-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KNpPlmsbEi78CCq1e70Yt7CeQt5JgHgvangd9akz0dO2AAqdZKbdYJ3KUviIyLCQ zpHvEk48xbxnlCwW28hIbg== 0000708821-98-000012.txt : 19980803 0000708821-98-000012.hdr.sgml : 19980803 ACCESSION NUMBER: 0000708821-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980730 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAR TECHNOLOGY CORP CENTRAL INDEX KEY: 0000708821 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 161434688 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09720 FILM NUMBER: 98674019 BUSINESS ADDRESS: STREET 1: PAR TECHNOLOGY PARK STREET 2: 8383 SENECA TURNPIKE CITY: NEW HARTFORD STATE: NY ZIP: 13413 BUSINESS PHONE: 3157380600 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1998. Commission File Number 1-9720 OR [ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ to __________ Commission File Number __________ PAR TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 16-1434688 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) PAR Technology Park 8383 Seneca Turnpike New Hartford, NY 13413-4991 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (315) 738-0600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No The number of shares outstanding of registrant's common stock, as of July 29, 1998 - 8,911,065 shares. PAR TECHNOLOGY CORPORATION TABLE OF CONTENTS FORM 10-Q PART 1 FINANCIAL INFORMATION Item Number ----------- Item 1. Financial Statements - Consolidated Statement of Income for the Three and Six Months Ended June 30, 1998 and 1997 - Consolidated Balance Sheet at June 30, 1998 and December 31, 1997 - Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1998 and 1997 - Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index Item 1. Financial Statements PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In Thousands Except Per Share Amounts) (Unaudited)
For the three months For the six months ended June 30, ended June 30, -------------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Net revenues: Product ........................... $ 11,955 $ 9,231 $ 19,916 $ 15,797 Service ........................... 7,250 6,794 14,205 13,175 Contract .......................... 6,772 5,652 13,037 10,768 -------- -------- -------- -------- 25,977 21,677 47,158 39,740 -------- -------- -------- -------- Costs of sales: Product ........................... 9,025 7,058 14,674 12,572 Service ........................... 6,459 5,844 12,851 11,453 Contract .......................... 5,992 5,388 11,974 10,275 -------- -------- -------- -------- 21,476 18,290 39,499 34,300 -------- -------- -------- -------- Gross margin ................ 4,501 3,387 7,659 5,440 -------- -------- -------- -------- Operating expenses: Selling, general and administrative 4,378 5,572 8,947 10,443 Research and development .......... 1,538 1,411 2,876 2,503 Non-recurring charges ............. (550) 4,919 (650) 4,919 -------- -------- -------- -------- 5,366 11,902 11,173 17,865 -------- -------- -------- -------- Loss from operations ................... (865) (8,515) (3,514) (12,425) Other income, net ...................... 166 111 311 253 -------- -------- -------- -------- Loss before provision for income taxes ......................... (699) (8,404) (3,203) (12,172) Benefit for income taxes ............... (254) (3,059) (1,131) (4,435) -------- -------- -------- -------- Net loss ............................... $ (445) $ (5,345) $ (2,072) $ (7,737) ======== ======== ======== ======== Loss per common share .................. $ (.05) $ (.60) $ (.23) $ (.88) ======== ======== ======== ======== Weighted average number of common shares outstanding ................ 8,897 8,843 8,896 8,841 ======== ======== ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In Thousands) (Unaudited)
For the three months For the six months ended June 30, ended June 30, -------------------- ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Net loss ............................... $ (445) $ (5,345) $ (2,072) $ (7,737) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments........................ (197) (54) 9 (331) -------- -------- -------- -------- Comprehensive loss ..................... $ (642) $ (5,399) $ (2,063) $ (8,068) ======== ======== ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Thousands Except Share Amounts)
June 30, 1998 December 31, Assets (Unaudited) 1997 - ------ ----------- ----------- Current Assets: Cash ................................... $ 3,083 $ 3,977 Accounts receivable-net ................ 26,726 29,938 Inventories ............................ 29,273 31,168 Income tax refund claims ............... 308 214 Deferred income taxes .................. 4,920 5,876 Other current assets ................... 1,029 1,340 -------- -------- Total current assets ............... 65,339 72,513 Property, plant and equipment - net ......... 8,015 7,013 Other assets ................................ 4,389 3,678 -------- -------- $ 77,743 $ 83,204 ======== ======== Liabilities and Shareholders' Equity Current Liabilities: Notes payable .......................... $ -- $ 195 Accounts payable ....................... 5,350 8,664 Accrued salaries and benefits .......... 4,111 3,804 Accrued expenses ....................... 3,143 3,444 Deferred service revenue ............... 3,001 3,024 -------- -------- Total current liabilities .......... 15,605 19,131 -------- -------- Deferred income taxes ....................... 684 656 -------- -------- Shareholders' Equity: Common stock, $.02 par value, 12,000,000 shares authorized; 9,499,671 and 9,466,771 shares issued 8,897,165 and 8,864,265 outstanding 190 189 Preferred stock, $.02 par value, 250,000 shares authorized ............ -- -- Capital in excess of par value ......... 27,974 27,875 Retained earnings ...................... 36,888 38,960 Cumulative translation adjustment ...... (673) (682) Treasury stock, at cost, 602,506 shares (2,925) (2,925) -------- -------- Total shareholders' equity ......... 61,454 63,417 -------- -------- Contingent liabilities -------- -------- $ 77,743 $ 83,204 ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (Unaudited)
