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, 2000. 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, 2000 - 7,899,205 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, 2000
and 1999
- Consolidated Statement of Comprehensive Income for
the Three Months Ended March 31, 2000 and 1999
- Consolidated Balance Sheet at
March 31, 2000 and December 31, 1999
- Consolidated Statement of Cash Flows
for the Three Months Ended
March 31, 2000 and 1999
- 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,
------------------------------------
2000 1999
-------- --------
<S> <C> <C>
Net revenues:
Product ....................................... $ 6,511 $ 22,045
Service ....................................... 6,688 8,666
Contract ...................................... 6,052 5,035
-------- --------
19,251 35,746
-------- --------
Costs of sales:
Product ....................................... 5,308 13,678
Service ....................................... 6,681 8,066
Contract ...................................... 5,695 4,756
-------- --------
17,684 26,500
-------- --------
Gross margin ............................ 1,567 9,246
-------- --------
Operating expenses:
Selling, general and administrative ........... 6,469 5,739
Research and development ...................... 2,102 2,213
-------- --------
8,571 7,952
-------- --------
Income (loss) from operations ...................... (7,004) 1,294
Other income (expense), net ........................ (11) 49
Interest expense ................................... (124) (117)
-------- --------
Income (loss) before provision for income taxes .... (7,139) 1,226
Provision (benefit) for income taxes ............... (2,616) 460
-------- --------
Net income (loss) .................................. $ (4,523) $ 766
======== ========
Basic and Diluted earnings (loss)
per common share ................................... $ (.56) $ .09
======== ========
Weighted average shares outstanding
Diluted ....................................... 8,034 8,607
======== ========
Basic ......................................... 8,034 8,482
======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
2000 1999
-------- --------
<S> <C> <C>
Net income (loss) .................................... $(4,523) $ 766
Other comprehensive loss net of tax:
Foreign currency translation adjustments ........ (35) (79)
------- -------
Comprehensive income (loss) .......................... $(4,558) $ 687
======= =======
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
March 31,
2000 December 31,
Assets (Unaudited) 1999
----------- ----------
<S> <C> <C>
Current Assets:
Cash .......................................... $ 1,325 $ 953
Accounts receivable-net ....................... 27,118 37,436
Inventories ................................... 32,160 28,164
Income tax refund claims ...................... 2,273 133
Deferred income taxes ......................... 3,605 3,442
Other current assets .......................... 2,563 2,042
-------- --------
Total current assets ...................... 69,044 72,170
Property, plant and equipment - net ................ 11,069 11,470
Other assets ....................................... 4,386 4,467
-------- --------
$ 84,499 $ 88,107
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ................................. $ 11,176 $ 4,984
Accounts payable .............................. 2,866 7,800
Accrued salaries and benefits ................. 4,423 4,746
Accrued expenses .............................. 1,776 2,497
Deferred service revenue ...................... 6,804 5,478
-------- --------
Total current liabilities ................. 27,045 25,505
-------- --------
Deferred income taxes .............................. 430 459
-------- --------
Shareholders' Equity:
Common stock, $.02 par value,
19,000,000 shares authorized;
9,516,711 shares issued
7,951,405 and 8,059,805 outstanding ......... 190 190
Preferred stock, $.02 par value,
1,000,000 shares authorized ................. -- --
Capital in excess of par value ................ 28,071 28,071
Retained earnings ............................. 37,668 42,191
Accumulated comprehensive loss ................ (799) (764)
Treasury stock, at cost,
1,565,306 and 1,456,906 shares .............. (8,106) (7,545)
-------- --------
Total shareholders' equity ................ 57,024 62,143
-------- --------
$ 84,499 $ 88,107
======== ========
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................... $ (4,523) $ 766
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................... 912 638
Provision for obsolete inventory .................. 1,135 1,115
Deferred income taxes ............................. (192) (233)
Translation adjustments ........................... (35) (79)
Increase (decrease) from changes in:
Accounts receivable-net ......................... 10,318 2,482
Inventories ..................................... (5,131) (6,846)
Income tax refund claims ........................ (2,140) --
Other current assets ............................ (521) (164)
Other assets .................................... -- (39)
Accounts payable ................................ (4,934) 112
Accrued salaries and benefits ................... (323) 400
Accrued expenses ................................ (721) (229)
Deferred service revenue ........................ 1,326 926
Income taxes payable ............................ -- 993
-------- --------
Net cash used by operating activities .......... (4,829) (158)
-------- --------
Cash flows from investing activities
Capital expenditures .............................. (113) (305)
Capitalization of software costs .................. (317) (84)
-------- --------
Net cash used by investing activities .......... (430) (389)
-------- --------
Cash flows from financing activities:
Net borrowings under line-of-credit agreements .... 6,192 1,230
Acquisition of treasury stock ..................... (561) (818)
-------- --------
Net cash provided by financing activities ..... 5,631 412
-------- --------
Net increase (decrease) in cash and cash equivalents 372 (135)
Cash and cash equivalents at beginning of year ..... 953 1,298
-------- --------
Cash and cash equivalents at end of period ......... $ 1,325 $ 1,163
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest .......................................... $ 107 $ 117
Income taxes paid, net of refunds ................. (255) (349)
</TABLE>
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The statements for the three months ended March 31, 2000 and 1999 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 results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results of opera-tions to be expected for the year ending
December 31, 2000. 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, 1999 and 1998 included in the Company's
December 31, 1999 Annual Report to the Securities and Exchange Commission
on Form 10-K.
