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, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-20109
Kronos Incorporated
(Exact name of registrant as specified in its charter)
Massachusetts 04-2640942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Fifth Avenue, Waltham MA 02451
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 890-3232
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 ]
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, 1999 11,746,547 $609,352,126
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, 1999 value per share 12,482,522
DOCUMENTS INCORPORATED BY REFERENCE.
The Company's definitive proxy statement dated December 17, 1999 for the
Annual Meeting of Stockholders to be held on February 3, 2000 (Part III - Items
10,11,12 and 13).
PART I
Item 1. Business
Kronos Incorporated (the "Company" or "Kronos") was organized in 1977
as a Massachusetts corporation. The Company develops, manufactures and markets
frontline labor management systems that enhance productivity in the workplace by
capturing, measuring and delivering information about employees' time and
activities. The Company's frontline labor management systems are designed for a
wide range of businesses from single-user to large multi-site enterprises.
Kronos' applications perform time and attendance, employee scheduling, shop
floor labor allocation, activity-tracking and labor analytics. Kronos' systems
capture information from employees in the workplace utilizing a variety of user
interaction technologies. These technologies include intelligent data collection
terminals that the Company manufactures, desktop applications, the Internet,
interactive voice response and biometrics. Kronos' application suite can either
operate independently in a desktop environment or interface with related
applications and technologies at many points throughout the enterprise to enable
management to optimize the use of their labor data. In addition, the Company
maintains an extensive professional service and technical support organization
that is responsible for maintaining systems and providing professional and
educational services. These services can be provided on site or over the
Internet. The Company also collaborates with industry leading vendors that
market products and services that are synergistic to Kronos solutions. These
collaborations include major enterprise resource planning system (ERPs)
providers, manufacturing execution system (MES) providers, and human resources,
finance, scheduling and payroll application providers, as well as consulting and
systems integration firms. To date, the majority of the Company's revenues and
profits have been derived from its time and attendance applications and related
products and services.
Products
The software incorporated in Kronos' frontline labor management systems
is parameter-driven, which allows it to be configured upon installation to meet
the needs of an individual customer and reconfigured as customer needs evolve.
The Company offers various products that operate in enterprise or desktop
environments and can be accessed through a number of methods including the
Internet. These products include:
Timekeeper Central(R) System -- targeted for small to mid-size businesses or
large enterprises that deploy systems site-by-site, the system streamlines the
management, collection and distribution of employee hours for payroll, human
resources, and other Kronos applications for frontline labor management. By
eliminating the need for manual data collection and data entry, the system
reduces the time needed to collect employee work related information, improves
payroll accuracy, and provides time-sensitive labor information to frontline
managers. Its rules engine has been developed to accommodate a wide variety of
pay policies and work rules correctly and uniformly across the organization. It
accepts a wide range of user interaction methods including data collection
devices, interactive voice response systems, native windows applications and the
Web.
Workforce Central(TM) Suite:
A suite of products designed for organizations that need to provide all levels
of management with access to real-time information on the labor components of
their business. Solutions integrated with the suite include:
o Workforce TimekeeperTM -- streamlines the management, collection and
distribution of employee hours, and simplifies the control of the labor
expense throughout an enterprise. Workforce Timekeeper uses a robust pay
rules engine to apply complex work and pay rules accurately and
consistently throughout an organization thus eliminating the need for
manual timecards and timesheets.
o Workforce AccrualsTM -- provides for control of leave liability, compliance
with corporate policies or contracts, and enables employees and supervisors
to manage benefit time by automatically calculating the balances of each
employee's available benefit time.
o Workforce ActivitiesTM -- collects activity data from an employee and
reports on activities performed, productivity and employee transactions as
well as provides data to other systems such as billing or project tracking.
Workforce Activities is anticipated to be released in the second
quarter of fiscal 2000.
o Workforce Smart SchedulerTM -- forecasts staffing needs to business
volumes, optimizes staffing by applying work standards, and provides all
levels of management with reporting tools to act on real-time labor
information.
The Company's Timekeeper Central and Workforce Timekeeper systems run on
Windows 95/98, Windows NT and Citrix Metaframe. The Workforce Central suite
supports a variety of industry-standard databases including Oracle, Informix and
Microsoft SQL Server.
Timekeeper(R)/AS Suite:
A suite of products for both single-site and enterprise-wide deployment in AS400
environments. Timekeeper/AS provides centralized data with decentralized access,
allowing all levels of management access to real-time information on the labor
component of the business and extending the functionality of ERP systems.
Solutions integrated with the suite include:
o Timekeeper/AS -- provides users with a flexible and comprehensive pay rules
engine to apply complex work and pay rules accurately and consistently
throughout the entire organization eliminating the need for manual
timecards and timesheets.
o Timekeeper/AS Accruals -- provides for control of leave liability,
compliance with corporate policies or contracts, and enables employees and
supervisors to manage benefit time by automatically calculating the
balances of each employee's available benefit time.
o Timekeeper/AS Attendance Tracker -- allows organizations to automate its
no-fault attendance program by capturing lost time exceptions and absences
from the Timekeeper/AS system and providing real time information to
managers for disciplinary management.
o Timekeeper/AS Labor Data Collection -- captures time, labor, and material
usage at every stage of the production process thereby providing managers
the tools to improve customer responsiveness, enhance operating efficiency,
increase labor productivity, and ensure quality control.
o Timekeeper/AS Gate Access -- provides a method to control and track
access to areas within an organization that require monitoring.
In addition, the Company offers the following solutions to address
customers specific needs:
ShopTrac ProTM -- captures time, labor, and material usage at every stage of the
production process thereby providing managers the tools to improve customer
responsiveness, enhance operating efficiency, increase labor productivity, and
ensure quality control.
Visionware(R) -- consists of a suite of labor productivity tools that
synthesizes information from disparate information systems such as billing,
payroll and time and attendance and accurately captures, analyzes and reports
the information. The information, which can be reported in either graphical or
tabular format, can enable management to monitor and manage labor productivity.
To date this product has principally been used within the Healthcare industry,
however, the Company intends to market this product through its other industry
specific divisions during fiscal 2000.
Imagekeeper(R) -- easy to use, flexible video imaging system that captures
employee images and signatures and stores them with other personnel data.
Imagekeeper provides instant on-line identification and verification of
employees and produces economical badges that can be utilized by multiple
applications using barcodes, magnetic stripes and other technologies. Personnel
data can easily be shared with other in-house applications that require the same
information.
Kronos provides a wide range of user interaction technologies to
accommodate various work environments and markets, and to satisfy the
price/performance requirements of its customers. These user interaction
technologies include:
o Time and Labor Data Entry Terminals: Fixed and portable intelligent data
collection devices that record time, labor, and activity data via serial,
Ethernet, Token Ring, or modem host communications. Data can be entered
using the terminal's stationary badge reader in Barcode or Magnetic Stripe
format, or entered manually via the terminal keyboard. Lasers, charged
coupled device ("CCD") scanners and Wedge readers can be attached to the
terminal to aid in the collection of factory-floor or labor activity data.
o Workforce WebTM and Timekeeper/AS Web: Using a standard web browser (e.g.
Netscape or Internet Explorer), employees can enter time worked in a
variety of formats, request time off, and review leave balances and total
hours worked.
o Workforce ExpressTM: Using Microsoft Outlook, Windows or web, employees can
enter time worked in a variety of formats, request time off, and review
leave balances and total hours worked.
o Timekeeper/AS Terminal Entry: Using AS/400 or PC based host systems, time
and labor data can be collected from local or remote data entry terminals
via serial, Ethernet, Token Ring or modem communications in a heterogeneous
computing environment.
o Workforce TeleTimeTM and Timekeeper/AS TeleTime: Using telephone-based,
interactive voice response solutions, enterprise-wide time and labor
information can be collected and communicated.
o Timekeeper/AS Graphical User Interface: Provides for a windows front end
for the entire Timekeeper/AS suite application. Additionally, provides
functionality for Web connectivity and access over the internet / intranet.
The Company believes that the extensive set of functions and features
within its time and attendance products, the suite of applications available
through its frontline labor management systems and its various user interaction
technologies provide it with an important advantage over its competition. The
Company believes additional competitive advantages are provided by its ability
to offer frontline labor management systems that accommodate specific vertical
markets and by its collaborations with various industry-leading vendors.
Services and Support
Kronos maintains an extensive professional service and technical
support organization which provides a suite of maintenance, professional and
educational services. These services are designed to support the Company's
customers throughout the product life cycle. Maintenance service options are
delivered through the Company's centralized Global Support operation or through
local service personnel. The Company also provides a wide range of customer
self-service options through the Internet. The Company's professional services
include implementation support, technical and business consulting as well as
system integration and optimization. The Company's educational services offer a
full range of curriculums which are delivered through local training centers or
via computer based training courses. When necessary, the Company may also
provide software customization services to meet any unique customer
requirements.
Marketing and Sales
Kronos markets and sells its products to the mid-market and enterprise
markets in the United States and other countries through its direct sales and
support organization and through independent dealers. In addition, to serve
smaller businesses, the Company has a joint marketing agreement with ADP, Inc.
("ADP"). The Company recognizes that the information needs of businesses in
various industries continue to be increasingly specialized and sophisticated. As
a result, the Company's marketing and field sales personnel are organized into
industry specific divisions. These divisions focus on the needs of the
manufacturing, healthcare, retail/hospitality and government/education markets.
These divisions operate with the following objectives:
o To gain expertise in their respective industry environments
and pursue opportunities for growth and product leadership.
o To focus engineering and marketing resources on industry
specific product development efforts required to deliver
products and services that meet those industry needs.
o To develop long-term business relationships with select
industry partners.
o To educate and train sales staff as industry specialists.
Focusing on industry specific divisions permits Kronos to better
understand the needs of its customers and to respond quickly to the
opportunities presented by these markets.
Direct Sales Organization
The Company has 36 direct sales and support offices located in the
United States. In addition, the Company has three sales and support offices
located in Canada, two in the United Kingdom, one in Mexico, four in Australia
and one in Brazil. Each direct sales office covers a defined territory, and has
sales and support functions.
For the fiscal years ended September 30, 1999, 1998 and 1997, the
Company's direct sales and support offices in the U.S. generated net revenues of
$184.3 million, $147.3 million and $120.0 million, respectively. For the fiscal
years ended September 30, 1999, 1998 and 1997, the Company's international
subsidiaries generated net revenues of $20.4 million, $14.9 million and $13.6
million, respectively. Total assets at the Company's international subsidiaries
for these periods were $15.3 million, $12.1 million and $10.7 million,
respectively.
