-----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, K9XSQVfQ3kdiEKJXFVkSwZfyma8Fxx10GekFSAYn6bf6zhRGSCsa84Do+JW7kFYf GS/Xc0L0pH9IodMLhDgvXA== 0000886903-97-000004.txt : 19970514 0000886903-97-000004.hdr.sgml : 19970514 ACCESSION NUMBER: 0000886903-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 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: 97601706 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 03-29-97 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 29, 1997 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 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 March 31, 1997, 8,204,572 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 and Six Months Ended March 29, 1997 and March 30, 1996 1 Condensed Consolidated Balance Sheets at March 29, 1997 and September 30, 1996 2 Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 29, 1997 and March 30, 1996 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 4. Submission of Matters to a Vote of Security Holders 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 and per share amounts) UNAUDITED Three Months Ended Six Months Ended --------------------------- ------------------------------ March 29, March 30, March 29, March 30, 1997 1996 1997 1996 -------------- ------------ -------------- -------------- Net revenues: Product .............................. $ 26,121 $ 23,236 $ 51,839 $ 45,774 Service .............................. 13,282 9,866 24,674 18,795 ----------- ----------- ----------- ----------- 39,403 33,102 76,513 64,569 Cost of sales: Product .............................. 7,041 6,321 13,456 12,302 Service .............................. 8,622 6,797 16,452 13,337 ----------- ----------- ----------- ----------- 15,663 13,118 29,908 25,639 ----------- ----------- ----------- ----------- Gross profit .................... 23,740 19,984 46,605 38,930 Expenses: Sales and marketing .................. 14,158 10,828 27,259 21,237 Engineering, research and development 4,034 2,856 7,791 5,502 General and administrative ........... 2,745 2,406 5,253 4,758 Other (income) expense, net .......... (75) 61 (112) 113 ----------- ----------- ----------- ----------- 20,862 16,151 40,191 31,610 ----------- ----------- ----------- ----------- Income before income taxes ...... 2,878 3,833 6,414 7,320 Provision for income taxes ................ 1,099 1,468 2,449 2,804 ----------- ----------- ----------- ----------- Net income ...................... $ 1,779 $ 2,365 $ 3,965 $ 4,516 =========== =========== =========== =========== Net income per common share: Primary and fully diluted ............ $ 0.21 $ 0.28 $ 0.47 $ 0.54 Average common and common equivalent shares outstanding: Primary ......................... 8,439,616 8,319,500 8,405,492 8,300,580 =========== =========== =========== =========== Fully diluted ................... 8,439,627 8,319,500 8,418,489 8,300,580 =========== =========== =========== =========== See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) UNAUDITED March 29, September 30, 1997 1996 ----------- ------------- ASSETS Current assets: Cash and equivalents .................................................... $ 14,306 $ 10,795 Marketable securities ................................................... 18,200 21,995 Accounts receivable, less allowances for doubtful accounts of $907 at March 29, 1997 and $987 at September 30, 1996 ..................... 29,674 30,622 Inventories ............................................................. 4,832 4,149 Deferred income taxes ................................................... 3,025 3,025 Other current assets .................................................... 4,304 3,765 --------- --------- Total current assets ............................................. 74,341 74,351 Equipment, net ............................................................. 16,980 14,738 Excess of cost over net assets of businesses acquired ...................... 6,786 7,221 Other assets ............................................................... 12,284 8,556 --------- --------- Total assets ..................................................... $ 110,391 $ 104,866 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses ................................... $ 12,328 $ 11,894 Accrued compensation .................................................... 6,831 8,445 Federal and state income taxes payable .................................. 654 1,367 Unearned service revenue ................................................ 19,067 16,388 --------- --------- Total current liabilities ........................................ 38,880 38,094 Deferred income taxes ...................................................... 2,236 2,236 Unearned service revenue ................................................... 2,806 2,721 Other liabilities .......................................................... 592 717 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, 8,205,350 shares and 8,124,133 shares issued at March 29, 1997 and September 30, 1996, respectively ..................................... 82 81 Additional paid-in capital .............................................. 28,375 27,512 Retained earnings ....................................................... 37,737 33,773 Equity adjustment from translation ...................................... (293) (251) Cost of Treasury Stock (778 shares and 583 shares at March 29, 1997 and September 30, 1996, respectively) ....... (24) (17) --------- --------- Total shareholders' equity ....................................... 65,877 61,098 --------- --------- Total liabilities and shareholders' equity ....................... $ 110,391 $ 104,866 ========= ========= See accompanying notes to condensed consolidated financial statements.
KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) UNAUDITED Six Months Ended ---------------------- March 29, March 30, 1997 1996 --------- --------- Operating activities: Net income ............................................................ $ 3,965 $ 4,516 Adjustments to reconcile net income to net cash and equivalents provided by operating activities: Depreciation .................................................. 3,020 2,155 Amortization of deferred software development costs and excess of cost over net assets of businesses acquired ...... 2,179 1,562 Changes in certain operating assets and liabilities: Accounts receivable, net ................................... 932 1,885 Inventories ................................................ (687) (13) Unearned service revenue ................................... 2,689 2,968 Accounts payable, accrued compensation and other liabilities ................................... (1,690) 685 Net investment in sales-type leases ........................ (2,676) (756) Other ......................................................... (844) (403) -------- -------- Net cash and equivalents provided by operating activities 6,888 12,599 Investing activities: Purchase of equipment ................................................. (5,177) (4,905) Capitalization of software development costs .......................... (2,552) (1,537) (Increase) decrease in marketable securities .......................... 3,795 (3,675) Acquisitions of businsesses ........................................... (422) (339) Other ................................................................. (5) 164 -------- -------- Net cash and equivalents used in investing activities ... (4,361) (10,292) Financing activities: Net proceeds from exercise of stock option and employee stock ......... 889 purchase plans Other ................................................................. -- (20) -------- -------- Net cash and equivalents provided by financing activities 968 869 Effect of exchange rate changes on cash and equivalents .................... 16 (24) -------- -------- Increase in cash and equivalents ........................................... 3,511 3,152 Cash and equivalents at the beginning of the period ........................ 10,795 17,727 -------- -------- Cash and equivalents at the end of the period .............................. $ 14,306 $ 20,879 ======== ======== 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 and six month periods ended March 29, 1997 and March 30, 1996 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 fiscalyear 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): March 29, September 30, 1997 1996 ------------------- ------------------- Finished goods $2,584 $2,148 Work - in - process 289 283 Raw materials 1,959 1,718 ------------------- ------------------- $4,832 $4,149 =================== =================== NOTE D - Financial Accounting Standards Board Statement No. 128, Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted in the first quarter of fiscal 1998. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in basic earnings per share of approximately $.01 per share for the three month periods ended March 29, 1997 and March 30, 1996, respectively, and approximately $.03 per share and $.02 per share for the six month periods ended March 29, 1997 and March 30, 1996, respectively. The impact of Statement 128 on the calculation of diluted earnings per share for these quarters is not expected to be material. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues. Revenues for the second quarter of fiscal 1997 amounted to $39.4 million as compared with $33.1 million for the second quarter of the prior year. Revenues for the first six months of fiscal 1996 were $76.5 million as compared with $64.6 million for the first six months of the prior year. Revenue growth of 19% and 18% in the three and six month periods ended March 29, 1997, respectively, increased from 13% and 17% for comparable periods of the prior year. Product revenues for the second quarter of fiscal 1997 amounted to $26.1 million as compared with $23.2 million for the second quarter of the prior year. Product revenues for the first six months of fiscal 1997 were $51.8 million as compared with $45.8 million for the first six months of the prior year. Product revenue growth of 12% for the second quarter of fiscal 1997 increased from 9% for the comparable period of the prior year. Product revenue