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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2004. Commission File Number 1-9720
OR
[ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number __________
PAR TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 16-1434688
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
PAR Technology Park
8383 Seneca Turnpike
New Hartford, NY 13413-4991
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 738-0600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes [ ] No [ X ]
The number of shares outstanding of registrant's common stock, as of April
30, 2004 - 8,626,715 shares.
PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART II
FINANCIAL INFORMATION
Item Number
-----------
Item 1. Financial Statements (Unaudited)
- Consolidated Statements of Income for
the three months ended March 31, 2004 and 2003
- Consolidated Statements of Comprehensive Income for
the three months ended March 31, 2004 and 2003
- Consolidated Balance Sheets at
March 31, 2004 and December 31, 2003
- Consolidated Statements of Cash Flows
for the three months ended March 31, 2004 and 2003
- Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the three months
ended March 31,
------------------------
2004 2003
--------- ---------
Net revenues:
Product ..................................... $ 16,239 $ 12,353
Service ..................................... 10,307 8,469
Contract .................................... 11,352 9,720
-------- --------
37,898 30,542
-------- --------
Costs of sales:
Product ..................................... 11,037 8,062
Service ..................................... 8,945 7,167
Contract .................................... 10,530 9,272
-------- --------
30,512 24,501
-------- --------
Gross margin .......................... 7,386 6,041
-------- --------
Operating expenses:
Selling, general and administrative ......... 5,016 4,411
Research and development .................... 1,343 1,159
-------- --------
6,359 5,570
-------- --------
Operating income ................................. 1,027 471
Other income, net ................................ 211 76
Interest expense ................................. (73) (143)
-------- --------
Income from continuing operations
before provision for income taxes .............. 1,165 404
Provision for income taxes ....................... (429) (148)
-------- --------
Income from continuing operations ................ 736 256
-------- --------
Discontinued operations:
Loss from operations of
discontinued component ................... -- (42)
Income tax benefit .......................... -- 15
-------- --------
Loss from discontinued operations ........... -- (27)
-------- --------
Net income ....................................... $ 736 $ 229
======== ========
(Continued)
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
For the three months
ended March 31,
-------------------------
2004 2003
--------- ---------
Earnings per share:
Basic:
Income from continuing operations ......... $ .09 $ .03
Loss from discontinued operations ......... $ -- $ --
Net income .......................... $ .09 $ .03
Diluted:
Income from continuing operations ......... $ .08 $ .03
Loss from discontinued operations ......... $ -- $ --
Net income .......................... $ .08 $ .03
Weighted average shares outstanding
Basic ..................................... 8,570 8,373
========= =========
Diluted ................................... 9,129 8,767
========= =========
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
For the three months
ended March 31,
--------------------
2004 2003
------ -----
Net income .............................................. $ 736 $ 229
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments ........... (163) 106
----- -----
Comprehensive income .................................... $ 573 $ 335
===== =====
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
(Unaudited)
March 31, December 31,
2004 2003
--------- ------------
Assets
Current assets:
Cash ............................................ $ 2,377 $ 1,467
Accounts receivable-net ......................... 26,528 31,876
Inventories-net ................................. 31,740 31,894
Deferred income taxes ........................... 6,465 6,486
Other current assets ............................ 3,721 2,472
Total assets of discontinued operation .......... -- 20
-------- --------
Total current assets ........................ 70,831 74,215
Property, plant and equipment - net .................. 7,251 7,240
Deferred income taxes ................................ 2,593 2,857
Other assets ......................................... 3,437 2,855
-------- --------
$ 84,112 $ 87,167
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt ............... $ 91 $ 89
Borrowings under lines of credit ................ 2,607 6,989
Accounts payable ................................ 8,999 8,301
Accrued salaries and benefits ................... 5,818 5,461
Accrued expenses ................................ 2,450 2,471
Deferred service revenue ........................ 5,612 5,947
Total liabilities of discontinued operation ..... 514 578
-------- --------
Total current liabilities ................... 26,091 29,836
-------- --------
Long-term debt ....................................... 2,068 2,092
-------- --------
Shareholders' Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized ................... -- --
Common stock, $.02 par value,
19,000,000 shares authorized;
10,025,237 and 9,966,062 shares issued;
8,614,550 and 8,555,375 outstanding ........... 201 199
Capital in excess of par value .................. 29,900 29,761
Retained earnings ............................... 33,111 32,375
Accumulated other comprehensive loss ............ (206) (43)
Treasury stock, at cost,
1,410,687 shares ............................ (7,053) (7,053)
-------- --------
Total shareholders' equity .................. 55,953 55,239
-------- --------
