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, 1995. 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 20, 1995 is 7,689,125 shares.
<PAGE>
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, 1995 and 1994
- Consolidated Balance Sheet at
September 30, 1995 and December 31, 1994
- Consolidated Statement of Cash Flows
for the Nine Months Ended
September 30, 1995 and 1994
- 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
<PAGE>
Item 1.
Financial Statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Share Amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------- --------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Net product sales ................... $11,428 $13,889 $35,654 $37,571
Service revenues .................... 6,440 5,288 17,936 15,299
Contract revenues ................... 6,112 4,726 18,790 14,926
------- ------- ------- -------
Total revenues ................... 23,980 23,903 72,380 67,796
------- ------- ------- -------
Costs and expenses:
Costs of products sold .............. 6,539 8,611 20,984 23,786
Costs of service .................... 4,857 4,219 14,163 12,606
Costs of contracts .................. 5,552 4,455 17,556 14,117
Selling, general and administrative . 3,885 3,435 12,194 10,565
Research and development ............ 1,187 1,209 3,822 3,557
------- ------- ------- -------
Total costs and expenses ......... 22,020 21,929 68,719 64,631
------- ------- ------- -------
Income from operations ................. 1,960 1,974 3,661 3,165
Other income ........................... 217 27 203 38
Interest expense ....................... -- (12) -- (37)
------- ------- ------- -------
Income before provision for income taxes 2,177 1,989 3,864 3,166
Provision for income taxes ............. 644 545 1,305 1,027
------- ------- ------- -------
Net income ............................. $ 1,533 $ 1,444 $ 2,559 $ 2,139
======= ======= ======= =======
Earnings per common share .............. $ .19 $ .18 $ .32 $ .27
======= ======= ======= =======
Weighted average number of common
shares outstanding .................. 8,082 7,970 8,097 7,997
======= ======= ======= =======
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
September 30,
1995 December 31,
(Unaudited) 1994
-------- --------
<S> <C> <C>
Assets
Current Assets:
Cash .............................................. $ 4,027 $ 2,912
Accounts receivable-net ........................... 27,616 28,103
Inventories ....................................... 19,502 16,467
Deferred income taxes ............................. 826 1,034
Other current assets .............................. 1,072 1,460
-------- --------
Total current assets .......................... 53,043 49,976
Property, plant and equipment - net .................. 7,570 7,716
Other assets ......................................... 2,413 2,950
-------- --------
$ 63,026 $ 60,642
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .................................. $ 3,481 $ 3,632
Accrued salaries and benefits ..................... 3,339 3,874
Accrued expenses .................................. 1,306 1,237
Deferred maintenance revenue ...................... 2,497 2,010
Income taxes payable .............................. 716 308
-------- --------
Total current liabilities ..................... 11,339 11,061
-------- --------
Deferred income taxes ................................ 739 936
-------- --------
Shareholders' equity:
Common stock, $.02 par value, 12,000,000
shares authorized, 9,109,116 and 9,030,787
shares issued and outstanding ................... 182 181
Preferred stock, $.02 par value, 250,000 shares
authorized ...................................... -- --
Capital in excess of par value .................... 13,524 13,268
Retained earnings ................................. 39,633 37,074
Cumulative translation adjustment ................. (209) (181)
Less 1,420,606 and 1,374,467 shares
in treasury, at cost ............................ (2,182) (1,697)
-------- --------
Total shareholders' equity .................... 50,948 48,645
-------- --------
$ 63,026 $ 60,642
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
--------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 2,559 $ 2,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 1,771 2,052
Translation adjustments ........................ (28) 251
Increase (decrease) from changes in:
Accounts receivable-net ........................... 487 5,290
Inventories ....................................... (3,035) (447)
Other current assets .............................. 388 (446)
Other assets ...................................... 229 10
Accounts payable .................................. (151) (606)
Accrued salaries and benefits ..................... (535) (18)
Accrued expenses .................................. 69 (962)
Deferred maintenance revenue ...................... 487 380
Income taxes payable .............................. 408 643
Deferred income taxes ............................. 11 (471)
------- -------
Net cash provided by operating activities ....... 2,660 7,815
------- -------
Cash flows from investing activities:
Capital expenditures ................................ (906) (1,204)
Capitalization of software costs .................... (411) (343)
------- -------
Net cash used in investing activities ........... (1,317) (1,547)
------- -------
Cash flows from financing activities:
Net payments under line-of-credit agreements ........ -- (4,087)
Proceeds from the exercise of stock options ......... 257 155
Acquisition of treasury stock ....................... (485) (22)
------- -------
Net cash used in financing activities ........... (228) (3,954)
------- -------
Net increase in cash and cash equivalents .............. 1,115 2,314
------- -------
Cash and cash equivalents at beginning of year ......... 2,912 907
------- -------
Cash and cash equivalents at end of period ............. $ 4,027 $ 3,221
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest .......................................... $ 11 $ 44
Income tax payments, net .......................... 876 856
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The statements for the three and nine months ended September 30, 1995 and
1994 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, 1995 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, 1995 are not necessarily indicative of the
results of operations to be expected for the year ending December 31, 1995.
