SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q

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

                   For the quarterly period ended July 1, 2000

                                       OR

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

For the transition period from               to
                               -------------   ------------
Commission file number         0-20109
                      -------------------------------------
                               Kronos Incorporated

--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

Massachusetts                                                    04-2640942
--------------                                                  ----------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                    297 Billerica Road, Chelmsford, MA 01824
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (978) 250-9800

--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                       400 Fifth Avenue, Waltham, MA 02154
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

     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
                                    --------                    --------

     As of July 29, 2000,  12,334,935  shares of the registrant's  Common Stock,
$.01 par value, were outstanding.

<PAGE>

                               KRONOS INCORPORATED

                                      INDEX

PART I.  FINANCIAL INFORMATION                                         Page

 Item 1.Condensed Consolidated Financial Statements (Unaudited)

        Condensed Consolidated Statements of Income for the Three
         Months and Nine Months Ended July 1, 2000 and July 3, 1999      1

        Condensed Consolidated Balance Sheets at July 1, 2000
         and September 30, 1999                                          2

        Condensed Consolidated Statements of Cash Flows for the Nine
         Months Ended July 1, 2000 and July 3, 1999                      3

        Notes to Condensed Consolidated Financial Statements           4 - 6

 Item 2. Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                     7 - 12

PART II. OTHER INFORMATION


 Item 5. Other Information                                               13

 Item 6. Exhibits and Reports on Form 8-K                                13

      Signatures                                                         14

      Exhibit Index                                                      15

<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements (Unaudited)

                               KRONOS INCORPORATED

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

               (In thousands, except share and per share amounts)
                                    UNAUDITED

<TABLE>
<CAPTION>

                                                               Three Months Ended         Nine Months Ended

                                                           -------------------------   ------------------------
                                                              July 1,      July 3,        July 1,       July 3,
                                                               2000          1999          2000          1999
                                                           -----------   -----------   -----------   -----------
<S>                                                        <C>           <C>           <C>           <C>
Net revenues:
      Product ..........................................   $    38,602   $    43,965   $   106,845   $   117,788
      Service ..........................................        29,531        23,252        87,722        64,230
                                                           -----------   -----------   -----------   -----------
                                                                68,133        67,217       194,567       182,018
Cost of sales:
      Product ..........................................         8,729         9,883        24,586        27,196
      Service ..........................................        17,813        13,664        51,068        38,521
                                                           -----------   -----------   -----------   -----------
                                                                26,542        23,547        75,654        65,717
                                                           -----------   -----------   -----------   -----------
           Gross profit ................................        41,591        43,670       118,913       116,301
Expenses:
      Sales and marketing ..............................        24,147        23,094        68,492        63,458
      Engineering, research and development ............         7,245         6,988        21,834        19,616
      General and administrative .......................         4,409         4,030        12,853        11,246
      Other expense, net ...............................           533           106           628           571
                                                           -----------   -----------   -----------   -----------
                                                                36,334        34,218       103,807        94,891
                                                           -----------   -----------   -----------   -----------
           Income before income taxes ..................         5,257         9,452        15,106        21,410
Provision for income taxes .............................         1,945         3,318         5,589         7,515
                                                           -----------   -----------   -----------   -----------
           Net income ..................................   $     3,312   $     6,134   $     9,517   $    13,895
                                                           ===========   ===========   ===========   ===========


Net income per common share:

           Basic .......................................   $      0.27   $      0.49   $      0.76   $      1.11
                                                           ===========   ===========   ===========   ===========
           Diluted .....................................   $      0.26   $      0.47   $      0.73   $      1.06
                                                           ===========   ===========   ===========   ===========

Average common and common equivalent shares outstanding:

           Basic .......................................    12,404,310    12,528,865    12,460,641    12,537,394
                                                           ===========   ===========   ===========   ===========
           Diluted .....................................    12,734,592    13,115,132    13,016,507    13,051,479
                                                           ===========   ===========   ===========   ===========
</TABLE>

         See accompanying notes to condensed consolidated financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                               July 1,    September 30,
                                                                                 2000          1999
                                                                               ---------    ---------
                                          ASSETS

