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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

|           |  |                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                        
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 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: 0-24464

THE CRONOS GROUP
(Exact name of Registrant as specified in its charter)

|                                                                          |  |                                                    
|------------------------------------------------------------------------- |  | ---------------------------------------------------
|LUXEMBOURG
(State or other Jurisdiction of incorporation or organization) |  | NOT APPLICABLE
(I.R.S. Employer Identification No.)

16, ALLÉE MARCONI, BOITE POSTALE 260, L-2120 LUXEMBOURG
(Address of principal executive offices)(zip code)

Registrants telephone number, including area codes:
(352) 453145



---



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 [ ]

The number of Common Shares outstanding as of November 12, 2001:

|       |  |                              |           | 
|------ |  | ---------------------------- | --------- | 
|Class  |  | Number of Shares Outstanding
|       |  |                             
|Common |  |                              | 7,364,580 | 





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TABLE OF CONTENTS



|                               |                                                                                                |                                                                                         |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1  Financial Statements                                                                 
|                               |                                                                                                | Management Representation                                                              
|                               |                                                                                                | Condensed Consolidated Statements of Income                                            
|                               |                                                                                                | Condensed Consolidated Balance Sheets                                                  
|                               |                                                                                                | Condensed Consolidated Statements of Cash Flows                                        
|                               |                                                                                                | Consolidated Statement of Shareholders Equity                                         
|                               |                                                                                                | Notes to the Condensed Consolidated Financial Statements                               
|                               | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               |                                                                                                | General                                                                                
|                               |                                                                                                | Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000
|                               |                                                                                                | Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000  
|                               |                                                                                                | Liquidity and Capital Resources                                                        
|                               |                                                                                                | Capital Resources                                                                      
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk                           
|PART II  OTHER INFORMATION   
|                               | Item 1  Legal Proceedings                                                                    
|                               | Item 2  Changes in Securities and Use of Proceeds                                            
|                               | Item 3  Defaults Upon Senior Securities                                                      
|                               | 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                    



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##### Table of Contents



TABLE OF CONTENTS

|                               |                                                                                                |                                                                                         |  |    |    | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |  | -- | -- | 
|PART I  FINANCIAL INFORMATION |                                                                                                |                                                                                         |  |   
|                               | Item 1  FINANCIAL STATEMENTS                                                                  |                                                                                         |  | 1  |   
|                               |                                                                                                | Management Representation                                                               |  |    | 1  | 
|                               |                                                                                                | Condensed Consolidated Statements of Income                                             |  |    | 2  | 
|                               |                                                                                                | Condensed Consolidated Balance Sheets                                                   |  |    | 3  | 
|                               |                                                                                                | Condensed Consolidated Statements of Cash Flows                                         |  |    | 4  | 
|                               |                                                                                                | Consolidated Statement of Shareholders Equity                                          |  |    | 5  | 
|                               |                                                                                                | Notes to the Condensed Consolidated Financial Statements                                |  |    | 6  | 
|                               | Item 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                         |  | 10 |   
|                               |                                                                                                | General                                                                                 |  |    | 10 | 
|                               |                                                                                                | Three Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000 |  |    | 11 | 
|                               |                                                                                                | Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000   |  |    | 12 | 
|                               |                                                                                                | Liquidity and Capital Resources                                                         |  |    | 13 | 
|                               |                                                                                                | Capital Resources                                                                       |  |    | 14 | 
|                               | Item 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                                                         |  | 14 |   
|PART II  OTHER INFORMATION    |                                                                                                |                                                                                         |  |   
|                               | Item 1  Legal Proceedings                                                                     |                                                                                         |  | 15 |   
|                               | Item 2  Changes in Securities and Use of Proceeds                                             |                                                                                         |  | 16 |   
|                               | Item 3  Defaults Upon Senior Securities                                                       |                                                                                         |  | 16 |   
|                               | Item 4  Submission of Matters to a Vote of Security Holders                                   |                                                                                         |  | 16 |   
|                               | Item 5  Other Information                                                                     |                                                                                         |  | 16 |   
|                               | Item 6  Exhibits and Reports on Form 8-K                                                      |                                                                                         |  | 16 |   





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##### Table of Contents






The Cronos Group

PART I  FINANCIAL INFORMATION




Item 1  Financial Statements




Management Representation

The unaudited condensed consolidated interim financial statements included
herein have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and disclosures
normally included in annual financial statements prepared in accordance with
accounting standards generally accepted in the United States of America have
been condensed or omitted pursuant to such rules and regulations.

These condensed consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Companys latest Annual Report on Form 10-K.

This financial information reflects, in the opinion of management, all
adjustments necessary to present fairly, the results for the interim periods.
Such adjustments consist of only normal recurring adjustments. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.

1



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##### Table of Contents






The Cronos Group

Condensed Consolidated Statements of Income
(US dollar amounts in thousands, except per share amounts)
(Unaudited)

