-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QAfWLytie7FZmHGzjf1VUeE0a7IgN8Jvd1Ieb4wbI4yNnrkiKcPucO0LXXZv4s98 mw0szCz62ARUj9sRs2vFHw== 0000950133-97-001956.txt : 19970520 0000950133-97-001956.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950133-97-001956 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97608413 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 MICROS SYSTEMS FORM 10-Q. 1 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, 1997 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, 1997, there were 7,962,650 shares of Common Stock, $.025 par value, outstanding. 1 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 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 its 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, 1996, 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, 1997 and 1996, Price Waterhouse LLP has reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated May 14, 1997, appearing herein, states that it did not audit and it does not express an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not conducted any significant or additional audit tests beyond those which would have been necessary if its report had not been included. Accordingly, the degree of reliance on its 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 its 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 3 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
(Unaudited) March 31, June 30, 1997 1996 ---- ---- ASSETS ------ Current assets: Cash and cash equivalents $ 18,251 $ 15,231 Accounts receivable, net of allowance for doubtful accounts of $2,237 at March 31, 1997 and $2,016 at June 30, 1996 57,659 49,250 Inventories 20,101 15,138 Deferred income taxes 3,899 3,899 Prepaid expenses and other current assets 4,204 4,420 -------- -------- Total current assets 104,114 87,938 Property, plant and equipment, net of accumulated depreciation and amortization of $14,542 at March 31, 1997 and $13,332 at June 30, 1996 17,547 15,623 Note receivable 0 225 Deferred income taxes, non-current 5,044 5,580 Goodwill and intangible assets, net of accumulated amortization of $5,326 at March 31, 1997 and $3,346 at June 30, 1996 17,660 20,746 Purchased and internally developed software costs, net of accumulated amortization of $4,069 at March 31, 1997 and $2,650 at June 30, 1996 9,070 6,287 Other assets 620 437 -------- -------- Total assets $154,055 $136,836 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Bank lines of credit $ 11,882 $ 14,947 Current portion of long-term debt 3,570 5,238 Current portion of capital lease obligation 140 124 Accounts payable 14,996 12,726 Accrued expenses and other current liabilities 26,823 23,927 Income taxes payable 5,026 986 Deferred service revenue 14,731 9,295 -------- -------- Total current liabilities 77,168 67,243 Long-term debt, net of current portion 4,182 6,704 Capital lease obligation, net of current portion 3,352 3,458 Deferred income taxes 2,725 2,588 Minority interests 1,245 648 -------- -------- Total liabilities 88,672 80,641 -------- -------- Commitments and contingencies Shareholders' equity: Common stock, $.025 par; authorized 10,000 shares; issued and outstanding 7,963 at March 31, 1997 and 7,944 at June 30, 1996 199 199 Capital in excess of par 17,092 16,253 Retained earnings 50,596 39,794 Accumulated foreign currency translation adjustments (2,504) (51) -------- -------- Total shareholders' equity 65,383 56,195 -------- -------- Total liabilities and shareholders' equity $154,055 $136,836 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 4 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)
Three Months Ended March 31, ---------------------------- 1997 1996 ---------- ---------- Revenue: Hardware and software $38,489 $29,825 Service 18,221 17,480 ------- ------- Total revenue 56,710 47,305 ------- ------- Costs and expenses: Cost of sales Hardware and software 16,899 14,902 Service 9,332 9,004 ------- ------- Total cost of sales 26,231 23,906 Selling, general and administrative expenses 17,440 16,955 Research and development expenses 3,303 2,152 Depreciation and amortization 1,802 1,564 ------- ------- Total costs and expenses 48,776 44,577 ------- ------- Income from operations 7,934 2,728 Non-operating income (expense): Interest income 99 66 Interest expense (356) (634) Other income (expense), net 34 121 ------- ------- Income before taxes and minority interest and equity in net earnings of affiliates 7,711 2,281 Income tax expense 3,081 878 ------- ------- Income before minority interest and equity in net earnings of affiliates 4,630 1,403 Minority interest and equity in net earnings of affiliates (166) (221) ------- ------- Net income $ 4,464 $ 1,182 ======= ======= Net income per common and common equivalent share $ 0.55 $ 0.15 ======= ======= Weighted-average number of common and common equivalent shares outstanding 8,169 8,040 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 4 5 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)
