##### 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: March 31, 2003OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | 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, BOÎTE 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 May 13, 2003:

|       |  |  |                              | 
|------ |  |  | ---------------------------- | 
|Class  |  |  | Number of Shares Outstanding | 
|       |  |  |                              | 
|Common |  |  | 7,360,080                    | 



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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 March 31, 2003 Compared to Three Months Ended March 31, 2002
|                               |                                                                                                | Liquidity and Capital Resources                                                
|                               |                                                                                                | Cash Flow Statements for the Three Months ended March 31, 2003 and 2002        
|                               |                                                                                                | 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                    
|CERTIFICATION                 
|Exhibit Index                 
|EXHIBIT 99                    



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##### Table of Contents



The Cronos Group

TABLE OF CONTENTS

|                               |                                                                                                |                                                                                 |    |    |    | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -- | -- | -- | 
|PART I  FINANCIAL INFORMATION |                                                                                                |                                                                                 | 1  |   
|                               | Item 1  FINANCIAL STATEMENTS                                                                  |                                                                                 |    | 1  |   
|                               |                                                                                                | Management Representation                                                       |    |    | 1  | 
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Income                           |    |    | 2  | 
|                               |                                                                                                | Condensed Unaudited Consolidated Balance Sheets                                 |    |    | 3  | 
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Cash Flows                       |    |    | 4  | 
|                               |                                                                                                | Consolidated Unaudited Statement of Shareholders Equity                        |    |    | 5  | 
|                               |                                                                                                | Notes to the Condensed Unaudited Consolidated Financial Statements              |    |    | 6  | 
|                               | Item 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |                                                                                 |    | 13 |   
|                               |                                                                                                | General                                                                         |    |    | 13 | 
|                               |                                                                                                | Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002 |    |    | 14 | 
|                               |                                                                                                | Liquidity and Capital Resources                                                 |    |    | 15 | 
|                               |                                                                                                | Cash Flow Statements for the Three Months Ended March 31, 2003 and 2002         |    |    | 16 | 
|                               |                                                                                                | Capital Resources                                                               |    |    | 16 | 
|                               | Item 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                                                 |    | 16 |   
|                               | Item 4   CONTROLS AND PROCEDURES                                                              |                                                                                 |    | 17 |   
|PART II  OTHER INFORMATION    |                                                                                                |                                                                                 | 18 |   
|                               | Item 1  Legal Proceedings                                                                     |                                                                                 |    | 18 |   
|                               | Item 2  Changes in Securities and Use of Proceeds                                             |                                                                                 |    | 20 |   
|                               | Item 3  Defaults Upon Senior Securities                                                       |                                                                                 |    | 20 |   
|                               | Item 4  Submission of Matters to a Vote of Security Holders                                   |                                                                                 |    | 20 |   
|                               | Item 5  Other Information                                                                     |                                                                                 |    | 20 |   
|                               | Item 6  Exhibits and Reports on Form 8-K                                                      |                                                                                 |    | 20 |   





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##### 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.

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The Cronos Group




Condensed Unaudited Consolidated Statements of Income

(US dollar amounts in thousands, except share amounts)

|                                                |  |                    |        |      |  |   |        | 
|----------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                                |  | Three Months Ended
|                                                |  | March 31,         
|                                                |  | 2003               |        | 2002
|Gross lease revenue                             |  | $                  | 28,753 |      |  | $ | 28,329 | 
|Equipment trading revenue                       |  |                    | 655    |      |  |   | 384    | 
|Commissions, fees and other income:             |  |                    |        |      |  |   |        | 
|- Container Equity Programs                     |  |                    | 281    |      |  |   | 311    | 
|- Unrelated parties                             |  |                    | 773    |      |  |   | 968    | 
|Equity in earnings of affiliate                 |  |                    | 216    |      |  |   |       | 
|                                                |  |                    |        |      |  |   |        | 
|Total revenues                                  |  |                    | 30,678 |      |  |   | 29,992 | 
|                                                |  |                    |        |      |  |   |        | 
|Direct operating expenses                       |  |                    | 5,685  |      |  |   | 7,757  | 
|Payments to Managed Container Owners:           |  |                    |        |      |  |   |        | 
|- Container Equity Programs                     |  |                    | 5,465  |      |  |   | 3,955  | 
|- Other Managed Container Owners                |  |                    | 9,510  |      |  |   | 8,826  | 
|Equipment trading expenses                      |  |                    | 570    |      |  |   | 367    | 
|Depreciation and amortization                   |  |                    | 3,733  |      |  |   | 3,849  | 
|Selling, general and administrative expenses    |  |                    | 3,828  |      |  |   | 3,366  | 
|Interest expense                                |  |                    | 1,247  |      |  |   | 1,644  | 
|                                                |  |                    |        |      |  |   |        | 
|Total expenses                                  |  |                    | 30,038 |      |  |   | 29,764 | 
|                                                |  |                    |        |      |  |   |        | 
|Income before income taxes                      |  |                    | 640    |      |  |   | 228    | 
|Income tax provision                            |  |                    | 171    |      |  |   | 40     | 
|                                                |  |                    |        |      |  |   |        | 
|Net income                                      |  |                    | 469    |      |  |   | 188    | 
|                                                |  |                    |        |      |  |   |        | 
|Net income per common share (basic and diluted) |  | $                  | 0.06   |      |  | $ | 0.03   | 
|                                                |  |                    |        |      |  |   |        | 

