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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003


COMMISSION FILE NUMBER: 000-21629



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KROLL INC.

(Exact name of Registrant as specified in its charter)


|                                         |  |                       
|---------------------------------------- |  | ----------------------
|DELAWARE                                 |  | 13-4131019            
|(State or other jurisdiction of          |  | (I.R.S. Employer      
|incorporation)                           |  | Identification Number)
|                                         |  |                       
|900 THIRD AVENUE                         |  | 10022                 
|NEW YORK, NY                             |  | (Zip code)            
|(Address of principal executive offices) |  |                       

(212) 593-1000
(Registrants telephone number, including area code)

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 [   ]

Indicate by check mark whether the Registrant is an
accelerated filer (as defined in Rule 12b-2 of the
Exchange Act): Yes [ X ] No [   ]

The number of shares outstanding of the Registrants
common stock was 41,790,731 shares as of October 31,
2003.



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TABLE OF CONTENTS



|                                         |                                                                                               |                                                                      |  |  |  |  |  | 
|---------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION           
|                                         | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                         |                                                                                               | CONSOLIDATED CONDENSED BALANCE SHEETS                               
|                                         |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|                                         |                                                                                               | CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS                     
|                                         |                                                                                               | NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS            
|                                         | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                         | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                         | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION              
|                                         | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                         | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                                         | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                              
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|CERTIFICATION OF CHIEF FINANCIAL OFFICER
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|CERTIFICATION OF CHIEF FINANCIAL OFFICER



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INDEX

|                               |  |                                                                                       |  |                                                                                                                                                  |    |      |    | 
|------------------------------ |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------ | -- | ---- | -- | 
|                               |  |                                                                                       |  |                                                                                                                                                  |    | Page
|PART I 
FINANCIAL INFORMATION |  |                                                                                       |  |                                                                                                                                                 
|Item 1.                        |  | Financial Statements                                                                  |  |                                                                                                                                                  |    |     
|                               |  |                                                                                       |  | Consolidated Condensed Balance Sheets (unaudited) as of
September 30, 2003 and December 31, 2002                                                 |    |      | 1  | 
|                               |  |                                                                                       |  | Consolidated Condensed Statements of Income and Comprehensive
Income (unaudited) for the three and nine months ended September
30, 2003 and 2002 |    |      | 3  | 
|                               |  |                                                                                       |  | Consolidated Condensed Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2003 and 2002                                |    |      | 4  | 
|                               |  |                                                                                       |  | Notes to the Consolidated Condensed Financial Statements (unaudited)                                                                             |    |      | 5  | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |                                                                                                                                                  | 22 |     
|Item 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                                                                  | 34 |     
|Item 4.                        |  | Controls and Procedures                                                               |  |                                                                                                                                                  | 35 |     
|PART II  OTHER INFORMATION    |  |                                                                                       |  |                                                                                                                                                 
|Item 1.                        |  | Legal Proceedings                                                                     |  |                                                                                                                                                  | 36 |     
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                             |  |                                                                                                                                                  | 37 |     
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                                                  | 38 |     
|                               |  |                                                                                       |  | Signatures                                                                                                                                       |    |      | 39 | 

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

KROLL INC.




CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands, except share data)


|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------- | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                                                                                                                  |                                                                                                                                                  |                      |         | September 30, |         | December 31,
|                                                                                                                                                  |                                                                                                                                                  |                      |         | 2003          |         | 2002        
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |             
|ASSETS                                                                                                                                            |                                                                                                                                                  |                      |         |               |         |              |         |        
|CURRENT ASSETS:                                                                                                                                   |                                                                                                                                                  |                      |         |               |         |              |         |        
|                                                                                                                                                  | Cash and cash equivalents                                                                                                                        |                      | $       | 45,264        |         |              | $       | 77,317  |        
|                                                                                                                                                  | Trade accounts receivable, net of allowance
for doubtful accounts of $7,994 and $6,875 at
September 30, 2003 and December 31, 2002,
respectively |                      |         | 62,923        |         |              |         | 48,661  |        
|                                                                                                                                                  | Unbilled revenues                                                                                                                                |                      |         | 35,592        |         |              |         | 29,921  |        
|                                                                                                                                                  | Related party receivables                                                                                                                        |                      |         | 249           |         |              |         | 720     |        
|                                                                                                                                                  | Deferred tax assets                                                                                                                              |                      |         | 5,625         |         |              |         | 5,304   |        
|                                                                                                                                                  | Assets of discontinued operations (Note 7)                                                                                                       |                      |         | 176           |         |              |         | 9,399   |        
|                                                                                                                                                  | Prepaid expenses and other current assets                                                                                                        |                      |         | 7,559         |         |              |         | 7,908   |        
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|                                                                                                                                                  |                                                                                                                                                  | Total current assets |         |               | 157,388 |              |         |         | 179,230 | 
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|PROPERTY, PLANT AND EQUIPMENT, at cost:                                                                                                           |                                                                                                                                                  |                      |         |               |         |              |         |        
|                                                                                                                                                  | Land                                                                                                                                             |                      |         | 386           |         |              |         | 194     |        
|                                                                                                                                                  | Buildings and improvements                                                                                                                       |                      |         | 2,095         |         |              |         | 2,092   |        
|                                                                                                                                                  | Leasehold improvements                                                                                                                           |                      |         | 14,403        |         |              |         | 12,420  |        
|                                                                                                                                                  | Furniture and fixtures                                                                                                                           |                      |         | 9,446         |         |              |         | 7,409   |        
|                                                                                                                                                  | Machinery and equipment                                                                                                                          |                      |         | 49,981        |         |              |         | 38,268  |        
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|                                                                                                                                                  |                                                                                                                                                  |                      | 76,311  |               |         |              | 60,383  |        
|                                                                                                                                                  | Less-accumulated depreciation and amortization                                                                                                   |                      |         | (41,372       | )       |              |         | (33,190 | )      
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|                                                                                                                                                  |                                                                                                                                                  |                      | 34,939  |               |         |              | 27,193  |        
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|DATABASES, net of accumulated amortization of
$41,695 and $38,200 at September 30, 2003 and
December 31, 2002, respectively                       |                                                                                                                                                  |                      | 10,517  |               |         |              | 10,715  |        
|GOODWILL                                                                                                                                          |                                                                                                                                                  |                      | 343,960 |               |         |              | 292,095 |        
|OTHER INTANGIBLE ASSETS, net of accumulated
amortization of $10,958 and $5,599 at September
30, 2003 and December 31, 2002, respectively
(Note 9) |                                                                                                                                                  |                      | 92,766  |               |         |              | 25,195  |        
|OTHER ASSETS                                                                                                                                      |                                                                                                                                                  |                      | 7,832   |               |         |              | 5,194   |        
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        
|                                                                                                                                                  |                                                                                                                                                  | Total Assets         |         | $             | 647,402 |              |         | $       | 539,622 | 
|                                                                                                                                                  |                                                                                                                                                  |                      |         |               |         |              |         |         |        

The accompanying notes are an integral part of these consolidated condensed unaudited financial statements

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KROLL INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In thousands, except share data)


|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------- | ------------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                                                                                                        |                                                                                                                                                                                |                            |         | September 30, |         | December 31,
|                                                                                                                                        |                                                                                                                                                                                |                            |         | 2003          |         | 2002        
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |                                                                                                                                                                                |                            |         |               |         |              |         |        
|CURRENT LIABILITIES:                                                                                                                    |                                                                                                                                                                                |                            |         |               |         |              |         |        
|                                                                                                                                        | Revolving lines of credit (Note 10)                                                                                                                                            |                            | $       | 4,035         |         |              | $       | 4,209   |        
|                                                                                                                                        | Current portion of long-term debt (Note 10)                                                                                                                                    |                            |         | 4,687         |         |              |         | 73      |        
|                                                                                                                                        | Trade accounts payable                                                                                                                                                         |                            |         | 16,378        |         |              |         | 10,529  |        
|                                                                                                                                        | Related party payables                                                                                                                                                         |                            |         | 353           |         |              |         | 2,253   |        
|                                                                                                                                        | Accrued payroll and related benefits                                                                                                                                           |                            |         | 25,836        |         |              |         | 9,422   |        
|                                                                                                                                        | Other accrued liabilities                                                                                                                                                      |                            |         | 14,519        |         |              |         | 10,873  |        
|                                                                                                                                        | Income taxes payable                                                                                                                                                           |                            |         | 13,809        |         |              |         | 2,448   |        
|                                                                                                                                        | Liabilities of discontinued operations (Note 7)                                                                                                                                |                            |         | 508           |         |              |         | 857     |        
|                                                                                                                                        | Deferred revenue                                                                                                                                                               |                            |         | 10,007        |         |              |         | 14,488  |        
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        
|                                                                                                                                        |                                                                                                                                                                                | Total current liabilities  |         |               | 90,132  |              |         |         | 55,152  | 
|DEFERRED INCOME TAXES                                                                                                                   |                                                                                                                                                                                |                            | 6,605   |               |         |              | 5,358   |        
|CONVERTIBLE NOTES, net of unamortized discount of $8,197
and $9,599 at September 30, 2003 and December 31, 2002,
respectively (Note 10) |                                                                                                                                                                                |                            | 21,803  |               |         |              | 20,401  |        
|LONG-TERM DEBT, net of current portion (Note 10)                                                                                        |                                                                                                                                                                                |                            | 4,380   |               |         |              | 18      |        
|OTHER LONG-TERM LIABILITIES                                                                                                             |                                                                                                                                                                                |                            | 1,620   |               |         |              | 1,786   |        
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        
|                                                                                                                                        |                                                                                                                                                                                | Total liabilities          |         |               | 124,540 |              |         |         | 82,715  | 
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        
|COMMITMENTS AND CONTINGENCIES (Note 11)                                                                                                 |                                                                                                                                                                                |                            |         |               |         |              |         |        
|STOCKHOLDERS EQUITY (Note 12):                                                                                                         |                                                                                                                                                                                |                            |         |               |         |              |         |        
|                                                                                                                                        | Preferred stock, $.01 par value, 5,000,000 shares authorized, none
issued                                                                                                      |                            |         |              |         |              |         |        |        
|                                                                                                                                        | Common stock, $.01 par value, 100,000,000 shares authorized,
41,788,981 and 36,994,758 shares issued and outstanding at
September 30, 2003 and December 31, 2002, respectively |                            |         | 418           |         |              |         | 370     |        
|                                                                                                                                        | Common shares to be issued for acquisition (Note 6)                                                                                                                            |                            |         |              |         |              |         | 55,280  |        
|                                                                                                                                        | Additional paid-in-capital                                                                                                                                                     |                            |         | 551,891       |         |              |         | 456,843 |        
|                                                                                                                                        | Accumulated deficit                                                                                                                                                            |                            |         | (26,646       | )       |              |         | (51,590 | )      
|                                                                                                                                        | Accumulated other comprehensive loss                                                                                                                                           |                            |         | (1,864        | )       |              |         | (3,952  | )      
|                                                                                                                                        | Deferred compensation                                                                                                                                                          |                            |         | (937          | )       |              |         | (44     | )      
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        
|                                                                                                                                        |                                                                                                                                                                                | Total stockholders equity |         |               | 522,862 |              |         |         | 456,907 | 
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        
|                                                                                                                                        |                                                                                                                                                                                | $                          | 647,402 |               |         | $            | 539,622 |        
|                                                                                                                                        |                                                                                                                                                                                |                            |         |               |         |              |         |         |        

The accompanying notes are an integral part of these consolidated condensed unaudited financial statements

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KROLL INC.




CONSOLIDATED CONDENSED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except per share amounts)


|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |        |        |        | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ------ | ----- | ------- | ------- | ------- | ------ | ------- | ------ | ------ | ------ | 
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        | Three Months Ended |        | Nine Months Ended
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        | September 30,      |        | September 30,    
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                  
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        | 2003               |        | 2002              |        | 2003   |       | 2002   
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |        
|NET SALES                                        |                                                                                                                                                                                                                                                           | $                                                                           | 125,960              |        |                    | $      | 78,077            |        |        | $     | 340,890 |         |         | $      | 190,459 |       
|COST OF SALES                                    |                                                                                                                                                                                                                                                           |                                                                             | 60,147               |        |                    |        | 37,537            |        |        |       | 155,086 |         |         |        | 98,599  |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | Gross profit                                                                                                                                                                                                                                              |                                                                             |                      | 65,813 |                    |        |                   | 40,540 |        |       |         | 185,804 |         |        |         | 91,860 |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|OPERATING EXPENSES:                              |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | Selling and marketing                                                                                                                                                                                                                                     |                                                                             |                      | 11,971 |                    |        |                   | 8,588  |        |       |         | 30,949  |         |        |         | 17,990 |       
|                                                 | General and administrative                                                                                                                                                                                                                                |                                                                             |                      | 26,034 |                    |        |                   | 19,281 |        |       |         | 77,433  |         |        |         | 49,734 |       
|                                                 | Research and development                                                                                                                                                                                                                                  |                                                                             |                      | 3,120  |                    |        |                   | 2,821  |        |       |         | 9,170   |         |        |         | 3,272  |       
|                                                 | Amortization of other intangible assets                                                                                                                                                                                                                   |                                                                             |                      | 3,398  |                    |        |                   | 818    |        |       |         | 5,856   |         |        |         | 1,339  |       
|                                                 | Restructuring charge                                                                                                                                                                                                                                      |                                                                             |                      | 5,381  |                    |        |                   |       |        |       |         | 5,381   |         |        |         |       |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Operating expenses                                                          |                      |        | 49,904             |        |                   |        | 31,508 |       |         |         | 128,789 |        |         |        | 72,335 |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             | Operating income     |        |                    | 15,909 |                   |        |        | 9,032 |         |         |         | 57,015 |         |        |        | 19,525 | 
|OTHER INCOME (EXPENSE):                          |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | Interest expense, net                                                                                                                                                                                                                                     |                                                                             |                      | (1,103 | )                  |        |                   | (1,162 | )      |       |         | (2,725  | )       |        |         | (3,006 | )     
|                                                 | Other income (expense)                                                                                                                                                                                                                                    |                                                                             |                      | 91     |                    |        |                   | (511   | )      |       |         | 54      |         |        |         | (426   | )     
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Income before provision for income taxes                                    |                      |        | 14,897             |        |                   |        | 7,359  |       |         |         | 54,344  |        |         |        | 16,093 |       
|                                                 | Provision for income taxes                                                                                                                                                                                                                                |                                                                             |                      | 5,885  |                    |        |                   | 1,945  |        |       |         | 21,073  |         |        |         | 4,829  |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Income from continuing operations                                           |                      |        | 9,012              |        |                   |        | 5,414  |       |         |         | 33,271  |        |         |        | 11,264 |       
|                                                 | Discontinued operations (Note 7):                                                                                                                                                                                                                         |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |        |       
|                                                 |                                                                                                                                                                                                                                                           | Loss from discontinued video
surveillance subsidiary, net of taxes          |                      |        | (310               | )      |                   |        | (37    | )     |         |         | (8,327  | )      |         |        | (35    | )     
|                                                 |                                                                                                                                                                                                                                                           | Income from discontinued security
products and services group, net of
taxes |                      |        |                   |        |                   |        |       |       |         |         |        |        |         |        | 70     |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             | Net income           |        |                    | 8,702  |                   |        |        | 5,377 |         |         |         | 24,944 |         |        |        | 11,299 | 
|OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES: |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | Foreign currency translation adjustment, net
of tax provision (benefit) of $224 and
($107) for the three months ended September
30, 2003 and 2002, respectively, and $1,307
and ($11) for the nine months ended
September 30, 2003 and 2002, respectively |                                                                             |                      | 358    |                    |        |                   | (217   | )      |       |         | 2,087   |         |        |         | (23    | )     
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             | Comprehensive income |        | $                  | 9,060  |                   |        | $      | 5,160 |         |         | $       | 27,031 |         |        | $      | 11,276 | 
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|PER SHARE DATA (Note 5):                         |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | BASIC                                                                                                                                                                                                                                                     |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |        |       
|                                                 |                                                                                                                                                                                                                                                           | Income from continuing operations                                           |                      | $      | 0.22               |        |                   | $      | 0.17   |       |         | $       | 0.82    |        |         | $      | 0.43   |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Net income                                                                  |                      | $      | 0.21               |        |                   | $      | 0.17   |       |         | $       | 0.62    |        |         | $      | 0.43   |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Weighted average shares outstanding                                         |                      |        | 41,203             |        |                   |        | 31,408 |       |         |         | 40,506  |        |         |        | 26,281 |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 | DILUTED                                                                                                                                                                                                                                                   |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |        |       
|                                                 |                                                                                                                                                                                                                                                           | Income from continuing operations                                           |                      | $      | 0.21               |        |                   | $      | 0.17   |       |         | $       | 0.80    |        |         | $      | 0.41   |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Net income                                                                  |                      | $      | 0.20               |        |                   | $      | 0.17   |       |         | $       | 0.60    |        |         | $      | 0.41   |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       
|                                                 |                                                                                                                                                                                                                                                           | Weighted average shares outstanding                                         |                      |        | 42,984             |        |                   |        | 32,454 |       |         |         | 41,803  |        |         |        | 27,423 |       
|                                                 |                                                                                                                                                                                                                                                           |                                                                             |                      |        |                    |        |                   |        |        |       |         |         |         |        |         |       

The accompanying notes are an integral part of these consolidated condensed unaudited financial statements

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##### Table of Contents



KROLL INC.




CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)


|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |         |  
|---------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------- | ----------------- | -------- | ---- | ------ | ------- | ------- | -
|                                                                       |                                                                                                     |                                                 |         | Nine Months Ended
|                                                                       |                                                                                                     |                                                 |         | September 30,    
|                                                                       |                                                                                                     |                                                 |         |                  
|                                                                       |                                                                                                     |                                                 |         | 2003              |          | 2002
|                                                                       |                                                                                                     |                                                 |         |                   |          |     
|OPERATING ACTIVITIES:                                                  |                                                                                                     |                                                 |         |                   |          |      |        |        
|                                                                       | Net income                                                                                          |                                                 | $       | 24,944            |          |      | $      | 11,299  |        
|                                                                       | Adjustments to reconcile net income to net cash provided by operating activities:                   |                                                 |         |                   |          |      |        |         |        
|                                                                       |                                                                                                     | (Income) loss from discontinued operations      |         |                   | 8,327    |      |        |         | (35     | )
|                                                                       |                                                                                                     | Bad debt expense                                |         |                   | 5,173    |      |        |         | 2,510   |  
|                                                                       |                                                                                                     | Depreciation and amortization                   |         |                   | 16,721   |      |        |         | 9,452   |  
|                                                                       |                                                                                                     | Non-cash interest expense                       |         |                   | 1,752    |      |        |         | 1,442   |  
|                                                                       |                                                                                                     | Write-off of deferred financing fees            |         |                   | 85       |      |        |         | 371     |  
|                                                                       |                                                                                                     | Non-cash compensation expense                   |         |                   | 536      |      |        |         |        |  
|                                                                       | Changes in operating assets and liabilities, excluding the impact of
acquisitions and dispositions: |                                                 |         |                   |          |      |        |         |        
|                                                                       |                                                                                                     | Trade accounts receivable and unbilled revenues |         |                   | (10,986  | )    |        |         | (4,225  | )
|                                                                       |                                                                                                     | Prepaid expenses and other current assets       |         |                   | 4,676    |      |        |         | (304    | )
|                                                                       |                                                                                                     | Trade accounts payable                          |         |                   | (4,614   | )    |        |         | (645    | )
|                                                                       |                                                                                                     | Amounts due to/from related parties             |         |                   | 888      |      |        |         | 887     |  
|                                                                       |                                                                                                     | Accrued liabilities                             |         |                   | 14,664   |      |        |         | (4,077  | )
|                                                                       |                                                                                                     | Income taxes payable                            |         |                   | 6,672    |      |        |         | 2,773   |  
|                                                                       |                                                                                                     | Deferred revenue                                |         |                   | (4,712   | )    |        |         | (1,056  | )
|                                                                       |                                                                                                     | Deferred income taxes                           |         |                   | (53      | )    |        |         |        |  
|                                                                       |                                                                                                     | Other long-term liabilities                     |         |                   | 92       |      |        |         | (171    | )
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|                                                                       |                                                                                                     | Net cash provided by operating activities       |         |                   | 64,165   |      |        |         | 18,221  |  
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|INVESTING ACTIVITIES:                                                  |                                                                                                     |                                                 |         |                   |          |      |        |        
|                                                                       | Purchases of property, plant and equipment                                                          |                                                 |         | (9,210            | )        |      |        | (4,671  | )      
|                                                                       | Additions to databases                                                                              |                                                 |         | (2,920            | )        |      |        | (3,074  | )      
|                                                                       | Additions to other intangible assets (Note 6)                                                       |                                                 |         | (5,010            | )        |      |        | (4,232  | )      
|                                                                       | Acquisitions, net of cash acquired (Note 6)                                                         |                                                 |         | (82,990           | )        |      |        | (70,851 | )      
|                                                                       | Other investments (Note 6)                                                                          |                                                 |         | (3,537            | )        |      |        | 5,626   |        
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|                                                                       |                                                                                                     | Net cash used in investing activities           |         |                   | (103,667 | )    |        |         | (77,202 | )
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|FINANCING ACTIVITIES:                                                  |                                                                                                     |                                                 |         |                   |          |      |        |        
|                                                                       | Net payments under revolving lines of credit                                                        |                                                 |         | (1,161            | )        |      |        | (4,618  | )      
|                                                                       | Proceeds from issuance of debt                                                                      |                                                 |         |                  |          |      |        | 75,000  |        
|                                                                       | Payments of long-term debt                                                                          |                                                 |         | (1,016            | )        |      |        | (927    | )      
|                                                                       | Foreign currency translation                                                                        |                                                 |         | (481              | )        |      |        | 2,299   |        
|                                                                       | Net funds received (transferred) from Employee Stock Purchase Plan contributions                    |                                                 |         | (355              | )        |      |        | 333     |        
|                                                                       | Issuance of stock under Employee Stock Purchase Plan                                                |                                                 |         | 2,581             |          |      |        |        |        
|                                                                       | Proceeds from exercise of employee stock options                                                    |                                                 |         | 6,960             |          |      |        | 8,084   |        
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|                                                                       |                                                                                                     | Net cash provided by financing activities       |         |                   | 6,528    |      |        |         | 80,171  |  
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|Effect of foreign currency exchange rates on cash and cash equivalents |                                                                                                     |                                                 | 465     |                   |          |      | (153   | )      
|Net cash provided by (used in) discontinued operations                 |                                                                                                     |                                                 | 456     |                   |          |      | (145   | )      
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   |                                                                                                     |                                                 | (32,053 | )                 |          |      | 20,892 |        
|CASH AND CASH EQUIVALENTS, beginning of period                         |                                                                                                     |                                                 | 77,317  |                   |          |      | 11,485 |        
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        
|CASH AND CASH EQUIVALENTS, end of period                               |                                                                                                     | $                                               | 45,264  |                   |          | $    | 32,377 |        
|                                                                       |                                                                                                     |                                                 |         |                   |          |      |        |         |        

The accompanying notes are an integral part of these consolidated condensed unaudited financial statements

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KROLL INC.




NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)




|1. |  | Nature of Operations
|-- |  | --------------------

Kroll Inc., together with its subsidiaries (collectively, Kroll), is a
leading global provider of complementary risk consulting services. Kroll
assists businesses, governments and individuals throughout the world in
preventing, mitigating and responding to risk through an integrated suite of
services. Krolls five business groups enable Kroll to provide its clients with
comprehensive, single source, risk consulting services. These five groups are:
(1) Corporate Advisory and Restructuring Services, which provides corporate
restructuring, operational turnaround, strategic advisory services, financial
crisis management and corporate finance services; (2) Consulting Services,
which provides business and financial investigations, forensic accounting,
business valuation, litigation consulting, due diligence, litigation
intelligence, asset tracing and analysis, monitoring and special inquiries,
market intelligence and intellectual property and infringement investigations;
(3) Technology Services, which provides electronic discovery, data recovery and
computer forensics services, along with related software solutions; (4)
Background Screening Services, which provides employee and vendor background
investigations, credit screening, substance abuse testing and identity fraud
solutions and (5) Security Services, which provides security architecture and
design, corporate security consulting, emergency management and environmental
services as well as protective services, operations and training.



|2. |  | Basis of Presentation
|-- |  | ---------------------

The accompanying consolidated condensed unaudited financial statements
include the historical consolidated financial statements of Kroll; the
businesses it has acquired, since their respective dates of acquisition, under
the purchase method of accounting; and the financial position, results of
operations and cash flows of entities which were merged with Kroll in
connection with pooling of interests business combinations prior to July 1,
2001. All intercompany accounts and transactions are eliminated in
consolidation. Investments in 20% to 50% owned entities are accounted for using
the equity method. Investments in less than 20% owned entities are accounted
for under the cost method.

On June 18, 2003, Kroll sold its video surveillance subsidiary, InPhoto
Surveillance Inc. (InPhoto). In connection with this disposition, the account
balances and activities of InPhoto were segregated and reported as a
discontinued operation in the accompanying consolidated condensed unaudited
financial statements for all periods presented (see Note 7 for further
discussion).

Losses recognized on extinguishment of debt during the three and nine
months ended September 30, 2002 previously included as an extraordinary item
were reclassified to income from continuing operations in accordance with
Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of
FASB Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections (see Note 3 for further discussion).

The consolidated condensed unaudited financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements.

In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for fair presentation have been
included. The operating results for the three and nine months ended September
30, 2003 and 2002 are not necessarily indicative of the results that may be
expected for a full year or

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any subsequent interim period. In addition, management is required to make
estimates and assumptions that affect the amounts reported and related
disclosures. Estimates, by their nature, are based on judgement and available
information. Accordingly, actual results could differ from these estimates. The
accompanying consolidated condensed unaudited financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in Krolls Annual Report on Form 10-K for the year ended
December 31, 2002 and Krolls Current Report on Form 8-K filed September 19,
2003.



|3. |  | Recent Accounting Pronouncements
|-- |  | --------------------------------

On January 1, 2003, Kroll adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS 143 addresses financial accounting and reporting
for obligations and costs associated with the retirement of tangible long-lived
assets. The adoption of SFAS No. 143 did not impact Krolls consolidated
results of operations or financial position.

On January 1, 2003, Kroll adopted SFAS No. 145, Rescission of FASB
Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. This statement eliminates the classification of gains or losses
on the extinguishment of debt as an extraordinary item and requires that such
gains or losses be evaluated for extraordinary classification under the
criteria of Accounting Principal Board (APB) No. 30 Reporting Results of
Operations. In addition, any prior period extraordinary items that do not meet
the criteria of APB No. 30 will be required to be reclassified to continuing
operations. This statement also requires sales-leaseback accounting for certain
modifications that have economic affects that are similar to sales-leaseback
transactions, and makes various other technical corrections to existing
pronouncements. As discussed in Note 2, losses recognized on extinguishment of
debt during the three and nine months ended September 30, 2002 were
reclassified to continuing operations.

On January 1, 2003, Kroll adopted SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 supersedes EITF
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring) and requires that costs associated with an exit or
disposal plan be recognized when incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure  an amendment of SFAS Statement No. 123. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition for a voluntary change to the fair value-based method of
accounting for stock-based employee compensation. In addition, this statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used in reporting results. Management complied with the additional disclosure
requirements effective December 31, 2002 (see Note 4 for the additional interim
disclosures required by SFAS No. 148).

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements Nos.
5, 57, and 107 and Rescission of FASB Interpretation No. 34 (FIN No. 45).
FIN No. 45 requires that upon issuance of a guarantee, an entity must recognize
a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting by requiring identical accounting for guarantees issued
with separately identified consideration and guarantees issued without
separately identified consideration. For Kroll, the initial recognition and
measurement provisions of FIN No. 45 applicable to guarantees issued or
modified after December 31, 2002 did not have an impact on its consolidated
results of operations or financial position. Kroll adopted the additional
disclosure provisions of FIN No. 45 effective December 31, 2002.

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In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, which addresses consolidation by business
enterprises of variable interest entities (FIN No. 46). In general, a
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. A
variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. The objective of FIN No. 46 is not to
restrict the use of variable interest entities but to improve financial
reporting by companies involved with variable interest entities. Until now, a
company generally has included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN No.
46 changes that by requiring a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns or both. The consolidation requirements of FIN No. 46
apply immediately to variable interest entities created after January 31, 2003
and to financial statements issued after December 15, 2003 for older entities.
Certain aspects of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. Kroll adopted the additional disclosure
provisions of FIN No. 46 effective December 31, 2002 and the consolidation
requirements of FIN No. 46 to variable interest entities created after January
31, 2003. The adoption of FIN No. 46 did not have an effect on Krolls
consolidated results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. In general, SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. As Kroll does not utilize derivative
instruments, the adoption of SFAS No. 149 did not have an effect on its
consolidated results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS No. 150 establishes standards for classification and measurement of
mandatorily redeemable financial instruments, obligations to repurchase the
issuers equity shares by transferring assets, and certain obligations to issue
a variable number of shares. SFAS No. 150 became effective on July 1, 2003 for
financial instruments created or modified after May 31, 2003. The adoption of
SFAS No. 150 did not have an effect on Krolls consolidated results of
operations or financial position.



|4. |  | Stock-Based Compensation
|-- |  | ------------------------

Kroll accounts for the cost of its employee stock options and other forms
of employee stock-based compensation plans utilizing the intrinsic value method
prescribed in APB Opinion 25, as allowed by SFAS No. 123, Accounting for
Stock-Based Compensation. Under the intrinsic value method prescribed in APB
Opinion 25, compensation cost for stock-based compensation plans is required to
be recognized based on the difference, if any, between the fair market value of
the stock on the date of grant and the option exercise price. SFAS No. 123 also
established a fair value-based method of accounting for compensation cost
related to stock options and other forms of stock-based compensation plans.
However, SFAS No. 123 allows an entity to continue to measure compensation cost
using the principles of APB Opinion 25 if certain pro forma disclosures are
made.

Under APB Opinion 25, no stock-based employee compensation cost relating
to Krolls option plans was reflected in net income, as all options granted
under its plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following tables illustrate
the effect on net income and net income per share if Kroll had applied the fair
value recognition provisions of SFAS No. 123 to stock-based employee
compensation:

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|                                                                                                                                            |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                                                                                                                                            |  | Three Months Ended |       | Nine Months Ended
|                                                                                                                                            |  | September 30,      |       | September 30,    
|                                                                                                                                            |  |                    |       |                  
|                                                                                                                                            |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                                                                                                                            |  |                    |       |                   |  |      |       |     
|                                                                                                                                            |  | (In thousands)    
|Net income, as reported                                                                                                                     |  | $                  | 8,702 |                   |  | $    | 5,377 |      |  | $ | 24,944 |  |  | $ | 11,299 | 
|Deduct: Total
stock-based employee
compensation expense
determined under fair
value-based method for
all awards, net of
related tax effects |  |                    | 2,215 |                   |  |      | 1,515 |      |  |   | 5,752  |  |  |   | 4,545  | 
|                                                                                                                                            |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 
|Pro forma net income                                                                                                                        |  | $                  | 6,487 |                   |  | $    | 3,862 |      |  | $ | 19,192 |  |  | $ | 6,754  | 
|                                                                                                                                            |  |                    |       |                   |  |      |       |      |  |   |        |  |  |   |        | 

|                      |             |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 
|--------------------- | ----------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                      |             |  | Three Months Ended |      | Nine Months Ended
|                      |             |  | September 30,      |      | September 30,    
|                      |             |  |                    |      |                  
|                      |             |  | 2003               |      | 2002              |  | 2003 |      | 2002
|                      |             |  |                    |      |                   |  |      |      |     
|Net income per share: |             |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |     
|Basic                 |             |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |     
|                      | As Reported |  | $                  | 0.21 |                   |  | $    | 0.17 |      |  | $ | 0.62 |  |  | $ | 0.43 | 
|                      | Pro Forma   |  | $                  | 0.16 |                   |  | $    | 0.12 |      |  | $ | 0.47 |  |  | $ | 0.26 | 
|Diluted               |             |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |     
|                      | As Reported |  | $                  | 0.20 |                   |  | $    | 0.17 |      |  | $ | 0.60 |  |  | $ | 0.41 | 
|                      | Pro Forma   |  | $                  | 0.15 |                   |  | $    | 0.12 |      |  | $ | 0.46 |  |  | $ | 0.25 | 

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions
used for grants:

|                        |  |                    |      |                   |  |         |      |         |  |  |      |   |  |  |      |  
|----------------------- |  | ------------------ | ---- | ----------------- |  | ------- | ---- | ------- |  |  | ---- | - |  |  | ---- | -
|                        |  | Three Months Ended |      | Nine Months Ended
|                        |  | September 30,      |      | September 30,    
|                        |  |                    |      |                  
|                        |  | 2003               |      | 2002              |  | 2003    |      | 2002   
|                        |  |                    |      |                   |  |         |      |        
|Dividend yield          |  |                    |     |                   |  |         |     |         |  |  |     |   |  |  |     |  
|Expected volatility     |  |                    | 52.9 | %                 |  |         | 59.0 | %       |  |  | 52.9 | % |  |  | 59.0 | %
|Risk-free interest rate |  |                    | 3.3  | %                 |  |         | 3.0  | %       |  |  | 3.3  | % |  |  | 3.0  | %
|Expected lives          |  | 5.0 yrs            |      | 5.0 yrs           |  | 5.0 yrs |      | 5.0 yrs



|5. |  | Earnings Per Share
|-- |  | ------------------

Pursuant to the provisions of SFAS No. 128 Earnings Per Share, basic
earnings per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding during the period, excluding
non-vested shares. Diluted earnings per share is computed by dividing net
income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Dilutive common stock
equivalents represent shares issuable upon assumed exercise of stock options
and warrants, assumed issuance of non-vested stock and the assumed issuance of
shares under contingent stock agreements.