growth was 13% in each of the six month periods ended March 29, 1997 and March 30, 1996. The growth in product revenues in the three and six month periods ended March 29, 1997 was principally driven by customer demand. While revenues increased over comparable periods of the prior year, the growth rate was below management's expectations. The shortfall in revenue growth from management's expectations is attributable to a variety of factors, the most significant of which includes the impact of recent product transitions and less than anticipated sales volume in the international and government and education markets. During the quarter the Company continued its transition of its core products from DOS and UNIX platforms to the Windows and client/server environments. Sales of the Company's client/server product to the manufacturing sector were below expectations due to a longer than anticipated sales cycle as a result of the complexity and size of these transactions. Sales in both the government and education and international markets also fell short of expectations. Sales to these markets may vary from quarter to quarter as the Company invests in these markets by building the infrastructure necessary to support future growth. Revenue growth over the remainder of fiscal 1997 will depend in part on the commercial success of the Company's Windows and client/server versions of its time and attendance products as well as its penetration into the international and government and education markets. Service revenues for the second quarter of fiscal 1997 amounted to $13.3 million as compared with $9.9 million for the second quarter of the prior year. Service revenues for the first six months of fiscal 1997 were $24.7 million as compared with $18.8 million for the first six months of the prior year. Service revenue growth of 35% and 31% in the three and six month periods ended March 29, 1997, respectively, increased from 26% in each of the comparable periods of the prior year. The growth in service revenues in the three and six month periods ended March 29, 1997 reflects an increase in maintenance revenue from expansion of the installed base. The Company also continued its efforts to increase revenue arising from maintenance and professional services. This effort has led to an increase in the level of maintenance contracts and professional services accompanying new sales as well as services sold to existing customers. Gross Profit. Gross profit as a percentage of revenues was 62% in the second quarter of fiscal 1997 as compared with 60% in the second quarter of the prior year. Gross profit as a percentage of revenues for the first six months of fiscal 1997 was 61% as compared with 60% for the first six months of fiscal 1996. Product gross profit as a percentage of revenues was 73% in the quarter, consistent with the prior year. Product gross profit increased slightly to 74% in the first six months of fiscal 1997 from 73% in the first six months of the prior year. Service gross profit as a percentage of revenues increased to 35% in the second quarter of fiscal 1997 from 31% in the second quarter of the prior year. Service gross profit increased to 33% for the first six months of fiscal 1997 from 29% in the first six months of the prior year. The increase in service gross profit in the three and six month periods ended March 29, 1997 is primarily attributable to growth in service revenues without a proportionate increase in service expenses. The Company has continued to realize the benefits of its service revenue enhancement programs, as well as improved efficiency in the delivery of services. Expenses. Total operating expenses as a percentage of revenues were 53% for the second quarter and six month period ended March 29, 1997 as compared to 49% for comparable periods in the prior year. The increase in expenses as a percentage of revenues results from lower than expected revenues, as well as investments made in the Company's international operations, government and education division and in engineering. Sales and marketing expenses as a percentage of revenues increased to 36% in the three and six month periods ended March 29, 1997 from 33% in the comparable periods 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 sales organization, including providing corporate support resources and investing in its direct subsidiary operations, as well as the Company's investment in the government and education division. The Company believes such investments are necessary to penetrate these markets successfully. Engineering, research and development expenses as a percentage of revenues increased to 10% in the second quarter and six month period ended March 29, 1997 as compared with 9% in the second quarter and six month period of the prior year. The growth in engineering, research and development expenses as a percentage of revenues results from the development of new products primarily in the Windows and client/server environments. Expenses of $4.0 million and $2.9 million in the second quarter of fiscal 1997 and 1996 are net of capitalized software development costs