-----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, MT2KPV+xaei73ISyKWVbvfkTZWbbvPWPeEUWSNpQg3yX0IHOv3lTB2qTLX+kt09k nYOKkWw/nMdRix48q5uuEw== 0000708821-99-000021.txt : 19991115 0000708821-99-000021.hdr.sgml : 19991115 ACCESSION NUMBER: 0000708821-99-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAR TECHNOLOGY CORP CENTRAL INDEX KEY: 0000708821 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 161434688 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09720 FILM NUMBER: 99747093 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, 1999. 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 29, 1999 - 8,223,005 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, 1999 and 1998 - Consolidated Statement of Comprehensive Income for the Three and Nine Months Ended September 30, 1999 and 1998 - Consolidated Balance Sheet at September 30, 1999 and December 31, 1998 - Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 1999 and 1998 - 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 PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In Thousands Except Per Share Amounts) (Unaudited)
For the three months For the nine months ended September 30, ended September 30, -------------------- -------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net revenues: Product ........................... $ 19,226 $ 19,683 $ 65,590 $ 39,599 Service ........................... 8,674 7,703 26,762 21,908 Contract .......................... 4,682 6,077 14,927 19,114 --------- --------- --------- --------- 32,582 33,463 107,279 80,621 --------- --------- --------- --------- Costs of sales: Product ........................... 12,331 13,779 41,916 28,453 Service ........................... 8,237 6,693 24,522 19,262 Contract .......................... 4,455 5,171 14,007 17,145 --------- --------- --------- --------- 25,023 25,643 80,445 64,860 --------- --------- --------- --------- Gross margin ................ 7,559 7,820 26,834 15,761 --------- --------- --------- --------- Operating expenses: Selling, general and administrative 5,289 4,874 16,785 14,103 Research and development .......... 2,003 1,399 6,551 4,275 Non-recurring benefit ............. - (157) - (807) --------- --------- --------- --------- 7,292 6,116 23,336 17,571 --------- --------- --------- --------- Income (loss) from operations .......... 267 1,704 3,498 (1,810) Other income, net ...................... 238 94 334 405 Interest expense ....................... (101) - (368) - --------- --------- --------- --------- Income (loss) before provision for income taxes ......................... 404 1,798 3,464 (1,405) Provision (benefit) for income taxes ... (349) 632 771 (499) --------- --------- --------- --------- Net income (loss) ...................... $ 753 $ 1,166 $ 2,693 $ (906) ========= ========= ========= ========= Earnings (loss) per share Diluted ........................... $ .09 $ .13 $ .31 $ (.10) ========= ========= ========= ========= Basic ............................. $ .09 $ .13 $ .32 $ (.10) ========= ========= ========= ========= Weighted average shares outstanding Diluted ........................... 8,595 8,959 8,580 8,878 ========= ========= ========= ========= Basic ............................. 8,412 8,841 8,435 8,878 ========= ========= ========= =========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In Thousands) (Unaudited)
For the three months For the nine months ended September 30, ended September 30, -------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Net income (loss) ...................... $ 753 $ 1,166 $ 2,693 $ (906) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ...................... (48) (22) (85) (13) --------- --------- --------- --------- Comprehensive income (loss) ............ $ 705 $ 1,144 $ 2,608 $ (919) ========= ========= ========= =========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Thousands Except Share Amounts)
