-----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, PwFX+zl1hiUT7P2yUclzdDsMHHpLXB6HtWtFWtjOzD/L1TU6I5NkZ48QIsPesFIx kDUbD5bWqqbRI96eXOgsVg== 0000950133-97-000469.txt : 19970222 0000950133-97-000469.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950133-97-000469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROS SYSTEMS INC CENTRAL INDEX KEY: 0000320345 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 521101488 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09993 FILM NUMBER: 97535924 BUSINESS ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705 BUSINESS PHONE: 3012016000 MAIL ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705-1291 10-Q 1 MICROS SYSTEMS, INC. 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, 1996 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, 1996, there were 7,957,984 shares of Common Stock, $.025 par value, outstanding. 1 2 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 PART I - Financial Information Item 1. Financial Statements. General The information contained in this report is furnished for the Registrant, MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as "MICROS" or the "Company"). In the opinion of management, the information in this report contains all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the results for the interim periods presented. The financial information has been reviewed by the Company's independent accountants, Price Waterhouse LLP, and a copy of its report is attached. The financial information presented herein should be read in conjunction with the financial statements included in the Registrant's Form 10-K for the fiscal year ended June 30, 1996, as filed with the Securities and Exchange Commission. With respect to the unaudited consolidated financial information for the three and six month periods ended December 31, 1996 and 1995, Price Waterhouse LLP has reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated February 10, 1997, appearing herein, states that it did not audit and it does not express an opinion on that unaudited consolidated financial information. Price Waterhouse LLP has not conducted any significant or additional audit tests beyond those which would have been necessary if its report had not been included. Accordingly, the degree of reliance on its reports on such information should be restricted in light of the limited nature of the review procedures applied. Price Waterhouse LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its report on the unaudited consolidated financial information because such report is not a "report" within the meaning of Sections 7 and 11 of the Securities Act of 1933. 2 3 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except per share data)
December 31, June 30, 1996 1996 ---- ---- ASSETS - ------ Current assets: Cash and cash equivalents $ 13,970 $ 15,231 Accounts receivable, net of allowance for doubtful accounts of $2,059 at December 31, 1996 and $2,016 at June 30, 1996 55,310 49,250 Inventories 18,172 15,138 Deferred income taxes 3,899 3,899 Prepaid expenses and other current assets 3,925 4,420 --------- --------- Total current assets 95,276 87,938 Property, plant and equipment, net of accumulated depreciation and amortization of $13,952 at December 31, 1996 and $13,332 at June 30, 1996 16,980 15,623 Note receivable 225 225 Deferred income taxes, non-current 5,539 5,580 Goodwill and intangible assets, net of accumulated amortization of $4,754 at December 31, 1996 and $3,346 at June 30, 1996 19,665 20,746 Purchased and internally developed software costs, net of accumulated amortization of $3,841 at December 31, 1996 and $2,650 at June 30, 1996 8,889 6,287 Other assets 616 437 --------- --------- Total assets $147,190 $136,836 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Bank lines of credit $ 13,486 $ 14,947 Current portion of long-term debt 3,984 5,238 Current portion of capital lease obligation 134 124 Accounts payable 14,296 12,726 Accrued expenses and other current liabilities 24,062 23,927 Income taxes payable 3,381 986 Deferred service revenue 12,805 9,295 --------- --------- Total current liabilities 72,148 67,243 Long-term debt, net of current portion 5,022 6,704 Capital lease obligation, net of current portion 3,389 3,458 Deferred income taxes 2,595 2,588 Minority interests 1,449 648 --------- --------- Total liabilities 84,603 80,641 --------- --------- Commitments and contingencies Shareholders' equity: Common stock, $.025 par; authorized 10,000 shares; issued and outstanding 7,958 at December 31, 1996 and 7,944 at June 30, 1996 199 199 Capital in excess of par 16,375 16,253 Retained earnings 46,132 39,794 Accumulated foreign currency translation adjustments (119) (51) --------- --------- Total shareholders' equity 62,587 56,195 --------- --------- Total liabilities and shareholders' equity $147,190 $136,836 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 3 4 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)
