10-Q 1 d607892d10q.htm FORM 10-Q FORM 10-Q
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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 AUGUST 31, 2013

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 October 4, 2013, was 1,000, par value $0.01 per share.

 

 

 


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INFOR, INC.

Form 10-Q

Index

 

PART I.

  

FINANCIAL INFORMATION

     3   

Item 1.

   Financial Statements (unaudited)      3   
   Condensed Consolidated Balance Sheets at August 31, 2013 and May 31, 2013      3   
   Condensed Consolidated Statements of Operations for the three months ended August 31, 2013 and 2012      4   
   Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended August 31, 2013 and 2012      5   
   Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2013 and 2012      6   
   Notes to Condensed Consolidated Financial Statements      7   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      34   

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk      48   

Item 4.

   Controls and Procedures      49   

PART II.

   OTHER INFORMATION      49   

Item 1.

   Legal Proceedings      49   

Item 1A.

   Risk Factors      49   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      50   

Item 3.

   Defaults Upon Senior Securities      50   

Item 4.

   Mine Safety Disclosures      50   

Item 5.

   Other Information      50   

Item 6.

   Exhibits      50   
   SIGNATURES      51   

 

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Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q for the Quarter Ended August 31, 2013, 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 Annual Report on Form 10-K for our fiscal year ended May 31, 2013, filed with the SEC on August 2, 2013, 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, whether as a result of new information, future events or otherwise. Readers should carefully review the risk factors described in our Annual Report on Form 10-K and in other documents that we file from time to time with the SEC including our Quarterly Reports on Form 10-Q.

 

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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)

 

     August 31,
2013
    May 31,
2013
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 481.0      $ 421.9   

Accounts receivable, net

     320.8        407.2   

Prepaid expenses

     107.4        108.5   

Income tax receivable

     34.8        32.5   

Other current assets

     16.3        18.6   

Deferred tax assets

     38.1        38.1   
  

 

 

   

 

 

 

Total current assets

     998.4        1,026.8   

Property and equipment, net

     73.9        71.3   

Intangible assets, net

     1,032.4        1,087.7   

Goodwill

     4,146.6        4,139.8   

Deferred tax assets

     83.8        87.8   

Other assets

     34.1        36.6   

Deferred financing fees, net

     146.0        141.1   
  

 

 

   

 

 

 

Total assets

   $ 6,515.2      $ 6,591.1   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 49.2      $ 40.6   

Income taxes payable

     34.3        28.7   

Accrued expenses

     359.2        366.4   

Deferred tax liabilities

     4.2        4.3   

Deferred revenue

     832.8        927.7   

Current portion of long-term obligations

     22.3        91.2   
  

 

 

   

 

 

 

Total current liabilities

     1,302.0        1,458.9   

Long-term debt

     5,320.0        5,232.9   

Deferred tax liabilities

     225.5        231.0   

Other long-term liabilities

     223.4        232.2   
  

 

 

   

 

 

 

Total liabilities

     7,070.9        7,155.0   
  

 

 

   

 

 

 

Commitments and contingencies (Note 14)

    

Stockholders’ deficit

    

Common stock, $0.01 par value; 1,000 shares authorized; 1,000 shares issued and outstanding at August 31, 2013 and May 31, 2013

     —          —     

Additional paid-in capital

     1,250.3        1,247.6   

Receivable from stockholders

     (27.4     (30.1

Accumulated other comprehensive income

     69.7        90.0   

Accumulated deficit

     (1,848.3     (1,871.4
  

 

 

   

 

 

 

Total stockholders’ deficit

     (555.7     (563.9
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 6,515.2      $ 6,591.1   
  

 

 

   

 

 

 

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
August 31,
 
     2013     2012  

Revenues:

    

Software license fees and subscriptions

   $ 105.6      $ 100.8   

Product updates and support fees

     365.0        357.1   
  

 

 

   

 

 

 

Software revenues

     470.6        457.9   

Consulting services and other fees

     179.7        173.9   
  

 

 

   

 

 

 

Total revenues

     650.3        631.8   
  

 

 

   

 

 

 

Operating expenses:

    

Cost of software license fees and subscriptions (1)

     17.7        17.6   

Cost of product updates and support fees (1)

     62.4        62.3   

Cost of consulting services and other fees (1)

     144.1        140.1   

Sales and marketing

     99.7        98.5   

Research and development

     89.9        82.7   

General and administrative

     47.3        50.1   

Amortization of intangible assets and depreciation

     63.9        73.0   

Restructuring costs

     2.2        5.5   

Acquisition related and other costs

     9.9        1.9   
  

 

 

   

 

 

 

Total operating expenses

     537.1        531.7   
  

 

 

   

 

 

 

Income from operations

     113.2        100.1   
  

 

 

   

 

 

 

Other expense, net:

    

Interest expense, net

     98.9        108.2   

Loss on extinguishment of debt

     0.7        —     

Other (income) expense, net

     (15.3     (4.2
  

 

 

   

 

 

 

Total other expense, net

     84.3        104.0   
  

 

 

   

 

 

 

Income (loss) before income tax

     28.9        (3.9

Income tax provision

     5.8        29.4   
  

 

 

   

 

 

 

Net income (loss)

   $ 23.1      $ (33.3
  

 

 

   

 

 

 

 

(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
August 31,
 
     2013     2012  

Net income (loss)

   $ 23.1      $ (33.3
  

 

 

   

 

 

 

Other comprehensive income (loss):

    

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

     (20.2     62.7   

Defined benefit plan funding status, net of tax

     (0.1     (0.3
  

 

 

   

 

 

 

Total other comprehensive income (loss)

     (20.3     62.4   
  

 

 

   

 

 

 

Comprehensive income

   $ 2.8      $ 29.1   
  

 

 

   

 

 

 

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)

 

     Three Months Ended
August 31,
 
     2013     2012  

Cash flows from operating activities:

    

Net income (loss)

   $ 23.1      $ (33.3

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     63.9        73.0   

Provision for doubtful accounts, billing adjustments and sales allowances

     3.8        3.0   

Deferred income taxes

     (4.6     10.8   

Non-cash (gain) loss on foreign currency

     (15.4     (4.2

Non-cash interest

     7.0        5.3   

Non-cash loss on extinguishment of debt

     0.7        —     

Equity-based compensation expense

     2.6        1.3   

Other

     (0.9     —     

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

    

Prepaid expenses and other assets

     6.4        3.3   

Accounts receivable, net

     83.9        54.7   

Income tax receivable/payable

     7.9        21.6   

Deferred revenue

     (99.7     (52.7

Accounts payable, accrued expenses and other liabilities

     (1.2     (56.6
  

 

 

   

 

 

 

Net cash provided by operating activities

     77.5        26.2   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Acquisitions, net of cash acquired

     (0.3     (39.6

Change in restricted cash

     (1.6     0.4   

Purchases of property, equipment and software

     (8.4     (10.3
  

 

 

   

 

 

 

Net cash used in investing activities

     (10.3     (49.5
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Loans to stockholders

     —          (2.8

Payments on capital lease obligations

     (0.6     (0.2

Proceeds from issuance of debt

     937.7        —     

Payments on long-term debt

     (933.5     (22.7

Deferred financing fees

     (11.9     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (8.3     (25.7
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     0.2        6.2   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     59.1        (42.8

Cash and cash equivalents at the beginning of the period

     421.9        384.4   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 481.0      $ 341.6   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash investing and financing activities

    

Assets acquired in acquisitions, net of cash acquired

   $ —        $ 50.8   

Liabilities assumed in acquisitions

   $ —        $ 11.2   

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. (Infor) is one of the largest providers of enterprise software and services in the world. We provide industry-specific and other enterprise software products and related services, primarily to large and medium-sized enterprises in the manufacturing, distribution, healthcare, public sector, automotive, service industries, equipment services, management and rental (ESM&R), consumer products and retail and hospitality industries. We serve a large, diverse and sophisticated customer base across three geographic regions: the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific (APAC). Our software and services offerings are often “mission critical” for many of our customers as they help automate and integrate critical business processes, which enable our customers to better manage their suppliers, partners, customers and employees, as well as their business operations generally. Our industry-specific approach distinguishes us from larger competing enterprise software vendors, whose primary focus is on less specialized software programs that take more time and cost to tailor to target customers’ specific needs during periods of implementation and upgrade. We believe our products and services provide a lower relative total cost of ownership for customers than the offerings of larger competing vendors.

