##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2007
 OR
 o
    
    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
  LUXEMBOURG
    
    NOT APPLICABLE(State or other Jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 5, Rue Guillaume Kroll, L-1882 LUXEMBOURG
 
 Securities registered pursuant to Section 12(b) of the Act.
 
 
 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 þ NO o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
 Large accelerated filer o Accelerated filer o Non- accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule
12b-2) YES o NO þ
 The number of Common Shares outstanding as of May 7, 2007:
 Class
    
    Number of Shares OutstandingCommon
    
    7,645,673




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##### Table of Contents



The Cronos Group
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    1Item 1  Financial Statements
    
    
    1Management Representation
    
    
    1Condensed Unaudited Consolidated Statements of Income and Comprehensive Income
    
    
    2Condensed Unaudited Consolidated Balance Sheets
    
    
    3Condensed Unaudited Consolidated Statements of Cash Flows
    
    
    4Condensed Unaudited Consolidated Statement of Shareholders Equity
    
    
    5Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
    
    
    20Liquidity and Capital Resources
    
    
    23Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4  Controls and Procedures
    
    
    25PART II  OTHER INFORMATION
    
    
    26Item 1  Legal Proceedings
    
    
    26Item 1A  Risk Factors
    
    
    26Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3  Defaults Upon Senior Securities
    
    
    26Item 4  Submission of Matters to a Vote of Security Holders
    
    
    27Item 5  Other Information
    
    
    27Item 6  Exhibits
    
    
    27EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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##### Table of Contents



The Cronos Group
 
 PART I  FINANCIAL INFORMATION
 
 Item 1  Financial Statements
 
       1




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##### Table of Contents



The Cronos Group
 
 Condensed Unaudited Consolidated Statements of Income and Comprehensive Income
 (US dollar amounts in thousands, except per share amounts)
 Three Months EndedMarch 31,2007
    
    
    2006Gross lease revenue
    
    $
    35,722
    
    
    $
    35,264Equipment trading revenue
    
    
    925
    
    
    
    1,726Commissions, fees and other income:- Related parties
    
    
    160
    
    
    
    203- Unrelated parties
    
    
    1,266
    
    
    
    987Total revenues
    
    
    38,073
    
    
    
    38,180Direct operating expenses
    
    
    3,909
    
    
    
    5,107Payments to Managed Container Programs:- Related parties
    
    
    15,314
    
    
    
    12,459- Unrelated parties
    
    
    6,947
    
    
    
    7,799Equipment trading expenses
    
    
    750
    
    
    
    1,572Depreciation and amortization
    
    
    2,964
    
    
    
    2,950Selling, general and administrative expenses
    
    
    5,658
    
    
    
    5,134Interest expense
    
    
    1,808
    
    
    
    1,644Total expenses
    
    
    37,350
    
    
    
    36,665Income before income taxes and equity in earnings of affiliate
    
    
    723
    
    
    
    1,515Income taxes
    
    
    (145
    )
    
    
    (227
    )Equity in earnings of unconsolidated affiliate
    
    
    1,725
    
    
    
    1,271Net income
    
    
    2,303
    
    
    
    2,559Other comprehensive (loss) income:- change in fair value of derivatives held by affiliate, net of tax
    
    
    (285
    )
    
    
    516Comprehensive income
    
    $
    2,018
    
    
    $
    3,075Basic net income per common share
    
    $
    0.30
    
    
    $
    0.34Diluted net income per common share
    
    $
    0.28
    
    
    $
    0.32
  2




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The Cronos Group
 
 Condensed Unaudited Consolidated Balance Sheets
 (US dollar amounts in thousands, except per share amounts)
 March 31,
    
    
    December 31,2007
    
    
    2006AssetsCash and cash equivalents
    
    $
    8,789
    
    
    $
    8,498Restricted cash
    
    
    
    
    
    
    250Amounts due from lessees, net
    
    
    32,189
    
    
    
    30,913Amounts receivable from Managed Container Programs
    
    
    2,224
    
    
    
    3,033New container equipment for resale
    
    
    42,041
    
    
    
    35,131Net investment in direct financing leases
    
    
    11,482
    
    
    
    12,222Investments in unconsolidated affiliates
    
    
    46,900
    
    
    
    43,710Container equipment, net
    
    
    111,562
    
    
    
    113,081Other equipment, net
    
    
    582
    
    
    
