-----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, ANgjE1RADMiKUT+eHifd+HpIVAjc5ID3aKtOmFeP57SMZ9ph12d2plzVdSd6jk/q VCFgNocIH3MLxVGGlVdJqQ== /in/edgar/work/0000950133-00-004527/0000950133-00-004527.txt : 20001115 0000950133-00-004527.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950133-00-004527 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROS SYSTEMS INC CENTRAL INDEX KEY: 0000320345 STANDARD INDUSTRIAL CLASSIFICATION: [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: 765193 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 w42663e10-q.txt QUARTERLY REPORT 1 Form 10-Q UNITED STATES 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 September 30, 2000 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) 7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289 ----------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: 443-285-6000 ------------ 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 September 30, 2000, there were 17,347,218 shares of Common Stock, $0.025 par value, outstanding. 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2000 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 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, 2000, 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)
September 30, June 30, 2000 2000 ------------- ---------- ASSETS Current assets: Cash and cash equivalents $ 26,222 $ 26,211 Accounts receivable, net of allowance for doubtful accounts of $8,013 at September 30, 2000 and $7,791 at June 30, 2000 91,033 98,917 Inventories 30,654 34,292 Deferred income taxes 15,544 15,575 Prepaid expenses and other current assets 13,495 16,098 ---------- --------- Total current assets 176,948 191,093 Property, plant and equipment, net of accumulated Depreciation and amortization of $31,248 at September 30, 2000 and $29,800 at June 30, 2000 25,876 24,332 Deferred income taxes, non-current 9,541 9,840 Goodwill and intangible assets, net of accumulated amortization of $13,729 at September 30, 2000 and $12,963 at June 30, 2000 25,077 26,750 Purchased and internally developed software costs, net of accumulated amortization of $11,470 at September 30, 2000 and $11,191 at June 30, 2000 26,267 24,604 Other assets 2,360 2,358 ---------- --------- Total assets $ 266,069 $ 278,977 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank lines of credit $ 3,017 $ 522 Current portion of long-term debt 250 397 Current portion of capital lease obligations 45 63 Accounts payable 19,450 21,145 Accrued expenses and other current liabilities 33,559 39,814 Income taxes payable 6,724 15,021 Deferred income taxes 479 475 Deferred service revenue 25,967 20,126 ---------- --------- Total current liabilities 89,491 97,563 Long-term debt, net of current portion 3,402 3,729 Capital lease obligations, net of current portion 299 330 Deferred income taxes, non-current 11,092 11,138 Commitments and contingencies Minority interests 2,441 2,596 Shareholders' equity: Common stock, $0.025 par; authorized 50,000 shares; issued and outstanding 17,347 at September 30, 2000 and 17,336 at June 30, 2000 433 433 Capital in excess of par 54,442 54,225 Retained earnings 118,145 119,064 Accumulated other comprehensive loss (13,676) (10,101) ---------- --------- Total shareholders' equity 159,344 163,621 ---------- --------- Total liabilities and shareholders' equity $ 266,069 $ 278,977 ========== =========
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 September 30, ---------------------------------- 2000 1999 ------------------- ------------- Revenue: Hardware and software $ 39,251 $ 53,383 Service 34,758 34,044 ---------- --------- Total revenue 74,009 87,427 ---------- --------- Costs and expenses: Cost of sales Hardware and software 19,994 29,445 Service 18,150 16,674 ---------- --------- Total cost of sales 38,144 46,119 Selling, general and administrative expenses 29,927 24,869 Research and development expenses 4,133 3,774 Depreciation and amortization 3,315 2,656 ---------- --------- Total costs and expenses 75,519 77,418 ---------- --------- Income (loss) from operations (1,510) 10,009 Non-operating income (expense): Interest income 259 163 Interest expense (116) (146) Other expense, net (165) (989) ---------- --------- Income (loss) before taxes, minority interests and equity in net earnings of affiliates (1,532) 9,037 Income taxes (621) 3,656 ---------- --------- Income (loss) before minority interests and equity in net earnings of affiliates (911) 5,381 Minority interests and equity in net earnings of affiliates (8) (243) ---------- --------- Net income (loss) $ (919) $ 5,138 ====== ====== Net income (loss) per common share: Basic $ (0.05) $ 0.32 ====== ====== Diluted $ (0.05) $ 0.30 ====== ====== Weighted-average number shares outstanding: Basic 17,344 16,290 ====== ====== Diluted 17,344 17,373 ====== ======
The accompanying notes are an integral part of the consolidated financial statements. 4 5 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Three Months Ended September 30, 2000 (Unaudited, in thousands)
Accumulated Common Stock Capital Other ------------------- in Excess Retained Comprehensive Shares Amount of Par Earnings Loss Total --------- --------- ---------- ---------- ---- ----- Balance, June 30, 2000 17,336 $433 $54,225 $119,064 $(10,101) $163,621 Comprehensive loss Net loss -- -- -- (919) -- (919) Foreign currency translation adjustments -- -- -- -- (3,575) (3,575) -------- Total comprehensive loss -- -- -- -- -- (4,494) Stock issued upon exercise of options 11 -- 204 -- -- 204 Income tax benefit from stock options exercised -- -- 13 -- -- 13 ---- --- --- --- --- --- Balance, September 30, 2000 17,347 $433 $54,442 $118,145 $(13,676) $159,344 ====== ==== ======= ======== ========= ========
