-----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, EUs0HOCUbu0++omCUl5j/K203YeghzjHGpFvpLvJMQK/wJ1Ex4JHPuq31b3tGBwz IByDeRPsVh2TXOLmInwJEw== 0000886903-00-000002.txt : 20000215 0000886903-00-000002.hdr.sgml : 20000215 ACCESSION NUMBER: 0000886903-00-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000101 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRONOS INC CENTRAL INDEX KEY: 0000886903 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 042640942 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20109 FILM NUMBER: 541538 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 FORM 10Q - 1ST QUARTER FY 00 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 January 1, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 -------------------------- For the transition period from to Commission file number 0-20109 Kronos Incorporated ----------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2640942 - ----------------- ------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 Fifth Avenue, Waltham, MA 02451 ----------------------------------- (Address of principal executive offices) (Zip Code) (781) 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 January 29, 2000, 12,530,761 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 January 1, 2000 and January 2, 1999 1 Condensed Consolidated Balance Sheets at January 1, 2000 and September 30, 1999 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended January 1, 2000 and January 2, 1999 3 Notes to Condensed Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. OTHER INFORMATION Item 5. 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 and per share amounts) UNAUDITED
Three Months Ended ----------------------- January 1, January 2, 2000 1999 ---------- ---------- Net revenues: Product .......................................... $ 36,152 $ 33,180 Service .......................................... 28,456 19,935 ---------- ---------- 64,608 53,115 ---------- ---------- Cost of sales: Product .......................................... 8,291 7,840 Service .......................................... 16,255 12,112 ---------- ---------- 24,546 19,952 ---------- ---------- Gross profit ................................ 40,062 33,163 Expenses: Sales and marketing .............................. 21,931 18,688 Engineering, research and development ............ 7,016 6,003 General and administrative ....................... 4,154 3,374 Other (income) expense, net ...................... 216 (95) ---------- ---------- 33,317 27,970 ---------- ---------- Income before income taxes .................. 6,745 5,193 Provision for income taxes ............................. 2,496 1,984 ---------- ---------- Net income .................................. $ 4,249 $ 3,209 ========== ========== Net income per common share: Basic ....................................... $ 0.34 $ 0.26 ========== ========== Diluted ..................................... $ 0.32 $ 0.25 ========== ========== Average common and common equivalent shares outstanding: Basic ....................................... 12,462,471 12,487,508 ========== ========== Diluted ..................................... 13,152,909 12,969,665 ========== ==========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) UNAUDITED
January 1, September 30, 2000 1999 ---------- ---------- ASSETS Current assets: Cash and equivalents .................................................... $ 16,602 $ 20,148 Marketable securities ................................................... 24,349 20,893 Accounts receivable, less allowances of $7,155 at January 1, 2000 and $6,791 at September 30, 1999 .................. 58,258 66,817 Deferred income taxes ................................................... 5,869 5,414 Other current assets .................................................... 13,028 11,872 --------- --------- Total current assets ............................................. 118,106 125,144 Property, plant and equipment, net ......................................... 29,133 23,981 Marketable securities ...................................................... 18,900 21,400 Excess of cost over net assets of businesses acquired, net ................. 29,049 29,946 Deferred software development costs, net ................................... 12,901 12,218 Other assets ............................................................... 14,861 15,554 --------- --------- Total assets ..................................................... $ 222,950 $ 228,243 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ........................................................ $ 8,141 $ 8,503 Accrued compensation .................................................... 14,994 21,106 Accrued expenses and other current liabilities .......................... 33,867 32,753 Deferred maintenance revenues ........................................... 42,988 41,636 --------- --------- Total current liabilities ........................................ 99,990 103,998 Deferred maintenance revenues .............................................. 18,127 18,818 Other liabilities .......................................................... 1,202 1,169 Shareholders' equity: Preferred Stock, par value $1.00 per share: authorized 1,000,000 shares, no shares issued and outstanding ..................................... -- -- Common Stock, par value $.01 per share: authorized 20,000,000 shares, 12,634,728 shares and 12,634,728 shares issued at January 1, 2000 and September 30, 1999, respectively ..................................... 126 126 Additional paid-in capital .............................................. 23,494 31,087 Retained earnings ....................................................... 86,393 82,143 Equity adjustment from translation ...................................... (337) (337) Cost of Treasury Stock (125,491 shares and 192,165 shares at January 1, 2000 and September 30, 1999, respectively) ...... (6,045) (8,761) --------- --------- Total shareholders' equity ....................................... 103,631 104,258 --------- --------- Total liabilities and shareholders' equity ....................... $ 222,950 $ 228,243 ========= =========
