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, 2012
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
|
(State of Incorporation)
|
(I.R.S. Employer Identification No.)
|
|
|
7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289
|
(Address of Principal Executive Offices) (Zip Code)
|
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
|
Common Stock, par value $0.025 per share
|
The NASDAQ Stock Market
|
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 reports), 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
YES
þ
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.
¨
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,
2011, was $3,698,172,241.
At the close of business on July 31, 2012, there were issued
and outstanding 80,211,983 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 16, 2012, 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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19
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Item 1B.
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Unresolved Staff Comments
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22
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Item 2.
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Properties
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22
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Item 3.
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Legal Proceedings
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24
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Item 4
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Mine Safety Disclosures
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25
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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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25
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Item 6.
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Selected Financial Data
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26
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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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27
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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41
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Item 8.
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Financial Statements and Supplementary Data
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41
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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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41
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Item 9A.
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Controls and Procedures
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42
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Item 9B.
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Other Information
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42
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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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42
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Item 11.
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Executive Compensation
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42
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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42
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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43
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Item 14.
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Principal Accountant Fees and Services
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43
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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44
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Signatures
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79
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Exhibit Index
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80
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PART I
ITEM 1. BUSINESS
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 2012 means the 12-month period ending June 30, 2012.
We operate in
two reportable segments for financial reporting purposes: U.S./Canada and International. You can find financial information for
each reportable segment, as well as certain financial information about geographic areas, in
Note 16
“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 laws, tax requirements
and customer preferences, the products and services are substantially similar worldwide.
Almost all of our customers are in the
hospitality industry and the retail industry. The hospitality industry encompasses numerous defined markets, including the following:
|
·
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lodging
(including, for
example, individual
hotel sites, hotel
chains and franchise
groups)
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|
·
|
table
service and quick
service restaurants
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|
·
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restaurant
chains and franchise
groups
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|
·
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entertainment
venues (including,
for example, stadiums
and arenas)
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·
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business
food service operations
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·
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transportation
food service
|
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 information systems consist of hardware and software
encompassing POS, loss prevention, web commerce applications, business analytics, customer gift cards, electronic payments and
enterprise applications. We have also expanded our web commerce and ecommerce offerings, which previously were mainly provided
to our retail industry customers, to also encompass our hotel and restaurant customers. We market our products and services globally.
PMS and CRS and Related Products and
Services
Approximately 29,000 MICROS PMS applications
are installed worldwide. Most of our PMS applications are accompanied by other property-specific modules and applications.
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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·
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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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·
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Société du Louvre (France)
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·
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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
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The MICROS CRS is installed in numerous
hotel chains, including the following:
·
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Boscolo (Italy)
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·
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MGM Resorts
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·
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Starhotels (Italy)
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·
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Constellation (Australia)
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Omni
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·
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Sun International (South Africa)
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·
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Delta Hotels (Canada)
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·
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Pan Pacific (Singapore)
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·
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Tarsadia Hotels
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·
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Fairmont
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Ramada (U.K.)
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·
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Thistle (U.K.)
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·
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Four Seasons
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Red Lion
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Thon Hotels
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Great Wolf Resorts
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Rydges (Australia)
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·
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Travelodge (U.K.)
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·
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Hard Rock Hotels
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Scandic Hotels (Sweden)
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·
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Westmark
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Loews Hotels
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Shangri-La
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Wyndham Worldwide
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Louvre Hotels
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Société du Louvre
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Wynn Resorts
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MacDonalds (U.K.)
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·
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Shell Hospitality
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Xanterra
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·
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Millennium & Copthorne
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·
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Sokos (Finland)
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Globally, over 80 hotel chains have installed
MICROS’ CRS applications.
POS and Related Products and Services
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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·
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Groupe Le Duff (France)
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·
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Perkins
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Buffalo Wild Wings
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Hard Rock Café
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Restaurant Brands (New Zealand)
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·
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Chevy’s
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HMS Host
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Ruby Tuesday’s
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Cara (Canada)
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·
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Hooters
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Ruth’s Chris Steakhouse
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Cracker Barrel
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IHOP
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T.G.I. Friday’s
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·
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Costa Coffee (U.K.)
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Johnny Carinos
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VIPS (Spain)
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Eat ‘n Park
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La Madeleine
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Wagamama (U.K.)
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·
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El Torito
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Lone Star
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Whitbread (U.K.)
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Fazer Amica (Finland)
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Manchu Wok
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·
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Famous Dave’s
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Mimi’s Cafe
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Friendly’s
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Mitchells and Butlers (U.K.)
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Major quick service chain restaurant customers
(including customers who are franchisees of the chains listed below), include:
·
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Atlanta Bread
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·
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Krispy Kreme
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·
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Tropical Smoothie Café
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·
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Arby’s
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·
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Nordsee (Germany)
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·
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Wagamama’s (U.K)
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·
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Auntie Anne’s
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Pollo Campero
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Wendy’s
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·
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Baja Fresh
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Panera Bread
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Which Wich
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Ben & Jerry’s
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Popeye’s
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Wingstop
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Burger King
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Retail Brand Group
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Yum! Brands (Pizza Hut, KFC Int’l, & Taco Bell)
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Coffee Club (Australia)
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Saxby’s Coffee
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Zaxby’s
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El Pollo Loco
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Starbucks
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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 the following:
·
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Accor
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·
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Hyatt
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·
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Omni
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Boyd Gaming
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InterContinental Hotels
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Pan Pacific
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Camino Real
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Kempinski
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Peninsula
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Danubius
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Mandarin Oriental
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Radisson
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Fairmont
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MGM Mirage
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Starwood
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Four Seasons
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Marriott International
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Wyndham International
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Hilton
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Millennium
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Additional significant markets for our
POS systems include complex food service environments, such as casinos, cruise ships, sports arenas, airport concourses, theme
parks, recreational centers, institutional food service organizations, and specialty retail shops. Customers for our systems that
serve these environments include Aramark, Centerplate, Compass, Delaware North, HMS Host, Sodexho and various government entities.
We have also installed large POS systems for the following customers:
·
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Citi Field (New York City)
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·
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Meadowlands Sports Complex
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Foxwoods Hotel and Casino (Ledyard, CT)
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Target Field (Minneapolis)
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Grand Casino (Australia)
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M&T Stadium (Baltimore)
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Atlantis (Bahamas)
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The Venetian Resort
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Mandalay Resorts Group
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Wembley Stadium (U.K.)
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Sun City (South Africa)
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Wynn Resorts
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Harrah’s Casinos
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We supply and service POS systems for
users in the complex food service environments identified above both directly and through distribution channels, including through
specialty reseller relationships with Blackboard Inc. and The CBORD Group Inc.
Additionally, we market a range of on-premises
paging and alert solutions for restaurants, retail, and medical environments.
Retail POS and eCommerce - Related
Products and Services
Our retail
solutions are provided through our “MICROS-Retail” group of subsidiaries, which includes, among others, Datavantage,
CommercialWare, Advance Retail Systems (Mexico), MICROS Retail and Manufacturing Ltd. (United Kingdom), eOne, Fry, Fortech
(Italy), MICROS eCommerce EAME (London), and MICROS Retail Austria GmbH. 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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Abercrombie and Fitch
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·
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Hannaford Brothers
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·
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S & K Famous Brands
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·
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Adidas
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H.E. Butt
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Sainsbury’s (U.K.)
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·
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Advance Auto Parts
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Hugo Boss (Germany)
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Sobeys (Canada)
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Armani Exchange
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Hudson Group
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7-11 (Mexico)
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Barney’s New York
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Jo Ann Stores
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Smith & Hawken
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Belk
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Jos. A. Banks Clothiers
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·
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Starbucks
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Blain’s Farm and Feed
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Jones Apparel
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Steve Madden Retail
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·
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Bostonian
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Kodak
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Stonewall Kitchen
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BP
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Limited Brands
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·
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Sur La Table
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·
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Burberry Limited
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Martin McColls (U.K.)
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·
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Talbots
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Calzedonia
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Metro (Germany)
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·
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Tesco (U.K.)
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·
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Chelsea and Scott
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·
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Nike Mexico
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Urban Brands
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Dixons
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Pendleton
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·
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Tommy Hilfiger
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Fresh and Easy
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Polo Ralph Lauren
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Wm Morrison (U.K.)
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Furla
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PPG
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Whirlpool
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Garnet Hill
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Reebok Retail
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Zales
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Geox
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Roots Canada
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PRODUCTS AND SERVICES
Summary of Product Solutions (Software and Hardware):
Hotel Products
|
|
Description
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|
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Software
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OPERA PMS
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PMS software product for hotels, 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 V7 and V8 PMS
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PMS software products for hotels, targeted to hotels in certain regions
(primarily EAME) and legacy users
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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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|
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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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|
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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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|
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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 a stand-alone kiosk, and includes
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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Hotel Commerce Platform
|
|
A hosted software application that provides front desk features and related
functions for use on both computers and handheld devices
|
Restaurant Products
|
|
Description
|
|
|
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Software
|
|
|
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S
i
mphony
|
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A web based POS application for table service restaurants, quick service
restaurants, and for large food service, leisure and entertainment venues
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|
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MICROS 9700 HMS
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POS software for large food service, 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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A suite of software products for 3700 POS
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MICROS e7 POS
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POS product for small restaurants
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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
|
|
Component of RES, for self-ordering and customer information via kiosk
or other hardware
|
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Mycentral
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A web based software product enabling on-line ordering from restaurants
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|
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mymicros.net
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A suite of web based software products for use with restaurant POS
products
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myreservations
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A web based restaurant reservation product and service
|
|
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Hardware
|
|
|
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MICROS Workstation 5A Terminal
|
|
Windows
®
CE POS and Windows
®
Embedded POS
terminal for restaurants
|
|
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|
MICROS 2015 PC Workstation
|
|
PC based POS terminal for restaurants and retail
|
|
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|
MICROS Keyboard Workstation
270
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|
Windows
®
CE POS terminal used in large complex food service, leisure and entertainment venues
|
|
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|
MICROS Protégé
Customer Display
|
|
Interactive customer display
providing order confirmation and marketing content
|
|
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MICROS Order Confirmation
System
|
|
Windows
®
CE display system used in quick service restaurant drive-thru
|
|
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JTECH Paging Products
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|
Suite of paging products
|
|
|
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MICROS
Kitchen Display System
|
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Hardware
for kitchen display systems
|
|
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|
MICROS Digital Menu
Boards
|
|
Hardware for digital menu
board systems for restaurants
|
Retail Products
|
|
Description
|
|
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|
Software
|
|
|
|
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Store 21 Store Management System
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POS retail software product targeted for specialty retailers
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|
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Tradewind Store Management System
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POS retail software product targeted for stores with high volume transactions
|
|
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Xstore Management
System
|
|
Java based POS retail
software product
|
|
|
|
AR POS
|
|
POS retail product developed
by our majority-owned subsidiary, Advanced Retail, marketed primarily in Mexico and Central America
|
|
|
|
Retail J
|
|
POS retail software
product that we obtained through our acquisition of Torex Retail Holdings, Ltd. (see “Retail Information Systems”
below). Retail J is an enterprise platform encompassing POS, inventory control and reporting
|
|
|
|
Lucas
|
|
POS retail product for
fuel and convenience stores, obtained through the Torex acquisition
|
|
|
|
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 from a variety of input sources (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
|
|
|
|
MICROS Creations and myCreations
|
|
Software that provides for collaborative supply chain management, for both
the private label and branded consumer goods market
|
Hotel Information Systems
For the hotel and resort industry, we
develop, distribute, and support a comprehensive line of hotel software products and services, principally under the OPERA brand
name. Our OPERA suite includes PMS, sales and catering, CRS, customer information system, revenue management, sales support, data
mining, financial statements, condominium reservations and accounting, golf reservations, spa management, and quality management.
We also offer a module for OPERA that enables guest check-in and check-out, and other interactive features, via a kiosk.
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 OPERA sales and catering software
enables hotel sales staff to evaluate, reserve and invoice meetings, banquets and related events for a property. The OPERA 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 OPERA customer information system software enables hotels to efficiently capture
and track relevant guest information. The OPERA revenue management 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 also offer limited versions of the
OPERA property management system called OPERA Xpress, OPERA Lite, and Operetta. These products enable smaller properties to deploy
the OPERA PMS at a lower price, but with fewer features and functions than the full OPERA suite. As of June 30, 2012, approximately
20,200 hotel sites have installed either OPERA, OPERA Xpress PMS, OPERA Lite, or Operetta.
We believe that the OPERA software suite is an important
product line for our continued growth in the hotel information systems market, because it has been a material source of our revenue
growth within the hotel industry and because we continue to devote a significant portion of our research and development efforts
toward further technological improvement of the software. 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 190 hotel chains have implemented OPERA, a number of which are in the
midst of multi-year rollouts.
Globally, there are approximately 29,000
MICROS PMS applications installed, which includes some sites using PMS products for which we have 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.
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. 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 (including Ashburn and Manassas, Virginia; Buenos Aires, Argentina; Frankfurt, Germany; and Singapore) with the OPERA
applications accessed via Internet or similar high speed connections. Currently, there are over 4,000 hotels running various OPERA
front office applications for which we provide hosting services.
In addition to OPERA, we continue to support
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,
2012, approximately 2,875 hotels were using Fidelio Version 7.0.
We also market a PMS product primarily
in Europe under the brand name Fidelio Version 8. This product, which was entirely developed in and currently supported from Europe,
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 3,750 hotel sites as
of June 30, 2012.
In conjunction with our PMS Software products,
we have developed and market The Hotel Commerce Platform, which is a hosted application, distributed under a software-as-a-service
model. The term “software as a service” refers to a pricing system in which the customer is billed a recurring fee
that includes the costs of the license to use the software, support services, and other related services. The model eliminates
an upfront software license fee for the customer. This application delivers hotel websites and lightweight agent facing applications
for both computers and mobile devices, and allows for easy management and configuration of a brand or property’s digital
image through a centrally accessed point-and-click user interface. The Hotel Commerce Platform enables hotels and resorts to extend
the front-desk features and functionality to handheld devices, thus reducing or eliminating the need for front desk personnel
to provide those functions.
Cruise
Through
our subsidiary Fidelio Cruise, we market the Ships Property Management System (“SPMS”) suite of applications,
which includes a PMS product designed for use by the cruise industry. The SPMS application enables cruise operators to manage
passenger, visitor, group, 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 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 SPMS modules support the operation of on-board health spas, on-board
MICROS point-of-sale systems, on-board business centers, on-board medical centers, and on-board casinos, as well as shore excursions.
We also market Fidelio Cruise Crew Management
System, which supports the shore side and shipboard crew resource operations for a cruise ship, and the Fidelio Cruise Fleet Management
System, which enables fleet-wide data analysis for cruise ship operators.
Fidelio Cruise software is installed on
approximately 220 cruise ships. Customers include the following:
·
|
Aida Cruises
|
·
|
MSC Cruises
|
·
|
Regent Seven Seas Cruises
|
·
|
Carnival
|
·
|
Norwegian Cruise Line
|
·
|
Royal Caribbean International
|
·
|
Cunard Line
|
·
|
P&O Cruises UK
|
·
|
Sea Cloud
|
·
|
Fred Olsen Line
|
·
|
Princess Cruises
|
·
|
Silversea Cruises
|
·
|
Holland America Line
|
·
|
Pullmantur
|
·
|
V. Ships
|
Restaurant Information Systems
Our restaurant systems include full-featured
POS applications, kitchen product applications, mobile applications, marketing applications, and hardware. Most of the products
are designed to operate on industry standard PCs. Our front-of-house restaurant products operate on either industry standard PCs
or proprietary terminals that have additional functionality and design appropriate for food service environments, including several
types of intelligent terminals that we developed and designed.
Hardware
The workstations we have designed, and
that we currently market and sell, are the Workstation 5A and 2015 PC Workstation. 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 screen display. Key design elements of MICROS’s
workstations, which Workstation 5A builds upon, are the encased nature of the screen, special materials to withstand various levels
of temperature and humidity, passive cooling, solid state storage, highly efficient energy use, and sound capabilities.
The MICROS 2015 PC Workstation is a high-performance
POS terminal designed to operate our restaurant applications and other third party PC-based software applications. The product
uses Intel
®
chip architecture. It can be configured to accommodate various memory and storage requirements. The
product supports several Microsoft operating systems and Linux.
The Protégé Customer Display
System and MICROS Order Confirmation Systems are designed primarily for the quick service restaurant market, and provide detailed
information to a restaurant’s customers regarding their order, ensuring order accuracy and improving speed of service. The
Protégé Customer Display System is connected directly to a MICROS Workstation. It is a Microsoft Windows CE client
equipped with a touchscreen allowing for interactive use. The MICROS Order Confirmation System is also a Microsoft Windows CE
client, and provides order detail via a remote 15” daylight viewable, environmentally protected display.
We also market a product named the Keyboard
Workstation 270. This product enables orders to be entered through 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 food service environments, convention centers, and sports complexes.
The Workstation 5A, 2015 PC Workstation,
Protégé Customer Display System, MICROS Order Confirmation System and the Keyboard Workstation 270 are all manufactured
for us by the Venture Group of Singapore, 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.
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 both Epson and Hewlett Packard Corporation (“HP”). The relationship
with HP enables us to resell its personal computers, printers, and networking equipment on a global basis.
Software
Our
main restaurant POS software systems are S
i
mphony, the MICROS Restaurant Enterprise Series (3700 POS) system, the MICROS
9700 Hospitality Management System (“HMS”), Hospitality Solution’s Profit Series, and the MICROS e7 Series.
These systems provide transaction control for table service, quick service and large food service and entertainment venues.
Our design architecture enables existing users of many
MICROS POS products to access 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.
Enterprise Enabled Point of Service
The S
i
mphony software solution
is designed to be an all-inclusive software application for use by table service restaurants, quick service restaurants, and large
enterprise operations. 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
S
i
mphony enterprise solution is implemented either through a central hosted model or as a client server on-premise (i.e.
installed at the customer’s location) based platform.
S
i
mphony’s
SOA (service-oriented architecture) and centralized configuration allows for a flexible deployment model that can be molded to
meet a hospitality industry customer’s requirements.
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.
When
deployed as an enterprise solution, S
i
mphony enables customers
to reduce significantly the costs associated with a traditional multiple property POS solution. The S
i
mphony
services can be run from a site’s workstations, which eliminates the need to manage a back office server. In addition, software
deployment for new properties and upgrades is controlled and managed at the enterprise level, thus eliminating the need to send
staff to every store for these tasks. As of June 30, 2012, MICROS has installed over 9,300 sites with Simphony, and hosts approximately
800 of those sites.
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 the Microsoft’s Windows
®
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 point-of-sale. 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, customer loyalty and enterprise data management. One of the modules is the Kitchen Display System, which displays
food orders and offers additional reporting capabilities on restaurant service. Other components include Mobile MICROS and MICROS
RES Kiosk, which enables customer information and self-ordering on third-party kiosks or directly through the use of smart phones
and tablets. All of these modules are designed to operate at a single restaurant site and throughout the restaurant chain.
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 also market
a POS system called MICROS e7, mainly to smaller restaurants around the world. This product runs on the MICROS Workstation 5 and
5A series and uses the Microsoft
Windows
®
CE
Operating system.
Portal
We developed and market an Internet-based
portal product called “mymicros.net.” The mymicros.net product 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.
Hosting
We host mymicros.net, S
i
mphony,
and other hosted POS-related applications in the same data centers where we offer hosting services for our OPERA PMS (listed above).
As of June 30, 2012, we hosted applications supporting over 29,000 restaurants.
Retail Information Systems
Through our MICROS-Retail group of subsidiaries
(“MICROS-Retail”), we market retail store software systems, direct commerce solutions and business intelligence applications.
The retail store software 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 most recently developed
retail POS software system. It is a full SOA (service oriented architecture) compliant architecture with a highly flexible configuration
capability. 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. It can operate on any Java
®
compatible
operating system and database. 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 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
also offers in-store mobile solutions compatible with Apple Corporation’s iPod Touch, iPhone and iPad systems. These solutions
enable the store associate to ring up sales, handle inventory and service customers using the mobile devices.
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 order management
and order broker software and services (marketed under the trade names CW Serenade and Locate, respectively) that enable a retailer
to manage customer purchase transactions through multiple sources, including 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 develops, supports, and
distributes software solutions that provide for collaborative end-to-end product and supplier lifecycle management and ingredient
legal compliance tracking under the names Creations and myCreations. These products, which may be deployed either as client server
applications or as web based applications, offer retailers the ability to track and manage product ingredients and finished inventory
from the manufacturer through the point of distribution. Creations and myCreations customers include accounts such as Tesco, Sainsbury’s,
Wm Morrison, Sobeys, H.E. Butt, Metro, Kodak, Bodyshop and Booker. These products have mainly been distributed in the UK, but
have been introduced into North America and other parts of Europe.
On May 31, 2012, MICROS acquired Torex
Retail Holdings, Ltd. of Dunstable, England (“Torex”). Torex has an extensive range of software solutions mainly for
retail chain main offices and for retail store outlets. The solutions encompass POS, inventory control, mobile applications, payment
solutions, business analytics, customer sales vouchers, and human capital management. The acquisition was consistent with MICROS’s
strategy to expand its retail presence in Europe. Torex currently has approximately 3,000 customers in Europe.
