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 June 30, 2007. 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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares outstanding of registrant's common stock, as of July
31, 2007 - 14,364,680 shares.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART I
FINANCIAL INFORMATION
Item Number
Item 1. Financial Statements (unaudited)
- Consolidated Statements of Operations for
the three and six months ended June 30, 2007 and 2006
- Consolidated Statements of Comprehensive Income (Loss)
for the three and six months ended June 30, 2007 and 2006
- Consolidated Balance Sheets at
June 30, 2007 and December 31, 2006
- Consolidated Statements of Cash Flows
for the six months ended June 30, 2007 and 2006
- Notes to Unaudited Interim Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II
OTHER INFORMATION
Item 1A. Risk Factors
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
Exhibit Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
For the three months For the six months
ended June 30, ended June 30,
---------------------- ----------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net revenues:
Product ...................................... $ 18,320 $ 22,710 $ 35,026 $ 45,730
Service ...................................... 16,100 14,886 31,629 28,631
Contract ..................................... 15,452 15,747 31,053 31,579
--------- --------- --------- ---------
49,872 53,343 97,708 105,940
--------- --------- --------- ---------
Costs of sales:
Product ...................................... 10,699 13,074 21,007 25,872
Service ...................................... 11,886 10,840 24,052 21,550
Contract ..................................... 14,652 14,518 29,206 29,244
--------- --------- --------- ---------
37,237 38,432 74,265 76,666
--------- --------- --------- ---------
Gross margin ........................... 12,635 14,911 23,443 29,274
--------- --------- --------- ---------
Operating expenses:
Selling, general and administrative .......... 9,186 8,194 17,895 16,269
Research and development ..................... 4,387 2,836 8,201 5,735
Amortization of identifiable intangible assets 394 308 784 615
--------- --------- --------- ---------
13,967 11,338 26,880 22,619
--------- --------- --------- ---------
Operating income (loss) ........................... (1,332) 3,573 (3,437) 6,655
Other income, net ................................. 154 218 394 375
Interest expense .................................. (237) (167) (459) (252)
--------- --------- --------- ---------
Income (loss) before provision for income taxes ... (1,415) 3,624 (3,502) 6,778
Benefit (provision) for income taxes .............. 394 (1,286) 1,173 (2,428)
--------- --------- --------- ---------
Net income (loss) ................................. $ (1,021) $ 2,338 $ (2,329) $ 4,350
========= ========= ========= =========
Earnings (loss) per share
Basic ........................................ $ (.07) $ .16 $ (.16) $ .31
Diluted ...................................... $ (.07) $ .16 $ (.16) $ .29
Weighted average shares outstanding
Basic ........................................ 14,348 14,173 14,334 14,162
========= ========= ========= =========
Diluted ...................................... 14,348 14,776 14,334 14,802
========= ========= ========= =========
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
For the three months For the six months
ended June 30, ended June 30,
---------------------- ----------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net income (loss) $ (1,021) $ 2,338 $ (2,329) $ 4,350
Other comprehensive income, net of tax:
Foreign currency translation adjustments 613 50 529 121
--------- --------- --------- ---------
Comprehensive income (loss) $ (408) $ 2,388 $ (1,800) $ 4,471
========= ========= ========= =========
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
June 30, December 31,
2007 2006
--------- ------------
Assets
Cash and cash equivalents ................... $ 3,320 $ 4,273
Accounts receivable-net ..................... 39,567 46,791
Inventories-net ............................. 38,012 35,948
Income tax refunds .......................... 357 1,103
Deferred income taxes ....................... 6,295 5,139
Other current assets ........................ 2,874 2,737
--------- ---------
Total current assets .................... 90,425 95,991
Property, plant and equipment - net .............. 7,277 7,535
Goodwill ......................................... 26,339 25,734
Intangible assets - net .......................... 10,508 10,695
Other assets ..................................... 3,370 2,841
--------- ---------
$ 137,919 $ 142,796
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt ........... $ 542 $ 240
Borrowings under lines of credit ............ 6,043 7,713
Accounts payable ............................ 9,923 12,470
Accrued salaries and benefits ............... 7,978 8,279
Accrued expenses ............................ 2,009 1,861
Customer deposits ........................... 3,969 3,656
Deferred service revenue .................... 12,342 12,254
--------- ---------
Total current liabilities ............... 42,806 46,473
--------- ---------
Long-term debt ................................... 7,357 7,708
--------- ---------
Deferred income taxes ............................ 499 653
--------- ---------
Other long-term liabilities ...................... 2,594 1,879
--------- ---------
Shareholders' Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized ............... -- --
Common stock, $.02 par value,
29,000,000 shares authorized;
16,017,285 and 15,980,486 shares issued;
14,364,530 and 14,327,731outstanding .... 320 320
Capital in excess of par value .............. 38,982 38,602
Retained earnings ........................... 50,830 53,159
Accumulated other comprehensive income (loss) 40 (489)
Treasury stock, at cost, 1,652,755 shares ... (5,509) (5,509)
