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 June 29, 2002

                                       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 July 27, 2002,  19,680,453  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
             and Nine Months Ended June 29, 2002 and June 30, 2001            1

          Condensed Consolidated Balance Sheets at June 29, 2002
             and September 30, 2001                                           2

          Condensed Consolidated Statements of Cash Flows for the Nine
             Months Ended June 29, 2002 and June 30, 2001                     3

          Notes to Condensed Consolidated Financial Statements                4

Item 2.   Management's Discussion and Analysis of Financial Condition and
             Results of Operations                                           11

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                   22

Signatures

<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
                                                     ----------------------------------    -----------------------------
                                                            June 29,           June 30,        June 29,        June 30,
                                                              2002               2001            2002            2001
                                                     ----------------   ---------------    ------------    -------------
<S>                                                        <C>             <C>             <C>             <C>
Net revenues:
      Product ..........................................   $     40,458    $     39,790    $    109,651    $    106,371
      Service ..........................................         46,612          35,960         133,482         102,193
                                                           ------------    ------------    ------------    ------------
                                                                 87,070          75,750         243,133         208,564
                                                           ------------    ------------    ------------    ------------
Cost of sales:
      Product ..........................................         10,106           8,298          26,956          24,009
      Service ..........................................         24,770          19,776          68,514          58,239
                                                           ------------    ------------    ------------    ------------
                                                                 34,876          28,074          95,470          82,248
                                                           ------------    ------------    ------------    ------------
          Gross profit .................................         52,194          47,676         147,663         126,316
Operating expenses and other income:
      Sales and marketing ..............................         28,337          26,035          79,586          73,002
      Engineering, research and development ............          9,023           9,107          26,210          25,443
      General and administrative .......................          5,507           4,954          15,114          13,570
      Amortization of intangible assets ................            746           1,860           2,113           5,447
      Other income, net ................................         (1,378)         (1,621)         (3,667)         (4,333)
      Special charge ...................................           --               698            --             3,689
                                                           ------------    ------------    ------------    ------------
                                                                 42,235          41,033         119,356         116,818

          Income before income taxes ...................          9,959           6,643          28,307           9,498
Income tax provision ...................................          3,462           2,325           9,840           3,324
                                                           ------------    ------------    ------------    ------------
          Net income ...................................   $      6,497    $      4,318    $     18,467    $      6,174
                                                           ============    ============    ============    ============

Net income per common share:
          Basic ........................................   $       0.33    $       0.23    $       0.94    $       0.33
                                                           ============    ============    ============    ============
          Diluted ......................................   $       0.32    $       0.23    $       0.90    $       0.32
                                                           ============    ============    ============    ============

Average common and common equivalent shares outstanding:
          Basic ........................................     19,658,011      18,750,018      19,607,647      18,683,586
                                                           ============    ============    ============    ============
          Diluted ......................................     20,349,674      19,164,780      20,501,109      19,224,752
                                                           ============    ============    ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>

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

                                                                                          June 29,      September 30,
                                                                                            2002             2001
                                                                                        ------------    -------------
                                        ASSETS
<S>                                                                                        <C>          <C>
Current assets:
   Cash and equivalents ................................................................   $  21,084    $  36,561
   Marketable securities ...............................................................      16,492       13,812
   Accounts receivable, less allowances  of $9,354
      at June 29, 2002 and $7,151 at September 30, 2001 ................................      70,287       75,295
   Deferred income taxes ...............................................................       8,176        6,655
   Other current assets ................................................................      21,201       15,819
                                                                                           ---------    ---------
          Total current assets .........................................................     137,240      148,142

Property, plant and equipment, net .....................................................      37,202       36,016
Marketable securities ..................................................................      19,196       18,400
Intangible assets ......................................................................      19,654       17,027
Goodwill ...............................................................................      55,982       34,142
Deferred software development costs, net ...............................................      18,223       17,144
Other assets ...........................................................................      17,830       13,943
                                                                                           ---------    ---------
         Total assets ..................................................................   $ 305,327    $ 284,814
                                                                                           =========    =========

                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ....................................................................   $   8,091    $   7,272
   Accrued compensation ................................................................      24,224       26,932
   Accrued expenses and other current liabilities ......................................      11,609       16,073
   Deferred professional service revenues ..............................................      30,331       29,740
   Deferred maintenance revenues .......................................................      63,973       57,053
                                                                                           ---------    ---------
         Total current liabilities .....................................................     138,228      137,070
Deferred maintenance revenues ..........................................................       8,357       12,054
Other liabilities ......................................................................       6,415        4,674
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, 19,911,952 and
     19,154,138 shares issued at June 29, 2002 and  September 30, 2001, respectively ...         199          192
   Additional paid-in capital ..........................................................      34,285       20,548
   Retained earnings ...................................................................     132,815      114,348
   Cost of Treasury Stock (315,378 shares and 95,787 shares
     at June 29, 2002 and September 30, 2001) ..........................................     (13,909)      (2,588)
   Accumulated other comprehensive income (loss):
     Foreign currency translation ......................................................      (1,170)      (1,796)
     Net unrealized gain on available-for-sale investments .............................         107          312
                                                                                           ---------    ---------
                                                                                              (1,063)      (1,484)
         Total shareholders' equity ....................................................     152,327      131,016
                                                                                           ---------    ---------
         Total liabilities and shareholders' equity ....................................   $ 305,327    $ 284,814
                                                                                           =========    =========
</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
                                                                                   ----------------------------
                                                                                        June 29,      June 30,
                                                                                          2002          2001
                                                                                   -------------    -----------

<S>                                                                                     <C>         <C>
Operating activities:
     Net income .....................................................................   $ 18,467    $  6,174
     Adjustments to reconcile net income to net cash and equivalents
         provided by operating activities:
             Depreciation ...........................................................      6,785       5,986
             Amortization of intangible assets ......................................      2,111       5,447
             Amortization of deferred software development costs ....................      7,227       6,257
             Provision for deferred income taxes ....................................        874       1,171
             Changes in certain operating assets and liabilities:
                 Accounts receivable, net ...........................................     13,652      11,979
                 Deferred maintenance revenue .......................................     (3,875)     (1,978)
                 Deferred professional service revenue ..............................     (1,338)      1,236
                 Accounts payable, accrued compensation
                     and other liabilities ..........................................     (6,215)       (991)
                 Taxes payable ......................................................     (5,964)     (3,697)
                 Non cash portion of special charge .................................       --         1,300
                 Other ..............................................................        704      (1,090)
             Tax benefit from exercise of stock options .............................     10,291       2,528
                                                                                        --------    --------
                     Net cash and equivalents provided by operating activities ......     42,719      34,322

