UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
x
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Fiscal Year Ended June 30, 2010
OR
¨
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____________to__________
Commission
File Number 0-9993
MICROS
SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
Maryland
|
52-1101488
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(State
of Incorporation)
|
(I.R.S.
Employer Identification
No.)
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7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289
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(Address of Principal Executive Offices) (Zip Code)
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443-285-6000
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class
|
|
Name of Exchange
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Common Stock, par value $0.025 per share
|
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The NASDAQ Stock Market LLC
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
YES
þ
NO
o
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
YES
o
NO
þ
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
þ
NO
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
YES
o
NO
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
þ
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Large
accelerated filer
þ
|
|
Accelerated
filer
o
|
|
Non-accelerated
filer
o
|
|
Smaller
Reporting Company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
YES
o
NO
þ
The
aggregate market value of the common equity (all of which is voting) held by
non-affiliates computed by reference to the price at which the common equity was
last sold as of December 30, 2009 was $2,456,870,905.
At the
close of business on July 31, 2010, there were issued and outstanding 80,107,423
shares of Registrant’s Common Stock at $0.025 par value.
DOCUMENTS
INCORPORATED BY REFERENCE
The
definitive proxy statement relating to the registrant’s Annual Meeting of
Stockholders, to be held November 19, 2010, is incorporated by reference in Part
III to the extent described therein.
TABLE
OF CONTENTS
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Page No.
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PART I
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Item 1.
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Business
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3
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Item 1A.
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Risk
Factors
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16
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Item 1B.
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Unresolved
Staff Comments
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19
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Item 2.
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Properties
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19
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Item 3.
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Legal
Proceedings
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20
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PART II
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Item 5.
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Market for the
Registrant’s Common Equity, Related Stockholder Matters and
Issuer
Purchases of Equity
Securities
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21
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Item 6.
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Selected
Financial Data
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22
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Item 7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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23
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Item 7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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37
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Item 8.
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Financial
Statements and Supplementary Data
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37
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Item 9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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37
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Item 9A.
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Controls
and Procedures
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37
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Item 9B.
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Other
Information
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37
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PART III
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Item 10.
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Directors,
Executive Officers and Corporate Governance
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38
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Item 11.
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Executive
Compensation
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38
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Item 12.
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Security
Ownership of Certain Beneficial Owners and Management and
Related
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38
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Stockholder
Matters
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Item 13.
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Certain
Relationships and Related Transactions, and Director
Independence
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38
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Item 14.
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Principal
Accounting Fees and Services
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38
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PART IV
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Item 15.
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Exhibits
and Financial Statement Schedule
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39
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Signatures
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73
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Exhibit Index
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74
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INTRODUCTION
MICROS Systems, Inc. is a leading
worldwide designer, manufacturer, marketer, and servicer of enterprise
information solutions for the global hospitality and retail industries. MICROS
Systems, Inc. was incorporated in the State of Maryland in 1977 as Picos
Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems,
Inc.
References to “MICROS,” the “Company,”
“we,” “us,” and “our” herein include the operations of MICROS Systems, Inc. and
also our subsidiaries on a consolidated basis, unless the context indicates
otherwise. Our fiscal year runs from July 1 through June
30. Accordingly, references to a fiscal year mean the 12-month period
ending June 30 of that year; i.e., fiscal year 2010 means the 12-month period
ending June 30, 2010.
We operate in two reportable segments
for financial reporting purposes: U.S. and International. You can
find financial information for each reportable segment, as well as certain
financial information about geographic areas, in Note 17 “Segment Information”
in our Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K. In each of our two reportable segments, we have
developed an infrastructure through which we license and sell all of our
products and services. While the products and services that are sold
may be configured for each segment to address local issues, laws, tax
requirements and customer preferences, the products and services are
substantially similar worldwide.
During January 2010, we uncovered
certain fraudulent activities in our subsidiary in Japan that occurred during
the period from fiscal year 2006 to the second quarter of fiscal year
2010. We determined that these fraudulent transactions resulted in a
cumulative overstatement of revenue and net income attributable to MICROS
Systems, Inc. of approximately $6.9 million and $4.9 million, respectively, over
this period and also concluded that the misstatements did not materially affect
the previously issued financial statements for any of our prior
periods. Appropriate adjustments have been made to prior period
information included in the accompanying consolidated financial statements and
described in Note 19 “Revisions to Prior Period Financial Statements” in the
Notes to the Consolidated Financial Statements included in this
report.
Almost all of our customers are in the
hospitality industry and the retail industry. The hospitality
industry encompasses numerous defined markets, including lodging (including, for
example, individual hotel sites, hotel chains and franchise groups), table
service and quick service restaurants, restaurant chains and franchise groups,
entertainment venues (including, for example, stadiums and arenas), business
foodservice operations, casinos, transportation foodservice, government
operations, and cruise ships. The retail industry consists of retail
operations selling directly to consumers, including retailers of clothing,
shoes, food, hardware, jewelry, and other specialty items.
Our enterprise information solutions
comprise three major areas: (1) hotel information systems; (2) restaurant
information systems; and (3) retail information systems. In addition
to our software enterprise solutions and hardware products, we offer an
extensive array of services and other products for our hotel, restaurant and
retail information systems. The hotel information systems consist
mainly of software, encompassing property based management systems (“PMS”),
related property-specific modules and applications, and central systems,
including central reservation systems (“CRS”). The restaurant
information systems consist of hardware and software for point-of-sale (“POS”)
and operational applications, a suite of back office applications, including
inventory, labor and financial management, and certain centrally hosted
enterprise applications. The retail systems consist of software
encompassing POS, loss prevention, web commerce applications, business
analytics, customer gift cards, electronic payments and enterprise applications.
We market our products and services globally.
We market our hotel systems directly to
customers through our direct sales force and through international distributors.
Our hotel PMS applications are installed worldwide in leading hotel chains,
including the following:
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Accor (France)
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Hyatt Hotels & Resorts
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Omni
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Best Western
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Hilton Hotels
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Peninsula (Hong Kong)
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Camino Real (Mexico)
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InterContinental Hotels Group
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Rica Hotels (Sweden)
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Carlson Hotels
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ITC Welcome Group (India)
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Shangri-La (Hong Kong)
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Danubius (Bulgaria)
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Kempinski (Germany)
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Société du Louvre (France)
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Delta Hotels (Canada)
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Loews
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Solare (Japan)
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Dusit Thani (Thailand)
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Louvre Hotels
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Starwood International
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Fairmont
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MGM Mirage
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Steigenberger
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Federal (Malaysia)
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Marriott International
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Travelodge (U.K.)
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Four Seasons (Canada)
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Millennium
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Wyndham Worldwide
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Hard Rock Hotels
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Mövenpick (Switzerland)
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Wynn Resorts
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Globally, there are approximately
26,000 MICROS PMS applications installed (most of which are accompanied by
other
property-specific
modules and applications).
The MICROS CRS is installed in numerous
hotel chains, including the following:
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Boscolo (Italy)
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Louvre Hotels
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Shell Hospitality
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Camino Real
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MacDonalds (U.K.)
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Sokos (Finland)
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Constellation (Australia)
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MGM Resorts International
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Starhotels (Italy)
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Delta Hotels (Canada)
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Oberoi (India)
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Sun International (South
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Equatorial (Malaysia)
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Omni
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Africa)
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Fairmont
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Pan Pacific (Singapore)
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Travelodge (U.K.)
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Four Seasons
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Red Lion
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Westmark
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Great Wolf Resorts
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Rydges (Australia)
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Wyndham Worldwide
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Hard Rock Hotels
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Shangri-La
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Wynn Resorts
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Loews Hotels
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Société du Louvre
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Xanterra
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Globally, over 70
hotel chains have installed MICROS’s CRS applications.
We market our restaurant systems
directly, and indirectly through our domestic and international
dealers. Our restaurant POS systems are installed
worldwide. Major table service restaurant chain customers include the
following:
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Bertucci’s
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Friendly’s
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Mimi’s Cafe
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Chevy’s
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Groupe Le Duff (France)
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Mitchells and Butlers (U.K.)
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Cara (Canada)
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Hard Rock Café
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Perkins
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Cracker Barrel
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HMS Host
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Rainforest Cafe
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Denny’s
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Hooters
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Ruby Tuesday’s
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Eat ‘n Park
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IHOP
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Ruth’s Chris Steakhouse
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El Torito
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Johnny Carinos
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T.G.I. Friday’s
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ESPN Zone
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La Madeleine
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VIPS (Spain)
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Fazer Amica (Finland)
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Lone Star
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Wagamama (U.K.)
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Famous Dave’s
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Manchu Wok
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Whitbread (U.K.)
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Major quick service chain restaurant customers, as well as numerous franchisees of the following, include:
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Atlanta Bread
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·
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Krispy Kreme
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Tropical Smoothie Café
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Arby’s
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Nordsee (Germany)
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Wagamama’s (U.K)
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Auntie Anne’s
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Pollo Campero
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Wendy’s
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Baja Fresh
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Panera Bread
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Wingstop
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Ben & Jerry’s
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Popeye’s
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Yum! Brands (Pizza Hut,
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Burger King
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Retail Brand Group
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KFC International, and
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Coffee Club (Australia)
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Saxby’s Coffee
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Taco Bell)
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El Pollo Loco
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Starbucks
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Zaxby’s
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Five Guys
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Subway
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Our restaurant POS systems are also installed in
hotel restaurants in various hotel chains, including Accor, Boyd Gaming, Camino
Real, Danubius, Fairmont, Four Seasons, Hilton, Hyatt, InterContinental Hotels,
Kempinski, Mandarin Oriental, MGM Mirage, Marriott International, Millennium,
Omni, Pan Pacific, Peninsula, Radisson, Starwood, and Wyndham
International. Additional significant markets for our POS systems
include complex foodservice environments, such as casinos, cruise ships, sports
arenas, airport concourses, theme parks, recreational centers, institutional
food service organizations, and specialty retail shops. Users include Aramark,
Centerplate, Compass, Delaware North, HMS Host, and various government
entities. We have installed large POS systems in Citi Field (New York
City), the Foxwoods Hotel and Casino (Ledyard, CT), Grand Casino (Australia),
Atlantis (Bahamas), Mandalay Resorts Group, Sun City (South Africa), Harrah’s
Casinos, Meadowlands Sports Complex, The Venetian Resort, Wembley
Stadium (U.K.), and Wynn Resorts. We supply and service POS systems
for users in the complex foodservice environments identified above both directly
and through distribution channels, including through specialty reseller
relationships with Blackboard Inc. and The CBORD Group Inc.
We also market a Windows
®
based
restaurant POS system through our Hospitality Solutions International (“HSI”)
division. Through our JTECH Communications, Inc. (“JTECH”)
subsidiary, we market a range of on-premises paging and alert solutions for
restaurants, retail, and medical environments.
Our
retail solutions are provided through our subsidiaries Datavantage,
CommercialWare, Advance Retail Systems (Mexico), MICROS Retail & Supply
Chain aka RedSky (United Kingdom), eOne, and Fry. In our marketing,
we sometimes refer to this group of subsidiaries as the “MICROS Retail”
group. See the discussion of “MICROS Retail” under the “Retail
Information Systems” heading below. Our retail store customers
include the following retailers:
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Adidas (Germany and
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Armani Exchange
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Bostonian
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USA)
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Barney’s New York
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Burberry Limited
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Advance Auto Parts
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Books-A-Million
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Chelsea and Scott
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Ann Taylor
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Blain’s Farm and Fleet
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Christopher & Banks
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Garnet Hill
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Polo Ralph Lauren
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Stonewall Kitchen
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Hannaford Brothers
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PPG
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Sur La Table
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Hugo Boss (Germany)
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Reebok Retail
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Talbots
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Jo Ann Stores
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Roots Canada
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Tesco (U.K.)
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Jos. A. Banks Clothiers
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S & K Famous Brands
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Urban Brands
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Limited Brands
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Sainsbury’s (U.K.)
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The U.S. Mint
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Maytag
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7-11 (Mexico)
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Tommy Hilfiger
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Michaels Stores
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Smith & Hawken
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Wm Morrison (U.K.)
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Nike Mexico
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Starbucks
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Whirlpool
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Pendleton
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Steve Madden Retail
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·
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Zales
|
PRODUCTS
AND SERVICES
Summary
of Product Solutions (Software and Hardware):
Hotel Products
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Description
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Software
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Opera
PMS
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PMS
software product for hotel reservations, targeted to full service
hotels
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Opera
Xpress PMS
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PMS
software product for hotels, targeted to limited service
hotels
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Opera
Lite PMS
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PMS
software for hotels, targeted to smaller hotels
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Operetta
PMS
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PMS
software and hardware bundle for hotels, targeted to smaller
hotels
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Fidelio
Versions 7 and 8 PMS
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PMS
software products for hotel reservations
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Opera
Revenue Management System
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Software
that helps hotels develop and manage pricing strategies
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Opera
Central Reservation System
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Software
that manages hotel reservations for hotel chains or hotel
groups
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Opera
Customer Information System
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Software
that manages customer information and loyalty programs
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Opera
Vacation Ownership System
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Software
that manages reservations for hotel condominiums and related condominium
management
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Opera
Web Booking Suite System
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Software
that enables Opera PMS to receive Internet reservations
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Opera
Sales and Catering
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Software
that helps hotels manage meeting needs (food, hotel rooms, meeting space,
and other customer needs)
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Opera
Sales Force Automation (SFA)
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Software
that manages leads, meeting agendas, and contracting, and provides other
support to the national and regional sales teams for hotel
chains
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Opera
Activity Scheduler
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Software
that manages the scheduling and billing for hotel resort recreational
activities, such as golf, tennis, spas, etc.
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Opera
Kiosk
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Enables
guest check-in and check-out at stand-alone kiosk, and other interactive
features
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Opera
Business Intelligence
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Software
that provides analytics for financial and operations
analyses
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myfidelio.net
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An
Internet based hotel reservation service and network
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Fidelio
Cruise SPMS Systems
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A
suite of software products that manages reservations, POS and other
activities for the cruise industry
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Materials
Management
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Software
that provides inventory control and costing for food production, mainly
marketed to hotel
restaurants
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Restaurant Products
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Description
|
|
|
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Software
|
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|
|
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MICROS
9700 HMS
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POS
software for large foodservice, leisure and entertainment
venues
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S
i
mphony
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Centrally-hosted
POS for large foodservice, leisure and entertainment
venues
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MICROS
3700 POS
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POS
software for table service and quick service
restaurants
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Restaurant
Enterprise Series (RES)
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Suite
of software products for 3700 POS
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Kitchen
Display System
|
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Component
of RES, providing additional reporting capabilities and
information
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RES
Kiosk
|
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Component
of RES, for self-ordering and customer information via kiosk or other
hardware
|
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HSI
Profit Series POS
|
|
POS
software for table service restaurants (only marketed through the HSI
division)
|
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mymicros.net
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Suite
of web based software products for use with restaurant POS
products
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myhsi.net
|
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Suite
of web based software products for HSI Profit Series
|
|
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MICROS
e7 POS
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POS
product for small restaurants (only marketed in North and South
America)
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Hardware
|
|
|
|
|
|
MICROS
Workstation 5A Terminal
|
|
Windows
CE POS and Windows Embedded POS terminal for
restaurants
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|
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MICROS
Workstation 4-LX Terminal
|
|
Windows
CE POS terminal for restaurants-enhanced version of Workstation
4
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MICROS
2010 PC Workstation
|
|
PC
based POS terminal for restaurants
|
|
|
|
MICROS
Keyboard Workstation Terminal
|
|
Windows
CE POS terminal used in large complex foodservice, leisure and
entertainment venues
|
|
|
|
JTECH
Paging Products
|
|
Suite
of paging products
|
|
|
|
MICROS
Kitchen Display System
|
|
Hardware
for kitchen display
systems
|
Retail Products
|
|
Description
|
|
|
|
Software
|
|
|
|
|
|
Store
21 Store Management System
|
|
POS
retail software product targeted for specialty
retailers
|
|
|
|
Tradewind
Store Management System
|
|
POS
retail software product targeted for stores with high volume
transactions
|
|
|
|
Xstore
Management System
|
|
Java
based POS retail software product
|
|
|
|
MICROS
Enterprise Merchandising
|
|
Java
based, centrally hosted merchandising application that manages inventory
throughout a chain and provides reporting and analytical
functions
|
|
|
|
Home
Office Business Intelligence Suite
|
|
Suite
of software products that analyzes, manages and reports on business
activities at the store level for corporate control (which includes XBR
Loss Prevention)
|
|
|
|
Gift
Cards Software
|
|
Software
product that manages a retailer’s gift card program
|
|
|
|
CWDirect
Cross Channel Order Management System
|
|
Software
that manages orders across multiple methods of ordering (phone, kiosk,
Internet, etc.)
|
|
|
|
CWLocate
Merchandise Location System
|
|
Software
that enables a retailer to locate inventory across multiple
locations
|
|
|
|
CWCollaborate
|
|
Software
that connects retailers with suppliers to efficiently manage inventory and
reorder levels
|
|
|
|
Open
Commerce Platform
|
|
Web
site development, management, hosting and ecommerce
applications
|
|
|
|
Creations
|
|
Integrated
life cycle and supply chain software for retail operations that allows
tracking
of inventory from a supplier to
POS
|
Hotel
Information Systems
For the hotel and resort industry, we
develop, distribute, and support a complete line of hotel software products and
services. The hotel information systems include PMS, sales and
catering systems, CRS, customer information systems, revenue management systems,
and an Internet/Global Distribution System based hotel reservation service
called myfidelio.net. We also provide installation and end-user
training services, and support services (including help desk) for our various
software products. MICROS markets its hotel products under brand
names such as Opera and Fidelio.
Globally, there are approximately
26,000 active MICROS PMS applications installed, which includes some sites using
PMS products for which MICROS has ceased ongoing development (although in many
instances we continue to provide limited support services to those
sites). Most of the hotels using a MICROS PMS have also installed
other MICROS property-specific modules and applications; additionally, there are
over 2,000 hotels running various MICROS property-specific modules and
applications without a MICROS PMS.
The PMS software provides for hotel
room check-in and checkout, reservations, guest accounting, travel agent
accounting, and engineering management. The PMS software also
interfaces to central reservation systems, to on-line travel services (also
known as alternative distribution services, e.g., Expedia), and to global
distribution systems (e.g., Sabre, Galileo, Amadeus and
WorldSpan). The sales and catering software enables hotel sales staff
to evaluate, reserve and invoice meetings, banquets and related events for a
property. The CRS software enables hotels to coordinate, process,
track, and analyze hotel room reservations at a central facility for electronic
distribution to the appropriate lodging site. The customer
information system software enables hotels to efficiently capture and track
relevant guest information. The revenue management system software
enables hotels to manage room rates, occupancy, and the mix of business between
corporate and transient customers. We also offer an Internet-based
hotel reservation service via our myfidelio.net service. This service
enables corporations, tourist representation services, and consumers to reserve
rooms and manage reservations directly with designated hotels. This
service also enables those hotel properties without internal reservation
capabilities to outsource to us the maintenance of their connectivity to the
global distribution systems and certain alternative distribution
systems.
We market
a comprehensive suite of hotel software products under the Opera brand
name. Opera includes modules for property management, central
reservations, customer information systems, sales and catering, revenue
management, sales support, data mining, financial statements, condominium
reservations and accounting, golf reservations, spa management, and quality
management. We also offer a module that enables guest check in and
check out, and other interactive features, via kiosk.
In addition to industry standard PCs,
the Opera platform will also run on large PC servers. Opera runs on
two operating systems: Microsoft Windows
®
(Server
and XP) and IBM AIX
®
, and
uses an Oracle
®
database.
We
believe that the Opera software suite is an important product line for our
continued growth in the hotel information systems market, because we believe it
reflects the future direction of PMS technology for us and the industry, and
because it has been a material source of our revenue growth within the hotel
industry. Opera is written on current architecture, using an Oracle
database; it is highly configurable, adapted for use in multiple countries, and
fully integrated with modules, features and functions that we believe are
desirable to the hospitality industry. Over 140 hotel chains have
implemented Opera, many of which are in the midst of multi-year
rollouts.
We also offer limited versions of the
Opera property management system called Opera Xpress, OperaLite, and
Operetta. These products enable smaller properties to deploy the
Opera PMS, but at a lower price and with more limited product
features. As of June 30, 2010, approximately 16,000
hotel sites have
installed either Opera, OperaXpress PMS, OperaLite, or Operetta.
Opera’s software architecture enables
the product to be deployed either on-premises or hosted in an off-site
location. We offer hosting services for hotel customers in various
data centers around the world (Ashburn and Manassas, Virginia; Buenos Aires,
Argentina; Frankfurt, Germany, and Singapore) with the application accessed via
Internet or similar high speed connections. Currently, there are over
3,000 hotels running various Opera applications for which we provide hosting
services.
In addition, we market a suite of hotel
software products (PMS and other modules) under the Fidelio Version 7.0 brand
name. Fidelio Version 7.0 uses the Microsoft Windows
®
graphical user interface and runs on an Oracle
®
database. As of June 30, 2010, over 3,500 hotels were using Fidelio
Version 7.0.
Furthermore, we market a PMS product
under the brand name Fidelio Version 8 primarily in Europe. This
product, which was entirely developed in and currently supported from Europe,
contains certain Internet-based features and uses the Windows
®
operating system with an Oracle
®
database. The product is designed to meet the needs of independent
hotel operators and smaller chains based in Europe. The product is installed in
over 2,750 hotel sites as of June 30, 2010.
Through
our subsidiary Fidelio
Cruise, we market the Fidelio SPMS Cruise product, which is a PMS product for
the cruise industry. Fidelio Cruise’s PMS enables cruise operators to manage
passengers, visitors, groups and crew information at various stages from
check-in to check-out, invoicing, credit card handling with online
functionality, safety and security, and automated check-in with picture taking
for passengers, crew, and visitors. Through the Fidelio Cruise SPMS
software, cruise lines can monitor all financial transactions on board and
operate a central accounting and invoicing system for each passenger and crew
member. Furthermore, the software maintains the count of passengers
and staff on-board, as required by international industry
regulations. Additional Fidelio Cruise modules support the operation
of health spas, on-board MICROS point-of-sale systems, business centers, shore
excursions, medical centers, and casinos onboard.
Fidelio Cruise introduced in fiscal
2010 a new product, the Fidelio Cruise Crew Management System. This
product supports the shore side and shipboard crew resource operations for a
cruise ship.
Fidelio Cruise software is installed on
board 218 cruise ships. Customers include: Carnival Cruise Lines,
Aida Cruises, Cunard Line, Fred Olsen Line, Holland America Line, MSC
Cruises, Norwegian Cruise Line, P&O Cruises UK, Pullmantur, Oceania, Regent
Seven Seas Cruises, Royal Caribbean International and Silversea
Cruises.
On December 31, 2009 MICROS acquired
TIG Global LLC (“TIG Global”) of Chevy Chase, Maryland. TIG Global provides
Internet based on-line marketing related services to hotels. TIG
Global’s customer base is currently located largely in North
America.
Restaurant
Information Systems
Our restaurant systems include
full-featured POS applications, kitchen product applications, marketing
applications, and hardware. Most of the products are designed to
operate on industry standard PCs. Our products for order entry
operate on either industry standard PCs or proprietary terminals with additional
functionality and design appropriate for foodservice environments, including
three types of proprietary intelligent terminals that we developed and
designed.
Hardware
The workstations we have designed, and
that we currently market and sell, are the Workstation 5A, Workstation 4-LX and
Workstation 2010. We also integrate other hardware devices (e.g.,
printers, cash drawers, handheld order entry and credit card remote payment
terminals, digital menu boards, kitchen control systems and pole displays) into
our complete product offerings.
Workstation 5A is a PC based POS
terminal using Microsoft’s Embedded CE 6.0 and POSReady 2009 operating systems.
The terminal is based upon the successful Workstation 4 and Workstation 5 POS
terminals, which we previously marketed. Workstation 5A incorporates
a faster microprocessor and more advanced security capabilities than Workstation
5, as well as a 15” touch display. Key design elements of MICROS’s PC
workstations, which Workstation 5A builds upon, are the encased nature of the
screen, special materials to withstand various levels of temperature and
humidity, more efficient energy use, and sound capabilities.
Workstation 4-LX is a thin-client POS
terminal, using Microsoft’s Windows
®
CE
operating system. The terminal has standalone resiliency, which means
that even if the system server malfunctions, the POS terminal can continue to
function and store data until the server is operational. Workstation
4-LX is an updated version of our Workstation 4 that has a faster microprocessor
and other improvements in memory management and data recovery as compared to the
prior model.
The
MICROS 2010 Workstation is a high-performance POS terminal designed to run our
restaurant applications and other third party PC-based software
applications. The product uses an Intel
®
Pentium
chip architecture. It can be configured to accommodate various memory
and storage requirements. The product supports several Microsoft operating
systems and Linux.
We also
market a product named the Keyboard Workstation 270. This product
enables orders to be entered into the MICROS
S
i
mphony
and 9700 HMS (software products
that are described below) via a lower cost, durable workstation with a keyboard
interface in lieu of a touchscreen. The Keyboard Workstation is used
primarily in institutional foodservice environments, convention centers, and
sports complexes.
The Workstation 5A, Workstation 4-LX,
2010 Workstation, and the Keyboard Workstation 270 are all manufactured for us
by the Venture Group of Singapore (
“Venture Group
”
, formerly GES
Singapore Pte. Ltd.), a third party contract manufacturing company.
Through our JTECH subsidiary, we offer
pagers, wireless systems, alert software, and related products (all manufactured
for us by third party contract manufacturers) for use in restaurants, retail,
medical, and other environments. JTECH primarily resells MICROS branded hardware
to its customers.
Additionally, we resell various other
hardware products, including personal computers, servers, printers, network
cards, and other related computer equipment. We maintain a global,
non-exclusive preferred provider agreement with Hewlett Packard Corporation
(HP). This relationship enables us to resell HP personal computers,
printers, and networking equipment on a global basis.
Software
Our main restaurant POS software
systems are the MICROS 9700 Hospitality Management System (“HMS”),
S
i
mphony
, the MICROS
3700 POS system, Hospitality Solution’s Profit Series, and the MICROS e7
Series. These systems provide transaction control for table service,
quick service and large foodservice and entertainment venues.
Leisure and Entertainment
Restaurants
The MICROS 9700 HMS is designed for
larger leisure and entertainment venues, which include resorts, casinos, airport
and other travel-related food service concessions, stadiums/arenas, theme parks,
table service and quick service restaurants in hotels, and larger stand-alone
restaurants. The MICROS 9700 HMS product has an open systems
architecture running on Microsoft’s Windows
®
2003
operating system and either Microsoft SQL Server 2005 or Oracle 10g
databases. The product can be deployed on site in a
client-server configuration or on a multi-property configuration where a remote
server can address multiple restaurant operations.
Table Service and Quick Service
Restaurants
The MICROS 3700 POS is designed for
table service and quick service restaurants. It has an open systems
architecture using Microsoft’s Windows
®
XP
operating system and a Sybase
®
relational database, and can run on standard PCs or proprietary
workstations. It uses a color touch screen with a Microsoft
Windows
®
based
graphical user interface.
We have developed and we market a suite
of back office and operation focused software solutions that extend beyond
POS. The suite is called the MICROS Restaurant Enterprise Series
(“RES”). RES is an important component of our strategy to fully
integrate point-of-sale transaction processing with other restaurant operational
and management functions. The MICROS RES software solutions include
point-of-sale transaction control, restaurant operations, data analysis, and
communications. The POS software comprises the front-end application
for the RES system. The restaurant operations modules include
inventory, product forecasting, labor management, financial management, gift
cards, and enterprise data management. One of those modules is the
Kitchen Display System, which displays food orders and offers additional
reporting capabilities on restaurant service. Another component is
MICROS RES Kiosk, which enables customer information and self-ordering on
third-party kiosks or other hardware. All of these modules are
designed to operate at a single restaurant site.
For management of multiple restaurants,
MICROS RES includes a suite of software products called Enterprise
Management. This suite enables data to be transmitted to a remote
site (e.g., the headquarters of a restaurant chain) for data collection and
analysis. Additionally, pricing and menu changes can be made from a
remote site and downloaded to specified restaurant locations.
We market a POS system called MICROS e7
mainly to smaller restaurants around the world. This product runs on the MICROS
Workstation 5 and uses the Microsoft Windows
®
CE
Operating system.
Through our HSI division, we market the
HSI Profit Series POS primarily to table service restaurant customers in North
America. The product contains a wide array of POS
features.
Enterprise Enabled Point of
Service
S
i
mphony is an
enterprise-enabled POS product. S
i
mphony’s service-oriented
architecture and centralized configuration allows for a flexible deployment
model that can be molded to meet a hospitality industry customer’s
requirements. It is capable of operating at large, single site venues
such as airport and other travel-related food service concessions, casinos,
theme parks, and resorts as well multi-unit quick service and table service
restaurant operations.
The enterprise S
i
mphony database is supported
either by Microsoft SQL Server or Oracle. The S
i
mphony client utilizes
Microsoft’s Windows Presentation Foundation and Silverlight technologies to
provide a user interface with extensive features, and the ability to create
highly tailored ordering and presentation processes. The
functionality within the client can be extended through the addition of custom
.NET assemblies.
In addition to the extensive feature
set and extensibility capabilities, S
i
mphony enables customers to
reduce significantly the costs associated with a traditional multiple property
POS solution when deployed as an enterprise solution, The S
i
mphony services can be run
from the workstations which eliminates the need to manage a back office
server. Software deployment for new properties and upgrades is
controlled and managed from the enterprise, thus eliminating the need to send
staff to every store for these tasks.
Centrally Hosted
Applications
Our design architecture enables
existing users of many MICROS POS and Hospitality Solutions International’s
products to access new technologies and third party software applications in
conjunction with their existing MICROS POS systems. In addition, many
MICROS restaurant information system products interface with various back office
accounting and property management systems, including our hotel PMS
products.
We developed and market an
Internet-based portal product called “mymicros.net.” The mymicros.net
posts restaurant transaction POS detail to a centralized data warehouse in near
real time. This product enables the customer to view reports and
charts for a single site, a group of restaurants, or the entire enterprise from
any location that has an Internet connection. In addition,
mymicros.net incorporates additional products for inventory management, labor
scheduling and control, gift cards, loyalty cards and other marketing programs.
The mymicros.net software product can either be purchased via a perpetual use
license or by an annual or multi-year “software as a service” subscription
contract. The HSI division also markets a portal called
“myhsi.net.” The product’s functionality is similar to the
mymicros.net portal, but is designed for use with the HSI POS
product.
We host these applications in the same
data centers where Opera is hosted. As of June 30, 2010, we hosted
applications supporting approximately 12,800 restaurants.
Retail
Information Systems
Through our MICROS Retail group of
subsidiaries (“MICROS Retail”), we market retail store software automation
systems and business intelligence applications. The retail store
systems are called Store21 Store Management System (“Store21”), Tradewind Store
Management System (“Tradewind”) and Xstore Store Management System
(“Xstore”). Store21 is a POS product designed for specialty
retailers, while Tradewind is a POS product targeted at larger format stores and
at high transaction volume stores. The products operate on
Microsoft’s Windows
®
NT and
2000 and 2003 operating systems and use a Sybase
®
database. Both products can be integrated with the retailer’s back
office systems, and we also offer certain additional back office,
communications, and reporting modules for use with Tradewind and
Store21.
Xstore is our next generation retail
POS software system. It runs on the Sun Microsystems
®
Java
®
operating system, and its architecture enables it to be integrated to both
Windows and Linux-based back office systems. Like Store21 and
Tradewind, its predecessor products, Xstore is a front-end POS software system
that may be integrated with the retailer’s back office
systems. Xstore is highly customizable by the customer, and is
designed to respond to the trend among large retailers to move to Linux-based
systems. Xstore is designed to be able to be run in a Windows or a
Linux environment, while Store21 and Tradewind, as currently designed, can
operate only in a Windows
®
environment.
We also
offer the MICROS Retail Home Office Business Intelligence Suite for retail
stores, which includes loss prevention (marketed under the trade name “XBR”),
customer relationship management, gift cards (marketed under the trade name
“Relate”), and audit control (marketed under the trade name “Balance”). We also
offer XBR to our restaurant customers via MICROS provided centrally hosted or
self-hosted environment.
All of these applications and systems
run on both industry standard PCs and specially designed PC-based POS terminals
manufactured by IBM, MICROS, Dell, and NCR.
MICROS Retail offers an eCommerce
platform with extensive features, marketed under the trade name Open Commerce
Platform, as well as creative and design services to help customers create
custom websites.
MICROS Retail also offers software and
services that enable a retailer to manage customer purchase transactions across
multiple touch-points. Specifically, these applications and services
enable a merchant to efficiently handle customer transactions from a store, the
Internet, catalog phone-in orders, call centers, kiosks, and wireless
devices. The solutions enable the merchant to provide the customer
with full transparency through the purchasing process, e.g., research from one
channel, purchasing from a second channel and implementing a return or exchange
through a third channel.
MICROS Retail also has developed and
distributes Creations, a fully integrated lifecycle management and supply chain
traceability product. Lifecycle management refers to the ability to
track and manage inventory from the manufacturer through the point of
distribution. Creations customers, which are mostly located in the
U.K. include accounts such as Tesco, Sainsbury’s, Wm Morrison, Bodyshop, and
Booker. The product has been introduced into North America with
primary users being Sobeys and Fresh and Easy retail chains.
Services
We provide a wide range of services to
our customers. Our services include system installation, operator and
manager training, on-site hardware maintenance, customized software development,
application software support, credit card software support, systems
configuration, network support and professional consulting. We also
offer software-hosting capabilities.
We
provide field hardware and software maintenance via a combination of direct and
indirect channels – authorized U.S. dealers and international
distributors. The field hardware maintenance is provided mainly to
customers using MICROS POS hardware and software systems. Depot field
maintenance is also provided. We sometimes contract with PC
manufacturers to provide either first or second line support for PC servers for
hotel, restaurant and retail customers.
We operate several help desks around
the world. There is a 24 hours per day, seven days a week (24/7) help
desk in our Columbia, Maryland headquarters. We also maintain other
24/7 regional and product specific help desks in the following
locations:
|
·
|
Galway,
Ireland – primarily for customers in Europe, Africa, and the Middle
East
|
|
·
|
Buenos
Aires, Argentina – primarily for customers in Latin
America
|
|
·
|
Singapore
– primarily for customers in the Asia-Pacific
region
|
|
·
|
Cleveland,
Ohio – for MICROS Retail products and
services.
|
|
·
|
Scottsdale,
Arizona – for the Hospitality Solutions International
products
|
|
·
|
Westborough,
Massachusetts – for the CommercialWare and eOne
products
|
|
·
|
Ann Arbor, Michigan – for MICROS’s Fry, Inc.
subsidiary
|
We also operate other more limited help
desk operations, including the myfidelio.net and Fidelio Cruise support desks in
Hamburg, Germany, the Fidelio Cruise support desk in Fort Lauderdale, Florida,
and the JTECH help desk in Boca Raton, Florida.
The help desks receive support calls
from customers and either address them telephonically or on-line, or, where
appropriate, dispatch a service call to the appropriate local service
provider. Internationally, in-country support is provided by the
local sales entity, which may be a MICROS subsidiary or an authorized
independent distributor. Our corporate customer support center
provides back-up support for our regional centers in Buenos Aires, Singapore,
and Galway, and our research and development operation in Naples, Florida,
provides higher-level support for the hotel software products. The
regional support centers also provide back-up support and guidance for local and
in-country support providers.
We operate data centers in Ashburn and
Manassas, Virginia, Chicago, Frankfurt, Buenos Aires, and Singapore in
conjunction with third-party vendors to serve as hosting centers for customers
deploying our various hosted and application service products. We
view hosting as an important strategic thrust of our business as demand shifts
from applications being deployed on premise of customers to centrally hosted
applications.
We offer web site development and
portal management for retail customers through MICROS Retail’s Fry and eOne
Group divisions. Specifically, we can develop and manage a customer’s
web site for ordering, sales promotion, and marketing.
Our TIG Global subsidiary offers
Internet based marketing services, mainly to hotels.
Services are a critical component of
our business. Service revenue, which is comprised of software
database and configuration programming, installation, training, in-field
support, help desk, custom software development and maintenance service
contracts, constituted approximately 66.4% ($607.2 million) of our total revenue
in fiscal year 2010 compared to approximately 62.2% ($565.0 million)
of our total revenue in fiscal year 2009 and approximately 55.5% ($529.4
million) in fiscal year 2008.
Maintenance service contracts, which
include field service, application hosting, depot hardware maintenance, and
software support, are a significant component of our service
offerings. Revenues for service maintenance contracts were
approximately $354.7 million for fiscal year 2010, approximately $312.8 million
for fiscal year 2009 and, approximately $293.9 million for fiscal year
2008. Service maintenance contract revenue is included in our service
revenue (described above).
SALES,
MARKETING AND DISTRIBUTION
We consider our direct and indirect
global distribution network to be a major strength and competitive
advantage. This network has been built over the past 33
years. We (including our various subsidiaries), our U.S.-based
dealers, and our international distributors work closely together in seeking to
identify new customers, products, services and markets, as well as to serve our
existing customer base with enhanced products and services.
Our restaurant products and services
are sold primarily through three channels: (i) the Direct Sales Channel,
comprised of our sales distribution network consisting of approximately 82
wholly or majority-owned subsidiaries and branch offices; (ii) the MICROS Major
Accounts program directed to designated regional, national, and international
customers; and (iii) the Indirect Sales Channel, an independent sales
distribution network consisting of approximately 51 domestic dealers
and 37 international
distributors.
