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, 1996
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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
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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.)
400 Fifth Avenue, Waltham MA 02154
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 890-3232
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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 ]
1
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, 1996 7,075,763 $201,659,246
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, 1996 value per share 8,132,450
DOCUMENTS INCORPORATED BY REFERENCE.
The Company's definitive proxy statement dated December 13, 1996 for the Annual
Meeting of Stockholders to be held on January 31, 1997 (Part III - Items
10,11,12 and 13).
2
PART I
Item 1. Business
Kronos Incorporated (the "Company" or "Kronos") designs, develops,
manufactures and markets time and attendance, workforce management and shop
floor data collection systems, and application software that enhance
productivity in the workplace. The Company's systems consist of fully integrated
software and intelligent data collection terminals. Kronos(R) also maintains an
extensive service and technical support organization which provides a suite of
maintenance, professional and educational services. The Company was organized in
1977 as a Massachusetts corporation.
Products and Services
Kronos' products include fully-integrated software, intelligent data
collection terminals and related components for time and attendance, workforce
management and shop floor data collection systems and value-added software
designed to expand the functions of its systems. These products are designed for
a wide range of businesses and applications from single-user to large multi-site
enterprises. In addition, the Company maintains an extensive service and support
organization that is responsible for maintaining systems and providing
professional and educational services. To date, the majority of the Company's
revenues and profits have been derived from its time and attendance systems and
services.
Time and Attendance, Workforce Management and Shop Floor Data Collection Systems
Kronos' Time and Attendance and Workforce Management systems are
designed to operate independently or in conjunction with other Kronos systems,
or to interface with third party systems. The Shop Floor Data Collection systems
are designed to operate independently or to interface with third party
Manufacturing Resource Planning ("MRP") systems.
The software incorporated in Kronos' 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. Currently, the Company
offers various releases of its software which run on such popular operating
systems as Windows, UNIX, DOS, and VMS. The Company's new client/server time and
attendance system runs on Windows 95 and Windows NT and integrates with Oracle,
Informix and Microsoft databases. In addition, the Company offers an IBM AS/400
based time and attendance package and shop floor data collection package.
3
Kronos provides a wide range of data collection options to accommodate
various work environments and markets and to satisfy the price/performance
requirements of its customers. The Company manufactures a family of intelligent
data collection terminals which collect time and attendance and factory-floor
data via keypad, bar code readers, lasers and charged coupled device ("CCD")
scanners. Terminal choices include wall-mounted, desk-mounted and hand-held
devices which are available in various sizes and models, some of which are
designed to operate in harsh environments. The Company also offers desktop
computer and telephone based data collection options. The Company believes that
the functions and features of its data collection options provide it with an
important advantage over its competition.
Major Systems
The major systems currently offered by the Company include:
Time and Attendance Systems. The Timekeeper Central(R), Timekeeper(R)/AS and
Timekeeper(R) C/S Systems are designed to reduce payroll preparation time,
consistently apply payroll rules, improve labor scheduling and control labor
costs. These systems automatically calculate employee hours data according to
the payroll policies of the individual customer, which are configured using the
parameter capabilities of the systems. In these systems, information is
consolidated into a number of standard labor management reports such as
absenteeism, tardiness, projected overtime, on-premises, and budget versus
actual costs. The Company's new client/server system, Timekeeper C/S, offers
open database connectivity and more powerful query and reporting tools. The
Company's time and attendance systems work in conjunction with a variety of data
collection methods described above.
Shop Floor Data Collection Systems. The ShopTrac Data Collection System and
Timekeeper/AS Labor Data Collection System consist of intelligent data
collection terminals and a suite of software applications for use primarily in
manufacturing plants. They are designed for manufacturers who build product in a
series of steps, such as job shops, work order based environments and repetitive
manufacturing. The systems capture labor and material data to provide real time
information on cost, location and completion time. This includes time and
attendance data to provide information for the basis of managing labor
resources; labor allocation data for the measurement of costs; the status of
work-in-process for communication to MRP, quality control and production
planning systems as well as quality control data.
Workforce Management System. The Workforce Management System is an integrated
labor management solution developed for the retail and hospitality markets. It
consists of several integrated modules, including Business Forecaster, which
predicts the level of activity a location can expect by analyzing key business
volume indicators, and WorkForce Planner, which then applies the appropriate
work standards to generate the correct staffing level required for the expected
level of business. The core of the system is the Smart Scheduler(TM) module,
which combines data from the WorkForce Planner, along with detailed employee
information about skill level, availability, seniority and work preferences, and
produces a complete, detailed work schedule. This information can then be
integrated with the applicable Kronos time and attendance system enabling
management to compare actual labor costs to budgeted costs. Together these
4
modules provide a full set of tools to increase productivity, manage labor costs
and meet customer service goals.
Value-Added Software
The Company offers optional application software designed to expand and
enhance the range of functions performed by its time and attendance and shop
floor data collection systems. Such software includes the following:
Kronos Scheduling Module. The Kronos Scheduling Module assists in the process of
creating and assigning employee schedules and reports to help managers make
labor scheduling decisions.
Kronos Archive Program. The Kronos Archive Program is designed to automatically
perform long-term record keeping by accumulating labor hours, absences, late
arrivals, vacation time and wages.
Kronos CardSaver(R) Module. The Kronos CardSaver Module automatically saves
employee in and out data for wage and hour inquiries, performance reviews or
resolving employee grievances.
Kronos Accruals Module. The Kronos Accrual Module provides added functionality
by automatically calculating the balances of each employee's available benefit
time ensuring that benefit time is administered fairly, consistently and
automatically across all classes of employees.
Kronos Attendance Tracker Module. The Kronos Attendance Tracker module
systematically records and documents all types of employee absences and provides
for attendance and performance data to be reported in detail or summary reports.
Other Products
The Company markets Time Bank, a product which provides an interface to
most major payroll service bureau software and also supports interfaces to major
human resources and automated scheduling based systems. The Company purchases
this product from a third party. The Company's Gatekeeper(R) product is used in
access control applications and can limit access to only authorized personnel or
allow scheduled access based on schedules in the Timekeeper Central system. The
Kronos TeleTime(R) System allows customer telephones to serve as data input
devices. This product incorporates technology which is licensed from a third
party. The Company also markets products called ACES and ACES PLUS, which it
obtains from a third party, and which use optical scanning mark sensitive
technology to read data from forms and transmit that data to a time and
attendance database. The Company also offers an imaging system, ImageKeeper(TM),
which utilizes high-resolution video imaging to create and store digital
photographs and signatures of employees. Finally, the Company markets a number
of other accessories to its products including badges, traditional badge making
equipment, time cards, bar code labels and modems.