We specialize in and target specific industries, or verticals, and have industry-specific business units that leverage our industry-oriented products and teams. 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®, are integrated with our enterprise software applications and sold across different verticals. In addition to providing software products, we provide on-going support and maintenance services for our customers through our subscription-based annual maintenance and support programs. We also help our customers implement and use our applications more effectively through our consulting services.

Unless otherwise indicated or the context requires otherwise, hereafter any reference to Infor, we, our, us or the Company refers to Infor, Inc. and its consolidated subsidiaries.

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, 2013, and other amounts presented herein as of May 31, 2013, 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, 2013, included in our Annual Report on Form 10-K, filed with the SEC on August 2, 2013.

Revision of Prior Period Financial Statements

During the third quarter of fiscal 2013, we identified and corrected an error in the manner in which we were classifying our affiliate receivables with Lux Bond Co, a subsidiary of IGS Intermediate Holdings and Infor’s immediate parent company, and presented our affiliate receivables as receivable from stockholders on our Consolidated Balance Sheets. Previously, the receivables were classified as other assets. The cash flows related to the affiliate receivables were also reclassified from operating activities to financing activities in our Consolidated Statement of Cash Flows. In accordance with accounting guidance found in ASC 250-10 (SEC Staff Accounting Bulletin No. 99, Materiality), we assessed the materiality of these changes and concluded that they were not material to any of our previously issued financial statements. In accordance with accounting guidance found in ASC 250-10

 

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(SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we revised our previously issued financial statements to correct the effect of the error in the current filing. The revisions resulted in a $2.8 million reclassification from Cash flows from financing activities to Cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows for the three-month period ended August 31, 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 equity-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 2014 and 2013 relate to our fiscal years ended May 31, 2014 and 2013, respectively. References to future years also relate to our fiscal years ending May 31.

2. Summary of Significant Accounting Policies

A detailed description of our significant accounting policies can be found in our financial statements for our fiscal year ended May 31, 2013, which are included in the Annual Report on Form 10-K that we filed with the SEC on August 2, 2013. 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 software license fees and subscriptions revenues in our Condensed Consolidated Statements of Operations and were approximately $14.7 million and $10.6 million in the first quarter of fiscal 2014 and 2013, 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, 2013

   $ 16.0   

Provision

     2.7   

Write-offs and recoveries

     (1.4

Currency translation effect

     (0.1
  

 

 

 

Balance, August 31, 2013

   $ 17.2   
  

 

 

 

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, we have 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, 2013

   $ 10.7   

Provision

     1.1   

Write-offs

     (0.3

Currency translation effect

     0.1   
  

 

 

 

Balance, August 31, 2013

   $ 11.6   
  

 

 

 

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 gains of $15.4 million and $4.2 million for the three months ended August 31, 2013, and for the comparable three months ended August 31, 2012. 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

None

Recent Accounting Pronouncements — Not Yet Adopted

In July 2013, the FASB issued guidance on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exist. This guidance requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when the uncertain tax position would reduce the net operating loss or other carryforward under the tax law of the applicable jurisdiction and the entity intends to use the deferred tax asset for that purpose. This guidance is effective for interim or annual periods beginning after December 15, 2013 (our fiscal 2015). Early adoption and retrospective application are permitted. We are currently evaluating how the adoption of this guidance will affect our presentation of unrecognized tax benefits and the impact it may have on our financial position, results of operations or cash flows.

In March 2013, the FASB amended existing guidance on foreign currency matters relating to the releasing of cumulative translation adjustments to net income when an entity ceases to have a controlling financial interest in a subsidiary or business within a foreign entity. According to this guidance, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided, or, if a controlling financial interest is no longer held. This revised guidance is effective on a prospective basis for fiscal years beginning after December 15, 2013 (our fiscal 2015), with early adoption permitted. We are currently evaluating how the adoption of this guidance will affect our accounting for such derecognition transactions and the impact it may have on our financial position, results of operations or cash flows.

3. Acquisitions

Fiscal 2014

In the first three months of fiscal 2014, we did not complete any acquisitions.

Fiscal 2013

In fiscal 2013, we made five acquisitions for a combined purchase price of $119.7 million, net of cash acquired, to expand our product and service offerings in our targeted verticals, primarily manufacturing and distribution, and our HCM and CRM horizontal offerings, two of which were completed in the first three months of fiscal 2013. 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 our results for the three months ended August 31, 2013, or the comparable period ended August 31, 2012.

The purchase consideration related to certain of these acquisitions is subject to post-closing adjustments and may include additional contingent cash consideration payable to the sellers if specific future performance conditions are met as detailed in the applicable purchase agreements. We have estimated the fair value of the contingent consideration to be $12.0 million and $13.2 million as of August 31, 2013, and May 31, 2013, respectively. The change in the estimated fair value of the contingent consideration, during the contingency period through settlement, is recorded in our results of operations in the period of such change and is included in acquisition related and other costs in our Consolidated Statements of Operations. The potential undiscounted amount of future payments that we may be required to make related to the contingent consideration is between $0.0 and approximately $54.2 million. In addition, we have received and/or estimated that we are due post-closing adjustments of approximately $0.9 million as of August 31, 2013. The original fair value of the contingent consideration of $14.6 million, as estimated at the applicable acquisition dates, along with the post-closing adjustments are reflected in the combined purchase price stated above.

 

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4. Goodwill

The change in the carrying amount of our goodwill by reportable segment for the three months ended August 31, 2013, was as follows:

 

(in millions)    License      Maintenance      Consulting      Total  

Balance, May 31, 2013

   $ 849.6       $ 3,012.9       $ 277.3       $ 4,139.8   

Currency translation effect

     1.4         4.9         0.5         6.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, August 31, 2013

   $ 851.0       $ 3,017.8       $ 277.8       $ 4,146.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

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.

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 no indication of potential impairment existed as of August 31, 2013. 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.

 

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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.

We measure certain financial assets and liabilities at fair value including our cash equivalents. The following table summarizes the fair value of our financial assets and liabilities that were accounted for at fair value on a recurring basis, by level within the fair value hierarchy, as of August 31, 2013, and May 31, 2013:

 

     August 31, 2013  
     Fair Value Measurements Using Inputs Considered as         
(in millions)    Level 1      Level 2      Level 3      Fair Value  

Liabilities

           

Contingent consideration

   $ —         $ —         $ 12.0       $ 12.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —         $ —         $ 12.0       $ 12.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     May 31, 2013  
     Fair Value Measurements Using Inputs Considered as         
(in millions)    Level 1      Level 2      Level 3      Fair Value  

Liabilities

           

Contingent consideration

   $ —         $ —         $ 13.2       $ 13.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ —         $ —         $ 13.2       $ 13.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Contingent consideration relates to certain of our fiscal 2013 acquisitions. The estimated fair value of the contingent consideration was based primarily on our estimates of meeting the applicable contingency conditions over the years following the acquisition as per the terms of the applicable purchase agreements. These include estimates of revenue growth rates and our assessment of the probability of meeting such results, with the probability-weighted earn-out then discounted to estimate fair value. As these are unobservable inputs, the contingent consideration is included in Level 3 inputs. The contingent consideration liabilities are included in accrued expenses and other long-term liabilities on our Condensed Consolidated Balance Sheets. In future periods, we will remeasure the estimated fair value of the contingent consideration and will include any change in the related liability in acquisition related and other costs in our Consolidated Statements of Operations. See Note 3, Acquisitions.

