<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1995
REGISTRATION NO. 33-88768
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MICROS SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND 52-1101488
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
12000 BALTIMORE AVENUE, BELTSVILLE, MARYLAND 20705-1291
(301) 210-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
A. L. GIANNOPOULOS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICROS SYSTEMS, INC.
12000 BALTIMORE AVENUE, BELTSVILLE, MARYLAND 20705-1291
(301) 210-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C> <C>
JOHN T. CONNOR, JR., ESQ. KRIS F. HEINZELMAN, ESQ. GERALD S. TANENBAUM, ESQ.
CHADBOURNE & PARKE CRAVATH, SWAINE & MOORE CAHILL GORDON & REINDEL
30 ROCKEFELLER PLAZA 825 EIGHTH AVENUE 80 PINE STREET
NEW YORK, NEW YORK 10112 NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10005
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS Subject to Completion
March 6, 1995
4,400,000 Shares
MICROS(R)
MICROS SYSTEMS, INC.
Common Stock
(par value $.025 per share)
All of the shares of Common Stock, par value $.025 per share (the "Common
Stock"), of MICROS Systems, Inc. (the "Company") offered hereby are being sold
by Westinghouse Electric Corporation (the "Selling Stockholder"). See "Principal
and Selling Stockholder." The Company will not receive any proceeds from the
sale of such shares.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"MCRS." On March 3, 1995, the reported last sale price for the Common Stock, as
quoted on the Nasdaq National Market, was $30.00 per share. See "Price Range of
Common Stock and Dividend Policy."
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) STOCKHOLDER(2)
<S> <C> <C> <C>
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Per Share $ $ $
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Total(3) $ $ $
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<FN>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Selling Stockholder estimated at
$900,000.
(3) The Selling Stockholder has granted the Underwriters an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
additional 449,123 shares of Common Stock on the same terms as set forth above,
solely to cover over-allotments, if any. If such over-allotment option is
exercised in full, the total Price to Public, Underwriting Discount and Proceeds
to Selling Stockholder will be $ , $ and $ ,
respectively. See "Underwriting."
</TABLE>
The shares of Common Stock offered by this Prospectus are being offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Cahill
Gordon & Reindel, counsel for the Underwriters, and certain other conditions. It
is expected that delivery of certificates representing the shares of Common
Stock will be made against payment therefor on or about , 1995 at the
offices of J.P. Morgan Securities Inc., 60 Wall Street, New York, New York
10260.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
, 1995
<PAGE> 3
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH
THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE
"UNDERWRITING."
No person is authorized to give any information or to make any representation
not contained or incorporated by reference in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company, the Selling Stockholder or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities in any jurisdiction in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
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Page
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Available Information....................... 3
Incorporation of Certain Documents by
Reference................................. 3
Prospectus Summary.......................... 4
Certain Investment Considerations........... 6
The Company................................. 8
Price Range of Common Stock and
Dividend Policy........................... 8
Use of Proceeds............................. 9
Capitalization.............................. 9
Selected Consolidated Financial
Information............................... 10
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Page
<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results
of Operations............................. 11
Business.................................... 15
Management.................................. 20
Principal and Selling Stockholder........... 23
Description of Capital Stock................ 24
Underwriting................................ 26
Legal Matters............................... 27
Experts..................................... 27
Index to Consolidated Financial
Statements................................ F-1
</TABLE>
2
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at the Commission's
office at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Commission at 7 World Trade Center, New York, New York 10048 and
500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Common Stock is
quoted on the Nasdaq National Market and reports, proxy statements and other
information concerning the Company can be inspected and copied at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus does not contain all the information set forth in the
Registration Statement of which this Prospectus is a part, or any amendments
thereto, certain portions of which have been omitted pursuant to the
Commission's rules and regulations. The information so omitted may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
fees prescribed by the Commission. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 0-9993) are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994;
(ii) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended September 30, 1994 and December 31, 1994;
(iii) the Company's Current Reports on Form 8-K dated October 11, 1994,
November 14, 1994 and February 28, 1995; and
(iv) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated October 23, 1981 by
incorporation by reference to the Company's Registration Statement
on Form S-1 (Registration No. 2-69969) and in the amendment to the
Company's Charter filed December 8, 1986 included as part of
Exhibit 3 to the Company's Annual Report of Form 10-K for the
fiscal year ended June 30, 1990.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Common Stock
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus. The Company will provide without charge
to each person to whom this Prospectus is delivered, upon such person's written
or oral request, a copy of any and all of the documents that have been
incorporated by reference in this Prospectus (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Any such request should be directed to the Corporate Secretary
of MICROS Systems, Inc., 12000 Baltimore Avenue, Beltsville, Maryland 20705-1291
(telephone number (301) 210-6000).
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and should
be read in conjunction with, the more detailed information included and
incorporated by reference in this Prospectus. References to MICROS or the
Company herein shall refer to MICROS Systems, Inc. and its subsidiaries, unless
the context otherwise indicates.
THE COMPANY
The Company is a leading worldwide designer, manufacturer, supplier and servicer
of point-of-sale ("POS") computer systems for hospitality providers, principally
full service and fast food restaurants, including restaurants located in hotels
and other lodging establishments. MICROS POS systems consist of terminals,
display devices, printers, computers and software which provide transaction
processing, in-store control and information management capabilities. The
Company's POS systems, which are installed in over 32,000 independent, national
and international full service and fast food restaurants, enable users to
control operations and inventory, enhance customer service efficiency, reduce
labor costs, increase productivity and improve planning and reporting. MICROS is
a major supplier of POS systems to full service restaurants such as T.G.I.
Friday's, Family Restaurants, Perkins, Planet Hollywood and Ruby Tuesday's, to
fast food restaurants such as Arby's, Burger King and Wendy's and to full
service restaurants in hotels such as Hilton, Hilton International, Hyatt,
Inter-Continental, Marriott, Radisson and Ritz-Carlton. New target markets for
the Company's POS systems include casinos, cruise ships, sports arenas, theme
parks, institutional food service organizations and specialty retail shops. The
Company has recently installed large POS systems in the Luxor Hotel and Casino
and the MGM Grand Hotel Casino and Theme Park in Las Vegas, Nevada.
The Company's POS products are sold by approximately 60 employees through a
Company-owned sales distribution network consisting of seven domestic and four
foreign sales offices and through MICROS' Major Accounts Program to large
regional, national and international customers (the "Direct POS Sales Channel").
The Company's POS products are also sold through an independent sales
distribution network consisting of 112 U.S. dealers and 46 foreign distributors
(the "Indirect POS Sales Channel").
The Company also markets and distributes property management information systems
("PMS") products which provide reservation, guest accounting and other
information management capabilities to hotels and other lodging establishments.
The PMS products marketed and distributed by the Company are supplied by Fidelio
Software GmbH, a German company ("Fidelio"). The Company has installed over 500
Fidelio PMS systems, including systems installed in various Radisson Hotels, Red
Roof Inns and Wyndham Hotels and Resorts. MICROS owns a 30% interest in Fidelio
and has an option to acquire the remaining 70%. Majority-owned subsidiaries of
the Company have the exclusive distribution rights to Fidelio PMS products in
the Americas, the United Kingdom and France.
MICROS also provides service and support for its POS and PMS products, including
installation, training, hardware and software maintenance, spare parts, media
supplies and consulting services. Service revenue constituted approximately 21%,
20% and 19% of the Company's total revenue in fiscal 1994, 1993 and 1992,
respectively. Service and support also are provided through the Company's
Indirect POS Sales Channel.
The Company believes there are substantial growth opportunities for information
systems providers in the hospitality market. MICROS also believes that key
drivers of future industry growth include the increasing awareness among
hospitality providers of the efficiencies and cost savings that may be realized
through the use of POS and PMS systems, the upgrading by current users of POS
and PMS systems to faster, more flexible systems with software and hardware
features tailored to the hospitality industry, the growing use of integrated POS
and PMS systems by lodging establishments and other hospitality providers and
the growing demand from international markets such as South America and Asia.
The Company believes its competitive strengths include its established global
distribution and service network, its relationship with Fidelio and its
corporate focus on providing information systems solutions principally to the
hospitality industry. The Company's strategy is to increase market share by:
- - Continuing to develop new POS and PMS products, both internally and in
conjunction with Fidelio, which are designed to meet the evolving needs of
hospitality providers and are compatible with existing products sold and
serviced by the Company;
- - Expanding its Direct and Indirect POS Sales Channels to meet the growing
demand in existing and emerging geographic markets;
- - Expanding its marketing efforts in new target markets including casinos,
cruise ships, sports arenas, theme parks, institutional food service
organizations and specialty retail shops; and
- - Identifying additional opportunities for selling both POS and PMS products by
progressively integrating the Company's POS and Fidelio PMS sales networks.
4
<PAGE> 6
THE OFFERING
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Common Stock Offered by the Selling Stockholder.............. 4,400,000 shares(1)
Common Stock Outstanding as of December 31, 1994............. 7,843,761 shares(2)
USE OF PROCEEDS.............................................. All of the shares of Common Stock offered hereby
are being sold by the Selling Stockholder. The
Company will not receive any of the proceeds
from the sale of such shares.
NASDAQ NATIONAL MARKET SYMBOL................................ "MCRS"
</TABLE>
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(1) Assumes the Underwriters' over-allotment option is not exercised. See
"Underwriting." If such option is exercised in full, the Selling
Stockholder will not own any shares of Common Stock following the
consummation of the offering.
(2) Excludes 168,359 shares of Common Stock issuable upon exercise of
outstanding stock options as of December 31, 1994 at a weighted average
exercise price of $11.58 per share and 186,000 shares of Common Stock
issuable upon exercise of stock options to be granted to certain plan
participants pursuant to the Company's 1991 Stock Option Plan. See
"Management -- Management Compensation and Changes."
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
--------------------------------------------------------------------
SIX MONTHS
ENDED DECEMBER 31,
YEAR ENDED JUNE 30,
In thousands, except per share data 1994 1993 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue $51,596 $35,714 $79,265 $55,314 $44,328 $39,626 $35,234
Income from operations 8,571 5,360 12,322 9,409 5,784 4,606 3,850
Net income 5,916 3,819 8,687 5,760 4,019 3,280 2,568
Net income per common and common equivalent
share 0.74 0.48 1.10 0.74 0.53 0.44 0.36
</TABLE>
<TABLE>
<CAPTION>
----------------------------------
DECEMBER 31, 1994 JUNE 30, 1994
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital $31,929 $ 27,126
Total assets 72,935 66,191
Long-term debt and capital lease obligation,
including current portion 5,576 5,803
Shareholders' equity 46,455 39,938
</TABLE>
RECENT OPERATING RESULTS:
On February 27, 1995, the Company issued a press release which read in part as
follows:
"[The Company] today announced the following results for the month of January
1995: revenue for the month was $6.7 million compared to $5.6 million for
January 1994, income from operations was $317,000 compared to $658,000 for
January 1994, and net income was $263,000 compared to $405,000 for January 1994.
The decrease in earnings is attributable to a lower than expected increase in
revenue for the month, while operating expenses increased in anticipation of
higher revenue. Based on currently available information, the Company believes
that revenue for February 1995 will exceed $8.0 million compared to $6.2 million
for February 1994."
On March 5, 1995, the Company issued a press release which read in part as
follows:
"[The Company] today announced results for the month of February 1995. Revenue
for the month increased 41% over revenue for February 1994, to $8,702,000 from
$6,175,000. Income from operations was $1,238,000 compared to $914,000 for
February 1994, an increase of 35%, and net income was $887,000 compared to
$616,000 for February 1994, an increase of 44%. The Company had previously
announced its results for the month of January 1995. The following are the
combined results for the months of January and February 1995: revenue for the
two months was $15,427,000 compared to $11,778,000 for January and February
1994, an increase of 31%, income from operations was $1,555,000 compared to
$1,572,000 for January and February 1994, a decrease of 1%, and net income was
$1,149,000 compared to $1,020,000 for January and February 1994, an increase of
13%."
5
<PAGE> 7
CERTAIN INVESTMENT CONSIDERATIONS
HOSPITALITY INDUSTRY ECONOMY
MICROS product sales are dependent in large part on the health of the
hospitality industry, which in turn is dependent on levels of travel, tourism
and business entertaining. Although the hospitality industry has recently
experienced profitability and growth after a recessionary period, there can be
no assurance that profitability and growth will continue. The hospitality
industry is affected by a variety of factors, including war, global and regional
instability, natural disasters and general economic conditions. Adverse
developments in the hospitality industry could materially adversely affect the
Company's business, operating results and financial condition.
COMPETITION
The markets in which the Company competes are highly competitive. There are at
least three dozen suppliers who offer some form of sophisticated POS system
similar to the Company's and over 100 PMS competitors worldwide. Some of these
competitors are larger than the Company and have access to substantially greater
financial and other resources than does the Company. The rapid rate of
technological change in the industry ensures that the Company will face
competition not only from new products designed by existing companies, but also
from products designed by companies not presently competing with the Company,
which products may have features not presently available on MICROS products. The
Company believes that its competitive ability depends on its product development
capability, its extensive distribution channels in the POS and the PMS markets
and its customer service capability. There can be no assurance that the Company
will be able to continue to compete effectively in the future. See
"Business--Competition."
DEPENDENCE UPON KEY PERSONNEL; MANAGEMENT OF POTENTIAL GROWTH
The Company's future success and potential growth depend in part on its ability
to retain its key management and technical and sales personnel and to recruit,
train and retain sufficient numbers of other highly qualified managerial,
technical and sales personnel on a continuing basis. There can be no assurance
that the Company will be able to retain its key management or technical and
sales personnel or that it will be able to attract and retain sufficient numbers
of other highly qualified managerial, technical and sales personnel. The
inability to retain or attract such personnel could materially adversely affect
the Company's business, operating results and financial condition. In addition,
the Company's ability to manage potential growth successfully will require the
Company to continue to improve its operational, management and financial systems
and controls.
RESEARCH AND DEVELOPMENT; TECHNOLOGICAL CHANGE
The products sold by the Company are subject to rapid and continual
technological change. Products available from the Company, as well as
competitors, have increasingly offered a wider range of features and
capabilities. The Company's product development strategy is to provide upwardly
compatible systems incorporating the newest technology. There can be no
assurance that the Company will be able to continue funding research and
development at levels sufficient to enhance its current product offerings or
will be able to develop and introduce on a timely basis new products that keep
pace with technological developments and emerging industry standards and address
the evolving needs of its customers. There also can be no assurance that the
Company will not experience difficulties that will result in delaying or
preventing the successful development, introduction and marketing of new
products or that its new products and product enhancements will adequately meet
the requirements of the marketplace or achieve any significant degree of market
acceptance. The inability of the Company, for any reason, to develop and
introduce new products and product enhancements in a timely manner in response
to changing market conditions or customer requirements could materially
adversely affect the Company's business, operating results and financial
condition. See "Business--Research and Development."
GROWTH RATE AND MARGINS
The Company has recently experienced rapid revenue growth at a rate that it
believes has significantly exceeded that of the global market for POS computer
systems and PMS products for the hospitality industry. Although the Company
currently anticipates continued revenue growth at a rate in excess of such
market, and therefore an increase in its overall market share, it does not
expect to maintain growth at recent levels and there can be no assurance that
any particular level of growth can be achieved. In addition, due to the
competitive nature of the market, the Company recently has experienced greater
gross margin pressure on its products than it has in the past, and the Company
expects this trend to continue. There can be no assurance that the Company will
be able to sufficiently increase sales of its higher margin products, including
software and services, to prevent declines in the Company's overall gross
margin.
6
<PAGE> 8
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results have varied in the past and may vary
in the future depending upon such factors as the timing of new product
introductions, changes in the pricing and promotion policies of the Company and
its competitors, market acceptance of new products and enhanced versions of
existing products and the capital expenditure budgets of its customers. Although
the Company does not consider its business to be seasonal, for a variety of
reasons, including certain of those noted above, during each of the past three
fiscal years the Company's revenue and income from operations in the third
fiscal quarter have shown declines from those for the second fiscal quarter, and
the Company expects that will continue to be the case in the current fiscal
year. The Company believes that quarter-to-quarter comparisons of its results of
operations are not necessarily meaningful or indicative of future performance.
DEPENDENCE ON PMS SUPPLIER
The failure of Fidelio to continue to develop PMS products or other adverse
developments in the business of Fidelio or the Company's relationship with
Fidelio could adversely affect the Company's ability to supply PMS products and,
as a result, could materially adversely affect the Company's business, operating
results and financial condition.
INCREASED COSTS FOLLOWING THE OFFERING
The Selling Stockholder has heretofore arranged for the provision of certain
services to the Company at costs less than the Company believes it could have
obtained as an independent company. The Company estimates that, upon the
consummation of the offering, the incremental cost to it of purchasing such
services without the benefit of participating in programs of the Selling
Stockholder could total approximately $1.0 million per year on a pre-tax basis.
