UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2008.
2011.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number 1-9720
PAR TECHNOLOGY CORPORATION
(Exact
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York 13413-4991
(Address of principal executive offices) (Zip
| Delaware | 16-1434688 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
| PAR Technology Park | |
| 8383 Seneca Turnpike | |
| New Hartford, New York | 13413-4991 |
| (Address of principal executive offices) | (Zip Code) |
(315) 738-0600
(Registrant's
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
| Title of Each Class | | Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $.02 par value New York Stock Exchange on Which Registered |
| Common Stock, $.02 par value | | New York Stock Exchange |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]o No [ X ]
x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]o No [ X ]
x
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 ]x No [ ]
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large“large accelerated filer"filer”, "accelerated filer"“accelerated filer”, and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ]
Smaller reporting company [ ] (Do not check if a smaller reporting company)
Large Accelerated Filer o | Accelerated Filer o | Non Accelerated Filer o | Smaller reporting company x |
| | (Do not check if a smaller reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]o No [X]
x
As of June 30, 2008,2011, the last business day of the registrant'sregistrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of voting and non-voting common stock held by non-affiliates of the registrant was approximately $59,866,000$34,220,893 based upon the closing price of the Company'sCompany’s common stock.
The number of shares outstanding of registrant'sregistrant’s common stock, as of February 28, 2009 - 14,536,96329, 2012 ─ 15,170,084 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the
registrant'sregistrant’s proxy statement in connection with its
20092012 annual meeting of stockholders are incorporated by reference into Part III.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-K
- -------------------------------------------------------------------------------
Item Number
- -------------------------------------------------------------------------------
PART I
Item 1. Business
Item 1A. Risk Factors
Item 2. Properties
Item 3. Legal Proceedings
PART II
Item 5. Market for the Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and
Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions,
and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Signatures
"Safe Harbor"
| Item Number | | Page |
| | |
| PART I | |
| Business | 2 |
| Risk Factors | 19 |
| Unresolved Staff Comments | 25 |
| Properties | 25 |
| Legal Proceedings | 25 |
| Mine Safety Disclosures | 25 |
| | |
| PART II | |
| Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 26 |
| Selected Financial Data | 26 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 |
| Quantitative and Qualitative Disclosures About Market Risk | 44 |
| Financial Statements and Supplementary Data | 45 |
| Controls and Procedures | 45 |
| | |
| PART III | |
| Directors, Executive Officers and Corporate Governance | 47 |
| Executive Compensation | 47 |
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 47 |
| Certain Relationships and Related Transactions, and Director Independence | 47 |
| Principal Accounting Fees and Services | 47 |
| | |
| PART IV | |
| Exhibits, Financial Statement Schedules | 48 |
| Signatures | 81 |
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This document contains
"forward-looking statements"“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Any statements in this document that do not describe historical facts are forward-looking statements. Forward-looking statements in this document (including forward-looking statements regarding the continued health of
segments of the hospitality industry, future information technology outsourcing opportunities, an expected increase
or decrease in contract funding by the U.S. Government, the impact of current world events on our results of operations, the effects of inflation on our margins, and the effects of interest rate and foreign currency fluctuations on our results of operations) are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When we use words such as
"intend," "anticipate," "believe," "estimate,"
"plan," "will,"“intend,” “anticipate,” “believe,” “estimate,” “plan,” “will,” or
"expect"“expect”, we are making forward-looking statements. We believe
that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you
that these assumptions and expectations will prove to have been correct or
that we will take any action
that we presently may be planning. We have disclosed certain important factors that could cause our actual future results to differ materially from our current expectation,
includingincluding: a decline in the volume of purchases made by one or a group of our major customers; risks in technology development and commercialization; risks of downturns in economic conditions generally, and in the quick-service sector of the hospitality market specifically; risks associated with government contracts; risks associated with competition and competitive pricing pressures; and risks related to foreign operations. Forward-looking statements made in connection with this report are necessarily qualified by these factors. We are not undertaking to update or revise publicly any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.
PAR TECHNOLOGY CORPORATION
PART I
Item 1: Business
PAR Technology Corporation (PAR or the Company) conducts businesshas operations in two distinct business segments: Hospitality and Government. PAR's core
PAR’s Hospitality business, is providingrepresenting approximately 70% of consolidated revenue for 2011, provides technology solutions, including hardware, software and professional/lifecyclea range of support services, to businesses and organizations in the global hospitality and specialty retail industries. The Company continues to be a leading supplierprovider of hospitality management technology systems to quick-service restaurants (the Quick Service, Fast Casual and Table Service categories make up our Restaurant business, which is conducted through the Company’s ParTech, Inc., subsidiary) with over 50,000 systems installed in more than 105over 110 countries. PAR'sOur PAR Springer-Miller Systems, Inc. (PSMS) subsidiary provides guest-centric property management solutions to hotels, resorts, spas, casinos, and other hospitality management
software applications are feature rich which allows for more efficient operation
of businesses and enterprises by managing transaction and operational data from
end-to-end and helping to maximize profitability through more optimal
operations. PAR's professional services mission is to enable businesses to
achieve the full potential of their hospitality technology investment.
As a leading provider of professional services and enterprise business
intelligence technology to the hospitality sector, PAR has solid long-term
relationships with the restaurant industry's two largest corporations -
McDonald's Corporation and Yum! Brands, Inc. (Yum!). McDonald's has over 32,000
restaurants in more than 120 countries and PAR has been a selected provider of
restaurant technology systems and lifecycle support services to McDonald's since
1980. In 2007, PAR was selected by McDonald's as its inaugural Technology
Supplier of the Year. Yum! (which includes Taco Bell, KFC, Pizza Hut, Long John
Silver's and A&W Restaurants) has been a loyal PAR customer since 1983. Yum! has
over 33,000 units globally and PAR continues to be a major supplier of
management technology systems to Taco Bell as well as the Point-of-Sale (POS)
vendor of choice to KFC Corporate Restaurants. Other significant hospitality
chains where PAR is the POS vendor of choice are: Subway Restaurants, Legal
Seafood, Boston Market, CKE Restaurants (including Hardees and Carl's Jr.),
Catalina Restaurant Group, Carnival Cruise Lines, and large franchisees of the
above mentioned brands.
PAR'sproperties worldwide.
PAR’s Government business, representing approximately 30% of consolidated revenue for 2011, provides a range of technical expertiseservices for the U.S. Department of Defense and other federal, state, and local governmental organizations. PAR Government Systems Corporation specializes in the development of advanced technologysignal and image processing and management systems for the Department of Defensewith a focus on geospatial intelligence, geographic information systems, and other
Governmental agencies.command and control applications. Additionally, PARour Rome Research Corporation subsidiary provides information technology, communications, and communications supportrelated services to the U.S. Navy, U.S. Air Force and U.S. Army.
PAR focuses its computer-based system design services on providing high quality
technical services, ranging from experimental studies to advanced operational
systems, within a variety of areas of research, including radar, image and
signal processing, logistics management systems, and geospatial services and
products. Through Government-sponsored research and development, PAR has
developed technologies with relevant commercial applications. A prime example of
this "technology transfer" is the Company's point-of-sale technology, which was
derived from research and development involving microchip processing technology
sponsored by the Department of Defense. Our most recent exampleDefense, providing comprehensive operational support worldwide.
During the fourth quarter of technology
transfer isfiscal year 2011, PAR entered into a definitive agreement to sell substantially all of the Company's logistics management tracking systems.assets of its Logistics Management business, PAR Logistics Management Systems Corporation (LMS) to ORBCOMM Inc., including, but not limited to accounts receivable, inventory, equipment, intellectual property, and customer contracts. This PAR
initiative brings tracking, security and information solutionstransaction closed on January 12, 2012. The results of operations of LMS for fiscal year 2011 have been recorded as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20, Presentation of Financial Statements – Discontinued Operations. All prior period amounts have been reclassified to conform to the intermodal, cold chaincurrent period presentation. Refer to Note 2 “Discontinued Operations” and land shipping industry. Through an integrated GPS,
RFID, cellular, Satellite Communications, and internet PAR solution, owners and
operatorsNote 15 “Subsequent Events” in the Notes to the Consolidated Financial Statements for further discussion, including the terms of refrigeration, tank, dry van, intermodal, and generator containers
have real time information on the status and location of assets and cargo around
the globe.
transaction.
Information concerning the Company'sCompany’s industry segments for the three years ended December 31, 20082011 is set forth in Note 11 “Segments and Related Information” in the Notes to the Consolidated Financial Statements included elsewhere herein.
The Company's common stock is traded on the New York Stock Exchange under
the symbol "PTC". Statements.
Our corporate headquarters are located at PAR Technology Park, 8383 Seneca Turnpike, New Hartford, NY 13413-4991, and our telephone number is (315) 738-0600. We maintain significant facilities for our Hospitality business in our New Hartford headquarters, as well as Boca Raton, FL, Boulder, CO, Las Vegas, NV, Stowe, VT, and Toronto, Canada. We maintain Hospitality sales offices worldwide. Our Government business has a presence in our New Hartford headquarters, and maintains significant facilities in Rome, NY. Our Government business has employees worldwide in fulfillment of our contract-based support services.
The Company’s common stock is traded on the New York 13413-4991; telephone number (315)
738-0600. OurStock Exchange under the symbol “PAR”. Through PAR’s website (our website address is http://www.partech.com. Through PAR's website,
itswww.partech.com), our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and amendments thereto are available to interested parties, free of charge. Information contained on our website is not part of this Annual Report on Form 10-K.
Unless the context otherwise requires, the term "PAR" or "Company" as used herein, means PAR Technology Corporation and its wholly-owned subsidiaries.
Hospitality Segment
PAR provides restaurant managementinformation technology solutions whichto two markets within its Hospitality Segment: Restaurants and Hotels/Resorts/Spas. PAR’s solutions for the Restaurant market combine software applications, an Intel(R)Intel® based hardware platformplatforms and installation and lifecycle support services. PAR's restaurant management offering includesPAR’s hardware offerings for the Restaurant market include fixed and wireless front-of store devices, order-entry terminals, self-service kiosks, kitchen systems utilizing printers and/or video monitors, and, introduced in 2011, a range of innovative food safety monitoring tools, back
officeand task management tools. Our hardware offerings include those products we design and manufacture ourselves and a limited range of complementary products we source from third-party partners. Our software offerings for the Restaurant market include front-of-store (known as Point-of-Sale or POS) software applications, operations management software applications (known as Back Office or BOH), and enterprise software applications for content management and business intelligence software.intelligence.
As a leading vendor to the Restaurant market, PAR also
provides hospitality management solutions that satisfyhas developed solid long-term relationships with the propertyindustry’s three largest organizations, McDonald’s Corporation, Yum! Brands, Inc., and the SUBWAY® franchisees of Doctor’s Associates Inc. McDonald’s has over 32,000 restaurants in more than 120 countries, and PAR has been an approved provider of restaurant technology systems and support services to their organization since 1980. Yum! Brands, which includes Taco Bell®, KFC, and Pizza Hut™, has been a PAR customer since 1983. Yum! Brands has nearly 38,000 units in more than 110 countries, and PAR continues to be a major supplier of management technology needssystems to chains within the Yum! Brands portfolio. We continue to expand our installed base of hardware technology with SUBWAY, which has more than 33,000 restaurants in over 75 countries. Other significant hospitality chains for an arraywhich PAR is the POS vendor of hospitality enterprises,choice include the Baskin-Robbins® unit of Dunkin' Brands Group, Inc., Boston Market Corporation, the Hardee’s® and Carl’s Jr.® units of CKE Restaurants, Inc., Legal Sea Foods, LLC, and franchisees of these organizations.
In the Hotel/Resort/Spa market, PAR, through our PSMS subsidiary, is a leading global provider of property and service management software solutions for a variety of property types including five-star city-center hotels, destination spa and golf properties, timeshare propertiesresorts, cruise ships, and five star resorts worldwide.casino hotels. High profile customers utilizing PAR solutions include the Boca Raton Resort & Beach Club® property of Hilton Worldwide, Inc., the Hard Rock Hotel & Casino® unit of Hard Rock Cafe International, Inc., the Pebble Beach Resorts® of the Pebble Beach Company, and The Gleneagles Hotel© unit of Diageo plc. Large hotel chains utilizing our software solutions include Accor SA, Four Seasons Hotels Limited, the Fairmont® and Swissotel® units of FRHI Holdings Limited, Hilton Worldwide, Inc., Kempinski AG, Mandarin Oriental Hotel Group, Marriott International, Inc. and its Ritz-Carlton subsidiary, The Maybourne Group, and Starwood Hotels & Resorts Worldwide, Inc.
Products
We sell our hardware, software and services as an integrated solution or unbundled, on an individual basis. Our hardware offerings, particularly our POS terminals, are well regarded by customers for their broad functionality, proven reliability, and high quality. We frequently sell our hardware in combination with our services, thereby delivering maximum system performance on a cost-effective turnkey basis. We increasingly are emphasizing to customers the operational and economic value of a bundled, integrated solution, combining hardware, software and services, offering customers a comprehensive, highly flexible solution capable of not only enabling efficient restaurant operation, but also providing innovative operational and marketing insights allowing for higher profits.
Hardware
PAR’s EverServ™ family of hardware platforms are designed to withstand challenging and harsh hospitality environments, while offering customers proven performance at a cost-conscious price point. PAR offers extensive service,hardware designed to be durable, scalable, and easily integrated. Our hardware platforms, compatible with popular operating systems, support systems
integrationa distributed processing environment and professional service capabilities. PAR's service professionals
design, tailor, implementare suitable for a broad range of use and maintain solutions that enable customersfunctions. PAR’s open architecture POS terminals are optimized to manage
all aspects of operational data collection and processing for single or multiple
site enterprises from a central location.
Products
- --------
The Company's integrated hospitality managementhost our powerful EverServ POS software applications, allowas well as most third-party POS applications, and are compatible with many peripheral devices, including increasingly prevalent customer "interaction" peripherals such as our EverServ 12” Customer Display. We partner with numerous vendors of complementary in-store peripherals, from cash drawers, card readers and printers to kitchen video systems, allowing us to provide a complete solution coordinated and delivered by one vendor.
We currently offer a range of POS system designs and capabilities, from counter systems to kiosks equipped to meet the needs of our customers, regardless of the restaurant concept, the size of the organization or the complexity of its requirements. We currently offer two POS system lines, the EverServ 6000™ platform, meeting the needs of the demanding chain environment, and the EverServ 2000™ platform, targeted at the more value conscious customer.
The EverServ 6000 capacitive touch screen platform, available in multiple processor, hard drive and memory configurations, provides high performance and our well-known durability, as well as the flexibility and scalability for any environment. The EverServ 6000 design leverages a common computing platform across multiple configurations to simplify and lower the costs of IT operations, deployment and support. We believe the EverServ 6000 offers customers a differentiated value proposition:
| · | Greater Flexibility and Ease of Use: We offer multiple form factors to meet space constraints and functional requirements. Configurations include pedestal mount, wall mount, low profile and kiosk. We also offer a standalone 12” touch panel display to enable multimedia digital signage. |
| · | Durability Driving Lower Total Cost of Ownership: The EverServ 6000’s innovative industrial design keeps the unit cooler during operation, increasing reliability and product life, while lowering operating and investment costs. The EverServ 6000 is housed in an ultra-durable, shock and spill-resistant casing that can withstand the toughest restaurant environments. Cable management is optimized to reduce clutter and accidental failures. |
| · | Higher Performance with Lower Power Consumption: The EverServ 6000 can be configured with a range of Intel processors to meet the most complex customer applications. Advanced energy saving features and auto-standby mode dramatically reduce overall power consumption. |
| · | Easy to Service: The design of the EverServ 6000 enables lowers service costs and maximizes uptime. The internal hard drive, power supply, cabling, and pedestal mechanism can be accessed without tools. Easy port access simplifies connections to printers and other peripherals. |
Our EverServ 2000 model is the affordable POS hardware solution with the smallest footprint among our offerings. The EverServ 2000 is a low power consumption, touch screen device utilizing Intel’s ultra-low voltage Atom® processor. Its small footprint is ideal for installations where space is at a premium. Featuring many of the same design advantages of the EverServ 6000, it has a highly durable enclosure, requires minimal maintenance, is easy to configure and install with peripherals, and is easy to service.
Software: Restaurant Market
Our restaurant market software offerings meet the requirements of large and small operators alike in the three dominant restaurant categories: Quick Serve Restaurants (QSR), Fast Casual Restaurants (FC), and Table Service Restaurants (TSR). Each of these distinctive restaurant categories has operating characteristics and service delivery requirements addressed by PAR’s family of EverServ™ software offerings, which enable customers to configure their technology systems to meet their order entry, food preparation, inventory, labor and propertyworkforce management coordination needs, while capturing all pertinent POS and BOH transaction data concerning the transactions at the specificeach location and delivering itvaluable insight throughout the enterprise. PAR's hospitality
management systems are based on more than 29 years of experience and knowledge,
and an in-depth understanding of the hospitality marketplace. This knowledge and
expertise is reflected in innovative product design, implementation capability
and systems integration skills.
Software
The Company's range of restaurant software products cover the hospitality
market with offerings that meet the requirements of large and small
operators/corporations alike. PAR has three major point-of-sale offerings.
First, the Company's enterprise-enabled solutionEverServ applications for enterprise use have been built on a cloud-based, service-oriented architecture.architecture (SOA) platform permitting straightforward integration of third party applications, as required, to meet ever expanding market requirements. The enterprise solution features an advanced master data configuration utility that is used to remotely manage a vast array of business critical data elements (pricing, menus, descriptions, promotions, recipes, inventory, etc.) located in geographically distributed restaurants and management offices connected via both wide area and local area networks. This streamlinescapability allows PAR’s corporate customers to modify, upgrade and control their system operations in their restaurants and regional offices from a central location. This capability removes the order processrequirement for table service, counter
service, and bar operations, while simplifyingon-site IT support withby orchestrating complex IT data management needs in a centralized applicationweb-hosted environment; thereby reducing costs, improving uptime and strengthening system and data security.
In addition to POS software, PAR offers a number of complementary restaurant applications for the enterprise customer. EverServ Operations Reporting is a Web-based enterprise reporting solution that consolidates data from all restaurant locations, and is offered either as an on-premises installation or as a Software-as-a-Service (SaaS) secure portal hosted by PAR. Designed for corporate, field, and site managers, this indispensable decision-making solution provides visibility into every restaurant location via a dashboard displaying customer-defined financials, sales analysis, marketing, inventory, and workforce variables. EverServ Operations reporting can be integrated into customers’ business applications such as financials, payroll, and supply-chain systems. Intuitive tools for forecasting, labor scheduling, and inventory management and real-time data transmission between restaurant sites
and the enterprise.
Second, foralso are available.
For franchisees in the
quick service restaurant (QSR)QSR and
fast
casualFC markets
(i.e., smaller operations not needing the more comprehensive functionality of our broader enterprise solutions), PAR offers a
multi-brand point of salemulti-mode POS application containing features and functions such as real-time mirror imaging of critical data, on-line graphical help and interactive diagnostics, all presented with
intuitive
graphicaladvanced, workflow-based user interfaces. This application contains an Enterprise Configuration
Manager that providesenterprise configuration manager providing business-wide management of the point-of-sale data, including diverse concept menus, security settings and system parameters.
Third,
PAR’s EverServ TSR™ solution is PAR's easy-to-usemarketed to table service restaurants both directly and through channel partners. It is designed to meet the unique requirements of the table serve market, including table side ordering, open checks, split checks, and bar/kitchen communications. This SOA-based solution has been designed to allow application modules to be distributed across a network, allowing a variety of configurations (e.g., fat or thin client) to suit the needs of PAR’s customers. EverServ TSR also provides highly integrated mobile ordering and at-table payment capability as well as back office and reporting solutions.
PAR’s EverServ PixelPoint® solution is primarily sold to independent restaurants through the Company'sCompany’s business partners (dealer)partner channel. This integrated software solution includes a point-of-sale software application, a wireless ordering software capability, an on-line ordering feature, a self-service ordering function, an enterprise management software function, and an in-store and enterprise level loyalty and gift card information sharing application.
In addition to point-of-sale
Software: Hotel/Resort/Spa Market
For the Hotel/Resort/Spa market, our property management software PAR offers a number of complementary
restaurant technologies. These include a wireless order-taking and payment
capability, an above store reporting software application that utilizes a
web-based reporting platform with the latest technology from Microsoft's .Net(R)
platform. Additionally, the Company's back office software allows restaurant
owners to control critical food and labor costs using intuitive tools for
forecasting, labor scheduling and inventory management.
In addition, PAR continues to be a provider of software solutions to the
hotel/resort industry. Today, hospitality-oriented businesses have the ability
to manage information and leverage their relationships with customers through
integrated technology systems. PAR's technology systems provideprovides a seamless user interface to manage all aspects of the guest experience, as well as consolidating customerguest information and history across the operation into a central, single database. PAR's
SMS|Host(R)To date, we have developed, sold and supported the SMS|Host® Hospitality Management System, which is a leading solution in the market, particularly for high-end, independent hotels and resorts. While the SMS|Host platform provides the functionality of a complete setproperty management system, it remains a market leader because of tools at
the fingertips ofits robust guest-centric functionality, allowing hotel staff to coordinate, cross-sell, and spa staff for selling and deliveringdeliver personalized guest services.services across the property. All transactions and business functions are seamlessly integrated with the front
office,into a single system, from guest room check-in, to spa appointments, orappointment scheduling, and retail purchases. The SMS|flexibility of the SMS|Host product suite, including over 20platform, with numerous seamlessly integrated, guest-centric modules, provides hotel and resort staff with the tools theyour hotel customers need to personalize service, anticipate guest needs, and consistently exceed guest expectations. The
SMS|Host module, SMS|Enterprise, enables a chain or management company to
instantly create a real-time, single-image consolidation of all details from all
locations within a large organization for use
Given our competitive focus and position as a central information systemleader in the high-end property segment and trends in the Hotel/Resort/Spa market, we began development in 2010 of a highly flexible, highly scalable next generation software solution that expanded our addressable market and will drive future revenue growth. In late 2011, PSMS introduced the ATRIO™ platform of solutions, which we believe represents a significant redefinition of the functionality and delivery of hospitality management software. While PSMS will continue to sell and support SMS|Host, we expect ATRIO, with its highly innovative capabilities and broader market application, to become the source of revenue growth for PSMS in 2012.
Leveraging PSMS’ domain knowledge, based on success in nearly 1,400 global hotels, resorts, and spas, ATRIO simplifies all aspects of guest-centric technology systems, resulting in easy deployment and integration, ultimate scalability, streamlined operations, superior feature availability, flexible reporting, and lower costs. Purpose built on Microsoft’s Windows® Azure® platform to leverage all the advantages of cloud computing (i.e., off-premise hosting of computing capacity and applications accessed via the Internet), ATRIO dramatically reduces on-premise technology, the requisite support staff, and the training and support of end users. By deploying ATRIO in the cloud, sensitive data moves off-premise, reducing risk and enhancing security. Although purpose built for the cloud, ATRIO offers deployment flexibility and can also be installed on premise or with some modules in the cloud and others on premise, depending on a customer’s priorities. ATRIO’s architecture is based on an Enterprise Service Bus (ESB), using Microsoft .Net® technology, which facilitates connection between disparate applications, allowing seamless integration of legacy, current and future capabilities. The ESB architecture also facilitates easy access from multiple sources, such as mobile and handheld devices, tablets, kiosks, workstations, and web browsers. ATRIO is internationally capable without modification, with full support for multiple languages, currencies, date formatting and cultural differences.
With its modular design, a
fullycustomer can use ATRIO to easily expand and adapt to changing business conditions. ATRIO’s ESB architecture enables an entirely new level of systems integration, unmatched in the industry today. Functional service modules can stand alone, new modules can be added as the needs of the customer change or new modules become available. Complementary modules, such as modules for event planning and catering, are available today through our ATRIO Platform Partner Exchange (APPX), which is a comprehensive partnering program. We intend to expand APPX participation, emphasizing the value to the market of tightly integrated
Property Management System(PMS)/Central Reservation
System(CRS).
PARtechnologies and expanded, complementary capabilities.
PSMS also markets SpaSoft(R)SpaSoft®, a stand-alone spa and activity management application. SpaSoftSpaSoft Spa Management System is designed to satisfy the unique needs of resort spas, day spas, and medi-spas. Validated by VISA(R) as compliant with CISP (Card
Information Security Program) Payment Application Best Practices, SpaSoft'sSpaSoft’s unique booking engine, advanced resource inventory, yield management module, scheduling, management and reporting tools assist in the total management of sophisticated hotel/resort spas and day spas. Because SpaSoftSpaSoft was specifically designed for the needs of the spa industry, it assists the spa staff in providing the individualized, impeccable guest service that their most important clients desire and expect.
Hardware
PAR's hardware platforms offer
EverServ SureCheck™
In 2011, we introduced our EverServ SureCheck platform, which provides accurate food safety monitoring and employee task management capabilities. The EverServ SureCheck platform combines a cloud-based enterprise server application, a PDA-based mobile application, and a highly integrated temperature measuring device for managing Hazard Analysis & Critical Control Points (HACCP) inspection programs for retail and food service organizations, and automates the monitoring of quality risk factors, while dramatically lowering the potential for human error. The EverServ SureCheck platform also helps hospitality and retail operators efficiently complete and monitor the compliance of employee-assigned tasks, providing explicit guidance on abnormal checklist conditions, and providing configurable, automated alerts when checks are behind schedule or out of compliance. Managers can conduct store oversight and audits with SureCheck, instead of using inefficient and error-prone pen and paper systems. Loss prevention, safety, merchandising, and other audits can be completed using checklists on SureCheck as supervisors or employees walk through a store. Updated food safety or employee task-oriented checklist nformation is transparently synchronized with SureCheck’s enterprise server to provide aggregated data management, reporting, and business intelligence to home office personnel.
Services
PAR offers customer support services to both its Restaurant customers proven performance at a
cost-conscious price point. PAR continuesand its Hotel/Resort/Spa customers, although, for the Restaurant market, the scale of our infrastructure is substantially larger and the nature of the services provided far broader.
We believe our ability to offer
hardware designed to be
durable, scalable, integrated and highly functional. PAR's Pentium-designed
systems are developed to host the powerful point-of-sale software applications
in the hospitality industry with open architecture, industry standard components
which are compatible with most operating systems. The hardware platforms support
a distributed processing environment and incorporate an advanced hospitality
management technology system, utilizing Intel microprocessors, standard PC
expansion slots, Ethernet LAN, standard Centronics printer ports as well as USB
ports. The hardware systems supply their industry-standard components with
features for hospitality applications such as multiple video ports. The POS
systems utilize architecture that allows for the integration of a broad range of
PAR and third-party peripherals and is ultimately designed to withstand harsh
hospitality environments. Both hardware platforms have a favorable
price-to-performance ratio over the life of the system as a result of their PC
compatibility, ease of expansion and high reliability design.
PAR manufactures and/or sells a full range of hardware peripherals
including cash drawers, coin changers, receipt printers, kitchen videos, bump
bars, kitchen printers and office printers.
PAR also offers a kiosk solution, which features both a touch screen and a
keyboard in a clean, approachable design suitable for deployment of a number of
different software application types that include employee training and hiring
to promotional content and nutrition information. This kiosk offering enables
restaurant operators to create a self-service information hub for employees and
guests.
Systems Installation and Professional Services
- ----------------------------------------------
PAR's ability to offerdirect installation, maintenance, and support services is one of PAR’s key differentiators in the Company's key differentiators.Restaurant market. PAR continues to work in unisonworks closely with its customers to identify and address the latest hospitality technology requirements by creating interfaces to equipment, including innovations such as automated cooking and drink-dispensing devices, customer-activated terminals and order display units located inside and outside of the customer's business site.
The Company provides itscustomer’s premises. We provide our systems integration expertise to interface specialized components, such as video monitors, coin dispensers and non-volatile memory for journalizing transaction data, as is required in some international applications. PAR employs experienced individuals with diverse hospitality backgrounds in both hotels/resortsthe Restaurant and restaurants. PAR has the knowledge and expertise to help
its customers structure property management solutions which can be used most
effectively in restaurants and hotels, with an emphasis on maximizing return on
investment. In addition, the Company has secured strategic partnerships with
third-party organizations to offer a variety of credit, debit and gift card
payment options that allow quick service restaurants, convenience stores,
gasoline stations and drugstores to process cashless payments quickly and
efficiently.
