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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  FORM 10-K  þ
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Year Ended June 30, 2004 OR  o
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Transition Period From ____________to__________ Commission File Number 0-9993 MICROS SYSTEMS, INC. 
 (Exact name of registrant as specified in its charter) Maryland
    
    52-1101488State or other jurisdiction of
Incorporation or organization
    
    (I.R.S. Employer
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 
  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, 2004, there were issued and
outstanding 18,378,962 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 $855,356,891.




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED CONSOLIDATED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONSITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-KEXHIBIT INDEXEX-14EX-21EX-23EX-31EX-32    Table of Contents  DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 2004 Annual Meeting of
Shareholders, currently scheduled to be held on November 19, 2004, 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, supermarkets, 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, a suite of back office applications, including
inventory, labor, and financial management, and certain centrally hosted
enterprise applications. The specialty retail systems consist of software
encompassing POS, loss prevention, business analytics, and enterprise
applications. The Companys PMS applications are installed worldwide in leading hotel
chains such as Marriott International, InterContinental Hotels Group, Best
Western, Fairmont Hotels, Radisson, Hilton International, Hyatt International,
Wyndham, Starwood, Four Seasons, Accor, Concorde, Thistle, Federal, Kempinski,
Mandarin Oriental, Mövenpick, Peninsula, Ramada Europe, Shangri-La
International, Dusit Hotels, Swissôtel and Steigenberger. Worldwide, there are
currently approximately 13,300 MICROS PMS installations. The MICROS CRS is installed in numerous hotel chains such as Four Seasons,
Best Western, Shangri-La, 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, La Madeleine, El Torito, Eat N
Park, HMS Host, Mitchells and Butlers (U.K.), Hooters, Marie Callenders, Ruby
Tuesdays, Hard Rock Café, Rainforest Cafe, VIPS (Spain), Corporacion Mexicana
de Restaurantes (Mexico), and Whitbread PLC (United Kingdom). Major quick
service chain restaurant (QSR) customers include numerous franchisees of
Burger King, Subway, Arbys, El Pollo Loco, El Pollo Campero (Guatemala),
various franchisees of Yum! Brands (Pizza Hut, KFC International, and Taco
Bell), Atlanta Bread, 2




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Baja Fresh, Grandys, Red Rooster (Australia), Panera Bread, Popeyes,
Krispy Kreme, Ben & Jerrys, 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, Omni, Wyndham, Radisson, Kempinski, Swissôtel,
Mandarin Oriental, Fairmont, 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, Compass, Delaware North, HMS
Host, and various government entities. The Company has installed large POS
systems in the Foxwoods Hotel and Casino (Ledyard, CT), Grand Casino
(Australia), Atlantis (Bahamas), Mandalay Resorts Group, 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, a privately held software application
developer and system integrator specializing in the specialty and apparel
retail market, which was acquired on May 1, 2003. Datavantage has over 190
retail company customers. Its customers include Abercrombie & Fitch, Armani,
Barneys New York, Hugo Boss (Germany), Jos. A Banks Clothiers,
Books-A-Million, Limited Too, Michaels Arts and Crafts, Polo Ralph Lauren,
Roots Canada Ltd. (Canada), Steve Madden Retail and Shaws Markets. MICROS, Fidelio, DatavatageCorp, Go 2 Team, In Store Plus,
Ovation, Opera, Store 21, Tradewind and Patient Select, are
trademarks or service marks of MICROS or its subsidiaries. This Annual Report
on Form 10-K (this Annual Report) also contains trademarks, trade names and
services marks of other companies that are the property of their respective
owners. 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 check-in and
check out, reservations, guest accounting, 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,
and the internet-based alternative distribution system. 3




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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, data mining, financials, golf
reservations, spa management, and quality management. The first modules of
Opera were released in June 2001. Several additional modules have since been
released to the market, with Opera Reservation System being the most recent
application, having been released in March 2003. Development of Opera continues
with significant enhancements to all of its modules. Opera is designed to run on PCs and large PC based servers. All the
products are designed to share a common Oracle® database. Opera operates 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 30 hotel chains
have adopted Opera and are in the midst of multi-year rollouts. As of June 30,
2004, over 1,500 hotel sites have installed Opera PMS. MICROS also has
released a version of Opera property management system called Opera Xpress.
This product allows smaller properties to deploy the Opera PMS at a lower price
with a limited number of product features. MICROS also continues to market suites of hotel software products under
the Fidelio Version 7.0 brand names. Fidelio Version 7.0 utilizes the
Microsoft Windows® graphical user interface and runs on an Oracle® database.
There are over 3,900 hotels using Version 7.0. For smaller hotels and bed and breakfast establishments, MICROS markets a
product called Fidelio Xpress. 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. The product incorporates a limited sales
and catering capability and has Internet reservations capability. It is
installed in over 850 sites in over 20 countries. MICROS also markets a suite
of hotel products via its Hospitality Solutions International division in
Phoenix, Arizona with over 450 sites installed. MICROS has also introduced a PMS product designed specifically for the
European resort markets called Fidelio Version 8. This product contains
certain Internet based features and utilizes 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. Fidelio Version 8 was
released in January 2004 and is installed in over 200 hotels sites as of June
30, 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. Fidelio Cruise has installed over 145 cruise ships. Customers
include Carnival Cruise Lines, Cunard Line, Radisson Seven Seas, Princess
Cruises, P. & O. Cruises, Holland America Line, Royal Caribbean International,
Norwegian Cruise Lines and the U.S. Navy. 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 addresses
operational needs and provides 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, offering transaction control, restaurant operations, accounting
data, interfaces to other systems, communications, and hardware and support
services. Most of the products are designed to operate on Intel® based
personal computers with the order entry 4




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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 9700 Hospitality Management
System (HMS), the 3700 POS system, HSI POS, Indatec, and the e7 Series.
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
workstations are the Eclipse and Workstation 4. The Eclipse was released in
June 2001 and continues to be enhanced with faster chips and memory. It 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 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.
GES is also manufacturing for MICROS a new product named the Keyboard
Workstation. This new product allows for orders to be entered into the MICROS
9700 HMS via a low cost but durable workstation with a keyboard interface
versus a more costly touchscreen. The 9700 HMS, released in fiscal year 2001, 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
9700 HMS product has an open systems architecture running on Microsofts
Windows® 2000 operating system. The 9700 succeeded an earlier product called
the MICROS 8700 HMS. The product can be deployed on site in a client-server
configuration or on a multi-property configuration where a remote server can
run multiple distant restaurants. A new version will be released in fiscal
year 2005 that will allow the 9700 HMS to be deployed with an Oracle database
in addition to the current proprietary database. The 3700 POS, released in fiscal year 1997, is designed for table service
restaurants. It has an open systems architecture utilizing Microsofts
Windows® 2000 operating system, and 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. 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 includes 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, gift cards 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. 5




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MICROS has developed and released in July 2004 a new POS system called the
e7 Series. This product is designed for small restaurants and runs on the
MICROS User Workstation 4 POS platform with a Microsoft Windows® CE Operating
system. It is designed as the successor product for the MICROS 2700 HMS. The
MICROS 2700 HMS was released in fiscal year 1989 and was marketed through
fiscal year 2004. This product was highly successful with approximately 95,000
terminals installed in the products fifteen-year life. In addition, MICROS developed and introduced an Internet based portal
product called mymicros.net in fiscal year 2002. Mymicros.net posts store
transaction POS detail to a centralized data warehouse in near real time. This
product 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 2003. The products functionality is similar to the mymicros.net portal
and is designed for the HSI POS product. HSI is currently developing a new POS
product called iPOS, which is a modified and enhanced version of the
Internet-based point of sale product previously developed by MICROS and an
outside development entity. The product will be released in fiscal year 2005.
It can be deployed either on site in a client-server configuration or via a
web-based configuration. The Indatec POS product is marketed in Europe to smaller table service
restaurants and small hotels with restaurants 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 (Store 21) 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
operating systems and utilize Sybase® as the database. Datavantage is developing a next generation POS system for release in
fiscal year 2005. This product runs on the Sun Microsystems Java operating
system and incorporates the latest available programming features. All of Datavantages software systems run on industry standard PCs and
specially designed PC-based POS terminals manufactured by IBM and NCR. MICROS
is working with Datavantage to develop a version of the Eclipse PCWS to offer
to customers as an alternative POS terminal option. 6




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Summary of Product Solutions (Software and Hardware): Restaurant Products
    
    Software Solutions
    
    Hardware Solutions9700 HMS
    
    Eclipse PC Workstation Terminal3700 POS
    
    User Workstation 4 TerminalRestaurant Enterprise Series 3000
    
    Elite PC Workstation TerminalHSI Profit Series POS
    
    Keyboard Workstation TerminalIndatec POSmymicros.netmyhsi.netiPOSe7 POS (launched in July 2004)iCare Gift CardsHotel Products
    
    Software SolutionsFidelio Property Management Systems (multiple versions)Fidelio Xpress PMSOpera Property Management SystemOpera Xpress Property Management SystemCentral Reservation SystemsCustomer Information SystemsWeb Booking Suite SoftwareSales and CateringMICROS-Fidelio FinancialsQuality Management SystemsSpa/GolfBookingsHSI Suite of Hotel Solutionsmyfidelio.netFidelio Cruise SoftwareYield Management SoftwareMaterials ManagementData Mining and Reporting SoftwareRetail Products
    
    Software SolutionsStore21 Store Management SystemTradewind Store Management SystemProact Home Office Business Intelligence SuiteGift Cards Software
 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, credit card software support, help desk, 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. Depot field
maintenance is also provided. 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. 7




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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 telephonically, on-line or,
where appropriate, 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 call 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 headquarters
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 many MICROS POS and hotel software
installations in most European nations. MICROS also plans to provide support
from Galway for its European Datavantage sites. MICROS is also in the process
of installing a data center in Galway to act as a hosting center for European
customers deploying MICROS web based applications, as well as acting as a
backup site for MICROSs data center in its Columbia, Maryland headquarters. 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 52.0% ($253.3 million) of MICROSs total
revenues in fiscal year 2004, 49.6% ($201.2 million) in fiscal year 2003 and
48.6% ($181.2 million) in fiscal year 2002. An important component of MICROSs service offerings are maintenance
service contracts that include 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. Revenue for service maintenance contracts were
$140.3 million for fiscal year 2004, $113.3 million for fiscal year 2003 and
$99.5 million for fiscal year 2002. Service maintenance contract revenue was
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 27 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 50 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 64 domestic dealers and 47
international distributors. MICROSs Datavantage subsidiary markets its product largely through a
direct sales force to a North American customer base. In fiscal year 2004,
Datavantage launched its international expansion plans by hiring selected sales
and support personnel in several countries. Foreign sales, including export sales from the United States, accounted
for approximately 45.2% ($220.4 million) of the Companys total revenue in
fiscal year 2004, 47.3% ($192.0 million) in fiscal year 2003, and 47.2% ($175.9
million) in fiscal 2002. 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 8




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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 regional 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 the
Company has acquired and may in the future acquire ownership or licensing
rights to such products and designs. MICROS outsources the manufacturing of its POS terminals mainly to
Sanmina-SCI and GES Electronics. Both companies provide hardware design
services and manufacturing services to MICROS. These outsourcing relationships
allow the Company to utilize each companys respective design capabilities and
efficient manufacturing facilities to produce a series of MICROS branded POS
terminals. MICROS uses its internal design capabilities to help each contract
manufacturer in designing industry specific POS terminals and peripherals. See
also Manufacturing in Part I of this Form 10-K. 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 Columbia,
Maryland, 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
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): 2004
    
    2003
    
    2002Total R&D
    
    $
    32,387
    
    
    $
    23,329
    
    
    $
    22,355R&D capitalization
    
    
    (5,178
    )
    
    
    (4,581
    )
    
    
    (3,035
    )Total R&D expenses
    
    $
    27,209
    
    
    $
    18,748
    
    
    $
    19,320
 The fiscal year 2004 increase in total R&D expenses arose primarily in
connection with the R&D activities conducted at Datavantage. 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 various bases, including product functionality, service
capabilities, price and geography. There are at least 40 competitors worldwide
that offer some form of sophisticated restaurant POS system, over 100 hotel
systems competitors and over 50 retail systems competitors. Competitors in the
restaurant POS marketplace include full service providers such as Infogenesis,
NCR, Par Technology, Panasonic, POSitouch, Progressive, Radiant Systems, Sharp,
Squirrel, Vectron AG, and hardware providers such as Dell, IBM, NCR, and
Wincor-Nixdorf. There are also numerous companies that license their
POS-oriented software with PC-based systems in regional markets around the
world. 9




