S-4 1 d390627ds4.htm FORM S-4 FORM S-4
Table of Contents

As filed with the Securities and Exchange Commission on August 23, 2012

No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

 

Infor (US), Inc.

Additional Registrants Listed on Schedule A Hereto

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7372   20-3469219

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

641 Avenue of the Americas

New York, NY 10011 (678) 319-8000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Gregory M. Giangiordano

Infor (US), Inc.

40 General Warren Blvd.

Suite 110

Malvern, PA 19355

(678) 319-8283

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

Joshua N. Korff, Esq.

Michael Kim, Esq.

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022-4675

(212) 446-4800

 

 

Approximate date of commencement of proposed sale of the securities to the public: The exchange will occur as soon as practicable after the effective date of this Registration Statement.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:    ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨

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 the definitions 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  (Do not check if a smaller reporting company)    Smaller reporting Company   ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of Securities

to be Registered

 

Amount

to be

Registered

 

Proposed Maximum

Aggregate

Offering Price(1)

 

Amount of

Registration Fee

11  1/2% Senior Notes due 2018

  $560,000,000   $560,000,000   $64,176.00

Guarantees of 11 1/2% Senior Notes due 2018

  (2)   (2)   (2)

9 3/8% Senior Notes due 2019

  $1,015,000,000   $1,015,000,000   $116,319.00

Guarantees of 9  3/8% Senior Notes due 2019

  (2)   (2)   (2)

10% Senior Notes due 2019

  €250,000,000   €250,000,000   $35,282.48(3)

Guarantees of 10% Senior Notes due 2019

  (2)   (2)   (2)

 

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act.
(2) Pursuant to Rule 457(n), no additional registration fee is payable with respect to the guarantees.
(3) The amount of registration fee was calculated based on the rate certified by the Board of Governors of the Federal Reserve System on August 17, 2012 of $1.2315 = €1.00.

The registrant hereby amends this Registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

Schedule A

 

Exact Name of

Additional Registrants

  

Jurisdiction of

Incorporation or

Formation

  

Primary Standard

Industrial

Classification Code

Number

  

I.R.S. Employer

Identification

Number

Infor, Inc.

   Delaware    7372    01-0924667

Infinium Software, Inc.

   Massachusetts    7372    04-2734036

Infor Enterprise Solutions Holdings, Inc.

   Georgia    7372    20-2597366

Infor (GA), Inc.

   Georgia    7372    74-3136648

Infor Global Solutions (Michigan), Inc.

   Michigan    7372    38-3489088

Seneca Acquisition Subsidiary Inc.

   Delaware    7372    20-0917084

EnRoute Emergency Systems LLC

   Delaware    7372    20-4533132

Infor Restaurant Systems LLC

   Delaware    7372    20-4533452

Trisyn Group, Inc.

   Delaware    7372    68-0560783

Hansen Information Technologies

   California    7372    94-2913642

 

* All guarantor registrants have the following principal executive office:

c/o Infor (US), Inc.

641 Avenue of the Americas

New York, NY 10011

(678) 319-8000


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion

Dated August 23, 2012

Prospectus

LOGO

Infor (US), Inc.

Exchange Offer for 11 1/2% Senior Notes due 2018, 9 3/8% Senior Notes due 2019 and 10% Senior Notes due 2019

Offering Price: 100%

Infor (US), Inc. is offering, upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, to exchange (i) an aggregate principal amount of up to $560,000,000 of the Issuer’s 11 1/2% Senior Notes due 2018 (which we refer to as the 2018 Exchange Notes) for an equal principal amount of the Issuer’s outstanding 11 1/2% Senior Notes due 2018 (which we refer to as the 2018 Original Notes), (ii) an aggregate principal amount of up to $1,015,000,000 of our 9 3/8% Senior Notes due 2019 (which we refer to as the 2019 Exchange Dollar Notes) for an equal principal amount of our outstanding 9 3/8% Senior Notes due 2019 (which we refer to as the 2019 Original Dollar Notes) and (iii) an aggregate principal amount of up to €250,000,000 of our 10% Senior Notes due 2019 (which we refer to as the 2019 Exchange Euro Notes, and collectively with the 2018 Exchange Notes and the 2019 Exchange Dollar Notes, the Exchange Notes) for an equal principal amount of our outstanding 10% Senior Notes due 2019 (which we refer to as the 2019 Original Euro Notes, and collectively with the 2018 Original Notes and the 2019 Original Dollar Notes, the Original Notes.)

Terms of the Exchange Offer

Expires 5:00 p.m., New York City time             , 2012, unless extended.

You may withdraw tendered outstanding Original Notes any time before the expiration or termination of the exchange offer.

Not subject to any condition other than that the exchange offer does not violate applicable law or any interpretation of the staff of the Securities and Exchange Commission.

We can amend or terminate the exchange offer.

We will not receive any proceeds from the exchange offer.

The exchange of Original Notes for the Exchange Notes should not be a taxable exchange for United States federal income tax purposes. See “Certain United States Federal Income Tax Considerations.”

Terms of the Exchange Notes

The Exchange Notes will rank senior in right of payment to all of our and the guarantor’s existing and future subordinated indebtedness and equal in right of payment with all of our and the guarantor’s existing and future senior indebtedness.

Infor, Inc., our parent company, and each of our existing and future domestic subsidiaries that guarantees our revolving credit facility and our term loan (collectively, the Credit Facilities) will unconditionally guarantee the Exchange Notes with guarantees that will rank equal in right of payment to all of the senior indebtedness of such guarantor and will rank senior to all of the future subordinated indebtedness of such guarantor.

The Exchange Notes will be effectively subordinated to all of our and the guarantor’s existing and future secured indebtedness, including amounts outstanding under our Credit Facilities, to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all obligations of our subsidiaries that do not guarantee the notes.

The 2018 Exchange Notes will mature on July 15, 2018 and the 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes will mature on April 1, 2019.

The 2018 Exchange Notes will accrue interest at a rate per annum equal to 11 1/2% and will be payable semi-annually on each July 15 and January 15, beginning on January 15, 2013.

The 2019 Exchange Dollar Notes will accrue interest at a rate per annum equal to 9 3/8% and will be payable semi-annually on each April 1 and October 1, beginning on October 1, 2012.

The 2019 Exchange Euro Notes will accrue interest at a rate per annum equal to 10% and will be payable semi-annually on each April 1 and October 1, beginning on October 1, 2012.

We may redeem the Exchange Notes in whole or in part from time to time. See “Description of the 2018 Exchange Notes” and “Description of the 2019 Exchange Notes.”

The terms of the Exchange Notes are substantially identical to those of the outstanding Original Notes, except the transfer restrictions, registration rights and additional interest provisions relating to the Original Notes do not apply to the Exchange Notes.

For a discussion of the specific risks that you should consider before tendering your outstanding Original Notes in the exchange offer, see “Risk Factors” beginning on page 22 of this prospectus.

We intend to apply to the Irish Stock Exchange Limited (the ISE) for the 2019 Exchange Euro Notes to be admitted to the Official List of the Irish Stock Exchange and traded on the Global Exchange Market, as the 2019 Original Euro Notes are. We do not intend to list the Exchange Dollar Notes on any securities exchange or automated quotation system.

Each broker-dealer that receives Exchange Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the Securities Act). A broker dealer who acquired Original Notes as a result of market making or other trading activities may use this prospectus, as supplemented or amended from time to time, in connection with any resales of the Exchange Notes. We have agreed that, for a period of up to 180 days after the closing of the exchange offer, we will make this prospectus available for use in connection with any such resale. See “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Exchange Notes or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                 , 2012.


Table of Contents

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities other than those specifically offered hereby or an offer to sell any securities offered hereby in any jurisdiction where, or to any person whom, it is unlawful to make such offer or solicitation. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or issuing the Exchange Notes.

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

     1   

RATIO OF EARNINGS TO FIXED CHARGES

     21   

RISK FACTORS

     22   

USE OF PROCEEDS

     35   

CAPITALIZATION

     36   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     37   

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     40   

EXCHANGE OFFERS

     44   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     56   

OUR BUSINESS

     94   

MANAGEMENT

     107   

COMPENSATION DISCUSSION AND ANALYSIS

     110   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     124   

DESCRIPTION OF OTHER INDEBTEDNESS

     125   

DESCRIPTION OF THE 2018 EXCHANGE NOTES

     129   

DESCRIPTION OF THE 2019 EXCHANGE NOTES

     190   

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     255   

PLAN OF DISTRIBUTION

     256   

LEGAL MATTERS

     257   

EXPERTS

     258   

WHERE YOU CAN FIND MORE INFORMATION

     259   

INDEX TO THE FINANCIAL STATEMENTS OF INFOR, INC. AND LAWSON SOFTWARE, INC.

     F-1   

 

i


Table of Contents

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of securities laws. You should not place undue reliance on these statements. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar expressions. 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. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions. Many factors could affect our actual financial results and could cause actual results to differ materially from those expressed in the forward-looking statements. Some important factors include:

 

   

uncertainties in the software industry;

 

   

changes in conditions in the combined company’s targeted customer industries;

 

   

the combined business’ ability to integrate operations and retain key personnel;

 

   

international sales and operations subject us to risks that can adversely affect our operating results;

 

   

we may experience foreign currency gains and losses;

 

   

changes in intellectual property laws which may disrupt or eliminate our certain anticipated revenue streams;

 

   

our products are deployed in large and complex systems and may contain defects or security flaws or be implemented incorrectly;

 

   

changes in the demand for our enterprise software and related services, particularly in light of competitive offerings;

 

   

if open source software expands into enterprise software applications, our software license revenues may decline;

 

   

the timely availability and market acceptance of new products and upgrades;

 

   

the impact of competitive products and pricing;

 

   

the discovery of undetected software errors;

 

   

the combined business’ ability to realize the cost savings and operating efficiencies anticipated from the exchange offer;

 

   

changes in the financial condition of the combined business’ major commercial customers;

 

   

the combined business’ future ability to continue to develop and expand its product and service offerings to address emerging business demand and technological trends;

 

   

natural disasters, military conflicts and acts of terrorism; and

 

   

other risk factors listed in the section of this prospectus entitled “Risk Factors.”

In light of these risks, uncertainties and assumptions, the forward-looking statements contained in this prospectus might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 

ii


Table of Contents

INDUSTRY AND MARKET DATA

This prospectus includes industry data that we obtained from periodic industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable. Neither we nor the initial purchasers have independently verified any of the data from third-party sources nor have we or the initial purchasers ascertained the underlying economic assumptions relied upon therein.

 

iii


Table of Contents

PROSPECTUS SUMMARY

This summary highlights material information about our business and about this exchange offer. This is a summary of material information contained elsewhere in this prospectus and is not complete and does not contain all of the information that may be important to you. For a more complete understanding of our business and this offering, you should read this entire prospectus, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the audited consolidated financial statements and related notes thereto, each of which are included elsewhere in this prospectus.

Unless otherwise indicated or the context requires otherwise, the following defined terms apply: References in this prospectus to “we,” “our,” “us,” “Infor and “the Company” refer to Infor, Inc. and its consolidated subsidiaries, including Infor (US), Inc., the issuer of the notes offered hereby. References to the “Issuer” refer to Infor (US), Inc. alone, and references to “Reporting Parent” refer to Infor, Inc. alone. References to “Lawson” refer to Lawson Software, Inc. as it existed prior to it becoming part of the Company. References in this prospectus to “fiscal year” are to the Company’s fiscal year ending May 31 of that year.

In the fourth quarter of fiscal 2012, we completed the combination of Lawson and the operating subsidiaries of Infor Global Solutions Intermediate Holdings Limited.

Our Company

We are the world’s third-largest provider of enterprise business applications software and services. 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 & retail and hospitality industries. 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 verticals. In addition to providing software products, we help our customers implement and use our applications more effectively through our consulting services. We also provide on-going support and maintenance services for our customers through our subscription-based annual maintenance and support programs.

We serve a large, diverse and sophisticated customer base of over 70,000 customers world-wide. Our customers range from Fortune 500 enterprises to medium-sized businesses. Our market leadership in key verticals, including manufacturing, distribution, healthcare, public sector, automotive, service industries, ESM&R, consumer products and retail software, and hospitality software, results from the fact that we serve many of the largest and most well-known customers in those verticals. For example, 59 of the 100 largest U.S. hospitals, 19 of the 20 largest aerospace companies, 12 of the 13 largest high-tech companies, 82 of the top 100 automotive suppliers and the 10 largest pharmaceutical companies use our software products.

 

 

1


Table of Contents

We serve customers across three geographic regions: the Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific (APAC). We have over 12,400 employees worldwide and have offices in over 38 countries. We offer our software in 31 languages, and we intend to continue to translate our systems as we enter into new geographical markets. This worldwide coverage provides us with both economies of scale and the ability to leverage our geographical expertise to effectively enter new markets and segments. We generated revenues of approximately 55% from the Americas, approximately 35% from EMEA and approximately 10% from APAC in the fiscal year 2012. Though we have a considerable presence outside of the U.S. today, we believe we have significant opportunities to expand internationally and capture market share, especially in the EMEA and APAC regions.

We generate most of our revenue through sales of the following offerings: (1) software licenses; (2) maintenance, which refers to our subscription-based services through which customers have access to product updates and technical support for products they license from us; and (3) consulting services. We market and sell our software and services primarily through a direct sales force, which is augmented by systems integrators and resellers.

Our Competitive Strengths

We believe we have the following competitive strengths:

 

   

Strong Market Position in Targeted Verticals. Our products have scale, specialization, depth and a strong market position in a number of our targeted verticals, including manufacturing, distribution, healthcare, public sector, automotive, ESM&R, service industries, consumer products and retail, and hospitality. For example, in manufacturing, our largest vertical, our customers include 19 of the 20 largest aerospace companies, 12 of the 13 largest high-tech companies, and 82 of the top 100 automotive suppliers. Our software is used by over 4,700 machinery manufacturers and 8 of the top 15 electrical distributors. In healthcare, our second largest vertical, our customers include 8 of the top 10 U.S. integrated delivery networks (IDNs) according to a 2010 independent report. In our other targeted verticals, we have similarly strong positions, counting over 1,200 state and local governments and 26 of the largest 35 global retailers as our customers.

 

   

Product Portfolio with Vertical Focus that Creates Attractive Total Cost of Ownership for Customers. We believe that our vertically specialized products generally have a lower total cost of ownership than those of our largest competitors. Industry-specific product functionality drives less required customization in our products, which we believe results in lower implementation and upgrade costs, as well as a lower cost of maintenance for our customers. We believe our cost advantage is further enhanced by our flexible approach to middleware and hardware. Our light-weight middleware and business vault technology, ION is built on open standards and allows customers to connect and analyze the data from numerous applications, including those from our company and third parties. We also seek to provide value for our customers through our advanced portfolio of horizontal applications, including our CRM, EAM, financial applications, HCM and SCM suites, which can be bundled together and integrated with our core ERP offering or sold on an individual basis to customers who do not utilize our ERP products.

 

   

Base of Recurring and High-Margin Revenue that Drives Visibility and Stability with Minimal Capital Expenditure Requirements. Our customers are often reluctant to change enterprise software vendors because full enterprise software suite implementations are disruptive, time consuming and require large initial outlays of financial and human resources. Our industry-specific software products are deeply embedded in our customers’ everyday business processes. Our continued investment in our products and services, our product development emphasis on products that are versatile and adaptable to other software and platforms that complement our offerings, together with our focus on customer service and support, have resulted in high renewal rates. In addition, our business is not capital-intensive.

 

 

2


Table of Contents
   

Large Scale with a Diversified Base of Customers, Geographies and Industries. We are the third-largest enterprise software company in the world, after Oracle and SAP. We serve over 70,000 customers, ranging from Fortune 500 enterprises to mid-sized businesses. Our revenue base is geographically diverse. Of our fiscal year 2012 revenues, approximately 55% was from the Americas, approximately 35% was from EMEA and approximately 10% was from APAC. Our strong presence in numerous industry verticals and the mission-critical nature of our products helps to diversify and mitigate the risk of industry-specific and cyclical downturns.

 

   

Complementary Products Create Compelling Cross-Selling Opportunities. We expect to realize significant cross-selling opportunities among our broad array of product offerings and enhanced focus of the sales effort on our product portfolio. For example, our distribution products were historically sold to customer bases in different geographies with almost no overlap. Within our public sector vertical, some of our public sector products focus on asset management and constituent interaction, including service requests, permitting, licensing and utilities, whereas other public sector products provide governments with back-office systems that help control spending via procurement, financial and human resources (HR) applications. In general, we believe there is significant opportunity to leverage greater cross-sale activity among our various business units and we continue to identify new synergies with respect to products we develop and acquire as they are integrated into our existing businesses.

 

   

Experienced Management Team and Strong Sponsorship. Our management team is comprised of industry executives with extensive operational, strategic, financial and legal experience. We are led by our CEO Charles Phillips, a seasoned executive who was formerly President of Oracle, where he led Oracle’s field organization and oversaw revenue growth of over 180% during his seven-year tenure. Mr. Phillips played a key role in the success of many of Oracle’s acquisitions, including, among others, BEA Systems, Hyperion Solutions and Siebel Systems. Since joining Infor in December 2010, Mr. Phillips and his team have transformed Infor into a product-led organization, increasing investment in research and development while maintaining strong margins. Mr. Phillips manages a deep team of senior executive talent, including: Co-President, Products and Support, Duncan Angove, with over 20 years of management experience from Oracle and Retek; Co-President, Global Field Operations and former CEO of the Issuer, Stephan Scholl, a 15-year industry veteran from Lawson, Oracle and PeopleSoft; CFO and Kevin Samuelson, a leader at Infor and the Issuer for 10 years. Additionally, our principal stockholders, investment funds affiliated with Golden Gate Capital and investment funds affiliated with Summit Partners, L.P. (Summit Partners and, together with Golden Gate Capital, the Sponsors), provide ongoing support and advice to our management team. We believe we can draw on the Sponsors’ experience and expertise as two of the most active investors in the technology industry, having collectively invested in or acquired more than 275 technology companies since their respective inceptions in 2000 and 1984.

Our Strategy

We are focused primarily on medium and large-sized enterprise customers that require advanced software products and services designed specifically for their needs. The principal features of our strategy are:

 

   

Provide Unique, Vertically-Focused Software Products. We believe that businesses in our target markets are increasingly taking advantage of information technology to manage their operations more effectively. Our enterprise software products are developed to meet the specific needs of customers in our targeted verticals and generally enable customers to have functionality tailored to the unique needs of their markets. We intend to continue the design, development and deployment of industry-specific products and technologies that maximize ease-of-use and provide a lower total cost of ownership for customers by saving them time and resources during implementation. To maximize the benefits of our

 

 

3


Table of Contents
 

industry-specific solutions, we plan to complement our industry expertise through our professional services organization and strategic relationships with key partners.

 

   

Maintain Technology Innovation and Development Leadership. We intend to continue focusing on core products and technologies that provide value to our customers and sustain our competitive advantage. With the release of Infor10® in 2011, we offer customers a common, consumer-grade user interface across best-in-class industry solutions and applications. Our recently developed light-weight middleware technology, ION, coupled with Infor10 applications, will continue to simplify implementation and inter-operability for our customers. ION has also enabled us to partner with Salesforce.com (Salesforce) and provide a more complete back-end (ERP) to front-end (CRM) solution to our respective customers. In addition, our cloud products deliver an integrated application suite hosted on multi-tenant servers. Our industry-leading model offers flexible hybrid deployment capabilities allowing them to run our software on-premise, on a hosted basis or in the cloud, using the same product.

 

   

Deliver Industry-Leading Productivity and Maintain Profitability. We will continue to capitalize on our best-in-class industry solutions and cutting-edge technology to continue to attract and retain customers. Our vertical approach and continued focus on maintaining technological leadership will allow us to optimize maintenance retention rates and leverage our domain expertise, enhancing the value of our consulting services, to help us maintain historical levels of profitability. Our continued focus on maintaining productivity and efficiency is shaped by the expertise of our world-class management team and experience of the Sponsors in partnering with portfolio company management teams in numerous acquisitions where productivity and profitability were optimized.

Our Products and Services

We design, develop, market, sell, implement and support enterprise business software applications that provide our customers with highly functional and technically advanced products. We believe we offer a compelling choice to many enterprise software customers and that we have developed competitive advantages in serving our targeted industries. We offer both vertical-specific and horizontal software products. We also believe we offer a number of flexible deployment options for customers, allowing them to run our software on-premise, on a hosted basis or in the cloud using the same product.

Enterprise Resource Planning (ERP)

Our ERP applications help customers in targeted industries cut costs, improve operational efficiency, and make smarter decisions faster. Our offerings are specifically designed to meet the needs of customers in the manufacturing, distribution, healthcare, automotive, public sector, ESM&R and other services and/or trade-oriented businesses and include the following suites:

ERP Enterprise (LN). Software designed to manage the demands of larger, multi-site businesses with complex manufacturing and distribution environments. Key products include Financial Management, CRM, Order Management, SCM, Manufacturing Control, Sourcing & Procurement, Project Management, Quality Management and Service Management.

S3 ERP Enterprise. Software designed to help customers “staff, source and serve” in their respective markets. Key products are specifically designed to serve the healthcare, public sector and other services industries and include financial management, SCM, and services management.

M3 ERP Enterprise. Software designed to help customers who “make, move and maintain” goods or equipment in their markets. Key products include Financial Management, Manufacturing Operations, SCM, Enterprise Asset Management and Customer Sales & Service.

 

 

4


Table of Contents

ERP Business (Syteline®). Software designed to provide discrete manufacturing customers with the foundation to improve business efficiency, customer service, and overall manufacturing productivity. Key products include CRM, Sales & Order Management, Services Management, HCM, Financial Management, Production Management, SCM, Enterprise Planning and Master Data Management.

ERP Express (Visual®). Software designed for order-driven manufacturers who desire an affordable, easy-to-implement system that provides multiple scheduling options. Key products include Advanced Planning and Scheduling, Manufacturing Execution System, CRM, Quality Management, Lean Scheduling, Project Management, Financials and Dashboard.

ERP Process Business (Adage). Software designed for manufacturers in the food and beverage, chemical, and pharmaceutical industries, where bill of material-based software cannot model operations. Key products include CRM, Customer Demand Planning, Pricing & Order Management, Product Lifecycle Management, Asset Management, Financials, Production Planning, Production & Costing, Production Scheduling, Procurement, Warehouse & Inventory Management and Quality Management.

Customer Resource Management (CRM)

Our CRM applications help users build deep relationships with their customers and improve service. This software is designed to help users react quickly, intelligently, and personally to customer interactions; plan, execute, and monitor outbound marketing campaigns; and convert customer leads into sales. Key products include CRM Enterprise Interaction Advisor, CRM Enterprise Outbound Marketing, CRM Enterprise Sales and CRM Enterprise Service.

Our strategic partnership with Salesforce tightly integrates Salesforce’s Sales and Services applications with Infor’s ERP and financial applications to create a powerful enterprise solution that spans the entire customer lifecycle. In addition to reselling Salesforce Sales Cloud and Salesforce Service Cloud, the Company developed native applications as part of the offering.

Enterprise Asset Management (EAM)

Our EAM applications help our customers keep their plant, equipment, and facilities available, reliable, and safe. The software is designed to help customers monitor, and manage the deployment, performance, and maintenance of company assets to eliminate operational downtimes and reduce costs, as well as provide customers with financial and physical controls required to control their energy consumption and the asset and operating infrastructure that underpins them. Key products include Asset Hierarchy Management, Budget Management, Inspection Management, Purchasing Management, Work Management and Materials Management, Analytics and Action Engine, Real-time Performance Data, Knowledge Base and Continuous Monitoring.

Financial Applications

Our financial applications help customers deliver timely, actionable financial information, enforce global financial standards and controls, and improve business transparency. This software is designed for budgeting, forecasting, financial reporting, expense management, and compliance. Key products include Accounts Receivable, Budgeting, Cost Accounting, Cash Flow Management, General Ledger, Product Cost, Risk Management, Project Accounting, Grant Management, Governance, Risk, and Compliance, and Expense Management.

 

 

5


Table of Contents

Human Capital Management (HCM)

Our comprehensive HCM product line enables our customers to manage their workforce and transform the role of the HR professional from an administrative and policy enforcing role to that of a strategic business partner. Offerings include:

Talent Management. Software designed to manage, develop and retain employees. Key products include Talent Acquisition, Goal Management, Performance Management, Compensation Management, Learning and Development, Succession Management and Global Human Resources.

Human Resource Management. Software designed to manage the HR processes related to employees. Key products include Absence Management, Benefits Administration, e-Recruiting, Employee and Manager Self-Service, Human Resources, Payroll, Performance Management for Healthcare, Personnel Administration, Resource Navigator, Teacher Contract Administration and TalentView of Performance.

Workforce Management. Software designed to automate time-intensive staffing and scheduling tasks. Key products include Scheduling and Staffing, Scheduling and Staffing for Casinos, Scheduling and Staffing for Healthcare and TimeOff Planner for Healthcare.

Supply Chain Management (SCM)

Our SCM applications are designed to help customers manage their entire supply chain including designing, forecasting, planning and execution. Key products include Sales & Operations Planning, Demand Planning, Advanced Planning, Advanced Scheduling, SCM Network Design, Enterprise Planning, Supply Chain Execution, Transportation and Logistics Planning, WMS and Enterprise Scheduling.