<S>                                                                            <C>          <C>
Current assets:
   Cash and equivalents ....................................................   $  10,654    $  20,148
   Marketable securities ...................................................      13,683       20,893
   Accounts receivable, less allowances of $7,472 at
       July 1, 2000 and $6,791 at September 30, 1999 .......................      64,810       66,817
   Deferred income taxes ...................................................       6,139        5,414
   Other current assets ....................................................      13,817       11,872
                                                                               ---------    ---------
          Total current assets .............................................     109,103      125,144

Property, plant and equipment, net .........................................      39,486       23,981
Marketable securities ......................................................      16,000       21,400
Excess of cost over net assets of businesses acquired, net .................      29,167       29,946
Deferred software development costs, net ...................................      14,108       12,218
Other assets ...............................................................      15,696       15,554
                                                                               ---------    ---------
           Total assets ....................................................   $ 223,560    $ 228,243
                                                                               =========    =========

                           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ........................................................   $   7,329    $   8,503
   Accrued compensation ....................................................      16,532       21,106
   Accrued expenses and other current liabilities ..........................      37,286       32,753
   Deferred maintenance revenues ...........................................      46,206       41,636
                                                                               ---------    ---------
           Total current liabilities .......................................     107,353      103,998
Deferred maintenance revenues ..............................................      17,079       18,818
Other liabilities ..........................................................       1,370        1,169
Shareholders' equity:
   Preferred Stock, par value $1.00 per share:  authorized 1,000,000 shares,
      no shares issued and outstanding .....................................        --           --
   Common Stock, par value $.01 per share:  authorized 50,000,000 shares,
     12,634,728 shares issued at July 1, 2000 and September 30, 1999 .......         126          126
   Additional paid-in capital ..............................................      19,553       31,087
   Retained earnings .......................................................      91,660       82,143
   Accumulated other comprehensive loss ....................................      (1,088)        (337)
   Cost of Treasury Stock  (302,426 shares and 192,165
      shares at July 1, 2000 and September 30, 1999, respectively) .........     (12,493)      (8,761)
                                                                               ---------    ---------
           Total shareholders' equity ......................................      97,758      104,258
                                                                               ---------    ---------
           Total liabilities and shareholders' equity ......................   $ 223,560    $ 228,243
                                                                               =========    =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                             Nine Months Ended

                                                                                            ------------------
                                                                                             July 1,   July 3,
                                                                                              2000      1999
                                                                                            --------  --------
<S>                                                                                         <C>       <C>
Operating activities:
      Net income .........................................................................  $  9,517  $ 13,895
      Adjustments to reconcile net income to net cash and equivalents
          provided by operating activities:
               Depreciation ..............................................................     5,826     5,938
               Amortization of excess of cost over net assets of businesses acquired .....     4,842     2,952
               Amortization of deferred software development costs .......................     5,356     4,340
               Provision for deferred income taxes .......................................    (3,808)
               Changes in certain operating assets and liabilities:
                   Accounts receivable, net ..............................................     2,685    (4,830)
                   Deferred maintenance revenue ..........................................     2,115    14,374
                   Accounts payable, accrued compensation
                        and other liabilities ............................................      (898)    7,049
                   Other .................................................................     1,025    (7,721)
                                                                                            --------  --------

                        Net cash and equivalents provided by operating activities ........    26,660    35,997

Investing activities:
      Purchase of property, plant and equipment ..........................................   (16,959)   (9,900)
      Capitalization of software development costs .......................................    (7,246)   (6,389)
      Decrease (increase) in marketable securities .......................................    12,610   (19,887)
      Acquisitions of businesses .........................................................    (9,009)   (9,771)
                                                                                            --------  --------

                        Net cash and equivalents used in investing activities ............   (20,604)  (45,947)

Financing activities:
      Net proceeds from exercise of stock option and employee stock
          purchase plans .................................................................     5,931     3,835
      Purchase of treasury stock .........................................................   (21,365)   (4,457)
      Proceeds from sale of put options ..................................................       169
                                                                                            --------  --------

                        Net cash and equivalents used in financing activities ............   (15,265)     (622)

Effect of exchange rate changes on cash and equivalents ..................................      (285)      (66)
                                                                                            --------  --------

Decrease in cash and equivalents .........................................................    (9,494)  (10,638)
Cash and equivalents at the beginning of the period ......................................    20,148    29,888
                                                                                            --------  --------

Cash and equivalents at the end of the period ............................................  $ 10,654  $ 19,250
                                                                                            ========  ========
</TABLE>


    See accompanying notes to condensed consolidated financial statements.

