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TMCNet:  EPICOR SOFTWARE CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

[February 14, 2013]

EPICOR SOFTWARE CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and related notes included above. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions.



Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under "Part I, Item 1A - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and in our other filings with the Securities and Exchange Commission. Unless the context requires otherwise, references to "we," "our," "us" and "the Company" are to Epicor Software Corporation and its consolidated subsidiaries, after the consummation of the Acquisitions. Unless the context requires otherwise, references to "Solarsoft" refer to Solarsoft Business Solutions, Inc., which we acquired in October 2012 and whose results are included in our results subsequent to the date we acquired them. Unless the context requires otherwise, references to "Legacy Epicor" refer to legacy Epicor Software Corporation and its consolidated subsidiaries prior to the acquisitions and references to "Activant" or "Predecessor" refer to Activant Solutions Inc. and its consolidated subsidiaries.

Overview We are a leading global provider of enterprise application software and services focused on small and mid-sized companies and the divisions and subsidiaries of Global 1000 enterprises. We provide industry-specific solutions to the manufacturing, distribution, retail, services and hospitality sectors. Our fully integrated systems, which primarily include license, professional services, support services and may include hardware products, are considered "mission critical" to many of our customers, as they manage the flow of information across the core business functions, operations and resources of their enterprises. By enabling our customers to automate and integrate information and critical business processes throughout their enterprise, as well as across their supply chain and distribution networks, our customers can increase their efficiency and productivity, resulting in higher revenues, increased profitability and improved working capital.

Our fully integrated systems and services include one or more of the following software applications: inventory and production management, supply chain management ("SCM"), order management, point-of-sale ("POS") and retail management, accounting and financial management, customer relationship management ("CRM"), human capital management ("HCM") and service management, among others. Our solutions also respond to our customers' need for increased supply chain visibility and transparency by offering multichannel e-commerce and collaborative portal capabilities that allow enterprises to extend their business and more fully integrate their operations with those of their customers, suppliers and channel partners. We believe this collaborative approach distinguishes us from conventional enterprise resource planning ("ERP") vendors, whose primary focus is predominately on internal processes and efficiencies within a single plant, facility or business. For this reason, we believe our products and services have become deeply embedded in our customers' businesses and are a critical component to their success.

In addition to processing the transactional business information for the vertical markets we serve, our data warehousing, business intelligence and industry catalog and content products aggregate detailed business transactions to provide our customers with advanced multi-dimensional analysis, modeling and reporting of their enterprise-wide data.

We have developed strategic relationships with many of the well-known and influential market participants across all segments in which we operate, and have built a large and highly diversified base of more than 20,000 customers who use our systems, maintenance and/or services offerings on a regular, ongoing basis in over 35,000 sites and locations. Additionally, our automotive parts catalog is used at approximately 27,000 locations, many of which are also our systems customers.

We have a global customer footprint across more than 150 countries and have a strong presence in both mature and emerging markets in North America, Europe, Asia and Australia, with approximately 4,500 employees worldwide as of December 31, 2012. Our software is available in more than 30 languages and we continue to translate and localize our systems to enter new geographical markets. In addition, we have a growing network of over 400 global partners, value-added resellers and systems integrators that provide a comprehensive range of solutions and services based on our software. This worldwide coverage provides us with economies of scale, higher capital productivity through lower cost offshore operations, the ability to more effectively deliver our systems and services to high-growth emerging markets, and to support increasingly global businesses.

During the fourth quarter of fiscal 2012, we changed the composition of our reportable segments by dividing our Retail reportable segment into two separate reportable segments, Retail Solutions and Retail Distribution which reflects our three target application software segments. Prior to the change, the Company had two reportable segments, ERP and Retail. We 29-------------------------------------------------------------------------------- Table of Contents have reclassified the revenues and contribution margin of prior periods to conform to the new reportable segment structure. These segments are determined in accordance with how our management views and evaluates our business and based on the criteria as outlined in authoritative accounting guidance regarding segments.

Because these segments reflect the manner in which our management views our business, they necessarily involve judgments that our management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified to reflect technologies and applications that are newly created, change over time, or evolve based on business conditions, each of which may result in reassessing specific segments and the elements included within each of those segments. Future events, including changes in our senior management, may affect the manner in which we present segments in the future.

The Transactions On March 25, 2011 ("Inception"), Eagle Parent, Inc. ("Eagle") was formed under Delaware law at the direction of funds advised by Apax Partners, L.P. and Apax Partners, LLP, together referred to as "Apax", for the purpose of acquiring Activant Group Inc. ("AGI"), the parent company of Activant Solutions Inc., the Predecessor for reporting purposes, (the "Predecessor" or "Activant"), and Epicor Software Corporation ("Legacy Epicor"). On April 4, 2011, Eagle entered into an Agreement and Plan of Merger with AGI, Activant and certain other parties pursuant to which Eagle agreed to acquire AGI and Activant. Also on April 4, 2011, Eagle entered into an Agreement and Plan of Merger with Legacy Epicor and certain other parties, pursuant to which Eagle agreed to acquire Legacy Epicor. Eagle had no activity from Inception to May 16, 2011, except for activities related to its formation, the acquisitions and arranging the related financing.

On May 16, 2011, pursuant to an Agreement and Plan of Merger, dated as of April 4, 2011 between Eagle, AGI, Sun5 Merger Sub, Inc, a wholly-owned subsidiary of the Company ("ASub"), and certain other parties, A Sub was merged with and into AGI with AGI surviving as a wholly-owned subsidiary of the Company. We paid net aggregate consideration of $972.5 million for the outstanding AGI equity (including "in-the-money" stock options outstanding immediately prior to the consummation of the acquisition) consisting of $890.0 million in cash, plus $84.1 million cash on hand (net of a $2.3 million agreed upon adjustment) and a payment of $5.8 million for certain assumed tax benefits minus the amount of a final net working capital adjustment of $7.4 million, as specified in the Activant Agreement and Plan of Merger.