Dealers
Kronos also markets and sells its products through independent dealers
within designated geographic territories generally not covered by Kronos' direct
sales offices. These dealers provide sales, support and installation services
for Kronos' products. There are presently approximately 23 dealers in the United
States actively selling and supporting Kronos' products. Sales to independent
U.S. dealers for the years ended September 30, 1999, 1998 and 1997 were $30.6
million, $26.9 million and $22.7 million, respectively. Kronos also has dealers
in Argentina, Bahamas, Bahrain, Barbados, Brazil, Chile, Columbia, Ghana, Guam,
Guatemala, Guyana, Jamaica, Lebanon, Mexico, Netherlands Antilles, Netherlands,
Norway, Panama, Puerto Rico, South Africa, Singapore, Trinidad and Venezuela.
Sales to independent international dealers were not material in any of the
fiscal years. Kronos supports its dealers with training, technical assistance,
and major account marketing assistance.
Original Equipment Manufacturers (OEM)
The Company has a joint marketing agreement with ADP, Inc. ("ADP")
under which ADP markets a proprietary version of the Company's PC-based time and
attendance software, together with data collection terminals manufactured by the
Company.
Reduction in the sales efforts of the Company's major dealers and/or
ADP, or termination or changes in their relationships with the Company, could
have a material adverse effect on the results of the Company's operations.
Customers
End-users of the Company's products include companies of all sizes from
the manufacturing, service, public and private sectors. The Company believes
that the dollar amount of backlog is not material to an understanding of its
business. Although the Company has contracts to supply systems to certain
customers over an extended period of time, substantially all of the Company's
product revenues in each quarter result from orders received in that quarter.
Product Development
The Company's product development efforts are focused on enhancing the
capabilities and increasing the performance of its existing products and
developing new products and interfaces to third party products on a timely basis
to meet the increasingly sophisticated needs of its customers. During fiscal
1999, 1998 and 1997, Kronos' engineering, research and development expenses were
$26.8 million, $19.7 million and $16.5 million, respectively. The Company
intends to continue to commit substantial resources to enhance and extend its
product lines and develop interfaces to third party products. Although the
Company is continually seeking to further enhance its product offerings and to
develop new products and interfaces, there can be no assurance that these
efforts will succeed, or that, if successful, such product enhancements or new
products will achieve widespread market acceptance, or that the Company's
competitors will not develop and market products which are superior to the
Company's products or achieve greater market acceptance. The Company also
depends upon the reliability and viability of a variety of software development
tools owned by third parties to develop its products. If these tools are
inadequate or not properly supported, the Company's ability to release
competitive products in a timely manner could be adversely impacted.
Competition
The frontline labor management industry is highly competitive. The
number of competitors is also increasing as applications and systems providers
in related industries, such as human resources management, payroll processing
and ERP, enter the market. Technological changes such as those allowing for
increased use of the Internet may also create the potential for new entrants.
Although the Company believes it has core competencies that are not easily
obtainable by competitors, maintaining the Company's competitive advantages over
competitors will require continued investment by the Company in research and
development and marketing and sales programs. There can be no assurance that the
Company will have sufficient resources to make such investments or be able to
achieve the technological advances necessary to maintain its competitive
advantages. Increased competition could adversely affect the Company's operating
results through price reductions and/or loss of market share.
The Company competes primarily on the basis of price/performance,
quality, reliability and customer service. In the time and attendance market,
the Company competes against firms that sell automated time and attendance
products to many industries, against firms that focus on specific industries,
and against firms selling related products, such as payroll processing, human
resources management, or ERP systems.
Proprietary Rights
The Company relies on a combination of patents, copyrights, trademarks,
trade secret law and contracts to protect its proprietary technology.
The Company generally provides software products to end-users under
non-exclusive shrink-wrap licenses or under signed licenses, both of which may
be terminated by Kronos if the end-user breaches the terms of the license. These
licenses generally require that the software be used only internally subject to
certain limitations, such as the number of employees, simultaneous or active
users, computer model and serial number, features and/or terminals for which the
end-user has paid the required license fee. The Company authorizes its dealers
to sublicense software products to end-users under similar terms. In certain
circumstances, the Company also makes master software licenses available to
end-users 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
customers license software products under individually negotiated terms.
Despite these precautions, it may be possible to copy or otherwise
obtain and use the Company's products or technology without authorization. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries.
The Company has registered trademarks for Kronos, Timekeeper,
Timekeeper Central, Jobkeeper, Jobkeeper Central, Datakeeper, Datakeeper
Central, Gatekeeper, Gatekeeper Central, Imagekeeper, TeleTime, TimeMaker,
CardSaver, ShopTrac, the ShopTrac logo, Start.Time, Keep.Trac, Solution In A
Box, Visionware and the Company's logo in the United States. In addition,
certain trademarks have been obtained or are in process in various foreign
countries.
The Company purchases a payroll interface and other software from a
single supplier for resale in certain of its frontline labor management systems.
Although the Company believes its relationship with this supplier 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 or identify and contract with another supplier to perform
this function. The Company is currently evaluating its ability to purchase
payroll interface software from alternative suppliers. Although the Company
believes it would be able to produce its own payroll interface software or
purchase payroll interface software from another supplier, 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 two
suppliers who have been certified to the Company's manufacturing specifications
to perform the software duplication process. The Company's data collection
terminals are assembled from the printed circuit board level in its facility in
Chelmsford, Massachusetts. Although most of the parts and components included
within the Company's products are available from multiple suppliers, certain
parts and components are purchased from single suppliers. The Company has chosen
to source these items from single suppliers because it believes that the
supplier chosen is able to consistently provide the Company with the highest
quality product at a competitive price on a timely basis. While the Company has
to date been able to obtain adequate supplies of these parts and components, the
Company's inability to transition to alternate sources on a timely basis if and
as required in the future could result in delays or reductions in product
shipments which could have a material adverse effect on the Company's operating
results.
Employees
As of November 30, 1999, the Company had 1,797 employees. None of the
Company's employees is represented by a union or other collective bargaining
agreement, and the Company considers its relations with its employees to be
good. The Company has encountered intense competition for experienced technical
personnel for product development, technical support and sales and expects such
competition to continue in the future. Any inability to attract and retain a
sufficient number of qualified technical personnel could adversely affect the
Company's ability to produce, support and sell products in a timely manner.
Item 2. Properties
The Company leases approximately 75,000 square feet at its headquarters
in Waltham, Massachusetts. This lease expires March 31, 2000. During fiscal 1999
the Company acquired a parcel of land located in Chelmsford, Massachusetts for
the construction of an approximately 129,000 square foot corporate headquarters
facility. The Company anticipates completing construction of the facility during
the second quarter of fiscal 2000 at which time the Company will relocate its
headquarters from Waltham to Chelmsford, Massachusetts. The Company also leases
a total of approximately 195,000 square feet in two facilities located in
Chelmsford, Massachusetts. The Company's manufacturing operations, Global
Support Center and various engineering and administrative operations are located
in these facilities. The Company additionally leases 48 sales and support
offices located throughout North America, Europe, Australia and South America.
The Company's aggregate rental expense for all of its facilities in fiscal 1999
was approximately $7.1 million. The Company considers its facilities to be
adequate for its current requirements and that additional space will be
available as needed in the future.
Item 3. Legal Proceedings
From time to time, the Company is involved in legal proceedings arising
in the normal course of business. None of the legal proceedings in which the
Company is currently involved is considered material by the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Name Age Position
Mark S. Ain 56 Chief Executive Officer and Chairman
W. Patrick Decker 52 President and Chief Operating Officer
Aron J. Ain 42 Vice President, Worldwide Sales and Service
Paul A. Lacy 52 Vice President, Finance and Administration,
Treasurer and Clerk
Laura L. Woodburn 52 Vice President, Engineering
Lloyd B. Bussell 54 Vice President, Manufacturing
Laurel Giarrusso 50 Vice President, Business Planning and
Development
James Kizielewicz 40 Vice President, Marketing
Mark S. Ain, a founder of the Company, has served as Chief Executive
Officer and Chairman since its organization in 1977. He also served as President
from 1977 until October, 1996. Mr. Ain is the brother of Aron J. Ain, Vice
President, Worldwide Sales and Service of the Company.
W. Patrick Decker served as Vice President, Marketing and Field
Operations from 1982 until October, 1996, when he was appointed President and
Chief Operating Officer. Mr. Decker was elected to the Board of Directors in
January, 1997.
Aron J. Ain served as Vice President, Sales and Service from 1988 until
October, 1996, when he was appointed Vice President, Marketing and Worldwide
Field Operations. In November, 1998, his title changed to Vice President,
Worldwide Sales and Service. Mr.
Ain is the brother of Mark S. Ain, Chief Executive Officer and Chairman.
Paul A. Lacy has been Vice President, Finance and Administration,
Treasurer and Clerk since 1988.
Laura L. Woodburn has served as Vice President, Engineering since
November, 1996. She held various positions at Digital Equipment Corporation from
1979 to 1996, most recently serving as Vice President of the Storage Big
Business segment.
Lloyd B. Bussell has served as Vice President, Manufacturing since
1987.
Laurel Giarrusso has served in a variety of positions at the Company
from 1979 until her appointment as Vice President, Business Planning and
Development in January, 1997.
James Kizielewicz has served in a variety of capacities at the
Company from 1981 until his appointment as Vice President, Marketing in
January, 1997.
Officers of the Company hold office until the first meeting of
directors following the next annual meeting of stockholders and, in the case of
the President, Treasurer and Clerk, until their successors are chosen and
qualified.
PART II
Item 5. Market for Registrant's Common Equity and Stockholder Matters
STOCK MARKET INFORMATION
The Company's common stock is traded on the Nasdaq National Market
under the symbol KRON. The following table sets forth the high and low sales
prices for fiscal 1999 and 1998. 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.
1999
----------------------------------------------------
Fiscal High Low
- --------------------------- ------------------------- --------------------------
First quarter $30.000 $16.667
Second quarter 32.500 22.250
Third quarter 47.750 25.000
Fourth quarter 54.500 34.500
1998
----------------------------------------------------
Fiscal High Low
- --------------------------- ------------------------- --------------------------
First quarter $22.750 $12.833
Second quarter 25.083 19.083
Third quarter 25.000 20.500
Fourth quarter 26.667 22.667
The sales prices have been restated to reflect the Company's
three-for-two stock split that was paid on March 9, 1999 to stockholders of
record as of February 23, 1999.
HOLDERS
On November 30, 1999 there were approximately 3,500 shareholders of
record of the Company's common stock.
DIVIDENDS
The Company has not paid cash dividends on its common stock, and the
present policy of the Company is to retain earnings for use in its business.
Item 6. Selected Financial Data
The following table data should be read in conjunction with the consolidated
financial statements and notes thereto.