|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                            |  | Three Months Ended |        | Nine Months Ended
|                                                                                            |  | September 30,      |        | September 30,    
|                                                                                            |  |                    |        |                  
|                                                                                            |  | 2001               |        | 2000              |  | 2001 |        | 2000
|                                                                                            |  |                    |        |                   |  |      |        |     
|Gross lease revenue                                                                         |  | $                  | 29,798 |                   |  | $    | 35,083 |      |  | $ | 91,364 |   |  | $ | 103,294 |  
|Commissions, fees and other income:                                                         |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|- US Limited Partnerships                                                                   |  |                    | 334    |                   |  |      | 325    |      |  |   | 1,000  |   |  |   | 990     |  
|- Unrelated parties                                                                         |  |                    | 1,366  |                   |  |      | 970    |      |  |   | 3,653  |   |  |   | 3,479   |  
|Gain on sale of investment:                                                                 |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|- gain on conversion of investment                                                          |  |                    |       |                   |  |      | 461    |      |  |   |       |   |  |   | 1,502   |  
|- realized holding gain                                                                     |  |                    |       |                   |  |      |       |      |  |   | 301    |   |  |   | 2,129   |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Total revenues                                                                              |  |                    | 31,498 |                   |  |      | 36,839 |      |  |   | 96,318 |   |  |   | 111,394 |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Direct operating expenses                                                                   |  |                    | 8,726  |                   |  |      | 7,068  |      |  |   | 23,276 |   |  |   | 20,989  |  
|Payments to container owners:                                                               |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|- US Limited Partnerships                                                                   |  |                    | 4,231  |                   |  |      | 6,627  |      |  |   | 14,733 |   |  |   | 19,607  |  
|- Other Container Owners                                                                    |  |                    | 9,074  |                   |  |      | 11,499 |      |  |   | 28,812 |   |  |   | 33,741  |  
|Depreciation and amortization                                                               |  |                    | 3,869  |                   |  |      | 3,941  |      |  |   | 11,947 |   |  |   | 11,886  |  
|Selling, general and administrative expenses                                                |  |                    | 3,339  |                   |  |      | 4,692  |      |  |   | 10,173 |   |  |   | 13,110  |  
|Interest expense                                                                            |  |                    | 2,043  |                   |  |      | 2,218  |      |  |   | 6,437  |   |  |   | 7,004   |  
|Recovery of related party loans                                                             |  |                    |       |                   |  |      |       |      |  |   | (6,000 | ) |  |   |        |  
|Impairment losses                                                                           |  |                    |       |                   |  |      |       |      |  |   | 4,000  |   |  |   |        |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Total expenses                                                                              |  |                    | 31,282 |                   |  |      | 36,045 |      |  |   | 93,378 |   |  |   | 106,337 |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Income before income taxes                                                                  |  |                    | 216    |                   |  |      | 794    |      |  |   | 2,940  |   |  |   | 5,057   |  
|Income taxes                                                                                |  |                    |       |                   |  |      | 158    |      |  |   | 122    |   |  |   | 709     |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Net income                                                                                  |  |                    | 216    |                   |  |      | 636    |      |  |   | 2,818  |   |  |   | 4,348   |  
|Other comprehensive income:                                                                 |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|- unrealised holding gain (loss) on available for sale
securities arising during the period |  |                    |       |                   |  |      | 86     |      |  |   | (150   | ) |  |   | (330    | )
|- reclassification adjustment                                                               |  |                    |       |                   |  |      | (452   | )    |  |   | (294   | ) |  |   | (533    | )
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Comprehensive income                                                                        |  | $                  | 216    |                   |  | $    | 270    |      |  | $ | 2,374  |   |  | $ | 3,485   |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Basic and diluted net income per common share                                               |  | $                  | 0.03   |                   |  | $    | 0.07   |      |  | $ | 0.34   |   |  | $ | 0.47    |  
|                                                                                            |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  

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

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The Cronos Group

Condensed Consolidated Balance Sheets
(US dollar amounts in thousands, except per share amounts)
(unaudited)

|                                                   |  |               |         |              |  |   |         |  
|-------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | -
|                                                   |  | September 30, |         | December 31,
|                                                   |  | 2001          |         | 2000        
|                                                   |  |               |         |             
|Assets                                             |  |               |         |              |  |   |         |  
|Cash and cash equivalents                          |  | $             | 4,954   |              |  | $ | 6,601   |  
|Amounts due from lessees (net)                     |  |               | 23,577  |              |  |   | 28,334  |  
|Amounts receivable from container owners           |  |               | 9,316   |              |  |   | 9,851   |  
|New container equipment for resale                 |  |               | 2,686   |              |  |   | 11,790  |  
|Net investment in direct finance leases            |  |               | 3,472   |              |  |   | 99      |  
|Investments                                        |  |               |        |              |  |   | 628     |  
|Container equipment (net)                          |  |               | 143,486 |              |  |   | 140,751 |  
|Building and other equipment (net)                 |  |               | 491     |              |  |   | 846     |  
|Cash deposits (restricted)                         |  |               | 452     |              |  |   | 1,418   |  
|Intangible assets                                  |  |               | 12,289  |              |  |   | 12,695  |  
|Other assets including prepayments                 |  |               | 17,076  |              |  |   | 17,880  |  
|                                                   |  |               |         |              |  |   |         |  
|Total assets                                       |  | $             | 217,799 |              |  | $ | 230,893 |  
|                                                   |  |               |         |              |  |   |         |  
|Liabilities and shareholders equity               |  |               |         |              |  |   |         |  
|Amounts payable to container owners                |  | $             | 17,318  |              |  | $ | 23,254  |  
|Amounts payable to container manufacturers         |  |               | 6,623   |              |  |   | 12,314  |  
|Other amounts payable and accrued expenses         |  |               | 14,235  |              |  |   | 15,684  |  
|Debt and capital lease obligations                 |  |               | 104,599 |              |  |   | 99,379  |  
|Current and deferred income taxes                  |  |               | 6,996   |              |  |   | 7,117   |  
|Deferred income and unamortized acquisition fees   |  |               | 6,901   |              |  |   | 8,392   |  
|                                                   |  |               |         |              |  |   |         |  
|Total liabilities                                  |  |               | 156,672 |              |  |   | 166,140 |  
|                                                   |  |               |         |              |  |   |         |  
|Shareholders equity                               |  |               |         |              |  |   |         |  
|Common shares                                      |  |               | 18,317  |              |  |   | 18,317  |  
|Additional paid-in capital                         |  |               | 49,925  |              |  |   | 49,925  |  
|Share subscriptions receivable                     |  |               | (79     | )            |  |   | (79     | )
|Accumulated other comprehensive income, net of tax |  |               |        |              |  |   | 444     |  
|Common shares held in treasury                     |  |               | (6,000  | )            |  |   |        |  
|Accumulated deficit                                |  |               | (1,036  | )            |  |   | (3,854  | )
|                                                   |  |               |         |              |  |   |         |  
|Total shareholders equity                         |  |               | 61,127  |              |  |   | 64,753  |  
|                                                   |  |               |         |              |  |   |         |  
|Total liabilities and shareholders equity         |  | $             | 217,799 |              |  | $ | 230,893 |  
|                                                   |  |               |         |              |  |   |         |  

