-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ObbEzgYqwDpIU1lHPGTiS3qPrG8YOxILzqvSBMG+vd/9ka6was7mp26/T7d1gu4e SfyGluCs+KclLfGzZ437+A== 0000893838-95-000021.txt : 19950516 0000893838-95-000021.hdr.sgml : 19950516 ACCESSION NUMBER: 0000893838-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROS SYSTEMS INC CENTRAL INDEX KEY: 0000320345 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 521101488 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09993 FILM NUMBER: 95539192 BUSINESS ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705 BUSINESS PHONE: 3012016000 MAIL ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705-1291 10-Q 1 FORM 10-Q Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended March 31, 1995 Commission file number 0-9993 MICROS SYSTEMS, INC. ----------------------------------------------------------------- (Exact name of Registrant as specified in its charter) MARYLAND 52-1101488 ------------------------------------------------------------------ (State of incorporation) (I.R.S. Employer Identification Number) 12000 Baltimore Avenue, Beltsville, Maryland 20705-1291 ------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 301-210-6000 ------------ 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 report(s)), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ----- ----- As of March 31, 1995, there were 7,848,761 shares of Common Stock, $.025 par value, outstanding. MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 PART I - Financial Information Item 1. Financial Statements. General ------- The information contained in this report is furnished for the Registrant, MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as "MICROS" or the "Company"). In the opinion of management, the information in this report contains all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the results for the interim periods presented. The financial information has been reviewed by the Company's independent accountants, Price Waterhouse LLP, and a copy of their report is attached. The financial information presented herein should be read in conjunction with the financial statements included in the Registrant's Form 10-K for the fiscal year ended June 30, 1994, as filed with the Securities and Exchange Commission. With respect to the unaudited consolidated financial information for the three and nine month periods ended March 31, 1995 and 1994, Price Waterhouse LLP has reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their report dated May 8, 1995, appearing herein, states that they did not audit and they do not express an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited consolidated financial information because such report is not a "report" within the meaning of Sections 7 and 11 of the Securities Act of 1933. 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, June 30, 1995 1994 ------------- ------------ ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 25,219,100 $ 16,339,100 Accounts receivable, net of allowance for doubtful accounts of $941,300 at March 31, 1995 and $764,300 at June 30, 1994 18,305,300 17,690,200 Inventories 10,953,200 10,186,800 Deferred income taxes 1,481,300 924,800 Prepaid expenses and other current assets 1,941,900 1,558,400 ------------ ------------ Total current assets 57,900,800 46,699,300 ------------ ------------ Property, plant and equipment: Land 1,582,700 1,582,700 Buildings 4,820,600 4,820,600 Building improvements 322,900 320,300 Machinery and equipment 6,825,400 5,687,200 Furniture and fixtures 2,770,500 2,293,300 Leasehold improvements 342,900 236,700 ------------ ------------ 16,665,000 14,940,800 Accumulated depreciation and amortization (6,963,500) (6,176,600) ------------ ------------ Net property, plant and equipment 9,701,500 8,764,200 ------------ ------------ Note receivable 654,400 3,151,500 Investments in affiliates 8,299,900 3,884,400 Other assets 3,052,000 3,691,200 ------------ ------------ Total assets $ 79,608,600 $ 66,190,600 ============ ============ The accompanying notes are an integral part of the consolidated financial statements. 3 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, June 30, 1995 1994 ------------- ------------ LIABILITIES AND SHAREHOLDERS' (Unaudited) EQUITY Current liabilities: Current portion of long-term debt $ 247,500 $ 218,900 Current portion of capital lease obligation 101,100 88,400 Accounts payable 6,886,000 5,864,400 Accrued expenses and other current liabilities 12,429,900 9,993,600 Income taxes payable 164,300 412,800 Deferred service revenue 3,963,200 2,995,100 ------------ ------------ Total current liabilities 23,792,000 19,573,200 ------------ ------------ Long-term debt, net of current portion 1,551,700 1,807,800 Capital lease obligation, net of current portion 3,610,600 3,687,700 Deferred income taxes payable 811,500 952,200 Minority interest 326,000 231,800 ------------ ------------ Total liabilities 30,091,800 26,252,700 ------------ ------------ Shareholders' equity: Common stock, $.025 par value; authorized 10,000,000 shares; issued and outstanding 7,848,761 shares at March 31, 1995 and 7,787,577 shares at June 30, 1994 196,200 194,700 Capital in excess of par 14,406,300 13,760,800 Retained earnings 33,964,600 25,825,200 Accumulated foreign currency translation adjustments 949,700 157,200 ------------ ------------ Total shareholders' equity 49,516,800 39,937,900 ------------ ------------ Total liabilities and shareholders' equity $ 79,608,600 $ 66,190,600 ============ ============ The accompanying notes are an integral part of the consolidated financial statements. 