--------- ---------
Total shareholders' equity .............. 84,663 86,083
--------- ---------
$ 137,919 $ 142,796
========= =========
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the six months
ended June 30,
------------------
2007 2006
-------- -------
Cash flows from operating activities:
Net income (loss) ............................................ $(2,329) $ 4,350
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................... 1,955 1,914
Provision for bad debts ................................. 1,066 286
Provision for obsolete inventory ........................ 663 622
Equity based compensation ............................... 271 138
Deferred income tax ..................................... (1,620) 1,682
Changes in operating assets and liabilities:
Accounts receivable ................................. 6,158 (9,748)
Inventories ......................................... (2,727) (3,259)
Income tax refunds .................................. 746 (25)
Other current assets ................................ (137) (250)
Other assets ........................................ (529) (451)
Accounts payable .................................... (2,574) (231)
Accrued salaries and benefits ....................... (301) (864)
Accrued expenses .................................... 148 (147)
Customer deposits ................................... 313 (738)
Deferred service revenue ............................ 88 (583)
Other long-term liabilities ......................... 715 582
------- -------
Net cash provided by (used in) operating activities 1,906 (6,722)
------- -------
Cash flows from investing activities:
Capital expenditures ......................................... (649) (867)
Capitalization of software costs ............................. (730) (234)
------- -------
Net cash used in investing activities ............. (1,379) (1,101)
------- -------
Cash flows from financing activities:
Net borrowings under line-of-credit agreements ............... (1,670) 4,588
Payments of long-term debt ................................... (49) (38)
Proceeds from the exercise of stock options .................. 109 159
Excess tax benefit of stock option exercises ................. -- 169
Cash dividend in lieu of fractional shares on stock split .... -- (4)
------- -------
Net cash provided by (used in) financing activities (1,610) 4,874
------- -------
Effect of exchange rate changes on cash and cash equivalents ..... 130 35
------- -------
Net decrease in cash and cash equivalents ........................ (953) (2,914)
Cash and cash equivalents at beginning of period ................. 4,273 4,982
------- -------
Cash and cash equivalents at end of period ....................... $ 3,320 $ 2,068
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ 474 $ 230
Income taxes, net of refunds ................................. (331) 548
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited interim consolidated financial statements have
been prepared by PAR Technology Corporation (the "Company" or "PAR") in
accordance with U.S. generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Regulation
S-X pertaining to interim financial statements. Accordingly, these interim
financial statements do not include all information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. 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 and six months ended June 30, 2007 are
not necessarily indicative of the results of operations to be expected for
any future period. The consolidated financial statements and notes thereto
should be read in conjunction with the audited consolidated financial
statements and notes for the year ended December 31, 2006 included in the
Company's December 31, 2006 Annual Report to the Securities and Exchange
Commission on Form 10-K.
The preparation of 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: the
carrying amount of property, plant and equipment, identifiable intangible
assets and goodwill, valuation allowances for receivables, inventories,
deferred income tax assets and equity based compensation. Actual results
could differ from those estimates.
2. On November 2, 2006, PAR Technology Corporation (the "Company") and its
wholly owned subsidiary, Par-Siva Corporation (f/k/a PAR Vision Systems
Corporation) (the "Subsidiary") acquired substantially all of the assets
and assumed certain liabilities of SIVA Corporation ("SIVA"). The purchase
price of the assets was approximately $6.9 million including estimated
acquisition costs of approximately $177,000. The purchase price consisted
of $1.1 million worth of PAR common stock (125,549 shares of PAR 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. SIVA, based in Delray Beach,
Florida, is a developer of software solutions for multi-unit restaurant
operations.
On an unaudited proforma basis, assuming the completed 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):
For the three months For the six months
ended June 30, 2006 ended June 30, 2006
-------------------- -------------------
Net revenues ................ $ 53,935 $ 106,992
Net income .................. $ 1,538 $ 2,680
Earnings per share:
Basic .................... $ .11 $ .19
Diluted .................. $ .10 $ .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.
3. Inventories are primarily used in the manufacture and service of
Hospitality products. The components of inventory, net of related reserves,
consist of the following:
(in thousands)
------------
June 30, December 31,
2007 2006
--------- ---------
Finished goods ............... $ 8,680 $ 9,533
Work in process .............. 1,836 1,667
Component parts .............. 8,650 7,119
Service parts ................ 18,846 17,629
------- -------
$38,012 $35,948
======= =======
At June 30, 2007 and December 31, 2006, the Company had recorded reserves
for shrinkage, excess and obsolete inventory of $3,724,000 and $3,658,000,
respectively.
