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 June 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 July
25, 1996 - 7,785,178 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 Six Months Ended
June 30, 1996 and 1995
- Consolidated Balance Sheet at
June 30, 1996 and December 31, 1995
- Consolidated Statement of Cash Flows
for the Six Months Ended
June 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 months For the six months
ended June 30, ended June 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Product ............................. $15,170 $11,884 $26,050 $24,226
Service ............................. 7,026 5,889 14,703 11,496
Contract ............................ 6,192 6,593 13,129 12,678
------- ------- ------- -------
28,388 24,366 53,882 48,400
------- ------- ------- -------
Costs of sales:
Product ............................. 9,401 6,782 16,179 14,445
Service ............................. 6,179 4,856 12,440 9,306
Contract ............................ 5,827 6,234 12,340 12,004
------- ------- ------- -------
21,407 17,872 40,959 35,755
------- ------- ------- -------
Gross margin ........................... 6,981 6,494 12,923 12,645
Operating expenses:
Selling, general and administrative . 4,331 4,144 8,075 8,323
Research and development ............ 1,286 1,302 2,637 2,635
------- ------- ------- -------
5,617 5,446 10,712 10,958
------- ------- ------- -------
Income before provision for income taxes 1,364 1,048 2,211 1,687
Provision for income taxes ............. 472 412 768 661
------- ------- ------- -------
Net income ............................. $ 892 $ 636 $ 1,443 $ 1,026
======= ======= ======= =======
Earnings per common share .............. $ .11 $ .08 $ .18 $ .13
======= ======= ======= =======
Weighted average number of common
shares outstanding .................. 8,241 8,110 8,234 8,108
======= ======= ======= =======
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ........................... $ 2,307 $ 458
Accounts receivable-net ............................. 30,161 36,474
Inventories ......................................... 21,975 17,801
Deferred income taxes ............................... 1,190 1,303
Other current assets ................................ 1,491 1,090
-------- --------
Total current assets ............................. 57,124 57,126
Property, plant and equipment - net .................... 7,168 7,580
Other assets ........................................... 3,614 3,367
-------- --------
$ 67,906 $ 68,073
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ....................................... $ 1,588 $ 286
Accounts payable .................................... 4,301 4,925
Accrued salaries and benefits ....................... 3,546 4,186
Accrued expenses .................................... 1,177 1,534
Deferred service revenue ............................ 2,067 2,214
Income taxes payable ................................ 562 1,005
-------- --------
Total current liabilities ........................ 13,241 14,150
-------- --------
Deferred income taxes .................................. 842 791
-------- --------
Shareholders' Equity:
Common stock, $.02 par value, 12,000,000 shares
authorized; 9,316,736 and 9,113,031 shares issued
and 7,780,128 and 7,682,425 outstanding .......... 186 182
Preferred stock, $.02 par value, 250,000 shares
authorized ....................................... -- --
Capital in excess of par value ...................... 14,349 13,664
Retained earnings ................................... 43,175 41,732
Cumulative translation adjustment ................... 20 (167)
Less 1,536,608 and 1,430,606 shares in treasury,
respectively, at cost ............................ (3,907) (2,279)
-------- --------
Total shareholders' equity ....................... 53,823 53,132
-------- --------
$ 67,906 $ 68,073
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(UNAUDITED)
For the six months
ended June 30,
--------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................ $ 1,443 $ 1,026
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 1,224 1,221
Provision for obsolete inventory ................ 956 974
Translation adjustments ......................... 187 64
Increase (decrease) from changes in:
Accounts receivable-net ......................... 6,313 306
Inventories ..................................... (5,130) (2,494)
Other current assets ............................ (401) 178
Other assets .................................... (228) 264
Accounts payable ................................ (624) (404)
Accrued salaries and benefits ................... (640) (61)
Accrued expenses ................................ (357) 177
Deferred service revenue ........................ (147) 642
Income taxes payable ............................ (443) 391
Deferred income taxes ........................... 164 (175)
------- -------
Net cash provided by operating activities ................ 2,317 2,109
------- -------
Cash flows from investing activities:
Capital expenditures .................................. (392) (798)
Capitalization of software costs ...................... (439) (280)
------- -------
Net cash used in investing activities .................... (831) (1,078)
------- -------
Cash flows from financing activities:
Net payments under line-of-credit agreements .......... 1,302 --
Proceeds from the exercise of stock options ........... 689 120
Acquisition of treasury stock ......................... (1,628) (399)
------- -------
Net cash provided (used) by financing activities ......... 363 (279)
------- -------
Net increase in cash and cash equivalents ................ 1,849 752
------- -------
Cash and cash equivalents at beginning of year ........... 458 2,912
------- -------
Cash and cash equivalents at end of period ............... $ 2,307 $ 3,664
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ............................................ $ 35 $ 11
Income taxes, net of refunds ........................ 1,045 437
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The statements for the three and six months ended June 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 six
months ended June 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)
--------------
June 30, December 31,
1996 1995
-------- -----------
<S> <C> <C>
Finished goods .......... $ 5,478 $ 4,427
Work in process ......... 3,403 3,337
Component parts ......... 5,829 3,979
Service parts ........... 7,265 6,058
------- -------
$21,975 $17,801
======= =======
</TABLE>
At June 30, 1996 and December 31, 1995, the Company had recorded reserves
for obsolete inventory of $1,761,000 and $1,922,000, respectively.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996
COMPARED WITH
QUARTER ENDED JUNE 30, 1995
Results of Operations
The Company reported an increase in net income of 40.3% for the quarter
ended June 30, 1996 compared to the same quarter of 1995. Net income was
$892,000, or earnings per share of $0.11, on net revenues of $28.4 million for
the quarter ended June 30, 1996, compared to net income of $636,000, or earnings
per share of $0.08, on net revenues of $24.4 million for the same quarter of
1995.
