<PAGE> 1
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 2000
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)
7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 443-285-6000
------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
----- -----
As of September 30, 2000, there were 17,347,218 shares of Common Stock, $0.025
par value, outstanding.
<PAGE> 2
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2000
Part I - Financial Information
Item 1. Financial Statements
General
The information contained in this report is furnished for the Registrant,
MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as
"MICROS" or the "Company"). In the opinion of management, the information in
this report contains all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair statement of the results for the
interim periods presented. The financial information presented herein should
be read in conjunction with the financial statements included in the
Registrant's Form 10-K for the fiscal year ended June 30, 2000, as filed with
the Securities and Exchange Commission.
2
<PAGE> 3
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,222 $ 26,211
Accounts receivable, net of allowance for
doubtful accounts of $8,013 at September 30,
2000 and $7,791 at June 30, 2000 91,033 98,917
Inventories 30,654 34,292
Deferred income taxes 15,544 15,575
Prepaid expenses and other current assets 13,495 16,098
---------- ---------
Total current assets 176,948 191,093
Property, plant and equipment, net of accumulated
Depreciation and amortization of $31,248 at
September 30, 2000 and $29,800 at June 30, 2000 25,876 24,332
Deferred income taxes, non-current 9,541 9,840
Goodwill and intangible assets, net of
accumulated amortization of $13,729 at
September 30, 2000 and $12,963 at June 30, 2000 25,077 26,750
Purchased and internally developed software costs,
net of accumulated amortization of $11,470 at
September 30, 2000 and $11,191 at June 30, 2000 26,267 24,604
Other assets 2,360 2,358
---------- ---------
Total assets $ 266,069 $ 278,977
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank lines of credit $ 3,017 $ 522
Current portion of long-term debt 250 397
Current portion of capital lease obligations 45 63
Accounts payable 19,450 21,145
Accrued expenses and other current liabilities 33,559 39,814
Income taxes payable 6,724 15,021
Deferred income taxes 479 475
Deferred service revenue 25,967 20,126
---------- ---------
Total current liabilities 89,491 97,563
Long-term debt, net of current portion 3,402 3,729
Capital lease obligations, net of current portion 299 330
Deferred income taxes, non-current 11,092 11,138
Commitments and contingencies
Minority interests 2,441 2,596
Shareholders' equity:
Common stock, $0.025 par; authorized 50,000
shares; issued and outstanding 17,347 at
September 30, 2000 and 17,336 at June 30, 2000 433 433
Capital in excess of par 54,442 54,225
Retained earnings 118,145 119,064
Accumulated other comprehensive loss (13,676) (10,101)
---------- ---------
Total shareholders' equity 159,344 163,621
---------- ---------
Total liabilities and shareholders' equity $ 266,069 $ 278,977
========== =========
</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 September 30,
----------------------------------
2000 1999
------------------- -------------
<S> <C> <C>
Revenue:
Hardware and software $ 39,251 $ 53,383
Service 34,758 34,044
---------- ---------
Total revenue 74,009 87,427
---------- ---------
Costs and expenses:
Cost of sales
Hardware and software 19,994 29,445
Service 18,150 16,674
---------- ---------
Total cost of sales 38,144 46,119
Selling, general and administrative expenses 29,927 24,869
Research and development expenses 4,133 3,774
Depreciation and amortization 3,315 2,656
---------- ---------
Total costs and expenses 75,519 77,418
---------- ---------
Income (loss) from operations (1,510) 10,009
Non-operating income (expense):
Interest income 259 163
Interest expense (116) (146)
Other expense, net (165) (989)
---------- ---------
Income (loss) before taxes, minority interests and
equity in net earnings of affiliates (1,532) 9,037
Income taxes (621) 3,656
---------- ---------
Income (loss) before minority interests and equity
in net earnings of affiliates (911) 5,381
Minority interests and equity in net earnings of affiliates (8) (243)
---------- ---------
Net income (loss) $ (919) $ 5,138
====== ======
Net income (loss) per common share:
Basic $ (0.05) $ 0.32
====== ======
Diluted $ (0.05) $ 0.30
====== ======
Weighted-average number shares outstanding:
Basic 17,344 16,290
====== ======
Diluted 17,344 17,373
====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Three Months Ended September 30, 2000
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Capital Other
------------------- in Excess Retained Comprehensive
Shares Amount of Par Earnings Loss Total
--------- --------- ---------- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 2000 17,336 $433 $54,225 $119,064 $(10,101) $163,621
Comprehensive loss
Net loss -- -- -- (919) -- (919)
Foreign currency translation
adjustments -- -- -- -- (3,575) (3,575)
--------
Total comprehensive loss -- -- -- -- -- (4,494)