Also on May 16, 2011, pursuant to Agreement and Plan of Merger, dated as of April 4, 2011 between us, Legacy Epicor and Element Merger Sub, Inc. ("E Sub"), E Sub acquired greater than 90% of the outstanding capital stock of Legacy Epicor pursuant to a tender offer and was subsequently merged with and into Legacy Epicor, with Legacy Epicor surviving as a wholly-owned subsidiary of the Company. We paid $12.50 per share, for a total of approximately 64.2 million shares, to the holders of Legacy Epicor common stock and vested stock options, which represented net aggregate merger consideration of $802.3 million (including approximately $0.1 million for additional shares purchased at par value to meet the tender offer requirements).

These acquisitions and the related transactions are referred to collectively as the "Acquisition" or "Acquisitions." The Acquisitions were funded by a combination of an equity investment by funds advised by Apax, in us of approximately $647.0 million, an $870.0 million senior secured term loan facility, $465.0 million in senior notes, $27.0 million drawn on senior secured revolving credit facility, and acquired cash.

Activant was determined to be the Predecessor for financial reporting purposes due to its relative total asset size to Legacy Epicor. Further, the majority of Named Executive Officers and other executive officers of the Company were employees of Activant.

Effective as of December 31, 2011, Legacy Epicor, AGI and Activant were merged with and into Eagle under Delaware law, whereupon each of Legacy Epicor, AGI and Activant ceased to exist and Eagle survived as the surviving corporation (the "Reorganization"). In connection with the Reorganization, Eagle changed its name to Epicor Software Corporation. Since Activant and Legacy Epicor were both subsidiaries of Eagle, the Reorganization represented a change in legal entities under common control which had no impact on the consolidated financial statements of the Company.

Updates to Critical Accounting Policies 30-------------------------------------------------------------------------------- Table of Contents There were no updates to our critical accounting policies during the quarter ended December 31, 2012. For a full list of our accounting policies, please refer to Footnote 1 - Basis of Presentation and Accounting Policy Information in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Components of Operations The key components of our results of operations are as follows: Revenues Our revenues are primarily derived from sales of our systems and services to customers that operate in three segments - ERP, Retail Solutions and Retail Distribution.

• ERP segment - The ERP segment provides (1) distribution solutions designed to meet the expanding requirement to support a demand driven supply network by increasing focus on the customer and providing a more seamless order-to-shipment cycle for a wide range of vertical markets including electrical supply, plumbing, medical supply, heating and air conditioning, tile, industrial machinery and equipment, industrial supplies, building supplies, fluid power, janitorial and sanitation, medical, value-added fulfillment, food and beverage, redistribution and general distribution; (2) manufacturing solutions designed for discrete, process and mixed-mode manufacturers with batch, lean and "to-order" manufacturing in a range of verticals including industrial machinery, instrumentation and controls, food and beverage, medical devices, printing, packaging, automotive, aerospace and defense, energy and high tech; (3) hospitality solutions designed for the hotel, resort, casino, food service, sports and entertainment industries that can manage and streamline virtually every aspect of a hospitality organization, from POS or property management system integration, to cash and sales management, centralized procurement, food costing and beverage management, core financials and business intelligence for daily reporting and analysis by outlet and property, all within a single solution and (4) financial management and professional services solutions designed to provide the project accounting, time and expense management, and financial analysis and reporting necessary to support the complex requirements of serviced-based companies in the consulting, banking, financial services, not-for-profit and software sectors.

• Retail Solutions segment - The Retail Solutions segment supports large, distributed retail environments that require a comprehensive multichannel retail solution including POS store operations, cross-channel order management, CRM, loyalty management, merchandising, planning and assortment planning, business intelligence and audit and operations management capabilities. Our Retail Solutions segment caters to the general merchandise, specialty retail, apparel and footwear, sporting goods and department store verticals.

• Retail Distribution segment - The Retail Distribution segment supports small- to mid-sized, independent or affiliated retailers that require integrated POS or ERP offerings. Our Retail Distribution segment primarily supports independent hardware retailers, lumber and home centers, lawn and garden centers, farm and agriculture and other specialty hardlines retailers, as well as customers involved in the manufacture, distribution, sale and installation of new and remanufactured parts used in the maintenance and repair of automobiles and light trucks primarily in North America as well as the United Kingdom and Ireland, including several retail chains in North America.

Within each segment, we generate revenues from systems and services.

Systems revenues are comprised primarily of: • License revenues: Represent revenues from the sale or license of software to customers. A substantial amount of our new license revenue is characterized by long sales cycles and is therefore a somewhat less predictable revenue stream in nature. License revenues are heavily affected by the strength of general economic conditions and our competitive position in the marketplace.

• Professional services revenues: Consist primarily of revenues generated from implementation contracts to install and configure our software products. Additionally, we generate revenues from consulting, custom modification and training and educational services to our customers regarding the use of our software products. Our consulting revenues are dependent upon general economic conditions, the level of our license revenues, as well as ongoing purchases of services by our existing customer base.

• Hardware revenues: Consist primarily of server, POS and storage product offerings, as well as revenues generated from the installation of hardware products. Our hardware revenues are dependent upon general economic conditions, the level of our license revenues, as well as on going purchases from our existing customer base.

• Other systems revenues: Consist primarily of sales of business products to our existing customer base.

31-------------------------------------------------------------------------------- Table of Contents Services revenues consist primarily of maintenance services and content and supply chain services (including recurring revenue such as software as a service ("SaaS"), hosting and managed services). These services are specific to the markets we serve and can complement our software product offerings. Maintenance services include customer support activities, including software, hardware and network support through our help desk, web help, software updates, preventive and remedial on-site maintenance and depot repair services. Content and supply chain services are comprised of proprietary catalogs, data warehouses, electronic data interchange, and data management products. We provide comprehensive automotive parts catalogs, industry-specific analytics and database services related to point-of-sale transaction activity or parts information in other core verticals, as well as, e-Commerce connectivity offerings, hosting, networking and security monitoring management solutions. We generally provide services on a subscription basis, and accordingly these revenues are generally recurring in nature. Of our total revenues for the three months ended December 31, 2012 and 2011, approximately $135.1 million and $111.8 million, respectively, or 59.1% and 53.4%, respectively, was derived from services revenues, which have been a stable and predictable recurring revenue stream for us.

