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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2002. Commission File Number 1-9720
OR
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number __________
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, NY 13413-4991
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 738-0600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The number of shares outstanding of registrant's common stock, as of July
31, 2002 - 7,900,760 shares.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART 1
FINANCIAL INFORMATION
Item Number
Item 1. Financial Statements
- Consolidated Statement of Income for
the Three and Six Months Ended June 30, 2002 and 2001
- Consolidated Statement of Comprehensive Income for
the Three and Six Months Ended June 30, 2002 and 2001
- Consolidated Balance Sheet at
June 30, 2002 and December 31, 2001
- Consolidated Statement of Cash Flows
for the Six Months Ended June 30, 2002 and 2001
- Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
Item 1.
Financial Statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net revenues:
Product ........................... $ 16,831 $ 13,081 $ 32,650 $ 25,258
Service ........................... 9,644 8,667 18,444 16,549
Contract .......................... 9,116 7,698 18,615 14,854
-------- -------- -------- --------
35,591 29,446 69,709 56,661
-------- -------- -------- --------
Costs of sales:
Product ........................... 11,419 8,681 22,272 16,648
Service ........................... 8,166 6,630 15,373 12,941
Contract .......................... 8,439 7,243 17,430 13,992
-------- -------- -------- --------
28,024 22,554 55,075 43,581
-------- -------- -------- --------
Gross margin ................ 7,567 6,892 14,634 13,080
-------- -------- -------- --------
Operating expenses:
Selling, general and administrative 5,096 4,510 9,745 8,547
Research and development .......... 1,617 1,914 3,373 3,959
-------- -------- -------- --------
6,713 6,424 13,118 12,506
-------- -------- -------- --------
Income from operations ................. 854 468 1,516 574
Other income, net ...................... 181 212 310 550
Interest expense ....................... (208) (325) (425) (680)
-------- -------- -------- --------
Income before provision for
income taxes ...................... 827 355 1,401 444
Provision for income taxes ............. 260 128 461 168
-------- -------- -------- --------
Net income ............................. $ 567 $ 227 $ 940 $ 276
======== ======== ======== ========
Basic and Diluted earnings
per common share .................. $ .07 $ .03 $ .12 $ .04
======== ======== ======== ========
Weighted average shares outstanding
Diluted ........................... 8,279 7,791 8,164 7,765
======== ======== ======== ========
Basic ............................. 7,891 7,723 7,886 7,723
======== ======== ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net income ....................... $ 567 $ 227 $ 940 $ 276
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustments ................. 376 (5) 413 (368)
-------- -------- -------- --------
Comprehensive income (loss) ...... $ 943 $ 222 $ 1,353 $ (92)
======== ======== ======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts)
June 30,
2002 December 31,
Assets (Unaudited) 2001
-------- --------
Current Assets:
Cash .................................... $ 416 $ 879
Accounts receivable-net ................. 30,359 36,934
Inventories ............................. 28,699 24,469
Income tax refund claims ................ -- 95
Deferred income taxes ................... 3,244 2,883
Other current assets .................... 2,647 3,315
-------- --------
Total current assets ................ 65,365 68,575
Property, plant and equipment - net .......... 9,104 9,471
Deferred income taxes ........................ 7,091 7,774
Other assets ................................. 3,073 3,204
-------- --------
$ 84,633 $ 89,024
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable ........................... $ 12,338 $ 14,686
Accounts payable ........................ 8,115 11,290
Accrued salaries and benefits ........... 4,383 4,580
Accrued expenses ........................ 2,508 2,274
Deferred service revenue ................ 6,061 6,339
-------- --------
Total current liabilities ........... 33,405 39,169
-------- --------
Long-term debt ............................... 2,239 2,268
-------- --------
Shareholders' Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized ........... -- --
Common stock, $.02 par value,
19,000,000 shares authorized;
9,694,466 and 9,674,466 shares issued
7,900,760 and 7,880,760 outstanding ... 194 193
Capital in excess of par value .......... 28,589 28,541
Retained earnings ....................... 30,203 29,263
Accumulated comprehensive loss .......... (1,028) (1,441)
Treasury stock, at cost, 1,793,706 shares (8,969) (8,969)
-------- --------
Total shareholders' equity .......... 48,989 47,587
-------- --------
$ 84,633 $ 89,024
======== ========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
For the six months
ended June 30,
------------------
2002 2001
-------- -------
Cash flows from operating activities:
Net income ....................................... $ 940 $ 276
