-----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, BizFqOrH9oPzPo+UUr4OYzsYa/MW4rN67peRlDK9XVXaE63c6hfPSpdbQ4+ZGw+p Qgp/8d9s4msJyXjEDVTc6g== 0000950133-99-000493.txt : 19990217 0000950133-99-000493.hdr.sgml : 19990217 ACCESSION NUMBER: 0000950133-99-000493 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 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: SEC FILE NUMBER: 000-09993 FILM NUMBER: 99542744 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 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 December 31, 1998 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 December 31, 1998, there were 16,125,866 shares of Common Stock, $0.025 par value, outstanding. 1 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 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. All references to fiscal 1998 share and per share amounts presented in Management's Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements in this Form 10-Q have been retroactively restated to reflect a two-for-one stock split effected in the form of a stock dividend in the fourth quarter of fiscal 1998. 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, 1998, as filed with the Securities and Exchange Commission. 2 3 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except per share data)
December 31, June 30, 1998 1998 ------------ --------- ASSETS Current assets: Cash and cash equivalents $14,494 $13,592 Accounts receivable, net of allowance for doubtful accounts of $2,964 at December 31, 1998 and $2,298 at June 30, 1998 92,916 85,436 Inventories 32,640 32,232 Deferred income taxes 4,767 4,715 Prepaid expenses and other current assets 7,600 7,136 ------- ----- Total current assets 152,417 143,111 Property, plant and equipment, net of accumulated depreciation and amortization of $22,879 at December 31, 1998 and $19,893 at June 30, 1998 22,238 21,764 Deferred income taxes, non-current 5,039 4,644 Goodwill and intangible assets, net of accumulated amortization of $10,593 at December 31, 1998 and $8,883 at June 30, 1998 17,826 17,597 Purchased and internally developed software costs, net of accumulated amortization of $7,964 at December 31, 1998 and $6,654 at June 30, 1998 20,209 16,964 Other assets 406 531 ----- --- Total assets $218,135 $204,611 ========== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank lines of credit $24,895 $26,830 Current portion of long-term debt 989 1,970 Current portion of capital lease obligations 255 280 Accounts payable 19,413 18,968 Accrued expenses and other current liabilities 27,620 29,350 Income taxes payable 10,254 9,158 Deferred income taxes 73 44 Deferred service revenue 12,336 11,112 -------- -------- Total current liabilities 95,835 97,712 Long-term debt, net of current portion 6,884 4,074 Capital lease obligations, net of current portion 3,429 3,466 Deferred income taxes, non-current 6,674 6,682 Minority interests 1,202 944 ------- --- Total liabilities 114,024 112,878 --------- ------- Commitments and contingencies Shareholders' equity: Common stock, $0.025 par; authorized shares 50,000 at December 31, 1998 and 30,000 at June 30, 1998; issued and outstanding 16,126 at December 31, 1998 and 16,101 at June 30, 1998 403 403 Capital in excess of par 20,653 20,097 Retained earnings 85,287 75,566 Accumulated other comprehensive income (Note 5) (2,232) (4,333) -------- ------- Total shareholders' equity 104,111 91,733 --------- ------ Total liabilities and shareholders' equity $218,135 $204,611 ========== ========
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 December 31, ------------------------------- 1998 1997 ---- ---- Revenue: Hardware and software $ 51,088 $ 42,186 Service 29,506 24,081 -------- -------- Total revenue 80,594 66,267 -------- -------- Costs and expenses: Cost of sales Hardware and software 26,690 19,261 Service 14,147 12,469 -------- -------- Total cost of sales 40,837 31,730 Selling, general and administrative expenses 22,291 20,385 Research and development expenses 3,605 3,265 Depreciation and amortization 2,426 2,072 -------- -------- Total costs and expenses 69,159 57,452 -------- -------- Income from operations 11,435 8,815 Non-operating income (expense): Interest income 115 131 Interest expense (574) (372) Other income (expense), net (304) (71) -------- -------- Income before taxes and minority interest, equity in net earnings of affiliates and cumulative effect of accounting change 10,672 8,503 Income tax expense 4,269 3,398 -------- -------- Income before minority interest, equity in net earnings of affiliates and cumulative effect of accounting change 6,403 5,105 Minority interest and equity in net earnings of affiliates (190) (77) -------- -------- Net income before cumulative effect of accounting change 6,213 5,028 Cumulative effect of change in accounting principle, net of tax benefit of $274 -- (412) -------- -------- Net income $ 6,213 $ 4,616 ======== ======== Basic net income per common share: Income before cumulative effect of accounting change $ 0.39 $ 0.31 Cumulative effect of change in accounting principle -- (0.02) -------- -------- Basic net income per common share $ 0.39 $ 0.29 ======== ======== Diluted net income per common share: Income before cumulative effect of accounting change $ 0.37 $ 0.30 Cumulative effect of change in accounting principle -- (0.02) -------- -------- Diluted net income per common share $ 0.37 $ 0.28 ======== ======== Weighted-average number of shares outstanding: Basic 16,123 16,016 ======== ======== Diluted 16,855 16,585 ======== ========
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)
Six Months Ended December 31, ----------------------------- 1998 1997 ---- ---- Revenue: Hardware and software $ 92,555 $ 79,598 Service 54,678 46,257 --------- --------- Total revenue 147,233 125,855 --------- --------- Costs and expenses: Cost of sales Hardware and software 47,291 37,683 Service 27,002 24,348 --------- --------- Total cost of sales 74,293 62,031 Selling, general and administrative expenses 42,102 39,245 Research and development expenses 7,308 6,423 Office closure costs 427 -- Depreciation and amortization 4,819 3,953 --------- --------- Total costs and expenses 128,949 111,652 --------- --------- Income from operations 18,284 14,203 Non-operating income (expense): Interest income 186 199 Interest expense (1,290) (672) Other income (expense), net (487) 7 --------- --------- Income before taxes and minority interest, equity in net earnings of affiliates and cumulative effect of accounting change 16,693 13,737 Income tax expense 6,677 5,494 --------- --------- Income before minority interest, equity in net earnings of affiliates and cumulative effect of accounting change 10,016 8,243 Minority interest and equity in net earnings of affiliates (295) (200) --------- --------- Net income before cumulative effect of accounting change 9,721 8,043 Cumulative effect of change in accounting principle, net of tax benefit of $274 -- (412) --------- --------- Net income $ 9,721 $ 7,631 ========= ========= Basic net income per common share: Income before cumulative effect of accounting change $ 0.60 $ 0.50 Cumulative effect of change in accounting principle -- (.02) --------- --------- Basic net income per common share $ 0.60 $ 0.48 ========= ========= Diluted net income per common share: Income before cumulative effect of accounting change $ 0.57 $ 0.49 Cumulative effect of change in accounting principle -- (.03) --------- --------- Diluted net income per common share $ 0.57 $ 0.46 ========= ========= Weighted-average number of shares outstanding: Basic 16,119 16,007 ========= ========= Diluted 16,951 16,538 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 5 6 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Six Months Ended December 31, 1998 (Unaudited, in thousands)
