CHELMSFORD, Mass.--(BUSINESS WIRE)--Jan. 30, 2006--Kronos(R) Incorporated (Nasdaq: KRON) today reported GAAP revenue for the first quarter of Fiscal 2006 of $127.9 million compared to $118.3 million for the same period a year ago. Non-GAAP revenue for the first quarter of Fiscal 2006 was $129.5 million, compared to $119.9 million for the same period a year ago. Non-GAAP revenue excludes certain business combination accounting adjustments.
GAAP net income for the first quarter of Fiscal 2006 was $6.2 million, or $0.19 per diluted share compared to $10.7 million, or $0.33 per diluted share, for the same period a year ago. First-quarter Fiscal 2006 GAAP earnings include a charge of $0.08 per diluted shared for stock-based compensation, which is not reflected in the previous year's first-quarter earnings. Non-GAAP net income for the first quarter of Fiscal 2006 was $11.0 million, or $0.34 per diluted share, compared to $12.5 million, or $0.38 per diluted share, for the same period a year ago. Non-GAAP earnings exclude the impact of stock-based compensation charges, amortization of intangible assets, certain business combination accounting adjustments, and net tax benefits.
The complete reconciliation between GAAP and non-GAAP results, along with the reasons for the presentation of non-GAAP financial measures, is provided in a table following the text of this press release that is entitled "Non-GAAP Condensed Consolidated Statements of Income".
Kronos' first-quarter results mark the company's 104th consecutive quarter of year-over-year revenue growth and 75th consecutive quarter of profitability, continuing one of the longest records of growth and profitability in the software industry (Note 1).
Total deferred maintenance, professional services, and product revenue on the balance sheet at the end of the first quarter of Fiscal 2006 totaled $145.6 million. In addition to this deferred revenue, Kronos has a backlog of uncommitted professional services engagements of approximately $50 million.
Kronos exited the first quarter of Fiscal 2006 with $155.5 million in cash and investments and no debt. During the first quarter, Kronos repurchased 141,750 shares of common stock for $6.4 million, and made payments on acquisitions of $2.0 million.
"While we were disappointed with our results this quarter, we've concluded from a careful review of the business that our new products are being well-received, there's solid demand in all our target markets, and the organization is stronger than ever," said Kronos Chief Executive Officer Aron Ain. "Most important, our discussions with customers, industry analysts, and our sales team, in conjunction with a deal-by-deal analysis of the pipeline, continue to validate Kronos' growing market opportunity and competitive strength. We're confident that we are well-positioned to capitalize on the increasing emphasis that organizations are placing on solutions to better manage their workforce, and remain optimistic about our prospects for growth in Fiscal 2006."
First-Quarter Highlights
-- Leadership in the retail market -- Retailers continue to turn to Kronos more than any other vendor in order to achieve a competitive advantage by optimizing their workforce. Today, retailers representing more than 50,000 stores and more than 1.8 million employees around the world utilize Kronos' centralized enterprise solutions. Industry thought leaders continue to report on Kronos' strength in retail workforce management:
-- AMR Research in its Oct. 28, 2005 alert, Kronos Looks to Demand-Driven Workforce Management for Growth, stated, "Kronos released its optimized scheduling functionality within the Kronos for Retail suite in the fall of 2004, and has closed more deals in the past year than any competitor."
-- Gartner, Inc. has rated Kronos the highest possible rating in its recent research report, MarketScope for Retail Time and Labor Applications 2H05, published on Jan. 20, 2006.
-- Mid-market traction -- Momentum in the mid-market continued to build as the company saw increasing demand for Kronos Essentials(TM), bundled solutions designed to meet the unique needs of mid-size organizations. Comprised of targeted products and remotely-delivered services, the Essentials programs enable mid-market customers to realize significant benefits from Kronos' time and labor and HRMS solutions in a quick and cost-effective manner. In addition, the company has been very successful attracting new name customers in the mid-market, validating Kronos as the clear choice for organizations of all sizes.
-- Notable customer wins across target vertical markets -- Notable wins during the quarter included:
-- CNF, a $4 billion transportation industry leader, purchased the Workforce Central(R) suite for 20,000 employees at more than 350 locations. This customer was attracted to the ease of use of Kronos solutions and to the company's low-risk, high-value reputation.
-- The large fruit grower-owned cooperative, Tree Top, became a new mid-market customer this quarter with its purchase of the human resources, payroll, scheduling, and time and labor applications within the Workforce Central suite. The company selected Kronos because of its superior product and service capabilities and its market leadership.