Three Months Ended December 31, ------------------------------- 1996 1995 ---------- -------- Revenue: Hardware and software $35,867 $29,646 Service 20,090 13,242 -------- -------- Total revenues 55,957 42,888 -------- -------- Costs and expenses: Cost of sales Hardware and software 17,613 16,207 Service 10,060 5,491 -------- -------- Total cost of sales 27,673 21,698 Selling, general and administrative expenses 16,813 13,293 Research and development expenses 2,467 1,673 Purchased incomplete software technology 0 14,770 Depreciation and amortization 1,511 867 -------- -------- Total costs and expenses 48,464 52,301 -------- -------- Income (loss) from operations 7,493 (9,413) Non-operating income (expense): Interest income 113 263 Interest expense (371) (365) Other income (expense), net 101 100 -------- -------- Income (loss) before taxes and minority interest and equity in net earnings of affiliates 7,336 (9,415) Income tax expense (benefit) 2,938 (4,575) -------- -------- Income (loss) before minority interest and equity in net earnings of affiliates 4,398 (4,840) Minority interest and equity in net earnings of affiliates (387) (248) -------- -------- Net income (loss) $ 4,011 $(5,088) ======== ======== Net income (loss) per common and common equivalent share $ .50 $ (0.63) ======== ======== Weighted-average number of common and common equivalent shares outstanding 8,055 8,015 ======== ========
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, ------------------------------ 1996 1995 ---------- ---------- Revenue: Hardware and software $66,828 $54,410 Service 36,645 20,838 -------- -------- Total revenues 103,473 75,248 -------- -------- Costs and expenses: Cost of sales Hardware and software 32,581 28,950 Service 18,463 9,147 -------- -------- Total cost of sales 51,044 38,097 Selling, general and administrative expenses 32,806 22,853 Research and development expenses 4,413 3,041 Purchased incomplete software technology 0 14,770 Depreciation and amortization 3,317 1,386 -------- -------- Total costs and expenses 91,580 80,147 -------- -------- Income (loss) from operations 11,893 (4,899) Non-operating income (expense): Interest income 219 602 Interest expense (782) (453) Other income (expense), net 142 (68) -------- -------- Income (loss) before taxes and minority interest and equity in net earnings of affiliates 11,472 (4,818) Income tax expense (benefit) 4,592 (2,948) -------- -------- Income (loss) before minority interest and equity in net earnings of affiliates 6,880 (1,870) Minority interest and equity in net earnings of affiliates (542) 36 -------- -------- Net income (loss) $ 6,338 $(1,834) ======== ======== Net income (loss) per common and common equivalent share $ .79 $ (0.23) ======== ======== Weighted-average number of common and common equivalent shares outstanding 7,997 7,998 ======== ========
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)
Six months ended December 31, ----------------------------- 1996 1995 --------- ---------- Net cash flows from operating activities: $10,283 $(8,920) -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (3,100) (2,472) Proceeds on dispositions of property, plant and equipment 35 -- Purchased and internally developed software costs (3,450) (430) Sale of short-term investments -- 3,170 Dividends (to) minority owners and received from affiliates (112) 581 Loan to affiliate -- (2,347) Net cash paid for acquisitions and minority interests (494) (27,036) -------- -------- Net cash used in investing activities (7,121) (28,534) -------- -------- Cash flows from financing activities: Principal payments on line of credit (1,451) -- Principal payments on long-term debt and capital lease obligation (3,155) (214) Proceeds from line of credit and long term debt 59 22,044 Proceeds from issuance of stock 99 273 Income tax benefit from stock options exercised 25 66 -------- -------- Net cash (used in) provided by financing activities (4,423) 22,169 -------- -------- Net decrease in cash and cash equivalents (1,261) (15,285) Cash and cash equivalents at beginning of period 15,231 23,215 -------- -------- Cash and cash equivalents at end of period $13,970 $ 7,930 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 943 $ 337 ======== ======== Income taxes $ 2,216 $ 3,244 ======== ========
