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 quarterly period ended December 28, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-20109
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Kronos Incorporated
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(Exact name of registrant as specified in its charter)
Massachusetts 04-264094
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Fifth Avenue, Waltham, MA 02154
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(Address of principal executive offices) (Zip Code)
(617) 890-3232
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
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
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As of December 31, 1996, 8,159,181 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
KRONOS INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Income for the Three
Months Ended December 28, 1996 and December 30, 1995 1
Condensed Consolidated Balance Sheets at December 28, 1996
and September 30, 1996 2
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended December 28, 1996 and December 30, 1995 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
UNAUDITED
Three Months Ended
--------------------------
December 28, December 30,
1996 1995
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<S> <C> <C>
Net revenues:
Product .......................................... $ 25,718 $ 22,538
Service .......................................... 11,392 8,929
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37,110 31,467
----------- -----------
Cost of sales:
Product .......................................... 6,415 5,981
Service .......................................... 7,830 6,540
----------- -----------
14,245 12,521
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Gross profit ................................ 22,865 18,946
Expenses:
Sales and marketing .............................. 13,101 10,409
Engineering, research and development ............ 3,757 2,646
General and administrative ....................... 2,508 2,352
Other (income) expense, net ...................... (37) 52
----------- -----------
19,329 15,459
----------- -----------
Income before income taxes .................. 3,536 3,487
Provision for income taxes ............................. 1,350 1,336
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Net income .................................. $ 2,186 $ 2,151
=========== ===========
Net income per common share:
Primary and fully diluted ........................ $ 0.26 $ 0.26
Average common and common equivalent shares outstanding:
Primary ..................................... 8,371,366 8,281,659
=========== ===========
Fully diluted ............................... 8,397,349 8,296,248
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
UNAUDITED
December 28, September 30,
1996 1996
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ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents .............................................$ 13,587 $ 10,795
Marketable securities ............................................ 20,200 21,995
Accounts receivable, less allowances for doubtful accounts of $977
at December 28, 1996 and $987 at September 30, 1996 ........... 28,979 30,622
Inventories ...................................................... 4,534 4,149
Deferred income taxes ............................................ 3,025 3,025
Other current assets ............................................. 4,033 3,765
----------- -----------
Total current assets ...................................... 74,358 74,351
Equipment, net ...................................................... 15,643 14,738
Excess of cost over net assets of businesses acquired ............... 6,955 7,221
Other assets ........................................................ 10,818 8,556
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Total assets ..............................................$ 107,774 $ 104,866
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................$ 10,997 $ 11,894
Accrued compensation ............................................. 9,045 8,445
Federal and state income taxes payable ........................... 1,465 1,367
Unearned service revenue ......................................... 17,492 16,388
----------- -----------
Total current liabilities ................................. 38,999 38,094
Deferred income taxes ............................................... 2,236 2,236
Unearned service revenue ............................................ 2,690 2,721
Other liabilities ................................................... 615 717
Shareholders' equity:
Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares,
no shares issued and outstanding
Common Stock, par value $.01 per share: authorized 12,000,000 shares,
8,138,645 shares and 8,124,133 shares issued at December 28, 1996 and
September 30, 1996, respectively ................................ 81 81
Additional paid-in capital ....................................... 27,500 27,512
Retained earnings ................................................ 35,959 33,773
Equity adjustment from translation ............................... (271) (251)
Cost of Treasury Stock (1,196 shares and 583 shares at
December 28, 1996 and September 30, 1996, respectively) ....... (35) (17)
----------- -----------
Total shareholders' equity ................................ 63,234 61,098
----------- -----------
Total liabilities and shareholders' equity ................$ 107,774 $ 104,866
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
UNAUDITED
Three Months Ended
------------------------
December 28, December 30,
1996 1995
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<S> <C> <C>
Operating activities:
Net income ................................................................ $ 2,186 $ 2,151
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation .................................................... 1,460 1,001
Amortization of deferred software development costs and
excess of cost over net assets of businesses acquired ....... 1,022 753
Changes in certain operating assets and liabilities:
Accounts receivable, net .................................... 1,651 1,766
Inventories ................................................. (382) (29)
Unearned service revenue .................................... 1,015 988
Accounts payable, accrued compensation
and other liabilities ................................... (95) 985
