-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BBV6iUfp0ArPXpEKrvmmrbDN5+S968zMG1Yf0tK0r5bvHYMY1J0Hg4TDIab5Zbdz 93G1JZnuaerHYp2mZVT/7g== 0000886903-97-000002.txt : 19970211 0000886903-97-000002.hdr.sgml : 19970211 ACCESSION NUMBER: 0000886903-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970207 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRONOS INC CENTRAL INDEX KEY: 0000886903 STANDARD INDUSTRIAL CLASSIFICATION: OFFICE MACHINES, NEC [3579] IRS NUMBER: 042640942 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20109 FILM NUMBER: 97520919 BUSINESS ADDRESS: STREET 1: 400 FIFTH AVENUE CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6178903232 MAIL ADDRESS: STREET 1: 400 FIFTH AVE STREET 2: 400 FIFTH AVE CITY: WALTHAM STATE: MA ZIP: 02154 10-Q 1 QUARTERLY REPORT ON FORM 10-Q 12/28/96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 28, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- ------------------------- Commission file number 0-20109 ------------------------------------------------- Kronos Incorporated - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-264094 - ------------------------------------------------ ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 Fifth Avenue, Waltham, MA 02154 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (617) 890-3232 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- As of December 31, 1996, 8,159,181 shares of the registrant's Common Stock, $.01 par value, were outstanding. KRONOS INCORPORATED INDEX PART I. FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Income for the Three Months Ended December 28, 1996 and December 30, 1995 1 Condensed Consolidated Balance Sheets at December 28, 1996 and September 30, 1996 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 28, 1996 and December 30, 1995 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share data) UNAUDITED Three Months Ended -------------------------- December 28, December 30, 1996 1995 ----------- ----------- Net revenues: Product .......................................... $ 25,718 $ 22,538 Service .......................................... 11,392 8,929 ----------- ----------- 37,110 31,467 ----------- ----------- Cost of sales: Product .......................................... 6,415 5,981 Service .......................................... 7,830 6,540 ----------- ----------- 14,245 12,521 ----------- ----------- Gross profit ................................ 22,865 18,946 Expenses: Sales and marketing .............................. 13,101 10,409 Engineering, research and development ............ 3,757 2,646 General and administrative ....................... 2,508 2,352 Other (income) expense, net ...................... (37) 52 ----------- ----------- 19,329 15,459 ----------- ----------- Income before income taxes .................. 3,536 3,487 Provision for income taxes ............................. 1,350 1,336 ----------- ----------- Net income .................................. $ 2,186 $ 2,151 =========== =========== Net income per common share: Primary and fully diluted ........................ $ 0.26 $ 0.26 Average common and common equivalent shares outstanding: Primary ..................................... 8,371,366 8,281,659 =========== =========== Fully diluted ............................... 8,397,349 8,296,248 =========== =========== See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) UNAUDITED December 28, September 30, 1996 1996 ----------- ------------- ASSETS Current assets: Cash and equivalents .............................................$ 13,587 $ 10,795 Marketable securities ............................................ 20,200 21,995 Accounts receivable, less allowances for doubtful accounts of $977 at December 28, 1996 and $987 at September 30, 1996 ........... 28,979 30,622 Inventories ...................................................... 4,534 4,149 Deferred income taxes ............................................ 3,025 3,025 Other current assets ............................................. 4,033 3,765 ----------- ----------- Total current assets ...................................... 74,358 74,351 Equipment, net ...................................................... 15,643 14,738 Excess of cost over net assets of businesses acquired ............... 6,955 7,221 Other assets ........................................................ 10,818 8,556 ----------- ----------- Total assets ..............................................$ 107,774 $ 104,866 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses ............................$ 10,997 $ 11,894 Accrued compensation ............................................. 9,045 8,445 Federal and state income taxes payable ........................... 1,465 1,367 Unearned service revenue ......................................... 17,492 16,388 ----------- ----------- Total current liabilities ................................. 38,999 38,094 Deferred income taxes ............................................... 2,236 2,236 Unearned service revenue ............................................ 2,690 2,721 Other liabilities ................................................... 615 717 Shareholders' equity: Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares, no shares issued and outstanding Common Stock, par value $.01 per share: authorized 12,000,000 shares, 8,138,645 shares and 8,124,133 shares issued at December 28, 1996 and September 30, 1996, respectively ................................ 