The Company's Professional Services organizationHotel/Resort/Spa markets. Our personnel continuously evaluatesevaluate new technologies and adoptsadopt those that allow PAR to provide significant improvements in customer'scustomers’ day-to-day systems. From hand-held wireless devices to advances in internet performance, the technical staff is available for consultation on a wide variety of topics including network infrastructures, system functionality, operating system platforms, and hardware expandability. In addition, the Company has secured strategic partnerships with third-party organizations to offer a variety of credit, debit and gift card payment options.
Installation and Training
-------------------------
In the United States, Canada, Europe, South Africa, the Middle East, Australia, and Asia, PAR personnel provide software configuration, installation, training and integration services as a normal part of the software or equipment purchase agreement. In certain areas of North and South America, Europe, and Asia, the Company provideswe provide these installation and training services through third parties.PAR certified partners. PAR is also staffed to provide complete application training for a site'ssite’s staff as well as technical instruction for Information Systemscustomers’ information systems personnel. The
PAR
training team is composed of experienced individuals with
diverse hospitality and technical backgrounds.
Maintenance and Service
- -----------------------
The Company offers a wide range of maintenance and support services as part of its total solution for itsthe hospitality markets.markets we serve. In the North American region,America, the Company provides comprehensive maintenance and installation services for its software, hardware and systems, as well as those of third parties, through a 24
x 7utilizing PAR-staffed, round-the-clock, central telephone customer support and diagnostic service centercenters in Boulder, ColoradoCO, and Las Vegas, Nevada. In addition theNV. The Company also has service centerscapabilities in Europe, South Africa, the Middle East, Australia, and Asia. The Company believes
that its ability to address all support and maintenance requirements for a
customer's hospitality technology network provides it with a clear competitive
advantage.
The Company
PAR maintains a field service network, consisting of over 100 locations, offering on-site service and repair, as well as depot repair and overnight unit replacements and spare unit rentals.replacements. At the time a hospitality technology system is installed, PAR trains customer employees and managers to ensure efficient and effective use of the system. If an issue arises within the
Company's products (hardware and software), PAR's current customer service
management software products allow a service technician to diagnose the problem
by telephone or by remotely entering the system, thus greatly reducing the need
for on-site service calls.
The Company'sCompany’s service organization utilizes a suite of software applications that allows PAR to demonstrate compelling value and differentiation to its customers through the utilization of its extensive and ever-growing knowledge base to efficiently diagnose and resolve customer-service issues. This also enables PAR to compile the kind of in-depth information it needs to identify trends and opportunities. A secondIf an issue arises with our products (hardware and software), PAR’s customer service management software suiteallows a service technician to diagnose the problem remotely, thus greatly reducing the need for on-site service calls. PAR’s service organization is further enabled by a sophisticated customer relationship management system that allows our call center CRM
solution and knowledge base that allows PARpersonnel to maintain a profile on each customer, theircustomer’s background, hardware and software details, client service history, and a problem-resolution database. Analysis of this data allows the
CompanyPAR to optimize customer service by identifying trends in calls and to work with customers to quickly resolve issues.
Sales & Marketing
- -----------------
Sales in
Within the hospitality technologyHospitality Segment, we have separate sales organizations and channels targeting the markets we serve.
In the Restaurant market,
are often made to corporate
chains where PAR is an approved vendor. Upon achieving such approved status,
marketing efforts are directed to the chain's franchisees. Sales efforts are
also directed toward franchisees of chains for which the Company
is not an
approved corporate vendor.
The Company employs a direct sales personnelforce in several sales groups that
concentrate uponconcentrating on both large chain corporate customers and their franchisees. TheSales efforts also are directed toward franchisees of large chains for which the Company is not a selected corporate vendor. We also utilizesutilize an International Sales Group that markets to major customers with global locations and to international chains that do not havewithout a presence in the United States.
The Company'sCompany’s Indirect Sales Channel targets distributors, sales representatives, and value-added resellers serving the independent restaurant sector and non-foodservice markets such as retail, convenience, amusement parks, movie theaters, cruise lines, spas and other ticketing and entertainment venues. This
group also works with third-party dealers and value-added resellers throughout
the country.
PAR also has a distribution channel, both domestic and global, that has
third party dealers and resellers penetrating the independent restaurant sector
on behalf of the Company and extends PAR's market reaches.
New sales
Sales in the hotel/resort technologyHotel/Resort/Spa market are often generatedcoordinated by leads, be it by referrals, internet searches, media coverage or trade show
presence. Marketing efforts are conducted in the form of email newsletters,
direct mail campaigns, trade show exhibitions, advertising and targeted
telesales calls. The Company employs direct sales personnel in severalfive sales groups. The Domestic Sales Group targets independent, business class and luxury hotels, and resorts and spas in the United States, Canada and the Caribbean. TheCaribbean, while the International Sales Group seeks sales totargets independent hotels and resorts outside of the United States. The Corporate Accounts Sales Group works with high profile corporate and chain clients such as Mandarin Oriental Hotel Group, Destination
Hotels and Resorts and West Paces Hotel Group.clients. The Company'sCompany’s Installed Accounts Sales Group works solely with clients who have already installed the SMS|SMS|Host product suite. The Business Development group focuses on proactive identification of and initial penetration into new business channels for the SMS|ATRIO, SMS|Host and SpaSoft SpaSoft product lines worldwide.
Competition
- -----------
The
markets in which we operate are highly competitive. Important competitive
landscapevariables in the hospitality market
is driven primarily byinclude, in order of customer priority, functionality, reliability, quality, pricing, service and support.
The Company
believes that its principalIn the Restaurant market, we believe our competitive advantages include
itsour focus on an integrated technology solution offering, advanced development capabilities,
in-depth industryextensive domain knowledge and expertise, excellent product reliability, a direct sales force organization,
and world class support and quick service response.
The markets in whichIn the
Company transacts business are highly
competitive.Hotel/Resort/Spa market, we believe our competitive advantages include our extensive domain knowledge, long-standing industry leadership, the guest-centric orientation of our software, and our high level of customer support. Most of our
majorsignificant customers have approved several suppliers
who
offeroffering some form of sophisticated hospitality technology system similar to that of the Company. Major competitors include
Panasonic,Micros Systems, Inc., NCR Corporation, IBM Corporation,
Radiant
Systems, NCR, and
Micros Systems.
Panasonic Corporation.Backlog
- -------
Due to the nature of the hospitality business, backlog is not significant at any point in time. The Hospitality segment orders are generally of a short-term nature and are usually booked and shipped in the same fiscal year.
less than 12 months.
Research and Development
- ------------------------
The highly technical nature of the Company'sCompany’s hospitality products requires a significant and continuous research and development effort. Ongoing product research and quality development efforts are an integral part of all activities within the Company. Functional and technical enhancements are actively being made to our products to increase customer satisfaction and maintain the high caliber of our software. Research and development expenses were approximately $15,036,000$13.8 million in 2008, $17,155,0002011, $15.9 million in 20072010 and $11,802,000$13.6 million in 2006.2009. The Company capitalizes certain software costs in accordance with Statement of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed.985. See Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in Part IV, Item 15 for further discussion.
Manufacturing and Suppliers
- ---------------------------
The Company
sources and/or assembles
some of its products from standard
electronic components,
such as
integrated circuits and fabricated parts such as printed circuit boards,
metal
parts and
castings. Mostmechanical components. Many assemblies and components are manufactured by third parties to
the
Company'sour specifications.
The CompanyPAR depends on outside suppliers for the continued availability of its
componentsassemblies and
parts.components. Although most items are generally available from a number of different suppliers,
the CompanyPAR purchases certain
final assemblies and components
consistently from
one supplier.single sources. Items purchased from
only one
suppliersingle sources include certain
printers, base castingsPOS devices, peripherals, custom molded and
tooled components, and electronic
assemblies and components. If such a supplier should cease to supply an item,
the Company believes thatwe believe new sources could be found to provide the components. However, added cost and manufacturing delays could result and adversely affect
the business of the
Company.our performance. The Company has not experienced significant delays of this nature in the past, but there can be no assurance that delays in delivery due to supply shortages will not occur in the future.
Intellectual Property
- ---------------------
The Company owns or has rights to certain patents, copyrights and trademarks, but believes none of these intellectual property rights provides a material competitive advantage.
The Company reliesWe rely upon non-disclosure agreements, license agreements and applicable domestic and foreign patent, copyright and trademark laws for protection of
itsour intellectual property. To the extent such protective measures are unsuccessful, or
the Company needswe need to enter into protracted litigation to enforce such rights, the
Company'sCompany’s business could be adversely impacted. Similarly, there is no assurance that the
Company'sCompany’s products will not become the subject of a third-party claim of infringement or misappropriation. To the extent such claims result in costly litigation or force the Company to enter into royalty or license agreements, rather than enter into a prolonged dispute,
the Company's businessour performance could be adversely impacted. The Company also licenses certain third-party software with its products. While
the
Company haswe have maintained a strong relationship with
itsour licensors, there is no assurance
that such relationships will continue or that the licenses will be continued under fees and terms acceptable to
the Company.
us.
Government Segment
PAR
The Company operates two wholly-owned subsidiaries inwithin the Government segment, PAR Government Systems Corporation (PGSC) and Rome Research Corporation (RRC). These
companiesPGSC and RRC provide servicescommand, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) support to the U.S. Department of Defense (DoD) and other federal agencies.
Our PGSC subsidiary delivers advanced technology in geospatial intelligence, geographic information systems, and state government organizations with a wide range of technical
capabilitycommand and scope. Significant areas in which the Company's services are
involved include providing technical expertise related to the design and
integration of state-of-the-art imagery intelligence systems for information
archive, retrieval, and processing; advanced research and development for
imaging sensors; and engineering andcontrol applications. PGSC’s offerings support services for Government information
technology and communications facilities.
The Company's offerings cover the entire development cycle for Government
systems, includingtechnology lifecycle to include requirements analysis, design specification, development, implementation, installation, test and evaluation.
Signal
Our RRC subsidiary provides worldwide communication and Image Processing
- ---------------------------
The Signalinformation technology support. RRC’s technical services support satellite operations and Image Processing (SIP) business sectorcommunications, battlefield networks, the global information grid, and various other information technology requirements ranging from advanced systems to basic help desk support. RRC supports the developmentU.S. Navy, the U.S. Army, the U.S. Air Force and implementationthe Department of complexState with operations worldwide.
PAR pursues businesses in four service areas:
Intelligence, Surveillance and Reconnaissance (ISR): The Company provides a variety of geospatial intelligence solutions including full motion video, geospatial information assurance, raster imagery, and light detection and ranging (LiDAR). In depth expertise in these domains provides government customers and large systems integrators with key technologies supporting a range of applications from strategic enterprise systems to tactical individual users. Furthermore, PAR has developed a number of products relative to these advanced technologies and provides integration and training support.
Systems Engineering & Evaluation: We integrate and test Electro-Optical (EO), Infrared (IR), Radar, and multi/hyper-spectral sensor systems for a broad range of government and industry surveillance applications. PAR developed the Multi-mission Advanced Sensor System (MASS), which assists with counter-terrorism, first responder, environmental, and drug enforcement applications. In addition, the Company designs and integrates radar sensor systems including the
collectionexperimentation, demonstration, and analysis of sensor data. The SIP group has developed sensor
concepts, algorithms, and real-time systems to address the difficult problems of
finding low-contrast targets against clutter background, detecting man-made
objects in dense foliage, and performing humanitarian efforts in support of the
removal of land mines with ground penetrating radar. The Company also supports
numerous technology demonstrations for the DoD, including a multi-national NATO
exercise of wireless communications interoperability. As part of this
demonstration, the Company designed and built systems for test and evaluation of
communications waveforms. The Company has extended this technology into public
safety and law enforcement via the Dynamic Open Architecture Radio System
(DOARS) system, a multi-channel communications gateway intended to solve the
problem of wireless communications interoperability. The Company also supports
Navy airborne infrared surveillance systems through the development of advanced
optical sensors.
Geospatial Software and Modeling
- --------------------------------
The Geospatial Software and Modeling (GS&M) business sector performs water
resources modeling; Geographic Informationsupport.
Communications Systems (GIS) based data management,
and geospatial information technology development. In particular, the Company's
Flood*Ware(TM) software tool and methodology is being utilized by New York State
in support of the Federal Emergency Management Agency's Map Modernization
Program. Similar technologies are used in support of water quality modeling and
assessment applications for the NYC Watershed Protection Program.
Logistics Management Systems
- ----------------------------
The Logistics Management Systems (LMS) business focuses on the
transportation sector. The LMS solutions provide comprehensive, end-to-end
monitoring, control, and management of over the road trailers and intermodal
assets. Par LMS has a particular focus on cold chain management and the
monitoring and control of refrigerated transport assets using long range
wireless technologies. Utilizing GPS, cellular, satellite, wireless, and
internet hosting technologies, Par LMS solutions include web based reporting for
stakeholders to improve asset utilization while protecting against cargo theft
and spoilage.
Par LMS contracts with US DOT Maritime Administration Research and
Development (US DOT MARAD) to advance the state of the art in technology
tracking, monitoring, and management. Also NYSERDA (New York State Energy
Research Development Administration) has contracted with Par LMS to develop a
real time tire pressure monitoring module called Pressure*Watch (TM).
Information Technology and Communications Support Services
- ----------------------------------------------------------
: The Company provides a wide range of technical and support services to sustain mission critical components of the Department of Defense Global Information Grid (GIG). These services include continuous operations, system enhancements and maintenance of very low frequency (VLF), high frequency (HF) and very high frequency (VHF) radio transmitter/receiver facilities, and extremely high frequency (EHF) and super high frequency (SHF) satellite communication heavy earth terminal facilities. In addition to theThese Department of Defense communications support of the GIG, the Company provides net-centric information technology
services in support of DoD customers. The Company provides a variety of
information technology support services, including systems administration,
operations, trouble shooting, planning, coordination and maintenance of hardware
and software systems, help desk support, and network security. These DoD
communications and information technology services are provided at customer locations in and outside of the continental United States. The various facilities, operating 24 x 7, are integral to the command and control of the nation'snation’s air, land and naval forces and those of United States coalition allies.
Test Laboratory and Range Operations
- ------------------------------------
Information Systems: The Company provides technical expertise to support the government's information management engineering,systems, primarily net-centric information technology services in support of Department of Defense customers. This on-site support includes infrastructure sustainment, configuration management, system staging, information assurance and technical services under
several contractsnetwork security tasks.
Products
Although a minor part of our Government business, we market a software product line built on PAR’s background and expertise in both Federal Government and commercial video standards and visualization products. The centerpiece of the PAR software is Gv2F™, a software toolkit for developers seeking to integrate full-motion video (FMV) into their geospatial software products. The toolkit provides simple yet robust C++, C#, and Java Application Programming Interfaces (APIs) and is fully compliant with Commercial MPEG-2 Transport Program Stream and Motion Imagery Standards Board (MISB) Key Length Value (KLV) meta-data standards. Additional software in the U.S. Air ForceGv product line provide further tools for visualizing and the U.S. Navy. These services
include the planning, execution,manipulating motion and evaluationstill imagery files. PAR also sells encryption and watermarking technology, called VectorLock®, for management of tests at government ranges
and laboratories operated and maintained by the Company. Test activities include
unique components, specialized equipment, and advanced systems for radar,
communications, electronic counter-measures, and integrated weapons systems. The
Company also develops complex measurement systems in several defense-related
areas of technology.
high value Geographic Information System (GIS) information.
Government Contracts
- --------------------
The Company performs work for U.S. Government agencies under firm fixed-price, cost-plus-fixed-fee, and time-and-material contracts. The majority of itsthese contracts are for one-yearhave a period of performance of one to five-year terms.five years. There are several risks associated with Government contracts.contracting. For example,instance, contracts may be reduced in size, scope and value, as well as modified, delayed and/or cancelled depending upon the Government’s requests, budgets, policies and/or changes in regulations. Contracts can also be terminated for the convenience of the Government at any time the Government believes that such termination would be in its best interests. In this circumstance, the Company is entitled to receive payments for its allowable costs and, in general, a proportionate share of its fee or profit for the work actually performed. The Company's business with the U.S. Government is also subject to other risks
unique to the defense industry, such as reduction, modification, or delays of
contracts or subcontracts if the Government's requirements, budgets, policies or
regulations change. The Company may also perform work prior to formal authorization or prior to adjustment of the contract price for increased work scope, change orders and other funding adjustments. Additionally, the Defense Contract Audit Agency on a regular basisregularly audits the books andfinancial records of the Company. Such audits can result in adjustments to contract costs and fees. Audits have been completed through the Company'sCompany’s fiscal year 2006 and have not resulted in any material adjustments.
Marketing and Competition
- -------------------------
Marketing begins with collecting information from a variety of sources
concerning the present and future requirements of the Government and other
potential customers for the types of technical expertise provided by the
Company. Although the Company believes it is positioned well in its chosen areas
of image and signal processing, information technology/communications and
engineering services, competition for Government contracts is intense. Many of
the Company's competitors are major corporations, or their subsidiaries, such as
Lockheed Martin, Raytheon, Northrop Grumman, BAE, Harris, and SAIC that are
significantly larger and have substantially greater financial resources than the
Company. The Company also competes with many smaller companies that target
particular segments of the Government market. Contracts are obtained principally through competitive proposals in response to solicitations from Government
agenciesgovernment organizations and prime contractors. In addition, the Company sometimes obtains contracts by submitting unsolicited proposals. Although the Company believes it is well positioned in its business areas, competition for Government contracts is intense. Many of the Company’s competitors are major corporations, or subsidiaries thereof, that are significantly larger and have substantially greater financial resources. The Company also competes with many smaller companies, many of which are designated by the Government for preferential “set aside” treatment, that target particular segments of the government contract market. The principal competitive factors are past performance, the ability to perform the statement of work, price, technological capabilities, management capabilities and service. In addition, the Company sometimes obtains
contracts by submitting unsolicited proposals. Many of the Company's DoDCompany’s Department of Defense customers are now migrating to commercial software standards, applications, and solutions. In that manner, the Company is utilizing its internal research and
development to migrate existing solutions into software product lines that will
support the DoD geospatial community (i.e., NGA, USAF, etc.).
Backlog
- --------
The
dollar value of existing Government contracts at December 31,
2008,2011, net of amounts relating to work performed to that date was approximately
$120,437,000,$134.4 million, of which
$41,650,000$51.4 million was funded.
AtThe value of existing Government contracts at December 31,
2007, the
comparable amount2010, net of amounts relating to work performed to that date was approximately
$152,451,000,$157.8 million, of which
$41,691,000$34.2 million was funded. Funded amounts represent those amounts committed under contract by Government agencies and prime contractors. The December 31,
20082011 Government contract backlog of
$120,437,000$134.4 million represents firm, existing contracts. Approximately
$59,626,000$72 million of this amount is expected to be completed in calendar year
2009,2012, as funding is committed.
Employees
As of December 31, 2008,2011, the Company had 1,7691,408 employees, approximately 55%58% of whom arewere engaged in the Company'sCompany’s Hospitality segment, 42%35% of whom arewere in the Government segment, and the remainder are7% of whom were corporate employees.
Due to the highly technical nature of the Company'sCompany’s business, the Company'sCompany’s future can be significantly influenced by its ability to attract and retain its technical staff. The Company believes that it has and will be able to continue to fulfill its near-term needs for technical staff.
Approximately 21%11% of the Company'sCompany’s employees are covered by collective bargaining agreements. The Company considers its employee relations to be good.
Exchange Certifications
The certification of the CEOChief Executive Officer of PAR required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, relating to PAR's compliance with the NYSE's corporate governance listing standards, was submitted to the NYSE on June 18, 2008July 8, 2011 with no qualifications.
Item 1A: Risk Factors
We operate in a dynamic and rapidly changing environment that involvesinvolving numerous risks and uncertainties. The following section describes some, but not all, of the risks and uncertainties that could have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock, and could cause our actual results to differ materially from those expressed or implied in our forward-looking statements.
Our future operating results are difficult to predict and are subject to fluctuations.
Our future operating results, including revenues, gross margins, operating expenses and net income (loss), have fluctuated on a quarterly and annual basis, are difficult to predict, and may be materially affected by a number of factors, many of which are beyond our control, including:
| · | the effects of adverse macroeconomic conditions in the United States and international markets, especially in light of the continued challenges in global credit and financial markets; |
| · | changes in customer demand for our products; |
| · | the timing of our new product announcements or introductions, as well as those by our competitors; |
| · | the level of demand and purchase orders from our customers, and our ability to adjust to changes in demand and purchase order patterns; |
| · | the ability of our third party suppliers, subcontractors and manufactures to supply us with sufficient quantities of high quality products or components, on a timely basis; |
| · | the effectiveness of our efforts to reduce product costs and manage operating expenses; |
| · | the ability to hire, retain and motivate qualified employees to meet the demands of our customers; |
| · | intellectual property disputes; |
| · | potential significant litigation-related costs; |
| · | costs related to compliance with increasing worldwide environmental and other regulations; and |
| · | the effects of public health emergencies, natural disasters, security risk, terrorist activities, international conflicts and other events beyond our control. |
As a result of these and other factors, there can be no assurance that the Company will not experience significant fluctuations in future operating results on a quarterly or annual basis. In addition, if our operating results do not meet the expectations of investors, the market price of our common stock may decline.
Our stock price has been volatile and may fluctuate in the future.
The trading price of our common stock has and may continue to fluctuate significantly. Such fluctuations may be influenced by many factors, including:
| · | the volatility of the financial markets; |
| · | uncertainty regarding the prospects of domestic and foreign economies; |
| · | uncertainty regarding domestic and international political conditions, including tax policies; |
| · | our performance and prospects; |
| · | the performance and prospects of our major customers; |
| · | investor perception of our company and the industry in which we operate; |
| · | the limited availability of earnings estimates and supporting research by investment analysts; |
| · | the liquidity of the market for our common stock; and |
| · | the concentration of ownership of our common stock by Dr. John W. Sammon, Director and Chairman Emeritus of PAR’s Board of Directors. |
Public stock markets have recently experienced price and trading volume volatility. This volatility significantly and negatively affected the market prices of securities of many technology companies and the return of such volatility could result in broad market fluctuations that could materially and adversely affect the market price of our common stock for indefinite periods. In addition, fluctuations in our stock price, volume of shares traded, and changes in our trading multiples may make our stock attractive to certain categories of investors who often shift funds into and out of stocks rapidly, exacerbating price fluctuations in either direction.
A DECLINE IN THE VOLUME OF PURCHASES MADE BY ANY ONE OF THE COMPANY'S MAJOR
CUSTOMERS WOULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.
decline in the volume of purchases made by any one of the company’s major customers would materially adversely affect our business.
A small number of related customers have historically accounted for a majority of the Company'sCompany’s net revenues in any given fiscal period. For each of the fiscal years ended December 31, 2008, 20072011, 2010 and 2006,2009, aggregate sales to our top two Hospitality segment customers, McDonald'sMcDonald’s Corporation and Yum! Brands, Inc., amounted to 40%42%, 46% and 39% of total revenues.revenues, respectively. Most of the Company'sCompany’s customers are not obligated to provide us with any minimum level of future purchases or with binding forecasts of product purchases for any future period. In addition, major customers may elect to delay or otherwise change the timing of orders in a manner that could adversely affect the Company'sCompany’s quarterly and annual results of operations. There can be no assurance that our current customers will continue to place orders with us, or that we will be able to obtain orders from new customers.
AN INABILITY TO PRODUCE NEW PRODUCTS THAT KEEP PACE WITH TECHNOLOGICAL
DEVELOPMENTS AND CHANGING MARKET CONDITIONS COULD RESULT IN A LOSS OF MARKET
SHARE.
An inability to produce new products that keep pace with technological developments and changing market conditions could result in a loss of market share.
The products we sell are subject to rapid and continual changes in technology. Our competitors offer products that have an increasingly wider range of features and capabilities. We believe that in order to compete effectively, we must provide systems incorporating new technologies at competitive prices. There can be no assurance that we will be able to continue funding research and development at levels sufficient to enhance our current product offerings, or
that the Company will be able to develop and introduce on a timely basis, new products that keep pace with technological developments and emerging industry standards and address the evolving needs of customers. There also can be no assurance that we will not experience difficulties that will result in delaying or preventing the successful development, introduction and marketing of new products in our existing markets, or that our new products and product enhancements will adequately meet the requirements of the marketplace or achieve any significant degree of market acceptance. Likewise, there can be no assurance as to the acceptance of our products in new markets, nor can there be any assurance as to the success of our penetration of these markets, nor to the revenue or profit margins realized by the Company with respect to these products. If any of our competitors were to introduce superior software products at competitive prices, or if our software products no longer meet the needs of the marketplace due to technological developments and emerging industry standards, our software products may no longer retain any significant market share.
WE GENERATE MUCH OF OUR REVENUE FROM THE HOSPITALITY INDUSTRY AND THEREFORE ARE
SUBJECT TO DECREASED REVENUES IN THE EVENT OF A DOWNTURN IN THAT INDUSTRY.
We generate much of our revenue from the hospitality industry and therefore are subject to decreased revenues in the event of a downturn in that industry.
For the fiscal years ended December 31, 2008, 20072011, 2010 and 2006,2009, we derived 68%70%, 69%72% and 70%65%, respectively, of our total revenues from the hospitality industry, primarily the quick service restaurant marketplace.QSR market. Consequently, our hospitality technology product sales are dependent in large part on the health of the hospitality industry, which in turn is dependent on the domestic and international economy, as well as factors such as consumer buying preferences and weather conditions. Instabilities or downturns in the hospitality market could disproportionately impact our revenues, as clients either may either exit the industry or delay, cancel or reduce planned expenditures for our products. Although we believe we can succeed in the quick service restaurant sector of the hospitality industry in a competitive environment, given the cyclical nature of that industry, there can be no assurance that our profitability and growth will continue.
WE DERIVE A PORTION OF OUR REVENUE FROM GOVERNMENT CONTRACTS, WHICH CONTAIN
PROVISIONS UNIQUE TO PUBLIC SECTOR CUSTOMERS, INCLUDING THE GOVERNMENT'S RIGHT
TO MODIFY OR TERMINATE THESE CONTRACTS AT ANY TIME.
For we face extensive competition in the
fiscal years ended December 31, 2008, 2007markets in which we operate, and
2006, we derived
32%, 31% and 30%, respectively, of our
total revenues from contractsfailure to
provide
technical expertise to U.S. Government agencies and defense contractors.
Contracts with U.S. Government agencies typically provide that such contracts
are terminable at the convenience of the U.S. Government. If the U.S. Government
terminated a contract on this basis, we would be entitled to receive paymentcompete effectively could result in price reductions and/or decreased demand for our
allowable costsproducts and
in general, a proportionate share of our fee or profit
for work actually performed. Most U.S. Government contracts are also subject to
modification or termination in the event of changes in funding. As such, we may
perform work prior to formal authorization, or the contract prices may be
adjusted for changes in scope of work. Termination or modification of a
substantial number of our U.S. Government contracts could have a material
adverse effect on our business, financial condition and results of operations.
We perform work for various U.S. Government agencies and departments
pursuant to fixed-price, cost-plus fixed fee and time-and-material, prime
contracts and subcontracts. Approximately 70% of the revenue that we derived
from Government contracts for the year ended December 31, 2008 came from
fixed-price or time-and-material contracts. The balance of the revenue that we
derived from Government contracts in 2008 primarily came from cost-plus fixed
fee contracts. Most of our contracts are for one-year to five-year terms.
While fixed-price contracts allow us to benefit from cost savings, they
also expose us to the risk of cost overruns. If the initial estimates we use for
calculating the contract price are incorrect, we can incur losses on those
contracts. In addition, some of our governmental contracts have provisions
relating to cost controls and audit rights and, if we fail to meet the terms
specified in those contracts, then we may not realize their full benefits. Lower
earnings caused by cost overruns would have an adverse effect on our financial
results.
Under time-and-materials contracts, we are paid for labor at negotiated
hourly billing rates and for certain expenses. Under cost-plus fixed fee
contracts, we are reimbursed for allowable costs and paid a fixed fee. However,
if our costs under either of these types of contract exceed the contract ceiling
or are not allowable under the provisions of the contract or applicable
regulations, we may not be able to obtain reimbursement for all of our costs.