-- Carondelet Health Network, an Ascension Health Ministry and existing Kronos time and labor customer, purchased 5,000 licenses of Workforce Scheduler(TM). The tight integration between the scheduling and the time and labor products in the Kronos for Healthcare solution was the deciding factor in this competitive win. The Health Network will utilize the integrated system to enable increased employee self-service through shift swapping and self-scheduling.
Outlook
"With respect to guidance, we expect to report GAAP revenue in the range of $136-139 million for the second quarter and $573-583 million for Fiscal Year 2006. Excluding certain business combination accounting adjustments, we expect to report non-GAAP revenue in the range of $137-140 million for the second quarter, and $577-587 million for Fiscal Year 2006. We expect to report GAAP net income per diluted share in the range of $0.24-0.27 for the second quarter and $1.32-1.40 for Fiscal Year 2006. Excluding the impact of stock-based compensation charges, amortization of intangible assets, certain business combination accounting adjustments, and net tax benefits, we expect to report non-GAAP net income per diluted share for the second quarter in the range of $0.39-0.42 and $1.90-1.98 for Fiscal Year 2006," concluded Ain.
Conference Call Webcast
Kronos senior management plans to review its first-quarter Fiscal 2006 results during a conference call today beginning at 4:30 p.m. Eastern. The conference call will be webcast live at http://www.kronos.com/invest and will be available for replay purposes.
About Kronos Incorporated
Kronos Incorporated is the most trusted name in workforce management. Kronos helps organizations staff, develop, deploy, track, and reward their workforce, resulting in reduced costs, increased productivity, better decision-making, improved employee satisfaction, and alignment with organizational objectives. More than 20 million people use a Kronos solution every day. Learn more about Kronos' high-impact enterprise solutions at www.kronos.com.
Safe Harbor Statement
This press release contains statements about the business prospects and estimates of Kronos' financial results for future periods that are forward-looking statements that involve a number of risks and uncertainties, including the performance estimates and statements relating to earnings and revenue growth and profitability, the ability to close potential product sales transactions, the ability to realize revenues from the sales pipeline and backlog, market acceptance of our new products and enhancements, including those formerly offered by AD OPT Technologies, our ability to monitor and manage discretionary costs, growth in the market for our products and within the economy generally, and potential acquisitions. These statements are based on management's expectations of future events as of the date of this press release, and Kronos assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management's expectations. Among the important factors that could cause actual operating results to differ materially from those indicated by such forward-looking statements are delays in product development, including enhancements to existing products, product performance issues, competitive pressures, general economic conditions, possible disruption in commercial activities caused by terrorist activity and armed conflict, such as changes in logistics and security arrangement and the risk factors detailed in the company's Annual Report on Form 10-K filed with the SEC on December 9, 2005 and its quarterly report on Form 10-Q filed with the SEC on August 11, 2005. The timing of the release of new products or product enhancements will take place if and when available and at the sole discretion of Kronos.
Note 1: Excluding a one-time special charge in the second quarter of Fiscal 2001.
(C) 2006 Kronos Incorporated. Kronos, the Kronos logo, and Workforce Central are registered trademarks, and Workforce Scheduler and Essentials are trademarks of Kronos Incorporated or a related company. The MarketScope is copyrighted 1/20/06 by Gartner, Inc. and is reused with permission. The MarketScope is an evaluation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the MarketScope, and does not advise technology users to select only those vendors with the highest rating. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. All other product and company names mentioned in this press release are used for identification purposes only and may be trademarks of their respective owners.
