.9       40.0       45.9       —          100.8  

Amortization of intangible assets and depreciation

     —          52.5       35.8       53.5       —          141.8  

Restructuring costs

     —          1.1       0.3       8.2       —          9.6  

Acquisition related and other costs

     —          11.9       2.7       —          —          14.6  

Affiliate (income) expense, net

     —          37.7       (30.0     (7.7     —