Accumulated Common Stock Capital Other ------------------ in Excess Retained Comprehensive Shares Amount of Par Earnings Income Total -------- ------ --------- -------- ------------- ----- Balance, June 30, 1998 16,101 $403 $20,097 $75,566 $(4,333) $91,733 Stock issued upon exercise of options 25 -- 451 -- -- 451 Income tax benefit from stock options exercised -- -- 105 -- -- 105 Comprehensive income (Note 5) Net income -- -- -- 9,721 -- -- Foreign currency translation adjustments -- -- -- -- 2,101 -- Total comprehensive income -- -- -- -- -- 11,822 ------ ---- ------- ------- -------- -------- Balance, December 31, 1998 16,126 $403 $20,653 $85,287 $(2,232) $104,111 ====== ==== ======= ======= ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 6 7 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed and unaudited - in thousands)
Six months ended December 31, ----------------------------- 1998 1997 ---- ---- Net cash flows provided by (used in) operating activities: $ 10,170 $ (2,714) -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (3,471) (3,843) Proceeds on dispositions of property, plant and equipment 112 83 Internally developed software (4,499) (3,693) Dividends to minority owners (69) (351) Net cash paid for acquisitions and minority interests (975) (238) -------- -------- Net cash used in investing activities (8,902) (8,042) -------- -------- Cash flows from financing activities: Principal payments on line of credit (6,295) (3,397) Principal payments on long-term debt and capital lease obligation (1,588) (1,808) Proceeds from line of credit 3,898 10,500 Proceeds from issuance of long term debt 2,995 2,870 Proceeds from issuance of stock 452 372 Income tax benefit from stock options exercised 105 64 -------- -------- Net cash (used in) provided by financing activities (433) 8,601 -------- -------- Effect of exchange rate changes on cash 67 (83) -------- -------- Net increase (decrease) in cash and cash equivalents 902 (2,238) Cash and cash equivalents at beginning of period 13,592 10,864 -------- -------- Cash and cash equivalents at end of period $ 14,494 $ 8,626 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,057 $ 714 ======== ======== Income taxes $ 4,226 $ 928 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 7 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended December 31, 1998 (Unaudited, in thousands, except per share data) 1. Inventories The components of inventories are as follows:
December 31, June 30, 1998 1998 ------------------ ----------------- Raw materials $ 4,773 $ 5,415 Work-in-process 2,832 1,762 Finished goods 25,035 25,055 ------------------ ----------------- $ 32,640 $ 32,232 ================== =================
2. Common Stock On November 20, 1998, the Company's shareholders approved an amendment to the Company's Articles of Incorporation which increased the Company's authorized shares of Common Stock from 30,000 to 50,000 shares. 3. 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. As the United States District Court Judge granted MICROS' motion to dismiss four of the seven causes of action on June 22, 1998, with leave to amend, Budgetel filed a first amended complaint on November 12, 1998. MICROS filed a motion to dismiss the amended complaint on December 7, 1998. While the ultimate outcome of litigation is uncertain, and while litigation is inherently difficult to predict, the Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that resulting liability, if any, should not have a material adverse effect on the Company's results of operations or financial position. 4. Net Income per Share Basic net income per common share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted net income per share includes the dilutive effect of stock options. 8 9 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended December 31, 1998 (Unaudited, in thousands, except per share data) 4. Net Income per Share, continued A reconciliation of weighted average of common shares outstanding assuming dilution is as follows:
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 ---- ---- ---- ---- Net Income $ 6,213 $ 4,616 $ 9,721 $ 7,631 ======= ======= ======= ======= Average common shares outstanding 16,123 16,016 16,119 16,007 Dilutive effect of outstanding stock options 732 569 832 531 ------- ------- ------- ------- Average common shares outstanding assuming dilution 16,855 16,585 16,951 16,538 ======= ======= ======= ======= Basic Net Income per Share $ 0.39 $ 0.29 $ 0.60 $ 0.48 ======= ======= ======= ======= Diluted Net Income per Share $ 0.37 $ 0.28 $ 0.57 $ 0.46 ======= ======= ======= =======
For the three and six-month periods ended December 31, 1998, 6,000 options and 4,000 options, respectively, were excluded from the above reconciliation as these options were anti-dilutive for these periods. For the three and six-month periods ended December 31, 1997, no options were excluded from the above reconciliation for these periods. 5. Comprehensive Income On July 1, 1998, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income." Total comprehensive income is reported in the consolidated statements of shareholders' equity and includes net income and foreign currency translation adjustments. 6. Subsequent event In anticipation of its move to new corporate headquarters in the Spring of 2000, MICROS entered into an amendment to a capital lease for one of the corporate headquarters buildings located at 12050 Baltimore Avenue, Beltsville, Maryland. As part of a comprehensive agreement, MICROS agreed to waive certain purchase rights of the facility embodied in the original capital lease, including the right to purchase the facility in 2009 for $10.00. MICROS also entered into a standard operating lease with the owner of the facility pursuant to which MICROS agreed to continue to rent portions of the facility until March 31, 2000. In consideration of MICROS' entering into the agreements, MICROS received a one-time cash payment from the owner of the facility. As of December 31, 1998, the Company's carrying values of the combined land and building along with the capital lease obligation were $3.5 million and $3.2 million, respectively. During the third quarter of fiscal 1999, the Company will remove these items from its balance sheet at a small gain, after consideration of proceeds and transaction costs. 