<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, 1997
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
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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
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As of March 31, 1997, there were 7,962,650 shares of Common Stock, $.025 par
value, outstanding.
1
<PAGE> 2
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
PART I - Financial Information
Item 1. Financial Statements.
General
The information contained in this report is furnished for the Registrant,
MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as
"MICROS" or the "Company"). In the opinion of management, the information in
this report contains all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair statement of the results for the
interim periods presented. The financial information has been reviewed by the
Company's independent accountants, Price Waterhouse LLP, and a copy of its
report is attached.
The financial information presented herein should be read in conjunction with
the financial statements included in the Registrant's Form 10-K for the fiscal
year ended June 30, 1996, as filed with the Securities and Exchange Commission.
With respect to the unaudited consolidated financial information for the three
and nine month periods ended March 31, 1997 and 1996, 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 14,
1997, appearing herein, states that it did not audit and it does not express an
opinion on that unaudited consolidated financial information. Price Waterhouse
LLP has not conducted any significant or additional audit tests beyond those
which would have been necessary if its report had not been included.
Accordingly, the degree of reliance on its report on such information should
be restricted in light of the limited nature of the review procedures applied.
Price Waterhouse LLP is not subject to the liability provisions of Section 11
of the Securities Act of 1933 for its report on the unaudited consolidated
financial information because such report is not a "report" within the meaning
of Sections 7 and 11 of the Securities Act of 1933.
2
<PAGE> 3
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1997 1996
---- ----
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 18,251 $ 15,231
Accounts receivable, net of allowance for
doubtful accounts of $2,237 at March 31,
1997 and $2,016 at June 30, 1996 57,659 49,250
Inventories 20,101 15,138
Deferred income taxes 3,899 3,899
Prepaid expenses and other current assets 4,204 4,420
-------- --------
Total current assets 104,114 87,938
Property, plant and equipment, net of accumulated
depreciation and amortization of $14,542 at
March 31, 1997 and $13,332 at June 30, 1996 17,547 15,623
Note receivable 0 225
Deferred income taxes, non-current 5,044 5,580
Goodwill and intangible assets, net of
accumulated amortization of $5,326 at
March 31, 1997 and $3,346 at June 30, 1996 17,660 20,746
Purchased and internally developed software costs,
net of accumulated amortization of $4,069 at
March 31, 1997 and $2,650 at June 30, 1996 9,070 6,287
Other assets 620 437
-------- --------
Total assets $154,055 $136,836
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Bank lines of credit $ 11,882 $ 14,947
Current portion of long-term debt 3,570 5,238
Current portion of capital lease obligation 140 124
Accounts payable 14,996 12,726
Accrued expenses and other current liabilities 26,823 23,927
Income taxes payable 5,026 986
Deferred service revenue 14,731 9,295
-------- --------
Total current liabilities 77,168 67,243
Long-term debt, net of current portion 4,182 6,704
Capital lease obligation, net of current portion 3,352 3,458
Deferred income taxes 2,725 2,588
Minority interests 1,245 648
-------- --------
Total liabilities 88,672 80,641
-------- --------
Commitments and contingencies
Shareholders' equity:
Common stock, $.025 par; authorized 10,000
shares; issued and outstanding 7,963 at
March 31, 1997 and 7,944 at June 30, 1996 199 199
Capital in excess of par 17,092 16,253
Retained earnings 50,596 39,794
Accumulated foreign currency translation
adjustments (2,504) (51)
-------- --------
Total shareholders' equity 65,383 56,195
-------- --------
Total liabilities and shareholders' equity $154,055 $136,836
