SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2001. Commission File Number 1-9720
OR
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number __________
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, NY 13413-4991
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 738-0600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of registrant's common stock, as of April
30, 2001 - 7,723,005 shares.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART 1
FINANCIAL INFORMATION
Item Number
Item 1. Financial Statements
- Consolidated Statement of Income for
the Three Months Ended March 31, 2001
and 2000
- Consolidated Statement of Comprehensive Income for
the Three Months Ended March 31, 2001 and 2000
- Consolidated Balance Sheet at
March 31, 2001 and December 31, 2000
- Consolidated Statement of Cash Flows
for the Three Months Ended
March 31, 2001 and 2000
- Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
Item 1.
Financial Statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the Three Months
Ended March 31,
------------------------
2001 2000
---------- ----------
Net revenues:
Product ....................................... $ 12,177 $ 6,511
Service ....................................... 7,882 6,688
Contract ...................................... 7,156 6,052
-------- --------
27,215 19,251
-------- --------
Costs of sales:
Product ....................................... 7,967 5,308
Service ....................................... 6,311 6,681
Contract ...................................... 6,749 5,695
-------- --------
21,027 17,684
-------- --------
Gross margin ............................ 6,188 1,567
-------- --------
Operating expenses:
Selling, general and administrative ........... 4,037 6,469
Research and development ...................... 2,045 2,102
-------- --------
6,082 8,571
-------- --------
Income (loss) from operations ...................... 106 (7,004)
Other income (expense), net ........................ 338 (11)
Interest expense ................................... (355) (124)
-------- --------
Income (loss) before provision for income taxes .... 89 (7,139)
Provision (benefit) for income taxes ............... 40 (2,616)
-------- --------
Net income (loss) .................................. $ 49 $ (4,523)
======== ========
Basic and Diluted earnings (loss)
per common share ................................... $ .01 $ (.56)
======== ========
Weighted average shares outstanding
Diluted ....................................... 7,724 8,034
======== ========
Basic ......................................... 7,723 8,034
======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
For the Three Months
Ended March 31,
------------------------
2001 2000
---------- ----------
Net income (loss) .................................... $ 49 $(4,523)
Other comprehensive loss net of tax:
Foreign currency translation adjustments ........ (363) (35)
------- -------
Comprehensive loss ................................... $ (314) $(4,558)
======= =======
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
March 31,
2001 December 31,
(Unaudited) 2000
Assets ---------- ----------
Current Assets:
Cash ............................................ $ 2,423 $ 1,199
Accounts receivable-net ......................... 27,962 30,400
Inventories ..................................... 24,610 26,776
Income tax refund claims ........................ 140 56
Deferred income taxes ........................... 4,202 4,255
Other current assets ............................ 2,308 1,868
-------- --------
Total current assets ........................ 61,645 64,554
Property, plant and equipment - net .................. 9,748 10,098
Deferred income taxes ................................ 6,216 6,321
Other assets ......................................... 4,063 3,963
-------- --------
$ 81,672 $ 84,936
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ................................... $ 13,382 $ 13,856
Accounts payable ................................ 6,259 8,800
Accrued salaries and benefits ................... 3,937 4,208
Accrued expenses ................................ 1,700 2,088
Deferred service revenue ........................ 7,567 6,829
-------- --------
Total current liabilities ................... 32,845 35,781
-------- --------
Long-term debt ....................................... 2,309 2,323
-------- --------
Shareholders' Equity:
Common stock, $.02 par value,
19,000,000 shares authorized;
9,516,711 shares issued
7,723,005 outstanding ......................... 190 190
Preferred stock, $.02 par value,
1,000,000 shares authorized ................... -- --
Capital in excess of par value .................. 28,071 28,071
Retained earnings ............................... 28,792 28,743
Accumulated comprehensive loss .................. (1,566) (1,203)
Treasury stock, at cost, 1,793,706 shares ..... (8,969) (8,969)
-------- --------
Total shareholders' equity .................. 46,518 46,832
-------- --------
$ 81,672 $ 84,936
======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Three Months
Ended March 31,
----------------------
2001 2000
---------- ----------
Cash flows from operating activities:
Net income (loss) ......................................... $ 49 $ (4,523)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................... 714 912
Provision for obsolete inventory ........................ 441 1,135
Deferred income taxes ................................... 158 (192)
Translation adjustments ................................. (363) (35)
Increase (decrease) from changes in:
Accounts receivable-net ............................... 2,438 10,318
Inventories ........................................... 1,725 (5,131)