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

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The Cronos Group




Condensed Unaudited Consolidated Balance Sheets

(US dollar amounts in thousands, except share amounts)

|                                                 |  |           |         |              |  |   |         |  
|------------------------------------------------ |  | --------- | ------- | ------------ |  | - | ------- | -
|                                                 |  | March 31, |         | December 31,
|                                                 |  | 2003      |         | 2002        
|Assets                                           |  |           |         |              |  |   |         |  
|Cash and cash equivalents                        |  | $         | 4,879   |              |  | $ | 4,626   |  
|Restricted cash                                  |  |           | 493     |              |  |   | 493     |  
|Amounts due from lessees, net                    |  |           | 22,180  |              |  |   | 22,580  |  
|Amounts receivable from container owners         |  |           | 7,390   |              |  |   | 7,542   |  
|New container equipment for resale               |  |           | 7,515   |              |  |   | 2,570   |  
|Net investment in direct financing leases        |  |           | 8,549   |              |  |   | 7,912   |  
|Investment in unconsolidated affiliate           |  |           | 3,819   |              |  |   | 3,603   |  
|Container equipment, net                         |  |           | 134,230 |              |  |   | 136,926 |  
|Other equipment, net                             |  |           | 585     |              |  |   | 513     |  
|Goodwill, net                                    |  |           | 11,038  |              |  |   | 11,038  |  
|Other intangible assets, net                     |  |           | 862     |              |  |   | 909     |  
|Other assets                                     |  |           | 14,620  |              |  |   | 15,477  |  
|                                                 |  |           |         |              |  |   |         |  
|Total assets                                     |  | $         | 216,160 |              |  | $ | 214,189 |  
|                                                 |  |           |         |              |  |   |         |  
|Liabilities and shareholders equity             |  |           |         |              |  |   |         |  
|Amounts payable to container owners              |  | $         | 18,609  |              |  | $ | 18,583  |  
|Amounts payable to container manufacturers       |  |           | 10,293  |              |  |   | 8,590   |  
|Direct operating expense payables and accruals   |  |           | 4,969   |              |  |   | 5,071   |  
|Debt and capital lease obligations               |  |           | 101,355 |              |  |   | 100,997 |  
|Current and deferred income taxes                |  |           | 5,450   |              |  |   | 5,536   |  
|Deferred income and unamortized acquisition fees |  |           | 4,968   |              |  |   | 5,201   |  
|Other amounts payable and accrued expenses       |  |           | 5,838   |              |  |   | 6,005   |  
|                                                 |  |           |         |              |  |   |         |  
|Total liabilities                                |  |           | 151,482 |              |  |   | 149,983 |  
|                                                 |  |           |         |              |  |   |         |  
|Shareholders equity                             |  |           |         |              |  |   |         |  
|Common shares (7,372,080 shares)                 |  |           | 14,744  |              |  |   | 14,744  |  
|Additional paid-in capital                       |  |           | 47,128  |              |  |   | 47,125  |  
|Common shares held in treasury (12,000 shares)   |  |           | (37     | )            |  |   | (37     | )
|Restricted retained earnings                     |  |           | 1,832   |              |  |   | 1,832   |  
|Retained earnings                                |  |           | 1,011   |              |  |   | 542     |  
|                                                 |  |           |         |              |  |   |         |  
|Total shareholders equity                       |  |           | 64,678  |              |  |   | 64,206  |  
|                                                 |  |           |         |              |  |   |         |  
|Total liabilities and shareholders equity       |  | $         | 216,160 |              |  | $ | 214,189 |  
|                                                 |  |           |         |              |  |   |         |  

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

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The Cronos Group




Condensed Unaudited Consolidated Statements of Cash Flows

(US dollar amounts in thousands, except share amounts)

