Kronos® Reports Fourth-Quarter and Fiscal 2006 Results
CHELMSFORD, Mass.--(BUSINESS WIRE)--Oct. 30, 2006--Kronos®
Incorporated (Nasdaq: KRON) today reported the following results for
the fourth quarter and Fiscal 2006:
Fourth-Quarter Fiscal 2006:
--Total revenue increased to $165.4 million from $149.8 million for
the same period a year ago.
--GAAP net income was $15.0 million, or $0.47 per diluted share,
compared to $19.4 million, or $0.60 per diluted share for the same
period a year ago. In the fourth quarter of Fiscal 2006, amortization
and interest related to the company's acquisition of Unicru, Inc.
decreased GAAP net income by $0.06 per diluted share.
--GAAP results for the fourth quarter of Fiscal 2006 include the
following items:
--A non-cash pre-tax charge of $4.2 million, or $0.09 per diluted
share, for stock-based compensation;
--A non-cash pre-tax charge of $3.6 million, or $0.07 per diluted
share, for amortization of acquired intangibles; compared to $0.03
per diluted share in the fourth quarter of the prior year; and
--A one-time tax charge of $296,000, or $0.01 per diluted share,
for the repatriation of foreign earnings.
--In total, these items reduced net income for the fourth quarter of
Fiscal 2006 by $5.5 million, or $0.17 per diluted share on an after-
tax basis.
Fiscal 2006:
--Total revenue increased to $578.2 million from $518.7 million for
the same period a year ago.
--GAAP net income was $41.4 million, or $1.29 per diluted share,
compared to $53.9 million, or $1.65 per diluted share in the previous
year. In Fiscal 2006, amortization and interest related to the
company's acquisition of Unicru decreased GAAP net income by $0.06
per diluted share.
--GAAP results for Fiscal 2006 include the following items:
--A non-cash pre-tax charge of $16.8 million, or $0.36 per diluted
share, for stock-based compensation;
--A non-cash pre-tax charge of $9.0 million, or $0.18 per diluted
share, for amortization of acquired intangibles, compared to $0.11
for Fiscal 2005; and
--A one-time tax charge of $296,000, or $0.01 per diluted share,
for the repatriation of foreign earnings.
--In total, these items reduced net income for Fiscal 2006 by $17.7
million, or $0.55 per diluted share on an after-tax basis.
"Q4 culminated an important year for Kronos in which we grew the
company while making strategic investments to expand our business over
the long-term. Excluding non-cash charges, we increased our net income
year-over-year for the full year, demonstrating the earnings strength
of our company. In particular, we generated strong cash flow from
operations, with results in Q4 and Fiscal 2006 which were
significantly higher than the comparable periods last year," said
Kronos Chief Executive Officer Aron Ain. "During Fiscal 2006, we
continued to execute on our growth strategy by increasing our global
presence and entering the talent management market with the
acquisition of Unicru -- a move that we believe extends our value
proposition and addressable market. In Fiscal 2007, we plan to
capitalize on customers' increasing focus on the value of optimizing
their workforce, and the expansion of large multi-nationals into
fast-growing economies such as China, India, and Southeast Asia. With
our market-leading workforce productivity solutions and global
delivery capabilities, we believe that Kronos is well-positioned for
sustained growth."
Total deferred maintenance, professional services, and product
revenue on the balance sheet at the end of Fiscal 2006 totaled $156.6
million. In addition to this deferred revenue, Kronos has a backlog of
professional services engagements of approximately $63.0 million.
Cash flow from operations was $26.5 million in the fourth quarter
and $102.7 million in Fiscal 2006, compared to $20.3 million and $78.2
million for the comparable periods last year. In the fourth quarter,
Kronos repurchased 322,025 shares of common stock for $10.0 million,
and repurchased 825,882 shares of common stock for $30.6 million
during Fiscal 2006. The company made payments on acquisitions of
$164.7 million for the full year, $151.5 million of which was in the
fourth quarter. Kronos exited Fiscal 2006 with $116.6 million in cash
and investments and a revolving loan balance of $80.8 million.
Fourth-Quarter Highlights
--Continued record of growth -- Kronos' fourth-quarter results mark
the company's 107th consecutive quarter of year-over-year revenue
growth and 78th consecutive quarter of profitability, continuing one
of the longest records of growth in the software industry. (Note 1).
--Notable customer wins across target markets -- Notable wins during
the quarter included:
--Heinen's Fine Foods Stores, an existing Kronos mid-market
customer, purchased the company's on-demand talent management
solution, Workforce Acquisition(TM), to reduce turnover and
streamline the process for selecting and hiring the highest
quality employees. Kronos won the deal based on the proven success
of its leading talent management solution in the grocery industry.
--Solectron Corporation, a leading global provider of electronics
manufacturing services and integrated supply chain solutions with
more than 50,000 employees, signed a large follow-on agreement for
the Workforce Central(R) time and labor application. Solectron
plans to deploy Kronos' centralized solution across all locations
in Asia, Europe, and the Americas to help increase workforce
productivity and ensure compliance.