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

3



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The Cronos Group




Condensed Consolidated Statements of Cash Flows
(US dollar amounts in thousands, except per share amounts)
(Unaudited)

|                                                                   |  |                   |         |      |  |   |         |  
|------------------------------------------------------------------ |  | ----------------- | ------- | ---- |  | - | ------- | -
|                                                                   |  | Nine Months Ended
|                                                                   |  | September 30,    
|                                                                   |  |                  
|                                                                   |  | 2001              |         | 2000
|                                                                   |  |                   |         |     
|Net cash provided by operating activities                          |  | $                 | 10,362  |      |  | $ | 13,615  |  
|                                                                   |  |                   |         |      |  |   |         |  
|Investing activities                                               |  |                   |         |      |  |   |         |  
|Purchase of container and other equipment                          |  |                   | (17,954 | )    |  |   | (2,339  | )
|Investment in finance lease equipment                              |  |                   | (2,515  | )    |  |   |        |  
|Proceeds from sale of building                                     |  |                   |        |      |  |   | 8,732   |  
|Proceeds from sales of container and other equipment               |  |                   | 5,926   |      |  |   | 1,315   |  
|Proceeds from sale of investment                                   |  |                   | 484     |      |  |   | 764     |  
|Proceeds from release of escrow deposits                           |  |                   |        |      |  |   | 1,245   |  
|                                                                   |  |                   |         |      |  |   |         |  
|Net cash (used in) provided by investing activities                |  |                   | (14,059 | )    |  |   | 9,717   |  
|                                                                   |  |                   |         |      |  |   |         |  
|Financing activities                                               |  |                   |         |      |  |   |         |  
|Proceeds from issuance of term debt                                |  |                   | 52,988  |      |  |   | 1,956   |  
|Repayments of term debt and capital lease obligations              |  |                   | (51,904 | )    |  |   | (24,703 | )
|Cash deposits (restricted)                                         |  |                   | 966     |      |  |   | (1,531  | )
|                                                                   |  |                   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                |  |                   | 2,050   |      |  |   | (24,278 | )
|                                                                   |  |                   |         |      |  |   |         |  
|Net decrease in cash and cash equivalents                          |  |                   | (1,647  | )    |  |   | (946    | )
|Cash and cash equivalents at beginning of period                   |  |                   | 6,601   |      |  |   | 8,701   |  
|                                                                   |  |                   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                         |  | $                 | 4,954   |      |  | $ | 7,755   |  
|                                                                   |  |                   |         |      |  |   |         |  
|Supplementary disclosure of cash flow information:                 |  |                   |         |      |  |   |         |  
|Cash paid during the period for:                                   |  |                   |         |      |  |   |         |  
|- interest                                                         |  | $                 | 6,699   |      |  | $ | 6,317   |  
|- income taxes                                                     |  |                   | 265     |      |  |   | 747     |  
|Cash received during the period for:                               |  |                   |         |      |  |   |         |  
|- interest                                                         |  |                   | 552     |      |  |   | 550     |  
|- income taxes                                                     |  |                   | 19      |      |  |   |        |  
|Non-cash activities:                                               |  |                   |         |      |  |   |         |  
|- container equipment acquired under capital lease                 |  |                   | 3,860   |      |  |   | 6,080   |  
|- other fixed assets acquired under capital lease                  |  |                   | 276     |      |  |   |        |  
|- container equipment / amounts payable to container manufacturers |  |                   |        |      |  |   | 5,051   |  
|- capital lease / amounts payable to container manufacturers       |  |                   |        |      |  |   | 1,145   |  
|- recovery of related party loans                                  |  |                   | 6,000   |      |  |   |        |  

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

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The Cronos Group




Consolidated Statement of Shareholders Equity
(US dollar amounts in thousands, except per share amounts)
(Unaudited)

Nine months ended September 30, 2001

|                                                                   |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |               |  |        |       |       |  |   |        |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ------ | ------ | ------- |  | ------------- | ------ | ------------- |  | -------- | --- | ----------- |  | ----------- | ---- | ------------- |  | ------ | ----- | ----- |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                   |  |        |        |         |  |               |        |               |  |          |     |             |  | Accumulated |      |               |  |        |       |       |  |   |        |   |  |   |        |   |  |  
|                                                                   |  |        |        |         |  | Additional    |        | Share         |  | other    |     | Restricted  |  |             |      |               |  | Common |       | Total
|                                                                   |  | Common |        | paid-in |  | subscriptions |        | comprehensive |  | retained |     | Accumulated |  | shares held |      | shareholders'
|                                                                   |  | shares |        | capital |  | receivable    |        | income        |  | earnings |     | deficit     |  | in treasury |      | equity       
|                                                                   |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |              
|Balance,
December 31, 2000                                         |  | $      | 18,317 |         |  | $             | 49,925 |               |  | $        | (79 | )           |  | $           | 444  |               |  | $      | 1,832 |       |  | $ | (5,686 | ) |  | $ |       |   |  | $ | 64,753 |  
|Net income                                                         |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |               |  |        |       |       |  |   | 2,818  |   |  |   |        |   |  |   | 2,818  |  
|Receipt of shares
in settlement of
related party
loans             |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |               |  |        |       |       |  |   |        |   |  |   | (6,000 | ) |  |   | (6,000 | )
|Change in
unrealized
holding gain
on available for
sale securities |  |        |        |         |  |               |        |               |  |          |     |             |  |             | (444 | )             |  |        |       |       |  |   |        |   |  |   |        |   |  |   | (444   | )
|                                                                   |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |               |  |        |       |       |  |   |        |   |  |   |        |   |  |   |        |  
|Balance,
September 30,
2001                                        |  | $      | 18,317 |         |  | $             | 49,925 |               |  | $        | (79 | )           |  | $           |     |               |  | $      | 1,832 |       |  | $ | (2,868 | ) |  | $ | (6,000 | ) |  | $ | 61,127 |  
|                                                                   |  |        |        |         |  |               |        |               |  |          |     |             |  |             |      |               |  |        |       |       |  |   |        |   |  |   |        |   |  |   |        |  

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

5



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The Cronos Group




Notes to the Condensed Consolidated Financial Statements
(US dollar amounts in thousands, except per share amounts)
(Unaudited)



|1. |  | The condensed consolidated financial statements include the accounts of
The Cronos Group and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Operating segment data                                                                                                                                                                               

Condensed segment information is provided in the tables below:

|                                       |  |              |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|-------------------------------------- |  | ------------ | ------ | --------- |  | ---------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                       |  |              |        |           |  | Other      |        |       |  |   |         |   |  |  
|                                       |  | US Limited   |        | Container |  | Owned      |        |       |  |  
|                                       |  | Partnerships |        | Owners    |  | Containers |        | Total
|                                       |  |              |        |           |  |            |        |      
|Three months ended September 30, 2001  |  |              |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $            | 8,212  |           |  | $          | 13,523 |       |  | $ | 8,063   |   |  | $ | 29,798  | 
|Operating profit before indirect items |  |              | 1,551  |           |  |            | 422    |       |  |   | 1,842   |   |  |   | 3,815   | 
|Operating profit (loss)                |  |              | 473    |           |  |            | (766   | )     |  |   | 1,133   |   |  |   | 840     | 
|Segment assets                         |  |              | 11,646 |           |  |            | 15,226 |       |  |   | 156,421 |   |  |   | 183,293 | 
|Three months ended September 30, 2000  |  |              |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $            | 10,768 |           |  | $          | 15,836 |       |  | $ | 8,479   |   |  | $ | 35,083  | 
|Operating profit before indirect items |  |              | 1,823  |           |  |            | 1,860  |       |  |   | 1,531   |   |  |   | 5,214   | 
|Operating profit                       |  |              | 532    |           |  |            | 571    |       |  |   | 826     |   |  |   | 1,929   | 
|Segment assets                         |  |              | 17,263 |           |  |            | 16,986 |       |  |   | 161,379 |   |  |   | 195,628 | 
|Nine months ended September 30, 2001   |  |              |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $            | 25,929 |           |  | $          | 41,667 |       |  | $ | 23,768  |   |  | $ | 91,364  | 
|Operating profit before indirect items |  |              | 4,936  |           |  |            | 2,585  |       |  |   | 1,982   |   |  |   | 9,503   | 
|Operating profit (loss)                |  |              | 1,486  |           |  |            | (1,059 | )     |  |   | (111    | ) |  |   | 316     | 
|Segment assets                         |  |              | 11,646 |           |  |            | 15,226 |       |  |   | 156,421 |   |  |   | 183,293 | 
|Nine months ended September 30, 2000   |  |              |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $            | 32,790 |           |  | $          | 46,353 |       |  | $ | 24,151  |   |  | $ | 103,294 | 
|Operating profit before indirect items |  |              | 6,255  |           |  |            | 5,343  |       |  |   | 4,064   |   |  |   | 15,662  | 
|Operating profit                       |  |              | 2,103  |           |  |            | 1,248  |       |  |   | 1,888   |   |  |   | 5,239   | 
|Segment assets                         |  |              | 17,263 |           |  |            | 16,986 |       |  |   | 161,379 |   |  |   | 195,628 | 

Reconciliation of operating profit for reportable segments to income before
income taxes:

|                                             |  |                    |      |                   |  |      |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                             |  | Three Months Ended |      | Nine Months Ended
|                                             |  | September 30,      |      | September 30,    
|                                             |  |                    |      |                  
|                                             |  | 2001               |      | 2000              |  | 2001 |        | 2000
|                                             |  |                    |      |                   |  |      |        |     
|Operating profit                             |  | $                  | 840  |                   |  | $    | 1,929  |      |  | $ | 316    |   |  | $ | 5,239  |  
|Gain on sale of investment                   |  |                    |     |                   |  |      | 461    |      |  |   | 301    |   |  |   | 3,631  |  
|Selling, general and administrative expenses |  |                    | (470 | )                 |  |      | (1,418 | )    |  |   | (1,270 | ) |  |   | (3,279 | )
|Amortization of intangibles                  |  |                    | (154 | )                 |  |      | (178   | )    |  |   | (407   | ) |  |   | (534   | )
|Impairment losses                            |  |                    |     |                   |  |      |       |      |  |   | (2,000 | ) |  |   |       |  
|Recovery of related party loans              |  |                    |     |                   |  |      |       |      |  |   | 6,000  |   |  |   |       |  
|                                             |  |                    |      |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Income before income taxes                   |  | $                  | 216  |                   |  | $    | 794    |      |  | $ | 2,940  |   |  | $ | 5,057  |  
|                                             |  |                    |      |                   |  |      |        |      |  |   |        |   |  |   |        |  

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##### Table of Contents



The Cronos GroupNotes to the Condensed Consolidated Financial Statements

3. Earnings per common share (US dollar amounts in thousands, except per
share amounts)

The components of basic and diluted net income per share were as follows:

|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------------ | --------- | ----------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                             |  | Three Months Ended |           | Nine Months Ended
|                                             |  | September 30,      |           | September 30,    
|                                             |  |                    |           |                  
|                                             |  | 2001               |           | 2000              |  | 2001 |           | 2000
|                                             |  |                    |           |                   |  |      |           |     
|Net income available for common shareholders |  | $                  | 216       |                   |  | $    | 636       |      |  | $ | 2,818     |  |  | $ | 4,348     | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Average outstanding shares of common stock   |  |                    | 7,364,580 |                   |  |      | 9,158,378 |      |  |   | 8,213,259 |  |  |   | 9,158,378 | 
|Dilutive effect of:                          |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|- Executive officer common share options     |  |                    | 45,380    |                   |  |      | 27,674    |      |  |   | 28,033    |  |  |   | 38,583    | 
|- Warrants                                   |  |                    | 28,896    |                   |  |      | 16,997    |      |  |   | 17,238    |  |  |   | 24,328    | 
|- 1999 Stock Option Plan                     |  |                    | 10,040    |                   |  |      |          |      |  |   | 3,347     |  |  |   | 6,871     | 
|- Non-Employee Directors Equity Plan         |  |                    | 21,714    |                   |  |      |          |      |  |   | 15,355    |  |  |   |          | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Common stock and common stock equivalents    |  |                    | 7,470,610 |                   |  |      | 9,203,049 |      |  |   | 8,277,232 |  |  |   | 9,228,160 | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Basic and diluted net income per share       |  | $                  | 0.03      |                   |  | $    | 0.07      |      |  | $ | 0.34      |  |  | $ | 0.47      | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 

4. Amounts receivable from container owners

Amounts receivable from container owners include amounts due from related
parties of $5.0 million and $5.9 million at September 30, 2001 and December 31,
2000, respectively.

5. Investments in related parties

Investments in related parties comprise investments as a general partner
and as a limited partner in eight sponsored funds. These general and limited
partner investments are accounted for using the equity method. The subsidiary
of the Company that acts as a general partner maintains insurance for bodily
injury, death and property damage for which a partnership may be liable, and
may be contingently liable for uninsured obligations of the partnerships.

The investment in US Limited Partnerships was $nil and $1 thousand at
September 30, 2001 and December 31, 2000, respectively.

6. Container equipment

Container equipment is net of accumulated depreciation of $78.2 million
and $78.8 million at September 30, 2001 and December 31, 2000, respectively.

7. Amounts payable to container owners

Amounts payable to container owners include amounts payable to related
parties of $10.9 million and $10.5 million at September 30, 2001 and December
31, 2000, respectively.

8. Debt and capital lease obligations

Debt and capital lease obligations include amounts due within twelve
months of $12.9 million and $18.2 million at September 30, 2001 and December
31, 2000, respectively.

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The Cronos Group

Notes to the Condensed Consolidated Financial Statements

9. Commitments and contingencies (to be read in conjunction with Note 15 to the
2000 Consolidated Financial Statements)

a. Contingencies  Dispute with Contrin Holding S.A.

