Kronos Reports First Quarter Fiscal 2005 Results; Achieves 100th conse

Kronos Reports First Quarter Fiscal 2005 Results; Achieves 100th consecutive quarter of revenue growth

    Business Editors/High-Tech Editors

    CHELMSFORD, Mass.--(BUSINESS WIRE)--Jan. 27, 2005--Kronos(R) Incorporated (Nasdaq: KRON) today reported financial results for the first quarter of Fiscal 2005. Net income for the quarter increased 44 percent to $10.7 million, or $0.33 per diluted share, as compared to $7.4 million, or $0.23 per diluted share, for the same period a year ago. Revenue for the first quarter increased 19 percent to $118.3 million as compared to $99.7 million for the same period a year ago.
    "We continued our momentum from last year by starting Fiscal 2005 on a very high note. We experienced a healthy mix of transactions from both new and existing customers spanning organizations of all sizes. Our newest workforce management solutions continue to drive strong product revenue growth as organizations turn to Kronos to staff, develop, deploy, track, and reward the workforce," said Mark S. Ain, Kronos' chief executive officer. "What's equally gratifying is that our first quarter results mark achievement of our 100th consecutive quarter of revenue growth compared to the same period in the previous year."
    Kronos' first-quarter results also mark the company's 71st consecutive quarter of profitability (Note 1). Total deferred maintenance, professional services, and product revenue at the end of the quarter was $145.0 million. In addition to this deferred revenue, Kronos has a growing backlog of professional services engagements not reflected on the balance sheet. Kronos' balance sheet remains strong with $157.7 million in cash and investments and no debt.

    First-Quarter Highlights

--	Broadened presence in scheduling -- Kronos acquired AD OPT Technologies, a Montreal-based provider of advanced workforce planning and scheduling solutions. AD OPT plays a key role in Kronos' strategy to help customers more effectively deploy their resources. Kronos' leadership in workforce management, together with AD OPT's innovation in employee scheduling, serves as a strong foundation on which to serve a much larger universe of industries with solutions that are designed to handle the most complex scheduling challenges.
--	Launch of Kronos for Retail -- Kronos for Retail is designed to help retailers increase employee productivity while improving the in-store customer experience. The enterprise offering includes both the software and services necessary to enable store managers to control labor costs, make better decisions, and improve employee satisfaction. Already, leading retailers such as Discount Tire Company and Roundy's Supermarkets are leveraging Kronos for Retail.
--	Notable customer wins -- Leading organizations choose Kronos solutions to staff, develop, deploy, track, and reward their workforce. Notable wins from new and existing customers during the quarter included:
--	Children's Medical Center in Dallas signed an upgrade agreement for Workforce Central(R) 5 for 5,000 employees as part of an employee resource optimization initiative to help the hospital obtain operational and financial objectives. The hospital's growth and increasingly complex pay rules led to the need for the latest version of Kronos' flagship suite.
--	Pinnacle Airlines purchased the Altitude Preferential Bidding System (PBS), a product developed by AD OPT Technologies. The PBS system is designed to automate and optimize the scheduling process by creating optimal schedules for cockpit and cabin crews. Pinnacle, one of the fastest growing airlines in the U.S., expects PBS to assist them in increasing productivity of its 1,000 pilots and 600 flight attendants.
--	Time Warner Cable selected Workforce Central 5 during the quarter for 25,000 employees in 20 company divisions. The solution is designed to automate processes and ensure data accuracy, fulfilling the company's goal of reducing workforce management costs. Time Warner Cable was attracted to Kronos' low-risk, high-value reputation and ability to take large enterprises from manual to fully automated processes.