Income tax refund claims .............................. (84) (2,140)
Other current assets .................................. (440) (521)
Accounts payable ...................................... (2,541) (4,934)
Accrued salaries and benefits ......................... (271) (323)
Accrued expenses ...................................... (388) (721)
Deferred service revenue .............................. 738 1,326
-------- --------
Net cash provided (used) by operating activities ..... 2,176 (4,829)
-------- --------
Cash flows from investing activities
Capital expenditures .................................... (151) (113)
Capitalization of software costs ........................ (313) (317)
-------- --------
Net cash used by investing activities ................ (464) (430)
-------- --------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit agreements (474) 6,192
Payments of long-term debt .............................. (14) --
Acquisition of treasury stock ........................... -- (561)
-------- --------
Net cash provided (used) by financing activities .... (488) 5,631
-------- --------
Net increase in cash and cash equivalents ................ 1,224 372
Cash and cash equivalents at beginning of year ........... 1,199 953
-------- --------
Cash and cash equivalents at end of period ............... $ 2,423 $ 1,325
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................................ $ 315 $ 107
Income taxes paid, net of refunds ....................... 17 (255)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The statements for the three months ended March 31, 2001 and 2000 are
unaudited; in the opinion of the Company such unaudited statements include
all adjustments (which comprise only normal recurring accruals) necessary
for a fair presentation of the results for such periods. The results of
operations for the three months ended March 31, 2001 are not necessarily
indicative of the results of operations to be expected for the year ending
December 31, 2001. The consolidated financial statements and notes thereto
should be read in conjunction with the financial statements and notes for
the years ended in December 31, 2000 and 1999 included in the Company's
December 31, 2000 Annual Report to the Securities and Exchange Commission
on Form 10-K.
2. Inventories are used in the manufacture of Point-Of-Sale systems and other
commercial products. The components of inventory, net of related reserves,
consist of the following:
(In Thousands)
------------
March 31, December 31,
2001 2000
---------- ----------
Finished goods .......... $ 5,442 $ 6,425
Work in process ......... 2,262 2,956
Component parts ......... 4,355 5,612
Service parts ........... 12,551 11,783
------- -------
$24,610 $26,776
======= =======
At March 31, 2001 and December 31, 2000, the Company had recorded reserves
for obsolete inventory of $4,380,000 and $4,219,000, respectively.
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products
and services.
In 2001, the Company has four reportable segments, Restaurant, Industrial,
Government and Vision. In previous years, the Restaurant and Industrial
segments were combined in the Transaction processing segment. The
Restaurant segment offers integrated solutions to the restaurant 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 Industrial
segment, for Fortune 500 industrial companies, designs and implements
complex integrated transaction processing solutions incorporating its data
collection and management software that provide real-time connectivity with
multiple host computers, diverse legacy applications, "best-of-breed"
software and data input hardware technologies. The Government segment
designs and implements advanced technology computer software systems
primarily for military and intelligence agency applications. It provides
services for operating and maintaining certain U.S. Government-owned test
sites, and for planning, executing and evaluating experiments involving new
or advanced radar systems. The Vision segment was involved in the
manufacture and sale of image processing systems for the food-processing
industry. This segment was disposed of in 2000. Inter-segment sales and
transfers are not material.
Information as to the Company's operations in these four segments is set
forth below:
Quarter ended March 31,
(In Thousands)
-----------------------
2001 2000
-----------------------
Revenues:
Restaurant .............. $ 19,239 $ 11,686
Industrial .............. 800 1,259
Government .............. 7,156 6,052
Vision .................. 20 254
-------- --------
Total ............. $ 27,215 $ 19,251
======== ========
Income (loss) from operations:
Restaurant .............. $ 45 $ (6,709)
Industrial .............. (243) (149)
Government .............. 318 79
Vision .................. (14) (225)
-------- --------
106 (7,004)
Other income (expense), net .. 338 (11)
Interest expense ............. (355) (124)
-------- --------
Income (loss) before provision
for income taxes ........ $ 89 $ (7,139)
======== ========
Depreciation and amortization:
Restaurant .............. $ 542 $ 621
Industrial .............. 16 75
Government .............. 25 34
Vision .................. -- 8
Corporate ............... 131 174
-------- --------
Total ............. $ 714 $ 912
======== ========
Capital expenditures:
Restaurant .............. $ 93 $ --
Industrial .............. 2 --
Government .............. 30 61
Vision .................. -- 3
Corporate ............... 26 49
-------- --------
Total ............. $ 151 $ 113
======== ========
The following table presents revenues by geographic area based on the
location of the use of the product or services.
