##### 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, 2006
 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
 
 
 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 11, 2006:
 Class
    
    Number of Shares OutstandingCommon
    
    7,604,347




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##### 



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
    
    
    4Consolidated Unaudited Statement of Shareholders Equity
    
    
    5Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
    
    
    20Liquidity and Capital Resources
    
    
    22Item 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
    
    
    29Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3  Defaults Upon Senior Securities
    
    
    29Item 4  Submission of Matters to a Vote of Security Holders
    
    
    29Item 5  Other Information
    
    
    29Item 6  Exhibits
    
    
    29EXHIBIT 10.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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##### Table of Contents



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




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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 31,2006
    
    
    2005Gross lease revenue
    
    $
    35,264
    
    
    $
    34,004Equipment trading revenue
    
    
    1,726
    
    
    
    135Commissions, fees and other income:- Related parties
    
    
    203
    
    
    
    187- Unrelated parties
    
    
    987
    
    
    
    875Gain on settlement of litigation
    
    
    
    
    
    
    1,333Total revenues
    
    
    38,180
    
    
    
    36,534Direct operating expenses
    
    
    5,107
    
    
    
    4,552Payments to Managed Container Programs:- Related parties
    
    
    12,459
    
    
    
    8,188- Unrelated parties
    
    
    7,799
    
    
    
    9,069Equipment trading expenses
    
    
    1,572
    
    
    
    127Depreciation and amortization
    
    
    2,950
    
    
    
    4,592Selling, general and administrative expenses
    
    
    5,134
    
    
    
    5,793Interest expense
    
    
    1,644
    
    
    
    1,521Recovery of amount payable to Managed Container Program
    
    
    
    
    
    
    (703
    )Total expenses
    
    
    36,665
    
    
    
    33,139Income before income taxes and equity in earnings of
unconsolidated affiliate
    
    
    1,515
    
    
    
    3,395Income taxes
    
    
    (227
    )
    
    
    (509
    )Equity in earnings of unconsolidated affiliate
    
    
    1,271
    
    
    
    743Net income
    
    
    2,559
    
    
    
    3,629Other comprehensive income:- change in fair value of derivatives held by affiliate, net of tax
    
    
    516
    
    
    
    619Comprehensive income
    
    $
    3,075
    
    
    $
    4,248Basic net income per common share
    
    $
    0.34
    
    
    $
    0.50Diluted net income per common share
    
    $
    0.32
    
    
    $
    0.46




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##### Table of Contents



The Cronos Group
 
 Condensed Unaudited Consolidated Balance Sheets
 (US dollar amounts in thousands, except per share amounts)
 March 31,
    
    
    December 31,2006
    
    
    2005AssetsCash and cash equivalents
    
    $
    15,816
    
    
    $
    15,829Restricted cash
    
    
    685
    
    
    
    4,200Amounts due from lessees
    
    
    28,123
    
    
    
    28,540Amounts receivable from Managed Container Programs
    
    
    5,072
    
    
    
    3,391New container equipment for resale
    
    
    35,420
    
    
    
    38,142Net investment in direct financing leases
    
    
    11,063
    
    
    
    12,678Investments in unconsolidated affiliates
    
    
    35,151
    
    
    
    31,358Container equipment, net
    
    
    124,678
    
    
    
    121,988Other equipment, net
    
    
    1,087
    
    
    
    1,130Goodwill
    
    
    11,038
    
    
    
    11,038Other intangible assets, net
    
    
    299
    
    
    
    345Other assets
    
    
    4,655
    
    
    
    3,093Total assets
    
    $
    273,087
    
    
    $
    271,732Liabilities and shareholders equityAmounts payable to Managed Container Programs
    
    
    23,879
    
    
    
    25,462Amounts payable to container manufacturers
    
    
    42,664
    
    
    
    52,790Direct operating expense payables and accruals
    
    
    5,847
    
    
    
    5,432Other amounts payable and accrued expenses
    
    
    5,835
    
    
    
    11,873Debt and capital lease obligations
    
    
    102,574
    
    
    
    87,780Current and deferred income taxes
    
    
    3,098
    
    
    
    3,174Deferred income and unamortized acquisition fees
    
    
    7,994
    
    
    
    7,684Total liabilities
    
    
    191,891
    
    
    