|                                                       |  |                    |        |      |  |   |        |  
|------------------------------------------------------ |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                       |  | Three Months Ended
|                                                       |  | March 31,         
|                                                       |  | 2003               |        | 2002
|Net cash provided by operating activities              |  | $                  | 5,352  |      |  | $ | 4,613  |  
|                                                       |  |                    |        |      |  |   |        |  
|Cash flows from investing activities                   |  |                    |        |      |  |   |        |  
|Purchase of container equipment                        |  |                    | (3,072 | )    |  |   | (5,531 | )
|Purchase of property and other equipment               |  |                    | (121   | )    |  |   | (13    | )
|Change in accrued equipment purchases                  |  |                    | (3,459 | )    |  |   |       |  
|Investment in direct finance lease equipment           |  |                    | (712   | )    |  |   | (747   | )
|Proceeds from sales of container equipment             |  |                    | 1,427  |      |  |   | 540    |  
|Proceeds from sale of direct financing lease equipment |  |                    | 627    |      |  |   |       |  
|                                                       |  |                    |        |      |  |   |        |  
|Net cash used in investing activities                  |  |                    | (5,310 | )    |  |   | (5,751 | )
|                                                       |  |                    |        |      |  |   |        |  
|Cash flows from financing activities                   |  |                    |        |      |  |   |        |  
|Proceeds from issuance of term debt                    |  |                    | 6,957  |      |  |   | 7,985  |  
|Repayments of term debt and capital lease obligations  |  |                    | (6,599 | )    |  |   | (5,455 | )
|Dividend paid                                          |  |                    | (147   | )    |  |   |       |  
|                                                       |  |                    |        |      |  |   |        |  
|Net cash provided by financing activities              |  |                    | 211    |      |  |   | 2,530  |  
|                                                       |  |                    |        |      |  |   |        |  
|Net increase in cash and cash equivalents              |  |                    | 253    |      |  |   | 1,392  |  
|Cash and cash equivalents at beginning of period       |  |                    | 4,626  |      |  |   | 4,914  |  
|                                                       |  |                    |        |      |  |   |        |  
|Cash and cash equivalents at end of period             |  | $                  | 4,879  |      |  | $ | 6,306  |  
|                                                       |  |                    |        |      |  |   |        |  
|Supplementary disclosure of cash flow information:     |  |                    |        |      |  |   |        |  
|Cash paid during the period for:                       |  |                    |        |      |  |   |        |  
|- interest                                             |  | $                  | 1,024  |      |  | $ | 1,416  |  
|- income taxes                                         |  |                    | 361    |      |  |   | 73     |  
|Cash received during the period for:                   |  |                    |        |      |  |   |        |  
|- interest                                             |  |                    | 73     |      |  |   | 13     |  
|- income taxes                                         |  |                    | 60     |      |  |   | 106    |  
|Non-cash activities:                                   |  |                    |        |      |  |   |        |  
|- container equipment acquired under capital lease     |  |                    |       |      |  |   | 986    |  

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

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The Cronos Group




Consolidated Unaudited Statement of Shareholders Equity

(US dollar amounts in thousands, except share amounts)

Three months ended March 31, 2003

|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        | 
|------------------------------------ |  | ------ | ------ | ------- |  | ----------- | ------ | -------- |  | ---------- | --- | ------------- |  | - | ----- | ----- |  | - | ----- |  |  | - | ------ | 
|                                     |  |        |        |         |  | Additional  |        | Common   |  | Restricted |     |               |  |   |       | Total
|                                     |  | Common |        | paid-in |  | shares held |        | retained |  | Retained   |     | shareholders
|                                     |  | shares |        | capital |  | in treasury |        | earnings |  | earnings   |     | equity       
|                                     |  |        |        |         |  |             |        |          |  |            |     |              
|Balance,
December 31, 2002           |  | $      | 14,744 |         |  | $           | 47,125 |          |  | $          | (37 | )             |  | $ | 1,832 |       |  | $ | 542   |  |  | $ | 64,206 | 
|Amortization of
employee share
grant |  |        |       |         |  |             | 3      |          |  |            |    |               |  |   |      |       |  |   |      |  |  |   | 3      | 
|Net income                           |  |        |       |         |  |             |       |          |  |            |    |               |  |   |      |       |  |   | 469   |  |  |   | 469    | 
|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        | 
|Balance,
March 31, 2003              |  | $      | 14,744 |         |  | $           | 47,128 |          |  | $          | (37 | )             |  | $ | 1,832 |       |  | $ | 1,011 |  |  | $ | 64,678 | 
|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        | 

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

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The Cronos Group




Notes to the Condensed Unaudited Consolidated Financial Statements

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



|1. |  | The condensed unaudited 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. |  | Stock-Based Compensation (US dollar amounts in thousands, except share
and per share amounts)                                                                                                                  

The Group has adopted disclosure requirements under SFAS No. 123 (SFAS
123) Accounting for Stock-Based Compensation, but continues to account for
stock-based compensation under Accounting Practices Board Opinion (APB) No.
25, Accounting for Stock Issued to Employees under which no compensation
expense has been recognized. In accordance with SFAS 123, the Company
discloses the fair value of its stock options, which is calculated based on the
Black Scholes model.

In December 2002, the Financial Accounting Standards Board issued SFAS No.
148 (SFAS 148), Accounting for Stock-Based Compensation  Transition and
Disclosure. SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
compensation. In addition, SFAS 148 amended the disclosure requirements of
SFAS 123 to require prominent disclosures in both annual and interim financial
statements of the method of accounting for stock-based employee compensation
and the method used to report results. The Company has adopted the disclosure
requirements of SFAS 148.

