Government Contracts
The Company performs work for U.S. Government agencies under firm fixed-price, cost-plus-fixed-fee and time-and-material contracts. The majority of its contracts are for one-year to five-year terms. There are several risks associated with Government contracts. For example, contracts may be terminated for the convenience of the Government at any time the Government believes that such termination would be in its best interests. In this circumstance, the Company is entitled to receive payments for its allowable costs and, in general, a proportionate share of its fee or profit for the work actually performed. The Company’s business with the U.S. Government is also subject to other risks unique to the defense industry, such as reduction, modification, or delays of contracts or subcontracts if the Government’s requirements, budgets, policies or regulations change. The Company may also perform work prior to formal authorization or prior to adjustment of the contract price for increased work scope, change orders and other funding adjustments. Additionally, the Defense Contract Audit Agency on a regular basis audits the books and records of the Company. Such audits can result in adjustments to contract costs and fees. Audits have been completed through the Company’s fiscal year 2006 and have not resulted in any material adjustments. Marketing and Competition
Marketing begins with collecting information from a variety of sources concerning the present and future requirements of the Government and other potential customers for the types of technical expertise provided by the Company. Although the Company believes it is positioned well in its chosen areas of image and signal processing, information technology/communications and engineering services, competition for Government contracts is intense. Many of the Company’s competitors are major corporations, or their subsidiaries, such as Lockheed Martin, Raytheon, Northrop Grumman, BAE, Harris, and SAIC that are significantly larger and have substantially greater financial resources than the Company. The Company also competes with many smaller companies that target particular segments of the Government market. Contracts are obtained principally through competitive proposals in response to solicitations from Government agencies and prime contractors. The principal competitive factors are past performance, the ability to perform, price, technological capabilities, management capabilities and service. In addition, the Company sometimes obtains contracts by submitting unsolicited proposals. Many of the Company’s DoD customers are now migrating to commercial software standards, applications, and solutions. In that manner, the Company is utilizing its internal research and development to migrate existing solutions into software product lines that will support the DoD geospatial community (i.e., NGA, USAF, etc.). Backlog
The dollar value of existing Government contracts at December 31, 2008, net of amounts relating to work performed to that date was approximately $120,437,000, of which $41,650,000 was funded. At December 31, 2007, the comparable amount was approximately $152,451,000, of which $41,691,000 was funded. Funded amounts represent those amounts committed under contract by Government agencies and prime contractors. The December 31, 2008 Government contract backlog of $120,437,000 represents firm, existing contracts. Approximately $59,626,000 of this amount is expected to be completed in calendar year 2009, as funding is committed. Employees
As of December 31, 2008, the Company had 1,769 employees, approximately 55% of whom are engaged in the Company’s Hospitality segment, 42% of whom are in the Government segment, and the remainder are corporate employees. Due to the highly technical nature of the Company’s business, the Company’s future can be significantly influenced by its ability to attract and retain its technical staff. The Company believes that it will be able to fulfill its near-term needs for technical staff.
Approximately 21% of the Company’s employees are covered by collective bargaining agreements. The Company considers its employee relations to be good. Exchange Certifications
The certification of the CEO of PAR required by Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual, relating to PAR’s compliance with the NYSE’s corporate governance listing standards, was submitted to the NYSE on June 18, 2008 with no qualifications.
annual report 2008
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