Supplemental schedule of noncash financing and investing activities: In August 1995, the Company purchased the remaining 77% of D.A.C. Systemes/MICROS France and AD-Maintenance Informatique ("ADMI") for FF 14,000,000 (approximately $2,800,000 at exchange rates in effect at the date of purchase), payable FF 8,000,000 at closing and FF 6,000,000 over the next four years, plus potential additional payments based on earnings over the next four years. The unamortized discount on the note, based on an imputed annual interest rate of 8.75%, is $115,800 at December 31, 1996. In October 1996, the Company purchased the remaining 30% interest in one of its majority-owned subsidiaries for $399,000, payable $79,800 at closing and $319,200 over the next four years, beginning October 1, 1997. The note bears interest at the prime rate and is adjusted annually each October 1st. The accompanying notes are an integral part of the consolidated financial statements. 6 7 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended December 31, 1996 (Unaudited) 1. Inventories The components of inventories are as follows (in thousands):
December 31, June 30, 1996 1996 ----------------- ----------------- Raw materials $ 4,927 $ 3,528 Work-in-process 4,356 2,955 Finished goods 8,889 8,655 ----------------- ----------------- $ 18,172 $ 15,138 ================= =================
2. Acquisitions A. Fidelio Software GmbH On November 30, 1995, the Company acquired the remaining 70% of Fidelio Software GmbH ("Fidelio") for approximately $28.5 million in a transaction which has been accounted for under the purchase method. In fiscal 1993, 15% of the capital stock of Fidelio had been acquired and an additional 15% was acquired in October 1994, at which time MICROS began accounting for Fidelio under the equity method. Goodwill related to these purchases aggregated $20.5 million at November 30, 1995 and is being amortized over nine years. Unaudited pro forma information for the six-month period ended December 31, 1995, as if the acquisition had occurred on the first day of that period, but excluding a one-time write-off of the purchased incomplete software technology is shown below. Such pro forma information also reflects the pro forma effects of Fidelio's acquisition of 100% of the common stock of Executive Technologies of Southwest Florida, Inc. ("ETI") in October 1995 for $4,000,000.
Six Months Ended December 31, 1995 (in thousands, except per share data) ------------------------------------- Revenue $ 99,910 Net income $ 6,055 Net income per share $ 0.76
B. Minority Interests The Company acquired the minority interests in several of its subsidiaries during fiscal 1997 at a cost of approximately $700,000. Goodwill approximated this total amount and is being amortized over periods ranging from five to ten years. 3. Stock options On November 22, 1996, the shareholders of the Company voted to approve a proposal to increase the number of shares available under the 1991 Stock Option Plan by 600,000 with the aggregate number of shares that can be issued under the plan being 1,150,000. Following shareholder approval, the Company continued to grant options in accordance with the terms of the 1991 Stock Option Plan, as amended. Financial Accounting Standards Board Statement No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation, was issued in October 1995. Adoption of SFAS 123 is required for the Company's fiscal 1997 year-end financial statements. Under SFAS 123, the Company will continue to measure compensation expense for its stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. Beginning with financial statements 7 8 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Quarter Ended December 31, 1996 (Unaudited) 3. Stock options, continued for fiscal year ending June 30, 1997, the Company will provide pro forma disclosures of net income and earnings per share as if the fair value based method of accounting defined in SFAS 123 had been applied to the Company's stock option grants made subsequent to fiscal 1995. The impact of SFAS 123 on the Company's pro forma information to be provided has not been determined. 