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 1,615 1,624
Provision for bad debts ........................ 510 222
Provision for obsolete inventory ............... 1,198 665
Deferred income taxes .......................... 322 122
Increase (decrease) from changes in:
Accounts receivable .......................... 6,065 15
Inventories .................................. (5,428) 2,594
Income tax refund claims ..................... 95 56
Other current assets ......................... 668 (494)
Other assets ................................. (200) --
Accounts payable ............................. (3,175) (2,545)
Accrued salaries and benefits ................ (197) 116
Accrued expenses ............................. 234 (572)
Income taxes payable ......................... -- 456
Deferred service revenue ..................... (278) 485
------- -------
Net cash provided by operating activities ... 2,369 3,020
------- -------
Cash flows from investing activities:
Capital expenditures ........................... (578) (300)
Capitalization of software costs ............... (339) (452)
------- -------
Net cash used in investing activities ....... (917) (752)
------- -------
Cash flows from financing activities:
Net payments under line-of-credit agreements ... (2,348) (2,381)
Payments on long-term debt obligations ......... (29) (27)
Proceeds from the exercise of stock options .... 49 --
------- -------
Net cash used in financing activities ...... (2,328) (2,408)
------- -------
Effect of exchange rate changes on cash
and cash equivalents .......................... 413 (368)
------- -------
Net decrease in cash and cash equivalents ....... (463) (508)
Cash and cash equivalents at beginning of year .. 879 1,199
------- -------
Cash and cash equivalents at end of period ...... $ 416 $ 691
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ....................................... $ 441 $ 612
Income taxes, net of refunds ................... 8 (481)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The statements for the three and six months ended June 30, 2002 and 2001
are unaudited; in the opinion of the Company such unaudited statements
include all adjustments (which comprise only normal recurring accruals)
necessary for a fair presentation of the results for such periods. The
consolidated financial statements for the year ending December 31, 2002 are
subject to adjustment at the end of the year when they will be audited by
independent accountants. The results of operations for the three and six
months ended June 30, 2002 are not necessarily indicative of the results of
operations to be expected for the year ending December 31, 2002. The
consolidated financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the years ended in
December 31, 2001 and 2000 included in the Company's December 31, 2001
Annual Report to the Securities and Exchange Commission on Form 10-K.
2. Inventories are primarily used in the manufacture and service of Restaurant
products. The components of inventory, net of related reserves, consist of
the following:
(In Thousands)
June 30, December 31,
--------- -----------
Finished goods .......... $ 6,116 $ 5,414
Work in process ......... 1,931 1,868
Component parts ......... 4,762 3,602
Service parts ........... 15,890 13,585
------- -------
$28,699 $24,469
======= =======
At June 30, 2002 and December 31, 2001, the Company had recorded reserves
for obsolete inventory of $3,821,000 and $3,253,000, respectively.
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. In June 2001, the Financial Accounting Standards Board approved Statement
of Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets", ("SFAS 142"). We adopted SFAS 142 effective January 1, 2002. Under
this standard, amortization of goodwill and certain intangible assets,
including certain intangibles recorded as a result of past business
combinations, is to be discontinued upon adoption of SFAS 142.
During 2002, we performed tests of goodwill as of January 1, 2002. We
tested for impairment using the two-step process prescribed in SFAS 142.
The first step is a screen for potential impairment. The second step, which
has been determined not to be necessary, measures the amount of any
impairment. No impairment losses have been recognized as a result of these
tests. The balance of goodwill at June 30, 2002 is $598,000.
4. The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products
and services.
In 2002, the Company has three reportable segments, Restaurant, Government
and Industrial. The Restaurant segment offers integrated solutions to the
restaurant industry. These offerings include industry leading hardware and
software applications utilized at the point-of-sale, back of store and
corporate office. This segment also offers customer support including field
service, installation, twenty-four hour telephone support and depot repair.
The 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 communication and test sites, and for planning,
executing and evaluating experiments involving new or advanced radar
systems. It is also involved in developing technology to track mobile
chassis. 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. Inter-segment sales and transfers are not material.
