SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-20109
Kronos Incorporated
(Exact name of registrant as specified in its charter)
Massachusetts 04-2640942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
297 Billerica Road, Chelmsford MA 01824
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 250-9800
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
<PAGE>
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
Non-Affiliate Voting Aggregate
Date Shares Outstanding Market Value
November 30, 2000 11,713,791 $404,125,790
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Date Class Outstanding Shares
Common Stock, $0.01 par
November 30, 2000 value per share 12,396,119
DOCUMENTS INCORPORATED BY REFERENCE.
The Company's definitive proxy statement dated December 20, 2000 for the Annual
Meeting of Stockholders to be held on February 8, 2001 (Part III - Items
10,11,12 and 13).
<PAGE>
PART I
Item 1. Business
Kronos Incorporated (the "Company" or "Kronos") was organized in 1977
as a Massachusetts corporation. The Company develops, manufactures and markets
frontline labor management systems that improve workforce productivity and the
utilization of labor resources by capturing, measuring and delivering time and
activities information about employees, including hourly workers, hourly
professionals and salaried professionals. By eliminating the need for manual
data collection and data entry, the systems reduce the time needed to collect
employee work related information, improve payroll accuracy, and provides
time-sensitive labor information to frontline managers. The Company's frontline
labor management systems are designed for a wide range of businesses from
single-site to large multi-site enterprises. During fiscal 2000, the Company
introduced its application service provider (ASP) delivery model. Using the ASP
service, businesses can obtain Kronos' frontline labor management solutions on a
monthly subscription basis. Kronos' applications perform time and attendance,
employee scheduling, shop floor labor allocation, activity-tracking and labor
analytics. Kronos' systems capture information from all employees in the
workplace utilizing a variety of user interaction technologies. These
technologies include the Internet, desktop applications and intelligent data
collection terminals that the Company manufactures, as well as interactive voice
response and biometrics. Kronos' application suite can either operate
independently in a desktop environment or interface with related applications
and technologies at many points throughout the enterprise to enable management
to optimize the utilization of labor resources. In addition, the Company
maintains an extensive professional service and technical support organization
that is responsible for maintaining systems and providing professional and
educational services. These services can be provided on site or over the
Internet. The Company also collaborates with industry leading vendors that
market products and services that are synergistic to Kronos solutions. These
collaborations include major enterprise resource planning system (ERPs)
providers, manufacturing execution system (MES) providers, and human resources,
finance, scheduling and payroll application providers, as well as consulting and
systems integration firms. To date, the majority of the Company's revenues and
profits have been derived from its time and attendance applications and related
products and services.
Products
The software incorporated in Kronos' frontline labor management systems
is parameter-driven, which allows it to be configured upon installation to
meet the needs of an individual customer and reconfigured as customer needs
evolve. The Company offers various products that operate in enterprise or
desktop environments and can be accessed through a variety of user
interaction technologies. During fiscal 2000, the Company introduced new
and enhanced products that have extended Kronos' solutions to meet the
specific needs of the professional workforce. The Company's current
products include:
Workforce CentralTM Suite:
A suite of web-enabled products, for both single-site and enterprise-wide
deployment, designed for organizations that need to provide all levels of
management with access to real-time information on the labor components of
their business. Solutions integrated with the suite include:
o Workforce TimekeeperTM - streamlines the management, collection and
distribution of employee hours, and simplifies the control of the
labor expense throughout an enterprise. Workforce Timekeeper uses a
robust pay rules engine to apply complex work and pay rules accurately
and consistently throughout an organization thus eliminating the need
for manual timecards and timesheets.
o Workforce AccrualsTM - Using a configurable accruals engine, the
product helps organizations control leave liability, comply with
corporate policies or contracts, and manage benefit time by
automatically calculating the balances of each employee's available
benefit time, as well as providing self service for both employees and
managers to interactively monitor, request, modify and approve employee
leave.
o Workforce ActivitiesTM - Provides a sophisticated activity rules engine
for monitoring and reporting on employee productivity and efficiency,
as well as calculating additional pay associated with the quality and
results of the work performed by the employee. This product also
captures data as a front end to other systems such as billing or
project tracking.
o Workforce Smart SchedulerTM - The scheduling engine offers organization
with complex staffing and scheduling needs to forecast staffing needs
to business volumes, optimize staffing by applying work standards, and
provides all levels of management with reporting tools to act on
real-time labor information to improve their staffing allocation and
optimize costs.
o Workforce DecisionsTM - The labor analytics tool that synthesizes
information from disparate information systems such as billing,
payroll, and time and attendance and accurately captures, analyzes and
reports the information. The information, which can be reported in
either graphical or tabular format, enables senior and department level
management to monitor labor productivity at the department and employee
level.
Timekeeper Central(R)System:
Targeted at small to mid-size businesses or large enterprises that deploy
systems site-by-site, the system streamlines the management, collection and
distribution of employee hours for payroll, human resources, and other
Kronos applications for frontline labor management. Its rules engine has
been developed to accommodate a wide variety of pay policies and work rules
correctly and uniformly across the organization. It accepts a wide range of
user interaction technologies including data collection devices, native
windows applications and the Internet.
The Company's Timekeeper Central and Workforce Timekeeper systems run
on Windows 95, 98, 2000, NT and Citrix Metaframe. The Workforce Central
suite supports a variety of industry-standard databases including Oracle,
Informix and Microsoft SQL Server.
Timekeeper(R)/AS Suite:
A suite of products for both single-site and enterprise-wide deployment in
AS400 environments. Timekeeper/AS provides centralized data with
decentralized access, allowing all levels of management access to real-time
information on the labor component of the business and extending the
functionality of ERP systems. Solutions integrated with the suite include:
o Timekeeper/AS -- provides users with a flexible and comprehensive pay
rules engine to apply complex work and pay rules accurately and
consistently throughout the entire organization eliminating the need
for manual timecards and timesheets.
o Timekeeper/AS Accruals -- provides for control of leave liability,
compliance with corporate policies or contracts, and enables employees
and supervisors to manage benefit time by automatically calculating the
balances of each employee's available benefit time.
o Timekeeper/AS Attendance Tracker -- allows organizations to automate
its no-fault attendance program by capturing lost time exceptions and
absences from the Timekeeper/AS system and providing real time
information to managers for disciplinary management.
o Timekeeper/AS Labor Data Collection -- captures time, labor, and
material usage at every stage of the production process thereby
providing managers the tools to improve customer responsiveness,
enhance operating efficiency, increase labor productivity, and ensure
quality control.
o Timekeeper/AS Gate Access -- provides a method to control and track
access to areas within an organization that require monitoring.
o Timekeeper/AS Interface -- provides a method to feed employee labor
information to back office production systems like payroll, human
resources, MRP and scheduling.
In addition, the Company offers the following solutions to address
customers' specific needs:
ShopTrac Pro(R) -- captures real-time information on time, labor, and
material usage at every stage of the production process thereby providing
managers the tools to improve customer responsiveness, reduce operating
costs, increase labor productivity, and ensure quality control. Modules
that are integrated with the solution include Time and Attendance, Labor
Allocation, Work-in-Process, Quality and Productivity Analysis. Optional
modules include Team Tracking and Electronic Scorecard.
Visionware(R) -- labor cost management tool specifically designed for the
healthcare industry that synthesizes information from disparate information
systems such as billing, payroll and time and attendance and accurately
captures, analyzes and reports the information. The information, which can
be reported in either graphical or tabular format, enables senior and
department level management to monitor labor productivity at the department
and employee level, as well as provides recommendations for both short and
longer term staffing decisions by department and employee type.
Timekeeper DecisionsTM -- labor analytics tool that synthesizes information
from disparate information systems such as billing, payroll, and time and
attendance and accurately captures, analyzes and reports the information.
The information, which can be reported in either graphical or tabular
format, enables senior and department level management to monitor labor
productivity at the department and employee level.
Imagekeeper(R) -- easy to use, fully featured video imaging system that
captures employee images and signatures and stores them with other
personnel data. Imagekeeper provides instant on-line identification and
verification of employees and produces economical badges that can be
utilized by multiple applications using barcodes, magnetic stripes and
other technologies. Personnel data can easily be shared with other in-house
applications that require the same information.
Kronos provides a wide range of user interaction technologies to
accommodate various work environments and markets, and to satisfy the
price/performance requirements of its customers. These user interaction
technologies include:
o Workforce WebTM and Timekeeper/AS Professional Time: Using a standard
web browser (e.g., Netscape or Internet Explorer), employers can
automate time and labor management for their professional workforce,
offering employee self service for routine labor reporting such as
entering time worked in a variety of formats, capturing hours worked on
various projects or tasks, allocating their time amongst various
departments, request time off, and review leave balances and total
hours worked.
o Workforce ExpressTM: Using Microsoft Outlook or Windows, employers can
automate time and labor management for their professional workforce,
offering employee self service for routine labor reporting such as
entering time worked in a variety of formats, capturing hours worked on
various projects or tasks, allocating their time amongst various
departments, request time off, and review leave balances and total
hours worked.
o Timekeeper ExpressTM: Using Microsoft Outlook, the Web or Windows,
employers can automate time and labor management for their professional
workforce, offering employee self service for routine labor reporting
such as entering time worked in a variety of formats, capturing hours
worked on various projects or tasks, allocating their time amongst
various departments, request time off, and review leave balances and
total hours worked.
o Workforce ManagerTM for Web or Windows: Using a standard web browser or
Windows, allows supervisors to schedule their employees, manage time
and leave on an exception basis and measure and improve productivity.
o Time and Labor Data Entry Terminals: Fixed and portable intelligent
data collection devices that record time, labor, and activity data via
serial, Ethernet, Token Ring, or modem host communications. Data can be
entered using the terminal's stationary badge reader in Barcode or
Magnetic Stripe format, or entered manually via the terminal keyboard.
Lasers, charged coupled device ("CCD") scanners and Wedge readers can
be attached to the terminal to aid in the collection of factory-floor
or labor activity data.
o Timekeeper/AS Terminal Entry: Using AS/400 or PC based host systems,
time and labor data can be collected from local or remote data entry
terminals via serial, Ethernet, Token Ring or modem communications in a
heterogeneous computing environment.
o Workforce TeleTimeTM and Timekeeper/AS TeleTime: Using telephone-based,
interactive voice response solutions, enterprise-wide time and labor
information can be collected and communicated.
o Timekeeper/AS Graphical User Interface: Provides for a Windows front
end for the entire Timekeeper/AS suite application. Additionally,
provides functionality for Web connectivity and access over the
Internet / Intranet.
o Kronos Handpunch: By measuring the unique hand geometry of an employee,
provides for positive verification of employees for punching in or out
of work, eliminating buddy punching, as well as offers positive
identification of employees working in high security or limited access
work environments.
The Company believes that the extensive set of functions and features
within its time and attendance products, the suite of applications
available through its frontline labor management systems and its various
user interaction technologies provide it with an important advantage over
its competition. The Company believes additional competitive advantages are
provided by: 1) its ability to offer frontline labor management systems
that accommodate the professional workforce as well as specific vertical
markets; 2) its ability to offer frontline labor management systems in an
ASP environment; and 3) the Company's collaborations with various
industry-leading vendors.
Services and Support
Kronos maintains an extensive professional service and technical
support organization that provides a suite of maintenance, professional and
educational services. These services are designed to support the Company's
customers throughout the product life cycle. Maintenance service options are
delivered through the Company's centralized Global Support operation or through
local service personnel. The Company also provides a wide range of customer
self-service options through the Internet. The Company's professional services
include implementation support, technical and business consulting as well as
system integration and optimization. The Company's educational services offer a
full range of curriculums that are delivered through local training centers or
via computer based training courses. When necessary, the Company may also
provide software customization services to meet any unique customer
requirements.