See accompanying notes to condensed consolidated financial statements. KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) UNAUDITED
Three Months Ended ----------------------- January 1, January 2 2000 1999 ----------- ---------- Operating activities: Net income ........................................................................ $ 4,249 $ 3,209 Adjustments to reconcile net income to net cash and equivalents provided by operating activities: Depreciation .............................................................. 1,873 1,916 Amoritzation of excess of cost over net assets of businesses acquired ..... 1,551 1,010 Amortization of deferred software development costs ....................... 1,643 1,318 Provision for deferred income taxes ....................................... (895) -- Changes in certain operating assets and liabilities: Accounts receivable, net .............................................. 8,591 1,453 Deferred maintenance revenue .......................................... 467 3,434 Accounts payable, accrued compensation and other liabilities ............................................. (5,878) (6,466) Other ................................................................. (16) (538) -------- -------- Net cash and equivalents provided by operating activities ......... 11,585 5,336 Investing activities: Purchase of property, plant and equipment ......................................... (7,024) (1,672) Capitalization of software development costs ...................................... (2,326) (2,002) (Increase) decrease in marketable securities ...................................... (956) 3,505 Acquisitions of businesses ........................................................ (514) (582) -------- -------- Net cash and equivalents used in investing activities ............. (10,820) (751) Financing activities: Net proceeds from exercise of stock option and employee stock purchase plans ................................................................ 3,844 1,845 Purchase of treasury stock ........................................................ (8,160) (175) -------- -------- Net cash and equivalents (used in) provided by financing activities (4,316) 1,670 Effect of exchange rate changes on cash and equivalents ................................ 5 (10) -------- -------- Increase (decrease) in cash and equivalents ............................................ (3,546) 6,245 Cash and equivalents at the beginning of the period .................................... 20,148 29,888 -------- -------- Cash and equivalents at the end of the period .......................................... $ 16,602 $ 36,133 ======== ========
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, 1999. The results of operations for the three months ended January 1, 2000 are not necessarily indicative of the results for a full fiscal year. NOTE B - Fiscal Quarters The Company utilizes a system of fiscal quarters. Under this system, the first three quarters of each fiscal year end on a Saturday. However, the fourth quarter of each fiscal year will always end on September 30. Because of this, the number of days in the first quarter (93 days in fiscal 2000 and 94 days in fiscal 1999) and fourth quarter (91 days in fiscal 2000 and 89 days in fiscal 1999) of each fiscal year varies from year to year. The second and third quarters of each fiscal year will be exactly thirteen weeks long. This policy does not have a material effect on the comparability of results of operations between quarters. NOTE C - Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands): January 1, September 30, 2000 1999 ---------- ---------- Deferred professional service revenue ....... $ 15,346 $ 17,262 Accrued acquisition payments ................ 6,208 6,461 Federal and state taxes payable ............. 4,685 2,522 Accrued other ............................... 7,628 6,508 ---------- ---------- $ 33,867 $ 32,753 ========== ========== NOTE D - Comprehensive Income For the three months ended January 1, 2000 and January 2, 1999 comprehensive income consisted of the following (in thousands): Three Months Ended ------------------------- January 1, January 2, 2000 1999 ---------- ---------- Comprehensive income: Net income .......................... $ 4,249 $ 3,209 Cumulative translation adjustment ... -- 99 ---------- ---------- Total comprehensive income .............. $ 4,249 $ 3,308 ========== ========== NOTE E - Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended -------------------------- January 1, January 2, 2000 1999 ----------- ----------- Net income (in thousands) .............. $ 4,249 $ 3,209 =========== =========== Weighted-average shares ................ 12,462,471 12,487,508 Effect of dilutive securities: Employee stock options .............. 690,438 482,157 ----------- ----------- Adjusted weighted-average shares and assumed conversions ............. 