5
Services and Support
Kronos maintains an extensive service and technical support
organization which provides a suite of maintenance, professional and educational
services. A range of maintenance services are available for hardware and
software and are delivered through either the Company's Global Support Center or
through local service personnel. The Company's wide range of professional
services include project management, technical consulting as well as system
integration and optimization. When necessary, the Company may also provide
customized software to meet its customers' unique software requirements. The
Company's educational services provide a full range of local classroom or
computer-based training courses.
Marketing and Sales
Kronos markets and sells its products in the United States and other
countries through its direct sales and support organization and through
independent dealers. In addition, the Company has a joint marketing agreement
with ADP, Inc. ("ADP"). Under the terms of the agreement, which was recently
extended to the year 2001, ADP markets a proprietary version of the Company's
PC-based time and attendance software, together with data collection terminals
manufactured by the Company. The product is offered to both new and existing ADP
clients, and is now also available in a customer-installable version.
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, field sales and service 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 Develop long-term business relationships with select industry
partners.
o Educate and train industry specific sales and service staff.
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.
6
Direct Sales Organization
In fiscal 1996 the Company re-aligned its field sales and service
personnel into the industry specific teams discussed above. The Company has 37
direct sales and support offices located in the United States. In addition, the
Company has two sales and support offices located in Canada, two in the United
Kingdom, one in Mexico and, as of July 1996, two in South Africa and one in
Australia. Each direct sales office covers a defined territory, and has sales
and support functions.
For the fiscal years ended September 30, 1996, 1995 and 1994, the
Company's international subsidiaries generated net revenues of $8,025,000,
$5,598,000 and $3,620,000, respectively. Total assets at these locations for
these periods were $5,496,000, $2,868,000 and $2,196,000, 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 40 dealers in the United
States actively selling and supporting Kronos' products. Kronos also has dealers
in Australia, Argentina, Canada, Guam, Guatemala, Guyana, Hong Kong, Jamaica,
Malaysia, Mexico, Netherland Antilles, Panama, Phillipines, Puerto Rico,
Singapore, and the West Indies. Sales to independent international dealers for
the years ended September 30, 1996, 1995 and 1994 were $2,367,000, $2,508,000
and $1,659,000, respectively. Kronos supports its dealers with training,
technical assistance, and major account marketing assistance.
Customers
The Company estimates it has an installed base of approximately 100,000
customer sites. End-users of the Company's products range from small companies
with as few as five employees to some of the world's largest multi-site
organizations.
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 revenue in each quarter results from
orders received in that quarter.
Product Development
The Company's product development efforts are focused on enhancing and
increasing the performance of its existing products, developing new products and
developing interfaces to third party products to meet customer needs. During
1996, 1995 and 1994, Kronos' engineering, research and development expenses were
$12,730,000, $8,192,000 and $5,593,000, 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, develop new
7
products and to develop interfaces to third party products, 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.
Competition
The Company's operations constitute a single segment within the data
collection industry--the design, development, manufacture and marketing of
integrated time and attendance, workforce management and shop floor data
collection systems that enhance productivity in the workplace.
The industry is highly competitive, and although the Company believes
it has certain technological and other advantages over its current competitors,
maintaining such advantages will require continued investment by the Company in
research and development, and sales and marketing. Competition could increase as
competitors in related industries, such as human resources and payroll, enter
the market. Advances in software development tools have accelerated the software
development process and, therefore, can allow competitors to penetrate certain
of the Company's markets.
The Company competes primarily on the basis of price/performance,
quality, reliability and customer service. In the time and attendance industry,
the Company competes against firms that sell automated time and attendance
products to many industries (typically to customers with 250 employees or less),
against firms that focus on particular industries, and against firms selling
related products, such as payroll or human resources products.
Proprietary Rights
The Company relies on a combination of patents, copyrights, 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 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 which permit either a specified limited number of copies or an
unlimited number of copies of the software to be made for internal use. Some
major 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.
8
The Company has registered trademarks for Kronos, Timekeeper,
Timekeeper Central, Jobkeeper, Jobkeeper Central, Datakeeper, Datakeeper
Central, Gatekeeper, Gatekeeper Central, TeleTime, TimeMaker, CardSaver,
ShopTrac, the ShopTrac logo, Start.Time, Keep.Trac, Solution In A Box and the
Company's logo in the United States. In addition, certain trademarks have been
obtained or are in process in various foreign countries.
The Company purchases the Time Bank payroll interface software from a
single vendor for resale in certain of its time accounting systems. Although the
Company believes its relationship with this vendor is good, any interruption or
termination of the Company's right to resell such software could delay shipment
of certain of the Company's products and require the Company to write its own
software to perform this function. Although the Company believes it would be
able to produce its own payroll interface software, any delay or problems
encountered in doing so could temporarily and adversely affect the Company's
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 four
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. 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 December 9, 1996, the Company had 1,235 employees. None of the
Company's employees is represented by a union or other collective bargaining
agent, and the Company considers its relations with its employees to be good.
9
Item 2. Properties
The Company leases approximately 73,000 square feet at its headquarters
in Waltham, Massachusetts and leases 46 sales and support offices located
throughout North America, Europe, Africa and Australia. The Company also leases
a total of approximately 165,000 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's aggregate rental expense for all of its
facilities in fiscal 1996 was approximately $4,761,000. 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.
10
Executive Officers of the Registrant
Name Age Position
Mark S. Ain 53 Chief Executive Officer and Chairman
of the Board
W. Patrick Decker 49 President, Chief Operating Officer
Verne S. Kayser 53 Vice President, Engineering
Paul A. Lacy 49 Vice President, Finance and Administration,
Treasurer and Clerk
Aron J. Ain 39 Vice President, Marketing and Worldwide
Field Operations
Lloyd B. Bussell 51 Vice President, Manufacturing
Sally J. Wallace 46 Vice President, General Counsel
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 until October, 1996. Mr. Ain is the brother of Aron J. Ain, Vice
President, Marketing and Worldwide Field Operations of the Company.
W. Patrick Decker served as Vice President, Marketing and Field Operations
from 1982 until October, 1996, when he was appointed President and Chief
Operating Officer.
Verne S. Kayser served as Vice President, Engineering from 1984 until
November 20, 1996.
Paul A. Lacy has been Vice President, Finance and Administration, Treasurer
and Clerk since 1988.
Aron J. Ain served as Vice President, Sales and Service from 1988 until
October, 1996, when he was appointed Vice President, Marketing and Worldwide
Field Operations. Mr. Ain is the brother of Mark S. Ain, Chief Executive Officer
and Chairman.
Lloyd B. Bussell has served as Vice President, Manufacturing since 1987.
Sally J. Wallace has served as General Counsel since 1988 and was elected
Vice President in October, 1994.
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.
11
PART II
Item 5. Market for Registrant's Common Equity and Stockholder Matters
STOCK MARKET INFORMATION
The Company's common stock is traded under the National Association of
Securities Dealers Automated Quotation System (NASDAQ) symbol KRON. The
following table sets forth the high and low sales prices for fiscal 1996 and
fiscal 1995. 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.
