Delaware
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16-1434688
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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PAR Technology Park
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8383 Seneca Turnpike
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New Hartford, New York
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13413-4991
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(Address of principal executive offices)
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(Zip Code)
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Large Accelerated Filer o
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Accelerated Filer o
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Non Accelerated Filer o
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Smaller Reporting Company x
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(Do not check if a smaller reporting company) |
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Item Number
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Page
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Item 1.
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Consolidated Statements of Operations for the three and nine months
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1
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ended September 30, 2011 and 2010
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Consolidated Statements of Comprehensive Income (Loss)
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2
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for the three and nine months ended September 30, 2011 and 2010
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Consolidated Balance Sheets at September 30, 2011 and
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3
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December 31, 2010
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Consolidated Statements of Cash Flows for the nine months ended
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4
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September 30, 2011 and 2010
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5
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Item 2.
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15
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Item 3.
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29
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Item 4.
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30
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PART II
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OTHER INFORMATION
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Item 1A.
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31
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Item 4.
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RESERVED
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31
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Item 5.
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31
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Item 6.
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Exhibits
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32
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33
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34
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For the three months
ended September 30,
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For the nine months
ended September 30,
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|||||||||||||||
Net revenues:
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2011
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2010
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2011
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2010
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||||||||||||
Product
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$ | 24,856 | $ | 27,850 | $ | 71,730 | $ | 72,185 | ||||||||
Service
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19,152 | 17,268 | 53,330 | 53,369 | ||||||||||||
Contract
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15,756 | 16,053 | 48,836 | 49,950 | ||||||||||||
59,764 | 61,171 | 173,896 | 175,504 | |||||||||||||
Costs of sales:
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||||||||||||||||
Product
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16,196 | 17,865 | 45,298 | 47,256 | ||||||||||||
Service
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13,650 | 12,192 | 45,383 | 36,141 | ||||||||||||
Contract
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14,667 | 15,041 | 45,812 | 46,854 | ||||||||||||
44,513 | 45,098 | 136,493 | 130,251 | |||||||||||||
Gross margin
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15,251 | 16,073 | 37,403 | 45,253 | ||||||||||||
Operating expenses:
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||||||||||||||||
Selling, general and administrative
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9,239 | 9,995 | 29,304 | 29,316 | ||||||||||||
Research and development
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3,730 | 4,826 | 11,590 | 12,592 | ||||||||||||
Impairment of goodwill and intangible assets
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─
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─
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20,843 |
─
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||||||||||||
Amortization of identifiable intangible assets
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257 | 234 | 667 | 703 | ||||||||||||
13,226 | 15,055 | 62,404 | 42,611 | |||||||||||||
Operating income (loss)
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2,025 | 1,018 | (25,001 | ) | 2,642 | |||||||||||
Other income (expense), net
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23 | 97 | (106 | ) | 516 | |||||||||||
Interest expense
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(48 | ) | (157 | ) | (163 | ) | (299 | ) | ||||||||
Income (loss) before provision for income taxes
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2,000 | 958 | (25,270 | ) | 2,859 | |||||||||||
(Provision) benefit for income taxes
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(798 | ) | (420 | ) | 9,028 | (890 | ) | |||||||||
Net income (loss)
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$ | 1,202 | $ | 538 | $ | (16,242 | ) | $ | 1,969 | |||||||
Earnings (loss) per share
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||||||||||||||||
Basic
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$ | .08 | $ | .04 | $ | (1.08 | ) | $ | .13 | |||||||
Diluted
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$ | .08 | $ | .04 | $ | (1.08 | ) | $ | .13 | |||||||
Weighted average shares outstanding
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||||||||||||||||
Basic
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15,031 | 14,879 | 14,984 | 14,794 | ||||||||||||
Diluted
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15,118 | 15,048 | 14,984 | 15,009 |
For the three months
ended September 30,
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For the nine months
ended September 30,
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|||||||||||||||
2011
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2010
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2011
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2010
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Net income (loss)
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$ | 1,202 | $ | 538 | $ | (16,242 | ) | $ | 1,969 | |||||||
Other comprehensive income (loss), net of tax:
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||||||||||||||||
Foreign currency translation adjustments
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(444 | ) | (5 | ) | 493 | (219 | ) | |||||||||
Comprehensive income (loss)
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$ | 758 | $ | 533 | $ | (15,749 | ) | $ | 1,750 |
September 30,
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December 31,
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2011
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2010
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Assets
Current assets:
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||||||||
Cash and cash equivalents
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$ | 3,351 | $ | 6,781 | ||||
Accounts receivable-net
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36,781 | 43,517 | ||||||
Inventories-net
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29,769 | 38,707 | ||||||
Income tax refunds
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37 | 152 | ||||||
Deferred income taxes
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9,925 | 5,719 | ||||||
Other current assets
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3,095 | 3,067 | ||||||
Total current assets
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82,958 | 97,943 | ||||||
