CRNS Cronos Grp. S A (MM)

The Cronos Group (Nasdaq:CRNS) today reported net income of $2.5 million, or $0.31 per diluted share, for the quarter ended June 30, 2006, compared to $3.5 million, or $0.44 per diluted share, for the corresponding period in 2005. In addition, the Board of Directors declared a dividend of $0.07 per common share for the third quarter of 2006, payable October 13, 2006 to shareholders of record as of the close of business on September 22, 2006. Gross lease revenue for the second quarter was $35 million, an increase of 2% over the corresponding quarter of 2005, reflecting the growth of the Company's specialized container fleet and continued strong utilization rates. The utilization of the combined container fleet finished the second quarter at 93% as Cronos experienced high levels of demand for all container types. Direct operating expenses declined in line with lower container redeliveries and were $0.5 million, or 10%, lower than in the second quarter of 2005. Net income for the second quarter of 2006 was $1 million lower than in the same period of 2005 because of increased interest rates and exceptionally high gains recorded on container dispositions and consultancy projects in the prior year comparative period. The Company added $88 million of new container equipment to its fleet during the first six months of 2006, with specialized equipment (comprising refrigerated, tank, and dry freight special containers) representing 87% of the new acquisitions. The Company's Joint Venture Program continues to be the primary funding source for container acquisitions and, accordingly, earnings from this program have increased in line with the increase in its fleet size. The Company's equity in earnings of the Joint Venture Program increased to $2.6 million in the first half of 2006 from $1.5 million in the corresponding period of 2005. Gross lease revenue was $70.3 million in the first half of 2006, an increase of 3% over the same period in 2005. Net income for the six months ended June 30, 2006 was $5.1 million, or $0.62 per diluted share, compared to $7.1 million, or $0.90 per diluted share for the comparable period in the prior year. Net income for the first half of 2006 included $0.6 million of legal fees relating to the resolution of legal claims. As a result of the settlement of these legal claims, Cronos expects to see a significant reduction in legal expenses in future periods. Net income for the first six months of 2005 included $2.1 million, or $0.27 per diluted share, of non-operating income items that were recognized at the conclusion of legal actions and $1.4 million of litigation related legal expenses. Cronos is one of the world's leading lessors of intermodal containers, owning and managing a fleet of over 440,000 TEU (twenty-foot equivalent units). The diversified Cronos fleet of dry cargo, refrigerated and other specialized containers is leased to a customer base of over 450 ocean carriers and transport operators around the world. Cronos provides container-leasing services through an integrated network of offices using state-of-the-art information technology. This release discusses certain forward-looking matters that involve risks and uncertainties that could cause actual results to vary materially from estimates. Risks and uncertainties include, among other things, changes in international operations, exchange rate risks, changes in market conditions for the Company's container lease operations and the Company's ability to provide innovative and cost-effective solutions. For further discussion of the risk factors attendant to an investment in the Company's Common shares, see the Business section in Part I (particularly Item 1A, "Risk Factors") of the Company's Annual Report on Form 10-K for the year ended December 31, 2005, which was filed with the SEC on March 30, 2006. This press release and other information concerning Cronos can be viewed on Cronos' website at www.cronos.com -0- *T The Cronos Group Condensed Unaudited Consolidated Statements of Income (US dollar amounts in thousands, except per share amounts) Three Months Six Months Ended Ended June 30, June 30, 2006 2005 2006 2005 ------- ------- ------- ------- Gross lease revenue $35,038 $34,469 $70,302 $68,473 Equipment trading revenue 1,649 1,815 3,375 1,950 Commissions, fees and other income: - Related parties 129 218 332 405 - Unrelated parties 1,253 1,675 2,240 2,550 - Gain on settlement of litigation - - - 1,333 ------- ------- ------- ------- Total revenues 38,069 38,177 76,249 74,711 ------- ------- ------- ------- Direct operating expenses 4,208 4,688 9,315 9,240 Payments to Managed Container Programs: - Related parties 13,892 8,247 26,351 16,435 - Unrelated parties 7,402 9,035 15,201 18,104 Equipment trading expenses 1,389 1,624 2,961 1,751 Depreciation and amortization 2,951 4,578 5,901 9,170 Selling, general and administrative expenses 5,015 4,909 10,149 10,702 Interest expense 1,855 1,854 3,499 3,375 Recovery of amount payable to Managed Container Program - - - (703) ------- ------- ------- ------- Total expenses 36,712 34,935 73,377 68,074 ------- ------- ------- ------- Income before income taxes and equity in earnings of affiliate 1,357 3,242 2,872 6,637 Income taxes (204) (476) (431) (985) Equity in earnings of unconsolidated affiliate 1,340 711 2,611 1,454 ------- ------- ------- ------- Net income 2,493 3,477 5,052 7,106 ======== ======== ======== ======== Basic net income per common share $0.33 $0.47 $0.67 $0.97 ======== ======== ======== ======== Diluted net income per common share $0.31 $0.44 $0.62 $0.90 ======== ======== ======== ======== The Cronos Group Condensed Unaudited Consolidated Balance Sheets (US dollar amounts in thousands, except per share amounts) June 30, December 31, 2006 2005 ============ ============ Assets Cash and cash equivalents $16,785 $15,829 Restricted cash 250 4,200 Amounts due from lessees 28,468 28,540 Amounts receivable from Managed Container Programs 3,586 3,391 New container equipment for resale 27,529 38,142 Net investment in direct financing leases 11,922 12,678 Investments in unconsolidated affiliates 39,922 31,358 Container equipment, net 117,938 121,988 Other equipment, net 711 1,130 Goodwill 11,038 11,038 Other intangible assets, net 251 345 Other assets 3,666 3,093 ============ ============ Total assets $262,066 $271,732 ============ ============ Liabilities and shareholders' equity Amounts payable to Managed Container Programs 27,467 25,462 Amounts payable to container manufacturers 30,352 52,790 Direct operating expense payables and accruals 4,755 5,432 Other amounts payable and accrued expenses 5,392 11,873 Debt and capital lease obligations 99,584 87,780 Current and deferred income taxes 3,121 3,174 Deferred income and unamortized acquisition fees 7,706 7,684 ============ ============ Total liabilities 178,377 194,195 ============ ============ Shareholders' equity Common shares issued 15,302 15,040 Additional paid-in capital 43,843 43,807 Common shares held in treasury (297) (297) Accumulated other comprehensive income 1,682 880 Restricted retained earnings 1,832 1,832 Retained earnings 21,327 16,275 ============ ============ Total shareholders' equity 83,689 77,537 ============ ============ Total liabilities and shareholders' equity $262,066 $271,732 ============ ============ *T