<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31,1996
Commission file number 0-9993
MICROS SYSTEMS, INC.
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(Exact name of Registrant as specified in its charter)
MARYLAND 52-1101488
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(State of incorporation) (I.R.S. Employer
Identification Number)
12000 Baltimore Avenue, Beltsville, Maryland 20705-1291
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 301-210-6000
------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
----- -----
As of March 31, 1996, there were 7,927,317 shares of Common Stock, $.025 par
value, outstanding.
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1996
PART I - Financial Information
Item 1. Financial Statements.
General
The information contained in this report is furnished for the Registrant,
MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as
"MICROS" or the "Company"). In the opinion of management, the information in
this report contains all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair statement of the results for the
interim periods presented. The financial information has been reviewed by the
Company's independent accountants, Price Waterhouse LLP, and a copy of its
report is attached.
The financial information presented herein should be read in conjunction with
the financial statements included in the Registrant's Form 10-K for the fiscal
year ended June 30, 1995, as filed with the Securities and Exchange Commission.
With respect to the unaudited consolidated financial information for the three
and nine month periods ended March 31, 1996 and 1995, Price Waterhouse LLP has
reported that it has applied limited procedures in accordance with professional
standards for a review of such information. However, its report dated May 9,
1996, appearing herein, states that it did not audit and it does not express an
opinion on that unaudited consolidated financial information. Price Waterhouse
LLP has not carried out any significant or additional audit tests beyond those
which would have been necessary if its report had not been included.
Accordingly, the degree of reliance on its reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Price Waterhouse LLP is not subject to the liability provisions of Section 11
of the Securities Act of 1933 for its report on the unaudited consolidated
financial information because such report is not a "report" within the meaning
of Sections 7 and 11 of the Securities Act of 1933.
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
-------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,712 $23,215
Short term investments - 3,170
Accounts receivable, net of
allowance for doubtful
accounts of $1,760 at March
31, 1996 and $1,229 at June 30, 1995 46,250 25,185
Inventories 16,502 11,344
Deferred income taxes 1,890 1,890
Prepaid expenses and other
current assets 6,380 1,820
----- --------
Total current assets 84,734 66,624
------ ---------
Property, plant and equipment, at
cost 28,100 17,512
Accumulated depreciation and
amortization (12,802) (7,350)
--------- --------
Net property, plant and equipment 15,298 10,162
--------- --------
Note receivable - 649
Deferred income taxes 6,647
Investments in affiliates, including
related goodwill 22,192 8,509
Capitalized computer software
development costs, net of
accumulated amortization of
$2,805 at March 31, 1996 and $1,684 at June
30, 1995. 5,387 1,544
Goodwill and district intangible
assets, net of accumulated
amortization of $966 at March 31, 1996 and $708
at June 30, 1995 1,461 1,719
Other assets 495 437
-------- -------
Total assets $136,214 $89,644
======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines of credit $18,814 -
Current portion of long-term debt
and capital lease obligation 3,613 $ 363
Accounts payable 10,597 8,505
Accrued expenses and other
current liabilities 22,190 16,215
Income taxes payable 2,211 361
Deferred service revenue 10,335 4,151
-------- --------
Total current liabilities 67,760 29,595
-------- --------
Long-term debt, net of current
portion 9,003 1,669
Capital lease obligation, net of
current portion 3,491 3,582
Deferred income taxes 933 933
Minority interests 988 415
-------- --------
Total liabilities 82,175 36,194
-------- --------
Shareholders' equity:
Common stock, $.025 par value;
authorized 10,000,000 shares;
issued and outstanding 7,927,317
shares at March 31, 1996 and
7,859,095 shares at June 30, 1995 198 196
Capital in excess of par 15,704 14,883
Retained earnings 36,750 37,402
Accumulated foreign currency
translation adjustments 1,386 969
-------- --------
Total shareholders' equity 54,039 53,450
-------- --------
Total liabilities and
shareholders' equity $136,214 $89,644
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue:
Hardware and software $29,825 $18,938
Service 17,480 6,248
------- -------
Total revenue 47,305 25,186
Costs and expenses:
Cost of sales
Hardware and software 14,902 9,697
Service 9,004 2,853
------- -------
Total cost of sales 23,906 12,550
Selling, general and administrative
expenses 16,955 7,811
Research and development expenses 2,152 1,338