Our hotel products and services are
sold through our direct sales force and through international distributors, many
which also sell our restaurant products and services.
Our
retail products and services are sold primarily through our direct sales force
in the United States and numerous company owned international
subsidiaries. MICROS Retail has several distributors which sell
certain of its products.
Foreign sales, including export sales
from the United States, accounted for approximately 51.9%
(approximately $474.5 million) of our total revenue in fiscal year 2010, 52.1%
(approximately $473.2 million) of our total revenue in fiscal year 2009 and
56.3% (approximately $537.5 million) in fiscal year 2008.
We also sell products used in the
provision of maintenance services, including miscellaneous spare parts, printer
ribbons, paper, printer cartridges, other consumable media supplies, network
products, and printers. We offer these supplies through our direct
sales offices, our dealers and distributors, and, in North America, through a
telephone and on-line service called POS Depot.
RESEARCH
AND DEVELOPMENT
Our products are subject to
technological change. Accordingly, we must continually devote our
efforts toward upgrading our existing products and developing innovative systems
incorporating new technologies. Our products, as well as those of our
competitors, have offered an increasingly wider range of features and
capabilities.
Locations
We conduct our core restaurant POS
product software and hardware development, and also development of our
Internet-based restaurant software products, at our Columbia, Maryland corporate
headquarters. To facilitate rapid responses for various regional
application needs, we also conduct restaurant POS software development in
regional offices located in Sydney, Australia; Neuss, Germany; and
Singapore. Our HSI division conducts restaurant POS product research
and development in its facility in Scottsdale, Arizona. JTECH conducts its
development at its Boca Raton, Florida location. In addition, we
monitor and evaluate software and hardware products and designs created by third
parties, and we have acquired and may in the future acquire ownership,
licensing, or distribution rights to some of those products and designs. We
contract the manufacturing of our POS terminals to the Venture Group of
Singapore. Venture Group also provides certain hardware design
services to us. Our internal hardware design team participates in the
design and development of these units. This team also provides
oversight of the manufacturing process as a means of insuring adherence to
quality standards. See also “Manufacturing and Supplies,”
below.
Development of our hotel property
management systems, sales and catering systems, central reservation systems, and
myfidelio.net, is primarily conducted in Naples, Florida. Additional
development on the Fidelio Version 8.0 suite of hotel products is conducted in
Neuss, Germany. We maintain close relationships with major software
operating and database companies like Oracle, IBM, Novell, Sybase, and
Microsoft. These relationships enable us to incorporate software
changes from these companies into our products. Our international
offices may also conduct specific product enhancement activities to meet
specific interface needs, local requirements, and specific customer
requests.
Product development for MICROS Retail’s
POS products is conducted in Cleveland, Ohio; MICROS Retail’s other products and
services are handled through offices in Westborough, Massachusetts, and Omaha,
Nebraska. MICROS’s Fry, Inc. subsidiary conducts its web site and
ecommerce application development in Ann Arbor, Michigan. MICROS’s
Advance Retail Solutions subsidiary conducts product development in Monterrey,
Mexico. MICROS’s Red Sky Retail units conducts its development in
Nottingham, England.
R&D
facilities
The following table shows the location
of our main research and development facilities and the products addressed at
each facility.
Location
|
|
Products
|
Columbia,
Maryland
|
|
Restaurant
POS software and hardware, Internet-based restaurant
applications
|
Sydney,
Australia
|
|
Additional
restaurant POS software development
|
Neuss,
Germany
|
|
Additional
restaurant POS software development; Fidelio Version 8.
|
Scottsdale,
Arizona
|
|
Restaurant
POS software (HSI only)
|
Boca
Raton, Florida
|
|
Paging
software and hardware development
|
Naples,
Florida
|
|
Hotel
PMS software and other modules, also Internet-based hotel
applications
|
Cleveland,
Ohio
|
|
Retail
POS software development
|
Westborough,
Massachusetts
|
|
Retail
Loss Prevention software development, cross-channel software
development
|
Omaha,
Nebraska
Nottingham,
England
|
|
Retail
web site development and management services
Retail
life cycle management and supply chain traceability
products
|
Ann
Arbor, Michigan
|
|
Retail
web site and ecommerce
development
|
Expenses
Research and development (“R&D”)
expenses consist primarily of labor costs less capitalized software development
costs. A summary of R&D expenditures for the fiscal years ended
June 30, 2010, 2009, and 2008 is set forth in the following table:
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Total
R&D incurred
|
|
$
|
44,672
|
|
|
$
|
43,100
|
|
|
$
|
42,048
|
|
Capitalized
software development costs
|
|
|
(2,443
|
)
|
|
|
(470
|
)
|
|
|
(1,919
|
)
|
Total
R&D expenses
|
|
$
|
42,229
|
|
|
$
|
42,630
|
|
|
$
|
40,129
|
|
COMPETITION
The markets in which we operate are
highly competitive. We believe that there are at least 20 significant
competitors worldwide that offer some form of sophisticated restaurant POS
system, approximately nine that offer competitive POS hardware platforms, over
15 significant hotel systems competitors, and over ten significant retail
systems competitors. We compete on various bases, including product
functionality, service capabilities, price, and geography. We believe
that our competitive strengths include our established global distribution and
service network, our ability to offer a broad array of hardware, software and
service products to the hospitality and retail industry, and our corporate focus
on providing specialized information systems solutions.
Competitors in the restaurant POS
marketplace include: (i) full service providers (hardware, software and
services), such as NCR, Panasonic, Par Technology, Radiant Systems, Sharp and
Torex Retail; (ii) suppliers that mainly provide software, such as Agilysys,
Positouch and Xpient Solutions; and (iii) providers that mainly provide
hardware, such as Casio, Dell, IBM, NCR and Wincor-Nixdorf. There are
also numerous other companies that license their POS-oriented software with
PC-based systems in regional markets around the world.
JTECH’s competitors include Long Range
Systems and certain distributors of Motorola paging products.
Many of our competitors in the hotel
systems market are companies with software designed to run on industry standard
PCs. These companies may have several hotel related software
products, or simply one product for a particular niche. These
competitors include Agilysys, Amadeus Hospitality, Multi-Systems, Newmarket
(sales and catering product only), Northwind, Par Technology (Springer-Miller),
Protel and Softbrands (infor). Our products also compete with
property management systems developed and marketed by major hotel chains for
their corporate-owned operations and franchisees. Internationally, we
generally face smaller, regionally-oriented competitors.
The central reservation system market
is highly fragmented and competitive. Many hotel chains and allied
reservation groups use their own customized central reservation
systems. In addition to these internally developed products, our CRS
products compete with those offered by some of our PMS competitors, e.g.,
Northwind and Par Technology, and with those offered by specialized central
reservation providers, e.g., Amadeus, Pegasus, Trust International/TravelPort,
and Vantis Corporation.
TIG Global competitors include Synxis
(subsidiary of Sabre) and TravelClick. TIG Global currently competes mainly in
North America.
Competitors in the retail market
include Epicor (through its CRS Retail Systems and NSB divisions), Escalate
Retail, JDA Software, Oracle (through its 360 Commerce division), and SAP
(through its Triversity division) among many others. Internationally,
MICROS Retail generally competes with smaller, regionally-oriented competitors.
Fry competes against several companies such as GSI Commerce and Art Technology
Group.
MANUFACTURING
AND SUPPLIES
Our manufacturing program seeks to
maintain flexibility and reduce costs by outsourcing key products and
subassemblies. Our primary POS platforms, Workstation 5A, Workstation
5, Workstation 4 LX, and 2010 Workstation, are manufactured by the Venture
Group.
Our contract with Venture Group is
subject to automatic annual renewal unless either party elects to terminate the
agreement at the end of the term then in effect by providing notice to the other
party at least three months before the end of such term. In addition
to other termination rights specified in the contract, either party may
terminate the contract for convenience (i.e., with or without cause) by
providing 120 days’ prior notice of termination to the other
party. While historically we have enjoyed very good relations with
Venture Group, if it were to exercise its non-renewal or termination rights
under the Agreement or otherwise cease to manufacture our products, we believe
we could readily replace Venture Group with other contract manufacturers or
resell appropriate third party hardware products in lieu of those manufactured
by Venture Group.
Venture Group performs certain warranty
and post-warranty repairs on equipment that it manufactures for MICROS at its
facilities in Singapore and in Lowell, Massachusetts. In addition, we
maintain a repair capability for certain products in our distribution facility
in Hanover, Maryland. We also perform repairs at certain of our
direct and subsidiary offices worldwide, and, additionally, we contract with
third parties to provide repair services.
JTECH’s paging and related products are
largely manufactured by several contract manufacturers in China and Venture
Group. JTECH conducts final assembly of its paging and related
products, including the installation of the applicable software, in its Boca
Raton, Florida facility.
Material sourcing is based on
availability, service, cost, delivery and quality of the purchased items from
domestic and international suppliers. Some items are custom
manufactured to our design specifications. We believe that the loss
of our current sources for components would not have a material adverse effect
on our business since other sources of supply are generally
available. We believe that we maintain good relationships with our
suppliers.
EMPLOYEES
As of June 30, 2010, we employed 4,646
full-time employees. The table below presents employees by
geographical region, expressed both as a headcount and as a percentage of total
employees:
By Geographical Region
|
|
North
America
|
|
|
Europe/Africa
Middle East
|
|
|
Asia/
Pacific
|
|
|
Latin
America
|
|
|
Total
|
|
Employees
|
|
|
2,427
|
|
|
|
1,478
|
|
|
|
512
|
|
|
|
229
|
|
|
|
4,646
|
|
As
% of total
|
|
|
52.2
|
%
|
|
|
31.8
|
%
|
|
|
11.0
|
%
|
|
|
5.0
|
%
|
|
|
100.0
|
%
|
About 850 employees (35%) of the North
America-based employees work out of our three Maryland locations: our
headquarters building in Columbia, Maryland, our Hanover, Maryland distribution
center, and our TIG Global subsidiary in Chevy Chase, Maryland.
The table below presents information,
as of June 30, 2010, regarding employees organized by functional
skills:
By Functional Skills
|
|
Sales &
Marketing
|
|
|
Customer
Support
|
|
|
Product
Development
|
|
|
Admin./
Finance
|
|
|
Operations
|
|
|
Total
|
|
Employees
|
|
|
2,438
|
|
|
|
1,195
|
|
|
|
590
|
|
|
|
324
|
|
|
|
99
|
|
|
|
4,646
|
|
As
% of total
|
|
|
52.5
|
%
|
|
|
25.7
|
%
|
|
|
12.7
|
%
|
|
|
7.0
|
%
|
|
|
2.1
|
%
|
|
|
100.0
|
%
|
We are not a party to any collective
bargaining agreements. None of our employees are represented by a
labor union, except in those countries where representation is mandated by law,
such as France, Germany and Spain. We use certain suppliers whose
employees may be represented by labor unions. We believe that we
maintain good relations with our employees.
EXECUTIVE
OFFICERS OF THE REGISTRANT
Name
|
|
Position
|
A.
L. Giannopoulos
|
|
Chairman,
President and Chief Executive Officer
|
Bernard
Jammet
|
|
Executive
Vice President, Latin American Region
|
Jennifer
Kurdle
|
|
Executive
Vice President, Chief Administrative Officer
|
Kaweh
Niroomand
|
|
Executive
Vice President, Europe-Africa-Middle East region
|
Thomas
L. Patz
|
|
Executive
Vice President, Strategic Initiatives, and General
Counsel
|
Stefan
Piringer
|
|
Executive
Vice President, Asia-Pacific region
|
Peter
J. Rogers, Jr
|
|
Executive
Vice President, Investor Relations and Business
Development
|
Cynthia
A. Russo
|
|
Executive
Vice President and Chief Financial
Officer
|
A. L. Giannopoulos
, 70, has
been the Company’s President and Chief Executive Officer since May 1993, and the
Company’s Chairman of the Board since April 2001. He has been a
Director of the Company since March 1992. Before 1992, Mr.
Giannopoulos served in a variety of positions for Westinghouse, most recently as
General Manager of the Westinghouse Information and Security Systems
Divisions. Mr. Giannopoulos is a graduate of Lamar University with a
Bachelor of Science degree in Electrical Engineering.
Bernard Jammet
, 52, has been
the Company’s Executive Vice President, Latin American Region since January
2001. Previously, Mr. Jammet served the Company in various
capacities. He first joined the Company in July
1984. Before joining the Company, Mr. Jammet was employed with the
former MICROS distributor for France. Mr. Jammet is a graduate of the
Hotel School of Lausanne, Switzerland, with a Masters degree in Hotel
Administration.
Jennifer Kurdle
, 43, has been
the Company’s Executive Vice President, Chief Administrative Officer since July
2008. From 2005 until 2008, Ms. Kurdle was the Company’s Executive
Vice President, Leisure & Entertainment, and held the position Vice
President, Leisure & Entertainment from 2000 to 2005. Before
2000, Ms. Kurdle served the Company various capacities. Ms. Kurdle
first joined the Company in 1990. Ms. Kurdle is a graduate of
Fairmont State University.
Kaweh Niroomand
, 57, has
been the Company
’
s Executive Vice
President, Europe-Asia-Middle East region since 2009. From 2005 until 2009, Mr.
Niroomand was the President of MICROS Europe, Africa and Middle East
(EAME). In prior positions with MICROS, Mr. Niroomand was Executive Vice
President, EAME and Managing Director of MICROS-Fidelio Software Deutschland
GmbH. Mr. Niroomand first started with Fidelio Software GmbH in
1993. Mr. Niroomand is a graduate of the Technical University in Berlin
with a degree in Civil Engineering.
Thomas L. Patz
, 50, has been
the Company’s Executive Vice President, Strategic Initiatives, and General
Counsel since January 2000. Previously, Mr. Patz served the Company
in various legal capacities. Mr. Patz first joined the Company in
August 1995. Mr. Patz is a graduate of Brown University and the
University of Virginia School of Law. Mr. Patz is a member of the
Maryland Bar.
Stefan Piringer
, 45
,
has been the Company’s
Executive Vice President, Asia-Pacific region, since 2009. From 1998 until
2009, Mr. Piringer was President Asia-Pacific region for the Company.
Previously, Mr. Piringer served the Company in various sales &
marketing capacities. Mr. Piringer first joined the Company in
1994. Mr. Piringer is a graduate of the Tourism & Hotel Management
School of the Chamber of Commerce of Vienna, Austria, and holds the degree of
Hotelkaufmann.
Peter J. Rogers, Jr.
, 55, has
been the Company’s Executive Vice President of Investor Relations and Business
Development since November 2007. From 1996 through November 2007, Mr.
Rogers was the Company’s Senior Vice President of Investor Relations and
Business Development. Previously, Mr. Rogers served the Company in various
marketing and business management capacities. Mr. Rogers joined the
Company in 1987. Mr. Rogers is a graduate of the University of
Pennsylvania and New York University Stern Graduate School of
Business.
Cynthia A. Russo
, 40, has been
the Company’s Executive Vice President and Chief Financial Officer since April
1, 2010. From November 2007 until April 2010, Ms. Russo was the
Company’s Senior Vice President and Corporate Controller. Ms. Russo
previously served the Company in various capacities. Ms. Russo first
joined the Company in January 1996. Ms. Russo is a graduate of James
Madison University. She is a Certified Public Accountant and a
Certified
Internal Auditor.
FOREIGN
SALES AND FOREIGN MARKET RISK
We recorded foreign sales, including
exports from the United States, of approximately $474.5 million
during fiscal year 2010
to customers located primarily in Europe, Asia and Latin
America. Comparable sales in fiscal years 2009 and 2008 were
approximately $473.2 million
and $537.5 million,
respectively. See Note 17 “Segment Information” in the Notes to
Consolidated Financial Statements as well as Item 7 (Management’s Discussion and
Analysis of Financial Condition and Results of Operations) in this report for
additional geographic data.
Our international business and presence
expose us to certain risks, such as currency, interest rate and political
risks. With respect to currency risk, we transact business in
different currencies primarily through our foreign subsidiaries. The
fluctuation of currencies impacts sales and
profitability. Frequently, sales and the costs associated with those
sales are not denominated in the same currency.
We transacted business in 39 currencies
in fiscal years 2010 and 2009 compared to 36 in fiscal year 2008. The
relative currency mix over the past three fiscal years was as
follows:
|
|
Fiscal Year Ended June 30,
|
|
|
|
% of Reported Revenues
|
|
|
Exchange Rates
|
|
Revenues by currency
(1)
:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
United
States Dollar
|
|
|
53
|
%
|
|
|
53
|
%
|
|
|
49
|
%
|
|
|
1.0000
|
|
|
|
1.0000
|
|
|
|
1.0000
|
|
European
Euro
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
22
|
%
|
|
|
1.2229
|
|
|
|
1.4029
|
|
|
|
1.5744
|
|
British
Pound Sterling
|
|
|
7
|
%
|
|
|
7
|
%
|
|
|
9
|
%
|
|
|
1.4939
|
|
|
|
1.6454
|
|
|
|
1.9919
|
|
Singapore
Dollar
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.7146
|
|
|
|
0.6904
|
|
|
|
0.7350
|
|
Australian
Dollar
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
0.8416
|
|
|
|
0.8058
|
|
|
|
0.9587
|
|
Swiss
Franc
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
0.9279
|
|
|
|
0.9203
|
|
|
|
0.9788
|
|
Canadian
Dollar
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
0.9393
|
|
|
|
0.8597
|
|
|
|
0.9806
|
|
Mexican
Peso
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
0.0773
|
|
|
|
0.0759
|
|
|
|
0.0970
|
|
Sweden
Krona
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.1282
|
|
|
|
0.1296
|
|
|
|
0.1660
|
|
All
Other Currencies
(2)
|
|
|
11
|
%
|
|
|
11
|
%
|
|
|
10
|
%
|
|
|
0.1469
|
|
|
|
0.1433
|
|
|
|
0.1645
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated
using weighted average exchange rates for the fiscal
year.
|
|
(2)
|
The
“% of Reported Revenue” for “All Other Currencies” is calculated based on
the weighted average twelve month exchange rates for all other currencies.
The “Exchange Rates to U.S. Dollar” for ‘All Other Currencies’ represents
the weighted average June 30, 2010 exchange rates for all other
currencies. Weighting is based on the twelve month fiscal year
revenue for each country or region whose currency is included in the “All
Other Currencies” category.
|
A 10% increase or decrease in the value
of the Euro and British pound sterling in relation to the U.S. dollar in fiscal
year 2010 would have affected total revenues by approximately $25.1 million, or
2.7%. The sensitivity analysis assumes a weighted average 10% change
in the exchange rate during the year with all other variables being held
constant. This sensitivity analysis does not consider the effect of
exchange rate changes on either cost of sales, operating expenses, or income
taxes, and accordingly, is not an indicator of the effect of potential exchange
rate changes on our attributable to MICROS Systems, Inc. common
shareholders.
We are also subject to interest rate
fluctuations in foreign countries to the extent that we elect to borrow in the
local foreign currency. In the past, this has not been an issue of
concern as we have the capacity to elect to borrow in other jurisdictions with
more favorable interest rates. We will continue to evaluate the need
to invest in financial instruments designed to protect against interest rate
fluctuations.
Finally, we are subject to, among
others, those environmental and geopolitical risks, and economic, pricing,
financial, and other risks described in Item 1A, “Risk Factors.”
PATENTS
AND TRADEMARKS
We hold six patents through our JTECH
subsidiary. In general, we believe that, historically, our
competitive position has not been materially dependent upon patent
protection. The technology used in the design and manufacture of most
of our hardware products is largely licensed or purchased from third
parties. With respect to our software products, we have historically
relied on nondisclosure agreements and applicable U.S. and foreign copyright and
trademark laws for protection. In the U.S. and in most other
countries, we believe that applicable law has provided and will continue to
provide us with sufficient protection.
There are risks that third party
entities, including competitors, could attempt to misappropriate our
intellectual property. Given these potential risks, we have
implemented procedures to monitor misappropriation of its intellectual
property. If a misappropriation is detected, we pursue appropriate
legal action when we determine that such action is appropriate.
“MICROS”,
“Fidelio”, “Datavantage”, “CommercialWare”, “JTECH”, “Go2Team”, “InStorePlus”,
“Ovation”, “OPERA”, “e7”, “Store21”, “Tradewind”, “Xstore”, “XBR”, “Premise
Pager System”, “TableAlert”, “ServAlert”, “GuestAlert”,
“HostAlert”, “CommPass”, “CWDirect”, “CWCollaborate”, “CWStore”,
“CWLocate”, “CWAnalytics”, “CWData”, “CWIntegrate”, “FRY”, and “Open Commerce
Platform” are registered or unregistered trademarks or servicemarks of the
Company or its subsidiaries. We also own numerous other trademarks
and servicemarks. This Annual Report on Form 10-K also contains
trademarks, trade names and servicemarks of other companies that are the
property of their respective owners.
FLUCTUATIONS
AND CUSTOMERS
Our quarterly operating results have
varied in the past and may vary in the future depending upon various factors,
including the timing of new product introductions, changes in our pricing and
promotion policies and those of our competitors, market acceptance of new
products and enhanced versions of existing products and the capital expenditure
budgets of our customers. Political uncertainty and international
events that often are unpredictable, e.g., terrorist attacks, natural disasters,
and the volatile and unpredictable political climate in the Middle East, are
expected to continue to adversely impact travel and tourism and therefore our
quarterly operating results.
In addition, over the
last two fiscal years, world macroeconomic conditions and tightened credit
markets have resulted in reduced demand from customers
generally. These conditions have made it harder for, and in some
cases may have prevented, some customers from obtaining financing for intended
purchases. We believe that these economic conditions have resulted in
reduced demand for our products and services.
Historically, our business has been
affected by seasonal trends. For example, the European summer
holidays tend to lower our sales volume in the European countries during our
first fiscal quarter, as compared to other quarters. We also
experience a stronger than average sales volume for the retail products and
services in our second fiscal quarter due to the holiday
season. Additionally, with the relative slowdown in corporate buying
at the beginning of the calendar year, which is our third fiscal quarter,
seasonal weakness for the third quarter ending March 31 has been
experienced. Therefore, we believe that sequential quarter-to-quarter
historic comparisons of our results are not necessarily meaningful or indicative
of future performance.
No single customer accounts for 10% or
more of our consolidated revenues. During the three fiscal years
ended June 30, 2010, we have been a party, directly and indirectly, to certain
contracts with the U.S. Federal Government, which contracts contained standard
termination for convenience clauses. Our U.S. Government related
revenue was approximately 0.5%, 0.2%, and 0.3% of our total consolidated revenue
for the fiscal years ended June 30, 2010, 2009, and 2008,
respectively. We do not anticipate any material adverse financial
impact if the U.S. Government elected to exercise its rights under a termination
for convenience clause.
ENVIRONMENTAL
MATTERS
We believe that we are in compliance in
all material respects with applicable environmental laws and do not anticipate
that environmental compliance will have a material effect on our future capital
expenditures, earnings or competitive position with respect to any of our
operations.
BACKLOG
We generally have a backlog of
approximately three months revenue, substantially all of which is cancelable at
any time before shipment of hardware and software or rendering of
services. As of June 30, 2010, 2009 and 2008, the backlog totaled
approximately $338.7 million, $224.0 million and $204.6 million,
respectively. Historically, only an immaterial portion of the backlog
existing as of the first day of the fiscal year does not result in recognizable
revenue in that fiscal year.
AVAILABLE
INFORMATION
We file with the U.S. Securities and
Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, proxy statements, and other documents as
required by applicable law and regulations. The public may read and
copy any materials that we file with the SEC at the SEC’s Public Reference Room
at 100 F Street, N. E., Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330 (1-800-732-0330). The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
SEC. We also maintain an Internet site
(http://www.micros.com). We make available free of charge on or
through our Internet website our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to these reports, as
soon as reasonably practicable after electronically filing those documents with
or furnishing them to the SEC. The information on our website is not
incorporated into and is not a part of this report.
There are a number of risks to which we
are subject. These risks include the following:
1.
|
ENVIRONMENTAL AND GEOPOLITICAL
RISKS.
While we do not sell our products and services
directly to consumers, changes in consumer habits in response to
environmental or geopolitical risks affect demand for our products and
services by the hospitality and tourism
industries.
|
·
Our business is very sensitive to the
threat of terrorism and political uncertainty.
As the
hospitality and tourism industries we serve are highly sensitive to consumer
sentiments caused by world events, we are very vulnerable to downturns in
customer buying habits associated with the threat of terrorist attacks and
uncertain political climates, such as those existing in the Middle East and
parts of Asia.
·
Our business is very sensitive to
environmental and health disasters.
Actual or anticipated
environmental disasters and epidemics, including for example, hurricanes,
tsunamis, and disease will deter and delay purchases of our products by
customers, as concerns about potential or anticipated instances of environmental
or health disasters tend to suppress travel and
tourism. Environmental disasters may also adversely affect our
operations in the distressed areas.
·
Higher oil and gas prices worldwide
could have a material adverse impact on the travel and tourism industries, and
indirectly, on our business.
Material increases in oil and gas
prices tend to reduce discretionary spending by consumers, such as on travel and
dining, as well as on retail spending generally. Reductions in
discretionary spending by consumers adversely affect our customers and,
indirectly, our business. Moreover, increases in oil and gas prices
also directly adversely affect our customer base in other ways. For
example, gas price increases can result in higher ingredient and food costs for
our restaurant customers.
·
We maintain offices in certain parts
of the world that are subject to economic instability, political unrest, and
terrorism, such as the Middle East and Thailand.
The
performance of our offices in these areas will be adversely affected if these
regions become subject to economic declines, political strife or episodes of
terrorism.
2.
|
ECONOMIC,
PRICING AND FINANCIAL RISKS.
|
·
We are subject to the variability of
world economies.
Since a substantial portion of our business
is conducted in foreign countries, a downturn in the economies of foreign
countries could adversely affect our financial results. While, under
certain circumstances, reliance on foreign operations can have a moderating
impact (as one region’s improving conditions may offset another region’s
declining conditions), our foreign businesses nonetheless add a degree of
uncertainty to our planning and forecasting processes.
·
We are subject to the global economic
crisis.
Starting in the summer of 2008, world macro-economic
conditions materially worsened, resulting in the failure of several key global
financial services providers, and a virtual freezing of the credit
markets. These economic conditions resulted in reduced demand from
customers and the inability of some customers to secure financing for intended
purchases. While many economists have noted signs of slow recovery,
and credit markets are improving, the current economic weakness may continue to
result in the reduced demand for our products and services. These
economic conditions may also increase our bad debts despite additional
collection efforts.
·
Our
quarterly financial results 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. We expect the customers with whom we do the largest amount
of business to vary from year to year as a result of the timing of the rollout
of each customer’s system. Further, if a customer delays or
accelerates its delivery requirements, or if a product’s completion is delayed
or accelerated, revenues that we may have expected in a given quarter could be
deferred or accelerated into subsequent or earlier quarters,
respectively. These events could have a meaningful effect on our
quarterly results.
·
Our ability to establish pricing is
subject to rapidly changing market and competitive conditions.
To be
competitive and to avoid losing business on the basis of price, we must evaluate
our pricing routinely. There are instances where we may have to
reduce our pricing to obtain business. Market forces have and will
continue to place pressure on our gross margins and overall
profitability.
·
Our gross margins will vary from
quarter to quarter based upon product mix.
Product mix can
affect our operating results. For example, as we enjoy a higher gross
margin on software than on hardware, our overall gross margin will vary
depending upon the percentage of software licensed and the percentage of
hardware sold each quarter. The difficulty in predicting product mix
on a quarter-to-quarter basis results in uncertainty in projecting gross margin,
and we have experienced a degree of variability in our gross margins on a
quarter-to-quarter basis as a result of changes in product mix.
·
Our non-major account business is
difficult to predict.
Our major account customers (generally
those customers who operate 50 or more locations) have longer sales cycles and
deployments; our non-major account sales have much shorter sales cycles and
shorter deployments. As a significant portion of our business
involves non-major accounts, there is inherent difficulty in predicting buying
patterns. Accordingly, it is much harder to appropriately staff and
prepare for fluctuations in buying demand for non-major-account
customers. This can result in inefficiencies that adversely affect
our operating results.
·
Some of the advanced systems we sell
are very complex and require a high level of technical sophistication, which may
result in increased costs that adversely affect our operating
results.
The costs of the implementation and operation of an
effective service structure capable of addressing increasingly complex software
systems in wildly diverse locations is high and may require us to engage
contractors, who generally have a higher cost structure than that of our own
employees. We incur additional costs due to the complexity of open
systems, which generally incorporate third party software products that may
entail difficult and costly support and service, as well as the difficulty in
implementing, operating, maintaining and supporting centrally hosted systems,
such as central reservation systems, and centrally-hosted property management
systems and reporting systems.
·
We are subject to certain material
cost increases that may be out of our control.
While we
attempt to control third party costs, we have little or no control over certain
material expenses, such as health care costs (which are generally
experience-based) and costs of compliance with new
legislation. Significant increases in any of these expenses could
adversely affect our operating results.
·
We are subject to fluctuations in
foreign currencies and exchange rates.
Because we conduct
significant portions of our business in foreign currencies, we experience
exchange rate fluctuations that can have a significant impact on our reported
results. For example, as much of our European business is transacted
in Euros, our revenue on a consolidated basis will decline if the Euro weakens
relative to the U.S. Dollar and increase if the Euro strengthens relative to the
U.S. Dollar.
·
As a publicly traded company, our
stock price is subject to certain market trends that are out of our control and
that may not reflect our actual operating performance.
We can
experience short-term increases and declines in our stock price due to factors
other than those specific to our business, such as economic news or other events
generally affecting the trading markets.
·
We have encountered risks associated
with maintaining large cash balances.
While we have attempted
to invest our cash balances in investments generally considered to be relatively
safe, we nevertheless confront credit and liquidity risks. For
example, the Company has invested some of its cash in auction rate securities,
which proved to be illiquid when the financial resale markets contracted in
February 2008. Not only may those securities continue to be illiquid,
but there have been some charges taken due to credit losses resulting from our
investments in two of the auction rate securities, and there may be additional
charges taken for losses in the future related to our investments in auction
rate securities. Also, bank failures could result in reduced
liquidity or the actual loss of money held in deposit accounts in excess of
federally insured amounts, if any.
·
Our customers’ requirements are
increasingly sophisticated.
To be able to continue to offer
competitive products and to meet our customers’ requirements, we must
continually develop and update our products. Unexpected costs and
delays in development and implementation, and addressing our commitments to
various customers, could adversely affect our financial results.
·
The development of software is an
inherently difficult process that may result in software bugs that adversely
impact a customer’s business.
While we have a testing and beta
program and protocol that we implement before the general release of any
product, such processes cannot guarantee that the released software will not
have any bugs. Our business could be adversely affected if these
problems are significant and not readily resolvable.
·
The manufacturing of our hardware
platform is performed primarily by a Singapore based third party contract
manufacturer, Venture Group of Singapore (fka GES Singapore) (“Venture
Group”).
While we believe we have a very good relationship
with Venture Group, and while we have not experienced any material manufacturing
problems with Venture Group, we cannot be certain that the relationship will
remain in force, nor can we be certain that Venture Group will not experience
labor or manufacturing challenges in the future, which may include claims of
patent infringement with respect to key product
components. Additionally, Venture Group procures many of its
components from other third parties that could experience manufacturing or labor
issues. We believe that, if our relationship with Venture Group were
to terminate, we could readily replace Venture Group with other contract
manufacturers or resell appropriate third-party hardware products in lieu of
those manufactured for us by Venture Group. However, any disruption
or interruption of the supply of hardware products from Venture Group could
adversely affect our business in the short run.
·
Large customized deployments may be
difficult and may result in cost overruns that are not
recoverable.
We have certain contracts under which we are
required to provide systems and services at a fixed price. We may be
contractually required to absorb costs that may not be recoverable if we
underestimate the amount of work required or if we encounter unanticipated
technical issues. This risk can be pronounced given the complexity of
some of the systems we install and the size and scope of some of the
deployments. Unanticipated costs that are not recoverable could
adversely affect our operations.
·
Our investment in certain
technologies may prove to be unsuccessful and may delay our focus on more
promising technologies.
As we invest significantly in research
and development, there is a risk that we will pursue technology that we
ultimately determine is not marketable or does not achieve the desired
solution. In such an event, we may be required to write off our
investment, which could have an adverse impact on our operating
income. Moreover, if we are delayed in deploying better technologies,
our business also could be adversely affected.
·
Actual or perceived security
vulnerabilities in our software products may result in reduced sales or
liabilities.
Our software may be used in connection with
processing sensitive data (e.g., credit card numbers), and is sometimes used to
store such data. It may be possible for the data to be compromised if
our customer does not maintain appropriate security procedures. In
those instances, the customer may attempt to seek damages from
us. While we believe that all of our current software complies with
applicable industry security requirements and that we use appropriate security
measures to reduce the possibility of breach through our support and other
systems, we cannot assure that our customers’ systems will not be breached, or
that all unauthorized access can be prevented. If a customer, or
other person, seeks redress from us as a result of a security breach, our
business could be adversely affected.
·
Hosting of software applications
presents increased security and liability risks
. As we expand
our software hosting capabilities and offer more of our software applications to
our customers on a hosted basis, our responsibility for data and system security
with respect to data held in the hosting centers increases. While we believe
that our current software applications comply with applicable laws and industry
security requirements, and while we believe that we use appropriate security
measures to reduce the possibility of unauthorized access or misuse of data in
the hosting center, we cannot provide absolute assurance that our hosted systems
will not be breached, or that all unauthorized access can be
prevented. If a security breach were to occur, a customer, regulatory
agency, or other person could seek redress from us, which could adversely affect
our business.
4.
|
RESOURCE
AND PERSONNEL RISKS.
|
·
We could be adversely affected by
vendor labor difficulties.
Some of our vendors may have
employees who are protected by certain labor laws or who may be members of
unions. We could experience unanticipated manufacturing or supply
shortages if any of our key vendors are subject to labor difficulties or work
slow-downs or stoppages.
·
Our inability to hire qualified
personnel, including particularly research & development personnel, could
adversely affect our ability to satisfy customer requirements on an efficient
basis.
Finding qualified technical personnel in all the
localities where our research and development facilities are situated is an
ongoing challenge. If we cannot find appropriate personnel, we risk
delays in satisfying customer demands, or may even lose the opportunity to
provide software to the customer. If we are required to retain a
consultant because we do not have available personnel, development costs would
increase. In general, our inability to recruit and retain appropriate
personnel would adversely affect our business.
·
Our internal control over financial
reporting cannot provide absolute assurance that all frauds will be
detected.
As we have previously disclosed, we discovered
fraudulent activities that occurred in our subsidiary in Japan during the period
from fiscal year 2006 to the second quarter of fiscal year 2010. We
determined that these activities resulted in a cumulative overstatement of
revenues and net income of approximately $6.9 million and $4.9 million,
respectively, over this period. Although the operation of our
i
nternal control system
ultimately led to discovery of the fraudulent activities in our Japanese
subsidiary, the individual involved was able to engage in fraudulent activities
for some time before detection. While we believe our internal control
over financial reporting is effective, a controls system cannot provide absolute
assurance that the objectives of the controls system are met, and no evaluation
of controls can provide absolute assurance that control issues and instances of
fraud, if any, within our company have been detected.
5.
|
LEGAL
AND ACCOUNTING RISKS.
|
·
Although we attempt to protect our
proprietary technology, these protections do not preclude competitors from
developing products with features similar to our products.
We
cannot guarantee that we can effectively preserve the proprietary nature and
competitive advantages of our products, despite our efforts to do so through a
combination of trade secrets, copyright, trademark law, non-disclosure
agreements, and technical measures. Others could attempt to copy what
we have developed, either through legal or illegal means. Moreover,
others have been able to develop competitive products and services that do not
violate our proprietary rights.
·
We are subject to litigation, which
may be costly.
As a company that does business with many
customers, employees, and vendors throughout the world, we are subject to
litigation, including claims made by or against us relating to intellectual
property rights and intellectual property licenses. While we
generally take steps to reduce the likelihood that disputes will result in
litigation and damages, litigation is very commonplace and could have an adverse
effect on our business. As part of the litigation risk, we could be
subject to potentially material adverse jury verdicts. We are
currently subject to an adverse jury verdict in the amount of $7.5 million,
which we have appealed.
·
We are subject to claims by others
that we are infringing their intellectual property
rights.
From time to time we receive letters from entities
that assert that we are infringing a patent. In those instances, we
assess the validity of the claims and the purported patent, and determine
whether a license is appropriate or necessary. If we conclude that a
license is not necessary, there is a risk that we will be sued; we may also face
indirect liability as a result of infringement claims brought against our
customers. While we do not believe that our products and services
infringe any patents or other intellectual property rights, we have from time to
time and may continue to become involved in infringement
litigation. If that occurs, we may incur significant legal expenses
and, if we are found liable, we could be obligated to pay significant damages or
enter into license agreements.
·
Credit card issuers have promulgated
credit card security guidelines as part of their ongoing effort to battle
identity theft and credit card fraud, which may substantially increase our
expenses; breaches of our customers’ credit card security may adversely affect
us.