<PAGE>

                               KRONOS INCORPORATED

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

NOTE A - General

The accompanying  unaudited condensed  consolidated financial statements include
all  adjustments,  consisting  of normal  recurring  accruals,  that  management
considers  necessary for a fair presentation of the Company's financial position
and results of operations as of and for the interim periods  presented  pursuant
to the rules and regulations of the Securities and Exchange Commission.  Certain
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to such rules and  regulations,  although the Company believes
the  disclosures  in  these  financial  statements  are  adequate  to  make  the
information  presented not misleading.  These condensed  consolidated  financial
statements  should be read in conjunction with the Company's  audited  financial
statements  for the  fiscal  year  ended  September  30,  1999.  The  results of
operations for the three and nine months ended July 1, 2000 are not  necessarily
indicative of the results for a full fiscal year.

NOTE B  -  Fiscal Quarters

The Company utilizes a system of fiscal quarters.  Under this system,  the first
three  quarters  of each  fiscal  year end on a  Saturday.  However,  the fourth
quarter of each fiscal year will always end on  September  30.  Because of this,
the number of days in the first  quarter  (93 days in fiscal 2000 and 94 days in
fiscal  1999) and fourth  quarter  (91 days in fiscal 2000 and 89 days in fiscal
1999) of each  fiscal  year  varies  from  year to year.  The  second  and third
quarters of each fiscal year will be exactly  thirteen  weeks long.  This policy
does not have a material  effect on the  comparability  of results of operations
between quarters.

NOTE C - Revenue Recognition

The Company recognizes revenues from sales and sales-type leases of its systems,
application  software,  parts and components when a noncancelable  agreement has
been signed, the product shipped, there are no uncertainties surrounding product
acceptance,  the fees are fixed and  determinable  and  collection is considered
probable. From time to time customers request delayed shipment,  usually because
of scheduling for systems  integration  and /or  lack of  storage  space  at the
customers'  facilities  during  the  implementation.   In  such  bill  and  hold
transactions,  the  Company  recognizes  revenue  when  the  criteria  of  Staff
Accounting Bulletin No. 101 are satisfied.  Revenues from maintenance agreements
are  recognized  ratably  over the  contractual  period  and all  other  service
revenues are recognized as the services are performed.

NOTE D - Marketable Securities

A portion of the  Company's  portfolio  of state  revenue  bonds and  government
agency bonds was placed  under the  direction of an  investment  advisor  during
fiscal year 2000 in order to better meet the Company's investment objectives. As
a  result,  the  Company  has  reclassified   $25,428,000  of  these  marketable
securities  from  held-to-maturity  to  available-for-sale  at July 1, 2000. The
related unrealized loss as of July 1, 2000 was $206,000  and is included in
Other Comprehensive Loss.

NOTE E - Accrued Expenses and Other Current Liabilities

Accrued  expenses and other  current  liabilities  consist of the  following (in
thousands):

<TABLE>
<CAPTION>

                                                  July 1,   September 30,
                                                   2000         1999
                                                 -------      -------
<S>                                              <C>          <C>
Deferred professional service revenue .......    $17,153      $17,262
Accrued acquisition payments ................      1,201        6,461
Federal and state taxes payable .............      7,461        2,522
Accrued construction costs ..................      4,285         --
Accrued other ...............................      7,186        6,508
                                                 -------      -------
                                                 $37,286      $32,753
                                                 =======      =======
</TABLE>
<PAGE>


NOTE F - Comprehensive Income

For the three and nine months ended July 1, 2000 and July 3, 1999  comprehensive
income consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                              Three Months Ended        Nine Months Ended

                                              --------------------    ---------------------
                                               July 1,    July 3,       July 1,    July 3,
                                                2000       1999          2000       1999
                                              ---------  ---------    ---------   ---------
<S>                                           <C>        <C>           <C>          <C>
Comprehensive income:
    Net income .............................. $ 3,312    $ 6,134       $ 9,517      $13,895
    Cumulative translation adjustment .......    (236)       217          (545)         815
    Cumulative unrealized losses
       on available-for-sale securities .....    (206)        --          (206)          --
                                              ---------  ---------    ---------    ---------
Total comprehensive income .................. $ 2,870     $ 6,351      $ 8,766      $14,710
                                              =========  =========    =========    =========
</TABLE>





