-----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, JFMpr3viRKFloh2XYF8sfvWbOYlGcQUvUoUZFjhRyYjiJqB/AQQDu0NPcKa+4WQz 15BA4UcYI9I5iBZ8Nm4wJw== 0000950133-01-503303.txt : 20020410 0000950133-01-503303.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950133-01-503303 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROS SYSTEMS INC CENTRAL INDEX KEY: 0000320345 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 521101488 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09993 FILM NUMBER: 1790715 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 w54897e10-q.txt FORM 10-Q 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, 2001 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, 2001, there were 17,500,443 shares of Common Stock, $0.025 par value, outstanding. 1 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2001 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, 2001, as filed with the Securities and Exchange Commission. 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except per share data)
September 30, June 30, 2001 2001 ------------- -------- ASSETS Current assets: Cash and cash equivalents $ 29,732 $ 26,456 Accounts receivable, net of allowance for doubtful accounts of $8,063 at September 30, 2001 and $7,508 at June 30, 2001 91,810 84,779 Inventories 28,042 28,547 Deferred income taxes 6,960 6,955 Prepaid expenses and other current assets 12,262 11,032 -------- -------- Total current assets 168,806 157,769 Property, plant and equipment, net of accumulated depreciation and amortization of $37,054 at September 30, 2001 and $35,366 at June 30, 2001 23,220 23,553 Deferred income taxes, non-current 23,823 23,573 Goodwill and intangible assets, net of accumulated amortization of $20,747 at September 30, 2001 and $18,483 at June 30, 2001 37,428 35,182 Purchased and internally developed software costs, net of accumulated amortization of $14,003 at September 30, 2001 and $12,699 at June 30, 2001 31,728 31,529 Other assets 3,089 2,850 -------- -------- Total assets $288,094 $274,456 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank lines of credit $11,688 $4,659 Current portion of long-term debt 143 2,317 Current portion of capital lease obligations 101 131 Accounts payable 23,468 21,980 Accrued expenses and other current liabilities 31,782 35,417 Income taxes payable 4,246 5,200 Deferred income taxes 576 547 Deferred service revenue 33,267 26,874 -------- -------- Total current liabilities 105,271 97,125 Long-term debt, net of current portion 955 979 Capital lease obligations, net of current portion 259 252 Deferred income taxes, non-current 14,233 14,213 Other non-current liabilities 1,100 936 Commitments and contingencies Minority interests 2,352 2,103 Shareholders' equity: Common stock, $0.025 par; authorized 50,000 shares; issued and outstanding 17,500 at September 30, 2001 and 17,475 at June 30, 2001 438 437 Capital in excess of par 56,877 56,515 Retained earnings 119,239 118,360 Accumulated other comprehensive loss (12,630) (16,464) -------- -------- Total shareholders' equity 163,924 158,848 -------- -------- Total liabilities and shareholders' equity $288,094 $274,456 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)
Three Months Ended September 30, -------------------------------- 2001 2000 ---- ---- Revenue: Hardware and software $42,698 $39,588 Service 40,813 34,758 ------ ------ Total revenue 83,511 74,346 ------ ------ Costs and expenses: Cost of sales Hardware and software 24,253 20,314 Service 19,190 18,167 ------ ------ Total cost of sales 43,443 38,481 Selling, general and administrative expenses 28,680 29,927 Research and development expenses 4,826 4,133 Depreciation and amortization 3,755 3,315 ------ ------ Total costs and expenses 80,704 75,856 ------ ------ Income (loss) from operations 2,807 (1,510) Non-operating income (expense): Interest income 235 259 Interest expense (288) (116) Other expense, net (1,086) (165) ------ ------ Income (loss) before taxes, minority interests and equity in net earnings of affiliates 1,668 (1,532) Income tax expense (benefit) 667 (621) ------ ------ Income (loss) before minority interests and equity in net earnings of affiliates 1,001 (911) Minority interests and equity in net earnings of affiliates (122) (8) ------ ------ Net income (loss) $ 879 $ (919) ====== ====== Net income (loss) per common share: Basic $0.05 $(0.05) ====== ====== Diluted $0.05 $(0.05) ====== ====== Weighted-average number shares outstanding: Basic 17,492 17,344 ====== ====== Diluted 17,722 17,344 ====== ======
The accompanying notes are an integral part of the consolidated financial statements. 4 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Three Months Ended September 30, 2001 (Unaudited, in thousands)