81 81 Additional paid-in capital ....................................... 27,500 27,512 Retained earnings ................................................ 35,959 33,773 Equity adjustment from translation ............................... (271) (251) Cost of Treasury Stock (1,196 shares and 583 shares at December 28, 1996 and September 30, 1996, respectively) ....... (35) (17) ----------- ----------- Total shareholders' equity ................................ 63,234 61,098 ----------- ----------- Total liabilities and shareholders' equity ................$ 107,774 $ 104,866 =========== =========== See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) UNAUDITED Three Months Ended ------------------------ December 28, December 30, 1996 1995 -------- -------- Operating activities: Net income ................................................................ $ 2,186 $ 2,151 Adjustments to reconcile net income to net cash and equivalents provided by operating activities: Depreciation .................................................... 1,460 1,001 Amortization of deferred software development costs and excess of cost over net assets of businesses acquired ....... 1,022 753 Changes in certain operating assets and liabilities: Accounts receivable, net .................................... 1,651 1,766 Inventories ................................................. (382) (29) Unearned service revenue .................................... 1,015 988 Accounts payable, accrued compensation and other liabilities ................................... (95) 985 Net investment in sales-type leases ......................... (1,810) Other ........................................................... (498) (458) -------- -------- Net cash and equivalents provided by operating activities 4,549 7,157 Investing activities: Purchase of equipment ..................................................... (2,229) (2,312) Capitalization of software development costs .............................. (1,163) (705) (Increase) decrease in marketable securities .............................. 1,795 (1,975) Acquisitions of businesses ................................................ (178) Other ..................................................................... (9) 146 -------- -------- Net cash and equivalents used in investing activities ... (1,784) (4,846) Financing activities: Principal payments under capital leases ................................... (18) Net proceeds from exercise of stock option and employee stock purchase plans ........................................................ 26 169 -------- -------- Net cash and equivalents provided by financing activities 26 151 Effect of exchange rate changes on cash and equivalents ........................ 1 (19) -------- -------- Increase in cash and equivalents ............................................... 2,792 2,443 Cash and equivalents at the beginning of the period ............................ 10,795 14,727 -------- -------- Cash and equivalents at the end of the period .................................. $ 13,587 $ 17,170 ======== ======== See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - General The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, that management considers necessary for a fair presentation of the Company's financial position and results of operations as of and for the interim periods presented pursuant to the rules and regulations of the Securities and Exchange Commission. Certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures in these financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company's audited financial statements for the fiscal year ended September 30, 1996. The results of operations for the three month period ended December 28, 1996 and December 30, 1995 are not necessarily indicative of the results for a full fiscal year. Certain amounts have been reclassified in fiscal 1996 to permit comparison with fiscal 1997. NOTE B - Fiscal Quarters The Company utilizes a system of fiscal quarters. Under this system, the first three quarters of each fiscal year end on a Saturday. However, the fourth quarter of each fiscal year will always end on September 30. Because of this, the number of days in the first and fourth quarters of each fiscal year may vary slightly from year to year. The second and third quarters of each fiscal year will be exactly thirteen weeks long. This policy does not have a material effect on the comparability of results of operations between quarters. NOTE C - Inventories Inventories consist of the following (in thousands): December 28, September 30, 1996 1996 ------------------- ------------------- Finished goods $2,340 $2,148 Work - in - process 432 283 Raw materials 1,762 1,718 ------------------- ------------------- $4,534 $4,149 =================== =================== Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues. Revenues for the first quarter of fiscal 1997 amounted to $37.1 million as compared with $31.5 million for the first quarter of the prior year. Revenue growth amounted to 18% and 20% in the first quarters of fiscal 1997 and 1996, respectively. During the quarter, the Company continued the transition of its core products from DOS and Unix platforms to the Windows and client/server environments. In December, an enhanced version of the Company's time and attendance Windows product was released for distribution. Due to the timing of that product release, there was no significant