4 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Revenue: Hardware and related software $ 18,938,000 $ 14,947,700 Service 6,248,200 4,333,300 ------------- ------------- Total revenue 25,186,200 19,281,000 Costs and expenses: Cost of sales Hardware and related software 9,696,600 7,917,500 Service 2,853,400 1,748,500 ------------- ------------- Total cost of sales 12,550,000 9,666,000 Selling, general and administra- tive expenses 7,811,300 5,559,100 Research and development expenses 1,338,100 865,200 Depreciation and amortization 400,200 312,900 ------------- ------------- Total costs and expenses 22,099,600 16,403,200 ------------- ------------- Income from operations 3,086,600 2,877,800 Non-operating income (expense): Interest income 288,200 148,900 Interest expense (85,800) (61,100) Other, net 43,500 12,600 ------------- ------------- Income before taxes and equity in net earnings of affiliates 3,332,500 2,978,200 Income taxes 1,128,400 1,024,600 ------------- ------------- Income before equity in net earnings of affiliates 2,204,100 1,953,600 Equity in net earnings of affiliates 19,700 46,400 ------------- ------------- Net income $ 2,223,800 $ 2,000,000 ============= ============= Net income per common and common equivalent share $ 0.28 $ 0.25 ============= ============= Weighted-average number of common and common equivalent shares outstanding 7,954,330 7,932,287 ============= ============= The accompanying notes are an integral part of the consolidated financial statements. 5 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Revenue: Hardware and related software $ 59,078,700 $ 43,330,000 Service 17,703,500 11,665,500 ------------- ------------- Total revenue 76,782,200 54,995,500 Costs and expenses: Cost of sales Hardware and related software 30,448,400 22,372,700 Service 7,956,400 5,052,200 ------------- ------------- Total cost of sales 38,404,800 27,424,900 Selling, general and administra- tive expenses 22,102,300 15,965,400 Research and development expenses 3,515,200 2,479,300 Depreciation and amortization 1,102,600 888,100 ------------- ------------- Total costs and expenses 65,124,900 46,757,700 ------------- ------------- Income from operations 11,657,300 8,237,800 Non-operating income (expense): Interest income 769,700 446,100 Interest expense (276,800) (89,300) Other, net 174,400 (95,400) ------------- ------------- Income before taxes and equity in net earnings of affiliates 12,324,600 8,499,200 Income taxes 4,207,000 2,761,000 ------------- ------------- Income before equity in net earnings of affiliates 8,117,600 5,738,200 Equity in net earnings of affiliates 21,800 80,400 ------------- ------------- Net income $ 8,139,400 $ 5,818,600 ============= ============= Net income per common and common equivalent share $ 1.02 $ 0.74 ============= ============= Weighted-average number of common and common equivalent shares outstanding 7,951,212 7,902,755 ============= ============= The accompanying notes are an integral part of the consolidated financial statements. 6 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Cash flows from operating activities: Net income $ 8,139,400 $ 5,818,600 ------------- ------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,102,600 888,100 Amortization of capitalized software development costs 378,400 312,300 Provision for losses on accounts receivable 318,600 203,700 Provision for inventory obsolescence 375,500 253,600 Undistributed net earnings from equity investments (21,800) (80,400) Provision for deferred income taxes (697,200) (508,700) Currency translation gain on equity investment and loan receivable (192,800) (125,300) Changes in assets and liabilities: Increase in accounts receivable (788,200) (3,131,100) Increase in inventories (1,087,300) (2,623,900) (Increase) decrease in prepaid expenses and other assets (621,900) 140,100 Increase (decrease) in accounts payable 993,700 (680,500) Increase (decrease) in accrued expenses and other current liabilities 2,384,700 (316,500) Decrease in income taxes payable (255,500) (268,500) Increase in deferred service revenue 925,900 1,826,300 ------------- ------------- Total adjustments 2,814,700 (4,110,800) ------------- ------------- Net cash provided by operating activities 10,954,100 1,707,800 ------------- ------------- The accompanying notes are an integral part of the consolidated financial statements. 7 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited) Nine Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Cash flows from investing activities: Purchases of property, plant and equipment (1,759,900) (685,600) Capitalized software development costs (16,100) (196,900) Purchase of net district assets - (245,300) Dividends received from affiliates 210,100 31,500 Purchase of equity interest in affiliates (3,481,700) (431,600) Proceeds from loan to affiliate 3,223,000 - Loan to affiliate (604,600) - Proceeds from sale of affiliate stock - 108,500 ------------- ------------- Net cash used in investing activities (2,429,200) (1,419,400) ------------- ------------- Cash flows from financing activities: Proceeds from issuance of stock 301,500 668,400 Principal payments on long-term debt (291,900) (178,400) Income tax benefit from stock options exercised 345,500 342,000 ------------- ------------- Net cash provided by financing activities 355,100 832,000 ------------- ------------- Net increase in cash and cash equivalents 8,880,000 1,120,400 Cash and cash equivalents at beginning of period 16,339,100 12,839,400 ------------- ------------- Cash and cash equivalents at end of period $ 25,219,100 $ 13,959,800 ============= ============= The accompanying notes are an integral part of the consolidated financial statements. 