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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number 1-9720
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York 13413-4991
(Address of principal executive offices) (Zip Code)
(315) 738-0600
(Registrant's Telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $.02 par value New York Stock Exchange
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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 aggregate market value of the voting stock held by non-affiliates of
the registrant based on the average price as of March 23, 2001 - $6,415,000.
The number of shares outstanding of registrant's common stock, as of March
23, 2001 - 7,723,005 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 2000
annual meeting of stockholders are incorporated by reference into Part III.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-K
Item Number
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Other
Significant Employees of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
Signatures
PAR TECHNOLOGY CORPORATION
PART I
Item 1: Business
PAR Technology Corporation ("PAR" or the "Company") is a leading provider
of professional services and enterprise business intelligence software. PAR
develops, markets and supports software products that improve the ability of
business professionals to make timely, fact-based business decisions. PAR is the
world's largest supplier of Point-of-Sale systems to the quick service
restaurant market with over 25,000 systems installed in over 90 countries. PAR
also focuses on the design, development, manufacture, sales and support of
Enterprise Application Integration (EAI) solutions to Fortune 500 manufacturing,
retailing and distribution organizations.
The Company is also a leading government contractor, providing computer
based system design and engineering services to the Department of Defense and
Federal Government Agencies. Through its government-sponsored research and
development, PAR has created significant technologies with commercial uses. PAR
Technology Corporation's stock is traded on the New York Stock Exchange under
the symbol PTC.
Information concerning the Company's industry segments for the three years
ended December 31, 2000 is set forth in Note 12 to the Consolidated Financial
Statements included elsewhere herein.
The Company's corporate headquarters offices are located at PAR Technology
Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991, telephone number
(315) 738-0600. Unless the context otherwise requires, the term "PAR" or
"Company" as used herein, means PAR Technology Corporation and its wholly-owned
Subsidiaries.
Restaurant Segment
PAR, through its wholly owned subsidiary ParTech, Inc., is a leading
provider of integrated solutions to the quick service restaurant industry. The
Company's Point-of-Sale (POS) restaurant management technology integrates both
cutting edge software applications and the Company's industry leading Pentium(R)
based hardware platform. This restaurant management system can host fixed as
well as wireless order-entry terminals and may include video monitors, third
party supplied peripherals networked via an Ethernet LAN and is accessible to
enterprise-wide network configurations. PAR also provides extensive systems
integration and professional service capabilities to design, tailor and
implement solutions that enable its customers to manage, from a central
location, all aspects of data collection and processing for single or multiple
site enterprises.
Products
The technology requirements of the major restaurant organizations include
rugged, reliable management systems (hardware and software) capable of
receiving, transmitting and coordinating large numbers of foodservice orders for
quick delivery. The Company's integrated management systems permit its Quick
Service Restaurant (QSR) customers to configure their restaurant technology
systems to meet their order-entry, menu, food preparation and delivery
coordination needs while recording all pertinent data concerning the
transactions at the respective restaurant. PAR's restaurant systems are the
result of over 20 years of experience, knowledge and an in-depth understanding
of the restaurant market. This knowledge and expertise is reflected in the
product design, implementation capability and systems integration skills.
Software. PAR's latest generation software applications are included in the
iN.fusion suite, consisting of three separate applications- iNtouch(TM),
iNform(TM) and iNsite(TM). The iNtouch(TM) product is a robust application, that
contains rich features and functions- such as real time mirror imaging of
critical data, on-line graphical help, and interactive diagnostics, including
real time monitoring of restaurant operations through user defined parameters as
well as intuitive graphical user interfaces. In addition, iNform(TM), PAR's
BackOffice management software, offers a manager's station application that
includes labor scheduling and inventory management. The software also maintains
in-store connectivity between PAR's hardware terminals, remote printers and
displays, and back office PCs through an Ethernet LAN. The Company's enterprise
software application, iNsite(TM), is operational Decisionware for the entire
organization and provides automation management reporting and process
integration. The Company's additional POS software, GT, is the predominant
software in the QSR industry. The capabilities of GT are extensive and integrate
a high degree of flexibility for the transport and display of orders in
real-time and for the design and integration of the Company's display data-entry
hardware terminals.
Hardware. The Company's hardware platform system, POS 4, is an industry
leading state-of-the-art 64 bit Pentium(R) designed system, developed to host
the most powerful applications of the restaurant industry. POS 4's design
utilizes open architecture with industry standard components, is compatible with
the most popular operating systems, and is the first POS hardware system to be
certified by Microsoft(R) as Windows(R) NT Compliant(R). POS 4 supports a
distributed processing environment and incorporates an advanced restaurant
technology system, utilizing Intel microprocessors, standard PC expansion slots,
Ethernet LAN and standard Centronics printer ports. The hardware system supplies
its industry standard components with features for restaurant applications such
as multiple video ports. The POS system utilizes distributed processing
architecture to integrate a broad range of PAR and third-party peripherals and
is designed to withstand the harsh restaurant environment. The hardware platform
has a favorable price-to-performance ratio over the life of the system as a
result of its PC compatibility, ease of expansion and high reliability design.
Display terminals receive and track customer orders, monitor employee
timekeeping records, and will provide on-screen production and labor scheduling.
PAR's hardware terminals are designed with a touch screen rather than a fixed
position keyboard, allowing greater flexibility in menu design as well as ease
of use and shorter training time. The POS touch screen configuration allows a
restaurant manager to easily reconfigure or change the menus to offer additional
food items or provide combination meals without reprogramming the system.
Wireless hand-held terminals permit restaurant employees to take orders while
customers are waiting or in drive-thru lines, thus increasing the speed of
service, as the customer's food order is complete by the time the customer
reaches the check-out counter and submits payment. This system also utilitizes
video monitors, printers and various other devices that can be added to a LAN.
The restaurant manager can use a standard PC to collect and form reports on
store-generated data.
Systems Integration and Professional Services. The Company utilizes its
systems integration and engineering expertise in developing cutting edge
features and interfaces for its restaurant management technology products to
meet a wide variety of customer requirements. The Company continues to work in
unison with its customers to identify and address the latest restaurant
technology requirements by creating interfaces to equipment, including
innovations such as automated cooking and drink dispensing devices,
customer-activated terminals and order display units located inside and outside
of the restau-rant. The Company provides its systems integration expertise to
interface specialized components, such as video monitors, coin dispensers and
non-volatile memory for journalizing transaction data, as may be required in
some international applications. Through its Professional Services organization,
the Company also integrates the restaurant manager's back office PC, as well as
corporate home office computer systems, as management information requirements
dictate.
The Company is currently pursuing new third-party initiatives that provide
their customers with a universal, very fast, and efficient way to allow for
non-cash credit card payment when buying in quick-service restaurants,
convenience stores, gasoline stations, drugstores, and many other large chain
retailers. The Company's initiative will automatically facilitate loyalty
programs to the Point Of Sale terminal with sub-second speed and create a
simplified and convenient shopping experience for customers while carefully
protecting their privacy.
Installation and Training
In the U.S., Canada, Europe, South Africa, Australia and Asia, PAR
personnel provide install-ation, training, and integration services, on a
fixed-fee basis, as a normal part of the equipment purchase agreement. In
certain areas of North and South America, Europe and Asia, the Company provides
these integration services through third parties.
Maintenance and Service
The Company offers a range of maintenance and support services as part of
its total solution for its targeted restaurant markets. In the North American
restaurant technology market, the Company provides comprehensive maintenance and
integration services for its own and third-party equipment and systems through a
24-hour central telephone customer support and diagnostic service in Boulder,
Colorado and a field service network consisting of 100 locations offering
factory, on-site, and depot maintenance and spare unit rentals. When a
restaurant technology system is installed, PAR employees train the restaurant
employees and managers to ensure efficient use of the system. If a problem
occurs, PAR's current software products allow a service technician to diagnose
the problem by telephone, greatly reducing the need for on-site service calls.
The Company's service organization utilizes Clarify as its Customer
Resource Management tool. Clarify allows PAR to demonstrate compelling value and
differentiation to their customers using customer service based on a wealth of
information about the individuals that do business with them. Clarify also
enables PAR to compile the kind of in-depth information they need to spot trends
and identify opportunities.
The Company also maintains service centers in Europe, South Africa,
Australia and Asia. The Company believes that its ability to address all support
and maintenance requirements for a customer's restaurant technology network
provides it with a competitive advantage.
Marketing
Sales in the restaurant technology market are usually generated by first
obtaining the acceptance of the corporate restaurant chain as an approved
vendor. Upon approval, marketing efforts are then directed to franchisees of the
chain. Sales efforts are also directed toward franchisees of chains for which
the Company is not an approved corporate vendor. The Company employs direct
sales personnel in several sales groups. The National Accounts Group works with
major restaurant chain customers. The Domestic Sales Group targets franchisees
of the major restaurant chain customers, franchisees of other major chains, as
well as smaller chains within the U.S.. The International Sales Group seeks
sales to major customers with restaurants overseas and to international chains
that do not have a presence in the United States. The New Accounts Group seeks
sales to major new corporate accounts. The Company's Reseller network works
exclusively with third-party dealers and value-added resellers throughout the
country. The New Market Group is responsible for sales to customers outside the
hospitality industry.
Competition
The competitive landscape in the restaurant market is based primarily on
functionality, reliability, quality, performance, price of products, and service
and support. The Company believes that its principal competitive advantages
include its focus on a total restaurant management solution offering, advanced
development capabilities, industry knowledge and expertise, product reliability,
a direct sales force and the quality of its support and quick service response.
The markets in which the Company competes are highly competitive. In most of our
major accounts there are currently several approved suppliers who offer some
form of sophisticated restaurant technology system similar to the Company's.
Major competitors include Panasonic, International Business Machines
Corporation, Radiant Systems, Inc., NCR, Micros Systems Inc. and Aspeon, Inc.
Backlog
At December 31, 2000, the Company's backlog of unfilled orders for the
Restaurant segment was approximately $10,200,000 compared to $6,300,000 a year
ago. Most of the present orders will be delivered in 2001. The Restaurant
segment orders are generally of a short-term nature and are usually booked and
shipped in the same fiscal year.
