UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2008. Commission File Number 1-9720 OR [ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __________ to __________ Commission File Number __________ PAR TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 16-1434688 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) PAR Technology Park 8383 Seneca Turnpike New Hartford, NY 13413-4991 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (315) 738-0600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer" and "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ] Smaller Reporting Company [ ] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x] The number of shares outstanding of registrant's common stock, as of July 31, 2008 - 14,455,063 shares.
PAR TECHNOLOGY CORPORATION TABLE OF CONTENTS FORM 10-Q PART I FINANCIAL INFORMATION Item Number ----------- Item 1. Financial Statements (unaudited) - Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 - Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2008 and 2007 - Consolidated Balance Sheets at June 30, 2008 and December 31, 2007 - Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 - Notes to Unaudited Interim Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures PART II OTHER INFORMATION Item 1A. Risk Factors Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits Signatures Exhibit Index
PART I - FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> <CAPTION> PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) For the three months For the six months ended June 30, ended June 30, ---------------------- ---------------------- 2008 2007 2008 2007 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net revenues: Product ...................................... $ 20,751 $ 18,320 $ 37,648 $ 35,026 Service ...................................... 17,729 16,100 34,144 31,629 Contract ..................................... 18,754 15,452 37,549 31,053 --------- --------- --------- --------- 57,234 49,872 109,341 97,708 --------- --------- --------- --------- Costs of sales: Product ...................................... 12,612 10,699 22,037 21,007 Service ...................................... 12,877 11,886 25,360 24,052 Contract ..................................... 17,713 14,652 35,553 29,206 --------- --------- --------- --------- 43,202 37,237 82,950 74,265 --------- --------- --------- --------- Gross margin ........................... 14,032 12,635 26,391 23,443 --------- --------- --------- --------- Operating expenses: Selling, general and administrative .......... 8,742 9,186 17,803 17,895 Research and development ..................... 3,890 4,387 8,011 8,201 Amortization of identifiable intangible assets 389 394 779 784 --------- --------- --------- --------- 13,021 13,967 26,593 26,880 --------- --------- --------- --------- Operating income (loss) ........................... 1,011 (1,332) (202) (3,437) Other income, net ................................. 229 154 543 394 Interest expense .................................. (121) (237) (470) (459) --------- --------- --------- --------- Income (loss) before provision for income taxes ... 1,119 (1,415) (129) (3,502) (Provision) benefit for income taxes .............. (445) 394 58 1,173 --------- --------- --------- --------- Net income (loss) ................................. $ 674 $ (1,021) $ (71) $ (2,329) ========= ========= ========= ========= Earnings (loss) per share Basic ........................................ $ .05 $ (.07) $ (.00) $ (.16) Diluted ...................................... $ .05 $ (.07) $ (.00) $ (.16) Weighted average shares outstanding Basic ........................................ 14,394 14,348 14,386 14,334 ========= ========= ========= ========= Diluted ...................................... 14,798 14,348 14,386 14,334 ========= ========= ========= ========= </TABLE> See notes to unaudited interim consolidated financial statements
<TABLE> <CAPTION> PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited) For the three months For the six months ended June 30, ended June 30, ---------------------- ---------------------- 2008 2007 2008 2007 --------- --------- --------- --------- <S> <C> <C> <C> <C> Net income (loss) ................................. $ 674 $ (1,021) $ (71) $ (2,329) Other comprehensive income, net of tax: Foreign currency translation adjustments ..... 140 613 36 529 --------- --------- --------- --------- Comprehensive income (loss) ....................... $ 814 $ (408) $ (35) $ (1,800) ========= ========= ========= ========= </TABLE> See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) (unaudited) June 30, December 31, 2008 2007 --------- ----------- Assets Current assets: Cash and cash equivalents ......................... $ 3,357 $ 4,431 Accounts receivable-net ........................... 45,568 43,608 Inventories-net ................................... 40,808 40,319 Income tax refunds ................................ 1,352 521 Deferred income taxes ............................. 5,039 5,630 Other current assets .............................. 3,454 3,370 --------- --------- Total current assets .......................... 99,578 97,879 Property, plant and equipment - net .................... 7,401 7,669 Deferred income taxes .................................. 443 503 Goodwill ............................................... 26,798 26,998 Intangible assets - net ................................ 9,263 9,899 Other assets ........................................... 1,978 3,570 --------- --------- Total Assets ............................. $ 145,461 $ 146,518 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Current portion of long-term debt ................. $ 917 $ 772 Borrowings under lines of credit .................. 7,862 2,500 Accounts payable .................................. 11,746 16,978 Accrued salaries and benefits ..................... 9,286 9,919 Accrued expenses .................................. 3,241 3,860 Customer deposits ................................. 4,089 3,898 Deferred service revenue .......................... 14,260 14,357 --------- --------- Total current liabilities ..................... 51,401 52,284 --------- --------- Long-term debt ........................................ 6,430 6,932 --------- --------- Other long-term liabilities ............................ 2,319 2,315 --------- --------- Shareholders' Equity: Preferred stock, $.02 par value, 1,000,000 shares authorized ..................... -- -- Common stock, $.02 par value, 29,000,000 shares authorized; 16,098,818 and 16,047,818 shares issued; 14,446,063 and 14,395,063 outstanding ........... 322 321 Capital in excess of par value .................... 39,610 39,252 Retained earnings ................................. 50,380 50,451 Accumulated other comprehensive income ............ 508 472 Treasury stock, at cost, 1,652,755 shares ......... (5,509) (5,509) --------- --------- Total shareholders' equity .................... 85,311 84,987 --------- --------- Total Liabilities and Shareholders' Equity $ 145,461 $ 146,518 ========= ========= See notes to unaudited interim consolidated financial statements