Investing activities:
     Purchase of property, plant and equipment ......................................     (7,696)     (4,606)
     Capitalization of software development costs ...................................     (9,100)     (9,003)
     Increase in marketable securities ..............................................     (3,476)    (19,470)
     Acquisitions of businesses and technology, net of cash acquired ................    (30,407)     (4,311)
                                                                                        --------    --------
                     Net cash and equivalents used in investing activities ..........    (50,679)    (37,390)

Financing activities:
     Net proceeds from exercise of stock option and employee stock
         purchase plans .............................................................     15,856       8,357
     Purchase of treasury stock .....................................................    (20,881)     (7,833)
     Net investment in call option ..................................................     (2,810)       --
                                                                                        --------    --------
                     Net cash and equivalents (used) provided in financing activities     (7,835)        524

Effect of exchange rate changes on cash and equivalents .............................        318        (187)
                                                                                        --------    --------
Decrease in cash and equivalents ....................................................    (15,477)     (2,731)
Cash and equivalents at the beginning of the period .................................     36,561      23,201
                                                                                        --------    --------
Cash and equivalents at the end of the period .......................................   $ 21,084    $ 20,470
                                                                                        ========    ========
</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 of
Kronos  Incorporated (the "Company" or "Kronos")  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, 2001. The results of operations for the three and nine months ended June 29,
2002 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 2002 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  (90 days in fiscal 2002 and 91 days in
fiscal  2001) and fourth  quarter  (93 days in fiscal 2002 and 92 days in fiscal
2001) 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 - Other Current Assets

Other current assets consists of the following (in thousands):

                                        June 29,               September 30,
                                          2002                      2001
                                        --------               -------------

Inventory                                 $6,340                    $5,076
Prepaid income and other taxes             4,367                       903
Prepaid commissions                        4,138                     4,633
Prepaid royalties                          1,715                     2,251
Prepaid expenses - other                   4,641                     2,956
                                         -------                   -------
    Total                                $21,201                   $15,819
                                         =======                   =======


<PAGE>

NOTE D - Goodwill and Other Intangible Assets - Adoption of Statements 141 and
         142

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial  Accounting Standards No. 141, "Business  Combinations",  and No. 142,
"Goodwill and Other Intangible Assets" (the "Statements").  Under the new rules,
goodwill (and intangible  assets deemed to have indefinite lives) will no longer
be amortized but will be subject to annual  impairment  tests in accordance with
the Statements. Other intangible assets will continue to be amortized over their
useful lives.

For  acquisitions  completed prior to June 30, 2001, the Company has applied the
new  rules on  accounting  for  business  combinations  and  goodwill  and other
intangible   assets   beginning  in  the  first  quarter  of  fiscal  2002.  For
acquisitions  completed  after June 30,  2001,  the  Company has applied the new
rules beginning in the fourth quarter of fiscal 2001.

During the  three-month  period ended March 30, 2002, the Company  completed the
initial  testing of the  impairment  of  goodwill,  as of October 1, 2001.  As a
result of the test,  the Company has  concluded  that no  impairment of goodwill
exists as of October 1, 2001.

The following table presents the impact of the new standards related to goodwill
amortization  (and related tax effects) on net income and earnings per share, as
if they had been in effect for the three and nine months ended June 30, 2001 (in
thousands, except per share data).

<TABLE>
<CAPTION>
                                                           Three Months Ended       Nine Months Ended
                                                          ---------------------   ----------------------
                                                           June 29,    June 30,     June 29,    June 30,
                                                             2002        2001         2002        2001
                                                          ---------   ---------   ----------   ---------

<S>                                                       <C>         <C>         <C>          <C>
Reported net income ...................................   $   6,497   $   4,318   $   18,467   $   6,174
    Add back:  Goodwill amortization ..................        --           855         --         2,555
                                                          ---------   ---------   ----------   ---------
    Adjusted net income ...............................   $   6,497   $   5,173   $   18,467   $   8,729
                                                          =========   =========   ==========   =========

Basic earnings-per-share:
    Reported net income ...............................   $    0.33   $    0.23   $     0.94   $    0.33
    Goodwill amortization .............................        --          0.05         --          0.14
                                                          ---------   ---------   ----------   ---------
    Adjusted net income ...............................   $    0.33   $    0.28   $     0.94   $    0.47
                                                          =========   =========   ==========   =========

Diluted earnings-per-share:
    Reported net income ...............................   $    0.32   $    0.23   $     0.90   $    0.32
    Goodwill amortization .............................        --          0.04         --          0.13
                                                          ---------   ---------   ----------   ---------
    Adjusted net income ...............................   $    0.32   $    0.27   $     0.90   $    0.45
                                                          =========   =========   ==========   =========
</TABLE>

<PAGE>

Acquired intangible assets subject to amortization are presented in the
following table.

                                                 (in thousands)
                                               As of June 29, 2002
                                         ---------------------------------
                                         Gross Carrying       Accumulated
                                             Amount           Amortization
                                         --------------       ------------

Customer related                               $18,998             $6,333
Maintenance relationships                        6,004                410
Non-compete agreements and other                 2,748              1,353
                                               -------             ------
                                               $27,750             $8,096
                                               =======             ======


For the three and nine  months  ended June 29,  2002,  amortization  expense for
intangible assets was $0.7 million and $2.1 million, respectively. The estimated
annual amortization  expense for intangible assets for the current and next five
fiscal years is as follows (in thousands):

          Fiscal Year Ending                       Estimated annual
             September 30,                       amortization expense
          ------------------                     --------------------

                 2002                                   $2,884
                 2003                                    2,897
                 2004                                    2,517
                 2005                                    2,054
                 2006                                    2,012
                 2007                                    1,995


NOTE E - Acquisitions

On November 29, 2001,  the Company  completed the  acquisition of certain assets
and the ongoing business  operations of NW  Micro-Technics,  Inc.  ("NWM"),  the
former Oregon-based Kronos dealer. The aggregate purchase price was not material
to the Company's financial position. The results of NWM's operations,  which are
not material to the Company's  results of operations,  have been included in the
consolidated  financial  statements since that date. NWM was engaged in the sale
and  service  of  employee  time  and  attendance,   employee  scheduling,  data
collection and labor  management  hardware and software  systems,  including the
resale of the Company's products through a dealer  relationship.  As a result of
the acquisition,  the Company gains access to existing and prospective customers
in the  northwestern  United States region  through its direct sales and service
organizations, as well as access to the existing maintenance revenue stream from
NWM customers.