    632Goodwill
    
    
    11,038
    
    
    
    11,038Other intangible assets, net
    
    
    111
    
    
    
    157Current and deferred income taxes
    
    
    447
    
    
    
    282Other assets
    
    
    3,913
    
    
    
    4,252Total assets
    
    $
    271,278
    
    
    $
    263,199Liabilities and shareholders equityAmounts payable to Managed Container Programs
    
    
    24,792
    
    
    
    24,171Amounts payable to container manufacturers
    
    
    43,767
    
    
    
    34,809Direct operating expense payables and accruals
    
    
    3,965
    
    
    
    4,821Other amounts payable and accrued expenses
    
    
    6,427
    
    
    
    7,381Debt and capital lease obligations
    
    
    93,651
    
    
    
    95,875Deferred income taxes
    
    
    3,656
    
    
    
    3,650Deferred income and unamortized acquisition fees
    
    
    7,449
    
    
    
    7,005Total liabilities
    
    
    183,707
    
    
    
    177,712Shareholders equityCommon shares issued (7,678,073 shares)
    
    
    15,356
    
    
    
    15,356Additional paid-in capital
    
    
    42,555
    
    
    
    42,489Common shares held in treasury (112,000 shares)
    
    
    (297
    )
    
    
    (297
    )Accumulated other comprehensive income
    
    
    320
    
    
    
    605Restricted retained earnings
    
    
    1,832
    
    
    
    1,832Retained earnings
    
    
    27,805
    
    
    
    25,502Total shareholders equity
    
    
    87,571
    
    
    
    85,487Total liabilities and shareholders equity
    
    $
    271,278
    
    
    $
    263,199
  3




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The Cronos Group
 
 Condensed Unaudited Consolidated Statements of Cash Flows
 (US dollar amounts in thousands, except per share amounts)
 Three Months EndedMarch 31,2007
    
    
    2006 (restated)Net cash provided by (used in) operating activities
    
    $
    4,383
    
    
    $
    (1,968
    )Cash flows from investing activitiesPurchase of container and other equipment
    
    
    (1,039
    )
    
    
    (11,948
    )Investment in unconsolidated affiliate
    
    
    (1,750
    )
    
    
    (2,000
    )Investment in equipment acquired for direct financing lease
    
    
    
    
    
    
    (134
    )Proceeds from sales of container and other equipment
    
    
    1,264
    
    
    
    1,825Restricted cash
    
    
    250
    
    
    
    3,515Net cash used in investing activities
    
    
    (1,275
    )
    
    
    (8,742
    )Cash flows from financing activitiesProceeds from issuance of term debt
    
    
    
    
    
    
    14,417Repayments of term debt and capital lease obligations
    
    
    (2,287
    )
    
    
    (3,721
    )Dividend paid
    
    
    (530
    )
    
    
    (518
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    519Net cash (used in) provided by financing activities
    
    
    (2,817
    )
    
    
    10,697Net increase (decrease) in cash and cash equivalents
    
    
    291
    
    
    
    (13
    )Cash and cash equivalents at beginning of period
    
    
    8,498
    
    
    
    15,829Cash and cash equivalents at end of period
    
    $
    8,789
    
    
    $
    15,816Supplementary disclosure of cash flow information:Cash paid during the period for:- interest
    
    $
    1,672
    
    
    $
    1,375- income taxes
    
    
    256
    
    
    
    328Cash received during the period for:- interest
    
    
    24
    
    
    
    5Non-cash activities:- container equipment acquired under capital lease
    
    
    
    
    
    
    4,025- container equipment transferred to direct financing leases
    
    
    28
    
    
    
    
  4




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The Cronos Group
 
 Condensed Unaudited Consolidated Statement of Shareholders Equity
 (US dollar amounts in thousands, except per share amounts)
 Three months ended March 31, 2007
 AccumulatedAdditional
    
    
    Common
    
    
    other
    
    
    Restricted
    
    
    
    
    
    
    TotalCommon
    
    
    paid-in
    
    
    shares held
    
    
    comprehensive
    
    
    retained
    
    
    Retained
    
    
    shareholdersshares
    
    
    capital
    
    
    in treasury
    
    
    income
    
    
    earnings
    
    
    earnings
    
    
    equityBalance,
January 1, 2007
    
    $
    15,356
    
    
    $
    42,489
    
    
    $
    (297
    )
    