Operating Expenses Our operating expenses consist primarily of cost of systems revenues, costs of services revenues, sales and marketing, product development, general and administrative expenses, acquisition-related costs and restructuring costs as well as non-cash expenses, including depreciation and amortization. We allocate overhead expenses including facilities and information technology costs to all departments based on headcount. As such, overhead expenses are included in costs of revenues and each operating expense category. All operating expenses are allocated to segments, except as otherwise noted below.

• Cost of systems revenues - Cost of systems revenues consists primarily of direct costs of software duplication and delivery, third-party royalty fees, salary related and third party consulting costs of providing customers' system installation and integration and training services, our logistics organization, cost of hardware, and allocated overhead expenses.

• Cost of services revenues - Cost of services revenues consists primarily of salary related costs, third party maintenance costs and other costs associated with product updates and providing support services, material and production costs associated with our automotive catalog and other content offerings and allocated overhead expenses.

• Sales and marketing - Sales and marketing expense consists primarily of salaries and bonuses, commissions, share-based compensation expense, travel, marketing promotional expenses and allocated overhead expenses.

Corporate marketing expenses are not allocated to our segments.

We sell, market and distribute our products and services worldwide, primarily through a direct sales force and internal telesales, as well as through an indirect channel including a network of VARs, distributors, national account groups and authorized consultants who market our products on a predominately nonexclusive basis. Our marketing approach includes developing strategic relationships with many of the well-known and influential market participants in the vertical markets that we serve. In addition to obtaining endorsements, referrals and references, we have data licensing and supply chain service agreements with many of these businesses that we believe are influential. The goal of these programs is to enhance the productivity of the field and inside sales teams and to create leveraged selling opportunities, as well as offering increased benefits to our customers by providing access to common industry business processes and best practices.

Incentive pay is a significant portion of the total compensation package for all sales representatives and sales managers. Our field sales teams are generally organized by new business sales, which focuses on identifying and selling to new customers and teams focused on customers that are migrating from one of our legacy systems to one of our new solution offerings. We also have dedicated inside sales teams that focus on selling upgrades and new software applications to our installed base of customers.

In recognition of global opportunities for our software products, we have committed resources to a global sales and marketing effort. We have established offices worldwide to further such sales and marketing efforts. We sell our products in the America's, EMEA and APAC through a mix of direct operations, VARs and certain third-party distributors. We translate and localize certain products directly or on occasion through outside contractors, for sale in Europe, the Middle East, Africa, Latin America and Asia Pacific.

32-------------------------------------------------------------------------------- Table of Contents • Product development - Product development expense consists primarily of salaries and bonuses, share-based compensation expense, outside services and allocated overhead expenses. Our product development strategy combines innovative new software capabilities and technology architectures with our commitment to the long-term support of our products to meet the unique needs of our customers and vertical industries we serve. We seek to enhance our existing product lines, offer streamlined upgrade and migration options for our existing customers and develop compelling new products for our existing customer base and prospective new customers.

• General and administrative - General and administrative expense primarily consists of salaries and bonuses, share-based compensation expense, outside services, and facility and information technology allocations for the executive, finance and accounting, human resources and legal service functions. Bad debt expenses and legal settlement fees are allocated to our segments and the remaining general and administrative expenses are not allocated.

• Depreciation and amortization - Depreciation and amortization expense consists of depreciation attributable to our fixed assets and amortization attributable to our intangible assets. Depreciation and amortization are not allocated to our segments.

• Acquisition-related costs - Acquisition-related costs consists primarily of sponsor arrangement fees, legal fees, investment banker fees, bond breakage fees, due diligence fees, costs to integrate acquired companies, and costs related to contemplated business combinations and acquisitions.

Acquisition-related costs are not allocated to our segments.

• Restructuring costs - Restructuring costs relate to management approved restructuring actions to eliminate certain employee positions and to consolidate certain excess facilities with the intent to integrate acquisitions and streamline and focus our operations to properly align our cost structure with our projected revenue streams. Restructuring costs are not allocated to our segments.

Non-Operating Expenses Our non-operating expenses consist of the following: • Interest expense - Interest expense represents interest and amortization of our original issue discount and deferred financing fees related to our outstanding debt.

• Other income (expense), net - Other income (expense), net consists primarily of interest income, other non-income based taxes, foreign currency gains or losses and gains or losses on marketable securities.

• Income tax expense - Income tax expense is based on federal, state and foreign taxes owed in these jurisdictions in accordance with current enacted laws and tax rates. Our income tax provision includes current and deferred taxes for these jurisdictions, as well as the impact of uncertain tax benefits for the estimated tax positions taken on tax returns.

General Business Trends Demand for our systems and services offerings has generally been correlated with the overall macroeconomic conditions. The global economic outlook remains uncertain. Over the past year the United States ("U.S.") economy has been experiencing positive momentum as evidenced by GDP growth through the third calendar quarter of 2012, improvement in light vehicle sales, improvement in the housing market, and improvements in consumer confidence and unemployment.

However, uncertainty about the future remains primarily due to the U.S.

government fiscal issues such as the debt ceiling and reduced spending levels which have contributed to a calendar fourth quarter decline in GDP, as well as historically high unemployment rates. The short-term outlook for the economy of the European Union ("EU") and the Eurozone remains fragile due to the ongoing impacts of the European sovereign debt crisis and high unemployment. We expect these conditions will lead to continued IT spending weakness in Europe into 2013, and these conditions could have a negative impact on IT spending in the U.S. as well.

Our Retail Distribution segment performance has improved as consumer confidence and the residential housing market have recovered. However, our ERP segment revenue and margins have been adversely affected by the weak European economy and uncertainty surrounding the U.S. economy. Our Retail Solutions segment performance continues to be driven by the number and timing of large strategic deals.

33-------------------------------------------------------------------------------- Table of Contents We continue to evaluate the economic situation, the business environment and our outlook for changes. We continue to focus on executing in the areas we can control by providing high value products and services while managing our expenses.

On October 12, 2012, we acquired 100% of the equity of Solarsoft. The Solarsoft discrete manufacturing, process manufacturing, packaging and wholesale and distribution verticals are reported in our ERP segment. The Solarsoft North America lumber and building materials verticals are reported in our Retail Distribution segment. We have indicated the impact of Solarsoft on our results below.