of $1.4 million and $.8 million, respectively. Expenses of $7.8 million and $5.5 million in the first six months of fiscal 1997 and 1996 are net of capitalized software development costs of $2.6 million and $1.5 million, respectively. The growth in spending on capitalized software development costs principally reflects enhancements of products released in the past three quarters. General and administrative expenses as a percentage of revenues amounted to 7% for all periods presented. Other (income) expense amounted to less than 1% for all periods presented. Other (income) expense is composed primarily of amortization of intangible assets related to acquisitions made by the Company which is offset by interest income earned on its investments. Income Taxes. The provision for income taxes as a percentage of pretax income was 38% for all periods presented 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 March 29, 1997, amounted to $35.5 million as compared with $36.3 million at September 30, 1996. As of those dates, cash and equivalents and marketable securities amounted to $32.5 million and $32.8 million, respectively. Cash generated from operations decreased to $6.9 million in the first six months of fiscal 1997 from $12.6 million in the first six months of the prior year. The decrease in cash generated from operations is principally due to changes in working capital items, primarily the Company's investment in its internal lease program and a reduction in compensation and income tax related obligations. The Company's investment in equipment in the first six months of fiscal 1997 was comparable to its investment in the first six months of the prior year. Cash generated from operations, together with the Company's other financial resources, was 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 also has an informal $3.0 million credit facility in which the bank may offer credit to the Company at the bank's discretion. No amounts were outstanding under the credit facility as of March 29, 1997. On April 16, 1997, the Company announced that its Board of Directors had approved a stock repurchase program covering up to 500,000 shares of the Company's common stock. The Company intends to use the shares for issuance under its employee stock purchase and stock option plans. 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 4. Submission of Matters to a Vote of Security Holders (a) The 1997 Annual Meeting of Stockholders of Kronos Incorporated was held on January 31, 1997. (b) At the Annual Meeting, W. Patrick Decker was elected as a Class II Director for a three-year term expiring in 2000. In addition, the Directors whose terms of office continue after the meeting are two Class I Directors: Messrs. D. Bradley McWilliams and Lawrence Portner and three Class III Directors: Messrs. Mark S. Ain, Richard Dumler and Samuel Rubinovitz. The tabulation of votes for the Director nominee was as follows: FOR WITHHELD W. Patrick Decker 7,521,335 6,575 (c) The other item voted upon at the meeting was as follows: BROKER FOR AGAINST ABSTAIN NON-VOTES (i) Ratification of the 7,517,765 3,251 6,894 ---- selection of Ernst & Young LLP Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10 1992 Employee Stock Purchase Plan, as amended and restated 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 March 29, 1997. 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) May 13, 1997 KRONOS INCORPORATED EXHIBIT INDEX Exhibit Number Description 10 1992 Employee Stock Purchase Plan, as amended and restated 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule EX-10 2 1992 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993. As amended through July 1, 1997 Kronos Incorporated 1992 Employee Stock Purchase Plan SECTION 1. PURPOSE OF PLAN The Kronos Incorporated 1992 Employee Stock Purchase Plan (the "Plan") is intended to provide a method by which eligible employees of Kronos Incorporated ("Kronos") and of such of Kronos' subsidiaries as Kronos' Board of Directors (the "Board of Directors") may from time to time designate (such subsidiaries, together with Kronos, being hereinafter referred to as the "Company") may use voluntary, systematic payroll deductions to purchase shares of the Common Stock of Kronos (the "Stock") and thereby acquire an interest in the future of the Company. For purposes of the Plan, a "subsidiary" is any corporation in which Kronos owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock. SECTION 2. OPTIONS TO PURCHASE STOCK Under the Plan, there is available an aggregate of not more than 275,000(1) shares of Stock (subject to adjustment as provided in Section 15) for sale pursuant to the exercise of options ("Options") granted under the Plan to employees of the Company ("Employees") who meet the eligibility requirements set forth in Section 3 hereof ("Eligible Employees"). The Stock to be delivered upon exercise of Options under the Plan may be either shares of authorized but unissued Stock or shares of reacquired Stock, as the Board of Directors may determine. SECTION 3. ELIGIBLE EMPLOYEES Except as otherwise provided below, each