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenue:
Hardware and software $38,489 $29,825
Service 18,221 17,480
------- -------
Total revenue 56,710 47,305
------- -------
Costs and expenses:
Cost of sales
Hardware and software 16,899 14,902
Service 9,332 9,004
------- -------
Total cost of sales 26,231 23,906
Selling, general and administrative
expenses 17,440 16,955
Research and development expenses 3,303 2,152
Depreciation and amortization 1,802 1,564
------- -------
Total costs and expenses 48,776 44,577
------- -------
Income from operations 7,934 2,728
Non-operating income (expense):
Interest income 99 66
Interest expense (356) (634)
Other income (expense), net 34 121
------- -------
Income before taxes and minority
interest and equity in net earnings of
affiliates 7,711 2,281
Income tax expense 3,081 878
------- -------
Income before minority interest and
equity in net earnings of affiliates 4,630 1,403
Minority interest and equity in net
earnings of affiliates (166) (221)
------- -------
Net income $ 4,464 $ 1,182
======= =======
Net income per common and common
equivalent share $ 0.55 $ 0.15
======= =======
Weighted-average number of common and
common equivalent shares outstanding 8,169 8,040
======= =======
</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>
Nine Months Ended March 31,
---------------------------
1997 1996
---------- ---------
<S> <C> <C>
Revenue:
Hardware and software $105,317 $ 84,235
Service 54,866 38,318
-------- --------
Total revenue 160,183 122,553
-------- --------
Costs and expenses:
Cost of sales
Hardware and software 49,480 43,852
Service 27,795 18,151
-------- --------
Total cost of sales 77,275 62,003
Selling, general and administrative
expenses 50,246 39,808
Research and development expenses 7,716 5,193
Purchased incomplete software technology 0 14,770
Depreciation and amortization 5,119 2,950
-------- --------
Total costs and expenses 140,356 124,724
-------- --------
Income (loss) from operations 19,827 (2,171)
Non-operating income (expense):
Interest income 318 668
Interest expense (1,139) (1,087)
Other income (expense), net 177 53
-------- --------
Income (loss) before taxes and minority
interest and equity in net earnings of
affiliates 19,183 (2,537)
Income tax expense (benefit) 7,673 (2,070)
-------- --------
Income (loss) before minority interest and
equity in net earnings of affiliates 11,510 (467)
Minority interest and equity in net
earnings of affiliates (708) (185)
-------- --------
Net income (loss) $ 10,802 $ (652)
======== ========
Net income (loss) per common and common
equivalent share $ 1.34 $ (0.08)
======== ========
Weighted-average number of common and
common equivalent shares outstanding 8,035 8,014
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and unaudited - in thousands)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net cash flows from operating activities: $18,572 $362
------- ---
Cash flows from investing activities:
Purchases of property, plant and
equipment (4,994) (3,771)
Proceeds on dispositions of property,
plant and equipment 153 --
Purchased and internally developed
software costs (4,486) (1,186)
Sale of short-term investments -- 3,170
Dividends (to) minority owners and
received from affiliates (112) 581
Loan to affiliate -- (2,347)
Net cash paid for acquisitions and
minority interests (1,206) (27,036)
------- -------
Net cash used in investing
activities (10,645) (30,589)
------- -------
Cash flows from financing activities:
Principal payments on line of credit (1,897) --
Principal payments on long-term debt
and capital lease obligation (3,908) (8,982)
Proceeds from line of credit and long
term debt 59 28,817
Proceeds from issuance of stock 793 823
Income tax benefit from stock options
exercised 46 66
------- -------
Net cash (used in) provided by
financing activities (4,907) 20,724
------- -------
Net increase (decrease) in cash and cash
equivalents 3,020 (9,503)
Cash and cash equivalents at beginning of
period 15,231 23,215
------- -------
Cash and cash equivalents at end of
period $18,251 $13,712
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $1,072 $ 942
====== =======
Income taxes $3,103 $ 4,707
====== =======
</TABLE>
Supplemental schedule of noncash financing and investing activities:
In August 1995, the Company purchased the remaining 77% of D.A.C.