9 10 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company now has a $45.0 million unsecured committed multi-currency line of credit, which was renewed and increased from $35.0 million during the second quarter of fiscal 1999 for an additional one-year period, expiring on December 31, 1999. Such line is convertible, at the Company's option, to three-year term debt. In addition, the Company has a credit facility from a European bank in the amount of DM 15.0 million (approximately $9.0 million at the December 31, 1998 exchange rate). Under the terms of this facility, the Company may, at its option, borrow in the form of a line of credit or in the form of term debt. For both of these credit agreements, at December 31, 1998, the Company had borrowed approximately $31.4 million and has approximately $22.6 million available. Of the $31.4 million outstanding as of December 31, 1998, $24.9 million represents line of credit borrowings and $6.5 million represents term debt. As of December 31, 1998, the Company's DM-denominated borrowings under these credit facilities amounted to DM 17.3 million (approximately $10.4 million at the December 31, 1998 exchange rate). The increase of $0.4 million in the Company's combined credit facility borrowings during fiscal 1999 stems primarily from continued spending for internally developed software, along with increased levels of accounts receivable and inventory. The Company believes it can operate at a lower inventory level and believes it can further reduce inventory during the rest of fiscal 1999. As the Company has significant international operations, its DM-denominated borrowings do not represent a significant foreign exchange risk. On an overall basis, the Company monitors its cash and debt positions in each currency in an effort to reduce its foreign exchange risk. Net cash provided by operating activities for the six months ended December 31, 1998 was $10.2 million. The Company used $8.9 million in investing activities, primarily for the purchase of property, plant and equipment and internally developed software. Net financing activities for the first six months of fiscal 1999 used $0.4 million, primarily for the repayment of line of credit borrowings. 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 property, plant and equipment expenditures for fiscal 1999 will continue to increase for the remainder of the fiscal year but should be lower than fiscal 1998's expenditures of $9.3 million. Results of Operations - Second Quarter Comparison The Company recorded diluted net income of $0.37 per common share in the second quarter of fiscal 1999, compared with diluted net income of $0.28 per common share in the second quarter of fiscal 1998. Net income for the six months ended December 31, 1998, on a diluted basis, was $0.57 per share compared with $0.46 per common share for the first six months of fiscal 1998. For the quarter and year-to-date, the increased net income was primarily due to higher sales volumes along with lower operating expenses as a percentage of sales, partially offset by lower gross margins. Fiscal 1998's second quarter and year-to-date results include an after-tax charge of $0.4 million, or $0.02 per share for the quarter and $0.03 per share for the year-to-date, relating to an accounting charge associated with a change in the treatment of capitalized business process re-engineering costs. 10 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Results of Operations - Second Quarter Comparison, Continued Revenue of $80.6 million for the second quarter of fiscal 1999 increased $14.3 million, or 21.6%, compared to the same period last year. For the first six months of fiscal 1999, revenue increased $21.4 million to $147.2 million, or 17.0%, over the same period in fiscal 1998. A comparison of the sales mix for fiscal years 1999 and 1998 is as follows:
Three Months Ended Six Months Ended December 31, December 31, 1998 1997 1998 1997 ---- ---- ---- ---- Hardware 45.8% 42.6% 43.4% 43.6% Software 17.6% 21.1% 19.5% 19.7% Service 36.6% 36.3% 37.1% 36.7% ------ ------ ------ ------ 100.0% 100.0% 100.0% 100.0% ====== ====== ====== ======
Both hardware and software sales increased in absolute dollars in fiscal 1999 in comparison to the prior year. For the quarter, hardware sales increased as a percentage of total sales while software sales decreased primarily due to strong hardware demand coinciding with the absence of significant hotel system deliveries during the second quarter of fiscal 1999. On a year-to-date basis, hardware and software sales continued to increase in absolute dollars, but declined as a percentage of sales, primarily due to the continued growth of the Company's service business. Service sales increased in absolute dollars and as a proportion of total sales for the second quarter in comparison to the prior year primarily due to increased installation and support revenues. Combined hardware and software revenues for the second quarter of fiscal 1999 increased $8.9 million, or 21.1%, while service revenues increased $5.4 million, or 22.5%, over the same period a year earlier. On a year-to-date basis, hardware and software sales increased $13.0 million, or 16.3%, while service revenues increased $8.4 million, or 18.2%, over the same period a year earlier. Cost of sales, as a percentage of revenue, increased to 50.7% for the second quarter of fiscal 1999 from 47.9% for the second quarter of fiscal 1998. For the first six months of fiscal 1999 and 1998, cost of sales, as a percentage of revenue, was 50.5% and 49.3% respectively. Cost of sales for hardware and software products, as a percentage of related revenue, was 52.2% in the second quarter of fiscal 1999 compared to 45.7% for the same quarter a year earlier and 51.1% compared to 47.3% for the first six months of fiscal 1999 and 1998, respectively. For the quarter and year-to-date, this increase was the result of decreased margins associated with hardware sales, which more than offset the favorable gross margin effect of increased software sales. Service costs, as a percentage of service revenue, decreased to 47.9% in the second quarter of fiscal 1999 compared to 51.8% in the same quarter in fiscal 1998. Service costs, as a percentage of service revenue, decreased to 49.4% in the first six months of fiscal 1999 compared to 52.6% for the same period in fiscal 1998. The second quarter and year-to-date decrease in comparison to the prior year was due to continued expansion of the Company's customer base and the ability of the Company to increase service revenues at a rate in excess of service costs. During the third quarter of fiscal 1998, the Company entered into a Service Contractor Agreement with Vanstar Corporation ("Vanstar"), a California-based company, which is in the business of providing certain installation, repair and maintenance services for certain MICROS major account and district customers. MICROS and Vanstar continue to work together in an effort to better coordinate and address customer needs in the deployment of Vanstar services. In 11 12 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Results of Operations - Second Quarter Comparison, Continued those regions where the Vanstar services have not been deployed, MICROS is currently servicing its customer base through its existing network of MICROS dealers and MICROS district offices. Selling, general and administrative expenses increased $1.9 million, or 9.3%, in the second quarter of fiscal 1999 compared to the same period last year. As a percentage of revenue, selling, general and administrative expenses decreased to 27.7% in the second quarter of fiscal 1999 compared to 30.8% in the second quarter of fiscal 1998. For the first six months of fiscal 1999, selling, general and administrative expenses, as a percentage of revenue, were 28.6% compared to 31.2% for the same period a year earlier. For both the quarter and year-to-date, these decreases are due to sales growth at a rate in excess of these expenses. Research and development expenses (exclusive of capitalized software development costs), which consist primarily of labor costs, increased $0.3 million, or 10.4%, in the second quarter of fiscal 1999 compared to the same period a year earlier. Actual research and development expenditures, including capitalized software development costs of $2.1 million in the second quarter of fiscal 1999 and $2.5 million in the second quarter of fiscal 1998, decreased $0.1 million, or 1.5%, compared to the same period a year earlier. This decrease in absolute dollars for the three-month period is primarily due to decreased expenditures in the Company's hotel business. For the first six months of fiscal 1999, research and development expenses (exclusive of capitalized software development costs),which consist primarily of internal and sub-contracted labor costs, increased $0.9 million, or 13.8%, compared to the same period a year earlier. Actual research and development expenditures for the first six months of fiscal 1999, including capitalized software development costs of $4.5 million, increased $1.7 million, or 16.7%, compared to the same period a year earlier. The increase in absolute dollars for the six-month period is primarily due to increased expenditures in the Company's hotel business during the first quarter of fiscal 1999 and to a lesser extent, increased expenditures in the Company's POS business throughout fiscal 1999. Office closure costs relate to follow-on costs incurred in the first quarter of fiscal 1999 associated with the Company's fourth quarter of fiscal 1998 permanent closure of its facility in Munich, Germany. These costs relate to the relocation of former Munich employees to their new places of employment within the Company. Income from operations for the second quarter of fiscal 1999 was $11.4 million, or 14.2% of revenue, compared to income of $8.8 million, or 13.3% of revenue, in the same period a year earlier. For the first six months of fiscal 1999, income from operations was $18.3 million compared to income of $14.2 million a year earlier. For both the second quarter and first six months of fiscal 1999, the Company's higher dollar income from operations is primarily due to higher sales and lower operating expenses as a percentage of sales, partially offset by lower gross margins. Interest expense increased $0.2 million to $0.6 million, or 54.7%, for the second quarter of fiscal 1999 from $0.4 million for the same period a year ago as the Company increased its debt obligations to fund its internal software development efforts and to meet its working capital requirements. Interest expense for the first six months in fiscal 1999 was $1.3 million compared to $0.7 million, an increase of 92.0%, for the comparable period in fiscal 1998 primarily due to the Company's higher overall debt level during the first six months of fiscal 1999 in comparison to the same period a year ago. 12 13 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Results of Operations - Second Quarter Comparison, Continued The effective tax rate for the second quarter and year-to-date of both fiscal years 1999 and 1998 is 40.0%. The Company has not experienced any significant shift in its mix of earnings that would require a change in its effective tax rate. Year 2000 The Company is currently in the process of performing a review of its business systems, and is querying its customers, vendors and resellers with respect to Year 2000 compliance issues. The "Year 2000 Issue" is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have a time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in normal business activities. In 1997, the Company created a corporate-wide Year 2000 project team representing all business units of the Company. The team was divided into three segments, each of which was tasked with analyzing one of the following three sets of issues: (i) Year 2000 compliance issues with respect to Company internal information technology systems and non-information technology systems; (ii) Year 2000 compliance issues with respect to the information systems of certain key Company vendors and suppliers; and (iii) Year 2000 compliance issues with respect to Company products that the Company sells and licenses to its worldwide customer base. Year 2000 Compliance Issues with respect to Company Internal Systems The Company's Management Information Systems Department assumed all Year 2000 obligations associated with testing, analyzing and implementing the Company's internal information systems. Although these activities were not formally assigned to the MIS department until 1997, the department had nonetheless embraced such as part of its implementation of new enterprise resources planning systems in 1996. This implementation involved replacing all internal information systems with Oracle Applications Release 10.7. As part of this implementation, the Company required certification that all Oracle products were Year 2000 compliant, which such certification has been provided. The Company is in the process of verifying the Year 2000 compliance of certain Oracle products, which is expected to be completed by March 31, 1999. Internationally, the Company currently intends to adopt Year 2000 compliant Oracle applications at certain central locations. The Company expects to implement appropriate alternative solutions to existing systems by September of 1999 at the non-central international offices, where deemed appropriate or necessary. Year 2000 Compliance Issues with respect to the Information Systems of Certain Key Company Vendors and Suppliers In addition to internal Year 2000 activities and the review and remediation of the Company's internal information systems, the Company is in contact with its key suppliers and vendors to assess their compliance. The Company has received to date certain assurances from these suppliers and vendors that any Year 2000 issues from which they suffer will not materially adversely affect MICROS. There can, however, be no absolute assurance that there will not be a material adverse effect on the Company if third parties do not convert their systems in a timely manner and in a way that is compatible with the Company's systems. The Company believes that its current and future actions with suppliers will minimize these risks. 13 14 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Results of Operations - Second Quarter Comparison, Continued Year 2000 Compliance Issues with respect to Company Products that the Company Sells and Licenses to its Worldwide Customer Base Finally, the Company is currently in the process of completing the testing of its existing product offerings. The testing includes an analysis of both standard products, currently offered, and all custom products that have been offered or developed since 1995, which the Company currently supports. The testing is not performed with respect to any legacy products that the Company does not currently sell or support. In the event that the testing determines that a product may not be Year 2000 compliant, the Company has or will develop either a fix, or a migration path to a product that is Year 2000 compliant. While certain potential issues have been identified to date, the expense of upgrading product applications to be Year 2000 compliant has not been material. The Company maintains a site on its web page which details the products that the Company will test or has tested, and the Year 2000 compliance status thereof. The site is updated approximately every four weeks. The last update was on