UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



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

For the fiscal year ended September 30, 2014



[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to

Commission File Number 333-178959

Epicor Software Corporation

(Exact name of registrant as specified in its charter)



Delaware		45-1478440
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

804 Las Cimas Parkway Austin, TX		78746
(Address of principal executive offices)		(Zip Code)

(512) 328-2300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes [ ] No [x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: Yes [x] No [ ]

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [] No [x] As a voluntary filer, not subject to the filing requirements, the registrant filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [] No [x] As a voluntary filer, the registrant is not required to submit Interactive Data Files pursuant to Rule 405 of Regulation S-T. The registrant has submitted all Interactive Data Files for the preceding 12 months.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x]

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.

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Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [x] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

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

No public trading market exists for the common stock, no par value, of Epicor Software Corporation. The aggregate market value of the common stock held by non-affiliates of the registrant was zero as of March 31, 2014, the last business day of the registrant's most recently completed second fiscal quarter. All of the outstanding shares of common stock, no par value, of Epicor Software Corporation, are held by Eagle Holdco, Inc., the registrant's parent company.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.



Class		Outstanding at December 17, 2014
Common Stock, no par value		100 shares

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. None

Explanatory Note

As used in this Annual Report on Form 10-K for the year ended September 30, 2014 (the “Form 10-K”), the terms “Company,” “our,” “us” or “we” refer to Epicor Software Corporation.

This Form 10-K includes the restatement of certain of the Company’s previously issued consolidated financial statements and information.

On December 16, 2014, we filed a Form 8-K under Item 402 with the Securities and Exchange Commission relating to previously issued financial statements as described below. As indicated in the Form 8-K under Item 4.02 and in Note 2 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K, the Company decided that it needed to correct an error related to its accounting for income taxes.

We have completed our assessment of the impact of the aforementioned correction in our accounting for income taxes. Based on that assessment, we have determined that we need to restate our annual and quarterly results for certain prior fiscal periods. In this Form 10-K, we therefore amend or restate the following types of financial information as of and for the periods (collectively, the "Restated Periods") noted in the table below.



Type of Financial Information	Date or Period
Consolidated Balance Sheets	September 30, 2013
Consolidated Statements of Comprehensive Loss, Stockholders’ Equity and Cash Flows	Fiscal Years Ended September 30, 2013 and 2012
Selected Financial Data	Fiscal Years Ended September 30, 2013 and 2012; Period from Inception to September 30, 2011
Unaudited quarterly financial information	Each quarter in the fiscal years ended September 30, 2013 and first, second and third quarters of 2014
Management’s discussion and analysis of financial condition and results of operations	Fiscal years ended September 30, 2013 and 2012

In addition, we have identified a material weakness with respect to our internal control over financial reporting for income taxes for the year ended September 30, 2014. Disclosures related to these matters are included in Part II, Item 9A, under "Controls and Procedures," which describes the material weakness and management's conclusion that the Company's internal control over financial reporting for income taxes was not effective as of September 30, 2014. Additionally, as the material weakness led to a restatement of financial information for the years ended September 30, 2013 and 2012, Part II, Item 9A includes management’s amended conclusion that our internal control over financial reporting for income taxes was not effective as of September 30, 2013 or September 30, 2012.

We believe that presenting all of the amended and restated information regarding the Restated Periods in this Form 10-K allows investors to review all pertinent data in a single presentation. In addition, the Company’s Quarterly Reports on Form 10-Q to be filed during fiscal 2015 will include the restated fiscal 2014 comparable prior quarter and year to date periods. We have not filed and do not intend to file amendments to (i) our Quarterly Reports on Form 10-Q for the first three quarterly periods in the year ended September 30, 2014 or (ii) our Annual Report on Form 10-K for the years ended September 30, 2013 and 2012 (collectively, the “Affected Periods”). Accordingly, investors should rely only on the financial information and other disclosures regarding the Restated Periods in this Form 10-K or in future filings with the SEC (as applicable), and not on any previously issued or filed reports, earnings releases or similar communications relating to these periods.

We have not modified or updated previously disclosed financial information for the years ended September 30, 2013 and 2012, except as required to reflect the effects of the restatement, in this Form 10-K.

The combined impact of the adjustments and specified line items in the Affected Periods resulting from the restatement is set forth in Notes 2 and 18 of Notes to the Consolidated Financial Statements. The following items of this Form 10-K are impacted as a result of the restatement.


•	Part I, Item IA, Risk Factors


•	Part II, Item 6, Selected Financial Data


•	Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations


•	Part II, Item 8, Financial Statements and Supplementary Data


•	Part II, Item 9A, Controls and Procedures

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EPICOR SOFTWARE CORPORATION

REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014

INDEX



	Page

Forward-Looking Statements	2
Part I	3
Item 1. Business	3
Item 1A. Risk Factors	13
Item 1B. Unresolved Staff Comments	28
Item 2. Properties	28
Item 3. Legal Proceedings	28
Item 4. Mine Safety Disclosures	28
Part II	28
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6. Selected Financial Data	29
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	61
Item 8. Financial Statements and Supplementary Data	63
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	135
Item 9A. Controls and Procedures	136
Item 9B. Other Information	138
Part III	138
Item 10. Directors, Executive Officers and Corporate Governance	138
Item 11: Executive Compensation	142
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	156
Item 13: Certain Relationships and Related Transactions, and Director Independence	158
Item 14: Principal Accountant Fees and Services	161
Part IV	162
Item 15: Exhibits and Financial Statement Schedule	162
Signatures	164
Exhibits Index	166

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

For purposes of this Annual Report on Form 10-K ("Report"), the terms "we", "our", "us", "Epicor" and the "Company" refer to Epicor Software Corporation and its consolidated subsidiaries. This Report contains forward-looking statements that set forth anticipated results based on management’s plans and assumptions. Such forward-looking statements involve substantial risks and uncertainties. These statements often include words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “seek”, “will”, “may”, or similar expressions. These statements include, among other things, statements regarding:


•	the economy, IT and software spending and our markets and technology, including Software as a Service and cloud offerings;


•	our strategy and ability to compete in our markets;


•	our results of operations, including the financial performance of acquired companies, products, services and technologies on a combined and stand-alone basis;


•	our ability to generate additional revenues from our current customer base;


•	the impact of new accounting pronouncements, legal or regulatory requirements;


•	our acquisitions, including statements regarding financial performance, products, and strategies;


•	our credit agreement and senior note indenture, our ability to comply with the covenants therein, and the terms of any future credit or debt agreements;


•	the impact of our parent company's PIK Toggle Notes, and our related dividend payments to our parent company, on our liquidity;


•	the life of our assets, including amortization schedules;


•	our sources of liquidity, cash flow from operations and borrowings;


•	our financing sources and their sufficiency;


•	our expected capital expenditures;


•	our legal proceedings;


•	our forward or other hedging contracts and practices; and


•	our tax expense and tax rate.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Part I, Item 1A. Risk Factors”, as well as elsewhere herein and in our other filings with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Report to conform these statements to actual results or to changes in our expectations, except as required by applicable law.

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PART I

ITEM 1 - BUSINESS

Our Business

Epicor Software Corporation ("we", "our", "us", "Epicor", and the "Company") is 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 and services sectors. Our fully integrated solutions, which primarily include software, professional services and 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 functions, operations and resources of their businesses and ultimately to their customers and suppliers. By enabling companies 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, which may result in higher revenues, increased profitability and improved customer loyalty.

Our fully integrated systems and services include one or more of the following software applications: inventory and production management, supply chain management (“SCM”), manufacturing execution systems ("MES"), 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’ needs for increased supply chain visibility and transparency by offering omni-channel commerce and collaborative capabilities that allow enterprises to extend their business and more fully integrate their operations with those of their customers, suppliers and partners. We believe this collaborative approach distinguishes us from most of the 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 are 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 industry data to provide our customers with advanced product information, multidimensional analysis, modeling and reporting.

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, support and/or services offerings on a regular, ongoing basis in over 35,000 sites and locations.

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, South America, Europe, Africa, Asia and Australia/New Zealand, with approximately 4,500 employees worldwide as of September 30, 2014. 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 providing 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 support increasingly global businesses and to more effectively deliver our systems and services to high-growth emerging markets.

Corporate Background

As a result of a series of mergers completed in May 2011, we became the parent company of Activant Group Inc. (“AGI”), the parent company of Activant Solutions Inc., our Predecessor for reporting purposes, (the “Predecessor” or “Activant”), and the former Epicor Software Corporation (“Legacy Epicor”). In December 2011, we changed our name to Epicor Software Corporation in connection with the merger of Legacy Epicor, AGI and Activant with and into us under Delaware law. Funds advised by Apax Partners L.P. and Apax Partners, LLP (together referred to as “Apax”) and certain of our employees indirectly own all of the outstanding shares of the Company.

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Segments

We specialize in and target three application software segments: ERP, Retail Solutions and Retail Distribution, which we consider our segments for reporting purposes. 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. We believe these segments accurately reflect the manner in which our management views and evaluates the business.

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.

A description of the businesses served by each of our reportable segments follows:

•

ERP segment - Our 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, 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, medical devices, rubber and plastics, food and beverage, aerospace and defense, electronics and high tech, and automotive; and (3) financial management and professional services solutions designed to provide the project accounting, time and expense management, and financial analytics and reporting necessary to support the complex requirements of serviced-based companies in the business services, consulting, financial services, not-for-profit and technology services sectors.

•

Retail Solutions segment - Our Retail Solutions segment supports both (1) distributed retail environments that require comprehensive omni-channel retail solutions including POS store operations, mobility, cross-channel order management, customer relationship management ("CRM"), loyalty management, merchandising, planning and assortment planning, business intelligence and audit and operations management capabilities and (2) retailers seeking to leverage the cloud and on-demand computing with our subscription based Epicor Retail SaaS offering that includes a preconfigured, full suite retail solution, the infrastructure for the host and store hardware, ongoing solution updates, monitoring, maintenance and support. Retailers can also choose a hosted option that provides a licensed, customizable solution with complete delivery, management, and support of the infrastructure and applications in the cloud. Our Retail Solutions segment caters to the general merchandise, specialty retail, apparel and footwear, sporting goods and department store verticals.

•

Retail Distribution segment - Our Retail Distribution segment supports small to mid-sized, independent or affiliated retailers that require integrated POS and ERP offerings. Customers in this segment are primarily independent hardware retailers, lumber and home centers, lawn and garden centers, farm and agriculture retailers, retail pharmacies, sporting goods, and other specialty retailers. Our Retail Distribution segment also supports 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.

See Note 13 - Segment Reporting in our audited consolidated financial statements for further information about our segments.

Our Products and Services

We design, develop, market, sell, implement and support enterprise software applications that provide small and mid-sized companies and the divisions and subsidiaries of Global 1000 enterprises with highly functional technically advanced business solutions that are aligned according to the markets and industries that they serve.

Most of our product offerings provide customers a range of deployment choices, from on-premise to on-demand or a combination thereof, providing a freedom of choice not generally available from most vendors who typically focus on a single deployment model by product. The ability to provide the same software solution on-premise, securely in the cloud, in a virtualized environment, or via a preconfigured appliance allows organizations increased flexibility and scalability. Customers

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can evolve and change their deployment model as their business needs evolve. Our customers may move between “on-demand” multi-tenant Software as a Service ("SaaS"), single-tenant (hosted), or traditional on-premise licensed software users.

Our software and cloud subscriptions services are comprised of proprietary catalogs, data warehouses, electronic data interchange, data management, connectivity and payment processing 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 eCommerce connectivity offerings, and networking and security monitoring management solutions. These proprietary products and services generate recurring revenues through periodic (generally monthly) subscription fees and differentiate our products from those of our competitors.

Our innovative software solutions include:

Epicor ERP. A highly configurable, global ERP solution, Epicor ERP was first introduced in 2008. The most recent release, Epicor E10, which became generally available in April 2014, is designed to provide increased performance, scalability, interoperability and ease of use, while reducing the cost and complexity of deployment and upgrades by leveraging a 100% Microsoft technology stack. The Epicor ERP product line combines functionality, business and process capabilities from several of our heritage product lines with an innovative, next generation service oriented architecture (SOA). A key benefit of Epicor ERP beyond its industry and global capabilities is its high degree of user flexibility, scalability and ease of implementation. Epicor E10 is designed to help organizations work more effectively, both internally and externally by focusing on collaboration, responsiveness, simplicity and accessibility. The architecture and performance characteristics of Epicor E10 are specifically designed for infrastructure typically found in cloud-based computing platforms. Epicor ERP is available as a multi-tenant SaaS solution or a perpetual license, which uniquely positions Epicor as one of the only ERP providers that can deliver the same highly functional, end-to-end software solution on-premise, hosted, or on-demand in the cloud. Epicor ERP is focused on the manufacturing, distribution and business services industry sectors and includes applications for CRM, sales, service, financials, human resources and payroll, supply chain, production, planning and scheduling, project management, enterprise performance management, ecommerce, governance, risk and compliance (GRC), and global business management.

Epicor Prophet 21 (Prophet 21). Designed for small and midsize wholesale distributors across a variety of vertical markets, Prophet 21 leverages our deep experience serving distribution businesses. A comprehensive end-to-end business management solution, Prophet 21 is designed for ease of use and scalability and can support a wide range of distribution environments from small single site distributors to complex, global distributors with hundreds of warehouse locations. Prophet 21 offers multiple and dynamic forecasting and inventory replenishment methods to help lower carrying costs, minimize excess or obsolete inventory, improve cash flow, and increase customer service levels by enabling customers to get the right products out on time. Prophet 21 covers the full spectrum of requirements for wholesale distribution businesses including order management, inventory management, CRM, materials management, financial management, eCommerce, services, manufacturing and business analytics.

Epicor Eclipse (Eclipse). Designed for the electrical, HVAC (heating/ventilation and air conditioning), PVF (pipe, valve and fittings) and plumbing industries, Eclipse is a highly scalable business management solution for distributors ranging from 10 to more than 5,000 users. Leveraging our deep domain expertise and experience, Eclipse is specifically designed to work the way industrial and wholesale distributors work. Eclipse combines vertical functionality, an intuitive user interface, embedded search and task automation with best practices for distribution operations to help companies drive costs out of their supply chain, increase sales and margins, and improve customer service. Eclipse operates under Microsoft Windows, UNIX and LINUX operating environments and includes applications for sales, pricing, CRM, purchasing, inventory, warehouse logistics, accounting and financial management, business intelligence and analytics.

Epicor Eagle (Eagle). A comprehensive retail business management software solution, Eagle is designed for small to mid-market retailers across a spectrum of verticals including specialty hard goods, lumber and building materials, lawn and garden, pharmacy, drugstores, sporting goods, and the automotive aftermarket. The most recent release, Epicor Eagle N Series which became generally available in August 2014, is designed to provide increased interoperability, an enhanced user experience and embedded analytics by leveraging Microsoft .NET technology. Eagle N Series provides a real time, customer centric, multi-location, omni-channel approach to retail automation. Eagle provides independent, cooperative and regional retailers an effective, affordable solution that allows them to provide the same store and customer experience as large national chains. Designed to scale from single location businesses to regional or national chains, Eagle N Series delivers deep retail functionality including applications and modules for POS, store operations, mobility, customer and marketing management, merchandising, supply chain integration, order and operations management, payment processing and accounting and financial management.

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Epicor Retail. Epicor Retail delivers advanced, end-to-end retail management solutions designed for fashion, apparel, and specialty retailers, as well as general merchandise retailers and department stores. Highly functional and designed for integration and scalability, the Epicor Retail solution supports multi-store, multi-channel and multi-national retailers allowing them to provide a consistent customer experience, precisely match supply with demand, and leverage actionable intelligence in all channels across the enterprise. Integrating software, hardware and support services, Epicor Retail solutions are delivered best-of-breed, packaged and via the cloud, enabling retailers to drive business transformation on their terms, improve profitability and accelerate growth. Epicor Retail applications and modules include store POS, mobility and operations, cross-channel order management, merchandising, planning and assortment planning, sourcing and product lifecycle management, CRM, eCommerce, audit and operations management, and business intelligence.

Epicor HCM. A comprehensive, configurable HCM solution, Epicor HCM enables companies to track, manage and analyze all facets of their human resource ("HR") data throughout the entire employee lifecycle from recruitment to retirement. Applications and modules of Epicor HCM include core HR, self-service, benefits and compensation management, talent and performance management, employee training and development, timesheets, position control and budgeting. Comprehensive reporting and embedded analytical tools provide a company's management team with a complete picture of their workforce, as well as the information and documentation necessary to respond to evolving government and regulatory compliance requirements. Epicor HCM is available on-demand through a SaaS, hosted, or on-premise model.

Epicor iScala (iScala). iScala is an integrated ERP, CRM and SCM solution targeting the divisions and subsidiaries of Global 1000 corporations and large local and regional companies worldwide. iScala's collaborative functionality, country-specific localizations and multi-language capabilities are designed to support global, multi-company deployments with significant cross-border trading requirements. iScala is targeted to meet the unique needs of companies in industry segments including: pharmaceutical, chemical and allied products, industrial machinery, light engineering, consumer goods and hospitality.

Epicor BisTrack (BisTrack). BisTrack is a comprehensive business software suite for dealers and distributors of lumber, building materials (“LBM”), and construction supplies. Designed to manage LBM distribution and pro-dealer businesses of all sizes, BisTrack software provides contractor and professional builder-focused businesses the ability to meet industry-specific requirements such as: complex sales, delivery and special orders; installed sales, contract billing, and project tracking; lumber and wood products tallies; millwork and other manufacturing orders.

Epicor LumberTrack (LumberTrack). LumberTrack is a comprehensive software solution for lumber and wood products manufacturers and wholesale distributors. Designed for the forestry and wood products industry, LumberTrack can provide regional value-added manufacturers and vertically integrated forest products multinationals with the critical functionality they need to meet key industry-specific requirements including: hardwood and softwood; lumber, panel, and treated wood; value-added and by-products; import, domestic, and export sales; forest management and log yard operations.

Epicor Manufacturing Packaging Solutions (AVP and BVP). Epicor packaging manufacturing solutions are comprehensive software solutions designed specifically for needs of retail, consumer and corrugated packaging manufacturers. Epicor BVP is designed to meet the complex planning, scheduling and production requirements of multi-plant and multi-national corrugated packaging manufacturers. Epicor AVP is designed to meet the end-to-end requirements of retail and consumer packaging manufacturers.

Epicor Manufacturing Execution and Intelligence Systems (Mattec and Informance). Epicor provides extended manufacturing execution systems (MES) to measure, monitor and optimize production and manufacturing operations through real-time data collection, analysis and performance tracking. Monitoring, alerting and reporting production lines, machines and operators in real-time allows manufacturers to pinpoint critical issues, reduce waste, and improve quality, efficiency and customer service whether in a single facility or across a globally distributed enterprise.

Epicor Tropos (Tropos). Tropos is a comprehensive software solution designed to meet the complex production, materials traceability and regulatory compliance requirements of process manufacturers. Tropos provides full recipe based production and support for co-products, byproducts and waste products and is optimized for recipe and rate based manufacturing. Epicor

Tropos supports the key business operations from demand planning, order processing, customer service, production scheduling, manufacturing and inventory control, while helping to ensure companies meet the stringent standards of industry and international regulators by managing quality control records, supporting full traceability and audit support.

Epicor CMS (CMS). CMS, formerly IVP, is a comprehensive ERP software solution designed for the automotive industry. Built to support intensive supply chains, CMS assists automotive distributors and manufacturers eliminate shipping errors, tighten inventory accuracy, and strengthen enterprise-wide control and supplier management. CMS delivers numerous automotive industry features and capabilities including compliance for Honda's Star, Delta and GPCS systems in North America and

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supports AIAG-compliant labeling, MMOG/LE compliance, product lifecycle management (PLM), and advanced quality management.

Epicor Vision (Vision). Vision is an enterprise software system designed for warehouse distributors in the automotive parts aftermarket and office product market. Vision helps automotive warehouse distributors connect each part of the enterprise, linking their auto parts distribution centers, company-owned parts stores, independent jobbers, program buying groups, and service and repair shop operations.

Industry Overview

The enterprise application software industry is evolving rapidly as companies look to improve their internal systems and processes to more quickly respond to the challenges of an increasingly global economy. While traditional ERP products have focused predominately on “back-office” transactional activities, such as accounting, order management, production and inventory control, enterprise applications have now expanded to include managing interactions across a company's complete value chain − from customers and partners to suppliers and employees. Along with the increased requirement to manage global operations and data, today's systems must also automate a much broader and more complex range of administrative, regulatory, and operational business processes − often across multiple industries. The velocity and complexity of business practices, market dynamics and pace of technology innovation means companies need agile and flexible business software. The cloud, analytics, social collaboration and mobility are driving entirely new technology adoption models and enhancing access to both internal and external information. According to Gartner, “the 2014 global spending forecast for enterprise software is $321 billion in constant dollars, with growth of 6.9% over 2013. Enterprise software continues to be a beacon of growth among technology spending. Key software markets, such as CRM, supply chain management and database management systems, have been buoyed by initiatives underpinned by the Nexus of Forces and the digitalization of business, which are augmenting foundational spending on normal maintenance and replacements.”¹

With our advanced applications, geographic reach and localized products, we believe our business is well positioned to take advantage of the expected growth in both the large developed markets of North America and Western Europe, as well as emerging markets including Asia Pacific, Central and Eastern Europe, Latin America, Africa, and the Middle East.

