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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, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number 1-9720
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, New York 13413-4991
(Address of principal executive offices) (Zip Code)
(315) 738-0600
(Registrant's Telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $.02 par value New York Stock Exchange
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the average price as of March 31, 2003 - $18,236,467.
The number of shares outstanding of registrant's common stock, as of March
31, 2003 - 8,476,296 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 2002
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
Item 14. Controls and Procedures
Item 14A. Statements of Fees Paid to Independent Auditors
PART IV
Item 15. 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 hardware platforms, software applications and professional services to
businesses in the retail, hospitality and quick-service-restaurant industries.
As the world's largest supplier of Point-of-Sale systems in the
quick-service-restaurant market, with over 30,000 systems installed in 95
countries, the beneficial attributes of PAR's hardware platforms are well
recognized. The Company's software applications assist in the operation of
hospitality and quick-service-restaurant businesses by managing data from
end-to-end and improving profitability through more efficient operations. The
Company's professional services mission is to assist businesses in achieving the
full potential of their Point-of-Sale systems. To that end, the Company provides
services ranging from implementation of and training for such systems to project
management of a business' technology investment.
PAR is confident to claim the title "leading provider" of professional
services and enterprise business intelligence applications due to our long-term
relationship with the restaurant industry's two largest corporations, McDonald's
and Yum! Brands. McDonald's has over 30,000 restaurants in 121 countries and PAR
has been a selected provider of Point-of-Sale systems and lifecycle support
services to McDonald's since 1980. Yum! Brands has been a PAR customer since
1983, and PAR has an install base within Yum's 3 major concepts: KFC, Pizza Hut
and Taco Bell. Yum has nearly 31,000 units globally and PAR is the sole approved
Point-of-Sale supplier to Taco Bell. PAR is also the Point-of-Sale vendor of
choice to Boston Market, Chic-fil-A, CKE Restaurants (Hardees, Carl Jr.'s, etc.)
Carnival Cruise Lines, Loews Ciniplex and large franchisees of each of the
foregoing brands.
The Company is also a leading government contractor, developing advanced
prototype and operational systems for the Department of Defense and other
Government agencies. Additionally, the Company provides information technology
and communications support services to the U.S. Navy and U.S. Air Force. Through
its government-sponsored research and development, PAR has migrated relevant
technologies to commercial uses. The Company's Point-of-Sale technology was
derived from research and development regarding micro-chip processing
technology, sponsored by the Department of Defense. Other technologies
transferred from government contract work to commercial applications by PAR were
Corneal Topography, Qscan food-container inspection and asset tracking through
PAR's Logistics Management Systems business. As a government contractor since
1968, and having expertise and experience acquired as both prime contractor and
for the U.S. Air Force Research Laboratory, the National Imagery and Mapping
Agency, U.S. Navy, U.S. Air Force, U.S. Army, Department of Transportation and
other federal and state agencies, PAR is a leading provider of applied
technology and technical services. Despite the competitive landscape of this
industry, the Company has carved out a very unique niche of the overall market.
Citing the Company's experience and growth over the years, we are confident to
claim our status as a government contractor of choice.
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, 2002 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. Our website address is http: www.partech.com. Information
contained on our website is not part of this prospectus.
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 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-and-accurate
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 25 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
back-office 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 a
Pentium(R)-designed system, developed to host the most powerful POS software
applications of the restaurant industry. POS4XP(TM)'s design utilizes open
architecture with industry standard components, is compatible with the most
popular operating systems, and was the first POS hardware system to be certified
by Microsoft(R) as Windows(R) NT Compliant(R). POS4XP(TM) supports a distributed
processing environment and incorporates an advanced restaurant technology
system, utilizing Intel microprocessors, standard PC expansion slots, Ethernet
LAN, and standard Centronics printer ports 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 LiNKS(TM) customer-interactive terminal offers an intuitive
touchscreen interface which integrates the customer into each transaction. The
highly-configurable LiNKS(TM) 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 LiNKS(TM) is user-friendly and is built using the same
rugged design, proven technology and software compatibility as PAR's POS4XP(TM).
Display terminals receive and track customer orders, monitor employee
timekeeping records and provide on-screen production and labor scheduling. PAR's
hardware terminals are designed with a touchscreen 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. 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 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 is 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 several strategic partnerships with third
party organizations that will provide PAR the ability to offer their customers
with a universal, very fast, and efficient way to process 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, as
contracted. In certain cases, the Company's equipment is installed by the
customer, or by unrelated third parties.
Maintenance and Service
The Company offers a wide 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. It also maintains a field service
network consisting of nearly 100 locations offering factory, on-site, and depot
repair and spare unit rentals. When a restaurant technology system is installed,
PAR employees train the restaurant employees and managers to ensure efficient
and effective use of the system. If a problem occurs within the Company's
proprietary Point-of-Sale system, PAR's current service management software,
Clarify, allows a service technician to diagnose the problem by telephone or by
directly dialing-in to the POS system, thus greatly reducing the need for
on-site service calls. Clarify allows PAR to demonstrate compelling value and
differentiation to its customers through the utilization of its extensive and
ever-growing knowledge base to efficiently diagnose and resolve customer-service
issues. Clarify also enables PAR to compile the kind of in-depth information it
needs 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 clear 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 OEM Sales
Group works exclusively with third-party dealers and value-added resellers
throughout the country. The New Market Sales 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, 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 a few suppliers who offer some form of
sophisticated restaurant technology system similar to the Company's. Major
competitors include Panasonic, IBM Corporation, Radiant Systems, NCR, Micros
Systems and Aspeon.
Backlog
At December 31, 2002, the Company's backlog of unfilled orders for the
Restaurant segment was approximately $5,500,000 compared to $9,000,000 a year
ago. Most of the present orders will be delivered in 2003. 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 $5,400,000
in 2002, $5,495,000 in 2001 and $7,613,000 in 2000. 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 15 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. PAR has
maintained good, long-term relationships with each of these sole suppliers. Such
relationships with these sole suppliers are generally governed by purchase
orders or other contracts, which typically serve to establish pricing terms.
None of these arrangements require PAR to make a minimum purchase commitment. If
any of these suppliers should cease to supply an item, the Company believes that
new sources could be found to provide the components. 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 information
technology/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.
IS&T is the system integrator for the Multi-Sensor Integration 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 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
programs.
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. 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 New York City Watershed Protection Program.
Logistics Management Systems (LMS)
PAR Logistics Management Systems (LMS) focuses on the design, development,
deployment, and commercialization of the Cargo*Mate(TM) Logistics Information
Management System, a comprehensive, end-to-end solution for the monitoring and
management of transport assets and cargo throughout the intermodal (i.e., port,
highway, rail, and ocean) transportation lifecycle. The Cargo*Mate(TM) system is
being implemented under a multi-year Cooperative Agreement with the U.S.
Department of Transportation/Federal Highway Administration (DOT/FHWA) with
funds specifically authorized by Congress for Cargo*Mate(TM) under the
Transportation Equity Act for the 21st Century (TEA-21) in 1998. Cargo*Mate(TM)
uses state-of-the-art technology to acquire Global Positioning System (GPS)
location and equipment status data; wireless communication networks to transmit
the data to the PAR LMS Operations Center; and a powerful relational database to
customize the data to meet the needs of each customer and provide it to the
customer over the Internet or via direct linkage to existing ("back-office")
information systems.
PAR LMS' initial product offering, the Cargo*Mate(TM) Chassis Tracking
System, commenced deployment in March 2002 with major shippers, rail carriers,
and equipment lessors across the U.S. who are evaluating the system for
fleetwide deployments. In mid-2002, PAR LMS expanded its offerings to include
the Refrigeration Unit Tracking System and the Genset Tracking System, both of
which are being deployed with shippers and carriers around the country. In
December 2002, PAR LMS began testing of the Cargo*Mate(TM) Version 3S, which
integrates with emerging transportation security technologies, including
advanced RFID technology which provides container tracking and security
capabilities. The Version 3S includes RFID tags that provide container
identification number, as well as electronic bolt seals that safeguard the
integrity of container doors. Beginning in January 2003, the Version 3S began
beta testing in cooperation with the DOT, the Department of Defense (DoD), and
RFID technology providers in order to assess the system's applicability in
support of port and homeland security.
As previously stated, the Company has realized federal funding under the
auspices of a DOT contract, for this business, since its inception. The original
contract with the DOT has recently concluded, and the Company has received
indications that there may be a brief hiatus in funding. Accordingly, the
Company may find it necessary to fund the operations of LMS with its own cash
flows during this brief hiatus of federal funding.
Information Technology and Communications Support Services
The Company provides a wide range of technical and support services to
sustain mission critical components of the DoD Global Information Grid. 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. The various
facilities, operating 24 hours a day, are integral to the command and control of
the nation's air, land and naval forces, and those of United States coalition
allies.
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 include
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 2000 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, BAE, 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., National Imagery and Mapping Agency, U.S. Air Force, etc.).
Backlog
The dollar value of existing government contracts at December 31, 2002, net
of amounts relating to work performed to that date, was approximately
$112,934,000, of which $24,100,000 was funded. At December 31, 2001, the
comparable amount was approximately $50,695,000, of which $19,174,000 was
funded. This increase from 2001 to 2002 was the result of new contract awards in
excess of $100 million in 2002. Funded represents amounts committed under
contract by Government agencies and prime contractors. The December 31, 2002
government contract backlog of $112,934,000 represents firm, existing contracts.
Approximately $33,600,000 of this amount will be completed in calendar year 2003
as funding is committed.
Employees
As of December 31, 2002, the Company had 1,100 employees, approximately 55%
of whom are engaged in the Company's Restaurant segment, 41% of whom are in the
Government 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 23% 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
Sydney, Australia ..... Restaurant Sales and Service 8,800
Boca Raton ............ Restaurant Research and Development 8,700
La Jolla, CA .......... Government Research and Development 7,100
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,
results of operations or cash flows 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, 2002, there were
approximately 669 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, 2002 as reported by New York Stock Exchange:
2002 2001
------------------------- ----------------------
Period Low High Low High
- ---------------- -------- -------- ------- -------
First Quarter $2.55 $4.15 $1.75 $2.62
Second Quarter $3.93 $5.88 $2.00 $4.10
Third Quarter $4.56 $6.25 $2.60 $4.30
Fourth Quarter $4.25 $8.13 $2.53 $3.25
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. Accordingly, it is anticipated that no cash dividends
will be paid in the foreseeable future.