Information as to the Company's operations in its segments is set forth
below (in thousands):
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenues:
Restaurant .............. $ 26,145 $ 21,183 $ 49,967 $ 40,442
Government .............. 9,116 7,698 18,615 14,854
Industrial .............. 330 565 1,127 1,365
-------- -------- -------- --------
Total ............. $ 35,591 $ 29,446 $ 69,709 $ 56,661
======== ======== ======== ========
Income (loss) from operations:
Restaurant .............. $ 901 $ 771 $ 1,509 $ 816
Government .............. 665 433 1,149 751
Industrial .............. (687) (736) (1,117) (979)
Corporate ............... (25) -- (25) (14)
-------- -------- -------- --------
854 468 1,516 574
Other income, net ............ 181 212 310 550
Interest expense ............. (208) (325) (425) (680)
-------- -------- -------- --------
Income before provision
for income taxes ........ $ 827 $ 355 $ 1,401 $ 444
======== ======== ======== ========
Depreciation and amortization:
Restaurant .............. $ 552 $ 606 $ 1,163 $ 1,148
Government .............. 26 25 54 50
Industrial .............. 75 151 162 167
Corporate ............... 119 128 236 259
-------- -------- -------- --------
Total ............. $ 772 $ 910 $ 1,615 $ 1,624
======== ======== ======== ========
Capital expenditures:
Restaurant .............. $ 318 $ 85 $ 428 $ 178
Government .............. -- 12 35 42
Industrial .............. -- 14 -- 16
Corporate ............... 30 38 115 64
-------- -------- -------- --------
Total ............. $ 348 $ 149 $ 578 $ 300
======== ======== ======== ========
The following table presents revenues by geographic area based on the
location of the use of the product or services.
For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
United States ........... $ 32,007 $ 25,370 $ 62,856 $ 48,456
Other Countries ......... 3,584 4,076 6,853 8,205
-------- -------- -------- --------
Total ............. $ 35,591 $ 29,446 $ 69,709 $ 56,661
======== ======== ======== ========
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
2002 2001 2002 2001
------ ------ ------- -------
Restaurant Segment:
McDonald's Corporation 32% 30% 29% 30%
Tricon Corporation ... 23% 26% 22% 25%
Government Segment:
Department of Defense 26% 26% 27% 26%
All Others ................ 19% 18% 22% 19%
--- --- --- ---
100% 100% 100% 100%
=== === === ===
June 30, December 31,
2002 2001
-------- -----------
Identifiable assets:
Restaurant ................... $71,661 $75,309
Government ................... 5,833 7,700
Industrial ................... 1,996 2,777
Corporate .................... 5,143 3,238
------- -------
Total .................. $84,633 $89,024
======= =======
The following table presents property by geographic area based on the
location of the asset.
June 30, December 31,
2002 2001
-------- --------
United States ..................... $76,331 $80,231
Other Countries ................... 8,302 8,793
------- -------
Total ....................... $84,633 $89,024
======= =======
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2002
COMPARED WITH
QUARTER ENDED JUNE 30, 2001
Information provided by the Company, including information contained in
this report or by its spokespersons from time to time might 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 quarter ended June 30, 2002. 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.
The Company reported revenues of $35.6 million for the second quarter ended
2002, an increase of 21% from the $29.4 million reported in 2001. The Company
recorded net income of $567,000 or diluted earnings per share of $.07 for 2002.
This compares to net income of $227,000 or diluted earnings per share of $.03
for 2001.
Product revenues were $16.8 million in 2002, an increase of 29% from the
$13.1 million recorded in 2001. Demand for the Company's restaurant products,
including the new POS4XP(TM), remains strong. In particular, sales increased to
certain of the Company's traditional customers including McDonald's and Yum!
Brands. Also contributing to the revenue growth were sales to the Company's
newer accounts, including Boston Market and Carnival Cruise Lines.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2002
COMPARED WITH
QUARTER ENDED JUNE 30, 2001
Customer service revenues were $9.6 million in 2002, an increase of 11%
from the $8.7 million in 2001. Higher installation revenue and increased service
opportunities in support of an expanded installed base were responsible for the
increase. The Company's service offerings include installation, twenty-four hour
help desk support and various field and on-site service options.
Contract revenues were $9.1 million in 2002, an increase of 18% when
compared to the $7.7 million recorded in the same period in 2001. This increase
resulted from in the expanded scope of our I/T outsourcing contracts for
facility operations at strategic U.S. Navy Telecommunication sites across the
globe. These operations directly support fleet operations. The Company has
become a recognized leader in the conversion of military I/T communications
facilities to contractor operations. Additionally, contract revenues grew as a
result of our emerging logistics management business, which involves the
tracking of mobile chassis under its Cargo*Mate(TM) contracts.
