SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-20109
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Kronos Incorporated
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2640942
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
297 Billerica Road, Chelmsford, MA 01824
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(Address of principal executive offices) (Zip Code)
(978) 250-9800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of April 27, 2002, 19,678,776 shares of the registrant's common
stock, $.01 par value, were outstanding.
KRONOS INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended March 30, 2002 and March 31, 2001 1
Condensed Consolidated Balance Sheets at March 30, 2002
and September 30, 2001 2
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended March 30, 2002 and March 31, 2001 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II.OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
UNAUDITED
Three Months Ended Six Months Ended
--------------------------- --------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
----------- ------------ ---------- ------------
Net revenues:
Product .......................................... $ 33,979 $ 32,607 $ 69,193 $ 66,581
Service .......................................... 45,955 35,026 86,870 66,233
------------ ------------ ------------ ------------
79,934 67,633 156,063 132,814
------------ ------------ ------------ ------------
Cost of sales:
Product .......................................... 8,396 7,939 16,850 15,711
Service .......................................... 22,930 20,342 43,744 38,463
------------ ------------ ------------ ------------
31,326 28,281 60,594 54,174
------------ ------------ ------------ ------------
Gross profit ................................. 48,608 39,352 95,469 78,640
Operating expenses and other income:
Sales and marketing .............................. 26,058 24,609 51,249 46,967
Engineering, research and development ............ 9,251 8,416 17,187 16,336
General and administrative ....................... 5,075 4,476 9,607 8,616
Amortization of intangible assets ................ 724 1,853 1,367 3,587
Other income, net ................................ (1,314) (1,559) (2,289) (2,712)
Special charge ................................... -- 2,991 -- 2,991
------------ ------------ ------------ ------------
39,794 40,786 77,121 75,785
Income before income taxes ................... 8,814 (1,434) 18,348 2,855
Income tax provision (benefit) ......................... 3,041 (502) 6,378 999
------------ ------------ ------------ ------------
Net income (loss) ............................ $ 5,773 $ (932) $ 11,970 $ 1,856
============ ============ ============ ============
Net income (loss) per common share:
Basic ........................................ $ 0.29 $ (0.05) $ 0.61 $ 0.10
============ ============ ============ ============
Diluted ...................................... $ 0.28 $ (0.05) $ 0.58 $ 0.10
============ ============ ============ ============
Average common and common equivalent shares outstanding:
Basic ........................................ 19,760,008 18,747,669 19,582,466 18,650,372
============ ============ ============ ============
Diluted ...................................... 20,765,450 18,747,669 20,576,827 19,254,740
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
March 30, September 30,
2002 2001
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ASSETS
Current assets:
Cash and equivalents ................................................................ $ 14,250 $ 36,561
Marketable securities ............................................................... 25,516 13,812
Accounts receivable, less allowances of $9,525
at March 30, 2002 and $7,151 at September 30, 2001 ............................... 62,025 75,295
Deferred income taxes ............................................................... 6,917 6,655
Other current assets ................................................................ 22,247 15,819
--------- ---------
Total current assets ......................................................... 130,955 148,142
Property, plant and equipment, net ..................................................... 36,563 36,016
Marketable securities .................................................................. 23,400 18,400
Intangible assets ...................................................................... 20,188 17,027
Goodwill ............................................................................... 56,103 34,142
Deferred software development costs, net ............................................... 17,725 17,144
Other assets ........................................................................... 16,684 13,943
--------- ---------
Total assets .................................................................. $ 301,618 $ 284,814
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................................... $ 7,470 $ 7,272
Accrued compensation ................................................................ 24,397 26,932
Accrued expenses and other current liabilities ...................................... 14,625 16,073
Deferred professional service revenues .............................................. 28,020 29,740
Deferred maintenance revenues ....................................................... 63,213 57,053
--------- ---------
Total current liabilities ..................................................... 137,725 137,070
Deferred maintenance revenues .......................................................... 9,039 12,054
Other liabilities ...................................................................... 4,310 4,674
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, 19,911,952 and
19,154,138 shares issued at March 30, 2002 and September 30, 2001, respectively .. 199 192
Additional paid-in capital .......................................................... 35,502 20,548
Retained earnings ................................................................... 126,318 114,348
Cost of Treasury Stock (205,685 shares and 95,787 shares
at March 30, 2002 and September 30, 2001) ......................................... (9,894) (2,588)
Accumulated other comprehensive income (loss):
Foreign currency translation ...................................................... (1,468) (1,796)
Net unrealized (loss) gain on available-for-sale investments ...................... (113) 312
--------- ---------
(1,581) (1,484)
Total shareholders' equity .................................................... 150,544 131,016
--------- ---------
Total liabilities and shareholders' equity .................................... $ 301,618 $ 284,814
========= =========
See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
UNAUDITED
Six Months Ended
---------------------
March 30, March 31,
2002 2001
--------- ---------
Operating activities:
Net income .............................................................. $ 11,970 $ 1,856