    194,195Shareholders equityCommon shares issued (7,633,247; 7,519,959 shares)
    
    
    15,267
    
    
    
    15,040Additional paid-in capital
    
    
    44,164
    
    
    
    43,807Common shares held in treasury (112,000 shares)
    
    
    (297
    )
    
    
    (297
    )Accumulated other comprehensive income
    
    
    1,396
    
    
    
    880Restricted retained earnings
    
    
    1,832
    
    
    
    1,832Retained earnings
    
    
    18,834
    
    
    
    16,275Total shareholders equity
    
    
    81,196
    
    
    
    77,537Total liabilities and shareholders equity
    
    $
    273,087
    
    
    $
    271,732




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##### Table of Contents



The Cronos Group
 
 Condensed Unaudited Consolidated Statements of Cash Flows
 (US dollar amounts in thousands, except per share amounts)
 Three Months EndedMarch 31,2006
    
    
    2005Net cash provided by operating activities
    
    $
    1,542
    
    
    $
    6,626Cash flows from investing activitiesPurchase of container and other equipment
    
    
    (11,948
    )
    
    
    (9,012
    )Investment in unconsolidated affiliate
    
    
    (2,000
    )
    
    
    (652
    )Investment in equipment acquired for direct financing lease
    
    
    (134
    )
    
    
    (125
    )Proceeds from sales of container and other equipment
    
    
    1,825
    
    
    
    2,685Restricted cash
    
    
    3,515
    
    
    
    416Purchase of loan note
    
    
    (3,510
    )
    
    
    Net cash used in investing activities
    
    
    (12,252
    )
    
    
    (6,688
    )Cash flows from financing activitiesProceeds from issuance of term debt
    
    
    14,417
    
    
    
    2,355Repayments of term debt and capital lease obligations
    
    
    (3,721
    )
    
    
    (9,449
    )Dividend paid
    
    
    (518
    )
    
    
    (363
    )Recovery of related party loan
    
    
    
    
    
    
    1,280Issue of common stock
    
    
    519
    
    
    
    Net cash provided by (used in) financing activities
    
    
    10,697
    
    
    
    (6,177
    )Net decrease in cash and cash equivalents
    
    
    (13
    )
    
    
    (6,239
    )Cash and cash equivalents at beginning of period
    
    
    15,829
    
    
    
    17,579Cash and cash equivalents at end of period
    
    $
    15,816
    
    
    $
    11,340Supplementary disclosure of cash flow information:Cash paid during the period for:- interest
    
    $
    1,375
    
    
    $
    1,468- income taxes
    
    
    328
    
    
    
    404Cash received during the period for:- interest
    
    
    5
    
    
    
    842- income taxes
    
    
    
    
    
    
    271Non-cash activities:- container equipment acquired under capital lease
    
    
    4,025
    
    
    
    721- container equipment transferred to direct financing leases
    
    
    
    
    
    
    952- direct finance lease equipment acquired under capital lease
    
    
    
    
    
    
    532




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The Cronos Group
 
 Consolidated Unaudited Statement of Shareholders Equity
 (US dollar amounts in thousands, except per share amounts)
 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,
December 31, 2005
    
    $
    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
 Three months ended March 31, 2005
 AccumulatedAdditional
    
    
    Common
    
    
    other
    
    
    Restricted
    
    
    
    
    
    
    TotalCommon
    
    
    paid-in
    
    
    shares held
    
    
    comprehensive
    
    
    retained
    
    
    Retained
    
    
    shareholders'shares
    
    
    capital
    
    
    in treasury
    
    
    income
    
    
    earnings
    
    
    earnings
    
    
    equityBalance,
December 31, 2004
    
    $
    14,763
    
    
    $
    45,358
    
    
    $
    (297
    )
    
    $
    230
    
    
    $
    1,832
    
    
    $
    8,473
    
    
    $
    70,359Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,629
    
    
    
    3,629Issue of common shares
    
    
    34
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76Other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    619
    
    
    
    
    
    
    
    
    
    
    
    619Balance,
March 31, 2005
    
    $
    14,797
    
    
    $
    45,400
    
    
    $
    (297
    )
    
    $
    849
    
    
    $
    1,832
    
    
    $
    12,102
    
    
    $
    74,683




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
        Three Months EndedMarch 31, 2005Net income:- as reported
    