Depreciation and amortization 1,564 400
------- -------
Total costs and expenses 44,577 22,099
------- -------
Income from operations 2,728 3,087
Non-operating income (expense):
Interest income 66 288
Interest expense (634) (85)
Other income, net 121 93
------- -------
Income before taxes, equity in net
earnings of affiliates and minority interests
2,281 3,383
Income taxes 878 1,129
-------- -------
Income before equity in net earnings
of affiliates and minority interests 1,403 2,254
Equity in net earnings of
affiliates and minority interests (221) (30)
-------- -------
Net income $ 1,182 $ 2,224
======== =======
Net income per common and
common equivalent share $ 0.15 $ 0.28
======== =======
Weighted-average number of
common and common equivalent
shares outstanding 8,040 7,954
======== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
----------------------------------
1996 1995
------------- ----------
<S> <C> <C>
Revenue:
Hardware and software $84,235 $59,079
Service 38,318 17,703
-------- --------
Total revenue 122,553 76,782
Costs and expenses:
Cost of sales
Hardware and software 43,852 30,449
Service 18,151 7,956
-------- --------
Total cost of sales 62,003 38,405
Selling, general and administrative
expenses 39,808 22,102
Research and development expenses 5,193 3,515
Purchased incomplete software
technology 14,770 -
Depreciation and amortization 2,950 1,102
-------- --------
Total costs and expenses 124,724 65,124
-------- --------
Income (loss) from operations (2,171) 11,658
Non-operating income (expense):
Interest income 668 770
Interest expense (1,087) (277)
Other income, net 53 248
-------- --------
Income (loss) before taxes, equity
in net earnings of affiliates and
minority interests (2,537) 12,399
Income taxes (benefit) (2,070) 4,207
-------- --------
Income (loss) before equity in net
earnings of affiliates and minority interests
(467) 8,192
Equity in net earnings of affiliates
and minority interests (185) (52)
-------- --------
Net income (loss) $ (652) $ 8,140
======== ========
Net income (loss) per common and
common equivalent share $ (0.08) $ 1.02
======== ========
Weighted-average number of
common and common equivalent
shares outstanding 8,014 7,951
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE> 7
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and unaudited - $ in thousands)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------------
1996 1995
------------- -----------
<S> <C> <C>
Net cash flows provided by
operating activities $ 428 $10,954
-------- --------
Cash flows from investing activities:
Purchases of property, plant and
equipment (3,771) (1,760)
Capitalized software development
costs (1,186) (16)
Sale of short term investments 3,170 -
Dividends received from affiliates 581 210
Purchase of affiliates,
net of cash received (27,036) -
Purchase of equity interest in
investees - (3,481)
Proceeds from loan to investee - 3,223
Loan to affiliate (2,347) (605)
------- --------
Net cash used in investing
activities (30,589) (2,429)
------- --------
Cash flows from financing activities:
Proceeds from issuance of stock 823 647
Principal payments on line of credit
and long-term debt (8,982) (292)
Proceeds from line of credit and
long term debt 28,817 -
------- --------
Net cash provided by
financing activities 20,658 355
------- --------
Net (decrease) increase in cash and
cash equivalents (9,503) 8,880
Cash and cash equivalents
at beginning of period 23,215 16,339
-------- --------
Cash and cash equivalents at end of
period $13,712 $25,219
======== ========
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 942 $ 285
======== ========
Income taxes $ 4,707 $ 4,558
======== ========
</TABLE>
Supplemental schedule of non-cash financing and investing
activities:
In August 1995, the Company purchased the remaining 77% of
D.A.C. Systemes/MICROS France and AD-Maintenance Informatique
("ADMI") for FF 14.0 million (approximately $2.8 million at
exchange rates in effect at the date of purchase), payable FF
8.0 million at closing and FF 6.0 million over the next four
years, plus potential additional payments based on earnings over
the next four years.
The accompanying notes are an integral part of the
consolidated financial statements.
7
<PAGE> 8
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
nine months ended March 31, 1996 (unaudited)
1. Inventories
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
------------------ -----------------
<S> <C> <C>
Raw materials $ 3,796 $ 2,534
Work-in-process 3,286 2,785
Finished goods 9,420 6,025
------------------ -----------------
$ 16,502 $ 11,344
================= =================
</TABLE>
2. Purchase of Fidelio Software GmbH
On November 30, 1995, the Company acquired the remaining 70% of
Fidelio Software GmbH ("Fidelio") for $28.5 million in a transaction
which has been accounted for under the purchase method (the
acquisition). In fiscal 1993, 15% of the capital stock of Fidelio had
been acquired and an additional 15% was acquired in October 1994; the
carrying value of this 30% investment at the date of the acquisition
was $7.7 million.
