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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/x/
    
      ANNUAL REPORT PURSUANT TO
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the Fiscal Year Ended June 30, 2003

OR

/ /
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934


For the Transition Period From    to

Commission File Number 0-9993

MICROS SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Maryland
    
    52-1101488State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization
    
    Identification No.)7031 Columbia Gateway DriveColumbia, Maryland
    
    21046-2289(Address of principal executive offices)
    
    (Zip Code)


Registrants telephone number, including area code: 443-285-6000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.025 per share
(Title of Class)

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

YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. o

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 þ NO o

At the close of business on August 31, 2003, there were issued and
outstanding 18,076,487 shares of Registrants Common Stock at $.025 par value.
At such time the aggregate market value of the Registrants Common Stock held
by nonaffiliates of the Registrant was $660,876,365.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2003 Annual Meeting of
Shareholders, currently scheduled to be held on November 21, 2003, and to be
filed with the Commission pursuant to Regulation 14A of the Securities Exchange
Act of 1934, are incorporated by reference in Part III of this Form 10-K.

PART I

ITEM 1. BUSINESS

INTRODUCTION

MICROS Systems, Inc. was incorporated in the State of Maryland in 1977 as
Picos Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems,
Inc. (References to MICROS or the Company herein include the operations of
MICROS Systems, Inc. and its subsidiaries on a consolidated basis). MICROS is
a leading worldwide designer, manufacturer, marketer, and servicer of
enterprise information solutions for the global hospitality and specialty
retail industries. The information solutions consist of application specific
software and hardware systems, supplemented by a wide range of services. The
hospitality industry includes numerous defined market segments such as lodging
(including individual hotel sites, hotel central reservation systems and
customer information systems), table service restaurants, quick service
restaurants, entertainment venues such as stadiums and arenas, business
foodservice operations, casinos, transportation foodservice, government
operations, and cruise ships. The specialty retail industry consists of retail
operations selling to consumers both general and specific products, such as
clothing, shoes, hardware, jewelry, and other specialty items.

MICROSs enterprise solutions comprise three major areas: (1) hotel
information systems; (2) restaurant information systems; and (3) specialty
retail information systems. In addition to its software enterprise solutions
and hardware products, MICROS offers an extensive array of support services and
products for its hotel, restaurant, and retail information systems. The hotel
information systems consist of software encompassing property management
systems (PMS), sales and catering systems (S&C), central reservation
systems (CRS), and customer information systems (CIS). The restaurant
information systems consist of hardware and software for point-of-sale (POS)
and operational applications, and a suite of back office applications,
including inventory, labor, and finance management. The specialty retail
systems consist of software encompassing POS, loss prevention and enterprise
applications.

The Companys PMS applications are installed worldwide in leading hotel
chains such as Marriott International, InterContinental Hotels Group (formerly
Six Continents Hotels), Best Western, Radisson, Hilton International (United
Kingdom), Hyatt International, Wyndham, Starwood, Four Seasons (Canada), Accor
(France), Concorde (France), Thistle (United Kingdom), Federal (Australia),
Kempinski (Germany), Mandarin Oriental (Hong Kong), Movenpick (Switzerland),
Peninsula (Hong Kong), Ramada Europe, Shangri-La International (Hong Kong),
Swissôtel (Switzerland) and Steigenberger (Germany). Worldwide, there are
currently approximately 13,000 MICROS PMS installations.

The MICROS CRS is installed in numerous hotel chains such as Four Seasons,
Wyndham, Concorde, Equatorial (Malaysia), West Coast Hotels, MacDonalds (United
Kingdom), Oberoi (India), Pan Pacific (Singapore), Rydges (Australia), Sokos
(Finland), Starhotels (Italy), Sun International (South Africa), Thistle (UK),
Tourast (Australia), and Vagabond Inns.

The MICROS CIS is installed in numerous hotel chains such as Four Seasons,
Wyndham, Concorde, Equatorial, First, Scandic (Sweden), Peninsula, Hilton
International, Rydges, Shangri-La, Sokos, Sorat (Germany), Starhotels, Sun
International, Tourast, Taj (India), Oberoi, and Pan Pacific.

MICROSs restaurant POS systems are installed worldwide. Major table
service restaurant chain customers include T.G.I. Fridays, Cracker Barrel,
Metromedia Restaurant Group, Brinker International, International House of
Pancakes, Bertuccis, Perkins, Friendlys, Don Pablos, La Madeleine, El
Torito, Eat N Park, Host Services, Mitchells and Butlers (U.K.), Hooters,
Marie Callenders, Ruby Tuesdays, Hard Rock Café, Corporacion Mexicana de
Restaurantes (Mexico), and Whitbread PLC (United Kingdom). Major quick service
chain restaurant (QSR)

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customers include numerous franchisees of Burger King, Arbys, El Pollo
Loco, El Pollo Campero (Guatemala), various franchisees of Yum! Brands (Pizza
Hut, KFC International, and Taco Bell), Atlanta Bread, Baja Fresh, Grandys,
Red Rooster (Australia), Panera Bread, Subway, Krispy Kreme, Starbucks (mainly
international sites), and Wendys. Most of MICROSs QSR installations are with
franchisees.

MICROSs restaurant POS systems are also installed in hotel restaurants in
chains such as Marriott International, Hilton International, Starwood, Hyatt,
InterContinental Hotels, Hilton, Swissôtel, Mandarin Oriental, Radisson,
Fairmont (Canada), and Four Seasons. Additional significant markets for the
Companys POS systems include complex foodservice environments such as casinos,
cruise ships, sports arenas, airport concourses, theme parks, recreational
centers, institutional food service organizations and specialty retail shops.
Users include Aramark, Antons, Delaware North, HMS Host (formerly Host
Marriott Services), and various government entities. The Company has installed
large POS systems in the Foxwood Hotel and Casino (Ledyard, CT), Grand Casino
(Australia), Atlantis (Bahamas), Sun City (South Africa), Harrahs Casinos,
Luxor Hotel and Casino, MGM Grand Hotel Casino and Theme Park, Mirage Casino,
Bellagio and The Venetian (the latter five casinos are located in Las Vegas,
Nevada). MICROS supplies and services POS systems for users in the complex
foodservice environments identified above both directly and through
distribution channels, including through specialty reseller relationships with
Blackboard, CBORD Group, and Diebold.

MICROS also markets both hotel and restaurant POS systems that it acquired
as part of the acquisition of certain assets of Hospitality Solutions
International, Inc. (HSI) in October 2000. The HSI hotel and restaurant
systems products are both Windows® based software products that run on personal
computers (PCs). Additionally, MICROS is marketing and further developing a
POS product that it acquired via the stock purchase of Indatec GmbH and Co. KG
(Indatec) in January 2001. The Indatec product is a proprietary based POS
system with embedded software. Currently, the Indatec product is sold
exclusively in Europe and is targeted to small restaurants.

MICROSs specialty retail solutions are provided through its wholly owned
subsidiary, Datavantage Corporation, which it acquired on May 1, 2003.
Datavantage has over 200 retail company customers. Its customers include
Abercrombie & Fitch, Barneys New York, Books-A-Million, Limited Too, Michaels
Arts and Crafts, Polo Ralph Lauren, Steve Madden Retail and Shaws Markets.

PRODUCTS AND SERVICES

Hotel Information Systems

For the hotel marketplace, MICROS develops, markets and distributes a
complete line of hotel software products and services. The hotel information
systems include property management systems, sales and catering systems,
central reservation systems, customer information systems, revenue management
systems (RMS), an Internet/Global Distribution System based hotel reservation
service called myfidelio.net, and installation and support services associated
with the various product sets. The PMS software provides for reservations,
guest accounting, sales and catering applications, travel agent accounting,
engineering management, and interfaces to central reservation and global
distribution systems. The S&C software enables hotel sales staff to evaluate,
reserve and invoice meetings, banquets and related events for a property. The
CRS software allows hotels to coordinate, process, track, and analyze hotel
room reservations at a central facility for electronic distribution to the
appropriate lodging site. The CIS software allows hotels to efficiently
capture and track relevant information of guests. The RMS software allows
hotels to manage room rates, occupancy, and the mix of business between
corporate and transient customers. The software systems run on PCs. MICROS
also offers an Internet based hotel reservation service via its myfidelio.net
service. This service enables corporations, tourist representation services,
and consumers to create room reservations directly with designated hotels.
This service also allows those hotel properties without internal reservation
capabilities to outsource to MICROS the maintenance of their connectivity to
the global distribution systems, such as Sabre, Galileo, Amadeus and WorldSpan.

MICROSs hotel systems run on industry standard Intel®-based PCs. MICROS
markets a range of property management systems geared to hotels of varying
sizes and operational needs. For larger hotels, MICROS markets a comprehensive
suite of hotel software products under the Opera brand name. Opera includes
modules for property management, central reservations, customer information
systems, sales and catering, revenue management, and quality management. Opera
development started in 1996, with the first module introduced in June 2001.
Several

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additional modules have been released to the market, with Opera
Reservation System being the most recent application, having been released in
March 2003. Opera is designed to run on PCs and large PC based servers. All
the products are designed to share a common Oracle® database. Opera will run
under these three operating systems: Microsoft Windows® (NT, 2000 and XP), IBM
AIX®, and Sun Solaris®. The Opera software suite is deemed an important
product line for MICROSs continued growth in the hotel information systems
market. Over 25 hotel chains have adopted Opera and are in the midst of
multi-year rollouts. As of June 30, 2003, over 700 hotel sites had installed
Opera PMS. MICROS also continues to market suites of hotel software products
under the Fidelio Version 6.0 and 7.0 brand names. Version 6.0 is a DOS-based
system with over 7,300 sites installed. Fidelio Version 7.0 utilizes the
Microsoft Windows® graphical user interface and runs on an Oracle® database.
There are over 3,700 hotels using Version 7.0.

For smaller hotels, MICROS markets a product called FidelioXpress. This
product operates on the Windows® 2000 operating system and runs on a Sybase SQL
database. It uses an innovative touch screen display user interface. It is
installed in over 700 sites worldwide. MICROS also markets a suite of hotel
products via its Hospitality Systems, Inc. division in Phoenix, Arizona. Over
400 hotels are using various modules from Hospitality Systems, Inc.

The next generation product for European users of Fidelio Version 6.0 and
7.0 is Version 8.0, which is currently being developed in Hamburg, Germany.
This product will contain certain Internet based features and utilize the
Windows® operating system with an Oracle® database. The product is designed to
meet the needs of independent hotel operators and smaller chains based in
Europe. In fiscal year 2003, the product was installed in a number of live
sites for extended field-testing and is targeted for release in fiscal year
2004.

MICROS markets a specialized version of its PMS product to the cruise
industry via its Fidelio Cruise subsidiary. The Fidelio Cruise PMS enables
cruise ships to manage their reservations and on-board operational needs
including check-in and check-out, point-of-sale, passenger and crew
administration, invoicing, maintenance tracking and passport document
management. Over 100 cruise ships are installed by Fidelio Cruise. Customers
include Radisson Seven Seas, Princess Cruises, P. & O. Cruises, Holland
America, and Norwegian Cruise Lines.

Additionally, MICROS has entered into an alliance with Systems Union Group
Plc, headquartered in London. This alliance involves the joint product
development and marketing of application software based on Systems Unions back
office accounting applications. This alliance enables MICROS to offer a hotel
customer a complete suite of integrated software solutions that encompasses
operational needs and back office accounting and reporting. As part of this
alliance, MICROS serves as a preferred reseller of Systems Unions software and
business solutions to the hospitality industry.

Restaurant Information Systems

MICROSs restaurant systems include a full-featured point of sale
application, encompassing transaction control, restaurant operations,
accounting data, interfaces to other systems, communications, and hardware and
support services. Most the products are designed to operate on Intel® based
personal computers with the order entry terminals being either industry
standard PCs or proprietary terminals, including two types of proprietary
intelligent terminals developed and designed by MICROS.

The Companys restaurant POS systems are the 8700 Hospitality Management
System (HMS), the 9700 HMS, the 3700 POS system, HSI POS, Indatec, and the
2700 HMS. These systems provide transaction control for table service, quick
service and large entertainment venues.

MICROS offers POS hardware terminals for entry of restaurant orders. The
terminals can either be Intel® chip-based personal computers with additional
functionality added for operating within foodservice environments or
proprietary intelligent terminals. MICROSs main PC based terminal workstation
is called the Eclipse. The Eclipse was released in June 2001 and serves as the
replacement for an earlier PC workstation (PCWS) named Ultra. The PCWS is a
specialized point-of-sale computer designed to withstand the rigors of a
restaurant environment. Sanmina-SCI Corporation (SSCI) manufactures the
MICROS Eclipse PCWS. It is a color touchscreen based system that offers both
passive and active matrix display options. MICROS resells various hardware
products such as personal computers, printers, network cards, and other related
computer equipment. MICROS signed an

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agreement with Hewlett Packard Corporation in fiscal year 2000 in which
Hewlett Packard was designated as a non-exclusive preferred provider of
personal computers, printers, and networking equipment on a global basis.
Sales under this relationship began in fiscal year 2001.

MICROS released a new POS terminal in fiscal year 2003, called Workstation
4. This product is a thin-client point-of-sale terminal, utilizing Microsofts
Windows® CE operating system, with standalone resiliency. This capability
means that even if the system server shuts down, the POS terminal can continue
to function and store data until the server is operational. MICROSs
Workstation 4 is manufactured by GES Singapore Pte Ltd.in Singapore. MICROS
also markets a PC-based POS terminal called the Elite in its Asia/Pacific
region. Partner Tech, Inc., manufactures this product for MICROS in Taiwan.

The 8700 HMS, released in fiscal year 1994, and since upgraded to add new
features and functionality in subsequent releases, is designed for table
service and quick service restaurants in hotels, resorts, casinos, airports,
stadiums/arenas, theme parks and larger independent and chain restaurants. The
8700 HMS product has an open systems architecture which allows its use on a PC
as the server with the order entry terminals being either the Companys
proprietary order entry POS terminal hardware or MICROS PCWS. The 8700 HMS
utilizes the SCO UNIX operating system, which permits multi-tasking and
multi-user operations. This architecture gives it the ability to manage any
size restaurant or food service operation.

The Company introduced the next generation version of the 8700 HMS in
fiscal year 2001, named the 9700 HMS. This product incorporates the feature
set of the 8700 HMS, but runs on Microsofts Windows® 2000 operating system,
and possesses additional features and functionality, including additional
reporting tools. The 9700 HMS continues to be developed as the successor
product to the 8700 HMS customer base.

The 3700 POS, released in fiscal year 1997, is designed for table service
restaurants. It has an open systems architecture as it operates under
Microsofts Windows® 2000 operating system, utilizes either Microsofts SQL or
Sybases relational databases, and runs on industry standard Intel®-based PCs.
It utilizes a touchscreen, with the Microsoft Windows® based graphical user
interface.

The 2700 HMS, released in fiscal year 1990, is a stand-alone intelligent
touchscreen terminal designed for table service restaurants, both large and
small. The 2700 HMS, available in both an entry level and premium-configured
platform, relies on proprietary terminal architecture and interfaces with
Microsofts DOS/Windows®, PC back office software systems.

MICROS introduced the Restaurant Enterprise Series (RES) software suite,
now called RES 3000, in fiscal year 1999. RES is a software suite of
products that encompasses point-of-sale transaction control, restaurant
operations (labor scheduling, time and attendance and financial management),
data analysis, and communications. The POS software comprises the front-end
application for the 3700 system. The restaurant operations modules constitute
the Enterprise Office suite. The software modules include inventory, product
forecasting, labor management, financial management, and enterprise data
management. These modules are designed to operate at a restaurant site. For
management of multiple restaurants, the RES includes a suite of software
products called Enterprise Management. This suite allows for data to be
transmitted to a remote site (including a corporations headquarters) for data
collection and analysis. Additionally, changes such as pricing and menus can
be made at a remote site and downloaded to specified restaurant locations. The
Restaurant Enterprise Series is an important component of MICROSs strategy to
fully integrate point-of-sale transaction processing with other restaurant
operational and management functions.

In fiscal year 2001, MICROS entered into an alliance with Vivonet, Inc., a
Vancouver, Canada based privately held software development company, pursuant
to which MICROS secured exclusive distribution rights for the global
hospitality industry to distribute Vivonets web-based POS
system called iPOS. MICROS and
Vivonet restructured this relationship in September 2003 as follows: (i) MICROS
obtained an unlimited non-exclusive license to the source code; and (ii) MICROS
will pay Vivonet a royalty on each license sold for a three year period,
subject to certain conditions and exceptions. Development of the iPOS product
will now be conducted in MICROSs Columbia, Maryland headquarters. As part of
the restructured arrangement, MICROS relinquished its minority ownership
interest in Vivonet, which such investment was fully expensed in the fiscal
fourth quarter of 2003.

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In addition, MICROS developed and introduced an Internet based portal
product called mymicros.net during fiscal year 2002. Mymicros.net posts
store transaction POS detail to a centralized data warehouse in near real time.
This allows the customer to view reports and charts for a single store, a
group, or the entire enterprise from any location that has an Internet
connection. The mymicros.net software product can either be purchased via a
license to use or by an annual or multi-year subscription contract. In fiscal
year 2003, MICROS created a data center in its Columbia, Maryland headquarters
to host the mymicros.net software for customers.

MICROS markets the HSI POS product primarily to table service customers in
North America via a direct sales force. The product contains a wide array of
point of sales features. A portal called myhsi.net was introduced in fiscal
year 2002. The products functionality is similar to the mymicros.net portal
and is designed for the HSI POS product. MICROS plans on continuing the
development of the HSI POS product, which serves effectively certain niches of
the hospitality industry.

The Indatec product is marketed to smaller table service restaurants and
small hotels with restaurants in Europe that do not require the higher-level
functionality of MICROS POS products. These smaller restaurants require a
lower cost product in terms of purchase and installation expense, a market
niche that the Indatec product is designed to serve.

The Companys design architecture allows existing users of many MICROS POS
products to access new technologies and applications in conjunction with their
existing MICROS POS system. In addition, many MICROS products interface with
various back office accounting and property management systems, including the
Companys hotel PMS products.

Retail Information Systems.

Through its Datavantage subsidiary, MICROS markets store software
automation systems and business intelligence applications. The store systems
are called Store21 Store Management System (Store21) and Tradewind Store Management
System (Tradewind). Store21 is designed for smaller retail operations, while Tradewind is
targeted at larger heavy transaction oriented retail stores. The
Proact Home Office Business Intelligence Suite (Proact)
includes loss prevention, customer relationship
management, gift cards and audit control. The products operate on Microsofts
Windows® NT and 2000 operation systems and utilize Sybase® as the database.
All of its systems run on industry standard PCs and specially designed PC-based
POS terminals manufactured by IBM and NCR. MICROS is working with Datavantage
to modify its software to run on MICROS Eclipse PCWS. This process is
scheduled for completion in the second quarter of fiscal year 2004, and shall
then be offered to customers as an alternative POS terminal option.