Marketing and Sales
Kronos markets and sells its products to the mid-market and enterprise
markets in the United States and other countries through its direct sales and
support organization and through independent dealers. In addition, to serve
smaller businesses, the Company has a joint marketing agreement with ADP, Inc.
("ADP"). The Company recognizes that the information needs of businesses in
various industries continue to be increasingly specialized and sophisticated. As
a result, the Company's marketing and field sales personnel are organized into
industry specific divisions. These divisions focus on the needs of the
manufacturing, healthcare, retail/hospitality and government/education markets.
These divisions operate with the following objectives:
o To gain expertise in their respective industry environments
and pursue opportunities for growth and product leadership.
o To focus engineering and marketing resources on industry
specific product development efforts required to deliver
products and services that meet those industry needs.
o To develop long-term business relationships with select industry
partners.
o To educate and train sales staff as industry specialists.
Focusing on industry specific divisions permits Kronos to better
understand the needs of its customers and to respond quickly to the
opportunities presented by these markets.
Direct Sales Organization
The Company has 38 direct sales and support offices located in the
United States. In addition, the Company has three sales and support offices
located in Canada, two in the United Kingdom, one in Mexico, four in Australia,
one in Brazil, and one in New Zealand. Each direct sales office covers a defined
territory, and has sales and support functions. To capitalize on the
specialization of the Company's Visionware and ShopTrac Pro products, effective
fiscal 2001, the Company has added dedicated Visionware and Discrete
Manufacturing sales teams to its direct sales organization. The Discrete
Manufacturing sales team will target sales efforts on companies within the
discrete manufacturing standard industry classification (SIC) and specific
employee size.
For the fiscal years ended September 30, 2000, 1999, and 1998, the
Company's direct sales and support offices in the U.S. generated net revenues of
$210.0 million, $184.3 million, $147.3 million, respectively. For the fiscal
years ended September 30, 2000, 1999, and 1998, the Company's international
subsidiaries generated net revenues of $21.2 million, $20.4 million, and $14.9
million, respectively. Total assets at the Company's international subsidiaries
for these periods were $15.8 million, $15.3 million, $12.1 million,
respectively.
Dealers
Kronos also markets and sells its products through independent dealers
within designated geographic territories generally not covered by Kronos' direct
sales offices. These dealers provide sales, support and installation services
for Kronos' products. There are presently approximately 21 dealers in the United
States actively selling and supporting Kronos' products. Sales to independent
U.S. dealers for the years ended September 30, 2000, 1999, and 1998 were $20.1
million, $30.6 million, and $26.9 million, respectively. The decrease in
revenues in fiscal 2000 is principally due to the acquisitions of various
dealers during fiscal 2000 and 1999. Kronos also has dealers in Argentina,
Australia, Bahamas, Bahrain, Barbados, Brazil, Chile, Columbia, Ghana, Guam,
Guatemala, Guyana, Jamaica, Lebanon, Mexico, Netherlands Antilles, Netherlands,
Norway, Panama, Puerto Rico, South Africa, Singapore, Trinidad, United Kingdom,
and Venezuela. Sales to independent international dealers were not material in
any of the fiscal years. Kronos supports its dealers with training, technical
assistance, and major account marketing assistance.
Original Equipment Manufacturers (OEM)
The Company has a joint marketing agreement with ADP under which ADP
markets a proprietary version of the Company's PC-based time and attendance
software, together with data collection terminals manufactured by the Company.
In September 2000, Kronos and ADP signed a three-year contract extension that
will enable ADP to continue to offer Kronos' PC-based time and attendance
software and data collection terminals, and added Kronos' Workforce Central(TM)
suite to ADP's existing time and labor management solutions.
Reduction in the sales efforts of the Company's major dealers and/or
ADP, or termination or changes in their relationships with the Company, could
have a material adverse effect on the results of the Company's operations.
Customers
End-users of the Company's products include companies of all sizes from
the manufacturing, service, public and private sectors. The Company believes
that the dollar amount of backlog is not material to an understanding of its
business. Although the Company has contracts to supply systems to certain
customers over an extended period of time, substantially all of the Company's
product revenues in each quarter result from orders received in that quarter.
Product Development
The Company's product development efforts are focused on enhancing the
capabilities and increasing the performance of its existing products as well as
developing new products and standard interfaces to third party products on a
timely basis to meet the increasingly sophisticated needs of its customers,
including reaching the professional workforce through the Internet. During
fiscal 2000, 1999, and 1998, Kronos' engineering, research and development
expenses were $29.9 million, $26.8 million, and $19.7 million, respectively. The
Company intends to continue to commit substantial resources to enhance and
extend its product lines and develop interfaces to third party products.
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 also depends upon the reliability and viability of a variety of software
development tools owned by third parties to develop its products. If these tools
are inadequate or not properly supported, the Company's ability to release
competitive products in a timely manner could be adversely impacted.
Competition
The frontline labor management industry is highly competitive. The
number of competitors is also increasing as applications and systems providers
in related industries, such as human resources management, payroll processing
and ERP enter the market. Technological changes such as those allowing for
increased use of the Internet may also create the potential for new entrants.
Although the Company believes it has core competencies that are not easily
obtainable by competitors, maintaining the Company's competitive 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.
The Company competes primarily on the basis of price/performance,
quality, reliability and customer service. In the time and attendance market,
the Company competes against firms that sell automated time and attendance
products to many industries, against firms that focus on specific industries,
and against firms selling related products, such as payroll processing, human
resources management, or ERP systems.
Proprietary Rights
The Company relies on a combination of patents, copyrights, trademarks,
trade secret law and contracts to protect its proprietary technology.
The Company generally provides software products to end-users under
non-exclusive shrink-wrap licenses or under signed licenses, both of which may
be terminated by Kronos if the end-user breaches the terms of the license. These
licenses generally require that the software be used only internally subject to
certain limitations, such as the number of employees, simultaneous or active
users, computer model and serial number, features and/or terminals for which the
end-user has paid the required license fee. The Company authorizes its dealers
to sublicense software products to end-users under similar terms. In certain
circumstances, the Company also makes master software licenses available to
end-users that permit either a specified limited number of copies or an
unlimited number of copies of the software to be made for internal use. Some
customers license software products under individually negotiated terms.
Despite these precautions, it may be possible to copy or otherwise
obtain and use the Company's products or technology without authorization. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries.
The Company has registered trademarks for Kronos, Timekeeper,
Timekeeper Central, Jobkeeper, Jobkeeper Central, Datakeeper, Datakeeper
Central, Gatekeeper, Gatekeeper Central, Imagekeeper, TeleTime, TimeMaker,
CardSaver, ShopTrac, the ShopTrac logo, Start.Time, Keep.Trac, Solution In A
Box, Visionware and the Company's logo in the United States. In addition,
certain trademarks have been obtained or are in process in various foreign
countries.
Kronos purchases the majority of its payroll interfaces from a single
supplier for resale in certain of its frontline labor management systems.
Kronos, however, also purchases such payroll interfaces from two other suppliers
in addition to now having its own payroll interface product. Although Kronos has
alternative suppliers as well as its own product to provide to its customers,
any interruption in delivery from its major supplier could temporarily and
adversely affect Kronos' results of operations.
Manufacturing and Sources of Supply
The duplication of the Company's software and the printing of
documentation are outsourced to suppliers. The Company currently has two
suppliers who have been certified to the Company's manufacturing specifications
to perform the software duplication process. The Company's data collection
terminals are assembled from the printed circuit board level in its facility in
Chelmsford, Massachusetts. Although most of the parts and components included
within the Company's products are available from multiple suppliers, certain
parts and components are purchased from single suppliers. The Company has chosen
to source these items from single suppliers because it believes that the
supplier chosen is able to consistently provide the Company with the highest
quality product at a competitive price on a timely basis. Kronos intends to
complete development and release an alternative hardware product during fiscal
2001 that is anticipated to have less reliance on single suppliers. While the
Company has to date been able to obtain adequate supplies of these parts and
components, the Company's inability to transition to alternate sources on a
timely basis if and as required in the future could result in delays or
reductions in product shipments which could have a material adverse effect on
the Company's operating results.
Employees
As of November 30, 2000, the Company had 1,899 employees. None of the
Company's employees are represented by a union or other collective bargaining
agreement, and the Company considers its relations with its employees to be
good. The Company has encountered intense competition for experienced technical
personnel for product development, technical support and sales and expects such
competition to continue in the future. Any inability to attract and retain a
sufficient number of qualified technical personnel could adversely affect the
Company's ability to produce, support and sell products in a timely manner. Item
2. Properties
During fiscal 1999 the Company acquired a parcel of land located in
Chelmsford, Massachusetts for the construction of an approximately 129,000
square foot corporate headquarters facility. The Company completed construction
of the facility during the second quarter of fiscal 2000 at which time the
Company relocated its headquarters from Waltham to Chelmsford, Massachusetts.
The Company also leases a total of approximately 195,000 square feet in two
facilities located in Chelmsford, Massachusetts. The Company's manufacturing
operations, Global Support Center and various engineering and administrative
operations are located in these facilities. The Company additionally leases 50
sales and support offices located throughout North America, Europe, Australia
and South America. The Company's aggregate rental expense for all of its
facilities in fiscal 2000 was approximately $8.2 million. The Company considers
its facilities to be adequate for its current requirements and that additional
space will be available as needed in the future.
Item 3. Legal Proceedings
From time to time, the Company is involved in legal proceedings arising
in the normal course of business. None of the legal proceedings in which the
Company is currently involved is considered material by the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Executive Officers of the Registrant
Name Age Position
Mark S. Ain 57 Chief Executive Officer and Chairman
W. Patrick Decker 53 President and Chief Operating Officer
Aron J. Ain 43 Vice President, Worldwide Sales and Service
Paul A. Lacy 53 Vice President, Finance and Administration,
Treasurer and Clerk
Laura L. Woodburn 53 Vice President, Engineering
Lloyd B. Bussell 55 Vice President, Manufacturing
James Kizielewicz 41 Vice President, Marketing
Mark S. Ain, a founder of the Company, has served as Chief Executive
Officer and Chairman since its organization in 1977. He also served as President
from 1977 through September, 1996. Mr. Ain is the brother of Aron J. Ain, Vice
President, Worldwide Sales and Service of the Company.
W. Patrick Decker served as Vice President, Marketing and Field Operations
from 1982 through September, 1996, when he was appointed President and Chief
Operating Officer. Mr. Decker was elected to the Board of Directors in January,
1997.
Aron J. Ain served as Vice President, Sales and Service from 1988 through
September, 1996, when he was appointed Vice President, Marketing and Worldwide
Field Operations. In November, 1998, his title changed to Vice President,
Worldwide Sales and Service. Mr. Ain is the brother of Mark S. Ain, Chief
Executive Officer and Chairman.
Paul A. Lacy has been Vice President, Finance and Administration, Treasurer
and Clerk since 1988.
Laura L. Woodburn has served as Vice President, Engineering since November,
1996. She held various positions at Digital Equipment Corporation from 1979 to
1996, most recently serving as Vice President of the Storage Big Business
segment.
Lloyd B. Bussell has served as Vice President, Manufacturing since 1987.
James Kizielewicz has served in a variety of capacities at the Company from
1981 until his appointment as Vice President, Marketing in January, 1997.