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation .................................................... 4,405 3,862
Amortization of intangible assets ............................... 1,369 3,587
Amortization of deferred software development costs ............. 4,629 4,071
Provision for deferred income taxes ............................. 45 (1,051)
Changes in certain operating assets and liabilities:
Accounts receivable, net .................................... 21,497 13,077
Deferred maintenance revenue ................................ (3,718) (1,540)
Deferred professional service revenue ....................... (3,625) 654
Accounts payable, accrued compensation
and other liabilities ................................... (6,717) 687
Taxes payable ............................................... (7,054) (2,729)
Non cash portion of special charge .......................... -- 1,253
Other ....................................................... 1,928 480
Tax benefit from exercise of stock options ...................... 9,654 2,304
-------- --------
Net cash and equivalents provided by operating activities 34,383 26,511
Investing activities:
Purchase of property, plant and equipment ............................... (4,673) (3,045)
Capitalization of software development costs ............................ (5,958) (5,838)
Increase in marketable securities ....................................... (16,704) (25,838)
Acquisitions of businesses and technology, net of cash acquired ......... (27,311) (2,056)
-------- --------
Net cash and equivalents used in investing activities ... (54,646) (36,777)
Financing activities:
Net proceeds from exercise of stock option and employee stock
purchase plans ...................................................... 15,006 5,964
Purchase of treasury stock .............................................. (14,217) (6,453)
Net investment in call option ........................................... (2,810) --
-------- --------
Net cash and equivalents used in financing activities ... (2,021) (489)
Effect of exchange rate changes on cash and equivalents ...................... (27) (457)
-------- --------
Decrease in cash and equivalents ............................................. (22,311) (11,212)
Cash and equivalents at the beginning of the period .......................... 36,561 23,201
-------- --------
Cash and equivalents at the end of the period ................................ $ 14,250 $ 11,989
======== ========
See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - General
The accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of normal recurring accruals that management of
Kronos Incorporated (the "Company") considers necessary for a fair presentation
of the Company's financial position and results of operations as of and for the
interim periods presented pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures in these financial
statements are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the Company's audited financial statements for the fiscal year ended September
30, 2001. The results of operations for the three and six months ended March 30,
2002 are not necessarily indicative of the results for a full fiscal year.
Certain reclassifications have been made in the accompanying consolidated
financial statements in order to conform to the fiscal 2002 presentation.
NOTE B - Fiscal Quarters
The Company utilizes a system of fiscal quarters. Under this system, the first
three quarters of each fiscal year end on a Saturday. However, the fourth
quarter of each fiscal year will always end on September 30. Because of this,
the number of days in the first quarter (90 days in fiscal 2002 and 91 days in
fiscal 2001) and fourth quarter (93 days in fiscal 2002 and 92 days in fiscal
2001) of each fiscal year varies from year to year. The second and third
quarters of each fiscal year will be exactly thirteen weeks long. This policy
does not have a material effect on the comparability of results of operations
between quarters.
NOTE C - Other Current Assets
Other current assets consists of the following (in thousands):
March 30, 2002 September 30, 2001
-------------- ------------------
Inventory $5,823 $5,076
Prepaid income and other taxes 5,483 903
Prepaid commissions 4,163 4,633
Prepaid royalties 2,329 2,251
Prepaid expenses - other 4,449 2,956
----- -----
Total $22,247 $15,819
======= =======
NOTE D - Goodwill and Other Intangible Assets - Adoption of Statements 141 and
142
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations", and No. 142,
"Goodwill and Other Intangible Assets" (the "Statements"). Under the new rules,
goodwill (and intangible assets deemed to have indefinite lives) will no longer
be amortized but will be subject to annual impairment tests in accordance with
the Statements. Other intangible assets will continue to be amortized over their
useful lives.
For acquisitions completed prior to June 30, 2001, the Company has applied the
new rules on accounting for business combinations and goodwill and other
intangible assets beginning in the first quarter of fiscal 2002. For
acquisitions completed after June 30, 2001, the Company has applied the new
rules beginning in the fourth quarter of fiscal 2001.
During the three-month period ended March 30, 2002, the Company completed the
initial testing of the impairment of goodwill, as of October 1, 2001. As a
result of the test, the Company has concluded that no impairment of goodwill
exists as of October 1, 2001.
The following table presents the impact of the new standards related to goodwill
amortization (and related tax effects) on net income and earnings per share, as
if they had been in effect for the three and six months ended March 31, 2001 (in
thousands, except per share data).
Three Months Ended Six Months Ended
--------------------- ----------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
---------- --------- ---------- ----------
Reported net income .......................... $ 5,773 $ (932) $ 11,970 $ 1,856
Add back: Goodwill amortization ......... -- 875 -- 1,700
--------- ------- ---------- ---------
Adjusted net income ...................... $ 5,773 $ (57) $ 11,970 $ 3,556
========= ======= ========== =========
Basic earnings-per-share:
Reported net income ...................... $ 0.29 $ (0.05) $ 0.61 $ 0.10
Goodwill amortization .................... -- 0.05 -- 0.09
--------- ------- ---------- ---------
Adjusted net income ...................... $ 0.29 $ 0.00 $ 0.61 $ 0.19
========= ======= ========== =========
Diluted earnings-per-share:
Reported net income ...................... $ 0.28 $ (0.05) $ 0.58 $ 0.10
Goodwill amortization .................... -- 0.05 -- 0.09
--------- ------- ---------- ---------
Adjusted net income ...................... $ 0.28 $ 0.00 $ 0.58 $ 0.18
========= ======= ========== =========
Acquired intangible assets subject to amortization are presented in the
following table.
