Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCFinancial_Report.xls
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR8.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR9.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR5.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR1.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR6.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR2.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR3.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR4.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR7.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR43.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR35.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR44.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR10.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR42.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR16.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR33.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR21.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR40.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR39.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR30.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR29.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR26.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR41.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR12.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR14.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR37.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR28.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR36.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR19.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR31.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR27.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR22.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR23.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR32.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR15.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR38.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR24.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR17.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR34.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR18.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR25.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR11.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR13.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR45.htm
XML - IDEA: XBRL DOCUMENT - MICROS SYSTEMS INCR20.htm
EX-31.A - EXHIBIT 31.A - MICROS SYSTEMS INCv331862_ex31a.htm
EX-32.A - EXHIBIT 32.A - MICROS SYSTEMS INCv331862_ex32a.htm
EX-32.B - EXHIBIT 32.B - MICROS SYSTEMS INCv331862_ex32b.htm
EX-31.B - EXHIBIT 31.B - MICROS SYSTEMS INCv331862_ex31b.htm
EX-10.2 - EXHIBIT 10.2 - MICROS SYSTEMS INCv331862_ex10-2.htm
EX-10.1 - EXHIBIT 10.1 - MICROS SYSTEMS INCv331862_ex10-1.htm
EX-10.4 - EXHIBIT 10.4 - MICROS SYSTEMS INCv331862_ex10-4.htm
EX-10.3 - EXHIBIT 10.3 - MICROS SYSTEMS INCv331862_ex10-3.htm

 

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 December 31, 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 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 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 ¨
   
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 o               NO þ

 

As of December 31, 2012, there were issued and outstanding 79,340,976 shares of Registrant’s Common Stock, $0.025 par value.

 

1
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES

 

Form 10-Q

For the three and six months ended December 31, 2012

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

2
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except par value data)

 

   December 31,   June 30, 
   2012   2012 
ASSETS          
Current Assets:          
Cash and cash equivalents  $552,110   $562,786 
Short-term investments   79,723    19,252 
Accounts receivable, net of allowance for doubtful accounts of $31,601 at December 31, 2012 and $31,753 at June 30, 2012   215,549    235,433 
Inventory   52,728    44,278 
Deferred income taxes   13,313    17,004 
Prepaid expenses and other current assets   54,995    37,343 
Total current assets   968,418    916,096 
           
Long-term investments   5,579    34,456 
Property, plant and equipment, net   39,350    35,435 
Deferred income taxes, non-current   54,602    50,326 
Goodwill   453,956    444,117 
Intangible assets, net   41,441    45,024 
Purchased and internally developed software costs, net of accumulated amortization of $91,069 at December 31, 2012 and $87,073 at June 30, 2012   34,986    33,980 
Other assets   6,837    6,586 
Total assets  $1,605,169   $1,566,020 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Current Liabilities:          
Accounts payable  $63,128   $69,978 
Accrued expenses and other current liabilities   145,124    174,214 
Income taxes payable   11,956    1,788 
Deferred revenue   164,760    169,989 
Total current liabilities   384,968    415,969 
           
Income taxes payable, non-current   33,136    34,722 
Deferred income taxes, non-current   866    2,554 
Other non-current liabilities   15,988    16,644 
Total Liabilities   434,958    469,889 
           
Commitments and contingencies (Note 11)          
           
Equity:          
MICROS Systems, Inc. Shareholders' Equity:          
Common stock, $0.025 par value; authorized 120,000 shares; issued and outstanding 79,341 at December 31, 2012 and 80,309 at June 30, 2012   1,984    2,008 
Capital in excess of par   71,773    107,662 
Retained earnings   1,085,972    1,000,822 
Accumulated other comprehensive income (loss)   7,389    (17,847)
Total MICROS Systems, Inc. shareholders' equity   1,167,118    1,092,645 
Noncontrolling interest   3,093    3,486 
Total equity   1,170,211    1,096,131 
           
Total liabilities and shareholders' equity  $1,605,169   $1,566,020 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

 

   Three Months Ended   Six Months Ended 
   December 31,   December 31, 
   2012   2011   2012   2011 
                 
Revenue:                    
Hardware  $67,245   $57,427   $131,004   $105,837 
Software   38,747    34,552    69,525    67,824 
Services   218,528    178,424    423,842    353,300 
Total revenue   324,520    270,403    624,371    526,961 
                     
Cost of sales:                    
Hardware   43,295    36,637    86,352    66,800 
Software   5,257    4,294    10,621    9,153 
Services   103,849    77,151    202,019    154,271 
Total cost of sales   152,401    118,082    298,992    230,224 
                     
Gross margin   172,119    152,321    325,379    296,737 
                     
Selling, general and administrative expenses   87,153    81,973    164,898    157,383 
Research and development expenses   17,854    12,479    34,657    23,814 
Depreciation and amortization   5,521    3,624    11,046    7,860 
Total operating expenses   110,528    98,076    210,601    189,057 
                     
Income from operations   61,591    54,245    114,778    107,680 
                     
Non-operating income (expense):                    
Interest income   1,224    1,877    2,571    3,849 
Interest expense   (95)   (112)   (266)   (270)
Other income (expense), net   2,859    (350)   2,530    198 
Total non-operating income, net   3,988    1,415    4,835    3,777 
                     
Income before taxes   65,579    55,660    119,613    111,457 
Income tax provision   21,289    17,477    34,257    35,891 
Net income   44,290    38,183    85,356    75,566 
Less: Net (income) loss attributable to noncontrolling interest   (204)   102    (206)   (49)
Net income attributable to MICROS Systems, Inc.  $44,086   $38,285   $85,150   $75,517 
                     
Net income per share attributable to MICROS Systems, Inc. common shareholders:                    
Basic  $0.55   $0.48   $1.06   $0.94 
Diluted  $0.54   $0.47   $1.04   $0.92 
                     
Weighted-average number of shares outstanding:                    
Basic   79,798    80,151    80,011    80,362 
Diluted   81,289    81,971    81,643    82,190 

 

The details of total other-than-temporary impairment losses ("OTTI") of long-term investments included in other non-operating income (expense) (1):

 

   Three Months Ended   Six Months Ended 
   December 31,   December 31, 
(in thousands)  2012   2011   2012   2011 
                     
Credit based OTTI recognized in non-operating income/expense  $600   $-   $600   $- 

 

(1) See Note 3 "Financial Instruments and Fair Value Measurements" in Notes to Consolidated Financial Statements.