Stock issued upon exercise of options 11 -- 204 -- -- 204
Income tax benefit from stock
options exercised -- -- 13 -- -- 13
---- --- --- --- --- ---
Balance, September 30, 2000 17,347 $433 $54,442 $118,145 $(13,676) $159,344
====== ==== ======= ======== ========= ========
</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>
Three Months Ended September 30,
-----------------------------------
2000 1999
------------------ -------------
<S> <C> <C>
Net cash flows provided by operating activities: $ 6,241 $ 11,653
--------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (3,787) (2,077)
Proceeds from dispositions of property, plant
and equipment -- 74
Internally developed software (2,530) (1,439)
Dividends paid to minority shareholders -- (8)
Net cash paid for acquisitions, minority
interests and contingent earn-out payments (2,295) (803)
--------- ----------
Net cash used in investing activities (8,612) (4,253)
--------- ----------
Cash flows from financing activities:
Principal payments on line of credit (630) (8)
Principal payments on long-term debt and
capital lease obligations (280) (297)
Proceeds from lines of credit 3,129 --
Proceeds from issuance of stock 204 3,330
--------- ----------
Net cash provided by financing activities 2,423 3,025
--------- ----------
Effect of exchange rate changes on cash (41) 33
--------- ----------
Net increase in cash and cash equivalents 11 10,458
Cash and cash equivalents at beginning of period 26,211 22,806
--------- ----------
Cash and cash equivalents at end of period $ 26,222 $ 33,264
========= ==========
</TABLE>
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 September 30, 2000
(Unaudited, in thousands, except per share data)
1. Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------------ -----------------
<S> <C> <C>
Raw materials $ 4,087 $ 4,573
Work-in-process 269 576
Finished goods 26,298 29,143
------------------ -----------------
$ 30,654 $ 34,292
================== =================
</TABLE>
2. New accounting standards
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements" to provide guidance regarding the recognition,
presentation and disclosure of revenue in the financial statements.
In March 2000, the SEC released SAB 101A, which delayed the
implementation date of SAB 101 for registrants with fiscal years that
begin between December 16, 1999 and March 15, 2000. Subsequently, the
SEC released SAB 101B which further delays the implementation date of
SAB 101 until no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. The Company is reviewing the
provisions of the Bulletin.
In March 2000, the Emerging Issues Task Force issued EITF 00-03,
"Application of Statement of Position 97-2 in Hosting Arrangements".
The software element covered by SOP 97-2 is only present in a hosting
arrangement if the customer has a contractual right to take
possession of the software at any time during the hosting period.
Arrangements that do not give the customer such an option are service
contracts outside the scope of SOP 97-2. This statement will not have
an impact on the Company's consolidated financial position, results
of operation or cash flows.
In July 2000, the Emerging Issues Task Force issued EITF 00-15,
"Classification in the Statement of Cash Flows of the Income Tax
Benefit Realized by a Company upon Employee Exercise of a
Nonqualified Stock Option". EITF 00-15 states that the income tax
benefit realized by the company upon employee exercise should be
classified in the operating section of the statement of cash flows.
The Company has elected to adopt EITF 00-15 as of June 2000. All
comparative financial statements have been restated to reflect the
change in classification within the Statements of Cash Flows from
financing activities to operating activities.
3. Legal proceedings
MICROS is and has been involved in legal proceedings arising in the
normal course of business. The Company is of the opinion, based upon
presently available information and the advice of counsel concerning
pertinent legal matters, that any resulting liability should not have
a material adverse effect on the Company's results of operations or
financial position.
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 filed a counterclaim against Budgetel,
alleging breach of contract and defamation. Although the
7
<PAGE> 8
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2000
(Unaudited, in thousands, except per share data)
3. Legal proceedings (continued)
discovery phase of the litigation has been substantially completed,
no trial date has been scheduled. While the ultimate outcome of
litigation is uncertain, and while litigation is inherently difficult
to predict, the Company is of the opinion, based upon presently
available information and the advice of counsel concerning pertinent
legal matters, that resulting liability, if any, should not have a
material adverse effect on the Company's results of operations or
financial position.
4. Net income (loss) per share
Basic net income per common share is computed by dividing net income
by the weighted-average number of shares outstanding. Diluted net
income per share includes the dilutive effect of stock options.