    $
    3,629- add stock-based compensation expense included in
reported net income, net of related tax effects
    
    
    - deduct stock-based compensation expense computed
in accordance with SFAS 123, net of tax effects
    
    
    - pro forma
    
    $
    3,629Basic net income per share:- as reported
    
    $
    0.50- pro forma
    
    $
    0.50Diluted net income per share:- as reported
    
    $
    0.46- pro forma
    
    $
    0.46




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##### Table of Contents



The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
    USLimited
    
    
    Joint
    
    
    PrivateUS dollar amounts in thousands
    
    Partnership
    
    
    Venture
    
    
    Container
    
    
    OwnedPrograms
    
    
    Program
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2006Items directly attributable to segments:- gross lease revenue
    
    $
    4,854
    
    
    $
    11,507
    
    
    $
    10,859
    
    
    $
    8,044
    
    
    $
    35,264- direct operating expenses
    
    
    (825
    )
    
    
    (1,053
    )
    
    
    (2,173
    )
    
    
    (1,056
    )
    
    
    (5,107
    )net lease revenue
    
    
    4,029
    
    
    
    10,454
    
    
    
    8,686
    
    
    
    6,988
    
    
    
    30,157- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    402- payments to Managed Container Programs
    
    
    (2,900
    )
    
    
    (9,559
    )
    
    
    (7,799
    )
    
    
    
    
    
    
    (20,258
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,832
    )
    
    
    (2,832
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,643
    )
    
    
    (1,643
    )Segment profit
    
    $
    1,129
    
    
    $
    895
    
    
    $
    887
    
    
    $
    2,915
    
    
    $
    5,826Segment assets at end of period
    
    $
    9,182
    
    
    $
    46,994
    
    
    $
    11,395
    
    
    $
    205,516
    
    
    $
    273,087
 USLimited
    
    
    Joint
    
    
    PrivateUS dollar amounts in thousands
    
    Partnership
    
    
    Venture
    
    
    Container
    
    
    OwnedPrograms
    
    
    Program
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2005Items directly attributable to segments:- gross lease revenue
    
    $
    6,160
    
    
    $
    4,990
    
    
    $
    11,861
    
    
    $
    10,993
    
    
    $
    34,004- direct operating expenses
    
    
    (863
    )
    
    
    (351
    )
    
    
    (1,825
    )
    
    
    (1,513
    )
    
    
    (4,552
    )net lease revenue
    
    
    5,297
    
    
    
    4,639
    
    
    
    10,036
    
    
    
    9,480
    
    
    
    29,452- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353
    
    
    
    353- payments to Managed Container Programs
    
    
    (3,971
    )
    
    
    (4,217
    )
    
    
    (9,069
    )
    
    
    
    
    
    
    (17,257
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,484
    )
    
    
    (4,484
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,606
    )
    
    
    (1,606
    )Segment profit
    
    $
    1,326
    
    
    $
    422
    
    
    $
    967
    
    
    $
    3,743
    
    
    $
    6,458Segment assets at end of period
    
    $
    7,422
    
    
    $
    23,419
    
    
    $
    11,959
    
    
    $
    234,118
    
    
    $
    276,918




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
  Three Months EndedMarch 31,US dollar amounts in thousands
    
    2006
    
    
    2005Segment profit
    
    $
    5,826
    
    
    $
    6,458Equipment trading revenue
    
    
    1,726
    
    
    
    135Unallocated commissions, fees and other operating income
    
    
    685
    
    
    
    661Gain on settlement of litigation
    
    
    
    
    
    
    1,333Other interest income
    
    
    103
    
    
    
    48Equipment trading expenses
    
    
    (1,572
    )
    
    
    (127
    )Amortization of intangible assets
    
    
    (47
    )
    
    
    (47
    )Non container depreciation
    
    
    (71
    )
    
    
    (61
    )Selling, general and administrative expenses
    
    
    (5,134
    )
    
    
    (5,793
    )Non container interest (expense) credit
    
    
    (1
    )
    
    
    85Recovery of amount payable to Managed Container Program
    
    
    
    
    
    
    703Income before income taxes and equity in earnings
of unconsolidated affiliate
    
    $
    1,515
    
    
    $
    3,395
  Three Months EndedMarch 31,US dollar amounts in thousands
    
    2006
    
    
    2005Revenues directly attributable to segments:- gross lease revenue
    
    $
    35,264
    
    
    $
    34,004- direct financing lease income
    
    
    402
    
    
    