<PAGE>


On December 28, 2001,  the Company  completed the  acquisition of certain assets
and the ongoing  business  operations  of the  Integrated  Software  Business of
SimplexGrinnell's   Workforce   Solutions  Division   ("SimplexGrinnell").   The
aggregate   purchase   price  was  $22.1   million  in  cash.   The  results  of
SimplexGrinnell's  operations have been included in the  consolidated  financial
statements  since that date.  SimplexGrinnell  was  engaged in the  development,
sales and support of integrated  workforce  management software solutions.  As a
result of the  acquisition,  the Company expects to increase its presence in the
mid-market  sector,   which  includes  companies  with  between  100  and  1,000
employees.

The  transaction  was accounted for under the purchase  method of accounting and
accordingly,  the  assets  and  liabilities  acquired  were  recorded  at  their
estimated  fair values at the effective  date of the  acquisition.  The goodwill
recognized is deductible for income tax purposes. The following table summarizes
the estimated fair values of the assets acquired and liabilities  assumed at the
date of the acquisition (in thousands).

                                                         At December 28, 2001
                                                         --------------------

Accounts receivable                                                  $7,091
Customer related intangible asset (amortized over                     1,100
12 years)
Maintenance relationships intangible asset                            2,500
(amortized over 12 years)
Goodwill                                                             18,067
Other assets                                                            768
                                                                    -------
    Total assets acquired                                            29,526

Deferred professional services revenue                              (1,564)
Deferred maintenance revenue                                        (5,611)
Other liabilities                                                     (301)
                                                                    -------
    Total liabilities assumed                                       (7,476)
                                                                    -------

Net assets acquired                                                 $22,050
                                                                    =======


Due to the significant  volume of customer contracts assumed in conjunction with
the SimplexGrinnell acquisition, the Company has not finalized the allocation of
the purchase  price.  The Company  anticipates  that the  allocation of purchase
price will be completed by September 30, 2002.

The  following  table  presents the  consolidated  results of  operations  on an
unaudited pro forma basis as if the  acquisition  of  SimplexGrinnell  had taken
place at the beginning of the periods  presented.  The following  table has been
prepared on the basis of estimates and assumptions available at the time of this
filing that the Company and  SimplexGrinnell  believe are  reasonable  under the
circumstances (in thousands, except per share data).

<PAGE>
<TABLE>
<CAPTION>



                                 Three Months Ended          Nine Months Ended
                               -----------------------   -------------------------
                                June 29,     June 30,      June 29,      June 30,
                                  2002          2001         2002          2001
                               ----------   ----------   -----------   -----------
<S>                            <C>          <C>          <C>           <C>
Total revenues .............   $   87,070   $   81,896   $   249,702   $   226,282
Net income .................        6,497        3,520        17,304         2,245
Earnings per share - basic .   $     0.33   $     0.19   $      0.88   $      0.12
Earnings per share - diluted   $     0.32   $     0.18   $      0.84   $      0.12
</TABLE>


The unaudited pro forma results of operations are for comparative  purposes only
and do not  necessarily  reflect the results  that would have  occurred  had the
acquisitions  occurred at the beginning of the periods  presented or the results
which may occur in the future.

On February 20, 2002,  the Company  completed the  acquisition of certain assets
and  the  ongoing  business   operations  of  Packard  Business  Systems,   Inc.
("Packard"),  the  former  West  Virginia-based  Kronos  dealer.  The  aggregate
purchase price was not material to the Company's financial position. The results
of  Packard's  operations,  which are not material to the  Company's  results of
operations,  have been included in the consolidated  financial  statements since
that date.  Packard was  engaged in the sale and  service of  employee  time and
attendance,  employee scheduling,  data collection and labor management hardware
and software systems,  including the resale of the Company's  products through a
dealer relationship. As a result of the acquisition, the Company gains access to
existing and prospective  customers in the West Virginia area through its direct
sales and service  organizations,  as well as access to the existing maintenance
revenue stream from Packard customers.

On March 18, 2002,  the Company  completed the  acquisition  of the  outstanding
stock of Data Collection Systems Ltd. ("DCS"), a provider of time and attendance
applications  headquartered  in the U.K. The  aggregate  purchase  price was not
material to the Company's financial  position.  The results of DCS's operations,
which  are not  material  to the  Company's  results  of  operations,  have been
included in the consolidated  financial  statements since that date. As a result
of the  acquisition,  the  Company  gains  access to  existing  and  prospective
customers in the U.K.  through its subsidiary in the U.K.,  Kronos Systems Ltd.,
as well as access to the existing maintenance revenue stream from DCS customers.

NOTE F - Source Code License Agreement

On March 15, 2002, the Company entered into an agreement with Best Software Inc.
("Best")  to acquire a limited  license to the source  code and object  code for
Best's human resources and payroll  software (Abra Enterprise  (TM)).  Under the
terms of the agreement, Best will provide the Abra Enterprise source code to the
Company and give the Company the right to reproduce,  market and  sublicense the
software.  The  Company  will  integrate  Abra  Enterprise  into  its  Workforce
Central(R)  suite and intends to market and sublicense  the  integrated  product
suite.  Per the  terms  of the  agreement,  the  Company  paid  Best a  one-time
technology  delivery fee that is being amortized over a five (5) year period and
prepaid  certain  service  fees.  These amounts are included in other assets and
other  current  assets on the balance  sheet.  The  agreement  also requires the
Company to pay minimum  royalties  for the first five (5) years of the agreement
with royalty payments based on the number of licensed  employees  continuing for
an aggregate period of ten (10) years.
<PAGE>

NOTE G - Comprehensive Income

For the three and nine months ended June 29, 2002 and June 30, 2001,
comprehensive income consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                      Three Months Ended        Nine Months Ended
                                     --------------------     ---------------------
                                     June 29,    June 30,     June 29,     June 30,
                                       2002        2001         2002         2001
                                     --------    --------     --------     --------
<S>                                  <C>         <C>          <C>          <C>
Comprehensive income:
Net income ......................    $  6,497    $  4,318     $ 18,467     $  6,174
Cumulative translation adjustment         298         216          626         (325)
Unrealized gain (loss) on
available-for-sale securities ...         220        (100)        (205)         306
                                     --------    --------     --------     --------
Total comprehensive income ......    $  7,015    $  4,434     $ 18,888     $  6,155
                                     ========    ========     ========     ========
</TABLE>