(in thousands)
As of March 30, 2002
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Gross Carrying Accumulated
Amount Amortization
-------------- ------------
Customer related $18,875 $5,757
Maintenance relationships 6,004 287
Non-compete agreements and other 2,618 1,265
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$27,497 $7,309
======= ======
For the three and six months ended March 30, 2002, amortization expense for
intangible assets was $0.7 million and $1.4 million, respectively. The estimated
annual amortization expense for intangible assets for the current and next five
fiscal years is as follows (in thousands):
Fiscal Year Ending Estimated annual
September 30, amortization expense
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2002 $2,843
2003 2,853
2004 2,476
2005 2,029
2006 1,989
2007 1,974
NOTE E - Acquisitions
On November 29, 2001, the Company completed the acquisition of certain assets
and the ongoing business operations of NW Micro-Technics, Inc. ("NWM"), the
former Oregon-based Kronos dealer. The aggregate purchase price was not material
to the Company's financial position. The results of NWM's operations, which are
not material to the Company's results of operations, have been included in the
consolidated financial statements since that date. NWM was engaged in the sale
and service of employee time and attendance, employee scheduling, data
collection and labor management hardware and software systems, including the
resale of the Company's products through a dealer relationship. As a result of
the acquisition, the Company gains access to existing and prospective customers
in the northwestern United States region through its direct sales and service
organizations, as well as access to the existing maintenance revenue stream from
NWM customers.
On December 28, 2001, the Company completed the acquisition of certain assets
and the ongoing business operations of the Integrated Software Business of
SimplexGrinnell's Workforce Solutions Division ("SimplexGrinnell"). The
aggregate purchase price was $22.1 million in cash. The results of
SimplexGrinnell's operations have been included in the consolidated financial
statements since that date. SimplexGrinnell was engaged in the development,
sales and support of integrated workforce management software solutions. As a
result of the acquisition, the Company expects to increase its presence in the
mid-market sector, which includes companies with between 100 and 1,000
employees.
The transaction was accounted for under the purchase method of accounting and
accordingly, the assets and liabilities acquired were recorded at their
estimated fair values at the effective date of the acquisition. The following
table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of the acquisition (in thousands).
At December 28, 2001
--------------------
Accounts receivable $6,773
Intangible assets 3,600
Goodwill 17,783
Other assets 743
--------
Total assets acquired 28,899
Deferred professional services revenue (1,564)
Deferred maintenance revenue (5,161)
Other liabilities (124)
--------
Total liabilities assumed (6,849)
--------
Net assets acquired $22,050
========
Due to the timing of the SimplexGrinnell acquisition, the Company has not
finalized the allocation of the purchase price.
The following table presents the consolidated results of operations on an
unaudited pro forma basis as if the acquisition of SimplexGrinnell had taken
place at the beginning of the periods presented. The following table has been
prepared on the basis of estimates and assumptions available at the time of this
filing that the Company and SimplexGrinnell believe are reasonable under the
circumstances (in thousands, except per share data).
Three Months Ended Six Months Ended
------------------------- -------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
------------ ----------- ----------- -------------
Total revenues ............. $ 79,934 $ 72,829 $ 162,632 $ 144,386
Net income ................. 5,773 (2,056) 10,807 (1,275)
Earnings per share - basic . $ 0.29 $ (0.11) $ 0.55 $ (0.07)
Earnings per share - diluted $ 0.28 $ (0.11) $ 0.53 $ (0.07)
The unaudited pro forma results of operations are for comparative purposes only
and do not necessarily reflect the results that would have occurred had the
acquisitions occurred at the beginning of the periods presented or the results
which may occur in the future.
On February 20, 2002, the Company completed the acquisition of certain assets
and the ongoing business operations of Packard Business Systems, Inc.
("Packard"), the former West Virginia-based Kronos dealer. The aggregate
purchase price was not material to the Company's financial position. The results
of Packard's operations, which are not material to the Company's results of
operations, have been included in the consolidated financial statements since
that date. Packard was engaged in the sale and service of employee time and
attendance, employee scheduling, data collection and labor management hardware
and software systems, including the resale of the Company's products through a
dealer relationship. As a result of the acquisition, the Company gains access to
existing and prospective customers in the West Virginia area through its direct
sales and service organizations, as well as access to the existing maintenance
revenue stream from Packard customers.
On March 18, 2002, the Company completed the acquisition of the outstanding
stock of Data Collection Systems Ltd. ("DCS"), a provider of time and attendance
applications headquartered in the U.K. The aggregate purchase price was not
material to the Company's financial position. The results of DCS's operations,
which are not material to the Company's results of operations, have been
included in the consolidated financial statements since that date. As a result
of the acquisition, the Company gains access to existing and prospective
customers in the U.K. through its subsidiary in the U.K., Kronos Systems Ltd.,
as well as access to the existing maintenance revenue stream from DCS customers.
NOTE F - Source Code License Agreement
On March 15, 2002, the Company entered into an agreement with Best Software Inc.
("Best") to acquire a limited license to the source code and object code for
Best's human resources and payroll software (Abra Enterprise (TM)). Under the
terms of the agreement, Best will provide the Abra Enterprise source code to the
Company and give the Company the right to reproduce, market and sublicense the
software. The Company will integrate Abra Enterprise into its Workforce
Central(TM) suite and will market and sublicense the integrated product suite.
Per the terms of the agreement, the Company shall pay to Best a one-time
technology delivery fee, a portion of which is being amortized over a five (5)
year period and is included in other assets on the balance sheet. The agreement
also requires the Company to pay minimum royalties for the first five (5) years
of the agreement with royalty payments based on the number of licensed employees
continuing for an aggregate period of ten (10) years.