If we are unable to control costs incurred in performing under each type of
contract, such inability to control costs could have a material adverse effect
on our financial condition and operating results. Cost over-runs also may
adversely affect our ability to sustain existing programs and obtain future
contract awards.
WE FACE EXTENSIVE COMPETITION IN THE MARKETS IN WHICH WE OPERATE, AND OUR
FAILURE TO COMPETE EFFECTIVELY COULD RESULT IN PRICE REDUCTIONS AND/OR DECREASED
DEMAND FOR OUR PRODUCTS AND SERVICES.
There are severalservices.
Several competing suppliers who offer hospitality management systems similar to ours. Some of these competitors are larger than PAR and have access to substantially greater financial and other resources and, consequently, may be able to obtain more favorable terms than we can for components and subassemblies incorporated into these hospitality technology products. The rapid rate of technological change in the Hospitality industrysegment makes it likely that we will face competition from new products designed by companies not currently competing with us. These new products may have features not currently available on our
Hospitality products.from us. We believe that our competitive ability depends on our total solution offering, our experience in the industry, our product development and systems integration capability, our direct sales force and our customer service organization. There is no assurance, however, that we will be able to compete effectively in the hospitality technology market in the future.
Our Government contracting business has been focused on niche offerings, reflecting our expertise, primarily signalin the areas of Communications Systems Support, Intelligence, Surveillance and image processing, information technology outsourcingReconnaissance (ISR), Systems Engineering & Evaluation and engineeringInformation Systems services. Many of our competitors are, or are subsidiaries of,
companies such as Lockheed Martin, Raytheon, Northrop Grumman, BAE, Harris and
SAIC. These companies are larger and have substantially greater financial resources than we do.and broader capabilities in information technology. We also compete with smaller companies, many of which are designated by the Government for preferential “set aside” treatment, that target particular segments of the Government market.government market and may have superior capabilities in a particular segment. These companies may be better positioned to obtain contracts through competitive proposals. Consequently, there are no assurances that we will continue to win Government contracts as a primedirect contractor or indirect subcontractor.
WE MAY NOT BE ABLE TO MEET THE UNIQUE OPERATIONAL, LEGAL AND FINANCIAL
CHALLENGES THAT RELATE TO OUR INTERNATIONAL OPERATIONS, WHICH MAY LIMIT THE
GROWTH OF OUR BUSINESS.
we may not be able to meet the unique operational, legal and financial challenges that relate to our international operations, which may limit the growth of our business.
For the fiscal years ended December 31, 2008, 20072011, 2010 and 2006,2009, our net revenues from sales outside the United States were 12%13%, 14%11% and 13%11%, respectively, of the Company'sCompany’s total revenues. We anticipate that international sales will continue to account for a significant portion of sales. We intend to continue to expand our operations outside the United States and to enter additional international markets, which will require significant management attention and financial resources. Our operating results are subject to the risks inherent in international sales, including, but not limited to, regulatory requirements, political and economic changes and disruptions, geopolitical disputes and war, transportation delays, difficulties in staffing and managing foreign sales operations, and potentially adverse tax consequences. In addition, fluctuations in exchange rates may render our products less competitive relative to local product offerings, or could result in foreign exchange losses, depending upon the currency in which we sell our products. There can be no assurance that these factors will not have a material adverse affect on our future international sales and, consequently, on our operating results.
OUR BUSINESS DEPENDS ON A LARGE NUMBER OF HIGHLY QUALIFIED PROFESSIONAL
EMPLOYEES AND, IF WE ARE NOT ABLE TO RECRUIT AND RETAIN A SUFFICIENT NUMBER OF
THESE EMPLOYEES, WE WOULD NOT BE ABLE TO PROVIDE HIGH QUALITY SERVICES TO OUR
CURRENT AND FUTURE CUSTOMERS, WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR REVENUES
AND OPERATING RESULTS.
We actively competederive a portion of our revenue from U.S. government contracts, which contain provisions unique to public sector customers, including the U.S. government’s right to modify or terminate these contracts at any time.
For the fiscal years ended December 31, 2011, 2010 and 2009, we derived 30%, 28% and 35%, respectively, of our total revenues from contracts to provide technical expertise to Government organizations and prime contractors. In any year, the majority of our Government contracting activity is associated with the U.S. Department of Defense. Contracts with the U.S. Government typically provide that such contracts are terminable at the convenience of the U.S. Government. If the U.S. Government terminated a contract on this basis, we would be entitled to receive payment for qualified professional staff.our allowable costs and, in general, a proportionate share of our fee or profit for work actually performed. Most U.S. Government contracts are also subject to modification or termination in the event of changes in funding. As such, we may perform work prior to formal authorization, or the contract prices may be adjusted for changes in scope of work. Termination or modification of a substantial number of our U.S. Government contracts could have a material adverse effect on our business, financial condition and results of operations.
We perform work for various U.S. Government agencies and departments pursuant to fixed-price, cost-plus fixed fee and time-and-material prime contracts and subcontracts. Approximately 74% of the revenue that we derived from government contracts for the year ended December 31, 2011 came from fixed-price or time-and-material contracts. The availabilitybalance of the revenue that we derived from Government contracts in 2011 primarily came from cost-plus fixed fee contracts. Most of our contracts are for one-year to five-year terms.
While fixed-price contracts allow us to benefit from cost savings, they also expose us to the risk of cost overruns. If the initial estimates we use for calculating the contract price are incorrect, we can incur losses on those contracts. In addition, some of our governmental contracts have provisions relating to cost controls and audit rights and if we fail to meet the terms specified in those contracts, then we may not realize their full benefits. Lower earnings caused by cost overruns would have an adverse effect on our financial results.
Under time-and-materials contracts, we are paid for labor at negotiated hourly billing rates and for certain expenses. Under cost-plus fixed fee contracts, we are reimbursed for allowable costs and paid a fixed fee. However, if our costs under either of these types of contract exceed the contract ceiling or lack thereofare not allowable under the provisions of qualified professional staffthe contract or applicable regulations, we may not be able to obtain reimbursement for all of our costs.
If we are unable to control costs incurred in performing under each type of contract, such inability to control costs could have a material adverse effect on our financial condition and operating results. Cost over-runs also may adversely affect our ability to develop
new productssustain existing programs and to provide services and meet the needsobtain future contract awards.
a significant portion of our customers in the
future. An inability to fulfill customer requirements duetotal assets consists of goodwill and identifiable intangible assets, which are subject to a lackperiodic impairment analysis, and a significant impairment determination in any future period could have an adverse effect on our results of available
qualified staff at agreed upon salary rates may adversely impact our operating
resultsoperations even without a significant loss of revenue or increase in the future.
A SIGNIFICANT PORTION OF OUR TOTAL ASSETS CONSISTS OF GOODWILL AND IDENTIFIABLE
INTANGIBLE ASSETS, WHICH ARE SUBJECT TO A PERIODIC IMPAIRMENT ANALYSIS AND A
SIGNIFICANT IMPAIRMENT DETERMINATION IN ANY FUTURE PERIOD, COULD HAVE AN ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS EVEN WITHOUT A SIGNIFICANT LOSS OF REVENUE
OR INCREASE IN CASH EXPENSES ATTRIBUTABLE TO SUCH PERIOD.
cash expenses attributable to such period.
We have goodwill and identifiable intangible assets at December 31, 20082011 totaling approximately $25.7$6.9 million and $8.3$15.9 million, respectively, resulting primarily from several business acquisitions. Pursuant to FASB Statement No.
142, Goodwillacquisitions and Other Intangible Assets, theinternally developed capitalized software. The Company tests goodwill for impairment annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We describe the impairment testing process and results of this testing more thoroughly in our Annual
Report on Form 10-Kherein in Item 7 under the heading "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations -Critical- Critical Accounting Policies."” If we determine that thean impairment has occurred at any point in time, we will be required to reduce goodwill or identifiable intangible assets on our balance sheet. As of
December 31, 2008, our balance sheet reflected a carrying amount of
approximately $25.7 million in goodwill.
ECONOMIC CONDITIONS AND THE VOLATILITY IN THE FINANCIAL MARKETS COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS, FINANCIAL CONDITION AND/OR
RESULTS OF OPERATIONS OR ON THE FINANCIAL CONDITION OF ITS CUSTOMERS AND
SUPPLIERS.
The economic conditions in late 2008 and early 2009 and the volatility in
the financial markets in late 2008 and early 2009, both in the U.S. and in many
other countries where the Company operates, have contributed and may continue to
contribute to higher unemployment levels, decreased consumer spending, reduced
credit availability and/or declining business and consumer confidence. Such
conditions could have an impact on consumer purchases and/or retail customer
purchases of the Company's products, which could result in a reduction of sales,
operating income and cash flows. This could have a material adverse effect on
the Company's business, financial condition and/or results of operations.
Additionally, disruptions in the credit and other financial markets and economic
conditions could, among other things, impair the financial condition of one or
more of the Company's customers or suppliers, thereby increasing the risk of
customer bad debts or non-performance by suppliers.
Item 2: Properties
| Item 1B: | Unresolved Staff Comments |
None.
The following are the principal facilities (by square footage) of the Company:
| Location | Industry Segment | Floor Area Principal Operations | | Number of Location Segment Principal Operations Sq. Ft.
-------- ------- -------------------- ----------
| |
| | | | | |
| New Hartford, NY | Hospitality Government | Principal executive offices, 138,500
Government manufacturing, research and development laboratories, computing facilities | | | 128,675 | |
| Rome, NY | Government | Research and development 52,800
| | | 31,900 | |
| Stowe, VT | Hospitality Sales, service and research 26,000
and development
Boulder, CO Hospitality Service 22,500
Boca Raton, FL Hospitality Research and development 14,900
Sydney, Australia Hospitality Sales and service 14,000
Las Vegas, NV Hospitality Service 8,800
Vaughn, Canada Hospitality | Sales, service and research and 8,000
development
Toronto, | | | 21,300 | |
| Boulder, CO | Hospitality | Service | | | 20,500 | |
| Boca Raton, FL | Hospitality | Research and development | | | 14,900 | |
| Sydney, Australia | Hospitality | Sales and service | | | 14,000 | |
| as Vegas, NV | Hospitality | Service | | | 12,000 | |
| Vaughn, Canada | Hospitality | Sales, service and research and development | | | 10,000 | |
| Toronto, Canada | Hospitality | Sales, service and research and development | | | 7,700
development
| |
The Company'sCompany’s headquarters and principal business facility is located in New Hartford, New York,NY, which is near Utica, located in Centralcentral New York State.
The Company owns its principal facility and adjacent space in New Hartford,
N.Y.Hartford. All of the other facilities are leased for varying terms. Substantially all of the Company'sCompany’s facilities are fully utilized, well maintained, and suitable for use. The Company believes its present and planned facilities and equipment are adequate to service its current and immediately foreseeable business needs.
Item 3: Legal Proceedings
The Company is subject to legal proceedings which arise in the ordinary course of business. In the opinion of management, the ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations or cash flows of the Company.
| Item 4: | Mine Safety Disclosures |
Not Applicable.
PART II
Item 5: Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
| Item 5: | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
The Company'sCompany’s Common Stock, par value $.02 per share, trades on the New York Stock Exchange (NYSE symbol - PTC)PAR). At December 31, 2008,2011, there were approximately 456417 owners of record of the Company'sCompany’s Common Stock, plus those owners whose stock certificates are held by brokers.
The following table shows the high and low stock prices for the two years ended December 31, 20082011 as reported by New York Stock Exchange:
2008 2007
------------------------- ------------------------
Period Low High Low High
- ------------------ --------- --------- --------- ---------
First Quarter $ 5.57 $ 8.25 $ 8.31 $ 10.18
Second Quarter $ 6.18 $ 9.79 $ 8.26 $ 10.87
Third Quarter $ 6.02 $ 8.75 $ 7.62 $ 8.90
Fourth Quarter $ 2.75 $ 7.44 $ 6.81 $ 8.99
| | | 2011 | | | 2010 | |
| Period | | Low | | | High | | | Low | | | High | |
| | | | | | | | | | | | | |
| First Quarter | | $ | 4.28 | | | $ | 6.63 | | | $ | 5.30 | | | $ | 6.33 | |
| Second Quarter | | $ | 3.63 | | | $ | 4.99 | | | $ | 5.14 | | | $ | 7.28 | |
| Third Quarter | | $ | 3.04 | | | $ | 3.93 | | | $ | 4.69 | | | $ | 6.20 | |
| Fourth Quarter | | $ | 3.22 | | | $ | 4.00 | | | $ | 5.24 | | | $ | 6.92 | |
The Company has not paid cash dividends on its Common Stock, and its Board of Directors presently intends to continue to retain earnings for reinvestment in growth opportunities. Accordingly, it is anticipated
that no cash dividends will be paid in the foreseeable future.
On November 14, 2005, the Company's Board of Directors declared a 3 for 2
stock split in the form of a stock dividend that was distributed on January 6,
2006 to shareholders of record on December 12, 2005. All share and per share
data in these consolidated financial statements and footnotes have been
retroactively restated as if the stock split had occurred as of the earliest
period presented.
Item 6: Selected Financial Data
SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
(In thousands, except per share amounts)
The following selected historical consolidated financial data should be
read in conjunction with the Consolidated Financial Statements and the related
notes and "Management's| Item 6: | Selected Financial Data |
Not Required.
| Item 7: | Management’s Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Annual Report on Form 10-K.
Year ended December 31,
-----------------------------------------------------------------------
2008 2007 2006 2005 2004
-----------------------------------------------------------------------
Net revenues .................... $ 232,687 $ 209,484 $ 208,667 $ 205,639 $ 174,884
Cost of sales ................... $ 175,237 $ 157,576 $ 153,158 $ 150,053 $ 137,738
Gross margin .................... $ 57,450 $ 51,908 $ 55,509 $ 55,586 $ 37,146
Selling, general & administrative $ 36,790 $ 37,517 $ 33,440 $ 30,867 $ 22,106
(Provision) benefit
for income taxes .............. $ (1,358) $ 1,497 $ (3,146) $ (5,358) $ (3,729)
Net income (loss) ............... $ 2,217 $ (2,708) $ 5,721 $ 9,432 $ 5,635
Basic earnings (loss) per share . $ .15 $ (.19) $ .40 $ .68 $ .43
Diluted earnings (loss) per share $ .15 $ (.19) $ .39 $ .64 $ .41
Financial Condition and Results of Operations
The selected consolidated financial statement data summarized above is
reflective of certain business acquisitions, as discussed in Note 2, and
reflects the adoption of accounting pronouncements, as discussed in Note 1, to
the Consolidated Financial Statements.
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
----------------------------------------------------
2008 2007 2006 2005 2004
----------------------------------------------------
Current assets ...... $110,038 $ 97,879 $ 95,453 $ 84,492 $ 77,696
Current liabilities . $ 59,969 $ 52,284 $ 46,473 $ 43,661 $ 45,159
Total assets ........ $153,988 $146,518 $142,258 $125,149 $111,752
Long-term debt ...... $ 5,852 $ 6,932 $ 7,708 $ 1,948 $ 2,005
Shareholders' equity $ 86,257 $ 84,987 $ 86,083 $ 78,492 $ 63,574
The selected consolidated financial statement data summarized above is
reflective of certain business acquisitions, as discussed in Note 2 to the
Consolidated Financial Statements.
On November 14, 2005, the Company's Board of Directors declared a 3 for 2
stock split in the form of a stock dividend that was distributed on January 6,
2006 to shareholders of record on December 12, 2005. All share and per share
data in these consolidated financial statements and footnotes have been
retroactively restated as if the stock split had occurred as of the earliest
period presented.
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements This document contains "forward-looking statements"“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Any statements in this document that do not describe historical facts are forward-looking statements. Forward-looking statements in this document (including forward-looking statements regarding the continued health of segments of the hospitality industry, future information technology outsourcing opportunities, an expected increase or decrease in contract funding by the U.S. Government, the impact of current world events on our results of operations, the effects of inflation on our margins, and the effects of interest rate and foreign currency fluctuations on our results of operations) are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When we use words such as "intend," "anticipate," "believe," "estimate,"
"plan," "will,"“intend,” “anticipate,” “believe,” “estimate,” “plan,” “will,” or "expect"“expect”, we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable based on information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we presently may be planning. We have disclosed certain important factors that could cause our actual future results to differ materially from our current expectations, includingincluding: a decline in the volume of purchases made by one or a group of our major customers; risks in technology development and commercialization; risks of downturns in economic conditions generally, and in the quick-service sector of the hospitality market specifically; risks associated with government contracts; risks associated with competition and competitive pricing pressures; and risks related to foreign operations. Forward-looking statements made in connection with this report are necessarily qualified by these factors. We are not undertaking to update or revise publicly any forward-looking statements if we obtain new information or upon the occurrence of future events or otherwise. Overview
PAR continues to be a leading provider of hospitality PAR’s technology solutions thatfor the Hospitality segment feature software, hardware and professional/lifecycle support services to
several industries including:tailored for the needs of restaurants, hotels/resorts/luxury hotels, resorts and spas, casinos, cruise lines, movie theatres, theme parks and specialty retailers. The Company alsoCompany’s Government segment provides technical expertise in the Federal Government,contract development of advanced systems and itssoftware solutions for the U.S. Department of Defense and other federal agencies, appliedas well as information technology and technical
outsourcingcommunications support services primarily withto the U.S. Department of Defense. The Company's hospitality technologyCompany’s products sold in the Hospitality segment are usedutilized in a varietyrange of applications by thousands of customers. The Company faces competition inacross all of its markets (restaurants, hotels, etc.) and competeswithin the Hospitality segment, competing primarily on the basis of product design/features/functions, product quality/design, features and functionality, quality and reliability, price, customer service, and delivery capability. Recently, the trend in the hospitality
industry has been to reduce the number of approved vendors in a specific concept
to companies that havePAR’s global capabilities in sales, serviceinfrastructure and deployment, can
achieve quality and delivery standards, have multiple product offerings, R&D
capability, and can be competitive with their pricing. PAR's global reach as a technology solutions provider to hospitality customers is an important competitive advantage, as it allows the Company to provide innovative solutions,systems, with significant global deployment capability, to its multinational customers like
McDonald's, Yum! Brands, CKE Restaurants and the Mandarin Oriental Hotel Group.
PAR'scustomers. PAR’s continuing strategy is to provide totallycomplete integrated technology systemssolutions and services with a high level ofexcellent customer service in the markets in which it competes.participates. The Company conducts its research and development efforts to create innovative technology offerings that meetsmeet and exceeds our customers'exceed customer requirements and also hashave a high probability for broader market appeal and success. PAR's business model focuses
upon operating efficiencies and controlling costs. This is achieved through
investment in modern production technologies, and by managing purchasing
processes and functions.
The Company executes an internal investment strategy in threeis focused on expanding four distinct areasparts of its Hospitality segment.businesses. First, it is investing in the market introduction and deployment of ATRIO, its next generation software for the Hotel/Resport/Spa market. Second, we are investing in the enhancement of existing software and the development of the next generation of software for the Restaurant market. Third, the Company makes significant
investments in its development of next generation software. Second, the Company
concentratescontinues to work on building a more robust further reachingand extensive third-party distribution channel.
Third,channels. Fourth, as the Company'sCompany’s customers continue to expand in international markets, PAR has been
creatingcreated an international infrastructure initially focusingfocused on that expansion.
The QSR market, our primary market, continues to perform well for the large, international companies, despite worldwide macroeconomic uncertainty. However, the Company has seen an impact of current economic conditions on smaller, regional QSR organizations, whose business is slowing because of higher unemployment and lack of consumer confidence in certain regions. These conditions have had and could continue to have an impact on the Asia/Pacific
rim due tomarkets in which the new restaurant growthCompany's customers operate, which could result in a reduction of sales, operating income and concentration of PAR's customers in
that region.
cash flows.
Approximately 32%30% of the Company'sCompany’s revenues are generated by its Government business. The operational performance of PAR’s Government segment requires consistently winning new contracts, the extension of existing contracts, and the renewal of expiring contracts. The general uncertainty in our Government
Business segment. ThisU.S. defense spending for the balance of the calendar year may impact the growth of this business segment is comprisedon a year-over-year basis.
Results of two subsidiaries:Operations — 2011 Compared to 2010
During the fourth quarter of fiscal year 2011, the Company entered into a definitive agreement to sell substantially all of the assets of its Logistics Management business, PAR GovernmentLogistics Management Systems Corporation (LMS) to ORBCOMM Inc., including but not limited to accounts receivable, inventory, equipment, intellectual property, and Rome Research Corporation. Through these government
contractors, the Company provides IT and communications support servicescustomer contracts. The transaction closed on January 12, 2012. The results of operations of LMS for fiscal year 2011 have been recorded as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20, Presentation of Financial Statements – Discontinued Operations. All prior period amounts have been reclassified to the
U.S. Navy, Air Force and Army. PAR also offers its services to several
non-military U.S. federal, state and local agencies by providing applied
technology services including radar, image and signal processing, logistics
management systems, and geospatial services and products. The Company's
Government performance rating allows the Company to consistently win add-on and
renewal business, and build long-term client-vendor relationships. PAR can
provide its clients the technical expertise necessary to operate and maintain
complex technology systems utilized by government agencies.
The Company will continue to leverage its core technical capabilities and
performance into related technical areas and an expanding customer base. The
Company will seek to accelerate this growth through strategic acquisitions of
businesses that broaden the Company's technology and/or business base.
Summary
The Company believes it is and can continue to be successful in its two
core business segments -Hospitality and Government- due to its capabilities and
industry expertise. The majority of the Company's business is in the quick-serve
restaurant sector of the hospitality market. In regardsconform to the current economic
landscape, PAR believes that this sector will remain strong during this period of uncertainty. This is a direct reflection of the valuepresentation. Refer to Note 2 “Discontinued Operations” and convenience PAR's
large quick-service customers can and do provide.
The smaller sectors of the Company's Hospitality segment are its hotel,
resort and spa customers as well as its distribution channel which targets
smaller independent restaurants. These sectors are being impacted by the current
economic uncertainty and, as a result, are experiencing a smaller rate of growth
than the Company's quick-service restaurant sector.
It has been the Company's experience that their Government I/T business is
resistant to economic cycles including reductionsNote 15 “Subsequent Events” in the Federal defense
budgets. Clearly PAR's I/T outsourcing business focuses on cost-effective
operations of technology and telecommunication facilities which must function
independent of economic cycles. Additionally, it isNotes to the Company's experience
that its Government research and development spending has only fluctuated
modestly during times of military cutbacks.
Results of Operations -- 2008 Compared to 2007
Consolidated Financial Statements for further discussion. The Company reported revenues of $232.7$229.4 million for the year ended December 31, 2008, an increase2011, a decrease of 11%2.4% from the $209.5$235 million reported for the year ended December 31, 2007.2010. The Company'sCompany’s net incomeloss from continuing operations for the year ended December 31, 20082011 was $2.2$13.4 million, or $.15$0.89 loss per diluted net earnings per share, compared to a net lossincome of $2.7$5.0 million, and $.19or $0.33 per diluted net loss per share for the same period in 2007.
Product revenues from2010. During 2011, the Company's Hospitality segment were $81.8Company reported a loss on discontinued operations of $2.2 million, or $0.15 loss per diluted share associated with its Logistics Management business. This compares to a loss of $1.8 million or $0.12 loss per diluted share for the same period in 2010. The Company’s net loss for the year ended December 31, 2008, an increase2011 was $15.5 million, or $1.04 loss per diluted share, compared to net income of 6%$3.1 million, or $0.21 per diluted share, for the same period in 2010.
Product revenues for the year ended December 31, 2011 were $91 million, a decrease of 7.8% from the $77.1$98.7 million recorded in 2007. This was primarily due to a $7.2 million increase in domestic
product sales. The Company recorded increased revenues to several major accounts
including Yum! Brands, Catalina, CKE and McDonald's. This increase was partially
offset by a $2.5 million decline in international revenue.2010. This decrease was primarily due to the timingresult of a decline in domestic sales to McDonald'sMcDonald’s as their significant North American upgrade program has been completed. Partially offsetting this decline was an increase in certain regions.
domestic sales to Baskin-Robbins, SUBWAY, and YUM! Brands. Lastly, the Company has experienced an increase in international product sales as well as sales made through its dealer channels which have increased 15% and 7%, respectively over 2010. Customer service revenues are also generated by the Company's
Hospitality segment. The Company's service offeringsprimarily include installation, software maintenance, training, twenty-four24 hour help desk support and various depot and on-site service options. Customer service revenues were $75.4$69.5 million for the year ended December 31, 2008,2011, a 12% increase1.1% decrease from $67.4$70.2 million reported for the same period in 2007. Approximately $3.3 million of this growth was
related2010. This decrease is mostly attributable to a majordecrease in depot service initiativerevenue, commensurate with a large restaurant customer. Also
contributing tonew store upgrades. This decrease was partially offset by increases in domestic field service revenue associated with the growth wasMcDonald’s hardware upgrade program, as well as an increase in professionalinternational service and software
maintenance contracts.
Contractrevenue to YUM! Brands.
Government contract revenues from the Company's Government segment were $75.5$68.9 million for the year ended December 31, 2008,2011, an increase of 16%4.4% when compared to the $65$66.1 million recorded in the same period in 2007. The primary factor contributing2010. This increase was due to multiple new contract wins, including revenue associated with the growth was a $7.4 million increase in revenue fromCompany’s new (ISR) technologies contract with the Company's
information technology outsourcing contracts for facility operations at critical
U.S. Department of Defense telecommunication sites across the globe. These
outsourcing operations provided by the Company directly support U.S. Navy, Air
Force and Army operations as they seek to convert their military information
technology communications facilities into contractor-run operations and to meet
new requirements with contractor support.
Army.
Product margins for the year ended December 31, 20082011 were 39.5%36.4%, a decreasean increase from 34.9% in the same period in 2010. This improvement was primarily the result of 130 basis pointsan improved product mix resulting from an increase in the 40.8%volume of terminals sold relative to related peripherals, as well as various cost reduction and efficiency improvement efforts implemented across the Company’s Hospitality businesses.
Customer service margins were 18.3% for the year ended December 31, 2007.2011, compared to 33% for the same period in 2010. This
decline is primarily due to lower margins realized on a special initiative with
a major restaurant customer involving third party peripheral devices. Also,
contributing to the decrease was primarily the result of a shiftcharge of $7.7 million recorded in product mix,the second quarter of 2011 associated with the write down of service parts inventory related to discontinued products. This charge was recorded as the result of an acceleration of technology upgrade programs by two of the Company’s major customers and an overall change in customer requirements as a stronger dollar.
Customer Serviceresult of these upgrades. As part of these programs, the Company’s customers were required to upgrade their existing hardware in support of new software utilized at their respective restaurants. In addition, this decrease was also the result of a reduction in higher margin depot service revenue as a result of the various customer upgrade programs. Partially offsetting this decrease was an improvement in installation margin resulting from improved utilization of installation personnel.
Government contract margins were 27.9%6.7% for the year ended December 31, 2008
compared to 24.2% for the same period in 2007. This2011, an increase was primarily due
to increases in professional services and software maintenance revenues, a
special initiative with a major customer and costs reductions made during 2008.
Contract margins were 5.5% for the year ended December 31, 2008 versusfrom 6.4% for the same period in 2007. The decrease2010. This increase was attributabledue to start up costs
incurred in 2008 on a new Information Technology outsourcing contractrevenue associated with the DepartmentCompany’s first commercial license sale of Defense.its full motion video technology. The most significant components of contract costs in 20082011 and 20072010 were labor and fringe benefits. For 2008,2011, labor and fringe benefits were $53.7$45.7 million, or 75%71% of contract costs, compared to $48.4 million or 79%78% of contract costs for the same period in 2007.
Selling, general and administrative expenses are virtually all related to
the Company's Hospitality segment. 2010. Selling, general and administrative expenses for the year ended December 31, 20082011 were $36.8$35.8 million, a decrease of 2%6.5% from the $37.5$38.3 million expense for the same period in 2007. The decrease was2010. Total expense for 2011 included non-recurring charges of $595,000 recorded in the second quarter of 2011 related to severance and office closure. Overall selling, general and administrative expenses decreased year over year as a result of the execution of various cost reduction strategies primarily due to a decline in bad debt expense and certain cost reductions. This
was partially offset bywithin the Company's continued investment into expanding its
distribution channels.