Summary of Product Solutions (Software and Hardware):

Software Solutions
    
    Hardware SolutionsRestaurants Products
    
    9700 HMS
    
    Eclipse PC Workstation Terminal8700 HMS
    
    User workstation 4 Terminal3700 POS
    
    Elite PC Workstation TerminalRestaurant Enterprise Series 3000
    
    2000 Series Terminal2700 HMSHSI Profit Series POSIndatec POSmymicros.netmyhsi.netiPOS


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Summary of Product Solutions (Software and Hardware) continued:

Software SolutionsHotel Systems Products
    
    Fidelio Property Management SystemFidelioXpress PMSOpera Property Management SystemCentral Reservation SystemsCustomer Information SystemsWeb Booking Suite SoftwareSales and CateringMICROS-Fidelio FinancialsQuality Management SystemsSpa/GolfBookingsHSI Suite of Hotel Solutionsmyfidelio.netFidelio Cruise Software
Yield Management SoftwareRetail Systems Products
    
    Store21 Store Management SystemTradewind Store Management SystemProact Home Office Business Intelligence Suite


Services

MICROS provides a wide range of service products and support services to
its customers. Products include spare parts, media supplies (ribbons, paper,
printer cartridges, etc.), network products, printers, active power-line
conditioners and uninterruptible power supplies. MICROS offers these supplies
through its direct sales offices and through an operation called POS Depot
(North America only). Services include installation, operator and manager
training, on-site hardware maintenance, customized software development,
application software support, help desk, credit card software support, systems
configuration, network support and consulting. MICROS offers software hosting
capabilities which allows customers
to utilize the software without investing in hardware and a network.

MICROS provides field hardware and software maintenance via a combination
of its direct and indirect (authorized U.S. dealers and international
distributors) channels. The field hardware maintenance is provided mainly to
customers using MICROS POS hardware and software systems. MICROS may contract
with various PC manufacturers to provide either first or second line support
for PC servers for both hotel and restaurant customers. Maintenance contracts
are an important and growing part of MICROSs revenue.

MICROS operates a help desk seven days a week, 24 hours per day (7/24) in
its Columbia, Maryland headquarters. This central support operation receives
support calls from customers and addresses them on-line or dispatches a service
call to the appropriate local service provider. Internationally, in-country
support is provided by the local sales entity, whether it be a MICROS
subsidiary or distributor. MICROS maintains regional support centers in Neuss,
Germany, Galway, Ireland, Buenos Aires, Argentina and Sydney, Australia. MICROSs corporate
customer service provides back-up support for its regional centers. Customer
support for myfidelio.net is centered in Hamburg, Germany, the site of the
subsidiarys product development operations. MICROSs HSI division maintains a
7/24 call center in Scottsdale, Arizona to support its hotel and restaurant
products. Datavantage supports its retail customers from its 7/24 help desk in its
headquarter facility located in Cleveland, Ohio.

In fiscal year 2002, MICROS opened a customer support call center in
Galway, Ireland. This center became operational in fiscal year 2003 and serves
as the software support call center for all MICROS POS and hotel software
installations in the United Kingdom. This center also operates as the support
center for MICROSs Opera hotel software sites in the Europe/Africa/Middle East
market region.

MICROS believes that its services are an important competitive factor and
differentiator in customer purchasing decisions. Service revenue, which
comprises programming, installation, training, in-field support and help-desk
maintenance, constituted approximately 48% ($192.0 million) of MICROSs total
revenues in fiscal year 2003, 47% ($172.6 million) in fiscal year 2002 and 47%
($154.8 million) in fiscal year 2001.

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An important component of MICROSs service offerings are maintenance
service contracts that encompass field and depot hardware maintenance and
software support. Most service maintenance contracts are annual contracts that
automatically renew for a one-year renewal term unless either party tenders
timely notice of non-renewal. Service maintenance contracts were $113.3
million for fiscal year 2003, $99.5 million for fiscal year 2002 and $87.0
million for fiscal year 2001. Service maintenance contract revenue is included
in the service revenue for the Company.

SALES, MARKETING AND DISTRIBUTION

The Company considers its direct and indirect global distribution network
to be a major strength and competitive advantage. This network has been built
over the past 26 years. The Company (including its various subsidiaries), its
U.S. based dealers, and international distributors work closely together in
seeking to identify new customers, products, services and markets, as well as
to serve the Companys existing customer base with enhanced products and
services.

The Companys hotel and restaurant products and services are sold
primarily through three channels: (i) the Direct Sales Channel, comprised of
the Companys sales distribution network consisting of approximately 49 wholly
or majority owned subsidiaries and sales offices; (ii) the MICROS Major
Accounts program directed to designated regional, national, and international
customers; and (iii) the Indirect Sales Channel, an independent sales
distribution network consisting of approximately 61 domestic dealers and 42
international distributors.

MICROSs Datavantage subsidiary markets its product largely through a
direct sales force to a North American customer base. It plans on expanding it
sales force and geographical market reach in fiscal year 2004. Its
geographical expansion will largely be accomplished through various MICROS
international subsidiaries and may also include reseller relationships where
appropriate.

Foreign sales, including export sales from the United States, accounted
for approximately 47% ($189.0 million) of the Companys total revenue in fiscal
year 2003, 48% ($172.7 million) in fiscal year 2002, and 47%
($154.9 million)
in fiscal 2001.

RESEARCH AND DEVELOPMENT

The products sold by the Company are subject to rapid and continual
technological change. Accordingly, the Company must continually develop
innovative systems incorporating the newest technologies. Products available
from the Company, as well as those from its competitors, have offered an
increasingly wider range of features and capabilities.

The Company conducts its core restaurant POS product software and hardware
development at its Columbia, Maryland
corporate headquarters. To facilitate rapid responses for various regional
application needs, MICROS also conducts POS software
development in its offices located in Scottsdale, Arizona, Sydney, Australia,
Hamburg, Neuss and Bernau am Chiemsee, Germany, and Singapore. In addition,
the Company continually examines and evaluates software and hardware products
and designs created by third parties and has acquired and may in the future
acquire ownership or licensing rights to such products and designs.

In fiscal 1998, MICROS engaged SCI Corporation (which, as part of a
merger, is now Sanmina-SCI) to provide hardware design services. This
outsourcing allowed the Company to reduce its internal staff of designers while
increasing its capacity to design new hardware platforms. MICROS still retains
an in-house design capability in Columbia, Maryland. See also Manufacturing in
Part I of this Form 10-K. MICROS expanded its use of third party contract
manufacturers with two other companies in the Asia/Pacific region in
fiscal year 2003.

The Companys hotel PMS, S&C, CRS, and CIS development is primarily
conducted in Naples, Florida. Additional development is conducted in Hamburg,
Germany on the Fidelio Version 8.0 suite of hotel products and in
Portsmouth, New Hampshire, for the Yield Management Software products. MICROS maintains
close relationships with major software operating and database companies such
as Oracle, Novell, Sybase, and Microsoft. These relationships are important to
MICROS so it can readily incorporate software changes from these companies into
its products. MICROSs international offices may also conduct specific product

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enhancement activities to meet specific interface needs, local
requirements, and customer requests.

Product
development for MICROSs myfidelio.net product is conducted in
Hamburg, Germany.

Product
development for MICROSs retail products is conducted in
Cleveland, Ohio and Boston, Massachusetts.

Research and development (R&D) expenses consist primarily of labor costs
less capitalized software development costs. A summary of R&D activities for
the past three fiscal years is as follows (in thousands):

2003
    
    2002
    
    2001Total R&D
    
    $
    23,329
    
    
    $
    22,355
    
    
    $
    28,564R&D capitalization
    
    
    (4,581
    )
    
    
    (3,035
    )
    
    
    (8,867
    )Total R&D expenses
    
    $
    18,748
    
    
    $
    19,320
    
    
    $
    19,697


COMPETITION

The Company believes that its competitive strengths include its
established global distribution and service network, its ability to offer a
broad array of hardware, software and service products to the
hospitality and retail
industry and its corporate focus on providing specialized information systems
solutions.

The markets in which the Company operates are highly competitive. MICROS
competes on the basis of various factors, including product functionality,
service capabilities, price and geography. There are at least 40 competitors
worldwide that offer some form of sophisticated restaurant POS system similar
to the Companys over 100 hotel systems competitors and over
50 retail systems competitors. Competitors in the
restaurant POS marketplace include full service providers such as Aloha,
Infogenesis, NCR, Par Technology, Panasonic, POSitouch, Progressive, Radiant
Systems, Sharp, Squirrel, Vectron AG, and hardware providers such as Dell, IBM,
and NCR. There are also numerous companies that license their POS-oriented
software with PC-based systems in regional markets around the world.

Many of the over 100 competitors in the hotel systems market are companies
with software designed to run on industry standard PCs. These companies may
have several hotel related software products, or simply one product for a
particular niche. These competitors include Inter-American Data, MAI Systems,
Multi-Systems, Newmarket, Optims, Pegasus, Ramesys, Springer-Miller, Visual
One, and property management systems developed and marketed by major hotel
chains for their corporate-owned operations and franchisees. Internationally,
MICROS generally faces smaller, regionally oriented competitors.

The specialty retail market in which MICROSs subsidiary Datavantage
operates within is highly competitive. Competitors include CRS Retail Systems, JDA Software, NSB, Retek, and Triversity, among many others.

The CRS market is highly fragmented, with most central reservation systems
being customized systems for each hotel chain or allied reservation group. The
competitors in this market consist of in-house development efforts by chains,
property management competitors such as Pegasus and Springer-Miller, and
specialized central reservation providers such as Lexington Services, Unirez,
VIP International Corp., and WizCom International/Trust International
(subsidiaries of Cendant Corporation). The market for central reservation
systems is highly competitive.

MICROS believes that the CIS market has various competitors. Those that
offer such a product are generally smaller companies targeting specialized
segments of the market. However, most of the systems in place today are
customized solutions developed by specific chains for their own use. These
customized systems are thus not marketed to other hotel chains.

MANUFACTURING

The Companys manufacturing program seeks to maintain flexibility and
reduce costs by emphasizing the

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strategic outsourcing of key products and subassemblies. MICROS maintains
relationships with several companies for the manufacturing of POS terminals.
Pursuant to a contract with MICROS, SSCI manufactures most of MICROSs POS
terminals, PCWS terminals, and certain communication boards. The Company
entered into this non-exclusive agreement in order to lower its manufacturing
costs, expand the availability of POS and PCWS terminals, and improve product
quality. MICROSs latest POS terminal, the Workstation 4, was developed in
conjunction with, and is manufactured by GES Singapore Pte Ltd, located in
Singapore. MICROSs Elite PC based POS terminal is manufactured by Partner
Tech, Inc. in Taiwan. This product is offered for sale in Asia by MICROSs
Asia/Pacific regional offices.

MICROSs Indatec operation manufactures its POS systems in a facility in
Bernau am Chiemsee, Germany, and contracts with a third party manufacturer in
Germany for additional production capacity.

The decision to outsource the Companys manufacturing was based upon an
extensive analysis of projected long-term production costs, current and
projected terminal demand relative to internal manufacturing capacity, targeted
product quality levels, and internal design and manufacturing capabilities.
The analysis indicated that MICROS could potentially obtain desired products
from SSCI and other contract manufacturers at a lower cost than the Company
could produce. MICROS retains a limited manufacturing and repair capability of
certain products in its facility in Hanover, Maryland.

While MICROS maintains a good relationship with SSCI under the
manufacturing agreement, MICROS was unable to achieve an amicable arrangement
with a subsidiary of SSCI in connection with certain alleged breaches by the
SSCI subsidiary under a 1999 development agreement and therefore MICROS has
filed litigation in the state of Maryland to recover certain damages; the
litigation has since been removed to Federal District Court in Alabama. While
there can be no assurances that the manufacturing relationship will remain
good, the parties have decided to continue to maintain the manufacturing
relationship without interruption. Additionally, MICROSs relationship with
GES Singapore Pte Ltd, while not replacing the relationship with SSCI, does
provide MICROS with certain additional manufacturing capabilities.

Material sourcing is based on availability, service, cost, delivery and
quality of the purchased items from domestic and international suppliers. Some
items are custom manufactured to the Companys design specifications. MICROS
believes that the loss of its current sources for components would not have a
material adverse effect on the Companys business since other sources of supply
are generally available. Except as provided above, the Company believes it
maintains good relationships with its suppliers.

In July 2001, MICROS moved its logistics operations from a building in
Beltsville, Maryland to a new facility in Hanover, Maryland. This facility
serves as MICROSs main distribution center for filling customer orders as well
as light assembly and product configuration services. MICROSs Workstation 4,
manufactured in Singapore, can be sent directly to MICROS subsidiaries and
distributors, thereby avoiding the delays and costs associated with being sent
to the MICROS Hanover facility for warehousing and distribution.

EMPLOYEES

As of August 31, 2003, the Company had approximately 2,749 full-time
employees. Approximately 1,519 or 55% of these employees are based in North
America (United States and Canada), with approximately 38% of the US-based
employees located in the Companys Columbia, Maryland headquarters and Hanover,
Maryland distribution center. The balance of this group is employed
principally at the Companys regional district offices, divisional office
located in Scottsdale, Arizona, its Datavantage subsidiary in Cleveland, Ohio and
Boston, and its product development subsidiaries in Naples, Florida, and
Portsmouth, New Hampshire. Approximately 800, or 29%, of the Companys
employees are employed in the Europe/Africa/Middle East region, 351 employees,
or 13%, are employed in the Asia/Pacific region, and 79 employees, or 3%, are
located in the Latin America region. On an aggregate basis, the Company had
approximately 1,447 employees in sales/marketing, 869 employees in customer
support services, administration and finance; 328 employees in product
development; and 104 employees in operations. The Company is not a party to
any collective bargaining agreements. None of the Companys employees are
represented by a labor union, except in France, Germany, Mexico and Spain, as
mandated by law. MICROS does use certain suppliers whose employees may be
represented by labor unions. MICROS believes it maintains good relations with
its employees.

10



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FOREIGN SALES AND FOREIGN MARKET RISK

The Company recorded foreign sales, including exports from the United
States, of approximately $189.0 million during fiscal year 2003 to customers
located primarily in Europe, Africa, the Middle East, Australia, Asia, Latin
America and Canada. Comparable sales in fiscal years 2002 and 2001
were $172.7
million and $154.9 million, respectively. See Note 15 of Notes to Consolidated
Financial Statements for additional geographic data.

MICROSs significant international business and presence expose the
Company to certain 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 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.

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 the
Middle East instability and world-wide 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.

Finally, the Companys committed line of credit bears interest at a
floating rate of interest. The Company does not invest in financial
instruments designed to protect against interest rate fluctuations, although it
will continue to evaluate the need to do so in the future.

PATENTS

The Company holds no patents and believes that its competitive position is
not materially dependent upon patent protection. The technology used in the
design and manufacture of most of the Companys hardware products is generally
known and available to others. With respect to the Companys software
products, it relies on nondisclosure agreements, and an array of U.S. and
foreign copyright and trademark laws for protection. In the U.S. and in most
countries, it is believed that both statutory and common law provides the
Company with a certain level of protection. Notwithstanding the above, there
is a risk that third party entities, including competitors, could attempt to
misappropriate the Companys intellectual property. Given this potential risk,
the Company has implemented certain procedures to monitor misappropriation of
its intellectual property. Once a misappropriation has been detected, the
Company will pursue appropriate legal action.

FLUCTUATIONS AND CUSTOMERS

The Companys quarterly operating results have varied in the past and may
vary in the future depending upon such factors as the timing of new product
introductions, changes in the pricing and promotion policies of the Company and
its competitors, market acceptance of new products and enhanced versions of
existing products and the capital expenditure budgets of its customers.
Political uncertainty and world turmoil, such as the terrorist attacks in the
U.S. and the volatile and unpredictable political climate in the Middle East,
will continue to adversely impact travel and tourism and therefore the
Companys quarterly operating results. Moreover, the Company has experienced
increased seasonality of its business, given the significant volume of
international sales. In particular, with the European summer holidays, the
Company generally experiences lower sales volume in the first fiscal quarter
relative to other quarters. Additionally, with the relative slowdown in
corporate buying at the beginning of the calendar year, which is MICROSs third
fiscal quarter, seasonal weakness for the third quarter ending March 31 has

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been experienced. Nonetheless, the Company believes that
quarter-to-quarter historic comparisons of its results are not necessarily
meaningful or indicative of future performance.

No single customer accounts for 10% or more of the Companys consolidated
revenues, nor is any material portion of the Companys business subject to
renegotiation of profits at the election of the U.S. Federal Government. In
fiscal years 2003 and 2002, the Company did participate, directly and
indirectly, in certain contracts with the U.S. Federal Government, which such
contracts contained standard termination for convenience clauses. The Company
would not anticipate any material adverse financial impact in the event that
the U.S. Government elected to exercise a termination for convenience clause.

ENVIRONMENTAL MATTERS

The Company believes that it is in compliance in all material respects
with all applicable environmental laws and does not anticipate that such
compliance will have a material effect on its future capital expenditures,
earnings or competitive position with respect to any of its operations.

BACKLOG

The Company generally has a backlog of approximately two months revenue,
substantially all of which is cancelable at any time prior to shipment,
although historically few orders have been canceled. As of June 30, 2003,
2002, and 2001, the backlog totaled approximately $65.5 million, $67.2 million
and $59.4 million, respectively.

OTHER

Prior to July 17, 2003, the Company maintained a $45.0 million
multi-currency committed line of credit (the Former Credit Agreement), the
Companys obligations under which were secured by its inventory and receivables
located in the United States. Interest due under the Former Credit Agreement
was calculated as follows: (i) if the advance is in U.S. dollars, at the option
of the Company, either the banks prime rate minus an amount as stipulated in
the loan agreement based on Company performance, or the LIBOR rate plus an
additional LIBOR rate percentage; and (ii) if the advance was made in a foreign
currency, the LIBOR rate for the applicable denominated currency, plus an
additional LIBOR rate percentage.

Effective July 17, 2003, the Former Credit
Agreement was terminated without additional expense, and 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, tax, 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 $8.7 million at the June 30, 2003
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 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 June 30, 2003, the total outstanding balance on the line of credit
is $10.2 million consisting of: USD $7.0 million, ZAR (South African Rand) 13.0
million (approximately $1.7 million at the June 30, 2003 exchange rate), SEK
(Swedish Krona) 7.5 million (approximately $1.0 million at the June 30, 2003
exchange rate), and JPY

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(Japanese Yen) 60.0 million (approximately $0.5 million at the June 30, 2003
exchange rate). As of June 30, 2003, the Company has
approximately $43.5
million available to borrow.

BUSINESS AND INVESTMENT RISKS; INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

In light of current market conditions, there is uncertainty as to whether
the Company can enjoy revenue or 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.

Moreover, 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.