Nine Months Ended March 31, --------------------------- 1997 1996 ---------- --------- Revenue: Hardware and software $105,317 $ 84,235 Service 54,866 38,318 -------- -------- Total revenue 160,183 122,553 -------- -------- Costs and expenses: Cost of sales Hardware and software 49,480 43,852 Service 27,795 18,151 -------- -------- Total cost of sales 77,275 62,003 Selling, general and administrative expenses 50,246 39,808 Research and development expenses 7,716 5,193 Purchased incomplete software technology 0 14,770 Depreciation and amortization 5,119 2,950 -------- -------- Total costs and expenses 140,356 124,724 -------- -------- Income (loss) from operations 19,827 (2,171) Non-operating income (expense): Interest income 318 668 Interest expense (1,139) (1,087) Other income (expense), net 177 53 -------- -------- Income (loss) before taxes and minority interest and equity in net earnings of affiliates 19,183 (2,537) Income tax expense (benefit) 7,673 (2,070) -------- -------- Income (loss) before minority interest and equity in net earnings of affiliates 11,510 (467) Minority interest and equity in net earnings of affiliates (708) (185) -------- -------- Net income (loss) $ 10,802 $ (652) ======== ======== Net income (loss) per common and common equivalent share $ 1.34 $ (0.08) ======== ======== Weighted-average number of common and common equivalent shares outstanding 8,035 8,014 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 5 6 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed and unaudited - in thousands)
Nine Months Ended March 31, --------------------------- 1997 1996 ---------- ---------- Net cash flows from operating activities: $18,572 $362 ------- --- Cash flows from investing activities: Purchases of property, plant and equipment (4,994) (3,771) Proceeds on dispositions of property, plant and equipment 153 -- Purchased and internally developed software costs (4,486) (1,186) Sale of short-term investments -- 3,170 Dividends (to) minority owners and received from affiliates (112) 581 Loan to affiliate -- (2,347) Net cash paid for acquisitions and minority interests (1,206) (27,036) ------- ------- Net cash used in investing activities (10,645) (30,589) ------- ------- Cash flows from financing activities: Principal payments on line of credit (1,897) -- Principal payments on long-term debt and capital lease obligation (3,908) (8,982) Proceeds from line of credit and long term debt 59 28,817 Proceeds from issuance of stock 793 823 Income tax benefit from stock options exercised 46 66 ------- ------- Net cash (used in) provided by financing activities (4,907) 20,724 ------- ------- Net increase (decrease) in cash and cash equivalents 3,020 (9,503) Cash and cash equivalents at beginning of period 15,231 23,215 ------- ------- Cash and cash equivalents at end of period $18,251 $13,712 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $1,072 $ 942 ====== ======= Income taxes $3,103 $ 4,707 ====== =======
Supplemental schedule of noncash financing and investing activities: In August 1995, the Company purchased the remaining 77% of D.A.C. Systemes/MICROS France and AD-Maintenance Informatique ("ADMI") for FF 14,000,000 (approximately $2,800,000 at exchange rates in effect at the date of purchase), payable FF 8,000,000 at closing and FF 6,000,000 over the next four years, plus potential additional payments based on earnings over the next four years. The unamortized discount on the note, based on an imputed annual interest rate of 8.75%, is $94,600 at March 31, 1997. In October 1996, the Company purchased the remaining 30% interest in one of its majority-owned subsidiaries for $399,000, payable $79,800 at closing and $319,200 in equal installments over the next four years, beginning October 1, 1997. The note bears interest at the prime rate and is adjusted annually each October 1st. The accompanying notes are an integral part of the consolidated financial statements. 6 7 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended March 31, 1997 (Unaudited) 1. Inventories The components of inventories are as follows (in thousands):
March 31, June 30, 1997 1996 ----------------- ----------------- Raw materials $ 5,652 $ 3,528 Work-in-process 4,788 2,955 Finished goods 9,661 8,655 ----------------- ----------------- $ 20,101 $ 15,138 ================= =================
2. Acquisitions A. Fidelio Software GmbH On November 30, 1995, the Company acquired the remaining 70% of Fidelio Software GmbH ("Fidelio") for approximately $28.5 million in a transaction which has been accounted for under the purchase method. In fiscal 1993, 15% of the capital stock of Fidelio had been acquired and an additional 15% was acquired in October 1994, at which time MICROS began accounting for Fidelio under the equity method. Goodwill related to these purchases aggregated $20.5 million at November 30, 1995 and is being amortized over nine years. Unaudited pro forma information for the nine-month period ended March 31, 1996, as if the acquisition had occurred on the first day of that period, but excluding a one-time write-off of the purchased incomplete software technology is shown below. Such pro forma information also reflects the pro forma effects of Fidelio's acquisition of 100% of the common stock of Executive Technologies of Southwest Florida, Inc. ("ETI") in October 1995 for $4,000,000.