We continue to work with credit card issuers to assure
that our products and services comply with the credit card associations’
security regulations and best practices applicable to our products and
services. We cannot assure, however, that our products and services
are invulnerable to unauthorized access or hacking. Additionally, we
cannot assure that our customers will implement all of the credit card security
features that we introduce, or all of the protections and procedures required by
the credit card issuers. Our customers may not establish and maintain
appropriate levels of firewall protection and other security
measures. If there is unauthorized access to credit card data that
results in financial loss, there is a potential that parties could seek damages
from us. Additionally, changes in the security guidelines and laws
relating to consumer privacy could require significant and unanticipated
development efforts.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not applicable.
Our worldwide corporate headquarters,
including our executive offices, are located in Columbia,
Maryland. We also conduct sales, marketing, customer support, and
product development activities at this location. We lease the entire
five-story structure, consisting of 247,624 square feet, from Columbia Gateway
Office Corporation, under a lease that, as amended, terminates on February 29,
2016. We sublease a portion of one of the five floors, consisting of
39,459 square feet, to Motorola, Inc. The sublease expires March 10,
2015.
In
addition to over 50 smaller offices, we lease the following larger facilities
(defined, for purposes of this filing, as those locations in which we lease
approximately 10,000 square feet.)
Location
|
|
Approximate
Size
(Square
Feet)
|
|
Use
|
|
Expiration Date
|
|
Additional Comments
|
|
|
|
|
|
|
|
|
|
Columbia,
Maryland
|
|
247,624
|
|
Headquarters
and other functions (see above)
|
|
February
29, 2016
|
|
See
above
|
|
|
|
|
|
|
|
|
|
Hanover,
Maryland
|
|
87,600
|
|
Warehouse,
distribution, light assembly, configuration, manufacturing,
repair
|
|
July
31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland,
Ohio
|
|
70,000
|
|
Sales,
marketing, support, product development
|
|
February
28, 2014
|
|
Cleveland
is the headquarters for the MICROS Retail group
|
|
|
|
|
|
|
|
|
|
Neuss,
Germany
|
|
42,000
|
|
Sales,
marketing, product development, and customer support
|
|
December
31, 2015
|
|
Also
serves as one of the hub offices for Europe, Africa, and the Middle
East
|
|
|
|
|
|
|
|
|
|
Ann
Arbor, Michigan
|
|
35,748
|
|
Sales,
marketing, customer support, product development and product
support
|
|
Ranges
from November 20, 2010 to July 31, 2012
|
|
Ann
Arbor is the headquarters for the Fry, Inc. subsidiary
|
|
|
|
|
|
|
|
|
|
Westborough,
Massachusetts
|
|
27,234
|
|
Sales,
marketing, customer support, product development and product
support
|
|
November
30, 2013
|
|
MICROS
Retail maintains this office for its XBR loss prevention products, as well
as for its CommercialWare products and services
|
|
|
|
|
|
|
|
|
|
Chevy
Chase, Maryland
|
|
26,744
|
|
Sales,
Web development services
|
|
November
15, 2017
|
|
Headquarters
of the TIG Global subsidiary
|
|
|
|
|
|
|
|
|
|
Boca
Raton, Florida
|
|
19,755
|
|
Sales,
marketing, product development, customer support and light
assembly
|
|
February
29, 2012
|
|
Boca
Raton is the headquarters for the JTECH subsidiary
|
|
|
|
|
|
|
|
|
|
Naples,
Florida
|
|
20,156
|
|
Software
development
|
|
December
31, 2016
|
|
Naples
is the main site for the development of the Company’s hotel
products
|
|
|
|
|
|
|
|
|
|
Galway,
Ireland
|
|
18,025
|
|
Customer
support, sales and marketing
|
|
May
31, 2022 (we have early termination rights in 2012 and
2017)
|
|
Also
serves as the regional headquarters for Europe, Africa, and the Middle
East
|
|
|
|
|
|
|
|
|
|
Nanterre,
France
|
|
16,867
|
|
Sales,
marketing, support
|
|
December
31, 2014 (we have an early termination right in 2010)
|
|
|
|
|
|
|
|
|
|
|
|
Buffalo,
NY
|
|
16,821
|
|
Sales,
marketing, support
|
|
September
15, 2015
|
|
We
have subleased a portion of this property to another
company.
|
|
|
|
|
|
|
|
|
|
Chicago,
Illinois
|
|
16,706
|
|
Sales,
marketing, product development, and hosting
|
|
December
31, 2014
|
|
Fry,
Inc. maintains this office for its hosting services as well as for sales
and services.
|
|
|
|
|
|
|
|
|
|
Sydney,
Australia
|
|
13,500
|
|
Sales,
marketing, support, product development
|
|
December
14, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale,
Arizona
|
|
12,969
|
|
Sales,
marketing, support, product development
|
|
January
31, 2016
|
|
Scottsdale
is the headquarters for the HSI division
|
|
|
|
|
|
|
|
|
|
Mexico
City, Mexico, DF
|
|
11,946
|
|
Sales,
marketing, customer support, operations
|
|
December
31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
Huntington
Beach, California
|
|
10,970
|
|
Sales,
marketing, support
|
|
January
31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Slough,
England (three sites)
|
|
25,000
|
|
Sales,
marketing, support
|
|
Ranges
from September 29, 2013 to December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Singapore
|
|
9,367
|
|
Sales,
marketing, support
|
|
September
30, 2014
|
|
|
To satisfy other sales, service and
support, and product development needs, we and our subsidiaries lease space in
other U.S. cities, including Boston, Cincinnati, Dallas, Denver, Hartford,
Houston, Nashville, New Orleans, New York, Pittsburgh, Portland, San Diego, San
Francisco, and Seattle, and in numerous cities overseas, including Buenos Aires,
Argentina; Hamburg, Germany; Helsinki, Finland; Madrid, Spain; Rome, Italy; São
Paulo, Brazil; Stockholm, Sweden; Tokyo, Japan; Toronto, Canada; Vancouver,
Canada; Vienna, Austria; and Zurich, Switzerland. In general, we
believe that additional space will be available as needed.
ITEM
3.
|
LEGAL
PROCEEDINGS
|
We are and have been involved in legal
proceedings arising in the normal course of business.
There is a case pending in the U.S.
District Court for the Northern District of Georgia, styled
Ware v. Abercrombie &
Fitch Stores, Inc. et al
.; although the Company was not a party to that
case, the Company may have had some obligation to indemnify certain of the
defendants who are the Company’s customers based on the terms of the Company’s
contracts with those customers. The plaintiff alleged that the
defendants infringed a patent relating to the processing of credit card
transactions. The defendants included approximately 107 individual
retailers, 13 of whom are the Company’s customers for retail point-of-sale
software. The Company initially agreed to provide indemnity coverage
to five of the defendants who are the Company’s customers in accordance with
applicable provisions of the contracts between the Company and those customers,
however, one such customer subsequently filed for protection under the U.S.
Bankruptcy Code. During the quarter ended June 30, 2010, the Company
entered into settlement agreements with all of the defendants for whom it may
have had indemnity obligations. Through June 30, 2010, our legal fees with
respect to the third party action have not been material, and the settlement
amounts were not material.
As disclosed in previous filings, on
May 22, 2008, a jury returned verdicts totaling $7.5 million against the Company
in the consolidated actions of
Roth Cash Register v. MICROS
Systems, Inc., et al. and Shenango Systems Solutions v. MICROS Systems, Inc., et
al.
The cases initially were filed in 2000 in the Court of
Common Pleas of Allegheny County, Pennsylvania. The complaints both
related to the non-renewal of dealership agreements in the year 2000 between the
Company and the respective plaintiffs. The agreements were
non-renewed as part of a restructuring of the dealer channel. There
is no other outstanding litigation relating to the restructuring of the dealer
channel in the year 2000. The plaintiffs alleged that the Company and
certain of its subsidiaries and employees entered into a plan to eliminate the
plaintiffs as authorized dealers and improperly interfere with the plaintiffs'
relationships with their respective existing and potential future clients and
customers without compensation to the plaintiffs. As a result, the
plaintiffs claimed that the Company was liable for, among other things, breach
of contract and tortious interference with existing and prospective contractual
relationships. The Company and the plaintiffs have appealed the
verdicts on various grounds. Oral argument on the appeal took place
on February 24, 2010, before the Superior Court of Pennsylvania. The
court has not yet issued a decision on the appeal. The Company has
established only an immaterial reserve for any potential liability relating to
these matters, as the Company believes that it presented strong arguments to
reverse the verdicts on appeal, and therefore believes that an unfavorable
outcome in these cases is not probable. Nevertheless, even if the
verdicts were not reversed or reduced on appeal, payment of the resulting
obligations would not have a material adverse effect on the Company’s
consolidated financial position or liquidity.
The Company is and has been involved in
legal proceedings arising in the normal course of business, and, subject to the
matters referenced above, 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, financial position, or cash
flows.
ITEM
5.
|
MARKET
FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY
SECURITIES
|
All share data has been retroactively
adjusted for a two-for-one stock split effective February 5, 2008.
STOCK
PERFORMANCE GRAPH
The following line graph compares the
cumulative total shareholder return on the Company’s common stock during the
past five fiscal years, based on the market price of MICROS Systems, Inc. common
stock, with the cumulative total yearly return of the S&P 500 Index, and
with the S&P Application Software composite index. The graph
assumes $100 invested on June 30, 2005 in MICROS Systems, Inc. common stock, and
an identical amount in the S&P 500 Index and the S&P 500 Application
Software composite index, and assumes the reinvestment of
dividends.
Shareholder Returns
|
|
Company/Index
|
|
June 2006
|
|
|
June 2007
|
|
|
June 2008
|
|
|
June 2009
|
|
|
June 2010
|
|
MICROS
Systems, Inc.
|
|
$
|
97.61
|
|
|
$
|
121.56
|
|
|
$
|
136.27
|
|
|
$
|
113.16
|
|
|
$
|
142.44
|
|
S&P
500 Index
|
|
$
|
108.63
|
|
|
$
|
131.00
|
|
|
$
|
113.81
|
|
|
$
|
83.97
|
|
|
$
|
96.09
|
|
S&P
500 Application Software
|
|
$
|
108.89
|
|
|
$
|
131.79
|
|
|
$
|
117.24
|
|
|
$
|
91.83
|
|
|
$
|
114.09
|
|
PRICE
RANGE OF COMMON STOCK
The Company’s common stock is traded on
the NASDAQ Stock Market under the symbol MCRS. As of August 19, 2010,
there were 18,383 record holders of the Company’s common stock, $0.025 par
value.
The following table shows the range of
sales prices for the periods indicated, as reported by NASDAQ.
|
|
1
st
Quarter
|
|
|
2
nd
Quarter
|
|
|
3
rd
Quarter
|
|
|
4
th
Quarter
|
|
Fiscal
Year Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
31.11
|
|
|
$
|
32.43
|
|
|
$
|
33.50
|
|
|
$
|
38.16
|
|
Low
|
|
$
|
22.79
|
|
|
$
|
25.68
|
|
|
$
|
26.17
|
|
|
$
|
31.26
|
|
Fiscal
Year Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
34.41
|
|
|
$
|
27.17
|
|
|
$
|
20.17
|
|
|
$
|
28.65
|
|
Low
|
|
$
|
22.98
|
|
|
$
|
13.34
|
|
|
$
|
13.47
|
|
|
$
|
18.45
|
|
The Company has never paid a cash
dividend and has no current intention to pay any cash dividends. Its
current policy is to retain earnings and to use those funds for the operation
and expansion of its business as well as the repurchase of the Company’s
stock. The Company is a party to two credit agreements which, as
renewed on July 30, 2010, restrict the payment of cash dividends. See
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Liquidity and Capital Resources” and Note 7 “Line of Credit,” in
the Notes to the Consolidated Financial Statements included in this
report.
PURCHASES
OF COMPANY STOCK
In August 2009 the Board of Directors
authorized the purchase of two million shares of the Company’s common stock over
the next three years, to be purchased from time to time depending on market
conditions and other corporate considerations as determined by
management.
We have incurred an aggregate of
approximately $0.3 million in fees in the aggregate related to all stock
purchase plans. As of July 31, 2010, approximately 1.6 million
additional shares are available for purchase. During the fourth
quarter of fiscal year 2010, our stock purchases were as follows
Subsequent to year-end, on August 24, 2010, the Board of Directors
authorized the purchases of an additional two million shares of the Company
’
s common stock
over the next three years, to be purchased from time to time depending on market
conditions and other corporate considerations as determined by management.
Issuer
Purchases of Equity Securities
|
|
Total Number
of Shares
Purchased
|
|
|
Average
Price
Paid per
Share
|
|
|
Total Number of
Shares Purchased
as
Part of Publicly
Announced Plan or
Program
|
|
|
Maximum
Number
of Shares
that May
Yet be
Purchased
Under
the Plan or
Program
|
|
04/01/10 –
04/30/10
|
|
|
—
|
|
|
|
N/A
|
|
|
|
—
|
|
|
|
1,986,130
|
|
05/01/10 –
05/31/10
|
|
|
—
|
|
|
|
N/A
|
|
|
|
—
|
|
|
|
1,986,130
|
|
06/01/10 –
06/30/10
|
|
|
350,000
|
|
|
$
|
33.52
|
|
|
|
350,000
|
|
|
|
1,636,130
|
|
|
|
|
350,000
|
|
|
$
|
33.52
|
|
|
|
350,000
|
|
|
|
1,636,130
|
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
|
|
Fiscal
Year
Ended
June
30,
(1)
|
|
(in thousands, except per share data)
|
|
|
201
0
(2),(4)
|
|
|
|
200
9
(2),(3),(4)
|
|
|
2008
(2)
|
|
|
2007
(2)
|
|
|
2006
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
914,319
|
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
|
$
|
784,973
|
|
|
$
|
678,233
|
|
Income
from operations
|
|
$
|
167,973
|
|
|
$
|
140,835
|
|
|
$
|
138,890
|
|
|
$
|
110,390
|
|
|
$
|
90,978
|
|
Net
income attributable to MICROS Systems, Inc.
|
|
$
|
114,353
|
|
|
$
|
96,292
|
|
|
$
|
100,737
|
|
|
$
|
79,875
|
|
|
$
|
62,963
|
|
Net
income per share attributable to MICROS Systems, Inc.
common:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.44
|
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
|
$
|
1.00
|
|
|
$
|
0.81
|
|
Diluted
|
|
$
|
1.41
|
|
|
$
|
1.17
|
|
|
$
|
1.20
|
|
|
$
|
0.97
|
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital
(5)
|
|
$
|
468,047
|
|
|
$
|
416,593
|
|
|
$
|
391,656
|
|
|
$
|
343,937
|
|
|
$
|
252,585
|
|
Total
assets
|
|
$
|
1,138,291
|
|
|
$
|
1,021,379
|
|
|
$
|
1,002,147
|
|
|
$
|
846,093
|
|
|
$
|
647,357
|
|
Line
of credit
|
|
$
|
1,442
|
|
|
$
|
1,090
|
|
|
$
|
989
|
|
|
$
|
2,308
|
|
|
$
|
2,134
|
|
MICROS
Systems, Inc. shareholders’ equity
|
|
$
|
783,380
|
|
|
$
|
718,997
|
|
|
$
|
671,723
|
|
|
$
|
550,493
|
|
|
$
|
416,552
|
|
Book
value per share
(6),
(7)
|
|
$
|
9.79
|
|
|
$
|
8.95
|
|
|
$
|
8.30
|
|
|
$
|
6.79
|
|
|
$
|
5.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
79,856
|
|
|
|
80,486
|
|
|
|
81,546
|
|
|
|
79,978
|
|
|
|
77,383
|
|
Diluted
|
|
|
81,448
|
|
|
|
81,461
|
|
|
|
83,346
|
|
|
|
82,581
|
|
|
|
81,248
|
|
|
(1)
|
Fiscal
years 2006 - 2009 have been revised to reflect the corrections of the
misstatements related to certain fraudulent activities uncovered in the
Company’s Japanese subsidiary that occurred during the period from fiscal
year 2006 to the six months ended December 31, 2009. See Note
19 “Revisions to Prior Period Financial Statements” in the Notes to
Consolidated Financial Statements.
|
|
(2)
|
Fiscal
years 2010, 2009, 2008 and 2007 include approximately $12.4 million ($8.1
million, net of tax or $0.10 per diluted share), $13.9 million ($9.8
million, net of tax or $0.12 per diluted share), $17.2 million ($13.1
million net of tax or $0.16 per diluted share) and $14.0 million ($11.1
million net of tax or $0.14 per diluted share) respectively, in non-cash
share-based compensation expense. See Note 3 “Share-based
Compensation” in the Notes to Consolidated Financial
Statements.
|
|
(3)
|
Fiscal
year 2009 includes approximately $3.1 million ($2.1 million, net of tax)
in restructuring charges and approximately $0.7 million in an inventory
write down reflecting adjustments to the Company’s cost structure to
address lower sales volume in certain of the Company’s locations affecting
both of its reportable segments.
|
|
(4)
|
The
fiscal years 2010 and 2009 include an other-than-temporary impairment of
approximately $4.8 million and $1.3 million, respectively, for long-term
investments. See Note 2 “Financial Instruments and Fair Value
Measurements” in the Notes to Consolidated Financial
Statements.
|
|
(5)
|
Current
assets less current liabilities.
|
|
(6)
|
Calculated
as shareholders’ equity divided by common stock outstanding at June
30.
|
|
(7)
|
Share
information for the fiscal years ended June 30, 2006 and 2007 is
retroactively adjusted to reflect the February 2008 two-for-one stock
split.
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
We are a
leading worldwide designer, manufacturer, marketer, and servicer of enterprise
information solutions for the global hospitality and specialty retail
industries. Our enterprise solutions comprise three major areas:
hotel information systems, restaurant information systems, and specialty retail
information systems. We also offer a wide range of related
services. We distribute our products and services directly and
through a network of independent dealers and distributors.
We are
organized and operate in four operating segments: U.S., Europe, the
Pacific Rim, and Latin America regions. We have identified our U.S.
operating segment as a separate reportable segment and we have aggregated our
three international operating segments into one reportable segment,
international, as the three international operating segments share many similar
economic characteristics. Our management views the U.S. and
international segments separately in operating our business, although the
products and services are similar for each segment.
CRITICAL
ACCOUNTING ESTIMATES
Our discussion and analysis of our
financial condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. On an ongoing basis, we evaluate our estimates, including
those that impact revenue recognition, share-based compensation, capitalized
software, goodwill and intangible assets, fair value of investments, allowance
for doubtful accounts, allowance for obsolescence and income
taxes. We base our estimates on historical experience and on various
other assumptions that we believe are reasonable under the circumstances, and
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The following comprise the critical
accounting estimates that we used in the preparation of our consolidated
financial statements.
Revenue
recognition
Revenue is generated from the sale of
software licenses, hardware, services and support and is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the arrangement fee is fixed or determinable and
collectability of the related receivable is probable. Our revenue
recognition involves judgment, including estimates of fair value in arrangements
that contain multiple elements, assessments of the likelihood of nonpayment and
estimates of total costs and costs to complete a project. In making
these judgments we analyze various factors, including the nature and terms of
the specific transaction, the nature and terms of comparable transactions, the
creditworthiness of our customers, our historical experience, accuracy of prior
estimates and overall market and economic conditions. Changes in
judgments related to these items, or a deterioration in market or economic
conditions, could materially impact the timing and amount of revenue and costs
recognized.
Allowance
for doubtful accounts
We maintain an allowance for doubtful
accounts for estimated losses that may result from the inability of our
customers to make required payments and for limited circumstances when the
customer disputes the amounts due to us. Our methodology for
determining this allowance requires estimates and is based on the age of the
receivable, customer payment practices and history, inquiries, credit reports
from third parties and other financial information. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required which
could affect our financial results in future periods. As of June 30,
2010 and 2009, accounts receivable totaled approximately $153.1 million and
$155.2 million, net of an allowance for doubtful accounts of approximately $28.4
million and $31.9 million, respectively. Additionally, bad debt
expenses for the fiscal years 2010, 2009 and 2008 were approximately $3.9
million, $8.3 million, and $6.9 million, respectively.
Inventory
Inventory is stated at the lower of
cost or market. Cost is determined principally by the first-in,
first-out pricing method. We wrote down inventory in the amount of
approximately $12.3 million and $11.4 million as of June 30, 2010 and 2009,
respectively. We regularly compare inventory quantities on hand
against historical usage or forecasts related to specific items to evaluate
obsolescence and excessive quantities. Nevertheless, changes in
business trends, competition and other factors not apparent when, or occurring
after, we make our estimates of inventory obsolescence could result in the need
to undertake additional inventory write-offs in future periods.
Financial
instruments and fair value measurements
All of our short-term investments are
recorded at fair value, which approximates cost. Our investments in
auction rate securities (debt instruments with long-term scheduled maturities
and periodic interest rate reset dates, classified as long-term investments in
the accompanying consolidated balance sheets) as discussed below, are carried at
fair value.
We periodically review to identify and
evaluate each investment that has an unrealized loss. Unrealized
losses that are determined to be temporary in nature are reported, net of tax,
in accumulated other comprehensive income. Other-than-temporary
“credit loss” (loss due to security issuer’s credit risk), net of tax and
valuation allowances, is recognized in the consolidated statements of
operations, while other-than-temporary impairment loss related to factors other
than credit loss, net of tax, is recognized in accumulated other comprehensive
income.
We periodically assess whether we would
likely recover the entire cost basis of each of our auction rate securities,
and, therefore, whether the securities had incurred an other-than-temporary
impairment. The factors considered in classifying the impairment
include (a) the credit quality of the underlying security, (b) the extent to
which and time period during which the fair value of each investment has been
below cost, (c) the expected holding or recovery period for each investment, (d)
our intent to hold each investment until recovery, the likelihood that we will
not be required to sell the security prior to recovery and our expectation of
recovery of the entire amortized cost basis of the security, and (e) the
existence of any evidence of default by the issuer. Applying these
factors entails significant judgment and considerable uncertainty. We
then estimated the extent to which other-than-temporary credit loss or
non-credit loss was applicable to our investments in auction rate
securities. Because there is no liquid market or negotiated
transaction history with regard to the auction rate securities, we engaged an
independent valuation firm to perform a valuation of our investments in auction
rate securities at June 30, 2010. The valuation firm used a
discounted cash flow model that considered various inputs including: (a) the
coupon rate specified under the debt instruments, (b) the current credit ratings
of the underlying issuers, (c) collateral characteristics, (d) discount rates,
(e) severity of default and (f) probability that the securities will be sold at
auction or through early redemption. While we reviewed and agreed
with this valuation, many of the assumptions utilized in connection with the
valuation are subject to considerable uncertainty, and changes in assumptions or
subsequent events could result in the recognition of additional credit
loss.
A change
in factors, including economic conditions, rates of default with respect to the
obligations underlying the securities, our liquidity needs, and a variety of
other factors may cause our future valuation results to differ, in which case
our financial results in future periods could be affected
significantly.
Capitalized
software development costs
Costs incurred in the research and
development of new software products to be licensed to others, primarily
consisting of salaries, employee benefits and administrative costs, are expensed
as incurred and included in research and development expenses until
technological feasibility is established. The capitalization of
software development costs on a product-by-product basis starts when a product’s
technological feasibility has been established and ends when the product is
available for general release to customers, at which time amortization of the
capitalized software development costs begins. Technological
feasibility is established when the product reaches the working model
stage. The cost of purchased software is also
capitalized.
Annual amortization of capitalized
software development costs is included in software cost of sales. For
each capitalized software product, the annual amortization is equal to the
greater of: (i) the amount computed using the ratio that the software product’s
current fiscal year gross revenue bears to the total current fiscal year and
anticipated future gross revenues for that product or (ii) the amount computed
based on straight-line method over the remaining estimated economic life of the
product. If we incorrectly estimate the remaining economic life of a
product or the anticipated future gross revenues of a product, we may be
required to take a significant write off of capitalized software development
costs or to accelerate amortization, either of which could materially affect our
future financial results. Amortization expenses for the fiscal years
2010, 2009 and 2008 were approximately $9.7 million, $7.7 million and $9.4
million, respectively.
Valuation
of long-lived assets and intangible assets
We evaluate long-lived assets,
including finite-lived purchased intangible assets, for impairment whenever
events and changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. When indicators of impairment are
present, we compare the fair value of the asset groups, based on the
undiscounted cash flows the asset groups are expected to generate (or market
value, if available), to the net book value of the asset groups. If
the fair value is less than the net book value, the asset group is impaired and
we recognize an impairment loss equal to the excess of the net book value over
the fair value.
The process of evaluating the potential
impairment of long-lived assets including finite-lived purchased intangible
assets is highly subjective and requires significant judgment at many points
during the analysis. In estimating the fair value of the asset groups
for the purposes of our analyses, we make estimates and judgments about the
future cash flows of these asset groups. The cash flow forecasts are
based on assumptions that are consistent with the plans and estimates used to
manage the Company. A change in assumptions and estimates in future
periods could cause us to determine that asset groups are impaired, resulting in
a significant charge in future periods.
Goodwill
and indefinite-lived intangible assets
We do not amortize goodwill and
indefinite-lived intangible assets. We assess annually, in the first
quarter of the fiscal year, whether goodwill and certain of our trademarks,
which are our only indefinite-lived purchased intangible assets, are impaired.
Goodwill is evaluated for impairment by comparing the fair value of each
of our reporting units (our four operating segments consisting of U.S., Europe,
the Pacific Rim and Latin America) to their book value. The fair
value of each reporting unit is determined based on a weighting of future income
approach (i.e., discounted future income) and market approach (i.e., a
comparison to the purchase and sale of similar assets in the relevant
industry). If the fair value of the reporting unit exceeds the book
value of the net assets assigned to that unit, goodwill is not
impaired. If goodwill is impaired, we recognize an impairment loss
based on the amount by which the book value of goodwill exceeds its implied fair
value. The implied fair value of goodwill is determined by deducting the
fair value of a reporting unit’s identifiable assets and liabilities from the
fair value of the reporting unit as a whole, as if that reporting unit had just
been acquired and the fair value of the individual assets acquired and
liabilities assumed were being determined initially.
Trademarks are evaluated for impairment
by comparing their fair value to book value. We estimate the fair
value of trademarks using an income approach, and recognize an impairment loss
if the estimated fair value of a trademark is less than its book
value.
Additional impairment assessments may
be performed on an interim basis if we encounter events or changes in
circumstances indicating that it is more likely than not that the book value of
goodwill and/or trademarks has been impaired.
The process of evaluating the potential
impairment of goodwill and/or trademarks is highly subjective and requires
significant judgment at many points during the analysis. In
estimating the fair value of the reporting units for the purposes of our annual
or interim analyses, we make estimates and judgments about the future cash flows
of these businesses. The cash flow forecasts are based on assumptions
that are consistent with the plans and estimates used to manage the underlying
reporting units and factor in assumptions on revenue and expense growth rates.
These estimates are based upon our historical experience and projections of
future activity, factoring in customer demand, changes in technology and the
cost structure necessary to achieve the related revenues. Additionally, these
cash flow analyses factor in expected amounts of working capital and weighted
average cost of capital. Changes in judgments on any of these factors could
materially impact the value of the reporting unit. We also consider
our market capitalization on the date the analysis is
performed. A determination that goodwill or intangible assets
are impaired (which could result from a change in our assumptions) could have a
significant impact on our operating results. As of June 30, 2010 and
2009, goodwill totaled approximately $213.8 million and $190.7 million,
respectively.
Share-based
compensation
We account for our option awards
granted under our stock option program by estimating fair value of option awards
as of the date of grant. Non-cash share-based compensation expenses,
which are based on the estimated value of the option awards adjusted for
expected pre-vesting forfeitures, are recognized ratably over the requisite
service (i.e. vesting) period of options in the consolidated statement of
operations.
We value stock options using the
Black-Scholes option pricing model, which was developed for use in estimating
the fair value of traded options that are fully transferable and have no vesting
restrictions. Therefore, we are required to input highly subjective
assumptions about volatility rates, expected term of options, dividend yields
and applicable interest rates in determining the estimated fair
value. Expected volatility is based on historical stock
prices. The expected term of options granted is based on historical
option activities, adjusted for the remaining option life cycle by assuming
ratable exercise of any unexercised vested options over the remaining
term. For this purpose, we separate groups of employees that have
historically exhibited similar behavior with regard to option exercises and
post-vesting cancellations. The risk-free interest rate is based on
the U.S. Treasury yield curve in effect at the time of grant. Total
expense recorded from period to period can be significantly different depending
on several variables, including the number of options granted, any changes to
assumptions such as pre-vesting cancellations and the estimated fair value of
those vested awards. But unlike every other accounting policy in this
section, changes in estimates affect only newly granted options; they do not
result in a change in previously recorded amounts.
Income
taxes
Income taxes are accounted for under
the asset and liability method. Deferred tax assets and liabilities
are recognized for the expected future tax consequences attributable to the
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities. Deferred tax assets and liabilities are
measured using the enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The
effect on the deferred tax assets and liabilities of a change in tax rate is
recognized in income in the period that includes the enactment
date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts more likely than not to be
realized. If we determine that we will not be able to realize all or
part of our net deferred tax asset in the future, an adjustment to the deferred
tax asset would be charged to income in the period in which the determination is
made. Our deferred tax assets and liabilities could be materially
affected if, based on subsequent events, we determine that we must derecognize
or recognize a tax position. Such a change also could materially
affect our annual tax rate in the year in which the change
occurs.
Although
we are profitable on a consolidated basis, we have incurred losses in certain
foreign jurisdictions. We applied valuation allowances in some
circumstances where the prospects of realizing the benefit of net operating loss
carryforwards and other deferred taxes are subject to
uncertainty. The determination of the likelihood of realizing this
tax benefit requires significant judgment in some instances, and actual results
of our operating subsidiaries, particularly certain international subsidiaries,
could result in material adjustments to our deferred tax assets or liabilities,
and changes in our annual tax rate in the year in which the adjustments
occur.
We
review our uncertain income tax positions and apply a “more likely than not”
threshold to the recognition and derecognition of tax positions. The
net unrecognized income tax benefits as of June 30, 2010 and 2009 were
approximately $21.3 million and $18.0 million, including interest and penalties
of approximately $2.4 million and $2.0 million,
respectively. Significant judgment is required in determining our tax
positions and evaluating uncertainties relating to these
positions. Changes in estimates regarding our tax positions, or
government determinations resulting from tax audits, could have an effect on our
deferred tax assets and liabilities, as well as our annual tax rate in the year
in which the changes or determinations occur.
RESULTS
OF OPERATIONS
As previously disclosed in our Form
10-Q for the period ended December 31, 2009, during January 2010, we uncovered
certain fraudulent activities in our Japanese subsidiary which occurred during
the period extending from fiscal year 2006 to the six months ended December 31,
2009. As a result of our investigation, we determined that fraudulent
transactions resulted in a cumulative overstatement of revenue and net income
attributable to MICROS Systems, Inc. of approximately $6.9 million and $4.9
million, respectively, over this period. The transactions served principally to
inflate revenue and cost of sales through the creation of fraudulent revenue
documentation and to understate liabilities for loans executed where we were the
guarantor over this period. These off-balance sheet loans were
indirectly used to pay down a portion of our fictitious accounts receivable
balances. We concluded, based on our investigation, that the fraud
was solely perpetrated by one employee of our Japanese subsidiary who was not a
member of senior management and that the individual involved expended
significant effort over the period to create a variety of schemes which
deliberately circumvented or manipulated the entity's local controls and
procedures. These schemes were primarily designed to inflate revenues
and cost of sales and to obtain financing from third parties to pay off the
accounts receivable balances in order to prolong the schemes. We
terminated the employee upon completion of our investigation.
Based on the materiality guidelines
contained in SEC Staff Accounting Bulletin No. 99, "Materiality" and SEC Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements in Current Year Financial Statements", we concluded that the
adjustments to correct for the fraudulent activities were not material to any of
our current financial statements for periods beginning with the year ended June
30, 2006 and through the three months ended September 30,
2009. However, we concluded that the adjustments would be material to
the quarterly results and trend for the three months ended December 31,
2009. Accordingly, we determined that we would revise our previous
financial statements to record these adjustments; however because the effect of
the adjustments were not material to any previously issued financial statements,
we determined not to amend our previously filed Quarterly Reports on Form 10-Q
or our Annual Reports on Form 10-K; rather, we would make corresponding
adjustments to prior period financial statements as appropriate the next time
those financial statements are filed.
The Consolidated Statement of
Operations for the fiscal years ended June 30, 2009 and 2008 included in this
Form 10-K has been revised to reflect the corrections of the misstatements
related to the fraudulent activities in our Japanese subsidiary described
above. The corrections decreased revenue for the fiscal years ended
June 30, 2009 and 2008 by approximately $4.1 million and $0.2 million,
respectively and decreased net income attributable to MICROS Systems, Inc. by
approximately $3.0 million and $0.5 million, respectively. See Note
19 “Revisions to Prior Period Financial Statements” in the Notes to Consolidated
Financial Statements for further detail.
During the three fiscal years ending
June 30, 2010, we acquired several businesses and accordingly, our results
include activities from the acquired businesses from their respective
acquisition dates. See Note 4 “Acquisitions” in the Notes to
Consolidated Financial Statements for further detail on
acquisitions.
All references to share data have been
retroactively adjusted to reflect the two-for-one stock split effective February
5, 2008.
Comparison of Fiscal Year
2010 to Fiscal Year 2009
Revenue
The following table provides
information regarding the sales mix by reportable segments in fiscal years 2010
and 2009 (amounts are net of intersegment eliminations, based on location of the
selling entity, and include export sales):
|
|
Fiscal Year Ended June 30,
|
|
|
|
U.S.
|
|
|
International
|
|
|
Total
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Hardware
|
|
$
|
96,560
|
|
|
$
|
107,960
|
|
|
$
|
91,773
|
|
|
$
|
101,874
|
|
|
$
|
188,333
|
|
|
$
|
209,834
|
|
Software
|
|
|
45,964
|
|
|
|
48,523
|
|
|
|
72,824
|
|
|
|
84,389
|
|
|
|
118,788
|
|
|
|
132,912
|
|
Service
|
|
|
297,268
|
|
|
|
277,999
|
|
|
|
309,930
|
|
|
|
286,980
|
|
|
|
607,198
|
|
|
|
564,979
|
|
Total
Revenue
|
|
$
|
439,792
|
|
|
$
|
434,482
|
|
|
$
|
474,527
|
|
|
$
|
473,243
|
|
|
$
|
914,319
|
|
|
$
|
907,725
|
|
The
following table provides information regarding the total sales mix as a percent
of total revenue in fiscal years 2010 and 2009:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
Hardware
|
|
|
20.6
|
%
|
|
|
23.1
|
%
|
Software
|
|
|
13.0
|
%
|
|
|
14.7
|
%
|
Service
|
|
|
66.4
|
%
|
|
|
62.2
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
For fiscal year 2010, total revenue was
approximately $914.3 million, an increase of approximately $6.6 million, or 0.7%
compared to the fiscal year 2009 due to the following:
|
·
|
Favorable
foreign currency exchange rate fluctuations, for primarily all foreign
currencies against the U.S. dollar, positively affected total revenue by
approximately $11.0 million; and,
|
|
·
|
Additional
services revenue generated by TIG Global LLC (“TIG Global”), a company
that we acquired in December 2009, and an additional 4% increase in
services sales volume compared to fiscal year
2009.
|
|
·
|
Above
increases were partially offset by 11% and 12% decreases in hardware and
software sales volume, respectively, compared to fiscal year
2009. We believe these decreases were due to a slow-down in
demand from our customers as a result of adverse global economic
conditions.
|
The international
segment revenue for the fiscal year ended June 30, 2010 increased by
approximately $1.3 million compared to the fiscal year 2009. The
favorable foreign currency exchange rate fluctuations positively affected total
revenue by approximately $11.0 million. The services sales volume
increased 5% compared to fiscal year 2009. The increase in services
sales volume was due to the continued expansion of our customer base coupled
with increased recurring support revenue from existing customers (primarily
through purchase of additional services). These increases were
partially offset by 12% and 15% decreases in hardware and software sales volume,
respectively, both compared to fiscal year 2009. We believe the
decreases in hardware and software sales volume were due to a slowdown in demand
from our customers because of adverse global economic conditions
U.S. segment revenue increased
approximately $5.3 million for the fiscal year ended June 30, 2010 compared to
the fiscal year 2009. The increase was the result of additional
services revenue generated as a result of the acquisition of TIG Global in
December 2009 and the continued expansion of our customer base coupled with
increased recurring support revenue from existing customers (primarily through
purchase of additional services). These increases were partially
offset by an 11% decrease in hardware revenues and a 5% decrease in software
sales revenues, both as compared to fiscal year 2009. We believe
these decreases were due to a slowdown in demand from our customers because of
adverse U.S. and global economic conditions.
Cost
of Sales
The following table provides
information regarding our cost of sales in fiscal years 2010 and
2009:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
(in thousands)
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
Hardware
|
|
$
|
119,489
|
|
|
|
63.4
|
%
|
|
$
|
135,033
|
|
|
|
64.4
|
%
|
Software
|
|
|
25,731
|
|
|
|
21.7
|
%
|
|
|
25,570
|
|
|
|
19.2
|
%
|
Service
|
|
|
267,618
|
|
|
|
44.1
|
%
|
|
|
264,883
|
|
|
|
46.9
|
%
|
Total
Cost of Sales
|
|
$
|
412,838
|
|
|
|
45.2
|
%
|
|
$
|
425,486
|
|
|
|
46.9
|
%
|
For fiscal year 2010, cost of sales as
a percent of revenue decreased 1.7% to 45.2% compared to 46.9% in fiscal year
2009. Hardware cost of sales as a percent of related revenue
decreased primarily as a result of an overall margin improvement on
substantially all hardware categories compared to fiscal year
2009. Software cost of sales as a percent of related revenue
increased primarily due to an increase in capitalized software amortization
expense (included in software cost of sales) as a percent of software revenue as
compared to fiscal year 2009 and a lower margin on sales of third party
software. Service cost of sales as a percent of related revenue
decreased 2.8% to 44.1% primarily due to lower service labor costs resulting
from our continued cost cutting efforts. The foreign currency
exchange rate fluctuations increased our cost of sales for the fiscal year 2010
by approximately $6.8 million.