On December 3, 2002, PAR sold an aggregate of 383,019 shares of its common
stock at a price of $5.30 per share to E*Capital Corporation and certain
individuals associated with Eliot Rose Asset Management, LLC for an aggregate
offering price of $2,030,000. Following the payment in the amount of $87,500 to
the placement agent engaged by the Company and certain other expenses, the
remaining net proceeds to the Company of approximately $1.9 million were used to
pay down short-term debtedness.
Such sales were made in reliance upon Rule 506 of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). All of the
foregoing securities are deemed restricted securities for purposes of the
Securities Act.
Item 6: Selected Financial Data
SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
(In thousands, except per share amounts)
The following selected historical consolidated financial data should be
read in conjunction with the Consolidated Financial Statements and the related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Annual Report on Form 10-K.
The following table has been restated to reflect all the activity of the
Company's Industrial segment as "discontinued operations." In addition, the
table reflects the restatement of the Company's financial statements as a result
of a determination by the Company to recognize revenue on certain product sales
upon arrival at the customer site, as well as the restatement of retained
earnings as of January 1, 2000 to properly state its deferred software costs.
Year ended December 31,
Restated Restated Restated
2002 2001 2000 1999 1998
----------------------------------------------------------------------
Net revenues from
continuing operations ......... $ 133,681 $ 114,354 $ 101,463 $ 132,839 $ 117,612
Cost of sales ................... $ 105,225 $ 89,001 $ 86,647 $ 103,392 $ 92,981
------------ ------------ ------------ ------------ ---------
Gross margin .................... $ 28,456 $ 25,353 $ 14,816 $ 29,447 $ 24,631
Selling, general & administrative $ 19,540 $ 16,774 $ 23,937 $ 20,982 $ 18,542
------------ ------------ ------------ ------------ ---------
(Provision) benefit for
income taxes .................. $ (884) $ (621) $ 6,800 $ 800 $ (675)
------------ ------------ ------------ ------------ ---------
Income (loss) from
continuing operations ......... $ 2,623 $ 2,080 $ (10,961) $ 374 $ 1,448
============ ============ ============ ============ =========
Basic earnings (loss) per share
from continuing operations .... $ .33 $ .27 $ (1.40) $ .04 $ .16
Diluted earnings (loss) per share
from continuing operations .... $ .32 $ .27 $ (1.40) $ .04 $ .16
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
----------------------------------------------------------
Restated Restated Restated
2002 2001 2000 1999 1998
----------------------------------------------------------
Working capital $ 37,327 $ 28,677 $ 27,575 $ 44,810 $ 49,189
Total assets $ 85,122 $ 88,915 $ 85,771 $ 86,798 $ 93,426
Long-term debt $ 2,181 $ 2,268 $ 2,323 $ -- $ --
Shareholders' equity $ 51,198 $ 47,529 $ 47,012 $ 61,410 $ 62,826
The restatement adjustments affecting the years 2001 and 2000 are set forth
in the following table (in thousands):
2001 2000
-----------------------------------------------------------
As As As As
Previously Restated Previously Restated
Reported Reported
-----------------------------------------------------------
Net revenues from
continuing operations ......... $ 115,734 $ 114,354 $ 98,273 $ 101,463
Cost of sales ................... $ 89,957 $ 89,001 $ 85,042 $ 86,647
------------- ------------- -------------- ---------
Gross margin .................... $ 25,777 $ 25,353 $ 13,231 $ 14,816
Selling, general & administrative $ 16,801 $ 16,774 $ 23,873 $ 23,937
------------- ------------- -------------- ---------
Income (loss) from continuing
operations before provision
for income taxes ............... $ 3,098 $ 2,701 $ (19,282) $ (17,761)
(Provision) benefit for taxes ... (987) (621) 7,409 6,800
------------- ------------- -------------- ---------
Income (loss) from continuing
operations .................... $ 2,111 $ 2,080 $ (11,873) $ (10,961)
Discontinued operations loss ... $ (2,335) $ (2,335) $ (2,556) $ (2,556)
Income tax benefit ............. $ 744 $ 537 $ 982 $ 982
-------------- ------------- -------------- ---------
Net income ..................... $ 520 $ 282 $ (13,447) $ (12,535)
============== ============= ============== =========
Basic earnings (loss) per share
from continuing operations .... $ .27 $ .27 $ (1.51) $ (1.40)
Basic earnings (loss) per share
from discontinued operations .. $ (.21) $ (.23) $ (.20) $ (.20)
Diluted earnings (loss) per share
from continuing operations .... $ .27 $ .27 $ (1.51) $ (1.40)
Diluted earnings (loss) per share
from discontinued operations .. $ (.20) $ (.23) $ (.20) $ (.20)
2001 2000
-------------------------------------------
As As As As
Previously Restated Previously Restated
Reported Reported
-------------------------------------------
Balance sheet data (at December 31):
Working capital .................... $29,406 $28,677 $27,908 $27,575
Total assets ...................... $89,024 $88,915 $85,613 $85,771
Shareholders' equity .............. $47,587 $47,529 $46,832 $47,012
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.
In March 2003, the Company announced it would restate its financial
statements for fiscal years 2000 and 2001 and the first three quarters of 2002
as a result of a determination by the Company that the Company should recognize
revenue on certain product sales upon arrival at the customer site. This change
more accurately reflects completion of the earnings process in order to
recognize revenue for sales of the Company's Point of Sale systems to individual
customers. Previously, the Company recorded revenue for these sales when
products left the Company's facility. In the aggregate, the restatement
decreased net revenue by $675,000 for the entire period of fiscal years 2000,
2001 and the nine months ended September 30, 2002. This represents 0.2% of the
total revenues during that period. The aggregate change in net income for this
same period was an increase of $238,000. More specifically, in 2000 revenue
increased by $3.2 million and the net loss decreased by $913,000. In 2001
revenue and net income decreased by $1.4 million and $238,000 respectively. For
the nine months ended September 30, 2002 revenues decreased by $2.5 million and
net income decreased by $437,000. Retained earnings as of January 1, 2000 were
restated (decreased) to reflect the impact of this change in revenue recognition
in the amount of $1.1 million, net of tax. In addition, the Company has restated
(increased) retained earnings as of January 1, 2000 to properly state its
deferred software costs in the amount of $380,000, net of tax. This latter
adjustment had no impact on the results of operations for 2000, 2001 or 2002.
The following discussion and analysis highlights items having a significant
effect on operations during the three-year period ended December 31, 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.
Results of Operations -- 2002 Compared to 2001
The Company reported revenues from continuing operations of $133.7 million
for the year ended December 31, 2002, an increase of 17% from the $114.4 million
reported in 2001. Income from continuing operations was $2.6 million in 2002, a
26% increase over the $2.1 million earned in 2001. The Company reported diluted
net income per share from continuing operations of $.32 for 2002, a 19% increase
over the $.27 reported for the same period a year earlier. Basic net income per
share was $.33 in 2002 compared to $.27 in 2001. The Company's net income for
the year ended December 31, 2002 was $741,000 or $.09 diluted net income per
share, compared to net income of $282,000 and $.04 per diluted share for the
same period in 2001.
Product revenues from the Company's Restaurant segment were $59.2 million
in 2002, an increase of 18% from the $50.3 million recorded in 2001. The
principal factor was increased sales to certain of the Company's traditional
customers including McDonald's and YUM! Brands, Inc. YUM! Brands, Inc. includes
five major restaurant chains. Also contributing to the revenue growth were sales
to several other new and existing accounts. These accounts include Carnival
Cruise Lines, Rare Hospitality, CKE Restaurants and The Pantry, Inc. These
increased sales were due to several factors including the market demand for the
Company's newest product, the POS4XP(TM), and customers' requirements to replace
or upgrade older systems at existing restaurants. This increase was partially
offset by a decline in sales to Boston Market. The Company acquired this account
and completed the delivery of the customer's initial requirements in 2001.
Customer service revenues are also generated by the Company's Restaurant
segment. The Company's service offerings include installation, training,
twenty-four hour help desk support and various field and on-site service
options. Customer service revenues were $36.6 million in 2002, an increase of 9%
from the $33.6 million in 2001. The growth was due to a larger volume of
installation activity in 2002. This was the result of increased product sales
during the year. Service revenue also grew due to increases in field service and
call center contracts.
Contract revenues from the Company's Government segment were $38 million in
2002, an increase of 24% when compared to the $30.5 million recorded in the same
period in 2001. The Company received over $100 million in new awards in 2002.
More specifically, this increase resulted from the expanded scope of our I/T
outsourcing contracts for facility operations at strategic U.S. Department of
Defense Telecommunication sites across the globe. These outsourcing operations
provided by the Company directly support the U.S. Navy and Air Force operations.
The Company has become a recognized leader in the conversion of military I/T
communications facilities to contractor operations. Also contributing to the
growth was a floodplain-mapping contract with the New York State Department of
Environment Conservation. Additionally, contract revenues grew as a result of
the Company's logistics management business, which involves the tracking of
mobile chassis under the Company's Cargo*Mate(TM) contracts.
Product margins were 32.9% for 2002 compared to 33.4% for the same period
in 2001. The product mix change as a result of the revenue growth discussed
above had a small positive impact on margins. However, this was offset by an
increase in the provision for excess and obsolete inventory in 2002 when
compared to 2001. This was primarily a result of a decline in the forecasted
usage of certain inventory components as the Company recently introduced newer
products.
Customer service margins were 17.7% in 2002 compared to 19.1% for the same
period in 2001. This margin decline was the result of an investment by the
Company to increase the number of field service personnel in the first half of
the year in order to support the installation and field service requirements of
the Boston Market account which was acquired by the Company in 2001.
Contract margins were 6.5% in 2002 versus 7.1% for the same period in 2001.