NOTE G - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>

                                          Three Months Ended             Nine Months Ended

                                     ---------------------------     ---------------------------
                                        July 1,         July 3,        July 1,         July 3,
                                         2000            1999            2000           1999
                                     -----------     -----------     -----------     -----------

<S>                                  <C>             <C>             <C>             <C>
Net income (in thousands) ......     $     3,312     $     6,134     $     9,517     $    13,895
                                     ===========     ===========     ===========     ===========


Weighted-average shares ........      12,404,310      12,528,865      12,460,641      12,537,394

Effect of dilutive securities:
   Put options .................            --              --            10,266            --
   Employee stock options ......         330,282         586,267         545,600         514,085
                                     -----------     -----------     -----------     -----------

Adjusted weighted-average shares
   and assumed conversions .....      12,734,592      13,115,132      13,016,507      13,051,479
                                     ===========     ===========     ===========     ===========

Basic earnings per share .......     $      0.27     $      0.49     $      0.76     $      1.11
                                     ===========     ===========     ===========     ===========

Diluted earnings per share .....     $      0.26     $      0.47     $      0.73     $      1.06
                                     ===========     ===========     ===========     ===========
</TABLE>
<PAGE>

                                                              7

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
 of Operations

Forward Looking Statements

         This  discussion  includes  certain  forward-looking  statements  about
Kronos' business and its  expectations.  Any such statements are subject to risk
that could cause the actual results to vary materially from expectations.  For a
further  discussion  of the various risks that may affect  Kronos'  business and
expectations,  see "Certain Factors That May Affect Future Operating Results" at
the end of  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations.

Results of Operations

       Revenues.  Revenues  for the three  and nine  months  ended  July 1, 2000
amounted to $68.1 million and $194.6 million, respectively, as compared to $67.2
million and $182.0  million in the  respective  comparable  periods in the prior
year.  Revenue grew 1% and 7% in the three and nine month  periods ended July 1,
2000,  respectively,  as  compared to 28% and 27% in the  respective  comparable
periods in the prior year.  The revenue  growth rate  experienced in fiscal 1999
exceeded  Kronos'  historical  growth rate of  approximately  20%. The unusually
strong  growth rates  experienced  during fiscal 1999 were in part due to demand
for new  products  and product  upgrades  resulting  from  customers'  Year 2000
compliance efforts. Management believes that as a result of customers' Year 2000
compliance efforts, Kronos benefited from an accelerated sales cycle during that
period.  Management believes that demand continues to exist for Kronos' products
and services and that Kronos is experiencing a more elongated sales cycle during
fiscal 2000.  The  elongation of the sales cycle is,  management  believes,  the
result of the combination of customers  delaying  investment in new applications
after the  significant  investments  made in  preparation  for the Year 2000 and
increased complexity in the sales process for Kronos products and services.  The
increased complexity in the sales process can be attributed to factors including
more complex product technology and an increase in average transaction size.

       Product revenues for the quarter amounted to $38.6 million as compared to
$44.0 million in the same period of fiscal 1999.  Product revenues for the first
nine months of fiscal 2000 were $106.8  million as compared to $117.8 million in
the first nine months of the prior year.  Product revenue declined 12% and 9% in
the three and nine month periods ended July 1, 2000, respectively, and increased
25%  and  24%  in the  respective  comparable  periods  in the  prior  year.  As
previously  indicated,  management  believes that as a result of customers' Year
2000  compliance  efforts  during fiscal 1999,  Kronos'  product  revenue growth
benefited  from  the   combination  of  unusually   strong  product  demand  and
accelerated  sales  cycles.  Management  believes  product  revenues  have  been
negatively  affected  in  fiscal  2000  for  the  reasons  described  above  and
anticipates  that product  revenues will continue to be similarly  affected over
the remainder of the fiscal year.