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited) Nine Months Ended ---------------------------- March 31, March 31, 1995 1994 ----------- ------------ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 284,500 $ 78,200 =========== ============ Income taxes $ 4,557,600 $ 3,172,900 =========== ============ Supplemental schedule of noncash financing and investing activities: The purchase of district assets (assets purchased from a dealer) in September 1993 included a cash payment of $245,300 and the issuance of a promissory note in the amount of $500,000. Annual payments in the amount of $100,000 began on September 30, 1994, and are due on September 30 of each succeeding year thereafter through September 30, 1998. The unamortized discount on the note, based on an imputed annual interest rate of 5.75%, was $41,500 at March 31, 1995. Disclosure of accounting policy: For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments are those with maturities in excess of three months, but less than one year, from the date of purchase. These interest-bearing investments are readily convertible to cash and are valued at the lower of cost or market. The accompanying notes are an integral part of the consolidated financial statements. 9 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 1. Inventories The components of inventories are as follows: March 31, June 30, 1995 1994 ------------ ------------ (Unaudited) Raw materials $ 2,732,000 $ 1,915,700 Work-in-process 1,742,700 1,319,400 Finished goods 6,478,500 6,951,700 ------------ ------------ $ 10,953,200 $ 10,186,800 ============ ============ 2. Investments and note receivable In fiscal 1992, the Company purchased a 15% interest in D.A.C. Systemes of Paris, France (now D.A.C. Systemes/MICROS France), a MICROS distributor which markets hospitality-related products to hotels and restaurants throughout France and services such products. An additional 8% interest was purchased in October 1993. The equity interests were acquired at an aggregate cost of $628,300, of which $383,300 represents goodwill which is being amortized over 10 years. The total goodwill amortized in the first nine months of fiscal 1995 and fiscal 1994 was $28,600 and $22,800, respectively. In fiscal 1993, MICROS purchased 15% of the capital stock of Fidelio Software GmbH ("Fidelio") of Munich, Germany for $3,374,500 and received an option to buy an additional 15% interest from individual shareholders for a fixed amount of DM 5,000,000, which was exercised on October 4, 1994. Additionally, the Company has the right to acquire all or part of the remaining shares of Fidelio on or before December 31, 1999, at a price to be determined based on an agreed upon formula. MICROS had accounted for its 15% investment as of September 30, 1994 under the cost method. However, effective October 4, 1994, the 30% investment is accounted for under the equity method. Included in the aggregate purchase price of the Company's 30% investment in Fidelio is approximately $5.7 million representing goodwill at October 4, 1994, which is being amortized over 10 years beginning on that date. The investment was not restated since it would not have produced a materially different result. Additionally, in fiscal 1993, MICROS granted a loan to Fidelio in the amount of DM 5,000,000. The loan bore interest at 7% per annum and was repaid upon exercise of the option to acquire the additional 15% interest in Fidelio. In connection with its 10 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 2. Investments and note receivable (continued) increase in ownership of Fidelio in October 1994 from 15% to 30%, the Company loaned Fidelio DM 900,000, which bears interest at a variable rate, and is obligated to make additional loans of up to DM 600,000, all of which are to be repaid by December 31, 2000. The obligation of the Company to make the further loans to Fidelio is conditioned on Fidelio's other shareholders increasing their current loans to Fidelio from DM 2.1 million to an aggregate amount of up to DM 3.5 million. As a result of the fiscal 1993 DM 10.0 million combined investment and loan being realizable only in Deutsche Marks, MICROS was subject to currency risks between the Deutsche Mark and U.S. dollar through September 30, 1994. MICROS continues to be subject to currency risks between the Deutsche Mark and U.S. dollar with respect to the DM 900,000 loan which is realizable only in Deutsche Marks and which must be repaid by December 31, 2000. As a result of the investment and loans, a foreign currency translation gain of $193,000 and $126,000 was recognized in the nine months ended March 31, 1995 and 1994, respectively. The Company does not engage in any foreign exchange hedging. 