Product margins were 32.2% for 2002 compared to 33.6% for the same period
in 2001. Margins declined slightly due to a less favorable product mix in the
Company's Restaurant business. Software content of revenue was lower in the
second quarter of 2002 compared to 2001.
Customer service margins were 15.3% in 2002 compared to 23.5% for the same
period in 2001. This margin decrease resulted from field service startup
expenses related to the support of the Company's new Boston Market account. The
margin was also impacted by the increased use of third party organizations to
meet certain installation commitments.
Contract margins were 7.4% in 2002 versus 5.9% for the same period in 2001.
Margins benefited from the initial system sales of the Company's Cargo*Mate(TM)
system. Margins on the Company's government contract business historically run
between 5% and 6%.
Selling, general and administrative expenses were $5.1 million in 2002
versus $4.5 million for the same period in 2001, an increase of 13%. This
increase is primarily the result of some executive salary adjustments. Last
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2002
COMPARED WITH
QUARTER ENDED JUNE 30, 2001
year, as part of the Company's plan to return to profitability following losses
incurred in 2000, a salary reduction program was initiated. This program was
terminated in the fourth quarter of 2001 and normal pay was reinstated
reflecting the return to profitability of the business. Additionally, sales and
marketing expenses of the Restaurant business increased which is directly
related to the growth in product revenue.
Research and development expenses were $1.6 million in 2002, a decrease of
16% from the $1.9 million recorded for the same period in 2001. This decline
resulted from a cost reduction in the Company's Industrial business and the
completion of certain restaurant development projects. Research and development
costs attributable to government contracts are included in cost of contract
revenues.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. The 36% decrease to
$208,000 in 2002 was primarily due to a lower borrowing rate in 2002 than in
2001.
The Company's Industrial segment continues to incur losses. This is the
result of a combination of an economic downturn in this market sector and a long
sales cycle in negotiating and obtaining final contracts. The Company is
attempting to contain expenses in this segment while pursuing the award of a
major contract.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 2001
The Company reported revenues of $69.7 million for the six months ended
2002, an increase of 23% from the $56.7 million reported in 2001. The Company
recorded net income of $940,000 or diluted earnings per share of $.12 for 2002.
This compares to net income of $276,000 or diluted earnings per share of $.04
for 2001.
Product revenues were $32.7 million in 2002, an increase of 29% from the
$25.3 million recorded in 2001. This is due to increased sales in the Company's
Restaurant business. New account sales included Boston Market, Carnival Cruise
Lines and the Turning Stone Casino. Additionally, sales increased to certain
traditional customers including McDonald's and Yum! Brands.
Customer service revenues were $18.4 million in 2002, an increase of 11%
from the $16.5 million in 2001. This increase was attributable to revenue
derived from the installation of equipment as product sales rose. An increase in
the number of service contracts also contributed to this revenue growth.
Contract revenues were $18.6 million in 2002, an increase of 25% when
compared to the $14.9 million recorded for the same period in 2001. This
increase is primarily due to the increase in scope of the Company's I/T
outsourcing contracts for strategic U.S. Navy Telecommunication sites. The
increase in revenue is also attributable to a floodplain-mapping contract with
the New York State Department of Environment Conservation. Additionally,
contract revenues grew as a result of the Company's Cargo*Mate(TM) contracts.
Product margins were 31.8% for 2002 compared to 34.1% for the same period
in 2001. This decline was due to a change in product mix in the Company's
Restaurant and Industrial segments where the software content of revenue was
lower in the first half of 2002 compared to 2001.
Customer service margins were 16.7% in 2002 compared to 21.8% for the same
period in 2001. This margin decrease resulted from field service startup
expenses related to the support of the Company's new Boston Market account and
increased use of third parties for certain installation activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 2001
Contract margins were 6.4% in 2002 compared to 5.8% in 2001. Margins on the
Company's government contract business historically run between 5% and 6%.
Selling, general and administrative expenses were $9.7 million in 2002
versus $8.5 million for the same period in 2001, an increase of 14%. This
increase is primarily the result of the executive salary reduction program that
was initiated in 2001. This program was part of the Company's plan to return to
profitability in 2001. The program was terminated in the fourth quarter of 2001.
There were also smaller increases in sales and marketing expenses related to the
higher sales volume.