4. 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 expense over the
vesting period of the awards. Total compensation expense included in
operating expenses for the three and six months ended June 30, 2007 was
$134,000 and $271,000, respectively. Total compensation expense included in
operating expenses for the three and six months ended June 30, 2006 was
$95,000 and $138,000, respectively. At June 30, 2007, the unrecognized
compensation expense related to non-vested option awards was $798,000 (net
of estimated forfeitures).
5. 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 is based upon the weighted average number of
common shares outstanding during the period. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
The following is a reconciliation of the weighted average shares
outstanding for the basic and diluted EPS computations (in thousands,
except per share data):
For the three months
ended June 30,
--------------------
2007 2006
-------- --------
Net income (loss) ................................... $ (1,021) $ 2,338
======== ========
Basic:
Shares outstanding at beginning of period ...... 14,343 14,158
Weighted average shares issued during the period 5 15
-------- --------
Weighted average common shares, basic .......... 14,348 14,173
======== ========
Earnings (loss) per common share, basic ........ $ (.07) $ .16
======== ========
Diluted:
Weighted average common shares, basic .......... 14,348 14,173
Dilutive impact of stock options ............... -- 603
-------- --------
Weighted average common shares, diluted ........ 14,348 14,776
======== ========
Earnings (loss) per common share, diluted ...... $ (.07) $ .16
======== ========
For the six months
ended June 30,
--------------------
2007 2006
-------- --------
Net income (loss) ................................... $ (2,329) $ 4,350
======== ========
Basic:
Shares outstanding at beginning of period ...... 14,310 14,137
Weighted average shares issued during the period 24 25
-------- --------
Weighted average common shares, basic .......... 14,334 14,162
======== ========
Earnings (loss) per common share, basic ........ $ (.16) $ .31
======== ========
Diluted:
Weighted average common shares, basic .......... 14,334 14,162
Dilutive impact of stock options ............... -- 640
-------- --------
Weighted average common shares, diluted ........ 14,334 14,802
======== ========
Earnings (loss) per common share, diluted ...... $ (.16) $ .29
======== ========
For the three and six months ended June 30, 2007, 449,361 and 454,626,
respectively, of incremental shares from the assumed exercise of stock
options and 18,300 restricted stock awards are not included in the
computation of diluted earnings per share because of the anti-dilution
effect on earnings per share.
6. The Company has adopted the provisions of Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48) effective January 1, 2007. The Company's adoption of FIN 48 on
January 1, 2007, did not have a material impact on the consolidated
financial position, results of operations or cash flows.
As of June 30, 2007 and January 1, 2007, the Company had an insignificant
amount of unrecognized tax benefits. The Company's policy is to recognize
interest and penalties on unrecognized tax benefits in income tax expense
in the consolidated statements of operations. The amount of interest and
penalties for the six months ended June 30, 2007 was immaterial. The
Company or one of its subsidiaries files income tax returns in the U.S.
federal jurisdiction and various state and foreign jurisdictions. The
Company is no longer subject to U.S. Federal or state income tax
examinations by tax authorities for tax years prior to 2003.
7. The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products
and services.
The Company has 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 in point-of-sale, back of store and corporate office
applications as well as in the hotel/resort/spa marketplace. This segment
also offers customer support including field service, installation,
twenty-four hour telephone support and depot repair. The Government segment
provides technical expertise in the development of advanced technology
prototype systems primarily for the Department of Defense and other
Governmental agencies. It provides 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.
