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[AGILYSYS LOGO] FOR IMMEDIATE RELEASE

Press Release

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AGILYSYS INC

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Title: [AGILYSYS LOGO] FOR IMMEDIATE RELEASE
Date: 8/9/2005
Industry: Electronic Instr. and Controls     Sector: Technology

[AGILYSYS LOGO] FOR IMMEDIATE RELEASE, Parties: agilysys inc
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                                                                 [AGILYSYS LOGO]

 

                                                                    EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE

 

 

            AGILYSYS, INC. REPORTS FISCAL 2006 FIRST-QUARTER RESULTS

 

     -     Consolidated Sales Increase 6 Percent to $410 Million

     -     Net Income of $0.01 per Diluted Share

     -     Non-GAAP Net Income Reaches $0.15 per Diluted Share, Excluding

          Restructuring and Loss on Redemption of Convertible Trust Preferred

          Securities

 

CLEVELAND - Aug. 4, 2005 - Agilysys, Inc. (Nasdaq: AGYS), a leading provider of

enterprise computer technology solutions, today announced fiscal 2006 unaudited

first-quarter results for the three months ended June 30, 2005. Consolidated

sales for the first quarter were $410.0 million, an increase of 6.0 percent

compared with sales of $386.7 million for the first quarter last year.

 

First-quarter sales of hardware products were $329.8 million, up 4.7 percent

from $314.9 million last year. Software sales were $58.9 million, up 14.4

percent from $51.5 million a year ago, and services sales were $21.3 million, up

4.9 percent from $20.3 million last year.

 

Gross margin for the first quarter was 12.4 percent of sales, compared with 12.6

percent in the first quarter last year. Selling, general and administrative

expenses were $41.2 million, or 10.1 percent of sales, compared with $39.0

million, or 10.1 percent of sales, in the prior year.

 

The company reported first-quarter net income of $290,000, or $0.01 per diluted

share. Excluding a $2.4 million restructuring charge and a non-recurring $4.8

million loss on redemption of the company's Convertible Trust Preferred

Securities, the company would have reported non-generally accepted accounting

principles (non-GAAP) net income of $4.6 million, or $0.15 per diluted share,

compared with non-GAAP net income of $4.0 million, or $0.14 per diluted share,

in the first quarter last year.

 

Arthur Rhein, chairman, president and chief executive officer of Agilysys, said,

"I am pleased with our strong operating performance in the first quarter of

fiscal 2006. Our results reflect sales growth in each of our major product

categories, continued execution of our strategic plan and a focus on improving

operational efficiency."

 

COMPANY REPORTS $2.4 MILLION RESTRUCTURING CHARGE

During the quarter Agilysys initiated a plan to consolidate a portion of its

operations to reduce costs and increase future operating efficiencies. As part

of this restructuring effort, the company initiated the exit of certain leased

facilities and headcount reduction. The company also executed a senior

management consolidation of responsibilities. Restructuring charges increased

$2.2 million during the quarter compared with last year, which reflects

headcount reduction in the first quarter this year. The company has not recorded

a liability for costs relating to the exit of certain leased facilities since

the company had not ceased using such properties as of June 30, 2005. The

company expects to record an additional restructuring charge of approximately

$2.3 million in the second quarter ending September 30, 2005.

 

Cost savings expected to be realized in fiscal 2006 as a result of the

restructuring initiative are approximately $6 million. None of these cost

savings were realized in the first quarter of fiscal 2006.

 

 

 

REDEMPTION OF CONVERTIBLE TRUST PREFERRED SECURITIES

 

 

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As part of its strategy to increase both financial flexibility and shareholder

value, on June 15, 2005 the company completed the redemption of its 6.75 percent

Convertible Trust Preferred Securities ("Trust Preferred Securities"). As of

March 31, 2005, the carrying value of the Trust Preferred Securities was $125.3

million. Holders of the Trust Preferred Securities were required to accept a

cash payment or to convert into common shares of Agilysys by June 15, 2005.

Trust Preferred Securities with a carrying value of $105.4 million were redeemed

for cash at a total cost of $109.0 million, which included accrued interest of

$1.5 million and a 2.025 percent premium of $2.1 million. Agilysys funded the

redemption with existing cash balances. In addition, 398,324 Trust Preferred

Securities with a carrying value of $19.9 million were converted into common

shares of the company, resulting in the issuance of 1.3 million common shares.

 

The company incurred a loss of $4.8 million in the first quarter of fiscal 2006

as a result of the redemption of the Trust Preferred Securities. As part of the

loss, the company wrote off deferred financing fees of $2.7 million. The

financing fees, incurred at the time of issuing the Trust Preferred Securities,

were being amortized over a 30-year period ending on March 31, 2028, which was

the maturity date of the Trust Preferred Securities. The write off of deferred

financing fees, together with the $2.1 million premium on redemption described

above, resulted in the loss of $4.8 million.

 

Agilysys shareholders will benefit by both the elimination of the annual

distribution on the Trust Preferred Securities, which amounted to approximately

$5.2 million annually, net of tax, and the elimination of 6.7 million shares of

dilution. After the redemption and conversion to common shares, Agilysys will

have approximately 30.4 million common shares issued and outstanding.

 

ACQUISITION OF THE CTS CORPORATIONS

During the first quarter of fiscal 2006 Agilysys completed its acquisition of

The CTS Corporations for $27.5 million and began the process of integrating CTS

into the company's professional services operation. The transaction, which

closed on May 31, 2005, enhances the Agilysys offering of comprehensive storage

solutions. The acquisition of CTS provides Agilysys a strong foundation to

capitalize on current industry trends around storage products and services.

 

USE OF NON-GAAP FINANCIAL MEASURES

The non-GAAP operating results provided above are "non-GAAP financial measures"

under the rules of the Securities and Exchange Commission. The company believes

that the non-GAAP financial information is useful to investors to assist them in

assessing and understanding the company's operating performance and underlying

trends in its business, as management considers the charges and losses referred

to above to be outside the company's core operating results. This non-GAAP

financial information supplements, and is not intended to represent a measure of

performance in accordance with U.S. GAAP. Accompanying this release is a tabular

reconciliation of the differences between the non-GAAP measures with the most

comparable financial measure calculated and presented in accordance with U.S.

GAAP.

 

UPDATED BUSINESS OUTLOOK

Agilysys also provided its business outlook for fiscal 2006 including the

results of its Convertible Trust Preferred Securities redemption.

 

For fiscal 2006, the company currently estimates sales to grow approximately

five to seven percent over fiscal 2005 sales of $1.62 billion. Full-year gross

margin is expected to be approximately 12.4 percent of sales and selling,

general and administrative expenses are anticipated to be approximately 9.5

percent of sales for fiscal 2006.

 

Fiscal 2006 net income is expected to be in the range of $0.80 to $0.88 per

diluted share, including the impact of the restructuring charges discussed above

and the loss on the Convertible Trust Preferred Securities redemption and the

associated diluted share count impact.

 

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Agilysys also expects to incur fiscal 2006 capital expenditures between $2 and

$4 million, depreciation and amortization of approximate


 
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