Product revenues increased 27.7% to $15.2 million in 1996 versus $11.9
million in 1995. The major contributor to second quarter growth was PAR's
Integrated Transaction Information Processing (ITIP) systems business for the
restaurant industry. This growth was led by demand for systems from the
Company's major accounts including Taco Bell and KFC International. Sales to KFC
International were in China and several other countries. Also contributing to
second quarter increase was PAR's ITIP manufacturing/warehousing business.
Revenue from this business was $1 million in the second quarter of 1996, an
increase of 80% over the same period in 1995.
As previously announced, the Company added another major account when it
was selected in the second quarter as the provider of next-generation POS ITIP
hardware solutions for Burger King Corporation ("Burger King"). Subject to the
negotiation and execution of a definitive agreement and the successful
implementation of a pilot program, the Company expects to sell its POS hardware
systems to Burger King for installation in corporate-owned stores commencing in
1997. The Company further anticipates offering POS systems to the more than
7,500 Burger King franchisee-owned stores through the Company's direct sales
organization. No assurances can be given that the pilot program will be
successful, that a definitive agreement will be reached on terms favorable to
the Company, if at all, or that the Company will be able to effect any
significant sales to Burger King or any of its franchisees.
Service revenues increased 19.3% to $7.0 million in the second quarter of
1996, compared to $5.9 million for the second quarter of 1995. This increase was
due to the ongoing activities with Taco Bell under the exclusive service
integration contract awarded in 1995. Under this agreement, the Company is
responsible for servicing of all Taco Bell's restaurant ITIP systems, back
office computer systems and other computer-based equipment in all Company-owned
restaurants. The Company also provides telephone diagnostic support, on-site
service and part depot capabilities for all such equipment. In addition, the
Company performed a special integration project for a customer during the second
quarter of 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996
COMPARED WITH
QUARTER ENDED JUNE 30, 1995
Contract revenues were $6.2 million in 1996, a decrease of 6.1% from $6.6
million reported in 1995. This decrease was due to certain nonrecurring material
purchases on contracts in the second quarter of 1995. Partially offsetting this
decrease was the Company's continuing activities in environmental monitoring
systems, hazardous material tracking and Airfield Management.
Gross margin on product revenues were 38% in the second quarter of 1996,
compared to 42.9% for the second quarter of 1995. The Company has experienced
reductions in average selling prices to certain major customers during this
period as compared to the second quarter of 1995. However, these lower margins
were anticipated and the revenue growth in these major accounts was a major
factor contributing to the earnings increase in 1996 versus 1995.
Gross margin on service revenues was 12.1% for the three months ended June
1996 versus 17.5% for the same three months of 1995. This decline was primarily
the result of lower margins attributable to a special integration project
requested by a customer and an equipment replacement program in the second
quarter of 1996.
Gross margin on contract revenues was 5.9% in 1996 versus 5.4% in 1995. The
improved margins were due to a favorable contract mix in 1996 versus 1995.
Selling, general and administrative expenses were $4.3 million in 1996, an
increase of 4.5% from the $4.1 million reported in 1995. This is primarily due
to an increase in the restaurant ITIP sales force costs in 1996 versus 1995.
