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, 1998. 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 April
30, 1998 - 8,897,165 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, 1998 and 1997
- Consolidated Balance Sheet at
March 31, 1998 and December 31, 1997
- Consolidated Statement of Cash Flows
for the Three Months Ended
March 31, 1998 and 1997
- 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,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net revenues:
Product ..................................... $ 7,961 $ 6,566
Service ..................................... 6,955 6,381
Contract .................................... 6,265 5,116
-------- --------
21,181 18,063
-------- --------
Costs of sales:
Product ..................................... 5,649 5,514
Service ..................................... 6,392 5,609
Contract .................................... 5,982 4,887
-------- --------
18,023 16,010
-------- --------
Gross margin .......................... 3,158 2,053
-------- --------
Operating expenses:
Selling, general and administrative ......... 4,569 4,871
Research and development .................... 1,338 1,092
Non-recurring charges (benefit) ............. (100) --
-------- --------
5,807 5,963
-------- --------
Loss from operations ............................. (2,649) (3,910)
Other income, net ................................ 145 141
-------- --------
Loss before provision for income taxes ........... (2,504) (3,769)
Benefit for income taxes ......................... (877) (1,376)
-------- --------
Net loss ......................................... $ (1,627) $ (2,393)
======== ========
Loss per common share ............................ $ (.18) $ (.27)
======== ========
Weighted average number of common
shares outstanding ............................... 8,895 8,840
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $(1,627) $(2,393)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ........ 206 (277)
------- -------
Comprehensive loss ................................... $(1,421) $(2,670)
======= =======
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
March 31,
1998 December 31,
Assets Unaudited) 1997
Current Assets:
Cash .......................................... $ 1,070 $ 3,977
Accounts receivable-net ....................... 26,617 29,938
Inventories ................................... 30,812 31,168
Income tax refund claims ...................... 867 214
Deferred income taxes ......................... 5,719 5,876
Other current assets .......................... 1,032 1,340
-------- --------
Total current assets ...................... 66,117 72,513
Property, plant and equipment - net ................ 7,051 7,013
Other assets ....................................... 4,382 3,678
-------- --------
$ 77,550 $ 83,204
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ................................. $ -- $ 195
Accounts payable .............................. 4,027 8,664
Accrued salaries and benefits ................. 4,034 3,804
Accrued expenses .............................. 3,836 3,444
Deferred service revenue ...................... 2,885 3,024
-------- --------
Total current liabilities ................. 14,782 19,131
-------- --------
Deferred income taxes .............................. 672 656
-------- --------
Shareholders' Equity:
Common stock, $.02 par value,
12,000,000 shares authorized;
9,499,671 and 9,466,771 shares issued
8,897,165 and 8,864,265 outstanding ......... 190 189
Preferred stock, $.02 par value,
250,000 shares authorized ................... -- --
Capital in excess of par value ................ 27,974 27,875
Retained earnings ............................. 37,333 38,960
Cumulative translation adjustment ............. (476) (682)
Treasury stock, at cost, 602,506 ............ (2,925) (2,925)
-------- --------
Total shareholders' equity ................ 62,096 63,417
-------- --------
Contingent liabilities
$ 77,550 $ 83,204
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................. $ (1,627) $ (2,393)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ........................... 542 546
Provision for obsolete inventory ........................ 655 740
Translation adjustments ................................. 206 (277)
Increase (decrease) from changes in:
Accounts receivable-net ............................... 3,321 10,752
Inventories ........................................... (299) (3,669)
Income tax refund claims .............................. (653) (1,060)
Other current assets .................................. 308 (342)
Other assets .......................................... (596) (359)
Accounts payable ...................................... (4,637) (1,268)
Accrued salaries and benefits ......................... 230 283
Accrued expenses ...................................... 392 (671)
Deferred service revenue .............................. (139) 454
Deferred income taxes ................................. 173 (106)
-------- --------
Net cash provided (used) by operating activities ..... (2,124) 2,630
-------- --------
Cash flows from investing activities:
Capital expenditures .................................... (427) (333)
Capitalization of software costs ........................ (261) (344)
-------- --------
Net cash used by investing activities ................ (688) (677)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit agreements (195) 10
Proceeds from the exercise of stock options ............. 100 82
Acquisition of treasury stock ........................... -- (163)
-------- --------
Net cash used by financing activities ............... (95) (71)
-------- --------
Net increase (decrease) in cash and cash equivalents ..... (2,907) 1,882
Cash and cash equivalents at beginning of year ........... 3,977 8,391
-------- --------
Cash and cash equivalents at end of period ............... $ 1,070 $ 10,273
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................ $ 2 $ --
Income taxes paid, net of refunds ....................... (393) (202)
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The statements for the three months ended March 31, 1998 and 1997 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, 1998 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,
1998 are not necessarily indicative of the results of operations to be
expected for the year ending December 31, 1998. 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, 1997 and
1996 included in the Company's December 31, 1997 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:
(In Thousands)
--------------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Finished goods $ 7,238 $ 8,635
Work in process 4,136 4,184
Component parts 10,389 9,883
Service parts 9,049 8,466
---------- ----------
$ 30,812 $ 31,168
========== ==========
</TABLE>
At March 31, 1998 and December 31, 1997, the Company had recorded reserves
for obsolete inventory of $3,300,000 and $3,800,000, respectively.