We have had no transfers of assets/liabilities into or out of Levels 1, 2 or 3 during fiscal 2014 or fiscal 2013. The following table reconciles the change in our Level 3 assets/liabilities for the first three months of fiscal 2014:

 

     Fair Value
Measurements Using
Significant
Unobservable Inputs
 
(in millions)    Level 3  

Balance, May 31, 2013

   $ 13.2   

Total gain recorded in earnings

     (1.2
  

 

 

 

Balance, August 31, 2013

   $ 12.0   
  

 

 

 

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 August 31, 2013, we had not recorded any impairment

 

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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 August 31, 2013, 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 August 31, 2013, and May 31, 2013, 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

To estimate fair value of our long-term debt for disclosure purposes, we used recent market transactions and related market quotes of our long-term debt’s August 31, 2013 bid and ask pricing (Level 2 on the fair value hierarchy). At August 31, 2013, and May 31, 2013, the total carrying value of our long-term debt was approximately $5.3 billion and $5.3 billion, respectively, and the estimated fair value of our long-term debt was approximately $5.6 billion and $5.6 billion, respectively.

6. Accounts Receivable, Net

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

 

     August 31,     May 31,  
(in millions)    2013     2013  

Accounts receivable

   $ 287.4      $ 368.9   

Unbilled accounts receivable

     50.6        54.3   

Less: allowance for doubtful accounts

     (17.2     (16.0
  

 

 

   

 

 

 

Accounts receivable, net

   $ 320.8      $ 407.2   
  

 

 

   

 

 

 

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:

 

     August 31, 2013      May 31, 2013       
(in millions)    Gross
Carrying
Amounts
     Accumulated
Amortization
     Net      Gross
Carrying
Amounts
     Accumulated
Amortization
     Net      Estimated
Useful Lives
(in years)

Customer contracts and relationships

   $ 1,781.0       $ 984.1       $ 796.9       $ 1,776.0       $ 942.7       $ 833.3       2 - 15

Acquired and developed technology

     1,015.9         792.3         223.6         1,011.7         771.4         240.3       2 - 10

Tradenames

     136.1         124.2         11.9         135.6         121.5         14.1       1 - 20
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total

   $ 2,933.0       $ 1,900.6       $ 1,032.4       $ 2,923.3       $ 1,835.6       $ 1,087.7      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

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

 

     Three Months Ended
August 31,
 
(in millions)    2013      2012  

Customer contracts and relationships

   $ 37.6       $ 40.4   

Acquired and developed technology

     17.4         23.2   

Tradenames

     2.3         2.5   
  

 

 

    

 

 

 

Total

   $ 57.3       $ 66.1   
  

 

 

    

 

 

 

The estimated future annual amortization expense related to these intangible assets as of August 31, 2013, was as follows:

 

(in millions)       

Fiscal 2014 (remaining 9 months)

   $ 171.1   

Fiscal 2015

     203.0   

Fiscal 2016

     178.7   

Fiscal 2017

     131.0   

Fiscal 2018

     80.8   

Fiscal 2019

     69.8   

Thereafter

     198.0   
  

 

 

 

Total

   $ 1,032.4   
  

 

 

 

8. Accrued Expenses

Accrued expenses consisted of the following for the periods indicated:

 

     August 31,      May 31,  
(in millions)    2013      2013  

Accrued compensation and employee benefits

   $ 135.6       $ 159.4   

Accrued taxes other than income

     16.0         27.2   

Accrued royalties and partner commissions

     28.8         44.1   

Accrued litigation

     9.8         12.0   

Accrued professional fees

     9.1         7.2   

Accrued subcontractor expense

     5.4         6.4   

Accrued interest

     94.3         45.8   

Accrued restructuring

     10.7         15.0   

Accrued retirement obligation

     7.8         7.7   

Deferred rent

     12.7         9.5   

Accrued other

     29.0         32.1   
  

 

 

    

 

 

 

Accrued expenses

   $ 359.2       $ 366.4   
  

 

 

    

 

 

 

9. Equity-Based Compensation

We account for equity-based payments, including grants of employee securities awards, in accordance with ASC 718,

Compensation—Stock Compensation, which requires that equity-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 securities 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 our total equity. 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 our 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

 

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(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 or in the first three months of fiscal 2014.

Pursuant to applicable FASB guidance related to equity-based awards, we have reflected equity compensation expense related to our parent companies’ equity grants within our results of operations with an offset to additional paid-in capital. During the third quarter of fiscal 2013, several of our parent company’s equity grants that had been classified as equity awards were modified to allow for a cash settlement option which caused these grants to be classified as liability awards at the parent company. Accordingly, we have recorded equity compensation expense of $1.3 million in the current quarter related to these liability awards. The following table presents the total equity compensation expense recognized in our Condensed Consolidated Statements of Operations, by category, for the periods indicated:

 

     Three Months Ended
August 31,
 
(in millions)    2013      2012  

Selling and marketing expense

   $ 1.1       $ 0.3   

Research and development expense

     0.9         0.3   

General and administrative expense

     0.6         0.7   
  

 

 

    

 

 

 

Total

   $ 2.6       $ 1.3   
  

 

 

    

 

 

 

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 2014 Restructuring Charges

We have incurred restructuring costs totaling $3.9 million during the first quarter of fiscal 2014 relating to employee severance costs primarily for personnel in our sales and professional services organizations. We made cash payments of approximately $1.7 million during the first three months of fiscal 2014 related to these actions. We expect to complete the majority of these restructuring activities in the remainder of fiscal 2014.

Fiscal 2013 Restructuring Charges

During fiscal 2013, we incurred restructuring costs related to employee severance for personnel in product development and general and administrative functions and costs related to certain exited facilities. In the first three months of fiscal 2014, we recorded restructuring cost reversals of $0.1 million related to these severance actions and exited facilities. We made cash payments of approximately $3.1 million during the first three months of fiscal 2014 related to these actions. We completed the majority of these restructuring activities in fiscal 2013.

Fiscal 2013 Acquisition-Related Charges

During fiscal 2013, we incurred acquisition-related restructuring costs related to operations we acquired in fiscal 2013. These restructuring charges included costs related to employee severance and accruals for costs related to facilities exited during fiscal 2013. In the first three months of fiscal 2014, we recognized $0.1 million in additional expenses related to these severance actions. During the first three months of fiscal 2014, we made $0.1 million in cash payments related to these actions. We completed the majority of these restructuring activities in fiscal 2013.

Previous Restructuring Charges and Acquisition-Related Charges

Prior to fiscal 2013, we had completed a series of acquisitions as well as certain restructuring activities. In the first three months of fiscal 2014, we recorded restructuring cost reversals of $1.7 million related to these severance actions and exited facilities. We made net cash payments of $2.3 million related to these previous actions. The remaining accruals associated with these prior

 

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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 three-month period ended August 31, 2013. 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):

 

                   Adjustment to Costs                          Total  
(in millions)    Balance
May 31,
2013
     Initial
Costs
     Expense     Foreign
Currency
Effect
     Cash
Payments
    Balance
August 31,
2013
     Total Costs
Recognized
to Date
     Expected
Program
Costs
 

Fiscal 2014 restructuring

                     

Severance

   $ —         $ 3.9       $ —        $ —         $ (1.7   $ 2.2       $ 3.9       $ 3.9   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total fiscal 2014 restructuring

     —           3.9         —          —           (1.7     2.2         3.9         3.9   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Fiscal 2013 restructuring

                     

Severance

     7.9         —           (0.2     0.1         (2.8     5.0         14.6         14.6   

Facilities and other

     0.5         —           0.1        —           (0.3     0.3         0.8         0.8   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total fiscal 2013 restructuring

     8.4         —           (0.1     0.1         (3.1     5.3         15.4         15.4   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Fiscal 2013 acquisition-related

                     

Severance

     0.6         —           0.1        —           (0.1     0.6         0.9         0.9   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total fiscal 2013 acquisition-related

     0.6         —           0.1        —           (0.1     0.6         0.9         0.9   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Previous restructuring

                     

Severance

     1.6         —           (0.1     —           (0.5     1.0         14.3         14.3   

Facilities and other

     0.1         —           —          —           —          0.1         1.4         1.4   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total previous restructuring

     1.7         —           (0.1     —           (0.5     1.1         15.7         15.7   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Previous acquisition-related

                     

Severance

     0.8         —           —          —           (0.2     0.6         54.6         54.6   

Facilities and other

     6.4         —           (1.6     —           (1.6     3.2         22.7         22.7   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total previous acquisition-related

     7.2         —           (1.6     —           (1.8     3.8         77.3         77.3   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total restructuring

   $ 17.9       $ 3.9       $ (1.7   $ 0.1       $ (7.2   $ 13.0       $ 113.2       $ 113.2   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

The remaining restructuring 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 Consolidated Balance Sheets.