Financial Highlights In thousands, except share data
Year Ended September 30,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
Operating Data:
Net revenues $254,298 $202,469 $170,538 $142,957 $120,373
Net income $22,378 $14,720 $11,272 $11,425 $8,398
Net income per common share:
Basic $1.78 $1.19 $0.92 $0.95 $0.74
Diluted $1.71 $1.15 $0.89 $0.91 $0.69
Balance Sheet Data:
Total assets $228,243 $163,861 $129,132 $105,117 $78,518
The presentation of amounts per share has been restated to reflect the
Company's three-for-two stock split that was paid on March 9, 1999 to
stockholders of record as of February 23, 1999.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
This discussion includes certain forward-looking statements about the
Company's business and its expectations. Any such statements are subject to risk
that could cause the actual results to vary materially from expectations. For a
further discussion of the various risks that may affect the Company's business
and expectations, see "Certain Factors That May Affect Future Operating Results"
at the end of Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Revenues. Revenues amounted to $254.3 million, $202.5 million and $170.5 million
in fiscal 1999, 1998 and 1997, respectively. Annual revenue growth amounted to
26% in fiscal 1999 and 19% in fiscal 1998 and 1997. Revenue growth in fiscal
1999 was principally the result of customer demand driving an increase in sales
volume through all of the Company's distribution channels. The increase in sales
volume was generated by both product and service revenues.
Product revenues amounted to $164.3 million, $135.2 million and $116.2
million in fiscal 1999, 1998 and 1997, respectively. Product revenues grew by
22% in fiscal 1999 as compared to 16% and 15% in fiscal 1998 and 1997,
respectively. Product revenue growth in all fiscal years was principally the
result of customer demand. Product revenue growth in fiscal 1999 was driven by
sales of the Company's products to new customers as well as sales into the
Company's existing customer base. Demand from both new and existing customers
was driven by enhancements delivered in fiscal 1999 to the Company's three
principal product lines: Timekeeper Central, Workforce Central and
Timekeeper/AS. The components of product revenue, software, hardware and
options, remained relatively consistent as a percentage of total product sales
as compared to fiscal 1998. The sales growth in fiscal 1998 was principally the
result of customer demand driving an increase in sales of the Company's Windows
and client/server products. As a result of the strength of sales of Windows and
client/server systems in fiscal 1998, the software component of product sales
increased to 45% of total product sales as compared to 38% in fiscal 1997. The
software component of product sales was approximately 45% of total product sales
in fiscal 1999.
Service revenues amounted to $90.0 million, $67.3 million and $54.4
million in fiscal 1999, 1998 and 1997, respectively. Service revenues grew by
34% in fiscal 1999 as compared to 24% and 29% in fiscal 1998 and 1997,
respectively. Service revenues amounted to 35%, 33% and 32% of total revenues in
fiscal 1999, 1998 and 1997, respectively. The growth in service revenues in all
periods reflects an increase in maintenance revenue from expansion of the
installed base and the level of services sold to the installed base, as well as
an increase in the level of maintenance contracts and professional services
accompanying new sales. The expansion of the installed base results from the
cumulative effect of adding new sales to the base and the acquisition of certain
dealer operations. The increase in the level of services sold to the installed
base is partially attributable to the upgrade of existing customers to the
Company's products on the Windows and client server platforms. Upgrade sales
generally result in an increased level of maintenance and professional services
revenue.
International revenues, which include revenues from the Company's
international subsidiaries and sales to independent international dealers, grew
39% in fiscal 1999 to $22.3 million as compared to $16.0 million and $15.4
million in fiscal 1998 and 1997, respectively. International revenues amounted
to 9%, 8% and 9% of total revenues in fiscal 1999, 1998 and 1997, respectively.
The increased growth rate in international revenues in fiscal 1999 was
principally a result of lower than anticipated revenue from international
operations in fiscal 1998. The international revenue growth rate in fiscal 1998
was unfavorably impacted by the Company's initiatives to strengthen subsidiary
management and to position the subsidiaries sales organizations to better
penetrate their respective markets. Fiscal 1998 revenue was also unfavorably
impacted by the Asian/Pacific economic recession and related fluctuations in
foreign currencies.
Gross Profit. Gross profit as a percentage of revenues was 64% in fiscal 1999 as
compared to 62% and 61% in fiscal 1998 and 1997, respectively. The improvement
in gross profit as a percentage of revenues in fiscal 1999 and 1998 was
attributable to increases in both product and service gross profit. Product
gross profit as a percentage of product revenues was 77% in fiscal 1999 as
compared to 76% and 74% in fiscal 1998 and 1997, respectively. The improvement
in product gross profit in fiscal 1999 as compared to fiscal 1998 was primarily
attributable to cost reductions in manufactured hardware components as well as
higher production volumes. The improvement in product gross profit in fiscal
1998 as compared to fiscal 1997 was primarily attributable to a change in the
mix of product sold. The Company's product revenue in fiscal 1998 was derived
from sales of systems in which software, which typically generates higher gross
profit, was a significantly higher proportion of product revenues than in fiscal
1997.
Service gross profit as a percentage of service revenues was 41% in
fiscal 1999 as compared to 34% and 33% in fiscal 1998 and 1997, respectively.
The improvement in service gross profit as a percentage of revenues in fiscal
1999 was primarily attributable to the growth in service revenues without a
proportionate increase in service expenses. Growth in maintenance revenues from
the installed base generally does not result in a commensurate growth in
expenses as the Company has centralized its software support function. In
addition, as customers upgrade to current versions of the Company's software
products, fewer versions of the Company's product require support which has in
turn reduced support costs. The Company has also focused on enhancing billing
for professional services, particularly in larger enterprise sales, which has
also improved margins for professional services.
Expenses. Expenses as a percentage of revenues were 51% in fiscal 1999 as
compared to 50% in fiscal 1998 and 1997. Sales and marketing expenses were $85.3
million, $68.0 and $57.9 million in fiscal 1999, 1998 and 1997, 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 34%
in all fiscal years. Engineering, research and development expenses were $26.8
million, $19.7 million and $16.5 million in fiscal 1999, 1998 and 1997,
respectively. These expenses are net of capitalized software development costs
of $8.8 million, $6.6 million and $5.2 million, respectively. Engineering,
research and development expenses as a percentage of revenues were 11% in fiscal
1999 as compared to 10% in fiscal 1998 and 1997, respectively. The growth in
engineering, research and development expenses in all periods resulted
principally from the development of new products in the client/server and
Windows environments. Increased spending on software development costs reflects
the Company's commitment to further enhance existing products, making them
easier to use, and on new product development.
General and administrative expenses were $15.5 million, $13.8 million
and $11.6 million in fiscal 1999, 1998 and 1997, respectively. As a percentage
of revenues, general and administrative expenses were 6% in fiscal 1999 as
compared to 7% in fiscal 1998 and 1997, respectively. Other expense, net
amounted to less than 1% of revenues in all fiscal years. Other expense, net is
composed primarily of amortization of intangible assets related to acquisitions
made by the Company that is offset by interest income earned on its investments.
Although management anticipates amortization expense to increase in fiscal 2000
as a result of the Company's acquisitions during fiscal 1999, other expense is
expected to remain less than 1% of revenues.
Income Taxes. The provision for income taxes as a percentage of pretax income
was 35% in fiscal 1999 as compared to 40% and 38% in fiscal 1998 and 1997,
respectively. The reduction in the Company's effective income tax rate was
primarily attributable to tax benefits resulting from the Company's sale of its
South African subsidiary during the fiscal year as well as utilization of
foreign net operating loss carryforwards. The increase in the effective income
tax rate in fiscal 1998 was primarily attributable to an increase in net
operating losses of foreign subsidiaries for which no benefit was recognized.
The Company anticipates that its tax rate will increase to approximately 37% in
fiscal 2000 due to the non-recurring nature of the tax benefit from the sale of
the South African subsidiary and a reduction in the impact of foreign net
operating loss carryforwards.
Liquidity and Capital Resources
Working capital as of September 30, 1999 amounted to $21.1 million as
compared with $45.1 million at September 30, 1998. The decrease in working
capital is attributable to the Company's increased investments in non-current
marketable securities, acquisitions of businesses, investments in property,
plant and equipment (including the construction of a headquarters facility) as
well as the repurchase of common shares under the Company's Stock Repurchase
Program.
Cash and equivalents and marketable securities amounted to $62.4
million and $51.8 million at September 30, 1999 and 1998, respectively. Cash
provided by operations increased to $51.9 million in fiscal 1999 from $36.2
million in fiscal 1998. Cash provided by operations amounted to $18.9 million in
fiscal 1997. The increase in operating cash flows in fiscal 1999 and 1998 was
primarily attributable to an increase in earnings, deferred maintenance and
professional service revenues, as well as compensation accruals. It is the
Company's policy to bill maintenance contracts at the contract start date,
including contracts accompanying lease agreements, and professional services
accompanying product sales when the product is invoiced. The Company has
experienced growth in deferred maintenance revenues as the result of the
expansion of the installed base and the level of maintenance contracts sold to
that installed base in fiscal 1999 and 1998 and, to a lesser extent, an increase
in the sale of extended maintenance contracts. In fiscal 1999, the Company has
experienced an increase in deferred professional services revenue as a result of
an increase in the level of professional services accompanying new sales and
sales to the Company's existing customer base. Also contributing to the increase
in operating cash flows in fiscal 1999 and 1998, were non-cash charges related
to depreciation and amortization. In fiscal 1999, these cash flows have been
partially offset by investments in the Company's lease portfolio of
approximately $9.2 million.
The Company's increase in its investment in property, plant and
equipment in fiscal 1999 was principally due to costs related to the
construction of the Company's new corporate headquarters facility and
development of its headquarters campus. The Company anticipates it will spend
approximately $10.0 million in the construction of the headquarters facility
over the next 9 months. The Company's increase in use of cash for acquisition of
businesses in fiscal 1999 and 1998 was related to acquisitions of dealer
territories as well as labor tracking and productivity technologies. During
fiscal 1999, the Company completed the acquisition of its largest dealer
territory and a labor-tracking software application company. Under the terms of
these acquisitions, the Company agreed to an initial cash payment, a guaranteed
payment within one year and, in conjunction with the dealer territory
acquisition, assumed certain maintenance contracts and other professional
services obligations.
Cash provided by operations was more than sufficient to fund
investments in property, plant and equipment, acquisitions of businesses and
capitalized software development costs in fiscal 1999, 1998 and 1997. Management
anticipates that investment in capitalized software development costs and
property, plant and equipment in fiscal 2000 will increase as compared to fiscal
1999. The increase will be the result of the Company's investment in product
enhancements, the headquarters facility as well as information systems to
improve and support operations. The Company expects to fund its investments in
software development costs, property, plant and equipment and additional cash
payments related to acquisitions in fiscal 2000 with available cash and
investments and operating cash flow.
