UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13
or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September
30, 2012
Commission file number 0-9993
MICROS SYSTEMS, INC.
(Exact name of Registrant as specified
in its charter)
MARYLAND
|
52-1101488
|
|
|
(State of incorporation)
|
(IRS Employer Identification Number)
|
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
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
¨
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
¨
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
¨
|
Smaller Reporting Company
¨
|
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
YES
¨
NO
þ
As of September 30, 2012, there were issued and outstanding
80,233,609 shares of Registrant’s Common Stock, $0.025 par value.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the three months ended September 30,
2012
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except par value data)
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2012
|
|
|
2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
574,028
|
|
|
$
|
562,786
|
|
Short-term investments
|
|
|
7,140
|
|
|
|
19,252
|
|
Accounts receivable, net of allowance for doubtful
accounts of $32,560 at September 30, 2012 and $31,753 at June 30, 2012
|
|
|
243,997
|
|
|
|
235,433
|
|
Inventory
|
|
|
48,859
|
|
|
|
44,278
|
|
Deferred income taxes
|
|
|
14,001
|
|
|
|
17,004
|
|
Prepaid expenses and other current assets
|
|
|
57,302
|
|
|
|
37,343
|
|
Total current assets
|
|
|
945,327
|
|
|
|
916,096
|
|
|
|
|
|
|
|
|
|
|
Long-term investments
|
|
|
34,458
|
|
|
|
34,456
|
|
Property, plant and equipment, net
|
|
|
36,381
|
|
|
|
35,435
|
|
Deferred income taxes, non-current
|
|
|
52,881
|
|
|
|
50,326
|
|
Goodwill
|
|
|
450,926
|
|
|
|
444,117
|
|
Intangible assets, net
|
|
|
43,426
|
|
|
|
45,024
|
|
Purchased and internally developed software costs,
net of accumulated amortization of $88,863 at September 30, 2012 and $87,073 at June 30, 2012
|
|
|
34,511
|
|
|
|
33,980
|
|
Other assets
|
|
|
6,803
|
|
|
|
6,586
|
|
Total assets
|
|
$
|
1,604,713
|
|
|
$
|
1,566,020
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
63,451
|
|
|
$
|
69,978
|
|
Accrued expenses and other current liabilities
|
|
|
145,660
|
|
|
|
174,214
|
|
Income taxes payable
|
|
|
6,107
|
|
|
|
1,788
|
|
Deferred revenue
|
|
|
191,348
|
|
|
|
169,989
|
|
Total current liabilities
|
|
|
406,566
|
|
|
|
415,969
|
|
|
|
|
|
|
|
|
|
|
Income taxes payable, non-current
|
|
|
31,092
|
|
|
|
34,722
|
|
Deferred income taxes, non-current
|
|
|
929
|
|
|
|
2,554
|
|
Other non-current liabilities
|
|
|
17,241
|
|
|
|
16,644
|
|
Total Liabilities
|
|
|
455,828
|
|
|
|
469,889
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
MICROS Systems, Inc. Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.025 par value; authorized 120,000 shares; issued and outstanding
80,234 at September 30, 2012 and 80,309 at June 30, 2012
|
|
|
2,006
|
|
|
|
2,008
|
|
Capital in excess of par
|
|
|
104,480
|
|
|
|
107,662
|
|
Retained earnings
|
|
|
1,041,886
|
|
|
|
1,000,822
|
|
Accumulated other comprehensive loss
|
|
|
(3,023
|
)
|
|
|
(17,847
|
)
|
Total MICROS Systems, Inc. shareholders' equity
|
|
|
1,145,349
|
|
|
|
1,092,645
|
|
Noncontrolling interest
|
|
|
3,536
|
|
|
|
3,486
|
|
Total equity
|
|
|
1,148,885
|
|
|
|
1,096,131
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
1,604,713
|
|
|
$
|
1,566,020
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
|
|
Three Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Hardware
|
|
$
|
63,759
|
|
|
$
|
48,409
|
|
Software
|
|
|
30,778
|
|
|
|
33,273
|
|
Services
|
|
|
205,314
|
|
|
|
174,876
|
|
Total revenue
|
|
|
299,851
|
|
|
|
256,558
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
Hardware
|
|
|
43,057
|
|
|
|
30,163
|
|
Software
|
|
|
5,365
|
|
|
|
4,859
|
|
Services
|
|
|
98,169
|
|
|
|
77,120
|
|
Total cost of sales
|
|
|
146,591
|
|
|
|
112,142
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
153,260
|
|
|
|
144,416
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
77,745
|
|
|
|
75,410
|
|
Research and development expenses
|
|
|
16,803
|
|
|
|
11,335
|
|
Depreciation and amortization
|
|
|
5,525
|
|
|
|
4,236
|
|
Total operating expenses
|
|
|
100,073
|
|
|
|
90,981
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
53,187
|
|
|
|
53,435
|
|
|
|
|
|
|
|
|
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,347
|
|
|
|
1,972
|
|
Interest expense
|
|
|
(171
|
)
|
|
|
(157
|
)
|
Other (expense) income, net
|
|
|
(329
|
)
|
|
|
547
|
|
Total non-operating income, net
|
|
|
847
|
|
|
|
2,362
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
|
|
|
54,034
|
|
|
|
55,797
|
|
Income tax provision
|
|
|
12,968
|
|
|
|
18,414
|
|
Net income
|
|
|
41,066
|
|
|
|
37,383
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(2
|
)
|
|
|
(151
|
)
|
Net income attributable to MICROS Systems, Inc.
|
|
$
|
41,064
|
|
|
$
|
37,232
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to MICROS Systems, Inc. common shareholders:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.51
|
|
|
$
|
0.46
|
|
Diluted
|
|
$
|
0.50
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
80,223
|
|
|
|
80,573
|
|
Diluted
|
|
|
81,969
|
|
|
|
82,410
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
|
|
Three Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
41,066
|
|
|
$
|
37,383
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments, net of tax of $0
|
|
|
14,874
|
|
|
|
(44,175
|
)
|
Change in unrealized losses on long-term investments,
net of tax benefits of $1 and $568
|
|
|
(2
|
)
|
|
|
(924
|
)
|
Total other comprehensive income (loss), net of taxes
|
|
|
14,872
|
|
|
|
(45,099
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
55,938
|
|
|
|
(7,716
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
(50
|
)
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to MICROS Systems, Inc.
