##### 



Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended September 30, 2003
Commission file number 0-9993
MICROS SYSTEMS, INC.

---

(Exact name of Registrant as specified in its
  charter) MARYLAND
      
      52-1101488(State of incorporation)
      
      (I.R.S. EmployerIdentification Number) 7031 Columbia Gateway Drive, Columbia, Maryland 21046-2289  (Address of principal executive offices) (Zip code)
  Registrants telephone number, including area code: 443-285-6000


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days.

YES [x]     NO
  [  ]

Indicate by check mark whether the Registrant is an Accelerated Filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).

YES [x]     NO [  ]

As of October 31, 2003, there were 18,145,241 shares of Common Stock, $0.025
par value, outstanding.

MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2003
Part I  Financial Information

Item 1. Financial Statements

General

The information contained in this report is furnished for the Registrant,
MICROS Systems, Inc., and its subsidiaries (referred to collectively herein as
MICROS or the Company). In the opinion of management, the information in
this report contains all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair statement of the results for the
interim periods presented. The financial information presented herein should
be read in conjunction with the financial statements included in the
Registrants Form 10-K for the fiscal year ended June 30, 2003, as filed with
the Securities and Exchange Commission.


2MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)September 30,
      
      June 30,2003
      
      2003ASSETSCurrent
          assets:Cash
          and cash equivalents
      
      $
      52,260
      
      
      $
      45,682Accounts
          receivable, net of allowance for doubtful accounts of $10,989 at September 30,
          2003 and $10,648 at June 30, 2003
      
      
      97,649
      
      
      
      98,700Inventories,
          net of allowance for obsolescence of $6,104 at September 30, 2003 and
          $5,900 at June 30, 2003
      
      
      31,178
      
      
      
      31,864Deferred
          income taxes
      
      
      8,300
      
      
      
      7,885Prepaid
          expenses and other current assets
      
      
      16,478
      
      
      
      17,860Total
          current assets
      
      
      205,865
      
      
      
      201,991Property,
          plant and equipment, net of accumulated depreciation and amortization
          of $53,188 at September 30, 2003 and $50,931 at June 30, 2003
      
      
      19,731
      
      
      
      20,179Deferred
          income taxes, non-current
      
      
      31,294
      
      
      
      32,003Goodwill
          and intangible assets, net of accumulated amortization of $29,924 at
          September 30, 2003 and $29,516 at June 30, 2003
      
      
      74,109
      
      
      
      74,270Purchased
          and internally developed software costs, net of accumulated amortization
          of $25,356 at September 30, 2003 and $23,487 at June 30, 2003
      
      
      37,653
      
      
      
      38,089Other
          investments
      
      
      510
      
      
      
      10Other
          assets
      
      
      3,110
      
      
      
      3,473Total
          assets
      
      $
      372,272
      
      
      $
      370,015LIABILITIES
          AND SHAREHOLDERS EQUITYCurrent
          liabilities:Bank
          lines of credit
      
      $
      10,551
      
      
      $
      10,185Current
          portion of long term debt
      
      
      
      
      
      
      363Current
          portion of capital lease obligations
      
      
      133
      
      
      
      106Accounts
          payable
      
      
      22,190
      
      
      
      24,177Accrued
          expenses and other current liabilities
      
      
      39,369
      
      
      
      44,240Income
          taxes payable
      
      
      5,201
      
      
      
      10,102Deferred
          income taxes
      
      
      497
      
      
      
      501Deferred
          service revenue
      
      
      47,521
      
      
      
      38,538Total
          current liabilities
      
      
      125,462
      
      
      
      128,212Capital
          lease obligations, net of current portion
      
      
      197
      
      
      
      198Deferred
          income taxes, non-current
      
      
      11,498
      
      
      
      11,495Other
          non-current liabilities
      
      
      6,494
      
      
      
      6,510Commitments
          and contingenciesMinority interests
      
      
      2,271
      
      
      
      2,372Shareholders
          equity:Common
          stock, $0.025 par; authorized 50,000 shares; issued and outstanding
          18,097 at September 30, 2003 and 18,018 at June 30, 2003
      
      
      452
      
      
      
      450Capital
          in excess of par
      
      
      69,331
      
      
      
      69,644Retained
          earnings
      
      
      157,128
      
      
      
      152,381Accumulated
          other comprehensive loss
      
      
      (561
      )
      
      
      (1,247
      )Total
          shareholders equity
      
      
      226,350
      
      
      
      221,228Total
          liabilities and shareholders equity
      
      $
      372,272
      
      
      $
      370,015

The accompanying notes are an integral part of the consolidated financial statements.3MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)Three Months Ended September 30,2003
    
    2002Revenue:Hardware
    
    $
    33,946
    
    
    $
    30,013Software
    
    
    17,838
    
    
    
    13,147Service
    
    
    54,633
    
    
    
    44,595Total revenue
    
    
    106,417
    
    
    
    87,755Cost of sales:Hardware
    
    
    23,742
    
    
    
    21,639Software
    
    
    5,004
    
    
    
    3,637Service
    
    
    25,536
    
    
    
    21,066Total cost of sales
    
    
    54,282
    
    
    
    46,342Gross margin
    
    
    52,135
    
    
    
    41,413Selling, general and administrative expenses
    
    
    35,562
    
    
    
    29,444Research and development expenses
    
    
    6,174
    
    
    
    4,887Depreciation and amortization
    
    
    2,317
    
    
    
    2,046Total operating expenses
    
    
    44,053
    
    
    
    36,377Income from operations
    
    
    8,082
    
    
    
    5,036Non-operating income (expense):Interest income
    
    
    239
    
    
    
    395Interest expense
    
    
    (189
    )
    
    
    (359
    )Other income (expense), net
    
    
    105
    
    
    
    (660
    )Total non-operating income (expense)
    
    
    155
    
    
    