Net investment in sales-type leases ......................... (1,810)
Other ........................................................... (498) (458)
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Net cash and equivalents provided by operating activities 4,549 7,157
Investing activities:
Purchase of equipment ..................................................... (2,229) (2,312)
Capitalization of software development costs .............................. (1,163) (705)
(Increase) decrease in marketable securities .............................. 1,795 (1,975)
Acquisitions of businesses ................................................ (178)
Other ..................................................................... (9) 146
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Net cash and equivalents used in investing activities ... (1,784) (4,846)
Financing activities:
Principal payments under capital leases ................................... (18)
Net proceeds from exercise of stock option and employee stock
purchase plans ........................................................ 26 169
-------- --------
Net cash and equivalents provided by financing activities 26 151
Effect of exchange rate changes on cash and equivalents ........................ 1 (19)
-------- --------
Increase in cash and equivalents ............................................... 2,792 2,443
Cash and equivalents at the beginning of the period ............................ 10,795 14,727
-------- --------
Cash and equivalents at the end of the period .................................. $ 13,587 $ 17,170
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
KRONOS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - General
The accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of normal recurring accruals, that management
considers necessary for a fair presentation of the Company's financial position
and results of operations as of and for the interim periods presented pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures in these financial statements are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the Company's audited financial
statements for the fiscal year ended September 30, 1996. The results of
operations for the three month period ended December 28, 1996 and December 30,
1995 are not necessarily indicative of the results for a full fiscal year.
Certain amounts have been reclassified in fiscal 1996 to permit comparison with
fiscal 1997.
NOTE B - Fiscal Quarters
The Company utilizes a system of fiscal quarters. Under this system, the first
three quarters of each fiscal year end on a Saturday. However, the fourth
quarter of each fiscal year will always end on September 30. Because of this,
the number of days in the first and fourth quarters of each fiscal year may vary
slightly from year to year. The second and third quarters of each fiscal year
will be exactly thirteen weeks long. This policy does not have a material effect
on the comparability of results of operations between quarters.
NOTE C - Inventories
Inventories consist of the following (in thousands):
December 28, September 30,
1996 1996
------------------- -------------------
Finished goods $2,340 $2,148
Work - in - process 432 283
Raw materials 1,762 1,718
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$4,534 $4,149
=================== ===================
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues. Revenues for the first quarter of fiscal 1997 amounted to $37.1
million as compared with $31.5 million for the first quarter of the prior year.
Revenue growth amounted to 18% and 20% in the first quarters of fiscal 1997 and
1996, respectively. During the quarter, the Company continued the transition of
its core products from DOS and Unix platforms to the Windows and client/server
environments. In December, an enhanced version of the Company's time and
attendance Windows product was released for distribution. Due to the timing of
that product release, there was no significant impact on revenues in the
quarter. The Company anticipates releasing an enhanced version of its time and
attendance product in the client/server environment in the second quarter as
well as enhanced versions of its time and attendance product in both the
client/server and Windows environment throughout fiscal 1997. Revenue growth in
fiscal 1997 will depend in part on the commercial success of its Windows and
client/server versions of its time and attendance product. Product revenues for
the quarter increased 14% to $25.7 million principally driven by customer
demand. Service revenues for the quarter increased 28% to $11.4 million. The
growth in service revenues reflects increases in maintenance revenue from
expansion of the installed base as well as an increase in the level of services
accompanying the sale of new products.
Gross Profit. Gross profit as a percentage of revenues was 62% in the
first quarter of fiscal 1997 as compared with 60% in the first quarter of the
prior year. The improvement in gross profit was evidenced in both product and
service gross profit. Product gross profit increased to 75% in the quarter from
73% in the first quarter of the prior year. The improvement in product gross
profit in the first quarter of fiscal 1997 is principally attributable to the
Company's ability to decrease the per unit product cost of the hardware
component of its systems. Service gross profit increased to 31% in the first
quarter of fiscal 1997 from 27% in the first quarter of the prior year. The
increase in service gross profit is primarily attributable to the growth in
service revenues. The Company has been able to absorb the increase in service
volume without a proportionate increase in service expenses, favorably impacting
gross margins. This has been accomplished by the implementation of programs
which focus on revenue enhancement for services provided, as well as improved
efficiency in the delivery of such services.
Expenses. Expenses as a percentage of revenues were 52% in the first
quarter of fiscal 1997 as compared with 49% in the first quarter of the prior
year. Sales and marketing expenses as a percentage of revenues increased to 35%
in the first quarter of fiscal 1997 from 33% in the first quarter of the prior
year. The increase in sales and marketing expenses as a percentage of revenues
is a result of the Company's investment in its international direct sales
organization and corporate marketing organization.