Since 1983, the Group has managed containers for Austrian investment
entities sponsored by companies owned or controlled by Contrin Holding S.A., a
Luxembourg holding company (Contrin) and for Contrin itself.

The Group is in a dispute with Contrin over funds that Contrin claims to
have remitted to the Group for the purchase of containers. Contrin claims that
in 1994 it transmitted $2.6 million to the Group for the purchase of
containers. The Group did not receive these funds and believes that the funds
were diverted to an account controlled by Stefan M. Palatin, a former Chairman
and Chief Executive Officer of the Group, and that this was known or should
have been known by Contrin.

In December 1997, the Group recorded an accrual of $3.4 million relating
to the alleged transfer of $2.6 million, the related interest, plus the
estimated settlement costs of this and other claims by Contrin. On September
30, 2001, the balance of this accrual was $3 million.

On August 8, 2000, Contrin, through an affiliate, filed an action in the
Luxembourg District Court against the Company seeking recovery of $2.6 million,
together with interest and costs. On January 10, 2001, the Company responded to
Contrins complaint, requesting that the District Court dismiss the proceeding
for lack of jurisdiction over the dispute. The Company intends to contest
Contrins claims, on the merits, if the Companys motion to dismiss is not
granted, but is unable to predict the outcome of the dispute.

To preserve its rights of indemnity in the face of Contrins claims, the
Group, on June 1, 2000, filed a protective claim against Mr. Palatin and his
wife. By its claim, the Group seeks to establish that the Palatins are liable
to the Group for any liability which the Group may have to Contrin arising out
of the 1994 transfers.

On July 13, 2000, Cronos also filed a protective claim against the bank
that received the funds, Barclays Bank PLC (Barclays) in the High Court of
Justice, London, England. By its claim, the Group seeks a declaration that
Barclays is liable to the Group for $2.6 million, plus interest and costs,
arising out of Contrins 1994 transfer to an account with Barclays in the name
of Mrs. Palatin. The Group is currently evaluating documents produced by
Barclays to determine whether to proceed with its claim against Barclays.

On August 2, 2001, Contrin, through the same affiliate that filed the
action in the Luxembourg District Court, filed a separate claim against Cronos
Containers N.V. (CNV), a wholly-owned Netherlands Antilles subsidiary of the
Company, in the High Court of Justice, London, England. By its claim, Contrin
asserts that CNV, wrongfully and in violation of the management agreement
between Contrin and CNV, failed to distribute to Contrin $0.5 million in
distributions for the second through fourth calendar quarters of 1996. Contrin
seeks recovery of this sum, plus interest.

Contrin has granted to CNV an extension of time within which to answer or
otherwise respond to the claim. CNV intends to contest Contrins claim,
believing it has meritorious defenses to the claim, but is unable to predict
the outcome of the dispute.

Contrin investors have also made claims with respect to alleged
transactions between third parties and companies alleged to be connected to Mr.
Palatin, including Transocean Equipment Manufacturing and Trading Limited
(TOEMT), involving the purchase and sale of containers in a manner designed
to secure a tax mitigation advantage to those third parties. It is alleged
that sums remain owing to the third parties by one or more of these companies
in connection with the pre-arranged trading in containers. Current management
of the Company believes that the Group was not involved in these transactions,
that the Group had no access to the records of the alleged transactions and
insofar as the Group has managed the containers, the Group has acted in
accordance with instructions from authorized representatives of the third
parties.

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##### Table of Contents



The Cronos GroupNotes to the Condensed Consolidated Financial Statements

9. Commitments and contingencies (continued)

a. Contingencies  Dispute with Contrin Holding S.A.(continued)

Management considers that prudent provision has been made in the financial
statements for the matters noted above. There is a reasonable possibility that
a material change could occur with respect to these commitments and
contingencies within one year of the date of these financial statements. In
such an event, management estimates that possible losses could exceed the
amount accrued by $2.3 million.

b. Contingencies  TOEMT

TOEMT, which is currently in liquidation in the United Kingdom, has been
separately registered in the same name in both the United Kingdom and the Isle
of Man. At September 30, 2001 and December 31, 2000, the Group had $1.1 million
and $0.9 million respectively, in amounts payable to TOEMT on deposit in a bank
account pending resolution of certain matters relating to the liquidation
process. Over the past eighteen months, the Group has become aware that more
than one creditor of TOEMT may claim an interest in the distributions made by
the Group with respect to the containers owned by TOEMT. At the present time,
the Group has insufficient information to evaluate the competing claims or to
determine whether the Group may have any liability to the competing creditors
for the prior distributions made with respect to the TOEMT containers.

10. New accounting pronouncements

On January 1, 2001 the Group adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities. The adoption of SFAS 133 did not have a significant impact on the
financial position, results of operations, or cash flows of the Group.

In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that all business combinations initiated after
September 30, 2001 be accounted for under the purchase method and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. The Group will adopt SFAS No. 142 for its fiscal year
beginning January 1, 2002. The Group has not yet determined the effect of
adoption of these standards on its financial position and results of
operations.

In August 2001, the Financial Accounting Standards Board issued SFAS No.
143, Accounting for Asset Retirement Obligations, which is effective for all
fiscal years beginning after June 15, 2002. This standard requires a company
to record the fair value of a liability for an asset retirement obligation in
the period in which it is incurred, and a corresponding increase in the
carrying value of the related long-lived asset. During October 2001, the
Financial Accounting Standards Board issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for all fiscal
years beginning after December 15, 2001. SFAS No. 144 supersedes SFAS No. 121,
but retains its fundamental provisions relating to the recognition and
measurement of the impairment of long-lived assets to be held and used, and the
measurement of long lived assets to be disposed of by sale. The Group has not
yet determined the effect of adoption of either SFAS 143 or SFAS 144 on its
financial position and results of operations.

9



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##### Table of Contents



The Cronos Group




Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations




General

The Group generates revenues by leasing to ocean carriers, marine
containers that are owned either by managed container programs (Managed
Container Owners), comprising US Limited Partnerships and Other Container
Owners, or by the Group itself (Owned Containers). These leases, which
generate most of the Groups revenues, are generally operating leases.