impact on revenues in the quarter. The Company anticipates releasing an enhanced version of its time and attendance product in the client/server environment in the second quarter as well as enhanced versions of its time and attendance product in both the client/server and Windows environment throughout fiscal 1997. Revenue growth in fiscal 1997 will depend in part on the commercial success of its Windows and client/server versions of its time and attendance product. Product revenues for the quarter increased 14% to $25.7 million principally driven by customer demand. Service revenues for the quarter increased 28% to $11.4 million. The growth in service revenues reflects increases in maintenance revenue from expansion of the installed base as well as an increase in the level of services accompanying the sale of new products. Gross Profit. Gross profit as a percentage of revenues was 62% in the first quarter of fiscal 1997 as compared with 60% in the first quarter of the prior year. The improvement in gross profit was evidenced in both product and service gross profit. Product gross profit increased to 75% in the quarter from 73% in the first quarter of the prior year. The improvement in product gross profit in the first quarter of fiscal 1997 is principally attributable to the Company's ability to decrease the per unit product cost of the hardware component of its systems. Service gross profit increased to 31% in the first quarter of fiscal 1997 from 27% in the first quarter of the prior year. The increase in service gross profit is primarily attributable to the growth in service revenues. The Company has been able to absorb the increase in service volume without a proportionate increase in service expenses, favorably impacting gross margins. This has been accomplished by the implementation of programs which focus on revenue enhancement for services provided, as well as improved efficiency in the delivery of such services. Expenses. Expenses as a percentage of revenues were 52% in the first quarter of fiscal 1997 as compared with 49% in the first quarter of the prior year. Sales and marketing expenses as a percentage of revenues increased to 35% in the first quarter of fiscal 1997 from 33% in the first quarter of the prior year. The increase in sales and marketing expenses as a percentage of revenues is a result of the Company's investment in its international direct sales organization and corporate marketing organization. Engineering, research and development expenses increased as a percentage of revenues to 10% in the first quarter of fiscal 1997 as compared with 8% in the first quarter of the prior year. The growth in engineering, research and development expenses as a percentage of revenues results primarily from the Company's continuing development of new products. Expenses of $3.8 million and $2.6 million in the first quarter of fiscal 1997 and 1996 are net of capitalized software development costs of $1.2 million and $.7 million, respectively. General and administrative expenses as a percentage of revenues amounted to 7% for all periods presented. Other (income) expense, net amounted to less than 1% of revenues for all periods presented. Other (income) expense, net is composed primarily of amortization of intangible assets related to acquisitions made by the Company which is partially offset by interest income earned on its investments. Income Taxes. The provision for income taxes as a percentage of pretax income was 38% in the first quarters of both fiscal 1997 and 1996. The Company's effective income tax rate may fluctuate between periods as a result of various factors, none of which is material, either individually or in aggregate, to the consolidated results of operations. Liquidity and Capital Resources Working capital as of December 28, 1996, amounted to $35.4 million as compared with $36.3 million at September 30, 1996. As of those dates, cash and equivalents and marketable securities amounted to $33.8 million and $32.8 million, respectively. Cash generated from operations decreased to $4.6 million in the first quarter of fiscal 1997 from $7.2 million in the first quarter of the prior year, principally due to the Company's investment in its internal customer lease program. The Company's investment in equipment in the quarter was comparable to its investment in the first quarter of the prior year. Cash generated from operations was more than sufficient to fund investments in equipment and capitalized software development costs. The Company expects to fund its investments in equipment and software development costs over the remainder of its fiscal year with existing cash and equivalents together with internally generated cash. The Company recently decided to cancel its committed bank line of credit of $3.0 million, in light of the Company's available cash and equivalents. The Company has replaced the line of credit with an informal $3.0 million credit facility in which the bank may offer credit to the Company at the bank's discretion. Certain Factors That May Affect Future Operating Results The Company's actual operating results may differ from those indicated by forward looking statements made in this Quarterly Report on Form 10-Q and presented elsewhere by management from time to time because of a number of factors, including the potential fluctuations in quarterly results, timing of new product announcements or introductions by the Company and its competitors, competitive pricing