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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 Agilysys, 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, Trax Software and, Triversity among many others.
Internationally, Datavantage generally competes with smaller, regionally
oriented competitors. 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 Optims, Pegasus, 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 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 MICROSs Eclipse terminals, and certain communication boards. The
Company entered into this non-exclusive agreement to lower its manufacturing
costs, expand the availability of 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. MICROS retains a limited manufacturing and repair capability of certain
products in its distribution facility in Hanover, Maryland. MICROS maintains a good relationship with SSCI under the manufacturing
agreement. In October 2003, MICROS concluded an amicable legal settlement with
SSCI in connection with alleged breaches by an SSCI subsidiary under a 1999
development agreement. As part of the settlement, SSCI made a cash payment to
MICROS. Additionally, MICROS maintains a good relationship with GES Singapore Pte
Ltd. While not replacing the relationship with SSCI, this arrangement 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. EMPLOYEES As of July 31, 2004, the Company had approximately 2,892 full-time
employees. Approximately 1,639, or 57%, of these employees are based in North
America (United States and Canada), with approximately 725, or 44%, of the 10




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US-based employees located in the Companys Columbia, Maryland headquarter
building 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
and Boston, and its hotel product development group in Naples, Florida.
Approximately 821, or 28%, of the Companys employees are employed in the
Europe/Africa/Middle East region, 339 employees, or 12%, are employed in the
Asia/Pacific region, and 93 employees, or 3%, are employed in the Latin America
region. On an aggregate basis, the Company had approximately 1,773 employees
in sales/marketing, 533 employees in customer support services, 157 employees
in administration and finance, 322 employees in product development, and 107
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 uses certain suppliers whose employees may be represented by labor
unions. MICROS believes it maintains good relations with its employees. FOREIGN SALES AND FOREIGN MARKET RISK The Company recorded foreign sales, including exports from the United
States, of approximately $220.4 million during fiscal year 2004 to customers
located primarily in Europe, Africa, the Middle East, Australia, Asia, Latin
America and Canada. Comparable sales in fiscal years 2003 and 2002 were $192.0
million and $175.9 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 worldwide threat of terrorism, especially in
developing countries with uncertain or unstable political structures or
regimes. Contributing to this risk factor is the adverse impact that political
instability has on the travel and tourism industries. The Company is also
subject to the effects of, and changes in, laws and regulations, other
activities of governments, agencies and similar organizations. 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 largely
licensed or purchased from third parties. 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 other 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. 11




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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, created by unpredictable factors such
as terrorist attacks 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. The Company also experiences a stronger than
average sales volume in the second fiscal quarter due to the holiday season for
the retail products and services. 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
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 2004, and 2003, the Company was party, directly and indirectly, to
certain contracts with the U.S. Federal Government, which such contracts
contained standard termination for convenience clauses. The Company does not
anticipate any material adverse financial impact if the U.S. Government elected
to exercise its rights under 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 before shipment. As of
June 30, 2004, 2003, and 2002, the backlog totaled approximately $78.1 million,
$65.5 million and $67.2 million, respectively. OFF-BALANCE SHEET ARRANGEMENTS The Company does not have any material 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. BUSINESS AND INVESTMENT RISKS; INFORMATION RELATING TO FORWARD-LOOKING
STATEMENTS In light of current market conditions, there remains 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 does not expect any material
product and service margin improvement. 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 12




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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. Certain 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. Examples of such
forward-looking statements include the statements in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations under
the heading Liquidity and Capital Resources that the Companys sources of
cash are sufficient to provide the working capital needs of the Company for the
next 12 months and that fiscal 2005 property, plant and equipment expenditures
will be approximately $2.0 million higher than in fiscal 2004. 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 parts of Asia;  Unexpected health and environmental disasters, such as the SARS (Severe
Acute Respiratory Syndrome) crisis in Asia and Eastern Canada. This type of
crisis has 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 Workstation 4 in the fourth
quarter of fiscal year 2003 could adversely impact sales insofar as it will
supplant in part sales of the higher-priced Eclipse workstation;  Potential declines in service margins, triggered in part by unauthorized and
unlicensed service agents who offer limited support services to price-conscious
customers at reduced rates. This influence also adversely impacts MICROS
support, insofar as those customers request MICROS intervention to correct
problems created by unauthorized third-party agents.  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; 13




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 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 rollouts, 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;  Adverse fluctuations in the Euro and Pound, both of which constitute
currencies in which material amounts of business are transacted;  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. 14




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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. 
 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. On November 1, 2003, MICROS
subleased one of the 5 floors, consisting of approximately 49,524 square feet,
to Motorola, Inc. pursuant to a 77-month sublease (which Motorola may terminate
after 60 months). MICROS also leases a facility in Hanover, Maryland, of approximately
75,600 square feet. 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 recently relocated to new leased
space in the Cleveland, Ohio, area, where it leases approximately 69,199 square
feet of office and warehouse space in which it conducts the majority of its
sales, marketing, customer support, and product development activities. The
Datavantage subsidiary also leases approximately 11,457 square feet of office
space in the Boston, Massachusetts, area primarily for customer support and
research and development activities. The current Cleveland lease expires
February 28, 2014, (with a termination right in 2010) 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 18,180 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 26 cities domestically, including Boston,
Chicago, Los Angeles and other major metropolitan areas, and in over 43 cities
internationally, including London, Paris, Stockholm, Sydney, Singapore, Tokyo,
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 15




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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 2004, no matters were submitted
to a vote of security holders. 
 PART II 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS Price Range of Common Stock As
of August 31, 2004, there were approximately 8,260 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, 2004, the closing price for the stock was $46.54. Price Range(in dollars)High
    
    LowYear Ended June 30, 20047/01/03  9/30/03
    
    (First Quarter)
    
    $
    38.00
    
    
    $
    32.4510/01/03  12/31/03
    
    (Second Quarter)
    
    $
    44.80
    
    
    $
    33.971/01/04- 3/31/04
    
    (Third Quarter)
    
    $
    48.50
    
    
    $
    42.184/01/04  6/30/04
    
    (Fourth Quarter)
    
    $
    47.97
    
    
    $
    41.45Year 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
    
    
    $
    25.53
 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 restrict the payment of dividends other than stock dividends
(see Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources and Note 5 of Notes to
Consolidated Financial Statements). In fiscal year 2002, the Board of Directors authorized the purchase of up
to one million shares of the Companys common stock. As of August 31, 2004,
the Company has purchased a total of 913,424 shares of its common stock. 16




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A summary of the cumulative number of whole shares purchased is as follows
(total purchase value $ in thousands): TotalNumber of
    
    Average
    
    PurchaseShares
    
    Purchase Price
    
    ValueShares purchased in FY02
    
    
    95,600
    
    
    $
    27.31
    
    
    $
    2,610Shares purchased in FY03
    
    
    282,241
    
    
    $
    23.67
    
    
    
    6,681Shares purchased in FY04 Q1
    
    
    109,699
    
    
    $
    35.18
    
    
    
    3,860Shares purchased in FY04 Q2
    
    
    76,811
    
    
    $
    38.77
    
    
    
    2,978Shares purchased in FY04 Q3
    
    
    75,530
    
    
    $
    43.39
    
    
    
    3,277Shares purchased in FY04 Q4
    
    
    159,850
    
    
    $
    43.77
    
    
    
    6,997Shares purchased in July & August 2004
    
    
    113,693
    
    
    $
    45.66
    
    
    
    5,191Total shares purchased as of August 31, 2004
    
    
    913,424
    
    
    $
    34.59
    
    
    $
    31,594
 Issuer Purchases of Equity Securities (1) Total Number of
    
    Maximum NumberShares Purchased
    
    of Shares that MayTotal Number
    
    Average
    
    as Part of Publicly
    
    Yet be Purchasedof Shares
    
    Purchase
    
    Announced Plans
    
    Under the Plans orPurchased
    
    Price
    
    or Programs
    
    ProgramsApril 1  30, 2004
    
    
    51,897
    
    
    $
    45.30
    
    
    
    51,897
    
    
    
    308,222May 1  31, 2004
    
    
    79,888
    
    
    $
    42.96
    
    
    
    79,888
    
    
    
    228,334June 1  30, 2004
    
    
    28,065
    
    
    $
    43.26
    
    
    
    28,065
    
    
    
    200,269July 1  31, 2004
    
    
    55,316
    
    
    $
    45.14
    
    
    
    55,316
    
    
    
    144,953August 1  31, 2004
    
    
    58,377
    
    
    $
    46.15
    
    
    
    58,377
    
    
    
    86,576Total
    
    
    273,543
    
    
    $
    44.56
    
    
    
    273,543
    
    
    
    86,576
  (1)
    
    In fiscal year 2002, the Board of Directors of the Company authorized
the purchase of up to one million shares of the Companys common stock. As of
August 31, 2004, the Company has purchased 913,424 shares in the open market. EQUITY COMPENSATION PLAN INFORMATION
As of June 30, 2004 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
    
    
    3,701,194
    
    
    $
    29.54
    
    
    
    382,906Equity compensation
plans not approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    3,701,194
    
    
    $
    29.54
    
    
    
    382,906
 17




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##### Table of Contents



Recent Sales of Unregistered Securities On 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 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 in the acquisition 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 shares of MICROS common stock.
The shareholders of Datavantage Corporation and its parent holding company were
not granted any registration rights in connection with the transaction, and
they received unregistered Common Stock in the transaction. The offering of
MICROS Common Stock to the shareholders of Datavantage Corporation and its
parent holding company was exempt from the registration requirements of the
U.S. Securities Act of 1933, as amended, (the Securities Act) pursuant to
Section 4(2) of the Securities Act. 
 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data) Fiscal Years Ended June 30,2004
    
    2003
    
    2002
    
    2001
    
    2000Statement of Operations DataRevenue
    
    $
    487,443
    
    
    $
    405,857
    
    
    $
    372,493
    
    
    $
    332,166
    
    
    $
    369,049Income from operations
    
    $
    56,834
    
    
    $
    38,322
    
    
    $
    18,764
    
    
    $
    3,999
    
    
    $
    29,470Net income (loss)
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239
    
    
    ($
    704
    )
    
    $
    16,204Basic net income (loss) per common share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70
    
    
    ($
    0.04
    )
    
    $
    0.96Diluted net income (loss) per common share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.69
    
    
    ($
    0.04
    )
    
    $
    0.91Balance Sheet DataWorking
capital (1)
    
    $
    118,485
    
    
    $
    73,779
    
    
    $
    83,485
    
    
    $
    60,644
    
    
    $
    93,535Total assets
    
    $
    418,892
    
    
    $
    370,015
    
    
    $
    312,830
    
    
    $
    274,456
    
    
    $
    278,977Long-term debt and capital leases (2)
    
    $
    305
    
    
    $
    667
    
    
    $
    426
    
    
    $
    3,679
    
    
    $
    4,519Shareholders equity
    
    $
    262,973
    
    
    $
    221,228
    
    
    $
    178,362
    
    
    $
    158,848
    
    
    $
    163,621Book value per share (3)
    
    $
    14.34
    
    
    $
    12.28
    
    
    $
    10.18
    
    
    $
    9.09
    
    
    $
    9.44Additional DataWeighted average number of common sharesOutstanding  - basic
    
    
    18,245
    
    
    
    17,502
    
    
    
    17,510
    
    
    
    17,377
    
    
    
    16,796- diluted
    
    
    19,226
    
    
    
    17,838
    
    
    
    17,850
    
    
    
    17,377
    
    
    
    17,892
  (1)
    
    Current assets less current liabilities.  (2)
    
    Including current portion.  (3)
    
    Calculated as shareholders equity divided by common stock
outstanding at June 30. 
 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. 18




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##### Table of Contents



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 the Company is the sole party that has the
proprietary knowledge to install the software, revenue is recognized upon
installation and when ready to go live, with an appropriate deferral for any
undelivered software contract elements. This deferral is earned when
significant obligations no longer exist. Service Service contract and hosting revenue is initially recorded as deferred
service revenue and is recognized on a pro rata basis over the contract
term. Revenue for the installation of the product, programming and the
training of customers staff is recognized as the work is performed.
Revenue from customer-specific development work is recognized under the
completed contract method. Multiple-element arrangements The Company enters into transactions that include multiple-element
arrangements, which may include any combination of hardware, software and/or
services. When some elements are delivered before others in an arrangement
and all of the following criteria are met, revenue for the delivered
elements is recognized upon delivery of such item. Otherwise, revenue is
deferred until the delivery of the last element.  
    
