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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1996.
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
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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)
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Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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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 14, 1997 - $45.4 million.
The number of shares outstanding of registrant's common stock, as of March
14, 1997 - 8,835,365 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement in connection with its 1997
annual meeting of stockholders are incorporated by reference into Part III.
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PAR TECHNOLOGY CORPORATION
TABLE OF CONTENTS
FORM 10-K
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Item Number
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PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Other
Significant Employees of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
Signatures
PAR TECHNOLOGY CORPORATION
PART I
Item 1: Business
PAR Technology Corporation ("PAR" or the "Company") provides
sophisticated integrated transaction information processing ("ITIP") solutions
that enable the reliable capture, preservation, processing and management of
information throughout a business enterprise. The Company is a leading supplier
of ITIP solutions to the quick service restaurant industry and also provides
ITIP solutions for manufacturing/warehousing enterprises. The Company's
systems-based solutions have been engineered to perform reliably under harsh
operating conditions and incorporate high levels of systems integration,
in-depth knowledge of the customers' workflow processes, and local and wide-area
networking capability.
The Company also develops advanced computer-based systems and
technologies for government agencies. Through its government-sponsored
development work, PAR has generated significant technologies with commercial
applications, from the transaction information processing capability underlying
its primary business, to advanced vision technology currently being implemented
in the Company's proprietary Corneal Topography System ("CTS") for use in
ophthalmic diagnoses and surgical procedures.
Information concerning the Company's industry segments for the three
years ended December 31, 1996 is set forth in Note 11 to the Consolidated
Financial Statements included elsewhere herein.
The Company's principal executive offices are located at PAR Technology
Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991, telephone number
(315) 738-0600. Unless the context otherwise requires, the term "PAR" or
"Company" as used herein means PAR Technology Corporation and its wholly-owned
subsidiaries.
Commercial Segment
PAR, through its wholly-owned subsidiary PAR Microsystems Corporation,
is a leading supplier of ITIP solutions to the quick service restaurant industry
and also provides ITIP solutions for manufacturing/warehousing enterprises. The
Company's POS restaurant ITIP system solution combines flexible, extendible
systems software connecting its open-system architecture hardware platform with
ruggedized fixed and wireless order-entry terminals, video monitors and PAR and
third-party supplied peripherals networked via an Ethernet LAN and accessible to
enterprise-wide network configurations. For manufacturing and warehousing
enterprises, the Company designs and implements complex integrated ITIP
solutions incorporating its TPS(TM) data collection and management software that
provide real-time connectivity with multiple host computers, diverse legacy
applications software and "best-of-breed" software and data input hardware
technologies. PAR further provides extensive systems integration 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. The Company's wholly-owned subsidiary, PAR Vision
Systems Corporation has developed a Corneal Topography System (CTS) which maps
the surface of the cornea of the human eye. Additionally, the Company has
developed and is marketing an automatic vision inspection system called Qscan(R)
for the food-processing industry. This system utilizes a specialized image
processing technique to detect contaminants in filled containers.
Products
The demands of the major quick service chains include rugged, reliable
point of sale systems capable of recording, transmitting and coordinating large
numbers of orders for quick delivery. The Company's modular, integrated
solutions permit its QSR customers to configure their restaurant ITIP systems to
meet their order-entry, menu, food preparation and delivery coordination
requirements while recording all aspects of the transaction at the site. The
current offerings are the result of the Company's 19 years of experience in and
an in-depth understanding of the QSR market. This knowledge and expertise is
reflected in its product design, manufacturing capability and systems
integration skills.
Software. The Company's current POS software, G/T, has been written in
the C programming language, operates under Microsoft DOS, is compatible with QNX
real-time operating systems and supports a distributed processing environment
across an Ethernet LAN. The features and functions of the software are extensive
and incorporate a high degree of flexibility for the routing and displaying of
orders in real-time and for the design and configurability of the Company's
display data-entry terminals.
Recently PAR introduced intouch(TM), a new software application which
enables the Company to expand its offerings beyond QSR to the full service and
delivery markets. In addition, this software offers a back office application
which includes such features as labor scheduling and inventory management. The
software also supports in-store communications between terminals, remote
printers and displays, and back office PCs through an Ethernet LAN.
Hardware. The Company's POS system, is an open architecture hardware
platform with industry standard components. The POS hardware supports a
distributed processing environment and incorporates an advanced restaurant ITIP
system, utilizing Intel microprocessors, standard PC expansion slots, Ethernet
LAN and standard Centronics printer ports. The system augments its industry
standard components with features for QSR 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 QSR environment. The system has a favorable price-to-performance ratio
over the life of the system as a result of its PC compatibility, ease of
expansion and use and high reliability design.
Display terminals process and track customer orders, process employee
timekeeping records, and provide on-screen production and labor scheduling.
Registers may be configured with a touch screen rather than a fixed position
keyboard, allowing greater flexibility in menu design. The POS touch screen
configuration allows a restaurant manager to easily reconfigure or change the
menu to add new food items or provide combination meals without reprogramming
the system. Wireless hand-held terminals permit restaurant employees to take
orders while customers are waiting or in drive-thru lines, thus increasing the
speed of service, as the customer's food order is complete by the time he or she
reaches the counter and pays for the order. This system also utilitizes video
monitors, printers and various other devices which can be added to a LAN. The
manager can use a standard microcomputer to collect and report on
store-generated data.
Systems Integration. The Company utilizes its systems integration and
engineering expertise in developing functions and interfaces for its restaurant
ITIP products to meet diverse customer requirements. The Company works closely
with its customers to identify and accommodate the latest developments in
restaurant technology by developing 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 systems integration to interface
specialized components, such as television monitors, coin dispensers and
non-volatile memory for journalizing transaction data, as may be required in
some international applications. The Company also integrates the restaurant
manager's back office computer, as well as corporate home office computers, as
management information requirements dictate.
Manufacturing/Warehousing ITIP Systems
The Company's manufacturing/warehousing information processing systems
business provides enabling and applications software and systems integration
services to manufacturing and warehousing end users through distributed
enterprise networks. The Company's primary product offering to the
manufacturing/warehousing industry is its TPS data collection enabling software
package. TPS is an open platform, middleware application that provides
connectivity across multiple non-compatible host computers, including those
manufactured by International Business Machines Corporation, Hewlett-Packard
Company, and Digital Equipment Corporation. TPS also provides connectivity among
diverse MRP, MRP II and MES programs (such as MANMAN and SAP) and fixed-base and
hand-held RF data collection terminals on the factory floor, including those
sold by Burr-Brown Corporation, Intermec Corporation, Maxilan Corporation,
Norand Corporation, Symbol Technologies and Telxon Corporation. TPS offers
simplified system use and operations while maintaining system speed in complex
transaction processing environments. TPS provides a flexible and highly
functional platform for on-line transaction processing applications such as
distribution time and attendance, inventory control, warehousing, job status,
scheduling and quality control. Data can be directly read from and written to
host databases, as well as forwarded to managers, who can respond quickly to
production deviations based on real-time information.
The Company offers system integration services for implementing data
collection hardware and its TPS software for its clients. PAR's team of systems
engineers, application developers, and product support personnel have experience
in providing optimal system integration solutions, and work closely with
customer personnel to define requirements, identify solutions, and implement
solutions based on the customer's needs.
Ophthalmic Diagnostic and Surgical Market
PAR's Vision System Corporation's Corneal Topography System is a
current example of the Company's ability to develop a commercial product from
technology developed under contract for the U.S. Government. With the growth of
refractive surgery to change the shape of the cornea, the foreseeable
introduction of the excimer laser for photorefractive keratotomy ("PRK") and the
desire to develop customized contact lenses, PAR recognized a need for corneal
topography system which could directly measure the true elevation/shape of the
cornea and created CTS. CTS used PAR patented technology and complex proprietary
algorithms and software to provide the eye care professional with true
elevation, curvature and refractive power data across the entire cornea.
The Company's focus market for its CTS products is the eye care
industry, including ophthalmologist, optometrists, excimer laser centers,
refractive surgery centers, hospitals, eye banks, custom contact lens labs,
research centers and university medical schools. Corneal topography has
important applications in diagnostics, inpatient screening, preoperative
surgical planning, postoperative evaluation, patient follow-up, patient
co-management, and contact lens fitting and design. In addition, corneal
topography is an effective patient education and marketing tool.
X-Ray Inspection Systems
Qscan(R) is the first system fully designed for use on a food
processor's production line. The system detects and rejects small contaminants
such as pits, shards of glass, or slivers of metal in opaque, filled and capped
food containers. Certain containers can be examined on-line at high speeds--up
to 1,100 per minute. This allows 100% inspection of all containers during the
flow of production.
Installation and Training
In the U.S., Canada, Europe, South Africa, Australia and Asia, PAR POS
personnel provide installation and training services, on a fixed-fee basis, as a
normal part of the equipment purchase agreement. In certain areas of North
America, Europe and Asia, the Company provides these services through third
parties.