The following table summarizes the restructuring charges reflected in our results of operations for the periods indicated for each of our reportable segments including charges related to those functions not allocated to our segments.

 

     Three Months Ended
August 31,
 
(in millions)    2013     2012  

License

   $ 0.7      $ (0.3

Maintenance

     (0.3     (0.3

Consulting

     1.2        0.1   

General and administrative and other functions

     0.6        6.0   
  

 

 

   

 

 

 

Total restructuring costs

   $ 2.2      $ 5.5   
  

 

 

   

 

 

 

 

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11. Debt

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

 

     August 31, 2013     May 31, 2013  
(in millions)    Amount     Effective
Rate
    Amount     Effective
Rate
 

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

   $ —          —     $ 340.0        5.750

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

     2,512.8        5.250     2,779.1        5.250

Infor first lien Term B-3 due June 3, 2020

     479.8        3.750     —          —  

Infor first lien Euro Term due April 5, 2018

     —          —       321.7        6.750

Infor first lien Euro Term B due June 3, 2020

     460.1        4.000     —          —  

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

     330.5        10.000     324.9        10.000

Infor 11.5% senior notes due July 15, 2018

     560.0        11.500     560.0        11.500

Debt discounts

     (15.9       (16.6  
  

 

 

     

 

 

   

Total long-term debt

     5,342.3          5,324.1     

Less: current portion

     22.3          91.2     
  

 

 

     

 

 

   

Total long-term debt - non-current

   $ 5,320.0        $ 5,232.9     
  

 

 

     

 

 

   

The weighted average interest rate at August 31, 2013, and May 31, 2013, was 6.7% and 7.1%, respectively.

The following table summarizes our future repayment obligations on the principal debt balances for all of our borrowings as of August 31, 2013:

 

(in millions)       

Fiscal 2014 (remaining 9 months)

   $ 13.0   

Fiscal 2015

     37.4   

Fiscal 2016

     37.4   

Fiscal 2017

     37.4   

Fiscal 2018

     2,426.8   

Fiscal 2019

     1,914.9   

Thereafter

     891.3   
  

 

 

 

Total

   $ 5,358.2   
  

 

 

 

Credit Facilities

On April 5, 2012, we entered into a secured credit agreement with Infor (US), Inc. as borrower and a syndicate of certain banks and other financial institutions as lenders and which consists of a secured term loan facility and a secured revolving credit facility (the Credit Agreement), which was subsequently amended pursuant to the First Amendment to the Credit Agreement and the Second Amendment to the Credit Agreement, each as described below.

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, $23.1 million of letters of credit have reduced the amount available under the Revolver to $126.9 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, Inc. and certain of our wholly owned domestic subsidiaries, and are secured by liens on substantially all of the borrower’s assets and the assets of the guarantors. Prior to the Second Amendment described below, under the Credit Agreement we were required to maintain a total leverage ratio not to exceed certain levels as of the last day of each fiscal quarter. However, pursuant to the Second Amendment, this financial maintenance covenant is applicable only for the Revolver and then only for those fiscal quarters in which we have significant borrowings under the Revolver outstanding as of the last day of

 

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such fiscal quarter. We are subject to certain other customary affirmative and negative covenants as well.

Refinancing Amendments

On June 3, 2013, we entered into the Second Amendment to the Credit Agreement (as amended). The Second Amendment provided for the refinancing of the then outstanding principal balance of our Tranche B-1 Term Loan and our Euro Term Loan with the proceeds of a new $483.0 million term loan (the Tranche B-3 Term Loan) and a new €350.0 million term loan (the Euro Tranche B Term Loan). Interest on the Tranche B-3 Term Loan is based on a fluctuating rate of interest determined by reference to either, at our option, an Adjusted LIBOR rate, plus a margin of 2.75% per annum, with an Adjusted LIBOR floor of 1.0%, or an alternate base rate, plus a margin of 1.75% per annum, with a minimum alternative base rate floor of 2.0%. The Tranche B-3 Term Loan matures on June 3, 2020, which is an extension of approximately three and a half years compared to the original Tranche B-1 Term Loan maturity date. Interest on the Euro Tranche B Term Loan is based on a fluctuating rate of interest determined by reference to an Adjusted LIBOR rate, plus a margin of 3.0% per annum, with an Adjusted LIBOR floor of 1.0%. The Euro Tranche B Term Loan matures on June 3, 2020, which is an extension of approximately two years compared to the original Euro Term Loan maturity date. Pursuant to the terms of the Credit Agreement, the Tranche B-3 Term Loan and Euro Tranche B Term Loan are guaranteed by the same guarantors, and are secured by liens on substantially all of the borrower’s assets and the assets of the guarantors. The Second Amendment also amended the Credit Agreement to, among other things, limit the applicability of the financial maintenance covenant (maximum total leverage ratio) to the Revolver and then only for those fiscal quarters in which we have significant borrowings under our Revolver outstanding as of the last day of such fiscal quarter.

Proceeds from the Tranche B-3 Term Loan and Euro Tranche B Term Loan were used to refinance the outstanding principal of our Tranche B-1 Term Loan and our Euro Term Loan, together with accrued and unpaid interest and applicable fees. In addition, $250.0 million of the proceeds were used to repay a portion of the outstanding balance of our Tranche B-2 Term Loan.

On September 27, 2012, we entered into the First Amendment to the Credit Agreement. The First Amendment provided for the refinancing of the then outstanding principal balance of our Tranche B Term Loan of $2,763.0 million with the proceeds of a new $2,793.1 million term loan (the Tranche B-2 Term Loan). Interest on the Tranche B-2 Term Loan is based on a fluctuating rate of interest determined by reference to, at our option, an Adjusted LIBOR rate, plus a margin of 4.0% per annum, with an Adjusted LIBOR floor of 1.25%, or an alternate base rate, plus a margin of 3.0% per annum. This was a reduction in our effective rate related to this term loan as compared to the Tranche B Term Loan which was based on an Adjusted 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 the same guarantors, and is secured by liens on substantially all of the borrower’s assets and the assets of the guarantors.

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.

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 (US), Inc. and are guaranteed by Infor, Inc. 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 August 31, 2013, deferred financing fees, net of amortization, of $146.0 million are reflected on our Condensed Consolidated Balance Sheets in deferred financing fees, net. For the three months ended August 31, 2013 and August 31, 2012, we amortized $6.3 million and $5.2 million, respectively, in deferred financing fees which are included in interest expense, net in our Condensed Consolidated Statements of Operations.

In conjunction with the June 3, 2013, Second 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-1 Term Loan and Euro Term Loan were modifications or extinguishments of the original term loans. Each lender involved in the Second Amendment refinance 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 first quarter of fiscal 2014 we capitalized an additional $11.9 million of fees paid to creditors as deferred financing fees related to the modifications. These fees also include costs associated with lenders participating in the

 

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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 remaining lenders who chose not to participate were determined to be extinguishments. As a result, in the first quarter of fiscal 2014, $0.7 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 $10.6 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 first quarter of fiscal 2014.