Selling,
General and Administrative (“SG&A”) Expenses
SG&A expenses decreased
approximately $7.3 million compared to fiscal year 2009 to approximately $274.0
million. This decrease was primarily due to the inclusion of the
following in fiscal year 2009 SG&A expenses:
·
|
Higher
bad debt expense, which was approximately $4.4 million higher than fiscal
year 2010, due to adverse U.S. and global economic conditions;
and,
|
·
|
Approximately
$3.1 million in restructuring charges, primarily reflecting adjustments to
our cost structure to reflect lower sales volume in certain of our
locations. The charge included approximately $1.5 million in
employee related costs and approximately $1.6 million in occupancy related
costs for certain of our facilities that we have
vacated.
|
During
fiscal year 2010, we were able to continue to reduce certain of our
costs. All of these factors were partially offset by an approximately
$5.1 million increase in compensation related expenses in fiscal year 2010
compared to fiscal year 2009.
The foreign currency exchange rate
fluctuations increased our SG&A expenses for the fiscal year 2010 by
approximately $3.4 million compared to fiscal year 2009.
Research
and Development (“R&D”)
R&D expenses consist primarily of
labor costs less capitalized software development costs. The
following table provides information regarding our R&D expenses in fiscal
years 2010 and 2009:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
R&D
labor and other costs
|
|
$
|
44,672
|
|
|
$
|
43,100
|
|
Capitalized
software development costs
|
|
|
(2,443
|
)
|
|
|
(470
|
)
|
Total
R&D expenses
|
|
$
|
42,229
|
|
|
$
|
42,630
|
|
%
of Revenue
|
|
|
4.6
|
%
|
|
|
4.7
|
%
|
Depreciation
and Amortization Expenses
Depreciation and amortization expenses
for fiscal year 2010 decreased approximately $0.2 million compared to fiscal
year 2009 to approximately $17.3 million.
Share-Based
Compensation Expenses
For fiscal years 2010 and 2009, we
recognized non-cash share-based compensation expense of approximately $12.4
million and $13.9 million, respectively. The SG&A expenses,
R&D expenses and cost of sales discussed above include the following
allocations of non-cash share-based compensation expense:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
SG&A
|
|
$
|
11,822
|
|
|
$
|
13,108
|
|
R&D
|
|
|
511
|
|
|
|
792
|
|
Cost
of sales
|
|
|
32
|
|
|
|
—
|
|
Total
non-cash share-based compensation expense
|
|
|
12,365
|
|
|
|
13,900
|
|
Income
tax benefit
|
|
|
(4,283
|
)
|
|
|
(4,100
|
)
|
Total
non-cash share-based compensation expense, net of tax
benefit
|
|
$
|
8,082
|
|
|
$
|
9,800
|
|
Impact
on diluted net income per share attributable to MICROS Systems, Inc.
common shareholders
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
The non-cash share-based compensation
expense allocated to SG&A for the 2010 and 2009 fiscal years included
approximately $1.7 million and $0.8 million related to the grant of options
during the respective years to our Chairman, President, and Chief Executive
Officer, A.L. Giannopoulos. In accordance with the terms of our
option plan, as he is over the retirement age of 62, any options that he holds
that have not yet vested at the time of his retirement will vest immediately
upon his retirement. Although Mr. Giannopoulos has not retired, we
expensed 100% of the share-based compensation expense related to his option
grant because he was over the age of 62 at the time he received the
options.
As of
June 30, 2010, there was approximately $13.7 million in non-cash share-based
compensation cost related to non-vested awards that were not yet recognized in
our consolidated statements of operations. This cost is expected to
be recognized over a weighted-average period of 1.83 years.
Income
from Operations
Income from operations for fiscal year
2010 increased approximately $27.1 million, or 19.3%, to approximately $168.0
million, compared to fiscal year 2009. The increase reflects an
overall improvement in margin coupled with our continued cost cutting
efforts. Foreign currency exchange rate fluctuations increased our
income from operations for the fiscal year 2010 by approximately $0.5
million.
Non-operating
Income (Expense)
Net non-operating income for fiscal
year 2010 was approximately $0.2 million compared to approximately $6.0 million
for fiscal year 2009. The decrease of approximately $5.9 million
reflects:
|
·
|
A
decrease in interest income of approximately $4.6 million due to overall
lower interest earned on cash and cash equivalents and investments
(short-term and long-term) balances;
and,
|
|
·
|
The
credit based other-than-temporary impairment losses of approximately $4.8
million and $1.3 million for fiscal years ended June 30, 2010 and 2009,
respectively, for investments in auction rate securities classified as
long-term investments on our consolidated balance sheets. This
increase loss in fiscal year 2010 is related to the deterioration of one
of our auction rate securities with an original cost of $10.0 million
which is valued at approximately $4.3 million at June 30,
2010.
|
|
·
|
Above
decreases in non-operating income was partially offset by approximately
$1.3 million increase in the foreign currency exchange transaction
gain. For fiscal year 2010, the foreign currency exchange
transaction gain was approximately $1.0 million compared to a loss of
approximately $0.3 million in fiscal year
2009.
|
Income
Tax Expense
The effective tax rates for fiscal
years 2010 and 2009 were 31.4% and 33.5%, respectively. The effective
tax rates for the fiscal years 2010 and 2009 were less than the 35.0% U.S.
statutory federal income tax rate, mainly due to the mix of earnings from
jurisdictions that have a lower statutory tax rate than the U.S., our continued
assertion to permanently reinvest the cumulative unremitted earnings of our
significant non-US affiliates, and tax benefits realized upon the expiration of
statutes of limitations or settlements with tax authorities,. These
benefits were partially offset by the recognition of uncertain tax
positions, non-deductible compensation items including, non-cash share-based
compensation, valuation allowances, creditable foreign withholding taxes and the
inclusion of foreign income in our U.S. tax base.
The decrease in the effective tax rate
for fiscal year 2010 as compared to fiscal year 2009 was primarily attributable
to reductions in the recognition of uncertain tax positions, reductions in the
inclusion of foreign income in our U.S. tax base, and reductions in valuation
allowances, partially offset by increases in tax primarily attributable to a
decrease in tax benefits realized upon the expiration of statutes of limitations
or settlements with tax authorities, increases in non-deductible compensation
items and the mix of earnings from jurisdictions that have a lower statutory tax
rate than the U.S.
We recorded net unrecognized income tax
benefits of approximately $21.3 million and $18.0 million, including accrued
interest and penalties of approximately $2.4 million and $2.0 million at June
30, 2010 and 2009, respectively. We have recognized approximately
$0.4 million and $0.7 million of interest expense for the fiscal years 2010 and
2009, respectively. The non-current portion of the net unrecognized
income tax benefits represents benefits with respect to which we do not
anticipate making a payment within 12 months of the balance sheet
date. If recognized, all of the net unrecognized income tax benefit
would be recognized as a reduction of income tax expense, impacting the
effective income tax rate.
We have recognized a decrease in
certain unrecognized tax benefits for the fiscal year ended June 30, 2010
primarily due to the expiration of statutes of limitations, which reduced the
effective tax rate and income tax expense by approximately $1.3
million. We estimate that within the next 12 months, we will decrease
the unrecognized income tax benefits by approximately $2.7 million to $3.7
million due to the expiration of statues of limitations and settlement of issues
with tax authorities, which we believe would increase earnings as a result of a
reduction in tax expense. However, audit outcomes and the timing of
audit settlements are subject to significant uncertainty. Over the
next 12 months, it is reasonably possible that our tax positions will continue
to generate liabilities for uncertain tax positions.
Net
Income Attributable to MICROS Systems, Inc. and Diluted Net Income per Share
Attributable to MICROS Systems, Inc. Common Shareholders
Net income attributable to MICROS
Systems, Inc. for fiscal year 2010 increased approximately $18.1 million, or
18.8%, to approximately $114.4 million, compared to fiscal year
2009. The increase is mainly due to an overall improvement in margin,
coupled with our continued cost cutting efforts. Foreign currency
exchange rate fluctuations increased our net income attributable to MICROS
Systems, Inc. for fiscal year 2010 by approximately $1.1 million.
Diluted net income per share
attributable to MICROS Systems, Inc. common shareholders for fiscal year 2010
and 2009 was $1.41 and $1.17 per diluted share.
Comparison of Fiscal Year
2009 to Fiscal Year 2008
Revenue
The following table provides
information regarding the sales mix by reportable segments in fiscal years 2009
and 2008 (amounts are net of intersegment eliminations, based on location of the
selling entity, and include export sales):
|
|
Fiscal Year Ended June 30,
|
|
|
|
U.S.
|
|
|
International
|
|
|
Total
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Hardware
|
|
$
|
107,960
|
|
|
$
|
131,712
|
|
|
$
|
101,874
|
|
|
$
|
134,253
|
|
|
$
|
209,834
|
|
|
$
|
265,965
|
|
Software
|
|
|
48,523
|
|
|
|
60,012
|
|
|
|
84,389
|
|
|
|
98,527
|
|
|
|
132,912
|
|
|
|
158,539
|
|
Service
|
|
|
277,999
|
|
|
|
224,734
|
|
|
|
286,980
|
|
|
|
304,712
|
|
|
|
564,979
|
|
|
|
529,446
|
|
Total
Revenue
|
|
$
|
434,482
|
|
|
$
|
416,458
|
|
|
$
|
473,243
|
|
|
$
|
537,492
|
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
The
following table provides information regarding the total sales mix as a percent
of total revenue for fiscal years 2009 and 2008:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
Hardware
|
|
|
23.1
|
%
|
|
|
27.9
|
%
|
Software
|
|
|
14.7
|
%
|
|
|
16.6
|
%
|
Service
|
|
|
62.2
|
%
|
|
|
55.5
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
For fiscal year 2009, total revenue was
approximately $907.7 million, a decrease of approximately $46.2 million, or 4.8%
compared to the fiscal year 2008 due to the following:
|
·
|
The
unfavorable foreign currency exchange rate fluctuations, for substantially
all foreign currencies against the U.S. dollar, negatively affected total
revenue by approximately $54.5
million;
|
|
·
|
Hardware
and software sales volume decreased by 17% and 10%, respectively, compared
to fiscal year 2008. We believe these decreases were due to a
slow-down in demand from our customers as a result of adverse global
economic conditions.
|
|
·
|
The
decreases noted above were offset partially by additional services revenue
generated by Fry, a company that we acquired in August 2008, and an
additional 5% increase in services sales volume compared to fiscal year
2008.
|
The international
segment revenue for the fiscal year ended June 30, 2009 decreased by
approximately $64.2 million compared to the fiscal year 2008. The
unfavorable foreign currency exchange rate fluctuations negatively affected
total revenue by approximately $54.5 million. The hardware and
software sales volume decreased 17% and 4%, respectively, both compared to
fiscal year 2008. We believe the decreases in hardware and software
sales volume were due to a slowdown in demand from our customers because of
adverse global economic conditions. The decreases discussed above
were partially offset by a 6% increase in services sales volume compared to
fiscal year 2008. The increase in services sales volume was due to
the continued expansion of our customer base coupled with increased recurring
support revenue from existing customers (primarily through purchase of
additional services).
U.S. segment revenue increased
approximately $18.0 million for the fiscal year ended June 30, 2009 compared to
the fiscal year 2008. The increase was primarily the result of
additional services revenue generated as a result of the acquisition of Fry in
August 2008 and the continued expansion of our customer base coupled with
increased recurring support revenue from existing customers (primarily through
purchase of additional services). This increase was partially offset
by 18% decrease in hardware and 19% decrease in software revenues, both compared
to fiscal year 2008. We believe these decreases were due to a
slowdown in demand from our customers because of adverse U.S. and global
economic conditions.
Cost
of Sales
The following table provides
information regarding the cost of sales in fiscal years 2009 and
2008:
|
|
Fiscal
Year
Ended
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
(in thousands)
|
|
Cost
of
Sales
|
|
|
%
of
Related
Revenue
|
|
|
Cost
of
Sales
|
|
|
%
of
Related
Revenue
|
|
Hardware
|
|
$
|
135,033
|
|
|
|
64.4
|
%
|
|
$
|
171,782
|
|
|
|
64.6
|
%
|
Software
|
|
|
25,570
|
|
|
|
19.2
|
%
|
|
|
33,135
|
|
|
|
20.9
|
%
|
Service
|
|
|
264,883
|
|
|
|
46.9
|
%
|
|
|
247,954
|
|
|
|
46.8
|
%
|
Total
Cost of Sales
|
|
$
|
425,486
|
|
|
|
46.9
|
%
|
|
$
|
452,871
|
|
|
|
47.5
|
%
|
For fiscal year 2009, cost of sales as
a percent of revenue decreased 0.6% to 46.9% compared to fiscal year 2008.
Hardware cost of sales as a percent of related revenue decreased primarily as a
result of a lower freight costs as compared to fiscal year 2008. This decrease
was partially offset by an increase in the inventory reserve provision of
approximately $1.3 million, including, approximately $0.7 million related to
potentially obsolete products resulting from adjustments to our cost structure
in one of our locations. Software cost of sales as a percent of related revenue
decreased primarily due to a lower cost of sales with respect to third party
software and a decrease in capitalized software amortization expense (included
in software cost of sales) as a percent of software revenue as compared to
fiscal year 2008. Service cost of sales as a percent of related revenue was
constant compared to fiscal year 2008. The foreign currency exchange rate
fluctuations decreased our cost of sales for the fiscal year 2009 by
approximately $30.2 million.
The foreign currency exchange rate fluctuations decreased our
SG&A expenses for the fiscal year 2009 by approximately $15.5 million
compared to fiscal year 2008.
Selling,
General and Administrative (“SG&A”) Expenses
SG&A expenses decreased
approximately $25.7 million to approximately $281.2 million compared to
approximately $306.9 million in fiscal year 2008. As a percent of
revenue, SG&A expenses decreased 1.2% to 31.0% compared to 32.2% in fiscal
year 2008 primarily due to:
|
·
|
Our
ability to manage our variable costs, mainly our compensation related
expenses; and,
|
|
·
|
The
decrease in non-cash share-based compensation expense, included in
SG&A expenses, for fiscal year 2009 to approximately $13.1 million
compared to non-cash share based compensation expense of approximately
$16.2 million for fiscal year 2008. See “Share-Based
Compensation Expenses” below for further
information.
|
|
·
|
Foreign
currency exchange rate fluctuations, which decreased our SG&A expenses
for the fiscal year 2009 by approximately $15.5 million compared to fiscal
year 2008.
|
The
decreases in SG&A noted above were partially offset by:
|
·
|
Approximately
$3.1 million in restructuring charges in fiscal year 2009, primarily
reflecting adjustments to our cost structure to address lower sales volume
in certain of our locations. The charge included approximately
$1.5 million in employee related costs and approximately $1.6 million in
occupancy related costs for certain of our facilities that we
vacated.
|
|
·
|
The
higher percentage of revenue represented by our fixed costs due to lower
revenue in fiscal year 2009 as compared to fiscal year 2008;
and,
|
|
·
|
An
increase in our bad debt expenses of approximately $1.4 million, due to
adverse U.S. and global economic
conditions.
|
Research
and Development (“R&D”)
R&D expenses consist primarily of
labor costs less capitalized software development costs. The
following table provides information regarding our R&D expenses in fiscal
years 2009 and 2008:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
R&D
labor and other costs
|
|
$
|
43,100
|
|
|
$
|
42,048
|
|
Capitalized
software development costs
|
|
|
(470
|
)
|
|
|
(1,919
|
)
|
Total
R&D expenses
|
|
$
|
42,630
|
|
|
$
|
40,129
|
|
%
of Revenue
|
|
|
4.7
|
%
|
|
|
4.2
|
%
|
Foreign currency exchange rate
fluctuations decreased our R&D expenses for fiscal year 2009 by
approximately $1.0 million.
Depreciation
and Amortization Expenses
Depreciation and amortization expenses
for fiscal year 2009 increased approximately $2.4 million to approximately $17.5
million compared to approximately $15.1 million in fiscal year
2008. The increase was primarily due to additional depreciation
expenses on capital expenditures since June 30, 2008 and the acquisition of
Fry. These increases were partially offset by foreign currency
exchange rate fluctuations which decreased depreciation and amortization
expenses for the fiscal year 2009 by approximately $0.9 million.
Share-Based
Compensation Expenses
For fiscal years 2009 and 2008, we
recognized non-cash share-based compensation expense of approximately $13.9
million and $17.2 million, respectively. The SG&A expenses and
R&D expenses discussed above included the following allocations of non-cash
share-based compensation expense:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2009
|
|
|
2008
|
|
SG&A
|
|
$
|
13,108
|
|
|
$
|
16,213
|
|
R&D
|
|
|
792
|
|
|
|
1,016
|
|
Total
non-cash share-based compensation expense
|
|
|
13,900
|
|
|
|
17,229
|
|
Income
tax benefit
|
|
|
(4,100
|
)
|
|
|
(4,083
|
)
|
Total
non-cash share-based compensation expense, net of tax
benefit
|
|
$
|
9,800
|
|
|
$
|
13,146
|
|
Impact
on diluted net income per share attributable to MICROS Systems, Inc.
common shareholders
|
|
$
|
0.12
|
|
|
$
|
0.16
|
|
The non-cash share-based compensation
expense allocated to SG&A for the 2009 and 2008 fiscal years included
approximately $0.8 million and $3.2 million, respectively, related to the grant
of options during those fiscal years to our Chairman, President, and Chief
Executive Officer, A.L. Giannopoulos. In accordance with the terms of
our option plan, as he was over the retirement age of 62, any options that he
holds that have not yet vested at the time of his retirement will vest
immediately upon his retirement. Although Mr. Giannopoulos had not
retired, we expensed 100% of the share-based compensation expense related to his
option grant because he was over the age of 62 at the time he received the
options.
Income
from Operations
Income from operations for fiscal year
2009 increased approximately $1.9 million, or 1.4%, to approximately $140.8
million, compared to approximately $138.9 million in fiscal year
2008. The increase principally reflects our ability to manage our
variable costs, mainly our compensation related expenses. Foreign
currency exchange rate fluctuations decreased our income from operations for the
fiscal year 2009 by approximately $7.0 million.
Non-operating
Income (Expense)
Net non-operating income for fiscal
year 2009 was approximately $6.0 million compared to approximately $15.0 million
for fiscal year 2008. The decrease of approximately $9.0 million
reflected:
|
·
|
A
decrease in interest income of approximately $6.0 million due to overall
lower interest earned on cash and cash equivalents and investment
(short-term and long-term)
balances;
|
|
·
|
The
credit based other-than-temporary impairment losses of approximately $1.3
million for investments in auction rate securities classified as long-term
investments on our consolidated balance
sheets.
|
|
·
|
The
inclusion in fiscal year 2008 of non-operating income of approximately
$1.7 million for a grant received in fiscal year 2008 from the Irish
Development Authority related to the number of jobs we created in
Ireland.
|
|
·
|
A
partially offsetting $1.1 million decrease in the foreign currency
exchange transaction loss from approximately $1.4 million in fiscal year
2008 to approximately $0.3 million in fiscal year
2009.
|
Income
Tax Expense
The effective tax rates for fiscal
years 2009 and 2008 were 33.5% and 34.0%, respectively. The effective
tax rates for the fiscal years 2009 and 2008 were less than the 35.0% U.S.
statutory federal income tax rate, mainly due to the mix of earnings from
jurisdictions that have a lower statutory tax rate than the U.S., our continued
assertion to permanently reinvest the cumulative unremitted earnings of our
significant non-US affiliates, and tax benefits realized upon the expiration of
statutes of limitations or settlements with tax authorities, These benefits were
partially offset by the recognition of uncertain tax
positions, non-deductible compensation items including , non-cash
share-based compensation , valuation allowances, creditable foreign withholding
taxes and the inclusion of foreign income in our U.S. tax base.
The decrease in the effective tax rate
for fiscal year 2009 as compared to fiscal year 2008 was primarily attributable
to the mix of earnings from jurisdictions that have a lower statutory tax rate
than the U.S., decreases in non-deductible compensation items including,
non-cash share-based compensation and reductions in the recognition of uncertain
tax positions due to the final settlement of certain tax audits, and the
expiration of statutes of limitations, partially offset by increases in tax
primarily attributable to increases in valuation allowances and
foreign withholding taxes.
Net
income attributable to MICROS Systems, Inc. and Diluted Net Income per Share
Attributable to MICROS Systems, Inc. Common Shareholders
Net income attributable to MICROS
Systems, Inc. for fiscal year 2009 decreased approximately $4.4 million, or
4.4%, to approximately $96.3 million, compared to approximately $100.7 million
in fiscal year 2008. The decrease is mainly due to an overall
decrease in sales volume and overall lower interest earned on our cash and cash
equivalents and short-term investments. These decreases were
substantially offset by our ability to manage our variable costs, mainly our
compensation related expenses, and a decrease in non-cash share-based
compensation expense, all of which are explained above in more
detail. Foreign currency exchange rate fluctuations decreased our net
income attributable to MICROS Systems, Inc. for fiscal year 2009 by
approximately $6.4 million.
Diluted net income per share
attributable to MICROS Systems, Inc. common shareholders for fiscal year 2009
was $1.17 per share compared to $1.20 per share for fiscal year
2008.
RECENT
ACCOUNTING STANDARDS
Recently
Adopted Accounting Pronouncements
On July
1, 2009, we adopted authoritative guidance issued by the Financial Accounting
Standards Board (“FASB”) on business combinations. The guidance
addresses the manner in which the acquirer of a business recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquired
business. This guidance also provides standards for recognizing and
measuring the goodwill acquired in a business combination and for disclosure of
information to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. Our acquisition of
TIG Global on December 31, 2009 was accounted for under this
guidance.
On July 1, 2009, we adopted
authoritative guidance issued by the FASB that changes the accounting and
reporting for non-controlling interests. This guidance requires,
among other things, that: non-controlling interests be reported as a component
of equity; changes in a parent’s ownership interest while the parent retains its
controlling interest be accounted for as equity transactions; and any retained
non-controlling equity investment upon the deconsolidation of a subsidiary
initially be measured at fair value. The adoption of this guidance
did not have a material impact on our consolidated financial
statements.
On July 1, 2009, we adopted
authoritative guidance issued by the FASB which revises the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset. This guidance is
intended to improve the consistency between the useful life of a recognized
intangible asset and the period of expected cash flows used to measure the fair
value of the asset under other U.S. generally accepted accounting
principles. The adoption of this guidance did not have a material
impact on our consolidated financial statements.
On July 1, 2009, we adopted
authoritative guidance issued by the FASB on fair value measurement for
nonfinancial assets and liabilities, other than non-financial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), which already were subject
to FASB guidance. The adoption of this guidance did not have a
material impact on our consolidated financial statements.
In January 2010, we adopted
authoritative guidance and disclosure requirements issued by the FASB related to
recurring and nonrecurring fair value measurements. The guidance requires new
disclosures on the transfers of assets and liabilities between Level 1 inputs
(quoted prices in active market for identical assets or liabilities) and Level 2
inputs (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally,
the guidance requires separate disclosure of activities on purchases, sales,
issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). The adoption
of this guidance, other than required additional disclosures on the activities
for Level 3 fair value measurements which is effective for us beginning July 1,
2011, did not have a material impact on our consolidated financial
statements.
Recent
Accounting Pronouncements Not Yet Adopted
In October 2009, the FASB issued
authoritative guidance on revenue arrangements with multiple deliverables that
are outside the scope of software revenue recognition guidance. Under
the guidance, when vendor-specific objective evidence or third-party evidence of
selling price is not available, a best estimate of the selling price is required
to separate deliverables and allocate arrangement consideration based on the
relative selling prices of the separate deliverables (the “relative selling
price method”). The relative selling price method allocates any
discount in the arrangement proportionately to each deliverable on the basis of
each deliverable’s selling price. The guidance also significantly
expands related disclosure requirements. This standard is effective
for us beginning July 1, 2010. We are continuing to evaluate the
impact that the adoption of this guidance will have on our consolidated
financial statements.
In October 2009, the FASB also issued
authoritative guidance on revenue recognition for arrangements that include
software elements. Under the guidance, tangible products containing
software components and non-software components that function together to
deliver the tangible product’s essential functionality are excluded from the
scope of software revenue recognition guidance and will be subject to other
relevant revenue recognition guidance. This guidance will become
effective for us beginning July 1, 2010. We do not believe the
adoption of this guidance will have a material impact on our consolidated
financial statements.
LIQUIDITY
AND CAPITAL RESOURCES
Sources
and Uses of Cash
The Company’s consolidated statement of
cash flows summary for the 2010, 2009, and 2008 fiscal years is as
follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net
cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
201,869
|
|
|
$
|
165,912
|
|
|
$
|
163,648
|
|
Investing
activities
|
|
|
(66,340
|
)
|
|
|
(193,219
|
)
|
|
|
(15,845
|
)
|
Financing
activities
|
|
|
(20,539
|
)
|
|
|
(37,195
|
)
|
|
|
(37,463
|
)
|
Operating
activities:
Net cash provided by operating
activities for fiscal year 2010 increased approximately $36.0 million compared
to fiscal year 2009 which was primarily due to an increase in net income of
approximately $17.7 million before adjusted for an increased performance based
compensation related accruals of approximately $16.6 million.
Net cash provided by operating
activities for fiscal year 2009 increased approximately $2.3 million compared to
fiscal year 2008 primarily due a decrease in net operating assets for the fiscal
year ended June 30, 2009 compared to fiscal year 2008.
Investing
activities:
Net cash used by investing activities
for fiscal year 2010 was approximately $66.3 million reflecting approximately
$30.7 million used primarily in connection with the acquisition of TIG Global in
December 2009. Additionally, approximately $11.5 million was used to purchase
property, plant and equipment and to internally develop software to be licensed
to others. We used approximately $24.3 million to purchase investments, net of
proceeds from sales of investments.
Net cash used by investing activities
for fiscal year 2009 was approximately $193.2 million reflecting approximately
$37.2 million used in connection with the acquisition of Fry in August 2008.
Additionally, approximately $13.8 million was used to purchase property, plant
and equipment and to internally develop software to be licensed to others. We
used approximately $142.4 million to purchase investments, net of proceeds from
sales of investments (including approximately $5.2 million received from the
sales of auction rate securities.)
Net cash used by investing activities
for fiscal year 2008 was approximately $15.8 million reflecting approximately
$16.1 million used in connection with various acquisitions, primarily the
acquisition of Check-in Data for which we used approximately $11.5
million. Additionally, approximately $14.9 million was used to
purchase property, plant and equipment and to internally develop software to be
licensed to others. We received approximately $14.9 million from the
sale of our investments, net of cash used to purchase
investments. Included in the sales proceeds was approximately $17.5
million from the sales of auction rate securities.
Financing
activities:
Net cash used in financing activities
for fiscal year 2010 was approximately $20.5 million, reflecting approximately
$47.6 million used to purchase our stock. This amount was partially
offset by proceeds from stock option exercises of approximately $23.3 million
and realized tax benefits from stock option exercises of approximately $3.5
million.
Net cash used in financing activities
for fiscal year 2009 was approximately $37.2 million, reflecting approximately
$22.2 million used to purchase our stock, and principal payments of
approximately $18.1 million on the line of credit and long-term debt that we
assumed as a result of our acquisition of Fry in August 2008. These
amounts were partially offset by proceeds from stock option exercises of
approximately $2.9 million and realized tax benefits from stock option exercises
of approximately $1.0 million.
Net cash used in financing activities
for fiscal year 2008 was approximately $37.5 million, reflecting approximately
$74.3 million used to purchase our stock, partially offset by proceeds from
stock option exercises of approximately $27.9 million and realized tax benefits
from stock option exercises of approximately $11.0 million.
All cash and cash equivalents and
short-term investments are being retained for operations, expansion of the
business and the repurchase of our stock.
Capital
Resources
At June 30, 2010, we had two credit
agreements (the “Credit Agreements”) that in the aggregate provided a $65.0
million multi-currency committed line of credit. Effective July 30,
2010, the Credit Agreements were renewed and extended through July 31, 2013,
subject to some changes in terms, including a reduction in the overall limit on
the line to $50.0 million (a change made at our request), the addition and
deletion of certain subsidiaries as co-borrowers, and a reduction in certain
fees payable to the lenders under certain circumstances. See Note 7
“Line of Credit,” in the Notes to the Consolidated Financial Statements included
in this report. As of June 30, 2010, we had approximately $1.4
million outstanding under the Credit Agreements and had applied approximately an
additional $0.4 million to guarantees.
We also have a credit relationship with
a European bank in the amount of EUR 1.0 million (approximately $1.2 million at
the June 30, 2010 exchange rate). As of June 30, 2010, there were no
balances outstanding on this credit facility, but approximately EUR 0.6 million
(approximately $0.7 million at the June 30, 2010 exchange rate) of the credit
facility had been used for guarantees.
As of June 30, 2010, we had
approximately $63.6 million borrowing capacity under all of the credit
facilities described above (as noted above, the overall limit on our line of
credit decreased by $15.0 million on July 30, 2010). The
weighted-average interest rate on the outstanding balances under the Credit
Agreements as of June 30, 2010 was 1.4%.
We do not currently invest in financial
instruments designed to protect against interest rate fluctuations, although we
will continue to evaluate the need to do so in the future.
We believe that our cash and cash
equivalents, short-term investments, cash generated from operations and our
available lines of credit are sufficient to provide our working capital needs
for the foreseeable future. Based on our expected operating cash
flows and sources of cash, we do not believe that any limitations on liquidity
of our auction rate securities will have a material impact on our overall
ability to meet our liquidity needs. In light of current economic
conditions generally and in light of the overall performance of the stock market
in recent periods, we cannot assume that funds would be available from other
sources if we were required to fund significant acquisitions or any
unanticipated and substantial cash needs. We currently anticipate
that our property, plant and equipment expenditures for fiscal year 2011 will be
approximately $12 million.
The following table provides certain
financial indicators of our liquidity and capital resources as of June 30, 2010
and June 30, 2009:
|
|
As of June 30,
|
|
(in
thousands, except ratios)
|
|
2010
|
|
|
2009
|
|
Cash
and cash equivalents and short-term investments
(1)
|
|
$
|
545,298
|
|
|
$
|
438,936
|
|
Available
credit facilities
|
|
$
|
66,223
|
|
|
$
|
66,403
|
|
Outstanding
credit facilities
|
|
|
(1,442
|
)
|
|
|
(1,090
|
)
|
Outstanding
guarantees
|
|
|
(1,187
|
)
|
|
|
(778
|
)
|
Unused
credit facilities
|
|
$
|
63,594
|
|
|
$
|
64,535
|
|
Working
capital
(2)
|
|
$
|
468,047
|
|
|
$
|
416,593
|
|
MICROS
Systems, Inc. shareholders’ equity
|
|
$
|
783,380
|
|
|
$
|
718,997
|
|
Current
ratio
(3)
|
|
|
2.50
|
|
|
|
2.58
|
|
|
(1)
|
Does
not include approximately $53.3 million and $57.8 million invested in
auction rate securities, classified as long-term investments in our
Consolidated Balance Sheet as of June 30, 2010 and 2009,
respectively.
|
|
(2)
|
Current
assets less current liabilities.
|
|
(3)
|
Current
assets divided by current liabilities. The Company does not
have any long-term debt.
|
Inflation
We have not experienced any significant
impact as a result of inflation.
Contractual
Obligations
The following table summarizes our
contractual arrangements at June 30, 2010:
|
|
Payments
due
by
period
|
|
(in thousands)
|
|
Total
|
|
|
Less
than
1
year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
More
than
5
years
|
|
Operating
lease obligations
|
|
$
|
99,778
|
|
|
$
|
26,944
|
|
|
$
|
38,447
|
|
|
$
|
25,817
|
|
|
$
|
8,570
|
|
SERP
liability*
|
|
|
4,654
|
|
|
|
96
|
|
|
|
181
|
|
|
|
650
|
|
|
|
3,727
|
|
Purchase
obligations
|
|
|
576
|
|
|
|
576
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Capital
lease obligations
|
|
|
415
|
|
|
|
189
|
|
|
|
186
|
|
|
|
40
|
|
|
|
—
|
|
Total
|
|
$
|
105,423
|
|
|
$
|
27,805
|
|
|
$
|
38,814
|
|
|
$
|
26,507
|
|
|
$
|
12,297
|
|
*
|
The
term “SERP” refers to our Supplemental Executive Retirement
Plan. See Note 16, “Employee Benefit Plans” in the Notes to
Consolidated Financial Statements included in this report for further
information.
|
Due to the uncertainty with respect to
the timing of future cash flows associated with our unrecognized income tax
benefits at June 30, 2010, we are unable to reasonably estimate settlements with
taxing authorities. The above contractual obligations table does not
reflect unrecognized income tax benefits of approximately $21.3
million. See Note 13 “Income Taxes” in the Notes to Consolidated
Financial Statements included in this report.
FORWARD-LOOKING
STATEMENTS
The preceding management’s discussion
and analysis of financial condition and results of operations should be read in
conjunction with the consolidated financial statements and the related notes and
other financial information included elsewhere in this Annual Report on Form
10-K. Certain statements contained in this Annual Report on Form 10-K
that are not historical facts are forward looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Our actual results may differ materially from those
anticipated in these forward-looking statements.
Examples of such forward-looking
statements in this Annual Report on Form 10-K include the
following:
|
·
|
Item
1, “Business,” statements regarding the future direction of PMS technology
and the growth of the OPERA suite of products, development and release of
additional products such as the Fidelio Cruise Crew Management System,
business strategy for and in connection with our new TIG Global
subsidiary, our strategy for product growth in restaurant software, trends
in retail software, demand shift toward hosted applications and away from
traditional on-premise implementations, our global distribution network,
our expectations regarding sourcing of materials and equipment, our
expectations regarding labor relations and employment, our expectations
regarding interest rate fluctuations and strategies to counter interest
rate fluctuations, the appropriateness of reliance on statutory and common
law protections for our intellectual property, the risks associated with
third party misappropriation of our intellectual property, competition,
labor relations, quarterly results, the anticipated effect of the U.S.
Government exercising a termination for convenience under one or more
contracts that we have with the U.S. Government, and our belief that
compliance with environmental laws and regulations will not have a
material effect on expenditures, earnings, or our competitive
position;
|
|
·
|
Item
1A, “Risk Factors,” regarding the anticipated or potential impact on our
business, financial results, or competitive position of the various risks
described in that section;
|
|
·
|
Item
2, “Properties,” regarding the anticipated availability of additional
space;
|
|
·
|
Item
3, “Legal Proceedings,” regarding the likely effect of litigation on our
results of operations or financial position;
and
|
|
·
|
Item
7A, “Quantitative and Qualitative Disclosures about Market
Risk.”
|
Additional
forward-looking statements are contained elsewhere in this report, including in
the preceding Management’s Discussion and Analysis of Financial Condition and
Results of Operations. Such statements include the
following:
|
(i)
|
our
statements about the growth and direction of the hospitality and retail
industries generally, and our analysis of the growth and direction of
various sectors within those
industries;
|
|
(ii)
|
our
expectation that product and service margins may decline in response to
the competitive nature of our
market;
|
|
(iii)
|
our
statements regarding the effects of foreign currency rate fluctuations (in
particular, Euro and British pound sterling) on our financial
performance;
|
|
(iv)
|
our
expectations that the customers with whom we do the largest amount of
business will fluctuate from year to year, and our statements about the
effects of large customer orders on our quarterly earnings, revenues, and
total revenues;
|
|
(v)
|
our
statements regarding the impact on financial results in future periods if
we determine that the financial condition of customers has
deteriorated;
|
|
(vi)
|
our
statements regarding the impact on financial results in future periods if
we misjudge the remaining economic life of a
product;
|
|
(vii)
|
our
statements concerning the fluctuations in the market price of our common
stock, whether as a result of variations in our quarterly operating
results or other factors;
|
|
(viii)
|
our
belief that any existing legal claims or proceedings will not have a
material adverse effect on our results of operations or financial
position;
|
|
(ix)
|
our
beliefs about our competitive
strengths;
|
|
(x)
|
our
expectations regarding effective tax rates in future
periods;
|
|
(xi)
|
our
expectations regarding the impact or lack of impact on our financial
position and results of operations of the application of recent accounting
standards;
|
|
(xii)
|
our
expectations about the adequacy of our cash flows and our available lines
of credit to meet our working capital needs, and our ability to raise
additional funds if and when
needed;
|
|
(xiii)
|
our
expectations about our capital expenditures for future
periods;
|
|
(xiv)
|
our
expectations that our exposure to interest rate risk will not materially
change in the future;
|
|
(xv)
|
our
expectation that we will evaluate our need to invest in instruments to
protect against interest rate fluctuations and our exposure to such
interest rate risk;
|
|
(xvi)
|
our
statements about the effects on our revenue recognition as a result of
changes to a customers’ delivery requirements or a products’
completion;
|
|
(xvii)
|
our
statements regarding our ability to increase sales of our higher margin
products;
|
|
(xviii)
|
our
expected costs associated with modifying our products to comply with
applicable legal rules, regulations, and guidelines, including the credit
card associations’ security and data protection rules,
and
|
|
(xix)
|
our
expectations regarding valuation and liquidity of auction rate securities
in which we have invested.
|
There are a number of
important factors that could cause actual results to differ materially from
those in the forward looking statements. These may include: changes
in applicable laws and regulations, other activities of governments,
governmental agencies, or other regulatory bodies that affect our products,
services, or business operations, changes in accounting and auditing rules (and
changes in the interpretations of those rules), as well as those matters
described in Item 1A, “Risk Factors.”