Employee whose customary employment for the Company is more than 20 hours per week and who has completed six months or more of continuous service in the employ of the Company will be eligible to participate in the Plan. (a) Any Employee who immediately after the grant of an option to him would (in accordance with the provisions of Sections 423 and 424(d) of the Internal Revenue Code of 1986, as amended (the "Code")) own stock possessing 5% or more of the total combined voting power or value of all classes of stock of the employer corporation or of its parent or subsidiary corporations, as defined in Section 424 of the Code, will not be eligible to receive an option to purchase stock pursuant to the Plan. (b) No Employee will be granted an option under the Plan which would permit his or her rights to purchase shares of stock under all employee stock purchase plans of the Company and parent and subsidiary corporations to accrue at a rate which exceeds $25,000 in fair market value of such stock (determined at the time the option is granted) for each calendar year during which any such Option granted to such Employee is outstanding at any time, as provided in Sections 423 and 424(d) of the Code. SECTION 4. METHOD OF PARTICIPATION Options may be granted hereunder during the "Option Periods" described below. The initial Option Period shall be the three-month period commencing on October 1, 1992. Subsequent Option Periods shall be the six month periods commencing on January 1 and July 1. Each person who will be an Eligible Employee on the first day of an Option Period may elect to participate in the Plan by executing and delivering, at least 15 days prior to such day, a payroll deduction authorization in accordance with Section 5. Such Employee will thereby become a participant ("Participant") on the first day of such Option Period and will remain a Participant until his or her participation is terminated as provided in the Plan. SECTION 5. PAYROLL DEDUCTION The payroll deduction authorization will request withholding at a rate (in whole percentages) of not less than 2% nor more than 10% of the Participant's Compensation paid in the Option Period in accordance with the Company's normal payroll practices. In no event shall more than $1,500 be withheld with respect to any Participant for the initial Option Period, and in no event shall more than $12,500 be withheld with respect to any participant for subsequent Option Periods. For purposes of the Plan, "Compensation" will mean all compensation paid to the participant by the Company and currently includible in his or her income, including bonuses, commissions and other amounts includible in the definition of compensation provided in the Treasury Regulations promulgated under Section 415 of the Code, plus any amount that would be so included but for an election under section 401(k) or 125 of the Code, but not including payments under stock option plans and other employee benefit plans or any other amounts excluded from the definition of compensation provided in the Treasury Regulations under Section 415 of the Code. A Participant may increase or reduce the withholding rate of his or her payroll deduction authorization for a future Option Period by written notice delivered to the Company at least 15 days prior to the first day of the Option Period as to which the change is to be effective. All amounts withheld in accordance with a Participant's payroll deduction authorization will be credited to a withholding account for such Participant. SECTION 6. GRANT OF OPTIONS Each person who is a Participant on the first day of an Option Period will as of such day be granted an Option for such Period. Such Option will be for the number of whole shares (not in excess of the share maximum as hereinafter defined) of Stock to be determined by dividing (i) the balance in the Participant's withholding account on the last day of the Option Period, by (ii) the purchase price per share of the Stock determined under Section 7. For purposes of the preceding sentence, the share maximum with respect to any Option for any Option Period shall be the largest number of shares which, when multiplied by the fair market value of a share of Stock at the beginning of the Option Period, produces a dollar amount of $12,500 or less. The number of shares of Stock receivable by each Participant upon exercise of his or her Option for an Option Period will be reduced, on a substantially proportionate basis, in the event that the number of shares then available under the Plan is otherwise insufficient. SECTION 7. PURCHASE PRICE The purchase price of Stock issued pursuant to the exercise of an Option will be 85% of the fair market value of the Stock at (a) the time of grant of the Option or (b) the time at which the Option is deemed exercised, whichever is less. Fair market value on any given day will mean the Closing Price of the Stock on such day or, if there was no Closing Price on such day, the latest day prior thereto on which there was a Closing Price. The "Closing Price" of the Stock on any business day will be the last sale price as