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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, 2001.
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)
(Registrant's Telephone number, including area code) (315) 738-0600
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. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the average price as of March 18, 2002 - $12,549,000.
The number of shares outstanding of registrant's common stock, as of March
18, 2002 - 7,880,760 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 2001
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 7A. Quantitative and Qualitative Disclosures About Market Risk
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
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
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.
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, 2001 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, may include video monitors
and/or 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 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 comprehensive software application is the
iN.fusion suite, which consists of three separate applications: iNtouch(TM),
iNform(TM) and iNsite(TM). The iNtouch 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, 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, is operational Decisionware for the entire
organization and provides automation management reporting and process
integration. The Company's additional POS software, GT/Exalt(TM), is the
predominant software in the QSR industry. The capabilities of GT/Exalt are
extensive and integrate a high degree of flexibility for the transport and
display of orders in a real-time fashion and for the design and integration of
the Company's display data-entry hardware terminals.
Hardware. The Company's hardware platform system, POS4XP(TM), 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. POS4XP'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).
POS4XP supports a distributed processing environment and incorporates an
advanced restaurant technology system, utilizing Intel microprocessors, standard
PC expansion slots, Ethernet LAN, standard Centronics printer ports as well as
USB 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.
The PAR Customer Interactive Terminal (CIT) offers an intuitive touch
screen interface which integrates the customer into each transaction. The highly
configurable PAR CIT design enables presentation of promotional advertisements
as well as information capture, such as customer feedback and signatures. It
also accepts electronic payments from credit and debit cards and from RF-ID
tags. The CIT is user friendly, and is built using the same rugged design,
proven technology and software compatibility as our POS4XP.
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 utilizes
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 restaurant. 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 Implementation 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 making purchases in quick-service restaurants,
convenience stores, gasoline stations, drugstores, and many other large chain
retailers. The Company's initiatives will facilitate loyalty programs to the
Point-Of-Sale terminal with sub-second speed and create a simplified and
convenient shopping experience for customers while protecting their privacy.
Installation and Training
In the U.S., Canada, Europe, South Africa, Middle East, Australia and Asia,
PAR personnel provide installation, 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 equipment and systems, as well as those of
third parties, through a 24-hour central telephone customer support and
diagnostic service in Boulder, Colorado and a field service network consisting
of nearly 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, Middle
East, 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 Major Accounts Group works with
major restaurant chain corporate 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 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 restaurant industry.
Competition
The competitive landscape in the restaurant market is driven primarily by
functionality, reliability, quality, performance, pricing, 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 transacts business are highly competitive. Most
of our major customers have approved several 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, 2001, the Company's backlog of unfilled orders for the
Restaurant segment was approximately $9,000,000 compared to $10,200,000 a year
ago. Most of the present orders will be delivered in 2002. 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 $5,495,000
in 2001, $7,613,000 in 2000 and $6,336,000 in 1999. 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 continued
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.
Government Segment
PAR operates two wholly-owned subsidiaries in the government business
segment, PAR Government Systems Corporation (PGSC) and Rome Research Corporation
(RRC). In addition, PAR also operates a business unit, PAR LMS, involved in
Logistics Management Information Services. These companies provide the U.S.
Department of Defense (DoD) and other federal and state government
organizations, with a wide range of technical services and products. Some of the
more significant areas with which the Company is involved include design,
development and systems integration of state-of-the-art data archiving,
processing and retrieval systems, advanced research and development for
high-technology projects, software development/testing, engineering services,
and technical and support services for government communications facilities. The
Company's offerings cover the entire development cycle for Government systems,
including requirements analysis, design specification, development,
implementation, installation, test and evaluation. PAR LMS provides customers
with a state-of-the-art solution for the monitoring of transport assets and
cargo throughout the intermodal shipment lifecycle.
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 archiving, 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. IS&T also designs and develops a distributed geospatial data archive
system for the National Nuclear Security Administration Remote Sensing
Laboratory (NNSA/RSL). 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. The Company participates in sensor and system development on the
Defense Advanced Research Project Agency (DARPA) sponsored Affordable Moving
Surface Target Engagement (AMSTE) program.
Signal & Image Processing (SIP)
The Signal and Image Processing (SIP) business sector supports the
development and implementation 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 U.S. Army, Navy and Air
Force, 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 communications 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*WareTM 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.
Logistics Management Systems (LMS)
Par Logistic Management Systems (LMS) 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.
The data is then provided to each customer through an enterprised based internet
information subscription service. The initial product offering is the CT-100
Chassis Tracking System, which provides in yard and in transit visibility of the
chassis that are used by ocean carriers and rail carriers to move intermodal
containers for the over-the-road portion of its shipment. This system is
entering into a Commercial Deployment phase, which will allow the evaluation by
a wide range of commercial customers for adoption into a fleet wide
installation.
Communications Support Services
The Company provides a wide range of technical and support services to
sustain mission critical DoD 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/receiver facilities, and extremely high frequency (EHF) and super
high frequency (SHF) satellite communication heavy earth terminal facilities.
The Company supports these DoD communications facilities, as well as other
telecommunications equipment and information systems, at customer locations 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 counter-measures, 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 1999 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, Northrop-Grumman (which includes Litton-PRC-TASC), Harris, and SAIC
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. Many of PAR Government's DoD customers are now migrating
to commercial software standards, applications, and solutions. In that light,
PAR Government is utilizing its Internal Research and Development to migrate
existing solutions into software product lines that will support the DoD
geospatial community (i.e., NIMA, US Air Force, etc.).