September 30, 1999 December 31, (Unaudited) 1998 ----------- ----------- Assets Current Assets: Cash ................................................ $ 1,032 $ 1,298 Accounts receivable-net ............................. 38,531 47,137 Inventories ......................................... 33,366 27,260 Deferred income taxes ............................... 4,546 3,208 Other current assets ................................ 2,246 1,367 -------- -------- Total current assets ............................ 79,721 80,270 Property, plant and equipment - net ...................... 9,054 8,465 Other assets ............................................. 4,202 4,691 -------- -------- $ 92,977 $ 93,426 ======== ======== Liabilities and Shareholders' Equity Current Liabilities: Notes payable ....................................... $ 7,823 $ 7,387 Accounts payable .................................... 5,710 9,789 Accrued salaries and benefits ....................... 3,799 4,731 Accrued expenses .................................... 2,825 3,427 Income taxes payable ................................ 2,411 273 Deferred service revenue ............................ 5,349 4,376 -------- -------- Total current liabilities ....................... 27,917 29,983 -------- -------- Deferred income taxes .................................... 483 617 -------- -------- Shareholders' Equity: Common stock, $.02 par value, 19,000,000 shares authorized; 9,516,711 and 9,513,571 shares issued 8,414,505 and 8,548,665 outstanding ............... 190 190 Preferred stock, $.02 par value, 1,000,000 shares authorized ....................... - - Capital in excess of par value ...................... 28,071 28,050 Retained earnings ................................... 42,915 40,222 Accumulative comprehensive income ................... (632) (547) Treasury stock, at cost, 1,102,206 and 964,906 shares (5,967) (5,089) -------- -------- Total shareholders' equity ...................... 64,577 62,826 -------- -------- $ 92,977 $ 93,426 ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (Unaudited)
For the nine months ended September 30, ------------------- 1999 1998 ------- ------- Cash flows from operating activities: Net income (loss) .................................... $ 2,693 $ (906) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...................... 2,061 1,731 Provision for obsolete inventory ........................ 2,981 2,067 Translation adjustments ............................ (85) (13) Increase (decrease) from changes in: Accounts receivable-net .......................... 8,606 (7,033) Inventories ...................................... (9,087) (768) Income tax refund claims ......................... - (411) Other current assets ............................. (879) 208 Other assets ..................................... (77) (582) Accounts payable ................................. (4,079) 295 Accrued salaries and benefits .................... (932) 484 Accrued expenses ................................. (602) (56) Income taxes payable ............................. 2,138 - Deferred service revenue ......................... 973 695 Deferred income taxes ............................ (1,472) 2,856 ------- ------- Net cash provided (used) by operating activities 2,239 (1,433) ------- ------- Cash flows from investing activities: Capital expenditures ............................... (1,681) (2,607) Capitalization of software costs ................... (403) (766) ------- ------- Net cash used in investing activities ........... (2,084) (3,373) ------- ------- Cash flows from financing activities: Net borrowings under line-of-credit agreements ..... 436 3,483 Proceeds from the exercise of stock options ........ 21 177 Acquisition of treasury stock ...................... (878) (1,235) ------- ------- Net cash provided (used) by financing activities (421) 2,425 ------- ------- Net decrease in cash and cash equivalents ........... (266) (2,381) Cash and cash equivalents at beginning of year ...... 1,298 3,977 ------- ------- Cash and cash equivalents at end of period .......... $ 1,032 $ 1,596 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest ........................................... $ 362 $ 12 Income taxes, net of refunds ....................... (115) (2,891)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The statements for the three and nine months ended September 30, 1999 and 1998 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, 1999 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, 1999 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 1999. 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, 1998 and 1997 included in the Company's December 31, 1998 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 and service of Transaction Processing products. The components of inventory, net of related reserves, consist of the following:
(In Thousands) -------------- September 30, December 31, 1999 1998 ------------ ----------- Finished goods $ 8,772 $ 7,377 Work in process 3,286 2,234 Component parts 6,302 7,342 Service parts 15,006 10,307 ---------- ---------- $ 33,366 $ 27,260 ========== ==========
