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, 1999. 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 29, 1999 - 8,223,005 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, 1999 and 1998
- Consolidated Statement of Comprehensive Income for
the Three and Nine Months Ended September 30, 1999 and 1998
- Consolidated Balance Sheet at
September 30, 1999 and December 31, 1998
- Consolidated Statement of Cash Flows
for the Nine Months Ended September 30, 1999 and 1998
- 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>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Product ........................... $ 19,226 $ 19,683 $ 65,590 $ 39,599
Service ........................... 8,674 7,703 26,762 21,908
Contract .......................... 4,682 6,077 14,927 19,114
--------- --------- --------- ---------
32,582 33,463 107,279 80,621
--------- --------- --------- ---------
Costs of sales:
Product ........................... 12,331 13,779 41,916 28,453
Service ........................... 8,237 6,693 24,522 19,262
Contract .......................... 4,455 5,171 14,007 17,145
--------- --------- --------- ---------
25,023 25,643 80,445 64,860
--------- --------- --------- ---------
Gross margin ................ 7,559 7,820 26,834 15,761
--------- --------- --------- ---------
Operating expenses:
Selling, general and administrative 5,289 4,874 16,785 14,103
Research and development .......... 2,003 1,399 6,551 4,275
Non-recurring benefit ............. - (157) - (807)
--------- --------- --------- ---------
7,292 6,116 23,336 17,571
--------- --------- --------- ---------
Income (loss) from operations .......... 267 1,704 3,498 (1,810)
Other income, net ...................... 238 94 334 405
Interest expense ....................... (101) - (368) -
--------- --------- --------- ---------
Income (loss) before provision for
income taxes ......................... 404 1,798 3,464 (1,405)
Provision (benefit) for income taxes ... (349) 632 771 (499)
--------- --------- --------- ---------
Net income (loss) ...................... $ 753 $ 1,166 $ 2,693 $ (906)
========= ========= ========= =========
Earnings (loss) per share
Diluted ........................... $ .09 $ .13 $ .31 $ (.10)
========= ========= ========= =========
Basic ............................. $ .09 $ .13 $ .32 $ (.10)
========= ========= ========= =========
Weighted average shares outstanding
Diluted ........................... 8,595 8,959 8,580 8,878
========= ========= ========= =========
Basic ............................. 8,412 8,841 8,435 8,878
========= ========= ========= =========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) ...................... $ 753 $ 1,166 $ 2,693 $ (906)
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustments ...................... (48) (22) (85) (13)
--------- --------- --------- ---------
Comprehensive income (loss) ............ $ 705 $ 1,144 $ 2,608 $ (919)
========= ========= ========= =========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
September 30,
1999 December 31,
(Unaudited) 1998
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash ................................................ $ 1,032 $ 1,298
Accounts receivable-net ............................. 38,531 47,137
Inventories ......................................... 33,366 27,260
Deferred income taxes ............................... 4,546 3,208
Other current assets ................................ 2,246 1,367
-------- --------
Total current assets ............................ 79,721 80,270
Property, plant and equipment - net ...................... 9,054 8,465
Other assets ............................................. 4,202 4,691
-------- --------
$ 92,977 $ 93,426
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ....................................... $ 7,823 $ 7,387
Accounts payable .................................... 5,710 9,789
Accrued salaries and benefits ....................... 3,799 4,731
Accrued expenses .................................... 2,825 3,427
Income taxes payable ................................ 2,411 273
Deferred service revenue ............................ 5,349 4,376
-------- --------
Total current liabilities ....................... 27,917 29,983
-------- --------
Deferred income taxes .................................... 483 617
-------- --------
Shareholders' Equity:
Common stock, $.02 par value,
19,000,000 shares authorized;
9,516,711 and 9,513,571 shares issued
8,414,505 and 8,548,665 outstanding ............... 190 190
Preferred stock, $.02 par value,
1,000,000 shares authorized ....................... - -
Capital in excess of par value ...................... 28,071 28,050
Retained earnings ................................... 42,915 40,222
