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 March 31, 1997. 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 pre-ceding 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 April
30, 1997 - 8,837,865 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 Months Ended March 31, 1997
and 1996
- Consolidated Balance Sheet at
March 31, 1997 and December 31, 1996
- Consolidated Statement of Cash Flows
for the Three Months Ended
March 31, 1997 and 1996
- 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
ended March 31,
-----------------------
1997 1996
-------- -------
<S> <C> <C>
Net revenues:
Product ...................................... $ 6,566 $ 10,880
Service ...................................... 6,381 7,677
Contract ..................................... 5,116 6,937
-------- --------
18,063 25,494
-------- --------
Costs of sales:
Product ...................................... 5,514 6,778
Service ...................................... 5,609 6,261
Contract ..................................... 4,887 6,513
-------- --------
16,010 19,552
-------- --------
Gross margin ........................... 2,053 5,942
-------- --------
Operating expenses:
Selling, general and administrative .......... 4,871 3,865
Research and development ..................... 1,092 1,351
-------- --------
5,963 5,216
-------- --------
Income (loss) from operations ..................... (3,910) 726
Other income, net ................................. 141 121
-------- --------
Income (loss) before provision for
income taxes .................................... (3,769) 847
Provision (benefit) for income taxes .............. (1,376) 296
-------- --------
Net income (loss) ................................. $ (2,393) $ 551
======== ========
Earnings (loss) per common share .................. $ (.26) $ .07
======== ========
Weighted average number of common
shares outstanding ........................... 9,130 8,157
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
Assets
Current Assets:
Cash .......................................... $ 10,273 $ 8,391
Accounts receivable-net ....................... 31,583 42,335
Inventories ................................... 24,917 21,988
Income tax refund claims ...................... 1,282 222
Deferred income taxes ......................... 1,248 1,096
Other current assets .......................... 1,603 1,261
-------- --------
Total current assets ...................... 70,906 75,293
Property, plant and equipment - net ................ 7,177 7,243
Other assets ....................................... 4,778 4,222
-------- --------
$ 82,861 $ 86,758
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ................................. $ 195 $ 185
Accounts payable .............................. 3,859 5,127
Accrued salaries and benefits ................. 3,033 2,750
Accrued expenses .............................. 2,212 2,883
Deferred service revenue ...................... 2,695 2,241
Income taxes payable .......................... -- --
-------- --------
Total current liabilities ................. 11,994 13,186
-------- --------
Deferred income taxes .............................. 1,016 970
-------- --------
Shareholders' Equity:
Common stock, $.02 par value,
12,000,000 shares authorized;
9,439,871 and 9,416,721 shares issued
8,837,365 and 8,826,315 outstanding ......... 189 188
Preferred stock, $.02 par value,
250,000 shares authorized ................... -- --
Capital in excess of par value ................ 27,645 27,564
Retained earnings ............................. 45,286 47,679
Cumulative translation adjustment ............. (344) (67)
Treasury stock, at cost, 602,506 and
590,406 shares .............................. (2,925) (2,762)
-------- --------
Total shareholders' equity ................ 69,851 72,602
-------- --------
Contingent liabilities
-------- --------
$ 82,861 $ 86,758
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................ $ (2,393) $ 551
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................ 546 655
Provision for obsolete inventory ............. 740 62
Translation adjustments ...................... (277) 34
Increase (decrease) from changes in:
Accounts receivable-net ........................ 10,752 7,323
Inventories .................................... (3,669) (3,182)
Income tax refund claims ...................... (1,060) --
Other current assets ........................... (342) (1,380)
Other assets ................................... (359) 245
Accounts payable ............................... (1,268) (874)
Accrued salaries and benefits .................. 283 (711)
Accrued expenses ............................... (671) (768)
Deferred service revenue ....................... 454 392
Income taxes payable ........................... -- (665)
Deferred income taxes .......................... (106) 170
-------- --------
Net cash provided by operating activities .... 2,630 1,852
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (333) (102)
Capitalization of software costs ................. (344) (96)
-------- --------
Net cash used by investing activities ........ (677) (198)
-------- --------
Cash flows from financing activities:
Net borrowings under line-of-credit agreements ... 10 97
Proceeds from the exercise of stock options ...... 82 239
Acquisition of treasury stock .................... (163) --
-------- --------
Net cash provided (used) by
financing activities ....................... (71) 336
-------- --------
Net increase in cash and cash equivalents ......... 1,882 1,990
Cash and cash equivalents at beginning of year .... 8,391 458
-------- --------
Cash and cash equivalents at end of period ........ $ 10,273 $ 2,448
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ..................................... $ -- $ 20
Income taxes paid, net of refunds ............ (202) 764
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The statements for the three months ended March 31, 1997 and 1996 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 consoli-dated
financial statements for the year ending December 31, 1997 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 months ended March 31,
1997 are not necessarily indicative of the results of operations to be
expected for the year ending December 31, 1997. 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, 1996 and
1995 included in the Company's December 31, 1996 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 of Point-Of-Sale systems and other
commercial products. The components of inventory, net of related reserves,
consist of the following:
<TABLE>
<CAPTION>
(In Thousands)
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Finished goods $ 6,588 $ 5,111
Work in process 4,134 3,538
Component parts 6,586 6,234
Service parts 7,609 7,105
---------- ----------
$ 24,917 $ 21,988
========== ==========
</TABLE>
At March 31, 1997 and December 31, 1996, the Company had recorded reserves
for obsolete inventory of $1,513,000 and $1,174,000, respectively.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997
COMPARED WITH
QUARTER ENDED MARCH 31, 1996
The Company reported a net loss of $2.4 million or a loss per share of $.26
for the first quarter of 1997. Revenues for the quarter were $18.1 million.
