-----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, Om0ZbxIpeMpHsaWPmsSy0EgOKozIpCRSUlce9BjLehfEFLl/zcuLdkvrtAanRKkD rTwl5TwKNTB2Hu2BLPOQTQ== 0000708821-96-000010.txt : 19961107 0000708821-96-000010.hdr.sgml : 19961107 ACCESSION NUMBER: 0000708821-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 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: 1934 Act SEC FILE NUMBER: 001-09720 FILM NUMBER: 96654990 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 September 30, 1996. 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 October 25, 1996 - 8,811,948 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 Nine Months Ended September 30, 1996 and 1995 - Consolidated Balance Sheet at September 30, 1996 and December 31, 1995 - Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 - 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 For the nine months ended months ended September 30, September 30, -------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net revenues: Product ............................. $16,331 $11,428 $42,381 $35,654 Service ............................. 6,171 6,440 20,874 17,936 Contract ............................ 5,436 6,112 18,564 18,790 ------- ------- ------- ------- 27,938 23,980 81,819 72,380 ------- ------- ------- ------- Costs of sales: Product ............................. 8,997 6,539 25,176 20,984 Service ............................. 5,716 4,857 18,156 14,163 Contract ............................ 5,125 5,552 17,465 17,556 ------- ------- ------- ------- 19,838 16,948 60,797 52,703 ------- ------- ------- ------- Gross margin ........................... 8,100 7,032 21,022 19,677 ------- ------- ------- ------- Operating expenses: Selling, general and administrative . 4,675 3,885 12,986 12,194 Research and development ............ 1,094 1,187 3,731 3,822 ------- ------- ------- ------- 5,769 5,072 16,717 16,016 ------- ------- ------- ------- Income from operations ................. 2,331 1,960 4,305 3,661 Other income ........................... 415 217 650 203 ------- ------- ------- ------- Income before provision for income taxes 2,746 2,177 4,955 3,864 Provision for income taxes ............. 774 644 1,542 1,305 ------- ------- ------- ------- Net income ............................. $ 1,972 $ 1,533 $ 3,413 $ 2,559 ======= ======= ======= ======= Earnings per common share .............. $ .22 $ .19 $ .40 $ .32 ======= ======= ======= ======= Weighted average number of common shares outstanding .................. 9,037 8,082 8,479 8,097 ======= ======= ======= =======
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Thousands Except Share Amounts)
September 30, 1996 December 31, (Unaudited) 1995 ----------- ---- Assets Current Assets: Cash and cash equivalents .......................... $ 5,080 $ 458 Investments ........................................ 2,995 -- Accounts receivable-net ............................ 37,419 36,474 Inventories ........................................ 22,941 17,801 Deferred income taxes .............................. 1,354 1,303 Other current assets ............................... 1,727 1,090 -------- -------- Total current assets ........................... 71,516 57,126 Property, plant and equipment - net ................... 7,282 7,580 Other assets .......................................... 4,081 3,367 -------- -------- $ 82,879 $ 68,073 ======== ======== Liabilities and Shareholders' Equity Current Liabilities: Notes payable ...................................... $ 165 $ 286 Accounts payable ................................... 5,846 4,925 Accrued salaries and benefits ...................... 3,170 4,186 Accrued expenses ................................... 1,214 1,534 Deferred service revenue ........................... 2,284 2,214 Income taxes payable ............................... 604 1,005 -------- -------- Total current liabilities ...................... 13,283 14,150 -------- -------- Deferred income taxes ................................. 843 791 -------- -------- Shareholders' Equity: Common stock, $.02 par value, 12,000,000 shares authorized; 9,402,354 and 9,113,031 shares issued and 8,811,948 and 7,682,425 outstanding ......... 188 182 Preferred stock, $.02 par value, 250,000 shares authorized ...................................... -- -- Capital in excess of par value ..................... 26,367 13,664 Retained earnings .................................. 45,145 41,732 Cumulative translation adjustment .................. (185) (167) Less 590,408 and 1,430,606 shares in treasury at cost ......................................... (2,762) (2,279) -------- -------- Total shareholders' equity ..................... 68,753 53,132 -------- -------- $ 82,879 $ 68,073 ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (UNAUDITED) For the nine months ended September 30, ------------------- 1996 1995 ---- ---- Cash flows from operating activities: Net income ......................................... $ 3,413 $ 2,559 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................ 1,773 1,771 Provision for obsolete inventory ............. 1,590 1,317 Translation adjustments ...................... (18) (28) Increase (decrease) from changes in: Accounts receivable-net ...................... (945) 487 Inventories .................................. (6,730) (4,352) Other current assets ......................... (636) 388 Other assets ................................. (386) 229 Accounts payable ............................. 921 (151) Accrued salaries and benefits ................ (1,017) (535) Accrued expenses ............................. (320) 69 Deferred service revenue ..................... 