Accumulated Capital Other Common Stock in Excess Retained Comprehensive Shares Amount Of Par Earnings Loss Total ------ ------ ------ -------- ---- ----- Balance, June 30, 2001 17,475 $437 $56,515 $118,360 $(16,464) $158,848 Comprehensive income Net income -- -- -- 879 -- 879 Foreign currency translation adjustments -- -- -- -- 3,834 3,834 -------- Total comprehensive income -- -- -- -- -- 4,713 Stock issued upon exercise of options 25 1 303 -- -- 304 Income tax benefit from stock options exercised -- -- 59 -- -- 59 ------ ---- ------- -------- -------- -------- Balance, September 30, 2001 17,500 $438 $56,877 $119,239 $(12,630) $163,924 ====== ==== ======= ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 5 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed and unaudited, in thousands)
Three Months Ended September 30, -------------------------------- 2001 2000 ---- ---- Net cash flows provided by operating activities: $3,873 $6,241 ------ ------ Cash flows from investing activities: Purchases of property, plant and equipment (1,419) (3,787) Proceeds from dispositions of property, plant and equipment -- Internally developed software (994) (2,530) Proceeds from settlement 200 -- Purchase of equity interest in investees (51) -- Net cash paid for acquisitions, minority interests and contingent earn-out payments (3,433) (2,295) ------ ------ Net cash used in investing activities (5,697) (8,612) ------ ------ Cash flows from financing activities: Principal payments on line of credit (3,006) (630) Principal payments on long-term debt and capital lease obligations (2,420) (280) Proceeds from lines of credit 10,174 3,129 Proceeds from issuance of stock 304 204 ------ ------ Net cash provided by financing activities 5,052 2,423 ------ ------ Effect of exchange rate changes on cash 48 (41) ------ ------ Net increase in cash and cash equivalents 3,276 11 Cash and cash equivalents at beginning of period 26,456 26,211 ------ ------ Cash and cash equivalents at end of period $29,732 $26,222 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 6 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended September 30, 2001 (Unaudited, in thousands, except per share data) 1. Inventories The components of inventories are as follows:
September 30, June 30, 2001 2001 --------------- -------------- Raw materials $ 6,323 $ 3,736 Work-in-process 1,170 445 Finished goods 20,549 24,366 --------------- -------------- $ 28,042 $ 28,547 =============== ==============
2. New accounting standards In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141") and No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS No. 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. FAS No. 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill be amortized over their useful lives. FAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is before June 30, 2001. The provisions of FAS No. 142 will be effective for fiscal years beginning after December 15, 2001. The Company is currently reviewing the provisions of these statements. In September 2000, the Emerging Issues Task Force ("EITF") issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs" which states that all amounts billed to a customer in a sale transaction related to shipping and handling represents revenues earned and as such, should be classified as revenue. The Company has adopted EITF 00-10 as of July 2001. All comparative financial statements reflect the change in classification within the income statement. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"). FAS 144 supercedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." FAS 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30, "Reporting Results of Operations- Reporting the Effects of Disposal of a Segment of a Business." FAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001. Management is currently determining what effect, if any, FAS 144 will have on its financial position and results of operations. 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. 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. 7 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended September 30, 2001 (Unaudited, in thousands, except per share data) A reconciliation of the weighted-average number of common shares outstanding assuming dilution is as follows:
Three Months Ended September 30, 2001 2000 ---- ---- Net income (loss) $ 879 $ (919) ------ ------ Average common shares outstanding 17,492 17,344 Dilutive effect of outstanding stock options 230 -- ------ ------ Average common shares outstanding assuming dilution 17,722 17,344 ------ ------ Basic net income (loss) per share $0.05 $(0.05) ====== ======= Diluted net income (loss) per share $0.05 $(0.05) ====== =======
For the three-month periods ended September 30, 2001 and 2000, 1,839 options and 2,245 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, the Pacific Rim and Latin America. 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. A summary of the Company's operating segments is as follows:
Three Months Ended September 30, Revenues(1): 2001 2000 ---- ---- United States $46,405 $38,714 International 48,535 46,825 Intersegment eliminations (11,429) (11,193) -------- -------- Total revenues $83,511 $74,346 ======== ======== Income (loss) before taxes, minority interests, and equity in net earnings of affiliates (1): United States $(6,174) $(6,748) International 14,730 11,752 Intersegment eliminations (6,888) (6,536) -------- -------- Total income (loss) before taxes, minority interests, and equity in net earnings of affiliates $1,668 $(1,532) ======== ========
September 30, June 30, 2001 2001 ---- ---- Identifiable assets (2): United States $147,025 $145,568 International 141,069 128,888 Intersegment eliminations -- -- -------- -------- Total identifiable assets $288,094 $274,456 ======== ========
(1) Amounts based on the location of the customer. (2) Amounts based on the location of the selling entity. 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2001 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - First Quarter Comparison The Company recorded a diluted net income of $0.05 per common share in the first quarter of fiscal 2002, compared with a net loss of $0.05 per common share in the first quarter of fiscal 2001. The increase was mainly due to an increase in sales volume. Revenue increased by $9.2 million or 12.3% to $83.5 million for the first quarter of fiscal 2002 compared to the same period last year. A comparison of the sales mix for fiscal years 2002 and 2001 is as follows:
Three Months Ended September 30, 2001 2000 ---- ---- Hardware 35.2% 37.2% Software 16.0% 16.1% Service 48.8% 46.7% ----- ----- 100.0% 100.0% ===== =====
Combined hardware and software revenues for the first quarter of fiscal 2002 increased $3.1 million, or 7.9%, and service revenues increased $6.1 million, or 17.4%, over the same period a year earlier. Combined hardware and software sales increased, in absolute dollars, in the first quarter of fiscal 2002 in comparison to the prior year primarily due to the acquisitions of Indatec GMbH & CO KG in January 2001 and the assets of the hospitality division of Hospitality Solutions International ("HSI") in October 2000. Service revenues increased primarily due to support revenues earned on a larger customer base. Cost of sales, as a percentage of revenue, remained relatively constant at 52.0% and 51.8% for the first quarter of fiscal 2002 and 2001, respectively. Cost of sales for hardware and software products, as a percentage of related revenue, increased to 56.8% in the first quarter of fiscal 2002 compared to 51.3% for the same quarter a year earlier. This increase, as a percentage of revenue, is primarily due to the increase of third party software sales, which generate lower margins. Service costs, as a percentage of service revenue, decreased to 47.0% in the first quarter of fiscal 2002 compared to 52.3% in the same quarter in fiscal 2001. The decrease was primarily due to the 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. Selling, general and administrative expenses decreased $1.2 million, or 4.2%, in the first quarter of fiscal 2002 compared to the same period last year. As a percentage of revenue, selling, general and administrative expenses decreased to 34.3% in the first quarter of fiscal 2002 compared to 40.3% in the first quarter of fiscal 2001. The decrease is primarily due to the Company's continued efforts to reduce expenses, partially offset by operating expenses of recent acquisitions. Research and development expenses (exclusive of capitalized software development costs), which consist primarily of labor costs, increased $0.7 million, or 16.8%, in the first quarter of fiscal 2002 compared to the same period a year earlier. The increase is primarily due to the release of Opera software in June 2001. Upon general release of a product, all new expenditures are charged to operations as incurred and previously capitalized amounts are amortized. Actual research and development expenditures, including capitalized software development costs of $1.0 million in the first quarter of fiscal 2002 and $2.5 million in the first quarter of fiscal 2001, decreased $0.8 million, or 12.75%, compared to the same period a year earlier. The decrease is mainly due to the reduction of outside consulting costs. Income from operations for the first quarter of fiscal 2002 was $2.8 million, or 3.4% of revenue, compared to a loss of $1.5 million, or 2.0% of revenue, in the first quarter of fiscal 2001. The increase is primarily due to higher sales volume and the Company's continued efforts to reduce operating expenses. Other expense increased from $0.2 million for the first quarter of fiscal 2001 to $1.1 million in the first quarter of fiscal 2002. The Company experienced foreign currency translation loss of $1.0 million in the first quarter of fiscal 2002 compared 9 to a loss of $0.2 million in the first quarter of fiscal 2001. The translation loss is primarily due to fluctuations in exchange rates with the Euro, South African Rand and Australian Dollar. The effective tax rate for the first quarter of fiscal 2002 and fiscal 2001 was 40.0% and 40.5%, respectively. The European Union ("EU") filed a challenge against the U.S. Foreign Sales corporation ("FSC") tax provisions with the World Trade Organization ("WTO"). On July 23, 2001, 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. 