--New York-Presbyterian Hospital, one of the most comprehensive
university hospitals in the world, signed a deal for 20,000
licenses of Workforce Central. This enterprise healthcare provider
purchased absence management, analytics, time and labor, and
scheduling to help reduce labor costs while optimizing
productivity, employee satisfaction, and patient care with a
skilled workforce.
Fiscal 2006 Highlights
--Expansion into talent management -- In August 2006, Kronos
completed the acquisition of Unicru, a leading provider of talent
management solutions. Upon closing the deal, the company formed the
Kronos Talent Management Division, based in Beaverton, Oregon. Kronos
plans to continue to enhance and expand its newly acquired base of
talent management products as part of its growing portfolio of
workforce management and human capital management solutions.
--Growing global presence -- Kronos moved forward with its global
expansion initiative, appointing a vice president of international
operations and establishing a dedicated international management team
responsible for strategy, sales, marketing, and product development.
The company also announced its expansion into China, with
headquarters in Beijing, and appointed a local general manager for
this operation. As planned, Kronos intensified its focus on the
Global 2000 and closed a number of key multi-national wins. Also
contributing to international growth in Fiscal 2006 was strong
performance by the company's subsidiaries in Australia and the UK.
--Market and technology leadership -- Leveraging a strong cash
position to extend its market leadership in workforce management,
Kronos completed the acquisitions of workforce analytics vendor,
ClarityMatters; workforce management vendor, SmartTime; TimeWorks, a
provider of time and labor solutions to the gaming industry; and
certain assets of Compu-Cash Systems, a Kronos distributor based in
Las Vegas. Finally, with the launch of Workforce Central 5.2 in
Fiscal 2006, Kronos further extended its leadership in workforce
management. Version 5.2 features dozens of significant enhancements
to all products in the suite, as well as the introduction of new
modules such as Workforce Analytics(TM) and Workforce Operations
Planner(TM).
--Industry analyst recognition -- Gartner, Inc. rated Kronos the
highest possible rating in its research report, MarketScope for
Retail Time and Labor Applications 2H05, published on Jan. 20, 2006.
Gartner also positioned Kronos in the "Market Forces" category in
"The U.S. Healthcare ERP Market Looks for Innovation" written by
John-David Lovelock, Chad Eschinger, and Vi Shaffer and published on
April 18, 2006. According to Gartner, "Market force vendors are
typically companies that have more than 10 percent of market share.
Vendors in this space have an established healthcare reputation and
market penetration."
Outlook
"We believe that Fiscal 2006 was a pivotal period for Kronos
during which we laid the foundation for our next leg of growth. We
made major investments that should significantly benefit our customers
and shareholders and enhance our market position and earnings power,"
said Ain. "In Fiscal 2007, we must continue to invest for the future
in order to achieve our goal of becoming the first $1 billion software
company focused exclusively on meeting the human capital management
needs of organizations on a worldwide basis. While these investments
are costly on a near-term basis, we believe they are necessary to help
ensure continued growth in earnings and revenue for years to come."
First-Quarter Fiscal 2007:
--Total revenue is expected to be in the range of $146-$150 million.
--GAAP net income per diluted share is expected to be in the range of
$0.12-$0.19. This reflects a decrease in GAAP net income of
approximately $0.09 per diluted share related to the company's
acquisition of Unicru, inclusive of amortization and interest.
--GAAP net income for the first quarter of Fiscal 2007 includes the
following items:
--A non-cash pre-tax charge for stock-based compensation, which is
expected to be approximately $0.09 per diluted share, compared to
$0.08 per diluted share in the same period of the prior year;
--A non-cash pre-tax charge for amortization of acquired
intangibles, which is expected to be approximately $0.08 per
diluted share, compared to $0.04 in the same period of the prior
year.
--In total, these items are expected to reduce net income for the
first quarter of Fiscal 2007 by $5.5 million, or $0.17 per share.
Fiscal 2007:
--Total revenue is expected to be in the range of $645-$660 million.
--GAAP net income per diluted share is expected to be in the range of
$1.10-$1.27. This reflects a decrease in GAAP net income of
approximately $0.20 per diluted share related to the company's
acquisition of Unicru, inclusive of amortization and interest.
--GAAP net income for Fiscal 2007 includes the following items:
--A non-cash pre-tax charge for stock-based compensation, which is
expected to be approximately $0.37 per diluted share, compared to
$0.36 for Fiscal 2006;
--A non-cash pre-tax charge for amortization of acquired
intangibles, which is expected to be approximately $0.32 per
diluted share, compared to $0.18 for Fiscal 2006.
--In total, these items are expected to reduce net income for Fiscal
2007 by $22.1 million, or $0.69 per diluted share.