70 487 Income taxes payable ......................... (401) 408 Deferred income taxes ........................ 1 11 -------- -------- Net cash provided (used) by operating activities ...... (2,685) 2,660 -------- -------- Cash flows from investing activities: Purchase of investments ............................ (2,995) -- Capital expenditures ............................... (910) (906) Capitalization of software costs ................... (893) (411) -------- -------- Net cash used in investing activities ................. (4,798) (1,317) -------- -------- Cash flows from financing activities: Net payments under line-of-credit agreements ....... (121) -- Proceeds from the issuance of common stock ......... 13,311 -- Proceeds from the exercise of stock options ........ 952 257 Acquisition of treasury stock ...................... (2,037) (485) -------- -------- Net cash provided (used) by financing activities ...... 12,105 (228) -------- -------- Net increase in cash and cash equivalents ............. 4,622 1,115 Cash and cash equivalents at beginning of year ........ 458 2,912 -------- -------- Cash and cash equivalents at end of period ............ $ 5,080 $ 4,027 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest ......................................... $ 43 $ 11 Income taxes, net of refunds ..................... 1,577 876
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The statements for the three and nine months ended September 30, 1996 and 1995 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, 1996 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 nine months ended September 30, 1996 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 1996. 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, 1995 and 1994 included in the Company's December 31, 1995 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, maintenance, and service of commercial systems. The components of inventory, net of related reserves, consist of the following:
(In Thousands) -------------- September 30, December 31, 1996 1995 ------------ ------------ Finished goods ............... $ 5,692 $ 4,427 Work in process .............. 3,271 3,337 Component parts .............. 6,706 3,979 Service parts ................ 7,272 6,058 ------- ------- $22,941 $17,801 ======= =======
At September 30, 1996 and December 31, 1995, the Company had recorded reserves for obsolete inventory of $1,517,000 and $1,922,000, respectively. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1995 Results of Operations The Company reported an increase in net income of 29% for the quarter ended September 30, 1996 compared to the same quarter of 1995. Net income was $2 million, or earnings per share of $.22, on net revenues of $27.9 million for the quarter ended September 30, 1996, compared to net income of $1.5 million, or earnings per share of $.19, on net revenues of $24 million for the same quarter of 1995. Product revenues increased 43% to $16.3 million in 1996 versus $11.4 million in 1995. PAR's Integrated Transaction Information Processing (ITIP) systems business for the restaurant industry was the main contributor to the third quarter growth. Sales to Whataburger, Taco Bell and Chick-fil-A were the key factors in the increase over 1995. During the third quarter, the Company received a $5.6 million order from Whataburger, Inc., a Texas based fast food chain. Approximately $3.7 million of this order was delivered in the third quarter with the balance expected to be shipped in the fourth quarter of 1996. Also in the third quarter of 1996, PAR Microsystems Corporation, a wholly owned subsidiary of the Company, received the International Standards Organization's (ISO) 9001 certification from TUV Essen, an internationally recognized ISO registrar. The ISO 9001 standards are the most comprehensive quality standards covering design, manufacturing and service. They are widely recognized throughout the European Community and in 57 other nations around the world, including the United States. Achieving this standard increases the Company's competitiveness in its worldwide markets. Service revenues decreased 4% to $6.2 million in the third quarter of 1996, compared to $6.4 million for the third quarter of 1995. This decrease was due to the non-reoccurrence in 1996 of several major customer equipment upgrade programs performed in the third quarter of 1995. This decline was partially offset by continuing activity under the exclusive integration contract with Taco Bell awarded in September 1995. Contract revenues were $5.4 million in 1996, a decrease of 11% from $6.1 million reported in 1995. This decrease was due to the cancellations for convenience of certain Company contracts by the Department of Defense. Partially offsetting this decrease was the Company's continuing activities in Airfield Management. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1996 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1995 Gross margin on product revenues was 45% in the third quarter of 1996, compared to 43% for the third quarter of 1995. The improved margins were due to lower electronic component costs and ongoing cost reduction programs. This was partially offset by reductions in the average selling prices to certain major customers during the period. Gross margin on service revenues was 7% for the three months ended September 1996 versus 25% for the same three months of 1995. This decline resulted from lower margins on a special integration project requested by a customer, as well as costs associated with the transition to a new third party service provider which the Company uses in certain parts of the United States. Additionally, certain equipment upgrade programs had a favorable impact on margins in the third quarter of 1995. Gross margin on contract revenues was 6% in 1996 versus 9% in 1995. This margin decline was the result of favorable contract award fees in the third quarter of 1995. Selling, general and administrative expenses were $4.7 million in 1996, an increase of 20% from the $3.9 million reported in 1995. This is primarily due to an increase in the restaurant ITIP sales force costs in 1996 versus 1995 which supports the Product revenues increase of 43% for the quarter. Research and development expenses were $1.1 million in the third quarter of 1996, a decrease of 8% from the $1.2 million recorded in 1995. Although the Company increased its expenditures in its ITIP restaurant and manufacturing/warehousing businesses, net research and development expenses declined due to the requirement to capitalize certain software development costs under the Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. The Company incurred more software costs meeting this requirement in 1996 than in 1995. Research and development costs attributable to government contracts are included in cost of contract revenues. Other income was $415,000 in 1996 versus $217,000 in 1995. This increase was primarily due to interest earned on proceeds from the recently completed secondary common stock offering. The effective tax rate for the third quarter of 1996 was 28.2% versus 29.6% a year ago. In 1996 the Company benefited from the favorable results of a federal income tax audit. In 1995 the tax rate reflected the utilization of certain foreign tax credits. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1995 The Company reported net income of $3.4 million, or earnings per share of $.40, on revenues of $81.8 million for the nine months ended September 30, 1996. This compares to net income of $2.6 million, or earnings per share of $.32, on revenues of $72.4 million for the same nine-month period of 1995. Product revenues increased 19% to $42.4 million in 1996 versus $35.7 million in 1995. This increase was the result of ITIP sales to the Company's restaurant customers including Taco Bell, KFC International and Whataburger. The Company's Vision businesses, although less than 2% of total revenue, also contributed to this increase. Service revenues increased 16% to $20.9 million for the first nine months of 1996 compared to $17.9 million for the same period of 1995. This increase was due to special service integration projects requested by customers and the Taco Bell service integration contract discussed previously. Contract revenues were $18.6 million in 1996, a decrease of 1% from $18.8 million reported in 1995. The decrease is due to the completion of a large site contract in 1995 and the cancellation for convenience by the Department of Defense of certain other programs in 1996. These declines have been virtually offset by the Company's Airfield Maintenance Contract at Griffiss Air Force Base and work in environmental monitoring and hazardous materials tracking. Gross margin on product revenues was 41% in 1996 and 1995. Certain reductions in selling prices have been offset by the Company's ability to reduce its product costs. Gross margin on service revenues was 13% for the nine months ended September 30, 1996 versus 21 % for the same nine months of 1995. Periodically, the Company is requested to perform special integration projects for certain customers. The 1996 projects involved more labor and generated less gross margin than the 1995 projects. Additionally, third party transaction costs contributed to the margin decline in 1996. Gross margin on contract revenues was 6% in 1996 compared to 7% for the same period in 1995. This decrease is attributable to contract mix and higher award fees in 1995. Selling, general and administrative expenses were $13 million in 1996 compared to $12.2 million in 1995, an increase of 7%. This increase was the result of expanding sales force costs in the Company's restaurant, manufacturing/warehousing and Vision businesses. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1995 Research and development expenses were $3.7 million in 1996, a decrease of 2% from the $3.8 million in 1995. The decrease is primarily due to the requirement to capitalize certain software costs as discussed above. Other income was $650,000 in 1996 versus $203,000 in 1995. This increase was due to the interest earned on proceeds from the recently completed secondary stock offering, and a 1995 charge to the Company's equity interest for losses incurred by Phoenix Systems & Technologies, Inc. Liquidity and Capital Resources Cash flows to meet the Company's requirements for operating, investing and financing activities for the nine months ended September 30, 1996 and 1995 are reported in the Consolidated Statement of Cash Flows. The Company's primary source of liquidity has been from operations. Cash used by operating activities was $2.7 million in the first nine months of 1996, compared to cash provided of $2.7 million in 1995. In 1996 the Company increased its restaurant ITIP and service inventory in anticipation of future sales orders and service requirements. Cash used in investing activities was $4.8 in 1996, compared to $1.3 million in 1995. In 1996, the Company used a portion of the proceeds received from its stock offering to purchase short-term investments. Capital expenditures in 1996 were for internal use computers and other miscellaneous items; in 1995, capital expenditures were primarily for upgrades to internal use software. Cash provided from financing activities was $12.1 million for the first nine months of 1996 compared to cash used of $228,000 in 1995. In 1996 the Company sold 975,200 shares of common stock in a secondary offering which netted approximately $13.3 million. The Company also received $952,000 from the exercise of employee stock options. During 1996 the Company purchased into treasury, 135,000 shares of its stock at a cost of approximately $2 million. The Company has line-of-credit agreements with certain banks, which aggregate $27.4 million, of which $165,000 was in use at September 30, 1996. The Company believes that it has adequate financial resources to meet its future liquidity and capital requirements. The foregoing statements contain forward-looking statements which involve risks and uncertainties. The Company's actual experience may differ materially from that discussed above. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" as well as future events that have the effect of reducing the Company's available cash balances, such an unanticipated operating losses or capital expenditures or cash expenditures related to possible future acquisitions. Although the Company has no material current acquisition agreements or arrangements, there may be opportunities which require additional external financing, and the Company may from time to time seek to obtain additional funds from public or private issuance of equity or debt securities. There can be no assurance that such financing will be available at all or on terms acceptable to the Company. Risk Factors In addition to the other information in this report, the following risk factors should be considered carefully in evaluating the Company and its business. Information provided by the Company from time to time may contain certain "forward-looking" information, as that terms defined by (i) the Private Securities Litigation Reform Act of 1995 (the "Act" and (ii) in releases made by the Securities and Exchange Commission (the "SEC"). These risk factors are being provided pursuant to the provisions of the Act and with the intention of obtaining the benefits of the "safe harbor" provisions of the Act. Concentration of Major Customers A small number of customers has historically accounted for a majority of the Company's net revenues in any given fiscal period. The majority of the Company's customers are not obligated to make any minimum level of future purchases from the Company or to provide the Company with binding forecasts of product purchases for any future period. In addition, major customers may elect to delay or otherwise change the timing of orders in a manner that could adversely effect quarterly and annual results of operations. The loss of, or reduced sales to, any one or more of the Company's major customers could materially and adversely affect the Company's business, operating results and financial condition. Fluctuations in Quarterly Operating Results The Company has experienced and expects to continue to experience quarterly fluctuations in its net revenues and net income. Due to the dynamics associated with the year-end capital budget planning of many of PAR's restaurant ITIP customers and the preference of some restaurant ITIP customers to install new systems between the busy summer and Christmas seasons, the Company has historically realized a higher amount of its restaurant ITIP systems sales and overall net income during the second half of the year. Major restaurant ITIP customers may, however, elect to delay purchases of the Company's products. If for any reason the Company's sales were below seasonal norms during its fourth fiscal quarter, the Company's annual operating results could be adversely affected. The Company's quarterly operating results may also vary as a result of such factors such as the timing or cancellation of customer orders, especially major customers, delays in order placement on the part of major customers in anticipation of the introduction of new products by the Company, price reductions by competitors or by the Company, the market acceptance of newly introduced products, significant fluctuation in the pricing of components of the Company's products and introductions of new or enhanced competing products. Because a high percentage of the Company's costs, including personnel and facilities costs, are relatively fixed, variations in the timing of orders and shipments can cause significant variations in quarterly financial results. New Product Development and Rapid Technological Change The products sold by the Company are subject to rapid and continual technological change. Products available from the Company in its current restaurant ITIP and manufacturing/warehousing ITIP markets, as well as from its competitors, have increasingly offered a wider range of features and capabilities. The Company believes that in order to compete effectively in selected commercial segment markets, it must provide upwardly compatible systems incorporating new technologies at competitive prices. There can be no assurance that the Company will be able to continue funding research and development at levels sufficient to enhance its current product offerings or will be able to develop and introduce on a timely basis new products that keep pace with technological developments and emerging industry standards and address the evolving needs of customers. There can also be no assurance that the Company will not experience difficulties that will result in delaying or preventing the successful development, introduction and marketing of new products in its existing markets or that its new products and product enhancements will adequately meet the requirements