Research and development expenses were $1.3 million in 1996 virtually
unchanged from 1995. Research and development costs attributable to government
contracts are included in cost of contract revenues.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995
The Company reported a net income of $1.4 million, or earnings per share of
$0.18, on revenues of $53.9 million for the six months ended June 30, 1996. This
compares to net income of $1.0 million, or earnings per share of $0.13, on
revenues of $48.4 million for the same six-month period of 1995.
Product revenues increased 7.5% to $26.1 million in 1996 versus $24.2
million in 1995. This increase was the result of ITIP sales to the Company's
major restaurant customers including KFC International and Taco Bell. The
Company's manufacturing/warehousing and Corneal Topography businesses also
contributed to this increase.
Service revenues increased 27.9% to $14.7 million for the first six months
of 1996 compared to $11.5 million for the same period of 1995. This increase was
due to special service integration projects requested by customers and the Taco
Bell service contract discussed previously.
Contract revenues were $13.1 million in 1996, an increase of 3.6% from
$12.7 million reported in 1995. The increase is due to 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 37.9% in 1996 versus 40.4 % in 1995.
This decline was due to certain reductions in selling prices discussed above.
This decrease was partially offset by reductions in product costs.
Gross margin on service revenues was 15.4% for the six months ended June
30, 1996 versus 19.1 % for the same six 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.
Gross margin on contract revenues was 6.0% in 1996 compared to 5.3% for the
same period in 1995. This increase is attributable to contract mix.
Selling, general and administrative expenses were $8.1 million in 1996,
compared to $8.3 million in 1995. This decrease was mainly the result of
nonrecurring charges in 1995 relating to the Company's accounts receivable from
and equity interest in Phoenix. This was partially offset by an increase in
restaurant sales force costs in 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995
Research and development expenses were $2.6 million in 1996, virtually
unchanged from 1995.
Liquidity and Capital Resources
Cash flows to meet the Company's requirements for operating, investing and
financing activities for the six months ended June 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
provided by operating activities was $2.3 million in the first six months of
1996, compared to $2.1 million in 1995. The Company experienced significant
collections of accounts receivable in 1996 due to the volume of sales generated
in the fourth quarter of 1995. This was partially offset by the build up of
restaurant ITIP and service inventory in anticipation of future sales orders and
service requirements.
Cash used in investing activities was $831,000 in 1996, compared to $1.1
million in 1995. In 1996, capital expenditures 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 $363,000 for the first six
months of 1996 compared to cash used of $279,000 in 1995. In 1996, the Company
increased its line of credit borrowings to finance the acquisition of treasury
stock. Additionally, the Company generated $689,000 from the exercise of stock
options held by key employees.
Subsequent to the close of the quarter the Company completed a public
offering of 975,200 shares of its common stock, which generated aggregate net
proceeds of $13.4 million.
The Company has line-of-credit agreements with certain banks, which
aggregate $27.2 million, of which $1.6 million was in use at June 30, 1996. The
Company believes that it has adequate financial resources to meet its future
liquidity and capital requirements.
The foregoing statements contain forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" as well as future
<PAGE>
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. With the exception of
certain purchase commitments by Taco Bell Corporation, the Company's largest
customer, no customer is 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
<PAGE>
such factors such as the timing or cancellation of customer orders, especially
major customers, including Taco Bell, delays in order placement on the part of
major customers in anticipation of the introduction of new products by the
Company, price reductions by competitors or by the Company, the market
acceptance of newly introduced products, significant fluctuation in the pricing
of components of the Company's products and introductions of new or enhanced
competing products. Because a high percentage of the Company's costs, including
personnel and facilities costs, are relatively fixed, variations in the timing
of orders and shipments can cause significant variations in quarterly financial
results.
New Product Development and Rapid Technological Change
The products sold by the Company are subject to rapid and continual
technological change. Products available from the Company in its current
restaurant ITIP and manufacturing/warehousing ITIP markets, as well as from its
competitors, have increasingly offered a wider range of features and
capabilities. The Company believes that in order to compete effectively in
selected commercial segment markets, it must provide upwardly compatible systems
incorporating new technologies at competitive prices. There can be no assurance
that the Company will be able to continue funding research and development at
levels sufficient to enhance its current product offerings or will be able to
develop and introduce on a timely basis new products that keep pace with
technological developments and emerging industry standards and address the
evolving needs of customers. There can also be no assurance that the Company
will not experience difficulties that will result in delaying or preventing the
successful development, introduction and marketing of new products in its
existing markets or that its new products and product enhancements will
adequately meet the requirements of the marketplace or achieve any significant
degree of market acceptance. Likewise, there can be no assurance as to the
acceptance of Company products in new markets, including the Company's CTS and
Qscan(R) products, nor can there be any assurance as to the success of the
Company's penetration of these markets, or to the revenue or profit margins with
respect to these products. The inability of the Company, for any reason, to
develop and introduce new products and product enhancements in a timely manner
in response to changing market conditions or customer requirements and could
materially adversely affect the Company's business, operating results and
financial condition.