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

4
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)

 

   Three Months Ended 
   December 31, 
   2012   2011 
         
Net income  $44,290   $38,183 
Other comprehensive income (loss), net of taxes:          
Foreign currency translation adjustments, net of tax of $0   7,729    (14,345)
Change in unrealized losses on long-term investments, net of taxes (benefits) of $1,653 and $39   2,685    64 
Total other comprehensive income (loss), net of taxes   10,414    (14,281)
           
Comprehensive income   54,704    23,902 
           
Comprehensive (income) loss attributable to noncontrolling interest   (206)   242 
           
Comprehensive income attributable to MICROS Systems, Inc.  $54,498   $24,144 

 

   Six Months Ended 
   December 31, 
   2012   2011 
         
Net income  $85,356   $75,566 
Other comprehensive income (loss), net of taxes:          
Foreign currency translation adjustments, net of tax of $0   22,603    (58,520)
Change in unrealized losses on long-term investments, net of taxes (benefits) of $1,652 and ($529)   2,683    (860)
Total other comprehensive income (loss), net of taxes   25,286    (59,380)
           
Comprehensive income   110,642    16,186 
           
Comprehensive (income) loss attributable to noncontrolling interest   (256)   498 
           
Comprehensive income attributable to MICROS Systems, Inc.  $110,386   $16,684 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

  

5
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

 

   Six Months Ended 
   December 31, 
   2012   2011 
         
Net cash flows provided by operating activities  $65,735   $63,389 
           
Cash flows from investing activities:          
Proceeds from maturities of investments   23,824    69,887 
Proceeds from sales of auction rate securities   36,719    - 
Purchases of investments   (83,841)   (74,327)
Purchases of property, plant and equipment   (10,009)   (8,300)
Internally developed software costs   (2,225)   (3,949)
Net cash paid for acquisitions   (167)   (520)
Other   45    36 
Net cash flows used in investing activities   (35,654)   (17,173)
           
Cash flows from financing activities:          
Repurchases of common stock   (53,372)   (48,449)
Proceeds from stock option exercises   4,655    3,060 
Realized tax benefits from stock option exercises   1,426    1,322 
Cash paid for acquisition of non-controlling interest   (846)   - 
Other   (51)   (82)
Net cash flows used in financing activities   (48,188)   (44,149)
           
Effect of exchange rate changes on cash and cash equivalents   7,431    (37,278)
           
Net decrease in cash and cash equivalents   (10,676)   (35,211)
           
Cash and cash equivalents at beginning of period   562,786    661,259 
Cash and cash equivalents at end of period  $552,110   $626,048 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

6
 

 

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   -    -    -    85,150    -    206    85,356 
Foreign currency translation adjustments,
net of tax of $0
   -    -    -    -    22,553    50    22,603 
Unrealized losses on long-term investments, net of tax benefits of $1,652   -    -    -    -    2,683    -    2,683 
Acquisition of non-controlling interest   -    -    (197)   -    -    (649)   (846)
Share-based compensation   -    -    11,526    -    -    -    11,526 
Stock issued upon exercise of options   228    6    4,649    -    -    -    4,655 
Repurchases of stock   (1,196)   (30)   (53,342)   -    -    -    (53,372)
Income tax benefit from options exercised   -    -    1,475    -    -    -    1,475 
Balance, December 31, 2012   79,341   $1,984   $71,773   $1,085,972   $7,389   $3,093   $1,170,211 

 

   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   -    -    -    75,517    -    49    75,566 
Foreign currency translation adjustments, net of tax of $0   -    -    -    -    (57,973)   (547)   (58,520)
Unrealized losses on long-term investments, net of tax benefits of $529   -    -    -    -    (860)   -    (860)
Share-based compensation   -    -    8,781    -    -    -    8,781 
Stock issued upon exercise of options   192    5    3,055    -    -    -    3,060 
Repurchases of stock   (1,076)   (27)   (48,422)   -    -    -    (48,449)
Income tax benefit from options exercised   -    -    1,408    -    -    -    1,408 
Balance, December 31, 2011   79,921   $1,998   $97,351   $909,356   $(10,510)  $6,042   $1,004,237 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

7
 

 

MICROS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.BASIS OF PRESENTATION

 

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 and six months ended December 31, 2012 are not necessarily indicative of the results to be expected for the full year or any future periods.

 

2.INVENTORY

 

The following table provides information on the components of inventory:

 

(in thousands)  December 31,
2012
   June 30,
2012
 
Raw materials  $1,422   $1,427 
Finished goods   51,306    42,851 
Total inventory  $52,728   $44,278 

 

3.FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Short-term and long-term investments consist of the following:

 

   As of December 31, 2012   As of June 30, 2012 
(in thousands)  Amortized
Cost Basis
   Aggregate
Fair Value
   Amortized
Cost Basis
   Aggregate
Fair Value
 
Time deposit – international  $333   $333   $19,419   $19,419 
Time deposit - domestic   34,118    34,118    0    0 
U.S. government debt securities   45,451    45,451    0    0 
Auction rate securities   6,000    5,400    52,625    34,289 
Total investments  $85,902   $85,302   $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).