Research and development expenses relate primarily to the Company's
Hospitality segment. businesses.
Research and development expenses were $15.3$13.8 million for the year ended December 31, 2008,2011, a decrease of 11%13% from the $17.2$15.9 million recorded in 2007. This2010. The decrease was associated with the Company capitalizing the development costs associated with its next generation Hospitality software platforms.
During the second quarter of 2011, the Company determined, as a result of the decline in the stock price that occurred during the second quarter, a goodwill impairment triggering event had occurred. The fair value of the Company’s common shares declined from $4.60 per share at April 1, 2011 to $3.83 per share at June 30, 2011, resulting in the Company no longer being able to reconcile the aggregate fair value of its reporting units to its market capitalization after consideration of a reasonable control premium. Although there was primarily attributableno significant adverse change to cost reductions
achievedthe long term financial outlook of any of its businesses, the Company concluded a triggering event had occurred and as a result, performed additional analyses over the valuation of its reporting units in outsourcing through strategic relationships.
accordance with the relevant accounting rules, recording a non-cash impairment charge of $20.2 million to its goodwill in the second quarter of 2011. In addition, as part of this goodwill triggering event assessment, the Company recorded an impairment charge of $580,000 associated with its indefinite lived intangible assets.
Amortization of identifiable intangible assets was $1.5 million$840,000 for the year ended December 31, 20082011 compared to $1.6 million$939,000 for 2007.the same period in 2010. This decrease was due to certain intangible assets becoming fully amortized in 2008.
during 2010.
Other income, net, was $921,000$203,000 for the year ended December 31, 20082011 compared to $1.2 million$640,000 for the same period in 2007.2010. Other income primarily includes rental income, income from the sale of certain assets, finance charges and foreign currency gains and losses. The decrease is primarily dueattributable to finance charges collected on a declinespecific outstanding receivable in foreign currency gains2010 that did not recur in 2008 compared to 2007.
2011.
Interest expense represents interest charged on the Company'sCompany’s short-term borrowing requirementsborrowings from banks and from long-term debt. Interest expense was $1.2 million$211,000 for the year ended December 31, 20082011, as compared to $1.1 million$352,000 for the same period in 2007.2010. The Company experienced higherlower average borrowings in 20082011 when compared to 2007. The Company also recognized an increase2010 and a decrease in interest expense of $101,000 related to its interest rate swap agreement that was entered into in September 2007. This was
partially offset by a lower borrowing interest rate in 2008 compared to 2007.
agreement. For the year ended December 31, 2008,2011, the Company'sCompany’s effective income tax rate was 38%a benefit of 35.8%, compared to a benefitan effective income tax expense rate of 35.6%30.1% in 2007.2010. The variance from the federal statutory rate in 20082011 was primarily due to theresearch credits and state income taxes and
various nondeductible expensestax benefits, partially offset by the research and experimentalan additional valuation allowance necessary related to certain deferred tax credit.assets. The variance from the federal statutory rate in 20072010 was primarily due to the state incomereversal of a valuation allowance of $230,000 on certain deferred tax benefits resulting fromassets as the pretax lossresult of the Company’s tax planning strategies and certain
taxresearch credits offset by various nondeductible expenses which decreased the tax
benefit.
generated. Results of Operations -- 2007— 2010 Compared to 2006
2009 The Company reported revenues of $209.5$235 million for the year ended December 31, 2007, virtually unchanged2010, an increase of 8.9% from the $208.7$215.9 million reported for the year ended December 31, 2006.2009. The Company'sCompany’s net lossincome from continuing operations for the year ended December 31, 20072010 was $2.7$5.0 million, or $.19$0.33 per diluted net loss per share, compared to net incomeloss of $5.7$5.0 million, and $.39or $0.35 loss per diluted net income per share for the same period in 2006.
Product revenues from2009. During 2010, the Company's Hospitality segment were $77.1Company reported a loss on discontinued operations of $1.8 million, or $0.12 loss per diluted share associated with its Logistics Management business. This compares to a loss of $143,000, or $0.01 loss per diluted share for the same period in 2009. The Company’s net income for the year ended December 31, 2007, a decrease2010 was $3.1 million, or $0.21 per diluted share, compared to net loss of 7%$5.2 million, or $0.36 loss per diluted share, for the same period in 2009. Product revenues for the year ended December 31, 2010 were $98.7 million, an increase of 46% from the $83.2$67.5 million recorded in 2006.2009. This decreaseincrease was dueprimarily attributable to an $8.3 million declineincrease in domestic
product sales primarily due to McDonald’s in fulfillment of a continued delay in hardware orders from a major
customer pendinglarge technology upgrade program. In addition to this increase, sales through the release of that customer's new third party software. The
decline was also dueCompany’s dealer channel increased significantly as compared to the Company's delay in replacing hardware and software
business associated with last year's orders from two new customers. This drop in
domestic revenue was partially offset by a $2.2 million2009. A 27% increase in international product sales. Approximately $900,000 ofrevenue during the international revenue
increase was dueyear further contributed to currency fluctuations. This increase was the result of growth in sales to the Company's restaurant customers in Asia and Canada and
property management systems in Europe and Latin America.
2010. Customer service revenues are also generated by the Company's Hospitality
segment. The Company's service offeringsprimarily include installation, software maintenance, training, twenty-four24 hour help desk support and various depot and on-site service options. Customer service revenues were $67.4$70.2 million for the year ended December 31, 2007,2010, a 9% increase3.6% decrease from $62$72.9 million reported for the same period in 2006. Approximately $3 million2009. This decrease is mostly attributable to a decrease in installation and field service revenue as a result of this growth was related to the awardcompletion of a new service contractspecific initiative with a major customer in October of 2006. Also
contributing to the growth was an increase in software maintenance contracts.
This was2009. These decreases were partially offset by a declineincreases in installation revenue due tofrom professional services within the lower
product revenue.
ContractRestaurant market.
Government contract revenues from the Company's Government segment were $65$66.1 million for the year ended December 31, 2007, an increase2010, a decrease of 2%12.5% when compared to the $63.5$75.5 million recorded in the same period in 2006. The primary factor
contributing2009. This decrease was due to the growth wascompletion of certain contracts in 2010 as well as a $1.9 million increasereduction in pass through revenue from the
Company's information technology outsourcing contracts for facility operations
at critical U.S. Department of Defense telecommunication sites across the globe.
These outsourcing operations provided by the Company directly support U.S. Navy,
Air Force and Army operations as they seek to convert their military information
technology communications facilities into contractor-run operations and to meet
new requirements with contractor support.
that occurred in 2009, but did not recur in 2010.
Product margins for the year ended December 31, 20072010 were 40.8%34.9%, a decrease
of 160 basis pointsan increase from the 42.4%33.0% for the year ended December 31, 2006.2009. This decline in marginsimprovement was primarily attributablethe result of an improved product mix resulting from an increase in the volume of terminals sold relative to related peripherals, as well as various cost reduction and efficiency improvement efforts implemented across the Company’s Restaurant and Hotel/Resort/Spa markets. Additionally, 2009 product margin was unfavorably impacted by a charge of $944,000 recorded relative to a decrease in software revenue
in 2007 when compared to 2006. The Company has not replaced the software revenuewrite-down of inventory associated with two new customersdiscontinued product lines due to a change in 2006.
customer requirements.
Customer Serviceservice margins were 24.2%33.0% for the year ended December 31, 20072010, compared to 25.2%23.8% for the same period in 2006. This decrease2009. A significant contributor to this variance was a charge of $4.5 million recorded in 2009, primarily due
toassociated with the obsolescencewrite down of service parts for a discontinued product line. The
decline was also due to lower than planned installation revenue directlyinventory related to discontinued products in response to certain major customers announcing their initiative to accelerate planned upgrades of their POS systems. Exclusive of the decreaseaforementioned charge, fiscal year 2009 service margins were 29.9%, versus 33.0% in product revenue.the current year. This adversely impactedimprovement is the utilizationresult of installation personnel.
Contractcost reduction efforts in the Company’s PSMS subsidiary, as well as improvements in international service margins resulting from the execution of various cost reduction strategies.
Government contract margins were 6.4% for the year ended December 31, 2007 versus 7.2%2010, an increase from 5.5% for the same period in 2006. The decrease2009. This increase was due in part, to a favorable cost
share adjustment on the Company's Logistics Management Programreduction in 2006. The
decrease was also attributable to start up costs incurredlow margin pass through revenue that occurred in 2007 on a new
Information Technology outsourcing2009, but did not recur in 2010, as well as improved margins associated with contract with the Navy.completions in 2010. The most significant components of contract costs in 20072010 and 20062009 were labor and fringe benefits. For 2007,2010, labor and fringe benefits were $48.4 million or 79%78% of contract costs compared to $45.9$52.4 million or 78%73% of contract costs for the same period in 2006.
Selling, general and administrative expenses are virtually all related to
the Company's Hospitality segment. 2009.
Selling, general and administrative expenses for the year ended December 31, 20072010 were $37.5$38.3 million, an increase of 12%9.6% from the $33.4$34.9 million expense for the same period in 2006. This2009. Of this increase, was due to
growth$2.8 million is associated with an increase in restaurant sales and marketing expenses associated with restaurant products asexpense attributable to the Company is investingincrease in its international infrastructure andrevenue. Increases also relate to the Company’s investment in the expansion of its dealer channel. The increase was also due toATRIO software initiative. These increases were partially offset by a risedecline in bad debt
expense due to an increase in write-offs related to various customers.
Research and development expenses relate primarily to the Company's
Hospitality segment. stock-based compensation expense.
Research and development expenses were $17.2$15.9 million for the year ended December 31, 2007,2010, an increase of 45%16.4% from the $11.8$13.6 million recorded in 2006. This2009. The increase was primarily attributable to the Company's
continuedresult of increased research and development expenditures in its next generation software products for
its restaurant customers. The platform for this next generationsupport of products was
acquired from SIVA Corporationthe Company’s investment in the fourth quarter of 2006.
ATRIO software initiative. These increases were partially offset by cost reductions achieved in outsourcing through strategic relationships.
Amortization of identifiable intangible assets was $1.6 million$939,000 for the year ended December 31, 20072010 compared to $1.3 million for 2006. The increase is
primarily2009. This decrease was due to amortization ofcertain intangible assets of SIVA Corporation which was
acquired on November 2, 2006.
becoming fully amortized during 2010.
Other income, net, was $1.2 million$640,000 for the year ended December 31, 20072010, compared to $617,000$165,000 for the same period in 2006.2009. Other income primarily includes rental income, income from the sale of certain assets, finance charges, and foreign currency gains and losses. The increase is primarily due to an increase in foreign currency gains in 2007 comparedfinance charge income related to 2006.
a specific outstanding receivable collected during 2010, as well as a gain on the sale of certain assets.
Interest expense represents interest charged on the Company'sCompany’s short-term borrowing requirementsborrowings from banks and from long-term debt. Interest expense was $1.1 million$352,000 for the year ended December 31, 20072010, as compared to $734,000$400,000 for the same period in 2006.2009. The Company experienced a higher borrowing interest ratelower average borrowings in 20072010 when compared to 2006.2009. The Company also recognized a decrease in interest expense of $115,000 related to its interest rate swap agreement that was entered into in September 2007. This was
partially offset by lower than average borrowings during 2007 versus 2006.
agreement.
For the year ended December 31, 2007,2010, the Company'sCompany’s effective income tax expense rate was a benefit of 35.6%30.1%, compared to a provisionan effective income tax benefit of 35.5%19.7% for the same period in 2006.2009. The variance from the federal statutory rate in 2007 was2010 is primarily due to the state
income tax benefits resultingbenefit derived from the pretax loss and certain federal tax credits, offsetas well as the exclusion of certain foreign income from U.S. taxable income that was taxed by various nondeductible expenses which decreased the tax benefit.local jurisdiction at a rate lower than the federal statutory rate. The variance from the federal statutory rate in 20062009 was primarily due to state
income taxes, offset by benefitsthe result of the establishment of a valuation allowance related to export sales as well ascertain deferred tax benefits
related to domestic production activities.
assets, which decreased the tax benefit.
Liquidity and Capital ResourcesThe Company'sCompany’s primary sources of liquidity have been cash flow from operations and lines of credit with various commercial banks. Cash used inprovided by operating activities of continuing operations was $2.3$13.7 million for the year ended December 31, 20082011, compared to cash provided by
operations of $8.7$16 million for 2007.the same period in 2010 and $9.3 million in fiscal year 2009. In 2008,2011, cash was impacted primarilygenerated by the growthCompany’s operating results before the non-cash goodwill and intangible asset impairment and inventory charges, offset by reductions to changes in operating assets and liabilities. The most significant changes to the Company’s operating assets and liabilities were the decrease in accounts receivable due to the timing of collections of advanced service and inventory.maintenance contract billings. This was partially offset by cash used towards payments of accounts payable and accrued salaries and benefits based on the timing of payments. Cash was also used to support the execution of existing service support contracts with customers.
In 2010, cash was generated primarily by the Company’s net income and add back of non-cash charges, as well as through the change in operating assets and liabilities. The most significant change to the Company’s operating assets and liabilities were an increase in customer deposits. accounts payable based on the timing of vendor payments, offset by an increase in inventory commensurate with forecast requirements for the period.
In 2007,2009, cash was generated throughby the timingCompany’s net loss plus the add back of payments to vendors and the timing of customer payments on annual service
contracts. This was partiallynon-cash charges, offset by reductions to changes in operating assets and liabilities. The most significant changes to the Company’s operating assets and liabilities were the reduction of accounts receivable, which was the result of improved collection efforts implemented in 2009, combined with an overall decrease in accounts receivable commensurate with the decrease in revenue as compared to the prior fiscal year. Cash flow was adversely impacted by the reduction in customer deposits from fiscal year 2008 primarily attributable to a growthsignificant advance payment received from a Restaurant customer in inventory.
the fourth quarter of fiscal 2008 that did not recur in 2009.
Cash used in investing activities from continuing operations was $424,000$8.3 million for the year ended December 31, 20082011, versus $3.5$6.0 million for the same period in 2007.2010 and $2.1 million for fiscal year 2009. In 2008,2011, capital expenditures were $1 million$896,000 and were primarily for manufacturingrelated to the purchase of office and computer equipment. Capitalized software costs relating to software development of Hospitality segment products were $797,000 in 2008. In 2008, the Company also
received $1.6$7.4 million, an increase from the voluntary conversion of a Company-owned life
insurance policy. The amount paidprior year as a contingent purchase price under prior
years' acquisitions totaled $156,000result of investment in 2008.the Company’s Restaurant and Hotel /Resort / Spa software. In 2007,2010, capital expenditures were $2$3.8 million and were principallyprimarily related to the Company’s acquisition of certain technology components to complement its next generation enterprise solution for manufacturingits restaurants. Capitalized software costs relating to software development of Hospitality segment products were $2.1 million, an increase from the prior year, as a result of increased investment in the Company’s ATRIO software initiative, a larger portion of which was capitalized. In 2009, capital expenditures were $1.2 million and researchwere primarily related to the purchase of office and developmentcomputer equipment. Capitalized software costs relating to software development of Hospitality segment products were $1.2 million$845,000, relating to the Company’s restaurant software products.Cash used in 2007. The amount paid as a
contingent purchase price under prior years' acquisitions totaled $278,000 in
2007.
Cash provided by financing activities from continuing operations was $6.1$1.6 million for the year ended December 31, 20082011, versus cash used of $5.3$3.2 million for the same period in 2010 and cash used of $7.3 million in 2007.fiscal year 2009. In 2008,2011, the Company increased its short-term borrowings by $6.3 million and decreased its long-termlong term debt by $773,000.$1.7 million in accordance with the related payment schedule. The Company also benefited $529,000$133,000 from the exercise of employee stock options. In 2007,2010, the Company reduceddecreased its short term borrowings by $2 million, as a result of its favorable operating cash flow and decreased its long term debt by $1.4 million in accordance with the related payment schedule. The Company also benefited $551,000 from the exercise of employee stock options. Lastly, the Company purchased $323,000 of treasury stock in 2010. In 2009, the Company decreased its short-term bank
borrowings by $5.2$6.8 million and decreased its long-term debt by $244,000.$1.1 million. The Company also benefited $203,000$547,000 from the exercise of employee stock options.
In
On June 2008,6, 2011, the Company executed a new credit agreement with a bank
replacing its existing agreement. Under this agreement,lenders. This short-term credit facility provides the Company has a borrowing availability up to $20,000,000 in$20 million (with the form of a line of credit.option to increase to $30 million). This agreement allows the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread (2.4% to 2.9%(1.31% at December 31, 2008)2011) or at the bank'sbank’s prime lending rate plus the applicable interest rate spread (3.25% at December 31, 2008)2011). This agreement expires in June 2011.2014. At December 31, 2008, there was $8,800,0002011, the Company did not have any outstanding underbalance on this agreement.line of credit. The weighted average interest rate paid by the Company was 4.9%2.0% during 2008.fiscal year 2011. This agreement contains certain loan covenants including leverage and fixed charge coverage ratios. In July 2011, this agreement was amended to exclude specific non-recurring charges recorded by the Company in the second quarter of 2011 from all debt covenant calculations in 2011 and through June 30, 2012. The Company is in compliance with these amended covenants at December 31, 2008.2011. This credit facility is secured by certain assets of the Company.
In 2006, the
The Company borrowed $6,000,000$6 million under an unsecured term loan agreement, executed as an amendment to one of its then bank line of credit
agreements, in connection with the asset acquisition of SIVA Corporation.a prior business acquisition. The loanagreement provides for interest only payments in the first year and escalating principal payments through 2012. The loan bears interest at the LIBOR rate plus the applicable interest rate spread (1.31% at December 31, 2011) or at the bank'sbank’s prime lending rate plus the
applicable interest rate spread (2.4%(3.25% at December 31, 2008)2011). The terms and conditions of the line of credit agreement described in the preceding paragraph also apply to the term loan.
In September 2007, the
The Company entered into an interest rate swap agreement associated with the above $6,000,000$6 million loan, with principal and interest payments due through August 2012. At December 31, 2008,2011, the notional principal amount totaled $5,175,000.$1.4 million. This instrument was utilized by the Company to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company did not adopt hedge accounting, under the provision
of FASB Statement No 133, Accounting for Derivative Instruments and Hedging
Activities, but rather records the fair market value adjustments through the consolidated statements of operations each period. The associated fair value adjustment within the consolidated statements of operationsadjustments for the years ended December 31, 20082011, 2010 and 2007, was $234,0002009 were $101,000, $115,000 and $154,000,$146,000, respectively and iswere recorded as additionaldecreases to interest expense. The Company has a $1,757,000$1.4 million mortgage loan, collateralized by certain real estate. The annual mortgage payment including interest totals $226,000.$222,000. The mortgage bears interest at a fixed rate of 7%5.75% and matures in 2010. 2019.
The Company
also leases office space in several locations for varying terms.
The Company'sCompany’s future principal payments under its term loan, mortgage and officeoperating leases are as follows (in thousands):
Less Than 3 - 5 More than
Total 1 Year 1-3 Years Years 5 Years
-------- -------- -------- --------- --------
Long-term debt $ 6,931 $ 1,079 $ 4,503 $ 1,349 $ --
obligations
Operating lease 6,224 2,158 2,054 902 1,110
------- ------- ------- ------- -------
Total ......... $13,155 $ 3,237 $ 6,557 $ 2,251 $ 1,110
======= ======= ======= ======= =======
| | | Total | | | Less Than 1 Year | | | 1-3 Years | | | 3 - 5 Years | | | More than 5 Years | | Long-term debt obligations | | $ | 2,743 | | | $ | 1,494 | | | $ | 315 | | | $ | 354 | | | $ | 580 | | | Operating lease | | | 6,357 | | | | 2,131 | | | | 3,029 | | | | 835 | | | | 362 | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 9,100 | | | $ | 3,625 | | | $ | 3,344 | | | $ | 1,189 | | | $ | 942 | |
During fiscal year 2009,2012, the Company anticipates that its capital requirements will benot exceed approximately $1 to 2$3 million. The Company does not usually enter into long term contracts with its major Hospitality segment customers. The Company commits to purchasing inventory from its suppliers based on a combination of internal forecasts and the actual orders from customers. This process, along with good relations with suppliers, minimizes the working capital investment required by the Company. Although the Company lists two major customers, McDonald'sMcDonald’s and Yum! Brands, it sells to hundreds of individual franchisees of these corporations, each of which is individually responsible for its own debts. These broadly made sales substantially reduce the impact on the Company'sCompany’s liquidity if one individual franchisee reduces the volume of its purchases from the Company in a given year. The Company, based on internal forecasts, believes its existing cash, line of credit facilities and its anticipated operating cash flow will be sufficient to meet its cash requirements through at least the next twelve months. However, the Company may be required, or could elect, to seek additional funding prior to that time. The Company'sCompany’s future capital requirements will depend on many factors including its rate of revenue growth, the timing and extent of spending to support product development efforts, potential growth through strategic acquisition, expansion of sales and marketing, the timing of introductions of new products and enhancements to existing products, and market acceptance of its products. The Company cannot assure that additional equity or debt financing will be available on acceptable terms or at all. The Company'sCompany’s sources of liquidity beyond twelve months, in management'smanagement’s opinion, will be its cash balances on hand at that time, funds provided by operations, funds available through its lines of credit and the long-term credit facilities that it can arrange.Critical Accounting Policies
The Company'sCompany’s consolidated financial statements are based on the application of U.S. generally accepted accounting principles (GAAP). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. The Company believes its use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. Valuations based on estimates are reviewed for reasonableness and adequacy on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include revenue recognition, accounts receivable, inventories, goodwill and intangible assets, and taxes. Revenue Recognition Policy
The Company recognizes revenue generated by the Hospitality segment using
the guidance from SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition" and the AICPA Statement of Position (SOP) 97-2, "Software Revenue
Recognition." Product revenues consist of sales of the Company'sCompany’s standard point-of-sale and property management systems of the Hospitality segment. Product revenues include both hardware and software sales. The Company also records service revenues relating to its standard point-of-sale and property management systems of the Hospitality segment.Hardware
Revenue recognition on hardware sales occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company) as
under SAB No. 104,when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibilitycollectability is reasonably assured. Software Revenue recognition on software sales generally occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company) as under SOP 97-2,, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibilitycollectability is reasonably assured.probable. For software sales where the Company is the sole party that has the proprietary knowledge to install the software, revenue is recognized upon installation and when the system is ready to go live. Service Service revenue consists of installation and training services, support maintenance, and field and depot repair. Installation and training service revenue are based upon standard hourly/daily rates, and revenue is recognized as the services are performed. Support maintenance and field and depot repair are provided to customers either on a time and materials basis or under a maintenance contract. Services provided on a time and materials basis are recognized as the services are performed. Service revenues from maintenance contracts are recorded as deferred revenue when billed to the customer and are recognized ratably over the underlying contract period.
The individual product and service offerings that are included in arrangements with our customers are identified and priced separately to the customer based upon the stand alone price for each individual product or service sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement. As such, the units of accounting are based on each individual product and service sold, and revenue is allocated to each element based on vendor specific objective evidence (VSOE) of fair value. VSOE of fair value for each individual product and service is based on separate individual prices of these products and services. The sales price used to establish fair value is the sales price of the element when it is sold individually in a separate arrangement and not as a separate element in a multiple element arrangement.
Contracts
The Company recognizes revenue in its Government segment using the guidance
from SEC SAB No. 104, Revenue Recognition. The Company'sCompany’s contract revenues generated by the Government segment result primarily from contract services performed for the U.S. Government under a variety of cost-plus fixed fee, time-and-material, and fixed-price contracts. Revenue on cost-plus fixed fee contracts is recognized based on allowable costs for labor hours delivered, as well as other allowable costs plus the applicable fee. Revenue on time and material contracts is recognized by multiplying the number of direct labor hours delivered in the performance of the contract by the contract billing rates and adding other direct costs as incurred. Revenue from fixed-price contracts is recognized as labor hours are delivered, which approximates the straight-line basis of the life of the contract. The Company'sCompany’s obligation under these contracts is to provide labor hours to conduct research or to staff facilities with no other deliverables or performance obligations. Anticipated losses on all contracts are recorded in full when identified. Unbilled accounts receivable are stated in the Company'sCompany’s consolidated financial statements at their estimated realizable value. Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Company and U.S. Government representatives. Accounts Receivable-Allowance for Doubtful Accounts Allowances for doubtful accounts are based on estimates of probable losses related to accounts receivable balances. The establishment of allowances requires the use of judgment and assumptions regarding probable losses on receivable balances. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based on our historical experience and any specific customer collection issues that we have identified. While such credit losses have historically been within our expectations and appropriate reserves have been established, we cannot guarantee that we will continue to experience the same credit loss rates that we have experienced in the past. Thus, if the financial condition of our customers were to deteriorate, our actual losses may exceed our estimates, and additional allowances would be required. Inventories The Company'sCompany’s inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. The Company uses certain estimates and judgments and considers several factors including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory. Capitalized Software Development Costs The Company capitalizes certain costs related to the development of computer software used in its Hospitality segment under the requirements of
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed.segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing technological feasibility are capitalized and amortized over the estimated economic life when the product is available for general release to customers. Goodwill The Company tests goodwill for impairment on an annual basis, or more often if events or circumstances indicate there may be impairment. The Company operates in two core business segments, Hospitality and Government. Goodwill impairment testing is performed at the sub-segment level (referred to as a reporting unit). The three reporting units utilized by the Company for its impairment testing are: Restaurant, Hotel/Resort/Spa, and Government. Goodwill is assigned to a specific reporting unitsunit at the date the goodwill is initially recorded. Once goodwill has been assigned to a specific reporting units,unit, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill.
Pursuant to FASB Statement No. 142,
Goodwill and Other Intangible Assets,
goodwill impairment analysis is a two-step test. The first step, used to identify potential impairment, involves comparing each reporting unit'sunit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of impairment, at which time a second step would be performed to measure the amount of impairment. The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated impairment.
During the second quarter of 2011, the Company determined as a result of the decline in the stock price that occurred during the second quarter, a goodwill impairment triggering event had occurred. The fair value of the Company’s common shares declined from $4.60 per share at April 1, 2011 to $3.83 per share at June 30, 2011, resulting in the Company no longer being able to reconcile the aggregate fair value of its reporting units to its market capitalization after consideration of a reasonable control premium. Although there was no significant adverse change to the long term financial outlook of any of its businesses, the Company concluded a triggering event had occurred and as a result, performed additional analyses over the valuation of its reporting units in accordance with the relevant accounting rules, recording a non-cash impairment charge of $20.2 million to its goodwill in the second quarter of 2011. In addition, as part of this goodwill triggering event assessment, the Company recorded an impairment charge of $580,000 associated with its indefinite lived intangible assets. Following the impairment charges, the Restaurant reporting unit did not carry any residual goodwill, while the Hotel/Resort/Spa reporting unit's remaining goodwill was $6.1 million. The fair value of the Government reporting unit was substantially in excess of its carrying value; therefore, no goodwill impairment was noted.
The Company utilizes three methodologies in performing theirits goodwill impairment test for each reporting unit. These methodologies include both an income approach, namely a discounted cash flow method, and two market approaches, namely the guideline public company method and quoted price method. The discounted cash flow method was weighted 80% in the fair value calculation, while the public company method and quoted price method were weighted each at 10% of the fair value calculation. The valuation methodologies and weightings used in the current year are generally consistent with those used in the Company’s past annual impairment tests.
The discounted cash flow method derives a value by determining the present value of a projected level of income stream, including a terminal value. This method involves the present value of a series of estimated future benefitscash flows at the valuation date by the application of a discount rate, one which a prudent investor would require before making an investment in the equity of the company.Company. The Company consideredconsiders this method to be most reflective of a market participant'sparticipant’s view of fair value given the current market conditions, as it is based on the Company'sCompany’s forecasted results and, therefore, established its weighting at 80% of the fair value calculation.
Key assumptions within the Company'sCompany’s discounted cash flow model includeutilized for its annual impairment test included projected financial projections,operating results, a long term growth rate of 3% (beyond five years) and discount rates ranging from 5%21% to 10%26%, depending on the reporting unit, and a discount rate of 18%.unit. As stated above, as thisthe discounted cash flow method derives value from the present value of a projected level of income stream, a modification to the Company’s projected operating results could impact the fair value. A
changeincluding changes to the long term growth rate could impact the fair value. The present value of the cash flows is determined using a discount rate that was based on the capital structure and capital costs of comparable public companies, as well as company-specific risk premium, as identified by the Company. A change to the discount rate could impact the fair value determination.