    Vendor-specific objective evidence (VSOE) of fair value
of undelivered elements is established;
    
    The functionality of delivered elements is not dependent on the undelivered elements;
    
    Delivery of the element(s) represents the culmination of the earning process. Allowance for doubtful accounts The Company maintains allowances for doubtful accounts for estimated losses
that may result from the inability of our customers to make required
payments. These allowances are based on customer payment practices and
history, inquiries, credit reports from third parties and other financial
information. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Capitalized software development costs Software development costs, for software products to be licensed to others,
incurred before 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, at which time
amortization begins. Annual amortization, charged to cost of sales, is the
greater of the amount computed using the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross
revenues for that product, or the straight-line method over the remaining
estimated economic life of the product. Long-lived assets Long-lived assets The Company periodically evaluates the recoverability of long-lived assets,
including intangibles, whenever events and changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. 19




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##### Table of Contents



When indicators of impairment are present, the carrying values of the assets
are evaluated in relation to the operating performance and future cash flows
of the underlying business. Impairment is measured by the amount by which
fair values are less than book value. Fair values are based on quoted market
prices and assumptions concerning the amount and timing of estimated future
cash flows and assumed discount rates, reflecting varying degrees of
perceived risk. If the Company determines that any of the impairment
indicators exist, and these assets are determined to be impaired, an
adjustment to write down the long-lived assets would be charged to income in
the period such determination is made. The Company recognized impairment
losses for investments of $0.8 million in fiscal year 2004 and $0.5 million
in fiscal year 2003.Intangible assets other than goodwillIdentified intangible assets were valued based on managements assumptions
and other considerations for estimating fair values. These intangible
assets are being amortized over their respective useful lives according to
the estimated present value of the net earning potential of each asset
category. The amortization expense related to intangible assets was $0.6
million, $0.1 million and $0.2 million in fiscal years 2004, 2003 and 2002,
respectively. The Company did not recognize any impairment losses during
the last three fiscal years ended June 30, 2004.GoodwillThe Company assesses whether goodwill and trademarks are impaired on an
annual basis during the first quarter of its fiscal year. Upon determining
the existence of goodwill and/or trademark impairment, the Company measures
that impairment based on the amount by which the book value of goodwill
and/or trademarks exceeds its fair value. The implied fair value of
goodwill is determined by deducting the fair value of a reporting units
identifiable assets and liabilities from the fair value of the reporting
unit as a whole, as if that reporting unit had just been acquired and the
purchase price were being initially allocated. Additional impairment
assessments may be performed on an interim basis if the Company encounters
events of changes in circumstances that would indicate that, more likely
than not, the book value of goodwill and/or trademarks has been impaired.The process of evaluating the potential impairment of goodwill and/or
trademark is highly subjective and requires significant judgment at many
points during the analysis. In estimating the fair value of the reporting
units with recognized goodwill for the purposes of our annual or periodic
analyses, the Company makes estimates and judgments about the future cash
flows of these businesses. The cash flow forecasts are based on assumptions
that are consistent with the plans and estimates used to manage the
underlying reporting units. MICROS also considers its market capitalization
(adjusted for unallocated monetary assets such as cash, marketable debt
securities and debt) on the date the analysis is performed.The Company completed the first step of its annual impairment analysis in
the first quarter of fiscal year 2004. As the estimated fair value of the
U.S. and international reporting units exceed the carrying values, the
Company concluded there was no impairment of goodwill or trademarks. As of
June 30, 2004, the net book value of goodwill and trademarks for the U.S.
and international reporting units was $60.0 million and $10.7 million,
respectively. 20




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##### Table of Contents



Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and
Other Intangible Assets requires the cessation of amortization for goodwill
and indefinite-lived intangible assets. 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 effect in fiscal year 2002 (in thousands, except
per share data): 2004
    
    2003
    
    2002Net incomeReported net income
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    5,370Adjusted net income
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    17,609Basic net income per common shareReported net income per common share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    0.31Adjusted basic net income per common share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    1.01Diluted net income per common shareReported net income per common share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.69Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    0.30Adjusted diluted net income per common share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.99Basic
    
    
    18,245
    
    
    
    17,502
    
    
    
    17,510Diluted
    
    
    19,226
    
    
    
    17,838
    
    
    
    17,850
  Income taxesIncome taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to the differences between the financial
statement carrying amounts and the tax basis of assets and liabilities.
Deferred tax assets and liabilities are measured using the enacted tax rates
in effect for the year in which those temporary differences are expected to
be recovered or settled. The effect on the deferred tax assets and
liabilities of a change in tax rate is recognized in income in the period
that includes the enactment date. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts more likely than not
to be realized. If the Company determines that it will not be able to
realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the
period such determination is made.Foreign currency translationThe financial statements of the Companys non-U.S. operations are translated
into U.S. dollars for financial reporting purposes. The assets and
liabilities of non-U.S. operations whose functional currencies are not in
U.S. dollars are translated at the fiscal year-end exchange rates, while
revenues and expenses are translated at month-end exchange rates during the
fiscal year. The cumulative translation effects are reflected in
shareholders equity. Gains and losses on monetary transactions denominated
in other than the functional currency of an operation are reflected in other
income (expense). Results of Operations Comparison of Fiscal Year 2004 to Fiscal Year 2003: The Company recorded a diluted net income of $1.73 per common share in
fiscal year 2004, compared with a diluted net income of $1.22 per common share
in fiscal year 2003. This increase was primarily due to increased sales volume
as well as the effect of the acquisition of Datavantage in May 2003. The
acquisition contributed approximately $0.21 per common share to diluted net
income in fiscal year 2004. 21




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##### Table of Contents



Revenue increased by $81.6 million, or 20.1%, to $487.4 million for fiscal
year 2004 compared to the same period last year. Of the increase, the U.S.
reporting unit accounted for $53.3 million while the international reporting
unit accounted for $28.3 million over the same period a year ago. The increase
in the U.S. was mainly due to increased sales volume from various roll out
programs and sales from Datavantage. The increase in the European
international reporting unit was primarily due to exchange rate fluctuations,
primarily between the Euro and the U.S. dollar. An analysis of the sales mix by reporting segments is as follows (note:
amounts are net of intersegment eliminations, based on location of the selling
entity and includes export sales): U.S.
    
    InternationalFiscal Years
    
    Fiscal Years(in thousands)
    
    Ended June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003Hardware
    
    $
    93,729
    
    
    $
    82,906
    
    
    $
    57,911
    
    
    $
    54,108Software
    
    
    46,043
    
    
    
    34,773
    
    
    
    36,443
    
    
    
    32,840Service
    
    
    127,293
    
    
    
    96,129
    
    
    
    126,024
    
    
    
    105,101Total
    
    $
    267,065
    
    
    $
    213,808
    
    
    $
    220,378
    
    
    $
    192,049
 An analysis of the sales mix as a percentage of total revenue is as
follows: Fiscal Year Ended
    
    Fiscal Year Ended(in thousands)
    
    June 30, 2004
    
    June 30, 2003$
    
    %
    
    $
    
    %Hardware
    
    $
    151,640
    
    
    
    31.1
    %
    
    $
    137,013
    
    
    
    33.8
    %Software
    
    
    82,486
    
    
    
    16.9
    %
    
    
    67,614
    
    
    
    16.7
    %Service
    
    
    253,317
    
    
    
    52.0
    %
    
    
    201,230
    
    
    
    49.5
    %Total
    
    $
    487,443
    
    
    
    100.0
    %
    
    $
    405,857
    
    
    
    100.0
    %
 Hardware revenue increased primarily due to sales of the Workstation 4,
which was released in the fourth quarter of fiscal year 2003. The increase in
Workstation 4 was offset by a decrease in the sale of PC Workstations. The
decrease in PC Workstations is due to the replacement with the newer and less
expensive Workstation 4 as well as the near completion of a previous roll out
program that utilized PC Workstations. The increase was also attributed to
third party computer equipment sold by Datavantage. Software revenue increased
primarily as a result of various roll out programs currently in progress and
the sale of Datavantages suite of software products. Service revenue
increased mainly due to increased support revenues and increased installation
revenue from the continued expansion of the MICROS customer base as well as the
recurring support revenue of existing customers and the addition of
professional services and support provided by Datavantage. Datavantages hardware, software and service revenues for the fiscal year
2004 were $9.5 million, $9.9 million and $25.6 million, respectively. Overall cost of sales, as a percentage of revenue, decreased to 48.9% for
fiscal year 2004 from 51.1% in the prior year. Cost of sales for hardware, as
a percentage of related revenue, decreased to 69.6% in fiscal year 2004
compared to 71.6% in fiscal year 2003. The year over year decrease was
primarily due to the increase in overall sales volume, especially of the
Workstation 4, which generates improved margins. Software costs, as a
percentage of related revenue, decreased to 19.9% in fiscal year 2004 compared
to 22.8% in the prior year. The year over year decrease was mainly attributed
to the increase in software sales volume compared to the fixed costs of
software amortization. Service costs, as a percentage of service revenue,
decreased to 46.0% in fiscal year 2004 compared to 46.6% in fiscal year 2003.
The decrease was primarily due to the continued expansion and increase of
recurring support revenue compared to the relatively fixed costs of providing
customer support as well as Datavantages high margins in their service
products. 22




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##### Table of Contents



Selling, general and administrative expenses increased $22.6 million, or
17.1%, in fiscal year 2004 compared to fiscal year 2003. This increase is
primarily due to the acquisition of Datavantage. Datavantage contributed an
additional $13.0 million in selling, general and administrative expenses in
fiscal year 2004 compared to fiscal year 2003 due to the fact that we purchased
Datavantage as of May 1, 2003 and therefore there was only two months of
expenses in fiscal year 2003. The year over year increase was also due to the
increase in salaries and related expenses and related foreign exchange
increases. In addition, the increase was also attributed to $1.3 million of
external costs related to the requirements of Sarbanes-Oxley Section 404. As a
percentage of revenue, selling, general and administrative expenses decreased
to 31.9% in fiscal year 2004 compared to 32.7% in fiscal year 2003. Research and development (R&D) expenses consist primarily of labor costs
less capitalized software development costs. In fiscal year 2004, R&D expenses
increased $8.5 million, or 45.1%, compared to fiscal year 2003. As a
percentage of revenue, R&D expenses increased to 5.6% in fiscal year 2004
compared to 4.6% in fiscal year 2003. Capitalized software development costs
increased $0.6 million to $5.2 million in fiscal year 2004. The increase was
primarily due to Datavantages development of Xstore, which is a Java based POS
product.
A comparative summary of R&D activities is as follows ($ in thousands): 2004
    
    2003Total R&D
    
    $
    32,387
    
    
    $
    23,329Capitalized software development costs
    
    
    (5,178
    )
    
    
    (4,581
    )Total R&D expenses
    
    $
    27,209
    
    
    $
    18,748Total revenue
    
    $
    487,443
    
    
    $
    405,857R&D expense as % of revenue
    
    
    5.6
    %
    
    
    4.6
    %Total R&D as % of revenue
    
    
    6.6
    %
    
    
    5.7
    %
 Depreciation and amortization expense increased by $0.9 million or 10.6%
in fiscal year 2004 compared to fiscal year 2003. The increase is primarily
due to additional depreciation and amortization expense associated with assets
of Datavantage. Income from operations for fiscal 2004 was $56.8 million, or 11.7% of
revenue, compared to $38.3 million, or 9.4% in fiscal year 2003. The increase
was mainly due to the overall increased sales volume due to improved market
conditions and various roll out programs currently in progress. In addition,
the increase was partly attributed to the Datavantage acquisition in May 2003,
since Datavantage generated income for the Company for only a portion of fiscal
year 2003. Datavantages contribution to income from operations in fiscal
year 2004 was $6.9 million compared to $1.6 million in fiscal year 2003. Non-operating income for fiscal year 2004 increased by $1.8 million
primarily due to a legal settlement in the net amount of approximately $1.3
million in the second quarter of fiscal 2004. This was partly offset by a write
off of a $0.8 million investment in the fourth quarter of fiscal year 2004
versus an investment of $0.5 million written off in fiscal year 2003. The effective tax rate for fiscal year 2004 was 41.0% compared to 40.5%
for fiscal year 2003. The increase was due to the relative mix of earnings in
higher taxing jurisdictions and a potential tax settlement in foreign
jurisdictions. On August 30, 2002, a World 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 Measures. The EU began to impose such sanctions effective
March 1, 2004. To date, the sanctions have not had any impact on the Companys
consolidated financial statements. However, 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. 23




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##### Table of Contents



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, the adoption of SFAS No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142) (See below and Note 1 of the Notes to Consolidated Financial
Statements under the heading Goodwill), as well as the effect of the
acquisition of Datavantage. The acquisition contributed approximately $0.06
per common share to diluted net income in fiscal year 2003. Revenue increased by $33.4 million, or 9.0%, to $405.9 million for fiscal
year 2003 compared to the same period last year. A comparison of the sales mix
for fiscal years 2003 and 2002 is as follows ($ in thousands): Fiscal Years Ended June 30,2003
    
    2002
    
    Change$
    
    %
    
    $
    
    %
    
    $Hardware
    
    $
    137,013
    
    
    
    33.8
    %
    
    $
    134,124
    
    
    
    36.0
    %
    
    $
    2,889Software
    
    
    67,614
    
    
    
    16.7
    %
    
    
    57,174
    
    
    
    15.3
    %
    
    
    10,440Service
    
    
    201,230
    
    
    
    49.5
    %
    
    
    181,195
    
    
    
    48.7
    %
    
    
    20,035Total
    
    $
    405,857
    
    
    
    100.0
    %
    
    $
    372,493
    
    
    
    100.0
    %
    
    $
    33,364
 In absolute dollars, combined hardware and software revenues for fiscal
year 2003 increased $13.3 million, or 7.0%, and service revenues increased
$20.0 million, or 11.1%, 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 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. 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 was
partially due to the acquisition of Datavantage. As a percentage of revenue,
selling, general and administrative expenses decreased slightly to 32.7% in
fiscal year 2003 compared to 33.0% in fiscal year 2002. 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 4.6% in fiscal year 2003 compared to 5.2% 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 5.7% in fiscal year 2003 compared to 6.0% in fiscal year 2002. 24