Information as to the Company's segments is set forth below:
(in thousands)
For the three months For the six months
ended June 30, ended June 30,
---------------------- ----------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Revenues:
Hospitality ............. $ 34,420 $ 37,596 $ 66,655 $ 74,361
Government .............. 15,452 15,747 31,053 31,579
--------- --------- --------- ---------
Total ............. $ 49,872 $ 53,343 $ 97,708 $ 105,940
========= ========= ========= =========
Operating income(loss):
Hospitality ............. $ (1,927) $ 2,513 $ (4,895) $ 4,572
Government .............. 729 1,155 1,729 2,221
Other ................... (134) (95) (271) (138)
--------- --------- --------- ---------
(1,332) 3,573 (3,437) 6,655
Other income, net ............ 154 218 394 375
Interest expense ............. (237) (167) (459) (252)
--------- --------- --------- ---------
Income (loss) before provision
for income taxes ........... $ (1,415) $ 3,624 $ (3,502) $ 6,778
========= ========= ========= =========
Depreciation and amortization:
Hospitality ............. $ 891 $ 797 $ 1,751 $ 1,696
Government .............. 8 10 17 24
Other ................... 91 122 187 194
--------- --------- --------- ---------
Total ............. $ 990 $ 929 $ 1,955 $ 1,914
========= ========= ========= =========
Capital expenditures:
Hospitality ............. $ 286 $ 300 $ 577 $ 688
Government .............. -- -- 32 --
Other ................... 31 119 40 179
--------- --------- --------- ---------
Total ............. $ 317 $ 419 $ 649 $ 867
========= ========= ========= =========
Revenues by geographic area:
United States ........... $ 41,817 $ 45,881 $ 83,503 $ 93,171
Other Countries ......... 8,055 7,462 14,205 12,769
--------- --------- --------- ---------
Total ............. $ 49,872 $ 53,343 $ 97,708 $ 105,940
========= ========= ========= =========
The following table represents identifiable assets by business segment:
(in thousands)
June 30, December 31,
2007 2006
--------- ---------
Identifiable assets:
Hospitality ..................... $117,832 $123,958
Government ...................... 11,667 10,898
Other ........................... 8,420 7,940
-------- --------
Total ............................... $137,919 $142,796
======== ========
The following table presents identifiable assets by geographic area based
on the location of the asset:
(in thousands)
June 30, December 31,
2007 2006
--------- ----------
United States ..................... $125,527 $135,337
Other Countries ................... 12,392 7,459
-------- --------
Total ...................... $137,919 $142,796
======== ========
The following table represents Goodwill by business segment:
(in thousands)
June 30, December 31,
2007 2006
---------- ---------
Hospitality ................... $25,743 $25,138
Government .................... 596 596
------- -------
Total ...................... $26,339 $25,734
======= =======
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
For the three months For the six months
ended June 30, ended June 30,
------------------ -----------------
2007 2006 2007 2006
------- ------- ------ -------
Restaurant Segment:
McDonald's Corporation ..... 27% 27% 26% 26%
YUM! Brands, Inc. .......... 14% 12% 13% 11%
Government Segment:
Department of Defense ...... 31% 30% 32% 30%
All Others ...................... 28% 31% 29% 33%
--- --- --- ---
100% 100% 100% 100%
=== === === ===
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statement
This document contains "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 the Hospitality industry, future information technology
outsourcing opportunities, continued funding by the U.S. Government relating to
the Company's logistics management contracts, 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," or "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, including 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.
Overview
PAR is a leading provider of hospitality technology systems. PAR is also a
leader in supplying engineering services and applied technology to the Federal
Government, and several of its agencies. The primary end markets for our
products and services are:
o Restaurant, hotel/resort/spa, entertainment, and retail industries for
the integrated solution technologies of transaction processing and
data capture for many hospitality enterprises
o the U.S. military and a broad range of Federal, State and Local
government agencies
The Company's hospitality technology products are used in several vertical
markets in a variety of applications by numerous customers. The Company
encounters competition in all of its markets (restaurants, hotels, theaters,
specialty retail, etc.) and competes primarily on the basis of product design,
features/functions, product quality/reliability, price, customer service and
delivery capability. Recently there has been a trend amongst hospitality
technology end users to consolidate their lists of approved vendors to companies
that have a global capability, can achieve high quality and delivery standards,
have multiple product offerings, R&D capability, and be competitive with their
pricing. PAR believes that its global presence as a hospitality technology
provider is a crucial competitive advantage as the Company provides innovative
products/solutions, with a significant delivery capability globally to its
multinational customers like McDonald's, Yum! Brands and Mandarin Oriental Hotel
Group.
In the fourth quarter of 2006 PAR acquired the assets of SIVA Corporation,
a privately held hospitality technology software company and a cutting edge
provider of web-based service oriented architected software applications to
large hospitality organizations in table-service dining and theme park resorts.
Several organizations in hospitality technology believe that the value in
restaurant technology happens at the point-of-sale. PAR fully understands that
to successfully run an enterprise business, a wide range of operations
information is needed--and that information has value to the individual stores,
field, and corporate employees beyond accounting. Par-Siva's applications
collect data at the site and then deliver it wherever it is required throughout
the organization--not as an add-on module, but as an integral component of every
application's design. Today's hospitality organizations are connected like never
before. Par-Siva's offering was designed from the ground up to utilize the
operational knowledge and experience PAR has in hospitality and specifically
restaurants. Par-Siva's applications automate core restaurant processes such as
order entry, food preparation, inventory control, and labor management. The
applications can deliver action prompts and performance scorecards. From
tracking to monitoring equipment performance, PAR- Siva's offerings support
operations.
PAR's business strategy is to provide completely integrated technology
systems, professional services and a high level of lifecycle support in the
markets in which it competes. The Company continues to focus its research and
development efforts to develop cutting-edge products that meet and exceed our
customers' needs and also have high probability for broader market appeal and
success. PAR concentrates upon efficiency in their operations and controlling
costs.
PAR operates two wholly-owned subsidiaries in the Government business
segment, PAR Government Systems Corporation (PGSC) and Rome Research Corporation
(RRC). As a long-standing Government contractor, PAR provides technical
expertise towards the development of advanced technology systems for the U.S.