ION

Our innovative ION technology is an easy-to-implement, low-cost middleware component that enables customers to connect various applications and share information across many sources and systems. Our ION products are designed to enable communication and secure sharing of data across on-premise and cloud applications, to monitor the status of business tasks in relation to promised completion or established service level agreements (SLAs), to automatically receive alerts about exceptions and potential non-compliance and to automate document routing and approvals via workflows across multiple applications. Key products include ION Connect, ION Business Vault, ION Event Management and ION Workflow.

Industry-Specific Software Products

Our industry-specific enterprise software suites are tailored to meet the specific conditions and requirements of individual industries. We target specific industries, including manufacturing, healthcare, distribution, software, public sector, automotive, service industries, ESM&R, consumer products and retail, and hospitality. Within our target industries, our products are tailored to provide rich functionality at a micro-vertical level. We believe an industry-specific focus is fundamental to our ability to help our customers achieve their desired results and derive greater value from their enterprise software investments.

A brief overview of our industry-specific software products is provided below:

Manufacturing. Our manufacturing software helps our customers manage fluctuating demand and costs. Our software covers many of the core and supporting areas that a manufacturing company needs, from initial forecasting, material and capacity planning through to production planning and warehouse management. Our easy-to-use tools and web-enabled technologies help our customers collaborate more effectively across their organizations and supply chain partners and better serve their customers. Features

 

 

6


Table of Contents

include, among others, powerful planning tools, support for lean manufacturing such as orderless production, advanced warehouse and logistics software products and integrated mobile solutions.

Healthcare. We offer a wide range of healthcare software products that provide end-to-end support to our customers’ business operations. Healthcare is our second-largest vertical, where we enjoy a market leadership position, with an approximate 55% share of the U.S. IDNs market and with 8 of the top 10 largest U.S. IDNs according to a 2010 independent report.

Distribution. Our distribution software products are designed to provide our customers with visibility and control to help manage high volumes, thin margins and wide product assortments. Features of our distribution software products include, among others, advanced order promising at point-of-sale, support for multi-channel sales, ability to handle supply and product diversity, auto balancing of stock across facilities and integrated route management.

Public Sector. Our public sector software is designed for organizations that serve the public. We invest in industry expertise and consult best practices in the government, education, public authorities and utilities industries. Our focus on the public sector allows us to enable our customers to serve the public in a personal, responsive and cost-effective fashion. Our public sector focused products are designed to fit most needs without unwanted functionality.

Automotive. Our automotive software is designed to meet the unique demands of the automotive manufacturing industry including original equipment manufacturers (OEMs), automotive tier suppliers, specialty vehicle manufacturers, manufacturers of licensed brand components, aftermarket service and specialty parts manufacturers, and companies that remanufacture complex parts. Features include powerful planning tools, support for lean manufacturing such as orderless production, advanced warehouse and logistics software products.

Service Industries. Our service industries’ software serves a wide variety of service-based organizations such as insurance companies, banks, airlines, shipping companies, casinos, religious institutions, utilities and professional service organizations. Our software offers both integrated products that are tailored to meet the needs of specific industries and a series of configurable components for planning, executing and controlling production in different environments.

Equipment Service, Management & Rental. ESM&R is software designed for equipment manufacturers, distributors and rental companies who focus on after-sales service and continuous customer care. Key products include Equipment and Component Control, Preventative Maintenance, Work Order Processing, Maintenance and Performance Costing, Maintenance Customer Order Processing, Maintenance Planning Board, Diagnostics Management and Vehicle Operations Management.

Consumer Products & Retail. A comprehensive enterprise software system for retail companies. This software product offers our retail customers tools to help them improve profits and combat charge-backs. It also helps them gain greater control over their margins, products and relationships throughout the supply chain. Additionally, this software product helps companies to identify and quantify, in advance, potential business process improvements and helps prioritize improvement opportunities within their business.

Hospitality. Our hospitality software products are used by more than 10,000 hospitality properties worldwide, including some of the world’s most recognizable hotels, resorts and gaming facilities. These software products are suitable for a hospitality property of any type and size, including global chains, smaller chains, independent hotels or motels and government lodging. Our software products help our customers manage their front-office tasks, reservations, housekeeping, sales and marketing, accounting, engineering and many other tasks.

 

 

7


Table of Contents

Maintenance and Support Services

Our maintenance and technical support programs include software upgrades, updates and corrections for the software under maintenance, as well as various levels of technical support including access to our knowledge base and our product support team, technical advice and application management. These programs are comprehensive customer care programs which entitle our customers to various levels of support to meet their specific needs. Our maintenance and technical support offerings are delivered through the support organization operating from our support centers around the world.

Consulting Services

Our consulting services range from the initial assessment and planning of a project to the actual implementation and post-implementation of a project, including optimizing a customer’s use of its software. We also provide training and learning tools to help our customers become proficient in using our software quickly and effectively.

Cloud Products

Our cloud products deliver an integrated application suite hosted on our multi-tenant servers. Our industry-leading model offers a flexible hybrid model, where some functionality is served on-premise and some functionality is served from the cloud, providing customers with the flexibility and adaptability that they need. Our cloud products are served from state-of-the-art industrial data centers and deliver enterprise-level functionality for ERP, CRM, EAM, Property Management, Expense Management, Hospitality Management, and Workforce Management.

We offer two different cloud-based payment options, as well as standard on-premise deployment and dedicated hosting options. These choices include a software-as-a-service (SaaS) subscription option, where we host customers’ applications on our multi-tenant servers, and they receive pay-as-you go term licenses that enable flexibility for on-demand software, as well as a hosted license option, where the customer purchases a perpetual software license, and we host the applications on our multi-tenant platform.

Our Industry

The enterprise application software industry is competitive, rapidly changing and significantly affected by new product offerings and other market activities. While traditional ERP products focused on “back-office” transactional activities, such as accounting, order management and inventory control, enterprise applications have expanded their focus to include managing customer interactions, managing supply chain and automation of and support for a range of administrative and operational business processes across multiple industries. According to Gartner, Inc., (Gartner), the world-wide enterprise applications industry was an approximately $115 billion revenue market in 2011, and is forecasted to grow at a compounded annual growth rate of 7% per annum from 2011 to 2016.

Our target market segments include ERP (including HCM and Financial Management), SCM, CRM and BI. According to Gartner, our target markets cumulatively represented approximately $55 billion of revenues or 48% of the world-wide enterprise applications market in 2011. Of our target market revenues, ERP represented 43%, CRM and BI each represented 22% and SCM represented 14% in 2011.

 

 

8


Table of Contents

The Sponsors

Golden Gate Capital

Golden Gate Capital is a leading private equity firm with $12 billion in committed capital under management. Golden Gate Capital partners with world-class management teams to make equity investments in situations where there is a demonstrable opportunity to significantly enhance a company’s value through analytically challenging, change-intensive investments. Golden Gate Capital partners with exceptional management teams to capitalize upon and catalyze change.

Golden Gate Capital’s approach to investing and adding value to its portfolio companies is founded upon the rigorous application of fact-based analysis to understand, drive and implement strategic and operational change. Golden Gate Capital’s principals have successfully used this analytical approach, their substantial transaction structuring experience and their ability to add value to investments to generate superior returns.

Golden Gate Capital is one of the most active software investors in the world, having invested in or acquired more than 75 technology companies since its inception in 2000. Golden Gate Capital’s current portfolio of software companies had combined revenues in 2011 of approximately $5 billion.

Notable current software investments include: Aspect Software, a provider of contact center and unified communications software and services; The Attachmate Group, a software holding company that operates under four business units including Attachmate, Novell, SUSE Linux and NetIQ; GXS, a global provider of B2B e-commerce software and services; and Symon, a provider of real-time data reporting, visualization and enterprise software and services.

Summit Partners

Summit Partners is a leading growth equity firm founded in 1984, and provides equity and credit for growth, recapitalizations and management buyouts. Since the firm’s inception, Summit Partners has raised nearly $15 billion in capital, and has invested in more than 350 growing businesses across a range of industries in North America, Europe and Asia. These companies have completed more than 125 successful public offerings and in excess of 130 strategic sales and mergers. Summit Partners’ strategy is to partner with outstanding management teams that have built their companies to market leadership, and then support and aid growth through strategic advice and institutional knowledge gained over the past 28 years. With offices in Boston, Palo Alto, London and Mumbai, Summit Partners has a worldwide presence and invests across the globe.

Summit Partners is particularly active in the technology sector, having made investments in more than 200 technology companies, including nearly 100 software companies. Summit Partners has helped build pioneering companies in the ERP, CRM, information and data security, antivirus, messaging management and archiving, and SaaS categories.

Notable software investments include AVAST Software, a market-leading provider of premium anti-virus software; Hyperion Solutions, a provider of business intelligence software (later acquired by Oracle); McAfee Associates, a pioneer in security software (later acquired by Intel); Meditech, a leading healthcare software provider; RightNow Technologies, a provider of web-based customer support software and services (later acquired by Oracle); and Unica Corporation, a provider of enterprise marketing management solutions (later acquired by IBM).

 

 

9


Table of Contents

Corporate Information

The Issuer was incorporated in June 1975 in the State of Minnesota. On February 12, 2011, the Issuer reincorporated under the laws of the State of Delaware. The Reporting Parent was incorporated on June 8, 2009 in the State of Delaware. Our principal executive offices are located at 641 Avenue of the Americas, New York, NY 10011 and our phone number is (678) 319-8000. Our website can be found at www.infor.com. Information on, or accessible through, our website shall not be deemed part of this prospectus.

 

 

10


Table of Contents

The Exchange Offer

The following is a brief summary of the terms of the exchange offers. For a more complete description of the exchange offers, see “Exchange Offers.”

 

Original Notes

$560,000,000 in aggregate principal amount of 11 1/2% Senior Notes due 2018.

 

  $1,015,000,000 in aggregate principal amount of 9 3/8% Senior Notes due 2019.

 

  €250,000,000 in aggregate principal amount of 10% Senior Notes due 2019.

 

Exchange Notes

$560,000,000 in aggregate principal amount of 11 1/2% Senior Notes due 2018, the issuance of which will be registered under the Securities Act.

 

  $1,015,000,000 in aggregate principal amount of 9 3/8% Senior Notes due 2019, the issuance of which will be registered under the Securities Act.

 

  €250,000,000 in aggregate principal amount of 10% Senior Notes due 2019, the issuance of which will be registered under the Securities Act.

 

Exchange Offer

The Issuer is offering to exchange the Original Notes for a like principal amount at maturity of the Exchange Notes. The 2018 Original Notes and the 2019 Original Dollar Notes may be exchanged only in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof. The 2019 Original Euro Notes may be exchanged only in minimum denominations of €100,000 and any integral multiple of €1,000 in excess thereof. The exchange offer is being made pursuant to registration rights agreements that the Issuer entered into with the initial purchasers (the Registration Rights Agreements), which grants the initial purchasers and any subsequent holders of the Original Notes certain exchange and registration rights. This exchange offer is intended to satisfy those exchange and registration rights with respect to the Original Notes. After the exchange offer is complete, holders of Original Notes will no longer be entitled to any exchange or registration rights with respect to their Original Notes.

 

Expiration Date; Withdrawal of Tender

The exchange offer will expire 5:00 p.m., New York City time, on                 , 2012, or a later time if the Issuer chooses to extend this exchange offer in its sole and absolute discretion. Holders of Original Notes may withdraw their tender of Original Notes at any time prior to the expiration date. All outstanding Original Notes that are validly tendered and not validly withdrawn will be exchanged. Any Original

 

 

11


Table of Contents
 

Notes not accepted for exchange for any reason will be returned at the Issuer’s expense as promptly as possible after the expiration or termination of the exchange offer.

 

Accrued Interest on the Exchange Notes and the Original Notes

The 2018 Exchange Notes will bear interest from January 15, 2013. The 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes will bear interest from October 1, 2012. Holders of Original Notes that are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on such Original Notes accrued to the date of issuance of the Exchange Notes.

 

Conditions on the Exchange Offer

The Issuer’s obligation to accept for exchange, or to issue the Exchange Notes in exchange for, any Original Notes is subject to certain customary conditions, including the Issuer’s determination that the exchange offer does not violate any law, statute, rule, regulation or interpretation by the Staff of the SEC or any regulatory authority or other foreign, federal, state or local government agency or court of competent jurisdiction, some of which the Issuer may be waive. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See “Exchange Offers—Conditions on the Exchange Offer.”

 

Procedures for Tendering Original Notes held in the Form of Book-Entry Interests

The Original Dollar Notes were issued as global securities and were deposited upon issuance with Wilmington Trust, National Association which issued uncertificated depositary interests in those outstanding Original Dollar Notes, which represent a 100% interest in those Original Dollar Notes, to The Depositary Trust Company (DTC).

 

  Beneficial interests in the outstanding Original Dollar Notes, which are held by direct or indirect participants in DTC, are shown on, and transfers of the Original Dollar Notes can only be made through, records maintained in book-entry form by DTC.

 

  The 2019 Original Euro Notes were issued as global securities and are held in book-entry form through Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”), which are participants in DTC.

 

  Holders may tender outstanding Original Notes by instructing their broker or bank to tender them on the holder’s behalf. In some cases a holder may be asked to submit the letter of transmittal that may accompany this prospectus. By tendering Original Notes a holder will be deemed to have acknowledged and agreed to be bound by the terms set forth under “Exchange Offer.” Outstanding 2018 Original Notes and 2019 Original Dollar Notes must be tendered in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof and outstanding 2019 Original Euro Notes must be tendered in minimum denominations of €100,000 and any integral multiple of €1,000 in excess thereof.

 

 

12


Table of Contents
  Holders of Original Notes through DTC: If you wish to exchange your Original Notes and either you or your registered holder hold your Original Notes in book-entry form directly through DTC, you must submit an instruction and follow the procedures for book-entry transfer as provided under “The Exchange Offer—Book-Entry Transfer.”

 

  Holders of Original Notes through Euroclear and Clearstream, Luxembourg: If you wish to exchange your Original Notes and either you or your registered holder hold your Original Notes in book-entry form directly through Euroclear or Clearstream, you should be aware that pursuant to their internal guidelines, Euroclear and Clearstream, Luxembourg will automatically exchange your Original Notes for Exchange Notes. If you do not wish to participate in the exchange offer, you must instruct Euroclear or Clearstream, as the case may be, to “Take No Action”; otherwise your Original Notes will automatically be tendered in the exchange offer, and you will be deemed to have agreed to be bound by the terms of the letter of transmittal.

 

  In order for a tender to be considered valid, the exchange agent must receive a confirmation of book-entry transfer of the outstanding Original Notes into the exchange agent’s account at DTC (in the case of the Original Dollar Notes) or Euroclear or Clearstream (in the case of the Original Euro Notes), under the procedure described in this prospectus under the heading “Exchange Offer,” on or before 5:00 p.m., New York City time, on the expiration date of the exchange offer.

 

United States Federal Income Tax Considerations

The exchange offer should not result in any income, gain or loss to the holders of Original Notes or to us for United States federal income tax purposes. See “Certain United States Federal Income Tax Considerations.”

 

Use of Proceeds

Neither the Issuer, nor the Reporting Parent, or any of their subsidiaries will receive any proceeds from the issuance of the Exchange Notes in the exchange offer.

 

Exchange Agent

Wilmington Trust, National Association is serving as the exchange agent for the exchange offer with respect to the Original Dollar Notes.

 

  Citibank, N.A., London Branch, is serving as the exchange agent for the exchange offer for the Original Euro Notes.

 

 

13


Table of Contents

Consequences of Not Exchanging Original Notes

If a holder does not exchange their Original Notes in the exchange offer, the Original Notes will continue to be subject to the restrictions on transfer currently applicable to the Original Notes. In general, a holder of Original Notes may offer or sell Original Notes only:

 

   

if they are registered under the Securities Act and applicable state securities laws;

 

   

if they are offered or sold under an exemption from registration under the Securities Act and applicable state securities laws; or

 

   

if they are offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.

We do not currently intend to register the Original Notes under the Securities Act. Under some circumstances, however, holders of the Original Notes, including holders who are not permitted to participate in the exchange offer or who may not freely resell Exchange Notes received in the exchange offer, may require the Issuer to file, and to cause to become effective, a shelf registration statement covering resales of Original Notes by these holders. For more information regarding the consequences of not tendering Original Notes and the Issuer’s obligation to file a shelf registration statement, see “Exchange Offers—Consequences of Failure to Exchange” and “Exchange Offers—Shelf Registration.”

 

 

14


Table of Contents

Terms of the Exchange Notes

 

Issuer

Infor (US), Inc.

 

Notes Offered

$560,000,000 in aggregate principal amount of 11 1/2% Senior Notes due 2018.

 

  $1,015,000,000 in aggregate principal amount of 9 3/8% Senior Notes due 2019.

 

  €250,000,000 in aggregate principal amount of 10% Senior Notes due 2019

 

Maturity Date

The 2018 Exchange Notes will mature on July 15, 2018.

 

  The 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes will mature on April 1, 2019.

 

Interest

Interest on the 2018 Exchange Notes will accrue at a rate of 11 1/2% per annum. Interest on the 2018 Exchange Notes will be payable semi-annually in cash in arrears on July 15 and January 15 of each year, commencing January 15, 2013.

 

  Interest on the 2019 Exchange Dollar Notes will accrue at a rate of 9 3/8% per annum. Interest on the Exchange Notes will be payable semi-annually in cash in arrears on April 1 and October 1 of each year, commencing October 1, 2012.

 

  Interest on the 2019 Exchange Euro Notes will accrue at a rate of 11 1/2% per annum. Interest on the 2019 Exchange Euro Notes will be payable semi-annually in cash in arrears on April 1 and October 1 of each year, commencing October 1, 2012.

 

Guarantees

The Exchange Notes will be fully and unconditionally guaranteed on a senior basis by the Reporting Parent, and fully and unconditionally guaranteed by certain of our existing and future domestic restricted subsidiaries.

 

Ranking

The Exchange Notes and the guarantees will be the Issuer’s and the guarantors’ general senior obligations and will:

 

   

rank equally in right of payment to all of the Issuer’s and the guarantors’ existing and future senior unsecured debt;

 

   

rank senior in right of payment to any of the Issuer’s and the guarantors’ future debt that is expressly subordinated in right of payment to the notes and the guarantees;

 

   

be effectively subordinated to the Issuer’s and the guarantors’ secured indebtedness, including indebtedness under the Credit Facilities, to the extent of the value of the collateral securing such indebtedness; and

 

 

15


Table of Contents
   

be structurally subordinated to all of the existing and future liabilities, including trade payables, of our subsidiaries that do not guarantee the notes.

 

  As of May 31, 2012, the Issuer and the guarantors would have had approximately $5,358.6 million of indebtedness outstanding and an additional $146.2 million of unused commitments available to be borrowed under the revolving credit facility.

 

  As of May 31, 2012, the Issuer’s non-guarantor subsidiaries had $809.6 million of outstanding liabilities, including trade payables but excluding inter-company obligations. For the year ended May 31, 2012, the Issuer’s non-guarantor subsidiaries generated 48% of its total revenues.

 

Optional Redemption

The 2018 Exchange Notes will be redeemable, in whole or in part, at any time on or after July 15, 2015 at the redemption prices specified under “Description of the 2018 Exchange Notes—Optional Redemption.” Prior to such date, the Issuer may redeem some or all of the 2018 Exchange Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus a “make whole” premium. The Issuer may also redeem up to 35% of the 2018 Exchange Notes before July 15, 2014, with the net cash proceeds from certain equity offerings.

 

  The 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes will be redeemable, in whole or in part, at any time on or after April 1, 2015 at the redemption prices specified under “Description of the 2019 Exchange Notes—Optional Redemption.” Prior to such date, the Issuer may redeem some or all of the 2019 Exchange Dollar Notes or the 2019 Exchange Euro Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus a “make whole” premium. The Issuer may also redeem up to 35% of the 2019 Exchange Dollar Notes or the 2019 Exchange Euro Notes before April 1, 2015, with the net cash proceeds from certain equity offerings.

 

Change of Control

If the Issuer experiences certain kinds of changes of control, the Issuer must offer to purchase the notes at 101% of their principal amount, plus accrued and unpaid interest. For more details, see the sections “Description of the 2018 Exchange Notes” and “Description of the 2019 Exchange Notes” under the headings “Change of Control.”

 

Mandatory Offer to Repurchase Following Certain Asset Sales

If the Issuer sells certain assets and does not repay certain debt or reinvest the proceeds of such sales within certain time periods, it must offer to repurchase the notes at the prices listed under “Description of the 2018 Exchange Notes—Limitation on Sales of Assets and Subsidiary Stock” and “Description of the 2019 Exchange Notes—Limitation on Sales of Assets and Subsidiary Stock.”

 

 

16


Table of Contents

Certain Covenants

The indentures governing the notes (the Indentures) limits, among other things, our ability and the ability of Parent and our restricted 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.

 

  These covenants are subject to a number of important qualifications and limitations. See “Description of the 2018 Exchange Notes—Certain Covenants” and “Description of the 2019 Exchange Notes—Certain Covenants.”

 

No Prior Market

The Exchange Notes will be a new class of securities for which there is currently no market. Although each initial purchaser of Dollar Notes has informed us that it intends to make a market in the Dollar Notes and each initial purchaser of Euro Notes has informed us that it intends to make a market in the Euro Notes, the initial purchasers are not obligated to do so, and may discontinue market-making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the Exchange Notes will develop or be maintained. We do not intend to list the Exchange Dollar Notes on any U.S. securities exchange. Application will be made to list the Euro Exchange Notes on the Official List of the Irish Stock Exchange and to admit the 2019 Euro Exchange Notes to trading on the Global Exchange Market. There are no assurances that the Euro Exchange Notes will be admitted to the Official List of the Irish Stock Exchange.

 

Use of Proceeds

Neither the Issuer, the Reporting Parent or any of their subsidiaries will receive any proceeds from the issuance of the Exchange Notes pursuant to the exchange offer.

 

Risk Factors

You should consider carefully all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors discussed in the section entitled “Risk Factors” before deciding to invest in the notes.

 

 

17


Table of Contents

Summary Historical Consolidated and Unaudited Pro Forma Combined Financial Data

The following table sets forth summary historical consolidated financial data for the periods and at the dates indicated. The historical consolidated statements of operations data for the years ended May 31, 2012, 2011 and 2010 and the balance sheet data as of May 31, 2012 and 2011 have been derived from audited consolidated financial statements and the notes thereto, which are included elsewhere in this prospectus. The consolidated financial statements of Infor include the accounts of Lawson, from its acquisition date on July 5, 2011. All significant intercompany balances have been eliminated. The historical results included below and elsewhere in this prospectus are not necessarily indicative of future performance.

The following tables also set forth unaudited pro forma combined financial data for the year ended May 31, 2012. The following pro forma combined financial data has been developed by applying pro forma adjustments to the historical audited consolidated financial statements of Infor, included elsewhere in this prospectus. The unaudited pro forma combined statement of operations presents the acquisition of Lawson and sale of the Original Notes as if both had occurred on June 1, 2011. The unaudited pro forma combined financial data has been prepared in accordance with Article 11 of Regulation S-X, with the period from June 1, 2011 to July 4, 2011 adjusted to reflect the acquisition of Lawson as of June 1, 2011 (reflecting pro forma adjustments for amortization of acquired intangible and transaction costs associated with the acquisition), also being adjusted for the effects of the sale of the Original Notes (reflecting adjustments for additional equity contributions, refinancing of long-term debt, interest expense, amortization of deferred financing fees, and the tax effect of the pro forma adjustments). As the Lawson acquisition and the sale of the Original Notes are all reflected in the historical audited consolidated balance sheet at May 31, 2012, no pro forma balance sheet is necessary.

The summary historical consolidated and unaudited pro forma combined financial data presented below should be read together with the audited consolidated financial statements and the notes thereto, which are included elsewhere in this prospectus, and the sections entitled “Selected Historical Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Combined Financial Information.”