    $
    605
    
    
    $
    1,832
    
    
    $
    25,502
    
    
    $
    85,487Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,303
    
    
    
    2,303Other comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (285
    )
    
    
    
    
    
    
    
    
    
    
    (285
    )Stock based
compensation
    
    
    
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66Balance,
March 31, 2007
    
    $
    15,356
    
    
    $
    42,555
    
    
    $
    (297
    )
    
    $
    320
    
    
    $
    1,832
    
    
    $
    27,805
    
    
    $
    87,571
 Three months ended March 31, 2006
 AccumulatedAdditional
    
    
    Common
    
    
    other
    
    
    Restricted
    
    
    
    
    
    
    TotalCommon
    
    
    paid-in
    
    
    shares held
    
    
    comprehensive
    
    
    retained
    
    
    Retained
    
    
    shareholdersshares
    
    
    capital
    
    
    in treasury
    
    
    income
    
    
    earnings
    
    
    earnings
    
    
    equityBalance,
January 1, 2006
    
    $
    15,040
    
    
    $
    43,807
    
    
    $
    (297
    )
    
    $
    880
    
    
    $
    1,832
    
    
    $
    16,275
    
    
    $
    77,537Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,559
    
    
    
    2,559Issue of common shares
    
    
    227
    
    
    
    325
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    552Declaration of dividend
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )Other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    516
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    516Stock based
compensation
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Balance,
March 31, 2006
    
    $
    15,267
    
    
    $
    44,164
    
    
    $
    (297
    )
    
    $
    1,396
    
    
    $
    1,832
    
    
    $
    18,834
    
    
    $
    81,196
  5




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
     Three Months EndedMarch 31, 2006Operating
    
    
    InvestingUS dollar amounts in thousands
    
    activities
    
    
    activitiesPreviously reported
    
    $
    1,542
    
    
    $
    (12,252
    )Reclassification
    
    
    (3,510
    )
    
    
    3,510Restated
    
    
    ($1,968
    )
    
    $
    (8,742
    )
    6




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
    USJoint
    
    
    Limited
    
    
    PrivateVenture
    
    
    Partnership
    
    
    Container
    
    
    OwnedUS dollar amounts in thousands
    
    Program
    
    
    Programs
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2007Items directly attributable to segments:- gross lease revenue
    
    $
    15,627
    
    
    $
    3,771
    
    
    $
    9,063
    
    
    $
    7,261
    
    
    $
    35,722- direct operating expenses
    
    
    (1,285
    )
    
    
    (537
    )
    
    
    (1,427
    )
    
    
    (660
    )
    
    
    (3,909
    )net lease revenue
    
    
    14,342
    
    
    
    3,234
    
    
    
    7,636
    
    
    
    6,601
    
    
    
    31,813- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    395- payments to Managed Container Programs
    
    
    (13,124
    )
    
    
    (2,190
    )
    
    
    (6,947
    )
    
    
    
    
    
    
    (22,261
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,847
    )
    
    
    (2,847
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,808
    )
    
    
    (1,808
    )Segment profit
    
    $
    1,218
    
    
    $
    1,044
    
    
    $
    689
    
    
    $
    2,341
    
    
    $
    5,292Segment assets at end of period
    
    $
    63,660
    
    
    $
    5,659
    
    
    $
    10,715
    
    
    $
    191,244
    
    
    $
    271,278
 USJoint
    
    
    Limited
    
    
    PrivateVenture
    
    
    Partnership
    
    
    Container
    
    
    OwnedUS dollar amounts in thousands
    
    Program
    
    
    Programs
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2006Items directly attributable to segments:- gross lease revenue
    
    $
    11,507
    
    
    $
    4,854
    
    
    $
    10,859
    
    
    $
    8,044
    
    
    $
    35,264- direct operating expenses
    
    
    (1,053
    )
    
    
    (825
    )
    
    
    (2,173
    )
    
    
    (1,056
    )
    
    
    (5,107
    )net lease revenue
    
    
    10,454
    
    
    
    4,029
    
    
    
    8,686
    
    
    
    6,988
    
    
    
    30,157- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    402- payments to Managed Container Programs
    
    
    (9,559
    )
    
    
    (2,900
    )
    
    
    (7,799
    )
    
    
    
    
    
    
    (20,258
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,832
    )
    