Research and Development
The highly technical nature of the Company's restaurant products requires a
significant and continuous research and development effort. Research and
development expenses on internally funded projects were approximately $7,613,000
in 2000, $6,336,000 in 1999 and $4,870,000 in 1998. The Company capitalizes
certain software costs in accordance with Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. See Note 1 to the Consolidated Financial
Statements included in Item 14 for further discussion
Manufacturing and Suppliers
The Company assembles its products from standard components, such as
integrated circuits, and fabricated parts such as printed circuit boards, metal
parts and castings, most of which are manufactured by others to the Company's
specifications. The Company depends on outside suppliers for the con-tinued
availability of its components and parts. Although most items are generally
available from a number of different suppliers, the Company purchases certain
components from only one supplier. Items purchased from only one supplier
include certain printers, base castings and electronic components. If such a
supplier should cease to supply an item, the Company believes that new sources
could be found to provide the components. However, added cost and manufacturing
delays could result and adversely affect the business of the Company. The
Company has not experienced significant delays of this nature in the past, but
there can be no assurance that delays in delivery due to supply shortages will
not occur in the future.
Industrial Segment
PAR, through its wholly owned subsidiary, Ausable Solutions, Inc. (ASI),
pursues the dynamic industrial systems marketplace centered on users of SAP's
mySAP.com applications, the industry leader in e-business platforms. The
Company's focus is on enhancing customer return-on-investment on Enterprise
Resource Planning (ERP) solutions by effectively integrating Production
Operation workflows--- eProduction. For Fortune 500 industrial companies, PAR
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 Company is a
premier supplier of transaction processing solutions and the best source for
bringing manufacturing operations into the e-Production internet age. PAR's
ability to create specific answers to intricate problems in the manufacturing
field led to the development of TranSend(TM), a high volume transaction
processing engine designed to operate, even flourish, within the framework of
SAP applications.
Products
The Company's primary product is the TranSend(TM) suite of applications.
This application software integrates various wireless and wired terminals with
attached bar code scanners and printers, RFID devices, scales, measuring
instruments, and other devices that are used by factory staffers to receive and
input information as part of the production process. The system also serves as
the factory's information hub by integrating information from machines, sensors,
and other manufacturing execution systems (MES). TranSend(TM) contains a robust
Business Process Manager application that guides and manages the activities of
production workers to assure proper execution of the manufacturing process.
Simultaneously, TranSend(TM) sends data to any of the components of SAP's
mySAP.com platform including the world's most widely installed integrated ERP
application, R/3. In addition, data can be exchanged with legacy applications
and other host systems through TranSend's(TM) Enterprise Application Integration
(EAI) features. Although TranSend(TM) provides a broad spectrum of complex
features, the implementation process has been simplified through the utilization
of advanced software technology that eliminates the need for most custom
programming.
Maintenance and Service
In the industrial software market, the Company offers technical support
through an experienced product support staff available in the field or by
telephone. The Company also provides training classes, led by experienced and
highly qualified personnel, on its products and integration services, including
both hands-on experience with use of software and operation of hardware. The
Company offers ongoing maintenance and enhancements.
Customers are utilizing the Company's services to gain greater control and
efficiency over their production phase of operation. This acceptance has been
gained because of the Company's ability to work within the framework of several
transaction platforms. Full service systems integration by the Company is a
matter of achieving data collection and transaction processing systems
integration solutions from design phase to implementation, along with 24 by 7
support service.
Marketing
The Company's direct sales efforts in the industrial software market is
generally focused on the highest level of the customer's executive management.
Substantial lead-time is required in sales efforts due to the fact that
automation equipment is normally fitted into the manufacturing or warehousing
environment as a plant is constructed. The Company has formed strategic business
partnerships with a variety of hardware and software manufacturers to provide
optimal solutions for our customers' needs for software products that target the
rapidly growing SAP marketplace. Some of these partners include: Compaq,
Intelligent Instrumentation, Intermec, LXE, Microsoft, Oracle, Oracle
Manufacturing, PSC, SAP and Symbol. The Company's specific approach to
facilitating proper solutions is to match the skills and experience of our
systems integration staff along with the technically innovative capabilities of
our software products with the particular needs of a customer's goals. The
Company works closely with customer IT and Production specialists to define
specific needs, identify potential challenges and create solutions to satisfy
those needs.
Research and Development
The highly technical nature of the Company's industrial products requires a
significant and continuous research and development effort. Research and
development expenses on internally funded projects were approximately $2,064,000
in 2000, $1,407,000 in 1999, and $656,000 in 1998. The Company capitalizes
certain software costs in accordance with Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. See Note 1 to the Consolidated Financial
Statements included in Item 14 for further discussion.
Government Segment
PAR operates two wholly-owned subsidiaries in the government business
segment, PAR Government Systems Corporation (PGSC) and Rome Research Corporation
(RRC). These companies provide the U.S. Department of Defense (DoD) and other
federal and state government organizations, with a wide range of technical
products and services. Some of the more significant areas with which the Company
is involved include design, development and systems integration of
state-of-the-art data processing systems, advanced research and development for
high-technology projects, software development/testing, engineering services,
and operation and maintenance for government facilities. The Company's offerings
cover the entire development cycle for Government systems, including
requirements analysis, design specification, development, implementation,
installation, test and evaluation.
Information Systems and Technology (IS&T)
The Information Systems and Technology (IS&T) business sector researches,
develops and applies advanced technology solutions addressing specific problems
in the area of multi-sensor information processing and exploitation. This
includes the development and integration of algorithms, advanced prototype
applications, and systems that process and exploit imagery,
Electro-Optical/Infrared, radar, video, and multi-hyperspectral data. IS&T is
the system integrator for the Image Exploitation 2000 facility at the Air Force
Research Laboratory-Rome Research Site and is a key developer of the National
Imagery and Mapping Agency's Image Product Library that provides access to a
"virtual" network of archives/libraries in support of the operational users of
imagery. Since 1986, the Company has been a key contributor to the full-scale
engineering development for the Joint Surveillance Target Attack Radar System
(Joint STARS) program, providing systems engineering algorithm and software
development and data handling for both moving target indicator and synthetic
aperture radar technologies that detect, track and target ground vehicles. More
recently, the Company supports the Joint STARS program in the area of software
verification and validation, with Company engineers embedded in the customer's
test organization for formal qualification of the entire Joint STARS suite. The
Company participates in all phases of the test process, from initial analysis to
government acceptance.
Signal & Image Processing (SIP)
The Signal and Image Processing (SIP) business sector supports the
development and imple-mentation of complex sensor systems and the collection and
analysis of sensor data. This group is considered a leader in developing and
implementing target detection and tracking algorithms for radar, infrared,
electro-optical, multispectral, and hyperspectral sensor systems. The SIP group
has developed sensor concepts, algorithms, and real-time systems to address the
difficult problems of finding low-contrast targets against clutter background
(e.g., finding cruise missiles, fighter aircraft, and personnel against heavy
terrain backgrounds), detecting man-made objects in dense foliage, and
performing humanitarian efforts in support of the removal of land mines with
ground penetrating radar. Through key contracts from the Defense Advanced
Research Project Agency (DARPA), the U.S. Army, and the U.S. Navy, the Company
creates, develops, and deploys real-time hyperspectral, multispectral, and radar
data collection and analysis systems. The Company also supports numerous
technology demonstrations for the DoD, including the ATLANTIC PAW, a
multi-national NATO exercise of wireless communi-cations interoperability. As
part of this demonstration, the Company designed and built the Software Radio
Development System (SoRDS) for test and evaluation of communications waveforms.
The Company supports Navy airborne infrared surveillance systems through the
development of advanced optical sensors.
Geospatial Software and Modeling (GS&M)
The Geospatial Software and Modeling (GS&M) business sector performs water
resources modeling, Geographic Information Systems (GIS) database management,
and geospatial information technology development. An advanced GIS-based
environmental modeling and mapping capability supports flood mapping and water
quality applications. In particular, the Company's Flood*Ware(TM) software tool
and methodology is being employed in New York State in support of Federal
Emergency Management Agency's Map Modernization Program. Also, similar GIS and
Remote Sensing technologies are used in support of water quality modeling and
assessment applications for the NYC Watershed Protection Program. Under a series
of contracts and task orders sponsored by various DoD agencies, this group
provides engineering services in the areas of digital topographic data
evaluations, geospatial data modeling, software prototyping, and software
engineering.
Logistics Management Systems (LMS)
The Logistic Management Systems (LMS) business sector is focused on
supporting the design, development, and deployment of the Cargo*Mate(TM)
intermodal Logistics Information Management Systems, a solution for the
monitoring and management of transport assets and cargo throughout the
intermodal (i.e., port, highway, rail, air, and ocean) transportation lifecycle.
The Cargo*Mate(TM) system is being developed under a multi-year Cooperative
Agreement with the U.S. Department of Transportation/Federal Highway
Administration, which resulted from
funds specifically authorized for the development and deployment of
Cargo*Mate(TM) by Congress's Transportation Equity Act-21 in 1998. The system
utilizes advanced sensor technology to acquire asset/cargo location, associated
transaction/events, and system status; wireless communication networks to
consolidate and transmit the data to the PAR Operations Center; and transaction
based software applications in the Operations Center to customize the data for
each intermodal customer in a format that has financial value to the enterprise.
Communications Support Services
The Company provides a wide range of support services to sustain mission
critical Department of Defense communications facilities. These services include
continuous operations, system enhancements and maintenance of very low frequency
(VLF), high frequency (HF) and very high frequency (VHF) radio transmitter
facilities, extremely high frequency (EHF), and super high frequency (SHF),
satellite communication heavy earth terminals, as well as other
telecommunications equipment and information systems. The Company provides
communications support services to customer locations both in and outside of the
continental United States.