pressures, the ability to attract and retain sufficient technical personnel, the dependence on alternate distribution channels, and the dependence on the Company's time and attendance product line and on key vendors, as further described below and in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, which factors are specifically incorporated by reference herein. Potential Fluctuations in Quarterly Results. The Company's quarterly operating results may fluctuate as a result of a variety of factors, including the timing of the introduction of new products and product enhancements by the Company and its competitors, market acceptance of new products, mix of products sold, the purchasing patterns of its customers, competitive pricing pressure and general economic conditions. The Company historically has realized a relatively larger percentage of its annual revenues and profits in the fourth quarter and a relatively smaller percentage in the first quarter of each fiscal year, although there can be no assurance that this pattern will continue. In addition, while the Company has contracts to supply systems to certain customers over an extended period of time, substantially all of the Company's product revenue and profits in each quarter result from orders received in that quarter. If near-term demand for the Company's products weakens or if significant anticipated sales in any quarter do not close when expected, the Company's revenues for that quarter will be adversely affected. The Company believes that its operating results for any one quarter are not necessarily indicative of results for any future period. Product Development and Technological Change. The markets for time and attendance and data collection systems are characterized by continual change and improvement in computer software and hardware technology. The Company's future success will depend largely on its ability to enhance its existing product lines and to develop new products and interfaces to third party products on a timely basis for the increasingly sophisticated needs of its customers. Although the Company is continually seeking to further enhance its product offerings and to develop new products and interfaces, there can be no assurance that these efforts will succeed, or that, if successful, such product enhancements or new products will achieve widespread market acceptance, or that the Company's competitors will not develop and market products which are superior to the Company's products or achieve greater market acceptance. The Company is transitioning its product offerings from DOS and Unix platforms to the Windows and client/server environments. The Company's revenue growth and results of operations in fiscal 1997 will depend in part on the success of this product transition. Competition. The time and attendance and data collection industries are highly competitive. Competition is increasing as competitors in related industries, such as human resources and payroll, enter the market. Advances in software development tools have accelerated the software development process and, therefore, can allow competitors to penetrate certain of the Company's markets. Maintaining the Company's technological and other advantages over competitors will require continued investment by the Company in research and development and marketing and sales programs. There can be no assurance that the Company will have sufficient resources to make such investments or be able to achieve the technological advances necessary to maintain its competitive advantages. Increased competition could adversely affect the Company's operating results through price reductions and/or loss of market share. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amendment dated October 11, 1996 to Lease dated November 6, 1992, as amended, between John Hancock Mutual Life Insurance Company and the Registrant, relating to premises leased in Waltham, MA. 10.2 Fleet Bank Letter Agreement and Promissory Note dated January 1, 1997 relating to amendment of $3,000,000 credit facility. 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the fiscal quarter ended December 28, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KRONOS INCORPORATED By /s/ Paul A. Lacy Paul A. Lacy Vice President of Finance and Administration (Duly Authorized Officer and Principal Financial Officer) February 7, 1997 KRONOS INCORPORATED EXHIBIT INDEX Exhibit Number Description 10.1 Amendment dated October 11, 1996 to Lease dated November 6, 1992, as amended, between John Hancock Mutual Life Insurance Company and the Registrant, relating to premises leased in Waltham, MA. 10.2 Fleet Bank Letter Agreement and Promissory Note dated January 1, 1997 relating to amendment of $3,000,000 credit facility. 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule EX-10.1 2 SEVENTH AMENDMENT TO WALTHAM LEASE EXHIBIT 10.1 SEVENTH AMENDMENT TO LEASE This is a Seventh Amendment to Lease dated as of October 11, 1996 between John Hancock Mutual Life Insurance Company ("Landlord") and Kronos Incorporated ("Tenant"). W I T N E S S E T H: WHEREAS, Landlord and Tenant have agreed to amend the Lease to incorporate additional space on the terms and conditions more particularly set forth below. NOW, THEREFORE, for good and valuable consideration, and in consideration of the covenants and agreements herein contained, the parties hereby agree to amend the Lease as follows: 1. The plan attached hereto as Exhibit A-4, setting forth the approximate location of 2,589 square feet on the 6th floor of the Building to be added to the Premises pursuant to this Seventh Amendment ("Seventh Amendment Additional Space"), is hereby incorporated into Exhibit A to the Lease. 