3. Other assets Other assets consist of the following: March 31, June 30, 1995 1994 ------------ ------------ (Unaudited) Capitalized software development costs, net of accumulated amortization of $1,750,300 and $1,371,900 $ 1,385,700 $ 1,748,000 Goodwill, net of accumulated amortization of $175,000 and $445,200 795,600 1,191,500 Net district intangible assets 425,100 524,500 Deferred financing costs 96,700 103,500 License fee, net of accumulated amortization of $87,500 212,500 - Other 136,400 123,700 ------------ ------------ $ 3,052,000 $ 3,691,200 ============ ============ 4. Line of credit The Company has a $15.0 million unsecured committed line of credit, effective February 9, 1995, at the bank's prime rate minus one quarter of one percent, which expires December 31, 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 4. Line of credit (continued) 1996. Prior to February 9, 1995, the Company had a similar line of credit with the same bank with a borrowing capacity of $10.0 million. There were no borrowings under the $10.0 million line of credit during either of fiscal 1993 or fiscal 1994 or subsequent thereto, although there was a $45,800 letter of credit issued thereunder and outstanding at June 30, 1993. There have been no borrowings under the current line of credit, although there was a $127,000 letter of credit issued thereunder and outstanding at March 31, 1995. Under the terms of the current loan agreement, the Company may borrow up to $15.0 million less the amount of outstanding letters of credit. Amounts outstanding under the line are payable on demand and are not secured by the assets of the Company. The agreement requires the Company to maintain certain levels of working capital and tangible net worth and a minimum debt to tangible net worth ratio. In addition, the agreement limits the incurrence of additional indebtedness and restricts the Company's payment of dividends other than stock dividends. 5. Long-term debt The components of long-term debt are as follows: March 31, June 30, 1995 1994 ------------ ------------ (Unaudited) Note payable to bank $ 1,363,500 $ 1,461,000 Note payable for net district assets 358,500 442,400 Obligation to minority share- holder 77,200 123,300 ------------ ------------ 1,799,200 2,026,700 Less current portion 247,500 218,900 ------------ ------------ $ 1,551,700 $ 1,807,800 ============ ============ The interest rate on the note payable to the bank, which was issued in connection with the Company's Industrial Revenue Bond obligation, is a variable rate set weekly by the bank based on prevailing market conditions up to a maximum rate of 15%. On March 31, 1995, the effective interest rate was approximately 5.7%. The Company is repaying the debt in equal monthly principal payments plus interest through January 2006. 12 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 5. Long-term debt (continued) In September 1993, as part of the purchase of district assets, the Company issued a promissory note in the amount of $500,000. Annual payments in the amount of $100,000 began on September 30, 1994 and are due on September 30 of each succeeding year thereafter through September 30, 1998. The unamortized discount on the note, based on an imputed annual interest rate of 5.75%, was $41,500 at March 31, 1995. Annual maturities of long-term debt are as follows: Twelve Months Ending March 31, Amount ------------------------------ ---------- 1996 $ 247,500 1997 231,700 1998 219,400 1999 224,600 2000 130,000 2001 and thereafter 746,000 ---------- $1,799,200 ========== The Company leases office and warehouse space under a 15 year capital lease as of January 1994. The cost of the asset is included in land and buildings at $1,000,000 and $2,837,800, respectively. Accumulated depreciation on the building was $88,700 and $35,400 at March 31, 1995 and June 30, 1994, respectively. The following represents future minimum lease payments under capital lease obligations at March 31, 1995: Twelve Months Ending March 31, Amount ------------------------------ ---------- 1996 $ 357,800 1997 368,600 1998 379,600 1999 391,000 2000 402,700 2001 and thereafter 4,079,800 ---------- 5,979,500 Less amount representing interest at 7% 2,267,800 ---------- 3,711,700 Current portion 101,100 ---------- Long-term capital lease obligation $3,610,600 ========== 13 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 6. Reclassifications Certain prior year reclassifications have been made to conform to current period classifications. 7. Subsequent Events On January 25, 1995, the Company filed with the Securities and Exchange Commission a Registration Statement on Form S-3 for the sale of up to 4,849,123 shares of Common Stock of the Company held directly or indirectly by Westinghouse Electric Corporation ("Westinghouse" or the "Selling Stockholder"), with all of the proceeds going to Westinghouse. On May 3, 1995, the Company filed an amendment to the Registration Statement on Form S-3 to permit the delayed offering of the shares of Common Stock owned by Westinghouse. The Registration Statement has not been declared effective yet. Westinghouse owns 4,849,123 shares of Common Stock, representing 61.8% of the outstanding Common Stock as of March 31, 1995. If all of the shares of Common Stock to which the Registration Statement relates are sold, the Selling Stockholder will not own any shares of Common Stock. As of the effective date of the Registration Statement, A. L. Giannopoulos, the Company's President and Chief Executive Officer, will become a full-time employee of the Company. He is currently a full-time employee