Under the Company's stock repurchase program implemented during fiscal
1997, the Company has repurchased 378,350, 116,250 and 135,000 common shares in
fiscal 1999, 1998 and 1997, respectively, at a cost of $14.2 million, $2.7
million and $2.3 million, respectively. The common shares repurchased under the
program are used for the Company's employee stock option plans and employee
stock purchase plan.
Adjustments resulting from the translation of the Company's net
investments in its foreign subsidiaries are made directly to a separate
component of stockholders' equity. In fiscal 1998, as a result of significant
fluctuations in foreign currency exchange rates and increases in its net
investments, the Company recorded a $.9 million adjustment to stockholders'
equity. Adjustments in fiscal 1999 and 1997 were not material. As a result of
the Company's sale of its South African subsidiary during fiscal 1999, the
Company recognized an immaterial charge to other expense resulting from the
write off of the cumulative equity adjustment from the translation of the
subsidiary's financial statements.
Certain Factors That May Affect Future Operating Results
Except for historical matters, the matters discussed in the Annual
Report and/or Form 10-K are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Act"). The Company
desires to take advantage of the safe harbor provisions of the Act and is
including this statement for the express purpose of availing itself of the
protection of the safe harbor with respect to all forward looking statements
that involve risks and uncertainties.
The following important factors, among others, could cause actual
operating results to differ materially from those indicated by forward-looking
statements made in this Annual Report and/or Form 10-K and presented elsewhere
by management from time to time.
Potential Fluctuations in Results. 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 revenues 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.
Product Development and Technological Change. Continual change and improvement
in computer software and hardware technology characterize the markets for
frontline labor management systems. The Company's future success will depend
largely on its ability to enhance the capabilities and increase the performance
of its existing products and to develop new products and interfaces to third
party products on a timely basis to meet the increasingly sophisticated needs of
its customers. Although 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.
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 products in
a timely manner.
Year 2000. The Company has an executive level steering committee to identify and
resolve Year 2000 issues associated with the Company's internal systems (both
information technology ("IT") and non-IT), the Company's own products and
services, the status of third party products distributed by the Company to its
customers, as well as the Year 2000 readiness of the Company's suppliers. The
Company has completed formulating a contingency plan on Year 2000 readiness and
has completed an assessment of all of its principal IT systems, which include
manufacturing, distribution, customer service and financial systems. The Company
has, with the assistance of an outside consultant, tested its principal internal
enterprise resource planning (ERP) system and believes it to be year 2000
compliant. This ERP system includes order entry, material resource planning,
master production scheduling, purchasing, shipping and financial systems. The
Company has identified Year 2000 issues in other less significant IT systems,
and expects to resolve those issues, by replacements and/or upgrades, by the end
of November 1999. The Company is currently performing an assessment and
remediation, as necessary, of certain non-IT systems and expects that assessment
to be completed prior to the end of December 1999. Any such systems determined
not to be Year 2000 compliant will be remedied or replaced, if necessary. The
Company has replaced certain stand alone shop floor test equipment that was
found to be noncompliant. The Company does not plan to assess specifically its
facility management systems, or the external forces such as utility or
transportation Year 2000 compliance failures that might generally affect
industry and commerce. Although the Company is not currently aware of any
material operational issues or costs associated with preparing its internal IT
and non-IT systems for the Year 2000, the Company may experience material
unanticipated problems and costs caused by undetected errors or defects in these
internal systems.
The Company's Year 2000 compliance plan includes designing its current
products to meet the Company's definition of "Year 2000 Compliant" and testing
the most recent versions of its current products to determine whether they meet
that definition. Testing of products currently manufactured by the Company is
essentially complete. The Company has warranted, and may in the future warrant
to certain customers that its products will work in the Year 2000 and beyond.
Generally, for products that have been identified to date as needing
upgrades/new versions to address Year 2000 issues, the Company has those
upgrades/new versions available to customers for purchase or under maintenance
agreements. Some of the Company's customers are using products and/or product
versions that the Company has not tested, and does not support, for Year 2000
compliance. The Company is encouraging these customers to migrate to current
products/versions that meet the Company's Year 2000 compliance definition. It is
possible that the Company may experience increased expenses in addressing
migration issues for these customers. In addition, the Company does not intend
to test any of its custom software products for Year 2000 compliance.
For third party products that the Company distributes with its
products, the Company has sought information and assurances from the
manufacturers concerning those products' Year 2000 compliance status. The
Company has completed its assessment of those third party products. As a result,
the Company has identified certain third party products that will require an
upgrade to be Year 2000 compliant and is currently notifying affected customers
and encouraging them to upgrade.
Despite the testing of its own products and efforts to obtain
assurances on third party products, errors or defects in such products could
result in delay or loss of revenue, diversion of development resources, damage
to the Company's reputation, or increased service and warranty costs, any of
which could materially affect the Company's business, results of operations, or
financial condition. In addition, the unprecedented nature of potential
litigation regarding Year 2000 compliance issues makes it uncertain whether the
Company will be affected by such litigation.
The Company has completed its systematic inquiry of key suppliers to
assess their Year 2000 readiness. The Company is not aware of any problems that
would materially affect its business, results of operations or financial
condition, but the Company has no means of ensuring that assurances received
from such suppliers are accurate. The inability of such suppliers to meet Year
2000 requirements could materially impact the ability of the Company to procure
material from these suppliers and to meet its obligations to supply products to
its customers.
The Company does not currently have any information concerning the Year
2000 compliance status of its customers. As with other similarly situated
companies, if the Company's current or future customers fail to achieve Year
2000 compliance or if they divert expenditures to address Year 2000 compliance
problems, the Company's business, results of operations, or financial condition
could be materially affected.
The costs associated with the Company's Year 2000 plan have been funded
from operating cash flows and have been charged to operations. To date, the
Company has incurred approximately $1.2 million of incremental costs to address
its internal IT and non-IT systems and to address Year 2000 compliance problems
in its own products and in third party products distributed with its products.
The Company believes that substantially all of the costs to be incurred
associated with the Company's Year 2000 plan have been recognized. The Company
does not separately track the internal costs associated with its Year 2000 plan,
which are primarily payroll costs for its information systems employees, support
and technical personnel and the Year 2000 steering committee. The costs
described herein, and the costs to accomplish the other elements of the
Company's Year 2000 plan, have not been and are not expected to be material to
the Company's financial position, results of operations or cash flows. The cost
of completing the Year 2000 plan and the date on which the Company believes the
plan will be complete are based upon management's best estimates derived by
using numerous assumptions of future events, including the continued
availability of certain resources. There can be no guarantee that these
estimates will be achieved and the actual results may differ materially from
those anticipated. Specific factors that might cause these differences include
without limitation, the availability and cost of personnel trained in this area,
the ability to make timely and appropriate adjustments to all relevant computer
codes and similar uncertainties.
Competition. The frontline labor management industry is highly competitive. The
number of competitors is also increasing as applications and systems providers
in related industries, such as human resources management, payroll processing
and ERP, enter the market. Technological changes such as those allowing for
increased use of the Internet may also create the potential for new entrants.
Although the Company believes it has core competencies that are not easily
obtainable by competitors, maintaining the Company's competitive advantages over
competitors will require continued investment by the Company in research and
development and marketing and sales programs. There can be no assurance that the
Company will have sufficient resources to make such investments or be able to
achieve the technological advances necessary to maintain its competitive
advantages. Increased competition could adversely affect the Company's operating
results through price reductions and/or loss of market share.
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 and the Company expects that to continue in the next fiscal
year. 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.
Dependence on Alternate Distribution Channels. The Company markets and sells its
products through its direct sales organization, independent dealers and OEMs.
Although the Company acquired the territory of its largest dealer in June 1999,
for the fiscal year ended September 30, 1999, approximately 19% 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 affect on
the results of the Company's operations.
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 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 affect on the Company's operating results.
In addition, the Company purchases payroll interface and other software from a
single supplier for resale in certain of its frontline labor management systems.
Although the Company believes its relationship with this supplier 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 or identify and contract with another supplier
to perform this function. The Company is currently evaluating its ability to
purchase payroll interface software from alternative suppliers. Although the
Company believes it would be able to produce its own payroll interface software
or purchase payroll interface software from another supplier, any delay or
problems encountered in doing so could temporarily and adversely affect the
Company's results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to a variety of market risks, including changes
in interest rates affecting the return on its investments and foreign currency
fluctuations. The Company's exposure to market risk for a change in interest
rates relates primarily to the Company's investment portfolio. The fair value of
the Company's investment portfolio and related interest income would not be
materially impacted by either a 100 basis point increase or decrease in interest
rates due mainly to the short-term nature of the major portion of the Company's
investment portfolio coupled with the fixed rate nature of these investments.
The Company's exposure to market risk for fluctuations in foreign currency
relate primarily to the amounts due from subsidiaries. Exchange gains and losses
related to amounts due from subsidiaries have not been material. For foreign
currency exposures existing at September 30, 1999, a 10% unfavorable movement in
the foreign exchange rates for each subsidiary location would not expose the
Company to material losses in earnings or cash flows. The calculation assumes
that each exchange rate would change in the same direction relative to the U.S.
dollar.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are listed in the
Index to Consolidated Financial Statements at Item 14 of this Form 10-K.
Item 9. Changes in and Disagreement with Accountants on Accounting and
Financial Disclosure
None.
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 3 through 6 of the Company's definitive
proxy statement for the 2000 Annual Meeting of Stockholders to be held on
February 3, 2000 under the caption "Election of Directors."
Item 11. Executive Compensation
Incorporated by reference from pages 6 through 10 of the Company's
definitive proxy statement for the 2000 Annual Meeting of Stockholders to be
held on February 3, 2000 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 2000 Annual Meeting of Stockholders to be
held on February 3, 2000 under the caption "Security Ownership of Certain
Beneficial Owners and Management."
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Related Transactions
(a) The following are filed as a part of this report:
1. Financial Statements Page
Consolidated Statements of Income for the Years Ended F-1
September 30, 1999, 1998 and 1997
Consolidated Balance Sheets as of September 30, 1999 and 1998 F-2
Consolidated Statements of Shareholders' Equity for
the Years Ended September 30, 1999, 1998 and 1997 F-3
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1999, 1998 and 1997 F-4
Notes to Consolidated Financial Statements F-5
Report of Ernst & Young LLP, Independent Auditors F-20
2. Financial Statement Schedules
Schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.
3. Exhibits
Exhibit
No. Description
3.1(10) Restated Articles of Organization of the Registrant,
as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(11) 1986A Stock Option Plan.
