May 26, 2006
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Attention: Stephen Krikorian
RE: PAR Technology Corporation Form 10-K for Fiscal Year Ended
December 31, 2005 File No. 001-09720
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Ladies and Gentlemen:
The following is in response to comments contained in the letter dated
April 24, 20069 (the "Letter") from Stephen Krikorian (Accounting Branch Chief)
of the Securities and Exchange Commission (the "SEC") to Dr. John W. Sammon,
Jr., Chairman of the Board, President and Director of the Company. The comments
and responses are set forth below and are keyed to the sequential numbering of
the comments and the headings used in the Letter.
Form 10-K For the Fiscal Year Ended December 31, 2005
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Item 9A: Controls and Procedures
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Comment:
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1. Please tell us whether the Principal Executive Officer and Principal
Financial Officer concluded that your disclosure controls and
procedures were effective based upon the full definition contained in
Rule 13a-15(e) under the Exchange Act. That is, tell us, and confirm
that you will disclose in future filings, whether your officer
concluded that your disclosure controls and procedures are effective
to ensure that information required to be disclosed in the reports
that you file or submit under the Exchange Act is accumulated and
communicated to your management, including your chief executive office
and chief financial officer, to allow timely decisions regarding
required disclosure.
Response:
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The Company's principal executive officer and principal financial
offer each concluded that the Company's disclosure controls and
procedures were effective as of December 31, 2005, based upon the full
definition of such term as contained in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Those officers concluded, as of December 31, 2005, that the
Company's disclosure controls and procedures were effective to ensure
that the information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated
and communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure. This disclosure
has been made in Item 4. Controls and Procedures in its Form 10-Q for
the quarter ended March 31, 2006 filed on May 10, 2006.
Notes to Consolidated Financial Statements
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Note 1 - Summary of Significant Accounting Policies
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Revenue Recognition
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Comment:
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2. Your accounting policy disclosure should clearly indicate how your
units of accounting are determined and valued for multiple-element
arrangements according to Question 1 of SAB Topic 13B. Tell us how you
apply EITF 00-21 and how you allocate the fee to deliverables that are
within the scope of different higher-level literature before you apply
that literature (i.e., separation of SOP 97-2 deliverables from SAB
104 deliverables). Indicate how you determine the fair value of each
of the deliverables in your multiple-element arrangements. Note that
even though you negotiate more than one contract with a customer, the
separate contracts may be viewed as one multiple-element arrangement
when determining the appropriate amount of revenue to be recognized.
Response:
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In response to the Staff's comment, the Company supplementally informs
the Staff that the Company's product revenues consist of sales of its
standard point-of-sale and property management systems of its
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 in its
Hospitality segment. Service revenues include installation and
training, support maintenance for both hardware and software products,
and field and depot repair.
The individual product and service offerings that are included in
arrangements with our customers are priced and sold separately to the
customer (including fees related to software and related components
that are within the scope of higher-level literature). Revenue is
allocated to the various separate elements indicated above based on
the relative fair value of each element, which in the Company's case
is allocated based upon the sales price of each individual element.
(For example, hardware and software are sold separately which is used
to establish fair value, support maintenance is sold at a stated
renewal rate which is used to establish fair value and other service
revenues are sold at a fixed rate which is used to establish fair
value.) Sale prices for the respective elements are fixed and are not
dependent upon the combination of the individual elements that might
be included in a particular sale to a customer.
EITF 00-21 indicates that these separate elements may be viewed as one
multiple-element arrangement, and that the fair value that is
allocated to the individual items is based on the vendor specific
objective evidence (VSOE) of the fair value of the respective
elements. In the Company's case, VSOE is based on separate sales of
each respective element consistently applied.
Comment:
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3. We note from your Business section that your Government contract
subsidiaries develop advanced technology systems and also provide
facilities operation and management services. Explain the timing of
the collection of fees for each element of your arrangements as
compared to the recognition of revenue. Tell us whether the payment
for delivery of services is contingent on the performance of future
service and how you considered paragraph 14 of EITF 00-21.
Response:
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In response to the Staff's comment, the Company supplementally informs
the Staff that the Company's Government segment provides services
under three different types of contractual arrangements: cost-plus
fixed fee contracts; time-and-material contracts; and fixed-price
contracts. The majority of the Company's contract revenue is derived
from fixed-price contracts. The Company's accounting for each type of
arrangement complies with SEC Staff Accounting Bulletin (SAB) 104.
Under its fixed-priced contracts, the Company provides labor to
support government information/communication facilities. The Company's
obligation is simply to provide the labor to staff these facilities
with no other deliverables or performance obligations. On these
contracts, the amount billed is taken from an agreed-to fixed billing
schedule that is set forth in the contract. This schedule is derived
by dividing the total value of the contract by the number of months
for which the contract endures. Payment terms are generally 30 days
from the date of invoice. Revenue for fixed-price contracts is
recognized as labor hours are delivered which approximates the
straight-line basis over the life of the contract.
Under cost-plus fixed fee contracts, the Company provides labor to
perform various research activities. There are no deliverables or
performance obligations related to these contracts other than the
delivery of labor hours. On these contracts, the amounts billed are
the monthly costs incurred for labor hours delivered, plus the fixed
fee arrangement stated within the contract. Payment terms are
generally 30 days from the date of invoice. 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 fixed
fee.
Under time-and-material contracts, the Company also provides labor to
perform research activities. There are no deliverables or performance
obligations related to these contracts other than the delivery of
labor hours. On time-and-material contracts, the amount billed is
determined based on the labor hours delivered multiplied by a
negotiated labor rate per hour, plus reimbursement for any
pass-through expenditures. Payment terms are generally 30 days from
the date of invoice. 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.
In each of the contract circumstances described above, the payment for
delivery of services is not in any way contingent on the performance
of future services, and revenue is appropriately recognized upon the
delivery of labor hours as indicated above. Based on the above, the
limitations indicated in paragraph 14 of EITF 00-21 are not applicable
in the circumstances.
The Company will revise its disclosures in the "Business" section
prospectively to clarify that its performance obligations with respect
to the services provided by the Government contract subsidiaries
includes solely the delivery of labor hours.
In connection with our response, the Company acknowledges that:
o the Company is responsible for the adequacy and accuracy of the
disclosure in the filing;
o staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with respect to the filing; and
o the Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Yours truly,
/s/Ronald J. Casciano
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Ronald J. Casciano
VP, C.F.O. & Treasurer
(315) 738-0600 Ext. 273