2. The term "Leased Premises" in Section 1 of the Lease is hereby amended by deleting therefrom the phrase "70,874 rentable square feet", and substituting therefor the phrase "73,463 rentable square feet". 3. The definition of "Minimum Annual Rent" set forth in Section 1 of the Lease is hereby amended by deleting the same and substituting therefor the following: "MINIMUM ANNUAL RENT: Year Sq. Ft. Per RSF Total 4/1/93-3/31/94 62,340 10.95* $682,623.00 4/1/94-10/31/94 62,340 14.75* 919,515.00 annual rate; 536,383.75 for this 7-month period 11/1/94-3/31/95 62,340 14.75* 979,023.00 annual rate: 407,926.25 for this 5-month period 4/1/95-5/31/95 62,340 15.00 994,608.00 3,480 17.10 annual rate; 165,768.00 for this 2-month period 6/1/95-1/31/96 62,340 15.00 1,076,156.00 3,480 17.10 annual rate; 4,292 19.00 717,437.33 for this 8-month period 2/1/96-3/31/96 62,340 15.00 1,091,357.90 3,480 17.10 annual rate; 4,292 19.00 181,892.98 for this 762 19.95 2-month period 4/1/96-10/10/96 62,340 15.25 1,106,942.90 3,480 17.10 annual rate; 4,292 19.00 583,798.65 for this 762 19.95 6-month and 10-day period 10/11/96-3/31/97 62,340 15.25 1,161,053.00 3,480 17.10 annual rate; 4,292 19.00 550,572.39 for this 762 19.95 5-month and 21-day 2,589 20.90 period 4/1/97-3/31/98 62,340 16.25 1,223,393.00 3,480 17.10 4,292 19.00 762 19.95 2,589 20.90 4/1/98-3/31/99 62,340 17.00 1,270,148.00 3,480 17.10 4,292 19.00 762 19.95 2,589 20.90 4/1/99-3/31/00 62,340 17.00 1,270,148.00 3,480 17.10 4,292 19.00 762 19.95 2,589 20.90 * Except as modified by the terms of Section 36." 4. The term "Total Rentable Area of the Leased Premises" in Section 1 of the Lease is hereby amended by deleting therefrom "70,874 sq. feet", and substituting therefor "73,463 sq. feet". 5. The term "Tax Base" in Section 1 of the Lease is hereby amended by adding thereto the following: "Notwithstanding the foregoing, the Tax Base for the Seventh Amendment Additional Space shall be Tax Year 1997." 6. The terms "Tax Percentage" and "Operating Cost Percentage" in Section 1 of the Lease are hereby amended by adding thereto the following: ", and, as to the Seventh Amendment Additional Space, 2.31%" 7. The term "Operating Cost Base" is hereby amended by adding thereto the following: "Notwithstanding the following, the Operating Cost Base for the Seventh Amendment Additional Space shall be Calendar Year 1996." 8. The Seventh Amendment Additional Space shall be deemed to be incorporated into the Lease as of October 11, 1996, and from and after that date, the Premises shall be deemed to include the original premises demised under the Lease and the Seventh Amendment Additional Space, in accordance with and subject to all of the terms and provisions of the Lease. Accordingly, the Tenant's rights to the Seventh Amendment Additional Space shall expire as of the date of expiration of the Lease, or its earlier termination. Any exercise by Tenant of its option to extend the Lease in accordance with Section 38 thereof shall include the Seventh Amendment Additional Space. 9. Tenant hereby acknowledges and agrees that the Seventh Amendment Additional Space shall be delivered by Landlord to Tenant in its "as is, with all faults" condition, and that Landlord shall have no obligations with respect to improvement of the Seventh Amendment Additional Space. Nothwithstanding any provision hereof to the contrary, (a) this Seventh Amendment shall not be effective until the existing occupant has vacated the Seventh Amendment Additional Space, (b) Tenant shall have no claim against Landlord in the event that the space is not available as of October 11, 1996, and (c) Tenant's occupancy shall at all times be subject to all of the terms and conditions of the Lease. 10. Landlord and Tenant hereby represent and warrant to each other that the only broker with whom each of them has had dealings in connection with this Seventh Amendment is Beacon Management Company. Each party agrees to defend, indemnify and hold the other party harmless from any breach of the foregoing representation. Except as hereinabove amended, the Lease remains in full force and effect. EXECUTED as a sealed instrument as of the day and year first above written. LANDLORD: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY By: /s/ Meliah Armour Its: Investment Officer TENANT: KRONOS INCORPORATED By: /s/ Paul Lacy Its: V.P. Finance and Administration EXHIBIT A-4 Exhibit A-4 contains a graphic which sets forth the approximate location of 2,589 square feet on the sixth floor of the Building to be added to the premises pursuant to the Seventh Amendment to the Lease. EX-10.2 3 FLEET BANK LETTER AGREEMENT EXHIBIT 10.2 [Fleet Logo] Fleet Bank January 1, 1997 Pam Kaplan Manager, Corporate Tax and Treasury Services Kronos Inc. 300 Billerica Road Chelmsford, MA 01824 Dear Pam: Fleet National Bank (the "Bank") is pleased to offer an informal credit facility effective January 1, 1997 to Kronos Incorporated ("Kronos") for aggregate advances not to exceed $3,000,000. This facility must not be construed as a binding commitment to lend, but rather an indication of our willingness to provide funds on an as offered basis. As such, it may be withdrawn by the Bank at any time. This letter agreement supersedes the Loan