The market approach is a generalgenerally-accepted way of determining a value indication of a business, business ownership interest, security or intangible asset by using one or more methods that compare the subject to similar businesses, business ownership interests, securities or intangible assets that have been sold. There are two methodologies considered under the market approach: the public company method and the quoted price method.
The public company method and quoted price methodsmethod of appraisal are based on the premise that pricing multiples of publicly traded companies can be used as a tool to be applied in valuing closely held companies. The mechanics of the method require the use of the stock price in conjunction with other factors to create a pricing multiple that can be used, with certain adjustments, to apply against the subject'ssubject’s similar factor to determine an estimate of value for the subject company. The Company considered these methods appropriate as they provide an indication of fair value as supported by current market conditions. The Company established its weighting at 10% of the fair value calculation for each method.
The most critical assumption underlying the market approaches utilized by the Company are the comparable companies utilized. Each market approach described above estimates revenue and earnings multiples for the Company based on its comparables.comparable companies. As such, a change to the comparable companies could have an impact on the fair value determination.
The valuation methodologies used inamount of goodwill carried by the current year are substantially the
same as those used in the prior year with the exception of the utilization of
the quoted price method in fiscal 2008Hotel/Resort/Spa and concurrent elimination of the mergerGovernment reporting units is $6.1 million and acquisition method, which was used in fiscal 2007. As part of the Company's
determination of appropriate valuation methods to be used, the Company concluded
that there was not sufficient data including current and relevant transactions
to appropriately serve as a basis for utilizing the merger and acquisition
method. However, the Company determined it prudent to continue to utilize a
market approach as part of their valuation and therefore selected the quoted
price method as the more appropriate method to replace the merger and
acquisition method.$0.7 million, respectively. The weightings applied to each method are unchanged from
those utilized in fiscal year 2007 except that 10% of the fair value calculation
was applied to the quoted price method in fiscal 2008 and no value was derived
from the merger and acquisition method.
Although the Company's market capitalization was less than its book value
at December 31, 2008 indicating a potential devaluation of the Company's assets,
the Company has determined that no triggering event occurred as of December 31,
2008 after considering the following factors:
o Although in general the economy was experiencing a downturn, the
primary markets in which the Company does business did not appear to
be experiencing a downturn commensurate with the overall economy
o The Company's operating results have improved throughout 2008:
o Actual operating performance of its major customers, as well as
the business outlook that such customers were providing to their
investors;
o Current overall order volume was in excess of order volume over
the same period of the previous fiscal quarter;
o The Company has been involved in negotiations with new customers
relative to potential hardware upgrades to a large number of
their restaurants;
The Company has qualitatively reconciled the aggregate estimated fair value of the Hotel/Resort/Spa reporting units to the market capitalizationunit exceeds its carrying value by approximately 6%. The estimated fair value of the consolidatedGovernment reporting unit is substantially in excess of its carrying value.
Hotel /Resort/Spa:
In deriving its fair value estimates, the Company includinghas utilized key assumptions built on the current core business adjusted to reflect anticipated revenue increases from continued investment in its next generation software. These assumptions, specifically those included within the discounted cash flow estimate, are comprised of the revenue growth rate, gross margin, operating expenses, working capital requirements, and depreciation and amortization expense.
The Company has utilized annual revenue growth rates ranging between 5% and 46%. The high end growth rate reflects the Company’s projected revenues resulting from the release of the Company’s next generation software platform, ATRIO. This software platform will expand the Company’s capabilities into new markets. The Company believes these estimates are reasonable given the size of the overall market which it will enter, combined with the projected market share the Company expects to achieve. The projected revenue growth rates ultimately trend to an estimated long term growth rate of 3%.
The Company has utilized gross margin estimates materially consistent with historical gross margins achieved. Estimates of operating expenses, working capital requirements and depreciation and amortization expense utilized for this reporting unit are generally consistent with actual historical amounts, adjusted to reflect its continued investment and projected revenue growth from ATRIO. The Company believes utilization of actual historical results adjusted to reflect its continued investment in ATRIO is an appropriate basis supporting the fair value of the Hotel/Resort/Spa reporting unit.
Lastly, the Company utilized a traditional control premium.
discount rate of approximately 26% for this reporting unit. This estimate was derived through a combination of current risk-free interest rate data, financial data from companies that PAR has deemed as its competitors, and was based on volatility between the Company’s historical financial projections and actual results achieved.
The current economic conditions in late 2008 and early 2009 and the continued volatility in
the financial markets in late 2008 and early 2009, both in the U.S. and in many other countries wherein which the Company operates have contributed and may continue tocould contribute to higher unemployment levels, decreased consumer spending, reduced
credit availability and/or declining businessconfidence and consumer confidence. Such
conditionscontinued economic uncertainty which may adversely impact the Company’s operating performance. Although the Company has seen an improvement in the markets which it serves, the continued volatility in these markets could have an impact on purchases of the markets in which the Company's customers
operate,Company’s products, which could result in a reduction of sales, operating income and cash flows. Reductions in these results or changes in the factors described in the
preceding paragraph could have a material adverse impact on the underlying estimates used in deriving the fair value of the Company'sCompany’s reporting units used in support of its annual goodwill impairment test or could result in a triggering event requiring a fair value remeasurement. This remeasurement, particularly if the Company is unable to achieve the estimates of revenue growth indicated in the preceding paragraphs. These conditions may result in an impairment charge in future periods.
The Company has reconciled the aggregate estimated fair value of the reporting units to the market capitalization of the consolidated Company, including a reasonable control premium.
Taxes
The Company has significant amounts of deferred tax assets that are reviewed for recoverability and valued accordingly. These assets are evaluated by using estimates of future taxable income and the impact of tax planning strategies. Valuations related to tax accruals and assets can be impacted by changes to tax codes, changes in statutory tax rates and the Company'sCompany’s estimates of its future taxable income levels. New Accounting Pronouncements Not Yet Adopted
See Note 1 to the Consolidated Financial Statements included in Part IV, Item 15 of this Report for details of New Accounting Pronouncements Not Yet Adopted. Off-Balance Sheet Arrangements
The Company diddoes not have any off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
INFLATION
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
inflation Inflation had little effect on revenues and related costs during 2008.2011. Management anticipates that margins will be maintained at acceptable levels to minimize the affectseffects of inflation, if any.
INTEREST RATES
interest rates
As of December 31, 2008,2011, the Company has $4.2$1.4 million in variable long-term debt and $9.8 million indid not have any variable short-term debt. The Company believes that an adverse change in interest rates of 100 basis points would not have a material impact on our business, financial condition, results of operations or cash flows.
FOREIGN CURRENCY
foreign currency The Company'sCompany’s primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Euro, the Australian dollar and the Singapore dollar. Management believes that foreign currency fluctuations should not have a significant impact on our business, financial conditions, and results of operations or cash flows due to the low volume of business affected by foreign currencies.
Item 8: Financial Statements and Supplementary Data
| Item 8: | Financial Statements and Supplementary Data |
The Company's 2008Company’s 2011 consolidated financial statements, together with the reportsreport thereon of KPMG LLP dated March 16, 2009,April 4, 2012, are included elsewhere herein. See Part IV, Item 15 for a list of Financial Statements.
Item 9A: Controls and Procedures
1. Evaluation of Disclosure Controls and Procedures.
| Item 9A: | Controls and Procedures |
| 1. | Evaluation of Disclosure Controls and Procedures. |
Based on an evaluation of the Company'sCompany’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934)1934, as amended (the “Exchange Act”)) as of December 31, 2008,2011, the end of the period covered by this Annual Report on Form 10-K (the "Evaluation Date"“Evaluation Date”), conducted under the supervision of and with the participation of the Company'sCompany’s chief executive officer and chief financial officer, such officers have concluded that the Company'sCompany’s disclosure controls and procedures, which are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'sSEC’s rules and forms and designed to ensure that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the chief executive and financial officers, as appropriate, to allow timely decisions regarding required disclosures, are effective as of the Evaluation Date.
2. Management's Report on Internal Control over Financial Reporting.
PAR's | 2. | Management’s Report on Internal Control over Financial Reporting. |
PAR’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended.Act. The Company'sCompany’s internal control system has been designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles.
A company'scompany’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of inherent limitations due to, for example, the potential for human error or circumvention of controls, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PAR's
PAR’s management, under the supervision of and with the participation of the Company'sCompany’s chief executive officer and chief financial officer, assessed the effectiveness of the Company'sCompany’s internal control over financial reporting as of December 31, 2008.2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) based on the framework in Internal Control - – Integrated Framework.Framework. Based on its assessment, based on those criteria, management believes that as of December 31, 2008,2011, the Company'sCompany’s internal control over financial reporting was effective.
3. Attestation Report of Independent Registered Public Accounting Firm.
The effectiveness of our internal control over financial reporting as of
December 31, 2008 has been audited by KPMG LLP, our independent registered
public accounting firm. KPMG LLP's related report is included within Item 15 of
this Form 10-K.
4. Changes in Internal Controls over Financial Reporting
| 3. | Changes in Internal Controls over Financial Reporting. |
During the period covered by this Annual Report on Form 10-K,Company’s last fiscal quarter of 2011 (the fourth fiscal quarter), there were no changes in the Company'sCompany’s internal control over financial reporting (as defined in Rule 13 a-15(f)) that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
PART III
Item 10: Directors, Executive Officers and Corporate Governance
| Item 10: | Directors, Executive Officers and Corporate Governance |
The information required by this item will appear under the caption "Directors,“Directors, Executive Officers and Corporate Governance"Governance” in our 20092012 definitive proxy statement for the annual meeting of stockholders in May 2009June 2012, to be filed under Schedule 14A, and is incorporated herein by reference.
Item 11: Executive Compensation
| Item 11: | Executive Compensation |
The information required by this item will appear under the caption "Executive Compensation"“Executive Compensation” in our 20092012 definitive proxy statement for the annual meeting of stockholders in May 2009June 2012, to be filed under Schedule 14A, and is incorporated herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
| Item 12: | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
The information required by this item will appear under the caption "Security“Security Ownership of Management and Certain Beneficial Owners"Owners” in our 20092012 definitive proxy statement for the annual meeting of stockholders in May 2009June 2012, to be filed under Schedule 14A, and is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions, and Director
Independence
| Item 13: | Certain Relationships and Related Transactions, and Director Independence |
The information required by this item will appear under the caption "Executive Compensation"“Executive Compensation” in our 20092012 definitive proxy statement for the annual meeting of stockholders in May 2009June 2012, to be filed under Schedule 14A, and is incorporated herein by reference.
Item 14: | Item 14: | Principal Accounting Fees and Services |
The response to this item will appear under the caption "Principal“Principal Accounting Fees and Services"Services” in our 20092012 definitive proxy statement for the annual meeting of stockholders in May 2009June 2012, to be filed under Schedule 14A, and is incorporated herein by reference.
PART IV
Item 15: Exhibits, Financial Statement Schedules
(a) Documents filed as a part of the | Item 15: | Exhibits, Financial Statement Schedules |
Form 10-K Financial Statements:
---------------------
Page | (a) | Documents filed as a part of the Form 10-K |
Financial Statements: | | Report of Independent Registered Public Accounting Firm | 49 | Consolidated Balance Sheets at December 31, 2011 and 2010 | 50 | Consolidated Statements of Operations for the three years ended December 31, 2011 | 51 | Consolidated Statements of Comprehensive Income (Loss) for the three years ended December 31, 2011 | 52 | Consolidated Statements of Changes in Shareholders’ Equity for the three years ended December 31, 2011 | 53 | Consolidated Statements of Cash Flows for the three years ended December 31, 2011 | 54 | Notes to Consolidated Financial Statements | 55 |
See list of exhibits on page 82.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2008 and 2007
Consolidated Statements of Operations for the three
years ended December 31, 2008
Consolidated Statements of Comprehensive Income (Loss) for the
three years ended December 31, 2008
Consolidated Statements of Changes in Shareholders' Equity for the
three years ended December 31, 2008
Consolidated Statements of Cash Flows for the three years ended
December 31, 2008
Notes to Consolidated Financial Statements
(b) Exhibits
See list of exhibits.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
PAR Technology Corporation: We have audited the accompanying consolidated financial statementsbalance sheets of PAR Technology Corporation and subsidiaries as of December 31, 20082011 and 20072010, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2008, as listed in the accompanying index.
We also have audited PAR Technology Corporation's internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). PAR Technology's management is
responsible for these2011. These consolidated financial statements for maintaining
effective internal control over financial reporting, and for its assessmentare the responsibility of the effectiveness of internal control over financial reporting, included in the
accompanying Management's Report on Internal Control over Financial Reporting.Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial
reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements includedmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,statements. An audit also includes assessing the accounting principles used and significant estimates made by management, andas well as evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PAR Technology Corporation and subsidiaries as of December 31, 20082011 and 2007,2010, and the results of itstheir operations and itstheir cash flows for each of the years in the three-year period ended December 31, 2008,2011, in conformity with U.S. generally accepted accounting principles. Also
in our opinion, PAR Technology Corporation maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2008,
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ KPMG LLP Syracuse, New York
March 16, 2009
April 4, 2012
PAR TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
December 31,
----------------------
2008 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents ....................... $ 6,227 $ 4,431
Accounts receivable-net ......................... 53,582 43,608
Inventories-net ................................. 41,132 40,319
Income tax refunds .............................. 208 521
Deferred income taxes ........................... 5,301 5,630
Other current assets ............................ 3,588 3,370
--------- ---------
Total current assets ........................ 110,038 97,879
Property, plant and equipment - net .................. 6,879 7,669
Deferred income taxes ................................ 1,525 503
Goodwill ............................................. 25,684 26,998
Intangible assets - net .............................. 8,251 9,899
Other assets ......................................... 1,611 3,570
--------- ---------
Total Assets .............................. $ 153,988 $ 146,518
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt ............... $ 1,079 $ 772
Borrowings under lines of credit ................ 8,800 2,500
Accounts payable ................................ 15,293 16,978
Accrued salaries and benefits ................... 8,360 9,919
Accrued expenses ................................ 3,962 3,860
Customer deposits ............................... 6,157 3,898
Deferred service revenue ........................ 16,318 14,357
--------- ---------
Total current liabilities ................... 59,969 52,284
--------- ---------
Long-term debt ....................................... 5,852 6,932
--------- ---------
Other long-term liabilities .......................... 1,910 2,315
--------- ---------
Shareholders' Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized ................... -- --
Common stock, $.02 par value,
29,000,000 shares authorized;
16,189,718 and 16,047,818 shares issued;
14,536,963 and 14,395,063 outstanding ......... 324 321
Capital in excess of par value .................. 40,173 39,252
Retained earnings ............................... 52,668 50,451
Accumulated other comprehensive income (loss) ... (1,399) 472
Treasury stock, at cost, 1,652,755 shares ....... (5,509) (5,509)
--------- ---------
Total shareholders' equity .................. 86,257 84,987
--------- ---------
Total Liabilities and Shareholders' Equity . $ 153,988 $ 146,518
========= =========
| | | December 31, | | | | | 2011 | | | 2010 | | Assets Current assets: | | | | | | | Cash and cash equivalents | | $ | 7,742 | | | $ | 6,779 | | Accounts receivable-net | | | 30,680 | | | | 35,825 | | Inventories-net | | | 25,260 | | | | 36,682 | | Income tax refunds | | ─ | | | | 152 | | Deferred income taxes | | | 10,240 | | | | 5,719 | | Other current assets | | | 3,088 | | | | 3,028 | | Total current assets | | | 77,010 | | | | 88,185 | | | Property, plant and equipment - net | | | 5,259 | | | | 5,706 | | | Deferred income taxes | | | 5,605 | | | | 1,079 | | | Goodwill | | | 6,852 | | | | 26,954 | | | Intangible assets - net | | | 15,888 | | | | 10,389 | | | Other assets | | | 2,147 | | | | 2,124 | | | Assets of discontinued operations | | | 3,182 | | | | 3,353 | | Total Assets | | $ | 115,943 | | | $ | 137,790 | | | Liabilities and Shareholders’ Equity | | | | | | | | | | Current liabilities: | | | | | | | | | Current portion of long-term debt | | $ | 1,494 | | | $ | 1,711 | | Accounts payable | | | 15,773 | | | | 19,624 | | Accrued salaries and benefits | | | 7,002 | | | | 8,868 | | Accrued expenses | | | 2,609 | | | | 2,778 | | Customer deposits | | | 1,137 | | | | 2,286 | | Deferred service revenue | | | 10,412 | | | | 9,752 | | Income taxes payable | | | 138 | | | ─ | | Total current liabilities | | | 38,565 | | | | 45,019 | | | Long-term debt | | | 1,249 | | | | 2,744 | | | Other long-term liabilities | | | 2,837 | | | | 2,725 | | | Liabilities of discontinued operations | | | 925 | | | | 543 | | | Shareholders’ Equity: | | | | | | | | | Preferred stock, $.02 par value, | | | | | | | | | 1,000,000 shares authorized | | ─ | | | ─ | | Common stock, $.02 par value, | | | | | | | | | 29,000,000 shares authorized; | | | | | | | | | 16,863,868 and 16,746,618 shares issued; | | | | | | | | | | 15,156,584 and 15,039,334 outstanding | | | 337 | | | | 335 | | Capital in excess of par value | | | 42,990 | | | | 42,264 | | Retained earnings | | | 35,073 | | | | 50,605 | | Accumulated other comprehensive loss | | | (201 | ) | | | (613 | ) | Treasury stock, at cost, 1,707,284 and 1,707,284 shares | | | (5,832 | ) | | | (5,832 | ) | Total shareholders’ equity | | | 72,367 | | | | 86,759 | | Total Liabilities and Shareholders’ Equity | | $ | 115,943 | | | $ | 137,790 | | | | | | | | | | | |
See accompanying notes to consolidated financial statements
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year ended December 31,
-------------------------------------------------------
2008 2007 2006
---------------- --------------- ---------------
Net revenues:
Product ...................................... $ 81,763 $ 77,116 $ 83,237
Service ...................................... 75,430 67,370 61,979
Contract ..................................... 75,494 64,998 63,451
-------------- -------------- --------------
232,687 209,484 208,667
-------------- -------------- --------------
Costs of sales:
Product ...................................... 49,440 45,635 47,925
Service ...................................... 54,421 51,078 46,338
Contract ..................................... 71,376 60,863 58,895
-------------- -------------- --------------
175,237 157,576 153,158
-------------- -------------- --------------
Gross margin ........................... 57,450 51,908 55,509
-------------- -------------- --------------
Operating expenses:
Selling, general and administrative .......... 36,790 37,517 33,440
Research and development ..................... 15,295 17,155 11,802
Amortization of identifiable intangible assets 1,535 1,572 1,283
-------------- -------------- --------------
53,620 56,244 46,525
-------------- -------------- --------------
Operating income (loss) ........................... 3,830 (4,336) 8,984
Other income, net ................................. 921 1,227 617
Interest expense .................................. (1,176) (1,096) (734)
-------------- -------------- --------------
Income (loss) before provision for income taxes ... 3,575 (4,205) 8,867
(Provision) benefit for income taxes .............. (1,358) 1,497 (3,146)
-------------- -------------- --------------
Net income (loss)
$ 2,217 $ (2,708) $ 5,721
============== ============== ==============
Earnings (loss) per share
Basic ........................................ $ .15 $ (.19) $ .40
Diluted ...................................... $ .15 $ (.19) $ .39
Weighted average shares outstanding
Basic ........................................ 14,421 14,345 14,193
============== ============== ==============
Diluted ...................................... 14,761 14,345 14,752
============== ============== ==============
PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
| | | Year ended December 31, | | | | | 2011 | | | 2010 | | | 2009 | | | Net revenues: | | | | | | | | | | Product | | $ | 90,998 | | | $ | 98,725 | | | $ | 67,543 | | Service | | | 69,484 | | | | 70,232 | | | | 72,886 | | Contract | | | 68,941 | | | | 66,065 | | | | 75,470 | | | | | | 229,423 | | | | 235,022 | | | | 215,899 | | | Costs of sales: | | | | | | | | | | | | | Product | | | 57,878 | | | | 64,286 | | | | 45,230 | | Service | | | 56,736 | | | | 47,045 | | | | 55,573 | | Contract | | | 64,347 | | | | 61,826 | | | | 71,293 | | | | | | 178,961 | | | | 173,157 | | | | 172,096 | | Gross margin | | | 50,462 | | | | 61,865 | | | | 43,803 | | | Operating expenses: | | | | | | | | | | | | | Selling, general and administrative | | | 35,774 | | | | 38,253 | | | | 34,896 | | Research and development | | | 13,797 | | | | 15,853 | | | | 13,618 | | Impairment of goodwill and intangible assets | | | 20,843 | | | ─ | | | ─ | | Amortization of identifiable intangible assets | | | 840 | | | | 939 | | | | 1,337 | | | | | | 71,254 | | | | 55,045 | | | | 49,851 | | | | | | | | | | | | | | | | | Operating income (loss) from continuing operations | | | (20,792 | ) | | | 6,820 | | | | (6,048 | ) | | Other income, net | | | 203 | | | | 640 | | | | 165 | | | Interest expense | | | (211 | ) | | | (352 | ) | | | (400 | ) | | | | | | | | | | | | | | | | Income (loss) from continuing operations before provision for income taxes | | | (20,800 | ) | | | 7,108 | | | | (6,283 | ) | | Benefit (provision) for income taxes | | | 7,440 | | | | (2,141 | ) | | | 1,240 | | Income (loss) from continuing operations | | | (13,360 | ) | | | 4,967 | | | | (5,043 | ) | | Discontinued operations - | | | | | | | | | | | | | Loss on discontinued operations (net of tax) | | | (2,172 | ) | | | (1,844 | ) | | | (143 | ) | | Net income (loss) | | $ | (15,532 | ) | | $ | 3,123 | | | $ | (5,186 | ) | | Basic earnings (loss) per share: | | | | | | | | | | | | | Income (loss) from continuing operations | | | (.89 | ) | | | .34 | | | | (.35 | ) | Loss from discontinued operations | | | (.15 | ) | | | (.13 | ) | | | (.01 | ) | Net income (loss) | | $ | (1.04 | ) | | $ | .21 | | | $ | (.36 | ) | | Diluted earnings (loss) per share: | | | | | | | | | | | | | Income (loss) from continuing operations | | | (.89 | ) | | | .33 | | | | (.35 | ) | Loss from discontinued operations | | | (.15 | ) | | | (.12 | ) | | | (.01 | ) | Net income (loss) | | $ | (1.04 | ) | | $ | .21 | | | $ | (.36 | ) | | Weighted average shares outstanding | | | | | | | | | | | | | Basic | | | 15,000 | | | | 14,822 | | | | 14,547 | | Diluted | | | 15,000 | | | | 15,008 | | | | 14,547 | |
See accompanying notes to consolidated financial statements
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year ended December 31,
-------------------------------------------------------
2008 2007 2006
---------------- --------------- ---------------
Net income (loss) ................................. $ 2,217 $ (2,708) $ 5,721
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ..... (1,871) 961 122
-------------- -------------- --------------
Comprehensive income (loss) ....................... $ 346 $ (1,747) $ 5,843
============== ============== ==============
PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands)
| | | Year ended December 31, | | | | | 2011 | | | 2010 | | | 2009 | | | Net income (loss) | | $ | (15,532 | ) | | $ | 3,123 | | | $ | (5,186 | ) | | Other comprehensive income (loss), net of tax: | | | | | | | | | | | | | Foreign currency translation adjustments | | | 412 | | | | (164 | ) | | | 950 | | | Comprehensive income (loss) | | $ | (15,120 | ) | | $ | 2,959 | | | $ | (4,236 | ) |
See accompanying notes to consolidated financial statements
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Capital in Other Total
Common Stock excess of Retained Comprehensive Treasury Stock Shareholders'
------------ --------------- -------------
(in thousands) Shares Amount Par Value Earnings Income (Loss) Shares Amount Equity
------ ------ --------- -------- ------------ ------ ------ ------
Balances at
December 31, 2005 15,915 $ 318 $ 37,271 $ 47,442 $ (611) (1,778) $ (5,928) $ 78,492
Net income 5,721 5,721
Issuance of common stock upon the
exercise of stock options,
net of tax benefit of $173 47 2 350 352
Issuance of treasury stock for
business acquisition 647 125 419 1,066
Issuance of restricted stock awards 18
Cash in lieu of fractional shares on
stock split (4) (4)
Equity based compensation 334 334
Translation adjustments, net of tax
benefit of $86 122 122
-------- ------- --------- --------- ----------- --------- -------- ---------
Balances at
December 31, 2006 15,980 320 38,602 53,159 (489) (1,653) (5,509) 86,083
Net loss (2,708) (2,708)
Issuance of common stock upon the
exercise of stock options 58 1 202 203
Issuance of restricted stock awards 10
Equity based compensation 448 448
Translation adjustments, net of tax
benefit of $564 961 961
-------- ------- --------- --------- ----------- --------- -------- ---------
Balances at
December 31, 2007 16,048 321 39,252 50,451 472 (1,653) (5,509) 84,987
Net income 2,217 2,217
Issuance of common stock upon the
exercise of stock options 92 2 526 528
Issuance of restricted stock awards 50 1 1
Equity based compensation 395 395
Translation adjustments, net of tax
benefit of $1,239 (1,871) (1,871)
-------- ------- --------- --------- ----------- --------- -------- ---------
Balances at
December 31, 2008 16,190 $ 324 $ 40,173 $ 52,668 $ (1,399) (1,653) $ (5,509) $ 86,257
======== ======= ========= ========= =========== ========= ======== =========
PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands) | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | Capital in | | | | | | Other | | | | | | Total | | | | | Common Stock | | | excess of | | | Retained | | | Comprehensive | | | Treasury Stock | | | Shareholders’ | | | (in thousands) | | Shares | | | Amount | | | Par Value | | | Earnings | | | Income (Loss) | | | Shares | | | Amount | | | Equity | | | Balances at December 31, 2008 | | | 16,190 | | | $ | 324 | | | ��$ | 40,173 | | | $ | 52,668 | | | $ | (1,399 | ) | | | (1,653 | ) | | $ | (5,509 | ) | | $ | 86,257 | | | Net loss | | | | | | | | | | | | | | | (5,186 | ) | | | | | | | | | | | | | | | (5,186 | ) | | Issuance of common stock upon the exercise of stock options | | | 192 | | | | 4 | | | | 543 | | | | | | | | | | | | | | | | | | | | 547 | | | Issuance of restricted stock awards | | | 68 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | 1 | | | Equity based compensation | | | | | | | | | | | 666 | | | | | | | | | | | | | | | | | | | | 666 | | | Translation adjustments, net of tax of $638 | | | | | | | | | | | | | | | | | | | 950 | | | | | | | | | | | | 950 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2009 | | | 16,450 | | | | 329 | | | | 41,382 | | | | 47,482 | | | | (449 | ) | | | (1,653 | ) | | | (5,509 | ) | | | 83,235 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | | | | | | | | | | | | | 3,123 | | | | | | | | | | | | | | | | 3,123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of common stock upon the exercise of stock options | | | 249 | | | | 5 | | | | 546 | | | | | | | | | | | | | | | | | | | | 551 | | | Issuance of restricted stock awards | | | 48 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | 1 | | | Equity based compensation | | | | | | | | | | | 336 | | | | | | | | | | | | | | | | | | | | 336 | | | Purchase of treasury stock | | | | | | | | | | | | | | | | | | | | | | | (54 | ) | | | (323 | ) | | | (323 | ) | | Translation adjustments, net of tax of $223 | | | | | | | | | | | | | | | | | | | (164 | ) | | | | | | | | | | | (164 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2010 | | | 16,747 | | | | 335 | | | | 42,264 | | | | 50,605 | | | | (613 | ) | | | (1,707 | ) | | | (5,832 | ) | | | 86,759 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | | | | | | | | | | | | | (15,532 | ) | | | | | | | | | | | | | | | (15,532 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of common stock upon the exercise of stock options | | | 77 | | | | 1 | | | | 131 | | | | | | | | | | | | | | | | | | | | 132 | | | Issuance of restricted stock awards | | | 40 | | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | 1 | | | Equity based compensation | | | | | | | | | | | 595 | | | | | | | | | | | | | | | | | | | | 595 | | | Translation adjustments, net of tax of $91 | | | | | | | | | | | | | | | | | | | 412 | | | | | | | | | | | | 412 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2011 | | | 16,864 | | | $ | 337 | | | $ | 42,990 | | | $ | 35,073 | | | $ | (201 | ) | | | (1,707 | ) | | $ | (5,832 | ) | | $ | 72,367 | |
See accompanying notes to consolidated financial statements
PAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
----------------------------------------------------
2008 2007 2006
------------- --------------- --------------
Cash flows from operating activities:
Net income (loss) $ 2,217 $ (2,708) $ 5,721
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,029 4,079 3,884
Provision for bad debts 1,052 3,034 849
Provision for obsolete inventory 2,625 3,001 1,922
Equity based compensation 395 448 334
Deferred income tax 546 (2,211) 916
Changes in operating assets and liabilities:
Accounts receivable (11,026) 149 (6,846)
Inventories (3,438) (7,372) (8,308)
Income tax refunds 313 582 (224)
Other current assets (218) (633) (139)
Other assets 388 (729) (754)
Accounts payable (1,685) 4,603 (496)
Accrued salaries and benefits (1,559) 1,640 (1,446)
Accrued expenses 204 1,999 (491)
Customer deposits 2,259 242 (317)
Deferred service revenue 1,961 2,103 813
Other long-term liabilities (405) 436 1,032
---------- ---------- ---------
Net cash provided by (used in) operating activities (2,342) 8,663 (3,550)
---------- ---------- ---------
Cash flows from investing activities:
Capital expenditures (1,042) (2,017) (1,189)
Capitalization of software costs (797) (1,158) (822)
Business acquisitions, net of cash acquired - - (5,827)
Contingent purchase price paid on prior year acquisitions (156) (278) -
Cash received from voluntary conversion of long-lived other assets 1,571 - -
---------- ---------- ---------
Net cash used in investing activities (424) (3,453) (7,838)
---------- ---------- ---------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit agreements 6,300 (5,213) 4,213
Proceeds from long-term debt - - 6,000
Payments of long-term debt (773) (244) (76)
Proceeds from the exercise of stock options 488 203 179
Excess tax benefit of stock option exercises 41 - 173
Cash dividend in lieu of fractional shares on stock split - - (4)
---------- ---------- ---------
Net cash provided by (used in) financing activities 6,056 (5,254) 10,485
---------- ---------- ---------
Effect of exchange rate changes on cash and cash equivalents (1,494) 202 194
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents 1,796 158 (709)
Cash and cash equivalents at beginning of period 4,431 4,273 4,982
---------- ---------- ---------
Cash and cash equivalents at end of period $ 6,227 $ 4,431 $ 4,273
========== ========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 873 $ 963 $ 687
Income taxes, net of refunds 508 104 2,237
See accompanying notes to consolidated financial statements
PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) | | | Year ended December 31, | | | | | 2011 | | | 2010 | | | 2009 | | | Cash flows from operating activities: | | | | | | | | | | Net income (loss) | | $ | (15,532 | ) | | $ | 3,123 | | | $ | (5,186 | ) | Loss from discontinued operations | | | 2,172 | | | | 1,844 | | | | 143 | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | | | | | Impairment of goodwill and intangible assets | | | 20,843 | | | ─ | | | ─ | | Depreciation and amortization | | | 2,648 | | | | 3,334 | | | | 3,836 | | Provision for bad debts | | | 124 | | | | 1,094 | | | | 1,432 | | Provision for obsolete inventory | | | 10,911 | | | | 1,897 | | | | 7,752 | | Equity based compensation | | | 595 | | | | 336 | | | | 666 | | Deferred income tax | | | (7,832 | ) | | | 1,685 | | | | (1,302 | ) | Changes in operating assets and liabilities: | | | | | | | | | | | | | Accounts receivable | | | 5,022 | | | | 1,556 | | | | 7,504 | | Inventories | | | 509 | | | | (6,844 | ) | | | 1,869 | | Income tax refunds/payable | | | 290 | | | | 286 | | | | (230 | ) | Other current assets | | | (60 | ) | | | 209 | | | | 445 | | Other assets | | | (23 | ) | | | (313 | ) | | | (26 | ) | Accounts payable | | | (3,599 | ) | | | 6,755 | | | | (2,475 | ) | Accrued salaries and benefits | | | (1,866 | ) | | | 1,364 | | | | (996 | ) | Accrued expenses | | | (169 | ) | | | (1,024 | ) | | | (114 | ) | Customer deposits | | | (1,149 | ) | | | 504 | | | | (4,375 | ) | Deferred service revenue | | | 660 | | | | (311 | ) | | | 92 | | Other long-term liabilities | | | 114 | | | | 513 | | | | 302 | | Net cash provided by operating activities-continuing operations | | | 13,658 | | | | 16,008 | | | | 9,337 | | Net cash used in operating activities-discontinued operations | | | (2,657 | ) | | | (3,615 | ) | | | (2,269 | ) | Net cash provided by operating activities | | | 11,001 | | | | 12,393 | | | | 7,068 | | | Cash flows from investing activities: | | | | | | | | | | | | | Capital expenditures | | | (896 | ) | | | (3,824 | ) | | | (1,196 | ) | Capitalization of software costs | | | (7,389 | ) | | | (2,095 | ) | | | (845 | ) | Contingent purchase price paid on prior year acquisitions | | ─ | | | | (33 | ) | | | (54 | ) | Net cash used in investing activities-continuing operations | | | (8,285 | ) | | | (5,952 | ) | | | (2,095 | ) | Net cash used in investing activities-discontinued operations | | | (76 | ) | | | (14 | ) | | | (110 | ) | Net cash used in investing activities | | | (8,361 | ) | | | (5,966 | ) | | | (2,205 | ) | | Cash flows from financing activities: | | | | | | | | | | | | | Net borrowings (payments) under line-of-credit agreements | | ─ | | | | (2,000 | ) | | | (6,800 | ) | Payments of long-term debt | | | (1,712 | ) | | | (1,404 | ) | | | (1,072 | ) | Proceeds from the exercise of stock options | | | 133 | | | | 551 | | | | 547 | | Purchase of treasury stock | | ─ | | | | (323 | ) | | ─ | | Net cash used in financing activities-continuing operations | | | (1,579 | ) | | | (3,176 | ) | | | (7,325 | ) | Net cash used in financing activities-discontinued operations | | ─ | | | ─ | | | ─ | | Net cash used in financing activities | | | (1,579 | ) | | | (3,176 | ) | | | (7,325 | ) | | Effect of exchange rate changes on cash and cash equivalents | | | (94 | ) | | | (377 | ) | | | 142 | | | Net increase (decrease) in cash and cash equivalents | | | 967 | | | | 2,874 | | | | (2,320 | ) | | Cash and cash equivalents at beginning of period | | | 6,781 | | | | 3,907 | | | | 6,227 | | | Cash and cash equivalents at end of period | | | 7,748 | | | | 6,781 | | | | 3,907 | | | Less cash and equivalents of discontinued operations at end of period | | | (6 | ) | | | (2 | ) | | | (3 | ) | | Cash and equivalents of continuing operations at end of period | | $ | 7,742 | | | $ | 6,779 | | | $ | 3,904 | | | Supplemental disclosures of cash flow information: | | | | | | | | | | | | | | Cash paid during the period for: | | | | | | | | | | | | | Interest | | $ | 330 | | | $ | 477 | | | $ | 555 | | Income taxes, net of refunds | | | 105 | | | | 136 | | | | 333 | | | See accompanying notes to consolidated financial statements | | | | | | | | | | | | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 --— Summary of Significant Accounting Policies
Basis of consolidation The consolidated financial statements include the accounts of PAR Technology Corporation and its subsidiaries (ParTech, Inc., PAR Springer-Miller Systems, Inc., PixelPoint ULC, Par-Siva Corporation, PAR Government Systems Corporation, Rome Research Corporation, and Ausable Solutions, Inc.), and PAR Logistics Management Systems Corporation), collectively referred to as the "Company."“Company.” All significant intercompany transactions have been eliminated in consolidation.