Nine Months Ended March 31, 1996 (in thousands, except per share data) ------------------------------------- Revenue $ 147,215 Net income $ 7,237 Net income per share $ 0.90
B. Minority Interests The Company has acquired all of the minority interests in five Fidelio distribution subsidiaries along with the minority interest in one MICROS distribution subsidiary during fiscal 1997 at a cost of approximately $1.5 million. The five Fidelio distribution subsidiaries are: Fidelio Hong Kong; Fidelio Singapore; Fidelio Thailand; Fidelio U.K.; and Fidelio U.S. Goodwill approximated this total amount and is being amortized over periods ranging from five to ten years. 3. Stock options Financial Accounting Standards Board Statement No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation, was issued in October 1995. Adoption of SFAS 123 is required for the Company's fiscal 1997 year-end financial statements. Under SFAS 123, the Company will continue to measure compensation expense for its stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. Beginning with financial statements for fiscal year ending June 30, 1997, the Company 7 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended March 31, 1997 (Unaudited) 3. Stock options, continued will provide pro forma disclosures of net income and earnings per share as if the fair value based method of accounting defined in SFAS 123 had been applied to the Company's stock option grants made subsequent to fiscal 1995. The impact of SFAS 123 on the Company's pro forma information to be provided has not been determined. 4. Legal proceedings MICROS is and has been involved in legal proceedings arising in the normal course of business. The Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that any resulting liability should not have a material adverse effect on the Company's results of operations or financial position. On March 25, 1997, Budgetel Inns, Inc. ("Budgetel") filed suit against MICROS in the United States Federal District Court in the Eastern District of Wisconsin. Budgetel alleges, among other things, that MICROS breached a March 1993 software support agreement by failing to provide full support to this software package licensed to Budgetel in 1993. MICROS will defend against Budgetel's allegations. While the ultimate outcome of litigation is uncertain, and while litigation is difficult to predict, the Company believes that this litigation will have no material adverse effect on the Company's results of operations or financial position. 5. Reclassifications Certain balances have been reclassified to conform to fiscal 1997 presentation. 8 9 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 (Unaudited) Item 2. Management's discussion and analysis of financial condition and results of operations Liquidity and Capital Resources The Company has a $25.0 million unsecured committed line of credit which was renewed December 31, 1996 for an additional one year period, expiring on December 31, 1997. In addition, the Company obtained additional lines of credit from three European banks aggregating DM 15.0 million (approximately $8.9 million at the March 31, 1997 exchange rate) as a result of its November 1995 acquisition of Fidelio. At March 31, 1997, the Company had borrowed approximately $11.9 million and has approximately $22.0 million available. As the Company has significant international operations, its DM-denominated borrowings do not represent a significant foreign exchange risk. The Company does not engage in any foreign exchange hedging. In addition, the Company has long-term debt, both current and non-current, of approximately $7.8 million as of March 31, 1997. The majority of this debt stems from the Fidelio acquisition. Net cash provided by operating activities for the nine months ended March 31, 1997 was $18.6 million. In addition, the Company used $9.5 million for the purchase of property, plant and equipment, internally developed software as well as software purchased from a third party. Net financing activities for the first nine months of fiscal 1997 used $4.9 million, primarily for debt repayment. The Company anticipates that its cash flow from operations along with available lines of credit, in conjunction with other lines of credit for which the Company may be eligible or lines of credit to be renewed, are sufficient to provide the working capital needs of the Company for the foreseeable future. The Company anticipates that its rate of property, plant and equipment expenditures for fiscal 1997 will continue to increase for the remainder of the fiscal year and will exceed fiscal 1996 expenditures by approximately $1.0 to $1.5 million. Results of Operations - Third Quarter and Nine Month Comparisons The Company recorded net income of $.55 per common share in the third quarter of fiscal 1997, compared with net income of $.15 