|
|
$
|
55,888
|
|
|
$
|
(7,460
|
)
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
Three Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities
|
|
$
|
6,022
|
|
|
$
|
19,566
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sales and maturities of investments
|
|
|
16,553
|
|
|
|
42,768
|
|
Purchases of investments
|
|
|
(4,029
|
)
|
|
|
(32,406
|
)
|
Purchases of property, plant and equipment
|
|
|
(3,796
|
)
|
|
|
(4,079
|
)
|
Internally developed software costs
|
|
|
(850
|
)
|
|
|
(1,825
|
)
|
Net cash paid for acquisitions
|
|
|
(129
|
)
|
|
|
(491
|
)
|
Other
|
|
|
43
|
|
|
|
15
|
|
Net cash flows provided by investing activities
|
|
|
7,792
|
|
|
|
3,982
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchases of common stock
|
|
|
(13,165
|
)
|
|
|
(25,424
|
)
|
Proceeds from stock option exercises
|
|
|
4,364
|
|
|
|
1,388
|
|
Realized tax benefits from stock option exercises
|
|
|
1,370
|
|
|
|
256
|
|
Other
|
|
|
(26
|
)
|
|
|
(52
|
)
|
Net cash flows used in financing activities
|
|
|
(7,457
|
)
|
|
|
(23,832
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
4,885
|
|
|
|
(28,425
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
11,242
|
|
|
|
(28,709
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
562,786
|
|
|
|
661,259
|
|
Cash and cash equivalents at end of period
|
|
$
|
574,028
|
|
|
$
|
632,550
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited, in thousands)
|
|
MICROS Systems, Inc.
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock
|
|
|
in Excess
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
of Par
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Interest
|
|
|
Total
|
|
Balance, June 30, 2012
|
|
|
80,309
|
|
|
|
2,008
|
|
|
|
107,662
|
|
|
|
1,000,822
|
|
|
|
(17,847
|
)
|
|
|
3,486
|
|
|
|
1,096,131
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,064
|
|
|
|
-
|
|
|
|
2
|
|
|
|
41,066
|
|
Foreign currency translation adjustments,
net of tax of $0
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,826
|
|
|
|
48
|
|
|
|
14,874
|
|
Unrealized losses on long-term investments,
net of tax benefits of $1
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(2
|
)
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
4,210
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,210
|
|
Stock issued upon exercise of options
|
|
|
201
|
|
|
|
5
|
|
|
|
4,359
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,364
|
|
Repurchases of stock
|
|
|
(276
|
)
|
|
|
(7
|
)
|
|
|
(13,158
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,165
|
)
|
Income tax benefit from options exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
1,407
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,407
|
|
Balance, September 30, 2012
|
|
|
80,234
|
|
|
$
|
2,006
|
|
|
$
|
104,480
|
|
|
$
|
1,041,886
|
|
|
$
|
(3,023
|
)
|
|
$
|
3,536
|
|
|
$
|
1,148,885
|
|
|
|
MICROS Systems, Inc. Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Common Stock
|
|
|
in Excess
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
of Par
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Interest
|
|
|
Total
|
|
Balance, June 30, 2011
|
|
|
80,805
|
|
|
|
2,020
|
|
|
|
132,529
|
|
|
|
833,839
|
|
|
|
48,323
|
|
|
|
6,540
|
|
|
|
1,023,251
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,232
|
|
|
|
-
|
|
|
|
151
|
|
|
|
37,383
|
|
Foreign currency translation adjustments, net of tax
of $0
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(43,768
|
)
|
|
|
(407
|
)
|
|
|
(44,175
|
)
|
Unrealized losses on long-term investments, net of
tax benefits of $568
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(924
|
)
|
|
|
-
|
|
|
|
(924
|
)
|
Share-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
3,005
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,005
|
|
Stock issued upon exercise of options
|
|
|
56
|
|
|
|
1
|
|
|
|
1,387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,388
|
|
Repurchases of stock
|
|
|
(576
|
)
|
|
|
(14
|
)
|
|
|
(25,410
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,424
|
)
|
Income tax benefit from options exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
Balance, September 30, 2011
|
|
|
80,285
|
|
|
$
|
2,007
|
|
|
$
|
111,779
|
|
|
$
|
871,071
|
|
|
$
|
3,631
|
|
|
$
|
6,284
|
|
|
$
|
994,772
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated
financial statements of MICROS Systems, Inc. and its subsidiaries (collectively, the “Company”) have been prepared
by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). This Quarterly
Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June
30, 2012.
The accompanying condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation
S-X, promulgated by the Securities and Exchange Commission. Accordingly, they do not include all disclosures required by U.S.
generally accepted accounting principles for complete financial statements.
The condensed consolidated financial statements
included in this report reflect all normal and recurring adjustments that, in the opinion of management, are necessary for a fair
presentation of the financial position of the Company, its results of operations and cash flows for the interim periods set forth
herein. The results for the three months ended September 30, 2012 are not necessarily indicative of the results to be expected
for the full year or any future periods.
The following table provides information on the
components of inventory:
|
|
September 30,
|
|
|
June 30,
|
|
(in thousands)
|
|
2012
|
|
|
2012
|
|
Raw materials
|
|
$
|
1,558
|
|
|
$
|
1,427
|
|
Finished goods
|
|
|
47,301
|
|
|
|
42,851
|
|
Total inventory
|
|
$
|
48,859
|
|
|
$
|
44,278
|
|
|
3.
|
FINANCIAL
INSTRUMENTS AND
FAIR VALUE MEASUREMENTS
|
Short-term and long-term
investments consist of the following:
|
|
As of September 30, 2012
|
|
|
As of June 30, 2012
|
|
(in thousands)
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
|
Amortized
Cost Basis
|
|
|
Aggregate
Fair Value
|
|
Time deposit – international
|
|
$
|
7,312
|
|
|
$
|
7,312
|
|
|
$
|
19,419
|
|
|
$
|
19,419
|
|
Auction rate securities
|
|
|
52,625
|
|
|
|
34,286
|
|
|
|
52,625
|
|
|
|
34,289
|
|
Total investments
|
|
$
|
59,937
|
|
|
$
|
41,598
|
|
|
$
|
72,044
|
|
|
$
|
53,708
|
|
Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date (exit price). The following hierarchy prioritizes the inputs (generally, assumptions that market participants use in pricing
an asset or liability) used to measure fair value based on the quality and reliability of the information provided by the inputs:
|
·
|
Level
1 - Unadjusted quoted
prices in active markets
that are accessible
at the measurement date
for identical, unrestricted
assets or liabilities.