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A comparative summary of R&D activities is as follows ($ in thousands): 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
    
    $
    405,857
    
    
    $
    372,493R&D expense as % of revenue
    
    
    4.6
    %
    
    
    5.2
    %Total R&D as % of revenue
    
    
    5.7
    %
    
    
    6.0
    %
 Depreciation and amortization expense decreased by $7.2 million or 44.6%
in fiscal year 2003. The decrease was primarily due to the adoption of SFAS
142. 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 effect 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 9.4% of
revenue, compared to $18.8 million, or 5.0% 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 34.0%
for fiscal year 2002. The increase was due to the relative mix of earnings in
higher-taxing jurisdictions. 25




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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 2004 is
as follows ($ in thousands): TotalNumber of
    
    Average Purchase
    
    PurchaseShares
    
    Price
    
    ValueShares purchased in fiscal year 2002
    
    
    95,600
    
    
    $
    27.31
    
    
    $
    2,610Shares purchased in fiscal year 2003
    
    
    282,241
    
    
    $
    23.67
    
    
    
    6,681Shares purchased in fiscal year 2004
    
    
    421,890
    
    
    $
    40.56
    
    
    
    17,112Total shares purchased as of June 30, 2004
    
    
    799,731
    
    
    $
    33.01
    
    
    $
    26,403
 Liquidity and Capital Resources On July 17, 2003, the Company (and its subsidiaries) entered into two new
credit agreements (the Credit Agreements) which in the aggregate offer a
$65.0 million multi-currency committed line of credit, expiring on July 31,
2005. The lenders (the Lenders) under the Credit Agreements are Bank of
America, N.A., Wachovia Bank, N.A., and US Bank. Simultaneously upon entering
into the Credit Agreements, the Company entered into: (i) a security agreement,
pursuant to which the Lenders were granted 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 the stock of
certain of its subsidiaries to the Lenders as collateral. The interest rate under the Credit Agreements is calculated as follows:
(i) if the advance is made in U.S. dollars, the greater of the federal funds
rate, plus 50 basis points, or the Bank of America prime rate, plus an
additional 25 to 150 basis points, depending upon the Companys consolidated
earnings before interest, taxes, depreciation and amortization (EBITDA) for
the immediately preceding four calendar quarters; and (ii) if the advance is
made in a foreign currency, the LIBOR rate for the applicable denominated
currency, plus an additional 150 to 250 basis points, depending upon the
Companys consolidated EBITDA for the immediately preceding four calendar
quarters. The Credit Agreements also require that the Company pay
insignificant commitment fees on the unused portion of the line of credit to
the Lenders. The Credit Agreements contain certain financial covenants and restrictions
on the Companys ability to assume additional debt and pay cash dividends. The
Lenders under the Credit Agreements have not alleged any breaches thereunder by
MICROS. The Company also has a credit relationship with a European bank in the
amount of EUR 1.0 million (approximately $1.2 million at the June 30, 2004
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, 2004, the total outstanding balance on the lines of credit
was $2.5 million consisting of: ZAR (South African Rand) 4.0 million
(approximately $0.7 million at the June 30, 2004 exchange rate), SEK (Swedish
Krona) 7.5 million (approximately $1.0 million at the June 30, 2004 exchange
rate), and JPY (Japanese Yen) 90.0 million (approximately $0.8 million at the
June 30, 2004 exchange rate). As of June 30, 2004, the Company had
approximately $63.7 million available to borrow under the available credit
facilities. The line of credit balance decreased from $10.2 million at June
30, 2003 to $2.5 million at June 30, 2004 mainly as a result of repayment of
indebtedness from the Companys positive cash flow. Net cash provided by operating activities for fiscal year 2004 was $71.9
million versus $40.4 million for fiscal year 2003. The Company used $14.4
million for investing activities, including $13.9 million for the purchase of
property, plant, and equipment and internally developed software and $0.5
million for the purchase of long-term investments. The Company used $12.0
million for financing activities, consisting primarily of net payments on the
line of credit of $8.0 million and $17.1 million in the repurchase of the
Companys stock offset by the proceeds from 26




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the issuance of stock under the employee option plan of $13.7 million.
All cash is being retained 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 2005 will be approximately $2.0
million higher than in fiscal year 2004. Financial indicators of the Companys liquidity and capital resources as
of June 30, 2004 and 2003 were (in thousands, except ratios): 2004
    
    2003Cash and cash equivalents
    
    $
    91,451
    
    
    $
    45,682Available credit facilities
    
    $
    66,220
    
    
    $
    53,751Outstanding credit facilities
    
    
    (2,481
    )
    
    
    (10,185
    )Unused credit facilities
    
    $
    63,739
    
    
    $
    43,566Working capital (1)
    
    $
    118,485
    
    
    $
    73,779Long-term debt and capital lease obligations:Current
    
    $
    139
    
    
    $
    469Non-current
    
    
    166
    
    
    
    198Total
    
    $
    305
    
    
    $
    667Shareholders equity
    
    $
    262,973
    
    
    $
    221,228Current ratio (2)
    
    
    1.87
    
    
    
    1.58
  (1)
    
    Current assets less current liabilities.  (2)
    
    Current assets divided by current liabilities. Inflation The Company has not experienced any significant impact as a result of
inflation. Off-balance sheet arrangements The Company does not have any material 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. Disclosure of contractual obligations Contractual Obligations Payments due by periodMore than 5Total
    
    Less than 1 year
    
    1-3 years
    
    4-5 years
    
    yearsOperating lease obligations
    
    $
    62,165
    
    
    $
    14,866
    
    
    $
    30,389
    
    
    $
    13,327
    
    
    $
    3,583Purchase obligations
    
    
    460
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    Total
    
    $
    62,625
    
    
    $
    14,866
    
    
    $
    30,849
    
    
    $
    13,327
    
    
    $
    3,583
 27




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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 June 30, 2004, 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 U.S.
Securities Exchange Act of 1934, as amended (the Exchange Act)). 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. The Companys 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 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. The Companys
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 its domestic and international locations 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
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. 28




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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 BoardB. Gary Dando
    
    DirectorA. 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 SalesGary 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
2004: T. Paul Armstrong, 46, 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, e-Business
Solutions. Mr. Armstrong holds a masters degree from Cambridge University,
England. Louis M. Brown, Jr., 61, 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 Chairman and 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.). B. Gary Dando, 62, has been a Director of the Company since November 2003.
Retiring in June 2001, Mr. Dando worked for Ernst & Young LLP for 37 years,
the last 25 of which he served as a partner. While at Ernst & Young LLP, Mr.
Dando serviced a broad array of clients, including those in high technology,
biosciences, government contracting, manufacturing and banking. Mr. Dando also
held positions of national and regional 29




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operational responsibility within Ernst & Young LLP in areas of practice
management and operations, and co-authored various internal training
publications, including those relating to audit procedures and government
contracting. Mr. Dando serves on the board of directors of PEC Solutions,
Inc., a publicly held professional services firm serving Federal, State and
local government agencies, where he also is the Chairman of the Audit
Committee. Additionally, Mr. Dando is currently a member of the Board of
Trustees, University System of Maryland Foundation, Inc., where he is also a
member of the Finance Committee and Chairman of the Spending Policy Committee,
and the University of Maryland College Park Foundation, where he is a member of
the Budget and Audit Committee. Mr. Dando is a 1964 graduate of the University
of Maryland, with a Bachelor of Science degree in Accounting. A. L. Giannopoulos, 64, 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
terminate on June 30, 2009. 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, 51, began his career with MICROS in January 2000. He has
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. Before 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 G. Interlandi, 51, 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, 46, 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 Group. 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. Gary C. Kaufman, 54, 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, 44, 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 30




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##### Table of Contents



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, 74, has been a Director of the Company since May 1996.
Mr. Puente served as Chairman of Telogy Networks, Inc., a developer of
communications software products until August 1999, at which time Texas
Instruments acquired it. 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 Network
Systems, a company that provides satellite services and facilities. Before
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, 34, 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, 59, 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, was employed by Constellation Real Estate, Inc. in various capacities.
Mr. Taylor is also 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. He also serves on the Board of the T. Rowe Price Group, Inc. Mr.
Taylor is a 1968 graduate of Lincoln University with a Bachelor of Arts degree
in Economics. William S. Watson, 60, has been a Director of the Company since 2000. He
currently serves as Chairman of ISM, a Boston based advertising agency, which
specializes in the travel and leisure industries and is the Managing Partner of
ISMs consulting arm, The Prism Partnership, LLC. 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. The Companys Proxy Statement will set forth the information called for by
this item pertaining to the Companys Audit Committee under the caption Audit
Committee, and such information is incorporated herein by reference. The Company has adopted a Code of Ethics and Business Practices, which
applies to all directors, officers, and U.S. based employees of the Company
(there are certain variations with respect to certain international locations
so as to comply with local law). It is posted on the Companys website at
www.micros.com, and is available in print free of charge to anyone who requests
a copy. Requests must be in writing and mailed to the Companys Corporate
Secretary. 31




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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 2004, 2003 and 2002, the Company compensated Mr.
Brown $427,000, $409,500 and $308,000 respectively, for consulting services
provided to the Company. For fiscal years 2004, 2003 and 2002, part of the
compensation that Mr. Brown received was in the form of an annual bonus in the
amounts of $177,000, $159,500 and $78,000, respectively. The bonus payments
were accrued during the fiscal year that they were earned and paid in the
following fiscal year. During fiscal year 2002, the Company paid J. Alan Hayman $1,596,279 for an
earn-out payment obligation as part of the 1999 acquisition by MICROS of
Stanley Hayman and Company, Inc. and Micros of South Florida, Inc., each entity
in which he was a 46.5% shareholder. There are no additional earn-out payments
required. During fiscal years 2003 and 2002, the Company paid a real estate
partnership $145,535 and $426,511 respectively, for the rental of the Laurel,
Maryland facilities. J. Alan Hayman, Executive Vice President, Restaurant
Sales and Strategies, holds a 50% interest in the partnership. 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 Registered Public
Accounting Firm, and such information is incorporated herein by reference. 32




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PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K PageNo.(a)
    
    The following documents are filed as a part of this report:1.
    
    Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    37Consolidated balance sheets as of June 30, 2004 and 2003
    
    
    38Consolidated statements of operations for the years ended June 30, 2004, 2003 and 2002
    
    
    39Consolidated statements of shareholders' equity for the years ended June 30, 2004, 2003 and 2002
    
    
    40Consolidated statements of cash flows for the years ended June 30, 2004, 2003 and 2002
    
    
    41-42Notes to consolidated financial statements
    
    
    43-602.
    
    Financial Statement Schedules:Schedule II  Valuation and qualifying accounts and reserves
    
    
    61All 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, 1990.3(iii).
    
    By-laws of the Company, as amended, is incorporated herein by
reference to Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.10a1.
    
    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 33




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##### Table of Contents



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, 1995.10d.
    
    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.
    
    Fourth Amendment to Employment Agreement dated November 19, 2001
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2001.10i.
    
    Fifth Amendment to Employment Agreement dated November 15, 2002
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2002.10j.
    
    Sixth Amendment to Employment Agreement dated January 28, 2004
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2003.10.k.
    
    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, 1995.10l.
    
    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. 34




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##### Table of Contents



10m.
    
    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, 2001.10n.
    
    Third Amendment to Consulting Agreement dated September 4, 2003
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, 2003.10o.
    
    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, 1997.10p.
    
    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, 1998.10q.
    
    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 10o above, as text is identical)10r.
    
    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 10p
above, as text is identical).10s.
    
    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) 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, 2003.10t.
    
    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) 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, 2003.10u.
    
    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) 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, 2003.14.
    
    Code of Ethics and Business Practices21.
    
    Subsidiaries of the Company.23.
    
    Consent of Independent Registered Public Accounting Firm31.
    
    Certifications32.
    