Parent Company PIK Term Loan

In addition to the debt held by Infor and its affiliates discussed above, Infor Lux Bond Company (Lux Bond Co), our parent company, has debt in respect of a term loan (the Lux PIK Term Loan) under the Holdco PIK Term Loan Agreement, dated March 2, 2007, and amended pursuant to the First Amendment thereto, dated as of April 5, 2012.

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 for a quarter may be paid in cash and the fixed rate will be reduced by 50 basis points per annum for that quarter. For fiscal 2013, Lux Bond Co elected to pay the quarterly interest in cash and we funded the applicable Lux PIK Term Loan interest payments. See Note 16, Related Party Transactions – Due to/from Affiliate. As of August 31, 2013, and May 31, 2013, the total balance outstanding related to the Lux PIK Term Loan was $166.8 million and $161.4 million, respectively. The balance as of August 31, 2013, includes accrued interest of $5.4 million as Lux Bond Co did not elect to pay the first quarter of fiscal 2014 interest in cash.

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 Lux PIK Term Loan and accordingly we have not reflected the Lux PIK Term Loan in our consolidated financial statements for any of the periods presented. While not contractually required to do so, we believe that any voluntary servicing of the Lux PIK Term Loan in future periods 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. The Company is included in the GGC Software Parent, Inc. consolidated federal income tax return. We provide for income taxes under the separate return method, by which Infor, Inc. and its subsidiaries compute tax expense as though they file a separate tax return. Interim period income tax benefits and expenses are measured using an estimated annual effective tax rate. For the three-month periods ended August 31, 2013 and August 31, 2012, our estimated global effective tax rates were 20.1% and (753.8)%, 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  
     August 31,  
(in millions, except percentages)    2013     2012  

Income tax provision

   $ 5.8      $ 29.4   

Effective income tax rate

     20.1     (753.8 )% 

The change in the effective tax rates for the three-month period ended August 31, 2013, compared to the three months ended August 31, 2012, was primarily due to a change in earnings levels, a shift in the jurisdictional mix of operating income in the respective periods, the Company’s current year interest expense no longer being subject to the limitations under IRC Section 163(j), a decrease in Subpart F inclusions, the tax benefit created in the current year by the Netherlands Innovation Box, changes in various withholding tax, the change in recorded liabilities for unrecognized tax benefits related to uncertain tax positions in various

 

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jurisdictions, the change of the valuation allowance for various foreign deferred tax assets, foreign subsidiary net operating losses not providing benefits, and tax law changes in Australia, Denmark and the United Kingdom. The current effective tax rate for the three-month period ended August 31, 2013, reflects the Company’s current year interest expense no longer being subject to the limitations under IRC Section 163(j), decreases in Subpart F inclusions, the tax benefit created by the Netherlands Innovation Box, a reduction in various foreign withholding taxes, a change in earnings levels, a shift in the jurisdictional mix of operating income in the respective periods, the change in recorded liabilities for unrecognized tax benefits related to uncertain tax positions in various jurisdictions, tax law changes in Denmark and the UK, and changes in the valuation allowances required to be recorded for various foreign subsidiary net operating losses.

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 2018. We are generally no longer subject to tax examination domestically for years prior to fiscal year 2009. We are currently under several 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.

Internationally, we generally file income tax returns in each jurisdiction in which we do business. The statutes of limitations for these returns, with some exceptions, run through 2018. We are generally no longer subject to tax examination internationally for years prior to fiscal year 2007. 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 August 31, 2014, we expect a net reduction of approximately $17.6 million of unrecognized tax benefits, primarily due to the expiration of statutes of limitation in the various jurisdictions.

During the three-month period ended August 31, 2013, we recorded a net increase of valuation allowances totaling $1.4 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, we completed several organizational restructuring actions and we continue to evaluate various other tax structuring alternatives to rationalize various legal entities and reduce our overall global tax liability. While we have not finalized additional plans at this time, we expect to conclude such plans during the second and third quarter of fiscal 2014. Until that time, we expect to further evaluate the impact of any restructuring actions on the realizability of available deferred tax assets in the various jurisdictions in which we operate.

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).

 

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

 

(in millions)    Foreign
Currency
Translation
Adjustment
    Funded Status of
Defined Benefit
Pension Plan
    Accumulated
Other
Comprehensive
Income (Loss) (1)
 

Balance, May 31, 2013

   $ 98.9      $ (8.9   $ 90.0   

Other comprehensive income (loss)

     (20.2     (0.1     (20.3
  

 

 

   

 

 

   

 

 

 

Balance, August 31, 2013

   $ 78.7      $ (9.0   $ 69.7   
  

 

 

   

 

 

   

 

 

 

 

(1) Accumulated other comprehensive income (loss) is presented net of tax provision of $0.9 million and $0.9 million as of August 31, 2013, and May 31, 2013, respectively.

The components of other comprehensive income (loss) were as follows for the periods indicated. There were no amounts reclassified out of accumulated other comprehensive income in either period.

 

(in millions)          Income Tax         

Three Months Ended

   Before-Tax     (Expense) Benefit      Net-of-Tax  

August 31, 2013

       

Foreign currency translation adjustment

   $ (20.2   $ —         $ (20.2

Change in funded status of defined benefit plans

     (0.1     —           (0.1
  

 

 

   

 

 

    

 

 

 

Other comprehensive income (loss)

   $ (20.3   $ —         $ (20.3
  

 

 

   

 

 

    

 

 

 

August 31, 2012

       

Foreign currency translation adjustment

   $ 62.7      $ —         $ 62.7   

Change in funded status of defined benefit plans

     (0.3     —           (0.3
  

 

 

   

 

 

    

 

 

 

Other comprehensive income (loss)

   $ 62.4      $ —         $ 62.4   
  

 

 

   

 

 

    

 

 

 

14. Commitments and Contingencies

Leases

We have entered into cancelable and non-cancelable operating leases, primarily related to rental of office space, certain office equipment and automobiles. Total rent expense for operating leases was $12.6 million and $14.1 million for the three-month periods ended August 31, 2013 and August 31, 2012, respectively.

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.

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 August 31, 2013, and May 31, 2013, was $9.8 million and $12.1 million, respectively. We expense all legal costs to resolve regulatory, legal, tax or other matters in the period incurred.

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,

 

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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 might enjoin further sales or servicing of the redesigned products that incorporate Punchout or Punchout and EDI. 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 as those claims 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. 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, which Petition was denied on January 29, 2013. The Petition did not raise the damages issues, thus making final ePlus’s non-entitlement to infringement damages.

The District Court conducted an evidentiary hearing in the contempt proceeding in the first week of April 2013. Before that hearing, Lawson moved to dissolve or modify the injunction based on the Circuit Court’s ruling. The District Court did not rule on that motion before the hearing. On June 11, 2013, the District Court modified the injunction by deleting from its scope the product consisting of the S3 Procurement System in combination with RSS, but ordered that the injunction shall remain in effect in all other respects. The District Court issued a separate order denying Lawson’s motion to dissolve or modify the injunction. Lawson has appealed the District Court’s denial of the motion to modify, and order of modification, to the United States Court of Appeals for the Federal Circuit.