1996
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High Low
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First quarter $33 5/8 $25
Second quarter 37 25 1/2
Third quarter 35 1/2 25 1/2
Fourth quarter 37 24 3/4
1995
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High Low
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First quarter $18 $12 1/2
Second quarter 21 1/4 17
Third quarter 25 1/4 16 1/4
Fourth quarter 32 3/4 24 5/8
Prices reflect the Company's stock split paid on January 29, 1996 to
shareholders of record as of January 15, 1996.
HOLDERS
On November 30, 1996 there were approximately 3,600 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.
12
Item 6. Selected Financial Data
The following table data should be read in conjunction with the consolidated
financial statements and notes thereto.
Financial Highlights
In thousands, except share data Year Ended September 30,
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1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- --------------
Operating Data:
Net revenues $142,957 $120,373 $92,919 $67,960 $59,784
Income before change in
accounting principle $11,425 $8,398 $4,892 $3,606 $3,432
Extraordinary item and change
in accounting principle $264 $53
--------------- --------------- --------------- --------------- --------------
Net income $11,425 $8,398 $4,892 $3,870 $3,485
Per share data (1):
Income before change in
accounting principle $1.37 $1.03 $0.62 $0.47 $0.51
Extraordinary item and change
in accounting principle $0.03 $0.01
--------------- --------------- --------------- --------------- --------------
Net income per common share $1.37 $1.03 $0.62 $0.50 $0.52
Average common and common
equivalent shares outstanding 8,330,060 8,150,903 7,859,513 7,745,691 6,729,390
Balance Sheet Data:
Total assets $104,866 $78,518 $60,284 $46,788 $38,022
Long-term obligations $28 $164 $510
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(1) The per share data presented above are for primary net income per common
share. Fully diluted net income per common share amounts have not been presented
as they did not differ significantly from primary net income per common share
amounts in any year.
13
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues. Revenues amounted to $143.0 million, $120.4 million and $92.9 million
in fiscal 1996, 1995 and 1994, respectively. Annual revenue growth amounted to
19% in fiscal 1996, 30% in fiscal 1995 and 37% in fiscal 1994. While revenue
growth in fiscal 1996 approximated the Company's historical growth rate of 20%
prior to fiscal 1994, it declined from the accelerated levels experienced in
fiscal 1995 and 1994. Revenue growth during fiscal 1995 and 1994 was driven by a
variety of factors including customer demand and the acquisition of distribution
rights to certain domestic sales territories previously held by certain of the
Company's independent dealers. The decline in the rate of revenue growth in
fiscal 1996 as compared with fiscal 1995 and 1994 can be attributed to a variety
of factors including the accelerated rate of growth experienced in fiscal 1995
and 1994 and a transition of the Company's core products from DOS and Unix
platforms to the Windows and client/server environments. The impact of these
factors was most significant over the first three quarters of fiscal 1996 which
reflected revenue growth of 17% over the comparable period in fiscal 1995. In
the fourth quarter of fiscal 1996 revenues grew by 24% over the comparable
period in fiscal 1995. During this quarter the Company released a client/server
version of its time and attendance product. The Company is also anticipating
releases of enhanced versions of its time and attendance product on
client/server and Windows platforms in the first part of fiscal 1997. The
Company's revenue growth in fiscal 1997 will depend in part on the commercial
success of these initiatives.
Product revenues amounted to $101.0 million, $87.9 million and $68.4 million in
fiscal 1996, 1995 and 1994, respectively. Product revenues grew by 15% in fiscal
1996, 28% in fiscal 1995 and 34% in fiscal 1994. Product revenue growth in
fiscal 1996 was principally the result of an increase in sales volume driven by
customer demand. The reduced rate of product revenue growth experienced in
fiscal 1996 as compared with fiscal 1995 and 1994 is attributable to the factors
described above. Consistent with total revenues, product revenue growth
increased in the fourth quarter to 22% from 12% over the first nine months of
fiscal 1996. Product demand resulting from the Company's small business
marketing program with ADP, Inc. contributed approximately one-third of the
product revenue increase in fiscal 1996. Product revenue growth in fiscal 1995
was principally the result of increased sales volume driven by customer demand.
Product revenue growth in fiscal 1994 was the result of an increase in sales
volume driven by customer demand, the impact of the shift of product sales from
wholesale to retail pricing for the acquired dealer territories, as well as the
unusually strong level of product shipments in the fourth quarter of that fiscal
year.
14
Service revenues were $42.0 million, $32.5 million and $24.5 million in fiscal
1996, 1995 and 1994, respectively. Service revenues grew by 29% in fiscal 1996,
33% in fiscal 1995 and 43% in fiscal 1994. Service revenues amounted to 29%, 27%
and 26% of total revenues in fiscal 1996, 1995 and 1994, respectively. The
growth in service revenues in all periods reflects increases in maintenance
revenue from expansion of the installed base, as well as an increase in the
level of services accompanying the sale of new products. In addition, the growth
rate experienced in fiscal 1994 was impacted by the transition of the acquired
dealer territories into direct sales and service districts. Prior to
acquisition, all service revenues for these territories were retained by the
independent dealers as they were responsible for providing such services.
International revenues, which include both revenues from the Company's
international subsidiaries and sales to independent international dealers, grew
28% in fiscal 1996 to $10.4 million from $8.1 million in fiscal 1995.
International revenues in fiscal 1994 were $5.3 million. The establishment of
the Company's Australian and South African subsidiaries in the fourth quarter
contributed significantly to the overall increase in fiscal 1996 international
revenues.
Gross Profit. Gross profit, as a percentage of revenues, was 62%, 59% and 57% in
fiscal 1996, 1995 and 1994, respectively. The improvement in gross profit in
each of the three fiscal years was evidenced in both product and service gross
profit. Product gross profit was 74%, 72% and 69% in fiscal 1996, 1995 and 1994,
respectively. The improvement in product gross profit in each of the three
fiscal years was a result of increased sales volume and improved product mix. In
each of the periods the Company's product revenue was derived from sales of
systems in which software, which typically generates higher gross profit, was an
increasingly higher proportion of product revenues. In addition, in fiscal 1996
and 1995, the Company experienced increased production volume without
proportionate increases in production overhead costs. Product gross profit was
negatively impacted in fiscal 1994 by a variety of factors including purchase
discounts granted to major account customers and expenses associated with the
move of the Company's manufacturing facility.
Service gross profit as a percentage of service revenues was 33%, 24% and 22%
for fiscal 1996, 1995 and 1994, respectively. The increase in service gross
profit is primarily attributable to the growth in service revenues. Also, the
Company has been able to absorb the increase in service volume without a
proportionate increase in service expenses, favorably impacting gross margins.
This has been accomplished by the implementation of programs which focus on
revenue enhancement for services provided, as well as improved efficiency in the
delivery of such services.