Services
Services are a critical component of our
business. We provide a wide range of services to our customers, including:
•
|
system installation
|
•
|
network support
|
•
|
operator and manager training
|
•
|
professional consulting
|
•
|
on-site hardware maintenance
|
•
|
software hosting
|
•
|
customized software development
|
•
|
web site development
|
•
|
application software support
|
•
|
portal management
|
•
|
credit card software support
|
•
|
web-based marketing services
|
•
|
systems configuration
|
|
|
Service revenue constituted approximately
65.6% ($727.0 million) of our total revenue in fiscal year 2012 compared to approximately 67.6% ($681.7 million) of our total
revenue in fiscal year 2011 and approximately 66.4% ($607.2 million) in fiscal year 2010.
Maintenance service contracts, which include
on-site and depot hardware maintenance, application software support, credit card software support, and software hosting, are
a significant component of our service offerings. Revenues for service maintenance contracts were approximately $441.0 million
for fiscal year 2012, approximately $392.1 million for fiscal year 2011 and approximately $354.7 million for fiscal year 2010.
Support
We provide on-site hardware maintenance
and software support via a combination of direct and indirect channels – authorized U.S. dealers and international distributors.
The on-site 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 and
Spain
|
|
·
|
Singapore
– primarily
for customers in
the Asia-Pacific
region
|
|
·
|
Cleveland,
Ohio – for
MICROS-Retail POS
products
|
|
·
|
Westborough,
Massachusetts –
for MICROS-Retail
back-office and
business intelligence
products
|
|
·
|
Ann
Arbor, Michigan
– for certain
of our web site
development and
portal management
products
|
|
·
|
Dunstable,
Bolton and Milton
Keynes, England
– for the
Torex products
and services.
|
We also operate other more limited help
desk operations, including, among others, Fidelio Cruise support desks in Hamburg, Germany and Fort Lauderdale, Florida, the JTECH
help desk in Boca Raton, Florida, and a help desk in Scottsdale, Arizona for certain legacy POS products.
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 in Columbia, Maryland provides back-up support
for our primary regional centers in Buenos Aires, Singapore, and Galway, and our research and development operation in Naples,
Florida, provides higher-level support for our hotel software products. The regional support centers also provide back-up support
and guidance for local and in-country support providers.
Hosting
We operate data centers in Ashburn and
Manassas, Virginia, Buenos Aires, Chicago, Frankfurt, Nottingham, England, 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 (hosted
software is sometimes referred to as “cloud applications”) as an important component of our business as demand shifts
from applications being deployed on premise of customers to centrally hosted applications.
Web/E-Commerce Services
We offer website design and portal management
services, primarily for the retail industry. These include the development
and management a customer’s
web site for ordering, sales promotion, and marketing. We also offer web based marketing services to hotels, restaurants and retail
companies.
SALES, MARKETING AND DISTRIBUTION
We consider our direct and indirect global
distribution network to be a major strength and competitive advantage. We work closely together with our U.S.-based dealers and
our international distributors 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 more than 80 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 47 domestic dealers
and 47
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 through our international subsidiaries. The Torex products and
services are sold through a direct sales force in the UK and Europe.
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. Over the past several years, our products, as well
as those of our competitors, have offered an increasingly wider range of features and capabilities.
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 also 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.
R&D Facilities
The following table summarizes the locations
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
(e.g., mymicros.net)
|
|
|
|
Sydney, Australia
|
|
Additional restaurant POS software development
|
|
|
|
Neuss, Germany
|
|
Additional restaurant POS software development; Fidelio Version 8.
|
|
|
|
Boca Raton, Florida
|
|
Paging software and hardware development
|
|
|
|
Naples, Florida
|
|
Hotel PMS software, CRS software, and other modules, also Internet-based
hotel applications (e.g., myfidelio.net)
|
|
|
|
Cleveland, Ohio
|
|
Retail POS software development
|
|
|
|
Westborough, Massachusetts
|
|
Retail Loss Prevention software development, cross-channel software development
|
|
|
|
Omaha, Nebraska
|
|
Retail web site development and management services
|
|
|
|
Nottingham, England
|
|
Retail life cycle management
and supply chain traceability products
|
|
|
|
Dunstable, England
|
|
Various Torex products
|
|
|
|
Bolton, England
|
|
Various Torex products
|
|
|
|
Berlin, Germany
|
|
Torex retail product
(Oscar)
|
|
|
|
Ann Arbor, Michigan
|
|
Retail web site and ecommerce development
|
Additional Locations.
In addition to the POS software and hardware
development conducted at our Columbia, Maryland headquarters, we also conduct restaurant POS software development in regional offices
located in Sydney, Australia; Neuss, Germany; Buenos Aires, Argentina; and Singapore to facilitate rapid responses for various
regional application needs. The AR POS product is supported by our Advance Retail Solutions subsidiary at its facilities in Monterrey,
Mexico. Development of our Cruise products is conducted in our offices in Hamburg, Germany, and Fort Lauderdale, Florida.
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 also participates in the design and development of these units. This team also provides oversight of the
manufacturing process to ensure the manufacturer’s adherence to our quality standards. See also “Manufacturing and
Supplies,” below.
Research and 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, 2012, 2011 and 2010 is set forth in the following table:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Total R&D incurred
|
|
$
|
59,228
|
|
|
$
|
51,424
|
|
|
$
|
44,672
|
|
Capitalized software development costs
|
|
|
(7,197
|
)
|
|
|
(5,580
|
)
|
|
|
(2,443
|
)
|
Total R&D expenses
|
|
$
|
52,031
|
|
|
$
|
45,844
|
|
|
$
|
42,229
|
|
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, at least 10 that offer competitive POS hardware platforms, over 15 significant hotel systems competitors, and more
than 10 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 (including the former Radiant Systems), Panasonic,
Par Technology, and Sharp; (ii) suppliers that mainly provide software, such as Agilysys, Positouch and Xpient Solutions; and
(iii) providers that mainly provide hardware, such as Casio, Dell, HP, IBM and Toshiba. There are also numerous other companies
that license their POS-oriented software with PC-based systems in regional markets around the world.
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, Multi-Systems, Newmarket (sales and
catering products only), Northwind, Par Technology (Springer-Miller), Protel and Softbrands (an affiliate of 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., Softbrands, Pegasus,
Trust International/TravelPort and Vantis.
Our competitors in web marketing services
in North America include Synxis (a subsidiary of Sabre) and TravelClick.
Competitors in the U.S. retail market
include Epicor, Escalate Retail, JDA Software, Oracle (through its 360 Commerce division), and SAP (through its Triversity division)
among many others. Internationally, MICROS-Retail’s POS and Business Intelligence products generally compete with products
offered by SAP, Wincor-Nixdorf and smaller, regionally-oriented competitors. With respect to e-commerce website development and
management, we compete against several companies, including DemandWare, Websphere Commerce (IBM), GSI Commerce (eBay) and Art
Technology Group (Oracle).
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, Keyboard
Workstation 270 and PC Workstation 2015, are manufactured by 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 365 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 us at its facilities in Singapore and in Anaheim, CA. 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.
Our paging and related products are largely
manufactured by several contract manufacturers in China and by Venture Group. We conduct final assembly of our paging and related
products, including the installation of the applicable software, in our 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, 2012, we employed 6,383
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
|
|
|
2,439
|
|
|
|
3,013
|
|
|
|
601
|
|
|
|
330
|
|
|
|
6,383
|
|
As a % of total
|
|
|
38
|
%
|
|
|
47
|
%
|
|
|
10
|
%
|
|
|
5
|
%
|
|
|
100
|
%
|
Approximately 850 of the North America
employees (approximately 35% of the North America-based employees), work out of our four Maryland locations: our headquarters
building in Columbia, Maryland, our Hanover, Maryland distribution center, our Salisbury, Maryland regional restaurant sales and
service office and our MICROS E-Commerce subsidiary in Chevy Chase, Maryland.
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
|
John Gularson
|
|
Executive Vice President, MICROS eCommerce U.S.
|
Bernard Jammet
|
|
Executive Vice President, Latin American Region
|
Jennifer Kurdle
|
|
Executive Vice President, North American Operations
|
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
,
72, 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.
John
E. Gularson
, 4
3
, has been the Company’s
Executive
Vice President, MICROS eCommerce U.S. since July 2012. Upon joining the Company in June 2006 and continuing until March
2012, Mr. Gularson was the Company’s Senior Vice President, Retail Systems U.S. From March 2012 until July 2012, Mr. Gularson
served as the Company’s Executive Vice-President, Micros Retail U.S.. Prior to joining the Company, he held executive management
positions in various software companies. Mr. Gularson is a graduate of the University of Delaware where he earned a Bachelor
of Science in Economics.
Bernard Jammet
, 54,
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
, 45,
has been the Company’s Executive Vice President, North American Operations since March 2012. From 2008 until 2012, Ms. Kurdle
was the Company’s Executive Vice President, Chief Administrative Officer. Before 2008, Ms. Kurdle served the Company in
various capacities. Ms. Kurdle first joined the Company in 1990. Ms. Kurdle is a graduate of Fairmont State University.
Kaweh Niroomand
, 59, has
been the Company’s Executive Vice President, Europe-Africa-Middle East region since August 2009. From 2005 until August
2009, Mr. Niroomand was President of MICROS Europe, Africa and Middle East (EAME) region. 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
, 52,
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
, 47
,
has been the Company’s Executive Vice President, Asia-Pacific region, since August 2009. From 1998 until August
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.
,
57, 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
, 42,
has been the Company’s Executive Vice President and Chief Financial Officer since April 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
$586.3 million
during
fiscal year 2012 to customers located primarily in Europe, Asia and Latin America. Comparable sales in fiscal years 2011 and 2010
were approximately $536.0 million and $474.5 million, respectively. See Note 16 “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 41, 40 and 39 currencies in fiscal years 2012, 2011 and 2010. The relative currency mix over the past three fiscal years was
as follows:
|
|
% of Reported Revenues
Fiscal Year Ended June 30,
|
|
|
Exchange Rates to U.S.
Dollar as of June 30,
|
|
Revenues by currency
(1)
:
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
United States Dollar
|
|
|
49
|
%
|
|
|
53
|
%
|
|
|
53
|
%
|
|
|
1.0000
|
|
|
|
1.0000
|
|
|
|
1.0000
|
|
European Euro
|
|
|
23
|
%
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
1.2661
|
|
|
|
1.4502
|
|
|
|
1.2229
|
|
British Pound Sterling
|
|
|
8
|
%
|
|
|
7
|
%
|
|
|
7
|
%
|
|
|
1.5704
|
|
|
|
1.6052
|
|
|
|
1.4939
|
|
Australian Dollar
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
1.0245
|
|
|
|
1.0722
|
|
|
|
0.8416
|
|
Swiss Franc
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
1.0541
|
|
|
|
1.1898
|
|
|
|
0.9279
|
|
Canadian Dollar
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.9835
|
|
|
|
1.0380
|
|
|
|
0.9393
|
|
Mexican Peso
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.0748
|
|
|
|
0.0854
|
|
|
|
0.0773
|
|
Singapore Dollar
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.7904
|
|
|
|
0.8141
|
|
|
|
0.7146
|
|
Sweden Krona
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.1444
|
|
|
|
0.1580
|
|
|
|
0.1282
|
|
Japanese Yen
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.0125
|
|
|
|
0.0124
|
|
|
|
0.0113
|
|
All Other Currencies
(2)
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
10
|
%
|
|
|
0.1899
|
|
|
|
0.1642
|
|
|
|
0.1430
|
|
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 exchange
rates for the 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. Revenues from
each currency included in “All Other Currencies” were
less than 1% of our total revenues for the period.
|
A 10% increase or decrease in the value
of both the Euro and British Pound Sterling in relation to the U.S. dollar in fiscal year 2012 would have affected total revenues
by an aggregate of approximately $33.9 million, or 3.1%. 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 net income attributable to MICROS Systems, Inc. common shareholders.
We also are 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. We also recently acquired an additional 18 patents as part of our acquisition of Torex. 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 our 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”,
“OPERA”, “e7”, “Store21”, “Tradewind”, “Xstore”, “XBR”,
“ServAlert”, “GuestAlert”, “HostAlert”, “CommPass”, “CWDirect”, “CWCollaborate”,
“CWStore”, “CWLocate”, “CWAnalytics”, “CWData”, “CWIntegrate”, “FRY”,
“Open Commerce Platform”, and “Torex”,
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 IN QUARTERLY OPERATING RESULTS; 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 several 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 may 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 each 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 fiscal years 2012, 2011 and 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 less than 0.1% for the fiscal year 2012 and approximately 0.2% and 0.5% of our total consolidated
revenue for the fiscal years 2011 and 2010, 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 an order backlog equal to 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, 2012, 2011 and 2010, our backlog totaled
approximately
$469.7 million, $404.8 million and $338.7 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.
ITEM 1A. RISK FACTORS
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 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, oil and gas price increases can result in higher ingredient and food costs for our restaurant customers.
·
We maintain offices and rely on distributors in 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 (or distributors) 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 majority of our business is conducted in foreign countries, a downturn
in the economies of foreign countries would 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, global economic conditions materially worsened.
While there has been some improvement subsequently, economic conditions continue to languish. We believe these economic conditions
resulted in reduced demand from customers and the inability of some customers to secure financing for intended purchases. The current
economic weakness may continue to result in the reduced demand for our products and services. Lack of worldwide economic growth
has resulted in reduced consumer spending, which has adversely impacted our customers. These economic conditions may also increase
our bad debts.
·
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 a meaningful 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, our results for a particular quarterly period could be adversely affected.
·
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 prices to obtain business. Market forces have and will continue to apply 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, and
due to 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 significant 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.
·
We
have a large exposure in Europe.
MICROS has historically had a large presence in Europe, with offices in most major European
cities. With the recent acquisition of Torex, our presence in Europe has increased. Given the uncertain economy of several member
nations in the European Union, and with mounting debt in certain European countries such as Greece, Spain, Italy and Portugal,
we confront increased risk of customer defaults and decreased demand for our products.
·
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, we
invested some of our cash in auction rate securities, which proved to be illiquid when the financial resale markets contracted
in February 2008. These securities may continue to be illiquid. Moreover, we have recorded charges totaling $14.0 million for credit
losses relating to two of the auction rate securities in our investment portfolio, and we may, in the future, incur additional
charges for losses related to our investments in auction rate securities. In addition, 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 continue to offer competitive products and 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 cannot readily be resolved.
·
The
manufacturing of our hardware platform is performed primarily by a Singapore based third party contract manufacturer, Venture
Group of Singapore (formerly known as GES Singapore) (“Venture Group”).
While we believe we have a good relationship
with Venture Group, and 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 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 materially 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 some 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.
We
make significant investments in research and development. Our investments entail a risk that we will pursue technologies that we
ultimately determine are not marketable or do 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 viable 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 comply with applicable industry
security requirements and that we take 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 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 increases significantly.
While we believe that our current software applications comply with applicable laws and industry security requirements, and 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.
·
Hosting
of software applications presents other increased liability risks
. Additionally, as we expand our software hosting capabilities
and offer more of our software applications to our customers on a hosted basis, our potential liability increases significantly.
Specifically, an outage in our data centers can affect literally thousands of customers, resulting in losses to both MICROS and
the impacted customers. While we believe that our data centers have been designed and engineered to reduce the likelihood of outages,
we cannot provide assurance that our hosted systems will not suffer from unanticipated outages or deficient performance. If an
unanticipated outage were to occur, one or more customers could suffer economic damages and seek redress from us, which could adversely
affect our business.
·
Rapidly
evolving mobile technologies present both opportunities and risks
. There has been a marked advancement in mobile technologies
over the past year. While this evolution offers us the opportunity to develop and sell new mobile products for the benefit of our
customers, it also creates certain risks. For example, some of the new mobile technology is untested and may cause unanticipated
business interruption or unforeseen security risks. Additionally, there are many new entrants into the markets we serve, which
may create confusion and additional competitive pressures.
|
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 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 located 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.
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.
·
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 judgments.
·
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 unfavorable 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, unanticipated, and costly development efforts.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM
2. PROPERTIES
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, primarily as those other locations in which we
lease approximately 20,000 square feet or more and regional locations):
Location
|
|
Size
(Square Feet)
|
|
Use
|
|
Expiration Date
|
|
Additional Comments
|
|
|
|
|
|
|
|
|
|
Columbia,
Maryland
|
|
247,624
|
|
Headquarters and other functions (see above)
|
|
February 29, 2016
|
|
See discussion preceding this table
|
|
|
|
|
|
|
|
|
|
Bielefeld, Germany
|
|
91,278
|
|
Warehouse, distribution, manufacturing, sales
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
Hanover, Maryland
|
|
87,600
|
|
Warehouse, distribution, light assembly, configuration, manufacturing, repair
|
|
July 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Cleveland, Ohio
|
|
69,199
|
|
Sales, marketing, support, product development
|
|
February 28, 2019
|
|
MICROS-Retail
|
|
|
|
|
|
|
|
|
|
Neuss, Germany
|
|
45,809
|
|
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
|
|
|
|
|
|
|
|
|
|
Berlin, Germany
|
|
38,514
|
|
Sales, marketing, support
|
|
October 31, 2017 (we have early termination rights in October, 2015)
|
|
Torex Retail subsidiary
|
|
|
|
|
|
|
|
|
|
Slough, England (four sites)
|
|
36,904
|
|
Sales, marketing, support
|
|
Ranges from January 31, 2014 to July 17, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Leusden, Netherlands
|
|
35,748
|
|
Sales, marketing, support
|
|
June 30, 2013
|
|
Torex Retail subsidiary
|
|
|
|
|
|
|
|
|
|
Milton Keynes, England
|
|
29,272
|
|
Sales, marketing, customer support, product development and product support
|
|
October 26, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Westborough, Massachusetts
|
|
27,234
|
|
Sales, marketing, customer support, product development and product support
|
|
November 30, 2013
|
|
MICROS eCommerce 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 (we have early termination rights in October, 2012)
|
|
Micros E-Commerce (formerly named TIG Global) subsidiary
|
|
|
|
|
|
|
|
|
|
Ann Arbor, Michigan
|
|
24,269
|
|
Sales, marketing, customer support, product development and product support
|
|
July 31, 2017
|
|
Fry subsidiary
|
|
|
|
|
|
|
|
|
|
Dunstable, England
|
|
23,247
|
|
Sales, marketing, customer support, product development and product support
|
|
April 13, 2015
|
|
Torex Retail subsidiary
|
|
|
|
|
|
|
|
|
|
Naples, Florida
|
|
20,516
|
|
Software development
|
|
December 31, 2016
|
|
Naples is the main site for the development of our 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
|
|
|
|
|
|
|
|
|
|
Singapore
|
|
9,367
|
|
Sales, marketing, support
|
|
September 30, 2014
|
|
Regional headquarters of Asia-Pacific
|
To satisfy other sales, service and support,
and product development needs, we and our subsidiaries lease space in other U.S. cities, including Boca Raton, Boston, Buffalo,
Chicago, Cincinnati, Dallas, Denver, Hartford, Houston, Huntington Beach (California), Las Vegas, Nashville, New Orleans, New
York, Philadelphia, Pittsburgh, Portland, San Diego, San Francisco, Scottsdale, and Seattle, and in numerous cities overseas,
including Buenos Aires, Argentina; Hamburg, Germany; Helsinki, Finland; Madrid, Spain; Mexico City, Mexico; Nanterre, France;
Rome, Italy; São Paulo, Brazil; Stockholm, Sweden; Sydney, Australia; 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
On May 22, 2008, a jury returned verdicts
against us 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 us and the respective plaintiffs.
The agreements were non-renewed as part of a restructuring of the dealer channel. The plaintiffs alleged that we and certain of
our 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. The plaintiffs claimed that, as a result, we were liable for, among other things, breach of contract and tortious
interference with existing and prospective contractual relationships. Both we and the plaintiffs appealed the verdicts on various
grounds. On December 30, 2010, the Superior Court of Pennsylvania issued an opinion reversing and remanding $4.5 million of the
award and affirming the remaining $3.0 million of the award, at which point we accrued a charge of $3.0 million in our selling,
general and administrative expenses. Both we and the plaintiffs appealed the Superior Court decision on various grounds. On April
10, 2012, the Pennsylvania Supreme Court denied all of the petitions for appeal. The matter was accordingly remanded to the trial
court for further proceedings consistent with the Superior Court decision. On June 7, 2012, we paid an aggregate of approximately
$3.5 million to the two plaintiffs, reflecting all amounts that were determined to be owed to the plaintiff in the Shenango case
and all amounts that were no longer in dispute to the plaintiff in the Roth case, including as to each payment (i) interest that
accrued at the statutory rate of 6% per annum, and (ii) certain reductions and offsets that were approved by the Court of Common
Pleas. The remaining amounts in dispute in the Roth case are not material.
We are and have been involved in legal
proceedings arising in the normal course of business, and we are 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 our results of operations, financial position, or cash flows. However, litigation is subject to many uncertainties, and the
outcome of litigation is not predictable with assurance. An adverse outcome in current or future litigation could have a material
adverse effect on our business, financial condition, results of operations, and liquidity.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
|
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
T
he
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, 2007 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.