Agreement between Kronos Incorporated and Fleet Bank of Massachusetts, N.A. and the First Amendment to Loan Agreement dated January 24, 1995, collectively the ("Loan Documents"). The referenced line of credit facility in the Loan Documents will be canceled as of the effective date of this facility. Advances hereunder will be made only if in the opinion of the Bank, in its sole discretion, there has been no material adverse change of circumstances in the condition of Kronos, financial or otherwise, and if there exists no default under any loan documentation executed by you. Advances shall be payable on demand, and shall bear interest at your option of either the "Prime Rate or Libor + 1.75%. The term "Prime Rate" as used herein shall mean the rate of interest announced by Bank from time to time at its Boston offices as its Prime Rate, the term Libor Rate shall mean the rate offered to the Bank by banks in the London interbank market. Prepayment penalties will apply only if Kronos elects to borrow at Libor + 1.75% and, only if Kronos does not give the Bank thirty days written notice of its intent to repay. Interest and fees are calculated on the basis of a 360-day year and actual days elapsed. Please indicate your acceptance of this credit facility by signing below and returning one copy to my attention. Sincerely, /s/ Ann M. Dillon Ann M. Dillon Vice President ACCEPTED BY: Kronos Incorporated /s/ Paul Lacy Name V.P. Finance and Administration Title February 6, 1997 Date cc: Paul A. Lacy [Fleet Bank Logo] Commercial Promissory Note - -------------------------------------------------------------------------------- ______, Massachusetts ____________, 19__ FOR VALUE RECEIVED, I, the undersigned, promise to pay to the order of Fleet Bank of Massachusetts, National Association (with any subsequent holder referred to in this note as "you") at any of your offices, the sum of Three Million and 00/100 DOLLARS ($3,000,000.00) with interest in accordance with the provisions below which are marked. INTEREST RATE I will pay interest on the unpaid principal balance of this Note as follows, but in no event will interest exceed the maximum rate permitted by law: X FLOATING RATE. At the aggregate of the Bank's Prime Rate as the Bank announces it from time to time, or Libor plus 1.75% percent per annum. Changes in the Bank's Prime Rate as the Bank announces it from time to time are to take effect, for the purposes of the determination of interest on this Note, when made effective generally to loans by the Bank. _ FIXED RATE. At the rate of _______ percent per annum. _ DISCOUNT. Interest to maturity has been deducted from the proceeds of this Note. Interest at the rate of __________ percent per annum shall be paid on any amount not paid when due hereunder until that amount and any such interest are so paid. INTEREST PAYMENTS I will pay interest at the above rate as follows: X PERIODICALLY. Monthly/Quarterly/Monthly, in arrears, with the first such payment due on the _____ day of _________, 19___, and each subsequent payment due on the corresponding day of each calendar month/calendar quarter/_______________ thereafter. _ AT MATURITY. At the maturity of this Note. _ INTEREST INCLUDED IN REPAYMENTS. Interest is included in the payment(s) to be made pursuant to the Repayment Provisions below. REPAYMENT PROVISIONS In addition to any interest payments to be made as indicated above, I will pay you the amount stated above as follows: X ON DEMAND. On demand by you. _ PAYMENTS TO BE MADE UNTIL DEMAND. On demand by you, with payments of $____________ each to be made monthly unless and until such demand is made. The first such payments shall be due on the ______ day of __________, 19____ (if you have not made demand before then) and unless and until you make demand, each subsequent payment shall be due on the corresponding day of each month thereafter. _ TIME. ______________ days after the date hereof on _______________, 19____. _ INSTALLMENTS. In __________ consecutive monthly installments, of which each but the last shall be $________ and the final of which shall be equal to the then unpaid principal balance of this Note plus all accrued and unpaid interest thereon. The first such monthly installment shall be due on the ______ day of __________, 19____ and each subsequent installment shall be due on the corresponding day of each month thereafter, with the balance of all principal and interest due on ____________, 19____. PREPAYMENT. I will be entitled to prepay this note as follows: Prepayment penalties will apply only if Kronos elects to borrow at Libor + 1.75% and, only if Kronos does not give the Bank thirty days written notice of its intent to repay. LATE CHARGES. Upon default for more than fifteen (15) days in the making of any payment of principal or interest on this Note. I will pay you, upon demand, in addition to all other amounts payable hereunder, a late charge equal to three percent (3%) of the payment due, but in no event are such charges to exceed the maximum permitted by law. APPLICATION OF PAYMENTS. Any payments you receive from me will be applied first to any accrued and unpaid interest and then to the unpaid principal balance of this Note. If any payment under this Note becomes due and payable on the day upon which your office is legally closed to business, the due date shall be extended to the next succeeding business day and interest shall be payable during such extension at the rate stated above. EACH