Expenses. Expenses as a percentage of revenues were 49% in fiscal 1996, and 48%
in fiscal 1995 and 1994. Sales and marketing expenses were $47.0 million, $40.1
million and $31.4 million in fiscal 1996, 1995 and 1994, respectively. The
increase in sales and marketing expenses in all periods relates to increased
business volume. Sales and marketing expenses as a percentage of sales were 33%
in fiscal 1996 and 1995 as compared with 34% in fiscal 1994. The Company
anticipates sales and marketing expenses as a percentage of sales to increase
somewhat in fiscal 1997 due to increased investment in the Company's
international direct sales organization. This increase is anticipated to be
partially offset by efficiencies which the Company expects to be realized from
the fiscal 1996 consolidation and reorganization of the North American direct
sales organization from geographic units into industry specific teams.
15
Engineering, research and development expenses were $12.7 million, $8.2 million
and $5.6 million in fiscal 1996, 1995 and 1994, respectively. These expenses are
net of capitalized software development costs of $4.0 million, $2.4 million and
$1.8 million, respectively. Engineering, research and development expenses as a
percentage of revenues were 9% in fiscal 1996, 7% in fiscal 1995 and 6% in
fiscal 1994. The growth in engineering, research and development expenses
resulted primarily from the development of new products. Increased spending on
capitalizable software development costs reflects the Company's commitment to
further enhancements of existing products, making them easier to use, and on new
product development. The Company anticipates fiscal 1997 engineering, research
and development expenses as a percentage of revenues to be comparable or
somewhat higher than fiscal 1996.
General and administrative expenses were $9.9 million, $8.5 million and $7.3
million in fiscal 1996, 1995 and 1994, respectively. As a percentage of
revenues, general and administrative expenses were 7% in fiscal 1996 and 1995 as
compared with 8% in fiscal 1994. Fiscal 1996 general and administrative expenses
included start-up costs incurred for an internally funded customer lease program
as well as certain administrative expenses related to Company programs initiated
to improve operating efficiencies. The Company expects fiscal 1997 general and
administrative expenses as a percentage of revenues to decrease slightly from
fiscal 1996. The decline in general and administrative expenses as a percentage
of revenues from fiscal 1994 to fiscal 1995 reflects the benefits and
efficiencies realized from the Company's investment in management information
and communication systems and the reengineering of certain of its administrative
processes. The decline also reflects, to some degree, the impact of leveraging
increased revenues on a fixed level of cost for certain general and
administration functions.
Other expense, net amounted to less than 1% of revenues in fiscal 1996, 1995 and
1994. Other expense, net is composed primarily of amortization of intangible
assets related to acquisitions made by the Company which is offset by interest
income earned on its investments.
Income Taxes. The provision for income taxes as a percentage of pretax income
was 39% in fiscal 1996 and 38% in fiscal 1995 and 1994. The Company's effective
income tax rate may fluctuate between periods as a result of various factors,
none of which is material, either individually or in the aggregate, to the
consolidated results of operations.
Accounting Standards. In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). This statement establishes financial
accounting and reporting standards for stock-based employee compensation plans.
While the Company is reviewing the adoption and impact of SFAS 123, it expects
to adopt the disclosure-only alternative and, accordingly, this standard will
have no impact on the Company's results of operations or its financial position.
16
Liquidity and Capital Resources
Working capital as of September 30, 1996 amounted to $36.3 million as compared
with $29.1 million at September 30, 1995. Cash and equivalents and marketable
securities at those dates amounted to $32.8 million and $21.4 million,
respectively. The Company has available a bank line of credit of $3.0 million
which expires in June 1998. No amounts were outstanding under the line of credit
as of September 30, 1996.
Cash provided by operations increased to $23.7 million in fiscal 1996 from $18.3
million in fiscal 1995 and $7.9 million in fiscal 1994. The increase in
operating cash flows in fiscal 1996 as compared to fiscal 1995 was principally
due to increased earnings and unearned service revenues as well as non-cash
charges related to depreciation, amortization and deferred taxes. The Company's
investment in the internal customer lease program which it introduced in fiscal
1996 partially offset the cash provided by other operations. The increase in
operating cash flows in fiscal 1995 as compared with fiscal 1994 was principally
due to increased earnings and better management of accounts receivable from
trade customers.
Cash provided by operations was more than sufficient to fund investments in
equipment and capitalized software development costs in fiscal 1996, 1995 and
1994. Investments in equipment in fiscal 1996, 1995 and 1994 totaled $9.7
million, $4.1 million and $4.8 million, respectively. The Company anticipates
that investment in equipment in fiscal 1997 will be comparable to fiscal 1996.
The Company expects to finance these investments from available cash and
operating cash flow generated in fiscal 1997. In fiscal 1996 the Company has
invested a significant portion of its remaining cash balances in short term
marketable securities.
Certain Factors That May Affect Future Operating Results
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 presented elsewhere by management from time to
time.
Potential Fluctuations in Results. The Company's operating results may fluctuate
as a result of a variety of factors, including the timing of the introduction of
new products and product enhancements by the Company and its competitors, market
acceptance of new products, mix of products sold, the purchasing patterns of its
customers, competitive pricing pressure and general economic conditions. The
Company historically has realized a relatively larger percentage of its annual
revenues and profits in the fourth quarter and a relatively smaller percentage
in the first quarter of each fiscal year, although there can be no assurance
that this pattern will continue. In addition, while the Company has contracts to
supply systems to certain customers over an extended period of time,
substantially all of the Company's product revenue and profits in each quarter
result from orders received in that quarter. If near-term demand for the
Company's products weakens or if significant anticipated sales in any quarter do
not close when expected, the Company's revenues for that quarter will be
adversely affected. The Company believes that its operating results for any one
period are not necessarily indicative of results for any future period.
17
Product Development and Technological Change. The markets for time and
attendance and data collection systems are characterized by continual change and
improvement in computer software and hardware technology. The Company's future
success will depend largely on its ability to enhance its existing product lines
and to develop new products and interfaces to third party products on a timely
basis for the increasingly sophisticated needs of its customers. Although the
Company is continually seeking to further enhance its product offerings and to
develop new products and interfaces, there can be no assurance that these
efforts will succeed, or that, if successful, such product enhancements or new
products will achieve widespread market acceptance, or that the Company's
competitors will not develop and market products which are superior to the
Company's products or achieve greater market acceptance.
Competition. The time and attendance and data collection industries are highly
competitive. Competition could increase as competitors in related industries,
such as human resources and payroll, enter the market. Advances in software
development tools have accelerated the software development process and,
therefore, can allow competitors to penetrate certain of the Company's markets.
Maintaining the Company's technological and other advantages over competitors
will require continued investment by the Company in research and development and
marketing and sales programs. There can be no assurance that the Company will
have sufficient resources to make such investments or be able to achieve the
technological advances necessary to maintain its competitive advantages.
Increased competition could adversely affect the Company's operating results
through price reductions and/or loss of market share.