February 11, 1999. Year 2000 Compliance Costs Through fiscal 1998, the Company has expensed all incremental costs related to the Year 2000 analysis and remediation efforts. Internal and external costs specifically associated with modifying software for the Year 2000 will be charged to expense as incurred. All of these costs are being funded through operating cash flows. Management's current estimate (including the Year 2000 issues identified to date) is that the costs associated with the Year 2000 issue should not have a material adverse effect on the results of operations or financial position of the Company in any given quarter. However, the Company is not certain that it has fully identified such impact or whether the Company can resolve it without disruption of its business or incurring significant expense. To date, not including the costs incurred to upgrade the Company's internal management information systems, the Company has incurred approximately $0.7 million in expenditures related to the Year 2000 issue. Costs capitalized to date to implement the Company's new internal management information systems, which addressed not only the Year 2000 issues, but also a large variety of other required and desired informational and processing needs, are approximately $6.1 million. The Company believes it is diligently addressing the Year 2000 issues and that it will satisfactorily resolve significant Year 2000 problems. The Company anticipates completing substantially all of its Year 2000 projects during fiscal 1999, with major completion milestones being targeted for the third and fourth quarters of fiscal 1999. In the event that the Company determines that it may fail to achieve these milestones, additional internal resources will be focused on completing these projects or developing contingency plans. Based on preliminary reviews from presently available information, it is believed that with the Company's current installation of a new business operating system, and the significant capital equipment purchases in recent years to upgrade the Company's technological capabilities, the additional costs of addressing potential problems are not expected to have a material adverse impact on the Company's results of operations, liquidity and capital resources. However, if the Company, its large customers, or significant suppliers are unable to resolve such processing issues in a timely manner, it could have a material impact on the results of operations, liquidity or capital resources of the Company. Moreover, the Company's expectations with respect to future costs and the timely completion of its Year 2000 modifications are subject to uncertainties that could cause actual results to differ materially from what has been discussed above. Factors that could influence the amount of future costs and the effective timing of remediation efforts include the success of the Company in identifying systems that contain two-digit year codes, the nature and amount of testing required to upgrade or replace each of the affected systems, and the success of the Company's key suppliers in addressing the Year 2000 issue. Contingency Plans The Company is currently developing a contingency plan for its products. This plan includes having an independent company test and verify that certain products are Year 2000 compliant, and increasing current staffing levels in customer service functions for the three month period commencing December 1, 1999. While the Company believes that its current product set will not have any material Year 2000 issues, the Company anticipates increased call volume during this period. With respect to internal information systems, MICROS does not intend to develop a full contingency plan. Given the complexity of the Company's Oracle enterprise resource planning system, it is neither practical nor cost effective to develop a back-up contingency approach. For this reason, and as noted above, MICROS is thoroughly testing and certifying the current internal systems so as to assure that any problems are fully addressed prior to January 1, 2000. However, Year 2000 issues in the Company's enterprise resource planning system, if gone undetected or uncorrected, could have a material adverse impact on the Company's results of operations or financial condition. Euro Conversion On January 1, 1999, certain member nations of the European Economic and Monetary Union ("EMU") adopted a common currency, the Euro. For a three-year transition period, both the Euro and individual participants' currencies will remain in circulation. After June 30, 2002, the Euro will be the sole legal tender for EMU countries. The adoption of the Euro will affect a multitude of financial systems and 14 15 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Results of Operations - Second Quarter Comparison, Continued business applications as the commerce of these nations will be transacted in the Euro and the existing national currency during the transition period. As of December 31, 1998, of the eleven countries currently admitted to the EMU, the Company has subsidiary operations in six of those countries and distributor relationships in the remaining five countries. MICROS is currently addressing Euro related issues and its impact on information systems, currency exchange rate risk, taxation, contracts, competition and pricing. Action plans currently being implemented are expected to result in compliance with all laws and regulations; however, there can be no certainty that such plans will be successfully implemented or that external factors will not have an adverse effect on the Company's operations. Moreover, there is still some uncertainty with respect to the interpretation of certain Euro regulations, and the impact of the regulations on the Company's Euro implementation. Any costs associated with the adoption of the Euro will be expensed as incurred and the Company currently does not expect these costs to be material to its results of operations, financial condition or liquidity. 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 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 continues to experience gross margin pressure on its products and service offerings, 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; implementation of a cost-effective service structure capable of servicing increasingly complex software systems in increasingly more remote locations; achieving increased sales of higher margin software products; hiring and retention of qualified employees with sufficient technical expertise; adverse economic or political conditions; unexpected currency fluctuations; impact of competitive products and pricing on margins; product development delays; technological difficulties associated with new product releases, including those with respect to the Fidelio next generation integrated property management and central reservation system technologies; and controlling expenses. These and other risks are disclosed in the Company's releases and SEC filings, including in the section titled "Business and Investment Risks; Information Relating to Forward-Looking Statements", in the Company's Annual Report on Form 10-K for the Fiscal Year ended June 30, 1998. 