##### Table of Contents



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, 2002OR



|[   ] | 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, 2002:

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





---

TABLE OF CONTENTS



|                               |                                                                                                |                                                                                         |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1  Financial Statements                                                                 
|                               |                                                                                                | Management Representation                                                              
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Income                                  
|                               |                                                                                                | Condensed Unaudited Consolidated Balance Sheets                                        
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Cash Flows                              
|                               |                                                                                                | Consolidated Unaudited Statement of Shareholders Equity                               
|                               |                                                                                                | Notes to the Condensed Unaudited Consolidated Financial Statements                     
|                               | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               |                                                                                                | General                                                                                
|                               |                                                                                                | Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001
|                               |                                                                                                | Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001  
|                               |                                                                                                | Liquidity and Capital Resources                                                        
|                               |                                                                                                | Capital Resources                                                                      
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk                           
|                               | Item 4  Controls and Procedures                                                              
|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                    
|Exhibit Index                 
|Exhibit 99.1                  
|Exhibit 99.2                  



---



##### Table of Contents



The Cronos Group

TABLE OF CONTENTS

|                               |                                                                                                |                                                                                         |    |    |    | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -- | -- | -- | 
|PART I  FINANCIAL INFORMATION |                                                                                                |                                                                                         | 1  |   
|                               | 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 Shareholders Equity                                          |    |    | 5  | 
|                               |                                                                                                | Notes to the Condensed Consolidated Financial Statements                                |    |    | 6  | 
|                               | Item 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                         |    | 14 |   
|                               |                                                                                                | General                                                                                 |    |    | 14 | 
|                               |                                                                                                | Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001 |    |    | 15 | 
|                               |                                                                                                | Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001   |    |    | 16 | 
|                               |                                                                                                | Liquidity and Capital Resources                                                         |    |    | 18 | 
|                               |                                                                                                | Capital Resources                                                                       |    |    | 19 | 
|                               | Item 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                                                         |    | 20 |   
|                               | Item 4  CONTROLS AND PROCEDURES                                                               |                                                                                         |    | 20 |   
|PART II  OTHER INFORMATION    |                                                                                                |                                                                                         | 21 |   
|                               | Item 1  Legal Proceedings                                                                     |                                                                                         |    | 21 |   
|                               | Item 2  Changes in Securities and Use of Proceeds                                             |                                                                                         |    | 24 |   
|                               | Item 3  Defaults Upon Senior Securities                                                       |                                                                                         |    | 24 |   
|                               | Item 4  Submission of Matters to a Vote of Security Holders                                   |                                                                                         |    | 24 |   
|                               | Item 5  Other Information                                                                     |                                                                                         |    | 24 |   
|                               | Item 6  Exhibits and Reports on Form 8-K                                                      |                                                                                         |    | 24 |   





---



##### Table of Contents



The Cronos Group




PART I  FINANCIAL INFORMATION




Item 1  Financial Statements




Management Representation

Unless the context indicates otherwise, the Company means The Cronos
Group and, where appropriate, includes its subsidiaries and predecessors, while
Cronos or the Group means The Cronos Group together with its subsidiaries
and predecessors.

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 (SEC). Certain information and
disclosures normally included in annual financial statements prepared in
accordance with accounting principles 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



---



##### Table of Contents






The Cronos Group

Condensed Unaudited Consolidated Statements of Income

(US dollar amounts in thousands, except per share amounts)

|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                     |  | Three Months Ended |        | Nine Months Ended
|                                                                                     |  | September 30,      |        | September 30,    
|                                                                                     |  |                    |        |                  
|                                                                                     |  | 2002               |        | 2001              |  | 2002 |        | 2001
|                                                                                     |  |                    |        |                   |  |      |        |     
|Gross lease revenue                                                                  |  | $                  | 28,279 |                   |  | $    | 29,798 |      |  | $ | 84,533 |   |  | $ | 91,364 |  
|Equipment trading revenue                                                            |  |                    | 27     |                   |  |      |       |      |  |   | 608    |   |  |   |       |  
|Commissions, fees and other income:                                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|- Container Equity Programs                                                          |  |                    | 309    |                   |  |      | 334    |      |  |   | 929    |   |  |   | 1,000  |  
|- Unrelated parties                                                                  |  |                    | 679    |                   |  |      | 1,366  |      |  |   | 2,624  |   |  |   | 3,653  |  
|Realized holding gain on sale of investment                                          |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   | 301    |  
|Equity in earnings of affiliate                                                      |  |                    | 169    |                   |  |      |       |      |  |   | 169    |   |  |   |       |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Total revenues                                                                       |  |                    | 29,463 |                   |  |      | 31,498 |      |  |   | 88,863 |   |  |   | 96,318 |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Direct operating expenses                                                            |  |                    | 6,482  |                   |  |      | 8,726  |      |  |   | 21,456 |   |  |   | 23,276 |  
|Payments to managed container owners:                                                |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|- Container Equity Programs                                                          |  |                    | 4,592  |                   |  |      | 4,231  |      |  |   | 12,626 |   |  |   | 14,733 |  
|- Other Managed Container Owners                                                     |  |                    | 9,300  |                   |  |      | 9,074  |      |  |   | 26,907 |   |  |   | 28,812 |  
|Equipment trading expenses                                                           |  |                    | 27     |                   |  |      |       |      |  |   | 545    |   |  |   |       |  
|Depreciation and amortization                                                        |  |                    | 3,878  |                   |  |      | 3,869  |      |  |   | 11,616 |   |  |   | 11,947 |  
|Selling, general and administrative expenses                                         |  |                    | 3,434  |                   |  |      | 3,339  |      |  |   | 10,204 |   |  |   | 10,173 |  
|Interest expense                                                                     |  |                    | 1,531  |                   |  |      | 2,043  |      |  |   | 4,834  |   |  |   | 6,437  |  
|Recovery of related party loans                                                      |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   | (6,000 | )
|Impairment losses                                                                    |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   | 4,000  |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Total expenses                                                                       |  |                    | 29,244 |                   |  |      | 31,282 |      |  |   | 88,188 |   |  |   | 93,378 |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Income before income taxes                                                           |  |                    | 219    |                   |  |      | 216    |      |  |   | 675    |   |  |   | 2,940  |  
|Income taxes (benefit) provision                                                     |  |                    |       |                   |  |      |       |      |  |   | (2,325 | ) |  |   | 122    |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Net income                                                                           |  |                    | 219    |                   |  |      | 216    |      |  |   | 3,000  |   |  |   | 2,818  |  
|Other comprehensive income:                                                          |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|- unrealised holding loss on available for sale
securities arising during the period |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   | (150   | )
|- reclassification adjustment                                                        |  |                    |       |                   |  |      |       |      |  |   |       |   |  |   | (294   | )
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Comprehensive income                                                                 |  | $                  | 219    |                   |  | $    | 216    |      |  | $ | 3,000  |   |  | $ | 2,374  |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Basic net income per common share                                                    |  | $                  | 0.03   |                   |  | $    | 0.03   |      |  | $ | 0.41   |   |  | $ | 0.34   |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Diluted net income per common share                                                  |  | $                  | 0.03   |                   |  | $    | 0.03   |      |  | $ | 0.40   |   |  | $ | 0.34   |  
|                                                                                     |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

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

2



---



##### Table of Contents






The Cronos Group

Condensed Unaudited Consolidated Balance Sheets

(US dollar amounts in thousands, except per share amounts)