Department of Defense and other U.S. Governmental agencies. Additionally, PAR
provides information technology and communications support services to the U.S.
Navy, U.S. Air Force and U.S. Army. The Company focuses its computer-based
system design services on providing high quality technical products and
services, ranging from experimental studies to advanced operational systems,
within a variety of areas of research, including radar, image and signal
processing, logistic management systems, and geospatial services and products.
PAR's Government engineering service business provides management and
engineering services that include facilities operation and management. The
Company will continue to execute its strategy of leveraging 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.
PAR's future business plan is to continue to expand the Company's customer
base and solidify their leading position in the industries to which they market
by:
o Developing integrated solutions
o Continuing to grow our global presence in growth markets
o Focusing on customer needs
o Encouraging entrepreneurial corporate attitude and spirit
o Fostering a mindset of controlling cost
o Pursuing strategic acquisitions
Summary
The Company believes they can continue to be successful in their two core
business segments -Hospitality and Government-their focus and industry expertise
will allow this to happen. In addition, PAR will continue its investment
initiatives for the remainder of 2007 in three particular areas: the continued
development of the newly acquired SIVA software platform for table service and
quick serve restaurant chains; increasing their distribution channel for
hospitality markets; and investing in the Company's international business
infrastructure, in particular in the Asia-Pacific Rim region. The Company will
benefit from our efficient supply chain and economies of scale as they leverage
suppliers and distribution operations. PAR remains committed to streamlining
operations and improving return on invested capital through a variety of
initiatives.
Results of Operations -- Three Months Ended June 30, 2007 Compared to Three
Months Ended June 30, 2006
The Company reported revenues of $ 49.9 million for the quarter ended June
30, 2007, a decrease of 6.5 % from the $53.3 million reported for the quarter
ended June 30, 2006. The Company's net loss for the quarter ended June 30, 2007
was $1 million, or $.07 diluted net loss per share, compared to net income of
$2.3 million and $.16 diluted net income per share for the same period in 2006.
Product revenues from the Company's Hospitality segment were $18.3 million
for the quarter ended June 30, 2007, a decrease of 19 % from the $22.7 million
recorded in 2006. This decrease was due to a $4.9 million decline in domestic
product sales due to a continued delay in hardware orders from a major customer
pending the release of that customer's new third party software. The decline was
also due 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 $504,000 increase in international product
sales. This increase was the result of growth in sales to the Company's
restaurant customers in Asia and Canada.
Customer service revenues are also generated by the Company's Hospitality
segment. The Company's service offerings include installation, software
maintenance, training, twenty-four hour help desk support and various depot and
on-site service options. Customer service revenues were $16.1 million for the
quarter ended June 30, 2007, an 8 % increase from $14.9 million reported for the
same period in 2006. The growth is primarily related to the award of a new
service contract with a major customer in October of 2006. This was partially
offset by a decline in installation revenue.
Contract revenues from the Company's Government segment were $15.5 million
for the quarter ended June 30, 2007, a decrease of 2% when compared to the $15.7
million recorded in the same period in 2006. This minor decline was due to the
delay in the start of some new contracts in the information technology
outsourcing area. 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.
Product margins for the quarter ended June 30, 2007 were 41.6 %, a decrease
of 80 basis points from the 42.4% for the quarter ended June 30, 2006. This
decrease in margins was primarily attributable to lower software revenue in 2007
when compared to 2006 and to unfavorable absorption of fixed manufacturing costs
as the result of a decline in production volume.
Customer Service margins were 26.2% for the quarter ended June 30, 2007 a
decrease of 100 basis points compared to 27.2% for the same period in 2006. The
Company experienced a drop in installation margins due to lower than planned
installation revenue as a result of the decrease in product sales. This was
partially offset by an increase in software maintenance margins due to increased
revenue in this area.
Contract margins were 5.2 % for the quarter ended June 30, 2007 a decrease
of 260 basis points compared to 7.8% for the same period in 2006. This decrease
was due to the completion of various higher margin fixed-price contracts. The
most significant components of contract costs in 2007 and 2006 were labor and
fringe benefits. For 2007, labor and fringe benefits were $11.4 million or 78%
of contract costs compared to $11.2 million or 70% of contract costs for the
same period in 2006.
Selling, general and administrative expenses are virtually all related to
the Company's Hospitality segment. Selling, general and administrative expenses
for the quarter ended June 30, 2007 were $9.2 million, an increase of 12% from
the $8.2 million for the same period in 2006. This increase was primarily due to
a rise in sales and marketing expenses associated with restaurant products as
the Company is investing in its international infrastructure and in the
expansion of its dealer channel. The increase is also due to higher bad debt
expense in 2007 versus 2006.