¹ Source: Gartner, Inc., “Forecast: Enterprise Software Markets, Worldwide, 2011-2018, 3Q14 Update,” September 10, 2014 (Analysts: Matthew Cheung; Yanna Dharmasthira; Chad Eschinger; Bianca Francesca Granetto; Joanne M. Correia; Neil McMurchy; Federico De Silva; Tom Eid; Ruggero Contu; Colleen Graham; Fabrizio Biscotti; Chris Pang; David M. Coyle; Dan Sommer; Hai Hong Swinehart; Bhavish Sood; Jie Zhang; Jin-Sik Yim; Michael Warrilow; Vassil Mladjov; Laurie F. Wurster; Terilyn Palanca)

The Gartner Report(s) described herein (the "Gartner Report(s)") represent(s) data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of this Report) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

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Traditionally, software spending in small and mid-sized companies and the divisions and subsidiaries of Global 1000 enterprises that make up our core market has outpaced spending in the larger ERP market segment. We believe that small and mid-sized businesses have dynamic information requirements, but limited resources. These markets are increasingly taking advantage of information technology to increase productivity and more effectively manage their operations. We have identified a number of common factors we believe drive this demand for technology solutions for our target customers:

•

Integrated Solutions with Vertical-Specific Functionality. Software applications from vendors such as Microsoft Corporation, Oracle Corporation, SAP AG, and NetSuite Inc., have a broad or horizontal approach, which we believe does not adequately address the needs of businesses that have high industry-specific functionality requirements. In addition, our typical customer generally does not have a large dedicated technology team to integrate and manage information technology solutions across multiple vendors and partners. As a result, our customers generally prefer a “single point of accountability” with one vendor providing and supporting a large portion of their information technology infrastructure, often on a turnkey basis.

•

The Internet of Things. The world is becoming an information system itself as uniquely identifiable sensors and transponders are embedded in an ever wider range of devices and objects that can then be linked, accessed and interconnected through the Internet. With the increased use of “smart devices” and increasingly ever-present access through low-cost wireless communications, the Internet of Things is expected to transform automation in nearly all fields and industries and enhance utilization and productivity by optimizing usage, providing real-time tracking and more accurate decision support.


•	Complex Supply Chains. Many of our customers operate in markets that may have multi-level supply chains consisting of manufacturers, distributors and buying groups on the supply side and service providers, commercial customers and consumers on the demand side. Businesses with complex supply chains require more sophisticated, tailored systems and services to operate effectively.

•

Inventory Management. Many of our customers operate in complex supply chain environments where they must manage, market and sell large quantities of diverse products. They can have complex, high cost, configured products, as well as low value, high velocity inventory. The ability to track and manage inventory more efficiently is critical to improving the operational and financial performance of these organizations.

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Modern Technology. Many of the systems currently in use in the vertical markets that we serve are older, character-based or in house systems, with spreadsheets and custom built databases that provide limited extensibility, scalability or flexibility. Such legacy solutions can also be responsible for restricting the agility of an organization from rapidly adapting to new opportunities. As global competition increases, businesses will need to replace their older systems with more modern, comprehensive business management solutions in order to increase efficiencies and optimize their business performance. Modern enterprise applications generally can provide much broader and deeper integration capabilities, better usability, responsive design to support device-independent access, cloud and on-demand deployment, social and collaborative tools and embedded analytics.

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Customer Experience. Many of our customers seek to differentiate themselves in their respective marketplaces by providing a high degree of customer service and value added services to improve customer loyalty. For example, in the distribution market, professional and trade customers expect on-time delivery of complex orders to their job sites, the ability to charge the orders to their account and the ability to receive a credit for any unused materials. In order to meet these high service requirements, businesses in the vertical markets we serve are increasingly adopting more advanced business management solutions. Our systems and services are specifically designed to facilitate this level of customer service.

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Embedded Social and Collaborative Tools. Companies in a wide variety of industries see social and collaboration tools as having an increasingly important role in their future business. The ability to search, filter, tag, follow and share information − both internally and externally can be beneficial in improving customer and supplier communications and service. Leveraging social technologies with ERP allows employees and teams to better share ideas, as well as track, monitor, and follow up on projects through real-time activity streams that can organize and aggregate a wide variety of information and data. Embedding social tools and concepts within ERP can provide the ability for both formal and informal teams to more easily communicate and collaborate on projects, orders, customers, suppliers or almost any other business information within the enterprise.


•	Two-Tier ERP Systems. Larger, distributed enterprises are increasingly adopting what has been termed “two-tier ERP,” in which a parent entity retains their corporate system while their subsidiaries, business units and satellite

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offices standardize on a second ERP system that is typically mid-market focused, provides vertical specialization, increased flexibility and lower cost of ownership.

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Regulatory and Data Security Requirements. Organizations need to be able to effectively support their business initiatives while maintaining compliance with rapidly evolving industry and regulatory standards around information and data security including regulations developed by payment card issuers, through the Payment Card Industry Security Standards Council (PCI SSC), to ensure that organizations properly safeguard sensitive customer information.

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Software as a Service and Cloud Computing. Companies are increasingly evaluating applications delivered on a subscription basis or on-demand for their potential to lower upfront costs, reduce cost of ownership, stay current with the latest technology, and reduce overall information technology complexity. In an increasingly global marketplace, growing companies can leverage applications and solutions delivered over the web anywhere they do business without the requirement to invest in expensive infrastructure and servers. Migrating enterprise applications to the cloud can allow small and mid-sized companies to leverage their often constrained IT assets and resources more effectively including redeploying them to focus on projects of higher strategic value.

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Mobile Devices. Companies are increasingly looking to access and transact information where and when it happens through smart phones, tablet computers and other wireless devices. Mobile solutions can securely and cost-effectively distribute and automate information from enterprise business systems both inside and outside of the company network, allowing companies to speed up sales cycles and improve service delivery by streamlining customer interactions.

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Industry Specific Data and Supply Chain Connectivity. Many of our customers are increasingly reliant on industry specific data and analytics to understand and grow their businesses. They benefit from deep vertical domain expertise and industry-specific information. In addition, the small and mid-sized companies we serve need to connect and engage in commerce with an ever expanding network of customers and consumers, partners and suppliers globally.

Competition

The enterprise business applications software industry is intensely competitive, rapidly changing and significantly affected by new product offerings and other market activities. A number of companies offer enterprise application suites similar to our product offerings that are targeted at the same markets. In addition, a number of companies offer “best-of-breed,” or point solutions, similar to or competitive with a portion of our enterprise business application suite. Some of our current competitors, as well as a number of potential competitors have larger technical organizations, larger more established marketing and sales organizations and significantly greater financial resources than we do. In addition, potential customers may increasingly demand that certain of our ERP systems incorporate certain databases or operating system software offered by competing products, but not currently supported by our products.

We believe the key factors influencing customers' technology purchase decisions in the markets we serve include, among others: ability to provide a turnkey business management solution with vertical specific functionality, depth of vertical expertise, pricing, level of service offered, credibility and scale of the technology vendor, on-demand and cloud deployment options, and connectivity with chosen industry trading partners.

A number of our competitors vary in size, target markets and overall product scope. Our primary competition comes from independent software vendors in four distinct groups, including (i) large, multinational ERP vendors that increasingly target mid-sized businesses as their traditional market becomes saturated, including Oracle Corporation and SAP AG, (ii) mid-range ERP vendors, including Infor Global Solutions, IFS, and Microsoft Corporation (iii) established point solution providers that compete with only one portion of the Company's overall ERP suite, including Sage Software, Ltd. for financial accounting; Deltek, Inc. and UNIT4 Agresso N.V, for professional services automation; HighJump Software, Inc. (acquired by Accellos Software in 2014), and Manhattan Associates, Inc. for distribution and warehousing; QAD, Inc., for automotive manufacturing; JDA Software Group, Inc., SAP AG, Oracle Corporation (includes MICROS) and NCR Corporation, for specialty retail; and (iv) SaaS providers including NetSuite Inc., Plex Systems, Inc., and Workday, Inc.

In certain markets, we primarily compete against smaller software companies with solutions for a single vertical market or with proprietary systems developed by or for industry participants. In the hardlines and lumber vertical market, we compete primarily with smaller, niche-focused companies, many of which target specific geographic regions. Some of our competitors in this market include Spruce Computer Systems, Inc., e-commerce Industries, Inc., and Distribution Management Systems Inc. In the automotive parts aftermarket, we compete primarily with smaller software and content companies that operate regionally or in a specific niche of the market and with proprietary systems developed by or for industry participants.

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Some of our competitors in this vertical market include Autologue Computer Systems, Inc., and WHI Solutions, Inc. (acquired by eBay in 2012).

In addition, as we sell our products to larger companies, we face increased competition from larger and well-established competitors such as Oracle Corporation and SAP AG. While these competitors offer broad application suites, we believe that our end-to-end product offerings, vertical industry focus, advanced architecture and level of product integration provide a significant competitive advantage.

Our Competitive Strengths

We believe that we are well-positioned to capitalize on the following competitive strengths to achieve future growth:

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Deep Vertical Domain Expertise with a Mid-Market Customer Focus. We are focused on mid-market companies in industries and vertical markets that have specialized functionality, terminology, processes and best practices that are critical to their success. Moreover, mid-market businesses in these industries build customer loyalty through high-touch customer services which is key to differentiating them from their larger counterparts. We believe the unique and specialized product and service offerings, which are often the competitive strengths of successful mid-market businesses, are not adequately served by general purpose business software suites. We believe mid-market companies require more cost effective systems that have broad functionality and global capabilities, yet are rapidly implemented, easily adapted and highly configurable to their unique business requirements. We provide the deep industry functionality and domain expertise that our mid-market customers need and require to compete more effectively in their particular markets.

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Recognized Software Brand with Global Scale. Based upon our revenues, we are the sixth largest global ERP vendor and focus predominantly on the mid-market segment. We are a leading mid-market ERP software provider in many of the industry verticals we serve and have high market shares in those vertical markets as a result of our deep sector expertise, valuable technology and content and high quality of customer service. We have customers in more than 150 countries and offer products in more than 30 languages. We believe our strong brand and scale will provide us with momentum to increase our market share by further penetrating our target markets and expanding our service offerings.

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Large Recurring Revenue Base. Software support, software and cloud subscriptions, hosting, network support and hardware maintenance revenues comprise approximately 58% of revenues for the year ended September 30, 2014. These revenues are generally recurring in nature since they are derived primarily from support services, software updates, SaaS offerings, proprietary catalogs, eCommerce and electronic data interchange, data warehouses, other data management products and services, hosting and hardware maintenance contracts. We believe that these products and services provide us with a more predictable and stable stream of revenues relative to our other revenue streams. All new software license customers subscribe to support services and most continue to subscribe as long as they use our products. Combining our software support and software and cloud subscriptions revenues and other revenue from existing customers, we derived over 80% of our revenue for the year ended September 30, 2014 from our existing customer base.

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Large Diversified Customer Base across Multiple Mid-Market Verticals. We serve a large diversified base of over 20,000 customers worldwide across the manufacturing, distribution, retail and services industries and are considered a leader in many of our target vertical markets. We also provide industry-specific solutions to a range of subsectors within these vertical markets, including industrial machinery, instrumentation/controls, medical devices, printing, packaging, food and beverage, automotive and aerospace and defense in manufacturing; electrical, industrial, plumbing, heating/ventilation air conditioning, fluid power and fasteners in distribution; hardware stores, home centers, lumber dealers, the automotive aftermarket, lawn and garden, farm and agriculture, pharmacies, apparel and footwear, department stores and general merchandise in retail; financial and professional services providers; and hotels, resorts and entertainment venues in hospitality.

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Strong Customer Retention. We believe our product and service offerings are integral to the operations of our customers' businesses and switching from our systems generally requires significant time and expense and may present an operating risk for our customers. In addition, our deep vertical focus and strong, ongoing customer relationships drive significant industry-specific functionality that would be difficult for competitors to readily replicate. Our service is critical to many customers as small and mid-sized companies typically lack a large, dedicated technology team to implement and support software and other information technology solutions across multiple vendors. Our focus on providing high-value services enhances the “mission critical” nature of our customer

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relationships. As a result, over the last three years, we have had retention rates in excess of 90% annually on our go-forward platforms.

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Leading Technology Platform. Our technology and product strategy is designed to increase a business' efficiency and agility by automating business processes, improving the visibility and reliability of information and supporting rapid processing of increasing volumes of business transactions. Our key products leverage the latest software tools and technologies. We utilize industry-standard, open technologies for database management, operating systems, user-interface components, infrastructure and network connectivity. Increasingly, we develop our applications based on a services architecture which includes support for web services protocols. Our next-generation computing model is designed to increase a business' efficiency and agility, which we believe simplifies the development, maintenance, deployment and customization of our products, all of which are critical to our customer base.

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Global Development Capabilities and Resources. Our global development infrastructure and resources provide us with flexible development capacity to more cost effectively advance the feature sets, technology foundation and architecture of our products. Our global development resources provide round-the clock development capacity. Critical products are built and tested continuously, allowing resources in any time zone the ability to continue the development process. Our agile development process allows us to more effectively respond to and support our customers and markets, which increasingly have worldwide operations and extended global commerce requirements. Our global development centers further allow us increased access to highly technical development resources in lower cost geographies, which is an essential element of our competitive cost structure and operating efficiency.

Our Strategy

We are focused on small and mid-market customers, as well as divisions and subsidiaries of Global 1000 companies that require advanced software solutions and products that are catered to meet their needs. The principal features of our strategy are:

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Capitalize on a Large and Growing Market Opportunity. While many software sectors have matured and growth has moderated, we are focused on several market opportunities that are growing faster than the overall software market, including the mid-market, customer relationship management, supply chain management, human capital management and business intelligence software markets. With a ten to twelve year product life-cycle, we believe our target market is approaching a potentially significant refresh opportunity. We support customers in more than 150 countries and have an industry-leading breadth of vertical-specific software offerings catered to our small and mid-market ERP customers and divisions of Global 1000 companies which we believe positions us well to capture such growth.

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Expand Our Position in Vertical and Geographic Markets. We believe that businesses in our target vertical markets are increasingly taking advantage of information technology to more effectively manage their operations. Our software enables customers to leverage a solution tailored to the unique needs of their market, as well as focused industry and vertical expertise, through our professional services organization and strategic relationships with key partners. Customers, particularly in the small and mid-sized markets, can benefit through solutions that are easier to implement, easier to use and require less customization than a horizontal solution. We intend to continue to enhance our software and service offerings to better serve, and increase the value we deliver to, customers in our target vertical markets worldwide.

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Maintain Our Technology Leadership. We intend to leverage our large development organization, technical expertise and vertical experience to continue to provide innovative products and services to our customers. Our customer base includes long-term customers using our older, character-based systems, as well as those who have upgraded to our recently developed products running on Microsoft .NET and Microsoft Windows. We have developed our current generation of products to provide an efficient migration path for customers operating older systems while preserving existing functionality, vertical domain capabilities and offering significant advantages in ease of use, business process management, eCommerce, collaboration, mobile and web access, business intelligence and analytics.

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Continue to Improve Operational Efficiencies. We have taken significant steps to improve our cost structure and enhance the efficiency of our operations and expect to achieve additional cost savings moving forward. For example, we intend to continue to leverage shared general and administrative costs and rationalize our facilities footprint and legal entity structure. From this and other operational areas, we have identified potential synergies, as well as opportunities to leverage our sizeable, global development organization to grow and improve our business.

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Selectively Pursue Acquisition Opportunities. We have a successful track record of acquiring and integrating companies and products that have enabled us to broaden our product and customer portfolios, as well as enhance relationships with many of our existing customers. We intend to continue employing a disciplined and focused acquisition strategy and exploring additional acquisition opportunities of varying sizes to expand our product lines, increase our customer base and enhance relationships with our customers. We will seek to opportunistically acquire businesses, products and technologies in existing or complementary vertical markets at attractive valuations, and through leverage and integration strategies, we expect to increase our overall revenue and profitability.

Sales and Marketing

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 value added resellers ("VARs"), distributors, national account groups and referral partners 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 our sales representatives and sales managers. Our field sales teams are generally organized by new account sales, which focuses on identifying and selling to new customers and teams focused on existing customers including those 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 services, 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 Americas, EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) 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.

Product Development

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. Our customer base includes long-term customers using our older systems, as well as those who have upgraded to our recently developed products running on Microsoft .NET, Microsoft Windows, Linux, AIX and several UNIX platforms. We believe there is a significant opportunity to migrate customers using older systems to our current generation of systems running on more modern technology platforms and the option to deploy their ERP systems in the cloud. We have developed our current generation of products to provide an efficient migration path for customers operating older systems while preserving existing functionality and offering significant advantages in ease of use and new eCommerce capabilities. In the development of our software, we use industry standard tools such as Microsoft .Net and other toolsets from Microsoft Corporation, Java and Progress Software Corporation and a variety of open source technologies. We also leverage a set of key technology relationships with third-party vendors to offer or facilitate a complete turnkey business management solution to our customers. We have relationships with several third-party vendors, including (1) Dell Inc., International Business Machines Corporation and Intermec Inc. for hardware platforms and peripherals, (2) Microsoft Corporation for tools, operating systems and databases, (3) Progress Software Corporation for development tools, (4) Sterling Commerce, Inc. (owned by IBM) and GXS Worldwide, Inc. (formerly Inovis, Inc.) for electronic data interchange and (5) SonicWALL, Inc. for security solutions.

Our product development expense was $104.7 million, $102.6 million and $83.3 million for the years ended September 30, 2014, September 30, 2013 and September 30, 2012, respectively.

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Intellectual Property

We regard our software as proprietary in that title to and ownership of the software generally resides exclusively with the Company, and we attempt to protect it with a combination of copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements and other industry standard methods for protecting ownership of our proprietary software. Despite these precautions, there can be no assurance unauthorized third parties will not copy certain portions of the Company's products or reverse engineer or obtain and use information the Company regards as proprietary. To date, we have relied to a limited extent on patent protection for our software products. While our competitive position may be affected by our ability to protect our proprietary information, we believe that trademark and copyright protections are less significant to our success than other factors such as the knowledge, ability and experience of the Company's personnel, name recognition and ongoing product development and support. There can be no assurance that the mechanisms used by us to protect our software and other intellectual property rights will be adequate or that our competitors will not independently develop products that are substantially equivalent or superior to our software products.

Our software products are generally licensed to end users on a “right to use” basis pursuant to a perpetual, non-exclusive license that generally restricts use of the software to the organization's internal business purposes. Additionally, the end user is generally not permitted to sublicense or transfer the products without paying a fee. When sold through VARs and distributors, Epicor typically licenses its software products pursuant to “shrink wrap” licenses that are not signed by licensees and therefore may be unenforceable under the laws of certain jurisdictions. In addition, the laws of some countries outside the United States do not protect our proprietary rights to the same extent as do the laws of the United States. Certain components of our products are licensed from third parties; however, we do not believe our results of operations are materially dependent on any of these products.

Customers and Backlog

No single customer accounted for more than 10% of sales during the year ended September 30, 2014. Products are generally shipped as ordered and are typically received by our customers within a short period thereafter and, accordingly, we have historically operated with little or no license backlog. Because of the generally short cycle between order and shipment, we believe that our backlog as of any particular date is not significant or meaningful.

Suppliers

We purchase materials, supplies, product components, and products as well as license third-party software from a large number of vendors, generally all of which are competitively priced and readily available, however, we do rely on single suppliers or a limited number of suppliers for some of the products included in our business management solutions. We do not believe that we are materially dependent on any single supplier.

Employees

We have approximately 4,500 employees worldwide as of September 30, 2014. None of our employees are represented by unions. We have not experienced any labor problems resulting in a work stoppage and believe we have good relations with our employees.

Item 1A — RISK FACTORS

RISK FACTORS

We operate in rapidly changing economic and technological environments that present numerous risks, many of which are driven by factors that we cannot control or anticipate. You should carefully consider the following risks, in addition to the other information contained in this report. The risks described below could materially adversely affect our business, financial condition or results of operations. The risks described below are not exhaustive; additional risks and uncertainties not currently known to us or that we currently consider immaterial could also harm our business, operating results and financial condition.

Risks Related to Our Business

Indebtedness

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We have substantial indebtedness, which increases our vulnerability to general adverse economic and industry conditions and may limit our ability to pursue strategic alternatives and react to changes in our business and industry or cause us to pay dividends to our parent company to fund interest payments.

As of September 30, 2014, the principal amount of our outstanding debt was of $818.8 million, before $5.8 million unamortized original issue discount ("OID"), under our 2011 Senior Secured Credit Agreement, as amended (the "2011 Credit Agreement") due 2018 and $465.0 million of Senior Notes due 2019 (the "Senior Notes"). Our debt service related to the 2011 Credit Agreement and Senior Notes for the year ended September 30, 2014 was $114.5 million, including $34.8 million of debt repayment related to the 2011 Credit Agreement and $79.7 million of cash paid for interest (including $3.5 million of interest settlement payments for our interest rate swap).

Our debt service requirements with respect to this amount of indebtedness may limit our operational flexibility, our access to additional capital and our ability to make capital expenditures and other investments in our business. It may also increase our vulnerability to general adverse economic and industry conditions, may limit our ability to pursue strategic alternatives including merger or acquisition transactions, to withstand economic downturns and interest rate increases, to plan for or react to changes in our business and our industry, to comply with financial and other restrictive covenants in our indebtedness or to pay dividends.

Additionally, our ability to comply with the financial and other covenants contained in our debt instruments may be affected by changes in economic or business conditions or other events beyond our control. If we do not comply with these covenants and restrictions, we may be required to take actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital.