See "Principal and Selling Stockholder." The Company's President and Chief
Executive Officer is currently a full-time employee of the Selling Stockholder
and devotes a portion of his business time to the affairs of the Company. He is
currently compensated by the Selling Stockholder and receives no compensation
from the Company. Upon the consummation of the offering, he will become a
full-time employee of the Company with an initial annual salary of $193,000 and
will be entitled to an initial annual bonus in an amount not to exceed $220,000
dependent on the achievement of certain performance goals. See
"Management--Management Compensation and Changes."
In addition, the Selling Stockholder, as an incentive to 11 key officers to
remain with the Company for a period of three years following the consummation
of the offering, has agreed to make payments to such officers aggregating up to
approximately $1.25 million, payable in three equal installments on the first,
second and third anniversaries of the consummation of the offering (subject to
the officer remaining employed by the Company on the relevant payment date).
Even though such payments will be entirely funded by the Selling Stockholder and
will not require any use of the Company's cash, for accounting purposes, such
payments will be required to be reflected as compensation expense in the
Company's financial statements over the 36-month period following the
consummation of the offering.
MARKET FOR COMMON STOCK
The Company's Common Stock is quoted on the Nasdaq National Market. Prior to
this offering, there has been limited trading in the Common Stock and there can
be no assurance that an active market for the Common Stock will develop or
continue after the offering. Accordingly, no assurance can be given as to the
liquidity of the market for the Common Stock or the price at which any sales may
occur, which price will depend upon a number of factors, many of which are
beyond the control of the Company.
POSSIBLE EFFECTS OF MARYLAND ANTI-TAKEOVER PROVISIONS
Certain provisions of the Maryland General Corporation Law (the "MGCL") may
discourage persons or entities from attempting to gain control of a corporation
that is subject to such provisions. The MGCL imposes certain statutory
requirements with respect to "business combinations," such as mergers and other
similar transactions and specified transfers of assets and securities, between a
Maryland corporation and a person who, directly or indirectly, beneficially owns
10% or more of the voting power of the then-outstanding voting stock of the
corporation or an affiliate of such a stockholder. The MGCL also contains
limitations on voting rights of shares acquired in a "control share acquisition"
(an acquisition in which certain thresholds of ownership of a Maryland
corporation's voting stock are met or exceeded). For a more detailed description
of these MGCL provisions, see "Description of Capital Stock--Maryland
Anti-takeover Provisions."
7
<PAGE> 9
THE COMPANY
The Company is a leading worldwide designer, manufacturer, supplier and servicer
of POS computer systems for hospitality providers, principally full service and
fast food restaurants, including restaurants located in hotels and other lodging
establishments. The Company also markets and distributes PMS products which
provide reservation, guest accounting and other information management
capabilities to hotels and other lodging establishments.
MICROS Systems, Inc. was incorporated in the State of Maryland in 1977 as Picos
Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems, Inc. The
Company's executive offices and its main administrative, manufacturing, sales,
marketing, customer service and product development facilities are located at
12000 Baltimore Avenue, Beltsville, Maryland 20705-1291, and its telephone
number is (301) 210-6000.
As of December 31, 1994, MICROS was a 61.8%-owned subsidiary of the Selling
Stockholder. Following the consummation of the offering, the Selling Stockholder
will not own any shares of Common Stock if the Underwriters' over-allotment
option is exercised in full. See "Principal and Selling Stockholder."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCRS." The following table sets forth, on a per share basis for the
periods indicated, the high and low sale prices of the Common Stock on the
Nasdaq National Market.
<TABLE>
<CAPTION>
----------------
SALE PRICE
HIGH LOW
------- ------
<S> <C> <C>
Fiscal Year Ended June 30, 1993:
First Quarter $10 $ 7 1/4
Second Quarter 22 3/4 9 1/8
Third Quarter 22 3/4 11 3/4
Fourth Quarter 16 13 1/4
Fiscal Year Ended June 30, 1994:
First Quarter $20 1/2 $13 1/2
Second Quarter 26 14 3/4
Third Quarter 29 1/2 23 1/4
Fourth Quarter 27 3/4 22 1/2
Fiscal Year Ending June 30, 1995:
First Quarter $33 1/2 $26 1/4
Second Quarter 41 1/4 28 3/4
Third Quarter (through March 3, 1995) 38 1/8 28
</TABLE>
On March 3, 1995, the reported last sale price for the Common Stock, as quoted
on the Nasdaq National Market, was $30.00 per share. As of December 31, 1994,
there were approximately 547 stockholders of record.
The Company has never paid a dividend on the Common Stock. Its current policy is
to retain earnings and use funds for the operation and expansion of its
business. In addition, the Company is a party to a line of credit facility which
prohibits the payment of dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Future dividend policy will be determined by the Board of Directors based on the
Company's earnings, financial condition, capital requirements and other existing
conditions, including restrictions in any loan agreements that may be in effect.
The Company does not currently anticipate paying any cash dividends in the
foreseeable future.
8
<PAGE> 10
USE OF PROCEEDS
All of the shares of Common Stock offered hereby are being sold by the Selling
Stockholder. The Company will not receive any of the proceeds from the sale of
such shares.
CAPITALIZATION
The following sets forth the consolidated capitalization of the Company at
December 31, 1994:
<TABLE>
<CAPTION>
-----------------
In thousands, except share data DECEMBER 31, 1994
-----------------
<S> <C>
CURRENT PORTION OF LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION $ 307
=======
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION $ 5,269
-------
SHAREHOLDERS' EQUITY:
Common stock, par value $.025 per share; 10,000,000 shares authorized;
7,843,761 shares issued and outstanding(1) 196
Capital in excess of par 14,374
Retained earnings 31,741
Accumulated foreign currency translation adjustments 144
-------
Total shareholders' equity 46,455
-------
Total capitalization $51,724
=======
<FN>
- ---------------
(1) Excludes 168,359 shares of Common Stock issuable upon exercise of
outstanding stock options as of December 31, 1994 at a weighted
average exercise price of $11.58 per share.
</TABLE>
9
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information of the Company for and
as of the end of each of the five fiscal years in the period ended June 30, 1994
has been derived from the Company's consolidated financial statements included
in the Company's Annual Reports on Form 10-K. The Company's consolidated
financial statements for and as of the end of the fiscal years ended June 30,
1994, 1993, 1992 and 1991 have been audited by Price Waterhouse LLP, independent
accountants. The Company's consolidated financial statements for and as of the
end of the fiscal year ended June 30, 1990 were audited by Laventhol & Horwath,
independent auditors, who have ceased operations. The selected consolidated
financial information for and as of the end of the six months ended December 31,
1994 and 1993 has been derived from unaudited financial statements included in
the Company's Quarterly Reports on Form 10-Q which, in the opinion of the
Company, contain all adjustments, consisting only of normal, recurring
adjustments, necessary to present fairly the results of operations and financial
position for such periods and at such dates. The information should be read in
conjunction with the consolidated financial statements and related notes
included herein and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The results for interim periods are not necessarily
indicative of results for an entire fiscal year.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
AND AT FOR THE YEAR ENDED
DECEMBER 31, AND AT JUNE 30,
In thousands, except per share data 1994 1993 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
STATEMENTS OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Hardware and related software $40,141 $28,382 $62,441 $44,215 $35,763 $32,282 $30,125
Service 11,455 7,332 16,824 11,099 8,565 7,344 5,109
------- ------- ------- ------- ------- ------- -------
Total revenue 51,596 35,714 79,265 55,314 44,328 39,626 35,234
------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Cost of sales
Hardware and related software 20,752 14,455 32,467 20,574 16,356 14,426 14,749
Service 5,103 3,304 6,981 4,618 3,718 3,524 2,207
------- ------- ------- ------- ------- ------- -------
Total cost of sales 25,855 17,759 39,448 25,192 20,074 17,950 16,956
Selling, general and administrative expenses 14,291 10,406 22,859 16,881 14,930 13,791 12,346
Research and development expenses 2,177 1,614 3,392 2,901 2,572 2,381 1,348
Depreciation and amortization 702 575 1,244 931 968 898 734
------- ------- ------- ------- ------- ------- -------
Total costs and expenses 43,025 30,354 66,943 45,905 38,544 35,020 31,384
------- ------- ------- ------- ------- ------- -------
Income from operations 8,571 5,360 12,322 9,409 5,784 4,606 3,850
Non-operating income (expense):
Interest income 482 297 651 367 502 531 589
Interest expense (191) (28) (188) (55) (81) (120) (146)
Minority interest -- -- (13) (42) (34) -- --
Other income (expense), net 131 (108) (201) (931) (119) (13) (183)
------- ------- ------- ------- ------- ------- -------
Income before taxes and equity in net earnings of
affiliates 8,993 5,521 12,571 8,748 6,052 5,004 4,110
Income taxes 3,079 1,736 3,982 3,034 2,109 1,724 1,542
------- ------- ------- ------- ------- ------- -------
Income before equity in net earnings of affiliates 5,914 3,785 8,589 5,714 3,943 3,280 2,568
Equity in net earnings of affiliates 2 34 98 46 76 -- --
------- ------- ------- ------- ------- ------- -------
Net income $ 5,916 $ 3,819 $ 8,687 $ 5,760 $ 4,019 $ 3,280 $ 2,568
======= ======= ======= ======= ======= ======= =======
Net income per common and common equivalent share $ 0.74 $ 0.48 $ 1.10 $ 0.74 $ 0.53 $ 0.44 $ 0.36
======= ======= ======= ======= ======= ======= =======
Weighted-average number of common and common equivalent
shares outstanding 7,950 7,886 7,911 7,807 7,640 7,531 7,114
BALANCE SHEET DATA:
Working capital $31,929 $22,040 $27,126 $18,216 $18,400 $15,411 $12,087
Total assets 72,935 49,942 66,191 48,207 37,404 30,707 26,626
Long-term debt and capital lease obligation, including
current portion 5,576 2,109 5,803 1,780 1,779 1,952 2,120
Shareholders' equity 46,455 34,374 39,938 29,970 23,559 19,208 15,794
</TABLE>
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On February 27, 1995, the Company issued a press release which read in part as
follows:
"[The Company] today announced the following results for the month of January
1995: revenue for the month was $6.7 million compared to $5.6 million for
January 1994, income from operations was $317,000 compared to $658,000 for
January 1994, and net income was $263,000 compared to $405,000 for January 1994.
The decrease in earnings is attributable to a lower than expected increase in
revenue for the month, while operating expenses increased in anticipation of
higher revenue. Based on currently available information, the Company believes
that revenue for February 1995 will exceed $8.0 million compared to $6.2 million
for February 1994."
On February 27, 1995, the Company obtained a $15.0 million unsecured committed
line of credit with its bank which expires December 31, 1996 and which replaces
the Company's expiring $10.0 million line of credit. See "--Liquidity and
Capital Resources."
On March 5, 1995, the Company issued a press release which read in part as
follows:
"[The Company] today announced results for the month of February 1995. Revenue
for the month increased 41% over revenue for February 1994, to $8,702,000 from
$6,175,000. Income from operations was $1,238,000 compared to $914,000 for
February 1994, an increase of 35%, and net income was $887,000 compared to
$616,000 for February 1994, an increase of 44%. The Company had previously
announced its results for the month of January 1995. The following are the
combined results for the months of January and February 1995: revenue for the
two months was $15,427,000 compared to $11,778,000 for January and February
1994, an increase of 31%, income from operations was $1,555,000 compared to
$1,572,000 for January and February 1994, a decrease of 1%, and net income was
$1,149,000 compared to $1,020,000 for January and February 1994, an increase of
13%."
RESULTS OF OPERATIONS
Comparison of Six Months Ended December 31, 1994 and 1993
Revenue for the six months ended December 31, 1994 increased 44.5%, or $15.9
million, compared to the same period last year. Sales increased in every
distribution channel worldwide, with a substantial portion of that increase
attributable to sales of the Company's latest POS product, the MICROS 8700 HMS,
and sales of the MICROS 2700 HMS. This included initial shipments of the 2700
HMS totaling approximately $1.4 million to Whitbread PLC in the second quarter
of fiscal 1995 for use in its Beefeater Restaurants and Pubs in the United
Kingdom. Hardware and software sales increased 41.4% while service related
revenue increased 56.2%.
Cost of sales, as a percentage of revenue, increased from 49.7% in the first six
months of fiscal 1994 to 50.1% in the first six months of fiscal 1995. Cost of
sales for hardware and software products, as a percentage of related revenue,
increased to 51.7% for the first six months of fiscal 1995 compared to 50.9% in
the first six months of fiscal 1994. The increase was due to an increase in
volume of lower margin products, partially offset by a favorable shift in sales
distribution from the indirect to direct sales channels. Service costs, as a
percentage of service revenue, decreased from 45.1% for the first six months of
fiscal 1994 to 44.5% for the first six months of fiscal 1995 due to increases in
labor productivity, partially offset by increases in subcontracted labor costs.
Selling, general and administrative expenses increased $3.9 million, or 37.3%,
in the first six months of fiscal 1995 compared to the same period last year
primarily as a result of increased sales and support activities required in
connection with the Company's increased level of sales. However, as a percentage
of revenue, such expenses decreased to 27.7% for the first six months of fiscal
1995 from 29.1% for the same period last year. The decrease was the result of
effectively controlling the growth in expenses during the period as the Company
expanded its operations.
Research and development expenses (exclusive of capitalized software development
costs), which consist primarily of labor costs, increased $563,000, or 34.9%,
for the first six months of fiscal 1995 compared to the same period in fiscal
1994. Actual research and development expenditures, including capitalized
software development costs of $196,900 for the 8700 HMS in the first quarter of
fiscal 1994, increased $366,100, or 20.2%, for the first six months of fiscal
1995 over the same period in fiscal 1994.
11
<PAGE> 13
Income from operations for the first six months of fiscal 1995 increased $3.2
million, or 59.9%, over the same period last year. Income from operations was
$8.6 million, or 16.6% of revenue, for the first six months of fiscal 1995,
compared to $5.4 million, or 15.0% of revenue, for the first six months of
fiscal 1994. This margin improvement resulted from the increase in sales and a
less than proportional increase in expenses.
Interest income for the first six months of fiscal 1995 increased $184,300, or
62.0%, to $481,500 from $297,200 for the first six months of fiscal 1994 as a
result of an increase in interest rates on investments and an increase in the
investment balances. Interest expense increased $162,800 to $191,000 for the
first six months of fiscal 1995 from $28,200 for the same period in fiscal 1994,
primarily as a result of interest on the capital lease entered into by the
Company in January 1994. See "Business--Facilities."
Comparison of Fiscal 1994 to Fiscal 1993
Revenue increased $24.0 million, or 43.3%, over fiscal 1993 with all
distribution channels showing increases. Sales of POS hardware, software and
services to North American dealers grew $6.9 million and to North American Major
Account customers grew $5.2 million over fiscal 1993 on the strength of the
Company's newly introduced 8700 HMS and continued success of the 2000 series
HMS. Sales through the Company's six foreign subsidiaries increased $5.5 million
over fiscal 1993, and sales through foreign distributors in the
Europe/Africa/Middle East and Asia/Pacific regions increased $1.9 million.
Cost of sales, as a percentage of revenue, increased from 45.5% in fiscal 1993
to 49.8% in fiscal 1994. Cost of sales for hardware and software products, as a
percentage of related revenue, increased to 52.0% in fiscal 1994 from 46.5% in
fiscal 1993. The increase was due to a strategic price reduction on certain
products and an increase in volume of lower margin products, partially offset by
a favorable shift in sales distribution from the indirect to direct sales
channels. Cost of service, as a percentage of related revenue, decreased
slightly to 41.5% in fiscal 1994 from 41.6% in fiscal 1993.
Selling, general and administrative expenses increased $6.0 million, or 35.4%,
in fiscal 1994 compared to fiscal 1993, primarily as a result of increased sales
and support activities, including those of the Company's PMS subsidiaries, with
the largest portion attributable to increased staffing costs. However, as a
percentage of revenue, such expenses decreased to 28.8% in fiscal 1994 from
30.5% in fiscal 1993. The decrease was due to effectively controlling the growth
in expenses as the Company expanded its operations.
Research and development expenses (exclusive of capitalized software development
costs) increased $491,100, or 16.9%, to $3.4 million in fiscal 1994. Actual
research and development expenditures decreased $114,900, or 3.1%, in fiscal
1994. The decrease was primarily due to the higher level of labor and material
expenditures in fiscal 1993 to prepare the Company's 8700 HMS released in the
first quarter of fiscal 1994.
Income from operations increased $2.9 million, or 31.0%, in fiscal 1994 to $12.3
million. As a percentage of revenue, income from operations decreased from 17.0%
in fiscal 1993 to 15.5% in fiscal 1994 due to a decline in hardware and related
software margins offset to some extent primarily by lower selling, general and
administrative expenses as a percentage of revenue.
Interest income increased $284,900, or 77.7%, in fiscal 1994 as a result of
interest earned on a loan to Fidelio and a shift in certain investments from
those earning dividends to interest-bearing investments. Interest expense
increased to $188,300 in fiscal 1994 from $54,600 in fiscal 1993 due to the
interest on the capital lease entered into by the Company in January 1994.