<PAGE>
Engineering, research and development expenses increased as a percentage
of revenues to 10% in the first quarter of fiscal 1997 as compared with 8% in
the first quarter of the prior year. The growth in engineering, research and
development expenses as a percentage of revenues results primarily from the
Company's continuing development of new products. Expenses of $3.8 million and
$2.6 million in the first quarter of fiscal 1997 and 1996 are net of capitalized
software development costs of $1.2 million and $.7 million, respectively.
General and administrative expenses as a percentage of revenues amounted
to 7% for all periods presented. Other (income) expense, net amounted to less
than 1% of revenues for all periods presented. Other (income) expense, net is
composed primarily of amortization of intangible assets related to acquisitions
made by the Company which is partially offset by interest income earned on its
investments.
Income Taxes. The provision for income taxes as a percentage of pretax
income was 38% in the first quarters of both fiscal 1997 and 1996. The Company's
effective income tax rate may fluctuate between periods as a result of various
factors, none of which is material, either individually or in aggregate, to the
consolidated results of operations.
Liquidity and Capital Resources
Working capital as of December 28, 1996, amounted to $35.4 million as
compared with $36.3 million at September 30, 1996. As of those dates, cash and
equivalents and marketable securities amounted to $33.8 million and $32.8
million, respectively. Cash generated from operations decreased to $4.6 million
in the first quarter of fiscal 1997 from $7.2 million in the first quarter of
the prior year, principally due to the Company's investment in its internal
customer lease program. The Company's investment in equipment in the quarter was
comparable to its investment in the first quarter of the prior year.
Cash generated from operations was more than sufficient to fund
investments in equipment and capitalized software development costs. The Company
expects to fund its investments in equipment and software development costs over
the remainder of its fiscal year with existing cash and equivalents together
with internally generated cash. The Company recently decided to cancel its
committed bank line of credit of $3.0 million, in light of the Company's
available cash and equivalents. The Company has replaced the line of credit with
an informal $3.0 million credit facility in which the bank may offer credit to
the Company at the bank's discretion.
<PAGE>
Certain Factors That May Affect Future Operating Results
The Company's actual operating results may differ from those indicated
by forward looking statements made in this Quarterly Report on Form 10-Q and
presented elsewhere by management from time to time because of a number of
factors, including the potential fluctuations in quarterly results, timing of
new product announcements or introductions by the Company and its competitors,
competitive pricing pressures, the ability to attract and retain sufficient
technical personnel, the dependence on alternate distribution channels, and the
dependence on the Company's time and attendance product line and on key vendors,
as further described below and in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996, which factors are specifically
incorporated by reference herein.
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results may fluctuate as a result of a variety of factors, including
the timing of the introduction of new products and product enhancements by the
Company and its competitors, market acceptance of new products, mix of products
sold, the purchasing patterns of its customers, competitive pricing pressure and
general economic conditions. The Company historically has realized a relatively
larger percentage of its annual revenues and profits in the fourth quarter and a
relatively smaller percentage in the first quarter of each fiscal year, although
there can be no assurance that this pattern will continue. In addition, while
the Company has contracts to supply systems to certain customers over an
extended period of time, substantially all of the Company's product revenue and
profits in each quarter result from orders received in that quarter. If
near-term demand for the Company's products weakens or if significant
anticipated sales in any quarter do not close when expected, the Company's
revenues for that quarter will be adversely affected. The Company believes that
its operating results for any one quarter are not necessarily indicative of
results for any future period.
Product Development and Technological Change. The markets for time and
attendance and data collection systems are characterized by continual change and
improvement in computer software and hardware technology. The Company's future
success will depend largely on its ability to enhance its existing product lines
and to develop new products and interfaces to third party products on a timely
basis for the increasingly sophisticated needs of its customers. Although the
Company is continually seeking to further enhance its product offerings and to
develop new products and interfaces, there can be no assurance that these
efforts will succeed, or that, if successful, such product enhancements or new
products will achieve widespread market acceptance, or that the Company's
competitors will not develop and market products which are superior to the
Company's products or achieve greater market acceptance. The Company is
transitioning its product offerings from DOS and Unix platforms to the Windows
and client/server environments. The Company's revenue growth and results of
operations in fiscal 1997 will depend in part on the success of this product
transition.