    (624
    )Income before taxes, minority interests and equity in net
earnings of affiliates
    
    
    8,237
    
    
    
    4,412Income tax provision
    
    
    3,336
    
    
    
    1,677Income before minority interests and equity in net
earnings of affiliates
    
    
    4,901
    
    
    
    2,735Minority interests and equity in net earnings of affiliates
    
    
    (154
    )
    
    
    (40
    )Net income
    
    $
    4,747
    
    
    $
    2,695Net income per common share:Basic
    
    $
    0.26
    
    
    $
    0.15Diluted
    
    $
    0.25
    
    
    $
    0.15Weighted-average number shares outstanding:Basic
    
    
    18,036
    
    
    
    17,474Diluted
    
    
    18,940
    
    
    
    17,807

The accompanying notes are an integral part of the consolidated financial statements.4MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Three Months Ended September 30, 2003
(Unaudited, in thousands)AccumulatedCapital
    
    
    
    
    
    OtherCommon Stock
    
    in Excess
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    of Par
    
    Earnings
    
    Income (Loss)
    
    TotalBalance, June 30, 2003
    
    
    18,018
    
    
    $
    450
    
    
    $
    69,644
    
    
    $
    152,381
    
    
    $
    (1,247
    )
    
    $
    221,228Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,747
    
    
    
    
    
    
    
    4,747Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    686Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,747
    
    
    
    686
    
    
    
    5,433Stock issued upon exercise of options
    
    
    189
    
    
    
    5
    
    
    
    3,239
    
    
    
    
    
    
    
    
    
    
    
    3,244Repurchases of stock
    
    
    (110
    )
    
    
    (3
    )
    
    
    (3,857
    )
    
    
    
    
    
    
    
    
    
    
    (3,860
    )Income tax benefit from stock
options exercised
    
    
    
    
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    305Balance, September 30, 2003
    
    
    18,097
    
    
    $
    452
    
    
    $
    69,331
    
    
    $
    157,128
    
    
    $
    (561
    )
    
    $
    226,350

The accompanying notes are an integral part of the consolidated financial statements.5MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and unaudited, in thousands)Three Months Ended September 30,2003
    
    2002Net cash flows provided by (used in) operating activities:
    
    $
    11,027
    
    
    $
    (625
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (1,652
    )
    
    
    (1,833
    )Proceeds from dispositions of property, plant and equipment
    
    
    1
    
    
    
    45Purchases of other investments
    
    
    (500
    )Internally developed software
    
    
    (1,408
    )
    
    
    (878
    )Net cash used in investing activities
    
    
    (3,559
    )
    
    
    (2,666
    )Cash flows from financing activities:Principal payments on line of credit
    
    
    (2,814
    )
    
    
    (158
    )Proceeds from lines of credit
    
    
    3,000
    
    
    
    Principal payments on shareholder loan
    
    
    (363
    )
    
    
    Principal payments on long-term debt and capital lease
obligations
    
    
    (23
    )
    
    
    (41
    )Dividends to minority owners
    
    
    (46
    )
    
    
    Repurchases of stock
    
    
    (3,860
    )
    
    
    (1,732
    )Proceeds from issuance of stock
    
    
    3,244
    
    
    
    33Net cash used in financing activities
    
    
    (862
    )
    
    
    (1,898
    )Effect of exchange rate changes on cash
    
    
    (28
    )
    
    
    (37
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,578
    
    
    
    (5,226
    )Cash and cash equivalents at beginning of period
    
    
    45,682
    
    
    
    66,638Cash and cash equivalents at end of period
    
    $
    52,260
    
    
    $
    61,412

The accompanying notes are an integral part of the consolidated financial statements.6MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)1.
 
 Basis of PresentationThe accompanying 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, 2003. Certain information and
footnote disclosures which are normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to SEC rules and regulations. The
information reflects all normal and recurring adjustments that, in the
opinion of management, are necessary for a fair presentation of the
financial position of the Company, and its results of operations for the
interim periods set forth herein. The results for the three months ended
September 30, 2003 are not necessarily indicative of the results to be
expected for the full year or any future period. Certain amounts
previously reported have been reclassified to conform to current year
presentation.2.
 
 Stock-based compensationThe Company has incentive and non-qualified stock options outstanding
that were granted to directors, officers, and other employees pursuant to
authorization by the Board of Directors. The exercise price of all
options equals the market value on the date of the grant. Substantially
all of the options granted are exercisable pursuant to a three-year
vesting schedule whereby one-third of the options vest upon the first
anniversary of the grant, the second third of the options vest upon the
second anniversary of the grant, and the final third of the options vest
upon the third anniversary of the grant. Currently, all outstanding
options expire ten years from the date of grant.


The Company applies the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, in accounting for the stock
option awards. The Company has not recognized any related compensation
expense in the consolidated statements of operations because the fair
value of the stock underlying the options granted did not exceed the
exercise price of the options on the date of grant. If compensation
expense had been determined based on the weighted-average estimate of the
fair value of each option granted consistent with the provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, as amended by SFAS
No. 148, the Companys net income would be reduced to pro forma amounts
as follows:Three Months Ended September 30,2003
    
    2002Net income  as reported
    
    $
    4,747
    
    
    $
    2,695Add: stock-based compensation expense included
in reported net income, net of tax
    
    
    
    
    
    
    Deduct: total stock-based employee compensation
expense determined under the fair value method,
net of tax
    
    
    (1,268
    )
    
    
    (1,992
    )Net income  pro forma
    
    $
    3,479
    
    
    $
    703Basic net income per shareAs reported
    
    $
    0.26
    
    
    $
    0.15Pro forma
    
    $
    0.19
    
    
    
    0.04Diluted net income per shareAs reported
    
    $
    0.25
    
    
    $
    0.15Pro forma
    
    $
    0.18
    
    
    
    0.04

The weighted average fair value of each option granted for the first
quarter of fiscal 2003 and 2002 was $17.26 and $11.76, respectively. The
fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following
weighted-average assumptions:

7MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)Three Months EndedSeptember 30,2003
    
    2002Risk-free interest rate
    
    
    3.8
    %
    
    
    3.4
    %Expected life
    
      6.0 years
    
      6.0 yearsExpected volatility
    
    
    50
    %
    
    
    50
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %

The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including the
expected stock price volatility. The Company uses projected volatility
rates, which are based upon historical volatility rates, trended into
future years. Because the Companys employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in managements opinion, existing models,
including the Black-Scholes option-pricing model, do not necessarily
provide a reliable single measure of the fair value of employee stock
options.3.
 