Test Laboratory and Range Operations
The Company provides management, engineering, and technical services under
several contracts with the U.S. Air Force and the U.S. Navy. These services
include the planning, execution, and evaluation of tests at government ranges
and laboratories operated and maintained by the Company. Test activities
encompass unique components, specialized equipment, and advanced systems for
radar, communications, electronic countermeasures, and integrated weapon
systems. The Company also develops complex measurement systems in several
defense-related areas of technology. These systems are computer-based and have
led to the development by the Company of a significant software capability,
which provides the basis for competing in new markets.
Government Contracts
The Company performs work for U.S. Government agencies under firm
fixed-price, cost-plus fixed fee, time-and-material, and incentive-type prime
contracts and subcontracts. Most of its contracts are for one-year to five-year
terms. The Company also has been awarded Task Order/Support contracts. There are
several risks associated with Government contracts. For example, contracts may
be terminated for the convenience of the Government any time the Government
believes that such termination would be in its best interests. In this
circumstance, the Company is entitled to receive payments for its allowable
costs and, in general, a proportionate share of its fee or profit for the work
actually performed. The Company's business with the U.S. Government is also
subject to other risks unique to the defense industry, such as reduction,
modification, or delays of contracts or subcontracts if the Government's
requirements, budgets, or policies or regulations change. The Company may also
perform work prior to formal authorization or to adjustment of the contract
price for increased work scope, change orders and other funding adjustments.
Additionally, the Defense Contract Audit Agency on a regular basis audits the
books and records of the Company. Such audits can result in adjustments to
contract costs and fees. Audits have been completed through the Company's fiscal
year 1998 and have not resulted in any material adjustments.
Marketing and Competition
Marketing begins with collecting information from a variety of sources
concerning the present and future requirements of the Government and other
potential customers for the types of technical expertise provided by the
Company. Although the Company believes it is positioned well in its chosen areas
of image and signal processing, communications and engineering services,
competition for Government contracts is intense. Many of the Company's
competitors are, or subsidiaries thereof, companies such as Lockheed-Martin,
Raytheon, Litton-PRC, SAIC and Hughes that are larger and have substantially
greater financial resources. The Company also competes with many smaller
companies that target particular segments of the Government market. Contracts
are obtained principally through competitive proposals in response to requests
for bids from Government agencies and prime contractors. The principal
competitive factors are past performance, the ability to perform, price,
technological capabilities, management capabilities and service. In addition,
the Company sometimes obtains contracts by submitting unsolicited proposals.
Backlog
The dollar value of existing Government contracts at December 31, 2000, net
of amounts relating to work performed to that date, was approximately
$45,500,000, of which $15,900,000 was funded. At December 31, 1999, the
comparable amount was approximately $46,500,000, of which $9,400,000 was funded.
Funded represents amounts committed under contract by Government agencies and
prime contractors. The December 31, 2000 Government contract backlog of
$45,500,000 represents firm, existing contracts. Approximately $20,900,000 of
this amount will be completed in calendar year 2001 as funding is committed.
Employees
As of December 31, 2000, the Company had 943 employees, approximately 61%
of whom are engaged in the Company's Restaurant segment, 31% are in the
Government segment, 3% are in the Industrial segment and the remainder are
corporate employees.
Due to the highly technical nature of the Company's business, the
Company's future can be significantly influenced by its ability to attract and
retain its technical staff. The Company believes that it will be able to fulfill
its near-term needs for technical staff.
Approximately 13% of the Company's employees are covered by collective
bargaining agreements. The Company considers its employee relations to be good.
Item 2: Properties
The following are the principal facilities (by square footage) of the
Company:
Industry Floor Area Number of
Location Segment Principal Operations Sq. Ft.
-------- ------- -------------------- ---------
New Hartford, NY ............. Restaurant Principal executive offices 147,000
Government manufacturing, research and
development laboratories,
computing facilities
Boulder, CO .................. Restaurant Service 21,200
Rome, NY ..................... Government Research and Development 18,000
Norcross, GA ................. Industrial Sales and Research and
Development 9,200
Sydney, Australia ............ Restaurant Sales and Service 8,800
La Jolla, CA ................. Government Research and Development 7,100
Boca Raton ................... Restaurant Research and Development 8,700
The Company's headquarters and principal business facility is located in
New Hartford, New York, which is near Utica, located in Central New York State.
The Company owns its principal facility and adjacent space in New Hartford,
N.Y. All of the other facilities are leased for varying terms. Substantially all
of the Company's facilities are fully utilized, well maintained, and suitable
for use. The Company believes its present and planned facilities and equipment
are adequate to service its current and immediately foreseeable business needs.
Item 3: Legal Proceedings
The Company is subject to legal proceedings which arise in ordinary course
of business. In the opinion of management, the ultimate liability, if any, with
respect to these actions will not materially affect the financial position of
the Company.
Item 4: Submission of Matters to a Vote of Security Holders
None
PART II
Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock, par value $.02 per share, trades on the New
York Stock Exchange (NYSE symbol - PTC). At December 31, 2000, there were
approximately 700 owners of record of the Company's Common Stock, plus those
owners whose stock certificates are held by brokers.
The following table shows the high and low stock prices for the two years
ended December 31, 2000 as reported by New York Stock Exchange:
2000 1999
---- ----
Period Low High Low High
------ --- ---- --- ----
First Quarter 4 5/16 6 1/4 5 1/4 7 3/8
Second Quarter 3 11/16 4 3/4 5 3/8 7 3/8
Third Quarter 2 3/4 4 15/16 6 7/8 9 3/4
Fourth Quarter 1 10/16 3 1/16 4 1/8 7 3/16
The Company has not paid cash dividends on its Common Stock, and its Board
of Directors presently intends to continue to retain earnings for reinvestment
in growth opportunities for the Company. Accordingly, it is anticipated that no
cash dividends will be paid in the foreseeable future.
Item 6: Selected Financial Data
SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
(In thousands, except per share amounts)
Year ended December 31,
-----------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Total revenues ..................... $ 100,938 $ 144,806 $ 122,280 $ 100,020 $ 117,661
========= ========= ========= ========= =========
Net income (loss) .................. $ (13,448) $ 1,969 $ 1,262 $ (8,719) $ 5,947
========= ========= ========= ========= =========
Diluted earnings (loss) per share... $ (1.71) $ .23 $ .14 $ (.99) $ .69
========= ========= ========= ========= =========
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Working capital ........ $28,773 $46,665 $50,287 $53,382 $62,107
Total assets ........... $84,936 $88,107 $93,426 $83,204 $86,758
Long-term debt ......... $ 2,323 -- -- -- --
Shareholders' equity.... $46,832 $62,143 $62,826 $63,417 $72,602
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis highlights items having a significant
effect on operations during the three-year period ended December 31, 2000. It
may not be indicative of future operations or earnings. It should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
other financial and statistical information appearing elsewhere in this report.
Results of Operations - 2000 Compared to 1999
The Company reported revenues of $100.9 million for the year ended 2000, a
decrease of 30% from the $144.8 million reported in 1999. For 2000, the Company
recorded a net loss of $13.4 million versus net income of $2.0 million in 1999.
The diluted loss per share was $1.71 for 2000, compared to diluted earnings per
share of $.23 in 1999.
In 2000, the Company was adversely affected by the current weakness in
worldwide economic conditions and in particular the slowdown in restaurant
corporate and consumer spending. After a robust year in capital spending in
1999, many of the Company's customers significantly decreased their capital
expenditures for new equipment in 2000. The Company reacted to this slowdown by
implementing certain cost reductions (without impacting its core capabilities)
in the fourth quarter of 2000. These actions will reduce costs throughout 2001
and improve the Company's cash flow. Additionally, several recent events have
led the Company to a dramatically improved outlook for 2001. The Company began
receiving numerous requests for proposals for hardware and software from several
restaurant companies. This is a clear indication that capital spending in the
restaurant market will increase in 2001. The Company has recently experienced
positive results in the field testing of its current release of its
iN.fusion(TM) software products. The Company is also pursuing several strategic
initiatives addressing areas such as web portals, speed of service and loyalty
programs. These new initiatives, coupled with our core products, will allow the
Company to increase its sales to the Restaurant market and provide new
opportunities in other markets. Based on this improved business outlook,
management believes it will return to profitability and a positive cash flow in
2001.
During 1999, the Company recorded a one time charge of $1.7 million ($1.1
million after tax or a loss per share of $.13) relating to trade accounts
receivable owed the Company by AmeriServe Food Distribution, Inc. which filed
for protection under Chapter 11 of the U.S. Bankruptcy Code.
Product revenues were $44 million in 2000, a decrease of 50% from the $88.8
million recorded in 1999. This decline is reflective of the general slowdown in
the buying patterns of the Company's restaurant customers following a
significant purchasing volume in 1999. This decline is also attributed to
ongoing delays in the release of PAR's restaurant management software, as well
as the release and market acceptance of third party software products used in
the Company's POS systems.
Customer service revenues were $31.9 million in 2000, a decrease of 11%
from the $36 million in 1999. This decline was attributable to lower
installation revenue and supply sales, which is directly related to the
decreased product revenue discussed above. This decline was partially offset by
an increase in the volume of field service activity. The Company's service
offerings include installation, twenty-four hour help desk support and various
field and on-site service options.
Contract revenues were $25 million in 2000, an increase of 25% when
compared to the $20 million recorded in the same period in 1999. This growth was
primarily due to a four-year, $24 million Navy contract to operate and maintain
communications in support of the Pacific Fleet. The growth was also attributable
to the recently awarded $4.5 million contract with the US Navy to provide
telecommunications support to the Naval Computer and Telecommunications
Detachment located in Brunswick, Maine.
Product margins were 23% for 2000 compared to 37% for 1999. This decrease
resulted from absorption of fixed manufacturing costs on low product volume and
less favorable product mix.
Customer service margins were 9% in 2000 compared to 3% for the same period
in 1999. This increase was due to efficiency improvements during 2000 related to
the Company's service management system, and certain price adjustments. During
the fourth quarter annual physical inventory of its service parts in 1999, the
Company discovered unreconciled differences between the physical count and the
perpetual inventory records. As a result, the Company recorded an after tax
charge of $1.7 million or $.20 per share. This situation was caused by
implementation and process issues related to the recently installed service
management system.