Results of Operations The following discussion of the Company's revenues and expenses has been prepared by comparing the combined results of Epicor for the three months ended December 31, 2012 and Solarsoft Business Solutions ("Solarsoft") for the period from the date of the acquisition on October 12, 2012 through December 31, 2012 compared to the three months ended December 31, 2011 for Epicor. Any references below to Solarsoft represent Solarsoft results for the period of October 13, 2012 through December 31, 2012.

Three Months Ended December 31, 2012 Compared to Three Months Ended December 31, 2011 Total revenues Our total revenues were $228.5 million and $209.4 million in the three months ended December 31, 2012 and 2011, respectively. Total revenues increased by $19.1 million, or 9%, in the three months ended December 31, 2012 as compared to the three months ended December 31, 2011. Of this increase, $17.2 million was attributable to the inclusion of Solarsoft revenues.

34-------------------------------------------------------------------------------- Table of Contents The following table sets forth our segment revenues by systems and services for the three months ended December 31, 2012 and 2011, and the variance thereof: Three Months Three Months Ended Ended December 31, (in thousands, except percentages) December 31, 2012 2011 Variance $ Variance % ERP revenues: Systems: License $ 20,886 $ 28,322 $ (7,436 ) (26 )% Professional services 34,485 31,815 2,670 8 % Hardware 4,401 3,736 665 18 % Other 120 148 (28 ) (19 )% Total systems 59,892 64,021 (4,129 ) (6 )% Services 80,289 60,999 19,290 32 % Total ERP revenues 140,181 125,020 15,161 12 % Retail Solutions revenues: Systems: License 3,752 7,863 (4,111 ) (52 )% Professional services 8,746 8,288 458 6 % Hardware 5,810 4,680 1,130 24 % Other - - - - % Total systems 18,308 20,831 (2,523 ) (12 )% Services 16,073 14,745 1,328 9 % Total Retail Solutions revenues 34,381 35,576 (1,195 ) (3 )% Retail Distribution revenues: Systems: License 5,048 4,051 997 25 % Professional services 4,068 3,048 1,020 33 % Hardware 4,952 4,451 501 11 % Other 1,106 1,169 (63 ) (5 )% Total systems 15,174 12,719 2,455 19 % Services 38,718 36,092 2,626 7 % Total Retail Distribution revenues 53,892 48,811 5,081 10 % Total revenues: Systems: License 29,686 40,236 (10,550 ) (26 )% Professional services 47,299 43,151 4,148 10 % Hardware 15,163 12,867 2,296 18 % Other 1,226 1,317 (91 ) (7 )% Total systems 93,374 97,571 (4,197 ) (4 )% Services 135,080 111,836 23,244 21 % Total revenues $ 228,454 $ 209,407 $ 19,047 9 % 35-------------------------------------------------------------------------------- Table of Contents Our ERP, Retail Solutions and Retail Distribution segments accounted for approximately 61%, 15% and 24%, respectively, of our revenues during the three months ended December 31, 2012. This compares to the three months ended December 31, 2011, where ERP and Retail Solutions and Retail Distribution segments accounted for approximately 60%, 17% and 23%, respectively, of revenues. The shift in ERP, Retail Solutions and Retail Distribution's percentage of total revenues is primarily attributable to the inclusion of Solarsoft revenues in the three months ended December 31, 2012, which contributed $14.2 million to ERP revenues and $3.0 million to Retail Distribution revenues during the three months ended December 31, 2012. See Note 11 - Segment Reporting - in our unaudited condensed consolidated financial statements for further information on our segments, including a summary of our segment revenues and contribution margin.

The following table sets forth, for the periods indicated, our Non-GAAP segment revenues by systems and services excluding the impact of the deferred revenue purchase accounting adjustment. Segment revenues excluding the impact of the deferred revenue purchase accounting adjustment do not represent GAAP revenues for our segments and should not be viewed as alternatives for GAAP revenues. We use segment revenues excluding the impact of the deferred revenue purchase accounting adjustment in order to compare the results of our segments on a comparable basis.

Three Months Three Months Ended Ended December 31,(in thousands, except percentages) December 31, 2012 2011 Variance $ Variance % Systems revenues ERP $ 59,901 $ 64,347 $ (4,446 ) (7 )% Retail Solutions 18,454 20,880 (2,426 ) (12 )% Retail Distribution 15,553 12,913 2,640 20 % Deferred revenue purchase accounting adjustment (534 ) (569 ) 35 (6 )% Total systems revenues 93,374 97,571 (4,197 ) (4 )% Services revenues ERP 82,104 69,168 12,936 19 % Retail Solutions 16,079 15,441 638 4 % Retail Distribution 39,331 36,321 3,010 8 % Deferred revenue purchase accounting adjustment (2,434 ) (9,094 ) 6,660 (73 )% Total services revenues 135,080 111,836 23,244 21 % Total revenues ERP 142,005 133,515 8,490 6 % Retail Solutions 34,533 36,321 (1,788 ) (5 )% Retail Distribution 54,884 49,234 5,650 11 % Deferred revenue purchase accounting adjustment (1) (2,968 ) (9,663 ) 6,695 (69 )% Total revenues $ 228,454 $ 209,407 $ 19,047 9 % (1) For the three months ended December 31, 2012, Solarsoft's deferred revenue purchase accounting adjustment was approximately $2.5 million.

• ERP revenues - ERP revenues increased by $15.2 million, or 12%, in the three months ended December 31, 2012 as compared to the three months ended December 31, 2011. Of this increase, $14.2 million was attributable to the inclusion of Solarsoft revenues in the three months ended December 31, 2012.

ERP systems revenues decreased by $4.1 million, or 6%, in the three months ended December 31, 2012. The inclusion of Solarsoft revenues contributed $7.5 million which was offset by a $11.6 million decrease primarily due to a $9.6 million decrease in license revenues, a $1.4 million decrease in professional services revenues, and a $0.6 million decrease in hardware revenues. Thisdecrease was primarily driven by large strategic deals in the prior year, a change in the sales compensation plan year end from December to September, (which has the tendency to incentivize our sales team to close opportunities in the pipeline in our fiscal fourth quarter), as well as uncertainty caused by macroeconomic circumstances in the U.S. and the ongoing weakness in the Eurozone which we believe adversely impacted our sales of new systems.