Systemes/MICROS France and AD-Maintenance Informatique ("ADMI") for FF
14,000,000 (approximately $2,800,000 at exchange rates in effect at
the date of purchase), payable FF 8,000,000 at closing and FF
6,000,000 over the next four years, plus potential additional payments
based on earnings over the next four years. The unamortized discount
on the note, based on an imputed annual interest rate of 8.75%, is
$94,600 at March 31, 1997.
In October 1996, the Company purchased the remaining 30% interest in
one of its majority-owned subsidiaries for $399,000, payable $79,800
at closing and $319,200 in equal installments over the next four
years, beginning October 1, 1997. The note bears interest at the
prime rate and is adjusted annually each October 1st.
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 1997
(Unaudited)
1. Inventories
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
----------------- -----------------
<S> <C> <C>
Raw materials $ 5,652 $ 3,528
Work-in-process 4,788 2,955
Finished goods 9,661 8,655
----------------- -----------------
$ 20,101 $ 15,138
================= =================
</TABLE>
2. Acquisitions
A. Fidelio Software GmbH
On November 30, 1995, the Company acquired the remaining 70% of
Fidelio Software GmbH ("Fidelio") for approximately $28.5 million in a
transaction which has been accounted for under the purchase method.
In fiscal 1993, 15% of the capital stock of Fidelio had been acquired
and an additional 15% was acquired in October 1994, at which time
MICROS began accounting for Fidelio under the equity method. Goodwill
related to these purchases aggregated $20.5 million at November 30,
1995 and is being amortized over nine years.
Unaudited pro forma information for the nine-month period ended March
31, 1996, as if the acquisition had occurred on the first day of that
period, but excluding a one-time write-off of the purchased incomplete
software technology is shown below. Such pro forma information also
reflects the pro forma effects of Fidelio's acquisition of 100% of the
common stock of Executive Technologies of Southwest Florida, Inc.
("ETI") in October 1995 for $4,000,000.
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1996
(in thousands, except per share data)
-------------------------------------
<S> <C>
Revenue $ 147,215
Net income $ 7,237
Net income per share $ 0.90
</TABLE>
B. Minority Interests
The Company has acquired all of the minority interests in five Fidelio
distribution subsidiaries along with the minority interest in one
MICROS distribution subsidiary during fiscal 1997 at a cost of
approximately $1.5 million. The five Fidelio distribution
subsidiaries are: Fidelio Hong Kong; Fidelio Singapore; Fidelio
Thailand; Fidelio U.K.; and Fidelio U.S. Goodwill approximated this
total amount and is being amortized over periods ranging from five to
ten years.
3. Stock options
Financial Accounting Standards Board Statement No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation, was issued in October 1995.
Adoption of SFAS 123 is required for the Company's fiscal 1997
year-end financial statements. Under SFAS 123, the Company will
continue to measure compensation expense for its stock-based
compensation plans using the intrinsic value method prescribed by APB
Opinion No. 25, Accounting for Stock Issued to Employees. Beginning
with financial statements for fiscal year ending June 30, 1997, the
Company
7
<PAGE> 8
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 1997
(Unaudited)
3. Stock options, continued
will provide pro forma disclosures of net income and earnings per
share as if the fair value based method of accounting defined in SFAS
123 had been applied to the Company's stock option grants made
subsequent to fiscal 1995. The impact of SFAS 123 on the Company's
pro forma information to be provided has not been determined.
4. Legal proceedings
MICROS is and has been involved in legal proceedings arising in the
normal course of business. The Company is of the opinion, based upon
presently available information and the advice of counsel concerning
pertinent legal matters, that any resulting liability should not have
a material adverse effect on the Company's results of operations or
financial position.
On March 25, 1997, Budgetel Inns, Inc. ("Budgetel") filed suit against
MICROS in the United States Federal District Court in the Eastern
District of Wisconsin. Budgetel alleges, among other things, that
MICROS breached a March 1993 software support agreement by failing to
provide full support to this software package licensed to Budgetel in
1993. MICROS will defend against Budgetel's allegations. While the
ultimate outcome of litigation is uncertain, and while litigation is
difficult to predict, the Company believes that this litigation will
have no material adverse effect on the Company's results of operations
or financial position.