Other non-operating expense, net, decreased $730,500, to $201,100, in fiscal
1994 primarily due to foreign currency translation gains in fiscal 1994, versus
losses in fiscal 1993, from the investment in and loan to Fidelio.
Comparison of Fiscal 1993 to Fiscal 1992
Revenue increased $11.0 million, or 24.8%, over fiscal 1992 as a result of a
significant increase in sales volume throughout North America, which offset
lower sales internationally, as most of Europe experienced depressed economic
conditions in fiscal 1993. The largest contributor to the growth was North
American Major Account sales which increased $4.9 million on the strength of the
Company's 2700 HMS product used in restaurant chain operations. North American
dealer sales grew $3.5 million over fiscal 1992 while the Company's six district
sales offices in the U.S. accounted for a nearly $2.4 million increase.
12
<PAGE> 14
Cost of sales, as a percentage of revenue, increased slightly from 45.3% in
fiscal 1992 to 45.5% in fiscal 1993. Cost of sales for hardware and software
products, as a percentage of related revenue, increased to 46.5% in fiscal 1993
from 45.7% due to certain strategic price decreases on products sold into
certain markets and a change in the product sales mix. Cost of service, as a
percentage of service revenue, improved from 43.4% in fiscal 1992 to 41.6% in
fiscal 1993 primarily due to an increase in productivity.
Selling, general and administrative expenses increased $2.0 million, or 13.1%,
in fiscal 1993 compared to fiscal 1992 primarily due to the expansion of sales,
service and support staff. However, as a percentage of revenue, such expenses
decreased to 30.5% in fiscal 1993 compared to 33.7% in fiscal 1992 due to
effectively controlling the growth in expenses as the Company expanded its
operations.
Research and development expenses (exclusive of capitalized software development
costs) increased $329,400, or 12.8%. Actual research and development
expenditures increased 12.8%, or $420,600, year to year with $802,900 being
capitalized in fiscal 1993 compared to $711,700 being capitalized in fiscal
1992. A majority of the development effort was on the Company's 8700 HMS, which
was released in September 1993.
Income from operations in fiscal 1993 increased $3.6 million, or 62.7%, over
fiscal 1992. As a percentage of revenue, income from operations was 17.0% in
fiscal 1993 compared to 13.0% in fiscal 1992. Increased revenue, combined with a
less than proportional increase in selling, general and administrative expenses,
resulted in the improvement.
Interest income decreased $135,300, or 27.0%, from $501,800 in fiscal 1992
primarily due to falling interest rates. Interest expense also decreased
$26,900, or 33.0%, from $81,500 in fiscal 1992 due to the lower interest rates
charged on the building loan and a decrease in the outstanding balance. See Note
6 of Notes to Consolidated Financial Statements.
Other non-operating expense, net, increased $812,300 primarily due to foreign
currency translation losses on net assets of the Company's foreign subsidiaries
and parent company assets denominated in foreign currencies.
LIQUIDITY AND CAPITAL RESOURCES
Effective January 1, 1994, the Company had a $10.0 million unsecured committed
line of credit with its bank which was due to expire February 28, 1995. See Note
5 of Notes to Consolidated Financial Statements. There were no borrowings under
this line of credit facility during fiscal 1993, fiscal 1994 or subsequent
thereto, although there was a $45,800 letter of credit issued thereunder and
outstanding at June 30, 1993. The Company has generated sufficient cash flow
through its operations during these periods and has significant funds available
in cash and highly-liquid investments to meet its immediate needs. On February
27, 1995, the Company obtained a $15.0 million unsecured committed line of
credit with its bank which expires December 31, 1996 and which replaces the
expiring $10.0 million line of credit.
Net cash provided by operating activities was $3.1 million for the first six
months of fiscal 1995 and $4.6 million and $5.2 million for fiscal 1994 and
1993, respectively. Proceeds from the issuance of stock under the Company's
incentive stock option plan provided $269,400 for the first six months of fiscal
1995 and $680,200 and $443,500 for fiscal 1994 and 1993, respectively. The
income tax benefit from the exercise of disqualified stock options provided
$345,500 for the first six months of fiscal 1995 and $356,700 and $294,300 for
fiscal 1994 and 1993, respectively. During the first six months of fiscal 1995,
the Company used cash of $2.0 million in investing activities, including $1.4
million for the purchase of property, plant and equipment and $3.4 million
primarily for the purchase of an additional 15% interest in Fidelio, offset by
$3.2 million in net proceeds from the repayment of a loan to Fidelio and
$210,100 in dividends from affiliates. The Company used $1.2 million and
$653,400 for the purchase of property, plant and equipment in fiscal 1994 and
1993, respectively. In addition, capitalized software development costs were
$196,900 and $802,900 in fiscal 1994 and 1993, respectively. The majority of the
development effort was for the 8700 HMS. No software development costs were
capitalized during the first six months of fiscal 1995. The Company made debt
repayments of $226,800 on its building loan and capital lease in the first six
months of fiscal 1995 and $257,100 and $178,900 during fiscal 1994 and 1993,
respectively. Also in fiscal 1994, the Company used $653,600 to purchase
district assets and equity interests in investees compared to $3.4 million used
in fiscal 1993 to purchase a 15% equity interest in Fidelio and $3.2 million
used for a loan to Fidelio. In addition, in fiscal 1993 the Company received
$6.8 million from the sale of investments purchased in fiscal 1992. As a result,
the cash position of the Company at December 31, 1994 was $17.8 million. All
cash is being held for the operation and expansion of the business.
In fiscal 1993, MICROS purchased 15% of the capital stock of Fidelio for $3.4
million and received an option to buy an additional 15% interest from individual
shareholders for a fixed amount of DM 5.0 million, which option was exercised on
October 4, 1994. Additionally, the Company has the right to acquire all or part
of the remaining shares of Fidelio on
13
<PAGE> 15
or before December 31, 1999, at a price to be determined based on an agreed upon
formula. MICROS had accounted for its 15% investment of Fidelio as of September
30, 1994 under the cost method. However, effective October 4, 1994, the 30%
investment is accounted for under the equity method. Included in the aggregate
purchase price of the Company's 30% investment in Fidelio is approximately $5.7
million representing goodwill at October 4, 1994, which is being amortized over
10 years beginning on that date. The investment was not restated as of September
30, 1994 to the equity method since it would not have produced a materially
different result.
Additionally, in fiscal 1993, MICROS granted a loan to Fidelio in the amount of
DM 5.0 million. The loan bore interest at 7% per annum and was repaid upon
exercise of the option to acquire the additional 15% interest in Fidelio. In
connection with its increase in ownership of Fidelio in October 1994 from 15% to
30%, the Company loaned Fidelio DM 900,000 (approximately $600,000), which bears
interest at a variable rate, and is obligated to make additional loans of up to
DM 600,000 (approximately $400,000), all of which loans are to be repaid by
December 31, 2000. The obligation of the Company to make the further loans to
Fidelio is conditioned on Fidelio's other shareholders increasing their current
loans to Fidelio from DM 2.1 million (approximately $1.4 million) to an
aggregate amount of up to DM 3.5 million (approximately $2.3 million).
As a result of the fiscal 1993 investment in and loan to Fidelio being
realizable only in Deutsche Marks, MICROS was subject to currency risks between
the Deutsche Mark and the U.S. Dollar through September 30, 1994. As a result of
this investment and loan, a currency translation gain of $143,000 was recognized
as Other Income in the first three months of fiscal 1995, a currency translation
gain of $446,000 was recognized as Other Income in fiscal 1994 and a currency
translation loss of $462,200 was recognized as Other Expense in fiscal 1993.
MICROS continues to be subject to currency risks between the Deutsche Mark and
the U.S. Dollar with respect to the DM 900,000 loan which is realizable only in
Deutsche Marks and which is to be repaid by December 31, 2000. The Company does
not engage in any foreign exchange hedging.
Financial indicators of the Company's liquidity and capital resources as of
December 31, 1994 and June 30, 1994 and 1993 were:
<TABLE>
<CAPTION>
--------------------------------------
DECEMBER 31, JUNE 30,
In thousands, except ratios 1994 1994 1993
----------- ------- -------
<S> <C> <C> <C>
Cash and cash equivalents $17,834 $16,339 $12,839
======= ======= =======
Available line of credit $10,000 $10,000 $10,000
Outstanding letters of credit -- -- 46
------- ------- -------
Unused bank line of credit $10,000 $10,000 $ 9,954
======= ======= =======
Working capital $31,929 $27,126 $18,216
======= ======= =======
Long-term debt and capital lease obligation:
Current $ 307 $ 307 $ 134
Non-current 5,269 5,496 1,646
------- ------- -------
Total $ 5,576 $ 5,803 $ 1,780
======= ======= =======
Shareholders' equity $46,455 $39,938 $29,970
======= ======= =======
Current ratio 2.59x 2.39x 2.19x
</TABLE>
14
<PAGE> 16
BUSINESS
INTRODUCTION
The Company is a leading worldwide designer, manufacturer, supplier and
servicer of POS computer systems for hospitality providers, principally full
service and fast food restaurants, including restaurants located in hotels and
other lodging establishments. MICROS POS systems consist of terminals, display
devices, printers, computers and software which provide transaction processing,
in-store control and information management capabilities. The Company's POS
systems, which are installed in over 25,000 independent, national and
international full service restaurants and over 7,000 fast food restaurants,
enable users to control operations and inventory, enhance customer service
efficiency, reduce labor costs, increase productivity and improve planning and
reporting. MICROS is a major supplier of POS systems to full service
restaurants such as T.G.I. Friday's, Family Restaurants, Perkins, Planet
Hollywood and Ruby Tuesday's, to fast food restaurants such as Arby's, Burger
King and Wendy's and to full service restaurants in hotels such as Hilton,
Hilton International, Hyatt, Inter-Continental, Marriott, Radisson and
Ritz-Carlton. New target markets for the Company's POS systems include casinos,
cruise ships, sports arenas, theme parks, institutional food service
organizations and specialty retail shops. The Company has recently installed
large POS systems in the Luxor Hotel and Casino and the MGM Grand Hotel Casino
and Theme Park in Las Vegas, Nevada.
The full service restaurant POS market consists of both stand-alone restaurants
and restaurants located in lodging operations in which servers use guest checks
to take orders at tables. The Company's customers in this market include
independent restaurants, franchisees, small chains and large national and
international chains. In the fast food restaurant POS market, the typical MICROS
customer is a franchisee of a national fast food chain operating multiple
restaurants.
The Company also markets and distributes PMS products which provide reservation,
guest accounting and other information management capabilities to hotels and
other lodging establishments. The PMS products marketed and distributed by the
Company are supplied by Fidelio. The Company has installed over 500 Fidelio PMS
systems, including systems installed in various Radisson Hotels, Red Roof Inns
and Wyndham Hotels and Resorts. Fidelio products are installed in over 3,500
sites worldwide, including certain Ciga, Forte, Hilton International,
Inter-Continental, Kempinski, Mandarin Oriental, Movenpick, Peninsula, Ramada
Europe, Shangri-La and Steigenberger locations. MICROS owns a 30% interest in
Fidelio and has an option to acquire the remaining 70%. The Company's recently
developed POS systems, as well as many POS systems offered by other suppliers,
are compatible with Fidelio PMS products. Majority-owned subsidiaries of the
Company have the exclusive distribution rights to Fidelio products in the
Americas, the United Kingdom and France. Many of the new target markets for the
Company's POS systems, including casinos, cruise ships and theme parks, are also
new target markets for Fidelio PMS products.
GROWTH STRATEGY
The Company believes there are substantial growth opportunities for information
systems providers in the hospitality market. MICROS also believes that key
drivers of future industry growth include the increasing awareness among
hospitality providers of the efficiencies and cost savings that may be realized
through the use of POS and PMS systems, the upgrading by current users of POS
and PMS systems to faster, more flexible systems with software and hardware
features tailored to the hospitality industry, the growing use of integrated POS
and PMS systems by lodging establishments and other hospitality providers and
the growing demand from international markets such as South America and Asia.
The Company believes its competitive strengths include its established global
distribution and service network, its relationship with Fidelio and its
corporate focus on providing information systems solutions principally to the
hospitality industry. The Company's strategy is to increase market share by:
- - Continuing to develop new POS and PMS products, both internally and in
conjunction with Fidelio, which are designed to meet the evolving needs of
hospitality providers and are compatible with existing products sold and
serviced by the Company;
- - Expanding its Direct and Indirect POS Sales Channels to meet the growing
demand in existing and emerging geographic markets;
- - Expanding its marketing efforts in new target markets including casinos,
cruise ships, sports arenas, theme parks, institutional food service
organizations and specialty retail shops; and
- - Identifying additional opportunities for selling both POS and PMS products by
progressively integrating the Company's POS and Fidelio PMS sales networks.
15
<PAGE> 17
PRODUCTS
Point-of-Sale Systems
MICROS markets a wide range of POS systems capable of meeting the functionality
and cost control needs of customers in various segments of the hospitality
industry. The Company's POS systems consist of terminals, display devices,
printers, computers and software which provide transaction processing, in-store
control and information management capabilities. All proprietary POS hardware is
designed to withstand the elements of the restaurant environment. The Company's
principal POS products are the 8700 HMS, the 2700 HMS and the 2700 HMS
Touchscreen System. Other products include the 4700 HMS, the 1700 HMS and the
2400 Fast Food System ("FFS").
The 8700 HMS, introduced in September 1993, is designed for hotels, resorts,
casinos, airports, sports arenas, theme parks and large local and chain
restaurants. It allows the user the flexibility to configure the system around
various hardware and software choices to control restaurant and food service
operations at both the server and management levels. Features of the 8700 HMS
include customized workstations, including customized keyboard and printer
configurations, touchscreen capability, flexible guest check printing,
detachable raised or flat keyboards, time and attendance capability with
complete time card detail and labor scheduling, training mode by operators,
check tracking by table or check, automatic credit card authorization with
expiration date verification, extensive revenue center and system-wide reporting
which analyzes sales mix, sales balancing, serving periods, table turn, time
periods, food cost and operator accountability, the ability to split checks into
multiple checks and hardware diagnostic and software confidence tests. The 8700
HMS POS product has been designed with an "open system architecture," which
allows its use on industry standard PCs as well as on the Company's proprietary
hardware. MICROS made a strategic decision to offer a PC-based platform in order
to complement its proprietary hardware and to give its customers a wide range of
hardware and software options for MICROS POS systems. The 8700 HMS is operated
on an Intel-based PC and utilizes the SCO Unix operating system, which permits
multi-tasking and multi-user operations. Its architecture gives it the ability
to manage any size restaurant or food service operation.
The 2700 HMS, released in March 1989, and the 1700 HMS, introduced in January
1990, are stand-alone intelligent terminals designed for small to large full
service restaurants and for certain fast food operations. The 2700 HMS is
available in both an entry level and premium platform, relies on proprietary
architecture and interfaces with DOS/ Windows-based back office support. The
2700 HMS Touchscreen System, released in September 1991, combines advanced
touchscreen technology with the Company's 2700 HMS POS system. It offers an
easy-touch electronic keypad with up to 60 entry points that can be customized
according to size and characters, dual LCD screens to speed up order entry and
reduce operator error, PC compatibility, lead-through prompting and
reprogramming of the system software and keyboards through remote communications
via phone lines.
The Company's 4700 HMS, introduced in May 1986, is a DOS-based, PC-driven POS
system for operational control of full service dining operations. The system
incorporates modular hardware components that allow for customization and
includes a number of important features to assist users with daily operations.
The Hand-Held Touchscreen terminal ("HHT"), introduced in March 1993, is a
small, hand-held, remote order entry touchscreen computer device which allows a
server to enter a guest's food and beverage order at the table- or seat-side.
The HHT is best suited for larger operations with distant seating locations such
as sports arenas and pool-side restaurants. The HHT is integrated with the
MICROS 4700 HMS and integration with the 8700 HMS is planned for mid-1995.
In the fast food restaurant sector, MICROS markets the 2400 FFS, which is based
primarily on the hardware platform used in the 2700 HMS with fast food
application software. The system, introduced in October 1991, features a
networked intelligent terminal architecture. A remote printer and video screen
subsystem accommodate a wide variety of kitchen production and order routing
schemes. The system's applications software meets fast food requirements in the
areas of order entry, drive-thru operation, inventory tracking, employee
timekeeping/labor tracking and data communications and produces a variety of
management reports through an interface with back office PCs. The Manager
Workstation ("MWS") software introduced in June 1993 is a PC-based software
product which provides for management analysis of sales and operational trends
at fast food restaurants, both at the store and corporate levels, and permits
the integration of point-of-sale functions with in-store back office, regional
and home office management information system functions. An upgraded MWS which
is currently under development is intended to broaden the scope of information
management, including multi-store database maintenance capabilities, and to
provide a migration path for current users of the 2400 FFS into the next
generation of MICROS fast food POS systems.