Backlog
The dollar value of existing Government contracts at December 31, 2001, net
of amounts relating to work performed to that date, was approximately
$50,695,000, of which $19,174,000 was funded. At December 31, 2000, the
comparable amount was approximately $45,500,000, of which $15,900,000 was
funded. Funded represents amounts committed under contract by Government
agencies and prime contractors. The December 31, 2001 Government contract
backlog of $50,695,000 represents firm, existing contracts. Approximately
$22,900,000 of this amount will be completed in calendar year 2002 as funding is
committed.
Industrial Segment
Ausable Solutions, Inc. (ASI), a wholly owned subsidiary of PAR, is a
premier supplier of transaction processing solutions and the best source for
bringing our customer's manufacturing, warehousing, and other operations into
the e-Production age. TranSend, the Company's high-volume transaction processing
product, is designed to expand the shop-floor capabilities of SAP and other
enterprise information systems. The Company provides a workflow empowered
business process integration tailored to the needs of plant workers that brings
effective utilization of Enterprise information and Plant operations data to the
supply chain, customers and throughout the total enterprise.
For Fortune 500 industrial companies, ASI 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.
Products
A variety of products employing imaginative solutions at various price
levels are offered by ASI all designed for the utmost in efficiency and lowest
cost of ownership.
Our primary product offering is TranSend, which is the high volume
transaction processing engine from ASI designed for total compatibility with SAP
applications and geared to channel the power of SAP into production operations
for the ultimate in manufacturing efficiency and internet compatibility. It is
the method of choice for bringing production squarely into the internet age.
This platform is set up to operate the very same way the customer's legacy
system already operates. This approach reduces the learning curve allowing
improved results.
TranSend also allows users to develop business processes without the need
for writing special codes for faster and more accurate implementation in a less
costly manner. This system can be easily upgraded to work with any new products
offered by SAP and currently is highly compatible with any and all SAP
transactions. TranSend uses SAP tools to define required interface procedures.
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 installed in the customer's manufacturing or
warehousing environment as a plant is constructed. The Company has formed
strategic business alliances 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 incurred by ASI on internally funded projects were
approximately $1,798,000 in 2001, $2,064,000 in 2000, and $1,407,000 in 1999.
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.
Employees
As of December 31, 2001, the Company had 1,000 employees, approximately 56%
of whom are engaged in the Company's Restaurant segment, 36% 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 15% 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
Rome, NY............ Government Research and Development 23,400
Boulder, CO......... Restaurant Service 21,200
Norcross, GA........ Industrial Sales and Research and
Development 12,700
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, 2001, there were
approximately 680 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, 2001 as reported by New York Stock Exchange:
2001 2000
---- ----
Period Low High Low High
------ --- ---- --- ----
First Quarter ........... $ 1.75 $ 2.62 $ 4.31 $ 6.25
Second Quarter .......... $ 2.00 $ 4.10 $ 3.69 $ 4.75
Third Quarter ........... $ 2.60 $ 4.30 $ 2.75 $ 4.94
Fourth Quarter .......... $ 2.53 $ 3.25 $ 1.62 $ 3.06
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,
-----------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Total revenues .................. $ 118,483 $ 100,938 $ 144,806 $ 122,280 $ 100,020
========= ========= ========= ========= =========
Net income (loss) ............... $ 520 $ (13,448) $ 1,969 $ 1,262 $ (8,719)
========= ========= ========= ========= =========
Diluted earnings (loss) per share $ .07 $ (1.71) $ .23 $ .14 $ (.99)
========= ========= ========= ========= =========
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Working capital .... $29,406 $28,773 $46,665 $50,287 $53,382
Total assets ....... $89,024 $84,936 $88,107 $93,426 $83,204
Long-term debt ..... $ 2,268 2,323 - - -
Shareholders' equity $47,587 $46,832 $62,143 $62,826 $63,417
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
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.
The following discussion and analysis highlights items having a significant
effect on operations during the three-year period ended December 31, 2001. 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 - 2001 Compared to 2000
The Company reported revenues of $118.5 million for the year ended December
31, 2001, an increase of 17% from the $100.9 million reported in 2000. The
Company recorded net income of $520,000, or diluted earnings per share of $.07
for 2001. This compares to a net loss of $13.4 million or diluted loss per share
of $1.71 for 2000.
The operating results for 2001 represent a significant improvement from
2000 and was due to a dramatic turnaround in the Company's restaurant segment.
This was attributable to an increase in capital spending by numerous restaurant
customers, release of new and improved products as well as operating cost
reductions implemented over the last year. The Company was successful in adding
13 new customer accounts consistent with its strategy to diversify its customer
base. Looking forward, the Company will continue to pursue new markets for its
products including gaming, specialty retail and banking.
Product revenues were $54.4 million in 2001, an increase of 24% from the
$44 million recorded in 2000. The growth in product revenue is attributable to
the significant recovery of the Company's restaurant business in 2001 after a
decline in 2000. The Company added several new accounts in 2001 such as Boston
Market and Carnival Cruise Lines. In addition, the Company achieved growth with
its traditional customers including Tricon and McDonald's. This turnaround can
be attributed to several factors, including the release of the Company's new
hardware product, POS4XP, increased demand for its integrated software suite and
a general improvement in economic conditions in the Company's marketplace.
Customer service revenues were $33.6 million in 2001, an increase of 5%
from the $31.9 million reported in 2000. This increase was the result of growth
in field service and call center revenue due to new contracts and certain price
increases. Installation revenue also improved which is directly related to the
increased product volume discussed above. These increases were partially offset
by a decline in depot repair volume due to improved product reliability. The
Company's service offerings include installation, twenty-four hour help desk
support and various on-site service options.
Contract revenues were $30.5 million in 2001, an increase of 22% compared
to the $25 million recorded in 2000. The continued success of the Company's
government business is due to several factors, including various naval contracts
to operate and maintain communications in support of fleet operations. The
Company has established a growing reputation for outsourcing of Naval
Telecommunications activities. Additionally, revenue grew due to the Company's
work in mapping certain watershed regions in New York State. In 2001, contract
revenues also experienced growth in the areas of logistic tracking of mobile
chassis under its Cargomate contracts.