|                                                               |  |               |         |              |  |   |         |  
|-------------------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | -
|                                                               |  | September 30, |         | December 31,
|                                                               |  | 2002          |         | 2001        
|                                                               |  |               |         |             
|Assets                                                         |  |               |         |              |  |   |         |  
|Cash and cash equivalents                                      |  | $             | 6,271   |              |  | $ | 4,914   |  
|Amounts due from lessees (net)                                 |  |               | 21,592  |              |  |   | 22,825  |  
|Amounts receivable from container owners                       |  |               | 8,013   |              |  |   | 8,675   |  
|New container equipment for resale                             |  |               | 114     |              |  |   | 1,463   |  
|Net investment in direct financing leases                      |  |               | 7,488   |              |  |   | 7,306   |  
|Investments                                                    |  |               | 3,717   |              |  |   |        |  
|Container equipment (net)                                      |  |               | 134,736 |              |  |   | 150,440 |  
|Other equipment (net)                                          |  |               | 498     |              |  |   | 375     |  
|Restricted cash                                                |  |               | 493     |              |  |   | 452     |  
|Goodwill                                                       |  |               | 11,039  |              |  |   | 11,039  |  
|Other intangible assets                                        |  |               | 955     |              |  |   | 1,096   |  
|Other assets including prepayments                             |  |               | 16,678  |              |  |   | 17,234  |  
|                                                               |  |               |         |              |  |   |         |  
|Total assets                                                   |  | $             | 211,594 |              |  | $ | 225,819 |  
|                                                               |  |               |         |              |  |   |         |  
|Liabilities and shareholders equity                           |  |               |         |              |  |   |         |  
|Amounts payable to container owners                            |  | $             | 17,909  |              |  | $ | 16,889  |  
|Amounts payable to container manufacturers                     |  |               | 1,591   |              |  |   | 12,888  |  
|Other amounts payable and accrued expenses                     |  |               | 11,886  |              |  |   | 13,020  |  
|Debt and capital lease obligations                             |  |               | 104,691 |              |  |   | 107,920 |  
|Current and deferred income taxes                              |  |               | 5,365   |              |  |   | 6,912   |  
|Deferred income and unamortized acquisition fees               |  |               | 5,673   |              |  |   | 6,711   |  
|                                                               |  |               |         |              |  |   |         |  
|Total liabilities                                              |  |               | 147,115 |              |  |   | 164,340 |  
|                                                               |  |               |         |              |  |   |         |  
|Shareholders equity                                           |  |               |         |              |  |   |         |  
|Common shares (2002: 7,364,580 shares, 2001: 9,158,378 shares) |  |               | 14,729  |              |  |   | 18,317  |  
|Additional paid-in capital                                     |  |               | 47,434  |              |  |   | 49,846  |  
|Common shares held in treasury (1,793,798 shares)              |  |               |        |              |  |   | (6,000  | )
|Restricted retained earnings                                   |  |               | 1,832   |              |  |   | 1,832   |  
|Retained earnings (accumulated deficit)                        |  |               | 484     |              |  |   | (2,516  | )
|                                                               |  |               |         |              |  |   |         |  
|Total shareholders equity                                     |  |               | 64,479  |              |  |   | 61,479  |  
|                                                               |  |               |         |              |  |   |         |  
|Total liabilities and shareholders equity                     |  | $             | 211,594 |              |  | $ | 225,819 |  
|                                                               |  |               |         |              |  |   |         |  

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

3



---



##### Table of Contents






The Cronos Group

Condensed Unaudited Consolidated Statements of Cash Flows

(US dollar amounts in thousands, except per share amounts)

|                                                       |  |                   |         |      |  |   |         |  
|------------------------------------------------------ |  | ----------------- | ------- | ---- |  | - | ------- | -
|                                                       |  | Nine Months Ended
|                                                       |  | September 30,    
|                                                       |  |                  
|                                                       |  | 2002              |         | 2001
|                                                       |  |                   |         |     
|Net cash provided by operating activities              |  | $                 | 16,064  |      |  | $ | 10,362  |  
|                                                       |  |                   |         |      |  |   |         |  
|Investing activities                                   |  |                   |         |      |  |   |         |  
|Purchase of container and other equipment              |  |                   | (5,556  | )    |  |   | (17,954 | )
|Investment in direct financing leases                  |  |                   | (1,093  | )    |  |   | (2,515  | )
|Change in accrued equipment purchases                  |  |                   | (8,959  | )    |  |   |        |  
|Proceeds from sales of container and other equipment   |  |                   | 11,759  |      |  |   | 5,926   |  
|Proceeds from sale of investment                       |  |                   |        |      |  |   | 484     |  
|                                                       |  |                   |         |      |  |   |         |  
|Net cash used in investing activities                  |  |                   | (3,849  | )    |  |   | (14,059 | )
|                                                       |  |                   |         |      |  |   |         |  
|Financing activities                                   |  |                   |         |      |  |   |         |  
|Proceeds from issuance of term debt                    |  |                   | 16,345  |      |  |   | 52,988  |  
|Repayments of term debt and capital lease obligations  |  |                   | (27,162 | )    |  |   | (51,904 | )
|Cash deposits (restricted)                             |  |                   | (41     | )    |  |   | 966     |  
|                                                       |  |                   |         |      |  |   |         |  
|Net cash (used in) provided by financing activities    |  |                   | (10,858 | )    |  |   | 2,050   |  
|                                                       |  |                   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents   |  |                   | 1,357   |      |  |   | (1,647  | )
|Cash and cash equivalents at beginning of period       |  |                   | 4,914   |      |  |   | 6,601   |  
|                                                       |  |                   |         |      |  |   |         |  
|Cash and cash equivalents at end of period             |  | $                 | 6,271   |      |  | $ | 4,954   |  
|                                                       |  |                   |         |      |  |   |         |  
|Supplementary disclosure of cash flow information:     |  |                   |         |      |  |   |         |  
|Cash paid during the period for:                       |  |                   |         |      |  |   |         |  
|- interest                                             |  | $                 | 4,274   |      |  | $ | 6,699   |  
|- income taxes                                         |  |                   | 434     |      |  |   | 265     |  
|Cash received during the period for:                   |  |                   |         |      |  |   |         |  
|- dividends                                            |  |                   | 1,125   |      |  |   |        |  
|- interest                                             |  |                   | 225     |      |  |   | 552     |  
|- income taxes                                         |  |                   | 1,016   |      |  |   | 19      |  
|Non-cash activities:                                   |  |                   |         |      |  |   |         |  
|- container equipment acquired under capital lease     |  |                   | 6,962   |      |  |   | 3,860   |  
|- other fixed assets acquired under capital lease      |  |                   |        |      |  |   | 276     |  
|- finance lease equipment acquired under capital lease |  |                   | 626     |      |  |   |        |  
|- recovery of related party loans                      |  |                   |        |      |  |   | 6,000   |  
|- investment in joint venture                          |  |                   | 4,673   |      |  |   |        |  

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

4



---



##### Table of Contents






The Cronos Group

Consolidated Unaudited Statement of Shareholders Equity

(US dollar amounts in thousands, except per share amounts)

Nine months ended September 30, 2002

|                                               |  |        |        |         |  |             |        |          |  |              |        |               |  |       |       |  |  |          |        |   |  |   |        | 
|---------------------------------------------- |  | ------ | ------ | ------- |  | ----------- | ------ | -------- |  | ------------ | ------ | ------------- |  | ----- | ----- |  |  | -------- | ------ | - |  | - | ------ | 
|                                               |  |        |        |         |  |             |        |          |  |              |        |               |  |       |       |  |  | Retained |        |   |  |  
|                                               |  |        |        |         |  | Additional  |        | Common   |  | Restricted   |        | earnings      |  | Total
|                                               |  | Common |        | paid-in |  | shares held |        | retained |  | (accumulated |        | shareholders'
|                                               |  | shares |        | capital |  | in treasury |        | earnings |  | deficit)     |        | equity       
|                                               |  |        |        |         |  |             |        |          |  |              |        |              
|Balance,
December 31, 2001                     |  | $      | 18,317 |         |  | $           | 49,846 |          |  | $            | (6,000 | )             |  | $     | 1,832 |  |  | $        | (2,516 | ) |  | $ | 61,479 | 
|Net income                                     |  |        |       |         |  |             |       |          |  |              |       |               |  |       |      |  |  |          | 3,000  |   |  |   | 3,000  | 
|Retirement and
cancellation of
treasury shares |  |        | (3,588 | )       |  |             | (2,412 | )        |  |              | 6,000  |               |  |       |      |  |  |          |       |   |  |   |       | 
|                                               |  |        |        |         |  |             |        |          |  |              |        |               |  |       |       |  |  |          |        |   |  |   |        | 
|Balance,
September 30, 2002                    |  | $      | 14,729 |         |  | $           | 47,434 |          |  | $            |       |               |  | $     | 1,832 |  |  | $        | 484    |   |  | $ | 64,479 | 
|                                               |  |        |        |         |  |             |        |          |  |              |        |               |  |       |       |  |  |          |        |   |  |   |        | 

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

5



---



##### Table of Contents






The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements

(US dollar amounts in thousands, except per share amounts)



|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                                                                                                                                                                               

In September 2002, the Group announced the establishment of a joint
venture container purchase program. Prior to the inception of the joint
venture, the Cronos operating segments were defined as containers managed on
behalf of US Limited Partnerships, containers managed on behalf of Other
Managed Container Owners, and containers owned by the Group itself. In
accordance with SFAS No. 131 Disclosures about Segments of an Enterprise and
Related Information, Cronos structures operating segments based on the way in
which management organizes the Group for making operating decisions and
assessing performance. The Group views the new joint venture as a natural
extension to its US Limited Partnership programs. The joint venture will
target the same container products and customer base and the operating decision
making and performance assessment processes will be consistent with those used
for the US Limited Partnership programs. Accordingly, the Group has combined
the US Limited Partnerships and the joint venture program into a revised
operating segment entitled Container Equity Programs.