The Company considers
active markets as those
in which transactions
for the assets or liabilities
occur with sufficient
frequency and volume
to provide pricing information
on an ongoing basis.
|
|
·
|
Level
2 - Quoted prices for
similar assets or liabilities
in active markets; quoted
prices for identical
assets or liabilities
in markets that are
not active; inputs that
are observable, either
directly or indirectly,
for substantially the
full term of the asset
or liability; inputs
that are derived principally
from or corroborated
by observable market
data or other means.
|
|
·
|
Level
3 - Measured based on
prices or valuation
models using unobservable
inputs to the extent
relevant observable
inputs are not available
(i.e., where there is
little or no market
activity for the asset
or liability).
|
The following table provides information
regarding the financial assets accounted for at fair value and the type of inputs used to value the assets:
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Balance, September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term and long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposit – international
|
|
$
|
0
|
|
|
$
|
7,312
|
|
|
$
|
0
|
|
|
$
|
7,312
|
|
Auction rate securities
|
|
|
0
|
|
|
|
0
|
|
|
|
34,286
|
|
|
|
34,286
|
|
Total short-term and long-term investments
|
|
$
|
0
|
|
|
$
|
7,312
|
|
|
$
|
34,286
|
|
|
$
|
41,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
At September 30, 2012 and June 30, 2012,
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 three months ended September 30, 2012 and 2011,
the Company did not recognize any gains or losses on its investments other than those 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 September 30, 2012 are as follows:
|
|
Amortized
|
|
|
Aggregate
|
|
(in thousands)
|
|
Cost Basis
|
|
|
Fair Value
|
|
Due within one year
|
|
$
|
7,140
|
|
|
$
|
7,140
|
|
Due between 1 – 2 years
|
|
|
172
|
|
|
|
172
|
|
Due after 10 years – auction rate securities
|
|
|
52,625
|
|
|
|
34,286
|
|
Total short-term and long-term investments
|
|
$
|
59,937
|
|
|
$
|
41,598
|
|
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 secured 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 enable it to limit or 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 September 30, 2012 and June
30, 2012 instead of being classified as short-term investments, as was the case before February 2008. During the three months
ended September 30, 2012 and 2011, the Company did not sell or redeem any of its investments in auction rate securities.
As of September 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 of the security. 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 September 30, 2012 approximately $29.9
million of the fair value of auction rate securities are supported by student loans guaranteed by FFELP and are carried at an
aggregate discount from cost of approximately 8%. The remaining approximately $4.4 million of the fair value of auction rate securities,
carried at an aggregate discount from cost of approximately 78%, are supported by student loans guaranteed by AMBAC and are therefore
more sensitive to changes in significant unobservable inputs described below. However, due to the nature of the guarantees, the
relative amounts invested and impairment losses already recorded, the sensitivity of the fair value measures to change in significant
unobservable inputs is not considered material.
The most significant assumptions and unobservable
inputs used in the valuation of the Company’s investments in auction rate securities are as follows:
Fair value at September 30, 2012 (in thousands)
|
|
$34,286
|
|
Valuation technique
|
|
Probability Weighted Discounted cash flow
|
|
|
|
|
|
Unobservable input:
|
|
Range (weighted average)
|
|
Maximum coupon rate
|
|
|
1.8
|
%
|
Cumulative probability of earning maximum rate until maturity
|
|
|
0.1
|
%
|
Cumulative probability of principal returned prior to maturity
|
|
|
59.5
|
%
|
Cumulative probability of default
|
|
|
40.4
|
%
|
Liquidity risk premium
|
|
|
4.3
|
%
|
Recovery rate in default
|
|
|
32.4
|
%
|
The unobservable inputs used in the fair
value measurement of the Company’s investments in auction rate securities listed above are listed in order of significance
to the Company’s valuation determination.
Based on its fair value assessments, the
Company determined that its investments in auction rate securities as of both September 30, 2012 and June 30, 2012 were impaired
by approximately $18.3 million. $14.0 million of this impairment at September 30, 2012 and June 30, 2012 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 student loan assets in the trust (including default and delinquency rates). These assumptions are subject to
change as the underlying market conditions change. Based on its evaluations, the Company determined that, consistent with the
June 30, 2012 valuation, all of the cumulative other-than-temporary impairment losses of $14.0 million as of September 30, 2012
were credit based, and were reflected in the Company’s statement of operations for periods prior to the three months ended
September 30, 2012.
The remaining cumulative impairment losses
of approximately $4.3 million (approximately $2.7 million, net of tax) were recorded in accumulated other comprehensive income,
net of tax, as of September 30, 2012.
The following table contains a reconciliation
of changes in the fair value of auction rate securities, and the related unrealized losses for the three months ended September
30, 2012:
(in thousands)
|
|
Cost
|
|
|
Temporary
Impairment Loss
(1)
|
|
|
OTTI
–
Non-Credit
Loss
(1)
|
|
|
OTTI
–
Credit
Loss
(2)
|
|
|
Fair
Value
|
|
Balance, June 30, 2012
|
|
$
|
52,625
|
|
|
$
|
(4,336
|
)
|
|
$
|
0
|
|
|
$
|
(14,000
|
)
|
|
$
|
34,289
|
|
Changes in losses related to investments
|
|
|
0
|
|
|
|
(3
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(3
|
)
|
Balance, September 30, 2012
|
|
$
|
52,625
|
|
|
$
|
(4,339
|
)
|
|
$
|
0
|
|
|
$
|
(14,000
|
)
|
|
$
|
34,286
|
|
|
(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)
|
Change in the amounts in this
column is recorded in the condensed consolidated statement of
operations.
|
The Company plans to continue to monitor
its investments, including the liquidity 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.
|
4.
|
GOODWILL AND INTANGIBLE ASSETS
|
During the three months ended September
30, 2012, the Company determined, based on its assessment of qualitative factors as of July 1, 2012, the date of the annual goodwill
impairment test, 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.
During the three months ended September
30, 2012, the Company also completed its annual impairment tests on its indefinite-lived trademarks as of July 1, 2012. Based
on its annual impairment test results, the Company determined that no impairment losses existed for its indefinite-lived trademarks
as of July 1, 2012.
Subsequent to the annual impairment analysis
date of July 1, 2012, 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. Subsequent
to July 1, 2012, there have 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.
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 September 30, 2012, the Company
had no balances outstanding under the Credit Agreements and has applied approximately $0.6 million to guarantees. A total of approximately
$49.4 million was available for future borrowings as of September 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 September 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 September 30, 2012,
there were no balances outstanding on this credit facility, but approximately EUR 0.4 million (approximately $0.5 million at the
September 30, 2012 exchange rate) of the credit facility has been used for guarantees.
