-----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, OhvjAA4LxO0jXA9cXsaE4XFMiZGM9DJt7Qrd9hfc+QWGt2828czNMlAW+CK6wwmI clTF9Yyvjx4rZfKnajSjjA== 0000886903-98-000017.txt : 19980817 0000886903-98-000017.hdr.sgml : 19980817 ACCESSION NUMBER: 0000886903-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980814 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: SEC FILE NUMBER: 000-20109 FILM NUMBER: 98690807 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 07/04/98 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 July 4, 1998 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) (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 August 3,1998, 8,282,811 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 Nine Months Ended July 4, 1998 and June 28, 1997 1 Condensed Consolidated Balance Sheets at July 4, 1998 and September 30, 1997 2 Condensed Consolidated Statements of Cash Flows for the Three Months and Nine Months Ended July 4, 1998 and June 28, 1997 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 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 Nine Months Ended ----------------------------- --------------------- July 4, June 28, July 4, June 28, 1998 1997 1998 1997 Net revenues: Product ........................................... $ 35,080 $ 29,106 $ 94,952 $ 80,945 Service ........................................... 17,599 14,193 48,772 38,867 ---------- ---------- ----------- ----------- 52,679 43,299 143,724 119,812 Cost of sales: Product ........................................... 8,636 7,964 23,419 21,420 Service ........................................... 11,440 9,318 32,063 26,103 ---------- ---------- ----------- ----------- 20,076 17,282 55,482 47,523 ---------- ---------- ----------- ----------- Gross profit ................................... 32,603 26,017 88,242 72,289 Expenses: Sales and marketing ............................... 17,670 15,015 49,599 41,594 Engineering, research and development ............. 5,334 3,987 14,215 12,125 General and administrative ........................ 3,526 2,905 9,938 8,158 Other (income) expense, net ....................... 159 10 (27) (102) ---------- ---------- ----------- ----------- 26,689 21,917 73,725 61,775 ---------- ---------- ----------- ----------- Income before income taxes ..................... 5,914 4,100 14,517 10,514 Provision for income taxes ............................. 2,259 1,567 5,546 4,016 ---------- ---------- ----------- ----------- Net income ..................................... $ 3,655 $ 2,533 $ 8,971 $ 6,498 ========== ========== =========== =========== Net income per common share: Basic .......................................... $ 0.44 $ 0.31 $ 1.09 $ 0.79 ========== ========== =========== =========== Diluted ........................................ $ 0.43 $ 0.30 $ 1.05 $ 0.77 ========== ========== =========== =========== Average common and common equivalent shares outstanding: Basic .......................................... 8,295,670 8,211,414 8,253,562 8,175,900 ========== ========== =========== =========== Diluted ........................................ 8,565,933 8,400,787 8,511,634 8,412,587 ========== ========== =========== ===========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) UNAUDITED
July 4, September 30, 1998 1997 --------- --------- ASSETS Curren Assets: Cash and equivalents .................................................... $ 20,503 $ 20,698 Marketable securities ................................................... 23,693 15,530 Accounts receivable, less allowances for doubtful accounts of $1,052 at July 4, 1998 and $1,091 at September 30, 1997 ..................... 39,155 38,817 Inventories ............................................................. 4,095 4,322 Deferred income taxes ................................................... 4,277 4,277 Other current assets .................................................... 8,237 6,539 --------- --------- Total current assets ............................................. 99,960 90,183 Equipment, net ............................................................. 16,405 17,038 Net investment in sales-type leases ........................................ 5,464 5,312 Excess of cost over net assets of businesses acquired ...................... 9,683 7,855 Other assets ............................................................... 12,069 7,726 --------- --------- Total assets ...................................................... $ 143,581 $ 128,114 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses ................................... $ 15,577 $ 13,217 Accrued compensation .................................................... 9,337 10,105 Federal and state income taxes payable .................................. 1,779 3,497 Unearned service revenue ................................................ 25,206 22,209 --------- --------- Total current liabilities ......................................... 51,899 49,028 Deferred income taxes ...................................................... 