Maintenance and Service
The Company offers a range of maintenance and support services as part
of its total solutions for its targeted transaction processing markets. In the
North American restaurant ITIP market, the Company provides comprehensive
maintenance and upgrade services for its own and third-party equipment and
systems through a 24-hour central telephone customer support and diagnostic
service in Boulder, Colorado and a field service network consisting of 60
locations offering factory, on-site, and depot maintenance and spare unit
rentals. When a restaurant ITIP system is installed, PAR employees train the
restaurant employees and managers to ensure efficient use of the system. If a
problem occurs, PAR's current software products allow a service technician to
diagnose the problem by telephone, greatly reducing the need for on-site service
calls. The Company has contracted with Taco Bell, the Company's largest customer
in fiscal 1996, to serve as the exclusive service integrator for restaurant ITIP
systems, back office computer systems, hand-held data entry devices and other
computer-based equipment in all company-owned Taco Bell, Taco Bell Express and
Hot `n Now restaurants in the United States, Canada and Puerto Rico.
The Company also maintains service centers in Europe, South Africa,
Australia and Asia. The Company believes that its ability to address all support
and maintenance requirements for a customer's restaurant ITIP network provides
it with a competitive advantage.
In the manufacturing/warehousing market, the Company offers technical
support through an experienced product support staff available in the field or
by telephone. The Company also provides training classes, led by experienced and
highly qualified personnel, on its products and implementations, including both
hands-on experience with use of software and operation of hardware. The Company
offers ongoing maintenance and enhancements.
Marketing
Restaurant ITIP. Sales in the restaurant ITIP market are usually
generated by first gaining the approval of the 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 vendor. The Company employs direct sales
personnel in five sales groups. The National Accounts Group works with major
restaurant chain customers. The North and South American Sales Group targets
franchisees of the major restaurant chain customers, franchisees of other major
chains, as well as smaller chains. The International Sales Group seeks sales to
major customers with restaurants overseas and to international chains that do
not have a presence in the United States. The New Accounts Group seeks sales to
major new corporate accounts.
Manufacturing/Warehousing ITIP. The Company's direct sales efforts in
the manufacturing/warehousing ITIP market are generally focused on the highest
level of the customer's executive management. Substantial lead time is required
in sales efforts due to the fact that automation equipment is normally fitted
into the manufacturing or warehousing environment as a plant is constructed. The
Company has also entered into strategic marketing relationships with several
companies, including Intermec Corporation, Norand Corporation and Telxon
Corporation, and Ernst and Young LLP.
CTS. The Company currently utilizes a direct sales force to market CTS.
The Company also has created an international dealer network in Europe, Asia,
South America, Australia and Canada in order to address the wide geographical
scope of the market.
Competition
Competition in the restaurant ITIP and manufacturing/warehousing ITIP
markets is based primarily on functionality, reliability, quality, performance
and price of products, and service and support. The Company believes that its
principal competitive advantages include its focus on a total solution offering,
its advanced development capabilities, its industry knowledge and experience,
product reliability, its direct sales force, the quality of its support and
quick service response, and, to a lesser extent, price. The markets in which the
Company competes are highly competitive. There are currently more than 10
suppliers who offer some form of sophisticated restaurant ITIP system similar to
the Company's. The Company competes with other vendors of ITIP systems and the
internal efforts of its current or prospective customers. Major competitors
include Panasonic, International Business Machines Corporation, NCR and Micros
Systems Inc. The Company believes that the manufacturing/warehousing ITIP market
is highly fragmented. In the CTS market, competitors include EyeSys Technologies
Inc., Tomey Technology, Inc. , Alcon Laboratories, Inc. and Humphrey Instruments
(a division of Carl Zeiss, Inc.).
Backlog
At December 31, 1996, the Company's backlog of unfilled orders for the
Commercial segment was approximately $1,877,000 compared to $20,600,000 a year
ago. Most of the present orders will be delivered in 1997. The decline in
backlog is primarily due to the Company fulfilling its requirements under the
Taco Bell Contract during 1996. Commercial 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 POS,
manufacturing/warehousing, and Vision products requires a significant and
continuous research and development effort. The Company engages in the research
and development of new technologies under government contracts and through
internally funded projects. Research and development expenses on internally
funded projects were approximately $5,005,000 in 1996, $5,331,000 in 1995,
$5,009,000 in 1994. See Note 1 to the Consolidated Financial Statements
incorporated herein by reference for discussion on Statement of Financial
Accounting Standards No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed.
Manufacturing and Suppliers
The Company assembles its products from standard components, such as
integrated circuits, and fabricated parts such as printed circuit boards, metal
parts and castings, most of which are manufactured by others to the Company's
specifications. The Company depends on outside suppliers for the continued
availability of its components and parts. Although most items are generally
available from a number of different suppliers, the Company purchases certain
components from only one supplier. Items purchased from only one supplier
include certain printers, base castings and electronic components. If such a
supplier should cease to supply an item, the Company believes that new sources
could be found to provide the components. However, added cost and manufacturing
delays could result and adversely affect the business of the Company. The
Company has not experienced significant delays of this nature in the past, but
there can be no assurance that delays in delivery due to supply shortages will
not occur in the future.
Government Segment
PAR has two wholly-owned subsidiaries in the government business
segment, PAR Government Systems Corporation (PGSC) and Rome Research Corporation
(RRC). These companies provide federal and state government organizations,
including the Department of Defense (DoD), with a wide range of technical
products and services. PGSC is involved with the design, development and systems
integration of state-of-the-art data processing systems, and with advanced
research and development for high-technology projects. RRC provides engineering
services, software development/testing, and operation & maintenance for
government facilities. The Company's products cover the entire development cycle
for Government systems: requirements analysis, design specification,
development, implementation, installation, test and evaluation. The Company also
develops and markets off-the-shelf software products for both DoD and commercial
use.
PAR Government Systems Corporation
PGSC is organized into four divisions. Two divisions, Image & Signal
Processing, and Special Programs & Command, Control, Communications and
Intelligence (C3I) deal principally with the Department of Defense, while the
other two divisions, Logistics Management Systems, and Environmental &
Geographical Information Systems (GIS), have both government and commercial
contracts. PGSC's headquarters and data processing technology center is in New
Hartford, NY and its Center for Advanced Sensor Processing is located in La
Jolla, CA, the San Diego Technology Center. PGSC has a Joint Surveillance Target
Attack System (JSTARS) project office located in Melbourne, FL to support
Northrop Grumman Corporation.
PGSC has designed and implemented advanced software systems that have
often become key components for the later development of large DoD systems.
PGSC's strategy has been to identify the Government's data processing needs and
to provide special--sometimes unique--solutions for either the Government or
prime contractors. PGSC is currently involved in radar, infrared and
electro-optical sensor data handling, design of algorithms for highly accurate
real-time tracking, sensor systems design and evaluation, massively parallel
processing, geographic information systems, image processing, environmental
data monitoring, command and control, mission planning, and asset tracking &
data management. Additionally, new environmental monitoring business is being
conducted for state agencies and public utilities in New York and Pennsylvania.
Image & Signal Processing
This business sector deals with the collection and analysis of complex
and massive sensor data. PGSC is a leader in developing and implementing target
detection and tracking algorithms for both radar and infrared sensor systems.
Since 1986, PGSC has been a key contributor to the full-scale engineering
development for J-STARS, providing algorithm development and data handling for
both moving target indicator and synthetic aperture radar technologies that
detect, track and target moving enemy vehicles.
PGSC scientists have also developed sensor concepts and algorithms to
address the difficult problem of detecting low-contrast targets against
cluttered background (e.g., finding a cruise missile or fighter aircraft against
a terrain background). Technical approaches developed for radar and infrared
sensors have been applied to other research and operational sensor systems.
Special Programs & C3I
PGSC provides special data handling and system interoperability for key
Government customers. PAR's operation of the Image Exploitation 2000 facility
for the Air Force's Rome Laboratory has assisted with the introduction of many
new data handling concepts, including imagery dissemination using Internet
technology. Key contracts in command and control are being conducted for the
Defense Advanced Research Projects Agency (DARPA). Image processing and mission
planning are conducted to support many DoD military exercises and training
programs.
Logistics Management Systems
This division provides seamless visibility for a user's assets,
utilizing small electronic tags on assets and cargos to communicate information
on an asset's location and state. Under a contract with the U.S. Department of
Transportation and the National Institute for Environmental Renewal (NIER), PGSC
is providing a system that will monitor and track hazardous material (HAZMAT)
cargoes on trucks in Northeastern Pennsylvania. A second program phase tracks
these cargos within an intermodal port facility in Los Angeles, California.
Through internal funding, PGSC has extended this technology to produce a
commercial product, Cargo*Mate, that will be able to track high-value or
hazardous cargos in a variety of transport or warehouse environments. Pilot
evaluations with commercial clients are underway.