As of September 30, 2012, the Company
had an aggregate borrowing capacity of approximately $50.2 million available under all of the credit facilities described above.
|
6.
|
SHARE-BASED COMPENSATION
|
The non-cash share-based compensation
expenses included in the condensed consolidated statements of operations are as follows:
|
|
Three Months Ended
September
30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Selling, general and administrative
|
|
$
|
3,700
|
|
|
$
|
2,659
|
|
Research and development
|
|
|
437
|
|
|
|
309
|
|
Cost of sales
|
|
|
73
|
|
|
|
37
|
|
Total non-cash share-based compensation expense
|
|
|
4,210
|
|
|
|
3,005
|
|
Income tax benefit
|
|
|
(1,264
|
)
|
|
|
(943
|
)
|
Total non-cash share-based compensation expense, net of tax benefit
|
|
$
|
2,946
|
|
|
$
|
2,062
|
|
Impact on diluted net income
per share attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
No non-cash share-based compensation expense
has been capitalized for the three months ended September 30, 2012 and 2011. As of September 30, 2012, there was approximately
$25.6 million (net of estimated forfeitures) in non-cash share-based compensation related to non-vested awards that are expected
to be recognized in the Company’s consolidated statements of operations over a weighted-average period of 1.7 years.
|
7.
|
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 available to MICROS Systems, Inc. to basic and diluted net income per share:
|
|
Three Months Ended
September
30,
|
|
(in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
Net income attributable to MICROS Systems, Inc.
|
|
$
|
41,064
|
|
|
$
|
37,232
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding
|
|
|
80,223
|
|
|
|
80,573
|
|
Dilutive effect of outstanding stock options
|
|
|
1,746
|
|
|
|
1,837
|
|
Average common shares outstanding assuming dilution
|
|
|
81,969
|
|
|
|
82,410
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share attributable
to MICROS Systems, Inc. common shareholders
|
|
$
|
0.51
|
|
|
$
|
0.46
|
|
Diluted net income per share
attributable to MICROS Systems, Inc. common shareholders
|
|
$
|
0.50
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive weighted shares excluded from reconciliation
|
|
|
1,687
|
|
|
|
1,125
|
|
Results for the three months ended September
30, 2012 and 2011 include approximately $4.2 million ($2.9 million, net of tax) and $3.0 million ($2.1 million, net of tax), in
non-cash share-based compensation expense, respectively. These non-cash share-based compensation expenses reduced diluted net
income per share attributable to MICROS Systems, Inc. common shareholders by $0.04 and $0.03 for the three months ended September
30, 2012 and 2011, respectively.
The effective tax rate for the three months
ended September 30, 2012 and 2011 was 24.0% and 33.0%, respectively. The decrease in tax rate for the three months ended
September 30, 2012 compared to the same period in 2011 was primarily attributable to increases in tax benefits realized upon the
expiration of statutes of limitation or settlements with tax authorities and decreases in tax associated with changes in our earnings
mix among jurisdictions.
The Company has recognized a net decrease
in unrecognized tax benefits for the three months ended September 30, 2012 as compared to the same period in 2011, which resulted
in a reduction in the effective tax rate of 11.8% and a reduction in income tax expense by approximately $6.4 million. This reduction
was primarily due to favorable settlements with tax authorities. The Company estimates that within the next 12 months, its unrecognized
income tax benefits will decrease by between approximately $3.6 million to approximately $5.6 million due to the expiration of
statues of limitations and settlement of issues with tax authorities. 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’s tax positions
will continue to generate liabilities related to uncertain tax positions.
The Company’s income tax returns
are no longer subject to examination by the U.S. tax authorities for tax years ending before June 2011, by the U.K. tax authorities
for tax years ending before June 2009, by 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 be subject to adjustment via competent
authority or due to the impact of items such as carryback or carryforward claims.
|
9.
|
RECENT ACCOUNTING GUIDANCE
|
Recently Adopted Accounting Pronouncements
On July 1, 2012, the Company adopted Financial
Accounting Standards Board (“FASB”) 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. In accordance with this update,
the Company has presented two separate but consecutive statements which include the components of net income and other comprehensive
income. 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 July 2012, the FASB issued revised
FASB guidance on how an entity tests indefinite-lived intangible assets for impairment. Under the new guidance, an entity is no
longer required to calculate the fair value of the indefinite-lived intangible assets and perform the quantitative impairment
test unless the entity determines, based on a qualitative assessment, that it is more likely than not that the fair value of an
indefinite-lived intangible asset is less than its carrying amount. This revised guidance is effective for the Company beginning
in its fiscal year 2014. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated
financial statements.
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 economic 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’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 geographic 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:
|
|
Three Months Ended
|
|
|
|
September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Revenues
(1)
:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
129,288
|
|
|
$
|
130,843
|
|
International
|
|
|
181,808
|
|
|
|
136,760
|
|
Intersegment eliminations
(2)
|
|
|
(11,245
|
)
|
|
|
(11,045
|
)
|
Total revenues
|
|
$
|
299,851
|
|
|
$
|
256,558
|
|
|
|
|
|
|
|
|
|
|
Income before taxes
(1)
:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
34,853
|
|
|
$
|
32,177
|
|
International
|
|
|
27,480
|
|
|
|
31,889
|
|
Intersegment eliminations
(2)
|
|
|
(8,299
|
)
|
|
|
(8,269
|
)
|
Total income before taxes
|
|
$
|
54,034
|
|
|
$
|
55,797
|
|
|
|
As of
|
|
(in thousands)
|
|
September 30,
2012
|
|
|
June 30,
2012
|
|
Identifiable assets
(3)
:
|
|
|
|
|
|
|
|
|
U.S./Canada
|
|
$
|
714,292
|
|
|
$
|
724,902
|
|
International
|
|
|
890,421
|
|
|
|
841,118
|
|
Total identifiable assets
|
|
$
|
1,604,713
|
|
|
$
|
1,566,020
|
|
|
(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 assets.
|
The Company’s Board of Directors
periodically authorizes the purchase of up to a specified number of 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 September 30, 2012, approximately 1.4 million additional shares remain available for purchases under the
most recent authorization.