This minor decline was due to slightly lower profit margins on certain
fixed-price contracts in 2002 when compared to 2001. The primary elements of
contract costs are direct and indirect labor, related fringe benefits,
materials, subcontract costs, and travel expenses. Margins in 2002 and 2001 were
higher than anticipated due to additional profit recognized upon completion of
certain contracts. Margins on the Company's government contract business
historically run between 5% and 6%.
Selling, general and administrative expenses are virtually all related
to the Company's Restaurant segment. Selling, general and administrative
expenses were $19.5 million in 2002 versus $16.8 million for the same period in
2001, an increase of 16%. This occurred primarily in sales and marketing
expenses and is directly related to the growth in product revenue. The Company
increased its worldwide sales force, increased related travel expenses and
incurred general inflationary increases in wages and benefits.
Research and development expenses are from the Company's Restaurant
segment. Research and development expenses were $5.4 million in 2002, a decrease
of 3% from the $5.6 million recorded for the same period in 2001. This minor
decrease was due to the completion of certain development projects in 2002.
Research and development costs attributable to government contracts are included
in cost of contract revenues.
Other income was $815,000 in 2002 and includes rental income and foreign
currency gains and losses. There were no significant variations in 2002 compared
to 2001.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. Interest expense
declined 29% to $824,000 in 2002 primarily due to a lower interest rate in 2002
compared to 2001.
In 2002, the Company's effective tax rate was 25.2%, compared to 23.0% in
2001. The variance from the statutory rate was due to the extraterritorial
income exclusion and an adjustment to prior year's accruals. This adjustment was
due to the favorable completion of federal tax audits through the year 2000.
These items were partially offset by a $329,000 valuation allowance against
certain foreign tax credits, due to the fact that the Company anticipates these
foreign tax credits will expire prior to utilization.
During 2002, the Company recorded an after tax loss of $1.9 million or $.23
loss per diluted share resulting from the discontinuance of its Industrial
segment. The Company's decision to close down its unprofitable Industrial
business unit, Ausable Solutions, Inc., followed a trend of continuous losses
over the past three years, which resulted from an economic downturn in the IT
software market with corresponding delays of anticipated contracts. This
decision will allow the Company to focus on its two core businesses, Restaurant
and Government, which are both growing and profitable.
Results of Operations -- 2001 Compared to 2000
The Company reported revenues from continuing operations of $114.4 million
for the year ended December 31, 2001, an increase of 13% from the $101.5 million
reported in 2000. Income from continuing operations was $2.1 million versus a
loss of $11 million in 2000. The Company reported basic and diluted net income
per share from continuing operations of $.27 for 2001, compared to a diluted
loss per share of $1.40 reported for the same period a year earlier.
The Company's net income for the year ended December 31, 2001 was $282,000,
or $.04 diluted net income per share, compared to a net loss of $12.5 million
and $1.60 loss per diluted share for the same period in 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.
Total revenue from this segment grew 11% to $83.8 million in 2001 versus $75.9
million in 2000. Operating results improved from a $17.4 million loss in 2000 to
a profit of $1.2 million in 2001. This was attributable to an increase in
capital spending by numerous restaurant customers as decisions were made to
replace older equipment, release of new and improved products as well as
operating cost reductions implemented in 2001. Consistent with the Company's
strategy to diversify its customer base, the Company was successful in adding 13
new customer accounts consistent with its strategy.
Product revenues from the Company's Restaurant segment were $50.3 million
in 2001, an increase of 13% from the $45 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. Additionally, this turnaround can be attributed to
several factors, including the release of the Company's new hardware product,
POS4XP(TM), increased demand for its integrated software suite and a general
improvement in economic conditions in the Company's marketplace.
Customer service revenues are also generated by the Company's Restaurant
segment. 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 from the Company's Government segment 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
Cargo*Mate(TM) contracts.
Product margins were 33.4% in 2001 compared to 23.8% 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 are virtually all related to
the Company's Restaurant segment. Selling, general and administrative expenses
were $16.8 million in 2001 versus $23.9 million in 2000, a decrease of 30%. 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. These cost reductions included a reduction in labor as well as
certain discretionary expenses such as travel. 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 are from the Company's Restaurant
segment. Research and development were $5.6 million in 2001, a decrease of 29%
from the $7.9 million recorded in 2000. This decline is due to the completion of
the new POS4XP(TM) system, 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.
Other income was $848,000 in 2001, an increase from the $525,000 recorded
in 2000. This increase was primarily due to an increase in rental income due to
increased occupancy.
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 23%. 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 38.3% 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. Cash provided by continuing operations was
$4.1 million in 2002 compared to $1.8 million in 2001. In 2002, cash flow
benefited from a reduction in accounts receivable and the operating profits for
the period. This was partially offset by an increase in customer service
inventory requirements to support the Company's newest product line and expanded
customer base. In addition, there was an increase in finished goods inventory in
anticipation of certain customer orders that were not delivered until the first
quarter of 2003. In 2001, cash flow benefited from the Company's return to
profitability, and the timing of vendor payments. This was partially offset by
an increase in accounts receivable.
Cash used in investing activities was $1.7 million in 2002 versus $1.3
million for 2001. In 2002, capital expenditures were primarily for normal
operational needs in the restaurant segment and for improvements to the
Company's headquarters facility. Capitalized software costs were $790,000 in
2002. 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.
Cash used by financing activities, was $2.8 million in 2002 compared to
cash provided of $1.2 million in 2001. In 2002, the Company reduced its
short-term bank borrowings by $5.1 million and received $381,000 from the
exercise of employee stock options. The Company also raised $1.9 million on the
sale of treasury stock. The Company evaluates market conditions on an ongoing
basis and may elect to repurchase shares of its common stock at times when the
prevailing market conditions provide an opportunity for the Company to buy back
its stock at a discounted rate as compared to book value. 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.
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 (4.25% at December
31, 2002) and is subject to loan covenants involving working capital and debt
coverage ratios. The Company is in compliance with these covenants as of
December 31, 2002. The availability of this facility is determined based on the
amount of certain receivables and inventory. This line expires on July 31, 2003.
The remaining line of $7,500,000 bears interest at the prime rate, and the
expiration date was extended from July 31, 2003 to January 1, 2004 in April
2003. Both lines are collateralized by certain accounts receivable and
inventory. At December 31, 2002, $9,549,000 was outstanding and $10,451,000 was
available under these lines. The Company has ongoing discussions with its
lenders and expects to be able to renew these lines at similar terms to meet its
ongoing needs.
The Company does not have any significant capital or purchase commitments.
The Company's future minimum obligations under non-cancelable operating leases
is as follows:
2003 $ 1,059
2004 914
2005 826
2006 557
2007 309
Thereafter 723
-----------
$ 4,388
===========
The Company is continuing to look at various alternatives to further
increase its credit availability. We believe our existing cash, line of credit
facilities and our anticipated operating cash flow will be sufficient to meet
our cash requirements at least through the next twelve months. However, we may
be required, or could elect, to seek additional funding prior to that time. Our
future capital requirements will depend on many factors, including our rate of
revenue growth, the timing and extent of spending to support product development
efforts, expansion of sales and marketing, the timing of introductions of new
products and enhancements to existing products, and market acceptance of our
products. We cannot assure you that additional equity or debt financing will be
available on acceptable terms or at all. Our sources of liquidity beyond twelve
months, in management's opinion, will be our cash balances on hand at that time,
funds provided by operations and whatever long-term credit facilities we can
arrange.
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.
The Company recognizes revenue generated by the Restaurant segment using
the guidance from SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" and the AICPA Statement of Position (SOP) 97-2, "Software
Revenue Recognition," and other applicable revenue recognition guidance and
interpretations. Product revenue consists of the Company's standard Point of
Sale systems of the Restaurant segment. The Company recognizes revenue from the
sale of complete restaurant systems (which primarily includes hardware or
hardware and software) upon delivery to the customer site. For restaurant
systems that are self-installed by the customer or an unrelated third party and
for component sales or supplies, the Company recognizes revenue at the time of
shipment. The Company records a provision for returns and allowances when the
sale is recognized. In addition to product sales, the Company may provide
installation and training services, and also offers maintenance contracts to its
customers. Installation and training service revenues are recognized as the
services are performed. The Company's other service revenues, consisting of
support, field and depot repair, are provided to customers either on a time and
materials basis or under its maintenance contracts. Services provided on a time
and materials basis are recognized as the services are performed. Service
revenues from maintenance contracts are deferred when billed and recognized
ratably over the related contract period.
The Company's contract revenues generated by the Government segment result
primarily from contract services performed for the United States Government
under a variety of cost-reimbursement, time-and-material and fixed-price
contracts. The Company recognizes contract revenues using the guidance from SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type 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.
Allowances for doubtful accounts are based on estimates of probable losses
related to accounts receivable balances. The establishment of allowances
requires the use of judgment and assumptions regarding probable losses on
receivable balances.
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 resulting from acquisitions. The valuation
of these assets and the assignment of useful amortization lives for the computer
software costs 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 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
A CHANGE IN THE RELATIONSHIP WITH ANY ONE OF OUR MAJOR CUSTOMERS WOULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS.
A small number of customers has historically accounted for a majority of
our net revenues in any given fiscal period. For the fiscal years ended December
31, 2002, 2001 and 2000, aggregate sales to our top two Restaurant segment
customers, McDonald's and Yum!Brands, amounted to 51%, 51% and 56%,
respectively, of net revenues. No customer is obligated to make any minimum
level of future purchases from us or to provide us with binding forecasts of
product purchases for any future period. In addition, major customers may elect
to delay or otherwise change the timing of orders in a manner that could
adversely effect quarterly and annual results of operations. There can be no
assurance that our current customers will continue to place orders with us, or
that we will be able to obtain orders from new customers.
AN INABIILITY TO PRODUCE NEW PRODUCTS THAT KEEP PACE WITH TECHNOLOGICAL
DEVELOPMENTS AND CHANGING MARKET CONDITIONS COULD RESULT IN A LOSS OF MARKET
SHARE.