Contract margins were 6% in 2000 and 1999. Margins on the Company's
government contract business typically run between 5% and 6%. Included in the
cost of contracts are selling, general and administrative expense as well as
research and development costs related to the Government business.
Selling, general and administrative expenses were $25.6 million in 2000
versus $23.5 million for the same period in 1999, an increase of 9%. This
increase is due to increases in severance costs related to the cost reductions
during the year and to an increase in the provision for bad debts required for
various aged receivables. Additionally, depreciation expense on the service
management system contributed to this increase. These increases were partially
offset by a decline in selling expense, which is directly related to lower
product revenues.
Research and development expenses were $9.9 million in 2000, an increase of
23% from the $8.1 million recorded for the same period in 1999. This increase is
the result of the Company's investment in its new iN.fusion(TM) software suite
for its restaurant customers and its investment in enterprise solutions for its
manufacturing/warehousing customers. Research and development costs attributable
to government contracts are included in cost of contract revenues.
Other income includes rental income and foreign currency gains and losses.
There were no significant variations in 2000 when compared to 1999.
Interest expense was $1 million in 2000, an increase of $480,000 from 1999.
This represents interest charged on the Company's short-term borrowings from
banks and from long-term debt acquired during 2000. The average amount of
outstanding borrowings was higher during 2000 than in 1999.
In 2000, the Company's effective tax rate was a 38% benefit. The variance
from the statutory rate was primarily due to the benefit recognized on state net
operating losses.
Results of Operations - 1999 Compared to 1998
The Company reported revenues of $144.8 million for the year ended 1999, an
increase of 18% from the $122.3 million reported in 1998. Net income was $2.0
million in 1999, an increase of 56% from the $1.3 million reported in 1998.
Diluted earnings per share were $.23 for 1999, an increase of 64% from the $.14
per share in 1998.
On February 1, 2000 AmeriServe Food Distribution, Inc., a large distributor
to fast-food restaurants, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. During 1999, equipment sold by the Company for use in certain
Tricon restaurants was purchased through AmeriServe. As a result, at December
31, 1999, the Company was owed $1.7 million in trade accounts receivable.
Accordingly, due to this uncertainty, the Company recorded a one-time after tax
charge to earnings of $1.1 million ($0.13 loss per share) in the fourth quarter
of 1999.
The 1998 results include an after tax benefit of $645,000, or $.07 diluted
earnings per share relating to the partial recovery of accounts receivable from
Phoenix Systems & Technologies, Inc. (Phoenix). See Note 2 to the Consolidated
Financial Statements for further discussion.
Product revenues reached $88.8 million in 1999, an increase of 33% from the
$66.9 million recorded in 1998. The Company's domestic product revenue increased
34% in 1999 compared to 1998. An increase in sales to Tricon Corporation (Taco
Bell, KFC and Pizza Hut) was the primary reason for this growth. The Company
also expanded its sales through its domestic reseller channel. International
product revenue increased 33% in 1999 due to sales in France, Mexico, Canada and
Australia. McDonald's, Tricon and Burger King accounted for this increase
abroad. The Company also experienced a 63% increase in sales of its integrated
solutions to manufacturing/warehousing customers. Raytheon and Boeing were major
customers in 1999.
Customer service revenues rose to $36 million in 1999, an increase of 15%
over the $31.4 million in 1998. The Company's service offerings include
installation, twenty-four hour call center support and various field and on-site
service options. In 1999, the Company increased its worldwide installation
revenue, which is directly related to the higher product revenue discussed
above. Revenue generated from the Company's call center increased as its
contract base expanded.
Contract revenues were $20 million in 1999, a decrease of 17% when compared
to the $24.1 million recorded in the same period in 1998. This decrease was due
to the completion of a major airfield management contract in the third quarter
of 1998. This decrease was partially offset by increased efforts on the
Company's Cargo*Mate contract. This contract, with the Department of
Transportation, involves the adaptation and deployment of a cargo identification
and monitoring system to address the requirement of the National Intelligent
Transportation Systems. The Company also began work on a multi-year, $24 million
contract to support the Worldwide Naval Communication Systems for the U.S. Navy.
Product margins were 37% for 1999 compared to 32% for the same period in
1998. The improved margins were largely the result of higher software content in
1999 and the Company's efforts to reduce manufacturing costs of its hardware
products.
Customer service margins were 3% in 1999 compared to 9% for the same period
in 1998. During the fourth quarter annual physical inventory of its service
parts in 1999, the Company discovered unreconciled differences between the
physical count and the perpetual inventory records. As a result, the Company
recorded an after tax charge of $1.7 million or $.20 per share. This situation
was caused by implementation and process issues related to the Company's
recently installed service management system.
Contract margins were 6% in 1999 compared to 9% for the same period in
1998. This decrease is primarily due to a retroactive fee adjustment in
connection with the completion of certain contracts in 1998. Margins on the
Company's government contract business typically run between 5% and 6%.
Selling, general and administrative expenses were $23.5 million in 1999
versus $20 million for the same period in 1998, an increase of 18%. This
increase was due to investments made in the Company's Transaction Processing
segment. The Company expanded its sales force and increased its marketing
efforts. Service administration costs also increased to support the
implementation and training of the service management system.
Research and development expenses were $8.1 million in 1999, an increase of
34% from the $6 million recorded for the same period in 1998. The Company
increased its investment in POS software development, including applications for
the front and back of the store and for interfacing store information to the
home office. The Company also invested in software products for interface with
SAP enterprise solutions for its manufacturing/warehouse customers. Research and
development costs attributable to government contracts are included in cost of
contract revenues.
Other income includes rental income and foreign currency gains and losses.
There were no significant variations in 1999 when compared to 1998.
Interest expense was $531,000, an increase of $407,000 from 1998. This
represents interest charged on the Company's short-term borrowings from banks.
The average amount of outstanding borrowings was higher during 1999 than in
1998.
In 1999, the Company's effective tax rate was a 4% benefit. The variance
from the statutory rate was primarily due to the benefit recognized on the
Company's foreign sales through its Foreign Sales Corporation and favorable
adjustments to prior years' accruals. Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations and
lines of credit with various banks. In 2000, the Company incurred an after tax
loss of $13.4 million. Additionally, the Company had an operating cash flow
deficit of $8 million. These losses were primarily the result of a slowdown in
capital spending of the Company's restaurant customers due to post Y2K cutbacks
and other economic factors. The Company's strong financial condition and its
available working capital lines of credit were more than adequate to fund this
cash flow deficit. In the fourth quarter of 2000, the Company reacted to this
situation by implementing cost cutting measures in personnel and discretionary
expenses. Additionally, the Company's outlook for 2001 improved as evidenced by
planned increases in capital spending by several major restaurant chains, the
release of several new products and opportunities in new markets. Based on these
factors, management believes it will return to profitability and a positive cash
flow in 2001.
Cash used by operating activities was $8 million in 2000 compared to cash
provided by operating activities of $10 million in 1999. In 2000, cash flow was
negatively affected by the Company's operating losses, which were partially
offset by a reduction in accounts receivable. In 1999, cash flow benefited from
the reduction in accounts receivable as a result of improved collections. This
was partially offset by a reduction in accounts payable due to the timing of
vendor payments.
Cash used in investing activities was $1.5 million in 2000 versus $5.5
million for 1999. In 2000, capital expenditures were primarily for improvements
to the Company's corporate facilities. In addition, the Company capitalized
$914,000 of software costs. In 1999, capital expenditures were primarily for
internal use software and the construction of a corporate wellness center.
Capitalized software costs amounted to $1 million in 1999.
Cash provided by financing activities was $9.8 million in 2000 versus cash
used of $4.8 million in 1999. In 2000, the Company increased its line-of-credit
borrowings by $8.8 million and secured a mortgage on a portion of its
headquarter facilities. Cash provided by these activities was partially offset
by cash used to acquire 336,800 shares of treasury stock for $1.4 million. In
1999, the Company reduced its line-of-credit borrowings by $2.4 million and
acquired 492,000 shares of treasury stock for $2.5 million.
The Company currently has line-of-credit agreements, which aggregate $18.5
million with certain banks. This amount was reduced from the $27.5 million of
available lines at September 30, 2000 due to the expiration and re-negotiation
of certain unused facilities. At December 31, 2000, $13.8 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 2000.
Management anticipates that margins will be maintained at acceptable levels to
minimize the effects of inflation, if any.
The Company has a total interest bearing short-term debt of approximately
$13.8 million. 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.
Important Factors Regarding Future Results
Information provided by the Company, including information contained in
this Annual 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 8: Financial Statements and Supplementary Data
The Company's 2000 Financial Statements, together with the report thereon
of PricewaterhouseCoopers LLP dated February 7, 2001, are included elsewhere
herein. See Item 14 for a list of Financial Statements and Financial Statement
Schedules.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Item 10: Directors, Executive Officers and Other Significant Employees of the
Registrant
The directors and executive officers of the Company and their respective
ages and positions are:
Name Age Position
---- --- --------
Dr. John W. Sammon, Jr. 61 Chairman of the Board, President and
Director
Charles A. Constantino 61 Executive Vice President and Director
J. Whitney Haney 66 Director
Sangwoo Ahn 62 Director
Dr. James C. Castle 64 Director
Gregory T. Cortese 50 President ParTech, Inc., General
Counsel and Secretary
Albert Lane, Jr. 59 President, PAR Government Systems
Corporation and Rome Research Corporation
Ronald J. Casciano 47 Vice President, C.F.O. and Treasurer
Other senior officers and significant employees of the Company and their
respective ages and positions are:
Name Age Position
---- --- --------
Raymond E. Barnes 53 Vice President, POS Systems
Development, ParTech, Inc.
Robert Bianchi 43 Vice President, Sales and Marketing,
ParTech, Inc.