At September 30, 1999 and December 31, 1998, the Company had recorded reserves for obsolete inventory of $3,652,000 and $2,123,000, respectively. PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Certain reclassifications have been made to conform the prior period financial statements with the current year presentation. 4. The Company's reportable segments are strategic business units that have separate management teams and infrastructures that offer different products and services. The Company has three reportable segments. The Transaction Processing segment offers integrated solutions to the restaurant and manufacturing/warehousing industries. These offerings include industry leading hardware and software applications utilized at the point-of-sale, back of store, corporate office and in the manufacturing/warehousing environment. This segment also offers customer support including field service, installation, twenty-four hour telephone support and depot repair. The Government segment designs and implements advanced technology computer software systems primarily for military and intelligence agency applications. It provides services for operating and maintaining certain U.S. Government-owned test sites, and for planning, executing and evaluating experiments involving new or advanced radar systems. The Vision segment designs, manufactures, sells, installs and services image processing systems for the food-processing industry. Inter-segment sales and transfers are not material. Information as to the Company's operations in these three segments is set forth below (in thousands):
For the three months For the nine months ended September 30, ended September 30, -------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Transaction Processing .. $ 27,855 $ 27,073 $ 91,844 $ 61,026 Government .............. 4,682 6,077 14,927 19,114 Vision .................. 45 313 508 481 --------- --------- --------- --------- Total ............. $ 32,582 $ 33,463 $ 107,279 $ 80,621 ========= ========= ========= ========= Income (loss) from operations: Transaction Processing .. $ 175 $ 632 $ 2,962 $ (4,113) Government .............. 292 983 940 2,145 Vision .................. (200) (68) (404) (649) Nonrecurring benefit .... - 157 - 807 --------- --------- --------- --------- 267 1,704 3,498 (1,810) Other income, net ............ 238 94 334 405 Interest expense ............. (101) - (368) - --------- --------- --------- --------- Income (loss) before provision for income taxes ........ $ 404 $ 1,798 $ 3,464 $ (1,405) ========= ========= ========= ========= Depreciation and amortization: Transaction Processing .. $ 568 $ 401 $ 1,606 $ 1,176 Government .............. 41 23 116 93 Vision .................. 7 26 31 73 Corporate ............... 134 236 308 389 --------- --------- --------- --------- Total ............. $ 750 $ 686 $ 2,061 $ 1,731 ========= ========= ========= ========= Capital expenditures: Transaction Processing .. $ 303 $ 784 $ 743 $ 2,435 Government .............. 162 33 359 45 Vision .................. 7 1 41 9 Corporate ............... 273 61 538 118 --------- --------- --------- --------- Total ............. $ 745 $ 879 $ 1,681 $ 2,607 ========= ========= ========= =========
The following table presents revenues by geographic area based on the location of the use of the product or services.
For the three months For the nine months ended September 30, ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- United States $ 24,631 $ 27,664 $ 89,512 $ 67,137 Other Countries 7,951 5,799 17,767 13,484 --------- --------- --------- --------- Total $ 32,582 $ 33,463 $ 107,279 $ 80,621 ========= ========= ========= =========
Customers comprising 10% or more of the Company's total revenues are summarized as follows:
For the three months For the nine months ended September 30, ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ------- ------- ------- ------- Transaction Processing Segment: McDonald's Corporation ... 32% 48% 42% 38% Tricon Corporation ....... 32% 15% 25% 20% Government Segment: Department of Defense .... 14% 18% 14% 24% All Others .................... 22% 19% 19% 18% --- --- --- --- 100% 100% 100% 100% === === === ===
September 30, December 31, 1999 1998 ------------ ----------- Identifiable assets: Transaction Processing $ 83,638 $ 83,569 Government ........... 6,628 6,022 Vision ............... 1,155 1,520 Corporate ............ 1,556 2,315 --------- --------- Total .......... $ 92,977 $ 93,426 ========= =========
The following table presents property by geographic area based on the location of the asset.