per common share in the third quarter of fiscal 1996. Net income for the nine months ended March 31, 1997, was $1.34 per common share compared with a net loss of $.08 per common share for the first nine months of fiscal 1996. The year to date results for fiscal 1996 include a one-time after tax charge of $8.1 million, or $1.01 per common share, for the write-off of purchased incomplete software technology associated with the acquisition of Fidelio. For the quarter and the year-to-date, excluding last year's one-time charge, the increased net income was primarily due to higher sales volumes and improved gross margins associated with a favorable sales mix of higher margin products. Revenue of $56.7 million for the third quarter of fiscal 1997 increased $9.4 million, or 19.9%, compared to the same period last year. For the first nine months of fiscal 1997, revenue increased $37.6 million to $160.2 million, or 30.7%, over the same period in fiscal 1996. A comparison of the sales mix for fiscal years 1997 and 1996 is as follows: 9 10 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 Results of Operations - Third Quarter and Nine Month Comparisons, Continued
Three Months Ended Nine Months Ended March 31, March 31, 1997 1996 1997 1996 ---- ---- ---- ---- Hardware 46.2% 47.8% 44.8% 55.0% Software 21.7% 15.2% 21.0% 13.7% Service 32.1% 37.0% 34.2% 31.3% ------ ------ ------ ------ 100.0% 100.0% 100.0% 100.0% ====== ====== ====== ======
While hardware sales represent a smaller proportion of total sales in fiscal 1997 in comparison to the prior year, this category continued to grow in absolute dollars. The increase in software for the quarter, relative to total sales, is primarily due to several significant software sales, while the year-to-date increase is primarily due to the acquisition of Fidelio on November 30, 1995. Service sales increased in absolute dollars for the third quarter in comparison to the prior year, although at a lesser rate than that of hardware and software sales. Year-to-date service sales have increased primarily due to the Fidelio acquisition. Combined hardware and software revenues for the third quarter of fiscal 1997 increased $8.7 million, or 29.1%, while service revenues increased $741,000, or 4.2%, over the same period a year earlier. On a year-to-date basis, hardware and software sales increased $21.1 million, or 25.0%, while service revenues increased $16.5 million, or 43.2%, over the same period a year earlier. Cost of sales, as a percentage of revenue, decreased to 46.3% from 50.5% for the third quarter of fiscal 1997 compared to the third quarter of fiscal 1996. For the first nine months of fiscal 1997, cost of sales, as a percentage of revenue, decreased to 48.2% from 50.6% for the same period a year earlier. Cost of sales for hardware and software products, as a percentage of related revenue, was 43.9% in the third quarter of fiscal 1997 compared to 50.0% for the same quarter a year earlier as a result of an increase in higher-margin software sales as a percentage of total hardware and software revenue along with a favorable shift in sales distribution from the indirect to direct sales channels. The Company's third quarter hardware and software cost of sales percentage was below its year-to-date percentage due to several significant high margin software sales in that quarter. For the first nine months of fiscal 1997, cost of sales for hardware and software products, as a percentage of related revenue, was 47.0% compared to 52.1% for the same period in fiscal 1996 as a result of software sales representing a larger proportion of hardware and software sales in fiscal 1997 in comparison to the prior year. Service costs, as a percentage of service revenue, decreased to 51.2% in the third quarter of fiscal 1997 compared to 51.5% in the same quarter in fiscal 1996. Service costs, as a percentage of service revenue, increased to 50.7% in the first nine months of fiscal 1997 compared to 47.4% for the same period in fiscal 1996. The third quarter decrease in comparison to the prior year was due to an improvement in the mix of service sales, while the increased costs year-to-date were primarily due to continued investment in the Company's service organization and infrastructure. Selling, general and administrative expenses increased $485,000, or 2.9%, in the third quarter of fiscal 1997 compared to the same period last year. As a percentage of revenue, selling, general and administrative expenses decreased to 30.8% in the third quarter of fiscal 1997 compared to 35.8% in the third quarter of fiscal 1996 as sales grew at a rate in excess of these expenses. For the first nine months of fiscal 1997, selling, general and administrative expenses, as a percentage of revenue, were 31.4% compared to 32.5% for the same period a year earlier. The year-to-date decrease is primarily