Condensed segment information is provided in the tables below:

|                                       |  |           |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|-------------------------------------- |  | --------- | ------ | --------- |  | ---------- | ------ | ----- |  | - | ------- | - |  | - | ------- | 
|                                       |  |           |        |           |  | Other      |        |       |  |   |         |   |  |  
|                                       |  | Container |        | Managed   |  |            |        |       |  |   |         |  
|                                       |  | Equity    |        | Container |  | Owned      |        |       |  |  
|                                       |  | Programs  |        | Owners    |  | Containers |        | Total
|                                       |  |           |        |           |  |            |        |      
|Three months ended September 30, 2002  |  |           |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $         | 7,460  |           |  | $          | 12,676 |       |  | $ | 8,143   |   |  | $ | 28,279  | 
|Operating profit before indirect items |  |           | 1,373  |           |  |            | 323    |       |  |   | 2,081   |   |  |   | 3,777   | 
|Operating profit (loss)                |  |           | 307    |           |  |            | (860   | )     |  |   | 1,321   |   |  |   | 768     | 
|Segment assets                         |  |           | 13,315 |           |  |            | 14,131 |       |  |   | 148,712 |   |  |   | 176,158 | 
|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 | 
|Nine months ended September 30, 2002   |  |           |        |           |  |            |        |       |  |   |         |   |  |   |         | 
|Gross lease revenue                    |  | $         | 21,812 |           |  | $          | 37,874 |       |  | $ | 24,847  |   |  | $ | 84,533  | 
|Operating profit before indirect items |  |           | 3,786  |           |  |            | 652    |       |  |   | 6,694   |   |  |   | 11,132  | 
|Operating profit (loss)                |  |           | 656    |           |  |            | (2,888 | )     |  |   | 4,372   |   |  |   | 2,140   | 
|Segment assets                         |  |           | 13,315 |           |  |            | 14,131 |       |  |   | 148,712 |   |  |   | 176,158 | 
|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 | 

6



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|2. |  | Operating segment data (US dollar amounts in thousands)
|-- |  | -------------------------------------------------------

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

|                                             |  |                    |      |                   |  |      |      |      |  |   |        |   |  |   |        |  
|-------------------------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ------ | - |  | - | ------ | -
|                                             |  | Three Months Ended |      | Nine Months Ended
|                                             |  | September 30,      |      | September 30,    
|                                             |  |                    |      |                  
|                                             |  | 2002               |      | 2001              |  | 2002 |      | 2001
|                                             |  |                    |      |                   |  |      |      |     
|Operating profit                             |  | $                  | 768  |                   |  | $    | 840  |      |  | $ | 2,140  |   |  | $ | 316    |  
|Gain on sale of investment                   |  |                    |     |                   |  |      |     |      |  |   |       |   |  |   | 301    |  
|Selling, general and administrative expenses |  |                    | (502 | )                 |  |      | (470 | )    |  |   | (1,324 | ) |  |   | (1,270 | )
|Amortization of intangibles                  |  |                    | (47  | )                 |  |      | (154 | )    |  |   | (141   | ) |  |   | (407   | )
|Impairment losses                            |  |                    |     |                   |  |      |     |      |  |   |       |   |  |   | (2,000 | )
|Recovery of related party loans              |  |                    |     |                   |  |      |     |      |  |   |       |   |  |   | 6,000  |  
|                                             |  |                    |      |                   |  |      |      |      |  |   |        |   |  |   |        |  
|Income before income taxes                   |  | $                  | 219  |                   |  | $    | 216  |      |  | $ | 675    |   |  | $ | 2,940  |  
|                                             |  |                    |      |                   |  |      |      |      |  |   |        |   |  |   |        |  



|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,    
|                                             |  |                    |           |                  
|                                             |  | 2002               |           | 2001              |  | 2002 |           | 2001
|                                             |  |                    |           |                   |  |      |           |     
|Net income available for common shareholders |  | $                  | 219       |                   |  | $    | 216       |      |  | $ | 3,000     |  |  | $ | 2,818     | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Average outstanding shares of common stock   |  |                    | 7,364,580 |                   |  |      | 7,364,580 |      |  |   | 7,364,580 |  |  |   | 8,213,259 | 
|Dilutive effect of:                          |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|- Executive officer common share options     |  |                    |          |                   |  |      | 45,380    |      |  |   | 15        |  |  |   | 28,033    | 
|- Warrants                                   |  |                    |          |                   |  |      | 28,896    |      |  |   |          |  |  |   | 17,238    | 
|- 1999 Stock Option Plan                     |  |                    |          |                   |  |      | 10,040    |      |  |   |          |  |  |   | 3,347     | 
|- Non-Employee Directors Equity Plan         |  |                    | 66,144    |                   |  |      | 21,714    |      |  |   | 54,402    |  |  |   | 15,355    | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Common stock and common stock equivalents    |  |                    | 7,430,724 |                   |  |      | 7,470,610 |      |  |   | 7,418,997 |  |  |   | 8,277,232 | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Basic net income per share                   |  | $                  | 0.03      |                   |  | $    | 0.03      |      |  | $ | 0.41      |  |  | $ | 0.34      | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 
|Diluted net income per share                 |  | $                  | 0.03      |                   |  | $    | 0.03      |      |  | $ | 0.40      |  |  | $ | 0.34      | 
|                                             |  |                    |           |                   |  |      |           |      |  |   |           |  |  |   |           | 



|4. |  | Amounts receivable from container owners
|-- |  | ----------------------------------------

Amounts receivable from container owners include amounts due from related
parties of $3.8 million and $4.3 million at September 30, 2002 and December 31,
2001, respectively.

7



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|5. |  | Investments in related parties
|-- |  | ------------------------------

Investments in related parties take two forms:

Under the first form the investments comprise interests 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 at both
September 30, 2002 and December 31, 2001, respectively.

Under the second form the Group has a 50% equity investment in a joint
venture container purchase entity. The joint venture entity is a
bankruptcy-remote, special purpose entity organized under the laws of Bermuda
and is accounted for using the equity method. The investment in the joint
venture entity was $3.7 million at September 30, 2002.



|6. |  | Container equipment
|-- |  | -------------------

Container equipment is net of accumulated depreciation of $89.5 million
and $81.2 million at September 30, 2002 and December 31, 2001, respectively.



|7. |  | Amounts payable to container owners
|-- |  | -----------------------------------

Amounts payable to container owners include amounts payable to related
parties of $8.5 million and $8.0 million at September 30, 2002 and December 31,
2001, respectively.



|8. |  | Debt and capital lease obligations
|-- |  | ----------------------------------

Debt and capital lease obligations include amounts due within twelve
months of $13.8 million and $12.8 million at September 30, 2002 and December
31, 2001, respectively.

8



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|9. |  | Commitments and contingencies (to be read in conjunction with Note 13 to
the Companys 2001 Consolidated Financial Statements on Form 10-K)
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------



|i. |  | Commitments
|-- |  | -----------

At September 30, 2002, the Group had outstanding orders to purchase
container equipment of $1.5 million.



|ii. |  | Guarantee to US Limited Partnership
|--- |  | -----------------------------------

During 2000, the Group provided a guarantee under a $5 million third-party
loan note (the Note), with a 2006 maturity date, to a US Limited Partnership.
Under the terms of the guarantee, the Group may be liable for any principal
and interest outstanding under the terms of the Note in the event of a default
by the US Limited Partnership. At September 30, 2002, the balance outstanding
under the Note was $3.2 million.



|iii. |  | Guarantee of third-party loan and rent support agreement
|---- |  | --------------------------------------------------------

During 1996 and 1997, the Group sold equipment, which was under a direct
finance lease with a major shipping line, to a third-party for $26.3 million.
The third-party financed the acquisition of this equipment with a loan of $26.3
million, with a 2004 maturity date, to which the Group provided a first loss
guarantee for 20% of the debt balance outstanding. The Group can collateralize
up to 50% of the guarantee with a first security interest in additional
equipment. At September 30, 2002, the balance outstanding under the loan was
$5.8 million.