    Section 1350 Certifications 35




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##### Table of Contents



(b)
    
    Reports on form 8-K during the fourth quarter of the fiscal year ending
June 30, 2004:Report on Form 8-K (Item 12) was furnished on April 30, 2004, regarding
the release of financial results for the third fiscal quarter for fiscal
year 2004 ended March 31, 2004. The annual report will be mailed to shareholders before the annual meeting
scheduled for November 19, 2004. 36




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##### Table of Contents



Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of MICROS Systems, Inc.: In our opinion, the consolidated financial statements listed in the index
appearing under item 15(a)(1) present fairly, in all material respects, the
financial position of MICROS Systems, Inc. and its subsidiaries at June 30,
2004 and 2003, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 2004 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the
index appearing under item 15(a)(2) present fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedules are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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. /s/ PricewaterhouseCoopers LLP
Baltimore, MD
September 13, 2004 37




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##### Table of Contents



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of June 30, 2004 and 2003
(in thousands, except per share data) 2004
    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    91,451
    
    
    $
    45,682Accounts receivable, net of allowance for
doubtful accounts of $11,903 in 2004 and
$10,648 in 2003
    
    
    101,367
    
    
    
    98,700Inventories, net
    
    
    36,095
    
    
    
    31,864Deferred income taxes
    
    
    9,396
    
    
    
    7,885Prepaid expenses and other current assets
    
    
    16,242
    
    
    
    17,860Total current assets
    
    
    254,551
    
    
    
    201,991Property, plant and equipment, net
    
    
    19,550
    
    
    
    20,179Deferred income taxes, non-current
    
    
    24,288
    
    
    
    32,003Goodwill, net of accumulated amortization of
$28,687 in 2004 and $27,824 in 2003
    
    
    70,715
    
    
    
    68,173Intangible assets, net of accumulated
amortization of $2,291 in 2004 and $1,692 in
2003
    
    
    5,476
    
    
    
    6,097Purchased and internally developed software
costs, net of accumulated amortization of
$30,484 in 2004 and $23,487 in 2003
    
    
    41,112
    
    
    
    38,089Other investments
    
    
    415
    
    
    
    10Other assets
    
    
    2,785
    
    
    
    3,473Total assets
    
    $
    418,892
    
    
    $
    370,015LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Bank lines of credit
    
    $
    2,481
    
    
    $
    10,185Current portion of long-term debt
    
    
    
    
    
    
    363Current portion of capital lease obligations
    
    
    139
    
    
    
    106Accounts payable
    
    
    29,681
    
    
    
    24,177Accrued expenses and other current liabilities
    
    
    58,693
    
    
    
    44,240Income taxes payable
    
    
    1,541
    
    
    
    10,102Deferred income taxes
    
    
    512
    
    
    
    501Deferred service revenue
    
    
    43,019
    
    
    
    38,538Total current liabilities
    
    
    136,066
    
    
    
    128,212Capital lease obligations, net of current portion
    
    
    166
    
    
    
    198Deferred income taxes, non-current
    
    
    15,544
    
    
    
    11,495Other non-current liabilities
    
    
    1,401
    
    
    
    6,510Commitments and contingenciesMinority interests
    
    
    2,742
    
    
    
    2,372Shareholders equity:Common stock, $0.025 par value; 50,000 shares authorized; shares issued
and outstanding 18,335 in 2004 and 18,018 in 2003
    
    
    457
    
    
    
    450Capital in excess of par
    
    
    71,525
    
    
    
    69,644Retained earnings
    
    
    185,660
    
    
    
    152,381Accumulated other comprehensive income (loss)
    
    
    5,331
    
    
    
    (1,247
    )Total shareholders equity
    
    
    262,973
    
    
    
    221,228Total liabilities and shareholders equity
    
    $
    418,892
    
    
    $
    370,015
 The accompanying notes are an integral part of the consolidated financial statements. 38




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##### Table of Contents



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended June 30, 2004, 2003 and 2002
(in thousands, except per share data) 2004
    
    2003
    
    2002Revenue:Hardware
    
    $
    151,640
    
    
    $
    137,013
    
    
    $
    134,123Software
    
    
    82,486
    
    
    
    67,614
    
    
    
    57,175Service
    
    
    253,317
    
    
    
    201,230
    
    
    
    181,195Total revenue
    
    
    487,443
    
    
    
    405,857
    
    
    
    372,493Cost of sales:Hardware
    
    
    105,507
    
    
    
    98,037
    
    
    
    96,006Software
    
    
    16,372
    
    
    
    15,401
    
    
    
    10,244Service
    
    
    116,455
    
    
    
    93,860
    
    
    
    89,106Total cost of sales
    
    
    238,334
    
    
    
    207,298
    
    
    
    195,356Gross margin
    
    
    249,109
    
    
    
    198,559
    
    
    
    177,137Selling, general and administrative expenses
    
    
    155,235
    
    
    
    132,601
    
    
    
    123,011Research and development expenses
    
    
    27,209
    
    
    
    18,748
    
    
    
    19,320Depreciation and amortization
    
    
    9,831
    
    
    
    8,888
    
    
    
    16,042Total operating expenses
    
    
    192,275
    
    
    
    160,237
    
    
    
    158,373Income from operations
    
    
    56,834
    
    
    
    38,322
    
    
    
    18,764Non-operating income (expense):Interest income
    
    
    1,300
    
    
    
    1,415
    
    
    
    1,067Interest expense
    
    
    (1,004
    )
    
    
    (859
    )
    
    
    (722
    )Other income (expense), net
    
    
    408
    
    
    
    (1,683
    )
    
    
    236Total non-operating income (expense)
    
    
    704
    
    
    
    (1,127
    )
    
    
    581Income before taxes, minority interests and equity in
net earnings of affiliates
    
    
    57,538
    
    
    
    37,195
    
    
    
    19,345Income tax provision
    
    
    23,592
    
    
    
    15,078
    
    
    
    6,577Income before minority interests and equity in net
earnings of affiliates
    
    
    33,946
    
    
    
    22,117
    
    
    
    12,768Minority interests and equity in net earnings of affiliates
    
    
    (667
    )
    
    
    (335
    )
    
    
    (529
    )Net income
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239Net income per common share:Basic
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70Diluted
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.69Weighted-average number of shares outstanding:Basic
    
    
    18,245
    
    
    
    17,502
    
    
    
    17,510Diluted
    
    
    19,226
    
    
    
    17,838
    
    
    
    17,850
 The accompanying notes are an integral part of the consolidated financial statements. 39




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##### Table of Contents



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
for the years ended June 30, 2004, 2003 and 2002
(in thousands) AccumulatedCommon Stock
    
    Capital
    
    
    
    
    
    Otherin Excess
    
    Retained
    
    ComprehensiveShares
    
    Amount
    
    of Par
    
    Earnings
    
    (Loss) Income
    
    TotalBalance, 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
    )
    
    $
    221,228Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,279
    
    
    
    
    
    
    
    33,279Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,578
    
    
    
    6,578Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,857Stock issued upon exercise of options
    
    
    739
    
    
    
    18
    
    
    
    13,677
    
    
    
    
    
    
    
    
    
    
    
    13,695Repurchases of stock
    
    
    (422
    )
    
    
    (11
    )
    
    
    (17,101
    )
    
    
    
    
    
    
    
    
    
    
    (17,112
    )Income tax benefit from stock options
exercised
    
    
    
    
    
    
    
    
    
    
    5,305
    
    
    
    
    
    
    
    
    
    
    
    5,305Balance, June 30, 2004
    
    
    18,335
    
    
    $
    457
    
    
    $
    71,525
    
    
    $
    185,660
    
    
    $
    5,331
    
    
    $
    262,973
 The accompanying notes are an integral part of the consolidated financial statements. 40




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##### Table of Contents



MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 2004, 2003 and 2002
(in thousands) 2004
    
    2003
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    9,831
    
    
    
    8,888
    
    
    
    16,042Amortization of capitalized software
    
    
    6,705
    
    
    
    5,419
    
    
    
    4,567Provision for losses on accounts receivable
    
    
    3,370
    
    
    
    4,831
    
    
    
    5,073Provision for inventory obsolescence
    
    
    2,002
    
    
    
    2,005
    
    
    
    1,638Undistributed earnings from equity investment and
minority interests
    
    
    667
    
    
    
    335
    
    
    
    529Provision for deferred income taxes
    
    
    4,430
    
    
    
    2,545
    
    
    
    661Loss on other than temporary decline in investments
    
    
    800
    
    
    
    500
    
    
    
    Income tax benefit from stock options exercised
    
    
    5,305
    
    
    
    181
    
    
    
    380Legal settlement, net
    
    
    1,260
    
    
    
    
    
    
    
    Changes in assets and liabilities (net of impact of
acquisitions):(Increase) decrease in accounts receivable
    
    
    (4,836
    )
    
    
    (4,866
    )
    
    
    (3,053
    )(Increase) decrease in inventories
    
    
    (5,268
    )
    
    
    (120
    )
    
    
    (3,143
    )(Increase) decrease in prepaid expenses and other assets
    
    
    1,421
    
    
    
    (4,402
    )
    
    
    (2,653
    )(Decrease) increase in accounts payable
    
    
    5,483
    
    
    
    (2,490
    )
    
    
    3,847Increase (decrease) in accrued expenses and
other current liabilities
    
    
    9,106
    
    
    
    4,734
    
    
    
    (688
    )(Decrease) in income taxes payable
    
    
    (5,795
    )
    
    
    (385
    )
    
    
    (27
    )Increase in deferred service revenue
    
    
    4,155
    
    
    
    1,447
    
    
    
    6,897Net cash provided by operating activities
    
    
    71,915
    
    
    
    40,404
    
    
    
    42,309Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (8,760
    )
    
    
    (5,581
    )
    
    
    (5,216
    )Proceeds from dispositions of property, plant and equipment
    
    
    83
    
    
    
    132
    
    
    
    54Proceeds from sale of building
    
    
    
    
    
    
    298
    
    
    
    Internally developed software costs
    
    
    (5,178
    )
    
    
    (4,581
    )
    
    
    (3,034
    )Proceeds from sale of subsidiary
    
    
    
    
    
    
    286
    
    
    
    Proceeds from settlements related to previous acquisition
    
    
    
    
    
    
    
    
    
    
    200Purchase of equity interest in investee
    
    
    
    
    
    
    
    
    
    
    (51
    )Purchases of other investments
    
    
    (500
    )
    
    
    
    
    
    
    Net cash paid for acquisitions, minority interests and
contingent earn-out payments
    
    
    
    
    
    
    (28,600
    )
    
    
    (4,038
    )Net cash (used in) investing activities
    
    
    (14,355
    )
    
    
    (38,046
    )
    
    
    (12,085
    )Cash flows from financing activities:Principal payments on line of credit
    
    
    (11,837
    )
    
    
    (31,892
    )
    
    
    (17,382
    )Proceeds from line of credit
    
    
    3,847
    
    
    
    15,125
    
    
    
    31,562Principal payments on long-term debt
    
    
    
    
    
    
    
    
    
    
    (3,418
    )Principal payments on capital lease obligations
    
    
    (92
    )
    
    
    (194
    )
    
    
    (149
    )Payment of shareholder loan
    
    
    (363
    )
    
    
    (424
    )
    
    
    Dividends to minority owners
    
    
    (166
    )
    
    
    (113
    )
    
    
    (371
    )Proceeds from issuance of stock
    
    
    13,695
    
    
    
    1,090
    
    
    
    2,583Repurchases of stock
    
    
    (17,112
    )
    
    
    (6,681
    )
    
    
    (2,610
    )Net cash (used in) provided by financing activities
    
    
    (12,028
    )
    
    
    (23,089
    )
    
    
    10,215Effect of exchange rate changes on cash
    
    
    237
    
    
    
    (225
    )
    
    
    (257
    )Net (decrease) increase in cash and cash equivalents
    
    
    45,769
    
    
    
    (20,956
    )
    
    
    40,182Cash and cash equivalents at beginning of year
    
    
    45,682
    
    
    
    66,638
    
    
    
    26,456Cash and cash equivalents at end of year
    
    $
    91,451
    
    
    $
    45,682
    
    
    $
    66,638Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    1,395
    
    
    $
    465
    
    
    $
    1,748Income taxes
    
    $
    23,243
    
    
    $
    15,365
    
    
    $
    10,697
 The accompanying notes are an integral part of the consolidated financial statements. 41




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the years ended June 30, 2004, 2003 and 2002
(in thousands)  Supplemental schedule of non-cash financing and investing activities:In May 2003, the Company purchased the outstanding stock of Datavantage
Corporation for total consideration of approximately $52,284. The
consideration consisted of $28,600 cash paid at closing, $5,200 cash to be
paid 18 months after closing, approximately $284 in transaction costs, and
719,360 whole shares of unregistered MICROS common stock valued at
approximately $18,200. The accompanying notes are an integral part of the consolidated financial statements. 42




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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 businessMICROS 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, supermarkets, 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 estimatesThe 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 consolidationThe 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 translationThe 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 monetary transactions
denominated in other than the functional currency of an operation are
reflected in other income (expense).Revenue recognitionThe Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred or the services have been provided to the
customer, the fee is fixed or determinable, and collectibility is
reasonably assured. In instances where the customer specifies final
acceptance, revenue is deferred until all acceptance criteria are met.
The Company reduces revenue for estimated customer returns and
allowances.Hardware
Revenue from hardware sales is recognized at the time of shipment. 43




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  SoftwareIf a third party can install the software, revenue is recognized when
shipped, with an appropriate deferral for any undelivered software
contract elements. However, if the Company is the sole party that has
the proprietary knowledge to install the software, revenue is recognized
upon installation and when ready to go live, with an appropriate deferral
for any undelivered software contract elements. This deferral is earned
when significant obligations no longer exist.ServiceService contract and hosting revenue is initially recorded as deferred
service revenue and is recognized on a pro rata basis over the contract
term. Revenue for the installation of the product, programming and the
training of customers staff is recognized as the work is performed.
Revenue from customer-specific development work is recognized under the
completed contract method.Multiple-element arrangementsThe Company enters into transactions that include multiple-element
arrangements, which may include any combination of hardware, software
and/or services. When some elements are delivered before others in an
arrangement and all of the following criteria are met, revenue for the
delivered elements is recognized upon delivery of such item. Otherwise,
revenue is deferred until the delivery of the last element.  
    