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
We are exposed to interest rate risk
and to foreign currency exchange rate risk. See Foreign Sales and
Foreign Market Risks in Part 1 “Business”, and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” above for
information regarding foreign currency exchange risks. Our committed
lines of credit bear interest at a floating rate, which exposes us to interest
rate risks. We manage our exposure to this risk by minimizing, to the
extent feasible, overall borrowing and monitoring available financing
alternatives. At June 30, 2010, we had total borrowings of
approximately $1.4 million, and had not entered into any instruments to hedge
the resulting exposure to interest-rate risk. Management
believes that the fair value of the debt equals its carrying value at June 30,
2010 and June 30, 2009. Our exposure to fluctuations in interest
rates will increase or decrease in the future with increases or decreases in the
outstanding amount under the line of credit. As our total borrowing
as of June 30, 2010 was approximately $1.4 million, a 1% change in interest rate
would have resulted in an immaterial impact on our consolidated financial
position, results of operations and cash flows. Our cash equivalents and our
portfolio of marketable securities, including auction rate securities, are
subject to market risk due to changes in interest rates. The market
value of fixed interest rate securities may be adversely affected by a rise in
interest rates, while floating rate securities may produce less income than
expected if interest rates fall. Should interest rates fluctuate by
1%, the change in value of our marketable securities would not have been
material as of June 30, 2010, but the change in our interest income would
be an increase of approximately $5.5 million based on the cash, cash equivalents
and short term investment balances as of June 30, 2010 for the year then
ended.
To minimize our exposure to credit risk
associated with financial instruments, we place our temporary cash investments
with high-credit-quality institutions, generally with bond rating of “A” and
above. See Note 2 “Financial Instruments and Fair Value Measurements”
in the Notes to Consolidated Financial Statements for a discussion regarding
auction rate securities.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
See the Index to Consolidated Financial
Statements on page 42 of this report.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
Not applicable.
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of the end of the period covered by this report are
functioning effectively to provide reasonable assurance that the information
required to be disclosed by us in reports filed under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding
disclosure.
MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management’s report on internal
control over financial reporting is set forth on
page 43
of this annual report on Form 10-K and is incorporated by reference
herein.
CHANGE
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No change in our internal control over
financial reporting occurred during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
ITEM
9B.
|
OTHER
INFORMATION
|
Not applicable.
PART
III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
|
See Part I, Item 1 for information
regarding the Company’s Executive Officers. Other information
required by this Item 10 will be set forth in the Company’s Proxy Statement
under the captions “Information as to Nominees”, “Section 16(a) Beneficial
Ownership Reporting Compliance”, “Corporate Governance,” and “Audit Committee”
and other appropriate sections of the Proxy Statement, and that information is
incorporated herein by reference.
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
The information required by Item 11
will be set forth in the Company’s Proxy Statement under the caption “Executive
Compensation,” and that information is incorporated herein by
reference.
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Except for the information set forth
below, the information required by Item 12 will be set forth in the Company’s
Proxy Statement under the caption “Security Ownership of Certain Beneficial
Owners and Management,” and that information is incorporated herein by
reference.
EQUITY
COMPENSATION PLAN INFORMATION
|
|
As of June 30, 2010
|
|
Plan category
|
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants
|
|
|
Weighted-Average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
6,573,716
|
|
|
$
|
24.06
|
|
|
|
3,496,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
6,573,716
|
|
|
$
|
24.06
|
|
|
|
3,496,581
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
|
The information required by Item 13
will be set forth in the Company’s Proxy Statement under the captions to
“Certain Relationships and Related Party Transactions” and “Corporate
Governance” and that information is incorporated herein by
reference.
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The information required by Item 14
will be set forth in the Company’s Proxy Statement under the caption
“Independent Registered Public Accounting Firm,” and that information is
incorporated herein by reference.
PART
IV
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT
SCHEDULE
|
(a)
|
Exhibits
and Financial Statement
Schedule:
|
|
(1)
|
Financial
Statements – See the Index to Consolidated Financial Statements on page
42
|
|
(2)
|
Schedule
II – See the Index to Consolidated Financial Statements on page
42
|
|
3(i)
|
Articles
of Incorporation of the Company are incorporated herein by reference to
Exhibit 3 to the Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 1990.
|
|
3(i)(a)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
period ended March 31, 1997.
|
|
3(i)(b)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
period ended March 31, 1998.
|
|
3(i)(c)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Form 8-K filed on November 16,
2007.
|
|
3(ii)
|
By-laws
of the Company, as amended, are incorporated herein by reference to
Exhibit 3(ii) to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 2008.
|
|
10(a)*
|
MICROS
Systems, Inc. 1991 Stock Option Plan as amended, is incorporated herein by
reference to Exhibit A to the Proxy Statement of the Company for the 2009
Annual Meeting of Shareholders
|
|
10(b)*
|
Employment
Agreement dated June 1, 1995 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10e to the
Annual Report on Form 10-K of the Company for the fiscal year ended June
30, 1995.
|
|
10(b)(1)*
|
First
Amendment to Employment Agreement dated February 6, 1997 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 1996.
|
|
10(b)(2)*
|
Second
Amendment to Employment Agreement dated February 1, 1998 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 1997.
|
|
10(b)(3)*
|
Third
Amendment to Employment Agreement dated September 8, 1999 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10g to the Annual Report on Form 10-K of the Company for the
fiscal year ended June 30, 1999.
|
|
10(b)(4)*
|
Fourth
Amendment to Employment Agreement dated November 19, 2001 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 2001.
|
|
10(b)(5)*
|
Fifth
Amendment to Employment Agreement dated November 15, 2002 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 2002.
|
|
10(b)(6)*
|
Sixth
Amendment to Employment Agreement dated January 28, 2004 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 2003.
|
|
10(b)(7)*
|
Seventh
Amendment to Employment Agreement dated August 9, 2005 between MICROS
Systems, Inc. and A. L. Giannopoulos is incorporated herein by reference
to Exhibit 10 to the Current Report on Form 8-K filed on August 11,
2005.
|
|
10(b)(8)*
|
Eighth
Amendment to Employment Agreement dated June 6, 2006, between MICROS
Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to
Exhibit 10 to the Current Report on Form 8-K filed on June 8,
2006.
|
|
10(b)(9)*
|
Ninth
Amendment to Employment Agreement dated November 17, 2006, between MICROS
Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to
Exhibit 10 to the Current Report on Form 8-K filed on November 21,
2006.
|
|
10(b)(10)*
|
Tenth
Amendment to Employment Agreement dated June 12, 2008, between MICROS
Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to
Exhibit 10 to the Current Report on Form 8-K filed on June 13,
2008.
|
|
10(b)(11)*
|
Eleventh
Amendment to Employment Agreement dated November 21, 2008, between MICROS
Systems, Inc. and A.L. Giannopoulos is incorporated herein by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed on November 24,
2008.
|
|
10(b)(12)* Twelfth
Amendment to Employment Agreement dated August 24, 2010, between
MICROS Systems, Inc. and A.L. Giannopoulos is incorporated herein by
reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
August 26, 2010.
|
|
10(c)*
|
Employment
Agreement dated May 28, 1997 between MICROS Systems, Inc. and Thomas L.
Patz is incorporated herein by reference to Exhibit 10 to the Annual
Report on Form 10-K of the Company for the fiscal year ended June 30,
1997.
|
|
10(c)(1)*
|
First
Amendment to Employment Agreement dated October 1, 1998 between MICROS
Systems, Inc. and Thomas L. Patz (filed herewith as Exhibit
10(c)(1)).
|
|
10(c)(2)*
|
Second
Amendment to Employment Agreement dated November 17, 2006 between MICROS
Systems, Inc. and Thomas L. Patz is incorporated herein by reference to
Exhibit 10 to the Current Report on Form 8-K filed on November 21, 2006
.
|
|
10(d)*
|
Employment
Agreement dated November 19, 2005, between MICROS Systems, Inc. and
Jennifer Kurdle is incorporated herein by reference to Exhibit 10 to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2009.
|
|
10(e)*
|
Employment
Agreement dated May 28, 1997 between MICROS Systems, Inc. and Gary C.
Kaufman is incorporated herein by reference to Exhibit 10 to the Annual
Report on Form 10-K of the Company for the fiscal Year ended June 30,
1997.
|
|
10(e)(1)*
|
First
Amendment to Employment Agreement dated October 1, 1998 between MICROS
Systems, Inc. and Gary C. Kaufman is incorporated herein by reference to
Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the
period ended December 31, 1998.
|
|
10(e)(2)*
|
Second
Amendment to Employment Agreement dated November 17, 2006 between
MICROS Systems, Inc. and Gary C. Kaufman is incorporated herein by
reference to Exhibit 10 to the Current Report on Form 8-K filed on
November 21, 2006.
|
|
10(f)
|
Restated
Supplemental Executive Retirement Plan, as approved by the Board of
Directors on
|
|
April
27, 2005, is incorporated herein by reference to Exhibit 10 to the Annual
Report on Form 10-K for the fiscal year ended June 30,
2006.
|
|
10(g)
|
Amended
and Restated Credit Agreement, effective as of July 29, 2005, among MICROS
Systems, Inc., DV Technology Holdings Corporation, Datavantage
Corporation, MICROS Fidelio Nevada, LLC, MSI Delaware, LLC, MICROS-Fidelio
Worldwide, Inc., and JTECH Communications, Inc. as Borrower, Bank of
America, N.A., as administrative agent, swing line lender and L/C issuer,
and Wachovia Bank, N.A., and US Bank, N.A., and Banc of America Securities
LLC, as sole lead arranger and book manager, is incorporated herein by
reference to Exhibit 10 to the Annual Report on Form 10-K for the fiscal
year ended June 30, 2005.
|
|
10(g)(1)
|
First
Amendment to Credit Agreements, dated December 11, 2008 among MICROS
Systems, Inc. DV Technology Holdings Corporation, Datavantage Corporation,
MICROS Fidelio Nevada, LLC, MSI Delaware, LLC, Micros Fidelio Worldwide,
Inc., JTECH Communications, MICROS-Fidelio (Ireland) Ltd. as Guarantor,
Bank of America, N.A., as Administrative Agent, and Bank of America, N.A.,
Wachovia Bank, N.A., and U.S. Bank, N.A., as Lenders is incorporated
herein by reference to Exhibit 10(b) to the Quarterly Report on Form 10-Q
of the Company for the period ended December 31,
2008.
|
|
10(g)(2)
|
Second
Amendment to Credit Agreements, dated July 30, 2010 among MICROS Systems,
Inc. DV Technology Holdings Corporation, Datavantage Corporation, TIG
Global LLC, Fry, Inc., JTECH Communications, and Micros-Fidelio Worldwide,
Inc., MICROS-Fidelio (Ireland) Ltd. as Guarantor, Bank of America, N.A.,
as Administrative Agent, and Bank of America, N.A., Wells Fargo, N.A., and
U.S. Bank, N.A., as Lenders (filed herewith as Exhibit
10(g)).
|
|
10(h)
|
Amended
and Restated Credit Agreement, effective as of July 29, 2005, among
MICROS-Fidelio (Ireland) Ltd., MICROS-Fidelio Systems (U.K.) Ltd.,
MICROS-Fidelio España S.L., MICROS Fidelio (Canada), Ltd., MICROS-Fidelio
Brazil, Ltda., MICROS-Fidelio France S.A.S., Hospitality Technologies,
S.A., MICROS-Fidelio Mexico S.A. de C.V., MICROS Systems Holding GmbH,
MICROS-Fidelio GmbH, MICROS-Fidelio Software Portugal Unipessoal Lda,
MICROS-Fidelio (Thailand) Co., Ltd., MICROS-Fidelio Singapore Pte Ltd.,
MICROS-Fidelio Software (Philippines), Inc., MICROS-Fidelio Japan Ltd.,
MICROS-Fidelio Australia Pty. Ltd., MICROS-Fidelio Hong Kong, Ltd.,
Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic Sverige,
A.B., Hotelbk, A.B., as Borrower, Bank Of America, N.A., as Administrative
Agent, swing line lender, and L/C issuer, and Wachovia Bank N.A. and US
Bank N.A., and Banc of America Securities LLC, as sole lead arranger and
book manager is incorporated herein by reference to Exhibit 10 to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2005.
|
|
10(h)(1)
|
Second
Amendment to Credit Agreements, dated July 30, 2010 among MICROS-Fidelio
(Ireland) Ltd., MICROS-Fidelio Systems (U.K.) Ltd., MICROS-Fidelio España
S.L., MICROS Fidelio (Canada), Ltd., MICROS-Fidelio Brazil, Ltda.,
MICROS-Fidelio France S.A.S., Hospitality Technologies, S.A.,
MICROS-Fidelio Mexico S.A. de C.V., MICROS Systems Holding GmbH,
MICROS-Fidelio GmbH, MICROS-Fidelio Software Portugal Unipessoal Lda,
MICROS-Fidelio (Thailand) Co., Ltd., MICROS-Fidelio Singapore Pte Ltd.,
MICROS-Fidelio Software (Philippines), Inc., MICROS-Fidelio Japan Ltd.,
MICROS-Fidelio Australia Pty. Ltd., MICROS-Fidelio Hong Kong, Ltd., Micros
Fidelio Norway A/S, Micros Fidelio Finland Oy, Micros
Fidelio Sverige, A.B., Hotelbk, A.B., as Borrower, Bank Of
America, N.A., as Administrative Agent, swing line lender, and L/C issuer,
and Wells Fargo N.A. and US Bank N.A., and Banc of America Securities LLC,
as sole lead arranger and book manager (filed herewith as Exhibit
10(h)).
|
|
10(i)
|
Lease
Agreement by and between Orix Columbia, Inc. and MICROS Systems, Inc.,
dated August 17, 1998, with respect to the Company’s corporate
headquarters located at 7031 Columbia Gateway Dr., Columbia MD 21046-2289,
as amended by a First Amendment to Lease, dated October 27, 1999, a Second
Amendment to Lease, dated December 26, 2001, and a Third Amendment to
Lease, dated March 1, 2006 and by and between MICROS Systems, Inc. and
Columbia Gateway Office Corporation as successor in interest to Orix
Columbia, Inc. is incorporated herein by reference to Exhibit 10(j) to the
Quarterly Report on Form 10-Q of the Company for the period ended March
31, 2009.
|
|
10(j)
|
Manufacturing
Agreement, by and between MICROS Systems, Inc., and GES Singapore Pte Ltd.
(now known as Venture Group of Singapore), with an effective date of
November 6, 2002 (incorporated herein by reference to Exhibit 10(j) to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2009)
|
|
14
|
Code
of Ethics and Business Practices is incorporated herein by reference to
Exhibit 14 to the Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 2004.
|
|
21
|
Subsidiaries
of the Company (filed herewith)
|
|
23(a)
|
Consent
of Houlihan Smith & Co., Inc. (filed
herewith)
|
|
23(b)
|
Consent
of PricewaterhouseCoopers LLP (filed
herewith)
|
|
31(a)
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934 (filed
herewith)
|
|
31(b)
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934 (filed
herewith)
|
|
32(a)
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
herewith)
|
|
32(b)
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. 1350 (furnished
herewith)
|
* Management
contract or compensatory plan or arrangement.
MICROS
Systems, Inc.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
No.
|
|
|
Management’s
Annual Report on Internal Control Over Financial Reporting
|
43
|
|
|
Financial
Statements:
|
|
Report
of Independent Registered Public Accounting Firm
|
44
|
Consolidated
balance sheets as of June 30, 2010 and 2009
|
45
|
Consolidated
statements of operations for the fiscal years ended June 30, 2010, 2009
and 2008
|
46
|
Consolidated
statements of cash flows for the fiscal years ended June 30, 2010, 2009
and 2008
|
47
|
Consolidated
statements of shareholders’ equity for the fiscal years ended June
30, 2010, 2009 and 2008
|
48
|
Consolidated
statements of comprehensive income for the fiscal years ended June
30, 2010, 2009 and 2008
|
49
|
Notes
to consolidated financial statements
|
50 -
71
|
|
|
Financial
Statement Schedule:
|
|
Schedule
II – Valuation and qualifying accounts and reserves
|
72
|
All other
schedules are omitted because they are not applicable, not required, or the
required information is included in the financial statements or notes
thereto
MANAGEMENT’S
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
M
anagement of MICROS Systems,
Inc. (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company, provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the
company; and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management evaluated the Company’s
internal control over financial reporting as of June 30, 2010. In
making this assessment, management used the framework established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). As a result of this assessment
and based on the criteria in the COSO framework, management has concluded that,
as of June 30, 2010, the Company’s internal control over financial reporting was
effective.
The Company’s independent registered
public accounting firm, PricewaterhouseCoopers LLP, has audited the Company’s
internal control over financial reporting. Their opinion on the
effectiveness of the Company’s internal control over financial reporting and on
the Company’s financial statements is included in this Annual Report on Form
10-K.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of MICROS Systems, Inc.:
In our opinion, the consolidated
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of MICROS Systems, Inc. and its
subsidiaries at June 30, 2010 and June 30, 2009, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2010 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of June 30, 2010, based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement
schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Annual Report on Internal Control over
Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on these financial statements, on the financial statement schedule, and
on the Company's internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
A company’s internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/PricewaterhouseCoopers
LLP
Baltimore,
Maryland
August
27, 2010
MICROS
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
June 30,
|
|
(in thousands, except par value
data)
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(1)
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
377,205
|
|
|
$
|
292,257
|
|
Short-term
investments
|
|
|
168,093
|
|
|
|
146,679
|
|
Accounts
receivable, net of allowance for doubtful accounts of $28,392 at June 30,
2010 and $31,892 at June 30, 2009
|
|
|
153,066
|
|
|
|
155,212
|
|
Inventory
|
|
|
35,103
|
|
|
|
39,783
|
|
Deferred
income taxes
|
|
|
19,624
|
|
|
|
19,870
|
|
Prepaid
expenses and other current assets
|
|
|
27,004
|
|
|
|
27,238
|
|
Total
current assets
|
|
|
780,095
|
|
|
|
681,039
|
|
|
|
|
|
|
|
|
|
|
Long-term
investments
|
|
|
59,884
|
|
|
|
57,823
|
|
Property,
plant and equipment, net
|
|
|
27,349
|
|
|
|
30,520
|
|
Deferred
income taxes, non-current
|
|
|
13,556
|
|
|
|
11,456
|
|
Goodwill
|
|
|
213,825
|
|
|
|
190,739
|
|
Intangible
assets, net
|
|
|
19,590
|
|
|
|
17,709
|
|
Purchased
and internally developed software costs, net of
accumulated
|
|
|
|
|
|
|
|
|
amortization
of $71,985 at June 30, 2010 and $66,804 at June 30, 2009
|
|
|
17,468
|
|
|
|
25,749
|
|
Other
assets
|
|
|
6,524
|
|
|
|
6,344
|
|
Total
assets
|
|
$
|
1,138,291
|
|
|
$
|
1,021,379
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Bank
lines of credit
|
|
$
|
1,442
|
|
|
$
|
1,090
|
|
Accounts
payable
|
|
|
44,783
|
|
|
|
38,445
|
|
Accrued
expenses and other current liabilities
|
|
|
135,469
|
|
|
|
104,821
|
|
Income
taxes payable
|
|
|
5,856
|
|
|
|
7,944
|
|
Deferred
revenue
|
|
|
124,498
|
|
|
|
112,146
|
|
Total
current liabilities
|
|
|
312,048
|
|
|
|
264,446
|
|
|
|
|
|
|
|
|
|
|
Income
taxes payable, non-current
|
|
|
22,737
|
|
|
|
19,611
|
|
Deferred
income taxes, non-current
|
|
|
2,590
|
|
|
|
1,752
|
|
Other
non-current liabilities
|
|
|
11,304
|
|
|
|
10,539
|
|
Total
liabilities
|
|
|
348,679
|
|
|
|
296,348
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
MICROS
Systems, Inc. Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
Common
stock, $0.025 par value authorized 120,000 shares; issued and outstanding
at 80,042 at June 30, 2010 and 80,310 at June 30, 2009
|
|
|
2,001
|
|
|
|
2,008
|
|
Capital
in excess of par
|
|
|
117,462
|
|
|
|
125,640
|
|
Retained
earnings
|
|
|
689,750
|
|
|
|
575,095
|
|
Accumulated
other comprehensive (loss) income
|
|
|
(25,833
|
)
|
|
|
16,254
|
|
Total
MICROS Systems, Inc. shareholders' equity
|
|
|
783,380
|
|
|
|
718,997
|
|
Noncontrolling
interest
|
|
|
6,232
|
|
|
|
6,034
|
|
Total
equity
|
|
|
789,612
|
|
|
|
725,031
|
|
Total
liabilities and equity
|
|
$
|
1,138,291
|
|
|
$
|
1,021,379
|
|
(1) See
Note 19 “Revisions to Prior Period Financial Statements” in Notes to
Consolidated Financial Statements.
The
accompanying notes are an integral part of the consolidated financial
statements.
MICROS
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Fiscal Year Ended June 30,
|
|
(in thousands, except per share
data)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
$
|
188,333
|
|
|
$
|
209,834
|
|
|
$
|
265,965
|
|
Software
|
|
|
118,788
|
|
|
|
132,912
|
|
|
|
158,539
|
|
Service
|
|
|
607,198
|
|
|
|
564,979
|
|
|
|
529,446
|
|
Total
revenue
|
|
|
914,319
|
|
|
|
907,725
|
|
|
|
953,950
|
|
Cost
of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
119,489
|
|
|
|
135,033
|
|
|
|
171,782
|
|
Software
|
|
|
25,731
|
|
|
|
25,570
|
|
|
|
33,135
|
|
Service
|
|
|
267,618
|
|
|
|
264,883
|
|
|
|
247,954
|
|
Total
cost of sales
|
|
|
412,838
|
|
|
|
425,486
|
|
|
|
452,871
|
|
Gross
margin
|
|
|
501,481
|
|
|
|
482,239
|
|
|
|
501,079
|
|
Selling,
general and administrative expenses
|
|
|
273,968
|
|
|
|
281,230
|
|
|
|
306,917
|
|
Research
and development expenses
|
|
|
42,229
|
|
|
|
42,630
|
|
|
|
40,129
|
|
Depreciation
and amortization
|
|
|
17,311
|
|
|
|
17,544
|
|
|
|
15,143
|
|
Total
operating expenses
|
|
|
333,508
|
|
|
|
341,404
|
|
|
|
362,189
|
|
Income
from operations
|
|
|
167,973
|
|
|
|
140,835
|
|
|
|
138,890
|
|
Non-operating
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
4,080
|
|
|
|
8,681
|
|
|
|
14,725
|
|
Interest
expense
|
|
|
(263
|
)
|
|
|
(895
|
)
|
|
|
(286
|
)
|
Other
(expense) income, net
(2)
|
|
|
(3,665
|
)
|
|
|
(1,759
|
)
|
|
|
597
|
|
Total
non-operating income, net
|
|
|
152
|
|
|
|
6,027
|
|
|
|
15,036
|
|
Income
before taxes
|
|
|
168,125
|
|
|
|
146,862
|
|
|
|
153,926
|
|
Income
tax provision
|
|
|
52,745
|
|
|
|
49,173
|
|
|
|
52,301
|
|
Net
income
|
|
|
115,380
|
|
|
|
97,689
|
|
|
|
101,625
|
|
Less: net
income attributable to non-controlling interest
|
|
|
(1,027
|
)
|
|
|
(1,397
|
)
|
|
|
(888
|
)
|
Net
income attributable to MICROS Systems, Inc.
|
|
$
|
114,353
|
|
|
$
|
96,292
|
|
|
$
|
100,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share attributable to MICROS Systems, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.44
|
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
Diluted
|
|
$
|
1.41
|
|
|
$
|
1.17
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
79,856
|
|
|
|
80,486
|
|
|
|
81,546
|
|
Diluted
|
|
|
81,448
|
|
|
|
81,461
|
|
|
|
83,346
|
|
The
details of total other-than-temporary impairment losses (“OTTI”) of long-term
investments and a reconciliation to OTTI charge included in other non-operating
income (expense)
(2)
:
|
|
Fiscal
Year
Ended
June
30,
|
|
(in
thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Total
other-than-temporary impairment losses
|
|
$
|
4,103
|
|
|
$
|
1,978
|
|
|
$
|
—
|
|
Adjustment: Non-credit
based OTTI recognized in other comprehensive income
|
|
|
680
|
|
|
|
(712
|
)
|
|
|
—
|
|
Credit
based OTTI charge recognized in non-operating income
(expense)
|
|
$
|
4,783
|
|
|
$
|
1,266
|
|
|
$
|
—
|
|
(1) See
Note 19 “Revisions to Prior Period Financial Statements” in Notes to
Consolidated Financial Statements.
(2) See
Note 2 “Financial Instruments and Fair Value Measurements” in Notes to
Consolidated Financial Statements.
The
accompanying notes are an integral part of the consolidated financial
statements.
MICROS
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
115,380
|
|
|
$
|
97,689
|
|
|
$
|
101,625
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
17,311
|
|
|
|
17,544
|
|
|
|
15,143
|
|
Amortization
of capitalized software
|
|
|
9,682
|
|
|
|
7,726
|
|
|
|
9,385
|
|
Amortization
of prior service cost
|
|
|
—
|
|
|
|
—
|
|
|
|
648
|
|
Provision
for losses on accounts receivable
|
|
|
3,875
|
|
|
|
8,318
|
|
|
|
6,937
|
|
Other-than-temporary
impairment losses on investments
|
|
|
4,783
|
|
|
|
1,266
|
|
|
|
—
|
|
Provision
for deferred income tax benefits
|
|
|
(3,062
|
)
|
|
|
(3,554
|
)
|
|
|
(984
|
)
|
Net
loss on disposal of property, plant and equipment
|
|
|
946
|
|
|
|
169
|
|
|
|
87
|
|
Share-based
compensation
|
|
|
12,365
|
|
|
|
13,900
|
|
|
|
17,229
|
|
Changes
in operating assets and liabilities (net of impact of
acquisitions):
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(4,099
|
)
|
|
|
19,680
|
|
|
|
(4,199
|
)
|
Decrease
(increase) in inventory
|
|
|
3,905
|
|
|
|
19,764
|
|
|
|
(12,813
|
)
|
(Increase)
decrease in prepaid expenses and other assets
|
|
|
(940
|
)
|
|
|
2,121
|
|
|
|
423
|
|
Increase
(decrease) in accounts payable
|
|
|
5,218
|
|
|
|
(8,048
|
)
|
|
|
252
|
|
Increase
(decrease) in accrued expenses and other current
liabilities
|
|
|
19,620
|
|
|
|
(14,716
|
)
|
|
|
(1,632
|
)
|
Increase
(decrease) in income taxes payable
|
|
|
3,813
|
|
|
|
(1,093
|
)
|
|
|
11,812
|
|
Increase
in deferred revenue
|
|
|
13,072
|
|
|
|
5,146
|
|
|
|
19,735
|
|
Net
cash flows provided by operating activities
|
|
|
201,869
|
|
|
|
165,912
|
|
|
|
163,648
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of short-term investments
|
|
|
(308,966
|
)
|
|
|
(264,998
|
)
|
|
|
(615,686
|
)
|
Proceeds
from sales and maturities of short-term investments
|
|
|
284,677
|
|
|
|
122,611
|
|
|
|
630,612
|
|
Net
cash paid for acquisitions
|
|
|
(30,684
|
)
|
|
|
(37,193
|
)
|
|
|
(16,135
|
)
|
Purchases
of property, plant and equipment
|
|
|
(9,044
|
)
|
|
|
(13,361
|
)
|
|
|
(12,944
|
)
|
Internally
developed software costs
|
|
|
(2,443
|
)
|
|
|
(470
|
)
|
|
|
(1,919
|
)
|
Disposal
of property, plant and equipment
|
|
|
120
|
|
|
|
192
|
|
|
|
227
|
|
Net
cash flows used in investing activities
|
|
|
(66,340
|
)
|
|
|
(193,219
|
)
|
|
|
(15,845
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases
of common stock
|
|
|
(47,635
|
)
|
|
|
(22,242
|
)
|
|
|
(74,303
|
)
|
Proceeds
from stock option exercises
|
|
|
23,310
|
|
|
|
2,866
|
|
|
|
27,884
|
|
Realized
tax benefits from stock option exercises
|
|
|
3,543
|
|
|
|
1,026
|
|
|
|
11,018
|
|
Principal
payments on line of credit
|
|
|
—
|
|
|
|
(18,124
|
)
|
|
|
(1,640
|
)
|
Other
|
|
|
243
|
|
|
|
(721
|
)
|
|
|
(422
|
)
|
Net
cash flows used in financing activities
|
|
|
(20,539
|
)
|
|
|
(37,195
|
)
|
|
|
(37,463
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(30,042
|
)
|
|
|
(20,313
|
)
|
|
|
26,348
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
84,948
|
|
|
|
(84,815
|
)
|
|
|
136,688
|
|
Cash
and cash equivalents at beginning of year
|
|
|
292,257
|
|
|
|
377,072
|
|
|
|
240,384
|
|
Cash
and cash equivalents at end of year
|
|
$
|
377,205
|
|
|
$
|
292,257
|
|
|
$
|
377,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the fiscal year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
111
|
|
|
$
|
120
|
|
|
$
|
137
|
|
Income
taxes
|
|
$
|
44,318
|
|
|
$
|
51,278
|
|
|
$
|
28,752
|
|
(1) See
Note 19 “Revisions to Prior Period Financial Statements” in Notes to
Consolidated Financial Statements.
The
accompanying notes are an integral part of the consolidated financial
statements.
MICROS SYSTEMS, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|
MICROS Systems, Inc.
Shareholders
(1)
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Capital
in
Excess
of
Par
|
|
|
Retained
Earnings
|
|
|
Accumulated
Compre-
hensive
Income
(Loss)
|
|
|
Non-
controlling
interest
|
|
|
Total
|
|
Balance,
June 30, 2007, as previously reported
|
|
|
81,096
|
|
|
$
|
2,027
|
|
|
$
|
147,569
|
|
|
$
|
382,101
|
|
|
$
|
18,793
|
|
|
$
|
4,404
|
|
|
$
|
554,894
|
|
Cumulative
impact of change in accounting principle relating to uncertain tax
positions
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(2,647
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(2,647
|
)
|
Balance,
June 30, 2007, adjusted
|
|
|
81,096
|
|
|
|
2,027
|
|
|
|
147,569
|
|
|
|
379,454
|
|
|
|
18,793
|
|
|
|
4,404
|
|
|
|
552,247
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
100,737
|
|
|
|
--
|
|
|
|
888
|
|
|
|
101,625
|
|
Foreign
currency translation adjustments, net of tax of $0
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
38,083
|
|
|
|
820
|
|
|
|
38,903
|
|
Unrealized
loss on long-term investments, net of tax of $1,583
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(2,651
|
)
|
|
|
--
|
|
|
|
(2,651
|
)
|
Amortization
of prior year pension costs, net of tax of $0
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
648
|
|
|
|
--
|
|
|
|
648
|
|
SERP
amendment, net of tax of $3,650
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
5,281
|
|
|
|
--
|
|
|
|
5,281
|
|
Non-controlling
interest put arrangement
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(645
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(645
|
)
|
Dividends
to non-controlling interest
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(220
|
)
|
|
|
(220
|
)
|
Share-based
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
17,229
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
17,229
|
|
Stock
issued upon exercise of options
|
|
|
2,131
|
|
|
|
53
|
|
|
|
27,831
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
27,884
|
|
Repurchases
of stock
|
|
|
(2,329
|
)
|
|
|
(58
|
)
|
|
|
(74,245
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(74,303
|
)
|
Income
tax benefit from options exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
11,617
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
11,617
|
|
Balance,
June 30, 2008
|
|
|
80,898
|
|
|
|
2,022
|
|
|
|
130,001
|
|
|
|
479,546
|
|
|
|
60,154
|
|
|
|
5,892
|
|
|
|
677,615
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
96,292
|
|
|
|
--
|
|
|
|
1,397
|
|
|
|
97,689
|
|
Foreign
currency translation adjustments, net of tax of $0
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(43,340
|
)
|
|
|
(534
|
)
|
|
|
(43,874
|
)
|
Unrealized
loss on long-term investments, net of tax of
$392
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(560
|
)
|
|
|
--
|
|
|
|
(560
|
)
|
Non-controlling
interest put arrangement
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(743
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
(743
|
)
|
Dividends
to non-controlling interest
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(721
|
)
|
|
|
(721
|
)
|
Share-based
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
13,900
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
13,900
|
|
Stock
issued upon exercise of options
|
|
|
267
|
|
|
|
7
|
|
|
|
2,859
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
2,866
|
|
Repurchases
of stock
|
|
|
(855
|
)
|
|
|
(21
|
)
|
|
|
(22,221
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(22,242
|
)
|
Income
tax benefit from options exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
1,101
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
1,101
|
|
Balance,
June 30, 2009
|
|
|
80,310
|
|
|
|
2,008
|
|
|
|
125,640
|
|
|
|
575,095
|
|
|
|
16,254
|
|
|
|
6,034
|
|
|
|
725,031
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
114,353
|
|
|
|
--
|
|
|
|
1,027
|
|
|
|
115,380
|
|
Foreign
currency translation adjustments, net of tax of $0
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(42,222
|
)
|
|
|
(714
|
)
|
|
|
(42,936
|
)
|
Unrealized
gain on long-term investments, net of tax of
$83
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
135
|
|
|
|
--
|
|
|
|
135
|
|
Non-controlling
interest put arrangement
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
302
|
|
|
|
--
|
|
|
|
--
|
|
|
|
302
|
|
Dividends
to non-controlling interest
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(115
|
)
|
|
|
(115
|
)
|
Share-based
compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
12,365
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
12,365
|
|
Stock
issued upon exercise of options
|
|
|
1,378
|
|
|
|
34
|
|
|
|
23,276
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
23,310
|
|
Repurchases
of stock
|
|
|
(1,646
|
)
|
|
|
(41
|
)
|
|
|
(47,594
|
)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(47,635
|
)
|
Income
tax benefit from options exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
3,775
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
3,775
|
|
Balance,
June 30, 2010
|
|
|
80,042
|
|
|
$
|
2,001
|
|
|
$
|
117,462
|
|
|
$
|
689,750
|
|
|
$
|
(25,833
|
)
|
|
$
|
6,232
|
|
|
$
|
789,612
|
|
(1) See
Note 19 “Revisions to Prior Period Financial Statements” in Notes to
Consolidated Financial Statements.
The
accompanying notes are an integral part of the consolidated financial
statements.
MICROS SYSTEMS, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
Fiscal
Year Ended June 30,
|
|
(in
thousands)
|
|
2010
|
|
|
2009
(1)
|
|
|
2008
(1)
|
|
Net
income
|
|
$
|
115,380
|
|
|
$
|
97,689
|
|
|
$
|
101,625
|
|
Other
comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
(42,936
|
)
|
|
|
(43,874
|
)
|
|
|
38,903
|
|
Unrealized
gain (loss) on long-term investments, net of taxes (benefit) of $83,
($392) and ($1,583)
|
|
|
135
|
|
|
|
(560
|
)
|
|
|
(2,651
|
)
|
Amortization
of prior year pension costs, net of taxes of $0
|
|
|
--
|
|
|
|
--
|
|
|
|
648
|
|
Total
other comprehensive income, net of taxes
|
|
|
(42,801
|
)
|
|
|
(44,434
|
)
|
|
|
36,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
72,579
|
|
|
|
53,255
|
|
|
|
138,525
|
|
Comprehensive
income attributable to non-controlling interest
|
|
|
(313
|
)
|
|
|
(863
|
)
|
|
|
(1,708
|
)
|
Comprehensive
income attributable to MICROS Systems, Inc.
|
|
$
|
72,266
|
|
|
$
|
52,392
|
|
|
$
|
136,817
|
|
(1) See
Note 19 “Revisions to Prior Period Financial Statements” in Notes to
Consolidated Financial Statements.
The
accompanying notes are an integral part of the consolidated financial
statements.
MICROS
SYSTEMS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
|
DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
|
DESCRIPTION
OF BUSINESS
MICROS Systems, Inc. is a leading
worldwide designer, manufacturer, marketer and servicer of enterprise
information solutions for the global hospitality and specialty retail
industries. The information solutions consist of application specific
software and hardware systems, supplemented by a wide range of
services. The hospitality industry includes numerous defined markets
such as lodging (including individual hotel sites, hotel central reservation
systems and customer information systems), table service restaurants, quick
service restaurants, entertainment venues such as stadiums and arenas, business
foodservice operations, casinos, transportation foodservice, government
operations, and cruise ships. The specialty retail industry consists
of retail operations selling to consumers both general and specific products,
such as clothing, shoes, food, hardware, jewelry, and other specialty
items. (References to “MICROS” or the “Company” in these notes
include the operations of MICROS Systems, Inc. and its subsidiaries on a
consolidated basis.)