These results compare to net income of $551,000, earnings per share of $.07 and
revenues of $25.5 million for the first quarter of 1996.
Product revenues decreased 40% to $6.6 million in 1997 versus $10.9 million
in 1996. The decrease was primarily the result of lower sales to Taco Bell. The
Company fulfilled the majority of this customer's requirements for 1997 in 1996.
Additionally, delays in delivery of our new POS IV products also adversely
affected product revenues. Partially offsetting this decline was the Company's
manufacturing/ warehousing business which reported revenues of $1.1 million in
the first quarter of 1997, an increase of 66% over the same quarter in 1996.
The Company believes that the delays in new product introductions in the
first quarter will continue into part of the second quarter. Therefore, the
Company anticipates that revenues in the second quarter of 1997, while better
than the first quarter of 1997, will be lower than the second quarter of 1996.
The Company expects to return to solid growth in the second half of 1997.
Service revenues decreased 17% to $6.4 million in the first quarter of 1997
compared to $7.7 million for the first quarter of 1996. This decrease was due to
a special integration project requested by a customer in 1996 that did not recur
in 1997. This decline was partially offset by 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 POS systems,
back office systems and Help Desk and On-Site Support activities.
Contract revenues were $5.1 million in 1997, a decrease of 26% from $6.9
million reported in 1996. The decrease in our government business was primarily
the result of cancellation for convenience in 1996 of certain software
development contracts of the Company by the Department of Defense.
Gross margin on product revenues was 16% in the first quarter of 1997,
versus 37.7% for the first quarter of 1996. The 1997 margin was due to the
inability to absorb certain manufacturing costs as a result of the lower than
normal product sales volume.
Gross margin on service revenues was 12.1% for the three months ended March
1997 versus 18.4% for the same three months of 1996. This decline was primarily
the result of lower margins attributable to product mix of the different service
offerings.
Gross margin on contract revenues was 4.5% in 1997 versus 6.1% in 1996.
Contract margins are generally in the range of 4% to 6% with minor fluctuation
due to contract mix.
Selling, general and administrative expenses were $4.9 million in 1997, an
increase of 26% from the $3.9 million reported in 1996. The increase was
primarily due to an increased investment in the POS sales force and to a lesser
degree a one time bad debt write off.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997
COMPARED WITH
QUARTER ENDED MARCH 31, 1997
Research and development expenses decreased 19% to $1.1 million in 1997
compared to $1.4 million in 1996. Net research and development expenses declined
due to the requirement to capitalize certain soft-ware 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 soft-ware development costs meeting this requirement in 1997 than
in 1996. Capitalized software research and development costs attributable to
government contracts are included in costs of contract revenues.
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations. Cash
provided by operating activities was $2.6 million in the first quarter of 1997,
compared to $1.9 million in 1996. The Company historically has experienced
significant collections of accounts receivable in its first quarter due to the
volume of sales generated in the preceding quarter. This is primarily due to the
seasonal demands of the Company's restaurant customers. However, this factor was
offset by the build up of product and service inventory in anticipation of
future sales orders and service requirements and the timing of estimated income
tax payments in 1997 versus 1996.
Cash used in investing activities was $677,000 for the first quarter of
1997 compared to $198,000 in 1996. In 1997, capital expenditures were primarily
for upgrades to the manufacturing facility. In 1996, capital expenditures were
for internal use computers and other miscellaneous items.
Cash used by financing activities was $71,000 for the first quarter of 1997
compared to cash provided of $336,000 in 1996. In 1997, the Company paid
$163,000 to repurchase some of its stock. In 1996, the Company benefited from
the proceeds from the exercise of stock options.
The Company has line-of-credit agreements, which aggregate $27.4 million
with certain banks, of which $195,000 was in use at March 31, 1997. The Company
believes that it has adequate financial resources to meet its future liquidity
and capital requirements.
Important Factors Regarding Future Results
Information provided by the Company, including information contained in
this Report, or by its spokespersons from time to time may contain
forward-looking statements. Forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, including without limitation, further delays in new product
introduction, risks in technology development and commercialization, risks in
product development and market acceptance of and demand for the Company's
products, risks of downturns in economic conditions generally, and in the quick
service sector of the restaurant market specifically, risks of intellectual
property rights associated with competition and competitive pricing pressures,
risks associated with foreign sales and high customer concentration and other
risks detailed in the Company's filings with the Securities and Exchange
Commission.
<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 first quarter of 1997.
<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: May 9, 1997
RONALD J. CASCIANO
---------------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Exhibit
-------
11 - Statement 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 March 31,
--------------------
1997 1996
---------- ---------
<S> <C> <C>
Primary and Fully Diluted Earnings Per Share:
Weighted average shares of common stock outstanding:
Balance - beginning of period ...................... 8,826 7,682
Weighted average shares issued ..................... 14 18
Assumed exercise of certain stock options .......... 290 457
----- -----
Weighted shares - end of period .................... 9,130 8,157
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,273
<SECURITIES> 0
<RECEIVABLES> 31,583
<ALLOWANCES> 0
<INVENTORY> 24,917
<CURRENT-ASSETS> 70,906
<PP&E> 7,177
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,861
<CURRENT-LIABILITIES> 11,994
<BONDS> 0
0
0
<COMMON> 189
<OTHER-SE> 69,662
<TOTAL-LIABILITY-AND-EQUITY> 82,961
<SALES> 6,566
<TOTAL-REVENUES> 18,063
<CGS> 5,514
<TOTAL-COSTS> 16,010
<OTHER-EXPENSES> 5,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,769)
<INCOME-TAX> (1,376)
<INCOME-CONTINUING> (2,393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,393)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