10.2(10)(11) 1992 Equity Incentive Plan, as amended and restated.
3. Exhibits (continued)
Exhibit
No. Description
10.3(9)(12) 1992 Employee Stock Purchase Plan, as amended and restated.
10.4(3) Lease dated November 16, 1993, between Teachers Realty
Corporation and the Registrant, relating to premises leased
in Chelmsford, MA.
10.5(5) Lease dated August 8, 1995, between Principal Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Chelmsford, MA. 10.6(8) Fleet Bank Letter Agreement
and Promissory Note dated January 1, 1997, relating to
amendment of $3,000,000 credit facility.
10.7(2) (13) Software License and Support and Hardware Purchase Agreement
dated April 2, 1993, between ADP, Inc. and the Registrant.
10.7.1(7)(13) Amendments dated July 22, 1996 to Software License and Support
and Hardware Purchase Agreement dated April 2, 1993,
between ADP, Inc. and the Registrant.
10.7.2(14) Amendment dated February 8, 1998 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(6) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated Design, Inc. and the
Registrant.
10.8.2 Amendment dated October 8, 1999 to Sales Agreement dated
December 6, 1990 between Integrated Design, Inc. and the
Registrant.
10.9(3)(13) Acquisition Agreement dated November 2, 1993 between Interboro
Systems Corporation and the Registrant.
10.10* Form of Indemnity Agreement entered into among the Registrant
and Directors of the Registrant.
10.11(1) Lease dated November 9, 1992, as amended, between John Hancock
Mutual Life Isurance Company and the Registrant, relating to
premises leased in Waltham, MA.
10.11.1(6) Amendment dated January 1, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Waltham, MA.
10.11.2(8) Amendment dated October 11, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.12 (4) Agreement of Reorganization among Kronos Incorporated;
Kronos S/T Corporation, ShopTrac Data Collection Systems,
Inc., Thomas J. O'Malia and Mark J. MacWhirter, dated March
31, 1994.
10.13(11) Lease Agreement Between W/9TIB Real Estate Limited
Partnership, as Landlord, and Kronos Incorporated, as Tenant
Dated 2/26/99
10.14(11) Construction Agreement Between Cranshaw Construction of New
England Limited Partnership and Kronos Incorporated
Dated March 10, 1999.
3. Exhibits (continued)
Exhibit
No. Description
10.15(12) Agreement of Purchase and Sale Beyond Between W/9TIB Real
Estate Limited Partnership and Kronos Incorporated Dated
March 29, 1999.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Incorporated by reference to the same Exhibit Number in the
Company's Registration Statement on Form S-1 (File No.
33-47383).
(1) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1992.
(2) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1993.
(3) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1993.
(4) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended July 2, 1994.
(5) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30,1995.
(6) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 30, 1996.
(7) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1996.
(8) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended December 28, 1996.
(9) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 29, 1997.
(10) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 4, 1998.
3. Exhibits (continued)
(11) Management contract or compensatory plan or arrangement filed
as an exhibit to this Form 10-K pursuant to Items 14(a) and
14(c) of Form 10-K.
(12) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1999.
(13) Confidential treatment was granted for certain portions of
this agreement.
(b) Reports on Form 8-K
(14) Confidential treatment was requested for certain portions of
this agreement.
No reports on Form 8-K were filed during the last fiscal quarter of the
fiscal year covered by this report.
Kronos, Timekeeper, Timekeeper Central, Jobkeeper, Jobkeeper Central,
Datakeeper, Datakeeper Central, Gatekeeper, Gatekeeper Central, Imagekeeper,
TeleTime, TimeMaker, CardSaver, ShopTrac, the ShopTrac logo, Start. Time,
Keep.Trac, Solution in a Box, Visionware and the Company's logo are registered
trademarks of the Company. DKC/Datalink, Timekeeper Web, HyperFind, Kronos 2100,
Smart Scheduler, Starter Series, Start.Labor, Start.WIP, Start.Quality, Labor
Plus, WIP Plus, Comm.Mgr, CommLink, Community Computer, Tempo and the Tempo
logo, ShopTrac Pro, Workforce Central and the Workforce Central logo, Workforce
Timekeeper, Workforce Activities, Workforce Smart Scheduler, Workforce Manager,
Workforce Accruals, Workforce Web, Workforce TeleTime, Workforce Express,
Workforce Scheduler, Workforce Decisions and Prism are trademarks of the
Company. IBM is a registered trademark of, and AS and AS/400 are trademarks of,
International Business Machines Corporation Total Time is a service mark of ADP,
Inc. and ADP is a registered trademark of Automatic Data Processing, Inc. Time
Bank is a registered trademark of Integrated Design Inc. UNIX is a registered
trademark in the U.S. and other countries, licensed exclusively by X/Open
Company Ltd. VMS is a registered trademark of Digital Equipment Corporation.
Microsoft, Windows, and Windows 95 are registered trademarks of, and Windows NT
is a trademark of, Microsoft Corporation. Oracle is a registered trademark of
Oracle Corporation. Informix is a registered trademark of Informix Software,
Inc. PeopleSoft is a registered trademark of PeopleSoft, Inc. Baan is a
trademark of Baan Development B.V. Honeywell is a registered trademark of
Honeywell, Inc. J.D. Edwards is a registered trademark of J.D. Edwards and
Company. Lawson is a registered trademark of Lawson Associates, Inc. SAP is a
trademark of SAP AG. Citrix is a registered trademark and Metaframe is a
trademark of Citrix Systems Inc.
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 17, 1999.
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 17, 1999.
Signature Capacity
/s/ MARK S. AIN Chief Executive
Mark S. Ain Officer and Chairman of the Board
(Principal Executive Officer)
/s/ PAUL A. LACY Vice President, Finance and
Paul A. Lacy Administration
(Principal Financial and
Accounting Officer)
/s/ W. PATRICK DECKER Director, President and Chief
W. Patrick Decker Operating Officer
/s/ RICHARD J. DUMLER Director
Richard J. Dumler
/s/ D. BRADLEY McWILLIAMS Director
D. Bradley McWilliams
/s/ LAWRENCE PORTNER Director
Lawrence Portner
/s/ SAMUEL RUBINOVITZ Director
Samuel Rubinovitz
Consolidated Statements of Income In thousands, except share data
Year Ended September 30, 1999 1998 1997
-------------- ------------- -------------
Net revenues:
Product $ 164,340 $ 135,186 $ 116,155
Service 89,958 67,283 54,383
-------------- ------------- -------------
254,298 202,469 170,538
Cost of sales:
Product 37,507 32,305 29,816
Service 53,292 44,085 36,449
-------------- ------------- -------------
90,799 76,390 66,265
-------------- ------------- -------------
Gross profit 163,499 126,079 104,273
Expenses:
Sales and marketing 85,283 68,049 57,886
Engineering, research and development 26,802 19,700 16,538
General and administrative 15,502 13,841 11,554
Other expense, net 1,432 158 7
-------------- ------------- -------------
129,019 101,748 85,985
-------------- ------------- -------------
Income before income taxes 34,480 24,331 18,288
Provision for income taxes 12,102 9,611 7,016
-------------- ------------- -------------
============== ============= =============
Net income $ 22,378 $ 14,720 $ 11,272
============== ============= =============
Net income per common share:
Basic $ 1.78 $ 1.19 $ 0.92
============== ============= =============
Diluted $ 1.71 $ 1.15 $ 0.89
============== ============= =============
Average common and common equivalent shares outstanding:
Basic 12,548,061 12,392,666 12,281,965
============== ============= =============
Diluted 13,109,231 12,784,956 12,620,329
============== ============= =============
See accompanying notes to consolidated financial statements.
F-1
Consolidated Balance Sheets In thousands, except share data
September 30, 1999 1998
------------ --------------
ASSETS
Current assets:
Cash and equivalents $ 20,148 $ 29,888
Marketable securities 20,893 17,501
Accounts receivable, less allowances of $6,791 in 1999 and $4,445 in 1998 66,817 50,904
Deferred income taxes 5,414 5,188
Other current assets 11,872 8,171
------------ --------------
Total current assets 125,144 111,652
Property, plant and equipment, net 23,981 15,816
Marketable securities 21,400 4,445
Excess of cost over net assets of businesses acquired, net 29,946 13,731
Deferred software development costs, net 12,218 9,541
Other assets 15,554 8,676
------------ --------------
Total assets $ 228,243 $ 163,861
============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,503 $ 6,427
Accrued compensation 21,106 14,503
Accrued expenses and other current liabilities 32,753 18,570
Deferred maintenance revenues 41,636 27,065
------------ --------------
Total current liabilities 103,998 66,565
Deferred maintenance revenues 18,818 8,830
Deferred income taxes - 911
Other liabilities 1,169 352
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 20,000,000 shares,
12,634,728 shares and 12,465,719 shares issued at September 30, 1999 and
1998, respectively 126 125
Additional paid-in capital 31,087 29,575
Retained earnings 82,143 59,765
Accumulated other comprehensive loss (337) (1,162)
Cost of Treasury Stock (192,165 shares and 45,861 shares at September 30, 1999
and 1998, respectively) (8,761) (1,100)
------------ --------------
Total shareholders' equity 104,258 87,203
------------ --------------
Total liabilities and shareholders' equity $ 228,243 $ 163,861
============ ==============
See accompanying notes to consolidated financial tatements.
F-2
Consolidated Statements of Shareholders' Equity
In thousands
Accumulated
Additional Other
Common Stock Paid-in Retained Comprehensive Treasury Stock
------------------ -------------------
Shares Amount Capital Earnings Income (loss) Shares Amount Total
------------------ ----------- ----------- ----------- ------------------- ---------
Balance at September 30, 1996 12,187 $ 122 $ 27,471 $ 33,773 $ (251) 1 $ (17) $ 61,098
Net income 11,272 11,272
Equity adjustment from translation (11) (11)
---------
Comprehensive income 11,261
Proceeds from exercise of stock options 117 1 439 (24) 454 894
Proceeds from employee stock purchase plan 66 1 1,104 1,105
Impact of compensation relating to
nonqualified stock option plans (60) (60)
Purchase of treasury stock 151 (2,599) (2,599)
Tax benefit associated with the exercise
of stock options 774 774
------------------ ----------- ----------- ----------- ------------------- ---------
Balance at September 30, 1997 12,370 124 29,728 45,045 (262) 128 (2,162) 72,473
Net income 14,720 14,720
Equity adjustment from translation (900) (900)
---------
Comprehensive income 13,820
Proceeds from exercise of stock options 84 1 (1,453) (203) 3,912 2,460
Proceeds from employee stock purchase plan 12 - (156) (64) 1,407 1,251
Purchase of treasury stock 185 (4,257) (4,257)
Tax benefit associated with the exercise
of stock options 1,456 1,456
------------------ ----------- ----------- ----------- ------------------- ---------
Balance at September 30, 1998 12,466 125 29,575 59,765 (1,162) 46 (1,100) 87,203
Net income 22,378 22,378
Equity adjustment from translation 825 825
---------
Comprehensive income 23,203
Proceeds from exercise of stock options 119 1 (3,097) (238) 6,916 3,820
Proceeds from employee stock purchase plan 50 - 956 (42) 1,133 2,089
Purchase of treasury stock 426 (15,710) (15,710)
Tax benefit associated with the exercise
of stock options 3,462 3,462
Proceeds from sale of put options 191 191
------------------ ----------- ----------- ----------- ------------------- ---------
Balance at September 30, 1999 12,635 $ 126 $ 31,087 $ 82,143 $ (337) 192 $ (8,761) $ 104,258
================== =========== =========== =========== =================== =========
See accompanying notes to consolidated financial statements.