Attracting and Retaining Sufficient Technical Personnel for Product Development,
Support and Sales. 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 robust
products in a timely manner.
Dependence on Alternate Distribution Channels. The Company markets and sells its
products through its direct sales organization, independent dealers and OEMs.
For the fiscal year ended September 30, 1996, approximately 25% of the Company's
revenue was generated through sales to dealers and OEMs. Reduction in the sales
efforts of the Company's major dealers and/or OEMs, or termination or changes in
their relationships with the Company, could have a material adverse effect on
the results of the Company's operations.
Dependence on Time and Attendance Product Line. To date, more than 90% of the
Company's revenues have been attributable to sales of time and attendance
systems and services. Competitive pressures or other factors could cause the
Company's time and attendance products to lose market acceptance or experience
significant price erosion, adversely affecting the results of the Company's
operations.
18
Reliance on Key Vendors. The Company 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. Also, certain parts and components used in the Company's hardware
products are purchased from single vendors. The Company has chosen to source
these items from single vendors because it believes that the vendor chosen is
able to consistently provide the Company with the highest quality product at a
competitive price on a timely basis. 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 material adverse effect on the Company's operating results. In addition,
the Company purchases payroll interface software from a single vendor for resale
in certain of its time and attendance systems. Although the Company believes its
relationship with this vendor is good, any interruption or termination of the
Company's rights to resell such software could delay shipment of certain of the
Company's products and require the Company to write its own software to perform
this function. Although the Company believes it would be able to produce its own
payroll interface software, any delay or problems encountered in doing so could
temporarily and adversely affect the Company's results of operations.
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.
19
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 4 through 6 of the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on January 31,
1997 under the caption "Election of Directors."
Item 11. Executive Compensation
Incorporated by reference from pages 6 through 12 of the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on January 31, 1997 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 2 through 3 of the Company's
definitive proxy statement for the Annual Meeting of Stockholders to be held on
January 31, 1997 under the caption "Security Ownership of Certain Beneficial
Owners and Management."
Item 13. Certain Relationships and Related Transactions
None.
20
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
September 30, 1996, 1995 and 1994 F-1
Consolidated Balance Sheets as of September 30,
1996 and 1995 F-2
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended September 30, 1996, 1995 and 1994 F-3
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 F-4
Notes to Consolidated Financial Statements F-5
Report of Ernst & Young LLP, Independent Auditors F-16
2. Financial Statement Schedule
II - Valuation and Qualifying Accounts F-17
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 Articles of Organization of the Registrant, as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(10) 1986A Stock Option Plan.
10.2(10) 1992 Equity Incentive Plan, as amended and restated.
21
3. Exhibits (continued)
Exhibit
No. Description
10.3(4)(10) 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(6) Lease dated August 8, 1995 between Principal Mutual Life
Insurance Company and the Registrant, relating to premises leased
in Chelmsford, MA.
10.6(3) Loan Agreement dated June 30, 1993 between Fleet Bank of
Massachusetts, N.A. and the Registrant ("Loan Agreement").
10.6.1(9) Amendment dated June 3, 1996 to Loan Agreement dated
June 30, 1993 between Fleet Bank of Massachusetts, N.A. and
the Registrant.
10.7(2)(11) Software License and Support and Hardware Purchase Agreement dated
April 2, 1993 between ADP, Inc. and the Registrant.
10.7.1(12) Amendments dated July 22, 1996 to Software License and Support
and Hardware Purchase Agreement dated April 2, 1993, between
ADP, Inc. and the Registrant.
10.8* Sales Agreement dated December 6, 1990, between Integrated
Design, Inc. and the Registrant.
10.8.1(7) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated Design, Inc. and the
Registrant.
10.9(3)(11) 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(8) 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.
10.12 (5) 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.
11 Statement re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
22
3. Exhibits (continued)
* 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 same Exhibit Number in the Company's
Form 10-K for the fiscal year ended September 30, 1992.
(2) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended April 3, 1993.
(3) Incorporated by reference to the same Exhibit Number in the Company's
Form 10-K for the fiscal year ended September 30, 1993.
(4) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended July 2, 1994.
(5) Incorporated by reference to Exhibit Number 2.1 in the Company's Form
10-Q for the quarterly period ended July 2, 1994.
(6) Incorporated by reference to Exhibit 10.13 in the Company's Form 10-K
for the fiscal year ended September 30,1995.
(7) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended March 30, 1996.
(8) Incorporated by reference to Exhibit Number 10.2 in the Company's Form
10-Q for the quarterly period ended March 30, 1996.
(9) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended June 29, 1996.
(10) 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.
(11) Confidential treatment was granted for certain portions of this
agreement.
(12) Confidential treatment requested for certain portions of these
amendments, which portions have been omitted and filed separately
with the Securities and Exchange Commission.
23
(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, TeleTime,
TimeMaker, CardSaver, ShopTrac, the ShopTrac logo, Start. Time, Keep.Trac,
Solution in a Box and the Company's logo are registered trademarks of the
Company. DKC/Datalink, ImageKeeper, WebTime, HyperFind, Smart Scheduler, Starter
Series, Start.Labor, Start.WIP, Start.Quality, Labor Plus, WIP Plus, Comm.Mgr,
Tempo and the Tempo logo are trademarks of the Company. IBM and OS/2 are
registered trademarks 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. Windows is a registered
trademark of Microsoft Corporation.
24
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 13, 1996.
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 13, 1996.