    
    (2,832
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,643
    )
    
    
    (1,643
    )Segment profit
    
    $
    895
    
    
    $
    1,129
    
    
    $
    887
    
    
    $
    2,915
    
    
    $
    5,826Segment assets at end of period
    
    $
    46,994
    
    
    $
    9,182
    
    
    $
    11,395
    
    
    $
    205,516
    
    
    $
    273,087
 7




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
  Three Months EndedMarch 31,US dollar amounts in thousands
    
    2007
    
    
    2006Segment profit
    
    $
    5,292
    
    
    $
    5,826Equipment trading revenue
    
    
    925
    
    
    
    1,726Unallocated commissions, fees and other operating income
    
    
    989
    
    
    
    685Interest income
    
    
    42
    
    
    
    103Equipment trading expenses
    
    
    (750
    )
    
    
    (1,572
    )Amortization of intangible assets
    
    
    (47
    )
    
    
    (47
    )Non container depreciation
    
    
    (70
    )
    
    
    (71
    )Selling, general and administrative expenses
    
    
    (5,658
    )
    
    
    (5,134
    )Non container interest expense
    
    
    
    
    
    
    (1
    )Income before income taxes and equity in earnings of affiliate
    
    $
    723
    
    
    $
    1,515
  Three Months EndedMarch 31,US dollar amounts in thousands
    
    2007
    
    
    2006Revenues directly attributable to segments:- gross lease revenue
    
    $
    35,722
    
    
    $
    35,264- direct financing lease income
    
    
    395
    
    
    
    40236,117
    
    
    
    35,666Other revenues:- equipment trading revenue
    
    
    925
    
    
    
    1,726- unallocated commissions, fees and other operating income
    
    
    989
    
    
    
    685- other interest income
    
    
    42
    
    
    
    103Total revenues
    
    $
    38,073
    
    
    $
    38,180
  8




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 3.
    
    Selling, general & administrative expenses
  4.
    
    Stock-Based Compensation
   i.
 ii
 5.
    
    Income taxes
     
    
    United Kingdom  2005 and 2006;
    
    Sweden  2006; and,
    
    USA  2003 to 2006.
  9




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 6.
    
    Earnings per common share
  Three Months EndedMarch,2007
    
    
    2006Net income available for common shareholders
    
    $
    2,303
    
    
    $
    2,559Average outstanding shares of common stock
    
    
    7,566,073
    
    
    
    7,486,714Dilutive effect of:- 1998 stock option
    
    
    216,223
    
    
    
    197,344- 1999 stock option plan
    
    
    214,799
    
    
    
    212,562- non-employee directors equity plan
    
    
    112,693
    
    
    
    109,247- 2005 equity incentive plan
    
    
    95,167
    
    
    
    48,700Common stock and common stock equivalents
    
    
    8,204,955
    
    
    
    8,054,567Basic net income per share
    
    $
    0.30
    
    
    $
    0.34Diluted net income per share
    
    $
    0.28
    
    
    $
    0.32
 10




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 7.
    
    Container and other equipment
  US dollar amounts in thousands
 CostBalance, December 31, 2005
    
    $
    197,481Additions
    
    
    25,036Disposals
    
    
    (51,319
    )Balance, December 31, 2006
    
    $
    171,198Additions
    
    
    2,619Disposals
    
    
    (3,093
    )Balance, March 31, 2007
    
    $
    170,724Accumulated depreciationBalance, December 31, 2005
    
    $
    75,493Depreciation expense
    
    
    11,374Disposals
    
    
    (28,750
    )Balance, December 31, 2006
    
    $
    58,117Depreciation expense
    
    
    2,847Disposals
    
    
    (1,802
    )Balance, March 31, 2007
    
    $
    59,162Book valueMarch 31, 2007
    
    $
    111,562December 31, 2006
    
    $
    113,081
   11




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 8.
    
    Investments in related parties
        12




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##### Table of Contents



The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 9.
    
    Other intangible assets
  10.
    
    Debt and capital lease obligations
   11.
    
    Commitments and contingencies
 i.
    
    Commitments
  ii.
    
    Parent Guarantee under Agreements with Private Container Programs
    13




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 iii.
    
    Guarantees under fixed non-cancellable operating leases
  US dollar amounts in thousands
 April 1 to December 31, 2007
    
    $
    1,8712008
    
    
    4,4962009
    
    
    1,2982010
    
    
    5,743Total
    
    $
    13,408
 iv.
    