$ 84,112 $ 87,167
======== ========
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the three months
ended March 31,
--------------------
2004 2003
-------- --------
Cash flows from operating activities:
Net income ............................................ $ 736 $ 229
Adjustments to reconcile net income to net
cash provided by operating activities:
Net loss from discontinued operations .............. -- 27
Depreciation and amortization ...................... 718 666
Provision for bad debts ............................ 335 191
Provision for obsolete inventory ................... 733 480
Deferred income tax ................................ 285 (3)
Changes in operating assets and liabilities:
Accounts receivable .............................. 5,013 1,410
Inventories ...................................... (579) 153
Other current assets ............................. (1,249) 132
Other assets ..................................... (749) --
Accounts payable ................................. 698 (2,518)
Accrued salaries and benefits .................... 357 (561)
Accrued expenses ................................. (21) 86
Deferred service revenue ......................... (335) 418
------- -------
Net cash provided by continuing
operating activities ........................... 5,942 710
Net cash used in discontinued operations ........ (44) (46)
------- -------
Net cash provided by operating activities ....... 5,898 664
------- -------
Cash flows from investing activities:
Capital expenditures .................................. (394) (53)
Capitalization of software costs ...................... (168) (186)
------- -------
Net cash used in investing activities ........... (562) (239)
------- -------
Cash flows from financing activities:
Net borrowings (payments) under
line-of-credit agreements ........................... (4,382) 511
Payments of long-term debt ............................ (22) (22)
Proceeds from the exercise of stock options ........... 141 68
------- -------
Net cash provided (used) by financing activities (4,263) 557
------- -------
Effect of exchange rate changes on cash and
cash equivalents ....................................... (163) 106
------- -------
Net increase in cash and cash equivalents ................ 910 1,088
Cash and cash equivalents at
beginning of year ...................................... 1,467 490
------- -------
Cash and cash equivalents at
end of period .......................................... $ 2,377 $ 1,578
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .............................................. $ 79 $ 118
Income taxes, net of refunds .......................... 15 --
See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. The statements for the three months ended March 31, 2004 and 2003 are
unaudited; in the opinion of the Company such unaudited statements include
all adjustments (which comprise only normal recurring accruals) necessary
for a fair presentation of the results for such periods. Amounts in the
prior period financial statements are reclassified whenever necessary to
conform to the current period's presentation. The December 31, 2003
consolidated balance sheet is derived from the audited consolidated
financial statements included in the Company's 2003 Annual Report on the
Form 10-K. The results of operations for the three months ended March 31,
2004 are not necessarily indicative of the results of operations to be
expected for the year ending December 31, 2004; or any other interim
period. The unaudited consolidated financial statements and notes thereto
should be read in conjunction with the consolidated financial statements
and notes as of and for the year ended in December 31, 2003 included in the
Company's December 31, 2003 Annual Report to the Securities and Exchange
Commission on Form 10-K.
2. During the third quarter of 2002, the Company decided to close down its
unprofitable Industrial business unit, Ausable Solutions, Inc., following a
trend of continuous losses. The overall downturn in the global economy and
specifically the manufacturing and warehousing industries, coupled with the
diminishing capital expenditures of the Company's industrial customers,
prevented the Company from being profitable in this particular business
segment. The decision to shut down this unit has allowed the Company to
focus on its two core businesses, Restaurant and Government. The Company
believes that the decision to exit the Industrial segment will not have a
negative impact on the Company's continuing operations. The Company's
Industrial business did not have common customers with its Restaurant and
Government contract businesses.
A summary of net revenues and pre-tax operating results and total assets
and liabilities of discontinued operations are detailed below (in
thousands):
For the three months
ended March 31,
---------------------
2004 2003
------- -------
Net revenues ..................................... $ -- $ --
======= =======
Loss from operations of discontinued
component, pretax .............................. $ -- $ (42)
======= =======
March 31, December 31,
2004 2003
------- ------------
Discontinued assets-other .................... $ -- $ 20
======= =======
Discontinued liabilities-other ............... $ 514 $ 578
======= =======
3. Inventories are primarily used in the manufacture and service of Restaurant
products. The components of inventory, net of related reserves, consist of
the following:
(In Thousands)
March 31, December 31,
2004 2003
-------- ------------
Finished goods ......................... $ 7,735 $ 7,430
Work in process ........................ 1,180 1,623
Component parts ........................ 5,574 5,585
Service parts .......................... 17,251 17,256
------- -------
$31,740 $31,894
======= =======
At March 31, 2004 and December 31, 2003, the Company had recorded reserves
for shrinkage, excess and obsolete inventory of $4,977,000 and $4,361,000,
respectively.