Accumulative comprehensive income ................... (632) (547)
Treasury stock, at cost, 1,102,206 and 964,906 shares (5,967) (5,089)
-------- --------
Total shareholders' equity ...................... 64,577 62,826
-------- --------
$ 92,977 $ 93,426
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
-------------------
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................... $ 2,693 $ (906)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................... 2,061 1,731
Provision for obsolete inventory ........................ 2,981 2,067
Translation adjustments ............................ (85) (13)
Increase (decrease) from changes in:
Accounts receivable-net .......................... 8,606 (7,033)
Inventories ...................................... (9,087) (768)
Income tax refund claims ......................... - (411)
Other current assets ............................. (879) 208
Other assets ..................................... (77) (582)
Accounts payable ................................. (4,079) 295
Accrued salaries and benefits .................... (932) 484
Accrued expenses ................................. (602) (56)
Income taxes payable ............................. 2,138 -
Deferred service revenue ......................... 973 695
Deferred income taxes ............................ (1,472) 2,856
------- -------
Net cash provided (used) by operating activities 2,239 (1,433)
------- -------
Cash flows from investing activities:
Capital expenditures ............................... (1,681) (2,607)
Capitalization of software costs ................... (403) (766)
------- -------
Net cash used in investing activities ........... (2,084) (3,373)
------- -------
Cash flows from financing activities:
Net borrowings under line-of-credit agreements ..... 436 3,483
Proceeds from the exercise of stock options ........ 21 177
Acquisition of treasury stock ...................... (878) (1,235)
------- -------
Net cash provided (used) by financing activities (421) 2,425
------- -------
Net decrease in cash and cash equivalents ........... (266) (2,381)
Cash and cash equivalents at beginning of year ...... 1,298 3,977
------- -------
Cash and cash equivalents at end of period .......... $ 1,032 $ 1,596
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ........................................... $ 362 $ 12
Income taxes, net of refunds ....................... (115) (2,891)
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The statements for the three and nine months ended September 30, 1999 and
1998 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, 1999 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, 1999 are not necessarily indicative of the
results of operations to be expected for the year ending December 31, 1999.
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, 1998 and 1997 included in the Company's December 31, 1998
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 and service of Transaction
Processing products. The components of inventory, net of related reserves,
consist of the following:
<TABLE>
<CAPTION>
(In Thousands)
--------------
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Finished goods $ 8,772 $ 7,377
Work in process 3,286 2,234
Component parts 6,302 7,342
Service parts 15,006 10,307
---------- ----------
$ 33,366 $ 27,260
========== ==========
</TABLE>
At September 30, 1999 and December 31, 1998, the Company had recorded
reserves for obsolete inventory of $3,652,000 and $2,123,000, respectively.
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Certain reclassifications have been made to conform the prior period
financial statements with the current year presentation.
4. The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products
and services. The Company has three reportable segments. The Transaction
Processing segment offers integrated solutions to the restaurant and
manufacturing/warehousing industries. These offerings include industry
leading hardware and software applications utilized at the point-of-sale,
back of store, corporate office and in the manufacturing/warehousing
environment. This segment also offers customer support including field
service, installation, twenty-four hour telephone support and depot repair.
The Government segment designs and implements advanced technology computer
software systems primarily for military and intelligence agency
applications. It provides services for operating and maintaining certain
U.S. Government-owned test sites, and for planning, executing and
evaluating experiments involving new or advanced radar systems. The Vision
segment designs, manufactures, sells, installs and services image
processing systems for the food-processing industry. Inter-segment sales
and transfers are not material.