    Outlook

    "With respect to guidance for our second quarter, we expect to report revenue in the range of $122-126 million, with net income per diluted share in the range of $.34-.38," concluded Ain. "For the fiscal year as a whole, we currently expect to report revenue in the range of $520-530 million, with net income per diluted share in the range of $1.64-1.70. Our guidance has been adjusted to include our November acquisition of AD OPT Technologies."
    The Financial Accounting Standards Board recently concluded that Statement 123R, Share-Based Payment, which would require all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. The effect of adopting this new accounting pronouncement has not been included in Kronos' Fiscal 2005 earnings forecast. The impact of adopting Statement 123R will reduce Kronos' net income. Kronos has not yet determined the magnitude of the impact of adopting Statement 123R.

    Conference Call Webcast

    Kronos senior management plans to review its first-quarter 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 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. 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 periodic reports and registration statements filed with the U.S. Securities and Exchange Commission. 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) 2005 Kronos Incorporated. Kronos, Workforce Central, and the Kronos logo are registered 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 ----------------------- Jan. 1, Jan. 3, 2005 2004 ----------- ----------- Net revenues: Product $53,266 $39,140 Maintenance 38,668 35,346 Professional services 26,342 25,187 ----------- ----------- 118,276 99,673 Cost of sales: Costs of product 11,373 9,700 Costs of maintenance and professional services 34,692 32,045 ----------- ----------- 46,065 41,745 ----------- ----------- Gross profit 72,211 57,928 Operating expenses and other income: Sales and marketing 35,862 31,020 Engineering, research and development 12,789 9,675 General and administrative 8,446 6,359 Amortization of intangible assets 1,096 1,007 Other income, net (1,702) (1,518) ----------- ----------- 56,491 46,543

Income before income taxes 15,720 11,385 Provision for income taxes 5,062 3,973 ----------- ----------- Net income $10,658 $7,412 =========== ===========

Net income per common share: Basic $0.34 $0.24 =========== =========== Diluted $0.33 $0.23 =========== ===========

Weighted-average common shares outstanding: Basic 31,571,549 30,689,641 =========== =========== Diluted 32,597,574 31,883,117 =========== ===========

KRONOS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) UNAUDITED

Jan. 1, Sept. 30, 2005 2004 --------- ----------

ASSETS

Current assets: Cash and equivalents $40,667 $45,877 Marketable securities 34,918 45,260 Accounts receivable, less allowances of $9,249 at January 1, 2005 and $9,143 at September 30, 2004 97,167 93,317 Deferred income taxes 9,454 8,951 Other current assets 28,947 21,434 --------- ---------- Total current assets 211,153 214,839

Marketable securities 82,109 98,005 Property, plant and equipment, net 48,996 43,832 Intangible assets 33,281 20,697 Goodwill 108,730 81,154 Capitalized software, net 22,793 22,871 Other assets 24,812 24,432 --------- ---------- Total assets $531,874 $505,830 ========= ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable $10,258 $9,988 Accrued compensation 42,370 39,788 Accrued expenses and other current liabilities 14,223 17,550 Deferred product revenues 7,473 9,844 Deferred professional service revenues 37,587 40,525 Deferred maintenance revenues 91,601 87,000 --------- ---------- Total current liabilities 203,512 204,695

Deferred maintenance revenues 8,353 7,251 Deferred income taxes 17,706 12,000 Other liabilities 2,852 2,824

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, 31,734,592 and 31,335,340 shares issued at January 1, 2005 and September 30, 2004, respectively 317 312 Additional paid-in capital 63,492 54,113 Retained earnings 234,749 224,091 Accumulated other comprehensive income: Foreign currency translation 1,394 653 Net unrealized (loss) on available-for-sale investments (501) (109) --------- ---------- 893 544

Total shareholders' equity 299,451 279,060 --------- ---------- Total liabilities and shareholders' equity $531,874 $505,830 ========= ==========

--30--LG/bo*

CONTACT: Kronos Inc. Paul Lacy, 978-947-4944 placy@kronos.com

KEYWORD: MASSACHUSETTS INDUSTRY KEYWORD: HARDWARE HUMAN RESOURCES SOFTWARE NETWORKING EARNINGS CONFERENCE CALLS SOURCE: Kronos Inc.

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