<TABLE> <CAPTION> PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) For the six months ended June 30, --------------------------------- 2008 2007 -------- -------- <S> <C> <C> Cash flows from operating activities: Net loss ................................................................. $ (71) $(2,329) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization ....................................... 2,045 1,955 Provision for bad debts ............................................. 48 1,066 Provision for obsolete inventory .................................... 731 663 Equity based compensation ........................................... 164 271 Deferred income tax ................................................. 692 (1,620) Changes in operating assets and liabilities: Accounts receivable ............................................. (2,008) 6,158 Inventories ..................................................... (1,220) (2,727) Income tax refunds .............................................. (831) 746 Other current assets ............................................ (84) (137) Other assets .................................................... 21 (529) Accounts payable ................................................ (5,232) (2,574) Accrued salaries and benefits ................................... (633) (301) Accrued expenses ................................................ (463) 148 Customer deposits ............................................... 191 313 Deferred service revenue ........................................ (97) 88 Other long-term liabilities ..................................... 4 715 ------- ------- Net cash provided by (used in) operating activities ........... (6,743) 1,906 ------- ------- Cash flows from investing activities: Capital expenditures ..................................................... (695) (649) Capitalization of software costs ......................................... (487) (730) Contingent purchase price paid on prior year acquisitions ................ (156) -- Cash received from voluntary conversion of long-lived other assets ....... 1,571 -- ------- ------- Net cash provided by (used in) investing activities ........... 233 (1,379) ------- ------- Cash flows from financing activities: Net borrowings under line-of-credit agreements ........................... 5,362 (1,670) Payments of long-term debt ............................................... (357) (49) Proceeds from the exercise of stock options .............................. 195 109 ------- ------- Net cash provided by (used in) financing activities ........... 5,200 (1,610) ------- ------- Effect of exchange rate changes on cash and cash equivalents ................. 236 130 ------- ------- Net decrease in cash and cash equivalents .................................... (1,074) (953) Cash and cash equivalents at beginning of period ............................. 4,431 4,273 ------- ------- Cash and cash equivalents at end of period ................................... $ 3,357 $ 3,320 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest ................................................................. $ 451 $ 474 Income taxes, net of refunds ............................................. (1) (331) </TABLE> See notes to unaudited interim consolidated financial statements
PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited interim consolidated financial statements have been prepared by PAR Technology Corporation (the "Company" or "PAR") in accordance with U.S. generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. Accordingly, these interim financial statements do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of the Company, such unaudited statements include all adjustments (which comprise only normal recurring accruals) necessary for a fair presentation of the results for such periods. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results of operations to be expected for any future period. The consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2007 included in the Company's December 31, 2007 Annual Report to the Securities and Exchange Commission on Form 10-K. The preparation of consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include: the carrying amount of property, plant and equipment, identifiable intangible assets and goodwill, equity based compensation, and valuation allowances for receivables, inventories and deferred income taxes. Actual results could differ from those estimates. 2. Inventories are primarily used in the manufacture and service of Hospitality products. The components of inventory, net of related reserves, consist of the following: (in thousands) June 30, December 31, 2008 2007 -------- -------- Finished goods $ 9,510 $ 9,965 Work in process 1,935 1,722 Component parts 10,579 10,408 Service parts . 18,784 18,224 ------- ------- $40,808 $40,319 ======= ======= At June 30, 2008 and December 31, 2007, the Company had recorded reserves for shrinkage, excess and obsolete inventory of $3,768,000 and $3,951,000, respectively. 3. Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123R Share-Based Payment (SFAS 123R) on a modified prospective basis. This standard requires the Company to measure the cost of employee services received in exchange for equity awards based on the grant date fair value of the awards. The cost is recognized as compensation expense over the vesting period of the awards. Total compensation expense included in operating expenses for the three and six months ended June 30, 2008 was