5. Reclassifications
Certain balances have been reclassified to conform to fiscal 1997
presentation.
8
<PAGE> 9
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
(Unaudited)
Item 2. Management's discussion and analysis of financial condition and
results of operations
Liquidity and Capital Resources
The Company has a $25.0 million unsecured committed line of credit
which was renewed December 31, 1996 for an additional one year period,
expiring on December 31, 1997. In addition, the Company obtained
additional lines of credit from three European banks aggregating DM
15.0 million (approximately $8.9 million at the March 31, 1997
exchange rate) as a result of its November 1995 acquisition of
Fidelio. At March 31, 1997, the Company had borrowed approximately
$11.9 million and has approximately $22.0 million available. As the
Company has significant international operations, its DM-denominated
borrowings do not represent a significant foreign exchange risk. The
Company does not engage in any foreign exchange hedging.
In addition, the Company has long-term debt, both current and
non-current, of approximately $7.8 million as of March 31, 1997. The
majority of this debt stems from the Fidelio acquisition.
Net cash provided by operating activities for the nine months ended
March 31, 1997 was $18.6 million. In addition, the Company used
$9.5 million for the purchase of property, plant and equipment,
internally developed software as well as software purchased from a
third party. Net financing activities for the first nine months of
fiscal 1997 used $4.9 million, primarily for debt repayment.
The Company anticipates that its cash flow from operations along with
available lines of credit, in conjunction with other lines of credit
for which the Company may be eligible or lines of credit to be
renewed, are sufficient to provide the working capital needs of the
Company for the foreseeable future. The Company anticipates that its
rate of property, plant and equipment expenditures for fiscal 1997
will continue to increase for the remainder of the fiscal year and
will exceed fiscal 1996 expenditures by approximately $1.0 to $1.5
million.
Results of Operations - Third Quarter and Nine Month Comparisons
The Company recorded net income of $.55 per common share in the third
quarter of fiscal 1997, compared with net income of $.15 per common
share in the third quarter of fiscal 1996. Net income for the nine
months ended March 31, 1997, was $1.34 per common share compared with
a net loss of $.08 per common share for the first nine months of
fiscal 1996. The year to date results for fiscal 1996 include a
one-time after tax charge of $8.1 million, or $1.01 per common share,
for the write-off of purchased incomplete software technology
associated with the acquisition of Fidelio. For the quarter and the
year-to-date, excluding last year's one-time charge, the increased net
income was primarily due to higher sales volumes and improved gross
margins associated with a favorable sales mix of higher margin
products.
Revenue of $56.7 million for the third quarter of fiscal 1997
increased $9.4 million, or 19.9%, compared to the same period last
year. For the first nine months of fiscal 1997, revenue increased
$37.6 million to $160.2 million, or 30.7%, over the same period in
fiscal 1996. A comparison of the sales mix for fiscal years 1997 and
1996 is as follows:
9
<PAGE> 10
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Results of Operations - Third Quarter and Nine Month Comparisons,
Continued
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Hardware 46.2% 47.8% 44.8% 55.0%
Software 21.7% 15.2% 21.0% 13.7%
Service 32.1% 37.0% 34.2% 31.3%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
</TABLE>
While hardware sales represent a smaller proportion of total sales in
fiscal 1997 in comparison to the prior year, this category continued
to grow in absolute dollars. The increase in software for the quarter,
relative to total sales, is primarily due to several significant
software sales, while the year-to-date increase is primarily due to
the acquisition of Fidelio on November 30, 1995. Service sales
increased in absolute dollars for the third quarter in comparison to
the prior year, although at a lesser rate than that of hardware and
software sales. Year-to-date service sales have increased primarily
due to the Fidelio acquisition.