 AcquisitionsOn May 1, 2003, the Company acquired Datavantage Corporation
(Datavantage), a privately held software application developer and
system integrator specializing in the specialty and apparel retail
market, for total purchase price of approximately $52,300. The
consideration consisted of $33,800 in cash ($28,600 paid at closing and
$5,200 to be paid 18 months after closing subject to certain holdback
rights), approximately $300 in estimated transaction costs and 719,360
shares of MICROS common stock, valued at approximately $18,200.The
following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition had occurred as of July 1, 2002.

The summary includes adjustments for depreciation and amortization of
assets and interest expense on any debt incurred to fund the acquisition,
which would have been incurred had such acquisition occurred as of July
1, 2002. These unaudited pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what
would have occurred had the acquisition and other transactions been made
as of that date or results which may occur in the future.Three Months Ended
        September 30, 2002Historical
      
      
      Historical
      
      Pro forma
      
      Pro formaMICROS
      
      
      Datavantage
      
      Adjustments
      
      ConsolidatedRevenue
      
      $
      87,755
      
      
      $
      10,281
      
      
      
      
      
      
      $
      98,036Net
          Income
      
      $
      2,695
      
      
      $
      1,386
      
      
      $
      (187
      )
      
      $
      3,894Net
          Income per common shareBasic
      
      $
      0.15
      
      
      
      
      
      
      
      
      
      
      $
      0.21Diluted
      
      $
      0.15
      
      
      
      
      
      
      
      
      
      
      $
      0.21Weighted
          average shares outstandingBasic
      
      
      17,474
      
      
      
      
      
      
      
      719
      
      
      
      18,193Diluted
      
      
      17,807
      
      
      
      
      
      
      
      719
      
      
      
      18,526


8MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)4.
 
 InventoriesThe components of inventories are as follows:September 30,
      
      June 30,2003
      
      2003Raw
          materials
      
      $
      7,995
      
      
      $
      8,368Work-in-process
      
      
      27
      
      
      
      146Finished
          goods
      
      
      29,260
      
      
      
      29,250Total
          inventory
      
      
      37,282
      
      
      
      37,764Reserve
          for obsolescence
      
      
      (6,104
      )
      
      
      (5,900
      )Net
          inventory
      
      $
      31,178
      
      
      $
      31,864

5.
 
 Recent accounting standardsIn January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which addresses
consolidation by business enterprises of variable interest entities that
either: (1) do not have sufficient equity investment at risk to permit
the entity to finance its activities without additional subordinated
financial support, or (2) the equity investors lack an essential
characteristic of a controlling financial interest. The provisions of
FIN 46 are effective immediately for all arrangements entered into after
January 31, 2003. For those arrangements made prior to January 31, 2003,
the provisions of FIN No. 46 are required to be adopted at the beginning
of the first interim period or annual period beginning after December 15,
2003. As of September 30, 2003, the Company does not have any entities
that require disclosure or new consolidation as a result of adopting the
provisions of FIN 46.In November 2002, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. This interpretation requires that a guarantor
recognize a liability for the fair value of the obligation undertaken in
issuing the guarantee at the inception of the guarantee. The adoption of
FIN 45 had no impact on the results of operations of the Company.The Company has applied the disclosure provisions of FIN 45 to its
agreements that contain guarantee or indemnification clauses. These
disclosure provisions expand those required by FASB Statement No. 5,
Accounting for Contingencies, by requiring a guarantor to disclose
certain types of guarantees, even if the likelihood of requiring the
guarantors performance is remote. The following is a description of
arrangements in which the Company is the guarantor.The Company is a party to a variety of customer agreements pursuant to
which it may be obligated to indemnify its customer with respect to
certain matters. Typically, these obligations arise in the context of
contracts entered into by the Company, under which the Company may agree
to hold harmless its customer from and against losses arising from a
breach of representations and covenants related to such matters as title
to the assets sold, certain intellectual property rights, and violation
of law. In each of these circumstances, payment by the Company is
conditioned on the customer making an adverse claim pursuant to the
procedures specified in the particular contract, which procedures
typically allow the Company to challenge the customers claims. Further,
the Companys obligations under these agreements may be limited in terms
of time and/or amount, and in some instances, the Company may have
recourse against independent third parties in connection with customers
contract indemnity claims.It is not possible to predict the maximum potential amount of future
payments under these or similar agreements, due to the conditional nature
of these obligations and the unique facts and circumstances involved in
each particular agreement. To date, the Company has not incurred
material expense under these agreements and has not accrued any amounts
relating to such provisions.9MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)The Company adopted Statement of Financial Accounting Standard (SFAS)
No. 142, Goodwill and Other Intangible Assets on July 1, 2001. This
standard requires that goodwill no longer be amortized, and instead, be
tested for impairment on an annual basis (or whenever events occur which
may indicate possible impairment). The Company performs the impairment
analysis on an annual basis during the first quarter of its fiscal year.
This analysis requires management to make a series of critical
assumptions to: (1) evaluate whether any impairment exists, and (2)
measure the amount of impairment.In testing for a potential impairment of goodwill, SFAS 142 requires the
Company to: (1) allocate goodwill to the various reporting units to which
the acquired goodwill relates; (2) estimate the fair value of those
reporting units to which goodwill relates; and (3) determine the carrying
value (book value) of those reporting units. Furthermore, if the
estimated fair value is less than the carrying value for a reporting
unit, SFAS 142 requires the estimation of the fair value of all
identifiable assets and liabilities of the reporting unit, in a manner
similar to a purchase price allocation for an acquired business. Only
after this process is completed, is the amount of goodwill impairment
determined. The Company estimated the fair value of its U.S. and
international reporting units using the discounted cash flow method.The process of evaluating the potential impairment of goodwill is highly
subjective and requires significant judgment at many points during the
analysis. In estimating the fair value of the reporting units with
recognized goodwill for the purposes of our annual or periodic analyses,
the Company makes estimates and judgments about the future cash flows of
these businesses. The cash flow forecasts are based on assumptions that
are consistent with the plans and estimates used to manage the underlying
reporting units. MICROS also considers its market capitalization
(adjusted for unallocated monetary assets such as cash, marketable debt
securities and debt) on the date the analysis is performed.The Company conducted its annual impairment analysis in the first quarter
of fiscal year 2004. Since the estimated fair value of the U.S. and
international reporting units exceed the carrying values, the Company
concluded there was no impairment of goodwill. As of September 30, 2003,
the net book value of goodwill for the U.S. and international reporting
unit was $57.5 million and $10.5 million, respectively.6.
 