4. Legal proceedings MICROS is and has been involved in legal proceedings arising in the normal course of business. The Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that any resulting liability should not have a material adverse effect on the Company's results of operations or financial position. On May 24, 1996, Imperial Hotels Corp. ("Imperial") filed suit against Executive Technologies of Southwest Florida, Inc. ("ETI"), MICROS and Fidelio in the Superior Court of the State of California for the County of Los Angeles. Imperial alleged, among other things, that ETI, an indirect wholly owned subsidiary of MICROS, breached a software license agreement ETI entered into with Imperial prior to Fidelio's acquisition of ETI, and prior to MICROS' acquisition of Fidelio. On November 20, 1996, the parties to the lawsuit amicably settled all claims, and the litigation was dismissed with prejudice. The settlement requires ETI to provide to Imperial certain software upgrades to the central reservation system currently licensed by Imperial. This settlement, for which an accrual had been established, did not have a material effect on the Company's results of operations. 5. Reclassifications Certain balances have been reclassified to conform to fiscal 1997 presentation. 8 9 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 (Unaudited) Item 2. Management's discussion and analysis of financial condition and results of operations Liquidity and Capital Resources The Company has a $25.0 million unsecured committed line of credit which was renewed December 31, 1996 for an additional one year period, expiring on December 31, 1997. In addition, the Company obtained additional lines of credit from three European banks aggregating DM 15.0 million (approximately $9.7 million at the December 31, 1996 exchange rate) as a result of its November 1995 acquisition of Fidelio. At December 31, 1996, the Company had borrowed approximately $13.5 million and has approximately $21.2 million available. As the Company has significant international operations, its DM-denominated borrowings do not represent a significant foreign exchange risk. The Company does not engage in any foreign exchange hedging. In addition, the Company has long-term debt, both current and non-current, of approximately $9.0 million as of December 31, 1996. The majority of this debt stems from the Fidelio acquisition. Net cash provided by operating activities for the six months ended December 31, 1996 was $10.3 million. In addition, the Company used $6.6 million for the purchase of property, plant and equipment, internally developed software as well as software purchased from a third party. Financing activities for the first six months of fiscal 1997 used $4.4 million, primarily for debt repayment. The Company anticipates that its cash flow from operations along with available lines of credit, in conjunction with other lines of credit for which the Company may be eligible or lines of credit to be renewed, are sufficient to provide the working capital needs of the Company for the foreseeable future. The Company anticipates that its rate of property, plant and equipment expenditures for fiscal 1997 will continue to increase for the remainder of the fiscal year and will exceed fiscal 1996 expenditures by approximately $1.0 to $1.5 million. Results of Operations - Second Quarter and Six Month Comparisons The Company recorded net income of $.50 per common share in the second quarter of fiscal 1997, compared with a net loss of $.63 per common share in the second quarter of fiscal 1996. Net income for the six months ended December 31, 1996, was $.79 per common share compared with a net loss of $.23 per common share for the first six months of fiscal 1996. The second quarter and first six months of fiscal 1996 results include a one-time after tax charge of $8.1 million, or $1.01 per common share, for the write-off of purchased incomplete software technology associated with the acquisition of Fidelio. Excluding this one-time charge, the increased net income was primarily due to higher sales volumes and improved gross margins, partially offset by higher operating expenses, interest expense associated with debt financing, and a higher tax rate attributed to increased foreign income. Revenue of $55.9 million for the second quarter of fiscal 1997 increased $13.1 million, or 30.5%, compared to the same period last year. For the first six months of fiscal 1997, revenue increased $28.2 million to $103.5 million, or 37.5%, over the same period in fiscal 1996. A comparison of the sales mix for fiscal years 1997 and 1996 is as follows:
Three Months Ended Six Months Ended December 31, December 31, 1996 1995 1996 1995 ---- ---- ---- ---- Hardware 43.2% 54.9% 44.0% 59.5% Software 20.9% 14.2% 20.6% 12.8% Service 35.9% 30.9% 35.4% 27.7% ------ ------ ------ ------ 100.0% 100.0% 100.0% 100.0% ====== ====== ====== ======