<PAGE>
Competition. The time and attendance and data collection industries are
highly competitive. Competition is increasing as competitors in related
industries, such as human resources and payroll, enter the market. Advances in
software development tools have accelerated the software development process
and, therefore, can allow competitors to penetrate certain of the Company's
markets. Maintaining the Company's technological and other advantages over
competitors will require continued investment by the Company in research and
development and marketing and sales programs. There can be no assurance that the
Company will have sufficient resources to make such investments or be able to
achieve the technological advances necessary to maintain its competitive
advantages. Increased competition could adversely affect the Company's operating
results through price reductions and/or loss of market share.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment dated October 11, 1996 to Lease dated November 6,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.2 Fleet Bank Letter Agreement and Promissory Note dated
January 1, 1997 relating to amendment of $3,000,000 credit
facility.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during
the fiscal quarter ended December 28, 1996.
<PAGE>
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.
KRONOS INCORPORATED
By /s/ Paul A. Lacy
Paul A. Lacy
Vice President of Finance
and Administration
(Duly Authorized Officer and
Principal Financial Officer)
February 7, 1997
<PAGE>
KRONOS INCORPORATED
EXHIBIT INDEX
Exhibit
Number Description
10.1 Amendment dated October 11, 1996 to Lease dated November 6,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.2 Fleet Bank Letter Agreement and Promissory Note dated
January 1, 1997 relating to amendment of $3,000,000 credit
facility.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
EXHIBIT 10.1
SEVENTH AMENDMENT TO LEASE
This is a Seventh Amendment to Lease dated as of October 11, 1996 between
John Hancock Mutual Life Insurance Company ("Landlord") and Kronos Incorporated
("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have agreed to amend the Lease to
incorporate additional space on the terms and conditions more particularly set
forth below.
NOW, THEREFORE, for good and valuable consideration, and in
consideration of the covenants and agreements herein contained, the parties
hereby agree to amend the Lease as follows:
1. The plan attached hereto as Exhibit A-4, setting forth the approximate
location of 2,589 square feet on the 6th floor of the Building to be added to
the Premises pursuant to this Seventh Amendment ("Seventh Amendment Additional
Space"), is hereby incorporated into Exhibit A to the Lease.
2. The term "Leased Premises" in Section 1 of the Lease is hereby amended
by deleting therefrom the phrase "70,874 rentable square feet", and substituting
therefor the phrase "73,463 rentable square feet".
3. The definition of "Minimum Annual Rent" set forth in Section 1 of the
Lease is hereby amended by deleting the same and substituting therefor the
following:
"MINIMUM ANNUAL RENT:
Year Sq. Ft. Per RSF Total
4/1/93-3/31/94 62,340 10.95* $682,623.00
4/1/94-10/31/94 62,340 14.75* 919,515.00
annual rate;
536,383.75 for this
7-month period
11/1/94-3/31/95 62,340 14.75* 979,023.00
annual rate:
407,926.25 for this
5-month period
4/1/95-5/31/95 62,340 15.00 994,608.00
3,480 17.10 annual rate;
165,768.00 for this
2-month period
6/1/95-1/31/96 62,340 15.00 1,076,156.00
3,480 17.10 annual rate;
4,292 19.00 717,437.33 for this
8-month period
2/1/96-3/31/96 62,340 15.00 1,091,357.90
3,480 17.10 annual rate;
4,292 19.00 181,892.98 for this
762 19.95 2-month period
4/1/96-10/10/96 62,340 15.25 1,106,942.90
3,480 17.10 annual rate;
4,292 19.00 583,798.65 for this
762 19.95 6-month and 10-day
period
10/11/96-3/31/97 62,340 15.25 1,161,053.00
3,480 17.10 annual rate;
4,292 19.00 550,572.39 for this
762 19.95 5-month and 21-day
2,589 20.90 period
4/1/97-3/31/98 62,340 16.25 1,223,393.00
3,480 17.10
4,292 19.00
762 19.95
2,589 20.90
4/1/98-3/31/99 62,340 17.00 1,270,148.00
3,480 17.10
4,292 19.00
762 19.95
2,589 20.90
4/1/99-3/31/00 62,340 17.00 1,270,148.00
3,480 17.10
4,292 19.00
762 19.95
2,589 20.90
* Except as modified by the terms of Section 36."