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The Company's design architecture allows existing users of MICROS POS products
to access new technologies and applications without losing their investment in
their existing MICROS POS system. In addition, many MICROS systems interface to
various back office accounting and property management systems, including the
Company's Fidelio PMS products.
Property Management Systems
For the PMS sector, MICROS markets and distributes a complete line of PMS
products supplied by Fidelio. The Front Office system, installed worldwide in
leading international hotel chains, is available in multiple configurations
covering the spectrum of hotels/resorts from the road-side hotel to the large
five-star resort. The Front Office PMS product is closely integrated with MICROS
POS systems for full service restaurants, including the option for a Guest Folio
Print & Check-out from the Company's 8700 HMS User Work Station III terminal in
a hotel restaurant. Other PMS software products marketed and supported by MICROS
include Food & Beverage Management, Sales and Catering, Cruise-line operations
and Casino-PMS.
SALES, MARKETING AND DISTRIBUTION
The Company considers its direct and indirect global distribution network a
major strength. This network has been built over the past 15 years, and the
Company and its dealers and distributors work closely together in seeking to
identify new customers, products, services and markets and to serve the
Company's existing customer base with enhanced products and services in
accordance with their needs.
The Company's POS products are sold by approximately 60 employees through a
Company-owned Direct POS Sales Channel consisting of seven domestic and four
foreign sales offices serving Europe, the Middle East, Africa and Asia and
MICROS' Major Accounts Program for large regional, national and international
customers. The Company's POS products are also sold through its Indirect POS
Sales Channel consisting of 112 U.S. dealers, 13 non-U.S. western hemisphere
distributors, 13 distributors in the Asia/Pacific region and 20 distributors in
the Europe/Africa/Middle East region. MICROS owns interests in two of its U.S.
dealers and one of its international distributors.
Majority-owned subsidiaries of the Company have the exclusive distribution
rights to Fidelio PMS products in the Americas, the United Kingdom and France.
Foreign sales accounted for approximately 29%, 26% and 33% of the Company's
total revenue in fiscal 1994, 1993 and 1992, respectively.
CUSTOMER SERVICE AND SUPPORT
The Company is committed to providing customers with superior service and
support, including installation, training, hardware and software maintenance,
spare parts, media supplies (ribbons, paper, etc.) and consulting services.
The Company has developed a comprehensive MICROS Service Network pursuant to
contracts with its dealers and distributors with the goal of providing its
customers with uniform service in installing and maintaining systems, on-going
training, prompt field service and timely availability of spare parts. The
Company believes that services are an important competitive factor and
differentiator and has been building its service infrastructure by adding
application and technology specialists to support software and hardware systems
and creating new and effective ways to support customers. Service revenue
constituted approximately 21%, 20% and 19% of the Company's total revenue in
fiscal 1994, 1993 and 1992, respectively.
RESEARCH AND DEVELOPMENT
The Company's product development strategy is to provide compatible systems
incorporating the newest technologies. This strategy allows users to configure
systems around various hardware and software choices, adding new functions to
their hospitality information systems that enhance their operations. Products
available from the Company, as well as its competitors, have increasingly
offered a wider range of features and capabilities.
The Company conducts its own product development at its research and development
facility located at its corporate headquarters in Beltsville, Maryland. To
supplement its own efforts, the Company occasionally utilizes outside design
services for product development. In addition, the Company continually examines
and evaluates software and hardware products and designs created by third
parties and has acquired and may in the future acquire rights to such products
and designs. See "Certain Investment Considerations--Research and Development;
Technological Change."
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COMPETITION
The Company believes that its competitive strengths include its established
global distribution and service network, its relationship with Fidelio and its
corporate focus on providing information systems solutions principally to the
hospitality industry.
The markets in which the Company competes are highly competitive. There are at
least three dozen suppliers that offer some form of sophisticated POS system
similar to the Company's and over 100 PMS competitors worldwide. Competitors in
the POS marketplace include full service providers such as Sulcus (Squirrel
POS), Sharp, Positouch, Par Technology and Panasonic and hardware providers
such as IBM and AT&T/GIS (formerly NCR) who market their products in
conjunction with independent software vendors. There are also numerous smaller
companies that market PC-based systems with POS-oriented software.
Many of the over 100 competitors in the PMS market are small companies with
software designed to run on industry standard personal computers. However, major
competitors include Sulcus (Lodgistix PMS), Hotel Information Systems, Encore
and property management systems developed and marketed by major hotel chains for
their corporate-owned operations and franchisees. See "Certain Investment
Considerations--Competition."
MANUFACTURING
The Company's manufacturing program seeks to maintain flexibility and reduce
costs by emphasizing the strategic outsourcing of key product components and
subassemblies. All lower level assemblies such as printed circuit assemblies,
mechanical assemblies and cables are outsourced based on competitive bidding.
The outsourcing process includes evaluating supplier processes, quality
assurance, test capability and management and technical support structures, as
well as price and delivery cycle. Whenever feasible, a second source is
developed to reduce one-supplier dependence. Outsourcing reduces requirements
for manpower, capital equipment and facilities, thus lowering overhead costs.
Most outsourcing contracts are short term (two years or less) based on quantity
points or strategic requirements with key price components traced to monitor
cost competitiveness. The Company believes it maintains excellent relationships
with its suppliers.
The Company's manufacturing operation is located at its corporate headquarters
in Beltsville, Maryland and consists primarily of assembly and testing of
various purchased components, parts and subassemblies. Product reliability and
quality are emphasized through stringent design reviews, sophisticated computer
testing of printed circuit assemblies, final product testing and numerous
quality control audits.
Material sourcing is based on availability, service, cost, delivery and quality
of the purchased items from domestic and international suppliers. Some items are
custom manufactured to the Company's design specifications. MICROS believes that
the loss of its current sources for components would not have a material adverse
effect on the Company's business since other sources of supply are generally
available.
FACILITIES
The Company's executive offices and its main administrative, manufacturing,
sales, marketing, customer service and product development facilities are
located in Beltsville, Maryland in two buildings, one of which is approximately
60,000 square feet and is owned by the Company and the other of which is
approximately 90,000 square feet, approximately 39,000 of which is leased by the
Company through 2009, with options to increase its leased space during that
period and an option to purchase the entire building.
The Company leases seven domestic and six foreign sales and service offices
located in Boston, Chicago, Dallas, Las Vegas, Los Angeles, Miami, San
Francisco, Dusseldorf, Frankfurt, London, Madrid, Singapore and Zurich.
The Company believes that its existing facilities are adequate for its current
needs and that additional space will be available as needed.
EMPLOYEES
As of December 31, 1994, the Company had approximately 520 full-time employees,
of whom approximately 430 were based in the U.S. and approximately 90 were based
internationally serving Europe, the Middle East, Africa and Asia/Pacific.
Approximately 60 employees are engaged in product development, 84 in operations,
346 in marketing, sales and customer support services and 30 in administration
and finance. The Company is not a party to any collective
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bargaining agreement and none of its employees is represented by a labor union.
MICROS believes its relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is not a party to any material pending litigation and is not aware
of any material threatened litigation. See Note 8 of Notes to Consolidated
Financial Statements.
The Company recently received a claim that its touchscreen product line
infringes certain patents in several European countries, including France,
Germany and the United Kingdom. Preliminary investigation indicates that the
asserted patents may be unenforceable because similar products were known and
available in the market prior to the relevant filing dates. While the Company's
investigation of this claim is in its preliminary stages and the ultimate
outcome of this matter is uncertain, the Company does not believe that the claim
will have a material adverse effect on its business, financial condition or
results of operations.
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MANAGEMENT
The following table sets forth information with respect to the Directors and
principal executive officers of the Company:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
A. L. Giannopoulos 55 Director and President and Chief Executive Officer
Ronald J. Kolson 41 Executive Vice President/Chief Operating Officer
Gary C. Kaufman 44 Vice President, Finance and Administration/Chief
Financial Officer
Louis M. Brown, Jr. 51 Director and Chairman of the Board
Daniel Cohen 39 Director
Carroll H. Johnson 48 Director
Alan M. Voorhees 72 Director
Edward T. Wilson 53 Director
</TABLE>
Mr. Giannopoulos has been a Director since March 1992 and was elected President
and Chief Executive Officer in May 1993. Mr. Giannopoulos is General Manager of
the Westinghouse Information and Security Systems Divisions, having been with
Westinghouse for 30 years. In prior assignments at Westinghouse, Mr.
Giannopoulos was General Manager of the Automation Division and National
Industrial Systems Sales Force, Industries Group. Mr. Giannopoulos is a graduate
of Lamar University with a Bachelor of Science degree in Electrical Engineering.
Mr. Kolson joined the Company in April 1984 as Controller. In September 1987, he
was promoted to Vice President, Finance and Administration/Chief Financial
Officer. In March 1994, he was promoted to his present position of Executive
Vice President/Chief Operating Officer. Mr. Kolson is a graduate of the
Pennsylvania State University with a Bachelor of Science degree in Accounting
and is also a Certified Public Accountant.
Mr. Kaufman served as a Director of the Company from January 1991 until May 1994
when he was appointed to his present position of Vice President, Finance and
Administration/Chief Financial Officer. Previously, Mr. Kaufman was Division
Controller for Westinghouse Security and Network Services Divisions, having been
with Westinghouse for 20 years in various financial positions. Mr. Kaufman is a
graduate of the University of Dayton with a Bachelor of Science degree in
Accounting and is also a Certified Public Accountant.
Mr. Brown has been a Director of the Company since 1977. Mr. Brown held the
position of President and Chief Executive Officer from January 1986 until his
appointment as Chairman of the Board in January 1987. He is also Chairman of
IDEAS, Inc., a supplier of high technology, custom-engineered products and
services with whom the Company has a product purchasing agreement, through
Granite Communications, Inc., an affiliate of IDEAS. Mr. Brown also serves as
President/Chief Executive Officer and as a Director of Autometric, Inc. and
Chairman of Planning Systems, Inc. He is a graduate of The Johns Hopkins
University (B.E.S.-E.E.).
Mr. Cohen is the Managing Director and principal shareholder of D.A.C.
Systemes/MICROS France, a current distributor of the Company's products, and is
the Chairman of the Board and Managing Director of Fidelio France S.A. In 1983,
Mr. Cohen had worked for the former MICROS distributor in France, prior to
starting the representation of MICROS in Israel. In 1986, he founded D.A.C.
Systemes and took over the distribution of MICROS products in France. In 1992,
the Company acquired a 15% equity interest in Mr. Cohen's company and the name
was changed to D.A.C. Systemes/MICROS France. An additional 8% equity interest
was acquired by the Company in fiscal 1994. Mr. Cohen is a graduate of the Hotel
School of Lausanne, Switzerland, from which he holds a Masters degree in Hotel
Administration.
Mr. Johnson has been a Director since May 1994. Mr. Johnson is a Divisions
Controller for Westinghouse Information and Security Systems Divisions. He has
been with Westinghouse for 26 years holding positions of increasing
responsibility in the financial arena including the positions of Controller for
the Commercial Systems Divisions and the Marine & Electrical Systems Divisions.
Mr. Johnson is a graduate of the University of Baltimore and currently serves on
its Alumni Board of Governors. Mr. Johnson will resign as a Director of the
Company effective upon the consummation of the offering.
Mr. Voorhees has been a Director of the Company since 1982. He is Chairman of
Summit Enterprises, Inc. of Virginia, a privately-held investment company. Mr.
Voorhees also is the Chairman of the Board of Autometric, Inc. and a member of
the Board of Directors of both Atlantic Southeast Airlines, Inc. and IDEAS, Inc.
with whom the Company has a product
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purchasing agreement, through Granite Communications, Inc., an affiliate of
IDEAS. Mr. Voorhees is a graduate of Rensselaer Polytechnic Institute and holds
a Masters degree from the Massachusetts Institute of Technology.
Mr. Wilson has been a Director of the Company since 1981. He is currently a
private investment advisor and President of the Fund for Fine Arts, Inc.
Previously, Mr. Wilson held senior management positions in domestic and
international banking with Riggs National Bank and The Bank of America and in
trade relations with the U.S. Chamber of Commerce and U.S. Commerce Department.
Mr. Wilson holds a doctorate in international relations from The Johns Hopkins
University.
In addition, other officers of the Company include the following:
Donny N. Anderson, 50, who joined the Company in January 1984 as a District
Manager. He was appointed to the position of Dealer Sales Manager in July 1985,
and was promoted to Managing Director for the Western Region in May 1988. In
July 1990, he became the Managing Director of Dealer Sales, a position he held
until May 1994, when he was promoted to the position of Vice President, Dealer
Sales--Americas. Prior to joining the Company, Mr. Anderson was employed at
Malloy Cash Register and held the position of Branch Manager.
T. Paul Armstrong, 36, who joined the Company in July 1981 as a software
engineer. In December 1983, he was promoted to the position of Director, Systems
Engineering which he held until November 1989 when he became Vice President,
Research and Development. In October 1993, Mr. Armstrong was promoted to Vice
President and Product Manager, Full Service Products. Mr. Armstrong is a
graduate of Cambridge University, England.
William N. Buckley, 52, who joined the Company as Vice President, Manufacturing
in June 1985. Prior to joining the Company, Mr. Buckley held various
manufacturing and engineering management positions. Mr. Buckley holds a B.S.
Degree in Business Management from the State University of New York and an
A.A.S. in Electronics from Erie Community College.
Kenneth M. Fisher, 40, who joined the Company in January 1978 as Director of New
Product Development. In September 1980, he was promoted to Vice President,
Research and Development, a position he held until October 1989 when he became
Vice President and Product Manager, Fast Food Service Products. Mr. Fisher is a
graduate of the Capitol Institute of Technology with a Bachelor of Science
degree in Electrical Engineering Technology.
Daniel G. Interlandi, 41, who began his career with MICROS in 1980. He has held
key sales and management positions at MICROS involving MICROS' district
operations, distributors, major accounts and customer service, and served as
Product Manager for Full Service Products. He was promoted to the position of
Vice President, Full Service Products in May 1993 and to his current position of
Senior Vice President, Sales and Marketing in October 1993. Mr. Interlandi is a
graduate of Knox College.
Bernard Jammet, 36, who joined the Company in July 1984 as European Sales
Manager. In 1988, he was named Managing Director for Europe/Africa/Middle East
Operations and was promoted to Vice President in November 1990. In November
1994, he was promoted to his current position of Senior Vice President,
International Operations. Before joining MICROS, he was employed with the former
MICROS distributor for France. Mr. Jammet is a graduate of the Hotel School of
Lausanne, Switzerland, with a Masters degree in Hotel Administration.
Richard B. Lamy, 35, who joined the Company in November 1991 as Director of
Major Accounts. In July 1994, he was promoted to the position of Vice President
of Major Accounts. For the ten years prior to coming to MICROS, Mr. Lamy was
employed at NCR Corporation where he held various management positions in their
hospitality division. Mr. Lamy is a graduate of Providence College with a
Bachelor of Science degree in Marketing and Management.
James T. Walsh, 37, who joined the Company in October 1990 as a Dealer
Maintenance Coordinator. Mr. Walsh was promoted to the position of Director of
Field Services in April 1991 and became Vice President and Product Manager,
Customer Service in September 1991. Prior to joining the Company, Mr. Walsh held
the position of National Service Manager for Fasfax Corporation, a
privately-held POS products manufacturer based in New Hampshire.
Roberta J. Watson, 33, who joined the Company in November 1987 as Manager of
Accounting. In March 1990, she was promoted to the position of Controller, and
in November 1994, she was promoted to Vice President and Controller. Ms. Watson
holds a Bachelor of Science degree in Accounting from the State University of
New York and is a Certified Public Accountant.
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<PAGE> 23
Judith F. Wilbert, 50, who joined the Company in May 1987. Ms. Wilbert is
Executive Assistant to the President/CEO of MICROS. She was appointed Assistant
Corporate Secretary in November 1988 and was promoted to Corporate Secretary in
November 1990.
MANAGEMENT COMPENSATION AND CHANGES
Mr. Giannopoulos, the Company's President and Chief Executive Officer, is
currently a full-time employee of the Selling Stockholder and devotes 15% to 20%
of his business time to the affairs of the Company. He is currently compensated
by the Selling Stockholder and receives no compensation from the Company. Upon
the consummation of the offering, he will become a full-time employee of the
Company and will devote 100% of his business time to the affairs of the Company.
Mr. Giannopoulos' arrangement with the Company will continue through December
31, 1999 and will provide for an initial annual salary of $193,000 and an
initial annual target bonus of $110,000, the actual amount of the bonus paid to
be based on certain performance criteria and not to exceed 200% of the target
bonus.
In addition, the Selling Stockholder, as an incentive to 11 key officers to
remain with the Company for a period of three years following the consummation
of the offering, has agreed to make payments to such officers aggregating up to
approximately $1.25 million, payable in three equal installments on the first,
second and third anniversaries of the consummation of the offering (subject to
the officer remaining employed by the Company on the relevant payment date).
Even though such payments will be entirely funded by the Selling Stockholder and
will not require any use of the Company's cash, for accounting purposes, such
payments will be required to be reflected as compensation expense in the
Company's financial statements over the 36-month period following the
consummation of the offering.