due to a 10 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 Results of Operations - Third Quarter and Nine Month Comparisons, Continued moderation in the expansion of the Company's corporate infrastructure, along with office and staffing consolidation in various international subsidiaries. Research and development expenses (exclusive of internally developed software costs), which consist primarily of labor costs, increased $1.2 million, or 53.5%, in the third quarter of fiscal 1997 compared to the same period a year earlier. Actual research and development expenditures, including internally developed software costs of $986,000 in the third quarter of fiscal 1997 and $759,000 in the third quarter of fiscal 1996, increased $1.4 million, or 47.5%, compared to the same period a year earlier. For the first nine months of fiscal 1997, research and development expenses (exclusive of internally developed software costs),which consist primarily of labor costs, increased $2.5 million, or 48.6%, compared to the same period a year earlier. Actual research and development expenditures for the first nine months of fiscal 1997, including internally developed software costs of $3.2 million, increased $4.6 million, or 71.7%, compared to the same period a year earlier. The increase in absolute dollars for both the three-month and nine-month periods is primarily due to Fidelio product development. Purchased incomplete software technology was a result of the one-time $14.8 million charge taken in the second quarter of fiscal 1996 associated with the acquisition of Fidelio. Income from operations for the third quarter of fiscal 1997 was $7.9 million, or 14.0% of revenue, compared to income of $2.7 million in the same period a year earlier. For the first nine months of fiscal 1997, income from operations was $19.8 million compared to a loss of $2.2 million a year earlier or income of $12.6 million excluding the one-time write-off mentioned above. For both the third quarter and first nine months of fiscal 1997, the Company's higher income from operations is primarily due to higher sales and improved gross margins. Interest income for the third quarter of fiscal 1997 increased $33,000 to $99,000, or 50.0%, compared to $66,000 for the third quarter of fiscal 1996. The increase in interest income for the period is primarily due to the improvement in the Company's cash position compared to a year ago when it reduced its cash balances to purchase Fidelio. Interest expense decreased $278,000 to $356,000 for the third quarter of fiscal 1997 from $634,000 for the same period a year ago as the Company reduced its debt obligations. Interest income for the first nine months in fiscal 1997 was $318,000 compared to $668,000, a decrease of 52.4%, for the comparable period in fiscal 1996 primarily as a result of lower investment balances during fiscal 1997. Interest expense for the first nine months in fiscal 1997 was $1,139,000 compared to $1,087,000, an increase of 4.8%, for the comparable period in fiscal 1996 primarily due to the increase in the Company's overall debt during the first nine months of fiscal 1997 in comparison to the same period in fiscal 1996. The effective tax rate for the third quarter of fiscal 1997 is 40.0% compared to 38.5% for the same quarter a year earlier. For the first nine months of fiscal 1997, the effective tax rate is 40.0% compared to a benefit of 81.6% for the first nine months of fiscal 1996. Excluding the effect of the purchase of incomplete software technology expense and the related tax benefit, the nine month effective tax rate for fiscal 1996 would have been 37.4%. The increase is primarily due to a shift in the mix of earnings on a country-by-country basis to those countries with higher tax rates. Summary 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 11 12 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 Results of Operations - Third Quarter and Nine Month Comparisons, Continued computer systems and property management information systems products for the hospitality industry, fueled in part by the acquisitions consummated in calendar year 1995. 