Brian J. Bluff 38 Vice President, Logistics Management
Systems, PAR Technology Corporation
Edward Bohling 42 Vice President, Information Systems
and Technology, PAR Government
Systems Corporation
Name Age Position
---- --- --------
Sam Y. Hua 39 Vice President and Chief Technical
Officer, ParTech, Inc.
F. Tibertus Lenz 50 Vice President and General Manager,
Ausable Solutions, Inc.
Fred A. Matrulli 56 Vice President, Operations/Logistics
Management Systems, PAR Technology
Corporation
Roger P. McReynolds 56 Vice President, Operations,
ParTech, Inc.
Victor Melnikow 43 Vice President, Finance,
Rome Research Corporation
E. John Mohler 57 Vice President, Marketing/Logistics
Management Systems,PAR Government
Systems Corporation
Timothy Prodanovich 53 Vice President, Customer Service and
Marketing, ParTech, Inc.
John Sheffield 42 Vice President, Restaurant and
Software Development, ParTech, Inc.
Samuel S. Talaba 44 Controller, ParTech, Inc.
Jerry F. Weimar 44 Vice President, Professional Services,
ParTech, Inc.
Ben F. Williams 59 Vice President, Business Development,
Ausable Solutions, Inc.
William J. Williams 39 Vice President, Manufacturing,
ParTech, Inc.
Alexander J. Zanon 62 Senior Vice President, Operations,
PAR Government Systems Corporation
The Company's Directors are elected in classes with staggered three-year
terms with one class being elected at each annual meeting of shareholders. The
Directors serve until the next election of their class and until their
successors are duly elected and qualified. The Company's officers are appointed
by the Board of Directors and hold office at the will of the Board of Directors.
The principal occupations for the last five years of the directors,
executive officers, and other significant employees of the Company are as
follows:
Dr. John W. Sammon, Jr. is the founder of the Company and has been the
Chairman of the Board, President and Director since its incorporation in 1968.
Mr. Charles A. Constantino has been a Director of the Company since 1971
and Executive Vice President since 1974.
Mr. J. Whitney Haney has been a Director of the Company and President of
ParTech, Inc. since April, 1988. He retired in 1997 as President of ParTech,
Inc.
Mr. Sangwoo Ahn was appointed a Director of the Company in March, 1986. He
has been a partner of Morgan, Lewis, Githens & Ahn (investment banking) since
1982.
Dr. James C. Castle was appointed a Director of the Company in December,
1989. Dr. Castle has been the Chairman and CEO of U.S.C.S. International
(previously U.S. Computer Services Corporation) since August, 1992.
Mr. Albert Lane, Jr. was appointed to President, Rome Research Corporation
in 1988. He was additionally appointed President of PAR Government Systems
Corporation in 1997.
Mr. Raymond E. Barnes was promoted to Vice President, Systems Development
of ParTech, Inc. in 1998. Prior to this position, he was the Director of Next
Generation Hardware and Software.
Mr. Robert Bianchi joined PAR in 1999 as Vice President, Sales and
Marketing of ParTech, Inc. Prior to joining the Company, Mr. Bianchi was
President of Productivity Partners.
Mr. Brian J. Bluff was promoted to Vice President of Logistics Management
Systems in 1998. Previously, Mr. Bluff was Vice President of Business
Development for Rome Research Corporation.
Mr. Edward Bohling was promoted to Vice President, Information Systems and
Technology of PAR Government Systems Corporation in 1998. Previously, he was
Director of Special Projects.
Mr. Ronald J. Casciano, CPA, was promoted to Vice President, C.F.O.,
Treasurer in June, 1995. Mr. Gregory T. Cortese was named President, ParTech,
Inc. in June 2000 in addition to General Counsel and Secretary. Previously, he
was the Vice President, Law and Strategic Development since 1998.
Mr. Sam Y. Hua was promoted to Vice President and Chief Technical Officer
in 1998. He joined the Company in 1997 as Vice President of Product Planning. He
previously was President of ISSI Corporation.
Mr. F. Tibertus Lenz was promoted to Vice President and General Manager,
Ausable Solutions, Inc. in June 2000. Previously, Mr. Lenz was Vice President
Manufacturing/Warehousing Systems, ParTech, Inc. since 1989.
Mr. Fred A. Matrulli was named Vice President, Operations/Logistics
Management Systems, in 1998. Previously, he was Vice President Operations, of
PAR Visions Systems Corporation.
Mr. Roger P. McReynolds was promoted in 1998 to Vice President, Operations
of ParTech, Inc. Previously, he held the position of Director of Total Quality
Management.
Mr. Victor Melnikow was promoted to Vice President, Finance of Rome
Research Corporation in July, 1995.
Mr. E. John Mohler was promoted to Vice President, Marketing/Logistics
Management Systems in 1997. He joined the Company in 1994 as Vice President,
Telecommunications Programs for PAR Government Systems Corporation.
Mr. Timothy Prodanovich joined PAR in 2000 as Vice President of Customer
Service and Marketing of ParTech, Inc. Prior to joining the Company, Mr.
Prodanovich was the National Director of Customer Engineering Operations with
Sensormatic Electronics Corporation, Inc. in Boca Raton, FL.
Mr. John Sheffield joined PAR in 2000 as Vice President of Restaurant and
Software Development of ParTech, Inc. Prior to joining the Company, Mr.
Sheffield was the Director of Engineering/Product Development with Dictaphone
Corporation in Stratford, CT.
Mr. Samuel Talaba was named Controller of ParTech, Inc. in 1997. Prior to
that, Mr. Talaba was Cost Accounting Manager.
Mr. Jerry F. Weimar was promoted to Vice President, Professional Services
of ParTech, Inc. in 1998. He joined PAR in 1997 as a Senior Technical Staff.
Previously, Mr. Weimar was a partner with Questra Consulting.
Mr. Ben F. Williams was appointed Vice President, Business Development,
Ausable Solutions, Inc. in December 2000. Previously, Mr. Williams was Vice
President, Business Development, PAR Technology Corporation.
Mr. William J. Williams was promoted to Vice President, Manufacturing of
ParTech, Inc. in February 1998. Prior to this position, Mr. Williams was the
Vice President, Operations.
Mr. Alexander J. Zanon was promoted to Senior Vice President, Operations of
PAR Government Systems Corporation in 1986.
Item 11: Executive Compensation
The information required by this item will appear under the caption
"Executive Compensation" in the Company's 2000 definitive proxy statement for
the annual meeting of stockholders on May 24, 2001 and is incorporated herein by
reference.
Item 12: Security Ownership Of Certain Beneficial Owners
The information required by this item will appear under the caption
"Security Ownership Of Management And Certain Beneficial Owners" in the
Company's 2000 definitive proxy statement for the annual meeting of stockholders
on May 24, 2001 and is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions
The information required by this item will appear under the caption
"Executive Compensation" in the Company's 2000 definitive proxy statement for
the annual meeting of stockholders on May 24, 2001 and is incorporated herein by
reference.
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of the Form 10-K
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Income for the three
years ended December 31, 2000
Consolidated Statements of Comprehensive Income
for the three years ended December 31, 2000
Consolidated Statements of Changes in Shareholders' Equity for
the three years ended December 31, 2000
Consolidated Statements of Cash Flows for the three years
ended December 31, 2000
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Valuation and Qualifying Accounts and Reserves (Schedule II)
(b) Reports on Form 8-K
None
(c) Exhibits
See list of exhibits on page 54
(d) Financial statement schedules
See (a)(2) above.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of PAR Technology Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) on page 31 present fairly, in all material
respects, the financial position of PAR Technology Corporation and its
subsidiaries at December 31, 2000 and December 31, 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a) (2) on page 31
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Syracuse, New York
February 5, 2001
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts) December 31,
------------
2000 1999
---- ----
Assets
Current Assets:
Cash .................................. $ 1,199 $ 953
Accounts receivable-net (Note 4) ...... 30,400 37,436
Inventories (Note 5) .................. 26,776 28,164
Income tax refund claims .............. 56 133
Deferred income taxes (Note 9) ........ 4,255 3,442
Other current assets .................. 1,868 2,042
-------- --------
Total current assets .............. 64,554 72,170
Property, plant and equipment - net (Note 6) 10,098 11,470
Deferred income taxes ...................... 6,321 -
Other assets ............................... 3,963 4,467
-------- --------
$ 84,936 $ 88,107
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable (Note 7) ................ $ 13,856 $ 4,984
Accounts payable ...................... 8,800 7,800
Accrued salaries and benefits ......... 4,208 4,746
Accrued expenses ...................... 2,088 2,497
Deferred service revenue .............. 6,829 5,478
-------- --------
Total current liabilities ......... 35,781 25,505
-------- --------
Deferred income taxes (Note 9) ............. - 459
-------- --------
Long term debt (Note 7) .................... 2,323 -
-------- --------
Shareholders' Equity (Note 8):
Common stock, $.02 par value,
19,000,000 shares authorized;
9,516,711 shares issued
7,723,005 and 8,059,805 outstanding . 190 190
Preferred stock, $.02 par value,
1,000,000 shares authorized ......... - -
Capital in excess of par value ........ 28,071 28,071
Retained earnings ..................... 28,743 42,191
Accumulated comprehensive income ...... (1,203) (764)
Treasury stock, at cost, 1,793,706 and
1,456,906 shares .................... (8,969) (7,545)
-------- --------
Total shareholders' equity ........ 46,832 62,143
-------- --------
$ 84,936 $ 88,107
======== ========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts) Year ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Net revenues:
Product ................................ $ 44,049 $ 88,784 $ 66,854
Service ................................ 31,887 35,990 31,357
Contract ............................... 25,002 20,032 24,069
--------- --------- ---------
100,938 144,806 122,280
--------- --------- ---------
Costs of sales:
Product ................................ 33,753 55,912 45,446
Service ................................ 29,132 34,982 28,518
Contract ............................... 23,541 18,834 21,892
86,426 109,728 95,856
--------- --------- ---------
Gross margin ..................... 14,512 35,078 26,424
--------- --------- ---------
Operating expenses:
Selling, general and administrative .... 25,648 23,455 19,955
Research and development ............... 9,917 8,078 6,040
Non-recurring charges (benefit) (Note 3) 300 1,700 (1,016)
--------- --------- ---------
35,865 33,233 24,979
--------- --------- ---------
Income (loss) from operations ............... (21,353) 1,845 1,445
Other income, net ........................... 525 578 529
Interest expense ............................ (1,011) (531) (124)
--------- --------- ---------
Income (loss) before provision for
income taxes .............................. (21,839) 1,892 1,850
Provision (benefit) for income taxes (Note 9) (8,391) (77) 588
--------- --------- ---------
Net income (loss) ........................... $ (13,448) $ 1,969 $ 1,262
========= ========= =========
Earnings (loss) per share
Diluted ................................ $ (1.71) $ .23 $ .14
========= ========= =========
Basic .................................. $ (1.71) $ .23 $ .14
========= ========= =========