The following table
summarizes the cumulative number of shares purchased under all purchase authorizations. All of the purchased shares were retired
and reverted to the status of authorized but unissued shares:
|
|
|
|
|
Average
|
|
|
|
|
|
|
Number of
|
|
|
Purchase Price
|
|
|
Total Purchase
|
|
(in thousands, except per share data)
|
|
Shares
|
|
|
per Share
|
|
|
Value
|
|
Total shares purchased:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2012
|
|
|
14,360
|
|
|
$
|
24.24
|
|
|
$
|
348,066
|
|
Three months ended September 30, 2012
|
|
|
276
|
|
|
|
47.63
|
|
|
|
13,165
|
|
As of September 30, 2012
|
|
|
14,636
|
|
|
$
|
24.68
|
|
|
$
|
361,231
|
|
|
12.
|
COMMITMENTS AND CONTINGENCIES
|
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. (the “Roth Matter”)
and Shenango Systems Solutions v. MICROS Systems, Inc., et al. (the “Shenango Matter”). 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. Both parties appealed the original verdicts on various grounds. On December 30, 2010, the Superior
Court of Pennsylvania reversed and remanded the trial court judgment as to $4.5 million of the award and affirmed the trial court
judgment as to the remaining $3.0 million of the award. Following the denial of appeals of the Superior Court decision by the
Pennsylvania Supreme Court on April 10, 2012, the Company accrued a charge of $3.0 million in its selling, general and administrative
expenses. The matter was subsequently remanded to the Court of Common Pleas (the trial court) for further proceedings consistent
with the appellate decisions. 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 Matter and all amounts that were no longer
in dispute and that were payable to the plaintiff in the Roth Matter, 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. Subsequently,
the Court of Common Pleas entered an order amending the judgment in favor of the plaintiff in the Roth Matter to an award of approximately
$2.8 million. The Company intends to file a motion for reconsideration of the revised award and also is preparing to appeal if
the motion is denied.
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.
ITEM 2. 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.
We have been adversely impacted by the
current global economic uncertainty. We believe that cautious consumer spending, coupled with difficulties in obtaining credit,
may continue to negatively impact our customers’ abilities to acquire or open new hospitality and retail venues, and may
also limit customers’ willingness and ability to make certain capital expenditures on new systems and system upgrades. In
light of these challenging and uncertain conditions, we continue to review certain discretionary expenses, and scrutinize carefully
and cautiously the expansion of our workforce.
FORWARD-LOOKING STATEMENTS
The following management’s discussion
and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated
financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form
10-Q. Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our actual results may differ materially
from those anticipated in these forward-looking statements.
Examples of such forward-looking statements
in this Quarter Report on Form 10-Q include the following:
|
·
|
our statements
regarding valuation
of our investments
in auction rate
securities and
our plans to monitor
our investments
including as to
liquidity of and
creditworthiness
of the issuers
of the auction
rate securities;
|
|
·
|
our belief
that any reduction
in liquidity of
auction rate securities
will not have a
material impact
on our overall
liquidity;
|
|
·
|
our expectations
regarding the impact
or lack of impact
on our financial
position and results
of operations of
the application
of recently adopted
accounting standards;
|
|
·
|
our belief
that, except as
noted, existing
legal claims or
proceedings will
not have a material
adverse effect
on our results
of operations or
financial position;
|
|
·
|
our expectations
regarding the effects
of current economic
conditions on our
customers, our
distributors, and
our business generally;
|
|
·
|
our expectations
regarding effective
tax rates in future
periods;
|
|
·
|
our statements
regarding the effects
of foreign currency
rate fluctuations
(in particular,
the Euro and British
Pound Sterling)
on our financial
performance; and
|
|
·
|
our expectations
about the adequacy
of our cash flows
and our available
borrowing capacity
to meet our working
capital needs,
and our ability
to raise additional
funds if and when
needed.
|
RESULTS OF OPERATIONS
The following discussion of our results
of operations for the three months ended September 30, 2012 includes the results of operations of Torex Retail Holdings Ltd. (“Torex”),
a company we acquired on May 31, 2012.
Revenue:
The following table provides information
regarding sales mix by reportable segments for the three months ended September 30, 2012 and 2011 (amounts are net of intersegment
eliminations, and are based on the location of the customer):
|
|
Three Months Ended September 30,
|
|
|
|
U.S./Canada
|
|
|
International
|
|
|
Total
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Hardware
|
|
$
|
27,474
|
|
|
$
|
21,503
|
|
|
$
|
36,285
|
|
|
$
|
26,906
|
|
|
$
|
63,759
|
|
|
$
|
48,409
|
|
Software
|
|
|
9,755
|
|
|
|
12,029
|
|
|
|
21,023
|
|
|
|
21,244
|
|
|
|
30,778
|
|
|
|
33,273
|
|
Service
|
|
|
81,134
|
|
|
|
80,625
|
|
|
|
124,180
|
|
|
|
94,251
|
|
|
|
205,314
|
|
|
|
174,876
|
|
Total Revenue
|
|
$
|
118,363
|
|
|
$
|
114,157
|
|
|
$
|
181,488
|
|
|
$
|
142,401
|
|
|
$
|
299,851
|
|
|
$
|
256,558
|
|
The following table provides information
regarding the total sales mix as a percent of total revenue:
|
|
Three Months Ended
September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Hardware
|
|
|
21.3
|
%
|
|
|
18.9
|
%
|
Software
|
|
|
10.2
|
%
|
|
|
13.0
|
%
|
Service
|
|
|
68.5
|
%
|
|
|
68.1
|
%
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
For the three months ended September 30,
2012, total revenue was approximately $299.9 million, an increase of approximately $43.3 million, or 16.9% compared to the same
period last year. The revenue increase reflects the following factors:
|
·
|
Hardware and
service revenue
increased by 31.7%
and 17.4%, respectively,
compared to the
same period last
year. Software
revenue decreased
by 7.5% compared
to the same period
last year. A substantial
portion of the
increase in hardware
and service revenue
is attributable
to the hardware
and service revenue
generated by Torex.
|
|
·
|
Additional
total revenue of
approximately $48.0
million generated
by Torex.
|
|
·
|
We believe
these results,
particularly the
decrease in software
revenue, reflect
continued adverse
impact caused by
current global
economic uncertainty.
|
|
·
|
The unfavorable
foreign currency
exchange rate fluctuations,
primarily for the
Euro against the
U.S. dollar, negatively
impacted total
revenue by approximately
$8.2 million.
|
The International segment revenue for
the three months ended September 30, 2012 increased by approximately $39.1 million, an increase of 27.4% compared to the same
period last year due to the following:
|
·
|
Hardware
and service revenue
increased by 34.9%
and 31.8%, respectively,
compared to the same
period last year.
Software revenue
decreased by 1.0%
compared to the same
period last year.