36-------------------------------------------------------------------------------- Table of Contents ERP services revenues increased by $19.3 million, or 32%, in the three months ended December 31, 2012. The inclusion of Solarsoft revenues contributed $6.7 million in addition to a $12.6 million increase primarily as a result of an $8.0 million reduction in deferred revenue purchase accounting adjustments, support price increases and new customer support revenues, partially offset by legacy platform attrition.

• Retail Solutions revenues - Retail Solutions revenues decreased by $1.2 million, or 3%, in the three months ended December 31, 2012, as compared to the three months ended December 31, 2011. Retail Solutions systems revenues decreased by $2.5 million partially offset by a $1.3 million increase in services revenues. The decrease in systems revenue was primarily attributable to lower license revenue as a result of large strategic deals in the prior year as well as the change in the sales compensation plan year end from December to September, (which has the tendency to incentivize our sales team to close opportunities in the pipeline in our fiscal fourth quarter). The increase in services revenue was attributable to a $0.7 million reduction in deferred revenue purchase accounting adjustments as well as support price increases and new customer support revenues, partially offset by legacy platform attrition.

• Retail Distributions revenues - Retail Distribution revenues increased by $5.1 million, or 10%, in the three months ended December 31, 2012, as compared to the three months ended December 31, 2011. The inclusion of Solarsoft revenues contributed $3.0 million of this increase, the remaining $2.1 million was primarily the result of increased services revenues. Retail Distribution systems revenues increased by $2.5 million primarily due to the inclusion of $1.8 million of Solarsoft revenues, as well as a $0.6 million increase in license revenues. Retail Distribution services revenues increased by $2.6 million primarily due to the inclusion of $1.2 million of Solarsoft revenues as well as a $1.4 million increase driven by a $0.2 million reduction in deferred revenue purchase accounting adjustments, support price increases and new customer support revenues, partially offset by legacy platform attrition.

Total operating and other expenses The following table sets forth our operating and other expenses for the periods indicated and the variance thereof: Three Months Three Months Ended Ended December 31,(in thousands, except percentages) December 31, 2012 2011 Variance $ Variance % Cost of systems revenues $ 55,934 $ 52,285 $ 3,649 7 % Cost of services revenues 40,133 36,027 4,106 11 % Total cost of revenues 96,067 88,312 7,755 9 % Sales and marketing 40,051 39,341 710 2 % Product development 23,812 20,645 3,167 15 % General and administrative 18,801 21,271 (2,470 ) (12 )% Depreciation and amortization 39,718 33,745 5,973 18 % Acquisition-related 1,452 2,230 (778 ) (35 )% Restructuring costs 1,844 3,640 (1,796 ) (49 )% Total other operating expenses 125,678 120,872 4,806 4 % Interest expense (24,042 ) (22,459 ) (1,583 ) 7 % Other income (expense), net 285 (1,325 ) 1,610 (122 )% Income tax benefit $ (3,485 ) $ (6,138 ) $ 2,653 (43 )% • Cost of systems revenues - Cost of systems revenues increased by $3.6 million, or 7%, in the three months ended December 31, 2012 as compared to the three months ended December 31, 2011. The increase was primarily attributable to the inclusion of $4.9 million of Solarsoft cost of systems revenues in the three months ended December 31, 2012, partially offset by lower third party software and hardware costs due to lower revenues.

• Cost of services revenues - Cost of services revenues increased by $4.1 million or 11%, in the three months ended December 31, 2012 as compared to the three months ended December 31, 2011. The increase was primarily attributable to the inclusion of $3.7 million of Solarsoft cost of services revenues in the three months ended December 31, 2012 as well as a $0.4 million increase in cost of services revenues primarily attributable to increased salary related costs which were partially offset by lower outside services costs.

37-------------------------------------------------------------------------------- Table of Contents Total other operating expenses increased by $4.8 million, or 4%, for the three months ended December 31, 2012, compared to the three months ended December 31, 2011. The increase was due to the inclusion of $12.3 million of SolarSoft total other operating expenses partially offset by a $7.5 million decrease in total other operating expenses in the three months ended December 31, 2012 as described in more detail below.

• Sales and marketing - Sales and marketing expenses increased by $0.7 million, or 2%, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The increase was primarily the result of the inclusion of $3.0 million of Solarsoft expenses, $0.5 million increased salary expense as a result of increased headcount, $0.5 million of marketing related expenses and $0.2 million of travel expenses partially offset by a $3.7 million decrease in commission costs.

• Product development - Product development expenses increased by $3.2 million, or 15%, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The increase was primarily the result of the inclusion of $2.0 million of Solarsoft expenses in the three months ended December 31, 2012, as well as a $1.3 million of increased salary related costs as a result of increased headcount.

• General and administrative - General and administrative expenses decreased by $2.5 million, or 12%, for the three months ended December 31, 2012 compared to the three months ended December 31, 2011. The decrease was primarily the result of a $1.9 million reduction in bad debt expense, $1.7 million of lower legal related costs and a $1.1 million decrease in incentive compensation, partially offset by the inclusion of $2.0 million of Solarsoft expenses.

• Depreciation and amortization - Depreciation and amortization expense was $39.7 million for the three months ended December 31, 2012 compared to $33.7 million for the three months ended December 31, 2011, an increase of $6.0 million, or 18%. The increase was primarily a result of $3.7 million due to the SolarSoft acquisition as well as a $2.3 million increase for depreciation and amortization expense as a result of increased depreciation related to facility leasehold improvements costs, capitalized IT costs and amortization recorded on development costs placed in service.

• Acquisition-related costs - Acquisition-related costs were $1.5 million for the three months ended December 31, 2012 as compared to $2.2 million for the three months ended December 31, 2011. The acquisition costs for the three months ended December 31, 2012 consisted primarily of acquisition costs related to integration activities of legacy Epicor and Activant as well as costs relating to the acquisition of Solarsoft. The acquisition costs for the three months ended December 31, 2011 consisted primarily of costs related to the integration related activities due to the Acquisitions completed in May 2011.