$60,000 and $164,000, respectively. Total compensation expense included in operating expenses for the three and six months ended June 30, 2007 was $134,000 and $271,000, respectively. At June 30, 2008, the unrecognized compensation expense related to non-vested option awards was $548,000 (net of estimated forfeitures) which is expected to be recognized as compensation expense in fiscal years 2008 through 2012. 4. Earnings per share are calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS). It requires the presentation of basic and diluted EPS. Basic EPS excludes all dilution and is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The following is a reconciliation of the weighted average shares outstanding for the basic and diluted EPS computations (in thousands, except per share data): For the three months ended June 30, -------------------- 2008 2007 -------- -------- Net income (loss) ................................... $ 674 $ (1,021) ======== ======== Basic: Shares outstanding at beginning of period ...... 14,382 14,343 Weighted average shares issued during the period 12 5 -------- -------- Weighted average common shares, basic .......... 14,394 14,348 ======== ======== Earnings (loss) per common share, basic ........ $ .05 $ (.07) ======== ======== Diluted: Weighted average common shares, basic .......... 14,394 14,348 Weighted average shares issued during the period 11 -- Dilutive impact of restricted stock awards ..... 17 -- Unamortized compensation expense ............... (18) -- Dilutive impact of stock options ............... 394 -- -------- -------- Weighted average common shares, diluted ........ 14,798 14,348 ======== ======== Earnings (loss) per common share, diluted ...... $ .05 $ (.07) ======== ======== For the six months ended June 30, -------------------- 2008 2007 -------- -------- Net income (loss) ................................... $ (71) $ (2,329) ======== ======== Basic: Shares outstanding at beginning of period ...... 14,372 14,310 Weighted average shares issued during the period 14 24 -------- -------- Weighted average common shares, basic .......... 14,386 14,334 ======== ======== Earnings (loss) per common share, basic ........ $ (.00) $ (.16) ======== ======== Diluted: Weighted average common shares, basic .......... 14,386 14,334 Dilutive impact of stock options ............... -- -- -------- -------- Weighted average common shares, diluted ........ 14,386 14,334 ======== ======== Earnings (loss) per common share, diluted ...... $ (.00) $ (.16) ======== ========
For the six months ended June 30, 2008, 395,823 incremental shares from the assumed exercise of stock options and 28,157 restricted stock awards are not included in the computation of diluted earnings per share because of the anti-dilutive effect on earnings per share. 5. In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, "Fair Value Measurements," (SFAS 157), which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. This statement applies under other accounting pronouncements that require or permit fair value measurements. The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1 and 157-2. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, "Accounting for Leases," (SFAS 13) and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which we have not applied the provisions of SFAS 157 include those measured at fair value in goodwill impairment testing, indefinite lived intangible assets measured at fair value for impairment testing, asset retirement obligations initially measured at fair value, and those initially measured at fair value in a business combination. SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company's interest rate swap agreement is valued at the amount the Company would have expected to pay to terminate the agreement. The fair value determination was based upon the present value of expected future cash flows using the LIBOR rate, plus an applicable interest rate spread, a technique classified within Level 2 of the valuation hierarchy described above. The fair value at June 30, 2008 was $171,000, and is included as a component of accrued expenses within the consolidated balance sheet. The associated fair value adjustments for the three months ended June 30, 2008 and the six months ended June 30, 2008, respectively, are: $148,000, included as a decrease to interest expense; and $17,000, included as an increase to interest expense. 6. In June 2008, the Company executed a new credit agreement with a bank. Under this agreement, the Company has borrowing availability up to $20,000,000 in the form of a line of credit. This agreement allows the Company, at its option, to borrow funds at the LIBOR rate plus the
applicable interest rate spread or at the bank's prime lending rate (5.38% at June 30, 2008). This agreement expires in June 2011. At June 30, 2008, there was $7,862,000 outstanding under this agreement. The weighted average interest rate paid by the Company was 5.2% during 2008. This agreement contains certain loan covenants including leverage and fixed charge coverage ratios. The Company is in compliance with these covenants at June 30, 2008. This credit facility is secured by certain assets of the Company. In 2006, the Company borrowed $6,000,000 under an unsecured term loan agreement, executed as an amendment to one of its then bank line of credit agreements, in connection with the asset acquisition for SIVA Corporation. The loan provides for interest only payments in the first year and escalating principal payments through 2012. The loan bears interest at the LIBOR rate plus the applicable interest rate spread (5.38% at June 30, 2008). The terms and conditions of the line of credit agreement described above also apply to the term loan. 7. The Company's reportable segments are strategic business units that have separate management teams and infrastructures that offer different products and services. The Company has two reportable segments, Hospitality and Government. The Hospitality segment offers integrated solutions to the hospitality industry. These offerings include industry leading hardware and software applications utilized in point-of-sale, back of store and corporate office applications as well as in the hotel/resort/spa marketplace. This segment also offers customer support including field service, installation, twenty-four hour telephone support and depot repair. The Government segment provides technical expertise in the development of advanced technology prototype systems primarily for the Department of Defense and other Governmental agencies. It provides services for operating and maintaining certain U.S. Government-owned communication and test sites, and for planning, executing and evaluating experiments involving new or advanced radar systems. It is also involved in developing technology to track mobile chassis. Intersegment sales and transfers are not significant.