Company/Index
|
|
June 2007
|
|
|
June 2008
|
|
|
June 2009
|
|
|
June 2010
|
|
|
June 2011
|
|
|
June 2012
|
|
MICROS Systems, Inc.
|
|
$
|
100.00
|
|
|
$
|
112.10
|
|
|
$
|
93.09
|
|
|
$
|
117.17
|
|
|
$
|
182.76
|
|
|
$
|
188.24
|
|
S&P 500 Index
|
|
$
|
100.00
|
|
|
$
|
86.88
|
|
|
$
|
64.10
|
|
|
$
|
73.35
|
|
|
$
|
95.87
|
|
|
$
|
101.09
|
|
S&P 500 Application Software
|
|
$
|
100.00
|
|
|
$
|
88.96
|
|
|
$
|
69.68
|
|
|
$
|
86.57
|
|
|
$
|
131.64
|
|
|
$
|
133.45
|
|
Price
Range of Common Stock
The Company’s
common stock is traded on the NASDAQ Stock Market under the symbol MCRS. As of August 20, 2012, there were 25,395 record holders
of the Company’s common stock, $0.025 par value.
The following table
shows the range of high and low 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, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
52.24
|
|
|
$
|
52.74
|
|
|
$
|
55.76
|
|
|
$
|
58.49
|
|
Low
|
|
$
|
38.38
|
|
|
$
|
41.11
|
|
|
$
|
46.63
|
|
|
$
|
48.11
|
|
Fiscal Year Ended June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
43.28
|
|
|
$
|
46.78
|
|
|
$
|
50.00
|
|
|
$
|
53.36
|
|
Low
|
|
$
|
30.96
|
|
|
$
|
41.79
|
|
|
$
|
42.76
|
|
|
$
|
46.02
|
|
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 restrict the payment of cash dividends. S
ee
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 2010, MICROS’s Board of
Directors authorized the purchase of up to 2 million shares of the Company’s common stock, to be purchased from time to
time over the ensuing three years depending on market conditions and other corporate considerations as determined by management.
As of July 31, 2012, approximately 1.5
million additional shares remain available for purchase under this authorization. During the fourth quarter of fiscal year 2012,
our stock purchases were as follows:
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
|
|
04/01/12 – 04/30/12
|
|
|
0
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
1,750,270
|
|
05/01/12 – 05/31/12
|
|
|
0
|
|
|
|
N/A
|
|
|
|
0
|
|
|
|
1,750,270
|
|
06/01/12 – 06/30/12
|
|
|
110,000
|
|
|
$
|
50.43
|
|
|
|
110,000
|
|
|
|
1,640,270
|
|
|
|
|
110,000
|
|
|
|
|
|
|
|
110,000
|
|
|
|
|
|
ITEM 6. SELECTED FINANCIAL DATA
|
|
Fiscal Year Ended June 30,
|
|
(in thousands, except per share data)
|
|
2012
(1),(3)
|
|
|
2011
(1),(3)
|
|
|
2010
(1),(3)
|
|
|
2009
(1),(2),(3)
|
|
|
2008
(1)
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,107,531
|
|
|
$
|
1,007,859
|
|
|
$
|
914,319
|
|
|
$
|
907,725
|
|
|
$
|
953,950
|
|
Income from operations
|
|
$
|
234,520
|
|
|
$
|
210,459
|
|
|
$
|
167,973
|
|
|
$
|
140,835
|
|
|
$
|
138,890
|
|
Net income attributable to MICROS Systems, Inc.
|
|
$
|
166,983
|
|
|
$
|
144,059
|
|
|
$
|
114,353
|
|
|
$
|
96,292
|
|
|
$
|
100,737
|
|
Net income per share attributable to MICROS Systems, Inc. common:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.08
|
|
|
$
|
1.78
|
|
|
$
|
1.44
|
|
|
$
|
1.19
|
|
|
$
|
1.23
|
|
Diluted
|
|
$
|
2.03
|
|
|
$
|
1.74
|
|
|
$
|
1.41
|
|
|
$
|
1.17
|
|
|
$
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
(4)
|
|
$
|
500,127
|
|
|
$
|
697,012
|
|
|
$
|
468,047
|
|
|
$
|
416,593
|
|
|
$
|
391,656
|
|
Total assets
|
|
$
|
1,566,020
|
|
|
$
|
1,433,018
|
|
|
$
|
1,138,291
|
|
|
$
|
1,021,379
|
|
|
$
|
1,002,147
|
|
Line of credit
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,442
|
|
|
$
|
1,090
|
|
|
$
|
989
|
|
MICROS Systems, Inc. shareholders’ equity
|
|
$
|
1,092,645
|
|
|
$
|
1,016,711
|
|
|
$
|
783,380
|
|
|
$
|
718,997
|
|
|
$
|
671,723
|
|
Book value per share
(5)
|
|
$
|
13.61
|
|
|
$
|
12.59
|
|
|
$
|
9.79
|
|
|
$
|
8.95
|
|
|
$
|
8.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
80,300
|
|
|
|
80,726
|
|
|
|
79,856
|
|
|
|
80,486
|
|
|
|
81,546
|
|
Diluted
|
|
|
82,238
|
|
|
|
82,672
|
|
|
|
81,448
|
|
|
|
81,461
|
|
|
|
83,346
|
|
|
(1)
|
Fiscal years 2012, 2011, 2010, 2009 and 2008 include approximately $16.5 million ($11.3 million, net of tax or $0.14 per diluted
share), $12.4 million ($8.0 million, net of tax or $0.10 per diluted share), $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) and $17.2 million ($13.1 million net of tax
or $0.16 per diluted share), respectively, in non-cash share-based compensation expense. See Note 3 “Share-based Compensation”
in the Notes to Consolidated Financial Statements.
|
|
(2)
|
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.
|
|
(3)
|
Fiscal years 2012, 2011, 2010 and 2009 include other-than-temporary impairments of approximately $4.0 million, $4.3 million,
$4.8 million and $1.3 million, respectively, for long-term investments (auction rate securities). See Note 2 “Financial Instruments
and Fair Value Measurements” in the Notes to Consolidated Financial Statements.
|
|
(4)
|
Current assets less current liabilities.
|
|
(5)
|
Calculated as shareholders’ equity divided by common stock outstanding at June 30.
|
|
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./Canada,
Europe, the Pacific Rim, and Latin America
regions. We
have
identified our U.S./Canada 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./Canada 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. 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. We reevaluate our estimates periodically.
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.
In making judgments regarding revenue recognition, 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 condition. Moreover, in connection with sales of a number of products and services
under a single contractual arrangements (a multiple element arrangement), we make judgments as to whether there is sufficient vendor
specific objective evidence to enable the allocation of fair value among the various elements in software arrangements that contain
multiple elements and as to relative selling prices for multiple element arrangements that contain hardware or other non-software
elements. In determining relative selling prices for products and services, we consider, among other things, the customer’s
geographic location, customer concentrations, our use of discounts from list prices, prices we charge for similar offerings and
our historical pricing practices. 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.
Our methodology for determining this allowance requires estimates and is based on the age of the receivable, customer payment practices
and history, inquiries regarding the customer, 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, 2012 and 2011, accounts receivable totaled
approximately $235.4 million and $181.8 million, net of an allowance for doubtful accounts of approximately $31.8 million and $32.3
million, respectively. Additionally, bad debt expense for fiscal years 2012, 2011 and 2010 was approximately $7.1 million, $6.2
million and $4.0 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
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.
We
wrote down our inventory by approximately $12.6 million and $13.1 million as of June 30, 2012 and 2011, respectively.
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 designed to have periodic
interest rate resets, classified as long-term investments in the accompanying consolidated balance sheets) as discussed below,
are carried at fair value.
We periodically review our financial instruments
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 estimate 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, 2012. 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. We reviewed and agreed with this valuation. The fair value
assessment also included an evaluation of the amount of the other-than-temporary impairment attributable to credit loss, which,
as noted above, is recognized in our consolidated statement of operations. The factors considered in making an evaluation of the
amount attributable to credit loss include 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 collateral held in the issuer trust (including
default and delinquency rates). Many of the assumptions utilized in connection with the valuation, and our fair value measurements
generally, 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 either included in software cost of sales or service 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 the 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 in the future 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 fiscal years 2012, 2011 and 2010 were approximately
$7.1 million, $7.5 million and $9.7 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 relevant
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./Canada, Europe, the Pacific Rim and
Latin America) to their book value. We first determine, based on a qualitative assessment, whether it is more likely than not that
the fair value of the reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the
fair value of a reporting unit is less than its carrying value, then we determine the fair value of the reporting unit 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.
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 is highly subjective and requires significant judgment at many points during the analysis. Qualitative assessments
regarding goodwill involve a high degree of judgment and can entail subjective considerations. Our estimates of the fair value
of the reporting units for the purposes of our annual or interim analyses, require 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, including assumptions relating to 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, 2012 and 2011, goodwill totaled approximately $444.1 million and $242.3 million,
respectively. See Note 4, “Acquisitions” in the Notes to Consolidated Financial Statements.
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 share-based
compensation 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. However, unlike all of the other accounting estimates described in this section, changes in estimates regarding stock options
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.
In connection with the purchase price allocation
for the Torex acquisition, we have established a gross deferred tax asset of approximately $41.6 million primarily related to Torex
U.K.’s net operating loss carryforwards. The future realization of the deferred tax asset is based on recent profitability
and our current forecast of Torex operations. However, if Torex’s operations experience a significant change, whether due
to future operational integration and reorganization or otherwise, we may not be able to fully utilize the net operating loss carryforwards.
To the extent that we are unable to use some portion of the loss carryforwards in future periods, we would be required to recognize
an increase to tax expense, which 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 require
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. Our
net unrecognized income tax benefits were approximately $34.7 million and $31.4
million, including interest and penalties of approximately $3.2 million and $2.8 million at June 30, 2012 and 2011, 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
During
the three fiscal years ending June 30, 2012, we acquired several businesses, including Torex, and accordingly,
our
results include activities from the acquired businesses from their respective acquisition dates. As Torex was acquired on May 31,
2012, the results of these acquisitions did not have a material effect on our overall results during those three fiscal years.
See Note 4 “Acquisitions” in the Notes to Consolidated Financial Statements for further detail on acquisitions.
Comparison of Fiscal Year 2012 to
Fiscal Year 2011
Revenue
The following table provides information
regarding the sales mix by reportable segments in fiscal years 2012 and 2011 (amounts are net of intersegment eliminations, based
on location of the customer):
|
|
Fiscal Year Ended June 30,
|
|
|
|
U.S./Canada
|
|
|
International
|
|
|
Total
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Hardware
|
|
$
|
126,940
|
|
|
$
|
98,762
|
|
|
$
|
110,980
|
|
|
$
|
100,241
|
|
|
$
|
237,920
|
|
|
$
|
199,003
|
|
Software
|
|
|
55,039
|
|
|
|
46,611
|
|
|
|
87,578
|
|
|
|
80,512
|
|
|
|
142,617
|
|
|
|
127,123
|
|
Service
|
|
|
339,296
|
|
|
|
326,492
|
|
|
|
387,698
|
|
|
|
355,241
|
|
|
|
726,994
|
|
|
|
681,733
|
|
Total Revenue
|
|
$
|
521,275
|
|
|
$
|
471,865
|
|
|
$
|
586,256
|
|
|
$
|
535,994
|
|
|
$
|
1,107,531
|
|
|
$
|
1,007,859
|
|
The following table
provides information regarding the total sales mix as a percent of total revenue in fiscal years 2012 and 2011:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
Hardware
|
|
|
21.5
|
%
|
|
|
19.8
|
%
|
Software
|
|
|
12.9
|
%
|
|
|
12.6
|
%
|
Service
|
|
|
65.6
|
%
|
|
|
67.6
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
For fiscal year 2012, total revenue was
approximately $1.1 billion, an increase of approximately $99.7 million, or 9.9% compared to fiscal year 2011 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 19.6%, 12.2% and
6.6%, respectively, compared to fiscal year 2011. We believe the increases were primarily due to an improvement in demand from
our customers as a result of a modest improvement in global economic conditions. The increase in total revenue also reflects additional
service revenue generated from the continued expansion of our customer base, additional hosting revenue due to increased demand
for this delivery model and the additional revenue generated by companies that we acquired during the fiscal years 2012 and 2011.
The additional revenue generated from the Torex acquisition was approximately $16.6 million for fiscal year 2012.
|
|
·
|
Offsetting
unfavorable foreign currency exchange rate fluctuations primarily for the Euro and the Mexican Peso against the U.S. dollar,
negatively affected total revenue by approximately $10.4 million.
|
|
·
|
The increase in hardware revenue was primarily due to increased sales of our Workstation products, a large
OEM sale to our international hotel customers and several large computer equipment sales to our retail customers compared to fiscal
year 2011.
|
|
·
|
The increase
in software revenue primarily reflects increased sales in our hotel and retail software products. This increase was partially
offset by software revenue from a major Simphony rollout by a large customer in fiscal year 2011.
|
International segment revenue for the fiscal
year ended June 30, 2012 increased by approximately $50.3 million, or 9.4% compared to the fiscal year 2011 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 10.7%, 8.8% and
9.1%, respectively, compared to the fiscal year 2011. We believe these changes were primarily due an improvement in demand from
our customers as a result of a modest improvement in global economic conditions and incremental revenue generated from our recent
acquisitions, including approximately $16.6 million from Torex.
|
|
·
|
The increase in hardware revenue was primarily due to increased sales
of our Workstation products compared to fiscal year 2011 and a large OEM sale to one of our international hotel customers.
|
|
·
|
Unfavorable
foreign currency exchange rate fluctuations, primarily for the Euro and the Mexican Peso against the U.S. dollar, negatively affected
total revenue by approximately $10.4 million.
|
U.S./Canada segment revenue for the fiscal
year ended June 30, 2012 increased by approximately $49.4 million, or 10.5% compared to the fiscal year 2011 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 28.5%, 18.1% and
3.9%, respectively, compared to the fiscal year 2011. We believe these changes were primarily due to an improvement in demand from
our customers as a result of a modest improvement in global economic conditions in fiscal year 2012.
|
|
·
|
The increase in hardware revenue was primarily due to increased sales
of our Workstation products and several large computer equipment sales to our retail customers compared to fiscal year 2011.
|
|
·
|
The increase
in software revenue primarily reflects increased sales in our hotel and retail software products. This increase was
partially
offset by software revenue from a major Simphony rollout by a large customer in fiscal year 2011.
|
|
·
|
The increase in service revenue also reflects the continued expansion
of our customer base and new products and services offerings including hosting and software-as-a-service.
|
Cost of Sales
The following table provides information
regarding our cost of sales in fiscal years 2012 and 2011:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
(in thousands)
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
Hardware
|
|
$
|
152,242
|
|
|
|
64.0
|
%
|
|
$
|
126,667
|
|
|
|
63.7
|
%
|
Software
|
|
|
20,779
|
|
|
|
14.6
|
%
|
|
|
21,200
|
|
|
|
16.7
|
%
|
Service
|
|
|
319,900
|
|
|
|
44.0
|
%
|
|
|
299,923
|
|
|
|
44.0
|
%
|
Total Cost of Sales
|
|
$
|
492,921
|
|
|
|
44.5
|
%
|
|
$
|
447,790
|
|
|
|
44.4
|
%
|
For fiscal year 2012, cost of sales as
a percent of revenue increased 0.1% to 44.5% compared to 44.4% in fiscal year 2011. Hardware cost of sales as a percent of related
revenue increased primarily as a result of unfavorable product mix between MICROS hardware products sales and third party hardware
sales including several large OEM and computer equipment hardware sales in fiscal year 2012 that had lower than average margin.
This increase was partially offset by lower freight costs and write down of inventory as a percent of revenue compared to fiscal
year 2011. Software cost of sales as a percent of related revenue decreased primarily due to lower software amortization expense
(included in software cost of sales) both in amount and as a percent of revenue as compared to fiscal year 2011. The lower amortization
expense reflects the fact that some of our retail capitalized software products became fully amortized in fiscal years 2011 and
2012. Service cost of sales as a percent of related revenue was 44.0% for both fiscal years 2012 and 2011. The foreign currency
exchange rate fluctuations decreased our total cost of sales for the fiscal year 2012 by approximately $3.4 million compared to
fiscal year 2011.
Selling, General and Administrative
(“SG&A”) Expenses
For fiscal year 2012, SG&A expenses
as a percent of revenue decreased 0.3% to 28.2% compared to 28.5% in fiscal year 2012 due to our ability to continue to reduce
certain of our costs. Although the SG&A expenses as a percent of revenue decreased, the dollar amount of SG&A expenses
increased by approximately $24.9 million compared to fiscal year 2011, primarily due to an increase in total compensation expenses
of approximately $23.4 million, principally reflecting new employees who joined our company as a result of acquisitions in fiscal
years 2012 and 2011. Foreign currency exchange rate fluctuations decreased overall SG&A expenses by approximately $2.7 million.
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 2012 and 2011:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
R&D labor and other costs
|
|
$
|
59,228
|
|
|
$
|
51,424
|
|
Capitalized software development costs
|
|
|
(7,197
|
)
|
|
|
(5,580
|
)
|
Total R&D expenses
|
|
$
|
52,031
|
|
|
$
|
45,844
|
|
% of Revenue
|
|
|
4.7
|
%
|
|
|
4.5
|
%
|
The increases in capitalized software development
costs and total R&D expenses are primarily related to continued development of our next generation retail and property management
related software. The increase in total R&D expenses is also due to the ongoing research and development programs conducted
by certain of our recent acquisitions.
Depreciation and Amortization Expenses
Depreciation and amortization expenses
for fiscal year 2012 decreased approximately $0.6 million compared to fiscal year 2011 to approximately $16.2 million. This decrease
is primarily due to an increase in fully depreciated assets, partially offset by additional depreciation and amortization expenses
related to recent acquisitions and increased depreciation expenses related to our hosting centers.
Share-Based Compensation Expenses
The following table provides information
regarding our recognition of non-cash share-based compensation expense, which was included in the SG&A expenses, R&D expenses
and cost of sales for fiscal years 2012 and 2011, as indicated below:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
SG&A
|
|
$
|
15,067
|
|
|
$
|
11,747
|
|
R&D
|
|
|
1,239
|
|
|
|
596
|
|
Cost of sales
|
|
|
195
|
|
|
|
105
|
|
Total non-cash share-based compensation expense
|
|
|
16,501
|
|
|
|
12,448
|
|
Income tax benefit
|
|
|
(5,163
|
)
|
|
|
(4,426
|
)
|
Total non-cash share-based compensation expense, net of tax benefit
|
|
$
|
11,338
|
|
|
$
|
8,022
|
|
Impact on diluted net income per share attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
0.14
|
|
|
$
|
0.10
|
|
As of June 30, 2012, there was approximately
$26.8 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 1.88 years.
Income from Operations
Income
from operations for fiscal year 2012
increased approximately $24.1 million, or 11.4%, to approximately $234.5 million, compared
to fiscal year 2011. The increase reflects an increase in total revenue and our continued cost cutting efforts
.
Foreign currency exchange rate fluctuations decreased our income from operations for the fiscal year 2012 by approximately $3.9
million compared to fiscal year 2011.
Non-operating Income (Expense)
Net non-operating income for fiscal year
2012 was approximately $2.7 million compared to net non-operating expense of approximately $0.8 million for fiscal year 2011. This
increase is primarily due to an increase in interest income of approximately $1.6 million. Fiscal years 2012 and 2011 also include
credit based impairment losses related to our investments in auction rates securities of approximately $4.0 million and $4.3 million,
respectively.
Income Tax Expense
The effective tax rates for fiscal years
2012 and 2011 were 29.5% and 31.0%, respectively. The effective tax rates for the fiscal years 2012 and 2011 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 determination to permanently reinvest overseas the cumulative unremitted earnings of our
significant non-US affiliates, tax benefits realized upon the expiration of statutes of limitations or settlements with tax authorities
and the domestic manufacturing deductions.
The decrease in the effective tax rate
for fiscal year 2012 as compared to fiscal year 2011 was primarily attributable to increases in tax benefits realized upon the
expiration of statutes of limitation or settlements with tax authorities and the net reduction of valuation allowances.
We recorded net unrecognized income tax
benefits of approximately $34.7 million and $31.4 million, including accrued interest and penalties of approximately $3.2 million
and $2.8 million at June 30, 2012 and 2011, respectively. We have recognized approximately $0.6 million and $0.8 million of interest
expense for the fiscal years 2012 and 2011, 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, affecting the effective
income tax rate.
We have recognized a net decrease in unrecognized
tax benefits for the fiscal year ended June 30, 2012 as compared to fiscal year 2011, which includes a reduction in the effective
tax rate of 2.1% and income tax expense by approximately $5.0 million, primarily due to the expiration of statutes of limitations.
We estimate that within the next 12 months, we will decrease the unrecognized income tax benefits by between approximately $9.5
million to $11.5 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
The net income attributable to MICROS Systems,
Inc. for fiscal year 2012 increased approximately $22.9 million, or 15.9%, to approximately $167.0 million, compared to fiscal
year 2011. The increase is due to an increase in total revenue and our continued cost cutting efforts. Foreign currency exchange
rate fluctuations decreased the net income attributable to MICROS Systems, Inc. for fiscal year 2012 by approximately $3.0 million
compared to fiscal year 2011.
Diluted
net income per share attributable to our shareholders for fiscal year
2012 and 2011 was
$2.03 and $1.74 per diluted share, respectively. Foreign currency exchange rate fluctuations decreased the diluted net income per
share for fiscal year 2012 compared to fiscal year 2011 by $0.04 per diluted share.