The following chart summarizes the composition of the Cronos fleet (based
on original equipment cost) at September 30 for each of the periods indicated:

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 2001 |     | 2000
|                               |  |      |     |     
|US Public Limited Partnerships |  |      | 31  | %    |  |  | 32  | %
|Other Container Owners         |  |      | 45  | %    |  |  | 45  | %
|Owned Containers               |  |      | 24  | %    |  |  | 23  | %
|                               |  |      |     |      |  |  |     |  
|Total                          |  |      | 100 | %    |  |  | 100 | %
|                               |  |      |     |      |  |  |     |  

All containers, whether owned or managed, are operated as part of a single
fleet. The Group has discretion over which ocean carriers, container
manufacturers and suppliers of goods and services it deals with. Since the
Groups agreements with the Managed Container Owners meet the definition of
leases in Statement of Financial Accounting Standards No. 13, they are
accounted for in the Groups financial statements as leases under which the
container owners are lessors and the Group is lessee. The agreements with
container owners generally provide that the Group will make payments to the
container owners based upon the rentals collected from ocean carriers after
deducting direct operating expenses and the Groups management fee. For the
nine months ended September 30, 2001, over 82% of payments to container owners
were under the terms of such agreements. The majority of payments to container
owners are therefore dependent upon the leasing of the containers by the Group
to ocean carriers and the collection of lease rentals. Minimum lease payments
on the agreements, which have fixed payment terms, are presented in Note 13 to
the Companys 2000 Consolidated Financial Statements.

The following chart summarizes the composition of the Cronos fleet (in
thousands), based on twenty-foot equivalent units (TEU), by equipment type,
at September 30 for each of the periods indicated:

|                                        |  |      |       |      |  |  |       | 
|--------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                        |  | 2001 |       | 2000
|                                        |  |      |       |     
|Dry Cargo                               |  |      | 368.4 |      |  |  | 372.3 | 
|Refrigerated                            |  |      | 12.9  |      |  |  | 12.7  | 
|Cellular Palletwide Containers (CPCs) |  |      | 5.3   |      |  |  | 3.3   | 
|Rolltrailer                             |  |      | 2.5   |      |  |  | 2.4   | 
|Tank                                    |  |      | 2.0   |      |  |  | 2.0   | 
|Other Dry Freight Specials              |  |      | 3.2   |      |  |  | 3.0   | 
|                                        |  |      |       |      |  |  |       | 
|Total fleet                             |  |      | 394.3 |      |  |  | 395.7 | 
|                                        |  |      |       |      |  |  |       | 

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##### Table of Contents



The Cronos Group

Although utilization for the combined fleet increased by 1% during the
third quarter, the market for dry cargo containers remained weak due to the
economic slowdown in the US economy and the resulting decline in leasing
activity in the transpacific trade routes. Over the first nine months of 2001,
Cronos has repositioned containers from low demand to higher demand locations
and will continue to reposition equipment as cost-effective opportunities
arise.

The Group operates a diversified fleet of containers, which in addition to
dry cargo containers, includes refrigerated containers, tanks, CPCs and
rolltrailers. These specialized containers account for over 50% of the Cronos
owned fleet (based on original equipment cost). During 2001, Cronos has
targeted its new production on specialized containers, which have been placed
under term and direct finance leases. Cronos will continue to invest in this
equipment during the fourth quarter.

The following chart summarizes the combined utilization of the Cronos
fleet (based on approximate original equipment cost) at the dates indicated:

|                            |  |      |    |      |  |  |    |  
|--------------------------- |  | ---- | -- | ---- |  |  | -- | -
|                            |  | 2001 |    | 2000
|                            |  |      |    |     
|Utilization at September 30 |  |      | 72 | %    |  |  | 78 | %

Over the course of the last twelve months, the Groups combined per diem
rate fell by approximately 8.5% from the combined rate at September 30, 2000.




Three
Months Ended September 30, 2001 Compared to Three Months Ended September 30, 2000

Operating profitfor the three months ended September 30, 2001, was $0.8
million compared to $1.9 million for the corresponding period of 2000.
Reductions of $1.6 million in management fees and $0.5 million in net lease
revenues earned on Owned Containers were partially offset by increased
commissions, fees and other income of $0.4 million, lower allocated selling,
general and administrative expenses of $0.4 million and lower interest expense
of $0.2 million.

Gross lease revenueof $29.8 million for the three months ended September
30, 2001, represented a decline of $5.3 million, or 15.1%, when compared to the
corresponding period of 2000. This was primarily due to the slow-down in
demand for dry containers, which are responsible for $4.7 million of the total
decline.

Commissions, fees and other incomefor the three months ended September
30, 2001, were $1.7 million compared to $1.3 million for the same period of
2000, an increase of $0.4 million, or 31.3%. This increase is primarily due to
higher CPC license fee income.

Direct operating expensesof $8.7 million for the three months ended
September 30, 2001, represented an increase of $1.7 million, or 23.5%, when
compared to the third quarter of 2000. Storage costs were $1.4 million higher
than for the same period of 2000 reflecting a larger off-hire fleet. During
the quarter, the total cost of repositioning containers from low demand to
higher demand locations was $1.7 million. This compares to $1.1 million in
costs for repositioning moves that were undertaken in the corresponding quarter
of 2000. This increase in inventory-related costs was partly offset by a $0.3
million reduction in legal and other expenses.

Payments to container ownersof $13.3 million during the three months
ended September 30, 2001, represented a decline of $4.8 million, or 26.6%, when
compared to the corresponding period in 2000. Net lease revenue declined by
$6.4 million across the managed segments reflecting the combined effect of
lower utilization and per diem rates and in the case of the US Limited
Partnership segment, a smaller fleet size.

Depreciation and amortizationduring the three months ended September 30,
2001, was essentially unchanged compared to the third quarter of 2000.

11



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##### Table of Contents



The Cronos Group

Selling, general and administrative expensesfor the three months ended
September 30, 2001, were $3.3 million compared to $4.7 million for the
corresponding period of 2000, representing a decrease of $1.4 million, or
28.8%. This is primarily due to a $0.7 million reduction in non-operating
legal and related expenses and a $0.5 million reduction in manpower expenses.

Interest expenseof $2.0 million for the three months ended September 30,
2001, represented a decline of $0.2 million, or 7.9%, when compared to the
corresponding period in 2000. An increase in interest expense attributable to
a higher total debt balance was more than offset by the decrease in interest
expense attributable to the reduction in interest rates over the course of the
last twelve months.




Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30, 2000

Operating profitfor the nine months ended September 30, 2001, was $0.3
million compared to $5.2 million for the corresponding period of 2000. A $3.8
million reduction in management fees, a $0.6 million reduction in net lease
revenue on Owned Containers and a $2 million container impairment charge more
than offset a $0.9 million reduction in allocated selling, general and
administrative expenses and lower interest expense of $0.3 million.