 

8
 

 

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, December 31, 2012:                    
Short-term and long-term investments:                    
Time deposit – international  $0   $333   $0   $333 
Time deposit - domestic   0    34,118    0    34,118 
U.S. government debt securities   45,451    0    0    45,451 
Auction rate security   0    0    5,400    5,400 
Total short-term and long-term investments  $45,451   $34,451   $5,400   $85,302 
                     
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 December 31, 2012 and June 30, 2012, the Company’s investments, other than the Company’s investment 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 and six months ended December 31, 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 December 31, 2012 are as follows:

 

(in thousands)  Amortized
Cost Basis
   Aggregate
Fair Value
 
Due within one year  $79,723   $79,723 
Due between 1 – 2 years   179    179 
Due after 10 years – auction rate security   6,000    5,400 
Total short-term and long-term investments  $85,902   $85,302 

 

AUCTION RATE SECURITIES

 

The Company’s investment in one remaining auction rate security, carried at estimated fair value, was its only assets valued on the basis of Level 3 inputs at December 31, 2012. 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 one remaining auction rate security held by the Company is secured by student loans for which repayment is guaranteed by the Federal Family Education Loan Program (“FFELP”). 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. The auction rate securities have been classified as long-term investments available-for-sale since February 2008 instead of being classified as short-term investments, as was the case before February 2008.

 

During the quarter ended December 31, 2012, the Company sold auction rate securities having a cost basis of approximately $46.6 million and a carrying value of approximately $32.6 million. As a result of the transaction, the Company recognized a gain of approximately $4.1 million.

 

9
 

 

A summary of the sale of auction rate securities during the three and six month periods ended December 31, 2012 and 2011 were as follows:

 

   Three Months Ended   Six Months Ended 
   December 31,   December 31, 
(in thousands)  2012   2011   2012   2011 
Original cost, par value  $46,625   $0   $46,625   $0 
Impairment losses previously recorded in:                    
Consolidated statement of operations   (14,000)   0    (14,000)   0 
Carrying value   32,625    0    32,625    0 
Proceeds from sales   36,719    0    36,719    0 
Gain from sales recorded in consolidated statement of operations  $4,094   $0   $4,094   $0 

 

As of December 31, 2012, following a series of disposals in the three months ended December 31, 2012, described in the table above, the Company had one auction rate security remaining with an original cost of $6.0 million. The Company updated its assessment as of December 31, 2012 as to whether it would likely recover the entire cost basis of this security, whether the security had incurred an other-than-temporary impairment, and the amount of the other-than-temporary impairment attributable to credit loss. The fair value assessment was based on a contingent written offer from the issuer of the security to repurchase the security, and the Company’s decision to sell it to the issuer. This assessment is subject to change based on the underlying contingent terms of the offer and market conditions. Based on its evaluation, the Company determined that the cumulative other-than-temporary impairment loss of approximately $0.6 million as of December 31, 2012 was credit based, and recorded the $0.6 million loss in the Company’s statement of operations for the three and six months ended December 31, 2012.

 

The following table contains a reconciliation of changes in the fair value of auction rate securities, and the related unrealized losses for the six months ended December 31, 2012 and 2011:

 

(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 
Change in losses related to investments   0    (3)   0    0    (3)
Balance, September 30, 2012   52,625    (4,339)   0    (14,000)   34,286 
Change in losses related to investments   0    515    0    (600)   (85)
Changes in losses related to sale   (46,625)   3,824    0    14,000    (28,801)
Balance, December 31, 2012  $6,000   $0   $0   $(600)  $5,400 

 

(in thousands)  Cost   Temporary
Impairment
Loss (1)
   OTTI –
Non-Credit
Loss (1)
   OTTI –
Credit
Loss (2)
   Fair Value 
Balance, June 30, 2011  $57,625   $(6,280)  $0   $(10,000)  $41,345 
Changes in losses related to investments   0    (1,492)   0    0    (1,492)
Balance, September 30, 2011   57,625    (7,772)   0    (10,000)   39,853 
Changes in losses related to investments   0    103    0    0    103 
Balance, December 31, 2011  $57,625   $(7,669)  $0   $(10,000)  $39,956 

 

(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)Increases in the amounts in this column are recorded in the condensed consolidated statement of operations.

 

The Company plans to continue to monitor its investment, including the liquidity and creditworthiness of the issuer, of its one remaining auction rate security 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 security will have a material impact on its overall ability to meet its liquidity needs.

 

10
 

 

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 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 caused the Company to determine that it is more likely than not that its indefinite-lived trademarks have been impaired.

 

5.CREDIT AGREEMENTS

 

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 a number of the Company’s 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 December 31, 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 December 31, 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 December 31, 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 December 31, 2012, there were no balances outstanding on this credit facility, but approximately EUR 0.4 million (approximately $0.5 million at the December 31, 2012 exchange rate) of the credit facility has been used for guarantees.

 

 As of December 31, 2012, the Company had an aggregate borrowing capacity of approximately $50.2 million available under all of the credit facilities described above.