4. The Company's products are sold with a standard warranty for defects in
material and workmanhip. The standard warranty offered by the Company is
for one year, although certain sales have shorter warranty periods. 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 three months ended
March 31, are summarized as follows: (in thousands)
2004 2003
---- ----
Balance at beginning of year ............................... $(494) $(560)
Accruals for warranties issued during the period ........... (207) (231)
Settlements made (in cash or in kind) during the period .... 292 252
----- -----
Balance at March 31, ....................................... $(409) $(539)
===== =====
5. 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 been
determined based on the fair values of the respective options on their
grant dates for those awards, consistent with the
requirements of SFAS No. 123, the Company's net income and earnings per
share would have been adjusted to the proforma amounts indicated below (in
thousands, except per share data):
For the three months
ended March 31,
----------------------------
2004 2003
------- -------
Net income $ 736 $ 229
Compensation expense (47) (26)
------- -------
Proforma net income $ 689 $ 203
======= =======
Earnings per share:
As reported -- Basic $ .09 $ .03
-- Diluted $ .08 $ .03
Proforma -- Basic $ .08 $ .02
-- Diluted $ .08 $ .02
6. Earnings per share are calculated in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings per Share", which specifies the
computation, presentation, and disclosure requirements for earnings per
share (EPS). It requires the presentation of basic and diluted EPS. Basic
EPS excludes all dilution and is based upon the weighted average number of
common shares outstanding during the period. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
The following is a reconciliation of the weighted average shares
outstanding for the basic and diluted EPS computations (In Thousands Except
Share and Per Share Data):
For the three months
ended March 31,
--------------------
2004 2003
------ ------
Net income ............................................... $ 736 $ 229
====== ======
Basic:
Shares outstanding at beginning of year ............. 8,555 8,360
Weighted average shares issued during the year ...... 15 13
------ ------
Weighted average common shares, basic ............... 8,570 8,373
====== ======
Earnings per common share, basic .................... $ .09 $ .03
====== ======
Diluted:
Weighted average common shares, basic ............... 8,570 8,373
Dilutive impact of stock options .................... 559 394
------ ------
Weighted average common shares, diluted ............. 9,129 8,767
====== ======
Earnings per common share, diluted .................. $ .08 $ .03
====== ======
The loss from operations of a discontinued component has no effect on basis
or diluted earnings per share for the 2003 period.
7. The Company's reportable segments are strategic business units that have
separate management teams and infrastructures that offer different products
and services.
The Company has two reportable segments, Restaurant and Government. The
Restaurant segment offers integrated solutions to the hospitality 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
develops advanced technology prototype systems primarily for the Department
of Defense and other Governmental agencies. It provides services for
operating and maintaining certain U.S. Government-owned communication and
test sites, and for planning, executing and evaluating experiments
involving new or advanced radar systems. It is also involved in developing
technology to track mobile chassis. As discussed in Note 2, 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 significant.
Information as to the Company's segments is set forth below:
For the three months
ended March 31,
(In thousands)
--------------------------
2004 2003
-------- ---------
Revenues:
Restaurant ............................... $ 26,546 $ 20,822
Government ............................... 11,352 9,720
-------- --------
Total ............................... $ 37,898 $ 30,542
======== ========
Operating income:
Restaurant ............................... $ 341 $ 100
Government ............................... 686 371
-------- --------
1,027 471
Other income, net ............................ 211 76
Interest expense ............................. (73) (143)
-------- --------
Income before provision
for income taxes ........................... $ 1,165 $ 404
======== ========
Depreciation and amortization:
Restaurant ............................... $ 565 $ 525
Government ............................... 124 40
Other .................................... 29 101
-------- --------
Total ............................... $ 718 $ 666
======== ========
Capital expenditures:
Restaurant ............................... $ 303 $ 22
Government ............................... 91 4
Other .................................... -- 27
-------- --------
Total ............................... $ 394 $ 53
======== ========
The following table presents revenues by geographic area based on the
location of the use of the product or service:
For the three months
ended March 31,
(In thousands)
---------------------------
2004 2003
------- -------
United States .......................... $34,737 $27,630
Other Countries ........................ 3,161 2,912
------- -------
Total ........................... $37,898 $30,542
======= =======
The following table represents identifiable assets by business segment:
March 31, December 31,
(In thousands)
-------------------------
2004 2003
-------- ---------
Identifiable assets:
Restaurant ............................. $66,362 $70,550
Government ............................. 10,844 10,475
Industrial ............................. -- 20
Other .................................. 6,906 6,122
------- -------
Total ...................................... $84,112 $87,167
======= =======
The following table presents identifiable assets by geographic area based
on the location of the asset:
March 31, December 31,
(In thousands)
------------------------
2004 2003
-------- --------
United States .......................... $77,264 $79,831
Other Countries ........................ 6,848 7,336
------- -------
Total ........................... $84,112 $87,167
======= =======
Customers comprising 10% or more of the Company's total revenues are
summarized as follows:
For the three months
ended March 31,
--------------------------
2004 2003
------- ------
Restaurant Segment:
McDonald's Corporation ........................ 25% 24%
YUM! Brands, Inc. ............................. 25% 18%
Government Segment:
Department of Defense ......................... 30% 28%
All Others ....................................... 20% 30%
--- ---
100% 100%
=== ===
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statement
This document contains forward-looking statements. Any statements in this
document that do not describe historical facts are forward-looking statements.