A substantial portion
of the increase in
hardware and service
revenue is attributable
to the hardware and
service revenue generated
by Torex, the revenues
for which is almost
entirely attributable
to the International
segment.
|
|
·
|
The unfavorable
foreign currency
exchange rate fluctuations,
primarily for Euro
against the U.S.
dollar, negatively
impacted total
revenue by approximately
$8.2 million.
|
U.S. segment revenue for the three months
ended September 30, 2012 increased approximately $4.2 million, an increase of 3.7% compared to the same period last year due to
the following:
|
·
|
Hardware and
service revenue
increased by 27.8%
and 0.6%, respectively,
compared to the
same period last
year. The increase
in hardware revenue
was primarily due
to an increase
in sales of third
party computer
equipment to our
retail customers.
|
|
·
|
The software
revenue decreased
by 18.9% compared
to the same period
last year. We believe
this result reflects
continued adverse
impact caused by
current global
economic uncertainty.
|
Cost of Sales:
The following table provides information
regarding our cost of sales:
|
|
Three Months Ended September 30,
|
|
|
|
2012
|
|
|
2011
|
|
(in thousands)
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
|
Cost
of Sales
|
|
|
% of Related
Revenue
|
|
Hardware
|
|
$
|
43,057
|
|
|
|
67.5
|
%
|
|
$
|
30,163
|
|
|
|
62.3
|
%
|
Software
|
|
|
5,365
|
|
|
|
17.4
|
%
|
|
|
4,859
|
|
|
|
14.6
|
%
|
Service
|
|
|
98,169
|
|
|
|
47.8
|
%
|
|
|
77,120
|
|
|
|
44.1
|
%
|
Total Cost of Sales
|
|
$
|
146,591
|
|
|
|
48.9
|
%
|
|
$
|
112,142
|
|
|
|
43.7
|
%
|
For the three months ended September 30,
2012 and 2011, cost of sales as a percent of revenue were 48.9% and 43.7%, respectively. Hardware cost of sales as a percent of
related revenue for the three months ended September 30, 2012 increased 5.2% compared to the same period last year. Software cost
of sales as a percent of related revenue for the three months ended September 30, 2012 increased approximately 2.8% compared to
the same period last year. Service costs as a percent of related revenue for the three months ended September 30, 2012 increased
3.7% compared to the same period last year. These increases were substantially due to our acquisition of Torex, which has lower
margins in its products and services and higher sales of non-proprietary hardware, than MICROS generally realizes. The increases
in cost of sales were also due to unfavorable product mix between software sales and hardware sales; between MICROS hardware products
sales and third party hardware sales; and between professional services and maintenance services.
Selling, General and Administrative (“SG&A”)
Expenses:
SG&A expenses, as a percentage of
revenue, for the three months ended September 30, 2012, were 25.9%, a decrease of 3.5% compared to the same period last year.
This decrease was primarily due to decreases in compensation related expenses as compared to the same period last year.
Research and Development (“R&D”) Expenses:
R&D expenses consisted primarily of
labor costs less capitalized software development costs. The following table provides information regarding our R&D expenses:
|
|
Three Months Ended
September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
R&D labor and other costs
|
|
$
|
17,653
|
|
|
$
|
13,160
|
|
Capitalized software development costs
|
|
|
(850
|
)
|
|
|
(1,825
|
)
|
Total R&D expenses
|
|
$
|
16,803
|
|
|
$
|
11,335
|
|
% of Revenue
|
|
|
5.6
|
%
|
|
|
4.4
|
%
|
The decrease
in capitalized software development costs is primarily related to the completion of the development of our next generation retail
related software during the current period. The increase in total R&D expenses is primarily related to R&D expenses associated
with Torex
,
a company that we acquired subsequent to the prior year period.
Depreciation and Amortization Expenses:
Depreciation and amortization expenses
for the three months ended September 30, 2012 were approximately $5.5 million, an approximately $1.3 million increase compared
to the same period in 2011. This increase is related to amortization of intangible assets related to Torex, a company that we
acquired subsequent to the prior year period, substantially due to amortization of acquired intangible assets.
Share-Based Compensation Expenses:
The following table provides information
regarding the allocation of non-cash share-based compensation expense across SG&A expense, R&D expense and cost of sales:
|
|
Three Months Ended
September 30,
|
|
(in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
SG&A
|
|
$
|
3,700
|
|
|
$
|
2,659
|
|
R&D
|
|
|
437
|
|
|
|
309
|
|
Cost of sales
|
|
|
73
|
|
|
|
37
|
|
Total non-cash share-based compensation expense
|
|
|
4,210
|
|
|
|
3,005
|
|
Income tax benefit
|
|
|
(1,264
|
)
|
|
|
(943
|
)
|
Total non-cash share-based compensation expense, net of tax benefit
|
|
$
|
2,946
|
|
|
$
|
2,062
|
|
Impact on diluted net income per share attributable to MICROS Systems, Inc.
common shareholders
|
|
$
|
0.04
|
|
|
$
|
0.03
|
|
As of September 30, 2012, there was approximately
$25.6 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 1.7 years.
Non-operating Income:
Net non-operating income for the three
months ended September 30, 2012 was approximately $0.8 million compared to approximately $2.4 million for the same period in 2011.
The decrease of approximately $1.5 million was primarily due to foreign currency exchange losses of approximately $0.7 million
for the three months ended September 30, 2012 compared to foreign currency exchange gains of approximately $0.5 million for the
same period in 2011. The decrease was also attributable to a decrease in interest income of approximately $0.6 million due to
aggregate decreases of approximately $163.3 million in cash equivalents and in short-term and long-term investment balances, from
$778.9 million at September 30, 2011 to $615.6 million at September 30 2012 and due to lower interest rates during the three months
ended September 30, 2012 compared to the same period last year. This decrease in cash equivalents and investment balances reflects
the use of funds to acquire Torex in May 2012.
Income Tax Provisions:
The effective tax rate for the three months
ended September 30, 2012 and 2011 was 24.0% and 33.0%, respectively. The decrease in tax rate for the three months ended
September 30, 2012 compared to the same period in 2011 was primarily attributable to increases in tax benefits realized upon the
expiration of statutes of limitation or settlements with tax authorities and decreases in tax associated with changes in our earnings
mix among jurisdictions.
Based on currently available information,
we estimate that the fiscal year 2013 effective tax rate will be approximately between 27% and 28%. We believe that due
to earnings fluctuations, changes in the mix of earnings among jurisdictions, and the impact of certain discrete items recognized
during the interim reporting periods, there may be some degree of adjustment to the effective tax rate on a quarterly basis.
We have recognized a net decrease in
unrecognized tax benefits for the three months ended September 30, 2012 as compared to the same period in 2011, which
resulted in a reduction in the effective tax rate of 11.8% and a reduction in income tax expense by approximately $6.4
million. This reduction was primarily due to favorable settlements with tax authorities. We estimate that within the next 12
months, our unrecognized income tax benefits will decrease by between approximately $3.6 million to approximately $5.6
million due to the expiration of statues of limitations and settlement of issues with tax authorities. 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 related to uncertain tax positions.
Our income tax returns are no longer subject
to examination by the U.S. tax authorities for tax years ending before June 2011, by the U.K. tax authorities for tax years ending
before June 2009, by 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 be subject to adjustment via competent authority
or due to the impact of items such as carryback or carryforward claims.