Basic and diluted net loss per common share is computed using the
weighted-average number of shares outstanding during the period and
does not include unexercised stock options since their effect would
be anti-dilutive due to the losses in the three-month period ended
September 30, 2000.
A reconciliation of the weighted-average number of common shares
outstanding assuming dilution is as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30,
2000 1999
------ ---------
<S> <C> <C>
Net income (loss) $ (919) $ 5,138
======= =========
Average common shares outstanding 17,344 16,290
Dilutive effect of outstanding stock options -- 1,083
------- ---------
Average common shares outstanding assuming dilution 17,344 17,373
======= =========
Basic net income (loss) per share $ (0.05) $ 0.32
======= ========
Diluted net income (loss) per share $ (0.05) $ 0.30
======= ========
</TABLE>
For the three-month periods ended September 30, 2000 and 1999,
2,245,000 options and 593 options, respectively, were excluded from
the above reconciliation as these options were anti-dilutive for
these periods.
5. Segment reporting data
The Company develops, manufactures, sells and services point-of-sale
computer systems, property management systems, central reservation
and central information systems products for the hospitality
industry. MICROS is organized and operates in two segments: U.S. and
International. The International segment is primarily in Europe and
the Pacific Rim. For purposes of applying SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," management
views the U.S. and International segments separately in operating the
business, although the products and services are similar for each
segment. The following information is presented in accordance with
the requirements of SFAS No. 131.
8
<PAGE> 9
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2000
(Unaudited, in thousands, except per share data)
5. Segment reporting data (continued)
A summary of the Company's operating segments is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Revenues (1):
United States $ 38,447 $ 45,064
International 46,755 53,152
Intersegment eliminations (11,193) (10,789)
-------- ---------
Total revenues $ 74,009 $ 87,427
======== =========
Income before taxes,
minority interests, and
equity in net earnings of
affiliates (1):
United States $ (6,748) $ (904)
International 11,752 17,108
Intersegment eliminations (6,536) (7,167)
-------- ---------
Total income before taxes,
minority interests, and
equity in net earnings
of affiliates $ (1,532) $ 9,037
======== =========
September 30, June 30,
2000 2000
---- ----
Identifiable assets (2):
United States $149,797 $ 158,552
International 116,272 120,425
Intersegment eliminations -- --
-------- ---------
Total identifiable assets $266,069 $ 278,977
======== =========
</TABLE>
(1) Amounts based on the location of the customer.
(2) Amounts based on the location of the selling entity.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - First Quarter Comparison
The Company recorded a net loss of $0.05 per common share in the first
quarter of fiscal 2001, compared with diluted net income of $0.30 per common
share in the first quarter of fiscal 2000. For the quarter, the loss was
primarily due to lower revenues in the U.S. and weakening European currencies.
The currency effect lowered revenue approximately $3.2 million.
Revenue of $74.0 million for the first quarter of fiscal 2001 decreased
$13.4 million, or 15.3%, compared to the same period last year. A comparison
of the sales mix for fiscal years 2001 and 2000 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Hardware 36.9% 43.6%
Software 16.1% 17.5%
Service 47.0% 38.9%
----- -----
100.0% 100.0%
</TABLE>
Both hardware and software sales decreased in absolute dollars in fiscal
2001 in comparison to the prior year, primarily due to the continued slowdown
in information technology purchases by the hospitality industry. Service sales
increased in absolute dollars for the first quarter in comparison to the prior
year first quarter primarily due to support revenues earned on a larger
customer base.
Combined hardware and software revenues for the first quarter of fiscal
2001 decreased $14.1 million, or 26.5%, while service revenues increased $0.7
million, or 2.1%, over the same period a year earlier.
Cost of sales, as a percentage of revenue, decreased to 51.5% for the
first quarter of fiscal 2001 from 52.8% for the first quarter of fiscal 2000.
Cost of sales for hardware and software products, as a percentage of related
revenue, was 50.9% in the first quarter of fiscal 2001 compared to 55.2% for
the same quarter a year earlier. This decrease as a percentage of revenue is
primarily due to the decrease of hardware sales as a percentage of total
hardware and software sales.
Service costs, as a percentage of service revenue, increased to 52.2% in
the first quarter of fiscal 2001 compared to 49.0% in the same quarter in
fiscal 2000. The increase was primarily due to a lower number of installations
performed in fiscal 2001 resulting in lower labor utilization rates for
service personnel.