 

11
 

 

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

December 31,

   Six Months Ended
December 31,
 
(in thousands)  2012   2011   2012   2011 
Selling, general and administrative  $6,905   $5,424   $10,605   $8,082 
Research and development   328    305    766    614 
Cost of sales   82    48    155    85 
Total non-cash share-based compensation expense   7,315    5,777    11,526    8,781 
Income tax benefit   (2,391)   (1,959)   (3,655)   (2,902)
Total non-cash share-based compensation expense, net of tax benefit  $4,924   $3,818   $7,871   $5,879 
Impact on diluted net income per share attributable to MICROS Systems, Inc. common shareholders  $0.06   $0.05   $0.10   $0.07 

  

No non-cash share-based compensation expense has been capitalized for the three and six months ended December 31, 2012 and 2011. As of December 31, 2012, there was approximately $31.2 million (net of estimated forfeitures) in non-cash share-based compensation expense related to non-vested awards that is expected to be recognized in the Company’s consolidated statements of operations over a weighted-average period of 2.0 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 shares of 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
December 31,
   Six Months Ended
December 31,
 
(in thousands, except per share data)  2012   2011   2012   2011 
Net income attributable to MICROS Systems, Inc.  $44,086   $38,285   $85,150   $75,517 
                     
Average common shares outstanding   79,798    80,151    80,011    80,362 
Dilutive effect of outstanding stock options   1,491    1,820    1,632    1,828 
Average common shares outstanding assuming dilution   81,289    81,971    81,643    82,190 
                     
Basic net income per share attributable to MICROS Systems, Inc. common shareholders  $0.55   $0.48   $1.06   $0.94 
Diluted net income per share attributable to MICROS Systems, Inc. common shareholders  $0.54   $0.47   $1.04   $0.92 
                     
Anti-dilutive weighted shares excluded from reconciliation   2,403    1,511    2,049    1,316 

 

Results for the three months ended December 31, 2012 and 2011 include approximately $7.3 million ($4.9 million, net of tax) and $5.8 million ($3.8 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 $0.06 and $0.05 for the three months ended December 31, 2012 and 2011, respectively.

 

 Results for the six months ended December 31, 2012 and 2011 include approximately $11.5 million ($7.9 million, net of tax) and $8.8 million ($5.9 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 $0.10 and $0.07 for the six months ended December 31, 2012 and 2011, respectively.

 

12
 

 

8.INCOME TAXES

 

The effective tax rate for the three months ended December 31, 2012 and 2011 was 32.5% and 31.4%, respectively. The increase in effective tax rate for the three months ended December 31, 2012 compared to the same period last year was primarily attributable to an increase in taxes associated with changes in the Company’s earnings mix among jurisdictions.

 

 The effective tax rate for the six months ended December 31, 2012 and 2011 was 28.6% and 32.2%, respectively. The decrease in effective tax rate for the six months ended December 31, 2012 compared to the same period last year was primarily attributable to an increase in tax benefits realized upon the expiration of statutes of limitation or settlements with tax authorities, partially offset by an increase due to changes in the Company’s earnings mix among jurisdictions. The Company has recognized a decrease in unrecognized tax benefits for the six months ended December 31, 2012 as compared to the same period last year, which resulted in a reduction in income tax expense of approximately $6.3 million and a reduction in the effective tax rate of 5.4%. 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 $3.8 million and approximately $5.8 million due to the expiration of statues of limitations and settlements 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 currently has no plans to repatriate to the U.S. its cumulative unremitted foreign earnings, as it intends to permanently reinvest such earnings internationally. If the Company changes its 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 appropriate jurisdictional income tax laws at the time of such repatriation. Due to the extent of uncertainty as to which remittance structure would be used should a decision be made in the future to repatriate, the availability and the complexity of calculating foreign tax credits, and the implications of indirect taxes, including withholding taxes, determination of the unrecognized deferred income tax liability related to these unremitted earnings is not practicable.

 

 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 as a result of the competent authority process 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 that 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 the new guidance, 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 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.

13
 

10.SEGMENT INFORMATION

 

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 set forth below:

 

  

Three Months Ended

December 31,

   Six Months Ended
December 31,
 
(in thousands)  2012   2011   2012   2011 
Revenues (1):                    
U.S./Canada  $138,265   $135,227   $267,552   $266,070 
International   199,793    149,768    381,602    286,529 
Intersegment eliminations (2)   (13,538)   (14,592)   (24,783)   (25,638)
Total revenues  $324,520   $270,403   $624,371   $526,961 
                     
Income before taxes (1):                    
U.S./Canada  $36,510   $29,733   $71,363   $61,910 
International   39,193    36,679    66,672    68,568 
Intersegment eliminations (2)   (10,124)   (10,752)   (18,422)   (19,021)
Total income before taxes  $65,579   $55,660   $119,613   $111,457 
                     

   As of 
(in thousands) 

December 31,

2012

   June 30,
2012
 
Identifiable assets (3):          
U.S./Canada  $705,447   $724,902 
International   899,722    841,118 
Total identifiable assets  $1,605,169   $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.

 

11.SHAREHOLDERS’ EQUITY

 

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 December 31, 2012, approximately 0.4 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:

 

(in thousands, except per share data)  Number of
Shares
   Average
Purchase Price
per Share
   Total Purchase
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 
Three months ended December 31, 2012   920    43.70    40,207 
As of December 31, 2012   15,556   $25.81   $401,438 

 

On January 22, 2013, the Company’s Board of Directors authorized the purchase of up to 2 million additional shares of the Company’s common stock, to be purchased from time to time over the ensuing three years.

 

14
 

 

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 had accrued at the statutory rate of 6% per annum, and (ii) certain reductions and offsets that were approved by the Court of Common Pleas. Upon the conclusion of the post-appeal proceedings in the trial court, the Court of Common Pleas entered an order amending the judgment in favor of the plaintiff in the Roth Matter, which had been in the amount of $4.5 million before the appeal, to an award of approximately $2.8 million. The Company has appealed the amended judgment.

 

 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 condition, results of operations, and liquidity.