    Agreements with Private Container Programs  early termination options
  v.
    
    Agreements with Private Container Programs  change of control provisions
  vi.
    
    Joint Venture Program  change of control provisions
  14




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 vii.
    
    Legal complaint
    12.
    
    Related party transactions
  i
 ii
 iii
 iv
  13.
    
    Significant accounting policies and estimates
  
    
    Container equipment  depreciable lives;
    
    Container equipment  valuation;
    
    Deferred taxation;
    
    Allowance for doubtful accounts;
    
    Goodwill; and,
    
    Reporting lease revenue on a gross basis for Managed Container Programs.
 15




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 14.
    
    New accounting pronouncements
    16




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##### Table of Contents



The Cronos Group
 
 Item 2  Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Introduction
   Funding Overview
  Owned Containers
      17




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##### Table of Contents



The Cronos Group
 Managed Container Programs
 Joint Venture Program:
 
    
    The maximum debt funding commitment increased from $350 million to $420
million;
    
    The interest rate margin over the one month London Inter-Bank Offered Rate
(Libor) decreased from 125 basis points to 75 basis points until October 31,
2007; and,
    
    The maximum equity commitment of each of the equity holders in the Joint
Venture Program increased to $42 million.
   US Limited Partnership Programs:
  Private Container Programs:
  18




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##### Table of Contents



The Cronos Group
 Product Overview
  Dry Cargo Containers
 ®
 Specialized Containers
 Refrigerated containers
 Tank containers
 Dry freight specials
 
    
    Cronos owns a series of patents for Cellular Palletwide Containers (CPCs), a
specialized container of extra interior width designed specifically for the
carriage of cargo on metric pallets. CPCs allow for the side-by-side stowage of
metric pallets, which is not possible in a standard ISO container, thereby
increasing the pallet load capacity per container. In addition to its leasing
activity, Cronos earns CPC licence fee income on the sale of CPCs to third parties.
    
    A rolltrailer is a heavy-duty chassis used for moving heavy cargo or containers
onto and off of Roll On  Roll Off ships. Cronos entered the rolltrailer market in
1996 when it acquired a Swedish company with an existing fleet of rolltrailers.
    
    Flat racks are typically used for the transportation of heavy machinery and can
be folded flat for inexpensive and efficient repositioning and storage.
    
    Bulkers are containers designed for the carriage of granular cargoes, including
plastics, certain chemicals and agricultural products. The cargo carried by
bulkers can be loaded and shipped in a loose state without the need for any other
packaging.
    
    Open tops are primarily used to enable loading of heavy machinery from above the
container and for the carriage of certain over-height cargoes that would be
unsuitable for a standard container.
 19




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##### Table of Contents



The Cronos Group
 Overview of Operating Performance
  
    
    Increasing the concentration levels of specialized containers in its fleet;
and,
    
    Participating in the lease market for new dry cargo containers as market
opportunities arise.
   March 31,
    
    
    December 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2006Utilization at end of period
    
    
    91.6
    %
    
    
    92.1
    %
    
    
    90
    %
 
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
   Analysis & Discussion
 Gross lease revenue (GLR)
 Direct operating expenses
 20




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##### Table of Contents



The Cronos Group
 Operating segment information
 USJoint
    
    
    Limited
    
    
    PrivateUS dollar amounts in thousands
    
    Venture
    
    
    Partnership
    
    
    Container
    
    
    OwnedProgram
    
    
    Programs
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2007Items directly attributable to segments:- gross lease revenue
    
    $
    15,627
    
    
    $
    3,771
    
    
    $
    9,063
    
    
    $
    7,261
    
    
    $
    35,722- direct operating expenses
    
    
    (1,285
    )
    
    
    (537
    )
    
    
    (1,427
    )
    
    
    (660
    )
    
    
    (3,909
    )net lease revenue
    
    
    14,342
    
    
    
    3,234
    
    
    
    7,636
    
    
    
    6,601
    
    
    
    31,813- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    395
    
    
    
    395- payments to Managed Container Programs
    
    
    (13,124
    )
    
    
    (2,190
    )
    
    
    (6,947
    )
    
    
    
    
    
    
    (22,261
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,847
    )
    
    
    (2,847
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,808
    )
    