The statements contained herein not based on historic facts are
forward-looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, 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, projections, or
forward-looking statements made by, or on behalf of, MICROS. Primary risks are
disclosed in the Companys press releases and periodic SEC filings. Some of
the additional risks and uncertainties include the following:

 Weakness in the hospitality and tourism industries as a result of the
ever-present threat of terrorist attacks and the uncertain political situation
in the Middle East and North Korea;

 Unexpected health and environmental disasters, such as the SARS (Severe
Acute Respiratory Syndrome) crisis in Asia and Eastern Canada, and tropical
storm Isabel, impacting the East Coast of the United States. These crises have
a material and adverse impact on the Companys business, as not only is there a
material reduction in tourism for the pendency of the crises, but there is a
mid-term adverse impact on the buying patterns of the customers located in the
affected areas.

 Potentially unfavorable adverse economic conditions arising from the US
involvement in Iraq and President Bushs war on terrorism (this is especially
true in the hospitality and tourism industry, where geo-political instability
has a material adverse impact);

 Given the adverse impact on the travel and hospitality industry as a result
of the Iraqi situation, MICROS has experienced delays in certain purchases.
There can be no guarantee that this slow down will be only short-term;

 MICROSs actions in connection with the continued and increasing price and
product competition in many product areas, including but not limited to Eclipse
PC Workstations, and the pressure on profit margins for those items.
Additionally, MICROSs introduction of the new WS 4 in the fourth quarter of
fiscal year 2003 could adversely impact sales insofar as it may supplant in
part sales of the higher-priced Eclipse workstation;

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 Difficulties or delays in the development, production, testing and marketing
of products, including a failure to deliver new products and technologies when
scheduled, announced or generally anticipated; the failure of customers to
accept these products or technologies when planned; any defects in products;
MICROSs inability to differentiate its products; and a failure of
manufacturing efforts, whether internal or through MICROSs third party
manufacturing entities;

 The inherent difficulties in accurately forecasting buying patterns
(especially since more than an insignificant portion of the business is
street business that cannot be easily predicted), and appropriately staffing
and preparing for fluctuations in buying demand;

 Implementation and operation of a cost-effective service structure capable
of servicing increasingly complex software systems in increasingly more remote
locations; additional costs and expenses associated with servicing and
supporting open systems, which generally incorporate third party software
products (the support and service of which may be more difficult and costly);

 Unanticipated manufacturing, supply, service or labor difficulties
experienced by certain large MICROS vendors, including Sanmina-SCI Systems,
Inc. and GES Singapore Pte Ltd, resulting in a disruption or discontinuation of
the services or products provided to MICROS, or difficulties in the
manufacturing relationship (certain of the facilities where MICROS products are
manufactured have union workers who may participate in work slow-downs or
stoppages);

 The technological risks of large customer roll-outs, especially where the
contracts involve newer technology such as Opera, or third party software; and
installation of which the customer contracts with MICROS to provide;

 The ability to respond quickly and cost-effectively to the introduction of
new technologies, including Internet-based technologies;

 Because almost half of MICROSs sales are outside the U.S., MICROSs results
could be significantly affected by weak economic conditions in countries in
which it does business, and emerging markets in which there tend to be
significant growth, and by changes in foreign currency exchange rates affecting
those countries;

 Ongoing economic and political turmoil and instability in countries where
MICROS maintains a direct sales and service presence, such as Argentina and
Brazil;

 The ability of MICROS to recruit and retain engineers and other
highly-skilled personnel;

 Although MICROS attempts to protect its proprietary technology through a
combination of trade secrets, copyright, trademark law, nondisclosure
agreements and technical measures, such protection may not preclude competitors
from developing products with features similar to MICROSs products;

 The costs and other effects of legal and administrative cases and
proceedings, settlements and investigations, claims, and changes in those
items, and developments or assertions by or against MICROS relating to
intellectual property rights and intellectual property licenses;

 The effects of, and changes in, laws and regulations, other activities of
governments, agencies and similar organizations, insofar as legislative change
can affect local operations and the features that may have to be incorporated
into the Companys software sets;

 Unanticipated impact of issues relating to the adoption and implementation
of a common currency, the Euro, by the European Economic and Monetary Union
(EMU); unanticipated litigation expenses relating to the adoption and
implementation of the Euro, including suits where MICROS is named as a result
of MICROS products interfacing to third party non-compliant products;

 Unanticipated taxation issues, including the imposition of tariffs by the
WTO and other governing bodies in an effort to deter or penalize US imports.

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AVAILABLE INFORMATION.

The Company files with the U.S. Securities and Exchange Commission (SEC)
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, amendments thereto, and other documents as required by applicable law
and regulations. The public may read and copy any materials that the Company
files with the SEC at the SECs Public Reference Room at 450 Fifth Street, NW,
Washington, DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330
(1-800-732-0330). The SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The Company maintains
an Internet site (http://www.micros.com). The Company makes available free of
charge on or through its Internet website its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after
electronically filing such material with or furnishing it to the SEC. The
information on the Companys website is not incorporated into and is not a part
of this annual report.

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ITEM 2. PROPERTIES

The Companys worldwide corporate headquarters are located in Columbia,
Maryland. Pursuant to the terms of a 10-year lease agreement (the Lease
Agreement) expiring on March 1, 2010, MICROS leases the entire five story
structure, consisting of 247,624 square feet, from Columbia Gateway Office
Corporation. The Companys executive offices are located at the Columbia
facility. The Company also conducts sales, marketing, customer support, and
product development activities at this location.

Effective August 1, 2001, and as a replacement to its former
warehouse/staging facility in Beltsville, Maryland, MICROS leases an
approximately 75,600 square foot facility in Hanover, Maryland. MICROS
conducts light assembly, manufacturing, repair and configuration in this
facility. MICROS leases the Hanover facility pursuant to a lease expiring July
31, 2009 with a termination right first available in July 2006.

The Companys Datavantage subsidiary leases approximately 56,400 square
feet of office and warehouse space in Cleveland, Ohio, from which it conducts
the majority of its sales, marketing, customer support, and product development
activities. The Datavantage subsidiary also leases approximately 11,400 square
feet of office space in the Boston, Massachusetts area, primarily for research
and development activities. The current Cleveland lease expires June 30, 2005,
and the current Boston lease expires September 30, 2006.

The Companys European headquarters facility, in which the Company
conducts certain sales, marketing, development and customer support activities
for Europe, is located in Neuss, Germany. Currently, the Company leases
approximately 42,000 square feet in a Neuss office building pursuant to a lease
agreement expiring in May 31, 2007.

Further, the Company leases approximately 20,515 square feet of office
space in Naples, Florida, where the Company develops software, including the
Opera suite of products, for the hotel industry. The lease expires
December 31, 2006.

To satisfy other sales, service and support, and product development
needs, the Company leases space in 23 cities domestically, including Boston,
Chicago, Los Angeles and other major metropolitan areas, and in over 32 cities
internationally, including London, Paris, Stockholm, Sydney and Hong Kong.

In general, the Company believes that additional space will be available
as needed.

ITEM 3. LEGAL PROCEEDINGS

MICROS 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 litigation 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of fiscal year 2003, no matters were submitted
to a vote of security holders.

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PART II

ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

As of August 31, 2003, there were approximately 512 record holders of the
Companys Common Stock, $.025 par value.

The Companys Common Stock (symbol MCRS) is traded on the National
Association of Securities Dealers Automated Quotation (NASDAQ) system. The
following table shows the range of trading prices (closing prices) for the
periods indicated, as reported by NASDAQ.

On August 31, 2003, the closing price for the stock was $36.56.

Price Range(in dollars)High
      
      LowYear
          Ended June 30, 20037/01/02 - 9/30/02
      
      (First Quarter)
      
      
      27.94
      
      
      
      21.7110/01/02 - 12/31/02
      
      (Second Quarter)
      
      
      24.81
      
      
      
      18.531/01/03- 3/31/03
      
      (Third Quarter)
      
      
      23.90
      
      
      
      20.264/01/03 - 6/30/03
      
      (Fourth Quarter)
      
      
      35.34
      
      
      
      24.04Year
          Ended June 30, 20027/01/01 - 9/30/01
      
      (First Quarter)
      
      
      28.40
      
      
      
      16.8010/01/01 - 12/31/01
      
      (Second Quarter)
      
      
      26.12
      
      
      
      17.011/01/02- 3/31/02
      
      (Third Quarter)
      
      
      30.78
      
      
      
      20.254/01/02 - 6/30/02
      
      (Fourth Quarter)
      
      
      29.07
      
      
      
      25.53Year
          Ended June 30, 20017/01/00 - 9/30/00
      
      (First Quarter)
      
      
      26.00
      
      
      
      14.6910/01/00 - 12/31/00
      
      (Second Quarter)
      
      
      23.50
      
      
      
      14.881/01/01- 3/31/01
      
      (Third Quarter)
      
      
      21.94
      
      
      
      16.314/01/01 - 6/30/01
      
      (Fourth Quarter)
      
      
      24.68
      
      
      
      16.81


The Company has never paid a cash dividend and has no current intention to
pay any cash dividends. Its current policy is to retain earnings and use funds
for the operation and expansion of its business and the repurchase of the
Companys stock. The Company is a party to two credit agreements expiring July
31, 2005, which restricts the payment of dividends other than stock dividends
(see Note 5 of Notes to Consolidated Financial Statements).

In fiscal 2002, the Board of Directors authorized the purchase of up to
one million shares of the Companys common stock. As of August 31, 2003, the
Company has purchased a total of 440,008 shares of its common stock.
A summary of the cumulative number of whole shares purchased is as follows ($
in thousands):

Whole
    
    Average PurchaseShares
    
    Price
    
    PrincipalShares purchased in FY 02
    
    
    95,600
    
    
    
    
    
    
    
    
    
    
    $
    27.31
    
    
    $
    2,610Shares purchased in Q1
    
    
    71,900
    
    
    
    
    
    
    
    
    
    
    $
    24.08
    
    
    
    1,731Shares purchased in Q2
    
    
    82,500
    
    
    
    
    
    
    
    
    
    
    $
    21.56
    
    
    
    1,779Shares purchased in Q3
    
    
    68,000
    
    
    
    
    
    
    
    
    
    
    $
    22.56
    
    
    
    1,534Shares purchased in Q4
    
    
    59,841
    
    
    
    
    
    
    
    
    
    
    $
    27.35
    
    
    
    1,636Shares purchased in August 2003
    
    
    62,167
    
    
    
    
    
    
    
    
    
    
    $
    34.85
    
    
    
    2,167Total shares purchased as of August 31, 2003
    
    
    440,008
    
    
    
    
    
    
    
    
    
    
    $
    26.04
    
    
    $
    11,459


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ITEM 5 continued:

EQUITY COMPENSATION PLAN INFORMATION

Number of
    
    
    
    
    
    Number ofsecurities to
    
    Weighted-
    
    securities remainingbe issued upon
    
    average
    
    available for futureExercise of
    
    exercise price
    
    issuance under equityoutstanding
    
    of outstanding
    
    compensation plansoptions, warrants
    
    options, warrants,
    
    (excluding securitiesPlan category
    
    and rights
    
    and rights
    
    reflected in column (a))(a)
    
    (b)
    
    (c)Equity compensation
plans approved by security holders
    
    
    3,963,408
    
    
    $
    25.97
    
    
    
    259,903Equity compensation
plans not approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,963,408
    
    
    $
    25.97
    
    
    
    259,903


Recent Sales of Unregistered Securities.

Effective May 1, 2003, the Company entered into a stock purchase agreement by
and among the stockholders of Datavantage Corporation and a parent holding
company of Datavantage, pursuant to which MICROS acquired, directly or
indirectly, all of the issued and outstanding shares of Datavantage and its
parent holding company on the terms and conditions stated in the Stock Purchase
Agreement. The consideration paid by MICROS was approximately $52.3 million,
subject to adjustments, modifications, and other conditions as stated in the
Stock Purchase Agreement. The consideration consisted of
$28.6 million cash paid
at closing, $5.2 million cash to be paid 18 months after
closing, approximately $0.3 million in transaction costs and 719,360
whole shares of unregistered MICROS common stock. There were no underwriters of the
transaction, and the persons receiving the unregistered MICROS common stock
were the shareholders of Datavantage Corporation and its parent holding
company. MICROS has relied on section 4(2) of the Securities Act of 1933 to
claim exemption from registration, because the stock purchase agreement was a
transaction by the issuer of the stock not involving any public offering.

18



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##### 



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except per share amounts)

Fiscal Years Ended June 30,2003
    
    2002
    
    2001
    
    2000
    
    1999Statement of Operations DataRevenue
    
    $
    400,191
    
    
    $
    367,163
    
    
    $
    326,776
    
    
    $
    361,854
    
    
    $
    337,079Income from operations
    
    $
    38,322
    
    
    $
    18,764
    
    
    $
    3,999
    
    
    $
    29,470
    
    
    $
    48,645Net income (loss)
    
    $
    21,782
    
    
    $
    12,239
    
    
    
    ($704
    )
    
    $
    16,204
    
    
    $
    27,294Basic net income (loss) per common share
    
    $
    1.24
    
    
    $
    0.70
    
    
    
    ($0.04
    )
    
    $
    0.96
    
    
    $
    1.69Diluted net income (loss) per common share
    
    $
    1.22
    
    
    $
    0.69
    
    
    
    ($0.04
    )
    
    $
    0.91
    
    
    $
    1.60Balance Sheet DataWorking capital
    
    $
    73,779
    
    
    $
    83,485
    
    
    $
    60,644
    
    
    $
    93,535
    
    
    $
    75,301Total assets
    
    $
    370,015
    
    
    $
    312,830
    
    
    $
    274,456
    
    
    $
    278,977
    
    
    $
    232,130Long-term debt and capital leases (1)
    
    $
    667
    
    
    $
    426
    
    
    $
    3,679
    
    
    $
    4,519
    
    
    $
    6,148Shareholders equity
    
    $
    221,228
    
    
    $
    178,362
    
    
    $
    158,848
    
    
    $
    163,621
    
    
    $
    119,273Book value per share (2)
    
    $
    12.28
    
    
    $
    10.18
    
    
    $
    9.09
    
    
    $
    9.44
    
    
    $
    7.36Additional DataWeighted average number of common sharesOutstanding  basic
    
    
    17,502
    
    
    
    17,510
    
    
    
    17,377
    
    
    
    16,796
    
    
    
    16,140 diluted
    
    
    17,838
    
    
    
    17,850
    
    
    
    17,377
    
    
    
    17,892
    
    
    
    17,034




|(1) |  | Including current portion.                                                        
|--- |  | ----------------------------------------------------------------------------------
|   
|(2) |  | Calculated as shareholders equity divided by common stock outstanding
at June 30.

19



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##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

The 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 recognition

The 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 MICROS 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.

Capitalized software development costs

Software 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.
Software development 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 upon which 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.

20



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##### 



Goodwill and intangible assets

On July 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.
Under SFAS No. 142, the Company ceased amortizing goodwill. On an annual
basis, the Company tests goodwill for potential impairment in the first
fiscal quarter.

Allowance for doubtful accounts

MICROS 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 taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities. Deferred tax assets and liabilities are measured using the
enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on the
deferred tax assets and liabilities of a change in tax rate is recognized
in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amounts more likely than not to be realized. If 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 translation

The financial statements of MICROS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).

Results of Operations

Comparison of Fiscal Year 2003 to Fiscal Year 2002:

The Company recorded a diluted net income of $1.22 per common share in
fiscal year 2003, compared with a diluted net income of $0.69 per common share
in fiscal year 2002. This increase was primarily due to increased sales volume
as well as the effect of the acquisition of Datavantage. The acquisition
contributed to a diluted net income of approximately $0.06 per common share in
fiscal year 2003.

Revenue increased by $33.0 million, or 9.0%, to $400.2 million for fiscal
year 2003 compared to the same period last year. A comparison of the sales mix
for fiscal years 2003 and 2002 is as follows ($ in millions):

Year Ended June 30,2003
    
    2002
    
    Change$
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $Hardware
    
    $
    137.0
    
    
    
    
    
    
    
    34.2
    %
    
    $
    134.1
    
    
    
    
    
    
    
    36.5
    %
    
    $
    2.9Software
    
    
    71.3
    
    
    
    
    
    
    
    17.8
    %
    
    
    60.5
    
    
    
    
    
    
    
    16.5
    %
    
    
    10.8Service
    
    
    191.9
    
    
    
    
    
    
    
    48.0
    %
    
    
    172.6
    
    
    
    
    
    
    
    47.0
    %
    
    
    19.3Total
    
    $
    400.2
    
    
    
    
    
    
    
    100.0
    %
    
    $
    367.2
    
    
    
    
    
    
    
    100.0
    %
    
    $
    33.0


21



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##### 



In absolute dollars, combined hardware and software revenues for fiscal
2003 increased $13.7 million, or 7.0%, and service revenues increased $19.3
million, or 11.2%, over the same period a year earlier. Combined hardware and
software sales increased primarily due to the increase in sales volume for
computer equipment and Opera software. The increase was also attributed to the
release of PC workstation 4 and mymicros.net software and the
increase in volume for the Elite PC workstation. Service revenues increased primarily due to support
revenues earned on a larger customer base. Datavantage accounted for
approximately $5.1 million of hardware and software revenues and $4.2 million
of service revenue in fiscal year 2003.

The Companys revenue for fiscal years 2003 and 2002 was transacted in
approximately 23 currencies while in 2001 revenue was transacted in
approximately 29 currencies. The decrease of currencies transacted is mainly
due to the adoption of the Euro as the common currency for the twelve
participating member nations of the European Union (EU). MICROS has
subsidiaries in seven of the twelve participating member nations. The relative
mix over the past three years is as follows:

Year Ended June 30,Revenues by currency (1)
    
    
    
    
    
    2003
    
    2002
    
    2001United States Dollar
    
    
    
    
    
    
    55
    %
    
    
    57
    %
    
    
    59
    %Euro
    
    
    
    
    
    
    18
    %
    
    
    18
    %
    
    
    German Mark
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    %British Pound Sterling
    
    
    
    
    
    
    7
    %
    
    
    7
    %
    
    
    7
    %Australian Dollar
    
    
    
    
    
    
    4
    %
    
    
    3
    %
    
    
    3
    %French Franc
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    %Swedish Krona
    
    
    
    
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Italian Lira
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    %Chinese Renminbi
    
    
    
    
    
    
    2
    %
    
    
    1
    %
    
    
    1
    %Singapore Dollar
    
    
    
    
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Spanish Peseta
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    %Japanese Yen
    
    
    
    
    
    
    2
    %
    
    
    1
    %
    
    
    All Other Currencies (2)
    
    
    
    
    
    
    9
    %
    
    
    10
    %
    
    
    9
    %Total
    
    
    
    
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %




|(1) |  | Calculated using average month end exchange rates for the year.                                
|--- |  | -----------------------------------------------------------------------------------------------
|   
|(2) |  | Represents approximately 15 currencies in fiscal years 2003 and 2002 and 17 currencies in 2001.

Cost of sales, as a percentage of revenue, decreased to 50.4% from 51.8% in the
prior year. Cost of sales for hardware and software products, as a percentage
of related revenue, was 55.3% and 55.5% in fiscal years 2003 and 2002,
respectively.

