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 March 31, 2001

                                                   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)


--------------------------------------------------------------------------------
(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 April 28, 2001, 12,492,652 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 Operations for the Three
            and Six Months Ended March 31, 2001 and April 1, 2000              1

         Condensed Consolidated Balance Sheets at March 31, 2001
            and September 30, 2000                                             2

         Condensed Consolidated Statements of Cash Flows for the Six
            Months Ended March 31, 2001 and April 1, 2000                      3

         Notes to Condensed Consolidated Financial Statements                  4

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

PART II. OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

Signatures

<PAGE>


PART I.  FINANCIAL INFORMATION

Item 1.     Condensed Consolidated Financial Statements (Unaudited)

                                         KRONOS INCORPORATED
                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                          (In thousands, except share and per share amounts)
                                              UNAUDITED
<TABLE>
<CAPTION>

                                                              Three Months Ended                 Six Months Ended
                                                         ------------------------------    ------------------------------
                                                           March 31,        April 1,         March 31,       April 1,
                                                             2001             2000             2001            2000
                                                         --------------   -------------    --------------  --------------
<S>                                                        <C>             <C>             <C>             <C>
Net revenues:
     Product ...........................................   $     32,368    $     32,091    $     66,090    $     68,243
     Service ...........................................         34,705          29,735          65,736          58,191
                                                           ------------    ------------    ------------    ------------
                                                                 67,073          61,826         131,826         126,434
                                                           ------------    ------------    ------------    ------------
Cost of sales:
     Product ...........................................          8,024           7,566          15,821          15,857
     Service ...........................................         19,746          17,000          37,469          33,255
                                                           ------------    ------------    ------------    ------------
                                                                 27,770          24,566          53,290          49,112
                                                           ------------    ------------    ------------    ------------
         Gross profit ..................................         39,303          37,260          78,536          77,322
Operating expenses and other income:
     Sales and marketing ...............................         24,560          22,415          46,863          44,345
     Engineering, research and development .............          8,416           7,573          16,336          14,589
     General and administrative ........................          4,476           4,290           8,616           8,444
     Amortization of intangible assets .................          1,853           1,587           3,587           3,138
     Other income, net .................................         (1,559)         (1,708)         (2,712)         (3,043)
     Special charge ....................................          2,991            --             2,991            --
                                                           ------------    ------------    ------------    ------------
                                                                 40,737          34,157          75,681          67,473

         Income before income taxes ....................         (1,434)          3,103           2,855           9,849
Income tax (benefit)provision...........................           (502)          1,148             999           3,644
                                                           ------------    ------------    ------------    ------------
         Net (loss) income .............................   $       (932)   $      1,955    $      1,856    $      6,205
                                                           ============    ============    ============    ============


Net (loss) income per common share:
         Basic .........................................   $      (0.07)   $       0.16    $       0.15    $       0.50
                                                           ============    ============    ============    ============
         Diluted .......................................   $      (0.07)   $       0.15    $       0.14    $       0.47
                                                           ============    ============    ============    ============

Average common and common equivalent shares outstanding:
         Basic .........................................     12,498,446      12,515,139      12,433,581      12,488,805
                                                           ============    ============    ============    ============
         Diluted .......................................     12,498,446      13,162,020      12,836,493      13,157,464
                                                           ============    ============    ============    ============

</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>

                                                                                 March 31,      September 30,
                                                                                   2001             2000
                                                                               --------------   --------------
                                    ASSETS
<S>                                                                            <C>          <C>
Current assets:
   Cash and equivalents ....................................................   $  11,989    $  23,201
   Marketable securities ...................................................      39,378       10,788
   Accounts receivable, less allowances  of $7,140
      at March 31, 2001 and $6,986 at September 30, 2000 ...................      57,887       71,493
   Deferred income taxes ...................................................       6,853        5,916
   Other current assets ....................................................      15,742       13,750
                                                                               ---------    ---------
          Total current assets .............................................     131,849      125,148

Property, plant and equipment, net .........................................      36,278       37,082
Marketable securities ......................................................      14,700       17,450
Excess of cost over net assets of businesses acquired, net .................      28,250       29,421
Deferred software development costs, net ...................................      15,199       13,788
Other assets ...............................................................      14,906       16,600
                                                                               ---------    ---------
         Total assets ......................................................   $ 241,182    $ 239,489
                                                                               =========    =========