BORROWER AND ENDORSER LIABLE. If more than one borrower has signed below, each of us has made all of the promises contained in this Note, and we are jointly and severally liable for all obligations on this Note. If one or more endorser has signed below, each endorser agrees to all terms of this Note, including without limitation the provisions relating to Security. This Note is subject to the terms, provisions and conditions set forth on the reverse side of this page. Signed as an instrument under seal on the date stated above. BORROWER(S) - ------------------------------------------------ Name of Borrower By: _____________________________________________ Name Title By: _____________________________________________ Name Title Address: _________________________________________ ----------------------------------------- By: _____________________________________________ Name Title Address: _________________________________________ (ENDORSER(S): - ------------------------------------------------ - ------------------------------------------------ EVENTS OF DEFAULT. Upon the occurrence of any one or more of the following Events of Default, the entire unpaid principal balance of this Note and all unpaid accrued interest hereunder shall become immediately due and payable at your option and without notice or demand. In addition, at your option and without notice or demand, the occurrence of any such Event of Default shall also constitute a default under all agreements between you and me as well as of all instruments and papers that I have given to you. Events of Default are: (a) my failure to pay when due (or upon demand, if payable on demand) any amount due on this Note or any other amount I owe you; (b) my failure promptly, punctually, and faithfully to perform any other obligation or discharge any liability of mine to you; (c) your determination that any representation or warranty I made to you in any document, instrument, agreement or paper was not true or accurate when given; (d) the occurrence of any event of default under any agreement between you and me or under any instrument or paper I have given to you notwithstanding that you may not have exercised your rights upon default under any such other agreement, instrument or paper; (e) any act by, against, or relating to me or my property or assets, which act constitutes the application for, consent to, or sufferance of, the appointment of a receiver, trustee, or other person, pursuant to court action or otherwise over all or any part of my property, the granting of any trust mortgage or execution of an assignment for the benefit of my creditors or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for me; my written admission of my inability to pay my debts as they mature; the filing of any complaint, application, or petition by or against me initiating any matter in which I am or may be granted any relief from my debts pursuant to the Federal Bankruptcy Code or pursuant to any other insolvency statute or procedure; my offering by or entering into any composition, extension, or any other arrangement seeking relief or extension for my debts or any other judicial or non-judicial proceeding or agreement by, against, or including me which seeks or intends to accomplish a reorganization or arrangement with creditors; (f) the imposition of any lien upon my assets or the entry of any judgment against me, which lien is not discharged, or judgment appealed from or satisfied, within fifteen (15) days after its imposition or entry; (g) any material adverse change in my assets, liabilities, property, business or condition, financial or otherwise; (h) the occurrence of any event or circumstance with respect to me such that you deem yourself to be insecure; (i) my death, termination of existence, dissolution, winding up, or liquidation; (j) the occurrence of any of the foregoing Events of Default with respect to any guarantor or endorser to you of my liabilities to you, as if such guarantor or endorser were a borrower who signed this Note. LOAN DOCUMENTS: SECURITY. The following loan documents and security instruments are incorporated herein by reference with the same force and effect as if set forth herein in full: ================================================================================ ================================================================================ The execution, endorsement or guaranty of this Note constitutes a confirmation by each person that any security interest listed above which was given to you before the date hereof shall continue in effect as security for this Note. In addition to the foregoing, any and all of the deposits or other sums at any time credited by or due from you to me or to any endorser or guarantor of this Note, and any cash, securities, instruments, or other property of mine or of such endorser or guarantor in your possession, whether for safekeeping, or otherwise, shall at all times constitute security for this note, and for any and all of my liabilities to you including, without limitation, the liability evidenced hereby, and may be applied or set off by you against such liabilities at any time whether or not such liabilities are then due and whether or not other collateral is available to you. COSTS AND EXPENSES. I and each endorser and guarantor of this Note, will pay all costs and expenses, including, without limitation, reasonable attorneys' fees and all expenses and disbursements of counsel, in connection