Service costs, as a percentage of service revenue, decreased to 45.0% in
fiscal year 2003 compared to 47.5% in fiscal year 2002. The decrease was
primarily due to the continued expansion of the Companys customer base and the
ability of the Company to increase productivity by increasing service revenues
at a rate in excess of service costs.

Selling, general and administrative expenses increased $9.6 million, or
7.8%, in fiscal year 2003 compared to fiscal year 2002. This increase is
partially due to the acquisition of Datavantage. As a percentage of revenue,
selling, general and administrative expenses decreased slightly to 33.1% in
fiscal year 2003 compared to 33.5% in fiscal year 2002.

Research and development (R&D) expenses consist primarily of labor costs
less capitalized software development costs. In fiscal year 2003, R&D expenses
decreased $0.6 million, or 3.0%, compared to fiscal year 2002. As a percentage
of revenue, R&D expenses decreased to 4.7% in fiscal year 2003 compared to 5.3%
in fiscal year 2002. Capitalized software development costs increased $1.5
million to $4.6 million in fiscal year 2003 due to Workstation 4 and the
continued capitalization of Version 8. As a percentage of revenue, total
research and development expenditures (including capitalized software
development costs) amounted to 5.8% in fiscal year 2003 compared to 6.1% in
fiscal year 2002. A comparative summary of R&D activities is as follows ($ in
thousands):

22



---



##### 



2003
    
    2002
    
    $ ChangeTotal R&D
    
    $
    23,329
    
    
    $
    22,355
    
    
    $
    974R&D capitalization
    
    
    (4,581
    )
    
    
    (3,035
    )
    
    
    (1,546
    )Total R&D expenses
    
    $
    18,748
    
    
    $
    19,320
    
    
    $
    (572
    )Total revenue
    
    $
    400,191
    
    
    $
    367,163R&D expense as % of revenue
    
    
    4.7
    %
    
    
    5.3
    %Total R&D as % of revenue
    
    
    5.8
    %
    
    
    6.1
    %


Depreciation and amortization expense decreased by $7.2 million or 44.6%
in fiscal year 2003. The decrease is primarily due to the adoption of SFAS
142, Goodwill and Other Intangible Assets. Upon adoption, the Company ceased
to amortize goodwill. The following table represents the impact of SFAS No.
142 on net income, basic and diluted net income per share had SFAS No. 142 been
in fiscal year 2002 ($ in thousands):

2003
    
    2002Net incomeReported net income
    
    $
    21,782
    
    
    $
    12,239Goodwill amortization, net of tax
    
    
    
    
    
    
    5,370Adjusted net income
    
    $
    21,782
    
    
    $
    17,609Basic net income per common shareReported net income per common share
    
    $
    1.24
    
    
    $
    0.70Goodwill amortization, net of tax
    
    
    
    
    
    
    0.31Adjusted basic net income per common share
    
    $
    1.24
    
    
    $
    1.01Diluted net income per common shareReported net income per common share
    
    $
    1.22
    
    
    $
    0.69Goodwill amortization, net of tax
    
    
    
    
    
    
    0.30Adjusted diluted net income per common share
    
    $
    1.22
    
    
    $
    0.99Weighted average shares outstandingBasic
    
    
    17,502
    
    
    
    17,510Diluted
    
    
    17,838
    
    
    
    17,850


Income from operations for fiscal 2003 was $38.3 million, or 9.6% of
revenue, compared to $18.8 million, or 5.1% in fiscal year 2002. The increase
was mainly due to the overall increase in software and service sales, the
increase in gross margins generated from service sales and the decrease of
goodwill amortization from the adoption of SFAS 142.

Non-operating income for fiscal year 2003 decreased by $1.7 million
primarily due to foreign currency translation loss of $0.7 million in fiscal
year 2003 compared to a gain of $0.4 million in fiscal year 2002. In addition,
an investment of $0.5 million was written off in the fourth quarter of fiscal
year 2003.

The effective tax rate for fiscal year 2003 was 40.5%, compared to 33.98%
for fiscal year 2002. The increase was due to the relative mix of earnings in
higher-taxing jurisdictions.

On August 30, 2002, a Word Trade Organization (WTO) arbitration panel issued a final
decision upholding a challenge allowing the European Union (EU) to impose $4.04 billion
per year in retaliatory tariffs on certain products if the U.S. tax code is not brought into
compliance with an August 2001 WTO decision. This original decision found that the
extraterritorial tax provisions (ETI) of the FSC Repeal and Extraterritorial Income Exclusion
of 2000 constitute an export subsidy prohibited by the WTO Agreement on Subsidies and
Countervailing

23



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##### 



Measures. The EU has not begun to impose such sanctions, nor has it indicated
when or if it will begin such charges. Negotiations among the EU, the European
Commission, and United States have been on-going and it is currently uncertain
when and if any resolution via U.S. legislative actions will subsequently
mitigate the sanctions ruled upon by the WTO panel. As a result, it is
currently not possible to predict what impact, if any, this issue will have on
the Companys future earnings pending final resolution of this matter.

Comparison of Fiscal Year 2002 to Fiscal Year 2001:

The Company recorded a diluted net income of $0.69 per common share in
fiscal year 2002, compared with a diluted net loss of $0.04 per common share in
fiscal year 2001. This increase was primarily due to increased sales volume
and cost savings from operating expenses, both in absolute dollars and as a
percentage of revenue.

Revenue increased by $40.4 million, or 12.4%, to $367.2 million for fiscal
year 2002 compared to the same period last year. A comparison of the sales mix
for fiscal years 2002 and 2001 is as follows ($ in millions):

Year Ended June 30,2002
    
    2001
    
    Change$
    
    %
    
    $
    
    %
    
    $Hardware
    
    $
    134.1
    
    
    
    36.5
    %
    
    $
    116.1
    
    
    
    35.5
    %
    
    $
    18.0Software
    
    
    60.5
    
    
    
    16.5
    %
    
    
    55.9
    
    
    
    17.1
    %
    
    
    4.6Service
    
    
    172.6
    
    
    
    47.0
    %
    
    
    154.8
    
    
    
    47.4
    %
    
    
    17.8Total
    
    $
    367.2
    
    
    
    100.0
    %
    
    $
    326.8
    
    
    
    100.0
    %
    
    $
    40.4


In absolute dollars, combined hardware and software revenues for fiscal
year 2002 increased $22.6 million, or 13.2%, and service revenues increased
$17.8 million, or 11.4%, over the same period a year earlier. Combined
hardware and software sales increased primarily due to the increase in sales
volume for MICROS PC Workstations and software sales for Opera, which was
released in June 2001. Part of the volume increase for PC Workstations was
related to a large rollout program, which was substantially completed in the
second half of fiscal 2002. Service revenues increased primarily due to
support revenues earned on a larger customer base.

The Companys revenue for fiscal year 2002 was transacted in approximately 23
currencies, while in fiscal years 2001 and 2000 the Companys revenue was
transacted in approximately 29 currencies. The decrease of currencies
transacted is due to the adoption of the Euro as the common currency for the
twelve participating member nations of the European Union (EU). MICROS has
subsidiaries in seven of the twelve participating member nations.

Cost of sales, as a percentage of revenue, increased to 51.8% from 49.8%
for fiscal 2002 compared to fiscal year 2001. Cost of sales for hardware and
software products, as a percentage of related revenue, was 55.5% and 49.1% in
fiscal years 2002 and 2001, respectively. The increase was primarily due to
the increase in sales for hardware (MICROS PC Workstations), which generate
lower margins. In addition, software amortization increased by $2.8 million
due to the release of Opera in June 2001.

Service costs, as a percentage of service revenue, decreased to 47.5% in
fiscal year 2002 compared to 50.6% in fiscal year 2001. The decrease was
primarily due to the continued expansion of the Companys customer base and the
ability of the Company to increase productivity by increasing service revenues
at a rate in excess of service costs.

Selling, general and administrative expenses decreased $3.0 million, or
2.4%, in fiscal year 2002 compared to fiscal year 2001. As a percentage of
revenue, selling, general and administrative expenses decreased to 33.5% in
fiscal year 2002 compared to 38.6% in fiscal year 2001. The decrease was due
primarily to strategic cost reductions in fiscal year 2002.

Research and development expenses (exclusive of capitalized software
development costs), which consist primarily of labor costs, decreased $0.4
million, or 1.9%, in fiscal 2002 compared to fiscal 2001. As a percentage of
revenue, research and development expenses (exclusive of capitalized software
development costs) decreased to 5.3% in fiscal 2002 compared to 6.0% in fiscal
2001. Capitalized software development costs were $3.0 million in fiscal 2002
compared to $8.9 million in fiscal 2001. Total research and development
expenditures, including capitalized software development costs, decreased 21.7%
from $28.6 million in fiscal 2001 to $22.4 million in fiscal

24



---



##### 



2002. As a percentage of revenue, research and development expenditures
(inclusive of capitalized software development costs) amounted to 6.1% in
fiscal 2002 compared to 8.7% in fiscal 2001. Total research and development
expenditures, including capitalized software development costs, decreased
mainly due to the reduction of outside consultants after the release of the
Opera software in June 2001.

Depreciation and amortization increased $1.7 million, or 12.0%, in fiscal
2002 compared to fiscal 2001. As a percentage of revenue, it remained constant
at 4.4%.

Income from operations for fiscal 2002 was $18.8 million, or 5.1% of
revenue, compared to income of $4.0 million, or 1.2% of revenue in fiscal 2001.
The increase was primarily due to an increase in sales, improved service
margins and a reduction of operating expenses, partially offset by a decrease
in hardware and software margins.

Non-operating income for fiscal 2002 increased $4.3 million compared to
fiscal 2001 mainly due to the write down of an investment of $1.2 million in
fiscal 2001. The increase was also due to a foreign currency translation gain
of $0.4 million in fiscal 2002 compared to a foreign translation loss of $1.2
million in fiscal 2001.

The effective tax rate for fiscal 2002 was 34% compared to 291.9% for
fiscal 2001. The overall decrease was due to the utilization of net operating
losses with prior valuation allowances and the utilization of foreign tax
credits.

Purchases of Company Stock

In fiscal year 2002, the Board of Directors authorized the purchase of up to one
million shares of the Companys common stock in the open market. A summary of
the cumulative number of whole shares purchased through June 30, 2003 is as
follows ($in thousands):

Whole
    
    AverageShares
    
    Purchase Price
    
    PrincipalTotal shares purchased as of June 30, 2002
    
    
    95,600
    
    
    $
    27.31
    
    
    $
    2,610Shares purchased in Q1
    
    
    71,900
    
    
    $
    24.08
    
    
    
    1,731Shares purchased in Q2
    
    
    82,500
    
    
    $
    21.56
    
    
    
    1,779Shares purchased in Q3
    
    
    68,000
    
    
    $
    22.56
    
    
    
    1,534Shares purchased in Q4
    
    
    59,841
    
    
    $
    27.35
    
    
    
    1,637Total shares purchased as of June 30, 2003
    
    
    377,841
    
    
    $
    24.59
    
    
    $
    9,291


Liquidity and Capital Resources

Prior to July 17, 2003, the Company maintained a $45.0 million
multi-currency committed line of credit (the Former Credit Agreement), the
Companys obligations under which were secured by its inventory and receivables
located in the United States. Interest due under the Former Credit Agreement
was calculated as follows: (i) if the advance is in U.S. dollars, at the option
of the Company, either the banks prime rate minus an amount as stipulated in
the loan agreement based on Company performance, or the LIBOR rate plus an
additional LIBOR rate percentage; and (ii) if the advance was made in a foreign
currency, the LIBOR rate for the applicable denominated currency, plus an
additional LIBOR rate percentage.

Effective July 17, 2003, the Former Credit
Agreement was terminated without additional expense, and 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 cash 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

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the Companys consolidated cash flow (GAAP 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 $8.8 million at the June 30, 2003
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 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 June 30, 2003, the total outstanding balance on the line of credit
is $10.2 million consisting of: USD $7.0 million, ZAR (South African Rand) 13.0
million (approximately $1.7 million at the June 30, 2003 exchange rate), SEK
(Swedish Krona) 7.5 million (approximately $1.0 million at the June 30, 2003
exchange rate), and JPY (Japanese Yen) 60.0 million (approximately $0.5 million
at the June 30, 2003 exchange rate). As of June 30, 2003, the Company has
approximately $43.6 million available to borrow.

Net cash provided by operating activities for fiscal year 2003 was $40.4
million versus $42.3 million for fiscal year 2002. The Company used $38.0
million for investing activities, including $28.6 million for the acquisition
of Datavantage Corporation, $10.2 million for the purchase of property, plant,
and equipment and internally developed software. The Company used $23.1
million for financing activities, primarily stemming from borrowing from the
line of credit. Net payments on the line of credit was $16.8 million.
Proceeds from the issuance of stock provided $1.1 million offset by $6.7
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 foreseeable future. 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.

Financial indicators of the Companys liquidity and capital resources as of
June 30, 2003 and 2002 were:

In thousands, except ratios
    
    2003
    
    2002Cash and cash equivalents
    
    $
    45,682
    
    
    $
    66,638Available credit facilities
    
    $
    53,751
    
    
    $
    52,600Outstanding credit facilities
    
    
    <10,185
    >
    
    
    <18,699
    >Outstanding letters of credit
    
    
    
    
    
    
    Exchange contracts
    
    
    
    
    
    
    <1,500
    >Unused credit facilities
    
    $
    43,566
    
    
    $
    32,401Working capital
    
    $
    73,779
    
    
    $
    83,485Long-term debt and capital lease obligations:Current
    
    $
    469
    
    
    $
    147Non-current
    
    
    198
    
    
    
    279Total
    
    $
    667
    
    
    $
    426Shareholders equity
    
    $
    221,228
    
    
    $
    178,362Current ratio
    
    
    1.58
    
    
    
    1.69


Inflation

The Company has not experienced any significant impact as a result of
inflation.

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Off-balance sheet arrangements

The Company does not have any off-balance sheet arrangements (as defined
in the applicable regulations) that have or are reasonably likely to have a
current or future effect on the Companys financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Part I, Item I, Foreign Sales and Foreign Market Risks, and Part II,
Item 7. Additionally, MICROSs committed lines of credit bear interest at a
floating rate. MICROS does not invest in financial instruments designed to
protect against interest rate fluctuations, although it will continue to
evaluate the need to do so in the future.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15(a) 1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this annual 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 Chairman, Chief Executive Officer and President, and Gary
C. Kaufman, MICROS 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
annual 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 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 to periodically 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 annual

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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.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Name
    
    PositionT. Paul Armstrong
    
    Executive Vice President, New TechnologiesLouis M. Brown, Jr.
    
    Director and Vice Chairman of the BoardA. L. Giannopoulos
    
    Chairman, President and Chief Executive OfficerJ. Alan Hayman
    
    Executive Vice President, Restaurant Sales and StrategiesDaniel G. Interlandi
    
    Executive Vice President, North American SalesBernard Jammet
    
    Executive Vice President, Latin American SalesF. Suzanne Jenniches
    
    DirectorGary C. Kaufman
    
    Executive Vice President, Finance and Administration and Chief
Financial OfficerThomas L. Patz
    
    Executive Vice President, Strategic Initiatives, and General CounselJohn G. Puente
    
    DirectorCynthia A. Russo
    
    Vice President and Corporate ControllerDwight S. Taylor
    
    DirectorWilliam S. Watson
    
    Director


Directors of the Registrant are elected for a term of one year.

Directors and Executive Officers of the Registrant during fiscal year
2003:

T. Paul Armstrong, 45, joined the Company in July 1981 as a software
engineer. In December 1983, he was promoted to the position of Director,
Systems Engineering. In November 1989 he was promoted to Vice President,
Research and Development. In October 1993, Mr. Armstrong was named Vice
President and Product Manager, Full Service Products. In July 1995, Mr.
Armstrong was promoted to Senior Vice President, Research and Development, in
April 1996, he was made Senior Vice President and General Manager for the Table
Service Restaurant Group, and in April 1997 was named Senior Vice President and
General Manager for the Strategic Account Group. In June 2000, Mr. Armstrong
was promoted to his current position of Executive Vice President, New
Technologies. Mr. Armstrong holds a master degree from Cambridge University,
England.

Louis M. Brown, Jr., 60, has been a Director of the Company since 1977.
Mr. Brown held the position of President and Chief Executive Officer from
January 1986 until his appointment as Chairman of the Board in January 1987.
In April 2001, Mr. Brown tendered his resignation as Chairman, and was
appointed Vice Chairman. He also serves as Chief Executive Officer of
Precision Auto Care, Inc., a franchise company for the auto care industry.
Additionally, Mr. Brown serves as President and a director of IDEAS, Inc., a
supplier of high technology, custom-engineered products and services. Formerly,
Mr. Brown served as Chairman of Autometric, Inc. and of Planning Systems, Inc.
He is a graduate of the Johns Hopkins University (B.E.S.-E.E.).

A. L. Giannopoulos, 63, has been a Director since March 1992 and was
elected President and Chief Executive Officer in May 1993. In April 2001, Mr.
Giannopoulos was appointed Chairman of the Companys Board of Directors.
Effective as of June 1, 1995, Mr. Giannopoulos resigned as General Manager of
the Westinghouse Information and Security Systems Divisions, having been with
Westinghouse for 30 years, and was hired by the Company pursuant to an
Employment Agreement to terminate December 31, 1999, subsequently amended to

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terminate on June 30, 2005. In prior assignments at Westinghouse, Mr.
Giannopoulos was General Manager of the Automation Division and National
Industrial Systems Sales Force, Industries Group. Mr. Giannopoulos is a
graduate of Lamar University with a Bachelor of Science degree in Electrical
Engineering.

J. Alan Hayman, 50, began his career with MICROS in January 2000. He has
also held key positions at the Company including Regional Vice President for
Restaurant Sales and Strategies, and was promoted to Senior Vice President in
October 2000. Mr. Hayman currently serves as Executive Vice President, a
position to which he was appointed in September 2001. Prior to joining MICROS,
Mr. Hayman served as Vice President of Sales for Hayman Systems, a leading
MICROS dealer that was acquired by MICROS in December 1999. Mr. Hayman
graduated in 1974 from Boston University, School of Management, with a BS in
Business Administration.

Daniel Interlandi, 50, began his career with MICROS in 1980, and has held
key sales and management positions with the Company involving districts
operations, distributors, major accounts, customer service, research and
development, and marketing. He was promoted to Vice President, Full Service
Products in May 1993 and to Senior Vice President, Sales and Marketing in
September 1993. In April 1996, he was appointed Senior Vice President and
General Manager, Leisure and Entertainment Group, and in April 1997, he assumed
additional responsibility for the Table Service Restaurant Group. In fiscal
year 2000, Mr. Interlandi had oversight responsibility for EAME operations, and
in January 2001, Mr. Interlandi was appointed to his current position,
Executive Vice President, North American Sales. Mr. Interlandi is a 1975
graduate of Knox College.