Forward-looking statements in this document (including forward-looking
statements regarding future sales to McDonald's restaurants, the impact of
current world events on our results of operations, the effects of inflation on
our margins, and the effects of interest rate and foreign currency fluctuations
on our results of operations) are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. 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 associated
with Government contracts; risks of downturns in economic conditions generally,
and in the quick service sector of the restaurant market specifically; risks
associated with foreign sales and high customer concentration; risks associated
with competition and competitive pricing pressures; and other risks detailed in
the Company's filings with the Securities and Exchange Commission. The Company's
actual results could differ materially from the results contemplated by these
and any other forward-looking statements. Factors that could contribute to such
differences include those discussed below as well as those cautionary statements
and other factors set forth in "Quantitative and Qualitative Disclosures about
Market Risk" and elsewhere herein. The cautionary statements made in this
Quarterly Report on Form 10-Q should be read as being applicable to all related
forward-looking statements whenever they appear in this Quarterly Report on Form
10-Q. Any forward-looking statements should be considered in light of all of
these factors.
Overview
PAR Technology Corporation ("PAR" or the "Company") is the parent company
of wholly-owned subsidiary businesses. PAR's largest subsidiary, ParTech, Inc.
is a provider of management technology solutions, including hardware , software
and professional services to businesses in the restaurant, hospitality, and
retail industries. The Company is a leading supplier of hospitality technology
systems with over 35,000 systems installed in 95 countries. PAR's hospitality
management software technology assists in the operation of hospitality and
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 hospitality technology systems.
PAR is also a provider of professional services and enterprise business
intelligence applications, with long-term relationships with the restaurant
industry's two largest corporations - McDonald's Corporation and Yum! Brands,
Inc. McDonald's has over 30,000 restaurants in 119 countries and PAR has been a
selected provider of restaurant management technology systems and lifecycle
support services to McDonald's since 1980. Yum! Brands (which includes Taco
Bell, KFC, Pizza Hut, Long John Silvers and A & W Restaurants) has been a PAR
customer since 1983. Yum has nearly 33,000 units globally and PAR is the sole
approved supplier of restaurant management technology systems to Taco Bell as
well as the Point-of-Sale vendor of choice to KFC, while successfully selling
solutions to the respective franchisees of all five concepts. Other significant
chains where PAR is the POS vendor of choice are: Boston Market, Chick-fil-A,
CKE Restaurants (including Hardees, Carl's Jr.), Carnival Cruise Lines, Loews
Cineplex and large franchisees of those foregoing brands.
During 2003, the Quick-Service Restaurant (QSR) market continued to
strengthen as evidenced by reported improved results from the Company's major
customers including McDonald's and Yum! Brands. Additionally, the Company was
named the primary supplier to KFC for their corporate stores. The Company also
recorded significant new business from Chick-fil-A, CKE and Bojangles
Restaurant, Inc. and released its new integrated software suite, iNfusion.
PAR is also the parent of PAR Government Systems Corporation and Rome
Research Corporation, both of whom are Government contractors. As a
long-standing Government contractor, PAR develops advanced technology systems
for the Department of Defense and other Governmental agencies. Additionally, PAR
provides information technology and communications support services to the U.S.
Navy, U.S. Air Force and U.S. Army. PAR focuses its computer-based system design
services on providing high quality technical projects and services, ranging from
experimental studies to advanced operational systems, within a variety of areas
of research, including radar, image and signal processing, logistic management
systems, and geospatial services and products. PAR's Government engineering
service business provides management and engineering services that include
facilities operation and management. In addition, through Government-sponsored
research and development, PAR has developed technologies with relevant
commercial uses. A prime example of this "technology transfer" is the Company's
Point-of-Sale technology, which was derived from research and development
involving microchip processing technology sponsored by the Department of
Defense.
The Company's Government business continued to win contracts in 2003
related to I/T outsourcing and secured its first contract with the U.S. Army.
The Company now performs outsourcing for the three main branches of the
military.
In 2004, the Company anticipates the continued health of the QSR market and
additional I/T outsourcing opportunities. Over the years, PAR has maintained its
leadership in its two businesses through the utilization of several Company
strengths including market leadership, technological innovation, customer focus,
global reach and employee initiative. By focusing on these strengths, PAR is
able to help shape the marketplace, increase its customer base and continue to
expand, worldwide.
The following table sets forth the Company's revenues by reportable segment
for the quarter ended March 31:
(In Thousands)
2004 2003
--------- ---------
Revenues:
Restaurant $ 26,546 $ 20,822
Government 11,352 9,720
-------- --------
Total Revenue $ 37,898 $ 30,542
======== ========
The following discussion and analysis highlights items having a significant
effect on operations during the quarter ended March 31, 2004. It may not be
indicative of future operations or earnings. It should be read in conjunction
with the Interim Unaudited Consolidated Financial Statements and Notes thereto
and other financial and statistical information appearing elsewhere in this
report.