The products we sell are subject to rapid and continual technological
change. The products that are available from our competitors have increasingly
offered a wider range of features and capabilities. We believe that in order to
compete effectively we must provide compatible systems incorporating new
technologies at competitive prices. There can be no assurance that we will be
able to continue funding research and development at levels sufficient to
enhance our current product offerings, or will be able to develop and introduce
on a timely basis new products that keep pace with technological developments
and emerging industry standards and address the evolving needs of customers.
There can also be no assurance that we will not experience difficulties that
will result in delaying or preventing the successful development, introduction
and marketing of new products in our existing markets, or that our new products
and product enhancements will adequately meet the requirements of the
marketplace or achieve any significant degree of market acceptance. Likewise,
there can be no assurance as to the acceptance of our products in new markets,
nor can there be any assurance as to the success of our penetration of these
markets, or to the revenue or profit margins with respect to these products. If
any of our competitors were to introduce superior software products at
competitive prices, or if our software products no longer met the needs of the
marketplace due to technological developments and emerging industry standards,
our software products may no longer retain any significant market share. If this
were to occur, we could be required to record a charge against capitalized
software costs, which amounts to $2.1 million as of December 31, 2002.
WE DERIVE A PORTION OF OUR REVENUE FROM GOVERNMENT CONTRACTS, WHICH CONTAIN
PROVISIONS UNIQUE TO PUBLIC SECTOR CUSTOMERS.
For the fiscal years ended December 31, 2002, 2001 and 2000, we derived
28%, 27% and 25%, respectively, of our net revenues from contracts to provide
technical products and services to United States government agencies and defense
contractors. Contracts with United States government agencies typically provide
that such contracts are terminable at the convenience of the government. If the
government terminated a contract on this basis, we would be entitled to receive
payment for our allowable costs and, in general, a proportionate share of our
fee or profit for work actually performed. Most U.S. government contracts are
also subject to modification or termination in the event of changes in funding.
As such, we may perform work prior to formal authorization, or the contract
prices may be adjusted for increased work scope or change orders. Termination or
modification of a substantial number of our U.S. government contracts could have
a material adverse effect on our business, financial condition and results of
operations. The Company does not anticipate any impact due to the current world
crisis on our current contracts.
WE FACE EXTENSIVE COMPETITION IN THE MARKETS IN WHICH WE OPERATE, AND OUR
FAILURE TO COMPETE EFFECTIVELY COULD RESULT IN PRICE REDUCTIONS AND DECREASED
DEMAND FOR OUR PRODUCTS AND SERVICES.
There are currently five major suppliers who offer restaurant management
systems similar to ours. Some of these competitors are larger than we are and
have access to substantially greater financial and other resources than we do,
and consequently may be able to obtain more favorable terms than we can for
components and subassemblies incorporated into their restaurant technology
products. The rapid rate of technological change in the restaurant market makes
it likely that we will face competition from new products designed by companies
not currently competing with us. Such products may have features not currently
available on our restaurant products. We believe that our competitive ability
depends on our total solution offering, our product development and systems
integration capability, our direct sales force and our customer service
organization. There is no assurance, however, that we will be able to compete
effectively in the restaurant technology market in the future.
Our government contracting business has been focused on niche offerings,
primarily signal and image processing and engineering services. Many of our
competitors are, or are subsidiaries of, companies such as Lockheed-Martin,
Raytheon, Northrop-Grumman (which includes Litton-PRC-TASC), BAE, Boeing and
SAIC. These companies are larger and have substantially greater financial
resources than we do. We also compete with smaller companies that target
particular segments of the government market. These companies may be better
positioned to obtain contracts through competitive proposals. Consequently,
there are no assurances that we will continue to win government contracts as a
prime contractor or subcontractor.
WE MAY NOT BE ABLE TO MEET THE UNIQUE OPERATIONAL, LEGAL AND FINANCIAL
CHALLENGES THAT RELATE TO OUR INTERNATIONAL OPERATIONS, WHICH MAY LIMIT THE
GROWTH OF OUR BUSINESS.
For the years ended December 31, 2002, 2001 and 2000, our net revenues from
sales outside the United States were 11%, 14% and 19%, respectively, of the
Company's net revenues. We anticipate that international sales will continue to
account for a significant portion of sales. We intend to continue to expand our
operations outside the United States and to enter additional international
markets, which will require significant management attention and financial
resources. Our operating results are subject to the risks inherent in
international sales, including, but not limited to, regulatory requirements,
political and economic changes and disruptions, geopolitical disputes and war,
transportation delays, difficulties in staffing and managing foreign sales
operations, and potentially adverse tax consequences. In addition, fluctuations
in exchange rates may render our products less competitive relative to local
product offerings, or could result in foreign exchange losses, depending upon
the currency in which we sell our products. There can be no assurance that these
factors will not have a material adverse effect on our future international
sales and, consequently, on our operating results. In 2002, less than 1% of the
Company's revenues was from customers in the Middle East. Therefore, the current
world crisis is not expected to have a material impact on the results of
operations in 2003.
INFLATION
Inflation had little effect on revenues and related costs during 2002.
Management anticipates that margins will be maintained at acceptable levels to
minimize the effects of inflation, if any.
INTEREST RATES
As of December 31, 2002, the Company has $2.2 million in variable long-term
debt and $9.6 million in variable short-term debt. The Company believes that a
10% change in interest rates would not have a material impact on our business,
financial conditions, results of operations or cash flows.
FOREIGN CURRENCY
The Company's primary exposures relate to certain non-dollar denominated
sales and operating expenses in Europe and Asia. These primary currencies are
the Euro, the Australian dollar and the Singapore dollar. Management believes
that foreign currency fluctuations should not have a significant impact on gross
margins due to the low volume of business affected by foreign currencies.
Item 8: Financial Statements and Supplementary Data
The Company's 2002 Financial Statements, together with the report thereon
of PricewaterhouseCoopers LLP dated March 28, 2003, are included elsewhere
herein. See Item 15 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. 63 Chairman of the Board, President
and Director
Charles A. Constantino 63 Executive Vice President and
Director
J. Whitney Haney 68 Director
Sangwoo Ahn 64 Director
James A. Simms 43 Director
Gregory T. Cortese 53 President ParTech, Inc.,
General Counsel and Secretary
Albert Lane, Jr. 61 President, PAR Government Systems
Corporation and Rome Research
Corporation
Ronald J. Casciano 49 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 55 Vice President, POS Systems
Development, ParTech, Inc.
Edward Bohling 43 Vice President, Information
Systems and Technology, PAR
Government Systems Corporation
Linda D. Brewer 46 Vice President, Pacific/West
Coast Operations
Rome Research Corporation
Louis Brown 52 Vice President, World Wide Sales,
ParTech, Inc.
Name Age Position
- ------------------------ --- ---------------------------------
Kenneth M. Giffune 54 Vice President of Human Resources
PAR Technology Corporation
Sam Y. Hua 41 Vice President and Chief
Technical Officer, ParTech, Inc.
Fred A. Matrulli 57 Vice President, Operations/
Logistics Management Systems,
PAR Technology Corporation
Roger P. McReynolds 57 Vice President, Chief Quality
Officer, ParTech, Inc.
Hector Melendez 53 Vice President of Plans,
Rome Research Corporation
Victor Melnikow 45 Vice President, Finance,
Rome Research Corporation
E. John Mohler 59 Vice President, Business
Development, PAR Logistics
Management Systems,
PAR Technology Corporation
Samuel S. Talaba 46 Controller, ParTech, Inc.
F. Gregory Talomie 58 Vice President/General Manager
PAR Logistics Management
Systems, PAR Technology
Corporation
Jerry F. Weimar 46 Vice President, Special Projects,
ParTech, Inc.
William J. Williams 41 Vice President, Manufacturing,
ParTech, Inc.
Stanley Zysk 56 Vice President, Product
Management, 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 A. Simms was appointed a director of the Company in October,
2001. He is currently a senior investment banker with Adams, Harkness & Hill,
Inc. and has held this position since 1997.
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, POS 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.
Ms. Linda D. Brewer was promoted to Vice President of Pacific/West Coast
Operations in January 2002. Prior to this position, Ms. Brewer was Director of
Pacific/West Coast Operations for Rome Research Corporation.
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.
Dr. Kenneth M. Giffune, Ed.D was appointed Vice President of Human
Resources for PAR Technology Corporation in July 1995.
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.
Mr. Fred A. Matrulli was named Vice President, Operations/Logistics
Management Systems, in 1998.
Mr. Hector Melendez joined Rome Research Corporation in April 2001 as Vice
President after a successful career in the United States Marine Corps as
Director of Communication Infrastructure. He was appointed to Vice President of
Plans in February, 2002.
Mr. Roger P. McReynolds was appointed Vice President, Chief Quality Officer
in February 2002. Previously, he was Vice President of Operations for ParTech,
Inc.
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, Business Development for
PAR Technology Corporation's Logistics Management Systems in January, 2002.
Prior, Mr. Mohler held the position of Vice President, Marketing/Logistics
Management Systems.
Mr. Samuel Talaba was named Controller of ParTech, Inc. in 1997.
Mr. Gregory Talomie was appointed Vice President/General Manager of PAR
Logistics Management Systems in August 2001.
Mr. Jerry F. Weimar was promoted to Vice President, Special Projects in
2002. Prior to that, he held the position of VP, Professional Services of
ParTech, Inc.
Mr. William J. Williams was promoted to Vice President, Manufacturing of
ParTech, Inc. in February 1998. Prior to this position, Mr. Williams was the
Vice President, Operations.
Mr. Stanley A. Zysk, Jr. assumed the position of Vice President of Product
Management for ParTech, Inc. in July 2000. Previously, Mr. Zysk was Director of
Software Applications.
Item 11: Executive Compensation
The information required by this item will appear under the caption
"Executive Compensation" in our 2002 definitive proxy statement for the annual
meeting of stockholders on May 22, 2003 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 our 2002
definitive proxy statement for the annual meeting of stockholders on May 22,
2003 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 our 2002 definitive proxy statement for the annual
meeting of stockholders on May 22, 2003 and is incorporated herein by reference.