F-3
Consolidated Statements of Cash Flows In thousands
Year Ended September 30, 1999 1998 1997
------------ ------------ ------------
Operating activities:
Net income $ 22,378 $ 14,720 $ 11,272
Adjustments to reconcile net income to net cash and equivalents
provided by operating activities:
Depreciation 7,856 7,368 6,435
Amortization of excess of costs over net assets of businesses acquired 4,384 2,503 1,505
Amortization of deferred software development costs 6,159 4,360 3,162
Provision for deferred income taxes (3,031) (2,587) (901)
Changes in certain operating assets and liabilities:
Accounts receivable, net (15,765) (8,553) (10,662)
Deferred maintenance revenues 20,899 10,321 6,555
Accounts payable, accrued compensation
and other liabilities 17,507 11,607 4,570
Other (8,440) (3,518) (3,056)
------------ ------------ ------------
Net cash and equivalents provided by operating activities 51,947 36,221 18,880
Investing activities:
Purchase of property, plant and equipment (16,222) (6,309) (8,698)
Capitalization of software development costs (8,836) (6,589) (5,215)
(Increase) decrease in marketable securities (20,253) (6,416) 6,465
Acquisitions of businesses (10,260) (8,490) (1,671)
------------ ------------ ------------
Net cash and equivalents used in investing activities (55,571) (27,804) (9,119)
Financing activities:
Net proceeds and tax benefits from exercise of stock options and
employee purchase plans 9,371 5,167 2,769
Purchase of treasury stock (15,710) (4,257) (2,599)
Proceeds from sale of put options 191 - -
------------ ------------ ------------
Net cash and equivalents (used in) provided by financing activities (6,148) 910 170
Effect of exchange rate changes on cash and equivalents 32 (137) (28)
------------ ------------ ------------
Increase (decrease) in cash and equivalents (9,740) 9,190 9,903
Cash and equivalents at the beginning of the period 29,888 20,698 10,795
------------ ------------ ------------
Cash and equivalents at the end of the period $ 20,148 $ 29,888 $ 20,698
============ ============ ============
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. Certain reclassifications have been made in the accompanying
consolidated financial statements in order to conform to the fiscal 1999
presentation.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Translation of Foreign Currencies: The assets and liabilities of the Company's
foreign subsidiaries are denominated in each country's local currency and
translated at the year-end rate of exchange. The related income statement items
are translated at the average rate of exchange for the year. The resulting
translation adjustments are excluded from income and reflected as a separate
component of shareholders' equity. Realized and unrealized exchange gains or
losses arising from transaction adjustments are reflected in operations and are
not material. The Company may periodically have certain intercompany foreign
currency transactions that are deemed to be of a long-term investment nature.
Exchange adjustments related to those transactions are made directly to a
separate component of stockholders' equity.
Cash Equivalents: Cash equivalents consist of highly liquid investments with
maturities of three months or less at date of acquisition.
Marketable Securities: The Company's marketable securities consist of state
revenue bonds, government agency bonds and market auction preferred stocks.
Bonds with a maturity of twelve months or longer at the balance sheet date are
classified as noncurrent marketable securities. As of September 30, 1999, no
bonds had maturities that extend beyond February 2002. The bonds are classified
as held to maturity and are carried at amortized cost. 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. Market auction preferred stocks are classified as
available for sale and are carried at cost which approximates fair value as
obtained from outside pricing sources. Interest income earned on the Company's
cash, cash equivalents and marketable securities is included in other expense,
net and amounted to $2,601,000, $1,790,000 and $1,401,000 in fiscal 1999, 1998
and 1997, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
Property, Plant and Equipment: Property, plant and equipment is stated on the
basis of cost less accumulated depreciation, provisions for which have been
computed using the straight-line method over the estimated useful lives of the
assets, which are principally as follows:
Estimated
Assets Useful Life
- ---------------------------------------- --------------------------------------
Machinery and equipment 3-5 years
Furniture and fixtures 8-10 years
Leasehold improvements Shorter of economic
life or lease-term
Accounting for the Impairment of Long-Lived Assets: Long-lived assets used in
operations, such as the excess of cost over net assets of businesses acquired,
capitalized software development costs and property, plant and equipment, are
included in impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be recoverable. If the
impairment evaluation indicates the affected asset is not recoverable, the
asset's carrying value would be reduced to fair value. No event has occurred
that would impair the value of long-lived assets recorded in the accompanying
consolidated financial statements.
Revenue Recognition: The Company derives its revenues from the sale of frontline
labor management systems as well as sales of application software, parts and
components. The Company also derives revenues by providing services including
maintenance, installation, consulting and training. As of October 1, 1998, the
Company adopted Statement of Position (SOP) 97-2, "Software Revenue
Recognition", which was effective for transactions the Company entered into in
fiscal 1999. Prior years were not restated. The adoption of SOP 97-2 did not
have a material effect on the Company's financial statements. The Company
recognizes revenues from sales and sales-type leases of its systems, application
software, parts and components when a non-cancelable agreement has been signed,
the product has been shipped, there are no uncertainties surrounding product
acceptance, the fees are fixed and determinable, and collection is considered
probable. Revenues from maintenance agreements are recognized ratably over the
contractual period and all other service revenues are recognized as the services
are performed. Prior to fiscal 1999, the Company accrued the cost to provide
installation services at the time revenues were recognized. The Company provides
certain warranties to its customers and, without additional charge, certain
software product enhancements for customers covered under software maintenance
agreements. Any provision required for these expenses is made at the time
revenues are recognized.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE A--Summary of Significant Accounting Policies--(continued)
Stock-Based Compensation: The Company accounts for its stock-based compensation
plans in accordance with the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. Under APB 25, no compensation expense is recognized as the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation" (see Note K).
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, includes stock options and put
options. (see Note M).
Newly Issued Accounting Standards: In June 1997 the Financial Accounting
Standard Board (FASB) issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" effective for the Company in fiscal 1999.
The Company believes it operates in one segment and consequently, adoption of
SFAS No. 131 did not result in any significant change in the presentation of the
Company's disclosures. In March 1998, the Accounting Standards Executive
Committee (AcSEC) issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use " which will be effective for
the Company in fiscal 2000. The Company does not believe the adoption of SOP
98-1 will have a material effect on the Company's financial statements. In June
1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" which will be effective for the Company in the first quarter
of fiscal 2001. The Company is currently evaluating the effect that
implementation of the new standard will have on its financial statements but
believes the effect will not be material.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE B--Concentration of Credit Risk
The Company markets and sells its products through its direct sales
organization, independent dealers and an OEM agreement with ADP, Inc. The
Company's dealers have significantly smaller resources than the Company. The
Company's direct sales organization sells to customers who are dispersed across
many different industries and geographic areas. The Company reviews a customer's
(including dealer's) credit history before extending credit and generally does
not require collateral. The Company establishes its allowances based upon
factors including the credit risk of specific customers, historical trends and
other information.
NOTE C--Accounts Receivable
Accounts receivable consists of the following (in thousands):
September 30,
-------------
1999 1998 1997
---- ---- ----
Trade accounts receivable $59,571 $50,314 $42,026
Current investment in sales-type leases 14,037 5,035 3,221
------ ----- -----
73,608 55,349 45,247
Less:
Allowance for doubtful accounts 2,023 1,268 1,091
Allowance for sales returns and adjustments 4,768 3,177 2,118
----- ----- -----
6,791 4,445 3,209
----- ----- -----
$66,817 $50,904 $42,038
======= ======= =======
In fiscal 1999, 1998 and 1997 the Company recorded provisions for its allowances
in the amount of $2,982,000, $2,075,000 and $896,000, respectively. Charges
against the allowances of $636,000, $839,000 and $390,000 in fiscal 1999, 1998
and 1997, respectively, principally relate to uncollectible accounts written
off, net of recoveries. It is the Company's practice to record an estimated
allowance for sales returns and adjustments based on historical experience and
to record individual charges for sales returns and adjustments directly to
revenue as incurred.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
KRONOS INCORPORATED
NOTE D--Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
September 30,
1999 1998
Machinery and equipment $39,258 $34,736
Furniture and fixtures 9,220 7,750
Leasehold improvements 5,416 4,724
Land 2,810 -
Construction in progress 4,220 -
----- -----
60,924 47,210
Less accumulated depreciation 36,943 31,394
------ ------
$23,981 $15,816
======== =======
During fiscal 1999 the Company acquired a parcel of land located in Chelmsford,
Massachusetts for the construction of an approximately 129,000 square foot
corporate headquarters facility. The Company anticipates completing construction
of the facility during the second quarter of fiscal 2000 at which time the
Company will begin depreciating the cost of the facility over its estimated
useful life of thirty years.
NOTE E--Leases
The Company leases systems to customers under sales-type leases as defined in
SFAS No. 13, "Accounting for Leases." The long-term portion of the net
investment in sales-type leases amounted to $13,308,000 and $8,279,000 at
September 30, 1999 and 1998, respectively, and is included in other assets. The
components of the net investment in sales-type leases are as follows (in
thousands):
September 30,
-----------------------------------
1999 1998
- -------------------------------------------- ------------------- ---------------
Minimum rentals receivable $30,344 $15,281
Estimated residual values of leased equipment
(unguaranteed) 436 396
Less unearned interest income 3,435 2,363
----- -----
Net investment in sales-type leases $27,345 $13,314
======= =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE E--Leases--(continued)
Minimum rentals receivable under existing leases as of September 30, 1999 are as
follows (in thousands):
Fiscal Year
- ------------------------------------------------------------ -----------------
2000 .................................... $15,779
2001 .................................... 9,746
2002 .................................... 3,222
2003 .................................... 1,169
2004 .................................... 428
---
$30,344
NOTE F--Acquisitions
In fiscal 1999, 1998 and 1997, the Company completed various acquisitions of
dealer territories as well as the acquisition of labor tracking and productivity
technologies. These acquisitions were accounted for under the purchase method of
accounting and, accordingly, the operating results are included in the
consolidated statements of income from the date of each respective acquisition.