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,
2000 1999
--------- -----------
<S> <C> <C>
Finished goods $ 9,348 $ 6,886
Work in process 3,122 2,763
Component parts 6,570 6,001
Service parts 13,120 12,514
--------- ---------
$ 32,160 $ 28,164
========= =========
</TABLE>
At March 31, 2000 and December 31, 1999, the Company had recorded reserves
for obsolete inventory of $3,094,000 and $2,208,000, respectively.
<PAGE>
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)
3. 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:
<TABLE>
<CAPTION>
Quarter ended March 31,
(In Thousands)
------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues:
Transaction Processing ...................... $ 12,945 $ 30,620
Government .................................. 6,052 5,035
Vision ................................... 254 91
-------- --------
Total ................................. $ 19,251 $ 35,746
======== ========
Income (loss) from operations:
Transaction Processing ...................... $ (6,858) $ 1,276
Government .................................. 79 234
Vision ...................................... (225) (216)
-------- --------
(7,004) 1,294
Other income (expense), net ...................... (11) 49
Interest expense ................................. (124) (117)
-------- --------
Income (loss) before provision
for income taxes ............................ $ (7,139) $ 1,226
======== ========
Depreciation and amortization:
Transaction Processing ...................... $ 696 $ 513
Government .................................. 34 29
Vision ...................................... 8 12
Corporate ................................... 174 84
-------- --------
Total ................................. $ 912 $ 638
======== ========
Capital expenditures:
Transaction Processing ...................... $ -- $ 236
Government .................................. 61 --
Vision ...................................... 3 27
Corporate ................................... 49 42
-------- --------
Total ................................. $ 113 $ 305
======== ========
<CAPTION>
March 31, December 31,
2000 1999
--------- -----------
<S> <C> <C>
Identifiable assets:
Transaction Processing ...................... $ 71,694 $ 76,780
Government .................................. 6,381 6,036
Vision ...................................... 875 1,112
Corporate ................................... 5,549 4,179
-------- --------
Total ................................. $ 84,499 $ 88,107
======== ========
</TABLE>
<PAGE>
The following table presents revenues by geographic area based on the
location of the use of the product or services.
<TABLE>
<CAPTION>
Quarter ended March 31,
(In Thousands)
--------------------
2000 1999
------- -------
<S> <C> <C>
United States ........... $16,483 $31,745
Other Countries ......... 2,768 4,001
------- -------
Total ............. $19,251 $35,746
======= =======
</TABLE>
The following table presents property by geographic area based on the
location of the asset.
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ----------
<S> <C> <C>
United States ........... $76,361 $77,438
Other Countries ......... 8,138 10,669
------- -------
Total ............. $84,499 $88,107
======= =======
</TABLE>
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
<TABLE>
<CAPTION>
Quarter ended March 31,
----------------------
2000 1999
------ ------
<S> <C> <C>
Transaction Processing segment:
McDonald's Corporation ....................... 22% 47%
Tricon Corporation ........................... 22% 20%
Government segment:
Department of Defense ........................ 31% 14%
All Others ....................................... 25% 19%
--- ---
100% 100%
=== ===
</TABLE>
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000
COMPARED WITH
QUARTER ENDED MARCH 31, 1999
The Company reported revenues of $19.3 million for the first quarter ended
2000, a decrease of 46% from the $35.7 million reported in 1999. The Company
recorded a net loss of $4.5 million or diluted loss per share of $.56 for 2000.
This compares to net income of $766,000 or diluted earnings per share of $.09
for 1999.
Product revenues were $6.5 million in 2000, a decrease of 70% from the $22
million recorded in 1999. This decline is attributed to ongoing delays in the
release of PAR's restaurant management software, as well as the release and
market acceptance of third party software products. Also contributing to the
lower revenues has been the delayed opportunities in PAR's restaurant business
caused by the scheduling of certain national and regional customer conventions
later in the calendar year. The first quarter of 1999 was a record first quarter
for the Company with sales especially strong to McDonald's Corporation due to
the requirements of their "Made for You" initiative. This program was completed
in 1999.
Customer service revenues were $6.7 million in 2000, a decrease of 23% from
the $8.7 million in 1999. The primary reason was lower installation revenue
which is directly related to the decreased product revenue 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 $6.1 million in 2000, an increase of 20% when
compared to the $5 million recorded in the same period in 1999. This growth was
primarily due to the startup of a recently awarded four-year, $24 million Navy
contract to operate and maintain communications in support of the Pacific Fleet.
Additionally, the Company was recently awarded a $4.5 million contract with US
Navy to provide telecommunications support to the Naval Computer and
Telecommunications Detachment located in Brunswick, Maine. These contracts will
contribute to revenue growth throughout the remainder of 2000.