 

15
 

 

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 the timing of 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 expectations regarding the effects of current economic conditions on our customers, our distributors, and our business generally;
·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;
·our statements regarding valuation of our investment in an auction rate security and our plans to monitor our investment including as to liquidity of and creditworthiness of the issuer of the one remaining auction rate security;
·our belief that any reduction in liquidity of our one remaining auction rate security 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 effective tax rates in future periods; and
·our statements regarding the effects of foreign currency rate fluctuations (in particular, the Euro and British Pound Sterling) on our financial performance.

 

RESULTS OF OPERATIONS

 

The following discussion of our results of operations for the three- and six-month periods ended December 31, 2012 includes the results of operations of Torex Retail Holdings Ltd. (“Torex”), a company we acquired on May 31, 2012.

 

16
 

 

Revenue:

 

Three Months Ended December 31, 2012:

 

The following table provides information regarding sales mix by reportable segments for the three months ended December 31, 2012 and 2011 (amounts are net of intersegment eliminations, and are allocated to the particular segment based on the location of the customer):

 

   Three Months Ended December 31, 
   U.S./Canada   International   Total 
(in thousands)  2012   2011   2012   2011   2012   2011 
Hardware  $28,166   $26,371   $39,079   $31,056   $67,245   $57,427 
Software   14,252    11,514    24,495    23,038    38,747    34,552 
Service   84,090    78,490    134,438    99,934    218,528    178,424 
Total Revenue  $126,508   $116,375   $198,012   $154,028   $324,520   $270,403 

 

The following table provides information regarding the total sales mix as a percent of total revenue:

 

   Three Months Ended
December 31,
 
(in thousands)  2012   2011 
Hardware   20.7%   21.2%
Software   11.9%   12.8%
Service   67.4%   66.0%
Total   100.0%   100.0%

 

For the three months ended December 31, 2012, total revenue was approximately $324.5 million, an increase of approximately $54.1 million, or 20.0% compared to the same period last year. The revenue increase reflects the following factors:

 

·Hardware, software and service revenue increased by 17.1%, 12.1% and 22.5%, respectively, compared to the same period last year. These increases were largely attributable to the approximately $48.0 million of revenue generated by Torex, which was comprised of hardware revenue of approximately $10.7 million, software revenue of approximately $2.8 million and services revenue of approximately $34.4 million.
·Current global economic uncertainty continued to have an adverse impact on revenues.
·The unfavorable foreign currency exchange rate fluctuations, primarily for the Euro against the U.S. dollar, negatively impacted total revenue by approximately $0.9 million.

 

The International segment revenue for the three months ended December 31, 2012 increased by approximately $44.0 million, an increase of 28.6% compared to the same period last year due to the following:

 

·Hardware, software and service revenue increased by 25.8%, 6.3% and 34.5%, respectively, compared to the same period last year. These increases are largely due to the additional revenues generated by Torex.
·The unfavorable foreign currency exchange rate fluctuations, primarily for the Euro against the U.S. dollar, negatively impacted total revenue by approximately $0.9 million.

 

U.S. segment revenue for the three months ended December 31, 2012 increased approximately $10.1 million, an increase of 8.7% compared to the same period last year due to the following:

 

·Hardware, software and service revenue increased by 6.8%, 23.8% and 7.1%, respectively, compared to the same period last year.
·The increase in software revenue is primarily due to an increase in sales of our retail software.
·The increase in service revenue is primarily due to increases in hosting and maintenance services, partially offset by a decrease in our professional services.

 

17
 

 

Six Months Ended December 31, 2012:

 

The following table provides information regarding sales mix by reportable segments for the six months ended December 31, 2012 and 2011 (amounts are net of intersegment eliminations, and are allocated to the particular segment based on the location of the customer):

 

   Six Months Ended December 31, 
   U.S./Canada   International   Total 
(in thousands)  2012   2011   2012   2011   2012   2011 
Hardware  $55,640   $47,874   $75,364   $57,963   $131,004   $105,837 
Software   24,007    23,543    45,518    44,281    69,525    67,824 
Service   165,224    159,115    258,618    194,185    423,842    353,300 
Total Revenue  $244,871   $230,532   $379,500   $296,429   $624,371   $526,961 

 

The following table provides information regarding the total sales mix as a percent of total revenue:

 

   Six Months Ended
December 31,
 
(in thousands)  2012   2011 
Hardware   21.0%   20.1%
Software   11.1%   12.9%
Service   67.9%   67.0%
Total   100.0%   100.0%

 

For the six months ended December 31, 2012, total revenue was approximately $624.4 million, an increase of approximately $97.4 million, or 18.5% compared to the same period last year. The revenue increase reflects the following factors:

 

·Hardware, software and service revenue increased by 23.8%, 2.5% and 20.0%, respectively, compared to the same period last year. These increases were largely attributable to the approximately $96.0 million of revenue generated by Torex, which was comprised of hardware revenue of approximately $23.8 million, software revenue of approximately $4.8 million and services revenue of approximately $67.4 million.
·Current global economic uncertainty continued to have an adverse impact on revenues.
·The unfavorable foreign currency exchange rate fluctuations, primarily for the Euro and British Pound Sterling against the U.S. dollar, negatively impacted total revenue by approximately $9.1 million.

 

The International segment revenue for the six months ended December 31, 2012 increased by approximately $83.1 million, an increase of 28.0% compared to the same period last year due to the following:

 

·Hardware, software and service revenue increased by 30.0%, 2.8% and 33.2%, respectively, compared to the same period last year. These increases are largely attributable to the additional revenues generated by Torex.
·The unfavorable foreign currency exchange rate fluctuations, primarily for Euro and British Pound Sterling against the U.S. dollar, negatively impacted total revenue by approximately $9.1 million.