Product margins were 34% in 2001 compared to 23% in 2000. This margin
improvement was attributable to a more favorable product mix, including a higher
software content, and a reduction in manufacturing overhead costs. The Company
also significantly improved its absorption of fixed manufacturing costs as
production levels increased substantially over 2000, and reduced its provision
for inventory obsolescence due to improved inventory management.
Customer service margins were 19% in 2001 compared to 9% in 2000. This
margin improvement was the result of successfully negotiated price increases and
improved efficiencies resulting from the Company's investment in service
management tools and infrastructure.
Contract margins were 7% in 2001 versus 6% in 2000. This improvement is the
result of favorable contract performance on both fixed price and award fee
contracts. Contract cost includes selling, general and administrative expenses
as well as research and development costs related to the Government business.
Selling, general and administrative expenses were $18.8 million in 2001
versus $25.6 million in 2000, a decrease of 27%. This decline was the result of
cost reductions made by the Company in the fourth quarter of 2000 and its
ongoing efforts to control costs without impacting core capabilities. Other
elements of this decline include the costs of an early retirement program in
2000 that did not recur in 2001 and a reduction in the provision for bad debts
in 2001.
Research and development expenses were $7.4 million in 2001, a decrease of
26% from the $9.9 million recorded in 2000. This decline is due to the
completion of the new POS4XP system, a reduced investment in the Company's
industrial business, and other expense reductions, which were implemented at the
end of 2000. Research and development costs attributable to government contracts
are included in cost of contract revenues.
Interest expense represents interest charged on the Company's short-term
borrowings from banks and from long-term debt. Interest expense was $1.2 million
in 2001, an increase of 15% compared to the $1 million recorded in 2000. The
average amount of outstanding borrowings was higher during 2001 than in 2000.
This was partially offset by a lower average borrowing rate in 2001.
In 2001, the Company's effective tax rate was 31.8%. The variance from the
statutory rate was due to the benefit derived from state net operating losses,
the extraterritorial income exclusion and the utilization of research credits.
This was partially offset by non deductible expenses and foreign income taxes.
In 2000, the Company's effective tax rate was a 38.4% benefit. The variance from
the statutory rate was primarily due to the benefit recognized on state net
operating losses.
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.
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 was reflective of the general slowdown in
the buying patterns of the Company's restaurant customers following a
significant purchasing volume in 1999. This decline was 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.
Contract revenues were $25 million in 2000, an increase of 25% when
compared to the $20 million recorded 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% 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%.
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 was due to an increase in severance costs related to 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 in 1999. This increase was 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.
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations and
lines of credit with various banks. In 2001, the Company reported net income of
$520,000 and an operating cash flow deficit of $309,000. This is a significant
improvement from 2000 when the Company reported a net loss of $13.4 million and
an operating cash flow deficit of $8 million. This dramatic turnaround was
attributable to an increase in capital spending by the Company's restaurant
customers, release of the Company's new POS4XP product, increased demand for the
Company's software, and certain cost reductions implemented by the Company at
the end of 2000.
Cash used by operating activities was $309,000 in 2001 compared to cash
used of $8 million in 2000. In 2001, cash flow benefited from the Company's
return to profitability, a reduction in inventory and the timing of vendor
payments. This was offset by an increase in accounts receivable. In 2000, cash
flow was negatively affected by the Company's operating losses, which were
partially offset by a reduction in accounts receivable.
Cash used in investing activities was $1.3 million in 2001 versus $1.5
million for 2000. In 2001, capital expenditures were primarily for manufacturing
equipment and for improvements to the Company's customer service facility in
Boulder, Colorado. Capitalized software costs were $742,000 in 2001. In 2000,
capital expenditures were primarily for improvements to the Company's corporate
facilities. In addition, the Company capitalized $914,000 of software costs.
Cash provided by financing activities was $1.2 million in 2001 compared to
$9.8 million in 2000. In 2001, the Company increased its line-of-credit
borrowings by $830,000 and cash of $473,000 was provided by the exercise of
employee stock options. 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.
The Company currently has line-of-credit agreements, which aggregate $20
million with various banks. This amount was increased from the $18.5 million of
available lines at December 31, 2000. At December 31, 2001, $14.6 million was
outstanding under these agreements. The Company is continuing to look at various
alternatives to further increase its credit availability. The Company believes
that it has adequate financial resources to meet its future liquidity and
capital requirements in 2002.
Critical Accounting Policies
The Company's consolidated financial statements are based on the
application of generally accepted accounting principles (GAAP). GAAP requires
the use of estimates, assumptions, judgments and subjective interpretations of
accounting principles that have an impact on the assets, liabilities, revenue
and expense amounts reported. The Company believes its use of estimates and
underlying accounting assumptions adhere to GAAP and are consistently applied.
Valuations based on estimates are reviewed for reasonableness and adequacy on a
consistent basis throughout the Company. Primary areas where financial
information of the Company is subject to the use of estimates, assumptions and
the application of judgment include revenues, receivables, inventories,
intangible assets and taxes.
Revenues from product sales are recorded as the products are shipped,
provided that no significant vendor or 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.
Allowances for doubtful accounts are based on estimates of losses related
to customer receivable balances. The establishment of reserves requires the use
of judgment and assumptions regarding the potential for losses on receivable
balances.
The Company's inventories are valued at the lower of cost or market. The
Company uses certain estimates and judgments and considers several factors
including product demand and changes in technology to provide for excess and
obsolescence reserves to properly value inventory.