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)
Three Months Ended September 30, ----------------------------------- 2000 1999 ------------------ ------------- Net cash flows provided by operating activities: $ 6,241 $ 11,653 --------- ---------- Cash flows from investing activities: Purchases of property, plant and equipment (3,787) (2,077) Proceeds from dispositions of property, plant and equipment -- 74 Internally developed software (2,530) (1,439) Dividends paid to minority shareholders -- (8) Net cash paid for acquisitions, minority interests and contingent earn-out payments (2,295) (803) --------- ---------- Net cash used in investing activities (8,612) (4,253) --------- ---------- Cash flows from financing activities: Principal payments on line of credit (630) (8) Principal payments on long-term debt and capital lease obligations (280) (297) Proceeds from lines of credit 3,129 -- Proceeds from issuance of stock 204 3,330 --------- ---------- Net cash provided by financing activities 2,423 3,025 --------- ---------- Effect of exchange rate changes on cash (41) 33 --------- ---------- Net increase in cash and cash equivalents 11 10,458 Cash and cash equivalents at beginning of period 26,211 22,806 --------- ---------- Cash and cash equivalents at end of period $ 26,222 $ 33,264 ========= ==========
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 September 30, 2000 (Unaudited, in thousands, except per share data) 1. Inventories The components of inventories are as follows:
September 30, June 30, 2000 2000 ------------------ ----------------- Raw materials $ 4,087 $ 4,573 Work-in-process 269 576 Finished goods 26,298 29,143 ------------------ ----------------- $ 30,654 $ 34,292 ================== =================
2. New accounting standards In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements" to provide guidance regarding the recognition, presentation and disclosure of revenue in the financial statements. In March 2000, the SEC released SAB 101A, which delayed the implementation date of SAB 101 for registrants with fiscal years that begin between December 16, 1999 and March 15, 2000. Subsequently, the SEC released SAB 101B which further delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company is reviewing the provisions of the Bulletin. In March 2000, the Emerging Issues Task Force issued EITF 00-03, "Application of Statement of Position 97-2 in Hosting Arrangements". The software element covered by SOP 97-2 is only present in a hosting arrangement if the customer has a contractual right to take possession of the software at any time during the hosting period. Arrangements that do not give the customer such an option are service contracts outside the scope of SOP 97-2. This statement will not have an impact on the Company's consolidated financial position, results of operation or cash flows. In July 2000, the Emerging Issues Task Force issued EITF 00-15, "Classification in the Statement of Cash Flows of the Income Tax Benefit Realized by a Company upon Employee Exercise of a Nonqualified Stock Option". EITF 00-15 states that the income tax benefit realized by the company upon employee exercise should be classified in the operating section of the statement of cash flows. The Company has elected to adopt EITF 00-15 as of June 2000. All comparative financial statements have been restated to reflect the change in classification within the Statements of Cash Flows from financing activities to operating activities. 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. MICROS filed a counterclaim against Budgetel, alleging breach of contract and defamation. Although the 7 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended September 30, 2000 (Unaudited, in thousands, except per share data) 3. Legal proceedings (continued) discovery phase of the litigation has been substantially completed, no trial date has been scheduled. 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 (loss) 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. Basic and diluted net loss per common share is computed using the weighted-average number of shares outstanding during the period and does not include unexercised stock options since their effect would be anti-dilutive due to the losses in the three-month period ended September 30, 2000. A reconciliation of the weighted-average number of common shares outstanding assuming dilution is as follows:
Three Months Ended September 30, 2000 1999 ------ --------- Net income (loss) $ (919) $ 5,138 ======= ========= Average common shares outstanding 17,344 16,290 Dilutive effect of outstanding stock options -- 1,083 ------- --------- Average common shares outstanding assuming dilution 17,344 17,373 ======= ========= Basic net income (loss) per share $ (0.05) $ 0.32 ======= ======== Diluted net income (loss) per share $ (0.05) $ 0.30 ======= ========