Property, plant and equipment - net
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5,500 | 5,796 | ||||||
Deferred income taxes
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5,902 | 1,079 | ||||||
Goodwill
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6,852 | 26,954 | ||||||
Intangible assets - net
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15,794 | 10,389 | ||||||
Other assets
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2,074 | 2,124 | ||||||
Total Assets
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$ | 119,080 | $ | 144,285 | ||||
Liabilities and Shareholders’ Equity
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||||||||
Current liabilities:
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||||||||
Current portion of long-term debt
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$ | 1,977 | $ | 1,711 | ||||
Borrowings under lines of credit
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1,500 | − | ||||||
Accounts payable
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14,211 | 19,902 | ||||||
Accrued salaries and benefits
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7,676 | 9,055 | ||||||
Accrued expenses
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2,746 | 2,843 | ||||||
Customer deposits
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1,247 | 2,286 | ||||||
Deferred service revenue
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14,209 | 16,260 | ||||||
Total current liabilities
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43,566 | 52,057 | ||||||
Long-term debt
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1,252 | 2,744 | ||||||
Other long-term liabilities
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2,686 | 2,725 | ||||||
Shareholders’ Equity:
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||||||||
Preferred stock, $.02 par value,
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1,000,000 shares authorized
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─
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─
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Common stock, $.02 par value,
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29,000,000 shares authorized;
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16,863,868 and 16,746,618 shares issued;
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15,156,584 and 15,039,334 outstanding
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337 | 335 | ||||||
Capital in excess of par value
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42,828 | 42,264 | ||||||
Retained earnings
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34,363 | 50,605 | ||||||
Accumulated other comprehensive loss
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(120 | ) | (613 | ) | ||||
Treasury stock, at cost, 1,707,284 shares
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(5,832 | ) | (5,832 | ) | ||||
Total shareholders’ equity
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71,576 | 86,759 | ||||||
Total Liabilities and Shareholders’ Equity
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$ | 119,080 | $ | 144,285 |
For the nine months ended
September 30,
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||||||||
2011
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2010
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|||||||
Cash flows from operating activities:
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Net income (loss)
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$ | (16,242 | ) | $ | 1,969 | |||
Adjustments to reconcile net income (loss) to net cashprovided by operating activities:
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||||||||
Impairment of goodwill and intangible assets
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20,843 |
─
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Depreciation and amortization
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2,072 | 2,496 | ||||||
Provision for bad debts
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358 | 966 | ||||||
Provision for obsolete inventory
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9,908 | 1,057 | ||||||
Equity based compensation
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434 | 212 | ||||||
Deferred income tax
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(8,988 | ) | 1,140 | |||||
Changes in operating assets and liabilities:
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Accounts receivable
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6,378 | 2,165 | ||||||
Inventories
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(970 | ) | (9,202 | ) | ||||
Income tax refunds
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115 | (815 | ) | |||||
Other current assets
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(28 | ) | (393 | ) | ||||
Other assets
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50 | (220 | ) | |||||
Accounts payable
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(5,437 | ) | 10,719 | |||||
Accrued salaries and benefits
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(1,379 | ) | 978 | |||||
Accrued expenses
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(97 | ) | (691 | ) | ||||
Customer deposits
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(1,039 | ) | (876 | ) | ||||
Deferred service revenue
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(2,051 | ) | (2,915 | ) | ||||
Other long-term liabilities
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(39 | ) | 339 | |||||
Net cash provided by operating activities
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3,888 | 6,929 | ||||||
Cash flows from investing activities:
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Capital expenditures
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(720 | ) | (3,519 | ) | ||||
Capitalization of software costs
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(7,048 | ) | (669 | ) | ||||
Contingent purchase price paid on prior acquisitions
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─
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(33 | ) | |||||
Net cash used in investing activities
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(7,768 | ) | (4,221 | ) | ||||
Cash flows from financing activities:
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Net borrowings (repayments) under line-of-credit agreements
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1,500 | (1,500 | ) | |||||
Payments of long-term debt
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(1,226 | ) | (996 | ) | ||||
Proceeds from the exercise of stock options
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132 | 546 | ||||||
Purchase of treasury stock
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─
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(323 | ) | |||||
Net cash provided by (used in) financing activities
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406 | (2,273 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
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44 | (254 | ) | |||||
Net (decrease) increase in cash and cash equivalents
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(3,430 | ) | 181 | |||||
Cash and cash equivalents at beginning of period
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6,781 | 3,907 | ||||||
Cash and cash equivalents at end of period
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$ | 3,351 | $ | 4,088 | ||||
Supplemental disclosures of cash flow information:
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Cash paid during the period for:
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Interest
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$ | 176 | $ | 387 | ||||
Income taxes, net of refunds
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92 | 714 | ||||||
See notes to unaudited interim consolidated financial statements
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1.
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The accompanying unaudited interim consolidated financial statements have been prepared by PAR Technology Corporation (the “Company” or “PAR”) in accordance with U.S. generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. Accordingly, these interim financial statements do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. 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 results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results of operations to be expected for any future period. The consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2010 included in the Company’s December 31, 2010 Annual Report to the Securities and Exchange Commission on Form 10-K.
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The preparation of consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include: the carrying amount of property, plant and equipment, identifiable intangible assets and goodwill, equity based compensation, and valuation allowances for receivables, inventories and deferred income taxes. Actual results could differ from those estimates.