• Restructuring costs - During the three months ended December 31, 2012, we incurred $1.8 million of restructuring costs primarily as a result of our eliminating certain employee positions in connection with the acquisition of Solarsoft. During the three months ended December 31, 2011, we incurred $3.6 million of restructuring costs, primarily as a result of eliminating certain employee positions as a result of the Acquisitions. See Note 9 - Restructuring Costs, in our unaudited condensed consolidated financial statements.

Interest expense Interest expense for the three months ended December 31, 2012 and 2011 was $24.0 million and $22.5 million, respectively. The increase in interest expense was primarily a result of incremental interest expense related to the October 2012 draw on our revolving credit facility to finance the Solarsoft acquisition and interest paid on tax liabilities.

Other income (expense), net Other income (expense) for the three months ended December 31, 2012 was income of $0.3 million compared to expense of $1.3 million for the three months ended December 31, 2011. The three months ended December 31, 2012 consisted primarily of $0.1 million of interest income and $0.2 million of recoveries from sales tax audits. The three months ended December 31, 2011 consisted primarily of $1.1 million of foreign exchange losses.

Income tax expense (benefit) We recognized an income tax benefit of $3.5 million, or 20.4% of pre-tax loss, for the three months ended December 31, 2012 compared to an income tax benefit of $6.1 million, or 26.1% of pre-tax loss, in the three months ended December 31, 2011. Our income tax rate for the three months ended December 31, 2012 differed from the federal statutory rate primarily due to non-deductible expenses including restricted unit compensation, changes in our reserve for uncertain tax positions, and lower 38-------------------------------------------------------------------------------- Table of Contents tax rates in foreign jurisdictions. Our effective tax rate for the three months ended December 31, 2011 differed from the statutory rate primarily due to lower tax rates of foreign subsidiaries and non-deductible expenses.

See Note 7 - Income Taxes - in our unaudited condensed consolidated financial statements for additional information about income taxes.

Contribution margin The results of the reportable segments are derived directly from our management reporting system. The results are based on our method of internal reporting using segment contribution margin as a measure of operating performance and are not necessarily in conformity with United States generally accepted accounting principles ("GAAP"). Our management measures the performance of each segment based on several metrics, including contribution margin as defined below, which is not a financial measure calculated in accordance with GAAP. Asset data is not reviewed by our management at the segment level and therefore is not included.

Segment contribution margin includes all segment revenues less the related cost of sales, direct marketing, sales, and product development expenses as well as certain general and administrative expenses, including bad debt expenses and direct legal costs. A significant portion of each segment's expenses arises from shared services and centrally managed infrastructure support costs that we allocate to the segments to determine segment contribution margin. These expenses primarily include information technology services, facilities, and telecommunications costs.

Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include marketing costs (other than direct marketing), general and administrative costs, such as human resources, finance and accounting, share-based compensation expense, depreciation and amortization of intangible assets, acquisition-related costs, restructuring costs, interest expense, and other income (expense).

There are significant judgments that our management makes with respect to the direct and indirect allocation of costs that may affect the calculation of contribution margin. While our management believes these and other related judgments are reasonable and appropriate, others could assess such matters in ways different than our management.

The exclusion of costs not considered directly allocable to individual business segments results in contribution margin not taking into account substantial costs of doing business. We use contribution margin, in part, to evaluate the performance of, and allocate resources to, each of the segments. While our management may consider contribution margin to be an important measure of comparative operating performance, this measure should be considered in addition to, but not as a substitute for, net income (loss), cash flow and other measures of financial performance prepared in accordance with GAAP that are otherwise presented in our financial statements. In addition, our calculation of contribution margin may be different from the calculation used by other companies and, therefore, comparability may be affected. Contribution margin for the three months ended December 31, 2012 and 2011 is as follows: Three Months Three Months Ended Ended December 31, (in thousands, except percentages) December 31, 2012 2011 Variance $ Variance % ERP $ 43,525 $ 31,453 $ 12,072 38 % Retail Solutions 10,388 12,481 (2,093 ) (17 )% Retail Distribution 16,144 14,550 1,594 11 % Total segment contribution margin $ 70,057 $ 58,484 $ 11,573 20 % • ERP contribution margin - Contribution margin for ERP increased by $12.1 million, or 38%, in the three months ended December 31, 2012 as compared to the same period in the prior year. Solarsoft contributed $3.3 million of contribution margin for the three months ended December 31, 2012, additionally contribution margin increased due to a $13.0 million increase in support margins (as a result of an $8.0 million reduction in the deferred revenue purchase accounting adjustments and a $5.0 million increase in support margins driven by support revenue growth), a $2.6 million reduction in commissions as a result of lower systems revenue, a $1.7 million reduction in legal related costs, a $1.5 million reduction in bad debt expense partially offset by an $8.9 million decrease in systems revenue margins driven primarily by lower license revenues as well as increased salary expenses of $0.4 million and $0.9 million in sales and marketing and product development expenses, respectively.

39-------------------------------------------------------------------------------- Table of Contents • Retail Solutions contribution margin - Contribution margin for Retail Solutions decreased by $2.1 million, or 17%, in the three months ended December 31, 2012 as compared to the same period in the prior year. The decrease was primarily as a result of a $4.0 million reduction in systems margins as a result of lower systems revenues and a higher mix of hardware revenues in the current year partially offset by a $1.2 million reduction in sales commissions as a result of the lower systems revenues and a $0.9 million increase in support margins driven by increased support revenues and a lower deferred revenue purchase accounting adjustment.

• Retail Distribution contribution margin - Contribution margin for Retail Distribution increased by $1.6 million, or 11%, in the three months ended December 31, 2012 as compared to the same period in the prior year.

Solarsoft contributed less than $0.1 million of contribution margin for the three months ended December 31, 2012. Additionally contribution margin also increased by $1.2 million as a result of increased support margins driven by increased support revenues and a lower deferred revenue purchase accounting adjustment as well as a $0.3 million reduction in bad debt expense.