Selling, general and administrative expenses increased $5.1 million, or
20.3%, in the first quarter of fiscal 2001 compared to the same period last
year. As a percentage of revenue, selling, general and administrative expenses
increased to 40.4% in the first quarter of fiscal 2001 compared to 28.4% in
the first quarter of fiscal 2000 due to decreased revenue and the acquisition
of direct sales offices during the period October 1999 through June 2000.
Research and development expenses (exclusive of capitalized software
development costs), which consist primarily of labor costs, increased $0.4
million, or 9.5%, in the first quarter of fiscal 2001 compared to the same
period a year earlier. Actual research and development expenditures, including
capitalized software development costs of $2.5 million in the first quarter of
fiscal 2001 and $1.4 million in the first quarter of fiscal 2000, increased
$1.5 million, or 27.8%, compared to the same period a year earlier. The
increase in absolute dollars for the three-month period is primarily due to
increased expenditures in the Company's hotel business.
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<PAGE> 11
Income from operations for the first quarter of fiscal 2000 was $10.0
million, or 11.4% of revenue, compared to a loss of $1.5 million, or 2.0% of
revenue, in the first quarter of fiscal 2001. The reduction is primarily due
to the lower volume of sales in fiscal 2001 and the higher operating expenses
due to new direct sales offices added since October 1999.
Other expense decreased from $1.0 million for the first quarter of fiscal
2000 to $0.2 million in the first quarter of fiscal 2001. The Company
experienced translation loss of $0.9 million in the first quarter of fiscal
2000 compared to a loss of $0.2 million in the first quarter of fiscal 2001.
The translation loss is primarily due to changes in exchange rates between the
German mark and the U.S. dollar and between the Australian dollar and the U.S.
dollar.
The effective tax rate for the first quarter of fiscal 2001 and fiscal
2000 was 40.5%.
The European Union ("EU") filed a challenge against the U.S. Foreign Sales
corporation ("FSC") tax provisions with the World Trade Organization ("WTO"). On
February 25, 2000, the WTO issued a final decision upholding this challenge.
Officials representing the United States on trade issues continue to seek
resolution through a negotiated settlement. It is currently not possible to
predict what impact, if any, this issue will have on future earnings pending
final resolution of the matter with the WTO, EU, and the United States.
Year 2000
In 1997, the Company created a corporate-wide Year 2000 project team
representing all business units of the Company. The "Year 2000 Issue" is the
result of computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. The team was divided into three segments, each of
which was tasked with analyzing one of the following three sets of issues: (i)
Year 2000 compliance issues with respect to Company internal information
technology systems and non-information technology systems; (ii) Year 2000
compliance issues with respect to the information systems of certain key
Company vendors and suppliers; and (iii) Year 2000 compliance issues with
respect to Company products that the Company sells and licenses to its
worldwide customer base.
On the basis of information currently available, MICROS believes that it
did not experience any material problems relating to the Year 2000 issues.
While MICROS did uncover certain minor issues relating to date dependent data,
none were material and all were promptly addressed. Accordingly, the Year 2000
task force had been disbanded in February 2000. Any remaining issues that may
surface will be handled through the Company's customer service organization.
Nonetheless, the Company will continue to monitor products to attempt to
assure that there are no uncorrected problems. While the Company believes it
has diligently addressed the Year 2000 issues and that it has satisfactorily
resolved any Year 2000 problems, it is possible hitherto undetected problems
could be uncovered in the future.
Year 2000 Compliance Costs
To date, the Company has expensed all incremental costs related to the
Year 2000 analysis and remediation efforts. Internal and external costs
specifically associated with modifying software for the Year 2000 have been
charged to expense as incurred. All of these costs were funded through
operating cash flows. Management's current estimate (including the Year 2000
issues identified to date) is that the costs associated with the Year 2000
issue have not and will not in the future have a material adverse effect on
the results of operations or financial position of the Company in any given
quarter. As of June 30, 2000, not including the costs incurred to upgrade the
Company's internal management information systems, the Company had incurred
approximately $2.2 million in expenditures related to the Year 2000 issue.
Costs capitalized through June 30, 2000 to implement the Company's new Year
2000
11
<PAGE> 12
compliant internal management information systems, which address a large
variety of informational and processing needs, are approximately $8.5 million.