Research and development expenses relate primarily to the Company's
Hospitality segment. Research and development expenses were $4.4 million for the
quarter ended June 30, 2007, an increase of 55% from the $2.8 million recorded
in 2006. The increase was primarily attributable to the Company's continued
research and development in its next generation software products for its
restaurant customers. The platform for this next generation of products was
acquired from SIVA Corporation in the fourth quarter of 2006.
Amortization of identifiable intangible assets was $394,000 for the quarter
ended June 30, 2007 compared to $308,000 for 2006. The increase is primarily due
to the amortization of intangible assets acquired as part of the acquisition of
SIVA Corporation on November 2, 2006.
Other income, net, was $154,000 for the quarter ended June 30, 2007
compared to $218,000 for the same period in 2006. Other income primarily
includes rental income and foreign currency gains and losses. This decrease is
primarily due to lower rental income in 2007 partially offset by an increase in
foreign currency gains in 2007 versus 2006.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. Interest expense was
$237,000 for the quarter ended June 30, 2007 as compared to $167,000 in 2006.
The Company entered into a $6 million term loan in the fourth quarter of 2006 to
finance the SIVA acquisition. This is partially offset by lower average
borrowings and a lower borrowing rate in 2007 under the Company's lines of
credit with banks when compared to 2006.
For the quarter ended June 30, 2007, the Company's effective income tax
rate was 27.8 %, compared to 35.5% in 2006. The variance from the federal
statutory rate in 2007 was primarily due to state income taxes, non-deductible
expenses, and the relative impact of these items in relation to the Company's
expected pre-tax financial performance. The variance from the federal statutory
rate in 2006 was primarily due to state income taxes, offset by benefits related
to export sales as well as tax benefits related to domestic production
activities.
Results of Operations -- Six Months Ended June 30, 2007 Compared to Six Months
Ended June 30, 2006
The Company reported revenues of $97.7 million for the six months ended
June 30, 2007, a decrease of 8% from the $105.9 million reported for the six
months ended June 30, 2006. The Company's net loss for the six months ended June
30, 2007 was $2.3 million, or $.16 diluted net loss per share, compared to net
income of $4.3 million and $.29 diluted net income per share for the same period
in 2006.
Product revenues from the Company's Hospitality segment were $35 million
for the six months ended June 30, 2007, a decrease of 23% from the $45.7 million
recorded in 2006. This decrease was due to a $11.7 million decline in domestic
product sales primarily due to a continued delay in hardware orders from a major
customer pending the release of that customer's new third party software. The
decline was also due 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 $1 million increase in international
product sales. This increase was the result of growth in sales to the Company's
restaurant customers in Asia and Canada.
Customer service revenues are also generated by the Company's Hospitality
segment. The Company's service offerings include installation, software
maintenance, training, twenty-four hour help desk support and various depot and
on-site service options. Customer service revenues were $31.6 million for the
six months ended June 30, 2007, a 10% increase from $28.6 million reported for
the same period in 2006. The growth is primarily related to the award of a new
service contract with a major customer in October of 2006. Also contributing to
the growth was an increase in software maintenance contracts.
Contract revenues from the Company's Government segment were $31 million
for the six months ended June 30, 2007, a decrease of 2 % when compared to the
$31.6 million recorded in the same period in 2006. This minor decline was due to
the completion of certain fixed price contracts and the delay in the start of
some new awards in the information technology outsourcing area.
Product margins for the six months ended June 30, 2007 were 40%, a decrease
of 340 basis points from the 43.4% for the six months ended June 30, 2006. This
decrease in margins was primarily attributable to lower software revenue in 2007
when compared to 2006 and to unfavorable absorption of fixed manufacturing costs
as the result of a decline in production volume.
Customer Service margins were 24% for the six months ended June 30, 2007, a
decrease of 70 basis points compared to 24.7% for the same period in 2006. This
decline is due to lower than planned installation revenue as a result of the
decrease in product sales. This was partially offset by an increase in software
maintenance.
Contract margins were 5.9% for the six months ended June 30, 2007, a
decline of 150 basis points versus 7.4% for the same period in 2006. The
decrease was due to a favorable cost share adjustment on the Company's Logistics
management program in 2006. This decrease was also due to the completion of
various higher margin fixed-price contacts. The most significant components of
contract costs in 2007 and 2006 were labor and fringe benefits. For 2007, labor
and fringe benefits were $24.1 million or 82% of contract costs compared to
$22.9 million or 78% of contract costs for the same period in 2006.
Selling, general and administrative expenses are virtually all related to
the Company's Hospitality segment. Selling, general and administrative expenses
for the six months ended June 30, 2007 were $17.9 million, an increase of 10 %
from the $16.3 million for the same period in 2006. This increase was due to a
rise in sales and marketing expenses associated with restaurant products as the
Company is investing in its international infrastructure and in the expansion of
its dealer channel. The increase was also due to a rise in bad debt expense and
stock based compensation expense.