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The current economic conditions and the continued volatility in the financial markets, both in the U.S and in many other countries where the Company operates, have contributed and may continue to contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and/or declining business and consumer confidence. Such conditions could have an impact on consumer purchases and/or retail customer purchases, which in turn could impact the buying conditions of the Company’s customers resulting in a reduction of sales, operating income and cash flows. This could have a material adverse effect on the Company’s business, financial condition and/or results of operations, which could have a material adverse impact on the Company’s significant estimates, specifically the fair value of its reporting units used in support of its annual goodwill impairment test. Additionally, disruptions in the credit and other financial markets and economic conditions could, among other things, impair the financial condition of one or more of the Company’s customers or suppliers, thereby increasing the risk of customer bad debts or non-performance by suppliers.
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Certain amounts for prior periods have been reclassified to conform to the current period classification.
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2.
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The Company’s net accounts receivable consist of:
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(in thousands)
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||||||||
September 30,
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December 31,
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|||||||
2011
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2010
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Government segment:
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Billed
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$ | 11,075 | $ | 10,622 | ||||
Advanced billings
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(2,013 | ) | (385 | ) | ||||
9,062 | 10,237 | |||||||
Hospitality segment:
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Accounts receivable - net
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26,791 | 32,083 | ||||||
Logistics Management segment:
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Accounts receivable - net
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928 | 1,197 | ||||||
$ | 36,781 | $ | 43,517 |
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At September 30, 2011 and December 31, 2010, the Company had recorded allowances for doubtful accounts of $1,309,000 and $1,619,000, respectively, primarily against Hospitality accounts receivable.
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3.
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The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company operates in three business segments, Hospitality, Government and Logistics Management, although no goodwill resides within the financial statements of the Logistics Management segment. Goodwill impairment testing is performed at the sub-segment level (referred to as a reporting unit). The three reporting units utilized by the Company for its impairment testing are: Restaurant, Hotel/Resort/Spa, and Government. Goodwill is assigned to a specific reporting unit at the date the goodwill is initially recorded. Once goodwill has been assigned to a specific reporting unit, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.
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Goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment, at which time a second step would be performed to measure the amount of impairment. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment.
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As part of its quarterly financial close process for the period ended June 30, 2011, the Company determined that as a result of the significant decline in the stock price that occurred during the second quarter, a goodwill impairment triggering event had occurred because the Company could no longer reconcile the aggregate fair value of its reporting units to its market capitalization after consideration of a reasonable control premium. Although there was no significant adverse change to the long term financial outlook of any of its reporting units, the Company concluded that a triggering event had occurred, and as a result, performed additional analyses over the valuation of its reporting units in accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles – Goodwill and Other. The goodwill impairment identified by the Company was within the Restaurant and Hotel/Resort/Spa reporting units of its Hospitality segment. The fair value of the Government reporting unit was substantially in excess of its carrying value; therefore, no goodwill impairment was noted.
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The Company utilizes three methodologies in performing its goodwill impairment test for each reporting unit. These methodologies include both an income approach, namely a discounted cash flow method, and two market approaches, namely the guideline public company method and quoted price method. The discounted cash flow method was weighted 80% in the fair value calculation, while the public company method and quoted price method were weighted each at 10% of the fair value calculation. The valuation methodologies and weightings used in the current year are generally consistent with those used in the Company’s annual impairment test.
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The discounted cash flow method derives a value by determining the present value of a projected level of income stream, including a terminal value. This method involves the present value of a series of estimated future cash flows at the valuation date by the application of a discount rate, one which a prudent investor would require before making an investment in the equity of the Company. The Company considers this method to be most reflective of a market participant’s view of fair value given the current market conditions, as it is based on the Company’s forecasted results and, therefore, established its weighting at 80% of the fair value calculation.
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Key assumptions within the Company’s discounted cash flow model included projected financial operating results, a long term growth rate ranging from 4% to 5% (beyond 5 years) and discount rates ranging from 17% to 27%, depending on the reporting unit. As stated above, as the discounted cash flow method derives value from the present value of a projected level of income stream, a modification to the Company’s projected operating results including changes to the long term growth rate, could impact the fair value. The present value of the cash flows is determined using a discount rate that was based on the capital structure and capital costs of comparable public companies as well as company-specific risk premium, as identified by the Company. A change to the discount rate could impact the fair value determination.
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The financial projections used within the discounted cash flow models were generally consistent with those used as part of the Company’s fiscal year 2010 goodwill impairment test performed within the fourth quarter of 2010. Furthermore, the long term growth rates remained constant, reflective of the Company’s belief that there was no adverse change to the long term financial outlook of its reporting units. However, given the signficant decline in the Company’s stock price experienced during the second quarter, the Company determined it prudent to utilize higher discount rates in its valuation, which the Company believes is reflective of the perceived market risk that is reducing the fair value of the Company’s stock. The Company believes that the assumptions used within its discounted cash flow estimates were appropriate in the circumstances.
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The market approach is a general way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold. There are two methodologies considered under the market approach: the public company method and the quoted price method.