Officers of the Company hold office until the first meeting of
directors following the next annual meeting of stockholders and, in the case of
the President, Treasurer and Clerk, until their successors are chosen and
qualified.
PART II
Item 5. Market for Registrant's Common Equity and Stockholder Matters
STOCK MARKET INFORMATION
The Company's common stock is traded on the Nasdaq National Market
under the symbol KRON. The following table sets forth the high and low sales
prices for fiscal 2000 and 1999. Such over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
2000
----------------------------------------------------
Fiscal High Low
---------------------- ------------------------- --------------------------
First quarter $64.000 $35.750
Second quarter 80.000 23.250
Third quarter 35.000 21.000
Fourth quarter 41.000 25.250
1999
----------------------------------------------------
Fiscal High Low
----------------------- ------------------------- --------------------------
First quarter $30.000 $16.667
Second quarter 32.500 22.250
Third quarter 47.750 25.000
Fourth quarter 54.500 34.500
HOLDERS
On November 30, 2000 there were approximately 4,500 shareholders of
record of the Company's common stock.
DIVIDENDS
The Company has not paid cash dividends on its common stock, and the
present policy of the Company is to retain earnings for use in its business.
Item 6. Selected Financial Data
The following table data should be read in conjunction with the consolidated
financial statements and notes thereto.
<TABLE>
<CAPTION>
Financial Highlights In thousands, except share data
Year Ended September 30,
----------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net revenues ............... $269,607 $254,298 $202,469 $170,538 $142,957
Net income ................. $ 15,701 $ 22,378 $ 14,720 $ 11,272 $ 11,425
Net income per common share:
Basic .................. $ 1.26 $ 1.78 $ 1.19 $ 0.92 $ 0.95
Diluted ................ $ 1.21 $ 1.71 $ 1.15 $ 0.89 $ 0.91
Balance Sheet Data:
Total assets ............... $239,491 $228,243 $163,861 $129,132 $105,117
</TABLE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data In thousands, except share data
Three Months Ended (1)
-------------------------------------------------------
Sept. 30, July 1, April 1, Jan. 1,
2000 2000 2000 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues ................. $ 75,040 $ 68,133 $ 61,826 $ 64,608
Gross profit ................. $ 47,045 $ 41,591 $ 37,260 $ 40,062
Net income ................... $ 6,184 $ 3,312 $ 1,955 $ 4,250
Net income per share:
Basic . $ 0.50 $ 0.27 $ 0.16 $ 0.34
Diluted $ 0.49 $ 0.26 $ 0.15 $ 0.32
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended (1)
-------------------------------------------------------
Sept. 30, July 3, April 3, Jan. 2,
1999 1999 1999 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues ................. $ 72,280 $ 67,217 $ 61,686 $ 53,115
Gross profit ................. $ 47,198 $ 43,670 $ 39,468 $ 33,163
Net income ................... $ 8,482 $ 6,134 $ 4,551 $ 3,211
Net income per share:
Basic . $ 0.67 $ 0.49 $ 0.36 $ 0.26
Diluted $ 0.64 $ 0.47 $ 0.35 $ 0.25
</TABLE>
(1) The Company follows a system of fiscal months as opposed to calendar months.
Under this system, the first eleven months of each fiscal year end on a
Saturday. The last month of the fiscal year always ends on September 30.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
This discussion includes certain forward-looking statements about
Kronos' business and its expectations. Any such statements are subject to risk
that could cause the actual results to vary materially from expectations. For a
further discussion of the various risks that may affect Kronos' business and
expectations, see "Certain Factors That May Affect Future Operating Results" at
the end of Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Revenues. Revenues amounted to $269.6 million, $254.3 million and $202.5 million
in fiscal 2000, 1999 and 1998, respectively. Annual revenue growth amounted to
6% in fiscal 2000, 26% in fiscal 1999 and 19% in fiscal 1998. As further
described below, management believes that the revenue growth rates experienced
in fiscal 2000 and fiscal 1999 varied from Kronos' historical growth rate of
approximately 19% due principally to the transitory impact on customers' demand
for Kronos' products and services as a result of Year 2000 compliance efforts.
Management believes that demand for Kronos' products and services continues to
exist and that the annual revenue growth rate in fiscal 2001 will be in the
range of 15% to 20%.
Product revenues amounted to $152.1 million, $164.3 million and $135.2
million in fiscal 2000, 1999 and 1998, respectively. Product revenues declined
7% in fiscal 2000 as compared to growth of 22% and 16% in fiscal 1999 and 1998,
respectively. The product revenue growth rate experienced in fiscal 1999 was
accelerated due to demand for new products and product upgrades resulting from
customers' Year 2000 compliance efforts. Whereas Kronos benefited from an
accelerated sales cycle during fiscal 1999 due to these Year 2000 compliance
efforts, it experienced a more elongated sales cycle during fiscal 2000. The
elongation of the sales cycle during fiscal 2000 was attributable to the
combination of customers delaying investment in new applications after the
significant investments made in preparation for the Year 2000 and increased
complexity in the sales process for Kronos products and services. The increased
complexity in the sales process can be attributed to factors including more
complex product technology and an increase in average transaction size. The
increase in complexity of the product technology is supported by the increase in
the software component of product revenues, and more specifically, by the
increase in revenues of Kronos' web-enabled enterprise product, Workforce
Central, as compared to prior years. The software component of product revenue
increased to 51% of total product sales in fiscal 2000 as compared to 46% and
45% in fiscal 1999 and 1998, respectively. Software revenues from Workforce
Central grew to 41% of total software revenues in fiscal 2000 as compared to 21%
and 27% in fiscal 1999 and 1998, respectively. Management believes that the
software component of product revenues will continue to increase in fiscal 2001
and the annual product revenue growth rate will be in the range of 15% to 20%.
Service revenues amounted to $117.5 million, $90.0 million and $67.3
million in fiscal 2000, 1999 and 1998, respectively. Service revenues grew by
31% in fiscal 2000 as compared to 34% and 24% in fiscal 1999 and 1998,
respectively. Service revenues amounted to 44%, 35% and 33% of total revenues in
fiscal 2000, 1999 and 1998, respectively. The growth in service revenues in
fiscal 2000 reflects an increase in maintenance revenue from expansion of the
installed base and an increase in the level of professional services
accompanying new sales. The expansion of the installed base results from the
cumulative effect of adding new sales to the base and the acquisition of certain
dealer operations. The growth in service revenues in fiscal 1999 reflects an
increase in maintenance revenue from expansion of the installed base and the
level of services sold to the installed base, as well as an increase in the
level of professional services accompanying new sales. The increase in the level
of services sold to the installed base is principally attributable to the
upgrade of existing customers to products on the Windows and client/server
platforms. Upgrade sales generally result in an increased level of maintenance
and professional service revenues. The increase in service revenues relative to
total revenues is partially attributable to the unusually low volume of product
revenues experienced in fiscal 2000, but also reflects the overall growth of
Kronos' installed base and the increase in the level of maintenance contracts
and professional services accompanying new sales. As the installed base
continues to grow, management anticipates that the annual service revenue growth
rate will be more consistent with the product revenue growth rate.
International revenues, which include revenues from Kronos'
international subsidiaries and sales to independent international dealers,
amounted to $24.1 million, $22.3 million and $16.0 million in fiscal 2000, 1999
and 1998, respectively. International revenues grew by 8% in fiscal 2000 as
compared to 39% and 4% in fiscal 1999 and 1998, respectively. International
revenues amounted to 9% of total revenues in fiscal 2000 and 1999, and 8% of
total revenues in fiscal 1998. The fluctuation in international revenue growth
rates is principally the result of the same factors discussed above. In
addition, the higher growth rate experienced in fiscal 1999 is partially the
result of lower than anticipated revenue from international operations in fiscal
1998 due to Kronos' initiatives to strengthen subsidiary management and to
position the subsidiaries sales organizations to better penetrate their
respective markets.
Gross Profit. Gross profit as a percentage of revenues was 62% in fiscal 2000 as
compared to 64% and 62% in fiscal 1999 and 1998, respectively. The decrease in
gross profit as a percentage of revenues is directly attributable to the
decrease in product revenues in fiscal 2000. Service revenue, which generates
lower gross margin, has grown faster than product revenue and represents a
greater proportion of total revenue in fiscal 2000 as compared to fiscal 1999.
Product gross profit as a percentage of product revenues was 77% in both fiscal
2000 and 1999 and 76% in fiscal 1998. Although software, which typically
generates higher gross profit, was a greater proportion of product revenues
during fiscal 2000 as compared to prior years, higher software development
amortization costs and increased absorption of production costs due to lower
sales volume offset the effect of this favorable mix. The improvement in product
gross profit in fiscal 1999 as compared to fiscal 1998 was primarily
attributable to cost reductions in manufactured hardware components as well as
higher production volumes. Management anticipates product gross margin in fiscal
2001 to be comparable to fiscal 2000.
Service gross profit as a percentage of service revenues was 42% in
fiscal 2000 as compared to 41% and 34% in fiscal 1999 and 1998, respectively.
The improvement in service gross profit as a percentage of revenues in fiscal
2000 continues to be primarily attributable to the growth in service revenues
without a proportionate increase in service expenses. This has been accomplished
by improving the efficiency in the delivery of support services by centralizing
the software support function, leveraging web-based self-service offerings and,
as customers have upgraded to current versions of Kronos' product, reducing the
number of versions requiring support. In addition, Kronos has also focused on
strengthening its billing practices for professional services, which has also
improved service gross profit.
Expenses. Expenses as a percentage of revenues were 52% in fiscal 2000 as
compared to 51% and 50% in fiscal 1999 and 1998. Sales and marketing expenses as
a percentage of sales were 34% in all fiscal years. Sales and marketing expenses
were $92.3 million, $85.3 and $68.0 million in fiscal 2000, 1999 and 1998,
respectively. The increase in sales and marketing expenses in all periods
relates to increased business volume. Engineering, research and development
expenses as a percentage of revenues were 11% in fiscal 2000 and 1999, and 10%
in fiscal 1998. Engineering, research and development expenses were $29.9
million, $26.8 million and $19.7 million in fiscal 2000, 1999 and 1998,
respectively. These expenses are net of capitalized software development costs
of $9.8 million, $8.8 million and $6.6 million, respectively. The growth in
engineering, research and development expenses in fiscal 2000 resulted
principally from the development and integration of new products and acquired
technologies. The growth in engineering, research and development expenses in
fiscal 1999 resulted principally from the development of new products in the
client/server and Windows environments. Increased spending on product
development reflects Kronos' commitment to new product development and further
enhancement of existing products.
General and administrative expenses were $17.8 million, $15.5 million
and $13.8 million in fiscal 2000, 1999 and 1998, respectively. As a percentage
of revenues, general and administrative expenses were 7% in fiscal 2000 as
compared to 6% and 7% in fiscal 1999 and 1998, respectively. Other expense, net
amounted to less than 1% of revenues in all fiscal years. Other expense, net, is
composed primarily of amortization of intangible assets related to acquisitions
made by Kronos that is offset by interest income earned on its investments.
Income Taxes. The provision for income taxes as a percentage of pretax
income was 36% in fiscal 2000 as compared to 35% and 40% in fiscal 1999 and
1998, respectively. The significant reduction in Kronos' effective income tax
rate in fiscal 1999 was primarily attributable to tax benefits resulting from
Kronos' sale of its South African subsidiary during the fiscal year as well as
utilization of foreign net operating loss carryforwards. Management anticipates
that Kronos' effective tax rate will decrease to approximately 35% in fiscal
2001.