Research and development expenses relate primarily to the Company's
Hospitality segment. Research and development expenses were $8.2 million for the
six months ended June 30, 2007, an increase of 43% from the $5.7 million
recorded in 2006. The increase was primarily attributable to the Company's
continued research and development in its next generation software products for
its restaurant customers. The platform for this next generation of products was
acquired from SIVA Corporation in the fourth quarter of 2006.
Amortization of identifiable intangible assets was $784,000 for the six
months ended June 30, 2007 compared to $615,000 for 2006. The increase is
primarily due to the amortization of intangible assets acquired as part of the
acquisition of SIVA Corporation on November 2, 2006.
Other income, net, was $394,000 for the six months ended June 30, 2007
compared to $375,000 for the same period in 2006. Other income primarily
includes rental income and foreign currency gains and losses. This increase is
primarily due to higher foreign currency gains in 2007 compared to 2006. This
was partially offset by a decline in rental income in 2007 when compared to
2006.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. Interest expense was
$459,000 for the six months ended June 30, 2007 as compared to $252,000 in 2006.
The Company experienced higher average borrowings in 2007 when compared to 2006
under its lines of credit with banks. In addition, the Company entered into a $6
million term loan in the fourth quarter of 2006 to finance the SIVA acquisition.
This is partially offset by a lower average borrowing rate in 2007 when compared
to 2006.
For the six months ended June 30, 2007, the Company's effective income tax
rate was 33.5 %, compared to 35.8% in 2006. The variance from the federal
statutory rate in 2007 was primarily due to state income taxes, non-deductible
expenses, and the relative impact of these items in relation to the Company's
expected pre-tax financial performance. The variance from the federal statutory
rate in 2006 was primarily due to state income taxes, offset by benefits related
to export sales as well as tax benefits related to domestic production
activities.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been cash flow from
operations and lines of credit with various banks. Cash provided by operations
was $1.9 million for the six months ended June 30, 2007 compared to cash used of
$6.7 million for 2006. In 2007, cash was generated through collection of
accounts receivable. This was partially offset by a growth in inventory and the
timing of payments to vendors. In 2006, cash flow was negatively impacted by the
timing of customer receipts and by inventory purchases in anticipation of future
demand.
Cash used in investing activities was $1.4 for the six months ended June
30, 2007 versus $1.1 million for the same period in 2006. In 2007, capital
expenditures were $649,000 and were primarily for manufacturing and research and
development equipment. Capitalized software costs relating to software
development of Hospitality segment products were $730,000 in 2007. In 2006,
capital expenditures were $867,000 and were principally for manufacturing and
information technology equipment and software for internal use. Capitalized
software costs relating to software development of Hospitality segment products
were $234,000 in 2006.
Cash used in financing activities was $1.6 million for the six months ended
June 30, 2007 versus cash provided of $4.9 million in 2006. In 2007, the Company
reduced its short-term borrowings by $1.7 million and decreased its long-term
debt by $49,000. The Company also benefited $109,000 from the exercise of
employee stock options. In 2006, the Company increased its short-term bank
borrowings by $4.6 million and benefited $159,000 from the exercise of employee
stock options.
The Company has an aggregate availability of $20,000,000 in unsecured bank
lines of credit. One line totaling $12,500,000 bears interest at the bank
borrowing rate (6.8 % at June 30, 2007). The second line of $7,500,000 allows
the Company, at its option, to borrow funds at the LIBOR rate plus the
applicable interest rate spread or at the bank's prime lending rate (6.5 % at
June 30, 2007). In June, 2007 these credit agreements were amended to waive the
existing leverage and fixed charge coverage ratios for the remainder of 2007.
Under the amendment, the Company is required to meet an EBITDA covenant for the
balance of 2007. These lines expire in April 2009. The Company was in compliance
with all loan covenants on June 30, 2007. At June 30, 2007, there was $6,043,000
outstanding under these lines. The weighted average interest rate paid by the
Company during 2007 was 6.4% and 6.9% during 2006.
In 2006, the Company borrowed $6,000,000 under an unsecured term loan
agreement with a bank in connection with the acquisition of SIVA Corporation.
The loan 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 (6.6 % at June 30, 2007).
The Company has a $1,899,000 mortgage collateralized by certain real
estate. The annual mortgage payment including interest totals $226,000. The
mortgage bears interest at a fixed rate of 7% and matures in 2010.
During fiscal year 2007, the Company anticipates that its capital
requirements will be approximately $2 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'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'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'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, 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's sources of
liquidity beyond twelve months, in management'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'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, intangible assets, taxes and
equity-based compensation.