The combined cost of the acquisitions, which amounted to $20,168,000,
$5,718,000, and $526,000 in fiscal 1999, 1998 and 1997, respectively,
principally relates to intangible assets that are being amortized using the
straight-line method over a period ranging from five to twelve years. Related
amortization expense amounted to $4,384,000, $2,503,000 and $1,505,000 in fiscal
1999, 1998 and 1997, respectively.
Certain agreements contain provisions that require the Company to make a
guaranteed payment within one year and/or contingent payments based upon
profitability of the business unit or if specified minimum revenue requirements
are met. These provisions expire during fiscal years 2002 through 2005.
Guaranteed payments are accrued at the time of the acquisition and are included
in the purchase price allocation. Contingent payments due under the terms of the
agreements are recognized when earned and are principally recorded as an
increase in the excess of the total acquisition cost over the fair value of the
net assets acquired. However, under certain circumstances a portion of the
contingent payment may be recorded as compensation expense. During fiscal 1999,
$811,000 of contingent payments were earned of which $225,000 was expensed.
During fiscal 1998 and 1997, $2,765,000 and $1,650,000, respectively, were
earned and recorded as an increase in the excess of the total acquisition cost
over the fair value of the net assets acquired.
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE G--Deferred Software Development Costs
Costs incurred in the research, design and development of software for sale to
others are charged to expense until technological feasibility is established.
Thereafter, software development costs are capitalized and amortized to product
cost of sales on a straight-line basis over the lesser of three years or the
estimated economic lives of the respective products, beginning when the products
are offered for sale. Total amounts capitalized were $8,836,000, $6,589,000 and
$5,215,000 in fiscal 1999, 1998 and 1997, respectively.
Amortization of capitalized software development costs amounted to $6,159,000,
$4,360,000 and $3,162,000 in fiscal 1999, 1998 and 1997, respectively. Total
research and development expenses charged to operations amounted to $19,505,000,
$14,263,000 and $11,455,000 in fiscal 1999, 1998 and 1997, respectively.
NOTE H-- Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in
thousands):
September 30,
--------------------------------------------
1999 1998
- ------------------------------------------------------------------------ ---------------------- ---------------------
Deferred professional services revenue and related costs $17,262 $7,816
Accrued acquisition payments 6,461 583
Federal and state tax payable 2,522 6,190
Accrued other 6,508 3,981
------ ------
$32,753 $18,570
======= =======
NOTE I--Lease Commitments
The Company leases certain office space, manufacturing facilities and equipment
under long-term operating lease agreements. Future minimum rental commitments
under operating leases with noncancellable terms of one year or more are as
follows (in thousands):
Fiscal Year
- -------------------------------------------------------------- -----------------
2000 .................................... $8,068
2001 .................................... 4,594
2002 .................................... 3,106
2003 .................................... 2,323
2004 .................................... 2,036
Thereafter .............................. 7,142
-----
$27,269
NOTES TO CONSOLIDATE FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE I--Lease Commitments --(continued)
Rent expense was $8,197,414, $7,649,000 and $7,360,000 in fiscal 1999, 1998 and
1997, respectively.
NOTE J--Capital Stock, Stock Split, Stock Repurchase Program and Stock Rights
Agreement
Capital Stock: The Board of Directors is authorized, subject to any limitations
prescribed by law, from time to time to issue up to an aggregate of 1,000,000
shares of Preferred Stock, $1.00 par value per share, in one or more series,
each of such series to have such preferences, voting powers (up to 10 votes per
share), qualifications, and special or relative rights and privileges as shall
be determined by the Board of Directors in a resolution or resolutions providing
for the issue of such Preferred Stock.
During the fourth quarter of fiscal 1999 the Company sold put options that
entitle the holder of each option to sell to the Company one share of Common
Stock at an exercise price of $47.00. The Company may, at its sole discretion,
elect to settle the obligation with either cash or shares of the Company's
Common Stock and accordingly, no put option liability has been recorded. The
50,000 options outstanding at September 30, 1999 expire on December 10, 1999.
The premium of $191,000 received in conjunction with this private placement was
recorded as additional paid-in capital. There was no significant effect on
diluted earnings per share for fiscal 1999.
Stock Split: 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 March 9,
1999 to stockholders of record as of February 23, 1999. Accordingly, the
presentations 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.
Stock Repurchase Program: In fiscal 1997, the Company's Board of Directors
implemented a stock repurchase program under which it periodically authorizes,
subject to certain business and market conditions, the repurchase of the
Company's outstanding common shares to be used for the Company's employee stock
option plans and employee stock purchase plan. Under the stock repurchase
program, the Company repurchased 378,350, 116,250 and 135,000 common shares in
fiscal 1999, 1998 and 1997, respectively, at a cost of $14,155,000, $2,708,000
and $2,250,000, respectively. In addition, the Company repurchases common stock
from employees in connection with the exercise of stock options.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE J--Capital Stock, Stock Split, Stock Repurchase Program and Stock Rights
Agreement--(continued)
Stock Rights Agreement: The Company has a Stock Rights Agreement under which
each holder of a share of Common Stock also has one Right that initially
represents the right to purchase one one-thousandth of a share of a new series
of preferred stock at an exercise price of $236, subject to adjustment. The
Company reserved 12,500 shares of its Preferred Stock for issuance under the
agreement. The Rights may be exercised, in whole or in part, only if a person or
group acquires beneficial ownership of 20% or more of the Company's outstanding
Common Stock or announces a tender or exchange offer upon consummation of which,
such person or group would beneficially own 25% or more of the Company's Common
Stock. When exercisable, each Right will entitle its holder (other than such
person or members of such group) to purchase for an amount equal to the then
current exercise price, in lieu of preferred stock, a number of shares of the
Company's Common Stock having a market value of twice the Right's exercise
price. In addition, when exercisable, the Company may exchange the Rights, in
whole or in part, at an exchange ratio of one share of Common Stock or one
one-thousandth of a share of Preferred Stock per Right. In the event that the
Company is acquired in a merger or other business combination, the Rights would
entitle the stockholders (other than the acquirer) to purchase securities of the
surviving company at a similar discount. Until they become exercisable, the
Rights will be evidenced by the Common Stock certificates and will be
transferred only with such certificates. Under the Agreement, the Company can
redeem all outstanding Rights at $.01 per Right at any time until the tenth day
following the public announcement that a 20% beneficial ownership position has
been acquired or the Company has been acquired in a merger or other business
combination. The Rights will expire on November 17, 2005.
NOTE K--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 1999, 1998 and 1997, the Company granted under the Plan stock options to
purchase 562,050, 519,750 and 512,175 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, 1999. Options
granted in fiscal 1999 and 1998 under the 1992 Equity Incentive Plan are
exercisable in equal installments over a four year period beginning one year
from the date of grant. Options granted in prior fiscal years under the same
Plan are exercisable in equal installments over a five year period. Options
available for grant are 1,056,946 and 1,545,105 at September 30, 1999 and 1998,
respectively.
The Company also has several nonqualified and incentive stock option plans
adopted from 1979 through 1987. No additional options were granted under these
plans since fiscal 1992.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--Employee Benefit Plans--(continued)
Options granted under these plans are exercisable five years after the date of
grant and generally have a ten year contractual life.
The following schedule summarizes the changes in stock options issued under
various plans for the three fiscal years in the period ended September 30, 1999.
Options exercisable under the plans were 428,288, 460,744 and 488,938 in fiscal
1999, 1998 and 1997, respectively.
Weighted - Average
Number of Shares Exercise Price Per Share Exercise Price Per Share
- ------------------------------------- --------------------- -------------------------- ---------------------------
Outstanding at
September 30, 1996 1,136,781 $ 9.68 $ 0.15 - 23.00
Granted 512,175 15.85 11.67 -17.33
Exercised (141,273) 6.33 3.26 - 18.00
Canceled (133,752) 13.33 0.15 - 21.67
--------- ----- ------------
Outstanding at
September 30, 1997 1,373,931 11.97 3.26 - 23.00
Granted 519,750 18.34 17.67 -24.00
Exercised (266,476) 8.59 3.26 - 21.67
Canceled (69,147) 15.73 7.33 - 21.67
-------- ----- ------------
Outstanding at
September 30, 1998 1,558,058 14.51 3.26 - 24.00
Granted 562,050 19.05 18.42 - 41.50
Exercised (356,824) 10.74 3.26 - 23.13
Canceled (75,215) 18.70 7.33 - 38.13
-------- ----- ------------
Outstanding at
September 30, 1999 1,688,069 $ 16.64 $ 3.26 - 41.50
========= ======== ==============
As discussed in Note A, the Company has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," and continues to
account for stock-based compensation under APB 25. Generally no compensation
expense is recorded with respect to the Company's stock option and employee
stock purchase plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--Employee Benefit Plans--(continued)
The following summarizes information about options outstanding and exercisable
at September 30, 1999:
Outstanding Exercisable
--------------------------------------
Weighted - Weighted - Weighted -
Average Remaining Average Exercise Average Exercise
Exercise Price Per Number of Shares Contractual Life Price Per Share Number of Price Per Share
Share Shares
$3.26 - 3.33 96,121 1.8 Years $3.31 96,121 $3.31
9.00 - 13.55 153,255 1.1 Years 10.13 79,050 9.77
16.50 - 23.00 1,366,390 2.7 Years 17.82 243,189 17.49
23.13 - 41.50 72,303 3.5 Years 25.70 9,928 23.16
------------- ------ --------- ----- ----- -----
$3.26 - 41.50 1,688,069 2.5 Years $16.64 428,288 $12.27
============= ========= ========= ====== ======= ======
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:
September 30,
-----------------------------------------
1999 1998 1997
--------------------------- ------ ------ ------
Expected volatility 56.4% 31.9% 36.8%
Risk-free interest rate 4.6% 5.9% 6.0%
Expected lives (in years) 4.4 4.4 4.5
The Company has not paid and does not anticipate paying cash dividends;
therefore, the expected dividend yield is assumed to be zero.