with the protection or enforcement of any of your rights against me or any such endorser and guarantor and against any collateral given to you to secure this Note or any other of my liabilities or of such endorser and guarantor to you (whether or not suit is instituted by or against you). ASSIGNABILITY BY YOU. You may assign and transfer this note to any person, firm or corporation and deliver to the assignee any collateral or security interest you hold in connection with this Note. In the event of such assignment, you will have no further responsibility or liability with respect to such collateral or security interest, and the terms of this Note and any related documents shall inure to the benefit of your assignee and its successors. This Note shall be binding upon me and each endorser and guarantor hereof and upon my and their respective heirs, successors, assigns, and representatives, and shall inure to the benefit of you and your successors and endorsees. SEVERABILITY. If any provision of this Note is deemed by any court having jurisdiction thereof to be invalid or unenforceable, the other provisions of this Note shall remain in full force and effect. If any provision of this note is deemed by any such court to be unenforceable because such provision is too broad in scope, such provision shall be construed to be limited in scope to the extent such court shall deem necessary to make it enforceable. If any provision is deemed inapplicable by any such court to any person or circumstances, it shall nevertheless be construed to apply to all other persons and circumstances. WAIVER. No delay or omission by you in exercising or enforcing any of your powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any default hereunder shall operate as a waiver of any other default hereunder, nor as a continuing waiver. ENDORSEMENT. Each endorser, jointly and severally if more than one, unconditionally guarantees prompt payment when due, by acceleration or otherwise, of this Note, regardless of its genuineness, validity, regularity or enforceability and waives any right to require you to proceed against the Borrower or any collateral which you might have been granted to secure any endorser's liabilities under this Note. PRESENTMENT, EXTENSION. I and each endorser and guarantor of this Note respectively waive presentment, demand, notices, and protest, and also waive any delay on the part of the holder hereof. Each assents to any extension or other indulgence (including, without limitation, the release of any other party to this Note or the release or substitution of collateral) which you permit me or any such endorser or guarantor with respect to this Note or any collateral given to secure this Note and any other liability of mine or such endorser or guarantor to you. MISCELLANEOUS. My liabilities and those of any endorser or guarantor of this Note are joint and several; provided, however, your release of me or any endorser or guarantor shall not release any other person obligated on account of this Note. Each reference in this Note to me, any endorser, and any guarantor, is to such person individually and also to all such persons jointly. No person obligated on account of this Note may seek contribution from any other person also obligated unless and until all liabilities to you of the person from whom contribution is sought have been satisfied in full. I and each endorser and guarantor of this Note authorize you to complete this Note if delivered in incomplete form, in any respect. This Note is delivered to you at one of your offices in Massachusetts and shall be governed by the laws of the Commonwealth of Massachusetts. I and each endorser and guarantor of this Note submit to the jurisdiction of the courts of the Commonwealth of Massachusetts for all purposes with respect to this Note, any collateral given to secure their respective liabilities to you or their respective liabilities to you or their respective relationships with you. EX-11 4 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 - Statement re: Computation of Per Share Earnings (In thousands, except share data) Three Months Ended ------------------------ December 28, December 30, 1996 1995 ---------- ---------- Net income ......................................... $ 2,186 $ 2,151 ========== ========== Net income per common share: Primary: Weighted average shares outstanding ..... 8,131,153 7,950,895 Common Stock equivalents ................ 240,213 330,764 ---------- ---------- Total ................................... 8,371,366 8,281,659 ========== ========== Net income per common share ............. $ 0.26 $ 0.26 ========== ========== Fully diluted: Weighted average shares outstanding ..... 8,131,153 7,950,895 Common Stock equivalents ................ 266,196 345,353 ---------- ---------- Total ................................... 8,397,349 8,296,248 ========== ========== Net income per common share ............. $ 0.26 $ 0.26 ========== ========== EX-27 5 FDS --
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statements of the Corporation for the three months ended December 28, 1996 and is qualified in its entirety by reference to such financial statements 0000886903 Kronos Inc. 1,000 U.S. Dollars 3-mos Sep-30-1997 Oct-01-1996 Dec-28-1996 1 13,587 20,200 29,956 977 4,534 74,358 34,809 19,166 107,774 38,999 0 0 0 81 63,153 107,774 25,718 37,110 6,415 14,245 0 83 0 3,536 1,350 2,186 0 0 0 2,186 0.26 0.26
-----END PRIVACY-ENHANCED MESSAGE-----