    Vendor-specific objective evidence (VSOE) of fair value of
undelivered elements is established;  
    
    The functionality of delivered elements is not dependent on the
undelivered elements;  
    
    Delivery of the element(s) represents the culmination of the
earning process.  Cash equivalentsThe Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.InventoriesInventories are stated at the lower of cost or market. Cost is
determined principally by the first-in, first-out pricing method.Property, plant and equipmentProperty, 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 2004, 2003 and 2002 was $9,211,
$8,784 and $7,906, respectively.Software for internal useInternally 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.WarrantiesThe Companys products are under warranty for defects in material and
workmanship for a period ranging from 12 to 48 months. The Company
establishes an accrual for estimated warranty costs at the time of sale.
Historically, the Companys warranty expense has not been material. 44




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  Capitalized software development costsSoftware development costs, for software products to be licensed to
others, incurred before 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 at which time 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
2004, 2003 and 2002 was $6,705, $5,419 and $4,567, respectively.Research and development costsExpenditures for research and development not capitalized as described
above are charged to operations as incurred.Long-lived assetsLong-lived assetsThe Company periodically evaluates the recoverability of long-lived
assets, including intangibles, whenever events and changes in
circumstances indicate that the carrying amount of an asset may not be
fully recoverable. When indicators of impairment are present, the
carrying values of the assets are evaluated in relation to the operating
performance and future cash flows of the underlying business. Impairment
is measured by the amount by which fair values are less than book value.
Fair values are based on quoted market prices and assumptions concerning
the amount and timing of estimated future cash flows and assumed discount
rates, reflecting varying degrees of perceived risk. If the Company
determines that any of the impairment indicators exist, and these assets
are determined to be impaired, an adjustment to write down the long-lived
assets would be charged to income in the period such determination is
made. The Company recognized impairment losses for investments of $800
in fiscal year 2004 and $500 in fiscal year 2003.Intangible assets other than goodwillIdentified intangible assets were valued based on managements
assumptions and other considerations for estimating fair values. These
intangible assets are being amortized over their respective useful lives
according to the estimated present value of the net earning potential of
each asset category. The amortization expense related to intangible
assets was $620, $103 and $184 in fiscal years 2004, 2003 and 2002,
respectively. The Company did not recognize any impairment losses during
the last three fiscal years ended June 30, 2004.GoodwillThe Company assesses whether goodwill and trademarks are impaired on an
annual basis during the first quarter of its fiscal year. Upon
determining the existence of goodwill and/or trademark impairment, the
Company measures that impairment based on the amount by which the book
value of goodwill and/or trademarks exceeds its fair value. The implied
fair value of goodwill is determined by deducting the fair value of a
reporting units identifiable assets and liabilities from the fair value
of the reporting unit as a whole, as if that reporting unit had just been
acquired and the purchase price were being initially allocated.
Additional impairment assessments may be performed on an interim basis if
the Company encounters events of changes in circumstances that would
indicate that, more likely than not, the book value of goodwill and/or
trademarks has been impaired.The process of evaluating the potential impairment of goodwill and/or
trademarks is highly subjective and requires significant judgment at many
points during the analysis. In estimating the fair value of the
reporting units with recognized goodwill for the purposes of our annual
or periodic analyses, the Company 45




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  makes estimates and judgments about the future cash flows of these
businesses. The cash flow forecasts are based on assumptions that are
consistent with the plans and estimates used to manage the underlying
reporting units. MICROS also considers its market capitalization
(adjusted for unallocated monetary assets such as cash, marketable debt
securities and debt) on the date the analysis is performed.  The Company completed the first step of its annual impairment analysis in
the first quarter of fiscal year 2004. As the estimated fair value of
the U.S. and international reporting units exceed the carrying values,
the Company concluded there was no impairment of goodwill or trademarks.
As of June 30, 2004, the net book value of goodwill and trademarks for
the U.S. and international reporting units was $59,959 and $10,756,
respectively.  Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill
and Other Intangible Assets requires the cessation of amortization for
goodwill and indefinite-lived intangible assets. 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 effect in fiscal year 2002: 2004
    
    2003
    
    2002Net incomeReported net income
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    5,370Adjusted net income
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    17,609Basic net income per common shareReported net income per common share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    0.31Adjusted basic net income per common share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    1.01Diluted net income per common shareReported net income per common share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.69Goodwill amortization, net of tax
    
    
    
    
    
    
    
    
    
    
    0.30Adjusted diluted net income per common share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.99Basic
    
    
    18,245
    
    
    
    17,502
    
    
    
    17,510Diluted
    
    
    19,226
    
    
    
    17,838
    
    
    
    17,850
  Financing costs related to long-term debtCosts associated with obtaining long-term debt are deferred and amortized
over the term of the related debt. The Company incurred financing costs
in fiscal year 2004 related to the new line of credit agreement, which
will be deferred and amortized over two years. The total financing
costs
expensed in fiscal year 2004 was $236.Advertising costs  Advertising costs are charged to expense as incurred. Advertising
expenses for fiscal years 2004, 2003 and 2002 were $3,826, $3,217 and
$2,832, respectively.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 46




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  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 2004, 2003 and 2002 was $3,196, $4,757 and $4,986,
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 per share  Basic net income per common share is computed by dividing net income by
the weighted-average number of shares outstanding. Diluted net income
per share includes the dilutive effect of stock options.  A reconciliation of the weighted-average number of common shares
outstanding assuming dilution is as follows: 2004
    
    2003
    
    2002Average common shares outstanding
    
    
    18,245
    
    
    
    17,502
    
    
    
    17,510Dilutive effect of outstanding stock options
    
    
    981
    
    
    
    336
    
    
    
    340Average common shares outstanding assuming
dilution
    
    
    19,226
    
    
    
    17,838
    
    
    
    17,850Basic net income per share
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70Diluted net income per share
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    .069
  As of June 30, 2004, 832,708 whole stock options were excluded in the
above reconciliation, as these options were anti-dilutive. In fiscal
years 2003 and 2002, 1,639,350 and 1,552,896 whole stock options were
excluded, respectively.Stock-based compensation  The Company has incentive and non-qualified stock options
outstanding that were granted to directors, officers, and other employees
pursuant to authorization by the Board of Directors. The exercise price
of all options equals the market value on the date of the grant.
Substantially all of the options granted are exercisable pursuant to a
three-year vesting schedule whereby one-third of the options vest upon
the first anniversary of the grant, the second third of the options vest
upon the second anniversary of the grant, and the final third of the
options vest upon the third anniversary of the grant. Currently, all
outstanding options expire ten years from the date of grant.  The Company applies the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees, in accounting for the stock
option awards. The Company has not recognized any related compensation
expense in the consolidated statements of operations because the fair
value of the stock underlying the options granted did not exceed the
exercise price of the options on the date of grant. If compensation
expense had been determined based on the weighted-average estimate of the
fair value of each option granted consistent with the provisions of 47




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  SFAS No. 123, Accounting for Stock-Based Compensation, as amended by
SFAS No. 148, the Companys net income would be reduced to pro forma
amounts as follows: 2004
    
    2003
    
    2002Net income  as reported
    
    $
    33,279
    
    
    $
    21,782
    
    
    $
    12,239Add: stock-based compensation
expense included in reported
net income, net of tax
    
    
    
    
    
    
    
    
    
    
    Deduct: total stock-based
employee compensation expense
determined under the fair value
method, net of tax
    
    
    (5,364
    )
    
    
    (5,838
    )
    
    
    (8,579
    )Net income  pro forma
    
    $
    27,915
    
    
    $
    15,944
    
    
    $
    3,660Basic net income per shareAs reported
    
    $
    1.82
    
    
    $
    1.24
    
    
    $
    0.70Pro forma
    
    $
    1.53
    
    
    $
    0.91
    
    
    $
    0.21Diluted net income per shareAs reported
    
    $
    1.73
    
    
    $
    1.22
    
    
    $
    0.69Pro forma
    
    $
    1.46
    
    
    $
    0.89
    
    
    $
    0.21
  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.Reclassifications  Certain previously reported amounts have been reclassified to conform to
the current year presentation.Recent accounting standards  In March 2004, the Financial Accounting Standards Board (FASB) issued
an exposure draft of its proposed standard on accounting for stock
compensation amending FASB Statement No. 123, Accounting for Stock-Based
Compensation. The exposure draft would require all grants of employee
stock options to be expensed based on their fair values. The FASB
expects to issue a final standard late in 2004 that would be effective
for public companies for fiscal years beginning after December 14, 2004.
There is continued uncertainty and disagreement among the governing
bodies as to how this matter will be addressed. The Company is currently
evaluating the impact of the proposed standard.  In December 2003, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, which
supersedes SAB 101, Revenue Recognition in Financial Statements. SAB
104s primary purpose is to rescind accounting guidance contained in SAB
101 related to multiple element revenue arrangements, superseded as a
result of the issuance of Emerging Issues Task Force (EITF) Issue No.
00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
Additionally, SAB 104 rescinds the Security and Exchange Commissions
Revenue Recognition in Financial Statements Frequently Asked Questions
and Answer issued with SAB 101 that had been codified 48




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  in SEC Topic 13, Revenue Recognition. The adoption of SAB No. 104 and
EITF No. 00-21 had no impact on the Companys consolidated financial
statements.  In December 2003, the FASB revised and superseded Interpretation (FIN)
No. 46, Consolidation of Variable Interest Entities, with FASB
Interpretation No. 46-R. FIN No. 46 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. FASB No. 46-R revised interpretation address certain
implementation issues. The adoption of FIN No. 46-R 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 a total purchase price of
approximately $52,284. 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 $284 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: Current assets
    
    $
    11,794Fixed assets
    
    
    1,520Deferred income taxes
    
    
    4,199Goodwill and intangible assets
    
    
    45,351Purchased and internally developed software costs
    
    
    6,140Other assets
    
    
    37Liabilities assumed
    
    
    (16,757
    )$
    52,284
  Recognition of the excess purchase price of $52,284 over the fair value
of the net assets acquired, have been recorded as goodwill as follows: Book value of net assets
    
    $
    8,512Fair value changes:Intangibles
    
    
    7,923Deferred income taxes
    
    
    (3,102
    )Adjusted net assets
    
    
    13,333Purchase price
    
    
    (52,284
    )Goodwill
    
    $
    38,951
  Datavantages customer relationships were valued at $6,200 and are being
amortized over 10 years.  The following fiscal year 2004 audited and fiscal year 2003 unaudited pro
forma summary presents the consolidated results of operations as if the
acquisition had occurred as of July 1, 2002. The summary includes
adjustments for depreciation and amortization of assets and interest
expense on any debt incurred to fund the acquisition, which would have
been incurred had such acquisition occurred as of July 1, 2002. 49




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  The 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. 2004
    
    2003Revenue
    
    $
    487,443
    
    
    $
    445,836Net income
    
    $
    33,279
    
    
    $
    23,089Net income per common shareBasic
    
    $
    1.82
    
    
    $
    1.32Diluted
    
    $
    1.73
    
    
    $
    1.29Weighted-average shares outstandingBasic
    
    
    18,245
    
    
    
    17,502Diluted
    
    
    19,226
    
    
    
    17,838
  3.
    
    Inventories:  The components of inventories are as follows: 2004
    
    2003Raw materials
    
    $
    5,592
    
    
    $
    7,070Work-in-process
    
    
    91
    
    
    
    146Finished goods
    
    
    30,412
    
    
    
    24,648$
    36,095
    
    
    $
    31,864
 The company maintains a reserve for
obsolescence for inventory in the amount of $6,380 in fiscal year
2004 and $5,900 in fiscal year 2003.  4.
    
    Property, plant and equipment:  The components of property, plant and equipment are as follows: 2004
    
    2003
    
    Useful LifeLeasehold improvements
    
    $
    5,237
    
    
    $
    4,246
    
    
    Lease termMachinery and equipment
    
    
    7,155
    
    
    
    6,728
    
    
    5-10 yearsFurniture and fixtures
    
    
    13,180
    
    
    
    11,960
    
    
    7-10 yearsComputer hardware and software
    
    
    52,223
    
    
    
    48,176
    
    
    3-5 yearsTotal property, plant and equipment
    
    
    77,795
    
    
    
    71,110Accumulated depreciation and amortization
    
    
    (58,245
    )
    
    
    (50,931
    )Net property, plant and equipment
    
    $
    19,550
    
    
    $
    20,179
  5.
    