                     LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ........................................................   $   6,838    $   8,278
   Accrued compensation ....................................................      20,523       19,879
   Accrued expenses and other current liabilities ..........................      12,692       14,339
   Deferred professional service revenues ..................................      24,224       23,451
   Deferred maintenance revenues ...........................................      50,844       48,483
                                                                               ---------    ---------
         Total current liabilities .........................................     115,121      114,430
Deferred maintenance revenues ..............................................      13,158       15,814
Other liabilities ..........................................................       1,612        1,455
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 20,000,000 shares,
     12,634,728 shares issued at March 31, 2001 and September 30, 2000 .....         126          126
   Additional paid-in capital ..............................................      18,415       23,842
   Retained earnings .......................................................      99,700       97,844
   Accumulated other comprehensive loss ....................................      (1,501)      (1,366)
   Cost of Treasury Stock  (146,028 shares and 310,038
      shares at March 31, 2001 and September 30, 2000, respectively) .......      (5,449)     (12,656)
                                                                               ---------    ---------
         Total shareholders' equity ........................................     111,291      107,790
                                                                               ---------    ---------
         Total liabilities and shareholders' equity ........................   $ 241,182    $ 239,489
                                                                               =========    =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>


                               KRONOS INCORPORATED
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                    UNAUDITED
<TABLE>
<CAPTION>

                                                                                       Six Months Ended
                                                                                  -------------------------
                                                                                    March 31,     April 1,
                                                                                      2001          2000
                                                                                  -----------    ----------
<S>                                                                                  <C>         <C>
Operating activities:
     Net income ..................................................................   $  1,856    $  6,205
     Adjustments to reconcile net income to net cash and equivalents
         provided by operating activities:
             Depreciation ........................................................      3,862       3,753
             Amortization of excess of cost over net assets of businesses acquired      3,587       3,182
             Amortization of deferred software development costs .................      4,071       3,461
             Provision for deferred income taxes .................................     (1,051)       (865)
             Changes in certain operating assets and liabilities:
                Accounts receivable, net .........................................     13,077       9,640
                Deferred maintenance revenue .....................................     (1,540)        104
                Accounts payable, accrued compensation
                    and other liabilities ........................................     (1,388)     (6,066)
                Long term investment in leases ...................................      2,214       2,609
                Non cash portion of special charge ...............................      1,253         ---
                Other ............................................................     (1,734)     (3,404)
             Tax benefit from exercise of stock options ..........................      2,304       4,552
                                                                                     --------    --------
                    Net cash and equivalents provided by operating activities ....     26,511      23,171

Investing activities:
     Purchase of property, plant and equipment ...................................     (3,045)    (14,192)
     Capitalization of software development costs ................................     (5,838)     (4,810)
     (Increase)decrease in marketable securities   ...............................    (25,838)      3,435
     Acquisitions of businesses, net of cash acquired ............................     (2,056)     (4,009)
                                                                                     --------    --------
                    Net cash and equivalents used in investing activities ........    (36,777)    (19,576)

Financing activities:
     Net proceeds from exercise of stock option and employee stock
         purchase plans ..........................................................      5,964       5,548
     Purchase of treasury stock ..................................................     (6,453)    (16,738)
     Proceeds from sale of put options ...........................................       --           169
                                                                                     --------    --------
                    Net cash and equivalents used in  financing activities .......       (489)    (11,021)

Effect of exchange rate changes on cash and equivalents ..........................       (457)       (119)
                                                                                     --------    --------
Decrease in cash and equivalents .................................................    (11,212)     (7,545)
Cash and equivalents at the beginning of the period ..............................     23,201      20,148
                                                                                     --------    --------
Cash and equivalents at the end of the period ....................................   $ 11,989    $ 12,603
                                                                                     ========    ========
</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,  2000.  The  results of
operations for the three and six months ended March 31, 2001 are not necessarily
indicative of the results for a full fiscal year. Certain reclassifications have
been made in the  accompanying  consolidated  financial  statements  in order to
conform to the fiscal 2001 presentation.