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/ RICHARD J. DUMLER Director
Richard J. Dumler
/s/ THEODORE G. JOHNSON Director
Theodore G. Johnson
/s/ DAVID B. KISER Director
David B. Kiser
/s/ DONALD S. LEVY Director
Donald S. Levy
/s/ D. BRADLEY McWILLIAMS Director
D. Bradley McWilliams
/s/ LAWRENCE PORTNER Director
Lawrence Portner
/s/ SAMUEL RUBINOVITSZ Director
Samuel Rubinovitz
Consolidated Statements of Income In thousands, except share data
Year Ended September 30, 1996 1995 1994
---------- ---------- ----------
Net revenues:
Product ........................................... $ 100,951 $ 87,879 $ 68,444
Service ........................................... 42,006 32,494 24,475
---------- ---------- ----------
142,957 120,373 92,919
Cost of sales:
Product ........................................... 26,281 24,762 20,925
Service ........................................... 28,296 24,552 19,143
---------- ---------- ---------- ----------
54,577 49,314 40,068
---------- ---------- ----------
Gross profit ............................. 88,380 71,059 52,851
Expenses:
Sales and marketing ............................... 46,982 40,138 31,381
Engineering, research and development ............. 12,730 8,192 5,593
General and administrative ........................ 9,942 8,455 7,326
Other expense, net ................................ 27 693 716
---------- ---------- ----------
69,681 57,478 45,016
---------- ---------- ----------
Income before income taxes .................... 18,699 13,581 7,835
Provision for income taxes ............................. 7,274 5,183 2,943
---------- ---------- ----------
Net income .................................... $ 11,425 $ 8,398 $ 4,892
========== ========== ==========
Net income per common share:
Primary:
Net income per common share ................... $ 1.37 $ 1.03 $ 0.62
========== ========== ==========
Fully Diluted:
Net income per common share ................... $ 1.37 $ 1.03 $ 0.62
========== ========== ==========
Average common and common equivalent shares outstanding:
Primary ........................................... 8,330,060 8,150,903 7,859,513
========== ========== ==========
Fully Diluted ..................................... 8,343,274 8,156,981 7,888,311
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-1
Consolidated Balance Sheets In thousands, except share data
September 30, 1996 1995
--------- ---------
ASSETS
Current assets:
Cash and equivalents .............................................................. $ 10,795 $ 14,727
Marketable securities ............................................................. 21,995 6,716
Accounts receivable, less allowances for doubtful accounts of $987 in 1996
and $1,001 in 1995 ............................................................ 30,622 28,159
Inventories ....................................................................... 4,149 4,469
Deferred income taxes ............................................................. 3,025 2,427
Other current assets .............................................................. 3,765 1,273
--------- ---------
Total current assets ....................................................... 74,351 57,771
Equipment, net ........................................................................ 14,738 10,079
Excess of cost over net assets of businesses acquired ................................. 7,221 6,606
Other assets .......................................................................... 8,556 4,062
--------- ---------
Total assets ............................................................... $ 104,866 $ 78,518
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................................. $ 11,894 $ 8,352
Accrued compensation .............................................................. 8,445 7,149
Federal and state income taxes payable ............................................ 1,367 969
Unearned service revenue .......................................................... 16,388 12,185
--------- ---------
Total current liabilities .................................................. 38,094 28,655
Deferred income taxes ................................................................. 2,236 912
Other liabilities ..................................................................... 3,438 2,382
Shareholders' equity:
Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares, no shares
issued and outstanding
Common Stock, par value $.01 per share: authorized 12,000,000 shares,
8,124,133 shares and 7,940,468 shares issued at September 30, 1996 and
1995, respectively ............................................................ 81 79
Additional paid-in capital ........................................................ 27,512 24,353
Retained earnings ................................................................. 33,773 22,348
Equity adjustment from translation ................................................ (251) (206)
Cost of Treasury Stock (583 shares and 170 shares at September 30, 1996 and
1995, respectively) ........................................................... (17) (5)
--------- ---------
Total shareholders' equity ................................................. 61,098 46,569
--------- ---------
Total liabilities and shareholders' equity ................................. $ 104,866 $ 78,518
========= =========
See accompanying notes to consolidated financial statements.
F-2
Consolidated Statements of Changes in Shareholders' Equity
In thousands
Equity
Common Stock Additional Adjustment Treasury Stock
---------------------- Paid-in Retained from -------------------
Shares Amount Capital Earnings Translation Shares Amount Total
-------------------------------- --------------------------------------------------------
Balance at October 1, 1993 7,629 $77 $21,461 $9,058 $(225) 27 $(335) $30,036
Net income 4,892 4,892
Proceeds from exercise of stock options 28 (114) (34) 412 298
Proceeds from employee stock purchase plan 45 389 389
Amortization of compensation expense
relating to nonqualified stock option plans (2) (2)
Equity adjustment from translation 17 17
Purchase of treasury stock 7 (82) (82)
Tax benefit associated with the exercise
of stock options 334 334
-------------------- ---------- ---------- ----------- ------------------- ---------
Balance at September 30, 1994 7,702 77 22,068 13,950 (208) (5) 35,882
Net income 8,398 8,398
Proceeds from exercise of stock options 186 1 249 (54) 1,077 1,327
Proceeds from employee stock purchase plan 52 1 599 600
Amortization of compensation expense
relating to nonqualified stock option plans (1) (1)
Equity adjustment from translation 2 2
Purchase of treasury stock 54 (1,077) (1,077)
Tax benefit associated with the exercise
of stock options 1,438 1,438
-------------------- ---------- ---------- ----------- ------------------- ---------
Balance at September 30, 1995 7,940 79 24,353 22,348 (206) (5) 46,569
Net income 11,425 11,425
Proceeds from exercise of stock options 144 2 538 (16) 525 1,065
Proceeds from employee stock purchase plan 40 945 945
Amortization of compensation expense
relating to nonqualified stock option plans 68 68
Equity adjustment from translation (45) (45)
Purchase of treasury stock 17 (537) (537)
Tax benefit associated with the exercise
of stock options 1,608 1,608
-------------------- ---------- ---------- ----------- ------------------- ---------
Balance at September 30, 1996 8,124 $81 $27,512 $33,773 $(251) 1 $(17) $61,098
==================== ========== ========== =========== =================== =========
See accompanying notes to consolidated financial statements.
F-3
Consolidated Statements of Cash Flows In thousands
Year Ended September 30, 1996 1995 1994
-------- -------- --------
Operating activities:
Net income ............................................................. $ 11,425 $ 8,398 $ 4,892
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation .................................................... 4,764 3,678 3,067
Provision for deferred income taxes ............................. 726 (636) 621
Amortization of deferred software development
costs and other assets ...................................... 3,404 2,571 1,820
Changes in certain operating assets and liabilities:
Accounts receivable, net .................................... (2,945) (3,096) (8,275)
Inventories ................................................. 330 (21) (646)
Unearned service revenue .................................... 5,367 2,392 4,479
Accounts payable, accrued compensation
and other liabilities ................................... 5,609 5,214 2,506
Net investment in sales-type leases ......................... (3,766)
Other ........................................................... (1,165) (170) (567)
-------- -------- --------
Net cash and equivalents provided by operating activities 23,749 18,330 7,897
Investing activities:
Purchase of equipment .................................................. (9,656) (4,065) (4,842)
Capitalization of software development costs ........................... (4,014) (2,364) (1,789)
(Increase) decrease in marketable securities ........................... (15,278) (5,914) 2,979
Acquisitions of businesses ............................................. (1,809) (1,322) (5,285)
Other .................................................................. 43 (45) (139)
-------- -------- --------
Net cash and equivalents used in investing activities ... (30,714) (13,710) (9,076)
Financing activities:
Principal payments under capital leases ................................ (27) (116) (392)
Net proceeds and tax benefits from exercise of stock option and
employee purchase plans ............................................ 3,081 2,286 937
-------- -------- --------
Net cash and equivalents provided by financing activities 3,054 2,170 545
Effect of exchange rate changes on cash and equivalents ..................... (21) (1) 20
-------- -------- --------
Increase (decrease) in cash and equivalents ................................. (3,932) 6,789 (614)
Cash and equivalents at the beginning of the period ......................... 14,727 7,938 8,552
-------- -------- --------
Cash and equivalents at the end of the period ............................... $ 10,795 $ 14,727 $ 7,938
======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
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.