The reconciliation of total segment contribution margin to loss before income taxes is as follows: Three Months Ended Three Months Ended (in thousands) December 31, 2012 December 31, 2011Segment contribution margin $ 70,057 $ 58,484 Corporate and unallocated costs (18,799 ) (18,000 ) Share-based compensation expense (1,535 ) (646 ) Depreciation and amortization (39,718 ) (33,745 ) Acquisition-related costs (1,452 ) (2,230 ) Restructuring costs (1,844 ) (3,640 ) Interest expense (24,042 ) (22,459 ) Other income (expense), net 285 (1,325 ) Loss before income taxes $ (17,048 ) $ (23,561 ) Liquidity and Capital Resources Our primary sources of liquidity are cash flows provided by operating activities and borrowings under our Senior Secured Credit Facilities (the "2011 credit agreement") and senior notes. We believe that these sources will provide sufficient liquidity for us to meet our working capital, capital expenditure and other cash requirements for the next twelve months. We believe that the costs associated with implementing our business strategy will not materially impact our liquidity. We are dependent upon our future financial performance, which is subject to many economic, commercial, financial and other factors that are beyond our control, including the ability of financial institutions to meet their lending obligations to us. If those factors significantly change, our business may not be able to generate sufficient cash flow from operations or additional capital may not be available to meet our liquidity needs. We anticipate that to the extent that we require additional liquidity as a result of these factors or in order to execute our strategy, it would be financed either by borrowings under our 2011 credit agreement, by other indebtedness, additional equity financings or a combination of the foregoing. We may be unable to obtain any such additional financing on terms acceptable to us or at all.

As a result of completing the Acquisitions, we have significant leverage. As of December 31, 2012, our total indebtedness was $1,391.0 million ($1,383.8 million, net of original issue discount (OID)). We also had an additional undrawn revolving credit facility of $6.0 million. Our cash requirements will be significant, primarily due to our debt service requirements. Our interest expense for the three months ended December 31, 2012 was $24.0 million.

Contractual Obligations We have current contractual obligations and commercial commitments of approximately $100 million per year from fiscal 2013 through fiscal 2017.

Additionally, we expect capital expenditures from fiscal 2013 through fiscal 2017 to range from three to four percent of revenues. We believe that our cash and cash equivalents balance as of December 31, 2012, and future cash flow from operations will be sufficient to cover the liquidity needs listed above for at least the next 12 months.

40-------------------------------------------------------------------------------- Table of Contents We expect that the predictable revenue stream generated by our support revenues as well as other cash flows from operations, and the $6.0 million of borrowing capacity available on our senior secured credit facility will be sufficient to cover our liquidity needs for the foreseeable future.

In October 2012, we borrowed $69.0 million on our revolving credit facility. The revolving credit facility expires in May 2016, and we are not required to repay the $69.0 million until then. We are planning to repay the drawn balance during the next twelve months using cash provided by operations, and as a result, we have included these borrowings within the current portion of long-term debt in our unaudited condensed consolidated balance sheet as of December 31, 2012.

In October 2012, in connection with the acquisition of Solarsoft, we assumed operating leases with the following future rental commitments as of December 31, 2012 (in thousands): Amount Nine months ending September 30, 2013 $ 2,645 Year ending September 30: 2014 1,334 2015 1,000 2016 712 2017 657 Thereafter - Total $ 6,348 Off Balance Sheet Arrangements The Securities Exchange Commission rules require disclosure of off-balance sheet arrangements with unconsolidated entities which are reasonably likely to have a material effect on the company's financial position, capital resources, results of operations, or liquidity. We did not have any such off-balance sheet arrangements as of December 31, 2012.

Cash Flows Operating Activities Cash provided by operating activities was $17.7 million and $16.1 million for the three months ended December 31, 2012 and 2011, respectively. Cash was provided by operating activities primarily due to the add-back of non-cash expenses, including depreciation and amortization of $39.7 million and $33.7 million in the three months ended December 31, 2012 and 2011, respectively. The increase in cash provided by operations was driven primarily by the Solarsoft acquisition and increased support revenues.

Investing Activities Net cash used in our investing activities was $156.9 million for the three months ended December 31, 2012. The cash used in investing activities was primarily $152.8 million for the acquisition of Solarsoft, as well as purchases of $2.8 million of property and equipment, and $2.7 million for capitalization of database and software costs, partially offset by $1.4 million proceeds from sale of short-term investments. Cash used in investing activities for the three months ended December 31, 2011 was $8.2 million and included $5.5 million used for purchases of property and equipment, and $2.7 million used for capitalized computer software and database costs.

Financing Activities Net cash provided by financing activities was $66.8 million for the three months ended December 31, 2012. The cash provided by financing activities included $69.0 million of net proceeds from our revolving credit facility offset by $2.2 million of payments on long-term debt. Cash used in financing activities for the three months ended December 31, 2011 was $0.1 million and included $2.2 million of payments on long-term debt, offset by $2.1 million of proceeds from a loan from our parent company, Eagle Topco, LP.

41-------------------------------------------------------------------------------- Table of Contents 2011 Credit Agreement As of December 31, 2012, we had $857.0 million (before $7.2 million unamortized original issue discount as of December 31, 2012) outstanding related to our 2011 credit agreement. In addition, we have an additional availability of $6.0 million as a result of our undrawn revolving credit facility. In October 2012, we borrowed $69.0 million against the revolving credit facility in connection with the acquisition of SolarSoft.

The borrowings under the 2011 credit agreement bear variable interest based on corporate rates, the federal funds rates and Eurocurrency rates. As of December 31, 2012, we had $857.0 million outstanding under the term loans, $69.0 million outstanding under the revolving credit facility, and the interest rate applicable to the term loans was 5.0%, and the interest rate applicable to the revolving credit facility was 3.74%.

Substantially all of our assets and those of our domestic subsidiaries are pledged as collateral to secure our obligations under the 2011 credit agreement and each of our material wholly-owned domestic subsidiaries guarantees our obligations thereunder. The terms of the 2011 credit agreement require compliance with various covenants and amounts repaid under the term loans may not be re-borrowed.

For more information, see Note 4 - Debt - in the unaudited condensed consolidated financial statements included elsewhere in this filing.