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, 2001, of the twelve countries currently admitted to the EMU, the Company has subsidiary operations in six of those countries and distributor relationships in the remaining six 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 currently has a $45.0 million multi-currency committed line of credit expiring on December 31, 2001. The financing agreement was amended on April 30, 2001 to include a security interest in inventory and receivables located in the United States. 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, 2001, there is a balance outstanding of US $9.0 million, SEK 3.5 million (approximately $0.3 million at the September 30, 2001 exchange rate), ZAR 10.6 million (approximately $1.2 million at the September 30, 2001 exchange rate) and JPY 140.0 million (approximately $1.2 million at the September 30, 2001 exchange rate) under this line of credit. The Company also has a credit relationship from a European bank in the amount of DM 15.0 million (approximately $7.0 million at the September 30, 2001 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 previously had a balance of DM 5.0 million (approximately $2.2 million at the June 30, 2001 exchange rate), which was discharged in full in September 2001. Net cash provided by operating activities for fiscal 2002 was $3.9 million. The Company used $5.7 million for investing activities in fiscal 2002, including $2.4 million for the purchase of property, plant, and equipment and internally developed software and $3.4 million for earn-out payments. Net financing activities for fiscal 2002 provided $5.1 million, primarily from the proceeds from the line of credit of $10.2 million offset by $5.4 million in repayments on the line of credit, long-term debt and capital lease obligations. The cash position of the Company at September 30, 2001 was $29.7 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 2002 will be approximately the same as fiscal 2001. 10 Summary Until the first quarter of calendar year 2000, the Company had experienced rapid revenue growth at a rate that it believes had 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 weaker market conditions, the Company's growth rate declined. Currently, given the weak worldwide economic conditions, and the general financial uncertainty triggered in part by the terrorist attacks on September 11, 2001, 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. 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: political and world instability created by additional terrorist attacks, which gravely impacts the travel and tourism industries; 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; unexpected currency fluctuations; impact of competitive products and pricing on margins; product development delays; technological difficulties associated with new product releases; 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, 2001. 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2001 Item 3. Quantitative and Qualitative Disclosures about Market Risk Until calendar year 2000, the Company had experienced 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 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, as most recently demonstrated by the terrorist attacks of September 11, 2001. Political and economic instability and uncertainty caused by terrorism, and the resultant conflicts designed to thwart terrorism, adversely impact the travel, tourism and hospitality industries which the Company serves. The Company is also subject to the effects of, and changes in, laws and regulations, other activities of governments, agencies and similar organizations. Finally, the Company's 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. 12 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2001 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. Items 2 through 5. No events occurred during the quarter covered by the report that would require a response to any of these items. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - None 13 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 2001 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, 2001 /s/ Gary C. Kaufman ------------------------ Executive Vice President, Finance and Administration/ Chief Financial Officer November 14, 2001 /s/ Cynthia A. Russo ------------------------ Cynthia A. Russo Vice President and Corporate Controller 14 -----END PRIVACY-ENHANCED MESSAGE-----