The Company has intangible assets on its balance sheet that includes
computer software costs and goodwill related to acquisitions. The valuation of
these assets and the assignment of useful amortization lives involves
significant judgments and the use of estimates. The testing of these intangibles
for impairment under established accounting guidelines also requires significant
use of judgment and assumptions. Changes in business conditions could
potentially require future adjustments to asset valuations.
The Company has significant amounts of deferred tax assets that are
reviewed for recoverability and valued accordingly. These assets are evaluated
by using estimates of future taxable income streams and the impact of tax
planning strategies. Valuations related to tax accruals and assets can be
impacted by changes to tax codes, changes in statutory tax rates and the
Company's future taxable income levels.
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Inflation had little effect on revenues and related costs during 2001.
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
$14.6 million. Management believes that increases in short-term rates could have
an adverse effect on the Company's 2002 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.
Item 8: Financial Statements and Supplementary Data
The Company's 2001 Financial Statements, together with the report thereon
of PricewaterhouseCoopers LLP dated February 4, 2002, 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. 62 Chairman of the Board, President and
Director
Charles A. Constantino 62 Executive Vice President and Director
J. Whitney Haney 67 Director
Sangwoo Ahn 63 Director
James Simms 42 Director
Gregory T. Cortese 52 President ParTech, Inc., General Counsel
and Secretary
Albert Lane, Jr. 60 President, PAR Government Systems
Corporation and Rome Research Corporation
Ronald J. Casciano 48 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 54 Vice President, POS Systems Development,
ParTech, Inc.
Edward Bohling 42 Vice President, Information Systems and
Technology, PAR Government Systems
Corporation
Louis Brown 51 Vice President, World Wide Sales,
ParTech, Inc.
Sam Y. Hua 40 Vice President and Chief Technical Officer,
ParTech, Inc.
Name Age Position
---- --- --------
F. Tibertus Lenz 51 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 44 Vice President, Finance,
Rome Research Corporation
E. John Mohler 58 Vice President, Marketing/Logistics
Management Systems,
PAR Technology Corporation
Timothy Prodanovich 54 Vice President, Customer Service and
Marketing, ParTech, Inc.
Samuel S. Talaba 45 Controller,
ParTech, Inc.
F. Gregory Talomie 57 Vice President/General Manager
PAR Logistics Management Systems,
PAR Technology Corporation
Jerry F. Weimar 45 Vice President, Professional Services,
ParTech, Inc.
William J. Williams 40 Vice President, Manufacturing,
ParTech, Inc.
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.
Mr. James Simms was appointed a Director of the Company in October, 2001.
He is currently a mergers and acquisition banker at Adams, Harkness & Hill, Inc.
and has held this position since 1997. Prior, Mr. Simms was a mergers and
acquisition banker with Robertson, Stephens & Company.
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. 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. Louis Brown was promoted to Vice President, World Wide Sales for
ParTech, Inc. in December 2001. Previously, Mr. Brown was the Director, New
Business Development.
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. Sam Y. Hua was promoted to Vice President and Chief Technical Office 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. Samuel Talaba was named Controller of ParTech, Inc. in 1997. Prior to
that, Mr. Talaba was Cost Accounting Manager.
Mr. Gregory Talomie was appointed Vice President/General Manager of PAR
Logistics Management Systems in August 2001. Previously, Mr. Talomie was the
President of PAR Visions Systems Corporation.
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. 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.
Item 11: Executive Compensation
The information required by this item will appear under the caption
"Executive Compensation" in the Company's 2001 definitive proxy statement for
the annual meeting of stockholders on May 23, 2002 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 2001 definitive proxy statement for the annual meeting of stockholders
on May 23, 2002 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 2001 definitive proxy statement for
the annual meeting of stockholders on May 23, 2002 and is incorporated herein by
reference.
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Form 10-K Page
(a) Documents filed as a part of the Form 10-K
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Income for the three
years ended December 31, 2001
Consolidated Statements of Comprehensive Income
for the three years ended December 31, 2001
Consolidated Statements of Changes in Shareholders' Equity for
the three years ended December 31, 2001
Consolidated Statements of Cash Flows for the three years
ended December 31, 2001
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 55
(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 32 present fairly, in all material
respects, the financial position of PAR Technology Corporation and its
subsidiaries at December 31, 2001 and December 31, 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 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 32
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 4, 2002
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
December 31,
------------
2001 2000
---- ----
Assets
Current Assets:
Cash ...................................... $ 879 $ 1,199
Accounts receivable-net (Note 4) .......... 36,934 30,400
Inventories-net (Note 5) .................. 24,469 25,911
Income tax refund claims .................. 95 733
Deferred income taxes (Note 9) ............ 2,883 4,255
Other current assets ...................... 3,315 1,868
------- -------
Total current assets .................. 68,575 64,366
------- -------
Property, plant and equipment - net (Note 6) ... 9,471 10,963
Deferred income taxes .......................... 7,774 6,321
Other assets ................................... 3,204 3,963
------- -------
$ 89,024 $ 85,613
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable (Note 7) .................... $ 14,686 $ 13,856
Accounts payable .......................... 11,290 8,800
Accrued salaries and benefits ............. 4,580 4,208
Accrued expenses .......................... 2,274 2,765
Deferred service revenue .................. 6,339 6,829
------- -------
Total current liabilities ............. 39,169 36,458
------- -------
Long-term debt (Note 7) ........................ 2,268 2,323
------- -------
Shareholders' Equity (Note 8):
Preferred stock, $.02 par value,
1,000,000 shares authorized ............. -- --
Common stock, $.02 par value,
19,000,000 shares authorized;
9,674,466 and 9,516,711 shares issued
7,880,760 and 7,723,005 outstanding ..... 193 190
Capital in excess of par value ............ 28,541 28,071
Retained earnings ......................... 29,263 28,743