       Service  revenues for the third  quarter of fiscal 2000 amounted to $29.5
million  as  compared  to $23.3  million in the third  quarter  of fiscal  1999.
Service  revenues for the first nine months of fiscal 2000 were $87.7 million as
compared to $64.2  million in the first nine  months of the prior year.  Service
revenue growth was 27% and 37% in the three and nine month periods ended July 1,
2000, respectively,  as compared to 32% in each of the comparable periods in the
prior year. The growth in service revenues in all periods principally  reflected
an increase in maintenance  revenue from expansion of the installed base and the
level  of  services  sold to the  installed  base,  and to a lesser  extent,  an
increase  in the  level  of  maintenance  contracts  and  professional  services
accompanying new and upgrade sales. Also contributing to the growth in the three
and nine month  periods  ended July 1, 2000 were  maintenance  and  professional
service revenues  resulting from acquisitions of various dealer territories over
the past four quarters.  Management  anticipates that the service revenue growth
rate over the remainder of the fiscal year will be less than that experienced in
the third quarter due to (i) the level of product revenues achieved in the first
nine months of fiscal 2000 and (ii) the  normalization of service revenues which
had been affected by dealer acquisitions in the prior year.

       Gross  Profit.  Gross profit as a  percentage  of revenues was 61% in the
three and nine month periods ended July 1, 2000,  decreasing from 65% and 64% in
the respective  comparable periods in the prior year. The decrease in margin was
directly  attributable  to  lower  product  revenues.   Service  revenue,  which
generates  lower  gross  margin,  has grown  faster  than  product  revenue  and
represents  a greater  proportion  of total  revenue in the three and nine month
periods  ended July 1, 2000 than in the  comparable  periods of the prior  year.
Management anticipates that gross profit will continue to be negatively affected
over the remainder of the fiscal year due to the  anticipated mix of product and
service revenues.

       Product gross profit as a percentage  of product  revenues was 77% in the
three and nine month  periods  ended July 1, 2000 as  compared to 78% and 77% in
the respective  comparable periods in the prior year. Software,  which typically
generates higher gross profit,  was a greater  proportion of product revenues in
the three and nine month  periods  ended July 1, 2000 as  compared  to the prior
year. However, higher software development amortization and production costs due
to lower sales  volume  and, to a lesser  extent,  discounting  of  manufactured
product on certain significant transactions, offset the effect of this favorable
mix.  Management  anticipates that product gross margin for the remainder of the
fiscal year will be comparable to that  experienced  in the first nine months of
the fiscal year.  Service gross profit as a percentage  of service  revenues was
40%  and  42%  in  the  three  and  nine  month  periods  ended  July  1,  2000,
respectively,  compared  to 41% and 40% in the  comparable  periods of the prior
year.  The decrease in service  gross profit in the third quarter as compared to
the first six months of the  fiscal  year was  principally  due to the timing of
increased  investments in its service  organization,  including program spending
and additional  headcount  related to a dealer  acquisition that occurred at the
end of the prior quarter. The increase in service gross profit in the nine month
period ended July 1, 2000 was  primarily  attributable  to the growth in service
revenues  without  a  proportionate  increase  in  service  expenses.  This  has
principally  been  accomplished  by improving the  efficiency in the delivery of
support  services by  centralizing  the software  support  function,  leveraging
web-based  self-service  offerings  and, as customers  have  upgraded to current
versions of Kronos' product,  reducing the number of versions requiring support.
In addition,  Kronos has also focused on more  accurately  and fully billing for
professional  services,  which also improve  service  gross  profit.  Management
anticipates  that service gross margin for the remainder of the fiscal year will
be comparable to that experienced in the first nine months of the fiscal year.

       Expenses. Expenses as a percentage of revenues were 53% for the three and
nine  month  periods  ended  July 1,  2000,  as  compared  to 51% and 52% in the
respective comparable periods in the prior year. The increase in expenses in the
three and nine month  periods  ended July 1, 2000 as  compared to the prior year
was  attributable to increases in program and  infrastructure  costs incurred to
support  anticipated  increases in business volume,  product development efforts
and  amortization  of  intangible  assets  related to  acquisitions.  Management
anticipates  expenses as a  percentage  of revenues  over the  remainder  of the
fiscal year will be less than that experienced in the third quarter.

       Sales and marketing  expenses as a percentage of revenues were 35% in the
three and nine month  periods ended July 1, 2000, as compared to 34% and 35% for
the  respective  comparable  periods in the prior year.  Management  anticipates
sales and  marketing  expenses as a percentage of revenues over the remainder of
the  fiscal  year  will be less  than that  experienced  in the  third  quarter.
Engineering,  research and development expenses as a percentage of revenues were
11% in the three and nine month  periods  ended July 1, 2000 as  compared to 10%
and 11% in the  respective  comparable  periods in the prior  year.  Engineering
expenses of $7.2  million and $7.0  million in the third  quarter of fiscal 2000
and 1999,  respectively,  are net of capitalized  software  development costs of
$2.4  million  and $2.2  million,  respectively.  Engineering  expenses of $21.8
million  and $19.6  million  in the first nine  months of fiscal  2000 and 1999,
respectively,  are net of capitalized software development costs of $7.2 million
and  $6.4  million,  respectively.  The  growth  in  engineering,  research  and
development   expenses  this  year  resulted  principally  from  the  continuing
development  and   integration  of  new  products  and  acquired   technologies.
Management  anticipates  that over the  remainder  of fiscal  year  engineering,
research and development expenses as a percentage of revenues will be comparable
to that experienced in the first nine months of the fiscal year.