REVISIONS
TO PRIOR PERIOD FINANCIAL STATEMENTS
During January 2010, the Company
uncovered certain fraudulent activities in its subsidiary in Japan that occurred
during the period from fiscal year 2006 to the six months ended December 31,
2009. The Company determined that these fraudulent transactions
resulted in a cumulative overstatement of revenue and net income attributable to
MICROS Systems, Inc. of approximately $6.9 million and $4.9 million,
respectively, over this period. The Company concluded that the
misstatements did not materially affect the previously issued financial
statements for any of its prior periods. Appropriate adjustments have
been made to prior period information included in the accompanying consolidated
financial statements and described in these notes to the consolidated financial
statements. See Note 19 “Revisions to Prior Period Financial
Statements” for further detail.
BASIS
OF PREPARATION AND USE OF ESTIMATES
The preparation of consolidated
financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the Company’s consolidated
financial statements and accompanying notes. Although these estimates
are based on assumptions that management believes are reasonable and
management’s knowledge of current matters pertaining to the Company and
anticipated activities that the Company may undertake in the future, actual
results may differ from these estimates. Certain amounts reported in
the prior years have been reclassified in the accompanying financial statements
to conform to the current year’s presentation
.
PRINCIPLES
OF CONSOLIDATION
The consolidated financial statements
include the accounts of the Company and its majority-owned
subsidiaries. The net income attributable to MICROS Systems, Inc. is
recorded net of non-controlling interest. Investments in 20% through
50% owned affiliated companies and any investments in other companies in which
the Company exercises significant influence over operating and financial
affairs, are accounted for under the equity method. Otherwise,
investments are recorded at cost. All intercompany accounts and
transactions have been eliminated.
FOREIGN
CURRENCY TRANSLATION
The financial statements of the
Company’s non-U.S. operations are translated into U.S. dollars for financial
reporting purposes. The assets and liabilities of non-U.S. operations
whose functional currencies are not in U.S. dollars are translated at the fiscal
year-end exchange rates, while revenues and expenses are translated at month-end
exchange rates during the fiscal year which approximate weighted average
exchange rates. Specifically, the applicable exchange rates used in
the financial statements are based on the exchange rates in effect on the last
business day of each month. The cumulative translation effects are
reported in accumulated other comprehensive income, a separate component of
shareholders’ equity. Gains and losses on monetary transactions
denominated in other than the functional currency of an operation are reflected
in other income (expense).
REVENUE
RECOGNITION
The Company’s revenue is generated from
the sale of software licenses, hardware, professional services and maintenance
support.
Software
The Company’s proprietary software
consists of hotel, restaurant and retail software systems. The
Company also resells various third party software products. All
software products are offered on a stand alone basis, and can be used either
with third party hardware products or the Company’s hardware
products.
Revenue from software licenses is
recognized when the following four basic criteria are met as
follows:
|
·
|
Persuasive
evidence of an arrangement exists: The Company requires a
contract signed by both parties to the agreement or a purchase order
received from the customer as persuasive evidence of an
arrangement.
|
|
·
|
Delivery
has occurred or services have been rendered: Delivery occurs when
risk of ownership has passed to the buyer or in the case of electronic
delivery, when the customer is given access to the licensed
programs. The Company deems its OPERA software to be delivered
when ready to “go live” (i.e., the software is ready to be used in the
ordinary course of the customer’s
business).
|
|
·
|
Fixed
or determinable fee: The Company considers the license fee to
be fixed or determinable if the fee is not subject to refund or adjustment
and is payable within its normal payment terms, generally, 90 days of
delivery, with generally no more than 20% of the contract price due at the
end of the payment term. If a software license arrangement
contains significant customer acceptance criteria or a cancellation right,
recognition of the software revenue is deferred until the earlier of
customer acceptance or the expiration of the acceptance period or
cancellation right. If the arrangement fee is not fixed or
determinable, the Company recognizes the revenue as amounts become due and
payable.
|
|
·
|
Collection
is probable: The Company performs a credit review to determine
the creditworthiness of the customer. Collection is deemed
probable if the Company expects that the customer will be able to pay
amounts under the arrangement as they become due. If the
Company determines collection is not probable, revenue is recognized as
collection occurs.
|
Hardware
The Company’s main proprietary hardware
is point-of-sale terminals. The Company also sells other hardware
devices, such as printers, cash drawers, handheld order entry terminals and pole
displays and also resells various hardware products, including personal
computers, servers, printers, network cards and other related computer
equipment. Hardware revenue is recognized when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectability is probable. If at the time of shipment, the
Company has not met these four criteria, recognition of the hardware revenue is
deferred until all four criteria are determined to have been met.
The Company’s hardware includes certain
system software embedded which is used solely in connection with the operation
of the hardware and is incidental to the hardware product as a whole; once
installed, the embedded system software is not updated for new versions that are
subsequently developed.
Service
The Company also provides maintenance
support and/or professional services, such as installation, customer specific
development, software-hosting and e-commerce design and
development. Revenue from maintenance support and software-hosting
services is initially recorded as deferred revenue and is recognized ratably
over the contract term. Revenue related to professional services is
recognized as the service is rendered provided all the other criteria for
revenue recognition have been met.
The Company’s software is ready for use
by the customer upon receipt. While many of the customers may choose
to tailor the software to fit their specific needs or request the Company’s
assistance activating the programs, the Company’s implementation services do not
typically involve significant customization to, or development of, the
underlying source code.
Revenue
from fixed e-commerce design and development contracts, where the product is
designed, developed or modified to the customer’s specifications is recognized
on a percentage of completion basis based on the estimated costs incurred
compared to total estimated costs. This method is used because
reasonably dependable estimates of the revenues and the project progress
applicable to various states of an arrangement can be made, based on historical
experience and milestones set in the contract.
Multiple
Element Arrangements
When more than one element such as
hardware, software and services are sold together in a single arrangement,
revenue is recognized using the residual method. Provided that each
element meets the criteria for treatment as a separate unit of accounting, the
Company defers revenue for the fair value of the undelivered elements based on
vendor specific objective evidence of fair value (“VSOE”), and the remaining
portion of the arrangement fee is allocated to the delivered elements and
recognized as revenue when all the other criteria for revenue recognition are
met. An element is considered a separate unit of accounting if it has
value to the customer on a standalone basis and there is objective and reliable
evidence of the fair value of the undelivered elements. VSOE of fair
value for the Company’s services are based upon standalone sales of those
services.
Other
Costs related to shipping and handling
and billable travel expenses are included in cost of sales. The
Company’s hardware and software products are sold under warranty for defects in
material and workmanship for a period generally ranging from 12 to 36 months
following delivery. The Company establishes an accrual for estimated
warranty costs at the time of sale. Historically, the Company’s
warranty expense has not been material.
FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS
The fair market values of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable,
accrued expenses and income taxes payable at both June 30, 2010 and 2009
approximate their carrying amounts.
The Company considers all highly liquid
investments with a maturity of generally three months or less at the date of
purchase to be cash equivalents. These investments are recorded at
cost which approximates fair value. Investments with original
maturities of greater than three months and remaining maturities of less than
one year are classified as short-term investments. These investments
are classified as available-for-sale securities and are recorded at fair value
which approximates cost. Auction rate securities, recorded at fair
value, are long-term debt instruments with variable interest rates that
periodically reset to prevailing market rates every 7 to 35 days through the
auction process (“auction rate securities.”)
The
Company periodically reviews each investment to identify any unrealized losses
and evaluates whether the losses are temporary in nature. Unrealized
losses that are determined to be temporary in nature are reported, net of tax,
in accumulated other comprehensive income. Other-than-temporary
“credit loss” (loss due to security issuer’s credit risk) is recognized, net of
tax and valuation allowances, in the consolidated statements of operations,
while other-than-temporary impairment loss related to factors other than credit
loss is recognized, net of tax, in accumulated other comprehensive
income.
ALLOWANCE
FOR DOUBTFUL ACCOUNTS
The Company maintains allowances for
doubtful accounts for estimated losses that may result from the inability of the
Company’s customers to make required payments and for limited circumstances when
the customer disputes the amounts due to the Company. The Company’s
methodology for determining this allowance requires estimates and is based on
the age of the receivable, customer’s payment practices and history, inquiries,
credit reports from third parties and other financial information. If
the financial condition of the Company’s customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
INVENTORY
Inventory is stated at the lower of
cost or market. Cost is determined principally on a first-in,
first-out basis. Inventory quantities on hand, future purchase
commitments with the Company’s suppliers and the estimated utility of the
Company’s inventory is reviewed regularly. If the review
indicates a reduction in utility below carrying value, the inventory is adjusted
with a charge to cost of sales.
PROPERTY,
PLANT AND EQUIPMENT
Property, plant and equipment are
stated at cost and depreciated using the straight-line method over their
estimated useful lives, ranging from three to ten years. Leasehold
improvements are amortized over the life of the lease or estimated useful lives,
whichever is shorter. Maintenance and repairs are charged to expense
as incurred, and the costs of additions and improvements are
capitalized. Any gain or loss from the retirement or sale of an asset
is credited or charged to operations in the current period.
SOFTWARE
FOR INTERNAL USE
Internally used computer software is
capitalized and are amortized on a straight-line basis over the estimated life
of the software ranging up to ten years.
CAPITALIZED
SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and
development of new software products to be licensed to others, primarily
consisting of salaries, employee benefits and administrative costs, are expensed
as incurred and included in research and development expenses until
technological feasibility is established. The capitalization of
software development costs on a product-by-product basis starts when a product’s
technological feasibility has been established and ends when the product is
available for general release to customers, at which time amortization of the
capitalized software development costs begins. Technological
feasibility is established when the product reaches the working model
stage. The cost of purchased software is also
capitalized.
Annual amortization of capitalized
software development costs is included in software cost of sales. For
each capitalized software product, the annual amortization is equal to the
greater of: (i) the amount computed using the ratio that the software product’s
current fiscal year gross revenue bears to the total current fiscal year and
anticipated future gross revenues for that product or (ii) the amount computed
based on straight-line method over the remaining estimated economic life of the
product. Amortization expenses for the fiscal years 2010, 2009 and
2008 were approximately $9.7 million, $7.7 million and $9.4 million,
respectively.
During the fiscal years 2009 and 2008,
the Company wrote off approximately $0.8 million and $0.7 million in capitalized
software costs, respectively. No capitalized software costs were
written off in fiscal year 2010.
LONG-LIVED
ASSETS INCLUDING FINITE-LIVED PURCHASED INTANGIBLE ASSETS
The Company evaluates long-lived
assets, including finite-lived purchased intangible assets, for impairment
whenever events and changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. The Company compares the
fair value of the assets based on the undiscounted cash flows the assets are
expected to generate (or market value, if available) to the net book value of
the assets. If the fair value is less than net book value, the asset
is impaired and the Company recognizes an impairment loss equal to the excess of
the net book value over the fair value.
During each of the fiscal years ended
June 30, 2010 and 2009, the Company recorded approximately $1.5 million in
accelerated amortization expenses related to finite-lived purchased intangible
assets. During the three fiscal years ended June 30, 2010, the
Company did not recognize any impairment losses on long-lived assets, including
finite-lived purchased intangible assets.
GOODWILL
AND INDEFINITE-LIVED PURCHASED INTANGIBLE ASSETS
The Company assesses annually, in the
first quarter of its fiscal year, whether goodwill and certain of its
trademarks, which are the Company’s only indefinite-lived purchased intangible
assets, are impaired. Goodwill is evaluated for impairment by comparing
the fair value of each of the Company’s reporting units (the Company’s four
operating segments consisting of U.S., Europe, the Pacific Rim and Latin
America) to their respective book values. The fair value of each
reporting unit is determined based on a weighting of the income approach (i.e.,
discounted future income associated with the item) and market approach (i.e.,
market value of similar assets purchased or sold in the same
industry). If the fair value of the reporting unit exceeds the book
value of the net assets assigned to that unit, goodwill is not
impaired. If goodwill is impaired, the Company recognizes an
impairment loss based on the amount by which the book value of goodwill exceeds
its implied fair value. The implied fair value of goodwill is determined
by deducting the fair value of a reporting unit’s identifiable assets and
liabilities from the fair value of the reporting unit as a whole, as if that
reporting unit had just been acquired and the fair value of the individual
assets acquired and liabilities assumed initially were being
determined.
Trademarks
are evaluated for impairment by comparing their fair value to book
value. The Company estimates the fair value of trademarks using an
income approach to value, and recognizes an impairment loss if the estimated
fair value of a trademark is less than its book value.
Additional
impairment assessments may be performed on an interim basis if the Company
encounters events or changes in circumstances indicating that it is more likely
than not that the book value of goodwill and/or trademarks has been
impaired.
The
process of evaluating the potential impairment of goodwill and/or trademarks is
highly subjective and requires significant judgment at many points during the
analysis. In estimating the fair value of the reporting units with
recognized goodwill for the purposes of its annual or interim analyses, the
Company makes estimates and judgments about the future cash flows of these
reporting units. The cash flow forecasts are based on assumptions
that are consistent with the plans and estimates used to manage the underlying
reporting units. The Company also considers its market capitalization on the
date the analysis is performed.
ADVERTISING COSTS
Advertising costs are charged to expense
as incurred. Advertising expenses for the fiscal years 2010, 2009 and
2008
were approximately $4.2 million, $5.2 million and $7.5 million,
respectively.
RESEARCH AND DEVELOPMENT
COSTS
Research and development costs,
primarily consisting of salaries, employee benefits and administrative costs
(other than capitalized software development costs) are charged to operations as
incurred.
SHARE-BASED
COMPENSATION
The
Company estimates the fair value of its option awards granted under the stock
option program as of the date of grant, and recognizes non-cash share-based
compensation expense, adjusted for expected pre-vesting forfeitures, ratably
over the requisite service (i.e. vesting) period of options in the consolidated
statement of operations. The Company values stock options using the
Black-Scholes option pricing model, which was developed for use in estimating
the fair value of traded options that are fully transferable and have no vesting
restrictions. Therefore, the Company is required to make highly
subjective assumptions about volatility rates, expected term of options,
dividend yields and applicable interest rates in determining the estimated fair
value. Expected volatility is based on historical stock
prices. The expected term of options granted is based on historical
option activities, adjusted for the remaining option life cycle by assuming
ratable exercise of any unexercised vested options over the remaining
term. The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant. See Note 3 “Share-Based
Compensation” for further detail.
WARRANTIES
The Company’s products are sold under
warranty for defects in material and workmanship for a period ranging generally
from 12 to 36 months. The Company establishes an accrual for
estimated warranty costs at the time of sale. Historically, the
Company’s warranty expense has
not been material.
INCOME TAXES
Income taxes are accounted for under the
asset and liability method. Deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to the
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities. Deferred tax assets and liabilities are
measured using the enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The
effect on the deferred tax assets and liabilities of a change in tax rate is
recognized in the results of operations in the period that includes the
enactment date. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts more likely than not to be
realized. If the Company determines that it will not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset
is
charged to the
deferred income tax provision in the
period such determination is made.
Effective
July 1, 2007, the Company adopted guidance on accounting for uncertainty in
income taxes, which provides a minimum recognition threshold that a tax position
is required to meet before being recognized in the financial
statements. The guidance also provides standards on derecognition,
measurement, and classification of the effects of a tax position, recognition of
interest and penalties, accounting in interim periods, and disclosure.
See Note 13 “Income Taxes” for further
detail.
NET INCOME PER SHARE ATTRIBUTABLE TO
MICROS SYSTEMS, INC. COMMON SHAREHOLDERS
Basic
net income per share attributable to
MICROS Systems, Inc. common shareholders
is computed by dividing
net income available to MICROS Systems,
Inc.
by the
weighted-average number of shares outstanding.
Diluted net income per share
attributable to MICROS Systems, Inc. common shareholders
includes the dilutive effect of stock
options. A reconciliation of the
net income attributable to MICROS
Systems, Inc.
and the
weighted-average number of common shares outstanding assuming dilution is as
follows:
|
|
Fiscal Year Ended June
30,
|
|
(in thousands, except per share
data)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net income attributable to MICROS
Systems, Inc.
|
|
$
|
114,353
|
|
|
$
|
9
6
,
292
|
|
|
$
|
10
0
,
737
|
|
Effect of non-controlling interest
put arrangement
|
|
|
302
|
|
|
|
(743
|
)
|
|
|
(645
|
)
|
Net income available to MICROS
Systems, Inc. common shareholders
|
|
$
|
114,655
|
|
|
$
|
95,549
|
|
|
$
|
100,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares
outstanding
|
|
|
79,856
|
|
|
|
80,486
|
|
|
|
81,546
|
|
Dilutive effect of outstanding
stock options
|
|
|
1,592
|
|
|
|
975
|
|
|
|
1,800
|
|
Average common shares outstanding
assuming dilution
|
|
|
81,448
|
|
|
|
81,461
|
|
|
|
83,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
attributable to MICROS Systems, Inc. common
shareholders
|
|
$
|
1.44
|
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
Diluted net income per share
attributable to MICROS Systems, Inc. common
shareholders
|
|
$
|
1.41
|
|
|
$
|
1.17
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive weighted shares
excluded from reconciliation
|
|
|
1,882
|
|
|
|
4,105
|
|
|
|
1,239
|
|
Fiscal
years 2010, 2009 and 2008 include approximately $12.4 million ($8.1 million, net
of tax), $13.9 million ($9.8 million, net of tax) and $17.2 million ($13.1
million, net of tax), respectively, in non-cash share-based compensation
expense. These non-cash share-based compensation expenses reduced
diluted net income per share attributable to MICROS Systems, Inc. common
shareholders by $0.10, $0.12 and $0.16 for fiscal years 2010, 2009 and 2008,
respectively. See Note 3 “Share-based Compensation” for further
detail.
The
effect of non-controlling interest put arrangement above relates to one of the
Company’s acquisitions where the non-controlling interest shareholders of the
acquired company have the option to require the Company to purchase their
remaining shares in the acquired company in accordance with a pre-defined
formula based on specified financial results of the acquired
company.
DEFINED BENEFIT PLAN
The
Company’s Supplemental Executive Retirement Plan (the “SERP”) provides
designated officers and executives of the Company with benefits upon retirement
or immediate vesting of benefits upon a participant’s death before
retirement. This plan is described more fully in Note 16 “Employee
Benefit Plans.”
SUBSEQUENT EVENTS
In June 2009, the Company
adopted the authoritative guidance on subsequent events which
addresses the accounting for and disclosure of subsequent transactions and
events not addressed in other applicable generally accepted accounting
principles.
Subsequent to year-end, o
n August
24, 2010, the Compensation and Nominating Committee of the Board of Directors
authorized the purchases of an additional two million shares of the Company’s
common stock over the next three years, to be purchased from time to time
depending on market conditions and other corporate considerations as determined
by management.
T
he
Board of Directors also on August 24, 2010, authorized and directed the Company
to enter into the Twelfth Amendment to the Employment Agreement between the
Company and Mr. Giannopoulos (the “Twelfth Amendment”).
The
Twelfth Amendment establishes that Mr. Giannopoulos will be eligible to earn a
bonus for each fiscal year during the term of his employment agreement, provided
that he satisfies the objectives as determined by the Board of Directors for
that fiscal year.
There were no
other
subsequent events that
the Company was required to
recognize
or
disclose
in the accompanying consolidated
financial statements
. Subsequent events have been
evaluated through
the date
these financial statements are issued.
RECENT ACCOUNTING
STANDARDS
Recently
Adopted Accounting Pronouncements
On July 1, 2009,
the Company
adopted authoritative guidance issued
by the Financial Accounting Standards Board (“FASB”) on busi
n
ess combinations. The
guidance addresses the manner in which the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquired
business. This guidance also provides standards for recognizing and
measuring the goodwill acquired in
a
business combination and for disclosure
of information to enable users of the financial statements to evaluate the
nature and financial effects of the business
combination.
The
Company’s
acquisition of
TIG Global
LLC (“TIG
Global”)
on December 31,
2009
(See Note 4,
“Acquisitions”)
was
accounted for under this guidance.
On July 1, 2009,
the Company
adopted authoritative guidance issued
by the FASB that changes the accounting and reporting for non-controlling
interests. This guidance requires, among other things, that:
non-controlling interests be re
ported as a component of
equity;
changes in a
parent’s ownership interest while the parent retains its controlling interest be
accounted for as equity transactions; and any retained non-controlling equity
investment upon the deconsolidation of a subsidiary initially be measured at
fair value. The adoption of this guidance did not have a material
impact on
the
Company’s
consolidated
financial statements.
On July
1, 2009, the Company adopted authoritative guidance issued by the FASB which
revises the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible
asset. This guidance is intended to improve the consistency between
the useful life of a recognized intangible asset and the period of expected cash
flows used to measure the fair value of the asset under other U.S. generally
accepted accounting principles. The adoption of this guidance did
not
have a material impact on
the Company’s
consolidated financial
statements.
On July 1, 2009,
the Company
adopted authoritative guidance issued
by the FASB on fair value measurement for nonfinancial assets and liabilities,
other than non-financial assets and liabilities that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least
annually), which already were subject to FASB guidance. The adoption
of this guidance did not
have a material impact on
the Company’s
consolidated financial
statements.
In
January 2010, the Company adopted authoritative guidance and disclosure
requirements issued by the FASB related to recurring and nonrecurring fair value
measurements. The guidance requires new disclosures on the transfers of assets
and liabilities between Level 1 inputs (quoted prices in active market for
identical assets or liabilities) and Level 2 inputs (significant other
observable inputs) of the fair value measurement hierarchy, including the
reasons and the timing of the transfers. Additionally, the guidance requires
separate disclosure of activities on purchases, sales, issuance, and settlements
of the assets and liabilities measured using significant unobservable inputs
(Level 3 fair value measurements). The adoption of this guidance,
other than required additional disclosures on the activities for Level 3 fair
value measurements which is effective the Company beginning July 1, 2011, did
not have a material impact on the Company’s consolidated financial
statements.
Recent
Accounting Guidance Not Yet Adopted
In
October 2009, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software revenue
recognition guidance. Under the guidance, when vendor-specific
objective evidence or third-party evidence of selling price is not available, a
best estimate of the selling price is required to separate deliverables and
allocate arrangement consideration based on the relative selling prices of the
separate deliverables (the “relative selling price method”). The
relative selling price method allocates any discount in the arrangement
proportionately to each deliverable on the basis of each deliverable’s selling
price. The guidance also significantly expands related disclosure
requirements. This standard is effective for the Company beginning
July 1, 2010. The Company is continuing to evaluate the impact that
the adoption of this guidance will have on its consolidated financial
statements.
In
October 2009, the FASB also issued authoritative guidance on revenue recognition
for arrangements that include software elements. Under the guidance,
tangible products containing software components and non-software components
that function together to deliver the tangible product’s essential functionality
are excluded from the scope of software revenue recognition guidance and will be
subject to other relevant revenue recognition guidance. This guidance
will become effective for the Company beginning July 1, 2010. The
Company does not believe the adoption of this guidance will have a material
impact on its consolidated financial statements.
2.
|
FINANCIAL
INSTRUMENTS AND FAIR VALUE
MEASUREMENTS
|
Short-term
and long-term investments consist of the following:
|
|
June 30, 2010
|
|
|
June 30, 2009
|
|
(in thousands)
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
Time
deposit - international
|
|
$
|
56,270
|
|
|
$
|
56,270
|
|
|
$
|
115,762
|
|
|
$
|
115,762
|
|
Auction
rate securities
|
|
|
64,275
|
|
|
|
53,258
|
|
|
|
64,275
|
|
|
|
57,823
|
|
U.S.
government debt securities
|
|
|
108,323
|
|
|
|
108,323
|
|
|
|
25,084
|
|
|
|
25,084
|
|
Foreign
corporate debt securities
|
|
|
10,126
|
|
|
|
10,126
|
|
|
|
4,209
|
|
|
|
4,209
|
|
Time
deposit - U.S.
|
|
|
-
|
|
|
|
-
|
|
|
|
970
|
|
|
|
970
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
654
|
|
|
|
654
|
|
Total investments
|
|
$
|
238,994
|
|
|
$
|
227,977
|
|
|
$
|
210,954
|
|
|
$
|
204,502
|
|
Fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date (exit price). The following hierarchy prioritizes
the inputs (generally, assumptions that market participants use in pricing an
asset or liability) used to measure fair value based on the quality and
reliability of the information provided by the inputs:
·
|
Level
1 - Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or
liabilities. The Company considers active markets as those in
which transactions for the assets or liabilities occur with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
|
·
|
Level
2 - Quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in markets that are not
active; inputs that are observable, either directly or indirectly, for
substantially the full term of the asset or liability; inputs that are
derived principally from or corroborated by observable market data or
other means.
|
·
|
Level
3 - Measured based on prices or valuation models using unobservable inputs
to the extent relevant observable inputs are not available (i.e., where
there is little or no market activity for the asset or
liability).
|
The
following table provides information regarding the financial assets accounted
for at fair value and the type of inputs used to value the assets (excludes cash
and cash equivalents of approximately $377.2 million and $292.3 million as of
June 30, 2010 and 2009):
(in
thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Balance
at June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
and long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
deposit - international
|
|
$
|
-
|
|
|
$
|
56,270
|
|
|
$
|
-
|
|
|
$
|
56,270
|
|
Auction
rate securities
|
|
|
-
|
|
|
|
-
|
|
|
|
53,258
|
|
|
|
53,258
|
|
U.S.
government debt securities
|
|
|
108,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
108,323
|
|
Foreign
corporate debt securities
|
|
|
10,126
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,126
|
|
Total
short-term and long-term investments
|
|
$
|
118,449
|
|
|
$
|
56,270
|
|
|
$
|
53,258
|
|
|
$
|
227,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
and long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
deposit - international
|
|
$
|
-
|
|
|
$
|
115,762
|
|
|
$
|
-
|
|
|
$
|
115,762
|
|
Auction
rate securities
|
|
|
-
|
|
|
|
-
|
|
|
|
57,823
|
|
|
|
57,823
|
|
U.S.
government debt securities
|
|
|
25,084
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,084
|
|
Foreign
corporate debt securities
|
|
|
4,209
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,209
|
|
Time
deposit - U.S.
|
|
|
-
|
|
|
|
970
|
|
|
|
-
|
|
|
|
970
|
|
Other
|
|
|
-
|
|
|
|
654
|
|
|
|
-
|
|
|
|
654
|
|
Total
short-term and long-term investments
|
|
$
|
29,293
|
|
|
$
|
117,386
|
|
|
$
|
57,823
|
|
|
$
|
204,502
|
|
At June
30, 2010 and 2009, other than the Company’s investments in auction rate
securities, the Company’s investments were recognized at fair value determined
based upon observable input information provided by the Company’s pricing
service vendors for identical or similar assets. For these
investments, cost approximated fair value. During the three fiscal
years ended June 30, 2010, the Company did not recognize any gains or losses on
its investments, other than related to the Company’s investments in auction rate
securities. See “Auction Rate Securities” below for further
discussion on the valuation of the Company’s investments in auction rate
securities.
The
contractual maturities of investments held at June 30, 2010 are as
follows:
(in
thousands)
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
Due
within one year
|
|
$
|
168,093
|
|
|
$
|
168,093
|
|
Due
between 1 - 2 years
|
|
|
6,626
|
|
|
|
6,626
|
|
Due
after 10 years - auction rate securities
|
|
|
64,275
|
|
|
|
53,258
|
|
Balance
at June 30, 2010
|
|
$
|
238,994
|
|
|
$
|
227,977
|
|
AUCTION
RATE SECURITIES
The
Company’s investments in auction rate securities, carried at estimated fair
values, were its only assets valued on the basis of Level 3
inputs. Auction rate securities are long-term debt instruments with
variable interest rates that are designed to reset to prevailing market interest
rates every 7 to 35 days through the auction process. The auction
rate securities held by the Company are supported by student loans for which
repayment is guaranteed either by the Federal Family Education Loan Program or
insured by AMBAC Financial Group. Before February 2008, due to the
liquidity previously provided by the interest rate reset mechanism and the
short-term nature of the Company’s investment, the auction rate securities
previously were classified as short-term investments available-for-sale in the
Company’s consolidated balance sheets. Beginning in February 2008,
auctions for these securities failed to obtain sufficient bids to establish a
clearing rate and the securities were not saleable in auction, thereby no longer
providing short-term liquidity. As a result, the auction rate
securities have been classified as long-term investments available-for-sale as
of June 30, 2010 and 2009 instead of being classified as short-term investments,
as was the case prior to February 2008.
As of
June 30, 2010, the Company updated its assessment as to whether it would likely
recover the entire cost basis of each of the auction rate securities, and,
therefore, whether the securities had incurred an other-than-temporary
impairment. Determination of whether the impairment is temporary or
other-than-temporary requires significant judgment. The primary
factors that are considered in assessing the nature of the impairment include
(a) the credit quality of the underlying security, (b) the extent and time
period to which the fair value of each investment has been below cost, (c) the
expected holding or recovery period for each investment, (d) the Company’s
intent to hold each investment until recovery and likelihood that the Company
will not be required to sell the security prior to recovery, and (e) the
existence of any evidence of default by the issuer. The Company engaged an
independent valuation firm to perform a valuation of its auction rate securities
in conjunction with the Company's assessment of any impairment as temporary
rather than other-than-temporary. The valuation firm used a discounted cash flow
model that considered various inputs including: (a) the coupon rate
specified under the debt instruments, (b) the current credit ratings of the
underlying issuers, (c) collateral characteristics, (d) discount rates, (e)
severity of default and (f) probability that the securities will be sold at
auction or through early redemption. The valuation firm used a mark
to model approach to arrive at this valuation, which the Company reviewed and
with which it agreed.
Based on
its fair value assessments, the Company determined that its investments in
auction rate securities as of June 30, 2010 were impaired by approximately $11.0
million as compared to an impairment of approximately $6.5 million as of June
30, 2009. Approximately $6.1 million and $2.0 million of this
impairment at June 30, 2010 and 2009, respectively, were deemed to be
other-than-temporary. The fair value assessment also included an
evaluation of the amount of the other-than-temporary impairment attributable to
credit loss. The factors considered in making an evaluation of the
amount attributable to credit loss included the following: (a)
default probability and the likelihood of restructuring of the security, (b)
payment structure of the security to determine how the expected underlying
collateral cash flows will be distributed to holders of the issuer’s securities
and (c) performance indicators of the underlying assets in the trust (including
default and delinquency rates). These assumptions are subject to
change as the underlying market conditions change. Based on its
evaluations, the Company determined that approximately $6.0 million and $1.3
million of the cumulative other-than-temporary impairment losses as of June 30,
2010 and 2009, respectively, were credit based, as a result, for the fiscal
years ended June 30, 2010 and 2009, the Company recorded approximately $4.8
million and $1.3 million, respectively, in its consolidated statements of
operations.
The
remaining cumulative impairment losses of approximately $5.0 million
(approximately $3.1 million, net of tax) and approximately $5.2 million
(approximately $3.2 million, net of tax) were recorded in accumulated other
comprehensive income, net of tax, as of June 30, 2010 and 2009,
respectively.
A
reconciliation of changes in the fair value of auction rate securities, and the
related unrealized losses were as follows:
(in thousands)
|
|
Cost
|
|
|
Temporary
Impairment
Loss (1)
|
|
|
OTTI -
Non-Credit
Loss (1)
|
|
|
OTTI -
Credit
Loss (2)
|
|
|
Fair
Value
|
|
Balance
at June 30, 2008
|
|
$
|
69,450
|
|
|
$
|
(4,234
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
65,216
|
|
Changes
in losses related to investments
|
|
|
-
|
|
|
|
(464
|
)
|
|
|
(712
|
)
|
|
|
(1,266
|
)
|
|
|
(2,442
|
)
|
Redemption
|
|
|
(5,175
|
)
|
|
|
224
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,951
|
)
|
Balance
at June 30, 2009
|
|
|
64,275
|
|
|
|
(4,474
|
)
|
|
|
(712
|
)
|
|
|
(1,266
|
)
|
|
|
57,823
|
|
Changes
in losses related to investments
|
|
|
-
|
|
|
|
(462
|
)
|
|
|
680
|
|
|
|
(4,783
|
)
|
|
|
(4,565
|
)
|
Balance
at June 30, 2010
|
|
$
|
64,275
|
|
|
$
|
(4,936
|
)
|
|
$
|
(32
|
)
|
|
$
|
(6,049
|
)
|
|
$
|
53,258
|
|
(1) OTTI
means "other-than-temporary impairment." The amounts in this column
are recorded, net of tax, in the accumulated other
comprehensive
income (loss) component of stockholders' equity.
(2) The
amounts in this column are recorded in the consolidated statement of
operations.
During
the fiscal years ended June 30, 2010 and 2008, the Company had no sales or
redemptions of its auction rate securities. During the fiscal year
ended June 30, 2009, the Company redeemed approximately $5.2 million of its
auction rate securities at their par value. The Company had no
realized gains or losses related to the sale or redemption of its investments in
auction rate securities during the three fiscal years ended June 30,
2010.
The
Company plans to continue to monitor its investments, including the liquidity of
and creditworthiness of the issuers of its auction rate securities, on an
ongoing basis for indications of further impairment and, if an impairment is
identified, for proper classification of the impairment. Based on the
Company’s expected operating cash flows and sources of cash, the Company does
not believe that any reduction in the liquidity of its auction rate securities
will have a material impact on its overall ability to meet its liquidity
needs.
3.
|
SHARE-BASED
COMPENSATION:
|
The
Company has incentive and non-qualified stock options outstanding that were
granted to directors, officers, and other employees pursuant to authorization by
the Board of Directors. With respect to directors, the Company’s
policy and practice during fiscal years 2010 and 2009 was that only those
directors who are employees to the Company were eligible to receive
options. The exercise price per share of each option equals the
market value of a share of the Company’s common stock on the date of the
grant. Substantially all of the options granted become exercisable in
equal increments on the first three anniversaries of the date of
grant. All outstanding options expire ten years from the date of
grant. Since its inception in 1991, the Company has authorized
approximately 36.4 million shares for issuance upon exercise of options, of
which approximately 10.1 million shares were available for issuance;
approximately 6.6 million shares of which have been granted and remain
outstanding and approximately 3.5 million shares have not been granted as of
June 30, 2010 and remain in the Company’s 1991 Stock Option Plan to be
granted.
The
non-cash share-based compensation expenses included in the consolidated
statements of operations are as follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Selling,
general and administrative
|
|
$
|
11,822
|
|
|
$
|
13,108
|
|
|
$
|
16,213
|
|
Research
and development
|
|
|
511
|
|
|
|
792
|
|
|
|
1,016
|
|
Cost
of sales
|
|
|
32
|
|
|
|
—
|
|
|
|
—
|
|
Total
non-cash share-based compensation expense
|
|
|
12,365
|
|
|
|
13,900
|
|
|
|
17,229
|
|
Income
tax benefit
|
|
|
(4,283
|
)
|
|
|
(4,100
|
)
|
|
|
(4,083
|
)
|
Total
non-cash share-based compensation expense, net of tax
benefit
|
|
$
|
8,082
|
|
|
$
|
9,800
|
|
|
$
|
13,146
|
|
Impact
on diluted net income per share attributable to MICROS Systems, Inc.
common shareholders
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
|
$
|
0.16
|
|
The
non-cash share-based compensation expense for the fiscal years 2010, 2009 and
2008 included approximately $1.7 million, $0.8 million and $3.2 million,
respectively, related to grants of options to the Company’s Chairman, President,
and Chief Executive Officer, A.L. Giannopoulos during the respective fiscal
years. In accordance with the terms of the Company’s option plan, as
he is over the retirement age of 62, any options that he holds that have not yet
vested will vest immediately upon his retirement. Although Mr.
Giannopoulos had not retired, the Company expensed 100% of the share-based
compensation expense related to his option grants because he was over the age of
62 at the time he received the options.
No
non-cash share-based compensation expense has been capitalized for fiscal years
2010, 2009 and 2008, as stock options were not granted to employees whose labor
cost was capitalized as software development costs or inventory.
Estimates
of fair values of options granted during the three fiscal years ended June 30,
2010, 2009, and 2008 were made on the date of grant using the following
assumptions:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Weighted-average
expected volatility
|
|
|
42
|
%
|
|
|
39
|
%
|
|
|
35
|
%
|
Expected
volatility
|
|
|
41%
- 42
|
%
|
|
|
35%
- 42
|
%
|
|
|
33%
- 36
|
%
|
Expected
term
|
|
5.0
– 5.2 years
|
|
|
4.9
– 5.3 years
|
|
|
4.8
– 5.3 years
|
|
Expected
dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-free
interest rate
|
|
|
1.7%
- 2.0
|
%
|
|
|
1.7%
- 2.8
|
%
|
|
|
2.6%
- 3.7
|
%
|
The
following is a summary of option activity during the fiscal year ended June 30,
2010:
(in thousands, except per share data and number of years)
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at June 30, 2009
|
|
|
7,132
|
|
|
$
|
21.79
|
|
|
|
|
|
|
|
Granted
|
|
|
1,120
|
|
|
$
|
29.81
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,378
|
)
|
|
$
|
16.92
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
(300
|
)
|
|
$
|
24.27
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2010
|
|
|
6,574
|
|
|
$
|
24.06
|
|
|
|
6.8
|
|
|
$
|
51,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2010
|
|
|
4,668
|
|
|
$
|
23.10
|
|
|
|
6.0
|
|
|
$
|
40,934
|
|
The
weighted-average grant-date estimated fair value per share of options granted
during the fiscal years 2010, 2009 and 2008 was $11.70, $5.93 and $12.87,
respectively. The total intrinsic value, which is the difference
between the exercise price and the market price on the date of exercise, of
options exercised during the fiscal years 2010, 2009 and 2008 was approximately
$18.1 million, $3.8 million and $38.9 million, respectively.
