Kronos Announces Strong Third Quarter Results; Pro Forma Earnings Grow 44%

Business Wire, July 23, 2001

Business Editors

CHELMSFORD, Mass.--(BUSINESS WIRE)--July 23, 2001

Kronos Incorporated (Nasdaq: KRON) today reported that revenue for its third quarter was $75,120,000 as compared to $68,133,000 for the same period a year ago. Pro forma net income for the quarter, excluding a non-recurring special charge, was $4,772,000 or $.37 per share as compared to $3,312,000 or $.26 per share for the same period a year ago. Earnings on a GAAP basis were $4,318,000 or $.34 per share for the quarter compared to $3,312,000, $.26 per share, for last year's third quarter.

For the nine months, revenue was $206,946,000 compared to $194,567,000 a year ago. Pro forma net income was $8,789,000 or $.69 per share as compared to $9,517,000 or $.73 per share a year ago. Earnings on a GAAP basis for the nine months were $6,174,000, $.48 per share, compared to $9,517,000, $.73 per share, for the same period last year.

During the quarter, the Company recognized a charge to earnings of $0.7 million, or $.03 per share, related to the cost of severance and other benefits related to a workforce reduction. Earnings before interest expense, taxes, depreciation, and amortization (EBITDA) were $13,511,000 as compared with $10,855,000 for the same quarter a year ago.

"We are extremely pleased with our results this quarter despite the weak economy. Both revenue and earnings exceeded the previous quarter and as compared to the same period last year," stated Mark S. Ain, Kronos' chief executive officer. "We have now grown our business for the 86th consecutive quarter and remained profitable for 57 consecutive quarters."

Business was strong in all of our key market sectors with the exception of manufacturing. Nevertheless, strong performances in government, education and retail made up for the softness in manufacturing. A large portion of our revenue growth this quarter was attributable to our services business. There was a notable improvement in the productivity of our services organization as we continue to leverage the systems and processes we have invested in over the last few years and capitalize our systems integration expertise. Also, many of our customers are upgrading and expanding their labor management systems and taking advantage of our wider portfolio of service offerings designed to help them optimize operations.

Service margins grew from 39.7 percent a year ago to 46.1 percent. Product margins also grew from 77.4 percent to 79.0 percent. The Company's balance sheet remained strong with cash and investments at $68 million, DSO for trade accounts receivable at 52 days, and deferred professional services and maintenance revenue of $89 million. Cash flow from operations were $7.8 million for the quarter and $34.3 million for the nine months.

"While we continue to watch our discretionary spending, our strong cash position affords us the opportunity to invest in product development and acquisitions intended to increase our market share and enhance our competitive position," continued Ain.

The Company recently announced the release of Workforce Central(TM), its new Web-based suite designed to support its professional workforce initiative as well as provide the existing customer base an opportunity to upgrade. The product, which delivers a host of productivity-enhancing capabilities through a browser, was introduced to the general public through a widely attended worldwide Webcast on June 19th. The new product suite has received high marks from the Company's customer advisory council and beta customers.

"This Web-based product is so technically advanced that we think many organizations that never previously considered automating their frontline labor management process will do so when they discover how easy this system is to implement, use, and maintain," stated Ain. "A number of our customers were active participants in the design so we know how enthusiastic they are about the release of our web-based product. The product will also permit organizations that are staffed predominantly by professionals to start making some important improvements in this key management processes."

In addition to its major new product release, the Company also announced the acquisition of a provider of labor management systems to the healthcare sector, Denniston & Denniston, Inc. (DDI). With the addition of DDI's customer base, Kronos has the opportunity to sell its new Web-based solution to those customers as well.

The Company also announced its intent to acquire privately held Gerber Systems, a Kronos distributor operating in Arizona, Colorado, New Mexico and Oklahoma. Gerber was one of Kronos' first distributors and today ranks among its largest. The acquisition allows Kronos to sell into these territories through its own direct sales network. The decision to purchase Gerber is part of an ongoing program to make opportunistic acquisitions of distributors, competitors, and complementary businesses.

Summarizing the current environment, Ain stated, "Though the economy continues to struggle, the fundamental demand for our labor management systems remains strong. While we currently expect that revenues in our fourth quarter will exceed this quarter, as well as the comparable quarter last year, the uncertainty of this economy makes it difficult to forecast by how much.