For the six months ended June 30, ------------------ 1998 1997 ------- ------ Cash flows from operating activities: ........................ Net loss .................................................. $ (2,072) $ (7,737) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................... 1,045 1,222 Provision for obsolete inventory ............................. 1,292 2,635 Translation adjustments ................................. 9 (331) Increase (decrease) from changes in: Accounts receivable-net ............................... 3,212 15,110 Inventories ........................................... 603 (7,330) Income tax refund claims .............................. (94) (2,707) Other current assets .................................. 311 (271) Other assets .......................................... (582) 1,687 Accounts payable ...................................... (3,314) (977) Accrued salaries and benefits ......................... 307 765 Accrued expenses ...................................... (301) 186 Deferred service revenue .............................. (23) 299 Deferred income taxes ................................. 984 (1,623) ------- ------- Net cash provided by operating activities ............ 1,377 928 ------- ------- Cash flows from investing activities: Capital expenditures .................................... (1,729) (869) Capitalization of software costs ........................ (447) (500) ------- ------- Net cash used in investing activities ................ (2,176) (1,369) ------- ------- Cash flows from financing activities: Net borrowings (payments) under line-of-credit agreements (195) 10 Proceeds from the exercise of stock options ............. 100 131 Acquisition of treasury stock ........................... -- (163) ------- ------- Net cash used in financing activities ............... (95) (22) ------- ------- Net decrease in cash and cash equivalents ................ (894) (463) Cash and cash equivalents at beginning of year ........... 3,977 8,391 ------- ------- Cash and cash equivalents at end of period ............... $ 3,083 $ 7,928 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest ................................................ $ 2 $ 9 Income taxes, net of refunds ............................ (2,057) (188)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The statements for the three and six months ended June 30, 1998 and 1997 are unaudited; in the opinion of the Company such unaudited statements include all adjustments (which comprise only normal recurring accruals) necessary for a fair presentation of the results for such periods. The consolidated financial statements for the year ending December 31, 1998 are subject to adjustment at the end of the year when they will be audited by independent accountants. The results of operations for the three and six months ended June 30, 1998 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 1998. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended in December 31, 1997 and 1996 included in the Company's December 31, 1997 Annual Report to the Securities and Exchange Commission on Form 10-K. Earnings per share are based on the weighted average number of shares outstanding plus common stock equivalents under the Company's stock option plans. 2. Inventories are used in the manufacture of Point-Of-Sale systems and other commercial products. The components of inventory, net of related reserves, consist of the following: (In Thousands) --------------
June 30, December 31, 1998 1997 ------- ----------- Finished goods $ 7,892 $ 8,635 Work in process 2,993 4,184 Component parts 8,842 9,883 Service parts 9,546 8,466 ------- ------- $29,273 $31,168 ======= =======
At June 30, 1998 and December 31, 1997, the Company had recorded reserves for obsolete inventory of $3,334,000 and $3,800,000, respectively. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1998 COMPARED WITH QUARTER ENDED JUNE 30, 1997 The Company reported a net loss of $445,000 or a loss per share of $.05 for the second quarter of 1998. Revenues for the quarter were $26 million. These results compare to a net loss of $5.3 million or a loss per share of $.60 and revenues of $21.7 million for the second quarter of 1997. The results for the second quarter of 1998 include a benefit of $550,000 ($350,000 after tax or $.04 per share) relating to a partial recovery of accounts receivable from Phoenix Systems and Technologies, Inc. (Phoenix), which were previously reserved. The results for the second quarter of 1997 include a charge of $4 million ($2.6 million after tax or $.29 per share) relating to a receivable from and loan guarantee for Phoenix. The 1997 results also include a charge of $900,000 ($580,000 after tax or $0.07 per share) pertaining to the CTS business. This charge primarily involves obsolete inventory in the Company's CTS business. Product revenues were $12 million in the second quarter of 1998, an increase of 30% from the $9.2 million recorded in the second quarter of 1997. The increase was primarily due to higher sales to McDonald's as the Company's POS 4 hardware products have been generally accepted by this major customer and meet the POS requirements of their "made for you" initiative. Higher sales to Chick-fil-A and an increase in sales to resellers also contributed to this increase. The increase was partially offset by lower sales to Burger King as the Company completed