Weighted average shares outstanding
Diluted ................................ 7,848 8,522 8,954
========= ========= =========
Basic .................................. 7,848 8,388 8,819
========= ========= =========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands) Year ended December 31,
2000 1999 1998
---- ---- ----
Net income (loss) ............................ $(13,448) $ 1,969 $ 1,262
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (439) (217) 135
--------- --------- ---------
Comprehensive income (loss) .................. $ (13,887) $ 1,752 $ 1,397
========= ========= =========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Capital in Accumulated
Common Stock excess of Retained Comprehensive Treasury Stock
(In Thousands) Shares Amount Par Value Earnings Income Shares Amount
------ ------ --------- -------- ------ ------ ------
Balance at
December 31, 1997 ............... 9,467 $ 189 $27,875 $38,960 $ (682) (603) $(2,925)
Net income ......................... 1,262
Issuance of common stock upon the
exercise of stock options (Note 8) 47 1 175
Translation adjustments ............ 135
Acquisition of treasury stock ...... (362) (2,164)
------ ------- ------- ------- ------- ----- -------
Balance at
December 31, 1998 ............... 9,514 190 28,050 40,222 (547) (965) (5,089)
Net income ......................... 1,969
Issuance of common stock upon the
exercise of stock options (Note 8) 3 21
Translation adjustments ............ (217)
Acquisition of treasury stock ...... (492) (2,456)
------ ------- ------- ------- ------- ----- -------
Balance at
December 31, 1999 ............... 9,517 190 28,071 42,191 (764) (1,457) (7,545)
Net loss ........................... (13,448)
Translation adjustments ............ (439)
Acquisition of treasury stock ...... (337) (1,424)
------ ------- ------- ------- ------- ----- -------
Balance at
December 31, 2000 ............... 9,517 $ 190 $28,071 $28,743 $(1,203) (1,794) $(8,969)
====== ======= ======= ======= ======= ====== =======
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands) Year ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Cash flows from operating activities:
Net income (loss) .............................. $(13,448) $ 1,969 $ 1,262
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ......... 3,403 2,862 2,405
Provision for bad debts ............... 2,138 2,837 394
Provision for obsolete inventory ...... 4,483 3,770 3,162
Translation adjustments ............... (439) (217) 135
Increase (decrease) from changes in:
Accounts receivable ................... 4,898 6,864 (17,593)
Inventories ........................... (3,095) (4,674) 746
Income tax refund claims .............. 77 (133) 214
Other current assets .................. 174 (675) (27)
Other assets .......................... (27) (95) (605)
Accounts payable ...................... 1,000 (2,426) 1,562
Accrued salaries and benefits ......... (538) 15 927
Accrued expenses ...................... (409) (493) (454)
Deferred service revenue .............. 1,351 1,102 1,352
Income taxes payable .................. - (273) 273
Deferred income taxes ................. (7,593) (392) 2,629
-------- -------- ---------
Net cash provided (used) by operating activities .... (8,025) 10,041 (3,618)
-------- -------- ---------
Cash flows from investing activities:
Capital expenditures ........................... (586) (4,536) (3,177)
Capitalization of software costs ............... (914) (1,012) (1,088)
Net cash used in investing activities ............... (1,500) (5,548) (4,265)
Cash flows from financing activities:
Net borrowings (payments) under
line-of-credit agreements .................... 8,822 (2,403) 7,192
Net proceeds from the issuance of long-term debt 2,373 - -
Proceeds from the exercise of stock options .... - 21 176
Acquisition of treasury stock .................. (1,424) (2,456) (2,164)
-------- -------- ---------
Net cash provided (used) by financing activities .... 9,771 (4,838) 5,204
-------- -------- ---------
Net increase (decrease) in cash
and cash equivalents .............................. 246 (345) (2,679)
Cash and cash equivalents at
beginning of year ................................. 953 1,298 3,977
-------- -------- ---------
Cash and cash equivalents at
end of year ....................................... $ 1,199 $ 953 $ 1,298
======== ======== =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ................................... $ 978 $ 530 $ 121
Income taxes, net of refunds ............... (807) 655 (2,507)
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Basis of consolidation
The consolidated financial statements include the accounts of PAR
Technology Corporation and its wholly owned subsidiaries (ParTech, Inc., Ausable
Solutions, Inc., PAR Government Systems Corporation, Rome Research Corporation
and PAR Vision Systems Corporation), collectively referred to as the "Company."
All significant intercompany transactions have been eliminated in consolidation.
Revenue recognition
During 2000, the Company amended its revenue recognition policy in order to
comply with Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition. This
change did not have a material impact on the results of operations. Revenues
from sales of products are generally recorded as the products are shipped,
provided that no significant vendor and post-contract support obligations remain
and the collection of the related receivable is probable. The Company's service
revenues are recognized ratably over the related contract period or as the
services are performed. Billings in advance of the Company's performance of such
work are reflected as deferred service revenue in the accompanying consolidated
balance sheet.
The Company's contract revenues result primarily from contract services
performed for the United States Government under a variety of
cost-reimbursement, time-and-material and fixed-price contracts. Contract
revenues, including fees and profits, are recorded as services are performed
using the percentage-of-completion method of accounting, primarily based on
contract costs incurred to date compared with estimated costs at completion.
Anticipated losses on all contracts and programs in process are recorded in full
when identified. Unbilled accounts receivable are stated at estimated realizable
value. Contract costs, including indirect expenses, are subject to audit and
adjustment through negotiations between the Company and government
representatives. Contract revenues have been recorded in amounts that are
expected to be realized on final settlement. The Company follows accepted
industry practice and records amounts retained by the government on contracts as
a current asset.
Statement of cash flows
For purposes of reporting cash flows, the Company considers all highly
liquid investments, purchased with a remaining maturity of three months or less,
to be cash equivalents. The effect of changes in foreign-exchange rates on cash
balances is not material.
Inventories
Inventories are valued at the lower of cost or market, cost being
determined on the basis of the first-in, first-out (FIFO) method.
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated using
the straight-line method over the estimated useful lives of the assets, which
range from three to twenty years. Expenditures for maintenance and repairs are
expensed as incurred.
Warranties
A majority of the Company's products are under warranty for defects in
material and workmanship for various periods of time. The Company establishes an
accrual for estimated warranty costs at the time of sale.
Income taxes
The provision for income taxes is based upon pretax earnings with deferred
income taxes provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities. The
Company believes it is more likely than not to realize the net deferred tax
asset and accordingly no valuation allowance has been provided.
Foreign currency
The assets and liabilities for the Company's international operations are
translated into U.S. dollars using year-end exchange rates. Income statement
items are translated at average exchange rates prevailing during the year. The
resulting translation adjustments are recorded as a separate component of
shareholders' equity under the heading Accumulated Comprehensive Income.
Exchange gains and losses on intercompany balances of a long-term investment
nature are also recorded as a translation adjustment. Foreign currency
transaction gains and losses, which historically have been immaterial, are
included in net income.
Research and development costs
The Company capitalizes certain costs related to the development of
computer software 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 feasibility are capitalized and amortized on a product-by-product
basis when the product is available for general release to customers. The
unamortized computer software costs included in other assets amounted to
$2,799,000 and $3,183,000 at December 31, 2000 and 1999, respectively. Annual
amortization, charged to cost of sales, is the greater of the amount computed
using the ratio that current gross revenues for a product bear to the total of
current and anticipated future gross revenues for that product, or the
straight-line method over the remaining estimated economic life of the product.
Amortization of capitalized software costs amounted to $1,297,000, $1,183,000
and $526,000 in 2000, 1999, and 1998, respectively.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), encourages, but does not require companies
to record compensation cost for stock-based compensation plans at fair value.
The Company has elected to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations.
Earnings per share
Earnings per share are calculated in accordance with Statement of Financial
Accounting Standards No. 128 Earnings per Share (SFAS 128), 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. It 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 year ended 2000
-----------------------
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic and Diluted EPS $(13,448) 7,848 $ (1.71)
======== ===== ========
The 2000 diluted EPS calculation excludes the effect of stock options as
they would have been antidilutive.
For the year ended 1999
-----------------------
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS $1,969 8,388 $ .23
Effect of Stock Options - 134 -
------ ----- --------
Diluted EPS $1,969 8,522 $ .23
====== ===== ========
For the year ended 1998
-----------------------
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS $1,262 8,819 $ .14
Effect of Stock Options - 135 -
------ ----- --------
Diluted EPS $1,262 8,954 $ .14
====== ===== ========
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities and
revenues and expenses (as well as disclosures of contingent liabilities) during
the reporting period. Actual results could differ from those estimates.
Derivatives
In June 1998, the Financial Accounting Standards Board issued No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The Statement
establishes accounting and reporting standards for derivative financial
statements beginning in 2001. Adoption of Statement No. 133 is not expected to
have a significant effect on the Company's consolidated results of operations,
financial position or cash flows.
Note 2 - Business Operations
In 2000, the Company incurred an after tax loss of $13.4 million.
Additionally, the Company had an operating cash flow deficit of $8 million. The
Company's primary source of liquidity has been cash flows from operations and
borrowings under its existing credit facilities. In 2000, the Company
experienced a slowdown in capital spending of its restaurant customers which
management believes was due to post Y2K reduction and to a delay in the release
of new software products.