Information as to the Company's segments is set forth below: (in thousands) For the three months For the six months ended June 30, ended June 30, --------------------- ---------------------- 2008 2007 2008 2007 --------------------- ---------------------- Net revenues: Hospitality ............. $ 38,480 $ 34,420 $ 71,792 $ 66,655 Government .............. 18,754 15,452 37,549 31,053 --------- --------- --------- --------- Total ............ $ 57,234 $ 49,872 $ 109,341 $ 97,708 ========= ========= ========= ========= Operating income (loss): Hospitality ............. $ 58 $ (1,927) $ (1,981) $ (4,895) Government .............. 943 729 1,873 1,729 Other ................... 10 (134) (94) (271) --------- --------- --------- --------- 1,011 (1,332) (202) (3,437) Other income, net ............ 229 154 543 394 Interest expense ............. (121) (237) (470) (459) --------- --------- --------- --------- Income (loss) before provision for income taxes ........... $ 1,119 $ (1,415) $ (129) $ (3,502) ========= ========= ========= ========= Depreciation and amortization: Hospitality ............. $ 900 $ 891 $ 1,807 $ 1,751 Government .............. 22 8 49 17 Other ................... 94 91 189 187 --------- --------- --------- --------- Total ............ $ 1,016 $ 990 2,045 $ 1,955 ========= ========= ========= ========= Capital expenditures: Hospitality ............. $ 441 $ 286 $ 543 $ 577 Government .............. -- -- 35 32 Other ................... 76 31 117 40 --------- --------- --------- --------- Total ............. $ 517 $ 317 $ 695 $ 649 ========= ========= ========= ========= Revenues by geographic area: United States ........... $ 50,141 $ 41,817 $ 96,089 $ 83,503 Other Countries ......... 7,093 8,055 13,252 14,205 --------- --------- --------- --------- Total ............. $ 57,234 $ 49,872 $ 109,341 $ 97,708 ========= ========= ========= ========= The following table represents identifiable assets by business segment: (in thousands) June 30, December 31, 2008 2007 -------- -------- Identifiable assets: Hospitality .... $125,190 $122,442 Government ..... 13,154 14,429 Other .......... 7,117 9,647 -------- -------- Total .............. $145,461 $146,518 ======== ========
The following table presents identifiable assets by geographic area based on the location of the asset: (in thousands) June 30, December 31, --------------------------- 2008 2007 -------- --------- United States . $132,588 $134,766 Other Countries 12,873 11,752 -------- -------- Total .. $145,461 $146,518 ======== ======== The following table represents Goodwill by business segment: (in thousands) June 30, December 31, ------------------------- 2008 2007 ------- --------- Hospitality $26,149 $26,349 Government . 649 649 ------- ------- Total $26,798 $26,998 ======= ======= Customers comprising 10% or more of the Company's total revenues are summarized as follows: For the three months For the six months ended June 30, ended June 30, -------------------- ------------------- 2008 2007 2008 2007 -------------------- ------------------- Restaurant Segment: McDonald's Corporation 23% 27% 21% 26% YUM! Brands, Inc. .... 16% 14% 14% 13% Government Segment: Department of Defense 33% 31% 34% 32% All Others ................ 28% 28% 31% 29% --- --- --- --- 100% 100% 100% 100% === === === ===
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statement This document contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Any statements in this document that do not describe historical facts are forward-looking statements. Forward-looking statements in this document (including forward-looking statements regarding the continued health of the Hospitality industry, future information technology outsourcing opportunities, an expected increase in contract funding by the U.S. Government, the impact of current world events on our results of operations, the effects of inflation on our margins, and the effects of interest rate and foreign currency fluctuations on our results of operations) are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When we use words such as "intend," "anticipate," "believe," "estimate," "plan," "will," or "expect", we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we presently may be planning. We have disclosed certain important factors that could cause our actual future results to differ materially from our current expectations, including a decline in the volume of purchases made by one or a group of our major customers; risks in technology development and commercialization; risks of downturns in economic conditions generally, and in the quick-service sector of the hospitality market specifically; risks associated with government contracts; risks associated with competition and competitive pricing pressures; and risks related to foreign operations. Forward-looking statements made in connection with this report are necessarily qualified by these factors. We are not undertaking to update or revise publicly any forward-looking statements if we obtain new information or upon the occurrence of future events or otherwise. Overview PAR continues to be a leading provider of hospitality solutions that feature software, hardware and professional/lifecycle support services to several industries including: restaurants, hotels/resorts/spas, cruise lines and specialty retailers. The Company also provides the Federal Government, and its agencies, applied technology and technical services primarily with the Department of Defense. The Company's hospitality technology products are used in a variety of applications by thousands of customers. The Company faces competition in all of its markets (restaurants, hotels, etc.) and competes primarily on the basis of product design/features, product quality/reliability, price, customer service, and delivery capability. Recently, the trend in the hospitality industry has
been for users to reduce their number of approved vendors to companies that have global capabilities, can achieve quality and delivery standards, have multiple product offerings, R&D capability, and can be competitive with their pricing. PAR believes that its global reach as a technology provider is an important competitive advantage as it allows the Company to provide innovative solutions, with significant delivery capability, globally, to its multinational customers like McDonald's, Yum! Brands and the Mandarin Oriental Hotel Group. PAR's strategy is to provide completely integrated technology systems and services with a high level of customer service in the markets in which it competes. The Company conducts its research and development efforts to create innovative technology that meet and exceed our customers' requirements and also have high probability for broader market appeal and success. PAR focuses upon operating efficiencies and controlling costs. This is achieved through investment in modern production technologies, and by managing purchasing processes and functions. In 2007, the Company undertook an internal investment strategy in three distinct areas of its hospitality segment. First, the Company made significant investments in developing its next generation software. Additionally, the Company invested in building a more robust, further reaching distribution channel. Lastly, as the Company's customers expand in international markets, PAR has invested in creating an international infrastructure, initially concentrating on the Asia/Pacific rim due to the new restaurant growth and concentration of PAR customers in that region. Approximately 34% of the Company's revenues are generated in our Government Business segment. This segment is comprised of two subsidiaries: PAR Government Systems Corporation and Rome Research Corporation. Through these two government contractors, the Company provides IT and communications support services to the U.S. Navy, Air Force and Army. PAR also offers its services to several non-military U.S. federal, state and local agencies. The Company provides applied technology services including radar, image and signal processing, logistics management systems, and geospatial services and products. The Company's record setting Government performance rating allows the Company to consistently win repeat business and establish long-term client-vendor relationships with their contract customers. PAR provides its clients the technical expertise necessary to facilitate and operate complex systems utilized by government agencies. The Company will continue to leverage its core technical capabilities and performance into related technical areas and an expanding customer base. The Company will seek to accelerate this growth through strategic acquisitions of businesses that broaden the Company's technology and/or business base.