       General and  administrative  expenses as a percentage of revenues were 6%
and 7% in the three and nine month periods ended July 1, 2000, respectively,  as
compared  to 6% in each of the  comparable  periods  in the  prior  year.  Other
expense,  net  amounted to less than 1% of revenues  for all periods  presented.
Other expense,  net is composed  primarily of interest  income earned on Kronos'
investments  offset by amortization of intangible assets related to acquisitions
made by Kronos.



       Income  Taxes.  The  provision for income taxes as a percentage of pretax
income  was 37% in the  three  and nine  month  periods  ended  July 1,  2000 as
compared to 35% for each of the comparable  periods in the prior year. The lower
effective income tax rate experienced in fiscal 1999 was primarily  attributable
to tax benefits  resulting from Kronos' sale of its South African  subsidiary as
well as substantial utilization of foreign net operating loss carryforwards.

Liquidity and Capital Resources

         Working  capital  as of July 1,  2000,  amounted  to  $1.7  million  as
compared to $21.1 million at September 30, 1999. The decrease in working capital
was  principally  attributable  to Kronos'  investment  in  property,  plant and
equipment (including the construction of its corporate  headquarters  facility),
the repurchase of common shares under Kronos' Stock Repurchase Program and, to a
lesser  extent,  payments  related  to  acquisitions  of  businesses.  Cash  and
equivalents  and marketable  securities  amounted to $40.3 million as of July 1,
2000 and $62.4 million as of September 30, 1999.

         Cash generated from  operations  amounted to $26.7 million in the first
nine months of fiscal 2000 as compared to $36.0 million in the first nine months
of fiscal 1999. The decrease is principally  attributable to a declining rate of
increase in the sale of standard and extended  maintenance  contracts  and lower
earnings  partially offset by increased  collection of accounts  receivable from
trade customers.  Cash used for property, plant and equipment increased to $17.0
million  in the  first  nine  months of fiscal  2000  from $9.9  million  in the
comparable period of the prior year. The increase in the investment in property,
plant and  equipment  was due to costs  related to the  construction  of Kronos'
corporate  headquarters  facility as well as investments in information  systems
and  infrastructure to improve and support expanding  operations.  Over the next
three months Kronos  anticipates it will use approximately  $4.0 million in cash
for the completion of its headquarters facility.

         Under Kronos' stock  repurchase  program,  Kronos  repurchased  494,000
common  shares  in the  first  nine  months  of  fiscal  2000 at a cost of $21.4
million.  The common shares  repurchased  under the program are used for Kronos'
employee stock option plans and employee  stock purchase plan.  Cash provided by
operations was more than sufficient to fund investments in capitalized  software
development costs, property,  plant and equipment and stock repurchases.  Kronos
believes it has available  adequate cash and investments and operating cash flow
to fund its investments in property,  plant and equipment,  software development
costs,   cash  payments   related  to  acquisitions  and  any  additional  stock
repurchases over the remainder of the fiscal year.


<PAGE>


Certain Factors That May Affect Future Operating Results

         Except for historical matters,  the matters discussed in this Quarterly
Report on Form 10-Q are  "forward-looking  statements" within the meaning of the
Private Securities  Litigation Reform Act of 1995 (the "Act"). Kronos desires to
take  advantage of the safe harbor  provisions of the Act and is including  this
statement for the express  purpose of availing  itself of the  protection of the
safe harbor with respect to all forward  looking  statements  that involve risks
and uncertainties.