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1998
COMPARED WITH
QUARTER ENDED MARCH 31, 1997
The Company reported a net loss of $1.6 million or a loss per share of $.18
for the first quarter of 1998. Revenues for the quarter were $21.2 million.
These results compare to a net loss of $2.4 million or a loss per share of $.27
and revenues of $18.1 million for the first quarter of 1997.
Product revenues were $8.0 million in the first quarter of 1998 an increase
of 21% from the $6.6 million recorded in the first quarter of 1997. The increase
was primarily due to higher sales to McDonald's as the Company's new POS 4
hardware products were recently approved by this major customer. Higher sales to
Taco Bell also contributed to this increase.
Customer service revenues were $7.0 million in the first quarter of
1998, an increase of 9% from the $6.4 million in the first quarter of 1997. In
1998, the Company increased its number of worldwide field service and telephone
help desk contracts as its customer base expands. The Company also increased its
integration work requested by customers.
Contract revenues were $6.3 million in 1998, an increase of 22% when
compared to the $5.1 million recorded in the same period in 1997. The Company
increased the level of integration and software development activity across
several contracts. Additionally, the Company expanded its engineering service
efforts in airfield management.
Product margins were 29% for the first quarter of 1998 compared to 16% for
the same quarter of 1997. The product margins in 1997 were depressed due to
lower than normal sales volume. Additionally, the Company experienced improved
margins on its international business as its customers are transitioning to the
Company's new products.
Customer service margins were 8% in 1998 compared to 12% in 1997. The
decline in margin is primarily due to an increase in personnel as the Company is
upgrading its integration and service capabilities. This investment will
continue throughout the remainder of the year.
Contract margins were 4.5% in 1998 virtually unchanged from a year ago.
Margins on the Company's government contract business typically run between 5%
and 6%. A slightly higher mix of low margin material and subcontract components
was the main reason for the lower than normal margins.
Selling, general and administrative expenses were $4.6 million in 1998
versus $4.9 million in 1997, a decrease of 6%. The decline is primarily due to
the Company's decision in 1997 to reduce its investment in its Corneal
Topography (CTS) business.
Research and development expenses were $1.3 million in 1998, an increase of
23% from the $1.1 million in 1997. The Company is actively increasing its
investment in its POS business in 1998. Partially offsetting the increase was
the reduction in the CTS business discussed above. Research and development
costs attributable to government contracts are included in cost of contract
revenues.
In the first quarter of 1998, the Company recorded a non-recurring benefit
of $100,000 due to payments received from Phoenix Systems and Technologies
pertaining to amounts owed the Company which were previously reserved.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1998
COMPARED WITH
QUARTER ENDED MARCH 31, 1997
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations. Cash
used by operating activities was $2.1 million in the first quarter of 1998,
compared to cash provided of $2.6 million in 1997. 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,
sales in the fourth quarter of 1997 were lower than the fourth quarter of 1996.
As a result, accounts receivable collections were not as great in the first
quarter of 1998 when compared to the first quarter of 1997. Additionally, in the
first quarter of 1998, the Company's accounts payable disbursements were greater
than a year ago primarily as a result of inventory growth in 1997.
Cash used in investing activities was $688,000 for the first quarter of
1998 compared to $677,000 in 1997. In 1998, capital expenditures were primarily
for upgrades to the Company's customer service center and for manufacturing
equipment. In 1997, capital expenditures were primarily for upgrades to the
manufacturing facility.
Cash used by financing activities was $95,000 for the first quarter of 1998
compared to cash used of $71,000 in 1997. In 1998, the Company repaid its
line-of-credit indebtedness of $195,000 and received $100,000 from the exercise
of employee stock options. In 1997, the Company paid $163,000 to repurchase some
of its stock and received $82,000 from the exercise of employee stock options.
The Company has line-of-credit agreements, which aggregate $34.4 million
with certain banks, of which were unused at March 31, 1998. 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 1998.
<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 6, 1998
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,
--------------------
1998 1997
---- ----
<S> <C> <C>
Primary and Fully Diluted Earnings Per Share:
Weighted average shares of common stock outstanding:
Balance - beginning of period ...................... 8,864 8,826
Weighted average shares issued ..................... 31 14
----- -----
Weighted shares - end of period .................... 8,895 8,840
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,070
<SECURITIES> 0
<RECEIVABLES> 26,617
<ALLOWANCES> 0
<INVENTORY> 30,812
<CURRENT-ASSETS> 66,117
<PP&E> 7,051
<DEPRECIATION> 0
<TOTAL-ASSETS> 77,550
<CURRENT-LIABILITIES> 14,782
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 61,906
<TOTAL-LIABILITY-AND-EQUITY> 77,550
<SALES> 7,961
<TOTAL-REVENUES> 21,181
<CGS> 5,649
<TOTAL-COSTS> 18,023
<OTHER-EXPENSES> 1,238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,504)
<INCOME-TAX> (877)
<INCOME-CONTINUING> (1,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,627)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