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, 1994 and 1993 included in the Company's December 31, 1994
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 consist of the following:
<TABLE>
<CAPTION>
(In Thousands)
September 30, December 31,
1995 1994
-------- --------
<S> <C> <C>
Finished goods ......................... $ 7,091 $ 3,891
Work in process ........................ 1,700 1,697
Component parts ........................ 5,133 5,411
Service parts .......................... 5,578 5,468
-------- --------
$ 19,502 $ 16,467
======== ========
</TABLE>
At September 30, 1995 and December 31, 1994, the Company had recorded
reserves for obsolete inventory of $2,438,000 and $2,860,000, respectively.
3. Beginning in the first quarter of 1995, certain revenues and related costs
relating to Systems Integration activity which previously were reflected as
service revenues and costs have been reclassified to product sales and
costs.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1995
COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 1994
Results of Operations
PAR Technology Corporation reported net income of $1.5 million, and
earnings per share of $.19, on revenues of $24 million for the quarter ended
September 30, 1995. This compares to net income of $1.4 million, and earnings
per share of $.18 on revenues of $23.9 million for the same quarter of 1994.
Net product sales of the Commercial segment decreased 17.7% to $11.4
million in 1995 versus $13.9 million in 1994. This decrease was primarily due to
lower sales to Taco Bell. The Company continues to fulfill the requirements
under its sales contract with Taco Bell. However, these requirements were less
in the third quarter of 1995 when compared to 1994. The decrease was also due to
a decline in sales to Kentucky Fried Chicken International, because of a greater
number of new store openings and replacement orders in the third quarter of
1994. Partially offsetting this decline was increased sales recorded by the
Company's Industrial Transaction Processing business.
Customer service revenues of the Commercial segment increased 21.8% to
$6.4 million in the third quarter of 1995 compared to $5.3 million for the same
quarter of 1994. During the third quarter of 1995, the Company successfully
negotiated a service integration contract with Taco Bell. This contract is
expected to generate an aggregate of more than $24 million during the next three
years. Also contributing to this increase was installation revenue associated
with an equipment upgrade with another major customer.
Contract revenues of the Government segment were $6.1 million in 1995,
an increase of 29.3% from $4.7 million reported in 1994. The Company's site
maintenance and testing activities and its software development business both
contributed to this increase. The Company was awarded new site contracts and
expanded the scope of other existing contracts during the third quarter of 1995.
The Company's software development business continues to expand its work in
environmental systems.
Gross margin on net product sales for the Commercial segment was 42.8%
in the third quarter of 1995, compared to 38% for same quarter of 1994. This
improved margin was due to certain customer discounts that were earned in 1994
that did not recur in 1995.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1995
COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 1994
Gross margin on service revenues of the Commercial segment was 24.6%
for the three months ended September 1995 versus 20.2% for the same three months
of 1994. This increase was due to the additional revenue described previously
and the improved absorption of certain fixed costs.
Gross margin on contract revenues of the Government segment was 9.2%
in 1995 versus 5.7% a year ago. The improved margin was the result of favorable
product mix on new contracts and higher award fees earned due to favorable
performance.
Selling, general and administrative expenses were $3.9 million in 1995,
an increase of 13.1% from the $3.4 million reported in 1994. This is primarily
due to an increased sales force as the Company is expanding its worldwide sales
efforts. Also contributing to this increase was expanded marketing efforts for
the Company's Corneal Topography System.
Research and development expenses were $1.2 million in 1995 virtually
unchanged from 1994. The Company has maintained a constant level of investment
in its POS, Data Collection and Vision Products.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1994
PAR Technology Corporation reported a net income of $2.6 million, or
earnings per share of $.32, on revenues of $72.4 million for the nine months
ended September 30, 1995. This compares to a net income of $2.1 million, or
earnings per share of $.27 on revenues of $67.8 million for the same nine months
ended September 30, 1994.
Net product sales of the Commercial segment decreased 5.1% to $35.7
million in 1995 versus $37.6 million in 1994. This decrease was the result of
lower sales to Kentucky Fried Chicken International in 1995 due to a large
volume of replacement orders in 1994. The Company's domestic sales to McDonald's
were less than anticipated due to the delay in the release of its new POS
software. This software was released in September. Partially offsetting these
decreases was a greater volume of sales to Taco Bell under the Company's sales
contract with this customer.