Summary The Company believes it can be successful in its two core business segments - - Hospitality and Government Contracting Services - due to its capabilities and industry expertise. PAR remains committed to streamlining operations and improving return on invested capital through a variety of initiatives. Results of Operations -- Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007 The Company reported revenues of $57.2 million for the quarter ended June 30, 2008, an increase of 15% from the $49.9 million reported for the quarter ended June 30, 2007. The Company's net income for the quarter ended June 30, 2008 was $674,000, or $.05 diluted earnings per share, compared to a net loss of $1 million and a $.07 diluted net loss per share for the same period in 2007. Product revenues from the Company's Hospitality segment were $20.8 million for the quarter ended June 30, 2008, an increase of 13% from the $18.3 million recorded in 2007. This increase was due to a 31% improvement in domestic product sales primarily due to sales to McDonald's, YUM! Brands, and other new restaurant customers. This increase in domestic revenue was partially offset by a 21% decline in international product sales. This decrease was due to the timing of restaurant customer orders in Asia and Canada. Customer service revenues are also generated by the Company's Hospitality segment. The Company's service offerings include installation, software maintenance, training, twenty-four hour help desk support and various depot and on-site service options. Customer service revenues were $17.7 million for the quarter ended June 30, 2008, a 10% increase from $16.1 million reported for the same period in 2007. The growth is primarily related to increases in several service areas including onsite contracts, installation, and professional service activities. Contract revenues from the Company's Government segment were $18.8 million for the quarter ended June 30, 2008, an increase of 21% when compared to the $15.5 million recorded in the same period in 2007. This increase was primarily due to the start of new contracts in both the information technology outsourcing and imaging information areas, including the timing of subcontract work and material buys on these new contracts. These outsourcing operations provided by the Company directly support U.S. Navy, Air Force and Army operations as they seek to convert their military information technology communications facilities into contractor-run operations and to meet new requirements with contractor support. The imaging information work of the Company includes high technology research involving information archive and retrieval as well as sensors.
Product margins for the quarter ended June 30, 2008 were 39.2%, a decrease of 240 basis points from the 41.6% for the quarter ended June 30, 2007. This decrease in margins was due to lower margins on increased hardware sales to McDonald's in the quarter ended June 30, 2008 partially offset by an increase in higher margin software sales to various restaurant customers as compared to the previous quarter. Customer service margins were 27.4% for the quarter ended June 30, 2008, an increase of 120 basis points compared to 26.2% for the same period in 2007. Service margins increased primarily due to improved margins in field service and installation as revenue and productivity increased in both of these areas. Contract margins were 5.6% for the quarter ended June 30, 2008, an increase of 40 basis points compared to 5.2% for the same period in 2007. This increase was due to slightly higher margins on certain fixed price contracts. The most significant components of contract costs in 2008 and 2007 were labor and fringe benefits. For 2008, labor and fringe benefits were $12.8 million or 72% of contract costs compared to $11.4 million or 78% of contract costs for the same period in 2007. Selling, general and administrative expenses are virtually all related to the Company's Hospitality segment. Selling, general and administrative expenses for the quarter ended June 30, 2008 were $8.7 million, a decrease of 5% from the $9.2 million for the same period in 2007. This decrease resulted from several factors including a decline in bad debts, benefit costs, and stock option expense. Research and development expenses relate primarily to the Company's Hospitality segment. Research and development expenses were $3.9 million for the quarter ended June 30, 2008, a decrease of 11% from the $4.4 million recorded in 2007. The decrease was primarily attributable to the near completion of certain software development projects. Amortization of identifiable intangible assets was $389,000 for the quarter ended June 30, 2008, virtually unchanged from 2007. Amortization is on the identifiable assets acquired in the Company's acquisitions over the last several years. Other income, net, was $229,000 for the quarter ended June 30, 2008 compared to $154,000 for the same period in 2007. Other income primarily includes rental income and foreign currency gains and losses. The increase is due to various factors including rental income. Interest expense represents interest charged on the Company's short-term borrowing requirements from banks and from long-term debt. Interest expense was $121,000 for the quarter ended June 30, 2008 as compared to $237,000 in 2007.