2,587 2,587 Unearned service revenue ................................................... 7,282 3,523 Other liabilities .......................................................... 393 503 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, 8,310,479 shares and 8,246,453 shares issued at July 4, 1998 and September 30, 1997, respectively ..................................... 83 82 Additional paid-in capital .............................................. 28,985 29,770 Retained earnings ....................................................... 54,016 45,045 Equity adjustment from translation ...................................... (1,268) (262) Cost of Treasury Stock (11,309 shares and 86,493 shares at July 4, 1998 and September 30, 1997, respectively) ......... (396) (2,162) --------- --------- Total shareholders' equity ........................................ 81,420 72,473 --------- --------- Total liabilities and shareholders' equity ........................ $ 143,581 $ 128,114 ========= =========
See accompanying notes to condensed consolidated financial statements. KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) UNAUDITED
Nine Months Ended ------------------- July 4, June 28, 1998 1997 -------- -------- Operating activities: Net income ............................................................. $ 8,971 $ 6,498 Adjustments to reconcile net income to net cash and equivalents provided by operating activities: Depreciation ................................................... 5,448 4,618 Amortization of deferred software development costs and excess of cost over net assets of businesses acquired ....... 4,943 3,402 Changes in certain operating assets and liabilities: Accounts receivable, net .................................... (1,018) (1,924) Inventories ................................................. 218 (1,222) Unearned service revenue .................................... 6,862 3,311 Accounts payable, accrued compensation and other liabilities ................................... (185) 2,827 Net investment in sales-type leases ......................... (602) (3,000) Other .......................................................... (1,425) (415) -------- -------- Net cash and equivalents provided by operating activities 23,212 14,095 Investing activities: Purchase of equipment .................................................. (4,936) (7,485) Capitalization of software development costs ........................... (4,857) (3,877) (Increase) decrease in marketable securities ........................... (8,163) 1,970 Acquisitions of businesses ............................................. (6,296) (1,255) -------- -------- Net cash and equivalents used in investing activities ... (24,252) (10,647) Financing activities: Net proceeds from exercise of stock option and employee stock purchase plans ...................................................... 2,343 1,023 Purchase of treasury stock ............................................. (1,361) (27) -------- -------- Net cash and equivalents provided by financing activities 982 996 Effect of exchange rate changes on cash and equivalents ..................... (137) (4) ------- -------- Increase (decrease) in cash and equivalents ................................. (195) 4,440 Cash and equivalents at the beginning of the period ......................... 20,698 10,795 -------- -------- Cash and equivalents at the end of the period ............................... $ 20,503 $ 15,235 ======== ========
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, 1997. The results of operations for the three and nine month periods ended July 4, 1998 are not necessarily indicative of the results for a full fiscal year. Certain amounts have been reclassified in fiscal 1997 to permit comparison with fiscal 1998. 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 (95 days in fiscal 1998 and 89 days in fiscal 1997) and fourth quarter (88 days in fiscal 1998 and 94 days in fiscal 1997) 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 - Earnings Per Share In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings per Share." SFAS No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts presented have been restated to conform to SFAS No. 128 requirements. The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended Nine Months Ended ----------------------- ----------------------- July 4, June 28, July 4, June 28, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net income (in thousands) ...... $ 3,655 $ 2,533 $ 8,971 $ 6,498 ========== ========== ========== ========== Weighted average shares ........ 8,295,670 8,211,414 8,253,562 8,175,900 Effect of dilutive securities: Employee stock options ......... 270,263 189,373 258,072 236,687 ---------- ---------- ---------- ---------- Adjusted weighted average shares and assumed conversions ...... 8,565,933 8,400,787 8,511,634 8,412,587 ========== ========== ========== ========== Basic earnings per share .......... $ 0.44 $ 0.31 $ 1.09 $ 0.79 ========== ========== ========== ========== Diluted earnings per share ........ $ 0.43 $ 0.30 $ 1.05 $ 0.77 ========== ========== ========== ==========