9 10 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 Results of Operations - Second Quarter and Six Month Comparisons, Continued While hardware sales represent a smaller proportion of total sales in fiscal 1997 in comparison to the prior year, this category continued to grow in absolute dollars. The increases in software and service sales, relative to total sales are primarily due to the acquisition of Fidelio on November 30, 1995. Combined hardware and software revenues for the second quarter of fiscal 1997 increased $6.2 million, or 21.0%, while service revenues increased $6.9 million, or 51.7%, over the same period a year earlier. On a year-to-date basis, hardware and software sales increased $12.4 million, or 22.8%, while service revenues increased $15.8 million, or 75.9%, over the same period a year earlier. Cost of sales, as a percentage of revenue, decreased to 49.5% from 50.6% for the second quarter of fiscal 1997 compared to the second quarter of fiscal 1996. For the first six months of fiscal 1997, cost of sales, as a percentage of revenue, decreased to 49.3% from 50.6% for the same period a year earlier. Cost of sales for hardware and software products, as a percentage of related revenue, was 49.1% in the second quarter of fiscal 1997 compared to 54.7% for the same quarter a year earlier as a result of a favorable shift in sales distribution from the indirect to direct sales channels and an increase in higher-margin Fidelio software sales as a percentage of total revenue. For the first six months of fiscal 1997, cost of sales for hardware and software products, as a percentage of related revenue, was 48.8% compared to 53.2% for the same period in fiscal 1996. Service costs, as a percentage of service revenue, increased to 50.1% in the second quarter of fiscal 1997 compared to 41.4% in the same quarter in fiscal 1996. Service costs, as a percentage of service revenue, increased to 50.4% in the first six months of fiscal 1997 compared to 43.9% for the same period in fiscal 1996. The increased costs for both the quarter and year-to-date were primarily due to continued investment in the Company's service organization and infrastructure. Selling, general and administrative expenses increased $3.5 million, or 26.5%, in the second quarter of fiscal 1997 compared to the same period last year. As a percentage of revenue, selling, general and administrative expenses decreased to 30.0% in the second quarter of fiscal 1997 compared to 31.0% in the second quarter of fiscal 1996 as sales grew at a rate in excess of these expenses. For the first six months of fiscal 1997, selling, general and administrative expenses, as a percentage of revenue, were 31.7% compared to 30.4% for the same period a year earlier. The year-to-date increase is primarily the result of the continued expansion of the Company's infrastructure, especially an increased emphasis on the sales and service organizations, including the addition of Fidelio in November 1995, three U.S. sales and service offices in fiscal 1996, D.A.C. Systemes/MICROS France and AD-Maintenance Informatique in August 1995 and increased sales and service staffing worldwide. Research and development expenses (exclusive of internally developed software costs), which consist primarily of labor costs, increased $794,000, or 47.5%, in the second quarter of fiscal 1997 compared to the same period a year earlier. Actual research and development expenditures, including internally developed software costs of $1.1 million in the second quarter of fiscal 1997 and $278,000 in the second quarter of fiscal 1996, increased $1.6 million, or 82.5%, compared to the same period a year earlier. For the first six months of fiscal 1997, research and development expenses (exclusive of internally developed software costs),which consist primarily of labor costs, increased $1.4 million, or 45.1%, compared to the same period a year earlier. Actual research and development expenditures for the 10 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 Results of Operations - Second Quarter and Six Month Comparisons, Continued first six months of fiscal 1997, including internally developed software costs of $2.2 million, increased $3.2 million, or 91.9%, compared to the same period a year earlier. The increase in absolute dollars for both the three-month and six-month periods is primarily due to Fidelio product development. Purchased incomplete software technology was a result of the one-time $14.8 million charge taken in the second quarter of fiscal 1996 associated with the acquisition of Fidelio. Income from operations for the second quarter of fiscal 1997 was $7.5 million, or 13.4% of revenue, compared to a loss from operations of $9.4 million in the same period a year earlier. Excluding the one-time expense of $14.8 million mentioned above, income from operations for last year's second quarter was $5.4 million. For the first six months of