The Company engaged a nationally recognized, independent appraisal
firm to express an opinion on the fair market value of the Fidelio
assets acquired to serve as a basis for allocation of the purchase
price for the remaining 70% to various classes of assets. The
appraisal included identifiable intangible assets as well as software
technology. After the Company's allocation of the purchase price for
the acquisition, including $1.7 million of acquisition liabilities
incurred, and elimination of the carrying value of the initial 30%
investment, Fidelio's assets and liabilities were recorded on a
consolidated basis at the date of acquisition (in millions):
<TABLE>
<S> <C>
Tangible net assets (liabilities) $(3.2)
Identifiable intangible assets 2.0
Current software products 3.8
Purchased incomplete software technology 14.8
Goodwill (excess of purchase price over
fair value of net assets acquired) 20.5
-----
$37.9
=====
</TABLE>
The tangible net assets (liabilities) consist primarily of cash,
accounts receivable, inventory, property and equipment and liabilities
assumed. The identifiable intangible assets are being amortized on a
straight-line basis over periods ranging from seven to nine years.
All goodwill related to Fidelio, including approximately $5 million
remaining from the initial 30% purchase, is being amortized over nine
years.
The software technology valuation was accomplished through the
application of an income approach. Projected debt-free income,
revenue net of provision for operating expenses, income taxes and
returns on requisite assets were discounted to a present value. This
approach was used for each of the Fidelio product lines. Software
technology was divided into two categories:
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1996
PART I - Financial Information
1. "Current products", representing software
products currently in the marketplace as
of the acquisition date, and software
still in the development stage and
technologically feasible.
2. "Purchased incomplete software
technology", representing products still
in the development stage but not
considered to have reached technological
feasibility.
The fair market value of the purchased current products was determined
to be $3.8 million. This amount was recorded as an asset and is being
amortized over a maximum of four years based on the greater of the
ratio of the current gross revenues from the product bear to the total
of current and anticipated future gross revenues for that product or
straight-line amortization.
Purchased incomplete software technology included the value of
products still in the development stage and not considered to have
reached the technological feasibility stage. As a result of the
valuation, the fair market value of the purchased incomplete software
technology was determined to be $14.8 million. In accordance with the
applicable accounting rules, this amount was expensed upon acquisition
in the second quarter of fiscal 1996.
Unaudited proforma information for the nine-month periods ended March
31, 1996 and 1995, as if the acquisition had occurred on the first day
of those periods, but excluding the one-time write-off of the
purchased incomplete software technology discussed above, is shown
below. Such proforma information also reflects the proforma effects
of Fidelio's acquisition of 100% of the common stock of Executive
Technologies of Southwest Florida, Inc. in October 1995 for $4 million.
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------
1996 1995
---- ----
($ in thousands, except per share data)
<S> <C> <C>
Revenue $147,215 $108,142
Net Income 7,237 7,933
Net income per share 0.90 1.00
</TABLE>
3. Debt
The Company has a $25.0 million multi-currency unsecured committed
line of credit with NationsBank, N.A., effective November 21, 1995,
and expiring on December 31, 1996. The Company has the one-time
option to convert the line of credit into a three-year secured term
loan upon expiration of the line of credit. Interest due under the
line of credit will be calculated as follows: (i) in the event the
advance is in U.S. dollars, at the option of the Company, either the
bank's prime rate minus one half of one percent (.50%) per annum, or
the LIBOR rate plus one and one eighth percent (1.125%) per annum; or
(ii) in the event the advance is made in a currency other than the
U.S. dollar, the LIBOR rate for the applicable denominated currency
selected, plus one and one eighth percent (1.125%) per annum.
Interest due under the three-year secured term loan shall be, at the
option of the Company, the prime rate or the treasury bill rate
(adjusted to a constant maturity of three years) plus two and one
quarter percent (2.25%). Under the existing line of credit, the
Company had drawn DM 30.0 million (approximately $20.7 million),
9
<PAGE> 10
which was utilized to acquire the remaining stock in Fidelio at the
end of November 1995.