As of
June 30, 2010, there was approximately $13.7 million (net of estimated
forfeitures) in non-cash share-based compensation costs related to non-vested
awards, expected to be recognized in the Company’s consolidated statements of
operations over a weighted-average period of 1.83 years.
Cash
received from options exercised during the fiscal years 2010, 2009 and 2008 was
approximately $23.3 million, $2.9 million and $27.9 million,
respectively.
FY 2010:
TIG GLOBAL, LLC.
On
December 31, 2009, the Company acquired TIG Global, LLC (“TIG Global”), an
online marketer specializing in hotel and destination internet marketing,
headquartered in the Washington, D.C. metropolitan area, for a total cash
purchase price of approximately $29.0 million, net of cash
acquired. Approximately $3.0 million of the total purchase price is
held in escrow and, if specified claims against TIG Global arise, such amounts
may be used to satisfy those claims. The amounts held in escrow, net
of any payments made to satisfy any such claims are to be paid in two
installments, at 12 and 18 months after closing. The former TIG
Global members may receive an additional amount of up to $0.9 million based upon
achievement of specified financial targets for calendar year
2010. Approximately $0.6 million of the $0.9 million has been
included in the recorded purchase price allocation based on fair
value. In connection with the acquisition, the Company recorded
goodwill of approximately $25.0 million and intangible assets of approximately
$6.8 million, principally comprised of customer relationships which will be
amortized over 10 years.
FY 2009:
FRY,
INC.
During
August 2008, the Company acquired Fry, Inc. (“Fry”), an e-commerce design,
development and managed services provider headquartered in Ann Arbor, Michigan,
for a total cash purchase price of approximately $32.7 million, net of cash
acquired. The Company also assumed debt of approximately $18.1
million, which was paid off immediately after the
acquisition. Approximately $6.0 million of the total purchase price
was initially held in escrow to satisfy certain claims the Company may have had
against Fry. Any amounts then remaining after the satisfaction of any
such claims are to be paid in two installments, at 12 and 18 months after
closing. The first installment of approximately $2.9 million was paid
in August 2009 and a second installment of approximately $2.7 million was paid
in February 2010. Approximately $.1million has also been paid to
Company to satisfy certain of its claims against the selling Fry
shareholders. As of June 2010, the balance of the escrow is
approximately $.3 million, which shall be paid as the remaining pending claims
are resolved. The selling Fry shareholders were eligible to earn up
to an additional $17 million in earn out payments over the approximately two
year period following closing, which were payable based upon achievement of
specified financial targets. In April 2009, the Company paid
approximately $4.5 million to the former Fry shareholders for meeting the
initial set of specified financial targets and in June 2010, the Company paid
approximately $1.6 million to the sellers for meeting another set of financial
targets for calendar year 2009. In connection with the
acquisition, the Company recorded goodwill of approximately $40.2 million,
intangible assets of approximately $7.0 million, and capitalized software of
approximately $4.7 million.
FY 2008:
CHECK-IN-DATA AG
During
the first quarter of fiscal year 2008, the Company acquired Check-in Data AG
(“Check in Data”) for an aggregate cash purchase price of approximately $13.5
million, net of cash acquired, in a step acquisition in which the Company
acquired an 80% interest in July 2007 and the remaining 20% interest in
September 2007. Approximately $2.0 million of the total purchase
price which was initially held back to satisfy certain claims the Company may
have had against Check in Data was released and paid in fiscal year
2009. Headquartered in Switzerland, Check in Data was a distributor
of MICROS products and services and also provided complementary products and
services. Goodwill of approximately $11.9 million and intangible
assets and capitalized software of approximately $3.3 million were recorded in
connection with the acquisition.
OTHER:
During
fiscal year 2008, the Company also acquired another distributor of MICROS
products and services. The aggregate cash purchase price for this
acquisition was approximately $4.3 million, net of cash acquired, which excluded
certain amounts that were held back to be released on either an agreed upon date
or upon the resolution of contractual indemnity obligations of the sellers, if
any. The first installment, including working capital adjustment, of
approximately $0.4 million was paid in July 2009, and a second installment of
approximately $0.4 million was paid in October 2009. The balance
remaining after satisfaction of any claims, if any, will be paid at four years
after the April 2008 closing.
The acquisitions described above have
been included in the Company’s results since their respective acquisition dates
and the
pro forma
effect
s
of the acquisitions w
ere
not material to the consolidated
financial statements
for
any periods presented in the financial statements
.
The
following table provides information on the components of
inventory at June 30
, 2010 and 2009
:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
Raw
materials
|
|
$
|
1,807
|
|
|
$
|
1,
904
|
|
Finished
goods
|
|
|
33,296
|
|
|
|
37,879
|
|
|
|
$
|
35,103
|
|
|
$
|
39,783
|
|
6.
|
PROPERTY, PLANT AND
EQUIPMENT:
|
The following table provides information
on t
he components of
property, plant and equipment at June 30
, 2010 and 2009
:
(in thousands)
|
|
2010
|
|
|
2009
|
|
Useful Life
|
Leasehold improvements
|
|
$
|
11,779
|
|
|
$
|
10,655
|
|
Shorter
of
useful
life
or
lease
term
|
Machinery
and equipment
|
|
|
12,641
|
|
|
|
11,679
|
|
5-10
years
|
Furniture and
fixtures
|
|
|
19,374
|
|
|
|
19,330
|
|
7-10
years
|
Computer hardware and
software
|
|
|
76,094
|
|
|
|
74,087
|
|
3-
7
years
|
Total property, plant and
equipment
|
|
|
119,888
|
|
|
|
115,751
|
|
|
Accumulated depreciation and
amortization
|
|
|
(92,539
|
)
|
|
|
(85,231
|
)
|
|
Net property, plant and
equipment
|
|
$
|
27,349
|
|
|
$
|
30,520
|
|
|
Depreciation expense for the fiscal
years 2010, 2009 and 2008
was approximately $12.7 million, $13.2 million
and $12.6 million
,
respectively.
The
Company had two credit agreements (the “Credit Agreements”) that in the
aggregate provided a $65.0 million multi-currency committed line of
credit. The lenders under the Credit Agreements were Bank of America,
N.A., Wachovia Bank, N.A., and US Bank (“Lenders”). The international
facility was secured by 65% of the capital stock of the Company’s main operating
Ireland subsidiary and 100% of the capital stock of all of the remaining major
foreign subsidiaries. The U.S. facility was secured by 100% of the
capital stock of the Company’s major U.S. subsidiaries as well as inventory and
receivables located in the U.S.
For
borrowings in U.S. currency, the interest rate under the Credit Agreements was
equal to the higher of the federal funds rate plus 50 basis points or the prime
rate. For borrowings in foreign currencies, the interest rate was
determined by a LIBOR-based formula, plus an additional margin of 125 to 200
basis points, depending upon the Company’s consolidated earnings before
interest, taxes, depreciation and amortization for the immediately preceding
four calendar quarters. Under the terms of the Credit Agreements, the
Company was required to pay to the Lenders insignificant commitment fees on the
unused portion of the line of credit. The Credit Agreements also
contained certain financial covenants and restrictions on the Company’s ability
to assume additional debt, repurchase stock, sell subsidiaries or acquire
companies. In case of an event of default, as defined in the Credit
Agreements including those not cured within the applicable cure period, if any,
the Lenders’ remedies included their ability to declare all outstanding loans,
plus interest and other related amounts owed, to be immediately due and payable
in full, and to pursue all rights and remedies available to them under the
Credit Agreements or under applicable law.
As of
June 30, 2010, the Company had approximately $1.4 million outstanding under the
Credit Agreements and has applied approximately an additional $0.4 million to
guarantees. A total of approximately $63.1 million was available for
future borrowings as of June 30, 2010. The total outstanding balance
consisted of 127.5 million in JPY (Japanese Yen) (approximately $1.4 million at
the June 30, 2010 exchange rate).
The Company also has a credit
relationship with a European bank in the amount of EUR 1.0 million
(approximately $1.2 million at the June 30, 2010 exchange
rate). Under the terms of this facility, the Company may borrow in
the form of either a line of credit or term debt. As of June 30,
2010, there were no balances outstanding on this credit facility, but
approximately EUR 0.6 million (approximately $0.7 million at the June 30, 2010
exchange rate) of the credit facility has been used for
guarantees.
As of June 30, 2010, the Company had
approximately $63.6 million
borrowing capacity under all of the credit facilities described
above. The weighted-average interest rate on the outstanding balances
under the Credit Agreements as of June 30, 20
10
was 1.4%.
Subsequent to the fiscal year ended June
30, 2010, the Credit Agreements were amended to extend the maturity date until
July 31, 2013, with some further modifications to the terms and
conditions.
The changes to the Credit Agreements in connection
with the renewal and extension include the addition and deletion of certain
subsidiaries as co-borrowers, a reduction in the overall limit on the line to
$50.0 million (a change made at the Company’s request), and reduction in certain
fees payable to the lenders under certain circumstances.
8.
|
ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES:
|
The components of accrued expenses and
other current liabilities at June 30 are as follows:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
Compensation, benefits and related
taxes
|
|
$
|
57,903
|
|
|
$
|
40,659
|
|
Deposits received from
customers
|
|
|
29,227
|
|
|
|
29,824
|
|
Professional
services
|
|
|
11,606
|
|
|
|
7,808
|
|
VAT and sales
taxes
|
|
|
10,381
|
|
|
|
9,197
|
|
Payable for investment securities
purchased
|
|
|
9,985
|
|
|
|
—
|
|
Product
related
|
|
|
6,119
|
|
|
|
3,276
|
|
Customer
related
|
|
|
1,669
|
|
|
|
2,355
|
|
Restructuring
charges
|
|
|
265
|
|
|
|
1,762
|
|
Other
|
|
|
8,314
|
|
|
|
9,940
|
|
|
|
$
|
135,469
|
|
|
$
|
104,821
|
|
During fiscal year 2009, the Company
recorded restructuring charges of approximately $3.1 million (approximately $2.1
million, net of tax), primarily to reflect adjustments to its cost structure in
response to lower sales volume in certain of its locations. The
charge included approximately $1.5 million in employee related costs and
approximately $1.6 million in occupancy related costs for certain
facilities that the Company
had
vacated. The
occupancy related costs is expected to be paid through September
2013. The charges affect
ed
both of the Company’s reportable
segments. This
reduction
did not have a
significant impact on the Company’s fiscal year 2010 financial results and
is not expected to have a
significant impact on
its
future financial results. As
of June 30, 2010, the remaining accrual related to the charge was approximately
$0.6 million, of which approximately $0.3 million is included in accrued
expenses and other current liabilities, and the remaining non-current balance of
approximately $0.3 million is included in other non-current liabilities in the
accompanying consolidated balance sheets.
Goodwill allocated to the Company’s
reportable segments as of June 30, 2010 and 2009 and changes in the carrying
amount of goodwill are as follows:
(in thousands)
|
|
United States
|
|
|
International
|
|
|
Total
|
|
Balance at June 30,
2008
|
|
$
|
95,888
|
|
|
$
|
63,834
|
|
|
$
|
159,722
|
|
Goodwill adjustment for prior
years’ acquisitions
|
|
|
23
|
|
|
|
(187
|
)
|
|
|
(164
|
)
|
Goodwill acquired - Fry,
Inc.
|
|
|
38,600
|
|
|
|
—
|
|
|
|
38,600
|
|
Foreign currency
translation
|
|
|
—
|
|
|
|
(7,419
|
)
|
|
|
(7,419
|
)
|
Balance at June 30,
2009
|
|
|
134,511
|
|
|
|
56,228
|
|
|
|
190,739
|
|
Goodwill adjustment for prior
years’ acquisitions
|
|
|
1,619
|
|
|
|
(92
|
)
|
|
|
1,527
|
|
Goodwill acquired – TIG
Global
|
|
|
24,996
|
|
|
|
—
|
|
|
|
24,996
|
|
Foreign currency
translation
|
|
|
—
|
|
|
|
(3,437
|
)
|
|
|
(3,437
|
)
|
Balance at June 30,
2010
|
|
$
|
161,126
|
|
|
$
|
52,699
|
|
|
$
|
213,825
|
|
During
the
fiscal year
ended June 30, 2009
, the Company adjusted its goodwill with
an offsetting adjustment to its net deferred tax assets related to its prior
year acquisitions, primarily due to adjustments to purchase accounting and
operating loss carryforwards.
Based on the results of its annual
impairment tests, the Company determined that no impairment of goodwill existed
as of and for the fiscal years ended June 30, 2010, 2009 and
2008.
Purchased
intangible assets are amortized over the estimated useful lives of the
respective asset category unless such lives are deemed
indefinite. The following table provides information on the Company’s
intangible assets at June 30, 2010 and 2009:
(in thousands except number of years)
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
|
Useful
Life
(in years)
|
|
At
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
lists
|
|
$
|
30,951
|
|
|
$
|
(13,632
|
)
|
|
$
|
17,319
|
|
|
|
4
- 10
|
|
Non-compete
agreement
|
|
|
309
|
|
|
|
(84
|
)
|
|
|
225
|
|
|
|
2
- 4
|
|
Product
lines
|
|
|
326
|
|
|
|
(326
|
)
|
|
|
—
|
|
|
|
|
|
Service
revenue backlog
|
|
|
833
|
|
|
|
(786
|
)
|
|
|
47
|
|
|
|
5
|
|
Trademark
|
|
|
1,200
|
|
|
|
(92
|
)
|
|
|
1,108
|
|
|
|
25
|
|
Finite-lived
purchased intangible assets
|
|
|
33,619
|
|
|
|
(14,920
|
)
|
|
|
18,699
|
|
|
|
|
|
Trademarks
|
|
|
891
|
|
|
|
—
|
|
|
|
891
|
|
|
|
|
|
Total
|
|
$
|
34,510
|
|
|
$
|
(14,920
|
)
|
|
$
|
19,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
lists
|
|
$
|
25,788
|
|
|
$
|
(10,554
|
)
|
|
$
|
15,234
|
|
|
|
4 -
10
|
|
Non-compete
agreement
|
|
|
10
|
|
|
|
(7
|
)
|
|
|
3
|
|
|
|
4
|
|
Product
lines
|
|
|
326
|
|
|
|
(317
|
)
|
|
|
9
|
|
|
|
5
|
|
Service
revenue backlog
|
|
|
906
|
|
|
|
(533
|
)
|
|
|
373
|
|
|
|
3 -
5
|
|
Trademark
|
|
|
1,200
|
|
|
|
(44
|
)
|
|
|
1,156
|
|
|
|
25
|
|
Finite-lived
purchased intangible assets
|
|
|
28,230
|
|
|
|
(11,455
|
)
|
|
|
16,775
|
|
|
|
|
|
Trademarks
|
|
|
934
|
|
|
|
—
|
|
|
|
934
|
|
|
|
|
|
Total
|
|
$
|
29,164
|
|
|
$
|
(11,455
|
)
|
|
$
|
17,709
|
|
|
|
|
|
Certain
of the Company’s trademarks are deemed to have indefinite lives and therefore
are not amortized. Amortization expense related to finite-lived
purchased intangible assets was approximately $4.6 million, $4.4 million and
$2.5 million in the fiscal years 2010, 2009 and 2008,
respectively. For each of the fiscal years ended June 30, 2010 and
2009, the Company recorded approximately $1.5 million in accelerated
amortization expenses related to finite-lived purchased intangible
assets. During the three fiscal years ended June 30, 2010, 2009, and
2008 the Company did not recognize any impairment losses on long-lived assets,
including finite-lived purchased intangible assets.
Estimated amortization expense in
future fiscal years ending June
30
is as follows (in
thousands):
2011
|
|
$
|
2,928
|
|
2012
|
|
|
2,806
|
|
2013
|
|
|
2,612
|
|
2014
|
|
|
2,080
|
|
2015
|
|
|
2,000
|
|
Later years
|
|
|
6,273
|
|
Total
|
|
$
|
18,699
|
|
11.
|
COMMITMENTS AND
CONTINGENCIES:
|
LEASES
The
Company and its subsidiaries lease office space under operating leases expiring
at various dates through 2022 and lease equipment under both operating and
capital leases. The capital leases are primarily international
automobile leases used by sales and installation personnel. Rent
expense under the operating leases for the three fiscal years ending June 30,
2010, 2009, and 2008 was as follows:
(in thousands)
|
|
Rent
Expense
|
|
|
Sublease
Income
|
|
|
Net
Rent
Expense
|
|
2010
|
|
$
|
29,338
|
|
|
$
|
(937
|
)
|
|
$
|
28,401
|
|
2009
|
|
|
30
,
772
|
|
|
|
(952
|
)
|
|
|
2
9
,
820
|
|
2008
|
|
|
27,
825
|
|
|
|
(931
|
)
|
|
|
26,
894
|
|
As of June 30, 2010, future minimum
lease payments for those leases having an initial or remaining non-cancelable
lease term in excess of one year are as follows:
(in
thousands)
|
|
Operating
Leases
|
|
|
Less
Sublease
Rentals
|
|
|
Net
Operating
Leases
|
|
|
Capital
Leases
|
|
Fiscal Year Ending June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
$
|
26,944
|
|
|
$
|
(965
|
)
|
|
$
|
25,979
|
|
|
$
|
189
|
|
2012
|
|
|
21,483
|
|
|
|
(957
|
)
|
|
|
20,526
|
|
|
|
105
|
|
2013
|
|
|
16,964
|
|
|
|
(905
|
)
|
|
|
16,059
|
|
|
|
81
|
|
2014
|
|
|
14,188
|
|
|
|
(923
|
)
|
|
|
13,265
|
|
|
|
40
|
|
2015
|
|
|
11,629
|
|
|
|
(654
|
)
|
|
|
10,975
|
|
|
|
—
|
|
2016 and
thereafter
|
|
|
8,570
|
|
|
|
—
|
|
|
|
8,570
|
|
|
|
—
|
|
|
|
$
|
99,778
|
|
|
$
|
(4,404
|
)
|
|
$
|
95,374
|
|
|
|
415
|
|
Less: current
portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189
|
|
Long-term obligations under
capital lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
226
|
|
LEGAL PROCEEDINGS
There is
a case pending in the U.S. District Court for the Northern District of Georgia,
styled
Ware v.
Abercrombie & Fitch Stores, Inc. et al
.; although the Company was not
a party to that case, the Company may have had some obligation to indemnify
certain of the defendants who are the Company’s customers based on the terms of
the Company’s contracts with those customers. The plaintiff alleged
that the defendants infringed a patent relating to the processing of credit card
transactions. The defendants included approximately 107
individual
retailers, 13 of whom
are the Company’s customers for retail point-of-sale
software.
The Company initially agreed to provide indemnity
coverage to five of the defendants who are the Company’s customers in accordance
with applicable provisions of the contracts between the Company and those
customers, however, one such customer subsequently filed for protection under
the U.S. Bankruptcy Code. During the quarter ended June 30, 2010, the
Company entered into settlement agreements with all of the defendants for whom
it may have had indemnity obligations. Through June 30, 2010, our legal fees
with respect to the third party action have not been material, and the
settlement amounts were not material
.
O
n May 22, 2008, a jury returned verdicts
totaling $7.5 million against the Company in the consolidated actions of
Roth Cash
Register v. MICROS Systems, Inc., et al. and Shenango Systems Solutions v.
MICROS Systems, Inc., et al
. The cases initially
were filed in 2000 in the Court of Common Pleas of Allegheny County,
Pennsylvania. The complaints both related to the non-renewal of
dealership agreements in the year 2000 between the Company and the respective
plaintiffs. The agreements were non-renewed as part of a
restructuring of the dealer channel. There is no other outstanding
litigation relating to the restructuring of the dealer channel in the year
2000. The plaintiffs alleged that the Company and certain of its
subsidiaries and employees entered into a plan to eliminate the plaintiffs as
authorized dealers and improperly interfere with the plaintiffs' relationships
with their respective existing and potential future clients and customers
without compensation to the plaintiffs. As a result, the plaintiffs
claimed that the Company was liable for, among other things, breach of contract
and tortious interference with existing and prospective contractual
relationships. The Company and the plaintiffs have appealed the
verdicts on various grounds.
Oral argument on the appeal took
place on February 24, 2010, before the Superior Court of
Pennsylvania. The court has not yet issued a decision on the
appeal.
The Company has
established an immaterial reserve for any potential liability relating to these
matters, as the Company believes that it present
ed
strong arguments to reverse the
verdicts on appeal, and therefore believes that an unfavorable outcome in these
cases is not probable. Nevertheless, even if the verdicts were not
reversed or reduced on appeal, payment of the resulting obligations would not
have a material adverse effect on the Company’s consolidated financial position
or liquidity.
The Company is and has been involved in
legal proceedings arising in the normal course of business, and, subject to the
matters referenced above, 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, financial position, or cash
flows.
12.
|
SHAREHOLDERS’
EQUITY:
|
During
the period from fiscal year 2002 through fiscal year 2009, the Board of
Directors authorized the purchase of up to an aggregate of 12 million shares of
the Company’s common stock. The Company completed the purchases of 12
million shares through February 2010. On August 25, 2009, the Board
of Directors authorized the purchase of an additional two million shares of the
Company’s common stock over the next three years, to be purchased from time to
time depending on market conditions and other corporate considerations as
determined by management. The Company has incurred an aggregate
of approximately $0.3 million in fees related to all stock
purchases. As of June 30, 2010, approximately 1.6 million additional
shares are available for purchases under the most recent
authorization.
The
following table summarizes the cumulative number of shares purchased under the
purchase authorizations, all of which have been retired:
|
|
Number of
Shares
|
|
|
Average
Purchase Price
per Share
|
|
|
Total Purchase
Value
(in thousands)
|
|
Total shares
purchased:
|
|
|
|
|
|
|
|
|
|
As of June 30,
2007
|
|
|
7,533,198
|
|
|
$
|
14.77
|
|
|
$
|
111,284
|
|
Fiscal year
2008
|
|
|
2,329,302
|
|
|
$
|
31.90
|
|
|
|
74,303
|
|
As of June 30,
2008
|
|
|
9,862,500
|
|
|
$
|
18.82
|
|
|
|
185,587
|
|
Fiscal year
2009
|
|
|
855,300
|
|
|
$
|
26.00
|
|
|
|
22,242
|
|
As of June 30,
2009
|
|
|
10,717,800
|
|
|
$
|
19.39
|
|
|
|
207,829
|
|
Fiscal year
2010
|
|
|
1,646,070
|
|
|
$
|
28.94
|
|
|
|
47,635
|
|
As of June 30,
2010
|
|
|
12,363,870
|
|
|
$
|
20.66
|
|
|
$
|
255,464
|
|
Subsequent to year-end, on August 24,
2010, the Board of Directors authorized the purchase of an additional two
million shares of the Company’s common stock over the next three years, to be
purchased from time to time depending on market conditions and other corporate
considerations as determined by management.
Income
before taxes for the three fiscal years
ende
d June 30, 2010, 2009,
and 2008
was taxed
as indicated in
the following
jurisdictions:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
United
States
|
|
$
|
82
,
626
|
|
|
$
|
72,039
|
|
|
$
|
66,915
|
|
International
|
|
|
85,499
|
|
|
|
74,823
|
|
|
|
87,011
|
|
|
|
$
|
168,125
|
|
|
$
|
146,862
|
|
|
$
|
153,926
|
|
The components of income tax expense for
the three fiscal years ended June 30, 2010 are as follows:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
32,498
|
|
|
|
31,729
|
|
|
$
|
29,720
|
|
State
|
|
|
4,554
|
|
|
|
4,443
|
|
|
|
2,996
|
|
Foreign
|
|
|
18,755
|
|
|
|
16,555
|
|
|
|
20,569
|
|
|
|
|
55,807
|
|
|
|
52,727
|
|
|
|
53,285
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,31
1
|
)
|
|
|
(2,
600
|
)
|
|
|
(116
|
)
|
State
|
|
|
(117
|
)
|
|
|
(233
|
)
|
|
|
(225
|
)
|
Foreign
|
|
|
(1,634
|
)
|
|
|
(721
|
)
|
|
|
(643
|
)
|
|
|
|
(3,062
|
)
|
|
|
(3,554
|
)
|
|
|
(984
|
)
|
|
|
$
|
52,745
|
|
|
$
|
49,173
|
|
|
$
|
52,301
|
|
The total tax provision is different
from the amount that would have been
recorded by applying the U.S. statutory
federal income tax rate to income before taxes. The reconciliation of
these differences
for the
three fiscal years ended June 30, 2010
is as follows:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Statutory
rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase (decrease) resulting
from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal tax
benefit
|
|
|
1.4
|
|
|
|
1.5
|
|
|
|
1.3
|
|
Effect of tax rates in foreign
jurisdictions
|
|
|
(11.6
|
)
|
|
|
(12.4
|
)
|
|
|
(
9.7
|
)
|
Share-based and other
compensation
|
|
|
1.5
|
|
|
|
0.9
|
|
|
|
1.8
|
|
Non-deferred foreign
income
|
|
|
0.3
|
|
|
|
1.3
|
|
|
|
1.5
|
|
Domestic manufacturing
deduction
|
|
|
(0.7
|
)
|
|
|
(0.7
|
)
|
|
|
(0.
7
|
)
|
Valuation
allowances
|
|
|
2.0
|
|
|
|
2.5
|
|
|
|
2.1
|
|
Uncertain tax
positions
|
|
|
2.1
|
|
|
|
3.1
|
|
|
|
3.9
|
|
Foreign withholding
taxes
|
|
|
1.0
|
|
|
|
0.8
|
|
|
|
0.7
|
|
Other
differences
|
|
|
0.4
|
|
|
|
1.5
|
|
|
|
(1.9
|
)
|
Effective tax
rate
|
|
|
31.4
|
%
|
|
|
33.5
|
%
|
|
|
34.0
|
%
|
The
Company has not provided U.S. deferred income taxes on the cumulative unremitted
earnings of its significant non-U.S. affiliates as the Company plans to
permanently reinvest cumulative unremitted foreign earnings outside the
U.S. These cumulative unremitted foreign earnings of approximately
$507 million and $459 million for fiscal years 2010 and 2009, respectively,
relate primarily to ongoing operations in foreign jurisdictions and are required
to fund foreign operations, capital expenditures and expansion
requirements. It is not practicable to determine the unrecognized
deferred income taxes on these foreign subsidiaries.
The significant components of the
Company’s deferred tax assets and liabilities at June 30, 2010 and
2009
are as
follows
:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
Deferred tax
assets:
|
|
|
|
|
|
|
Net operating loss
carryforwards
|
|
$
|
12,464
|
|
|
$
|
13,372
|
|
Accruals
|
|
|
11,
468
|
|
|
|
10,
255
|
|
Share-based
compensation
|
|
|
13,421
|
|
|
|
12,337
|
|
Bad debt
reserves
|
|
|
6,570
|
|
|
|
6,857
|
|
Inventory
|
|
|
2,040
|
|
|
|
2,271
|
|
Benefit related
accruals
|
|
|
2,032
|
|
|
|
1,737
|
|
Deferred revenues and customer
deposits
|
|
|
1,286
|
|
|
|
1,333
|
|
Other unrealized gains and
losses
|
|
|
4,021
|
|
|
|
2,24
4
|
|
Restructuring
|
|
|
620
|
|
|
|
832
|
|
Tax credit
carryforward
|
|
|
94
|
|
|
|
—
|
|
Tax impact of technology
transfer
|
|
|
—
|
|
|
|
124
|
|
Total deferred tax
assets
|
|
|
54,016
|
|
|
|
51,362
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities:
|
|
|
|
|
|
|
|
|
Intangibles
amortization
|
|
|
(7,682
|
)
|
|
|
(8,076
|
)
|
Capitalized software development
costs
|
|
|
(3,795
|
)
|
|
|
(4,301
|
)
|
Depreciation
|
|
|
(705
|
)
|
|
|
(1,240
|
)
|
Other
|
|
|
(14
|
)
|
|
|
(13
|
)
|
Total deferred tax
liabilities
|
|
|
(12,196
|
)
|
|
|
(13,630
|
)
|
|
|
|
|
|
|
|
|
|
Valuation
allowance:
|
|
|
|
|
|
|
|
|
Net operating
losses
|
|
|
(7,039
|
)
|
|
|
(6,244
|
)
|
Other
|
|
|
(4,557
|
)
|
|
|
(2,276
|
)
|
Total valuation
allowance
|
|
|
(11,596
|
)
|
|
|
(8,520
|
)
|
Net deferred tax
assets
|
|
$
|
30,224
|
|
|
$
|
29,212
|
|
The tax effected net operating loss
carryforwards and related valuation allowance at June 30, 2010 and 2009 are as
follows:
(in
thousands)
|
|
2010
|
|
|
2009
|
|
Net operating loss
carryforwards:
|
|
|
|
|
|
|
U.S.
|
|
$
|
3,947
|
|
|
$
|
5,287
|
|
International
|
|
|
8,517
|
|
|
|
8,085
|
|
|
|
|
12,464
|
|
|
$
|
13,372
|
|
Net operating loss carryforward
valuation allowance:
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
—
|
|
|
|
—
|
|
International
|
|
|
(7,039
|
)
|
|
|
(6,244
|
)
|
|
|
|
(7,039
|
)
|
|
|
(6,244
|
)
|
Net operating loss carryforwards,
net of valuation allowance
|
|
$
|
5,425
|
|
|
$
|
7,128
|
|
Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.
The Company is profitable on a
consolidated basis. However, it has incurred losses in certain
jurisdictions. A valuation allowance has been provided at June 30,
2010 and 2009 to offset the related deferred tax assets in these jurisdictions
due to uncertainty of realizing the benefit of the net operating loss
carryforwards and other deferred tax assets.
The Company’s net operating loss
carryforwards and tax credit carryforwards (if not applied against taxable
income) as of June 30, 2010 expire as follows:
|
|
Expires in Fiscal Year
|
|
(in thousand)
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
|
No
Expiration
|
|
|
Total
|
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
carryf
orwards
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,947
|
|
|
$
|
—
|
|
|
$
|
3,947
|
|
Valuation
allowances
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,947
|
|
|
|
—
|
|
|
|
3,947
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
carryforwards
|
|
|
—
|
|
|
|
—
|
|
|
|
4,960
|
|
|
|
3,557
|
|
|
|
8,517
|
|
Valuation
allowances
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,960
|
)
|
|
|
(2,079
|
)
|
|
|
(7,039
|
)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,478
|
|
|
|
1,478
|
|
Net operating loss
carryforwards,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of valuation
allowances
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,947
|
|
|
$
|
1,478
|
|
|
$
|
5,425
|
|
Effective
July 1, 2007, the Company adopted guidance on accounting for uncertainty in
income taxes, which provides a minimum recognition threshold that a tax position
is required to meet before being recognized in the financial statements.
The guidance also provides standard on derecognition, measurement, and
classification of the effects of a tax position, recognition of interest and
penalties, accounting in interim periods and disclosure.
The cumulative effect of
adopting
the guidance of
approximately $2.6 million,
including interest and penalties of approximately $0.3 million, was recorded as
a reduction to retained earnings and an increase in
net income
taxes payable.
The
Company’s net unrecognized income tax benefits were approximately $21.3 million
and $18.0 million, including interest and penalties of approximately $2.4
million and $2.0 million, at June 30, 2010 and 2009,
respectively. The Company has recognized approximately $0.4 million
and $0.7 million of interest expense for the fiscal years ending June 30, 2010
and 2009, respectively. The interest and penalties related to
unrecognized income tax benefits are classified as a component of income tax
expense. The non-current components of the unrecognized income tax benefits were
recorded as non-current to the extent that the Company does not anticipate
making a payment within 12 months of the balance sheet date. If
recognized, all of the unrecognized income tax benefit would be recognized as a
reduction of income tax expense, impacting the effective income tax rate. The
Company has recognized a decrease in certain unrecognized tax benefits,
including interest and penalties for the fiscal year ended June 30, 2010
primarily due to the expiration of statutes of limitations, which reduced the
effective tax rate and income tax expense by approximately $1.3
million.
In the
ordinary course of the Company’s business, transactions occur for which the
ultimate tax outcome may be uncertain. Tax authorities periodically audit
the Company’s income tax returns. These audits include examination of the
Company’s significant tax filing positions, including the timing and amounts of
deductions and the allocation of income and expenses among tax
jurisdictions. The Company files income tax returns with tax authorities
in the U.S. as well as with various foreign tax jurisdictions. The
Company currently considers its major taxing jurisdictions to include the U.S.,
the United Kingdom and Ireland.
The
Company’s income tax returns are no longer subject to examination by the U.S.
tax authorities for tax years ending before June 2007, by the U.K. tax
authorities for tax years ending before June 2005 and the Irish tax authorities
for tax years ending before June 2005.
Certain
periods prior to these dates, however, could typically be subject to adjustment
due to the impact of items such as competent authority or carryback or
carryforward claims.
The
Company estimates that within the next 12 months, it will decrease unrecognized
income tax benefits, including interest and penalties by approximately $2.7
million to $3.7 million due to the expiration of statutes of limitations and
settlement of issues with tax authorities, which it believes would increase
earnings as a result of a reduction in tax expense. However, audit outcomes and
the timing of audit settlements are subject to significant
uncertainty. Over the next 12 months, it is reasonably possible that
the Company will continue to generate liabilities for uncertain tax positions.
Due to changes in the mix of earnings among jurisdictions and the impact of
discreet items recognized on an intraperiod basis, there may be some degree of
volatility to the quarterly tax rate. The statute of limitations associated with
our significant tax jurisdictions, generally expires in our third
quarter.
The
significant components of the Company’s gross unrecognized tax benefits at June
30, 2010 and 2009 are as follows:
|
|
Gross Unrecognized Tax Benefits
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
Balance,
beginning of year
|
|
$
|
17,834
|
|
|
$
|
17,190
|
|
Current
year uncertain tax positions:
|
|
|
|
|
|
|
|
|
Gross
increases
|
|
|
4,552
|
|
|
|
7,086
|
|
Prior
year uncertain tax positions:
|
|
|
|
|
|
|
|
|
Gross
increases
|
|
|
714
|
|
|
|
50
|
|
Gross
decreases
|
|
|
(1,375
|
)
|
|
|
(2,699
|
)
|
Expiration
of statute of limitations
|
|
|
(1,081
|
)
|
|
|
(1,166
|
)
|
Settlements
with tax authorities
|
|
|
—
|
|
|
|
(2,627
|
)
|
Balance,
end of year
|
|
$
|
20,644
|
|
|
$
|
17,834
|
|
14.
|
OTHER INCOME (EXPENSE),
NET:
|
The following table provides information
regarding the components of other
income (expense) for the three fiscal
years ended June 30, 2010
,
2009, and 2008
:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Credit based impairment losses on
investments
|
|
$
|
(
4
,
783
|
)
|
|
$
|
(1,266
|
)
|
|
$
|
—
|
|
Grant
|
|
|
—
|
|
|
|
—
|
|
|
|
1,726
|
|
Foreign exchange
gain (
loss
)
, net
|
|
|
974
|
|
|
|
(297
|
)
|
|
|
(1,384
|
)
|
Other, net
|
|
|
144
|
|
|
|
(196
|
)
|
|
|
255
|
|
Total other (expense) income,
net
|
|
$
|
(3,665
|
)
|
|
$
|
(1,759
|
)
|
|
$
|
597
|
|
For
fiscal year 2008, the Company recognized approximately $1.7 million in income
due to its receipt of a grant payment from the Irish Development Authority
related to the number of jobs the Company created in Ireland.
15.
|
RELATED PARTY
TRANSACTIONS
|
Effective
June 30, 1995, the Company and
Louis M. Brown, Jr., Vice-Chairman of
the Board,
entered into a Consulting Agreement that, as amended, expired
in accordance with its terms on June 30, 2008. Under the Consulting
Agreement, Mr. Brown was to provide during each fiscal year an average of 20
hours per week of consulting services to the Company in exchange for an annual
base consulting fee of approximately $0.3 million. Additionally for
fiscal year 2008, Mr. Brown’s total compensation also included annual target
b
onus
of approximately $0.2 million that
was accrued during the fiscal year 2008 and paid in the fiscal year
2009. Notwithstanding the expiration of his Consulting Agreement, Mr.
Brown continues to serve the Company as Vice-Chairman of the Board of
Directors.
16.
|
EMPLOYEE BENEFIT
PLANS:
|
DEFINED CONTRIBUTION
PLANS
The Company sponsors an employee savings
plan (the “Plan”), which conforms to the provisions of Section 401(k) of the
Internal Revenue Code. The Plan covers substantially all full-time
and part-time employees in the U.S. and allows employees to voluntarily defer
their eligible
compensation
through contributions to the Plan, up to the maximum amount per year permitted
under the Internal Revenue Code.
The Company matches 50% of the first 5%
in eligible compensation deferred by each participating employee
.
During each of the three fiscal years
ended June 30, 2010, 2009, and 2008, the Company’s matching contributions to the
Plan were approximately $2.1 million, $2.3 million and $1.9 million,
respectively
.
The Company does not have
any material obligations to past or present employees related to post employment
benefits under the Plan.