    35335,666
    
    
    
    34,357Other revenues:- equipment trading revenue
    
    
    1,726
    
    
    
    135- unallocated commissions, fees and other operating income
    
    
    685
    
    
    
    661- gain on settlement of litigation
    
    
    
    
    
    
    1,333- other interest income
    
    
    103
    
    
    
    48Total revenues
    
    $
    38,180
    
    
    $
    36,534




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
   Three Months EndedMarch 31,2006
    
    
    2005Net income available for common shareholders
    
    $
    2,559
    
    
    $
    3,629Weighted average outstanding shares of common stock
    
    
    7,486,714
    
    
    
    7,282,098Dilutive effect of:- 1998 stock option
    
    
    197,344
    
    
    
    183,747- 1999 stock option plan
    
    
    212,562
    
    
    
    273,640- non-employee directors equity plan
    
    
    109,247
    
    
    
    179,866- 2005 Equity Incentive Plan
    
    
    48,700
    
    
    
    Common stock and common stock equivalents
    
    
    8,054,567
    
    
    
    7,919,351Basic net income per share
    
    $
    0.34
    
    
    $
    0.50Diluted net income per share
    
    $
    0.32
    
    
    $
    0.46




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##### Table of Contents



The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
   US dollar amounts in thousands
 CostBalance, December 31, 2004
    
    $
    294,575Additions
    
    
    64,457Disposals
    
    
    (161,551
    )Balance, December 31, 2005
    
    $
    197,481Additions
    
    
    7,910Disposals
    
    
    (4,604
    )Balance, March 31, 2006
    
    $
    200,787Accumulated depreciationBalance, December 31, 2004
    
    $
    127,991Depreciation expense
    
    
    14,890Disposals
    
    
    (67,388
    )Balance, December 31, 2005
    
    $
    75,493Depreciation expense
    
    
    2,832Disposals
    
    
    (2,216
    )Balance, March 31, 2006
    
    $
    76,109Book valueMarch 31, 2006
    
    $
    124,678December 31, 2005
    
    $
    121,988




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements




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##### Table of Contents



The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
       i
 ii
 iii
 iv




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##### Table of Contents



The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
    
    
    Container equipment  depreciable lives;
    
    Container equipment  valuation;
    
    Deferred taxation;
    
    Allowance for doubtful accounts;
    
    Goodwill;
    
    Reporting lease revenue on a gross basis for Managed Container Programs; and,
    
    US Limited Partnership Programs  evaluation of expected losses and expected residual
returns in accordance with FIN 46R.
 11.
    
    Commitments and contingencies (to be read in conjunction with Note 17 to the Companys 2005
consolidated financial statements on Form 10-K).
 i.
    
    CommitmentsAt March 31, 2006, the Group had outstanding orders to purchase $37.6 million of container
equipment.
 ii.
    
    Parent Guarantee under Agreements with Private Container Programs




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##### Table of Contents



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, 2006
    
    $
    9852007
    
    
    1,3132008
    
    
    1,3132009
    
    
    1,3132010
    
    
    6,4022011 and thereafter
    
    
    Total
    
    $
    11,326
 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




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The Cronos Group
 Notes to the Condensed Unaudited Consolidated Financial Statements
 vii.
    
    TOEMT & Provision for legal claims
   12.
    
    New accounting pronouncements




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




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The Cronos Group
 Managed Container Programs
  Joint Venture Program:
  US Limited Partnership Programs:
 Private Container Programs:




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The Cronos Group
 Overview of Operating Performance
  March 31,
    
    
    December 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2005Utilization at end of period
    
    
    90
    %
    
    
    91
    %
    
    
    93
    %
      US Limited
    
    
    Joint
    
    
    PrivateBased on original equipment cost
    
    Partnership
    
    
    Venture
    
    
    Container
    
    
    Owned
    
    
    TotalPrograms
    
    
    Program
    
    
    Programs
    
    
    Containers
    
    
    FleetDry cargo containers
    
    
    79
    %
    
    
    50
    %
    
    
    85
    %
    
    
    39
    %
    
    
    62
    %Specialized containers:Refrigerated containers
    
    
    16
    %
    
    
    26
    %
    
    
    3
    %
    
    
    27
    %
    
    
    18
    %Tank containers
    
    
    5
    %
    
    
    13
    %
    
    
    7
    %
    
    
    13
    %
    
    
    10
    %Dry freight specials
    
    
    