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  (91 days in fiscal 2001 and 93 days in
fiscal  2000) and fourth  quarter  (92 days in fiscal 2001 and 91 days in fiscal
2000) 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 - Comprehensive Income

For the three and six months ended March 31, 2001 and April 1, 2000
comprehensive income consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                       Three Months Ended      Six Months Ended
                                      ---------------------   -------------------
                                      March 31,    April 1,   March 31,  April 1,
                                         2001        2000       2001       2000
                                      ----------   --------   --------   --------
<S>                                     <C>        <C>        <C>        <C>
Comprehensive income:
    Net (loss) income ...............   $  (932)   $ 1,955    $ 1,856    $ 6,205
    Cumulative translation adjustment      (666)      (309)      (540)      (309)
    Unrealized gains
    on ..............................       200       --          405       --
    available-for-sale securities
                                        -------    -------    -------    -------
Total comprehensive (loss) income ...   $(1,398)   $ 1,646    $ 1,721    $ 5,896
                                        =======    =======    =======    =======
</TABLE>
<PAGE>

Note D - Special Charge

During  this  fiscal  quarter,  the  Company  commenced  the  shut  down  of its
Crosswinds Technology Group operations located in Santa Cruz, California,  which
resulted in a $3.0 million charge to operating income.  The charge included $1.6
million in  termination  costs,  $1.3  million  for the write off of  intangible
assets and $.1 million in other costs. At March 31, 2001, the Company recorded a
liability associated with the Crosswinds closing of $1.7 million. The components
of this  liability  are listed below and are  expected to be settled  within the
next twelve months. Approximately 19 employees were effected by this action.

<TABLE>
<CAPTION>
Accrual for special charge (in thousands):


                   Balance at
Description      March 31, 2001
-----------      --------------
<S>                 <C>
Termination costs   $1,600
Other costs ....       100
                    ------
Total accrual ..    $1,700
                    ======
</TABLE>


NOTE E - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>

                                        Three Months Ended           Six Months Ended
                                   ---------------------------   -------------------------
                                     March 31,       April 1,      March 31,     April 1,
                                        2001           2000          2001          2000
                                   -------------   -----------   ----------- -------------
<S>                                <C>             <C>           <C>           <C>
Net income (in thousands) ......   $       (932)   $     1,955   $     1,856   $     6,205
                                   ============    ===========   ===========   ===========


Weighted-average shares ........     12,498,446     12,515,139    12,433,581    12,488,805

Effect of dilutive securities:
   Put options .................           --           30,802          --          15,401
   Employee stock options ......           --          616,079       402,912       653,258
                                   ------------    -----------   -----------   -----------

Adjusted weighted-average shares
   and assumed conversions .....     12,498,446    13,162,020    12,836,493     13,157,464
                                   ============    ===========   ===========   ===========

Basic earnings per share .......   $      (0.07)   $      0.16   $      0.15   $      0.50
                                   ============    ===========   ===========   ===========

Diluted earnings per share .....   $      (0.07)   $      0.15   $      0.14   $      0.47
                                   ============    ===========   ===========   ===========
</TABLE>

<PAGE>

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,  including  statements  relating  to demand for
products and  services,  revenue  growth rates and gross  margin,  management of
dealer  channels,  future  acquisitions  and  available  cash,  investments  and
operating  cash flow.  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 six months ended March 31, 2001 were
$67.1 million and $131.8 million, respectively, as compared to $61.8 million and
$126.4 million for the comparable  periods in the prior year.  Revenue growth in
the three and six months ended March 31, 2001 were 9% and 4%,  respectively,  as
compared  to flat and 10% growth in the  comparable  periods of the prior  year.
Beginning in the second quarter of fiscal 2000 Kronos experienced revenue growth
rates that were lower than those  historically  experienced due to a combination
of factors  including the  transitory  impact on demand for Kronos  products and
services  as a result of Year 2000  compliance  efforts  and the  elongation  of
Kronos' sales cycle.  The revenue growth rate  experienced in the second quarter
of fiscal 2001 exceeded the growth rate experienced in the comparable  period of
the  prior  year,  but  continues  to be less  than  growth  rates  historically
experienced. The revenue growth rate experienced in the second quarter of fiscal
2001 compares  favorably to the comparable quarter of the prior year principally
due to the unusually low growth rate experienced in the second quarter of fiscal
2000.  Management  believes  that  demand  for  Kronos'  products  and  services
continues to exist, however,  revenue growth rates for the remainder of the year
are uncertain given the broad economic downturn and the possibility of companies
postponing technology spending.