NOTE H - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except share and per share data):

<TABLE>
<CAPTION>


                                      Three Months Ended             Nine Months Ended
                                  --------------------------    --------------------------
                                    June 29,      June 30,       June 29,       June 30,
                                      2002          2001           2002           2001
                                  -----------    -----------    -----------    -----------

<S>                               <C>            <C>            <C>            <C>
Net income ...................    $     6,497    $     4,318    $    18,467    $     6,174
                                  ===========    ===========    ===========    ===========
Weighted-average shares ......     19,658,011     18,750,018     19,607,647     18,683,586
Effect of dilutive securities:
    Employee stock options ...        691,663        414,762        893,462        541,166
                                  -----------    -----------    -----------    -----------
Adjusted weighted-average
shares and assumed conversions     20,349,674     19,164,780     20,501,109     19,224,752
                                  ===========    ===========    ===========    ===========
Basic earnings per share .....    $      0.33    $       .23    $      0.94    $      0.33
                                  ===========    ===========    ===========    ===========
Diluted earnings per share ...    $      0.32    $       .23    $      0.90    $      0.32
                                  ===========    ===========    ===========    ===========
</TABLE>


NOTE I - Stock Split

On October 25, 2001, the Company's  Board of Directors  approved a three-for-two
stock split  effected in the form of a 50% stock  dividend.  This stock dividend
was paid on November 15, 2001 to  stockholders of record as of November 5, 2001.
Accordingly,  the presentation of shares  outstanding and amounts per share have
been restated for all periods  presented to reflect the split.  The par value of
the additional shares was transferred from additional  paid-in capital to Common
Stock.

<PAGE>


NOTE J - New Accounting Pronouncements

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement  addresses  financial  accounting
and reporting for the impairment of long-lived  assets and for long-lived assets
to be disposed of. This statement  supercedes SFAS No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of,"
and APB Opinion No. 30,  "Reporting  the Results of  Operations - Reporting  the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring Events and Transactions."  SFAS No. 144 is effective for
the Company October 1, 2002, and early adoption is allowed. The Company does not
expect  SFAS No.  144 to have a material  effect on its  earnings  or  financial
position.

In January  2002,  the Emerging  Issues Task Force (EITF) issued EITF No. 01-14,
"Income   Statement    Characterization    of   Reimbursements    Received   for
'Out-of-Pocket'  Expenses Incurred" (formerly EITF Abstracts,  Topic No. D-103).
This EITF  requires  that  reimbursements  received for  out-of-pocket  expenses
incurred should be  characterized  as revenue in the income statement as opposed
to a reduction  of expenses  incurred.  Out-of-pocket  expenses  include  travel
expenses  such as  airfare,  hotel,  mileage  and meals that the  customer  will
reimburse the service  vendor.  The EITF is effective  for  financial  reporting
periods  beginning  after  December 15, 2001. As a result of the adoption of the
EITF,  service  revenues and the  corresponding  cost of sales increased by $0.3
million and $0.4  million for the three  month  periods  ended June 29, 2002 and
June 30, 2001,  respectively,  and by $0.8 million and $0.9 million for the nine
month periods ended June 29, 2002 and June 30, 2001, respectively.

<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 revenues derived
from  prior  acquisitions,  revenue  growth  rates and gross  profit,  operating
expenses, future acquisitions and available cash, investments and operating cash
flow and the future effects of accounting  pronouncements.  Any such  statements
are subject to risk that could cause Kronos' 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.

Critical Accounting Policies

     Management's  discussion and analysis of financial condition and results of
operations are based upon Kronos' consolidated financial statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
Kronos to make  estimates and  assumptions  that affect the reported  amounts of
assets and  liabilities,  revenue  and  expenses,  and  related  disclosures  of
contingent  assets and  liabilities.  Kronos bases its  estimates on  historical
experience  and various  other  assumptions  that are believed to be  reasonable
under the circumstances.  Actual results could differ from these estimates under
different assumptions or conditions.

     Kronos has  identified  the  following  critical  accounting  policies that
affect the more  significant  judgments and estimates used in the preparation of
consolidated  financial statements.  This listing is not a comprehensive list of
all of  Kronos'  accounting  policies.  Please  refer to Note A in the  Notes to
Consolidated  Financial  Statements in Item 14 of Kronos'  Annual Report on Form
10-K for the year ended September 30, 2001 for further information.

     Revenue  Recognition - Kronos  recognizes  revenues in accordance  with the
provisions of the American Institute of Certified Public  Accountants  Statement
of Position (SOP) 97-2, "Software Revenue  Recognition," as amended by SOP 98-9,
"Modification  of SOP 97-2,  With  Respect  to  Certain  Transactions."  Product
revenue from sales and  sales-type  leases is  recognized  upon  shipment when a
noncancelable agreement has been signed, there are no uncertainties  surrounding
product  acceptance,  the fees are  fixed and  determinable  and  collection  is
probable.  Revenue earned on software  arrangements  involving multiple elements
which qualify for separate element  treatment is allocated to each element based
on the relative fair values of those elements based on vendor specific objective
evidence.  In instances where vendor specific  objective evidence does not exist
for delivered elements, typically software products, the residual method is used
to recognize revenue.  Typically software fees are due within one year from date

<PAGE>

of  contract  signing.  However,  since the mid 1990's  Kronos has also  offered
customers the option to make payments  over periods  exceeding one year.  Kronos
has established a history of sucessfully  collecting  under the original payment
terms  without  making  concessions  on payments,  products or services.  Kronos
ordinarily  records revenue for these  transactions upon shipment,  assuming all
other  conditions for revenue  recognition  have been satisfied.  If the fee due
from the  customer  is not  fixed or  determinable,  revenue  is  recognized  as
payments become due and all other  conditions for revenue  recognition have been
satisfied.  Revenues from maintenance agreements are recognized ratably over the
contractual period and all other service revenues are recognized as the services
are performed.