of the marketplace or achieve any significant degree of market acceptance. Likewise, there can be no assurance as to the acceptance of Company products in new markets, including the Company's CTS and Qscan(R) products, nor can there be any assurance as to the success of the Company's penetration of these markets, or to the revenue or profit margins with respect to these products. The inability of the Company, for any reason, to develop and introduce new products and product enhancements in a timely manner in response to changing market conditions or customer requirements and could materially adversely affect the Company's business, operating results and financial condition. Government Contracts The government contracting business is subject to various risks including: (1) unpredictable contract or project termination, reductions in funds available for the Company's projects due to government policy changes and contract adjustments and penalties arising from post-award contract audits and incurred cost audits in which the value of the contract may be reduced; (2) risks of underestimating costs, particularly with respect to software and hardware development, for work performed pursuant to "fixed-price" contracts, where the Company commits to achieve specified deliveries for a predetermined fixed price; (3) limited profitability from "cost-plus" contracts under which the amount of profit attainable is limited to a specified negotiated amount, usually in the range of six to ten percent of estimated costs, although no assurance can be given that acceptance of contract deliverables to the customer, and contract close-out procedures, including government approval of final indirect rates. In addition, budgetary constraints and changes in spending priorities in government agencies, including the Department of Defense, have resulted in sudden program changes, reductions or cancellations in the past and such conditions may be expected to continue. As a result, the Company's revenues may fluctuate from year to year and quarter to quarter depending on government procurement activity in the Company's areas of business. In addition, the Company's government contracts are subject to termination for the convenience of the government. If the government terminates on this basis, the Company would be entitled to recover its allowable costs incurred as well as a reasonable profit on the work performed. Dependence on Suppliers for Key Components Certain key components used in the Company's products, such as base castings and certain printers and electronic components, are currently being purchased from single sources of supply. Although the Company believes that additional sources are available to it, the inability to obtain sufficient components or subassemblies as required, or to develop alternative sources of supply if and as required in the future, could result in delays or reductions in product shipments that could materially and adversely affect the Company's operating results and damage customer relationships. Competition The Company faces extensive competition in the markets in which it operates. There are currently more than ten suppliers who offer restaurant ITIP systems similar to the Company's. Some of these competitors are larger than the Company and have access to substantially greater financial and other resources than does the Company, and consequently may be able to obtain more favorable terms than the Company for components and subassemblies incorporated into their restaurant ITIP products. The rapid rate of technological change in the restaurant market makes it likely that the Company will face competition from new products designed by companies not currently competing with the Company. Such products may have features not currently available on PAR restaurant ITIP products. The Company believes that its competitive ability depends on its total solution offering, its product development and systems integration capability, its direct sales force and its customer service organization. There is no assurance that the Company will be able to compete effectively in the restaurant ITIP systems market in the future. The Company's manufacturing/warehousing ITIP business is also highly competitive. Some of the Company's competitors in the manufacturing/warehousing ITIP market are much large than the Company and have access to substantially greater financial and other resources than the Company. There is no assurance that the Company will be able to compete effectively in the manufacturing/warehousing ITIP business. The Company's government contracting businesses compete with a large number of companies, large and small, for government contracts. The Company's government contracting businesses have been focused on niche offerings, primarily signal and image processing and engineering services. There are no assurances that the Company will continue to win government contracts as a prime contractor or subcontractor. Additionally, there are no assurances that the Government will continue to contract for the provision of services in the areas in which the Company has expertise. Industry Concentration and Cyclicality The Company's restaurant ITIP product sales are dependent in large part on the health of the quick service sector of the restaurant industry ("QSR"), which in turn is dependent on the domestic and international economy, as well as factors such as consumer buying preferences and weather conditions. Although the QSR industry has experienced profitability and growth recently, there can be no assurance that profitability and growth will continue. The QSR market is affected by a