Accumulated other comprehensive loss ...... (1,441) (1,203)
Treasury stock, at cost, 1,793,706 shares (8,969) (8,969)
------- -------
Total shareholders' equity ............ 47,587 46,832
------- -------
$ 89,024 $ 84,936
======== ========
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,
-----------------------
2001 2000 1999
---- ---- ----
Net revenues:
Product ................................ $ 54,401 $ 44,049 $ 88,784
Service ................................ 33,572 31,887 35,990
Contract ............................... 30,510 25,002 20,032
-------- -------- --------
118,483 100,938 144,806
-------- -------- --------
Costs of sales:
Product ................................ 35,772 33,753 55,912
Service ................................ 27,163 29,132 34,982
Contract ............................... 28,332 23,541 18,834
-------- -------- --------
91,267 86,426 109,728
-------- -------- --------
Gross margin ..................... 27,216 14,512 35,078
-------- -------- --------
Operating expenses:
Selling, general and administrative .... 18,777 25,648 23,455
Research and development ............... 7,363 9,917 8,078
Non-recurring charges (Note 3) ......... -- 300 1,700
-------- -------- --------
26,140 35,865 33,233
-------- -------- --------
Income (loss) from operations ............... 1,076 (21,353) 1,845
Other income, net ........................... 848 525 578
Interest expense ............................ (1,161) (1,011) (531)
-------- -------- --------
Income (loss) before provision for
income taxes .............................. 763 (21,839) 1,892
Provision (benefit) for income taxes (Note 9) 243 (8,391) (77)
-------- -------- --------
Net income (loss) ........................... $ 520 $ (13,448) $ 1,969
========= ========= =========
Earnings (loss) per share
Diluted ................................ $ .07 $ (1.71) $ .23
========= ========= =========
Basic .................................. $ .07 $ (1.71) $ .23
========= ========= =========
Weighted average shares outstanding
Diluted ................................ 7,799 7,848 8,522
========= ========= =========
Basic .................................. 7,726 7,848 8,388
========= ========= =========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands) Year ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Net income (loss) ........................... $ 520 $ (13,448) $ 1,969
Other comprehensive loss:
Foreign currency translation adjustments (238) (439) (217)
-------- -------- --------
Comprehensive income (loss) ................. $ 282 $ (13,887) $ 1,752
========= ========= =========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Common Stock Capital in Other Treasury Stock
------------ excess of Retained Comprehensive --------------
(In Thousands) Shares Amount Par Value Earnings Loss Shares Amount
- -------------- ------ ------ --------- -------- ------ ------ ------
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)
Net income ......................... 520
Issuance of common stock upon the
exercise of stock options (Note 8) 157 3 470
Translation adjustments ............ (238)
----- ------- ------ ------ ----- ----- ------
December 31, 2001 ............... 9,674 $ 193 $28,541 $29,263 $(1,441) (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,
-------------- -----------------------
2001 2000 1999
---- ---- ----
Cash flows from operating activities:
Net income (loss) .............................. $ 520 $(13,448) $ 1,969
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......... 3,491 3,403 2,862
Provision for bad debts ................ 1,299 2,138 2,837
Provision for obsolete inventory ....... 590 4,483 3,770
Translation adjustments ................ (238) (439) (217)
Increase (decrease) from changes in:
Accounts receivable .................... (7,833) 4,898 6,864
Inventories ............................ 894 (3,095) (4,674)
Income tax refund claims ............... 638 (197) (231)
Other current assets ................... (1,447) 174 (675)
Other assets ........................... (23) (27) (95)
Accounts payable ....................... 2,490 1,000 (2,426)
Accrued salaries and benefits .......... 372 (538) 15
Accrued expenses ....................... (491) (135) (668)
Deferred service revenue ............... (490) 1,351 1,102
Deferred income taxes .................. (81) (7,593) (392)
----- ------ ------
Net cash provided (used) by operating activities . (309) (8,025) 10,041
----- ------ ------
Cash flows from investing activities:
Capital expenditures .......................... (517) (586) (4,536)
Capitalization of software costs .............. (742) (914) (1,012)
----- ------ ------
Net cash used in investing activities ............ (1,259) (1,500) (5,548)
----- ------ ------
Cash flows from financing activities:
Net borrowings (payments) under
line-of-credit agreements .................... 830 8,822 (2,403)
Net proceeds (payments)
from the issuance of long-term debt .......... (55) 2,373 --
Proceeds from the exercise of stock options ... 473 -- 21
Acquisition of treasury stock ................. -- (1,424) (2,456)
----- ------ ------
Net cash provided (used) by financing activities . 1,248 9,771 (4,838)
----- ------ ------
Net increase (decrease) in cash
and cash equivalents ........................... (320) 246 (345)
Cash and cash equivalents at
beginning of year .............................. 1,199 953 1,298
----- ------ ------
Cash and cash equivalents at
end of year .................................... $ 879 $ 1,199 $ 953
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest .................................... $ 1,095 $ 978 $ 530
Income taxes, net of refunds ................ (543) (807) 655
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 and Rome Research
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 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-five 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 Other Comprehensive Loss.
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
$2,165,000 and $2,799,000 at December 31, 2001 and 2000, respectively. Annual
amortization, charged to cost of sales, is computed using the straight-line
method over the remaining estimated economic life of the product, generally
three years. Amortization of capitalized software costs amounted to $1,376,000,
$1,297,000 and $1,183,000 in 2001, 2000, and 1999, 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 and is based upon the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
would occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
The following is a reconciliation of the weighted average shares
outstanding for the basic and diluted EPS computations (In Thousands Except Per
Share Data):
For the year ended 2001
-----------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------- ----------- ---------
Basic EPS .................... $ 520 7,726 $ .07
Effect of Stock Options ...... - 73 -
----- ----- -------
Diluted EPS .................. $ 520 7,799 $ .07
===== ===== =======
For the year ended 2000
-----------------------
Income 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 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
====== ===== =======
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.