In addition, under the terms of a rent support agreement, the Group is
required to deposit an amount equal to the aggregate of all rental charges
scheduled to be paid under the direct finance lease for the next twelve months
or until the end of the lease, if sooner, upon the occurrence of a continuing
event of default by the shipping line. Annual rental charges under the lease,
with a 2004 scheduled maturity date, approximate $5.1 million.



|iv. |  | Guarantee under a purchase, assignment and agency agreement
|--- |  | -----------------------------------------------------------

During 1996, the Group entered into a term lease with a lessee in the
ordinary course of business. During 1997, the containers held under the lease
were sold, and the lease was assigned to a financial institution. As part of
this contract, the Group continues to manage the containers held under the term
lease, and invoices the lessee and collects monies on behalf of the financial
institution. Rental under the lease is approximately $0.5 million per annum of
which the Group remits $0.4 million to the financial institution as rent and
just under $0.1 million to a retention account held as security by the
institution. The remaining amount is retained by the Group as compensation for
this service.

Under the terms of the contract with the financial institution, if the
lessee fails to make payments, other than in the event of being declared
bankrupt, the Group has guaranteed that it will continue to make these payments
to the financial institution. The guarantee and agreement with the financial
institution will expire in October 2005.



|v. |  | Agreements with Other Managed Container Owners  early termination
options
|-- |  | --------------------------------------------------------------------------

Approximately 49% (based on original equipment cost) of the agreements
with Other Managed Container Owners (Agreements) contain early termination
options, whereby the container owner may terminate the Agreements if certain
performance thresholds are not achieved. At September 30, 2002, approximately
37% of the Agreements were eligible for early termination. Cronos believes
that early termination of these Agreements by the Other Managed Container
Owners is unlikely.

9



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|9. |  | Commitments and contingencies
|-- |  | -----------------------------



|vi. |  | Agreements with Other Managed Container Owners  change of control
provisions
|--- |  | -----------------------------------------------------------------------------

Approximately 54% (based on original equipment cost) of Agreements with
Other Managed Container Owners provide that a change in ownership of the Group,
without the prior consent of the container owner, may constitute an event of
default under the Agreements. In substantially all of these Agreements, the
consent of the container owners may not be unreasonably withheld. In the event
that consent is not obtained, 31% of Agreements may require the Group to
transfer possession of the equipment to another equipment manager. Such
transfer of possession may result in the Group incurring certain costs. The
remaining 23% of Agreements may require the Group to purchase the equipment
from the container owners pursuant to the terms of their respective Agreements,
generally a stipulated percentage (determined by age of the equipment) of the
original cost of the equipment.



|vii. |  | Contingencies  Disputes 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, and for Contrin Holding S.A.itself (collectively,
Contrin).

As described further below, the Group is in litigation 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, 2002, the balance of this accrual was $3.0 million.

On August 8, 2000, Contrin, through an 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 Contrins complaint,
requesting that the District Court dismiss the proceeding for lack of
jurisdiction over the dispute, and denying Contrins claims on the merits.
Since January 10, 2001, the parties have supplemented their pleadings and filed
documentary evidence with the court to respond to assertions made by the other
party. On September 26, 2002, the Company issued its intervening summons in
the proceeding, naming Mr. Palatin, his wife, and Klamath Enterprises, S.A.
(Klamath) as cross-defendants. By its intervening summons, the Company
claims the right to indemnity from the Palatins and Klamath for any liability
imposed upon the Company in favor of Contrin on Contrins claims against the
Company. Klamath is a Panamanian company and the record owner of an estate
located in Amersham, England. The Company alleges that a substantial portion
of the $2.6 million transferred by Contrin for the purchase of containers was
diverted by the Palatins to improve and furnish the Amersham estate, in which
they lived in 1994, and that Mr. Palatin is the beneficial owner of Klamath.
The Company is currently in the process of serving the summons on the Palatins
and Klamath; once served, the cross-defendants will have the opportunity to
file responsive pleadings and evidence. No date has been set for a final
hearing on CWCs claims against the Company.

In anticipation of the filing of Contrins claims against the Company in
Luxembourg, the Group, in June of 2000, filed claims for indemnity against Mr.
Palatin and his wife in the High Court of Justice, London, England, and in July
2000, separately, a claim against Barclays Bank PLC (Barclays). Barclays was
the bank that received the $2.6 million from Contrin. For a description of
these claims, see Legal Proceedings.

On August 2, 2001, CWC 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 container 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. On December 31, 2001, CNV filed its
defense to CWCs claim, denying CWCs claims and denying that CNV is liable to
CWC in any amount. A trial of CWCs claim is set for January 27, 2003.

10



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|9. |  | Commitments and contingencies
|-- |  | -----------------------------

Concurrently with the filing of its defense to CWCs claims, CNV filed a
separate claim against the Palatins and Klamath, seeking recovery of $0.5
million from the Palatins that CNV alleges was misappropriated from CNV by Mr.
Palatin. For the status of this separate claim by CNV against the Palatins and
Klamath, see Legal Proceedings.

On September 18, 2002, three Austrian affiliates of Contrin filed a claim
against CNV in the High Court of Justice, London, England. The claimants
assert that CNV has breached container management agreements entered into in
1993 by selling containers without obtaining the consent of the claimants, in
violation of the terms of the container management agreements. The claimants
assert that they are entitled to all sums received by CNV from the sale of
containers wrongfully disposed of under the container management agreements or,
alternatively, that CNV is liable for damages for wrongfully depriving the
claimants of the use and possession of the containers sold. Claimants assert
damages in excess of £50,000 pounds sterling, and request an accounting,
interest, and costs.

Prior to the filing of the above-described action, CNV had rejected
Contrins container disposal contractual claims as a misinterpretation of the
relevant container management agreements, and intends to vigorously defend the
claim filed by the three Contrin affiliates on September 18, 2002.

Contrin has also asserted an interest in the containers managed by the
Group for Transocean Equipment Manufacturing and Trading Limited (TOEMT) and
in the distributions payable with respect to such containers, as discussed
below.

Management considers that prudent provision has been made in the financial
statements for the Contrin 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 $3 million.



|viii. |  | TOEMT
|----- |  | -----

TOEMT, which is currently in liquidation in the United Kingdom, has been
separately registered by the same name in both the United Kingdom and in the
Isle of Man. At September 30, 2002, the Group had $1.2 million in amounts
payable to TOEMT on deposit in a bank account pending clarification of the
proper claimants to the distributions payable with respect to the containers
owned by TOEMT. Contrin has provided the Group with copies of default
judgments that Contrin secured in January and June 2001 from the Commercial
Court of Vienna, Austria, against TOEMT, the UK company, in the amount of $0.1
million, and against TOEMT, the Isle of Man company, in the amount of $0.4
million. Until clarification is secured by the court overseeing the
liquidation of the UK TOEMT and/or through agreement with the creditors of
TOEMT, the Group presently intends to continue to set aside the distributions
due and payable by the Group on the containers it manages for TOEMT. Contrin,
through its UK counsel, has also provided notice to the Group of a claim
counsel asserts will be filed against CNV by the liquidator of the UK TOEMT
company. Counsel advises that the liquidator will allege that TOEMT (UK)
entered into a management agreement with CNV on or about March 10, 1986; that
sometime after November 21, 1991 (the date counsel alleges TOEMT (Isle of Man)
was organized), CNV, in breach of the terms of the management agreement,
transferred containers from TOEMT (UK) to TOEMT (Isle of Man) and/or paid over
revenues and sums due to TOEMT (UK) to TOEMT (Isle of Man), in each case
without the consent of TOEMT (UK). Counsel further advises that the liquidator
will assert a right to all of the revenues the Group has set aside representing
the distributions due and payable on the containers it manages for TOEMT, and
will request an accounting, a declaration that TOEMT (UK) is the rightful owner
of the containers purportedly transferred by CNV to TOEMT (Isle of Man), an
order requiring CNV to pay to the liquidator all distributions set aside by the
Group for TOEMT, and damages for breach of contract. The notice does not
specify the amount of damages.

The Group believes the assertions of wrongdoing made on behalf of TOEMT
(U.K) are without merit. If the liquidator of TOEMT (UK) proceeds with the
filing of its claim against the Group, the Group intends to vigorously defend
the claim.