 

 

18


Table of Contents
     Year Ended May 31,  
(in millions )    Pro Forma
2012
    2012(1)     2011     2010(2)  

Consolidated Statements of Operations Data:

        

Revenues:

        

License fees

   $ 511.1      $ 505.3      $ 367.9      $ 339.5   

Product updates and support fees

     1,321.5        1,284.4        995.8        1,000.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     1,832.6        1,789.7        1,363.7        1,339.5   

Consulting services and other fees

     771.2        751.0        510.0        497.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,603.8        2,540.7        1,873.7        1,836.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Cost of license fees

     90.9        90.1        65.6        56.7   

Cost of product updates and support fees

     266.2        258.5        204.0        211.4   

Cost of consulting services and other fees

     620.5        593.9        384.0        371.9   

Sales and marketing

     458.4        438.7        335.1        320.3   

Research and development

     335.8        322.3        207.4        199.1   

General and administrative

     253.6        233.4        185.5        196.2   

Amortization of intangible assets and depreciation

     335.7        323.6        237.3        275.5   

Restructuring

     67.8        67.8        14.9        28.8   

Acquisition related and other costs

     —          75.9        6.2        17.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,428.9        2,404.2        1,640.0        1,677.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     174.9        136.5        233.7        159.0   

Total other expense, net

     321.7        462.8        424.9        209.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (146.8     (326.3     (191.2     (50.8

Income tax (benefit) provision

     52.0        (16.3     (50.8     44.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (198.8   $ (310.0   $ (140.4   $ (95.4
  

 

 

   

 

 

   

 

 

   

 

 

 
           As of May 31,        
(in millions )          2012     2011        

Consolidated Balance Sheet Data:

        

Cash and cash equivalents

     $ 384.4      $ 337.0     

Working capital deficit

       (526.0     (252.6  

Total assets

       6,555.0        4,680.0     

Total debt, including current maturities(3)

       5,358.6        4,384.4     

Due to affiliate(4)

       —          329.8     

Total stockholders’ deficit

       (599.1     (1,200.9  

Other Financial Information:

        

Capital expenditures

     $ (21.5   $ (11.9  

Dividends paid

       —          (40.0  
     Year Ended May 31,  
(in millions )    Pro Forma
2012
    2012     2011     2010  

Reconciliation of net loss to Adjusted EBITDA:

        

Net loss

   $ (198.8   $ (310.0   $ (140.4   $ (95.4

Interest expense, net

     428.5        467.4        314.0        306.2   

Income tax provision (benefit)

     52.0        (16.3     (50.8     44.6   

Depreciation and amortization

     335.7        323.6        237.3        275.5   

Purchase accounting impact — License fees(5)

     26.1        25.5        2.1        3.1   

Purchase accounting impact — Product updates and support fee(5)

     122.6        122.6        0.2        0.4   

Purchase accounting impact — Consulting(5)

     6.9        6.8        0.1        —     

Purchase accounting impact — Deferred costs(5)

     (6.5     (6.5     —          —     

Stock-based compensation(6)

     41.8        11.2        1.4        0.2   

 

 

19


Table of Contents
     Year Ended May 31,  
(in millions )    Pro Forma
2012
    2012(1)     2011      2010(2)  

Consolidated Statements of Operations Data:

         

Acquisition transaction and integration costs

     —          75.9        6.2         17.7   

Non-recurring costs(7)

     18.6        18.6        7.7         18.4   

Restructuring(8)

     67.8        67.8        14.9         28.8   

Sponsor management fee

     10.0        10.0        7.2         8.4   

Loss on extinguishment of debt

     3.8        107.1        —           —     

FX (gains) losses

     (110.4     (111.4     111.3         (96.1

Lawson transaction costs savings(9)

     25.5        —          —           —     

Infor Combination cost savings(10)

     13.9        —          —           —     
  

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 837.5      $ 792.3      $ 511.2       $ 511.8   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

(1) On July 5, 2011 we completed our acquisition of Lawson Software, Inc. Fiscal 2012 includes Lawson results for the period from July 5, 2011 through May 31, 2012. See Note 3 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(2) On August 13, 2009 we completed our acquisition of SoftBrands, Inc. Fiscal 2010 includes SoftBrands results for the period from August 13, 2009 through May 31, 2010. Fiscal 2011 and 2012 includes Softbrands results for the full year. See Note 3 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(3) Over the past few fiscal years, in conjunction with our acquisitions of SoftBrands, Inc. in fiscal 2010 and Lawson Software, Inc. in fiscal 2012 and in conjunction with the recapitalization of our debt structure in fiscal 2012, we have had significant changes to our long-term debt as we have entered into new credit facilities, issued various notes, amended certain existing facilities and repaid others. See Note 12 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(4) Amounts relate to outstanding balances of loans to Infor Lux Bond Company, Infor, Inc.’s parent. In conjunction with the recapitalization of our debt structure on April 5, 2012, the outstanding balance due to Infor Lux Bond Company was contributed as equity and is no longer outstanding as of May 31, 2012. See Note 21 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(5) Represents revenues that would have been recognized had we not adjusted acquired deferred revenues related to acquisitions to the fair values as required by GAAP. Certain deferred revenues on the acquired entity’s balances sheet, at the time of such acquisitions, were eliminated from GAAP results as part of the purchase accounting for such acquisitions as well as the corresponding adjustments to related deferred costs.
(6) Represents stock-based compensation (including stock options, restricted stock and restricted stock units) related to the granting of stock awards to key employees.
(7) Represents costs incurred related to certain litigation and/or settlements and costs incurred as a result of previous acquisitions, including salaries and benefits for employees to be terminated from the date of such acquisition to their termination date.
(8) Represents restructuring charges related to actions taken to reduce our cost structure to enhance operating effectiveness and improve profitability and to eliminate certain redundancies in connection with previous acquisitions. These restructuring activities impacted different functional areas of our operations in different locations and were undertaken to meet specific business objectives in light of the facts and circumstances at the time of each restructuring event.
(9) Cost savings related to the Lawson transaction were fully realized on an annualized run rate basis as of May 31, 2012.
(10) Cost savings related to the combination of Infor and Infor Global Solutions which were 30% realized on an annualized run rate basis as of May 31, 2012.

 

 

20


Table of Contents

RATIO OF EARNINGS TO FIXED CHARGES

The table below sets forth our ratio of earnings to fixed charges for the periods indicated on a consolidated historical basis. For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings (loss) from continuing operations before income taxes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness, amortization of debt discount, amortization of deferred financing costs and an interest factor attributable to operating leases.

 

     Year Ended May 31,  
(in millions, except ratios)    2012     2011     2010     2009     2008  

Fixed charges:

          

Interest expense on indebtedness

   $ 468.4      $ 313.9      $ 305.6      $ 409.7      $ 464.9   

Rent interest factor (1)

     21.0        14.5        15.8        17.0        22.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

   $ 489.4      $ 328.4      $ 321.4      $ 426.7      $ 487.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings:

          

Loss before income tax

   $ (326.3   $ (191.2   $ (50.8   $ (215.9   $ (489.1

Fixed charges

     489.4        328.4        321.4        426.7        487.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total earnings

   $ 163.1      $ 137.2      $ 270.6      $ 210.8      $ (2.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges (2)

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dollar amount of one-to-one coverage deficiency

   $ 326.3      $ 191.2      $ 50.8      $ 215.9      $ 489.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Approximately 1/ 3 of our rent expense relating to operating leases is deemed representative of the applicable interest factor.

 

(2) Our ratio of earnings to fixed charges was below a one-to-one coverage for each of the fiscal years presented as our earnings were not adequate to cover our fixed charges. The dollar amount of the coverage deficiency is presented above.

 

21


Table of Contents

RISK FACTORS

Risks Related to the Exchange Notes

We may not be able to generate sufficient cash to service all of our indebtedness, including the Exchange Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations, including the Exchange Notes, depends on our financial condition and operating performance, which in turn are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the Exchange Notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the Exchange Notes. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments and the Indenture may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The Credit Facilities and the Indentures will restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and any proceeds we do receive may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

The Exchange Notes will not be secured by any of our assets and are effectively subordinated to our secured debt to the extent of the assets securing such debt. The Credit Facilities are secured, and, therefore, the related lenders will have a prior claim on substantially all of our assets and those of our guarantors.

Our obligations under the Exchange Notes and our guarantors’ obligations under their guarantees of the Exchange Notes are unsecured. Our Credit Facilities are secured by a security interest in substantially all of our and the guarantors’ domestic tangible and intangible assets. If we are declared bankrupt or insolvent, or if we default under our Credit Facilities, the lenders under our Credit Facilities could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, such secured creditors could foreclose on the pledged assets to the exclusion of holders of the Exchange Notes, even if an event of default exists under the Indenture. Furthermore, if such secured creditors foreclose and sell the pledged equity interests in any subsidiary guarantor under the Exchange Notes, then that guarantor will be released from its guarantee of the Exchange Notes automatically and immediately upon such sale. In any such event, because the Exchange Notes will not be secured by any of our assets or the equity interests in subsidiary guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully.

Repayment of our debt, including the Exchange Notes, is dependent on cash flow generated by our subsidiaries.

Our subsidiaries own substantially all of our assets and conduct substantially all of our operations. Accordingly, repayment of our indebtedness, including the Exchange Notes, is dependent, to a significant extent,

 

22


Table of Contents

on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the Exchange Notes, our subsidiaries do not have any obligation to pay amounts due on the Exchange Notes or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the Exchange Notes. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the Indenture limits the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the Exchange Notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Exchange Notes.

Any default under the agreements governing our indebtedness, including a default under the Credit Facilities, that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on the Exchange Notes and substantially decrease the market value of the Exchange Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants in the instruments governing our indebtedness (including covenants in the Credit Facilities and the Indenture), we could be in default under the terms of the agreements governing such indebtedness, including the Credit Facilities and the Indenture. In the event of such default,

 

   

the holders of such indebtedness may be able to cause all of our available cash flow to be used to pay such indebtedness and, in any event, could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest;

 

   

the lenders under the Credit Facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets; and

 

   

we could be forced into bankruptcy or liquidation.

Upon any such bankruptcy filing, we would be stayed from making any ongoing payments on the Exchange Notes, and the holders of the Exchange Notes would not be entitled to receive post-petition interest or applicable fees, costs or charges, or any “adequate protection” under Title 11 of the United States Code (the Bankruptcy Code). Furthermore, if a bankruptcy case were to be commenced under the Bankruptcy Code, we could be subject to claims, with respect to any payments made within 90 days prior to commencement of such a case, that all or a portion of such payments, which could include repayments of amounts due under the Exchange Notes, might be deemed to constitute a preference, under the Bankruptcy Code, and that such payments should be voided by the bankruptcy court and recovered from the recipients for the benefit of the entire bankruptcy estate. Also, in the event that we were to become a debtor in a bankruptcy case seeking reorganization or other relief under the Bankruptcy Code, a delay and/or substantial reduction in payment under the Exchange Notes may otherwise occur.

If our operating performance declines, we may in the future need to obtain waivers from the required lenders under the Credit Facilities to avoid being in default. If we breach our covenants under the Credit Facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation

A court could void our subsidiaries’ guarantees of the Exchange Notes under fraudulent transfer laws.

Although the guarantees provide you with a direct claim against the assets of the subsidiary guarantors, under the federal bankruptcy laws and comparable provisions of state fraudulent transfer and insolvency laws, a

 

23


Table of Contents

guarantee could be voided, or claims with respect to a guarantee could be subordinated to all other debts of that guarantor. In addition, a bankruptcy court could void (i.e., cancel) any payments by that guarantor pursuant to its guarantee and require those payments to be returned to the guarantor or to a fund for the benefit of the other creditors of the guarantor.

The bankruptcy court might take these actions if it found, among other things, that when a subsidiary guarantor executed its guarantee (or, in some jurisdictions, when it became obligated to make payments under its guarantee):

 

   

such subsidiary guarantor received less than reasonably equivalent value or fair consideration for the incurrence of its guarantee; and

 

   

such subsidiary guarantor:

 

   

was (or was rendered) insolvent by the incurrence of the guarantee;

 

   

was engaged or about to engage in a business or transaction for which its assets constituted unreasonably small capital to carry on its business;

 

   

intended to incur, or believed that it would incur, obligations beyond its ability to pay as those obligations matured; or

 

   

was a defendant in an action for money damages, or had a judgment for money damages docketed against it and, in either case, after final judgment, the judgment was unsatisfied.

A bankruptcy court would likely find that a subsidiary guarantor received less than fair consideration or reasonably equivalent value for its guarantee to the extent that it did not receive direct or indirect benefit from the issuance of the Exchange Notes. A bankruptcy court could also void a guarantee if it found that the subsidiary issued its guarantee with actual intent to hinder, delay, or defraud creditors. Although courts in different jurisdictions measure solvency differently, in general, an entity would be deemed insolvent if the sum of its debts, including contingent and unliquidated debts, exceeds the fair value of its assets, or if the present fair saleable value of its assets is less than the amount that would be required to pay the expected liability on its debts, including contingent and unliquidated debts, as they become due.

We cannot predict what standard a court would apply in order to determine whether a subsidiary guarantor was insolvent as of the date it issued the guarantee or whether, regardless of the method of valuation, a court would determine that the subsidiary guarantor was insolvent on that date, or whether a court would determine that the payments under the guarantee constituted fraudulent transfers or conveyances on other grounds.

If a guarantee is deemed to be a fraudulent transfer, it could be voided altogether, or it could be subordinated to all other debts of the subsidiary guarantor. In such case, any payment by the subsidiary guarantor pursuant to its guarantee could be required to be returned to the subsidiary guarantor or to a fund for the benefit of the creditors of the subsidiary guarantor. If a guarantee is voided or held unenforceable for any other reason, holders of the Exchange Notes would cease to have a claim against the subsidiary guarantor based on the guarantee and would be creditors only of the Company and any subsidiary guarantor whose guarantee was not similarly voided or otherwise held unenforceable.

We may be unable to purchase the Exchange Notes upon a change of control.

Upon the occurrence of a change of control, as defined in the Indenture governing the Exchange Notes, we will be required to offer to purchase the Exchange Notes in cash at a price equal to 101% of the principal amount of the Exchange Notes, plus accrued interest and additional interest, if any. A change of control will constitute an event of default under our Credit Facilities that permits the lenders to accelerate the maturity of the borrowings thereunder and may trigger similar rights under our other indebtedness then outstanding. Our Credit Facilities will prohibit us from repurchasing any Exchange Notes. The failure to repurchase the Exchange Notes would

 

24


Table of Contents

result in an event of default under the Exchange Notes. In the event of a change of control, we may not have sufficient funds to purchase all of the Exchange Notes and to repay the amounts outstanding under our Credit Facilities or other indebtedness.

The lenders under the Credit Facilities will have the discretion to release any guarantors under the Credit Facilities in a variety of circumstances, which may cause those guarantors to be released from their guarantees of the Exchange Notes.

While any obligations under the Credit Facilities remain outstanding, any guarantee of the Exchange Notes may be released without action by, or consent of, any holder of the Exchange Notes or the trustee under the Indenture, at the discretion of lenders under the Credit Facilities, if the related guarantor is no longer a guarantor of obligations under the Credit Facilities or any other indebtedness. The lenders under the Credit Facilities will have the discretion to release the guarantees under the Credit Facilities in a variety of circumstances. You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the Exchange Notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of the subsidiaries will effectively be senior to claims of noteholders.

The Exchange Notes will be structurally junior to indebtedness of our non-guarantor subsidiaries.

You will not have any claim as a creditor against any of our non-guarantor subsidiaries, and indebtedness and other liabilities, including trade payables, of those subsidiaries will effectively be senior to your claims against those subsidiaries. As of May 31, 2012, the Issuer’s non-guarantor subsidiaries had $809.6 million of outstanding liabilities, including trade payables but excluding inter-company obligations. In addition, the indentures under which the Exchange Notes will be issued will, subject to certain limitations, permit these subsidiaries to incur additional indebtedness and will not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries. For the year ended May 31, 2012, the Issuer’s non-guarantor subsidiaries generated 48% of its total revenues.

An active trading market may not develop for the Exchange Notes, which would limit your ability to resell.

The Exchange Notes are a new issue of securities for which there is no active public trading market. We have been informed by the initial purchasers that they intend to make a market in the notes after the offering is completed. However, the initial purchasers may cease their market-making at any time without notice. An application will be made to list the 2019 Exchange Euro Notes on the Official List of the Irish Stock Exchange and for trading on the Global Exchange Market thereof. There are no assurances that the 2019 Exchange Euro Notes will be admitted to the Official List of the Irish Stock Exchange. Although no assurance is made as the liquidity of the 2019 Exchange Euro Notes as a result of the admission to trading on the Global Exchange Market, failure to be approved for listing on or the delisting of the 2019 Exchange Euro Notes from the Official List of the Irish Stock Exchange may have a material effect on a holder’s ability to resell the 2019 Exchange Euro Notes in the secondary market. We do not intend to apply for listing of the Exchange Notes on any US securities exchange or for quotation through an automated dealer quotation system. The liquidity of the trading market in the Exchange Notes and the market prices quoted for the notes may be adversely affected by changes in the overall market for this type of securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a consequence, an active trading market may not develop for the Exchange Notes, you may not be able to sell the Exchange Notes, or, even if you can sell the Exchange Notes, you may not be able to sell them at an acceptable price.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit

 

25


Table of Contents

rating will generally affect the market value of the Exchange Notes. Credit ratings are not recommendations to purchase, hold or sell the Exchange Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the Exchange Notes.

Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the Exchange Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your Exchange Notes without a substantial discount or at all.

Risks Related to Our Business

Economic, political and market conditions, including the recent recession and global economic crisis, can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability.

Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting. These include:

 

   

general economic and business conditions;

 

   

the overall demand for enterprise software, hardware systems and services;

 

   

governmental budgetary constraints or shifts in government spending priorities;

 

   

general political developments; and

 

   

currency exchange rate fluctuations.

Macroeconomic developments like the recent recessions in the U.S. and Europe and the debt crisis in certain countries in the European Union could negatively affect our business, operating results or financial condition. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending could cause current or potential customers to reduce their information technology (IT) budgets or be unable to fund software and services purchases, which could cause customers to delay, decrease or cancel purchases of our products and services or cause customers not to pay us or to delay paying us for previously purchased products and services.

In addition, political unrest in regions like the Middle East, terrorist attacks around the globe and the potential for other hostilities in various parts of the world, potential public health crises and natural disasters, including the earthquake and resulting tsunami in Japan, continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability. These factors generally have the strongest effect on our sales of new software licenses, and related services and, to a lesser extent, also may affect our renewal rates for software license updates and product support.

We face large, established competitors, specialized competitors and substantial price competition.

We compete with Oracle Corporation, SAP AG and other larger software companies that have advantages over us due to their larger customer bases, greater name recognition, long operating and product development history, greater international presence and substantially greater financial, technical and marketing resources. If customers or prospects want to reduce the number of their software vendors, they may elect to purchase competing products from Oracle or SAP since those larger vendors offer a wider range of products. Furthermore, Oracle is capable of bundling its software with its database applications, which underlie a significant portion of our installed applications. We also compete with a variety of more specialized software and services vendors, including:

 

   

single-industry software vendors;

 

   

human resource management software vendors;

 

 

26


Table of Contents
   

financial management software vendors;

 

   

manufacturing software vendors;

 

   

merchandising software vendors;

 

   

services automation software vendors;

 

   

software integrators and outsourced services providers; and

 

   

internet (on demand) software vendors.

Some competitors offer payment terms, contractual warranties, implementation terms or guarantees that are more favorable to customers and prospects. Competitors may entice our customers and prospects to switch software vendors by offering those customers or prospects free or heavily discounted products or services, and other more favorable contract terms. We may be unable to continue to compete successfully with new and existing competitors without lowering prices or offering other favorable terms to customers that lower our margins and increase our risks. We expect competition to persist and intensify, which could negatively impact our operating results and market share.

Our revenues, and in particular our software license revenues, vary each quarter and are difficult to predict.

Revenues from license fees in any quarter depend substantially upon our licensing activity with new and existing customers, and our ability to recognize revenues in that quarter under our revenue recognition policies. A significant portion of our future revenue is dependent upon our existing installed base of customers continuing to license additional products, as well as purchasing consulting services and renewing their annual maintenance agreements. If we do not continue to develop or acquire new products, licensing activity with existing customers will decline. Licensing activity for our products drives maintenance and services revenues because we sell maintenance and services for only our products. A decrease in licensing activity will typically lead to a decrease in services revenue in the same or subsequent quarters. If we do not have sufficient new licensing activity each year, our maintenance revenue and profit for the following year will decline because new customers or sales of additional products to existing customers are needed to offset the percentage of existing customers who scale back their businesses, reduce licenses and maintenance contracts, are acquired, or otherwise choose not to renew annual maintenance. Our sales force and marketing team must continue to generate sales leads among existing customers and prospective customers. When we “qualify” a lead, that lead becomes part of our sales “pipeline.” If our pipeline does not continue to grow in our different markets and geographies, our revenues will eventually decline. The rate at which we convert our pipeline into actual sales can vary greatly from year to year for the following reasons:

 

   

The period between initial customer contact and a purchase by a customer may vary and can be more than one year. During the sales cycle, prospective customers may decide not to purchase or may scale down purchases because of competing offers, budgetary constraints or changes in the prospect’s management, strategy, business or industry. Increasingly, customer or prospect organizations are taking more steps to approve the purchase of our products and services. Often times, we must wait for a customer or prospect’s board of directors to approve a purchase. These added approval requirements can delay the sales cycle and jeopardize the likelihood of completing the sale.

 

   

A substantial number of our existing and prospective customers make their purchase decision within the last few weeks or days of each quarter. A delay or deferral in a small number of large new software license transactions could cause our quarterly license revenue to fall significantly short of our predictions.

 

   

Prospective customers may decline or defer the purchase of new products if we do not have sufficient customer references for those products.

 

   

New products or technologies, software industry mergers and other software industry news may create uncertainty and cause customers and prospective customers to cancel, postpone or reduce capital spending for our products.

 

27


Table of Contents

Our revenue is largely dependent on renewal of maintenance agreements by our customers.

We generate substantial recurring revenue from our customer support program and other software maintenance services, most of which renew annually at the customer’s option. The level of our maintenance revenue is directly related to the number of our software products that are in active use by customers. If our customers stop using our products, if we are unable to maintain the rate of addition of new customers, or if our customers determine that they cannot afford maintenance, our maintenance revenue can be expected to decline. We expect that maintenance revenue from legacy products for which we have decreased or curtailed development funding will decline over time.

We may not retain or attract customers if we do not develop new products and enhance our current products in response to technological changes and competing products.

The enterprise software market is faced with rapid technological change, evolving standards in computer hardware, software development, communications and security infrastructure, and changing needs and expectations of customers. Building new products and service offerings requires significant investment in development. A substantial portion of our research and development resources are devoted to regulatory and maintenance requirements and product upgrades that address new technology support. These demands put significant constraints on our resources available for new product development. We also face uncertainty when we develop or acquire new products because there is no assurance that a sufficient market will develop for those products.

We may be unable to identify or complete suitable acquisitions and investments; and any acquisitions and investments we do complete may create business difficulties or dilute earnings.

As part of our business strategy, we intend to pursue strategic acquisitions in the future. We may be unable to identify suitable acquisitions or investment candidates. Even if we identify suitable candidates, we cannot provide assurance that we will be able to make acquisitions or investments on commercially acceptable terms. If we acquire a company, we may incur losses in the operations of that company and we may have difficulty integrating its products, personnel and/or operations into our business. In addition, its key personnel may decide not to work for us. These difficulties could disrupt our on-going business, distract our management and workforce, increase our expenses and adversely affect our operating results. We may also incorrectly judge the value or worth of an acquired company or business. Furthermore, we may incur significant debt or issue equity securities to pay for future acquisitions or investments. The issuance of equity securities may be dilutive to our stockholders. If the products of an acquired company are not successful, those remaining assets could become impaired, which may result in an impairment loss that could materially adversely impact our financial position and results of operations.

Competitors may take advantage of our limited intellectual property protection.

We consider certain aspects of our internal operations, software and documentation to be proprietary, and rely on a combination of contract, copyright, trademark and trade secret laws to protect this information. In addition, we currently hold 63 patents and 8 pending patent applications in the U.S. Generally, copyright laws afford only limited protection because those laws do not protect product ideas. In addition, when we license our products to customers, we may provide source code for some of our products. Some customers may also access source code through a source code escrow arrangement. Access to our source code could provide an opportunity for companies to offer competing maintenance and product modification services to our customers. Defending our intellectual property rights is time-consuming and costly.

Changes in intellectual property laws which may disrupt or eliminate our certain anticipated revenue stream.

Protecting our global intellectual property rights and combating unlicensed copying and use of software and other intellectual property is difficult. While piracy adversely affects U.S. revenue, the impact on revenue from

 

28


Table of Contents

outside the U.S. is more significant, particularly in countries where laws are less protective of intellectual property rights. Any changes to foreign intellectual property legislation which would restrict our ability to enforce certain intellectual property rights, including with respect to customer non-compliance and anti-assignment and other software license terms, may disrupt or eliminate our anticipated revenue streams from those affected areas.

Others may claim that we infringe their intellectual property rights.

Many participants in the technology industry, and patent holding companies who have no independent product revenue, have an increasing number of patents and have frequently demonstrated a readiness to take legal action based on allegations of patent and other intellectual property infringement. These types of claims are time-consuming and costly to defend. We are currently appealing an adverse judgment on a patent infringement lawsuit that enjoined the sale and support of one of our software modules. If a successful claim is made against us and we fail to develop or license a substitute technology, our business, results of operations, financial condition or cash flows could be adversely affected.

Our products are deployed in large and complex systems and may contain defects or security flaws or be implemented incorrectly.

Because our products are deployed in large and complex systems, they can only be fully tested for reliability when deployed in networks for long periods of time. Our software programs may contain undetected defects when first introduced or as new versions are released. Our customers might encounter difficulties with the implementation of our products, experience corruption of their data or encounter performance or scaling problems only after our software programs have been deployed. The services needed for implementing our products are also complex, and require knowledge and cooperation between both the customer’s and the service provider’s teams. As a consequence, from time to time we have received customer complaints or been sued. In addition, our products are combined with products from other vendors. As a result, should problems occur, it may be difficult to identify the source of the problem. Software and data security are becoming increasingly important because of regulatory restrictions on data privacy and the significant legal exposures and business disruptions stemming from computer viruses and other unauthorized entry or use of computer systems. We may not be able to avoid or limit liability for disputes relating to product performance, software security or the provision of services. Product defects and security flaws could expose us to product liability and warranty claims and harm our reputation, which could impact our future sales of products and services.