During the fourth quarter of fiscal year 2011, the Company entered into a definitive agreement to sell substantially all of the assets of its Logistics Management business, PAR Logistics Management Systems Corporation (LMS) to ORBCOMM Inc., including but not limited to assets such as accounts receivable, inventory, equipment, intellectual property and LMS’s customer contracts. This transaction closed on January 12, 2012. The results of operations of LMS fiscal year 2011 have been recorded as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20, Presentation of Financial Statements – Discontinued Operations. All prior period amounts have been reclassified to conform to the current period presentation. Refer to Note 2 “Discontinued Operations” and Note 15 “Subsequent Events” in the Notes to the Consolidated Financial Statements for further discussion. Revenue recognition
The Company recognizes revenue generated by the Hospitality segment using
the guidance from SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition" and the AICPA Statement of Position (SOP) 97-2, "Software Revenue
Recognition".
Product revenues consist of sales of the Company'sCompany’s standard point-of-sale and property management systems of the Hospitality segment. Product revenues include both hardware and software sales. The Company also records service revenues relating to its standard point-of-sale and property management systems of the Hospitality segment. Hardware
Revenue recognition on hardware sales occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company) as
under SAB No. 104,when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibilitycollectability is reasonably assured.
Software Revenue recognition on software sales generally occurs upon delivery to the customer site (or when shipped for systems that are not installed by the Company) as under SOP 97-2,, when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibilitycollectability is reasonably assured.probable. For software sales where the Company is the sole party that has the proprietary knowledge to install the software, revenue is recognized upon installation and when the system is ready to go live. Service Service revenue consists of installation and training services, support maintenance, and field and depot repair. Installation and training service revenue are based upon standard hourly/daily rates and revenue is recognized as the services are performed. Support maintenance and field and depot repair are provided to customers either on a time and materials basis or under a maintenance contract. Services provided on a time and materials basis are recognized as the services are performed. Service revenues from maintenance contracts are recorded as deferred revenue when billed to the customer and are recognized ratably over the underlying contract period.
The individual product and service offerings that are included in arrangements with our customers are identified and priced separately to the customer based upon the stand alone price for each individual product or service sold in the arrangement irrespective of the combination of products and services which are included in a particular arrangement. As such, the units of accounting are based on each individual product and service sold, and revenue is allocated to each element based on vendor specific objective evidence (VSOE) of fair value. VSOE of fair value for each individual product and service is based on separate individual prices of these products and services. The sales price used to establish fair value is the sales price of the element when it is sold individually in a separate arrangement and not as a separate element in a multiple element arrangement.
Contracts The Company recognizes revenue in its Government segment using the guidance
from SEC Staff Accounting Bulletin No. 104, Revenue Recognition. The Company'sCompany’s contract revenues generated by the Government segment result primarily from contract services performed for the U.S. Government under a variety of cost-plus fixed fee, time-and-material, and fixed-price contracts. Revenue on cost-plus fixed fee contracts is recognized based on allowable costs for labor hours delivered, as well as other allowable costs plus the applicable fee. Revenue on time and material contracts is recognized by multiplying the number of direct labor hours delivered in the performance of the contract by the contract billing rates and adding other direct costs as incurred. Revenue forfrom fixed-price contracts is recognized as labor hours are delivered which approximates the straight-line basis of the life of the contract. The Company'sCompany’s obligation under these contracts is to provide labor hours to conduct research or to staff facilities with no other deliverables or performance obligations. Anticipated losses on all contracts are recorded in full when identified. Unbilled accounts receivable are stated in the Company'sCompany’s consolidated financial statements at their estimated realizable value. Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Company and U.S. Government representatives. Statement of cash flows
For purposes of reporting cash flows, the Company considers all highly liquid investments, purchased with a remaining maturity of three months or less, to be cash equivalents. Accounts receivable -– Allowance for doubtful accounts
Allowances for doubtful accounts are based on estimates of probable losses related to accounts receivable balances. The establishment of allowances requires the use of judgment and assumptions regarding probable losses on receivable balances. Inventories
The Company'sCompany’s inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out (FIFO) method. The Company uses certain estimates and judgments and considers several factors including product demand, changes in customer requirements and changes in technology to provide for excess and obsolescence reserves to properly value inventory. Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to twenty-five years. Expenditures for maintenance and repairs are expensed as incurred. Other assets Other assets consist of cash surrender value of life insurance related to the Company'sCompany’s Deferred Compensation Plan. Income taxes
The provision for income taxes is based upon pretax earnings with deferred income taxes provided for the temporary differences between the financial reporting basis and the tax basis of the Company'sCompany’s assets and liabilities. The Company records a valuation allowance when necessary to reduce deferred tax assets to their net realizable amounts. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.Other long-term liabilities
Other long-term liabilities represent amounts owed to certain employees who are participants in the Company'sCompany’s Deferred Compensation Plan. Foreign currency The assets and liabilities for the Company'sCompany’s international operations are translated into U.S. dollars using year-end exchange rates. Income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of shareholders'shareholders’ equity under the heading Accumulated Other Comprehensive Loss. Exchange gains and losses on intercompany balances of a long-term investment nature are also recorded as a translation adjustment and are included in Accumulated Other Comprehensive Income (Loss). Foreign currency transaction gains and losses are recorded in other income in the accompanying statements of operations. Other income
The components of other income for the three years ending December 31 are as follows:
Year ended December 31
(in thousands)
-----------------------------------
2008 2007 2006
-------- --------- --------
Foreign currency gains ............... $ 314 $ 605 $ 76
Rental income-net .................... 410 444 320
Other ................................ 197 178 221
------ ------ ------
$ 921 $1,227 $ 617
====== ====== ======
| | | Year ended December 31 | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | | | Foreign currency gains / (loss) | | $ | (454 | ) | | $ | 145 | | | $ | (19 | ) | | Rental income-net | | | 191 | | | | 131 | | | | 191 | | | Other | | | 466 | | | | 364 | | | | (7 | ) | | | | $ | 203 | | | $ | 640 | | | $ | 165 | |
Identifiable intangible assets The Company capitalizes certain costs related to the development of computer software used insold by its Hospitality segment under the requirements of
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.segment. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing feasibility (as defined within ASC 985-20) are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Annual amortization, charged to cost of sales when the product is available for general release to customers, is computed using the greater of (a) the straight-line method over the remaining estimated economic life of the product, generally three years.to five years or (b) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product. Amortization of capitalized software costs amounted to $662,000, $624,000$465,000, $767,000, and $680,000$656,000 in 2008, 2007,2011, 2010, and 2006,2009, respectively.
The Company acquired identifiable intangible assets in connection with its acquisitions in prior years. Amortization of identifiable intangible assets amounted to $1,535,000$840,000 in 2008, $1,572,0002011, $939,000 in 20072010 and $1,283,000$1,337,000 in 2006. See
Note 2 for additional details.
2009.
The components of identifiable intangible assets, are:
December 31,
(in thousands)
---------------------------
2008 2007
--------- --------
Softwareincluding capitalized internal software development costs ............................. $ 6,843 $ 7,475
Customer relationships ..................... 4,401 4,506
Trademarks (non-amortizable) ............... 2,677 2,758
Other ...................................... 577 613
-------- --------
14,498 15,352
Less accumulated amortization .............. (6,247) (5,453)
-------- --------
$ 8,251 $ 9,899
======== ========
are:
| | | December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | | | | | | | | | Acquired and internally developed software costs | | $ | 17,902 | | | $ | 12,161 | | | Customer relationships | | | 4,519 | | | | 4,519 | | | Trademarks (non-amortizable) | | | 2,100 | | | | 2,750 | | | Other | | | 690 | | | | 620 | | | | | | 25,211 | | | | 20,050 | | | Less accumulated amortization | | | (9,323 | ) | | | (9,661 | ) | | | | $ | 15,888 | | | $ | 10,389 | |
The future amortization of these intangible assets is as follows (in thousands):
2009 $ 2,158
2010 1,571
| 2012 | | $ | 2,802 | | | 2013 | | | 2,267 | | | 2014 | | | 2,243 | | | 2015 | | | 1,961 | | | 2016 | | | 1,961 | | | Thereafter | | | 2,554 | | | | | $ | 13,788 | |
In conjunction with its quarterly financial close process for the second quarter of 2011, 1,153
2012 684
2013 8
--------
$ 5,574
========
Thethe Company reevaluated its indefinite lived intangibles and determined that two of its trade names within its Hospitality segment should no longer be considered to have indefinite lives. This determination was made after consideration of the Company’s planned use of these trade names in future periods. As such, the Company utilized the royalty method to estimate the fair values of the two specific trade names in question as of June 30, 2011. As a result of this estimate, the Company recorded an impairment charge of $580,000 during the quarter ended June 30, 2011. In addition, the Company has elected to test for impairment of identifiableindefinite lived intangible assets during the fourth quarter of its fiscal year. There was no additional impairment of identifiable intangible assets in 2008, 20072011 other than as noted above, nor was there any impairment identified in fiscal years 2010 or 2009. Stock-based compensation
The Company recognizes all stock-based compensation to employees, including grants of employee stock options and 2006.
Stock split
On November 14, 2005, the Company's Board of Directors declared a 3 for 2restricted stock splitawards, in the form of a stock dividend that was distributed on January 6,
2006 to shareholders of record on December 12, 2005. All share and per share
data in these consolidated financial statements and footnotes have been
retroactively restated as if the stock split had occurred as of the earliest
period presented.
Stock-based compensation
Effective January 1, 2006, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123R Share-Based
Payment (SFAS 123R) on a modified prospective basis. This standard requires the
Company to measure the cost of employee services received in exchange for equity
awards based on the grant date fair value of the awards. The cost is recognized
as compensation expensecost over the vesting period using an accelerated expense recognition method, based on their fair value on the date of the awards. Total
compensation expense included in operating expenses for 2008, 2007 and 2006 was
$395,000, $448,000 and $334,000, respectively. Prior to adopting SFAS 123R on
January 1, 2006, the Company's equity based employee compensation awards were
accounted for under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
grant. Earnings per share
Earnings
Basic earnings per share are calculated in accordance with Statement of Financial
Accounting Standards No. 128 Earnings per Share, which specifies the
computation, presentation, and disclosure requirements for earnings per share
(EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes
all dilution and iscomputed based uponon the weighted average number of common shares outstanding during the period. Diluted EPS reflectsearnings per share reflect the potential dilution that
would occur if securities or other contracts to issue commondilutive impact of outstanding stock were
exercised or converted into common stock.
options and restricted stock awards. The following is a reconciliation of the weighted average shares outstanding for the basic and diluted EPSearnings per share computations (in thousands, except share and per share data):
2008 2007 2006
-------- -------- -------
Net income (loss) ............................... $ 2,217 $ (2,708) $ 5,721
======== ======== =======
Basic:
Shares outstanding at beginning of year .... 14,372 14,310 14,137
Weighted shares issued during the year ..... 49 35 56
-------- -------- -------
Weighted average common shares, basic ...... 14,421 14,345 14,193
======== ======== =======
Earnings (loss) per common share, basic $ .15 $ (.19) $ .40
======== ======== =======
Diluted:
Weighted average common shares, basic ...... 14,421 14,345 14,193
Weighted average shares issued
during the year .......................... 65 -- --
Dilutive impact of stock options and
restricted stock awards .................. 275 -- 559
-------- -------- -------
Weighted average common shares, diluted .... 14,761 14,345 14,752
======== ======== =======
Earnings (loss) per common share, diluted .. $ .15 $ (.19) $ .39
======== ======== =======
| | | 2011 | | | 2010 | | | 2009 | | | Income (loss) from continuing operations | | $ | (13,360 | ) | | $ | 4,967 | | | $ | (5,043 | ) | | Basic: | | | | | | | | | | | | | Shares outstanding at beginning of year | | | 14,909 | | | | 14,677 | | | | 14,471 | | Weighted shares issued during the year | | | 91 | | | | 145 | | | | 76 | | Weighted average common shares, basic | | | 15,000 | | | | 14,822 | | | | 14,547 | | Earnings (loss) from continuing operations per common share, basic | | $ | (0.89 | ) | | $ | .34 | | | $ | (.35 | ) | | Diluted: | | | | | | | | | | | | | Weighted average common shares, basic | | | 15,000 | | | | 14,822 | | | | 14,547 | | Weighted average shares issued during the year | | | — | | | | 57 | | | | — | | Dilutive impact of stock options and restricted stock awards | | | — | | | | 129 | | | | — | | Weighted average common shares, diluted | | | 15,000 | | | | 15,008 | | | | 14,547 | | Earnings (loss) from continuing operations per common share, diluted | | $ | (0.89 | ) | | $ | .33 | | | $ | (.35 | ) |
At December 31, 2008, there were 442,000 anti-dilutive stock options
outstanding. For the year ended December 31, 2007, 436,0002011, 22,000 of incremental shares from the assumed exercise of stock options and 22,74927,000 restricted stock awards arewere not included in the computation of diluted earnings per share because of the anti-dilutive effect on earnings per share. At December 31, 2006,2010, there were 70,500295,000 anti-dilutive stock options outstanding. Goodwill
Goodwill held byAt December 31, 2009, 245,000 of incremental shares from the Company representsassumed exercise of stock options and 26,000 restricted stock awards were not included in the excess purchase price overcomputation of diluted earnings per share because of the fair value of assets acquired. anti-dilutive effect on earnings per share. Goodwill The Company accounts for its goodwill in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", and does
not amortize its goodwill. The Company reviews itstests goodwill for impairment at
least annually,on an annual basis, or whenevermore often if events or changes in circumstances would indicate possible impairment in accordance with SFAS No. 142.there may be impairment. The Company operates in two
core business segments, Hospitality and Government. Goodwill impairment testing is performed at the sub-segment level (referred to as a reporting unit). The three reporting units utilized by the Company are: Restaurant, Hotel/Resort/Spa, and Government. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or organically grown, are available to support the value of the goodwill. The amount outstanding for goodwill was $25.7$6.9 million, $27.0$27 million and $25.7$26.6 million at December 31, 2008, 20072011, 2010 and 2006,2009, respectively.
During the second quarter of 2011, the Company determined that as a result of the decline in the stock price that occurred during the second quarter, a goodwill impairment triggering event had occurred. The fair value of the Company’s common shares declined from $4.60 per share at April 1, 2011 to $3.83 per share at June 30, 2011, resulting in the Company no longer being able to reconcile the aggregate fair value of its reporting units to its market capitalization after consideration of a reasonable control premium. Although there was no significant adverse change to the long term financial outlook of any of its businesses, the Company concluded that a triggering event had occurred and as a result, performed additional analyses over the valuation of its reporting units in accordance with the relevant accounting rules, recording a non-cash impairment charge of $20.2 million to its goodwill in the second quarter of 2011. In addition, the Company performs its annual impairment testtests of goodwill as of October 11. There was no additional impairment of goodwill in 2011 other than as noted above, nor was there any impairment identified in fiscal years 2010 or 2009.
The changes and performed the annual testcarrying amounts of goodwill by reporting unit were as of October 1, 2008, 2007, and 2006 and concluded
that no impairment existed at any of the aforementioned dates.
The following table reflects the changes in goodwill during the yearfollows (in thousands):
Year ended December 31,
-------------------------------
2008 2007 2006
-------- -------- --------
Balance at beginning of year ............ $ 26,998 $ 25,734 $ 20,622
Acquisition of businesses during the year -- -- 4,843
Purchase accounting adjustment related to
prior year acquisition ................ -- 27 (15)
Contingent purchase price earned on prior
year acquisitions ..................... 54 156 278
Change in foreign exchange rates during
the period ............................ (1,368) 1,081 6
-------- -------- --------
Balance at end of year .................. $ 25,684 $ 26,998 $ 25,734
======== ======== ========
| | | Restaurants | | | Hotel/Resort/Spa | | | Government | | | Total | | | Balances at December 31, 2009: | | | | | | | | | | | | | Goodwill | | $ | 11,953 | | | $ | 13,946 | | | $ | 736 | | | $ | 26,635 | | Accumulated impairment charges | | ─ | | | ─ | | | ─ | | | ─ | | | Net balance at December 31, 2009: | | | 11,953 | | | | 13,946 | | | | 736 | | | | 26,635 | | Effects of foreign currency adjustments | | | 319 | | | ─ | | | ─ | | | | 319 | | | Balances at December 31, 2010: | | | | | | | | | | | | | | | | | Goodwill | | | 12,272 | | | | 13,946 | | | | 736 | | | | 26,954 | | Accumulated impairment charges | | ─ | | | ─ | | | ─ | | | ─ | | | Net balance at December 31, 2010: | | | 12,272 | | | | 13,946 | | | | 736 | | | | 26,954 | | Impairment charge | | | (12,433 | ) | | | (7,830 | ) | | ─ | | | | (20,263 | ) | Effects of foreign currency adjustments | | | 161 | | | ─ | | | ─ | | | | 161 | | | Balances at December 31, 2011: | | | | | | | | | | | | | | | | | Goodwill | | | 12,433 | | | | 13,946 | | | | 736 | | | $ | 27,115 | | Accumulated impairment charges | | | (12,433 | ) | | | (7,830 | ) | | ─ | | | | (20,263 | ) | | Net balance at December 31, 2011 | | $─ | | | $ | 6,116 | | | $ | 736 | | | $ | 6,852 | |
Accounting for impairment or disposal of long-lived assets
In accordance with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," we evaluate
The Company evaluates the accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed. SFAS 144 requires
recognition ofThe Company will recognize impairment of long-lived assets or asset groups if the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets. If the carrying value of a long-lived asset or asset group is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset or asset group for assets to be held and used, or the amount by which the carrying value exceeds the fair market value less cost to disposesell for assets to be disposed.sold. No impairment was identified during 2008, 20072011, 2010 or 2006.
2009. Reclassifications Amounts in prior years'years’ consolidated financial statements are reclassified whenever necessary to conform withto the current year'syear’s presentation.
During 2011, the Company changed the presentation of its accounts receivable and related deferred revenue for service contracts billed in advance, where the service period of the contracts did not begin until subsequent to the balance sheet date. At December 31, 2011, the Company presented these amounts on a net basis instead of on a gross basis as the Company believes that net presentation better reflects the fact that the period of performance for the service contracts does not begin until after the balance sheet. The Company also changed the presentation as of December 31, 2010 to provide comparability with 2011. The adjustments as of December 31, 2010 reduced both accounts receivable and deferred revenue by $6.5 million. The Company concluded that the change in presentation was not material to the Company’s 2010 consolidated financial statements as it had no impact to its statements of operations, cash flows, working capital or debt covenant compliance in any of the periods noted within this annual report on Form 10-K. Use of estimates The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include:include the carrying amount of property, plant and equipment, identifiable intangible assets and goodwill, and valuation allowances for receivables, inventories and deferred income tax assets. Actual results could differ from those estimates. The current economic conditions in late 2008 and early 2009 and the continued volatility in
the financial markets in late 2008 and early 2009, both in the U.S. and in many other countries where the Company operates have contributed and may continue tocould contribute to higher unemployment levels, decreased consumer spending, reduced
credit availability and/or declining businessconfidence and consumer confidence. Such
conditionscontinued economic uncertainty which may adversely impact the Company’s operating performance. Although the Company has seen an improvement in the markets which it serves, the continued volatility in these markets could have an impact on purchases of the markets in which the Company's customers
operate,Company’s products, which could result in a reduction of sales, operating income and cash flowsflows. This could have a material adverse effect on the Company’s business, financial condition and/or results of operations and could have a material adverse impact on the Company'sCompany’s significant estimates discussed above, specifically the fair value of the Company'sCompany’s reporting units used in support of its annual goodwill impairment test.
New Recently Issued Accounting Pronouncements Not Yet Adopted In February 2008, theSeptember 2011, FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other: Testing Goodwill for Impairment, which amends FASB Staff Position ("FSP")Topic ASC 350, Intangible Assets-Goodwill and Other. Under ASU No. 157-2,
"Effective Date2011-08, an entity may elect the option to assess qualitative factors to determine whether it is necessary to perform the first step in the two-step impairment testing process. ASU No. 2011-08 is effective on January 1, 2012. The Company does not expect the adoption of ASU No. 2011-08 will have a material impact on its consolidated financial statements.