11



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|10. |  | Issued and Authorised Share Capital
|--- |  | -----------------------------------

In June 2002, the Company retired and canceled 1,793,798 shares held in
the Company by Cronos Equipment (Bermuda) Limited (CEB), a subsidiary of the
Company. In May 2001, Cronos was awarded the outstanding common shares in the
Company that were beneficially owned by a former Chairman and Chief Executive
Officer of the Company in partial consideration for amounts owed under two
promissory notes (see Item I of PART II  Legal Proceedings). Such shares had
been recorded as common shares held in treasury.



|11. |  | New accounting pronouncements (US dollar amounts in thousands, except per
share amounts)
|--- |  | ----------------------------------------------------------------------------------------

On January 1, 2002, the Group adopted Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, and SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

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 annually in December for impairment. The
impact of the adoption of SFAS No. 142 on the results of operations of the
Group may be presented as follows:

|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|------------------------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ----- |  |  | - | ----- | 
|                                      |  | Three Months Ended |      | Nine Months Ended
|                                      |  | September 30,      |      | September 30,    
|                                      |  |                    |      |                  
|                                      |  | 2002               |      | 2001              |  | 2002 |      | 2001
|                                      |  |                    |      |                   |  |      |      |     
|Net income:                           |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Reported net income                   |  | $                  | 219  |                   |  | $    | 216  |      |  | $ | 3,000 |  |  | $ | 2,818 | 
|Add back Goodwill amortization        |  |                    |     |                   |  |      | 107  |      |  |   |      |  |  |   | 266   | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Adjusted net income                   |  | $                  | 219  |                   |  | $    | 323  |      |  | $ | 3,000 |  |  | $ | 3,084 | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Earnings per share:                   |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Reported basic net income per share   |  | $                  | 0.03 |                   |  | $    | 0.03 |      |  | $ | 0.41  |  |  | $ | 0.34  | 
|Add back Goodwill amortization        |  |                    |     |                   |  | $    | 0.01 |      |  |   |      |  |  | $ | 0.03  | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Adjusted basic net income per share   |  | $                  | 0.03 |                   |  | $    | 0.04 |      |  | $ | 0.41  |  |  | $ | 0.37  | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Reported diluted net income per share |  | $                  | 0.03 |                   |  | $    | 0.03 |      |  | $ | 0.40  |  |  | $ | 0.34  | 
|Add back Goodwill amortization        |  |                    |     |                   |  | $    | 0.01 |      |  |   |      |  |  | $ | 0.03  | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 
|Adjusted diluted net income per share |  | $                  | 0.03 |                   |  | $    | 0.04 |      |  | $ | 0.40  |  |  | $ | 0.37  | 
|                                      |  |                    |      |                   |  |      |      |      |  |   |       |  |  |   |       | 

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 measure of long-lived assets to
be disposed of by sale.

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. The Group is currently
evaluating the impact that SFAS No. 143 will have on its financial statements.

12



---



##### Table of Contents



The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|11. |  | New accounting pronouncements
|--- |  | -----------------------------

In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities, which
addresses accounting for restructuring and similar costs. SFAS No. 146
supersedes previous accounting guidance, principally Emerging Issues Task Force
Issue No. 94-3. The Group will adopt the provisions of SFAS No. 146 for
restructuring activities initiated after December 31, 2002. SFAS No. 146
requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost was recognized at the date of the Companys
commitment to an exit plan. SFAS No. 146 also establishes that the liability
should initially be measured and recorded at fair value. Accordingly, SFAS No.
146 may affect the timing of recognizing future restructuring costs as well as
the amounts recognized.

13



---



##### 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 Container Equity Programs and Other Managed
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:

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 2002 |     | 2001
|                               |  |      |     |     
|Container Equity Programs      |  |      | 31  | %    |  |  | 31  | %
|Other Managed Container Owners |  |      | 44  | %    |  |  | 45  | %
|Owned Containers               |  |      | 25  | %    |  |  | 24  | %
|                               |  |      |     |      |  |  |     |  
|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 SFAS 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, 2002, over 80%
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 11 to the Companys 2001 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:

|                      |                                         |  |       |     |      |  |       |     | 
|--------------------- | --------------------------------------- |  | ----- | --- | ---- |  | ----- | --- | 
|                      |                                         |  | 2002  |     | 2001
|                      |                                         |  |       |     |     
|Dry Cargo             |                                         |  | 362.7 |     |      |  | 368.4 |    
|Refrigerated          |                                         |  | 13.6  |     |      |  | 12.9  |    
|Tank                  |                                         |  | 2.3   |     |      |  | 2.0   |    
|Dry Freight Specials: |                                         |  |       |     |      |  |       |    
|                      | Cellular Palletwide Containers (CPCs) |  |       | 7.4 |      |  |       | 5.3 | 
|                      | Rolltrailer                             |  |       | 2.7 |      |  |       | 2.5 | 
|                      | Other Dry Freight Specials              |  |       | 3.5 |      |  |       | 3.2 | 
|                      |                                         |  |       |     |      |  |       |    
|Total Fleet           |                                         |  | 392.2 |     |      |  | 394.3 |    
|                      |                                         |  |       |     |      |  |       |    

14



---



##### Table of Contents



The Cronos Group

Over the past two years, the slowdown in the global economy has led to
reduced levels of capital available for investment in new container equipment.
This has resulted in increased demand for existing dry cargo and specialized
container equipment in 2002. To exploit this demand, the Group has
repositioned off-hire equipment to locations of greatest demand and pursued
leasing opportunities through its global network of marketing resources. As a
result, utilization for the Cronos fleet of dry cargo containers increased to
83% by the end of September compared to 73% at the beginning of the year. In
addition, the per diem rate for dry cargo containers, although lower than in
the first quarter, remained level during the second and third quarters of 2002,
thus halting the steady decline reported in recent years. Since September 30,
2001, the combined per diem rate for the Cronos fleet of dry cargo containers
has declined by approximately 16%.

On October 8, 2002, the Pacific Maritime Associations 10 day lock-out of
the International Longshore and Warehouse Union ended. While there were some
short term benefits, the long term impact of this lock-out will not be known
until the labor issues associated with the lock-out are ultimately resolved,
shipping lines assess their losses, and containers and ships are redeployed
into areas of demand.

Cronos operates a diversified fleet of containers, including refrigerated
containers, tanks, CPCs and rolltrailers. Specialized containers account for
over 50% of the Cronos owned fleet (based on original equipment cost). Due to
their specialized nature, demand for these containers is less likely to be
affected by global economic downturns. During the third quarter of 2002,
Cronos has experienced strong demand for all specialized containers.

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

|                            |  |      |    |      |  |  |    |  
|--------------------------- |  | ---- | -- | ---- |  |  | -- | -
|                            |  | 2002 |    | 2001
|                            |  |      |    |     
|Utilization at September 30 |  |      | 83 | %    |  |  | 72 | %

The Group reviews its owned container equipment when changes in
circumstances require consideration as to whether the carrying value of the
equipment has become impaired, pursuant to SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Management considers assets to
be impaired if the carrying value of the asset exceeds the future projected
cash flows from related operations (undiscounted and without interest charges).
When impairment is deemed to exist, the assets are written down to fair value
or projected discounted cash flows from related operations. The Group
periodically evaluates future cash flows and potential impairment of its fleet
by container type rather than for each individual container. Therefore, future
losses could result for individual container dispositions due to various
factors including age, condition, suitability for continued leasing, as well as
geographic location of the containers where disposed. In addition, subjective
management judgement is required in estimating future cash flows from container
operations. Accordingly, the estimates may not be indicative of the amounts
that may be realized in future periods.




Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001

Gross lease revenueof $28.3 million for the three months ended September
30, 2002, was $1.5 million, or 5%, lower than in the corresponding period of
2001. Dry cargo and refrigerated containers accounted for all of the decline
as the effect of the increase in utilization reported during 2002 was more than
offset by the effect of reduced per diem rates and the disposal of older dry
cargo equipment.

Equipment trading revenuefor the three months ended September 30, 2002,
represented transactions undertaken in which the Group used its relationships
with equipment manufacturers to assist third-parties to design and acquire
their own equipment and arrange for delivery to designated locations.
Equipment trading expenses represent equipment and related costs for this
activity.

15



---



##### Table of Contents



The Cronos Group

Commissions, fees and other incomefor the three months ended September
30, 2002, of $1 million were $0.7 million, or 42%, lower than in the same
quarter of 2001. An increase of $0.2 million in direct finance lease income
was offset by a $0.5 million decline in CPC license fee income and consultancy
fee income, and reductions of $0.1 million in each of acquisition fees,
investment income, property rental revenue and other income. The increase in
finance lease income is attributable to the new transactions undertaken over
the course of the last year that were funded primarily by the Groups revolving
credit facility. The reduction in the amount of deferred acquisition fees
recognized during the quarter reflects the maturing profile of a number of
investor programs. The reduction of property income follows the decision of
the Group to relocate its UK office during the second quarter of 2002 to a
leasehold premises. Previously, the Group had sublet this property to third
party tenants.

Direct operating expensesof $6.5 million for the three months ended
September 30, 2002 were $2.2 million, or 26%, lower than in the third quarter
of 2001. Storage costs declined by $1.5 million reflecting the increased
demand for dry cargo containers when compared to the corresponding period in
2001. Repositioning expenses were $0.7 million lower than in 2001. This was
due to the fact that the third quarter of 2001 included the cost of a large
movement of off-hire dry cargo containers from the East Coast of the United
States to Korea.