reported on the principal market on which the Stock is traded or, if no last sale is reported, then the fair market value of the Stock as determined by the Board of Directors. A good faith determination by the Board of Directors as to fair market value shall be final and binding. SECTION 8. EXERCISE OF OPTIONS Each Employee who is a Participant in the Plan on the last day of an Option Period will be deemed to have exercised on the last day of the Option Period the Option granted to him or her for that Option Period. Upon such exercise, the balance of the Participant's withholding account will be applied to the purchase of the number of whole shares of Stock determined under Section 6 and as soon as practicable thereafter certificates for said shares will be issued and delivered to the Participant. In the event that the balance of the Participant's withholding account following an Option Period is in excess of the total purchase price of the shares so issued, the balance of the account shall be returned to the Participant; provided, however, that if the balance left in the account consists solely of an amount equal to the value of a fractional share it will be retained in the withholding account and carried over to the next Option Period. The entire balance of the Participant's withholding account following the final Option Period shall be returned to the Participant. No fractional shares will be issued hereunder. Notwithstanding anything herein to the contrary, Kronos' obligation to issue and deliver shares of Stock under the Plan is subject to the approval required of any governmental authority in connection with the authorization, issuance, sale or transfer of said shares, to any requirements of any national securities exchange applicable thereto, and to compliance by the Company with other applicable legal requirements in effect from time to time, including without limitation any applicable tax withholding requirements. SECTION 9. INTEREST No interest will be payable on withholding accounts. SECTION 10. CANCELLATION AND WITHDRAWAL A Participant who holds an Option under the Plan may at any time prior to exercise thereof under Section 8 cancel such Option as to all (but not less than all) the Shares subject or to be subject to such Option by written notice delivered to the Company. Upon such cancellation, the balance in his or her withholding account will be returned to him. A Participant may terminate his or her payroll deduction authorization as of any date by written notice delivered to the Company and will thereby cease to be a Participant as of such date. Any Participant who voluntarily terminates his or her payroll deduction authorization prior to the last business day of an Option Period will be deemed to have cancelled his or her Option. Any Participant who cancels an Option or terminates his or her payroll deduction authorization may at any time thereafter again become a Participant in accordance with Section 4. SECTION 11. TERMINATION OF EMPLOYMENT Subject to Section 12, upon the termination of a Participant's service with the Company for any reason, he or she will cease to be a Participant, and any Option held by such Participant under the Plan will be deemed cancelled, the balance of his or her withholding account will be returned to him or her, and he or she will have no further rights under the Plan. SECTION 12. DEATH OF PARTICIPANT A Participant may file a written designation of beneficiary specifying who is to receive any Stock and/or cash credited to the Participant under the Plan in the event of the Participant's death, which designation will also provide for the election by the Participant of either (i) cancellation of the Participant's Option upon his or her death, as provided in Section 10 or (ii) application as of the last day of the Option Period of the balance of the deceased Participant's withholding account at the time of death to the exercise of his or her Option, pursuant to Section 8 of the Plan. In the absence of a valid election otherwise, the death of a Participant will be deemed to effect a cancellation of his or her Option. A designation of beneficiary and election may be changed by the Participant at any time, by written notice. In the event of the death of a Participant and receipt by Kronos of proof of the identity and existence at the Participant's death of a beneficiary validly designated by him or her under the Plan, Kronos will deliver to such beneficiary such Stock and/or cash to which the beneficiary is entitled under the Plan. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant's death, Kronos will deliver such Stock and/or cash to the executor or administrator of the estate of the Participant, if Kronos is able to identify such executor or administrator. If Kronos is unable to identify such administrator or executor, Kronos, in its discretion, may deliver such stock and/or cash to the spouse or to any one or more dependents of a Participant as Kronos may determine. No beneficiary will, prior to the death of the Participant by whom he has been designated, acquire any interest in any Stock or cash credited to the Participant under the Plan. SECTION 13. PARTICIPANT'S RIGHTS NOT TRANSFERABLE All Participants will have the same rights and privileges under the Plan. Each Participant's rights and privileges under any Option may be exercisable during his or her lifetime only by him or her, and may not be sold, pledged, assigned, or transferred in any manner. In the event any Participant violates the terms of this Section, any Option held by him or her may be terminated by the Company and upon return to the Participant of the balance of his or her withholding account, all his or her rights under the Plan will terminate. SECTION 14. EMPLOYMENT RIGHTS Nothing contained in the provisions of the Plan will be construed to give to any Employee the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge any Employee at any time. SECTION 15. CHANGE IN CAPITALIZATION In the event of any change in the outstanding Stock of Kronos by reason of a stock dividend, split-up, recapitalization, merger, consolidation, reorganization, or other capital change, after the effective date of this Plan, the aggregate number of shares available under the Plan, the number of shares under Options granted but not exercised, and the Option price will be appropriately adjusted. SECTION 16. ADMINISTRATION OF PLAN The Plan will be administered by the Board of Directors, which will have the right to determine any questions which may arise regarding the interpretation and application of the provisions of the Plan and to make, administer, and interpret such rules and regulations as it will deem necessary or advisable. The Board of Director's determinations hereunder shall be final and binding. SECTION 17. AMENDMENT AND TERMINATION OF PLAN Kronos reserves the right at any time or times to amend the Plan to any extent and in any manner it may deem advisable by vote of the Board of Directors; provided, however, that any amendment relating to the aggregate number of shares which may be issued under the Plan (other than an adjustment provided for in Section 15) or to the Employees (or class of Employees) eligible to receive Options under the Plan will have no force or effect unless it is approved by the shareholders within twelve months before or after its adoption. The Plan shall terminate automatically following the end of the first Option Period beginning in 2002; provided, however, that the Board of Directors in its discretion may extend the Plan for one or more Option Periods. The Plan may be earlier suspended or terminated by the Board of Directors, but no such suspension or termination will adversely affect the rights and privileges of holders of outstanding Options. The Plan will terminate in any case when all or substantially all the Stock reserved for the purposes of the Plan has been purchased. SECTION 18. APPROVAL OF SHAREHOLDERS The Plan is subject to the approval of the shareholders of Kronos, which approval must be secured within twelve months before or after the date the Plan is adopted by the Board of Directors, and any Option granted hereunder prior to such approval is conditioned on such approval being obtained prior to the exercise thereof. - -------- (1)The 275,000 share total gives effect to the May 15, 1992 stock dividend. EX-11 3 COMPUTATION OF EARNINGS PER SHARE KRONOS INCORPORATED Exhibit 11 - Statement re: Computation of Per Share Earnings (In thousands, except share data) Three Months Ended Six Months Ended ------------------------ ----------------------- March 29, March 30, March 29, March 30, 1997 1996 1997 1996 ----------- ---------- ----------- ---------- Net income .................................. $ 1,779 $ 2,365 $ 3,965 $ 4,516 ========== ========== ========== ========== Net income per common share: Primary: Weighted average shares outstanding 8,185,134 8,019,061 8,158,144 7,984,979 Common Stock equivalents .......... 254,482 300,439 247,348 315,601 ---------- ---------- ---------- ---------- Total ............................. 8,439,616 8,319,500 8,405,492 8,300,580 ========== ========== ========== ========== Net income per common share ....... $ 0.21 $ 0.28 $ 0.47 $ 0.54 ========== ========== ========== ========== Fully diluted: Weighted average shares outstanding 8,185,134 8,019,061 8,158,144 7,984,979 Common Stock equivalents .......... 254,493 300,439 260,345 315,601 ---------- ---------- ---------- ---------- Total ............................. 8,439,627 8,319,500 8,418,489 8,300,580 ========== ========== ========== ========== Net income per common share ....... $ 0.21 $ 0.28 $ 0.47 $ 0.54 ========== ========== ========== ==========
EX-27 4 FDS --
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statements of the Corporation for the six months ended March 29, 1997 and is qualified in its entirety by reference to such financial statements 0000886903 Kronos Inc. 1,000 U.S. Dollars 6-mos Sep-30-1997 Oct-01-1996 Mar-26-1997 1 14,306 18,200 30,581 907 4,832 74,341 37,700 20,720 110,391 38,880 0 0 0 82 65,795 110,391 51,839 76,513 13,456 29,908 0 173 0 6,414 2,449 3,965 0 0 0 3,965 0.47 0.47
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