Prior to November 21, 1995, the Company had another line of credit
with the same bank with a borrowing capacity of $15.0 million. There
were no borrowings under the $15.0 million line of credit as of
November 21, 1995.
Under the terms of the current loan agreement, the Company may borrow
up to $25.0 million 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 to satisfy certain financial covenants.
In addition, the agreement limits the incurrence of additional
indebtedness and restricts the Company's payment of dividends other
than stock dividends.
On March 29, 1996, the Company acquired a DM10.0 million term loan
from Commerzbank. Under the loan, payments of principal and accrued
interest at a fixed rate of 5.3% are due at the end of each month,
beginning April 1996, for the next 36 months. The Company used the
full proceeds to reduce the DM30.0 million borrowing under the
NationsBank line of credit. Accordingly, as of March 29, 1996, the
borrowing under the NationsBank line of credit was DM20.0 million.
Further, Fidelio maintains three unsecured committed lines of credit
with BHF Bank, Hypobank and Commerzbank. DM 13.0 million
(approximately $8.8 million at quarter end exchange rates), is
available in the aggregate under these lines of credit. As of March
31, 1996, Fidelio had drawn approximately DM 7.8 million (approximately
$5.3 million at quarter end exchange rates) which was utilized for
general corporate purposes and the acquisition of Executive
Technologies of Southwest Florida, Inc. in October 1995. Additionally,
Fidelio has a 1.5 year term loan with BHF in the amount of DM 1.2
million (approximately $.8 million at quarter end exchange rates).
Proceeds of this term loan were used for a strategic acquisition in
calendar 1995. Certain Fidelio subsidiaries maintain additional lines
of credit, none of which are considered material.
4. Accounting for Stock-Based Compensation
The Company has not elected early adoption of Financial Accounting
Standards Board Statement No. 123 (SFAS 123), Accounting for
Stock-Based Compensation, issued in October 1995. Adoption of SFAS
123 is required for the fiscal 1997 financial statements. Under SFAS
123, the Company will continue to measure compensation expense for its
stock-based compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees. Beginning with financial statements for fiscal 1997, the
Company will provide proforma disclosures of net income and earnings
per share as if the fair value based method of accounting defined in
SFAS 123 had been applied to the Company's stock option grants made
subsequent to fiscal 1995. The impact of SFAS 123 on the Company's
proforma information to be provided has not been determined.
5. Reclassifications
Certain prior year reclassifications have been made to conform to
fiscal 1996 classifications.
Item 2. Management's discussion and analysis of financial condition and
results of operations
Liquidity and Capital Resources
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The Company has a $25.0 million multi-currency line of credit facility
effective November 21, 1995, and expiring on December 31, 1996. An
additional DM 13.0 million (approximately $9.0 million) is available
to Fidelio through three additional lines of credit. The Company has
borrowed approximately DM 27.8 million (approximately $18.8 million)
from these lines of credit to fund the acquisition of Fidelio and for
working capital.
Net cash provided by operating activities for the nine months ended
March 31, 1996 was $.4 million. The Company used cash of $27.0
million primarily for the purchase of Fidelio and D.A.C/ADMI, net of
cash received. In addition, the Company used $3.8 million for the
purchase of property, plant and equipment and $2.3 million for loans
to an affiliate, which is offset by proceeds of $3.2 million from the
sale of short-term investments. Financing activities for the first
nine months of fiscal 1996 provided $20.7 million, primarily from
borrowings against the line of credit to finance the acquisition of
Fidelio.
The Company anticipates that its cash flow from operations along with
available lines of credit, in conjunction with other lines of credit
for which the Company may be eligible, are sufficient to provide the
working capital needs of the Company for the foreseeable future.
Results of Operations - Third Quarter and Nine Month Comparisons
The Company recorded net income of $.15 per common share in the third
quarter of fiscal 1996, compared with net income of $.28 per common
share in the third quarter of fiscal 1995. The net loss for the nine
months ended March 31, 1996, was $.08 per common share compared with
net income of $1.02 per common share for the first nine months of
fiscal 1995. The first nine months of fiscal 1996 results include a
one-time after tax charge of $8.1 million, or $1.01 per common share,
for the write-off of purchased incomplete software technology acquired
in the acquisition of Fidelio. Excluding this one-time after tax
charge, net income for the first nine months of fiscal 1996 was $.93
per common share.