13,152,909 12,969,665 =========== =========== Basic earnings per share ............... $ 0.34 $ 0.26 =========== =========== Diluted earnings per share ............. $ 0.32 $ 0.25 =========== =========== 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements This discussion includes certain forward-looking statements about Kronos' business and its expectations. Any such statements are subject to risk that could cause the actual results to vary materially from expectations. For a further discussion of the various risks that may affect Kronos' business and expectations, see "Certain Factors That May Affect Future Operating Results" at the end of Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Revenues. Revenues for the first quarter of fiscal 2000 amounted to $64.6 million as compared with $53.1 million for the first quarter of the prior year. Revenue growth amounted to 22% and 19% in the first quarter of fiscal 2000 and 1999, respectively. Product revenues for the quarter increased 9% to $36.2 million from $33.2 million in the same period of fiscal 1998. In the first quarter of fiscal 1999, product revenues increased 12% over the same period in fiscal 1998. Product revenue growth in the first quarter of fiscal 2000 was principally driven by sales of Kronos' products to new customers as well as sales into Kronos' existing customer base. While product revenues increased over the comparable period of the prior year, the growth rate was negatively impacted as a result of the postponement of customer orders due to their Year 2000 compliance efforts. Although management anticipates that the product revenue growth rate for the remainder of the year to be above the growth rate experienced in the first quarter of fiscal 2000, the growth rate in the second quarter may continue to be impacted as customers transition from Year 2000 compliance efforts. Service revenues for the first quarter of fiscal 2000 increased 43% to $28.5 million from $19.9 million in the same period of fiscal 1999. In the first quarter of fiscal 1999, service revenues increased 35% over the same period in fiscal 1998. The growth in service revenues in the first quarter of fiscal 2000 and 1999 principally reflects an increase in maintenance revenue from expansion of the installed base and the level of services sold to the installed base, as well as an increase in the level of maintenance contracts and professional services accompanying new and upgrade sales. Also contributing to the growth in the first quarter of fiscal 2000 were maintenance and professional service revenues resulting from the Company's acquisition of the New York-New Jersey territory from a dealer in June 1999. Gross Profit. Gross profit as a percentage of revenues was 62% in the first quarter of fiscal 2000 and 1999. Product gross profit as a percentage of product revenues was 77% and 76% in the first quarter of fiscal 2000 and 1999, respectively. The improvement in product gross profit is principally attributable to an increased proportion of product revenues generated by software, which typically generates higher gross profit than other products. The software component of product sales was 47% in the first quarter of fiscal 2000 as compared to 45% for the comparable period of the prior year. Service gross profit as a percentage of service revenues increased to 43% in the first quarter of fiscal 2000 from 39% in the first quarter of the prior year. The increase in service gross profit is primarily attributable to the growth in service revenues without a proportionate increase in service expenses. This has principally been accomplished by improving the efficiency in the delivery of support services by centralizing the software support function, leveraging web-based self-service offerings and, as customers have upgraded to current versions of Kronos' product, reducing the number of versions requiring support. In addition, Kronos has also focused on enhancing the billing for professional services which also improves service gross profit. Expenses. Expenses as a percentage of revenues were 52% and 53% in the first quarter of fiscal 2000 and 1999, respectively. Sales and marketing expenses as a percentage of revenues were 34% in the first quarter of fiscal 2000 as compared to 35% in the first quarter of the prior year. Sales and marketing expenses as a percentage of revenues were lower in the first quarter of fiscal 2000 principally due to lower incentive related expenses relative to revenues. Engineering, research and development expenses as a percentage of revenues were 11% in the first quarter of fiscal 2000 and 1999. Expenses of $7.0 million and $6.0 million in the first quarter of fiscal 2000 and 1999, respectively, are net of capitalized software development costs of $2.3 million and $2.0 million, respectively. The growth in engineering, research and development expenses resulted principally from the continuing development and integration of new products and acquired technologies. Management anticipates that over the remainder of fiscal 2000 engineering, research and development expenses as a percentage of revenues will be in the 10%-11% range. General and administrative expenses as a percentage of revenues were 6% in the first quarter of fiscal 2000 and 1999. Other (income) expense, net amounted to less than 1% of revenues for all periods presented. Other (income) expense, net is composed primarily of interest income earned on Kronos' investments offset by amortization of intangible assets related to acquisitions made by Kronos. Income Taxes. The provision for income taxes as a percentage of pretax income was 37% and 38% in the first quarter of fiscal 1999 and 1998, respectively. Kronos' effective income tax rate may fluctuate between periods as a result of various factors, none of which is material, either individually or in the aggregate, to the consolidated results of operations. Liquidity and Capital Resources Working capital as of January 1, 2000, amounted to $18.1 million as compared with $21.1 million at September 30, 1999. As of those dates, cash and equivalents, marketable securities and investments amounted to $59.9 million and $62.4 million, respectively. Cash generated from operations increased to $11.6 million in the first quarter of fiscal 2000 from $5.3 million in the first quarter of the prior year, principally due to an increase in earnings and collection of accounts receivable from trade customers. Cash used for property, plant and equipment increased to $7.0 million in the first quarter of fiscal 2000 from $1.7 million in the first quarter of fiscal 1999. The increase in the investment in property, plant and equipment was due to costs related to the construction of Kronos' new corporate headquarters facility as well as investments in information systems and infrastructure