Liquidity and Capital Resources
Working capital as of September 30, 2000 amounted to $10.7 million as
compared with $21.1 million at September 30, 1999. The decrease in working
capital was principally attributable to Kronos' investment in property, plant
and equipment (including the construction of its corporate headquarters
facility) and the repurchase of common shares under Kronos' stock repurchase
program.
Cash and equivalents and marketable securities amounted to $51.4
million and $62.4 million at September 30, 2000 and 1999, respectively. Cash
provided by operations amounted to $44.0 million in fiscal 2000 as compared to
$55.4 million and $37.7 million in fiscal 1999 and 1998, respectively. The
decrease in operating cash flows in fiscal 2000 is principally attributable to a
reduced rate of increase in Kronos' deferred maintenance and professional
service revenues, lower earnings and related compensation accruals, as well as
the use of cash for guaranteed acquisition related payments due during fiscal
2000. Partially offsetting these items were cash flows from increased collection
of accounts receivable from trade customers and a reduced rate of investment in
Kronos' lease portfolio. The increase in operating cash flows in fiscal 1999 and
1998 was primarily attributable to an increase in earnings, deferred maintenance
and professional service revenues, as well as compensation accruals. In fiscal
1999, these cash flows were partially offset by investments in Kronos' lease
portfolio of approximately $9.2 million. It is Kronos' policy to bill
accompanying professional services and maintenance contracts, including
contracts accompanying lease agreements, when the product is invoiced. Kronos
has experienced growth in deferred maintenance revenues in all fiscal years as
the result of the expansion of the installed base and the level of maintenance
contracts sold to that installed base. In fiscal 2000 and 1999, Kronos has also
experienced an increase in deferred professional services revenues as a result
of an increase in the level of professional services accompanying new sales and
sales to Kronos' existing customer base. Also contributing to the increase in
operating cash flows in all periods were non-cash charges related to
depreciation and amortization.
Kronos' investment in property, plant and equipment in fiscal 2000 and
1999 was principally due to costs related to the construction of Kronos' new
corporate headquarters facility, development of its headquarters campus and
investments in information systems and infrastructure to improve and support
expanding operations. Kronos' use of cash for acquisition of businesses in
fiscal 2000, 1999 and 1998 was related to acquisitions of dealer territories as
well as labor tracking and productivity technologies. Under Kronos' stock
repurchase program, Kronos has repurchased 522,000, 378,350 and 116,250 common
shares in fiscal 2000, 1999 and 1998, respectively, at a cost of $22.4 million,
$14.2 million and $2.7 million, respectively. The common shares repurchased
under the program are used for Kronos' employee stock option plans and employee
stock purchase plan. In addition, Kronos repurchases common stock from employees
in connection with the exercise of stock options. Cash provided by operations
was more than sufficient to fund investments in property, plant and equipment,
capitalized software development costs, acquisitions of businesses and stock
repurchases in fiscal 2000, 1999 and 1998. During fiscal 2000, Kronos' portfolio
of state revenue and government agency bonds was placed under the direction of
an investment advisor in order to better manage Kronos' investment objectives.
As a result, Kronos' marketable securities were reclassified from
held-to-maturity to available-for-sale. Kronos believes it has available
adequate cash and investments and operating cash flow to fund its investments in
property, plant and equipment, software development costs, cash payments related
to prior acquisitions and stock repurchases, if any,for the foreseeable future.
Adjustments resulting from the translation of Kronos' net investments
in its foreign subsidiaries are made directly to a separate component of
stockholders' equity. In fiscal 1999, as a result of Kronos' sale of its South
African subsidiary, Kronos recognized an immaterial charge to other expense
resulting from the write off of the cumulative equity adjustment from the
translation of the subsidiary's financial statements.
Certain Factors That May Affect Future Operating Results
Except for historical matters, the matters discussed in the Annual
Report and/or Form 10-K are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Act"). Kronos desires
to take advantage of the safe harbor provisions of the Act and is including this
statement for the express purpose of availing itself of the protection of the
safe harbor with respect to all forward looking statements that involve risks
and uncertainties.
The following important factors, among others, could cause actual
operating results to differ materially from those indicated by forward-looking
statements made in this Annual Report and/or Form 10-K and presented elsewhere
by management from time to time.
Potential Fluctuations in Results. Kronos' operating results, including revenue
growth, sources of revenue, effective tax rate and liquidity, may be effected as
a result of a variety of factors, including the purchasing patterns of its
customers, mix of products and services sold, the timing of the introduction of
new products and product enhancements by Kronos and its competitors, market
acceptance of new products, competitive pricing pressure and general economic
conditions. Kronos 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 Kronos has
contracts to supply systems to certain customers over an extended period of
time, substantially all of Kronos' product revenue and profits in each quarter
result from orders received in that quarter. If near-term demand for Kronos'
products weakens or if significant anticipated sales in any quarter do not close
when expected, Kronos' revenues for that quarter will be adversely affected.
Kronos believes that its operating results for any one period are not
necessarily indicative of results for any future period.
Product Development and Technological Change. Continual change and improvement
in computer software and hardware technology characterize the markets for
frontline labor management systems. Kronos' future success will depend largely
on its ability to enhance the capabilities and increase the performance of its
existing products and to develop new products and interfaces to third party
products on a timely basis to meet the increasingly sophisticated needs of its
customers. Although Kronos 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
Kronos' competitors will not develop and market products which are superior to
Kronos' products or achieve greater market acceptance.
Attracting and Retaining Sufficient Technical Personnel for Product Development,
Support and Sales. Kronos has encountered intense competition for experienced
technical personnel for product development, technical support and sales and
expects such competition to continue in the future. Any inability to attract and
retain a sufficient number of qualified technical personnel could adversely
affect Kronos' ability to produce, support and sell products in a timely manner.
Competition. The frontline labor management industry is highly competitive. The
number of competitors is also increasing as applications and systems providers
in related industries, such as human resources management, payroll processing
and enterprise resource planning (ERP), enter the market. Technological changes
such as those allowing for increased use of the Internet may also create the
potential for new entrants. Although Kronos believes it has core competencies
that are not easily obtainable by competitors, maintaining Kronos' technological
and other advantages over competitors will require continued investment by
Kronos in research and development, marketing and sales programs. There can be
no assurance that Kronos 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 Kronos'
operating results through price reductions and/or loss of market share.
Dependence on Time and Attendance Product Line. To date, more than 90% of the
Kronos' revenues have been attributable to sales of time and attendance systems
and related services and Kronos expects that to continue in the next fiscal
year. Competitive pressures or other factors could cause Kronos' time and
attendance products to lose market acceptance or experience significant price
erosion, adversely affecting the results of Kronos' operations.
Dependence on Alternate Distribution Channels. Kronos markets and sells its
products through its direct sales organization, independent dealers and OEMs. In
fiscal 2000, approximately 14% of Kronos' revenue was generated through sales to
dealers and OEMs. In September 2000, Kronos and its OEM partner, ADP, Inc.,
signed a three-year contract extension that will enable the OEM partner to
continue to offer Kronos' Timekeeper Central(R) software product and terminals,
and add Kronos' Workforce Central(TM) suite to the OEM's existing time and labor
management solutions. However, reduction in the sales efforts of Kronos' major
dealers and/or OEMs, or termination or changes in their relationships with the
Kronos, could have a material adverse affect on the results of Kronos'
operations.
Reliance on Key Vendors. Kronos depends upon the reliability and viability of a
variety of software development tools owned by third parties to develop its
products. If these tools are inadequate or not properly supported, Kronos'
ability to release competitive products in a timely manner could be adversely
impacted. Also, certain parts and components used in Kronos' hardware products
are purchased from single suppliers. Kronos has chosen to source these items
from single suppliers because it believes that the supplier chosen is able to
consistently provide Kronos with the highest quality product at a competitive
price on a timely basis. Kronos intends to complete development and release an
alternative hardware product during fiscal 2001 that is anticipated to have less
reliance on single suppliers. While Kronos has to date been able to obtain
adequate supplies of these parts and components, Kronos' inability to transition
to alternate sources on a timely basis if and as required in the future could
result in delays or reductions in product shipments that could have a material
adverse affect on Kronos' operating results. In addition, Kronos purchases the
majority of its payroll interfaces from a single supplier for resale in certain
of its frontline labor management systems. Kronos, however, also purchases such
payroll interfaces from two other suppliers in addition to now having its own
payroll interface product. Although Kronos has alternative suppliers as well as
its own product to provide to its customers, any interruption in delivery from
its major supplier could temporarily and adversely affect Kronos' results of
operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks, including changes
in interest rates affecting the return on its investments and foreign currency
fluctuations. The Company's marketable securities that expose it to market rate
risks are comprised of debt securities. A decrease in interest rates would not
adversely impact interest income or related cash flows pertaining to securities
held at September 30, 2000, as all of these securities have fixed rates of
interest. A 100 basis point increase in interest rates would not adversely
impact the fair value of these securities by a material amount due to the size
and average duration of the portfolio. The Company's exposure to market risk for
fluctuations in foreign currency relate primarily to the amounts due from
subsidiaries. Exchange gains and losses related to amounts due from subsidiaries
have not been material. For foreign currency exposures existing at September 30,
2000, a 10% unfavorable movement in the foreign exchange rates for each
subsidiary location would not expose the Company to material losses in earnings
or cash flows. The calculation assumes that each exchange rate would change in
the same direction relative to the U.S. dollar.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are listed in the Index
to Consolidated Financial Statements at Item 14 of this Form 10-K.
Item 9. Changes in and Disagreement with Accountants on Accounting and Financial
Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information relating to the executive officers of the registrant
appears under the caption "Executive Officers of the Registrant" in Part I,
following Item 4 of this Form 10-K. Information relating to the directors is
incorporated by reference from pages 5 through 7 of the Company's definitive
proxy statement for the 2001 Annual Meeting of Stockholders to be held on
February 8, 2001 under the caption "Election of Directors."
Item 11. Executive Compensation
Incorporated by reference from pages 7 through 13 of the Company's
definitive proxy statement for the 2001 Annual Meeting of Stockholders to be
held on February 8, 2001 under the following captions: "Director Compensation,"
"Executive Compensation," "Option Grants and Exercises," and "Report of
Compensation Committee."
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference from pages 3 through 4 of the Company's
definitive proxy statement for the 2001 Annual Meeting of Stockholders to be
held on February 8, 2001 under the caption "Security Ownership of Certain
Beneficial Owners and Management."
Item 13. Certain Relationships and Related Transactions
Information related to executive officers' retention agreements is
incorporated by reference from pages 9 through 12 of the Company's definitive
proxy statement for the 2001 Annual Meeting of Stockholders to be held on
February 8, 2001 under the caption "Report of Compensation Committee."
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Related Transactions
(a) The following are filed as a part of this report:
1. Financial Statements Page
Consolidated Statements of Income for the Years Ended F -1
September 30, 2000, 1999 and 1998
Consolidated Balance Sheets as of September 30, 2000 and 1999 F-2
Consolidated Statements of Shareholders' Equity for
the Years Ended September 30, 2000, 1999 and 1998 F-3
Consolidated Statements of Cash Flows for the Years Ended
September 30, 2000, 1999 and 1998 F-4
Notes to Consolidated Financial Statements F-5
Report of Ernst & Young LLP, Independent Auditors F-21
2. Financial Statement Schedules
Information required by schedule II is shown in the Notes to Consolidated
Financial Statements. All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and therefore
have been omitted.
3. Exhibits
Exhibit
No. Description
3.1(10) Restated Articles of Organization of the Registrant, as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(11) 1986A Stock Option Plan.