Environmental & GIS
An environmental measurement and data management system has been
implemented for the NIER which integrates field sensors, GIS systems, image
processing, contaminant monitoring, risk assessment, and site modeling. This
environmental data system has been used to assess conditions at several private
and government-owned sites, addressing air and water quality monitoring,
detection and monitoring of soil and underground contaminants, and emergency
response for flooding situations.
This division also addresses the movement of massive data sets, and the
adaptation of mapping data to meet user needs for mission planning, and decision
support. U.S. Government agencies use PGSC's software to rapidly convert images
to digital maps; to store, edit, and retrieve such maps; and to extract features
from digital data bases. Applications of these GIS technologies also address the
needs of state and local government groups.
Rome Research Corporation
RRC provides management and engineering service solutions to the
Department of Defense (DoD) and other Government and commercial customers. At
DoD sites located around the United States, RRC operates and maintains
facilities including airfields, electromagnetic laboratories, and
state-of-the-art antenna measurement ranges. RRC personnel plan, execute, and
evaluate experiments involving advanced radar systems, electronic
countermeasures systems, and communications systems, and operate training and
operational communications equipment. RRC also provides software test and
validation, and has developed a relationship with Northrup Grumman Corporation
to support the testing of operational software for the J-STARS project.
Test Laboratory and Range Operations
RRC 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 RRC. Test activities encompass
unique components, specialized equipment, and advanced systems for radar,
communications, electronic countermeasures, and integrated weapon systems. RRC
also develops complex measurement systems in several defense-related areas of
technology. These systems are computer-based and have led to the development by
RRC of a significant software capability, which provides the basis for competing
in new markets.
Software Test and Validation
RRC supports the Northrup Grumman J-STARS program, which provides RRC
with a means of expanding its business base into a different segment of the
defense industry. The J-STARS effort is RRC's first venture into the software
verification and validation arena, with RRC engineers embedded in the Northrup
Grumman test organization for formal qualification of the entire J-STARS suite.
RRC participates in all phases of the test process, from initial analysis to
government acceptance. The ability to provide a wide range of software
technology is particularly important during a period when almost all engineering
efforts require the application of complex software and hardware in support of a
given task.
Airfield Management
RRC manages all phases of airfield operations of the Griffiss Minimum
Essential Airfield (MEA) at the former Griffiss Air Force Base in Rome, NY.
Griffiss MEA has one of the world's largest runways, and is the only airfield
ever to be privatized by the U.S. Air Force. RRC provides a full range of
services, from air traffic control and airfield management to grounds
maintenance, in support of the U.S. Army's 10th Mountain Division.
Advanced Research and Development
RRC supports numerous technology demonstrations for the DoD, including
the Advanced Sensor Technology Program (ASTP), dedicated to air defense
surveillance and reconnaissance systems for missile defense. RRC supports the
development of sensor systems and fusion processor programs for the ASTP. RRC
also supports Navy airborne surveillance systems through the development of
advanced optical sensors. Technology efforts include optical materials
characterization, laser design and analysis, image and signal processing, and
aircraft systems integration.
Government Contracts
PGSC and RRC perform work for U.S. Government agencies under
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 three-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. Under contracts terminated for the convenience of the Government, 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 books and records of the Company are audited by the
Defense Contract Audit Agency on a regular basis. Such audits can result in
adjustments to contract costs and fees. Audits have been completed through the
Company's fiscal year 1994 and have not resulted in any material adjustments.
Marketing and Competition
The Company's marketing activities in the Government sector are
conducted primarily by senior- and middle-management and technical staff
members. 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. A proven approach is for the Company to enter into teaming arrangements
with other contractors. Teaming arrangements allow the contractors to complement
the unique capabilities of each other and to offer the Government the best
combination of capabilities to achieve the performance, cost, and delivery
schedule desired for the system being procured. Structuring the right teaming
arrangement can significantly enhance a contractor's competitive position. Some
of the contractors that the Company has previously, or is presently, teamed with
are AAI, GDE, Harris, Lockheed-Martin, Northrop Grumman Corporation, GTE, and
TASC.
Although the Company believes it is positioned well in its chosen areas
of image and signal processing, telecommunications and engineering services,
competition for Government contracts is intense. Many of the Company's
competitors are, or are controlled by, companies such as Lockheed-Martin, SAIC
and Hughes that are larger and have substantially greater financial resources.
The Company also competes with many smaller companies that target particular
segments of the Government market. Typically, seven or more companies will
compete for each contract and, as previously discussed, PAR sometimes bids as
part of a team with other companies. Contracts are obtained principally through
competitive proposals in response to requests for bids from Government agencies
and prime contractors. The principal competitive factors are prior experience,
the ability to perform, price, technological capabilities, and service. In
addition, the Company sometimes obtains contracts by submitting unsolicited
proposals.
Backlog
The dollar value of existing Government contracts at December 31, 1996,
net of amounts relating to work performed to that date, was approximately
$19,700,000, of which $4,800,000 was funded. At December 31, 1995, the
comparable amount was approximately $32,088,000, of which $7,568,000 was funded.
The 1996 backlog has declined from the prior year primarily due to the Company's
continuing performance on existing, multi-year contracts. Funded represents
amounts committed under contract by Government agencies and prime contractors.
The December 31, 1996 Government contract backlog of $19,700,000 represents
firm, existing contracts. Approximately $12,300,000 of this amount will be
completed in calendar year 1997 as funding is committed.
Employees
As of December 31, 1996, the Company had 788 employees, approximately
68% of whom are engaged in the Company's Commercial segment, 24% 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.
None 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 Commercial Principal executive offices 148,000
Government manufacturing, research and
development laboratories,
computing facilities
Boulder, CO Commercial Service 17,500
Rome, NY Government Research and Development 15,000
Norcross, GA Commercial Research and Development 9,200
Sydney, Australia Commercial Sales and Service 8,800
La Jolla, CA Government Research and Development 8,400
Arlington, TX Commercial Sales, Research and Development 6,100
San Antonio, TX . Commercial Sales 4,700
Irvine, CA Commercial Sales and Service 4,500
The Company's headquarters and principal business facility is located
in New Hartford, New York, which is near Utica, located in Central New York
State.
The Company owns its principal facility and adjacent space in New
Hartford, N.Y. All of the other facilities are leased for varying terms.
Substantially all of the Company's facilities are fully utilized, well
maintained, and suitable for use. The Company believes its present and planned
facilities and equipment are adequate to service its current and immediately
foreseeable business needs.
Item 3: Legal Proceedings
The Company is subject to legal proceedings which arise in ordinary
course of business. In the opinion of Management, the ultimate liability, if
any, with respect to these actions will not materially affect the financial
position of the Company.
Item 4: Submission of Matters to a Vote of Security Holders
None
PART II
Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock, par value $.02 per share, trades on the New
York Stock Exchange (NYSE symbol - PTC). At December 31, 1996, there were
approximately 906 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, 1996 as reported by New York Stock Exchange:
1996 1995
------------------ ----------------
Period Low High Low High
------ --- ---- --- ----
First Quarter 8 1/4 16 7/8 5 7/8 9 3/4
Second Quarter 14 1/8 19 7/8 8 10 3/4
Third Quarter 12 3/8 17 3/4 8 1/4 10 3/4
Fourth Quarter 10 3/4 14 3/4 8 5/8 10 1/4
The Company has not paid cash dividends on its common stock, and its
Board of Directors presently intends to continue to retain earnings for
reinvestment in growth opportunities for the Company. Accordingly, it is
anticipated that no cash dividends will be paid in the foreseeable future.
Item 6: Selected Financial Data
SELECTED CONSOLIDATED STATEMENT OF INCOME DATA
(In thousands, except per share amounts)
Year ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------
Total revenues $ 117,661 $ 107,394 $ 94,530 $ 81,247 $ 73,271
========= ========= ========= ======== ========
Net income $ 5,947 $ 4,658 $ 3,661 $ 2,529 $ 2,333
========= ========= ========= ======== ========
Earnings per share $ .69 $ .58 $ .46 $ .32 $ .30
========= ========= ========= ======== ========
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------
Working capital $62,107 $42,976 $38,915 $34,489 $31,373
Total assets 86,758 68,073 60,642 60,449 53,433
Long-term debt -- -- -- -- --
Shareholders' equity 72,602 53,132 48,645 44,530 41,858
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis highlights items having a
significant effect on operations during the three-year period ended December 31,
1996. 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 -- 1996 Compared to 1995
PAR Technology Corporation reported earnings per share of $.69 for the
year ended December 31, 1996, an increase of 19% from the $.58 per share
recorded for the year ended December 31, 1995. Net income increased 28% to $5.9
million in 1996 compared to $4.7 million for 1995. Revenues for 1996 were $117.7
million versus $107.4 million for 1995, an increase of 10%.