<PAGE>
Information as to the Company's operations in these three segments is set
forth below (in thousands):
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Transaction Processing .. $ 27,855 $ 27,073 $ 91,844 $ 61,026
Government .............. 4,682 6,077 14,927 19,114
Vision .................. 45 313 508 481
--------- --------- --------- ---------
Total ............. $ 32,582 $ 33,463 $ 107,279 $ 80,621
========= ========= ========= =========
Income (loss) from operations:
Transaction Processing .. $ 175 $ 632 $ 2,962 $ (4,113)
Government .............. 292 983 940 2,145
Vision .................. (200) (68) (404) (649)
Nonrecurring benefit .... - 157 - 807
--------- --------- --------- ---------
267 1,704 3,498 (1,810)
Other income, net ............ 238 94 334 405
Interest expense ............. (101) - (368) -
--------- --------- --------- ---------
Income (loss) before provision
for income taxes ........ $ 404 $ 1,798 $ 3,464 $ (1,405)
========= ========= ========= =========
Depreciation and amortization:
Transaction Processing .. $ 568 $ 401 $ 1,606 $ 1,176
Government .............. 41 23 116 93
Vision .................. 7 26 31 73
Corporate ............... 134 236 308 389
--------- --------- --------- ---------
Total ............. $ 750 $ 686 $ 2,061 $ 1,731
========= ========= ========= =========
Capital expenditures:
Transaction Processing .. $ 303 $ 784 $ 743 $ 2,435
Government .............. 162 33 359 45
Vision .................. 7 1 41 9
Corporate ............... 273 61 538 118
--------- --------- --------- ---------
Total ............. $ 745 $ 879 $ 1,681 $ 2,607
========= ========= ========= =========
</TABLE>
The following table presents revenues by geographic area based on the
location of the use of the product or services.
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
United States $ 24,631 $ 27,664 $ 89,512 $ 67,137
Other Countries 7,951 5,799 17,767 13,484
--------- --------- --------- ---------
Total $ 32,582 $ 33,463 $ 107,279 $ 80,621
========= ========= ========= =========
</TABLE>
<PAGE>
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Transaction Processing Segment:
McDonald's Corporation ... 32% 48% 42% 38%
Tricon Corporation ....... 32% 15% 25% 20%
Government Segment:
Department of Defense .... 14% 18% 14% 24%
All Others .................... 22% 19% 19% 18%
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
Identifiable assets:
Transaction Processing $ 83,638 $ 83,569
Government ........... 6,628 6,022
Vision ............... 1,155 1,520
Corporate ............ 1,556 2,315
--------- ---------
Total .......... $ 92,977 $ 93,426
========= =========
</TABLE>
The following table presents property by geographic area based on the
location of the asset.
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
United States $ 82,979 $ 84,656
Other Countries 9,998 8,770
--------- ---------
Total $ 92,977 $ 93,426
========= =========
</TABLE>
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1999
COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 1998
The Company reported revenues of $32.6 million for the third quarter ended
September 30, 1999, a decrease of 3% from the $33.5 million reported in the
third quarter of 1998. Net income was $753,000 and diluted earnings per share
were $.09 for 1999. This compares to a net income of $1.2 million and diluted
earnings per share of $.13 for 1998.
Product revenues were $19.2 million in 1999, a decrease of 3% from the
$19.7 million recorded in 1998. This decline was primarily due to lower domestic
sales to McDonald's Corporation. McDonald's "Made for You" initiative is nearing
completion. Higher domestic sales to Tricon Restaurants partially offset this
decline. The Company's international business reported a 35% growth in product
revenue in the third quarter of 1999 compared to a year ago. Tricon, Burger King
and Wendy's were the major customers contributing to this increase abroad.
Revenue from the Company's Industrial Software product line increased 45% as the
Company's SAP certified software, TranSend gained customer acceptance. The
Company's Industrial customers in the third quarter of 1999 include Raytheon and
Rapistan.
Customer service revenues were $8.7 million in 1999, an increase of 13%
from the $7.7 million in 1998. POS support revenue was a major factor
contributing to this revenue growth. Service revenue also grew in international
markets consistent with the increase in international product sales discussed
above. The Company's service offerings include installation, twenty-four hour
help desk support and various field and on-site service options.