10.2(10)(11) 1992 Equity Incentive Plan, as amended and restated.
<PAGE>
3. Exhibits (continued)
Exhibit
No. Description
10.3(9)(12) 1992 Employee Stock Purchase Plan, as amended and restated.
10.4(3) Lease dated November 16, 1993, between Teachers Realty
Chelmsford, MA.
10.5(5) Lease dated August 8, 1995, between Principal Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Chelmsford, MA.
10.6(8) Fleet Bank Letter Agreement and Promissory Note dated
January 1, 1997, relating to amendment of $3,000,000 credit
facility.
10.7(14) Restated Software License & Support & Hardware Purchase
Agreement dated September 25, 2000 between ADP, Inc. and
the Registrant.
10.8* Sales Agreement dated December 6, 1990, between Integrated
Design, Inc. and the Registrant.
10.8.1(6) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated Design, Inc. and the
Registrant.
10.8.2 Amendment dated October 8, 1999 to Sales Agreement dated
December 6, 1990 between Integrated Design, Inc. and the
Registrant.
10.9(3)(13) Acquisition Agreement dated November 2, 1993 between Interboro
Systems Corporation and the Registrant.
10.10* Form of Indemnity Agreement entered into among the Registrant
and Directors of the Registrant.
10.11(1) Lease dated November 9, 1992, as amended, between John Hancock
Mutual Life Insurance Company and the Registrant, relating to
premises leased in Waltham, MA.
10.11.1(6) Amendment dated January 1, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Waltham, MA.
10.11.2(8) Amendment dated October 11, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.12 (4) Agreement of Reorganization among Kronos Incorporated;
Kronos S/T Corporation, ShopTrac Data Collection Systems,
Inc., Thomas J. O'Malia and Mark J. MacWhirter, dated
March 31, 1994.
10.13(11) Lease Agreement Between W/9TIB Real Estate Limited
Partnership, as Landlord, and Kronos Incorporated,
as Tenant Dated 2/26/99
10.14(11) Construction Agreement Between Cranshaw Construction of
New England Limited Partnership and Kronos Incorporated
Dated March 10, 1999.
<PAGE>
3. Exhibits (continued)
Exhibit
No. Description
10.15(12) Agreement of Purchase and Sale Beyond Between W/9TIB Real
Estate Limited Partnership and Kronos Incorporated Dated
March 29, 1999.
10.16(11) Form of Senior Executive Retention Agreement.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Incorporated by reference to the same Exhibit Number in the
Company's Registration Statement on Form S-1 (File No.
33-47383).
(1) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1992.
(2) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1993.
(3) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1993.
(4) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended July 2, 1994.
(5) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30,1995.
(6) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 30, 1996.
(7) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1996.
(8) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended December 28, 1996.
(9) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 29, 1997.
(10) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 4, 1998.
(11) Management contract or compensatory plan or arrangement filed
as an exhibit to this Form 10-K pursuant to Items 14(a) and
14(c) of Form 10-K.
(12) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1999.
(13) Confidential treatment was granted for certain portions of
this agreement.
(14) Confidential treatment was requested for certain portions of
this agreement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last fiscal quarter of the
fiscal year covered by this report.
Kronos, Timekeeper, Timekeeper Central, Jobkeeper, Jobkeeper Central,
Datakeeper, Datakeeper Central, Gatekeeper, Gatekeeper Central, Imagekeeper,
TeleTime, TimeMaker, CardSaver, ShopTrac, the ShopTrac logo, Start. Time,
Keep.Trac, Solution in a Box, Visionware and the Company's logo are registered
trademarks of the Company. DKC/Datalink, Timekeeper Web, HyperFind, Kronos 2100,
Smart Scheduler, Starter Series, Start.Labor, Start.WIP, Start.Quality, Labor
Plus, WIP Plus, Comm.Mgr, CommLink, Community Computer, Tempo and the Tempo
logo, ShopTrac Pro, Workforce Central and the Workforce Central logo, Workforce
Timekeeper, Workforce Activities, Workforce Smart Scheduler, Workforce Manager,
Workforce Accruals, Workforce Web, Workforce TeleTime, Workforce Express,
Workforce Scheduler, Workforce Decisions and Prism are trademarks of the
Company. IBM is a registered trademark of, and AS and AS/400 are trademarks of,
International Business Machines Corporation Total Time is a service mark of ADP,
Inc. and ADP is a registered trademark of Automatic Data Processing, Inc. Time
Bank is a registered trademark of Integrated Design Inc. UNIX is a registered
trademark in the U.S. and other countries, licensed exclusively by X/Open
Company Ltd. VMS is a registered trademark of Digital Equipment Corporation.
Microsoft, Windows, and Windows 95 are registered trademarks of, and Windows NT
is a trademark of, Microsoft Corporation. Oracle is a registered trademark of
Oracle Corporation. Informix is a registered trademark of Informix Software,
Inc. PeopleSoft is a registered trademark of PeopleSoft, Inc. Baan is a
trademark of Baan Development B.V. Honeywell is a registered trademark of
Honeywell, Inc. J.D. Edwards is a registered trademark of J.D. Edwards and
Company. Lawson is a registered trademark of Lawson Associates, Inc. SAP is a
trademark of SAP AG. Citrix is a registered trademark and Metaframe is a
trademark of Citrix Systems Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on December 20, 2000.
KRONOS INCORPORATED
By /s/ Mark S. Ain
Mark S. Ain
Chief Executive
Officer and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on December 20, 2000.
Signature Capacity
/s/ Mark S. Ain Chief Executive
Mark S. Ain Officer and Chairman of the Board
(Principal Executive Officer)
/s/ Paul A. Lacy Vice President, Finance and
Paul A. Lacy Administration
(Principal Financial and
Accounting Officer)
/s/ W. Patrick Decker Director, President and Chief
W. Patrick Decker Operating Officer
/s/ Richard J. Dumler Director
Richard J. Dumler
/s/ D. Bradley McWilliams Director
D. Bradley McWilliams
/s/ Lawrence Portner Director
Lawrence Portner
/s/ Samuel Rubinovitz Director
Samuel Rubinovitz
<PAGE>
<TABLE>
<CAPTION>
Consolidates Statements of Income In thousands, except share data
Year Ended September 30, 2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues:
Product ...................................... $ 152,122 $ 164,340 $ 135,186
Service ...................................... 117,485 89,958 67,283
----------- ----------- -----------
269,607 254,298 202,469
Cost of sales:
Product ...................................... 35,119 37,507 32,305
Service ...................................... 68,530 53,292 44,085
----------- ----------- -----------
103,649 90,799 76,390
----------- ----------- -----------
Gross profit ......................... 165,958 163,499 126,079
Operating expenses and other income:
Sales and marketing .......................... 92,254 85,283 68,049
Engineering, research and development ........ 29,889 26,802 19,700
General and administrative ................... 17,771 15,502 13,841
Other expense, net ........................... 1,511 1,432 158
----------- ----------- -----------
141,425 129,019 101,748
----------- ----------- -----------
Income before income taxes ............... 24,533 34,480 24,331
Provision for income taxes ....................... 8,832 12,102 9,611
----------- ----------- -----------
----------- ----------- -----------
Net income ............................... $ 15,701 $ 22,378 $ 14,720
=========== =========== ===========
Net income per common share:
Basic .................................... $ 1.26 $ 1.78 $ 1.19
=========== =========== ===========
Diluted .................................. $ 1.21 $ 1.71 $ 1.15
=========== =========== ===========
Average common and common equivalent
shares outstanding:
Basic ............................... 12,429,338 12,548,061 12,392,666
=========== =========== ===========
Diluted ............................. 12,948,341 13,109,231 12,784,956
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets In thousands, except share data
September 30, 2000 1999
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents .............................................................. $ 23,201 $ 20,148
Marketable securities ............................................................. 10,788 20,893
Accounts receivable, less allowances of $6,986 in 2000 and $6,791 in 1999 ......... 71,493 66,817
Deferred income taxes ............................................................. 5,916 5,414
Other current assets .............................................................. 13,750 11,872
--------- ---------
Total current assets ...................................................... 125,148 125,144
Property, plant and equipment, net ..................................................... 37,082 23,981
Marketable securities .................................................................. 17,450 21,400
Excess of cost over net assets of businesses acquired, net ............................. 29,421 29,946
Deferred software development costs, net ............................................... 13,788 12,218
Other assets ........................................................................... 16,600 15,554
--------- ---------
Total assets .............................................................. $ 239,489 $ 228,243
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................................. $ 8,278 $ 8,503
Accrued compensation .............................................................. 19,879 21,106
Accrued expenses and other current liabilities .................................... 14,339 15,491
Deferred professional service revenues ............................................ 23,451 17,262
Deferred maintenance revenues ..................................................... 48,483 41,636
--------- ---------
Total current liabilities ................................................. 114,430 103,998
Deferred maintenance revenues .......................................................... 15,814 18,818
Other liabilities ...................................................................... 1,455 1,169
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 50,000,000 shares,
12,634,728 shares issued at September 30, 2000 and 1999 ....................... 126 126
Additional paid-in capital ........................................................ 23,842 31,087
Retained earnings ................................................................. 97,844 82,143
Accumulated other comprehensive loss .............................................. (1,366) (337)
Cost of Treasury Stock (310,038 shares and 192,165 shares at September 30, 2000
and 1999, respectively) ....................................................... (12,656) (8,761)
--------- ---------
Total shareholders' equity ................................................ 107,790 104,258
--------- ---------
Total liabilities and shareholders' equity ................................ $ 239,489 $ 228,243
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
In thousands
Accumulated
Additional Other
Common Stock Paid-in Retained Comprehensive Treasury Stock
----------------- ---------------
Shares Amount Capital Earnings Income (loss) Shares Amount Total
----------------- --------- -------- ----------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 ............. 12,370 $ 124 $ 29,728 $ 45,045 $ (262) 128 $ (2,162) $ 72,473
Net income ............................... 14,720 14,720
Equity adjustment from translation ....... (900) (900)
--------
Comprehensive income ................... 13,820
Proceeds from exercise of stock options .. 84 1 (1,453) (203) 3,912 2,460
Proceeds from employee stock purchase plan 12 -- (156) (64) 1,407 1,251
Purchase of treasury stock ............... 185 (4,257) (4,257)
Tax benefit associated with the exercise
of stock options ..................... 1,456 1,456
-------- -------- -------- -------- -------- --------
Balance at September 30, 1998 ............. 12,466 125 29,575 59,765 (1,162) 46 (1,100) 87,203
Net income ............................... 22,378 22,378
Equity adjustment from translation ....... 825 825
--------
Comprehensive income ................... 23,203
Proceeds from exercise of stock options .. 119 1 (3,097) (238) 6,916 3,820
Proceeds from employee stock purchase plan 50 -- 956 (42) 1,133 2,089
Purchase of treasury stock ............... 426 (15,710) (15,710)
Tax benefit associated with the exercise
of stock options ..................... 3,462 3,462
Proceeds from sale of put options ........ 191 191
-------- -------- -------- -------- -------- --------
Balance at September 30, 1999 ............ 12,635 126 31,087 82,143 (337) 192 (8,761) 104,258
Net income ............................... 15,701 15,701
Equity adjustment from translation ....... (941) (941)
Equity adjustment from net unrealized loss
on available for sale securities ..... (88) (88)
--------
Comprehensive income ................... 14,672
Proceeds from exercise of stock options .. (10,829) (333) 15,466 4,637
Proceeds from employee stock purchase plan (1,384) (94) 4,144 2,760
Purchase of treasury stock ............... 545 (23,505) (23,505)
Tax benefit associated with the exercise
of stock options ..................... 4,799 4,799
Proceeds from sale of put options ........ 169 169
-------- -------- -------- -------- -------- --------
Balance at September 30, 2000 ............. 12,635 $ 126 $ 23,842 $ 97,844 $ (1,366) 310 $(12,656) $107,790
======== ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows In thousands
Year Ended September 30, 2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net income .................................................................... $ 15,701 $ 22,378 $ 14,720
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation ............................................................ 7,756 7,856 7,368
Amortization of excess of costs over net assets of businesses acquired .. 6,491 4,384 2,503
Amortization of deferred software development costs ..................... 8,191 6,159 4,360
Provision for deferred income taxes ..................................... (3,860) (3,031) (2,587)
Changes in certain operating assets and liabilities:
Accounts receivable, net ............................................. (3,936) (15,765) (8,553)
Deferred maintenance revenues ........................................ 4,149 20,899 10,321
Accounts payable, accrued compensation
and other liabilities ................................................ 5,199 17,507 11,607
Tax benefits from exercise of stock options ............................. 4,799 3,462 1,456
Other ................................................................... (539) (8,440) (3,518)
-------- -------- --------
Net cash and equivalents provided by operating activities ............ 43,951 55,409 37,677
Investing activities:
Purchase of property, plant and equipment ..................................... (19,718) (16,222) (6,309)
Capitalization of software development costs .................................. (9,761) (8,836) (6,589)
(Increase) decrease in marketable securities .................................. 14,055 (20,253) (6,416)
Acquisitions of businesses, net of cash acquired .............................. (9,009) (10,260) (8,490)
-------- -------- --------
Net cash and equivalents used in investing activities ................ (24,433) (55,571) (27,804)
Financing activities:
Net proceeds from exercise of stock options and
employee purchase plans .................................................... 7,397 5,909 3,711
Purchase of treasury stock .................................................... (23,505) (15,710) (4,257)
Proceeds from sale of put options ............................................. 169 191 --
-------- -------- --------
Net cash and equivalents (used in) provided by financing activities .. (15,939) (9,610) (546)
Effect of exchange rate changes on cash and equivalents ........................... (526) 32 (137)
-------- -------- --------
Increase (decrease) in cash and equivalents ....................................... 3,053 (9,740) 9,190
Cash and equivalents at the beginning of the period ............................... 20,148 29,888 20,698
-------- -------- --------
Cash and equivalents at the end of the period ..................................... $ 23,201 $ 20,148 $ 29,888
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts of Kronos Incorporated and its wholly-owned subsidiaries (the
"Company"). All intercompany accounts and transactions have been eliminated in
consolidation. Certain reclassifications have been made in the accompanying
consolidated financial statements in order to conform to the fiscal 2000
presentation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Translation of Foreign Currencies: The assets and liabilities of the Company's
foreign subsidiaries are denominated in each country's local currency and
translated at the year-end rate of exchange. The related income statement items
are translated at the average rate of exchange for the year. The resulting
translation adjustments are excluded from income and reflected as a separate
component of shareholders' equity. Realized and unrealized exchange gains or
losses arising from transaction adjustments are reflected in operations. The
Company may periodically have certain intercompany foreign currency transactions
that are deemed to be of a long-term investment nature. Exchange adjustments
related to those transactions are made directly to a separate component of
stockholders' equity.