fiscal 1997, income from operations was $11.9 million compared to a loss of $4.9 million a year earlier or income of $9.9 million excluding the one-time write-off. For both the second quarter and first six months of fiscal 1997, the Company's improved income from operations is primarily due to higher sales and stronger gross margins. Interest income for the second quarter of fiscal 1997 decreased $150,000 to $113,000, or 57.0%, compared to $263,000 for the second quarter of fiscal 1996. The decrease in interest income for the period is primarily due to the use of cash to purchase Fidelio. Interest expense increased $6,000 to $371,000 for the second quarter of fiscal 1997 from $365,000 for the same period a year ago. Last year's results included a partial quarter of interest expense incurred on the Fidelio debt acquired on November 30, 1995. The Company reduced this debt subsequent to December 31, 1995. Interest income for the first six months in fiscal 1997 was $219,000 compared to $602,000, a decrease of 63.6%, for the comparable period in fiscal 1996 as a result of lower investment balances during fiscal 1997. Interest expense for the first six months in fiscal 1997 was $782,000 compared to $453,000, an increase of 72.6%, for the comparable period in fiscal 1996 primarily due to the increase in the Company's overall debt during the first six months of fiscal 1997 in comparison to the same period in fiscal 1996. The effective tax rate for the second quarter of fiscal 1997 is 40.0% compared to a benefit of 48.6% for the same quarter a year earlier. Excluding the one-time expense for the purchase of incomplete software technology and the related tax benefit, last year's second quarter's effective tax rate would have been 38.7%. For the first six months of fiscal 1997, the effective tax rate is 40.0% compared to a benefit of 61.2% for the first six months of fiscal 1996. Excluding the effect for the purchase of incomplete software technology expense and the related tax benefit, the six month tax rate for fiscal 1996 would have been 37.2%. The increase in the tax rate is primarily due to a shift in the mix of earnings on a country-by-country basis to those countries with higher tax rates. Summary The Company has recently experienced rapid revenue growth at a rate that it believes has significantly exceeded that of the global market for point-of-sale computer systems and property management information systems products for the hospitality industry, fueled in part by the acquisitions consummated in calendar year 1995. Although the Company currently anticipates continued revenue growth at a rate in excess of such market, and therefore an increase in its overall market share, it does not expect to maintain growth at recent levels and there can be no assurance that any particular level of growth can be achieved. In addition, due to the competitive nature of the market, the Company continues to experience gross margin 11 12 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 Results of Operations - Second Quarter and Six Month Comparisons, Continued pressure on its products, and the Company expects this to continue. There can be no assurance that the Company will be able 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 (see Part II, Item 5); adverse economic or political conditions; unexpected currency fluctuations; impact of competitive products and pricing on margins; product development delays and technological difficulties; and controlling expenses. Other risks are disclosed in the Company's releases and SEC filings, including the Company's 1997 10-Q for the quarter ended September 30, 1996, and the Company's 1996 10-K. 12 13 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of MICROS Systems, Inc. We have reviewed the accompanying consolidated balance sheet of MICROS Systems, Inc. and subsidiaries as of December 31, 1996, and the related consolidated statements of operations and cash flows for the three and six month periods ended December 31, 1996 and December 31, 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of June 30, 1996, and the related consolidated statements of operations, cash flows and shareholders' equity for the year then ended (not presented herein), and in our report dated September 20, 1996 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the accompanying consolidated balance sheet information as of June 30, 1996, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Baltimore, Maryland February 10, 1997 THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS LIABILITY PROVISIONS OF SECTION 11 OF THE ACT DO NOT APPLY. 