If the stock options had been accounted for under SFAS 123, the impact on
the Groups net income and net income per share would have been as follows:

|                                                       |  |                    |      |      |  |   |      |  
|------------------------------------------------------ |  | ------------------ | ---- | ---- |  | - | ---- | -
|                                                       |  | Three Months Ended
|                                                       |  | March 31,         
|                                                       |  | 2003               |      | 2002
|Net income:                                            |  |                    |      |      |  |   |      |  
|- as reported                                          |  | $                  | 469  |      |  | $ | 188  |  
|- stock-based compensation expense, net of tax effects |  |                    | (71  | )    |  |   | (122 | )
|                                                       |  |                    |      |      |  |   |      |  
|- pro forma                                            |  | $                  | 398  |      |  | $ | 66   |  
|                                                       |  |                    |      |      |  |   |      |  
|Basic and diluted net income per share:                |  |                    |      |      |  |   |      |  
|- as reported                                          |  | $                  | 0.06 |      |  | $ | 0.03 |  
|                                                       |  |                    |      |      |  |   |      |  
|- pro forma                                            |  | $                  | 0.05 |      |  | $ | 0.01 |  
|                                                       |  |                    |      |      |  |   |      |  

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements

3.     Operating segment data

Condensed segment information is provided in the tables below:

|                                       |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|-------------------------------------- |  | --------- | ------ | --------- |  | ---------- | ------ | ----- |  | - | ------- |  |  | - | ------- | 
|                                       |  |           |        |           |  | Other      |        |       |  |   |         |  |  |  
|                                       |  | Container |        | Managed   |  |            |        |       |  |   |         | 
|                                       |  | Equity    |        | Container |  | Owned      |        |       |  |  
|                                       |  | Programs  |        | Owners    |  | Containers |        | Total
|Three months ended March 31, 2003      |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 8,058  |           |  | $          | 12,720 |       |  | $ | 7,975   |  |  | $ | 28,753  | 
|Operating profit before indirect items |  |           | 1,419  |           |  |            | 502    |       |  |   | 2,623   |  |  |   | 4,544   | 
|Operating profit (loss)                |  |           | 261    |           |  |            | (799   | )     |  |   | 1,810   |  |  |   | 1,272   | 
|Segment assets                         |  |           | 13,540 |           |  |            | 20,709 |       |  |   | 156,611 |  |  |   | 190,860 | 
|Three months ended March 31, 2002      |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 7,350  |           |  | $          | 12,696 |       |  | $ | 8,283   |  |  | $ | 28,329  | 
|Operating profit before indirect items |  |           | 1,379  |           |  |            | 174    |       |  |   | 2,113   |  |  |   | 3,666   | 
|Operating profit (loss)                |  |           | 321    |           |  |            | (1,026 | )     |  |   | 1,330   |  |  |   | 625     | 
|Segment assets at end of period        |  |           | 11,507 |           |  |            | 22,191 |       |  |   | 169,224 |  |  |   | 202,922 | 

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

|                                             |  |                    |       |      |  |   |      |  
|-------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ---- | -
|                                             |  | Three Months Ended
|                                             |  | March 31,         
|                                             |  | 2003               |       | 2002
|Operating profit                             |  | $                  | 1,272 |      |  | $ | 625  |  
|Selling, general and administrative expenses |  |                    | (585  | )    |  |   | (350 | )
|Amortization of intangibles                  |  |                    | (47   | )    |  |   | (47  | )
|                                             |  |                    |       |      |  |   |      |  
|Income before income taxes                   |  | $                  | 640   |      |  | $ | 228  |  
|                                             |  |                    |       |      |  |   |      |  

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|4. |  | Earnings per common share (US dollar amounts in thousands, except share and
per share amounts)
|-- |  | ----------------------------------------------------------------------------------------------
|  
|   |  | The components of basic and diluted net income per share were as follows:                     

|                                             |  |                    |           |      |  |   |           | 
|-------------------------------------------- |  | ------------------ | --------- | ---- |  | - | --------- | 
|                                             |  | Three Months Ended
|                                             |  | March 31,         
|                                             |  | 2003               |           | 2002
|Net income available for common shareholders |  | $                  | 469       |      |  | $ | 188       | 
|                                             |  |                    |           |      |  |   |           | 
|Average outstanding shares of common stock   |  |                    | 7,360,080 |      |  |   | 7,364,580 | 
|Dilutive effect of:                          |  |                    |           |      |  |   |           | 
|- 1998 Stock Option Plan                     |  |                    |          |      |  |   | 45        | 
|- Non-Employee Directors Equity Plan         |  |                    | 109,869   |      |  |   | 45,257    | 
|                                             |  |                    |           |      |  |   |           | 
|Common stock and common stock equivalents    |  |                    | 7,469,949 |      |  |   | 7,409,882 | 
|                                             |  |                    |           |      |  |   |           | 
|Basic and diluted net income per share       |  | $                  | 0.06      |      |  | $ | 0.03      | 
|                                             |  |                    |           |      |  |   |           | 



|5. |  | Amounts receivable from container owners
|-- |  | ----------------------------------------

Amounts receivable from container owners include amounts due from related
parties of $3.3 million and $3.4 million at March 31, 2003 and December 31,
2002, respectively.



|6. |  | 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 March
31, 2003 and December 31, 2002, respectively.