We may not be able to generate sufficient cash to service all of our indebtedness, including the 2011 Credit Agreement and Senior 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 2011 Credit Agreement and Senior Notes, depends on our financial condition and operating performance, which 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 Senior 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, sell assets, seek additional capital or restructure or refinance our indebtedness.

If we are required to restructure or refinance our indebtedness, or we believe that it is in our best interest to restructure or refinance our indebtedness, our ability to do so will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations, or such refinancing may not be available on terms acceptable to us or at all. Further, the terms of existing or future debt instruments may restrict us from 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 cash flows and financial resources from additional indebtedness, 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. Our 2011 Credit Agreement and the indenture that governs the Senior Notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions on terms acceptable to us or the proceeds that we could realize from them may not be adequate to meet any debt service obligations then due. Any failure to meet our current or future debt service obligations could have a material adverse effect on our business.

Covenants in the 2011 Credit Agreement, the indenture governing the Senior Notes and debt agreements we may enter into in the future will restrict our business in many ways.

The 2011 Credit Agreement and the indenture governing the Senior Notes contains various covenants that limit, subject to certain exceptions, our ability and/or our restricted subsidiaries’ ability to, among other things:


•	incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;


•	issue redeemable stock and preferred stock;


•	pay dividends or distributions or redeem or repurchase capital stock;


•	prepay, redeem or repurchase subordinated debt;

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•	make loans, investments and capital expenditures;


•	enter into agreements that restrict distributions from our subsidiaries;


•	grant liens on our assets or the assets of our restricted subsidiaries;


•	enter into certain transactions with affiliates; and


•	consolidate or merge with or into, or sell substantially all the assets of ours and our subsidiaries, taken as a whole.

A breach of any of these covenants could result in a default under the 2011 Credit Agreement and/or the indenture governing the Senior Notes. Further, additional indebtedness that we incur in the future may subject us to further covenants. Our failure to comply with these covenants could result in a default under the agreements governing the relevant indebtedness. If a default under the 2011 Credit Agreement or the indenture governing the Senior Notes or any such debt agreement is not cured or waived, the default could result in the acceleration of indebtedness under our debt agreements that contain cross-acceleration or cross-default provisions, which could require us to repurchase or repay debt prior to the date it is otherwise due and that could adversely affect our financial condition.

Our ability to comply with covenants contained in the 2011 Credit Agreement, the indenture governing the Senior Notes and any other debt agreements to which we are or may become a party may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

General Business

Economic and market conditions can materially adversely impact our business, results of operations and financial condition as well as that of our customers.

Our global operations and financial performance vary significantly due to changes in worldwide economic conditions and the overall demand for enterprise software and services. Uncertain global economic conditions could adversely affect our business and financial performance if consumers and businesses postpone spending in response to tighter credit markets, increased unemployment, negative financial news and/or declines in income or asset values. Macroeconomic developments such as the recent recession and slow recovery in the U.S. and Europe as well as the European sovereign debt crisis, could affect our business, operating results and 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 IT budgets or be unable to fund software, hardware systems or 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. These and other economic factors could materially adversely affect demand for our products and services and our financial condition and operating results.

Our operating results are difficult to predict and are subject to substantial fluctuation.

Our revenue and income from operations have fluctuated significantly in the past. Our operating results may continue to fluctuate in the future as a result of many specific factors that include:


•	turmoil in the global economy, particularly economic weakness in the U.S., Europe and Asia;


•	demand for our products, including reduced demand related to changes in marketing focus for certain products, software market conditions or general economic conditions as they pertain to IT spending;


•	growth rates of, or sudden changes in, the market segments in which we compete;


•	fluctuations in the length of our sales cycles, which may vary depending on the complexity of our products as well as the complexity of our customers' or prospective customers' specific software and service needs;


•	productivity of our sales and consulting forces and the impact of any reorganizations of those forces;


•	the size and timing of orders for our software products and services, which, because many orders are completed in the final days of each reporting period, may be delayed to future reporting periods;


•	our ability to grow and convert our sales "pipeline";


•	the number, timing and significance of new software product announcements by us and our competitors;


•	customers’ unexpected postponement or termination of expected system upgrades or replacement due to a variety of factors including economic conditions, credit availability, changes in IT strategies or management changes;


•	changes in accounting standards, including software revenue recognition standards;


•	extraordinary expenses, such as litigation or other dispute-related settlement payments;

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•	general political developments and governmental budgetary constraints;


•	currency fluctuations and devaluation; and


•	fluctuations in number of customers continuing to subscribe to maintenance and support services or content and connectivity offerings.

In addition, we have historically realized a significant portion of our software license revenues in the final month of the reporting period, with a concentration of such revenues recorded in the final ten business days of that month. Further, we generally realize a significant portion of our annual software license revenues in the final quarter of the fiscal year. If expected sales at the end of any reporting period or at the end of any fiscal year are delayed for any reason, including the failure of anticipated orders to materialize, or our inability to ship products prior to quarter-end to fulfill orders received near the end of the reporting period, our results for that reporting period or for the full fiscal year could fall below our expectations or those of our stakeholders.

Due to the above factors, among others, our revenues are difficult to forecast. We, however, base our expense levels, including operating expenses and hiring plans, in significant part, on our expectations of future revenue and the majority of our expenses are fixed in the short term. As a result, we may not be able to reduce our expenses quickly enough or in sufficient amounts to offset any expected shortfall in revenue. If this occurs, our operating results could be adversely affected and below expectations.

As a result of all of these factors and other factors discussed in these risk factors, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful, and you should not rely upon them as an indication of our future performance.

Our results have been harmed by, and our future results could be harmed by, economic, political, geographic, regulatory and other specific risks associated with our international operations.

We have significant operations in jurisdictions outside the United States and we plan to continue to expand our international operations and sales activities. We believe that our future growth will be dependent, in part, upon our ability to maintain and increase revenues in our existing and emerging international markets. We can provide no assurance that the revenues that we generate from foreign activities will be adequate to offset the expense of maintaining foreign offices and activities. In addition, maintenance or expansion of our international sales and operations are subject to inherent risks, including:


•	rapidly changing economic and political conditions;


•	differing intellectual property and labor laws;


•	lack of experience in a particular geographic market;


•	compliance with a wide variety of complex foreign laws, treaties and regulatory requirements;


•	activities by our employees, contractors or agents that are prohibited by United States laws and regulations such as the Foreign Corrupt Practices Act and by local laws prohibiting corrupt payments to government officials or other persons, in spite of our policies and procedures designed to promote compliance with these laws;


•	tariffs and other barriers, including import and export requirements and taxes on subsidiary operations;


•	fluctuating exchange rates, currency devaluation and currency controls;


•	restrictions on our ability to access cash in foreign jurisdictions;


•	difficulties in staffing and managing foreign sales and support operations;


•	longer accounts receivable collection cycles;


•	potentially adverse tax consequences, including repatriation of earnings;


•	development and support of localized and translated products;


•	lack of acceptance of localized products or the Company in foreign countries;


•	shortage of skilled personnel required for local operations; and


•	perceived health risks, natural disasters, hostilities, political instability or terrorist risks which impact a geographic region and business operations therein.

Any one of these factors or a combination of them could materially and adversely affect our future international sales and, consequently, our business, operating results, cash flows and financial condition.

Offshoring and outsourcing certain of our operations and/or services may adversely affect our ability to maintain the quality of service that we provide and damage our reputation.

As part of our efforts to streamline operations and reduce costs, we have offshored and outsourced certain of our operations, services and other functions and we will continue to evaluate additional offshoring or outsourcing possibilities. If

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our outsourcing partners or operations fail to perform their obligations in a timely manner or at satisfactory quality levels or if we are unable to attract or retain sufficient personnel with the necessary skill sets to meet our offshoring needs, the quality of our services, products and operations, as well as our reputation, could suffer. Our success depends, in part, on our ability to manage these difficulties which could be largely outside of our control. In addition, much of our offshoring takes place in developing countries and as a result may also be subject to geopolitical uncertainty. Diminished service quality from offshoring and outsourcing could have an adverse material impact to our operating results due to service interruptions and negative customer reactions.

The failure of Epicor E10, Eagle N Series or our other primary products to compete successfully could materially impact our ability to grow our business. In addition, we may not be successful in our strategy to expand the marketing of our systems to new retail and ERP subvertical markets, which would negatively impact our financial performance.

Epicor E10, an ERP software product, became generally available in April 2014. Eagle N Series, a Retail Distribution product, became generally available in July 2014. If we are not able to successfully market and license Epicor E10, Eagle N Series or our other primary products in the future, it may have an adverse effect on our financial condition and results of operations. In addition, we operate in a highly competitive segment of the software industry and if our competitors develop more successful products or services, our revenue and profitability will most likely decline.

We have begun to market our products and services to new subvertical segments of the retail, distribution and ERP markets. There can be no assurance that our products will achieve widespread acceptance in these markets, that we will be able to successfully compete against incumbent suppliers, or that we will successfully develop industry association relationships which will help lead to penetration of these new subverticals. If we are unable to expand into new subvertical markets, our financial performance may be negatively impacted.

The market for our software products and services is highly competitive. If we are unable to compete effectively with existing or new competitors our business could be negatively impacted.

The business information systems industry in general and the enterprise applications market specifically, in which we compete are very competitive and subject to rapid technological change, evolving standards, frequent product enhancements, new offerings, regulatory mandates and changing customer requirements. Many of our current and potential competitors have (i) longer operating and product development histories, (ii) significantly greater financial, technical and marketing resources, (iii) greater name recognition, (iv) larger technical organizations, (v) larger international presence and/or (vi) a larger installed customer base than ours. In addition, as we continue to sell to larger companies outside the mid-market, we face more competition from large well-established competitors such as SAP AG (“SAP”) and Oracle Corporation (“Oracle”). Furthermore, if larger customers or prospects want to reduce their number of software vendors, they may elect to purchase competing products from SAP or Oracle as such larger vendors offer a wider range of products. A number of companies offer products that are similar to our products and target the same markets. Any of these competitors may be able to respond more quickly to new or emerging technologies and market trends (such as cloud computing, and social and mobile applications), and devote greater resources to the development, promotion and sale of their products than we can. Moreover, because there are relatively low barriers to entry in the software industry, we expect additional competition from other established and emerging companies. Such competitors may develop products and services that compete with those offered by us or may acquire companies, businesses and product lines that compete with us. It also is possible that competitors may create alliances and rapidly acquire significant market share, including new and emerging markets. Further, our competitors may offer extended payment terms or price reductions for their products and services, either of which could materially and adversely affect our ability to compete successfully, operating results and financial condition. There can be no assurance that we will be able to compete successfully against current and future competitors or that the competitive pressures that we may face will not materially adversely affect our business, market share, operating results, cash flows and financial condition.

We face intense competition in the marketplace which may necessitate changes to our pricing models to successfully compete.

Competition and general economic and market conditions may necessitate changes to our pricing model. If our competitors offer deep discounts or other favorable commercial terms, such as extended payment terms, contractual warranties, implementation terms or guarantees, on certain competing products or services, we may need to respond by lowering prices or offering additional favorable terms in order to compete successfully. Any such changes to our pricing could adversely affect our revenue, operating results and cash flows. Our software and hardware support services are generally priced as a percentage of our software license fees and hardware product fees, respectively. If our competitors offer lower pricing on their software and hardware support offerings, it would put additional pressure on us to discount our pricing for these services.

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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 continuing to subscribe to support services, managed services, hosting and software and cloud subscriptions. Our revenues and results of operations could be materially impacted if our existing customers do not continue, or reduce the level of, their support services, managed services, hosting and software and cloud subscriptions, or fail to purchase new user licenses or product enhancements or additional services from us at historical levels.

We generate a substantial majority of our revenue from our installed base of customers. For certain of our products, support and other service agreements with customers are renewed at the customer’s discretion, and for other products, customers may elect to terminate support services, typically upon 60 days' notice. There normally is no requirement that a customer renew support and other service agreements or that a customer pay new license or service fees to us following the initial purchase. Some customers have not renewed, or have terminated, or reduced the level of, support services and other service agreements following the last economic downturn. If our existing customers do not renew or continue support services or other service agreements or fail to purchase new user licenses or product enhancements or additional services at historical levels, our revenues and results of operations could be materially impacted.

Revenues from our existing customer base may shrink due to a number of factors which may negatively impact our financial performance.

The markets we serve are highly fragmented. These markets have experienced consolidation in the past and are expected to continue to do so. For example, the hard goods and lumber vertical markets served by the Retail Distribution segment have experienced consolidation as retail hardware stores and lumber and building materials dealers try to compete with mass merchandisers such as The Home Depot, Inc., Lowe’s Home Centers, Inc. and Menard, Inc.

Our customers may be acquired by companies with their own proprietary business management systems or by companies that utilize a competitor’s system. We may lose these customers as a result of this consolidation.

We may also lose customers if customers exit the markets in which we operate or migrate to competitors’ products and services. For example, if original equipment manufacturers successfully increase sales into the automotive parts aftermarket, our customers in this vertical market may lose revenues, which could adversely affect their ability to purchase and maintain our solutions or stay in business. Additionally, economic downturns may cause customers to exit the market altogether and there may be insufficient new customers entering the market to replace the business of existing customers.

Our revenue may also contract if customers reduce the level of support subscriptions and other subscription-based service agreements. This may occur in response to a downturn in economic and market conditions, if customers determine that they can no longer afford our support and other services or if customers reduce their employee base and reduce the number of users for which they subscribe for support and other service agreements. Additionally we anticipate that support and other services agreement revenue from our legacy products, for which we have decreased development funding, will decline over time.

If we do not develop new relationships and maintain our existing relationships with key customers and/or well-known market participants, our revenues could decline significantly and our operating results could be materially adversely affected.

We have developed strategic relationships with many well-known market participants in the retail and wholesale distribution vertical markets. For example, we are a preferred and/or a recommended business management solutions provider for the members of the Ace Hardware Corporation, True Value Company and Do it Best Corp. cooperatives and Aftermarket Auto Parts Alliance, Inc. We believe that our ability to increase revenues depends in part upon maintaining our existing customer and market relationships, including exclusive, preferred and/or recommended provider status, and developing new relationships. We may not be able to renew or replace our existing licensing agreements upon expiration or maintain our market relationships that allow us to market and sell our products effectively. The loss or weakening of key relationships, in whole or in part, could materially adversely impact our business.

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

We operate in an industry with rapid technological change, evolving standards and regulations and changing and increasingly sophisticated customer needs. If we are unable to develop new products and services or enhance and improve our existing products and services in a timely manner, customers may not purchase our software or subscribe to subscription-based service agreements or renew their support subscriptions and other subscription-based service agreements. Our business may be adversely affected if:

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•	we do not continue to develop and release new or enhanced products and services within the anticipated time frames;


•	there is a delay in market acceptance of a new, enhanced or acquired product lines or services; or


•	there are changes in information technology trends that we do not adequately anticipate or address with our product development efforts.

We rely on automotive aftermarket and original equipment parts manufacturer information for our electronic automotive parts and applications catalog, and we are increasingly facing pressure to present our electronic automotive parts and applications catalog in a flexible format, each of which could expose us to a variety of risks, including increased pressure on our pricing.

We are dependent upon automotive aftermarket and original equipment parts manufacturers to supply and continually update information for our electronic automotive parts and applications catalog. Currently, we obtain most of this information without a written agreement with these suppliers. In the future, more suppliers may require us to enter into a license agreement or may make it more generally available to others. In addition, as a result of competitive pressures and technical requirements, we may be required to provide our electronic automotive parts and applications catalog in an industry standard format, which could make it more difficult for us to maintain control over the way information presented in our catalog is used. For example, an industry association is currently developing a data collection format that would make this information more accessible to consumers and provide it in a more generalized format. Any significant change in the manner or basis on which we currently receive this information or in which it is made available to others who are or who could become competitors could have a material adverse effect on our electronic automotive parts and applications catalog business, which could have a material adverse effect on our business and results of operations.

If the emerging and current technologies and platforms of Microsoft Corporation and others upon which we build our products do not gain or retain broad market acceptance, or if we fail to develop and introduce in a timely manner new products and services compatible with such emerging technologies in a timely manner, we may not be able to compete effectively and our ability to generate revenues will suffer.

Our software products are built and depend upon several underlying relational database management system platforms such as systems offered by Microsoft Corporation, Progress Software Corporation, Oracle Corporation, MySQL, and Rocket Software, Inc., which are regularly evolving. The market for our software products is subject to ongoing rapid technological developments, quickly evolving industry standards and rapid changes in customer requirements, and there may be existing or future technologies and platforms that achieve industry standard status, which are not compatible with our products. Additionally, because our products rely significantly upon popular existing user interfaces to third party business applications, we must forecast which user interfaces will be popular in the future. For example, we believe the Internet, mobile and the cloud have and will continue to transform the way businesses operate and the software requirements of customers, who are increasingly shifting towards Web-based, mobile and cloud applications and away from server-based applications. We are continuing to develop several of our primary product lines upon the Microsoft .NET technology. If we cannot continue to develop such .NET-compatible products in time to effectively bring them to market, or if .NET does not continue to be a widely accepted industry standard, or if customers adopt competitors’ products when they shift to Web-based, mobile and cloud applications, the ability of our products to interface with popular third party applications will be negatively impacted and our competitive position, operating results and revenues could be adversely affected.

As Software as a Service ("SaaS"), hosting, subscription-based and other new software technologies or models become more widespread, we may be driven to alter our business model resulting in adverse effects on our operating results.

Development of new technologies or models may cause us to change how we license or price our products, which may adversely impact our revenues and operating results. Developing licensing models include SaaS and subscription-based licensing, in which the licensee essentially rents software for a defined period of time, as opposed to the perpetual license model. We currently offer a hosted model as well as a SaaS model to customers of some of our retail and ERP products. Currently, we sell the majority of our software under perpetual licensing arrangements where we record revenue when the software is delivered. If our SaaS business continues to grow, more revenue will shift from perpetual licenses to subscriptions, which will cause a deferral of revenues and cash received from customers.

Our future business, operating results and financial condition will depend on the ability of our sales force to sell an integrated comprehensive set of business software products and our ability to recognize and implement emerging industry standards and models, including new pricing and licensing models. Our competitive position and revenues could be adversely affected if we fail to respond to emerging industry standards including licensing models and end-user requirements.

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Our increasingly complex software products may contain errors, defects, security flaws or be implemented incorrectly which could result in the rejection of our products and damage to our reputation as well as cause lost revenue, delays in collecting accounts receivable, diverted development resources and increased service costs and warranty claims.

Although our products are tested prior to release, because our products are deployed in large and complex environments, they can only be fully tested for reliability when deployed in networks for long periods of time. Our software programs may contain undetected errors or defects (commonly referred to as bugs) 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 and the implementation team. As a consequence, from time to time we have received customer complaints or have been sued. We may not be able to avoid or limit liability for disputes relating to product performance, product implementation or security flaws, which may result in loss of or delay in market acceptance, release or shipment of our products, or if the defect or error is discovered only after customers have received the products, these defects or errors could result in increased costs, litigation, customer attrition, reduced market acceptance of our systems and services or damage to our reputation. Ultimately, such errors or defects could lead to a decline in our revenues. In addition, if material technical problems with the current release of the various database and technology platforms, on which our products operate, including offerings by Progress Software Corporation, Rocket Software, Inc., Oracle Corporation and Microsoft Corporation (i.e., SQL Server and .NET), occur, such difficulties could also negatively impact sales of these products, which could in turn have a material adverse effect on our results of operations.

The market for new development tools, application products and consulting and education services continues to emerge, which could negatively affect our client/server and Web-based products, and, if we fail to respond effectively to evolving requirements of these markets, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Our development tools, application products and consulting and education services generally help organizations build, customize and deploy solutions that operate in both client/server-computing and Web-based environments. We believe that the environment for application software is continuing to change from client/server to a Web-based environment to facilitate commerce on the Internet. There can be no assurance that we will be able to effectively respond to the evolving transition to Web-based markets. Deterioration in the client/server market or our failure to respond effectively to the transition to and needs of Web-based markets could harm our ability to compete or grow our business which would adversely affect our financial condition and results of operations.

In the event of a failure in a customer’s computer system installed by us or failed installation of a system sold by us, a claim for damages may be made against us regardless of our responsibility for the failure, which could expose us to liability.

We provide business management solutions that we believe are critical to the operations of our customers’ businesses and provide benefits that may be difficult to quantify. In addition, we are introducing new backup products for our customers and assuming additional responsibility for their disaster recovery plans and procedures. Any failure of a customer’s system installed by us or any aborted installation of a system sold by us could result in a claim for substantial damages against us, regardless of our responsibility for the failure. Although we attempt to limit our contractual liability for damages resulting from negligent acts, errors, mistakes or omissions in rendering our services, the limitations on liability we include in our agreements may not be enforceable in all cases, and those limitations on liability may not otherwise protect us from liability for damages. Furthermore, our insurance coverage may not be adequate and that coverage may not remain available at acceptable costs. Successful claims brought against us in excess of our insurance coverage could seriously harm our business, prospects, financial condition and results of operations. Even if not successful, large claims against us could result in significant legal and other costs and may be a distraction to our senior management.

Our software products incorporate and rely upon third party software products for certain key functionality. Our revenues, as well as our ability to develop and introduce new products, certain of which are provided by sole suppliers, could be adversely affected by our inability to control or replace these third party products and operations.