to improve and support expanding operations. Over the next six months Kronos anticipates it will use approximately $13.0 million in cash for the construction of its headquarters facility and for payments due under the terms of various acquisition agreements. The Company is also assessing several acquisition opportunities that may be completed over the remainder of the fiscal year, although there can be no assurance that these acquisitions will be completed. Under Kronos' stock repurchase program, Kronos repurchased 168,500 common shares in the first quarter of fiscal 2000 at a cost of $8.2 million. The common shares repurchased under the program are used for Kronos' employee stock option plans and employee stock purchase plan. Cash provided by operations in the first quarter of fiscal 2000 was more than sufficient to fund investments in capitalized software development costs, property, plant and equipment and stock repurchases. Kronos expects to fund its investments in property, plant and equipment, software development costs, cash payments related to acquisitions and any additional stock repurchases over the remainder of fiscal 2000 with available cash and investments and operating cash flow. Certain Factors That May Affect Future Operating Results Except for historical matters, the matters discussed in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Kronos desires to take advantage of the safe harbor provisions of the Act and is including this statement for the express purpose of availing itself of the protection of the safe harbor with respect to all forward looking statements that involve risks and uncertainties. Kronos' actual operating results may differ from those indicated by forward looking statements made in this Quarterly Report on Form 10-Q and presented elsewhere by management from time to time because of a number of factors including the potential fluctuations in quarterly results, timing and acceptance of new product introductions by Kronos and its competitors, the ability to attract and retain sufficient technical personnel, competitive pricing pressures, potential effects of the century change, the dependence on Kronos' time and attendance product line, and the dependence on alternate distribution channels and on key vendors, as further described below and in Kronos' Annual Report on Form 10-K for the fiscal year ended September 30, 1999, which factors are specifically incorporated by reference herein. Potential Fluctuations in Quarterly Results. Kronos' quarterly operating results may fluctuate as a result of a variety of factors, including the timing of the introduction of new products and product enhancements by Kronos 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. Kronos historically has realized a relatively larger percentage of its annual revenues and profits in the fourth quarter and a relatively smaller percentage in the first quarter of each fiscal year, although there can be no assurance that this pattern will continue. In addition, while Kronos has contracts to supply systems to certain customers over an extended period of time, substantially all of Kronos' product revenue and profits in each quarter result from orders received in that quarter. If near-term demand for Kronos' products weakens or if significant anticipated sales in any quarter do not close when expected, Kronos' revenues for that quarter will be adversely affected. Kronos believes that its operating results for any one period are not necessarily indicative of results for any future period. Product Development and Technological Change. Continual change and improvement in computer software and hardware technology characterize the markets for frontline labor management systems. Kronos' future success will depend largely on its ability to enhance the capabilities and increase the performance of its existing products and to develop new products and interfaces to third party products on a timely basis to meet the increasingly sophisticated needs of its customers. Although Kronos is continually seeking to further enhance its product offerings and to develop new products and interfaces, there can be no assurance that these efforts will succeed, or that, if successful, such product enhancements or new products will achieve widespread market acceptance, or that Kronos' competitors will not develop and market products which are superior to Kronos' products or achieve greater market acceptance. Attracting and Retaining Sufficient Technical Personnel for Product Development, Support and Sales. Kronos has encountered intense competition for experienced technical personnel for product development, technical support and sales and expects such competition to continue in the future. Any inability to attract and retain a sufficient number of qualified technical personnel could adversely affect Kronos' ability to produce, support and sell products in a timely manner. Competition. The frontline labor management industry is highly competitive. The number of competitors is also increasing as applications and systems providers in related industries, such as human resources management, payroll processing and enterprise resource planning (ERP), enter the market. Technological changes such as those allowing for increased use of the Internet may also create the potential for new entrants. Although Kronos believes it has core competencies that are not easily obtainable by competitors, maintaining Kronos' technological and other advantages over competitors will require continued investment by Kronos in research and development and marketing and sales programs. There can be no assurance that Kronos will have sufficient resources to make such investments or be able to achieve the technological advances necessary to maintain its competitive advantages. Increased competition could adversely affect Kronos' operating results through price reductions and/or loss of market share. Year 2000. The Company continues