     Product revenues for the quarter  increased 1% to $32.4 million as compared
to $32.1  million and product  revenue  decline of 21% in the second  quarter of
fiscal 2000.  Product  revenues for the first six months of fiscal 2001 declined
3% to $66.1 million  compared to $68.2 million and product revenue decline of 8%
in the first six months of fiscal 2000. The product  revenue growth  experienced
in the  second  quarter  was  principally  driven by the  Kronos'  direct  sales
channel.  Product  revenues from Kronos'  independent  dealer channel  decreased
slightly  during the second  quarter of fiscal  2001 in  comparison  to the same
quarter  of the prior  year.  Management  continues  to  believe  that given the
increased sophistication of Kronos' products and the related heightened need for
pre-sales  technological  support and other sales support,  the dealer channel's
sales cycle requires greater  management and participation by Kronos. To address
this trend,  management  anticipates  expending  greater resources to assist the
dealer channel in the short term and increasing Kronos' emphasis on direct sales
in the longer term.

     Service  revenues for the second  quarter of fiscal 2001 increased to $34.7
million as  compared  to $29.7  million in the  second  quarter of fiscal  2000.
Service  revenues for the first six months of fiscal 2001 were $65.7  million as
compared to $58.2  million  for the first six months of the prior year.  Service
revenues  grew at a rate of 17% and 13% during  the three and six month  periods
ended  March 31,  2001,  respectively.  The growth in service  revenues in these
periods  reflect an  increase  in  maintenance  revenue  from  expansion  of the
installed base, increased level of services sold to the installed base and, to a
lesser  extent,   incremental   maintenance   revenues  resulting  from  Kronos'
acquisitions  of various dealer  territories  over the past four  quarters.  The
growth in service revenues in the second quarter of fiscal 2001 also reflects an
increase in the level of professional  services  delivered due to more effective
management  of  resources  as  compared  to the same  period in the prior  year.
Service  revenues  grew  at a rate of 41% and  42% in the  three  and six  month
periods ended April 1, 2000,  respectively.  The unusually high service  revenue
growth  rate  experienced  in these  periods is  attributable  to an increase in
maintenance  revenue from expansion of the installed base due to the accelerated
product  revenue  growth  experienced  in fiscal 1999  because of demand for new
products and upgrades  resulting from customers'  Year 2000 compliance  efforts.
Also  contributing  to the growth in service  revenues in these  periods were an
increase  in the  level  of  maintenance  contracts  and  professional  services
accompanying  new and  upgrade  sales as well as  maintenance  and  professional
service  revenues  resulting  from Kronos'  acquisitions,  including its largest
dealer territory in June 1999.

     Gross  Profit.  Gross profit as a percentage of revenues was 59% and 60% in
the three and six month periods ended March 31, 2001,  respectively,  decreasing
from 60% and 61% for the  comparable  periods of the prior year. The decrease in
margin was directly  attributable  to lower product  revenues as a percentage of
total sales.  Service  revenue,  which generates  lower gross margin,  has grown
faster than product revenue and represents a greater proportion of total revenue
in fiscal 2001 than in the  comparable  period of the prior year.  Product gross
profit as a percentage of product  revenues was 75% and 76% in the three and six
month  periods  ended March 31, 2001,  respectively,  compared to 76% and 77% in
each of the  comparable  periods in the prior year.  Software,  which  typically
generates higher gross profit,  was a greater  proportion of product revenues in
the three and six month  periods  ended  March 31,  2001 as compared to the same
periods in prior year.  However,  higher software  development  amortization and
production  costs due to lower sales volume offset the effect of this  favorable
mix.  Service  gross profit as a percentage  of service  revenues was 43% in the
three and six month periods  ended March 31, 2001 and April 1, 2000.  Management
anticipates  that service  gross margin for the  remainder of the fiscal year to
exceed the gross margin  experienced  in the second  quarter due to its on-going
efforts to  streamline  operations  and more  effectively  utilize  its  service
resources.