Comparison of Fiscal Year 2011 to
Fiscal Year 2010
Revenue
The following table provides information
regarding the sales mix by reportable segments in fiscal years 2011 and 2010 (amounts are net of intersegment eliminations, based
on location of the customer):
|
|
Fiscal Year Ended June 30,
|
|
|
|
U.S./Canada
|
|
|
International
|
|
|
Total
|
|
(in thousands)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Hardware
|
|
$
|
98,762
|
|
|
$
|
96,560
|
|
|
$
|
100,241
|
|
|
$
|
91,773
|
|
|
$
|
199,003
|
|
|
$
|
188,333
|
|
Software
|
|
|
46,611
|
|
|
|
45,964
|
|
|
|
80,512
|
|
|
|
72,824
|
|
|
|
127,123
|
|
|
|
118,788
|
|
Service
|
|
|
326,492
|
|
|
|
297,268
|
|
|
|
355,241
|
|
|
|
309,930
|
|
|
|
681,733
|
|
|
|
607,198
|
|
Total Revenue
|
|
$
|
471,865
|
|
|
$
|
439,792
|
|
|
$
|
535,994
|
|
|
$
|
474,527
|
|
|
$
|
1,007,859
|
|
|
$
|
914,319
|
|
The following table
provides information regarding the total sales mix as a percent of total revenue in fiscal years 2011 and 2010:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
Hardware
|
|
|
19.8
|
%
|
|
|
20.6
|
%
|
Software
|
|
|
12.6
|
%
|
|
|
13.0
|
%
|
Service
|
|
|
67.6
|
%
|
|
|
66.4
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
For fiscal year 2011, total revenue was
approximately $1.0 billion, an increase of approximately $93.5 million, or 10.2% compared to fiscal year 2010 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 5.7%, 7.0% and
12.3%, respectively, compared to the fiscal year 2010. We believe the increases were primarily due to an improvement in demand
from our customers as a result of a modest improvement in global economic conditions in fiscal year 2011. The software revenue
increase also reflects a major rollout of Simphony by a large customer.
|
|
·
|
The increase in total revenue also reflects additional service revenue
generated from the continued expansion of our customer base and the additional revenue generated by companies that we acquired
during the fiscal years 2011 and 2010.
|
|
·
|
The favorable foreign currency exchange rate fluctuations, for substantially
all foreign currencies against the U.S. dollar, positively affected total revenue by approximately $17.2 million.
|
International segment revenue for the fiscal
year ended June 30, 2011 increased by approximately $61.5 million, or 13.0% compared to the fiscal year 2010 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 9.2%, 10.6% and
14.6%, respectively, compared to the fiscal year 2010. We believe these changes were primarily due to an improvement in demand
from our customers as a result of a modest improvement in global economic conditions in fiscal year 2011.
|
|
·
|
The increase in total revenue also reflects additional service revenue
generated from the continued expansion of our customer base and the additional revenue generated by companies that we acquired
during fiscal year 2011.
|
|
·
|
The favorable foreign currency exchange rate fluctuations, for substantially
all foreign currencies against the U.S. dollar, positively affected total revenue by approximately $17.2 million.
|
U.S./Canada segment revenue for the fiscal
year ended June 30, 2011 increased by approximately $32.1 million, or 7.3% compared to the fiscal year 2010 principally due to
the following factors:
|
·
|
Hardware, software and service revenue increased by 2.3%, 1.4% and
9.8%, respectively, compared to the fiscal year 2010. We believe these changes were primarily due to an improvement in demand from
our customers as a result of a modest improvement in global economic conditions in fiscal year 2011.
|
|
·
|
The software revenue increase also reflects a major rollout of Simphony
by a large customer.
|
|
·
|
The service revenue for the fiscal year 2011 includes additional service
revenue generated by TIG Global (now known as Micros E-Commerce), a company that we acquired in December 2009. The increase in
service revenue also reflects the continued expansion of our customer base and new product and service offerings.
|
Cost of Sales
The following table provides information
regarding our cost of sales in fiscal years 2011 and 2010:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2011
|
|
|
2010
|
|
(in thousands)
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
Hardware
|
|
$
|
126,667
|
|
|
|
63.7
|
%
|
|
$
|
119,489
|
|
|
|
63.4
|
%
|
Software
|
|
|
21,200
|
|
|
|
16.7
|
%
|
|
|
25,731
|
|
|
|
21.7
|
%
|
Service
|
|
|
299,923
|
|
|
|
44.0
|
%
|
|
|
267,618
|
|
|
|
44.1
|
%
|
Total Cost of Sales
|
|
$
|
447,790
|
|
|
|
44.4
|
%
|
|
$
|
412,838
|
|
|
|
45.2
|
%
|
For fiscal year 2011, cost of sales as
a percent of revenue decreased 0.8% to 44.4% compared to 45.2% in fiscal year 2010. Hardware cost of sales as a percent of related
revenue increased primarily as a result of a change in customer mix compared to fiscal year 2010. Software cost of sales as a percent
of related revenue decreased primarily due to a favorable product mix between internally developed software products and third
party software products. The decrease also reflects lower capitalized software amortization expense (included in software cost
of sales) as a percent of software revenue as compared to fiscal year 2010. Service cost of sales as a percent of related revenue
decreased 0.1% to 44.0% in fiscal year 2011. The foreign currency exchange rate fluctuations increased our cost of sales for the
fiscal year 2011 by approximately $10.2 million compared to fiscal year 2010.
Selling, General and Administrative
(“SG&A”) Expenses
SG&A expenses increased approximately
$13.0 million compared to fiscal year 2010 to approximately $287.0 million. This increase was primarily due to the following:
|
·
|
Additional SG&A expenses from companies
acquired during fiscal years 2011 and 2010;
|
|
·
|
A $3.0 million litigation charge recognized in fiscal year 2011;
|
|
·
|
Although we saw modest improvements in the global economic conditions
in general, these conditions, primarily in Europe, led to an increase in bad debt expense of approximately $2.3 million in fiscal
year 2011 compared to fiscal year 2010; and,
|
|
·
|
The foreign currency exchange rate fluctuations increased our SG&A
expenses for the fiscal year 2011 by approximately $7.0 million compared to fiscal year 2010.
|
All of these increases were partially offset
by our ability to continue to reduce certain of our costs. Overall we experienced a 1.5% decrease in SG&A expenses as a percent
of revenue to 28.5% in fiscal year 2011 as compared to fiscal year 2010.
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 2011 and 2010:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2011
|
|
|
2010
|
|
R&D labor and other costs
|
|
$
|
51,424
|
|
|
$
|
44,672
|
|
Capitalized software development costs
|
|
|
(5,580
|
)
|
|
|
(2,443
|
)
|
Total R&D expenses
|
|
$
|
45,844
|
|
|
$
|
42,229
|
|
% of Revenue
|
|
|
4.5
|
%
|
|
|
4.6
|
%
|
The increase in capitalized software development
costs is primarily related to development of the next generation of property management and retail related software. The increase
in total R&D expenses was primarily related to our recently acquired subsidiaries.
Depreciation and Amortization Expenses
Depreciation and amortization expenses
for fiscal year 2011 decreased approximately $0.5 million compared to fiscal year 2010 to approximately $16.8 million. The decrease
was primarily due to an increase in fully depreciated assets, partially offset by additional depreciation and amortization expenses
related to recent acquisitions.
Share-Based Compensation Expenses
The following table provides information
regarding our recognition of non-cash share-based compensation expense, which was included in the SG&A expenses, R&D expenses
and cost of sales for fiscal years 2011 and 2010, as indicated below:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands, except per share data)
|
|
2011
|
|
|
2010
|
|
SG&A
|
|
$
|
11,747
|
|
|
$
|
11,717
|
|
R&D
|
|
|
596
|
|
|
|
511
|
|
Cost of sales
|
|
|
105
|
|
|
|
137
|
|
Total non-cash share-based compensation expense
|
|
|
12,448
|
|
|
|
12,365
|
|
Income tax benefit
|
|
|
(4,426
|
)
|
|
|
(4,283
|
)
|
Total non-cash share-based compensation expense, net of tax benefit
|
|
$
|
8,022
|
|
|
$
|
8,082
|
|
Impact on diluted net income per share attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
The non-cash share-based compensation expense
allocated to SG&A for the 2011 and 2010 fiscal years included approximately $2.5 million and $1.7 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 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.
As of June 30, 2011, there was approximately
$20.6 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 1.91 years.
Income from Operations
Income
from operations for fiscal year 2011
increased approximately $42.5 million, or 25.3%, to approximately $210.5 million, compared
to fiscal year 2010. The increase reflects an increase in total revenue, an overall improvement in margin and our continued cost
cutting efforts
.
Foreign currency exchange rate fluctuations
decreased our income from operations for the fiscal year 2011 by approximately $0.4 million compared to fiscal year 2010.
Non-operating Income (Expense)
Net non-operating expense for fiscal year
2011 was approximately $0.8 million compared to net non-operating income of approximately $0.2 million for fiscal year 2010. This
decrease of approximately $1.0 million reflects:
|
·
|
For fiscal year 2011, the foreign currency exchange transaction loss
was approximately $1.3 million compared to a gain of approximately $1.0 million in fiscal year 2010; and,
|
|
·
|
An increase in interest expense of approximately $0.8 million primarily
due to approximately $0.5 million interest accrued related to a litigation charge.
|
The decreases described above
were partially offset by:
|
·
|
An increase in interest income of approximately $1.7 million due to
overall higher cash and cash equivalents and investment (short-term and long-term) balances; and,
|
|
·
|
The credit based other-than-temporary impairment losses of approximately
$4.3 million for fiscal year 2011 compared to approximately $4.8 million for fiscal year 2010 for investments in auction rate securities
classified as long-term investments on our consolidated balance sheets.
|
Income Tax Expense
The effective tax rates for fiscal years
2011 and 2010 were 31.0% and 31.4%, respectively. The effective tax rates for the fiscal years 2011 and 2010 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 determination to permanently reinvest overseas the cumulative unremitted earnings of our
significant non-US affiliates, tax benefits realized upon the expiration of statutes of limitations or settlements with tax authorities
and the domestic manufacturers deduction.
The decrease in the effective tax rate
for fiscal year 2011 as compared to fiscal year 2010 was primarily attributable to increases in tax benefits realized upon the
expiration of statutes of limitation or settlements with tax authorities, the increase in the domestic manufacturing deduction
and the net reduction of valuation allowances.
We recorded net unrecognized income tax
benefits of approximately $31.4 million and $21.3 million, including accrued interest and penalties of approximately $2.8 million
and $2.4 million at June 30, 2011 and 2010, respectively. We have recognized approximately $0.8 million and $0.7 million of interest
expense for the fiscal years 2011 and 2010, 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, affecting the effective
income tax rate.
We have recognized a net increase in unrecognized
tax benefits for the fiscal year 2011 as compared to fiscal year 2010, which includes a reduction in the effective tax rate of
1.4% and income tax expense by approximately $3.1 million, primarily due to the expiration of statutes of limitations.
Net
Income Attributable to MICROS Systems, Inc. and Diluted Net Income per Share Attributable to MICROS Systems, Inc. Common Shareholders
The
net income attributable to us for fiscal year 2011 increased approximately $29.7 million, or 26.0%, to approximately $144.1 million,
compared to fiscal year 2010.
The increase is due to an increase in total revenue, an overall improvement in margin and
our continued cost cutting efforts
.
Foreign currency exchange
rate fluctuations had less than $0.1 million impact on the net income attributable to us for fiscal year 2011 compared to fiscal
year 2010.
Diluted net income per share attributable
to our shareholders for fiscal year
2011 and 2010 was
$1.74
and $1.41 per diluted share, respectively.
Recent
accounting STANDARDS
See Note
1 “Description of Business and Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial
Statements included in this report for further information about recently adopted accounting guidance and recent accounting guidance
not yet adopted.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company’s consolidated statement
of cash flows summary is as follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
179,949
|
|
|
$
|
199,584
|
|
|
$
|
201,869
|
|
Investing activities
|
|
|
(183,880
|
)
|
|
|
35,458
|
|
|
|
(66,340
|
)
|
Financing activities
|
|
|
(43,884
|
)
|
|
|
(673
|
)
|
|
|
(20,539
|
)
|
Operating activities:
Net cash provided by operating activities
for fiscal year 2012 decreased approximately $19.6 million compared to fiscal year 2011, primarily due to unfavorable change in
the international accounts receivable in comparison to fiscal year 2011, partially offset by an increase in net income of approximately
$22.5 million, which includes unfavorable foreign currency exchange rate fluctuations impact of approximately $3.0 million.
Net cash provided by operating activities
for fiscal year 2011 decreased approximately $2.3 million compared to fiscal year 2010, due principally to certain unfavorable
changes in working capital in comparison to fiscal year 2010. These unfavorable changes were substantially offset by the increase
in net income of approximately $29.2 million.
Investing activities:
Net cash used in investing activities for
fiscal year 2012 was approximately $183.9 million primarily due to approximately $258.2 million we used (net of cash acquired)
in connection with the acquisition of Torex in May 2012. We also used approximately $24.7 million to purchase property, plant and
equipment and to develop software to be licensed to others. These amounts were partially offset by approximately $99.7 million
in proceeds from sales of investments (including approximately $5.0 million received from the sale of auction rate securities),
net of funds used to purchase investments.
Net cash provided by investing activities
for fiscal year 2011 was approximately $35.5 million reflecting approximately $70.7 million in proceeds from sales of investments
(including approximately $6.4 million received from the sale of auction rate securities), net of funds used to purchase investments.
This amount was partially offset by approximately $18.6 million we used for acquisitions and approximately $16.3 million used to
purchase property, plant and equipment and to develop software to be licensed to others.
Net cash used in investing activities for
fiscal year 2010 was approximately $66.3 million reflecting approximately $30.7 million used primarily in connection with the acquisition
of Micros E-Commerce (formerly named 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.
Financing activities:
Net cash used in financing activities for
fiscal year 2012 was approximately $43.9 million, principally reflecting approximately $59.2 million used to purchase our stock
and approximately $4.2 million we used to acquire a noncontrolling interest, partially offset by proceeds from stock option exercises
of approximately $14.9 million and realized tax benefits from stock option exercises of approximately $4.7 million.
Net cash used in financing activities for
fiscal year 2011 was approximately $0.7 million, principally reflecting approximately $33.4 million used to purchase our stock,
substantially offset by proceeds from stock option exercises of approximately $28.1 million and realized tax benefits from stock
option exercises of approximately $7.7 million.
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, 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.
At June 30, 2012, our
cash and cash equivalents and short-term investment balance was approximately $582.0 million, of which approximately $230.2 million
was held internationally. 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
We have two credit agreements (the “Credit
Agreements”) that in the aggregate provide a $50.0 million multi-currency committed line of credit through July 31, 2013.
See Note 7 “Line of Credit,” in the Notes to the Consolidated Financial Statements included in this report for further
information. As of June 30, 2012, we had no borrowings outstanding under the Credit Agreements, but we applied approximately $0.5
million to guarantees.
We also have a credit relationship with
a European bank in the amount of EUR 1.0 million (approximately $1.3 million at the June 30, 2012 exchange rate). As of June 30,
2012, there were no balances outstanding on this credit facility, but approximately EUR 0.4 million (approximately $0.5 million
at the June 30, 2012 exchange rate) of the credit facility had been used for guarantees.
As of June 30, 2012, we had approximately
$50.2 million borrowing capacity available under all of the credit facilities described above.
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 2013 will be approximately $20 million.
The following table provides information
regarding certain financial indicators of our liquidity and capital resources:
|
|
As of June 30,
|
|
(in thousands, except ratios)
|
|
2012
|
|
|
2011
|
|
Cash and cash equivalents and short-term investments
(1)
|
|
$
|
582,038
|
|
|
$
|
780,265
|
|
Available credit facilities
|
|
$
|
51,266
|
|
|
$
|
51,450
|
|
Outstanding credit facilities
|
|
|
0
|
|
|
|
0
|
|
Outstanding guarantees
|
|
|
(1,055
|
)
|
|
|
(1,410
|
)
|
Unused credit facilities
|
|
$
|
50,211
|
|
|
$
|
50,040
|
|
Working capital
(2)
|
|
$
|
500,127
|
|
|
$
|
697,012
|
|
MICROS Systems, Inc. shareholders’ equity
|
|
$
|
1,092,645
|
|
|
$
|
1,016,711
|
|
Current ratio
(3)
|
|
|
2.20
|
|
|
|
2.97
|
|
|
(1)
|
Does not include approximately $34.3 million and $41.3 million invested in auction rate securities,
classified as long-term investments in our Consolidated Balance Sheet as of June 30, 2012 and 2011, 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, 2012:
|
|
Payments due by period
|
|
(in thousands)
|
|
Total
|
|
|
Less than
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than
5 years
|
|
Operating lease obligations
|
|
$
|
97,296
|
|
|
$
|
34,578
|
|
|
$
|
46,891
|
|
|
$
|
13,797
|
|
|
$
|
2,030
|
|
SERP liability*
|
|
|
4,868
|
|
|
|
96
|
|
|
|
708
|
|
|
|
1,155
|
|
|
|
2,909
|
|
Purchase obligations
|
|
|
1,213
|
|
|
|
471
|
|
|
|
742
|
|
|
|
0
|
|
|
|
0
|
|
Capital lease obligations
|
|
|
154
|
|
|
|
89
|
|
|
|
49
|
|
|
|
16
|
|
|
|
0
|
|
Total
|
|
$
|
103,531
|
|
|
$
|
35,234
|
|
|
$
|
48,390
|
|
|
$
|
14,968
|
|
|
$
|
4,939
|
|
|
*
|
The term “SERP” refers to our Supplemental
Executive Retirement Plan. See Note 15, “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, 2012, we are unable to reasonably
estimate settlements with taxing authorities. The above contractual obligations table does not reflect unrecognized income
tax benefits of approximately $34.7 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.
E
xamples
of suc
h forward-looking
statements in this Annual Report on Form 10-K include the following:
|
·
|
Item 1, “Business,”
statements regarding the growth of and our efforts to further develop the OPERA suite of products; our strategy for expansion of
our presence in retail outside the USA; demand shift toward hosted applications and away from traditional on-premise implementations;
our global distribution network; our intentions to acquire rights in third party products or designs; our expectations regarding
sourcing of manufacturing capability, materials and equipment; our expectations regarding labor relations and employment, our expectations
regarding interest rate and foreign exchange 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; 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;
our belief that compliance with environmental laws and regulations will not have a material effect on expenditures, earnings, or
our competitive position;
and,
our expectations regarding whether
backlog will result in recognizable revenue,
|
|
·
|
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;
|
|
·
|
Item 5 “Market for the Registrant’s
Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities,” regarding our intentions for use
of retained earnings and our intention not to pay cash dividends; 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 trends in the hospitality and retail industries generally
and in 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 impact of changes in our business
judgment, market conditions, macro-economic conditions, financial conditions of our customers, competition, business trends, and
government activity on the application of our critical accounting estimates;
|
|
(viii)
|
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;
|
|
(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, 2012, we had no borrowings
and had not entered into any instruments to hedge the resulting exposure to interest-rate risk. Our exposure to fluctuations in
interest rates may increase in the future with increases in the outstanding amount under the line of credit. As we did not have
any borrowing as of June 30, 2012, a 1% change in interest rate would have no 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, 2012, but the change in our interest income would have been a change of approximately $5.8 million
based on our cash, cash equivalents and short term investment balances as of June 30, 2012 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 47 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 effective 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 48 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.
As a result of our acquisition of Torex
Retail Holdings, Ltd. (“Torex”) on May 31, 2012, our internal control over financial reporting now addresses the operations
of Torex. Internal control over financial reporting with regard to the operations of Torex were excluded from management’s
annual report on internal control over financial reporting since it was acquired in a business combination that occurred only one
month prior to the end of our fiscal year ended June 30, 2012.
|
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, 2012
|
|
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
|
|
|
6,769,713
|
|
|
$
|
34.22
|
|
|
|
3,437,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
6,769,713
|
|
|
$
|
34.22
|
|
|
|
3,437,500
|
|
|
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
“Certain Relationships
and Related Party Transactions” and “Corporate Governance”
and that information is
incorporated herein by reference.
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT 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 SCHEDULES
|
(a) Exhibits
and Financial Statement Schedule:
(1) Financial Statements –
See the Index to Consolidated Financial Statements on page 47
(2) Schedule II – See
the Index to Consolidated Financial Statements on page 47
(3) Exhibits:
|
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 2011 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 27, 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 is incorporated
herein by reference to Exhibit 10(c)(1) to the Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
|
|
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(d)(1)*
|
First Amendment to Employment Agreement dated January 25, 2011, between MICROS Systems, Inc. and Jennifer Kurdle is incorporated
herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on January 27, 2011.
|
|
10(d)(2)*
|
Second Amendment to Employment Agreement dated November 7, 2011, between MICROS Systems, Inc. and Jennifer Kurdle is incorporated
herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on November 7, 2011.
|
|
10(e)*
|
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(f)
|
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(f)(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, Inc.,
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(f)(2)
|
Second Amendment to Credit Agreements, dated July 30, 2010 among MICROS Systems, Inc. DV Technology Holdings Corporation, Datavantage
Corporation, TIG Global LLC (now named Micros E-Commerce LLC), Fry, Inc., JTECH Communications, 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 is incorporated herein by reference to Exhibit 10(g)(2) to the Annual Report on Form
10-K for the fiscal year ended June 30, 2010.
|
|
10(g)
|
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(g)(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 is incorporated herein by reference to Exhibit 10(h)(1) to the Annual Report on Form 10-K for the fiscal
year ended June 30, 2010.
|
|
10(h)
|
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(i)
|
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
)
|
|
10(j)
|
Stock Purchase Agreement, by and between MICROS Systems, Inc., Torex Retail Holdings Limited, the stockholders and optionholders
of Torex, and MF UK FC Limited (a wholly-owned subsidiary of MICROS Systems, Inc.) entered into by the parties on April 26, 2012
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 5, 2012).
|
|
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 Capital Advisors, LLC (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
|
48
|
|
|
Financial Statements:
|
|
|
Report of Independent Registered Public Accounting Firm
|
49
|
|
Consolidated balance sheets as of June 30, 2012 and 2011
|
50
|
|
Consolidated statements of operations for the fiscal years ended June
30, 2012, 2011 and 2010
|
51
|
|
Consolidated statements of cash flows for the fiscal years ended June
30, 2012, 2011 and 2010
|
52
|
|
Consolidated statements of shareholders’ equity for the fiscal
years ended June 30, 2012, 2011 and 2010
|
53
|
|
Consolidated statements of comprehensive income for the fiscal years
ended June 30, 2012, 2011 and 2010
|
54
|
|
Notes to consolidated financial statements
|
55 - 78
|
|
|
|
Financial Statement Schedule:
|
|
|
Schedule II – Valuation and qualifying accounts and reserves
|
78
|
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
Management 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, 2012. 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,
2012, the Company’s internal control over financial reporting was effective.