Recent accounting
standards
Recently Adopted Accounting Pronouncements
On July 1, 2012, we adopted FASB 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. In accordance with this update, we have presented two separate but consecutive statements which include
the components of net income and other comprehensive income. The adoption of this new guidance did not have a material impact
on our condensed consolidated financial statements.
Recent Accounting Guidance Not Yet
Adopted
In July 2012, the FASB issued revised
FASB guidance on how an entity tests indefinite-lived intangible assets for impairment. Under the new guidance, an entity is no
longer required to calculate the fair value of the indefinite-lived intangible assets and perform the quantitative impairment
test unless the entity determines, based on a qualitative assessment, that it is more likely than not that the fair value of an
indefinite-lived intangible asset is less than its carrying amount. This revised guidance is effective for us beginning in our
fiscal year 2014. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial
condition and results of operations are based on our condensed 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 that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates
on historical experience and on various assumptions that we believe are reasonable under the circumstances. Actual results may
differ from these estimates.
The following comprise the categories
of critical accounting estimates that we used in the preparation of our condensed consolidated financial statements:
|
·
|
Allowance for doubtful accounts;
|
|
·
|
Financial instruments and fair value measurements;
|
|
·
|
Capitalized software development costs;
|
|
·
|
Valuation of long-lived assets and intangible assets;
|
|
·
|
Goodwill and indefinite-lived intangible assets;
|
|
·
|
Share-based compensation;
|
We have reviewed our critical accounting
estimates and the related disclosures with our Audit Committee. Critical accounting estimates are described further in our Annual
Report on Form 10-K for the year ended June 30, 2012 in Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” under the heading “Critical Accounting Estimates.”
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Our Condensed Consolidated Statement of
Cash Flows summary is as follows:
|
|
Three Months Ended
September 30,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
6,022
|
|
|
$
|
19,566
|
|
Investing activities
|
|
|
7,792
|
|
|
|
3,982
|
|
Financing activities
|
|
|
(7,457
|
)
|
|
|
(23,832
|
)
|
Operating activities:
Net cash provided by operating activities
for the three months ended September 30, 2012 decreased approximately $13.5 million compared to the three months ended September
30, 2011. This decrease was primarily due to certain unfavorable changes in working capital in comparison to the same period last
year, including higher bonus and interim income tax payments during the three months ended September 30, 2012 as compared to September
30, 2011, a longer collection period for domestic receivables and higher inventory levels. These unfavorable changes were partially
offset by an increase in net income of approximately $3.8 million.
Investing activities:
Net cash provided by investing activities
for the three months ended September 30, 2012 was approximately $7.8 million, reflecting approximately $12.5 million in cash received
from the sale of investments, net of cash used to purchase investments. We used approximately $4.6 million to purchase property,
plant and equipment, and to internally develop software to be licensed to others.
Net cash provided by investing activities
for the three months ended September 30, 2011 was approximately $4.0 million, reflecting approximately $10.4 million in cash received
from the sale of investments, net of cash used to purchase investments. We used approximately $5.9 million to purchase property,
plant and equipment, and to internally develop software to be licensed to others.
Financing activities:
Net cash used in financing activities
for the three months ended September 30, 2012 was approximately $7.5 million, reflecting approximately $13.2 million used to purchase
our stock, partially offset by proceeds from stock option exercises of approximately $4.4 million and realized tax benefits from
stock option exercises of approximately $1.4 million.
Net cash used in financing activities
for the three months ended September 30, 2011 was approximately $23.8 million, reflecting approximately $25.4 million used to
purchase our stock, partially offset by proceeds from stock option exercises of approximately $1.4 million and realized tax benefits
from stock option exercises of approximately $0.3 million.
Capital Resources
Our cash and cash equivalents and short-term
investment balance of approximately $581.2 million at September 30, 2012 is a decrease of approximately $0.9 million from the
June 30, 2012 balance. At September 30, 2012, approximately $251.6 million of our cash and cash equivalents and short-term investment
balance is held internationally. We currently have no plans to repatriate to the U.S. our cumulative unremitted foreign earnings,
as we intend to permanently reinvest such earnings internationally. If we change our strategy in the future and repatriate such
funds, the amount of any taxes, which could be significant, and the application of any tax credits, would be determined based
on the income tax laws at the time of such repatriation.
The favorable foreign exchange rate fluctuations,
substantially for the Euro against the U.S. dollar as compared to June 30, 2012, increased our cash and cash equivalents’
balance at September 30, 2012 by approximately $4.9 million. All cash and cash equivalents and short-term investments are being
retained for our operations, expansion of our business, the repurchase of our common stock, and future acquisitions.
We have two credit agreements (the “Credit
Agreements”) that, through July 31, 2013, provide an aggregate $50.0 million multi-currency committed line of credit. As
of September 30, 2012, we had no balance outstanding under the Credit Agreements and had applied approximately $0.6 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 September 30, 2012 exchange rate). As of September 30, 2012, there were no balances outstanding on this credit facility,
but approximately EUR 0.4 million (approximately $0.5 million at the September 30, 2012 exchange rate) of the credit facility
has been used for guarantees. As of September 30, 2012, we had an aggregate borrowing capacity of approximately $50.2 million
under all of the credit facilities described above. See Note 5 “Credit Agreements,” in the Notes to the Condensed
Consolidated Financial Statements included in this report for further information about our credit facilities. 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 further 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:
|
|
September 30,
|
|
|
June 30,
|
|
(in thousands, except ratios)
|
|
2012
|
|
|
2012
|
|
Cash and cash equivalents and short-term investments
(1)
|
|
$
|
581,168
|
|
|
$
|
582,038
|
|
Available credit facilities
|
|
$
|
51,286
|
|
|
$
|
51,266
|
|
Outstanding credit facilities
|
|
|
0
|
|
|
|
0
|
|
Outstanding guarantees
|
|
|
(1,119
|
)
|
|
|
(1,055
|
)
|
Unused credit facilities
|
|
$
|
50,167
|
|
|
$
|
50,211
|
|
Working capital
(2)
|
|
$
|
538,761
|
|
|
$
|
500,127
|
|
MICROS Systems, Inc.’s shareholders’ equity
|
|
$
|
1,145,349
|
|
|
$
|
1,092,645
|
|
Current ratio
(3)
|
|
|
2.33
|
|
|
|
2.20
|
|
|
(1)
|
Does not include approximately $34.3 million invested in
auction rate securities, classified as long-term investments
in our Condensed Consolidated Balance Sheet as of September 30,
2012 and June 30, 2012.
|
|
(2)
|
Current assets less current liabilities.
|
|
(3)
|
Current assets divided by current liabilities. The Company
does not have any long-term debt.
|
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Currency exchange rate risk
We recorded foreign sales, including exports
from the U.S./Canada, of approximately $181.5 million and $142.4 million during the three months ended September 30, 2012 and
2011, respectively, to customers located primarily in Europe, Asia and Latin America. See Note 10, “Segment Information”
in the Notes to Condensed Consolidated Financial Statements as well as Item 2 (Management’s Discussion and Analysis of Financial
Condition and Results of Operations) above 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 reported sales and profitability.