Gross lease revenueof $91.4 million for the nine months ended September
30, 2001 was $11.9 million, or 11.5%, lower than for the same period of 2000.
The combined effect of lower per diem and utilisation rates for dry cargo,
refrigerated and tank containers caused a decline of $12.7 million in gross
lease revenue. This was partly offset by increased revenue for CPC and other
dry freight special products.

Commissions, fees and other incomefor the nine months ended September 30,
2001, were $4.7 million, representing an increase of $0.2 million, or 4.1%,
when compared to the nine months ended September 30, 2000. This was due to a
$0.6 million increase in CPC license fees, partly offset by a $0.1 million
reduction in acquisition fees. In addition, the nine months ended September
30, 2000 included a net gain of $0.3 million on the sale of property.

Gain on sale of investmentof $0.3 million in the first nine months of
2001 represented the sale of shares that had been held in escrow as security
for a 1994 tax indemnification agreement. This agreement expired on December
31, 2000, and the shares were released in the first quarter of 2001. The gain
of $3.6 million for the nine months ended September 30, 2000, represented
profit realized pursuant to the receipt of shares from two escrow accounts that
had been held pending post-closing reports and adjustments related to the
Agreement and Plan of Merger between Transamerica Corporation and Trans Ocean
Limited in 1996.

Direct operating expensesof $23.3 million for the first nine months of
2001 represented an increase of $2.3 million, or 10.9%, when compared to the
corresponding period of 2000. Inventory-related costs increased by $3.7
million, reflecting a larger off-hire fleet. This was partly offset by a total
reduction of $1.3 million in charges for insurance expense and doubtful
accounts.

Payments to container ownersof $43.5 million for the first nine months of
2001, represented a decrease of $9.8 million, or 18.4%, when compared to the
corresponding period in 2000. This is a result of a decline in net lease
revenue due to the current global economic climate. Payments to US Limited
Partnerships were $4.9 million lower than in the same period of 2000 due to the
sale of containers owned by older programs in the second half of 2000 as well
as the combined effect of lower utilization and per diem rates for dry cargo
containers. Payments to Other Container Owners were also $4.9 million lower
than in the first nine months of 2000. An increase in fleet size during the
period was more than offset by the downward trends in utilization and per diem
rates.

Depreciation and amortizationfor the nine months ended September 30,
2001, was essentially unchanged when compared to the corresponding period of
2000. An increase in container depreciation was offset by a reduction in
depreciation for other fixed assets as a result of the sale of a building in
June 2000.

12



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The Cronos Group

Selling, general and administrative expenseswere $10.2 million for the
first nine months of 2001, representing a decline of $2.9 million, or 22.4%,
when compared to the corresponding period in 2000. This was primarily due to
decreased non-operating legal and related expenses of $1.6 million, reduced
manpower costs of $0.8 million, lower professional services costs of $0.4
million and reduced information technology costs of $0.1 million.

Interest expenseof $6.4 million for the nine months ended September 30,
2001, represented a decline of $0.6 million, or 8.1%, when compared to the
corresponding period in 2000. This decrease was primarily due to the effect of
lower interest rates. Interest expense for the first nine months of 2001
included a $0.1 million non-recurring charge incurred in connection with the
refinancing of certain loan facilities. Interest expense for the first nine
months of 2000 included interest on a loan facility relating to the building,
which was sold in June 2000.

Recovery of related party loansfor the nine months ended September 30,
2001, represented the partial recovery of interest and principal receivable
under two promissory notes between the Group and a former Chairman and Chief
Executive Officer of the Group. The Group had previously made a provision
against some of the amounts owed under the promissory notes in December 1997.
In May 2001, Cronos was awarded 1.8 million outstanding common shares in the
Company that were beneficially owned by the former Chairman and Chief Executive
Officer in partial consideration for amounts owed under the promissory notes.
Such shares had been recorded as common shares in treasury. The valuation of $6
million was based on the estimated fair value of the shares received.

Impairment chargesof $4 million for the nine months ended September 30,
2001 were recorded against certain refrigerated containers and against loan
notes receivable from a third-party container owner.

In the second quarter of 2001, the Group undertook a review of its
refrigerated container equipment and identified a number of issues that have
had an impact on the carrying value of certain equipment, which use the R12
refrigerant gas. As a result of the review, management concluded that
inventories of R12 equipment would be targeted for immediate sale and that 531
containers with a carrying value of $2.4 million exceeded fair value.
Additionally, a review was conducted of 776 containers with a carrying value of
$3.7 million that were on lease at June 30, 2001. It was concluded that the
carrying value of these assets exceeded the future cash flows expected to
result from the use of the assets and their eventual disposition. As a result
of these reviews, an impairment charge of $2 million was recorded.

The Group also reviewed the carrying value of a loan note receivable from
third-party container owners in the second quarter of 2001. The carrying value
of the loan note is measured in terms of the discounted value of future
revenues to be generated based on historical and projected trends on per diem
revenues, utilization, and container disposal proceeds. Due to the global
economic climate and forecasts for economic recovery, management revised the
projections for per diem revenues and utilization downwards. Based on the
revised projected trends, the Group considered that the carrying value of the
loan notes due from the third-party container owners exceeded the discounted
value of the future cash flows by $2 million. Accordingly, an impairment of $2
million was recorded.




Liquidity and Capital Resources

Cash from Operating Activities:Net cash provided by operating activities
was $10.4 million and $13.6 million during the first nine months of 2001 and
2000, respectively. The net cash generated in 2001 reflected earnings from
operations, as well as cash generated from the sale of new container equipment
purchased for resale to a new managed container owner program. This sale
generated $8 million in proceeds, of which $6.8 million was used to pay
container manufacturers. The net cash generated in 2000 included earnings from
operations and a $10.3 million increase in amounts payable to container
manufacturers, partly offset by a $12.2 million increase in new container
equipment for resale.

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The Cronos Group

Cash from Investing Activities:Net cash used in investing activities was
$14.1 million in the first nine months of 2001, reflecting the acquisition of
$17.9 million of container equipment, $9 million of which relates to a new
five-year refrigerated container term lease. Net cash provided by investing
activities comprised proceeds generated from the sale of container equipment of
$5.9 million, and proceeds from the sale of investments of $0.5 million. In the
first nine months of 2000, net cash provided by investing activities was $9.7
million reflecting $10 million in proceeds generated by the sale of a building
and container equipment, and the receipt of $1.2 million of funds that had been
held in an escrow account.