15 16 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company has experienced rapid growth internationally. MICROS' significant international business and presence does expose the Company to certain market risks, such as currency, interest rate and political risks. With respect to currency risk, the Company transacts business in over 25 different currencies through its foreign subsidiaries. The fluctuation of currencies impacts sales and profitability. Frequently, sales and the costs associated with such sales are not always denominated in the same currency. Given the fact that the Company transacts business in many different currencies, adverse declines in certain currencies can be offset by favorable advances in other currencies. While the Company has not to date invested in financial instruments designed to protect against currency fluctuations, the Company will continue to evaluate the need to do so in the future. Additionally, the Company is subject to interest rate fluctuations in foreign countries to the extent that the Company elects to borrow in the local foreign currency. In the past, this has not been an issue of concern as the Company has the capacity to elect to borrow in other currencies with more favorable interest rates. While the Company has not to date invested in financial instruments designed to protect against interest rate fluctuations, the Company will continue to evaluate the need to do so in the future. Finally, the Company is subject to political risk, especially in developing countries with uncertain or unstable political structures or regimes. The Company is also subject to the effects of, and changes in, laws and regulations, other activities of governments, agencies and similar organizations, especially in light of the current weak Asian economic conditions, which may prompt certain legislative reform. The Company does not believe at this time that it is exposed to unusual political risk that could have a material adverse impact on the Company. 16 17 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Part II - Other Information Item 1. 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. As the United States District Court Judge granted MICROS' motion to dismiss four of the seven causes of action on June 22, 1998, with leave to amend, Budgetel filed a first amended complaint on November 12, 1998. MICROS filed a motion to dismiss the amended complaint on December 7, 1998. While the ultimate outcome of litigation is uncertain, and while litigation is inherently difficult to predict, the Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that resulting liability, if any, should not have a material adverse effect on the Company's results of operations or financial position. Item 2. Changes in Securities An amendment of the Company's Articles of Incorporation to increase the number of shares of common stock that the Company is authorized to issue from 30,000,000 to 50,000,000 shares was approved by the Company's shareholders at the annual meeting held on November 20, 1998. Articles of Amendment were filed with the Maryland State Department of Assessments and Taxation on November 24, 1998. Item 3. Defaults upon Senior Securities No events occurred during the quarter covered by the report that would require a response to this item. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders was held on November 20, 1998. A quorum was present and shareholders voted on the following matters: 1. Approval of an Amendment to the Articles of Incorporation The shareholders voted 12,854,129 shares in the affirmative and 717,691 shares in the negative with respect to a proposal to adopt an amendment to the Company's Articles of Incorporation. A total of 61,470 shares abstained from the vote. There were no broker non-votes. The amendment increases the number of shares of common stock that the Company is authorized to issue from 30,000,000 to 50,000,000 shares. As the requisite number of shares required for approval was obtained, the amendment was approved, and Articles of Amendment were filed with the Maryland State Department of Assessments and Taxation on November 24, 1998. 17 18 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Part II - Other Information, continued 2. Election of Directors The management of the Company nominated a slate of six persons to serve on the Board of Directors. No other nominations were made. The nominees received the following votes:
Nominee For Vote Withheld(Abstain) ------- --- ------------- Louis M. Brown, Jr. 13,504,991 128,299 Daniel Cohen 13,603,785 29,505 A.L. Giannopoulos 13,604,545 28,745 F. Suzanne Jenniches 13,611,095 22,245 John G. Puente 13,619,125 14,165 Dwight S. Taylor 13,606,875 26,415
The entire slate of directors nominated was elected by a majority of the shares present in person or represented by proxy and entitled to vote. 3. Selection of Independent Public Accountants The Board of Directors of the Company selected PricewaterhouseCoopers LLP as the independent public accountants for the Company for the fiscal year ending June 30, 1999. A proposal to approve the selection of PricewaterhouseCoopers LLP was approved by a majority of the shares present in person or represented by proxy and entitled to vote. A total of 13,614,020 shares voted in the affirmative; a total of 6,640 shares voted in the negative; and a total of 12,630 shares abstained from the vote. 4. Approval of Amendment to Stock Option Plan The shareholders voted 8,986,380 shares in the affirmative and 3,307,678 shares in the negative with respect to an amendment to the 1991 Stock Option Plan. A total of 76,684 shares abstained from the vote, and there were 1,262,548 broker non-votes. The amendment modifies the 1991 Stock Option Plan by increasing the number of shares available under the 1991 Stock Option Plan by 1,000,000, with the aggregate number of shares that can be issued under the plan being 4,500,000. As the requisite number of shares required for approval was obtained, the amendment was approved. Item 5. Other Information On January 27, 1999, the Board of Directors at a scheduled Board meeting unanimously approved (with Mr. Brown abstaining from the vote) the First Amendment of the Consulting Agreement between Louis M. Brown, Jr. and the Company dated June 30, 1995. The amendment extends the term of the Consulting Agreement for two more years until June 30, 2002, and provides for compensation for the extended term. Additionally, on September 11, 1998, the Compensation Committee of the Board of Directors at a scheduled Compensation Committee meeting unanimously approved the amendment of the Employment Agreement between Gary C. Kaufman and the Company dated May 28, 1997. The First Amendment extends the term of the Employment Agreement for a three year period commencing on October 1, 1998, and such period may automatically be extended for additional three year rolling periods unless either 18 19 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 Part II - Other Information, continued Item 5. Other Information, continued party elects otherwise. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 3(i) - Articles of Amendment to Articles of Incorporation Exhibit 10a - First Amendment to Consulting Agreement between the Company and Louis M. Brown Jr., dated February 1, 1999 Exhibit 10b - First Amendment to Employment Agreement between the Company and Gary C. Kaufman, dated October 1, 1998 Exhibit 11 - Computation of Earnings Per Share Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None 19 20 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1998 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) February 16, 1999 /s/ Gary C. Kaufman - ------------------ ------------------- Gary C. Kaufman Senior Vice President, Finance and Administration/Chief Financial Officer February 16, 1999 /s/ Roberta J. Watson - ------------------ --------------------- Roberta J. Watson Vice President and Controller 20 21 EXHIBIT INDEX