KRONOS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) UNAUDITED Three Months Ended December 31, January 1, 2005 2005
Net revenues:
Product $ 47,987 $ 53,266
Maintenance 46,246 38,668
Professional services 33,710 26,342
------------- ------------
127,943 118,276
Cost of sales:
Costs of product 10,586 11,373
Costs of maintenance and professional services 43,945 34,692
------------- ------------
54,531 46,065
------------- ------------
Gross profit 73,412 72,211
Operating expenses and other income:
Sales and marketing 38,772 35,862
Engineering, research and development 13,013 12,789
General and administrative 11,977 8,446
Amortization of intangible assets 1,542 1,096
Other income, net (1,508) (1,702)
------------- ------------
63,796 56,491
Income before income taxes 9,616 15,720
Provision for income taxes 3,392 5,062
------------- ------------
Net income $ 6,224 $ 10,658
============= ============
Net income per common share:
Basic $ 0.20 $ 0.34
============= ============
Diluted $ 0.19 $ 0.33
============= ============
Weighted-average common shares
outstanding:
Basic 31,789,546 31,571,549
============= ============
Diluted 32,271,154 32,597,574
============= ============
KRONOS INCORPORATED
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
UNAUDITED
Three Months Ended
--------------------------------------------
December 31, 2005
--------------------------------------------
Stock-
Based Other
Reported Comp Adjustments Non-GAAP (1)
------------------------------- ------------
Net revenues:
Product (2) $ 47,987 $ 47,987
Maintenance (2) 46,246 1,331 47,577
Professional services (2) 33,710 269 33,979
----------- ------ ------------ -----------
127,943 - 1,600 129,543
Cost of sales:
Costs of product (3),(4) 10,586 (82) (199) 10,305
Costs of maintenance
and professional
services (3) 43,945 (819) 43,126
----------- ------- ----------- -----------
54,531 (901) (199) 53,431
----------- ------- ----------- -----------
Gross profit 73,412 901 1,799 76,112
Operating expenses and
other income:
Sales and marketing
(3) 38,772 (1,256) 37,516
Engineering, research
and development (3) 13,013 (783) 12,230
General and
administrative (3) 11,977 (974) 11,003
Amortization of
intangible assets (4) 1,542 (1,542) -
Other income, net (1,508) (1,508)
------------------------------- -----------
63,796 (3,013) (1,542) 59,241
----------- ------- ----------- -----------
Income before
income taxes 9,616 3,914 3,341 16,871
Provision for income
taxes 3,392 1,252 1,178 5,822
----------- ------- ----------- -----------
Net income $ 6,224 $ 2,662 $ 2,163 $ 11,049
=========== ======= =========== ===========
Net income per common
share:
Basic $ 0.20 $ 0.35
=========== ===========
Diluted $ 0.19 $ 0.34
=========== ===========
Weighted-average common
shares outstanding:
Basic 31,789,546 31,789,546
Diluted 32,271,154 32,271,154
--------------------------------------------
--------------------------------------------
Non-GAAP
January 1, 2005 (1)
-----------------------------------------------------
Stock- % Increase
Based Other Non-GAAP (Decrease)
Reported Comp Adjustments (1) in US$
-----------------------------------------------------
Net revenues:
Product (2) $ 53,266 802 $ 54,068 -11%
Maintenance (2) 38,668 794 39,462 21%
Professional
services (2) 26,342 26,342 29%
---------------------------- -----------
118,276 1,596 119,872 8%
Cost of sales:
Costs of
product (3),
(4) 11,373 11,373 -9%
Costs of
maintenance
and
professional
services (3) 34,692 34,692 24%
---------------------------- -----------
46,065 - 46,065 16%
---------------------------- -----------
Gross profit 72,211 1,596 73,807 3%
Operating
expenses and
other income:
Sales and
marketing (3) 35,862 35,862 5%
Engineering,
research and
development
(3) 12,789 12,789 -4%
General and
administrative
(3) 8,446 8,446 30%
Amortization of (a)
intangible
assets (4) 1,096 (1,096) -
Other income,
net (1,702) (1,702) -11%
---------------------------- -----------
56,491 (1,096) 55,395 7%
----------------------------------------
Income before
income taxes 15,720 2,692 18,412 -8%
Provision for
income taxes 5,062 867 5,929 -2%
----------------- ----------- -----------
Net income $ 10,658 $ 1,825 $ 12,483 -11%
================= =========== ===========------------
Net income per
common share:
------------
Basic $ 0.34 $ 0.40 -12%
=========== ===========
Diluted $ 0.33 $ 0.38 -11%
=========== ===========
Weighted-average
common shares
outstanding:
Basic 31,571,549 31,571,549
Diluted 32,597,574 32,597,574
-----------------------------------------------------
(a) Not meaningful
(1) To supplement our financial results presented on a GAAP basis, we
use non-GAAP measures of revenue, net income and diluted earnings
per share. Kronos' management uses these non-GAAP financial
measures to gain an understanding of its comparative operating
performance (when comparing such results to previous periods or
forecasts), future prospects and to its peers. These non-GAAP
financial measures are also used by Kronos' management in their
financial and operating decision-making because management
believes they reflect the underlying economics of Kronos' ongoing
business in a manner that allows meaningful period-to-period
comparisons. Such comparisons may be more meaningful because
operating results presented under GAAP may include, from time to
time, items that are not necessarily relevant to understand
Kronos' business. Kronos' management believes that these non-GAAP
financial measures provide useful information to investors and
others in understanding and evaluating Kronos' current operating
performance and future prospects in the same manner as management
does if they so choose. These non-GAAP financial measures have
limitations, however, because they do not include all items of
income and expense that impact Kronos' operations. Management
compensates for these limitations by also considering Kronos'
financial results as determined in accordance with GAAP.