The decline is primarily due to a reversal of interest expense recorded in prior periods related to the Company's interest rate swap agreement that was entered into in September 2007. In addition, the Company's average borrowing rate decreased in 2008 compared to 2007. This was partially offset by an increase in the Company's average borrowings in 2008 when compared to 2007. For the quarters ended June 30, 2008 and 2007, the Company's expected effective income tax rate based on projected pre-tax income was 39.8% and 27.8%, respectively. The increase in effective tax rate is primarily attributable to the expiration of the Research and Experimental Tax Credit at the end of 2007. Also contributing to the increase in effective tax rate was the taxable portion of the proceeds from the voluntary conversion of a Company-owned life insurance policy in the quarter ended June 30, 2008. Due to the pre-tax loss for the quarter ended June 30, 2007, the Company provided a tax benefit of 27.8% as its estimate of the annual effective income tax rate based on projected pre-tax income as indicated above. Results of Operations -- Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007 The Company reported revenues of $109.3 million for the six months ended June 30, 2008, an increase of 12% from the $97.7 million reported for the six months ended June 30, 2007. The Company's net loss for the six months ended June 30, 2008 was $71,000, or ($0.00) diluted net loss per share, compared to a net loss of $2.3 million and $.16 diluted net loss per share for the same period in 2007. Product revenues from the Company's Hospitality segment were $37.6 million for the six months ended June 30, 2008, an increase of 7% from the $35 million recorded in 2007. This increase was due to a 16% increase in domestic product sales primarily due to solution sales to new restaurant customers and to YUM! Brands. This increase in domestic revenue was partially offset by a 13% decrease in international product sales. This decrease was the result of the timing of orders from the Company's restaurant customers in Asia and Canada. Customer service revenues are also generated by the Company's Hospitality segment. The Company's service offerings include installation, software maintenance, training, twenty-four hour help desk support and various depot and on-site service options. Customer service revenues were $34.1 million for the six months ended June 30, 2008, an 8% increase from $31.6 million reported for the same period in 2007. The growth is primarily related to increases in field service and installation revenue primarily with McDonald's and YUM! Brands. Also contributing to the growth was an increase in software maintenance contracts.
Contract revenues from the Company's Government segment were $37.5 million for the six months ended June 30, 2008, an increase of 21% when compared to the $31.1 million recorded in the same period in 2007. The increase was primarily due to new contracts in the information technology outsourcing and imaging information areas. Product margins for the six months ended June 30, 2008 were 41.5%, an increase of 150 basis points from the 40% for the six months ended June 30, 2007. The improved margins were the result of higher software sales in 2008 compared to 2007. Customer Service margins were 25.7% for the six months ended June 30, 2008, an increase of 170 basis points compared to 24% for the same period in 2007. This increase is due to an increase in margins in field service and installation as revenue and productivity rose in both of these areas. Contract margins were 5.3% for the six months ended June 30, 2008, a decline of 60 basis points versus 5.9% for the same period in 2007. The decrease was due to a favorable cost share adjustment on the Company's Logistics management program in 2007. The most significant components of contract costs in 2008 and 2007 were labor and fringe benefits. For 2008, labor and fringe benefits were $26.4 million or 74% of contract costs compared to $24.1 million or 82% of contract costs for the same period in 2007. Selling, general and administrative expenses are virtually all related to the Company's Hospitality segment. Selling, general and administrative expenses for the six months ended June 30, 2008 were $17.8 million, a decrease of .5 % from the $17.9 million for the same period in 2007. This decrease resulted from several factors including a decline in benefit costs, stock option expense and bad debts. This was partially offset by the Company's investment in the expansion of its dealer channel. Research and development expenses relate primarily to the Company's Hospitality segment. Research and development expenses were $8 million for the six months ended June 30, 2008, a decrease of 2% from the $8.2 million recorded in 2007. The decrease was primarily attributable to the near completion of certain software development projects. Amortization of identifiable intangible assets was $779,000 for the six months ended June 30, 2008 compared to $784,000 for 2007. This relates to amortization of intangible assets acquired in the Company's acquisitions over the last several years. Other income, net, was $543,000 for the six months ended June 30, 2008 compared to $394,000 for the same period in 2007. Other income primarily includes rental income and foreign currency gains and losses. This increase is primarily due to higher foreign currency gains and rental income in 2008 compared to 2007. Interest expense represents interest charged on the Company's short-term borrowing requirements from banks and from long-term debt. Interest expense was $470,000 for the six months ended June 30, 2008 as compared to $459,000 in 2007.