     Allowance  for  Doubtful  Accounts  and Sales  Returns  Allowance  - Kronos
maintains  an  allowance  for  doubtful  accounts  to reflect  estimated  losses
resulting  from the  inability  of  customers to make  required  payments.  This
allowance is based on estimates  made by Kronos after  consideration  of factors
such as the composition of the accounts receivable aging, bad debt history,  and
customer  creditworthiness.  If the  financial  condition of  customers  were to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional allowances and bad debt expense may be required. In addition,  Kronos
maintains  a sales  returns  allowance  to  reflect  estimated  losses for sales
returns and adjustments. This allowance is established by Kronos using estimates
based on  historical  experience.  If Kronos  experiences  an  increase in sales
returns and adjustments,  additional  allowances and charges against revenue may
be required.

     Valuation  of   Intangible   Assets  and   Goodwill  -  In  assessing   the
recoverability  of  goodwill  and  other  intangible  assets,  Kronos  must make
assumptions  regarding  the  estimated  future  cash flows and other  factors to
determine  the fair value of these assets.  If these  estimates or their related
assumptions  change in the future,  Kronos may be required to record  impairment
charges against these assets in the reporting  period in which the impairment is
determined.  For  intangible  assets,  this  evaluation  includes an analysis of
estimated  future  undiscounted  net cash flows  expected to be generated by the
assets over their estimated useful lives. If the estimated  future  undiscounted
net cash flows are insufficient to recover the carrying value of the assets over
their  estimated  useful lives,  Kronos will record an impairment  charge in the
amount by which the carrying value of the assets  exceeds their fair value.  For
goodwill,  the impairment evaluation includes a comparison of the carrying value
of the reporting unit which houses goodwill to that reporting unit's fair value.
Kronos has only one  reporting  unit.  The fair value of the  reporting  unit is
based upon the net  present  value of future  cash  flows,  including a terminal
value  calculation.  If the reporting  unit's  estimated  fair value exceeds the
reporting unit's carrying value, no impairment of goodwill  exists.  If the fair
value of the  reporting  unit does not exceed its carrying  value,  then further
analysis  would be required to determine the amount of the  impairment,  if any.
For the first nine months of fiscal 2002, no impairment was recorded.

<PAGE>

     Capitalization  of  Software  Development  Costs  - Costs  incurred  in the
research,  design and  development of software for sale to others are charged to
expense until  technological  feasibility is established.  Thereafter,  software
development  costs are  capitalized  and amortized to product cost of sales on a
straight-line  basis over the lesser of three  years or the  estimated  economic
lives of the  respective  products,  beginning when the products are offered for
sale. Costs incurred in the development of software for internal use are charged
to expense  until it becomes  probable  that future  economic  benefits  will be
realized.  Thereafter,  certain costs are capitalized and amortized to operating
expense on a straight-line basis over the lesser of three years or the estimated
economic life of the software.


Results of Operations

     Revenues. Revenues for the three and nine month periods ended June 29, 2002
were $87.1 million and $243.1 million respectively, as compared to $75.8 million
and $208.6 million for the comparable  periods in the prior year. Revenue growth
was 15% for the three  month  period  ended  June 29,  2002 and 17% for the nine
month period ended June 29,  2002,  as compared to 11% and 7% in the  comparable
periods in the prior year. The revenue growth rates experienced in the three and
nine month periods ended June 29, 2002 were primarily attributable to the effect
of incremental  revenues  derived from customers  obtained from  acquisitions of
businesses  over the  preceding  four  quarters.  Excluding  the effect of these
incremental revenues, revenue growth was nominal in the three month period ended
June 29,  2002 and grew 5% in the nine  month  period  ended June 29,  2002.  In
addition,  revenues were favorably  impacted by the continued increase in demand
for Kronos'  services.  Management  presently  anticipates  that revenue growth,
including  revenues from  customers  obtained in the  acquisition of businesses,
will  range  between 7% - 12% in the  fourth  quarter  of fiscal  2002 and range
between 14% - 15% for all of fiscal 2002.

     Product revenues for the quarter  increased 2% to $40.5 million as compared
to $39.8  million  and an increase  of 3% in the third  quarter of fiscal  2001.
Product  revenue for the first nine months of fiscal 2002 increased 3% to $109.7
million as compared to $106.4 million and a product revenue decline of 1% in the
first nine months of fiscal 2001. The product revenue growth  experienced in the
three and nine month  periods ended June 29, 2002 was  attributable  to revenues
related to the conversion to Kronos products by, and add-on sales to,  customers
acquired from other  providers of labor  management  solutions.  Product revenue
derived from  acquired  customers was $4.6 million and $8.0 million in the three
and nine month periods ended June 29, 2002,  respectively.  Management  believes
that the decline in product revenues, excluding incremental product revenue from
acquired customers, is attributable to the continued economic downturn resulting
in many  customers  deferring  or reducing  their  technology  purchases.  While
management believes the impact on technology purchasing is temporary, the effect
may  continue to cause  delays or  reductions  in customer  purchases  of Kronos
products and services in the future.

<PAGE>

     Service  revenues  for the third  quarter of fiscal 2002  increased  30% to
$46.6  million as compared to $36.0  million and an increase of 21% in the third
quarter of fiscal  2001.  Service  revenues  for the first nine months of fiscal
2002  increased  31% to $133.5  million as  compared  to $102.2  million  and an
increase  of 16% for the first nine months of the prior  year.  Service  revenue
derived from acquired  customers was $6.6 million and $16.0 million in the three
and nine month  periods  ended June 29, 2002,  respectively.  In addition to the
acquisition of businesses,  the growth in service revenues in the three and nine
month periods ended June 29, 2002  reflects an increase in  maintenance  revenue
from the 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 professional
services accompanying new and upgrade sales.


     Gross Profit.  Gross profit as a percentage of revenues was 60% and 61% for
the three and nine month periods ended June 29, 2002, respectively,  as compared
to 63% and 61% for the same  periods of the prior  year.  The  decrease in gross
profit as a percentage of revenues in the three month period ended June 29, 2002
was primarily  attributable to a higher  proportion of service  revenues,  which
generate  lower margins than product  revenues,  as well as a decline in product
gross profit that was partially offset by an increase in service gross profit.

     Product  gross profit as a percentage  of product  revenues was 75% in both
the three and nine month periods ended June 29, 2002, compared to 79% and 77% in
the three and nine month periods ended June 30, 2001, respectively. The decrease
in product gross profit in both periods is primarily  related to higher  royalty
and software  amortization costs as well as higher production costs attributable
to a newly  released  terminal and related  modules.  This decrease is partially
offset by a higher  proportion of software sales that  typically  carry a higher
gross profit than  hardware  sales.  Management  anticipates  that product gross
profit as a  percentage  of product  revenues in the fourth  quarter will exceed
that experienced in the current quarter.