Our products incorporate and rely upon software products developed by several other third party entities such as Microsoft Corporation, Progress Software Corporation, and Rocket Software, Inc. Specifically, our software products are built and depend upon several underlying and evolving relational database management system platforms including Microsoft SQL Server, Progress OpenEdge and Rocket U2^TM and also are integrated with several other third party provider products for the purpose of providing or enhancing necessary functionality. In the event that these third party products were to become unavailable to us or to our customers, either directly from the third party manufacturers or through other resellers of such

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products, we may not be able to readily replace these products with substitute products. We cannot provide assurance that these third parties will:


•	remain in business;


•	continue to support our product lines;


•	maintain viable product lines;


•	make their product lines available to us on commercially acceptable terms; and


•	not make their products available to our competitors on more favorable terms.

Any interruption could have a significant detrimental effect on our ability to continue to market and sell those of our products relying on these specific third party products, additionally any errors or defects in third-party software could result in errors or a failure of our software and services, which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

If we were to lose and not be able to replace the services of the members of our senior management team and other key personnel, we may not be able to execute our business strategy and achieve our financial objectives.

Our future success depends in a large part upon the continued service of key personnel, including members of our senior management team and highly skilled employees in technical, marketing, sales and other key positions. We face extreme competition for these resources, particularly from within our industry. All of our key employees, including our executive officers, are at-will employees. There can be no assurance that we will continue to attract and retain key personnel, and the failure to do so could have a material adverse effect on our business, operating results, cash flows and financial condition.

We expect to continue to pursue strategic acquisitions, investments and relationships and we may not be able to successfully manage our operations if we fail to successfully integrate such acquired businesses and technologies, which could adversely affect our operating results.

As part of our business strategy, we expect to pursue strategic acquisitions, investments and relationships, such as joint development agreements and technology licensing agreements, in order to expand our product offerings to include application software products and services that are complementary to our existing software applications, particularly in the areas of electronic commerce or commerce over the Internet, or to gain access to established customer bases into which we can sell our current products. For example, in fiscal 2012, we acquired the remaining equity interests of Internet AutoParts, Inc. ("Internet AutoParts") and certain assets of Cogita Business Services Ltd. ("Cogita"), and in fiscal 2013 we acquired the business of Solarsoft Business Systems ("Solarsoft").

In connection with acquisitions, investments and relationships, we commonly encounter the following risks:


•	the potential failure to achieve the expected benefits of the combination or acquisition;


•	potential for unknown liabilities associated with the acquired businesses to materialize;


•	difficulty valuing the acquired business on a strategic and financial basis;


•	difficulty in effectively integrating any acquired technologies or software products into our current products and technologies;


•	difficulty in predicting and responding to issues related to product transition such as development, distribution and customer support;


•	adverse impact on existing relationships with third party partners and suppliers of technologies and services;


•	failure to retain customers of the acquired company who might not accept new ownership and may transition to different technologies or attempt to renegotiate contract terms or relationships, including support and service agreements;


•	failure to completely identify and resolve in a timely manner material issues associated with product quality, product architecture, product development, intellectual property, key personnel or legal and financial contingencies;


•	difficulty in integrating acquired operations, including incorporating internal control structures, due to geographical distance, and language and cultural differences; and


•	difficulty in retaining employees of the acquired company.

A failure to successfully integrate acquired businesses or technology for any of these reasons could disrupt our ongoing business, distract our management or otherwise have a material adverse effect on our results of operations.

Initiatives to upgrade our information technology infrastructure involve many risks which could result in, among other things, business interruptions and higher costs.

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We regularly implement business process improvement initiatives to optimize our performance. Our current business process initiatives include plans to improve business results through standardization of business processes and technology that support our Company through implementation of integrated software solutions over the next few years. We may experience difficulties as we transition to these new or upgraded systems and processes, including loss of data, decreases in productivity as our personnel become familiar with new systems and lost revenues. In addition, transitioning to these new or upgraded systems requires significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or significant system failures could disrupt our operations and have a material adverse effect on our capital resources, financial condition, results of operations or cash flows.

We expect implementation of this new information technology infrastructure to have a pervasive impact on our business processes and information systems across a significant portion of our operations, including our finance operations. As a result, we may experience significant changes in our operational processes and internal controls as our implementation progresses. If we are unable to successfully implement this system, including harmonizing our systems, data and processes, our ability to conduct routine business functions could be negatively impacted and significant disruptions to our business could occur. In addition, we could incur material unanticipated expenses, including additional costs of implementation or costs of conducting business. These risks could result in significant business disruptions and have a material adverse effect on our operations, financial reporting process, capital resources, financial condition, results of operations, or cash flows.

We have taken restructuring actions in connection with acquisitions and the globalization of our workforce and we may take additional restructuring actions in the future that would result in additional charges which would have a negative impact on our results of operations in the period the action is taken.

As a result of our acquisitions, the globalization of our workforce, prevailing economic conditions and our decision to more properly align our cost structure with our projected revenues, our management approved restructuring plans eliminating certain employee positions and consolidating certain excess facilities. For the year ended September 30, 2014, we recorded restructuring charges of $3.9 million, primarily related to employee severance and excess facility costs.

Future acquisitions and subsequent integration activities, adverse global economic conditions and other management approved restructuring plans could have a material adverse impact on our results of operations.

Workforce restructurings, including reorganizations of our sales force, 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, these types of restructurings have resulted in increased restructuring costs and temporary reduced productivity while the workforce adjusted to their new roles and responsibilities. These effects could recur in connection with future acquisitions and other restructurings and our revenues and other results of operations could be negatively affected.

We have a material amount of goodwill and other acquired intangible assets on our balance sheet and if our goodwill is impaired in the future, we may record charges to earnings, which could adversely impact our results of operations.

As a result of prior acquisitions, we recorded goodwill and intangible assets with carrying values of $1,288.0 million and $595.1 million, respectively, as of September 30, 2014. We account for goodwill and other intangibles in accordance with relevant authoritative accounting principles. Our goodwill is not amortized and we are required to test the goodwill for impairment at least yearly and test intangibles and goodwill any time there is indication impairment may have occurred. See Note 4 - Goodwill in our audited consolidated financial statements for a description of our impairment testing. If we determine that the carrying value of the goodwill or other intangible assets is in excess of its fair value, we will be required to write down a portion or all of the goodwill or other acquired intangible assets, which would adversely impact our results of operations.

We rely, in part, on third parties to sell and implement our products. Disruptions to these channels or failure of these channels to adequately market and implement our products would adversely affect our ability to generate revenues.

We distribute products through our direct sales force as well as through an indirect distribution channel, which includes value added resellers (“VARs”) and other third party distributors, consisting primarily of professional firms and we implement our products using our internal professional services team as well as third party implementers. If our relationships with these VARs, third party distributors and system implementers deteriorate or terminate, our results of operations could be materially and adversely affected if our distributors cease distributing or recommending our products or emphasize competing products and our third party system implementers stop installing our systems. Additionally, our distributors may generally terminate their agreements with us upon as little as 30 days' notice and almost all distributors may effectively terminate their agreements at any time by ceasing to promote or sell our products. Our results of operations could be adversely affected if our distributors

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are unable to effectively promote or sell our products or if several were to cease doing business or terminate their agreements and we are unable to replace them in a timely fashion. Further, there can be no assurance that having both a direct sales force and a third party distribution channel for our products will not lead to conflicts between those two sales forces that could adversely impact our ability to close sales transactions or could have a negative impact upon average selling prices, any of which may negatively impact our operating revenues and results of operations. Finally, many distributors operate on narrow operating margins and may be negatively impacted by weak economic conditions, including the loss of personnel to promote our products and services or inability to remain in business. Our financial condition and operating results could be materially adversely affected if the financial condition of these distributors weakens.

If third parties infringe upon our intellectual property, we may expend significant resources enforcing our rights or suffer competitive injury, which could adversely affect our operating results. In addition, we may be subject to claims that we infringe upon the intellectual property of others.

We consider our proprietary software and the related intellectual property rights in such products to be among our most valuable assets. We rely on a combination of copyright, trademark and trade secret laws (domestically and internationally), employee and third party nondisclosure agreements and other industry standard methods for protecting ownership of our intellectual property. However, we cannot provide assurance that, in spite of these precautions, an unauthorized third party will not copy or reverse-engineer certain portions of our products or obtain and use information that we regard as proprietary. This risk is potentially heightened in such diverse international markets as Eastern Europe, Asia and the Middle East where intellectual property laws are often less rigorous than in the United States. From time to time, we have in the past taken legal action against third parties whom we believed were infringing upon our intellectual property rights. However, there is no assurance that the mechanisms that we use to protect our intellectual property will be adequate.

Moreover, from time to time, we receive claims from third parties that our software products infringe upon the intellectual property rights of others. We expect that as the number of software products in the United States and worldwide increases and the functionality of these products further overlap, the number of these types of claims will increase. Although it has not yet occurred to date, any such claim, with or without merit, could result in costly litigation and require us to enter into royalty or licensing arrangements or result in an injunction against us. The terms of such royalty or license arrangements, if required, may not be favorable to us.

In addition, in certain cases, we provide the source code for some of our application software under licenses to our customers to enable them to customize the software to meet their particular requirements and to VARs and other distributors or other third party developers to translate or localize the products for resale in foreign countries. Although the source code licenses contain confidentiality and nondisclosure provisions, we cannot be certain that such customers, distributors or third-party developers will take or have taken adequate precautions to protect our source code or other confidential information. Moreover, regardless of contractual arrangements, the laws of some countries in which we do business or distribute our products do not offer the same level of protection to intellectual property as do the laws of the United States.

If open source software expands into enterprise software applications, our software license revenues may decline.

Open source software includes a broad range of software applications and operating environments produced by companies, development organizations and individual software developers and typically licensed for use, distribution and modification at a nominal cost or often, free of charge. To the extent that the open source software models expand and non-commercial companies and software developers create and contribute competitive enterprise software applications to the open source community, we may have to adjust our pricing, maintenance and distribution strategies and models, which could adversely affect our revenue and operating margins. Additionally, if one of our developers embedded open source components into one of our products without our knowledge or authorization, we may be required to release source code to third parties, under open source license terms. We currently take steps to train our developers and monitor the content of products in development; however, there is no assurance that this will always be effective.

Unplanned or unforeseeable business interruptions could adversely affect our business.

A number of particular types of business interruptions including natural disaster, terrorist attack or other natural or manmade catastrophe with respect to which we have no control could greatly interfere with our ability to conduct business. For example, some of our facilities that conduct critical business operations are located near major earthquake faults. We do not carry earthquake insurance and do not reserve for earthquake-related losses. In addition, our computer systems are susceptible to damage from fire, floods, earthquakes, power loss, interruptions in cooling systems, telecommunications failures, and similar events. We continue to consider and implement our options and develop contingency plans to avoid and/or minimize potential disruptions to our telecommunication services. However, any force majeure or act of God as described above could cause severe disruptions in our business.

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Interruptions in our connectivity applications and our systems could disrupt the services that we provide and materially adversely affect our customers' business as well as our business and our results of operations.

Certain of our customers depend on the efficient and uninterrupted operation of our software connectivity applications, such as our SaaS solutions, AConneX and our eCommerce and hosting services. A number of our connectivity applications rely on our data center or third-party datacenter, hosting, cloud services and infrastructure providers. Any loss or interruption of these applications could result in system downtime, errors, security breaches or loss of data which could have a material adverse financial impact on our customers. In addition, our businesses are highly dependent on our ability to communicate with our customers in providing services and to process, on a daily basis, a large number of transactions. We rely heavily on our telecommunications and information technology infrastructure, as well as payroll, financial, accounting and other data processing systems. As we continue to place additional strain on this infrastructure through increasing the number of products that we host, these applications and systems are increasingly vulnerable to damage or interruption from a variety of sources, including natural disasters, telecommunications failures, hackers or other breaches of security and electricity brownouts or blackouts. If any of these systems fail to operate properly or become disabled, we could suffer financial loss, a disruption of our business, or damage to our reputation. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our connectivity applications or in these services or the harm to our reputation due to these failures. We have certain recovery plans in place to protect our business against natural disasters, security breaches, power or communications failures or similar events. At the same time, we have concluded it is not cost effective at this time to maintain full secondary “off-site” systems to replicate our connectivity applications, and we do not maintain a catastrophic disaster recovery capability with respect to these applications. In the event of a catastrophic occurrence, our disaster recovery plans may not be successful in preventing loss of customer data, service interruptions, disruptions to our operations or ability to communicate with our customers, or damage to our important locations. A loss or damage to our data center, telecommunications or information technology infrastructure, or our connectivity applications, could result in damage to our reputation and lost revenues due to service interruptions and adverse customer reactions.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters, as well as changing industry standards in many areas. Many of these laws, regulations and standards are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, loss of current or prospective customers, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy and data protection, intellectual property, data retention and deletion, personal information, financial security, taxation and online payment services. Further, we must comply with industry guidelines in many areas, including increasingly stringent standards regarding credit card processing. The introduction of or expansion of new products or services in certain jurisdictions may subject us to additional laws, regulations and guidelines. In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the U.S. These U.S. federal and state and foreign laws and regulations, which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. Similarly, there are a number of legislative proposals in the U.S., at both the federal and state level, that could impose new obligations in areas affecting our business, such as privacy or online payment services. In addition, some countries are considering or have passed legislation requiring local storage and processing of data or similar requirements that, if enacted, could increase the cost and complexity of delivering our services. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices.

If our security measures are breached and unauthorized access is obtained to a customer’s data or our data or our IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

Certain of our services involve the storage and transmission of customers’ proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. These security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data or IT systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be

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unable to anticipate these techniques or to implement adequate preventative measures. In addition, our customers may authorize third-party technology providers to access their customer data. Because we do not control our customers and third-party technology providers, or the processing of such data by third-party technology providers, we cannot ensure the integrity or security of such transmissions or processing. Malicious third-parties may also conduct attacks designed to temporarily deny customers access to our services. Any security breach could result in a loss of confidence in the security of our service, damage our reputation, negatively impact our future sales, disrupt our business and lead to legal liability. These risks will increase as we continue to grow our cloud-based offerings and services and process increasingly large amounts of our customers’ information and data and host or manage parts of our customers’ businesses in cloud-based IT environments. Additionally, we may assume these risks as we integrate acquisitions.

If we experience shortages or delays in the receipt of third party software or hardware necessary to develop our business management solutions and systems, we may suffer product delays, which could have a material adverse effect on our business and financial results.

We rely on a single supplier or a limited number of suppliers for some of the products and software licenses included in our business management solutions. If there is a shortage of, or delay in supplying us with the necessary third party software or hardware, we would likely experience shipment delays and increased costs of developing our business management solutions and systems. This could result in a loss of revenues or deferral of revenue from one period to another, thus reducing our revenues and operating margins.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting, which could harm our reputation and our business and have a material adverse effect on our financial condition and results of operations.

Our ability to successfully implement our business plan and comply with regulations, including the Sarbanes-Oxley Act, requires an effective planning and management process. We are required to document and test our internal controls over financial reporting so that we can provide reasonable assurance with respect to our financial reports and prevent fraud. We expect that we will need to continue to improve existing, and implement new, operational and financial systems, procedures and controls to manage our business effectively in the future. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures and controls, could harm our ability to accurately forecast sales demand, manage our supply chain and record and report our financial performance on a timely and accurate basis, which could materially and adversely affect our results of operations. If our management is unable to annually certify the effectiveness of our internal controls or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and our financial condition and results of operations.

We have identified a material weakness in accounting for income taxes in our internal controls over financial reporting. Failure to implement and maintain effective internal controls over financial reporting has resulted in, and could in the future result in, material misstatements in our financial statements which could require us to restate financial statements.

Management, through documentation, testing and assessment of our internal controls over financial reporting has concluded that our internal controls over financial reporting were not effective as of September 30, 2013 and 2014 due to a material weakness in accounting for income taxes; see Item 9A - Controls and Procedures.

While new and enhanced controls have been implemented to remedy our material weakness for income taxes as described further in Item 9A - Controls and Procedures, we can provide no assurance that we will be able to effectively remediate this material weakness in a timely manner, or in the course of remediating this weakness we may find additional historical errors in our accounting for income taxes or discover new facts that cause us to reach different conclusions with respect to uncertain tax positions or otherwise change our existing opinion of these matters. Any failure to maintain or implement required new or improved controls over the accounting for income taxes, or any difficulties we encounter in their implementation, could delay the remediation of the above mentioned material weakness, cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding the effectiveness of our internal controls over financial reporting. The existence of a material weakness could result in errors in our financial statements that could result in a restatement of financial statements, cause us to fail to meet our reporting obligations require us to expend significant resources to correct the material weakness, expose us to regulatory or legal proceedings, subject us to fines, penalties or judgments or cause investors and creditors to lose confidence in our reported financial information.

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We may have exposure to additional tax liabilities.

As a multinational company, we are subject to both income, withholding and non-income taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, both in the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision and other tax accruals. In operating our global business, we enter into transactions across jurisdictions and taxing authorities may have different views as to pricing and characterization of those transactions. In addition, our worldwide tax provision may be impacted by changes in foreign currency exchange rates, by entry into new businesses and geographies and changes to our existing businesses, by acquisitions, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are regularly under audit by tax authorities with respect to income and non-income taxes and may have exposure to additional tax liabilities. Although we believe that our tax estimates are reasonable, there is no assurance that the determination of tax audits or tax disputes will not be materially different from what is reflected in our historical income tax provisions and accruals.

Fluctuations in foreign currency exchange rates may negatively impact our financial results.

Our results of operations or financial condition may be negatively impacted by fluctuations in foreign currency exchange rates and devaluations of foreign currencies. We operate throughout the world through international sales subsidiaries, networks of exclusive and non-exclusive third party distributors, and non-exclusive VARs. As a result, certain sales and related expenses are denominated in currencies other than the United States Dollar. The foreign currencies for which we currently have the most significant exposure are the Australian Dollar, Canadian Dollar, Euro, British Pound, Mexican Peso, Malaysian Ringgit, Swedish Krona, Hungarian Forint, Russian Rouble and Venezuelan Bolivar. Our results of operations may fluctuate due to exchange rate fluctuation between the United States Dollar and other currencies because our financial results are reported on a consolidated basis in United States Dollars. We have historically implemented a foreign exchange hedging program using derivative financial instruments (e.g. forward contracts and options contracts) and operational strategies (e.g. natural hedges, netting, leading and lagging of accounts payables and account receivables) to hedge certain foreign exposures. However, we can provide no assurance that any of these strategies will be effective or continued or can we rely on our hedging program to eliminate all foreign currency exchange rate or devaluation risk.

Elimination of or substantial reduction in the Investissement Quebec Credit Program may negatively impact our financial results.

The province of Quebec, Canada has established a program to attract and retain investment in the information technology sector in Quebec. A corporation with employees performing eligible activities can apply for and receive a refund of up to 24% of eligible salaries (Salary Rebate), up to a maximum of $20,000 (CAD) per eligible employee. The program is administered by Investissement Quebec (“IQ”). IQ reviews applications and issues annual eligibility certificate to qualifying companies. IQ also issues annual eligibility certificates confirming named qualifying employees. The payment of the Salary Rebate is made by the Minister of Revenue of Quebec and is subject to audit at a later date. The Salary Rebate is taxable in the year of receipt. The classification of the rebate to these financial statement line items is consistent with the classification of the qualifying salaries that were eligible for the credit. The program was recently extended through 2025 and we plan to continue to apply for the credits for each eligible year. However, there is no guarantee that the program will continue or that we will continue to be able to participate. If the Quebec Government were to materially alter or eliminate the program or were subsequent audits by the Minister of Revenue found to materially reduce or eliminate the rebate for any specific year or periods, our financial results at quarter or fiscal year end could be materially and negatively impacted.

The interests of our controlling stockholders (the "sponsors”) may differ from the interests of our other stakeholders.

The interests of the sponsors may differ from our other stakeholders in material respects. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of our sponsors, as equity holder of the Company, might conflict with the interests of the holders of the Senior Notes. The sponsors and their affiliates may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to the holders of our Senior Notes, including the incurrence of additional indebtedness. Additionally, the indenture governing the Senior Notes permits us to pay fees, dividends or make other restricted payments under certain circumstances, and the sponsors may have an interest in our doing so.

The sponsors and their affiliates are in the business of making investments in companies and may, from time to time in the future, acquire interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. The interests of the sponsors and their affiliates may differ from the interests of the Senior Note holders.

A failure to remain current in our filings with the Securities and Exchange Commission ("SEC") may have material adverse impacts on our business and liquidity.

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If we are not able to remain current in our filings with the SEC, we may face several adverse consequences and restrictions. While the Company is a voluntary filer and is not required by the rules and regulations of the SEC to continue filing current and periodic reports, in accordance with the terms of the indenture governing its Senior Notes, the Company files an annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K in a manner that complies in all material respects with the requirements specified in such forms, and is required to do so in a timely manner. Failure to remain current in our filings will constitute a breach of our covenants under the indenture governing our Senior Notes and such breach could result in an event of default that would accelerate our payment obligations under the Senior Notes. In addition, we will not be able to use a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering a public offering of securities during the period that we are not current in our filings and we may be limited in our ability to raise funds in a private placement of our securities under Regulation D. These restrictions may impair our ability to raise funds in the public markets or private markets, should we desire to do so, and to attract and retain employees.

Payment of dividends to fund interest payments on our parent company's PIK Toggle Notes will utilize cash resources which could otherwise be utilized to fund operating cash flow requirements and service our debt obligations. These dividend payments may require us to borrow against our revolving credit facility, and may affect our ability to comply with financial covenants contained in our debt instruments.