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 and
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 and are
not material.
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 state
revenue bonds and market auction preferred stocks. State revenue bonds, which
generally mature within one year, are classified as held to maturity and are
carried at amortized cost. Market auction preferred stocks are classified as
available-for-sale and are carried at cost which approximates fair value.
Unrealized gains and losses on investments classified as held to maturity are
not recognized until realized or until a decline in fair value below cost is
deemed to be other-than-temporary. Unrealized gains and losses, if any, on
available-for-sale securities would be reflected as a separate component of
shareholders' equity.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
Equipment: Equipment, which includes assets recorded in connection with capital
leases, are 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
- - --------------------------------------------------------------------------------
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 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 which 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 time and
attendance, workforce management and shop floor data collection systems as well
as sales of application software and parts and components. The Company's systems
consist of fully integrated software and intelligent data collection terminals.
The Company also derives revenues by providing maintenance, professional and
educational services to its direct customers. The Company recognizes revenues
from sales of its systems, application software, parts and components at the
time of shipment, unless the Company has significant obligations remaining. When
significant obligations remain, revenue is not recognized until such obligations
have been completed or are no longer significant. The Company recognizes
revenues from its sales-type leases of systems at time of shipment. Service
revenues are recognized ratably over the contractual period or as the services
are performed.
The Company provides installation services and certain warranties to its
customers. It also provides, without additional charge, certain software product
enhancements for customers covered under software maintenance contracts. The
provision for these expenses is made at the time revenues are recognized.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
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 bases 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, common stock equivalents outstanding
during the year. Common stock equivalents are attributable to stock options.
Reclassifications: Certain amounts in 1995 and 1994 have been reclassified to
permit comparison with 1996.
Newly Issued Accounting Standard: In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). This statement
establishes financial accounting and reporting standards for stock-based
employee compensation plans. While the Company is reviewing the adoption and
impact of SFAS 123, it expects to adopt the disclosure-only alternative and,
accordingly, this standard will have no impact on the Company's results of
operations or its financial position.
NOTE B--Concentration of Credit Risk
The Company markets and sells its products through its direct sales
organization, through independent dealers and through 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
reviews a customer's (including dealers) credit history before extending credit
and generally does not require collateral. The Company establishes an allowance
for doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE C--Inventories
Inventories consist of the following (in thousands):
September 30,
-----------------------------------
1996 1995
- - --------------------------------------------------------------------------------
Finished goods $2,148 $1,769
Work-in-process 283 315
Raw materials 1,718 2,385
------ ------
$4,149 $4,469
====== ======
NOTE D--Equipment
Equipment consists of the following (in thousands):
September 30,
-----------------------------------
1996 1995
- - --------------------------------------------------------------------------------
Machinery and equipment $24,102 $18,414
Furniture and fixtures 5,363 3,627
Leasehold improvements 3,106 1,758
------- -------
32,571 23,799
Less accumulated depreciation
and amortization 17,833 13,720
------- -------
$14,738 $10,079
======= =======
NOTE E--Acquisitions
In fiscal 1996, 1995 and 1994, the Company completed various acquisitions of
dealer territories in the United States, Mexico and Australia. 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 $750,000, $1,000,000 and
$5,800,000 in fiscal 1996, 1995 and 1994, respectively, largely relates to
intangible assets which are being amortized using the straight-line method over
a period of eight years. Related amortization expense amounted to $1,232,000,
$1,006,000 and $797,000 in fiscal 1996, 1995 and 1994, respectively.
F-8
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE E--Acquisitions--(continued)
Certain acquisition agreements contain provisions for making additional
payments, if specified minimum revenue requirements are met, to former
shareholders of the acquired companies who have not continued employment with
the Company. These provisions expire during fiscal years 1998 and 1999. Amounts
earned under the terms of the agreements are recorded as an increase in the
excess of the total acquisition cost over the fair value of the net assets
acquired. During fiscal 1996 and 1995, $903,000 and $428,000 of such payments
were made.
NOTE F--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.
The unamortized portion of capitalized software development costs included in
other assets amounted to $5,259,000 and $3,361,000 at September 30, 1996 and
1995, respectively. Amortization of capitalized software development costs
amounted to $2,115,000, $1,481,000 and $986,000 in fiscal 1996, 1995 and 1994,
respectively. Total research and development expenses charged to operations
amounted to $9,299,000, $5,060,000 and $3,506,000 in fiscal 1996, 1995 and 1994,
respectively.
NOTE G--Credit Arrangements
The Company maintains a credit agreement, expiring June 1, 1998, providing
unsecured borrowings up to $3,000,000. Borrowings under the agreement bear
interest at the bank's prime rate or, with the consent of the bank, the London
Inter-bank Offered Rate ("LIBOR").
The agreement contains restrictive covenants including the maintenance of a
minimum amount of tangible net worth and specific financial statement ratios.
There were no borrowings on the line of credit during the three year period
ended September 30, 1996.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE H--Lease Commitments
The Company leases certain office space, manufacturing facilities and equipment
under long-term capital and 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
- - -------------------------------------------------------------------------
1997 .................................... $5,258
1998 .................................... 4,610
1999 .................................... 3,870
2000 .................................... 2,661
2001 .................................... 1,447
Thereafter .............................. 3,110
-------
$20,956
=======
Rent expense was $5,756,000, $4,478,000 and $4,083,000 in fiscal 1996, 1995
and 1994, respectively.
NOTE I--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.
On November 17, 1995, the Company's Board of Directors adopted a Rights
Agreement. Under the Agreement, the Company distributed to stockholders a
dividend of one Right for each outstanding share of Common Stock. Each Right
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
F-10
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE I--Capital Stock--(continued)
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.
The Company's Board of Directors approved a three-for-two stock split effected
in the form of a 50% stock dividend that was paid on January 29, 1996 to
stockholders of record as of January 15, 1996. 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--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 1996, 1995
and 1994, the Company granted under the Plan stock options to purchase 190,400,
180,150 and 178,725 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, 1996.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE J--Employee Benefit Plans--(continued)
The Company also has several nonqualified and incentive stock option plans
adopted from 1979 through 1987. No additional options may be granted under these
plans.
The following schedule summarizes the changes in stock options issued under
various plans for the three fiscal years in the period ended September 30, 1996.
At September 30, 1996, options to purchase 312,896 shares were exercisable.
