PAR Technology Corporation Announces 2011 Third Quarter Results

PAR Technology Corporation (NYSE: PAR) today announced results for the third quarter ended September 30, 2011. PAR reported revenues of $59.8 million and net earnings of $1.2 million or $0.08 per diluted share. This compares with the prior year’s third quarter of $61.2 million in revenues and net earnings of $538,000 or $0.04 per diluted share.

“We continue to make solid progress executing our business plan despite macroeconomic challenges that have caused uncertainty in our targeted markets. While we have shown improvement since the beginning of the year, we are not satisfied with just quarter over quarter growth, but remain focused on building an enhanced and sustainable business model for the future,” commented Paul B. Domorski, Chairman and Chief Executive Officer. “Focusing on strengthening our core strategic initiatives, accelerating our development efforts, and improving our business processes will enable us to improve our operational performance and deliver value to shareholders.”

Mr. Domorski continued, “Our businesses performed consistent with our expectations for the third quarter, with improved bottom-line performance across all segments. The hospitality segment continued to make significant progress toward final development and initial deployment of our NextGen software solutions, specifically the cloud-based ATRIO™ product for hotels. ATRIO continues to receive strong market attention as innovative operators understand the dramatic operational and financial benefits of enterprise level cloud computing. In our restaurant business this past quarter, we were awarded the Technology Vendor of the Year distinction by Subway Restaurants. PAR continues to be recognized by our hospitality customers for our technology innovation, industry leading service, and overall customer commitment. Our Government segment performed well during the quarter, and our momentum continues, as evidenced by our recent award of a $42.5 million, five year contract to support the U.S. Army with Intelligence Surveillance and Reconnaissance (ISR) technologies and services. Our Logistics Management business once again realized year over year revenue growth, and is focused on improving near-term performance. As we exit 2011, we remain focused on driving growth, improving margins and cash flow and believe our product mix and software solutions position us well heading into 2012.”

Hospitality segment revenues accounted for 72% of consolidated revenues for the third quarter and grew 7% sequentially, but declined 3% over the same period of the prior year, due to the benefit to the prior year’s third quarter results of a very large portion of the McDonald’s technology upgrade. Renewed business growth with Yum! Brands offset a portion of the planned decline in McDonald’s revenue as the technology upgrade approached completion. International hospitality revenues grew 13% for the third quarter, as sales increased in Europe, China and Latin America. PAR continues to expand its channel base for restaurant solutions, as evidenced by an increase in channel revenues of 37% for the third quarter. During the period, 18 new channel partners were signed. Despite uncertain economic conditions in the hotel and resort market, PAR Springer-Miller Systems secured new customers and expanded relationships with existing customers. Operating income for the Hospitality segment improved sharply for the third quarter, increasing 45% compared to the third quarter of 2010, reflecting increased revenues and expense control.

Government segment revenues accounted for 26% of consolidated revenues for the third quarter, and contract backlog totaled $141 million at the end of the period. Quarterly segment revenue declined 2% year over year, reflecting the slow pace at which funding has been authorized for new and renewed contracts. Other notable contracts announced during the third quarter in addition to the above mentioned $42.5 million Army contract included a $3.4 million multi-year contract with the U.S. Navy to operate a telecommunications facility in Jacksonville, FL. Operating income for the Government segment for the third quarter grew 4.6% over the third quarter of 2010.

Third quarter revenues for the Logistics Management segment increased 14% over the third quarter of 2010, reflecting deployment of several fleet systems. In addition, new contract activity accelerated, with robust field trials underway. The business is benefiting from a marked increase in concern for food safety as an expanding range of cold chain monitoring and reporting solutions differentiates PAR in the logistics market. Continued expansion of the installed base, coupled with ongoing improvement of operational capabilities should drive profitability in 2012.

Non-GAAP Financial Measures

Previously, the Company presented second quarter 2011 earnings and earnings per share on a non-GAAP basis, excluding non-recurring charges. Management believed these non-GAAP financial measures provided meaningful supplemental information regarding the Company’s performance, thereby enhancing the ability of investors to evaluate PAR’s results for the periods presented. Please refer to the table below for supplemental information and corresponding reconciliation of non-GAAP adjusted financial measures to GAAP financial measures for the nine months ended September 30, 2011.