Reclassifications
Certain reclassifications have been made to prior year numbers to conform
to the current year presentation.
Goodwill and Other Intangible Assets
In July 2001, The Financial Accounting Standards Board (FASB) issued SFAS
142 "Goodwill and Other Intangible Assets," which establishes new financial
accounting and reporting requirements for acquired goodwill and other intangible
assets. Upon implementation of SFAS 142, goodwill and intangible assets with an
indefinite life will not be amortized but will be tested, at least annually, for
impairment. Intangible assets with finite lives will continue to be amortized
over their useful lives, but without the constraint of a ceiling. Furthermore,
the Statement requires additional disclosure for financial statement purposes.
The Company is required to implement this standard for the fiscal year ending
December 31, 2002. Adoption of Statement No. 142 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 2001, the Company reported net income of $520,000 and an operating cash
flow deficit of $309,000. This is a significant improvement from 2000 when the
Company reported a net loss of $13.4 million and an operating cash flow deficit
of $8 million. This dramatic turnaround was attributable to an increase in
capital spending by the Company's restaurant customers, release of the Company's
new POS4XP product, increased demand for the Company's integrated software and
to cost reductions made in personnel and discretionary expenses over the last
year. In addition, the Company was successful in obtaining new customers in
2001. The Company is continuing to pursue strategic initiatives involving new
technology and business alliances. These initiatives are focused on new markets
for the Company's products as well as further penetration into the restaurant
market.
The Company's primary source of liquidity has been cash flows from
operations and borrowings under its existing credit facilities. During 2001, the
Company increased its credit facilities from $18.5 million to $20 million. One
facility for $12.5 million expires April 30, 2003 and the second facility
expires September 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)
--------------
2001 2000
---- ----
Government segment:
Billed ................ $ 4,945 $ 3,587
Unbilled (overbilled).. (310) 93
------- -------
4,635 3,680
------- -------
Other segments:
Trade accounts receivable 32,299 26,720
------- -------
$ 36,934 $ 30,400
======== ========
At December 31, 2001 and 2000, the Company had recorded a reserve for
doubtful accounts of $4,489,000 and $4,420,000, respectively, against trade
accounts receivable. Trade accounts receivable are primarily with major
fast-food corporations or their franchisees. At December 31, 2001 and 2000, the
Company had also recorded reserves of $15,000 and $24,000, 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)
--------------
2001 2000
---- ----
Finished goods $ 5,414 $ 5,560
Work in process 1,868 2,956
Component parts 3,602 5,612
Service parts . 13,585 11,783
------ ------
$24,469 $25,911
======= =======
At December 31, 2001 and 2000 the Company had recorded reserves for excess
and obsolete inventory of $3,253,000 and $4,171,000, respectively.
Note 6 - Property, Plant and Equipment
The components of property, plant and equipment are:
December 31,
(In Thousands)
--------------
2001 2000
---- ----
Land .............................. $ 253 $ 253
Buildings and improvements ........ 7,108 7,067
Rental property ................... 3,506 3,491
Furniture and equipment ........... 25,370 24,987
------ ------
36,237 35,798
------ ------
Less accumulated depreciation
and amortization ................. 26,766 24,835
------ ------
$ 9,471 $10,963
======= =======
The Company subleases a portion of its headquarters facility to various
tenants. Rent received from these leases totaled $1,051,000, $967,000 and
$744,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
The Company leases office space under various operating leases. Rental
expense on these operating leases was approximately $1,143,000, $1,113,000 and
$938,000 for the years ended December 31, 2001, 2000, and 1999, respectively.
Future minimum lease payments under all noncancelable operating leases are
(in thousands):
2002 $1,143
2003 697
2004 511
2004 422
2006 335
Thereafter 306
------
$3,414
======
Note 7 - Debt
The Company has an aggregate of $20,000,000 in bank lines of credit. One
line totaling $12,500,000 bears interest at the prime rate (4.75% at December
31, 2001) and is subject to various loan covenants. The availability of this
facility is determined based on the amount of certain receivables and inventory.
This line expires on April 30, 2003. The remaining line of $7,500,000 bears
interest at the prime rate and expires on September 30, 2002. Both lines are
collateralized by certain accounts receivable and inventory. At December 31,
2001, $14,631,000 was outstanding and $5,369,000 was available under these
lines.
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, 2001, the current portion of this
mortgage totaling $55,000 was included in notes payable.
Note 8 - Common Stock
The Company has reserved 2,055,260 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 generally
vest over a three to five year period 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, 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
Granted .......................... 404 2.29
Exercised ........................ (157) 3.00
Forfeited ........................ (289) 4.01
----- -------
Outstanding at December 31, 2001 ...... 1,473 $ 3.81
=== ==== ===== ========
Shares remaining
available for grant .............. 582
=====
Total shares vested and exercisable
as of December 31, 2001 .......... 695 $ 4.28
===== ========
The weighted average fair value of options granted during 2001 is $.62.