6 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 the Company's business and its expectations. Any such statements are subject to risk that could cause the actual results to vary materially from expectations. For a further discussion of the various risks that may affect the Company's business and expectations, see "Certain Factors That May Affect Future Operating Results" at the end of Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS REVENUES. Revenues for the third quarter of fiscal 1998 amounted to $52.7 million as compared with $43.3 million for the third quarter of the prior year. Revenues for the first nine months of fiscal 1998 were $143.7 million as compared with $119.8 million for the first nine months of the prior year. Revenue growth was 22% and 20% in the three and nine month periods ended July 4, 1998, respectively, as compared to 19% for each of the comparable periods of the prior year. The revenue growth in the three and nine month periods ended July 4, 1998 was principally driven by customer demand in the domestic market. Also contributing to the revenue growth in the three month period ended July 4, 1998 were revenues of approximately $1.2 million from the Company's Visionware Division that was established in conjunction with the acquisition of the Visionware labor productivity technology in March of Fiscal 1998. Product revenues for the third quarter of fiscal 1998 amounted to $35.1 million as compared with $29.1 million for the third quarter of the prior year. Product revenues for the first nine months of fiscal 1998 were $95.0 million as compared with $80.9 million for the first nine months of the prior year. Product revenue growth of 21% and 17% in the three and nine month periods ended July 4, 1998, respectively, increased from 16% and 14% for comparable periods of the prior year. Product revenue growth in the three and nine month periods ended July 4, 1998, was principally driven by customer demand for the Company's Windows and client/server products. Incremental revenues resulting from Visionware product sales also favorably impacted product revenue growth in the three month period ended July 4, 1998. Service revenues for the third quarter of fiscal 1998 amounted to $17.6 million as compared with $14.2 million for the third quarter of the prior year. Service revenues for the first nine months of fiscal 1998 were $48.8 million as compared with $38.9 million for the first nine months of the prior year. Service revenue growth of 24% and 25% in the three and nine month periods ended July 4, 1998, respectively, decreased from 26% and 29% for comparable periods of the prior year. The growth in service revenues reflects an increase in the level of professional services accompanying new sales as well as an increase in maintenance revenue from expansion of the installed base. As the customer installed base continues to grow, management anticipates that service revenue growth rates will gradually become more consistent with product revenue growth rates. Incremental revenues resulting from services accompanying Visionware product sales also favorably impacted service revenue growth in the three month period ended July 4, 1998. GROSS PROFIT. Gross profit as a percentage of revenues was 62% and 61% in the three and nine month periods ended July 4, 1998, respectively, as compared with 60% in the comparable periods of the prior year. The improvement in gross profit was evidenced in both product and service gross profit. Product gross profit as a percentage of product revenues of 75% in each of the three and nine month periods ended July 4, 1998, increased from 73% and 74%, respectively, for comparable periods of the prior year. The improvement in product gross profit in both periods is primarily attributable to an increased proportion of product revenues generated by software, which typically generates higher gross profit than other product. Service gross profit as a percentage of service revenues of 35% and 34% in the three and nine month periods ended July 4, 1998, respectively, increased from 34% and 33%, respectively, for comparable periods of the prior year. The improvement in service gross profit in both periods is primarily attributable to the growth in service revenues without a proportionate increase in service expenses. This has been accomplished by more fully leveraging service resources and improving the efficiency of the system implementation process. EXPENSES. Total operating expenses as a percentage of revenues were 51% in each of the three and nine month periods ended July 4, 1998, as compared to 51% and 52%, respectively, in the comparable periods of the prior year. Sales and marketing expenses as a percentage of revenues were 34% and 35% in the three and nine month periods ended July 4, 1998, respectively, as compared to 35% in the comparable periods of the prior year. Engineering expenses as a percentage of revenues were 10% in each of the three and nine month periods ended July 4, 1998, as compared to 9% and 10%, respectively, in the comparable periods of the prior year. Engineering expenses of $5.3 million and $4.0 million in the third quarter of fiscal 1998 and 1997, respectively, are net of capitalized software development costs of $1.8 million and $1.3 million, respectively. Engineering expenses of $14.2 million and $12.1 million in the first nine months of fiscal 1998 and 1997, respectively, are net of capitalized software development costs of $4.9 million and $3.9 million, respectively. The growth in engineering, research and development expenses results primarily from efforts to standardize products and the development of new products in the client/server environment. 