4. The term "Total Rentable Area of the Leased Premises" in Section 1 of
the Lease is hereby amended by deleting therefrom "70,874 sq. feet", and
substituting therefor "73,463 sq. feet".
5. The term "Tax Base" in Section 1 of the Lease is hereby amended by
adding thereto the following:
"Notwithstanding the foregoing, the Tax Base for the Seventh Amendment
Additional Space shall be Tax Year 1997."
6. The terms "Tax Percentage" and "Operating Cost Percentage" in Section 1
of the Lease are hereby amended by adding thereto the following:
", and, as to the Seventh Amendment Additional Space, 2.31%"
7. The term "Operating Cost Base" is hereby amended by adding thereto the
following:
"Notwithstanding the following, the Operating Cost Base for the Seventh
Amendment Additional Space shall be Calendar Year 1996."
8. The Seventh Amendment Additional Space shall be deemed to be
incorporated into the Lease as of October 11, 1996, and from and after that
date, the Premises shall be deemed to include the original premises demised
under the Lease and the Seventh Amendment Additional Space, in accordance with
and subject to all of the terms and provisions of the Lease. Accordingly, the
Tenant's rights to the Seventh Amendment Additional Space shall expire as of the
date of expiration of the Lease, or its earlier termination. Any exercise by
Tenant of its option to extend the Lease in accordance with Section 38 thereof
shall include the Seventh Amendment Additional Space.
9. Tenant hereby acknowledges and agrees that the Seventh Amendment
Additional Space shall be delivered by Landlord to Tenant in its "as is, with
all faults" condition, and that Landlord shall have no obligations with respect
to improvement of the Seventh Amendment Additional Space. Nothwithstanding any
provision hereof to the contrary, (a) this Seventh Amendment shall not be
effective until the existing occupant has vacated the Seventh Amendment
Additional Space, (b) Tenant shall have no claim against Landlord in the event
that the space is not available as of October 11, 1996, and (c) Tenant's
occupancy shall at all times be subject to all of the terms and conditions of
the Lease.
10. Landlord and Tenant hereby represent and warrant to each other that the
only broker with whom each of them has had dealings in connection with this
Seventh Amendment is Beacon Management Company. Each party agrees to defend,
indemnify and hold the other party harmless from any breach of the foregoing
representation.
Except as hereinabove amended, the Lease remains in full force and effect.
EXECUTED as a sealed instrument as of the day and year first above written.
LANDLORD:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Meliah Armour
Its: Investment Officer
TENANT:
KRONOS INCORPORATED
By: /s/ Paul Lacy
Its: V.P. Finance and Administration
<PAGE>
EXHIBIT A-4
Exhibit A-4 contains a graphic which sets forth the approximate location of
2,589 square feet on the sixth floor of the Building to be added to the premises
pursuant to the Seventh Amendment to the Lease.
EXHIBIT 10.2
[Fleet Logo] Fleet Bank
January 1, 1997
Pam Kaplan
Manager, Corporate Tax and Treasury Services
Kronos Inc.
300 Billerica Road
Chelmsford, MA 01824
Dear Pam:
Fleet National Bank (the "Bank") is pleased to offer an informal credit facility
effective January 1, 1997 to Kronos Incorporated ("Kronos") for aggregate
advances not to exceed $3,000,000. This facility must not be construed as a
binding commitment to lend, but rather an indication of our willingness to
provide funds on an as offered basis. As such, it may be withdrawn by the Bank
at any time. This letter agreement supersedes the Loan Agreement between Kronos
Incorporated and Fleet Bank of Massachusetts, N.A. and the First Amendment to
Loan Agreement dated January 24, 1995, collectively the ("Loan Documents"). The
referenced line of credit facility in the Loan Documents will be canceled as of
the effective date of this facility.
Advances hereunder will be made only if in the opinion of the Bank, in its sole
discretion, there has been no material adverse change of circumstances in the
condition of Kronos, financial or otherwise, and if there exists no default
under any loan documentation executed by you. Advances shall be payable on
demand, and shall bear interest at your option of either the "Prime Rate or
Libor + 1.75%. The term "Prime Rate" as used herein shall mean the rate of
interest announced by Bank from time to time at its Boston offices as its Prime
Rate, the term Libor Rate shall mean the rate offered to the Bank by banks in
the London interbank market. Prepayment penalties will apply only if Kronos
elects to borrow at Libor + 1.75% and, only if Kronos does not give the Bank
thirty days written notice of its intent to repay. Interest and fees are
calculated on the basis of a 360-day year and actual days elapsed.