In January 1995, the Company authorized the grant to certain plan participants,
pursuant to the Company's 1991 Stock Option Plan and contingent upon the
consummation of the offering, of options to purchase an aggregate of 186,000
shares of Common Stock at an exercise price equal to the closing sale price of
the Common Stock on the date of grant.
Mr. Johnson, who is an employee of the Selling Stockholder, will resign as a
Director of the Company effective upon the consummation of the offering.
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of December 31, 1994, the Directors and executive officers of the Company
beneficially owned approximately 2.4% of the outstanding shares of Common Stock.
No individual Director or executive officer owned in excess of 1% of the
outstanding shares of Common Stock.
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<PAGE> 24
PRINCIPAL AND SELLING STOCKHOLDER
The Selling Stockholder owns 4,849,123 shares of Common Stock, representing
61.8% of the outstanding Common Stock as of December 31, 1994. If the
Underwriters' over-allotment option is exercised in full, the Selling
Stockholder will not own any shares of Common Stock following the consummation
of the offering.
The Company has purchased certain raw materials and has contracted for certain
sub-assembly operations from the Selling Stockholder to take advantage of more
competitive pricing available through the Selling Stockholder's off-shore
manufacturing locations. The Company estimates that it purchased approximately
$1.7 million, $1.5 million and $1.3 million in such materials and labor from the
Selling Stockholder during fiscal 1994, 1993 and 1992, respectively. During
fiscal 1994, 1993 and 1992, the Company also obtained through the Selling
Stockholder and its subsidiaries for approximately $667,400, $673,400 and
$454,000, respectively, other products and services, including insurance
coverage, office space, office furniture and telecommunications services. The
Company has reviewed the services and products provided by the Selling
Stockholder and believes that, except for insurance coverage, all such products
and services should be obtainable at prices not substantially different from
those charged by the Selling Stockholder.
The Company also benefits from certain corporate purchasing discount
arrangements negotiated by the Selling Stockholder for itself and its
subsidiaries and affiliates. These arrangements permit the Company to purchase
various services such as overnight letter and package delivery, freight handling
and forwarding, travel-related services and various components, materials and
supplies on discounted terms. Along with the insurance coverage described above,
these arrangements will ultimately have to be replaced by the Company with its
own contracts and arrangements. The Company estimates that the incremental cost
to it of purchasing similar goods and services, without the benefit of
participating in programs of the Selling Stockholder, could be approximately
$1.0 million per year on a pre-tax basis. The Selling Stockholder has indicated
its willingness to work with the Company to establish new service arrangements
in efforts to minimize any incremental costs thereof.
The Company's President and Chief Executive Officer, Mr. Giannopoulos, is
currently a full-time employee of the Selling Stockholder and devotes 15% to 20%
of his business time to the affairs of the Company. He is currently compensated
by the Selling Stockholder and receives no compensation from the Company. Upon
the consummation of the offering, Mr. Giannopoulos will become a full-time
employee of the Company and will devote 100% of his business time to the affairs
of the Company. See "Management--Management Compensation and Changes."
The shares of Common Stock owned by the Selling Stockholder and offered hereby
are being registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to the exercise by the Selling Stockholder of its
rights to request such registration under a Stock Unit Purchase Agreement dated
as of October 30, 1986 between the Selling Stockholder and the Company (the
"Purchase Agreement"). Pursuant to the terms of the Purchase Agreement, the
Selling Stockholder shall pay the expenses incurred by the Company in connection
with the registration and sale of the shares offered hereby. If less than all
the shares of Common Stock owned by the Selling Stockholder are sold in
connection with the offering, the Selling Stockholder will have the right under
the Purchase Agreement to request one additional registration under the
Securities Act for the sale of all or a portion (subject to a minimum of 100,000
shares) of its shares, as well as the right to include such shares in a
registration statement filed by the Company under the Securities Act for the
sale of shares by the Company. In the Purchase Agreement, the Company has agreed
to indemnify the Selling Stockholder in respect of certain liabilities,
including liabilities under the federal securities laws.
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<PAGE> 25
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The following description of the Common Stock of the Company includes a summary
of certain provisions of the Company's Charter (the "Charter") and its By-laws,
as amended (the "By-laws"). Such description does not purport to be complete and
is subject to the detailed provisions of, and is qualified in its entirety by
reference to, the Charter and the By-laws, copies of which are on file with the
Commission and are incorporated by reference as exhibits to the Registration
Statement of which this Prospectus is a part.
The Company is authorized by its Charter to issue up to 10,000,000 shares of
Common Stock, par value $.025 per share. As of December 31, 1994, there were
7,843,761 shares of Common Stock issued and outstanding, all of which are
validly issued, fully paid and nonassessable. Holders of Common Stock are
entitled to cast one vote per share on all matters voted upon by stockholders.
Except as otherwise provided in the Charter or the MGCL, a majority of the votes
cast at a meeting of stockholders at which a quorum is present is sufficient to
elect directors and to approve any matter which properly comes before the
meeting. Holders of Common Stock are entitled to receive such dividends as are
authorized and declared by the Board of Directors. See "Price Range of Common
Stock and Dividend Policy." The Charter provides that the holders of Common
Stock shall have preemptive rights to acquire additional shares upon any new
issue of Common Stock. Upon liquidation of the Company, holders of Common Stock
are entitled to share equally and ratably in any assets available for
distribution to them.
Under the MGCL and the Charter, any amendment to the Charter shall be approved
by the vote of a majority of the shares of Common Stock entitled to vote on the
matter; however, any amendment to the Charter which changes the terms of any of
the outstanding stock shall not be valid unless such change of terms shall have
been authorized by the holders of four-fifths of all such stock at the time
outstanding, by vote at a meeting or in writing with or without a meeting.
Special meetings of stockholders of the Company may be called at any time by the
Board of Directors or the President, and shall be called by the President or the
Secretary at the written request of the holders of 25% of the shares of Common
Stock then outstanding and entitled to vote, or as otherwise required by law.
The transfer agent and registrar for the Common Stock is First National Bank of
Maryland, Baltimore, Maryland.
For a description of certain Securities Act registration rights granted to the
Selling Stockholder, see "Principal and Selling Stockholder."
MARYLAND ANTI-TAKEOVER PROVISIONS
Business Combinations
The MGCL imposes certain statutory requirements with respect to certain
"business combinations," such as mergers and other similar transactions and
specified transfers of assets and securities, between a Maryland corporation and
either (i) a person who, directly or indirectly, beneficially owns 10% or more
of the voting power of the outstanding voting stock of the corporation or (ii)
an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the then-
outstanding voting stock of the corporation (such person, affiliate or
associate, an "Interested Stockholder").
Under the MGCL, certain business combinations between a Maryland corporation and
an Interested Stockholder may not be consummated for a period of five years
following the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Following the five-year period, any such business
combination must be recommended by the board of directors of the corporation and
approved by the affirmative vote of at least (i) 80% of the votes entitled to be
cast by the holders of outstanding shares of voting stock and (ii) 66- 2/3% of
the votes entitled to be cast by the holders of the voting stock held by
stockholders other than the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless the corporation's
common stockholders receive a minimum price (as defined in the MGCL) for their
shares and the consideration is received in the same form as previously paid by
the Interested Stockholder for its shares. A business combination with an
Interested Stockholder which is approved by, or exempted from the statute by,
the board of directors of the Maryland corporation at any time before an
Interested Stockholder first becomes an Interested Stockholder is not subject to
the special voting requirements. An amendment to a Maryland corporation's
charter electing not to be subject to the foregoing requirements must be
approved by the affirmative vote of at least 80% of the votes entitled to be
cast by all holders of outstanding shares of voting stock and 66- 2/3% of the
votes
24
<PAGE> 26
entitled to be cast by holders of outstanding shares of voting stock who are not
Interested Stockholders. Because the Company had a stockholder who held more
than 10% of its voting stock on July 1, 1983, any business combination between
the Company and a current or future Interested Stockholder would not be subject
to the five-year moratorium or the supermajority vote requirements of the MGCL;
however, there can be no assurance that the Board of Directors of the Company
will not elect to make such provisions applicable to the Company in the future
as permitted under the MGCL.
Control Share Acquisitions
The MGCL provides that "control shares" of a Maryland corporation acquired in a
"control share acquisition" have no voting rights unless approved by a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquiror, by officers or by directors who are employees of
the corporation. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct the
exercise of voting power (except solely by virtue of a revocable proxy), would
entitle the acquiror, directly or indirectly, to exercise or direct the exercise
of voting power in electing directors within one of the following ranges of
voting power: (i) one-fifth or more but less than one-third, (ii) one-third or
more but less than a majority or (iii) a majority or more of all voting power.
Control shares do not include shares the acquiring person is entitled to vote as
a result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition, directly or indirectly, of control shares,
subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions, may compel the corporation to call a special
meeting of stockholders to be held within 50 days of the demand to consider the
voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person does
not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value. If voting rights for control shares are approved
at a stockholders meeting, resulting in the acquiring person controlling a
majority of the voting power, then all other stockholders shall be entitled to
demand and receive from the corporation for their stock the highest price per
share paid by the acquiring person in the control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction or (b) to acquisitions approved or exempted by the charter or
by-laws of the corporation. There are currently no such exemptive provisions in
the Charter or By-laws of the Company.
Reference is made to the full text of the foregoing statutes for their entire
terms, and the partial summary contained herein is not intended to be complete.
25
<PAGE> 27
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below have severally agreed to purchase, and the Selling Stockholder has
agreed to sell to them, severally, the respective number of shares of Common
Stock set forth opposite their names below:
<TABLE>
<CAPTION>
---------
NUMBER OF
UNDERWRITERS SHARES
---------
<S> <C>
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
---------
Total 4,400,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are committed to take
and pay for all of the shares of Common Stock offered hereby if any are taken.
The Underwriters initially propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus and in part to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the initial offering of the Common Stock offered
hereby, the public offering price and such concessions may be changed.
Pursuant to the Underwriting Agreement, the Selling Stockholder has granted to
the Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional 449,123 shares of Common Stock at
the public offering price set forth on the cover page hereof less the
underwriting discount. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, made in connection
with the sale of the shares of Common Stock offered hereby. To the extent that
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock offered hereby.
In the Underwriting Agreement, the Company and the Selling Stockholder have
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the federal securities laws, or to contribute to payments
which the Underwriters may be required to make in respect thereof.
Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by this
Prospectus or the time at which a stabilizing bid for such shares is made. In
general, on and after the date two days prior to the Commencement Date (i) such
market makers' net daily purchases of the Common Stock may not exceed 30% of
their average daily trading volume in such stock for the two full consecutive
calendar months immediately preceding the filing date of the Registration
Statement of which this Prospectus forms a part, (ii) such market makers may not
effect transactions in, or display bids for, the Common Stock at a price that
exceeds the highest bid for the Common Stock by persons who are not passive
market makers and (iii) bids by passive market makers must be identified as
such.
26
<PAGE> 28
The Company, each of its directors and principal executive officers and the
Selling Stockholder have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (except for the shares
offered hereby, in the case of the Selling Stockholder, and except for shares
issuable upon the exercise of currently outstanding options and the grant of
options pursuant to the Company's existing stock option plans, in the case of
the Company) for a period of 90 days after the date of this Prospectus, without
the prior written consent of J.P. Morgan Securities Inc.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed upon
for the Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland.
Certain legal matters in connection with the Offering will be passed upon for
the Company by Chadbourne & Parke, New York, New York, for the Selling
Stockholder by Louis J. Briskman, General Counsel of the Selling Stockholder,
and Cravath, Swaine & Moore, New York, New York, and for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York. With respect to certain matters relating to the laws of the
State of Maryland, Chadbourne & Parke, Louis J. Briskman, Cravath, Swaine &
Moore and Cahill Gordon & Reindel may rely upon the opinion of Ballard Spahr
Andrews & Ingersoll.
EXPERTS
The consolidated financial statements as of June 30, 1994 and 1993 and for each
of the three years in the period ended June 30, 1994, included in this
Prospectus and incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994, have been so
included and incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
With respect to the unaudited consolidated financial information for the three
months ended September 30, 1994 and 1993 and the six months ended December 31,
1994 and 1993, included or incorporated by reference in this Prospectus, Price
Waterhouse LLP reported that they have applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate reports dated October 28, 1994 and February 8, 1995, included or
incorporated by reference herein, state that they did not audit and they do not
express an opinion on that unaudited consolidated financial information. Price
Waterhouse LLP has not carried out any significant or additional audit tests
beyond those which would have been necessary if their reports had not been
included or incorporated by reference. Accordingly, the degree of reliance on
their 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 for their reports
on the unaudited consolidated financial information because neither such report
is a "report" or a "part" of the Registration Statement prepared or certified by
Price Waterhouse LLP within the meaning of Sections 7 and 11 of the Securities
Act.
27
<PAGE> 29
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants............................................................ F-2
Review Report of Independent Accountants..................................................... F-3
Consolidated Balance Sheets as of December 31, 1994
(unaudited) and June 30, 1994 and 1993..................................................... F-4
Consolidated Statements of Operations for the six months ended
December 31, 1994 and 1993 (unaudited) and the years ended
June 30, 1994, 1993 and 1992............................................................... F-6
Consolidated Statements of Shareholders' Equity for the six
months ended December 31, 1994 (unaudited) and the years
ended June 30, 1994, 1993 and 1992......................................................... F-7
Consolidated Statements of Cash Flows for the six months ended
December 31, 1994 and 1993 (unaudited) and the years ended
June 30, 1994, 1993 and 1992............................................................... F-8
Notes to Consolidated Financial Statements................................................... F-11
</TABLE>
F-1
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of MICROS Systems, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of MICROS
Systems, Inc. and its subsidiaries at June 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in fiscal 1994.
PRICE WATERHOUSE LLP
Baltimore, Maryland
August 17, 1994
F-2
<PAGE> 31
REVIEW 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, 1994, the related consolidated
statements of operations and cash flows for the six-month periods ended December
31, 1994 and December 31, 1993, and the related consolidated statement of
shareholders' equity for the six-month period ended December 31, 1994. 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.