For the three-month periods ended September 30, 2000 and 1999, 2,245,000 options and 593 options, respectively, were excluded from the above reconciliation as these options were anti-dilutive for these periods. 5. Segment reporting data The Company develops, manufactures, sells and services point-of-sale computer systems, property management systems, central reservation and central information systems products for the hospitality industry. MICROS is organized and operates in two segments: U.S. and International. The International segment is primarily in Europe and the Pacific Rim. For purposes of applying SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," management views the U.S. and International segments separately in operating the business, although the products and services are similar for each segment. The following information is presented in accordance with the requirements of SFAS No. 131. 8 9 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended September 30, 2000 (Unaudited, in thousands, except per share data) 5. Segment reporting data (continued) A summary of the Company's operating segments is as follows:
Three Months Ended September 30, 2000 1999 ---- ---- Revenues (1): United States $ 38,447 $ 45,064 International 46,755 53,152 Intersegment eliminations (11,193) (10,789) -------- --------- Total revenues $ 74,009 $ 87,427 ======== ========= Income before taxes, minority interests, and equity in net earnings of affiliates (1): United States $ (6,748) $ (904) International 11,752 17,108 Intersegment eliminations (6,536) (7,167) -------- --------- Total income before taxes, minority interests, and equity in net earnings of affiliates $ (1,532) $ 9,037 ======== ========= September 30, June 30, 2000 2000 ---- ---- Identifiable assets (2): United States $149,797 $ 158,552 International 116,272 120,425 Intersegment eliminations -- -- -------- --------- Total identifiable assets $266,069 $ 278,977 ======== =========
(1) Amounts based on the location of the customer. (2) Amounts based on the location of the selling entity. 9 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - First Quarter Comparison The Company recorded a net loss of $0.05 per common share in the first quarter of fiscal 2001, compared with diluted net income of $0.30 per common share in the first quarter of fiscal 2000. For the quarter, the loss was primarily due to lower revenues in the U.S. and weakening European currencies. The currency effect lowered revenue approximately $3.2 million. Revenue of $74.0 million for the first quarter of fiscal 2001 decreased $13.4 million, or 15.3%, compared to the same period last year. A comparison of the sales mix for fiscal years 2001 and 2000 is as follows:
Three Months Ended September 30, 2000 1999 ---- ---- Hardware 36.9% 43.6% Software 16.1% 17.5% Service 47.0% 38.9% ----- ----- 100.0% 100.0%
Both hardware and software sales decreased in absolute dollars in fiscal 2001 in comparison to the prior year, primarily due to the continued slowdown in information technology purchases by the hospitality industry. Service sales increased in absolute dollars for the first quarter in comparison to the prior year first quarter primarily due to support revenues earned on a larger customer base. Combined hardware and software revenues for the first quarter of fiscal 2001 decreased $14.1 million, or 26.5%, while service revenues increased $0.7 million, or 2.1%, over the same period a year earlier. Cost of sales, as a percentage of revenue, decreased to 51.5% for the first quarter of fiscal 2001 from 52.8% for the first quarter of fiscal 2000. Cost of sales for hardware and software products, as a percentage of related revenue, was 50.9% in the first quarter of fiscal 2001 compared to 55.2% for the same quarter a year earlier. This decrease as a percentage of revenue is primarily due to the decrease of hardware sales as a percentage of total hardware and software sales. Service costs, as a percentage of service revenue, increased to 52.2% in the first quarter of fiscal 2001 compared to 49.0% in the same quarter in fiscal 2000. The increase was primarily due to a lower number of installations performed in fiscal 2001 resulting in lower labor utilization rates for service personnel. Selling, general and administrative expenses increased $5.1 million, or 20.3%, in the first quarter of fiscal 2001 compared to the same period last year. As a percentage of revenue, selling, general and administrative expenses increased to 40.4% in the first quarter of fiscal 2001 compared to 28.4% in the first quarter of fiscal 2000 due to decreased revenue and the acquisition of direct sales offices during the period October 1999 through June 2000. Research and development expenses (exclusive of capitalized software development costs), which consist primarily of labor costs, increased $0.4 million, or 9.5%, in the first quarter of fiscal 2001 compared to the same period a year earlier. Actual research and development expenditures, including capitalized software development costs of $2.5 million in the first quarter of fiscal 2001 and $1.4 million in the first quarter of fiscal 2000, increased $1.5 million, or 27.8%, compared to the same period a year earlier. The increase in absolute dollars for the three-month period is primarily due to increased expenditures in the Company's hotel business. 