    
    
    
    11
    %
    
    
    5
    %
    
    
    21
    %
    
    
    10
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %




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The Cronos Group
 
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
   
    
    Income of $1.3 million recognized on the recovery of amounts owed by a related party;
    
    The recovery of $0.8 million payable to a Private Container Program; and,
    
    Legal expenses of $0.5 million incurred in connection with a former chairman and chief
executive officer and the TOEMT litigation.
 Analysis & Discussion
 Gross lease revenue (GLR)
 Direct operating expenses
 Operating segment information
 USLimited
    
    
    Joint
    
    
    PrivateUS dollar amounts in thousands
    
    Partnership
    
    
    Venture
    
    
    Container
    
    
    OwnedPrograms
    
    
    Program
    
    
    Programs
    
    
    Containers
    
    
    TotalThree months ended March 31, 2006Items directly attributable to segments:- gross lease revenue
    
    $
    4,854
    
    
    $
    11,507
    
    
    $
    10,859
    
    
    $
    8,044
    
    
    $
    35,264- direct operating expenses
    
    
    (825
    )
    
    
    (1,053
    )
    
    
    (2,173
    )
    
    
    (1,056
    )
    
    
    (5,107
    )net lease revenue
    
    
    4,029
    
    
    
    10,454
    
    
    
    8,686
    
    
    
    6,988
    
    
    
    30,157- direct financing lease income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    402- payments to Managed Container Programs
    
    
    (2,900
    )
    
    
    (9,559
    )
    
    
    (7,799
    )
    
    
    
    
    
    
    (20,258
    )- container depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,832
    )
    
    
    (2,832
    )- container interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,643
    )
    
    
    (1,643
    )Segment profit
    
    $
    1,129
    
    
    $
    895
    
    
    $
    887
    
    
    $
    2,915
    
    
    $
    5,826
 US Limited Partnership Programs:




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The Cronos Group
 Joint Venture Program:
 
    
    Net lease revenueincreased by $5.8 million in the first quarter of 2006 reflecting the
significant investment in additional equipment for the program, including the acquisition
of $73.8 million of container fixed assets from the Group in August 2005; and,
    
    Payments to the Joint Venture Programincreased by $5.3 million in the first quarter of
2006, in line with the increase in net lease revenue for this segment.
 Private Container Programs:
 
    
    Net lease revenueof $8.7 million declined by $1.4 million when compared to the
corresponding period of 2005 due primarily to a reduction in the quantity of containers
owned by these programs; and,
    
    Payments to Private Container Programsdeclined by $1.3 million in the first quarter of
2006 in line with the decline in net lease revenue for this segment.
 Owned Containers:
 
    
    Net lease revenueof $7 million was $2.5 million lower than in the corresponding period
of 2005, reflecting the decline in the size of the owned container fleet;
    
    Container depreciationof $2.8 million in the first three months of 2006 was $1.7
million lower than in the same period of 2005. The primary factors for the decline were:
 
    
    The effect of the sale of the container fixed assets to the Joint
Venture Program in the third calendar quarter of 2005; and,
    
    The effect of the change in the estimate of useful lives for tank,
rolltrailer and flat rack products on October 1, 2005.
 
    
    Container interest expenseof $1.6 million increased slightly when compared to the first
quarter of 2005. The increase in interest expense attributable to higher interest rates,
was almost offset by the effect of lower debt balances further to the repayment of $64.2
million of debt utilizing part of the proceeds generated by the fixed asset sale to the
Joint Venture Program in August 2005.
 Equipment trading revenue
 Commissions, fees and other income
 Selling, general and administrative expenses
 
    
    A decrease of $0.5 million in the expense recognized for a stock appreciation rights
plan, reflecting a decrease in the Groups share price in the first quarter of 2006
compared to an increase in the corresponding period of 2005; and
    
    A decrease of $0.3 million in legal expenses in relation to the TOEMT and Palatin legal
actions.
 Income Taxes
 Equity in earnings of affiliate