Combined hardware and software revenues for the third quarter of
fiscal 1997 increased $8.7 million, or 29.1%, while service revenues
increased $741,000, or 4.2%, over the same period a year earlier. On
a year-to-date basis, hardware and software sales increased $21.1
million, or 25.0%, while service revenues increased $16.5 million, or
43.2%, over the same period a year earlier.
Cost of sales, as a percentage of revenue, decreased to 46.3%
from 50.5% for the third quarter of fiscal 1997 compared to the third
quarter of fiscal 1996. For the first nine months of fiscal 1997,
cost of sales, as a percentage of revenue, decreased to 48.2% from
50.6% for the same period a year earlier. Cost of sales for hardware
and software products, as a percentage of related revenue, was 43.9%
in the third quarter of fiscal 1997 compared to 50.0% for the same
quarter a year earlier as a result of an increase in higher-margin
software sales as a percentage of total hardware and software revenue
along with a favorable shift in sales distribution from the indirect
to direct sales channels. The Company's third quarter hardware and
software cost of sales percentage was below its year-to-date
percentage due to several significant high margin software sales in
that quarter. For the first nine months of fiscal 1997, cost of
sales for hardware and software products, as a percentage of related
revenue, was 47.0% compared to 52.1% for the same period in fiscal
1996 as a result of software sales representing a larger proportion of
hardware and software sales in fiscal 1997 in comparison to the prior
year.
Service costs, as a percentage of service revenue, decreased to 51.2%
in the third quarter of fiscal 1997 compared to 51.5% in the same
quarter in fiscal 1996. Service costs, as a percentage of service
revenue, increased to 50.7% in the first nine months of fiscal 1997
compared to 47.4% for the same period in fiscal 1996. The third
quarter decrease in comparison to the prior year was due to an
improvement in the mix of service sales, while the increased costs
year-to-date were primarily due to continued investment in the
Company's service organization and infrastructure.
Selling, general and administrative expenses increased $485,000, or
2.9%, in the third quarter of fiscal 1997 compared to the same period
last year. As a percentage of revenue, selling, general and
administrative expenses decreased to 30.8% in the third quarter of
fiscal 1997 compared to 35.8% in the third quarter of fiscal 1996 as
sales grew at a rate in excess of these expenses. For the first nine
months of fiscal 1997, selling, general and administrative expenses,
as a percentage of revenue, were 31.4% compared to 32.5% for the same
period a year earlier. The year-to-date decrease is primarily due
to a
10
<PAGE> 11
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Results of Operations - Third Quarter and Nine Month Comparisons,
Continued
moderation in the expansion of the Company's corporate infrastructure,
along with office and staffing consolidation in various international
subsidiaries.
Research and development expenses (exclusive of internally developed
software costs), which consist primarily of labor costs, increased
$1.2 million, or 53.5%, in the third quarter of fiscal 1997 compared
to the same period a year earlier. Actual research and development
expenditures, including internally developed software costs of
$986,000 in the third quarter of fiscal 1997 and $759,000 in the third
quarter of fiscal 1996, increased $1.4 million, or 47.5%, compared to
the same period a year earlier. For the first nine months of fiscal
1997, research and development expenses (exclusive of internally
developed software costs),which consist primarily of labor costs,
increased $2.5 million, or 48.6%, compared to the same period a year
earlier. Actual research and development expenditures for the first
nine months of fiscal 1997, including internally developed software
costs of $3.2 million, increased $4.6 million, or 71.7%, compared to
the same period a year earlier. The increase in absolute dollars for
both the three-month and nine-month periods is primarily due to
Fidelio product development.
Purchased incomplete software technology was a result of the one-time
$14.8 million charge taken in the second quarter of fiscal 1996
associated with the acquisition of Fidelio.
Income from operations for the third quarter of fiscal 1997 was $7.9
million, or 14.0% of revenue, compared to income of $2.7 million in
the same period a year earlier. For the first nine months of fiscal
1997, income from operations was $19.8 million compared to a loss of
$2.2 million a year earlier or income of $12.6 million excluding the
one-time write-off mentioned above. For both the third quarter and
first nine months of fiscal 1997, the Company's higher income from
operations is primarily due to higher sales and improved gross
margins.