Management has implemented certain cost cutting measures in personal and
discretionary expenses. In addition, the Company is focusing on increasing its
revenue base through further penetration of new and existing customers including
the introduction of new software products, and the pursuit of strategic
partnerships which should provide both the expanded uses of the Company current
products and the introduction of new products. The Company's focus on tight cost
control and improved operating profits and an anticipated improvement in market
conditions is expected to enhance the Company's liquidity position. Based on its
plan, and the availability on its working capital lines of credit, the Company
expects that it will be able to meet its obligations as they become due.
Certain of the Company's current credit facilities are negotiated annually
while others expire April 30, 2002. Management continues to evaluate its overall
financing requirements to ensure adequate financing is available to fund its
business operations.
Note 3 - Nonrecurring Charges
The results for 2000 include a nonrecurring charge of $300,000 ($200,000
after tax or $.03 loss per share) relating to the sale of the Company's Vision
business.
On February 1, 2000 AmeriServe Food Distribution, Inc., a large distributor
to fast-food restaurants, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. During 1999 equipment sold by the Company for use in certain
Tricon restaurants was purchased through AmeriServe. As a result, at December
31, 1999, the Company was owed $1.7 million in trade accounts receivable.
Accordingly, due to this uncertainty, the Company recorded a one-time after tax
charge to earnings of $1.1 million ($0.13 loss per share) in the fourth quarter
of 1999.
Note 4 - Accounts Receivable
The Company's net accounts receivable consist of:
December 31,
(In Thousands)
--------------
2000 1999
---- ----
Government segment:
United States Government -
Billed ............... $ 2,278 $ 1,587
Unbilled ............. 13 66
------- -------
2,291 1,653
------- -------
Other -
Billed ............... 1,309 1,480
Unbilled ............. 80 23
------- -------
1,389 1,503
------- -------
Other segments:
Trade accounts receivable 26,720 34,280
------- -------
$30,400 $37,436
======= =======
At December 31, 2000 and 1999, the Company had recorded a reserve for
doubtful accounts of $4,420,000 and $3,325,000, respectively, against trade
accounts receivable. Trade accounts receivable are primarily with major
fast-food corporations or their franchisees. At December 31, 2000 and 1999, the
Company had also recorded reserves of $24,000 and $90,000, respectively, against
government accounts receivable.
Note 5 - Inventories
Inventories are used primarily in the manufacture, maintenance, and service
of transaction processing systems. Inventories are net of related reserves. The
components of inventory are:
December 31,
(In Thousands)
--------------
2000 1999
---- ----
Finished goods $ 6,425 $ 6,886
Work in process 2,956 2,763
Component parts 5,612 6,001
Service parts 11,783 12,514
------- -------
$26,776 $28,164
======= =======
At December 31, 2000 and 1999 the Company had recorded reserves for
obsolete inventory of $3,769,000 and $2,208,000, respectively.
Note 6 - Property, Plant and Equipment
The components of property, plant and equipment are:
December 31,
(In Thousands)
--------------
2000 1999
---- ----
Land ........................ $ 253 $ 253
Buildings and improvements .. 7,067 7,868
Rental property ............. 3,491 3,390
Furniture and equipment ..... 24,047 24,327
34,858 35,838
Less accumulated depreciation
and amortization ........... 24,760 24,368
------- -------
$10,098 $11,470
======= =======
The Company subleases a portion of its headquarters facility to various
tenants. Rent received from these leases totaled $967,000, $744,000 and $642,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
The Company leases office space under various operating leases. Rental
expense on these operating leases was approximately $1,113,000, $938,000 and
$919,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
Future minimum lease payments under all noncancelable operating leases are
(in thousands):
2001 $1,005
2002 829
2003 376
2004 235
2005 215
Thereafter 69
------
$2,729
======
Note 7 - Debt
The Company has an aggregate of $18,500,000 in bank lines of credit. This
amount was reduced from the $27.5 million of available lines at September 30,
2000 due to the expiration and re-negotiation of certain unused facilities.
Certain lines totaling $11,000,000 allow the Company to choose among unsecured
borrowings, which bear interest at the prime rate (9.5% at December 31, 2000),
banker's acceptance borrowings, which bear interest at a rate below the prime
rate, or other bank negotiated rates below prime. These lines are negotiated
annually. The remaining line of $7,500,000 bears interest at the prime rate,
requires a compensating balance and expires on April 30, 2002. At December 31,
2000, $13,806,000 was outstanding under these lines at a weighted average
interest rate of 8.2%.
The Company has a $2.3 million mortgage collateralized by its corporate
wellness facility. The annual mortgage payment including interest totals
$250,000. The mortgage bears interest at the rate of 8.375% and the remaining
balance is due on May 1, 2010. At December 31, 2000, the current portion of this
mortgage totaling $50,000 was included in notes payable.
Note 8 - Common Stock
The Company has reserved 2,345,643 shares under its stock option plan.
Options under this Plan may be incentive stock options or nonqualified options.
Stock options are nontransferable other than upon death. Option grants become
exercisable no less than six months after the grant and typically expire ten
years after the date of the grant.
A summary of the stock options follows:
No. of Shares Weighted Average
(In Thousands) Exercise Price
-------------- --------------
Outstanding at December 31, 1997 .. 579 $ 5.31
Granted ...................... 143 6.51
Exercised .................... (47) 3.76
Forfeited .................... (6) 6.42
----- --------
Outstanding at December 31, 1998 .. 669 5.67
Granted ...................... 469 4.87
Exercised .................... (3) 6.72
Forfeited .................... (164) 9.21
----- --------
Outstanding at December 31, 1999 .. 971 4.68
Granted ...................... 592 3.52
Exercised .................... - -
Forfeited .................... (48) 5.25
----- --------
Outstanding at December 31, 2000 .. 1,515 $ 4.21
===== ========
Shares remaining
available for grant .......... 830
=====
Total shares vested and exercisable
as of December 31, 2000 ...... 602 $ 4.30
===== ========
During 1999, pursuant to the terms of the plan, grants of 154,000 incentive
stock options were cancelled at a price of $9.25 and replacement options granted
at a price of $4.75.
Stock options outstanding at December 31, 2000 are summarized as follows:
Range of Number Weighted Average Weighted Average
Exercise Prices Outstanding Remaining Life Exercise Price
--------------- ----------- -------------- --------------
$2.03 - $4.00 738 6.0 Years $3.08
$4.01 - $6.00 596 8.8 Years $4.85
$6.01 - $9.25 181 6.3 Years $6.69
$2.03 - $9.25 1,515 7.1 Years $4.21
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 2000, 1999 and 1998:
2000 1999 1998
---- ---- ----
Risk-free interest rate ...... 6.3% 5.9% 5.5%
Dividend yield ............... N/A N/A N/A
Volatility factor ............ 40% 39% 48%
Weighted average expected life 7 Years 6 Years 6 Years
Had compensation cost for the Company's stock-based compensation plans and
other transactions been determined based on the fair values of the fiscal year
2000, 1999 and 1998 grant dates for those awards, consistent with the
requirements of SFAS No. 123, Accounting for Stock-Based Compensation, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below (in thousands, except per share data):
2000 1999 1998
---- ---- ----
Net income (loss):
As reported ................ $ (13,448) $ 1,969 $ 1,262
Pro forma .................. $ (14,053) $ 1,492 $ 1,043
Earnings (loss) per share:
As reported -- Diluted.... $ (1.71) $ .23 $ .14
-- Basic...... $ (1.71) $ .23 $ .14
Proforma -- Diluted.... $ (1.79) $ .18 $ .12
-- Basic...... $ (1.79) $ .18 $ .12
Note 9 - Income Taxes
The provision (benefit) for income taxes consists of:
Year ended December 31,
(In Thousands)
--------------
2000 1999 1998
---- ---- ----
Current tax expense:
Federal ....................... $ (443) $ 321 $ (122)
State ....................... 39 265 161
Foreign ....................... 29 382 312
------- ------- -------
(375) 968 351
------- ------- -------
Deferred income tax:
Federal ....................... (6,950) (1,084) 230
State ......................... (1,066) 39 183
Foreign ....................... - - (176)
------- ------- -------
(8,016) (1,045) 237
------- ------- -------
Provision (benefit) for income taxes $(8,391) $ (77) $ 588
======= ======= =======
Deferred tax liabilities (assets) are comprised of the following at:
December 31,
(In Thousands)
--------------
2000 1999
---- ----
Software development expense . $ 952 $ 1,082
Depreciation ................. 616 380
-------- --------
Gross deferred tax liabilities 1,568 1,462
-------- --------
Allowances for bad debts,
inventory and warranty ..... (2,990) (3,205)
Capitalized inventory costs .. (99) (106)
Wage and salary accruals ..... (343) (321)
Federal net operating loss ... (6,364) -
State net operating loss ..... (1,116) (50)
Foreign net operating loss ... (522) (522)
Foreign tax credit ........... (533) (228)
Other ........................ (177) (13)
-------- --------
Gross deferred tax assets .... (12,144) (4,445)
-------- --------
$(10,576) $ (2,983)
======== ========
Total income tax provision differed from total tax expense as computed by
applying the statutory U.S. federal income tax rate to income before taxes. The
reasons were:
Year ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Statutory U.S. federal tax rate .. (34.0)% 34.0% 34.0%
State taxes net of federal benefit .1 1.6 15.6
State NOL ........................ (4.9) - -
FSC benefit ...................... - (30.1) (6.9)
Prior years' adjustment .......... .3 (9.4) (10.9)
Non deductible expenses .......... .4 8.3 10.4
Research credit .................. (.2) (6.3) -
Foreign income taxes ............. (.1) (2.8) (9.5)
Other ............................ - .6 (.9)
---- ---- ----
(38.4)% (4.1)% 31.8%
===== ==== ====
The provision for income taxes is based on income (loss) before income
taxes as follows:
Year ended December 31,
(In Thousands)
--------------
2000 1999 1998
---- ---- ----
Domestic operations $(20,849) $ 1,465 $ 2,450
Foreign operations (990) 427 (600)
-------- -------- --------
Total ........ $(21,839) $ 1,892 $ 1,850
Note 10 - Employee Benefit Plans
The Company has a deferred profit-sharing retirement plan that covers
substantially all employees. The Company's annual contribution to the plan is
discretionary. The contributions to the plan in 2000, 1999 and 1998 were
approximately $257,000, $1,030,000 and $957,000, respectively. The plan also
contains a 401(k) provision that allows employees to contribute a percentage of
their salary.