Bernard Jammet, 44, joined the Company in July 1984 as European Sales
Manager. In 1988, he was named Managing Director for Europe/Africa/Middle East
Operations and was promoted to Vice President in November 1990. In November
1994, he was promoted to the position of Senior Vice President, International
Operations. In October 1998, he was appointed Executive Vice President,
Product Development, and in January 2001, Mr. Jammet was appointed to his
current position of Executive Vice President, Latin American Sales. Before
joining MICROS, Mr. Jammet was employed with the former MICROS distributor for
France. Mr. Jammet is a graduate of the Hotel School of Lausanne, Switzerland,
with a Masters degree in Hotel Administration.

F. Suzanne Jenniches, 55, has been a Director of the Company since October
1996. She is Vice President and General Manager of the Government Systems
Division for the Electronic Systems Sector of Northrop Grumman, which designs
and develops advanced automation, information systems, communications systems
and homeland security for both US government and international applications.
Ms. Jenniches is past President of the national Society of Women Engineers, is
Chair Elect of the Board of Governors for the American Association of
Engineering Societies, and is currently a member of the U.S. Army Science
Board. Ms. Jenniches is a graduate of Clarion College and holds a Masters
degree in Environmental Engineering from the Johns Hopkins University.

Gary C. Kaufman, 53, served as a Director of the Company from January 1991
until May 1994 when he was appointed to Vice President, Finance and
Administration and Chief Financial Officer. Subsequent to June 30, 1996, he
was promoted to Senior Vice President, Finance and Administration and Chief
Financial Officer, and in September 1999, was promoted to Executive Vice
President, Finance and Administration and Chief Financial Officer. Previously,
Mr. Kaufman was Division Controller for Westinghouse Security and Network
Services Divisions, having been with Westinghouse for 20 years in various
financial positions. Mr. Kaufman is a graduate of the University of Dayton
with a Bachelor of Science degree in Accounting and is also a Certified Public
Accountant.

Thomas L. Patz, 43, joined the Company in August 1995 as General Counsel.
In November 1996, he was promoted to the position of Vice President and General
Counsel. In September 1999, Mr. Patz was promoted to the position of Senior
Vice President and General Counsel, and in January 2000, Mr. Patz was promoted
to his present position of Executive Vice President, Strategic Initiatives, and
General Counsel. Previously, Mr. Patz was Assistant General Counsel of
Westinghouse Electric Corporation. Mr. Patz is a 1982 graduate of Brown
University, and a 1985 graduate of the University of Virginia School of Law
with a degree of Juris Doctor. Mr. Patz is a member of the Maryland State Bar.

John G. Puente, 73, has been a Director of the Company since May 1996.
Until August 1999, Mr. Puente served as Chairman of Telogy Networks, Inc., a
developer of communications software products, at which time it was acquired by
Texas Instruments. Mr. Puente is on the Board of Directors of Primus
Telecommunications, a long distance telecommunications service provider.
Previously, he was Chairman and Chief Executive Officer of Orion

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Network Systems, a company that provides satellite services and
facilities. Prior to joining Orion, Mr. Puente was Vice Chairman of M/A-Com, a
supplier of microwave components and systems to the telecommunications
industry. He was a founder and Chairman of Digital Communications Corporation
(now Hughes Network Systems) and SouthernNet, a fiber optic long distance
company that merged to form Telecom USA and was later acquired by MCI. Mr.
Puente is a graduate of Polytechnic Institute of New York and now serves on the
Board of Trustees of that institution, and he holds a Masters degree from
Stevens Institute of Technology. He is also Chairman of the Board of Trustees
of Capitol College.

Cynthia A. Russo, 33, joined the Company in January 1996 as a Senior
Accountant. In October 1996, she was promoted to Manager of Accounting, in
March 1999, she was promoted to Director of Financial Reporting and Services,
in February 2000 she was promoted to Director of Corporate Reporting and
Accounting, and in May 2001 she was promoted to her current position, Vice
President and Corporate Controller. Ms. Russo holds a Bachelor of Science
degree in Accounting from James Madison University. She is a Certified Public
Accountant and a Certified Internal Auditor.

Dwight S. Taylor, 58, has been a Director of the Company since 1997. He
is President of Corporate Development Services, LLC (CDS), a commercial real
estate development firm with offices in Columbia, Maryland, and a subsidiary of
Corporate Offices Properties Trust (NYSE: OFC). From 1984 until 1998, Mr.
Taylor had been employed by Constellation Real Estate, Inc. in various
capacities. Mr. Taylor is also the immediate past President of the Maryland
Chapter of the National Association of Industrial and Office Properties
(NAIOP), and a member of the NAIOP National Board. Mr. Taylor currently
serves on the Trustee Boards of the Baltimore Polytechnic Institute Foundation,
Capitol College, and Lincoln University. Mr. Taylor is a 1968 graduate of
Lincoln University with a Bachelor of Arts degree in Economics.

William
S. Watson, 59, has been a director of the Company since 2000. He currently serves as the Managing Director of The
Prism Partnership LLC, a consulting practice that provides strategic planning
and implementation consulting with a specialty in the hospitality and travel
industry. Mr. Watson also serves as Chairman and Executive Vice President of
TLX, Inc., a provider of logistics solutions to the airline industry, based in
Scottsdale, Arizona, and is a member of the board of directors of Passkey
Systems, Inc., a privately held company that provides meetings and convention
reservation and bookings services. During his career, Mr. Watson also served
as Vice President of Strategic Marketing for ITT-Sheraton Hotels, and Executive
Vice President, Chief Operating Officer of Best Western International. Mr.
Watson is a 1964 graduate of Croydon Polytechnic, with a degree in Mechanical
Engineering.

The Company knows of no family relationships between any director,
executive officer, or person nominated or chosen to become a director or
executive officer.

Information relating to filings made pursuant to Section 16 of the
Securities Exchange Act of 1934 will be set forth in the Companys Proxy
Statement, and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS

The information required by Item 11 will be set forth in the Companys
Proxy Statement under the caption Executive Compensation, and such
information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 will be set forth in the Companys
Proxy Statement under the caption Security Ownership of Certain Beneficial
Owners and Management, and such information is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Effective June 30, 1995, and amended February 1, 1999, April 26, 2001, and
September 4, 2003, the Company and Louis M. Brown, Jr., Vice-Chairman of the
Board, entered into a Consulting Agreement terminating June 30, 2007, pursuant
to which Mr. Brown is to provide on the average 20 hours per week of consulting
services to the Company in exchange for a base consulting fee plus a target
bonus. During fiscal years 2003 and 2002, the

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Company compensated Mr. Brown $410 and $308, respectively, for consulting
services provided to the Company. For fiscal year 2003, Mr. Brown earned a
base consulting fee of $250 and a bonus of $160. The bonus was accrued in
fiscal year 2003 and paid in September 2003.

During fiscal years 2003 and 2002, the Company paid a real estate
partnership $146 and $427, respectively, for the rental of the Laurel, Maryland
facilities. J. Alan Hayman, Executive Vice President, Restaurant Sales and
Strategies, holds a 50% interest, as he was a previous owner of Stanley Hayman
and Company, Inc. which was acquired by MICROS in December 1999. The rental
rates were fair market value rates, as determined by two independent
valuations. The Laurel lease expired on December 31, 2002, and was not
renewed.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by Item 14 will be set forth in the Companys
Proxy Statement under the section heading Independent Public Accountants, and
such information is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Page
No.(a)
    
    The following documents are filed as a part of this report:1.
    
    Financial Statements:Report of Independent Auditors
    
    36Consolidated balance sheets as of June 30, 2003 and 2002
    
    37Consolidated statements of operations for the years ended June 30, 2003, 2002 and 2001
    
    38Consolidated statements of shareholders equity for the years ended June 30, 2003, 2002 and 2001
    
    39Consolidated statements of cash flows for the years ended June 30, 2003, 2002 and 2001
    
    40-41Notes to consolidated financial statements
    
    42-562.
    
    Financial Statement Schedules:Schedule II  Valuation and qualifying accounts and reserves
    
    57All other schedules are omitted because they are not applicable, not required, or the required
information is included in the financial statements or notes thereto.3.
    
    Exhibits:


3(i).
    
    Articles of Incorporation of the Company are incorporated
herein by reference to Exhibit 3 to the Annual Report on Form 10-K of
the Company for the Fiscal Year ended June 30, 1990.3(i)(a).
    
    Articles of Amendment to Articles of Incorporation are
incorporated herein by reference to Exhibit 3(i) to the Quarterly
Report on Form 10-Q of the Company for the period ended December 31,
1997.3(i)(b).
    
    Articles of Amendment to Articles of Incorporation are
incorporated herein by reference to Exhibit 3(i) to the Quarterly
Report on Form 10-Q of the Company for the period ended December 31,
1998.3(ii).
    
    By-laws of the Company as in effect on the date hereof is
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, 1990.10a1.
    
    Amendment and Restatement of MICROS Systems, Inc. Stock Option
Plan is incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 of the Company filed on February
16, 1990.10a2.
    
    First Amendment to the Amendment and Restatement of MICROS
Systems, Inc. Stock Option Plan constituting Exhibit 10a1 hereto is
incorporated herein by reference to Exhibit 4.2 to the Registration
Statement on Form S-8 of the Company filed on February 16, 1990.10b1.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1993 Annual Meeting of Shareholders.10b2.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1995 Annual Meeting of Shareholders.10b3.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1996 Annual Meeting of Shareholders.


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10b4.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1997 Annual Meeting of Shareholders.10b5.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1998 Annual Meeting of Shareholders.10b6.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1999 Annual Meeting of Shareholders.10b7.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 2001 Annual Meeting of Shareholders.10c.
    
    Underwriting Agreement dated July 6, 1995 by and among MICROS
Systems, Inc., Westinghouse Electric Corporation, Westinghouse
Holdings Corporation, J.P. Morgan Securities, Inc., Morgan Stanley &
Co. Incorporated and Smith Barney, Inc. is incorporated herein by
reference to Exhibit 10d to the Annual Report on Form 10-K of the
Company for the Fiscal Year ended June 30, 1995.10d.
    
    Employment Agreement dated June 1, 1995 between MICROS Systems, Inc.
and A. L. Giannopoulos is incorporated herein by reference to
Exhibit 10e to the Annual Report on Form 10-K of the Company for the
Fiscal Year ended June 30, 1995.10e.
    
    First Amendment to Employment Agreement dated February 6, 1997
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1996.10f.
    
    Second Amendment to Employment Agreement dated February 1, 1998
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1997.10g.
    
    Third Amendment to Employment Agreement dated September 8, 1999
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10g to the Annual Report on Form 10-K
of the Company for the Fiscal Year ended June 30, 1999.10h.
    
    Consulting Agreement dated June 30, 1995 between MICROS Systems,
Inc. and Louis M. Brown, Jr. is incorporated herein by reference to
Exhibit 10 to the Annual Report on Form 10-K of the Company for the
Fiscal Year ended June 30, 1995.10i.
    
    First Amendment to Consulting Agreement dated February 1, 1999
between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998.10j.
    
    Second Amendment to Consulting Agreement dated April 26, 2001
between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended March 31, 2001.10k.
    
    Third Amendment to Consulting Agreement dated September 4, 2003
between MICROS Systems, Inc. and Louis M. Brown, Jr.10l.
    
    MICROS Systems, Inc. Bonus and Incentive Plan is incorporated herein
by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of
the Company for the period ended September 30, 1994.10m.
    
    Employment Agreement dated May 28, 1997 between MICROS Systems, Inc.
and Gary C. Kaufman is incorporated herein by reference to Exhibit
10 to the Annual Report on Form 10-K of the Company for the Fiscal
Year ended June 30, 1997.


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10n.
    
    First Amendment to Employment Agreement dated October 1, 1998
between MICROS Systems, Inc. and Gary C. Kaufman is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998.10o.
    
    Employment Agreement dated May 28, 1997 between MICROS Systems, Inc.
and Thomas L. Patz is incorporated herein by reference to Exhibit 10
to the Annual Report on Form 10-K of the Company for the Fiscal Year
ended June 30, 1997 (see 10m above, as text is identical)10p.
    
    First Amendment to Employment Agreement dated October 1, 1998
between MICROS Systems, Inc. and Thomas L. Patz is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998 (see 10n
above, as text is identical).10q1
    
    Credit Agreement, dated as of July 17, 2003, among MICROS Systems,
Inc., DV Technology Holdings Corporation, Datavantage Corporation,
MICROS-Fidelio Nevada, LLC, MSI Delaware, LLC, MICROS-Fidelio
Southwest, Inc., and MICROS-Fidelio Worldwide, Inc. (Borrowers), and
Bank Of America, N.A., Wachovia Bank, National Association and US
Bank (Lenders)10q2
    
    Credit Agreement, dated As Of July 17, 2003, Among MICROS-Fidelio
(Ireland) Ltd., MICROS-Fidelio Systems (UK) Ltd., MICROS-Fidelio
España S.L., Merchants Information Solutions, Ltd., MICROS-Fidelio
Brazil, Ltda., MICROS-Fidelio France S.A.S., Hospitality
Technologies, S.A., MICROS-Fidelio Mexico S.A. De C.V., MICROS
Systems Holding GmbH, MICROS-Fidelio Software Deutschland GmbH,
Indatec GmbH & Co. Kg., MICROS-Fidelio Software GmbH & Co. Kg.,
MICROS-Fidelio Software Portugal Unipessoal Lda, MICROS-Fidelio
(Thailand) Co., Ltd., MICROS-Fidelio Singapore Pte Ltd.,
MICROS-Fidelio Software (Philippines), Inc., MICROS-Fidelio Japan
Ltd., MICROS-Fidelio Australia Pty. Ltd., MICROS-Fidelio Hong Kong,
Ltd., Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic
Sverige, A.B., And Hotelbk, A.B., and Bank Of America, N.A.,
Wachovia Bank, National Association And Us Bank (Lenders)10q3
    
    Security Agreement, dated As Of July 17, 2003, By and Among MICROS
Systems, Inc., DV Technology Holdings Corporation, Datavantage
Corporation, MICROS-Fidelio Nevada, LLC, MSI Delaware, LLC,
MICROS-Fidelio Southwest, Inc., MICROS-Fidelio Worldwide, Inc.
(Borrowers) And Bank Of America, N.A., Wachovia Bank, National
Association And Us Bank (Lenders)21.
    
    Subsidiaries of the Company.23.
    
    Consent of Independent Accountants.31.
    
    Certifications32.
    
    Section 1350 Certifications.


(b)           
Reports on form 8-K during the fourth quarter of the fiscal year ending June 30, 2003:

(1) May 1, 2003, which contained the Companys press release dated April
30, 2003, regarding its financial results for the three- and nine-month periods
ended March 31, 2003.

(2) May 5, 2003, which contained information concerning the acquisition of
Datavantage.

The annual report will be mailed to shareholders before the annual meeting
scheduled for November 21, 2003.

35



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##### 



REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of MICROS Systems, Inc.

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) on page 33 present fairly, in all material
respects, the financial position of MICROS Systems, Inc. and its subsidiaries
at June 30, 2003 and 2002, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2003, in
conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 15(a)(2) on page 33 presents fairly,
in all material aspects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of
the Companys management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

As discussed in Note 1 to the
financial statements, the Company ceased amortizing certain goodwill
and intangibles as a result of the adoption of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible
Assets, effective on the first day of its 2003 fiscal year.

PricewaterhouseCoopers LLP

Baltimore, Maryland
August 15, 2003

36



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 2003 and 2002
(in thousands, except per share data)

2003
    
    2002ASSETSCurrent assets:Cash and cash equivalents
    
    $
    45,682
    
    
    $
    66,638Accounts receivable, net of allowance for
doubtful accounts of $10,648 in 2003 and
$8,981 in 2002
    
    
    98,700
    
    
    
    86,918Inventories, net
    
    
    31,864
    
    
    
    31,211Deferred income taxes
    
    
    7,885
    
    
    
    7,008Prepaid expenses and other current assets
    
    
    17,860
    
    
    
    12,756Total current assets
    
    
    201,991
    
    
    
    204,531Property, plant and equipment, net
    
    
    20,179
    
    
    
    21,467Deferred income taxes, non-current
    
    
    32,003
    
    
    
    20,707Goodwill and intangible assets, net of
accumulated amortization of $29,516 in 2003
and $28,025 in 2002
    
    
    74,270
    
    
    
    32,055Purchased and internally developed software
costs, net of accumulated amortization of
$23,487 in 2003 and $18,248 in 2002
    
    
    38,089
    
    
    
    30,303Other assets
    
    
    3,483
    
    
    
    3,767Total assets
    
    $
    370,015
    
    
    $
    312,830LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Bank lines of credit
    
    $
    10,185
    
    
    $
    18,699Current portion of long-term debt
    
    
    363
    
    
    
    Current portion of capital lease obligations
    
    
    106
    
    
    
    147Accounts payable
    
    
    24,177
    
    
    
    25,955Accrued expenses and other current liabilities
    
    
    44,240
    
    
    
    34,554Income taxes payable
    
    
    10,102
    
    
    
    7,303Deferred income taxes
    
    
    501
    
    
    
    547Deferred service revenue
    
    
    38,538
    
    
    
    33,841Total current liabilities
    
    
    128,212
    
    
    
    121,046Capital lease obligations, net of current portion
    
    
    198
    
    
    
    279Deferred income taxes, non-current
    
    
    11,495
    
    
    
    9,933Other non-current liabilities
    
    
    6,510
    
    
    
    1,232Commitments and contingencies:Minority interests
    
    
    2,372
    
    
    
    1,978Shareholders equity:Common stock, $0.025 par value; 50,000 shares authorized; shares issued
and outstanding 18,018 in 2003 and 17,521 in 2002
    
    
    450
    
    
    
    438Capital in excess of par
    
    
    69,644
    
    
    
    56,867Retained earnings
    
    
    152,381
    
    
    
    130,599Accumulated other comprehensive loss
    
    
    (1,247
    )
    
    
    (9,542
    )Total shareholders equity
    
    
    221,228
    
    
    
    178,362Total liabilities and shareholders equity
    
    $
    370,015
    
    
    $
    312,830


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

37



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 2003, 2002 and 2001
(in thousands, except per share data)

2003
    
    2002
    
    2001Revenue:Hardware and software
    
    $
    208,264
    
    
    $
    194,606
    
    
    $
    171,930Service
    
    
    191,927
    
    
    
    172,557
    
    
    
    154,846Total revenue
    
    
    400,191
    
    
    
    367,163
    
    
    
    326,776Cost of sales:Hardware and software
    
    
    115,244
    
    
    
    108,032
    
    
    
    84,374Service
    
    
    86,388
    
    
    
    81,994
    
    
    
    78,374Total cost of sales
    
    
    201,632
    
    
    
    190,026
    
    
    
    162,748Gross Margin
    
    
    198,559
    
    
    
    177,137
    
    
    
    164,028Selling, general and administrative expenses
    
    
    132,601
    
    
    
    123,011
    
    
    
    126,013Research and development expenses
    
    
    18,748
    
    
    
    19,320
    
    
    
    19,697Depreciation and amortization
    
    
    8,888
    
    
    
    16,042
    
    
    
    14,319Total operating expenses
    
    
    160,237
    
    
    
    158,373
    
    
    