to maintain its executive level steering committee which had been previously formed to identify and resolve Year 2000 issues associated with the Company's internal systems (both information technology ("IT") and non-IT), the Company's own products and services, the status of third party products distributed by the Company to its customers, as well as the Year 2000 readiness of the Company's suppliers. Prior to January 1, 2000, the Company completed testing of its principal internal enterprise resource planning (ERP) system for year 2000 compliance. This ERP system includes order entry, material resource planning, master production scheduling, purchasing, shipping and financial systems. The Company identified Year 2000 issues in other less significant IT systems, and resolved those issues, by replacements and/or upgrades. The Company also completed an assessment and remediation, as necessary, of certain non-IT prior to the end of December 1999. The Company has replaced certain stand alone shop floor test equipment that was found to be non-compliant. The Company did not assess specifically its facility management systems, or the external forces such as utility or transportation Year 2000 compliance failures that might have generally affect industry and commerce. The Company is not currently aware of any material operational issues or costs associated with preparing its internal IT and non-IT systems for the Year 2000, nor is the Company aware of any unanticipated problems caused by undetected errors or defects in these internal systems as a result of the year 2000. The Company tested the most recent versions of its current products to determine whether they met the Company's definition of "Year 2000 Compliant". Testing of these products was completed by the end of December 1999. The Company has warranted, and may in the future warrant to certain customers that its products will work in the Year 2000 and beyond. Where products were identified as needing upgrades/new versions to address Year 2000 issues, the Company made those upgrades/new versions available to customers for purchase or under maintenance agreements. Some of the Company's customers were using products and/or product versions that the Company had not tested, and does not support, for Year 2000 compliance. The Company encouraged these customers to migrate to current products/versions that meet the Company's Year 2000 compliance definition. The Company did not test any of its custom software products for Year 2000 compliance. For third party products that the Company distributes with its products, the Company sought information and assurances from the manufacturers concerning those products' Year 2000 compliance status. The Company completed its assessment of those third party products by the end of December 1999. As a result, the Company identified certain third party products that required an upgrade to be Year 2000 compliant notified the affected customers and encouraged them to upgrade. To date, no Year 2000 related software problems have been detected in the Company's standard products, other than problems that had been detected and addressed prior to the end of 1999. A critical date still to be experienced is February 29, 2000. Some known problems surrounding that date were identified in one product prior to the end of 1999, and all known customers using this product were notified and offered a free upgrade. In addition, even if customers do not upgrade, workarounds for the problem are available. Notwithstanding the Company's testing of its own products and efforts to obtain assurances concerning third party products, errors or defects in such products could result in delay or loss of revenue, diversion of development resources, damage to the Company's reputation, or increased service and warranty costs, any of which could materially affect the Company's business, results of operations, or financial condition. In addition, the unprecedented nature of potential litigation regarding Year 2000 compliance issues makes it uncertain whether the Company will be affected by such litigation, although no such litigation relating to the Company's products has been filed so far. The costs associated with the Company's Year 2000 plan have been funded from operating cash flows and have been charged to operations. To date, the Company has incurred approximately $1.2 million of incremental costs to address its internal IT and non-IT systems and to address Year 2000 compliance problems in its own products and in third party products distributed with its products. The Company believes that substantially all of the costs to be incurred associated with the Company's Year 2000 plan have been recognized. The Company does not separately track the internal costs associated with its Year 2000 plan, which are primarily payroll costs for its information systems employees, support and technical personnel and the Year 2000 steering committee. The costs described herein, and the costs to accomplish the other elements of the Company's Year 2000 plan, have not been and are not expected to be material to the Company's financial position, results of operations or cash flows. PART II. OTHER INFORMATION Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K filed during the fiscal quarter ended January 1, 2000. 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 14, 2000 EXHIBIT INDEX Exhibit Number Description 27 Financial Data Schedule EX-27 2 FDS --
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statements of the Corporation for the three months ended January 1, 2000 and is qualified in its entirety by reference to such financial statements 0000886903 Kronos Incorporated 1,000 U.S. Dollars 3-mos Sep-30-2000 Oct-01-1999 Jan-01-2000 1 16,602 24,349 65,413 7,155 3,371 118,106 67,913 38,780 222,950 99,990 0 0 0 126 103,505 222,950 36,152 64,608 8,291 24,546 33,317 244 0 6,745 2,496 4,249 0 0 0 4,249 0.34 0.32
-----END PRIVACY-ENHANCED MESSAGE-----