     Net Operating Expenses.  Net operating expenses as a percentage of revenues
were 61% and 57% for the three  and six  month  periods  ended  March 31,  2001,
respectively, as compared to 55% and 53% for the comparable periods in the prior
year.  The increase in operating  expenses in fiscal 2001, as compared to fiscal
2000, is attributable to increased program and infrastructure  costs incurred to
support increases in business volume and product  development efforts as well as
increased  amortization of intangible assets related to acquisitions.  Sales and
marketing expenses as a percentage of revenues were 37% and 36% in the three and
six month periods ended March 31, 2001, respectively, as compared to 36% and 35%
in  the  comparable  periods  of  the  prior  year.  Engineering,  research  and
development  expenses as a percentage  of revenues were 13% and 12% in the three
and six month periods ended March 31, 2001 as compared to 12% in the  comparable
periods of the prior year. Engineering expenses of $8.4 million and $7.6 million
in the  second  quarter  of  fiscal  2001  and  2000,  respectively,  are net of
capitalized  software  development  costs  of $2.8  million  and  $2.5  million,
respectively.  Engineering  expenses of $16.3  million and $14.6  million in the
first six months of fiscal 2001 and 2000,  respectively,  are net of capitalized
software development costs of $5.5 million and $4.8 million,  respectively.  The
growth in  engineering,  research and  development  expenses  this year resulted
principally from the continuing research, design and development of software and
hardware  technology.  General and  administrative  expenses as a percentage  of
revenues  were 7% in the three and six month  periods  ended  March 31, 2001 and
April 1, 2000. Amortization of intangible assets as a percentage of revenues was
3% in the three and six month periods ended March 31, 2001 as compared to 3% and
2% in the  comparable  periods of the prior year.  The increase in  amortization
expense  is  principally  related  to  various  dealer  territory   acquisitions
completed  in the past four  quarters.  Kronos  amortizes  these  costs over the
assets  estimated  remaining  economic lives.  Other income,  net is principally
attributable  to interest income earned from Kronos' cash as well as investments
in its marketable securities and lease portfolio.

     Special  Charge.  A special charge in the amount of $3.0 million related to
the termination of Kronos' Crosswinds  Technology operations was recorded in the
second  quarter of fiscal  2001.  The  Crosswinds  Technology  Group,  which was
purchased in May 1999, was  responsible for the product  development,  marketing
and  sales  support  of time and  attendance  applications  that  operated  as a
Microsoft  Outlook  plug in  product.  Lower  than  anticipated  sales  of these
applications, redundant infrastructure and ongoing operating losses has resulted
in the termination of the stand-alone  operating unit. Revenues in the first six
months of fiscal 2001 generated by the Crosswinds  Technology Group approximated
$0.5 million.  The $3.0 million  charge  consists of $1.6 million in termination
costs,  $1.3 million for the write off of intangible  assets and $0.1 million in
other costs. Cash outlays of approximately  $1.7 million relating to this action
are anticipated to be paid over the next twelve months. The anticipated  pre-tax
financial   benefit   resulting   from  this  action  is  a  cost  reduction  of
approximately $0.3 million in fiscal 2001 and $1.2 million annually  thereafter,
excluding  amortization  of $1.3 million over the next three years. In addition,
to better align costs with  expected  revenues for the remainder of fiscal 2001;
Kronos  anticipates  reducing its workforce in the third quarter of this year by
75 to 125  employees or  approximately  5%. This is  anticipated  to result in a
third quarter  special  charge of less than $1.0  million.  As a result of these
additional  headcount  reductions,  pre-tax  savings  attributable to salary and
fringe  benefits,  but excluding other indirect  costs,  are expected to be $2.0
million to $3.0  million for the  remainder  of fiscal 2001 and $6.0  million to
$8.0 million annually thereafter.

     Income  Taxes.  The income tax benefit and tax provision as a percentage of
pretax results were 35% in the three and six month periods ended March 31, 2001,
respectively, as compared to a tax provision as a percentage of pretax income of
37% in the comparable  periods of the prior year. The lower effective income tax
rate  experienced in fiscal 2001 was  principally  attributable  to tax benefits
resulting  from Kronos'  investment  tax  credits.  Management  anticipates  the
effective income tax rate for the remainder of the fiscal year will be 35%.

Liquidity and Capital Resources

     Working capital as of March 31, 2001, amounted to $16.7 million as compared
to $10.7 million at September 30, 2000. During fiscal 2000,  working capital was
reduced as Kronos funded its investment in its corporate  headquarters  facility
and other  property,  plant and  equipment,  as well as the repurchase of common
shares under Kronos' stock repurchase program and, to a lesser extent,  payments
related  to  acquisitions  of  dealer  territories.  Cash  and  equivalents  and
marketable  securities  amounted to $66.1 million as of March 31, 2001 and $51.4
million as of September 30, 2000.