Deterioration in our relationships with resellers, systems integrators and other third-parties that market and sell our products could reduce our revenues.

Our revenue growth will depend, in part, on adding new partners to expand our sales channels, as well as leveraging our relationships with existing partners. If our relationships with these resellers, system integrators and strategic and technology partners deteriorate or terminate, we may lose sales and marketing opportunities. Some current and potential customers rely on third-party systems integrators to implement and manage new and existing applications. These systems integrators may increase their promotion of competing enterprise software applications, or may otherwise discontinue their relationships with us.

Because we do not own all of the products that we license, we rely on our continued relationships with other software suppliers.

We license third-party software products that we incorporate into, or resell with, our own software products. For example, we incorporate in many of our products software supplied by Micro Focus International, Inc. We also have reseller and alliance relationships with IBM, and other software suppliers businesses that allow us to resell their offerings with our products and services. These relationships and other technology licenses are subject to periodic renewal and may include minimum sales requirements. There can be no assurance that the licenses for

 

29


Table of Contents

these third-party technologies will not be terminated, that the licenses will be available on future terms acceptable to us or that we will be able to license third-party software for future products. In the event that these third-party products were to become unavailable, we may be unable to readily replace these products with substitute products. Any interruption in the short term could have a detrimental effect on our ability to continue to market and sell those of our products relying on these specific third-party products and could adversely impact our business.

International sales and operations subject us to risks that can adversely affect our operating results.

We derive a substantial portion of our revenues, and have significant operations, outside of the U.S. Our international operations include software development, sales, customer support and administration. We face challenges in managing an organization operating in various countries, which can entail longer payment cycles and difficulties in collecting accounts receivable, fluctuations in currency exchange rates, overlapping tax regimes, difficulties in transferring funds from certain countries and reduced protection for intellectual property rights in some countries. We must comply with a variety of international laws and regulations, including trade restrictions, local labor ordinances, and import and export requirements.

We may experience foreign currency gains and losses.

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. We also recognize transaction gains and losses from revaluing debt denominated in Euros and held by subsidiaries whose functional currency is United States dollars. We conduct a significant portion of our business in currencies other than the U.S. Dollar. Our revenues and operating results are affected when the U.S. Dollar strengthens or weakens relative to other currencies. Changes in the value of major foreign currencies, particularly the Euro, the British Pound and the Swedish Krona relative to the U.S. Dollar can significantly affect our revenues and operating results. Net foreign currency transaction gains and losses, resulting primarily from recognized balance sheet exposures, are recorded within earnings in the period incurred.

Litigation may adversely affect our business, financial condition and results of operations.

We are subject to legal and regulatory requirements applicable to our business and industry throughout the world. We are subject to various 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. Litigation can be lengthy, expensive, and disruptive to our operations and results cannot be predicted with certainty. There may also be adverse publicity associated with litigation, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations.

Open source software may diminish our license fees and impair the ownership of our products.

The open source community is comprised of many different formal and informal groups of companies, software developers and individuals who have created a wide variety of software and have made that software available for use, distribution and modification, often free of charge. Open source software, such as the Linux operating system, has been gaining in popularity among business users. If developers contribute enterprise application software to the open source community, and that software has competitive features and scale to business users in our markets, we will need to change our product pricing and distribution strategy to compete. If one of our developers embedded open source components into one of our products, without our knowledge or authorization, our ownership and licensing of that product could be in jeopardy. Depending on the open source license terms, the use of an open source component could mean that all products delivered with that open source component become part of the open source community. In that case, our ownership rights and ability to charge license fees for those delivered products could be diminished or rendered worthless. We currently take steps to

 

30


Table of Contents

train our developers and monitor the content of products in development, but there is no assurance that these steps will always be effective.

Regional business disruptions could adversely affect our operating results.

A significant portion of our critical business operations, including research and development, product maintenance, services support, and general and administrative support, are concentrated in a few geographic areas. A disruption or failure of our systems could cause delays in completing sales and providing maintenance and services to customers. A major earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be materially and adversely affected.

We must attract and retain account executives in our sales organization to achieve our revenue goals.

Revenue growth, and in particular software license revenue growth, requires that we have a sufficient number of trained account executives in our sales organization to develop leads and call on prospective customers. Competition in our industry for experienced account executives is intense. Competitors and other software companies may lure away our account executives through signing bonuses and other special incentives. The failure to attract and retain account executives will negatively impact our revenue growth. When we hire a new account executive, the time period required for that person to become productive will vary, depending on their experience and training and the customer pipeline and length of sales cycle.

If we are unable to attract and retain senior management, software developers, services consultants, finance and accounting specialists, and other qualified personnel, we will be unable to develop new products and increase our revenue and profitability.

We also rely on the continued service of our senior management, software developers, services consultants, finance and accounting specialists, and other key employees. In the software industry, there is substantial and continuous competition for highly skilled business, product development, technical, financial and other personnel. The failure to attract, train, retain and effectively manage employees could negatively impact our development and efforts and cause a degradation of our customer service. If we are unable to attract and retain finance and accounting personnel who have experience with the software industry and U.S. accounting requirements, we will have to rely on more costly contractors to fill the roles necessary for us to meet our governance and regulatory requirements.

We are required to delay revenue recognition into future periods for portions of our license fee activity.

Our financial statements are prepared in accordance with U.S. GAAP. Under those rules, we are required to defer revenue recognition for license fees in situations that include the following:

 

   

the customer agreement includes essential services, including significant modifications, customization or complex interfaces;

 

   

the customer agreement includes unique acceptance criteria;

 

   

the customer agreement includes extended or contingent payment terms or fees;

 

   

a third-party vendor, whose technology is incorporated into our products, delays delivery of its product to the customer; or

 

   

we are not able to establish historical pricing and maintenance renewal rates with respect to our products, such as where the customer agreement includes products that are under development or has other undelivered elements, to meet the vendor-specific objective evidence (VSOE) requirements of these accounting rules.

 

31


Table of Contents

We expect that we will continue to defer recognition of portions of our license fee activity in each period. The amount of license fees deferred may be significant and will vary each quarter, depending on the specific terms of contracts executed during each quarterly period.

We may take additional restructuring actions that result in financial charges in the period taken.

In response to the current global economic downturn and as part of our preparation for verticalization of our organization’s structure in fiscal 2010, we took actions to reduce costs. In the event of another global economic downturn, we may decide to take additional restructuring actions to improve our operational efficiencies and we may be required to incur financial charges in the period when we make such decisions, which could have a material adverse impact on our results of operations for that period.

We may have exposure to additional tax liabilities.

As a multinational organization, we are subject to income taxes as well as non-income based taxes, in both the U.S. as well as in various foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision and other tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable, there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals. We are also subject to non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, both in the U.S. and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income taxes and may have additional exposure to additional non-income tax liabilities.

Our effective tax rate may increase or fluctuate, which could increase our income tax expense and reduce our net income.

Our effective tax rate can be adversely affected by several factors, many of which are outside of our control, including:

 

   

changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

 

   

changing tax laws, regulations, and interpretations in multiple jurisdictions in which we operate;

 

   

changes to the financial accounting rules for income taxes;

 

   

unanticipated changes in tax rates;

 

   

changes in accounting and tax treatment of stock-based compensation;

 

   

the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations between reporting periods;

 

   

changes to the valuation allowance on net deferred tax assets; or

 

   

assessments, or any related tax interest or penalties, that could significantly affect our income tax expense for the period in which the settlements take place.

Based upon our corporate structure, a higher proportion of our income before taxes may be subject to U.S. tax compared to the our predecessor companies and company groups. Since the combined U.S. federal and state tax rate is typically higher than the tax rates of the non-U.S. jurisdictions in which we operate, our tax expense and cash tax costs may increase as a result.

We report our results of operations in part based on our determination of the amount of taxes owed in the various tax jurisdictions in which we operate. Periodically, we receive notices from the relevant tax authorities

 

32


Table of Contents

claiming that we owe a greater amount of tax than we have reported. We regularly engage in discussions, and sometimes disputes, with these tax authorities regarding the amount of taxes owed. If the ultimate determination of our taxes owed is for an amount in excess of the tax provision we have recorded, our operating results, cash flows, and financial condition could be adversely affected.

The obligations associated with being a registered company will require significant resources and management attention.

As a result of filing the prospectus with the SEC in connection with this exchange offer and becoming a registrant, we will incur significant legal, accounting and other expenses that we did not previously incur. We will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act). The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. Furthermore, the need to establish the corporate infrastructure demanded of a registrant may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a registrant. However, the measures we take may not be sufficient to satisfy our obligations. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements.

Changes in regulation and industry practice, including particularly regulation and practice dealing with security and privacy, could cause us additional expense.

Recent legislation has increased the responsibilities of software companies and their clients regarding financial security, identity theft and privacy. In particular, the credit card industry has adopted credit card security guidelines intended to help minimize identity theft and credit card fraud. Our customers may not effectively implement all of the updated security features that we introduce or make all necessary changes to their operating procedures, or they may fail to implement other required security measures. It is possible that, regardless of our efforts to comply with credit card company requirements or to implement sound security measures through our software code, we could be subject to claims from our customers, or their clients, if unauthorized access to credit card data occurs through the use of our software.

Economic, political and market conditions can adversely affect our revenue growth and operating results.

The uncertainty posed by the weakened global economy, volatile credit markets, escalating energy prices, terrorist activities, potential pandemics, natural disasters and related uncertainties and risks and other geopolitical issues may impact the purchasing decisions of current or potential customers. Because of these factors, we believe the level of demand for our products and services and projections of future revenue and operating results, will continue to be difficult to predict. These geopolitical risks could also impede employee travel and our business operations in any affected regions.

We may need to change our pricing models to compete successfully.

The intense competition we face in the sales of our products and services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts on certain products or services or develop products that the marketplace considers more valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect operating results. Our software license updates and product support fees and hardware systems support fees are generally priced as a percentage of our net new software license fees and net new hardware systems products fees, respectively. Our competitors may offer lower pricing on their support offerings, which could put pressure on us to further discount our new license prices.

 

33


Table of Contents

Our periodic workforce restructurings can be disruptive.

We have in the past restructured or made other adjustments to our workforce, including our direct sales force on which we rely heavily, in response to management changes, product changes, performance issues, acquisitions and other internal and external considerations. In the past, our attempts to realign our sales force and other restructurings have generally resulted in a temporary lack of focus and reduced productivity. These effects could recur in connection with future acquisitions and other restructurings and our revenues could be negatively affected.

We might experience significant errors or security flaws in our software products and services.

Despite testing prior to their release, software products frequently contain errors or security flaws, especially when first introduced or when new versions are released. The detection and correction of any security flaws can be time-consuming and costly. Errors in our software products could affect the ability of our products to work with other hardware or software products, could delay the development or release of new products or new versions of products and could adversely affect market acceptance of our products. If we experience errors or delays in releasing new software products or new versions of software products, we could lose revenues. In addition, there could be security issues with our products and networks and any security flaws, if exploited, could affect our ability to conduct internal business operations. End users, who rely on our software products and services for applications that are critical to their businesses, may have a greater sensitivity to product errors and security vulnerabilities than customers for software products generally. Software product errors and security flaws in our products or services could expose us to product liability, performance and/or warranty claims as well as harm our reputation, which could impact our future sales of products and services. In addition, we may be legally required to publicly report security breaches of our services, which could adversely impact future business prospects for those services.

We may not receive significant revenues from our current research and development efforts for several years, if at all.

Developing software products is expensive, and the investment in product development often involves a long return on investment cycle. We have made and expect to continue to make significant investments in research and development and related product opportunities. Accelerated product introductions and short product life cycles require high levels of expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive significant revenues from these investments for several years, if at all.

 

34


Table of Contents

USE OF PROCEEDS

This exchange offer is intended to satisfy our obligations under the Registration Rights Agreement. Neither we nor any of their respective subsidiaries will receive any cash proceeds from the issuance of the Exchange Notes. In consideration for issuing the Exchange Notes contemplated in this prospectus, we will receive the tendered outstanding Original Notes in like principal amount, the form and terms of which are substantially the same as the form and terms of the Exchange Notes for which these Original Notes are exchanged, except as otherwise described in this prospectus. The Original Notes surrendered in exchange for the Exchange Notes will be retired and cancelled. Accordingly, no additional debt will result from the exchange offer. We will bear the expense of the exchange offer.

 

35


Table of Contents

CAPITALIZATION

The following table sets forth our consolidated capitalization as of May 31, 2012. This information should be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and related notes thereto included in this prospectus.

 

(in millions)    As of May 31,
2012
 

Debt:

  

Infor first lien Term B due April 5, 2018

   $ 2,770.0   

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

     400.0   

Infor first lien Euro Term due April 5, 2018

     309.1   

Infor 9  3/8% senior notes due April 1, 2019

     1,015.0   

Infor 10.0% senior notes due April 1, 2019

     309.1   

Infor 11.5% senior notes due July 15, 2018

     560.0   

Debt discounts

     (4.6
  

 

 

 

Total debt

     5,358.6   

Stockholders deficit

     (599.1
  

 

 

 

Total Capitalization

   $ 4,759.5   
  

 

 

 

 

36


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth Infor’s selected historical consolidated financial data for the periods and at the dates indicated. The consolidated financial statements of Infor include the results of Lawson from its acquisition date in July 2011. All significant intercompany balances have been eliminated. The historical consolidated statements of operations data for the years ended May 31, 2012, 2011 and 2010 and the balance sheet data as of May 31, 2012 and 2011 have been derived from our audited consolidated financial statements and the notes thereto, which are included elsewhere in this prospectus. The historical consolidated statements of operations data for the years ended May 31, 2009 and 2008 and the balance sheet data as of May 31, 2010, 2009 and 2008 have been derived from our consolidated financial statements, which are not included elsewhere in this prospectus. Our historical results included below and elsewhere in this prospectus are not necessarily indicative of Infor’s future performance.

 

37


Table of Contents
(in millions)    Year Ended May 31,  
Consolidated Statements of Operations Data:    2012(1)     2011     2010(2)     2009     2008  

Revenues:

          

License fees

   $ 505.3      $ 367.9      $ 339.5      $ 372.3      $ 497.1   

Product updates and support fees

     1,284.4        995.8        1,000.0        1,005.7        1,043.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenues

     1,789.7        1,363.7        1,339.5        1,378.0        1,540.4   

Consulting services and other fees

     751.0        510.0        497.1        589.4        668.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,540.7        1,873.7        1,836.6        1,967.4        2,208.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Cost of license fees

     90.1        65.6        56.7        60.3        128.3   

Cost of product updates and support fees

     258.5        204.0        211.4        207.4        152.5   

Cost of consulting services and other fees

     593.9        384.0        371.9        458.0        542.5   

Sales and marketing

     438.7        335.1        320.3        336.2        421.6   

Research and development

     322.3        207.4        199.1        210.1        249.5   

General and administrative

     233.4        185.5        196.2        189.3        214.3   

Amortization of intangible assets and depreciation

     323.6        237.3        275.5        258.9        311.4   

Restructuring

     67.8        14.9        28.8        45.6        10.9   

Acquisition related and other costs

     75.9        6.2        17.7        0.2        1.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,404.2        1,640.0        1,677.6        1,766.0        2,032.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     136.5        233.7        159.0        201.4        176.3   

Total other expense, net

     462.8        424.9        209.8        417.3        665.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (326.3     (191.2     (50.8     (215.9     (489.1

Income tax (benefit) provision

     (16.3     (50.8     44.6        88.7        (24.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (310.0   $ (140.4   $ (95.4   $ (304.6   $ (464.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) On July 5, 2011 we completed our acquisition of Lawson Software, Inc. Fiscal 2012 includes Lawson results for the period from July 5, 2011 through May 31, 2012. See Note 3 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(2) On August 13, 2009 we completed our acquisition of SoftBrands, Inc. Fiscal 2010 includes SoftBrands results for the period from August 13, 2009 through May 31, 2010. Fiscal 2011 and 2012 includes SoftBrands results for the full year. See Note 3 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.

 

     As of May 31,  
(in millions)    2012     2011     2010     2009     2008  

Consolidated Balance Sheet Data:

          

Cash and cash equivalents

   $ 384.4      $ 337.0      $ 246.4      $ 186.8      $ 244.4   

Working capital deficit

     (526.0     (252.6     (253.0     (306.6     (313.3

Total assets

     6,555.0        4,680.0        4,466.0        4,750.7        5,751.9   

Total debt, including current maturities(1)

     5,358.6        4,384.4        4,162.5        4,324.9        4,548.4   

Due to affiliate(2)

     —          329.8        310.2        290.6        266.5   

Total stockholders’ deficit

     (599.1     (1,200.9     (1,128.7     (1,042.1     (664.2

Other Financial Information:

          

Capital expenditures

   $ (21.5   $ (11.9   $ (7.5   $ (12.9   $ (19.9

Dividends paid

     —          (40.0     —          —          —     

 

38


Table of Contents

 

(1) Over the past few fiscal years, in conjunction with our acquisitions of SoftBrands, Inc. in fiscal 2010 and Lawson Software, Inc. in fiscal 2012 and in conjunction with the recapitalization of our debt structure in fiscal 2012, we have had significant changes to our long-term debt as we have entered into new credit facilities, issued various notes, amended certain existing facilities and repaid others. See Note 12 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.
(2) Amounts relate to outstanding balances of loans to Infor Lux Bond Company, Infor, Inc.’s parent. In conjunction with the recapitalization of our debt structure on April 5, 2012, the outstanding balance due to Infor Lux Bond Company was contributed as equity and is no longer outstanding as of May 31, 2012. See Note 21 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.

 

39


Table of Contents

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following pro forma combined financial information has been developed by applying pro forma adjustments to the historical audited consolidated financial statements of Infor, included elsewhere in this prospectus. The unaudited pro forma combined statement of operations presents the acquisition of Lawson and sale of the Original Notes as if both had occurred on June 1, 2011. The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X, with the period from June 1, 2011 to July 4, 2011 adjusted to reflect the acquisition of Lawson as of June 1, 2011(reflecting pro forma adjustments for amortization of acquired intangible assets and transaction costs associated with the acquisition), also being adjusted for the effects of the sale of the Original Notes (reflecting adjustments for additional equity contributions, refinancing of long-term debt, interest expense, amortization of deferred financing fees, and the tax effect of the pro forma adjustments). As the acquisition of Lawson and the sale of the Original Notes are all reflected in the historical audited consolidated balance sheet at May 31, 2012, no pro forma balance sheet is necessary.

The unaudited pro forma combined statement of operations includes unaudited pro forma adjustments that are factually supportable, directly attributable to the acquisition of Lawson and the sale of the Original Notes are expected to have a continuing impact on our combined results. The unaudited pro forma combined financial information was prepared in conformity with GAAP, and in relation to the Lawson acquisition pro forma adjustments, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805—Business Combinations, and is based on Infor’s consolidated financial statements for the year ended May 31, 2012 and Lawson’s historical financial statements for the period from June 1, 2011 through July 4, 2011.

The unaudited pro forma combined statement of operations does not include adjustments related to deferred revenues that are not expected to have a recurring impact on earnings.

The unaudited pro forma combined financial information is presented for informational purposes only. The unaudited pro forma combined financial information does not purport to represent what our results of operations or financial condition would have been had the acquisition of Lawson and the sale of the Original Notes actually occurred on the dates indicated, nor do they purport to project our results of operations or financial condition for any future period or as of any future date. The unaudited pro forma combined financial information should be read together with the information included under the headings “Prospectus Summary,” “Summary Historical Consolidated and Unaudited Pro Forma Combined Financial Data,” “Selected Historical Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements of Infor and Lawson, respectively, included elsewhere in this prospectus. All pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma combined financial information.

 

40


Table of Contents

Unaudited Pro Forma Combined Statement of Operations

Year Ended May 31, 2012

 

     Infor (a)     Lawson (b)     Pro Forma
Adjustments
          Pro
Forma
 

Revenues

          

License fees

   $ 505.3      $ 5.8      $ —          $ 511.1   

Product updates and support

     1,284.4        37.1        —            1,321.5   
  

 

 

   

 

 

   

 

 

     

 

 

 

Software revenues

     1,789.7        42.9        —            1,832.6   

Consulting services and other fees

     751.0        20.2        —            771.2   
  

 

 

   

 

 

   

 

 

     

 

 

 

Total revenues

     2,540.7        63.1        —            2,603.8   
  

 

 

   

 

 

   

 

 

     

 

 

 

Expenses

          

Cost of license fees

     90.1        0.8        —            90.9   

Cost of product updates and support

     258.5        7.7        —            266.2   

Cost of consulting services and other

     593.9        26.6        —            620.5   

Sales and marketing

     438.7        19.7        —            458.4   

Research, development and updates

     322.3        13.5        —            335.8   

General and administrative

     233.4        20.2        —            253.6   

Depreciation and amortization of intangible assets

     323.6        5.5        6.6        (c     335.7   

Restructuring costs

     67.8        —          —            67.8   

Acquisition related and other costs

     75.9        25.5        (101.4     (d     —     
  

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

     2,404.2        119.5        (94.8       2,428.9   
  

 

 

   

 

 

   

 

 

     

 

 

 

Income from operations

     136.5        (56.4     94.8          174.9   

Interest expense, net

     467.4        1.5        (40.4     (e     428.5   

Loss on extinguishment of debt

     107.1        —          (103.3     (d     3.8   

Other expense (income), net

     (111.7     1.1        —            (110.6
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss before provision for income taxes

     (326.3     (59.0     238.5          (146.8

Provision (benefit) for income taxes

     (16.3     (12.8     81.1        (f     52.0   
  

 

 

   

 

 

   

 

 

     

 

 

 

Net (loss) income

   $ (310.0   $ (46.2   $ 157.4        $ (198.8
  

 

 

   

 

 

   

 

 

     

 

 

 

See accompanying notes to the unaudited pro forma combined financial information.

 

41


Table of Contents

Notes to the Unaudited Pro Forma Combined Financial Information

Note 1—Basis of Presentation

The financial information presented above is for Infor. The unaudited pro forma combined statement of operations is presumed to show how the combined Company might have looked if the acquisition of Lawson and the sale of the Original Notes had occurred on June 1, 2011. The unaudited pro forma combined financial information includes an adjustment related to the impact of the amortization of intangible assets related to the Lawson acquisition. As the Lawson acquisition and the sale of the Original Notes are both reflected in the historical audited balance sheet at May 31, 2012, no pro forma balance sheet was deemed necessary. For further discussion related to the Lawson acquisition, see the audited historical financial statements included elsewhere in this prospectus.

Note 2—Pro Forma Adjustments and Assumptions

Unaudited pro forma combined statement of operations

 

(a) Represents the historical consolidated results of operations of Infor for the year ended May 31, 2012 (including the results of operations of Lawson from July 5, 2011 to May 31, 2012, the post acquisition period).

 

(b) Represents the historical consolidated results of operations of Lawson for the period from June 1, 2011 through July 4, 2011 (the period in fiscal 2012 prior to Infor’s acquisition of Lawson).

Adjustments (c) through (e) to the statements of operations for the year ended May 31, 2012, include unaudited pro forma adjustments related to changes in fair value of certain of the assets acquired relating to the Lawson acquisition along with pro forma adjustments related to various financing activities and the tax effect of the unaudited pro forma adjustments.

 

(c) Represents the adjustments to amortization expense related to the change in fair value of new identifiable intangible assets recorded in relation to the Lawson acquisition. The revised amortization expense was calculated using the range of useful lives of three to fifteen years. The amounts allocated to the identifiable intangible assets and the estimated useful lives are based on the fair value estimates under the guidance of ASC 805 and the purchase price allocation made related to the Lawson acquisition. The calculation of the adjustment to amortization expense is as follows:

 

     Year Ended
May 31,
2012
 
(in millions)       

Amortization expense for Lawson’s acquired technology costs

   $ 9.7   

Less: Lawson’s historical amortization:

  
     (3.1
  

 

 

 

Net adjustment to depreciation and amortization of intangibles

   $ 6.6   
  

 

 

 

 

(d) Represents adjustments to acquisition related and other costs and loss on extinguishment of debt for non-recurring expenses directly related to the acquisition of Lawson, sale of the Original Notes, and the combination of Lawson and the operating subsidiaries of Infor Global Solutions Parent Ltd. and the recapitalization of our debt structure which currently are reflected in the historical financial statements included elsewhere in this prospectus.