In addition to our debt discussed above, our indirect parent company, Eagle Midco Inc. ("EGL Midco"), has issued $400 million in principal amount of Senior PIK Toggle Notes (the "Midco Notes"). The $400 million of Midco Notes were issued on June 10, 2013 and mature on June 15, 2018. We and our consolidated subsidiaries have not guaranteed the Midco Notes, and we have not pledged any assets as collateral for the payment of the Midco Notes. The Midco Notes are unsecured.

However, we expect to pay dividends of approximately $36 million per year to EGL Midco to fund interest payments on the Midco Notes. Payment of these dividends will utilize cash resources which could otherwise be utilized to fund operating cash flow requirements and service our debt obligations. When sufficient cash resources are not available to pay these cash dividends, we intend to borrow against our revolving credit facility to finance these cash dividends. The first lien senior secured leverage ratio covenant in our 2011 Credit Agreement is effective when we have a balance outstanding on our revolving credit facility. As a result, our intent to pay dividends to EGL Midco to service the Midco Notes may affect our ability to meet debt service requirements on our debt as well as our ability to comply with financial covenants contained in our debt instruments.

We are, and expect to be in the future subject to, litigation and legal proceedings which may adversely affect our business, financial condition and results of operations.

We are party to lawsuits and legal proceedings in the normal course of business. These matters are often expensive and disruptive to normal business operations and require significant management time and attention. We are currently subject to, or may be subject to in the future, legal proceedings by various stakeholders including employees, customers, patent owners, suppliers, distributors, stockholders, former stockholders or others through private actions, class actions, administrative proceedings or other litigation. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages, and include claims for injunctive relief. Litigation and regulatory proceedings can be lengthy, expensive, and disruptive to our operations and results cannot be predicted with certainty. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products and features or require us to stop offering certain products, all of which could negatively impact our business and financial results. There may also be adverse publicity associated with legal proceedings, regardless of whether the allegations are valid or whether we are ultimately found liable or otherwise experience a negative outcome. As a result, litigation may adversely affect our business, financial condition and results of operations.

We are a “voluntary filer” with the SEC which may reduce the information you have access to regarding the Company, its controlling stockholders and certain transactions.

The Company is a "voluntary filer” with the SEC and is not required by the rules and regulations of the SEC to continue filing current and periodic reports. In accordance with the terms of the indenture governing the Senior Notes, the Company files an annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K in a manner that complies in all material respects with the requirements specified in such form. However, the Company is not a fully reporting company that is subject to review under Section 408 of the Sarbanes-Oxley Act of 2002 and is not subject to certain other statutory provisions such as prohibitions on personal loans to directors and executive officers, the requirement to have a fully independent Audit Committee and the requirement to disgorge profits following an accounting restatement. Furthermore, the Company is not subject to the going private rules and certain tender offer regulations, and the beneficial holders of the Company's securities do not need to report on acquisitions or dispositions of the Company's securities or their plans regarding their influence and control over the Company, nor is the Company required to distribute proxy materials in connection with its annual meeting. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act exempted issuers other than

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large accelerated filers and accelerated filers from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. Finally, the Company's securities are not listed on an exchange and, accordingly, the Company is not subject to the corporate governance requirements set forth in the listing rules of The NASDAQ Stock Market, the New York Stock Exchange or any other exchange. Therefore, the Company's status as a voluntary filer reduces investors' rights to access significant information regarding the Company and its controlling stockholders and limits the governance requirements to which the Company is subject.

ITEM 1B - UNRESOLVED STAFF COMMENTS

None.

ITEM 2 - PROPERTIES

Our properties consist primarily of leased office facilities which we use for our sales, marketing, consulting, customer support, product development, executive and administrative functions. Additionally, we own buildings in Montreal, Canada and Columbus, Ohio. We are in contract to sell our Montreal, Canada building and we plan to lease space in the same area. Our corporate headquarters and executive offices are located in Austin, Texas where we currently lease approximately 100,000 square feet of space. We conduct our principal operations in Austin, Texas as well as several other locations across the Americas, including Dublin, California, where we lease approximately 75,000 square feet of space, Bensalem, Pennsylvania, where we lease approximately 43,000 square feet of space and Minneapolis, Minnesota, where we lease approximately 62,000 square feet of space. We also lease an additional 239,000 square feet of space for various functions in other locations across the U.S. In addition, internationally we lease approximately 406,000 square feet of space for operations and for sales offices in Latin America, Canada, EMEA, and Asia Pacific. Expiration dates of leases on all of our facilities range from 2015 to 2024. We believe that our existing domestic and international facilities are sufficient to meet our current needs. In addition, we believe suitable additional or alternative space would be available on commercially reasonable terms to accommodate expansion of our operations, if required. The restructuring plans we have implemented over the past few years have involved the exit or reduction in space of certain of our leased facilities. See Note 11 - Restructuring Costs in our audited consolidated financial statements for additional information.

ITEM 3 - LEGAL PROCEEDINGS

We are a party to various legal proceedings and administrative actions, all of which are of an ordinary or routine nature incidental to our operations, except as otherwise described below. We do not believe that such proceedings and actions will, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows, except as may otherwise be described below.

State Court Shareholder Litigation

In connection with the announcement of the proposed acquisition of Epicor Software Corporation ("Legacy Epicor") by funds advised by Apax in April 2011, four putative stockholder class action suits were filed in the Superior Court of California, Orange County, and two such suits were filed in Delaware Chancery Court. The actions filed in California were entitled Kline v. Epicor Software Corp. et al., (filed Apr. 6, 2011); Tola v. Epicor Software Corp. et al., (filed Apr. 8, 2011); Watt v. Epicor Software Corp. et al., (filed Apr. 11, 2011), and Frazer v. Epicor Software et al., (filed Apr. 15, 2011). The actions filed in Delaware were entitled Field Family Trust Co. v. Epicor Software Corp. et al., (filed Apr. 12, 2011) and Hull v. Klaus et al., (filed Apr. 22, 2011). Amended complaints were filed in the Tola and Field Family Trust actions on April 13, 2011 and April 14, 2011, respectively. Plaintiff Kline dismissed his lawsuit on April 18, 2011 and shortly thereafter filed an action in federal district court. Kline then dismissed his federal lawsuit on July 22, 2011. The state court suits alleged that the Legacy Epicor directors breached their fiduciary duties of loyalty and due care, among others, by seeking to complete the sale of Legacy Epicor to funds advised by Apax through an allegedly unfair process and for an unfair price and by omitting material information from the Solicitation/Recommendation Statement on Schedule 14D-9 that Legacy Epicor filed on April 11, 2011 with the SEC. The complaints also alleged that Legacy Epicor, Apax Partners, L.P. and Element Merger Sub, Inc. aided and abetted the directors in the alleged breach of fiduciary duties. The plaintiffs sought certification as a class and relief that included, among other things, an order enjoining the tender offer and merger, rescission of the merger, and payment of plaintiff's attorneys' fees and costs. On April 25, 2011, plaintiff Hull filed a motion in Delaware Chancery Court for a preliminary injunction seeking to enjoin the parties from taking any action to consummate the transaction. On April 28, 2011, plaintiff Hull withdrew this motion. On December 30, 2011, Hull dismissed his Delaware suit.

On May 2, 2011, after engaging in discovery, plaintiffs advised that they did not intend to seek injunctive relief in connection with the merger, but would instead file an amended complaint seeking damages in California Superior Court following the consummation of the tender offer. On May 11, 2011, the Superior Court for the County of Orange entered an Order consolidating the Tola, Watt, and Frazer cases pursuant to a joint stipulation of the parties. Plaintiffs filed a Second Amended Complaint on September 1, 2011, which made essentially the same claims as the original complaints. Plaintiffs Kline and Field Family Trust have both joined in the amended complaint. We filed a demurrer (motion to dismiss) to this amended complaint on September 29, 2011. The demurrers were heard on December 12, 2011, and the Court overruled them. The Defendants answered the Complaint on December 22, 2011. On June 22, 2012, the court granted plaintiff's motion for class certification and dismissed Mr. Hackworth as a defendant.

After the parties had completed fact discovery and begun expert discovery, plaintiffs sought leave to amend their complaint to add two new defendants, the Company's former chief financial officer and the Company's former financial advisor, Moelis & Company. On February 22, 2013, the Court granted plaintiffs leave, and plaintiffs' Third Amended Complaint was filed. On April 5, 2013, pursuant to a stipulation between the parties, the Court dismissed Legacy Epicor from this action with prejudice. On April 29, 2013, the Court overruled demurrers by the new defendants to the Third Amended Complaint.

Although we believed this lawsuit was without merit and have vigorously defended against the claims, the parties engaged in a mediation on October 21, 2013. Following the mediation, the parties reached an agreement in principle to settle the action, subject to the approval of the Court. On May 23, 2014, the Court preliminarily approved the proposed settlement and ordered the creation of a settlement fund of $18 million from the various defendants and their insurers. On October 24, 2014, the hearing on final approval of the settlement was held and the court approved the settlement and issued a final order and judgment. A final hearing was set for April 24, 2015, at which hearing the plaintiffs shall report to the Court on the payment of claims to the Epicor shareholders. During the year ended September 30, 2014, we paid $7.7 million to settle our portion of the litigation. As of September 30, 2014, we do not believe we will pay any additional amounts for the litigation, and as such, we have no remaining liability recorded for the litigation as of September 30, 2014.

ITEM 4 - MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

No public trading market exists for the common stock, no par value, of Epicor Software Corporation. All of the outstanding shares of common stock, no par value, of Epicor Software Corporation are held by Eagle Holdco, L.P., the registrant's parent company.

In November 2011, the Board of Directors of Eagle Topco LP, a limited partnership (“Eagle Topco”), our indirect parent company, approved a Restricted Unit plan for purposes of compensation to our employees and certain directors. See Note 10 - Share Based Compensation in our audited consolidated financial statements for further information. The following table summarizes restricted units granted by Eagle Topco to our employees and directors during the quarter ended September 30, 2014.



Month		Restricted Units Granted
August 2014		173,000

The sales of the above securities were exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the securities issued in these transactions.

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All recipients had adequate access, through their relationships with the Company and Eagle Topco, to information about the Company and Eagle Topco. The sales of these securities were made without any general solicitation or advertising.

In December 2011, Eagle Topco issued 707,010 Series B units to certain employees and directors as compensation, for an initial contribution of $2.8571 per unit. In December 2013 and January 2014, we repurchased 409,506 Series B Units in Eagle Topco for a total of $1.4 million.

In December 2013 and June 2014, we made voluntary dividend payments of $18.5 million and $18.0 million, respectively, to our indirect parent company, EGL Midco, to fund interest payments on the $400 million of Midco Notes which mature in June 2018. We intend to continue making voluntary dividend payments to EGL Midco to fund future interest payments on the Midco Notes. If EGL Midco pays all interest in cash, we anticipate that our voluntary dividend payments to EGL Midco will be approximately $36 million per year from fiscal 2015 through fiscal 2018.

Interest on the Midco Notes will be required to be paid in cash to the extent that we are permitted to make dividend payments to EGL Midco. The 2011 Credit Agreement and the indenture governing the Senior Notes restrict our ability to pay dividends or make distributions or other payments to EGL Midco to fund payments with respect to the Midco Notes or to repay or repurchase the Midco Notes unless the restricted payment covenants in these agreements are satisfied. However, dividend payments will only be provided to the extent that after funding the interest payment our domestic cash and cash equivalents plus available borrowings under our revolving credit facility exceed $25.0 million.

See "Parent Company PIK Toggle Notes" in Note 6 - Debt in our audited consolidated financial statements for further information regarding the Midco Notes.

ITEM 6 - SELECTED FINANCIAL DATA

The following table sets forth our selected historical consolidated financial data for the periods presented. The summary historical consolidated financial information as of September 30, 2014 and 2013 and for the fiscal years ended September 30, 2014, 2013 and 2012 are derived from, and should be read in conjunction with, our audited consolidated financial statements included elsewhere in this Report. As discussed further in Note 2 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this Form 10-K, we have restated our consolidated financial statements to correct certain errors in our prior period financial statements related to accounting for income taxes.

The summary historical consolidated financial information as of September 30, 2012 and 2011 and for the period from Inception to September 30, 2011 have been derived from and should be read in conjunction with, our audited consolidated financial statements included in our Report on Form 10-K for the fiscal year ended September 30, 2012, filed with the Securities and Exchange Commission on December 12, 2012. The consolidated statements of stockholder's equity were revised to reflect a 2011 income tax benefit adjustment resulting in an increase to retained earnings and total stockholder’s equity of $0.8 million. Revisions to increase goodwill associated with tax adjustments from the 2011 merger of approximately $8.0 million are reflected in the beginning balance as of October 1, 2012.

The summary historical consolidated financial information as of September 30, 2010, for the period from October 1, 2010 to May 15, 2011, and for the fiscal year ended September 30, 2010, have been derived from the Predecessor’s audited consolidated financial statements not included in this Report. Please also refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the notes to our audited consolidated financial statements included elsewhere in this Report.

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	Predecessor										Year Ended September 30,
(in thousands)		As of and for the year ended September 30, 2010			October 1, 2010 to May 15, 2011			Inception to September 30, 2011			2012			2013			2014
								(Restated)			(Restated)			(Restated)
Total revenues		$	369,222		$	227,330		$	304,755		$	855,457		$	961,731		$	994,956
Operating expenses:
Cost of revenues		145,129			87,788			133,512			356,404			394,496			391,184
Sales and marketing		56,390			36,200			53,657			147,446			165,240			170,667
Product development		30,917			19,659			31,417			83,304			102,573			104,696
General and administrative		28,116			21,519			27,611			75,702			76,580			70,469
Depreciation and amortization		39,611			25,322			50,716			138,985			160,865			183,131
Acquisition-related costs		2,862			16,846			42,581			8,845			8,561			8,780
Restructuring costs		2,981			27			11,049			4,776			4,890			3,896
Total operating expenses		306,006			207,361			350,543			815,462			913,205			932,823
Operating income (loss)		63,216			19,969			(45,788		)	39,995			48,526			62,133
Interest expense		(30,427		)	(33,069		)	(36,643		)	(90,483		)	(92,669		)	(87,108		)
Other income (expense), net		(101		)	223			(257		)	(133		)	(992		)	(911		)
Income (loss) from continuing operations before income taxes		32,688			(12,877		)	(82,688		)	(50,621		)	(45,135		)	(25,886		)
Income tax expense (benefit)		13,948			(4,488		)	(27,543		)	(8,735		)	(13,177		)	(5,037		)
Income (loss) from continuing operations		18,740			(8,389		)	(55,145		)	(41,886		)	(31,958		)	(20,849		)
Loss from discontinued operations, net of income taxes		(357		)	—			—			—			—			—
Gain from sale of discontinued operations, net of income taxes		6,178			—			—			—			—			—
Net income (loss)		$	24,561		$	(8,389	)	$	(55,145	)	$	(41,886	)	$	(31,958	)	$	(20,849	)
Other Financial Data:
Ratio of Earnings to Fixed Charges (1)		2.04x			N/A			N/A			N/A			N/A			N/A



	Predecessor
	As of September 30,			As of September 30,
(in thousands)		2010		2011		2012		2013		2014
				(Restated)		(Restated)		(Restated)
Selected Balance Sheet Data:
Cash and cash equivalents		$	74,290	$	44,796	$	130,676	$	82,902	$	130,359
Total assets		851,906		2,468,652		2,426,327		2,429,012		2,284,596
Total debt, including current maturities		499,395		1,324,259		1,316,578		1,312,383		1,277,927
Stockholder's equity		196,862		588,539		550,787		518,247		457,889
Cash dividends declared and paid		—		—		—		—		36,500

(1) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred issuance costs, a portion of rental expense that management believes is representative of the interest component of rental expense, and interest related to uncertain tax positions. For periods in which income (loss) from continuing operations is a loss, the Ratio of Earnings to Fixed Charges is not applicable (N/A).

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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with the audited consolidated financial statements and related notes thereto appearing elsewhere in this report. 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 “Risk Factors” in Part I, section IA. Unless the context requires otherwise, references to “we,” “our,” “us”, "Epicor" and “the Company” are to Epicor Software Corporation and its consolidated subsidiaries. Unless the context requires otherwise, references to "Solarsoft" refer to the business of Solarsoft Business Systems, which we acquired in October 2012 and whose results are included in our results subsequent to the date we acquired it.

Overview

Epicor is 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 and services sectors. Our fully integrated solutions, which primarily include software, professional services and 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 functions, operations and resources of their businesses and ultimately to their customers and suppliers. By enabling companies 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, which may result in higher revenues, increased profitability and improved customer loyalty.

Our fully integrated systems and services include one or more of the following software applications: inventory and production management, supply chain management (“SCM”), manufacturing execution systems ("MES"), 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 omni-channel commerce and collaborative capabilities that allow enterprises to extend their business and more fully integrate their operations with those of their customers, suppliers and partners. We believe this collaborative approach distinguishes us from most of the 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 are deeply embedded in our customers’ businesses and are a critical component to their success.

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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.

Beginning in fiscal 2014, the Company elected to change the presentation of the revenues and cost of revenues sections of our consolidated statements of comprehensive loss to better align our presentation with other companies in our industry and to enhance comparability. Beginning in fiscal 2014, within revenues and cost of revenues, we present software and software related services, professional services and hardware and other. Prior periods have been reclassified to conform to the current period presentation. The change in presentation had no effect on the total amount of revenues or cost of revenues and no change has been made to the Company’s reporting segments.

Corporate Background

General Business Trends

Demand for our product offerings has generally been correlated with macroeconomic and business conditions. During our fiscal 2014, the economy showed signs of continued improvement. While the outlook for growth remains positive, concern remains regarding the overall strength of the recovery. We continue to evaluate the economic situation, the business environment and our outlook for changes. We believe that our customers and prospective customers will invest in IT products and services that deliver value, reduce their operating costs and achieve strong return on investment and we believe that our product and service offerings position us to remain competitive.

In fiscal 2014, our revenues grew approximately 3.5% as compared to the prior year. The increase in revenues was due to strong growth in software license, Software as a Service ("SaaS"), payment exchange, software support and hosting and managed services revenues. These increases offset decreases in professional services revenues while our hardware and other revenues were relatively flat. Cost of revenues in total and as a percentage of revenues were lower year over year primarily as a result of a mix shift to higher software and software related services revenues and hosting and managed services revenues as well as lower hardware equipment costs due to a favorable mix of hardware products sold in the current fiscal year. Other operating expenses increased primarily due to an increase in depreciation and amortization expense. As a result of the increase in revenues and corresponding increase in gross margins, partially offset by higher other operating expenses, our operating income in fiscal 2014 increased $14.0 million compared to the prior year. Our operating income margin increased to 6.2% in fiscal 2014 compared to 5.0% in the prior year.

Our ERP segment delivered solid growth in revenues and contribution margin in fiscal 2014, primarily driven by growth in revenues from software licenses, SaaS, software support and professional services in our America’s (North, Central and South America) region and software support revenues in our EMEA (Europe, Middle East and Africa) region and software license revenues in our APAC (Asia Pacific) region, partially offset by lower professional services revenues in our APAC and EMEA regions due to lower professional services backlog. Our Retail Distribution segment also contributed solid revenue and contribution margin growth in fiscal 2014, driven by increased software license, payment exchange and hardware equipment revenues which have been favorably impacted by improvements in consumer confidence, the residential housing market recovery and a beneficial hardware refresh cycle as several customers have updated their hardware platforms. Our Retail Solutions segment performance continues to be affected by lower software license sales to existing customers, longer sales cycles, as well as by the number and timing of large strategic deals. Lower software license revenues in Retail Solutions in fiscal 2014 have contributed to lower professional services revenues, which have resulted in lower contribution margin in the current fiscal year. Additionally, Retail Solutions hardware and other revenues have been lower in the current fiscal year due to a lower number of strategic roll outs as a result of lower software license revenues.

Over the last year we have enhanced our capabilities and marketplace experience with additions to our management team. In October 2013, Joseph L. Cowan became our President and Chief Executive Officer. Additionally, Janie West was appointed as Chief Product Officer and Mark Mincin was appointed Chief Information Officer during fiscal 2014.

Components of Operations

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The key components of our results of operations are as follows:

Revenues

Our revenues are primarily derived from sales of our software and software related services, professional services and hardware and other to customers that are categorized into one of our three segments - ERP, Retail Solutions and Retail Distribution.

•

Within each segment, we generate revenues from software and software related services, professional services, and hardware and other products as described below.

Software and Software Related Services:


•	Software license revenues - Revenues from the granting of perpetual licenses to customers to use our software and application offerings.

•

Software and cloud subscriptions revenues – Recurring fees earned from granting customers access to a broad range of our software and application offerings on a subscription basis. These offerings consist primarily of software application modules and suites, proprietary catalogs, ecommerce and electronic data interchange, data warehouses and other data management products and all software accessed or managed on-demand over the Internet through a Software as a Service (“SaaS”) model.


•	Software support revenues – Revenues earned primarily for providing customers with technical support services, as well as unspecified software upgrades (when and if available) and release updates and patches.

Professional Services:

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Consist primarily of revenues generated from implementation contracts to install (software and hardware), configure and deploy our software products. Our professional services revenues also include business and technical consulting, integration services, custom software development and product training and educational services regarding the use of our software products. Additionally, we provide managed services for customers hosted at our data center facilities, partner data centers or physically on-premise at customer facilities.