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The public company method and quoted price method of appraisal are based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing closely held companies. The mechanics of the method require the use of the stock price in conjunction with other factors to create a pricing multiple that can be used, with certain adjustments, to apply against the subject’s similar factor to determine an estimate of value for the subject company. The Company considered these methods appropriate as they provide an indication of fair value as supported by current market conditions. The Company established its weighting at 10% of the fair value calculation for each method.
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The most critical assumption underlying the market approaches utilized by the Company are the comparable companies utilized. Each market approach described above estimates revenue and earnings multiples for the Company based on its comparable companies. As such, a change to the comparable companies could have an impact on the fair value determination.
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The following table reflects the changes in goodwill during the nine month period ended September 30, 2011 (in thousands):
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(in thousands)
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September 30,
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December 31,
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|||||||
2011
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2010
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|||||||
Balance at beginning of the period
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$ | 26,954 | $ | 26,635 | ||||
Impairment of goodwill
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(20,263 | ) |
─
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Change in foreign exchange rates during the period
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161 | 319 | ||||||
Balance at end of period
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$ | 6,852 | $ | 26,954 |
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4.
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Inventories are primarily used in the manufacture and service of Hospitality products. The components of inventory consist of the following:
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(in thousands)
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||||||||
September 30,
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December 31,
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|||||||
2011
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2010
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|||||||
Finished Goods
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$ | 12,080 | $ | 13,913 | ||||
Work in process
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1,021 | 959 | ||||||
Component parts
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7,281 | 7,228 | ||||||
Service parts
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9,387 | 16,607 | ||||||
$ | 29,769 | $ | 38,707 |
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During the nine months ended September 30, 2011, the Company recorded a charge of $7.7 million (all recorded during the quarter ended June 30, 2011) associated with the write down of service parts inventory related to discontinued products. This charge was recorded as the result of an acceleration of technology upgrade programs by two of the Company’s major customers and an overall change in customer requirements as a result of these upgrades. As part of these programs, the Company’s customers were required to upgrade their existing hardware in support of new software utilized at their respective restaurants.
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5.
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The Company capitalizes certain costs related to the development of computer software sold by its Hospitality segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing feasibility (as defined within ASC 985-20) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Capitalized software for the three and nine months ended September 30, 2011 was $2 million and $7 million respectively. Capitalized software for the three and nine months ended September 30, 2010 was $1.2 million and $3.4 million respectively.
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Annual amortization, charged to cost of sales when the product is available for general release to customers, is computed using the greater of (a) the straight-line method over the remaining estimated economic life of the product, generally three to five years or (b) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product. Amortization of capitalized software costs for the three and nine months ended September 30, 2011 was $112,000 and $395,000, respectively. Amortization for the three and nine months ended September 30, 2010 was $171,000 and $598,000, respectively.
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The Company acquired identifiable intangible assets in connection with its acquisitions in prior years. Amortization of identifiable intangible assets for the three and nine months ended September 30, 2011 was $257,000 and $667,000 respectively. Amortization for the three and nine months ended September 30, 2010 was $234,000 and $703,000, respectively.
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The components of identifiable intangible assets are:
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(in thousands)
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||||||||
September 30,
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December 31,
|
|||||||
2011
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2010
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|||||||
Software costs
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$ | 19,208 | $ | 12,161 | ||||
Customer relationships
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4,519 | 4,519 | ||||||
Trademarks (non-amortizable)
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2,170 | 2,750 | ||||||
Other
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620 | 620 | ||||||
26,517 | 20,050 | |||||||
Less accumulated amortization
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(10,723 | ) | (9,661 | ) | ||||
$ | 15,794 | $ | 10,389 |
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The future amortization of these intangible assets assuming straight-line amortization of capitalized software costs is as follows (in thousands):
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2011
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$ | 253 | ||
2012
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1,962 | |||
2013
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1,451 | |||
2014
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1,446 | |||
2015
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1,446 | |||
Thereafter
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7,066 | |||
$ | 13,624 |
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In conjunction with its quarterly financial close process for the second quarter of 2011, the Company reevaluated its indefinite lived intangibles and determined that two of its trade names within its Hospitality segment should no longer be considered to have indefinite lives. This determination was made after consideration of the Company’s planned use of these trade names in future periods. As such, the Company utilized the royalty method to estimate the fair values of the two specific trade names in question as of June 30, 2011. As a result of this estimate, the Company recorded an impairment charge of $580,000 during the quarter ended June 30, 2011. The residual value of the aforementioned trade names will be amortized over their remaining useful lives.
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6.
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The Company applies the fair value recognition provisions of ASC Topic 718 Stock-Based Compensation. Total stock-based compensation expense included within operating expenses for the three and nine months ended September 30, 2011 was $203,000 and $434,000, respectively. These amounts were recorded net of benefit of $61,000 (all recorded during the quarter ended March 31, 2011) for the nine months ended September 30, 2011, as the result of forfeitures of unvested stock options prior to the completion of the requisite service period. Total stock-based compensation expense included within operating expenses for the three and nine months ended September 30, 2010 was $199,000 and $212,000, respectively. These amounts were recorded net of benefits of $211,000 for the nine months ended September 30, 2010, as the result of forfeitures of unvested stock options prior to the completion of the requisite service period. At September 30, 2011, the unrecognized compensation expense related to non-vested equity awards was $845,000 (net of estimated forfeitures), which is expected to be recognized as compensation expense in fiscal years 2011 through 2015.