The beginning weighted average number of shares of common stock
outstanding for the three and nine months ended September 30, 2003 in the table
below includes the effect of 2.9 million shares of common stock issued in
January 2003 relating to the acquisition of Zolfo Cooper, LLC (Zolfo Cooper)
on September 5, 2002, the closing date of the acquisition (see Notes 6 and 12).
In addition, the diluted weighted average number of shares of common stock
outstanding for the three and nine months ended September 30, 2003 include the
effect of 625,000 shares of common stock contingently issuable to the former
owners of Zolfo Cooper as of July 1, 2003. These contingent shares are included
as of July 1, 2003 as a result of Zolfo Coopers operating profit for the nine
months ended September 30, 2003 exceeding the 2003 annual operating profit
level required for the issuance of these shares.

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|                         |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |      |      | 
|------------------------ | ------------------------------------------ | ---------- | - | ------------------ | ---- | ----------------- | - | ---- | ---- | ---- | - | ----- | ---- |  | - | ---- | ---- | 
|                         |                                            |            |   | Three Months Ended |      | Nine Months Ended
|                         |                                            |            |   | September 30,      |      | September 30,    
|                         |                                            |            |   |                    |      |                  
|                         |                                            |            |   | 2003               |      | 2002              |   | 2003 |      | 2002
|                         |                                            |            |   |                    |      |                   |   |      |      |     
|Income (loss) per share: |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |     
|Basic                    |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |     
|                         | Income from continuing operations          |            | $ | 0.22               |      |                   | $ | 0.17 |      |      | $ | 0.82  |      |  | $ | 0.43 |     
|                         | Income (loss) from discontinued operations |            |   | (0.01              | )    |                   |   |     |      |      |   | (0.20 | )    |  |   |     |     
|                         |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |      |     
|                         |                                            | Net income |   | $                  | 0.21 |                   |   | $    | 0.17 |      |   | $     | 0.62 |  |   | $    | 0.43 | 
|                         |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |      |     
|Diluted                  |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |     
|                         | Income from continuing operations          |            | $ | 0.21               |      |                   | $ | 0.17 |      |      | $ | 0.80  |      |  | $ | 0.41 |     
|                         | Income (loss) from discontinued operations |            |   | (0.01              | )    |                   |   |     |      |      |   | (0.20 | )    |  |   |     |     
|                         |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |      |     
|                         |                                            | Net income |   | $                  | 0.20 |                   |   | $    | 0.17 |      |   | $     | 0.60 |  |   | $    | 0.41 | 
|                         |                                            |            |   |                    |      |                   |   |      |      |      |   |       |      |  |   |      |     

|                                     |                                                                  |  |                    |        |                   |  |                |        |      |  |  |        |  |  |  |        | 
|------------------------------------ | ---------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | -------------- | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                                     |                                                                  |  | Three Months Ended |        | Nine Months Ended
|                                     |                                                                  |  | September 30,      |        | September 30,    
|                                     |                                                                  |  |                    |        |                  
|                                     |                                                                  |  | 2003               |        | 2002              |  | 2003           |        | 2002
|                                     |                                                                  |  |                    |        |                   |  |                |        |     
|                                     |                                                                  |  |                    |        |                   |  | (In thousands) |        |      |  | 
|Weighted average shares outstanding: |                                                                  |  |                    |        |                   |  |                |        |      |  |  |        |  |  |  |       
|                                     | Basic                                                            |  |                    | 41,203 |                   |  |                | 31,408 |      |  |  | 40,506 |  |  |  | 26,281 | 
|                                     | Stock options, non-vested shares and contingent
stock agreements |  |                    | 1,781  |                   |  |                | 1,046  |      |  |  | 1,297  |  |  |  | 1,142  | 
|                                     |                                                                  |  |                    |        |                   |  |                |        |      |  |  |        |  |  |  |        | 
|                                     | Diluted                                                          |  |                    | 42,984 |                   |  |                | 32,454 |      |  |  | 41,803 |  |  |  | 27,423 | 
|                                     |                                                                  |  |                    |        |                   |  |                |        |      |  |  |        |  |  |  |        | 

At September 30, 2003, there were 1,871,700 options outstanding to
purchase an equivalent number of shares of common stock of Kroll at a range of
$24.36 to $26.94 per option that were not included in the shares in the above
table because the options exercise prices were greater than the average market
price of the common shares. Also excluded from the above table is the potential
conversion of the $30.0 million 6% Convertible Notes into 2,777,777 shares of
Kroll common stock, as it was determined that such conversion would have an
anti-dilutive effect on the earnings per share calculation.

At September 30, 2002, there were 8,719 warrants and 1,680,205 options
outstanding to purchase an equivalent number of shares of common stock of Kroll
at $25.69 per warrant and a range of $20.38 to $31.61 per option that were not
included in the shares in the above table because the warrants and options
exercise prices were greater than the average market price of the common
shares. Also excluded from the above table is the potential conversion of the
$30.0 million 6% Convertible Notes into 2,777,777 shares of Kroll common stock,
as it was determined that such conversion would have an anti-dilutive effect on
the earnings per share calculation.

Basic weighted average shares outstanding for the three and nine months
ended September 30, 2003 exclude the effect of 40,854 shares of restricted
stock awarded during June 2003 as such shares are forfeitable prior to the
vesting provisions of the award being satisfied.



|6. |  | Acquisitions
|-- |  | ------------

On January 15, 2003, Kroll issued 2.9 million shares of its common stock,
valued at approximately $55.3 million, to the former owners of Zolfo Cooper in
connection with the acquisition of Zolfo Cooper on September 5, 2002 (see Note
12). In addition, during the third quarter of 2003, Kroll completed its
evaluation of the fair value assigned to Zolfo Coopers identifiable net assets
recorded at acquisition. Such evaluation resulted in an increase to other
intangible assets of $13.4 million and a decrease to goodwill of $13.4 million.

On March 14, 2003, Kroll consummated an asset purchase agreement with
Certico Verification Services, LLC (Certico). Under the agreement, Kroll
acquired most of Certicos assets and assumed certain liabilities,

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for a purchase price of $3.3 million paid in cash. Certico provides background
checking services and its results of operations are included within the
Background Screening Services segment subsequent to the date of acquisition.

On July 18, 2003, Kroll consummated an asset purchase agreement with
Intellifacts Corporation (Intellifacts). Under the agreement, Kroll acquired
substantially all of the assets of Intellifacts and assumed certain liabilities
for a purchase price of $2.2 million paid in cash. Intellifacts, which provides
background checking services, is included within the Background Screening
Services segment subsequent to the date of acquisition.

The amounts paid for Certico and Intellifacts have primarily been included
in the Consolidated Condensed Statements of Cash Flows within Investing
Activities as Additions to other intangible assets.

On March 21, 2003, Kroll completed the acquisition of Personnel Risk
Management (PRM) for a purchase price of $1.4 million paid in cash. An
additional payment of up to $1.9 million will become payable after one year if
agreed upon profit levels are achieved. If paid, such amount would be recorded
as an adjustment to goodwill. PRM provides pre-employment screening services in
the UK, and its results of operations are included within the Background
Screening Services segment subsequent to the date of acquisition.

On March 25, 2003, Kroll acquired the remaining 50% equity ownership
interest it did not own in Invex for a purchase price of $1.2 million in cash.
Invex, which provides corporate financial services in the UK, is included as
part of the Corporate Advisory and Restructuring Services segment subsequent to
the date of acquisition.

Pro forma financial data for the preceding four acquisitions is not
presented as such acquisitions were not material to Krolls consolidated
results of operations or financial position.

On June 23, 2003, Kroll entered into an agreement to acquire all of the
outstanding shares of Factual Data Corp. (Factual Data). The agreement
provided that a wholly-owned subsidiary of Kroll would merge into Factual Data,
resulting in Factual Data becoming a wholly-owned subsidiary of Kroll. The
acquisition was consummated on August 21, 2003. Kroll paid $87.4 million in
cash and issued 934,712 shares of its common stock in exchange for the shares
of Factual Data outstanding at closing. In addition, approximately 446,000 new
shares of Kroll common stock may be issued upon the future exercise of Factual
Data options that Kroll assumed in the transaction. The total purchase price,
based on the final number of shares outstanding that were exchanged in the
transaction, as well as transaction costs and expenses and the fair value of
employee stock options assumed by Kroll, was approximately $119 million.
Factual Data is a provider of customized information services to businesses
across the United States that assist them in making decisions, and its results
of operations are included within the Background Screening Services segment
subsequent to the date of acquisition.

The following table sets forth the components of the total purchase price (in thousands):

|                                               |  |   |         | 
|---------------------------------------------- |  | - | ------- | 
|Value of shares of common stock issued         |  | $ | 21,087  | 
|Cash consideration                             |  |   | 87,415  | 
|Fair value of employee stock options exchanged |  |   | 7,760   | 
|Estimated transaction costs and expenses       |  |   | 3,100   | 
|                                               |  |   |         | 
|Total purchase price                           |  | $ | 119,362 | 
|                                               |  |   |         | 

The number of shares of Krolls common stock issued in connection with the
acquisition of Factual Data was derived by multiplying the number of
outstanding shares of Factual Data on the effective date of the merger
(6,243,903 shares) by an exchange ratio of 0.1497. This ratio was calculated by
dividing $3.50, the value of the equity consideration to be paid by
Kroll for each share of Factual Data common stock, by $23.38, the volume-weighted average trading price of Krolls
common stock for the 20 consecutive trading days ended Monday, August 18, 2003,
three trading days before the Factual Data special meeting of shareholders.

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The value assigned to the number of shares of Krolls common stock issued
in connection with the acquisition of Factual Data is based on the average of
Krolls common stock price on August 12, 2003 and the two days before and after
such measurement date, resulting in an average common stock price of $22.56.
The measurement date was the date the volume-weighted average trading price of
Krolls common stock went below $23.85, the lowest end of the purchase price
collar described in the Agreement and Plan of Reorganization dated June 23,
2003.

The table below sets forth the preliminary estimate of the fair value of
 identifiable net assets of Factual Data acquired and acquisition goodwill. Such
estimate of fair value could change based on the completion of Krolls
evaluation of the assets and liabilities of Factual Data, including
finalization of an independent appraisal of the assets acquired.

|                 |                                                                                       |                                                        |         |                |         | 
|---------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------- | -------------- | ------- | 
|                 |                                                                                       |                                                        |         | (In thousands)
|Assets           |                                                                                       |                                                        |         |               
|                 | Cash, cash equivalents, accounts receivable and unbilled revenue                      |                                                        | $       | 19,613         |        
|                 | Prepaid expenses and other                                                            |                                                        |         | 4,637          |        
|                 | Property, plant and equipment                                                         |                                                        |         | 5,735          |        
|                 | Goodwill                                                                              |                                                        |         | 64,170         |        
|                 | Other intangible assets                                                               |                                                        |         | 50,600         |        
|                 | Other assets                                                                          |                                                        |         | 140            |        
|                 |                                                                                       |                                                        |         |               
|                 |                                                                                       |                                                        | 144,895 |               
|Less Liabilities |                                                                                       |                                                        |         |               
|                 | Accounts payable, accrued liabilities, deferred revenue and other current liabilities |                                                        |         | 20,324         |        
|                 | Long-term debt and capitalized lease obligations                                      |                                                        |         | 3,790          |        
|                 | Deferred income taxes                                                                 |                                                        |         | 1,419          |        
|                 |                                                                                       |                                                        |         |               
|                 |                                                                                       | Total identifiable net assets and acquisition goodwill |         | $              | 119,362 | 
|                 |                                                                                       |                                                        |         |               

The goodwill recorded by Kroll in this transaction is not deductible for
federal income tax purposes.

The amount assigned to other intangible assets consisted of the following
(in thousands):

|                  |                                  |            |   |                     |        |  |          |                  |  | 
|----------------- | -------------------------------- | ---------- | - | ------------------- | ------ |  | -------- | ---------------- |  | 
|                  |                                  |            |   |                     |        |  |          | Weighted-average
|Asset Description |                                  | Fair Value |   | Amortization Period
|                  |                                  |            |   |                    
|Amortizable       |                                  |            |   |                     |        |  |          |                 
|                  | Customer relationships           |            | $ | 27,200              |        |  | 15 years
|                  | Franchise and license agreements |            |   | 7,800               |        |  | 6 years 
|                  | Internally developed software    |            |   | 3,200               |        |  | 7 years 
|                  | Trademarks                       |            |   | 1,000               |        |  | 5 years 
|                  | Non-compete agreements           |            |   | 800                 |        |  | 5 years 
|                  |                                  |            |   |                     |        |  |          |                 
|                  |                                  | Total      |   | $                   | 40,000 |  |          | 10 years        
|                  |                                  |            |   |                     |        |  |          |                 
|Non-amortizable   |                                  |            |   |                     |        |  |          |                 
|                  | Customer rights                  |            | $ | 10,600              |        |  |          |                  | 
|                  |                                  |            |   |                     |        |  |          |                 

Pro Forma Financial Data

The following unaudited pro forma combined summary results of operations
give effect to the acquisition of Factual Data as if it occurred as of January
1, 2002. In addition, the unaudited pro forma combined summary results of
operations for the three and nine months ended September 30, 2002 also give
effect to the Ontrack and

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Zolfo Cooper acquisitions, as applicable, as if they occurred as of
January 1, 2002. The unaudited pro forma combined summary results of operations
is presented for illustrative purposes only and is not necessarily indicative
of the operating results that would have been achieved if all of these
acquisitions had been consummated on January 1, 2002.

|                                  |         |   |                                          |      |                   |   |         |      |      |   |         |      |  |   |         |      | 
|--------------------------------- | ------- | - | ---------------------------------------- | ---- | ----------------- | - | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | ---- | 
|                                  |         |   | Three Months Ended                       |      | Nine Months Ended
|                                  |         |   | September 30,                            |      | September 30,    
|                                  |         |   |                                          |      |                  
|                                  |         |   | 2003                                     |      | 2002              |   | 2003    |      | 2002
|                                  |         |   |                                          |      |                   |   |         |      |     
|                                  |         |   | (In thousands, except per share amounts)
|Net sales                         |         | $ | 137,214                                  |      |                   | $ | 107,314 |      |      | $ | 397,116 |      |  | $ | 305,469 |     
|Income from continuing operations |         | $ | 10,181                                   |      |                   | $ | 14,762  |      |      | $ | 40,204  |      |  | $ | 30,994  |     
|Net income                        |         | $ | 9,871                                    |      |                   | $ | 14,725  |      |      | $ | 31,877  |      |  | $ | 31,029  |     
|Earnings per share:               |         |   |                                          |      |                   |   |         |      |      |   |         |      |  |   |         |     
|                                  | Basic   |   | $                                        | 0.24 |                   |   | $       | 0.43 |      |   | $       | 0.77 |  |   | $       | 0.85 | 
|                                  | Diluted |   | $                                        | 0.23 |                   |   | $       | 0.42 |      |   | $       | 0.75 |  |   | $       | 0.82 | 

The amounts paid for PRM, Invex and Factual Data, including transaction
costs and expenses, have been included in the Consolidated Condensed Statements
of Cash Flows within Investing Activities as Acquisitions, net of cash
acquired of $8.4 million.