Payments to managed container ownersof $13.9 million during the three
months ended September 30, 2002, were $0.6 million, or 4%, higher when compared
to the corresponding period in 2001. Gross lease revenue declined for each
segment due to the impact of lower per diem rates. However, the decline in
direct operating expenses together with the inception of the joint venture
program resulted in an increase in total Managed Container Owner net lease
revenue.

Depreciation and amortizationof $3.9 million for the three months ended
September 30, 2002, was almost unchanged when compared to the corresponding
quarter of 2001. A $0.3 million increase in container depreciation, reflecting
the acquisition of new equipment over the last year, was more than offset by a
$0.2 million reduction in depreciation for leasehold and computer assets
together with a $0.1 million reduction in the amortization of intangible assets
due to the adoption of SFAS No. 142.

Selling, general and administrative expensesof $3.4 million in the third
quarter of 2002 were $0.1 million, or 3%, higher than in the corresponding
period of 2001. A total increase of $0.3 million in manpower, professional
service and insurance costs were partially offset by reductions of $0.1 million
in each of occupancy and information technology costs.

Interest expenseof $1.5 million for the three months ended September 30,
2002, declined by $0.5 million, or 25%, when compared to the corresponding
period in 2001. The decline in interest expense attributable to the reduction
in interest rates more than offset the increase in interest expense resulting
from higher debt balances used to finance new equipment purchases.

Income taxes:Further to the settlement agreed with a foreign taxation
authority during the second quarter of 2002, the Group performed an evaluation
of its worldwide tax position during the third quarter of 2002. Based on this
review, the Group recorded a tax benefit of $0.6 million in its US
subsidiaries. This benefit was offset by $0.6 million of income tax charges
arising primarily in European subsidiaries.




Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30, 2001

Gross lease revenueof $84.5 million for the nine months ended September
30, 2002, was $6.8 million, or 7%, lower than in the corresponding period of
2001. Dry cargo and refrigerated containers accounted for all of the decline as
the effect of the increase in utilization reported during 2002 was more than
offset by the effect of reduced per diem rates and the disposal of older dry
cargo equipment.

Equipment trading revenueof $0.6 million for the nine months ended
September 30, 2002, represented transactions undertaken in which the Group used
its relationships with equipment manufacturers to assist third-parties to
design and acquire their own equipment and arrange for delivery to designated
locations. Equipment trading expenses represent equipment and related costs
for this activity.

16



---



##### Table of Contents



The Cronos Group

Commissions, fees and other incomefor the nine months ended September 30,
2002, of $3.6 million were $1.1 million, or 24%, lower when compared to the
first nine months of 2001. Reductions of $0.8 million in CPC license fee
income, $0.3 million in acquisition fees, $0.3 million in investment and other
income and a $0.3 million decline in the profit realized on the sale of fixed
assets were partly offset by a $0.6 million increase in direct finance lease
income.

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.

Direct operating expensesof $21.5 million in the first nine months of
2002 were $1.8 million, or 8%, lower than in the corresponding period of 2001.
Reduced storage costs of $2.2 million reflect the increased demand for dry
cargo containers during 2002. This was partly offset by $0.4 million of
increased repositioning expense.

Payments to managed container ownersof $39.5 million in the nine months
ended September 30, 2002, were $4.0 million, or 9%, lower when compared to the
corresponding period in 2001, due primarily to the decline in dry cargo
container net lease revenue for each of these segments. Payments to Container
Equity Programs of $12.6 million in the nine months to September 30, 2002, were
$2.1 million lower than in the same period of 2001. Payments to Other Managed
Container Owners were $26.9 million for the nine months ended September 30,
2002, a decrease of $1.9 million, or 7%, when compared to the same period of
2001.

Depreciation and amortizationof $11.6 million for the nine months ended
September 30, 2002, was $0.3 million, or 3%, lower when compared to the
corresponding period in 2001. In 2002, depreciation expense for leasehold and
computer assets was $0.5 million lower than for the same period in 2001. This
is due to certain computer assets reaching the end of their useful life and the
relocation of the UK office to new leasehold premises in the second quarter of
2002. This was offset by a $0.5 million increase in container depreciation
expense reflecting the addition of new equipment. The amortization of
intangible assets declined by $0.3 million in 2002 due to the adoption of SFAS
No. 142.

Selling, general and administrative expensesof $10.2 million for the nine
months ended September 30, 2002, were almost unchanged when compared to the
corresponding period of 2001. Reductions of $0.2 million in information
technology costs and $0.1 million in occupancy expense were offset by increased
professional services costs.

Interest expenseof $4.8 million for the nine months ended September 30,
2002, decreased by $1.6 million, or 25%, when compared to the corresponding
period in 2001. The decline in interest expense attributable to the reduction
in interest rates more than offset the increase in interest expense resulting
from higher debt balances used to finance new equipment purchases.

Income taxes:During the second quarter of 2002, the Group agreed to a
settlement with a foreign taxation authority. This followed a review that
focused primarily on the transfer prices under the terms of the principal
trading agreements between Cronos Group companies prior to December 31, 1998.
The Group had previously recorded a charge of $2.9 million in this regard. As
a result of the settlement, the Group reversed $2.5 million of the tax
liability in the second quarter of 2002 and recorded a tax benefit of the same
amount. Further to the settlement agreed in the second quarter, the Group
performed an evaluation of its worldwide tax position during the third quarter.
Based on this review, the Group recorded a tax benefit of $0.6 million in
its US subsidiaries. The total income tax benefit was partly offset by $0.8
million of income tax charges in the first nine months of 2002.

Income from 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 Mr. Palatin. 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 Mr. Palatin in partial consideration for amounts owed under the promissory
notes. These shares were recorded as common shares in treasury. The valuation
of $6 million was based on the estimated fair value of the shares received.

17



---



##### Table of Contents



The Cronos Group

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 June 2001, the Group undertook a review of its refrigerated container
equipment and identified a number of issues that 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 loan notes receivable from a
third-party container owner in the second quarter of 2001. The carrying value
of the loan notes are measured in terms of the discounted value of projected
future net cash flows to be generated based on historical and projected trends
on per diem revenues, utilization, container disposal proceeds and funding
costs over the expected useful life of the containers. Due to the global
economic downturn, 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 owner exceeded the discounted value of the future cash flows by $2
million. Accordingly, an impairment of $2 million was recorded.




Liquidity and Capital Resources

The funding sources available to the Group and its consolidated
subsidiaries include operating cash flow and borrowings.

The Groups operating cash flow is derived from lease revenues generated
by the Groups container fleet and fee revenues from its managed container
programs and other parties. Operating cash flow is utilized to meet costs
relating to day-to-day fleet support, payments to Managed Container Owners,
selling, general and administrative expenses, interest expense, servicing the
current portion of long-term borrowings and financing a portion of certain debt
funded equipment acquisitions.

Operating cash flow is largely dependent upon the timely collections of
lease revenues from shipping lines. Based on loss experience for the last nine
years, bad debts have approximated 1% of lease revenues. The Group monitors
the aging of lease receivables, collections and the credit status of existing
and potential customers. In the current economic climate there is a risk that
some shipping lines may experience financial difficulty. Any resultant
material increase in the level of bad debts could potentially impair the
ability of the Group to meet its operating commitments.

At September 30, 2002, the Group had $114.4 million of available container
borrowing facilities under which $104.6 million was outstanding. In addition,
the Group had $1.7 million of credit facilities under which $0.1 million was
outstanding. The credit facilities are available, if required, for operating
cash flow purposes.

Cash Flow Statements for the Nine Months ended September 30, 2002 and 2001

Cash from Operating Activities:Net cash provided by operating activities
was $16.1 million and $10.4 million during the first nine months of 2002 and
2001, respectively. In 2002, the cash provided by operating activities
represented earnings from operations together with a dividend of $1.1 million
received from the joint venture container purchase program. This was partly
offset by a decrease in amounts payable and accrued expenses. The net cash
generated in 2001 reflected a decrease in container equipment for resale,
resulting from the sale of $8 million of container equipment to a new managed
container owner program of which $6.8 million was used to pay container
manufacturers.

18



---



##### Table of Contents



The Cronos Group

Cash from Investing Activities:Net cash used in investing activities was
$3.8 million in the first nine months of 2002, reflecting the acquisition of
$5.6 million of container and other equipment. This was more than offset by
the sale of $11.8 million of container equipment, of which $9.8 million was
sold to a new container purchase program. 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 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.