Item 14: Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the filing date, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President and Chief Executive Office and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures, as defined in Exchange Act Rule
15d-14(c). Based upon that evaluation, the Company's President and Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in enabling the Company to
identify, process, and report information required to be included in the
Company's periodic SEC filings within the required time period.
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal controls or to
our knowledge, in other factors that could significantly affect our disclosure
controls and procedures subsequent to the Evaluation Date.
Item 14A: Statement of Fees Paid to Independent Auditors
The response to this item will appear under the caption "Statement of Fees
Paid to Independent Auditors" in our 2002 definitive proxy statement for the
annual meeting of stockholders on May 22, 2003 and is incorporated herein by
reference.
PART IV
Item 15: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of the Form 10-K
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 2002 and 2001
Consolidated Statements of Income for the three years ended December
31, 2002
Consolidated Statements of Comprehensive Income for the three years
ended December 31, 2002
Consolidated Statements of Changes in Shareholders' Equity for the
three years ended December 31, 2002
Consolidated Statements of Cash Flows for the three years ended
December 31, 2002
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 76
(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 15(a) (1) on page 41 present fairly, in all material
respects, the financial position of PAR Technology Corporation and its
subsidiaries at December 31, 2002 and December 31, 2001 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002 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 15(a) (2) on page 41
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.
As discussed in Note 2, the Company has restated its Consolidated Financial
Statements as of and for the years ended December 31, 2001 and 2000.
PricewaterhouseCoopers LLP
Syracuse, New York
March 28, 2003
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
December 31,
--------------------
Restated
(Note 2)
2002 2001
-------- --------
Assets
Current Assets:
Cash ............................................... $ 490 $ 879
Accounts receivable-net (Note 4) ................... 25,843 34,400
Inventories-net (Note 5) ........................... 34,274 26,223
Income tax refund claims ........................... -- 95
Deferred income taxes (Note 9) ..................... 5,766 2,883
Other current assets ............................... 2,638 3,315
Total assets of discontinued operation (Note 3) .... 59 --
-------- --------
Total current assets ........................... 69,070 67,795
Property, plant and equipment - net (Note 6) ............ 8,455 9,471
Deferred income taxes ................................... 4,386 7,813
Other assets ............................................ 3,211 3,836
-------- --------
$ 85,122 $ 88,915
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable (Note 7) ............................. $ 9,634 $ 14,686
Accounts payable ................................... 8,371 11,290
Accrued salaries and benefits ...................... 4,615 4,528
Accrued expenses ................................... 2,077 2,275
Deferred service revenue ........................... 6,704 6,339
Total liabilities of discontinued operation (Note 3) 342 --
-------- --------
Total current liabilities ...................... 31,743 39,118
-------- --------
Long-term debt (Note 7) ................................. 2,181 2,268
-------- --------
Shareholders' Equity (Note 8):
Preferred stock, $.02 par value,
1,000,000 shares authorized ...................... -- --
Common stock, $.02 par value,
19,000,000 shares authorized;
9,770,262 and 9,674,466 shares issued
8,359,575 and 7,880,760 outstanding .............. 195 193
Capital in excess of par value ..................... 28,926 28,541
Retained earnings .................................. 29,946 29,205
Accumulated other comprehensive loss ............... (816) (1,441)
Treasury stock, at cost, 1,410,687 and
1,793,706 shares ............................... (7,053) (8,969)
-------- --------
Total shareholders' equity ..................... 51,198 47,529
-------- --------
$ 85,122 $ 88,915
======== ========
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,
---------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- -------- --------
Net revenues:
Product ....................... $ 59,153 $ 50,272 $ 44,574
Service ....................... 36,553 33,572 31,887
Contract ...................... 37,975 30,510 25,002
-------- -------- --------
133,681 114,354 101,463
-------- -------- --------
Costs of sales:
Product ....................... 39,643 33,506 33,974
Service ....................... 30,081 27,163 29,132
Contract ...................... 35,501 28,332 23,541
-------- -------- --------
105,225 89,001 86,647
-------- -------- --------
Gross margin ............ 28,456 25,353 14,816
-------- -------- --------
Operating expenses:
Selling, general and
administrative ............... 19,540 16,774 23,937
Research and development ...... 5,400 5,565 7,854
Non-recurring charges ......... -- -- 300
-------- -------- --------
24,940 22,339 32,091
-------- -------- --------
Operating income (loss)
from continuing operations ........ 3,516 3,014 (17,275)
Other income, net .................. 815 848 525
Interest expense ................... (824) (1,161) (1,011)
-------- -------- --------
Income (loss) from
continuing operations
before provision for
income taxes ..................... 3,507 2,701 (17,761)
(Provision) benefit for
income taxes (Note 9) ............ (884) (621) 6,800
-------- -------- --------
Income (loss) from
continuing operations ............ 2,623 2,080 (10,961)
-------- -------- --------
Discontinued operations:
Loss from operations of
discontinued component
(including loss on disposal
of $830,000 in 2002) ....... (2,516) (2,335) (2,556)
Income tax benefit ............ 634 537 982
-------- -------- --------
Loss on discontinued operations (1,882) (1,798) (1,574)
-------- -------- --------
Net income (loss) .................. $ 741 $ 282 $(12,535)
======== ======== ========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(In Thousands Except Per Share Amounts)
Year ended December 31,
-----------------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
---------- --------- ---------
Earnings per share:
Basic:
Income (loss) from
continuing operations $ .33 $ .27 $ (1.40)
Loss from discontinued
operations $ (.24) $ (.23) $ (.20)
Net income (loss) $ .09 $ .04 $ (1.60)
Diluted:
Income (loss) from
continuing operations $ .32 $ .27 $ (1.40)
Loss from discontinued
operations $ (.23) $ (.23) $ (.20)
Net income (loss) $ .09 $ .04 $ (1.60)
Weighted average shares
outstanding
Basic 7,934 7,726 7,848
========= ========= ========
Diluted 8,315 7,799 7,848
========= ========= ========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Year ended December 31,
-----------------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
---------- --------- ---------
Net income (loss) $ 741 $ 282 $(12,535)
Other comprehensive
income (loss), net of tax:
Foreign currency translation
adjustments 625 (238) (439)
--------- --------- --------
Comprehensive income (loss) $ 1,366 $ 44 $(12,974)
========= ========= ========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Accumulated
Capital in Other
Common Stock excess of Retained Comprehensive Treasury Stock
(In Thousands) Shares Amount Par Value Earnings Income (Loss) Shares Amount
------ ------ --------- -------- ------------ ------ ------
Balance at
December 31, 1999, as reported 9,517 $ 190 $ 28,071 $ 42,191 $ (764) (1,457) $ (7,545)
Effect of restatement * (733)
Balance at
December 31, 1999, as restated* 9,517 190 28,071 41,458 (764) (1,457) (7,545)
Net loss (12,535)
Translation adjustments (439)
Acquisition of treasury stock (337) (1,424)
------- ------- -------- --------- ------- --------- --------
Balance at
December 31, 2000, as restated* 9,517 190 28,071 28,923 (1,203) (1,794) (8,969)
Net income 282
Issuance of common stock upon the
exercise of stock options (Note 8) 157 3 470
Translation adjustments (238)
------- ------- -------- --------- ------- ---------- --------
Balance at
December 31, 2001, as restated* 9,674 193 28,541 29,205 (1,441) (1,794) (8,969)
Net income 741
Sale of treasury stock 6 383 1,916
Issuance of common stock upon the
exercise of stock options (Note 8) 96 2 379
Translation adjustments 625
------- ------- -------- --------- ------- ---------- --------
Balance at
December 31, 2002 9,770 $ 195 $ 28,926 $ 29,946 $ (816) (1,411) $ (7,053)
======= ======= ======== ========= ======= ========= ========
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
* See Note 2.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Year ended December 31,
---------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- -------- --------
Cash flows from operating activities:
Net income (loss) .......................... $ 741 $ 282 $(12,535)
Adjustments to reconcile net income to net
cash provided by operating activities:
Net loss from discontinued operations ... 1,882 1,798 1,574
Depreciation and amortization ........... 2,894 3,156 3,132
Provision for bad debts ................. 1,491 1,299 2,138
Provision for obsolete inventory ........ 2,321 590 4,483
Increase (decrease) from changes in:
Accounts receivable ................... 6,045 (5,982) 561
Inventories ........................... (10,454) (103) (1,492)
Income tax refund claims .............. 95 638 (600)
Other current assets .................. 596 (1,352) 160
Other assets .......................... (24) (22) (27)
Accounts payable ...................... (2,611) 2,226 956
Accrued salaries and benefits ......... 292 477 (813)
Accrued expenses ...................... (197) (491) 268
Deferred service revenue .............. 493 (518) 1,357
Deferred income taxes ................. 544 (240) (6,984)
-------- -------- --------
Net cash provided (used) by continuing
operating activities ................ 4,108 1,758 (7,822)
Net cash provided (used) in
discontinued operations ............. (580) (1,829) 236
-------- -------- --------
Net cash provided (used) by
operating activities ................ 3,528 (71) (7,586)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures ....................... (916) (517) (586)
Capitalization of software costs ........... (790) (742) (914)
-------- -------- --------
Net cash used in investing activities (1,706) (1,259) (1,500)
-------- -------- --------
Cash flows from financing activities:
Net borrowings (payments) under
line-of-credit agreements ................ (5,082) 830 8,822
Net proceeds (payments)
from the issuance of long-term debt ....... (57) (55) 2,373
Net proceeds from the sale of treasury stock 1,922 -- --
Proceeds from the exercise of stock options 381 473 --
Acquisition of treasury stock .............. -- -- (1,424)
-------- -------- --------
Net cash provided (used) by
financing activities ................ (2,836) 1,248 9,771
-------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents ............................ 625 (238) (439)
-------- -------- --------
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
Year ended December 31,
---------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- -------- --------
Net increase (decrease) in cash
and cash equivalents ........................ (389) (320) 246
Cash and cash equivalents at
beginning of year ........................... 879 1,199 953
-------- -------- --------
Cash and cash equivalents at
end of year ................................. $ 490 $ 879 $ 1,199
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 848 $ 1,095 $ 978
Income taxes, net of refunds 101 (543) (807)
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
The Company recognizes revenue generated by the Restaurant segment using
the guidance from SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" and the AICPA Statement of Position (SOP) 97-2, "Software
Revenue Recognition," and other applicable revenue recognition guidance and
interpretations. Product revenue consists of the Company's standard Point of
Sale systems of the Restaurant segment. The Company recognizes revenue from the
sale of complete restaurant systems (which primarily includes hardware or
hardware and software) upon delivery to the customer site. For restaurant
systems that are self-installed by the customer or an unrelated third party and
for component sales or supplies, the Company recognizes revenue at the time of
shipment. The Company records a provision for returns and allowances when the
sale is recognized. In addition to product sales, the Company may provide
installation and training services, and also offers maintenance contracts to its
customers. Installation and training service revenues are recognized as the
services are performed. The Company's other service revenues, consisting of
support, field and depot repair, are provided to customers either on a time and
materials basis or under its maintenance contracts. Services provided on a time
and materials basis are recognized as the services are performed. Service
revenues from maintenance contracts are deferred when billed and recognized
ratably over the related contract period.