PRICE WATERHOUSE LLP
Baltimore, Maryland
February 8, 1995
F-3
<PAGE> 32
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ---------------------------
1994 1994 1993
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $17,833,900 $16,339,100 $12,839,400
Accounts receivable, net of allowance for doubtful
accounts of $823,900 (unaudited) at December
31, 1994, $764,300 at June 30, 1994 and
$696,200 at June 30, 1993 20,038,800 17,690,200 12,126,800
Inventories (Note 2) 10,581,400 10,186,800 7,086,700
Deferred income taxes 1,324,900 924,800 649,100
Prepaid expenses and other current assets 2,217,600 1,558,400 860,100
----------- ----------- -----------
Total current assets 51,996,600 46,699,300 33,562,100
----------- ----------- -----------
Property, plant and equipment (Note 6):
Land 1,582,700 1,582,700 582,700
Buildings 4,820,600 4,820,600 1,980,600
Building improvements 320,300 320,300 320,300
Machinery and equipment 6,576,700 5,687,200 4,951,800
Furniture and fixtures 2,695,200 2,293,300 2,057,600
Leasehold improvements 305,500 236,700 153,200
----------- ----------- -----------
16,301,000 14,940,800 10,046,200
Accumulated depreciation and amortization (6,636,600) (6,176,600) (5,389,600)
----------- ----------- -----------
Net property, plant and equipment 9,664,400 8,764,200 4,656,600
----------- ----------- -----------
Note receivable (Note 3) 604,600 3,151,500 2,928,500
Investments (Note 3) 7,401,100 3,884,400 3,385,600
Other assets (Note 4) 3,268,700 3,691,200 3,673,900
----------- ----------- -----------
Total assets $72,935,400 $66,190,600 $48,206,700
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 33
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1994 ---------------------------
------------------ 1994 1993
(UNAUDITED) ----------- -----------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 6) $ 210,000 $ 218,900 $ 133,800
Current portion of capital lease obligation
(Note 8) 96,800 88,400 --
Accounts payable 5,380,000 5,864,400 5,259,100
Accrued expenses and other current liabilities
(Note 7) 11,556,400 9,993,600 6,892,600
Income taxes payable 327,400 412,800 463,200
Deferred service revenue 2,496,800 2,995,100 2,597,000
----------- ----------- -----------
Total current liabilities 20,067,400 19,573,200 15,345,700
----------- ----------- -----------
Long-term debt, net of current portion (Note 6) 1,630,700 1,807,800 1,646,000
Capital lease obligation, net of current portion
(Note 8) 3,638,500 3,687,700 --
Deferred income taxes payable 851,300 952,200 1,113,800
Minority interest 292,500 231,800 130,800
----------- ----------- -----------
Total liabilities 26,480,400 26,252,700 18,236,300
----------- ----------- -----------
Commitments and contingencies (Note 8)
Shareholders' equity (Note 9):
Common stock, $.025 par; authorized 10,000,000
shares; issued and outstanding 7,843,761 shares
(unaudited) at December 31, 1994, 7,787,577
shares at June 30, 1994
and 7,654,461 shares at June 30, 1993 196,100 194,700 191,400
Capital in excess of par 14,374,300 13,760,800 12,727,200
Retained earnings (Notes 5 and 6) 31,740,800 25,825,200 17,137,900
Accumulated foreign currency translation
adjustments 143,800 157,200 (86,100)
----------- ----------- -----------
Total shareholders' equity 46,455,000 39,937,900 29,970,400
----------- ----------- -----------
Total liabilities and shareholders'
equity $72,935,400 $66,190,600 $48,206,700
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 34
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- -----------------------------------------
1994 1993 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Hardware and related software $40,140,700 $28,382,300 $62,440,700 $44,214,500 $35,762,900
Service 11,455,300 7,332,200 16,823,800 11,099,100 8,565,000
----------- ----------- ----------- ----------- -----------
Total revenue 51,596,000 35,714,500 79,264,500 55,313,600 44,327,900
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales
Hardware and related software 20,751,800 14,455,200 32,466,600 20,574,200 16,355,900
Service 5,103,000 3,303,700 6,980,900 4,617,400 3,718,200
----------- ----------- ----------- ----------- -----------
Total cost of sales 25,854,800 17,758,900 39,447,500 25,191,600 20,074,100
Selling, general and
administrative expenses 14,291,000 10,406,300 22,858,800 16,880,600 14,930,200
Research and development expenses 2,177,100 1,614,100 3,392,300 2,901,200 2,571,800
Depreciation and amortization 702,400 575,200 1,244,000 931,100 967,600
----------- ----------- ----------- ----------- -----------
Total costs and expenses 43,025,300 30,354,500 66,942,600 45,904,500 38,543,700
----------- ----------- ----------- ----------- -----------
Income from operations 8,570,700 5,360,000 12,321,900 9,409,100 5,784,200
Non-operating income (expense):
Interest income 481,500 297,200 651,400 366,500 501,800
Interest expense (191,000) (28,200) (188,300) (54,600) (81,500)
Minority interest -- -- -- (41,600) (33,500)
Other income (expense), net
(Note 11) 130,900 (108,000) (201,100) (931,600) (119,300)
----------- ----------- ----------- ----------- -----------
Income before taxes and equity in
net earnings of affiliates 8,992,100 5,521,000 12,571,200 8,747,800 6,051,700
Income taxes (Note 10) 3,078,600 1,736,400 3,982,200 3,033,900 2,108,900
----------- ----------- ----------- ----------- -----------
Income before equity in net
earnings of affiliates 5,913,500 3,784,600 8,589,000 5,713,900 3,942,800
Equity in net earnings of
affiliates 2,100 34,000 98,300 46,000 76,100
----------- ----------- ----------- ----------- -----------
Net income $ 5,915,600 $ 3,818,600 $ 8,687,300 $ 5,759,900 $ 4,018,900
=========== =========== =========== =========== ===========
Net income per common and common
equivalent share $0.74 $0.48 $1.10 $0.74 $0.53
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Weighted-average number of common
and common equivalent shares
outstanding 7,949,641 7,885,610 7,910,619 7,806,773 7,639,536
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 35
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
COMMON STOCK CURRENCY
---------------------- CAPITAL IN RETAINED TRANSLATION
SHARES AMOUNT EXCESS OF PAR EARNINGS ADJUSTMENT TOTAL
---------- -------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1991 7,384,768 $184,600 $11,664,600 $ 7,359,100 $ -- $19,208,300
Stock issued upon exercise
of options 94,302 2,400 168,100 -- -- 170,500
Income tax benefit from
stock options exercised -- -- 161,100 -- -- 161,100
Net income for the year -- -- -- 4,018,900 -- 4,018,900
--------- -------- ----------- ----------- --------- -----------
Balance, June 30, 1992 7,479,070 187,000 11,993,800 11,378,000 -- 23,558,800
Stock issued upon exercise
of options 175,391 4,400 439,100 -- -- 443,500
Income tax benefit from
stock options exercised -- -- 294,300 -- -- 294,300
Net income for the year -- -- -- 5,759,900 -- 5,759,900
Accumulated foreign
currency translation
adjustment -- -- -- -- (86,100) (86,100)
--------- -------- ----------- ----------- --------- -----------
Balance, June 30, 1993 7,654,461 191,400 12,727,200 17,137,900 (86,100) 29,970,400
Stock issued upon exercise
of options 133,116 3,300 676,900 -- -- 680,200
Income tax benefit from
stock options exercised -- -- 356,700 -- -- 356,700
Net income for the year -- -- -- 8,687,300 -- 8,687,300
Accumulated foreign
currency translation
adjustment -- -- -- -- 243,300 243,300
--------- -------- ----------- ----------- --------- -----------
Balance, June 30, 1994 7,787,577 194,700 13,760,800 25,825,200 157,200 39,937,900
Stock issued upon exercise
of options 56,184 1,400 268,000 -- -- 269,400
Income tax benefit from
stock options exercised -- -- 345,500 -- -- 345,500
Net income for the period -- -- -- 5,915,600 -- 5,915,600
Accumulated foreign
currency translation
adjustment -- -- -- -- (13,400) (13,400)
--------- -------- ----------- ----------- --------- -----------
Balance, December 31, 1994
(unaudited) 7,843,761 $196,100 $14,374,300 $31,740,800 $ 143,800 $46,455,000
========= ======== =========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 36
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- -----------------------------------------
1994 1993 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 5,915,600 $ 3,818,600 $ 8,687,300 $ 5,759,900 $ 4,018,900
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 702,400 575,200 1,244,000 931,100 967,600
Amortization of capitalized
software development costs 252,300 166,700 438,800 140,700 175,900
Provision for losses on accounts
receivable 184,600 128,500 273,700 240,100 244,900
Provision for inventory
obsolescence 274,800 193,600 564,200 150,000 241,600
Provision for loss on short-term
investment -- -- -- 148,400 29,500
Undistributed earnings from
equity investments (2,100) (34,000) (98,300) (46,000) (76,100)
Provision for deferred income
taxes (501,000) -- (398,500) 368,500 269,600
Currency translation (gain) loss
on equity investment and loan
receivable (149,000) 98,600 (446,000) 462,200 --
Changes in assets and
liabilities:
Increase in accounts
receivable (2,387,700) (1,312,800) (5,837,100) (2,378,300) (1,188,500)
Increase in inventories (614,900) (2,660,300) (3,633,100) (2,241,500) (327,000)
(Increase) decrease in prepaid
expenses and other assets (949,100) 328,000 407,300 (115,000) 33,100
(Decrease) increase in
accounts payable (512,300) (902,100) 605,300 1,338,200 30,100
Increase (decrease) in accrued
expenses and other current
liabilities 1,511,200 (1,662,300) 2,732,900 1,105,800 1,235,200
Decrease in income taxes
payable (92,400) (577,300) (653,200) (176,500) (85,900)
(Decrease) increase in
deferred
service revenue (540,500) (3,400) 680,400 (485,100) 1,055,800
----------- ----------- ----------- ----------- -----------
Total adjustments (2,823,700) (5,661,600) (4,119,600) (557,400) 2,605,800
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities $ 3,091,900 $(1,843,000) $ 4,567,700 $ 5,202,500 $ 6,624,700
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE> 37
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- -----------------------------------------
1994 1993 1994 1993 1992
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from investing
activities:
Purchases of property, plant and
equipment $(1,395,900) $ (377,800) $(1,224,900) $ (653,400) $ (437,600)
Dispositions of property, plant
and equipment -- -- 87,600 (400) 51,700
Capitalized software development
costs -- (196,900) (196,900) (802,900) (711,700)
Purchase of net district assets -- (245,300) (245,300) -- (100,000)
Purchase of equity interest in
investee (3,417,800) (382,600) (408,300) (3,374,500) (271,500)
(Purchase) sale of short-term
investments -- -- -- 5,846,600 (6,024,500)
(Purchase) sale of long-term
investments -- -- -- 1,000,100 (1,000,100)
Proceeds from loan to investee 3,223,000 -- -- -- --
Loan to investee (604,600) -- -- (3,159,600) --
Dividends received from
affiliates 210,100 31,500 31,500 -- --
Proceeds from sale of affiliate
stock -- 112,600 108,500 -- --
Net cash received in acquisitions -- -- -- 262,100 --
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities (1,985,200) (1,058,500) (1,847,800) (882,000) (8,493,700)
----------- ----------- ----------- ----------- -----------
Cash flows from financing
activities:
Principal payments on long-term
debt (226,800) (95,400) (186,600) (130,000) (130,000)
Principal payments on capital
lease obligation -- -- (70,500) (48,900) (43,100)
Proceeds from issuance of stock 269,400 460,300 680,200 443,500 170,500
Income tax benefit from stock
options exercised 345,500 96,500 356,700 294,300 161,100
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities 388,100 461,400 779,800 558,900 158,500
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 1,494,800 (2,440,100) 3,499,700 4,879,400 (1,710,500)
Cash and cash equivalents at
beginning of period 16,339,100 12,839,400 12,839,400 7,960,000 9,670,500
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period $17,833,900 $10,399,300 $16,339,100 $12,839,400 $ 7,960,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE> 38
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Supplemental disclosure of cash flow information:
Details of businesses acquired in purchase transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Fair value of assets acquired -- $ 4,187,900 --
Liabilities assumed -- 2,419,000 --
Cash paid for acquisitions -- 1,737,700 --
Less cash acquired -- (1,999,800) --
Net cash received in acquisitions -- (262,100) --
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED DECEMBER 31, YEAR ENDED JUNE 30,
------------------------- -----------------------------------------
1994 1993 1994 1993 1992
---------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest $ 203,600 $ 23,300 $ 171,100 $ 46,100 $ 83,800
Income taxes $3,380,200 $2,188,200 $4,729,400 $ 2,534,100 $1,877,800
</TABLE>
Supplemental schedule of noncash financing and investing activities:
The purchase of net district assets (assets purchased from a dealer) in August,
1991 included a cash payment of $100,000 and the release of the seller from
obligations of $118,000 in trade receivables owed to the Company.
The purchase of district assets in September, 1993 included a cash payment of
$245,300 and the issuance of a promissory note in the amount of $500,000. Annual
payments in the amount of $100,000 began on September 30, 1994 and are due on
September 30 of each succeeding year thereafter through September 30, 1998. The
unamortized discount on the note, based on an imputed annual interest rate of
5.75%, is $57,600 at June 30, 1994 and $46,500 (unaudited) at December 31, 1994.
A capital lease obligation of $3,837,800 was incurred in January, 1994 when the
Company entered into a lease for office space.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Short-term investments are those with maturities in excess of three months, but
less than one year, from the date of purchase. These interest-bearing
investments are readily convertible to cash and are valued at lower of cost or
market.
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 39
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of business
MICROS Systems, Inc. is a majority-owned subsidiary (62.3% at June 30, 1994 and
61.8% at December 31, 1994) of Westinghouse Electric Corporation
("Westinghouse"). (References to "MICROS" or the "Company" herein include the
operations of MICROS Systems, Inc. and its subsidiaries on a consolidated
basis.) The Company is a leading worldwide designer, manufacturer, supplier and
servicer of point-of-sale ("POS") computer systems for hospitality providers,
principally full service and fast food restaurants, including restaurants
located in hotels and other lodging establishments. The Company also markets and
distributes property management information systems ("PMS") products which
provide reservation, guest accounting and other information management
capabilities to hotels and other lodging establishments.
Unaudited quarterly information
The unaudited information as of December 31, 1994 and for the six months ended
December 31, 1994 and 1993, included in these financial statements, in the
opinion of management, contains all adjustments, consisting only of normal,
recurring adjustments, necessary to present fairly the results of operations and
financial position for such periods and at such date.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.
Minority interest
The Company owns 60% of the capital stock of Micros Systems AG (Ltd.), a company
organized under the laws of Switzerland.
On May 12, 1993, MICROS acquired a majority interest in three subsidiaries of
Fidelio Software GmbH ("Fidelio GmbH"), a supplier of hotel property management
systems, which control the distribution rights of Fidelio GmbH products in
North, South and Central America, the United Kingdom and France. The total
purchase price, including net liabilities assumed and capitalized expenses, was
$1,926,900, of which $1,226,100 represents goodwill which is being amortized
over 10 years, for 90% of the capital stock of Fidelio Software Corporation, a
Delaware corporation, 80% of Fidelio Software UK Limited, a company organized
under the laws of England and Wales, and 80% of Fidelio France S.A., a company
organized under the laws of France. In October, 1993, the Company sold a 29%
interest in Fidelio France S.A. to an affiliate. The Company now owns 51% of the
stock of Fidelio France S.A. directly, and has an additional 12.67% interest
indirectly through such affiliate and through Fidelio GmbH. In addition, a
capital contribution of $296,800 was made in fiscal 1994 to Fidelio France S.A.
by an affiliate.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars at period-end exchange rates and all income and expense accounts are
translated at average exchange rates. Net translation gains and losses are
reflected in income for parent company assets denominated in foreign currencies
and foreign operations where the functional currency is considered to be the
U.S. dollar.
Effective January 1, 1993, the Company determined that the functional currency
for several foreign entities should
be changed from the U.S. dollar to the local currency, as cash flows and
financing activities of these entities are increasingly denominated in foreign
currencies. Accordingly, assets and liabilities are translated at period-end
exchange rates and all income and expense accounts are translated at average
exchange rates. Net translation exchange gains and losses are excluded from net
earnings and accumulated in a separate component of shareholders' equity.
Revenue recognition
Revenue from product sales is recognized at the time of shipment with a
provision for estimated returns and allowances and classified as "hardware and
related software" revenue in the Consolidated Statements of Operations. Revenue
from
F-11
<PAGE> 40
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
the installation of products is recognized upon the completion of the
installation of the product as acknowledged by the customer and is classified as
"service" revenue in the Consolidated Statements of Operations.
Service contract revenue is initially recorded as deferred service revenue and,
to the extent not remitted to the dealers and distributors which provide such
services for certain customers, is reflected in operating income on a pro rata
basis over the contract term, which is generally one year. Service contract
revenue is classified as "service" revenue in the Consolidated Statements of
Operations.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by the first-in, first-out method.
Property, plant and equipment
Property, plant and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred, and the costs of additions and betterments are
capitalized. Depreciation is provided in amounts which amortize costs over the
useful lives of the related assets, generally three to ten years for equipment
and 40 years for buildings and building improvements, utilizing the
straight-line method.
Leasehold improvements are amortized over the terms of the respective leases or
service lives of the improvements, whichever is shorter.
Warranties
A majority of the Company's products are under warranty for defects in material
and workmanship for a one-year period. The Company establishes an accrual for
estimated warranty costs at the time of sale.
Capitalized computer software development costs
The Company capitalizes software development costs in accordance with Statement
of Financial Accounting Standards No. 86. Software development costs incurred
prior to establishing technological feasibility are charged to operations and
included in research and development expenses. Software development costs
incurred after establishing technological feasibility, and purchased software
costs, are capitalized and amortized on a product-by-product basis when the
product is available for general release to customers. Annual amortization,
charged to cost of sales, is the greater of the amount computed using the ratio
that current gross revenues for a product bear to the total of current and
anticipated future gross revenues for that product or the straight-line method
over the remaining estimated economic life of the product.
Research and development expenses
Expenditures for research and development not capitalized as described above are
charged to operations as incurred.
Goodwill
The excess of cost over fair market value of net assets acquired is amortized on
a straight-line basis over periods ranging from three to ten years.
Investments
The investment in D.A.C. Systemes/MICROS France is carried on the equity basis
because the Company is considered to exercise significant influence over the
investee through distribution and management agreements (see Note 3).
The investment in Fidelio GmbH was carried on the cost basis until October 4,
1994 and has been accounted for on the equity basis subsequent to that date.
Financial statements prior to October 4, 1994 have not been restated to the
equity method because it would not have produced a materially different result
(see Note 3).
Financing costs related to long-term debt
Costs associated with financing long-term debt are amortized over the term of
the related debt.
F-12
<PAGE> 41
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
Advertising costs
The Company's policy for accounting for advertising is to expense costs as
incurred. Advertising expenses for fiscal 1994, 1993, and 1992 were $1,224,800,
$820,100, and $602,300, respectively. Advertising expenses for the six months
ended December 31, 1994 and 1993 were $745,600 (unaudited) and $588,800
(unaudited), respectively.
Income taxes
Deferred taxes have been provided to reflect temporary differences between the
financial statement and the tax return recognition of certain items.
In February, 1992, the Financial Accounting Standards Board issued its Statement
No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 changed the method of
accounting for income taxes from the deferred method (APB 11) to an asset and
liability approach. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets
and liabilities. MICROS adopted SFAS 109 effective for the first quarter of
fiscal 1994. Adoption did not have a material effect on the Company's
consolidated financial position or results of operations. However, first quarter
earnings for fiscal 1994 include a credit for tax changes enacted on August 10,
1993. These changes decreased the quarter's tax provision by $178,200
(unaudited) attributable to the retroactive reinstatement of the Research Tax
Credit.