of Westinghouse and is compensated by Westinghouse, receiving no compensation from the Company. Mr. Giannopoulos' compensation arrangement with the Company will extend through December 31, 1999 and provide for a fiscal 1995 annual salary of $193,000 and a fiscal 1995 target bonus of $110,000, the actual amount of the bonus paid to be based on certain performance criteria and not to exceed 200% of the target bonus. Such annual salary and target bonus will each increase $10,000 each July 1 hereafter. In addition, Westinghouse, as an incentive to 11 key officers to remain with the Company for a period of two years following the effective date of the Registration Statement, has agreed to make payments to such officers aggregating up to approximately $1.25 million, payable in three equal installments promptly after such effective date and on the first and second anniversaries of the such effective date (subject to the officer remaining employed by the Company on the relevant payment date). Even though such payments will be entirely funded by Westinghouse and will not require any use of the Company's cash, for accounting purposes, one-third of such payments will be required to be reflected as compensation expense in the Company's financial statements on the first payment date with the remainder to be reflected as compensation expense over the 24-month period following the effective date of the Registration Statement. 14 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS nine months ended March 31, 1995 and year ended June 30, 1994 7. Subsequent Events (continued) In May 1995, the Company authorized the grant to certain plan participants on the day after the effective date of the Registration Statement, pursuant to the Company's 1991 Stock Option Plan, of options to purchase an aggregate of 186,000 shares of Common Stock at an exercise price equal to the closing sale price of the Common Stock on the date of grant. The Company has entered into a letter agreement dated May 2, 1995 with Westinghouse which amends the Stock Unit Purchase Agreement dated as of October 30, 1986 to permit Westinghouse to request a shelf registration for the sale of shares of Common Stock owned by Westinghouse. The Company obtains certain insurance coverage and other services through arrangements negotiated by Westinghouse for itself and its subsidiaries and affiliates. These arrangements will be replaced by the Company with its own contracts as and when the Company elects to do so or is no longer eligible to participate in such arrangements. The Company estimates that the incremental cost to it of purchasing such services without the benefit of participating in programs of Westinghouse could total approximately $1.0 million per year on a pre-tax basis. Westinghouse has indicated its willingness to work with the Company to establish new service arrangements in efforts to minimize any incremental costs thereof. 8. Commitments and Contingencies In late January 1995, the Company received a claim that its touchscreen product line may infringe a patent having counterparts in several European countries, including France, Germany and the United Kingdom. Preliminary investigation indicates that the asserted patents may be invalid because products apparently using the technology disclosed by these patents were in the market prior to the relevant "invention dates". While the Company's investigation of this claim is in its preliminary stages and the ultimate outcome of this matter is uncertain, the Company does not believe that the claim will have a material adverse effect on its business, financial condition or results of operations. 15 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 PART I - Financial Information Item 2. Management's discussion and analysis of financial condition and results of operations. Liquidity and Capital Resources ------------------------------- Effective February 9, 1995, the Company has a $15.0 million unsecured committed line of credit with its bank which expires December 31, 1996. Prior to February 9, 1995, the Company had a similar line of credit with the same bank with a borrowing capacity of $10.0 million. There were no borrowings under the $10.0 million line of credit facility during either of fiscal 1993 or fiscal 1994 or subsequent thereto, although there was a $45,800 letter of credit issued thereunder and outstanding at June 30, 1993. There have been no borrowings under the current line of credit, although there was a $127,000 letter of credit issued thereunder and outstanding at March 31, 1995. The Company has generated sufficient cash flow through its operations during these periods and has significant funds available in cash and highly-liquid investments to meet its immediate needs. For the first nine months of fiscal 1995, net cash provided by operating activities was $10,954,100. The sale of stock issued to employees under the Company's incentive stock option plan provided $301,500, while $345,500 was provided by the income tax benefit from the exercise of non-qualified stock options. During this period, the Company used cash of $2,429,200 in investing activities, including $1,759,900 for the purchase of property, plant and equipment and $3,481,700 primarily for the purchase of an additional 15% of Fidelio, offset by $3,223,000 in net proceeds from the repayment of a loan to Fidelio and $210,100 in dividends from affiliates. The