    Line of credit:  On July 17, 2003, the Company (and its subsidiaries) entered into two new
credit agreements (the Credit Agreements) which in the aggregate offer
$65,000 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, N.A., and US Bank. Simultaneously upon
entering into the Credit Agreements, the Company entered into: (i) a
security agreement, pursuant to which the Lenders were granted 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 the stock of certain of its subsidiaries to the
Lenders as collateral.  The interest due under the Credit Agreements is calculated as follows:
(i) if the advance is made in U.S. dollars, the greater of the federal
funds rate, plus 50 basis points, or the Bank of America prime rate, plus
an additional 25 to 150 basis points, depending upon the Companys
consolidated earnings before interest, taxes, depreciation and
amortization (EBITDA) for the immediately preceding four calendar
quarters; and (ii) if the advance is made in a foreign currency, the
LIBOR rate for the applicable denominated currency, 50




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  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 that the Company pay insignificant
commitment fees on the unused portion of the line of credit to the
Lenders.  The Credit Agreements contain certain financial covenants and
restrictions on the Companys ability to assume additional debt and pay
cash dividends. The Lenders under the Credit Agreements have not alleged
any breaches thereunder by MICROS.  The Company also has a credit relationship with a European bank in the
amount of EUR 1,000 (approximately $1,220 at the June 30, 2004 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, 2004, the total outstanding balance on the lines of credit
was $2,481 consisting of: ZAR (South African Rand) 4,000 (approximately
$650 at the June 30, 2004 exchange rate), SEK (Swedish Krona) 7,500
(approximately $1,000 at the June 30, 2004 exchange rate), and JPY
(Japanese Yen) 90,000 (approximately $831 at the June 30, 2004 exchange
rate). As of June 30, 2004, the Company had approximately $63,739
available to borrow.  6.
    
    Long-term debt:  As of June 30, 2004 and 2003, 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: 2004
    
    2003Compensation and related taxes
    
    $
    22,103
    
    
    $
    18,030Commissions
    
    
    2,411
    
    
    
    2,434Volume rebates
    
    
    2,231
    
    
    
    2,145Deposits received from customers
    
    
    10,966
    
    
    
    8,035VAT and sales taxes
    
    
    3,467
    
    
    
    2,373Payments due for acquisitions
    
    
    5,200
    
    
    
    Accrued payables and other
    
    
    12,315
    
    
    
    11,223$
    58,693
    
    
    $
    44,240
  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. The capital leases are primarily
related to international automobile leases used for sales and
installation. Rent expense under these leases for fiscal years 2004,
2003 and 2002 was $14,729, $14,181 and $13,042 respectively. 51




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  Future minimum lease payments at June 30, 2004 for those leases having an
initial or remaining non-cancelable lease term in excess of one year are
as follows: Operating
    
    CapitalYears ending June 30,
    
    Leases
    
    Leases2005
    
    $
    14,866
    
    
    $
    1392006
    
    
    12,095
    
    
    
    992007
    
    
    10,144
    
    
    
    532008
    
    
    8,150
    
    
    
    112009
    
    
    7,700
    
    
    
    32010 and thereafter
    
    
    9,210
    
    
    
    $
    62,165
    
    
    
    305Less: current portion
    
    
    
    
    
    
    (139
    )Long-term obligations under capital lease
    
    
    
    
    
    $
    166
  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. On
November 1, 2003, MICROS subleased one of the five floors, consisting of
approximately 49,524 square feet, to Motorola, Inc. pursuant to a
77-month sublease (which Motorola may terminate after 60 months).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 with a termination right first available
in July 2006.  The Companys Datavantage subsidiary recently relocated to new leased
space in the Cleveland, Ohio area, where it leases approximately 69,199
square feet of office and warehouse space, from which it conducts the
majority of its sales, marketing, customer support, and product
development activities. The Datavantage subsidiary also leases
approximately 11,457 square feet of office space in the Boston,
Massachusetts area, primarily for customer support and research and
development activities. The current Cleveland lease expires February 28,
2014, and the current Boston lease expires September 30, 2006.  The Company has purchase commitments of $460 for non-recurring
engineering fees for development work. The commitments are due in
eighteen to twenty-four months to the vendor if the Company does not meet
the agreed upon sales targets. The costs are being amortized in the per
unit price charged to the Company.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 year 2002, the Board of Directors authorized the purchase of up
to one million shares of the Companys common stock. Since the inception
of the re-purchase program, we have incurred approximately $35 in fees
related to the program. 52




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  A summary of the cumulative number of shares purchased and retired
through June 30, 2004, is as follows: TotalNumber of
    
    Average
    
    PurchaseShares
    
    Purchase Price
    
    ValueTotal shares purchased as of June 30, 2003
    
    
    378
    
    
    $
    24.59
    
    
    $
    9,291Shares purchased from July 1  Jun 30, 2004
    
    
    422
    
    
    $
    40.56
    
    
    
    17,112Total shares purchased as of June 30, 2004
    
    
    800
    
    
    $
    33.01
    
    
    $
    26,403
  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, 2004,
the Company has approximately 382,906 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 operations.  The following table summarizes the status of, and changes in, the
Companys stock option plans
: Years Ended June 30,
    
    2004
    
    2003
    
    2002Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    Average
    
    Number
    
    Average
    
    Number
    
    Averageof
    
    Exercise
    
    of
    
    Exercise
    
    of
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of year
    
    
    3,963
    
    
    
    
    
    
    
    3,755
    
    
    
    
    
    
    
    3,550Options granted
    
    
    504
    
    
    $
    42.15
    
    
    
    416
    
    
    $
    21.70
    
    
    
    525
    
    
    $
    23.96Options cancelled
    
    
    (27
    )
    
    $
    33.70
    
    
    
    (148
    )
    
    $
    26.77
    
    
    
    (179
    )
    
    $
    23.63Options exercised
    
    
    (739
    )
    
    $
    18.80
    
    
    
    (60
    )
    
    $
    18.25
    
    
    
    (141
    )
    
    $
    18.26Outstanding at end of year
    
    
    3,701
    
    
    $
    29.54
    
    
    
    3,963
    
    
    $
    25.97
    
    
    
    3,755
    
    
    $
    26.35Options exercisable at end of
year
    
    
    2,807
    
    
    $
    28.24
    
    
    
    2,975
    
    
    $
    27.34
    
    
    
    2,453
    
    
    $
    26.68
 53




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  Additional information regarding stock options outstanding at June 30, 2004 is as follows: Options Outstanding
    
    Options ExercisableWeightedWeighted
    
    Average
    
    
    
    
    
    WeightedAverage
    
    Remaining
    
    
    
    
    
    AverageExercise
    
    Contractual
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Price
    
    Life (in years)
    
    Shares
    
    Price$14.78 - $20.05
    
    
    513
    
    
    $
    16.90
    
    
    
    4.8
    
    
    
    494
    
    
    $
    16.80$20.06 - $22.02
    
    
    635
    
    
    $
    21.26
    
    
    
    7.6
    
    
    
    422
    
    
    $
    21.14$22.30 - $23.09
    
    
    540
    
    
    $
    23.06
    
    
    
    4.3
    
    
    
    498
    
    
    $
    23.08$23.11 - $26.81
    
    
    847
    
    
    $
    25.99
    
    
    
    5.6
    
    
    
    733
    
    
    $
    26.12$28.00 - $42.08
    
    
    575
    
    
    $
    41.40
    
    
    
    8.6
    
    
    
    114
    
    
    $
    39.78$44.67 - $45.50
    
    
    45
    
    
    $
    45.17
    
    
    
    9.7
    
    
    
    
    
    
    
    $48.88 - $48.88
    
    
    517
    
    
    $
    48.88
    
    
    
    5.4
    
    
    
    517
    
    
    $
    48.88$52.69 - $56.34
    
    
    29
    
    
    $
    55.56
    
    
    
    5.6
    
    
    
    29
    
    
    $
    55.56$14.78 - $56.34
    
    
    3,701
    
    
    $
    29.54
    
    
    
    6.1
    
    
    
    2,807
    
    
    $
    28.24
  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. The estimated weighted-average fair
value of each option granted in fiscal years 2004, 2003 and 2002 was
$21.42, $11.00 and $12.74, respectively. The Company estimated the
grant-date fair value of each option awarded in fiscal years 2004, 2003
and 2002 using the Black-Scholes option-pricing model with the following
weighted-average assumptions: 2004
    
    2003
    
    2002Risk-free interest rate
    
    
    3.7
    %
    
    
    3.0
    %
    
    
    4.4
    %Expected life
    
    5.9 years
    
    6.0 years
    
    5.8 yearsExpected volatility
    
    
    49
    %
    
    
    50
    %
    
    
    52
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  11.
    
    Income taxes:  Pretax accounting income for the years ended June 30 was taxed under the
following jurisdictions: 2004
    
    2003
    
    2002United States
    
    $
    28,249
    
    
    $
    6,370
    
    
    $
    (8,985
    )International
    
    
    29,289
    
    
    
    30,825
    
    
    
    28,330$
    57,538
    
    
    $
    37,195
    
    
    $
    19,345
  The components of income tax expense are: 2004
    
    2003
    
    2002Current:Federal
    
    $
    6,084
    
    
    $
    1,113
    
    
    $
    (5,836
    )State
    
    
    1,304
    
    
    
    248
    
    
    
    Foreign
    
    
    11,774
    
    
    
    11,172
    
    
    
    11,752Total current
    
    
    19,162
    
    
    
    12,533
    
    
    
    5,916Deferred:Federal
    
    
    3,789
    
    
    
    1,817
    
    
    
    2,123State
    
    
    622
    
    
    
    82
    
    
    
    (424
    )Foreign
    
    
    19
    
    
    
    646
    
    
    
    (1,038
    )Total deferred
    
    
    4,430
    
    
    
    2,545
    
    
    
    661Total tax expense
    
    $
    23,592
    
    
    $
    15,078
    
    
    $
    6,577
 54




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  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: 2004
    
    2003
    
    2002At statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Increase (decrease) resulting from:State taxes, net of federal tax benefit
    
    
    2.6
    
    
    
    0.6
    
    
    
    (2.2
    )Tax credits
    
    
    (0.8
    )
    
    
    (0.7
    )
    
    
    (52.0
    )Extraterritorial income exclusion
benefit
    
    
    (1.3
    )
    
    
    (4.6
    )
    
    
    (1.0
    )Effect of tax rates in foreign
jurisdictions
    
    
    5.0
    
    
    
    9.5
    
    
    
    4.7Subpart F inclusion
    
    
    
    
    
    
    
    
    
    
    47.1Permanent differences
    
    
    0.7
    
    
    
    0.5
    
    
    
    2.0Other
    
    
    (0.2
    )
    
    
    0.2
    
    
    
    0.4Effective tax rate
    
    
    41.0
    %
    
    
    40.5
    %
    
    
    34.0
    %
  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, which 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: 2004
    
    2003Bad debt reserves
    
    $
    2,574
    
    
    $
    2,343Accruals not currently deductible for tax
    
    
    5,182
    
    
    
    4,104Inventory
    
    
    1,640
    
    
    
    1,438Net operating loss carryforwards
    
    
    3,875
    
    
    
    5,843Tax credit carryforwards
    
    
    1,650
    
    
    
    5,854Purchased in-development software technology write-off
    
    
    10,045
    
    
    
    11,639Tax impact of technology transfer
    
    
    8,529
    
    
    
    10,262Other
    
    
    935
    
    
    
    688Total deferred tax assets
    
    
    34,430
    
    
    
    42,171Depreciation
    
    
    (3,637
    )
    
    
    (1,953
    )Capitalized software development costs
    
    
    (11,972
    )
    
    
    (8,883
    )Other
    
    
    (447
    )
    
    
    (1,160
    )Total deferred tax liabilities
    
    
    (16,056
    )
    
    
    (11,996
    )Valuation allowance
    
    
    (746
    )
    
    
    (2,283
    )Net deferred tax asset
    
    $
    17,628
    
    
    $
    27,892
  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, 2004 and 2003, the Company had potential tax benefits of
$3,875 and $5,843, 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 $289 and $2,072 with the remainder of $3,586 and $3,771
representing foreign net operating losses. In addition, at June 30, 2004
and 2003, the Company had potential tax benefits of $1,650 and $5,854,
respectively, related to U.S. federal tax credits for income tax
purposes. 55




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  The fiscal year 2004 tax net operating losses and tax credit
carryforwards (if not utilized against taxable income) expire as follows: Net Operating
    
    
    
    
    
    Net ofLoss
    
    Valuation
    
    ValuationCarryforwards
    
    Allowance
    
    AllowanceExpire beginning:June 2006
    
    $
    29
    
    
    $
    (13
    )
    
    $
    16June 2008
    
    
    247
    
    
    
    (246
    )
    
    
    1June 2009
    
    
    233
    
    
    
    
    
    
    
    233After June 2009
    
    
    289
    
    
    
    (253
    )
    
    
    36Unlimited
life
    
    
    3,077
    
    
    
    (234
    )
    
    
    2,843Total
    
    $
    3,875
    
    
    $
    (746
    )
    
    $
    3,129
 Tax Credits
    
    Valuation
    
    Net ofValuationCarryforwards
    
    Allowance
    
    AllowanceExpire beginning:June 2006
    
    $
    1,062
    
    
    $
    
    
    
    $
    1,062After June 2009
    
    
    588
    
    
    
    
    
    
    
    588Total
    
    $
    1,650
    
    
    $
    
    
    
    $
    1,650
  A valuation allowance of $746 and $2,283 has been provided at June 30,
2004 and 2003, respectively, to offset the related deferred tax assets
due to uncertainty of realizing the benefit of the loss carryforwards and
tax credits.During fiscal year 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: 2004
    
    2003
    
    2002Foreign exchange (loss) gain, net
    
    $
    (357
    )
    
    $
    (702
    )
    
    $
    404Investment write-down
    
    
    (800
    )
    
    
    (500
    )
    
    
    Legal settlement, net
    
    
    1,260
    
    
    
    
    
    
    
    Other, net
    
    
    305
    
    
    
    (481
    )
    
    
    (168
    )Total other (expense) income, net
    
    $
    408
    
    
    $
    (1,683
    )
    
    $
    236
  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 2004, 2003 and
2002, the Company compensated Mr. Brown $427, $410 and $308,
respectively, for consulting services provided to the Company. For
fiscal years 2004, 2003 and 2002, part of the compensation that Mr. Brown
received was in the form of an annual bonus in the amounts of $177, $160,
and $78, respectively. The bonus payments were accrued during the
fiscal year that they were earned and paid in the following fiscal year. 56




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  During fiscal year 2002, the Company paid J. Alan Hayman $1,596 for an
earn-out payment obligation as part of the 1999 acquisition by MICROS of
Stanley Hayman and Company, Inc. and Micros of South Florida, Inc., each
entity in which he was a 46.5% shareholder. There are no additional
earn-out payments required. 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 in
the partnership. 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.14.
    