Results of Operations -- Three Months Ended March 31, 2004 Compared to Three
Months Ended March 31, 2003
The Company reported revenues of $37.9 million for the quarter ended March
31, 2004, an increase of 24% from the $30.5 million reported for the quarter
ended March 31, 2003. The Company's net income for the three months ended March
31, 2004 was $736,000, or $.08 diluted net income per share, compared to net
income of $229,000 and $.03 per diluted share for the same period in 2003.
Product revenues from the Company's Restaurant segment were $16.2 million
for the quarter ended March 31, 2004, an increase of 31% from the $12.4 million
recorded in 2003. Overall this increase was a result of the healthy financial
condition of the quick service restaurant marketplace. Product sales to Yum!
Brands increased 120% or $2.9 million over the same quarter of 2003. The
principal driver of this growth was the Company's selection as this customer's
primary supplier of restaurant systems to their KFC Corporate stores. Sales to
McDonald's increased 49% or $1.8 million over the same quarter of 2003. Due to
its recent strong financial performance, McDonald's is investing in capital
equipment to upgrade its restaurants. These increases were partially offset by a
14% or $865,000 decline in sales to all other customers. This decline was due to
a large sale to a non-restaurant customer in the first quarter of 2003 that did
not recur in 2004.
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 $10.3 million for the quarter ended
March 31, 2004, an increase of 22% from $8.5 million in 2003. This increase was
primarily due to a 51% or $818,000 increase in installation revenue that is
directly related to the growth in product revenue. All other service area
revenues increased 15% or $1 million primarily due to increased contracts
relating to the expansion of the Company's customer base.
Contract revenues from the Company's Government segment were $11.4 million
for the quarter ended March 31, 2004, an increase of 17% when compared to the
$9.7 million recorded in the same period in 2003. This increase primarily
resulted from a $1 million or 110% increase in revenue from research contracts
involving Imagery Information Technology. Also contributing to this growth was a
$858,000 or 16% increase in information technology outsourcing revenue for
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 U.S. Navy, Army and Air Force operations as they
seek to convert their military information technology communications facilities
into contractor-run operations. This was partially offset by a $700,000 decline
in the Company's Logistic Management Program, due to reduced funding from the
Government. This program involves the tracking of mobile chassis under the
Company's Cargo*Mate(TM) contracts. The Company anticipates new funding for this
project from the Government later in 2004.
Product margins for the quarter ended March 31, 2004 were 32%, a decline
from 34.7% for the quarter ended March 31, 2003. This decline was caused, in
part, by lower software revenue in 2004 when compared to 2003. Contributing to
the decline was an integration project for a major customer in the first quarter
of 2004 that involved lower margin peripheral hardware products.
Customer service margins were 13.2% for the quarter ended March 31, 2004
compared to 15.4% for the same period in 2003. The lower margin in 2004 was
primarily due to higher installation expenses as a result of an increased use of
third parties in certain installations. Also contributing to the margin decline
was a $75,000 increase in the provision for service inventory obsolescence.
Contract margins were 7.2% for the quarter ended March 31, 2004 versus 4.6%
for 2003. The increase in margins is primarily attributable to a favorable
performance-based award fee on an imagery information technology contract.
Additionally, the Company also received a favorable contract modification on a
certain I/T outsourcing contract. The significant components of contract costs
in 2004 were 86% for labor and fringe benefits, 3% for materials and supplies,
and 1% for subcontract costs. For the same period in 2003, these costs were 78%,
6%, and 3%, respectively of contract costs. The balance of contract costs for
2004 and 2003 included consulting, facilities, communications and corporate
overhead costs. 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
for the quarter ended March 31, 2004 were $5 million, an increase of 14% from
the $4.4 million expended in 2003. The increase was primarily attributed to a
rise in selling expenses due to a planned addition to the sales force. Also
contributing to the increase was higher sales commission that is directly
related to product revenue growth.
Research and development expenses relate primarily to the Company's
Restaurant segment. Research and development expenses were $1.3 million for the
quarter ended March 31, 2004, an increase of 16% from the $1.2 million recorded
in 2003. This increase reflects a modest addition to the development staff
related to new product investments.
Other income, net, was $211,000 in the first quarter of 2004 compared to
$76,000 in 2003. Other income primarily includes rental income and foreign
currency gains and losses. The increase in 2004 was due to foreign currency
gains.
Interest expense represents interest charged on the Company's short-term
borrowing requirements from banks and from long-term debt. Interest expense
declined 49% to $73,000 for the quarter ended March 31, 2004, as compared to
$143,000 in 2003, due to lower interest rates on borrowings and lower average
amounts outstanding in 2004 as compared to 2003.