Cash Equivalents: Cash equivalents consist of highly liquid investments with
maturities of three months or less at date of acquisition.
Marketable Securities: The Company's marketable securities consist of United
States government agency bonds, corporate bonds and state revenue bonds and, in
fiscal 1999, included market auction preferred stocks. Bonds with a maturity of
twelve months or longer at the balance sheet date are classified as noncurrent
marketable securities. At September 30, 2000, no bonds had maturities that
extend beyond April 2006. In fiscal 2000, the Company reclassified its
marketable securities from held-to-maturity to available-for-sale and at
September 30, 2000, carried them at fair value as obtained from outside pricing
sources. In fiscal 1999, the Company's investments in bonds were classified as
held-to-maturity and carried at cost. The market auction preferred stocks were
classified as available-for-sale and were carried at cost, which approximated
fair value as obtained from outside pricing sources. Interest income earned on
the Company's cash, cash equivalents and marketable securities is included in
other expense, net and amounted to $2,579,000, $2,601,000 and $1,790,000 in
fiscal 2000, 1999 and 1998, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
Property, Plant and Equipment: Property, plant and equipment is stated on the
basis of cost less accumulated depreciation, provisions for which have been
computed using the straight-line method over the estimated useful lives of the
assets, which are principally as follows:
Estimated
Assets Useful Life
------------------------------------------ -------------------------------
Building 30 years
Machinery and equipment 3-5 years
Furniture and fixtures 8-10 years
Leasehold improvements Shorter of economic
life or lease-term
Accounting for the Impairment of Long-Lived Assets: Long-lived assets used in
operations, such as the excess of cost over net assets of businesses acquired,
capitalized software development costs and property, plant and equipment, are
included in impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be recoverable. If the
impairment evaluation indicates the affected asset is not recoverable, the
asset's carrying value would be reduced to fair value. No event has occurred
that would impair the value of long-lived assets recorded in the accompanying
consolidated financial statements.
Revenue Recognition: The Company derives its revenues from the sale of frontline
labor management systems as well as sales of application software, parts and
components. The Company also derives revenues by providing services including
maintenance, installation, consulting and training. The Company recognizes
revenues from sales and sales-type leases of its systems, application software,
parts and components when a noncancelable agreement has been signed, the product
shipped, there are no uncertainties surrounding product acceptance, the fees are
fixed and determinable and collection is considered probable. From time to time,
customers request delayed shipment, usually because of scheduling for systems
integration and /or lack of storage space at the customers' facilities during
the implementation. In such bill and hold transactions, the Company recognizes
revenue when the criteria of Staff Accounting Bulletin No. 101 are satisfied.
Revenues from maintenance agreements are recognized ratably over the contractual
period and all other service revenues are recognized as the services are
performed. As of October 1, 1998, the Company adopted Statement of Position
(SOP) 97-2, "Software Revenue Recognition," which was effective for transactions
the Company entered into in fiscal 1999. Prior years were not restated. The
Company subsequently adopted SOP 98-9, "Modification of SOP 97-2, With Respect
to Certain Transactions." The adoption of SOP 97-2 and SOP 98-9 did not have a
material effect on the Company's financial statements. The Company provides
certain warranties to its customers and, without additional charge, certain
software product enhancements for customers covered under software maintenance
agreements. Any provision required for these expenses is made at the time
revenues are recognized.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
Stock-Based Compensation: The Company accounts for its stock-based compensation
plans in accordance with the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. Under APB 25, no compensation expense is recognized as the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation" (see Note L).
Income Taxes: The Company accounts for income taxes under the liability method.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Net Income Per Share: Net income per share is based on the weighted-average
number of common shares and, when dilutive, includes stock options and put
options. (see Note N).
Newly Issued Accounting Standards: In March 1998, the Accounting Standards
Executive Committee (AcSEC) issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" effective for the
Company in fiscal 2000. The adoption of SOP 98-1 did not have a material effect
on the Company's financial statements. In June 1998, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" which will
be effective for the Company in the first quarter of fiscal 2001. The Company
believes that the implementation of SFAS No. 133 will not have a material effect
on its financial statements. In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin 101, (SAB 101), "Revenue Recognition
in Financial Statements." SAB 101 summarizes the application of generally
accepted accounting principles to revenue recognition in financial statements.
SAB 101 will be effective for the Company in fiscal 2001. The Company does not
expect SAB 101 to have a material effect on its financial position or results of
operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE B--Concentration of Credit Risk
The Company markets and sells its products through its direct sales
organization, independent dealers and an OEM agreement with ADP, Inc. The
Company's dealers have significantly smaller resources than the Company. The
Company's direct sales organization sells to customers who are dispersed across
many different industries and geographic areas. The Company does not have a
concentration of credit or operating risk in any one industry or any one
geographic region within or outside of the United States. The Company reviews a
customer's (including dealer's) credit history before extending credit and
generally does not require collateral. The Company establishes its allowances
based upon factors including the credit risk of specific customers, historical
trends and other information
NOTE C- -Marketable Securities
The following is a summary of available-for-sale securities and held-to-maturity
securities (in thousands):
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
September 30, 2000 Available-for-sale securities:
United States government
and agency debt securities ........... $ 11,838 $ -- $ 125 $ 11,713
Municipal debt securities .............. 11,875 25 29 11,871
U.S. corporate securities .............. 4,613 41 -- 4,654
---------- ----------- ----------- ------------
$ 28,326 $ 66 $ 154 $ 28,238
========== =========== =========== ============
September 30, 1999 Held-to-maturity securities:
United States government
and agency debt securities ............ $ 21,900 $ -- $ 180 $ 21,720
Municipal debt securities .............. 8,293 1 -- 8,294
---------- ----------- ----------- ------------
$ 30,193 $ 1 $ 180 $ 30,014
========== =========== =========== ============
Available-for-sale securities:
Market auction preferred stock ........ $ 12,100 $ -- $ -- $ 12,100
========== =========== =========== ============
</TABLE>
During fiscal 2000, the Company's portfolio of marketable securities was placed
under the direction of an investment advisor in order to better manage
investment objectives. As a result, the Company's marketable securities were
reclassified from held-to-maturity to available-for-sale. At the time of the
reclassification the cost of the Company's marketable securities approximated
fair value. In fiscal 2000, the Company recorded gross realized losses of
$56,000. At September 30,
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE C- -Marketable Securities--(continued)
2000, the net adjustment of $88,000 for unrealized losses on available-for-sale
securities is included as a separate component of shareholders' equity.
The amortized costs and estimated fair value of debt securities by contractual
maturity at September 30, 2000 are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have the
right to prepay obligations without prepayment penalties.
(In thousands) Estimated
Fair
Cost Value
Available-for-sale securities: --------- -----------
Due in one year or less $ 10,946 $ 10,787
Due after one year through two years 10,425 10,400
Due after two years through four years 6,460 6,550
Due after four years 495 501
--------- -----------
$ 28,326 $ 28,238
========= ===========
NOTE D--Accounts Receivable
<TABLE>
<CAPTION>
Accounts receivable consists of the following (in thousands):
September 30,
--------------------------------
2000 1999 1998
------- ------- --------
<S> <C> <C> <C>
Trade accounts receivable ................. $60,598 $59,571 $50,314
Current investment in sales-type leases ... 17,881 14,037 5,035
------- ------- -------
78,479 73,608 55,349
Less:
Allowance for doubtful accounts ........... 2,498 2,023 1,268
Allowance for sales returns and adjustments 4,488 4,768 3,177
------- ------- -------
6,986 6,791 4,445
------- ------- -------
$71,493 $66,817 $50,904
======= ======= =======
</TABLE>
In fiscal 2000, 1999 and 1998 the Company recorded provisions for its allowances
in the amount of $1,128,000, $2,982,000 and $2,075,000, respectively. Charges
against the allowances of $933,000, $636,000 and $839,000 in fiscal 2000, 1999,
and 1998, respectively, principally relate to uncollectible accounts written
off, net of recoveries. It is the Company's practice to record an estimated
allowance for sales returns and adjustments based on historical experience and
to record individual charges for sales returns and adjustments directly to
revenue as incurred.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
KRONOS INCORPORATED
NOTE E--Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
September 30,
---------------------
2000 1999
--------- ---------
Land $ 2,810 $ 2,810
Building 13,508 -
Machinery and equipment 47,322 39,258
Furniture and fixtures 11,374 9,220
Leasehold improvements 4,863 5,416
Construction in progress - 4,220
--------- ---------
79,877 60,924
Less accumulated depreciation 42,795 36,943
--------- ---------
$37,082 $23,981
========= =========
During fiscal 2000, the Company completed the construction on its corporate
headquarters facility located in Chelmsford, Massachusetts. The facility is
approximately 129,000 square feet and is being depreciated over its estimated
useful life of thirty years.