Frequently, sales and the costs associated with those sales are not denominated in the same currency.
We transacted business in 41 and 40 currencies
in the three months ended September 30, 2012 and 2011, respectively. The relative currency mix for the three months ended September
30, 2012 and 2011 was as follows:
|
|
% of Reported
Revenues
Three Months Ended
September 30,
|
|
|
Exchange Rates to
U.S. Dollar as of
September 30,
|
|
Revenues by currency
(1)
:
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
United States Dollar
|
|
|
41
|
%
|
|
|
50
|
%
|
|
|
1.0000
|
|
|
|
1.0000
|
|
Euro
|
|
|
25
|
%
|
|
|
23
|
%
|
|
|
1.2859
|
|
|
|
1.3387
|
|
British Pound Sterling
|
|
|
14
|
%
|
|
|
8
|
%
|
|
|
1.6163
|
|
|
|
1.5588
|
|
Australian Dollar
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
1.0379
|
|
|
|
0.9664
|
|
Swiss Franc
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
1.0640
|
|
|
|
1.1011
|
|
Singapore Dollar
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.8147
|
|
|
|
0.7649
|
|
Canadian Dollar
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1.0167
|
|
|
|
0.9525
|
|
Swedish Krona
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.1523
|
|
|
|
0.1455
|
|
Norwegian Krone
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.1745
|
|
|
|
0.1705
|
|
Mexican Pesos
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
0.0777
|
|
|
|
0.0719
|
|
All Other Currencies
(2)
|
|
|
12
|
%
|
|
|
9
|
%
|
|
|
0.1672
|
|
|
|
0.1670
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
(1) Calculated
using weighted average exchange rates for the fiscal period.
|
(2) The “% of
Reported Revenue” for “All Other Currencies” is calculated based on the weighted average three month exchange
rates for all other currencies. The “Exchange Rates to U.S. Dollar” for “All Other Currencies” represents
the weighted average September 30, 2012 and June 30, 2012 exchange rates for the currencies. Weighting is based on the
three month fiscal period 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 the Euro and British Pound Sterling in relation to the U.S. dollar in the three months ended September 30, 2012 would have
affected our total revenues by approximately $11.8 million, or 3.9%. The sensitivity analysis assumes a weighted average 10% change
in the exchange rate during the period with all other variables being held constant. This sensitivity analysis does not consider
the effect of exchange rate changes on cost of sales, operating expenses, or income taxes, and accordingly, is not necessarily
an indicator of the effect of potential exchange rate changes on our net income attributable to MICROS Systems, Inc. common shareholders.
Interest rate risk
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 by monitoring available financing alternatives. At September 30,
2012, we had no borrowings and had not entered into any instruments to hedge our 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 borrowings as of September 30, 2012, a 1% change in interest rate would have no impact on our condensed
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 September 30, 2012, but the change in our interest income for the three months ended September
30, 2012 would be an increase or decrease (depending on the nature of the fluctuation) of approximately $1.5 million based on
the cash, cash equivalents and short term investment balances as of September 30, 2012.
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
ratings of “A” and above. See Note 3 “Financial Instruments and Fair Value Measurements” in the Notes
to Condensed Consolidated Financial Statements for a discussion regarding auction rate securities.
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,” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
ITEM 4. 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.
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.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Note 12 to the Condensed Consolidated
Financial Statements included in this report for information regarding pending legal proceedings.
ITEM 1A. RISK FACTORS.
In addition to other information presented
in this report, including the risk factors set forth below, you should consider carefully the factors discussed in Item 1A, “Risk
Factors” in our Annual Report on Form 10-K for the year ended June 30, 2012.
Weakened consumer spending, and low or
declining gross domestic products (“GDPs”) in many of the countries in which we have a presence, coupled with difficulties
many businesses continue to encounter in obtaining credit, have negatively affected our customers’ operating results, which
we believe may have an adverse impact on their ability to acquire or open new hospitality and retail venues, as well as their
ability to make significant capital expenditures on the systems that we sell. We believe these constraints may cause and in some
cases may have already caused our customers to maintain their existing systems rather than purchase newer systems.
ITEM 2.
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 24, 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 September 30, 2012, approximately
1.4 million shares remain available for purchase under this authorization. During the first quarter of fiscal year 2013, our stock
purchases were as follows:
Issuer Purchases of Equity
Securities
|
|
Total
Number
of
Shares
Purchased
(1)
|
|
|
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
|
|
07/01/12 – 07/31/12
|
|
|
100,000
|
|
|
$
|
47.41
|
|
|
|
100,000
|
|
|
|
1,540,270
|
|
08/01/12 – 08/31/12
|
|
|
100,000
|
|
|
$
|
47.19
|
|
|
|
100,000
|
|
|
|
1,440,270
|
|
09/01/12 – 09/30/12
|
|
|
76,402
|
|
|
$
|
48.49
|
|
|
|
76,402
|
|
|
|
1,363,868
|
|
|
|
|
276,402
|
|
|
|
|
|
|
|
276,402
|
|
|
|
|
|
(1) Purchases of company securities described
in the table were made under the repurchase authorized on August 24, 2010. The repurchase authorization expires on August 24,
2013.
ITEM 6. 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.
|
|
23
|
Consent of Houlihan Capital Advisors, 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)
|
|
101
|
The following materials from MICROS Systems, Inc.’s quarterly
report on Form 10-Q for the quarter ended September 30, 2012, formatted
in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated
Balance Sheets at September 30, 2012 and June 30, 2012, (ii) Condensed
Consolidated Statements of Operations for the three months ended September
30, 2012 and 2011, (iii) Condensed Consolidated Statements of Comprehensive
Income for the three months ended September 30, 2012 and 2011, (iv)
Condensed Consolidated Statements of Cash Flows for the three months
ended September 30, 2012 and 2011, (v) Condensed Consolidated Statements
of Shareholders’ Equity for the three months ended September
30, 2012 and 2011, and (vi) Notes to Condensed Consolidated Financial
Statements.
|
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
MICROS SYSTEMS, INC.
|
|
(Registrant)
|
|
|
Date: October 29, 2012
|
/s/ Cynthia A. Russo
|
|
Cynthia A. Russo
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
|
Date: October 29, 2012
|
/s/ Michael P. Russo
|
|
Michael P. Russo
|
|
Vice President, Corporate Controller, and Principal Accounting Officer
|
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