Revenue for the third quarter of fiscal 1996 increased $22.1 million,
or 87.8%, compared to the same period last year. For the first nine
months of fiscal 1996, revenue increased $45.8 million, or 59.6%, over
the same period in fiscal 1995. Sales increased in every distribution
channel worldwide for both periods. For the third quarter, Property
Management System ("PMS") sales increased $14.7 million in fiscal 1996
over the third quarter of fiscal 1995 and increased $26.2 million in
the first nine months of fiscal 1996 over the same period a year
earlier. The PMS sales increases were due to the acquisition of
Fidelio on November 30, 1995 and continued market penetration by the
Company's three PMS distribution offices. Sales of Point of Sale
("POS") hardware, software and related services increased $7.4 million
in the third quarter of fiscal 1996 compared to the same period a year
earlier, and increased $19.6 million in the first nine months of
fiscal 1996 over the same period in fiscal 1995, primarily due to
increased sales in the Company's direct sales offices in the U.S. and
Europe. For the third quarter of fiscal 1996, hardware and software
sales increased $10.9 million, or 57.5%, while service revenues
increased $11.2 million, or 179.8%, over the same period a year
earlier. For the first nine months of fiscal 1996, hardware and
software sales increased $25.2 million, or 42.6%, and service revenues
increased $20.6 million, or 116.4%.
Cost of sales, as a percentage of revenue, increased to 50.5% from
49.8% for the third quarter of fiscal 1996 compared to the third
quarter of fiscal 1995. For the first nine months of fiscal 1996,
cost of sales, as a percentage of revenue, increased to 50.6% from
50.0% for the same period a year earlier. Cost of sales for hardware
and software products, as a percentage of related revenue, was 50.0%
in the third quarter of fiscal 1996 compared to 51.2% for the same
quarter a year earlier as
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<PAGE> 12
a result of a favorable shift in sales distribution from the indirect
to direct sales channels and an increase in higher-margin Fidelio
software sales as a percentage of total revenue. For the first nine
months of fiscal 1996, cost of sales for hardware and software
products, as a percentage of related revenue, was 52.1% compared to
51.5% for the same period in fiscal 1995. The cost increases were
primarily due to an increase in volume of lower margin products and
certain strategic selling price decreases on hardware 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, increased to 51.5% in the third quarter of fiscal
1996 compared to 45.7% in the same quarter in fiscal 1995. Service
costs, as a percentage of related revenue, increased to 47.4% in the
first nine months of fiscal 1996 compared to 44.9% for the same period
in fiscal 1995. The increased costs in both periods were primarily
due to the higher labor costs for subcontracting installations,
rebuilding the service organizations of certain district offices, and
resolving issues with respect to certain recent complex installations.
Selling, general and administrative expenses increased $9.1 million,
or 117.1%, in the third quarter of fiscal 1996 compared to the same
period last year. Selling, general and administrative expenses for
the first nine months of fiscal 1996 increased $17.7 million, or
80.1%, compared to the same period in fiscal 1995. As a percentage of
revenue, selling, general and administrative expenses increased to
35.8% in the third quarter of fiscal 1996 compared to 31.0% in the
third quarter of fiscal 1995. For the first nine months of fiscal
1996, selling, general and administrative expenses, as a percentage of
revenue, were 32.5% compared to 28.8% for the same period a year
earlier. The increases are primarily the result of the continued
expansion of the Company's infrastructure, with an increased
emphasis on the sales and service organizations, including the
addition of Fidelio in December 1995, three U.S. sales and service
offices (Connecticut, Colorado, and Washington State/British
Columbia) and D.A.C. Systemes/MICROS France and AD-Maintenance
Informatique in August 1995. In addition, certain costs have
increased as a result of the Company no longer being a subsidiary of
Westinghouse Electric Corporation.
Research and development expenses (exclusive of capitalized software
development costs), which consist primarily of labor costs, increased
$814,000, or 60.8%, in the third quarter of fiscal 1996 and
$1,678,000, or 47.7%, for the first nine months of fiscal 1996,
compared to the same periods a year earlier. Actual research and
development expenditures, including capitalized software development
costs of $759,000 in the third quarter of fiscal 1996 and $17,000 in
the third quarter of fiscal 1995, increased $1,556,000, or 114.8%,
compared to the same period a year earlier. Actual research and
development expenditures for the first nine months of fiscal 1996,
including capitalized development costs of $1,186,000 in fiscal 1996
and $17,000 in fiscal 1995, increased $2,847,000, or 80.6%, compared
to the same period a year earlier. The increase in absolute dollars
is primarily due to the acquisition of Fidelio in December 1995 and
the additional staffing required to develop new POS products.