Euro Conversion
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common currency, the Euro. For a three-year
transition period, both the Euro and individual participants' currencies will
remain in circulation. After June 30, 2002, the Euro will be the sole legal
tender for EMU countries. The adoption of the Euro will affect a multitude of
financial systems and business applications as the commerce of these nations
will be transacted in the Euro and the existing national currency during the
transition period. As of September 30, 2000, of the eleven countries currently
admitted to the EMU, the Company has subsidiary operations in six of those
countries and distributor relationships in the remaining five countries.
MICROS is currently addressing Euro related issues and its impact on
information systems, currency exchange rate risk, taxation, contracts,
competition and pricing. Action plans currently being implemented are expected
to result in compliance with all laws and regulations; however, there can be
no certainty that such plans will be successfully implemented or that external
factors will not have an adverse effect on the Company's operations. Moreover,
there is still some uncertainty with respect to the interpretation of certain
Euro regulations, and the impact of the regulations on the Company's Euro
implementation. Any costs associated with the adoption of the Euro will be
expensed as incurred. The Company currently does not expect these costs to be
material to its results of operations, financial condition or liquidity.
Liquidity and Capital Resources
The Company has a $45.0 million multi-currency unsecured committed line of
credit expiring on December 31, 2000. Prior to this upcoming expiration date,
the Company anticipates that it will renew this line of credit for an
additional one-year period. The Company has the one-time option to convert the
line of credit into a three-year secured term loan upon expiration of the line
of credit. As of September 30, 2000, there is $3.0 million outstanding under
this line of credit.
In addition, the Company has a credit relationship from a European bank in
the amount of DM 15.0 million (approximately $6.8 million at the September 30,
2000 exchange rate). Under the terms of this facility, the Company may borrow
in the form of either a line of credit or term debt. Under the credit
facility, the Company has a balance of DM 5.0 million (approximately $2.3
million at the September 30, 2000 exchange rate) in the form of balloon debt
and has no line of credit borrowings. As the Company has significant
international operations, its DM-denominated borrowings do not represent a
significant foreign exchange risk.
Also, due to an acquisition in June 2000, the Company has a line of
credit and a line for term loans of $0.7 million. The agreement requires the
Company to satisfy certain financial covenants. The line of credit can be
borrowed in either U.S. dollars or Canadian dollars. The interest rate charged
is the prime rate plus 1 percent (1%). As of September 30, 2000, the Company
had no balance outstanding on the line of credit and $0.1 million outstanding
in term loans.
Net cash provided by operating activities for fiscal 2001 was $6.2 million
versus $11.7 million for fiscal 2000. The reduction in net cash for fiscal
2001 relative to fiscal 2000 was caused, by among other factors: (i) slowdown
in information technology purchases due to Year 2000 driven purchases in
calendar 1999; (ii) longer and delayed sales cycles due to the introduction of
new and/or untested technologies, such as Internet-based technologies; and
(iii) European currency weakness relative to the dollar. The Company used $8.6
million for investing activities in fiscal 2001, including $6.3 million for
the purchase of property, plant, and equipment and internally developed
software and $2.3 million for contingent earn-out payments and business
acquisitions. Net financing activities for fiscal 2001 provided $2.4
12
<PAGE> 13
million, primarily from proceeds of $3.1 million on the line of credit during
fiscal 2001 which was offset by $0.9 million in repayments on the lines of
credit, long term debt and capital lease obligations. The cash position of the
Company at September 30, 2000 was $26.2 million. All cash is being held for
the operation and expansion of the business.
The Company anticipates that its cash flow from operations along with
available lines of credit, in conjunction with other lines of credit for which
the Company may be eligible or lines of credit to be renewed or converted into
term debt, are sufficient to provide the working capital needs of the Company
for the foreseeable future. The Company anticipates that its rate of property,
plant and equipment expenditures for fiscal 2001 will be approximately $9.0
million.
Summary
Until calendar year 2000, the Company had experienced rapid revenue
growth at a rate that it believes had significantly exceeded that of the
global market for point-of-sale computer systems and property management
information systems products for the hospitality industry. In light of current
market conditions, the Company does not expect to maintain growth at historic
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
service offerings, and the Company expects product and service margins to
decline. There can be no assurance that the Company will be able to continue
to increase sufficiently sales of its higher margin products, including
software, to prevent future declines in the Company's overall gross margin.
Moreover, MICROS's financial results in any single quarter are dependent
upon the timing and size of customer orders and the shipment of products for
large orders. Large software orders from customers may account for more than
an insignificant portion of earnings in any quarter. The customers with whom
MICROS does the largest amount of business are expected to vary from year to
year as a result of the timing for the roll-out of each customer's system.