Quarter ended March 31,
(In Thousands)
-----------------------
2001 2000
-----------------------
United States ................ $ 23,086 $ 16,483
Other Countries .............. 4,129 2,768
-------- --------
Total .................. $ 27,215 $ 19,251
======== ========
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
Quarter ended March 31,
-----------------------
2001 2000
-------- -------
Restaurant segment:
McDonald's Corporation ............. 30% 22%
Tricon Corporation ................. 23% 22%
Government segment:
Department of Defense .............. 26% 31%
All Others ............................. 21% 25%
---- ----
100% 100%
==== ====
March 31, December 31,
2001 2000
--------- -----------
Identifiable assets:
Restaurant ........................ $ 68,663 $ 74,635
Industrial ........................ 2,202 2,322
Government ........................ 5,228 5,200
Vision ............................ 416 468
Corporate ......................... 5,163 2,311
-------- --------
Total ....................... $ 81,672 $ 84,936
======== ========
The following table presents property by geographic area based on the
location of the asset.
March 31, December 31,
2001 2000
--------- -----------
United States .......................... $ 74,725 $ 76,203
Other Countries ........................ 6,947 8,733
-------- --------
Total .................. $ 81,672 $ 84,936
======== ========
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2001
COMPARED WITH
QUARTER ENDED MARCH 31, 2000
The Company reported revenues of $27.2 million for the first quarter ended
2001, an increase of 41% from the $19.3 million reported in 2000. The Company
recorded net income of $49,000 or diluted earnings per share of $.01 for 2001.
This compares to net loss of $4.5 million or diluted loss per share of $.56 for
2000.
Product revenues were $12.2 million in 2001, an increase of 87% from the
$6.5 million recorded in 2000. This substantial increase is due to dramatically
improved sales in the Company's Restaurant business as evidenced by increased
capital spending in the restaurant markets. Sales increased domestically to
McDonald's, Tricon, Dealers and Value-Added Resellers. Internationally, product
sales grew 68% primarily due to McDonald's and various new accounts.
Customer service revenues were $7.9 million in 2001, an increase of 18%
from the $6.7 million in 2000. This increase was the result of higher
installation revenue, which is directly related to the increase in product
revenue discussed above. Additionally, field service revenue increased as a
result of new contracts and certain price increases. The Company's service
offerings include installation, twenty-four hour help desk support and various
field and on-site service options.
Contract revenues were $7.2 million in 2001, an increase of 18% when
compared to the $6.1 million recorded in the same period in 2000. This increase
is due primarily to the startup of recently awarded Navy contracts to operate
and maintain communications in support of Fleet Operations. The Company has
become a recognized leader in the conversion of military communications
facilities to contractor operations. The U.S. government is continuing to
emphasize the outsourcing of military facility operations and, management
anticipates further growth in this segment of our government business. The
increase is also attributable to a floodplain mapping contract with the New York
State Department of Environment Conservation.
Product margins were 35% for 2001 compared to 18% for the same period in
2000. This improvement is attributable to greater absorption of fixed
manufacturing costs on higher product volume and to a more favorable product
mix.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2001
COMPARED WITH
QUARTER ENDED MARCH 31, 2000
Customer service margins were 20% in 2001 compared to .1% for the same
period in 2000. This margin improvement was the result of improved efficiencies
and certain price increases. The Company is beginning to realize the benefits of
its investment in its recently installed service management system.
Contract margins were 6% in 2001 virtually unchanged from the same period
in 2000. Margins on the Company's government contract business typically run
between 5% and 6%.
Selling, general and administrative expenses were $4 million in 2001 versus
$6.5 million for the same period in 2000, a decrease of 38%. This decline was
the result of recent cost reductions made by the Company. Additionally, the
first quarter of 2000 included a charge relating to a one-time early retirement
program offered to eligible employees.