Purchased incomplete software technology was a result of the one-time
$14.8 million charge taken in the second quarter of fiscal 1996
associated with the acquisition of Fidelio.
Income from operations for the third quarter of fiscal 1996 was $2.7
million, or 5.7% of revenue, compared to $3.1 million, or 12.3% of
revenue, in the same period a year earlier. For the first nine months
of fiscal 1996, loss from operations was $2.2 million. Excluding the
$14.8 million charge for the purchase of incomplete software
technology in the second quarter, income from operations for the first
nine months of fiscal 1996 was $12.6 million, or 10.3% of revenue,
compared to income of $11.7 million, or 15.2% of revenue, for the same
period of fiscal 1995. Higher selling, general and
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<PAGE> 13
administrative expenses and lower gross margins have adversely
impacted income from operations in the quarter and nine month periods.
Interest income for the third quarter of fiscal 1996 decreased
$222,000 to $66,000, or 77.1%, compared to $288,000 for the third
quarter of fiscal 1995. Interest income for the first nine months in
fiscal 1996 was $668,000 compared to $770,000, a decrease of 13.2%,
for the comparable period in fiscal 1995. The decrease in interest
income for the periods is primarily due to the use of the proceeds
from the cash investments to purchase Fidelio on November 30, 1995.
Interest expense increased $549,000 to $634,000 for the third quarter
of fiscal 1996 from $85,000 for the same period a year ago. Interest
expense increased $810,000 to $1,087,000 for the nine months ended
March 31, 1996 compared to the first nine months of fiscal 1995,
primarily due to the bank lines of credit borrowings outstanding since
the end of November 1995.
The effective tax rate for the third quarter of fiscal 1996 is 38.5%
compared to a tax rate of 33.4% for the same quarter a year earlier.
For the first nine months of fiscal 1996, the effective tax rate is a
benefit of 81.6%. Excluding the one-time expense for the purchase of
incomplete software technology and the related tax benefit, the nine
month tax rate would have been 37.4%. The primary reason for the
increase over the prior year is due to the mix of earnings and the
corresponding weighting of tax rates on a country-by-country basis and
the loss of the R&D tax credit effective July 1, 1995 due to the
expiration of the tax legislation.
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 property management information systems
products for the hospitality industry. The Company 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 traditionally higher margin products, including
software and services, to prevent declines in the Company's overall
gross margin.
13
<PAGE> 14
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 March 31, 1996, and the related consolidated
statements of operations and cash flows for the three and nine month periods
ended March 31, 1996 and March 31, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of June 30, 1995, and the related
consolidated statements of operations, cash flows and shareholders' equity for
the year then ended (not presented herein), and in our report dated August 21,
1995 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the accompanying consolidated balance sheet
information as of June 30, 1995, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE LLP
Baltimore, Maryland
May 9, 1996
THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF
THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS LIABILITY PROVISIONS
OF SECTION 11 OF THE ACT DO NOT APPLY.
14
<PAGE> 15
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1996
Part II - Other Information
Items 1 through 3.
No events occurred during the quarter covered by the report that would
require a response to any of these items.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on November 7,
1995. A quorum was present and shareholders voted on the
following matters:
1. Election of Directors
The management of the Company nominated a slate of five
persons to serve on the Board of Directors. No other
nominations were made. The nominees received the following
votes:
<TABLE>
<CAPTION>
Nominee For Vote Withheld(Abstain)
------- --- ----------------------
<S> <C> <C>
Louis M. Brown, Jr. 6,616,093 74,400
Daniel Cohen 6,616,093 74,400
A.L. Giannopoulos 6,616,093 74,400
Alan M. Voorhees 6,616,093 74,400
Edward T. Wilson 6,616,093 74,400
</TABLE>
The entire slate of directors nominated was elected by a
majority of the shares present in person or represented by
proxy and entitled to vote.