September 30, December 31, 1999 1998 ------------ ----------- United States $ 82,979 $ 84,656 Other Countries 9,998 8,770 --------- --------- Total $ 92,977 $ 93,426 ========= =========
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1998 The Company reported revenues of $32.6 million for the third quarter ended September 30, 1999, a decrease of 3% from the $33.5 million reported in the third quarter of 1998. Net income was $753,000 and diluted earnings per share were $.09 for 1999. This compares to a net income of $1.2 million and diluted earnings per share of $.13 for 1998. Product revenues were $19.2 million in 1999, a decrease of 3% from the $19.7 million recorded in 1998. This decline was primarily due to lower domestic sales to McDonald's Corporation. McDonald's "Made for You" initiative is nearing completion. Higher domestic sales to Tricon Restaurants partially offset this decline. The Company's international business reported a 35% growth in product revenue in the third quarter of 1999 compared to a year ago. Tricon, Burger King and Wendy's were the major customers contributing to this increase abroad. Revenue from the Company's Industrial Software product line increased 45% as the Company's SAP certified software, TranSend gained customer acceptance. The Company's Industrial customers in the third quarter of 1999 include Raytheon and Rapistan. Customer service revenues were $8.7 million in 1999, an increase of 13% from the $7.7 million in 1998. POS support revenue was a major factor contributing to this revenue growth. Service revenue also grew in international markets consistent with the increase in international product sales discussed above. The Company's service offerings include installation, twenty-four hour help desk support and various field and on-site service options. Contract revenues were $4.7 million in 1999, a decrease of 23% when compared to the $6.1 million recorded in the same period in 1998. This decrease was due to the completion of a major airfield management contract in the third quarter of 1998. This decrease was partially offset by a $9 million multi-year contract for our Cargo*Mate identification and monitoring system from the Department of Transportation. The Company was recently awarded a $24 million, multi-year contract involving the support of Naval Communications Systems in the Pacific. This contract, which commences in the fourth quarter of 1999, will stimulate future growth of the government business. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH QUARTER ENDED SEPTEMBER 30, 1998 Product margins were 36% for 1999 compared to 30% for the same period in 1998. The Company benefited from lower component costs, other manufacturing efficiencies and favorable product mix. Customer service margins were 5% in the third quarter of 1999 compared to 13% for the same period in 1998. The Company is continuing its investments in service personnel, training and service integration and help desk capabilities. Additionally, greater than planned use of third party service providers in the third quarter of 1999 contributed to the margin decline. The Company does not expect this trend to continue in the future and anticipates improved margins. Contract margins were 5% in 1999 compared to 15% for the same period in 1998. The 1998 margins were higher than normal due to a retroactive fee adjustment on a certain contract. Selling, general and administrative expenses were $5.3 million in 1999 versus $4.9 million for the same period in 1998, an increase of 9%. The Company has expanded its sales force and increased its marketing efforts in both the POS and Industrial Software areas. Research and development expenses were $2 million in 1999, an increase of 43% from the $1.4 million recorded for the same period in 1998. The Company continues to increase its investment in POS software development, including numerous store applications and interfacing store information to the home office. The Company is also investing in software products for interface with industry leading enterprise solutions. Research and development costs attributable to government contracts are included in cost of contract revenues. Interest expense of $101,000 represents interest charged on the Company's short-term borrowing requirements from banks. The Company's tax provision includes a one-time tax benefit of $500,000 or $.06 earnings per share relating to the finalization of the Company's 1998 tax return. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 The Company reported revenues of $107.3 million for the nine months ended 1999, an increase of 33% from the $80.6 million reported in 1998. Net income was $2.7 and diluted earnings per share were $.31 for 1999. This compares to a net loss of $906,000 and a diluted loss per share of $.10 for 1998. Product revenues were $65.6 million in 1999, an increase of 66% from the $39.6 million recorded in 1998. This growth was led by increased domestic sales to McDonald's Corporation, Tricon Restaurants and increased sales of the Company's Industrial Software products. The Company also recorded a 35% increase in international product revenue with growth recorded in several areas including Europe, the Middle East and Mexico. Customer service revenues were $26.8 million in 1999, an increase of 22% from the $21.9 million in 1998. The Company recorded higher installation revenue that was directly related to the increased product revenue discussed above. Increased POS support contracts and supply sales also contributed to this growth. Contract revenues were $14.9 million in 1999, a decrease of 22% when compared to the $19.1 million recorded in the same period in 1998. This decrease was due to the completion of a major airfield management contract in the third quarter of 1998. This decrease was partially offset by the Cargo*Mate contract discussed previously. Product margins were 36% for 1999 compared to 28% for the same period in 1998. The improved margins were primarily due to lower component costs and other manufacturing efficiencies. Increased software content also contributed to the improved margins. Customer service margins were 8% for 1999 compared to 12% for the same period in 1998. The Company's investment in its service capabilities continued in the first three quarters of 1999. Additionally, the use of third party service providers contributed to the decline in margin as discussed above. Contract margins were 6% in 1999 compared to 10% for the same period in 1998. As discussed previously, the 1998 margin included the benefit of a retroactive fee adjustment on a contract. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 Selling, general and administrative expenses were $16.8 million in 1999 versus $14.1 million for the same period in 1998, an increase of 19%. The Company has invested in its sales and marketing capabilities in both the POS and Industrial Software areas. Research and development expenses were $6.6 million in 1999, an increase of 53% from the $4.3 million recorded for the same period in 1998. The Company is investing in POS software applications and software products for interface with SAP enterprise solutions. Additionally, the amount required to be capitalized under Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed was less in 1999 when compared to 1998. Interest expense of $368,000 in 1999 represents interest charged on the Company's short-term borrowing requirements from banks. Liquidity and Capital Resources The Company's primary source of liquidity has been from operations. Cash provided by operating activities was $2.2 million in the first nine months of 1999, compared to cash used in operating activities of $1.4 million in 1998. During the first nine months of 1999, cash flow benefited from the collection of accounts receivable, net income for the period and a federal income tax refund. This was partially offset by the increase in inventory levels in anticipation of future demand and to meet the growing service parts requirements as the Company's customer base increases. In 1998, the Company's cash flow was impacted by an increase in accounts receivable due to growth in product revenue. This was partially offset by the receipt of a $2.5 million federal tax refund pertaining to utilization of 1997's net operating loss. Cash used in investing activities was $2.1 million for the first nine months of 1999 compared to $3.4 million in 1998. In 1999, capital expenditures were for the continued upgrade to the Company's customer service center, for PC equipment and for research and development equipment. In 1998, capital expenditures were primarily for upgrades to the Company's customer service center and for manufacturing equipment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 Cash used in financing activities was $421,000 for 1999 compared to cash provided by financing activities of $2.4 million in 1998. In 1999, the Company increased its lines of credit obligations by $436,000. The Company also repurchased 137,300 shares of its stock for $878,000. In 1998, the Company borrowed an additional $3.5 million on its lines of credit and received $177,000 from the exercise of employee stock options. Additionally in 1998, the Company spent $1.2 million to repurchase 213,600 shares of its stock. The Company has line-of-credit agreements, which aggregate $35 million with certain banks, of which $27.2 million were unused at September 30, 1999. The Company believes that it has adequate financial resources to meet its future liquidity and capital requirements. Year 2000 Disclosure- The "Year 2000 problem" exists because many computer programs use only the last two digits to refer to a year. Therefore these computer programs do not properly recognize a year beginning with "20", instead of the familiar "19". The Year 2000 problem affects virtually all computer systems, processes, and products in all segments of society. The Company has identified the following areas which could be impacted by the Year 2000 issue. They are: Company products, internally used systems and software, and products or services provided by key third parties or business partners. If the Company experiences Year 2000 issues resulting from failures in any of these areas, the results could conceivably have a material adverse effect on the Company. In 1997, the Company established a corporate-wide program to address the Year 2000 issue. The objective of this program is to identify, assess, and address any issues associated with its infrastructure, operations, and products in transitioning to Year 2000. The Company's cross-functional Year 2000 Task Force includes senior management personnel who have responsibility for ensuring Year 2000 program tasks are completed in support of all PAR business functions and locations. Year 2000 progress reports are also presented regularly to executive management and the Company's Board of Directors. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 The multi-phase Year 2000 program includes: (1) education of Company personnel on the Year 2000 and its effects, (2) identification of systems, suppliers of goods and services, and business partners with potential Year 2000 issues relating to the Company's internal operations as well as the creation and support of its products, (3) assessment of internal systems and products, as well as inquiries to outside parties to ascertain Year 2000 readiness, (4) resolution and contingency planning for any items identified as having Year 2000 issues, and (5) post implementation follow-up. The Company has virtually completed Phase 4 of its program and has begun Phase 5 of the program-post implementation follow-up. The Company has established a site on its web page dedicated to Year 2000 Readiness Disclosure. This site is a culmination of Company product analysis and testing results, and can be found at http://www.partech.com/. The