Number of Shares Exercise Price Per Share
- - -------------------------------------------------------- -------------------------- ----------------------------------
Outstanding at
October 1, 1993 751,923 $0.22 -$13.67
Granted 178,725 10.33 - 11.33
Exercised (63,893) 0.22 - 8.00
Canceled (16,414) 0.22 - 13.67
-------- --------------
Outstanding at
September 30, 1994 850,341 0.22 - 13.67
Granted 180,150 13.50 - 23.33
Exercised (239,664) 0.22 - 13.67
Canceled (21,432) 0.22 - 13.67
-------- --------------
Outstanding at
September 30, 1995 769,395 0.22 - 23.33
Granted 190,400 27.00 - 34.50
Exercised (160,727) 0.22 - 20.33
Canceled (41,214) 0.22 - 32.50
-------- --------------
Outstanding at
September 30, 1996 757,854 $0.22 - $34.50
======== ==============
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
$3,000 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 1996, 39,763 shares were issued to employees
at prices ranging from $21.04 to $26.92 per share.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE J--Employee Benefit Plans--(continued)
Defined Contribution Plan
The Company sponsors a defined contribution savings plan for the benefit of
substantially all employees. Total expense under the plan was $777,000, $501,000
and $369,000 in fiscal 1996, 1995 and 1994, respectively.
NOTE K--Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended September 30,
---------------------------------------------------
1996 1995 1994
- - ------------------------------------------------------------- ---------------- ----------------- ----------------
Current:
Federal $5,566 $4,984 $1,965
State 951 835 357
Foreign 31
------ ------ ------
6,548 5,819 2,322
Deferred:
Federal 654 (555) 541
State 72 (81) 80
726 (636) 621
------ ------ ------
$7,274 $5,183 $2,943
====== ====== ======
At September 30, 1996, a total of 1,598,767 shares of Common Stock were reserved
for issuance. Included in this amount are 1,163,467 shares for the 1992 Equity
Incentive Plan, 235,946 shares for the Employee Stock Purchase Plan and 199,354
shares for the various stock option plans adopted in the period 1979 through
1987.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--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. For financial reporting
purposes, the Company has determined that recognition of the deferred tax asset
resulting from net operating loss carryforwards of foreign subsidiaries does not
meet the "more likely than not" criteria of the Standard and, therefore, has
provided a valuation allowance for related future tax benefits. Significant
components of the Company's deferred tax assets and liabilities were as follows
(in thousands):
September 30,
-------------------------------
1996 1995
- - ------------------------------------------------------------------------------------------------ ---------------
Deferred tax assets:
Inventory reserves $ 492 $ 424
Accounts receivable reserves 370 359
Accrued expenses 2,264 1,663
Net operating loss carryforwards of
foreign subsidiaries 694 532
-------- --------
Total deferred tax assets 3,820 2,978
Valuation allowance (694) (532)
-------- --------
3,126 2,446
Deferred tax liabilities:
Capitalized software development costs (2,130) (1,277)
Other (207) 346
-------- --------
Net deferred tax assets $ 789 $1,515
======== ========
The effective tax rate differed from the United States statutory rate as
follows:
Year ended September 30,
1996 1995 1994
- - ---------------------------------------------------------------- --------------- ---------------- ---------------
Statutory rate 35% 34% 34%
State income taxes, net of federal
income tax benefit 4 4 4
Foreign losses not benefited 1
Use of foreign net operating loss carryforwards (1) (1)
Income tax credits (1) (1)
Other 2 1
---- ---- ----
39% 38% 38%
==== ==== ====
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--Income Taxes--(continued)
There were $200,000 and $328,000 of net operating loss carryforwards utilized in
fiscal 1996 and 1995. At September 30, 1996, the Company had $1,714,000 of
available net operating loss carryforwards from foreign operations which may be
used to reduce future income taxes payable in their respective countries. Of
these carryforwards, $1,053,000 expire from 1997 through 2003. The remaining
carryforwards, totaling $661,000, may be carried forward indefinitely.
The Company made income tax payments of $4,424,000, $4,352,000 and $1,496,000 in
fiscal 1996, 1995 and 1994, respectively.
F-15
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, 1996 and 1995, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule 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 generally accepted auditing
standards. 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, 1996 and 1995, and the consolidated results of
operations and cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
October 24, 1996
F-16
KRONOS INCORPORATED
SCHEDULE II - Valuation and Qualifying Accounts
(In thousands)
====================================================================================================================================
COL. A COL. B COL. C COL. D COL. E
- - ------------------------------------------------------------------------------------------------------------------------------------
Additions
-----------------------------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts- Deductions- End
Description of Period Expenses Describe Describe of Period
- - ------------------------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $809 $264 $209 (1) $864
============ =========== =========== ============ ============
Year ended September 30, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $864 $571 $434 (1) $1,001
============ =========== =========== ============ ============
Year ended September 30, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $1,001 $322 $336 (1) $987
============ =========== =========== ============ ============
(1) Uncollectible accounts written off, net of recoveries.
Exhibit Index
Exhibit
No. Description
3.1 Articles of Organization of the Registrant, as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(10) 1986A Stock Option Plan.
10.2(10) 1992 Equity Incentive Plan, as amended and restated.
10.3(4)(10) 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(6) Lease dated August 8, 1995 between Principal Mutual Life
Insurance Company and the Registrant, relating to premises leased
in Chelmsford, MA.
10.6(3) Loan Agreement dated June 30, 1993 between Fleet Bank of
Massachusetts, N.A. and the Registrant ("Loan Agreement").
10.6.1(9) Amendment dated June 3, 1996 to Loan Agreement dated
June 30, 1993 between Fleet Bank of Massachusetts, N.A. and
the Registrant.
10.7(2)(11) Software License and Support and Hardware Purchase Agreement dated
April 2, 1993 between ADP, Inc. and the Registrant.
10.7.1(12) Amendments dated July 22, 1996 to Software License and Support
and Hardware Purchase Agreement dated April 2, 1993, between
ADP, Inc. and the Registrant.
10.8* Sales Agreement dated December 6, 1990, between Integrated
Design, Inc. and the Registrant.
10.8.1(7) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated Design, Inc. and the
Registrant.
10.9(3)(11) 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(8) 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.
10.12 (5) 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.
11 Statement re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
Exhibit Index (continued)
Exhibit
No. Description
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 same Exhibit Number in the Company's
Form 10-K for the fiscal year ended September 30, 1992.
(2) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended April 3, 1993.
(3) Incorporated by reference to the same Exhibit Number in the Company's
Form 10-K for the fiscal year ended September 30, 1993.
(4) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended July 2, 1994.
(5) Incorporated by reference to Exhibit Number 2.1 in the Company's Form
10-Q for the quarterly period ended July 2, 1994.
(6) Incorporated by reference to Exhibit 10.13 in the Company's Form 10-K
for the fiscal year ended September 30,1995.
(7) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended March 30, 1996.
(8) Incorporated by reference to Exhibit Number 10.2 in the Company's Form
10-Q for the quarterly period ended March 30, 1996.
(9) Incorporated by reference to Exhibit Number 10.1 in the Company's Form
10-Q for the quarterly period ended June 29, 1996.
Exhibit Index (continued)
Exhibit
No. Description
(10) 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.
(11) Confidential treatment was granted for certain portions of this
agreement.
(12) Confidential treatment requested for certain portions of these
amendments, which portions have been omitted and filed separately
with the Securities and Exchange Commission.