     Cash generated from  operations  amounted to $26.5 million in the first six
months of fiscal 2001 as  compared  to $23.2  million in the first six months of
fiscal 2000.  The increase in cash  generated  from  operations  is  principally
attributable to increased collection of accounts receivable from trade customers
and the lease portfolio,  increased deferred professional services and a smaller
decline  in  accrued  compensation  partially  offset  by lower  earnings  and a
reduction in the tax benefit from  exercise of stock  options as compared to the
prior year. Cash used for property,  plant and equipment was $3.0 million in the
first six months of fiscal 2001  compared to $14.2 million in the same period of
fiscal 2000.  Fiscal 2000  investments  in property,  plant and  equipment  were
principally related to the construction of Kronos' corporate headquarters campus
as well as investments in information  systems and infrastructure to improve and
support expanded  operations.  Excess cash reserves not required for operations,
investments  in property,  plant and equipment or  acquisitions  are invested in
marketable  securities.  Marketable  securities  increased  by $25.8  million in
fiscal 2001  compared  to a decrease of $3.4  million in the first six months of
fiscal 2000.  Kronos' use of cash for acquisition of businesses in the first six
months of fiscal  year 2001 was  principally  related  to the  acquisition  of a
dealer  territory  in November  2000.  Kronos is assessing  several  acquisition
opportunities that may be completed over the next six months, although there can
be no assurance that these acquisitions will be completed.

     Under Kronos' stock repurchase  program,  Kronos repurchased 135,000 common
shares in the first six months of fiscal 2001 at a cost of $4.9 million compared
to 328,500  common  shares at a cost of $15.6 million for the same period in the
prior year. 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,  if any, and any additional stock
repurchases for the foreseeable future.

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, 2000, 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.

     Dependence on Time and Attendance  Product Line. To date,  more than 90% of
the Kronos'  revenues  have been  attributable  to sales of time and  attendance
systems and related  services  and Kronos  expects  that to continue in the next
fiscal year. Competitive pressures or other factors could cause Kronos' time and
attendance  products to lose market  acceptance or experience  significant price
erosion, adversely affecting the results of Kronos' operations.

     Dependence on Alternate Distribution Channels. Kronos markets and sells its
products through its direct sales organization, independent dealers and OEMs. In
the first six months of fiscal 2001,  approximately  13% of Kronos'  revenue was
generated through sales to dealers and OEMs. A reduction in the sales efforts of
Kronos'  major  dealers  and/or  OEMs,  the  termination  or  changes  in  their
relationships  with  Kronos,  or the failure of Kronos to monitor and incent its
independent  dealers  and OEMs,  could  have a  material  adverse  affect on the
results of Kronos' operations.

     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.
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 4.   Submission of Matters to a Vote of Security Holders

(a)       The 2001 Annual Meeting of  Stockholders  of Kronos  Incorporated  was
          held on February 8, 2001.

(b)       At the Annual Meeting, Messrs. Richard J. Dumler and Samuel Rubinovitz
          were elected as Class III Directors for  three-year  terms expiring in
          2004. In addition,  the Directors whose terms of office continue after
          the meeting are two Class I Directors:  Messrs. D. Bradley  McWilliams
          and Lawrence Portner and two Class II Directors:  Messrs.  Mark S. Ain
          and W. Patrick Decker. The tabulation was as follows:

                                               FOR                  WITHHELD
                                               ---                  --------
          Richard J. Dumler                 11,036,521               237,322
          Samuel Rubinovitz                 11,035,393               238,450

(c)       Amendments to the Company's 1992 Equity Incentive Plan and an increase
          in the number of shares  available  under the Plan from  3,356,250  to
          4,356,250, were approved as follows:

                                                                   BROKER
               FOR             AGAINST         ABSTAIN            NON VOTES
               ---             -------         -------            ---------
            7,090,296         2,505,462        161,368            1,516,717

(d)       The other item voted upon at the meeting was the  ratification  of the
          selection of Ernst & Young LLP as the Company's  independent  auditors
          for the 2001 fiscal year.

                      FOR                AGAINST               ABSTAIN
                      ---                -------               -------
                   11,256,789             4,550                 12,504


Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

(a)       Exhibits

          None

(b)       Reports on Form 8-K

          There were no reports on Form 8-K filed during the fiscal quarter
          ended March 31, 2001.

<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)




May 11, 2001