Specifically, on both a historic and a forward-looking basis,
these non-GAAP measures exclude:
-- Revenue adjustments associated with the application of
business combination accounting rules because they aren't
relevant to the ongoing operation of the company. We estimated
the fair value of support obligations and implementation
consulting obligations assumed in connection with business
acquisitions made during fiscal 2005 and the first quarter of
fiscal 2006. Due to our application of business combination
accounting rules, product, maintenance and professional
services revenues related to contractual obligations assumed
in business acquisitions which would have been otherwise
recorded by the acquired entities, were not recognized as
revenue by Kronos during those three month periods. To the
extent that customers renew maintenance contracts and purchase
additional professional services over the next year, we will
recognize revenue for the full contract value over the support
period, or the full value of the services as delivered in
accordance with our revenue recognition policy.
-- Expense associated with the amortization of
acquisition-related intangible assets because a significant
portion of the purchase price for acquisitions may be
allocated to intangible assets that have lives of 3 to 12
years. Exclusion of the amortization expense reported in Costs
of product and Operating expenses allows comparisons of
operating results that are consistent over time for both the
Company's newly acquired and long-held businesses and with
both acquisitive and non-acquisitive peer companies.
-- Expense associated with stock-based compensation because the
Company believes that available valuation methodologies and
assumptions related to employee stock options may result in
estimates of option values that are misleading in the
comparison of the Company's financial results to previous
periods or to those of the Company's competitors and do not
provide meaningful insight into the Company's ongoing
operations.
(2) Represents revenue adjustments in the amount of approximately $1.6
million in both the first quarter ended December 31, 2005 and
January 1, 2005, due to the application of business combination
accounting rules.
(3) Represents stock-based compensation expenses in the amount of
approximately $3.9 million recognized in the first quarter ended
December 31, 2005 in accordance with FAS123(R).
(4) Represents amortization of intangible assets in the amount of
approximately $1.7 million and approximately $1.1 million in the
first quarter ended December 31, 2005 and January 1, 2005,
respectively, acquired in connection with our business
acquisitions.
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
December 31, September 30,
2005 2005
------------- ------------
ASSETS
Current assets:
Cash and equivalents $ 54,385 $ 43,492
Marketable securities 43,514 37,078
Accounts receivable, less allowances
of $10,620 at December 31, 2005 and
$11,156 at September 30, 2005 106,172 120,746
Deferred income taxes 10,653 10,937
Other current assets 19,198 20,142
------------- ------------
Total current assets 233,922 232,395
Marketable securities 57,562 59,865
Property, plant and equipment, net 55,944 56,158
Customer related intangible assets 30,968 31,085
Other intangible assets 15,193 15,818
Goodwill 147,139 142,665
Capitalized software, net 22,938 23,092
Other assets 17,960 18,348
------------- ------------
Total assets $ 581,626 $ 579,426
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,203 $ 9,013
Accrued compensation 43,468 43,379
Accrued expenses and other current
liabilities 20,835 27,877
Deferred product revenues 4,161 3,938
Deferred professional service
revenues 32,015 36,530
Deferred maintenance revenues 103,692 102,038
------------- ------------
Total current liabilities 212,374 222,775
Deferred maintenance revenues 5,727 4,921
Deferred income taxes 15,261 15,261
Other liabilities 4,638 4,435
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 50,000,000 shares,
31,868,274 and 31,724,460 shares
issued at December 31, 2005 and
September 30, 2005, respectively 319 317
Additional paid-in capital 58,304 52,802
Retained earnings 284,219 277,995
Accumulated other comprehensive
income:
Foreign currency translation 1,204 1,307
Net unrealized (loss) on
available-for-sale investments (420) (387)
------------- ------------
784 920
Total shareholders' equity 343,626 332,034
------------- ------------
Total liabilities and
shareholders' equity $ 581,626 $ 579,426
============= ============
CONTACT: Kronos Incorporated
Paul Lacy, 978-947-4944
placy[at]kronos.com
SOURCE: Kronos(R) Incorporated
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"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Kronos Incorporated's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year. |