NOTE G - Comprehensive Income
For the three and six months ended March 30, 2002 and March 31, 2001,
comprehensive income (loss) consisted of the following (in thousands):
Three Months Ended Six Months Ended
------------------------ ---------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
---------- ----------- ---------- ---------
Comprehensive income (loss):
Net income (loss) ............... $ 5,773 $ (932) $ 11,970 $ 1,856
Cumulative translation adjustment 125 (666) 328 (540)
Unrealized (loss) gain on
available-for-sale securities ... (274) 200 (425) 405
-------- -------- -------- --------
Total comprehensive income (loss) $ 5,624 $ (1,398) $ 11,873 $ 1,721
======== ======== ======== ========
NOTE H - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except share and per share data):
Three Months Ended Six Months Ended
------------------------ ------------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
----------- ----------- ----------- ----------
Net income (loss) ............ $ 5,773 $ (932) $ 11,970 $ 1,856
=========== =========== =========== ===========
Weighted-average shares ...... 19,760,008 18,747,669 19,582,466 18,650,372
Effect of dilutive securities:
Employee stock options ... 1,005,442 -- 994,361 604,368
----------- ----------- ----------- -----------
Adjusted weighted-average
shares and assumed conversions 20,765,450 18,747,669 20,576,827 19,254,740
=========== =========== =========== ===========
Basic earnings per share ..... $ 0.29 $ (0.05) $ 0.61 $ 0.10
=========== =========== =========== ===========
Diluted earnings per share ... $ 0.28 $ (0.05) $ 0.58 $ 0.10
=========== =========== =========== ===========
NOTE I - Stock Split
On October 25, 2001, the Company's Board of Directors approved a three-for-two
stock split effected in the form of a 50% stock dividend. This stock dividend
was paid on November 15, 2001 to stockholders of record as of November 5, 2001.
Accordingly, the presentation of shares outstanding and amounts per share have
been restated for all periods presented to reflect the split. The par value of
the additional shares was transferred from additional paid-in capital to Common
Stock.
NOTE J - New Accounting Pronouncements
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment of long-lived assets and for long-lived assets
to be disposed of. This statement supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS No. 144 is effective for
the Company October 1, 2002, and early adoption is allowed. The Company does not
expect SFAS No. 144 to have a material effect on its earnings or financial
position.
In January 2002, the Emerging Issues Task Force (EITF) issued EITF No. 01-14,
"Income Statement Characterization of Reimbursements Received for
'Out-of-Pocket' Expenses Incurred" (formerly EITF Abstracts, Topic No. D-103).
This EITF requires that reimbursements received for out-of-pocket expenses
incurred should be characterized as revenue in the income statement as opposed
to a reduction of expenses incurred. Out-of-pocket expenses include travel
expenses such as airfare, hotel, mileage and meals that the customer will
reimburse the service vendor. The EITF is effective for financial reporting
periods beginning after December 15, 2001. As a result of the adoption of the
EITF, service revenues and the corresponding cost of sales increased by $0.3
million for the three month periods ended March 30, 2002 and March 31, 2001, and
by $0.6 million and $0.5 million for the six month periods ended March 30, 2002
and March 31, 2001, respectively.
Item 2. 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, including statements relating to revenues derived
from prior acquisitions, revenue growth rates and gross profit, operating
expenses, future acquisitions and available cash, investments and operating cash
flow. 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.
Critical Accounting Policies
Management's discussion and analysis of financial condition and results of
operations are based upon Kronos' consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
Kronos to make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenue and expenses, and related disclosures of
contingent assets and liabilities. Kronos bases its estimates on historical
experience and various other assumptions that are believed to be reasonable
under the circumstances. Actual results could differ from these estimates under
different assumptions or conditions.
Kronos has identified the following critical accounting policies that
affect the more significant judgments and estimates used in the preparation of
consolidated financial statements. This listing is not a comprehensive list of
all of Kronos' accounting policies. Please refer to Note A in the Notes to
Consolidated Financial Statements in Item 14 of Kronos' Annual Report on Form
10-K for the year ended September 30, 2001 for further information.
Revenue Recognition - Kronos recognizes revenues in accordance with the
provisions of the American Institute of Certified Public Accountants Statement
of Position (SOP) 97-2, "Software Revenue Recognition," as amended by SOP 98-9,
"Modification of SOP 97-2, With Respect to Certain Transactions." Product
revenue from sales and sales-type leases is recognized upon shipment when a
noncancelable agreement has been signed, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable and collection is
probable. Revenue earned on software arrangements involving multiple elements
which qualify for separate element treatment is allocated to each element based
on the relative fair values of those elements based on vendor specific objective
evidence. In instances where vendor specific objective evidence does not exist
for delivered elements, typically software products, the residual method is used
to recognize revenue. Typically software fees are due within one year from date
of contract signing. If the fee due from the customer is not fixed or
determinable, including payment terms greater than one year from contract
signing, revenue is recognized as payments become due and all other conditions
for revenue recognition have been satisfied. Revenues from maintenance
agreements are recognized ratably over the contractual period and all other
service revenues are recognized as the services are performed.
Allowance for Doubtful Accounts and Sales Returns Allowance - Kronos
maintains an allowance for doubtful accounts to reflect estimated losses
resulting from the inability of customers to make required payments. This
allowance is based on estimates made by Kronos after consideration of factors
such as the composition of the accounts receivable aging, bad debt history, and
customer creditworthiness. If the financial condition of customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances and bad debt expense may be required. In addition, Kronos
maintains a sales returns allowance to reflect estimated losses for sales
returns and adjustments. This allowance is established by Kronos using estimates
based on historical experience. If Kronos experiences an increase in sales
returns and adjustments, additional allowances and charges against revenue may
be required.