Product revenues were $63.1 million for 1996, an 8% increase from the
$58.3 million recorded in 1995. The increase was primarily due to sales of the
Company's restaurant products. The Company's international product revenues
increased 17% as major customers, KFC International and McDonald's, expanded
their operations abroad. Domestically, the Company added Whataburger, Inc. a
Texas based quick service restaurant chain, as a new account and increased its
sales to Burger King Corporation ("Burger King") and Taco Cabana. The Company
was selected in June 1996 as the provider of next-generation POS hardware
solutions for Burger King. The Company recently completed a contract with Burger
King under which it anticipates delivering systems to Burger King's 550
corporate stores in 1997. Partially offsetting these increases were lower sales
to Taco Bell and McDonald's domestic restaurants. During 1996, the Company
delivered systems that will fulfill Taco Bell's requirements through
substantially all of 1997. The decline in McDonald's revenue is primarily the
result of continuing efforts by this customer to select its future software
migration path. Numerous replacement decisions are being postponed pending the
outcome of this matter. Regardless of the situation , the Company anticipates
that its worldwide sales to McDonald's will increase in 1997.
The Company's manufacturing/warehousing ITIP business also reported lower
sales. Although the Company added several new customers during 1996, the growth
of this business was interrupted by technical problems encountered during the
implementation of a large cellular network at a customer plant. Through our
integration skills the problem was solved and the customer is proceeding with
the rollout of our products at additional sites. The Company anticipates a
return to growth by this business in 1997.
Service revenues increased 20% to $30.1 million in 1996 compared to $25.1
million for 1995. This increase was due to the certain integration projects
requested by customers, and the expansion of the exclusive service integration
contract with Taco Bell which was awarded in the third quarter of 1995. Under
this agreement, the Company is responsible for the servicing of all restaurant
ITIP systems, back office systems and Help Desk and on-site support activities.
Growth in installation and repair revenue also contributed to this increase.
Contract revenues were $24.4 million for 1996, an increase of 2% from the
$24 million reported in 1995. The government segment's engineering services
business increased primarily due to the Griffiss Minimum Essential Airfield
Contract awarded to Phoenix in 1995. The Company is a subcontractor to Phoenix
to operate and maintain Griffiss Air Force Base. Additionally, the Company's
software development and systems integration business continues to expand its
efforts in environmental monitoring and hazardous materials tracking. Partially
offsetting this increase was the cancellation for convenience of certain
software development contracts of the Company by the Department of Defense and
the completion of a large engineering services program in 1995.
Gross margin on product revenues was 41% compared to 42% in 1995. Margins
declined due to a reduction in average selling prices to several major customers
during the year. The Company was able to minimize the effect of these pricing
actions through lower part costs and other manufacturing cost reductions.
Gross margin on service revenues was 14% in 1996 versus 17% in 1995.
Periodically, the Company is requested to perform specific integration projects
for certain customers. In 1996 these projects involved more labor and generated
less gross margin than the 1995 projects. Additionally, costs relating to the
transition to a new third party service provider contributed to the margin
decline in 1996.
Gross margin on contract revenues was 5% in 1996 compared to 6% in 1995.
This decrease is attributable to contract mix and higher award fees in 1995.
Selling, general and administrative expenses were $18 million in 1996, a
decrease of 3% from the $18.5 million recorded in 1995. Included in 1995 was
$1.1 million for allowances related to the Company's investment in and
receivable from Phoenix. See Note 9 to the Consolidated Financial Statements for
further discussion. Partially offsetting this decrease were expanding sales
force costs in the Company's restaurant, manufacturing/warehousing and Vision
businesses.
Research and development expenses were $5 million in 1996, a decrease of
6% from the $5.3 million reported a year ago. Although the Company increased its
expenditures in its ITIP restaurant and manufacturing/warehousing businesses,
net research and development expenses declined due to the requirement to
capitalize certain software development costs under the Statement of Financial
Accounting Standards No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed. The Company incurred more software
development costs meeting this requirement in 1996 than in 1995. Research and
development costs attributable to government contracts are included in cost of
contract revenues.
The Company's effective tax rate was 32.5% in 1996 compared to 33.6% in
1995. In 1996, the Company benefited from the favorable results of a federal
income tax audit. In 1995, the tax rate reflected the utilization of certain
foreign tax credits.
Results of Operations -- 1995 Compared to 1994
PAR Technology Corporation reported earnings per share of $.58 for the
year ended December 31, 1995, an increase of 26% from the $.46 per share
recorded for the year ended December 31, 1994. Net income increased 27% to $4.7
million in 1995 compared to $3.7 million for 1994. Revenues for 1995 were $107.4
million versus $94.5 million for 1994, an increase of 14%.
Product revenues were $58.3 million for 1995, a 10% increase from the $53
million recorded in 1994. Most of this increase occurred in the fourth quarter
of 1995. This was primarily due to the Company's continued successful
partnership with Taco Bell. In the fourth quarter of 1995, the Company received
a $23 million order from Taco Bell for POS products. The Company began delivery
of this order in 1995, with the majority to be shipped in 1996. The increase is
also due to new contract awards from the Chick-fil-A restaurant chain. Product
revenues also increased in 1995 due to the growth in the Company's ITIP
manufacturing/warehousing business. This business won several new contracts in
1995 and grew 34% over 1994. Partially offsetting these increases was a decline
in sales to KFC International due to a greater number of new store openings and
replacement orders in 1994 than in 1995.
Service revenues increased 20% to $25.1 million in 1995 compared to $20.8
million for 1994. The growth in service revenue was primarily related to higher
installation revenue as a result of the increase in product revenues discussed
above. Additionally, in the third quarter of 1995 the Company was awarded a
service integration contract with Taco Bell. Certain product enhancement
programs for various customers also contributed to this increase in 1995.
Contract revenues were $24 million for 1995, an increase of 16% from the
$20.7 million reported in 1994. The Government segment's engineering services
and its software development and systems integration business both contributed
to this increase. The Company was awarded new site contracts and expanded the
scope of other existing contracts during 1995. The Company's software
development business expanded its work in environmental systems.
The Company's Rome Research Corporation (RRC) was awarded a $10 million,
five-year contract as the prime subcontractor for the Griffiss Minimum Essential
Airfield Contract awarded to Phoenix Systems and Technologies, Inc. (Phoenix).
Under this contract, Phoenix and RRC provide engineering services to Griffiss
Air Force Base.
Gross margin on product revenues were 42% compared to 39% in 1994.
Restaurant ITIP margins improved primarily due to certain customer discounts
earned in 1994 that did not recur in 1995. Additionally, the Company was able to
achieve certain product cost reductions in 1995.
Gross margin on service revenues were 17% in 1995 and 1994. Margins
benefited from increased revenues including revenue from certain product
enhancement programs. However, this was offset by start-up costs related to the
service integration contract with Taco Bell discussed above.
Gross margin on contract revenues was 6% in 1995 compared to 5% in 1994.
This margin improvement was the result of higher award fees earned on certain
contracts due to high performance ratings and to a favorable contract mix.
Selling, general and administrative expenses were $18.5 million in 1995,
an increase of 27% from the $14.6 million recorded in 1994. This increase is
primarily due to the expansion of the Company's worldwide Restaurant ITIP sales
force, and growth in the manufacturing/warehousing ITIP sales force. Also, 1995
expenses included $1.1 million for allowances related to the Company's
investment in and receivable from Phoenix.
Research and development expenses were $5.3 million in 1995, an increase
of 6% from the $5 million reported a year ago. The Company continued its
investment in Restaurant ITIP hardware and software products. Additionally, the
Company improved the technological performance of its CTS products.
The Company's effective tax rate was 33.6% in 1995 compared to 36.3%
in 1994. The lower rate is primarily due to the utilization of Foreign Tax
credits in 1995.
Liquidity and Capital Resources
Cash flows to meet the Company's requirements of operating, investing and
financing activities during the past three years are reported in the
Consolidated Statement of Cash Flows.
Cash flow used by operating activities was $2.9 million in 1996 compared
to $767,000 in 1995. The Company's accounts receivable balance grew
substantially in 1996 which was the result of timing of certain customer
payments which are not due until the first quarter of 1997. Inventory levels
also increased during 1996 due to the requirements to support the Company's
different product lines and the need for additional service inventory to support
expanding service integration activities.
Cash used in investing activities was $2.5 million in 1996 compared to
$1.8 million in 1995. The Company incurred $1.3 million for capital expenditures
in 1996 and 1995. Capital expenditures in 1996 were primarily for internal use
computer hardware and software. In 1995, the Company purchased internal use
computer hardware and software and upgraded certain communications equipment.
Cash flow provided by financing activities was $13.3 million in 1996
versus $101,000 in 1995. In 1996 the Company sold 975,200 shares of common stock
in a secondary offering which netted approximately $13.3 million. The Company
also received a $2.2 million benefit in 1996 from the exercise of employee stock
options. Additionally in 1996, the Company purchased into treasury, 134,000
shares of its stock at a cost of approximately $2 million. In 1995, cash flow
benefited by the proceeds from the exercise of employee stock options and
short-term bank borrowings for working capital requirements. This was partially
offset by the acquisition of treasury stock during the year.