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7.
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Earnings per share are calculated in accordance with ASC Topic 260, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and nine months ended September 30, 2011, 728,000 and 602,000, respectively, of incremental shares from the assumed exercise of stock options were not included in the computation of diluted earnings per share because of the anti-dilutive effect on earnings per share.
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The following is a reconciliation of the weighted average shares outstanding for the basic and diluted EPS computations (in thousands, except per share data):
|
For the three months
ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net income
|
$ | 1,202 | $ | 538 | ||||
Basic:
|
||||||||
Shares outstanding at beginning of period
|
15,009 | 14,838 | ||||||
Weighted average shares issued during the period, net
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22 | 41 | ||||||
Weighted average common shares, basic
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15,031 | 14,879 | ||||||
Earnings per common share, basic
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$ | .08 | $ | .04 | ||||
Diluted:
|
||||||||
Weighted average common shares, basic
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15,031 | 14,879 | ||||||
Dilutive impact of stock options and restricted stock awards
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87 | 169 | ||||||
Weighted average common shares, diluted
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15,118 | 15,048 | ||||||
Earnings per common share, diluted
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$ | .08 | $ | .04 |
For the nine months
ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net income (loss)
|
$ | (16,242 | ) | $ | 1,969 | |||
Basic:
|
||||||||
Shares outstanding at beginning of period
|
14,909 | 14,677 | ||||||
Weighted average shares issued during the period, net
|
75 | 117 | ||||||
Weighted average common shares, basic
|
14,984 | 14,794 | ||||||
Earnings (loss) per common share, basic
|
$ | (1.08 | ) | $ | .13 | |||
Diluted:
|
||||||||
Weighted average common shares, basic
|
14,984 | 14,794 | ||||||
Dilutive impact of stock options and restricted stock awards
|
─
|
215 | ||||||
Weighted average common shares, diluted
|
14,984 | 15,009 | ||||||
Earnings (loss) per common share, diluted
|
$ | (1.08 | ) | $ | .13 |
|
8.
|
The Company utilizes the fair value provisions of ASC Topic 820 Fair Value Measurements and Disclosures. ASC Topic 820 describes a fair value hierarchy based upon three levels of input, which are:
|
|
9.
|
The Company’s reportable segments are strategic business units that have separate management teams and infrastructures that offer different products and services.
|
(in thousands)
|
||||||||||||||||
For the three months
|
For the nine months
|
|||||||||||||||
ended September 30,
|
ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net revenues:
|
||||||||||||||||
Hospitality
|
$ | 42,934 | $ | 44,174 | $ | 120,471 | $ | 122,115 | ||||||||
Government
|
15,756 | 16,053 | 48,836 | 49,950 | ||||||||||||
Logistics Management
|
1,074 | 944 | 4,589 | 3,439 | ||||||||||||
Total
|
$ | 59,764 | $ | 61,171 | $ | 173,896 | $ | 175,504 | ||||||||
Operating income (loss):
|
||||||||||||||||
Hospitality
|
$ | 1,940 | $ | 1,335 | $ | (25,563 | ) | $ | 2,223 | |||||||
Government
|
937 | 894 | 2,760 | 2,716 | ||||||||||||
Logistics Management
|
(695 | ) | (1,012 | ) | (1,764 | ) | (2,085 | ) | ||||||||
Other
|
(157 | ) | (199 | ) | (434 | ) | (212 | ) | ||||||||
2,025 | 1,018 | (25,001 | ) | 2,642 | ||||||||||||
Other income, net
|
23 | 97 | (106 | ) | 516 | |||||||||||
Interest expense
|
(48 | ) | (157 | ) | (163 | ) | (299 | ) | ||||||||
Income (loss) before provision
|
||||||||||||||||
for income taxes
|
$ | 2,000 | $ | 958 | $ | (25,270 | ) | $ | 2,859 | |||||||
Depreciation and amortization:
|
||||||||||||||||
Hospitality
|
$ | 558 | $ | 652 | $ | 1,715 | $ | 2,108 | ||||||||
Government
|
18 | 20 | 58 | 61 | ||||||||||||
Logistics Management
|
8 | 6 | 22 | 18 | ||||||||||||
Other
|
86 | 122 | 277 | 309 | ||||||||||||
Total
|
$ | 670 | $ | 800 | $ | 2,072 | $ | 2,496 | ||||||||
Capital expenditures including software costs:
|
||||||||||||||||
Hospitality
|
$ | 2,063 | $ | 1,524 | $ | 7,610 | $ | 3,999 | ||||||||
Government
|
─
|
─
|
20 | 44 | ||||||||||||
Logistics Management
|