Please indicate your acceptance of this credit facility by signing below and
returning one copy to my attention.
Sincerely,
/s/ Ann M. Dillon
Ann M. Dillon
Vice President
ACCEPTED BY:
Kronos Incorporated
/s/ Paul Lacy
Name
V.P. Finance and Administration
Title
February 6, 1997
Date
cc: Paul A. Lacy
<PAGE>
[Fleet Bank Logo] Commercial Promissory Note
- --------------------------------------------------------------------------------
______, Massachusetts ____________, 19__
FOR VALUE RECEIVED, I, the undersigned, promise to pay to the order of
Fleet Bank of Massachusetts, National Association (with any subsequent holder
referred to in this note as "you") at any of your offices, the sum of Three
Million and 00/100 DOLLARS ($3,000,000.00) with interest in accordance with the
provisions below which are marked.
INTEREST RATE
I will pay interest on the unpaid principal balance of this Note as follows, but
in no event will interest exceed the maximum rate permitted by law: X FLOATING
RATE. At the aggregate of the Bank's Prime Rate as the Bank announces it from
time to time, or Libor plus 1.75% percent
per annum. Changes in the Bank's Prime Rate as the Bank announces it from
time to time are to take effect, for the purposes of the determination of
interest on this Note, when made effective generally to loans by the Bank.
_ FIXED RATE. At the rate of _______ percent per annum.
_ DISCOUNT. Interest to maturity has been deducted from the proceeds of this
Note. Interest at the rate of __________ percent per annum shall be paid on
any amount not paid when due hereunder until that amount and any such
interest are so paid.
INTEREST PAYMENTS
I will pay interest at the above rate as follows:
X PERIODICALLY. Monthly/Quarterly/Monthly, in arrears, with the first such
payment due on the _____ day of _________, 19___, and each subsequent payment
due on the corresponding day of each calendar month/calendar
quarter/_______________ thereafter.
_ AT MATURITY. At the maturity of this Note.
_ INTEREST INCLUDED IN REPAYMENTS. Interest is included in the payment(s) to be
made pursuant to the Repayment Provisions below.
REPAYMENT PROVISIONS
In addition to any interest payments to be made as indicated above, I will pay
you the amount stated above as follows:
X ON DEMAND. On demand by you.
_ PAYMENTS TO BE MADE UNTIL DEMAND. On demand by you, with payments of
$____________ each to be made monthly unless and until such demand is made.
The first such payments shall be due on the ______ day of __________, 19____
(if you have not made demand before then) and unless and until you make
demand, each subsequent payment shall be due on the corresponding day of each
month thereafter.
_ TIME. ______________ days after the date hereof on _______________, 19____.
_ INSTALLMENTS. In __________ consecutive monthly installments, of which each
but the last shall be $________ and the final of which shall be equal to the
then unpaid principal balance of this Note plus all accrued and unpaid
interest thereon. The first such monthly installment shall be due on the
______ day of __________, 19____ and each subsequent installment shall be due
on the corresponding day of each month thereafter, with the balance of all
principal and interest due on ____________, 19____.
PREPAYMENT. I will be entitled to prepay this note as follows: Prepayment
penalties will apply only if Kronos elects to borrow at Libor + 1.75% and, only
if Kronos does not give the Bank thirty days written notice of its intent to
repay.
LATE CHARGES. Upon default for more than fifteen (15) days in the making of any
payment of principal or interest on this Note. I will pay you, upon demand, in
addition to all other amounts payable hereunder, a late charge equal to three
percent (3%) of the payment due, but in no event are such charges to exceed the
maximum permitted by law.
APPLICATION OF PAYMENTS. Any payments you receive from me will be applied first
to any accrued and unpaid interest and then to the unpaid principal balance of
this Note. If any payment under this Note becomes due and payable on the day
upon which your office is legally closed to business, the due date shall be
extended to the next succeeding business day and interest shall be payable
during such extension at the rate stated above.
EACH BORROWER AND ENDORSER LIABLE. If more than one borrower has signed below,
each of us has made all of the promises contained in this Note, and we are
jointly and severally liable for all obligations on this Note. If one or more
endorser has signed below, each endorser agrees to all terms of this Note,
including without limitation the provisions relating to Security.
This Note is subject to the terms, provisions and conditions set forth on
the reverse side of this page. Signed as an instrument under seal on the date
stated above.