Net income per common and common equivalent share
Net income per common and common equivalent share is computed based on the
weighted-average number of common and common equivalent shares outstanding
during each period. For purposes of this computation, the Company's outstanding
stock options are considered common stock equivalents.
Reclassifications
Certain prior period reclassifications have been made to conform to current
period classifications.
2. INVENTORIES:
The components of inventories are as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -------------------------
1994 1994 1993
--------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials $ 2,578,000 $ 1,915,700 $1,760,200
Work-in-process 1,683,200 1,319,400 1,478,900
Finished goods 6,320,200 6,951,700 3,847,600
----------- ----------- ----------
$10,581,400 $10,186,800 $7,086,700
=========== =========== ==========
</TABLE>
3. INVESTMENTS AND NOTE RECEIVABLE:
In fiscal 1992, the Company purchased a 15% interest in D.A.C. Systemes of
Paris, France (now D.A.C. Systemes/ MICROS France), a MICROS distributor which
markets hospitality-related products to hotels and restaurants throughout France
and services such products. An additional 8% interest was purchased in October,
1993. The equity interests were acquired at an aggregate cost of $628,300, of
which $383,300 represents goodwill which is being amortized over 10 years. The
total goodwill amortized in the first six months of fiscal 1995 was $19,000 and
in fiscal 1994, 1993, and 1992 was $32,300, $15,100 and $15,100, respectively.
On May 12, 1993, MICROS purchased 15% of the capital stock of Fidelio GmbH of
Munich, Germany for $3,374,500 and received an option to buy an additional 15%
interest from individual shareholders for a fixed amount of DM 5,000,000, which
was exercised on October 4, 1994. Additionally, the Company has the right to
acquire all or part of the remaining shares of Fidelio GmbH on or before
December 31, 1999, at a price to be determined based on an agreed upon formula.
MICROS had accounted for its 15% investment as of September 30, 1994 under the
cost method.
F-13
<PAGE> 42
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
However, effective October 4, 1994, the 30% investment is accounted for under
the equity method. Included in the aggregate purchase price of the Company's 30%
investment in Fidelio GmbH is approximately $5.7 million representing goodwill
at October 4, 1994, which is being amortized over 10 years beginning on that
date. The investment was not restated as of September 30, 1994 since it would
not have produced a materially different result.
Additionally, on May 12, 1993, MICROS granted a loan to Fidelio GmbH in the
amount of DM 5,000,000. The loan bore interest at 7% per annum and was repaid
upon exercise of the option to acquire the additional 15% interest in Fidelio
GmbH. In connection with its increase in ownership of Fidelio GmbH in October,
1994 from 15% to 30%, the Company loaned Fidelio GmbH DM 900,000, which bears
interest at a variable rate, and is obligated to make additional loans of up to
DM 600,000, all of which loans are to be repaid by December 31, 2000. The
obligation of the Company to make the further loans to Fidelio GmbH is
conditioned on Fidelio GmbH's other shareholders increasing their current loans
to Fidelio GmbH from DM 2.1 million to an aggregate amount of up to DM 3.5
million.
As a result of the fiscal 1993 investment and loan being realizable only in
Deutsche Marks, MICROS was subject to currency risks between the Deutsche Mark
and the U.S. dollar through September 30, 1994. As a result of this investment
and loan, a foreign currency translation gain of $143,000 (unaudited) and a loss
of $98,600 (unaudited) was recognized in the six months ended December 31, 1994
and 1993, respectively. A currency translation gain of $446,000 and a loss of
$462,200 were recognized in fiscal 1994 and 1993, respectively. MICROS continues
to be subject to currency risks between the Deutsche Mark and U.S. dollar with
respect to the DM 900,000 loan which is realizable only in Deutsche Marks and
which is to be repaid by December 31, 2000. The Company does not engage in any
foreign exchange hedging.
4. OTHER ASSETS:
Other assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ------------------------
1994 1994 1993
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Capitalized computer software development costs,
net of accumulated amortization of $1,624,200
(unaudited) at December 31, 1994, $1,371,900 at
June 30, 1994 and $933,100 at June 30, 1993 $1,495,700 $1,748,000 $1,989,900
Purchased software, net of accumulated amortization
of $525,000 at June 30, 1993 -- -- 105,000
Goodwill, net of accumulated amortization of
$177,400 (unaudited) at December 31, 1994,
$445,200 at June 30, 1994 and $297,800 at
June 30, 1993 827,700 1,191,500 1,350,200
Net district intangible assets 458,300 524,500 --
Deferred financing costs (see Note 6) 99,100 103,500 112,400
License fee, net of accumulated amortization of
$50,000 (unaudited) at December 31, 1994 250,000 -- --
Other 137,900 123,700 116,400
---------- ---------- ----------
$3,268,700 $3,691,200 $3,673,900
========== ========== ==========
</TABLE>
The total computer software development costs capitalized in fiscal 1994, 1993,
and 1992 were $196,900, $802,900, and $711,700, respectively. The total costs
amortized and charged to operations in fiscal 1994, 1993, and 1992 were
$438,800, $140,700, and $175,900, respectively.
5. LINE OF CREDIT:
The Company has a $10,000,000 committed line of credit, effective January 1,
1994, bearing interest at the bank's prime rate minus one quarter of one
percent, which expires February 28, 1995. Under the terms of the loan agreement,
the Company may borrow up to $10,000,000 less the amount of outstanding letters
of credit. Amounts outstanding under the line are payable on demand and are not
secured by the assets of the Company. The agreement requires the Company
F-14
<PAGE> 43
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
to maintain certain levels of working capital and tangible net worth and a
minimum debt to worth ratio. In addition, the agreement limits the incurrence of
additional indebtedness and prohibits the Company's payment of cash dividends.
Prior to January 1, 1994, the Company had a similar line of credit with the same
bank with a borrowing capacity of $10,000,000. There have been no borrowings
under the line of credit during either of fiscal 1993 or fiscal 1994 or
subsequent thereto, although there was a $45,800 letter of credit issued
thereunder and outstanding at June 30, 1993. The Company has recently signed a
commitment letter to increase the line to $15.0 million and to extend the term
through December 31, 1996.
6. LONG-TERM DEBT:
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ------------------------
1994 1994 1993
-------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to bank $1,396,000 $1,461,000 $1,591,000
Note payable for net district assets 353,500 442,400 --
Capitalized lease obligation on computer
equipment,
due in monthly installments through 1993 -- -- 8,800
Obligation to minority shareholder (Note 12) 91,200 123,300 180,000
---------- ---------- ----------
1,840,700 2,026,700 1,779,800
Less current portion 210,000 218,900 133,800
---------- ---------- ----------
$1,630,700 $1,807,800 $1,646,000
========== ========== ==========
</TABLE>
In June, 1989, the Company refinanced its Industrial Revenue Bond (IRB)
obligation. Variable Rate Revenue Refunding Bonds were issued by Prince George's
County, Maryland in the amount of $2,111,000, the then outstanding principal
balance of the IRB, and were sold to a bank which acted as the remarketing agent
of the bonds. The interest rate on the note payable to the bank, which was
issued in connection with the Company's IRB obligation, is a variable rate set
weekly by the bank based on prevailing market conditions with a maximum rate of
15%. On December 31, 1994 and June 30, 1994, the effective interest rates were
approximately 7.0% (unaudited) and 4.1%, respectively. The Company is repaying
the debt in equal monthly principal payments plus interest through January,
2006. The loan, which is collateralized by property, plant and equipment, is
subject to certain debt covenants similar to those contained in the line of
credit agreement (see Note 5).
In September, 1993, as part of the purchase of district assets, the Company
issued a promissory note in the amount of $500,000. Annual payments in the
amount of $100,000 began on September 30, 1994 and are due on September 30 of
each succeeding year thereafter through September 30, 1998. The unamortized
discount on the note, based on an imputed annual interest rate of 5.75%, was
$46,500 (unaudited) at December 31, 1994 and $57,600 at June 30, 1994.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS
ENDING YEAR ENDING
DECEMBER 31, JUNE 30,
------------ ------------
(UNAUDITED)
<S> <C> <C>
1995 $ 210,000 $ 218,900
1996 245,700 270,000
1997 219,400 217,900
1998 224,600 219,400
1999 130,000 224,500
2000 and thereafter 811,000 876,000
---------- ----------
$1,840,700 $2,026,700
========== ==========
</TABLE>
F-15
<PAGE> 44
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
The components of accrued expenses and other current liabilities are as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1994 ------------------------
----------------- 1994 1993
(UNAUDITED) ---------- ----------
<S> <C> <C> <C>
Payroll and related taxes $ 1,775,700 $2,118,200 $1,961,300
Compensated absences 690,800 626,300 436,000
Commissions 2,109,500 1,895,900 1,353,700
Quantity discounts and credits due customers 1,158,000 1,968,900 1,016,100
Professional services 200,000 155,100 315,400
Advertising and promotional costs 286,300 387,000 297,700
Deposits received from customers 2,501,500 1,091,700 276,000
Other 2,834,600 1,750,500 1,236,400
----------- ---------- ----------
$11,556,400 $9,993,600 $6,892,600
=========== ========== ==========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office space and equipment under operating leases expiring at
various dates through 1999. Rent expense under these leases for fiscal 1994,
1993, and 1992 was $1,170,700, $777,100, and $716,800, respectively.
The Company leases office and warehouse space under a 15-year capital lease as
of January, 1994. The cost of the asset is included in land and buildings at
$1,000,000 and $2,837,800, respectively, at June 30, 1994. Accumulated
depreciation on the building was $70,900 (unaudited) at December 31, 1994 and
$35,400 at June 30, 1994.
Future minimum lease commitments at June 30, 1994, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING CAPITAL
JUNE 30, LEASES LEASE
-------------------- ---------- -----------
<S> <C> <C>
1995 $ 602,500 $ 350,000
1996 418,500 360,500
1997 260,900 371,300
1998 149,900 382,400
1999 69,600 393,900
2000 and thereafter -- 4,382,500
---------- -----------
$1,501,400 6,240,600
==========
Less amount
representing
interest at 7% 2,464,500
-----------
3,776,100
Current portion 88,400
-----------
Long-term
obligations under
capital lease $ 3,687,700
===========
</TABLE>
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 would not have a material effect on the
Company's results of operations or financial position.
F-16
<PAGE> 45
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
9. STOCK OPTIONS:
The Company has incentive stock options outstanding which were granted to
officers and other key employees pursuant to authorization by the Board of
Directors. The exercise price of all options equals the market value on the date
of the grant. The options granted become exercisable in three equal, annual
installments beginning one year after the date of grant and expire five years
from the date of grant. The Company has reserved 329,546 shares as of June 30,
1994 for exercise pursuant to these options.
A summary of changes in outstanding stock options follows:
<TABLE>
<CAPTION>
INCENTIVE
STOCK OPTION PRICE
OPTIONS PER SHARE
------------ -------------
<S> <C> <C>
Balance, June 30, 1991 375,355 $1.375- 5.000
Options granted 136,000 $5.875- 7.125
Options cancelled (19,669) $1.375- 3.250
Options exercised (94,302) $1.375- 3.250
-------- -------------
Balance, June 30, 1992 397,384 $1.375- 7.125
Options granted 117,000 $8.625-12.125
Options cancelled (10,334) $5.875- 8.625
Options exercised (175,391) $1.375- 6.875
-------- -------------
Balance, June 30, 1993 328,659 $1.750-12.125
Options granted -- --
Options cancelled -- --
Options exercised (133,116) $1.750- 8.625
-------- -------------
Balance, June 30, 1994 195,543 $3.250-12.125
======== =============
Options exercisable at June 30, 1994 99,868 $3.250-12.125
======== =============
</TABLE>
10. INCOME TAXES:
The components of income tax expense are:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $3,200,700 $2,112,500 $1,397,400
State 719,700 465,800 330,500
Foreign 460,300 87,100 111,400
---------- ---------- ----------
4,380,700 2,665,400 1,839,300
---------- ---------- ----------
Deferred:
Federal (366,900) 307,100 220,700
State (31,600) 61,400 48,900
Foreign -- -- --
---------- ---------- ----------
(398,500) 368,500 269,600
---------- ---------- ----------
$3,982,200 $3,033,900 $2,108,900
========== ========== ==========
</TABLE>
F-17
<PAGE> 46
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
The total tax provision is different from the amount that would have been
recorded by applying the U.S. statutory federal income tax rate to income before
taxes. The reconciliation of these differences is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
At statutory rate 35.0% 34.0% 34.0%
Increase (decrease) resulting from:
U.S. federal surtax reduction (.9 ) -- --
State taxes, net of federal tax benefit 3.8 4.0 4.1
Research tax credits (2.9) -- (3.0)
Foreign Sales Corporation tax benefit (1.2) (.9 ) (1.1)
Effect of tax rates in foreign jurisdictions 1.6 1.3 2.6
Other (3.7) (3.9) (2.2)
---- ---- ----
Effective tax rate 31.7% 34.5% 34.4%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At June 30, 1994, the
Company had unused tax benefits of $386,700 related to U.S. net operating loss
carryforwards for income tax purposes. The tax loss carryforwards (if not
utilized against taxable income) expire beginning 2005 and continue through
2009. A valuation allowance of $386,700 has been provided at June 30, 1994 to
offset the related deferred tax assets due to uncertainty of realizing the
benefit of the loss carryforwards. The operating loss carryforwards were
acquired as part of a purchase of a subsidiary, and any realization of the net
operating loss carryforwards will result in a reduction of goodwill recorded as
part of that acquisition. The following summarizes the significant components of
the Company's deferred tax assets and liabilities as of June 30, 1994:
<TABLE>
<CAPTION>
ASSETS LIABILITIES TOTAL
--------- ----------- ---------
<S> <C> <C> <C>
Current deferred taxes:
Bad debt $ 266,500 $ -- $ 266,500
Accruals not deductible for tax purposes 479,500 -- 479,500
Other 178,800 -- 178,800
--------- ----------- ---------
$ 924,800 $ -- $ 924,800
--------- ----------- ---------
--------- ----------- ---------
Non-current deferred taxes:
Depreciation $ -- $ (357,000) $(357,000)
Capitalized software development costs -- (680,000) (680,000)
Net operating loss carryforward 386,700 -- 386,700
Net operating loss carryforward valuation allowance (386,700) -- (386,700)
Other 84,800 -- 84,800
--------- ----------- ---------
$ 84,800 $(1,037,000) $(952,200)
========= =========== =========
</TABLE>
F-18
<PAGE> 47
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
11. OTHER INCOME (EXPENSE), NET:
Other income (expense), net is comprised of the following items:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
----------------------- -------------------------------------
1994 1993 1994 1993 1992
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Service charges on accounts
receivable $ 144,600 $ 101,400 $ 269,500 $ 253,500 $ 298,800
Prompt payment discounts (241,600) (189,000) (422,100) (287,200) (224,600)
Foreign exchange gain (loss) 110,600 (98,600) 402,500 (633,300) 67,600
Legal settlements -- -- -- (157,000) --
Other, net 117,300 78,200 (451,000) (107,600) (261,100)
--------- --------- --------- --------- ---------
$ 130,900 $(108,000) $(201,100) $(931,600) $(119,300)
========= ========= ========= ========= =========
</TABLE>
12. RELATED PARTY TRANSACTIONS:
The Company has purchased certain raw materials and has contracted for certain
sub-assembly operations through Westinghouse, its majority shareholder, to take
advantage of more competitive pricing available through off-shore manufacturing
locations. The Company estimates that it purchased approximately $1,691,200,
$1,543,000, and $1,261,000 in such materials and labor from Westinghouse during
fiscal 1994, 1993 and 1992, respectively.
During fiscal 1994, 1993 and 1992, the Company also purchased from Westinghouse
and its subsidiaries approximately $667,400, $673,400, and $454,000,
respectively, of other products and services, including insurance coverage,
office space, office furniture and telecommunications services.
During fiscal 1993 and 1992, the Company sold approximately $779,200 and
$615,000, respectively, in products to Hugin Sweda-Austria, under the same terms
and conditions offered to other independently-owned dealers/distributors of the
Company. Hugin Sweda-Austria is owned, in part, by Peter Unterweger, a Director
of the Company until October, 1992.
During fiscal 1994, 1993 and 1992, the Company sold approximately $1,107,500,
$946,600, and $1,287,100, respectively, in products to D.A.C. Systemes/MICROS
France, under the same terms and conditions offered to other independently-owned
dealers/distributors of the Company. D.A.C. Systemes/MICROS France is
principally owned by Daniel Cohen, a Director of the Company.