Government Contracts
The government contracting business is subject to various risks including:
(1) unpredictable contract or project termination, reductions in funds available
for the Company's projects due to government policy changes and contract
adjustments and penalties arising from post-award contract audits and incurred
cost audits in which the value of the contract may be reduced; (2) risks of
underestimating costs, particularly with respect to software and hardware
development, for work performed pursuant to "fixed-price" contracts, where the
Company commits to achieve specified deliveries for a predetermined fixed price;
(3) limited profitability from "cost-plus" contracts under which the amount of
profit attainable is limited to a specified negotiated amount, usually in the
range of six to ten percent of estimated costs, although no assurance can be
given that such levels will be obtainable on present or future contract; (4)
unpredictable timing of cash collections of certain unbilled receivables as they
may be subject to acceptance of contract deliverables to the customer, and
<PAGE>
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
<PAGE>
have been focused on niche offerings, primarily signal and image processing and
engineering services. There are no assurances that the Company will continue to
win government contracts as a prime contractor or subcontractor. Additionally,
there are no assurances that the Government will continue to contract for the
provision of services in the areas in which the Company has expertise.
Industry Concentration and Cyclicality
The Company's restaurant ITIP product sales are dependent in large part on
the health of the quick service sector of the restaurant industry ("QSR"), which
in turn is dependent on the domestic and international economy, as well as
factors such as consumer buying preferences and weather conditions. Although the
QSR industry has experienced profitability and growth recently, there can be no
assurance that profitability and growth will continue. The QSR market is
affected by a variety of factors, including war, global and regional
instability, natural disasters and general economic conditions. Adverse
developments in the restaurant industry could materially affect the Company's
restaurant ITIP business, operating results and financial condition.
International Sales
The Company intends to continue to expand its operations outside the United
States and to enter additional international markets, which will require
significant management attention and financial resources. The Company's
operating results are subject to the risks inherent in international sales,
including, but not limited to, regulatory requirements, political and economic
changes and disruptions, transportation delays, difficulties in staffing and
managing foreign sales operations, and potentially adverse tax consequences. In
addition, fluctuations in exchange rate may render the Company's products less
competitive relative to local product offerings, or could result in foreign
exchanges losses, depending upon the currency in which the Company sells its
products. There can be no assurance that these factors will not have a material
adverse effect on the Company's future international sales and, consequently, on
the Company's operating results.
Dependence on Proprietary Technology
PAR's success and ability to compete is dependent in part upon its ability
to protect its proprietary technology. The Company relies on a combination of
patent, copyright and trade secret laws and non-disclosure agreements to protect
its proprietary technology. The Company generally enters into confidentiality or
license agreements with its employees, distributors, customers and potential
customers and limits access to and distribution of its software, documents other
proprietary information. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to the same extent as do the laws
<PAGE>
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 second 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: August 7, 1996
/s/RONALD J. CASCIANO
---------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Sequential
Page
Exhibit Number
------- ------
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 June 30,
--------------------
1996 1995
---- ----
<S> <C> <C>
Primary and Fully Diluted Earnings Per Share:
Weighted average shares of common stock outstanding:
Balance - beginning of period ...................... 7,747 7,686
Weighted average shares issued ..................... 66 5
Acquisition of treasury stock ...................... (51) (2)
Assumed exercise of certain stock options .......... 479 421
----- -----
Weighted shares - end of period .................... 8,241 8,110
====== ======
</TABLE>
<PAGE>
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
(In Thousands)
<TABLE>
<CAPTION>
For the six months
ended June 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 ........................... 75 25
Acquisition of treasury stock ............................ (25) (1)
Assumed exercise of certain stock options ................ 502 428
----- -----
Weighted shares - end of period .......................... 8,234 8,108
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,307
<SECURITIES> 0
<RECEIVABLES> 30,161
<ALLOWANCES> 0
<INVENTORY> 21,975
<CURRENT-ASSETS> 57,124
<PP&E> 7,168
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,906
<CURRENT-LIABILITIES> 13,241
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 53,637
<TOTAL-LIABILITY-AND-EQUITY> 67,906
<SALES> 26,050
<TOTAL-REVENUES> 53,882
<CGS> 16,179
<TOTAL-COSTS> 40,959
<OTHER-EXPENSES> 2,637
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,211
<INCOME-TAX> 768
<INCOME-CONTINUING> 1,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,443
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