Management has excluded the
operations of Torex Retail Holdings Limited (“Torex”) from its assessment of internal control over financial
reporting as of June 30, 2012 since it was acquired in a purchase business combination that occurred only one month prior to
the end of our fiscal year ended June 30, 2012. Torex is a wholly-owned subsidiary with total assets as of June 30, 2012 of
$362.8 million and total revenues of approximately $16.6 million since the date of acquisition.
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, 2012 and June 30, 2011, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2012 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, 2012, 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.
As described in Management’s Annual
Report On Internal Control Over Financial Reporting, management has excluded the operations of Torex Retail Holdings Limited (“Torex”)
from its assessment of internal control over financial reporting as of June 30, 2012, since it was acquired in a purchase business
combination during the fourth quarter of 2012. We have also excluded the operations of Torex from our audit of internal control
over financial reporting. Torex’s total assets and total revenues represent $362.8 million and $16.6 million,
respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2012.
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 29, 2012
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
June 30,
|
|
(in thousands, except par value data)
|
|
2012
|
|
|
2011
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
562,786
|
|
|
$
|
661,259
|
|
Short-term investments
|
|
|
19,252
|
|
|
|
119,006
|
|
Accounts receivable, net of allowance for doubtful
accounts of $31,753 at June 30, 2012 and $32,282 at June 30, 2011
|
|
|
235,433
|
|
|
|
181,833
|
|
Inventory
|
|
|
44,278
|
|
|
|
38,119
|
|
Deferred income taxes
|
|
|
17,004
|
|
|
|
21,036
|
|
Prepaid expenses and other current assets
|
|
|
37,343
|
|
|
|
30,454
|
|
Total current assets
|
|
|
916,096
|
|
|
|
1,051,707
|
|
|
|
|
|
|
|
|
|
|
Long-term investments
|
|
|
34,456
|
|
|
|
46,226
|
|
Property, plant and equipment, net
|
|
|
35,435
|
|
|
|
28,145
|
|
Deferred income taxes, non-current
|
|
|
50,326
|
|
|
|
20,798
|
|
Goodwill
|
|
|
444,117
|
|
|
|
242,319
|
|
Intangible assets, net
|
|
|
45,024
|
|
|
|
19,293
|
|
Purchased and internally developed software costs,
net of accumulated
amortization of $87,073 at June 30, 2012 and $84,885 at June 30, 2011
|
|
|
33,980
|
|
|
|
18,710
|
|
Other assets
|
|
|
6,586
|
|
|
|
5,820
|
|
Total assets
|
|
$
|
1,566,020
|
|
|
$
|
1,433,018
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
69,978
|
|
|
$
|
54,851
|
|
Accrued expenses and other current liabilities
|
|
|
174,214
|
|
|
|
148,901
|
|
Income taxes payable
|
|
|
1,788
|
|
|
|
7,705
|
|
Deferred revenue
|
|
|
169,989
|
|
|
|
143,238
|
|
Total current liabilities
|
|
|
415,969
|
|
|
|
354,695
|
|
|
|
|
|
|
|
|
|
|
Income taxes payable, non-current
|
|
|
34,722
|
|
|
|
32,309
|
|
Deferred income taxes, non-current
|
|
|
2,554
|
|
|
|
8,261
|
|
Other non-current liabilities
|
|
|
16,644
|
|
|
|
14,502
|
|
Total liabilities
|
|
|
469,889
|
|
|
|
409,767
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
MICROS Systems, Inc. Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.025 par value authorized 120,000
shares; issued and outstanding 80,309 at June 30, 2012 and 80,805 at June 30, 2011
|
|
|
2,008
|
|
|
|
2,020
|
|
Capital in excess of par
|
|
|
107,662
|
|
|
|
132,529
|
|
Retained earnings
|
|
|
1,000,822
|
|
|
|
833,839
|
|
Accumulated other comprehensive (expense) income
|
|
|
(17,847
|
)
|
|
|
48,323
|
|
Total MICROS Systems, Inc. shareholders' equity
|
|
|
1,092,645
|
|
|
|
1,016,711
|
|
Noncontrolling interest
|
|
|
3,486
|
|
|
|
6,540
|
|
Total equity
|
|
|
1,096,131
|
|
|
|
1,023,251
|
|
Total liabilities and equity
|
|
$
|
1,566,020
|
|
|
$
|
1,433,018
|
|
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)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
$
|
237,920
|
|
|
$
|
199,003
|
|
|
$
|
188,333
|
|
Software
|
|
|
142,617
|
|
|
|
127,123
|
|
|
|
118,788
|
|
Service
|
|
|
726,994
|
|
|
|
681,733
|
|
|
|
607,198
|
|
Total revenue
|
|
|
1,107,531
|
|
|
|
1,007,859
|
|
|
|
914,319
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
152,242
|
|
|
|
126,667
|
|
|
|
119,489
|
|
Software
|
|
|
20,779
|
|
|
|
21,200
|
|
|
|
25,731
|
|
Service
|
|
|
319,900
|
|
|
|
299,923
|
|
|
|
267,618
|
|
Total cost of sales
|
|
|
492,921
|
|
|
|
447,790
|
|
|
|
412,838
|
|
Gross margin
|
|
|
614,610
|
|
|
|
560,069
|
|
|
|
501,481
|
|
Selling, general and administrative expenses
(1)
|
|
|
311,882
|
|
|
|
286,976
|
|
|
|
273,968
|
|
Research and development expenses
|
|
|
52,031
|
|
|
|
45,844
|
|
|
|
42,229
|
|
Depreciation and amortization
|
|
|
16,177
|
|
|
|
16,790
|
|
|
|
17,311
|
|
Total operating expenses
|
|
|
380,090
|
|
|
|
349,610
|
|
|
|
333,508
|
|
Income from operations
|
|
|
234,520
|
|
|
|
210,459
|
|
|
|
167,973
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
7,354
|
|
|
|
5,732
|
|
|
|
4,080
|
|
Interest expense
|
|
|
(566
|
)
|
|
|
(1,069
|
)
|
|
|
(263
|
)
|
Other (expense), net
(2)
|
|
|
(4,117
|
)
|
|
|
(5,510
|
)
|
|
|
(3,665
|
)
|
Total non-operating income (expense), net
|
|
|
2,671
|
|
|
|
(847
|
)
|
|
|
152
|
|
Income before taxes
|
|
|
237,191
|
|
|
|
209,612
|
|
|
|
168,125
|
|
Income tax provision
|
|
|
70,090
|
|
|
|
64,999
|
|
|
|
52,745
|
|
Net income
|
|
|
167,101
|
|
|
|
144,613
|
|
|
|
115,380
|
|
Less: Net income attributable to non-controlling interest
|
|
|
(118
|
)
|
|
|
(554
|
)
|
|
|
(1,027
|
)
|
Net income attributable to MICROS Systems, Inc.
|
|
$
|
166,983
|
|
|
$
|
144,059
|
|
|
$
|
114,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to MICROS Systems,
Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.08
|
|
|
$
|
1.78
|
|
|
$
|
1.44
|
|
Diluted
|
|
$
|
2.03
|
|
|
$
|
1.74
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
80,300
|
|
|
|
80,726
|
|
|
|
79,856
|
|
Diluted
|
|
|
82,238
|
|
|
|
82,672
|
|
|
|
81,448
|
|
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)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Total other-than-temporary impairment losses
|
|
$
|
4,000
|
|
|
$
|
3,919
|
|
|
$
|
4,103
|
|
Adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in non-credit based OTTI recognized in other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in credit based OTTI due to redemption
|
|
|
0
|
|
|
|
0
|
|
|
|
680
|
|
Change in non-credit based OTTI due to redemption
|
|
|
0
|
|
|
|
342
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
32
|
|
|
|
0
|
|
Credit based OTTI recognized in non-operating income/expense
|
|
$
|
4,000
|
|
|
$
|
4,293
|
|
|
$
|
4,783
|
|
(1) See Note 11 “Contingencies” 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)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
167,101
|
|
|
$
|
144,613
|
|
|
$
|
115,380
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,177
|
|
|
|
16,790
|
|
|
|
17,311
|
|
Share-based compensation
|
|
|
16,501
|
|
|
|
12,448
|
|
|
|
12,365
|
|
Amortization of capitalized software
|
|
|
7,148
|
|
|
|
7,489
|
|
|
|
9,682
|
|
Provision for losses on accounts receivable
|
|
|
7,137
|
|
|
|
6,168
|
|
|
|
3,875
|
|
Other-than-temporary impairment losses on investments, net
|
|
|
4,000
|
|
|
|
4,293
|
|
|
|
4,783
|
|
Net loss on disposal of property, plant and equipment
|
|
|
642
|
|
|
|
726
|
|
|
|
946
|
|
Impairment of capitalized software costs
|
|
|
336
|
|
|
|
0
|
|
|
|
0
|
|
Loss on other investments
|
|
|
0
|
|
|
|
500
|
|
|
|
0
|
|
Benefit from deferred income taxes
|
|
|
(3,436
|
)
|
|
|
(8,579
|
)
|
|
|
(3,062
|
)
|
Gain on sales of long-term investments
|
|
|
0
|
|
|
|
(76
|
)
|
|
|
0
|
|
Changes in operating assets and liabilities (net of impact of acquisitions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
|
(40,095
|
)
|
|
|
(15,104
|
)
|
|
|
(4,099
|
)
|
(Increase) decrease in inventory
|
|
|
(1,751
|
)
|
|
|
369
|
|
|
|
3,905
|
|
(Increase) decrease in prepaid expenses and other assets
|
|
|
(1,790
|
)
|
|
|
1,488
|
|
|
|
(940
|
)
|
Increase in accounts payable
|
|
|
2,507
|
|
|
|
5,506
|
|
|
|
5,218
|
|
Increase (decrease) in accrued expenses and other current liabilities
|
|
|
2,551
|
|
|
|
(2,230
|
)
|
|
|
19,620
|
|
(Decrease) increase in income tax assets and liabilities
|
|
|
(1,755
|
)
|
|
|
12,454
|
|
|
|
3,813
|
|
Increase in deferred revenue
|
|
|
4,676
|
|
|
|
12,729
|
|
|
|
13,072
|
|
Net cash flows provided by operating activities
|
|
|
179,949
|
|
|
|
199,584
|
|
|
|
201,869
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid for acquisitions, net of cash acquired
|
|
|
(258,940
|
)
|
|
|
(18,586
|
)
|
|
|
(30,684
|
)
|
Purchases of short-term investments
|
|
|
(78,816
|
)
|
|
|
(198,605
|
)
|
|
|
(308,966
|
)
|
Proceeds from sales and maturities of investments
|
|
|
178,474
|
|
|
|
269,274
|
|
|
|
284,677
|
|
Purchases of property, plant and equipment
|
|
|
(17,468
|
)
|
|
|
(10,706
|
)
|
|
|
(9,044
|
)
|
Internally developed software costs
|
|
|
(7,197
|
)
|
|
|
(5,580
|
)
|
|
|
(2,443
|
)
|
Other
|
|
|
67
|
|
|
|
(339
|
)
|
|
|
120
|
|
Net cash flows (used in) provided by investing activities
|
|
|
(183,880
|
)
|
|
|
35,458
|
|
|
|
(66,340
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock
|
|
|
(59,199
|
)
|
|
|
(33,403
|
)
|
|
|
(47,635
|
)
|
Cash paid for acquisition of non-controlling interest
|
|
|
(4,212
|
)
|
|
|
(1,041
|
)
|
|
|
0
|
|
Proceeds from stock option exercises
|
|
|
14,933
|
|
|
|
28,106
|
|
|
|
23,310
|
|
Realized tax benefits from stock option exercises
|
|
|
4,717
|
|
|
|
7,697
|
|
|
|
3,543
|
|
Proceeds from line of credit
|
|
|
0
|
|
|
|
1,131
|
|
|
|
0
|
|
Principal payments on line of credit
|
|
|
0
|
|
|
|
(2,573
|
)
|
|
|
0
|
|
Other
|
|
|
(123
|
)
|
|
|
(590
|
)
|
|
|
243
|
|
Net cash flows used in financing activities
|
|
|
(43,884
|
)
|
|
|
(673
|
)
|
|
|
(20,539
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(50,658
|
)
|
|
|
49,685
|
|
|
|
(30,042
|
)
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(98,473
|
)
|
|
|
284,054
|
|
|
|
84,948
|
|
Cash and cash equivalents at beginning of year
|
|
|
661,259
|
|
|
|
377,205
|
|
|
|
292,257
|
|
Cash and cash equivalents at end of year
|
|
$
|
562,786
|
|
|
$
|
661,259
|
|
|
$
|
377,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the fiscal year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
290
|
|
|
$
|
250
|
|
|
$
|
111
|
|
Income taxes
|
|
$
|
61,612
|
|
|
$
|
46,349
|
|
|
$
|
44,318
|
|
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
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Capital
in
Excess of
|
|
|
Retained
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Non-
controlling
|
|
|
|
|
(in thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Par
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
interest
|
|
|
Total
|
|
Balance, June 30, 2009
|
|
|
80,310
|
|
|
$
|
2,008
|
|
|
$
|
125,640
|
|
|
$
|
575,095
|
|
|
$
|
16,254
|
|
|
$
|
6,034
|
|
|
$
|
725,031
|
|
Net income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
114,353
|
|
|
|
0
|
|
|
|
1,027
|
|
|
|
115,380
|
|
Foreign currency translation
adjustments, net of tax of $0
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(42,222
|
)
|
|
|
(714
|
)
|
|
|
(42,936
|
)
|
Unrealized loss on long-term
investments, net of taxes of $83
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
135
|
|
|
|
0
|
|
|
|
135
|
|
Non-controlling interest
put arrangement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
302
|
|
|
|
0
|
|
|
|
0
|
|
|
|
302
|
|
Dividends to non-controlling
interest
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(115
|
)
|
|
|
(115
|
)
|
Share-based compensation
|
|
|
0
|
|
|
|
0
|
|
|
|
12,365
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,365
|
|
Stock issued upon exercise
of options
|
|
|
1,378
|
|
|
|
34
|
|
|
|
23,276
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
23,310
|
|
Repurchases of stock
|
|
|
(1,646
|
)
|
|
|
(41
|
)
|
|
|
(47,594
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(47,635
|
)
|
Income
tax benefit from options exercised
|
|
|
0
|
|
|
|
0
|
|
|
|
3,775
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,775
|
|
Balance, June 30, 2010
|
|
|
80,042
|
|
|
|
2,001
|
|
|
|
117,462
|
|
|
|
689,750
|
|
|
|
(25,833
|
)
|
|
|
6,232
|
|
|
|
789,612
|
|
Net income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
144,059
|
|
|
|
0
|
|
|
|
554
|
|
|
|
144,613
|
|
Foreign currency translation
adjustments, net of tax of $0
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
74,968
|
|
|
|
856
|
|
|
|
75,824
|
|
Unrealized losses on long-term
investments, net of tax benefit of $500
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(812
|
)
|
|
|
0
|
|
|
|
(812
|
)
|
Non-controlling interest
put arrangement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
30
|
|
|
|
0
|
|
|
|
0
|
|
|
|
30
|
|
Acquisition of non-controlling interest
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(682
|
)
|
|
|
(682
|
)
|
Dividends to non-controlling
interest
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(420
|
)
|
|
|
(420
|
)
|
Share-based compensation
|
|
|
0
|
|
|
|
0
|
|
|
|
12,448
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,448
|
|
Stock issued upon exercise
of options
|
|
|
1,471
|
|
|
|
37
|
|
|
|
28,069
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,106
|
|
Repurchases of stock
|
|
|
(708
|
)
|
|
|
(18
|
)
|
|
|
(33,385
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(33,403
|
)
|
Income
tax benefit from options exercised
|
|
|
0
|
|
|
|
0
|
|
|
|
7,935
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,935
|
|
Balance, June 30, 2011
|
|
|
80,805
|
|
|
|
2,020
|
|
|
|
132,529
|
|
|
|
833,839
|
|
|
|
48,323
|
|
|
|
6,540
|
|
|
|
1,023,251
|
|
Net
income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
166,983
|
|
|
|
0
|
|
|
|
118
|
|
|
|
167,101
|
|
Foreign
currency translation adjustments, net of tax of $0
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(67,373
|
)
|
|
|
(540
|
)
|
|
|
(67,913
|
)
|
Unrealized
gains on long-term investments, net of taxes of $741
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,203
|
|
|
|
0
|
|
|
|
1,203
|
|
Acquisition of non-controlling
interest
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,069
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,632
|
)
|
|
|
(4,701
|
)
|
Share-based compensation
|
|
|
0
|
|
|
|
0
|
|
|
|
16,501
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
16,501
|
|
Stock
issued upon exercise of options
|
|
|
792
|
|
|
|
20
|
|
|
|
14,913
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,933
|
|
Repurchases of stock
|
|
|
(1,288
|
)
|
|
|
(32
|
)
|
|
|
(59,167
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(59,199
|
)
|
Income
tax benefit from options exercised
|
|
|
0
|
|
|
|
0
|
|
|
|
4,955
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,955
|
|
Balance,
June 30, 2012
|
|
|
80,309
|
|
|
$
|
2,008
|
|
|
$
|
107,662
|
|
|
$
|
1,000,822
|
|
|
$
|
(17,847
|
)
|
|
$
|
3,486
|
|
|
$
|
1,096,131
|
|
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)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Net income
|
|
$
|
167,101
|
|
|
$
|
144,613
|
|
|
$
|
115,380
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(67,913
|
)
|
|
|
75,824
|
|
|
|
(42,936
|
)
|
Change in unrealized (loss) gain
on long-term investments, net of taxes (benefit) of $741, ($500) and $83
|
|
|
1,203
|
|
|
|
(812
|
)
|
|
|
135
|
|
Total other comprehensive income (loss), net of taxes
|
|
|
(66,710
|
)
|
|
|
75,012
|
|
|
|
(42,801
|
)
|
Comprehensive income
|
|
|
100,391
|
|
|
|
219,625
|
|
|
|
72,579
|
|
Comprehensive loss (income) attributable to non-controlling
interest
|
|
|
422
|
|
|
|
(1,410
|
)
|
|
|
(313
|
)
|
Comprehensive income attributable to MICROS Systems, Inc.
|
|
$
|
100,813
|
|
|
$
|
218,215
|
|
|
$
|
72,266
|
|
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 Company’s 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 and hotel chains), table service restaurants, quick service restaurants, entertainment venues
such as stadiums and arenas, business food service operations, casinos, transportation food service, 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,
unless the context indicates otherwise.)
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 activities that management anticipates 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 the U.S. dollar 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 within 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 proprietary hardware devices, such as cash drawers, handheld order entry
terminals and pole displays and also resells various nonproprietary hardware products, including personal computers, servers,
printers, credit card processing 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 reasonably assured.
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 embedded system software 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.
Generally, when the Company is primarily
obligated in a transaction, is subject to inventory risk, has latitude in establishing prices and selecting suppliers, or has some
but not all of these indicators, revenue is recorded at the gross sales price.
Service
The Company also provides maintenance
support and professional services, such as installation, customer specific development, software hosting and e-commerce design
and development. Revenue from maintenance support and software-hosting services contracts is initially recorded as deferred revenue
and is recognized ratably over the contract term. Customer setup fees in hosting arrangements are recognized over the estimated
customer relationship period. 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 software 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. The Company defers the recognition of all revenue
if the Company’s ability to estimate its progress is not reasonably dependable.
Multiple Element Arrangements
The
Company accounts for multiple element arrangements that consist of software and software-related services, collectively referred
to as “software elements”, in accordance with industry specific accounting guidance for software and software-related
transactions. For such transactions,
the fee is allocated to the
various elements based on vendor-specific objective evidence of fair value, which is either the price charged when the same element
is sold separately or, if the element is not sold separately, the price established by management having the relevant authority,
if it is probable that the price, once established, will not change before the separate introduction of the element into the marketplace.