Conference Call Webcast
Kronos senior management plans to review its fourth-quarter and
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 empowers organizations around the world to
effectively manage their workforce. At Kronos, we are experts who are
solely focused on delivering software and services that enable
organizations to reduce costs, increase productivity, improve employee
satisfaction, and ultimately enhance the level of service they
provide. Kronos serves customers in more than 50 countries through its
network of offices, subsidiaries, and distributors. Widely recognized
as a market and thought leader in managing the workforce, Kronos has
unrivaled reach with more than 30 million people using a Kronos
solution every day. Learn more about Kronos 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,
Kronos' ability to realize the anticipated benefits of the Unicru
acquisition, 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 Unicru and 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 10, 2006. 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, Workforce Central, and the
Kronos logo are registered trademarks and Workforce Acquisition,
Workforce Analytics, and Workforce Operations Planner are trademarks
of Kronos Incorporated or a related company. All other product and
company names mentioned 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 Twelve Months Ended
----------------------- -----------------------
September September September September
30, 30, 30, 30,
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net revenues:
Product $69,109 $68,620 $229,773 $221,569
Maintenance 51,257 45,793 193,839 170,692
Professional services 37,889 35,357 147,487 126,397
Subscription 7,104 - 7,104 -
----------- ----------- ----------- -----------
165,359 149,770 578,203 518,658
Cost of sales:
Costs of product 12,639 13,443 49,008 48,455
Costs of maintenance 16,104 13,475 59,759 46,891
Costs of professional
services 31,717 28,101 123,251 104,692
Costs of subscription 3,705 - 3,705 -
----------- ----------- ----------- -----------
64,165 55,019 235,723 200,038
----------- ----------- ----------- -----------
Gross profit 101,194 94,751 342,480 318,620
Operating expenses and other income:
Sales and marketing 47,756 38,618 171,554 145,643
Engineering, research
and development 15,881 13,136 57,645 50,659
General and
administrative 13,310 13,065 48,963 41,647
Amortization of
intangible assets 2,526 1,393 7,212 4,843
Other income, net (1,173) (1,278) (6,191) (5,710)
----------- ----------- ----------- -----------
78,300 64,934 279,183 237,082
Income before income
taxes 22,894 29,817 63,297 81,538
Provision for income
taxes 7,866 10,423 21,858 27,634
----------- ----------- ----------- -----------
Net income $15,028 $19,394 $41,439 $53,904
=========== =========== =========== ===========
Net income per common share:
Basic $0.47 $0.61 $1.30 $1.69
=========== =========== =========== ===========
Diluted $0.47 $0.60 $1.29 $1.65
=========== =========== =========== ===========
Weighted-average common shares outstanding:
Basic 31,919,327 31,751,607 31,914,729 31,804,861
=========== =========== =========== ===========
Diluted 32,134,892 32,355,178 32,238,001 32,593,040
=========== =========== =========== ===========
Stock-based
compensation expense:
Costs of product $97 $- $374 $-
Costs of maintenance 365 - 1,267 -
Costs of professional
services 585 - 2,432 -
Sales and marketing 1,387 - 5,436 -
Engineering, research
and development 728 - 3,075 -
General and
administrative 1,047 - 4,262 -
----------- ----------- ----------- -----------
$4,209 $- $16,846 $-
=========== =========== =========== ===========
Amortization of
intangible assets:
Costs of product $356 $195 $1,020 $379
Costs of subscription 727 - 727 -
Amortization of
intangible assets 2,526 1,393 7,212 4,843
----------- ----------- ----------- -----------
$3,609 $1,588 $8,959 $5,222
=========== =========== =========== ===========
KRONOS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
UNAUDITED
September September
30, 30,
2006 2005
--------- ---------
ASSETS
Current assets:
Cash and equivalents $40,680 $43,492
Marketable securities 62,770 37,078
Accounts receivable, less allowances of $9,248 at
September 30, 2006 and $11,156 at September 30,
2005 123,537 120,746
Deferred income taxes 8,871 10,937
Other current assets 28,962 20,142
--------- ---------
Total current assets 264,820 232,395
Marketable securities 13,192 59,865
Property, plant and equipment, net 69,867 56,158
Customer related intangible assets 72,853 31,085
Other intangible assets 43,568 15,818
Goodwill 241,654 142,665
Capitalized software, net 22,946 23,092
Other assets 20,731 18,348
--------- ---------
Total assets $749,631 $579,426
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $11,025 $9,013
Accrued compensation 48,768 43,379
Accrued expenses and other current liabilities 33,862 27,877
Deferred product revenues 2,950 3,938
Deferred professional service revenues 21,139 36,530
Deferred maintenance revenues 124,485 100,090
--------- ---------
Total current liabilities 242,229 220,827
Deferred maintenance revenues 7,990 6,869
Deferred income taxes 22,605 15,261
Notes payable, long-term 80,820 -
Other liabilities 7,855 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, 31,846,620 and 31,724,460
shares issued at September 30, 2006 and September
30, 2005, respectively 318 317
Additional paid-in capital 65,473 52,802
Retained earnings 319,434 277,995
Accumulated other comprehensive income:
Foreign currency translation 3,086 1,307
Net unrealized (loss) on available-for-sale
investments (179) (387)
--------- ---------
2,907 920
Total shareholders' equity 388,132 332,034
--------- ---------
Total liabilities and
shareholders' equity $749,631 $579,426
========= =========
CONTACT: Kronos
Paul Lacy, 978-947-4944
placy@kronos.com
SOURCE: Kronos Incorporated
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