Valuation of Intangible Assets and Goodwill - In assessing the
recoverability of goodwill and other intangible assets, Kronos must make
assumptions regarding the estimated future cash flows and other factors to
determine the fair value of the respective assets. If these estimates or their
related assumptions change in the future, Kronos may be required to record
impairment charges against these assets in the reporting period in which the
impairment is determined. For intangible assets, this evaluation includes an
analysis of estimated future undiscounted net cash flows expected to be
generated by the assets over their estimated useful lives. If the estimated
future undiscounted net cash flows are insufficient to recover the carrying
value of the assets over their estimated useful lives, Kronos will record an
impairment charge in the amount by which the carrying value of the assets
exceeds their fair value. For goodwill, the impairment evaluation includes a
comparison of the carrying value of the reporting unit which houses goodwill to
that reporting unit's fair value. The fair value of the reporting unit is based
upon the net present value of future cash flows, including a terminal value
calculation. If the reporting unit's estimated fair value exceeds the reporting
unit's carrying value, no impairment of goodwill exists. If the fair value of
the reporting unit does not exceed its carrying value, then further analysis
would be required to determine the amount of the impairment, if any. For the
first six months of fiscal 2002, no impairment was recorded.
Capitalization of 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. Costs incurred in the development of software for internal use are charged
to expense until it becomes probable that future economic benefits will be
realized. Thereafter, certain costs are capitalized and amortized to operating
expense on a straight-line basis over the lesser of three years or the estimated
economic life of the software.
Results of Operations
Revenues. Revenues for the three and six month periods ended March 30, 2002
were $79.9 million and $156.1 million, respectively, as compared to $67.6
million and $132.8 million for the comparable periods in the prior year. Revenue
growth was 18% for both the three and six month periods ended March 30, 2002, as
compared to 9% and 5% in the comparable periods in the prior year. The revenue
growth rates experienced in the three and six month periods ended March 30, 2002
were primarily attributable to the continued increase in demand for Kronos'
services. In addition, revenues were favorably impacted by acquisition of
businesses over the preceding four quarters. The revenue growth rate experienced
in the second quarter of fiscal 2001 was principally due to the unusually low
growth rate experienced in the second quarter of fiscal 2000.
On December 28, 2001, Kronos acquired certain assets and the ongoing
business operations of the Integrated Software Business of SimplexGrinnell's
Workforce Solutions Division ("SimplexGrinnell"). The revenues and results of
operations related to the acquisition are included in the three and six month
periods ended March 30, 2002. Kronos presently anticipates that revenue growth,
including revenues from customers obtained in the acquisition of businesses,
will range between 12% - 17% in the third quarter of fiscal 2002 and range
between 14% - 17% for all of fiscal 2002.
Product revenues for the quarter increased 4% to $34.0 million as compared
to $32.6 million and a product revenue increase of 2% in the second quarter of
fiscal 2001. Product revenue for the first six months of fiscal 2002 increased
4% to $69.2 million as compared to $66.6 million and a product revenue decline
of 2% in the first six months of fiscal 2001. The product revenue growth
experienced in the three and six month periods ended March 30, 2002 was
attributable to revenues related to the conversion to Kronos products and add-on
sales to customers acquired from other providers of labor management solutions.
Product revenue derived from acquired customers was $2.7 million and $3.4
million in the three and six month periods ended March 30, 2002, respectively.
Management believes that, as a result of various factors including the broad
economic slowdown, many transactions, particularly those of larger transaction
value, have been deferred. The deferral of various transactions has negatively
impacted the organic revenue growth rates in the three and six month periods
ended March 30, 2002.
Service revenues for the second quarter of fiscal 2002 increased to $46.0
million as compared to $35.0 million in the second quarter of fiscal 2001.
Service revenues for the first six months of fiscal 2002 were $86.9 million as
compared to $66.2 million for the first six months of the prior year. Service
revenues increased 31% in both the three and six months ended March 30, 2002.
Excluding the effect of incremental service revenues from acquisition of
businesses in the preceding four quarters, service revenues increased 14% and
18% in the three and six month periods ended March 30, 2002, respectively. In
addition to the acquisition of businesses, the growth in service revenues in the
three and six month periods ended March 30, 2002 reflects an increase in the
level of professional services accompanying new and upgrade sales and, to a
lesser extent, an increase in maintenance revenue from the expansion of the
installed base and the level of services sold to the installed base. Service
revenues grew at a rate of 18% and 14% during the three and six month periods
ended March 31, 2001, respectively. The growth in service revenues in these
prior periods reflect an increase in maintenance revenue from expansion of the
installed base, increased level of services sold to the installed base and, to a
lesser extent, incremental maintenance revenues resulting from Kronos'
acquisitions of various dealer territories.
Gross Profit. Gross profit as a percentage of revenues was 61% for the
three and six month periods ended March 30, 2002, as compared to 58% and 59% for
the same periods of the prior year. The improvement in gross profit in the three
and six month periods ended March 30, 2002 was attributable to an increase in
service gross profit, which was partially offset by a decrease in product gross
profit in these periods. Management anticipates gross profit to be between 61%
and 63% over the remainder of the fiscal year. Product gross profit as a
percentage of product revenues was 75% and 76% in the three and six month
periods ended March 30, 2002, respectively, compared to 76% in the same periods
of the prior year. The decrease in product gross profit in this quarter is
primarily related to higher royalty costs, higher production costs attributable
to a newly released terminal, and higher costs associated with the
SimplexGrinnell product line. This decrease is partially offset by a higher
proportion of software sales that typically carry a higher gross profit than
hardware sales.