The Company has line-of-credit agreements with certain banks which
aggregate $27.4 million, virtually all of which were unused at December 31,
1996. The Company believes that it has adequate financial resources to meet its
future liquidity and capital requirements.
The Company owns a 44% interest in Phoenix and was involved in the
DoD's Mentor Protege Program with Phoenix. At December 31, 1996, Phoenix owes
the Company $1.7 million (net of a $903,000 reserve) related to contracted
manufacturing and services. Additionally, the Company has guaranteed a $900,000
line-of-credit borrowing of Phoenix. See Note 9 to the Consolidated Financial
Statements for further discussion.
Important Factors Regarding Future Results
Information provided by the Company, including information contained in
this Annual Report, or by its spokepersons 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, risks in technology development and
commercialization, risks in product development and market acceptance of and
demand for the Company's products, risks of downturns in economic conditions
generally, and in the quick service sector of the restaurant market
specifically, risks of intellectual property rights associated with competition
and competitive pricing pressures, risks associated with foreign sales and high
customer concentration and other risks detailed in the Company's filings with
the Securities and Exchange Commission.
Item 8: Financial Statements and Supplementary Data
The Company's 1996 Financial Statements, together with the report
thereon of Price Waterhouse LLP dated February 12, 1997, are included elsewhere
herein. See Item 14 for a list of Financial Statements and Financial Statement
Schedules.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Item 10: Directors, Executive Officers and Other Significant Employees of
the Registrant
The directors and executive officers of the Company and their respective ages
and positions are:
Name Age Position
---- --- --------
Dr. John W. Sammon, Jr. 57 Chairman of the Board, President and
Director
Charles A. Constantino 57 Executive Vice President and Director
J. Whitney Haney 62 President, PAR Microsystems and Director
Sangwoo Ahn 58 Director
Dr. James C. Castle 60 Director
Albert Lane, Jr. 55 President, Rome Research
Dr. John P. Retelle, Jr. 51 President, PAR Government Systems
Ronald J. Casciano 43 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
---- --- --------
James E. Cashman III 43 Vice President, International Sales
and Service, PAR Microsystems
William L. Collier 53 Vice President, Sales and Marketing
Industrial Transaction Processing Systems,
PAR Microsystems
Gregory T. Cortese 47 Vice President, Business & Legal Affairs,
General Counsel and Secretary
Donald A. England 45 Vice President, National Accounts
PAR Microsystems
Name Age Position
---- --- --------
William J. Francis 45 Vice President Customer Service
PAR Microsystems
Donald D. Hall 61 Vice President Operations, Rome Research
F. Tibertus Lenz 46 Vice President and General Manager
PAR Microsystems
Fred A. Matrulli 51 Vice President Operations
PAR Vision Systems
Victor Melnikow 39 Vice President, Finance
Rome Research
E. John Mohler 53 Vice President Telecommunications
Programs, PAR Government Systems
David W. Robbins 42 Vice President, San Diego Area Center
PAR Government Systems
Robert G. Saenz 58 Vice President Engineering
PAR Microsystems
Richard P. Sargent 65 Vice President Worldwide Sales
PAR Microsystems
Penny Schob 42 Vice President Field Operations
PAR Microsystems
Warren M. Thomas 58 Vice President Advanced Technology
Development, PAR Government Systems
Ben F. Williams 55 Vice President Business Development
William J. Williams 35 Vice President Operations
PAR Microsystems
Alexander J. Zanon 58 Senior Vice President Operations
PAR Government Systems
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
President and a Director since its incorporation in 1968. He has authored
several papers in the field of Artificial Intelligence and Pattern Recognition
and is a Fellow of the Institute of Electronic Engineers.
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
PAR Microsystems since April, 1988.
Mr. Sangwoo Ahn was appointed a Director of the Company in March, 1986. He
has been a partner of Morgan, Lewis, Githens & Ahn (investment banking) since
1982.
Dr. James C. Castle was appointed a Director of the Company in December,
1989. Dr. Castle has been the Chairman and CEO of U.S.C.S. International
(previously U.S. Computer Services Corporation) since August, 1992. Prior to
assuming that position, he was the President of Teradata Corp. since 1991. He
also held the position of Chairman of the Board of Infotron Systems Corporation
since 1989.
Mr. Albert Lane, Jr. was appointed to President, Rome Research in 1988.
Dr. John P. Retelle, Jr. was appointed President, PAR Government Systems in
November 1993. He was Vice President, Business Development and joined the
Company in July, 1993. Previously, he held a number of executive positions with
Lockheed Corp.
Mr. Ronald J. Casciano, CPA, was promoted to Vice President, C.F.O.,
Treasurer in June, 1995. Mr. Casciano had been Vice President and Treasurer
since 1994. He joined the Company in 1983 as Corporate Controller.
Mr. James E. Cashman III joined PAR Microsystems as Vice President,
International Sales and Service in June of 1995. Prior to joining PAR, Mr.
Cashman was Vice President, Development and Marketing with Metaphase Technology,
Inc.
Mr. William L. Collier joined the Company as Vice President, Sales and
Marketing, Industrial Transaction Processing Systems in May, 1994. Prior to
joining the Company, Mr. Collier was a Sales Manager with Tyler
Computer/Controls.
Mr. Gregory T. Cortese was appointed Secretary of the Company in 1987. Mr.
Cortese is also responsible for the Company's Ophthalmic business.
Mr. Donald A. England was promoted to Vice President, National Accounts of
PAR Microsystems in 1994. Previously, he was the Director of Product Marketing.
Mr. William J. Francis was promoted to Vice President, Customer Service of
PAR Microsystems in February 1997. Previously he was the Vice President, Finance
and Operations.
Mr. Donald D. Hall joined Rome Research in November, 1990. He was promoted
to Vice President, Operations in May, 1993. Previously, he served as a Colonel
in the U.S. Marine Corp.
Mr. F. Tibertus Lenz was promoted to Vice President and General Manager,
Industrial Transaction Processing Systems in 1989.
Mr. Fred A. Matrulli was promoted to Vice President, Operations of PAR
Vision Systems in January, 1993. He held the positions of Vice President
Production and Manager of Hardware Development for PAR Microsystems since 1987.
Mr. Victor Melnikow was promoted to Vice President, Finance of Rome
Research in July, 1995. Previously, he held the position of Controller.
Mr. E. John Mohler joined the Company in 1994 as Vice President,
Telecommunications Programs for PAR Government Systems. Prior to this, he was a
self-employed consultant.
Mr. David W. Robbins was promoted to Vice President, PAR Government
Systems, San Diego Area Center in January, 1992. Mr. Robbins had been the
Director of the Center since June, 1987.
Mr. Robert G. Saenz joined the Company in 1989 as Vice President,
Engineering of PAR Microsystems.
Mr. Richard P. Sargent was promoted to Vice President, Worldwide Sales of
PAR Microsystems in 1994. Previously, he was Vice President, International
Sales.
Ms. Penny Schob was promoted to Vice President, Field Operations of PAR
Microsystems in February 1997. Previously she held the position of Director of
Field Operations.
Mr. Warren M. Thomas joined the Company in 1994 as Vice President, Advanced
Technology Development of PAR Government Systems. Prior to PAR, he was Manager
of Advanced Program Development for Northrop Grumman Corporation.
Mr. Ben F. Williams was appointed Vice President, Business Development in
1986.
Mr. William J. Williams was promoted to Vice President, Operations of PAR
Microsystems in February 1997. Prior to this position, Mr. Williams was the
Director of Manufacturing.
Mr. Alexander J. Zanon was promoted to Senior Vice President, Operations of
PAR Government Systems in 1986.
Item 11: Executive Compensation
The information required by this item will appear under the caption
"Executive Compensation" in the Company's 1997 definitive proxy statement for
the annual meeting of stockholders on May 22, 1997 and is incorporated herein by
reference.
Item 12: Security Ownership Of Management And Certain Beneficial Owners
The information required by this item will appear under the caption
"Security Ownership Of Management And Certain Beneficial Owners" in the
Company's 1997 definitive proxy statement for the annual meeting of stockholders
on May 22, 1997 and is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions
The information required by this item will appear under the caption
"Executive Compensation" in the Company's 1997 definitive proxy statement for
the annual meeting of stockholders on May 22, 1997 and is incorporated herein by
reference.
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as a part of the Form 10-K
(1) Financial Statements:
Report of Independent Accountants
Consolidated Balance Sheet at December 31, 1996 and 1995
Consolidated Statement of Income for the three
years ended December 31, 1996
Consolidated Statement of Changes in Shareholders' Equity for
the three years ended December 31, 1996
Consolidated Statement of Cash Flows for the three years
ended December 31, 1996
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 50.
(d) Financial statement schedules
See (a)(2) above.
REPORT OF INDEPENDENT ACCOUNTANTS
OF FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and
Shareholders of PAR Technology Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) and (2) on page 30 of the Annual Report on Form
10-K present fairly, in all material respects, the financial position of PAR
Technology Corporation and its subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards 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 the opinion expressed above.