Under the second form the Group has a 50% equity investment in a joint
venture container purchase entity (the Joint Venture Program). The Joint
Venture Program operates as 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 $3.8 million and $3.6
million at March 31, 2003 and December 31, 2002.



|7. |  | Container equipment
|-- |  | -------------------

Container equipment is net of accumulated depreciation of $91.8 million
and $91.7 million at March 31, 2003 and December 31, 2002, respectively.



|8. |  | Amounts payable to container owners
|-- |  | -----------------------------------

Amounts payable to container owners include amounts payable to related
parties of $8.4 million and $8.2 million at March 31, 2003 and December 31,
2002, respectively.



|9. |  | Debt and capital lease obligations
|-- |  | ----------------------------------

Debt
and capital lease obligations are secured by container equipment and include amounts due within twelve
months of $14.8 million and $13.1 million at March 31, 2003 and December 31,
2002, respectively. Interest rates under these facilities range from
2.9% to 8.6% and they extend to various dates through 2012. At
March 31, 2003, the Group had provided guarantees for the
payment of the $101.4 million of outstanding debt and capital
lease obligations, plus related interest.

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements



|10. |  | Commitments and contingencies (to be read in conjunction with Note 13 to the
Companys 2002 Consolidated Financial Statements on Form 10-K)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|   
|i.  |  | Commitments                                                                                                                                
|   
|    |  | At March 31, 2003, the Group had outstanding orders to purchase $10
million of container equipment.                                        
|   
|ii. |  | Guarantee to US Limited Partnership                                                                                                        

During 2000, the Group provided an unsecured 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 March 31, 2003, the balance
outstanding under the Note was $2.7 million.



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

During 1996 and 1997, the Group sold a total of $26.3 million of
equipment, which was under a direct financing lease with a major shipping line,
to a third-party. 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 outstanding debt. The Group can
collateralize up to 50% of the guarantee with a first security interest in
additional equipment. At March 31, 2003, the balance outstanding under the
loan was $3.5 million. In addition, under the terms of a rent support
agreement for which Cronos earns a fee of $0.1 million per annum, the Group is
required to deposit an amount equal to the aggregate of all rental charges
scheduled to be paid under the direct financing 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 $3.5 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. The
transaction was accounted for as a sale. 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 $0.1 million to a
retention account held as security by the institution. As compensation for
this service, the Group earns an agency fee. 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 provided an
unsecured guarantee that it will continue to make payments to the financial
institution. The guarantee and agreement with the financial institution will
expire in 2005.



|v. |  | Guarantees under fixed non-cancellable operating leases
|-- |  | -------------------------------------------------------

Cronos, as lessee, has entered into secured fixed operating lease
contracts for container equipment under which it has guaranteed the payment of
the future minimum lease obligations. As of March 31, 2003, the future minimum
annual lease payments under these non-cancellable operating leases were:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2004                |  | $ | 6,588  | 
|2005                |  |   | 8,427  | 
|2006                |  |   | 9,731  | 
|2007                |  |   | 2,563  | 
|2008                |  |   | 2,563  | 
|2009 and thereafter |  |   | 14,436 | 
|                    |  |   |        | 
|Total               |  | $ | 44,308 | 
|                    |  |   |        | 



|vi. |  | Agreements with Other Managed Container Owners  early termination
options
|--- |  | --------------------------------------------------------------------------

Approximately 49% (based on original equipment cost) of the agreements
(the Agreements) with Other Managed Container Owners contain early
termination options, whereby the container owner may terminate

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements

the Agreement if certain performance thresholds are not achieved. At
March 31, 2003, approximately 36% (based on original equipment cost) of total
Agreements were eligible for early termination. Cronos believes that early
termination of these Agreements by the Other Managed Container Owners is
unlikely.



|vii. |  | 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 Agreement. 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 total 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 total 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.



|viii. |  | 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 March 31,
2003, the balance of this accrual was $3 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. No date has been set for a final hearing on CWCs claims against the
Company.

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 has served the summons on Klamath and is currently in the process
of serving the summons on the Palatins. Once served, the cross-defendants will
have the opportunity to file responsive pleadings and evidence. Klamath,
through its Austrian counsel, has indicated that it will challenge the
jurisdiction of the Luxembourg court over it.

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

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements

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. The trial of CWCs claim, initially set for January 27,
2003, was postponed. The new trial date has yet to be scheduled.

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 Disposals
Claim). 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 $0.1 million, and request an
accounting, interest, and costs.

CNV filed its defense to the Disposals Claim on December 13, 2002, denying
the substantive allegations of the claim and that the claimants are entitled to
the relief claimed or to any other relief.

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 $3.5 million.

ix.      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 March 31, 2003, the Group had $1.3 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 judgements 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. Contrin
has recently retained separate UK insolvency counsel, and has initiated
proceedings to place TOEMT (Isle of Man) in liquidation. Contrin has claimed
an entitlement to all of the distributions that the Group has set aside in the
separate bank account on the TOEMT containers, and its insolvency counsel,
which also represents the liquidator of the UK TOEMT and the proposed
liquidator of TOEMT (Isle of Man) has requested an accounting and extensive
information on the Groups management of the containers for TOEMT. Until
clarification is secured by the court(s) overseeing the liquidation(s) of UK
TOEMT and TOEMT (Isle of Man) and / or through agreement with the liquidators
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.