On August 16, 2013, the District Court issued an Opinion and Order finding Lawson in contempt of its May 23, 2011 injunction, awarding damages to ePlus in the amount of $18,167,950 (plus post-judgment interest at an annual rate of 0.12%), denying ePlus’ request for enhanced damages and attorney’s fees, and imposing a coercive remedy in the daily amount of $62,362 payable to the Court, unless and until Lawson establishes that it is in compliance with the Court’s injunction order by September 20, 2013. Lawson filed a stay request in the District Court, which granted the request to stay the money judgment to ePlus, but denied the request to stay the deadline to demonstrate compliance. Lawson noticed a timely appeal and filed a motion for stay with the United States Court of Appeals for the Federal Circuit of the District Court’s August 16, 2013 ruling. On September 19, 2013, the Court of Appeals entered a stay order providing that “(1) Lawson shall not have to demonstrate compliance with the May 23, 2011 injunction order during the pendency of its appeal of the Contempt Order; (2) Lawson shall not have to pay the $62,362 per day fine, which will not accrue during the pendency of its appeal; and (3) the $62,362 per day fine will only begin to accrue if Lawson is unsuccessful on appeal.” The Court of Appeals denied the stay in part, stating that if Lawson did not comply with the injunction and did not prevail on appeal, Lawson would be liable for compensatory damages, interest or fees “to the extent appropriate.” Lawson believes it has a strong likelihood of success in its appeal based on the arguments it asserted in its motion for stay filed with the Court of Appeals, among other arguments.

On September 20, 2013, Lawson submitted to the District Court a Report of Compliance, limited to software configurations with the decommissioned RSS module and Procurement Punchout. Lawson states in that submission that it is in compliance with the District Court injunction as it pertains to those configurations.

 

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Given the inherent unpredictability of judicial proceedings, the pending appeal of the District Court’s injunction orders, as well as the right of either party to appeal an unfavorable decision from any ruling made on the merits of the contempt application, 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 or vacation 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 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.

Other Proceedings

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 August 31, 2013, 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 August 31, 2013, and May 31, 2013.

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 and other enterprise software products and related services 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, product, 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

 

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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.

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  

August 31, 2013

        

Revenues

   $ 106.9      $ 365.5      $ 180.4      $ 652.8   

Cost of revenues

     15.8        62.4        144.3        222.5   

Direct sales costs

     85.1        —          —          85.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 6.0      $ 303.1      $ 36.1      $ 345.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     5.6     82.9     20.0     52.9

August 31, 2012

        

Revenues

   $ 105.6      $ 357.7      $ 175.3      $ 638.6   

Cost of revenues

     15.2        62.3        140.5        218.0   

Direct sales costs

     82.4        —          —          82.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin

   $ 8.0      $ 295.4      $ 34.8      $ 338.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Sales margin %

     7.6     82.6     19.9     53.0

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:

 

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Table of Contents
     Three Months Ended
August 31,
 
(in millions)    2013     2012  

Reportable segment revenues

   $ 652.8      $ 638.6   

Purchase accounting revenue adjustments (1)

     (2.5     (6.8
  

 

 

   

 

 

 

Total revenues

   $ 650.3      $ 631.8   
  

 

 

   

 

 

 

Reportable segment sales margin

   $ 345.2      $ 338.2   

Other unallocated costs and operating expenses (2)

     165.9        159.6   

Amortization of intangible assets and depreciation

     63.9        73.0   

Restructuring

     2.2        5.5   
  

 

 

   

 

 

 

Income from operations

     113.2        100.1   

Total other expense, net

     84.3        104.0   
  

 

 

   

 

 

 

Income (loss) before income tax

   $ 28.9      $ (3.9
  

 

 

   

 

 

 

 

(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  

August 31, 2013

           

Software license fees and subscriptions

   $ 67.5       $ 28.6       $ 9.5       $ 105.6   

Product updates and support fees

     224.7         110.7         29.6         365.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     292.2         139.3         39.1         470.6   

Consulting services and other fees

     86.6         75.7         17.4         179.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 378.8       $ 215.0       $ 56.5       $ 650.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

August 31, 2012

           

Software license fees and subscriptions

   $ 58.6       $ 33.6       $ 8.6       $ 100.8   

Product updates and support fees

     219.2         106.7         31.2         357.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Software revenues

     277.8         140.3         39.8         457.9   

Consulting services and other fees

     85.5         69.1         19.3         173.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 363.3       $ 209.4       $ 59.1       $ 631.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

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  

August 31, 2013

   $ 44.9       $ 25.8       $ 3.2       $ 73.9   

May 31, 2013

   $ 42.9       $ 25.0       $ 3.4       $ 71.3   

 

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Table of Contents

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

 

(in millions)    Three Months Ended
August 31,
 

Revenues

   2013      2012  

United States

   $ 332.6       $ 310.8   

All other countries

     317.7         321.0   
  

 

 

    

 

 

 

Total revenues

   $ 650.3       $ 631.8   
  

 

 

    

 

 

 

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)    August 31,      May 31,  

Long-Lived Tangible Assets

   2013      2013  

United States

   $ 44.1       $ 42.1   

Germany

     9.9         9.7   

All other countries

     19.9         19.5   
  

 

 

    

 

 

 

Total long-lived tangible assets

   $ 73.9       $ 71.3   
  

 

 

    

 

 

 

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.”

16. Related Party Transactions

We have entered into advisory agreements with both Golden Gate Capital and Summit Partners, L.P. (Summit Partners, and together with Golden Gate Capital, the Sponsors) pursuant to which we have retained them to provide advisory services relating to financing and strategic business planning, acquisitions and investments, analysis and oversight, executive recruiting and certain other services. The Sponsors are our largest investors.

Golden Gate Capital

During the first three months of fiscal 2014 and 2013, we recognized as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations $1.5 million and $1.4 million, respectively, for Golden Gate Capital management fees and expenses rendered in connection with acquisitions, debt refinancing and other advisory services. At August 31, 2013, $0.3 million of these fees remained unpaid.

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 $0.3 million and $0.5 million in the first three months of fiscal 2014 and 2013, respectively. These revenues were recognized according to our revenue recognition policy as described in Note 2, Summary of Significant Accounting Policies. In addition, we have made payments to companies owned by Golden Gate Capital of an insignificant amount and approximately $0.3 million in the first three months of fiscal 2014 and 2013, respectively.

Summit Partners

During the first three months of fiscal 2014 and 2013, we recognized as a component of general and administrative expenses in our Condensed Consolidated Statement of Operations $0.5 million and $0.5 million, respectively, for Summit Partners management fees and expenses rendered in connection with acquisitions, debt refinancing and other advisory services, all of which were paid at August 31, 2013. We had no sales to companies owned by Summit Partners in the first three months of fiscal 2014 or the corresponding prior period. We have made an insignificant amount of payments to companies owned by Summit Partners in the first three months of fiscal 2014 with none in the corresponding prior period.

 

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Table of Contents

Due from Affiliates

Infor, through certain of our subsidiaries, had net receivables from Lux Bond Co of $27.4 million and $30.1 million as of August 31, 2013, and May 31, 2013, respectively. These receivables arose primarily due to our payment of deferred financing fees and interest related to Lux Bond Co debt and are included in receivable from stockholders in the equity section on our Condensed Consolidated Balance Sheets. In fiscal 2013, we funded quarterly interest payments totaling $18.2 million that were due related to the Lux PIK Term Loan primarily through affiliate loans to Lux Bond Co. In the first quarter of fiscal 2014, Lux Bond Co did not elect to pay interest in cash and we did not fund the quarterly interest payment. Any 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.

In addition, Infor has entered into a tax Allocation Agreement with GGC Software Parent, Inc., an affiliate of Lux Bond Co, that was effective as of April 5, 2012. The Company is included in the GGC Software Parent, Inc. consolidated federal income tax return and the Tax Allocation Agreement sets forth the obligation of the Company and its domestic subsidiaries with regard to preparing and filing tax returns and allocating tax payments under the consolidated reporting rules of the Internal Revenue Code and similar state and local tax laws governing combined or consolidated filings. The Tax Allocation Agreement provides that each domestic subsidiary that is a member of the consolidated, unitary or combined tax group will pay its share of the taxes of the group. In the first quarter of fiscal 2014, we recorded $2.7 million under the terms of the Tax Allocation Agreement as a reduction to the receivable from Lux Bond Co as of August 31, 2013.