 Net income per shareBasic net income per common share is computed by dividing net income by
the weighted average number of shares outstanding. Diluted net income
per share includes the dilutive effect of stock options.A reconciliation of the weighted average number of common shares
outstanding assuming dilution is as follows:Three Months EndedSeptember 30,2003
    
      2002Net income
    
    $
    4,747
    
    
    $
    2,695Average common shares outstanding
    
    
    18,036
    
    
    
    17,474Dilutive effect of outstanding stock options
    
    
    904
    
    
    
    333Average common shares outstanding assuming
dilution
    
    
    18,940
    
    
    
    17,807Basic net income per share
    
    $
    0.26
    
    
    $
    0.15Diluted net income per share
    
    $
    0.25
    
    
    $
    0.15Anti-dilutive weighted shares excluded from
reconciliation
    
    
    671
    
    
    
    1,684


10MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)7.
 
 Segment reporting dataThe Company develops, manufactures, sells and services point-of-sale
computer systems, property management systems, central reservation and
central information systems products for the hospitality industry and
information technology solutions for the specialty and general
merchandise retail industry. MICROS is organized and operates in two
segments: U.S. and International. The International segment is primarily
in Europe, the Pacific Rim and Latin America. For purposes of applying
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, management views the U.S. and International segments
separately in operating the business, although the products and services
are similar for each segment.A summary of the Companys operating segments is as follows:Three Months Ended September 30,2003
    
      2002Revenues (1):United States
    
    $
    63,427
    
    
    $
    50,228International
    
    
    57,087
    
    
    
    48,452Intersegment eliminations
    
    
    (14,097
    )
    
    
    (10,925
    )Total revenues
    
    $
    106,417
    
    
    $
    87,755Income before taxes, minority interests and
equity in net earnings of affiliates (1):United States
    
    $
    3,523
    
    
    $
    625International
    
    
    15,829
    
    
    
    11,570Intersegment eliminations
    
    
    (11,115
    )
    
    
    (7,783
    )Total income before taxes, minority
interests and equity in net earnings of
affiliates
    
    $
    8,237
    
    
    $
    4,412September 30,
    
    June 30,2003
    
      2003Identifiable assets (2):United States
    
    $
    186,502
    
    
    $
    186,748International
    
    
    185,770
    
    
    
    183,267Total identifiable assets
    
    $
    372,272
    
    
    $
    370,015

(1) Amounts based on the location of the customer.
(2) Amounts based on the location of the selling entity.8.
 
 Shareholders EquityIn fiscal year 2002, the Board of Directors authorized the purchase of up
to one million shares of the Companys common stock. A summary of the
cumulative number of whole shares purchased through September 30, 2003,
is as follows:Whole
      
      AverageShares
      
      Purchase Price
      
      PrincipalTotal
          shares purchased as of June 30, 2003
      
      
      377,841
      
      
      
      
      
      
      $
      24.59
      
      
      $
      9,291Shares
          purchased from July 1  September 30, 2003
      
      
      109,699
      
      
      
      
      
      
      $
      35.18
      
      
      
      3,860Total
          shares purchased as of September 30, 2003
      
      
      487,540
      
      
      
      
      
      
      $
      26.97
      
      
      $
      13,151


11MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 2003
(Unaudited, $ in thousands, except per share data)9.
 