During fiscal 1992, the Company entered into an agreement with Granite
Communications, Inc. ("Granite") to purchase certain hardware and communications
software for the Company's handheld products to be sold in conjunction with its
internally-developed applications software. Granite is an entity affiliated with
the Chairman of the Board, Louis M. Brown, Jr., and another Director of the
Company, Alan Voorhees, since it was acquired by IDEAS, Inc. in fiscal 1992. In
fiscal 1991, the Company had advanced the sum of $220,000 to the predecessor of
Granite for the development of a product, and advanced $150,000 in fiscal 1994
to Granite for the development of an additional product. Under the current
agreements with Granite, the crediting of the advances is being reflected in
product purchases through a reduced price for each unit purchased. During fiscal
1994 and 1993, the Company purchased products from Granite in the amount of
$1,301,500 and $863,500, respectively, net of $127,500 and $92,500,
respectively, in credits against the advance payment made in 1991. In September,
1994, the Company acquired a license for the technology to develop, manufacture
and market the products exclusively in the hospitality food service field, and
nonexclusively in the lodging field and certain retail and general merchandise
locations.
During fiscal 1993, the Company assumed a liability in the amount of $180,000 to
a minority shareholder, payable in equal installments over the ensuing three
fiscal years. The liability was assumed as part of the purchase of a majority
interest in Fidelio Software Corporation. In addition, the Company has entered
into certain software licensing and royalty agreements with Fidelio GmbH through
the Company's majority-owned subsidiaries in the U.S., the United Kingdom and
France which distribute Fidelio GmbH software products. The terms and conditions
of the licensing and royalty agreements are
F-19
<PAGE> 48
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
substantially similar to agreements which Fidelio GmbH has with its other
distributors. MICROS owns a minority interest in Fidelio GmbH. See Note 3 of
Notes to Consolidated Financial Statements.
During fiscal 1994, 1993 and 1992, the Company compensated Louis M. Brown, Jr.,
Chairman of the Board, $154,000, $35,300 and $21,000, respectively, for
consulting services provided to the Company.
13. EMPLOYEE BENEFIT PLAN:
The Company sponsors an employee savings plan which conforms to the provisions
of Section 401(k) of the Internal Revenue Code. The Plan covers substantially
all full-time employees and allows employees to voluntarily defer a certain
percentage of their income through contributions to the Plan. The Company may,
at its discretion, elect to contribute to the Plan. Company contributions were
made during fiscal 1994, 1993 and 1992 totaling $241,200, $163,800 and $103,100,
respectively.
The Company does not have any obligations to past or present employees related
to post-employment benefits.
14. GEOGRAPHIC INFORMATION:
The Company currently develops, manufactures, sells and services POS computer
systems and markets and distributes PMS software products for the hotel/lodging
industry. Foreign sales aggregated approximately 29%, 26%, and 33% of revenue in
fiscal 1994, 1993 and 1992, respectively. MICROS products are distributed in the
U.S. and internationally, primarily in Europe, through independent
dealers/distributors and Company-owned sales and service offices. The Company's
principal customers are food and lodging service-related businesses. Economic
risks are similar for these businesses in that consumers generally spend more
time dining and lodging away from home in robust economies and less time in slow
or recessionary economies. The Company's experience with the collections of
trade receivables and the sales growth pattern follow general economic
conditions. No significant concentration of credit risk exists within any
geographic area.
Operations in different geographic areas are as follows:
<TABLE>
<CAPTION>
REVENUE (1)
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
North America $59,640,800 $43,117,700 $31,569,000
International 19,623,700 12,195,900 12,758,900
----------- ----------- -----------
Revenue $79,264,500 $55,313,600 $44,327,900
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
INCOME FROM OPERATIONS
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
North America $10,604,100 $8,338,200 $4,316,900
International 1,717,800 1,070,900 1,467,300
----------- ---------- ----------
Income from operations $12,321,900 $9,409,100 $5,784,200
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
North America $55,904,800 $41,617,800 $31,981,600
International 10,285,800 6,588,900 5,422,700
----------- ----------- -----------
Total identifiable assets $66,190,600 $48,206,700 $37,404,300
=========== =========== ===========
<FN>
(1) Included in North America Revenue are export sales amounting to $3,076,300,
$2,404,100, and $1,841,100 for each of the respective years.
</TABLE>
F-20
<PAGE> 49
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Quarterly financial information for the first and second quarters of fiscal 1995
and for fiscal 1994, 1993 and 1992 is presented in the following tables:
<TABLE>
<CAPTION>
FIRST SECOND
1995 QUARTER QUARTER
- ---- ----------- -----------
<S> <C> <C>
Revenue $24,474,400 $27,121,600
=========== ===========
Gross margin $12,393,000 $13,348,200
=========== ===========
Income from operations $ 4,104,300 $ 4,466,400
=========== ===========
Net income $ 3,035,700 $ 2,879,900
=========== ===========
Net income per common and common equivalent
share $ 0.38 $ 0.36
=========== ===========
STOCK PRICES
- ------------
High 33 1/2 41 1/4
Low 26 1/4 28 3/4
FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER
- ---- ----------- ----------- ----------- -----------
Revenue $16,395,600 $19,318,900 $19,281,000 $24,269,000
=========== =========== =========== ===========
Gross margin $ 8,470,700 $ 9,484,900 $ 9,615,000 $12,246,400
=========== =========== =========== ===========
Income from operations $ 2,427,600 $ 2,932,400 $ 2,877,800 $ 4,084,100
=========== =========== =========== ===========
Net income $ 2,014,800 $ 1,803,800 $ 2,000,000 $ 2,868,700
=========== =========== =========== ===========
Net income per common and common equivalent
share $ 0.26 $ 0.23 $ 0.25 $ 0.36
=========== =========== =========== ===========
STOCK PRICES
- ------------
High 20 1/2 26 29 1/2 27 3/4
Low 13 1/2 14 3/4 23 1/4 22 1/2
FIRST SECOND THIRD FOURTH
1993 QUARTER QUARTER QUARTER QUARTER
- ---- ----------- ----------- ----------- -----------
Revenue $11,426,800 $13,113,400 $12,272,100 $18,501,300
=========== =========== =========== ===========
Gross margin $ 6,281,400 $ 7,288,100 $ 6,763,400 $ 9,789,100
=========== =========== =========== ===========
Income from operations $ 1,364,400 $ 2,314,900 $ 1,764,700 $ 3,965,100
=========== =========== =========== ===========
Net income $ 1,100,100 $ 1,281,700 $ 1,149,800 $ 2,228,300
=========== =========== =========== ===========
Net income per common and common equivalent
share $ 0.14 $ 0.16 $ 0.15 $ 0.28
=========== =========== =========== ===========
STOCK PRICES
- ------------
High 10 22 3/4 22 3/4 16
Low 7 1/4 9 1/8 11 3/4 13 1/4
</TABLE>
F-21
<PAGE> 50
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992 (CONTINUED)
<TABLE>
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
1992 QUARTER QUARTER QUARTER QUARTER
- ---- ---------- ----------- ---------- -----------
Revenue $8,465,900 $11,770,000 $9,765,500 $14,326,500
========== =========== ========== ===========
Gross margin $4,721,500 $ 6,149,300 $5,305,700 $ 8,077,300
========== =========== ========== ===========
Income from operations $ 777,000 $ 1,728,700 $ 591,500 $ 2,687,000
========== =========== ========== ===========
Net income $ 599,600 $ 1,202,400 $ 405,500 $ 1,811,400
========== =========== ========== ===========
Net income per common and common equivalent
share $ 0.08 $ 0.16 $ 0.05 $ 0.24
========== =========== ========== ===========
STOCK PRICES
- ------------
High 6 3/8 7 1/4 7 1/2 7 1/2
Low 4 5/8 5 5/8 5 3/4 5 3/4
</TABLE>
The Company has never paid a dividend. Its current policy is to retain earnings
and use funds for the operation and expansion of its business. The Company is a
party to a Loan Agreement which prohibits the payment of cash dividends.
F-22
<PAGE> 51
MICROS(R)
<PAGE> 52
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the distribution of the securities being
registered hereby, other than underwriting discounts and commissions, are as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 54,762
*Legal Fees and Expenses 555,000
*Accountants' Fees and Expenses 150,000
*Printing Expenses 110,000
*State Qualification Expenses (including legal fees) 12,500
*Miscellaneous 17,738
--------
*Total $900,000
========
<FN>
- ---------
* Estimated.
</TABLE>
All of the expenses in connection with the distribution of the securities
registered hereby will be borne by the Selling Stockholder.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Charter, as amended, of MICROS Systems, Inc. ("MICROS" or the "Company")
provides that the Company shall indemnify its directors and officers, whether
serving the Company or, at its request, another entity, to the fullest extent
required or permitted by the general laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures
provided by such laws. The Company's Charter also provides that the Company
shall indemnify its other agents or employees, whether serving the Company or,
at its request, another entity, to such an extent as is authorized by the Board
of Directors or the By-laws of the Company and as permitted by law.
Section 2-418 of the Maryland General Corporation Law (the "MGCL") requires a
corporation (unless its charter provides otherwise) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which such director or officer is a made a party by reason of
such director's or officer's service in that capacity. The Charter does not
currently exempt the Company from such requirements.
Section 2-418 of the MGCL provides that a corporation may indemnify any director
or officer made a party to any proceeding by reason of service in these or
certain other capacities against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by the director or officer in connection
with the proceeding, unless it is established that (i) the act or omission of
the director or officer was material to the matter giving rise to the proceeding
and (a) was committed in bad faith or (b) was the result of active and
deliberate dishonesty; (ii) the director or officer actually received an
improper personal benefit in money, property or services; or (iii) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. Termination of any proceeding by
judgment, order or settlement does not create a presumption that the director
did not meet the requisite standard of conduct. Termination of any proceeding by
conviction, or plea of nolo contendere or its equivalent, or entry of an order
of probation prior to judgment, creates a rebuttable presumption that the
director did not meet the requisite standard of conduct. Indemnification is not
permitted unless authorized for a specific proceeding, after a determination
that indemnification is permissible because the requisite standard of conduct
designated above has been met.
Under Section 2-418 of the MGCL, a director or officer may not be indemnified by
a Maryland corporation in respect of any proceeding by or in the right of the
corporation in which such director or officer has been adjudged liable to the
corporation or in respect of any proceeding charging improper personal benefit
in which such director or officer was adjudged to be liable on the basis that
personal benefit was improperly received.
The reasonable expenses incurred by a director who is a party to a proceeding
may be paid or reimbursed by the Company in advance of the final disposition of
the proceeding upon receipt by the Company of both a written affirmation by the
director of his good faith belief that the standard of conduct necessary for
indemnification by the Company has been met and a written undertaking by or on
behalf of the director to repay the amount if it shall be ultimately determined
that the standard
II-1
<PAGE> 53
of conduct has not been met. This undertaking shall be an unlimited general
obligation of the director but need not be secured and may be accepted without
reference to financial ability to make the repayment.
The indemnification and advancement of expenses provided or authorized by
Section 2-418 are not exclusive of any other rights to which a director may be
entitled under the charter, by-laws, a resolution of stockholders or directors,
an agreement or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Pursuant to Section 2-418 of the MGCL, a corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or who, while serving in such capacity, is or was at
the request of the corporation serving as a director, officer, partner, trustee,
employee or agent of another corporation or legal entity or of an employee
benefit plan, against liability asserted against and incurred by such person in
any such capacity or arising out of such person's position, whether or not the
corporation would have the power to indemnify against liability under Section
2-418. A corporation may provide similar protection, including a trust fund,
letter of credit or surety bond, which is not inconsistent with Section 2-418. A
subsidiary or an affiliate of the corporation may provide the insurance or
similar protection.
Subject to certain exclusions, the directors and officers of the Company and its
affiliates are insured against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). The Company is insured, subject to certain retentions
and exceptions, to the extent it shall have indemnified the directors and
officers for such loss.
In addition, the Company and certain other persons may be entitled under
agreements entered into with agents or underwriters to indemnification by such
agents or underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which the
Company or such persons may be required to make in respect thereof.
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<S> <C>
1. Form of Underwriting Agreement.*
4a. Charter of the Company, incorporated herein by reference to Exhibit 3 to the Annual
Report on Form 10-K of the Company for the fiscal year ended June 30, 1990.
4b. By-laws of the Company, incorporated herein by reference to Exhibit 3 to the Annual
Report on Form 10-K of the Company for the fiscal year ended June 30, 1990.
4c. Specimen certificate for Common Stock, incorporated herein by reference to Exhibit 4 to
Amendment No. 1 to the Registration Statement on Form S-1 of the Company bearing
Registration No. 2-69969.
4d. Stock Unit Purchase Agreement dated as of October 30, 1986 between the Company and the
Selling Stockholder.*
5. Opinion of Ballard Spahr Andrews & Ingersoll.*
15a. Letter on Unaudited Interim Financial Information with respect to the report dated
October 28, 1994.**
15b. Letter on Unaudited Interim Financial Information with respect to the report dated
February 8, 1995.
23a. Consent of Price Waterhouse LLP, independent accountants.
23b. Consent of Ballard Spahr Andrews & Ingersoll (contained in their opinion filed as
Exhibit 5 to this Registration Statement).*
24. Powers of Attorney.*
<FN>
- ---------
* Previously filed.
** Previously filed as Exhibit 15 to Amendment No. 1 to this Registration
Statement.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 54
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 55
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT (REGISTRATION NO. 33-88768) TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN BELTSVILLE, MARYLAND, ON THIS 6TH
DAY OF MARCH, 1995.
MICROS Systems, Inc.
By /s/ RONALD J. KOLSON
---------------------------------
Ronald J. Kolson
Executive Vice President
and Chief Operating
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
THE REGISTRATION STATEMENT (REGISTRATION NO. 33-88768) HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THIS 6TH DAY OF MARCH, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
LOUIS M. BROWN, JR.* Chairman of the Board and Director
----------------------------------
Louis M. Brown, Jr.
A.L. GIANNOPOULOS* President and Chief Executive Officer
---------------------------------- and Director (Principal executive officer)
A.L. Giannopoulos
/s/ GARY C. KAUFMAN Vice President, Finance and
---------------------------------- Administration/Chief Financial Officer
Gary C. Kaufman (Principal financial officer)
/s/ ROBERTA J. WATSON Vice President and Controller
---------------------------------- (Principal accounting officer)
Roberta J. Watson
DANIEL COHEN* Director
----------------------------------
Daniel Cohen
CARROLL H. JOHNSON* Director
----------------------------------
Carroll H. Johnson
ALAN M. VOORHEES* Director
----------------------------------
Alan M. Voorhees
EDWARD T. WILSON* Director
----------------------------------
Edward T. Wilson
/s/ GARY C. KAUFMAN
*By ----------------------------------
(Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER PAGE
------- ----
<S> <C> <C>
1. Form of Underwriting Agreement.*
4a. Charter of the Company, incorporated herein by reference to Exhibit 3 to the
Annual Report on Form 10-K of the Company for the fiscal year ended June 30,
1990.
4b. By-laws of the Company, incorporated herein by reference to Exhibit 3 to the
Annual Report on Form 10-K of the Company for the fiscal year ended June 30,
1990.
4c. Specimen certificate for Common Stock, incorporated herein by reference to
Exhibit 4 to Amendment No. 1 to the Registration Statement on Form S-1 of the
Company bearing Registration No. 2-69969.
4d. Stock Unit Purchase Agreement dated as of October 30, 1986 between the
Company and the Selling Stockholder.*
5. Opinion of Ballard Spahr Andrews & Ingersoll.*
15a. Letter on Unaudited Interim Financial Information with respect to the report
dated October 28, 1994.**
15b. Letter on Unaudited Interim Financial Information with respect to the report
dated February 8, 1995.
23a. Consent of Price Waterhouse LLP, independent accountants.
23b. Consent of Ballard Spahr Andrews & Ingersoll (contained in their opinion
filed as Exhibit 5 to this Registration Statement).*
24. Powers of Attorney.*
<FN>
- ---------
* Previously filed.
** Previously filed as Exhibit 15 to Amendment No. 1 to this Registration
Statement.
</TABLE>
<PAGE> 1
Exhibit 15b
[Letterhead of PRICE WATERHOUSE LLP] 7 St. Paul Street
Suite 1700
Baltimore, MD 21202
Telephone 410-685-0542
March 6, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen,
We are aware that MICROS Systems, Inc. has included our report dated
February 8, 1995 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statement on Form S-3 (Registration No. 33-88768) to be filed on or about March
6, 1995. We are also aware of our responsibilities under the Securities Act of
1933.
Yours very truly,
Price Waterhouse LLP
<PAGE> 1
EXHIBIT 23a
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 (Registration
No. 33-88768) of MICROS Systems, Inc. of our report dated August 17, 1994
appearing on page 22 of MICROS Systems, Inc. Annual Report on Form 10-K for the
year ended June 30, 1994. We also consent to the use of our report dated
August 17, 1994 relating to the financial statements of MICROS Systems, Inc.
which appears in such Prospectus. We also consent to the references to us
under the headings "Experts" and "Selected Consolidated Financial Information"
in such Prospectus. However, it should be noted that Price Waterhouse LLP has
not prepared or certified such "Selected Consolidated Financial Information."
PRICE WATERHOUSE LLP
Baltimore, Maryland
March 6, 1995