BORROWER(S)
- ------------------------------------------------
Name of Borrower
By: _____________________________________________
Name Title
By: _____________________________________________
Name Title
Address: _________________________________________
-----------------------------------------
By: _____________________________________________
Name Title
Address: _________________________________________
(ENDORSER(S):
- ------------------------------------------------
- ------------------------------------------------
<PAGE>
EVENTS OF DEFAULT. Upon the occurrence of any one or more of the following
Events of Default, the entire unpaid principal balance of this Note and all
unpaid accrued interest hereunder shall become immediately due and payable at
your option and without notice or demand. In addition, at your option and
without notice or demand, the occurrence of any such Event of Default shall also
constitute a default under all agreements between you and me as well as of all
instruments and papers that I have given to you. Events of Default are:
(a) my failure to pay when due (or upon demand, if payable on demand) any
amount due on this Note or any other amount I owe you; (b) my failure promptly,
punctually, and faithfully to perform any other obligation or discharge any
liability of mine to you; (c) your determination that any representation or
warranty I made to you in any document, instrument, agreement or paper was not
true or accurate when given; (d) the occurrence of any event of default under
any agreement between you and me or under any instrument or paper I have given
to you notwithstanding that you may not have exercised your rights upon default
under any such other agreement, instrument or paper; (e) any act by, against, or
relating to me or my property or assets, which act constitutes the application
for, consent to, or sufferance of, the appointment of a receiver, trustee, or
other person, pursuant to court action or otherwise over all or any part of my
property, the granting of any trust mortgage or execution of an assignment for
the benefit of my creditors or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for me; my written
admission of my inability to pay my debts as they mature; the filing of any
complaint, application, or petition by or against me initiating any matter in
which I am or may be granted any relief from my debts pursuant to the Federal
Bankruptcy Code or pursuant to any other insolvency statute or procedure; my
offering by or entering into any composition, extension, or any other
arrangement seeking relief or extension for my debts or any other judicial or
non-judicial proceeding or agreement by, against, or including me which seeks or
intends to accomplish a reorganization or arrangement with creditors; (f) the
imposition of any lien upon my assets or the entry of any judgment against me,
which lien is not discharged, or judgment appealed from or satisfied, within
fifteen (15) days after its imposition or entry; (g) any material adverse change
in my assets, liabilities, property, business or condition, financial or
otherwise; (h) the occurrence of any event or circumstance with respect to me
such that you deem yourself to be insecure; (i) my death, termination of
existence, dissolution, winding up, or liquidation; (j) the occurrence of any of
the foregoing Events of Default with respect to any guarantor or endorser to you
of my liabilities to you, as if such guarantor or endorser were a borrower who
signed this Note.
LOAN DOCUMENTS: SECURITY. The following loan documents and security
instruments are incorporated herein by reference with the same force and
effect as if set forth herein in full:
================================================================================
================================================================================
The execution, endorsement or guaranty of this Note constitutes a confirmation
by each person that any security interest listed above which was given to you
before the date hereof shall continue in effect as security for this Note. In
addition to the foregoing, any and all of the deposits or other sums at any time
credited by or due from you to me or to any endorser or guarantor of this Note,
and any cash, securities, instruments, or other property of mine or of such
endorser or guarantor in your possession, whether for safekeeping, or otherwise,
shall at all times constitute security for this note, and for any and all of my
liabilities to you including, without limitation, the liability evidenced
hereby, and may be applied or set off by you against such liabilities at any
time whether or not such liabilities are then due and whether or not other
collateral is available to you.
COSTS AND EXPENSES. I and each endorser and guarantor of this Note, will
pay all costs and expenses, including, without limitation, reasonable attorneys'
fees and all expenses and disbursements of counsel, in connection with the
protection or enforcement of any of your rights against me or any such endorser
and guarantor and against any collateral given to you to secure this Note or any
other of my liabilities or of such endorser and guarantor to you (whether or not
suit is instituted by or against you).
ASSIGNABILITY BY YOU. You may assign and transfer this note to any person,
firm or corporation and deliver to the assignee any collateral or security
interest you hold in connection with this Note. In the event of such assignment,
you will have no further responsibility or liability with respect to such
collateral or security interest, and the terms of this Note and any related
documents shall inure to the benefit of your assignee and its successors. This
Note shall be binding upon me and each endorser and guarantor hereof and upon my
and their respective heirs, successors, assigns, and representatives, and shall
inure to the benefit of you and your successors and endorsees.