     Service  gross profit as a percentage  of service  revenues was 47% and 49%
for the three and nine month periods ended June 29, 2002, respectively, compared
to 45% and 43% in the same periods of the prior year. The improvement in service
gross  profit  is  attributable   to  increased   productivity  in  the  service
organization.  The  improvement  in  productivity  is the  result of  leveraging
investments in service systems to more effectively manage the resources required
to deliver professional  services and customer support.  Management  anticipates
that  service  gross profit as a  percentage  of service  revenues in the fourth
quarter will exceed that  experienced  in the current  quarter  despite the fact
that  Kronos  is  continuing  to  invest  in   infrastructure   to  support  the
introduction of its new Human Resources Management System (HRMS) products.

     Net Operating Expenses.  Net operating expenses as a percentage of revenues
were 49% for both the three and nine  month  periods  ended  June 29,  2002,  as
compared to 54% and 56% for the same periods in the prior year.  The decrease in
operating  expenses as a percentage of revenues was primarily due to the special
charge  recorded  in the  second  and  third  quarters  of  fiscal  2001 and the

<PAGE>

elimination of goodwill  amortization  due to Kronos'  adoption of Statements of
Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations" and
No. 142 ("SFAS 142") "Goodwill and Other Intangible Assets" effective October 1,
2001 (see Note D in the Notes to Condensed  Consolidated  Financial Statements).
On a pro forma basis, excluding the special charge and amortization expense, net
operating  expenses as a  percentage  of  revenues  for the three and nine month
periods  ended June 30, 2001 were 52% for both periods.  Management  anticipates
that  operating  expenses as a percentage of revenues in the fourth quarter will
be less than that  experienced  in the first nine months of fiscal 2002  despite
the fact that Kronos is  continuing to invest in  infrastructure  to support the
introduction of its new HRMS products.

     Sales and  marketing  expenses as a percentage of revenues were 33% for the
three and nine month periods ended June 29, 2002, as compared to 34% and 35% for
the  comparable  periods in the prior year.  The increase in sales and marketing
expenses  in both  periods  is  attributable  to  Kronos'  investments  in sales
personnel  and related  support  costs to maximize the  penetration  of existing
accounts  and to add new  customers  as well as  initiatives  to  expand  market
awareness of Kronos  products and services.  The decrease in sales and marketing
expense as a percent of revenue in both periods was  attributable  to leveraging
our investment in infrastructure to generate higher sales volumes.

     Engineering,  research and development expenses as a percentage of revenues
were 10% and 11% for the three and nine month  periods  ended  June 29,  2002 as
compared to 12% for the comparable  periods in the prior year. The decrease as a
percentage  of revenues for the three and nine month periods ended June 29, 2002
as  compared  to the  same  period  in the  prior  fiscal  year  was due to cost
containment efforts coupled with higher sales volume in fiscal 2002. Engineering
expenses of $9.0  million and $9.1  million in the third  quarter of fiscal 2002
and 2001,  respectively,  are net of capitalized  software  development costs of
$3.0 million in each period. The nominal decrease in expenses in the three month
period  ended June 29,  2002 as compared to the same period of the prior year is
principally  attributable  to  a  reduction  in  spending  related  to  contract
consultants  partially  offset by an increase in salary and related expenses for
additional  engineering  personnel.  Engineering  expenses of $26.2  million and
$25.4  million in the first nine months of fiscal  2002 and 2001,  respectively,
are net of  capitalized  software  development  costs of $8.7  million  and $8.4
million,  respectively.  The increase in engineering  expenses in the nine month
period  ended June 29,  2002 as compared to the same period of the prior year is
principally   attributable  to  an  increase  in  salary  related  expenses  for
additional  engineering  personnel  partially  offset by a reduction in spending
related to contract consultants.  The significant project development efforts in
the three and nine  month  periods  ended  June 29,  2002  primarily  related to
further   development  and  enhancement  of  the  Workforce   Central(R)  suite,
Timekeeper  Central(R)  system,  Kronos iSeries  Central suite,  Kronos 4500(TM)
terminal  and,  to  a  lesser  extent,  the  eForce(R)  software  acquired  from
SimplexGrinnell.  In  addition,  in the three month  period ended June 29, 2002,
Kronos  initiated  its  development  of  its  newest  product  suite,  Workforce
HRMS(TM).

<PAGE>

     General and administrative  expenses as a percentage of revenues were 6% in
the three and nine month  periods ended June 29, 2002 as compared to 7% in three
and nine month  periods  ended  June 30,  2001.  The  increase  in  general  and
administrative  expenses in both periods is principally  attributable to Kronos'
investment  in  personnel  and other  infrastructure  to  support  the growth of
operations.  The  decrease as a  percentage  of revenues  for the three and nine
month  periods  ended June 29,  2002 as compared to the same period in the prior
fiscal year was attributable to leveraging our investment in  infrastructure  to
support higher sales volumes.

     Amortization of intangible assets as a percentage of revenues was 1% in the
three and nine month periods ended June 29, 2002 as compared to 2% and 3% in the
comparable periods of the prior year. The decrease in amortization is the result
of the elimination of goodwill  amortization  described above. Other income, net
is principally  attributable to interest income earned from Kronos' cash as well
as investments in its marketable securities and lease portfolio.

     Prior Year Special Charges.  A special charge in the amount of $0.7 million
was recorded in the third  quarter of fiscal 2001 related to  termination  costs
from a reduction in workforce of approximately 90 employees.  The charge was the
result of  management's  effort to  streamline  operations to better align costs
with expected revenues. In addition, in the second quarter of fiscal 2001 Kronos
recorded  a  special  charge  in the  amount  of  $3.0  million  related  to the
termination  of  Kronos'  Crosswinds  Technology   operations.   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 resulted in the termination of the stand-alone  operating unit.
The $3.0 million  charge  consisted of $1.6 million in termination  costs,  $1.3
million for the write off of intangible assets and $0.1 million in other costs.