Service gross profit as a percentage of service revenues was 50% for the
three and six month periods ended March 30, 2002, compared to 42% in the same
periods of the prior year. The improvement in service gross profit is
attributable to increased productivity in the service organization. The
improvement in productivity is the result of leveraging investments in service
systems to more effectively manage the resources required to deliver
professional services and customer support.
Net Operating Expenses. Net operating expenses as a percentage of revenues
were 50% and 49% for the three and six month periods ended March 30, 2002,
respectively, as compared to 60% and 57% for the same periods in the prior year.
The decrease in operating expenses as a percentage of revenues was primarily due
to the special charge recorded in the second quarter of fiscal 2001 and the
elimination of goodwill amortization due to Kronos' adoption of Statements of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations" and
No. 142 ("SFAS 142") "Goodwill and Other Intangible Assets" effective October 1,
2001 (see Note D in the Notes to Condensed Consolidated Financial Statements).
On a pro forma basis, excluding the special charge and amortization expense, net
operating expenses as a percentage of revenues for the three and six month
periods ended March 31, 2001 were 54% and 53%, respectively.
Sales and marketing expenses as a percentage of revenues were 33% for the
three and six month periods ended March 30, 2002, as compared to 36% and 35% for
the comparable periods in the prior year. The decrease in sales and marketing
expense as a percent of revenue was attributable to leveraging our investment in
infrastructure to generate higher sales volumes. Engineering, research and
development expenses as a percentage of revenues were 12% and 11% for the three
and six month periods ended March 30, 2002 as compared to 12% for the comparable
periods in the prior year. The decrease as a percentage of revenues for the six
month period ended March 30, 2002 as compared to the same period in the prior
fiscal year was due to higher sales volume. Engineering expenses of $9.3 million
and $8.4 million in the second quarter of fiscal 2002 and 2001, respectively,
are net of capitalized software development costs of $3.0 million and $2.8
million, respectively. Engineering expenses of $17.2 million and $16.3 million
in the first six months of fiscal 2002 and 2001, respectively, are net of
capitalized software development costs of $5.6 million and $5.5 million,
respectively. General and administrative expenses as a percentage of revenues
were 6% in the three and six month periods ended March 30, 2002 as compared to
7% in three month period ended March 31, 2001 and 6% in the six month period
ended March 31, 2001. Amortization of intangible assets as a percentage of
revenues was 1% in the three and six month periods ended March 30, 2002 as
compared to 3% in the comparable periods of the prior year. The decrease in
amortization is the result of the elimination of goodwill amortization described
above. Other income, net is principally attributable to interest income earned
from Kronos' cash as well as investments in its marketable securities and lease
portfolio. Management anticipates that operating expenses, as a percent of
revenues in the final six months of fiscal 2002 will be less than that
experienced in the first six months of fiscal 2002.
Prior Year Special Charge. A special charge in the amount of $3.0 million
related to the termination of Kronos' Crosswinds Technology operations was
recorded in the second quarter of fiscal 2001. The Crosswinds Technology Group,
which was purchased in May 1999, was responsible for the product development,
marketing and sales support of time and attendance applications that operated as
a Microsoft Outlook plug-in product. Lower than anticipated sales of these
applications, redundant infrastructure and ongoing operating losses has resulted
in the termination of the stand-alone operating unit. Revenues in the first six
months of fiscal 2001 generated by the Crosswinds Technology Group approximated
$0.5 million. The $3.0 million charge consists of $1.6 million in termination
costs, $1.3 million for the write off of intangible assets and $0.1 million in
other costs.
Income Taxes. For the three and six month periods ended March 30, 2002, the
income tax provisions as a percentage of pretax income were 34.5% and 34.8%,
respectively. As a percentage of pretax income, the three month period ended
March 31, 2001 had a tax benefit of 35.0% and the six month period ended March
31, 2001 had a tax provision of 35.0%. Kronos' effective income tax rate may
fluctuate between periods as a result of various factors, none of which is
material, either individually or in the aggregate, to the consolidated results
of operations.
Newly Issued Accounting Standards. In June 2001, the Financial Accounting
Standards Board (the "FASB") issued SFAS 141 and SFAS 142. Under the new rules,
goodwill (and intangible assets deemed to have indefinite lives) will no longer
be amortized but will be subject to annual impairment tests in accordance with
the Statements. Other intangible assets will continue to be amortized over their
useful lives.
For acquisitions completed prior to June 30, 2001, the Company applied the
new rules on accounting for business combinations and goodwill and other
intangible assets beginning in the first quarter of fiscal year 2002. For
acquisitions completed after June 30, 2001, Kronos applied the new rules
beginning in the fourth quarter of fiscal 2001. On a pro forma basis, Kronos
would have realized an increase in net income of $0.9 million, or $0.05 per
diluted share for the three months ended March 31, 2001 and $1.7 million, or
$0.09 per diluted share for the six months ended March 31, 2001, if these new
standards had been applied to the first six months of fiscal 2001. During the
second quarter of fiscal 2002, Kronos completed the initial testing of the
impairment of goodwill, as of October 1, 2001. As a result of the test, Kronos
has concluded that no impairment of goodwill exists as of October 1, 2001.