 

42


Table of Contents
(e) Represents the net adjustment to interest expense, calculated as follows:

 

(in millions)    Year
Ended
May 31,
2012
 

Interest expense on the 2019 Exchange Dollar Notes, 2019 Exchange Euro Notes and the Credit Facilities(1)

   $ 343.6   

Interest expense on 2018 Exchange Notes (2)

     5.4   

Amortization of debt issuance costs and OID related to the 2019 Exchange Dollar Notes, 2019 Exchange Euro Notes and the Credit Facilities(3)

     18.8   

Amortization of debt issuance costs and OID related to the 2018 Exchange Notes (4)

     3.6   

Interest Income

     (1.9
  

 

 

 

Pro forma interest expense, net

     369.5   
  

 

 

 

Less: Historical interest expense, net

     (468.9

Add: Interest expense on 2018 Exchange Notes (5)

     59.0   
  

 

 

 

Net adjustment to interest expense, net

   $ (40.4
  

 

 

 

 

  (1) Represents the pro forma interest expense related to the 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes with a principal amount, of $1,015.0 million and €250 million and the Credit Facilities in an aggregate principal amount of $3,500.0 million. Further this includes pro forma interest expense related to the undrawn portion of the Credit Facility of $150 million, bearing a commitment fee rate of 0.5 % per annum. The 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes will bear a fixed interest rate while the Credit Facilities will bear a variable interest rate. The interest expense has been determined bearing a weighted average interest rate of 7.6% per annum. Each 1/8% fluctuation in the interest rate of the 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes would change pro forma interest expense by approximately $1.7 million per annum. Each 1/8% fluctuation in the interest rate of the Credit Facilities and a 1% fluctuation in the original issue discount (OID) on the Infor 11.5% senior notes due July 15, 2018 would change pro forma interest expense by approximately $4.3 million and $0.8 million per annum, respectively.

 

  (2) Represents the pro forma interest expense on the 2018 Exchange Notes as though they were outstanding from June 1, 2011.

 

  (3) Represents the straight-line amortization (which approximates the effective interest method) of deferred financing fees related to the 2019 Exchange Dollar Notes and the 2019 Exchange Euro Notes over a seven-year period and using the effective interest method for the Credit Facilities over a four and a half to six year period for the term loans and over a five-year period for the revolving credit facility.

 

  (4) Represents the pro forma amortization of deferred financing fees of the 2018 Exchange Notes as though they were outstanding from June 1, 2011.

 

  (5) Represents the interest expense of the 2018 Exchange Notes included above in historical interest expense, net as they are not being repaid as part of the Exchange Offer.

 

(f) Represents the adjustment to income taxes to reflect the unaudited pro forma adjustments at a blended statutory rate of 34%.

 

43


Table of Contents

EXCHANGE OFFERS

Purpose of the Exchange Offer

The exchange offer is designed to provide holders of Original Notes with an opportunity to acquire Exchange Notes which, unlike the Original Notes, will be freely transferable, subject to any restrictions on transfer imposed by state “blue sky” laws and provided that the transferring holder is not our affiliate within the meaning of the Securities Act and, provided further that such holder acquired the Exchange Notes in the ordinary course of its business and is not engaged in, and does not intend to engage in, a “distribution” of the Exchange Notes as such term is defined for purposes of the Securities Act.

The 2018 Original Notes were originally issued and sold on July 5, 2011, to the initial purchasers, pursuant to the purchase agreement dated July 5, 2011 and the 2019 Original Dollar Notes and the 2019 Original Euro Notes were originally issued and sold on April 5, 2012, to the initial purchasers, pursuant to the purchase agreement dated March 29, 2012. The Original Notes were issued and sold in transactions not registered under the Securities Act in reliance upon the exemption provided by Section 4(2) of the Securities Act. The concurrent resales of the Original Notes by the initial purchasers to investors were done in reliance upon the exemptions provided by Rule 144A and Regulation S promulgated under the Securities Act. The Original Notes may not be reoffered, resold or transferred other than (i) to us or our subsidiaries, (ii) to a qualified institutional buyer in compliance with Rule 144A promulgated under the Securities Act, (iii) outside the United States to a non-U.S. person within the meaning of Regulation S under the Securities Act, (iv) pursuant to the exemption from registration provided by Rule 144 promulgated under the Securities Act (if available) or (v) pursuant to an effective registration statement under the Securities Act.

In connection with the original issuance and sale of the Original Notes, we entered into the Registration Rights Agreements, pursuant to which we agreed to file with the SEC an exchange offer registration statement on an appropriate form under the Securities Act and offer to holders of Original Notes who are able to make certain representations the opportunity to exchange their Original Notes for Exchange Notes.

Under existing interpretations by the Staff of the SEC as set forth in no-action letters issued to third parties in other transactions, the Exchange Notes would, in general, be freely transferable (other than in a distribution as noted above) after the exchange offer without further registration under the Securities Act; provided, however, that in the case of broker-dealers participating in the exchange offer, a prospectus meeting the requirements of the Securities Act must be delivered by such broker-dealers in connection with resales of the Exchange Notes. We have agreed to furnish a prospectus meeting the requirements of the Securities Act to any such broker-dealer for use in connection with any resale of any Exchange Notes acquired in the exchange offer. A broker-dealer that delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act and will be bound by the provisions of the Registration Rights Agreement (including certain indemnification rights and obligations).

We do not intend to seek our own interpretation regarding the exchange offer, and we cannot assure you that the staff of the SEC would make a similar determination with respect to the Exchange Notes as it has in other interpretations to third parties.

Each holder of Original Notes that exchanges such Original Notes for Exchange Notes in the exchange offer will be deemed to have made certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of Exchange Notes and (iii) it is not our affiliate as defined in Rule 405 under the Securities Act, or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable.

If the holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of Original Notes or Exchange Notes. If the holder is a broker-dealer that

 

44


Table of Contents

will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes.

Terms of the Exchange Offer; Period for Tendering Outstanding Original Notes

Upon the terms and subject to the conditions set forth in this prospectus, we will accept any and all validly tendered Original Notes that were acquired pursuant to Rule 144A or Regulation S, provided such tender has not been withdrawn prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. The 2018 Original Notes and the 2019 Original Dollar Notes may be exchanged only in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof. The 2019 Original Euro Notes may be exchanged only in minimum denominations of €100,000 and any integral multiple of €1,000 in excess thereof.

The form and terms of the Exchange Notes are the same as the form and terms of the outstanding Original Notes except that:

(1) the Exchange Notes will be registered under the Securities Act and will not have legends restricting their transfer;

(2) the Exchange Notes will not contain the registration rights and liquidated damages provisions contained in the outstanding Original Notes; and

(3) interest on the Exchange Notes will accrue from the last interest date on which interest was paid on your Original Notes.

The Exchange Notes will evidence the same debt as the Original Notes and will be entitled to the benefits of the Indenture.

We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC.

We will be deemed to have accepted validly tendered Original Notes when, as and if we have given oral or written notice of our acceptance to the relevant exchange agent. The exchange agents will act as agent for the tendering holders for the purpose of receiving the Exchange Notes from us.

If any tendered Original Notes are not accepted for exchange because of an invalid tender or the occurrence of specified other events set forth in this prospectus, the certificates for any unaccepted Original Notes will be promptly returned, without expense, to the tendering holder.

Holders who tender Original Notes in the exchange offer will not be required to pay brokerage commissions or fees or transfer taxes with respect to the exchange of Original Notes pursuant to the exchange offer. We will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the exchange offer. See “Fees and expenses” and “Transfer taxes” below.

The exchange offer will remain open for at least 20 full business days. The term “expiration date” will mean 5:00 p.m., New York City time, on                 , 2012, unless we, in our sole discretion, extend the exchange offer, in which case the term “expiration date” will mean the latest date and time to which the exchange offer is extended.

To extend the exchange offer, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date, we will:

(1) notify the exchange agents of any extension by oral notice (promptly confirmed in writing) or written notice, and

 

45


Table of Contents

(2) mail to the registered holders an announcement of any extension, and issue a notice by press release or other public announcement before such expiration date.

We reserve the right, in our sole discretion:

(1) if any of the conditions below under the heading “—Conditions on the Exchange Offer” shall have not been satisfied,

(a) to delay accepting any Original Notes,

(b) to extend the exchange offer, or

(c) to terminate the exchange offer, or

(2) to amend the terms of the exchange offer in any manner, provided however, that if we amend the exchange offer to make a material change, including the waiver of a material condition, we will extend the exchange offer, if necessary, to keep the exchange offer open for at least five business days after such amendment or waiver; provided further, that if we amend the exchange offer to change the percentage of Original Notes being exchanged or the consideration being offered, we will extend the exchange offer, if necessary, to keep the exchange offer open for at least ten business days after such amendment or waiver.

Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice to the registered holders.

Procedures for Tendering Original Notes Through Brokers and Banks

Since the Original Notes are represented by global book-entry notes, DTC, as depositary, or its nominee (in the case of the 2019 Original Notes and the 2019 Original Dollar Notes) and a Common depository for Euroclear and Clearstream (in the case of the 2019 Original Euro Notes) is treated as the registered holder of the Original Notes and will be the only entity that can tender your Original Notes for Exchange Notes. Therefore, to tender Original Notes subject to this exchange offer and to obtain Exchange Notes, you must instruct the institution where you keep your Original Notes to tender your Original Notes on your behalf so that they are received on or prior to the expiration of this exchange offer.

The letter of transmittal that may accompany this prospectus may be used by you to give such instructions.

YOU SHOULD CONSULT YOUR ACCOUNT REPRESENTATIVE AT THE BROKER OR BANK WHERE YOU KEEP YOUR ORIGINAL NOTES TO DETERMINE THE PREFERRED PROCEDURE.

IF YOU WISH TO ACCEPT THIS EXCHANGE OFFER, PLEASE INSTRUCT YOUR BROKER OR ACCOUNT REPRESENTATIVE IN TIME FOR YOUR ORIGINAL NOTES TO BE TENDERED BEFORE THE 5:00 PM (NEW YORK CITY TIME) DEADLINE ON             , 2012.

Deemed Representations

To participate in the exchange offer, we require that you represent to us that:

(1) you or any other person acquiring Exchange Notes in exchange for your Original Notes in the exchange offer is acquiring them in the ordinary course of business;

(2) neither you nor any other person acquiring Exchange Notes in exchange for your Original Notes in the exchange offer is engaging in or intends to engage in a distribution of the Exchange Notes within the meaning of the federal securities laws;

(3) neither you nor any other person acquiring Exchange Notes in exchange for your Original Notes has an arrangement or understanding with any person to participate in the distribution of Exchange Notes issued in the exchange offer;

 

46


Table of Contents

(4) neither you nor any other person acquiring Exchange Notes in exchange for your Original Notes is our “affiliate” as defined under Rule 405 of the Securities Act; and

(5) if you or another person acquiring Exchange Notes in exchange for your Original Notes is a broker-dealer and you acquired the Original Notes as a result of market-making activities or other trading activities, you acknowledge that you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the Exchange Notes.

BY TENDERING YOUR ORIGINAL NOTES YOU ARE DEEMED TO HAVE MADE THESE REPRESENTATIONS.

Broker-dealers who cannot make the representations in item (5) of the paragraph above cannot use this exchange offer prospectus in connection with resales of the Exchange Notes issued in the exchange offer.

If you are our “affiliate,” as defined under Rule 405 of the Securities Act, if you are a broker-dealer who acquired your Original Notes in the initial offering and not as a result of market-making or trading activities, or if you are engaged in or intend to engage in or have an arrangement or understanding with any person to participate in a distribution of Exchange Notes acquired in the exchange offer, you or that person:

(1) may not rely on the applicable interpretations of the Staff of the SEC and therefore may not participate in the exchange offer; and

(2) must comply with the registration and prospectus delivery requirements of the Securities Act or an exemption therefrom when reselling the Original Notes.

You may tender some or all of your Original Notes in this exchange offer. The 2018 Original Notes and the 2019 Original Dollar Notes may be exchanged only in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof. The 2019 Original Euro Notes may be exchanged only in minimum denominations of €100,000 and any integral multiple of €1,000 in excess thereof.

When you tender your outstanding Original Notes and we accept them, the tender will be a binding agreement between you and us as described in this prospectus.

The method of delivery of outstanding Original Notes and all other required documents to the exchange agent is at your election and risk.

We will decide all questions about the validity, form, eligibility, acceptance and withdrawal of tendered Original Notes, and our reasonable determination will be final and binding on you. We reserve the absolute right to:

(1) reject any and all tenders of any particular Original Note not properly tendered;

(2) refuse to accept any Original Note if, in our reasonable judgment or the judgment of our counsel, the acceptance would be unlawful; and

(3) waive any defects or irregularities or conditions of the exchange offer as to any particular Original Notes before the expiration of the offer.

Our interpretation of the terms and conditions of the exchange offer will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of Original Notes as we will reasonably determine. Neither we, the exchange agents nor any other person will incur any liability for failure to notify you or any defect or irregularity with respect to your tender of Original Notes. If we waive any terms or conditions pursuant to (3) above with respect to a noteholder, we will extend the same waiver to all noteholders with respect to that term or condition being waived.

 

47


Table of Contents

Procedures for Brokers and Custodian Banks; DTC ATOP Account

In order to accept this exchange offer on behalf of a holder of Original Notes held through DTC you must submit or cause your DTC participant to submit an Agent’s Message as described below.

The exchange agent, on our behalf will seek to establish an Automated Tender Offer Program (ATOP) account with respect to the outstanding Original Notes at DTC promptly after the delivery of this prospectus. Any financial institution that is a DTC participant, including your broker or bank, may make book-entry tender of outstanding Original Notes by causing the book-entry transfer of such Original Notes into our ATOP account in accordance with DTC’s procedures for such transfers. Concurrently with the delivery of Original Notes, an Agent’s Message in connection with such book-entry transfer must be transmitted by DTC to, and received by, the exchange agent on or prior to 5:00 pm, New York City Time on the expiration date. The confirmation of a book entry transfer into the ATOP account as described above is referred to herein as a “Book-Entry Confirmation.”

The term “Agent’s Message” means a message transmitted by the DTC participants to DTC, and thereafter transmitted by DTC to the exchange agent, forming a part of the Book-Entry Confirmation which states that DTC has received an express acknowledgment from the participant in DTC described in such Agent’s Message stating that such participant and beneficial holder agree to be bound by the terms of this exchange offer.

Each Agent’s Message must include the following information:

(1) Name of the beneficial owner tendering such Original Notes;

(2) Account number of the beneficial owner tendering such Original Notes;

(3) Principal amount of Original Notes tendered by such beneficial owner; and

(4) A confirmation that the beneficial holder of the Original Notes tendered has made the representations for our benefit set forth under “—Deemed Representations” above.

Procedures for Tendering

We have forwarded to you, along with this prospectus, a letter of transmittal relating to this exchange offer. Because all of the Original Notes are held in book-entry accounts maintained by the exchange agent at DTC, Euroclear and Clearstream, Luxembourg, a holder need not submit a letter of transmittal. However, all holders who exchange their Original Notes for exchange notes in accordance with procedures outlined below will be deemed to have acknowledged receipt of, and agreed to be bound by, and to have made all of the representations and warranties contained in the letter of transmittal.

Holders of Original Dollar Notes hold their notes through DTC. Holders of Original Euro Notes hold their Euro Notes through Euroclear or Clearstream, Luxembourg, which are participants in DTC.

To tender in the exchange offer, a holder must comply with the following procedures, as applicable:

 

   

Holders of Original Notes through DTC: If you wish to exchange your Original Notes and either you or your registered holder hold your Original Notes (either Old Dollar Notes or old Euro Notes) in book-entry form directly through DTC, you must submit an instruction and follow the procedures for book-entry transfer as provided under “—Book-Entry Transfer.”

 

   

Holders of Original Notes through Euroclear or Clearstream, Luxembourg: If you wish to exchange your Original Notes and either you or your registered holder hold your Original Notes (either old Dollar Notes or old Euro Notes) in book-entry form directly through Euroclear or Clearstream, Luxembourg, you should be aware that pursuant to their internal guidelines, Euroclear and Clearstream, Luxembourg will automatically exchange your Original Notes for exchange notes. If you

 

48


Table of Contents
 

do not wish to participate in the exchange offer, you must instruct Euroclear or Clearstream, Luxembourg, as the case may be, to “Take No Action”; otherwise your Original Notes will automatically be tendered in the exchange offer, and you will be deemed to have agreed to be bound by the terms of the letter of transmittal.

Only a registered holder of record or Original Notes may tender Original Notes in the exchange offer. If you are beneficial owner of Original Notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you may request your respective broker, dealer, commercial bank, trust company or other nominee to effect the above transactions for you. Alternatively, if you are beneficial owner and you wish to act on your own behalf in connection with the exchange offer, you must either make appropriate arrangements to register ownership of the Original Notes in your name or obtain a properly completed bond power from the registered holder.

The tender by a holder that is not withdrawn before expiration of the exchange offer will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. If a holder tenders less than all of the Original Notes held by the holder, the tendering holder should so indicate. The amount of Original Notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated.

The method of delivery of Original Notes, the letter of transmittal and all other required documents or transmission of an agent’s message, as described under “—Book-Entry Transfer,” to the exchange agent is at the election and risk of the holder. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assume delivery to the exchange agent before expiration of the exchange offer. Holders should not send the letter of transmittal or Original Notes to us. Delivery of documents to DTC, Euroclear or Clearstream, Luxembourg in accordance with their respective procedures will not constitute delivery to the exchange agent.

The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. If the applicable letter of transmittal is signed by the record holder(s) of the Original Notes tendered, the signature must correspond with the name(s) written on the face of the original note without alteration, enlargement or any change whatsoever. If a letter of transmittal is signed by the participant in DTC or Euroclear or Clearstream, Luxembourg, as applicable, the signature must correspond with the name as it appears on the security position listing as the holder of the Original Notes.

A signature on a letter of transmittal or a notice of withdrawal must be guaranteed by a member firm of a registered national securities exchange or of the Financial industry Regulatory Authority, a commercial bank or trust company having an office or correspondent in the United States or “an eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act unless the Original Notes tendered pursuant thereto are tendered:

 

   

by a registered holder who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or

 

   

for the account of an eligible institution.

If a letter of transmittal is signed by a person other than the registered holder of any Original Notes, the Original Notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder’s name appears on the Original Notes and an eligible institution must guarantee the signature on the bond power.

If a letter of transmittal or any Original Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing. Unless we waive this requirement, they should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal.

 

49


Table of Contents

We will determine in our sole discretion all questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tendered Original Notes. Our determination will be final and binding. We reserve the absolute right to reject any Original Notes not properly tendered or any Original Notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular Original Notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties.

Unless waived, any defects or irregularities in connection with tenders of Original Notes must be cured within the time that we determine. Although we intend to notify holders of defects or irregularities with respect to tenders of Original Notes, neither we, the exchange agent nor any other person will incur any liability for failure to give notification. Tenders of Original Notes will not be deemed made until those defects or irregularities have been cured or waived.

Original notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.

In addition, we reserve the right in our sole discretion to (a) purchase or make offers for any Original Notes that remain outstanding subsequent to the expiration date, and (b) to the extent permitted by applicable law, purchase Original Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the exchange offer.

Book-Entry Transfer

The exchange agent has established an account with respect to the Original Notes at DTC for the purpose of facilitating the exchange offer. Any financial institution that is a participant in DTC’s system may make book-entry delivery of Original Notes by causing DTC to transfer such Original Notes into the exchange agent’s DTC account in accordance with DTC’s Automated Tender Offer Program procedures for such transfer. Pursuant to their internal guidelines, Euroclear and Clearstream, Luxembourg will automatically exchange Original Notes for exchange notes on behalf of the holders of the Original Notes. If they do not wish to participate in the exchange offer, the registered holder of Original Notes on the records of Euroclear or Clearstream, Luxembourg must instruct Euroclear or Clearstream, Luxembourg, as the case may be, to “Take No Action”; otherwise such Original Notes will be tendered in the exchange offer, and the holder of such notes will be deemed to have agreed to be bound by the terms of the letter of transmittal. The exchange for Original Notes so tendered will only be made after a timely confirmation of a book-entry transfer of Original Notes into the exchange agent’s account, and timely receipt by the exchange agent of an agent’s message.

The term “agent’s message” means a message transmitted by DTC, Euroclear or Clearstream as the case may be, and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that DTC has received an express or deemed acknowledgment from a participant tendering Original Notes and that the participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce that agreement against the participant. Delivery of an agent’s message will also constitute an acknowledgement from the tendering participant that the representations contained in the appropriate letter of transmittal and described below are true and correct.

BY SENDING AN AGENT’S MESSAGE THE DTC, EUROCLEAR OR CLEARSTREAM PARTICIPANT IS DEEMED TO HAVE CERTIFIED THAT THE BENEFICIAL HOLDER FOR WHOM NOTES ARE BEING TENDERED HAS BEEN PROVIDED WITH A COPY OF THIS PROSPECTUS.

The delivery of Original Notes through DTC, Euroclear or Clearstream and any transmission of an Agent’s Message through ATOP, is at the election and risk of the person tendering Original Notes. We will ask the exchange

 

50


Table of Contents

agent to instruct DTC to promptly return those Original Notes, if any, that were tendered through ATOP but were not accepted by us, to the DTC participant that tendered such Original Notes on behalf of holders of the Original Notes.

Acceptance of Outstanding Original Notes for Exchange; Delivery of Exchange Notes

We will accept validly tendered Original Notes when the conditions to the exchange offer have been satisfied or we have waived them. We will have accepted your validly tendered Original Notes when we have given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the Exchange Notes from us. If we do not accept any tendered Original Notes for exchange by book-entry transfer because of an invalid tender or other valid reason, we will credit the Notes to an account maintained with DTC promptly after the exchange offer terminates or expires.

THE AGENT’S MESSAGE MUST BE TRANSMITTED TO EXCHANGE AGENT ON OR BEFORE 5:00 PM, NEW YORK CITY TIME, ON THE EXPIRATION DATE.

Withdrawal Rights

You may withdraw your tender of outstanding notes at any time before 5:00 p.m., New York City time, on the expiration date.

For a withdrawal to be effective, you should contact your bank or broker where your Original Notes are held and have them send an ATOP notice of withdrawal (in the case of Original Notes held through DTC) or on electronic instruction (in the case of Original Notes held through Euroclear or Clearstream) so that it is received by the exchange agent before 5:00 p.m., New York City time, on the expiration date. Such notice of withdrawal must:

(1) specify the name of the person that tendered the Original Notes to be withdrawn;

(2) identify the Original Notes to be withdrawn, including the CUSIP number or ISIN number (as applicable) and principal amount at maturity of the Original Notes; specify the name and number of an account at the DTC, Euroclear or Clearstream (as applicable) to which your withdrawn Original Notes can be credited.

We will decide all questions as to the validity, form and eligibility of the notices and our determination will be final and binding on all parties. Any tendered Original Notes that you withdraw will not be considered to have been validly tendered. We will promptly return any outstanding Original Notes that have been tendered but not exchanged, or credit them to the DTC Euroclear or Clearstream account (as applicable). You may re-tender properly withdrawn Original Notes by following one of the procedures described above before the expiration date.

Conditions on the Exchange Offer

Notwithstanding any other provision of the exchange offer, or any extension of the exchange offer, we will not be required to accept for exchange, or to issue Exchange Notes in exchange for, any outstanding Original Notes and may terminate the exchange offer (whether or not any Original Notes have been accepted for exchange) or amend the exchange offer, if any of the following conditions has occurred or exists and such condition has not been waived by us in our sole reasonable discretion or satisfied, prior to the expiration date:

 

   

any statute, rule, regulation, order or injunction has been sought, proposed, introduced, enacted, promulgated or deemed applicable to the exchange offer or any of the transactions contemplated by the exchange offer by any governmental authority, domestic or foreign or if there is threatened, instituted or pending any action or proceeding before, or any injunction, order or decree issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission:

(1) seeking to restrain or prohibit the making or completion of the exchange offer or any other transaction contemplated by the exchange offer, or assessing or seeking any damages as a result of this transaction; or

 

51


Table of Contents

(2) resulting in a material delay in our ability to accept for exchange or exchange some or all of the Original Notes in the exchange offer; or

 

   

any action has been taken, proposed or threatened, by any governmental authority, domestic or foreign, that, in our sole reasonable judgment, would (a) directly or indirectly result in any of the consequences referred to in clauses (1) or (2) above, (b) result in the holders of Exchange Notes having obligations with respect to resales and transfers of Exchange Notes which are greater than those described in the interpretation of the SEC referred to above, or (c) otherwise make it inadvisable to proceed with the exchange offer; or

 

   

any of the following has occurred:

(1) any general suspension of or general limitation on prices for, or trading in, securities on any national securities exchange or in the over-the-counter market; or

(2) any limitation by a governmental authority which adversely affects our ability to complete the transactions contemplated by the exchange offer; or

(3) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation by any governmental agency or authority which adversely affects the extension of credit; or

(4) a commencement of a war, armed hostilities or other similar international calamity directly or indirectly involving the United States, or, in the case of any of the preceding events existing at the time of the commencement of the exchange offer, a material acceleration or worsening of these calamities; or

 

   

any change, or any development involving a prospective change, has occurred or been threatened in our business, financial condition, operations or prospects and those of our subsidiaries taken as a whole that is or may be adverse to us, or we have become aware of facts that have or may have an adverse impact on the value of the Original Notes or the Exchange Notes, which in our sole reasonable judgment in any case makes it inadvisable to proceed with the exchange offer and/or with such acceptance for exchange or with such exchange; or

 

   

there shall occur a change in the current interpretation by the Staff of the SEC which permits the Exchange Notes issued pursuant to the exchange offer in exchange for Original Notes to be offered for resale, resold and otherwise transferred by holders thereof (other than broker-dealers and any such holder which is our affiliate within the meaning of Rule 405 promulgated under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders’ business and such holders have no arrangement or understanding with any person to participate in the distribution of such Exchange Notes; or

 

   

any law, statute, rule or regulation shall have been adopted or enacted which, in our reasonable judgment, would impair our ability to proceed with the exchange offer; or

 

   

a stop order shall have been issued by the SEC or any state securities authority suspending the effectiveness of the registration statement, or proceedings shall have been initiated or, to our knowledge, threatened for that purpose, or any governmental approval has not been obtained, which approval we shall, in our sole reasonable discretion, deem necessary for the consummation of the exchange offer as contemplated hereby; or

 

   

we have received an opinion of counsel experienced in such matters to the effect that there exists any actual or threatened legal impediment (including a default or prospective default under an agreement, indenture or other instrument or obligation to which we are a party or by which we are bound) to the consummation of the transactions contemplated by the exchange offer.