 

U.S. segment revenue for the six months ended December 31, 2012 increased approximately $14.3 million, an increase of 6.2% compared to the same period last year due to the following:

 

·Hardware, software and service revenue increased by 16.2%, 2.0% and 3.8%, 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 during the three months ended September 30, 2012.
·The increase in software revenue is primarily due to increases in sales of our retail software and Simphony software, partially offset by a decrease in sales of third party software.
·The increase in service revenue was primarily due to increases in maintenance and hosting services, partially offset by a decrease in our professional services.

 

18
 

 

Cost of Sales:

 

Three Months Ended December 31, 2012:

 

The following table provides information regarding our cost of sales:

 

   Three Months Ended December 31, 
   2012   2011 
(in thousands)  Cost
of Sales
  

% of Related

Revenue

   Cost
of Sales
  

% of Related

Revenue

 
Hardware  $43,295    64.4%  $36,637    63.8%
Software   5,257    13.6%   4,294    12.4%
Service   103,849    47.5%   77,151    43.2%
Total Cost of Sales  $152,401    47.0%  $118,082    43.7%

 

For the three months ended December 31, 2012 and 2011, cost of sales as a percent of revenue was 47.0% and 43.7%, respectively. Hardware cost of sales as a percent of hardware revenue for the three months ended December 31, 2012 increased 0.6% compared to the same period last year. Software cost of sales as a percent of software revenue for the three months ended December 31, 2012 increased approximately 1.2% compared to the same period last year. Service costs as a percent of service revenue for the three months ended December 31, 2012 increased 4.3% compared to the same period last year. These increases were mostly due to our acquisition of Torex, which has higher sales of non-proprietary hardware, and lower margins in its products and services than MICROS generally realizes. The increases also reflect an unfavorable product mix between MICROS hardware products sales and third party hardware sales, and between professional services and maintenance services. MICROS generally realizes higher margins on professional services than it does on maintenance services.

 

Six Months Ended December 31, 2012:

 

The following table provides information regarding our cost of sales:

 

   Six Months Ended December 31, 
   2012   2011 
(in thousands)  Cost
of Sales
  

% of Related

Revenue

   Cost
of Sales
  

% of Related

Revenue

 
Hardware  $86,352    65.9%  $66,800    63.1%
Software   10,621    15.3%   9,153    13.5%
Service   202,019    47.7%   154,271    43.7%
Total Cost of Sales  $298,992    47.9%  $230,224    43.7%

 

For the six months ended December 31, 2012 and 2011, cost of sales as a percent of revenue were 47.9% and 43.7%, respectively. Hardware cost of sales as a percent of hardware revenue for the six months ended December 31, 2012 increased 2.8% compared to the same period last year. Software cost of sales as a percent of software revenue for the six months ended December 31, 2012 increased approximately 1.8% compared to the same period last year. Service costs as a percent of service revenue for the six months ended December 31, 2012 increased 4.0% compared to the same period last year. These increases were substantially due to our acquisition of Torex, which has higher sales of non-proprietary hardware, and lower margins in its products and services than MICROS generally realizes and due to an unfavorable product mix between MICROS hardware products sales and third party hardware sales, and between professional services and maintenance services. MICROS generally realizes higher margins on professional services than it does on maintenance services.

 

Selling, General and Administrative (“SG&A”) Expenses:

 

SG&A expenses, as a percentage of revenue, for the three months ended December 31, 2012, were 26.9%, a decrease of 3.5% compared to the same period last year. SG&A expenses, as a percentage of revenue, for the six months ended December 31, 2012, were 26.4%, a decrease of 3.5% compared to the same period last year. The decreases in both 2012 periods were primarily due to decreases in compensation related expenses as compared to the same periods last year.

 

19
 

 

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

December 31,

   Six Months Ended
December 31,
 
(in thousands)  2012   2011   2012   2011 
R&D labor and other costs  $19,229   $14,603   $36,882   $27,763 
Capitalized software development costs   (1,375)   (2,124)   (2,225)   (3,949)
Total R&D expenses  $17,854   $12,479   $34,657   $23,814 
% of Revenue   5.5%   4.6%   5.6%   4.5%

 

The decrease in capitalized software development costs is primarily related to the completion of the development of our supply chain and life cycle management tool software during the three months ended September 30, 2012. The increase in total R&D expenses is primarily related to R&D expenses associated with Torex.

 

Depreciation and Amortization Expenses:

 

Depreciation and amortization expenses for the three months ended December 31, 2012 were approximately $5.5 million, an approximately $1.9 million increase compared to the same period in 2011. Depreciation and amortization expenses for the six months ended December 31, 2012 were approximately $11.0 million, an approximately $3.2 million increase compared to the same period in 2011. The increases in both 2012 periods are primarily due to amortization of acquired intangible assets related to Torex.

 

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

December 31,

   Six Months Ended
December 31,
 
(in thousands)  2012   2011   2012   2011 
Selling, general and administrative  $6,905   $5,424   $10,605   $8,082 
Research and development   328    305    766    614 
Cost of sales   82    48    155    85 
Total non-cash share-based compensation expense   7,315    5,777    11,526    8,781 
Income tax benefit   (2,391)   (1,959)   (3,655)   (2,902)
Total non-cash share-based compensation expense, net of tax benefit  $4,924   $3,818   $7,871   $5,879 
Impact on diluted net income per share attributable to MICROS Systems, Inc. common shareholders  $0.06   $0.05   $0.10   $0.07 

  

As of December 31, 2012, there was approximately $31.2 million in non-cash share-based compensation expense related to non-vested awards that were not yet recognized in our consolidated statements of operations. This expense is expected to be recognized over a weighted-average period of 2.0 years.