The Company experienced higher average borrowings in 2008 when compared to 2007 under its lines of credit with banks. This is partially offset by a lower average borrowing rate in 2008 when compared to 2007. For the six months ended June 30, 2008, the Company's effective income tax rate was 45%, compared to 33.5% in 2007. The increase in effective tax rate is primarily attributable to the expiration of the Research and Experimental Tax Credit at the end of 2007. Also contributing to the increase in effective tax rate was the taxable portion of the proceeds from the voluntary conversion of a Company-owned life insurance policy in 2008. Due to the pre-tax loss for the six months ended June 30, 2008 and 2007, the Company provided a tax benefit of 45% and 33.5%, respectively, as its estimate of the annual effective income tax rate based on projected pre-tax income as indicated above. Liquidity and Capital Resources The Company's primary sources of liquidity have been cash flow from operations and lines of credit with various banks. Cash used by operations was $6.7 million for the six months ended June 30, 2008 compared to cash provided by operations of $1.9 million for 2007. In 2008, cash was impacted by the timing of payments to vendors and a growth in accounts receivable. In 2007, cash was generated through collection of accounts receivable. This was partially offset by a growth in inventory and the timing of payments to vendors. Cash generated by investing activities was $233,000 for the six months ended June 30, 2008 versus cash used in investing activities of $1.4 million for the same period in 2007. In 2008, the Company received $1.6 million from the voluntary conversion of a Company-owned life insurance policy. In 2008, capital expenditures were $695,000 and were primarily for manufacturing and computer equipment. Capitalized software costs relating to software development of Hospitality segment products were $487,000 in 2008. In 2007, capital expenditures were $649,000 and were principally for manufacturing and research and development equipment. Capitalized software costs relating to software development of Hospitality segment products were $730,000 in 2007. Cash provided by financing activities was $5.2 million for the six months ended June 30, 2008 versus cash used in financing activities of $1.6 million in 2007. In 2008, the Company increased its short-term borrowings by $5.4 million
and decreased its long-term debt by $357,000. The Company also benefited $195,000 from the exercise of employee stock options. In 2007, the Company decreased its short-term bank borrowings by $1.7 million, benefited $109,000 from the exercise of employee stock options and decreased its long-term debt by $49,000. In June 2008, the Company executed a new credit agreement with a bank. Under this agreement, the Company has a borrowing availability up to $20,000,000 in the form of a line of credit. This agreement allows the Company, at its option, to borrow funds at the LIBOR rate plus the applicable interest rate spread or at the bank's prime lending rate (5.38% at June 30, 2008). This agreement expires in June 2011. At June 30, 2008, there was $7,862,000 outstanding under this agreement. The weighted average interest rate paid by the Company was 5.2% during 2008. This agreement contains certain loan covenants including leverage and fixed charge coverage ratios. The Company is in compliance with these covenants at June 30, 2008. This credit facility is secured by certain assets of the Company. In 2006, the Company borrowed $6,000,000 under an unsecured term loan agreement, executed as an amendment to one of its then bank line of credit agreements, in connection with the asset acquisition for SIVA Corporation. The loan provides for interest only payments in the first year and escalating principal payments through 2012. The loan bears interest at the LIBOR rate plus the applicable interest rate spread (5.38% at June 30, 2008). The terms and conditions of the line of credit agreement described above also apply to the term loan. In September 2007, the Company entered into an interest rate swap agreement associated with a $6,000,000 variable rate loan with principal and interest payments due through August 2012. At September 30, 2007, the notional principal amount totaled $6,000,000. This instrument was utilized by the Company to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company did not adopt hedge accounting under the provision of FASB Statement No 133, Accounting for Derivative Instruments and Hedging Activities, but rather records the fair market value adjustments through the consolidated statements of operations each period. The associated fair value adjustments for the three months ended June 30, 2008 and the six months ended June 30, 2008, respectively, are: $148,000, included as a decrease to interest expense; and $17,000, included as an increase to interest expense. The Company has a $1,806,000 mortgage collateralized by certain real estate. The annual mortgage payment including interest totals $226,000. The mortgage bears interest at a fixed rate of 7% and matures in 2010. During fiscal year 2008, the Company anticipates that its capital requirements will be $2 - $3 million. The Company does not usually enter into
long term contracts with its major Hospitality segment customers. The Company commits to purchasing inventory from its suppliers based on a combination of internal forecasts and the actual orders from customers. This process, along with good relations with suppliers, minimizes the working capital investment required by the Company. Although the Company lists two major customers, McDonald's and Yum! Brands, it sells to hundreds of individual franchisees of these corporations, each of which is individually responsible for its own debts. These broadly made sales substantially reduce the impact on the Company's liquidity if one individual franchisee reduces the volume of its purchases from the Company in a given year. The Company, based on internal forecasts, believes its existing cash, line of credit facilities and its anticipated operating cash flow will be sufficient to meet its cash requirements through at least the next twelve months. However, the Company may be required, or could elect, to seek additional funding prior to that time. The Company's future capital requirements will depend on many factors including its rate of revenue growth, the timing and extent of spending to support product development efforts, expansion of sales and marketing, the timing of introductions of new products and enhancements to existing products, and market acceptance of its products. The Company cannot assure that additional equity or debt financing will be available on acceptable terms or at all. The Company's sources of liquidity beyond twelve months, in management's opinion, will be its cash balances on hand at that time, funds provided by operations, funds available through its lines of credit and the long-term credit facilities that it can arrange. Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"), which provides guidance for measuring the fair value of assets and liabilities, as well as requires expanded disclosures about fair value measurements. SFAS 157 indicates that fair value should be determined based on the assumptions marketplace participants would use in pricing the asset or liability, and provides additional guidelines to consider in determining the market-based measurement. The Company adopted SFAS 157 as of January 1, 2008, with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities. Refer to Note 5 to the Unaudited Interim Consolidated Financial Statements for additional discussion on fair value measurements. This did not have a material impact on the consolidated financial statements. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates. SFAS 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The Company adopted SFAS 159 as of January 1, 2008 and has elected not to measure any additional financial instruments and other items at fair value. This did not have a material impact on the consolidated financial statements.