Interest income for the third quarter of fiscal 1997 increased
$33,000 to $99,000, or 50.0%, compared to $66,000 for the third
quarter of fiscal 1996. The increase in interest income for the period
is primarily due to the improvement in the Company's cash position
compared to a year ago when it reduced its cash balances to purchase
Fidelio. Interest expense decreased $278,000 to $356,000 for the
third quarter of fiscal 1997 from $634,000 for the same period a year
ago as the Company reduced its debt obligations. Interest income for
the first nine months in fiscal 1997 was $318,000 compared to
$668,000, a decrease of 52.4%, for the comparable period in fiscal
1996 primarily as a result of lower investment balances during fiscal
1997. Interest expense for the first nine months in fiscal 1997 was
$1,139,000 compared to $1,087,000, an increase of 4.8%, for the
comparable period in fiscal 1996 primarily due to the increase in the
Company's overall debt during the first nine months of fiscal 1997 in
comparison to the same period in fiscal 1996.
The effective tax rate for the third quarter of fiscal 1997 is 40.0%
compared to 38.5% for the same quarter a year earlier. For the first
nine months of fiscal 1997, the effective tax rate is 40.0% compared
to a benefit of 81.6% for the first nine months of fiscal 1996.
Excluding the effect of the purchase of incomplete software
technology expense and the related tax benefit, the nine month
effective tax rate for fiscal 1996 would have been 37.4%. The
increase is primarily due to a shift in the mix of earnings on a
country-by-country basis to those countries with higher tax rates.
Summary
The Company has recently experienced rapid revenue growth at a rate
that it believes has significantly exceeded that of the global market
for point-of-sale
11
<PAGE> 12
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Results of Operations - Third Quarter and Nine Month Comparisons,
Continued
computer systems and property management information systems products
for the hospitality industry, fueled in part by the acquisitions
consummated in calendar year 1995. Although the Company currently
anticipates continued revenue growth at a rate in excess of such
market, and therefore an increase in its overall market share, it does
not expect to maintain growth at recent levels and there can be no
assurance that any particular level of growth can be achieved. In
addition, due to the competitive nature of the market, the Company
continues to experience gross margin pressure on its products, and the
Company expects this to continue. There can be no assurance that the
Company will be able to continue to increase sufficiently sales of its
higher margin products, including software and services, to prevent
future declines in the Company's overall gross margin.
Moreover, some of the statements contained herein not based on
historic facts are forward looking statements that involve risks and
uncertainties. Past performance is not necessarily a strong or
reliable indicator of future performance. Actual results could differ
materially from past results, estimates or projections. Some of the
additional risks and uncertainties are: product demand and market
acceptance, including demand and acceptance for the new 3400 QSA and
the new 3700 POS systems; achieving increased sales of higher margin
software products; adverse economic or political conditions;
unexpected currency fluctuations; impact of competitive products and
pricing on margins; product development delays and technological
difficulties, including those with respect to the Fidelio next
generation integrated property management and central reservation
system technologies; and controlling expenses. Other risks are
disclosed in the Company's releases and SEC filings, including the
Company's 1997 10-Q filings for the quarters ended September 30 and
December 31, 1996, and the Company's 1996 10-K.
12
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of MICROS Systems, Inc.
We have reviewed the accompanying consolidated balance sheet of MICROS
Systems, Inc. and subsidiaries as of March 31, 1997, and the related
consolidated statement of operations for the three and nine month periods ended
March 31, 1997 and March 31, 1996 and the related consolidated statements of
cash flows for the nine month period ended March 31, 1997 and March 31, 1996.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of June 30, 1996, and the related
consolidated statements of operations, cash flows and shareholders' equity for
the year then ended (not presented herein), and in our report dated September
20, 1996 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the accompanying consolidated balance sheet
information as of June 30, 1996, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE LLP
Linthicum, Maryland
May 14, 1997
THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF
THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS LIABILITY PROVISIONS
OF SECTION 11 OF THE ACT DO NOT APPLY.