 

Non-operating Income:

 

Net non-operating income for the three months ended December 31, 2012 was approximately $4.0 million compared to approximately $1.4 million for the same period in 2011. The increase of approximately $2.6 million was due to an approximately $4.1 million gain on the sale of auction rate securities during the three months ended December 31, 2012. This increase was partially offset by a $0.6 million credit based impairment loss on our one remaining auction rate security in our portfolio and a decrease in interest income of approximately $0.7 million for the three months ended December 31, 2012. The decrease in interest income was due to lower funds available to earn interest, primarily reflecting funds used to acquire Torex, and lower interest rates during the three months ended December 31, 2012.

 

20
 

 

Net non-operating income for the six months ended December 31, 2012 was approximately $4.8 million compared to approximately $3.8 million for the same period in 2011. The increase of approximately $1.1 million was due to an approximately $4.1 million gain on sale of auction rate securities, offset by lower interest income of approximately $1.3 million, higher foreign currency exchange losses of approximately $1.3 million, and credit based impairment loss related to the our one remaining auction rate security in our portfolio of approximately $0.6 million. The lower interest income was due to lower funds available to earn interest, primarily reflecting funds used to acquire Torex, and lower interest rates during the six months ended December 31, 2012.

 

Income Tax Provisions:

 

The effective tax rate for the three months ended December 31, 2012 and 2011 was 32.5% and 31.4%, respectively. The increase in tax rate for the three months ended December 31, 2012 compared to the same period last year was primarily attributable to an increase in taxes associated with changes in our earnings mix among jurisdictions.

 

 The effective tax rate for the six months ended December 31, 2012 and 2011 was 28.6% and 32.2%, respectively. The decrease in tax rate for the six months ended December 31, 2012 compared to the same period last year was primarily attributable to an increase in tax benefits realized upon the expiration of statutes of limitation or settlements with tax authorities, partially offset by an increase due to changes in our earnings mix among jurisdictions. We have recognized a decrease in unrecognized tax benefits for the six months ended December 31, 2012 as compared to the same period last year, which resulted in a reduction in income tax expense of approximately $6.3 million and a reduction in the effective tax rate of 5.4%. This reduction was primarily due to favorable settlements with tax authorities.

 

 Based on currently available information, we estimate that the fiscal year 2013 effective tax rate will be approximately between 28% and 29%. 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 estimate that within the next 12 months, our unrecognized income tax benefits will decrease by between approximately $3.8 million and approximately $5.8 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.

 

 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 U.S. taxes due on the repatriation of such funds, which could be significant, and the application of any tax credits, would be determined based on the appropriate jurisdictional income tax laws at the time of such repatriation. Due to the extent of uncertainty as to which remittance structure would be used should a decision be made in the future to repatriate, the availability and the complexity of calculating foreign tax credits, and the implications of indirect taxes, including withholding taxes, determination of the unrecognized deferred income tax liability related to these unremitted earnings is not practicable.

 

 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 as a result of the competent authority process 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 that 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 the new guidance, 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.

 

21
 

 

Recent Accounting Guidance Not Yet Adopted

 

In July 2012, the FASB issued revised 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:

 

·Revenue recognition;
·Allowance for doubtful accounts;
·Inventory;
·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;
·Income taxes.

 

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:

 

  

Six Months Ended

December 31,

 
(in thousands)  2012   2011 
Net cash provided by (used in):          
Operating activities  $65,735   $63,389 
Investing activities   (35,654)   (17,173)
Financing activities   (48,188)   (44,149)

 

Operating activities:

 

Net cash provided by operating activities for the six months ended December 31, 2012 increased approximately $2.3 million compared to the six months ended December 31, 2011. This increase was primarily due to an increase in net income of approximately $9.6 million, partially offset by certain unfavorable changes in working capital in comparison to the same period last year, including higher interim income tax payments during the six months ended December 31, 2012 as compared to the six months ended December 31, 2011 and higher purchases of inventory for the same periods.

 

Investing activities:

 

Net cash used in investing activities for the six months ended December 31, 2012 was approximately $35.7 million, reflecting approximately $23.3 million used to purchase investments, net of cash received from the sale and redemption of investments (including approximately $36.7 million received from the sale of our auction rate securities). We also used approximately $12.2 million to purchase property, plant and equipment, and to internally develop software to be licensed to others.

 

22
 

 

Net cash used in investing activities for the six months ended December 31, 2011 was approximately $17.2 million, reflecting approximately $4.4 million in cash used to purchase investments, net of cash received from the sale of investments. We used approximately $12.2 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 six months ended December 31, 2012 was approximately $48.2 million, reflecting approximately $53.4 million used to repurchase our stock, partially offset by proceeds from stock option exercises of approximately $4.7 million and realized tax benefits from stock option exercises of approximately $1.4 million.

 

 Net cash used in financing activities for the six months ended December 31, 2011 was approximately $44.1 million, reflecting approximately $48.4 million used to repurchase our stock, partially offset by proceeds from stock option exercises of approximately $3.1 million and realized tax benefits from stock option exercises of approximately $1.3 million.

 

Capital Resources

 

Our cash and cash equivalents and short-term investment balance of approximately $631.8 million at December 31, 2012 is an increase of approximately $49.8 million from the June 30, 2012 balance. At December 31, 2012, approximately $273.3 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 U.S. taxes due on the repatriation of such funds, which could be significant, and the application of any tax credits, would be determined based on the appropriate jurisdictional income tax laws at the time of such repatriation. Due to the extent of uncertainty as to which remittance structure would be used should a decision be made in the future to repatriate, the availability and the complexity of calculating foreign tax credits, and the implications of indirect taxes, including withholding taxes, determination of the unrecognized deferred income tax liability related to these unremitted earnings is not practicable.