43 |
─
|
69 | 13 | ||||||||||||
Other
|
6 | 38 | 69 | 132 | ||||||||||||
Total
|
$ | 2,112 | $ | 1,562 | $ | 7,768 | $ | 4,188 | ||||||||
Revenues by geographic area:
|
||||||||||||||||
United States
|
$ | 52,136 | $ | 54,403 | $ | 152,676 | $ | 157,380 | ||||||||
Other Countries
|
7,628 | 6,768 | 21,220 | 18,124 | ||||||||||||
Total
|
$ | 59,764 | $ | 61,171 | $ | 173,896 | $ | 175,504 |
|
The following table represents identifiable assets by business segment:
|
(in thousands)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
Identifiable assets:
|
||||||||
Hospitality
|
$ | 88,115 | $ | 119,237 | ||||
Government
|
10,268 | 11,627 | ||||||
Logistics Management
|
2,907 | 3,398 | ||||||
Other
|
17,790 | 10,023 | ||||||
Total
|
$ | 119,080 | $ | 144,285 |
|
The following table represents identifiable assets by geographic area based on the location of the assets:
|
(in thousands)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
United States
|
$ | 107,111 | $ | 133,385 | ||||
Other Countries
|
11,969 | 10,900 | ||||||
Total
|
$ | 119,080 | $ | 144,285 |
|
The following table represents Goodwill by business segment:
|
(in thousands)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
Hospitality
|
$ | 6,116 | $ | 26,218 | ||||
Government
|
736 | 736 | ||||||
Total
|
$ | 6,852 | $ | 26,954 |
|
Customers comprising 10% or more of the Company’s total revenues are summarized as follows:
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Hospitality segment:
|
||||||||||||||||
McDonald’s Corporation
|
30 | % | 38 | % | 29 | % | 34 | % | ||||||||
Yum! Brands, Inc.
|
15 | % | 10 | % | 13 | % | 10 | % | ||||||||
Government segment:
|
||||||||||||||||
U.S. Department of Defense
|
26 | % | 26 | % | 28 | % | 28 | % | ||||||||
All Others
|
29 | % | 26 | % | 30 | % | 28 | % | ||||||||
100 | % | 100 | % | 100 | % | 100 | % |
Exhibit No.
|
Description of Instrument
|
31.1
|
Certification of Chairman of the Board and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chairman of the Board and Chief Executive Officer and Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
PAR TECHNOLOGY CORPORATION
|
||
(Registrant)
|
||
Date: November 10, 2011
|
||
/s/RONALD J. CASCIANO
|
||
Ronald J. Casciano
|
||
Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer
|
Exhibit No.
|
Description of Instrument
|
Sequential Page Number
|
|
Certification of Chairman of the Board and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
E-1
|
|
Certification of Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
E-2
|
|
Certification of Chairman of the Board and Chief Executive Officer and Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
E-3
|
1.
|
I have reviewed this report on Form 10-Q of PAR Technology Corporation;
|
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 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and 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.
|
Designed such internal control over financial reporting, or caused such internal control over financial
|
|
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 evaluations; 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 officer 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 the registrant’s board of directors (or persons performing equivalent functions):
|
|
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.
|
Date: November 10, 2011
|
/s/Paul B. Domorski
|
Paul B. Domorski
|
|
Chairman of the Board, President and Chief Executive Officer
|
1.
|
I have reviewed this report on Form 10-Q of PAR Technology Corporation;
|
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 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 officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and 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.
|
Designed such internal control over financial reporting, or caused such internal control over financial
|
|
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 evaluations; 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 officer 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 the registrant’s board of directors (or persons performing equivalent functions):
|
|
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.
|
Date: November 10, 2011
|
/s/Ronald J. Casciano
|
Ronald J. Casciano
|
|
Vice President, Chief Financial Officer, Treasurer, and Chief Accounting Officer
|
|
1.
|
The Report fully complies with the requirement 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 Company.