Company made debt repayments of $291,900 on its building loan and capital lease. As a result, the cash position during the first nine months of fiscal 1995 increased $8,880,000, or 54.3%, to $25,219,100. The cash is being held for the operation and expansion of the business. Accounts receivable increased $615,100, or 3.5%, and inventories increased $766,400, or 7.5%, in the first nine months of fiscal 1995 primarily due to increased sales volume. In fiscal 1993, MICROS purchased 15% of the capital stock of Fidelio Software GmbH ("Fidelio") of Munich, Germany for $3,374,500 and received an option to buy an additional 15% interest from individual shareholders for a fixed amount of DM 5,000,000, which was exercised on October 4, 1994. Additionally, the Company has the right to acquire all or part of the remaining shares of Fidelio on or before December 31, 1999, at a price to be determined based on an agreed upon formula. MICROS had 16 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part I - Financial Information Item 2. Management's discussion and analysis of financial condition and results of operations. (Continued) accounted for its 15% investment as of September 30, 1994 under the cost method. However, effective October 4, 1994, the 30% investment is accounted for under the equity method. Included in the aggregate purchase price of the Company's 30% investment in Fidelio is approximately $5.7 million representing goodwill at October 4, 1994, which is being amortized over 10 years beginning on that date. The investment was not restated since it would not have produced a materially different result. Additionally, in fiscal 1993, MICROS granted a loan to Fidelio in the amount of DM 5,000,000. The loan bore interest at 7% per annum and was repaid upon exercise of the option to acquire the additional 15% interest in Fidelio. In connection with its increase in ownership of Fidelio in October 1994 from 15% to 30%, the Company loaned Fidelio DM 900,000, which bears interest at a variable rate, and is obligated to make additional loans of up to DM 600,000, all of which are to be repaid by December 31, 2000. The obligation of the Company to make the further loans to Fidelio is conditioned on Fidelio's other shareholders increasing their current loans to Fidelio from DM 2.1 million to an aggregate amount of up to DM 3.5 million. As a result of the fiscal 1993 DM 10.0 million combined investment and loan being realizable only in Deutsche Marks, MICROS was subject to currency risks between the Deutsche Mark and U.S. dollar through September 30, 1994. MICROS continues to be subject to currency risks between the Deutsche Mark and U.S. dollar with respect to the DM 900,000 loan which is realizable only in Deutsche Marks and which must be repaid by December 31, 2000. As a result of the investment and loans, a foreign currency translation gain of $193,000 and $126,000 was recognized in the nine months ended March 31, 1995 and 1994, respectively. The Company does not engage in any foreign exchange hedging. 17 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part I - Financial Information Item 2. Management's discussion and analysis of financial condition and results of operations. (Continued) Financial indicators of the Company's liquidity and capital resources as of March 31, 1995 and June 30, 1994 were: March 31, June 30, 1995 1994 ------------ ------------ (Unaudited) Cash and cash equivalents $ 25,219,100 $ 16,339,100 ============ ============ Available line of credit $ 15,000,000 $ 10,000,000 Outstanding letters of credit 127,000 - ------------ ------------ Unused bank line of credit $ 14,873,000 $ 10,000,000 ============ ============ Working capital $ 34,108,800 $ 27,126,100 ============ ============ Long-term debt: Current $ 348,600 $ 307,300 Non-current 5,162,300 5,495,500 ------------ ------------ Total $ 5,510,900 $ 5,802,800 ============ ============ Shareholders' equity $ 49,516,800 $ 39,937,900 ============ ============ Current ratio 2.43 2.39 ============ ============ 18 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part I - Financial Information Item 2. Management's discussion and analysis of financial condition and results of operations. (Continued) Results of Operations - Third Quarter and Nine Month Comparisons ---------------------------------------------------------------- Revenue and Operating Income Revenue for the third quarter of fiscal 1995 increased $5.9 million, or 30.6%, compared to the same period last year. For the first nine months of fiscal 1995, revenue increased $21.8 million, or 39.6%, over the same period in fiscal 1994. Sales increased in every distribution channel worldwide, with a substantial portion of the increase attributable to the Company's latest point-of-sale product, the 8700 Hospitality Management System (HMS) released in September 1993. Cost of sales, as a percentage of revenue, decreased slightly to 49.8% from 50.1% for the third quarter of fiscal 1995 compared to the third quarter of fiscal 1994. For the first nine months of fiscal 1995, cost of sales, as a percentage of revenue, increased slightly to 50.0% compared to 49.9% for the same period a year earlier. Cost of sales for hardware and software products, as a percentage of related revenue, decreased to 51.2% for the third quarter of fiscal 1995 compared to 53.0% for the same quarter of fiscal 1994, primarily due to significantly