 Subsequent EventOn October 9, 2003, MICROS entered into a settlement agreement in
connection with alleged breaches under a vendor development agreement.
The total settlement amount, net of legal fees, was $1.7 million, which
includes approximately $1.2 million in cash and approximately $0.5
million in credits for future development services that MICROS may, in
its discretion, use over the next two years. The net cash payment of
approximately $1.2 million will be recorded as non-operating income in
the second quarter.On October 22, 2003, MICROS filed with the Securities and Exchange
Commission its Voting Rights and Proxy Solicitation (the Proxy) in
connection with its Annual Meeting of Stockholders scheduled to be held
on November 21, 2003. In its Proxy, the Company seeks shareholder
approval with respect to the following three items: (1) the election of
six directors to serve for a one-year term; (2) the approval of the
appointment of PricewaterhouseCoopers LLP as independent public
accountants for the 2004 fiscal year; and (3) the approval of an
amendment to the Companys 1991 Stock Option Plan, which serves to
authorize the issuance of an additional 600,000 shares of Common Stock
under the Option Plan.On October 23, 2003, Datavantage Corporation executed a lease for
approximately 70,000 square feet of office and warehouse space in Solon,
Ohio. The lease will commence on or about March 1, 2004 and the duration
of the lease is ten years, with a termination right at the end of six
years. Datavantage will vacate their current location and occupy the new
office and warehouse on or about March 1, 2004. The average annual
rental expense will be approximately $0.5 million, which is approximately the same as the current annual rent expense.Effective November 1, 2003, MICROS subleases to Motorola, Inc. one of the
five floors of its current headquarters building in Columbia, Maryland,
consisting of approximately 49,524 square feet, pursuant to a 77-month
sublease (which Motorola may terminate after 60 months). The average
annual rental income will be approximately $1.0 million, which will
offset the Companys rent expense recorded as operating
expense.12Item
    2.   Managements Discussion and Analysis
      of Financial Condition and Results of OperationsResults
  of Operations  Three Months Ended September 30, 2003 Compared to
  Three Months Ended September 30, 2002MICROS recorded diluted net income of $0.25 per common share in the first
quarter of fiscal year 2004, compared with diluted net income of $0.15 per
common share in the first quarter of fiscal year 2003. As described more fully
below, the increase was primarily due to increased sales volume, including
sales from the new subsidiary, Datavantage, which was acquired on May 1, 2003.
Datavantage accounted for diluted net income of $0.05 per common share.An analysis of the change in revenues is as follows ($ in thousands):Three Months EndedSeptember 30,2003
    
      2002
    
      $ Change
    
      % ChangeHardware
    
    $
    33,946
    
    
    $
    30,013
    
    
    $
    3,933
    
    
    
    13.1
    %Software
    
    
    17,838
    
    
    
    13,147
    
    
    
    4,691
    
    
    
    35.7
    %Service
    
    
    54,633
    
    
    
    44,595
    
    
    
    10,038
    
    
    
    22.5
    %Total Revenue
    
    $
    106,417
    
    
    $
    87,755
    
    
    $
    18,662
    
    
    
    21.3
    %

An analysis of the sales mix as a percentage of total revenue is follows:Three Months EndedSeptember 30,2003
    
      2002Hardware
    
    
    31.9
    %
    
    
    34.7
    %Software
    
    
    16.8
    %
    
    
    15.2
    %Service
    
    
    51.3
    %
    
    
    50.1
    %Total
    
    
    100.0
    %
    
    
    100.0
    %

The Companys total revenues increased $18.7 million to $106.4 million in the
first quarter of fiscal year 2004 compared to $87.8 million in the first
quarter of fiscal year 2003. Of this increase, the U.S. reporting unit
accounted for $14.5 million while the international reporting unit accounted
for $4.2 million. The increase in the U.S. was mainly due to sales from
Datavantage.Hardware revenues increased primarily due to increased volume in third party
hardware and sale of Workstation 4, which was released in the fourth quarter of
fiscal year 2003. The increase in Workstation 4 was offset, to a degree, by a
decrease in the sale of PC Workstations in connection with the slow down of a
major customer rollout program. Software revenues increased primarily from the
sale of Datavantages suite of software products, third party software and 9700
software. Service revenues increased in the three months ended September 30,
2003 primarily due to increased support revenues from the continued expansion
of our customer base and the addition of professional services provided by
Datavantage.Datavantages hardware, software and service revenues for the first quarter
were $2.7 million, $2.4 million and $6.5 million, respectively.13An analysis of the change in cost of sales as a percentage of total revenue is
as follows ($ in thousands):Three Months EndedSeptember 30,
    
    As % of Total Revenue2003
    
      2002
    
      2003
    
      2002Hardware
    
    $
    23,742
    
    
    $
    21,639
    
    
    
    22.3
    %
    
    
    24.7
    %Software
    
    
    5,004
    
    
    
    3,637
    
    
    
    4.7
    %
    
    
    4.1
    %Service
    
    
    25,536
    
    
    
    21,066
    
    
    
    24.0
    %
    
    
    24.0
    %Total Cost of Sales
    
    $
    54,282
    
    
    $
    46,342
    
    
    
    51.0
    %
    
    
    52.8
    %

For the three months ended September 30, 2003, total cost of sales, as a
percentage of revenue, decreased to 51.0% from 52.8% in the prior fiscal year.
Cost of sales for hardware, as a percentage of related revenue, decreased to
69.9% in three months ended September 30, 2003 compared to 72.1% for the same
quarter a year earlier mainly due to the increase in the sale of the
Workstation 4, which generates higher margins. Software costs, as a percentage
related revenue, increase slightly to 28.1%, while service cost as a percentage
of related revenue decreased slightly to 46.7%.Selling, general and administrative expenses increased by $6.2 million or 20.8%
in the three months ended September 30, 2003, compared to the same period last
year. Datavantage contributed to $3.7 million of this increase. The remaining
$2.5 million increase was mainly due to an increase in salaries and related
expenses and related foreign exchange increases. As a percentage of revenue,
selling, general and administrative expenses decreased slightly to 33.4% in the
three months ended September 30, 2003 from 33.6% in the same period last year.Research and development (R&D) expenses consist primarily of labor costs less
capitalized software development costs. In the three months ended September
30, 2003, R&D expenses increased $1.3 million, or 26.3%, compared to the same
period last year. As a percentage of revenue, R&D expenses increased to 5.8%
in three months ended September 30, 2003 compared to 5.6% in the first quarter
of fiscal year 2003. Capitalized software development costs increased $0.5
million to $1.4 million mainly due to the development of a new Java-based
retail point-of-sale product. A comparative summary of R&D activities is as
follows ($ in thousands):Three Months EndedSeptember 30,2003
    
      2002
    
      $ ChangeTotal R&D
    
    $
    7,582
    
    
    $
    5,765
    
    
    $
    1,817R&D capitalization
    
    
    (1,408
    )
    