The Company's effective tax rate was 36.8% for the quarter ended March 31,
2004 virtually unchanged from the 36.7% rate for the same period in 2003.
Liquidity and Capital Resources
The Company's primary source of liquidity has been cash flow from
operations and lines of credit with various banks. Cash provided by continuing
operations was $5.9 million for the first quarter of 2004 compared to $710,000
in 2003. In 2004, cash flow benefited from a reduction in accounts receivable
and the operating profits for the period. In 2003, cash flow was also generated
from a reduction in accounts receivable and operating profits. This was
partially offset by the timing of vendor payments.
Cash used in investing activities was $562,000 for the first quarter of
2004 versus $239,000 for 2003. In 2004, capital expenditures were $394,000 and
were primarily for manufacturing equipment and internal use information
technology equipment. Capitalized software costs relating to software
development of restaurant products were $168,000 in 2004. For 2003, capital
expenditures were $53,000 and were primarily for vehicles used in operations of
both business segments. Capitalized software costs were $186,000 in 2003.
Cash used in financing activities was $4.3 million for the first quarter of
2004 versus $557,00 of cash provided in 2003. During 2004, the Company reduced
its short-term bank borrowings by $4.4 million and received $141,000 from the
exercise of employee stock options. In 2003, the Company increased its
short-term bank borrowings by $511,000, and received $68,000 from 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% at March 31,
2004) and is subject to loan covenants. These covenants include a debt to
tangible net worth ratio of 1 to 1; working capital of at least $25 million; and
a debt coverage ratio of 4 to 1. The total amount of credit available under this
facility at a given time is based on (a) 80% of the Company's accounts
receivable under 91 days outstanding attributable to the Company's Restaurant
segment and (b) 40% of the Company's inventory, excluding work in process. This
line expires on April 30, 2005. The remaining line of $7,500,000 allows the
Company, at its option, to borrow funds at the LIBOR rate plus the applicable
interest rate spread or at the bank's prime lending rate (4% at March 31, 2004).
At March 31, 2004 borrowings under this line were at the prime rate. This
facility contains certain loan covenants including a leverage ratio of not
greater than 4 to 1 and a fixed charge coverage ratio of not less than 4 to 1.
This line expires on October 30, 2005. Both lines are collateralized by certain
accounts receivable and inventory. The Company was in compliance with all loan
covenants as of March 31, 2004. At March 31, 2004, an aggregate of $2,607,000
was outstanding and an aggregate of $17,393,000 was available under these lines.
During fiscal year 2004, the Company anticipates that its capital
requirements will be less than $2 million. The Company does not usually enter
into long term contracts with its major restaurant customers. The Company
commits to purchasing inventory from its suppliers based on a combination of
internal forecasts and the actual orders from customers. This process, along
with good relations with suppliers, minimizes the working capital investment
required by the Company. While the Company lists two major customers, McDonald's
and Yum!Brands, it sells to hundreds of individual franchisees of these
corporations, each of which is individually responsible for its own debts. These
broadly-made sales substantially reduce the impact on the Company's liquidity if
one individual franchisee reduces the volume of its purchases from the Company
in a given year. The Company, based on internal forecasts, believes its existing
cash, line of credit facilities and its anticipated operating cash flow will be
sufficient to meet its cash requirements through at least the next twelve
months. However, the Company may be required, or could elect, to seek additional
funding prior to that time. The Company's future capital requirements will
depend on many factors, including its rate of revenue growth, the timing and
extent of spending to support product development efforts, expansion of sales
and marketing, the timing of introductions of new products and enhancements to
existing products, and market acceptance of its products. The Company cannot
assure that additional equity or debt financing will be available on acceptable
terms or at all. The Company's sources of liquidity beyond twelve months, in
management's opinion, will be its cash balances on hand at that time, funds
provided by operations, funds available through its lines of credit and whatever
long-term credit facilities it can arrange.
Critical Accounting Policies
The Company's consolidated financial statements are based on the
application of accounting principles generally accepted in the United States of
America (GAAP). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. The Company believes
its use of estimates and underlying accounting assumptions adhere to GAAP and
are consistently applied. Valuations based on estimates are reviewed for
reasonableness and adequacy on a consistent basis throughout the Company.
Primary areas where financial information of the Company is subject to the use
of estimates, assumptions and the application of judgment include revenue
recognition, accounts receivable, inventories, intangible assets and taxes.