    Employee benefit plans:The Company sponsors two employee savings plans, which conform to the
provisions of Section 401(k) of the Internal Revenue Code. The Plans
covers substantially all full-time employees and also part-time employees
in the United States and allow employees to voluntarily defer up to the
government maximum per year of their income through contributions to the
Plans. 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
voluntary contributions. Furthermore, the Company may elect to make
additional contributions, at its discretion.Company contributions made during the years ended June 30, 2004, 2003 and
2002 totaled $1,315, $924 and $1,278, 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. 57




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  A summary of the Companys operating segments is as follows: Years Ended June 30,2004
    
    2003
    
    2002Revenues (1):United States
    
    $
    293,922
    
    
    $
    233,141
    
    
    $
    212,497International
    
    
    262,996
    
    
    
    229,765
    
    
    
    209,670Intersegment eliminations
    
    
    (69,475
    )
    
    
    (57,049
    )
    
    
    (49,674
    )Total revenues
    
    $
    487,443
    
    
    $
    405,857
    
    
    $
    372,493Income before taxes, minority interests and
equity in net earnings of affiliates (1):United States
    
    $
    35,680
    
    
    $
    16,869
    
    
    $
    (2,754
    )International
    
    
    76,777
    
    
    
    61,993
    
    
    
    54,323Intersegment eliminations
    
    
    (54,919
    )
    
    
    (41,667
    )
    
    
    (32,224
    )Total income before taxes, minority interests
and equity in net earnings of affiliates
    
    $
    57,538
    
    
    $
    37,195
    
    
    $
    19,345Identifiable assets (2):United States
    
    $
    232,577
    
    
    $
    186,748
    
    
    $
    133,653International
    
    
    186,315
    
    
    
    183,267
    
    
    
    179,177Total identifiable assets
    
    $
    418,892
    
    
    $
    370,015
    
    
    $
    312,830Capital expenditures (2):United States
    
    $
    5,032
    
    
    $
    2,118
    
    
    $
    3,160International
    
    
    3,728
    
    
    
    3,463
    
    
    
    2,056Total capital expenditures
    
    $
    8,760
    
    
    $
    5,581
    
    
    $
    5,216Depreciation and amortization (2):United States
    
    $
    5,846
    
    
    $
    5,381
    
    
    $
    9,982International
    
    
    3,985
    
    
    
    3,507
    
    
    
    6,060Total depreciation and amortization
    
    $
    9,831
    
    
    $
    8,888
    
    
    $
    16,042
  (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 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, specialty retail, 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 30, 2004 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. Intangible assets are not included below. 58




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  Revenues from unaffiliated customers by geographic location are as
follows: 2004
    
    2003
    
    2002United States
    
    $
    267,065
    
    
    $
    213,808
    
    
    $
    196,596International
    
    
    220,378
    
    
    
    192,049
    
    
    
    175,897Net revenue
    
    $
    487,443
    
    
    $
    405,857
    
    
    $
    372,493
  Long-lived assets by geographic location are as follows: 2004
    
    2003
    
    2002United States
    
    $
    12,922
    
    
    $
    13,370
    
    
    $
    14,786International
    
    
    6,628
    
    
    
    6,809
    
    
    
    6,681Total long-lived assets
    
    $
    19,550
    
    
    $
    20,179
    
    
    $
    21,467
 59




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##### Table of Contents



MICROS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)  16.
    
    Quarterly financial information (unaudited):Quarterly financial information for fiscal years 2004 and 2003 is
presented in the following tables: First
    
    Second
    
    Third
    
    Fourth2004
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterRevenue
    
    $
    106,417
    
    
    $
    117,254
    
    
    $
    120,967
    
    
    $
    142,805Gross margin
    
    $
    52,135
    
    
    $
    61,072
    
    
    $
    62,126
    
    
    $
    73,776Income from operations
    
    $
    8,082
    
    
    $
    13,353
    
    
    $
    12,798
    
    
    $
    22,601Net income
    
    $
    4,747
    
    
    $
    8,571
    
    
    $
    7,516
    
    
    $
    12,445Basic net income per common share
    
    $
    0.26
    
    
    $
    0.47
    
    
    $
    0.41
    
    
    $
    0.68Diluted net income per common share
    
    $
    0.25
    
    
    $
    0.45
    
    
    $
    0.39
    
    
    $
    0.64Stock Prices (in dollars)High
    
    $
    38.00
    
    
    $
    44.80
    
    
    $
    48.50
    
    
    $
    47.97Low
    
    $
    32.45
    
    
    $
    33.97
    
    
    $
    42.18
    
    
    $
    41.45
 First
    
    Second
    
    Third
    
    Fourth2003
    
    Quarter
    
    Quarter
    
    Quarter
    
    *QuarterRevenue
    
    $
    87,755
    
    
    $
    97,045
    
    
    $
    98,889
    
    
    $
    122,168Gross margin
    
    $
    41,413
    
    
    $
    47,575
    
    
    $
    47,379
    
    
    $
    62,193Income from operations
    
    $
    5,036
    
    
    $
    8,516
    
    
    $
    9,513
    
    
    $
    15,258Net income
    
    $
    2,695
    
    
    $
    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
  *
    
    Fourth quarter of fiscal year 2003 includes the acquisition of Datavantage. 60




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MICROS SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended June 30, 2004, 2003 and 2002 (in thousands) Balance at
    
    Charged
    
    
    
    
    
    
    
    
    
    Balancebeginning
    
    To
    
    
    
    
    
    
    
    
    
    at endDescription
    
    of period
    
    expense
    
    Deductions
    
    Other (1)
    
    of periodYear ended June 30, 2004:Allowance for doubtful accounts
    
    $
    10,648
    
    
    $
    3,370
    
    
    $
    1,062
    
    
    $
    (1,053
    )
    
    $
    11,903Reserve for inventory obsolescence
    
    
    5,900
    
    
    
    2,002
    
    
    
    272
    (2)
    
    
    (1,250
    )
    
    
    6,380$
    16,548
    
    
    $
    5,372
    
    
    $
    1,334
    
    
    $
    (2,303
    )
    
    $
    18,283Year 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
    )
    
    $
    13,938
  (1)
    
    Primarily related to foreign currency translation.  (2)
    
    Material scrapped or otherwise disposed. 61




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##### Table of Contents



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: 9-13-04
    
    By:
    
    /s/ Gary C. KaufmanGary C. KaufmanExecutive Vice President, Finance andAdministration/Chief Financial OfficerDate: 9-13-04
    
    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
    
    9-13-04A. L. Giannopoulos
    
    Chief Executive Officer/s/ Gary C. Kaufman
    
    Executive Vice President
    
    9-13-04Finance and AdministrationGary C. Kaufman
    
    Chief Financial Officer/s/ Louis M. Brown, Jr.

Louis M. Brown, Jr.
    
    Director and
Vice Chairman of the Board
    
    9-13-04/s/ B. Gary Dando

Gary Dando
    
    Director
    
    9-13-04/s/ John G. Puente

John G. Puente
    
    Director
    
    9-13-04/s/ Dwight S. Taylor

Dwight S. Taylor
    
    Director
    
    9-13-04/s/ William S. Watson

William S. Watson
    
    Director
    
    9-13-04
 62




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##### Table of Contents



CERTIFICATIONS I, A.L. Giannopoulos, certify that: 1. I have reviewed this Annual Report on Form 10-K of MICROS Systems, Inc.
(the Registrant); 2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report. 4. The Registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15(e)) [clause omitted pursuant to SEC
Release Nos. 33-8392 and 34-49313] for the Registrant and we have: a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; b) [paragraph omitted pursuant to SEC Release Nos. 33-8392 and 34-49313]; c) evaluated the effectiveness of the Registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and d) disclosed in this report any change in the Registrants internal
control over financial reporting that occurred during the Registrants most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Registrants internal control over financial reporting;
and 5. The Registrants other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the Registrants auditors and the audit committee of Registrants board of
directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrants ability to record, process,
summarize and report financial information; and b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrants internal control over
financial reporting. By:
    
    /s/ A.L. GiannopoulosA.L. GiannopoulosChairman, President andChief Executive Officer
 Date: September 13, 2004 63




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##### Table of Contents



I, Gary C. Kaufman, certify that: 1. I have reviewed this Annual Report on Form 10-K of MICROS Systems, Inc.
(the Registrant); 2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report. 4. The Registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15(e)) [clause omitted pursuant to SEC
Release Nos. 33-8392 and 34-49313] for the Registrant and we have: a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared; b) [paragraph omitted pursuant to SEC Release Nos. 33-8392 and 34-49313]; c) evaluated the effectiveness of the Registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and d) disclosed in this report any change in the Registrants internal
control over financial reporting that occurred during the Registrants most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Registrants internal control over financial reporting;
and 5. The Registrants other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the Registrants auditors and the audit committee of Registrants board of
directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrants ability to record, process,
summarize and report financial information; and b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrants internal control over
financial reporting. By:
    
    /s/ Gary C. KaufmanGary C. KaufmanExecutive Vice President,Finance and Administration,and Chief Financial Officer
 Date: September 13, 2004 64




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##### Table of Contents



Certification of Principal Executive Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002) I, A.L. Giannopoulos, Chairman, President and Chief Executive Officer of
MICROS Systems, Inc. (Registrant), certify that to the best of my knowledge,
based upon a review of the annual report on Form 10-K for the fiscal year ended
June 30, 2004 of the Registrant (the Report): (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities
Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant. /s/ A.L. GiannopoulosName:
    
    A.L. GiannopoulosDate:
    
    September 13, 2004
 Certification of Principal Financial Officer
Pursuant to 18 U.S.C. 1350
(Section 906 of the Sarbanes-Oxley Act of 2002) I, Gary C. Kaufman, Executive Vice President of Finance and Administration
and the Chief Financial Officer of MICROS Systems, Inc. (Registrant), certify
that to the best of my knowledge, based upon a review of the annual report on
Form 10-K for the fiscal year ended June 30, 2004 of the Registrant (the
Report): (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities
Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant. /s/ Gary C. KaufmanName:
    
    Gary C. KaufmanDate:
    
    September 13, 2004
 65




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##### Table of Contents



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, 1990.3(iii).
    
    By-laws of the Company, as amended, is incorporated herein by
reference to Exhibit 3(ii) to the Form 8-K filed on August 30, 2004.10a1.
    
    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.,
 66




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##### Table of Contents



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.
    
    Fourth Amendment to Employment Agreement dated November 19, 2001
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2001.10i.
    
    Fifth Amendment to Employment Agreement dated November 15, 2002
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2002.10j.
    
    Sixth Amendment to Employment Agreement dated January 28, 2004
between MICROS Systems, Inc. and A. L. Giannopoulos is incorporated
herein by reference to Exhibit 10 to the Quarterly Report on Form
10-Q of the Company for the period ended December 31, 2003.10k.
    
    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, 1995.10l.
    
    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, 1998.10m.
    
    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, 2001.10n.
    
    Third Amendment to Consulting Agreement dated September 4, 2003
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, 2003.10o.
    
    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, 1997.10p.
    
    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, 1998.10q.
    
    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 10o above, as text is identical)
 67




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##### Table of Contents



10r.
    
    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 10p
above, as text is identical).10s.
    
    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) 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, 2003.10t.
    
    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) 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, 2003.10u.
    
    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) 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, 2003.14.
    
    Code of Ethics and Business Practices21.
    
    Subsidiaries of the Company23.
    
    Consent of Independent Registered Public Accounting Firm31.
    
    Certifications32.
    
    Section 1350 Certifications
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