    160,029Income from operations
    
    
    38,322
    
    
    
    18,764
    
    
    
    3,999Non-operating (expense) income:Interest income
    
    
    1,415
    
    
    
    1,067
    
    
    
    1,011Interest expense
    
    
    (859
    )
    
    
    (722
    )
    
    
    (966
    )Other (expense) income, net
    
    
    (1,683
    )
    
    
    236
    
    
    
    (3,810
    )Total non-operating (expense) income
    
    
    (1,127
    )
    
    
    581
    
    
    
    (3,765
    )Income before taxes, minority interests and equity in
net earnings of affiliates
    
    
    37,195
    
    
    
    19,345
    
    
    
    234Income tax provision
    
    
    15,078
    
    
    
    6,577
    
    
    
    683Income (loss) before minority interests and equity
in net earnings of affiliates
    
    
    22,117
    
    
    
    12,768
    
    
    
    (449
    )Minority interests and equity in net earnings of affiliates
    
    
    (335
    )
    
    
    (529
    )
    
    
    (255
    )Net income (loss)
    
    $
    21,782
    
    
    $
    12,239
    
    
    
    ($704
    )Net income (loss) per common share:Basic
    
    $
    1.24
    
    
    $
    0.70
    
    
    $
    (0.04
    )Diluted
    
    $
    1.22
    
    
    $
    0.69
    
    
    $
    (0.04
    )Weighted-average number of shares outstanding:Basic
    
    
    17,502
    
    
    
    17,510
    
    
    
    17,377Diluted
    
    
    17,838
    
    
    
    17,850
    
    
    
    17,377


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

38



---



##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
for the years ended June 30, 2003, 2002 and 2001
(in thousands)

AccumulatedCommon Stock
    
    Capital
    
    
    
    
    
    Otherin Excess
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    of Par
    
    Earnings
    
    (Loss) Income
    
    TotalBalance, June 30, 2000
    
    
    17,336
    
    
    $
    433
    
    
    $
    54,225
    
    
    $
    119,064
    
    
    $
    (10,101
    )
    
    $
    163,621Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (704
    )
    
    
    
    
    
    
    (704
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,363
    )
    
    
    (6,363
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,067
    )Stock issued upon exercise of options
    
    
    94
    
    
    
    3
    
    
    
    1,320
    
    
    
    
    
    
    
    
    
    
    
    1,323Stock issued to third party
    
    
    45
    
    
    
    1
    
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    800Income tax benefit from stock options
exercised
    
    
    
    
    
    
    
    
    
    
    171
    
    
    
    
    
    
    
    
    
    
    
    171Balance, June 30, 2001
    
    
    17,475
    
    
    $
    437
    
    
    $
    56,515
    
    
    $
    118,360
    
    
    $
    (16,464
    )
    
    $
    158,848Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,239
    
    
    
    
    
    
    
    12,239Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,922
    
    
    
    6,922Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,161Stock issued upon exercise of options
    
    
    142
    
    
    
    3
    
    
    
    2,580
    
    
    
    
    
    
    
    
    
    
    
    2,583Repurchases of stock
    
    
    (96
    )
    
    
    (2
    )
    
    
    (2,608
    )
    
    
    
    
    
    
    
    
    
    
    (2,610
    )Income tax benefit from stock options
exercised
    
    
    
    
    
    
    
    
    
    
    380
    
    
    
    
    
    
    
    
    
    
    
    380Balance, June 30, 2002
    
    
    17,521
    
    
    $
    438
    
    
    $
    56,867
    
    
    $
    130,599
    
    
    $
    (9,542
    )
    
    $
    178,362Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,782
    
    
    
    
    
    
    
    21,782Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,295
    
    
    
    8,295Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,077Stock issued in connection with acquisition
    
    
    719
    
    
    
    18
    
    
    
    18,182
    
    
    
    
    
    
    
    
    
    
    
    18,200Stock issued upon exercise of options
    
    
    60
    
    
    
    1
    
    
    
    1,088
    
    
    
    
    
    
    
    
    
    
    
    1,089Repurchases of stock
    
    
    (282
    )
    
    
    (7
    )
    
    
    (6,674
    )
    
    
    
    
    
    
    
    
    
    
    (6,681
    )Income tax benefit from stock options
exercised
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    
    
    
    
    181Balance, June 30, 2003
    
    
    18,018
    
    
    $
    450
    
    
    $
    69,644
    
    
    $
    152,381
    
    
    $
    (1,247
    )
    
    $
    221,228


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

39



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 2003, 2002 and 2001
(in thousands)

2003
    
    2002
    
    2001Cash flows from operating activities:Net income (loss)
    
    $
    21,782
    
    
    $
    12,239
    
    
    $
    (704
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    8,888
    
    
    
    16,042
    
    
    
    14,319Amortization of capitalized software
    
    
    5,419
    
    
    
    4,567
    
    
    
    1,766Provision for losses on accounts receivable
    
    
    4,831
    
    
    
    5,073
    
    
    
    4,198Provision for inventory obsolescence
    
    
    2,005
    
    
    
    1,638
    
    
    
    614Undistributed earnings from equity investment and
minority interests
    
    
    335
    
    
    
    530
    
    
    
    255Provision for deferred income taxes
    
    
    2,545
    
    
    
    661
    
    
    
    (9,828
    )Loss on other than temporary decline in investments
    
    
    500
    
    
    
    
    
    
    
    1,200Income tax benefit from stock options exercised
    
    
    181
    
    
    
    380
    
    
    
    171Changes
in assets and liabilities (net of):(Increase) decrease in accounts receivable
    
    
    (4,866
    )
    
    
    (3,053
    )
    
    
    10,503(Increase) decrease in inventories
    
    
    (120
    )
    
    
    (3,143
    )
    
    
    7,042(Increase) decrease in prepaid expenses and other assets
    
    
    (4,402
    )
    
    
    (2,653
    )
    
    
    3,745(Decrease) increase in accounts payable
    
    
    (2,490
    )
    
    
    3,847
    
    
    
    (247
    )Increase
(decrease) in accrued expenses and other current liabilities
    
    
    4,734
    
    
    
    (689
    )
    
    
    (8,142
    )(Decrease) in income taxes payable
    
    
    (385
    )
    
    
    (27
    )
    
    
    (2,861
    )Increase in deferred service revenue
    
    
    1,447
    
    
    
    6,897
    
    
    
    4,602Net cash provided by operating activities
    
    
    40,404
    
    
    
    42,309
    
    
    
    26,633Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (5,581
    )
    
    
    (5,216
    )
    
    
    (8,056
    )Proceeds from dispositions of property, plant and equipment
    
    
    132
    
    
    
    54
    
    
    
    59Proceeds from sale of building
    
    
    298
    
    
    
    
    
    
    
    Internally developed software costs
    
    
    (4,581
    )
    
    
    (3,034
    )
    
    
    (8,866
    )Proceeds
from sale of subsidiary
    
    
    286
    
    
    
    
    
    
    
    54Proceeds from settlement related to previous acquisition
    
    
    
    
    
    
    200
    
    
    
    Purchase of equity interest in investee
    
    
    
    
    
    
    (51
    )
    
    
    (429
    )Net cash paid for acquisitions, minority interests and
contingent earn-out payments
    
    
    (28,600
    )
    
    
    (4,038
    )
    
    
    (13,938
    )Net cash used in investing activities
    
    
    (38,046
    )
    
    
    (12,085
    )
    
    
    (31,176
    )Cash flows from financing activities:Principal payments on line of credit
    
    
    (31,892
    )
    
    
    (17,382
    )
    
    
    (12,652
    )Proceeds from line of credit
    
    
    15,125
    
    
    
    31,562
    
    
    
    17,037Principal payments on long-term debt
    
    
    
    
    
    
    (3,418
    )
    
    
    (418
    )Principal payments on capital lease obligations
    
    
    (194
    )
    
    
    (149
    )
    
    
    (450
    )Payment of shareholder loan
    
    
    (424
    )
    
    
    
    
    
    
    Dividends to minority owners
    
    
    (113
    )
    
    
    (371
    )
    
    
    Proceeds from issuance of stock
    
    
    1,090
    
    
    
    2,583
    
    
    
    1,322Repurchases of stock
    
    
    (6,681
    )
    
    
    (2,610
    )
    
    
    Net
cash (used in) provided by financing activities
    
    
    (23,089
    )
    
    
    10,215
    
    
    
    4,839Effect of exchange rate changes on cash
    
    
    (225
    )
    
    
    (257
    )
    
    
    (51
    )Net (decrease) increase in cash and cash equivalents
    
    
    (20,956
    )
    
    
    40,182
    
    
    
    245Cash and cash equivalents at beginning of year
    
    
    66,638
    
    
    
    26,456
    
    
    
    26,211Cash and cash equivalents at end of year
    
    $
    45,682
    
    
    $
    66,638
    
    
    $
    26,456Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    465
    
    
    $
    1,748
    
    
    $
    1,132Income taxes
    
    $
    15,365
    
    
    $
    10,697
    
    
    $
    14,034


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

40



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended June 30, 2003, 2002 and 2001
(in thousands)

Supplemental schedule of noncash financing and investing activities:

In May 2003, the Company purchased the outstanding stock of Datavantage
Corporation for total consideration of approximately $52,300. The
consideration consisted of $28,600 cash paid at closing, $5,200 cash to be
paid 18 months after closing, approximately $300 in transaction
costs, and 719,360 whole shares of unregistered
MICROS common stock valued at approximately $18,200.

In February 2001, the Company purchased the outstanding stock of the
minority shareholder in hotelBANK, Inc. for total consideration in the
amount of $800. Simultaneous with the purchase of the stock in hotelBANK,
Inc., the Company sold to the minority shareholder, 44,216 whole shares of
unregistered MICROS common stock, for total consideration in the amount of
$800.

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

41



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)



|1. |  | Description of business and summary of significant accounting policies:
|-- |  | -----------------------------------------------------------------------

Description of business

MICROS Systems, Inc. is a leading worldwide designer, manufacturer,
marketer, and servicer of enterprise information solutions for the global
hospitality and specialty retail industries. The information solutions
consist of application specific software and hardware systems,
supplemented by a wide range of services. The hospitality industry
includes numerous defined market segments such as lodging (including
individual hotel sites, hotel central reservation systems and customer
information systems), table service restaurants, quick service
restaurants, entertainment venues such as stadiums and arenas, business
foodservice operations, casinos, transportation foodservice, government
operations, and cruise ships. The specialty retail industry consists of
retail operations selling to consumers both general and specific
products, such as clothing, shoes, hardware, jewelry, and other specialty
items. (References to MICROS or the Company herein include the
operations of MICROS Systems, Inc. and its subsidiaries on a consolidated
basis.)

Basis of preparation and use of estimates

The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America.
Inherent in this process are estimates and assumptions made by
management that affect the amounts reported in the Companys financial
statements and accompanying notes. Although these estimates are based on
managements knowledge of current events and actions it may undertake in
the future, actual results may ultimately differ from estimates.

Principles of consolidation

The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. The earnings in consolidated MICROS
subsidiaries are recorded net of minority interests.
Investments in 15%- through 50%-owned affiliated companies in which the
Company exercises significant influence over operating and financial
affairs are accounted for under the equity method. Otherwise,
investments are included at cost. All significant intercompany accounts
and transactions have been eliminated.

Foreign currency translation

The financial statements of MICROS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).

Revenue recognition

The 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

42



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

any undelivered software contract elements. However, if MICROS 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 are 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.

Cash equivalents

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or market. Standard cost is
determined principally by the first-in, first-out pricing method.

Property, plant and equipment

Property, plant and equipment are stated at cost and depreciated using
the straight-line method over their estimated useful lives, ranging from
three to ten years. Leasehold improvements are amortized over the life
of the lease or estimated useful lives, whichever is shorter.
Maintenance and repairs are charged to expense as incurred, and the costs
of additions and improvements are capitalized. Any gain or loss from the
retirement or sale of an asset is credited or charged to operations.

Depreciation
expense for fiscal years 2003, 2002 and 2001, was $8,785,
$7,906 and $8,053, respectively.

Software for internal use

Internally used computer software is capitalized according to Statement
of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. Capitalized costs are amortized
on a straight-line basis over the estimated life of the software ranging
from three to five years.

Warranties

The Companys products are under warranty for defects in material and
workmanship for a period ranging from 12 to 24 months. The Company
establishes an accrual for estimated warranty costs at the time of
sale. Historically, the Companys warranty expense has not been
material.

Capitalized software development costs

Software 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.
Software development 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 upon which amortization begins. Annual
amortization, charged to cost of sales, is the greater of: (i) the amount
computed using the ratio that current gross revenues for a product bear
to the total current and anticipated future gross revenues for that
product or (ii) the straight-line method over the remaining estimated
economic life of the product. Amortization expense for fiscal years
2003, 2002 and 2001 was $5,419, $4,567 and $1,766, respectively.

43



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

Research and development costs

Expenditures for research and development not capitalized as described above
are charged to operations as incurred.

Goodwill and intangible assets

Goodwill

In order to complete the transitional assessment of goodwill as
required by SFAS No. 142, the Company was required to determine by June 30,
2002, the fair value of each market and compare it to the markets carrying
amount. To the extent a markets carrying amount exceeded its fair value, an
indication would have existed that the amount of goodwill attributed to a
market may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the markets goodwill, determined by allocating the
markets fair value to all of its assets and liabilities in a manner similar to
a purchase price allocation in accordance with SFAS No. 141, to its carrying
amount, both of which would be measured as of the date of adoption. This second
step was required to be completed in during fiscal 2003. Any transitional
impairment charge would have been recognized as the cumulative effect of a change in accounting
principle in the Companys consolidated statement of operations. The Company
completed the transitional assessment of goodwill and determined that the
carrying amount of goodwill for each of the Companys markets did not exceed
the fair value. Since the carrying amount of goodwill did not exceed the fair
value under the transitional assessment, the Company did not need to perform
the second step of the transitional impairment test and accordingly, the
Company did not record a goodwill impairment charge during fiscal 2003. The
fair value was determined by using either an income or market approach for each market
cluster. The market approach compared recent sales and offering prices of similar
properties. The income approach used the subject propertys income generated over a
specified time and capitalized at an appropriate market rate to arrive at an indication of the
most probable selling price. The amount of goodwill, net of accumulated amortization, reflected in
the balance sheet as of June 30, 2003 was $ 74.3 million. The required impairment tests of goodwill may result in future period write-downs.

The following table represents the impact of SFAS No. 142 on net income
(loss), basic and diluted net income (loss) per share had SFAS No. 142
been in effect in previous fiscal years:

2003
    
    2002
    
    2001Net
income (loss)Reported net income (loss)
    
    $
    21,782
    
    
    $
    12,239
    
    
    $
    (704
    )Goodwill amortization, net of tax
    
    
    
    
    
    
    5,370
    
    
    
    3,760Adjusted net income
    
    $
    21,782
    
    
    $
    17,609
    
    
    $
    3,056Basic net income (loss) per common shareReported net income (loss) per common share
    
    $
    1.24
    
    
    $
    0.70
    
    
    $
    (0.04
    )Goodwill amortization, net of tax
    
    
    
    
    
    
    0.31
    
    
    
    0.22Adjusted basic net income per common share
    
    $
    1.24
    
    
    $
    1.01
    
    
    $
    0.18Diluted net income (loss) per common shareReported net income (loss) per common share
    
    $
    1.22
    
    
    $
    0.69
    
    
    $
    (0.04
    )Goodwill amortization, net of tax
    
    
    
    
    
    
    0.30
    
    
    
    0.22Adjusted diluted net income per common share
    
    $
    1.22
    
    
    $
    0.99
    
    
    $
    0.18Weighted
average common shares outstanding (in thousands)Basic
    
    
    17,502
    
    
    
    17,510
    
    
    
    17,377Diluted
    
    
    17,838
    
    
    
    17,850
    
    
    
    17,377


Financing costs related to long-term debt

Costs associated with obtaining long-term debt are deferred and amortized
over the term of the related debt. The Company did not incur financing
costs in fiscal year 2003. In relation to the new line of credit
agreement, the Company incurred financing costs which will be deferred
and amortized over two years.

Advertising costs

Advertising costs are charged to expense as incurred. Advertising
expenses for fiscal years 2003, 2002 and 2001 were $3,036, $2,722 and
$3,474, respectively.

Bad debt

44



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

MICROS maintains allowances for doubtful accounts for estimated losses
which 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. Bad debt expense for
fiscal years 2003, 2002 and 2001 was $4,757, $4,986 and $3,449,
respectively.

Income taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected
future tax consequences attributable to the differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities. Deferred tax assets and liabilities are measured using the
enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on the
deferred tax assets and liabilities of a change in tax rate is recognized
in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amounts more likely than not to be realized. If 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.

Net income (loss) per share

Basic net income (loss) per common share is computed by dividing net
income (loss) 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 (in thousands):

2003
    
    2002
    
    2001Average common shares outstanding
    
    
    17,502
    
    
    
    17,510
    
    
    
    17,377Dilutive effect of outstanding stock options
    
    
    336
    
    
    
    340
    
    
    
    Average common shares outstanding assuming
dilution
    
    
    17,838
    
    
    
    17,850
    
    
    
    17,377


As of June 30, 2003, 1,639,350
whole stock options were excluded in the above
reconciliation, as these options were anti-dilutive. In fiscal year 2002
and 2001, 1,552,896 and 2,570,047 whole stock options were excluded,
respectively.

Stock-based compensation

SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure an Amendment of
FASB Statement No. 123, amends the disclosure requirements of SFAS No.
123, Accounting for Stock-Based Compensation, to require more prominent
disclosures in both the annual and interim financial statements regarding
the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.

The Company accounts for stock-based compensation using the intrinsic
value method of accounting in accordance with Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to Employees.
Accordingly, no compensation expense is recognized in the Companys
consolidated financial statements because the exercise price of the
employee stock options equals the market price of the Companys common
stock on the date of grant.

Under SFAS No. 123, The Company is required to disclose pro forma
information regarding option grants made to its employees based on
specific valuation techniques to calculate estimated compensation
expense.

45



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

The pro forma information is as follows:

Year ended June 30,2003
    
    2002
    
    2001Net income (loss)As reported
    
    $
    21,782
    
    
    $
    12,239
    
    
    $
    (704
    )Pro forma
    
    $
    15,944
    
    
    $
    3,660
    
    
    $
    (9,616
    )Basic net income (loss) per shareAs reported
    
    $
    1.24
    
    
    $
    0.70
    
    
    $
    (0.04
    )Pro forma
    
    $
    0.91
    
    
    $
    0.21
    
    
    $
    (0.55
    )Diluted net income (loss) per shareAs reported
    
    $
    1.22
    
    
    $
    0.69
    
    
    $
    (0.04
    )Pro forma
    
    $
    0.89
    
    
    $
    0.21
    
    
    $
    (0.55
    )


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.

Fair value of financial instruments

The carrying amounts of the Companys financial instruments reflected in
the consolidated balance sheets approximate fair values.