    
    (878
    )
    
    
    (530
    )Total R&D expenses
    
    $
    6,174
    
    
    $
    4,887
    
    
    $
    1,287Total revenue
    
    $
    106,417
    
    
    $
    87,755R&D expense as % of revenue
    
    
    5.8
    %
    
    
    5.6
    %Total R&D as % of revenue
    
    
    7.1
    %
    
    
    6.6
    %

Depreciation and amortization expense increased by $0.3 million or 13.2% in
three months ended September 30, 2003 compared to the same period last year
mainly due to Datavantage.Income from operations for the first quarter of fiscal 2004 was $8.1 million,
or 7.6% of revenue, compared to $5.0 million, or 5.7% of revenue, in the first
quarter of fiscal year 2003 mainly due to the overall increase in sales volume
in all business aspects of the Company. Datavantage contributed $1.9 million
of this increase.Non-operating income increased to $0.2 million in the three months ended
September 30, 2003 partially due to a decrease in exchange loss on foreign
currency transactions.The effective tax rate for the first quarter of fiscal year 2004 and 2003 was
40.5% and 38.0%, respectively. The increase was due to the mix of earnings in
high tax jurisdictions.14Income before taxes increased $3.8 million to $8.2 million in the first quarter
of fiscal year 2004 compared to $4.4 million in the previous year. The U.S.
reporting unit accounted for the $3.8 million increase as the international
reporting unit remained unchanged. The U.S. reporting unit increase was mainly
due to increased sales volume and sales from Datavantage.Critical Accounting PoliciesThe Companys discussion and analysis of its financial condition and results of
operations are based on the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an ongoing basis, the Company
evaluates its estimates, including those that impact revenue recognition and
those related to capitalized software, intangible assets, allowance for
doubtful accounts, allowance for obsolescence, income taxes, contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.Management believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of the consolidated
financial statements.Revenue recognitionThe Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred or the services have been provided to the
customer, the fee is fixed or determinable, and collectibility is reasonably
assured. In instances where the customer specifies final acceptance,
revenue is deferred until all acceptance criteria are met. The Company
reduces revenue for estimated customer returns and allowances.Hardware
Revenue from hardware sales is recognized at the time of shipment.Software
If a third party can install the software, revenue is recognized when
shipped, with an appropriate deferral for any undelivered software contract
elements. However, if the Company is the sole party that has the
proprietary knowledge to install the software, revenue is recognized upon
installation and when ready to go live, with an appropriate deferral for any
undelivered software contract elements. This deferral is earned when
significant obligations no longer exist.Service
Service contract and hosting revenue is initially recorded as deferred
service revenue and is recognized on a pro rata basis over the contract
term. Revenue for the installation of the product, programming and the
training of customers staff is recognized as the work is performed.
Revenue from customer-specific development work is recognized under the
completed contract method.Multiple-element arrangements
The Company enters into transactions that include multiple-element
arrangements, which may include any combination of hardware, software and/or
services. When some elements are delivered prior to others in an
arrangement and all of the following criteria are met, revenue for the
delivered elements is recognized upon delivery of such item. Otherwise,
revenue is deferred until the delivery of the last element.
 
 Vendor-specific objective evidence (VSOE) of fair value of undelivered elements;
 
 The functionality of delivered elements is not dependent on the undelivered elements;
 