13
<PAGE> 14
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Part II - Other Information
Item 1. Legal Proceedings.
On March 25, 1997, Budgetel Inns, Inc. ("Budgetel") filed suit against
MICROS in the United States Federal District Court in the Eastern District of
Wisconsin. Budgetel alleges, among other things, that MICROS breached a March
1993 software support agreement by failing to provide full support to this
software package licensed to Budgetel in 1993. MICROS will defend against
Budgetel's allegations. While the ultimate outcome of litigation is uncertain,
and while litigation is difficult to predict, the Company believes that this
litigation will have no material adverse effect on the Company's results of
operations or financial position.
Items 2 through 4.
No events occurred during the quarter covered by the report that would
require a response to any of these items.
Item 5. Other Information
14
<PAGE> 15
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Part II - Other Information, continued
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
Exhibit 15 - Letter Regarding Unaudited Interim Financial
Information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
15
<PAGE> 16
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROS SYSTEMS, INC.
-----------------------
(Registrant)
May 15, 1997 s/ Gary C. Kaufman
- ------------ ---------------
Gary C. Kaufman
Senior Vice President, Finance and
Administration/Chief Financial Officer
May 15, 1997 s/ Roberta J. Watson
- ------------ -----------------
Roberta J. Watson
Vice President and Controller
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered Page
- ------- -------------
<S> <C> <C>
11. Computation of Earnings Per Share 18
15. Letter regarding Unaudited Interim 19
Financial Information
27. Financial Data Schedule
</TABLE>
17
<PAGE> 1
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
MICROS SYSTEMS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------- ------
<S> <C> <C>
Weighted-average number of common shares 7,960 7,903
Dilutive effect of outstanding stock options 209 137
------- ------
Weighted-average number of common and common 8,169 8,040
equivalent shares outstanding ======= ======
Net income $ 4,464 $1,182
======= ======
Net income per common and common equivalent share $ 0.55 $ 0.15
======= ======
<CAPTION>
Nine Months Ended
March 31,
1997 1996
------- ------
<S> <C> <C>
Weighted-average number of common shares 7,955 7,882
Dilutive effect of outstanding stock options 80 132
------- ------
Weighted-average number of common and common 8,035 8,014
equivalent shares outstanding ======= ======
Net income (loss) $10,802 $ (652)
======= ======
Net income (loss) per common and common $ 1.34 $(0.08)
equivalent share ======= ======
</TABLE>
18
<PAGE> 1
Exhibit 15
May 14, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that MICROS Systems, Inc. has incorporated by reference our report
dated May 14, 1997 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectus constituting part of its Registration
Statements on Forms S-8 (No. 333-17725, No. 333-05125, No. 33-69782, No.
33-44481 and No. 33-33535). We are also aware of our responsibilities under
the Securities Act of 1933.
Yours very truly,
PRICE WATERHOUSE LLP
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,808
<SECURITIES> 3,443
<RECEIVABLES> 59,896
<ALLOWANCES> 2,237
<INVENTORY> 20,101
<CURRENT-ASSETS> 104,114
<PP&E> 32,089
<DEPRECIATION> 14,542
<TOTAL-ASSETS> 154,055
<CURRENT-LIABILITIES> 77,168
<BONDS> 7,534
0
0
<COMMON> 199
<OTHER-SE> 65,184
<TOTAL-LIABILITY-AND-EQUITY> 154,055
<SALES> 105,317
<TOTAL-REVENUES> 160,183
<CGS> 49,480
<TOTAL-COSTS> 90,876
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,139
<INCOME-PRETAX> 19,183
<INCOME-TAX> 7,673
<INCOME-CONTINUING> 10,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,802
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