In October 2001, the FASB issued Statements of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets." This statement addresses financial accounting and reporting
for the impairment of long-lived assets and for long-lived assets to be disposed
of. This statement supercedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and APB Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. Kronos does not expect SFAS No. 144
to have a material effect on its earnings or financial position.
In January 2002, the Emerging Issues Task Force (EITF) issued EITF No.
01-14, "Income Statement Characterization of Reimbursements Received for
'Out-of-Pocket' Expenses Incurred" (formerly EITF Abstracts, Topic No. D-103).
This EITF requires that reimbursements received for out-of-pocket expenses
incurred should be characterized as revenue in the income statement as opposed
to a reduction of expenses incurred. Out-of-pocket expenses include travel
expenses such as airfare, hotel, mileage and meals that the customer will
reimburse the service vendor. The EITF is effective for financial reporting
periods beginning after December 15, 2001. As a result of the adoption of the
EITF, service revenues and the corresponding cost of sales increased by $0.3
million for the three month periods ended March 30, 2002 and March 31, 2001, and
by $0.6 million and $0.5 million for the six month periods ended March 30, 2002
and March 31, 2001, respectively.
Liquidity and Capital Resources
As of March 30, 2002, Kronos had negative working capital of $6.8 million
as compared to working capital of $11.1 million at September 30, 2001. Kronos
believes that this decrease in working capital is principally due to cash spent
on the acquisition of businesses and technology and the purchase of treasury
stock during the first six months of fiscal 2002. During the first six months of
fiscal 2002, working capital was reduced as Kronos used available cash of $27.3
million to complete acquisitions of businesses with a net working capital of
$0.5 million and an acquisition of technology. In addition, Kronos completed
purchases of common shares of approximately $14.2 million during the first six
months of fiscal 2002 for share repurchases pursuant to Kronos' stock repurchase
program as well as the purchase of mature stock from employees related to the
exercise of stock options. Cash, cash equivalents and marketable securities
amounted to $63.2 million as of March 30, 2002, and $68.8 million as of
September 30, 2001. The decline in cash, cash equivalents and marketable
securities in the first six months of fiscal 2002 is primarily attributable to
cash used in the Company's acquisitions and stock repurchases.
Cash generated from operations amounted to $34.4 million in the first six
months of fiscal 2002 as compared to $26.5 million in the first six months of
fiscal 2001. The increase in cash generated from operations is primarily
attributable to collections of accounts receivable and an increase in net
income, partially offset by a decrease in deferred revenues and payments of
bonuses and commissions. Also contributing to the increase in cash generated
from operations is an increase in the tax benefit from exercise of stock
options, however, this is substantially offset by the corresponding reduction in
income taxes payable. Cash used for property, plant and equipment was $4.7
million in the first six months of fiscal 2002 compared to $3.0 million in the
same period of fiscal 2001. Kronos' use of cash for the acquisition of
businesses and technology in the first six months of fiscal 2002 was principally
related to the acquisitions of specified assets and/or businesses of Kronos'
dealers and/or other providers of labor management solutions as well as the
acquisition of the source code license for the Abra Enterprise human resources
and payroll software. Kronos is assessing several acquisition opportunities that
may be completed over the next twelve months, although there can be no assurance
that these acquisitions will be completed. Excess cash reserves not required for
operations, investments in property, plant and equipment or acquisitions are
invested in marketable securities. Marketable securities increased by $16.7
million in the first six months of fiscal 2002 compared to an increase of $25.8
million in the first six months of fiscal 2001.
Under Kronos' stock repurchase program, Kronos repurchased 230,500 common
shares in the first six months of fiscal 2002 at a cost of $10.4 million
compared to 202,500 common shares at a cost of $4.9 million for the same period
in the prior year. The common shares repurchased under the program are used for
Kronos' employee stock option plans and employee stock purchase plan. Cash
provided by operations was sufficient to fund investments in capitalized
software development costs, property, plant and equipment and stock repurchases.
Kronos believes that with cash generated from ongoing operations it has adequate
cash and investments and operating cash flow to fund its investments in
property, plant and equipment, software development costs, cash payments related
to acquisitions, if any, and any additional stock repurchases for the
foreseeable future. If the need arose, Kronos believes that based on its current
debt-free balance sheet and its financial position, it would be
successful in securing financing from the capital markets.
During the quarter ended March 30, 2002, Kronos did not engage in:
o material off-balance sheet activities, including the use of structured
finance or special purpose entities,
o trading activities in non-exchange traded contracts, or
o transactions with persons or entities that benefit from their
non-independent relationship with Kronos.
Certain Factors That May Affect Future Operating Results
Except for historical matters, the matters discussed in this Quarterly
Report on Form 10-Q 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.
Kronos' actual operating results may differ from those indicated by forward
looking statements made in this Quarterly Report on Form 10-Q and presented
elsewhere by management from time to time because of a number of factors
including the potential fluctuations in quarterly results, timing and acceptance
of new product introductions by Kronos and its competitors, the dependence on
Kronos' time and attendance product line, the ability to attract and retain
sufficient technical personnel, competitive pricing pressure, and the dependence
on alternate distribution channels and on key vendors, as further described
below and in Kronos' Annual Report on Form 10-K for the fiscal year ended
September 30, 2001, which are specifically incorporated by reference herein.