The Company's contract revenues generated by the Government segment result
primarily from contract services performed for the United States Government
under a variety of cost-reimbursement, time-and-material and fixed-price
contracts. The Company recognizes contract revenues using the guidance from SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type 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.
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
The Company's products are sold with a standard warranty for defects in
material and workmanship. The standard warranty offered by the Company is for
one year. The Company establishes an accrual for estimated warranty costs at the
time revenue is recognized on the sale. This estimate is based on projected
product reliability using historical performance data.
The changes in the product warranty liability for the year ended December
31, 2002 are summarized as follows: (in thousands)
Dollar Amount of
Liability
Debit/(Credit)
--------------
Balance at December 31, 2001 $ (388)
Accruals for warranties issued during the period (1,540)
Accruals related to pre-existing warranties
(including changes in estimates) 153
Settlements made (in cash or in kind) during the period 1,215
------------
Balance at December 31, 2002 $ (560)
============
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 records a valuation allowance when necessary to reduce deferred tax
assets to their net realizable amounts.
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 Income
(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 used in its Restaurant products segment under the requirements
of Statement of Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased, or Otherwise Marketed". Software
development costs incurred prior to establishing technological feasibility are
charged to operations and included in research and development costs. Software
development costs incurred after establishing 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 $2,148,000, and $2,165,000 at December 31, 2002 and
2001, 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 $1,098,000, $1,376,000 and $1,297,000 in 2002, 2001, and 2000,
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.
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
2002, 2001 and 2000 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):
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
------- ------- -----------
Net income (loss) ............ $ 741 $ 282 $ (12,535)
Compensation benefit (expense) 117 (278) (605)
------- ------- ----------
Pro forma net income (loss) .. $ 858 4 $ (13,140)
======= ======= ==========
Earnings (loss) per share:
As reported -- Basic ....... $ .09 $ .04 $ (1.60)
-- Diluted ..... $ .09 $ .04 $ (1.60)
Proforma -- Basic ....... $ .11 $ -- $ (1.67)
-- Diluted ..... $ .10 $ -- $ (1.67)
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):
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- -------- --------
Net income (loss) .......................... $ 741 $ 282 $(12,535)
======== ======== ========
Basic:
Shares outstanding at beginning of year 7,881 7,723 8,060
Weighted shares issued during the year 53 3 --
Weighted average shares of treasury
stock acquired ...................... -- -- (212)
-------- -------- --------
Weighted average common shares, basic . 7,934 7,726 7,848
======== ======== ========
Earnings per common share, basic ...... $ .09 $ .04 $ (1.60)
======== ======== ========
Diluted:
Weighted average common shares, diluted 7,934 7,726 7,848
Dilutive impact of stock options ...... 381 73 --
-------- -------- --------
Weighted average common shares, diluted 8,315 7,799 7,848
======== ======== ========
Earnings per common share, diluted .... $ .09 $ .04 $ (1.60)
======== ======== ========
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 approved Statement
of Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets", ("SFAS 142"). The Company 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. Instead, all
goodwill will be tested for impairment annually, or more frequently if
circumstances indicate potential impairment, through a comparison of fair value
to its carrying amount. The Company has elected to annually test for impairment
at December 31. There was no impairment of goodwill in 2002. The carrying value
of goodwill was $598,000 at December 31, 2002.
The following is a reconciliation assuming goodwill had been accounted for
in accordance with SFAS 142 in the years ended December 31, 2001 and 2000:
2002 2001 2000
------------- ------------- -------------
Income (loss) from continuing operations
- as reported $ 2,623 $ 2,080 $ (10,961)
------------- ------------- ------------
Add back: Goodwill amortization
(net of income taxes) $ -- $ 114 $ 91
------------- ------------- -------------
Adjusted income (loss)
from continuing operations $ 2,623 $ 2,194 $ (10,870)
============= ============= ============
Basic EPS
Income (loss) from continuing operations
- as reported $ .33 $ .27 $ (1.40)
------------- ------------- ------------
Add back: Goodwill amortization
(net of income taxes) $ -- $ .01 $ .01
------------- ------------- -------------
Adjusted income (loss)
from continuing operations $ .33 $ .28 $ (1.39)
============= ============= =============
2002 2001 2000
------------- ------------- -------------
Diluted EPS
Income (loss) from continuing operations
- as reported $ .32 $ .27 $ (1.40)
------------- ------------- ------------
Add back: Goodwill amortization
(net of income taxes) $ -- $ .01 $ .01
------------- ------------- -------------
Adjusted income (loss)
from continuing operations $ .32 $ .28 $ (1.39)
============= ============= =============
Accounting for Impairment or Disposal of Long-Lived Assets
SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets,"
was issued in August 2001. SFAS No. 144 provides new guidance on the recognition
of impairment and losses on long-lived assets to be held and used, or to be
disposed of, and also broadens the definition of what constitutes a discontinued
operation and how the results of discontinued operations are to be measured and
presented. SFAS No. 144 supersedes SFAS 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of," and a portion of Accounting Principle
Board (APB) No. 30, "Reporting the Results of Operations-Reporting the Effects
of Disposal of Segment of a Business," while retaining many of the requirements
of these two statements. Under SFAS No. 144, discontinued operations are no
longer measured on a net realizable value basis, and future operating losses are
no longer recognized before they occur.
As further described in Note 3, the Company decided to dispose of its
Industrial segment in August 2002 and has adopted the provisions of SFAS 144
regarding the measurement, recognition and disclosure of this discontinued
operation.
New Accounting Pronouncements
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
This Statement supersedes Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
and Activity (including Certain Costs Incurred in a Restructuring)." The
provisions of this Statement are effective for exit or disposal activities that
are initiated after December 31, 2002, with early application encouraged. This
pronouncement did not have an impact on our financial condition or results of
operations for the year ended December 31, 2002.
In November 2002, FASB Interpretation ("FIN") No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" was issued. The interpretation provides
guidance on the guarantor's accounting and disclosure requirements for
guarantees, including indirect guarantees of indebtedness of others. We have
adopted the disclosure requirements of the interpretation as of December 31,
2002. The accounting guidelines are applicable to guarantees issued after
December 31, 2002 and require that we record a liability for the fair value of
such guarantees in the balance sheet. We are reviewing FIN 45 to determine its
impact, if any, on future reporting periods, and do not currently anticipate any
material accounting impact on our financial condition or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS 123, "Accounting for Stock-Based Compensation"
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. We will continue to account for
stock-based compensation using the intrinsic value method and will continue to
provide pro forma disclosures of the net income and earnings per share effect of
stock options using the "fair value method" in our annual and interim financial
statements.
Non-recurring Charges
The results for 2000 include a non-recurring charge of $300,000 ($200,000
after tax or $.03 loss per share) relating to the sale of the Company's Vision
business.
Note 2 -- Restatement
In March 2003, the Company announced it would restate its financial
statements for fiscal years 2000 and 2001 and the first three quarters of 2002
as a result of a determination by the Company that the Company should recognize
revenue on certain product sales upon arrival at the customer site. This change
more accurately reflects the completion of the earning process in order to
recognize revenue for sales of the Company's Point of Sale systems to individual
customers. Previously, the Company recorded revenue for these sales when
products left the Company's facility. In the aggregate, the restatement
decreased net revenue by $675,000 for the entire period of fiscal years 2000,
2001 and the nine months ended September 30, 2002. This represents 0.2% of the
total revenues during that period. The aggregate change in net income for this
same period was an increase of $238,000. More specifically, in 2000 revenue
increased by $3.2 million and the net loss decreased by $913,000. In 2001
revenue and net income decreased by $1.4 million and $238,000 respectively. For
the nine months ended September 30, 2002 revenues decreased by $2.5 million and
net income decreased by $437,000. Retained earnings as of January 1, 2000 were
restated (decreased) to reflect the impact of this change in revenue recognition
in the amount of $1.1 million, net of tax. In addition, the Company has restated
(increased) retained earnings as of January 1, 2000 to properly state its
deferred software costs in the amount of $380,000, net of tax. This latter
adjustment had no impact on the results of operations for 2000, 2001 or 2002.