Contract revenues were $4.7 million in 1999, a decrease of 23% when
compared to the $6.1 million recorded in the same period in 1998. This decrease
was due to the completion of a major airfield management contract in the third
quarter of 1998. This decrease was partially offset by a $9 million multi-year
contract for our Cargo*Mate identification and monitoring system from the
Department of Transportation. The Company was recently awarded a $24 million,
multi-year contract involving the support of Naval Communications Systems in the
Pacific. This contract, which commences in the fourth quarter of 1999, will
stimulate future growth of the government business.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1999
COMPARED WITH
QUARTER ENDED SEPTEMBER 30, 1998
Product margins were 36% for 1999 compared to 30% for the same period in
1998. The Company benefited from lower component costs, other manufacturing
efficiencies and favorable product mix.
Customer service margins were 5% in the third quarter of 1999 compared to
13% for the same period in 1998. The Company is continuing its investments in
service personnel, training and service integration and help desk capabilities.
Additionally, greater than planned use of third party service providers in the
third quarter of 1999 contributed to the margin decline. The Company does not
expect this trend to continue in the future and anticipates improved margins.
Contract margins were 5% in 1999 compared to 15% for the same period in
1998. The 1998 margins were higher than normal due to a retroactive fee
adjustment on a certain contract.
Selling, general and administrative expenses were $5.3 million in 1999
versus $4.9 million for the same period in 1998, an increase of 9%. The Company
has expanded its sales force and increased its marketing efforts in both the POS
and Industrial Software areas.
Research and development expenses were $2 million in 1999, an increase of
43% from the $1.4 million recorded for the same period in 1998. The Company
continues to increase its investment in POS software development, including
numerous store applications and interfacing store information to the home
office. The Company is also investing in software products for interface with
industry leading enterprise solutions. Research and development costs
attributable to government contracts are included in cost of contract revenues.
Interest expense of $101,000 represents interest charged on the Company's
short-term borrowing requirements from banks.
The Company's tax provision includes a one-time tax benefit of $500,000 or
$.06 earnings per share relating to the finalization of the Company's 1998 tax
return.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
The Company reported revenues of $107.3 million for the nine months ended
1999, an increase of 33% from the $80.6 million reported in 1998. Net income was
$2.7 and diluted earnings per share were $.31 for 1999. This compares to a net
loss of $906,000 and a diluted loss per share of $.10 for 1998.
Product revenues were $65.6 million in 1999, an increase of 66% from the
$39.6 million recorded in 1998. This growth was led by increased domestic sales
to McDonald's Corporation, Tricon Restaurants and increased sales of the
Company's Industrial Software products. The Company also recorded a 35% increase
in international product revenue with growth recorded in several areas including
Europe, the Middle East and Mexico.
Customer service revenues were $26.8 million in 1999, an increase of 22%
from the $21.9 million in 1998. The Company recorded higher installation revenue
that was directly related to the increased product revenue discussed above.
Increased POS support contracts and supply sales also contributed to this
growth.
Contract revenues were $14.9 million in 1999, a decrease of 22% when
compared to the $19.1 million recorded in the same period in 1998. This decrease
was due to the completion of a major airfield management contract in the third
quarter of 1998. This decrease was partially offset by the Cargo*Mate contract
discussed previously.
Product margins were 36% for 1999 compared to 28% for the same period in
1998. The improved margins were primarily due to lower component costs and other
manufacturing efficiencies. Increased software content also contributed to the
improved margins.
Customer service margins were 8% for 1999 compared to 12% for the same
period in 1998. The Company's investment in its service capabilities continued
in the first three quarters of 1999. Additionally, the use of third party
service providers contributed to the decline in margin as discussed above.
Contract margins were 6% in 1999 compared to 10% for the same period in
1998. As discussed previously, the 1998 margin included the benefit of a
retroactive fee adjustment on a contract.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
Selling, general and administrative expenses were $16.8 million in 1999
versus $14.1 million for the same period in 1998, an increase of 19%. The
Company has invested in its sales and marketing capabilities in both the POS and
Industrial Software areas.