On
March 27, 2003, Kroll invested $1.0 million in convertible
notes of iJet Travel
Intelligence, Inc. (iJet) and also received warrants to
purchase shares of iJet. iJet is an intelligence
organization focused on delivering proactive travel risk management services
and real-time alerts to travelers, expatriates, corporations, government and
non-governmental organizations, learning institutions and the travel
industry. The iJet notes are convertible into preferred stock of iJet upon iJet raising additional equity
financing. This $1.0 million investment is in addition to
$1.5 million of Series B preferred stock of iJet and
warrants to purchase approximately 2.6 million shares of iJet
common stock that Kroll acquired in 2002. The investment in iJet is included in Other Assets in the
Consolidated Condensed Balance Sheet as of September 30, 2003.

On May 22, 2003, Kroll invested $2.0 million in Eid Access Inc. (EID).
The investment in EID, which provides vendor security solutions, is convertible
into common stock of EID at Krolls option. The investment in EID is included
in Other Assets in the Consolidated Condensed Balance Sheet as of September 30,
2003.

The amounts paid for iJet and EID, including transaction costs and
expenses, have been included in the Consolidated Condensed Statements of Cash
Flows within Investing Activities as Other investments.



|7. |  | Discontinued Operations
|-- |  | -----------------------

On June 18, 2003, Kroll sold its video surveillance subsidiary, InPhoto,
for $850,000 in cash. In connection with this disposition, Kroll wrote off $7.5
million of related goodwill. InPhoto, which was part of Krolls Background
Screening Services segment, provided surveillance services primarily to the
insurance industry.

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Summarized Statement of Income data for InPhoto consisted of (in
thousands):

|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |     |     |  
|-------------------------------------------- | ------------------------------------------- | --------------------------------------------------------- | - | ------------------ | ---- | ----------------- | ----- | ---- | --- | ---- | ----- | ------ | ------ | - | ----- | --- | --- | -
|                                             |                                             |                                                           |   | Three Months Ended |      | Nine Months Ended
|                                             |                                             |                                                           |   | September 30,      |      | September 30,    
|                                             |                                             |                                                           |   |                    |      |                  
|                                             |                                             |                                                           |   | 2003               |      | 2002              |       | 2003 |     | 2002
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |     
|Net sales                                    |                                             | $                                                         |  |                    |      | $                 | 1,622 |      |     | $    | 2,350 |        |        | $ | 4,975 |    
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|Loss from discontinued operations:           |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|                                             | Loss before benefit from income taxes       |                                                           | $ | (417               | )    |                   | $     | (51  | )   |      | $     | (697   | )      |   | $     | (51 | )  
|                                             | Benefit from income taxes                   |                                                           |   | (107               | )    |                   |       | (14  | )   |      |       | (176   | )      |   |       | (16 | )  
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|                                             |                                             | Loss from discontinued operations, net
of taxes           |   | $                  | (310 | )                 |       | $    | (37 | )    |       | $      | (521   | ) |       | $   | (35 | )
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|Loss on disposal of discontinued operations: |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|                                             | Loss on disposal of discontinued operations |                                                           |   |                    |      |                   |       |      |     |      | $     | (7,767 | )      |   |       |     |    
|                                             | Provision for income taxes                  |                                                           |   |                    |      |                   |       |      |     |      |       | 39     |        |   |       |     |    
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    
|                                             |                                             | Loss on disposal of discontinued
operations, net of taxes |   |                    |      |                   |       |      |     |      |       | $      | (7,806 | ) |       |     |     |  
|                                             |                                             |                                                           |   |                    |      |                   |       |      |     |      |       |        |        |   |       |    

Summarized Balance Sheet data for InPhoto as of September 30, 2003 and
December 31, 2002 consisted of (in thousands):

|                                        |                             |                                              |   |               |     |              |   |       |       | 
|--------------------------------------- | --------------------------- | -------------------------------------------- | - | ------------- | --- | ------------ | - | ----- | ----- | 
|                                        |                             |                                              |   | September 30, |     | December 31,
|                                        |                             |                                              |   | 2003          |     | 2002        
|                                        |                             |                                              |   |               |     |             
|Assets of discontinued operations:      |                             |                                              |   |               |     |              |   |      
|                                        | Current assets              |                                              | $ | 176           |     |              | $ | 1,170 |      
|                                        | Property and equipment, net |                                              |   |              |     |              |   | 225   |      
|                                        | Goodwill                    |                                              |   |              |     |              |   | 7,487 |      
|                                        | Other assets                |                                              |   |              |     |              |   | 517   |      
|                                        |                             |                                              |   |               |     |              |   |       |      
|                                        |                             | Total assets of discontinued operations      |   | $             | 176 |              |   | $     | 9,399 | 
|                                        |                             |                                              |   |               |     |              |   |       |      
|Liabilities of discontinued operations: |                             |                                              |   |               |     |              |   |      
|                                        | Current liabilities         |                                              | $ | 508           |     |              | $ | 822   |      
|                                        | Other liabilities           |                                              |   |              |     |              |   | 35    |      
|                                        |                             |                                              |   |               |     |              |   |       |      
|                                        |                             | Total liabilities of discontinued operations |   | $             | 508 |              |   | $     | 857   | 
|                                        |                             |                                              |   |               |     |              |   |       |      

During the nine months ended September 30, 2002, Kroll also recorded
$70,000 of income from its previously discontinued security products and
services group, net of taxes.



|8. |  | Restructuring Charge
|-- |  | --------------------

During the third quarter of 2003, Kroll recorded a restructuring charge of
$5.7 million in connection with the elimination of 10 non-hub offices worldwide
and the termination of 102 employees. The breakdown by segment was $4.1
million, $0.6 million, $0.2 million and $0.8 million within Consulting
Services, Security Services, Background Screening Services and Corporate
Advisory and Restructuring Services, respectively. Such activities were
undertaken to reduce costs and improve operating efficiencies. Liabilities
associated with these initiatives at September 30, 2003 were classified as a
component of other accrued liabilities. In addition, the accrued balance
related to Krolls 2001 restructuring plan was reduced by $0.3 million as a
result of a change in the original estimate of costs to be incurred.
The net effect
of these transactions is a $5.4 million restructuring charge.

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Approximately $4.0 million of the restructuring charge represents
severance and related benefits. The remaining $1.7 million of the charge
relates primarily to lease rental payments, net of sublease income, associated
with the elimination of offices.

The total cash portion of the charge is $5.5 million, of which $4.0
million relates to employee severance costs and $1.5 million relates
principally to lease rental payments.

The initial recognition of the 2003 restructuring charge and the
corresponding utilization from inception by category is as follows (in
thousands):

|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 
|----------------------------------- |  | ------------- | ----- | ------------- |  | ---------------- | ----- | ---- |  | - | --- | ------------- |  | - | ----- | 
|                                    |  | 2003          |       |               |  |                  |       |      |  |   |     | Balance at   
|                                    |  | Restructuring |       |               |  |                  |       |      |  |   |     | September 30,
|                                    |  | Charge        |       | Cash Payments |  | Other Reductions |       | 2003
|                                    |  |               |       |               |  |                  |       |     
|Employee related                    |  | $             | 4,040 |               |  | $                | 1,824 |      |  | $ |    |               |  | $ | 2,216 | 
|Write-off of leasehold improvements |  |               | 205   |               |  |                  |       |      |  |   | 205 |               |  |   |      | 
|Impairment of equipment             |  |               | 120   |               |  |                  |       |      |  |   | 120 |               |  |   |      | 
|Lease rentals                       |  |               | 1,170 |               |  |                  | 110   |      |  |   |     |               |  |   | 1,060 | 
|Other
exit costs                    |  |               | 205   |               |  |                  | 205   |      |  |   |     |               |  |   |      | 
|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 
|                                    |  | $             | 5,740 |               |  | $                | 2,139 |      |  | $ | 325 |               |  | $ | 3,276 | 
|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 

The 2003
restructuring plan is expected to be substantially completed in early
2004.



|9. |  | Intangible Assets
|-- |  | -----------------

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
Kroll did not record any amortization expense for goodwill during the three and
nine months ended September 30, 2003 and 2002.

Kroll has not changed the amortization periods of its amortizable
intangible assets or ceased amortizing intangible assets other than goodwill as
a result of its review of indefinite-lived assets to date. Kroll has conducted
impairment tests of the goodwill recorded on its books as required by SFAS No.
142 during the third quarter of 2003. These tests determined that Krolls
recorded goodwill was not impaired as of July 1, 2003. Impairment tests will be
conducted annually in the third quarter, or sooner if circumstances indicate
impairment may have taken place.

As of September 30, 2003, Kroll had recorded cost and accumulated
amortization for amortizable other intangible assets of $93.1 million and $11.0
million, respectively. Of this amount, $47.2 million pertains to the cost and
$5.5 million pertains to accumulated amortization for acquired customer lists
and customer relationships, $15.5 million pertains to the cost and $2.2 million
pertains to accumulated amortization for internally developed software, $7.8
million pertains to the cost and $0.1 million pertains to accumulated
amortization for franchise and license agreements and $9.7 million pertains to
the cost and $0.4 million pertains to accumulated amortization for trademarks.
The remaining $12.9 million and $2.8 million of cost and accumulated
amortization, respectively, is primarily related to non-compete agreements.

In addition, Kroll had recorded indefinite-lived other intangible assets
of $10.6 million in connection with the acquisition of Factual Data (see Note
6).

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Amortization expense for other intangible assets of $3.4 million and $0.8
million were recognized during the three months ended September 30, 2003 and
2002, respectively. Amortization expense for other intangible assets of $5.9
million and $1.3 million were recognized during the nine months ended September
30, 2003 and 2002, respectively. Approximately $46.4 million of amortization
expense is anticipated to be recognized over the next five years as follows:
$10.2 million in 2004, $9.5 million in 2005, $9.1 million in 2006, $9.1 million
in 2007 and $8.5 million in 2008.

As
previously discussed, during the third quarter of
2003 Kroll completed its evaluation of the
fair value assigned to Zolfo Coopers identifiable net assets recorded at
acquisition. Such evaluation resulted in an increase to other intangible assets
of $13.4 million, a decrease to goodwill of $13.4 million and an adjustment of
$1.2 million to amortization expense which was reflected during the third
quarter of 2003.

During
the nine months ended September 30, 2003, goodwill increased by
$51.9 million due to the acquisition of Factual Data ($64.2 million) and several other acquisitions
($1.1 million). This was partially offset by a decrease in
goodwill resulting from the revaluation of Zolfo Coopers
identifiable net assets ($13.4 million).



|10. |  | Debt
|--- |  | ----

(a)  Revolving Line of Credit

On February 21, 2002, Kroll executed agreements with Foothill Capital
Corporation (Foothill) to provide a revolving credit facility of up to $15
million, subject to borrowing base limitations, for a term of three years.
During the term of the credit facility, Kroll paid Foothill a fee equal to
0.375% per annum of the unused portion of the credit facility. The credit
facility required Kroll to maintain a minimum level of earnings before
interest, taxes, depreciation and amortization (EBITDA), and contained
restrictions on the incurrence of additional debt, the creation of any liens on
any of Krolls assets, certain acquisitions, distributions to certain
subsidiaries and other affirmative and negative covenants customarily contained
in debt agreements of this type. The credit facility was secured by a security
interest in substantially all of the assets of Kroll and its material domestic
subsidiaries and a pledge of the stock of certain of Krolls subsidiaries.

On September 5, 2002, Kroll amended and ultimately terminated the $15
million revolving credit facility with Foothill. No borrowings were made under
the terminated $15 million credit facility. Concurrently, Kroll entered into a
new $100 million credit facility with Goldman Sachs that included a $25 million
revolving credit facility and a $75 million term loan (see Note 10(c) for a
discussion of the term loan portion of this facility). Kroll wrote off
financing fees of $0.5 million related to the replacement of the Foothill
revolving credit facility during the third quarter of 2002. Such amount is
reflected in Other income (expense) in the Consolidated Statements of Income.

The $25 million revolving credit facility with Goldman Sachs was subject
to borrowing base limitations and had a three year term. The available
borrowing amount was calculated based on an analysis of Krolls accounts
receivable as of the month end preceding the borrowing date. Borrowings under
the revolving credit facility bore interest, at Krolls election, at a rate per
annum equal to the base rate plus applicable margin or the Eurodollar rate plus
applicable margin. The applicable margin was determined by the leverage ratio,
calculated as of the last day of any fiscal quarter as the ratio of
consolidated total debt as of that day to adjusted EBITDA for the four fiscal
quarters ending on such date.

The Goldman Sachs revolving credit facility required Kroll to comply with
certain customary restrictive covenants, including maintaining certain ratios
such as EBITDA to fixed charges and EBITDA to debt, and limiting capital
expenditures, additional indebtedness and dividends.

The Goldman Sachs revolving credit facility also required Kroll to pay a
fee equal to 0.75% per annum of the unused portion of this facility. Upon the
repayment of the $75 million Goldman Sachs term loan in October 2002 with the
proceeds of Krolls common stock offering, this fee was reduced to 0.375% per
annum (see Notes 10(c) and 12). The revolving credit facility was secured by a
lien on substantially all of Krolls assets and those of most of Krolls
domestic subsidiaries.

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On March 6, 2003, Kroll executed agreements with Fleet National Bank
(Fleet) providing a revolving credit facility of up to $25 million for a term
of three years. Krolls obligations under the Fleet revolving credit facility
are guaranteed by its domestic subsidiaries. In addition, the Fleet revolving
credit facility is secured by a security interest in substantially all of the
assets of Kroll and its material domestic subsidiaries and a pledge of the
stock of Krolls material domestic subsidiaries and 65% of the stock of certain
of the foreign subsidiaries of Kroll and its domestic subsidiaries.

The $25 million Goldman Sachs revolving credit facility undertaken as part
of the $100 million credit facility on September 5, 2002 was simultaneously
retired on March 6, 2003. As a result, Kroll wrote off approximately $0.1
million of unamortized deferred financing fees relating to this facility during
the first quarter of 2003. Such amount is reflected in Other income (expense)
in the Consolidated Statements of Income. There were no borrowings made under
the retired $25 million revolving credit facility.

During the first quarter of 2003, Kroll was required to cash collateralize
letters of credit which had been issued under the $25 million Goldman Sachs
revolving credit facility totaling $2.2 million. This amount was subsequently
released during the second and third quarters of 2003.

Borrowings under the Fleet revolving credit facility will bear interest,
at Krolls election, at a rate per annum equal to (1) the prime rate of Fleet
or (2) LIBOR plus 2.00%. During the term of the Fleet revolving credit
facility, Kroll will pay Fleet a quarterly fee equal to 0.375% per annum of the
unused portion of the line of credit. The Fleet revolving credit facility
requires Kroll to maintain a minimum level of EBITDA and net income and maximum
leverage and liabilities requirements and contains restrictions on the
incurrence of additional debt, the creation of any liens, the payment of cash
dividends, certain acquisitions, and distributions to certain subsidiaries. The
Fleet revolving credit facility also contains other affirmative and negative
covenants and events of default customarily contained in debt agreements of
this type. There have been no borrowings made under this facility. At September
30, 2003, Kroll was in compliance with all covenants and provisions of this
facility.

In connection with the acquisition of Buchler Phillips prior to 2002,
Kroll acquired a demand note with maximum borrowings of 2.5 million pounds
sterling. This amount was increased to 4.4 million pounds sterling in March
2002. The demand note bears interest at the Bank of Englands base rate plus
1.5%. During the first quarter of 2003, maximum borrowings permitted under the
demand note decreased from 4.4 million pounds sterling to 2.9 million pounds
sterling, or $4.8 million, as translated at September 30, 2003. The amount
outstanding under this demand note at September 30, 2003 was $3.4 million, a
decrease of $0.4 million from the amount outstanding at December 31, 2002 due
primarily to repayments made during the first quarter of 2003.