New accounting standards

In January 2003, the FASB issued Interpretation (FIN) No. 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 No. 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
June 15, 2003. As of June 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 December 2002, the FASB issued No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure an Amendment of FASB Statement No. 123. SFAS
No. 148 provides alternative methods of transition for companies making a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. Effective for interim periods
beginning after December 15, 2002, SFAS No. 148 requires disclosure of
pro-forma results as if the Company had applied the fair value
recognition provisions of SFAS No. 123.

In November 2002, the FASB issued No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, which provides for an interpretation of SFAS No.
5, 57, and 107 and rescission of FASB Interpretation No. 34. This
interpretation elaborates on the disclosures to be made by a guarantor in
its financial statements about its obligations under certain guarantees
that it has issued. This interpretation also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee.
The provisions of FIN No. 45 are effective for guarantees issued or
modified after December 31, 2002. As of June 30, 2003, the Companys
guarantees issued or modified after December 31, 2002 were not material.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 nullifies the
guidance in Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). Under EITF No. 94-3, an entity recognized a liability
for an exit cost on the date that the entity committed itself to an exit
plan. In SFAS No. 146, the FASB acknowledges that an entitys commitment
to a plan does not, by itself, create a present obligation. It also
establishes that fair value is the objective for the initial measurement
of the liability. SFAS No. 146 was effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS No.
146 had no impact on the Companys consolidated financial statements.

In November 2001, the FASB issued EITF Issue No. 01-14, Income Statement
Characterization of Reimbursements Received for Out of Pocket Expenses
Incurred. This guidance requires companies to recognize the recovery of
reimbursable expenses such as travel costs as revenue. This pronouncement did not have a material impact
on the companys consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which was adopted by the
Company in fiscal year 2002. This Statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30,

46



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions, for the disposal of a segment
of a business. SFAS No. 144 expands the reporting of discontinued
operations to include any component of an entity with operations and cash
flows that can be clearly distinguished from the rest of the entity.
This Statement also requires that any net assets to be disposed of by
sale be reported at the lower of carrying value or fair market value less
costs to sell. The adoption of SFAS No. 144 had no impact on the
Companys consolidated financial statements.

2     Acquisitions:

Datavantage

On May 1, 2003, the Company acquired Datavantage Corporation, 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
total purchase price was allocated as follows. This allocation
preliminary and is
subject to change pending the completion of the final allocation of the
fair value of the assets acquired and liabilities assumed.

Current assets
    
    $
    10,592Fixed assets
    
    
    1,558Deferred income taxes
    
    
    3,495Goodwill and intangible assets
    
    
    45,093Purchased and internally developed software costs
    
    
    6,140Other assets
    
    
    122Liabilities assumed
    
    
    (14,700
    )$
    52,300


Recognition of the excess purchase price of $52,300 over the fair value
of the net assets acquired, have been recorded as goodwill as follows:

Book value of net assets
    
    $
    8,762Fair value changes:Intangibles
    
    
    8,074Deferred income taxes
    
    
    (3,229
    )Adjusted net assets
    
    
    13,607Purchase price
    
    
    (52,300
    )Goodwill
    
    $
    38,693


Under SFAS No. 142, no amortization is required for the amount of
goodwill.

Datavantages customer relationships were preliminarily valued at $6,200
and is being amortized over 10 years.

The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition had occurred as of July 1,
2001. The summary includes adjustments for depreciation and amortization
of assets and interest expense on any debt incurred to fund the
acquisitions, which would have been incurred had such acquisitions and
other transactions occurred as of July 1, 2001. 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.

2003
    
    
    2002Revenue
    
    $
    439,720
    
    
    $
    411,005Net Income
    
    $
    23,089
    
    
    $
    15,799Net Income per common shareBasic
    
    $
    1.32
    
    
    $
    0.87Diluted
    
    $
    1.29
    
    
    $
    0.85Weighted average shares outstandingBasic
    
    
    17,502
    
    
    
    18,229Diluted
    
    
    17,838
    
    
    
    18,569


Indatec

In January 2001, the Company acquired the stock of Indatec GmbH and Co.
KG (Indatec). Based in Bernau am Chiemsee, Germany, Indatec is one of
Germanys top developers of point-of-sale solutions for the independent
restaurant industry. Indatecs products include a range of point-of-sale
terminals, peripherals and associated software for independent
restaurants and other catering facilities. The purchase

47



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

price was DM
10,706 (approximately $5,100 at the exchange rate as of the date of
acquisition), which was subsequently reduced by DM 329 due to adjustments
to the net assets. Goodwill related to this acquisition
was DM 11,698 at the date of acquisition (approximately $5,602 at the
exchange rate as of the date of acquisition).

Hospitality Solutions International

In October 2000, the Company purchased the assets of the hospitality
division of Hospitality Solutions
International, Inc. (HSI). Based in Scottsdale, Arizona, HSIs
hospitality division is a top developer of technology solutions for the
hospitality industry. HSIs products include the point-of-service and
enterprise systems for restaurants, as well as hotel management software.
The purchase price for the assets of $3,900 was paid in November 2000.
As part of the acquisition, certain liabilities of HSI were assumed.
Goodwill related to this acquisition was $5,618 at the date of
acquisition. Subsequent to the acquisition, the goodwill was increased
by $638 due to adjustments to the net assets.

3.    Inventories:

The components of inventories are as follows:

2003
    
    2002Raw materials
    
    $
    8,368
    
    
    $
    7,494Work-in-process
    
    
    146
    
    
    
    986Finished goods
    
    
    29,250
    
    
    
    27,688Total inventory
    
    
    37,764
    
    
    
    36,168Reserve for obsolescence
    
    
    (5,900
    )
    
    
    (4,957
    )Net inventory
    
    $
    31,864
    
    
    $
    31,211


4.    Property, plant and equipment:

The components of property, plant and equipment are as follows:

2003
    
    2002
    
    Useful LifeLeasehold improvements
    
    $
    4,246
    
    
    $
    3,579
    
    
    Lease termMachinery and equipment
    
    
    6,728
    
    
    
    6,579
    
    
    5-10 yearsFurniture and fixtures
    
    
    11,960
    
    
    
    12,925
    
    
    7-10 yearsComputer hardware and software
    
    
    48,176
    
    
    
    41,053
    
    
    3-5 yearsTotal property, plant and equipment
    
    
    71,110
    
    
    
    64,136Accumulated depreciation and amortization
    
    
    (50,931
    )
    
    
    (42,669
    )Net property, plant and equipment
    
    $
    20,179
    
    
    $
    21,467


5.    Line of credit:

Prior
to July 17, 2003, the Company maintained a $45,000 multi-currency committed line of credit (the Former Credit Agreement).
The Companys obligations were secured by its inventory and receivables
located in the United States. Interest due under the Former Credit
Agreement was calculated as follows: (i) if the advance is in U.S.
dollars, at the option of the Company, either the banks prime rate minus
an amount as stipulated in the loan agreement based on Company
performance, or the LIBOR rate plus an additional LIBOR rate percentage;
and (ii) if the advance was made in a foreign currency, the LIBOR rate
for the applicable denominated currency, plus an additional LIBOR rate
percentage.

Effective
July 17, 2003, the Former Credit Agreement was terminated
without additional expense and
the Company (and its subsidiaries) entered into two new credit agreements
(the Credit Agreements) which in the aggregate offer a
$65,000 multi-currency committed line of credit, expiring on July 31, 2005. The
lenders (the

48



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

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) has 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 7,600 (approximately $7,600 at the June 30, 2003 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 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 June 30, 2003, the total outstanding balance on the line of credit
is $10,200 consisting of: USD $7,000, ZAR (South African
Rand) 13,000 (approximately $1,000 at the June 30, 2003
exchange rate), SEK (Swedish Krona) 7,500 (approximately
$1,000 at the June 30, 2003 exchange rate), and JPY (Japanese
Yen) 60,000 (approximately $500 at the June 30, 2003 exchange rate).
As of June 30, 2003, the Company has approximately $43,500
available to borrow.

6.    Long-term debt:

As of June 30, 2003 and 2002, the Company had no long-term debt.

7.    Accrued expenses and other current liabilities:

The components of accrued expenses and other current liabilities are as
follows:

2003
    
    2002Compensation and related taxes
    
    $
    18,030
    
    
    $
    13,933Commissions
    
    
    2,434
    
    
    
    2,665Volume rebates and credits due customers
    
    
    2,145
    
    
    
    1,530Deposits received from customers
    
    
    8,035
    
    
    
    5,464VAT and sales taxes
    
    
    2,373
    
    
    
    2,274Accrued payables and other
    
    
    11,223
    
    
    
    8,688$
    44,240
    
    
    $
    34,554


8.    Commitments and contingencies:

Leases

The Company and its subsidiaries lease office space under operating
leases expiring at various dates through 2015 and equipment leases under
both operating and capital leases. Rent expense under these leases for
fiscal years 2003, 2002 and, 2001 was $12,844, $13,042 and $13,283
respectively.

Future minimum lease payments at June 30, 2003 for those leases having an
initial or remaining non-

49



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

cancelable lease term in excess of one year are
as follows:

Operating
    
    CapitalYear ending June 30,
    
    Leases
    
    Leases2004
    
    $
    12,194
    
    
    $
    1062005
    
    
    9,858
    
    
    
    972006
    
    
    7,285
    
    
    
    882007
    
    
    5,825
    
    
    
    112008
    
    
    4,407
    
    
    
    22009 and thereafter
    
    
    8,868
    
    
    
    $
    48,437
    
    
    
    304Current portion
    
    
    
    
    
    
    106Long-term obligation under capital lease
    
    
    
    
    
    $
    198


The Companys worldwide corporate headquarters are located in Columbia,
Maryland. Pursuant to the terms of a 10-year lease agreement (the Lease
Agreement) expiring on March 1, 2010, MICROS leases the entire
five-story structure consisting of approximately 247,624 square feet.
The Company also leases a facility of approximately 75,600 square feet in
Hanover, Maryland for warehousing and staging. The Company conducts
light assembly, manufacturing, repair and configuration at this location.
The lease expires in July 2009.

The Companys Datavantage subsidiary leases approximately 56,400 square
feet of office and warehouse space in Cleveland, Ohio, from which it
conducts the majority of its sales, marketing, customer support, and
product development activities. The Datavantage subsidiary also leases
approximately 11,400 square feet of office space in the Boston,
Massachusetts area, primarily for research and development activities.
The current Cleveland lease expires June 30, 2005, and the current Boston
lease expires September 30, 2006.

Legal proceedings

MICROS 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.

9.    Shareholders equity

In fiscal 2002, the Board of Directors authorized the purchase of up to
one million shares of the Companys stock. As of June 30,2003, the
Company purchased 377,841 whole shares at an aggregate cost of $9,309,
including minimal fees of $18, and the remaining 622,159 whole shares are
eligible for repurchase.

10.   Stock options:

The Company has incentive and non-qualified stock options outstanding
that were granted to directors, officers, and other employees pursuant to
authorization by the Board of Directors. The exercise price 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
options expire ten years from the date of grant. As of June 30, 2003,
the Company has approximately 259,903 authorized options available to
grant.

The Company applies the intrinsic value based method of accounting
prescribed by APB No. 25, Accounting for Stock Issued to Employees, in
accounting for the stock option awards. Accordingly, the Company has not
recognized any related compensation expense in the consolidated
statements of

50



---



##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

operations.

The following table summarizes the status of, and changes in, the
Companys stock option plans (shares in thousands):

Years Ended June 30,
    
    2003
    
    2002
    
    2001Weighted Average
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    Weighted AverageNumber of Shares
    
    Exercise Price
    
    Number of Shares
    
    Exercise Price
    
    Number of Shares
    
    Exercise PriceOutstanding at beginning of year
    
    
    3,755
    
    
    
    
    
    
    
    3,550
    
    
    
    
    
    
    
    2,885Options granted
    
    
    416
    
    
    $
    21.70
    
    
    
    525
    
    
    
    23.96
    
    
    
    1,060
    
    
    $
    19.10Options cancelled
    
    
    (148
    )
    
    $
    26.77
    
    
    
    (179
    )
    
    
    23.63
    
    
    
    (301
    )
    
    $
    33.24Options exercised
    
    
    (60
    )
    
    $
    18.25
    
    
    
    (141
    )
    
    
    18.26
    
    
    
    (94
    )
    
    $
    14.05Outstanding at end of year
    
    
    3,963
    
    
    $
    25.97
    
    
    
    3,775
    
    
    $
    26.35
    
    
    
    3,550
    
    
    $
    26.24Options exercisable at end of
year
    
    
    2,975
    
    
    $
    27.34
    
    
    
    2,453
    
    
    $
    26.68
    
    
    
    1,906
    
    
    $
    25.25


Additional information regarding stock options outstanding at June 30,
2003 is as follows (shares in thousands):

Options Outstanding
    
    Options ExercisableWeightedAverageWeighted
    
    Remaining
    
    
    
    
    
    WeightedAverage
    
    Contractual
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    Price
    
    Life (in years)
    
    Shares
    
    Price$14.78 to $19.31
    
    
    818
    
    
    $
    15.80
    
    
    
    4.9
    
    
    
    699
    
    
    $
    15.55$19.38 to $22.02
    
    
    931
    
    
    $
    20.95
    
    
    
    8.3
    
    
    
    371
    
    
    $
    20.53$22.20 to $25.16
    
    
    1,037
    
    
    $
    23.91
    
    
    
    6.3
    
    
    
    739
    
    
    $
    23.65$26.72 to $48.88
    
    
    1,143
    
    
    $
    38.33
    
    
    
    6.0
    
    
    
    1,132
    
    
    $
    38.43$52.69 to $56.34
    
    
    34
    
    
    $
    55.14
    
    
    
    6.6
    
    
    
    34
    
    
    $
    55.14$14.78 to $56.34
    
    
    3,963
    
    
    $
    25.97
    
    
    
    6.4
    
    
    
    2,975
    
    
    $
    27.34


SFAS No. 123, Accounting for Stock-Based Compensation, requires the
Company to make certain disclosures as if the fair value based method of
accounting had been applied to the Companys stock option grants made
subsequent to fiscal year 1995. Accordingly, the Company estimated the
grant-date fair value of each option awarded in fiscal years 2003, 2002
and 2001 using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

2003
    
    2002
    
    2001Risk-free interest rate
    
    
    3.0
    %
    
    
    4.4
    %
    
    
    5.6
    %Expected life
    
    6.0 years
    
    5.8 years
    
    5.2 yearsExpected volatility
    
    
    50
    %
    
    
    52
    %
    
    
    55
    %Expected dividend yield
    
    
    0
    %
    
    
    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

51



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

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. Under the
Black-Scholes option pricing model, the weighted-average estimate of the
fair value of each option granted in fiscal years 2003, 2002 and 2001 was
$11.00, $12.74 and $10.35, respectively.

11.  Income taxes:

Pretax accounting income for the years ended June 30 was taxed under the
following jurisdictions:

2003
    
    2002
    
    2001United States
    
    $
    6,370
    
    
    $
    (8,985
    )
    
    $
    (19,382
    )Non-U.S
    
    
    30,825
    
    
    
    28,330
    
    
    
    19,616$
    37,195
    
    
    $
    19,345
    
    
    $
    234


52



---



##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

The components of income tax expense are:

2003
    
    2002
    
    2001Current:Federal
    
    $
    1,113
    
    
    $
    (5,836
    )
    
    $
    State
    
    
    248
    
    
    
    
    
    
    
    364Foreign
    
    
    11,172
    
    
    
    11,752
    
    
    
    10,147Total current
    
    
    12,533
    
    
    
    5,916
    
    
    
    10,511Deferred:Federal
    
    
    1,817
    
    
    
    2,123
    
    
    
    (7,580
    )State
    
    
    82
    
    
    
    (424
    )
    
    
    (1,182
    )Foreign
    
    
    646
    
    
    
    (1,038
    )
    
    
    (1,066
    )Total deferred
    
    
    2,545
    
    
    
    661
    
    
    
    (9,828
    )Total tax expense
    
    $
    15,078
    
    
    $
    6,577
    
    
    $
    683


The total tax provision is different from the amount that would have been
recorded by applying the U.S. statutory federal income tax rate to income
before taxes. The reconciliation of these differences is as follows:

2003
    
    2002
    
    2001At statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase (decrease) resulting from:State taxes, net of federal tax benefit
    
    
    0.6
    
    
    
    (2.2
    )
    
    
    (434.7
    )Tax credits
    
    
    (0.7
    )
    
    
    (52.0
    )
    
    
    (2,563.9
    )Extraterritorial income exclusion
benefit
    
    
    (4.6
    )
    
    
    (1.0
    )
    
    
    Effect of tax rates in foreign
jurisdictions
    
    
    9.5
    
    
    
    4.7
    
    
    
    419.7Subpart F inclusion
    
    
    
    
    
    
    47.1
    
    
    
    Permanent differences
    
    
    0.5
    
    
    
    2.0
    
    
    
    2,835.8Other
    
    
    0.2
    
    
    
    0.4
    
    
    
    Effective tax rate
    
    
    40.5
    %
    
    
    34.0
    %
    
    
    291.9
    %


Except for certain earnings that the Company intends to reinvest
indefinitely, a provision has been made for the estimated U.S. federal
income tax liabilities applicable to undistributed earnings of affiliates
and associated companies. It is currently not practicable to determine
the U.S. federal income tax liability, if any, that would be payable if
such earnings were not reinvested indefinitely.

The following summarizes the significant components of the Companys
deferred tax assets and liabilities:

2003
    
    2002Bad
debt reserves
    
    $
    2,343
    
    
    $
    2,199Accruals not currently deductible for tax
    
    
    4,104
    
    
    
    3,541Inventory
    
    
    1,438
    
    
    
    1,267Net operating loss carryforwards
    
    
    5,843
    
    
    
    5,111Tax credit carryforwards
    
    
    5,854
    
    
    
    Purchased in-development software technology write-off
    
    
    11,639
    
    
    
    4,309Tax impact of technology transfer
    
    
    10,262
    
    
    
    11,460Other
    
    
    688
    
    
    
    641Total deferred tax assets
    
    
    42,171
    
    
    
    28,528Depreciation
    
    
    (1,953
    )
    
    
    (1,874
    )Capitalized software development costs
    
    
    (8,883
    )
    
    
    (8,077
    )Other
    
    
    (1,160
    )
    
    
    (528
    )Total deferred tax liabilities
    
    
    (11,996
    )
    
    
    (10,479
    )Valuation allowance
    
    
    (2,282
    )
    
    
    (814
    )Net deferred tax asset
    
    $
    27,893
    
    
    $
    17,235


53



---



##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.

At June 30, 2003 and 2002, the Company had potential tax benefits of
$5,843 and $5,111, respectively, related to both U.S. and foreign net
operating loss carryforwards for income tax purposes. The U.S. net
operating loss component of the above totals, respective of fiscal years,
amounted to $2,072 and $2,506 with the remainder of $3,771 and $2,605
representing foreign net operating losses. In addition, at June 30, 2003
and 2002, the Company had potential tax benefits of $5,854 and $0,
respectively, related to U.S. federal tax credits for income tax
purposes. The tax net operating losses and tax credit carryforwards (if
not utilized against taxable income) expire beginning 2004 with some
having no expiration date. A valuation allowance of $2,282 and $814 has
been provided at June 30, 2003 and 2002, respectively, to offset the
related deferred tax assets due to uncertainty of realizing the benefit
of the loss carryforwards and tax credits.