The weighted-average fair value of options granted under the 1992 Equity
Incentive Plan during fiscal 1999, 1998 and 1997 was $9.64, $10.15 and
$7.63, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--Employee Benefit Plans--(continued)
For purposes of the pro forma disclosure below, the estimated fair value of the
Company's stock-based compensation plan and the estimated benefit derived from
the Company's Stock Purchase Plan is amortized to expense over the options'
vesting period. The Company's pro forma net income and net income per share for
the years ended September 30, 1999, 1998 and 1997 are as follows:
1999 1998 1997
---- ---- ----
Net income (in thousands):
As reported $22,378 $14,720 $11,272
Pro forma 19,909 13,909 10,671
Earnings per share:
As reported $1.71 $1.15 $0.89
Pro forma 1.52 1.09 0.85
These pro forma disclosures may not be representative of the effects for future
years since options vest over several years and options granted prior to fiscal
1996 are not considered in these disclosures.
Stock Purchase Plan: In accordance with the 1992 Employee Stock Purchase Plan,
eligible employees may authorize payroll deductions of up to 10% of their
compensation (not to exceed $12,500 in a six month period) to purchase shares at
the lower of 85% of the fair market value of the Company's Common Stock at the
beginning or end of the six month option period. During fiscal 1999, 92,340
shares were issued to employees at prices ranging from $20.54 to $25.11 per
share.
At September 30, 1999, a total of 2,902,787 shares of Common Stock were reserved
for issuance. Included in this amount are 2,648,876 shares for the 1992 Equity
Incentive Plan, 118,627 shares for the Employee Stock Purchase Plan and 135,284
shares for the various stock option plans adopted in the period 1979 through
1987.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE K--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 $1,475,000, $1,182,000 and $958,000 in fiscal 1999, 1998 and 1997,
respectively.
NOTE L--Income Taxes
The provision for income taxes consists of the following (in thousands):
Year Ended September 30,
--------------------------------
1999 1998 1997
- ------------------- ------ ------ ------
Current:
Federal $12,953 $10,315 $6,682
State 1,924 1,706 1,010
Foreign 256 177 225
------ ------ -------
15,133 12,198 7,917
------ ------ -------
Deferred:
Federal (2,652) (2,264) (797)
State (379) (323) (104)
------ ------ -------
(3,031) (2,587) (901)
------ ------- -------
$12,102 $9,611 $7,016
======= ======= =======
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE L--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 and
other items do 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 are
as follows (in thousands):
September 30,
--------------------------------
1999 1998
--------------- ----------------
Deferred tax assets:
Inventory reserves $ 652 $ 604
Accounts receivable reserves 2,292 1,188
Accrued expenses 2,171 3,464
Deferred maintenance revenues 4,633 2,022
Other 2,792 747
Net operating loss carryforwards of
foreign subsidiaries
689 2,400
----- -----
Total deferred tax assets 13,229 10,425
Valuation allowance (993) (2,400)
----- -----
12,236 8,025
Deferred tax liabilities:
Capitalized software development costs (4,790) (3,748)
------ -----
Net deferred tax assets $7,446 $ 4,277
======= =======
The effective tax rate differed from the United States statutory rate as
follows:
Year Ended September 30,
1999 1998 1997
--------------- ---------------- ----------------
Statutory rate 35% 35% 35%
State income taxes, net of federal
income tax benefit 4 4 3
Foreign losses not benefited - 5 3
Use of foreign net operating loss carryforwards (4) - (1)
Income tax credits (2) (2) (1)
Other 2 (2) (1)
--- --- ---
35% 40% 38%
=== === ===
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
KRONOS INCORPORATED
NOTE L--Income Taxes--(continued)
During fiscal 1999, $3,946,000 of net operating loss carryforwards from foreign
operations were utilized, and $1,724,000 remain available to reduce future
income taxes payable in their respective countries. Of the remaining
carryforwards, $1,390,000 expire from 2001 through 2006. The remaining
carryforwards, totaling $334,000, may be carried forward indefinitely.
The Company made income tax payments of $15,409,000, $7,659,000 and
$4,847,000 in fiscal 1999, 1998 and 1997, respectively.
NOTE M--Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
Year Ended September 30,
1999 1998 1997
------ ------ ------
Net income (in thousands) $22,378 $14,720 $11,272
================== ==================== =====================
Weighted-average shares 12,548,061 12,390,222 12,281,965
Effect of dilutive securities:
Employee stock options 561,170 392,290 338,364
------------------ -------------------- ---------------------
Adjusted weighted-average shares
and assumed conversions 13,109,231 12,782,512 12,620,329
================== ==================== =====================
Basic earnings per share $1.78 $1.19 $0.92
================== ==================== =====================
Diluted earnings per share $1.71 $1.15 $0.89
================== ==================== =====================
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, 1999 and 1998 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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, 1999 and 1998, and the consolidated results of
operations and cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
As described in Note A, effective October 1, 1998, the Company adopted Statement
of Position (SOP) 97-2 "Software Revenue Recognition" as amended by SOP 98-4.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 27, 1999
F-20
Exhibit Index
Exhibit
No. Description
3.1(10) Restated Articles of Organization of the Registrant, as amended.
3.2* Amended and Restated By-laws of the Registrant.
4* Specimen Stock Certificate.
10.1*(11) 1986A Stock Option Plan.
10.2(10)(11) 1992 Equity Incentive Plan, as amended and restated.
10.3(9)(12) 1992 Employee Stock Purchase Plan, as amended and restated.
10.4(3) Lease dated November 16, 1993, between Teachers Realty
Corporation and the Registrant, relating to premises leased in
Chelmsford, MA.
10.5(5) Lease dated August 8, 1995, between Principal Mutual Life
Insurance Company and the Registrant, relating to premises
leased in Chelmsford, MA.
10.6(8) Fleet Bank Letter Agreement and Promissory Note dated January 1,
1997, relating to amendment of $3,000,000 credit facility.
10.7(2)(13) Software License and Support and Hardware Purchase Agreement
dated April 2, 1993, between ADP, Inc. and the Registrant.
10.7.1(7)(13) Amendments dated July 22, 1996 to Software License and Support
and Hardware Purchase Agreement dated April 2, 1993, between
ADP, Inc. and the Registrant.
10.7.2(14) Amendment dated September 14, 1999 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(6) Amendment dated November 2, 1995 to Sales Agreement dated
December 6, 1990, between Integrated
Design, Inc. and the Registrant.
10.8.2 Amendment dated October 8, 1999 to Sales Agreement dated
December 6, 1990 between Integrated Design, Inc. and
the Registrant.
10.9(3)(13) Acquisition Agreement dated November 2, 1993 between
Interboro Systems Corporation and the Registrant.
10.10* Form of Indemnity Agreement entered into among the
Registrant and Directors of the Registrant.
10.11(1) Lease dated November 9, 1992, as amended, between John Hancock
Mutual Life Insurance Company and the Registrant, relating
to premises leased in Waltham, MA.
10.11.1(6) Amendment dated January 1, 1996 to Lease dated November 9, 1992,
as amended, between John Hancock Mutual Life Insurance Company
and the Registrant, relating to premises leased in Waltham, MA.
10.11.2(8) Amendment dated October 11, 1996 to Lease dated November 9,
1992, as amended, between John Hancock Mutual Life Insurance
Company and the Registrant, relating to premises leased in
Waltham, MA.
10.12(4) Agreement of Reorganization among Kronos Incorporated;
Kronos S/T Corporation, ShopTrac Data Collection Systems,
Inc., Thomas J. O'Malia and Mark J. MacWhirter, dated March
31, 1994.
Exhibit Index (continued)
10.13(11) Lease Agreement Between W/9TIB Real Estate Limited
Partnership, as Landlord, and Kronos Incorporated, as Tenant
Dated 2/26/99
10.14(11) Construction Agreement Between Cranshaw Construction of New
England Limited Partnership and Kronos Incorporated Dated
March 10, 1999.
10.15(12) Agreement of Purchase and Sale Beyond Between W/9TIB Real
Estate Limited Partnership and Kronos Incorporated Dated March
29, 1999.
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
* Incorporated by reference to the same Exhibit Number in the
Company's Registration Statement on Form S-1 (File No. 33-47383).
(1) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1992.
(2) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1993.
(3) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1993.
(4) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended July 2, 1994.
(5) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30,1995.
(6) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 30, 1996.
(7) Incorporated by reference to the Company's Form 10-K for the
fiscal year ended September 30, 1996.
(8) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended December 28, 1996.
(9) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 29, 1997.
(10) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 4, 1998.
Exhibit Index (continued)
(11) Management contract or compensatory plan or arrangement filed
as an exhibit to this Form 10-K pursuant to Items 14(a) and
14(c) of Form 10-K.
(12) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended April 3, 1999.
(13) Confidential treatment was granted for certain portions of this
agreement.
(b) Reports on Form 8-K
(14) Confidential treatment was requested for certain portions of this
agreement.
No reports on Form 8-K were filed during the last fiscal quarter of the
fiscal year covered by this report.
Kronos, Timekeeper, Timekeeper Central, Jobkeeper, Jobkeeper Central,
Datakeeper, Datakeeper Central, Gatekeeper, Gatekeeper Central, Imagekeeper,
TeleTime, TimeMaker, CardSaver, ShopTrac, the ShopTrac logo, Start. Time,
Keep.Trac, Solution in a Box, Visionware and the Company's logo are registered
trademarks of the Company. DKC/Datalink, Timekeeper Web, HyperFind, Kronos 2100,
Smart Scheduler, Starter Series, Start.Labor, Start.WIP, Start.Quality, Labor
Plus, WIP Plus, Comm.Mgr, CommLink, Community Computer, Tempo and the Tempo
logo, ShopTrac Pro, Workforce Central and the Workforce Central logo, Workforce
Timekeeper, Workforce Activities, Workforce Smart Scheduler, Workforce Manager,
Workforce Accruals, Workforce Web, Workforce TeleTime, Workforce Express,
Workforce Scheduler, Workforce Decisions and Prism are trademarks of the
Company. IBM is a registered trademark of, and AS and AS/400 are trademarks of,
International Business Machines Corporation Total Time is a service mark of ADP,
Inc. and ADP is a registered trademark of Automatic Data Processing, Inc. Time
Bank is a registered trademark of Integrated Design Inc. UNIX is a registered
trademark in the U.S. and other countries, licensed exclusively by X/Open
Company Ltd. VMS is a registered trademark of Digital Equipment Corporation.
Microsoft, Windows, and Windows 95 are registered trademarks of, and Windows NT
is a trademark of, Microsoft Corporation. Oracle is a registered trademark of
Oracle Corporation. Informix is a registered trademark of Informix Software,
Inc. PeopleSoft is a registered trademark of PeopleSoft, Inc. Baan is a
trademark of Baan Development B.V. Honeywell is a registered trademark of
Honeywell, Inc. J.D. Edwards is a registered trademark of J.D. Edwards and
Company. Lawson is a registered trademark of Lawson Associates, Inc. SAP is a
trademark of SAP AG.