Potential Fluctuations in Quarterly Results. Kronos' quarterly operating
results may fluctuate as a result of a variety of factors, including the
purchasing patterns of its customers, mix of products and services sold, the
ability of Kronos to effectively integrate acquired businesses into Kronos'
operations, the timing of the introduction of new products and product
enhancements by Kronos and its competitors, the strategy employed by Kronos to
enter the Human Resource (HR)/Payroll market, 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,
including products for the HR/Payroll market, 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.
Dependence on Time and Attendance Product Line. To date, more than 90% of
Kronos' revenues have been attributable to sales of time and attendance systems
and related services. Although Kronos has announced its intention to enter the
licensed HR/Payroll market this fiscal year, Kronos expects that its dependence
on the time and attendance product line for revenues will continue for the
foreseeable future. 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 its OEM
partner, ADP, Inc ("ADP"). In the first six months of fiscal 2002, approximately
13% of Kronos' revenue was generated through sales to dealers and ADP.
Management does not anticipate that its intention to enter the HR/Payroll market
will have a negative impact on its relationship with ADP. However, a reduction
in the sales efforts of Kronos' major dealers and/or ADP, or termination or
changes in their relationships with Kronos, could have a material adverse affect
on the results of Kronos' operations.
Competition. The frontline labor management industry and the HR/Payroll
market are highly competitive. The number of competitors is also increasing as
applications and systems providers such as human resources management, payroll
processing and enterprise resource planning (ERP), enter these markets.
Technological changes such as those allowing for increased use of the Internet
have also resulted in new entrants into the markets. 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 and 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.
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.
Protection of Intellectual Property. Kronos has developed, and through its
acquisitions of businesses, acquired, proprietary technology and intellectual
property rights. Kronos' success is dependent upon its ability to further
develop and protect its proprietary technology and intellectual property rights.
Kronos seeks to protect products, software, documentation and other written
materials primarily through a combination of trade secret, patent, trademark and
copyright laws, confidentiality procedures and contractual provisions. While
Kronos has attempted to safeguard and maintain its proprietary rights, it is
unknown whether Kronos has been or will be successful in doing so.
Despite Kronos' efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of its products or obtain and use
information that is regarded as proprietary. Policing unauthorized use of
Kronos' products is difficult. While Kronos is unable to determine the extent to
which piracy of its software products exists, software piracy can be expected to
be a persistent problem, particularly in foreign countries where the laws may
not protect proprietary rights as fully as in the United States. Kronos can
offer no assurance that it can adequately protect its proprietary rights or that
its competitors will not reverse engineer or independently develop similar
technology.
Infringement of Intellectual Property Rights. Kronos cannot provide
assurance that others will not claim that Kronos developed or acquired
intellectual property rights are infringing on their intellectual property
rights or that Kronos does not in fact infringe on those intellectual property
rights.
Any litigation regarding intellectual property rights could be costly and
time-consuming and divert the attention of Kronos' management and key personnel
from business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Claims of
intellectual property infringement might also require Kronos to enter into
costly royalty or license agreements, and in this event, Kronos may not be able
to obtain royalty or license agreements on acceptable terms, if at all. Kronos
may also be subject to significant damages or an injunction against the use of
its products. A successful claim of patent or other intellectual property
infringement against Kronos could cause immediate and substantial damage to its
business and financial condition.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 2002 Annual Meeting of Stockholders of Kronos Incorporated was
held on February 7, 2002.
(b) At the Annual Meeting, Messrs. D. Bradley McWilliams and Lawrence
Portner were elected as Class I Directors for three-year terms
expiring in 2005. In addition, the Directors whose terms of office
continue after the meeting are two Class II Directors: Messrs. Mark
S. Ain and W. Patrick Decker and two Class III Directors: Messrs.
Richard J. Dumler and Samuel Rubinovitz. The tabulation was as
follows:
FOR WITHHELD
--- --------
D. Bradley McWilliams 17,273,846 247,480
Lawrence Portner 17,273,003 248,323
(c) Adoption of the Company's 2002 Stock Incentive Plan was approved as
follows:
BROKER
FOR AGAINST ABSTAIN NON VOTES
--- ------- ------- ---------
12,856,775 2,392,134 154,793 2,117,624
(d) Amendments to the Company's 1992 Employee Stock Purchase Plan and an
increase in the number of shares available under the Plan from
1,378,125 to 1,678,125, were approved as follows:
BROKER
FOR AGAINST ABSTAIN NON VOTES
--- ------- ------- ---------
14,984,008 260,232 159,462 2,117,624
(e) The other item voted upon at the meeting was the ratification of the
selection of Ernst & Young LLP as the Company's independent auditors
for the 2002 fiscal year.
FOR AGAINST ABSTAIN
--- ------- -------
17,437,064 77,195 7,067
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1(1) Best Software Inc./Kronos Incorporated Agreement, dated as of
March 15, 2002 by and between Kronos Incorporated and Best
Software, Inc.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fiscal quarter
ended March 30, 2002.
(1) Confidential treatment requested as to certain portions thereof.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KRONOS INCORPORATED
By /s/ Paul A. Lacy
----------------------------------
Paul A. Lacy
Executive Vice President,
Chief Financial and
Administrative Officer
(Duly Authorized Officer and
Principal Financial Officer)
May 13, 2002
KRONOS INCORPORATED
EXHIBIT INDEX
Exhibit
Number Description
10.1(1) Best Software Inc./Kronos Incorporated Agreement, dated as of
March 15, 2002 by and between Kronos Incorporated and Best
Software, Inc.
(1) Confidential treatment requested as to certain portions thereof.