PRICE WATERHOUSE LLP
Syracuse, New York
February 12, 1997
CONSOLIDATED BALANCE SHEET
(In Thousands Except Share Amounts) December 31,
-----------------------
1996 1995
-----------------------
Assets
Current Assets:
Cash $ 8,391 $ 458
Accounts receivable-net (Note 2) 42,335 36,474
Inventories (Note 3) 21,988 17,801
Income tax refund claims 222 --
Deferred income taxes (Note 7) 1,096 1,303
Other current assets 1,261 1,090
-------- --------
Total current assets 75,293 57,126
Property, plant and equipment - net (Note 4) 7,243 7,580
Other assets 4,222 3,367
-------- --------
$ 86,758 $ 68,073
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable (Note 5) $ 185 $ 286
Accounts payable 5,127 4,925
Accrued salaries and benefits 2,750 4,186
Accrued expenses 2,883 1,534
Deferred service revenue 2,241 2,214
Income taxes payable -- 1,005
-------- --------
Total current liabilities 13,186 14,150
-------- --------
Deferred income taxes (Note 7) 970 791
-------- --------
Shareholders' Equity (Note 6):
Common stock, $.02 par value,
12,000,000 shares authorized;
9,416,721 and 9,113,031 shares issued
8,826,315 and 7,682,425 outstanding 188 182
Preferred stock, $.02 par value,
250,000 shares authorized -- --
Capital in excess of par value 27,564 13,664
Retained earnings 47,679 41,732
Cumulative translation adjustment (67) (167)
Treasury stock, at cost, 590,406 and
1,430,606 shares (2,762) (2,279)
-------- -------
Total shareholders' equity 72,602 53,132
-------- -------
Contingent liabilities (Note 10)
-------- -------
$ 86,758 $68,073
======== =======
The Accompanying Notes are an Integral Part of the Financial Statements
CONSOLIDATED STATEMENT OF INCOME
(In Thousands Except Per Share Amounts) Year ended December 31,
------------------------------------
1996 1995 1994
------------------------------------
Net revenues:
Product $ 63,134 $ 58,306 $52,965
Service 30,124 25,059 20,823
Contract 24,403 24,029 20,742
-------- -------- -------
117,661 107,394 94,530
-------- -------- -------
Costs of sales:
Product 37,407 34,028 32,527
Service 25,979 20,807 17,296
Contract 23,093 22,492 19,740
-------- -------- -------
86,479 77,327 69,563
-------- -------- -------
Gross margin 31,182 30,067 24,967
-------- -------- -------
Operating expenses:
Selling, general and administrative 18,044 18,499 14,611
Research and development 5,005 5,331 5,009
-------- -------- -------
23,049 23,830 19,620
-------- -------- -------
Income from operations 8,133 6,237 5,347
Other income, net 678 778 400
-------- -------- -------
Income before provision for
income taxes 8,811 7,015 5,747
Provision for income taxes (Note 7) 2,864 2,357 2,086
-------- -------- -------
Net income $ 5,947 $ 4,658 $ 3,661
======== ======== =======
Earnings per common share $ .69 $ .58 $ .46
======== ======== =======
Weighted average number of common
shares outstanding 8,643 8,068 7,992
======== ======== =======
The Accompanying Notes are an Integral Part of the Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands)
Common Stock Capital in Cumulative Treasury Stock
excess of Retained Translation --------------
Shares Amount Par Value Earnings Adjustment Shares Amount
------ ------ --------- -------- ---------- ------ ------
Balance at
December 31, 1993 8,976 $ 180 $13,023 $33,413 $(411) (1,371) $(1,675)
Net income 3,661
Issuance of common stock upon the
exercise of stock options (Note 6) 55 1 245
Translation adjustments 230
Acquisition of treasury stock (3) (22)
------- ------- ------- ------- ----- ------ -------
Balance at
December 31, 1994 9,031 181 13,268 37,074 (181) (1,374) (1,697)
Net income 4,658
Issuance of common stock upon the
exercise of stock options (Note 6) 82 1 396
Translation adjustments 14
Acquisition of treasury stock (57) (582)
------- ------- ------- ------- ----- ------ -------
Balance at
December 31, 1995 9,113 182 13,664 41,732 (167) (1,431) (2,279)
Net income 5,947
Issuance of common stock 11,748 975 1,554
Issuance of common stock upon the
exercise of stock options (Note 6) 304 6 2,152
Translation adjustments 100
Acquisition of treasury stock (134) (2,037)
------- ------- ------- ------- ----- ------ -------
Balance at
December 31, 1996 9,417 $ 188 $27,564 $47,679 $ (67) (590) $(2,762)
======= ======= ======= ======= ===== ====== =======
The Accompanying Notes are an Integral Part of the Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands) Year ended December 31,
------------------------
1996 1995 1994
------------------------
Cash flows from operating activities:
Net income $ 5,947 $ 4,658 $ 3,661
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,342 2,414 2,683
Provision for obsolete inventory 2,143 2,072 1,834
Translation adjustments 100 14 230
Increase (decrease) from changes in:
Accounts receivable-net (5,861) (8,371) 1,337
Inventories (6,330) (3,406) (1,994)
Income tax refund claims (222) -- --
Other current assets (171) 370 (189)
Other assets (371) (907) (57)
Accounts payable 202 1,293 267
Accrued salaries and benefits (1,436) 312 560
Accrued expenses 1,349 297 (874)
Deferred service revenue 27 204 325
Income taxes payable (1,005) 697 28
Deferred income taxes 386 (414) 231
-------- ------- -------
Net cash provided (used) by operating activities (2,900) (767) 8,042
-------- ------- -------
Cash flows from investing activities:
Capital expenditures (1,302) (1,288) (1,726)
Capitalization of software costs (1,187) (500) (448)
-------- ------- -------
Net cash used in investing activities (2,489) (1,788) (2,174)
-------- ------- -------
Cash flows from financing activities:
Net borrowings (payments) under
line-of-credit agreements (101) 286 (4,087)
Net proceeds from issuance of common stock 13,302 -- --
Proceeds from the exercise of stock options 2,158 397 246
Acquisition of treasury stock (2,037) (582) (22)
-------- ------- -------
Net cash provided (used) by financing activities 13,322 101 (3,863)
-------- ------- -------
Net increase (decrease) in cash
and cash equivalents 7,933 (2,454) 2,005
Cash and cash equivalents at
beginning of year 458 2,912 907
-------- ------- -------
Cash and cash equivalents at
end of year $ 8,391 $ 458 $ 2,912
======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 54 $ 20 $ 69
Income taxes, net of refunds 2,537 1,940 1,759
The Accompanying Notes are an Integral Part of the 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 (PAR Microsystems
Corporation, PAR Government Systems Corporation, Rome Research Corporation and
PAR Vision Systems Corporation), collectively referred to as the "Company." All
significant intercompany transactions have been eliminated in consolidation.
Revenue recognition
Revenues from sales of commercial products are generally recorded as the
products are shipped, provided that no significant vendor and post-contract
support obligations remain and the collection of the related receivable is
probable. Costs relating to any remaining insignificant vendor and post-contract
obligations are accrued. The Company's service revenues are recognized ratably
over the related contract period or as the services are performed. Billings in
advance of the Company's performance of such work are reflected as deferred
service revenue in the accompanying consolidated balance sheet.
The Company's contract revenues result primarily from contract services
performed for the United States Government under a variety of
cost-reimbursement, time-and-material and fixed-price contracts. Contract
revenues, including fees and profits, are recorded as services are performed
using the percentage-of-completion method of accounting, primarily based on
contract costs incurred to date compared with estimated costs at completion.
Anticipated losses on all contracts and programs in process are recorded in full
when identified. Unbilled accounts receivable are stated at estimated realizable
value. Contract costs, including indirect expenses, are subject to audit and
adjustment through negotiations between the Company and government
representatives. Contract revenues have been recorded in amounts that are
expected to be realized on final settlement. The Company follows accepted
industry practice and records amounts retained by the government on contracts as
a current asset.
Statement of cash flows
For purposes of reporting cash flows, the Company considers all highly
liquid investments, purchased with a remaining maturity of three months or less,
to be cash equivalents. The effect of changes in foreign-exchange rates on cash
balances is not material.
Inventories
Inventories are valued at the lower of cost or market, cost being
determined on the basis of the first-in, first-out (FIFO) method.
Property, plant and equipment
Property, plant and equipment are recorded at cost and depreciated using
the straight-line or an accelerated method over the estimated useful lives of
the assets, which range from three to twenty years. Expenditures for maintenance
and repairs are expensed as incurred.
Warranties
A majority of the Company's products are under warranty for defects in
material and workmanship for various periods of time. The Company establishes an
accrual for estimated warranty costs at the time of sale.
Income taxes
The provision for income taxes is based upon pretax earnings with
deferred income taxes provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities.
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. Exchange gains and losses on intercompany balances of a
long-term investment nature are also recorded as a translation adjustment.