Hardware and Other:

Consist primarily of revenues generated from the re-sale of servers, POS and storage product offerings, hardware maintenance fees and the sale of business products.

Operating Expenses

Our operating expenses consist primarily of cost of software and software related services revenues, cost of professional services revenues, cost of hardware and other 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 cost of revenues and each operating expense category. All operating expenses are allocated to segments, except as otherwise noted below.

•

Cost of software and software related services revenues - Cost of software and software related services revenues consists primarily of direct costs of software duplication and delivery, third-party royalty fees, channel partner referral fees, third party maintenance costs, salary related costs and other costs associated with product updates and providing support services, as well as material and production costs associated with our automotive catalog and other software and cloud subscription and allocated overhead expenses.

•

Cost of professional services revenues - Cost of professional services revenues consists primarily of salary related costs, third party consulting fees, travel costs and allocated overhead expenses associated with providing customers' system installation and integration, custom modification and training services. Additionally the cost of professional services includes salary related costs, outside services costs, travel costs and allocated overhead expenses associated with providing our hosting and managed services offerings.


•	Cost of hardware and other revenues - Cost of hardware and other revenues consists primarily of hardware equipment costs, our logistics organization, third party hardware maintenance contracts and the cost of business products.


•	Sales and marketing - Sales and marketing expense consists primarily of salaries and bonuses, commissions, share-based compensation expense, employee benefits, travel, marketing promotional expenses and allocated overhead expenses. Corporate marketing expenses are not allocated to our segments.


•	Product development - Product development expense consists primarily of salaries and bonuses, share-based compensation expense, employee benefits, outside services and allocated overhead expenses.

•

General and administrative - General and administrative expense primarily consists of salaries and bonuses, share-based compensation expense, employee benefits, outside services, and facility and information technology allocations for the executive, finance and accounting, human resources and legal support 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 primarily consists of depreciation attributable to our fixed assets and amortization attributable to our intangible assets acquired in acquisitions. Depreciation and amortization are not allocated to our segments.


•	Acquisition-related costs - Acquisition-related costs consists primarily of legal fees, investment banker 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

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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 on our outstanding debt, amortization of our original issue discount and deferred financing fees related to our outstanding debt and interest recorded for our interest rate swap.


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


•	Income tax expense (benefit) - Income tax expense (benefit) 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.

Results of Operations

Year Ended September 30, 2014 Compared to the year ended September 30, 2013

Total revenues

Our total revenues were $995.0 million and $961.7 million for the year ended September 30, 2014 and 2013, respectively. Total revenues increased by $33.3 million, or 3%, for the year ended September 30, 2014 as compared to the year ended September 30, 2013. The increase was primarily due to growth in software license, SaaS, payment exchange and software support revenues as well as a $5.7 million decrease in deferred revenue purchase accounting adjustments as described in more detail below.

The following table sets forth our segment revenues by software and software related services, professional services and hardware and other for the periods indicated and the variance thereof:

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	Year Ended September 30,
(in thousands, except percentages)	2014		2013		Variance $			Variance %
ERP revenues:
Software and software related services:
Software license	$	115,531	$	105,971	$	9,560		9	%
Software and cloud subscriptions	21,581		18,481		3,100			17	%
Software support	312,516		296,788		15,728			5	%
Total software and software related services	449,628		421,240		28,388			7	%
Professional services	159,959		158,118		1,841			1	%
Hardware and other	17,339		19,111		(1,772		)	(9	)%
Total ERP revenues	626,926		598,469		28,457			5	%

Retail Solutions revenues:
Software and software related services:
Software license	13,351		14,907		(1,556		)	(10	)%
Software and cloud subscriptions	8,945		7,829		1,116			14	%
Software support	42,065		41,067		998			2	%
Total software and software related services	64,361		63,803		558			1	%
Professional services	45,073		49,603		(4,530		)	(9	)%
Hardware and other	24,396		28,751		(4,355		)	(15	)%
Total Retail Solutions revenues	133,830		142,157		(8,327		)	(6	)%

Retail Distribution revenues:
Software and software related services:
Software license	24,009		20,644		3,365			16	%
Software and cloud subscriptions	57,065		55,242		1,823			3	%
Software support	77,668		76,995		673			1	%
Total software and software related services	158,742		152,881		5,861			4	%
Professional services	28,358		26,883		1,475			5	%
Hardware and other	47,100		41,341		5,759			14	%
Total Retail Distribution revenues	234,200		221,105		13,095			6	%



Total revenues:
Software and software related services:
Software license	152,891		141,522		11,369			8	%
Software and cloud subscriptions	87,591		81,552		6,039			7	%
Software support	432,249		414,850		17,399			4	%
Total software and software related services	672,731		637,924		34,807			5	%
Professional services	233,390		234,604		(1,214		)	(1	)%
Hardware and other	88,835		89,203		(368		)	—	%
Total revenues	$	994,956	$	961,731	$	33,225		3	%

Our ERP, Retail Solutions and Retail Distribution segments accounted for approximately 63%, 13% and 24%, respectively, of our revenues during the year ended September 30, 2014. This compares to the year ended September 30, 2013, in which our ERP, Retail Solutions and Retail Distribution segments accounted for approximately 62%, 15% and 23%, respectively, of our revenues.

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As a result of purchase accounting, deferred revenue of acquired companies is reduced to reflect the cost of the related work to be performed plus a reasonable profit margin. These adjustments decrease over time as acquired contracts are completed. The following table sets forth, for the periods indicated, our Non-GAAP segment revenues by software and software related services, professional services and hardware and other excluding the impact of deferred revenue purchase accounting adjustments. Non-GAAP segment revenues, which exclude the impact of deferred revenue purchase accounting adjustments, 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 deferred revenue purchase accounting adjustments in order to compare the results of our segments on a comparable basis.



	Year Ended September 30,							Year Ended September 30,
(in thousands)	2014							2013
	Non-GAAP		Purchase Accounting Adjustment			GAAP		Non-GAAP		Purchase Accounting Adjustment			GAAP
ERP revenues:
Software and software related services	$	449,713	$	(85	)	$	449,628	$	424,505	$	(3,265	)	$	421,240
Professional services	159,962		(3		)	159,959		158,234		(116		)	158,118
Hardware and other	17,339		—			17,339		19,111		—			19,111
Total ERP revenues	627,014		(88		)	626,926		601,850		(3,381		)	598,469

Retail Solutions revenues:
Software and software related services	64,361		—			64,361		63,816		(13		)	63,803
Professional services	45,343		(270		)	45,073		50,079		(476		)	49,603
Hardware and other	24,396		—			24,396		28,751		—			28,751
Total Retail Solutions revenues	134,100		(270		)	133,830		142,646		(489		)	142,157

Retail Distribution revenues:
Software and software related services	158,804		(62		)	158,742		154,786		(1,905		)	152,881
Professional services	28,358		—			28,358		27,024		(141		)	26,883
Hardware and other	47,315		(215		)	47,100		41,755		(414		)	41,341
Total Retail Distribution revenues	234,477		(277		)	234,200		223,565		(2,460		)	221,105



Total revenues:
Software and software related services	672,878		(147		)	672,731		643,107		(5,183		)	637,924
Professional services	233,663		(273		)	233,390		235,337		(733		)	234,604
Hardware and other	89,050		(215		)	88,835		89,617		(414		)	89,203
Total revenues	$	995,591	$	(635	)	$	994,956	$	968,061	$	(6,330	)	$	961,731

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The following discussion is based upon our GAAP results of operations.


•	ERP revenues - ERP revenues increased by $28.5 million, or 5%, for the year ended September 30, 2014 compared to the year ended September 30, 2013.

◦

ERP software and software related services revenues increased by $28.4 million, or 7%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The increase was primarily as a result of a $15.7 million increase in software support revenues (which consisted of $12.5 million attributable to the addition of new customer software support contracts and support price increases partially offset by attrition, as well as a $3.2 million decrease in deferred revenue purchase accounting adjustments) as well as a $9.6 million increase in software license revenues led by our Americas region which grew year over year software license revenues as a result of revenues from large strategic sales transactions. Additionally, software and cloud subscriptions revenues increased by $3.1 million primarily due to growth in SaaS revenues.

◦

ERP professional services revenues increased by $1.8 million, or 1%, for the year ended September 30, 2014 compared to the year ended September 30, 2013 driven by an increase in our Americas region due to growth software license revenues in the preceding years, which positively affects follow-on professional services implementation revenues, partially offset by decreases in our APAC and EMEA regions.


◦	ERP hardware and other revenues decreased by $1.7 million, or 9%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The decrease was primarily attributable to lower hardware equipment sales to the manufacturing sector in our Americas region.

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Retail Solutions revenues - Retail Solutions revenues decreased by $8.3 million, or 6%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. Professional services revenues decreased by $4.5 million primarily due to lower software license revenues in fiscal year 2014 and 2013, which adversely affected follow-on professional services implementation revenues. Hardware and other revenues decreased by $4.4 million primarily due to large strategic sales transactions in the prior year. Software and software related services revenues increased by $0.6 million. The increase in software and software related services revenues was primarily attributable to a $1.1 million increase in software and cloud subscriptions revenues, due primarily to increased SaaS revenues, as well as a $1.0 million increase in software support revenues primarily as a result of the addition of new customer software support contracts and support price increases partially offset by customer attrition and a $1.5 million decrease in software license revenues due to a lower level of sales to existing customers in the current year.

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Retail Distributions revenues - Retail Distribution revenues increased by $13.1 million, or 6%, for the year ended September 30, 2014 as compared to the year ended September 30, 2013. Software and software related services revenues increased by $5.9 million. The increase in software and software related services revenues was driven by a $3.4 million increase in software license revenues as a result of increased revenues from new customers and existing customers (including a $0.8 million decrease in deferred revenue purchase accounting adjustments), a $1.8 million increase in software and cloud subscriptions revenues due primarily to increased payment exchange revenues partially offset by lower catalog revenues and a $0.7 million increase in software support revenues (driven primarily by a $1.0 million decrease in deferred revenue purchase accounting adjustments which was partially offset by customer attrition). Professional services revenues increased by $1.5 million due to increases in hosting, network support and implementation revenues. Hardware and other revenues increased by $5.7 million primarily due to increased demand from existing customers to refresh their hardware equipment.

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Total operating and other expenses

The following table sets forth our operating and other expenses for the periods indicated and the variance thereof:



	Year Ended September 30,
(in thousands, except percentages)	2014			2013			Variance $			Variance %
				(Restated)
Cost of software and software related services revenues	$	147,709		$	144,748		$	2,961		2	%
Cost of professional services revenues	177,974			180,129			(2,155		)	(1	)%
Cost of hardware and other revenues	65,501			69,619			(4,118		)	(6	)%
Sales and marketing	170,667			165,240			5,427			3	%
Product development	104,696			102,573			2,123			2	%
General and administrative	70,469			76,580			(6,111		)	(8	)%
Depreciation and amortization	183,131			160,865			22,266			14	%
Acquisition-related costs	8,780			8,561			219			3	%
Restructuring costs	3,896			4,890			(994		)	(20	)%
Total operating expenses	932,823			913,205			19,618			2	%
Interest expense	(87,108		)	(92,669		)	5,561			(6	)%
Other expense, net	(911		)	(992		)	81			(8	)%
Income tax benefit	(5,037		)	(13,177		)	8,140			(62	)%

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Cost of software and software related services revenues - Cost of software and software related services revenues increased by $3.0 million, or 2%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The increase was primarily attributable to a $3.1 million increase in software and cloud subscriptions cost of revenues as a result of increased SaaS and payment exchange cost of revenues driven by increased revenues, as well as a $0.2 million increase in software license cost of sales primarily as a result of increased royalty costs due to increased software license revenues, partially offset by a $0.3 million decrease in software support costs.


•	Cost of professional services revenues - Cost of professional services revenues decreased by $2.2 million, or 1%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The decrease was primarily due to reduced employee related expenses as a result of lower professional services revenues.

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Cost of hardware and other revenues - Cost of hardware and other revenues decreased by $4.1 million, or 6%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The decrease was primarily attributable to a decrease in hardware equipment costs driven by lower hardware equipment revenues in our Retail Solutions segment, a mix shift of hardware equipment sold in our ERP and Retail Distribution segments to products with lower costs than our ordinary mix of hardware as well as lower third party maintenance costs. These decreases were partially offset by an increase in hardware equipment costs in our Retail Distribution segment attributed to higher hardware equipment revenues. Additionally, third party hardware maintenance costs decreased driven by lower revenues.

•

Sales and marketing - Sales and marketing expenses increased by $5.4 million, or 3%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The increase was primarily the result of a $3.3 million increase in commissions due to increased software license revenues and a $4.9 million increase in employee related costs due primarily to increased incentive bonus, travel and salary and wages costs, partially offset by a $1.5 million decrease in sales conference expenses, $0.7 million decrease in referral fees, a $0.3 million decrease in marketing related expenses, a $0.2 million decrease in outside services and a $0.1 million decrease in allocated IT and facilities costs.

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Product development - Product development expenses increased by $2.1 million, or 2%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The increase was primarily the result of a $1.7 million increase in incentive compensation expense, a $0.7 million increase in other employee related costs and a $0.5 million increase in allocated costs, partially offset by a $0.5 million increase in capitalized software costs and a $0.3 million decrease in outside services costs.

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General and administrative - General and administrative expenses decreased by $6.1 million, or 8%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The decrease was primarily the result of a $10.1 million year over year reduction in expenses related to the shareholder litigation ($8.9 million of charges were recorded during the year ended September 30, 2013, including a $7.8 million settlement and $1.1 million of legal fees, while during the year ended September 30, 2014 we recorded a $1.2 million legal fee insurance recovery), as well as a $2.2 million sales and use tax benefit for recoveries and adjustments to reserves related to the Solarsoft acquisition, a $1.4 million decrease in other salary related expenses, a $1.2 million decrease in bad debt expense, a $0.7 million decrease in financing related fees and a $0.6 million decrease in outside services expenses, partially offset by a $2.5 million increase in severance costs (including a one-time $2.0 million severance cost related to the departure of our former President and CEO), a $2.3 million increase in incentive compensation expense, a $2.1 million increase in share based compensation expense, a $1.7 million increase in legal fees as a result of an intellectual property litigation proceeding we have initiated against Alternative during the year ended September 30, 2014 and a $1.5 million favorable one-time payroll tax adjustment related to purchase accounting reserves that occurred during the year ended September 30, 2013.

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Depreciation and amortization - Depreciation and amortization expense was $183.1 million for the year ended September 30, 2014 compared to $160.9 million for the year ended September 30, 2013, an increase of $22.2 million. The increase was primarily the result of a $9.0 million impairment recorded to reduce the carrying value of our facility in Montreal, Canada to its fair value, a $4.6 million impairment recorded for leasehold improvements and furniture and equipment which the Company plans to abandon in connection with exiting leased facilities, as well as $3.4 million of increased amortization recorded on development costs placed in service, $4.0 million of increased depreciation related to facility leasehold improvements costs and capitalized IT equipment costs and $1.1 million of increased amortization of acquired intangible assets. See Note 3 - Property and Equipment in our audited consolidated financial statements.

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Acquisition-related costs - Acquisition-related costs were $8.8 million for the year ended September 30, 2014 compared to $8.6 million for the year ended September 30, 2013. Acquisition-related costs for the year ended September 30, 2014 consisted primarily of costs for integration activities, such as consolidating the Company's information systems and accounting back office functions, as well as fees incurred relating to the legal entity consolidations of the Solarsoft acquisition. The acquisition costs for the year ended September 30, 2013 consisted primarily of costs for integration activities, such as consolidating the Company's information systems and the accounting back office functions, as well as costs relating to the acquisition of Solarsoft.

•

Restructuring costs - During the year ended September 30, 2014, we incurred $3.9 million of management-approved restructuring costs, primarily severance costs to eliminate certain employee positions and lease termination and restructuring costs to exit certain leased facilities. During the year ended September 30, 2013, we incurred $4.9 million of management-approved restructuring costs as a result of our restructuring actions primarily related to eliminating certain employee positions as a result of prior acquisitions. We expect to incur additional restructuring charges to exit certain identified facilities during fiscal 2015. See Note 11 - Restructuring Costs in our audited consolidated financial statements.

Interest expense

Interest expense for the year ended September 30, 2014 was $87.1 million compared to $92.7 million for the year ended September 30, 2013. The $5.6 million decrease in interest expense was attributed primarily to a $5.8 million decrease in our 2011 Credit Agreement term loan interest expense due to interest rate reductions as a result of refinancing amendments in March 2013 and January 2014 and lower outstanding principal balances and a $1.7 million decrease due to decreased borrowings against our revolving credit facility, partially offset by a $1.4 million increase in interest expense reclassified from accumulated other comprehensive loss related to our interest rate swap and a $0.5 million increase in other fees and expenses. See Note 6 - Debt and Note 16 - Accumulated Other Comprehensive Loss in our audited consolidated financial statements.

Other expense, net

Other expense, net was $0.9 million for the year ended September 30, 2014 compared to $1.0 million for the year ended September 30, 2013. The year ended September 30, 2014 amount consisted primarily of $1.0 million of foreign exchange losses as well as a $0.5 million loss on extinguishment of debt recorded in connection with the refinancing of our term loan in January 2014 partially offset by $0.5 million of interest income and $0.1 million of sales tax refunds. The year ended September 30, 2013 amount consisted primarily of $1.3 million of foreign exchange losses, partially offset by $0.3 million of interest income.

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Income tax benefit

We recorded an income tax benefit of $5.0 million, or 20% of pre-tax loss, during the year ended September 30, 2014, compared to an income tax benefit of $13.2 million, or 29% of pre-tax loss, during the year ended September 30, 2013. Our income tax rate for the year ended September 30, 2014, differed from the federal statutory rate primarily due to changes in foreign and state tax rates on our deferred tax liabilities, foreign earnings that are currently taxed in the US under the Controlled Foreign Corporation Regime set forth in IRC Section 951 through 965 (“Income Inclusion”), share-based compensation, other non-deductible expenses, lower tax rates in foreign jurisdictions where earnings are deemed permanently reinvested, and changes in our liabilities for uncertain tax positions (FIN 48).

Our income tax rate for the year ended September 30, 2013, differed from the federal statutory rate primarily due to non-deductible expenses, earnings that are currently taxed in the U.S. under the Controlled Foreign Corporation regime set forth in the IRC Sec 951 through 965 ("Income Inclusion"), reconciliation adjustments made to our income tax payables, changes in foreign and state tax rates as applied to our deferred liability balances, lower tax rates in jurisdictions where earnings are deemed permanently reinvested and share-based compensation.

We are included in the consolidated federal income tax return of our indirect parent company, EGL Midco. We provide for income taxes under the separate return method, by which Epicor and its domestic subsidiaries compute tax expense as though they file a separate federal income tax return. Under the separate company method, our income tax expense/(benefit) does not account for the taxable income or expense at EGL Midco, which primarily is comprised of Midco Notes interest expense (“Midco Interest Expense”). The Midco Interest Expense is included in our consolidated federal income tax return when filed. We have not entered into a tax sharing agreement with EGL Midco. We may enter into an EGL Midco tax sharing agreement with EGL Midco in the future.

See Note 9 - Income Taxes in our audited consolidated financial statements for additional information about income taxes.

Contribution margin

Our management measures the performance of each of our segments based on several metrics, including contribution margin, which is a Non-GAAP financial measure. 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 and are excluded from the calculation of contribution margin for each segment.

See Note 13 - Segment Reporting in our audited consolidated financial statements for a more detailed description of contribution margin, the reasons why we believe contribution margin provides useful information to investors, the limitations surrounding the use of contribution margin, and a reconciliation of contribution margin to loss before income taxes.

Contribution margin for the year ended September 30, 2014 and 2013 is as follows:



	Year Ended September 30,
(in thousands, except percentages)	2014		2013		Variance $			Variance %
ERP	$	218,378	$	194,096	$	24,282		13	%
Retail Solutions	39,429		43,217		(3,788		)	(9	)%
Retail Distribution	80,948		70,082		10,866			16	%
Total segment contribution margin	$	338,755	$	307,395	$	31,360		10	%

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ERP contribution margin - Contribution margin for ERP increased by $24.3 million, or 13%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. Software and software related services margins increased by $25.0 million as a result of a $9.0 million increase in software license margins due to increased software license revenues, a $14.5 million increase in software support margins (attributable to an $11.3 million increase from new customer software support revenues and support price increases partially offset by attrition and a $3.2 million reduction in the deferred revenue purchase accounting adjustments) and a $1.5 million increase in software and cloud subscriptions margins primarily due to increased SaaS and electronic data interchange revenues. Professional services

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margins increased by $2.7 million driven by increased hosting and managed services revenues as well as lower employee salary and benefit related costs. Hardware and other margins increased by $1.3 million due to a favorable mix of hardware equipment sold. Additionally, ERP contribution margin was positively impacted by a $0.8 million decrease in bad debt expense, a $0.7 million decrease in outside services costs, a $0.8 million decrease in sales conference expense and a $0.7 million decrease in referral fees. These increases in ERP contribution margin were offset by a $4.2 million increase in sales and marketing and product development employee related and allocated expenses, a $1.9 million increase in commission expense as a result of increased software license revenues and a $1.5 million increase in legal expenses.

•

Retail Solutions contribution margin - Contribution margin for Retail Solutions decreased by $3.8 million, or 9%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. The decrease was primarily as a result a $3.4 million decrease in professional services margins due to lower professional services revenues, a $0.2 million decrease in hardware and other margins due to lower hardware equipment revenues and a $1.4 million increase in sales and marketing and product development employee related expenses, partially offset by a $1.0 million increase in software and software related services margins due to higher SaaS and software support revenues.