13 14 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 Part II - Other Information Item 1. Legal Proceedings. On May 24, 1996, Imperial Hotels Corp. ("Imperial") filed suit against Executive Technologies of Southwest Florida, Inc. ("ETI"), MICROS and Fidelio in the Superior Court of the State of California for the County of Los Angeles. Imperial alleged, among other things, that ETI, an indirect wholly owned subsidiary of MICROS, breached a software license agreement ETI entered into with Imperial prior to Fidelio's acquisition of ETI, and prior to MICROS' acquisition of Fidelio. On November 20, 1996, the parties to the lawsuit amicably settled all claims, and the litigation was dismissed with prejudice. The settlement requires ETI to provide to Imperial certain software upgrades to the central reservation system currently licensed by Imperial. This settlement, for which an accrual had been established, did not have a material effect on the Company's results of operations. 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 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders was held on November 22, 1996. A quorum was present and shareholders voted on the following matters: 1. Approval of an Amendment to the Articles of Incorporation The shareholders voted 2,060,143 shares in the affirmative and 3,561,476 shares in the negative with respect to a proposal to adopt an amendment to the Company's Articles of Incorporation (the "Classified Board Amendment") to add a new article which would classify the Board of Directors into three classes of directors. A total of 17,692 shares abstained from the vote. There were 1,456,038 broker non-votes. The Classified Board Amendment provided for the Board of Directors to be divided into three classes of directors serving staggered three-year terms. As the requisite number of shares required for approval was not obtained, the Classified Board Amendment was not approved and the Directors were accordingly approved for one-year terms. 2. Election of Directors The management of the Company nominated a slate of seven 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. 6,992,657 102,692 Daniel Cohen 6,992,657 102,692 A.L. Giannopoulos 6,992,657 102,692 F. Suzanne Jenniches 6,992,657 102,692 John G. Puente 6,992,457 102,892 Alan M. Voorhees 6,992,457 102,892 Edward T. Wilson 6,992,557 102,792
14 15 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 Price Waterhouse LLP as the independent public accountants for the Company for the fiscal year ending June 30, 1997. A proposal (Proposal 3) to approve the selection of Price Waterhouse LLP was approved by a majority of the shares present in person or represented by proxy and entitled to vote. A total of 7,084,145 shares voted in the affirmative; a total of 5,910 shares voted in the negative; and a total of 5,294 shares abstained from the vote. 4. Approval of Amendment to Stock Option Plan The shareholders voted 4,413,495 shares in the affirmative and 1,009,683 shares in the negative to approve a proposal to increase the number of shares available under the 1991 Stock Option Plan by 600,000 with the aggregate number of shares that can be issued under the plan being 1,150,000; a total of 77,884 shares abstained from the vote and there were 1,594,287 broker non-votes. Item 5. Other Information The Company introduced two new products in October 1996, the 3700 POS and the 3400 QSA (Quick Service Advantage). Both software products run on Microsoft's Windows 95 or Windows NT operating systems and operate on IBM compatible personal computers. The 3700 POS is a table service restaurant application software program. The product has been developed by MICROS. The 3400 QSA is a quick service restaurant application software program. The product is licensed on a non-exclusive basis from a third party developer. MICROS has development rights to the software to modify and customize as deemed appropriate or necessary. Shipments of the 3700 POS commenced in the second quarter of fiscal 1997. Shipments of the 3400 QSR are expected to commence in the latter part of the third quarter of fiscal 1997. 15 16 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 Part II - Other Information, continued Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10 - Material Contracts Exhibit 11 - Computation of Earnings Per Share Exhibit 15 - Letter Regarding Unaudited Interim Financial Information Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - None 16 17 MICROS SYSTEMS, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended December 31, 1996 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 14, 1997 s/Gary C. Kaufman - ----------------- ----------------- Gary C. Kaufman Senior Vice President, Finance and Administration/Chief Financial Officer February 14, 1997 s/Roberta J. Watson - ----------------- ------------------- Roberta J. Watson Vice President and Controller 17 18 EXHIBIT INDEX