Research and development expenses were $2 million in 2001, a decrease of 3%
from the $2.1 million recorded for the same period in 2000. The Company is
maintaining its investment in restaurant products including its iN.fusion
software suite and in its manufacturing/warehouse business. Research and
development costs attributable to government contracts are included in cost of
contract revenues.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. The average amount of
outstanding borrowings was higher during 2001 than in 2000.
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations and
lines of credit with various banks. In the first quarter of 2001, the Company
generated cash flow from operating activities of $2.2 million compared to cash
used by operating activities of $4.8 million in 2000. Improved collections, a
reduction in inventory and cost cutting measures taken by the Company in the
fourth quarter of 2000 all contributed to the positive cash flow in the first
quarter of 2001. In 2000, cash flow was adversely affected by a large operating
loss, an increase of inventory, and in the timing of vendor payments.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2001
COMPARED WITH
QUARTER ENDED MARCH 31, 2000
Cash used in investing activities was $464,000 in 2001 versus $430,000 in
2000. In 2001 capital expenditures were primarily for improvements to its
customer service facility in Boulder, Colorado. In addition, the Company
capitalized $313,000 of software costs. In 2000, capital expenditures were
primarily for renovation to the Company's headquarters facility. Capitalized
software costs amounted to $317,000 in 2000.
Cash used by financing activities was $488,000 in 2001 compared to cash
provided of $5.6 million in 2000. In 2001, the Company reduced its
line-of-credit borrowings by 474,000. In 2000, the Company increased its
line-of-credit borrowings by $6.2 million. In addition, the Company acquired
108,400 shares of treasury stock for $561,000.
The Company currently has line-of-credit agreements, which aggregate $18.5
million with certain banks. At March 31, 2001, $13.4 million was outstanding
under these agreements. The Company believes that it has adequate financial
resources to meet its future liquidity and capital requirements in 2001.
Other Matters
Inflation had little effect on revenues and related costs during the first
quarter of 2001. Management anticipates that margins will be maintained at
acceptable levels to minimize the effects of inflation, if any.
The Company has total interest bearing short-term debt of approximately
$13.4 million at March 31, 2001. Management believes that increases in
short-term rates could have an adverse effect on the Company's 2001 results.
Management believes that foreign currency fluctuations should not have a
significant impact on gross margins due to the low volume of business affected
by foreign currencies.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2001
COMPARED WITH
QUARTER ENDED MARCH 31, 2000
Important Factors Regarding Future Results
Information provided by the Company, including information contained in
this report, or by its spokespersons from time to time may contain
forward-looking statements. Forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, including without limitation, further delays in new product
introduction, risks in technology development and commercialization, risks in
product development and market acceptance of and demand for the Company's
products, risks of downturns in economic conditions generally, and in the quick
service sector of the restaurant market specifically, risks of intellectual
property rights associated with competition and competitive pricing pressures,
risks associated with foreign sales and high customer concentration, and other
risks detailed in the Company's filings with the Securities and Exchange
Commission.
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
11 Statement re computation of per-share earnings
Reports on Form 8-K
None during the first quarter of 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAR TECHNOLOGY CORPORATION
--------------------------
(Registrant)
Date: May 14, 2001
/s/RONALD J. CASCIANO
----------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Exhibit
-------
11 - Statement re computation
of per-share earnings
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
(In Thousands)
For the Three Months
Ended March 31,
------------------
2001 2000
------------------
Diluted Earnings Per Share:
Weighted average shares of
Common Stock outstanding:
Balance outstanding - beginning of period .......... 7,723 8,060
Weighted average shares of
treasury stock acquired ............................ -- (26)
Incremental shares of common stock
outstanding giving effect to stock options ......... 1 --
------ ------
Weighted balance - end of period ................... 7,724 8,034
====== ======
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK
(In Thousands)
For the Three Months
Ended March 31,
------------------
2001 2000
------------------
Basic Earnings Per Share:
Weighted average shares of
Common Stock outstanding:
Balance outstanding - beginning of period .......... 7,723 8,060
Weighted average shares of
treasury stock acquired ............................ -- (26)
------ ------
Weighted balance - end of period ................... 7,723 8,034
====== ======
E-2