Sequentially Exhibit Numbered Page - ------- ------------- 3(i) Articles of Amendment to Articles of Incorporation 22 10a First Amendment to Consulting Agreement between the Company and Louis M. Brown, Jr.,dated February 1, 1999 25 10b First Amendment to Employment Agreement between the Company and Gary C. Kaufman, dated October 1, 1998 27 11. Computation of Earnings Per Share 29 27. Financial Data Schedule N/A
21 EX-3.I 2 ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION 1 EXHIBIT 3(i) - ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION MICROS SYSTEMS, INC. ARTICLES OF AMENDMENT MICROS Systems, Inc., a Maryland corporation, having its principal office at 12000 Baltimore Avenue, Beltsville, Maryland 20705 (which is hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The Articles of Incorporation of the Corporation are hereby amended by striking out Article FIFTH thereof in its entirety and inserting in lieu thereof the following: "FIFTH: The total number of shares which the Corporation shall have authority to issue is 50,000,000, all such shares to be common stock, par value $0.025 per share. Dividends may be declared on the common stock and each share of common stock will entitle the holder thereof to one vote in all proceedings in which action should be taken by stockholders of the Corporation." SECOND: The Board of Directors of the Corporation at a meeting duly convened and held on September 24, 1998, adopted a resolution in which was set forth the foregoing amendment to the Articles of Incorporation of the Corporation, declaring that said amendment was advisable and directing that such amendment be submitted for action thereon at the next annual meeting of the stockholders of the Corporation. THIRD: The amendment of the Articles of Incorporation of the Corporation as hereinabove set forth were approved by the affirmative vote of a majority of the total votes eligible to be cast at the annual meeting of stockholders held on November 20, 1998, in accordance with the provisions of Article SEVENTH, subsection (f), of the Articles of Incorporation of the Corporation. FOURTH: (a) Prior to the amendment, the Corporation had authority to issue 30,000,000 shares of common stock with a par value of $.025 per share. (b) After amendment the Corporation has authority to issue 50,000,000 shares of common stock with a par value of $.025 per share. (c) The capital stock of the Corporation is not divided into classes. (d) The aggregate par value of all shares of common stock of the Corporation is $1,250,000. IN WITNESS WHEREOF, MICROS Systems, Inc. has caused these presents to be signed in its name and on its behalf by its President and its corporate seal to be hereunto affixed and attested by its Secretary on the __ day of November, 1998. ATTEST MICROS SYSTEMS, INC. /s/Judith F. Wilbert /s/A.L. Giannopoulos - ---------------------- -------------------- Judith F. Wilbert By: A.L. Giannopoulos Secretary Its: President and Chief Executive Officer 22 2 THE UNDERSIGNED, President and Chief Executive Officer of MICROS Systems, Inc., who executed on behalf of the Corporation the foregoing Articles of Amendment of which this is made a part, hereby acknowledges in the name and on behalf of said Corporation that the foregoing Articles of Amendment to be the corporate act of said Corporation, and hereby certifies that to the best of his knowledge, information, and belief the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/A.L. Giannopoulos -------------------- A.L. Giannopoulos President and Chief Executive Officer STATE OF MARYLAND, COUNTY OF PRINCE GEORGES, To wit: I HEREBY CERTIFY that on this __ day of November, 1998, before me, the subscriber, a Notary Public in and for the State and County aforesaid, personally appeared A.L. Giannopoulos, President of the Corporation and made oath in due form of law that he executed the above on behalf of the Corporation, being authorized to do so, and executed same in my presence. AS WITNESS My Hand and Notarial Seal. My commission expires: /s/Judith F. Wilbert -------------------- Judith F. Wilbert Notary Public 23 EX-10.A 3 FIRST AMENDMENT TO CONSULTING AGREEMENT 1 EXHIBIT 10 - MATERIAL CONTRACTS FIRST AMENDMENT TO CONSULTING AGREEMENT This First Amendment to the Consulting Agreement is effective the first day of February, 1999 (the "First Amendment"), by and between MICROS SYSTEMS, INC., a Maryland corporation, with offices located at 12000 Baltimore Avenue, Beltsville, Maryland 20705 (hereinafter referred to as the "Company"), and Louis M. Brown, Jr., whose address is 1665 Kenwood Avenue, Alexandria, Virginia 22312 (hereinafter referred to as the "Consultant"). WHEREAS, the Consultant and the Company entered into a Consulting Agreement dated June 30, 1995 (the "Agreement"); and WHEREAS, the parties hereto would like to amend the Agreement pursuant to this First Amendment in an effort: (i) to reflect the rapid growth experienced by the Company, and the current status of the Company and the Consultant relative to other similarly positioned entities; (ii) to reward the Consultant for achieving financial objectives; and (iii) to solidify the long-term management structure of the Company. NOW, THEREFORE, the Company and the Consultant, for good and valuable consideration, and pursuant to the terms, conditions, and covenants contained herein, hereby agree as follows: 1. Section 3 of the Agreement, captioned "Term", shall be deleted in its entirety and the following new language inserted in lieu thereof: "The term of this Agreement shall commence upon the day and year first above written ("Commencement Date") and shall continue until June 30, 2002, unless sooner terminated, as provided herein." 2. Section 4 of the Agreement, captioned "Compensation", is amended by deleting the compensation chart contained therein in its entirety and inserting the following in lieu thereof:
--------------------------------------------------------------------------- Period Compensation --------------------------------------------------------------------------- July 1, 1995 through June 30, 1996 $150,000 --------------------------------------------------------------------------- July 1, 1996 through June 30, 1997 $160,000 --------------------------------------------------------------------------- July 1, 1997 through June 30, 1998 $170,000 --------------------------------------------------------------------------- July 1, 1998 through June 30, 1999 $180,000 --------------------------------------------------------------------------- July 1, 1999 through June 30, 2000 $190,000 --------------------------------------------------------------------------- July 1, 2000 through June 30, 2001 $210,000 --------------------------------------------------------------------------- July 1, 2001 through June 30, 2002 $230,000 ---------------------------------------------------------------------------
3. Section 5 of the Agreement, captioned "Bonuses", is amended by deleting the target bonus chart contained therein in its entirety, and inserting the following in lieu thereof:
--------------------------------------------------------------------------- Fiscal Year Ending Target Bonus --------------------------------------------------------------------------- June 30, 1996 $70,000 --------------------------------------------------------------------------- June 30, 1997 $80,000 --------------------------------------------------------------------------- June 30, 1998 $90,000 --------------------------------------------------------------------------- June 30, 1999 $100,000 ---------------------------------------------------------------------------
24 2 --------------------------------------------------------------------------- June 30, 2000 $110,000 --------------------------------------------------------------------------- June 30, 2001 $130,000 --------------------------------------------------------------------------- June 30, 2002 $150,000 ---------------------------------------------------------------------------
4. The first paragraph of Section 13(c)(3) of the Agreement shall be deleted in its entirety and the following new language inserted in lieu thereof: "Payment Upon Termination By The Company. If the Company terminates this Agreement for any reason other than Good Cause, the Consultant shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the termination of this Agreement, all of the compensation and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the termination of the Agreement and ending on June 30, 2002." 5. The first paragraph of Section 13(c)(4) of the Agreement shall be deleted in its entirety and the following new language inserted in lieu thereof: "Payment Upon Termination By The Consultant. If the Consultant terminates this Agreement for Good Reason, other than Good Reason described in Section 13(a)(3)a), he shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the date of the Consultant's termination of this Agreement, all of the compensation and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Consultant's termination of this Agreement and ending on June 30, 2002. If the Consultant terminates this Agreement for the Good Reason described in Section 13(a)(3)a), then and in such event, he shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the date of the Consultant's termination of this Agreement, an amount equal to the lesser of (i) all of the compensation and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Consultant's termination and ending on June 30, 2002, or (ii) all of the compensation and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period commencing on the date of the Consultant's termination and ending on the third anniversary of the date of the Consultant's termination." 6. All other provisions of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the dates indicated below, the effective date of this First Amendment being the first day of February, 1999. COMPANY: ATTEST: MICROS SYSTEMS, INC. - ----------------- By: (SEAL) ---------------------- A. L. Giannopoulos President and Chief Executive Officer [Corporate Seal] CONSULTANT: WITNESS: - ---------------- ------------------------- (SEAL) Louis M. Brown, Jr. 25 EX-10.B 4 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10 - MATERIAL CONTRACTS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This First Amendment to the Employment Agreement is effective the first day of October, 1998 (the "First Amendment"), by and between MICROS SYSTEMS, INC., a Maryland corporation, with offices located at 12000 Baltimore Avenue, Beltsville, Maryland 20705 (hereinafter referred to as the "Company"), and Gary C. Kaufman, whose address is 10203 Castle Hill Court, Ellicott City, MD 21042 (hereinafter referred to as the "Executive"). WHEREAS, the Executive and the Company entered into an Employment Agreement dated May 28, 1997 (the "Agreement"); and WHEREAS, the parties hereto would like to amend the Agreement pursuant to this First Amendment in an effort both: (i) to reflect the rapid growth experienced by the Company, and the current status of the Company and the Executive relative to other similarly positioned entities; and (ii) to solidify the long-term management structure of the Company. NOW, THEREFORE, the Company and the Executive, for good and valuable consideration, and pursuant to the terms, conditions, and covenants contained herein, hereby agree as follows: 1. Section 3 of the Agreement, captioned "Term", shall be deleted in its entirety and the following new language inserted in lieu thereof: "Term. The term of this Agreement shall commence upon October 1, 1998, and shall be for a period of three years. The term of this Agreement shall be automatically renewed on October 1 of each year for successive three-year renewal terms thereafter, unless written notice is given by either party to the other party, pursuant to which a party states that it elects not to renew automatically the Agreement for an additional three-year renewal term. Such written notice of non-renewal must be provided to the other party not less than 120 days prior to the automatic renewal date. In the event a notice of non-renewal is tendered in accordance with the terms hereof, the Agreement shall continue until the end of the then existing three-year term, unless otherwise terminated as provided hereinbelow." 2. All other provisions of the Agreement shall remain in full force and effect. 26 2 IN WITNESS WHEREOF, the parties have executed this First Amendment as of the dates indicated below, the effective date of this First Amendment being the first day of October, 1998. COMPANY: ATTEST: MICROS SYSTEMS, INC. - ----------------- By: ----------------------- (SEAL) A.L. Giannopoulos President and Chief Executive Officer [Corporate Seal] EXECUTIVE: WITNESS: GARY C. KAUFMAN - ----------------- ------------------------- 27 EX-11 5 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE MICROS SYSTEMS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data) Share and per share amounts shown for the three month and six month periods ending December 31, 1997 have been retroactively restated to reflect a two-for-one stock split, effected in the form of a stock dividend, paid June 23, 1998:
Three months ended December 31, 1998 1997 --------- ---------- Weighted-average number of common shares 16,123 16,016 Dilutive effect of outstanding stock options 732 569 ------- ------- Weighted-average number of common and common equivalent shares outstanding 16,855 16,585 ======= ======= Net income $ 6,213 $ 4,616 ======= ======= Basic net income per common share $ 0.39 $ 0.29 ======= ======= Diluted net income per common share $ 0.37 $ 0.28 ======= =======
Six months ended December 31, 1998 1997 -------- ------- Weighted-average number of common shares 16,119 16,007 Dilutive effect of outstanding stock options 832 531 ------- ------- Weighted-average number of common and common equivalent shares outstanding 16,951 16,538 ======= ======= Net income $ 9,721 $ 7,631 ======= ======= Basic net income per common share $ 0.60 $ 0.48 ======= ======= Diluted net income per common share $ 0.57 $ 0.46 ======= =======
28 EX-27 6 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 DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1999 DEC-31-1998 14,494 0 95,880 2,964 32,640 152,417 45,117 22,879 218,135 95,835 11,557 0 0 403 103,708 218,135 92,555 147,233 47,291 81,658 0 0 1,290 16,693 6,677 9,721 0 0 0 9,721 0.60 0.57
-----END PRIVACY-ENHANCED MESSAGE-----