Except as set forth in the following sentence, if sufficient vendor-specific objective evidence does not exist, all revenue from
the arrangement is deferred until all elements of the arrangement have been delivered or, if earlier, such sufficient vendor-specific
objective evidence does exist. However, when the fair value of a delivered element has not been established, but fair value exists
for the undelivered elements, the Company uses the residual method to recognize revenue. Under the residual method, the fair value
of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered elements
and is recognized as revenue upon delivery, provided the other revenue recognition criteria are met.
For multiple element arrangements that
include tangible products with incidental embedded software and other related services, collectively referred to as “non-software
elements”, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances,
the Company uses the following hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i)
vendor-specific objective evidence of fair value, (ii) third-party evidence of selling price, and (iii) best estimate of the selling
price. Best estimate of selling price reflects the Company’s estimates of what the selling prices of elements would be if
they were sold regularly on a stand-alone basis. Factors considered by the Company in developing relative selling prices for products
and services include the customers' geographical region, customer concentrations, the use of typical discounts from list prices,
prices charged by the Company for similar offerings and the Company’s historical pricing practices.
For multiple element arrangements that
include a combination of software elements and non software elements, the Company first allocates the arrangement revenue to the
software elements as a group and the non software elements as a group based on each group’s relative selling prices. In
such circumstances, the Company uses the hierarchy described above to determine the relative selling price to be used to allocating
revenue to each the group. After this initial allocation has occurred, the Company allocates revenue to any separate deliverables
within each group using the methodology described above.
The Company resells software and peripheral
hardware products obtained from other companies.
Other
Costs related to shipping and handling
and billable travel expenses are included in cost of sales.
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, 2012 and 2011 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 are designed periodically to 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 losses 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. The
Company’s methodology for determining this allowance requires estimates and is based on the age of the receivable, actual
collection experience, the customer’s payment practices and history, inquiries, credit reports from third parties and other
financial information.
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
provided to the Company’s suppliers and the estimated utility of the Company’s inventory is reviewed regularly. If
the review indicates a reduction in utility of inventory below carrying value, the inventory is adjusted and a charge to cost
of sales is recorded in an amount equal to the adjustment.
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. Internally used computer software is amortized
on a straight-line basis over the estimated life of the software ranging up to seven years.
Purchased
and internally developed software 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 fair values of software purchased with acquisitions are also included here.
Annual amortization of purchased and internally
developed software costs is either included in software cost of sales or services 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 2012, 2011 and 2010 were approximately $7.1 million, $7.5 million and $9.7 million, respectively.
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 the fiscal years ended June 30,
2012, 2011 and 2010, the Company recorded approximately $1.3 million, $1.5 million and $1.5 million, respectively, in accelerated
amortization expenses related to finite-lived customer relationship intangible assets due to increased attrition of customer relationships.
During the fiscal year 2011, the Company wrote off approximately $0.5 million in finite-lived purchased intangible assets. During
the fiscal years 2012 and 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 the 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 its
reporting units (U.S./Canada, Europe, the Pacific Rim and Latin America) to their respective book value. The Company first determines,
based on a qualitative assessment, whether it is more likely than not that the fair value of the reporting unit is less than its
carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than
its carrying value, then the Company determines the fair value of the reporting unit 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, 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 were being
determined initially.
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.
During the fiscal year 2012, the Company
wrote off approximately $0.1 million in indefinite-lived trademark. There were no other impairment charges recorded for fiscal
years 2012, 2011 and 2010.
Advertising
costs
Advertising
costs are charged to expense as incurred. Advertising expenses for the fiscal years 2012, 2011 and 2010
were approximately
$5.0 million, $4.6 million and $4.2 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 its 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 three to 48 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 of the change. 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.
The Company reviews
its uncertain income tax positions and applies a “more likely than not” threshold to the recognition and derecognition
of tax positions in the financial statements.
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 additional
dilution from potential common stock issuable upon the exercise of outstanding stock options.
The following table provides a reconciliation
of the net income attributable to MICROS Systems, Inc. to basic and diluted net income per share:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Net income attributable to MICROS Systems, Inc.
|
|
$
|
166,983
|
|
|
$
|
144,059
|
|
|
$
|
114,353
|
|
Effect of non-controlling interest put arrangement
|
|
|
0
|
|
|
|
30
|
|
|
|
302
|
|
Net income available to MICROS Systems, Inc. common shareholders
|
|
$
|
166,983
|
|
|
$
|
144,089
|
|
|
$
|
114,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
80,300
|
|
|
|
80,726
|
|
|
|
79,856
|
|
Dilutive effect of outstanding stock options
|
|
|
1,938
|
|
|
|
1,946
|
|
|
|
1,592
|
|
Average common shares outstanding assuming dilution
|
|
|
82,238
|
|
|
|
82,672
|
|
|
|
81,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share attributable
to MICROS Systems, Inc. common shareholders
|
|
$
|
2.08
|
|
|
$
|
1.78
|
|
|
$
|
1.44
|
|
Diluted net income per share
attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
2.03
|
|
|
$
|
1.74
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive weighted shares excluded from reconciliation
|
|
|
1,702
|
|
|
|
701
|
|
|
|
1,882
|
|
Fiscal years 2012, 2011 and 2010 include
approximately $16.5 million ($11.3 million, net of tax), $12.4 million ($8.0 million, net of tax) and $12.4 million ($8.1 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 $0.14, $0.10 and $0.10 for fiscal years
2012, 2011 and 2010, respectively. See Note 3 “Share-based Compensation” for further detail.
RECENT
ACCOUNTING STANDARDS
Recently Adopted Accounting Pronouncements
On January 1, 2012, the Company adopted
authoritative guidance to amend the accounting and disclosure requirements on fair value measurements to clarify that the use
of the highest-and-best-use concept in a fair value measurement is relevant only when measuring non-financial assets. The new
guidance also permits certain financial assets and liabilities with offsetting positions in market risks or counterparty credit
risks to be measured on a net basis, and provides guidance on the applicability of premiums and discounts in a fair value measurement.
Additionally, the new guidance clarifies that a reporting entity should disclose quantitative information about unobservable inputs
used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy, and describe the valuation processes
and the sensitivity of the fair value measurement to changes in unobservable inputs, as well as the interrelationships between
those fair value measurements, if any. The adoption of this new guidance did not have a material impact on the Company’s
consolidated financial statements and is included in Note 2, “Financial Instruments and Fair Value Measurements.”
On July 1, 2011, the date as of which
the Company conducts its annual impairment analysis, the Company adopted, in advance of the required adoption date, revised authoritative
guidance on how an entity tests goodwill for impairment. The new guidance allows an entity to first assess qualitative factors
to determine whether it is necessary to perform the two-step quantitative goodwill impairment test required under previous guidance.
Under the new guidance, an entity is no longer required to calculate the fair value of a reporting unit unless the entity determines,
based on a qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. Based on its qualitative analysis as of July 1, 2011, the Company determined that none of its reporting units met the
“more likely than not” threshold requiring that the Company perform the first step of the two-step goodwill impairment
test. Accordingly, the Company did not perform any further analysis.
On July 1, 2011, the Company adopted authoritative
guidance to amend the disclosure requirements related to fair value measurements. The guidance requires disclosure of changes
during a reporting period attributable to purchases, sales, issuance, and settlements of the assets and liabilities measured using
significant unobservable inputs (Level 3 fair value measurements). The adoption of this new guidance did not have a material impact
on the Company’s condensed consolidated financial statements.
Recent Accounting Guidance Not Yet
Adopted
In June 2011, the Financial Accounting
Standards Board (“FASB”) issued accounting guidance on presentation of comprehensive income. The new guidance
eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders’
equity. The new guidance requires the changes in other comprehensive income be presented either in a single continuous statement
of net income and other comprehensive income or in two separate but consecutive statements. This portion of the guidance
will be effective for the Company beginning in its fiscal year 2013 and will result only in presentation changes in the consolidated
financial statements. The new guidance also required entities to present reclassification adjustments out of accumulated other
comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive
income is presented. However, in December 2011, the FASB issued guidance that indefinitely defers this portion of the guidance.
|
2.
|
FINANCIAL
INSTRUMENTS AND FAIR VALUE MEASUREMENTS
|
Short-term and long-term
investments consist of the following:
|
|
As of June 30, 2012
|
|
|
As of June 30, 2011
|
|
(in thousands)
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
Time deposit – international
|
|
$
|
19,419
|
|
|
$
|
19,419
|
|
|
$
|
74,745
|
|
|
$
|
74,745
|
|
Auction rate securities
|
|
|
52,625
|
|
|
|
34,289
|
|
|
|
57,625
|
|
|
|
41,345
|
|
U.S. government debt securities
|
|
|
0
|
|
|
|
0
|
|
|
|
30,222
|
|
|
|
30,222
|
|
Foreign corporate debt securities
|
|
|
0
|
|
|
|
0
|
|
|
|
18,920
|
|
|
|
18,920
|
|
Total investments
|
|
$
|
72,044
|
|
|
$
|
53,708
|
|
|
$
|
181,512
|
|
|
$
|
165,232
|
|
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 on a recurring basis and the type of inputs used to value the assets:
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Balance, June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term and long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposit – international
|
|
$
|
0
|
|
|
$
|
19,419
|
|
|
$
|
0
|
|
|
$
|
19,419
|
|
Auction rate securities
|
|
|
0
|
|
|
|
0
|
|
|
|
34,289
|
|
|
|
34,289
|
|
Total short-term and long-term investments
|
|
$
|
0
|
|
|
$
|
19,419
|
|
|
$
|
34,289
|
|
|
$
|
53,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term and long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposit – international
|
|
$
|
0
|
|
|
$
|
74,745
|
|
|
$
|
0
|
|
|
$
|
74,745
|
|
Auction rate securities
|
|
|
0
|
|
|
|
0
|
|
|
|
41,345
|
|
|
|
41,345
|
|
U.S. government debt securities
|
|
|
30,222
|
|
|
|
0
|
|
|
|
0
|
|
|
|
30,222
|
|
Foreign corporate debt securities
|
|
|
18,920
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18,920
|
|
Total short-term and long-term investments
|
|
$
|
49,142
|
|
|
$
|
74,745
|
|
|
$
|
41,345
|
|
|
$
|
165,232
|
|
At June 30, 2012
and 2011, the Company’s investments, other than the Company’s investments in auction rate securities, 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 fiscal years 2012, 2011 and 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, 2012 are as follows:
(in thousands)
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
Due within one year
|
|
$
|
19,252
|
|
|
$
|
19,252
|
|
Due between 1 – 2 years
|
|
|
167
|
|
|
|
167
|
|
Due after 10 years – auction rate securities
|
|
|
52,625
|
|
|
|
34,289
|
|
Total short-term and long-term investments
|
|
$
|
72,044
|
|
|
$
|
53,708
|
|
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 (“FFELP”) or insured by AMBAC Financial
Group (“AMBAC”). AMBAC commenced a voluntary case under Chapter 11 of the US Bankruptcy Code in November 2010, which
may limit it or enable it to avoid its obligations to provide insurance for repayment of the relevant securities. Before February
2008, due to the liquidity previously provided by the interest rate reset mechanism and the anticipated short-term nature of the
Company’s investment, the auction rate securities 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, 2012 and 2011 instead
of being classified as short-term investments, as was the case prior to February 2008.
As of June 30, 2012, 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 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) 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 as to whether any impairment
was 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.
At June 30, 2012 approximately $29.8 million
of the fair value of auction rate securities are supported by student loans guaranteed by FFELP and carry aggregate discount from
cost of 9%. The remaining approximately $4.5 million of the fair value of auction rate securities, carried at 55% discount from
cost, are supported by student loan guaranteed by AMBAC and are therefore more sensitive to changes in significant observable
inputs described below. However, due to the nature of the guarantees noted, combined with the relative amounts invested, the sensitivity
of the fair value measures to change in significant unobservable inputs is not considered material.
The significant assumptions used in the
valuation of the Company’s investments in auction rate securities are as follows:
Fair value at June 30, 2012 (in thousands)
|
|
|
$ 34,289
|
|
Valuation technique
|
|
|
Probability Weighted Discounted cash flow
|
|
Unobservable input:
|
|
Range (weighted average)
|
|
Cumulative probability of default
|
|
|
40.5
|
%
|
Cumulative probability of principal returned prior to maturity
|
|
|
59.4
|
%
|
Cumulative probability of earning maximum rate until maturity
|
|
|
0.1
|
%
|
Liquidity risk premium
|
|
|
4.3
|
%
|
Recovery rate in default
|
|
|
32.4
|
%
|
Maximum coupon rate
|
|
|
1.9
|
%
|
The most significant unobservable inputs
used in the fair value measurement of the Company’s investments in auction rate securities relate to the Company’s
assessment of the maximum rate, the cumulative probability of earning the maximum rate until maturity, the cumulative probability
of principal return prior to maturity, the cumulative probability of default, the liquidity risk premium and the recovery rate
in case of default related to each instrument. A small change in any of these assumptions could significantly increase or decrease
the valuation conclusion for some of the auction rate securities, the cumulative probability of default could especially impact
the ones with credit based other-than-temporary-impairment losses.
Based on its fair value assessments, the
Company determined that its investments in auction rate securities as of June 30, 2012 were impaired by approximately $18.3 million
as compared to an impairment of approximately $16.3 million as of June 30, 2011. Approximately $14.0 million and $10.0 million
of this impairment at June 30, 2012 and 2011, respectively, was 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 recorded other-than-temporary impairment losses as of approximately $4.0 million,
$4.3 million and $4.8 million, respectively, in its fiscal years 2012, 2011 and 2010 consolidated statements of operations. The
credit based other-than-temporary impairment losses for the three years ended June 30, 2012 are primarily due to continued declines
in the credit ratings of the underlying issuers and the worsening performance of the underlying student loan collateral.
The remaining cumulative impairment losses
of approximately $4.3 million (approximately $2.7 million, net of tax) and approximately $6.3 million (approximately $3.9 million,
net of tax) were recorded in accumulated other comprehensive income, net of tax, as of June 30, 2012 and 2011, respectively.
A reconciliation of changes in the fair
value of auction rate securities were as follows:
(in thousands)
|
|
Cost
|
|
|
Temporary
Impairment
Loss (1)
|
|
|
OTTI –
Non-Credit
Loss (1)
|
|
|
OTTI –
Credit
Loss (2)
|
|
|
Fair Value
|
|
Balance, June 30, 2010
|
|
$
|
64,275
|
|
|
$
|
(4,936
|
)
|
|
$
|
(32
|
)
|
|
$
|
(6,049
|
)
|
|
$
|
53,258
|
|
Changes in losses related to investments
|
|
|
0
|
|
|
|
(1,593
|
)
|
|
|
0
|
|
|
|
(4,293
|
)
|
|
|
(5,886
|
)
|
Changes in losses related to redemption/sale
|
|
|
(6,650
|
)
|
|
|
249
|
|
|
|
32
|
|
|
|
342
|
|
|
|
(6,027
|
)
|
Balance, June 30, 2011
|
|
|
57,625
|
|
|
|
(6,280
|
)
|
|
|
0
|
|
|
|
(10,000
|
)
|
|
|
41,345
|
|
Changes in losses related to investments
|
|
|
0
|
|
|
|
1,404
|
|
|
|
0
|
|
|
|
(4,000
|
)
|
|
|
(2,596
|
)
|
Changes in losses related to redemption/sale
|
|
|
(5,000
|
)
|
|
|
540
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(4,460
|
)
|
Balance, June 30, 2012
|
|
$
|
52,625
|
|
|
$
|
(4,336
|
)
|
|
$
|
0
|
|
|
$
|
(14,000
|
)
|
|
$
|
34,289
|
|
|
(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.
|
Sales of auction rate securities during fiscal
2012, 2011, and 2010 were as follows:
|
|
Fiscal Year Ended June
30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Original cost, par value
|
|
$
|
5,000
|
|
|
$
|
6,650
|
|
|
$
|
0
|
|
Impairment losses previously recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
(540
|
)
|
|
|
(281
|
)
|
|
|
0
|
|
Consolidated statement of operations
|
|
|
0
|
|
|
|
(342
|
)
|
|
|
0
|
|
Carrying value
|
|
|
4,460
|
|
|
|
6,027
|
|
|
|
0
|
|
Proceeds from redemption/sale
|
|
|
5,000
|
|
|
|
6,384
|
|
|
|
0
|
|
Gain from redemption/sale
|
|
$
|
540
|
|
|
$
|
357
|
|
|
$
|
0
|
|
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. 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 38.8 million shares for issuance upon exercise of options. At June 30, 2012, approximately 10.2 million
shares were available for issuance, of which approximately 6.8 million shares have been granted and remain outstanding and approximately
3.4 million shares remain available for grant.
The non-cash share-based
compensation expenses included in the consolidated statements of operations are as follows:
|
|
Fiscal Year Ended June
30,
|
|
(in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Selling, general and administrative
|
|
$
|
15,067
|
|
|
$
|
11,747
|
|
|
$
|
11,717
|
|
Research and development
|
|
|
1,239
|
|
|
|
596
|
|
|
|
511
|
|
Cost of sales
|
|
|
195
|
|
|
|
105
|
|
|
|
137
|
|
Total non-cash share-based compensation expense
|
|
|
16,501
|
|
|
|
12,448
|
|
|
|
12,365
|
|
Income tax benefit
|
|
|
(5,163
|
)
|
|
|
(4,426
|
)
|
|
|
(4,283
|
)
|
Total non-cash share-based compensation expense, net of tax benefit
|
|
$
|
11,338
|
|
|
$
|
8,022
|
|
|
$
|
8,082
|
|
Impact on diluted net income
per share attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
0.14
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
No non-cash share-based compensation expense
has been capitalized for fiscal years 2012, 2011 and 2010.
Estimates of fair values of options granted
were made on the date of grant using the following assumptions:
|
|
Fiscal Year Ended June
30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Weighted-average expected volatility
|
|
|
40
|
%
|
|
|
41
|
%
|
|
|
42
|
%
|
Expected volatility
|
|
|
39% - 41
|
%
|
|
|
39% - 41
|
%
|
|
|
41% - 42
|
%
|
Expected term
|
|
|
4.8 – 5.7
years
|
|
|
|
4.9 – 5.5 years
|
|
|
|
5.0 – 5.2 years
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
0.9% - 1.1
|
%
|
|
|
1.4% - 1.9
|
%
|
|
|
1.7% - 2.0
|
%
|
The following is a summary of option activity
during fiscal year 2012:
(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, 2011
|
|
|
6,278
|
|
|
$
|
29.40
|
|
|
|
6.9
|
|
|
$
|
127,482
|
|
Granted
|
|
|
1,330
|
|
|
$
|
47.87
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(792
|
)
|
|
$
|
18.85
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(46
|
)
|
|
$
|
36.07
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2012
|
|
|
6,770
|
|
|
$
|
34.22
|
|
|
|
6.7
|
|
|
$
|
114,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2012
|
|
|
4,574
|
|
|
$
|
29.18
|
|
|
|
5.7
|
|
|
$
|
100,729
|
|
The weighted-average grant-date estimated
fair value per share of options granted during the fiscal years 2012, 2011 and 2010 was $17.67, $17.19 and $11.70, 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 2012, 2011 and 2010 was approximately $24.3 million, $34.9 million and $18.1 million,
respectively.
As of June 30, 2012, there was approximately
$26.8 million (net of estimated forfeitures) in non-cash share-based compensation costs related to non-vested options that are
expected to be recognized in the Company’s consolidated statements of operations over a weighted-average period of 1.88
years.
Cash received from options exercised during
the fiscal years 2012, 2011 and 2010 was approximately $14.9 million, $28.1 million and $23.3 million, respectively.
FY 2012:
On May 31, 2012, the Company acquired
all of the outstanding shares of capital stock of Torex Retail Holdings Limited (“Torex”) for a purchase price of
approximately £119.9 million (approximately $184.7 million at the May 31, 2012 exchange rate). Headquartered in Dunstable,
England, Torex is a provider of point-of-sale systems and back office products for retailers, gas stations, convenience stores
and pubs and restaurants in the United Kingdom and Europe. The Company, through one of its subsidiaries, also purchased certain
assets of Torex located in the U.S. for a purchase price of £2.5 million (approximately $3.9 million). These amounts exclude
cash acquired of approximately £5.8 million (approximately $8.9 million). The Company also assumed third party debt valued
at £45.2 million (approximately $69.6 million), which was immediately repaid as part of the acquisition. Of the purchase
price, £19.4 million (approximately $29.9 million) was paid into escrow upon closing to provide for payment of post-closing
indemnification obligations of the Torex selling stockholders, if any. The majority of amounts held in escrow will be released
over the next two years, subject to indemnification claims, if any. Given the proximity of the acquisition to June 30, 2012, the
purchase price allocation is not finalized, however the Company does not expect future adjustments to be material. The Company
entered into this transaction to increase its presence in the Europe retail market and to reduce costs through economies of scale
and synergies.
