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.
<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, 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
<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 For the nine
months ended months ended
September 30, September 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
----------- ----
<S> <C> <C>
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
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
For the nine months
ended September 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
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
</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, 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:
<TABLE>
<CAPTION>
(In Thousands)
--------------
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<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 the third quarter of 1996.
<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: November 5, 1996
/s/RONALD J. CASCIANO
---------------------
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,
-------------------
1996 1995
---- ----
<S> <C> <C>
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
====== ======
</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,
-------------------
1996 1995
------- -------
<S> <C> <C>
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
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,080
<SECURITIES> 0
<RECEIVABLES> 37,419
<ALLOWANCES> 0
<INVENTORY> 22,941
<CURRENT-ASSETS> 71,516
<PP&E> 7,282
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,879
<CURRENT-LIABILITIES> 13,283
<BONDS> 0
0
0
<COMMON> 188
<OTHER-SE> 68,565
<TOTAL-LIABILITY-AND-EQUITY> 68,753
<SALES> 42,381
<TOTAL-REVENUES> 81,819
<CGS> 25,176
<TOTAL-COSTS> 60,797
<OTHER-EXPENSES> 3,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,955
<INCOME-TAX> 1,542
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,413
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