In May 2011, FASB Statementissued ASU No. 157"2011-04, Amendment to Achieve Common Fair Value Measurement and Disclosure Requirements, in U.S. GAAP and International Financial Reporting Standards (IFRS), which permits a one-year deferral foramends FASB Topic ASC 820, Fair value measurement. ASU No. 2011-04 modifies the implementationexisting standard to include disclosure of SFAS 157 with regard to non-financial assetsall transfers between Level 1 and liabilities that are not recognized or disclosed atLevel 2 asset and liability fair value incategories. In addition, ASU No. 2011-04 provides guidance on measuring the financial
statements on a recurring basis (at least annually). We elected to defer
adoption of SFAS 157 for such non-financial assets and liabilities, which, for
the Company, primarily includes long-lived assets, goodwill and intangibles for
which fair value wouldof financial instruments managed within a portfolio and the application of premiums and discounts on fair value measurements. ASU No. 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. ASU No. 2011-04 will be determined as part of related impairment tests, and we
doeffective on January 1, 2012. The Company does not currently anticipate that full adoption in 2009expect adopting ASU No. 2011-04 will materiallyhave a material impact the Company's results of operations oron its consolidated financial condition.
statements. Recently Adopted Accounting Pronouncements In December 2007, the2010, FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R")ASU 2010-28 “Intangibles—Goodwill and Other (Topic 350)” (ASU 2010-28). SFAS 141R, which Topic 350 is broader in scope than SFAS 141,
appliesamended to all transactionsclarify the requirement to test for impairment of goodwill. Topic 350 has required that goodwill be tested for impairment if the carrying amount of a reporting unit exceeds its fair value. Under ASU 2010-28, when the carrying amount of a reporting unit is zero or other events in which an entity obtains control
of one or more businesses, and requires that the acquisition method be used for
such transactions or events. SFAS 141R, with limited exceptions, will require an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values asnegative, goodwill of that date. This will result in acquisition related costs
and anticipated restructuring costs relatedreporting unit shall be tested for impairment on an annual or interim basis if an event occurs or circumstances exist that indicate that it is more likely than not that a goodwill impairment exists. The modifications to the acquisition being recognized
separatelyASC Topic 350 resulting from the business combination. SFAS 141R isissuance of ASU 2010-28 are effective as of the
beginning of an entity's firstfor fiscal yearyears beginning after December 15, 2008
(the Company's2010 and interim periods within those years. The adoption of this standard did not impact the consolidated financial statements.
In October 2009, fiscal year). The impact of SFAS 141R on the Company will be
dependent upon the extent to which we have transactions or events occur that are
within its scope.
In December 2007, the FASB issued SFASASU No. 160, "Noncontrolling Interests
in Consolidated Financial Statements" ("SFAS 160")2009-14, “Certain Revenue Arrangements That Include Software Elements. SFAS 160” ASU No. 2009-14 amends Accounting
Research Bulletinguidance included within ASC Topic 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality. Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 51, "Consolidated Financial Statements," and will change
the accounting and reporting for noncontrolling interests, which are the portion
of equity in a subsidiary not attributable, directly or indirectly, to a parent.
SFAS 1602009-13. ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years and interim periods beginning on or after DecemberJune 15, 2008 (the Company's 2009 fiscal year) and requires retroactive2010. The adoption of its presentationthis standard did not have a material impact on the consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements.” ASU No. 2009-13 amends guidance included within ASC Topic 605-25 to require an entity to use an estimated selling price when vendor specific objective evidence or acceptable third party evidence does not exist for any products or services included in a multiple element arrangement. The arrangement consideration should be allocated among the products and disclosure requirements. We do not anticipate
thatservices based upon their relative selling prices, thus eliminating the use of the residual method of allocation. ASU No. 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying this guidance. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of SFAS 160 will materiallythis standard did not have a material impact on the Company.
consolidated financial statements.
Note 2 -- Business Acquisitions
On November 2, 2006, PAR Technology Corporation (the "Company") and its
wholly owned subsidiary, Par-Siva Corporation (f/k/— Discontinued Operations During the fourth quarter of fiscal year 2011, the Company entered into a PAR Vision Systems
Corporation) (the "Subsidiary") acquireddefinitive agreement to sell substantially all of the assets of its Logistics Management business, PAR Logistics Management Systems Corporation (LMS) to ORBCOMM Inc., including but not limited to assets such as accounts receivable, inventory, equipment, intellectual property and assumed certain liabilitiesLMS’s customer contracts. This transaction closed on January 12, 2012. Summarized financial information for the Company’s discontinued operations is as follows: | | | December 31, | | | | | 2011 | | | 2010 | | | Assets | | | | | | | | Cash | | $ | 5 | | | $ | 2 | | | Accounts receivable - net | | | 1,398 | | | | 1,197 | | | Inventories | | | 1,355 | | | | 2,025 | | | Other assets | | | 424 | | | | 129 | | | Total assets of discontinued operations | | $ | 3,182 | | | $ | 3,353 | | | | | | | | | | | | | Liabilities | | | | | | | | | | Accounts payable and accrued expenses | | $ | 674 | | | $ | 343 | | | Accrued salaries and benefits | | | 236 | | | | 187 | | | Other liabilities | | | 15 | | | | 13 | | | Total liabilities of discontinued operations | | $ | 925 | | | $ | 543 | |
| Operations | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | | | | | | Total revenues | | $ | 6,433 | | | $ | 4,917 | | | $ | 7,149 | | | | | | | | | | | | | | | | | Loss from discontinued operations before income taxes | | $ | (3,525 | ) | | $ | (2,985 | ) | | $ | (217 | ) | | Benefit for income taxes | | | 1,353 | | | | 1,141 | | | | 74 | | | Loss from discontinued operations, net of taxes | | $ | (2,172 | ) | | $ | (1,844 | ) | | $ | (143 | ) |
The Company anticipates recognition of SIVA Corporation ("SIVA"). The purchase price of
the assets was approximately $6.9 million including estimated acquisition costs
of approximately $204,000. The purchase price consisted of $1.1 million worth of
PAR common stock (125,549 shares of PAR Technology Corporation common stock
issued out of treasury) and the remainder in cash. The agreement provides for
additional contingent purchase price payments based on certain sales based
milestones and other conditions. In 2008 and 2007, there was no contingent
payment earned. SIVA, based in Delray Beach, Florida, is a developer of software
solutions for multi-unit restaurant operations. In 2008, the Company paid
$156,000 in contingent purchase price payments pertaining to acquisitions made
by the Company prior to 2006.
The purchase price of this acquisition was allocated basedgain on the fair
valuedisposition of the tangible and identifiable intangible assets acquired and
liabilities assumed by the Company as of the closing date of the acquisition.
Management was responsible for determining the fair value of the assets acquired
and liabilities assumed using certain assumptions and assessments including the
income approach. Identifiable intangible assets recordedLMS in the acquisitions are
tested for impairment in accordance withrange of $2.5 million to $2.9 million, pending final resolution of conditions noted within the provisions of SFAS 142. The
following table presents the estimated fair value of the assets acquired and
liabilities assumed at the date of acquisition:
(in thousands) SIVA
------------ ----------
Other current assets .................. $ 13
Property, plant and equipment ......... 223
Intangible assets ..................... 1,924
Goodwill .............................. 4,843
------
Total assets acquired ................. $7,003
======
Deferred revenues and customer deposits 110
------
Total liabilities assumed ............. 110
------
Purchase price, including
acquisition related costs ........... $6,893
======
The identifiable intangible assets acquired and their estimated useful
lives are as follows:
(in thousands) SIVA Useful Life
------------ --------- -----------
Software costs $ 1,025 5 Years
Customer relationships 649 5 Years
Trademarks 250 Indefinite
--------
$ 1,924
========
On an unaudited proforma basis, assuming the acquisition had occurred as of
the beginning of the periods presented, the consolidated results of the Company
would have been as follows (in thousands, except per share amounts):
Year ended December 31,
-----------------------
2006
----
Revenues $ 209,723
==========
Net income $ 2,743
==========
Earnings per share:
Basic $ .19
==========
Diluted $ .18
==========
The unaudited proforma financial information presented above gives effect
to purchase accounting adjustments which have resulted or are expected to result
from the acquisition. This proforma information is not necessarily indicative of
the results that would actually have been obtained had the companies been
combined for the periods presented.
divestiture agreement.
Note 3 --— Accounts Receivable
The Company's net accounts receivable consist of:
December 31,
(in thousands)
-------------------------
2008 2007
-------- ---------
Government segment:
Billed ............. $ 13,260 $ 13,153
Advanced billings .. (2,096) (2,687)
-------- --------
11,164 10,466
-------- --------
Hospitality segment:
Accounts receivable - net 42,418 33,142
-------- --------
$ 53,582 $ 43,608
======== ========
| The Company’s net accounts receivable consist of: |
| | | December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | Government segment: | | | | | | | Billed | | $ | 12,903 | | | $ | 10,622 | | Advanced billings | | | (1,552 | ) | | | (385 | ) | | | | | 11,351 | | | | 10,237 | | | Hospitality segment: | | | | | | | | | Accounts receivable – net | | | 19,329 | | | | 25,588 | | | | | $ | 30,680 | | | $ | 35,825 | |
At December 31, 2008, 20072011, 2010 and 2006,2009, the Company had recorded allowances for doubtful accounts of $2,306,000, $2,447,000$917,000, $1,579,000, and $1,850,000,$1,621,000, respectively, against Hospitality segment accounts receivable. Write-offs of accounts receivable during fiscal years 2008, 20072011, 2010, and 20062009 were $1,193,000, $2,437,000$786,000, $1,114,000 and $747,000,$2,117,000, respectively. The provision for doubtful accounts recorded in the consolidated statements of operations was $1,052,000, $3,034,000$124,000, $1,094,000, and $849,000$1,432,000 in 2008, 20072011, 2010, and 2006,2009, respectively. Note 4 --— Inventories
Inventories are used primarily in the manufacture, maintenance, and service of the Hospitality segment systems. Inventories are net of related reserves. The components of inventories-net are:
December 31,
(in thousands)
----------------------
2008 2007
------- ---------
Finished goods $ 7,761 $ 9,965
Work in process 1,425 1,722
Component parts 13,661 10,408
Service parts . 18,285 18,224
------- -------
$41,132 $40,319
======= =======
The Company records reserves for shrinkage and excess and obsolete
inventory. At December 31, 2008, 2007 and 2006, these amounts were $3,267,000,
$3,951,000 and $3,658,000, respectively. Write-offs of inventories during fiscal
years 2008, 2007 and 2006 were $3,309,000, $2,708,000 and $2,453,000,
respectively. The provision for shrinkage and excess and obsolete inventory
recorded in the consolidated statements of operations was $2,625,000, $3,001,000
and $1,922,000, in 2008, 2007 and 2006, respectively.
| | | December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | Finished Goods | | $ | 9,325 | | | $ | 13,913 | | | Work in process | | | 1,007 | | | | 959 | | | Component parts | | | 6,138 | | | | 5,459 | | | Service parts | | | 8,790 | | | | 16,351 | | | | | $ | 25,260 | | | $ | 36,682 | |
Note 5 --— Property, Plant and Equipment
The components of property, plant and equipment are:
December 31,
(in thousands)
-------------------------
2008 2007
---------- ---------
Land ........................ $ 253 $ 253
Buildings and improvements .. 5,857 5,895
Rental property ............. 5,490 5,490
Furniture and equipment ..... 20,787 20,215
-------- --------
32,387 31,853
Less accumulated depreciation
and amortization ........... (25,508) (24,184)
-------- --------
$ 6,879 $ 7,669
======== ========
| | | December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | Land | | $ | 253 | | | $ | 253 | | | Building and improvements | | | 6,235 | | | | 6,111 | | | Rental property | | | 5,289 | | | | 5,519 | | | Furniture and equipment | | | 23,009 | | | | 22,552 | | | | | | 34,786 | | | | 34,435 | | | Less accumulated depreciation | | | (29,527 | ) | | | (28,729 | ) | | | | $ | 5,259 | | | $ | 5,706 | |
The estimated useful lives of buildings and improvements and rental property are twenty to twenty-five years. The estimated useful lives of furniture and equipment range from three to eight years. Depreciation expense recorded was $1,832,000, $1,882,000$1,343,000, $1,628,000 and $1,921,000$1,843,000 for 2008, 20072011, 2010, and 2006,2009, respectively.
The Company leases a portion of its headquarters facility to various tenants. Rent received from these leases totaled $1,051,000, $1,132,000$440,000, $442,000 and $1,129,000$416,000 for 2008, 20072011, 2010, and 2006,2009, respectively. Future minimum rent payments due to the Company under these lease arrangements are as follows (in thousands):
2009 $ 406
2010 289
2011 228
2012 46
2013 46
Thereafter 4
-------
$ 1,019
=======
| 2012 | | $ | 407 | | | 2013 | | | 282 | | | 2014 | | | 176 | | | | | $ | 865 | |
The Company leases office space under various operating leases. Rental expense on these operating leases was approximately $2,778,000, $2,706,000$2,535,000, $2,580,000 and $2,559,000$2,917,000 for 2008, 2007,2011, 2010, and 2006,2009, respectively. Future minimum lease payments under all noncancelablenon-cancelable operating leases are (in thousands):
2009 $2,158
2010 1,208
2011 846
2012 528
2013 374
Thereafter 1,110
------
$6,224
======
Note 6 -- Debt
| 2012 | | $ | 2,131 | | | 2013 | | | 1,737 | | | 2014 | | | 1,292 | | | 2015 | | | 482 | | | 2016 | | | 353 | | | Thereafter | | | 362 | | | | | $ | 6,357 | |
At December 31, 20072010 and through June 2008,2011, the Company had an aggregatea credit agreement containing a borrowing availability up to $20 million in the form of $20,000,000 in unsecured bank linesa line of credit. One line totaling
$12,500,000 bore interest at the bank borrowing rate (6.75% at December 31,
2007). The second line of $7,500,000This agreement allowed the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread (1.27% at December 31, 2010) or at the bank'sbank’s prime lending rate (6.85%(3.25% at December 31, 2007)2010). At December 31,
2007, there was $2,500,000 outstanding under these lines. The weighted average
interest rate paid by the Company during 2007 was 6.6%.
InOn June 2008,6, 2011, the Company executed a new credit agreement with a bank
replacingthe lenders of its existing agreement. Under this agreement,credit facility. This credit facility provides the Company has a borrowing availability up to $20,000,000$20 million (with the option to increase to $30 million) in the form of a line of credit. This agreement allows the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread (2.4% to 2.9%(1.31% at December 31, 2008)2011) or at the bank'sbank’s prime lending rate plus the applicable interest rate spread (3.25% at December 31, 2008)2011). This agreement expires in June 2011.2014. At December 31, 2008, there was $8,800,0002011 and 2010, the Company did not have any outstanding under this agreement.balance on the line of credit. The weighted average interest rate paid by the Company was 4.9%2.0% during 2008.fiscal year 2011 as compared to 2.4% for the same period in 2010. This agreement contains certain loan covenants including leverage and fixed charge coverage ratios. In July 2011, this agreement was amended to exclude specific non-recurring charges recorded by the Company in the second quarter of 2011 from all debt covenant calculations in 2011 and through June 30, 2012. The Company is in compliance with these amended covenants at December 31, 2008.2011. This credit facility is secured by certain assets of the Company.
In 2006, the
The Company borrowed $6,000,000$6 million under an unsecured term loan agreement, executed as an amendment to one of its then bank line of credit
agreements, in connection with the asset acquisitiona prior business acquisition. This loan is part of SIVA Corporation. The
loanits existing credit facility and provides for interest only payments in the first year and escalating principal payments through 2012. The loan bears interest at the LIBOR rate plus the applicable interest rate spread (1.31% at December 31, 2011) or at the bank'sbank’s prime lending rate plus the
applicable interest rate spread (2.4%(3.25% at December 31, 2008)2011). The terms and conditions of the line of credit agreement described in the preceding paragraph also apply to the term loan.
In September 2007, the
The Company entered into an interest rate swap agreement associated with the above $6,000,000$6 million loan, with principal and interest payments due through August 2012. At December 31, 2008,2011, the notional principal amount totaled $5,175,000.$1.4 million. This instrument was utilized by the Company to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company did not adopt hedge accounting, under the provision
of FASB Statement No 133, Accounting for Derivative Instruments and Hedging
Activities, but rather records the fair market value adjustments through the consolidated statements of operations each period. The associated fair value adjustment included within the consolidated statements of operationsadjustments for the years ended December 31, 20082011, 2010 and 2007 was $234,0002009 were $101,000, $115,000, and $154,000,$146,000, respectively and iswere recorded as additionaldecreases to interest expense.
The Company has a $1,757,000$1.4 million mortgage, collateralized by certain real estate. The annual mortgage payment including interest totals $226,000.$222,000. The mortgage bears interest at a fixed rate of 7%5.75% and matures in 2010.
2019.
The Company'sCompany’s future principal payments under its term loan and mortgage are as follows (in thousands):
2009 $ 1,079
2010 2,928
2011 1,575
2012 1,349
--------
$ 6,931
========
| 2012 | | $ | 1,494 | | | 2013 | | | 153 | | | 2014 | | | 162 | | | 2015 | | | 172 | | | 2016 | | | 182 | | | Thereafter | | | 580 | | | | | $ | 2,743 | |
Note 7 --— Stock basedBased Compensation
The Company recognizes all stock-based compensation Effective January 1, 2006, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123R Share-Based
Payment (SFAS 123R) on a modified prospective basis. This standard requires the
Company to measure the costemployees, including grants of employee services receivedstock options and restricted stock awards, in exchange for equity
awards based on the grant date fair value of the awards. The cost is recognizedfinancial statements as compensation expensecost over the vesting period based on their fair value on the date of the awards.grant. Total stock-based compensation expense included in selling, general and administrative expense in 2008, 2007,2011, 2010, and 20062009 was $395,000, $448,000,$595,000, $336,000, and $334,000,$666,000, respectively. This amount includes $115,000, $78,000,$350,000, $362,000, and $20,000$236,000 in 2008, 2007,2011, 2010, and 2006,2009, respectively, relating to restricted stock awards. Total 2011 expense includes a benefit of $61,000 as the result of forfeitures of unvested stock options prior to the completion of the requisite service period. No compensation expense has been capitalized during fiscal years 2008, 20072011, 2010, and 2006.
In 2005, the Company's 1995 Stock Option plan expired. The 2005 Equity
Incentive Plan was approved by the shareholders at the Company's 2006 Annual
Meeting. 2009.
The Company has reserved 1,000,000 shares under its 2005 Equity Incentive Plan. Stock options under this Plan may be incentive stock options or nonqualified stock options. The Plan also provides for restricted stock awards. Stock options are nontransferable other than upon death. Option grants generally vest over a one to five year period after the grant and typically expire ten years after the date of the grant.
Information with respect to stock options included within this plan is as follows:
Aggregate
Weighted Intrinsic
Average Value
No. of Shares Exercise (in
(in thousands) Price thousands)
-----------------------------------------
Outstanding at December 31, 2007 1,083 $ 4.75 $3,206
======
Options granted .............. 31 6.94
Exercised .................... (92) 5.29
Forfeited and cancelled ...... (42) 7.83
----- -------
Outstanding at December 31, 2008 980 $ 4.63 $ 897
====== ======= ======
Vested and expected to vest
at December 31, 2008 ......... 968 $ 4.58 $ 939
====== ======= ======
Total shares exercisable
as of December 31, 2008 ...... 817 $ 3.78 $1,446
====== ======= ======
Shares remaining
available for grant .......... 740
======
| | | No. of Shares (in thousands) | | | Weighted Average Exercise Price | | | Aggregate Intrinsic Value (in thousands) | | | Outstanding at December 31, 2010 | | | 571 | | | $ | 5.47 | | | $ | 493 | | | Options granted | | | 310 | | | | 4.70 | | | | | | | Exercised | | | (77 | ) | | | 1.71 | | | | | | | Forfeited and cancelled | | | (47 | ) | | | 6.57 | | | | | | | Outstanding at December 31, 2011 | | | 757 | | | $ | 5.47 | | | $ | 38 | | | Vested and expected to vest at December 31, 2011 | | | 740 | | | $ | 5.49 | | | $ | 38 | | | | | | | | | | | | | | | | | Total shares exercisable as of December 31, 2011 | | | 360 | | | $ | 6.19 | | | $ | 38 | | | | | | | | | | | | | | | | | Shares remaining available for grant | | | 194 | | | | | | | | | |
The weighted average grant date fair value of options granted during the years 2008, 20072011, 2010 and 20062009 was $3.90, $4.39$2.32, $2.87, and $3.69,$2.41, respectively. The total intrinsic value of options exercised during the years ended December 31, 2008,
20072011, 2010 and 20062009 was $234,000, $289,000$236,000, $969,000 and $670,000,$718,000, respectively. The fair value of options at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the respective period ending December 31:
2008 2007 2006
------- --------- -------
Expected option life ................... 6.2 years 4.5 years 4.5 years
Weighted average risk-free interest rate 3.4% 4.7% 4.6%
Weighted average expected volatility ... 46% 48% 50%
Expected dividend yield ................ 0% 0% 0%
| | | 2011 | | | 2010 | | | 2009 | | | Expected option life | | 5.5 years | | | 6.0 years | | | 5.2 years | | | Weighted average risk-free interest rate | | | 2.1 | % | | | 2.1 | % | | | 2 | % | | Weighted average expected volatility | | | 53 | % | | | 52 | % | | | 49 | % | | Expected dividend yield | | | 0 | % | | | 0 | % | | | 0 | % |
For the years ended December 31, 2008, 20072011, 2010, and 2006,2009, the expected option life was based on the Company'sCompany’s historical experience with similar type options. Expected volatility is based on historical volatility levels of the Company'sCompany’s common stock over the preceding period of time consistent with the expected life. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life. Stock options outstanding at December 31, 20082011 are summarized as follows:
Range of Number Outstanding Weighted Average Weighted Average
Exercise Prices (in thousands) Remaining Life Exercise Price
- --------------- ------------ -------------- --------------
$1.25 - $3.17 519 1.9 Years $ 2.20
$3.22 - $8.18 254 5.4 Years $ 5.59
$8.47 - $11.40 207 7.5 Years $ 9.58
- ---------------- ----- ----------- -------
$1.25 - $11.40 980 4.0 Years $ 4.63
================ ===== =========== =======
Range of Exercise Prices | Number Outstanding (in thousands) | Weighted Average Remaining Life | Weighted Average Exercise Price | | | | | | | | | | $1.72 - $4.81 | | 408 | | 8.3 Years | | $4.55 | | $4.88 - $6.01 | | 243 | | 2.2 Years | | $5.71 | | $6.25 - $11.40 | | 106 | | 5.0 Years | | $8.53 | | $1.72 - $11.40 | | 757 | | 5.9 Years | | $5.47 |
At December 31, 20082011 the aggregate unrecognized compensation cost of unvested options, as determined using a Black-Scholes option valuation model, was $623,000$673,000 (net of estimated forfeitures) which is expected to be recognized as compensation expense in fiscal years 20082012 through 2013.
2016.
Current year activity with respect to the Company's nonvestedCompany’s non-vested stock options is as follows:
Weighted Average
Nonvested shares (in thousands) Shares grant-date fair value
- ------------------------------- ----------- ---------------------
Balance at January 1, 2008 246 $ 3.97
Granted 31 3.89
Vested (72) 3.99
Forfeited
Non-vested shares (in thousands) | | Shares | | | Weighted Average grant-date fair value | | | Balance at January 1, 2011 | | | 153 | | | $ | 2.73 | | Granted | | | 310 | | | | 2.32 | | Vested | | | (30 | ) | | | 2.49 | | Forfeited and cancelled | | | (36 | ) | | | 2.41 | | | Balance at December 31, 2011 | | | 397 | | | $ | 2.36 | |
During 2011, 2010, and cancelled (42) 3.57
------ --------
Balance at December 31, 2008 163 $ 3.95
====== ========
During 2008, 2007 and 2006,2009, the Company issued 50,000, 9,60040,000, 48,000 and 17,80068,000 restricted stock awards, respectively, at a per share price of $.02. These awards vest over various periods ranging from 6 to 60 months. The fair value of restricted stock awards is based on the closing price of the Company’s common stock one day prior to the grant date. The weighted average grant date fair value of restricted stock awards granted during the years 2011, 2010 and 2009 was $4.08, $5.35, and $5.46, respectively. In accordance with the terms of the restricted stock award agreements, the Company released 64,000, 37,000, and 14,000 shares during 2011, 2010, and 2009, respectively. No restricted stock awards were cancelled during 2011, 2010 or 2009. Note 8--8— Income Taxes
The provision (benefit) for income taxes from continuing operations consists of:
Year
| | | Year ended December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | | | Current income tax: | | | | | | | | | | Federal | | $ | (198 | ) | | $ | (263 | ) | | $ | (960 | ) | State | | | 153 | | | | 255 | | | | 220 | | Foreign | | | 437 | | | | 464 | | | | 802 | | | | | | 392 | | | | 456 | | | | 62 | | | Deferred income tax: | | | | | | | | | | | | | Federal | | | (7,777 | ) | | | 1,600 | | | | (1,100 | ) | State | | | (55 | ) | | | 85 | | | | (202 | ) | | | | | (7,832 | ) | | | 1,685 | | | | (1,302 | ) | | Provision (benefit) for income taxes | | $ | (7,440 | ) | | $ | 2,141 | | | $ | (1,240 | ) |
Deferred tax benefit related to discontinued operations was $1,354,000, $1,141,000 and $74,000 related to the years ended December 31, (in thousands)
------------------------------------
2008 2007 2006
------- ------- --------
Current income tax:
Federal ....................... $ 49 $ 206 $ 1,565
State ......................... 379 86 346
Foreign ....................... 384 422 319
------- ------- -------
812 714 2,230
------- ------- -------
Deferred income tax:
Federal ....................... 487 (1,872) 802
State ......................... 59 (339) 114
------- ------- -------
546 (2,211) 916
------- ------- -------
Provision (benefit) for income taxes $ 1,358 $(1,497) $ 3,146
======= ======= =======
2011, 2010, and 2009 respectively.
Deferred tax liabilities (assets) are comprised of the following at:
December 31,
(in thousands)
----------------------
2008 2007
--------- ---------
Software development expense .......... $ 836 $ 778
Intangible assets ..................... 1,241 864
Foreign currency ...................... -- 277
------- -------
Gross deferred tax liabilities ........ 2,077 1,919
------- -------
Allowances for bad debts and inventory (3,523) (3,738)
Capitalized inventory costs ........... (108) (115)
Employee benefit accruals ............. (1,313) (1,566)
Federal net operating loss carryforward (130) (672)
State net operating loss carryforward . (333) (405)
Tax credit carryforwards .............. (2,378) (1,345)
Foreign currency ...................... (962) --
Other ................................. (156) (211)
------- -------
Gross deferred tax assets ............. (8,903) (8,052)
------- -------
Net deferred tax assets ............... $(6,826) $(6,133)
======= =======
| | | December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | | | | | | | | | Software development costs | | $ | 4,003 | | | $ | 1,429 | | | Intangible assets | | ─ | | | | 2,282 | | | Gross deferred tax liabilities | | | 4,003 | | | | 3,711 | | | Allowances for bad debts and inventory | | | (6,608 | ) | | | (5,037 | ) | | Capitalized inventory costs | | | (107 | ) | | | (92 | ) | | Intangible assets | | | (4,792 | ) | | ─ | | | Employee benefit accruals | | | (1,848 | ) | | | (1,835 | ) | | Federal net operating loss carryforward | | | (3,722 | ) | | | (1,263 | ) | | State net operating loss carryforward | | | (493 | ) | | | (321 | ) | | Tax credit carryforwards | | | (3,879 | ) | | | (2,905 | ) | | Foreign currency | | | (191 | ) | | | (101 | ) | | Other | | | (361 | ) | | | (453 | ) | | Gross deferred tax assets | | | (22,001 | ) | | | (12,007 | ) | | | | | | | | | | | | Less valuation allowance | | | 2,153 | | | | 1,498 | | | | | | | | | | | | | Net deferred tax assets | | $ | (15,845 | ) | | $ | (6,798 | ) |
The Company has Federal tax credit carryforwards of $1,597,000$3,900,000 that expire in various tax years from 20132014 to 2018.2026. The Company has a Federal operating loss carryforward of $382,000$12,500,000 that expires in 2027.various tax years through 2030. Of the operating loss carryforward, $241,000$1,500,000 will result in a benefit within additional paid in capital when realized. The Company also has state tax credit carryforwards of $195,000$200,000 and state net operating loss carryforwards of $8,474,000$7,300,000 which expire in various tax years through 2027.2029. In assessing the realizability ofability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based uponAs a result of this analysis and based on the historical level ofcurrent year’s taxable income and
projections for future taxable income,loss, management believesdetermined that it is more likely than not that the future benefit associated with the foreign tax credit carryforwards and certain state tax credits and loss carryforwards will not be realized. As a result, the Company will realize the benefit of therecorded tax expense associated with an additional deferred tax assets.