Customer service revenues of the Commercial segment increased 17.2% to
$17.9 million the first nine months of 1995 compared to $15.3 million for the
same period of 1994. This increase was due to new service contracts as the
Company's customer base continues to expand. Certain product enhancement
programs with major customers in 1995 also contributed to this increase.
Contract revenues of the Government segment were $18.8 million in 1995,
an increase of 25.9% from $14.9 million reported in 1994. Both the Company's
site maintenance and software development businesses contributed to this
increase.
Gross margin on net product sales of the Commercial segment was 41.1%
in 1995 versus 36.7% in 1994. This improvement was the result of favorable
product mix and certain discounts earned by customers in 1994 that did not recur
in 1995.
Gross margin on service revenues of the Commercial segment was 21% for
the nine months ended September 1995 versus 17.6% for the same nine months of
1994. This improvement is due to the product enhancement programs described
above and the improved absorption as revenue increases.
Gross margin on contract revenues of the Government segment was 6.6% in
1995 versus 5.4% in 1994. This improvement was due to favorable award fees
earned and contract mix.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1994
Selling, general and administrative expenses were $12.2 million in
1995, a 15.4% increase from the $10.6 million reported in 1994. The Company is
increasing the size of its sales force in all areas including major accounts and
is also establishing a dealer distribution channel.
Research and development expenses were $3.8 million in 1995 compared to
$3.6 million in 1994, an increase of 7.5%. The Company is continuing to invest
in its POS products primarily in software development and field trial support of
new products.
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, 1995 and 1994
are reported in the Consolidated Statement of Cash Flows.
Cash provided by operating activities was $2.6 million for the first
nine months of 1995 compared to $7.8 million in 1994. During 1994, the Company
benefited from improved accounts receivable collections. The Company has
maintained its receivable position at a comparable level in 1995. The Company
also increased its inventory levels in 1995 in anticipation of fourth quarter
shipments.
Cash used in investing activities was $1.3 million in 1995 versus $1.5
million in 1994. In 1995, capital improvements were primarily for upgrades to
internal use software. In 1994, capital expenditures were primarily for
improvements to the Company's headquarters facility.
Cash used in financing activities was $228,000 in 1995 compared to $4
million in 1994. In 1995, the Company repurchased stock owned by an executive
officer of the Corporation. In 1994, the Company was able to pay down its
line-of-credit borrowings with the cash provided from operations.
The Company has line-of-credit agreements with certain banks, which
aggregate $17.2 million, all of which were unused at September 30, 1995. The
Company believes that it has adequate financial resources to meet its future
liquidity and capital requirements.
<PAGE>
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 third quarter of 1995.
<PAGE>
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: 10/25/95
RONALD J. CASICANO
---------------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Exhibit
- -------
11 - Statements re computation
of per share earnings
<PAGE>
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
(In Thousands)
<TABLE>
<CAPTION>
For the three months
ended September 30,
--------------------
1995 1994
------ ------
<S> <C> <C>
Primary and Fully Diluted
Earnings per share:
Weighted average shares of common stock outstanding:
Balance - beginning of period ........................... 7,672 7,643
Weighted average shares issued .......................... 18 7
Acquisition of treasury stock ........................... (3) --
Assumed exercise of certain stock options ............... 395 320
------ ------
Weighted shares - end of period ........................ 8,082 7,970
====== ======
</TABLE>
<PAGE>
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
(In Thousands)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1995 1994
------ ------
<S> <C> <C>
Primary and Fully Diluted
Earnings per share:
Weighted average shares of common stock outstanding:
Balance - beginning of period ............................ 7,656 7,605
Weighted average shares issued ........................... 41 35
Acquisition of treasury stock ............................ (14) (3)
Assumed exercise of certain stock options ................ 414 360
------ ------
Weighted shares - end of period .......................... 8,097 7,997
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,027
<SECURITIES> 0
<RECEIVABLES> 27,616
<ALLOWANCES> 0
<INVENTORY> 19,502
<CURRENT-ASSETS> 53,043
<PP&E> 7,570
<DEPRECIATION> 0
<TOTAL-ASSETS> 63,026
<CURRENT-LIABILITIES> 11,339
<BONDS> 0
<COMMON> 182
0
0
<OTHER-SE> 50,766
<TOTAL-LIABILITY-AND-EQUITY> 63,026
<SALES> 11,428
<TOTAL-REVENUES> 23,980
<CGS> 6,539
<TOTAL-COSTS> 16,948
<OTHER-EXPENSES> 1,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,177
<INCOME-TAX> 644
<INCOME-CONTINUING> 1,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,533
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