higher software sales. Cost of sales for hardware and software products as a percentage of related revenue decreased slightly to 51.5% for the first nine months of fiscal 1995 compared to 51.6% for the first nine months of fiscal 1994. Service costs, as a percentage of service revenue, increased in the third quarter of fiscal 1995 to 45.7% compared to 40.4% in the same period in fiscal 1994 primarily due to subcontracting labor to meet the volume of 8700 HMS and Fidelio installations and initial training costs related to increased installation personnel. Service costs, as a percentage of service revenue, for the first nine months of fiscal 1995 increased to 44.9% from 43.3% in fiscal 1994 primarily due to the higher costs of subcontracting labor to meet the volume of 8700 HMS installations. Selling, general and administrative expenses increased $2.3 million, or 40.5%, in the third quarter of fiscal 1995 compared to the same period last year. Selling, general and administrative expenses for the first nine months of fiscal year 1995 increased $6.1 million, or 38.4%, compared to the same period in 1994. The increases were primarily as a result of increased sales and support activities required to support the 19 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part I - Financial Information Item 2. Management's discussion and analysis of financial condition and results of operations. (Continued) Company's increased level of sales. Selling, general and administrative expenses, as a percentage of revenue, increased to 31.0% for the third quarter of fiscal 1995 from 28.8% for the same period last year primarily as a result of the increased emphasis on the Company's sales and service organizations and lower than anticipated sales for the quarter. Selling, general and administrative expenses, as a percentage of revenue, decreased to 28.8% for the first nine months of fiscal 1995 compared to 29.0% for the same period in fiscal 1994. The decrease was the result of effectively controlling the growth in expenses during the period, partially offset by lower than anticipated sales in the third quarter of fiscal 1995. Research and development expenses (exclusive of capitalized software development costs), which consist primarily of labor costs, increased $472,900, or 54.7%, for the third quarter of fiscal 1995 compared to the same period in fiscal 1994. For the first nine months of fiscal 1995, research and development expenses (exclusive of capitalized software development costs) increased $1,035,900, or 41.8%, compared to the same period in fiscal 1994. Actual research and development expenditures, including capitalized software development costs of $16,100 in fiscal 1995 and $196,900 for the 8700 HMS in the first quarter of fiscal 1994, increased $855,100, or 32.0%, for the first nine months of fiscal 1995 over the same period in fiscal 1994. Income from operations was $3.1 million, or 12.3% of revenue, for the third quarter of fiscal 1995, an increase of 7.3% over the same period a year ago when income from operations was $2.9 million, or 14.9% of revenue. Income from operations was $11.7 million, or 15.2% of revenue, for the first nine months of fiscal 1995, compared to $8.2 million, or 15.0% of revenue, for the first nine months of fiscal year 1994, an increase of 41.5%. This improvement resulted from the increase in sales and a less than proportional increase in expenses. Interest income for the third quarter of fiscal 1995 increased $139,300 to $288,200, or 93.6%, compared to $148,900 for the third quarter of fiscal 1994. Interest income for the first nine months in fiscal 1995 was $769,700 compared to $446,100, an increase of 72.5%, for the comparable period in fiscal 1994. The third quarter and nine-month period improvements were the result of an increase in interest rates on investments and an increase in the investment balances. Interest expense increased $24,700 to $85,800 for the third quarter of 20 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part II - Other Information Item 2. Management's discussion and analysis of financial condition and results of operations. (Continued) fiscal 1995 from $61,100 for the same period a year ago. Interest expense increased $187,500 to $276,800 for the nine months ended March 31, 1995 compared to the first nine months of fiscal 1994. The increases were primarily the result of interest on the capital lease entered into by the Company in January 1994. The Company has recently experienced rapid revenue growth at a rate that it believes has significantly exceeded that of the global market for point-of-sale computer systems and property management information systems products for the hospitality industry. Although the Company currently anticipates continued revenue growth at a rate in excess of such market, and therefore an increase in its overall market share, it does not expect to maintain growth at recent levels and there can be no assurance that any particular level of growth can be achieved. In addition, due to the competitive nature of the market, the Company recently has experienced greater gross margin pressure on its products than it has in the past, and the Company expects this trend to continue. There can be no assurance that the Company will be able to sufficiently increase sales of its higher margin products, including software and services, to prevent declines in the Company's overall gross margin. 