 Delivery of the element(s) represents the culmination of the earning process.Capitalized software development costsSoftware development costs, for software products to be licensed to others,
incurred prior to establishing technological feasibility are charged to
operations and included in research and development costs. Software15development costs incurred after establishing technological feasibility and
purchased software costs are capitalized on a product-by-product basis until
the product is available for general release to customers, at which time
amortization begins. Annual amortization, charged to cost of sales, is the
greater of the amount computed using the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross
revenues for that product, or the straight-line method over the remaining
estimated economic life of the product.Long-lived AssetsIntangible Assets Other than GoodwillThe Company reviews its long-lived assets (other than goodwill) for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company assesses the
recoverability of the long-lived assets (other than goodwill) by comparing
the estimated undiscounted cash flows associated with the related asset or
group of assets against their respective carrying amounts. The amount of an
impairment, if any, is calculated based on the excess of the carrying amount
over the fair value of those assets.At September 30, 2003, the net book value of Intangible Assets Other than
Goodwill was approximately $6.1 million, as compared with a net book value
of $0 at September 30, 2002. The Company did not recognize any impairment
loss during the three months ended September 30, 2003 and 2002.GoodwillSee footnote 5, Recent Accounting Standards, in the Notes to Consolidated
Financial Statements section.Allowance for doubtful accountsThe Company maintains allowances for doubtful accounts for estimated losses
that may result from the inability of our customers to make required
payments. These allowances are based on customer payment practices and
history, inquiries, credit reports from third parties and other financial
information. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.Income taxesIncome taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to the differences between the financial
statement carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets and liabilities are measured using the enacted tax rates
in effect for the year in which those temporary differences are expected to
be recovered or settled. The effect on the deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period
that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts more likely than not
to be realized. If the Company determines that it will not be able to
realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the
period such determination is made.Foreign currency translationThe financial statements of the Companys non-U.S. operations are translated
into U.S. dollars for financial reporting purposes. The assets and
liabilities of non-U.S. operations whose functional currencies are not in
U.S. dollars are translated at the fiscal year-end exchange rates, while
revenues and expenses are translated at month-end exchange rates during the
fiscal year. The cumulative translation effects are reflected in
shareholders equity. Gains and losses on transactions denominated in other
than the functional currency of an operation are reflected in other income
(expense).16Liquidity and Capital
ResourcesEffective July 17, 2003, the Company (and its subsidiaries) entered into two
new credit agreements (the Credit Agreements) which in the aggregate offer a
$65.0 million multi-currency committed line of credit, expiring on July 31,
2005. The lenders (the Lenders) under the Credit Agreements are Bank of
America, N.A., Wachovia Bank, National Association, and US Bank.
Simultaneously upon entering into the Credit Agreements, the Company entered
into: (i) a security agreement, pursuant to which the Lenders have a security
interest in all inventory and receivables located in the United States; and
(ii) a pledge agreement and irrevocable stock powers, pursuant to which the
Company pledges stock to the Lenders in certain subsidiaries. Interest due
under the Credit Agreements is calculated as follows: (i) if the advance is
made in U.S. dollars, the greater of the Federal Funds Rate, plus 50 basis
points, or the Bank of America prime rate, plus an additional 25 to 150 basis
points, depending upon the Companys consolidated earnings before interest,
taxes, depreciation and amortization (EBITDA) for the immediately preceding
four calendar quarters; and (ii) if the advance is made in a foreign currency,
the LIBOR rate for the applicable denominated currency, plus an additional 150
to 250 basis points, depending upon the Companys consolidated EBITDA for the
immediately preceding four calendar quarters. The Credit Agreements also
require the Company to satisfy certain financial covenants and limits the
Companys ability to assume additional debt and pay cash dividends.
Additionally, the Credit Agreements impose upon the Company certain commitment
fees on the unused portion of the line of credit.The Company also has a credit relationship with a European bank in the amount
of EUR 7.6 million (approximately $8.9 million at the September 30, 2003
exchange rate). Effective October 2003, this credit facility was reduced to
EUR 1.0 million. Under the terms of this facility, the Company may borrow in
the form of either a line of credit or term debt. As the Company has
significant international operations, its Euro-denominated borrowings do not
represent a significant foreign exchange risk. On an overall basis, the
Company monitors its cash and debt positions in each currency in an effort to
reduce its foreign exchange risk.As of September 30, 2003, the total outstanding balance on the lines of credit
is $10.6 million consisting of: USD $8.0 million, ZAR (South African Rand) 9.0
million (approximately $1.3 million at the September 30, 2003 exchange rate),
SEK (Swedish Krona) 7.5 million (approximately $1.0 million at the September
30, 2003 exchange rate), and JPY (Japanese Yen) 30.0 million (approximately
$0.3 million at the September 30, 2003 exchange rate). As of September 30,
2003, the Company has approximately $63.3 million available to borrow.Net cash provided by operating activities for fiscal year 2004 was $11.0
million versus net cash used in operating activities of $0.6 million for fiscal
year 2003. The Company used $3.6 million for investing activities, including
$3.0 million for the purchase of property, plant, and equipment and internally
developed software and $0.5 million for the purchase of long-term investments.
The Company used $0.9 million for financing activities, consisting of net
borrowings from the line of credit of $0.2 million, proceeds from the issuance
of stock of $3.3 million offset by $3.9 million in the repurchase of the
Companys stock. All cash is being held for the operation and expansion of the
business and the repurchase of the Companys stock.The Company anticipates that its cash flow from operations along with available
lines of credit, in conjunction with other lines of credit for which the
Company may be eligible or lines of credit to be renewed or converted into term
debt, are sufficient to provide the working capital needs of the Company for
the next 12 months. The Company anticipates that its property, plant and
equipment expenditures for fiscal year 2004 will be approximately $1.0 million
higher than in fiscal year 2003.SummaryIn light of current market conditions, and world political instability, it is
difficult to determine whether the Company can continue to enjoy revenue and
profitability growth in the next year. Accordingly, there can be no assurance
that any particular level of growth is reasonable or can be achieved. In
addition, due to the competitive nature of the market, the Company continues to
experience gross margin pressure on its products and service offerings, and the
Company expects product and service margins to decline. There can be no
assurance that the Company will be able to increase sufficiently sales of its
higher margin products, including software, to prevent future declines in the
Companys overall gross margin.17Moreover, MICROSs financial results in any single quarter are dependent upon
the timing and size of customer orders and the shipment of products for large
orders. Large software orders from customers may account for more than an
insignificant portion of earnings in any quarter. The customers with whom
MICROS does the largest amount of business are expected to vary from year to
year as a result of the timing for the roll-out of each customers system.
Furthermore, if a customer delays or accelerates its delivery requirements or a
products completion is delayed or accelerated, revenues expected in a given
quarter may be deferred or accelerated into subsequent or earlier quarters.The market price of MICROS Common Stock is volatile, and may be subject to
significant fluctuations in response to variations in MICROSs quarterly
operating results and other factors such as announcements of technological
developments or new products by MICROS, customer roll-outs, technological
advances by existing and new competitors, and general market conditions in the
hospitality and retail industries. In addition, conditions in the stock market
in general and shares of technology companies in particular have experienced
significant price and volume fluctuations which have at times been unrelated to
the operating performance of companies.Moreover, some of the statements contained herein not based on historic facts
are forward looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, that involve risks and uncertainties. Past
performance is not necessarily a strong or reliable indicator of future
performance. Actual results could differ materially from past results,
estimates or projections. Some of the additional risks and uncertainties are:
political and world instability created by the threat of subsequent terrorist
attacks, which gravely impacts the travel and tourism industries; product
demand and market acceptance, including demand and acceptance for the new OPERA
products; implementation of a cost-effective service structure capable of
servicing increasingly complex software systems in increasingly more remote
locations; achieving increased sales of higher margin software products; risks
and uncertainties associated with the Companys recent acquisition of
Datavantage; hiring and retention of qualified employees with sufficient
technical expertise; unexpected currency fluctuations; impact of competitive
products and pricing on margins; product development delays; technological
difficulties associated with new product releases; and managing expenses,
including those over which the Company exercises little or no control, such as
health care costs. These and other risks are disclosed in the Companys
releases and SEC filings, including in the section titled Business and
Investment Risks; Information Relating to Forward-Looking Statements, in the
Companys Annual Report on Form 10-K for the Fiscal Year ended June 30, 2003.Item 3. Quantitative and Qualitative Disclosures about Market RiskMICROSs significant international business and presence exposes the Company to
a multitude of market risks, such as currency, interest rate and political
risks. With respect to currency risk, the Company transacts business in 23
different currencies through its foreign subsidiaries. The fluctuation of
currencies impacts sales and profitability. Frequently, sales and the costs
associated with such sales are not always denominated in the same currency.
Given the fact that the Company transacts business in many different
currencies, adverse declines in certain currencies can be offset by favorable
advances in other currencies. Recent weakness in certain Latin American
currencies, including the Argentine Peso and the Brazilian Real, has adversely
impacted the financial performance of the Company.Additionally, the Company is subject to interest rate fluctuations in foreign
countries to the extent that the Company elects to borrow in the local foreign
currency. In the past, this has not been an issue of concern as the Company
has the capacity to elect to borrow in other currencies with more favorable
interest rates. While the Company has not to date invested in financial
instruments designed to protect against interest rate fluctuations, the Company
will continue to evaluate the need to do so in the future.Further, the Company is subject to political risk, due in part to instability
in the Middle East and the worldwide threat of terrorism, especially in
developing countries with uncertain or unstable political structures or
regimes. Contributing to this risk factor is the adverse impact that political
instability has on the travel and tourism industries. The Company is also
subject to the effects of, and changes in, laws and regulations, other
activities of governments, agencies and similar organizations.