delivery of POS systems in 1997 under its corporate contract with this customer. The Company is pursuing the Burger King Franchisee market in 1998. Customer service revenues were $7.3 million in the second quarter of 1998, an increase of 7% from the $6.8 million in the second quarter of 1997. In 1998, the Company increased its number of worldwide field service contracts as its customer base expands. The Company also increased its installation revenue which is directly related to the higher product sales discussed above. Contract revenues were $6.8 million in the second quarter of 1998, an increase of 20% when compared to the $5.7 million recorded in the same period in 1997. The Company increased its level of integration and software development activity in 1998, and expanded its engineering service efforts in airfield management and government site contracts. Product margins were 25% for the second quarter of 1998 compared to 24% for the same period in 1997. The slight improvement is due to product mix as the Company's customers are transitioning to the new POS 4 products. The Company anticipates an increase in its margin percentage in the second half of 1998. Customer service margins were 11% in the second quarter of 1998 compared to 14% for the same period in 1997. The decline in margin is primarily due to an increase in personnel as the Company is upgrading its integration and service capabilities. This investment will continue throughout the remainder of the year. Contract margins were 12% in the second quarter of 1998 compared to 5% for the same period in 1997. This increase is primarily due to a retroactive fee adjustment on a contract. Margins on the Company's government contract business typically run between 5% and 6%. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1998 COMPARED WITH QUARTER ENDED JUNE 30, 1997 Selling, general and administrative expenses were $4.4 million in the second quarter of 1998 versus $5.6 million for the same period in 1997, a decrease of 21%. The decline is primarily due to several factors. In 1997, the Company recorded certain bad debt reserves relating to the Company's government contract business. Additionally, in 1997 the Company decided to reduce its investment in its Corneal Topography (CTS) business. Finally, the Company has experienced a reduction in general and administrative headcount. Research and development expenses were $1.5 million in second quarter of 1998, an increase of 9% from the $1.4 million recorded for the same period in 1997. The Company is actively increasing its investment in its POS business in 1998. Partially offsetting the increase was the reduction in the CTS business discussed above. Research and development costs attributable to government contracts are included in cost of contract revenues. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997 The Company reported a net loss of $2.1 million or a loss per share of $.23 for the first six months of 1998. Revenues for the six months were $47.2 million. These results compare to a net loss of $7.7 million or a loss per share of $.88 and revenues of $39.7 million for the first six months of 1997. Product revenues were $19.9 million in the first six months of 1998 an increase of 26% from the $15.8 million recorded in the first six months of 1997. The increase was primarily due to higher sales to McDonald's as the Company's new POS 4 hardware products were recently approved by this major customer. Sales to Taco Bell and to the Company's reseller's channel also contributed to this increase. The increase was partially offset by lower sales to Burger King as the Company completed delivery of POS systems in 1997 under its corporate contract with this customer. Customer service revenues were $14.2 million in the first six months of 1998, an increase of 8% from the $13.2 million in the first six months of 1997. In 1998, the Company increased its number of worldwide field service and telephone help desk contracts as its customer base expands. Installation revenue also increased which is directly related to the higher product sales discussed above. Contract revenues were $13 million in the first six months of 1998, an increase of 21% when compared to the $10.8 million recorded for the same period in 1997. The Company increased its level of integration and software development activity across several contracts. Additionally, the Company expanded its engineering service efforts in airfield management. Product margins were 26% for the first six months of 1998 compared to 20% for the same period in 1997. The Company experienced improved margins as its customers are transitioning to the Company's new products. Customer service margins were 10% in the first six months of 1998 compared to 13% for the same period in 1997. This decline in margin is primarily due to an increase in personnel as the Company is upgrading its integration and service capabilities. This investment will continue throughout the remainder of the year. Contract margins were 8% in the first six months of 1998 compared to 5% for the same period in 1997. This increase is primarily due to a retroactive fee adjustment on a contract. Margins on the Company's government contract business typically run between 5% and 6%. Selling, general and administrative expenses were $8.9 million in the first six months of 1998 versus $10.4 million for the same period in 1997, a decrease of 14%. This decline is primarily due to certain reserves for bad debts recorded in 1997 relating to the Company's government business. The Company's decision in 1997 to reduce its investment in its CTS business also contributed to the decline. Research and development expenses were $2.9 million in the first six months of 1998, an increase of 15% from the $2.5 million recorded for the same period in 1997. The Company is actively increasing its investment in its POS business in 1998. Partially offsetting the increase was the reduction in the CTS business discussed above. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997 Liquidity and Capital Resources The Company's primary source of liquidity has been from operations. Cash provided by operating activities was $1.4 million in the first six months of 1998, compared to cash provided of $928,000 in 1997. In 1998, the Company's cash flow benefited from the collection of accounts receivable and a reduction of inventory. The Company also received a $1.7 million federal tax refund pertaining to utilization of 1997's net operating loss. Additionally, the Company's accounts payable disbursements were greater in the first half of 1998 than a year ago, primarily as a result of inventory growth in 1997. In 1997, the Company experienced significant collections of accounts receivable due to the volume of sales generated in the fourth quarter of 1996. This was partially offset by the build up of restaurant and service inventory in anticipation of future sales orders and service requirements. Cash used in investing activities was $2.2 million for 1998 compared to $1.4 million in 1997. In 1998, capital expenditures were primarily for upgrades to the Company's customer service center and for manufacturing equipment. In 1997, capital expenditures were primarily for upgrades to the manufacturing facility. Cash used in financing activities was $95,000 for 1998 compared to cash used of $22,000 in 1997. In 1998, the Company repaid its line-of-credit indebtedness of $195,000 and received $100,000 from the exercise of employee stock options. In 1997, the Company paid $163,000 to repurchase some of its stock and received $131,000 from the exercise of employee stock options. The Company has line-of-credit agreements, which aggregate $30 million with certain banks, which were unused at June 30, 1998. The Company believes that it has adequate financial resources to meet its future liquidity and capital requirements. Year 2000--As part of the Company's continuing process to update its products and internal systems, the Company is evaluating the costs associated with testing and, as necessary, modifying its products and internal systems for the Year 2000. The Company expects to incur internal staff costs and outside consulting costs associated with the Year 2000 conversion effort. The total incremental cost of this effort, at this time, cannot be estimated. As the process of analyzing the Company's products and internal systems continues, however, the Company will expense such costs as they are incurred. Although the Company at present does not believe the cost of implementing any changes to address Year 2000 issues will have a material effect on the Company's results of operations or financial condition, there can be no assurance that there will not be a delay in or significantly increased costs associated with the implementation of any necessary changes and the Company's inability to implement such changes could have an adverse effect on future results of operations. Important Factors Regarding Future Results Information provided by the Company, including information contained in this Report, or by its spokespersons from time to time may contain forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including without limitation, further delays in new product introduction, risks in technology development and commercialization, risks in product development and market acceptance of and demand for the Company's products, risks of downturns in economic conditions generally, and in the quick service sector of the restaurant market specifically, risks of intellectual property rights associated with competition and competitive pricing pressures, risks associated with foreign sales and high customer concentration and other risks detailed in the Company's filings with the Securities and Exchange Commission. Item 6. Exhibits and Reports on Form 8-K List of Exhibits Exhibit No. Description of Instrument ----------- ------------------------- 11 Statement re computation of per-share earnings Reports on Form 8-K None during the second quarter of 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PAR TECHNOLOGY CORPORATION -------------------------- (Registrant) Date: July 29, 1998 RONALD J. CASCIANO ------------------ Ronald J. Casciano Vice President, Chief Financial Officer and Treasurer EX-11 2 Exhibit Index Exhibit ------- 11 - Statement re computation of per-share earnings Exhibit 11 COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK (In Thousands)
For the three months ended June 30, -------------------- 1998 1997 ------- ------ Primary and Fully Diluted Earnings Per Share: Weighted average shares of common stock outstanding: Balance - beginning of period 8,897 8,837 Weighted average shares issued -- 6 --------- --------- Weighted shares - end of period 8,897 8,843 ========= =========
Exhibit 11 COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK (In Thousands)
For the three months ended June 30, -------------------- 1998 1997 ------- ------ Primary and Fully Diluted Earnings Per Share: Weighted average shares of common stock outstanding: Balance - beginning of period 8,864 8,826 Weighted average shares issued 32 21 Acquisition of treasury stock -- (6) --------- --------- Weighted shares - end of period 8,896 8,841 ========= =========
EX-27 3
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 3,083 0 26,726 0 29,273 65,339 8,015 0 77,743 15,605 0 0 0 190 61,264 77,743 19,916 47,158 14,674 39,499 2,226 0 0 (3,203) (1,131) (2,072) 0 0 0 (2,072) (.23) (.23)
-----END PRIVACY-ENHANCED MESSAGE-----