Product margins were 18% for 2000 compared to 38% for the same period in
1999. This decrease resulted from absorption of fixed manufacturing costs on a
very low product volume as discussed above.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000
COMPARED WITH
QUARTER ENDED MARCH 31, 1999
Customer service margins were .1% in 2000 compared to 7% for the same
period in 1999. The service margins were down primarily due to a loss in
installation activities caused by lower than anticipated product sales.
Additionally, the provision for excess and obsolete inventory was higher in 2000
when compared to 1999. The Company is continuing its investments in service
personnel, training and service integration and help desk capabilities.
Contract margins were 6% unchanged from the same period in 1999. Margins on
the Company's government contract business typically run between 5% and 6%.
Selling, general and administrative expenses were $6.5 million in 2000
versus $5.7 million for the same period in 1999, an increase of 13%. The
increase is the result of a one-time early retirement program offered to
eligible employees in the first quarter of 2000. Additionally, administrative
expenses related to the recently installed service management system increased.
Research and development expenses were $2.1 million in 2000, a decrease of
5% from the $2.2 million recorded for the same period in 1999. The decline is
due to an increase in 2000 in the amount of software development costs
capitalized in accordance with Statement of Financial Accounting Standards No.
86, Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed. Absent this requirement, expenses increased 5% as the
Company is continuing to invest in enterprise solutions for its
manufacturing/warehouse customers. The Company is also preparing for release of
its new iN.fusion software suite for its restaurant customers. Research and
development costs attributable to government contracts are included in cost of
contract revenues.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000
COMPARED WITH
QUARTER ENDED MARCH 31, 1999
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations. Cash
used by operating activities was $4.8 in the first quarter of 2000, compared to
$158,000 in 1999. During the first quarter of 2000, cash flow was adversely
affected by the operating loss, a build up in inventory in anticipation of
future demands and the timing of vendor payments. This was partially offset by
the $10.3 million reduction in accounts receivable. During the first quarter of
1999, the Company increased its inventory levels in anticipation of future
demand and to meet the growing service parts requirements as its customer base
increased. This was partially offset by accounts receivable collections, net
income for the period and a federal income tax refund.
Cash used in investing activities was $430,000 for the first quarter of
2000 compared to $389,000 in 1999. In the first quarter of 2000, the most
significant investing activity was the $317,000 capitalization of software
costs. In 1999, capital expenditures were for the continued upgrade to the
Company's customer service center and for PC equipment.
Cash provided by financing activities was $5.6 million for the first
quarter of 2000 compared to $412,000 in 1999. In 2000, the Company increased its
line-of-credit borrowings by $6.2 million. This was partially offset by the
repurchase of 108,400 shares of its stock for $561,000. In 1999, the Company
received advances on its lines of credit totaling $1.2 million. The Company also
repurchased 128,200 shares of its stock for $818,000.
The Company has line-of-credit agreements, which aggregate $25 million with
certain banks, of which $13.8 million were unused at March 31, 2000. The Company
believes that it has adequate financial resources to meet its future liquidity
and capital requirements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2000
COMPARED WITH
QUARTER ENDED MARCH 31, 1999
Other Matters
Inflation had little effect on revenues and related costs during the first
quarter of 2000. Manage- ment 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
$11.2 million at March 31, 2000. Management believes that increases in
short-term rates could have an adverse effect on the Company's 2000 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 first quarter of 2000.
<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, 2000
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>
<TABLE>
<CAPTION>
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
(In Thousands)
For the Three Months
Ended March 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Diluted Earnings Per Share:
Weighted average shares of
Common Stock outstanding:
Balance outstanding - beginning of period 8,060 8,549
Weighted average shares of
treasury stock acquired .................. (26) (67)
Incremental shares of common stock
outstanding giving effect to stock options -- 125
------ ------
Weighted balance - end of period ......... 8,034 8,607
====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
(In Thousands)
For the Three Months
Ended March 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Basic Earnings Per Share:
Weighted average shares of
Common Stock outstanding:
Balance outstanding - beginning of period 8,060 8,549
Weighted average shares of
treasury stock acquired ................. (26) (67)
------ ------
Weighted balance - end of period ........ 8,034 8,482
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,325
<SECURITIES> 0
<RECEIVABLES> 27,118
<ALLOWANCES> 0
<INVENTORY> 32,160
<CURRENT-ASSETS> 69,044
<PP&E> 11,069
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,499
<CURRENT-LIABILITIES> 27,045
<BONDS> 0
0
0
<COMMON> 190
<OTHER-SE> 56,834
<TOTAL-LIABILITY-AND-EQUITY> 84,499
<SALES> 6,511
<TOTAL-REVENUES> 19,251
<CGS> 5,308
<TOTAL-COSTS> 17,684
<OTHER-EXPENSES> 2,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,139)
<INCOME-TAX> (2,616)
<INCOME-CONTINUING> (4,523)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,523)
<EPS-BASIC> (.56)
<EPS-DILUTED> (.56)
</TABLE>