(b)  Senior Convertible Notes

During 2001, Kroll obtained additional financing of $30.0 million in the
form of 6% Senior Secured Subordinated Convertible Notes due 2006 (6%
Convertible Notes). The notes mature November 14, 2006 and bear interest at
the rate of 6% per annum payable semi-annually. However, 12% per annum will
accrue on any principal payment that is past due. Kroll may redeem these
convertible notes at par plus accrued interest, in whole or in part, beginning
November 14, 2004, provided the note holders have been notified in writing 20
days in advance. The note holders may, at any time prior to one day before the
earlier of the maturity date or the redemption date, convert all or a portion
of the principal amount of the notes into Kroll common stock at the conversion
price of $10.80 per share. The $30.0 million of notes are presently convertible
into 2,777,777 shares of Kroll common stock, subject to customary and other
anti-dilution adjustments.

In connection with the issuance of the 6% Convertible Notes, Kroll
recorded a notes discount of approximately $11.4 million based on the
difference between the closing price of its stock on the issuance date and the
conversion price. In addition to the stated 6% interest, the discount is being
amortized as non-cash interest expense over the expected 5-year life of the
notes. Barring early conversion by the noteholders or early redemption by
Kroll, the average additional non-cash interest expense resulting from this
discount amortization is approximately $2.3 million, or 7.6% per year, on the
$30.0 million aggregate principal amount. The amount of

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non-cash interest expense resulting from this discount amortization during
the three and nine months ended September 30, 2003 was $0.5 million and $1.4
million, respectively. The amount of non-cash interest expense resulting from
this discount amortization during the three and nine months ended September 30,
2002 was $0.4 million and $1.2 million, respectively.

The notes were secured by the same assets of Kroll and its material
subsidiaries and the same pledge of stock of certain of Krolls subsidiaries as
the Foothill revolving credit facility, except that the notes were subordinate
to the security interest and rights of the credit facility lender.

On September 5, 2002, Kroll amended certain provisions of its outstanding
6% Convertible Notes. Under the amendments, the security interest of the
noteholders was terminated and the collateral securing the 6% Convertible Notes
was released. In addition, the amendments deleted all of the negative covenants
in respect of all of the 6% Convertible Notes. Furthermore, Palisades
Concentrated Equity Partnership, LP (Palisade), the only note holder who had
the right to designate a board observer, no longer has this right. Palisade
also agreed to subordinate the $20.0 million in aggregate principal amount of
the 6% Convertible Notes that it owned to borrowings under the $100 million
Goldman Sachs credit facility (see Notes 10(a) and (c)). In connection with
these amendments, Kroll agreed to compensate Palisade based on the performance
of Krolls common stock, and as a result of this agreement, paid Palisade $1.6
million in October 2002.

Kroll has an effective registration statement with the Securities and
Exchange Commission covering the resale of the notes, and the shares of common
stock issuable upon conversion of these notes, and is required to keep the
registration statement effective until November 14, 2003.

(c)  Other Long-term Debt

In connection with the acquisition of Zolfo Cooper in September 2002,
Kroll obtained $75 million in term loan financing through a syndicate arranged
by Goldman Sachs to be repaid under the following terms: $0.8 million by
December 31, 2002, an additional $4.5 million within one year of the closing
date, $18.7 million within two years of closing and the balance of $51.0
million within three years of closing.

The term loan was part of a $100 million credit facility with Goldman
Sachs which included a $25 million revolving credit facility (see Note 10(a)).
The cost of obtaining the credit facility was being amortized over the
facilitys three year life. The term loan bore interest, at Krolls election,
at a rate per annum equal to the base rate plus applicable margin or the
Eurodollar rate plus applicable margin. The applicable margin was determined by
the leverage ratio, calculated as of the last day of any fiscal quarter as the
ratio of consolidated total debt, as of that day, to EBITDA for the four fiscal
quarters ending on such date. A provision in the term loan required that
proceeds from any equity offering be used to repay the term loan.

The term loan was repaid in October 2002 with the proceeds from Krolls
common stock offering (see Note 12). In the fourth quarter of 2002, Kroll wrote
off financing fees of $1.1 million associated with the repayment of the $75
million term loan.

Long-term debt (including current portion) at September 30, 2003 also
includes $9.1 million related to Factual Data as follows: $3.0 million of notes
payable incurred by Factual Data in connection with prior acquisitions and $6.1
million of capitalized lease obligations, $5.7 million of which relate to
service license agreements for consumer credit reporting services expiring in
April and December 2005 and February 2006 (monthly principal and interest
payments totaling $275,891, with interest at 9.985%) and $0.4 million of which
relate to leases of furniture and fixtures.

The $3.0 million of notes payable bears interest at different rates ranging from 5% to 12%
per annum and matures at different times from May 2004
through July 2008 as follows: within one year, $1.5 million;
2005, $0.5 million; 2006, $0.4 million; 2007,
$0.4 million; and 2008, $0.3 million.

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The current portion of Factual Datas long-term debt at September 30, 2003
totaled $4.7 million, which is included within Current portion of long-term
debt in the Consolidated Condensed Balance Sheet as of September 30, 2003.



|11. |  | Commitments and Contingencies
|--- |  | -----------------------------

Kroll Lindquist Avey Co. (formerly Lindquist Avey Macdonald & Baskerville
(LAMB)), a subsidiary of Kroll, and several of its principals have been named
as third-party defendants in a lawsuit filed in the Ontario Superior Court of
Justice by HSBC Securities (Canada) Inc., formerly Gordon Capital, an
investment dealer (HSBC). HSBC filed the underlying suit against Gordon
Capitals former law firm, Davies, Ward & Beck, (DW&B) seeking damages in the
amount of approximately $40,000,000 (Cdn.). HSBC alleges DW&B negligently
advised Gordon Capital during 1991 through 1993 with respect to its rights
concerning trading losses and irregularities by a client account manager and
various insurance bonds relating to such losses and irregularities. HSBC
further alleges various suits and declaratory judgment actions involving the
insurers were filed in 1993 and that summary judgment granted in favor of the
insurers in 1996 was affirmed on appeal to the Supreme Court of Canada on the
basis that the limitation period under the bonds had expired without an action
being commenced for recovery of Gordon Capitals losses. Gordon Capital, DW&B
and LAMB entered into various tolling agreements until the matters pending with
the insurers were exhausted. In April 2000, HSBC filed suit against DW&B. In
July 2001, DW&B filed a third-party claim against LAMB and certain principals
for contribution and indemnity. An amended third-party claim was filed in
September 2001. The third-party claim alleges DW&B retained LAMB in June 1991
to examine the trading irregularities and to advise Gordon Capital in respect
of its dealings with its insurers and that LAMB acted negligently in carrying
out these services. Third party claims have also been filed against some
entities formerly known as Peat Marwick Thorne, Gordon Capitals alleged former
auditors and AON Reed Stenhouse, Inc., Gordon Capitals alleged former
insurance broker. The parties attended mediation on December 11 and 12, 2002,
with additional dates to be scheduled in 2003. LAMB is being defended by its
former carrier, the Reliance Insurance Company. Reliance is in liquidation, and
while paying all defense costs, has advised that any claim for damages or
settlement greater than $25,000 (Cdn.) will be a claim in the liquidation, on
which distributions will be made as the liquidation progresses. Management of
Kroll believes LAMB has meritorious defenses to the claims and intends to
defend the claims vigorously.

On June 27, 2003, a shareholder of Factual Data filed a lawsuit against
Factual Data and its directors in the District Court for the County of Larimer,
Colorado, William Troxler v. Factual Data Corporation [sic], Jerald H. Donnan,
Todd A. Neiberger, Robert J. Terry, J. Barton Goodwin, Daniel G. Helle, Abdul
H. Rajput and James N. Donnan. The plaintiff alleges, among other things, that
the individual defendants engaged in self dealing in connection with the
negotiation and approval of the merger agreement and the merger. The plaintiff
also claims the individual defendants obtained benefits not shared by the
plaintiff, and that they breached their fiduciary duties of care, loyalty,
candor and independence owed under Colorado law to Factual Datas public
shareholders. The plaintiff further alleges that Factual Data aided and abetted
the other defendants breaches of fiduciary duty and failed to disclose
material information to the shareholders. The plaintiff seeks certification of
the case as a class action, and preliminary and permanent injunctive relief
declaring that the merger agreement is unlawful and unenforceable. The
plaintiff also seeks an order enjoining consummation of the agreement, and an
order directing the defendants to exercise their fiduciary duties to obtain a
transaction in the best interests of Factual Data shareholders, and that they
arrange to rescind any implemented terms of the transaction. Finally, the
plaintiff demands that the court impose a trust on any benefits received by the
defendants, and award attorneys fees and costs. The plaintiff is seeking
equitable relief only, not monetary damages. On July 23, 2003, the plaintiff
filed a motion for expedited discovery, which motion was never ruled on by the
court. On August 1, 2003, the plaintiff filed an amended complaint and a
response to Factual Datas motion to dismiss. On August 5, 2003, the plaintiff
requested oral argument on the request for expedited discovery, which request
was not granted by the court. On August 15, 2003, Factual Data moved to dismiss
the plaintiffs amended complaint. On September 15, 2003, the plaintiff filed a
response to Factual Datas motion to dismiss. On September 26, 2003, Factual
Data filed an amended reply in support of its motion to dismiss the first
amended complaint. The court has not yet ruled on

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Factual Datas motion to dismiss
the amended complaint. Kroll and Factual Data believe that the allegations in the amended complaint are meritless and will defend the
suit vigorously.

In addition to the matters discussed above, Kroll is involved in
litigation from time to time in the ordinary course of its business; however,
Kroll does not believe that there is any currently pending litigation,
individually or in the aggregate, that is likely to have a material adverse
effect on its consolidated financial position, results of operations or its
cash flows.



|12. |  | Stockholders Equity
|--- |  | --------------------

In October 2002, Kroll sold 6.3 million shares of its common stock to the
public in an underwritten public offering and raised approximately $110.6
million of net proceeds, including $0.2 million of accrued expenses. Kroll used
a portion of these proceeds to repay its three-year $75 million term loan
incurred on September 5, 2002 to acquire Zolfo Cooper (see Note 10(c)). The
remaining proceeds were used for working capital to fund operations and other
general company purposes. Because the repayment effectively terminated the term
loan agreement, all unamortized deferred financing fees associated with this
agreement were written off in the fourth quarter of 2002.

On January 1, 2003, Kroll issued 25,000 shares of restricted stock, valued
at approximately $0.5 million. Such amount is being amortized over the
applicable vesting period of three years as additional compensation expense.

On January 15, 2003, Kroll issued 2.9 million shares of its common stock,
valued at approximately $55.3 million, to the former owners of Zolfo Cooper in
connection with the acquisition of Zolfo Cooper on September 5, 2002. These
shares were presented on the December 31, 2002 balance sheet under the caption
Common shares to be issued for acquisition. In addition, the contingent
consideration arrangements with the former owners of Zolfo Cooper were amended
in April 2003 to provide that Kroll will issue to them 625,000 additional
shares of its common stock per year if Zolfo Cooper achieves operating profit
levels of $24.0 million, $24.8 million, $25.6 million and $26.4 million in
2003, 2004, 2005 and 2006, respectively.

On June 3, 2003, Krolls 1998 Stock Incentive Plan was amended to modify
restrictions on the number of shares of common stock that may be awarded to
executive officers, provide that non-employee directors be eligible to receive
awards, allow no more than 50,000 shares to be awarded annually to any eligible
person, provide that shares of common stock be granted without requiring
payment from participants, and include some minor changes from the original
plan. Also on June 3, 2003, Kroll issued 40,854 shares of restricted stock,
valued at approximately $0.9 million. Such amount is being amortized over the
applicable vesting period of one and a half years as additional compensation
expense.

On August 21, 2003, Kroll issued 934,712 shares of its common stock in
exchange for shares of Factual Data outstanding at closing in connection with
the acquisition of Factual Data (see Note 6).

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|13. |  | Supplemental Cash Flows Disclosures
|--- |  | -----------------------------------

The following is a summary of cash paid related to certain items (in
thousands):

|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|------------------------------------------------ | -------------------------------------------------------------------- |  | ----------------- | ------ | ---- |  | - | ------- | 
|                                                 |                                                                      |  | Nine Months Ended
|                                                 |                                                                      |  | September 30,    
|                                                 |                                                                      |  |                  
|                                                 |                                                                      |  | 2003              |        | 2002
|                                                 |                                                                      |  |                   |        |     
|Supplemental Disclosure of Cash Flow Activities: |                                                                      |  |                   |        |      |  |   |        
|                                                 | Cash paid for interest                                               |  | $                 | 1,015  |      |  | $ | 1,153   | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|                                                 | Cash paid for taxes, net of refunds                                  |  | $                 | 10,439 |      |  | $ | 2,381   | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|Supplemental Disclosure of Non-cash Activities:  |                                                                      |  |                   |        |      |  |   |        
|                                                 | Deferred compensation related to restricted stock issuance           |  | $                 | 1,429  |      |  | $ |        | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|                                                 | Issuance of common shares pertaining to the Zolfo Cooper
acquisition |  | $                 | 55,280 |      |  | $ |        | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|                                                 | Issuance of common shares pertaining to the Ontrack acquisition      |  | $                 |       |      |  | $ | 150,019 | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 
|                                                 | Issuance of common shares pertaining to the Factual Data
acquisition |  | $                 | 28,847 |      |  | $ |        | 
|                                                 |                                                                      |  |                   |        |      |  |   |         | 



|14. |  | Customer and Segment Data
|--- |  | -------------------------

Krolls reportable operating segments consist of the following five
business segments: Corporate Advisory and Restructuring Services, Consulting
Services, Technology Services, Background Screening Services and Security
Services. Krolls reportable segments are organized, managed and operated along
product lines. These product lines are provided to similar clients, are offered
together as packaged offerings, generally produce similar margins and are
managed under a consolidated operations management.

The Corporate Advisory and Restructuring Services segment includes
revenues and expenses from corporate restructuring, operational turnaround,
strategic advisory services, financial crisis management and corporate finance
services.

The Consulting Services segment includes revenues and expenses from
business and financial investigations, forensic accounting, business valuation,
litigation consulting, due diligence, litigation intelligence, asset tracing
and analysis, monitoring and special inquiries, marketing intelligence and
intellectual property and infringement investigations.

The Technology Services segment includes revenues and expenses from
electronic discovery, data recovery and computer forensics services, along with
related software solutions.

The Background Screening Services segment includes revenues and expenses
from employee and vendor background investigations, credit screening, substance
abuse testing and identity fraud solutions.

The Security Services segment includes revenues and expenses from security
architecture and design, corporate security consulting, emergency management
and environmental services as well as protective services, operations and
training.