NOTE F--Leases
The Company leases systems to customers under sales-type leases as defined in
SFAS No. 13, "Accounting for Leases." The long-term portion of the net
investment in sales-type leases amounted to $12,071,000 and $13,308,000 at
September 30, 2000 and 1999, respectively, and is included in other assets. The
components of the net investment in sales-type leases are as follows (in
thousands):
September 30,
--------------------------------
2000 1999
---------------------------------------------- --------------- ---------------
Minimum rentals receivable $32,746 $30,344
Estimated residual values of leased equipment
(unguaranteed) 339 436
Unearned interest income (3,133) (3,435)
--------------- ---------------
Net investment in sales-type leases $29,952 $27,345
=============== ===============
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE F--Leases--(continued)
Minimum rentals receivable under existing leases as of September 30, 2000 are as
follows (in thousands):
Fiscal Year
-----------------------------------------
2001 .................................... $19,771
2002 .................................... 9,419
2003 .................................... 2,504
2004 .................................... 924
2005 .................................... 128
--------
$32,746
========
NOTE G--Acquisitions
In fiscal 2000, the Company completed various acquisitions of dealer
territories. In fiscal 1999 and 1998, the Company completed various acquisitions
of dealer territories as well as the acquisition of labor-tracking and
productivity technologies. These acquisitions were accounted for under the
purchase method of accounting and, accordingly, the operating results are
included in the consolidated statements of income from the date of each
respective acquisition.
The combined cost of the acquisitions, which amounted to $5,910,000,
$20,168,000, and $5,718,000 in fiscal 2000, 1999 and 1998, respectively,
principally relates to intangible assets that are being amortized using the
straight-line method over a period ranging from two to eleven years. Related
amortization expense amounted to $6,491,000, $4,384,000 and $2,503,000 in fiscal
2000, 1999, 1998, respectively. Related accumulated amortization amounted to
$17,383,000 and $11,272,000 in fiscal 2000 and 1999, respectively.
Certain agreements contain provisions that require the Company to make a
guaranteed payment within one year and/or contingent payments based upon
profitability of the business unit or if specified minimum revenue requirements
are met. These provisions expire during fiscal 2002 through 2005. Guaranteed
payments are accrued at the time of the acquisition and are included in the
purchase price allocation. Contingent payments due under the terms of the
agreements are recognized when earned and are principally recorded as an
increase in the excess of the total acquisition cost over the fair value of the
net assets acquired. However, under certain circumstances a portion of the
contingent payment may be recorded as compensation expense. During fiscal 2000
and 1999, $318,000 and $811,000, respectively, of contingent payments were
earned of which $62,000 and $225,000, respectively, were expensed. During 1998,
$2,765,000 in contingent payments were earned and recorded as an increase in the
excess of the total acquisition cost over the fair value of the net assets
acquired.
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE H--Deferred Software Development Costs
Costs incurred in the research, design and development of software for sale to
others are charged to expense until technological feasibility is established.
Thereafter, software development costs are capitalized and amortized to product
cost of sales on a straight-line basis over the lesser of three years or the
estimated economic lives of the respective products, beginning when the products
are offered for sale. Total amounts capitalized were $9,761,000, $8,836,000 and
$6,589,000 in fiscal 2000, 1999 and 1998, respectively.
Amortization of capitalized software development costs amounted to $8,191,000,
$6,159,000, and $4,360,000 in fiscal 2000, 1999 and 1998, respectively. Total
research and development expenses charged to operations amounted to $23,188,000,
$19,505,000 and $14,263,000 in fiscal 2000, 1999 and 1998, respectively.
NOTE I-- Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in
thousands):
September 30,
--------------------------
2000 1999
------------------------------- ---------- ----------
Accrued acquisition payments $ 1,643 $ 6,461
Federal and state tax payable 3,718 2,522
Accrued other 8,978 6,508
---------- ----------
$ 14,339 $ 15,491
========== ==========
NOTE J--Lease Commitments
The Company leases certain office space, manufacturing facilities and equipment
under long-term operating lease agreements. Future minimum rental commitments
under operating leases with noncancellable terms of one year or more are as
follows (in thousands):
Fiscal Year
-----------------------------------------
2001 .................................... $7,006
2002 .................................... 5,652
2003 .................................... 4,576
2004 .................................... 4,283
2005 .................................... 3,403
Thereafter .............................. 6,937
--------
$31,857
========
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE J--Lease Commitments --(continued)
Rent expense was $9,227,000, $8,197,000 and $7,649,000 in fiscal 2000, 1999, and
1998, respectively.
NOTE K--Capital Stock, Stock Repurchase Program and Stock Rights Agreement
Capital Stock: The Board of Directors is authorized, subject to any limitations
prescribed by law, from time to time to issue up to an aggregate of 1,000,000
shares of Preferred Stock, $1.00 par value per share, in one or more series,
each of such series to have such preferences, voting powers (up to 10 votes per
share), qualifications and special or relative rights and privileges as shall be
determined by the Board of Directors in a resolution or resolutions providing
for the issue of such Preferred Stock.
In fiscal 2000, the shareholders approved an amendment to the Company's Restated
Articles of Organization increasing the number of authorized shares of common
stock from 20,000,000 to 50,000,000. During fiscal 2000, the Company sold put
options that entitled the holder of each option to sell to the Company one share
of Common Stock at an exercise price of $50.00. The 50,000 options expired on
June 9, 2000 and the Company chose to settle the obligation with cash. The put
options, which were sold during fiscal 1999 expired without being exercised on
December 10, 1999. The premiums of $169,000 and $191,000 respectively, which
were received in conjunctions with these private placements, were recorded as
additional paid-in capital.
Stock Repurchase Program: In fiscal 1997 the Company's Board of Directors
implemented a stock repurchase program under which it periodically authorizes,
subject to certain business and market conditions, the repurchase of the
Company's outstanding common shares to be used for the Company's employee stock
option plans and employee stock purchase plan. Under the stock repurchase
program, the Company repurchased 522,000, 378,350, and 116,250 common shares in
fiscal 2000, 1999 and 1998 respectively, at a cost of $22,364,000, $14,155,000
and $2,708,000, respectively.
<PAGE>
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--Capital Stock, Stock Repurchase Program and Stock Rights
Agreement--(continued)
Stock Rights Agreement: The Company has a Stock Rights Agreement, under which
each holder of a share of Common Stock also has one Right that initially
represents the right to purchase one one-thousandth of a share of a new series
of preferred stock at an exercise price of $236, subject to adjustment. The
Company reserved 12,500 shares of its Preferred Stock for issuance under the
agreement. The Rights may be exercised, in whole or in part, only if a person or
group acquires beneficial ownership of 20% or more of the Company's outstanding
Common Stock or announces a tender or exchange offer upon consummation of which,
such person or group would beneficially own 25% or more of the Company's Common
Stock. When exercisable, each Right will entitle its holder (other than such
person or members of such group) to purchase for an amount equal to the then
current exercise price, in lieu of preferred stock, a number of shares of the
Company's Common Stock having a market value of twice the Right's exercise
price. In addition, when exercisable, the Company may exchange the Rights, in
whole or in part, at an exchange ratio of one share of Common Stock or one
one-thousandth of a share of Preferred Stock per Right. In the event that the
Company is acquired in a merger or other business combination, the Rights would
entitle the stockholders (other than the acquirer) to purchase securities of the
surviving company at a similar discount. Until they become exercisable, the
Rights will be evidenced by the Common Stock certificates and will be
transferred only with such certificates. Under the Agreement, the Company can
redeem all outstanding Rights at $.01 per Right at any time until the tenth day
following the public announcement that a 20% beneficial ownership position has
been acquired or the Company has been acquired in a merger or other business
combination. The Rights will expire on November 17, 2005.
NOTE L--Employee Benefit Plans
Stock Option Plans: The 1992 Equity Incentive Plan enables the Compensation
Committee of the Board of Directors of the Company to grant awards in the form
of options, stock appreciation rights, restricted or unrestricted stock awards,
deferred stock awards and performance awards, as defined in the Plan. During
fiscal 2000, 1999 and 1998, the Company granted under the Plan stock options to
purchase 794,700, 562,050 and 519,750 shares, respectively, of Common Stock at a
purchase price equal to the fair value of the Common Stock at the date of grant.
No other awards were made under the Plan through September 30, 2000. Options
granted in fiscal 2000, 1999 and 1998 under the 1992 Equity Incentive Plan are
exercisable in equal installments over a four year period beginning one year
from the date of grant and have a contractual life of four years and six months.
Options granted in prior fiscal years under the same Plan are exercisable in
equal installments over a five year period and have a contractual life of five
years and sixty days. Options available for grant are 456,474, 1,056,946 and
1,545,105 at September 30, 2000, 1999 and 1998, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE L--Employee Benefit Plans--(continued)
The Company also has several nonqualified and incentive stock option plans
adopted from 1979 through 1987. No additional options were granted under these
plans since fiscal 1992. Options granted under these plans are exercisable five
years after the date of grant and generally have a ten year contractual life.
The following schedule summarizes the changes in stock options issued under
various plans for the three fiscal years in the period ended September 30, 2000.
Options exercisable under the plans were 498,244, 428,288, and 460,744 in fiscal
2000, 1999, and 1998, respectively.
<TABLE>
<CAPTION>
Weighted - Average
Number of Shares Exercise Price Per Share Exercise Price Per Share
--------------------- ---------------- ------------------------ -------------------------
<S> <C> <C> <C>
Outstanding at
September 30, 1997 1,373,931 $ 11.97 $ 3.26 - 23.00
Granted .......... 519,750 18.34 17.67 - 24.00
Exercised ........ (266,476) 8.59 3.26 - 21.67
Canceled ......... (69,147) 15.73 7.33 - 21.67
----------- ---------- ---------------
Outstanding at
September 30, 1998 1,558,058 14.51 3.26 - 24.00
Granted .......... 562,050 19.05 18.42 - 41.50
Exercised ........ (356,824) 10.74 3.26 - 23.13
Canceled ......... (75,215) 18.70 7.33 - 38.13
----------- ---------- ---------------
Outstanding at
September 30, 1999 1,688,069 16.64 3.26 - 41.50
Granted .......... 794,700 34.96 23.00 - 65.00
Exercised ........ (332,983) 13.92 3.26 - 23.13
Canceled ......... (194,228) 24.51 11.67 - 38.13
----------- ---------- ---------------
Outstanding at
September 30, 2000 1,955,558 $ 23.76 $ 3.26 - 65.00
=========== ========== ===============
</TABLE>
As discussed in Note A, the Company has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," and continues to
account for stock-based compensation under APB 25. Generally no compensation
expense is recorded with respect to the Company's stock option and employee
stock purchase plans.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE L--Employee Benefit Plans--(continued)
The following summarizes information about options outstanding and exercisable
at September 30, 2000:
<TABLE>
<CAPTION>
Outstanding Exercisable
----------------------------------------------------- ---------------------------------
Weighted - Weighted - Weighted -
Exercise Price Average Remaining Average Exercise Number of Average Exercise
Per Share Number of Shares Contractual Life Price Per Share Shares Price Per Share
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.26 - 3.33 65,147 0.8 Years $3.31 65,147 $3.31
11.67 - 17.67 596,231 1.4 Years 16.83 263,441 16.71
18.00 - 27.00 559,830 2.1 Years 18.80 167,671 18.82
27.93 - 38.13 718,350 3.7 Years 34.41 1,485 37.56
41.50 - 65.00 16,000 3.8 Years 60.54 500 41.50
--------------- --------- --------- ------ ------- -------
$3.26 - 65.00 1,955,558 2.4 Years $23.76 498,244 $15.33
=============== ========= ========= ====== ======= =======
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
September 30,
----------------------------------------
2000 1999 1998
----------------------------- ------------ ------------ ------------
Expected volatility 49.4% 56.4% 31.9%
Risk-free interest rate 6.1% 4.6% 5.9%
Expected lives (in years) 3.9 4.4 4.4
--------------------------------------------------------------------------------
The Company has not paid and does not anticipate paying cash dividends;
therefore, the expected dividend yield is assumed to be zero.