2. Selection of Independent Public Accountants
The Board of Directors of the Company selected Price
Waterhouse LLP as the independent public accountants for the
Company for the fiscal year ending June 30, 1996. A proposal
(Proposal 2) to approve the selection of Price Waterhouse LLP
was approved by a majority of the shares present in person or
represented by proxy and entitled to vote. A total of
6,661,723 shares voted in the affirmative; a total of 2,655
shares voted in the negative; and a total of 26,115 shares
abstained from the vote.
3. Approval of Amendment to Stock Option Plan
The shareholders voted 5,104,299 shares in the affirmative and
1,543,079 shares in the negative to approve a proposal to
increase the number of shares available under the 1991 Stock
Option Plan by 200,000 with the aggregate number of shares
that can be issued under the plan being 550,000; a total of
43,115 shares abstained from the vote.
Item 5. Other Information
On May 3, 1996, at a properly called meeting of the Board of
Directors, the Board approved the expansion of the Board from
five members to six members, in accordance with the Bylaws of
the Company. The Board appointed Mr. John G. Puente as a
director to fill the newly created position. Mr. Puente, 65,
became a director of the Company upon his acceptance of his
nomination on May
15
<PAGE> 16
13, 1996. Mr. Puente is Chairman of Telogy Networks, Inc., a
position he has held since January 1996. Since April 1987,
Mr. Puente has served on the Board of Directors of Orion
Network Systems. He was Chairman of the Board at Orion until
his retirement from that position in January 1996, and
previously served as Orion's Chief Executive Officer. Prior
to joining Orion, Mr. Puente was Vice Chairman of M/A-Com, and
he was a founder and Chairman of Digital Communications
Corporation (now Hughes Network Systems) and SouthernNet. Mr.
Puente is a graduate of Polytechnic University and holds a
Masters degree from Stevens Institute of Technology. He
serves on Polytechnic's Board of Trustees, and he is Chairman
of the Board of Trustees of Capitol College and an IEEE
fellow.
On April 24, 1996, Jeffrey B. Edwards, 41, was appointed
President and Chief Executive Officer of Fidelio Software
GmbH, a wholly-owned subsidiary of MICROS Systems, Inc. with
headquarters in Munich, Germany. Mr. Edwards has been with
the MICROS organization since November 1994 when he was named
the President of Fidelio Software Corporation, a MICROS
subsidiary located in the United States. Mr. Edwards was a
self-employed consultant to the lodging and hospitality
industry from 1992 to November 1994, and he was Chief
Operating Officer of Sulcus Computer (Sulcus Hospitality
Management Company) from May 1990 to July 1992. Mr. Edwards
is a graduate of the University of Oregon with a degree in
Business Administration.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2 - Purchase and Transfer Agreement dated
November 30, 1995 (incorporated by reference)
Exhibit 15 - Letter Regarding Unaudited Interim
Financial Information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - The Company filed a Current
Report on Form 8-K dated March 26, 1996, item 5.
16
<PAGE> 17
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
MICROS SYSTEMS, INC.
----------------------------
(Registrant)
May 15, 1996 S/Gary C. Kaufman
- ---------------------------------- ------------------------------------
Gary C. Kaufman
Vice President, Finance and
Administration/Chief Financial
Officer
</TABLE>
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered Page
- ------- -------------
<S> <C> <C>
15. Letter regarding Unaudited Interim
Financial Information
27. Financial Data Schedule N/A
</TABLE>
18
<PAGE> 1
Exhibit No. 15
May 9, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that MICROS Systems, Inc. has incorporated by reference our report
dated May 9, 1996 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statements on Forms S-8, (No. 33-69782, No. 33-44481 and No. 33-33535). We
are also aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
PRICE WATERHOUSE LLP
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS
OF MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 13,712
<SECURITIES> 0
<RECEIVABLES> 48,010
<ALLOWANCES> 1,760
<INVENTORY> 16,502
<CURRENT-ASSETS> 84,734
<PP&E> 28,100
<DEPRECIATION> 12,802
<TOTAL-ASSETS> 136,214
<CURRENT-LIABILITIES> 67,760
<BONDS> 12,494
0
0
<COMMON> 198
<OTHER-SE> 53,841
<TOTAL-LIABILITY-AND-EQUITY> 136,214
<SALES> 84,235
<TOTAL-REVENUES> 122,553
<CGS> 43,852
<TOTAL-COSTS> 80,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,087
<INCOME-PRETAX> (2,537)
<INCOME-TAX> (2,070)
<INCOME-CONTINUING> (652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (652)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