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The following summarizes information about Krolls business segments for
the three and nine months ended September 30, 2003 and 2002 (in thousands):

|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|------------------------------------- | ------------------------------------- |  | ------------------ | ------- | ---------- |  | ---------- | ------ | --------- |  | -------- | ------ | ---------- |  | ----- | ------ |  |  | - | ------ | - |  | -------- | ------- | - |  | - | ------- | 
|                                      |                                       |  | Corporate Advisory |         |            |  |            |        |           |  |          |        | Background |  |       |        |  |  |   |        |   |  | Consoli-
|                                      |                                       |  | and Restructuring  |         | Consulting |  | Technology |        | Screening |  | Security |        | Other      |  | dated
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |      
|Three Months Ended September 30, 2003 |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Net sales to unaffiliated customers   |  | $                  | 35,381  |            |  | $          | 34,159 |           |  | $        | 24,192 |            |  | $     | 23,835 |  |  | $ | 8,393  |   |  | $        |        |   |  | $ | 125,960 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Gross profit                          |  | $                  | 17,454  |            |  | $          | 15,944 |           |  | $        | 18,245 |            |  | $     | 11,999 |  |  | $ | 2,171  |   |  | $        |        |   |  | $ | 65,813  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Operating income (loss)               |  | $                  | 10,004  |            |  | $          | 3,896  |           |  | $        | 7,041  |            |  | $     | 4,783  |  |  | $ | (566   | ) |  | $        | (9,249  | ) |  | $ | 15,909  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|Three Months Ended September 30, 2002 |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Net sales to unaffiliated customers   |  | $                  | 18,420  |            |  | $          | 26,002 |           |  | $        | 15,992 |            |  | $     | 11,428 |  |  | $ | 6,235  |   |  | $        |        |   |  | $ | 78,077  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Gross profit                          |  | $                  | 10,961  |            |  | $          | 10,367 |           |  | $        | 10,953 |            |  | $     | 5,708  |  |  | $ | 2,551  |   |  | $        |        |   |  | $ | 40,540  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Operating income (loss)               |  | $                  | 6,262   |            |  | $          | 2,729  |           |  | $        | 2,142  |            |  | $     | 3,063  |  |  | $ | 585    |   |  | $        | (5,749  | ) |  | $ | 9,032   | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|Nine Months Ended September 30, 2003  |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Net sales to unaffiliated customers   |  | $                  | 119,223 |            |  | $          | 95,416 |           |  | $        | 59,084 |            |  | $     | 47,246 |  |  | $ | 19,921 |   |  | $        |        |   |  | $ | 340,890 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Gross profit                          |  | $                  | 70,526  |            |  | $          | 42,690 |           |  | $        | 44,154 |            |  | $     | 22,772 |  |  | $ | 5,662  |   |  | $        |        |   |  | $ | 185,804 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Operating income (loss)               |  | $                  | 47,957  |            |  | $          | 15,800 |           |  | $        | 13,473 |            |  | $     | 8,671  |  |  | $ | (1,492 | ) |  | $        | (27,394 | ) |  | $ | 57,015  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|As of September 30, 2003              |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Goodwill                              |  | $                  | 158,456 |            |  | $          | 17,234 |           |  | $        | 94,320 |            |  | $     | 68,076 |  |  | $ | 5,874  |   |  | $        |        |   |  | $ | 343,960 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Identifiable assets                   |  | $                  | 44,564  |            |  | $          | 55,943 |           |  | $        | 32,874 |            |  | $     | 52,176 |  |  | $ | 9,409  |   |  | $        |        |   |  |   | 194,966 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Corporate assets                      |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   | 108,300 | 
|                                      | Net assets of discontinued operations |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   | 176     | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Total assets                          |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  | $ | 647,402 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|Nine Months Ended September 30, 2002  |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |        
|                                      | Net sales to unaffiliated customers   |  | $                  | 38,583  |            |  | $          | 77,692 |           |  | $        | 20,899 |            |  | $     | 32,784 |  |  | $ | 20,501 |   |  | $        |        |   |  | $ | 190,459 | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Gross profit                          |  | $                  | 22,432  |            |  | $          | 31,709 |           |  | $        | 14,073 |            |  | $     | 16,215 |  |  | $ | 7,431  |   |  | $        |        |   |  | $ | 91,860  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 
|                                      | Operating income (loss)               |  | $                  | 11,203  |            |  | $          | 9,430  |           |  | $        | 2,882  |            |  | $     | 8,242  |  |  | $ | 3,550  |   |  | $        | (15,782 | ) |  | $ | 19,525  | 
|                                      |                                       |  |                    |         |            |  |            |        |           |  |          |        |            |  |       |        |  |  |   |        |   |  |          |         |   |  |   |         | 

Total net sales by segment include sales to unaffiliated customers.
Inter-segment sales are nominal. Operating income equals gross profit less
operating expenses. Operating income does not include the following items:
interest expense, interest income, other income (expense) and income taxes. The
Other column includes the cost of Krolls corporate headquarters.
Identifiable assets by segment are those assets that are used in Krolls
operations in each segment. Corporate assets are principally cash, computer
software and certain prepaid expenses.



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##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of results of operations and financial condition
is based upon and should be read in conjunction with our consolidated condensed
unaudited financial statements and accompanying notes thereto included
elsewhere herein.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements can sometimes be identified by the use of forward-looking
words such as anticipate, believe, estimate, expect, intend, may,
will and similar expressions. These statements are based on managements
current expectations and are subject to risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, expected, estimated or projected.

The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: changes in
the demand for, or in the mix of, Krolls services; project delays or
cancellations; cost overruns with regard to fixed price projects; competitive
pricing and other competitive pressures; changes in United States and foreign
governmental regulation and licensing requirements; currency exchange rate
fluctuations; foreign currency restrictions; general economic conditions;
political instability in foreign countries in which Kroll operates; Krolls
ability to implement its internal growth strategy and to integrate and manage
successfully any business Kroll acquires; and other factors that are set forth
in Krolls Annual Report on Form 10-K for the year ended December 31, 2002.

General

Kroll is a leading global provider of complementary risk consulting
services. Kroll assists businesses, governments and individuals throughout the
world in preventing, mitigating and responding to risk through an integrated
suite of services. Krolls five business groups enable Kroll to provide its
clients with comprehensive, single source, risk consulting services. These five
business groups are:



| |  |  | Corporate Advisory and Restructuring Services.Kroll acts both
in an advisory capacity to, and as interim management of, financially
troubled companies throughout North America and Europe, and advises
all the various stakeholders involved in the reorganization process.
In this context, Kroll provides corporate restructuring, operational
turnaround, strategic advisory services, financial crisis management
and corporate finance services.            
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Consulting Services.Kroll provides independent consulting
services free from the audit conflicts incurred by major accounting
firms. These consulting services include business and financial
investigations, forensic accounting, business valuation, litigation
consulting, due diligence, litigation intelligence, asset tracing and
analysis, monitoring and special inquiries, market intelligence and
intellectual property and infringement investigations.
|
| |  |  | Technology Services.Kroll provides electronic discovery, data
recovery and computer forensics services, along with related software
solutions.                                                                                                                                                                                                                                                                                                                    
|
| |  |  | Background Screening Services.Kroll provides employee and
vendor background investigations, credit screening, substance abuse
testing and identity fraud solutions.                                                                                                                                                                                                                                                                                               

22



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| |  |  | Security Services.Kroll provides security architecture and
design, corporate security consulting, emergency management and
environmental services as well as protective services, operations and
training.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

Krolls significant accounting policies, including the assumptions and
judgments underlying them, are more fully described in Krolls Annual Report on
Form 10-K for the year ended December 31, 2002. Some of Krolls accounting
policies require the application of significant judgment by management in the
preparation of the financial statements, and as a result they are subject to a
greater degree of uncertainty. In applying these policies, management uses its
judgment to determine the appropriate assumptions to be used in calculating
estimates that affect the reported amounts of assets, liabilities, revenues and
expenses. Management bases its estimates and assumptions on historical
experience and on various other factors that are believed to be reasonable
under the circumstances. Krolls significant accounting policies include the
following:

Revenue recognition. Revenue is recognized as the services are performed
pursuant to the applicable contractual arrangements. Revenue related to time
and materials arrangements is recognized in the period in which the services
are performed. Revenue from standard hourly rate engagements is recognized as
hours are incurred and revenue from standard daily rate arrangements is
recognized at amounts represented by the agreed-upon billing amounts as
incurred. Revenue related to fixed price arrangements are recognized based upon
the achievement of certain milestones or progress points within the project
plan. Revenue provided from credit services is recognized when the information
is delivered to the customer, either electronically or by other means. The
impact of any revisions in estimated total revenue and direct contract costs is
recognized in the period in which they become known. Expenses incurred by
professional staff in the generation of revenue are billed to the client and
included in revenue. Kroll records either billed or unbilled accounts
receivable based on case-by-case invoicing determinations. Software revenue is
recognized when shipped, with the exception of royalty-based products, for
which revenue is recognized when earned. Software revenue is stated net of
estimated customer returns and allowances. Kroll recognizes contingent fees as
earned, i.e., upon satisfaction of all conditions to their payment.

Databases.Databases are capitalized costs incurred in obtaining
information from third party providers. Kroll utilizes this information to
create and maintain its proprietary and non-proprietary databases. Because of
the continuing accessibility of the information and its usefulness to future
investigative procedures, the cost of acquiring the information is capitalized
and amortized over a five year period.

Foreign Currency Translation and Transactions. Assets and liabilities of
foreign operations are translated using exchange rates prevailing at the
balance sheet date and revenues and expenses are translated using exchange
rates prevailing during the period, with gains or losses resulting from
translation included in a separate component of stockholders equity.

Gains or losses resulting from foreign currency transactions are
translated to local currency at the rates of exchange prevailing at the dates
of the transactions. Amounts receivable or payable in foreign currencies, other
than the subsidiarys local currency, are translated at the rates of exchange
prevailing at the balance sheet date.

Accounting for intangible and long-lived assets.In accordance with SFAS
No. 142, Kroll no longer amortizes goodwill and indefinite-lived intangible
assets. Instead, Kroll conducts annual impairment tests of goodwill and
indefinite-lived intangible assets recorded on its books in order to ascertain
if impairment has taken place. Impairment tests will be conducted sooner if
circumstances indicate that impairment has occurred. In accordance with SFAS
No. 144, Kroll tests for impairment its long-lived assets held and used
whenever events or changes in circumstances indicate that the carrying amount
of such assets may not be recoverable. The carrying amount of a long-lived
asset is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset. An
impairment loss will be measured as the amount by which the carrying amount of
a long-lived asset exceeds its fair value. In addition, in accordance with SFAS
No.

23



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##### Table of Contents



144, Kroll measures long-lived assets to be disposed of by sale, including
discontinued operations, at the lower of carrying amount or fair value less
cost to sell.

Results of Operations

The following table sets forth the items noted as a percentage of total net
sales:

|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |      |       |  
|-------------------------------------------------------- | --------------------------------------------- | ---------------------------------------- | ------------------ | ---- | ------------------ | ----- | ----------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | -
|                                                         |                                               |                                          |                    |      | Three Months Ended |       | Nine Months Ended
|                                                         |                                               |                                          |                    |      | September 30,      |       | September 30,    
|                                                         |                                               |                                          |                    |      |                    |       |                  
|                                                         |                                               |                                          |                    |      | 2003               |       | 2002              |      | 2003 |       | 2002
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |     
|Net sales:                                               |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |     
|                                                         | Corporate Advisory and Restructuring Services |                                          |                    | 28.1 | %                  |       |                   | 23.6 | %    |       |      | 35.0 | %    |       |      | 20.3 | %   
|                                                         | Consulting Services                           |                                          |                    | 27.1 |                    |       |                   | 33.3 |      |       |      | 28.0 |      |       |      | 40.8 |     
|                                                         | Technology Services                           |                                          |                    | 19.2 |                    |       |                   | 20.5 |      |       |      | 17.3 |      |       |      | 11.0 |     
|                                                         | Background Screening Services                 |                                          |                    | 18.9 |                    |       |                   | 14.6 |      |       |      | 13.9 |      |       |      | 17.2 |     
|                                                         | Security Services                             |                                          |                    | 6.7  |                    |       |                   | 8.0  |      |       |      | 5.8  |      |       |      | 10.7 |     
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               |                                          | Total net sales    |      |                    | 100.0 | %                 |      |      | 100.0 | %    |      |      | 100.0 | %    |      |      | 100.0 | %
|Cost of sales                                            |                                               |                                          | 47.7               |      |                    |       | 48.1              |      |      |       | 45.5 |      |      |       | 51.8 |     
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               |                                          | Gross profit       |      |                    | 52.3  |                   |      |      | 51.9  |      |      |      | 54.5  |      |      |      | 48.2  |  
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|Selling and marketing                                    |                                               |                                          | 9.5                |      |                    |       | 11.0              |      |      |       | 9.1  |      |      |       | 9.5  |     
|General and administrative                               |                                               |                                          | 20.7               |      |                    |       | 24.6              |      |      |       | 22.6 |      |      |       | 26.1 |     
|Research and development                                 |                                               |                                          | 2.5                |      |                    |       | 3.6               |      |      |       | 2.7  |      |      |       | 1.7  |     
|Amortization of other intangible assets                  |                                               |                                          | 2.7                |      |                    |       | 1.1               |      |      |       | 1.7  |      |      |       | 0.7  |     
|Restructuring charge                                     |                                               |                                          | 4.3                |      |                    |       | 0.0               |      |      |       | 1.6  |      |      |       | 0.0  |     
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               |                                          | Operating expenses |      |                    | 39.7  |                   |      |      | 40.3  |      |      |      | 37.8  |      |      |      | 37.9  |  
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               |                                          | Operating income   |      |                    | 12.6  |                   |      |      | 11.6  |      |      |      | 16.7  |      |      |      | 10.3  |  
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|Other income (expense):                                  |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |     
|                                                         | Interest expense, net                         |                                          |                    | (0.9 | )                  |       |                   | (1.5 | )    |       |      | (0.8 | )    |       |      | (1.6 | )   
|                                                         | Other income (expense), net                   |                                          |                    | 0.1  |                    |       |                   | (0.7 | )    |       |      | 0.0  |      |       |      | (0.2 | )   
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               | Total other income (expense)             |                    |      | (0.8               | )     |                   |      | (2.2 | )     |      |      | (0.8 | )     |      |      | (1.8 | )    
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               | Income before provision for income taxes |                    |      | 11.8               |       |                   |      | 9.4  |       |      |      | 15.9 |       |      |      | 8.5  |      
|Provision for income taxes                               |                                               |                                          | 4.7                |      |                    |       | 2.5               |      |      |       | 6.2  |      |      |       | 2.6  |     
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         | Income from continuing operations             |                                          |                    | 7.2  |                    |       |                   | 6.9  |      |       |      | 9.7  |      |       |      | 5.9  |     
|Income (loss) from discontinued operations, net of taxes |                                               |                                          | (0.3               | )    |                    |       | 0.0               |      |      |       | (2.4 | )    |      |       | 0.0  |     
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     
|                                                         |                                               |                                          | Net income         |      |                    | 6.9   | %                 |      |      | 6.9   | %    |      |      | 7.3   | %    |      |      | 5.9   | %
|                                                         |                                               |                                          |                    |      |                    |       |                   |      |      |       |      |      |      |       |      |      |     

Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002

Net sales.Net sales increased $47.9 million, or 61.3%, from $78.1 million
in the three months ended September 30, 2002 to $126.0 million in the three
months ended September 30, 2003.

Corporate Advisory and Restructuring Services  Net sales for the
Corporate Advisory and Restructuring Services segment increased $17.0 million,
or 92.1%, from $18.4 million for the three months ended September 30, 2002 to
$35.4 million for the three months ended September 30, 2003. This increase is
due to a 38.6% increase in revenues from Krolls European recovery and
turnaround division and the inclusion of Kroll Zolfo Cooper for the entire
quarter in 2003. Zolfo Cooper was acquired on September 5, 2002. Kroll Zolfo
Cooper recognized $1.3 million of success fees during the three months ended
September 30, 2003. Approximately $0.8 million of success fees were recognized in the 2002 period.

24



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Consulting Services  Net sales for the Consulting Services segment
increased $8.2 million, or 31.4%, from $26.0 million for the three months ended
September 30, 2002 to $34.1 million for the three months ended September 30,
2003. This increase was primarily due to higher revenues in the United States
of 95.1%, which resulted from strong demand for Krolls forensic and litigation
support and valuation services. Partially offsetting this growth were decreases
in revenue in Krolls Canadian operations of 11.4% and relatively flat
performance in Asia.

Technology Services  Net sales for the Technology Services segment
increased $8.2 million or 51.3% from $16.0 million for the three months ended
September 30, 2002 to $24.2 million for the three months ended September 30,
2003. This increase was due to the performance of Kroll Ontrack which posted
strong results in its data recovery and electronic evidence products resulting
from successful cross-selling to Krolls existing client base.

Background Screening Services  Net sales for the Background Screening
Services segment increased $12.4 million, or 108.6%, from $11.4 million for the
three months ended September 30, 2002 to $23.8 million for the three months
ended September 30, 2003. This increase was primarily due to a 33.2% increase
in the demand for Krolls domestic pre-employment background checking services,
as well as the inclusion of revenues from Kroll Factual Data. Kroll Factual
Data was acquired August 21, 2003. Krolls Background Screening Services are
beginning to benefit from an improving employment market, and the successful
negotiation of government contracts.

Security Services  Net sales for the Security Services segment increased
$2.2 million, or 34.6%, from $6.2 million for the three months ended September
30, 2002 to $8.4 million for the three months ended September 30, 2003. This
increase was primarily due to the strong performance of our European security
services, which is a new practice area this year. This was partially offset by
a 22.6% decrease in domestic security and architectural services due to reduced
corporate and government activity.