The Company also maintains an incentive-compensation plan. Participants in
the plan are key employees as determined by executive management. Compensation
under the plan is based on the achievement of predetermined financial
performance goals of the Company and its subsidiaries. Awards under the plan are
payable in cash. In 2000, there were no cash awards under the plan. In 1999 and
1998, cash awards under the plan totaled $360,000 and $253,000 respectively.
Note 11 - Contingencies
The Company is subject to legal proceedings, which arise, in the ordinary
course of business. Additionally, U.S. Government contract costs are subject to
periodic audit and adjustment. In the opinion of management, the ultimate
liability, if any, with respect to these actions will not materially affect the
financial position or results of operations of the Company.
Note 12 - Segment and Related Information
The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products and
services.
In 2000, 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 intregrated 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:
Year ended December 31,
(In Thousands)
--------------
2000 1999 1998
---- ---- ----
Revenues:
Restaurant ................... $ 72,676 $ 116,396 $ 92,677
Industrial ................... 2,668 7,623 4,668
Government ................... 25,002 20,032 24,069
Vision ....................... 592 755 866
--------- --------- ---------
Total .................. $ 100,938 $ 144,806 $ 122,280
========= ========= =========
Income (loss) from operations:
Restaurant ................... $ (18,940) $ 2,154 $ (788)
Industrial ................... (2,556) 463 (273)
Government ................... 1,285 1,396 2,097
Vision ....................... (392) (468) (607)
Corporate .................... (450) -- --
Nonrecurring (charges) benefit (300) (1,700) 1,016
--------- --------- ---------
(21,353) 1,845 1,445
Other income, net ................. 525 578 529
Interest expense .................. (1,011) (531) (124)
--------- --------- ---------
Income (loss) before provision
for income taxes ............. $ (21,839) $ 1,892 $ 1,850
========= ========= =========
Identifiable assets:
Restaurant ................... $ 74,635 $ 74,574 $ 80,236
Industrial ................... 2,322 2,206 3,333
Government ................... 5,200 6,036 6,022
Vision ....................... 468 1,112 1,520
Corporate .................... 2,311 4,179 2,315
--------- --------- ---------
Total .................. $ 84,936 $ 88,107 $ 93,426
========= ========= =========
Depreciation and amortization:
Restaurant ................... $ 2,726 $ 2,088 $ 1,486
Industrial ................... 32 219 150
Government ................... 113 159 128
Vision ....................... 32 40 86
Corporate .................... 500 356 555
--------- --------- ---------
Total .................. $ 3,403 $ 2,862 $ 2,405
========= ========= =========
Capital expenditures:
Restaurant ................... $ 113 $ 950 $ 2,855
Industrial ................... 124 58 57
Government ................... 46 421 87
Vision ....................... 12 36 30
Corporate .................... 291 3,071 148
--------- --------- ---------
Total .................. $ 586 $ 4,536 $ 3,177
========= ========= =========
The following table presents revenues by country based on the location of
the use of the product or services.
2000 1999 1998
---- ---- ----
United States ..... $ 81,595 $119,378 $102,468
Other Countries.... 19,343 25,428 19,812
-------- -------- --------
Total ......... $100,938 $144,806 $122,280
======== ======== ========
The following table presents property by country based on the location of
the asset.
2000 1999 1998
---- ---- ----
United States...... $ 76,203 $ 77,438 $ 84,656
Other Countries.... 8,733 10,669 8,770
-------- -------- --------
Total ......... $ 84,936 $ 88,107 $ 93,426
======== ======== ========
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
2000 1999 1998
---- ---- ----
Restaurant segment:
McDonald's Corporation..... 32% 38% 40%
Tricon Corporation ........ 22% 27% 22%
Government segment:
Department of Defense...... 25% 14% 20%
All Others .................. 21% 21% 18%
--- --- ---
100% 100% 100%
=== === ===
Note 13 - Fair Value of Financial Instruments
Financial instruments consist of the following:
December 31, 2000
(In Thousands)
--------------
Carrying Fair
Value Value
----- -----
Cash and cash equivalents.... $ 1,199 $ 1,199
Notes payable ............... $13,856 $13,856
Long term debt .............. $ 2,323 $ 2,270
Fair value of financial instruments classified as current assets or
liabilities approximate carrying value due to the short-term maturity of the
instruments. The estimated value of the Company's long-term debt is based on
interest rates at December 31, 2000 for new issues with similar remaining
maturities.
Note 14 - Selected Quarterly Financial Data (Unaudited)
Quarter ended
(In Thousands Except Per Share Amounts)
---------------------------------------
2000 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues ................. $ 19,251 $ 24,314 $ 28,958 $ 28,415
Gross margin ................... 1,567 3,024 6,109 3,812
Net loss ....................... (4,523) (3,252) (1,179) (4,494)
Diluted and basic loss per share $ (.56) $ (.41) $ (.15) $ (.58)
======== ======== ======== ========
Quarter ended
(In Thousands Except Per Share Amounts)
---------------------------------------
1999 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues ................. $ 35,746 $ 38,951 $ 32,582 $ 37,527
Gross margin ................... 9,246 10,029 7,559 8,244
Net income (loss) .............. 766 1,174 753 (724)
Diluted and basic
Earnings (loss) per share $ .09 $ .14 $ .09 $ (.09)
======== ======== ======== ========
In the fourth quarter of 2000, the Company recorded additional adjustments
and/or reserves in the amount of $3.2 million ($1.9 million after tax or a loss
per share of $.25) relating to service inventory, severance and bad debts.
In the first quarter of 2000, the Company recorded a charge of $550,000
($339,000 after tax or a loss per share of $.04) relating to severance costs.
On February 1, 2000 AmeriServe Food Distribution, Inc., a large distributor
to fast-food restaurants, filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. During 1999, equip-ment sold by the Company for use in certain
Tricon restaurants was purchased through AmeriServe. As a result, at December
31, 1999 the Company was owed $1.7 million in trade accounts receivable.
Accordingly, due to this uncertainty, the Company recorded a one-time after tax
charge to earnings of $1.1 million ($0.13 loss per share) in the fourth quarter
of 1999.
During the fourth quarter annual physical inventory of its service parts in
1999, the Company discovered unreconciled differences between the physical count
and the perpetual inventory records. As a result, the Company recorded a charge
of $2.6 million ($1.7 million after tax) or $.20 per share. The third and fourth
quarter of 1999 include tax benefits relating to adjustments of current and
prior years accruals of $500,000 ($.06 per share) and $290,000 ($.03 per share),
respectively.
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
(In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
---------
Balance at
beginning of Charged to Costs Charged to Balance at end
Description period and Expenses Other Accounts Deductions of period
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful
Accounts - deducted from
Accounts Receivable in
the Balance Sheet
2000 $3,415 2,138 (1,109) (a) $4,444
1999 $1,195 2,837 (617) (b) $3,415
1998 $2,362 394 (1,561) (c) $1,195
(a) Uncollectible accounts written off during 2000.
(b) Uncollectible accounts written off during 1999.
(c) Uncollectible accounts written off during 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
---------
Balance at
beginning of Charged to Costs Charged to Balance at end
Description period and Expenses Other Accounts Deductions of period
- ------------------------------------------------------------------------------------------------------------------------------------
Inventory Reserves
- - deducted from Inventory
in the Balance Sheet
2000 $ 2,208 4,483 (2,922) $ 3,769
1999 $ 2,123 5,683 (5,598) $ 2,208
1998 $ 3,817 3,162 (4,856) $ 2,123
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PAR TECHNOLOGY CORPORATION
March 29, 2001 /s/John W. Sammon, Jr.
-------------------------------
John W. Sammon, Jr.
Chairman of Board and President
_________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
- --------------------------------------------------------------------------------
Signatures Title Date
- --------------------------------------------------------------------------------
/s/John W. Sammon, Jr.
- ----------------------
John W. Sammon, Jr. Chairman of Board and March 29, 2001
President (Principal
Executive Officer)
and Director
/s/Charles A. Constantino
- -------------------------
Charles A. Constantino Executive Vice President March 29, 2001
and Director
/s/J. Whitney Haney
- -------------------
J. Whitney Haney Director March 29, 2001
/s/Ronald J. Casciano
- ---------------------
Ronald J. Casciano Vice President, Chief Financial March 29, 2001
Officer and Treasurer
List of Exhibits
Exhibit
No. Description of Instrument
- -----------------------------------------------------------------------------------------------------------
3.1 Certificate of Incorporation, as amended Filed as Exhibit 3.1 to Registration
Statement on Form S-2 (Registration
No. 333-04077) of PAR Technology
Corporation incorporated herein by
reference.
3.2 Certificate of Amendment to the Filed as Exhibit 3.1 to Registration
Certificate of Incorporation Statement on Form S-2 (Registration
No. 333-04077) of PAR Technology
Corporation incorporated herein by
reference.
3.3 By-laws, as amended. Filed as Exhibit 3.1 to Registration
Statement on Form S-2 (Registration
No. 333-04077) of PAR Technology
Corporation incorporated herein by
reference.
4 Specimen Certificate representing the Filed as Exhibit 3.1 to Registration
Common Stock. Statement on Form S-2 (Registration
No. 333-04077) of PAR Technology
Corporation incorporated herein by
reference.
11 Statement re computation of Earnings per
share.
22 Subsidiaries of the registrant
23 Consent of independent accountants
* Confidential treatment granted as to certain portions.