Company has undergone a review of its internal systems, including those which support manufacturing, financial, and general business operations. The Company identified systems which required upgrades to be Year 2000 ready, including certain business software applications. The business application upgrades are nearly complete, and are accommodated by existing software maintenance contracts with outside providers. The Company completed its analysis of key third parties which did not reveal any issues that would prevent them from continuing to provide products and services through the Year 2000 transition. Such analysis included telephone and written inquiries to third parties. The Company has completed contingency planning for all critical internal operations and third party suppliers. The Company estimates that the remaining cost of resolving Year 2000 issues will be approximately $100,000. This will be funded by existing financial resources. The costs to date associated with the Year 2000 effort represent a reallocation of existing Company resources. However failure, delays or increased costs experienced by the Company could have a material adverse effect on the Company's results of operations or financial condition. Additionally the Company cannot guarantee that third parties, upon which the Company relies, have been able to MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1998 adequately assess and address their Year 2000 compliance issues in a timely manner, the effects of which may also have an adverse impact on the Company's results of operations. As a consequence, the Company can give no assurances that issues related to Year 2000 will not have a material adverse effect on future results of operations or financial condition. Other Matters Inflation had little effect on revenues and related costs during the nine months of 1999. Management anticipates that margins will be maintained at acceptable levels to minimize the effects of inflation, if any. The Company has total interest bearing short-term debt of approximately $7.8 million at September 30, 1999. Management believes that increases in short-term rates could have an adverse effect on the Company's 1999 results. Management believes that foreign currency fluctuations should not have a significant impact on gross margins due to the low volume of business affected by foreign currencies. Important Factors Regarding Future Results Information provided by the Company, including information contained in this report, or by its spokespersons from time to time may contain forward-looking statements. Forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including without limitation, further delays in new product introduction, risks in technology development and commercialization, risks in product development and market acceptance of and demand for the Company's products, risks of downturns in economic conditions generally, and in the quick service sector of the restaurant market specifically, risks of intellectual property rights associated with competition and competitive pricing pressures, risks associated with foreign sales and high customer concentration, Year 2000 compliance risks and other risks detailed in the Company's filings with the Securities and Exchange Commission. Item 6. Exhibits and Reports on Form 8-K List of Exhibits Exhibit No. Description of Instrument ----------- ------------------------- 11 Statement re computation of per-share earnings Reports on Form 8-K None during the third quarter of 1999. 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 10, 1999 RONALD J. CASCIANO ------------------ Ronald J. Casciano Vice President, Chief Financial Officer and Treasurer EX-11 2 Exhibit Index Exhibit Number ------ 11 - Statement re computation of per-share earnings Exhibit 11 COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK (In Thousands)
For the three months ended September 30, -------------------- 1999 1998 ---- ---- Diluted Earnings Per Share: Weighted average shares of Common stock outstanding: Balance outstanding - beginning of period 8,411 8,897 Weighted average shares issued 1 11 Weighted average shares of treasury stock acquired - (67) Incremental shares of common stock outstanding giving effect to stock options 183 118 -------- -------- Weighted balance - end of period 8,595 8,959 ======== ========
For the three months ended September 30, -------------------- 1999 1998 ---- ---- Basic Earnings Per Share: Weighted average shares of Common stock outstanding: Balance outstanding - beginning of period 8,411 8,897 Weighted average shares issued 1 11 Weighted average shares of treasury stock acquired - (67) -------- -------- Weighted balance - end of period 8,412 8,841 ======== ========
Exhibit 11 COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK (In Thousands)
For the nine months ended September 30, --------------------- 1999 1998 ---- ---- Diluted Earnings Per Share: Weighted average shares of Common stock outstanding: Balance outstanding - beginning of period 8,549 8,864 Weighted average shares issued - 36 Weighted average shares of treasury stock acquired (114) (22) Incremental shares of common stock outstanding giving effect to stock options 145 - -------- -------- Weighted balance - end of period 8,580 8,878 ======== ========
For the nine months ended September 30, ------------------- 1999 1998 ---- ---- Basic Earnings Per Share: Weighted average shares of Common stock outstanding: Balance outstanding - beginning of period 8,549 8,864 Weighted average shares issued - 36 Weighted average shares of treasury stock acquired (114) (22) -------- -------- Weighted balance - end of period 8,435 8,878 ======== ========
EX-27 3
5 1,000 9-MOS DEC-31-1999 SEP-30-1999 1,032 0 38,531 0 33,366 79,721 9,054 0 92,977 27,917 0 0 0 190 64,387 92,977 65,590 107,279 41,916 80,445 6,551 0 0 3,464 771 2,693 0 0 0 2,693 .31 .32
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