|
/s/Paul B. Domorski
|
Paul B. Domorski
|
Chairman of the Board, President & Chief Executive Officer
|
November 10, 2011
|
/s/Ronald J. Casciano
|
Ronald J. Casciano
|
Vice President, Chief Financial Officer, Treasurer,
|
and Chief Accounting Officer
|
November 10, 2011
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (USD $) In Thousands | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Consolidated Statements of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 1,202 | $ 538 | $ (16,242) | $ 1,969 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | (444) | (5) | 493 | (219) |
Comprehensive income (loss) | $ 758 | $ 533 | $ (15,749) | $ 1,750 |
Document And Entity Information (USD $) | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Jun. 30, 2010 | |
Entity Registrant Name | PAR TECHNOLOGY CORPORATION | |
Entity Central Index Key | 0000708821 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 44,814,992 | |
Entity Common Stock, Shares Outstanding | 15,156,584 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 |
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Stock-Based Compensation | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Stock-Based Compensation [Abstract] | |||
Stock-Based Compensation |
|
Accounts Receivable | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable |
At September 30, 2011 and December 31, 2010, the Company had recorded allowances for doubtful accounts of $1,309,000 and $1,619,000, respectively, primarily against Hospitality accounts receivable. |
Fair Value Measurements | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | |||
Fair Value Measurements [Abstract] | |||
Fair Value Measurements |
Level 1 - quoted prices in active markets for identical assets or liabilities (observable) Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable market data for essentially the full term of the asset or liability (observable) Level 3 - unobservable inputs that are supported by little or no market activity, but are significant to determining the fair value of the asset or liability (unobservable) The Company's interest rate swap agreement is valued at the amount the Company would have expected to pay to terminate the agreement. The fair value determination is based upon the present value of expected future cash flows using the LIBOR rate, plus an applicable interest rate spread, a technique classified within Level 2 of the valuation hierarchy described above. At September 30, 2011, the fair value of the Company's interest rate swap included an unrealized loss of $45,000, and is included as a component of accrued expenses within the Consolidated Balance Sheet. The associated fair value adjustments for the three and nine months ended September 30, 2011 and 2010 were $25,000 and $82,000, respectively, and $27,000 and $78,000, respectively, and were recorded as decreases to interest expense. |
Segment Reporting | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting |
The following table represents identifiable assets by business segment:
The following table represents identifiable assets by geographic area based on the location of the assets:
The following table represents Goodwill by business segment:
Customers comprising 10% or more of the Company's total revenues are summarized as follows:
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Earnings Per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
The following is a reconciliation of the weighted average shares outstanding for the basic and diluted EPS computations (in thousands, except per share data):
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Goodwill and Intangible Assets Disclosure | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets |
Goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit's fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment, at which time a second step would be performed to measure the amount of impairment. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment. As part of its quarterly financial close process for the period ended June 30, 2011, the Company determined that as a result of the significant decline in the stock price that occurred during the second quarter, a goodwill impairment triggering event had occurred because the Company could no longer reconcile the aggregate fair value of its reporting units to its market capitalization after consideration of a reasonable control premium. Although there was no significant adverse change to the long term financial outlook of any of its reporting units, the Company concluded that a triggering event had occurred, and as a result, performed additional analyses over the valuation of its reporting units in accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles - Goodwill and Other. The goodwill impairment identified by the Company was within the Restaurant and Hotel/Resort/Spa reporting units of its Hospitality segment. The fair value of the Government reporting unit was substantially in excess of its carrying value; therefore, no goodwill impairment was noted. The Company utilizes three methodologies in performing its goodwill impairment test for each reporting unit. These methodologies include both an income approach, namely a discounted cash flow method, and two market approaches, namely the guideline public company method and quoted price method. The discounted cash flow method was weighted 80% in the fair value calculation, while the public company method and quoted price method were weighted each at 10% of the fair value calculation. The valuation methodologies and weightings used in the current year are generally consistent with those used in the Company's annual impairment test. The discounted cash flow method derives a value by determining the present value of a projected level of income stream, including a terminal value. This method involves the present value of a series of estimated future cash flows at the valuation date by the application of a discount rate, one which a prudent investor would require before making an investment in the equity of the Company. The Company considers this method to be most reflective of a market participant's view of fair value given the current market conditions, as it is based on the Company's forecasted results and, therefore, established its weighting at 80% of the fair value calculation. Key assumptions within the Company's discounted cash flow model included projected financial operating results, a long term growth rate ranging from 4% to 5% (beyond 5 years) and discount rates ranging from 17% to 27%, depending on the reporting unit. As stated above, as the discounted cash flow method derives value from the present value of a projected level of income stream, a modification to the Company's projected operating results including changes to the long term growth rate, could impact the fair value. The present value of the cash flows is determined using a discount rate that was based on the capital structure and capital costs of comparable public companies as well as company-specific risk premium, as identified by the Company. A change to the discount rate could impact the fair value determination. The financial projections used within the discounted cash flow models were generally consistent with those used as part of the Company's fiscal year 2010 goodwill impairment test performed within the fourth quarter of 2010. Furthermore, the long term growth rates remained constant, reflective of the Company's belief that there was no adverse change to the long term financial outlook of its reporting units. However, given the signficant decline in the Company's stock price experienced during the second quarter, the Company determined it prudent to utilize higher discount rates in its valuation, which the Company believes is reflective of the perceived market risk that is reducing the fair value of the Company's stock. The Company believes that the assumptions used within its discounted cash flow estimates were appropriate in the circumstances. The market approach is a general way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold. There are two methodologies considered under the market approach: the public company method and the quoted price method. The public company method and quoted price method of appraisal are based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing closely held companies. The mechanics of the method require the use of the stock price in conjunction with other factors to create a pricing multiple that can be used, with certain adjustments, to apply against the subject's similar factor to determine an estimate of value for the subject company. The Company considered these methods appropriate as they provide an indication of fair value as supported by current market conditions. The Company established its weighting at 10% of the fair value calculation for each method. The most critical assumption underlying the market approaches utilized by the Company are the comparable companies utilized. Each market approach described above estimates revenue and earnings multiples for the Company based on its comparable companies. As such, a change to the comparable companies could have an impact on the fair value determination. After recording the goodwill impairment charge during the second quarter of 2011, the Company had reconciled the aggregate estimated fair value of the reporting units to the market capitalization of the consolidated Company including a control premium that was consistent with the premium observed in prior annual impairment tests. As part of the financial close process for the quarter ended September 30, 2011, the Company reevaluated the assumptions utilized in the impairment test performed during the quarter ended June 30, 2011 and concluded they remained appropriate based on the Company's actual financial results to date, combined with its assessment of the long term financial outlook of its businesses. Although the Company experienced a reduction in its stock price through September 30, 2011, it was able to reconcile the estimated fair value of the reporting units (both individually and in the aggregate) to the market capitalization of the consolidated Company, including a control premium consistent with the control premium observed during the second quarter. As such, the Company concluded that a triggering event relative to its goodwill and intangible assets did not exist as of September 30, 2011.