     Income  Taxes.  The  provision  for income taxes as a percentage  of pretax
income was 34.8% in the three and nine  month  periods  ended  June 29,  2002 as
compared to 35.0% in the comparable periods of the prior year. Kronos' effective
income tax rate may fluctuate  between  periods as a result of various  factors,
none of which is  material,  either  individually  or in the  aggregate,  to the
consolidated results of operations.

     Newly Issued Accounting  Standards.  In June 2001, the Financial Accounting
Standards  Board (the "FASB") issued SFAS 141 and SFAS 142. Under the new rules,
goodwill (and intangible  assets deemed to have indefinite lives) will no longer
be amortized but will be subject to annual  impairment  tests in accordance with
the FASB statements.  Other intangible assets will continue to be amortized over
their useful lives.

     For acquisitions  completed prior to June 30, 2001, the Company applied the
new  rules on  accounting  for  business  combinations  and  goodwill  and other
intangible  assets  beginning  in the first  quarter of fiscal  year  2002.  For
acquisitions  completed  after  June 30,  2001,  Kronos  applied  the new  rules

<PAGE>

beginning  in the fourth  quarter of fiscal 2001.  On a pro forma basis,  Kronos
would have  realized  an increase  in net income of $0.9  million,  or $0.04 per
diluted  share for the three  months  ended June 30, 2001 and $2.6  million,  or
$0.13 per diluted  share for the nine months ended June 30,  2001,  if these new
standards had been applied to the first nine months of fiscal 2001.

     In  October  2001,  the FASB  issued  Statements  of  Financial  Accounting
Standards No. 144 ("SFAS 144"),  "Accounting  for the  Impairment or Disposal of
Long-Lived  Assets." This FASB  statement  addresses  financial  accounting  and
reporting for the impairment of long-lived  assets and for long-lived  assets to
be disposed of. This  statement  supercedes  SFAS No. 121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of,"
and APB Opinion No. 30,  "Reporting  the Results of  Operations - Reporting  the
Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual and
Infrequently  Occurring  Events and  Transactions."  SFAS 144 is  effective  for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. Kronos does not expect SFAS No.
144 to have a material effect on its earnings or financial position.

     In January  2002,  the Emerging  Issues Task Force  (EITF)  issued EITF No.
01-14,  "Income  Statement   Characterization  of  Reimbursements  Received  for
'Out-of-Pocket'  Expenses Incurred" (formerly EITF Abstracts,  Topic No. D-103).
This EITF  requires  that  reimbursements  received for  out-of-pocket  expenses
incurred should be  characterized  as revenue in the income statement as opposed
to a reduction  of expenses  incurred.  Out-of-pocket  expenses  include  travel
expenses  such as  airfare,  hotel,  mileage  and meals that the  customer  will
reimburse the service  vendor.  The EITF is effective  for  financial  reporting
periods  beginning  after  December 15, 2001. As a result of the adoption of the
EITF,  service  revenues and the  corresponding  cost of sales increased by $0.3
million and $0.4  million for the three  month  periods  ended June 29, 2002 and
June 30, 2001,  respectively,  and by $0.8 million and $0.9 million for the nine
month periods ended June 29, 2002 and June 30, 2001, respectively.


Liquidity and Capital Resources

     Kronos  funds  its  business  through  cash  generated  by  operations.  If
near-term  demand for Kronos'  products  weakens or if  significant  anticipated
sales in any quarter do not close when expected,  the availability of such funds
may be adversely impacted.  If the need arose, Kronos believes that based on its
current  debt-free  balance  sheet  and its  financial  position,  it  would  be
successful in securing financing from the capital markets.  As of June 29, 2002,
Kronos had  negative  working  capital of $1.0  million as  compared  to working
capital of $11.1  million at  September  30,  2001.  Kronos  believes  that this
decrease in working  capital is principally due to cash spent on the acquisition
of businesses and technology and the purchase of treasury stock during the first
nine months of fiscal 2002. During the first nine months of fiscal 2002, working
capital was reduced as Kronos used  available  cash of $30.4 million to complete
acquisitions  of  businesses  with a net working  capital of $0.2 million and to

<PAGE>

purchase  the  Abra  Enterprise  human  resources  and  payroll  software  (HRMS
technology).  In addition,  Kronos completed repurchases of its common shares of
approximately  $20.9  million  during the first nine  months of fiscal  2002 for
share  repurchases  pursuant to Kronos' stock repurchase  program as well as the
purchase of mature  stock  (stock held for at least six months)  from  employees
related to the exercise of stock options.  Cash, cash equivalents and marketable
securities  amounted to $56.8 million as of June 29, 2002,  and $68.8 million as
of September 30, 2001.  The decline in cash,  cash  equivalents  and  marketable
securities in the first nine months of fiscal 2002 is primarily  attributable to
cash used in the Company's acquisitions and stock repurchases.

     Cash generated from operations  amounted to $42.7 million in the first nine
months of fiscal 2002 as  compared to $34.3  million in the first nine months of
fiscal  2001.  The  increase in cash  generated  from  operations  is  primarily
attributable  to an increase in net income and the tax benefit from the exercise
of  stock  options,  partially  offset  by a  decrease  in  long  term  deferred
maintenance revenues and deferred  professional services as well as compensation
related payments.  Cash used for property,  plant and equipment was $7.7 million
in the first nine  months of fiscal 2002  compared  to $4.6  million in the same
period of fiscal 2001. Kronos' use of cash for the acquisition of businesses and
technology  in the first nine months of fiscal 2002 was  principally  related to
the acquisitions of specified assets and/or businesses of Kronos' dealers and/or
other providers of labor management  solutions as well as the acquisition of the
source  code  license  for the HRMS  technology.  Kronos  is  assessing  several
acquisition  opportunities  that may be completed  over the next twelve  months,
although  there can be no assurance that these  acquisitions  will be completed.
Excess cash reserves not required for operations, investments in property, plant
and  equipment  or  acquisitions  are  invested in  marketable  securities.  Net
investments in marketable securities increased by $3.5 million in the first nine
months of fiscal 2002 compared to an increase of $19.5 million in the first nine
months of fiscal 2001.

     Under Kronos' stock repurchase  program,  Kronos repurchased 396,950 common
shares  in the first  nine  months  of  fiscal  2002 at a cost of $17.0  million
compared to 171,000  common shares at a cost of $6.0 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  sufficient  to fund  investments  in  capitalized
software development costs, property, plant and equipment and stock repurchases.
Kronos believes that with cash generated from ongoing operations it has adequate
cash  and  investments  and  operating  cash  flow to fund  its  investments  in
property,  plant and equipment,  software  development  costs, cash requirements
under operating leases,  cash payments related to acquisitions,  if any, and any
additional stock repurchases for the foreseeable future.