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, 2001 are summarized as follows:
Range of Number Weighted Average Weighted Average
Exercise Prices Outstanding Remaining Life Exercise Price
--------------- ----------- -------------- --------------
$1.88 - $4.00 849 7.7 Years $2.69
$4.01 - $6.00 471 7.8 Years $4.91
$6.01 - $9.25 153 5.3 Years $6.70
----- ----- ----- --- -----
$1.88 - $9.25 1,473 7.5 Years $3.81
===== ===== ===== === =====
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 2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
Risk-free interest rate 3.8% 6.3% 5.9%
Dividend yield N/A N/A N/A
Volatility factor 42% 40% 39%
Weighted average expected life 7.5 Years 7 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
2001, 2000 and 1999 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):
2001 2000 1999
---- ---- ----
Net income (loss):
As reported .......... $ 520 $ (13,448) $ 1,969
Pro forma ............ $ 241 $ (14,053) $ 1,492
Earnings (loss) per share:
As reported -- Diluted $ .07 $ (1.71) $ .23
-- Basic $ .07 $ (1.71) $ .23
Proforma -- Diluted $ .03 $ (1.79) $ .18
-- Basic $ .03 $ (1.79) $ .18
Note 9 - Income Taxes
The provision (benefit) for income taxes consists of:
Year ended December 31,
(In Thousands)
--------------
2001 2000 1999
---- ---- ----
Current tax expense:
Federal ....................... $ 13 $ (443) $ 321
State ......................... 28 39 265
Foreign ....................... 98 29 382
------ ------ ------
139 (375) 968
------ ------ ------
Deferred income tax:
Federal ....................... 102 (6,950) (1,084)
State ......................... (64) (1,066) 39
Foreign ....................... 66 - -
------ ------ ------
104 (8,016) (1,045)
------ ------ ------
Provision (benefit) for income taxes $ 243 $(8,391) $ (77)
======= ======= =======
Deferred tax liabilities (assets) are comprised of the following at:
December 31,
(In Thousands)
--------------
2001 2000
---- ----
Software development expense ...... $ 736 $ 952
Depreciation ...................... 592 616
------ ------
Gross deferred tax liabilities .... 1,328 1,568
------ ------
Allowances for bad debts,
inventory and warranty .......... (2,505) (2,990)
Capitalized inventory costs ....... (101) (99)
Wage and salary accruals .......... (303) (343)
Federal net operating loss ........ (6,396) (6,364)
State net operating loss .......... (1,278) (1,116)
Foreign net operating loss ........ (456) (522)
Foreign tax credit ................ (702) (533)
Other ............................. (244) (177)
------ ------
Gross deferred tax assets ......... (11,985) (12,144)
------ ------
$(10,657) $(10,576)
======== ========
Total income tax provision (benefit) differed from total tax expense
(benefit) as computed by applying the statutory U.S. federal income tax rate to
income before taxes. The reasons were:
Year ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Statutory U.S. federal tax rate ...... 34.0% (34.0)% 34.0%
State taxes net of federal benefit ... 2.4 .1 1.6
State NOL ............................ (8.4) (4.9) --
Extraterritorial income exclusion .... (9.5) -- (30.1)
Prior years' adjustment .............. 1.7 .3 (9.4)
Non deductible expenses .............. 9.4 .4 8.3
Research credit ...................... (6.6) (.2) (6.3)
Foreign income taxes ................. 8.7 (.1) (2.8)
Other ................................ .1 -- .6
---- ----- ----
31.8% (38.4)% (4.1)%
==== ===== ====
The provision for income taxes is based on income (loss) before income
taxes as follows:
Year ended December 31,
(In Thousands)
----------------------
2001 2000 1999
---- ---- ----
Domestic operations $ 1,273 $(20,849) $ 1,465
Foreign operations (510) (990) 427
------- ------- -------
Total ........ $ 763 $(21,839) $ 1,892
======== ======== ========
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. There was no contribution to the plan in 2001. Contributions to
the plan in 2000 and 1999 were approximately $257,000 and $1,030,000,
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. Awards under the plan totaled $416,000, $0, $360,000 in 2001,
2000 and 1999, respectively.
Note 11 - Contingencies
The Company is subject to legal proceedings, which arise in the ordinary
course of business. In the opinion of management, all matters, which are
currently in various stages of litigation, are without merit and the Company
intends to defend such claims vigorously. Additionally, U.S. Government contract
costs are subject to periodic audit and adjustment. Based on information
currently available, management believes that the outcome of any such 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 2001, the Company has three reportable segments, Restaurant, Industrial
and Government. The Restaurant segment offers integrated solutions to the
restaurant industry, including 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,
which targets Fortune 500 industrial companies, designs and implements complex
integrated transaction processing solutions incorporating its data collection
and management software that provide real-time connectivity with multiple host
computers, diverse legacy applications, "best-of-breed" software and data input
hardware technologies. The Government segment designs and implements advanced
technology computer software systems primarily for military and intelligence
agency applications. It provides services for operating and maintaining certain
U.S. Government-owned naval communication sites, and for planning, executing and
evaluating experiments involving new or advanced radar systems. The Company's
Vision segment was disposed of in 2000. Inter-segment sales and transfers are
not material.
Information as to the Company's operations in its segments is set forth
below:
Year ended December 31,
(In Thousands)
--------------
2001 2000 1999
---- ---- ----
Revenues:
Restaurant ................... $ 85,224 $ 72,676 $ 116,396
Industrial ................... 2,749 2,668 7,623
Government ................... 30,510 25,002 20,032
Vision ....................... -- 592 755
-------- -------- --------
Total .................. $ 118,483 $ 100,938 $ 144,806
========= ========= =========
Income (loss) from operations:
Restaurant ................... $ 1,623 $ (18,940) $ 2,154
Industrial ................... (2,335) (2,556) 463
Government ................... 1,954 1,285 1,396
Vision ....................... -- (392) (468)
Corporate .................... (166) (450) -
Nonrecurring (charges) benefit -- (300) (1,700)
-------- -------- --------
1,076 (21,353) 1,845
Other income, net ................. 848 525 578
Interest expense .................. (1,161) (1,011) (531)
-------- -------- --------
Income (loss) before provision
for income taxes ............. $ 763 $ (21,839) $ 1,892
========= ========= =========
Identifiable assets:
Restaurant ................... $ 75,309 $ 74,635 $ 74,574
Industrial ................... 2,777 2,322 2,206
Government ................... 7,700 5,200 6,036
Vision ....................... -- 468 1,112
Corporate .................... 3,238 2,311 4,179
-------- -------- --------
Total .................. $ 89,024 $ 84,936 $ 88,107
========= ========= =========
Depreciation and amortization:
Restaurant ................... $ 2,557 $ 2,487 $ 2,088
Industrial ................... 335 271 219
Government ................... 104 113 159
Vision ....................... -- 32 40
Corporate .................... 495 500 356
-------- -------- --------
Total .................. $ 3,491 $ 3,403 $ 2,862
========= ========= =========
Capital expenditures:
Restaurant ................... $ 307 $ 113 $ 950
Industrial ................... 42 124 58
Government ................... 83 46 421
Vision ....................... -- 12 36
Corporate .................... 85 291 3,071
-------- -------- --------
Total .................. $ 517 $ 586 $ 4,536
========= ========= =========
2
The following table presents revenues by country based on the location of
the use of the product or services.