Certain Company information in this release or statements made by its spokespersons from time to time may contain forward-looking statements. Any statements in this document that do not describe historical facts are 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, delays in new product introduction, risks in technology development and commercialization, risks in product development and market acceptance of and demand for the Company’s products, risks of downturns in economic conditions generally, and in the quick service sector of the restaurant market specifically, risks of intellectual property rights associated with competition and competitive pricing pressures, risks associated with foreign sales and high customer concentration, and other risks detailed in the Company’s filings with the Securities and Exchange Commission.

About PAR Technology Corporation

PAR Technology Corporation's stock is traded on the New York Stock Exchange under the symbol PAR. PAR has three operating segments:
  • PAR’s Hospitality segment has been a leading provider of restaurant and retail technology for more than 30 years. ParTech, Inc. offers technology solutions for the full spectrum of restaurant operations, from large chain and independent table service restaurants to international quick service chains. PAR Springer-Miller Systems, Inc. offers hotel management systems that provide a complete suite of powerful tools for guest management, recreation management, and timeshare/condo management. PAR Springer-Miller Systems also provides the spa industry a leading management application that was specifically designed to support the unique needs of the resort spa and day spa markets, a rapidly growing hospitality segment. Products from PAR also can be found in retailers, cinemas, cruise lines, stadiums and food service companies.
  • PAR’s Government segment is comprised of PAR Government Systems Corporation, which develops and delivers geospatial and full motion video (FMV) solutions to our customers that include federal/state governments and industry, and Rome Research Corporation, which is a leading provider of communications and information technology support services to the United States Department of Defense.
  • PAR’s Logistics Management segment provides asset tracking and management solutions to the “cold chain” owners and operators of untethered trailers and intermodal containers, chassis, and gensets. PAR Logistics Management Systems Corporation offers systems to help customers improve operations by accurately monitoring and controlling their assets through state-of-the-art wireless, GPS, cellular communications, satellite communications, sensor, and internet technologies.

Visit www.partech.com for more information.

There will be a conference call at 4:30 p.m. eastern time on November 2, 2011, during which the Company’s management will discuss the financial results for the third quarter of 2011. If you would like to participate in this conference please call 1-800-299-7098 approximately 10 minutes before the call is scheduled to begin and use the PAR pass code 84068911. Individual & Institutional Investors will have the opportunity to listen to the conference call/event over the Internet. Individual Investors can listen to the call by visiting PAR’s website at www.partech.com, and through CCBN’s individual investor center at www.companyboardroom.com or by visiting any of the investor sites in CCBN’s Individual Investor Network. Institutional investors can access the call via CCBN’s password-protected site, StreetEvents ( www.streetevents.com). In case you are unable to participate in the conference call, an automatic replay will be available on the World Wide Web via www.companyboardroom.com until November 9, 2011 or dial 1-888-286-8010 and use the Pass Code number 35799791 until November 9, 2011 as well.

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)
   
September 30, December 31,
2011   2010  
Assets
Current assets:
Cash and cash equivalents $ 3,351 $ 6,781
Accounts receivable-net 36,781 43,517
Inventories-net 29,769 38,707
Income tax refunds 37 152
Deferred income taxes 9,925 5,719
Other current assets   3,095     3,067  
Total current assets 82,958 97,943
Property, plant and equipment – net 5,500 5,796
Deferred income taxes 5,902 1,079
Goodwill 6,852 26,954
Intangible assets – net 15,794 10,389
Other assets   2,074     2,124  
Total Assets $ 119,080   $ 144,285  
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt $ 1,977 $ 1,711
Borrowings under lines of credit 1,500
Accounts payable 14,211 19,902
Accrued salaries and benefits 7,676 9,055
Accrued expenses 2,746 2,843
Customer deposits 1,247 2,286
Deferred service revenue   14,209     16,260  
Total current liabilities   43,566     52,057  
Long-term debt   1,252     2,744  
Other long-term liabilities   2,686     2,725  
Shareholders’ Equity:
Preferred stock, $.02 par value,
1,000,000 shares authorized
Common stock, $.02 par value,
29,000,000 shares authorized;
16,863,868 and 16,746,618 shares issued;
15,156,584 and 15,039,334 outstanding 337 335
Capital in excess of par value 42,828 42,264
Retained earnings 34,363 50,605
Accumulated other comprehensive loss (120 ) (613 )
Treasury stock, at cost, 1,707,284 shares   (5,832 )   (5,832 )
Total shareholders’ equity   71,576     86,759  
Total Liabilities and Shareholders’ Equity $ 119,080   $ 144,285  