During the quarter ended June 29, 2002, Kronos did not engage in:

o    material  off-balance  sheet  activities,  including  the use of structured
     finance or special purpose entities,

o    material trading activities in non-exchange traded commodity contracts, or

o    transactions   with   persons  or   entities   that   benefit   from  their
     non-independent relationship with Kronos.

<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 dependence on
Kronos'  time and  attendance  product  line,  the ability to attract and retain
sufficient technical personnel, competitive pricing pressure, 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, 2001, 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
ability of Kronos to  effectively  integrate  acquired  businesses  into Kronos'
operations,  the  timing  of  the  introduction  of  new  products  and  product
enhancements by Kronos and its competitors,  the strategy  employed by Kronos to
enter the Human Resources Management System (HRMS) market,  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

<PAGE>

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,
including  products  for the HRMS market,  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
Kronos' revenues have been attributable to sales of time and attendance  systems
and related  services.  Although  Kronos has  introduced  its  products  for the
licensed HRMS market this fiscal quarter,  Kronos expects that its dependence on
the  time and  attendance  product  line  for  revenues  will  continue  for the
foreseeable future.  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 its OEM
partner,   ADP,  Inc  ("ADP").   In  the  first  nine  months  of  fiscal  2002,
approximately  12% of Kronos' revenue was generated through sales to dealers and
ADP.  Management does not anticipate that its intention to enter the HRMS market
will have a negative impact on its relationship with ADP.  However,  a reduction
in the sales  efforts of Kronos'  major dealers  and/or ADP, or  termination  or
changes in their relationships with Kronos, could have a material adverse affect
on the results of Kronos' operations.

     Competition. The frontline labor management industry is highly competitive.
Technological  changes such as those  allowing for increased use of the Internet
have resulted in new entrants into the markets.  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.  With  Kronos'  efforts  to expand  its  frontline  labor
management  offering  with the recent  introduction  of its HRMS product  suite,
Kronos will continue to meet strong  competition.  Many of these competitors may
be able to adapt  more  quickly  to new or  emerging  technologies  or to devote
greater  resources to the promotion and sale of their HRMS products than Kronos.
Many of Kronos' HRMS competitors have significantly greater financial, technical
and sales and marketing  resources  than Kronos,  as well as more  experience in
delivering HRMS solutions. There can be no assurance that Kronos will be able to
compete  successfully  against the current and future HRMS competitors,  and its
failure  to do so could  have a  material  adverse  impact  upon  its  business,
prospects, financial condition and operating results.

<PAGE>

     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.

     Protection of Intellectual Property.  Kronos has developed, and through its
acquisitions of businesses,  acquired  proprietary  technology and  intellectual
property  rights.  Kronos'  success  is  dependent  upon its  ability to further
develop and protect its proprietary technology and intellectual property rights.
Kronos seeks to protect  products,  software,  documentation  and other  written
materials primarily through a combination of trade secret, patent, trademark and
copyright laws,  confidentiality  procedures and contractual  provisions.  While
Kronos has attempted to safeguard  and maintain its  proprietary  rights,  it is
unknown whether Kronos has been or will be successful in doing so.

     Despite  Kronos' efforts to protect its  proprietary  rights,  unauthorized
parties  may  attempt  to  copy  aspects  of its  products  or  obtain  and  use
information  that is  regarded  as  proprietary.  Policing  unauthorized  use of
Kronos' products is difficult. While Kronos is unable to determine the extent to
which piracy of its software products exists, software piracy can be expected to
be a persistent  problem,  particularly in foreign  countries where the laws may
not  protect  proprietary  rights as fully as in the United  States.  Kronos can
offer no assurance that it can adequately protect its proprietary rights or that
its  competitors  will not reverse  engineer or  independently  develop  similar
technology.

     Infringement  of  Intellectual   Property  Rights.  Kronos  cannot  provide
assurance  that  others  will  not  claim  that  Kronos  developed  or  acquired
intellectual  property  rights are  infringing  on their  intellectual  property
rights or that Kronos does not in fact infringe on those  intellectual  property
rights.

     Any litigation regarding  intellectual  property rights could be costly and
time-consuming  and divert the attention of Kronos' management and key personnel
from business  operations.  The  complexity of the  technology  involved and the
uncertainty of intellectual  property litigation increase these risks. Claims of
intellectual  property  infringement  might  also  require  Kronos to enter into
costly royalty or license agreements,  and in this event, Kronos may not be able
to obtain royalty or license  agreements on acceptable  terms, if at all. Kronos
may also be subject to significant  damages or an injunction  against the use of
its  products.  A  successful  claim of  patent or other  intellectual  property
infringement  against Kronos could cause immediate and substantial damage to its
business and financial condition.

<PAGE>

PART II.   OTHER INFORMATION


Item 6.    Exhibits and Reports on Form 8-K

(a)        Exhibits

           99.1  Certification pursuant to 18 U.S.C. Section 1350, as adopted
                 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(b)        Reports on Form 8-K

           There were no reports on Form 8-K filed during the fiscal quarter
           ended June 29, 2002.

<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
                                               Executive Vice President, Chief
                                            Financial and Administrative Officer
                                               (Duly Authorized Officer and
                                                Principal Financial Officer)


August 12, 2002

<PAGE>


                               KRONOS INCORPORATED

                                  EXHIBIT INDEX



Exhibit
Number      Description


99.1        Certification pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to section 906 of the Sarbanes-Oxley Act of 2002.





<PAGE>

                                                                    EXHIBIT 99.1



                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

                             AS ADOPTED PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



     In connection with the Quarterly Report on Form 10-Q of Kronos Incorporated
(the "Company") for the period ended June 29, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), the undersigned, Mark
S. Ain, Chief Executive Officer of the Company, and Paul A. Lacy, Executive Vice
President,  Chief  Financial  and  Administrative  Officer of the Company,  each
hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)  The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.





                                       By     /s/ Mark S. Ain
                                          -------------------------------------
Dated: August 12, 2002                            Mark S. Ain
                                            Chief Executive Officer



                                       By     /s/ Paul A. Lacy
                                           ------------------------------------
Dated: August 12, 2002                            Paul A. Lacy
                                       Executive Vice President, Chief Financial
                                            and  Administrative Officer