Sequentially Exhibit Numbered Page - ------- ------------- 10. Material Contracts 19 11. Computation of Earnings Per Share 21 15. Letter regarding Unaudited Interim 22 Financial Information 27. Financial Data Schedule N/A
18 EX-10 2 EMPLOYMENT AGREEMENT. 1 EXHIBIT 10 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This First Amendment to the Employment Agreement is made and effective this 6th day of February, 1997 (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 A. L. GIANNOPOULOS, whose address is 6125 Wooded Run Drive, Columbia, Maryland 21044 (hereinafter referred to as the "Executive"). WHEREAS, the Executive and MICROS entered into an Employment Agreement dated June 1, 1995 (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 reward the Executive for achieving financial objectives for the first two quarters of the Company's 1997 fiscal year. NOW, THEREFORE, MICROS and the Executive, for good and valuable consideration, and pursuant to the terms, conditions, and covenants contained herein, hereby agree as follows: 1. Section 4 of the Agreement is amended by deleting the salary chart therein in its entirety and inserting the following in lieu thereof:
Period Salary ------ ------ Commencement Date through June 30, 1995 $32,170 July 1, 1995 through June 30, 1996 $203,000 July 1, 1996 through June 30, 1997 $250,000* July 1, 1997 through June 30, 1998 $262,500 July 1, 1998 through June 30, 1999 $275,000 July 1, 1999 through December 31, 1999 $143,750
*Upon execution of this First Amendment, the Executive shall immediately receive a payment in the amount equal to the difference between the salary received by the Executive in the Company's 1997 fiscal year to date, and the amount the Executive would have received to date if the increased level had been in effect as of the first day of the Company's 1997 fiscal year. 2. Section 5 of the Agreement is amended by deleting the target bonus chart therein in its entirety and inserting the following in lieu thereof:
Fiscal Year Ending Target Bonus ------------------ ------------ June 30, 1995 $110,000 June 30, 1996 $120,000 June 30, 1997 $150,000 June 30, 1998 $163,500 June 30, 1999 $177,000 June 30, 2000 $95,250
3. 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 6th day of February, 1997. COMPANY: 19 2 ATTEST: MICROS SYSTEMS, INC. By: /s/ Louis M. Brown, Jr. (SEAL) ------------------ ------------------------------- Louis M. Brown, Jr. Chairman [Corporate Seal] EXECUTIVE: WITNESS: /s/ A. L. GIANNOPOULOS (SEAL) ------------------ ------------------------------- A. L. GIANNOPOULOS
20 EX-11 3 COMPUTATION. 1 EXHIBIT 11 MICROS SYSTEMS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (unaudited - in thousands, except per share data)
Three months ended December 31, 1996 1995 ----------- ---------- Weighted-average number of common shares 7,958 7,882 Dilutive effect of outstanding stock options 97 133 ------ -------- Weighted-average number of common and common equivalent shares outstanding 8,055 8,015 ====== ======== Net income (loss) $4,011 $(5,088) ====== ======== Net income (loss) per common and common $ 0.50 $ (0.63) equivalent share ====== ======== Six months ended December 31, 1996 1995 ----------- ---------- Weighted-average number of common shares 7,952 7,872 Dilutive effect of outstanding stock options 45 126 ------ --------- Weighted-average number of common and common 7,997 7,998 equivalent shares outstanding ====== ========= Net income (loss) $6,338 $ (1,834) ====== ========= Net income (loss) per common and common $ 0.79 $ (0.23) equivalent share ====== =========
21 EX-15 4 LETTER. 1 EXHIBIT 15 February 10, 1997 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that MICROS Systems, Inc. has incorporated by reference our report dated February 10, 1997 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) in the Prospectus constituting part of its Registration Statements on Forms S-8 (No. 333-17725, No. 333-05125, No. 33-69782, No. 33-44481 and No. 33-33535). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, PRICE WATERHOUSE LLP 22 EX-27 5 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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1997 DEC-31-1996 10,413 3,557 57,369 2,059 18,172 95,276 30,932 13,952 147,190 72,148 8,411 0 0 199 62,388 147,190 66,828 103,473 32,581 58,999 0 0 782 11,472 4,592 6,338 0 0 0 6,338 0.79 0.79
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