In December 2007, the FASB issued SFAS No.141 (revised 2007), Business Combinations (SFAS 141(R)). The objective of this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination. Specifically, it establishes principles and requirements over how the acquirer (1) recognizes and measures the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (2) recognizes and measures goodwill acquired in the business combination or a gain from a bargain purchase, and; (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement is effective for fiscal years beginning after December 15, 2008 (fiscal year 2009). The Company is currently assessing the impact of adopting SFAS 141(R) on its consolidated financial statements. In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (SFAS 160). The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary (minority interests) and for the deconsolidation of a subsidiary. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008 (fiscal year 2009). The Company is currently assessing the impact of adopting SFAS 160 on its consolidated financial statements. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (fiscal year 2009), with early application permitted. The Company is currently evaluating the disclosure implications of this statement.
Critical Accounting Policies In our Annual Report on Form 10-K for the year ended December 31, 2007, we disclose accounting policies, referred to as critical accounting policies, that require management to use significant judgment or that require significant estimates. Management regularly reviews the selection and application of our critical accounting policies. There have been no updates to the critical accounting policies contained in our Annual Report on Form 10-K for the year ended December 31, 2007. Item 3. Quantitative and Qualitative Disclosures about Market Risk INFLATION Inflation had little effect on revenues and related costs during the first six months of 2008. Management anticipates that margins will be maintained at acceptable levels to minimize the affects of inflation, if any. INTEREST RATES As of June 30, 2008, the Company has $4.7 million in variable long-term debt and $8.7 million in variable short-term debt. The Company believes that an adverse change in interest rates of 100 basis points would not have a material impact on our business, financial condition, results of operations or cash flows. FOREIGN CURRENCY The Company's primary exposures relate to certain non-dollar denominated sales and operating expenses in Europe and Asia. These primary currencies are the Euro, the Australian dollar and the Singapore dollar. Management believes that foreign currency fluctuations should not have a significant impact on our business, financial conditions, and results of operations or cash flows due to the low volume of business affected by foreign currencies. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the Company' s "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) of the Company. These officers have concluded that our disclosure controls and procedures are effective. As such, we believe that all material information relating to us and our consolidated subsidiaries required to be disclosed in our periodic filings with the Securities and Exchange Commission (i) is recorded, processed, summarized and reported within the required time period, and (ii) is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting. There was no change in the Company's internal controls over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, such internal controls over financial reporting. PART II - OTHER INFORMATION Item 1A. Risk Factors The Company is exposed to certain risk factors that may effect operations and/or financial results. The significant factors known to the Company are described in the Company's most recently filed Annual Report on Form 10-K. There have been no material changes from the risk factors as previously disclosed in the Company's Annual Report on Form 10-K. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information On April 29, 2008, PAR Technology Corporation furnished a report on Form 8-K pursuant to its results of operations for the quarterly period ending March 31, 2008. On June 20, 2008, PAR Technology Corporation furnished a report on Form 8-K pursuant to Items 1.01 (Entry into a Material Definitive Agreement); 1.02 (Termination of a Material Definitive Agreement); and 2.03 (Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant).
Item 6. Exhibits List of Exhibits Exhibit No. Description of Instrument ----------- ------------------------- 31.1 Certification of Chairman of the Board and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Vice President, Chief Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chairman of the Board and Chief Executive Officer and Vice President, Chief Financial Officer and Treasurer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PAR TECHNOLOGY CORPORATION -------------------------- (Registrant) Date: August 11, 2008 RONALD J. CASCIANO ------------------------------- Ronald J. Casciano Vice President, Chief Financial Officer and Treasurer
Exhibit Index Sequential Page Exhibit Number ------- ------ 31.1 Certification of Chairman of the Board E-1 and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Vice President, Chief E-2 Financial Officer and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chairman of the Board E-3 and Chief Executive Officer and Vice President, Chief Financial Officer and Treasurer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.1 PAR TECHNOLOGY CORPORATION STATEMENT OF EXECUTIVE OFFICER I, John W. Sammon certify that: 1. I have reviewed this report on Form 10-Q of PAR Technology Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter and that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 11, 2008 John W. Sammon ------------------------------- John W. Sammon Chairman of the Board and Chief Executive Officer E-1
Exhibit 31.2 PAR TECHNOLOGY CORPORATION STATEMENT OF EXECUTIVE OFFICER I, Ronald J. Casciano, certify that: 1. I have reviewed this report on Form 10-Q of PAR Technology Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter and that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 11, 2008 Ronald J. Casciano ------------------------------- Ronald J. Casciano Vice President, Chief Financial Officer & Treasurer E-2
Exhibit 32.1 PAR TECHNOLOGY CORPORATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PAR Technology Corporation (the "Company") on Form 10-Q for the quarter ended June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, John W. Sammon, and Ronald J. Casciano, Chairman of the Board & Chief Executive Officer and Vice President, Chief Financial Officer & Treasurer of the Company, certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge: (1) The Report fully complies with the requirement of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. John W. Sammon - -------------------------- John W. Sammon Chairman of the Board & Chief Executive Officer August 11, 2008 Ronald J. Casciano - -------------------------- Ronald J. Casciano Vice President, Chief Financial Officer & Treasurer August 11, 2008 E-3