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The Cronos Group
 
 Liquidity and Capital Resources
  Balance Sheet and Cash Flows
 Cash and cash equivalents
      
    
    $1.3 million of one-time termination payments in connection with the reorganization of
the Cronos marketing and operations structures in 2005; and,
    
    $2 million to container manufacturers for equipment purchased on behalf of a Managed
Container Program and under an equipment trading transaction. The Group will receive the
proceeds from the sale of this equipment in the second quarter of 2006.
 Restricted cash
  Amounts due from lessees, net
   Amounts receivable from Managed Container Programs




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The Cronos Group
 New container equipment held for resale & Amounts payable to container manufacturers
  Other amounts payable and accrued expenses
  Commitments to container manufacturers
  Declared dividends




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The Cronos Group
 
 Item 3  Quantitative and Qualitative Disclosures about Market Risk
 Interest rate risk:
 Exchange rate risk: .
  Credit risk




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The Cronos Group
 
 Item 4  Controls and Procedures




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The Cronos Group
 
 PART II  OTHER INFORMATION
 
 Item 1  Legal Proceedings
 TOEMT Litigation
    1.
    
    The transfer on or about November 25, 1991, to TOEMT (UK) of 5,500,000 ordinary
            shares of the Group in consideration of the contribution of shares in Trans Ocean
Limited by TOEMT (UK) to the Group worth approximately $16 million, which 5,500,000
ordinary shares were then redeemed and/or transferred to Mr. Palatin and/or his nominee
for no or no proper consideration;2.
    
    The transfer on or about December 31, 1991, to TOEMT (UK) of 90,000 preference
            shares (worth approximately $9 million) which were then transferred to Barton Holding
Limited (a company allegedly controlled by Palatin) for no or no proper consideration,
and a loan which the liquidator alleges not to have been repaid;3.
    
    The making of various payments (amounting to approximately $1 million) between
approximately April 1993 and February 1996 by CNV to third parties, including Mr.
Palatin or entities in which he was interested and/or his associates, which payments
were made otherwise than for any legitimate commercial purpose or any other purpose of
TOEMT (UK)s business or interests;4.
    
    The making of improper cash withdrawals (amounting to in excess of $2 million),
between approximately February 1991 and June 1999 from TOEMT (UK)s bank accounts, with
the assistance of CNV, which withdrawals were allegedly for the benefit of Mr. Palatin
and/or his wife rather than for any legitimate commercial purpose or other purpose of
TOEMT (UK)s business or interests; and,5.
    
    The diversion between 1991 and 1993 (with the assistance of CNV) of TOEMT
(UK)s container business to TOEMT (Isle of Man), for no or for no proper
consideration.




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The Cronos Group
     Purchase of TOEMT Creditor Claims




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The Cronos Group




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##### Table of Contents



The Cronos Group
 
 Item 1A  Risk Factors
   
 Item 2  Unregistered Sales of Equity 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
 (a)
    
    Exhibits
 Number
    
    Exhibit10.1
    
    Amendment No.1, dated as of January 17, 2006 to the Third Amended
and Restated Loan Agreement, dated as of August 1, 2005, among
Cronos Finance (Bermuda) Limited, Fortis Bank (Nederland) N.V.,
NIBC Bank N.V. and Hollandsche Bank-Unie N.V.31.1
    
    Rule 13a-14 Certification31.2
    
    Rule 13a-14 Certification32
    
    Section 1350 Certifications




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The Cronos Group
 Signatures
   SIGNATURE
    
    TITLE
    
    DATEBy
    
    /s/ PETER J. YOUNGER
    
    President and Chief Operating Officer
    
    May 12, 2006Peter J. Younger/s/ FRANK P. VAUGHAN
    
    Chief Financial Officer,
    
    May 12, 2006Frank P. Vaughan
    
    Senior Vice President(Principal Financial and Accounting Officer)




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The Cronos Group
 Exhibit Index
 Number
    
    Exhibit10.1
    
    Amendment No.1, dated as of January 17, 2006 to the Third
Amended and Restated Loan Agreement, dated as of August 1,
2005, among Cronos Finance (Bermuda) Limited, Fortis Bank
(Nederland) N.V., NIBC Bank N.V. and Hollandsche Bank-Unie
N.V.31.1
    
    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.*