Foreign currency transaction gains and losses, which historically have been
immaterial, are included in net income.
Research and development costs
The Company capitalizes certain costs related to the development of
computer software under the requirements of Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Software development costs incurred prior to
establishing technological feasibility are charged to operations and included in
research and development costs. Software development costs incurred after
establishing feasibility, are capitalized and amortized on a product-by-product
basis when the product is available for general release to customers. The
unamortized computer software costs included in other assets amounted to
$1,818,000 and $1,311,000 at December 31, 1996 and 1995, respectively. Annual
amortization, charged to cost of sales, is the greater of the amount computed
using the ratio that current gross revenues for a product bear to the total of
current and anticipated future gross revenues for that product, or the
straight-line method over the remaining estimated economic life of the product.
Amortization of capitalized software costs amounted to $680,000, $990,000 and
$1,076,000 in 1996, 1995, and 1994, respectively.
Stock-based compensation
Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for
Stock-Based Compensation, 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.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock. SFAS No.
123 also calls for the pro forma disclosure of stock-based compensation expense
for those companies which elect to maintain their accounting policy under APB
25. The Company has calculated the pro forma stock-based compensation under the
guidelines set forth in SFAS No. 123 and has determined the effects to be not
material.
Earnings per share
Earnings per share are based upon the weighted average number of shares
outstanding plus common stock equivalents under the Company's stock option
plans.
Reclassifications
Certain miscellaneous income and expense items which previously were
reflected as selling, general and administrative expenses have been reclassified
to other income, net.
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.
Note 2 -- Accounts Receivable
The Company's accounts receivable consist of:
December 31,
(In Thousands)
--------------
1996 1995
---- ----
Government segment:
United States Government --
Billed .................................... $ 1,599 $ 2,522
Unbilled .................................. 820 1,474
------- -------
2,419 3,996
------- -------
Other --
Billed .................................... 3,223 2,947
Unbilled .................................. 1,183 681
------- -------
4,406 3,628
------- -------
Commercial segment:
Trade accounts receivable-net ................. 35,510 28,850
------- -------
$42,335 $36,474
======= =======
At December 31, 1996 and 1995, the Company had recorded a reserve for
doubtful accounts of $677,000 and $768,000, respectively, against trade
accounts receivable. Trade accounts receivable are primarily with major
fast-food corporations or their franchisees.
Note 3 -- Inventories
Inventories are used primarily in the manufacture, maintenance, and
service of commercial systems. Inventories are net of related reserves. The
components of inventory are:
December 31,
(In Thousands)
--------------
1996 1995
------- -------
Finished goods ......................... $ 5,111 $ 4,427
Work in process .......................... 3,538 3,337
Component parts .......................... 6,234 3,979
Service parts ............................ 7,105 6,058
------- -------
$21,988 $17,801
======= =======
Note 4 -- Property, Plant and Equipment
The components of property, plant and equipment are:
December 31,
(In Thousands)
--------------
1996 1995
---- ----
Land ........................................... $ 253 $ 253
Building and improvements ...................... 8,393 8,371
Furniture and equipment ........................ 22,974 21,952
------- -------
31,620 30,576
Less accumulated depreciation
and amortization .............................. 24,377 22,996
------- -------
$ 7,243 $ 7,580
======= =======
The Company leases office space under various operating leases. Rental
expense on these operating leases was approximately $810,000, $879,000 and
$817,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
Future minimum lease payments under all noncancelable operating leases
are (in thousands):
1997 906
1998 829
1999 784
2000 355
2001 208
Thereafter 132
------
$3,214
======
Note 5 -- Notes Payable
The Company has an aggregate of $27,400,000 in bank lines of credit.
Certain lines totalling $23,200,000 allow the Company to choose among unsecured
borrowings which bear interest at the prime rate (8.25% at December 31, 1996),
banker's acceptance borrowings which bear interest at a rate below the prime
rate or other bank negotiated rates below prime. These lines are negotiated
annually. The remaining line of $4,200,000 is unsecured, bears interest at the
prime rate, requires a compensating balance and expires on April 30, 1998. At
December 31, 1996, $185,000 was outstanding under these lines at an interest
rate of 8.25%.
Note 6 -- Common Stock
The Company had reserved 2,052,500 shares of common stock for issuance
under its Stock Option Plans. By November 30, 1994, these Plans had expired. In
1995, the Company reserved 500,000 shares under the 1995 Stock Option Plan.
Options under this Plan may be incentive stock options or nonqualified options.
Stock options are nontransferable other than upon death. Option grants become
exercisable no less than six months after the grant and typically expire ten
years after the date of the grant.
A summary of the stock options follows:
No. of Shares Option Price Total
(In Thousands) Per Share (In Thousands)
-------------- ---------- -------------
Outstanding at December 31, 1993 ..... 863 $2.00 - $15.00 $2,882
Granted ......................... 72 6.50 - 7.25 476
Exercised ....................... (55) 3.00 - 5.00 (169)
Forfeited ....................... (21) 3.00 - 15.00 (110)
----- ------
Outstanding at December 31, 1994 ..... 859 2.00 - 13.00 3,079
Granted ......................... 38 9.31 - 10.19 372
Exercised ....................... (82) 3.00 - 5.81 (269)
Forfeited ....................... (5) 5.25 - 13.00 (56)
----- ------
Outstanding at December 31, 1995 ..... 810 2.00 - 11.25 3,126
Granted ......................... 186 9.25 - 14.16 1,770
Exercised ....................... (304) 2.00 - 11.25 (1,018)
Forfeited ....................... (20) 5.25 - 9.31 (184)
----- ------
Outstanding at December 31, 1996 ..... 672 $3.00 - $14.16 $3,694
===== ======
Shares remaining
available for grant ............. 294
=====
Total shares vested and exercisable
as of December 31, 1996 ......... 387
=====
Note 7-- Income Taxes
The provision for income taxes consists of:
Year ended December 31,
(In Thousands)
-------------------------------------
1996 1995 1994
-------------------------------------
Current tax expense:
Federal .......................... $ 1,991 $ 2,248 $ 1,219
State ......................... 626 542 457
Foreign .......................... 48 (11) 150
------- ------- -------
2,665 2,779 1,826
------- ------- -------
Deferred income tax:
Federal .......................... 287 (422) 260
Foreign .......................... (88) -- --
------- ------- -------
199 (422) 260
------- ------- -------
Provision for income taxes ............ $ 2,864 $ 2,357 $ 2,086
======= ======= =======
Deferred tax liabilities (assets) are comprised of the following at:
December 31,
(In Thousands)
--------------------------
1996 1995
--------------------------
Depreciation ................................. $ 678 $ 744
Software development expense ................. 618 446
------- -------
Gross deferred liabilities ................... 1,296 1,190
------- -------
Reserves ................................... (736) (1,250)
Capitalized inventory costs .................. (88) (84)
Wage and salary accruals ..................... (345) (342)
Foreign net operating loss ................... (163) --
Other ........................................ (90) (26)
------- -------
Gross deferred tax assets .................... (1,422) (1,702)
------- -------
$ (126) $ (512)
======= =======
Total income tax provision differed from total tax expense as computed by
applying the statutory U.S. federal income tax rate to income before taxes. The
reasons were:
Year ended December 31,
-----------------------------
1996 1995 1994
-----------------------------
Statutory U.S. federal tax rate ............ 34.0% 34.0% 34.0%
State taxes net of federal benefit ......... 4.7 5.1 5.2
Foreign income taxes ....................... .5 .8 2.6
FSC benefit ................................ (2.0) (2.6) (1.4)
Adjustment to prior years' accrual ......... (4.3) 1.8 2.5
Foreign tax credits ........................ (.6) (7.7) (6.5)
Other ...................................... .2 2.2 (0.1)
---- ----- -----
32.5% 33.6% 36.3%
==== ===== =====
The provision for income taxes is based on income before income taxes as
follows:
Year ended December 31,
(In Thousands)
---------------------------------------
1996 1995 1994
---------------------------------------
Domestic operations ............. $ 9,849 $ 7,697 $ 5,519
Foreign operations .............. (1,038) (682) 228
------- ------- -------
Total ...................... $ 8,811 $ 7,015 $ 5,747
======= ======= =======
Note 8 -- Employee Benefit Plans
The Company has a deferred profit-sharing retirement plan that covers
substantially all employees. The Company's annual contribution to the plan is
discretionary. The contributions to the plan in 1996, 1995 and 1994 were
approximately $200,000, $824,000 and $749,000, respectively. The plan also
contains a 401(K) provision that allows employees to contribute a percentage of
their salary.
The Company also maintains an incentive-compensation plan. Participants
in the plan are key employees as determined by executive management.
Compensation under the plan is based on the achievement of predetermined
financial performance goals of the Company and its subsidiaries. Awards under
the plan are payable in cash. In 1996 there were no awards under the Plan. For
the years ended December 31, 1995 and 1994 the Company expensed approximately
$628,000 and $764,000, respectively, in cash awards under the plan.