•

Retail Distribution contribution margin - Contribution margin for Retail Distribution increased by $10.9 million, or 16%, for the year ended September 30, 2014 compared to the year ended September 30, 2013. Software and software related services margins increased by $5.8 million (including a $1.8 million decrease in deferred revenue purchase accounting adjustments) driven by higher software license and payment exchange revenues as well as higher software support margins. Hardware and other margins increased by $2.7 million as a result of increased hardware equipment revenues and higher margins on the equipment sold. Professional services margins increased by $1.2 million due to higher hosting and professional services revenues. Additionally, Retail Distribution contribution margin was positively impacted by a $0.6 million decrease in sales conference expenses, a $0.5 million decrease in sales and marketing and product development employee related costs, a $0.5 million increase in capitalized software costs, a $0.4 million reduction in bad debt expense and a $0.3 million decrease in supplies and materials expense. These increases in contribution margin were offset by a $1.4 million increase in sales commission expenses due to higher software license revenues.

Year Ended September 30, 2013 Compared to the year ended September 30, 2012

Total revenues

Our total revenues were $961.7 million for the year ended September 30, 2013 as compared to $855.5 million for the year ended September 30, 2012. Total revenues increased by $106.3 million, or 12%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. The increase was due primarily to the inclusion of $77.4 million (net of $5.0 million of deferred revenue purchase accounting adjustments) of revenue from Solarsoft products, a $14.4 million decrease in deferred revenue purchase accounting adjustments related to prior acquisitions and growth in software and software related services, professional services and hardware and other revenues as described in more detail below.

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The following table sets forth our segment revenues by software and software related services, professional services and hardware and other for the periods indicated and the variance thereof:



	Year Ended September 30,
(in thousands, except percentages)	2013		2012		Variance $			Variance %
ERP revenues:
Software and software related services:
Software license	$	105,971	$	100,395	$	5,576		6	%
Software and cloud subscriptions	18,481		11,652		6,829			59	%
Software support	296,788		247,752		49,036			20	%
Total software and software related services	421,240		359,799		61,441			17	%
Professional services	158,118		138,417		19,701			14	%
Hardware and other	19,111		16,984		2,127			13	%
Total ERP revenues	598,469		515,200		83,269			16	%

Retail Solutions revenues:
Software and software related services:
Software license	14,907		20,698		(5,791		)	(28	)%
Software and cloud subscriptions	7,829		6,323		1,506			24	%
Software support	41,067		39,035		2,032			5	%
Total software and software related services	63,803		66,056		(2,253		)	(3	)%
Professional services	49,603		48,614		989			2	%
Hardware and other	28,751		23,444		5,307			23	%
Total Retail Solutions revenues	142,157		138,114		4,043			3	%

Retail Distribution revenues:
Software and software related services:
Software license	20,644		18,078		2,566			14	%
Software and cloud subscriptions	55,242		52,302		2,940			6	%
Software support	76,995		73,152		3,843			5	%
Total software and software related services	152,881		143,532		9,349			7	%
Professional services	26,883		18,564		8,319			45	%
Hardware and other	41,341		40,047		1,294			3	%
Total Retail Distribution revenues	221,105		202,143		18,962			9	%



Total revenues:
Software and software related services:
Software license	141,522		139,171		2,351			2	%
Software and cloud subscriptions	81,552		70,277		11,275			16	%
Software support	414,850		359,939		54,911			15	%
Total software and software related services	637,924		569,387		68,537			12	%
Professional services	234,604		205,595		29,009			14	%
Hardware and other	89,203		80,475		8,728			11	%
Total revenues	$	961,731	$	855,457	$	106,274		12	%

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Our ERP, Retail Solutions and Retail Distribution segments accounted for approximately 62%, 15% and 23%, respectively, of our revenues during the year ended September 30, 2013. This compares to the year ended September 30, 2012, in which our ERP, Retail Solutions and Retail Distribution segments accounted for approximately 60%, 16% and 24%, respectively, of our revenues.



	Year Ended September 30,							Year Ended September 30,
(in thousands)	2013							2012
	Non-GAAP		Purchase Accounting Adjustment			GAAP		Non-GAAP		Purchase Accounting Adjustment			GAAP
ERP revenues:
Software and software related services	$	424,505	$	(3,265	)	$	421,240	$	372,818	$	(13,019	)	$	359,799
Professional services	158,234		(116		)	158,118		138,562		(145		)	138,417
Hardware and other	19,111		—			19,111		16,984		—			16,984
Total ERP revenues	601,850		(3,381		)	598,469		528,364		(13,164		)	515,200

Retail Solutions revenues:
Software and software related services	63,816		(13		)	63,803		67,178		(1,122		)	66,056
Professional services	50,079		(476		)	49,603		49,259		(645		)	48,614
Hardware and other	28,751		—			28,751		23,444		—			23,444
Total Retail Solutions revenues	142,646		(489		)	142,157		139,881		(1,767		)	138,114

Retail Distribution revenues:
Software and software related services	154,786		(1,905		)	152,881		143,946		(414		)	143,532
Professional services	27,024		(141		)	26,883		18,564		—			18,564
Hardware and other	41,755		(414		)	41,341		40,491		(444		)	40,047
Total Retail Distribution revenues	223,565		(2,460		)	221,105		203,001		(858		)	202,143



Total revenues:
Software and software related services	643,107		(5,183		)	637,924		583,942		(14,555		)	569,387
Professional services	235,337		(733		)	234,604		206,385		(790		)	205,595
Hardware and other	89,617		(414		)	89,203		80,919		(444		)	80,475
Total revenues	$	968,061	$	(6,330	)	$	961,731	$	871,246	$	(15,789	)	$	855,457

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The following discussion is based upon our GAAP results of operations.


•	ERP revenues - ERP revenues increased by $83.3 million, or 16%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. Of this increase, $62.3 million was attributable to revenues from Solarsoft products (net of $3.1 million of deferred revenue purchase accounting adjustments).

◦

ERP software and software related services revenues increased by $61.5 million, or 17%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Revenue from Solarsoft products contributed $37.4 million and the remaining $24.1 million was due primarily to a $22.0 million increase in software support revenues and a $4.5 million increase in software and cloud subscriptions revenues, partially offset by a $2.4 million decrease in software license revenues. The increase in software support revenues was primarily due to a $12.5 million decrease in deferred revenue purchase accounting adjustments as well as the addition of new customer software support contracts and support price increases partially offset by attrition. The increase in software and cloud subscriptions revenues was primarily attributable to growth in SaaS revenues. The decrease in software license revenues was primarily driven by a change in a portion of our sales teams compensation plans from a December to a September year end in fiscal year 2012 (effectively creating two sales year ends in the prior year for a portion of our sales team which has the tendency to incentivize our sales team to close a higher percentage of opportunities in the sales pipeline) as well as an increase in the amount of software license revenue deferred as of September 30, 2013.

◦

ERP professional services revenues increased by $19.7 million, or 14%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Revenue from Solarsoft products contributed $19.5 million, and the remainder of the increase was primarily attributable to having a full year of revenue from Cogita Business Services International Ltd. ("Cogita"), which was acquired in the third quarter of fiscal 2012 as well as a $0.1 million decrease in deferred revenue purchase accounting adjustments.


◦	ERP hardware and other revenues increased by $2.1 million, or 13%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Revenue from Solarsoft products contributed $5.4 million, which was partially offset by a $3.3 million decrease due to a lower mix of systems sold with hardware.

•

Retail Solutions revenues - Retail Solutions revenues increased by $4.0 million, or 3%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. The increase in Retail Solutions revenues was driven primarily by a $5.3 million increase in hardware and other revenues as a result of large follow-on strategic hardware sales transactions as well as a $1.0 million increase in professional services revenues primarily due to a large professional services backlog entering into fiscal year 2013 following strong software license revenues in the year ended September 30, 2012 as well as a $0.2 million decrease in deferred revenue purchase accounting adjustments, partially offset by a $2.3 million decrease in software and software related services revenues. The decrease in software and software related services revenues was primarily attributable to a $5.8 million decrease in software license revenues due to a lower level of strategic sales transactions in the year ended September 30, 2013 as well as a change in the sales compensation plans from a December to a September year end in fiscal year 2012 (effectively creating two sales year ends in the prior year which has the tendency to incentivize our sales team to close a higher percentage of opportunities in the sales pipeline). The decrease in software license revenues was partially offset by a $2.0 million increase in software support revenues due to a $1.1 million decrease in deferred revenue purchase accounting adjustments and a $0.9 million increase in software support revenues due to the addition of new customer software support contracts and support price increases partially offset by legacy platform attrition and a $1.5 million increase in software and cloud subscriptions revenues due primarily to increased SaaS revenues.

•

Retail Distributions revenues - Retail Distribution revenues increased by $19.0 million, or 9%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. Revenue from Solarsoft products contributed $15.1 million (net of $1.9 million of deferred revenue purchase accounting adjustments), and the remaining $3.9 million increase was primarily the result of a $1.4 million increase in software and software related services revenues, a $1.4 million increase in professional services revenues and a $1.1 million increase in hardware and other revenues. Software and software related services revenues increased by $9.4 million primarily due to the inclusion of $8.0 million (net of $1.8 million of deferred revenue purchase accounting adjustments) of revenues related to Solarsoft products, a $1.8 million increase as a result of our acquisition of Internet AutoParts, Inc. ("Internet AutoParts") as well as a $1.0 million increase in payment exchange revenue, partially offset by a $0.9 million decrease in software support revenues as a result of legacy platform attrition and a $0.5 million decrease in software license revenues as a result of

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lower software license revenue from new customers. Professional services revenues increased by $8.3 million primarily due to the inclusion of $6.9 million (net of $0.1 million of deferred revenue purchase accounting adjustments) of revenues related to Solarsoft products, a $0.8 million increase in hosting and managed services revenues and a $0.6 million increase in professional services consulting revenues. Hardware and other revenues increased by $1.3 million due to the inclusion of $0.2 million of revenues related to Solarsoft products as well as a $1.1 million increase due primarily to a higher mix of customer add-on orders.

Total operating and other expenses

The following table sets forth our operating and other expenses for the periods indicated and the variance thereof:



	Year Ended September 30,
(in thousands, except percentages)	2013			2012			Variance $			Variance %
	(Restated)			(Restated)
Cost of software and software related services revenues	$	144,748		$	130,010		$	14,738		11	%
Cost of professional services revenues	180,129			161,618			18,511			11	%
Cost of hardware and other revenues	69,619			64,776			4,843			7	%
Sales and marketing	165,240			147,446			17,794			12	%
Product development	102,573			83,304			19,269			23	%
General and administrative	76,580			75,702			878			1	%
Depreciation and amortization	160,865			138,985			21,880			16	%
Acquisition-related costs	8,561			8,845			(284		)	(3	)%
Restructuring costs	4,890			4,776			114			2	%
Total operating expenses	913,205			815,462			97,743			12	%
Interest expense	(92,669		)	(90,483		)	(2,186		)	2	%
Other expense, net	(992		)	(133		)	(859		)	646	%
Income tax benefit	(13,177		)	(8,735		)	(4,442		)	51	%

•

Cost of software and software related services revenues - Cost of software and software related services revenues increased by $14.7 million, or 11%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Cost of software and software related services revenues from Solarsoft products contributed $14.7 million. Cost of software license revenues decreased by $2.8 million as a result of lower third party software costs due to lower software license revenues, which was offset by cost of software and software related services which increased by $2.5 million primarily as a result of increased SaaS costs driven by increased SaaS revenues as well as a $0.3 million increase in software support costs.

•

Cost of professional services revenues - Cost of professional services revenues increased by $18.5 million, or 11%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Cost of professional services revenues related to Solarsoft products contributed $17.6 million of the increase, and the remaining $0.9 million was due primarily to an increase in employee related expenses as a result of higher professional services revenues.

•

Cost of hardware and other revenues - Cost of hardware and other revenues increased by $4.8 million, or 7%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Cost of hardware and other revenues related to Solarsoft products contributed $3.6 million of the increase, and the remaining $1.2 million was due primarily to a $1.8 million increase in hardware equipment costs as a result of higher hardware equipment revenues, partially offset by a $0.6 million decrease in hardware maintenance costs.

•

Sales and marketing - Sales and marketing expenses increased by $17.8 million, or 12%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. The increase was primarily the result of the inclusion of $12.0 million of Solarsoft expenses as well as a $3.7 million increase in employee related costs due to higher headcount, a $1.6 million increase in sales conference costs, a $0.8 million increase in referral fees, $0.7 million of allocated expenses due to higher headcount and $0.4 million of marketing expenses partially offset by a $1.8 million decrease in commission expenses.

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•

Product development - Product development expenses increased by $19.3 million, or 23%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. The increase was primarily the result of the inclusion of $9.9 million of Solarsoft expenses for the year ended September 30, 2013, as well as a $5.5 million increase in employee related costs, and a $4.2 million increase in allocated costs due to higher headcount, partially offset by a $0.7 million increase in capitalized software costs.

•

General and administrative - General and administrative expenses increased by $0.9 million, or 1%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. The increase was primarily the result of a $7.8 million charge for the estimated settlement of our shareholder litigation, an $0.8 million increase in benefits costs, as well as the inclusion of $4.1 million of Solarsoft expenses, partially offset by a $5.9 million reduction in bad debt expense, a $2.6 million reduction in share based compensation expense, a $2.5 million reduction in legal costs, and a $1.0 million decrease in other employee related costs.

•

Depreciation and amortization - Depreciation and amortization expense was $160.9 million for the year ended September 30, 2013 compared to $139.0 million for the year ended September 30, 2012, an increase of $21.9 million. The increase was primarily the result of $14.4 million additional depreciation and amortization due to the Solarsoft acquisition as well as $3.6 million of increased depreciation related to facility leasehold improvements costs and capitalized IT equipment costs and $3.5 million of increased amortization recorded on development costs placed in service.

•

Acquisition-related costs - Acquisition-related costs were $8.6 million for the year ended September 30, 2013 compared to $8.8 million for the year ended September 30, 2012. Acquisition-related costs for the year ended September 30, 2013 consisted primarily of acquisition costs for integration activities, such as consolidating the Company's information systems and the accounting back office functions, as well as legal, tax and accounting fees relating to the acquisition of Solarsoft. Acquisition-related costs for the year ended September 30, 2012 consisted primarily of $4.9 million of integration activities due to the Acquisitions and $3.9 million of acquisition costs primarily consisting of costs related to the integration related activities due to the Acquisitions such as consolidating the Company's information systems as well as due diligence fees and legal fees related to the acquisition of Solarsoft, which was consummated in the first quarter of our fiscal 2013.

•

Restructuring costs - During the year ended September 30, 2013, we incurred $4.9 million of management-approved restructuring costs, primarily as a result of the acquisition of Solarsoft, including severance costs to eliminate certain employee positions and lease termination and restructuring costs to consolidate certain excess facilities. During the year ended September 30, 2012, we incurred $4.8 million of management approved restructuring costs, primarily as a result of the Acquisitions, 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.

Interest expense

Interest expense for the year ended September 30, 2013 was $92.7 million compared to $90.5 million for the year ended September 30, 2012. The year over year increase in our outstanding debt related to the October 2012 draw on our revolving credit facility to finance the Solarsoft acquisition, during the year ended September 30, 2013 resulting in increased interest expense of approximately $1.7 million. Additionally, we reclassified $1.9 million of other comprehensive loss on our interest rate swap into interest expense. These increases were partially offset by a 0.5% interest rate reduction as a result of refinancing the term loan in March 2013. See Note 6 - Debt in our audited consolidated financial statements.

Other expense, net

Other expense for the year ended September 30, 2013 was $1.0 million compared to $0.1 million for the year ended September 30, 2012. Other expense for the year ended September 30, 2013 included $1.3 million of foreign exchange losses, partially offset by $0.3 million of interest income. Other expense, net for the year ended September 30, 2012 included $0.8 million of foreign exchange losses, a $0.7 million sales tax assessment and a loss on disposal of fixed assets of $0.5 million partially offset by $0.9 million of earnings from our previous minority interest in Internet AutoParts and $0.7 million of interest income.

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Income tax benefit

We recognized an income tax benefit of $13.2 million, or 29% of pre-tax loss, for the year ended September 30, 2013, compared to an income tax benefit of $8.7 million, or 17% of pre-tax loss, for the year ended September 30, 2012. Our income tax rate for the year ended September 30, 2013, differed from the federal statutory rate primarily due to non-deductible expenses, earnings that are currently taxed in the U.S. under the Controlled Foreign Corporation regime set forth in the IRC Sec 951 through 965 ("Income Inclusion"), reconciliation adjustments made to our income tax payables, changes in foreign and state tax rates as applied to our deferred liability balances, lower tax rates in jurisdictions where earnings are deemed permanently reinvested and share-based compensation.

For the year ended September 30, 2012, our income tax rate differed from the federal statutory rate primarily due earnings that are currently taxed in the U.S. under the Controlled Foreign Corporation regime set forth in the IRC Sec 951 through 965 ("Income Inclusion") , share-based compensation, lower tax rates in jurisdictions where earnings are deemed permanently reinvested, the impact of foreign exchange rates on our deferred tax assets and liabilities, and adjustments to our deferred tax liabilities.

Contribution margin

See Note 13 - Segment Reporting in our audited consolidated financial statements included in Part II - Item 8 of this filing for a description of contribution margin, the reasons why we believe contribution margin provides useful information to investors, the limitations surrounding the use of contribution margin and a reconciliation contribution margin to loss before income taxes.

Contribution margin for the years ended September 30, 2013 and 2012 is as follows:



	Year Ended September 30,
(in thousands, except percentages)	2013		2012		Variance $			Variance %
ERP	$	194,096	$	154,127	$	39,969		26	%
Retail Solutions	43,217		47,042		(3,825		)	(8	)%
Retail Distribution	70,082		65,787		4,295			7	%
Total segment contribution margin	$	307,395	$	266,956	$	40,439		15	%

•

ERP contribution margin - Contribution margin for ERP increased by $40.0 million, or 26%, for the year ended September 30, 2013 compared to the year ended September 30, 2012. Solarsoft contributed $16.1 million of contribution margin for the year ended September 30, 2013. Software and software related services margins increased by $23.9 million (including a $12.7 million decrease in deferred revenue purchase accounting adjustments) attributable to a $20.4 million increase in customer support margins as a result of a $7.9 million increase from new customer software support revenues and support price increases partially offset by customer attrition and a $12.5 million reduction in the deferred revenue purchase accounting adjustments, a $3.7 million increase in software and cloud subscriptions margins primarily due to increased SaaS revenues and a $0.2 million decrease in software license margins due to lower software license revenues. Professional services margins increased by $1.0 million driven by higher hosting and consulting revenues. Additionally there was a $3.9 million reduction in legal fees, a $4.6 million reduction in bad debt expense and a $1.4 million reduction in commissions, partially offset by a $5.9 million increase in sales and marketing and product development employee related expenses as a result of increased headcount, a $2.7 million increase in allocated expenses as a result of increased sales and marketing and product development headcount, a $0.9 million increase in sales conference costs, a $0.9 million increase in channel partner referral fees and a $0.5 million increase in marketing related expenses.

•

Retail Solutions contribution margin - Contribution margin for Retail Solutions decreased by $3.8 million, or 8%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. The decrease was primarily a result of a $2.4 million decrease in software and software related services margins attributable to a $5.1 million decrease in software license margins due to lower software license revenues partially offset by a $2.3 million increase

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in customer support margins ($1.2 million increase from new customer software support revenues and support price increases partially offset by customer attrition and a $1.1 million reduction in the deferred revenue purchase accounting adjustments), a $0.4 million increase in software and cloud subscriptions margins primarily due to increased SaaS revenues. Professional services margins decreased by $0.9 million primarily as a result of increased hosting and managed services costs. Additionally there was a $2.6 million increase in sales and marketing and product development employee related costs as a result of increased headcount and a $0.8 million increase in allocated expenses. These increases were partially offset by a $1.3 million reduction in sales commissions as a result of lower software license revenues, a $0.9 million reduction in bad debt expense and a $1.0 million increase in hardware and other margins driven by increased hardware and other revenues.

•

Retail Distribution contribution margin - Contribution margin for Retail Distribution increased by $4.3 million, or 7%, for the year ended September 30, 2013 as compared to the year ended September 30, 2012. Solarsoft contributed $2.2 million of contribution margin for the year ended September 30, 2013. Contribution margin increased as a result of a $1.7 million increase in software and software related services margins primarily due to a $2.1 million increase in software and cloud subscriptions margins driven by a $1.4 million increase due to the full year impact of the Internet AutoParts acquisition and a $0.8 million increase in payment exchange margins due to revenue growth, partially offset by a $0.5 million decrease in software license margins as a result of lower software license revenues. Professional services margins increased by $1.8 million due to increased network support and consulting services revenues. Hardware and other margins increased by $1.4 million as a result of increased hardware equipment revenues and higher margins on the equipment sold. Additionally, there was a $0.7 million increase in capitalized software and database costs. These increases were partially offset by a $0.9 million increase in commission expense, a $1.1 million increase in sales and marketing and product development employee related expenses as a result of increased headcount, a $0.9 million increase in allocated expenses as a result of increased sales and marketing and product development headcount and a $0.8 million increase in sales conference costs.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows provided by operating activities and borrowings under our 2011 Senior Secured Credit Agreement (as amended, the "2011 Credit Agreement") and Senior Notes. We believe that the predictable revenue stream generated by our support revenues as well as other cash flows from operations, and the $103.0 million of borrowing capacity available on the revolving credit facility contained in our 2011 Credit Agreement will be sufficient to cover our liquidity needs required 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. 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 prior acquisitions, we have significant indebtedness. As of September 30, 2014, our total indebtedness was $1,283.8 million ($1,277.9 million, net of original issue discount). We also had additional availability under our revolving credit facility of $103.0 million. Our cash requirements are, and will continue to be, significant, primarily due to our debt service requirements. Our interest expense for the year ended September 30, 2014 was $87.1 million. In addition to servicing our debt, in December 2013 and June 2014, we paid dividends of $18.5 million and $18.0 million, respectively, to our indirect parent company, Eagle Midco, Inc. ("EGL Midco"), to fund the December 2013 and June 2014 interest payments on $400 million in principal amount of Senior PIK Toggle Notes issued by EGL Midco (the "Midco Notes") which mature in June 2018. If EGL Midco pays all interest on the Midco Notes in cash, we anticipate that our voluntary dividend payments to EGL Midco will be approximately $36 million per year from fiscal 2015 through 2018. See "Parent Company PIK Toggle Notes" below for further information regarding the Midco Notes.