Calculation of Excess Cash Flow The 2011 credit agreement requires us to make certain mandatory prepayments when we generate excess cash flow. Excess cash flow under the 2011 credit agreement is calculated as net income, adjusted for non-cash charges and credits, changes in working capital and other adjustments, less the sum of debt principal repayments, capital expenditures, and other adjustments. The calculated excess cash flow may be reduced based on our attained ratio of consolidated total debt to EBITDA (consolidated earnings before interest, taxes, depreciation and amortization, further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance under the indenture governing the senior notes and our 2011 credit agreement), all as defined in the 2011 credit agreement. Pursuant to the terms of the 2011 credit agreement, excess cash flow is measured on an annual basis. Our next required excess cash flow measurement will occur at the end of fiscal 2013. Any mandatory prepayments due are reduced dollar-for-dollar by any voluntary prepayments made during the year.

Senior Notes As of December 31, 2012, we had senior notes outstanding of $465.0 million in principal amount at an interest rate of 8.625%. The indenture that governs the senior notes contains certain covenants, agreements and events of default that are customary with respect to non-investment grade debt securities, including limitations on mergers, consolidations, sale of substantially all of our assets, incurrence of indebtedness, restricted payments liens and affiliates transactions by us or our restricted subsidiaries. The terms of the senior notes require us to make an offer to repay the senior notes upon a change of control or upon certain asset sales. The terms of the indenture also significantly restrict us and our restricted subsidiaries from paying dividends and otherwise transferring assets. For more information, see Senior Notes Due 2019 ("Senior Notes") in Note 4 of the unaudited condensed consolidated financial statements included elsewhere in this filing.

Covenant Compliance The terms of the 2011 credit agreement and the senior notes restrict certain activities, the most significant of which include limitations on the incurrence of additional indebtedness, liens or guarantees, payment or declaration of dividends, sales of assets and transactions with affiliates. The 2011 credit agreement also contains certain customary affirmative covenants and events of default.

Under the 2011 credit agreement, if at any time we have an outstanding balance under the revolving credit facility, our first lien senior secured leverage, consisting of amounts outstanding under the 2011 credit agreement and other secured borrowings, may not exceed the applicable ratio to our consolidated Adjusted EBITDA for the preceding 12-month period. At December 31, 2012, the applicable ratio is 5.00:1.00, which ratio incrementally steps down to 3.25:1.00 over the term of the revolving loan facility.

42-------------------------------------------------------------------------------- Table of Contents At December 31, 2012, we had a $69 million outstanding balance under the revolving credit facility, we were subject to the maximum first lien senior secured leverage ratio requirement, and we were in compliance with all covenants included in the terms of the 2011 credit agreement and the senior notes.

We use consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA"), as further adjusted, a non-GAAP financial measure, to determine our compliance with certain covenants contained in the 2011 credit agreement and the senior notes. For covenant calculation purposes, "adjusted EBITDA" is defined as consolidated net income (loss) adjusted to exclude interest, taxes, depreciation and amortization, and further adjusted to exclude unusual items and other adjustments permitted in calculating covenant compliance under our senior secured credit facilities. The breach of covenants in our 2011 credit agreement that are tied to ratios based on adjusted EBITDA could result in a default under that agreement and under our indenture governing the senior notes.

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures) We believe that EBITDA and Adjusted EBITDA are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We believe that these non-GAAP financial measures provide investors with useful tools for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. We use EBITDA and Adjusted EBITDA for business planning purposes and in measuring our performance relative to that of our competitors.

We believe EBITDA and Adjusted EBITDA are measures commonly used by investors to evaluate our performance and that of our competitors. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and our use of the terms EBITDA and Adjusted EBITDA varies from others in our industry. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income (loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA: • exclude certain tax payments that may represent a reduction in cash available to us; • exclude amortization of intangible assets, which were acquired in acquisitions of businesses in exchange for cash; • do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; • do not reflect changes in, or cash requirements for, our working capital needs; and • do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

As Adjusted EBITDA is included in the calculation of the maximum first lien senior secured leverage ratio covenant, our management believes that Adjusted EBITDA is a key performance indicator for us. As the covenant is calculated using Adjusted EBITDA for the previous twelve months, a calculation of Adjusted EBITDA for the twelve months ended December 31, 2012 is presented below. We did not have outstanding borrowings on the senior secured revolving credit facility as of December 31, 2011, and as a result, the maximum first lien senior secured leverage ratio was not in effect at December 31, 2011. As a result, we have not presented a calculation of Adjusted EBITDA for the twelve month period ended December 31, 2011.

43-------------------------------------------------------------------------------- Table of Contents The table below presents a reconciliation of our net loss to Adjusted EBITDA for the twelve months ended December 31, 2012.

Twelve Months Ended (in thousands) December 31, 2012 Reconciliation of net loss to Adjusted EBITDA Net loss $ (35,226 ) Interest expense 92,066 Income tax benefit (8,882 ) Depreciation and amortization 144,958 EBITDA 192,916 Acquisition-related costs 8,067 Restructuring costs 2,980 Deferred revenue and other purchase accounting adjustments 9,327 Share-based compensation expense 9,197 Management fees paid to Apax 1,942 Other 4,269 Adjusted EBITDA $ 228,698 The following table presents the Maximum First Lien Senior Secured Leverage Ratio required as of December 31, 2012 under the 2011 credit agreement: Covenant Requirement Our Ratio Senior Secured Credit Agreement (1) Maximum First Lien Senior Secured Leverage Ratio 5.00x 3.80x __________________________________________ (1) Under the 2011 credit agreement, if at any time we have an outstanding balance under the revolving credit facility, our first lien senior secured leverage, consisting of amounts outstanding under the 2011 credit agreement and other secured borrowings, may not exceed the applicable ratio to our consolidated Adjusted EBITDA for the preceding 12-month period. At December 31, 2012, the applicable ratio is 5.00x, which ratio incrementally steps down to 3.25x over the term of the revolving loan facility.

Recently Issued Accounting Pronouncements See Note 1 - Basis of Presentation and Accounting Policy Information in our unaudited condensed consolidated financial statements for a summary of recently issued accounting pronouncements.

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