 

 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 December 31, 2012 by approximately $7.4 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 December 31, 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 December 31, 2012 exchange rate). As of December 31, 2012, there were no balances outstanding on this credit facility, but approximately EUR 0.4 million (approximately $0.5 million at the December 31, 2012 exchange rate) of the credit facility has been used for guarantees. As of December 31, 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 one remaining auction rate security 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.

 

23
 

 

The following table provides information regarding certain financial indicators of our liquidity and capital resources:

 

(in thousands, except ratios) 

December 31,

2012

   June 30,
2012
 
Cash and cash equivalents and short-term investments (1)  $631,833   $582,038 
Available credit facilities  $51,319   $51,266 
Outstanding credit facilities   0    0 
Outstanding guarantees   (1,133)   (1,055)
Unused credit facilities  $50,186   $50,211 
Working capital (2)  $583,450   $500,127 
MICROS Systems, Inc.’s shareholders’ equity  $1,167,118   $1,092,645 
Current ratio (3)   2.52    2.20 

 

(1)Does not include approximately $5.4 million and $34.3 million invested in auction rate securities, classified as long-term investments in our Condensed Consolidated Balance Sheet as of December 31, 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 $379.5 million and $296.4 million during the six months ended December 31, 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 six months ended December 31, 2012 and 2011, respectively. The relative currency mix for the three and six months ended December 31, 2012 and 2011 was as follows:

 

   % of Reported Revenues   Exchange Rates to 
   Three Months Ended   Six Months Ended   U.S. Dollar as of 
   December 31,   December 31,   December 31, 
Revenues by currency (1)  2012   2011   2012   2011   2012   2011 
United States Dollar   41%   48%   41%   49%   1.0000    1.0000 
Euro   25%   23%   25%   23%   1.3195    1.2960 
British Pound Sterling   14%   8%   14%   8%   1.6247    1.5542 
Australian Dollar   2%   3%   2%   3%   1.0393    1.0208 
Macao Pataca   2%   1%   1%   0%   0.1252    0.1226 
Brazil Real   1%   1%   1%   1%   0.4882    0.5360 
Canadian Dollar   1%   2%   1%   1%   1.0073    0.9794 
Mexican Peso   1%   1%   1%   1%   0.0778    0.0717 
Norway Krone   1%   1%   1%   1%   0.1797    0.1673 
Singapore Dollar   1%   0%   1%   1%   0.8188    0.7713 
Sweden Krona   1%   1%   1%   1%   0.1538    0.1453 
Swiss Franc   1%   2%   1%   2%   1.0926    1.0670 
All Other Currencies (2)   9%   9%   10%   9%   0.1229    0.1351 
Total   100%   100%   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 and six month exchange rates for all other currencies. The “Exchange Rates to U.S. Dollar” for “All Other Currencies” represents the weighted average December 31, 2012 and 2011 exchange rates for the currencies. Weighting is based on the three and six 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.

 

24
 

 

A 10% increase or decrease in the value of the Euro and British Pound Sterling in relation to the U.S. dollar in the six months ended December 31, 2012 would have affected our total revenues by approximately $24.4 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 December 31, 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 December 31, 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 our one remaining auction rate security, 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 December 31, 2012, but the change in our interest income for the six months ended December 31, 2012 would be an increase or decrease (depending on the nature of the fluctuation) of approximately $3.2 million based on the cash, cash equivalents and short term investment balances as of December 31, 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.

 

25
 

 

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 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 two 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 December 31, 2012, approximately 0.4 million shares remain available for purchase under this authorization. During the second 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

 
10/01/12 – 10/31/12   344,689   $46.27    344,689    1,019,179 
11/01/12 – 11/30/12   100,000   $44.89    100,000    919,179 
12/01/12 – 12/31/12   475,311   $41.60    475,311    443,868 
    920,000         920,000      

 

(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.

 

On January 22, 2013, the Company’s Board of Directors authorized the purchase of up to 2 million additional shares of the Company’s common stock, to be purchased from time to time over the ensuing three years.

 

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.
10(a)Thirteenth Amendment to Employment Agreement dated December 3, 2012, between MICROS Systems, Inc. and A. L. Giannopoulos (filed herewith as Exhibit 10.1).
10(b)(1)Employment Agreement dated May 28, 1997 between MICROS Systems, Inc. and Thomas L. Patz (filed herewith as Exhibit 10.2).

10(b)(2) Third Amendment to Employment Agreement dated December 3, 2012, between MICROS Systems, Inc. and Thomas L. Patz (filed herewith as Exhibit 10.3).

10(c)Third Amendment to Employment Agreement dated December 3, 2012, between MICROS Systems, Inc. and Jennifer Kurdle (filed herewith as Exhibit 10.4).
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)

  

26
 

 

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)
101The following materials from MICROS Systems, Inc.’s quarterly report on Form 10-Q for the quarter ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at December 31, 2012 and June 30, 2012, (ii) Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2012 and 2011, (iii) Condensed Consolidated Statements of Comprehensive Income for the six months ended December 31, 2012 and 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2012 and 2011, (v) Condensed Consolidated Statements of Shareholders’ Equity for the six months ended December 31, 2012 and 2011, and (vi) Notes to Condensed Consolidated Financial Statements.

 

27
 

  

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: January 24, 2013 /s/  Cynthia A. Russo
     Cynthia A. Russo
     Executive Vice President and
     Chief Financial Officer
     
Date: January 24, 2013 /s/  Michael P. Russo
     Michael P. Russo
 

Vice President, Corporate Controller,

and Principal Accounting Officer

 

28