Research and development expenses were $6.6 million in 1999, an increase of
53% from the $4.3 million recorded for the same period in 1998. The Company is
investing in POS software applications and software products for interface with
SAP enterprise solutions. Additionally, the amount required to be capitalized
under Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed was less in
1999 when compared to 1998.
Interest expense of $368,000 in 1999 represents interest charged on the
Company's short-term borrowing requirements from banks.
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations. Cash
provided by operating activities was $2.2 million in the first nine months of
1999, compared to cash used in operating activities of $1.4 million in 1998.
During the first nine months of 1999, cash flow benefited from the collection of
accounts receivable, net income for the period and a federal income tax refund.
This was partially offset by the increase in inventory levels in anticipation of
future demand and to meet the growing service parts requirements as the
Company's customer base increases. In 1998, the Company's cash flow was impacted
by an increase in accounts receivable due to growth in product revenue. This was
partially offset by the receipt of a $2.5 million federal tax refund pertaining
to utilization of 1997's net operating loss.
Cash used in investing activities was $2.1 million for the first nine
months of 1999 compared to $3.4 million in 1998. In 1999, capital expenditures
were for the continued upgrade to the Company's customer service center, for PC
equipment and for research and development equipment. In 1998, capital
expenditures were primarily for upgrades to the Company's customer service
center and for manufacturing equipment.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
Cash used in financing activities was $421,000 for 1999 compared to cash
provided by financing activities of $2.4 million in 1998. In 1999, the Company
increased its lines of credit obligations by $436,000. The Company also
repurchased 137,300 shares of its stock for $878,000. In 1998, the Company
borrowed an additional $3.5 million on its lines of credit and received $177,000
from the exercise of employee stock options. Additionally in 1998, the Company
spent $1.2 million to repurchase 213,600 shares of its stock.
The Company has line-of-credit agreements, which aggregate $35 million with
certain banks, of which $27.2 million were unused at September 30, 1999. The
Company believes that it has adequate financial resources to meet its future
liquidity and capital requirements.
Year 2000 Disclosure- The "Year 2000 problem" exists because many computer
programs use only the last two digits to refer to a year. Therefore these
computer programs do not properly recognize a year beginning with "20", instead
of the familiar "19". The Year 2000 problem affects virtually all computer
systems, processes, and products in all segments of society.
The Company has identified the following areas which could be impacted by
the Year 2000 issue. They are: Company products, internally used systems and
software, and products or services provided by key third parties or business
partners. If the Company experiences Year 2000 issues resulting from failures in
any of these areas, the results could conceivably have a material adverse effect
on the Company.
In 1997, the Company established a corporate-wide program to address the
Year 2000 issue. The objective of this program is to identify, assess, and
address any issues associated with its infrastructure, operations, and products
in transitioning to Year 2000. The Company's cross-functional Year 2000 Task
Force includes senior management personnel who have responsibility for ensuring
Year 2000 program tasks are completed in support of all PAR business functions
and locations. Year 2000 progress reports are also presented regularly to
executive management and the Company's Board of Directors.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
The multi-phase Year 2000 program includes: (1) education of Company
personnel on the Year 2000 and its effects, (2) identification of systems,
suppliers of goods and services, and business partners with potential Year 2000
issues relating to the Company's internal operations as well as the creation and
support of its products, (3) assessment of internal systems and products, as
well as inquiries to outside parties to ascertain Year 2000 readiness, (4)
resolution and contingency planning for any items identified as having Year 2000
issues, and (5) post implementation follow-up.
The Company has virtually completed Phase 4 of its program and has begun
Phase 5 of the program-post implementation follow-up. The Company has
established a site on its web page dedicated to Year 2000 Readiness Disclosure.
This site is a culmination of Company product analysis and testing results, and
can be found at http://www.partech.com/.