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 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 July 4, 1998, amounted to $48.1 million as compared with $41.2 million at September 30, 1997. As of those dates, cash and equivalents and marketable securities amounted to $44.2 million and $36.2 million, respectively. Cash generated from operations increased to $23.2 million in the first nine months of fiscal 1998 from $14.1 million in the first nine months of the prior year, principally due to increased earnings and unearned service revenues as well as increases in depreciation and amortization charges. Cash provided from those sources was partially offset by cash used for payment of income tax obligations and compensation accruals. During fiscal 1998 the Company used $6.3 million of cash for payments related to the acquisition of businesses including an investment of approximately $4.4 million to acquire labor productivity technology and distribution rights in a dealer territory. The Company's investment in equipment in the first nine months of the fiscal year decreased from its investment in the first nine months of the prior year due to the timing of capital projects. Management expects the lower level of capital spending as compared to the prior year to continue in the fourth quarter of fiscal 1998. 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 available cash and operating cash flow generated in fiscal 1998. YEAR 2000 Many currently installed computer systems and software products will not function properly in the year 2000 and beyond. As a result, computer systems and/or software used by many companies may need to be upgraded to comply with such "year 2000" requirements. Significant uncertainty exists in the software industry concerning the potential effects associated with the century change. Although the Company currently offers software products that are designed to work properly in the year 2000 and beyond, there can be no assurance that the Company's software products contain all necessary date code changes. The Company has warranted, and may in the future warrant, to certain customers that its products will work in the year 2000 and beyond. In addition, the Company has initiated a program to assess the products offered by it, its internal operating systems, and third party products incorporated into or used to develop its products and to develop a timetable for correcting any issues, if necessary. The Company is currently developing a complete cost estimate but does not anticipate that costs associated with this program will be material. However, if the Company's program is not completed on a timely basis, if there is a failure of the products or systems of other companies on which the Company relies for use internally or in its products, if customer demand is reduced due to customers' concerns about year 2000 issues, or if the Company's own products fail in the year 2000 and beyond, there could be a material adverse effect on the Company's business, financial condition or results of operations. 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"). The Company desires to take advantage of the safe harbor provisions of the Act and is including this statement for the express purpose of availing itself of the protection of the safe harbor with respect to all forward looking statements that involve risks and uncertainties. The 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 and market acceptance of new product introductions by the Company and its competitors, competitive pricing pressures, rapid technological change, new competitors entering the market, the dependence on alternate distribution channels, potential effects associated with the century change, the ability to attract and retain sufficient technical personnel, 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, 1997, 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 period are not necessarily indicative of results for any future period. PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The markets for time and attendance, labor management, 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. Although management believes the Company has substantially completed the product transition from DOS and UNIX platforms to the Windows and client/server environments, the Company's revenue growth and results of operations in fiscal 1998 will depend in part on the continuing growth of sales