10 11 Income from operations for the first quarter of fiscal 2000 was $10.0 million, or 11.4% of revenue, compared to a loss of $1.5 million, or 2.0% of revenue, in the first quarter of fiscal 2001. The reduction is primarily due to the lower volume of sales in fiscal 2001 and the higher operating expenses due to new direct sales offices added since October 1999. Other expense decreased from $1.0 million for the first quarter of fiscal 2000 to $0.2 million in the first quarter of fiscal 2001. The Company experienced translation loss of $0.9 million in the first quarter of fiscal 2000 compared to a loss of $0.2 million in the first quarter of fiscal 2001. The translation loss is primarily due to changes in exchange rates between the German mark and the U.S. dollar and between the Australian dollar and the U.S. dollar. The effective tax rate for the first quarter of fiscal 2001 and fiscal 2000 was 40.5%. The European Union ("EU") filed a challenge against the U.S. Foreign Sales corporation ("FSC") tax provisions with the World Trade Organization ("WTO"). On February 25, 2000, the WTO issued a final decision upholding this challenge. Officials representing the United States on trade issues continue to seek resolution through a negotiated settlement. It is currently not possible to predict what impact, if any, this issue will have on future earnings pending final resolution of the matter with the WTO, EU, and the United States. Year 2000 In 1997, the Company created a corporate-wide Year 2000 project team representing all business units of the Company. 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 time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. 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. On the basis of information currently available, MICROS believes that it did not experience any material problems relating to the Year 2000 issues. While MICROS did uncover certain minor issues relating to date dependent data, none were material and all were promptly addressed. Accordingly, the Year 2000 task force had been disbanded in February 2000. Any remaining issues that may surface will be handled through the Company's customer service organization. Nonetheless, the Company will continue to monitor products to attempt to assure that there are no uncorrected problems. While the Company believes it has diligently addressed the Year 2000 issues and that it has satisfactorily resolved any Year 2000 problems, it is possible hitherto undetected problems could be uncovered in the future. Year 2000 Compliance Costs To date, 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 have been charged to expense as incurred. All of these costs were 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 have not and will not in the future have a material adverse effect on the results of operations or financial position of the Company in any given quarter. As of June 30, 2000, not including the costs incurred to upgrade the Company's internal management information systems, the Company had incurred approximately $2.2 million in expenditures related to the Year 2000 issue. Costs capitalized through June 30, 2000 to implement the Company's new Year 2000 11 12 compliant internal management information systems, which address a large variety of informational and processing needs, are approximately $8.5 million. 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 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 September 30, 2000, 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. The Company currently does not expect these costs to be material to its results of operations, financial condition or liquidity. Liquidity and Capital Resources The Company has a $45.0 million multi-currency unsecured committed line of credit expiring on December 31, 2000. Prior to this upcoming expiration date, the Company anticipates that it will renew this line of credit for an additional one-year period. The Company has the one-time option to convert the line of credit into a three-year secured term loan upon expiration of the line of credit. As of September 30, 2000, there is $3.0 million outstanding under this line of credit. In addition, the Company has a credit relationship from a European bank in the amount of DM 15.0 million (approximately $6.8 million at the September 30, 2000 exchange rate). Under the terms of this facility, the Company may borrow in the form of either a line of credit or term debt. Under the credit facility, the Company has a balance of DM 5.0 million (approximately $2.3 million at the September 30, 2000 exchange rate) in the form of balloon debt and has no line of credit borrowings. As the Company has significant international operations, its DM-denominated borrowings do not represent a significant foreign exchange risk. Also, due to an acquisition in June 2000, the Company has a line of credit and a line for term loans of $0.7 million. The agreement requires the Company to satisfy certain financial covenants. The line of credit can be borrowed in either U.S. dollars or Canadian dollars. The interest rate charged is the prime rate plus 1 percent (1%). As of September 30, 2000, the Company had no balance outstanding on the line of credit and $0.1 million outstanding in term loans. Net cash provided by operating activities for fiscal 2001 was $6.2 million versus $11.7 million for fiscal 2000. The reduction in net cash for fiscal 2001 relative to fiscal 2000 was caused, by among other factors: (i) slowdown in information technology purchases due to Year 2000 driven purchases in calendar 1999; (ii) longer and delayed sales cycles due to the introduction of new and/or untested technologies, such as Internet-based technologies; and (iii) European currency weakness relative to the dollar. The Company used $8.6 million for investing activities in fiscal 2001, including $6.3 million for the purchase of property, plant, and equipment and internally developed software and $2.3 million for contingent earn-out payments and business acquisitions. Net financing activities for fiscal 2001 provided $2.4 12 13 million, primarily from proceeds of $3.1 million on the line of credit during fiscal 2001 which was offset by $0.9 million in repayments on the lines of credit, long term debt and capital lease obligations. The cash position of the Company at September 30, 2000 was $26.2 million. All cash is being held for the operation and expansion of the business. 