The Company has undergone a review of its internal systems, including those
which support manufacturing, financial, and general business operations. The
Company identified systems which required upgrades to be Year 2000 ready,
including certain business software applications. The business application
upgrades are nearly complete, and are accommodated by existing software
maintenance contracts with outside providers.
The Company completed its analysis of key third parties which did not
reveal any issues that would prevent them from continuing to provide products
and services through the Year 2000 transition. Such analysis included telephone
and written inquiries to third parties. The Company has completed contingency
planning for all critical internal operations and third party suppliers. The
Company estimates that the remaining cost of resolving Year 2000 issues will be
approximately $100,000. This will be funded by existing financial resources. The
costs to date associated with the Year 2000 effort represent a reallocation of
existing Company resources. However failure, delays or increased costs
experienced by the Company could have a material adverse effect on the Company's
results of operations or financial condition. Additionally the Company cannot
guarantee that third parties, upon which the Company relies, have been able to
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1998
adequately assess and address their Year 2000 compliance issues in a timely
manner, the effects of which may also have an adverse impact on the Company's
results of operations. As a consequence, the Company can give no assurances that
issues related to Year 2000 will not have a material adverse effect on future
results of operations or financial condition.
Other Matters
Inflation had little effect on revenues and related costs during the nine
months of 1999. Management anticipates that margins will be maintained at
acceptable levels to minimize the effects of inflation, if any.
The Company has total interest bearing short-term debt of approximately
$7.8 million at September 30, 1999. Management believes that increases in
short-term rates could have an adverse effect on the Company's 1999 results.
Management believes that foreign currency fluctuations should not have a
significant impact on gross margins due to the low volume of business affected
by foreign currencies.
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, Year 2000
compliance risks 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 third quarter of 1999.
<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 10, 1999
RONALD J. CASCIANO
------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Exhibit
Number
------
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 September 30,
--------------------
1999 1998
---- ----
<S> <C> <C>
Diluted Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 8,411 8,897
Weighted average shares issued 1 11
Weighted average shares of
treasury stock acquired - (67)
Incremental shares of common stock
outstanding giving effect to stock options 183 118
-------- --------
Weighted balance - end of period 8,595 8,959
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the three months
ended September 30,
--------------------
1999 1998
---- ----
<S> <C> <C>
Basic Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 8,411 8,897
Weighted average shares issued 1 11
Weighted average shares of
treasury stock acquired - (67)
-------- --------
Weighted balance - end of period 8,412 8,841
======== ========
</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,
---------------------
1999 1998
---- ----
<S> <C> <C>
Diluted Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 8,549 8,864
Weighted average shares issued - 36
Weighted average shares of
treasury stock acquired (114) (22)
Incremental shares of common stock
outstanding giving effect to stock options 145 -
-------- --------
Weighted balance - end of period 8,580 8,878
======== ========
</TABLE>
<TABLE>
<CAPTION>
For the nine months
ended September 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Basic Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 8,549 8,864
Weighted average shares issued - 36
Weighted average shares of
treasury stock acquired (114) (22)
-------- --------
Weighted balance - end of period 8,435 8,878
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,032
<SECURITIES> 0
<RECEIVABLES> 38,531
<ALLOWANCES> 0
<INVENTORY> 33,366
<CURRENT-ASSETS> 79,721
<PP&E> 9,054
<DEPRECIATION> 0
<TOTAL-ASSETS> 92,977
<CURRENT-LIABILITIES> 27,917
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 64,387
<TOTAL-LIABILITY-AND-EQUITY> 92,977
<SALES> 65,590
<TOTAL-REVENUES> 107,279
<CGS> 41,916
<TOTAL-COSTS> 80,445
<OTHER-EXPENSES> 6,551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,464
<INCOME-TAX> 771
<INCOME-CONTINUING> 2,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,693
<EPS-BASIC> .31
<EPS-DILUTED> .32
</TABLE>