Revenue Recognition Policy
The Company recognizes revenue generated by the Restaurant segment using
the guidance from SEC Staff Accounting Bulletin No. 104, "Revenue Recognition"
and the AICPA Statement of Position (SOP) 97-2, "Software Revenue Recognition,"
and other applicable revenue recognition guidance and interpretations. Product
revenue in the Restaurant segment is generated from sales of the Company's
standard Point-of-Sale systems. When the Company installs its restaurant systems
(which primarily include hardware or hardware and software) on behalf of its
customers, the Company recognizes revenue from the sale of its restaurant
systems upon delivery to the customer's 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. 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 in the Restaurant segment, 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 recognizes revenue in its Government segment using the guidance
from SEC Staff Accounting Bulletin No. 104, "Revenue Recognition". The Company's
contract revenues generated by the Government segment result primarily from
contract services performed for the United States Government under a variety of
costs-plus fee, time-and-material and fixed-price contracts. Revenue on
cost-plus fixed fee contracts is recognized based on allowable costs for labor
hours delivered, as well as other allowable costs plus the applicable fee.
Revenue on time and material contracts is recognized by multiplying the number
of direct labor-hours delivered in the performance of the contract by the
contract billing rates and adding other direct costs as incurred. Revenue for
fixed price contracts is recognized primarily on a straight-line basis over the
life of the fixed-price contract. The Company's obligation under these contracts
is simply to provide labor hours to conduct research or to staff facilities with
no other deliverables or performance obligations. Anticipated losses on all
contracts are recorded in full when identified. Unbilled accounts receivable are
stated in the Company's financial statements at their estimated realizable
value. Contract costs, including indirect expenses, are subject to audit and
adjustment through negotiations between the Company and Government
representatives.
Accounts receivable
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.
Inventories
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.
Capitalized software 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 when the product is available for general release to customers.
Goodwill
In July 2001, the Financial Accounting Standards Board issued 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 intangible assets recorded as a result of past business combinations,
was discontinued upon the adoption of SFAS 142. Instead, all goodwill is 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.
Taxes
The Company has significant amounts of deferred tax assets that are
reviewed for recoverability and valued accordingly. These assets are evaluated
by using estimates of future taxable income 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 estimates of its future taxable income levels.
Factors that could affect future results
A DECLINE IN THE VOLUME OF PURCHASES MADE BY ANY ONE OF THE COMPANY'S 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, 2003, 2002 and 2001, aggregate sales to our top two Restaurant segment
customers, McDonald's and Yum!Brands, amounted to 50%, 51% and 51%,
respectively, of total revenues. For the three months ended March 31, 2004 and
2003, sales to these customers were 50% and 42%, respectively, of total
revenues. Most customers are not 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 affect
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 INABILITY 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 that the Company 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 amount to
$1.6 million as of March 31, 2004.
WE GENERATE MUCH OF OUR REVENUE FROM THE QUICK SERVICE RESTAURANT INDUSTRY AND
THEREFORE ARE SUBJECT TO DECREASED REVENUES IN THE EVENT OF A DOWNTURN EITHER IN
THAT INDUSTRY OR IN THE ECONOMY AS A WHOLE.
For the fiscal years ended December 31, 2003, 2002 and 2001, we derived
70%, 72% and 73%, respectively, of our total revenues from the restaurant
industry, primarily the Quick Service Restaurant (QSR) industry. For the three
months ended March 31, 2004 and 2003 revenues from the restaurant industry were
70% and 68%, respectively, of total revenues. Consequently, our restaurant
technology product sales are dependent in large part on the health of the QSR
industry, which in turn is dependent on the domestic and international economy,
as well as factors such as consumer buying preferences and weather conditions.
Instabilities or downturns in the restaurant market could disproportionately
impact our revenues, as clients may either exit the industry or delay, cancel or
reduce planned expenditures for our products. Although we believe we can assist
the QSR sector of the restaurant industry in a competitive environment, given
the cyclical nature of that industry, there can be no assurance that our
profitability and growth will continue.
WE DERIVE A PORTION OF OUR REVENUE FROM GOVERNMENT CONTRACTS, WHICH CONTAIN
PROVISIONS UNIQUE TO PUBLIC SECTOR CUSTOMERS, INCLUDING THE GOVERNMENT'S RIGHT
TO MODIFY OR TERMINATE THESE CONTRACTS AT ANY TIME.
For the fiscal years ended December 31, 2003, 2002 and 2001, we derived
30%, 28% and 27%, respectively, of our total revenues from contracts to provide
technical products and services to United States Government agencies and defense
contractors. For the three months ended March 31, 2004 and 2003 revenues from
such contracts were 30% and 32%, respectively. 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.
We perform work for the United States Government pursuant to firm
fixed-price, cost-plus fixed fee and time-and-material, prime contracts and
subcontracts. The majority of our Government contracts are either firm
fixed-price/time-and-material, or cost-plus fixed fee contracts. Approximately
72% of the revenue that we derived from Government contracts for the year ended
December 31, 2003 came from firm fixed-price or time-and-material contracts. The
balance of the revenue that we derived from Government contracts in 2003
primarily came from cost-plus fixed fee contracts. Most of our contracts are for
one-year to five-year terms.