The restatement adjustments affecting the years 2001 and 2000 are set
forth in the following table (in thousands):
2001 2000
-----------------------------------------------------------
As As As As
Previously Restated Previously Restated
Reported (Note 2) Reported (Note 2)
-----------------------------------------------------------
Net revenues from
continuing operations ......... $ 115,734 $ 114,354 $ 98,273 $ 101,463
Cost of sales ................... $ 89,957 $ 89,001 $ 85,042 $ 86,647
------------- ------------- -------------- ---------
Gross margin .................... $ 25,777 $ 25,353 $ 13,231 $ 14,816
Selling, general & administrative $ 16,801 $ 16,774 $ 23,873 $ 23,937
------------- ------------- -------------- ---------
Income (loss) from continuing
operations before provision
for income taxes ............... $ 3,098 $ 2,701 $ (19,282) $ (17,761)
(Provision) benefit for taxes ... (987) (621) 7,409 6,800
------------- ------------- -------------- ---------
Income (loss) from continuing
operations .................... $ 2,111 $ 2,080 $ (11,873) $ (10,961)
Discontinued operations loss ... $ (2,335) $ (2,335) $ (2,556) $ (2,556)
Income tax benefit ............. $ 744 $ 537 $ 982 $ 982
-------------- ------------- -------------- ---------
Net income ..................... $ 520 $ 282 $ (13,447) $ (12,535)
============= ============= ============== =========
Basic earnings (loss) per share
from continuing operations .... $ .27 $ .27 $ (1.51) $ (1.40)
Basic earnings (loss) per share
from discontinued operations .. $ (.21) $ (.23) $ (.20) $ (.20)
Diluted earnings (loss) per share
from continuing operations .... $ .27 $ .27 $ (1.51) $ (1.40)
Diluted earnings (loss) per share
from discontinued operations .. $ (.20) $ (.23) $ (.20) $ (.20)
2001 2000
------------------------------------------
As As As As
Previously Restated Previously Restated
Reported (Note 2) Reported (Note 2)
------------------------------------------
Balance sheet data (at December 31):
Accounts receivable - net .......... $36,934 $34,400 $30,400 $29,246
Inventory - net .................... $24,469 $26,223 $25,911 $26,709
Deferred income taxes .............. $10,657 $10,696 $10,576 $10,456
Other assets ....................... $ 3,204 $ 3,836 $ 3,963 $ 4,596
Total assets ...................... $89,024 $88,915 $85,613 $85,771
Accrued salaries and benefits ...... $ 4,580 $ 4,528 $ 4,208 $ 4,183
Shareholders' equity ............... $47,587 $47,529 $46,832 $47,012
Note 3 -- Business Operations
For the year ended December 31, 2002, the Company recorded an after tax
loss of $1.9 million or $.23 loss per diluted share resulting from the
discontinuance of its Industrial segment. The Company's decision in the third
quarter of 2002 to close down its unprofitable Industrial business unit, Ausable
Solutions, Inc., followed a trend of continuous losses over the past three
years, which resulted from an economic downturn in the IT software market with
corresponding delays of anticipated contracts. This decision will allow the
Company to focus on its two core businesses, Restaurant and Government.
A summary of net revenues and pre-tax operating results and total assets
and liabilities of discontinued operations are detailed below (in thousands):
Year ended December 31,
--------------------------------------
2002 2001 2000
---------- --------- ---------
Net revenues .................. $ 1,454 $ 2,749 $ 2,668
Pre-tax loss from
discontinued operations .... $ (2,516) $ (2,335) $ (2,556)
December 31,
2002
-----------
Discontinued Assets:
Cash ................................................ $ 28
Other current assets ................................ 31
------
Total assets of discontinued operations .... $ 59
======
Discontinued Liabilities:
Accrued salaries and benefits ....................... $ 205
Other current liabilities ........................... 137
------
Total liabilities of discontinued operations $ 342
======
Note 4 -- Accounts Receivable
The Company's net accounts receivable consist of:
December 31,
(In Thousands)
----------------------
Restated
(Note 2)
2002 2001
--------- ----------
Government segment:
Billed .................................... $ 4,789 $ 4,945
Advanced billings ......................... (532) (310)
--------- --------
4,257 4,635
--------- --------
Restaurant segment:
Trade accounts receivable ...................... 21,586 29,765
--------- --------
$ 25,843 $ 34,400
========= ========
At December 31, 2002 and 2001, the Company had recorded allowances for
doubtful accounts of $3,153,000 and $4,489,000, respectively, against trade
accounts receivable. Trade accounts receivable are primarily with major
fast-food corporations or their franchisees. At December 31, 2002 and 2001, the
Company had also recorded reserves of $15,000, against government accounts
receivable.
Note 5 -- Inventories
Inventories are used primarily in the manufacture, maintenance, and service
of restaurant systems. Inventories are net of related reserves. The components
of inventory are:
December 31,
(In Thousands)
------------------------
Restated
(Note 2)
2002 2001
--------- ---------
Finished goods .................... $10,892 $ 7,168
Work in process ................... 1,700 1,868
Component parts ................... 4,923 3,602
Service parts ..................... 16,759 13,585
------- -------
$34,274 $26,223
======= =======
The Company records reserves for shrinkage, excess and obsolete inventory.
At December 31, 2002 and 2001, these amounts were $4,094,000 and $3,253,000,
respectively.
Note 6 -- Property, Plant and Equipment
The components of property, plant and equipment are:
December 31,
(In Thousands)
---------------------------
2002 2001
----------- -----------
Land ............................................ $ 253 $ 253
Buildings and improvements ...................... 7,026 7,108
Rental property ................................. 3,582 3,506
Furniture and equipment ......................... 25,992 25,370
----------- -----------
36,853 36,237
Less accumulated depreciation
and amortization ............................... 28,398 26,766
----------- -----------
$ 8,455 $ 9,471
=========== ===========
The useful lives of Buildings and improvements and Rental property are
twenty-five years. The useful lives of Furniture and equipment ranges from three
to seven years.
The Company subleases a portion of its headquarters facility to various
tenants. Rent received from these leases totaled $1,027,000, $1,051,000 and
$967,000 for the years ended December 31, 2002, 2001 and 2000, respectively.
Future minimum rent payments due to the Company under these leases is as
follows (in thousands):
2003 $ 915
2004 715
2005 553
2006 156
2007 117
---------
$ 2,456
=========
The Company leases office space under various operating leases. Rental
expense on these operating leases was approximately $1,228,000, $1,143,000 and
$1,113,000 for the years ended December 31, 2002, 2001, and 2000, respectively.
Future minimum lease payments under all noncancelable operating leases
are (in thousands):
2003 $ 1,059
2004 914
2005 826
2006 557
2007 309
Thereafter 723
-----------
$ 4,388
===========
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," or SFAS 144, we evaluate the accounting and reporting for
the impairment of long-lived assets and for long-lived assets to be disposed of.
SFAS 144 requires recognition of impairment of long-lived assets if the net book
value of such assets exceeds the estimated future undiscounted cash flows
attributable to such assets. If the carrying value of a long-lived asset is
considered impaired, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset for assets
to be held and used, or the amount by which the carrying value exceeds the fair
market value less cost to dispose for assets to be disposed. Fair market value
is determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved. No impairment was recorded during 2002,
2001 or 2000.
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 (4.25% at December
31, 2002) and is subject to loan covenants including working capital and debt
coverage ratios. The Company is in compliance with these covenants as of
December 31, 2002. The availability of this facility is determined based on the
amount of certain receivables and inventory. This line expires on July 31, 2003.
The remaining line of $7,500,000 bears interest at the prime rate and expires on
July 31, 2003. Both lines are collateralized by certain accounts receivable and
inventory. At December 31, 2002, $9,549,000 was outstanding and $10,451,000 was
available under these lines. The Company has ongoing discussions with its
lenders and expects to be able to renew these lines at similar terms to meet its
ongoing needs.
The Company has a $2.2 million mortgage collateralized by its corporate
wellness facility. The annual mortgage payment including interest totals
$192,500. The mortgage bears interest at a variable rate based on the banks
Corporate Base Lending Rate plus 1/2%. At December 31, 2002, the interest rate
was 4 3/4%. The remaining balance is due on May 1, 2010. At December 31, 2002,
the current portion of this mortgage totaling $85,000 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, 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
Granted ...................... 109 2.77
Exercised .................... (96) 3.22
Forfeited .................... (188) 5.69
------ --------
Outstanding at December 31, 2002 .. 1,298 $ 3.67
====== ========
Shares remaining
available for grant .......... 641
======
Total shares vested and exercisable
as of December 31, 2002 ...... 741 $ 3.67
====== ========
The weighted average fair market value of options granted during 2002 is
$1.10.
Stock options outstanding at December 31, 2002 are summarized as follows:
Range of Number Weighted Average Weighted Average
Exercise Prices Outstanding Remaining Life Exercise Price
- --------------- ----------- -------------- --------------
$1.88 - $4.00 880 7.8 Years $ 2.70
$4.01 - $6.50 418 6.5 Years $ 5.01
- -------------- ------ ------------ --------
$1.88 - $6.50 1,298 7.4 Years $ 3.67
============== ====== ============ ========
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 2002, 2001 and 2000:
2002 2001 2000
---- ---- ----
Risk-free interest rate 4.2% 3.8% 6.3%
Dividend yield N/A N/A N/A
Volatility factor 44% 42% 40%
Weighted average expected life 6 Years 7.5 Years 7 Years
In December 2002, the Company sold 383,000 shares of Treasury Stock for a
net price of $1.9 million.
Note 9-- Income Taxes
The provision (benefit) for income taxes consists of:
Year ended December 31,
(In Thousands)
------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- ------- ---------
Current tax expense:
Federal ....................... $ (465) $ 13 $ (443)
State55 ....................... 55 28 39
Foreign ....................... 131 98 29
------- ------- -------
(279) 139 (375)
------- ------- -------
Deferred income tax:
Federal ....................... 370 (57) (6,341)
State ......................... 121 (64) (1,066)
Foreign ....................... 38 66 --
------- ------- -------
529 (55) (7,407)
------- ------- -------
Provision (benefit) for income taxes $ 250 $ 84 $(7,782)
======= ======= =======
Deferred tax liabilities (assets) are comprised of the following at:
December 31,
(In Thousands)
--------------------
Restated
(Note 2)
2002 2001
--------- --------
Software development expense .............. $ 266 $ 736
Depreciation .............................. 426 592
-------- --------
Gross deferred tax liabilities ............ 692 1,328
-------- --------
Allowances for bad debts,
inventory and warranty .................. (3,511) (2,505)
Capitalized inventory costs ............... (67) (101)
Benefit accruals .......................... (324) (303)
Federal net operating loss ................ (5,113) (6,435)
State net operating loss .................. (865) (1,278)
Foreign net operating loss ................ (483) (456)
Tax credits ............................... (772) (946)
Valuation allowance for foreign tax credits 329 --
Other ..................................... (38) --
-------- --------
Gross deferred tax assets ................. (10,844) (12,024)
-------- --------
$(10,152) $(10,696)
======== ========
The Company has a federal net operating loss carryforward of $15,000,000,
which expires in 2020. The Company has tax credit carryforwards of $443,000, net
of valuation allowance, which begin to expire in 2004. In 2002, the Company
recorded a $329,000 valuation allowance against foreign tax credits, since the
Company anticipates these will expire prior to utilization.