         Kronos'  actual  operating  results may differ from those  indicated by
forward  looking  statements  made in this  Quarterly  Report  on Form  10-Q and
presented  elsewhere  by  management  from time to time  because  of a number of
factors including the potential  fluctuations in quarterly  results,  timing and
acceptance  of new  product  introductions  by Kronos and its  competitors,  the
ability  to attract  and  retain  sufficient  technical  personnel,  competitive
pricing  pressure,  the dependence on Kronos' time and attendance  product line,
and the  dependence on alternate  distribution  channels and on key vendors,  as
further described below and in Kronos' Annual Report on Form 10-K for the fiscal
year ended September 30, 1999, which are specifically  incorporated by reference
herein.

         Potential   Fluctuations  in  Quarterly   Results.   Kronos'  quarterly
operating  results may fluctuate as a result of a variety of factors,  including
the purchasing patterns of its customers, mix of products and services sold, the
timing of the  introduction  of new products and product  enhancements by Kronos
and its  competitors,  market  acceptance of new products,  competitive  pricing
pressure and general  economic  conditions.  Kronos  historically has realized a
relatively  larger  percentage of its annual  revenues and profits in the fourth
quarter and a relatively  smaller percentage in the first quarter of each fiscal
year,  although there can be no assurance  that this pattern will  continue.  In
addition, while Kronos has contracts to supply systems to certain customers over
an extended  period of time,  substantially  all of Kronos'  product revenue and
profits  in each  quarter  result  from  orders  received  in that  quarter.  If
near-term  demand for Kronos'  products  weakens or if  significant  anticipated
sales in any  quarter  do not close when  expected,  Kronos'  revenues  for that
quarter will be adversely  affected.  Kronos believes that its operating results
for any one  period are not  necessarily  indicative  of results  for any future
period.

         Product  Development and  Technological  Change.  Continual  change and
improvement  in computer  software  and  hardware  technology  characterize  the
markets for frontline  labor  management  systems.  Kronos'  future success will
depend  largely on its  ability to enhance the  capabilities  and  increase  the
performance of its existing  products and to develop new products and interfaces
to third party products on a timely basis to meet the increasingly sophisticated
needs of its  customers.  Although  Kronos is  continually  seeking  to  further
enhance its product offerings and to develop new products and interfaces,  there
can be no assurance  that these  efforts will succeed,  or that, if  successful,
such  product  enhancements  or new  products  will  achieve  widespread  market
acceptance,  or that Kronos'  competitors  will not develop and market  products
which are superior to Kronos' products or achieve greater market acceptance.

         Attracting  and Retaining  Sufficient  Technical  Personnel for Product
Development,  Support and Sales.  Kronos has encountered intense competition for
experienced  technical personnel for product development,  technical support and
sales and expects such  competition to continue in the future.  Any inability to
attract and retain a sufficient  number of qualified  technical  personnel could
adversely  affect  Kronos'  ability to produce,  support and sell  products in a
timely manner.

         Competition.   The  frontline  labor  management   industry  is  highly
competitive.  The number of competitors is also increasing as  applications  and
systems  providers in related  industries,  such as human resources  management,
payroll  processing and enterprise  resource  planning (ERP),  enter the market.
Technological  changes such as those  allowing for increased use of the Internet
may also create the potential for new entrants.  Although Kronos believes it has
core  competencies  that are not easily  obtainable by competitors,  maintaining
Kronos'  technological  and  other  advantages  over  competitors  will  require
continued  investment  by Kronos in research and  development  and marketing and
sales  programs.  There can be no  assurance  that Kronos  will have  sufficient
resources  to make such  investments  or be able to  achieve  the  technological
advances necessary to maintain its competitive advantages. Increased competition
could adversely affect Kronos' operating results through price reductions and/or
loss of market share.
<PAGE>

PART II.          OTHER INFORMATION


Item 5.           Other Information
                  None

Item 6.           Exhibits and Reports on Form 8-K
                  (a)   Exhibits

                             27     Financial Data Schedule

                  (b)   Reports on Form 8-K

                             There were no reports on Form 8-K filed  during the
                             fiscal quarter ended July 1, 2000.

<PAGE>

                                                         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.

                                                  KRONOS INCORPORATED


                                             By         /s/ Paul A. Lacy
                                               Paul A. Lacy
                                               Vice President of Finance
                                               and Administration

                                              (Duly Authorized Officer and
                                                Principal Financial Officer)




August 14, 2000

<PAGE>

                               KRONOS INCORPORATED

                                  EXHIBIT INDEX

     Exhibit
     Number         Description

       27         Financial Data Schedule