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

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. FIN 45 requires (i) that for financial statements issued after the
issuance of FIN 45, certain disclosures be made by the guarantor in its
financial statements and (ii) that for guarantees issued after December 31,
2002 a guarantor recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the guarantee.
Accounting for guarantees issued prior to the initial application of FIN 45
shall not be revised or restated to reflect the recognition or measurement
provisions of FIN 45.

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The Cronos Group

Notes to the Condensed Unaudited Consolidated Financial Statements

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities. FIN 46 is applicable immediately to any variable
interest entity created after January 31, 2003, and must be
applied in the first fiscal year or interim period after
June 15, 2003, for an interest in a variable interest entity
that was acquired before February 1, 2003. The Group has not yet completed the process of identifying whether
it has variable interests in any variable interest entities. The Group is
evaluating the impact that will result from adopting FIN 46 and is therefore
unable to disclose the impact that adopting FIN 46 will have on its financial
position and results of operation when such statement is adopted.

In April 2003, the Financial Accounting Standards Board issued SFAS No.
149 (SFAS 149), Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. The Statement amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for other hedging activities under Statement
133. SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The
Group is evaluating SFAS 149 but does not believe it will have an impact on its
financial statements.

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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 March 31 for each of the periods indicated:

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 2003 |     | 2002
|Container Equity Programs      |  |      | 31  | %    |  |  | 30  | %
|Other Managed Container Owners |  |      | 44  | %    |  |  | 44  | %
|Owned Containers               |  |      | 25  | %    |  |  | 26  | %
|                               |  |      |     |      |  |  |     |  
|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 management agreements with the Managed Container Owners meet the
definition of leases in SFAS No. 13 (SFAS 13) Accounting for Leases, they
are accounted for in the Groups financial statements as leases under which the
container owners are lessors and the Group is lessee. In the three months
ended March 31, 2003, 84% of payments to Managed Container Owners represented
agreements which generally provided that the amounts payable to container
owners were based upon the rentals to ocean carriers after deducting direct
operating expenses and a management fee. The remaining 16% of payments to
Managed Container Owners represented agreements under which there were fixed
payment terms. Minimum lease payments on the agreements with fixed payment
terms are presented in Note 11 (c) to the Groups 2002 Consolidated Financial
Statements.

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.

Cronos operates a diversified fleet of containers, including refrigerated
containers, tanks, Cellular Palletwide Containers (CPCs) and rolltrailers
(Specialized Containers). Specialized Containers account for over 50% of the
Cronos owned fleet (based on original equipment cost).

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The Cronos Group

The following chart summarizes the composition of the Cronos fleet (in
thousands), based on twenty-foot equivalent units (TEU), by equipment type,
at March 31 for each of the periods indicated:

|                      |                            |  |       |     |      |  |       |     | 
|--------------------- | -------------------------- |  | ----- | --- | ---- |  | ----- | --- | 
|                      |                            |  | 2003  |     | 2002
|Dry Cargo             |                            |  | 367.9 |     |      |  | 364.4 |    
|Refrigerated          |                            |  | 13.2  |     |      |  | 14.1  |    
|Tank                  |                            |  | 2.5   |     |      |  | 2.3   |    
|Dry Freight Specials: |                            |  |       |     |      |  |       |    
|                      | CPCs                       |  |       | 9.2 |      |  |       | 5.8 | 
|                      | Rolltrailer                |  |       | 2.6 |      |  |       | 2.7 | 
|                      | Other Dry Freight Specials |  |       | 4.2 |      |  |       | 3.5 | 
|                      |                            |  |       |     |      |  |       |    
|Total Fleet           |                            |  | 399.6 |     |      |  | 392.8 |    
|                      |                            |  |       |     |      |  |       |    

Off-hire container inventories have declined by 44% since January 2002.
This is due to an improvement in market conditions and to the implementation of
several Cronos marketing initiatives. Utilization increased by 12% to 85% at
March 2003, from 73% at the beginning of 2002. The Company will seek to
exploit market demand by moving off-hire containers from low demand markets
into markets of higher demand as and when conditions allow.

During the fourth quarter of 2002 and the first quarter of 2003, the
payment terms for a number of Agreements with a container owner in the Other
Managed Container Owner segment changed from a fixed payment basis to one under
which the Group will earn a management fee based upon the rentals to ocean
carriers after deducting direct operating expenses.

During the first quarter of 2003, the Group added $14 million of new
equipment to its container fleet. Of this amount, $8.5 million was invested in
dry cargo containers, primarily for term and direct finance leases. CPCs
represented $2.2 million of new container expenditure, with refrigerated
containers, tanks and dry freight specials accounting for the remaining
balance.




Three Months Ended March 31, 2003 Compared to Three Months Ended March 31,
2002

Gross lease revenueof $28.8 million for the three months ended March 31,
2003, was $0.4 million, or 2%, higher than in the corresponding period of 2002.
Revenue for dry cargo containers increased by $0.4 million reflecting the
increases in both the quantity of on hire containers and in fleet size. CPC
gross lease revenue increased by $0.2 million due primarily to a 59% increase
in the size of the CPC fleet. However, such increases were partly offset by a
reduction in revenue for refrigerated containers due to the disposal of older
equipment.