21 INDEPENDENT ACCOUNTANTS REPORT ------------------------------ To the Board of Directors and Shareholders of MICROS Systems, Inc. We have reviewed the accompanying consolidated balance sheet of MICROS Systems, Inc. and subsidiaries as of March 31, 1995, and the related consolidated statements of operations and cash flows for the three and nine-month periods ended March 31, 1995 and March 31, 1994. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope that an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of June 30, 1994, and the related consolidated statements of operations, cash flows and shareholders' equity for the year then ended (not presented herein), and in our report dated August 17, 1994 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the accompanying consolidated balance sheet information as of June 30, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Baltimore, Maryland May 8, 1995 THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS LIABILITY PROVISIONS OF SECTION 11 OF THE ACT DO NOT APPLY. 22 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Part II - Other Information Items 1 through 4. No events occurred during the quarter covered by the report that would require a response to any of these items. Item 5. Other Information For a discussion of certain recent events, see Note 7 of Notes to Consolidated Financial Statements. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10 - Letter Agreement dated May 2, 1995 between the Company and Westinghouse amending the Stock Unit Purchase Agreement dated as of October 30, 1986 between the Company and Westinghouse constituting Exhibit 4d to the Registration Statement on Form S-3 (Registration No. 33-88768) is incorporated herein by reference to Exhibit 4e to the Registration Statement on Form S-3 (Registration No. 33-88768). Exhibit 11 - Computation of Earnings Per Share Exhibit 15 - Letter Regarding Unaudited Interim Financial Information Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K dated February 28, 1995, items 5 and 7. 23 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICROS SYSTEMS, INC. ------------------------- (Registrant) May 15, 1995 Gary C. Kaufman - ------------------ -------------------------- Gary C. Kaufman Vice President, Finance and Administration/Chief Financial Officer 24 EXHIBIT INDEX ------------- Sequentially Exhibit Numbered Page - ------- ------------- 10. Letter Agreement dated May 2, 1995 between the Company and Westinghouse amending the Stock Unit Purchase Agreement dated as of October 30, 1986 between the Company and Westinghouse constituting Exhibit 4d to the Registration Statement on Form S-3 (Registration No. 33-88768) is incorporated herein by reference to Exhibit 4e to the Registration Statement on Form S-3 (Registration No. 33-88768) 11. Computation of Earnings Per Share 15. Letter regarding Unaudited Interim Financial Information 27. Financial Data Schedule EX-11 2 EXHIBIT 11 Exhibit 11 ---------- MICROS SYSTEMS, INC. AND SUBSIDIARIES three months ended March 31, 1995 and 1994 Exhibit 11 - Computation of Earnings Per Share (Unaudited) Three Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Weighted-average number of common shares 7,845,283 7,773,381 Dilutive effect of outstanding stock options 109,047 158,906 ------------- ------------- Weighted-average number of common and common equivalent shares outstanding 7,954,330 7,932,287 ============= ============= Net income per statements of income $ 2,223,800 $ 2,000,000 ============= ============= Net income per common and common equivalent share $ 0.28 $ 0.25 ============= ============= MICROS SYSTEMS, INC. AND SUBSIDIARIES nine months ended March 31, 1995 and 1994 Exhibit 11 - Computation of Earnings Per Share (Unaudited) Nine Months Ended ---------------------------- March 31, March 31, 1995 1994 ------------- ------------- Weighted-average number of common shares 7,828,489 7,717,327 Dilutive effect of outstanding stock options 122,723 185,428 ------------- ------------- Weighted-average number of common and common equivalent shares outstanding 7,951,212 7,902,755 ============= ============= Net income per statements of income $ 8,139,400 $ 5,818,600 ============= ============= Net income per common and common equivalent share $ 1.02 $ 0.74 ============= ============= EX-15 3 EXHIBIT 15 Exhibit 15 ---------- Price Waterhouse LLP 7 St. Paul Street Suite 1700 Baltimore, Maryland 21202 410-685-0542 May 8, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that MICROS Systems, Inc. has incorporated by reference our report dated May 8, 1995 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the Prospectus constituting part of its Registration Statements on Forms S-8, No. 33-69782, No. 33-44481 and No. 33-33535, filed on September 30, 1993, December 12, 1991 and February 16, 1990, respectively and Form S-3, No. 33-88768 filed on May 3, 1995. We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, Price Waterhouse LLP EX-27 4 EXHIBIT 27
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 9-MOS JUN-30-1995 JUL-01-1994 MAR-31-1995 3,091,300 22,127,800 19,246,600 941,300 10,953,200 57,900,800 16,665,000 6,963,500 79,608,600 23,792,000 5,162,300 196,200 0 0 49,320,600 79,608,600 76,782,200 76,782,200 38,404,800 65,124,900 0 0 276,800 12,324,600 4,207,000 8,139,400 0 0 0 8,139,400 1.02 1.02
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