Cost of sales and gross margin.Cost of sales increased $22.6 million, or
60.2%, from $37.5 million for the three months ended September 30, 2002 to
$60.1 million for the three months ended September 30, 2003. Gross margin as a
percentage of sales increased 0.4 percentage points from 51.9% for the three
months ended September 30, 2002 to 52.3% for the three months ended September
30, 2003.

Corporate Advisory and Restructuring Services  Gross margin for the
Corporate Advisory and Restructuring Services segment decreased 10.2 percentage
points from 59.5% for the three months ended September 30, 2002 to 49.3% for
the three months ended September 30, 2003. This decrease was primarily
attributable to seasonal hiring practices in our European unit and a decrease
in margin in our domestic operations as certain personnel were reassigned from
a large engagement that was successfully completed.

Consulting Services  Gross margin for the Consulting Services segment
increased 6.8 percentage points from 39.9% for the three months ended September
30, 2002 to 46.7% for the three months ended September 30, 2003. This increase
was primarily due to margin improvements in our domestic businesses. Domestic
margins were strong due to performance in our financial and valuations
services.

Technology Services  Gross margin for the Technology Services Segment
increased 6.9 percentage points from 68.5% for the three months ended September
30, 2002 to 75.4% for the three months ended September 30, 2003. This increase
is primarily due to the sales growth of Kroll Ontrack.

Background Screening Services  Gross margin for the Background Screening
Services segment increased 0.4 percentage points from 49.9% for the three
months ended September 30, 2002 to 50.3% for the three months ended September
30, 2003. This increase was primarily due to margin improvement in our European
Background Screening Services, and to the inclusion of Kroll Factual Data in
the third quarter 2003. These increases were partially offset by a decrease in
our domestic drug testing operations as a result of high levels of competition.

25



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Security Services  Gross margin for the Security Services segment
decreased 15.0 percentage points from 40.9% for the three months ended
September 30, 2002 to 25.9% for the three months ended September 30, 2003. This
decrease was primarily due to the 22.6% revenue decrease in our domestic
security and architectural services, as well as from upfront costs
relating to our European security group.

Operating expenses.Operating expenses increased $18.4 million, or 58.4%,
from $31.5 million for the three months ended September 30, 2002 to $49.9
million for the three months ended September 30, 2003. This increase is due to
the inclusion of Kroll Factual Data, which was acquired August 21, 2003 and
Kroll Zolfo Cooper which was acquired on September 5, 2002, as well as the
intangible amortization relating to these acquisitions. In addition, Kroll
recorded a $5.4 million net restructuring charge, described below, in the third
quarter of 2003, and increased expense to support the sales growth being
experienced in technology and consulting services.

As a percent of net sales, selling, general and administrative expenses
decreased 5.5 percentage points, from 35.7% in 2002 to 30.2% in 2003.

During the third quarter of 2003, Kroll recorded a restructuring charge of
$5.7 million in connection with the elimination of 10 non-hub offices worldwide
and the termination of 102 employees. The breakdown by segment was $4.1
million, $0.6 million, $0.2 million and $0.8 million within Consulting
Services, Security Services, Background Screening Services and Corporate
Advisory and Restructuring Services, respectively. Such activities were
undertaken to reduce costs and improve operating efficiencies. In addition, the accrued balance
related to Krolls 2001 restructuring plan was reduced by $0.3 million as a
result of a change in the original estimate of costs to be incurred.
The net effect
of these transactions is a $5.4 million restructuring charge.

|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 
|----------------------------------- |  | ------------- | ----- | ------------- |  | ---------------- | ----- | ---- |  | - | --- | ------------- |  | - | ----- | 
|                                    |  | 2003          |       |               |  |                  |       |      |  |   |     | Balance at   
|                                    |  | Restructuring |       |               |  |                  |       |      |  |   |     | September 30,
|                                    |  | Charge        |       | Cash Payments |  | Other Reductions |       | 2003
|                                    |  |               |       |               |  |                  |       |     
|Employee related                    |  | $             | 4,040 |               |  | $                | 1,824 |      |  | $ |    |               |  | $ | 2,216 | 
|Write-off of leasehold improvements |  |               | 205   |               |  |                  |       |      |  |   | 205 |               |  |   |      | 
|Impairment of equipment             |  |               | 120   |               |  |                  |       |      |  |   | 120 |               |  |   |      | 
|Lease rentals                       |  |               | 1,170 |               |  |                  | 110   |      |  |   |     |               |  |   | 1,060 | 
|Other
exit costs                    |  |               | 205   |               |  |                  | 205   |      |  |   |     |               |  |   |      | 
|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 
|                                    |  | $             | 5,740 |               |  | $                | 2,139 |      |  | $ | 325 |               |  | $ | 3,276 | 
|                                    |  |               |       |               |  |                  |       |      |  |   |     |               |  |   |       | 

The 2003
restructuring plan is expected to be substantially completed in early
2004. In addition, the restructuring charge is expected to yield an equivalent amount of
savings in 2004 representing a one-year pay back.

Interest
expense, net.Interest expense, net was essentially flat in the
third quarter 2003 compared to the third quarter 2002.

Provision for income taxes.The provision for income taxes increased $7.5
million from $7.4 million for the three months ended September 30, 2002 to
$14.9 million for the three months ended September 30, 2003. The increase in
the provision for income taxes is due to higher pre-tax income and an increase
in Krolls effective income tax rate. The increase in the effective tax rate is
due to a larger proportion of pre-tax income being attributable to domestic
operations which is taxed at a higher rate than our foreign operations.

Income from continuing operations.Income from continuing operations
increased $3.6 million from $5.4 million in the third quarter of 2002 to $9.0
million in the third quarter of 2003 as a result of the above mentioned items.

Loss from discontinued operations.Loss from discontinued operations
increased $0.3 million from zero in the third quarter of 2002 to $0.3 million
in the third quarter of 2003. This is primarily due to additional operating
expenses incurred by InPhoto, which was sold during the second quarter of 2003.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September
30, 2002

Net sales.Net sales increased $150.4 million, or 79.0%, from $190.5
million in the nine months ended September 30, 2002 to $340.9 million in the
nine months ended September 30, 2003.

Corporate Advisory and Restructuring Services  Net sales for the
Corporate Advisory and Restructuring Services segment increased $80.6 million,
or 209.0%, from $38.6 million for the nine months ended September 30, 2002 to
$119.2 million for the nine months ended September 30, 2003. This increase is
due to a 41.6% increase in revenues from Krolls European recovery and
turnaround division and the inclusion of Kroll Zolfo Cooper for the entire
period in 2003. Zolfo Cooper was acquired on September 5, 2002. In addition, Kroll
Zolfo Cooper

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recognized $14.3 million of success fees during the nine months ended
September 30, 2003. Approximately $0.8 million of success fees were recognized in the 2002 period.

Consulting Services  Net sales for the Consulting Services segment
increased $17.7 million, or 22.8%, from $77.7 million for the nine months ended
September 30, 2002 to $95.4 million for the nine months ended September 30,
2003. This increase was primarily driven by increases in demand for Krolls
forensic accounting, financial and valuation services in the United States of
261.2% and increases in Krolls intelligence and investigative services in
Europe of 26.8%. These increases were partially offset by decreases
in revenues from Krolls
domestic intelligence and investigative services of 2.1%, and in our Canadian
financial services unit of 8.8%.

Technology Services  Net sales for the Technology Services segment
increased $38.2 million, or 182.7%, from $20.9 million for the nine months
ended September 30, 2002 to $59.1 million for the nine months ended September
30, 2003. This increase is due to the inclusion of Kroll Ontrack for the entire
nine month period in 2003. Ontrack was acquired on June 13, 2002.

Background Screening Services  Net sales for the Background Screening
Services segment increased $14.5 million, or 44.1%, from $32.8 million for the
nine months ended September 30, 2002 to $47.2 million for the nine months ended
September 30, 2003. This increase was due to an increase of 16.6% in the demand
for Krolls domestic pre-employment background checking services, as well as
the inclusion of revenues from Kroll Factual Data, which was acquired on August
21, 2003.

Security Services  Net sales for the Security Services segment decreased
$0.6 million, or 2.8%, from $20.5 million for the nine months ended September
30, 2002 to $19.9 million for the nine months ended September 30, 2003. This
decrease was primarily the result of a decrease in corporate activity due to
the current domestic economic environment and a delay in the issuance of
additional government contracts.

Cost of sales and gross margin.Cost of sales increased $56.5 million, or
57.3%, from $98.6 million for the nine months ended September 30, 2002 to
$155.1 million for the nine months ended September 30, 2003. Gross margin as a
percentage of sales increased 6.3 percentage points from 48.2% for the nine
months ended September 30, 2002 to 54.5% for the nine months ended September
30, 2003.

Corporate Advisory and Restructuring Services  Gross margin for the
Corporate Advisory and Restructuring Services segment increased 1.1 percentage
points from 58.1% for the nine months ended September 30, 2002 to 59.2% for the
nine months ended September 30, 2003. This is primarily attributable to the
inclusion of Kroll Zolfo Cooper for the entire period in 2003 (Zolfo Cooper was
acquired on September 5, 2002), the growth in our Canadian restructuring unit,
a newly developed practice, and the recognition of $14.3 million in success
fees in the nine months ended September 30, 2003. No success fees were
recognized in the 2002 period.

Consulting Services  Gross margin for the Consulting Services segment
increased 3.9 percentage points from 40.8% for the nine months ended September
30, 2002 to 44.7% for the nine months ended September 30, 2003. This increase
was primarily attributable to increased utilization in our domestic consulting
business, which was driven by the growth of our forensic accounting and
litigation consulting practice areas. This was partially offset by a decrease
in margins in our Canadian operations due to a decrease in utilization.

Technology Services  Gross margin for the Technology Services Segment
increased 7.4 percentage points from 67.3% for the nine months ended September
30, 2002 to 74.7% for the nine months ended September 30, 2003. This increase
is primarily due to the inclusion of Kroll Ontrack for the entire period and to
the strong results of Kroll Ontracks data recovery and electronics evidence
products. Ontrack was acquired on June 13, 2002,

Background Screening Services  Gross margin for the Background Screening
Services segment decreased 1.3 percentage points from 49.5% for the nine months
ended September 30, 2002 to 48.2% for the nine

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months ended September 30, 2003. This decrease was primarily attributable
to decreased margins in Krolls drug testing unit due to increased competition.

Security Services  Gross margin for the Security Services segment
decreased 7.8 percentage points from 36.2% for the nine months ended September
30, 2002 to 28.4% for the nine months ended September 30, 2003. This decrease
is due to the margin impact of a 2.8% decrease in revenues, especially in the
architecture and technical design service areas. This was partially offset by
strong performance of our European Security Services.

Operating expenses. Operating expenses increased $56.5 million, or 78.0%,
from $72.3 million for the nine months ended September 30, 2002 to $128.8
million for the nine months ended September 30, 2003. This increase is
primarily due to the inclusion of Kroll Factual Data, which was acquired on
August 21, 2003, and the inclusion of the operating expenses for Kroll Ontrack and Kroll Zolfo
Cooper for the entire nine months ended September 30, 2003. Ontrack and Zolfo
Cooper were acquired on June 13, 2002 and September 5, 2002, respectively. In
addition, Kroll recorded a $5.4 million net restructuring charge in the third
quarter of 2003, and increased expense to support the sales growth
being experienced in
technology and consulting services.

As a percent of net sales, selling, general and administrative expenses
decreased 3.9 percentage points from 35.6% for the nine months ended September
30, 2002 to 31.7% for the nine months ended September 30, 2003.

Interest expense, net.Interest expense, net decreased $0.3 million during
the nine months ended September 30, 2003 due to interest earnings from larger
short-term investments made possible by Krolls increased average cash balances
in 2003.

Provision for income taxes.The provision for income taxes increased $16.3
million from $4.8 million for the nine months ended September 30, 2002 to $21.1
million for the nine months ended September 30, 2003. The increase in the
provision for income taxes is due to higher pre-tax income and an increase in
our effective income tax rate. The increase in the effective tax rate is due to
a larger proportion of pre-tax income attributable to domestic
operations which is taxed at a higher rate than our foreign operations.

Income from continuing operations.Income from continuing operations
increased $22.0 million, or 195.4%, from $11.3 million in the nine months ended
September 30, 2002 to $33.3 million in the nine months ended September 30,
2003, as a result of the above discussed factors.

Income
(loss) from discontinued operations.Income from discontinued operations
decreased $8.3 million from zero in the nine months ended September 30, 2002 to
an $8.3 million loss in the nine months ended September 30, 2003. This is due
to the loss on the sale of InPhoto which was recorded during the second quarter
2003.

Liquidity and Capital Resources

General

Kroll historically has met its operating cash needs by utilizing
borrowings under its credit arrangements to supplement cash provided by
operations.

Kroll currently believes that cash on hand, cash flows from operations and
available borrowings under its credit facility will be sufficient to meet its
current funding requirements and obligations.

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Cash Flows

Cash flows provided by operating activities. Operating activities provided
$64.2 million during the nine months ended September 30, 2003, compared with
$18.2 million provided from operating activities during the nine months ended
September 30, 2002. The $46.0 million increase reflects strong sales growth
from existing operations and contributions from strategic acquisitions
completed during 2003 and the latter half of 2002. In addition, $4.4 million of
cash was used to fund working capital investments in the 2002 period, compared
with $6.5 million provided by working capital investments in the 2003 period.

Cash flows used in investing activities. Investing activities used $103.7
million during the nine months ended September 30, 2003, compared with $77.2
million used by investing activities during the nine months ended September 30,
2002. In the 2002 period, $4.7 million was used for capital expenditures, $3.1
million was used for database additions and $4.2 million was used for additions
to intangible assets, compared to $9.2 million used for capital expenditures,
$2.9 million used for database additions and $5.0 million used for additions to
intangible assets in the 2003 period. Acquisitions, net of cash acquired, used
$70.9 million in the 2002 period and used $83.0 million in the 2003 period. In
2002, major acquisitions by Kroll included Ontrack, where Kroll received $28.4
million net cash, Zolfo Cooper, where Kroll used $98.1 million net cash, and
Crucible, where Kroll used $1.2 million net cash. In 2003, Kroll had one major
acquisition, Factual Data, in which $79.5 million net cash was used, and several small
acquisitions, in which $3.5 million net cash was used.

Cash flows provided by financing activities. Financing activities provided
$6.5 million during the nine months ended September 30, 2003, compared to $80.2
million provided from financing activities during the nine months ended
September 30, 2002. In the 2002 period, Krolls net payments on debt were $5.5
million, compared to payments on debt of $2.2 million in the
2003 period. Of the 2002 amount, Kroll paid financing fees of
$3.4 million. Of the 2003 amount, Kroll paid financing fees of $0.7 million. In addition, $8.1 million was
provided from the exercise of stock options and $0.3 million provided from
Krolls Employee Stock Purchase Plan in the 2002 period, compared with $7.0
million provided from the exercise of stock options and $2.6 million provided
from Krolls Employee Stock Purchase Plan in the 2003 period.

Revolving Line of Credit

On March 6, 2003, Kroll executed agreements with Fleet providing a
revolving credit facility of up to $25 million for a term of three years.
Krolls obligations under the Fleet revolving credit facility are guaranteed by
its domestic subsidiaries. In addition, the Fleet revolving credit facility is
secured by a security interest in substantially all of the assets of Kroll and
its material domestic subsidiaries and a pledge of the stock of Krolls
material domestic subsidiaries and 65% of the stock of certain of the foreign
subsidiaries of Kroll and its domestic subsidiaries.

The $25 million Goldman Sachs revolving credit facility undertaken as part
of a $100 million credit facility on September 5, 2002 was simultaneously
retired on March 6, 2003. As a result, Kroll wrote off approximately $0.1
million of unamortized deferred financing fees relating to this facility during
the first quarter of 2003. There were no borrowings made under the retired $25
million revolving credit facility.

During the first quarter of 2003, Kroll was required to cash collateralize
letters of credit which had been issued under the $25 million Goldman Sachs
revolving credit facility totaling $2.2 million. This amount was subsequently
released during the second and third quarters of 2003.

Borrowings under the Fleet revolving credit facility will bear interest,
at Krolls election, at a rate per annum equal to (1) the prime rate of Fleet
or (2) LIBOR plus 2.00%. During the term of the Fleet revolving credit
facility, Kroll will pay Fleet a quarterly fee equal to 0.375% per annum of the
unused portion of the line of credit. The Fleet revolving credit facility
requires Kroll to maintain a minimum level of EBITDA and net income and maximum
leverage and liabilities requirements and contains restrictions on the
incurrence of additional debt, the creation of any liens, the payment of cash
dividends, certain acquisitions, and distributions to certain subsidiaries.