of its Windows and client/server products. COMPETITION. The time and attendance, labor management, 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. DEPENDENCE ON ALTERNATE DISTRIBUTION CHANNELS. The Company markets and sells its products through its direct sales organization, independent dealers and OEMs. For the fiscal year ended September 30, 1997, approximately 22% of the Company's revenues were generated through sales to dealers and OEMs. Reduction in the sales efforts of the Company's major dealers and/or OEMs, or termination or changes in their relationships with the Company, could have a material adverse effect on the results of the Company's operations. YEAR 2000. Many currently installed computer systems and software products will not function properly in the year 2000 and beyond. As a result, computer systems and/or software used by many companies may need to be upgraded to comply with such "year 2000" requirements. Significant uncertainty exists in the software industry concerning the potential effects associated with the century change. Although the Company currently offers software products that are designed to work properly in the year 2000 and beyond, there can be no assurance that the Company's software products contain all necessary date code changes. The Company has warranted, and may in the future warrant, to certain customers that its products will work in the year 2000 and beyond. In addition, the Company has initiated a program to assess the products offered by it, its internal operating systems, and third party products incorporated into or used to develop its products and to develop a timetable for correcting any issues, if necessary. The Company is currently developing a complete cost estimate but does not anticipate that costs associated with this program will be material. However, if the Company's program is not completed on a timely basis, if there is a failure of the products or systems of other companies on which the Company relies for use internally or in its products, if customer demand is reduced due to customers' concerns about year 2000 issues, or if the Company's own products fail in the year 2000 and beyond, there could be a material adverse effect on the Company's business, financial condition or results of operations. Part II. OTHER INFORMATION Item 5. Other Information Stockholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and intended to be presented at the Company's 1999 Annual Meeting of Stockholders must be received by the Company not later than August 14,1998 in order to be considered for inclusion in the Company's proxy materials for that meeting. The Company's Amended and Restated By-Laws also establish an advance notice procedure with respect to stockholder nomination of candidates for election as Directors. A Notice regarding stockholder nominations for Director must be received by the Company not less than 60 days nor more than 90 days prior to the applicable stockholder meeting, provided, however, that in the event the date of the meeting is not publicly announced by the Company by mail, press release or otherwise more than 70 days prior to the meeting, the notice must be received by the Company not later than the tenth day following the day on which such announcement of the date of the meeting is made. Any such notice must contain certain specified information concerning the persons to be nominated and the stockholder submitting the nomination, all as set forth in the By-Laws. The presiding officer of the meeting may refuse to acknowledge any Director nomination not made in compliance with such advance notice requirements. The Company has not yet publicly announced the date of the 1999 Annual Meeting. Stockholder proposals intended to be presented at the Company's 1999 Annual Meeting that are not submitted pursuant to Exchange Act Rule 14-8 or are not stockholder nominations of candidates for election as Directors must be received by the Company no later than October 28, 1998. Stockholder proposals should be mailed to Clerk, Kronos Incorporated, 400 Fifth Avenue, Waltham, Massachusetts 02451. 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) August 14, 1998 KRONOS INCORPORATED EXHIBIT INDEX Exhibit Number Description 27.1 Financial Data Schedule EX-27.1 2 FDS --
5 This schedule contains summary financial information extracted from the Condensed Consolidated Financial Statements of the Corporation for the nine months ended July 4, 1998 and is qualified in its entirety by reference to such financial statements. 0000886903 Kronos Incorporated 1,000 U.S. Dollars 9-mos 9-mos Sep-30-1998 Sep-30-1997 Oct-01-1997 Oct-01-1996 Jul-04-1998 Jun-28-1997 1 1 20,503 15,235 23,693 20,025 40,207 33,529 1,052 944 4,095 5,366 99,960 82,048 45,873 39,979 29,468 22,336 143,581 118,563 51,899 44,402 0 0 0 0 0 0 83 82 81,337 68,430 143,581 118,563 94,952 80,945 143,724 119,812 23,419 21,420 55,482 47,523 73,725 61,775 370 318 0 0 14,517 10,514 5,546 4,016 8,971 6,498 0 0 0 0 0 0 8,971 6,498 1.09 0.79 1.05 0.77
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