The following table summarizes the consideration
paid for Torex, the recognized amounts of the assets acquired and liabilities assumed, and the useful lives of identifiable intangible
assets as of the date of the Torex acquisition (in thousands):
Consideration:
|
|
|
|
|
Cash (net of cash acquired)
|
|
$
|
188,579
|
|
Debt assumed
|
|
|
69,613
|
|
Fair value of total cash consideration transferred
|
|
$
|
258,192
|
|
|
|
|
|
|
Acquisition-related costs
|
|
$
|
1,580
|
|
|
|
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed
:
|
|
|
|
|
Current assets
|
|
$
|
48,658
|
|
Property, plant and equipment
|
|
|
3,654
|
|
Net deferred income taxes - noncurrent
|
|
|
31,899
|
|
Intangible assets
|
|
|
30,735
|
|
Purchased software technology
|
|
|
15,899
|
|
Other assets
|
|
|
183
|
|
Current liabilities
|
|
|
(72,984
|
)
|
Net deferred income tax liabilities - noncurrent
|
|
|
(1,402
|
)
|
Other noncurrent liabilities
|
|
|
(1,620
|
)
|
Total identifiable net assets
|
|
|
55,022
|
|
Goodwill
|
|
|
203,170
|
|
Fair value of total consideration transferred
|
|
$
|
258,192
|
|
Fair value of intangible assets subject to amortization
|
|
|
|
|
|
Useful Life
(in years)
|
|
Customer lists
|
|
$
|
28,223
|
|
|
|
10
|
|
Software license technology (recorded as purchased software costs)
|
|
|
15,899
|
|
|
|
1 – 7
|
|
Service revenue backlog
|
|
|
2,326
|
|
|
|
1
|
|
Other technology
|
|
|
602
|
|
|
|
3
|
|
Fair value of intangible assets subject to amortization
|
|
$
|
47,050
|
|
|
|
|
|
Substantially all of the goodwill of approximately
$203.2 million recorded in connection with the acquisition was included in the International segment and primarily reflects the
anticipated synergies and economies of scale arising from the combination of the Company and Torex operations. None of the goodwill
recognized is expected to be deductible for income tax purposes.
The pro forma consolidated revenue including
the acquisition of Torex for the fiscal years ended June 30, 2012 and 2011 had the acquisition date been July 1, 2010, are approximately
as follows:
(in thousands)
|
|
Revenue
(unaudited)
|
|
Fiscal year 2012 supplemental pro forma from 7/1/2011 – 6/30/2012
|
|
$
|
1,291,343
|
|
Fiscal year 2011 supplemental pro forma from 7/1/2010 – 6/30/2011
|
|
|
1,214,008
|
|
For fiscal years 2012 and 2011, the pro
forma net income including the effect of Torex is immaterial to the Company’s consolidated net income. The above unaudited
pro forma results presented do not necessarily reflect the results of operations that would have resulted had the acquisition
been completed at the beginning of the applicable periods presented, nor do they indicate the results of operations in the future
periods. Additionally, the unaudited pro forma results do not include the impact of possible business model changes, potential
cost savings from synergies nor does it consider any potential impacts of current market conditions on revenues or other factors.
FY 2011:
During the fiscal year ended June 30, 2011,
the Company acquired stock in three companies for an aggregate total cash purchase price of approximately $19.9 million, net of
cash acquired. In addition, the sellers of two of the companies may receive up to an aggregate additional $2.1 million contingent
upon achievement of certain specified financial targets during designated time periods. Approximately $1.5 million of the $2.1
million contingent payments has been included in the purchase price allocations based on fair value of these contingent obligations.
As of June 30, 2012, approximately $1.9 million of the aggregate total purchase price was retained by the Company or held in escrow,
to be used to satisfy specified claims made by the Company against the sellers. In connection with the acquisitions described above,
the Company recorded aggregate goodwill of approximately $19.0 million and other intangible assets of approximately $4.8 million,
principally comprised of customer relationships and developed technology which will be amortized over 2 to 10 years.
FY 2010:
On December 31, 2009, the Company acquired
TIG Global LLC (now named MICROS E-Commerce, LLC) (“Micros E-Commerce”), 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 was held in escrow,
to be used to satisfy specified claims made by the Company against the sellers, and was released to the sellers at two intervals
during the following 18 months. In connection with the acquisition, the Company recorded goodwill of approximately $24.8 million
and other intangible assets of approximately $6.8 million, principally comprised of customer relationships, which is being amortized
over 10 years.
The goodwill recorded in connection with
the fiscal years 2011 and 2010 acquisitions described above reflect the anticipated synergies arising from the combination of
the Company’s and the acquired companies’ products and operations. The results of operations of the acquired entities
have been included in the Company’s results of operations commencing beginning on the respective acquisition dates. The
proforma impacts of the acquisitions in fiscal years 2011 and 2010 were not material.
5. Inventory:
The following table provides information
on the components of
inventory:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Raw materials
|
|
$
|
1,427
|
|
|
$
|
1,604
|
|
Finished goods
|
|
|
42,851
|
|
|
|
36,515
|
|
Total inventory
|
|
$
|
44,278
|
|
|
$
|
38,119
|
|
|
6.
|
Property,
plant and equipment:
|
The following table provides information
on the components of property, plant and equipment:
|
|
As of June 30,
|
|
|
|
(in thousands, except for number of years)
|
|
2012
|
|
|
2011
|
|
|
Useful Life
(in years)
|
Leasehold improvements
|
|
$
|
14,199
|
|
|
$
|
12,896
|
|
|
Shorter of useful life or lease term
|
Machinery and equipment
|
|
|
13,820
|
|
|
|
14,282
|
|
|
3-10
|
Furniture and fixtures
|
|
|
20,980
|
|
|
|
21,254
|
|
|
7-10
|
Computer hardware and software
|
|
|
90,163
|
|
|
|
85,053
|
|
|
3-7
|
Total property, plant and equipment
|
|
|
139,162
|
|
|
|
133,485
|
|
|
|
Accumulated depreciation and amortization
|
|
|
(103,727
|
)
|
|
|
(105,340
|
)
|
|
|
Net property, plant and equipment
|
|
$
|
35,435
|
|
|
$
|
28,145
|
|
|
|
Depreciation
expense for the fiscal years 2012, 2011 and 2010
was approximately $11.0 million, $11.5 million and $12.7 million
,
respectively.
The Company has two credit agreements (the
“Credit Agreements”) that, through July 31, 2013, provide an aggregate $50.0 million multi-currency committed line
of credit. The lenders under the Credit Agreements are Bank of America, N.A., Wells Fargo N.A. and US Bank N.A. (“Lenders”).
The international facility is 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 is 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 is 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 is 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 is required to pay to the Lenders
insignificant commitment fees on the unused portion of the line of credit. The Credit Agreements also contain 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 any applicable
cure period, the Lenders’ remedies include 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, 2012, the Company had no
balances outstanding under the Credit Agreements and had applied approximately $0.5 million to guarantees. A total of approximately
$49.5 million was available for future borrowings as of June 30, 2012.
The Company also has a credit relationship
with a European bank in the amount of EUR 1.0 million (approximately $1.3 million at the June 30, 2012 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, 2012, there
were no balances outstanding on this credit facility, but approximately EUR 0.4 million (approximately $0.5 million at the June
30, 2012 exchange rate) of the credit facility has been used for guarantees.
As of June 30, 2012, the Company had approximately
$50.2 million borrowing capacity available under all of the credit facilities described above.
|
8.
|
Accrued expenses and other current liabilities:
|
The components of accrued expenses and
other current liabilities are as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Compensation, benefits and related taxes
|
|
$
|
84,497
|
|
|
$
|
68,175
|
|
Deposits received from customers
|
|
|
25,616
|
|
|
|
28,604
|
|
Professional services
|
|
|
21,405
|
|
|
|
16,224
|
|
VAT and sales taxes
|
|
|
17,210
|
|
|
|
15,040
|
|
Product related
|
|
|
6,447
|
|
|
|
6,073
|
|
Acquisition holdbacks
|
|
|
1,193
|
|
|
|
2,534
|
|
Customer related
|
|
|
2,555
|
|
|
|
1,829
|
|
Deferred income taxes - current
|
|
|
2,244
|
|
|
|
1,817
|
|
Property related
|
|
|
3,792
|
|
|
|
858
|
|
Insurance
|
|
|
1,027
|
|
|
|
1,136
|
|
Other
|
|
|
8,228
|
|
|
|
6,611
|
|
Total accrued expenses and other current liabilities
|
|
$
|
174,214
|
|
|
$
|
148,901
|
|
Goodwill allocated to the Company’s
reportable segments and changes in the carrying amount of goodwill are as follows:
(in thousands)
|
|
US/Canada
|
|
|
International
|
|
|
Total
|
|
Balance, June 30, 2010
|
|
$
|
162,614
|
|
|
$
|
51,211
|
|
|
$
|
213,825
|
|
Goodwill adjustments for prior years’ acquisitions
|
|
|
(50
|
)
|
|
|
8
|
|
|
|
(42
|
)
|
Goodwill on acquisitions
|
|
|
0
|
|
|
|
19,543
|
|
|
|
19,543
|
|
Foreign currency translation
|
|
|
156
|
|
|
|
8,837
|
|
|
|
8,993
|
|
Balance, June 30, 2011
|
|
|
162,720
|
|
|
|
79,599
|
|
|
|
242,319
|
|
Goodwill adjustments for prior years’ acquisitions
|
|
|
(75
|
)
|
|
|
74
|
|
|
|
(1
|
)
|
Goodwill on acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Torex
|
|
|
3,434
|
|
|
|
199,736
|
|
|
|
203,170
|
|
Others
|
|
|
1,051
|
|
|
|
0
|
|
|
|
1,051
|
|
Foreign currency translation
|
|
|
174
|
|
|
|
(2,596
|
)
|
|
|
(2,422
|
)
|
Balance, June 30, 2012
|
|
$
|
167,304
|
|
|
$
|
276,813
|
|
|
$
|
444,117
|
|
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 2012, 2011 and 2010.
Subsequent to the annual impairment analysis date of July 1, 2011, there have been no events
or circumstances that would have caused the Company to determine that it is more likely than not that the fair values of the Company’s
reporting units are less than their respective carrying values.
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:
(in thousands, except for number of years)
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
|
Useful
Life
(in years)
|
|
As of June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists
|
|
$
|
63,723
|
|
|
$
|
(23,055
|
)
|
|
$
|
40,668
|
|
|
2 – 10
|
|
Non-compete agreements
|
|
|
427
|
|
|
|
(390
|
)
|
|
|
37
|
|
|
2
|
|
Product lines
|
|
|
469
|
|
|
|
(286
|
)
|
|
|
183
|
|
|
3
|
|
Service revenue backlog
|
|
|
2,452
|
|
|
|
(163
|
)
|
|
|
2,289
|
|
|
2 – 5
|
|
Trademarks
|
|
|
1,529
|
|
|
|
(384
|
)
|
|
|
1,145
|
|
|
10 – 25
|
|
Finite-lived purchased intangible assets
|
|
|
68,600
|
|
|
|
(24,278
|
)
|
|
|
44,322
|
|
|
|
|
|
Trademarks
|
|
|
702
|
|
|
|
0
|
|
|
|
702
|
|
|
|
|
|
Total intangible assets
|
|
$
|
69,302
|
|
|
$
|
(24,278
|
)
|
|
$
|
45,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists
|
|
$
|
35,938
|
|
|
$
|
(18,924
|
)
|
|
$
|
17,014
|
|
|
2 – 10
|
|
Non-compete agreement
|
|
|
445
|
|
|
|
(255
|
)
|
|
|
190
|
|
|
2
|
|
Product lines
|
|
|
281
|
|
|
|
(281
|
)
|
|
|
0
|
|
|
|
|
|
Service revenue backlogs
|
|
|
78
|
|
|
|
(47
|
)
|
|
|
31
|
|
|
5
|
|
Trademarks
|
|
|
1,771
|
|
|
|
(558
|
)
|
|
|
1,213
|
|
|
10 – 25
|
|
Finite-lived purchased intangible assets
|
|
|
38,513
|
|
|
|
(20,065
|
)
|
|
|
18,448
|
|
|
|
|
|
Trademarks
|
|
|
845
|
|
|
|
0
|
|
|
|
845
|
|
|
|
|
|
Total intangible assets
|
|
$
|
39,358
|
|
|
$
|
(20,065
|
)
|
|
$
|
19,293
|
|
|
|
|
|
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 $5.2 million, $5.3 million and $4.6 million in the fiscal years 2012, 2011 and 2010, respectively. During
each of the fiscal years 2012, 2011 and 2010, the Company recorded approximately $1.3 million, $1.5 million and $1.5 million, respectively,
in accelerated amortization expenses related to finite-lived customer related intangible assets due to increased attrition of customer
relationships.
Subsequent to the annual impairment analysis
date of July 1, 2011, there have been not been any events or circumstances that would have caused the Company to determine that
it is more likely than not that indefinite-lived trademarks have been impaired.
Estimated amortization expense in future
fiscal years ending June 30 is as follows (in thousands):
2013
|
|
$
|
8,241
|
|
2014
|
|
|
5,333
|
|
2015
|
|
|
5,248
|
|
2016
|
|
|
4,738
|
|
2017
|
|
|
4,219
|
|
Later years
|
|
|
16,543
|
|
Total
|
|
$
|
44,322
|
|
|
11.
|
Commitments and contingencies:
|
Leases
The Company and its subsidiaries lease
office space under operating leases expiring at various dates through fiscal year 2022 and lease equipment under both operating
and capital leases. Rent expense under the operating leases was as follows:
Fiscal Year Ended June 30,
(in thousands)
|
|
Rent
Expense
|
|
|
Sublease
Income
|
|
|
Net Rent
Expense
|
|
2012
|
|
$
|
30,990
|
|
|
$
|
(972
|
)
|
|
$
|
30,018
|
|
2011
|
|
$
|
30,039
|
|
|
$
|
(955
|
)
|
|
$
|
29,084
|
|
2010
|
|
$
|
29,338
|
|
|
$
|
(937
|
)
|
|
$
|
28,401
|
|
As of June 30, 2012, future minimum lease
payments for those leases having an initial or remaining non-cancelable lease term in excess of one year are as follows:
Fiscal Year Ended June 30,
(in thousands)
|
|
Operating
Leases
|
|
|
Less
Sublease
Rentals
|
|
|
Net
Operating
Leases
|
|
|
Capital
Leases
|
|
2013
|
|
$
|
34,578
|
|
|
$
|
(1,060
|
)
|
|
$
|
33,518
|
|
|
$
|
89
|
|
2014
|
|
|
26,949
|
|
|
|
(944
|
)
|
|
|
26,005
|
|
|
|
49
|
|
2015
|
|
|
19,942
|
|
|
|
(654
|
)
|
|
|
19,288
|
|
|
|
16
|
|
2016
|
|
|
11,068
|
|
|
|
0
|
|
|
|
11,068
|
|
|
|
0
|
|
2017
|
|
|
2,729
|
|
|
|
0
|
|
|
|
2,729
|
|
|
|
0
|
|
2018 and thereafter
|
|
|
2,030
|
|
|
|
0
|
|
|
|
2,030
|
|
|
|
0
|
|
|
|
$
|
97,296
|
|
|
$
|
(2,658
|
)
|
|
$
|
94,638
|
|
|
|
154
|
|
Less: current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
|
|
Long-term obligations under capital lease
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65
|
|
Legal proceedings
On May 22,
2008, a jury returned verdicts 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.
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. The plaintiffs claimed that, as a result, the Company was
liable for, among other things, breach of contract and tortious interference with existing and prospective contractual relationships.
The plaintiffs and the Company both appealed the verdicts on various grounds. On December 30, 2010, the Superior Court of Pennsylvania
issued an opinion reversing and remanding $4.5 million of the award and affirming the remaining $3.0 million of the award, at
which point the Company accrued a charge of $3.0 million in its selling, general and administrative expenses. The plaintiffs and
the Company both appealed the Superior Court decision on various grounds. On April 10, 2012, the Pennsylvania Supreme Court denied
all of the petitions for appeal. The matter was accordingly remanded to the trial court for further proceedings consistent with
the Superior Court decision. On June 7, 2012, the Company paid an aggregate of approximately $3.5 million to the two plaintiffs,
reflecting all amounts that were determined to be owed to the plaintiff in the Shenango case and all amounts that were no longer
in dispute to the plaintiff in the Roth case, including as to each payment (i) interest that accrued at the statutory rate of
6% per annum, and (ii) certain reductions and offsets that were approved by the Court of Common Pleas. The remaining amounts in
dispute in the Roth case are not material.
The Company is and has been involved in
legal proceedings arising in the normal course of business, and 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. However, litigation is subject to many uncertainties,
and the outcome of litigation is not predictable with assurance. An adverse outcome in current or future litigation could have
a material adverse effect on the Company’s business, financial conditions, results of operations, and liquidity.
12.
Shareholders’
equity:
In August 2010, the Company’s Board
of Directors authorized the purchase of up to 2 million shares of the Company’s common stock, to be purchased from time to
time over the ensuing three years depending on market conditions and other corporate considerations as determined by management.
As of June 30, 2012, approximately 1.6 million additional shares remain available for purchase under this authorization.
The following table summarizes the cumulative
number of shares purchased under the August 2010 and previous purchase authorizations. All of the purchased shares were retired
and reverted to the status of authorized but unissued shares:
(in thousands, except per share data)
|
|
Number of
Shares
|
|
|
Average
Purchase Price
per Share
|
|
|
Total Purchase
Value
|
|
Total shares purchased:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009
|
|
|
10,718
|
|
|
$
|
19.39
|
|
|
$
|
207,829
|
|
Fiscal year 2010
|
|
|
1,646
|
|
|
$
|
28.94
|
|
|
|
47,635
|
|
As of June 30, 2010
|
|
|
12,364
|
|
|
$
|
20.66
|
|
|
|
255,464
|
|
Fiscal year 2011
|
|
|
708
|
|
|
$
|
47.19
|
|
|
|
33,403
|
|
As of June 30, 2011
|
|
|
13,072
|
|
|
$
|
22.10
|
|
|
$
|
288,867
|
|
Fiscal year 2012
|
|
|
1,288
|
|
|
$
|
45.96
|
|
|
|
59,199
|
|
As of June 30, 2012
|
|
|
14,360
|
|
|
$
|
24.24
|
|
|
$
|
348,066
|
|
Income before taxes was taxed as indicated
in the following jurisdictions:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
U.S./Canada
|
|
$
|
124,860
|
|
|
$
|
118,599
|
|
|
$
|
82,626
|
|
International
|
|
|
112,331
|
|
|
|
91,013
|
|
|
|
85,499
|
|
Total income tax before taxes
|
|
$
|
237,191
|
|
|
$
|
209,612
|
|
|
$
|
168,125
|
|
The components of income tax expense were
as follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
46,991
|
|
|
$
|
45,319
|
|
|
$
|
32,498
|
|
State
|
|
|
4,153
|
|
|
|
6,099
|
|
|
|
4,554
|
|
Foreign
|
|
|
22,382
|
|
|
|
22,160
|
|
|
|
18,755
|
|
Total current income tax expense
|
|
|
73,526
|
|
|
|
73,578
|
|
|
|
55,807
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(2,650
|
)
|
|
|
(5,603
|
)
|
|
|
(1,311
|
)
|
State
|
|
|
(235
|
)
|
|
|
(492
|
)
|
|
|
(117
|
)
|
Foreign
|
|
|
(551
|
)
|
|
|
(2,484
|
)
|
|
|
(1,634
|
)
|
Total deferred income tax expense
|
|
|
(3,436
|
)
|
|
|
(8,579
|
)
|
|
|
(3,062
|
)
|
Total income tax expense
|
|
$
|
70,090
|
|
|
$
|
64,999
|
|
|
$
|
52,745
|
|
The total tax provision is different from
the amount that would have been recorded by applying the U.S. statutory federal income tax rate to income before taxes. The reconciliation
of these differences is as follows:
|
|
Fiscal Year Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal tax benefit
|
|
|
1.6
|
|
|
|
1.7
|
|
|
|
1.4
|
|
Effect of tax rates in foreign jurisdictions
|
|
|
(11.4
|
)
|
|
|
(11.0
|
)
|
|
|
(11.6
|
)
|
Share-based and other compensation
|
|
|
1.4
|
|
|
|
1.4
|
|
|
|
1.5
|
|
Non-deferred foreign income
|
|
|
0.3
|
|
|
|
0.4
|
|
|
|
0.3
|
|
Domestic manufacturing deduction
|
|
|
(1.0
|
)
|
|
|
(1.0
|
)
|
|
|
(0.7
|
)
|
Valuation allowances
|
|
|
0.3
|
|
|
|
1.5
|
|
|
|
2.0
|
|
Net uncertain tax positions
|
|
|
1.4
|
|
|
|
3.1
|
|
|
|
2.1
|
|
Foreign withholding taxes
|
|
|
0.8
|
|
|
|
0.7
|
|
|
|
1.0
|
|
Other differences
|
|
|
1.1
|
|
|
|
(0.8
|
)
|
|
|
0.4
|
|
Effective tax rate
|
|
|
29.5
|
%
|
|
|
31.0
|
%
|
|
|
31.4
|
%
|
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 $751 million,
$670 million and $554 million for fiscal years 2012, 2011 and 2010, respectively, relate primarily to ongoing operations in foreign
jurisdictions and are required to fund foreign operations, foreign acquisitions such as Torex, capital expenditures and expansion
requirements. It is not practicable to determine the unrecognized deferred income taxes on these foreign subsidiaries.