DEFINED BENEFIT PLAN
The
Company’s Supplemental Executive Retirement Plan (“SERP”) provides designated
officers and executives of the Company or their designated beneficiaries with
benefits upon retirement or death. The Company funds the benefits
under the SERP with corporate owned life insurance policies held by a segregated
trust (known as a “Rabbi Trust”), whose assets are subject to the claims of
creditors of the Company. The Board of Directors of the Company, in
its sole discretion, had selected the participants in the SERP.
During
fiscal year 2008, there were 13 participants in the SERP. As of June
30, 2008, the Board of Directors approved the removal of all participants that
were not vested, leaving three vested participants in the SERP.
Under the
terms of the SERP, vested participants (or their designated beneficiaries upon
death) will receive ten annual payments over nine years commencing six months
after the earlier of death or retirement on or after age 62. The
value of benefits under the SERP is not based on years of service, but is
determined based on the (1) participant’s age at retirement, at death or at a
change of control of the Company, and (2) the base salary received by the
participant during the 12 months immediately preceding his or her retirement,
death or at a change of control of the Company. Two of the three
vested participants are currently receiving their SERP benefits. The
remaining vested participant is the Company’s Chairman, President and Chief
Executive Officer, A.L. Giannopoulos. As he is over the age of 65,
per the terms of the SERP, he is entitled to the maximum benefit rate of 30% of
his base salary upon his retirement, death or at a change of control of the
Company.
The
change in pension benefit obligation, funded status, and accumulated benefit
obligation of the SERP at June 30, 2010 and 2009 are as follows:
(in thousands)
|
|
2010
|
|
|
2009
|
|
Change
in Projected Benefit Obligation (“PBO”):
|
|
|
|
|
|
|
PBO
at the beginning of year
|
|
$
|
4,576
|
|
|
$
|
4,393
|
|
Interest
cost
|
|
|
179
|
|
|
|
284
|
|
Benefit
payments
|
|
|
(101
|
)
|
|
|
(101
|
)
|
PBO
at the end of year
|
|
$
|
4,654
|
|
|
$
|
4,576
|
|
|
|
|
|
|
|
|
|
|
Fair
value of plan assets
|
|
|
N/A
|
|
|
|
N/A
|
|
Unfunded
status of PBO
|
|
$
|
4,654
|
|
|
$
|
4,576
|
|
Accumulated
benefit obligation
|
|
$
|
4,654
|
|
|
$
|
4,576
|
|
Amount
recognized in the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
Accrued
benefit liability
(1)
|
|
$
|
4,654
|
|
|
$
|
4,576
|
|
|
(1)
|
Accrued
benefit liability is included in Other Non-Current Liabilities on the
consolidated balance sheets, except for approximately $0.1 million as of
June 30, 2010 and 2009, respectively, included in Accrued Expenses and
Other Current Liabilities.
|
Assumptions
used to measure benefit obligations at June 30, 2010 and 2009 were as
follows:
|
|
2010
|
|
|
2009
|
|
Discount
rate
(1)
|
|
|
4.40
|
%
|
|
|
4.40
|
%
|
Expected
return on plan assets
|
|
|
—
|
|
|
|
—
|
|
Rate
of compensation increase
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
(1)
|
The
discount rate assumption is based on the internal rate of return for a
portfolio of high-quality bonds (Moody’s Aa Corporate bonds) with
maturities that are consistent with projected future cash
flows.
|
|
(2)
|
The
rate of compensation increase is not applicable as the SERP benefits are
defined and fixed as of June 30, 2008 for the remaining SERP
participants.
|
The
components of net periodic pension cost and the assumptions used to determine
net cost for the three fiscal years ended June 30, 2010 are as
follows:
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Service
cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
646
|
|
Interest
cost
|
|
|
179
|
|
|
|
264
|
|
|
|
870
|
|
Curtailment
gain
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,717
|
)
|
Amortization
of prior service cost
|
|
|
—
|
|
|
|
20
|
|
|
|
648
|
|
Net
periodic pension cost
|
|
$
|
179
|
|
|
$
|
284
|
|
|
$
|
447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
4.40
|
%
|
|
|
5.00
|
%
|
|
|
6.10
|
%
|
Expected
return on plan assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Rate
of compensation increase
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
9.00
|
%
|
|
(1)
|
Due
to the removal of unvested SERP participants as of June 30,
2008.
|
|
(2)
|
The
rate of compensation increase is not applicable for fiscal year 2010 and
2009 as the SERP benefits were defined and fixed as of June 30, 2008 for
the remaining SERP participants.
|
The total
periodic pension costs for fiscal year 2011 will consist of an interest cost of
approximately $0.1 million.
As of
June 30, 2010, the projected benefit payments to be paid from the SERP are as
follows for the following fiscal years (each ending June 30) (in
thousands):
2011
|
|
$
|
96
|
|
2012
|
|
|
92
|
|
2013
|
|
|
88
|
|
2014
|
|
|
85
|
|
2015
|
|
|
565
|
|
2016
– 2020
|
|
|
2,324
|
|
The Company is organized and operates in
four operating segments: U.S., Europe, the Pacific Rim, and Latin
America regions.
T
he Company has identified U.S. as a
separate reportable segment and has aggregated its three international operating
segments into one reportable segment, international, as the three international
operating segments share many similar economical
characteristics. Management views the U.S. and international segments
separately in operating its business, although the products and services are
similar for each segment.
The Company’s chief operating decision
maker is the Company’s Chief Executive Officer.
Historically, all of the Company’s new
business acquisitions have been incorporated into the existing operating
segments, based on their respective geographical locations, and are subsequently
operated and managed as part of that operating segment.
A summary of certain financial
information regarding the
Company’s reportable segments is
set forth below
:
|
|
Fiscal Years Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Revenues
(1)
:
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
491,632
|
|
|
$
|
488,817
|
|
|
$
|
484,026
|
|
International
|
|
|
461,310
|
|
|
|
453,857
|
|
|
|
514,389
|
|
Intersegment
eliminations
(2)
|
|
|
(38,623
|
)
|
|
|
(34,949
|
)
|
|
|
(44,465
|
)
|
Total
revenues
|
|
$
|
914,319
|
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
Income
before taxes
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
85,701
|
|
|
$
|
78,465
|
|
|
$
|
80,291
|
|
International
|
|
|
110,455
|
|
|
|
91,932
|
|
|
|
103,864
|
|
Intersegment
eliminations
(2)
|
|
|
( 28,031
|
)
|
|
|
(23,535
|
)
|
|
|
(30,229
|
)
|
Total
income before taxes
|
|
$
|
168,125
|
|
|
$
|
146,862
|
|
|
$
|
153,926
|
|
Capital
expenditures
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
3,895
|
|
|
$
|
5,635
|
|
|
$
|
7,419
|
|
International
|
|
|
5,149
|
|
|
|
7,726
|
|
|
|
5,525
|
|
Total
capital expenditures
|
|
$
|
9,044
|
|
|
$
|
13,361
|
|
|
$
|
12,944
|
|
Depreciation
and amortization
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
10,611
|
|
|
$
|
10,668
|
|
|
$
|
7,582
|
|
International
|
|
|
6,700
|
|
|
|
6,876
|
|
|
|
7,561
|
|
Total
depreciation and amortization
|
|
$
|
17,311
|
|
|
$
|
17,544
|
|
|
$
|
15,143
|
|
|
|
As of June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
Identifiable
assets
(3)
:
|
|
|
|
|
|
|
United
States
|
|
$
|
569,629
|
|
|
$
|
492,402
|
|
International
|
|
|
568,662
|
|
|
|
528,977
|
|
Total
identifiable assets
|
|
$
|
1,138,291
|
|
|
$
|
1,021,379
|
|
|
|
|
|
|
|
|
|
|
Goodwill
(3)
:
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
161,126
|
|
|
$
|
134,511
|
|
International
|
|
|
52,699
|
|
|
|
56,228
|
|
Total
goodwill
|
|
$
|
213,825
|
|
|
$
|
190,739
|
|
(1)
Amounts based on the location of the
selling entity.
(2)
Amounts primarily represent elimination
of U.S. and Ireland’s intercompany business.
(3)
Amounts based on the physical location
of the asset.
The Company’s products are distributed
in the U.S. and internationally, primarily in Europe, the Pacific Rim, and Latin
America through its subsidiaries, independent dealers/distributors and
Company-owned sales and service offices. The Company’s principal
customers are lodging, food service-related businesses, specialty retail, and
entertainment venues. No single customer accounts for 10% or more of
the Company’s consolidated revenues.
Revenues from unaffiliated customers by
geographic location
for
fiscal years ended June 30, 2010, 2009, and 2008 are set forth below
:
|
|
Fiscal Years Ended June 30,
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
United
States
|
|
$
|
439,792
|
|
|
$
|
434,482
|
|
|
$
|
416,458
|
|
International
|
|
|
474,527
|
|
|
|
473,243
|
|
|
|
537,492
|
|
|
|
$
|
914,319
|
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
Long-lived
assets (property, plant, and equipment) organized by geographic locations as of
June 30 of each indicated fiscal year, are as follows:
(in thousands)
|
|
2010
|
|
|
2009
|
|
United
States
|
|
$
|
15,800
|
|
|
$
|
18,458
|
|
International
|
|
|
11,549
|
|
|
|
12,062
|
|
|
|
$
|
27,349
|
|
|
$
|
30,520
|
|
Approximately $4.8 million and $3.3
million of the long-lived assets as of June 30, 2010 and 2009, respectively,
were located in Ireland. There were no other individual foreign
countries in which the Company has material long-lived
assets.
The
above chart does not include intangible assets.
There were no individual foreign
countries in which the Company received material revenues from unaffiliated
customers.
18.
|
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED):
|
Quarterly financial information for the
fiscal years ended June 30, 2010 and 2009 is
as follows
(in thousands, except per share
data):
|
|
Fiscal Year 2010
(1), (3), (4)
|
|
|
|
1
st
Quarter
|
|
|
2
nd
Quarter
|
|
|
3
rd
Quarter
|
|
|
4
th
Quarter
|
|
Revenue
|
|
$
|
211,401
|
|
|
$
|
225,647
|
|
|
$
|
229,054
|
|
|
$
|
248,217
|
|
Gross
margin
|
|
|
115,826
|
|
|
|
124,979
|
|
|
|
124,310
|
|
|
|
136,366
|
|
Income from
operations
|
|
|
35,847
|
|
|
|
39,598
|
|
|
|
40,869
|
|
|
|
51,659
|
|
Net income attributable to MICROS
Systems, Inc.
|
|
|
24,147
|
|
|
|
26,130
|
|
|
|
30,198
|
|
|
|
33,8
80
|
|
Income from operations per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.45
|
|
|
$
|
0.50
|
|
|
$
|
0.51
|
|
|
|
0.64
|
|
Diluted
|
|
|
0.44
|
|
|
|
0.49
|
|
|
|
0.50
|
|
|
|
0.63
|
|
Net income per share attributable
to MICROS Systems, Inc. common shareholders
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.33
|
|
|
$
|
0.38
|
|
|
$
|
0.42
|
|
Diluted
|
|
|
0.30
|
|
|
|
0.32
|
|
|
|
0.37
|
|
|
|
0.42
|
|
Stock Prices (range of sales
prices):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
31.11
|
|
|
$
|
32.43
|
|
|
$
|
33.50
|
|
|
$
|
38.16
|
|
Low
|
|
|
22.79
|
|
|
|
25.68
|
|
|
|
26.17
|
|
|
|
31.26
|
|
|
|
Fiscal Year 2009
(1), (2), (3), (4), (5)
|
|
|
|
1
st
Quarter
|
|
|
2
nd
Quarter
|
|
|
3
rd
Quarter
|
|
|
4
th
Quarter
|
|
Revenue
|
|
$
|
243
,
632
|
|
|
$
|
236
,
509
|
|
|
$
|
204
,
743
|
|
|
$
|
222
,
840
|
|
Gross
margin
|
|
|
125,9
38
|
|
|
|
125
,
974
|
|
|
|
110
,
655
|
|
|
|
119
,
672
|
|
Income from
operations
|
|
|
34
,
008
|
|
|
|
38
,
323
|
|
|
|
31
,
857
|
|
|
|
36
,
645
|
|
Net income attributable to MICROS
Systems, Inc.
|
|
|
24
,
298
|
|
|
|
26
,
178
|
|
|
|
22
,
952
|
|
|
|
22
,
864
|
|
Income f
rom operations per common
share
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.42
|
|
|
$
|
0.48
|
|
|
$
|
0.40
|
|
|
$
|
0.46
|
|
Diluted
|
|
|
0.41
|
|
|
|
0.47
|
|
|
|
0.39
|
|
|
|
0.45
|
|
Net income per share attributable
to MICROS Systems, Inc. common shareholders
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.32
|
|
|
$
|
0.28
|
|
|
$
|
0.28
|
|
Diluted
|
|
|
0.29
|
|
|
|
0.32
|
|
|
|
0.28
|
|
|
|
0.28
|
|
Stock Prices (range of sales
prices):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
34.41
|
|
|
$
|
27.17
|
|
|
$
|
20.17
|
|
|
$
|
28.65
|
|
Low
|
|
|
22.98
|
|
|
|
13.34
|
|
|
|
13.47
|
|
|
|
18.45
|
|
|
(1)
|
Fiscal years ended June 30,
20
10 and
2009
include
approximately $
12.4
million ($
8.1
million, net
of tax, or $0.10 per diluted
share) and approximately $13.9 million ($9.8 million, net of tax, or $0.12
per diluted share), respectively, in non-cash share-based compensation
expenses. See Note 3 “Share
-based
Compensation.”
The fiscal year 2010
and 2009 also includes other-than-temporary impairment losses of
approximately $4.8 million and $1.3 million, respectively, for long-term
investments. See Note 2 “Financial Instruments and Fair Value
Measurement.”
|
|
(2)
|
Fiscal year ended June 30, 2009
includes approximately $3.1 million ($2.1 million, net of tax) in
restructuring charges and approximately $0.7 million in an inventory
provision reflecting adjustments to the Company’s cost structure to
reflect lower sales volume in certain of the Company’s locations affecting
bo
th of its
reportable segments.
|
|
(3)
|
Net income attributable to MICROS
Systems, Inc.
for the
fiscal years 20
10
has been increased by
approximately $0.3 million for the impact of non-controlling interest
arrangement as compared to fiscal year 2009 which has been decreased by
approximately
$0.7
million.
|
|
(4)
|
Sum of quarterly amounts does not
equal the sum of as reported amounts for the respective fiscal years due
to rounding
differences.
|
19.
|
REVISIONS TO PRIOR PERIOD
FINANCIAL STATEMENTS
|
As
previously disclosed by the Company in its Form 10-Q for the period ended
December 31, 2009, during January 2010, the Company uncovered certain fraudulent
activities in its Japanese subsidiary that occurred during the period from
fiscal year 2006 to the six months ended December 31, 2009. As a result of
the Company’s investigation, the Company determined that fraudulent transactions
resulted in a cumulative overstatement of revenue and net income attributable to
MICROS Systems, Inc. of approximately $6.9 million and $4.9 million,
respectively, over this period. The transactions served principally to inflate
revenue and cost of sales through the creation of fraudulent revenue
documentation and to understate liabilities for loans executed where the Company
was the guarantor over this period. These off-balance sheet loans were
indirectly used to pay down a portion of the Company's fictitious accounts
receivable balances. The Company concluded, based on its investigation,
that the fraud was solely perpetrated by one employee of the Company's Japanese
subsidiary who was not a member of senior management and that the individual
involved expended significant effort over the period to create a variety of
schemes which deliberately circumvented or manipulated the entity's local
controls and procedures. These schemes were primarily designed to inflate
revenues and cost of sales and to obtain financing from third parties to pay off
the accounts receivable balances in order to prolong the schemes. The
Company terminated the employee upon completion of its
investigation.
The
following table shows the revised financial statement line items for the various
fiscal periods affected by the adjustments described above:
|
|
Fiscal Year Ended June 30,
|
|
(in
thousands, except per share data)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously
reported
|
|
$
|
911,847
|
|
|
$
|
954,184
|
|
|
$
|
785,727
|
|
|
$
|
678,953
|
|
Adjustment
|
|
|
(4,122
|
)
|
|
|
(234
|
)
|
|
|
(754
|
)
|
|
|
(720
|
)
|
As revised
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
|
$
|
784,973
|
|
|
$
|
678,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to MICROS
Systems, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously
reported
|
|
$
|
99,297
|
|
|
$
|
101,284
|
|
|
$
|
79,988
|
|
|
$
|
63,528
|
|
Adjustment
|
|
|
(3,005
|
)
|
|
|
(547
|
)
|
|
|
(113
|
)
|
|
|
(565
|
)
|
As revised
|
|
$
|
96,292
|
|
|
$
|
100,737
|
|
|
$
|
79,875
|
|
|
$
|
62,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share available
to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MICROS Systems, Inc. common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously
reported
|
|
$
|
1.22
|
|
|
$
|
1.23
|
|
|
$
|
1.00
|
|
|
$
|
0.82
|
|
Adjustment
|
|
|
(0.03
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.01
|
)
|
As revised
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
|
$
|
1.00
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously
reported
|
|
$
|
1.21
|
|
|
$
|
1.21
|
|
|
$
|
0.97
|
|
|
$
|
0.78
|
|
Adjustment
|
|
|
(0.04
|
)
|
|
|
(0.01
|
)
|
|
|
-
|
|
|
|
(0.01
|
)
|
As revised
|
|
$
|
1.17
|
|
|
$
|
1.20
|
|
|
$
|
0.97
|
|
|
$
|
0.77
|
|
Based on
the materiality guidelines contained in SEC Staff Accounting Bulletin No. 99,
"Materiality" and SEC Staff Accounting Bulletin No. 108, "Considering the
Effects of Prior Year Misstatements in Current Year Financial Statements", the
Company concluded that the adjustments to correct for the fraudulent activities
are not material to any of its current financial statements for periods
beginning with the year ended June 30, 2006 and through the three months ended
September 30, 2009. However, the Company concluded that the
adjustments would be material to the quarterly results and trend for the three
months ended December 31, 2009. Accordingly, the Company
determined that it would revise its previous financial statements to record
these adjustments; however, because the effect of the adjustments were not
material to any previously issued financial statements, the Company determined
not to amend its previously filed Quarterly Reports on Form 10-Q or its Annual
Reports on Form 10-K, rather the Company would make corresponding adjustments to
prior period financial statements, as appropriate, the next time those financial
statements are filed.
The Consolidated
Statements of Operations for the fiscal
years ended June 30, 2009 and 2008 and the Consolidated
Balance Sheet as of June 30, 2009
included in this Form 10-
K
ha
s
been revised as
follows:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2009
|
|
|
2008
|
|
(in thousands, except for EPS)
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
$
|
210,676
|
|
|
$
|
(842
|
)
|
|
$
|
209,834
|
|
|
$
|
265,965
|
|
|
$
|
-
|
|
|
$
|
265,965
|
|
Software
|
|
|
134,845
|
|
|
|
(1,933
|
)
|
|
|
132,912
|
|
|
|
158,699
|
|
|
|
(160
|
)
|
|
|
158,539
|
|
Services
|
|
|
566,326
|
|
|
|
(1,347
|
)
|
|
|
564,979
|
|
|
|
529,520
|
|
|
|
(74
|
)
|
|
|
529,446
|
|
Total
|
|
|
911,847
|
|
|
|
(4,122
|
)
|
|
|
907,725
|
|
|
|
954,184
|
|
|
|
(234
|
)
|
|
|
953,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
135,775
|
|
|
|
(742
|
)
|
|
|
135,033
|
|
|
|
171,779
|
|
|
|
3
|
|
|
|
171,782
|
|
Software
|
|
|
27,244
|
|
|
|
(1,674
|
)
|
|
|
25,570
|
|
|
|
33,252
|
|
|
|
(117
|
)
|
|
|
33,135
|
|
Services
|
|
|
264,883
|
|
|
|
0
|
|
|
|
264,883
|
|
|
|
247,954
|
|
|
|
0
|
|
|
|
247,954
|
|
Total
|
|
|
427,902
|
|
|
|
(2,416
|
)
|
|
|
425,486
|
|
|
|
452,985
|
|
|
|
(114
|
)
|
|
|
452,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
483,945
|
|
|
|
(1,706
|
)
|
|
|
482,239
|
|
|
|
501,199
|
|
|
|
(120
|
)
|
|
|
501,079
|
|
Selling,
general and administrative expenses
|
|
|
279,956
|
|
|
|
1,274
|
|
|
|
281,230
|
|
|
|
306,624
|
|
|
|
293
|
|
|
|
306,917
|
|
Income
before taxes
|
|
|
149,842
|
|
|
|
(2,980
|
)
|
|
|
146,862
|
|
|
|
154,339
|
|
|
|
(413
|
)
|
|
|
153,926
|
|
Income
tax provision
|
|
|
49,148
|
|
|
|
25
|
|
|
|
49,173
|
|
|
|
52,167
|
|
|
|
134
|
|
|
|
52,301
|
|
Net
income attributable to MICROS Systems, Inc.
|
|
|
99,297
|
|
|
|
(3,005
|
)
|
|
|
96,292
|
|
|
|
101,284
|
|
|
|
(547
|
)
|
|
|
100,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to MICROS Systems, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.22
|
|
|
$
|
(0.03
|
)
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
|
$
|
-
|
|
|
$
|
1.23
|
|
Diluted
|
|
$
|
1.21
|
|
|
$
|
(0.04
|
)
|
|
$
|
1.17
|
|
|
$
|
1.21
|
|
|
$
|
(0.01
|
)
|
|
$
|
1.20
|
|
|
|
As of June 30, 2009
|
|
(in thousands)
|
|
As
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
Accounts receivable,
net
|
|
$
|
157,479
|
|
|
$
|
(2,267
|
)
|
|
$
|
155,212
|
|
Deferred income taxes,
current
|
|
|
20,283
|
|
|
|
(413
|
)
|
|
|
19,870
|
|
Deferred income taxes,
non-current
|
|
|
11,483
|
|
|
|
(27
|
)
|
|
|
11,456
|
|
Total
assets
|
|
|
1,024,086
|
|
|
$
|
(2,707
|
)
|
|
|
1,021,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
36,647
|
|
|
$
|
1,798
|
|
|
$
|
38,445
|
|
Income taxes
payable
|
|
|
7,999
|
|
|
|
(55
|
)
|
|
|
7,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
579,331
|
|
|
|
(4,236
|
)
|
|
|
575,095
|
|
Accumulated other comprehensive
income
|
|
|
16,468
|
|
|
|
(214
|
)
|
|
|
16,254
|
|
Total MICROS Systems, Inc.
shareholders' equity
|
|
|
723,447
|
|
|
|
(4,450
|
)
|
|
|
718,997
|
|
Total liabilities and
equity
|
|
|
1,024,086
|
|
|
$
|
(2,707
|
)
|
|
|
1,021,379
|
|
The
adjustments noted above had no impact on the consolidated statements of cash
flows for the relevant periods, other than to change certain reconciling items
in arriving at cash provided by operations; however, the aggregate amount of
cash provided by operations was unaffected for any of the relevant annual or
interim periods.
MICROS SYSTEMS, INC. AND
SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(in
thousands)
Description
|
|
Balance
at
beginning
of
period
|
|
|
Charged
To
expense
|
|
|
Deductions
(1
)
|
|
|
Other
(
2
)
|
|
|
Balance
at
end
of
period
|
|
Allowance for doubtful
accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
2010
|
|
$
|
31,892
|
|
|
$
|
3,979
|
|
|
$
|
(6,622
|
)
|
|
$
|
(857
|
)
|
|
$
|
28,392
|
|
Year ended June 30,
2009
|
|
|
28,197
|
|
|
|
8,449
|
|
|
|
(2,888
|
)
|
|
|
(1,866
|
)
|
|
|
31,892
|
|
Year ended June 30,
2008
|
|
|
23,
087
|
|
|
|
7,010
|
|
|
|
(4,066
|
)
|
|
|
2,166
|
|
|
|
28,
197
|
|
(1)
Charge offs, net of
recoveries.
(2)
Primarily related to foreign currency
translation.
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) 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.
|
|
|
|
|
|
|
Date:
|
August 27,
2010
|
|
By:
|
|
/s/Cynthia A.
Russo
|
|
|
|
|
|
Cynthia A.
Russo
|
|
|
|
|
|
Executive Vice President and Chief
Financial
Officer
|
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant, and in the capacities and on the
dates indicated.
Name
|
|
Title
|
|
|
|
|
|
|
|
/s/A. L.
Giannopoulos
|
|
Chairman,
President and
|
|
August 27,
2010
|
A. L.
Giannopoulos
|
|
Chief Executive
Officer
|
|
|
|
|
|
|
|
/s/Cynthia A.
Russo
|
|
Executive Vice President, Chief
Financial Officer
|
|
August 27,
2010
|
Cynthia A.
Russo
|
|
and Principal Financial and
Accounting Officer
|
|
|
|
|
|
|
|
/s/Louis M. Brown, J
r.
|
|
Director
and
|
|
August 27,
2010
|
Louis M. Brown,
Jr.
|
|
Vice Chairman of the
Board
|
|
|
|
|
|
|
|
/s/B. Gary
Dando
|
|
|
|
August 27,
2010
|
B. Gary
Dando
|
|
Director
|
|
|
|
|
|
|
|
/s/F. Suzanne
Jenniches
|
|
|
|
|
F. Suzanne
Jenniches
|
|
Director
|
|
August 27,
2010
|
|
|
|
|
|
/s/John G.
Puente
|
|
|
|
August 27,
2010
|
John G.
Puente
|
|
Director
|
|
|
|
|
|
|
|
/s/Dwight S.
Taylor
|
|
|
|
August 27,
2010
|
Dwight S.
Taylor
|
|
Director
|
|
|
EXHIBIT
INDEX
|
3(i)
|
Articles
of Incorporation of the Company are incorporated herein by reference to
Exhibit 3 to the Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 1990.
|
|
3(i)(a)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
period ended March 31, 1997.
|
|
3(i)(b)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Quarterly Report on Form 10-Q of the Company for the
period ended March 31, 1998.
|
|
3(i)(c)
|
Amendment
to Articles of Incorporation is incorporated herein by reference to
Exhibit 3(i) to the Form 8-K filed on November 16,
2007.
|
|
3(ii)
|
By-laws of the Company, as
amended, are incorporated herein by reference to Exhibit 3(ii) to the
Quarterly Report on Form 10
-Q of the Company for the period
ended December 31, 2008.
|
|
10(a)
|
MICROS Systems, Inc. 1991 Stock
Option Plan as amended, is incorporated herein by reference to Exhibit A
to the Proxy Statement of the Company for the 2009 Annual Meeting of
Shareholders
|
|
10(b)*
|
Employment Agreement dated June 1,
1995 between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10e to the Annual Report on Form 10-K of
the Company for the fiscal year ended June 30,
1995.
|
|
10(b)(1)*
|
First Amendment to Employment
Agreement dated February 6, 1997 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended December
31, 1996.
|
|
10(b)(2)*
|
Second Amendment to Employment
Agreement dated February 1, 1998 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended December
31, 1997.
|
|
10(b)(3)*
|
Third Amendment to Employment
Agreement dated September 8, 1999 between MICROS Systems, Inc. and A. L.
Giannopoulos
is
incorporated herein by reference to Exhibit 10g to the Annual Report on
Form 10-K of the Company for the fiscal year ended June 30,
1999
.
|
|
10(b)(4)*
|
Fourth Amendment to Employment
Agreement dated November 19, 2001 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended December
31, 2001.
|
|
10(b)(5)*
|
Fifth Amendment to Employment
Agreement dated November 15, 2002 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended December
31, 2002.
|
|
10(b)(6)*
|
Sixth Amendment to Employment
Agreement dated January 28, 2004 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended December
31, 2003.
|
|
10(b)(7)*
|
Seventh Amendment to Employment
Agreement dated August 9, 2005 between MICROS Systems, Inc. and A. L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Current Report on Form 8-K filed on August 11,
2005.
|
|
10(b)(8)*
|
Eighth Amendment to Employment
Agreement dated June 6, 2006, between MICROS Systems, Inc. and A.L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Current Report on Form 8-K filed on June 8,
2006.
|
|
10(b)(9)*
|
Ninth Amendment to Employment
Agreement dated November 17, 2006, between MICROS Systems, Inc. and A.L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Current Report on Form 8-K filed on November 21,
2006.
|
|
10(b)(10)*
|
Tenth Amendment to Employment
Agreement dated June 12, 2008, between MICROS Systems, Inc. and A.L.
Giannopoulos is incorporated herein by reference to Exhibit 10 to the
Current Report on Form 8-K filed on June 13,
2008.
|
|
10(b)(11)*
|
Eleventh Amendment to Employment
Agreement dated November 21, 2008, between MICROS Systems, Inc. and A.L.
Giannopoulos is incorporated herein by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed on November 24,
2008.
|
|
10(b)(12)*
|
Twelfth Amendment to Employment
Agreement dated August 24, 2010, between MICROS Systems, Inc. and A.L.
Giannopoulos is incorporated herein by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed on August 26,
2010.
|
|
10(c)*
|
Employment Agreement dated May 28,
1997 between MICROS Systems, Inc. and Thomas L. Patz is incorporated
herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the
Company for the fiscal year ended June 30, 1997.
|
|
10(c)(1)*
|
First Amendment to Employment
Agreement dated October 1, 1998 between MICROS Systems, Inc. and Thomas L.
Patz (filed herewith as Exhibit 10(c)(1)).
|
|
10(c)(2)*
|
Second Amendment to Employment
Agreement dated November 17, 2006 between MICROS Systems, Inc. and Thomas
L. Patz is incorporated herein by reference to Exhibit 10 to the Current
Report on Form 8-K filed on November 21, 2006.
|
|
10(d)*
|
Employment Agreement dated
November 19, 2005, between MICROS Systems, Inc. and Jennifer Kurdle is
incorporated herein by reference to Exhibit 10 to the Annual Report on
Form 10-K for the fiscal year ended June 30,
2009.
|
|
10(e)
|
Employment Agreement dated May 28,
1997 between MICROS Systems, Inc. and Gary C. Kaufman is incorporated
herein by reference to Exhibit 10 to the Annual Report on Form 10-K of the
Company for the fiscal Year ended June 30, 1997.
|
|
10(e)(1)*
|
First Amendment to Employment
Agreement dated October 1, 1998 between MICROS Systems, Inc. and Gary C.
Kaufman is incorporated herein by reference to Exhibit 10 to the Quarterly
Report on Form 10-Q of the Company for the period ended December 31,
1998.
|
|
10(e)(2)*
|
Second Amendment to Employment
Agreement dated November 17, 2006 between MICROS Systems, Inc. and Gary C.
Kaufman is incorporated herein by reference to Exhibit 10 to the Current
Report on Form 8-K filed on November 21, 2006.
|
|
10(f)*
|
Restated Supplemental Executive
Retirement Plan, as approved by the Board of Directors
on
April 27, 2005, is incorporated
herein by reference to Exhibit 10 to the Annual Report on Form 10-K for
the fiscal year ended June 30, 2006.
|
|
10(g)
|
Amended and Restated Credit
Agreement, effective as of July 29, 2005, among MICROS Systems, Inc., DV
Technology Holdings Corporation, Datavantage Corporation, MICROS Fidelio
Nevada, LLC, MSI Delaware, LLC, MICROS-Fidelio Worldwide, Inc., and JTECH
Communications, Inc. as Borrower, Bank of America, N.A., as administrative
agent, swing line lender and L/C issuer, and Wachovia Bank, N.A., and US
Bank, N.A., and Banc of America Securities LLC, as sole lead arranger and
book manager, is incorporated herein by reference to Exhibit 10 to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2005.
|
|
10(g)(1)
|
First Amendment to Credit
Agreements, dated December 11, 2008 among MICROS Systems, Inc. DV
Technology Holdings Corporation, Datavantage Corporation, MICROS Fidelio
Nevada, LLC, MSI Delaware, LLC, MICROS-Fidelio (Ireland) Ltd. as
Guarantor, Bank of America, N.A., as Administrative Agent, and Bank of
America, N.A., Wachovia Bank, N.A., and U.S. Bank, N.A., as Lenders is
incorporated herein by reference to Exhibit 10(b) to the Quarterly Report
on Form 10-Q of the Company for the period ended December 31,
2008.
|
|
10(g)(2)
|
Second Amendment to Credit
Agreements, dated July 30, 2010 among MICROS Systems, Inc. DV Technology
Holdings Corporation, Datavantage Corporation, TIG Global LLC, Fry, Inc.,
and Micros-Fidelio Worldwide, Inc., MICROS-Fidelio (Ireland) Ltd. as
Guarantor, Bank of America, N.A., as Administrative Agent, and Bank of
America, N.A., Wells Fargo, N.A., and U.S. Bank, N.A., as Lenders (filed
herewith as Exhibit 10A).
|
|
10(h)
|
Amended and Restated Credit
Agreement, effective as of July 29, 2005, among MICROS-Fidelio (Ireland)
Ltd., MICROS-Fidelio Systems (U.K.) Ltd., MICROS-Fidelio España S.L.,
MICROS Fidelio (Canada), Ltd., MICROS-Fidelio Brazil, Ltda.,
MICROS-Fidelio France S.A.S., Hospitality Technologies, S.A.,
MICROS-Fidelio Mexico S.A. de C.V., MICROS Systems Holding GmbH,
MICROS-Fidelio GmbH, MICROS-Fidelio Software Portugal Unipessoal Lda,
MICROS-Fidelio (Thailand) Co., Ltd., MICROS-Fidelio Singapore Pte Ltd.,
MICROS-Fidelio Software (Philippines), Inc., MICROS-Fidelio Japan Ltd.,
MICROS-Fidelio Australia Pty. Ltd., MICROS-Fidelio Hong Kong, Ltd.,
Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic Sverige,
A.B., Hotelbk, A.B., as Borrower, Bank Of America, N.A., as Administrative
Agent, swing line lender, and L/C issuer, and Wachovia Bank N.A. and US
Bank N.A., and Banc of America Securities LLC, as sole lead arranger and
book manager is incorporated herein by reference to Exhibit 10 to the
Annual Report on Form 10-K for the fiscal year ended June 30,
2005.
|
|
10(h)(1)
|
Second Amendment to Credit
Agreements, dated July 30, 2010 among MICROS-Fidelio (Ireland) Ltd.,
MICROS-Fidelio Systems (U.K.) Ltd., MICROS-Fidelio España S.L., MICROS
Fidelio (Canada), Ltd., MICROS-Fidelio Brazil, Ltda., MICROS-Fidelio
France S.A.S., Hospitality Technologies, S.A., MICROS-Fidelio Mexico S.A.
de C.V., MICROS Systems Holding GmbH, MICROS-Fidelio GmbH, MICROS-Fidelio
Software Portugal Unipessoal Lda, MICROS-Fidelio (Thailand) Co., Ltd.,
MICROS-Fidelio Singapore Pte Ltd., MICROS-Fidelio Software (Philippines),
Inc., MICROS-Fidelio Japan Ltd., MICROS-Fidelio Australia Pty. Ltd.,
MICROS-Fidelio Hong Kong, Ltd., Micros Fidelio Norway A/S, Micros Fidelio
Finland Oy, Micros Fidelio Sverige, A.B., Hotelbk, A.B., as
Borrower, Bank Of America, N.A., as Administrative Agent, swing line
lender, and L/C issuer, and Wells Fargo N.A. and US Bank N.A., and Banc of
America Securities LLC, as sole lead arranger and book manager (filed
herewith as Exhibit 10B).
|
|
10(i)
|
Lease
Agreement by and between Orix Columbia, Inc. and MICROS Systems, Inc.,
dated August 17, 1998, with respect to the Company’s corporate
headquarters located at 7031 Columbia Gateway Dr., Columbia MD 21046-2289,
as amended by a First Amendment to Lease, dated October 27, 1999, a Second
Amendment to Lease, dated December 26, 2001, and a Third Amendment to
Lease, dated March 1, 2006 and by and between MICROS Systems, Inc. and
Columbia Gateway Office Corporation as successor in interest to Orix
Columbia, Inc. is incorporated herein by reference to Exhibit 10 to the
Quarterly Report on Form 10-Q of the Company for the period ended March
31, 2009.
|
|
10(j)
|
Manufacturing
Agreement, by and between MICROS Systems, Inc., and GES Singapore Pte Ltd.
(now known as
Venture Group
of Singapore)
, with an effective date of November 6, 2002 (
incorporated herein by reference
to Exhibit 10 to the Annual Report on Form 10-K for the fiscal year ended
June 30, 2009
)
|
|
14
|
Code of Ethics and Business
Practices is incorporated herein by reference to Exhibit 14 to the Annual
Report on Form 10-K of the Company for the fiscal year ended June 30,
2004.
|
|
21
|
Subsidiaries of the Company (filed
herewith)
|
|
23(a)
|
Consent of Houlihan Smith &
Co., Inc. (filed herewith)
|
|
23(b)
|
Consent of PricewaterhouseCoopers
LLP (filed herewith)
|
|
31(a)
|
Certification of Principal
Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange
Act of 1934 (filed herewith)
|
|
31(b)
|
Certification of Principal
Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange
Act of 1934 (filed herewith)
|
|
32(a)
|
Certification of Principal
Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange
Act of 1934 and 18 U.S.C. 1350 (filed herewith)
|
|
32(b)
|
Certification of Principal
Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange
Act of 1934 and 18 U.S.C. 1350 (filed
herewith)
|
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