Equipment trading revenueof $0.7 million in the first quarter of 2003
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 organize delivery to designated locations. Equipment
trading expenses of $0.6 million represented equipment and related costs for
this activity. The Group earned $0.1 million from equipment trading activity
during the first three months of 2003.

Commissions, fees and other incomefor the quarter ended March 31, 2003,
of $1.1 million were $0.2 million, or 18%, lower than in the same quarter of
2002. Increases of $0.1 million in each of direct finance lease income and
unrealized exchange gains recognized on Euro direct finance lease receivables
were offset by declines of $0.2 million in equipment design and consultancy fee
income, $0.1 million in property fee income and $0.1 million in acquisition fee
income. 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 $5.7 million for the three months ended March
31, 2003, were $2.1 million, or 27%, lower than in the same period of 2002, due
primarily to the improved utilization of the dry

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The Cronos Group

container fleet. A total reduction of $1.9 million was achieved in
storage and handling costs compared to the corresponding period in 2002.
Repositioning expenses were $0.7 million lower than in 2002. However, the
Group recorded a $0.5 million increase in the provision for doubtful accounts
reflecting a deterioration in the credit position of a Far East based shipping
line.

Payments to Managed Container Ownersof $15 million during the three
months ended March 31, 2003, were $2.2 million, or 17%, higher when compared to
the corresponding period in 2002. This increase is attributable to a total
increase in net lease revenue (gross lease revenue net of direct operating
expenses) for the managed segments and includes the effect of the Joint Venture
Program, which commenced in September 2002. This was partly offset by a $0.3
million reduction in payments to a container owner resulting from the change of
a number of agreements from a fixed payment basis to a variable management fee
basis (see discussion above).

Depreciation and amortizationof $3.7 million for the three months ended
March 31, 2003, was $0.1 million lower than in the same period of 2002. The
reduction was primarily due to the sale of containers from the Group to the
Joint Venture Program in September 2002.

Selling, general and administrative expensesof $3.8 million in the first
quarter of 2003 were $0.5 million, or 14%, higher than in the corresponding
period of 2002. This was due to increases of $0.3 million in manpower costs
and $0.1 million in each of audit and other professional costs and insurance.
The increase in the level of total expenses compared to the corresponding
period in 2002 is partially due to the decline in the value of the US dollar
against Sterling, the Euro and other major currencies. It is estimated that
$0.3 million of the total increase in selling, general and administrative
expenses may be attributable to exchange rate movements.

Interest expenseof $1.2 million for the three months ended March 31,
2003, declined by $0.4 million, or 24%, when compared to the corresponding
period in 2002. The decline in interest expense is attributable to the
reduction in interest rates during 2002, as well as lower debt balances
resulting from the partial repayment of the Groups revolving credit facility
in September 2002 following the sale of equipment to the Joint Venture Program.

Income taxesfor the first three months of 2003 were $0.2 million, or 27%
of pre-tax income, compared to less than $0.1 million, or 18% of pre-tax income
in the corresponding period of 2002. The increase in income taxes primarily
reflects the improvement in earnings. In addition, in the first quarter of
2002, the Group utilised prior year trading losses in a subsidiary to further
reduce taxation expense.




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
eleven years, bad debts have approximated 1% of lease revenues. The Group
monitors the ageing 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 March 31, 2003, the Group had $103.4 million of available container
borrowing facilities under which $101.4 million was outstanding. In addition,
the Group had $1.7 million of unutilized credit facilities, which are
available, if required, for operating cash flow purposes.

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The Cronos Group




Cash Flow Statements for the Three Months ended March 31, 2003 and 2002

Cash from Operating Activities:Net cash provided by operating activities
was $5.4 million and $4.6 million during the first three months of 2003 and
2002, respectively. The cash provided by operating activities was primarily
generated by earnings from operations in each respective year.

Cash from Investing Activities:Net cash used in investing activities was
$5.3 million in the first three months of 2003, reflecting the acquisition of
$3.2 million of container and other equipment, and $0.7 million of equipment
placed on direct finance leases. Additionally there was a $3.5 million
reduction in amounts due to container manufacturers. This was partly offset by
the sale of $1.4 million of container equipment and $0.6 million of direct
finance lease equipment. Net cash used in investing activities was $5.8
million in the first quarter of 2002, reflecting the acquisition of $5.5
million of container equipment and an investment of $0.7 million in direct
finance lease equipment. This was partly offset with proceeds of $0.5 million
from the sale of container equipment.

Cash from Financing Activities:Net cash provided by financing activities
was $0.2 million during the first three months of 2003. Proceeds from the
issuance of new term debt of $7 million were only partly offset by the
repayment of $6.6 million of debt and capital lease obligations. Additionally,
the Company paid a dividend of $0.1 million in the first quarter. Net cash
provided by financing activities was $2.5 million during the first quarter of
2002. Proceeds from the issuance of new term debt of $8 million was partly
offset by $5.5 million of debt and capital lease obligations repaid by the
Group.




Capital Resources

The Group purchases new containers for its own account and for resale to
Managed Container Owners and other parties. At March 31, 2003, the Group owed
container manufacturers $10.3 million for equipment. The Group will fund $2.9
million of this equipment utilizing new and existing container funding
facilities and the remaining $7.4 million will be sold to a Container Equity
Program.