Note 9 -- Investment in Affiliate
In June 1992, the Company was approved under the Department of Defense
Mentor-Protege Program as a mentor for a minority-owned government contractor,
Phoenix Systems and Technology, Inc. (Phoenix). Concurrent with this approval,
the Company acquired a 44% interest in Phoenix which is accounted for under the
equity method.
The Company is a subcontractor to Phoenix on certain engineering service
contracts with the United States Government. Additionally, Phoenix rents its
office space from the Company. Phoenix is also a vendor to PAR providing
manufacturing and certain contract services. During 1996 and 1995, PAR billed
Phoenix approximately $3.4 million and $1.6 million, respectively, and Phoenix
billed PAR $1.7 million and $1.1 million, respectively, in connection with the
above activities. At December 31, 1996, the Company had recorded a receivable
from Phoenix of $1,700,000 compared to $1,000,000 at December 31, 1995. These
amounts, net of allowances of $903,000 and $830,000, respectively, are included
in other assets in the consolidated balance sheet. The increase in this amount
during 1996 was primarily due to the award of the Griffiss Minimum Essential
Airfield Contract to Phoenix on which the Company is a subcontractor. During
1996, Phoenix achieved its business plan and was profitable. In 1995, allowances
of $1.1 million were recorded related to Phoenix as a result of delays in
contract starts, the exiting of certain unprofitable manufacturing activities
and the settlement of a contractor's claim with the federal government.
The 1997 business plan for Phoenix projects a continuing profitable
business. The Company has also guaranteed a $900,000 line-of-credit borrowing
of Phoenix. If Phoenix is unable to successfully execute its business plan, the
Company could incur additional losses.
Note 10 -- Contingencies
The Company is subject to legal proceedings which arise in the ordinary
course of business. Additionally, 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 of the Company.
Note 11 -- Industry Segments
The Company, through its separate operating subsidiaries, operates in two
principal segments: a Commercial segment and a Government segment. The
Commercial segment designs, develops, manufactures, sells, installs and services
point-of-sale terminal systems for the restaurant industry, transaction
processing systems for the manufacturing/warehousing industry, and image
processing systems for the ophthalmic and food-processing industries. The
Government segment designs and implements advanced technology computer software
systems primarily for military and intelligence agency applications, and
provides services for operating and maintaining certain U.S. Government-owned
test sites, and for planning, executing and evaluating experiments involving new
or advanced radar systems. Inter-segment sales and transfers are not material.
Information as to the Company's operations in these two segments is set
forth below:
Year ended December 31,
(In Thousands)
------------------------------------
1996 1995 1994
------------------------------------
Revenues:
Commercial segment
United States ............... $ 85,421 $ 76,984 $ 67,079
Europe ...................... 5,841 6,335 5,579
Australia ................... 3,048 2,654 4,299
Other Non U.S. .............. 6,255 3,432 3,190
Eliminations ................ (7,307) (6,040) (6,359)
Government segment .............. 24,403 24,029 20,742
--------- --------- ---------
Total ......................... $ 117,661 $ 107,394 $ 94,530
========= ========= =========
Income from operations:
Commercial segment
United States ............... $ 5,861 $ 4,585 $ 2,727
Europe ...................... 518 1,047 783
Australia ................... 151 260 840
Other Non U.S. .............. 862 164 215
Government segment .............. 1,310 1,537 1,002
Corporate ....................... (569) (1,356) (220)
--------- --------- ---------
8,133 6,237 5,347
Other income, net .................... 678 778 400
--------- --------- ---------
Income before provision
for income taxes .............. $ 8,811 $ 7,015 $ 5,747
========= ========= =========
Identifiable assets:
Commercial segment
United States ............... $ 60,403 $ 50,186 $ 39,574
Europe ...................... 3,044 3,263 3,227
Australia ................... 1,415 1,195 1,341
Other Non U.S. .............. 3,372 2,511 2,920
Government segment .............. 10,929 10,730 9,834
Corporate ....................... 7,595 188 3,746
--------- --------- ---------
Total ....................... $ 86,758 $ 68,073 $ 60,642
========= ========= =========
Depreciation and amortization:
Commercial segment .............. $ 1,893 $ 1,959 $ 2,304
Government segment .............. 159 210 182
Corporate ....................... 290 245 197
--------- --------- ---------
Total ....................... $ 2,342 $ 2,414 $ 2,683
========= ========= =========
Capital expenditures:
Commercial segment .............. $ 793 $ 1,063 $ 1,051
Government segment .............. 175 137 295
Corporate ....................... 334 88 380
--------- --------- ---------
Total ....................... $ 1,302 $ 1,288 $ 1,726
========= ========= =========
Customers comprising 10% or more of the Company's Commercial segment
sales are summarized as follows:
1996 1995 1994
-------- -------- --------
Taco Bell Corporation ................... 40% 42% 34%
McDonald's Corporation .................. 22% 27% 31%
Kentucky Fried Chicken .................. 8% 6% 10%
All Others .............................. 30% 25% 25%
--- --- ---
100% 100% 100%
=== === ===
Substantially all revenues derived by the Government segment arise from
Federal government contracts, or subcontracts related thereto, virtually all of
which are with the Department of Defense.
Note 12 -- Fair Value of Financial Instruments
Financial instruments consist of the following:
December 31, 1996
(In Thousands)
--------------
Carrying Fair
Value Value
----- -----
Cash and cash equivalents .................... $8,391 $8,391
Long-term receivables and
other investments ....................... 1,627 1,627
Notes Payable ................................ 185 185
Fair value of financial instruments classified as current assets or
liabilities approximate carrying value due to the short-term maturity of the
instruments. Fair value of long-term receivables and other investments was based
on discounted cash flows.
Note 13 -- Selected Quarterly Financial Data (Unaudited)
Quarter ended
(In Thousands Except Per Share Amounts)
1996 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues ..... $ 25,494 $ 28,388 $ 27,938 $ 35,841
Gross margin ....... 5,942 6,981 8,100 10,159
Net income ......... 551 892 1,972 2,532
Earnings per
common share ..... $ .07 $ .11 $ .22 $ .28
======== ======== ======== =========
Quarter ended
(In Thousands Except Per Share Amounts)
1995 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Total revenues ..... $ 24,034 $ 24,366 $ 23,980 $ 35,014
Gross margin ....... 6,151 6,494 7,032 10,390
Net income ......... 390 636 1,533 2,099
Earnings per
common share ..... $ .05 $ .08 $ .19 $ .26
======== ======== ======== =========
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES
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
1996 $ 768 174 (265) (a) $ 677
1995 $ 818 137 (187) (b) $ 768
1994 $ 771 321 (274) (c) $ 818
(a) Uncollectible accounts written off during 1996.
(b) Uncollectible accounts written off during 1995.
(c) Uncollectible accounts written off during 1994.
- ------------------------------------------------------------------------------------------------
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
the Balance Sheet
1996 $1,922 2,143 (2,891) $1,174
1995 $2,860 2,072 (3,010) $1,922
1994 $4,136 1,834 (3,110) $2,860
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PAR TECHNOLOGY CORPORATION
March 26, 1997 /s/John W. Sammon, Jr.
-------------------------
John W. Sammon, Jr.
Chairman of Board and President
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
- --------------------------------------------------------------------------------
Signatures Title Date
================================================================================
/s/John W. Sammon, Jr.
- ----------------------
John W. Sammon, Jr. Chairman of Board and March 26, 1997
President (Principal
Executive Officer)
and Director
/s/Charles A. Constantino
- -------------------------
Charles A. Constantino Executive Vice President March 26, 1997
and Director
/s/Sangwoo Ahn
- --------------
Sangwoo Ahn Director March 26, 1997
/s/Ronald J. Casciano
- ---------------------
Ronald J. Casciano Vice President, March 26, 1997
Chief Financial Officer
and Treasurer
List of Exhibits
Exhibit
No. Description of Instrument
================================================================================
3.1 Certificate of Incorporation, as amended Filed as Exhibit 3.1 to
Registration Statement on
Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
3.2 Form of Certificate of Amendment to the Filed as Exhibit 3.1 to
Certificate of Incorporation Registration Statement on
Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
3.3 By-laws, as amended Filed as Exhibit 3.1 to
Registration Statement on
Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
4 Specimen Certificate representing the Filed as Exhibit 3.1 to
Common Stock Registration Statement on
Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
10.1 * Agreement between Taco Bell Corp. and Filed as Exhibit 3.1 to
PAR Microsystems Corporation, dated Registration Statement on
December 18, 1995. Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
10.2 * Service Integration Agreement between Filed as Exhibit 3.1 to
Taco Bell Corp. and PAR Microsystems Registration Statement on
Corporation, dated September 12, 1995. Form S-2 (Registration
No. 333-04077) of PAR
Technology Corporation
incorporated herein by
reference.
11 Statement re computation of Earnings per
share.
22 Subsidiaries of the registrant
23 Consent of independent accountants
* Confidential treatment requested as to certain portions.