PAR TECHNOLOGY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)
   

For the three monthsended September 30,

For the nine monthsended September 30,
Net revenues: 2011   2010 2011   2010
Product $ 24,856 $ 27,850 $ 71,730 $ 72,185
Service 19,152 17,268 53,330 53,369
Contract   15,756     16,053     48,836     49,950  
  59,764     61,171     173,896     175,504  
Costs of sales:
Product 16,196 17,865 45,298 47,256
Service 13,650 12,192 45,383 36,141
Contract   14,667     15,041     45,812     46,854  
  44,513     45,098     136,493     130,251  
Gross margin   15,251     16,073     37,403     45,253  
Operating expenses:
Selling, general and administrative 9,239 9,995 29,304 29,316
Research and development 3,730 4,826 11,590 12,592
Impairment of goodwill and intangible assets 20,843
Amortization of identifiable intangible assets   257     234     667     703  
  13,226     15,055     62,404     42,611  
Operating income (loss) 2,025 1,018 (25,001 ) 2,642
Other income (expense), net 23 97 (106 ) 516
Interest expense   (48 )   (157 )   (163 )   (299 )
Income (loss) before provision for income taxes 2,000 958 (25,270 ) 2,859
(Provision) benefit for income taxes   (798 )   (420 )   9,028     (890 )
Net income (loss) $ 1,202   $ 538   $ (16,242 ) $ 1,969  
Earnings (loss) per share
Basic $ .08 $ .04 $ (1.08 ) $ .13
Diluted $ .08 $ .04 $ (1.08 ) $ .13
Weighted average shares outstanding
Basic   15,031     14,879     14,984     14,794  
Diluted   15,118     15,048     14,984     15,009  

PAR TECHNOLOGY CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)
   
For the nine months ended September 30, 2011

Reportedbasis(GAAP)
  Adjustments  

Comparablebasis (Non-GAAP)

For the ninemonths endedSeptember 30,2010
   
Net revenues $ 173,896 $ 173,896 $ 175,504
 
Costs of sales   136,493     7,732     128,761     130,251  
Gross Margin 37,403 7,732 45,135 45,253
 
Operating Expenses
Selling, general and administrative 29,304 595 28,709 29,316
Research and development 11,590 11,590 12,592
Impairment of goodwill and intangible assets 20,843 20,843
Amortization of identifiable intangible assets   667       667     703  
Total operating expenses 62,404 21,438 40,966 42,611
 
Operating income (25,001 ) 29,170 4,169 2,642
Other income (expense) (106 ) 253 147 516
Interest expense   (163 )     (163 )   (299 )
Income (loss) before provision for income taxes (25,270 ) 29,423 4,153 2,859
(Provision)benefit for income taxes   9,028     (10,568 )   (1,540 )   (890 )
Net Income (loss) $ (16,242 ) $ 18,855   $ 2,613   $ 1,969  
 
Earnings (loss) per diluted share $ (1.08 ) $ 0.17   $ 0.13  
The Company reports its financial results in accordance with GAAP. However, non-GAAP adjusted financial measures, as defined in the reconciliation table above, are provided herein because management uses such measures in evaluating the results of the continuing operations of the Company and believes this information provides investors better insight into underlying business trends and performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
 
For the nine months ended September 30, 2011, the Company recorded total charges of $29.4 million primarily related to an impairment of goodwill and intangible assets of $20.8 million. Additionally, the Company recorded a charge of $7.7 million related to a non-recurring write-down of certain inventory associated with discontinued products, and charges of $0.9 million related to the consolidation of some of its facilities. The aforementioned charges have been recorded net of tax benefit of $10.6 million and have been excluded in the Company’s non-GAAP measures because they are considered non-recurring in nature and are quantitatively and qualitatively different from the Company’s core operations during any particular period.
 
These charges did not have any impact on the Company’s financial results for the three months ended September 30, 2011.

Copyright Business Wire 2010

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