Cash from Financing Activities:Net cash used in financing activities was
$10.9 million during the first nine months of 2002. Proceeds from the issuance
of new term debt of $16.3 million was more than offset by the repayment of
$27.2 million of debt and capital lease obligations, including $11.3 million
that was repaid at the inception of the joint venture container purchase
program. In the first nine months of 2001, net cash provided by financing
activities was $2.1 million.




Capital Resources

The Group purchases new containers for its own account and for resale to
Managed Container Owners and other parties. At September 30, 2002, the Group
owed container manufacturers $1.6 million for equipment, of which $1.5 million
is scheduled to be funded in the fourth quarter of 2002, utilizing available
container funding facilities.

In addition, the Group had outstanding orders to purchase container
equipment at September 30, 2002 of $1.5 million. These orders relate to
containers to be financed by the Group using available container funding
facilities.

On September 18, 2002, Cronos established a container purchase program
(the Program) with a major international financial services provider (the
Bank), and a current lender to the Company. The purpose of the Program is to
acquire and lease to third party lessees marine cargo containers through a
joint venture 50% owned by a subsidiary of the Company and 50% owned by an
affiliate of the Bank. The joint venture entity is a bankruptcy-remote,
special purpose company organized under the laws of Bermuda.

The Bank has committed $35 million in debt financing to the joint venture,
and each of the Group and the Bank have committed approximately $5 million in
equity to the joint venture. The intention is to expand the Program, as
additional lenders become part of the lending group, with the lenders providing
up to 80% of the cost of acquiring the containers and the joint venture
partners each providing one-half of the equity to fund the balance of the
capital requirements of the joint venture.

The Group sold approximately $18.8 million of containers to the joint
venture and transferred an additional $4.7 million of containers as a capital
contribution. The Group utilized the proceeds from the sale of containers to
repay approximately $10.2 million of indebtedness outstanding under its
existing revolving line of credit with the Bank. In addition, an initial
distribution from the joint venture of approximately $1.1 million was utilized
to further reduce the existing revolving line of credit with the Bank. The
sale of the containers by the Group to the joint venture did not result in a
material gain (or loss).

In connection with the establishment of the Program, and the repayment of
a portion of the outstanding balance under its revolving line of credit with
the Bank, the Group has amended its revolving line of credit agreement with the
Bank to reduce the maximum commitment of the Bank thereunder from $60 million
to $50 million, and has agreed to amortize the balance outstanding under the
revolving line of credit, as of September 18, 2003, over five years.

The Group believes that it has sufficient capital resources to support its
operating and investing activities for the next twelve months.

19



---



##### Table of Contents



The Cronos Group




Item 3  Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk:Outstanding borrowings are subject to interest rate
risk. Approximately 83% of total borrowings had floating interest rates at
September 30, 2002. 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 $0.3 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 2002, 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 annual
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.




Item 4  Controls and Procedures

The principal executive and principal financial officers of the Company
have evaluated the disclosure controls and procedures of the Group within 90
days prior to the filing of this quarterly report. As used herein, the term
disclosure controls and procedures has the meaning given to the term by Rule
13a-14 under the Securities Exchange Act of 1934, as amended (Exchange Act),
and includes the controls and other procedures of the Group that are designed
to ensure that information required to be disclosed by the Company in the
reports that it files with the SEC under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms. Based upon their evaluation, the principal executive
and financial officers of the Company have concluded that the Groups
disclosure controls and procedures provide reasonable assurance that the
information required to be disclosed by the Company in this report is recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms applicable to the preparation of this report.

There have been no significant changes in the Groups internal controls or
in other factors that could significantly affect the Groups internal controls
subsequent to the evaluation described above conducted by the Companys
principal executive and financial officers.

20



---



##### Table of Contents



The Cronos Group




PART II  OTHER INFORMATION




Item 1  Legal Proceedings

Disputes with the Contrin Group

Contrins $2.6 Million Claim. The Group manages containers for investment
entities sponsored by or affiliated with Contrin. Approximately 1% (measured
by TEUs) of the Groups fleet of containers is owned by Contrin. The Group is
in litigation with Contrin over funds that Contrin claims to have remitted to
Cronos for the purchase of additional 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, 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, (i) requesting that the District Court dismiss
the proceeding for lack of jurisdiction over the dispute, and (ii) denying
Contrins claims on the merits. Since January 10, 2001, the parties have
supplemented their pleadings and filed documentary evidence with the court to
respond to assertions made and evidence submitted by the other party. On
September 26, 2002, the Company issued its intervening summons in the
proceeding, naming Mr. Palatin, his wife, and Klamath as cross-defendants. By
its intervening summons, the Company claims the right to indemnity from the
Palatins and Klamath for any liability imposed upon the Company in favor of
Contrin on Contrins claims against the Company. Klamath is a Panamanian
company and the record owner of an estate located in Amersham, England. The
Company alleges that a substantial portion of the $2.6 million transferred by
Contrin for the purchase of containers was diverted by the Palatins to improve
and furnish the Amersham estate, in which they lived in 1994, and that Mr.
Palatin is the beneficial owner of Klamath. The Company is currently in the
process of serving the summons on the Palatins and Klamath; once served, the
cross-defendants will have the opportunity to file responsive pleadings and
evidence. No date has been set for a final hearing on CWCs claims against the
Company.

In anticipation of the filing of Contrins claims against the Company in
Luxembourg, 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 this
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 UK claim against the Palatins. By the
injunction, the Palatins are prohibited from selling, charging, or otherwise
disposing of their interest in the Amersham estate. The injunction also extends
to Klamath, the record owner of the estate.

The Palatins and Klamath have contested the jurisdiction of the High Court
of Justice over them, or, in the alternative, have requested that the court
exercise its discretion not to exercise jurisdiction over them. In support
their application, the Palatins have filed an affidavit with the court
asserting that the Amersham estate is owned by Pontino, SA, a Panamanian
company, in which they disclaim any interest. The Group has opposed the
applications of the Palatins and Klamath. A hearing on the defendants motion
for dismissal was originally scheduled to be heard on July 22, 2002; the
hearing was postponed and has been re-set for hearing on November 27, 2002, or,
if the motion cannot be heard on that date, on January 21, 2003.

In light of the Companys issuance of its intervening summons against the
Palatins and Klamath in the Luxembourg proceeding, described above, the Group
is seeking a stay of prosecution of the UK proceeding pending the outcome of
the Luxembourg proceeding, and is seeking to preserve its freezing injunction
prohibiting any disposition by the defendants of their interest in the Amersham
estate pending the outcome of the Luxembourg proceeding.

21



---



##### Table of Contents



The Cronos Group

On July 13, 2000, the Group also filed a protective claim against Barclays
in the High Court of Justice, London, England. Barclays was the bank that
received the $2.6 million from Contrin. 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. In February 2001, the Group obtained an
order from the court requiring the production of documents by Barclays. The
Group and Barclays have agreed to a stay of the action while the Group
evaluates the documentation produced by Barclays.

Austrian Conviction of Mr. Palatin. In July 1998, the Vienna public
prosecutor initiated criminal proceedings against Mr. Palatin, Axel Friedberg,
a director of the Company from January 1997 through March 1999, and a third
defendant, the managing director of the Austrian companies affiliated with
Contrin. The focus of the indictment is the defendants conduct in managing,
or controlling the management of, the Austrian entities affiliated with
Contrin.

One of the counts of the indictment involved Contrins transfer, in 1994,
of $2.6 million, discussed above. Specifically, the 1998 indictment alleged
that S. Palatin instructed the managing director of Contrins Austrian
affiliates to transfer this amount, intended for the purchase of containers to
be managed by the Group, to the personal account of Mr. Palatins wife. The
Vienna public prosecutor alleged that this conduct constituted the crime of
gross fraud under the Austrian criminal code.

The trial of the defendants proceeded intermittently through October 15,
2002. On that date, the court, in the form of two judges and two lay jurors,
rendered its judgment, convicting Messrs. Palatin and Contrins managing
director of certain of the counts brought against them, and acquitting Mr.
Friedberg of the counts brought against him. Mr. Palatin was convicted of
gross fraud with respect to the transfer by Contrin of $2.6 million in 1994.
The public prosecutor withdrew the count alleging that Contrins managing
director colluded in this conversion, but has reserved the right to re-file the
count against Contrins managing director. Mr. Palatin was also convicted of
three of the other counts involving his mismanagement of the Austrian entities
affiliated with Contrin, and sentenced to nine years in prison.

The defendants have entered appeals of their convictions. The Group has
not fully evaluated the impact of Mr. Palatins conviction on the prosecution
of the proceedings it has brought against Mr. Palatin in Luxembourg and in the
United Kingdom, described above. The Group presently intends to proceed
vigorously with the prosecution of the aforesaid proceedings against Mr.
Palatin, his wife, and Klamath.