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, Inc., 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 August 31, 2013, and May 31, 2013, our Condensed Consolidating Statements of Operations and our Condensed Consolidating Statements of Comprehensive Income (Loss) for our fiscal quarters ended August 31, 2013 and August 31, 2012, and our Condensed Consolidating Statements of Cash Flows for the three months ended August 31, 2013 and August 31, 2012.

During the third quarter of fiscal 2013, we restructured certain of our legal entities which altered the make-up of our Subsidiary Issuer, Guarantor Subsidiaries and Non-Guarantor Subsidiaries. As a result of this reorganization of our legal structure, all financial information set forth below as of and for the periods ended August 31, 2013, and all prior periods presented have been retrospectively adjusted to, reflect our current organizational structure.

During the third quarter of fiscal 2013, we identified and corrected an error in the manner in which we were classifying our affiliate receivables with Lux Bond Co. Previously, the receivables were classified on our Consolidated Balance Sheets as other assets. Based upon our review of the nature of transactions that resulted in these receivables and our expectation as to the timing of the payments, we corrected our presentation of our affiliate receivables and reclassified the balance from other assets to receivable from stockholders on our Consolidated Balance Sheets as of May 31, 2013. The cash flows related to the affiliate receivables were also reclassified from operating activities to financing activities in our Consolidated Statement of Cash Flows. We have assessed the materiality of these revisions and concluded that they were not material to any of our previously issued financial statements. As permitted by applicable accounting guidance, we have presented revised cash flow information below for the fiscal quarter ended August 31, 2012.

 

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Table of Contents

Condensed Consolidating Balance Sheets

 

     August 31, 2013  
(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

   $ —        $ 117.8      $ —         $ 363.2       $ —        $ 481.0   

Accounts receivable, net

     —          125.8        6.8         188.2         —          320.8   

Prepaid expenses

     —          47.8        15.9         43.7         —          107.4   

Income tax receivable

     0.1        18.1        0.5         16.1         —          34.8   

Other current assets

     —          1.6        —           14.7         —          16.3   

Affiliate receivable

     —          332.2        268.3         23.8         (624.3     —     

Deferred tax assets

     —          18.9        2.8         16.5         (0.1     38.1   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     0.1        662.2        294.3         666.2         (624.4     998.4   

Property and equipment, net

     —          27.0        17.2         29.7         —          73.9   

Intangible assets, net

     —          648.0        12.2         372.2         —          1,032.4   

Goodwill

     —          2,240.6        62.7         1,843.3         —          4,146.6   

Deferred tax assets

     0.3        —          4.8         83.8         (5.1     83.8   

Other assets

     —          6.5        7.7         19.9         —          34.1   

Deferred financing fees, net

     —          146.0        —           —           —          146.0   

Affiliate receivable

     —          1,067.1        1.3         118.6         (1,187.0     —     

Investment in subsidiaries

     —          1,432.3        —           —           (1,432.3     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 0.4      $ 6,229.7      $ 400.2       $ 3,133.7       $ (3,248.8   $ 6,515.2   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

              

Current liabilities:

              

Accounts payable

   $ —        $ 25.8      $ —         $ 23.4       $ —        $ 49.2   

Income taxes payable

     —          —          —           34.3         —          34.3   

Accrued expenses

     —          173.5        27.4         158.3         —          359.2   

Deferred tax liabilities

     0.1        —          —           4.2         (0.1     4.2   

Deferred revenue

     —          503.8        15.4         313.6         —          832.8   

Affiliate payable

     29.4        290.3        225.2         79.4         (624.3     —     

Current portion of long-term obligations

     —          22.3        —           —           —          22.3   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     29.5        1,015.7        268.0         613.2         (624.4     1,302.0   

Long-term debt

     —          5,320.0        —           —           —          5,320.0   

Deferred tax liabilities

     —          177.3        —           53.3         (5.1     225.5   

Affiliate payable

     58.5        119.4        0.4         1,008.7         (1,187.0     —     

Other long-term liabilities

     —          65.4        8.4         149.6         —          223.4   

Losses in excess of investment in subsidiaries

     468.1        —          —           —           (468.1     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     556.1        6,697.8        276.8         1,824.8         (2,284.6     7,070.9   

Total stockholders’ equity (deficit)

     (555.7     (468.1     123.4         1,308.9         (964.2     (555.7
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 0.4      $ 6,229.7      $ 400.2       $ 3,133.7       $ (3,248.8   $ 6,515.2   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents
     May 31, 2013  
(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

   $ —        $ 89.5      $ —         $ 332.4       $ —        $ 421.9   

Accounts receivable, net

     —          161.3        6.2         239.7         —          407.2   

Prepaid expenses

     —          51.2        15.4         41.9         —          108.5   

Income tax receivable

     0.1        15.8        0.5         16.1         —          32.5   

Other current assets

     —          2.1        0.4         16.1         —          18.6   

Affiliate receivable

     —          314.7        222.1         47.3         (584.1     —     

Deferred tax assets

     —          18.9        2.8         16.5         (0.1     38.1   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     0.1        653.5        247.4         710.0         (584.2     1,026.8   

Property and equipment, net

     —          24.6        17.5         29.2         —          71.3   

Intangible assets, net

     —          682.0        13.2         392.5         —          1,087.7   

Goodwill

     —          2,240.6        62.7         1,836.5         —          4,139.8   

Deferred tax assets

     0.2        —          5.8         87.8         (6.0     87.8   

Other assets

     —          7.0        10.5         19.1         —          36.6   

Deferred financing fees, net

     —          141.1        —           —           —          141.1   

Affiliate receivable

     —          1,049.0        11.0         119.0         (1,179.0     —     

Investment in subsidiaries

     —          1,404.8        —           —           (1,404.8     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 0.3      $ 6,202.6      $ 368.1       $ 3,194.1       $ (3,174.0   $ 6,591.1   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

              

Current liabilities:

              

Accounts payable

   $ —        $ 19.0      $ —         $ 21.6       $ —        $ 40.6   

Income taxes payable

     —          0.3        —           28.4         —          28.7   

Accrued expenses

     —          150.2        30.0         186.2         —          366.4   

Deferred tax liabilities

     0.1        —          —           4.3         (0.1     4.3   

Deferred revenue

     —          552.2        13.6         361.9         —          927.7   

Affiliate payable

     29.4        258.1        193.2         103.4         (584.1     —     

Current portion of long-term obligations

     —          91.2        —           —           —          91.2   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     29.5        1,071.0        236.8         705.8         (584.2     1,458.9   

Long-term debt

     —          5,232.9        —           —           —          5,232.9   

Deferred tax liabilities

     —          186.1        —           50.9         (6.0     231.0   

Affiliate payable

     58.3        119.8        0.4         1,000.5         (1,179.0     —     

Other long-term liabilities

     —          69.2        11.5         151.5         —          232.2   

Losses in excess of investment in subsidiaries

     476.4        —          —           —           (476.4     —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     564.2        6,679.0        248.7         1,908.7         (2,245.6     7,155.0   

Total stockholders’ equity (deficit)

     (563.9     (476.4     119.4         1,285.4         (928.4     (563.9
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 0.3      $ 6,202.6      $ 368.1       $ 3,194.1       $ (3,174.0   $ 6,591.1   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

Condensed Consolidating Statements of Operations

 

     Three Months Ended August 31, 2013  
(in millions)    Infor, Inc.
(Parent)
    Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-
Guarantor
Subsidiaries
    Eliminations     Total
Consolidated
 

Revenues:

            

Software license fees and subscriptions

   $ —        $ 62.4      $ 1.3      $ 41.9      $ —        $ 105.6   

Product updates and support fees

     —          203.0        7.3        154.7        —          365.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     —          265.4        8.6        196.6        —          470.6   

Consulting services and other fees

     —          71.9        2.9        104.9        —          179.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          337.3        11.5        301.5        —          650.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of software license fees and subscriptions