If we determine in our sole reasonable discretion that any of the foregoing events or conditions has occurred or exists and has not been satisfied, we may, subject to applicable law, terminate the exchange offer (whether or

 

52


Table of Contents

not any Original Notes have been accepted for exchange) or may waive any such condition or otherwise amend the terms of the exchange offer in any respect. If such waiver or amendment constitutes a material change to the exchange offer, we will promptly disclose such waiver or amendment by means of a prospectus supplement that will be distributed to the registered holders of the Original Notes and will extend the exchange offer to the extent required by Rule 14e-1 promulgated under the Exchange Act.

These conditions are for our sole benefit and we may assert them regardless of the circumstances giving rise to any of these conditions, or we may waive them, in whole or in part, in our sole reasonable discretion, provided that we will not waive any condition with respect to an individual holder of Original Notes unless we waive that condition for all such holders. Any reasonable determination made by us concerning an event, development or circumstance described or referred to above will be final and binding on all parties. Our failure at any time to exercise any of the foregoing rights will not be a waiver of our rights and each such right will be deemed an ongoing right which may be asserted at any time before the expiration of the exchange offer.

Exchange Agent

Wilmington Trust, National Association has been appointed as Dollar Note Exchange Agent in connection with the Exchange Offer for the Dollar Notes. Questions and requests for assistance, as well as requests for additional copies of this prospectus or of the letter of transmittal, should be directed to the Exchange Agent at its offices at Wilmington Trust, National Association, c/o Wilmington Trust Company, Corporate Capital Markets, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-1626. The Dollar Note Exchange Agent’s telephone number is (302) 636-6181 and facsimile number is (302) 636-4139.

Citibank, N.A. London Branch has been appointed as Euro Note Exchange Agent in connection with the Exchange Offer for the Euro Notes. Questions and requests for assistance, as well as requests for additional copies of this prospectus or of the letter of transmittal, should be directed to the Exchange Agent at its offices at Citibank, N.A. London Branch, 13th Floor, Citigroup Centre, Canada Square, London E14 5LB, United Kingdom, attention Exchange Team. The Euro Note Exchange Agent’s telephone number is +44 20 7508 3867 and facsimile number is +44 20 3320 2405.

Fees and Expenses

The principal solicitation is being made through DTC by Wilmington Trust, National Association, as exchange agent. We will pay the exchange agent customary fees for its services, reimburse the exchange agent for its reasonable out-of-pocket expenses incurred in connection with the provisions of these services and pay other registration expenses, including registration and filing fees, fees and expenses of compliance with federal securities and state blue sky securities laws, printing expenses, messenger and delivery services and telephone, fees and disbursements to our counsel, application and filing fees and any fees and disbursements to our independent certified public accountants. We will not make any payment to brokers, dealers, or others soliciting acceptances of the exchange offer except for reimbursement of mailing expenses.

Additional solicitations may be made by telephone, facsimile or in person by our and our authorized agents’ respective officers, employees and by persons so engaged by the exchange agent.

Accounting Treatment

The Exchange Notes will be recorded at the same carrying value as the existing Original Notes, as reflected in our accounting records on the date of exchange. Accordingly, neither Reporting Parent, Issuer or any of their subsidiaries will recognize any gain or loss for accounting purposes.

Transfer Taxes

If you tender outstanding Original Notes for exchange you will not be obligated to pay any transfer taxes. However, if you instruct us to register Exchange Notes in the name of, or request that your Original Notes not

 

53


Table of Contents

tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder, you will be responsible for paying any transfer tax owed.

YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU FAIL TO EXCHANGE OUTSTANDING ORIGINAL NOTES.

If you do not tender your outstanding Original Notes, you will not have any further registration rights, except for the rights described in the Registration Rights Agreement and described above, and your Original Notes will continue to be subject to the provisions of the indenture governing the Original Notes regarding transfer and exchange of the Original Notes and the restrictions on transfer of the Original Notes imposed by the Securities Act and state securities laws when we complete the exchange offer. These transfer restrictions are required because the Original Notes were issued under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. Accordingly, if you do not tender your Original Notes in the exchange offer, your ability to sell or otherwise transfer your Original Notes could be adversely affected. Once we have completed the exchange offer, holders who have not tendered notes will not continue to be entitled to any increase in interest rate that the indenture governing the Original Notes provides for if we do not complete the exchange offer.

Consequences of Failure to Exchange

The Original Notes that are not exchanged for Exchange Notes pursuant to the exchange offer will remain restricted securities. Accordingly, the Original Notes may be resold only:

(1) to us upon redemption thereof or otherwise;

(2) so long as the outstanding securities are eligible for resale pursuant to Rule 144A, to a person inside the United States who is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act, which other exemption is based upon an opinion of counsel reasonably acceptable to us;

(3) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act; or

(4) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States.

Shelf Registration

The Registration Rights Agreement also requires that we file a shelf registration statement if:

(1) we cannot file a registration statement for the exchange offer because the exchange offer is not permitted by law or SEC policy;

(2) a law or SEC policy prohibits a holder from participating in the exchange offer;

(3) a holder cannot resell the Exchange Notes it acquires in the exchange offer without delivering a prospectus and this prospectus is not appropriate or available for resales by the holder; or

(4) a holder is a broker-dealer and holds notes acquired directly from us or one of our affiliates.

We will also register the Exchange Notes under the securities laws of jurisdictions that holders may request before offering or selling notes in a public offering. We do not intend to register Exchange Notes in any jurisdiction unless a holder requests that we do so.

Original Notes may be subject to restrictions on transfer until:

(1) a person other than a broker-dealer has exchanged the Original Notes in the exchange offer;

 

54


Table of Contents

(2) a broker-dealer has exchanged the Original Notes in the exchange offer and sells them to a purchaser that receives a prospectus from the broker-dealer on or before the sale;

(3) the Original Notes are sold under an effective shelf registration statement that we have filed; or

(4) the Original Notes are sold under Rule 144 of the Securities Act.

 

55


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following overview in conjunction with the selected consolidated financial data presented above, the audited financial statements of Infor, Inc. the related notes thereto, and other financial information appearing elsewhere in this prospectus.

The discussion and analysis of our financial condition and results of operations are based upon our audited financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods presented, as well as our disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions, including, but not limited to, those related to revenue recognition, allowance for doubtful accounts and sales returns, fair value of stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, restructuring obligations and contingencies and litigation. We base our estimates and assumptions on our historical experience and on other information available to us at the time that these estimates and assumptions are made. We believe that these estimates and assumptions are reasonable under the circumstances and form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results and outcomes could differ from our estimates.

Basis of Financial Statement Presentation

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

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

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

Hereafter, any reference to we, our, us, Infor or the Company refers to the combined company and the consolidated financial statements thereof presented under common control.

 

56


Table of Contents

Management Overview

General

Infor is a global provider of enterprise business applications software and services focused primarily on medium and large enterprises. We develop, market, distribute and service enterprise software applications that help organizations manage their businesses. We deliver integrated enterprise business solutions including customer relationship management (CRM), enterprise asset management (EAM), enterprise resource planning (ERP), financial management, human capital management (HCM), performance management, product lifecycle management, property management systems, central reservations systems, man supplier relationship management and supply chain management (SCM), including business specific inventory management, transportation logistics, manufacturing and warehouse management software. Infor also offers software license updates and product support as well as other services including consulting, advanced product services, hosting and education.

We offer a broad range of software applications and industry-specific solutions that we believe help our customers improve their business processes and reduce costs, resulting in better business or operational performance. Our solutions help automate and integrate critical business processes which enable our customers to better manage their suppliers, partners, customers and employees.

We specialize in and target specific industries (or verticals), and have industry-specific business units that leverage our industry-oriented products and teams. We provide industry-specific ERP software products to companies in the manufacturing, distribution, healthcare, public sector, automotive, service industries, equipment services, management and rental (ESM&R), consumer products & retail and hospitality industries. Our industry-specific approach distinguishes us from larger competing ERP vendors, whose primary focus is on less specialized software programs that take more time and cost to tailor to our target customers’ specific needs. Augmenting our vertical-specific applications, we have leading horizontal software applications, including our CRM, EAM, HCM, SCM and financial application suites, which, through our proprietary light-weight middleware solution ION®, are integrated with our enterprise software applications and sold across verticals.

We generate revenue primarily by licensing software, providing product updates and support and providing consulting services to our customers. We operate in three segments: License, Maintenance and Consulting. We market and sell our software and services primarily through a direct sales force, which is augmented by systems integrators and resellers. In addition to providing software products, we generate substantial recurring revenue by providing on-going software support services to our customers through our maintenance and support programs. The product updates and support we provide are valued by our customers as evidenced by our high annual maintenance retention rates. We also help our customers implement and use our applications effectively through our consulting services offerings, including training, implementation and consulting services.

We serve customers across three geographic regions—the Americas, EMEA and APAC. We have over 12,400 employees worldwide and have offices in 38 countries. We have established a worldwide infrastructure for distribution, development and support of our enterprise software. This worldwide coverage provides us with both economies of scale and the ability to leverage our geographical expertise to effectively enter new markets and segments. In fiscal 2012, our Americas, EMEA and APAC regions generated approximately 54.7%, 35.5% and 9.8% of our revenues, respectively. Though we have a considerable presence outside of the U.S. today, we believe we have significant opportunities to expand internationally and capture market share, especially in the EMEA and APAC regions.

Fiscal 2012 Overview

In the current business environment, given ongoing concerns about economic growth, the global financial system, and numerous geopolitical issues, there is a focus on IT products and services that can reduce cost and deliver rapid return on investment (ROI). We believe that our industry-specific solutions, flexible distribution,

 

57


Table of Contents

and implementation model and innovative technology allows for increased business flexibility and rapid ROI, enabling us to stay competitive in a challenging economic environment.

During our fiscal 2012 our total revenues grew by 35.6% compared to fiscal 2011 primarily as a result of our acquisition of Lawson. Excluding the impact of Lawson, we were also able to grow our revenues in all categories when compared to fiscal 2011. We made many key investments during fiscal year 2012, including the addition of 325 developers to help drive more rapid and rich product across our key vertical markets and product categories. This was in addition to the over 1,000 research and development resources acquired through Lawson. With our acquisition of Lawson, the completion of the Infor Combination and our continued focus on driving efficiency into operations, we were also able to deliver non-GAAP operating margin of 27.0% in fiscal 2012.

With the acquisition of Lawson, we significantly expanded our product offerings and now provide unique, vertically-focused software products to companies in the healthcare, manufacturing, distribution, public sector, equipment rental, retail, services and hospitality industries. In addition, Lawson has greatly increased our base of recurring and high-margin maintenance services, specifically our product update and support revenues. The ratable recognition of our maintenance revenues combined with low costs associated with these recurring sales, results in a stable source of cash flow. We believe customer feedback relating to the Lawson acquisition has been positive and that our strong sales during fiscal 2012 are continued evidence of the successful integration of Lawson and of our industry-focused growth strategy.

Our enterprise software products are developed to meet the specific needs of customers in our targeted industries and generally enable customers to have functionality tailored to the unique needs of their markets. We intend to continue the design, development and deployment of industry-specific products and technologies that maximize ease-of-use and provide a lower total cost of ownership for customers by saving them time and resources during implementation. To maximize the benefits of our industry-specific solutions, we complement our industry expertise through our professional services organization and strategic relationships with key consulting partners.

We expect that the challenging overall demand environment that existed in fiscal year 2012 will continue for fiscal year 2013. This overall economic uncertainty may negatively affect sales, with particular risk in Europe. Offsetting the challenges of the current economic environment is the robust series of products that were released in fiscal year 2012 and are slated to be released in fiscal year 2013. Additionally, our strategy will remain focused on specific industries and the ability to rapidly deliver ROI, which we believe will allow us to outperform the broader market as IT managers continue to focus on projects that quickly deliver value.

Acquisitions

An active acquisition program is another important element of our corporate strategy. In recent years, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. We believe our acquisition program strengthens our competitive position, enhances the products and services that we can offer to customers, expands our customer base, provides greater scale to accelerate innovation, grow our revenues and earnings, and increases our overall value. We expect to continue to acquire companies, products, services and technologies in furtherance of our corporate strategy. See Note 3 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus for additional information related to our recent acquisitions.

We believe we can fund our pending and future acquisitions with our internally available cash, cash equivalents and marketable securities, cash generated from operations or additional borrowings. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash flow and return on invested capital targets before deciding to move forward with an acquisition.

 

58


Table of Contents

Acquisition of Lawson

On July 5, 2011, GGC Holdings (now known as Infor, Inc.) purchased 100% of the outstanding voting shares of Lawson Software, Inc., a publicly traded company located in St. Paul, MN, for approximately $1,958.2 million. Under the terms of the merger agreement, stockholders of Lawson received $11.25 per share in cash. We financed the merger, refinanced certain existing debt of Infor, and paid related fees and expenses through a combination of cash, new debt and bonds. Operating results of Lawson have been included in our results of operations since the acquisition date.

Acquisition of SoftBrands

On August 13, 2009, Steel Holdings (now known as Infor, Inc.) purchased 100% of the outstanding voting shares of SoftBrands, Inc. (SoftBrands), a publicly traded company, for approximately $82.9 million in cash, net of cash acquired. SoftBrands is a global provider of enterprise software and related consulting services to customers primarily in the manufacturing and hospitality industries.

Other Acquisitions

During the last three fiscal years we completed seven additional acquisitions for an aggregate purchase price of $68.8 million, net of cash acquired. These acquisitions were not significant, either individually or in the aggregate.

Financing Activities

In the fourth quarter of fiscal 2012, we completed the Infor Combination. As part of these transactions, investment funds affiliated with Golden Gate Capital and Summit Partners invested $550 million in Infor Enterprise Applications, LP (Infor Enterprise), of which $325 million was contributed as equity to Infor, Inc., and $225 million was used to repay a portion of Infor Lux Bond Company’s (Lux Bond Co.) PIK Term Loan (Lux PIK Term Loan). Additionally, $344 million owed to Lux Bond Co. by Infor, Inc. was forgiven and contributed as capital. In addition, we successfully refinanced our debt structure by entering into a new credit agreement under which we borrowed $3,170.0 million in U.S. Dollar denominated term loans and €250.0 million Euro denominated term loans. In addition we issued $1,015.0 million in U.S. Dollar denominated 93/ 8% senior notes and €250.0 million Euro denominated 10.0% senior notes. We used the net proceeds from the issuance of these notes, borrowings under our new credit facilities, and the additional equity investments to repay certain of our existing debt balances, pay related fees and expenses and for general corporate purposes.

In the first quarter of fiscal 2012, concurrent with the consummation of the Lawson transaction, Lawson and SoftBrands entered into new senior secured credit facilities under which Lawson and SoftBrands borrowed $1,040.0 million aggregate principal Term Loan and issued $560.0 million in aggregate principal amount of 11.5% Infor Senior Notes. Proceeds from the new debt and notes were used to fund the purchase of Lawson, to pay fees and expenses incurred in connection with the merger, and to repay the previously existing debt as well as the Lawson senior convertible notes assumed with the acquisition. With the Lawson transaction, we also assumed the liability relating to Lawson’s senior convertible notes totaling $253.8 million. All of these notes were surrendered for purchase in the first quarter of fiscal 2012 or settled upon maturity during the fourth quarter of fiscal 2012. With the refinancing of our debt structure in the fourth quarter of fiscal 2012, the remaining balance of the $1,040.0 million term Loan was repaid.

In the first quarter of fiscal 2012, certain of the Infor Global Solutions subsidiaries entered into a refinancing amendment with respect to the Infor Global Solutions Original First Lien Term Loan. The primary objective of the Infor Global Solutions refinancing amendment was to extend the maturity date of the Infor Global Solutions Original First Lien Term Loan. Under the terms of the refinancing amendment, Infor Global Solutions refinanced $500.0 million, paid off $446.8 million of the Infor Global Solutions Original First Lien Term Loan and received $24.6 million in cash, net of transaction costs of $28.6 million. The remaining balance of the Infor Global Solutions Original First Lien Term Loan was also repaid in conjunction with our fourth quarter refinancing.

 

59


Table of Contents

See, Liquidity and Capital Resources – Long-Term Debt, below for further discussion of these financing activities.

Restructuring Activities

During recent years, the global economy was weakened by a world-wide economic downturn. Due to the unprecedented nature of this downturn, we experienced longer sales cycles and increased pricing pressure. Budgetary concerns by current and prospective customers led them to delay, cancel or limit software purchases, implementation and annual product updates. The negative impact on demand for our software products and services was primarily felt throughout fiscal 2010 and the first half of fiscal 2011.

In response to these economic conditions we undertook certain restructuring actions, particularly during fiscal 2009 and 2010, including reducing our headcount and streamlining our operations. These actions included the elimination of 1,200 Infor Global Solutions employees, or 13% of our global workforce, and the elimination of 198 former SoftBrands employees, or 32% of the SoftBrands global workforce. During fiscal 2012, we eliminated 549 former Lawson employees, or 14% of the Lawson global workforce. We achieved these reductions by streamlining our back-office functions and eliminating redundancies incurred through acquisitions. We also undertook actions to eliminate redundant locations worldwide. Our results for fiscal 2012, fiscal 2011 and fiscal 2010 include restructuring charges of $67.8 million, $14.9 million and $28.8 million, respectively, relating to these actions. We continue to closely monitor our discretionary spending while preserving targeted investments that we believe will enable our long-term growth and increase our operational efficiencies. We may consider possible future actions to reduce our operating costs if circumstances warrant.

Non-GAAP Financial Measures

Our results of operations in this Management’s Discussion and Analysis are presented in accordance with GAAP. In addition to reporting our financial results in accordance with U.S. GAAP, we present certain non-GAAP financial measures as well. Presentation of these non-GAAP measures allows users to review our results of operations from the same perspective as management and our Board of Directors. These non-GAAP measures include non-GAAP revenues, non-GAAP income from operations and non-GAAP operating margin. See, Non-GAAP Financial Measure Reconciliations, below for additional information regarding our use of these non-GAAP financial measures and reconciliations to the corresponding GAAP measures.

Foreign Currency

A significant portion of our business is conducted in currencies other than the U.S. Dollar, particularly the Euro and British Pound. Our revenues and operating expenses are affected by fluctuations in applicable foreign currency exchange rates. Downward fluctuations in the value of the U.S. Dollar compared to a foreign currency generally have the effect of increasing our revenues but also increasing our operating expenses denominated in currencies other than the U.S. Dollar. Similarly, strengthening in the U.S. Dollar compared to foreign currency exchange rates generally has the effect of reducing our revenues but also reducing our operating expenses denominated in currencies other than the U.S. Dollar. In addition, we have certain intercompany transfer pricing transactions, intercompany loans and other intercompany transactions that are not considered permanent in nature. Fluctuations in applicable foreign currency exchange rates on these intercompany balances may impact our results of operations.

For fiscal 2012, the average exchange rates for the U.S. Dollar against the Euro and British Pound weakened by approximately 0.7% and 0.7%, respectively, as compared to the average exchange rates for fiscal 2011. For fiscal 2011, the average exchange rates for the U.S. Dollar against the Euro and the British Pound strengthened by approximately 4.3% and 1.0%, respectively, compared to the average exchange rates for fiscal 2010.

Our international operations have provided and will continue to provide a significant portion of our total revenues and expenses. As a result, total revenues and expenses will continue to be affected by changes in the

 

60


Table of Contents

U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percent change in the results from one period to another period using constant currency disclosure. To present this information, the most current period results for our entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e. the average rates in effect in the prior comparable period) rather than the actual exchange rates in effect during the respective periods. In each of the tables below, we present the percent change based on actual results in reported currency and in constant currency.

The following tables summarize the period-over-period change, both in U.S. Dollars and percentages, in revenues and costs and expenses, isolating the fluctuations in exchange rates from changes in activity and pricing on a constant currency basis for the periods presented:

 

(in millions, except percentages)

Year Ended May 31,

2012 vs. 2011

   Change Due
to Currency
Fluctuations
    Change
in
Constant
Currency
     Total
Change
as
Reported
     Change Due
to
Currency
Fluctuations
    Change
in
Constant
Currency
    Total
Change
as
Reported
 

Revenues:

              

License fees

   $ (1.8   $ 139.2       $ 137.4         (0.5 )%      37.8     37.3

Product updates and support fees

     6.2        282.4         288.6         0.6        28.4        29.0   
  

 

 

   

 

 

    

 

 

        

Software revenues

     4.4        421.6         426.0         0.3        30.9        31.2   

Consulting services and other fees

     2.2        238.8         241.0         0.5        46.8        47.3   
  

 

 

   

 

 

    

 

 

        

Total revenues

   $ 6.6      $ 660.4       $ 667.0         0.4     35.2     35.6
  

 

 

   

 

 

    

 

 

        

Total operating expenses

   $ 7.8      $ 756.4       $ 764.2         0.5     46.1     46.6
  

 

 

   

 

 

    

 

 

        

 

(in millions, except percentages)

Year Ended May 31,

2011 vs. 2010

   Change Due
to Currency
Fluctuations
    Change
in
Constant
Currency
    Total
Change
as
Reported
    Change Due
to Currency
Fluctuations
    Change
in
Constant
Currency
    Total
Change
as
Reported
 

Revenues:

            

License fees

   $ 5.2      $ 23.2      $ 28.4        1.6     6.8     8.4

Product updates and support fees

     (0.1     (4.1     (4.2     (0.0     (0.4     (0.4
  

 

 

   

 

 

   

 

 

       

Software revenues

     5.1        19.1        24.2        0.4        1.4        1.8   

Consulting services and other fees

     (0.7     13.6        12.9        (0.1     2.7        2.6   
  

 

 

   

 

 

   

 

 

       

Total revenues

   $ 4.4      $ 32.7      $ 37.1        0.2     1.8     2.0
  

 

 

   

 

 

   

 

 

       

Total operating expenses

   $ (1.5   $ (36.1   $ (37.6     (0.0 )%      (2.2 )%      (2.2 )% 
  

 

 

   

 

 

   

 

 

       

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our audited Consolidated Financial Statements, which have been 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). GAAP, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, in Notes to Consolidated Financial Statements of this Annual Report. The accounting policies that reflect management’s significant estimates, judgments and assumptions and which we believe are

 

61


Table of Contents

the most critical to aid in fully understanding and evaluating our reported financial results include the following areas:

 

   

Revenue Recognition;

 

   

Business Combinations;

 

   

Restructuring;

 

   

Valuation of Accounts Receivable;

 

   

Valuation of Goodwill and Intangible Assets;

 

   

Income Taxes and Valuation of Deferred Tax Assets;

 

   

Contingencies—Litigation Reserves; and

 

   

Stock-Based Compensation.

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. Our senior management has reviewed the below critical accounting policies and related disclosures with the Audit Committee of our Board of Directors.

Revenue Recognition

Revenue is a key component of our results of operations and is a key metric used by management and investors to evaluate our performance. Revenue recognition for software businesses is very complex. We follow specific guidelines in determining the proper amount of revenue to be recorded. However, certain judgments affect the application of our revenue recognition policy. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from year to year. The significant judgments for revenue recognition typically involve whether collectability can be considered probable and whether fees are fixed or determinable. In addition, our transactions often consist of multiple element arrangements, which typically include license fees, maintenance and support fees and consulting service fees. The amounts of revenue reported in our consolidated statements of operations may vary, due to the amount of judgment required to address significant assumptions, risks and uncertainties in applying the guidelines under GAAP.

We generate revenues primarily by licensing software, providing software support and product updates and providing consulting services to our customers. We record all 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 specific revenue recognition policies are as follows:

License Fees

License fees revenues are primarily from sales of perpetual software licenses granting customers use of the Infor’s software products and access to those 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.

We do not generally offer rights of return or acceptance clauses. If a software license contains rights of return or customer acceptance criteria, recognition of the license fee revenue is deferred until the earlier of customer acceptance or the expiration of the acceptance period or cancellation of the right of return.

 

62


Table of Contents

We record revenues from sales of third party products on a “gross” basis pursuant to ASC 605-45 Revenue Recognition, Principal Agent Considerations when the Company 1) has obtained persuasive evidence of an arrangement, 2) takes title to the products which are being sold and 3) has the risks and rewards of ownership such as retaining the risk for collection. If these three criteria have not been met, revenue is recognized net of related direct costs.

Revenue arrangements through our resellers that involve Infor contracting directly with an end user follow the same revenue recognition rules as our direct sales business. Revenue arrangements which involve Infor contracting directly with a reseller are generally recognized when the reseller purchases a product for resale to an identified end user provided that all other revenue recognition criteria have been met.