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'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 104, persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, and collectibility 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, persuasive evidence of an arrangement exists,
delivery has occurred, the price is fixed or determinable, and collectibility is
reasonably assured. 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 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'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'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'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'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 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. 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
Following Financial Accounting Standards Board issuance of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets,
(SFAS 142), the Company tests all goodwill for impairment annually, or more
frequently if circumstances indicate potential impairment. The Company has
elected to annually test for impairment in the fourth quarter of its fiscal
year.
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's estimates
of its future taxable income levels.
Equity-Based Compensation
The Company accounts for equity based compensation by recognizing expense
over the vesting period for any non-vested stock option awards granted. Stock
option grants are valued by using a Black-Scholes method at the date of the
grant. There are assumptions and estimates made by management which go into the
valuation of the options granted, such as volatility, vesting period, and
forfeiture rate. The Company recognizes expense on options granted using a
ratable method over the vesting period. Restricted stock grants are expensed
over the vesting period, which is determined at the date of the grant.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS 157"), which provides guidance for measuring the fair value of assets and
liabilities, as well as requires expanded disclosures about fair value
measurements. SFAS 157 indicates that fair value should be determined based on
the assumptions marketplace participants would use in pricing the asset or
liability, and provides additional guidelines to consider in determining the
market-based measurement. The Company will be required to adopt SFAS 157 on
January 1, 2008. The Company is currently evaluating the impact of adopting SFAS
157 on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits all
entities to choose to measure eligible items at fair value at specified election
dates. SFAS 159 is effective as of the beginning of an entity's first fiscal
year that begins after November 15, 2007. The Company is currently assessing the
impact of adopting SFAS 159 on its consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
INFLATION
Inflation had little effect on revenues and related costs during the first
three months of 2007. Management anticipates that margins will be maintained at
acceptable levels to minimize the affects of inflation, if any.
INTEREST RATES
As of June 30, 2007, the Company has $5.6 million in variable long-term
debt and $6.5 million in 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
The Company'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, results of operations or cash flows due to the
low volume of business affected by foreign currencies.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, our management,
including our Chief Executive Officer and Chief Financial Officer, carried out
an evaluation of the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e)) of the Company. These officers have concluded that our disclosure
controls and procedures are effective. As such, we believe that all material
information relating to us and our consolidated subsidiaries required to be
disclosed in our periodic filings with the Securities and Exchange Commission
(i) is recorded, processed, summarized and reported within the required time
period, and (ii) is accumulated and communicated to the Company's management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls.
There was no change in the Company's internal controls over financial
reporting, as defined in Rule 13a-15(f) of the Exchange Act during the quarter
ended June 30, 2007 that has materially affected, or is reasonably likely to
materially affect, such internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1A. Risk Factors
The Company is exposed to certain risk factors that may effect operations
and/or financial results. The significant factors known to the Company are
described in the Company's most recently filed Annual Report on Form 10-K. There
have been no material changes from the risk factors as previously disclosed in
the Company's Annual Report on Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On April 26, 2007, PAR Technology Corporation furnished a report on Form
8-K pursuant to Item 2.02 (Results of Operations and Financial Condition) of
that Form relating to its financial information for the quarter ended March 31,
2007, as presented in a press release of April 26, 2007 and furnished thereto as
an exhibit.
Item 6. Exhibits
List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
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 and Treasurer 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
and Treasurer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
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: August 9, 2007
RONALD J. CASCIANO
--------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Sequential
Page
Exhibit Number
------- ------
31.1 Certification of Chairman of the Board E-1
and Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of Vice President, Chief E-2
Financial Officer and Treasurer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of Chairman of the Board E-3
and Chief Executive Officer and
Vice President, Chief Financial Officer
and Treasurer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, John W. Sammon certify that:
1. I have reviewed this report on Form 10-Q of PAR Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, 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;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluations; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter and that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 9, 2007
John W. Sammon
-----------------------------------
John W. Sammon
Chairman of the Board and
Chief Executive Officer
E-1
Exhibit 31.2
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, Ronald J. Casciano, certify that:
1. I have reviewed this report on Form 10-Q of PAR Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, 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;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluations; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter and that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 9, 2007
Ronald J. Casciano
-----------------------------------
Ronald J. Casciano
Vice President,
Chief Financial Officer & Treasurer
E-2
Exhibit 32.1
PAR TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PAR Technology Corporation (the
"Company") on Form 10-Q for the quarter ended June 30, 2007 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), we, John
W. Sammon, Jr. and Ronald J. Casciano, Chairman of the Board & Chief Executive
Officer and Vice President, Chief Financial Officer & Treasurer of the Company,
certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
(1) The Report fully complies with the requirement of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
John W. Sammon
- ------------------------------
John W. Sammon
Chairman of the Board & Chief Executive Officer
August 9, 2007
Ronald J. Casciano
- ------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer & Treasurer
August 9, 2007
E-3