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Inventory | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Inventory [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
During the nine months ended September 30, 2011, the Company recorded a charge of $7.7 million (all recorded during the quarter ended June 30, 2011) associated with the write down of service parts inventory related to discontinued products. This charge was recorded as the result of an acceleration of technology upgrade programs by two of the Company's major customers and an overall change in customer requirements as a result of these upgrades. As part of these programs, the Company's customers were required to upgrade their existing hardware in support of new software utilized at their respective restaurants. |
Research, Development, and Computer Software Disclosure | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Research, Development, and Computer Software Disclosure | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research Development and Computer Software |
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CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
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Shareholders' Equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.02 | $ 0.02 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Common shares, par value (in dollars per share) | $ 0.02 | $ 0.02 |
Common shares, authorized (in shares) | 29,000,000 | 29,000,000 |
Common shares, issued (in shares) | 16,863,868 | 16,746,618 |
Common shares, outstanding (in shares) | 15,156,584 | 15,039,334 |
Treasury stock, shares (in shares) | 1,707,284 | 1,707,284 |
Basis of Presentation | 9 Months Ended | ||
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Sep. 30, 2011 | |||
Basis of Presentation [Abstract] | |||
Basis of Presentation |
The preparation of consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include: the carrying amount of property, plant and equipment, identifiable intangible assets and goodwill, equity based compensation, and valuation allowances for receivables, inventories and deferred income taxes. Actual results could differ from those estimates. The current economic conditions and the continued volatility in the financial markets, both in the U.S and in many other countries where the Company operates, have contributed and may continue to contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and/or declining business and consumer confidence. Such conditions could have an impact on consumer purchases and/or retail customer purchases, which in turn could impact the buying conditions of the Company's customers resulting in a reduction of sales, operating income and cash flows. This could have a material adverse effect on the Company's business, financial condition and/or results of operations, which could have a material adverse impact on the Company's significant estimates, specifically the fair value of its reporting units used in support of its annual goodwill impairment test. Additionally, disruptions in the credit and other financial markets and economic conditions could, among other things, impair the financial condition of one or more of the Company's customers or suppliers, thereby increasing the risk of customer bad debts or non-performance by suppliers. Certain amounts for prior periods have been reclassified to conform to the current period classification. |
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $) In Thousands, except Share data | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Net revenues: | ||||
Product | $ 24,856 | $ 27,850 | $ 71,730 | $ 72,185 |
Service | 19,152 | 17,268 | 53,330 | 53,369 |
Contract | 15,756 | 16,053 | 48,836 | 49,950 |
Revenue, Net | 59,764 | 61,171 | 173,896 | 175,504 |
Costs of sales: | ||||
Product | 16,196 | 17,865 | 45,298 | 47,256 |
Service | 13,650 | 12,192 | 45,383 | 36,141 |
Contract | 14,667 | 15,041 | 45,812 | 46,854 |
Cost of Goods And Services Sold | 44,513 | 45,098 | 136,493 | 130,251 |
Gross margin | 15,251 | 16,073 | 37,403 | 45,253 |
Operating expenses: | ||||
Selling, general and administrative | 9,239 | 9,995 | 29,304 | 29,316 |
Research and development | 3,730 | 4,826 | 11,590 | 12,592 |
Impairment of goodwill and intangible assets | 0 | 0 | 20,843 | 0 |
Amortization of identifiable intangible assets | 257 | 234 | 667 | 703 |
Operating Expenses | 13,226 | 15,055 | 62,404 | 42,611 |
Operating income (loss) | 2,025 | 1,018 | (25,001) | 2,642 |
Other income (expense), net | 23 | 97 | (106) | 516 |
Interest expense | (48) | (157) | (163) | (299) |
Income (loss) before provision for income taxes | 2,000 | 958 | (25,270) | 2,859 |
(Provision) benefit for income taxes | (798) | (420) | 9,028 | (890) |
Net income (loss) | $ 1,202 | $ 538 | $ (16,242) | $ 1,969 |
Earnings (loss) per share | ||||
Basic | $ 0.08 | $ 0.04 | $ (1.08) | $ 0.13 |
Diluted | $ 0.08 | $ 0.04 | $ (1.08) | $ 0.13 |
Weighted average shares outstanding | ||||
Basic | 15,031 | 14,879 | 14,984 | 14,794 |
Diluted | 15,118 | 15,048 | 14,984 | 15,009 |