SEVERABILITY. If any provision of this Note is deemed by any court having
jurisdiction thereof to be invalid or unenforceable, the other provisions of
this Note shall remain in full force and effect. If any provision of this note
is deemed by any such court to be unenforceable because such provision is too
broad in scope, such provision shall be construed to be limited in scope to the
extent such court shall deem necessary to make it enforceable. If any provision
is deemed inapplicable by any such court to any person or circumstances, it
shall nevertheless be construed to apply to all other persons and circumstances.
WAIVER. No delay or omission by you in exercising or enforcing any of your
powers, rights, privileges, remedies, or discretions hereunder shall operate as
a waiver thereof on that occasion nor on any other occasion. No waiver of any
default hereunder shall operate as a waiver of any other default hereunder, nor
as a continuing waiver.
ENDORSEMENT. Each endorser, jointly and severally if more than one,
unconditionally guarantees prompt payment when due, by acceleration or
otherwise, of this Note, regardless of its genuineness, validity, regularity or
enforceability and waives any right to require you to proceed against the
Borrower or any collateral which you might have been granted to secure any
endorser's liabilities under this Note.
PRESENTMENT, EXTENSION. I and each endorser and guarantor of this Note
respectively waive presentment, demand, notices, and protest, and also waive any
delay on the part of the holder hereof. Each assents to any extension or other
indulgence (including, without limitation, the release of any other party to
this Note or the release or substitution of collateral) which you permit me or
any such endorser or guarantor with respect to this Note or any collateral given
to secure this Note and any other liability of mine or such endorser or
guarantor to you.
MISCELLANEOUS. My liabilities and those of any endorser or guarantor of
this Note are joint and several; provided, however, your release of me or any
endorser or guarantor shall not release any other person obligated on account of
this Note. Each reference in this Note to me, any endorser, and any guarantor,
is to such person individually and also to all such persons jointly. No person
obligated on account of this Note may seek contribution from any other person
also obligated unless and until all liabilities to you of the person from whom
contribution is sought have been satisfied in full.
I and each endorser and guarantor of this Note authorize you to complete
this Note if delivered in incomplete form, in any respect.
This Note is delivered to you at one of your offices in Massachusetts and
shall be governed by the laws of the Commonwealth of Massachusetts. I and each
endorser and guarantor of this Note submit to the jurisdiction of the courts of
the Commonwealth of Massachusetts for all purposes with respect to this Note,
any collateral given to secure their respective liabilities to you or their
respective liabilities to you or their respective relationships with you.
Exhibit 11 - Statement re: Computation of Per Share Earnings
(In thousands, except share data)
Three Months Ended
------------------------
December 28, December 30,
1996 1995
---------- ----------
Net income ......................................... $ 2,186 $ 2,151
========== ==========
Net income per common share:
Primary:
Weighted average shares outstanding ..... 8,131,153 7,950,895
Common Stock equivalents ................ 240,213 330,764
---------- ----------
Total ................................... 8,371,366 8,281,659
========== ==========
Net income per common share ............. $ 0.26 $ 0.26
========== ==========
Fully diluted:
Weighted average shares outstanding ..... 8,131,153 7,950,895
Common Stock equivalents ................ 266,196 345,353
---------- ----------
Total ................................... 8,397,349 8,296,248
========== ==========
Net income per common share ............. $ 0.26 $ 0.26
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Financial Statements of the Corporation for the three
months ended December 28, 1996 and is qualified in its entirety by reference to
such financial statements </LEGEND>
<CIK> 0000886903
<NAME> Kronos Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Dec-28-1996
<EXCHANGE-RATE> 1
<CASH> 13,587
<SECURITIES> 20,200
<RECEIVABLES> 29,956
<ALLOWANCES> 977
<INVENTORY> 4,534
<CURRENT-ASSETS> 74,358
<PP&E> 34,809
<DEPRECIATION> 19,166
<TOTAL-ASSETS> 107,774
<CURRENT-LIABILITIES> 38,999
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 63,153
<TOTAL-LIABILITY-AND-EQUITY> 107,774
<SALES> 25,718
<TOTAL-REVENUES> 37,110
<CGS> 6,415
<TOTAL-COSTS> 14,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,536
<INCOME-TAX> 1,350
<INCOME-CONTINUING> 2,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,186
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