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Contractual Obligations

The following table summarizes our contractual obligations at September 30, 2014 (in thousands):



	Payments Due by Fiscal Year
Contractual Obligations (1):	Total		2015		2016		2017		2018		2019		2020 and Beyond
Long-term debt obligations (2)	$	1,283,750	$	5,200	$	—	$	5,002	$	808,548	$	465,000	$	—
Operating lease obligations (3)	86,590		15,216		14,981		14,199		12,252		8,945		20,997
Interest obligations (4)	323,077		76,498		73,392		72,563		60,405		40,219		—
Pension benefit payments	3,145		222		243		280		288		288		1,824
Purchase obligations	1,750		1,750		—		—		—		—		—
Total	$	1,698,312	$	98,886	$	88,616	$	92,044	$	881,493	$	514,452	$	22,821

(1) This table excludes obligations for uncertain tax positions with a carrying value of $10.4 million as of September 30, 2014 because we are unable to reliably estimate the timing of payment of these obligations. Additionally, this table excludes our estimated dividend payments to fund interest payments on the $400 million of Midco Notes issued by our indirect parent company, EGL Midco since we are not obligated, at this time, to make future payments. We expect to make dividend payments of approximately $36 million per year from fiscal 2015 through fiscal 2018 to fund interest payments on the Midco Notes.

(2) Includes the current and long-term portion of debt. See Note 6 - Debt in our audited consolidated financial statements for additional information regarding our long-term debt obligations. As a result of prepayments on our 2011 Credit Agreement, we currently are not obligated to pay quarterly principal payments during fiscal 2015, 2016 and a portion of 2017. The amount listed for fiscal 2015 represents our Mandatory Prepayment. See "Calculation of Excess Cash Flow and Mandatory Prepayments of 2011 Credit Agreement" below for additional information regarding prepayments of the 2011 Credit Agreement.

(3) See Note 15 - Commitments and Contingencies in our audited consolidated financial statements for additional information regarding our operating lease obligations.

(4) Represents interest payment obligations related to our long-term debt as specified in the applicable debt agreements as of September 30, 2014. A portion of our long-term debt has variable interest rates due to either existing swap agreements or interest arrangements. We have estimated our variable interest payment obligations using the interest rate forward curve where practicable. Interest obligations have been calculated assuming 3-month LIBOR rates will remain below the 1.0% LIBOR floor contained in our term loan as of September 30, 2014.

In addition to the contractual obligations and commercial commitments listed above, we expect capital expenditures from fiscal 2015 through fiscal 2018 to range from three to four percent of revenues.

In December 2013 and June 2014, we paid dividends of $18.5 million and $18.0 million, respectively, to our indirect parent company, EGL Midco, to fund the December 2013 and June 2014 interest payments on the Midco Notes. During September 2014, we paid a $15.0 million voluntary prepayment on the term loan contained in our 2011 Credit Agreement. Additionally, during December 2013, we paid a $13.5 million mandatory prepayment on the term loan contained in our 2011 Credit Agreement.

2011 Senior Secured Credit Agreement

The 2011 Senior Secured Credit Agreement consists of a term loan with an outstanding principal balance of $818.8 million (before $5.8 million unamortized original issue discount) as of September 30, 2014 and a revolving credit facility with a borrowing capacity of $103.0 million. As of September 30, 2014, we had no borrowings outstanding on the revolving credit facility. The interest rate on the term loan is calculated based on an interest rate index plus a margin. The interest rate index is based, at our option, on a LIBOR rate with a minimum LIBOR floor of 1.0% or a Base Rate as defined in the 2011 Senior Secured Credit Agreement. As of September 30, 2014, the interest rate applicable to the term loans was 4.0%. The term loan requires that we repay $8.4 million per year with the balance to be repaid at maturity in May 2018. Principal payments may be prepaid on a mandatory or voluntary basis, see "Calculation of Excess Cash Flow and Mandatory Prepayments of Term Loan" below for additional information regarding prepayments. The revolving credit facility matures in May 2016. The 2011 Senior Secured Credit Agreement was initiated on May 16, 2011 and was amended in March 2013, September 2013, January 2014 and

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May 2014 ("2011 Credit Agreement"). See Note 6 - Debt in our audited consolidated financial statements for more information on the 2011 Credit Agreement including Amendment No. 1 through Amendment No. 4. The descriptions of the amendments to the 2011 Credit Agreement and the original terms of the 2011 Credit Agreement are discussed in more detail below.

On March 7, 2013, we entered into Amendment No. 1 to the 2011 Credit Agreement to, among other things, reduce the interest rate margin applicable to borrowings under the term loans included in the 2011 Credit Agreement. Amendment No. 1 reduced the interest rate margin on the term loans by 0.5% per annum, and increased the outstanding principal amount by $3.1 million. As a result of Amendment No. 1, our annual principal payments decreased by $0.1 million per annum through March 31, 2018, and our payment at maturity increased by approximately $3.6 million. Our annual interest payments decreased by approximately $4.3 million per year, assuming 3-month LIBOR rates remain below 1.25% per annum.

On September 20, 2013, we entered into Amendment No. 2 to the 2011 Credit Agreement to increase the borrowing capacity under our revolving credit facility from $75.0 million to $88.0 million. Amendment No. 2 did not affect the interest rate applicable to the revolving credit facility, or the maturity date.

On January 17, 2014, we entered into Amendment No. 3 to the 2011 Credit Agreement to reduce the interest rate margin and the LIBOR floor applicable to borrowings under the term loan included in the 2011 Credit Agreement. Amendment No. 3 provided for the refinancing of our existing Term B-1 Loans under the 2011 Credit Agreement with new Term B-2 Loans. The interest rate on the Term B-2 Loans is based, at our option, on a LIBOR rate, plus a margin of 3% per annum, with a LIBOR floor of 1% per annum, or the Base Rate (as defined in the 2011 Credit Agreement), plus a margin of 2% per annum. Amendment No. 3 increased our annual principal payments by $6.3 million for fiscal 2014, decreased our annual principal payments from $8.6 million per annum to $8.4 million per annum from fiscal 2015 through fiscal 2017, and decreased our principal payment at maturity from $810.0 million to $804.3 million. Amendment No. 3 did not affect the maturity date or the outstanding principal amount of the term loan contained in the 2011 Credit Agreement.

On May 15, 2014, we entered into Amendment No. 4 to the 2011 Credit Agreement to increase the borrowing capacity under our revolving credit facility from $88.0 million to $103.0 million. Amendment No. 4 did not affect the interest rate applicable to the revolving credit facility, or the maturity date.

The 2011 Credit Agreement originated in May 2011 and provided for (i) a seven-year term loan in the amount of $870.0 million, amortized (principal repayment) at a rate of 1% per year beginning September 30, 2011 on a quarterly basis for the first six and three-quarters years, with the balance paid at maturity and (ii) a five-year revolving credit facility with a borrowing capacity of $75.0 million which was due and payable in full at maturity in May 2016.

The original interest rate under the 2011 Credit Agreement was equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the highest of (1) the corporate base rate of the administrative agent, (2) the fed funds rate plus 0.5 percent per annum and (3) the Eurocurrency rate for an interest period of one month plus 1%, or (b) a Eurocurrency rate for interest periods of one, two, three or six months, and to the extent agreed by the administrative agent nine and twelve months; provided, however that the minimum Eurocurrency rate for any interest period may be no less than 1.25% per annum in the case of the term loans. The initial applicable margin for term loans and borrowings under the revolving credit facility was 2.75% with respect to base rate borrowings and 3.75% with respect to Eurodollar rate borrowings, which in the case of borrowings under the revolving credit facility, may be reduced subject to our attainment of certain First Lien Senior Secured Leverage Ratios.

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.

Calculation of Excess Cash Flow and Mandatory Prepayments of the 2011 Credit Agreement

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 consolidated Adjusted 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

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Credit Agreement, excess cash flow is measured on an annual basis. Any mandatory prepayments due are reduced dollar-for-dollar by any voluntary prepayments made during the year. Additionally, any prepayments can be applied against future quarterly principal payments.

We generated $79.4 million of excess cash flow during fiscal 2014, which required us to pay a prepayment of $19.9 million. We paid a voluntary prepayment of $15.0 million on September 30, 2014 and thus, we are required to pay a mandatory prepayment of $4.9 million in December 2014. Additionally, we plan to pay a voluntary prepayment of $0.3 million by the end of fiscal 2015. As a result of the prepayments, we are not required to pay quarterly principal payments on the term loan during fiscal 2015 or 2016, and our quarterly principal payments are reduced for fiscal 2017. As of September 30, 2014, the current portion of our long term debt is equal to the remaining mandatory prepayment of $5.2 million.

We generated $27 million of excess cash flow during fiscal 2013. As a result, we paid a mandatory prepayment of $13.5 million in December 2013 in accordance with the 2011 Credit Agreement. We included the December 2013 mandatory prepayment within the current portion of long-term debt in our consolidated balance sheet as of September 30, 2013.

Senior Notes

As of September 30, 2014, we had outstanding $465.0 million in principal amount of Senior Notes due 2019 at an interest rate of 8 5/8% (the "Senior Notes"). 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 in Note 6 - Debt in the audited consolidated financial statements included elsewhere in this filing.

Parent Company PIK Toggle Notes

In addition to our debt discussed above, our indirect parent company, Eagle Midco Inc. ("EGL Midco"), issued $400 million in principal amount of Senior PIK Toggle Notes (the "Midco Notes"). The Midco Notes were issued on June 10, 2013 and mature on June 15, 2018. We and our consolidated subsidiaries have not guaranteed the Midco Notes, and we have not pledged any assets as collateral for the payment of the Midco Notes. The Midco Notes are unsecured.

Interest on the Midco Notes is payable semiannually in arrears on June 15th and December 15th of each year, commencing on December 15, 2013. Subject to conditions in the indenture for the Midco Notes, EGL Midco will be required to pay interest on the Midco Notes in cash or through issuing additional notes or increasing the principal amount of the Midco Notes ("PIK Interest"). The interest rate on the Midco Notes is 9.0% per annum for interest paid in cash or 9.75% per annum for PIK Interest. PIK Interest will be paid by issuing additional notes having the same terms as the Midco Notes or by increasing the outstanding principal amount of the Midco Notes.

The terms of the Midco Notes require that a calculated portion of the interest be payable in cash ("Minimum Cash Interest"). EGL Midco will be dependent upon our cash flows for any interest on the Midco Notes which it pays in cash.

The terms of the Midco Notes require EGL Midco and its subsidiaries including us to comply with certain covenants, including limitations on incurring additional indebtedness, a prohibition of additional limitations on dividend payments, limitations on sales of assets and subsidiary stock, and limitations on making guarantees. Additionally, failure to pay Minimum Cash Interest on the Midco Notes constitutes an event of default for EGL Midco, causing the Midco Notes to become immediately due and payable by Midco. The holders of the Midco Notes, however, have no recourse against us or our assets.

We are not contractually obligated to service interest or principal payments on the Midco Notes. Additionally, the holders of the Midco Notes have no recourse against us or our assets. Under applicable guidance from the SEC (SAB Topic 5-J), a parent's debt, related interest expense and allocable deferred financing fees should be included in a subsidiary's financial statements under certain circumstances. We have considered these circumstances and determined that Epicor does not meet any of the applicable criteria related to the Midco Notes and accordingly we have not included the Midco Notes within Long-Term

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Debt in our consolidated balance sheets as of September 30, 2014 and 2013, nor have we included interest related to the Midco Notes within interest expense in our consolidated statements of comprehensive loss for the years ended September 30, 2014 and 2013.

We fund cash interest payments through cash dividends to EGL Midco. In December 2013 and June 2014, we paid dividends of $18.5 million and $18.0 million, respectively, to fund the December 2013 and June 2014 interest payments on the Midco Notes. We intend to continue funding cash interest payments through cash dividends to EGL Midco. If all interest is paid in cash, our dividend payments to EGL Midco would be approximately $36 million per year from fiscal 2015 through fiscal 2018. We include dividend payments to EGL Midco within cash outflows for financing activities in our consolidated statements of cash flows.

To the extent we do not fund interest with cash, interest obligations will be satisfied by issuing additional notes (PIK Interest). If all interest is paid in the form of PIK Interest, the outstanding balance of the Midco Notes as of their maturity date on June 15, 2018 would be approximately $585 million.

Our voluntary servicing of the Midco Notes could affect our liquidity by utilizing cash resources which might otherwise be used to service our debt or fund other investments in our business. Furthermore, we may borrow against our revolving credit facility to service the Midco Notes. If we carry an outstanding balance on our revolving credit facility, we are required to meet the First Lien Senior Secured Leverage Ratio covenant in our 2011 Credit Agreement. See "Covenant Compliance" below for further details on our First Lien Senior Secured Leverage Ratio covenant. We continue to believe, however, that our cash flow from operations, our current working capital, as well as funds available to us on our revolving credit facility will be sufficient to cover our liquidity needs and to fund dividend payments to EGL Midco for the foreseeable future.

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 September 30, 2014.

Cash Flows

Operating Activities

Cash provided by operating activities consists of our net loss adjusted for certain non-cash items (primarily amortization, depreciation, deferred income taxes, provision for doubtful accounts and share-based compensation) and the effect of changes in working capital and other activities. Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their software and hardware support, software and cloud subscriptions, and hosting and managed services agreements. We also generate significant cash from new software license revenues as well as revenues from our professional services and sales of hardware. Our primary uses of cash from operating activities are for employee related expenditures, third party royalties and maintenance, the cost of hardware products, and payment of interest on our debt.

Cash provided by operating activities was $155.9 million, $140.9 million and $133.6 million for the years ended September 30, 2014, 2013 and 2012.

Cash provided by operating activities increased by $15.0 million for the year ended September 30, 2014 as compared to the year ended September 30, 2013. Our net loss plus non-cash items provided $153.9 million and $118.7 million for the years ended September 30, 2014 and 2013, respectively. This year over year increase was primarily driven by increased gross margins as a result of software and software related services revenues growth as well as a reduction in benefit costs and cash paid for interest due to lower interest rates paid on our 2011 Credit Agreement term loan and lower borrowings on our revolving credit facility, partially offset by increased operating expenses primarily related to incentive compensation and sales commission expense. Changes in operating assets and liabilities provided $2.0 million of cash for the year ended September 30, 2014 and provided $22.2 million of cash for the year ended September 30, 2013. The change in operating assets and liabilities in fiscal year 2014 was primarily due to strong cash collection on accounts receivable and collections of other receivables, partially offset by payments of current liabilities including our shareholder litigation. The change in operating assets and liabilities in fiscal year 2013 was primarily due to an increase in deferred revenue which was primarily attributable

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to increased deferred support revenues as well as revenue deferrals on year-end sales transactions, increases in accrued liabilities due to our litigation settlement liability, as well as strong cash collection on accounts receivable.

Cash provided by operating activities increased by $7.4 million for the year ended September 30, 2013 as compared to the year ended September 30, 2012. Our net loss plus non-cash items provided $118.7 million and $100.8 million for the years ended September 30, 2013 and 2012, respectively. This year over year increase was primarily driven by incremental revenues and associated margins from the Solarsoft acquisition as well as organic revenue growth, partially offset by approximately a $1.8 million increase in cash paid for interest expense due to interest paid on our revolving credit facility and settlements on our interest rate swap. Changes in operating assets and liabilities provided $22.2 million and $32.8 million for the years ended September 30, 2013 and 2012, respectively. The change in operating assets and liabilities in fiscal year 2013 was primarily due to an increase in deferred revenue which was primarily attributable to increased deferred support revenues as well as revenue deferrals on yearend sales transactions, increases in accrued liabilities due to our litigation settlement liability, as well as strong cash collection on accounts receivable. The change in operating assets and liabilities in fiscal year 2012 was primarily due an increase in deferred revenue partially offset by an increase in accounts receivable.

Investing Activities

Our primary uses of cash for investing activities are for acquisitions of businesses, purchases of property and equipment, and capitalized expenditures for software and database costs. Our primary source of cash from investing activities is the proceeds from the sale of short-term investments.

Cash used in investing activities was $31.2 million for the year ended September 30, 2014, and included $19.3 million used for purchases of property and equipment, and $11.9 million used for capitalized computer software and database costs.

Cash used in investing activities was $179.9 million for the year ended September 30, 2013, and included $152.8 million used for the purchase of Solarsoft, $17.2 million used for purchases of property and equipment, and $11.3 million used for capitalized computer software and database costs, partially offset by $1.4 million provided by sales of short-term investments.

Cash used in investing activities was $41.1 million for the year ended September 30, 2012, and included $25.8 million used for purchases of property and equipment, $11.1 million used for capitalized computer software and database costs, and $4.9 million used for the acquisitions of Internet AutoParts and Cogita, partially offset by $0.7 million proceeds from sale of short-term investments.

Financing Activities

Our primary sources of cash from financing activities include the proceeds from issuance of debt and the proceeds of loans from affiliates as a result of employee contributions to partnership equity. Our primary uses of cash for financing activities include payments on long-term debt, payments of financing fees, repayments of loans to affiliates and payments of dividends to our indirect parent company, EGL Midco, to fund interest payments on the Midco Notes.

Cash used in financing activities was $74.4 million for the year ended September 30, 2014, and included $34.8 million of payments on long-term debt as well as $36.5 million used for the payment of dividends to our indirect parent company, EGL Midco, $1.7 million used for payments to EGL Topco and $1.4 million used for payment of financing fees.

Cash used in financing activities was $7.2 million for the year ended September 30, 2013, and included $8.6 million of payments on long-term debt as well as $1.6 million used for payment of deferred financing fees, partially offset by $3.0 million of proceeds from the refinancing of our senior secured term loan. Additionally, during fiscal 2013, we borrowed and repaid $69.0 million on our revolving credit facility to partially fund the Solarsoft acquisition. As of September 30, 2013, the revolver was paid in full. The revolving credit facility is supported by one month notes which roll over for the term of the facility. Due to the short term of the notes, we present borrowings and repayments on the revolving credit facility on a net basis in our statement of cash flows.

Cash used in financing activities was $6.5 million for the year ended September 30, 2012, and included $8.7 million of payments on long-term debt, partially offset by $2.2 million of proceeds of loan from an affiliate.

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Cash held in foreign jurisdictions

As of September 30, 2014, we held $67 million of cash outside of the U.S. Approximately 39% of this cash may be repatriated to the U.S. through repayment of outstanding intercompany loans owed to our U.S. subsidiaries by our foreign subsidiaries. Therefore, there would be no incremental U.S. tax expense to utilize such loan proceeds in the U.S as we intend to repay these loans. The remaining 61% of our foreign cash is deemed to be permanently reinvested to be used to cover working capital requirements of our foreign jurisdictions as well as to finance growth and investment in our foreign operations. These undistributed earnings would be subject to U.S. income tax if repatriated to the United States. Management considers the working capital needs of the U.S. operations, including servicing our debt obligations, when planning to reinvest foreign earnings outside of the U.S.

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 ratio, calculated using the 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 September 30, 2014, the applicable ratio is 3.50:1.00, which will decrease to 3.25:1.00 on March 31, 2015 and will not decrease thereafter.

At September 30, 2014, we had no outstanding borrowings under the revolving credit facility, and as such, we were not subject to the First Lien Senior Secured Leverage Ratio requirement.

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” (referred to as "Consolidated EBITDA" in the 2011 Credit Agreement) is generally defined to consist of 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 2011 Credit Agreement. 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;

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•	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.

Although we were not required to meet a First Lien Senior Secured Leverage Ratio, which relates to our Adjusted EBITDA under our 2011 Credit Agreement, as of September 30, 2014, due to the factors discussed above, our management believes that Adjusted EBITDA is a key performance indicator for us. As such, the calculation of Adjusted EBITDA for the periods indicated below is as follows:



	Year Ended September 30,
(in thousands)	2014			2013			2012
				(Restated)			(Restated)
Reconciliation of net loss to Adjusted EBITDA
Net loss	$	(20,849	)	$	(31,958	)	$	(41,886	)
Interest expense	87,108			92,669			90,483
Income tax benefit	(5,037		)	(13,177		)	(8,735		)
Depreciation and amortization	183,131			160,865			138,985
EBITDA	244,353			208,399			178,847
Acquisition-related costs	8,780			8,561			8,845
Restructuring costs	3,896

Epicor Software Corp 10-K