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 or converted into term debt, 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 2001 will be approximately $9.0 million. Summary Until calendar year 2000, the Company had experienced rapid revenue growth at a rate that it believes had significantly exceeded that of the global market for point-of-sale computer systems and property management information systems products for the hospitality industry. In light of current market conditions, the Company does not expect to maintain growth at historic 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 product and service margins to decline. There can be no assurance that the Company will be able to continue to increase sufficiently sales of its higher margin products, including software, to prevent future declines in the Company's overall gross margin. Moreover, MICROS's financial results in any single quarter are dependent upon the timing and size of customer orders and the shipment of products for large orders. Large software orders from customers may account for more than an insignificant portion of earnings in any quarter. The customers with whom MICROS does the largest amount of business are expected to vary from year to year as a result of the timing for the roll-out of each customer's system. Furthermore, if a customer delays or accelerates its delivery requirements or a product's completion is delayed or accelerated, revenues expected in a given quarter may be deferred or accelerated into subsequent or earlier quarters. The market price of MICROS Common Stock is volatile, and may be subject to significant fluctuations in response to variations in MICROS's quarterly operating results and other factors such as announcements of technological developments or new products by MICROS, customer roll-outs, technological advances by existing and new competitors, and general market conditions in the hospitality industry. In addition, conditions in the stock market in general and shares of technology companies in particular have experienced significant price and volume fluctuations which have at times been unrelated to the operating performance of companies. Moreover, some of the statements contained herein not based on historic facts are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, 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 OPERA products and the newest versions of the 3700 RES; 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 13 14 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, 2000. 14 15 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2000 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company has experienced rapid growth internationally. MICROS's 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 28 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. Recent weakness in certain European currencies has, however, adversely impacted the financial performance of the Company. 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. Further, 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. 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. Finally, the Company's unsecured committed line of credit bears interest at a floating rate of interest. It does not invest in financial instruments designed to protect against interest rate fluctuations, although it will continue to evaluate the need to do so in the future. 15 16 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2000 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. MICROS filed a counterclaim against Budgetel, alleging breach of contract and defamation. Although the discovery phase of the litigation has been substantially completed, no trial date has been scheduled. 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. 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 None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None 16 17 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2000 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) November 14, 2000 /s/ Gary C. Kaufman - ------------------ --------------- Gary C. Kaufman Executive Vice President, Finance and Administration/Chief Financial Officer November 14, 2000 /s/ Roberta J. Watson - ------------------ ----------------- Roberta J. Watson Senior Vice President and Controller 17 18 EXHIBIT INDEX
Sequentially Exhibit Numbered Page - ------- ------------- 27. Financial Data Schedule N/A
18 EX-27 2 w42663ex27.txt 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 SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-30-2001 SEP-30-2000 26,222 0 99,046 8,013 30,654 176,948 57,124 31,248 266,069 89,491 3,267 0 0 433 159,344 266,069 39,251 74,009 19,994 75,519 0 0 116 (1,532) (621) (911) 0 0 0 (919) (.05) (.05)
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