We enter into multiple element arrangements for software and software related products and services, which may include software license, product updates and support and/or implementation and consulting services agreements. Revenue is allocated to undelivered elements based upon their fair value as determined by vendor-specific objective evidence (VSOE). VSOE of fair value for certain elements of an arrangement is based upon our normal pricing practices, when those products and services are sold separately

We generally do not have VSOE of fair value for license fees as software licenses are typically not sold separately from product updates. Since the fair value of a delivered element (license) has not been established, the residual method is used to record license revenue when VSOE of fair value of all undelivered elements is determinable. Under the residual method, the VSOE of fair value of an undelivered element (product updates and/or services) is deferred and the remaining portion of the fee is allocated to the delivered element (license) and is recognized as revenue in accordance with the provisions of ASC 985-605. In instances where VSOE of fair value of one or more of the undelivered elements is not established, license revenue is recognized ratably over the term of the arrangement once all other services have been delivered and one undelivered element remains.

For customer arrangements that include license fees, implementation and/or other consulting services, the portion of the fees related to software licenses is generally recognized when delivered, as the implementation and consulting services typically qualify for separate recognition. The significant factors considered in determining whether the elements constitute multiple units of accounting for revenue recognition purposes include: (1) the nature of the services and consideration of whether the services are essential to the functionality of the licensed product, (2) degree of risk related to delivering the services, (3) availability of comparable services from other vendors, (4) timing of payments and (5) impact of milestones or acceptance criteria on the recognition of the license fee. The portion of the fees related to implementation and other consulting services is recognized as such services are performed. If there is a significant uncertainty about the project completion or receipt of payment for the services, revenues are deferred until the uncertainty is sufficiently resolved. If it is determined that the services are not separable from the arrangement for revenue recognition purposes, the license fees and services are recognized using contract accounting either on a percentage of completion basis, measured by the percentage of labor hours incurred to date to estimated total labor hours for each contract, or on a completed contract basis when dependable estimates are not available. Such contract accounting is applied to any arrangements: (1) that include milestones or customer specific acceptance criteria that may affect collection of the license fees, (2) where services include significant modification or customization of the software, or (3) where the software license payment is tied to the performance of consulting services.

We also enter into multiple element arrangements that may include a combination of our various software related and non-software related products and services offerings including software licenses, SaaS, product updates and support, consulting services, education and hosting services. Each element within a non-software multiple element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis, and (2) if the arrangement includes a general right to return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in our control. We consider a deliverable to have standalone value if the

 

63


Table of Contents

product or service is sold separately by Infor or another vendor or could be resold by the customer. In such arrangements, we first allocate the total arrangement consideration based on the relative selling prices of the software group of elements as a whole and to the non-software elements. We then further allocates consideration within the software group to the respective elements within that group following the guidance in ASC 985-605 and our policies as described above. For the non-software group, revenue is then allocated to each element using a selling price hierarchy; VSOE if available, third party evidence (TPE) if VSOE is not available, or best estimate of selling price (BESP) if neither VSOE nor TPE are available.

To determine the selling price in multiple-element arrangements, we establish VSOE of selling price as described earlier. For non-software multiple-element arrangements, TPE is established by evaluating similar and interchangeable competitor products or service in standalone arrangements with similarly situated customers. If we are unable to determine the selling price because VSOE or TPE is unavailable, BESP is determined for the purposes of allocating the arrangement. The objective of BESP is to determine the price at which the vendor would transact if the deliverable were sold by the vendor regularly on a standalone basis. Infor determines BESP for its offerings by considering many factors, including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives and pricing practices.

For arrangements which include hosting, we account for the license element according to the residual method upon delivery of the license element to the customer. The portion of the arrangement fee allocated to the hosting element is recognized ratably over the term of the hosting arrangement.

Product Updates and Support Fees

Product updates and support fees entitle the customer to receive, for an agreed upon period, unspecified product upgrades (when and if available), release updates, regulatory updates and patches, as well as support services including access to technical information and technical support staff. The term of product updates and support services is typically twelve months. Product updates and support fees can fluctuate based on the number and timing of new license contracts, renewal rates and price increases. The product updates and support fees are recorded as product updates and support fees revenue and recognized ratably over the term of the agreement. Revenues for maintenance and support that are bundled with license fees are deferred based on the VSOE of fair value of the bundled maintenance and support and recognized over the term of the agreement.

Consulting Services and Other

We also provide software-related services, including systems implementation and integration services, consulting, education & training, custom modification, hardware education, hosting services and application managed services. Consulting services are usually separately priced and are generally not essential to the functionality of our software products. Consulting services are generally provided under time and materials contracts and revenues are recognized as the services are provided. However, when we enter into arrangements with a fixed-fee or a maximum-fee basis where services are not considered essential to the functionality of the software, revenue is recognized based upon a proportionate performance method. When we enter into arrangements where services are considered essential to the functionality of the software, revenue is recognized based upon a percentage of completion method. Under this method, revenue is recognized based upon labor hours incurred as a percentage of total estimated labor hours to complete the project. Provisions for estimated losses on incomplete contracts are made in the period in which such losses are determined. Revenues for consulting services that are bundled with license fees are deferred based on the VSOE of fair value of the bundled services and recognized when the services are performed.

Consulting services and other revenue also include hosting services. Hosted customers with perpetual licenses have the contractual right to take possession of the software at any time during the hosted period. The customer has the right to choose not to renew its hosting arrangement upon its expiration and can deploy the software internally or contract with another party unrelated to Infor to host the software. Customers can self-host

 

64


Table of Contents

and any penalties to do so are not significant. Accordingly, the portion of an arrangement allocated to the hosting element is recognized separately from license fee revenue as services are provided. In accordance with the provisions set forth in ASC 605, we recognize amounts associated with reimbursements from customers for out-of-pocket expenses as revenue on a gross basis. Such amounts have been classified as consulting services and other revenue.

Deferred Revenues

Deferred revenues represent amounts billed or payments received from customers for software licenses, services and/or product updates in advance of recognizing revenue or performing services. We defer revenues for any undelivered elements, and recognize revenues when the product is delivered or over the period in which the service is performed, in accordance with its revenue recognition policy for such elements. Product updates and support is normally billed quarterly or annually in advance of performing the service.

Deferred Expenses

Commissions payable to our direct sales force and independent affiliates who resell Infor’s software products, as well as royalties payable to third-party software vendors, are recorded when a sale is completed or cash received, which coincides with the timing of revenue recognition in most cases. When revenue is recognized ratably over time, related commissions and royalties are deferred and amortized over the same period as the recognition of the revenue.

Collectability

We assess the probability of collection based upon several factors, including: (1) third party credit agency information, (2) customer financial statements and/or (3) customer payment history. We typically do not provide for payment terms in excess of six months. Certain customer arrangements are recognized upon collection due to their specific collection history.

Business Combinations

We account for acquisitions under ASC 805, Business Combinations. The underlying principles require recognition, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While best estimates and assumptions are used as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, adjustments are recorded to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in our results of operations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets, support obligations assumed, estimated restructuring liabilities and pre-acquisition contingencies. Although we believe the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

Examples of critical estimates in valuing certain of the intangible assets we have acquired include but are not limited to:

 

   

future expected cash flows from license fees, product updates and support fees, consulting contracts, other customer contracts and acquired developed technologies and patents;

 

65


Table of Contents
   

expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed;

 

   

the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will continue to be used in the combined company’s product portfolio; and

 

   

discount rates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

In connection with the purchase price allocations for our acquisitions, we estimate the fair value of product updates and support obligations assumed. The acquired deferred revenue is recognized at fair value to the extent it represents a legal obligation assumed by Infor. We consider post-contract support (PCS) obligations/services in their entirety and service contracts to be legal obligations of the acquired entity. PCS arrangements of acquired entities typically include unspecified product upgrades (when and if available), release updates, regulatory updates and patches, as well as support fees including access to technical information and technical support staff. We consider the PCS arrangement to be a separate element when determining the legal obligation assumed from the acquired entity. We expect to fulfill each underlying obligation element of the support arrangement. The estimated fair values of these PCS arrangements are determined utilizing a top-down approach. The top-down approach relies on market indicators of expected revenue for any obligation yet to be delivered with appropriate adjustments. Conceptually, we start with the amount we would expect to receive in a transaction, less the estimated selling effort, which has already been performed, including an estimated profit margin on that selling effort.

In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date and we reevaluate these items periodically with any adjustments to our preliminary estimates being recorded to goodwill provided that we are within the measurement period and we continue to collect information in order to determine their estimated values. Subsequent to the measurement period or our final determination of the uncertain tax positions estimated value or tax related valuation allowances, changes to these uncertain tax positions and tax related valuation allowances will affect our provision for income taxes in our consolidated statement of operations and could have a material impact on our results of operations and financial position.

Restructuring

Costs to exit or restructure certain activities of an acquired company or our internal operations are accounted for as one-time termination and exit costs pursuant to ASC 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for a cost associated with an exit or disposal activity is measured at fair value on the consolidated balance sheet and recognized in the consolidated statement of operations in the period in which the liability is incurred. When estimating the fair value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to be received, which can differ materially from actual results. This may require revision of initial estimates which may materially affect our results of operations and financial position in the period the revision is made. In the normal course of business, Infor may incur restructuring charges related to personnel which are accounted for in accordance with ASC 712, Compensation—Nonretirement Postemployment Benefits. These restructuring charges represent severance associated with redundant positions.

We estimate the amounts of these costs based on our expectations at the time the charges are taken and we reevaluate the remaining accruals at each reporting date based on current facts and circumstances. If our estimates or expectations change because we are subjected to contractual obligations or negotiations we did not anticipate, we choose to further restructure our operations, or there are other costs or changes we did not foresee, we adjust the restructuring accruals in the period that our estimates change. Such changes are recorded as increases or decreases to the restructuring related charges in our results of operations.

 

66


Table of Contents

Valuation of Accounts Receivable

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. 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 judging the adequacy of the allowance for doubtful accounts, we consider multiple factors including historical bad debt experience, the general economic environment, the need for specific customer reserves and the aging of our receivables. To assess the need for specific customer reserves, we evaluate the probability of collection based upon several factors including: 1) third party credit agency information, 2) customer financial statements and/or 3) customer payment history. A considerable amount of judgment is required in assessing these factors. If the factors used in determining the allowance do not reflect future events, then a change in the allowance for doubtful accounts would be necessary at the time of determination. Such a change may have a significant impact on our future results of operations. Accounts receivable are charged off against the allowance when we determine it is probable the receivable will not be recovered.

Valuation of Goodwill and Intangible Assets

Our intangible assets and goodwill resulted primarily from our acquisitions. We account for intangible assets and goodwill pursuant to ASC 350, Intangibles—Goodwill and Other. Whenever events or changes in circumstances indicate the carrying amount may not be recoverable we review these assets for impairment or disposal. In order to perform these reviews we must first determine our reporting units in accordance with ASC 280, Segment Reporting. ASC 280 requires a public enterprise to report financial and descriptive information about its reportable operating segments, and thus its reporting units. As of June 1, 2011, we have determined that we operate as three reporting units: License, Maintenance and Consulting. As a result of our change in reporting units, we performed a Step 1 impairment test of our goodwill by reporting unit as of June 1, 2011 and determined no impairment was indicated. Events or changes in circumstances that indicate the carrying amount of the assets may not be recoverable include, but are not limited to, a significant decrease in the market value of the business or asset acquired, a significant adverse change in the extent or manner in which the business or asset acquired is used or a significant adverse change in the business climate in which we operate.

We adopted the FASB guidance that allows for a qualitative analysis to determine goodwill impairment on June 1, 2011 and performed our first goodwill impairment analysis under the new guidance on September 30, 2011. Our annual testing for goodwill impairment begins with a qualitative comparison of a reporting unit’s fair value to its carrying value to determine if it is more-likely-than-not that the fair value is less than the carrying value and thus whether any further two-step impairment tests are necessary. If further two-step impairment testing is necessary, the first step is used to identify potential impairment and compares the fair value of a reporting unit with its carrying amount, including goodwill. If our carrying amount exceeded our market value, the second step of the goodwill impairment test would be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of the goodwill with its carrying amount. If the carrying amount of the goodwill exceeds the implied fair value, an impairment loss would be recognized in an amount equal to the excess. Any loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill is the new accounting basis. A subsequent reversal of a previously recognized goodwill impairment loss is prohibited once the measurement of that loss is completed and the loss has been recognized. The estimate of the total fair value of the reporting unit requires assumptions including the use of projections of future cash flows and discount rates. The discount rate utilized is based on management’s best estimate of the related risks and return at the time the impairment assessment is made. We perform our annual impairment test as of September 30. The results of our most recent annual tests performed in fiscal 2012, 2011 and 2010 did not indicate any potential impairment of our goodwill and we have no accumulated impairment charges related to our goodwill.

 

67


Table of Contents

The carrying amount of our intangible assets, other than acquired technology, are reviewed whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable, also known as a “triggering event.” The carrying amount of our acquired technology is reviewed on at least an annual basis. Recoverability of these assets is compared to the undiscounted future cash flows the assets are expected to generate. If an asset is considered to be impaired, the carrying value of that asset is compared to its fair value and this difference is recognized as an impairment loss. We have not recognized any losses from impairment of our intangible assets during fiscal 2012, 2011 and 2010.

Income Taxes and Valuation of Deferred Tax Assets

Our provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment with significant operations in various locations outside of the United States. Accordingly, our combined income tax rate is a composite rate reflecting our operating results in various locations and the applicable rates.

Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Our judgments, assumptions, and estimates relative to the provision for income taxes take into account current tax laws, our interpretation of current tax laws, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Although we believe that our estimates are reasonable, the final tax outcome of matters could be different from that which is reflected in our historical income tax provision and accruals. Such differences, if identified in future periods, could have a material effect on the amounts recorded in our consolidated financial statements.

We utilize the asset and liability method of accounting for income taxes as set forth in ASC 740 Income Taxes. Under this method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized to the differences between the financial statements carrying amount and the tax bases of existing assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in net loss (or net income) in the period in which the tax rate change is enacted. The statement also requires a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets may not be realized.

Our worldwide net deferred tax assets consist primarily of net operating loss carryforwards, tax credit carryforwards, disallowed interest expense carryforwards and temporary differences between taxable income (loss) on our tax returns and income (loss) before income taxes under GAAP, primarily related to goodwill and intangible assets. A deferred tax asset generally represents future tax benefits to be received when these carryforwards can be applied against future taxable income or when expenses previously reported in our financial statements become deductible for income tax purposes. We maintain certain strategic management and operational activities in overseas subsidiaries and our foreign earnings are taxed at rates that are generally lower than in the United States. As of May 31, 2012, we did not provide for U.S. federal income taxes or foreign withholding taxes on the undistributed earnings of our foreign subsidiaries as such earnings are expected to be reinvested indefinitely.

A valuation allowance is recognized for a portion of our net deferred tax assets in the U.S. as well as certain foreign tax jurisdictions. This valuation allowance is based on our assessment of the realizability of these assets. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. Projected future taxable income is based on our expected results and

 

68


Table of Contents

assumptions as to the jurisdiction in which the income will be earned. We expect to continue to provide a valuation allowance against these assets until, or unless, we can sustain a level of profitability in the respective tax jurisdictions that demonstrates our ability to utilize these assets. At that time, the valuation allowance could be reduced in part or in total.

We are subject to the provisions of ASC 740-10, which defines the accounting for uncertainty in income taxes by prescribing thresholds and attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities, which may result in proposed assessments. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given with respect to the final outcome of these matters. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings and refinement of estimates or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of these matters is different than the amounts recorded, such differences generally will impact our provision for income taxes in the period in which such a determination is made.

The provisions of ASC 740-10 contain a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. We recognize interest and penalties related to uncertain tax positions in the provision for income taxes line of our Consolidated Statements of Operations.

The Company is included in the GGC Software Parent, Inc. consolidated federal income tax return. The Company and its subsidiaries 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 company tax return.

Contingencies—Litigation Reserves

We may, from time to time, have unresolved regulatory, legal, tax or other matters. We provide for contingent liabilities in accordance with ASC 450, Contingencies. Pursuant to this guidance, a loss contingency is charged to income when it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Disclosure in the notes to the financial statements is required for loss contingencies that do not meet both conditions if there is a reasonable possibility that a loss may have been incurred. Gain contingencies are not recorded until realized. We expense all legal costs to resolve regulatory, legal, tax, or other matters in the period incurred.

Periodically, we review the status of each significant matter to assess our potential financial exposure. If a potential loss is considered probable and the amount can be reasonably estimated as defined by the guidance related to accounting for contingencies, we reflect the estimated loss in our results of operations. Significant judgment is required to determine the probability that a liability has been incurred and whether such liability can be reasonably estimated. Because of uncertainties related to these matters, accruals are based on the best information available to us at that time. Further, estimates of this nature are highly subjective, and the final outcome of these matters could vary significantly from the amounts that have been included in the accompanying consolidated financial statements. As additional information becomes available, we reassess the potential liability related to any pending claims and litigation and may revise our estimates accordingly. Such revisions in the estimates of the potential liabilities could have a material impact on our future results of operations, financial position and cash flows.

 

69


Table of Contents

Litigation by its nature is uncertain and the determination of whether any particular case involves a probable loss and quantifying the amount of loss for purposes of establishing or adjusting applicable reserves requires us to exercise considerable judgment, which is applied as of a certain date. The required reserves may change in the future due to new matters, developments in existing matters or if we determine to change our strategy with respect to the resolution of any particular matter.

Stock-Based Compensation

We account for share-based payments, including grants of employee stock options, restricted stock and other share-based awards, in accordance with ASC 718, Compensation-Stock Compensation, which requires that share-based payments (to the extent they are compensatory) be recognized in our results of operations based on their fair values and the estimated number of shares we ultimately expect will vest. Circumstances may change and additional data may become available over time which could result in changes to these assumptions. Such changes could materially impact our fair value estimates.

As more fully described in Note 16, Share Purchase and Option Plans and Stockholder Receivable, certain stock options and restricted stock awards outstanding under our Share Purchase and Option Plans are subject to repurchase features that function as in-substance forfeiture provisions. The repurchase features are removed only upon an employee termination event without cause or a change in control event as defined by the Infor Share Purchase and Option Plans. These events are not considered probable as of the reporting date and, therefore, no compensation costs are recognized for shares subject to these repurchase features. In fiscal 2012, the number of our stock-based awards granted which include such a repurchase feature was lower than in previous years. As a result, we have recognized significantly more stock-based compensation in fiscal 2012 than in prior years.

 

70


Table of Contents

Results of Operations

The following tables set forth certain line items in our Consolidated Statements of Operations as reported in conformity with GAAP, the period-over-period actual percentage change (Actual) and the period-over-period constant currency percentage change (Constant Currency), for the periods indicated:

 

     Year Ended May 31,     Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012     2011     2010     Actual     Constant
Currency
    Actual     Constant
Currency
 

Revenues:

              

License fees

   $ 505.3      $ 367.9      $ 339.5        37.3     37.8     8.4     6.8

Product updates and support fees

     1,284.4        995.8        1,000.0        29.0        28.4        (0.4     (0.4
  

 

 

   

 

 

   

 

 

         

Software revenues

     1,789.7        1,363.7        1,339.5        31.2        30.9        1.8        1.4   

Consulting services and other fees

     751.0        510.0        497.1        47.3        46.8        2.6        2.7   
  

 

 

   

 

 

   

 

 

         

Total revenues

     2,540.7        1,873.7        1,836.6        35.6        35.2        2.0        1.8   
  

 

 

   

 

 

   

 

 

         

Operating expenses:

              

Cost of license fees

     90.1        65.6        56.7        37.3        37.8        15.7        14.6   

Cost of product updates and support fees

     258.5        204.0        211.4        26.7        26.1        (3.5     (3.5

Cost of consulting services and other fees

     593.9        384.0        371.9        54.7        53.9        3.3        3.2   

Sales and marketing

     438.7        335.1        320.3        30.9        30.5        4.6        3.8   

Research and development

     322.3        207.4        199.1        55.4        55.5        4.2        4.8   

General and administrative

     233.4        185.5        196.2        25.8        25.7        (5.5     (5.4

Amortization of intangible assets and depreciation

     323.6        237.3        275.5        36.4        35.7        (13.9     (13.1

Restructuring costs

     67.8        14.9        28.8        355.0        348.3        (48.3     (44.1

Acquisition related and other costs

     75.9        6.2        17.7        NM        NM        (65.0     (65.0
  

 

 

   

 

 

   

 

 

         

Total operating expenses

     2,404.2        1,640.0        1,677.6        46.6        46.1        (2.2     (2.2
  

 

 

   

 

 

   

 

 

         

Income from operations

     136.5        233.7        159.0        (41.6     (41.1     47.0        43.3   
  

 

 

   

 

 

   

 

 

         

Interest expense, net

     467.4        314.0        306.2        48.9        48.9        2.5        2.5   

Loss on extinguishment of debt

     107.1        —          —          NM        NM        —          —     

Other (income) expense, net

     (111.7     110.9        (96.4     NM        NM        NM        NM   
  

 

 

   

 

 

   

 

 

         

Loss before income tax

     (326.3     (191.2     (50.8     70.7        68.0        276.4        268.1   

Income tax (benefit) provision

     (16.3     (50.8     44.6        (67.9     (72.3     NM        NM   
  

 

 

   

 

 

   

 

 

         

Net loss

   $ (310.0   $ (140.4   $ (95.4     120.8     118.8     47.2     43.2
  

 

 

   

 

 

   

 

 

         

 

* NM Percentage not meaningful

The discussion that follows relating to our results of operations for the comparable fiscal years ended May 31, 2012, 2011 and 2010, should be read in conjunction with the accompanying audited Consolidated Financial Statements and related Notes and with the information presented in the above table. This analysis addresses the actual changes in our results of operations for the comparable fiscal years as presented in accordance with GAAP. For changes excluding the impact of foreign currency fluctuations, see the constant currency percentages in the above table and the tables that follow. See the Foreign Currency discussion, above, for further explanation of the impact on our results of operations.

 

71


Table of Contents

Revenues

 

     Year Ended May 31,      Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012      2011      2010      Actual     Constant
Currency
    Actual     Constant
Currency
 

Revenues:

                 

License fees

   $ 505.3       $ 367.9       $ 339.5         37.3     37.8     8.4     6.8

Product updates and support fees

     1,284.4         995.8         1,000.0         29.0        28.4        (0.4     (0.4
  

 

 

    

 

 

    

 

 

          

Software revenues

     1,789.7         1,363.7         1,339.5         31.2        30.9        1.8        1.4   

Consulting services and other fees

     751.0         510.0         497.1         47.3        46.8        2.6        2.7   
  

 

 

    

 

 

    

 

 

          

Total revenues

   $ 2,540.7       $ 1,873.7       $ 1,836.6         35.6     35.2     2.0     1.8
  

 

 

    

 

 

    

 

 

          

Total Revenues. We generate revenues from licensing software, providing product updates and support related to our licensed products and providing consulting services. We generally utilize written contracts as the means to establish the terms and conditions by which our products, product updates and support and consulting services are sold to our customers. As our product updates and support and consulting services are primarily attributable to our licensed products, growth in our product updates and support and consulting services is generally tied to the level of our license contracting activity.

We recognize revenues pursuant to specific and detailed guidelines applicable to the software industry. License fees revenues from end-users are generally recognized when the software product has been shipped and certain conditions are met. Revenues from customer product updates and support contracts are deferred and recognized ratably over the term of the agreements. Revenues from consulting services (including training and implementation services) are recognized as services are provided to customers. See, Critical Accounting Policies and Estimates – Revenue Recognition, above, for a more complete description of our revenue recognition policy.

Total revenues increased by 35.2% in fiscal 2012 compared to fiscal 2011, excluding the favorable foreign currency impact of 0.4%. On a constant currency basis, the increase was due to broad growth of software licenses, in terms of numbers of software licenses and the size of significant software licenses, significant growth in our product updates and support fees and growth in the volume of our consulting services and other fees. Our results were positively impacted by our acquisitions, particularly the impact of Lawson’s business in fiscal 2012, which contributed 32.6% of the overall increase, compared to fiscal 2011.

Total revenues increased by 1.8% in fiscal 2011 compared to in fiscal 2010, excluding the favorable foreign currency impact of 0.2%. On a constant currency basis, the increase was due to broad growth of software licenses, in terms of numbers of software licenses and the size of significant software licenses, and growth in the volume of consulting services. Total revenues were offset marginally by a decline in product updates and support. Our results were positively impacted by our acquisitions, particularly the full-year impact of SoftBrands’ business in fiscal 2011, compared to a 9.5 month impact in fiscal 2010.

License Fees. Our license fees primarily consist of fees resulting from products licensed to customers on a perpetual basis. Product license fees result from a customer’s licensing of a given software product for the first time or with a customer’s licensing of additional users for previously licensed products. License fees also include revenues related to our SaaS offerings.

For fiscal 2012, license fees revenues increased by 37.8%, excluding the unfavorable foreign currency rate impact of 0.5%, compared to fiscal 2011. At constant currency, the increase was primarily the result of our acquisition of Lawson, which contributed 33.1% of the overall increase. The remaining increase in license fees was a result of increases in the volume of our license transactions in fiscal 2012 of 7.4%, excluding the increase from Lawson license transactions. In total, our volume of license transactions increased 15.6%. In addition, the average size of our license transactions greater than $100 thousand increased 7.0% compared to last year.