While firm fixed-price contracts allow us to benefit from cost savings,
they also expose us to the risk of cost overruns. If the initial estimates we
use for calculating the contract price are incorrect, we can incur losses on
those contracts. In addition, some of our Governmental contracts have provisions
relating to cost controls and audit rights and, if we fail to meet the terms
specified in those contracts, then we may not realize their full benefits. Lower
earnings caused by cost overruns would have an adverse effect on our financial
results.
Under time and materials contracts, we are paid for labor at negotiated
hourly billing rates and for certain expenses. Under cost-plus fixed fee
contracts, we are reimbursed for allowable costs and paid a fixed fee. However,
if our costs under either type of contract exceed the contract ceiling or are
not allowable under the provisions of the contract or applicable regulations, we
may not be able to obtain reimbursement for all of our costs.
Under each type of contract, if we are unable to control costs we incur in
performing under the contract, our financial condition and operating results
could be materially adversely affected. Cost over-runs also may adversely affect
our ability to sustain existing programs and obtain future contract awards.
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 PAR and have
access to substantially greater financial and other resources 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, I/T outsourcing and engineering services.
Many of our competitors are, or are subsidiaries of, companies such as
Lockheed-Martin, Raytheon, Northrop-Grumman, BAE, Harris, 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 fiscal years ended December 31, 2003, 2002 and 2001, our net
revenues from sales outside the United States were 11%, 11% and 14%,
respectively, of the Company's total revenues. For the three months ended March
31, 2004 and 2003, sales outside the United States were 8% and 9%, respectively,
of the Company's total 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
INFLATION
Inflation had little effect on revenues and related costs during the first
quarter of 2004. Management anticipates that margins will be maintained at
acceptable levels to minimize the effects of inflation, if any.
INTEREST RATES
As of March 31, 2004, the Company has $2.2 million in variable long-term
debt and $2.6 million in variable short-term debt. The Company believes that
adverse change in interest rates of 100 basis points 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 our
business, financial conditions, results of operations or cash flows due to the
low volume of business affected by foreign currencies.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
As of March 31, 2004, 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 Officer 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
the evaluation, the Company's President and Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure and procedures are
effective in enabling the Company to identify, process, record 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 was no significant change in the Company's internal controls over
financial reporting, as defined in Rule 13a-15(f) of the Exchange Act during the
quarter ended March 31, 2004 that has materially affected, or is reasonably
likely to materially affect, such internal controls over financial reporting.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
31.1 Certification of Chairman of the Board
and Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of Vice President, Chief
Financial Officer and Treasurer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of Chairman of the Board
and Chief Executive Officer and
Vice President, Chief Financial Officer
and Treasurer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
On February 12, 2004, PAR Technology Corporation furnished a report on
Form 8-K pursuant to Item 9 (Regulation FD Disclosure) of that Form relating to
its financial information for the quarter ended December 31, 2003, as presented
in a press release of February 12, 2004 and furnished thereto as an exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAR TECHNOLOGY CORPORATION
(Registrant)
Date: May 14, 2004
/s/RONALD J. CASCIANO
---------------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
and Treasurer
Exhibit Index
Sequential
Page
Exhibit Number
------- ------
31.1 Certification of Chairman of the Board E-1
and Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of Vice President, Chief E-2
Financial Officer and Treasurer Pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of Chairman of the Board E-3
and Chief Executive Officer and
Vice President, Chief Financial Officer
and Treasurer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, John W. Sammon, Jr., certify that:
1. I have reviewed this report on Form 10-Q of PAR Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)), for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluations; and,
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter and that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 14, 2004
/s/John W. Sammon, Jr.
------------------------------------------
John W. Sammon, Jr.
Chairman of the Board and Chief Executive Officer
E-1
Exhibit 31.2
PAR TECHNOLOGY CORPORATION
STATEMENT OF EXECUTIVE OFFICER
I, Ronald J. Casciano, certify that:
1. I have reviewed this report on Form 10-Q of PAR Technology Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)), for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluations; and,
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter and that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 14, 2004
/s/Ronald J. Casciano
------------------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer
& Treasurer
E-2
Exhibit 32.1
PAR TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PAR Technology Corporation (the
"Company") on Form 10-Q for the quarter ended March 31, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), we, John
W. Sammon, Jr. and Ronald J. Casciano, Chairman of the Board & Chief Executive
Officer and Vice President, Chief Financial Officer & Treasurer of the Company,
certify pursuant to 18 U.S.C.ss.1350, as adopted pursuant toss.906 of the
Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
(1) The Report fully complies with the requirement of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/John W. Sammon, Jr.
- -------------------------------
John W. Sammon, Jr.
Chairman of the Board & Chief Executive Officer
May 14, 2004
/s/Ronald J. Casciano
- -------------------------------
Ronald J. Casciano
Vice President, Chief Financial Officer & Treasurer
May 14, 2004
E-3