Accordingly, no deferred taxasset valuation allowance was recorded atof $655,000, $94,000 and $1,404,000 for 2011, 2010, and 2009, respectively.
The Company records the benefits relating to uncertain tax positions only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. At December 31, 20082011, the Company’s reserve for uncertain tax positions is not material and 2007.
Thethe Company believes it has adopted the provisions of Financial Accounting Standards
Board Interpretation No. 48, Accountingadequately provided for Uncertainty in Income Taxes (FIN48)
effective January 1, 2007. The Company's adoption of FIN 48 on January 1, 2007,
did not have a material impact on the Company's consolidated financial position,
results of operations or cash flows.its tax-related liabilities. The Company is no longer subject to United States federal income tax examinations for years before 2002.2008. The provision (benefit) for income taxes differed from the provision computed by applying the Federal statutory rate to income (loss) from continuing operations before taxes due to the following:
Year ended December 31,
------------------------------------
2008 2007 2006
------------------------------------
Federal statutory tax rate ...... 35.0% (35.0)% 35.0%
State taxes ..................... 5.3 (6.6) 3.9
Extraterritorial income exclusion -- -- (2.4)
Non deductible expenses ......... 9.3 6.8 1.9
Tax credits ..................... (10.9) (3.6) (1.0)
Foreign income taxes ............ 0.5 1.7 --
Others .......................... (1.2) 1.1 (1.9)
------ ------ ------
38.0% (35.6)% 35.5%
====== ====== ======
| | | Year ended December 31, | | | | | 2011 | | | 2010 | | | 2009 | | | Federal statutory tax rate | | | (35.0 | )% | | | 35.0 | % | | | (35.0 | )% | | State taxes | | | 0.3 | | | | 3.6 | | | | (2.2 | ) | | Non deductible expenses | | | 0.7 | | | | 1.2 | | | | 2.2 | | | Tax credits | | | (2.9 | ) | | | (6.6 | ) | | | (2.6 | ) | | Foreign income tax rate differential | | | (0.3 | ) | | | (5.0 | ) | | | (4.9 | ) | | Valuation allowance | | | 0.9 | | | | 1.3 | | | | 22.3 | | | Other | | | 0.5 | | | | 0.6 | | | | 0.5 | | | | | | (35.8 | )% | | | 30.1 | % | | | (19.7 | )% |
Note 9 --— Employee Benefit Plans
The Company has a deferred profit-sharing retirement plan that covers substantially all employees. The Company'sCompany’s annual contribution to the plan is discretionary. The Company contributed $200,000, $800,000,$626,000 in 2011, $671,000 in 2010, and $880,000no contribution was made to the plan in 2008, 2007, and 2006, respectively.2009. The plan also contains a 401(k) provision that allows employees to contribute a percentage of their salary up to the statutory limitation. These contributions are matched at the rate of 10% by the Company. The Company'sCompany’s matching contributions under the 401(k) component were $408,000, $396,000$352,000, $338,000 and $348,000$366,000 in 2008, 2007,2011, 2010, and 2006,2009, respectively.
The Company also maintains an incentive-compensation plan. Participants in the plan are key employees as determined by the Board of Directors and executive management. Compensation under the plan is based on the achievement of predetermined financial performance goals of the Company and its subsidiaries. Awards under the plan are payable in cash. Awards under the plan totaled $461,000, $632,000,$558,000, $1,785,000, and $707,000$779,000 in 2008, 2007,2011, 2010, and 2006,2009, respectively.
The Company also sponsors a Deferred Compensation Plan for a select group of highly compensated employees that includes the Executive Officers. The
Deferred Compensation Plan was adopted effective March 4, 2004. Participants may make elective deferrals of their salary to the plan in excess of tax code limitations that apply to the Company'sCompany’s qualified plan. The Company invests the participantsparticipants’ deferred amounts to fund these obligations. The Company also has the sole discretion to make employer contributions to the plan on the behalf of the participants, though it did not make any employer contributions in 2008,
2007, and 2006.
2011, 2010, or 2009.
Note 10 --— Contingencies
The Company is subject to legal proceedings, which arise in the ordinary course of business. Additionally, U.S. Government contract costs are subject to periodic audit and adjustment. In the opinion of management, the ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or cash flows of the Company.
Note 11 -- Segment and Related Information
| Note 11 — Segment and Related Information |
The Company'sCompany’s reportable segments are strategic business units that have separate management teams and infrastructures that offer different products and services.
The Company has two reportable segments, Hospitality and Government. The Hospitality segment offers integrated solutions to the hospitality industry. These offerings include industry leading hardware and software applications utilized at the point-of-sale, back of store and corporate office. This segment also offers customer support including field service, installation, twenty-four hour telephone support and depot repair. The Government segment performs complex technical studies, analysis, and experiments, develops innovative solutions, and provides technical expertiseworld-class on-site engineering in the developmentsupport of advanced technology prototype systems
primarily for the U.S. Department of Defensedefense, security, and other U.S. Governmental
agencies. Itaerospace systems. This segment also provides affordable expert on-site services for operating and maintaining certain U.S. Government-owned communication and test sites, and for planning, executing and
evaluating experiments involving new or advanced radar systems. It is also
involved in developing technology to track mobile chassis. Intersegment sales
and transfers are not significant.
assets.Information as to the Company'sCompany’s segments is set forth below:
Year ended December 31,
(in thousands)
-----------------------------------------
2008 2007 2006
-----------------------------------------
Revenues:
Hospitality ............. $ 157,193 $ 144,486 $ 145,216
Government .............. 75,494 64,998 63,451
--------- --------- ---------
Total ............. $ 232,687 $ 209,484 $ 208,667
========= ========= =========
Operating income (loss):
Hospitality ............. $ 819 $ (7,701) $ 5,051
Government .............. 3,314 3,814 4,267
Other ................... (303) (449) (334)
--------- --------- ---------
3,830 (4,336) 8,984
Other income, net ............ 921 1,227 617
Interest expense ............. (1,176) (1,096) (734)
--------- --------- ---------
Income (loss) before provision
for income taxes ........... $ 3,575 $ (4,205) $ 8,867
========= ========= =========
Identifiable assets:
Hospitality ............. $ 127,678 $ 122,442 $ 123,958
Government .............. 13,532 14,429 10,898
Other ................... 12,778 9,647 7,402
--------- --------- ---------
Total ............. $ 153,988 $ 146,518 $ 142,258
========= ========= =========
Goodwill:
Hospitality ............. $ 24,981 $ 26,349 $ 25,138
Government .............. 703 649 596
--------- --------- ---------
Total ............. $ 25,684 $ 26,998 $ 25,734
========= ========= =========
Depreciation and amortization:
Hospitality ............. $ 3,567 $ 3,622 $ 3,453
Government .............. 88 81 42
Other ................... 374 376 389
--------- --------- ---------
Total ............. $ 4,029 $ 4,079 $ 3,884
========= ========= =========
Capital expenditures:
Hospitality ............. $ 779 $ 1,788 $ 903
Government .............. 22 57 14
Other ................... 241 172 272
--------- --------- ---------
Total ............. $ 1,042 $ 2,017 $ 1,189
========= ========= =========
below. Amounts below exclude discontinued operations. | | | Year ended December 31, | | | | | (in thousands) | | | | | 2011 | | | 2010 | | | 2009 | | | | | | | | | | | | | | Revenues: | | | | | | | | | | Hospitality | | $ | 160,482 | | | $ | 168,957 | | | $ | 140,429 | | Government | | | 68,941 | | | | 66,065 | | | | 75,470 | | Total | | $ | 229,423 | | | $ | 235,022 | | | $ | 215,899 | | | Operating income (loss): | | | | | | | | | | | | | Hospitality | | $ | (24,542 | ) | | $ | 3,509 | | | $ | (9,286 | ) | Government | | | 4,344 | | | | 3,787 | | | | 3,905 | | Other | | | (594 | ) | | | (476 | ) | | | (667 | ) | | | | | (20,792 | ) | | | 6,820 | | | | (6,048 | ) | | Other income, net | | | 203 | | | | 640 | | | | 165 | | | Interest expense | | | (211 | ) | | | (352 | ) | | | (400 | ) | | Income (loss) from continuing operations before provision for income taxes | | $ | (20,800 | ) | | $ | 7,108 | | | $ | (6,283 | ) | | Identifiable assets: | | | | | | | | | | | | | Hospitality | | $ | 89,135 | | | $ | 112,743 | | | $ | 102,512 | | Government | | | 12,617 | | | | 11,627 | | | | 15,097 | | Other | | | 11,009 | | | | 10,067 | | | | 9,518 | | Total | | $ | 112,761 | | | $ | 134,437 | | | $ | 127,127 | | | Goodwill: | | | | | | | | | | | | | Hospitality | | $ | 6,116 | | | $ | 26,218 | | | $ | 25,899 | | Government | | | 736 | | | | 736 | | | | 736 | | Total | | $ | 6,852 | | | $ | 26,954 | | | $ | 26,635 | | | Depreciation and amortization: | | | | | | | | | | | | | Hospitality | | $ | 2,199 | | | $ | 2,722 | | | $ | 3,384 | | Government | | | 78 | | | | 83 | | | | 79 | | Other | | | 371 | | | | 529 | | | | 373 | | Total | | $ | 2,648 | | | $ | 3,334 | | | $ | 3,836 | | | Capital expenditures including software costs: | | | | | | | | | | | | | Hospitality | | $ | 8,121 | | | $ | 5,585 | | | $ | 1,858 | | Government | | | 20 | | | | 77 | | | | 47 | | Other | | | 144 | | | | 257 | | | | 136 | | Total | | $ | 8,285 | | | $ | 5,919 | | | $ | 2,041 | |
The following table presents revenues by country based on the location of the use of the product or services.
2008 2007 2006
--------- --------- ---------
United States ................ $ 205,202 $ 179,323 $ 181,482
Other Countries .............. 27,485 30,161 27,185
--------- --------- ---------
Total ...................... $ 232,687 $ 209,484 $ 208,667
========= ========= =========
| | | 2011 | | | 2010 | | | 2009 | | | United States | | $ | 198,764 | | | $ | 208,252 | | | $ | 192,420 | | | Other Countries | | | 30,659 | | | | 26,770 | | | | 23,479 | | | Total | | $ | 229,423 | | | $ | 235,022 | | | $ | 215,899 | |
The following table presents assets by country based on the location of the asset.
2008 2007 2006
--------- --------- ---------
United States ................ $ 142,461 $ 134,766 $ 134,799
Other Countries .............. 11,527 11,752 7,459
--------- --------- ---------
Total ...................... $ 153,988 $ 146,518 $ 143,258
========= ========= =========
| | | 2011 | | | 2010 | | | 2009 | | | United States | | $ | 100,310 | | | $ | 123,537 | | | $ | 119,689 | | | Other Countries | | | 12,451 | | | | 10,900 | | | | 7,438 | | | Total | | $ | 112,761 | | | $ | 134,437 | | | $ | 127,127 | |
Customers comprising 10% or more of the Company'sCompany’s total revenues are summarized as follows:
2008 2007 2006
------- ------- -------
Hospitality segment:
McDonald's Corporation ... 24% 25% 26%
Yum! Brands, Inc. ........ 16% 15% 14%
Government segment:
U.S. Department of Defense 32% 31% 30%
All Others ................. 28% 29% 30%
--- --- ---
100% 100% 100%
=== === ===
| | | 2011 | | | 2010 | | | 2009 | | Hospitality segment: | | | | | | | �� | | | McDonald’s Corporation | | | 29 | % | | | 35 | % | | | 26 | % | Yum! Brands, Inc. | | | 13 | % | | | 11 | % | | | 13 | % | Government segment: | | | | | | | | | | | | | U.S. Department of Defense | | | 30 | % | | | 28 | % | | | 36 | % | | All Others | | | 28 | % | | | 26 | % | | | 25 | % | | | | | 100 | % | | | 100 | % | | | 100 | % |
Note 12 --— Fair Value of Financial Instruments
As of January 1, 2008, the Company adopted SFAS No. 157, which defines fair
value, establishes a framework for measuring fair value as required by other
accounting pronouncements and expands disclosure requirements. In February 2008,
the FASB issued FSP No. FAS 157-2, which delays the effective date of SFAS No.
157 as it applies to non-financial assets and liabilities that are not required
to be measured
The Company’s financial instruments have been recorded at fair value on a recurring (at least annual) basis.
Non-recurring nonfinancial assetsusing available market information and nonfinancial liabilities for which we have
not applied the provisions of SFAS 157 include those measured atvaluation techniques. The fair value in
goodwill impairment testing, indefinite lived intangible assets measured at fair
value for impairment testing, asset retirement obligations initially measured at
fair value, and those initially measured at fair value in a business
combination. As a resulthierarchy is based upon three levels of the delay, SFAS No. 157 will be applied to the
Company's non-financial assets and liabilities as of January 1, 2009.
SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to
valuation used to measure fair value. This hierarchy prioritizes the inputs into
three broad levels as follows. input, which are: Level 1 inputs are− quoted prices (unadjusted) in active markets for identical assets or liabilities. liabilities (observable) Level 2 − inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets andor liabilities, quoted prices in activeinactive markets, or other inputs that are observable market data for the asset or liability, either directly or indirectly through
market corroboration, for substantiallyessentially the full term of the financial
instrument. asset or liability (observable)
Level 3 inputs are− unobservable inputs based on our own assumptions
usedthat are supported by little or no market activity, but are significant to measure assets and liabilities at fair value. A financial asset or
liability's classification within the hierarchy is determined based on the
lowest level input that is significant todetermining the fair value measurement.
of the asset or liability (unobservable) The Company'sCompany’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, debt instruments, and an interest rate swap agreement. For cash and cash equivalents, trade receivables and trade payables, the carrying amounts of these financial instruments as of December 31, 20082011 and 20072010 were considered representative of their fair values. The estimated fair valuesvalue of the Company'sCompany’s long-term debt at December 31, 20082011 and 2007 were2010 was based on variable and fixed interest rates at December 31, 20082011 and 2007,2010, respectively, for new issues with similar remaining maturities and approximates the respective carrying values at December 31, 20082011 and 2007.
2010.
The Company'sCompany’s interest rate swap agreement is valued at the amount the Company would have expected to pay to terminate the agreement. The fair value determination was based upon the present value of expected future cash flows using the LIBOR rate, plus an applicable interest rate spread, a technique classified within Level 2 of the valuation hierarchy described above. At December 31, 20082011 and 20072010, the fair market value of the Company'sCompany’s interest rate swap included a realizedcumulative unrealized loss of $388,000$26,000 and $154,000,$127,000, respectively, which is recorded as a component of interest expense within the consolidated statements of operations and as a component of accrued expenses within the consolidated balance sheets. The deferred compensation assets and liabilities primarily relate to the Company’s Deferred Compensation Plan , which allows for pre-tax salary deferrals for certain key employees (see note 9). Changes in the fair value of the deferred compensation liabilities are derived using quoted prices in active markets of the asset selections made by the participants. The deferred compensation liabilities are classified within Level 2, as defined under U.S. GAAP, because their inputs are derived principally from observable market data by correlation to the hypothetical investments. The Company holds insurance investments to partially offset the Company’s liabilities under the Deferred Compensation Plan, which are recorded at fair value each period using the cash surrender value of the insurance investments.
Note 13 --— Related Party Transactions
The Company leases its corporate wellness facility to related parties at a current rate of $9,775 per month. The Company receives a complimentary membership to this facility which is provided to all employees. During 2008,
2007,2011, 2010, and 20062009 the Company received rental income amounting to $117,300 for the lease of the facility in each year. All lease payments are current at December
31, 2008.
The Company also leases office space from an officer of one of its
subsidiaries. The lease is for a period of five years beginning on October 1,
2004 at an annual rate of $360,000. In 2008, 2007, and 2006, the Company paid
$360,000 to the officer under this lease.
Note 14 --— Selected Quarterly Financial Data (Unaudited)
Quarter ended
(in thousands except per share amounts)
----------------------------------------------------------------------
2008 March 31 June 30 September 30 December 31
---- ---------- --------- ------------ -----------
Net revenues $ 52,107 $ 57,234 $ 57,967 $ 65,379
Gross margin 12,359 14,032 14,561 16,498
Net income (loss) (744) 674 828 1,459
Basic earnings (loss) per share (.05) .05 .06 .10
Diluted earnings (loss) per share (.05) .05 .06 .10
Quarter ended
(in thousands except per share amounts)
--------------------------------------------------------------------------
2007 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Net revenues $ 47,836 $ 49,872 $ 51,577 $ 60,199
Gross margin 10,808 12,635 12,402 16,063
Net income (loss) (1,308) (1,021) (862) 483
Basic earnings (loss) per share (.09) (.07) (.06) .03
Diluted earnings (loss) per share (.09) (.07) (.06) .03
| | | Quarter ended | | | | | (in thousands except per share amounts) | | | 2011 | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Net revenues | | $ | 54,176 | | | $ | 56,442 | | | $ | 58,689 | | | $ | 60,116 | | | Gross margin | | | 14,488 | | | | 6,861 | | | | 15,084 | | | | 14,029 | | | Income (loss) from continuing operations, net of tax | | | 741 | | | | (17,526 | ) | | | 1,597 | | | | 1,828 | | | Loss on discontinued operations (net of tax) | | | (337 | ) | | | (322 | ) | | | (394 | ) | | | (1,119 | ) | | Net income (loss) | | | 404 | | | | (17,848 | ) | | | 1,203 | | | | 709 | | | Diluted Earnings per Share: | | | | | | | | | | | | | | | | | Income (loss) from continuing operations | | | .05 | | | | (1.17 | ) | | | .11 | | | | .12 | | Loss from discontinued operations | | | (.02 | ) | | | (.02 | ) | | | (.04 | ) | | | (.07 | ) | Net income (loss) | | | .03 | | | | (1.19 | ) | | | .07 | | | | .05 | |
| | | Quarter ended | | | | | (in thousands except per share amounts) | | | 2010 | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Net revenues | | $ | 56,812 | | | $ | 54,526 | | | $ | 60,227 | | | $ | 63,457 | | | Gross margin | | | 13,950 | | | | 14,619 | | | | 16,032 | | | | 17,264 | | | Income from continuing operations, net of tax | | | 922 | | | | 1,198 | | | | 1,167 | | | | 1,680 | | | Loss on discontinued operations (net of tax) | | | (340 | ) | | | (349 | ) | | | (629 | ) | | | (526 | ) | | Net income | | | 582 | | | | 849 | | | | 538 | | | | 1,154 | | | Diluted Earnings per Share: | | | | | | | | | | | | | | | | | Income (loss) from continuing operations | | | .06 | | | | .08 | | | | .08 | | | | .11 | | Loss from discontinued operations | | | (.02 | ) | | | (.02 | ) | | | (.04 | ) | | | (.04 | ) | Net income | | | .04 | | | | .06 | | | | .04 | | | | .07 | |
Note 15 — Subsequent Events
Agreement to Sell Logistics Management Business:
On January 12, 2012, PAR Technology Corporation completed its previously announced disposition of substantially all of the assets of the PAR Logistics Management Systems Corporation (LMS) to ORBCOMM Inc. (“ORBCOMM”).
The consideration payable by ORBCOMM at the closing with respect to substantially all the assets of LMS aggregates $6,000,000 in cash and common stock (the Closing Consideration).
In addition to the Closing Consideration, contingent consideration of up to $3,950,000 is payable by ORBCOMM to PAR post-closing in cash, ORBCOMM common stock or a combination of cash and ORBCOMM common stock, at ORBCOMM’s option. Up to $3,000,000 of the contingent consideration will be payable based on LMS achieving certain agreed-upon new subscriber targets for calendar year 2012 and up to $950,000 of the contingent consideration will be payable based on LMS achieving agreed-upon sales targets for calendar years 2012 through 2014.
If paid in stock, the number of ORBCOMM shares to be issued to PAR will be based upon the average 20-day closing price of ORBCOMM common stock prior to the payment due date for such contingent consideration.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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
March 16, 2009 John W. Sammon, Jr.
------------------------------------
John W. Sammon, Jr.
Chairman of Board and President
-------------------------
| PAR TECHNOLOGY CORPORATION | | | | April 4, 2012 | /s/Paul B. Domorski | | Paul B. Domorski | | Chairman & Chief Executive Officer |
_________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
- -------------------------------------------------------------------------------
Signatures Title Date
- -------------------------------------------------------------------------------
John W. Sammon, Jr.
- -------------------
John W. Sammon, Jr. Chairman
/s/Paul B. Domorski | | | | Paul B. Domorski | President & Chief Executive Officer | April 4, 2012 | | | | | /s/ Sangwoo Ahn | | | | Sangwoo Ahn | Director | April 4, 2012 | | | | | /s/ James A. Simms | | | | James A. Simms | Director | April 4, 2012 | | | | | /s/ Paul D. Nielsen | | | | Paul D. Nielsen | Director | April 4, 2012 | | | | | /s/ Kevin R. Jost | | | | Kevin R. Jost | Director | April 4, 2012 | | | | /s/ Ronald J. Casciano | | | | Ronald J. Casciano | Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer (Principal Accounting Officer) | April 4, 2012 |
List of the Board and March 16, 2009
President (Principal
Executive Officer)
and Director
Charles A. Constantino
- ----------------------
Charles A. Constantino Executive Vice President March 16, 2009
and Director
Sangwoo Ahn
- ----------------------
Sangwoo Ahn Director March 16, 2009
James A. Simms
- ----------------------
James A. Simms Director March 16, 2009
Paul D. Nielsen
- ----------------------
Paul D. Nielsen Director March 16, 2009
Kevin R. Jost
- ----------------------
Kevin R. Jost Director March 16, 2009
Ronald J. Casciano
- ------------------
Ronald J. Casciano Vice President, Chief Financial March 16, 2009
Officer and Treasurer
Exhibits
List of Exhibits
| Exhibit No. | Description of Instrument
- ----------- -------------------------
| | | 3.1 | Certificate of Incorporation, as amended | Filed as Exhibit 3(i) to the quarterly report on Form 10Q for the period ended June 30, 2006, of PAR Technology Corporation and incorporated herein by reference. | | | | | 3.3 | By-laws, as amended. | Filed as Exhibit 3.1 to Registration Statement on Form S-2 (Registration
No. 333-04077)of PAR Technology
Corporation incorporated herein by
reference.
4 Specimen Certificate representing the Filed as Exhibit 3.1 to Registration
Common Stock. Statement on Form S-2 (Registration
No. 333-04077) of PAR Technology Corporation incorporated herein by reference. | | | | | 4 | Specimen Certificate representing the Common Stock. | Filed as Exhibit 3.1 to Registration Statement on Form S-2 (Registration No. 333-04077) of PAR Technology Corporation incorporated herein by reference. | | | | | 10.1 | Letter of Agreement with Sandman Sanmina– SCI Corporation | Filed as Exhibit 10.1 to Form S-3/A - SCI Corporation (Registration No. 333-102197) of PAR Technology Corporation incor-
porated herein by reference.
10.2 Asset Purchase Agreement dated October 27, Filed as Exhibit 10.1 to the current
2006. By and among PAR Technology report on Form 8K dated November 8,
Corporation, Par-Siva Corporation and 2006 of PAR Technology Corporation
SIVA Corporation. and incorporated herein by reference.
10.3 | | | | | 10.2 | JP Morgan term loan. | Filed as Exhibit 10.3 to Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.
10.4 | | | | | 10.3 | 2005 Equity Incentive Plan of PAR Technology Corporation | Filed as Exhibit 4.2 to Form S-8 Technology Corporation (Registration No. 333-137647) of PAR Technology Corporation and incorporated herein by reference.
10.5 | | | | | 10.4 | Form of Stock Option Award Agreement | Filed as Exhibit 4.3 to Form S-8 (Registration No. 333-137647) of PAR Technology Corporation and incorporated herein by reference.
10.6 | | | | | 10.5 | Form of Restricted Stock Award Agreement | Filed as Exhibit 4.4 to Form S-8 (Registration No. 333-137647) of PAR Technology Corporation and incorporated herein by reference. |
List of Exhibits
(Continued)
Exhibit No. Description of Instrument
- ----------- -------------------------
10.7 June 2007 amendment to bank line of credit Filed as Exhibit 10.7 to Form 10-K
agreement - JP Morgan Chase for the year ended December 31, 2007
incorporated herein by reference.
10.8 February 2008 amendment to bank line of Filed as Exhibit 10.7 to Form 10-K
credit agreement - JP Morgan Chase for the year ended December 31, 2007
incorporated herein by reference.
10.9 June 2007 amendment to bank line of Filed as Exhibit 10.7 to Form 10-K
credit agreement - NBT Bank for the year ended December 31, 2007
incorporated herein by reference.
10.10 January 2008 amendment to bank line of Filed as Exhibit 10.7 to Form 10-K
credit agreement - NBT Bank for the year ended December 31, 2007
incorporated herein by reference.
10.11 January 2008 amendment to bank line of Filed as Exhibit 10.7 to Form 10-K
credit agreement - NBT Bank for the year ended December 31, 2007
herein by reference.
10.12 Credit Agreement with JP Morgan Chase Filed as Exhibit 10.1 to Form 8-K
dated June 16, 2008 of PAR Technology
Corporation and incorporated herein by
reference.
10.13 | | | | 10.6 | Pledge and Security Agreement with JP Morgan Chase | Filed as Exhibit 10.2 to Form 8-K dated June 16, 2008 of PAR Technology Corporation and incorporated herein by reference. | | | | | 10.7 | Employment Agreement Between ParTech, Inc. and A. Edwin Soladay | Filed as Exhibit 10(iii)(A) to Form 10-Q for the quarter ended March 31, 2009 and Incorporated herein by reference. |
List of Exhibits (Continued)
| Exhibit No. | Description of Instrument | | | 10.8 | Employment Agreement Between PAR Technology Corporation and Ronald J. Casciano. | Filed as Exhibit 10(iii)(A) to Form 10-K for the year ended December 31, 2010 and Incorporated herein by reference. | | | | | 10.9 | April 2011 – Employment Agreement Between PAR Technology Corporation and Paul B. Domorski. | Filed as an Exhibit 10(iii)(A) to Form 10-Q for the quarter ended June 30, 2011 and incorporated herein by reference. | | | | | 10.10 | June 2011 – Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A; NBT Bank, N.A.; Alliance Bank, N.A. | Filed as an Exhibit 10.1 to Form 8-K dated June 6, 2011 of PAR Technology Corporation and incorporated herein by reference. | | | | | 10.11 | June 2011 - Amendment No. 1 to Pledge and Security Agreement with JPMorgan Chase Bank, N.A. | Filed as an Exhibit 10.2 to Form 8-K dated June 6, 2011 of PAR Technology Corporation and incorporated herein by reference. | | | | | 10.12 | December 2011 – Waiver and Consent among PAR Technology Corporation, JPMorgan Chase Bank, N.A; NBT Bank, N.A.; Alliance Bank, N.A. | | | | | | 10.13 *** | December 2011 - Asset Purchase and Sale Agreement by and between PAR Technology Corporation , PAR Government Systems Corporation, PAR Logistics Management Systems Corporation and ORBCOMM Inc. and PLMS Acquisition, LLC. | | | | | | 22 | Subsidiaries of the registrant | | | | | | 23 | Consent of Independent Registered Public Accounting Firm | | | | | | 31.1 | Certification of Chairman of the Board and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | 31.2 | Certification of Vice President, Chief Financial Officer,Treasurer and TreasurerChief Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | 32.1 | Certification of Chairman of the Board and Chief Executive Officer and Vice President, Chief Financial Officer, Treasurer and TreasurerChief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
2002. | | | | | *** | Portions of this Exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the Securities and Exchange Commission. | |
83
|