variety of factors, including war, global and regional instability, natural disasters and general economic conditions. Adverse developments in the restaurant industry could materially affect the Company's restaurant ITIP business, operating results and financial condition. International Sales The Company intends to continue to expand its operations outside the United States and to enter additional international markets, which will require significant management attention and financial resources. The Company's operating results are subject to the risks inherent in international sales, including, but not limited to, regulatory requirements, political and economic changes and disruptions, transportation delays, difficulties in staffing and managing foreign sales operations, and potentially adverse tax consequences. In addition, fluctuations in exchange rate may render the Company's products less competitive relative to local product offerings, or could result in foreign exchanges losses, depending upon the currency in which the Company sells its products. There can be no assurance that these factors will not have a material adverse effect on the Company's future international sales and, consequently, on the Company's operating results. Dependence on Proprietary Technology PAR's success and ability to compete is dependent in part upon its ability to protect its proprietary technology. The Company relies on a combination of patent, copyright and trade secret laws and non-disclosure agreements to protect its proprietary technology. The Company generally enters into confidentiality or license agreements with its employees, distributors, customers and potential customers and limits access to and distribution of its software, documents other proprietary information. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of its technology or that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technology. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. The Company is also subject to the risk of adverse claims and litigation alleging infringement of the proprietary rights of other parties. Additionally, the Company periodically review recent patents that have been issued to third parties. As a result of such review, the Company has from time to time identified and investigated the validity and scope of issued patents for technologies similar to, or related to, the Company's technologies. Although the Company believes that it does not infringe the valid patents of others, there can be no assurance that third parties will not assert infringement claims in the future with respect to the Company's current or future products or that any such claim will not require the Company to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. The failure to obtain such royalty or licensing agreements on a timely basis would have a material adverse effect upon the Company's business, results of operations and financial conditions. Reliance on Key Personnel The Company's future success and potential growth depend in part on its ability to retain its key management and technical and sales personnel and to recruit, train and retain sufficient numbers of other highly qualified managerial, technical and sales personnel on a continuing basis. There can be no assurance that the Company will be able to retain its key management or technical and sales personnel or that it will be able to attract and retain sufficient numbers of other highly qualified managerial, technical and sales personnel. The inability to retain or attract such personnel could materially adversely affect the Company's business, operating results and financial condition. In addition, the Company's ability to manage potential growth successfully will require the Company to attract additional experienced managerial, technical and sales personnel and to continue to improve its operational, management and financial systems and controls. 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 third quarter of 1996. 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: November 5, 1996 /s/RONALD J. CASCIANO --------------------- Ronald J. Casciano Vice President, Chief Financial Officer and Treasurer EX-11 2 Exhibit Index Exhibit 11 - Statements 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 September 30, ------------------- 1996 1995 ---- ---- Primary and Fully Diluted Earnings Per Share: Weighted average shares of common stock outstanding: Balance - beginning of period ...................... 7,780 7,672 Weighted average shares issued ..................... 896 18 Acquisition of treasury stock ...................... (14) (3) Assumed exercise of certain stock options .......... 375 395 ------ ------ Weighted shares - end of period .................... 9,037 8,082 ====== ======
Exhibit 11 COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK (In Thousands)
For the nine months ended September 30, ------------------- 1996 1995 ------- ------- Primary and Fully Diluted Earnings Per Share: Weighted average shares of common stock outstanding: Balance - beginning of period ...................... 7,682 7,656 Weighted average shares issued ..................... 419 41 Acquisition of treasury stock ...................... (57) (14) Assumed exercise of certain stock options .......... 435 414 ------ ------ Weighted shares - end of period .................... 8,479 8,097 ====== ======
EX-27 3
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 5,080 0 37,419 0 22,941 71,516 7,282 0 82,879 13,283 0 0 0 188 68,565 68,753 42,381 81,819 25,176 60,797 3,731 0 0 4,955 1,542 0 0 0 0 3,413 .40 .40
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