In addition, the Group had outstanding orders to purchase container
equipment of $10 million at March 31, 2003. Of this amount, $3.4 million will
be financed by the Group using new and existing container funding facilities,
$6 million will be sold to a Container Equity Program and $0.6 million will be
sold to a third-party under an equipment trading transaction.

On December 10, 2002, the Board of Directors, declared an interim dividend
of 4 cents per common share. The Company paid 50% of this dividend on January
9, 2003, to shareholders of record as of December 23, 2002. The remaining 50%
was paid on April 17, 2003, to shareholders of record as of March 28, 2003.

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




Item 3  Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk:Outstanding borrowings are subject to interest rate
risk. Approximately 86% of total borrowings had floating interest rates at
March 31, 2003. 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 was
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 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.

16



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The Cronos Group




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.

17



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##### Table of Contents



The Cronos Group




PART II  OTHER INFORMATION




Item 1  Legal Proceedings

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 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. No date
has been set for a final hearing on CWCs claims against the Company.

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 has served the summons
on Klamath and is in the process of serving the summons on the Palatins. Once
served, the cross-defendants will have the opportunity to file responsive
pleadings and evidence. Klamath, through its Austrian counsel, has indicated
that it will challenge the jurisdiction of the Luxembourg court over it.

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 contested the jurisdiction of the High Court of
Justice over them, or, in the alternative, requested that the court exercise
its discretion not to exercise jurisdiction over them. In support of their
application, the Palatins filed an affidavit with the court asserting that the
Amersham estate is owned by Pontino S.A., a Panamanian company, in which they
disclaim any interest. The Group opposed the applications of the Palatins and
Klamath. On December 22, 2002, the court rendered its decision rejecting the
defendants motion for dismissal and on February 26, 2003, the court rejected
the defendants motion for leave to appeal the courts decision, awarded the
Company 90% of its costs in opposing the motions, and ordered the defendants to
pay $30,000 on account of these costs. The defendants have failed to comply
with the courts order, and their counsel have resigned. The Group has sought
and secured a debarring order, preventing the defendants from defending the
action until they comply with the courts cost award.

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 and that stay remains in
place.

Contrins $0.5 Million Claim. On August 2, 2001, CWC filed a separate
claim against CNV 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

18



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##### Table of Contents



The Cronos Group

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.
The trial of CWCs claim is scheduled for December 8, 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 opposed both applications, and both
were heard by the court at the same time as Klamaths and the Palatins
challenge to the jurisdiction of the UK court over them with respect to the
Groups $2.6 million claim against them, discussed above. The court, by its
decision of December 22, 2002, rejected the defendants jurisdictional
challenge to CNVs claim. The defendants in this action were also subject to
the courts award of costs rendered in the $2.6 million action, discussed
above. They have failed to comply with the order, and their counsel have
likewise resigned from representing them in this claim. On May 2, 2003, CNV
secured a default judgment against the Palatins in the amount of $0.5 million,
plus interest.

Contrins Disposals Claim. On September 18, 2002, three Austrian
affiliates of Contrin filed the Disposals 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 $0.1
million, and request an accounting, interest, and costs.

CNV filed its defense to the Disposals Claim on December 13, 2002, denying
the substantive allegations of the claim and that the claimants are entitled to
the relief claimed or to any other relief. The parties are currently engaged
in discovery.

Collection of Palatin Notes

On May 8, 2001, the Massachusetts Superior Court entered its judgement
against Mr. Palatin and Klamath, affirming the default judgement 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 judgement, and to transfer the
Klamath Shares on the books and records of the transfer agent to CEB. The
Groups transfer agent promptly cancelled 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 judgement.

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

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 judgement. CEB will seek to enforce the
claim against the Amersham estate discussed above. 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 opposed Mr. Palatins application, and on December
22, 2002, the court rejected the application at the same time that it rejected
Mr. Palatins and Klamaths jurisdictional challenges to the other claims
brought by the Group against the Palatins and Klamath in the UK, discussed
above. CEB has now filed its motion for summary judgement on its claim; the
motion is to be heard on May 23, 2003.

19



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The Cronos Group

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 were cancelled.




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             |  | 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                                                                                              
|              
|Not applicable

20



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##### 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) |  | May 14, 2003

21



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##### Table of Contents






CERTIFICATION

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: May 14, 2003

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

22



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##### Table of Contents



CERTIFICATION

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: May 14, 2003

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

23



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##### Table of Contents






Exhibit Index

|       |  |                                                                                                                     |  |      |    | 
|------ |  | ------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Number |  | Exhibit                                                                                                             |  | Page
|99     |  | Certification pursuant to 18 U.S.C. § 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. * |  |      | 24 | 



---

*     This certification, required by Section 906 of the Sarbanes-Oxley Act of
2002, other than as required by Section 906, is not deemed to be
filed with the Commission or subject to the rules and regulations promulgated by the
Commission under the Securities Exchange Act of 1934, as amended, or to the
liabilities of Section 18 of said Act.


24