Contrins $0.5 Million Claim. On August 2, 2001, CWC filed a separate
claim against CNV, 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 container 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. On December 31, 2001, CNV filed its
defense to CWCs claim, denying CWCs claims and denying that CNV is liable to
the CWC in any amount. A trial of CWCs claim is set for January 27, 2003.

Concurrently with the filing of its defense to CWCs claims, CNV filed a
separate claim against the Palatins and Klamath, seeking recovery of $0.5
million from the Palatins that CNV alleges was misappropriated from CNV by Mr.
Palatin. On April 8, 2002, Klamath filed its application with the court
seeking an order declaring that the court has no jurisdiction over Klamath or,
in the alternative, that it should exercise its discretion not to assert
jurisdiction over the Groups claims against Klamath. The Palatins filed their
application for dismissal with the court on July 5, 2002, alleging that the
court has no jurisdiction over them. CNV opposes both applications. A hearing
on the applications is scheduled to be heard on November 27, 2002, or, if the
hearing cannot be held on that date, on January 21, 2003.

22



---



##### Table of Contents



The Cronos Group

Contrins Contractual Disposal Claim. On September 18, 2002, three
Austrian affiliates of Contrin filed a claim against CNV in the High Court of
Justice, London, England. The claimants assert that CNV has breached container
management agreements entered into in 1993 by selling containers without
obtaining the consent of the claimants, in violation of the terms of the
container management agreements. The claimants assert that they are entitled
to all sums received by CNV from the sale of containers wrongfully disposed of
under the container management agreements or, alternatively, that CNV is liable
for damages for wrongfully depriving the claimants of the use and possession of
the containers sold. Claimants assert damages in excess of £50,000 pounds
sterling, and request an accounting, interest, and costs.

Prior to the filing of the above-described action, CNV had rejected
Contrins container disposal contractual claims as a misinterpretation of the
relevant container management agreements, and intends to vigorously defend the
claim filed by the three Contrin affiliates on September 18, 2002.

Threatened TOEMT Claim. A subsidiary of the Company manages refrigerated
containers for TOEMT. TOEMT, which is currently in liquidation in the United
Kingdom, has been separately registered by the same name in both the United
Kingdom and in the Isle of Man. Contrin has asserted a right to the
distributions being held by the Group for TOEMT. Contrin has provided the
Group with copies of default judgments Contrin secured in January and June 2001
from the Commercial Court of Vienna, Austria, against TOEMT, the UK company, in
the amount of $0.1 million, and against TOEMT, the Isle of Man company, in the
amount of $0.4 million. Until clarification is secured by the court overseeing
the liquidation of the UK TOEMT and/or through agreement with the creditors of
TOEMT, the Group presently intends to continue to set aside the distributions
due and payable by the Group on the containers it manages for TOEMT.

Contrin, through its UK counsel, has also provided notice to the Group of
a claim counsel asserts will be filed against CNV by the liquidator of the UK
TOEMT company. Counsel advises that the liquidator will allege that TOEMT (UK)
entered into a management agreement with CNV on or about March 10, 1986; that
sometime after November 21, 1991 (the date counsel alleges TOEMT (Isle of Man)
was organized), CNV, in breach of the terms of the management agreement,
transferred containers from TOEMT (UK) to TOEMT (Isle of Man) and/or paid over
revenues and sums due to TOEMT (UK) to TOEMT (Isle of Man), in each case
without the consent of TOEMT (UK). Counsel further advises that the liquidator
will assert a right to all of the revenues the Group has set aside representing
the distributions due and payable on the containers it manages for TOEMT, and
will request an accounting, a declaration that TOEMT (UK) is the rightful owner
of the containers purportedly transferred by CNV to TOEMT (Isle of Man), an
order requiring CNV to pay to the liquidator all distributions set aside by the
Group for TOEMT, and damages for breach of contract. The notice does not
specify the amount of damages.

The Group believes the assertions of wrongdoing made on behalf of TOEMT
(UK) are without merit. If the liquidator of TOEMT (UK) proceeds with the
filing of its claim against the Group, the Group intends to vigorously defend
the claim.

Collection of Palatin Notes

On May 8, 2001, the Massachusetts Superior Court entered its judgment
against Mr. Palatin and Klamath, affirming the default judgment secured on
February 8, 2000 in the New York State Supreme Court by a subsidiary of the
Company, Cronos Equipment (Bermuda) Limited (CEB) against Mr. Palatin in the
amount of $6.6 million. The court further ordered the Groups transfer agent
to cancel 1,793,798 outstanding common shares of the Company owned of record by
Klamath (the Klamath Shares), beneficially owned by Mr. Palatin, in partial
satisfaction of the New York State Supreme Court judgment, and to transfer the
Klamath Shares on the books and records of the transfer agent to CEB. The
Groups transfer agent promptly canceled the Klamath Shares and issued a new
stock certificate for 1,793,798 common shares of the Company to CEB. The Court
also ordered Mr. Palatin and Klamath to pay CEBs fees and expenses, including
attorneys fees, incurred in securing the final judgment.

As of May 8, 2001, the amount owed by Mr. Palatin to CEB under the New
York judgment totaled $7.3 million, representing the amount of the judgment
($6.6 million) plus interest thereon at 9% per annum. The Group reduced the
amount owed by Mr. Palatin to CEB under the judgment by $6 million as a result
of the cancelation of the Klamath Shares, leaving a balance due under the
judgement of $1.3 million as of May 8, 2001.

23



---



##### Table of Contents



The Cronos Group

On November 23, 2001, CEB filed its claim against Mr. Palatin in the High
Court of Justice, London, England, for the purpose of collecting the remaining
balance due to CEB under the New York judgment. CEB will seek to enforce the
claim against the estate that the Group believes is beneficially owned by Mr.
Palatin in Amersham, England. On July 5, 2002, Mr. Palatin filed his
application with the court seeking an order declaring that the court has no
jurisdiction over him or, in the alternative, that it should exercise its
discretion not to assert jurisdiction over him on the ground of forum non
conveniens.CEB opposes Mr. Palatins application. A hearing on the
application is tentatively set for November 27, 2002; if the hearing cannot be
held on that date, then the hearing will be held on January 21, 2003.

At the annual shareholders meeting held June 12, 2002, the shareholders
approved a proposal to retire and cancel the Klamath Shares then held of record
by CEB. As a result of this approval, the Klamath shares are no longer deemed
authorized or outstanding common shares of the Company.




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

(a)  Exhibits

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

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

(b)  Reports on Form 8-K

On October 2, 2002, a Current Report on Form 8-K was filed by the Company
announcing the establishment of a joint venture container purchase program with
a major European financial institution.

24



---



##### Table of Contents



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, 2002

25



---



##### Table of Contents



The Cronos Group

CERTIFICATIONS
(Exchange Act Rule 13a-14)

I, Dennis J Tietz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Cronos Group
(the Registrant);

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | (b) evaluated the effectiveness of the Registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5. The Registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrants auditors and the Audit
Committee of Registrants Board of Directors (or persons performing the
equivalent function):

| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants ability
to record, process, summarize and report financial data and have
identified for the Registrants auditors any material weaknesses in
internal controls; and
|
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants internal
controls; and                                                                                                                                        

6. The Registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

/s/   DENNIS J TIETZ
Dennis J Tietz
Chief Executive Officer

26



---



##### Table of Contents



The Cronos Group

CERTIFICATIONS
(Exchange Act Rule 13a-14)

I, Peter J Younger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Cronos Group
(the Registrant);

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4. The Registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
|
| | (b) evaluated the effectiveness of the Registrants disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5. The Registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrants auditors and the Audit
Committee of Registrants Board of Directors (or persons performing the
equivalent function):

| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrants ability
to record, process, summarize and report financial data and have
identified for the Registrants auditors any material weaknesses in
internal controls; and
|
| | (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrants internal
controls; and                                                                                                                                        

6. The Registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

/s/   PETER J YOUNGER
Peter J Younger
Chief Financial Officer

27



---



##### Table of Contents



The Cronos Group

CERTIFICATIONS
(Exchange Act Rule 13a-14)




Exhibit Index

|       |  |                                                                                                                     |  |      |    | 
|------ |  | ------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Number |  | Exhibit                                                                                                             |  | Page
|       |  |                                                                                                                     |  |     
|99.1   |  | Certification pursuant to 18 U.S.C. § 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. * |  |      | 26 | 
|99.2   |  | Certification pursuant to 18 U.S.C. § 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. * |  |      | 27 | 



---

|* |  | These two certifications, required by Section 906 of the Sarbanes-Oxley Act
of 2002, other than as required by Section 906, are 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.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28