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 significant components of the Company’s deferred tax assets and liabilities were
as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
20,177
|
|
|
$
|
15,277
|
|
Net operating loss carryforwards
|
|
|
59,034
|
|
|
|
14,357
|
|
Accruals
|
|
|
13,207
|
|
|
|
11,732
|
|
Accounts receivable reserves
|
|
|
7,574
|
|
|
|
7,759
|
|
Other unrealized gains and losses
|
|
|
6,657
|
|
|
|
5,865
|
|
Intercompany profit eliminations
|
|
|
2,962
|
|
|
|
4,384
|
|
Deferred revenues and customer deposits
|
|
|
673
|
|
|
|
4,001
|
|
Inventory
|
|
|
3,113
|
|
|
|
3,147
|
|
Benefit related accruals
|
|
|
2,330
|
|
|
|
2,177
|
|
Other
|
|
|
755
|
|
|
|
128
|
|
Total deferred tax assets
|
|
|
116,482
|
|
|
|
68,827
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Intangible assets amortization
|
|
|
(26,724
|
)
|
|
|
(15,051
|
)
|
Capitalized software development costs
|
|
|
(2,748
|
)
|
|
|
(4,070
|
)
|
Depreciation
|
|
|
(831
|
)
|
|
|
(411
|
)
|
Total deferred tax liabilities
|
|
|
(30,303
|
)
|
|
|
(19,532
|
)
|
|
|
|
|
|
|
|
|
|
Valuation allowance:
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
|
(5,338
|
)
|
|
|
(3,810
|
)
|
Net operating losses
|
|
|
(15,619
|
)
|
|
|
(11,284
|
)
|
Other
|
|
|
(2,690
|
)
|
|
|
(2,406
|
)
|
Total valuation allowance
|
|
|
(23,647
|
)
|
|
|
(17,500
|
)
|
Net deferred tax assets
|
|
$
|
62,532
|
|
|
$
|
31,795
|
|
The tax effected net operating loss carryforwards
and related valuation allowance are as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Net operating loss carryforwards:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
3,958
|
|
|
$
|
3,204
|
|
International
|
|
|
55,076
|
|
|
|
11,153
|
|
Total net operating loss carryforwards
|
|
|
59,034
|
|
|
|
14,357
|
|
Net operating loss carryforward valuation allowance:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
|
(939
|
)
|
|
|
(131
|
)
|
International
|
|
|
(14,680
|
)
|
|
|
(11,153
|
)
|
Total net operating loss carryforward valuation allowance
|
|
|
(15,619
|
)
|
|
|
(11,284
|
)
|
Net operating loss carryforwards, net of valuation allowance
|
|
$
|
43,415
|
|
|
$
|
3,073
|
|
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, 2012 and 2011
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 as of June 30, 2012 expire as follows:
|
|
Expires in Fiscal Year Ending June 30,
|
|
(in thousands)
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
No
Expiration
|
|
|
Total
|
|
U.S./Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,958
|
|
|
$
|
0
|
|
|
$
|
3,958
|
|
Valuation allowances
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(939
|
)
|
|
|
(939
|
)
|
Total U.S.
|
|
|
0
|
|
|
|
0
|
|
|
|
3,958
|
|
|
|
(939
|
)
|
|
|
3,019
|
|
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
0
|
|
|
|
0
|
|
|
|
9,811
|
|
|
|
45,265
|
|
|
|
55,076
|
|
Valuation allowances
|
|
|
0
|
|
|
|
0
|
|
|
|
(8,380
|
)
|
|
|
(6,300
|
)
|
|
|
(14,680
|
)
|
Total international
|
|
|
0
|
|
|
|
0
|
|
|
|
1,431
|
|
|
|
38,965
|
|
|
|
40,396
|
|
Net operating loss carryforwards,
net of valuation allowances
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,389
|
|
|
$
|
38,026
|
|
|
$
|
43,415
|
|
In the ordinary course of the Company’s
business, transactions occur for which the ultimate tax outcome may be uncertain. Under applicable accounting guidance, the Company
is unable to recognize the effects of a tax position in its financial statements unless the position satisfies a minimum recognition
threshold mandated by the guidance. The Company’s net unrecognized income tax benefits were approximately $34.7 million and
$31.4 million, including interest and penalties of approximately $3.2 million and $2.8 million, at June 30, 2012 and 2011, respectively.
The Company has recognized approximately $0.6 million and $0.8 million of interest expense for the fiscal years ending June 30,
2012 and 2011, respectively. The interest and penalties related to unrecognized income tax benefits are classified as a component
of income tax expense. Components of the previously 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. To the extent ultimately recognized,
the previously 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 net increase of income tax expenses with respect to previously unrecognized tax benefits,
including interest and penalties for the fiscal year ended June 30, 2012, which includes a reduction in the effective tax rate
of 2.1% and income tax expense by approximately $5.0 million, primarily due to the expiration of statutes of limitations.
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, Germany 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 2009, by the U.K. tax authorities
for tax years ending before June 2009, the German tax authorities for tax years ending before June 2007 and the Irish tax authorities
for tax years ending before June 2008.
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 $9.5 million to
$11.5 million due to the expiration of statutes of limitations and settlement of issues with tax authorities, which 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 discrete 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 are as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Balance, beginning of year
|
|
$
|
30,013
|
|
|
$
|
20,644
|
|
Current year uncertain tax positions:
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
8,183
|
|
|
|
7,925
|
|
Prior year uncertain tax positions:
|
|
|
|
|
|
|
|
|
Gross increases
|
|
|
229
|
|
|
|
1,857
|
|
Gross decreases
|
|
|
(1,337
|
)
|
|
|
0
|
|
Gross increases - acquisitions
|
|
|
0
|
|
|
|
2,825
|
|
Expiration of statute of limitations
|
|
|
(5,009
|
)
|
|
|
(3,238
|
)
|
Balance, end of year
|
|
$
|
32,079
|
|
|
$
|
30,013
|
|
|
14.
|
Other income (expense), net:
|
The following table provides information
regarding the components of other income (expense):
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Credit based impairment losses on investments
|
|
$
|
(4,000
|
)
|
|
$
|
(4,293
|
)
|
|
$
|
(4,783
|
)
|
Foreign exchange (loss) gain, net
|
|
|
(661
|
)
|
|
|
(1,317
|
)
|
|
|
974
|
|
Other, net
|
|
|
544
|
|
|
|
100
|
|
|
|
144
|
|
Total other expense, net
|
|
$
|
(4,117
|
)
|
|
$
|
(5,510
|
)
|
|
$
|
(3,665
|
)
|
|
15.
|
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 enables 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 the fiscal
years 2012, 2011, and 2010, the Company’s matching contributions to the Plan were approximately $2.1 million, $2.2 million
and $2.1 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 planS
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. As of June 30, 2012, there are three participants, all of whom are all fully vested. The Company
also sponsors similar plans related to its acquisition of Torex. As of June 30, 2012 and 2011, total accumulated benefit
obligations of approximately $6.8 million and $4.8 million, respectively, were included in Other Non-Current Liabilities on
the consolidated balance sheets.
In addition, the Company sponsors
pension plans inherited with its acquisition of Torex. The following tables provide information regarding these plans for the
period ended June 30, 2012 (in thousands):
|
|
|
Change in Projected Benefit Obligation (“PBO”):
|
|
|
|
|
PBO at the beginning of year
|
|
$
|
0
|
|
Acquired PBO – Torex
|
|
|
40,409
|
|
Service cost
|
|
|
29
|
|
Interest cost
|
|
|
184
|
|
Actuarial (gain) loss
|
|
|
108
|
|
Benefit payments
|
|
|
(184
|
)
|
PBO at the end of year
|
|
$
|
40,546
|
|
Fair Value of Plan Assets:
|
|
|
Fair value at the beginning of year
|
|
$
|
0
|
|
Acquired fair value of plan assets - Torex
|
|
|
40,160
|
|
Return on assets
|
|
|
134
|
|
Contributions
|
|
|
63
|
|
Actuarial (gain) loss
|
|
|
(25
|
)
|
Benefit payments
|
|
|
(153
|
)
|
Fair value at the end of the year
|
|
$
|
40,179
|
|
|
|
|
|
|
Funded Status of the Plan
|
|
|
|
|
(Unfunded) status of PBO
|
|
$
|
(388
|
)
|
Unrecognized prior service cost
|
|
|
N/A
|
|
Unrecognized net actuarial (gain) losses
|
|
|
N/A
|
|
Accrued benefit cost
|
|
$
|
(388
|
)
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
388
|
|
|
|
|
|
|
Amount recognized in the consolidated balance sheet:
|
|
|
|
|
Accrued benefit liability
(1)
|
|
$
|
(388
|
)
|
(1) Accrued benefit liability is included in Other Non-Current Liabilities in the consolidated balance
sheet.
Assumptions used to measure benefit obligations at June 30,
2012 were as follows:
Discount rate
|
2.2% - 4.5%
|
Return on plan assets
|
3.7% - 4.3%
|
The total periodic pension cost for the
fiscal year ended June 30, 2012 for the inherited pension plans was immaterial.
As of June 30, 2012, the projected benefit
payments to be paid from the Company’s inherited pension plans are as follows for the fiscal years ending June 30 (in thousands):
2013
|
|
$
|
2,042
|
|
2014
|
|
|
1,727
|
|
2015
|
|
|
2,356
|
|
2016
|
|
|
1,884
|
|
2017
|
|
|
2,199
|
|
2018 – 2022
|
|
|
11,464
|
|
The Company is organized and operates in
four operating segments: U.S./Canada, Europe, the Pacific Rim, and Latin America regions. The Company has identified U.S./Canada
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./Canada and
international segments separately in operating its business, although the products and services are similar for each segment. The
Company is in the process of integrating the Torex acquisition substantially into its International segment based on the physical
locations of its operations. 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 as follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenues
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
565,731
|
|
|
$
|
541,272
|
|
|
$
|
491,632
|
|
International
|
|
|
589,850
|
|
|
|
511,883
|
|
|
|
461,310
|
|
Intersegment eliminations
(2)
|
|
|
(48,050
|
)
|
|
|
(45,296
|
)
|
|
|
(38,623
|
)
|
Total revenues
|
|
$
|
1,107,531
|
|
|
$
|
1,007,859
|
|
|
$
|
914,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
136,485
|
|
|
$
|
130,254
|
|
|
$
|
85,701
|
|
International
|
|
|
136,355
|
|
|
|
112,043
|
|
|
|
110,455
|
|
Intersegment eliminations
(2)
|
|
|
(35,649
|
)
|
|
|
(32,685
|
)
|
|
|
(28,031
|
)
|
Total income before taxes
|
|
$
|
237,191
|
|
|
$
|
209,612
|
|
|
$
|
168,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
7,628
|
|
|
$
|
5,333
|
|
|
$
|
3,895
|
|
International
|
|
|
9,840
|
|
|
|
5,373
|
|
|
|
5,149
|
|
Total capital expenditures
|
|
$
|
17,468
|
|
|
$
|
10,706
|
|
|
$
|
9,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
10,104
|
|
|
$
|
11,129
|
|
|
$
|
10,611
|
|
International
|
|
|
6,073
|
|
|
|
5,661
|
|
|
|
6,700
|
|
Total depreciation and amortization
|
|
$
|
16,177
|
|
|
$
|
16,790
|
|
|
$
|
17,311
|
|
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Identifiable assets
(3)
:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
724,902
|
|
|
$
|
668,527
|
|
International
|
|
|
841,118
|
|
|
|
764,491
|
|
Total identifiable assets
|
|
$
|
1,566,020
|
|
|
$
|
1,433,018
|
|
|
|
|
|
|
|
|
|
|
Goodwill
(3)
:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
167,304
|
|
|
$
|
162,720
|
|
International
|
|
|
276,813
|
|
|
|
79,599
|
|
Total goodwill
|
|
$
|
444,117
|
|
|
$
|
242,319
|
|
|
(1)
|
Amounts based on the location of the selling entity.
|
|
(2)
|
Amounts primarily represent elimination of U.S./Canada 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./Canada 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 are as follows:
|
|
Fiscal Year Ended June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
U.S./Canada
|
|
$
|
521,275
|
|
|
$
|
471,865
|
|
|
$
|
439,792
|
|
International
|
|
|
586,256
|
|
|
|
535,994
|
|
|
|
474,527
|
|
Total revenue
|
|
$
|
1,107,531
|
|
|
$
|
1,007,859
|
|
|
$
|
914,319
|
|
Long-lived assets (property, plant, and
equipment) organized by geographic locations are as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
U.S./Canada
|
|
$
|
13,174
|
|
|
$
|
13,053
|
|
International
|
|
|
22,261
|
|
|
|
15,092
|
|
Total long-lived assets
|
|
$
|
35,435
|
|
|
$
|
28,145
|
|
Foreign countries
with material long-lived assets
(property, plant, and equipment) are as follows:
|
|
As of June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Ireland
|
|
$
|
10,089
|
|
|
$
|
6,916
|
|
U.K.
|
|
|
3,789
|
|
|
|
887
|
|
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.
|
17.
|
quarterly
financial information (unaudited):
|
Quarterly financial information is as follows:
|
|
Fiscal Year 2012
(1), (2)
|
|
(in thousands, except per share data)
|
|
1
st
Quarter
|
|
|
2
nd
Quarter
|
|
|
3
rd
Quarter
|
|
|
4
th
Quarter
|
|
Revenue
|
|
$
|
256,558
|
|
|
$
|
270,403
|
|
|
$
|
278,044
|
|
|
$
|
302,526
|
|
Gross margin
|
|
|
144,416
|
|
|
|
152,321
|
|
|
|
152,535
|
|
|
|
165,338
|
|
Income from operations
|
|
|
53,435
|
|
|
|
54,245
|
|
|
|
55,947
|
|
|
|
70,894
|
|
Net income attributable to MICROS Systems, Inc.
|
|
|
37,232
|
|
|
|
38,285
|
|
|
|
43,247
|
|
|
|
48,218
|
|
Income from operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.66
|
|
|
$
|
0.68
|
|
|
$
|
0.70
|
|
|
$
|
0.88
|
|
Diluted
|
|
|
0.65
|
|
|
|
0.66
|
|
|
|
0.68
|
|
|
|
0.86
|
|
Net income per share attributable to MICROS Systems, Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.46
|
|
|
$
|
0.48
|
|
|
$
|
0.54
|
|
|
$
|
0.60
|
|
Diluted
|
|
|
0.45
|
|
|
|
0.47
|
|
|
|
0.53
|
|
|
|
0.59
|
|
Stock Prices (range of sales prices):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
52.24
|
|
|
$
|
52.74
|
|
|
$
|
55.76
|
|
|
$
|
58.49
|
|
Low
|
|
|
38.38
|
|
|
|
41.11
|
|
|
|
46.63
|
|
|
|
48.11
|
|
|
|
Fiscal Year 2011
(1), (2)
|
|
(in thousands, except per share data)
|
|
1
st
Quarter
|
|
|
2
nd
Quarter
|
|
|
3
rd
Quarter
|
|
|
4
th
Quarter
|
|
Revenue
|
|
$
|
233,414
|
|
|
$
|
247,117
|
|
|
$
|
253,193
|
|
|
$
|
274,135
|
|
Gross margin
|
|
|
126,420
|
|
|
|
137,370
|
|
|
|
141,378
|
|
|
|
154,900
|
|
Income from operations
|
|
|
46,840
|
|
|
|
46,681
|
|
|
|
51,906
|
|
|
|
65,033
|
|
Net income attributable to MICROS Systems, Inc.
|
|
|
31,617
|
|
|
|
32,328
|
|
|
|
38,579
|
|
|
|
41,536
|
|
Income from operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
|
$
|
0.58
|
|
|
$
|
0.64
|
|
|
$
|
0.80
|
|
Diluted
|
|
|
0.57
|
|
|
|
0.56
|
|
|
|
0.63
|
|
|
|
0.78
|
|
Net income per share attributable to MICROS Systems, Inc. common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.39
|
|
|
$
|
0.40
|
|
|
$
|
0.48
|
|
|
$
|
0.51
|
|
Diluted
|
|
|
0.39
|
|
|
|
0.39
|
|
|
|
0.47
|
|
|
|
0.50
|
|
Stock Prices (range of sales prices):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
43.28
|
|
|
$
|
46.78
|
|
|
$
|
50.00
|
|
|
$
|
53.36
|
|
Low
|
|
|
30.96
|
|
|
|
41.79
|
|
|
|
42.76
|
|
|
|
46.02
|
|
|
(1)
|
Fiscal years ended June 30, 2012 and 2011 include approximately $16.5 million ($11.3 million, net of tax, or $0.14 per diluted
share) and approximately $12.4 million ($8.0 million, net of tax, or $0.10 per diluted share), respectively, in non-cash share-based
compensation expenses. See Note 3 “Share-based Compensation.” Fiscal years 2012 and 2011 also include other-than-temporary
impairment losses of approximately $4.0 million and $4.3 million, respectively, for long-term investments. See Note 2 “Financial
Instruments and Fair Value Measurements.”
|
|
(2)
|
The sum of quarterly amounts does not equal the sum of as reported amounts for the respective fiscal years due to rounding
differences.
|
MICROS SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Description
(in thousands)
|
|
Balance
at beginning
of period
|
|
|
Charged
To
expense
|
|
|
Deductions
(1)
|
|
|
Other
(2)
|
|
|
Balance
at end
of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
32,282
|
|
|
$
|
7,137
|
|
|
$
|
(5,285
|
)
|
|
$
|
(2,381
|
)
|
|
$
|
31,753
|
|
Income taxes - valuation allowance
|
|
|
17,500
|
|
|
|
782
|
|
|
|
0
|
|
|
|
5,365
|
|
|
|
23,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
28,392
|
|
|
$
|
6,168
|
|
|
$
|
(4,972
|
)
|
|
$
|
2,694
|
|
|
$
|
32,282
|
|
Income taxes - valuation allowance
|
|
|
11,596
|
|
|
|
3,085
|
|
|
|
0
|
|
|
|
2,819
|
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
31,892
|
|
|
$
|
3,979
|
|
|
$
|
(6,622
|
)
|
|
$
|
(857
|
)
|
|
$
|
28,392
|
|
Income taxes - valuation allowance
|
|
|
8,520
|
|
|
|
3,295
|
|
|
|
0
|
|
|
|
(219
|
)
|
|
|
11,596
|
|
|
(1)
|
Charge offs, net of recoveries.
|
|
(2)
|
Primarily related to foreign currency translation, except
for income taxes valuation allowance for the years ended June 30, 2012 and 2011.
|
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.
Date: August 29, 2012
|
/s/ Cynthia A. Russo
|
|
Cynthia A. Russo
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
Date: August 29, 2012
|
/s/ Michael P. Russo
|
|
Michael P. Russo
|
|
Vice President and Corporate Controller and
Principal Accounting 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 29, 2012
|
A. L. Giannopoulos
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
/s/Cynthia A. Russo
|
|
Executive Vice President and
|
|
August 29, 2012
|
Cynthia A. Russo
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/Louis M. Brown, Jr.
|
|
Director and
|
|
August 29, 2012
|
Louis M. Brown, Jr.
|
|
Vice Chairman of the Board
|
|
|
|
|
|
|
|
/s/B. Gary Dando
|
|
Director
|
|
August 29, 2012
|
B. Gary Dando
|
|
|
|
|
|
|
|
|
|
/s/F. Suzanne Jenniches
|
|
Director
|
|
August 29, 2012
|
F. Suzanne Jenniches
|
|
|
|
|
|
|
|
|
|
/s/John G. Puente
|
|
Director
|
|
August 29, 2012
|
John G. Puente
|
|
|
|
|
|
|
|
|
|
/s/Dwight S. Taylor
|
|
Director
|
|
August 29, 2012
|
Dwight S. Taylor
|
|
|
|
|
EXHIBIT INDEX
(a) Exhibits,
Financial Statement Schedule:
(1) Financial Statements –
See the Index to Consolidated Financial Statements on page 47
(2) Schedule II – See the
Index to Consolidated Financial Statements on page 47
(3) Exhibits:
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 2011 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.
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10(b)(2)
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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.
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10(b)(3)
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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.
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10(b)(4)
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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.
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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.
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10(b)(6)
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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.
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10(b)(7)
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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.
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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.
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10(b)(9)
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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.
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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.
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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.
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10(b)(12)
|
Twelfth Amendment to Employment Agreement dated August 27, 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.
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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.
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10(c)(1)
|
First Amendment to Employment Agreement dated October 1, 1998 between MICROS Systems, Inc. and Thomas L. Patz is incorporated herein by reference to Exhibit 10(c)(1) to the Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
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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.
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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.
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10(d)(1)
|
First Amendment to Employment Agreement dated January 25, 2011, between MICROS Systems, Inc. and Jennifer Kurdle is incorporated herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on January 27, 2011.
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10(d)(2)*
|
Second Amendment to Employment Agreement dated November 7, 2011, between MICROS Systems, Inc. and Jennifer Kurdle is incorporated herein by reference to Exhibit 10 to the Current Report on Form 8-K filed on November 7, 2011.
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10(e)
|
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.
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10(f)
|
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.
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10(f)(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, Inc., 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.
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10(f)(2)
|
Second Amendment to Credit Agreements, dated July 30, 2010 among MICROS Systems, Inc. DV Technology Holdings Corporation, Datavantage Corporation, TIG Global LLC (now named Micros E-Commerce LLC), Fry, Inc., JTECH Communications, 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 is incorporated herein by reference to Exhibit 10(g)(2) to the Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
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10(g)
|
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.
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10(g)(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 is incorporated herein by reference to Exhibit 10(h)(1) to the Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
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10(h)
|
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(i)
|
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
)
|
10(j)
|
Stock Purchase Agreement, by and between MICROS Systems, Inc., Torex Retail Holdings Limited, the stockholders and optionholders of Torex, and MF UK FC Limited (a wholly-owned subsidiary of MICROS Systems, Inc.) entered into by the parties on April 26, 2012 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on June 5, 2012).
|
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 Capital Advisors LLC (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)
|
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