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,
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
-------- -------- --------
Statutory U.S. federal tax rate . 34.0% 34.0% (34.0)%
State taxes ..................... 15.8 (12.6) (5.1)
Extraterritorial income exclusion (20.6) (19.7) --
Valuation allowance ............. 33.2 -- --
Prior years' adjustment ......... (54.1) (3.0) .7
Non deductible expenses ......... 8.3 19.5 .4
Research credit ................. (4.0) (13.7) (.3)
Foreign income taxes ............ 12.6 18.0 (.1)
Other ........................... -- .5 .1
------ ------ ------
25.2% 23.0% (38.3)%
====== ====== ======
The provision for income taxes is based on income (loss) before income
taxes as follows:
Year ended December 31,
(In Thousands)
---------------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
--------- --------- ---------
Domestic operations......... $ 1,080 $ 876 $(19,327)
Foreign operations ......... (89) (510) (990)
-------- -------- --------
Total ................. $ 991 $ 366 $(20,317)
======== ======== =========
Note 10 -- Employee Benefit Plans
The Company has a deferred profit-sharing retirement plan that covers
substantially all employees. The Company's annual contribution to the plan is
discretionary. The Company contributed $200,000 to the Plan in 2002. There was
no contribution to the plan in 2001. Contributions to the plan in 2000 were
$257,000. 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 $261,000, $416,000 and $0 in
2002, 2001 and 2000, 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. In the opinion of
management, the ultimate liability, if any, with respect to these actions will
not materially affect the financial position, results of operations, or cash
flows 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.
The Company has two reportable segments, Restaurant and Government. 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.
As discussed in Note 3, the Company discontinued its Industrial segment in the
third quarter of 2002. Accordingly, the results of this segment have been
reported as discontinued operations. Intersegment sales and transfers are not
material.
Information as to the Company's continuing operations in its segments is
set forth below:
Year ended December 31,
(In Thousands)
-------------------------------------
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
---------- ---------- -----------
Revenues:
Restaurant ......................... $ 95,706 $ 83,844 $ 75,866
Government ......................... 37,975 30,510 25,002
Other .............................. -- -- 595
--------- --------- ---------
Total ........................ $ 133,681 $ 114,354 $ 101,463
========= ========= =========
Income (loss) from continuing operations:
Restaurant ......................... $ 1,278 $ 1,226 $ (17,418)
Government ......................... 2,266 1,954 1,285
Other .............................. (28) (166) (842)
Non-recurring charge ............... -- -- (300)
--------- --------- ---------
3,516 3,014 (17,275)
Other income, net ....................... 815 848 525
Interest expense ........................ (824) (1,161) (1,011)
--------- --------- ---------
Income (loss) before provision
for income taxes ................... $ 3,507 $ 2,701 $ (17,761)
========= ========= =========
Identifiable assets:
Restaurant ......................... $ 71,725 $ 75,200 $ 74,793
Government ......................... 6,568 7,700 5,200
Industrial ......................... 59 2,777 2,322
Other .............................. 6,770 3,238 3,456
--------- --------- ---------
Total ........................ $ 85,122 $ 88,915 $ 85,771
========= ========= =========
Depreciation and amortization:
Restaurant ......................... $ 2,315 $ 2,557 $ 2,487
Government ......................... 117 104 113
Other .............................. 462 495 532
--------- --------- ---------
Total ........................ $ 2,894 $ 3,156 $ 3,132
========= ========= =========
Capital expenditures:
Restaurant ......................... $ 549 $ 307 $ 113
Government ......................... 112 83 46
Other .............................. 255 127 427
--------- --------- ---------
Total ........................ $ 916 $ 517 $ 586
========= ========= =========
The following table presents revenues by country based on the location of
the use of the product or services.
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
--------- ---------- ----------
United States ............... $118,375 $ 97,937 $ 82,120
Other Countries ............. 15,306 16,417 19,343
-------- -------- --------
Total ................... $133,681 $114,354 $101,463
======== ======== ========
The following table presents property by country based on the location of
the asset.
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
--------- ---------- ---------
United States ............... $75,640 $80,122 $77,038
Other Countries ............. 9,482 8,793 8,733
------- ------- -------
Total ................... $85,122 $88,915 $85,771
======= ======= =======
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
Restated Restated
(Note 2) (Note 2)
2002 2001 2000
--------- ---------- ----------
Restaurant segment:
McDonald's Corporation ....... 30% 30% 31%
Yum! Brands, Inc. ............ 21% 21% 25%
Government segment:
Department of Defense ........ 28% 27% 25%
All Others ..................... 21% 22% 19%
--- --- ---
100% 100% 100%
=== === ===
Note 13 -- Fair Value of Financial Instruments
Financial instruments consist of the following:
December 31, 2002
(In Thousands)
-------------------------
Carrying Fair
Value Value
--------- -------
Cash and cash equivalents........... $ 490 $ 490
Notes payable ...................... $9,634 $9,634
Long-term debt ..................... $2,181 $2,181
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, 2002 for new issues with similar remaining
maturities.
Note 14 -- Selected Quarterly Financial Data (Unaudited)
Quarter ended
(In Thousands Except Per Share Amounts)
---------------------------------------------
Restated Restated Restated
(Note 2) (Note 2) (Note 2)
2002 March 31 June 30 September 30 December 31
---- --------- ------- ------------ -----------
Net revenues
from continuing operations ..... $33,715 $33,918 $31,785 $34,263
Gross margin ..................... 6,818 7,038 7,226 7,374
Income from
continuing operations .......... 832 702 726 363
Basic earnings per share
from continuing operations ..... .10 .09 .09 .05
Diluted earnings per share
from continuing operations ..... .10 .09 .09 .04
Quarter ended
(In Thousands Except Per Share Amounts)
--------------------------------------------
Restated Restated Restated Restated
(Note 2) (Note 2) (Note 2) (Note 2)
2001 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Net revenues
from continuing operations ..... $25,684 $28,497 $27,622 $32,551
Gross margin ..................... 5,438 6,469 5,416 8,030
Income from
continuing operations .......... 103 758 668 551
Basic earnings per share
from continuing operations ..... .01 .10 .09 .07
Diluted earnings per share
from continuing operations ..... .01 .10 .09 .07
Quarter ended
Previously Reported (In Thousands Except Per Share Amounts)
- ------------------- -------------------------------------------
2002 March 31 June 30 September 30
---- -------- ------- ------------
Net revenues
from continuing operations .... $ 33,321 $ 35,262 $ 33,319
Gross margin .................... 6,701 7,441 7,721
Income from
continuing operations ......... 680 1,063 896
Basic earnings per share
from continuing operations .... .09 .13 .11
Diluted earnings per share
from continuing operations .... .09 .13 .11
Quarter ended
Previously Reported (In Thousands Except Per Share Amounts)
- ------------------- --------------------------------------------
2001 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Net revenues
from continuing operations ... $ 26,415 $28,881 $ 27,574 $ 32,864
Gross margin ................... 5,652 6,584 5,401 8,136
Income from
continuing operations ........ 182 698 581 650
Basic earnings per share
from continuing operations ... .02 .09 .07 .08
Diluted earnings per share
from continuing operations ... .02 .09 .07 .08
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
2002 $4,504 1,491 (2,827) (a) $3,168
2001 $4,444 1,299 (1,239) (b) $4,504
2000 $3,415 2,138 (1,109) (c) $4,444
(a) Uncollectible accounts written off during 2002.
(b) Uncollectible accounts written off during 2001.
(c) Uncollectible accounts written off during 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
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
2002 $ 3,253 2,321 (1,480) $ 4,094
2001 $ 4,171 590 (1,508) $ 3,253
2000 $ 2,208 4,933 (2,970) $ 4,171
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
April 14, 2003 /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.
- ---------------------- Chairman of Board and April 14, 2003
John W. Sammon, Jr. President (Principal
Executive Officer)
and Director
/s/Charles A. Constantino
- ------------------------- Executive Vice President April 14, 2003
Charles A. Constantino and Director
/s/Sangwoo Ahn
- ------------------------- Director April 14, 2003
Sangwoo Ahn
/s/J. Whitney Haney
- ------------------------- Director April 14, 2003
J. Whitney Haney
/s/James A. Simms
- ------------------------- Director April 14, 2003
James A. Simms
/s/Ronald J. Casciano
- ------------------------- Vice President, Chief Financial April 14, 2003
Ronald J. Casciano Officer and Treasurer
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, John W. Sammon, certify that:
1. I have reviewed this annual report on Form 10-K of PAR Technology
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared; b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and b. any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/John W. Sammon, Jr.
----------------------
John W. Sammon, Jr.
Chairman of the Board
and Chief Executive Officer
Date: April 14, 2003
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, Ronald J. Casciano, certify that:
1. I have reviewed this annual report on Form 10-K of PAR Technology
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared; b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior
to the filing date of this annual report (the "Evaluation Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and b. any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/Ronald J. Casciano
------------------------
Ronald J. Casciano
VP, C.F.O. & Treasurer
Date: April 14, 2003
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.
22 Subsidiaries of the registrant
23 Consent of independent accountants
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 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 (33-04968, 33-39784, 33-58110, and 33-63095) and the
Registration Statement on Form S-3 (333-102197) of PAR Technology Corporation of
our report dated March 28, 2003 relating to the financial statements and
financial statement schedules, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Syracuse, New York
March 28, 2003
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 Annual Report of PAR Technology Corporation (the Company)
on Form 10-K for the year ending December 31, 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, to the best of my knowledge:
(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, Jr.
- ----------------------
John W. Sammon, Jr.
Chairman of the Board and Chief Executive Officer
April 14, 2003
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 Annual Report of PAR Technology Corporation (the Company)
on Form 10-K for the year ending December 31, 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, to the
best of my knowledge:
(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
April 14, 2003