Furthermore, if a customer delays or accelerates its delivery requirements or
a product's completion is delayed or accelerated, revenues expected in a given
quarter may be deferred or accelerated into subsequent or earlier quarters.
The market price of MICROS Common Stock is volatile, and may be subject
to significant fluctuations in response to variations in MICROS's quarterly
operating results and other factors such as announcements of technological
developments or new products by MICROS, customer roll-outs, technological
advances by existing and new competitors, and general market conditions in the
hospitality industry. In addition, conditions in the stock market in general
and shares of technology companies in particular have experienced significant
price and volume fluctuations which have at times been unrelated to the
operating performance of companies.
Moreover, some of the statements contained herein not based on historic
facts are forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, that involve risks and uncertainties. Past
performance is not necessarily a strong or reliable indicator of future
performance. Actual results could differ materially from past results,
estimates or projections. Some of the additional risks and uncertainties are:
product demand and market acceptance, including demand and acceptance for the
new OPERA products and the newest versions of the 3700 RES; implementation of
a cost-effective service structure capable of servicing increasingly complex
software systems in increasingly more remote locations; achieving increased
sales of higher margin software products; hiring and retention of qualified
employees with sufficient technical expertise; adverse economic or political
conditions; unexpected currency fluctuations; impact of competitive products
and pricing on margins; product development delays; technological difficulties
associated with new product releases, including those with respect to the
Fidelio next generation integrated property management and central reservation
13
<PAGE> 14
system technologies; and controlling expenses. These and other risks are
disclosed in the Company's releases and SEC filings, including in the section
titled "Business and Investment Risks; Information Relating to Forward-Looking
Statements", in the Company's Annual Report on Form 10-K for the Fiscal Year
ended June 30, 2000.
14
<PAGE> 15
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2000
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has experienced rapid growth internationally. MICROS's
significant international business and presence does expose the Company to
certain market risks, such as currency, interest rate and political risks.
With respect to currency risk, the Company transacts business in over 28
different currencies through its foreign subsidiaries. The fluctuation of
currencies impacts sales and profitability. Frequently, sales and the costs
associated with such sales are not always denominated in the same currency.
Given the fact that the Company transacts business in many different
currencies, adverse declines in certain currencies can be offset by favorable
advances in other currencies. Recent weakness in certain European currencies
has, however, adversely impacted the financial performance of the Company.
Additionally, the Company is subject to interest rate fluctuations in
foreign countries to the extent that the Company elects to borrow in the local
foreign currency. In the past, this has not been an issue of concern as the
Company has the capacity to elect to borrow in other currencies with more
favorable interest rates. While the Company has not to date invested in
financial instruments designed to protect against interest rate fluctuations,
the Company will continue to evaluate the need to do so in the future.
Further, the Company is subject to political risk, especially in
developing countries with uncertain or unstable political structures or
regimes. The Company is also subject to the effects of, and changes in, laws
and regulations, other activities of governments, agencies and similar
organizations. The Company does not believe at this time that it is exposed to
unusual political risk that could have a material adverse impact on the
Company.
Finally, the Company's unsecured committed line of credit bears interest
at a floating rate of interest. It does not invest in financial instruments
designed to protect against interest rate fluctuations, although it will
continue to evaluate the need to do so in the future.
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<PAGE> 16
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2000
Part II - Other Information
Item 1. Legal Proceedings
MICROS is and has been involved in legal proceedings arising in the
normal course of business. The Company is of the opinion, based upon presently
available information and the advice of counsel concerning pertinent legal
matters, that any resulting liability should not have a material adverse
effect on the Company's results of operations or financial position.
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 filed a counterclaim
against Budgetel, alleging breach of contract and defamation. Although the
discovery phase of the litigation has been substantially completed, no trial
date has been scheduled. While the ultimate outcome of litigation is
uncertain, and while litigation is inherently difficult to predict, the
Company is of the opinion, based upon presently available information and the
advice of counsel concerning pertinent legal matters, that resulting
liability, if any, should not have a 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
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
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MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICROS SYSTEMS, INC.
-----------------------
(Registrant)
November 14, 2000 /s/ Gary C. Kaufman
------------------ ---------------
Gary C. Kaufman
Executive Vice President, Finance and
Administration/Chief Financial Officer
November 14, 2000 /s/ Roberta J. Watson
------------------ -----------------
Roberta J. Watson
Senior Vice President and Controller
17
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered Page
------- -------------
<S> <C> <C>
27. Financial Data Schedule N/A
</TABLE>
18