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The Fleet revolving credit facility also contains other affirmative and
negative covenants and events of default customarily contained in debt
agreements of this type. There have been no borrowings made under this
facility. At September 30, 2003, Kroll was in compliance with all covenants and
provisions of this facility.

In connection with the acquisition of Buchler Phillips prior to 2002,
Kroll acquired a demand note with maximum borrowings of 2.5 million pounds
sterling. This amount was increased to 4.4 million pounds sterling in March
2002. The demand note bears interest at the Bank of Englands base rate plus
1.5%. During the first quarter of 2003, maximum borrowings permitted under the
demand note decreased from 4.4 million pounds sterling to 2.9 million pounds
sterling, or $4.8 million, as translated at September 30, 2003. The amount
outstanding under this demand note at September 30, 2003 was $3.4 million, a
decrease of $0.4 million from the amount outstanding at December 31, 2002 due
primarily to repayments made during the first quarter of 2003.

Senior Convertible Notes

The $30.0 million aggregate principal amount of 6% Convertible Notes due
2006 bear interest at the rate of 6% per annum payable semi-annually. However,
12% per annum will accrue on any principal payment that is past due. Kroll may
redeem these convertible notes at par plus accrued interest, in whole or in
part, beginning November 14, 2004, provided the note holders have been notified
in writing 20 days in advance. The note holders may, at any time prior to one
day before the earlier of the maturity date or the redemption date, convert all
or a portion of the principal amount of the notes into Kroll common stock at
the conversion price of $10.80 per share. The $30.0 million of notes are
presently convertible into 2,777,777 shares of Kroll common stock, subject to
customary and other anti-dilution adjustments.

Kroll has an effective registration statement with the Securities and
Exchange Commission covering the resale of the notes, and the shares of common
stock issuable upon conversion of these notes, and is required to keep the
registration statement effective until November 14, 2003.

Other
Debt

Long-term debt (including current portion) at September 30, 2003 also
reflects $9.1 million related to Factual Data as follows: $3.0 million of notes
payable incurred by Factual Data in connection with prior acquisitions and $6.1
million of capitalized lease obligations, $5.7 million of which relate to
service license agreements for consumer credit reporting services expiring in
April and December 2005 and February 2006 (monthly principal and interest
payments totaling $275,891, with interest at 9.985%) and $0.4 million of which
relate to leases of furniture and fixtures.

The $3.0 million of notes payable bears interest at different rates ranging from 5% to 12%
per annum and matures at different times from May 2004
through July 2008 as follows: within one year, $1.5 million;
2005, $0.5 million; 2006, $0.4 million; 2007,
$0.4 million; and 2008, $0.3 million.

Acquisitions and Other Investments

On January 15, 2003, Kroll issued 2.9 million shares of its common stock,
valued at approximately $55.3 million, to the former owners of Zolfo Cooper in
connection with the acquisition of Zolfo Cooper on September 5, 2002.

On March 14, 2003, Kroll consummated an asset purchase agreement with
Certico. Under the agreement, Kroll acquired most of Certicos assets and
assumed certain liabilities, for a purchase price of $3.3 million paid in cash.
Certico provides background checking services and its results of operations are
included within the Background Screening Services segment subsequent to the
date of acquisition.

On July 18, 2003, Kroll consummated an asset purchase agreement with
Intellifacts. Under the agreement, Kroll acquired substantially all of the
assets of Intellifacts and assumed certain liabilities for a purchase price of
$2.2 million paid in cash. Intellifacts, which provides background checking
services, is included within the Background Screening Services segment
subsequent to the date of acquisition.

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On March 21, 2003, Kroll completed the acquisition of PRM for a purchase
price of $1.4 million paid in cash. An additional payment of up to $1.9 million
will become payable after one year if agreed upon profit levels are achieved.
PRM provides pre-employment screening services in the UK, and its results of
operations are included within the Background Screening Services segment
subsequent to the date of acquisition.

On March 25, 2003, Kroll acquired the remaining 50% equity ownership
interest it did not own in Invex for a purchase price of $1.2 million in cash.
Invex, which provides corporate financial services in the UK, is included as
part of the Corporate Advisory and Restructuring Services segment subsequent to
the date of acquisition.

On June 23, 2003, Kroll entered into an agreement to acquire all of the
outstanding shares of Factual Data. The agreement provided that a wholly-owned
subsidiary of Kroll would merge into Factual Data, resulting in Factual Data
becoming a wholly-owned subsidiary of Kroll. The acquisition was consummated on
August 21, 2003. Kroll paid $87.4 million in cash and issued 934,712 shares of
its common stock in exchange for the shares of Factual Data outstanding at
closing. In addition, approximately 446,000 new shares of Kroll common stock
may be issued upon the future exercise of Factual Data options that Kroll
assumed in the transaction. The total purchase price, based on the final number
of shares outstanding that were exchanged in the transaction, as well as
transaction costs and expenses and the fair value of employee stock options
assumed by Kroll, was approximately $119 million. Factual Data is a provider of
customized information services to businesses across the United States that
assist them in making decisions, and its results of operations are included
within the Background Screening Services segment subsequent to the date of
acquisition.

The following table sets forth the components of the total purchase price (in thousands):

|                                               |  |   |         | 
|---------------------------------------------- |  | - | ------- | 
|Value of shares of common stock issued         |  | $ | 21,087  | 
|Cash consideration                             |  |   | 87,415  | 
|Fair value of employee stock options exchanged |  |   | 7,760   | 
|Estimated transaction costs and expenses       |  |   | 3,100   | 
|                                               |  |   |         | 
|Total purchase price                           |  | $ | 119,362 | 
|                                               |  |   |         | 

On
March 27, 2003, Kroll invested $1.0 million in convertible
notes of iJet Travel
Intelligence, Inc. (iJet) and also received warrants to
purchase shares of iJet. iJet is an intelligence
organization focused on delivering proactive travel risk management services
and real-time alerts to travelers, expatriates, corporations, government and
non-governmental organizations, learning institutions and the travel
industry. The iJet notes are convertible into preferred stock of iJet upon iJet raising additional equity
financing. This $1.0 million investment is in addition to
$1.5 million of Series B preferred stock of iJet and
warrants to purchase approximately 2.6 million shares of iJet
common stock that Kroll acquired in 2002.

On May 22, 2003, Kroll invested $2.0 million in EID. The investment in
EID, which provides vendor security solutions, is convertible into common stock
of EID at Krolls option.

Discontinued Operations

On June 18, 2003, Kroll sold its video surveillance subsidiary, InPhoto,
for $850,000 in cash. In connection with this disposition, Kroll wrote off $7.5
million of related goodwill.

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Contractual Obligations

Krolls contractual obligations were comprised of the following as of
September 30, 2003 (in thousands):

|                                                     |       |   |                        |         |               |   |           |        |           |   |        |        |  |   |        |        |  |   |         |        | 
|---------------------------------------------------- | ----- | - | ---------------------- | ------- | ------------- | - | --------- | ------ | --------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------- | ------ | 
|                                                     |       |   | Payments due by Period
|                                                     |       |   |                       
|                                                     |       |   |                        |         |               |   |           |        |           |   |        |        |  |   |        |        |  |   | After 5
|                                                     |       |   | Total                  |         | Within 1 Year |   | 2-3 Years |        | 4-5 Years |   | Years 
|                                                     |       |   |                        |         |               |   |           |        |           |   |       
|Long-term
debt (including revolving lines of credit) |       | $ | 43,102                 |         |               | $ | 8,722     |        |           | $ | 3,728  |        |  | $ | 30,652 |        |  | $ |        |       
|Operating leases                                     |       |   | 74,402                 |         |               |   | 15,726    |        |           |   | 25,758 |        |  |   | 18,942 |        |  |   | 13,976  |       
|Other long-term obligations                          |       |   | 750                    |         |               |   | 250       |        |           |   | 500    |        |  |   |       |        |  |   |        |       
|                                                     |       |   |                        |         |               |   |           |        |           |   |        |        |  |   |        |        |  |   |         |       
|                                                     | Total |   | $                      | 118,254 |               |   | $         | 24,698 |           |   | $      | 29,986 |  |   | $      | 49,594 |  |   | $       | 13,976 | 
|                                                     |       |   |                        |         |               |   |           |        |           |   |        |        |  |   |        |        |  |   |         |       

Foreign operations. Kroll attempts to mitigate the risks of doing business
in foreign countries by separately incorporating its operations in those
countries, maintaining reserves for credit losses and insuring equipment to
protect against losses related to political risks and terrorism.

Quarterly fluctuations. Although Kroll does have some long term contracts
with its clients, its ability to generate sales is generally dependent upon
obtaining many new projects each year, most of which are
relatively short term. In addition, during the latter part of the
fourth quarter of every year, Krolls business is generally
impacted by fewer background and mortgage requests and fewer
consulting assignments compared with other quarters within the year.
Accordingly, period-to-period comparisons within a given year or
between years will need to take this normal fluctuation into
consideration.

Recent Accounting Pronouncements

On January 1, 2003, Kroll adopted SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS 143 addresses financial accounting and reporting
for obligations and costs associated with the retirement of tangible long-lived
assets. The adoption of SFAS No. 143 did not impact Krolls consolidated
results of operations or financial position.

On January 1, 2003, Kroll adopted SFAS No. 145, Rescission of FASB
Statements Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections. This statement eliminates the classification of gains or losses
on the extinguishment of debt as an extraordinary item and requires that such
gains or losses be evaluated for extraordinary classification under the
criteria of APB No. 30 Reporting Results of Operations. In addition, any
prior period extraordinary items that do not meet the criteria of APB No. 30
will be required to be reclassified to continuing operations. This statement
also requires sales-leaseback accounting for certain modifications that have
economic affects that are similar to sales-leaseback transactions, and makes
various other technical corrections to existing pronouncements.

On January 1, 2003, Kroll adopted SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 supersedes EITF
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring) and requires that costs associated with an exit or
disposal plan be recognized when incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of SFAS
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value-based method of accounting for stock-based
employee compensation. In addition, this statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used in reporting results.
Management complied with the additional disclosure requirements effective
December 31, 2002.

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In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements Nos.
5, 57, and 107 and Rescission of FASB Interpretation No. 34 (FIN No. 45).
FIN No. 45 requires that upon issuance of a guarantee, an entity must recognize
a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting by requiring identical accounting for guarantees issued
with separately identified consideration and guarantees issued without
separately identified consideration. For Kroll, the initial recognition and
measurement provisions of FIN No. 45 applicable to guarantees issued or
modified after December 31, 2002 did not have an impact on its consolidated
results of operations or financial condition. Kroll adopted the additional
disclosure provisions of FIN No. 45 effective December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, which addresses consolidation by business
enterprises of variable interest entities (FIN No. 46). In general, a
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. A
variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. The objective of FIN No. 46 is not to
restrict the use of variable interest entities but to improve financial
reporting by companies involved with variable interest entities. Until now, a
company generally has included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN No.
46 changes that by requiring a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns or both. The consolidation requirements of FIN No. 46
apply immediately to variable interest entities created after January 31, 2003
and to financial statements issued after December 15, 2003 for older entities.
Certain aspects of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. Kroll adopted the additional disclosure
provisions of FIN No. 46 effective December 31, 2002 and the consolidation
requirements of FIN No. 46 to variable interest entities created after January
31, 2003. The adoption of FIN No. 46 did not have an effect on Krolls
consolidated results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. In general, SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. As Kroll does not utilize derivative
instruments, the adoption of SFAS No. 149 did not have an effect on its
consolidated results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for classification and measurement of
mandatorily redeemable financial instruments, obligations to repurchase the
issuers equity shares by transferring assets and certain obligations to issue
a variable number of shares. SFAS No. 150 is effective on July 1, 2003 for
financial instruments created or modified after May 31, 2003. The adoption of
SFAS No. 150 did not have an effect on Krolls consolidated results of
operations or financial position.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Kroll does not expect to enter into financial instruments for trading or
hedging purposes. Kroll does not currently anticipate entering into interest
rate swaps and/or similar instruments.

Krolls carrying values of cash, accounts receivable, accounts payable and
accrued expenses are a reasonable approximation of their fair value. Krolls
carrying value of its long-term debt is below its fair value as the conversion
price of the Companys 6% Convertible Notes is below the current market price
of its common stock.

Krolls business is subject to certain risks, including, but not limited
to, differing economic conditions, loss of significant customers, changes in
political climate, differing tax structures, other regulations and restrictions
and foreign exchange rate volatility. Krolls future results could be
materially and adversely impacted by changes in these or other factors.

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ITEM 4. CONTROLS AND PROCEDURES



| | (a) |  | Disclosure Controls and Procedures.Krolls management, with the
participation of Krolls Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as of the end of the period covered by this report.
Based on such evaluation, Krolls Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period,
Krolls disclosure controls and procedures are effective.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Internal Control Over Financial Reporting.There have not been any
changes in Krolls internal controls over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect,
Krolls internal control over financial reporting.                                                                                                                                                                                                                     

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

For information on litigation, please see Note 11 of the notes to the
consolidated condensed unaudited financial statements included elsewhere in
this Quarterly Report of Form 10-Q.

In addition to the matters referred to above, Kroll is involved in
litigation from time to time in the ordinary course of its business; however,
Kroll does not believe that there is any currently pending litigation,
individually or in the aggregate, that is likely to have a material adverse
effect on its business, financial position, results of operations or cash
flows.

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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Krolls revolving credit facility described under Managements Discussion
and Analysis of Financial Condition and Results of Operations includes
negative and financial covenants which, among other things, prohibit the
payment of cash dividends by the Company except in certain limited
circumstances, require the Company to maintain a minimum level of EBITDA, net
income and domestic assets and meet leverage and net worth ratios.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

|        |  |                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                
|Number  |  | Description                                                                                                    
|        |  |                                                                                                                
|31.1    |  | Certification of Krolls Chief Executive Officer, as
required by Section 302 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                
|31.2    |  | Certification of Krolls Chief Financial Officer, as
required by Section 302 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                
|32.1    |  | Certification of Krolls Chief Executive Officer, as
required by Section 906 of the Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                
|32.2    |  | Certification of Krolls Chief Financial Officer, as
required by Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

During the three months ended September 30, 2003, Kroll filed the
following current reports on Form 8-K:

|                |  |                                                                 
|--------------- |  | ----------------------------------------------------------------
|Date of report: |  | July 31, 2003 (filed on July 31, 2003); Items 5, 7 and 9.       
|                |  |                                                                 
|                |  | August 18, 2003 (filed on August 19, 2003); Items 5 and 7.      
|                |  |                                                                 
|                |  | August 21, 2003 (filed on September 5, 2003); Items 2 and 7.    
|                |  |                                                                 
|                |  | September 17, 2003 (filed on September 17, 2003); Item 7.       
|                |  |                                                                 
|                |  | September 19, 2003 (filed on September 19, 2003);
Items 5 and 7.
|                |  |                                                                 

| |                                                                             |  |                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following financial statements were filed with this Report on
Form 8-K:
| |                                                                             |  |                                                                                                                                                                                                                                                 
| | Exhibit 99.1                                                                |  | Restated Selected Financial Data.                                                                                                                                                                                                               
| |                                                                             |  |                                                                                                                                                                                                                                                 
| | Exhibit 99.2                                                                |  | Restated Managements Discussion and Analysis
of Financial Condition and Results of Operations.                                                                                                                                                 
| |                                                                             |  |                                                                                                                                                                                                                                                 
| | Exhibit 99.3                                                                |  | Restated Audited Consolidated Financial
Statements of Kroll Inc. at December 31, 2002 and 2001 and
for each of the years then ended and historical Audited
Consolidated Financial Statements of Kroll Inc. for the year
ended December 31, 2000.

38



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##### Table of Contents






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, this 14th day of November, 2003.

| |  |            |  |                             
| |  | ---------- |  | ----------------------------
| |  | Kroll Inc.
| |  |            |  |                             
| |  | By:        |  | /s/ Steven L. Ford          
| |  |            |  |                             
| |  |            |  | Steven L. Ford              
| |  |            |  | Executive Vice President and
| |  |            |  | Chief Financial Officer     

39