Cash from Financing Activities:Net cash provided by financing activities
was $2.1 million during the first nine months of 2001. In July, 2001, the
Group entered into a $60 million revolving credit facility, under which Cronos
refinanced $37.6 million of existing debt. The Group has borrowed an
additional $15.4 million to finance new container production. In addition to
the refinancing of existing debt, the Group repaid $14.3 million of debt and
capital lease obligations during the nine months ended September 30, 2001. Net
cash used in financing activities for the first nine months of 2000 was $24.3
million. Debt repayments included $2.7 million of proceeds realized on the
conversion of investment securities together with $8.7 million of property sale
proceeds.




Capital Resources

At September 30, 2001, the Group had placed orders with container
manufacturers totaling $11.9 million for containers to be financed by the Group
using debt and capital lease funding.

On July 19, 2001, the Group entered into a $60 million revolving credit
facility with Fortis Bank (Nederland) N.V. This facility is for a term of three
years with an interest rate of libor plus 2.25%, payable monthly in arrears.
The first draw down under the facility was utilized to refinance existing loan
facilities and to fund new container acquisitions.




Item 3  Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk:Outstanding borrowings are subject to interest rate
risk. Approximately 79% of total borrowings had floating interest rates at
September 30, 2001. The Group conducted an analysis of borrowings with variable
interest rates to determine their sensitivity to interest rate changes. In this
analysis, the same change was applied to the current balance outstanding,
leaving all other factors constant. It was found that if a 10% increase were
applied to variable interest rates, the expected effect would be to reduce
annual cash flows by $0.4 million.

Exchange rate risk:Substantially all of the Groups revenues are billed
and paid in US dollars and a significant portion of costs are billed and paid
in US dollars. Of the remaining costs, the majority are individually small,
unpredictable and incurred in various denominations and thus are not suitable
for cost-effective hedging. By reference to the first nine months of 2001, it
is estimated that for every 10% incremental decline in the value of the US
dollar against various foreign currencies, the effect would be to reduce cash
flows by $0.9 million in any given year.

As exchange rates are outside of the control of the Group, there can be no
assurance that such fluctuations will not adversely effect its results of
operations and financial condition.

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The Cronos Group
 
PART II  OTHER INFORMATION




Item 1  Legal Proceedings

Dispute with the Contrin Group

The Group manages containers for investment entities sponsored by or
affiliated with Contrin. Approximately 1% (measured by TEUs) of the Groups
fleet of managed containers is owned by Contrin. The Group is in a dispute with
Contrin over funds that Contrin claims to have remitted to Cronos for the
purchase of containers. Contrin claims that in 1994 it transmitted $2.6 million
to Cronos for the purchase of containers. The Group did not receive these
funds and believes that the funds were diverted to an account controlled by Mr.
Palatin, and that this was known or should have been known by Contrin.

On August 8, 2000, Contrin, through its affiliate, Contrin Worldwide
Container Leasing GmbH (CWC), filed an action in the Luxembourg District
Court against the Company, seeking recovery of $2.6 million, together with
interest and costs. On January 10, 2001, the Company responded to CWCs
complaint, requesting that the District Court dismiss the proceeding for lack
of jurisdiction over the dispute. The Company intends to contest Contrins
claims, on the merits, if its motion to dismiss is not granted, but is unable
to predict the outcome of the dispute.

To preserve its rights of indemnity in the face of Contrins claims, the
Group, on June 1, 2000, filed a protective claim in the High Court of Justice,
London, England, against Mr. Palatin and his wife. By its claim, the Group
seeks to establish that the Palatins are liable to the Group for any liability
which the Group may have to Contrin arising out of the 1994 transfers. On March
29, 2001, The Group secured a freezing injunction from the High Court of
Justice in aid of its claim against the Palatins. By the injunction, the
Palatins are prohibited from selling, charging, or otherwise disposing of their
interest in an estate the Group believes is beneficially owned by the Palatins
in Amersham, England, until further order of the Court. The injunction also
extends to Klamath Enterprises, S.A. (Klamath), a Panamanian company and the
record owner of the estate. The Palatins have contested the jurisdiction of the
High Court of Justice over them, and have filed an affidavit with the Court
asserting that the estate is owned by Pontino SA, a Panamanian company, in
which they disclaim any interest. The Group believes that the High Court of
Justice has jurisdiction to hear its claim against the Palatins and that their
disclaimer of any beneficial interest in the Amersham estate is not credible.
On June 22, 2001, upon the stipulation of the parties, the Court entered its
Order staying further prosecution of the Groups claim against the Palatins.
The purpose of the stay is to await resolution of the Companys motion to
dismiss Contrins Luxembourg action against the Company. By the terms of the
stay, either party may restore the action upon 14 days notice to the other
party. The Groups freezing injunction remains in place during the period of
the stay, but the Palatins may, upon 14 days notice to the Group, apply to
modify the terms of the injunction.

On July 13, 2000, the Group also filed a protective claim (2000 Folio
No. 10) against Barclays in the High Court of Justice, London, England. By its
claim, the Group seeks a declaration that Barclays is liable to the Group for
$2.6 million, plus interest and costs, arising out of Contrins 1994 transfer
to an account with Barclays in the name of Mrs. Palatin. The Group obtained an
order from the Court requiring the production of documents by Barclays. The
Group is currently evaluating the documents produced by Barclays to determine
whether to proceed with its claim against Barclays.

On August 2, 2001, CWC filed a separate claim against Cronos Containers,
N.V., a wholly-owned Netherlands Antilles subsidiary of the Company, in the
High Court of Justice, London, England. By its claim, CWC asserts that CNV,
wrongfully and in violation of the management agreement between CWC and CNV,
failed to distribute to CWC $0.5 million in distributions for the second
through fourth calendar quarters of 1996. CWC seeks recovery of this sum, plus
interest.

CWC has granted to CNV an extension of time within which to answer or
otherwise respond to the claim. CNV intends to contest CWCs claim, believing
it has meritorious defences to the claim, but is unable to predict the outcome
of the dispute.

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The Cronos Group




Item 2  Changes in Securities and Use of Proceeds

Not applicable




Item 3  Defaults Upon Senior Securities

Not applicable




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

Not applicable




Item 5  Other Information

Not applicable




Item 6  Exhibits and Reports on Form 8-K

Not applicable

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The Cronos Group
 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.

THE CRONOS GROUP

|                                                |  |                                                                                                                                      |  |                  
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------
|SIGNATURE                                       |  | TITLE                                                                                                                                |  | DATE             
|                                                |  |                                                                                                                                      |  |                  
|By  /s/  PETER J YOUNGER
       Peter J Younger |  | Director, Chief Operating Officer,
Chief Financial Officer and
Chief Accounting Officer
(Principal Financial and Accounting Officer) |  | November 12, 2001

17