 

72


Table of Contents

License fees, excluding the favorable foreign currency rate impact of 1.6%, increased by 6.8% for fiscal 2011 compared to fiscal 2010. On a constant currency basis, the increase was primarily due to an increase in the number of license transactions by 18.7%, and a 4.5% increase in the average size of transactions greater than $100 thousand.

Product Updates and Support Fees. Our product updates and support fees revenues 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. Product updates and support revenues can fluctuate based on the number and timing of new license contracts, renewal rates and price increases.

Fiscal 2012 product updates and support fees increased by 28.4%, excluding the favorable foreign currency impact of 0.6%, compared to fiscal 2011. At constant currency, the increase was primarily the result of the acquisition of Lawson, which contributed 25.4% of the overall increase. The remaining increase was largely attributable to increases in revenues related to new maintenance pull-through from new license transactions and price increases which more than offset customer attrition.

Product updates and support fees decreased by 0.4%, both at actual rates and at constant currency rates, in fiscal 2011 compared to fiscal 2010. Fiscal 2010 acquisitions positively contributed an increase of approximately 1.4%. However, Infor maintenance declined by 0.8%, due to customer attrition being slightly higher than new maintenance pull-through from new license sales and price increases, and revenues related to channel partners and third parties declined by 1.0%.

Consulting Services and Other Fees. Our consulting services and other fees revenues consist primarily of software-related services, including systems implementation and integration services, consulting, custom modification, hardware education, hosting services, application managed services and education and training services for customers who have licensed our products. Consulting services and other fees revenues also includes revenues related to hardware systems products.

Fiscal 2012 consulting services and other fees increased by 46.8%, excluding the favorable foreign currency impact of 0.5%, compared to fiscal 2011. At constant currency, consulting services and other fees increased primarily as a result of the acquisition of Lawson, which contributed 46.3% of the total increase. The remaining increase in consulting services and other fees is due to the increase in license transactions with attached consulting services.

Consulting services and other fees increased by 2.7%, excluding the unfavorable foreign currency impact of 0.1%, in fiscal 2011 compared to fiscal 2010. These increases were consistent with the increase in license fees sales with attached consulting services.

Deferred Revenue. Certain of our revenues are deferred when all conditions of revenue recognition have not been met. Deferred revenue represents revenue that is to be recognized in future periods when such conditions have been satisfied related to certain license agreements, maintenance contracts and certain consulting arrangements, as discussed above. We had total deferred revenues of $870.6 million at May 31, 2012, compared to $593.8 million at May 31, 2011.

 

73


Table of Contents

The following table sets forth the components of deferred revenue:

 

     May 31,  
(in millions)    2012     2011  

License fees

   $ 29.5      $ 23.5   

Product updates and support fees

     766.1        527.6   

Consulting services and other fees

     75.0        42.7   
  

 

 

   

 

 

 

Total deferred revenue

     870.6        593.8   

Less current portion

     (851.9     (577.1
  

 

 

   

 

 

 

Deferred revenue—non-current

   $ 18.7      $ 16.7   
  

 

 

   

 

 

 

In general, changes in the balance of our deferred revenue are cyclical and primarily driven by the timing of our maintenance services renewal cycles. Our renewal dates primarily occur in the third and fourth quarters of our fiscal year with revenues being recognized ratably over the applicable service periods. The increases reflected in the above table were primarily due to deferred revenues related to our acquisition of Lawson.

Operating Expenses

 

     Year Ended May 31,      Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012      2011      2010      Actual     Constant
Currency
    Actual     Constant
Currency
 

Operating expenses:

                 

Cost of license fees

   $ 90.1       $ 65.6       $ 56.7         37.3     37.8     15.7     14.6

Cost of product updates and support fees

     258.5         204.0         211.4         26.7        26.1        (3.5     (3.5

Cost of consulting services and other fees

     593.9         384.0         371.9         54.7        53.9        3.3        3.2   

Sales and marketing

     438.7         335.1         320.3         30.9        30.5        4.6        3.8   

Research and development

     322.3         207.4         199.1         55.4        55.5        4.2        4.8   

General and administrative

     233.4         185.5         196.2         25.8        25.7        (5.5     (5.4

Amortization of intangible assets and depreciation

     323.6         237.3         275.5         36.4        35.7        (13.9     (13.1

Restructuring costs

     67.8         14.9         28.8         355.0        348.3        (48.3     (44.1

Acquisition related and other costs

     75.9         6.2         17.7         NM        NM        (65.0     (65.0
  

 

 

    

 

 

    

 

 

          

Total operating expenses

   $ 2,404.2       $ 1,640.0       $ 1,677.6         46.6     46.1     (2.2 )%      (2.2 )% 
  

 

 

    

 

 

    

 

 

          

 

* NM Percentage not meaningful

Cost of License Fees. Cost of license fees includes royalties to third-parties, channel partner commissions and other software delivery expenses. Our software solutions may include embedded components of third-party vendors for which a fee is paid to the vendor upon the sale of our products. In addition, we resell third-party products in conjunction with the license of our software solutions, which also results in a fee. We also resell our software solutions through our third-party channel relationships which require us to pay applicable commissions to our channel partners. The cost of license fees is generally higher, as a percentage of revenues, when we resell products of third-party vendors. As a result, license fees gross margins will vary depending on the proportion of third-party product sales in our revenue mix.

Cost of license fees for fiscal 2012 increased 37.8% compared to fiscal 2011 excluding the favorable foreign currency impact of 0.5%. At constant currency, cost of license fees increased primarily as a result of the

 

74


Table of Contents

acquisition of Lawson, which contributed 23.1% of the total increase. The remaining increase was primarily due to increased channel partner commissions and third-party royalties as a result of higher revenues associated with these costs.

Cost of license fees for fiscal 2011 increased 14.6% compared to fiscal 2010, excluding the unfavorable foreign currency impact of 1.1%. This increase was primarily due to increased third party costs in-line with increased licensing activity in fiscal 2011 compared to fiscal 2010.

Cost of Product Updates and Support Fees. Cost of product updates and support fees includes salaries, employee benefits, related travel, third-party maintenance costs associated with embedded and non-embedded third-party products, related channel partner commissions, and the overhead costs of providing our customers product updates and support.

Fiscal 2012 cost of product updates and support fees increased 26.1% compared to fiscal 2011, excluding the unfavorable foreign currency impact of 0.6%. At constant currency, this increase was primarily due to our acquisition of Lawson, which contributed 23.9% of the total increase. The remaining increase was primarily due to higher channel partner commissions.

Cost of product updates and support fees for fiscal 2011 decreased 3.5%, compared to fiscal 2010 both at actual and constant currency rates. This decrease was primarily due to a decrease in third party costs in-line with the decrease in channel partner and third party revenues. This decrease was somewhat offset by an increase in employee-related costs due to a 3.8% higher headcount primarily as a result of our fiscal 2011 acquisitions.

Cost of Consulting Services and Other Fees. Cost of consulting services and other fees includes salaries, employee benefits, third-party consulting costs, related travel, and the overhead costs of providing our customers systems implementation and integration services, consulting, custom modification, hardware education, hosting services, application managed services and education and training services. Cost of consulting services and other fees also includes costs associated with our hardware business.

Fiscal 2012 cost of consulting services and other fees increased 53.9% compared to fiscal 2011, excluding the unfavorable foreign currency impact of 0.8%. At constant currency, cost consulting services and other fees increased primarily as a result of the acquisition of Lawson, which contributed 49.8% of the total increase. In addition to the impact of Lawson, we had an increase in employee-related costs as well as an increase in overhead allocations.

For the comparable fiscal years 2011 and 2010, cost of consulting services and other fees for fiscal 2011 increased 3.2% as compared to fiscal 2010 excluding the unfavorable foreign currency impact of 0.1%. This increase was primarily due to an increase in employee-related costs resulting from an 8.5% higher headcount primarily as a result of our fiscal 2011 acquisitions as well as an increase in costs related to billable consultants.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries, commissions, employee benefits, travel, trade show activities, advertising and branding costs and overhead costs related to our sales and marketing personnel.

Fiscal 2012 sales and marketing expenses increased by 30.5%, excluding the unfavorable foreign currency impact of 0.4%, compared to fiscal 2011. On a constant currency basis, sales and marketing expenses increased primarily as a result of the acquisition of Lawson which accounted for 35.0% of the total increase. The increases related to Lawson were somewhat offset by a decrease in commissions compared to fiscal 2011 as well as a decrease in overhead allocations.

Sales and marketing expenses increased by 3.8%, excluding the unfavorable impact of foreign currency of 0.8%, in fiscal 2011 compared to fiscal 2010. On a constant currency basis, sales and marketing expenses increased primarily as a result of higher sales, resulting in increased commissions and travel costs. In addition,

 

75


Table of Contents

higher salaries and other compensation-related costs were partially offset by decreases in advertising and promotional campaigns, training and education, hosted events, cellphones and other controllable expenses.

Research and Development. Research and development expenses consist primarily of personnel related expenditures.

Research and development expense increased by 55.5%, excluding the favorable foreign currency impact of 0.1%, in fiscal 2012 compared to fiscal 2011. On a constant currency basis, research and development expenses increased primarily as a result of the acquisition of Lawson which accounted for 42.4% of the total increase. In addition to increases related to Lawson, our research and development employee-related costs increased due to a net increase of 325 in headcount in fiscal 2012 as compared to fiscal 2011 as we have made significant investment in our development capacity. Cost related to contractors and consultants were also increased over fiscal 2011.

Total research and development expenses, excluding the favorable foreign currency impact of 0.6%, increased by 4.8% in fiscal 2011 compared to fiscal 2010. In fiscal 2011 we increased our research and development staffing as we prepared for product launches in fiscal 2012, which resulted in increased employee-related costs and translation costs, on a constant currency basis.

General and Administrative. General and administrative expenses consist primarily of personnel related expenditures for information technology, finance, legal and human resources support functions.

Fiscal 2012 general and administrative expenses increased by 25.7%, excluding the unfavorable foreign currency impact of 0.1%, compared to fiscal 2011. On a constant currency basis, general and administrative expenses increased primarily as a result of our acquisition of Lawson which contributed 40.0% to the overall increase including an increase in our legal costs primarily due to the settlement of certain patent litigation matters. Excluding the impact of Lawson, we also had an increase in stock compensation expense. These increases were partially offset by a reduction in our professional fees and consulting expenses.

General and administrative expenses decreased 5.4%, excluding the favorable foreign currency impact of 0.1%, in fiscal 2011 compared to fiscal 2010. This decrease was primarily due to lower professional fees and lower legal settlement costs.

Amortization of Intangible Assets and Depreciation. Amortization of intangibles assets primarily relates to the on-going amortization of intangible assets acquired in acquisitions. Depreciation expense relates primarily to our computer equipment and purchased software, furniture and fixtures as well as amortization of leasehold improvements.

Fiscal 2012 amortization of intangibles assets and depreciation increased by 35.7% compared to fiscal 2011, excluding the unfavorable impact of foreign currency of 0.7%, primarily as a result of the acquisition of customer-related intangibles and trade names related to Lawson, as well as other fixed assets acquired in the transaction.

Amortization of intangible assets and depreciation decreased by 13.1% in fiscal 2011 compared to fiscal 2010, excluding the favorable impact of foreign currency of 0.8%. This decrease was a result of a greater number of assets, principally those related to the values of customer relationships and trade names, acquired in prior years, becoming fully amortized. This decrease was somewhat offset by increased amortization and depreciation of similar assets added in recent years, including the impact of our fiscal 2011 acquisitions.

Restructuring. Restructuring expenses primarily relate to costs and charges from redundant positions and redundant office locations.

For fiscal 2012, we incurred restructuring charges of $67.8 million compared to $14.9 million in fiscal 2011. Current restructuring charges were primarily for employee severance costs for related to our Lawson acquisition.

 

76


Table of Contents

Our management approved, committed to and initiated these actions in order to eliminate redundancies and better align our cost structure. See Note 11 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus for details of our restructuring actions.

We incurred restructuring expenses of $14.9 million in fiscal 2011 compared with $28.8 million in fiscal 2010. The restructuring expenses in fiscal 2011 were incurred primarily in the EMEA region, including those related to our fiscal 2011 acquisitions. The restructuring in fiscal 2010 also related to the EMEA region, as well as the SoftBrands acquisition. All restructuring activities were approved by, committed to and initiated by our management to better align our cost structure as a result of acquisitions and cost-containment initiatives.

Acquisition Related and Other Costs. Acquisition related and other costs include transaction and integration costs related to our acquisitions primarily professional services fees and certain employee costs related to transitional and certain other employees. Acquisition related and other costs also include certain costs incurred in financing our acquisitions and reorganizing our operations.

Fiscal 2012 acquisition related and other costs of $75.9 million increased by approximately $69.7 million compared to fiscal 2011 primarily as a result of costs related to our acquisition of Lawson, the integration of Lawson’s operations into Infor, cost incurred for related financing activities, as well as costs incurred related to the combination of Infor’s operating entities.

In fiscal 2011 acquisition related and other costs of $6.2 million decreased by approximately $11.5 million compared to fiscal 2010. Fiscal 2011 costs included $3.9 million and $2.3 million related to Lawson and other acquisitions. Fiscal 2010 costs of $17.7 million included $13.3 million related to amending and extending our debt in fiscal 2010 and $4.4 million related to our SoftBrands acquisition.

Non-Operating Income and Expenses

 

     Year Ended May 31,     Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012     2011      2010     Actual     Constant
Currency
    Actual     Constant
Currency
 

Interest expense, net

   $ 467.4      $ 314.0       $ 306.2        48.9     48.9     2.5     2.5

Loss on extinguishment of debt

     107.1        —           —          NM        NM        —          —     

Other (income) expense, net

     (111.7     110.9         (96.4     NM        NM        NM        NM   
  

 

 

   

 

 

    

 

 

         

Total non-operating expenses

   $ 462.8      $ 424.9       $ 209.8        8.9     8.0     102.5     97.8
  

 

 

   

 

 

    

 

 

         

 

* NM Percentage not meaningful

Interest Expense, Net. Interest expense, net consists of the interest expense related to our debt less the interest income on cash, marketable securities, and other investments.

Fiscal 2012 interest expense, net increased by $153.4 million, or 48.9% to $467.4 million compared to $314.0 million in fiscal 2011. The net increase in interest expense was primarily the result of the additional debt incurred to complete the acquisition of Lawson on July 5, 2011. This increase was somewhat offset by a decrease in interest expense related to our debt that was retired in conjunction with the funding of the Lawson acquisition and the recapitalization of our debt structure in April 2012.

Interest expense, net, increased by $7.8 million, or 2.5%, to $314.0 million in fiscal 2011 compared to $306.2 million in fiscal 2010, primarily due to higher interest rates and additional debt related to our acquisitions.

Loss on Extinguishment of Debt. The $107.1 million loss on extinguishment of debt relates primarily to the net book value of deferred financing fees and the remaining debt discounts written off in fiscal 2012 in

 

77


Table of Contents

connection with our debt transactions during the year. See Note 12 to the Audited Consolidated Financial Statements of Infor, Inc., contained elsewhere in this prospectus.

Other (Income) Expense, Net. Other (income) expense, net consists of the effects of foreign currency fluctuations, gain/loss on the sale of fixed assets, and other costs.

For fiscal 2012, other (income) expense, net changed by $222.6 million to $111.7 million of income compared to $110.9 million expense in last year. The increase in other (income) expense, net for fiscal 2012 was primarily due to the decreases in the value of the Euro, which resulted in decreases affecting our Euro denominated debt.

Other (income) expense, net, changed by $207.3 million, to an expense of $110.9 million in fiscal 2011 compared to income of $96.4 million fiscal 2010. Other (income) expense, net increased primarily as a result of increases in the value of the Euro, which resulted in increases affecting our Euro denominated debt.

Income Tax Benefit (Provision)

 

     Year Ended May 31,     Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012     2011     2010     Actual     Constant
Currency
    Actual      Constant
Currency
 

Income tax (benefit) provision

   $ (16.3   $ (50.8   $ 44.6        (67.9 )%      (72.3 )%      NM         NM   

Effective income tax rate

     5.0     26.6     (87.8 )%          

 

* NM Percentage not meaningful

For fiscal 2012, we recorded an income tax benefit of $16.3 million, resulting in an effective tax rate of 5.0%. The change in the effective tax rate for fiscal 2012 compared to last year was primarily due to our acquisition of Lawson and the implementation of the current global tax structure on April 5, 2012. The items accounting for the difference between income taxes computed at the statutory rate and the benefit from income taxes primarily relate to foreign subsidiary income subject to tax in the U.S. as a result of the change in the global tax structure, a valuation allowance for non-deductible carried forward interest expense under IRC Section 163(j), differences in foreign statutory rates via the acquisition of Lawson, losses not providing benefit, and non-deductible expenses related to various reorganizational costs including the acquisition of Lawson.

For fiscal 2011, we recorded an income tax benefit of $50.8 million, resulting in an effective tax rate of 26.6%. The items accounting for the difference between income taxes computed at the statutory rate and the benefit from income taxes primarily relate to a valuation allowance for non-deductible carried forward interest expense under IRC Section 163(j), differences in foreign statutory rates, the release of various valuation allowances, and unrecognized tax benefits.

For fiscal 2010, we recorded an income tax provision of $44.6 million, resulting in a negative effective tax rate of 87.8%. The items accounting for the difference between income taxes computed at the statutory rate and the benefit from income taxes primarily relate to a valuation allowance for non-deductible carried forward interest expense under IRC Section 163(j), differences in foreign statutory rates, government enacted tax rate changes in various jurisdictions, and withholding taxes.

Non-GAAP Financial Measure Reconciliations

We believe our presentation of non-GAAP revenues, operating income and operating margin provide meaningful insight into our operating performance and an alternative perspective of our results of operations. We use these non-GAAP measures to assess our operating performance, to develop budgets, to serve as a measurement for incentive compensation awards and to manage expenditures. Presentation of these non-GAAP

 

78


Table of Contents

measures allows users to review our results of operations from the same perspective as management and our Board of Directors. These non-GAAP financial measures provide users an enhanced understanding of our operations, facilitate analysis and comparisons of our current and past results of operations, facilitate comparisons of our operating results with those of our competitors and provide insight into the prospects of our future performance. We also believe that the non-GAAP measures are useful to users because they provide supplemental information that research analysts frequently use to analyze software companies including those that have recently made significant acquisitions. Additionally, certain non-GAAP disclosures are required and/or permitted by our lenders in our reporting to them.

The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. These non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for each period presented below.

Non-GAAP Revenues

 

     Year Ended May 31,      Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012      2011      2010      Actual     Constant
Currency
    Actual     Constant
Currency
 

GAAP revenues

   $ 2,540.7       $ 1,873.7       $ 1,836.6         35.6     35.2     2.0     1.8

Non-GAAP revenue adjustments:

                 

Purchase accounting impact on license fees

     25.5         2.1         3.1            

Purchase accounting impact on product updates and support fees

     122.6         0.2         0.4            

Purchase accounting impact on consulting services and other fees

     6.8         0.1         —              
  

 

 

    

 

 

    

 

 

          

Total non-GAAP revenue adjustments

     154.9         2.4         3.5            
  

 

 

    

 

 

    

 

 

          

Non-GAAP revenues

   $ 2,695.6       $ 1,876.1       $ 1,840.1         43.7     43.3     2.0     1.7
  

 

 

    

 

 

    

 

 

          

 

79


Table of Contents

Non-GAAP Income From Operations

 

     Year Ended May 31,     Fiscal 2012 vs.
2011
    Fiscal 2011 vs.
2010
 
(in millions, except percentages)    2012     2011     2010     Actual     Constant
Currency
    Actual     Constant
Currency
 

GAAP income from operations

   $ 136.5      $ 233.7      $ 159.0        (41.6 )%      (41.1 )%      47.0     43.3

GAAP operating margin

     5.4     12.5     8.7        

Non-GAAP revenue adjustments

     154.9        2.4        3.5           

Non-GAAP costs and operating expense adjustments:

              

Purchase accounting impact on deferred costs

     (6.5     —          —             

Amortization

     287.5        223.2        260.1           

Stock-based compensation

     11.2        1.4        0.2           

Acquisition transaction and integration costs

     75.9        6.2        17.7           

Restructuring costs

     67.8        14.9        28.8           
  

 

 

   

 

 

   

 

 

         

Total non-GAAP costs and operating expense adjustments

     435.9        245.7        306.8           
  

 

 

   

 

 

   

 

 

         

Non-GAAP income from operations

   $ 727.3      $ 481.8      $ 469.3        51.0     50.5     2.7     2.1
  

 

 

   

 

 

   

 

 

         

Non-GAAP operating margin

     27.0     25.7     25.5        

The non-GAAP adjustments we make to our reported GAAP results are primarily related to purchase accounting and other acquisition matters, significant non-cash accounting charges and restructuring charges. Our primary non-GAAP reconciling items are as follows:

Purchase Accounting Impact on Revenue. Our non-GAAP financial results include pro forma adjustments to increase license fees, product updates and support fees, and consulting services and other fees that we would have recognized if we had not adjusted acquired deferred revenues to their fair values as required by GAAP. Certain deferred revenue for license fees, product updates and support fees, and consulting services and other fees on the acquired entity’s balance sheet, at the time of the acquisition, were eliminated from our GAAP results as part of the purchase accounting for the acquisition as they do not reflect the fair value of performance obligations to us. As a result, our GAAP results do not, in management’s view, reflect all of our license fees, product updates and support fees, and consulting services and other fees. We believe the inclusion of the pro forma revenue adjustment provides users a helpful alternative view of our operations.

Amortization of Intangibles. We have excluded amortization of acquisition-related intangible assets including purchased technology and customer relationships from our non-GAAP results. The fair value of the intangible assets, which was allocated to these assets through purchase accounting, is amortized using accelerated or straight-line methods which approximate the proportion of future cash flows estimated to be generated each period over the estimated useful lives of the applicable assets. While these non-cash amortization charges are recurring in nature and the underlying assets benefit our operations, this amortization expense can fluctuate significantly based on the nature, timing and size of our past acquisitions and may be affected by future acquisitions. This makes comparisons of our current and historic operating performance difficult. Therefore, we exclude such expenses when analyzing the results of our operations including those of acquired entities. We believe that the exclusion of the amortization expense of acquired intangible assets provides users helpful information facilitating comparison of our results period-over-period and with other companies in the software industry as they each have their own acquisition histories and related non-GAAP adjustments.

 

80


Table of Contents

Stock-Based Compensation. Expenses related to stock-based compensation have been excluded from our non-GAAP results of operations. These charges consist of the estimated fair value of stock-based awards. While the charges for stock-based compensation are of a recurring nature, as we grant stock-based awards to attract and retain quality employees and as an incentive to help achieve financial and other corporate goals, we exclude them from our results of operations in assessing our operating performance. These charges are typically non-cash and are often the result of complex calculations using an option pricing model that estimates stock-based awards’ fair value based on factors such as volatility and risk-free interest rates that are beyond our control. As such, we do not include such charges in our operating plans that we use to manage our business. In addition, we believe the exclusion of these charges facilitates comparisons of our operating results with those of our competitors who may have different policies regarding the use of stock-based awards.

Acquisition Transaction and Integration Costs. We have incurred various transaction and integration costs related to our acquisitions. The costs of acquiring and integrating the operations of acquired businesses are incremental to our historical costs and are charged to our GAAP results of operations in the periods incurred. We do not consider these costs in our assessment of our operating performance. While these costs are not recurring with respect to our past acquisitions, we may incur similar costs in the future if we pursue other acquisitions. These costs are primarily reflected in acquisition related and other costs in our Consolidated Statements of Operations. We believe that the exclusion of the non-recurring acquisition transaction and integration costs provides users a useful alternative view of our results of operations and facilitates comparisons of our results period-over-period.

Restructuring. We have recorded various restructuring charges related to actions taken to reduce our cost structure to enhance operating effectiveness, improve profitability and to eliminate certain redundancies in connection with acquisitions. These restructuring activities impacted different functional areas of our operations in different locations and were undertaken to meet specific business objectives in light of the facts and circumstances at the time of each restructuring event. These charges include costs related to severance and other termination benefits as well as costs to exit leased facilities. These restructuring charges are excluded from management’s assessment of our operating performance. We believe that the exclusion of the restructuring charges provides users an alternative view of the cost structure of our operations and facilitates comparisons with the results of other periods that may not reflect such charges or may reflect different levels of such charges.

Liquidity and Capital Resources

Cash Flows

 

(in millions, except percentages)    Year Ended May 31,     Fiscal
2012

vs.  2011
    Fiscal
2011

vs.  2010
 
Cash Flows    2012     2011     2010      

Cash provided by (used in):

          

Operating activities

   $ 150.6      $ 164.9      $ 86.3        (8.7 )%      91.1

Investing activities

     (1,533.2     (38.9     (84.9     NM        (54.2 )% 

Financing activities

     1,451.8        (64.2     66.9        NM        NM   

Effect of exchange rate changes on cash and cash equivalents

     (21.8     28.8        (8.7     NM        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

   $ 47.4      $ 90.6      $ 59.6        (47.7 )%      52.0