    
    (1,808
    )Segment profit
    
    $
    1,218
    
    
    $
    1,044
    
    
    $
    689
    
    
    $
    2,341
    
    
    $
    5,292
 Joint Venture Program:
 
    
    Net lease revenueincreased by $3.9 million in the first quarter of 2007 reflecting the
significant investment in additional equipment for the program; and,
    
    Payments to the Joint Venture Programincreased by $3.6 million in the first quarter of
2007, in line with the increase in net lease revenue for this segment.
 US Limited Partnership Programs:
 
    
    Net lease revenue declined by $0.8 million due primarily to the effect of the disposal
of dry cargo containers at the end of their useful economic life; and,
    
    Payments to US Limited Partnership Programs declined in line with net lease revenue.
 21




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##### Table of Contents



The Cronos Group
 Private Container Programs:
 
    
    Net lease revenueof $7.6 million declined by $1.1 million when compared to the
corresponding period of 2006 due primarily to a reduction in the quantity of containers
owned by these programs;
    
    Payments to Private Container Programsdeclined by $0.9 million in the first quarter of
2007 reflecting the decline in net lease revenue.
 Owned Containers:
 
    
    Net lease revenueof $6.6 million was $0.4 million lower than in the corresponding
period of 2006, reflecting the decline in the size of the owned container fleet due to the
disposal of equipment at the end of its useful economic life;
    
    Container depreciationof $2.8 million in the first quarter of 2007 was comparable to
the charge in the corresponding period of 2006; and,
    
    Container interest expenseof $1.8 million was $0.2 million higher when compared to the
first quarter of 2006 due primarily to increased interest rates.
 Equipment trading revenue
 Commissions, fees and other income
 Selling, general and administrative expenses
 
    
    Professional fees of $0.6 million recorded in the first quarter of 2007 incurred
in connection with the proposed transaction for the sale of the Company.
  
    
    A $0.2 million decline in manpower related expenses reflecting the implementation
of a number of restructuring plans during 2006.
 Income Taxes
 Equity in earnings of unconsolidated affiliate
 22




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##### Table of Contents



The Cronos Group
 
 Liquidity and Capital Resources
  Balance Sheet and Cash Flows
 Cash and cash equivalents
     Restricted cash
  Amounts due from lessees, net
   Amounts receivable from Managed Container Programs
  New container equipment held for resale & Amounts payable to container manufacturers
  23




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##### Table of Contents



The Cronos Group
 Other amounts payable and accrued expenses
  Commitments to container manufacturers
  Declared dividends
    
 Item 3  Quantitative and Qualitative Disclosures about Market Risk
 Interest rate risk:
 Exchange rate risk: .
  Credit risk
 24




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##### Table of Contents



The Cronos Group
 
 Item 4  Controls and Procedures
   25




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##### Table of Contents



The Cronos Group
 
 PART II  OTHER INFORMATION
 
 Item 1  Legal Proceedings
 Legal Complaint
    
 Item 1A  Risk Factors
   
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3  Defaults Upon Senior Securities
  26




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##### Table of Contents



The Cronos Group
 
 Item 4  Submission of Matters to a Vote of Security Holders
  
 Item 5  Other Information
  
 Item 6  Exhibits
 (a)
    
    Exhibits
 Number
    
    Exhibit31.1
    
    Rule 13a-14 Certification31.2
    
    Rule 13a-14 Certification32
    
    Section 1350 Certifications
 27




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##### Table of Contents



Signatures
   SIGNATURE
    
    TITLE
    
    DATEBy
    
    /s/ PETER J. YOUNGER
    
    President and Chief Operating Officer
    
    May 8, 2007Peter J. Younger/s/ FRANK P. VAUGHAN

Frank P. Vaughan
    
    Chief Financial Officer,
Senior Vice President
(Principal Financial and Accounting Officer)
    
    May 8, 2007




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##### Table of Contents



The Cronos Group
 Exhibit Index
 Number
    
    Exhibit31.1
    
    Rule 13a-14 Certification31.2
    
    Rule 13a-14 Certification32
    
    Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. *
 
 *
    
    This certification, required by Section 906 of the
Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not
deemed to be filed with the Commission or subject to the rules and
regulations promulgated by the Commission under the Securities Exchange Act of
1934, as amended, or to the liabilities of Section 18 of said Act.