During fiscal years 2003 and 2002, the Company entered into intercompany
intellectual property sales. The tax impact will be amortized over the
intellectual properties respective economic useful lives for financial
statement purposes.

12.  Other income (expense), net:

Other income (expense) is comprised of the following:

2003
    
    2002
    
    2001Foreign exchange (loss) gain, net
    
    $
    (702
    )
    
    $
    404
    
    
    $
    (1,213
    )Investment write-down
    
    
    (500
    )
    
    
    
    
    
    
    (1,200
    )Other, net
    
    
    (481
    )
    
    
    (168
    )
    
    
    (1,397
    )Total other income (expense), net
    
    $
    (1,683
    )
    
    $
    236
    
    
    $
    (3,810
    )


13.  Related party transactions:

Effective June 30, 1995, and amended February 1, 1999, April 26, 2001,
and September 4, 2003, the Company and Louis M. Brown, Jr., Vice-Chairman
of the Board, entered into a Consulting Agreement terminating June 30,
2007, pursuant to which Mr. Brown is to provide on the average 20 hours
per week of consulting services to the Company in exchange for a base
consulting fee plus a target bonus. During fiscal years 2003 and 2002,
the Company compensated Mr. Brown $410 and $308, respectively, for
consulting services provided to the Company. For fiscal year 2003, Mr.
Brown earned a base consulting fee of $250 and a bonus of $160. The
bonus was accrued in fiscal year 2003.

During fiscal years 2003 and 2002, the Company paid a real estate
partnership $146 and $427, respectively, for the rental of the Laurel,
Maryland facilities. J. Alan Hayman, Executive Vice President,
Restaurant Sales and Strategies, holds a 50% interest, as he was a
previous owner of Stanley Hayman and Company, Inc. which was acquired by
MICROS in December 1999. The rental rates were fair market value rates,
as determined by two independent valuations. The Laurel lease expired
on December 31, 2002, and was not renewed.

During fiscal year 2003, the Company paid Mr. Christoph Gissler, a former
owner of Indatec, which was acquired by MICRO in January 2001. EUR 394 ($424 at the January 2003 rate). This
payment was the second of three installment payments for the shareholder loan
entered into as part of the acquisition of Indatec.

14.  Employee benefit plan:

The Company sponsors an employee savings plan, which conforms to the
provisions of Section 401(k) of the Internal Revenue Code. The Plan
covers substantially all full-time employees in the United States and
allows employees to voluntarily defer up to 15% of their income through
contributions to the Plan. The Plan for corporate employees matches 50%
of the first 5% of each participating employees voluntary contributions.
The Plan for Datavantage matches 25% of the first 6% of each
participating employees

54



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

voluntary contributions. Furthermore, the Company may elect to make
additional contributions, at its discretion.

Company contributions made during the years ended June 30, 2003, 2002 and
2001 totaled $924, $1,278 and $1,048, respectively. The Company does not
have any material obligations to past or present employees related to
post employment benefits.

15.  Segment reporting data:

The 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:

Year Ended June 30,2003
    
    2002
    
    2001Revenues (1):United States
    
    $
    230,552
    
    
    $
    210,335
    
    
    $
    186,795International
    
    
    226,671
    
    
    
    206,502
    
    
    
    185,502Intersegment eliminations
    
    
    (57,032
    )
    
    
    (49,674
    )
    
    
    (45,521
    )Total revenues
    
    $
    400,191
    
    
    $
    367,163
    
    
    $
    326,776Income before taxes, minority interests and
equity in net earnings of affiliates (1):United States
    
    $
    16,869
    
    
    $
    (2,754
    )
    
    $
    (17,944
    )International
    
    
    61,993
    
    
    
    54,323
    
    
    
    44,705Intersegment eliminations
    
    
    (41,667
    )
    
    
    (32,224
    )
    
    
    (26,527
    )Total income before taxes, minority interests
and equity in net earnings of affiliates
    
    $
    37,195
    
    
    $
    19,345
    
    
    $
    234Identifiable assets (2):United States
    
    $
    186,748
    
    
    $
    133,653
    
    
    $
    145,568International
    
    
    183,267
    
    
    
    179,177
    
    
    
    128,888Total identifiable assets
    
    $
    370,015
    
    
    $
    312,830
    
    
    $
    274,456Capital expenditures (2):United States
    
    $
    2,118
    
    
    $
    3,160
    
    
    $
    4,955International
    
    
    3,463
    
    
    
    2,056
    
    
    
    3,101Total capital expenditures
    
    $
    5,581
    
    
    $
    5,216
    
    
    $
    8,056Depreciation and amortization (2):United States
    
    $
    5,381
    
    
    $
    9,982
    
    
    $
    8,874International
    
    
    3,507
    
    
    
    6,060
    
    
    
    5,445Total depreciation and amortization
    
    $
    8,888
    
    
    $
    16,042
    
    
    $
    14,319


(1) Amounts based on the location of the customer.
(2) Amounts based on the location of the selling entity.

MICROS products are distributed in the U.S. and internationally, primarily in
Europe, the Pacific Rim, and

55



---



##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share data)

Latin America through subsidiaries, independent dealers/distributors and
Company-owned sales and service offices. The Companys principal customers are
lodging, food service-related businesses, and entertainment venues. No single
customer accounts for 10% or more of the Companys consolidated revenues.

Geographic revenue information for the three years ended June 2003 is
based on the location of the selling entity. Long-lived assets shown by
geographic location represent property, plant, and equipment and are
based on the physical location of the assets at the end of each fiscal
year. Substantially all intangible assets do not have a physical or
geographic location; therefore, intangible assets are not included below.

Revenues from unaffiliated customers by geographic location are as
follows:

2003
    
    2002
    
    2001United States
    
    $
    211,216
    
    
    $
    194,433
    
    
    $
    171,898International
    
    
    188,975
    
    
    
    172,730
    
    
    
    154,878Net revenue
    
    $
    400,191
    
    
    $
    367,163
    
    
    $
    326,776


Long-lived assets by geographic location are as follows:

2003
    
    2002
    
    2001United States
    
    $
    13,370
    
    
    $
    14,786
    
    
    $
    17,099International
    
    
    6,809
    
    
    
    6,681
    
    
    
    6,454Total long-lived assets
    
    $
    20,179
    
    
    $
    21,467
    
    
    $
    23,553


56



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended June 30, 2003, 2002 and 2001 (in thousands)

16.  Quarterly financial information (unaudited):

Quarterly financial information for fiscal years 2003 and 2002 is
presented in the following tables:

First
    
    Second
    
    Third
    
    Fourth2003
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterRevenue
    
    $
    86,511
    
    
    $
    95,548
    
    
    $
    97,590
    
    
    $
    120,542Gross margin
    
    $
    41,412
    
    
    $
    47,575
    
    
    $
    47,379
    
    
    $
    62,193Income from operations
    
    $
    5,035
    
    
    $
    8,516
    
    
    $
    9,513
    
    
    $
    15,258Net income
    
    $
    2,694
    
    
    $
    4,931
    
    
    $
    5,369
    
    
    $
    8,786Basic net income per common share
    
    $
    0.15
    
    
    $
    0.28
    
    
    $
    0.31
    
    
    $
    0.49Diluted net income per common share
    
    $
    0.15
    
    
    $
    0.28
    
    
    $
    0.31
    
    
    $
    0.48Stock Prices (in dollars)High
    
    $
    27.94
    
    
    $
    24.81
    
    
    $
    23.90
    
    
    $
    35.34Low
    
    $
    21.71
    
    
    $
    18.53
    
    
    $
    20.26
    
    
    $
    24.04


First
    
    Second
    
    Third
    
    Fourth2002
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterRevenue
    
    $
    83,511
    
    
    $
    90,899
    
    
    $
    92,378
    
    
    $
    100,375Gross margin
    
    $
    40,068
    
    
    $
    43,074
    
    
    $
    43,842
    
    
    $
    50,153Income from operations
    
    $
    2,807
    
    
    $
    3,913
    
    
    $
    4,528
    
    
    $
    7,516Net income
    
    $
    879
    
    
    $
    2,485
    
    
    $
    3,685
    
    
    $
    5,190Basic net income per common share
    
    $
    0.05
    
    
    $
    0.14
    
    
    $
    0.21
    
    
    $
    0.30Diluted net income per common share
    
    $
    0.05
    
    
    $
    0.14
    
    
    $
    0.21
    
    
    $
    0.29Stock Prices (in dollars)High
    
    $
    28.40
    
    
    $
    26.12
    
    
    $
    30.78
    
    
    $
    29.07Low
    
    $
    16.80
    
    
    $
    17.01
    
    
    $
    20.25
    
    
    $
    25.53


57



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##### 



MICROS SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended June 30, 2003, 2002 and 2001 (in thousands)

Balance at
    
    Charged
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    to
    
    
    
    
    
    
    
    
    
    
    
    
    
    at endDescription
    
    of period
    
    expense
    
    Deductions
    
    
    
    
    
    Other (1)
    
    of periodYear ended June 30, 2003:Allowance for doubtful accounts
    
    $
    8,981
    
    
    $
    4,831
    
    
    $
    1,935
    
    
    
    
    
    
    $
    (1,229
    )
    
    $
    10,648Reserve for inventory obsolescence
    
    
    4,957
    
    
    
    2,005
    
    
    
    928
    
    
    
    (2
    )
    
    
    (134
    )
    
    
    5,900$
    13,938
    
    
    $
    6,836
    
    
    $
    2,863
    
    
    
    
    
    
    $
    (1,363
    )
    
    $
    16,548Year ended June 30, 2002:Allowance for doubtful accounts
    
    $
    7,508
    
    
    $
    5,073
    
    
    $
    2,569
    
    
    
    
    
    
    $
    (1,031
    )
    
    $
    8,981Reserve for inventory obsolescence
    
    
    4,236
    
    
    
    1,638
    
    
    
    1,529
    
    
    
    (2
    )
    
    
    612
    
    
    
    4,957$
    11,744
    
    
    $
    6,711
    
    
    $
    4,098
    
    
    
    
    
    
    $
    (419
    )
    
    $
    13,938Year ended June 30, 2001:Allowance for doubtful accounts
    
    $
    7,791
    
    
    $
    4,198
    
    
    $
    4,010
    
    
    
    
    
    
    $
    (471
    )
    
    $
    7,508Reserve for inventory obsolescence
    
    
    3,799
    
    
    
    614
    
    
    
    530
    
    
    
    (2
    )
    
    
    353
    
    
    
    4,236$
    11,590
    
    
    $
    4,812
    
    
    $
    4,540
    
    
    
    
    
    
    $
    (118
    )
    
    $
    11,744


(1) Primarily related to foreign currency translation.
(2) Material scrapped or otherwise disposed.

58



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##### 



Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

MICROS SYSTEMS, INC.Date:
    
    9-29-03
    
    By:
    
    /s/Gary C. KaufmanGary C. KaufmanExecutive Vice President, Finance andAdministration/Chief Financial OfficerDate:
    
    9-29-03
    
    By:
    
    /s/Cynthia A. RussoCynthia A. RussoVice President and Corporate Controller


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated.

Name
    
    Title/s/A. L. Giannopoulos
    
    Chairman,
        President and
    
    9-29-03Chief Executive
        OfficerA. L. Giannopoulos/s/Gary C. Kaufman
    
    Executive
        Vice President
    
    9-29-03Gary C. Kaufman
    
    Finance
        and Administration Chief Financial Officer/s/Louis M. Brown, Jr.
    
    
    
    9-29-03Louis M. Brown, Jr.
    
    Director
        and Vice Chairman of the Board/s/F. Suzanne Jenniches
    
    
    
    9-29-03F. Suzanne Jenniches
    
    Director/s/John G. Puente
    
    
    
    9-29-03John G. Puente
    
    Director/s/Dwight S. Taylor
    
    
    
    9-29-03DirectorDwight S. Taylor/s/William S. Watson
    
    
    
    9-29-03DirectorWilliam S. Watson


59



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##### 



EXHIBIT INDEX

3(i).
    
    Articles of Incorporation of the Company are incorporated
herein by reference to Exhibit 3 to the Annual Report on Form 10-K
of the Company for the Fiscal Year ended June 30, 1990.3(i)(a).
    
    Articles of Amendment to Articles of Incorporation are
incorporated herein by reference to Exhibit 3(i) to the Quarterly
Report on Form 10-Q of the Company for the period ended December 31,
1997.3(i)(b).
    
    Articles of Amendment to Articles of Incorporation are
incorporated herein by reference to Exhibit 3(i) to the Quarterly
Report on Form 10-Q of the Company for the period ended December 31,
1998.3(ii).
    
    By-laws of the Company as in effect on the date hereof is
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, 1990.10a1.
    
    Amendment and Restatement of MICROS Systems, Inc. Stock Option
Plan is incorporated herein by reference to Exhibit 4.1 to the
Registration Statement on Form S-8 of the Company filed on February
16, 1990.10a2.
    
    First Amendment to the Amendment and Restatement of MICROS Systems,
Inc. Stock Option Plan constituting Exhibit 10a1 hereto is
incorporated herein by reference to Exhibit 4.2 to the Registration
Statement on Form S-8 of the Company filed on February 16, 1990.10b1.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1993 Annual Meeting of Shareholders.10b2.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1995 Annual Meeting of Shareholders.10b3.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1996 Annual Meeting of Shareholders.10b4.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1997 Annual Meeting of Shareholders.10b5.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1998 Annual Meeting of Shareholders.10b6.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 1999 Annual Meeting of Shareholders.10b7.
    
    MICROS Systems, Inc. 1991 Stock Option Plan as amended, is
incorporated herein by reference to Exhibit A to the Proxy Statement
of the Company for the 2001 Annual Meeting of Shareholders.10c.
    
    Underwriting Agreement dated July 6, 1995 by and among MICROS
Systems, Inc., Westinghouse Electric Corporation, Westinghouse
Holdings Corporation, J.P. Morgan Securities, Inc., Morgan Stanley &
Co. Incorporated and Smith Barney, Inc. is incorporated herein by
reference to Exhibit 10d to the Annual Report on Form 10-K of the
Company for the Fiscal Year ended June 30, 1995.





60



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##### 



10d.
    
    Employment Agreement dated June 1, 1995 between MICROS Systems, Inc.
and A. L. Giannopoulos is incorporated herein by reference to
Exhibit 10e to the Annual Report on
Form 10-K of the Company for the Fiscal Year ended June 30, 1995.10e.
    
    First Amendment to Employment Agreement dated February 6, 1997
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1996.10f.
    
    Second Amendment to Employment Agreement dated February 1, 1998
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1997.10g.
    
    Third Amendment to Employment Agreement dated September 8, 1999
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10g to the Annual Report on Form 10-K
of the Company for the Fiscal Year ended June 30, 1999.10h.
    
    Consulting Agreement dated June 30, 1995 between MICROS Systems,
Inc. and Louis M. Brown, Jr. is incorporated herein by reference to
Exhibit 10 to the Annual Report on Form 10-K of the Company for the
Fiscal Year ended June 30, 1995.10i.
    
    First Amendment to Consulting Agreement dated February 1, 1999
between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998.10j.
    
    Second Amendment to Consulting Agreement dated April 26, 2001
between MICROS Systems, Inc. and Louis M. Brown, Jr. is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended March 31, 2001.10k.
    
    Third Amendment to Consulting Agreement dated September 4, 2003
between MICROS Systems, Inc. and Louis M. Brown, Jr.10l.
    
    MICROS Systems, Inc. Bonus and Incentive Plan is incorporated herein
by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of
the Company for the period ended September 30, 1994.10m.
    
    Employment Agreement dated May 28, 1997 between MICROS Systems, Inc.
and Gary C. Kaufman is incorporated herein by reference to Exhibit
10 to the Annual Report on Form 10-K of the Company for the Fiscal
Year ended June 30, 1997.10n.
    
    First Amendment to Employment Agreement dated October 1, 1998
between MICROS Systems, Inc. and Gary C. Kaufman is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998.10o.
    
    Employment Agreement dated May 28, 1997 between MICROS Systems, Inc.
and Thomas L. Patz is incorporated herein by reference to Exhibit 10
to the Annual Report on Form 10-K of the Company for the Fiscal Year
ended June 30, 1997 (see 10m above, as text is identical).10p.
    
    First Amendment to Employment Agreement dated October 1, 1998
between MICROS Systems, Inc. and Thomas L. Patz is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 1998 (see 10n
above, as text is identical).10q1.
    
    Credit Agreement, dated as of July 17, 2003, among MICROS Systems,
Inc., DV Technology Holdings Corporation, Datavantage Corporation,
MICROS-Fidelio Nevada, LLC, MSI Delaware, LLC, MICROS-Fidelio
Southwest, Inc., and MICROS-Fidelio Worldwide, Inc. (Borrowers), and
Bank Of America, N.A., Wachovia Bank, National Association and US
Bank (Lenders)


61



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##### 



10q2.
    
    Credit Agreement, Dated As Of July 17, 2003, Among MICROS-Fidelio
(Ireland) Ltd., MICROS-Fidelio Systems (UK) Ltd., MICROS-Fidelio
España S.L., Merchants Information Solutions, Ltd., MICROS-Fidelio
Brazil, Ltda., MICROS-Fidelio France S.A.S., Hospitality
Technologies, S.A., MICROS-Fidelio Mexico S.A. De C.V., MICROS
Systems Holding GmbH, MICROS-Fidelio Software Deutschland GmbH,
Indatec GmbH & Co. Kg., MICROS-Fidelio Software GmbH & Co. Kg.,
MICROS-Fidelio Software Portugal Unipessoal Lda, MICROS-Fidelio
(Thailand) Co., Ltd., MICROS-Fidelio Singapore Pte Ltd.,
MICROS-Fidelio Software (Philippines), Inc., MICROS-Fidelio Japan
Ltd., MICROS-Fidelio Australia Pty. Ltd., MICROS-Fidelio Hong Kong,
Ltd., Fidelio Nordic Norway A/S, Fidelio Nordic Oy, Fidelio Nordic
Sverige, A.B., And Hotelbk, A.B., and Bank Of America, N.A.,
Wachovia Bank, National Association And Us Bank (Lenders)10q3.
    
    Security Agreement, Dated As Of July 17, 2003, By and Among MICROS
Systems, Inc., DV Technology Holdings Corporation, Datavantage
Corporation, MICROS-Fidelio Nevada, LLC, MSI Delaware, LLC,
MICROS-Fidelio Southwest, Inc., MICROS-Fidelio Worldwide, Inc.
(Borrowers) And Bank Of America, N.A., Wachovia Bank, National
Association And Us Bank (Lenders21.
    
    Subsidiaries of the Company.23.
    
    Consent of Independent Accountants.31.
    
    Certifications32.
    
    Section 1350 Certifications


62