Research and development expenses were $3.4 million in 2002, a decrease of
15% from the $4 million recorded for the same period in 2001. This decline
resulted from a cost reduction in the Company's Industrial business and the
completion of certain restaurant development projects.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. The 37% decrease to
$425,000 in 2002 was primarily due to a lower borrowing rate in 2002 than in
2001.
Liquidity and Capital Resources
The Company's primary source of liquidity has been from operations and
lines of credit with various banks. The Company generated cash flow from
operating activities of $2.4 million in 2002 compared to $3 million in 2001. The
primary factor contributing to the 2002 positive cash flow was a reduction in
accounts receivable. This was partially offset by an increase in inventory to
meet current demand. Improved collections, a reduction in inventory and cost
cutting measures taken by the Company in the fourth quarter of 2000 all
contributed to the positive cash flow in the first half of 2001.
Cash used in investing activities was $917,000 in 2002 versus $752,000 in
2001. In 2002, capital expenditures were primarily for improvements to the
Company's headquarter facility and for normal operational needs in the
restaurant segment. In addition, the Company capitalized $339,000 of software
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 2001
costs. In 2001, capital expenditures were primarily for improvements to the
Company's customer service facility in Boulder, Colorado. The Company also
capitalized $452,000 of software costs.
Cash used in financing activities was $2.3 million in 2002 compared to $2.4
million in 2001. The Company reduced its line-of-credit borrowings by $2.3
million in 2002, and by $2.4 million in 2001. million.
The Company currently has line-of-credit agreements, which aggregate $20
million with certain banks. At June 30, 2002, $12.3 million was outstanding
under these agreements. The Company continues to review its existing debt
structure and credit availability. One line totaling $7.5 million expires on
September 30, 2002. The remaining line of $12.5 million expires on April 30,
2003. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 2001
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 contract amounts retained by the government 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 involve 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 these assets.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
COMPARED WITH
SIX MONTHS ENDED JUNE 30, 2001
Quantitative and Qualitative Disclosures about Market Risk
Inflation had little effect on revenues and related costs during the first
half of 2002. Management anticipates that margins will be maintained at
acceptable levels to minimize the effects of inflation, if any.
The Company has total interest bearing short-term debt of approximately
$12.3 million at June 30, 2002. 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 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
11 Statement re computation of per-share earnings
99.1 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Reports on Form 8-K
None during the second quarter of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAR TECHNOLOGY CORPORATION
--------------------------
(Registrant)
Date: August 12, 2002
/s/RONALD J. CASCIANO
----------------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Exhibit
-------
11 - Statement re computation
of per-share earnings
99.1 - Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002
99.2 - Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
(In Thousands)
For the three months
ended June 30,
-----------------------
2002 2001
-----------------------
Diluted Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 7,881 7,723
Weighted average shares issued 10 --
Incremental shares of common stock
outstanding giving effect to stock options 388 68
-------- ---------
Weighted balance - end of period 8,279 7,791
========= =========
For the three months
ended June 30,
-----------------------
2002 2001
-----------------------
Basic Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 7,881 7,723
Weighted average shares issued 10 --
--------- ---------
Weighted balance - end of period 7,891 7,723
========= =========
Exhibit 11
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
(In Thousands)
For the six months
ended June 30,
-----------------------
2002 2001
-----------------------
Diluted Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 7,881 7,723
Weighted average shares issued 5 --
Incremental shares of common stock
outstanding giving effect to stock options 278 42
-------- ---------
Weighted balance - end of period 8,164 7,765
======== =========
For the six months
ended June 30,
-----------------------
2002 2001
-----------------------
Basic Earnings Per Share:
Weighted average shares of
Common stock outstanding:
Balance outstanding - beginning of period 7,881 7,723
Weighted average shares issued 5 --
--------- ---------
Weighted balance - end of period 7,886 7,723
========= =========
Exhibit 99.1
PAR TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PAR Technology Corporation (the
Company) on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, John W.
Sammon, Chairman of the Board and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350 as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirement of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ John W. Sammon
- ------------------
John W. Sammon
Chairman of the Board and Chief Executive Officer
August 12, 2002
Exhibit 99.2
PAR TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PAR Technology Corporation (the
Company) on Form 10-Q for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Ronald J.
Casciano, VP, C.F.O. & Treasurer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350 as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirement of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Ronald J. Casciano
- ----------------------
Ronald J. Casciano
VP, C.F.O. & Treasurer
August 12, 2002