     —          10.3        1.0        6.2        0.2        17.7   

Cost of product updates and support fees

     —          30.5        0.9        29.7        1.3        62.4   

Cost of consulting services and other fees

     —          55.5        2.3        84.0        2.3        144.1   

Sales and marketing

     —          47.1        6.8        44.4        1.4        99.7   

Research and development

     —          45.4        2.2        39.6        2.7        89.9   

General and administrative

     —          5.8        27.3        22.1        (7.9     47.3   

Amortization of intangible assets and depreciation

     —          36.9        3.0        24.0        —          63.9   

Restructuring costs

     —          (0.3     0.2        2.3        —          2.2   

Acquisition related and other costs

     —          10.8        —          (0.9     —          9.9   

Affiliate (income) expense, net

     —          36.9        (36.4     (0.5     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     —          278.9        7.3        250.9        —          537.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     —          58.4        4.2        50.6        —          113.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net:

            

Interest expense, net

     —          98.7        —          0.2        —          98.9   

Affiliate interest (income) expense, net

     —          (14.8     —          14.8        —          —     

Loss on extinguishment of debt

     —          0.7        —          —          —          0.7   

Other (income) expense, net

     —          4.5        (0.1     (19.7     —          (15.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     —          89.1        (0.1     (4.7     —          84.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax

     —          (30.7     4.3        55.3        —          28.9   

Income tax provision (benefit)

     —          (6.7     0.9        11.6        —          5.8   

Equity in (earnings) loss of subsidiaries

     (23.1     (47.1     —          —          70.2        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 23.1      $ 23.1      $ 3.4      $ 43.7      $ (70.2   $ 23.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

30


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

Revenues:

            

Software license fees and subscriptions

   $ —        $ 55.0      $ 1.2      $ 44.6      $ —        $ 100.8   

Product updates and support fees

     —          196.7        7.1        153.3        —          357.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     —          251.7        8.3        197.9        —          457.9   

Consulting services and other fees

     —          69.0        2.9        102.0        —          173.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     —          320.7        11.2        299.9        —          631.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Cost of software license fees and subscriptions

     —          9.4        1.1        7.0        0.1        17.6   

Cost of product updates and support fees

     —          31.0        0.5        29.8        1.0        62.3   

Cost of consulting services and other fees

     —          54.6        2.6        81.0        1.9        140.1   

Sales and marketing

     —          45.1        3.0        49.2        1.2        98.5   

Research and development

     —          43.6        0.1        37.0        2.0        82.7   

General and administrative

     —          10.6        23.7        22.0        (6.2     50.1   

Amortization of intangible assets and depreciation

     —          41.7        3.7        27.6        —          73.0   

Restructuring costs

     —          0.6        0.1        4.8        —          5.5   

Acquisition related and other costs

     —          (0.7     2.6        —          —          1.9   

Affiliate (income) expense, net

     —          32.0        (33.2     1.2          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     —          267.9        4.2        259.6        —          531.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     —          52.8        7.0        40.3        —          100.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net:

            

Interest expense, net

     —          108.2        —          —          —          108.2   

Affiliate interest (income) expense, net

     —          (19.4     —          19.4        —          —     

Loss on extinguishment of debt

     —          —          —          —          —          —     

Other (income) expense, net

     —          8.4        0.3        (12.9     —          (4.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     —          97.2        0.3        6.5        —          104.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax

     —          (44.4     6.7        33.8        —          (3.9

Income tax provision (benefit)

     1.3        8.2        2.0        17.9        —          29.4   

Equity in (earnings) loss of subsidiaries

     32.0        (20.6     —          —          (11.4     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (33.3   $ (32.0   $ 4.7      $ 15.9      $ 11.4      $ (33.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Consolidating Statements of Comprehensive Income (Loss)

 

     Three Months Ended August 31, 2013  
(in millions)    Infor, Inc.
(Parent)
     Infor (US), Inc.
(Subsidiary Issuer)
     Guarantor
Subsidiaries
     Non-Guarantor
Subsidiaries
    Eliminations     Total
Consolidated
 

Net income (loss)

   $ 23.1       $ 23.1       $ 3.4       $ 43.7      $ (70.2   $ 23.1   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss):

               

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

     —           —           —           (20.2     —          (20.2

Defined benefit plan funding status, net of tax

     —           —           —           (0.1     —          (0.1
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —           —           —           (20.3     —          (20.3
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 23.1       $ 23.1       $ 3.4       $ 23.4      $ (70.2   $ 2.8   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

31


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

Net income (loss)

   $ (33.3   $ (32.0   $ 4.7       $ 15.9      $ 11.4       $ (33.3
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Other comprehensive income (loss):

              

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

     —          —          —           62.7        —           62.7   

Defined benefit plan funding status, net of tax

     —          —          —           (0.3     —           (0.3
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total other comprehensive income (loss)

     —          —          —           62.4        —           62.4   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Comprehensive income (loss)

   $ (33.3   $ (32.0   $ 4.7       $ 78.3      $ 11.4       $ 29.1   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Condensed Consolidating Statements of Cash Flows

 

     Three Months Ended August 31, 2013  
(in millions)    Infor, Inc.
(Parent)
     Infor (US), Inc.
(Subsidiary Issuer)
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations      Total
Consolidated
 

Net cash provided by (used in) operating activities

   $ —         $ 34.8      $ (7.8   $ 50.5      $ —         $ 77.5   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash flows from investing activities:

              

Acquisitions, net of cash acquired

     —           0.4        —          (0.7     —           (0.3

Change in restricted cash

     —           —          —          (1.6     —           (1.6

Purchases of property, equipment and software

     —           (5.3     (1.8     (1.3     —           (8.4
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in investing activities

     —           (4.9     (1.8     (3.6     —           (10.3
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash flows from financing activities:

              

Loans to stockholders

     —           —          —          —          —           —     

Payments on capital lease obligations

     —           (0.1     —          (0.5     —           (0.6

Proceeds from issuance of debt

     —           937.7        —          —          —           937.7   

Payments on long-term debt

     —           (933.5     —          —          —           (933.5

(Payments) proceeds from affiliate within group

     —           6.2        9.6        (15.8     —           —     

Deferred financing fees

     —           (11.9     —          —          —           (11.9
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) financing activities

     —           (1.6     9.6        (16.3     —           (8.3
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        —          —          0.2        —           0.2   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

     —           28.3        —          30.8        —           59.1   

Cash and cash equivalents at the beginning of the period

     —           89.5        —          332.4        —           421.9   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at the end of the period

   $ —         $ 117.8      $ —        $ 363.2      $ —         $ 481.0   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

32


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

Net cash provided by (used in) operating activities

   $ —         $ 26.3      $ 3.5      $ (3.6   $ —         $ 26.2   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash flows from investing activities:

              

Acquisitions, net of cash acquired

     —           —          —          (39.6     —           (39.6

Change in restricted cash

     —           —          —          0.4        —           0.4   

Purchases of property, equipment and software

     —           (5.9     (3.4     (1.0     —           (10.3
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash used in investing activities

     —           (5.9     (3.4     (40.2     —           (49.5
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash flows from financing activities:

              

Loans to stockholders

     —           (2.8     —          —          —           (2.8

Payments on capital lease obligations

     —           —          (0.1     (0.1     —           (0.2

Proceeds from issuance of debt

     —           —          —          —          —           —     

Payments on long-term debt

     —           (22.7     —          —          —           (22.7

(Payments) proceeds from affiliate within group

     —           (34.6     —          34.6        —           —     

Deferred financing fees

     —           —          —          —          —           —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net cash provided by (used in) financing activities

     —           (60.1     (0.1     34.5        —           (25.7
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     —           —          —          6.2        —           6.2   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

     —           (39.7     —          (3.1     —           (42.8

Cash and cash equivalents at the beginning of the period

     —           164.4        —          220.0        —           384.4   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Cash and cash equivalents at the end of the period

   $ —         $ 124.7      $ —        $ 216.9      $ —         $ 341.6