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 continues to experience gross margin pressure on its products, and the Company expects this to continue. There can be no assurance that the Company will be able to continue to increase sufficiently sales of its higher margin products, including software and services, to prevent future declines in the Company's overall gross margin. Moreover, some of the statements contained herein not based on historic facts are forward looking statements that involve risks and uncertainties. Past performance is not necessarily a strong or reliable indicator of future performance. Actual results could differ materially from past results, estimates or projections. Some of the additional risks and uncertainties are: product demand and market acceptance, including demand and acceptance for the new 3400 QSA and the new 3700 POS systems; achieving increased sales of higher margin software products; adverse economic or political conditions; unexpected currency fluctuations; impact of competitive products and pricing on margins; product development delays and technological difficulties, including those with respect to the Fidelio next generation integrated property management and central reservation system technologies; and controlling expenses. Other risks are disclosed in the Company's releases and SEC filings, including the Company's 1997 10-Q filings for the quarters ended September 30 and December 31, 1996, and the Company's 1996 10-K. 12 13 REPORT OF INDEPENDENT ACCOUNTANTS 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, 1997, and the related consolidated statement of operations for the three and nine month periods ended March 31, 1997 and March 31, 1996 and the related consolidated statements of cash flows for the nine month period ended March 31, 1997 and March 31, 1996. 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 than 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, 1996, 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 September 20, 1996 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the accompanying consolidated balance sheet information as of June 30, 1996, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Linthicum, Maryland May 14, 1997 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. 13 14 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 Part II - Other Information Item 1. Legal Proceedings. On March 25, 1997, Budgetel Inns, Inc. ("Budgetel") filed suit against MICROS in the United States Federal District Court in the Eastern District of Wisconsin. Budgetel alleges, among other things, that MICROS breached a March 1993 software support agreement by failing to provide full support to this software package licensed to Budgetel in 1993. MICROS will defend against Budgetel's allegations. While the ultimate outcome of litigation is uncertain, and while litigation is difficult to predict, the Company believes that this litigation will have no material adverse effect on the Company's results of operations or financial position. Items 2 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 14 15 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 Part II - Other Information, continued Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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 - None 15 16 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended March 31, 1997 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, 1997 s/ Gary C. Kaufman - ------------ --------------- Gary C. Kaufman Senior Vice President, Finance and Administration/Chief Financial Officer May 15, 1997 s/ Roberta J. Watson - ------------ ----------------- Roberta J. Watson Vice President and Controller 16 17 EXHIBIT INDEX
Sequentially Exhibit Numbered Page - ------- ------------- 11. Computation of Earnings Per Share 18 15. Letter regarding Unaudited Interim 19 Financial Information 27. Financial Data Schedule
17 EX-11 2 COMPUTATION. 1 EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE MICROS SYSTEMS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (Unaudited - in thousands, except per share data)
Three Months Ended March 31, 1997 1996 ------- ------ Weighted-average number of common shares 7,960 7,903 Dilutive effect of outstanding stock options 209 137 ------- ------ Weighted-average number of common and common 8,169 8,040 equivalent shares outstanding ======= ====== Net income $ 4,464 $1,182 ======= ====== Net income per common and common equivalent share $ 0.55 $ 0.15 ======= ====== Nine Months Ended March 31, 1997 1996 ------- ------ Weighted-average number of common shares 7,955 7,882 Dilutive effect of outstanding stock options 80 132 ------- ------ Weighted-average number of common and common 8,035 8,014 equivalent shares outstanding ======= ====== Net income (loss) $10,802 $ (652) ======= ====== Net income (loss) per common and common $ 1.34 $(0.08) equivalent share ======= ======
18 EX-15 3 LETTER. 1 Exhibit 15 May 14, 1997 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 14, 1997 (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. 333-17725, No. 333-05125, No. 33-69782, No. 33-44481 and No. 33-33535). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, PRICE WATERHOUSE LLP 19 EX-27 4 FINANCIAL DATA SCHEDULE.
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1997 MAR-31-1997 14,808 3,443 59,896 2,237 20,101 104,114 32,089 14,542 154,055 77,168 7,534 0 0 199 65,184 154,055 105,317 160,183 49,480 90,876 0 0 1,139 19,183 7,673 10,802 0 0 0 10,802 1.34 1.34
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