18Item 4. Controls and ProceduresAs of the end of the period covered by this quarterly report, the Company has
conducted an evaluation of the effectiveness of the design and operation of the
Companys Disclosure Controls and Procedures (as defined in Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934). This evaluation was carried
out under the supervision of the Companys management, including A.L.
Giannopoulos, MICROSs Chairman, Chief Executive Officer and President, and
Gary C. Kaufman, MICROSs Executive Vice President and Chief Financial Officer.
Disclosure Controls and Procedures are designed with the objective of ensuring
that information required to be disclosed in the reports MICROS files or
submits under the Securities Exchange Act of 1934 (Exchange Act), such as this
quarterly report, is recorded, processed, summarized and reported within the
time periods specified in the SECs rules and forms. Disclosure Controls and
Procedures are also designed with the objective of ensuring that such
information is accumulated and communicated to management, including the Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.The Company does not expect that its Disclosure Controls and Procedures will
prevent all errors and all fraud. Despite its level of sophistication, detail
and thoroughness, a disclosure control system can provide only reasonable, not
absolute, assurance that the objectives of the control system are satisfied.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been or will be detected.The evaluation of MICROSs Disclosure Controls and Procedures included a review
of the controls objectives and design, and the controls implementation and
operational procedures. In the course of this evaluation, MICROS sought to
identify and analyze the manner in which it collects information and requires
its employees from the four worldwide regional headquarters (North America,
Latin America, Europe/Africa/Middle East, and Asia Pacific) to produce such
information. Once the information is collected, the Company evaluated how the
information is analyzed for purposes of determining if, how, when and where to
disclose such information. Finally, MICROS analyzed the forms and guidelines it
has developed internally that are disseminated to all operations, and are
required to be resubmitted to the finance operation. These forms and documents
are designed to elicit pertinent financial and non-financial information from
the operations on a worldwide basis.MICROS has evaluated and will continue periodically to evaluate its Disclosure
Controls and Procedures. Based on its most recent evaluations, MICROS has
concluded that, as of the end of the period covered by this quarterly report,
its Disclosure Controls and Procedures currently in place are effective at such
reasonable assurance level that material information relating to MICROS would
be made known to the Chairman, President and Chief Executive Officer, and the
Executive Vice President and Chief Financial Officer on a timely basis.19MICROS SYSTEMS, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 2003
Part II  Other InformationItem 1. Legal ProceedingsMICROS is and has been involved in legal proceedings arising in the normal
course of business. The Company is of the opinion, based upon presently
available information and the advice of counsel concerning pertinent legal
matters, that any resulting liability should not have a material adverse effect
on the Companys results of operations or financial position.On October 9, 2003, MICROS entered into a settlement agreement in
connection with alleged breaches under a vendor development agreement. The
total settlement amount, net of legal fees, was $1.7 million, which includes
approximately $1.2 million in cash and approximately $0.5 million in credits
for future development services that MICROS may, in its discretion, use over
the next two years.Items 2 through 5.No events occurred during the quarter covered by the report that would
require a response to any of these items.


20Item 6. Exhibits and Reports on Form 8-K(a)
      
      Exhibits31.1 Certification by CEO
        pursuant to Rule 13A-14 or 15D of the Securities Exchange Act of
        1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
        of 2002.31.2 Certification by CFO
        pursuant to Rule 13A-14 or 15D of the Securities Exchange Act of
        1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
        of 2002.32.1 Certification by CEO
        pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
        of the Sarbanes-Oxley Act of 2002.32.2 Certification by CFO
        pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
        of the Sarbanes-Oxley Act of 2002.(b)
      
      Reports on Form 8-KReport on Form 8-K was
        filed on August 27, 2003, regarding the release of financial results
        for the fiscal year ended June 30, 2003.Report on Form 8-K/A
        was filed on July 14, 2003, updating information relating to the
        acquisition of Datavantage that had previously been reported on Form 8-K
        filed on May 5, 2003.

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.MICROS SYSTEMS, INC.(Registrant)November 14, 2003
    
    /s/ Gary C. KaufmanGary C. KaufmanExecutive Vice President,Finance and Administration/Chief Financial OfficerNovember 14, 2003
    
    /s/ Cynthia A. RussoCynthia A. RussoVice President and Corporate Controller

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