2001 2000 1999
---- ---- ----
United States ........... $102,066 $ 81,595 $119,378
Other Countries ......... 16,417 19,343 25,428
------- ------- -------
Total ............... $118,483 $100,938 $144,806
======== ======== ========
The following table presents property by country based on the location of
the asset.
2001 2000 1999
---- ---- ----
United States ........... $ 80,231 $ 76,203 $ 77,438
Other Countries ......... 8,793 8,733 10,669
------- ------- -------
Total ............... $ 89,024 $ 84,936 $ 88,107
======== ======== ========
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
2001 2000 1999
---- ---- ----
Restaurant segment:
McDonald's Corporation ................ 30% 32% 38%
Tricon Corporation .................... 21% 22% 27%
Government segment:
Department of Defense ................. 26% 25% 14%
All Others .............................. 23% 21% 21%
--- --- ---
100% 100% 100%
=== === ===
Note 13 - Fair Value of Financial Instruments
Financial instruments consist of the following:
December 31, 2001
(In Thousands)
--------------
Carrying Fair
Value Value
----- -----
Cash and cash equivalents .................... $ 879 $ 879
Notes payable ................................ $14,686 $14,686
Long-term debt ............................... $ 2,268 $ 2,210
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, 2001 for new issues with similar remaining
maturities.
Note 14 - Selected Quarterly Financial Data (Unaudited)
Quarter ended
(In Thousands Except Per Share Amounts)
---------------------------------------
2001 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues ............. $27,215 $29,446 $28,191 $33,631
Gross margin ............... 6,188 6,892 5,632 8,504
Net income ................. 49 227 80 164
Diluted and basic
earnings per share ....... $ .01 $ .03 $ .01 $ .02
======= ======= ======= =======
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)
======== ======== ======== ========
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.
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
2001 $4,444 1,299 (1,239) (a) $4,504
2000 $3,415 2,138 (1,109) (b) $4,444
1999 $1,195 2,837 (617) (c) $3,415
(a) Uncollectible accounts written off during 2001.
(b) Uncollectible accounts written off during 2000.
(c) Uncollectible accounts written off during 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
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
2001 $ 4,171 590 (1,508) $ 3,253
2000 $ 2,208 4,933 (2,970) $ 4,171
1999 $ 2,123 5,683 (5,598) $ 2,208
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 27, 2002 /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 27, 2002
President (Principal
Executive Officer)
and Director
/s/Charles a. Constantino
- -------------------------
Charles A. Constantino Executive Vice President March 27, 2002
and Director
/s/J. Whitney Haney
- -------------------
J. Whitney Haney Director March 27, 2002
/s/Ronald J. Casciano
- ---------------------
Ronald J. Casciano Vice President, Chief Financial March 27, 2002
Officer and Treasurer
List of Exhibits
Exhibit
No. Description of Instrument
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation, Filed as Exhibit 3.1 to Registration
as amended 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 Statement on Form S-2 (Registration
Exhibit 3.1 to Registration No. 333-04077) of PAR Technology
Corporation incorporated herein by
reference.
4 Specimen Certificate representing Filed as Exhibit 3.1 to Registration
the 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.
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS
(In Thousands)
2001 2000 1999
---- ---- ----
Diluted Earnings Per Share:
Weighted average shares of
common stock outstanding:
Balance outstanding - beginning of year ..... 7,723 8,060 8,549
Weighted average shares
issued during the year ...................... 3 - 1
Weighted average shares of
treasury stock acquired ..................... - (212) (162)
Incremental shares of common stock
outstanding giving effect to stock
options ..................................... 73 - 134
----- ----- -----
Weighted balance - end of year .............. 7,799 7,848 8,522
===== ===== =====
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS
(In Thousands)
2001 2000 1999
---- ---- ----
Basic Earnings Per Share:
Weighted average shares of
common stock outstanding:
Balance outstanding - beginning of year ..... 7,723 8,060 8,549
Weighted average shares
issued during the year ...................... 3 - 1
Weighted average shares of
treasury stock acquired ..................... - (212) (162)
----- ----- -----
Weighted balance - end of year .............. 7,726 7,848 8,388
===== ===== =====
EXHIBIT 22
Subsidiaries of PAR Technology Corporation
Name State of Incorporation
---- ----------------------
ParTech, Inc. ........................................ New York
PAR Government Systems Corporation ................... New York
Rome Research Corporation ............................ New York
PAR Vision Systems Corporation ....................... New York
Ausable Solutions, Inc. .............................. Delaware
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-82392, 33-04968, 33-39784, 33-58110, and 33-63095)
of PAR Technology Corporation of our report dated February 4, 2002 relating to
the financial statements and financial statement schedules, which appears in
this Form 10-K.
PricewaterhouseCoopers LLP
Syracuse, New York
March 28, 2002