The weighted-average fair value of options granted under the 1992 Equity
Incentive Plan during fiscal 2000, 1999 and 1998 was $17.07, $9.64 and $10.15,
respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE L--Employee Benefit Plans--(continued)
For purposes of the pro forma disclosure below, the estimated fair value of the
Company's stock-based compensation plan and the estimated benefit derived from
the Company's Stock Purchase Plan is amortized to expense over the options'
vesting period. The Company's pro forma net income and net income per share for
the years ended September 30, 2000, 1999 and 1998 are as follows:
2000 1999 1998
------ ------ ------
Net income (in thousands):
As reported $15,701 $22,378 $14,720
Pro forma 12,126 19,907 13,909
Earnings per share:
As reported $1.21 $1.71 $1.15
Pro forma 0.94 1.52 1.09
Stock Purchase Plan: In accordance with the 1992 Employee Stock Purchase Plan,
eligible employees may authorize payroll deductions of up to 10% of their
compensation (not to exceed $12,500 in a six month period) to purchase shares at
the lower of 85% of the fair market value of the Company's Common Stock at the
beginning or end of the six month option period. During fiscal 2000, 93,890
shares were issued to employees at prices ranging from $22.10 to $39.84 per
share.
At September 30, 2000, a total of 2,775,914 shares of Common Stock were reserved
for issuance. Included in this amount are 2,346,867 shares for the 1992 Equity
Incentive Plan, 324,737 shares for the Employee Stock Purchase Plan and 104,310
shares for the various stock option plans adopted in the period 1979 through
1987.
Defined Contribution Plan: The Company sponsors a defined contribution savings
plan for the benefit of substantially all employees. Company contributions to
the plan are based upon a matching formula applied to employee contributions.
Total expense under the plan was $1,835,000, $1,475,000 and $1,182,000 in fiscal
2000, 1999 and 1998, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE M--Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended September 30,
----------------------------------------------------
2000 1999 1998
------------------ ----------------- ---------------- -----------------
Current:
Federal $10,449 $12,953 $10,315
State 1,669 1,924 1,706
Foreign 574 256 177
------- ------- --------
12,692 15,133 12,198
------- ------- --------
Deferred:
Federal (3,378) (2,652) (2,264)
State (482) (379) (323)
------- ------- --------
(3,860) (3,031) (2,587)
------- ------- --------
$8,832 $12,102 $9,611
======= ======= ========
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE M--Income Taxes--(continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows (in thousands):
September 30,
----------------------
2000 1999
----------------------------------------- --------- --------
Deferred tax assets:
Inventory reserves ................... $ 676 $ 652
Accounts receivable reserves ......... 2,460 2,292
Accrued expenses ..................... 2,601 2,171
Deferred maintenance revenues ........ 7,968 4,633
Other ................................ 2,405 2,792
Net operating loss carryforwards
of foreign subsidiaries.............. 122 689
--------- --------
Total deferred tax assets ............ 16,232 13,229
Valuation allowance ................ (122) (993)
--------- --------
16,110 12,236
Deferred tax liabilities:
Capitalized software development costs (5,806) (4,790)
--------- --------
Net deferred tax assets ............ $ 10,304 $ 7,446
========= ========
The effective tax rate differed from the United States statutory rate as
follows:
Year Ended September 30,
-------------------------
2000 1999 1998
----------------------------------------------- ----- ----- -----
Statutory rate ................................ 35% 35% 35%
State income taxes, net of federal
income tax benefit .......................... 4 4 4
Foreign losses not benefited .................. -- -- 5
Use of foreign net operating loss carryforwards -- (4) --
Income tax credits ............................ (4) (2) (2)
Other ......................................... 1 2 (2)
----- ----- -----
36% 35% 40%
===== ===== =====
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE M--Income Taxes--(continued)
During fiscal 2000, $322,000 of net operating loss carryforwards from foreign
operations were utilized, and $304,000 remain available to reduce future income
taxes payable in their respective countries. The remaining net operating loss
carryforwards may be carried forward indefinitely.
The Company made income tax payments of $7,128,000, $15,409,000, and $7,659,000
in fiscal 2000, 1999, and 1998, respectively.
NOTE N--Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------
2000 1999 1998
----------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net income (in thousands) ......... $ 15,701 $ 22,378 $ 14,720
=========== =========== ===========
Weighted-average shares ........ 12,429,338 12,548,061 12,392,666
Effect of dilutive securities:
Employee stock options ......... 519,003 561,170 392,290
----------- ----------- -----------
Adjusted weighted-average shares
and assumed conversions ...... 12,948,341 13,109,231 12,784,956
=========== =========== ===========
Basic earnings per share .......... $ 1.26 $ 1.78 $ 1.19
=========== =========== ===========
Diluted earnings per share ........ $ 1.21 $ 1.71 $ 1.15
=========== =========== ===========
</TABLE>
F-21
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Kronos Incorporated
We have audited the accompanying consolidated balance sheets of Kronos
Incorporated as of September 30, 2000 and 1999 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kronos
Incorporated at September 30, 2000 and 1999, and the consolidated results of
operations and cash flows for each of the three years in the period ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
October 25, 2000
F-21
<PAGE>
Exhibits Index
Exhibit
No. Description
3.1(10) Restated Articles of Organization of the Registrant,
as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(11) 1986A Stock Option Plan.
10.2(10)(11) 1992 Equity Incentive Plan, as amended and restated.
10.3(9)(12) 1992 Employee Stock Purchase Plan, as amended and restated.
10.4(3) Lease dated November 16, 1993, between Teachers Realty
Corporation and the Registrant, relating to premises leased in
Chelmsford, MA.
10.5(5) Lease dated August 8, 1995, between Principal Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Chelmsford, MA.
10.6(8) Fleet Bank Letter Agreement and Promissory Note dated January
1, 1997, relating to amendment of $3,000,000 credit facility.
10.7(14) Restated Software License & Support & Hardware Purchase
Agreement dated September 25, 2000 between ADP, Inc. and
the Registrant.
10.8* Sales Agreement dated December 6, 1990, between Integrated
Design, Inc. and the Registrant.
10.8.1(6) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated Design, Inc. and the
Registrant.
10.8.2 Amendment dated October 8, 1999 to Sales Agreement dated
December 6, 1990 between Integrated Design, Inc. and the
Registrant.
10.9(3)(13) Acquisition Agreement dated November 2, 1993 between
Interboro Systems Corporation and the Registrant.
10.10* Form of Indemnity Agreement entered into among the Registrant
and Directors of the Registrant.
10.11(1) Lease dated November 9, 1992, as amended, between John Hancock
Mutual Life Insurance Company and the Registrant, relating to
premises leased in Waltham, MA.
10.11.1(6) Amendment dated January 1, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.11.2(8) Amendment dated October 11, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.12 (4) Agreement of Reorganization among Kronos Incorporated;
Kronos S/T Corporation, ShopTrac Data Collection Systems,
Inc., Thomas J. O'Malia and Mark J. MacWhirter, dated
March 31, 1994.
10.13(11) Lease Agreement Between W/9TIB Real Estate Limited
Partnership, as Landlord, and Kronos Incorporated, as Tenant
Dated 2/26/99
10.14(11) Construction Agreement Between Cranshaw Construction of
New England Limited Partnership and Kronos Incorporated
Dated March 10, 1999.
<PAGE>
Exhibits (continued)
Exhibit
No. Description
10.15(12) Agreement of Purchase and Sale Beyond Between W/9TIB Real
Estate Limited Partnership and Kronos
Incorporated Dated March 29, 1999.
10.16(11) Form of Senior Executive Retention Agreement.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Incorporated by reference to the same Exhibit Number in the
Company's Registration Statement on Form S-1
(File No. 33-47383).
(1) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1992.
(2) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1993.
(3) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1993.
(4) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended July 2, 1994.
(5) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30,1995.
(6) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 30, 1996.
(7) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1996.
(8) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended December 28, 1996.
(9) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 29, 1997.
(10) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 4, 1998.
<PAGE>
Exhibits (continued)
(11) Management contract or compensatory plan or arrangement filed
as an exhibit to this Form 10-K pursuant to Items 14(a) and
14(c) of Form 10-K.
(12) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1999.
(13) Confidential treatment was granted for certain portions of
this agreement.
(14) Confidential treatment was requested for certain portions of
this agreement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last fiscal quarter of the
fiscal year covered by this report.
Kronos, Timekeeper, Timekeeper Central, Jobkeeper, Jobkeeper Central,
Datakeeper, Datakeeper Central, Gatekeeper, Gatekeeper Central, Imagekeeper,
TeleTime, TimeMaker, CardSaver, ShopTrac, the ShopTrac logo, Start. Time,
Keep.Trac, Solution in a Box, Visionware and the Company's logo are registered
trademarks of the Company. DKC/Datalink, Timekeeper Web, HyperFind, Kronos 2100,
Smart Scheduler, Starter Series, Start.Labor, Start.WIP, Start.Quality, Labor
Plus, WIP Plus, Comm.Mgr, CommLink, Community Computer, Tempo and the Tempo
logo, ShopTrac Pro, Workforce Central and the Workforce Central logo, Workforce
Timekeeper, Workforce Activities, Workforce Smart Scheduler, Workforce Manager,
Workforce Accruals, Workforce Web, Workforce TeleTime, Workforce Express,
Workforce Scheduler, Workforce Decisions and Prism are trademarks of the
Company. IBM is a registered trademark of, and AS and AS/400 are trademarks of,
International Business Machines Corporation Total Time is a service mark of ADP,
Inc. and ADP is a registered trademark of Automatic Data Processing, Inc. Time
Bank is a registered trademark of Integrated Design Inc. UNIX is a registered
trademark in the U.S. and other countries, licensed exclusively by X/Open
Company Ltd. VMS is a registered trademark of Digital Equipment Corporation.
Microsoft, Windows, and Windows 95 are registered trademarks of, and Windows NT
is a trademark of, Microsoft Corporation. Oracle is a registered trademark of
Oracle Corporation. Informix is a registered trademark of Informix Software,
Inc. PeopleSoft is a registered trademark of PeopleSoft, Inc. Baan is a
trademark of Baan Development B.V. Honeywell is a registered trademark of
Honeywell, Inc. J.D. Edwards is a registered trademark of J.D. Edwards and
Company. Lawson is a registered trademark of Lawson Associates, Inc. SAP is a
trademark of SAP AG. Citrix is a registered trademark and Metaframe is a
trademark of Citrix Systems Inc.
<PAGE>
