TAL International Group, Inc. (TAL)

TAL 
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TAL International Group, Inc. (TAL)

Q2 2010 Earnings Conference Call

July 29, 2010 9:00 AM ET

Executives

Jeff Casucci – VP, Treasury and IR

Brian Sondey – President and CEO

John Burns – SVP and CFO

Analysts

Art Hatfield – Morgan Keegan

Gregory Lewis – Credit Suisse

Brian Hogan – Piper Jaffray

Presentation

Operator

Good morning and welcome to the TAL International Group’s second quarter earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Jeff Casucci, Vice President, Treasury and Investor Relations, please go ahead.

Jeff Casucci

Thank you. Good morning and thank you for joining us on today’s call. We are here to discuss TAL’s second quarter 2010 results, which were reported yesterday evening. Joining me on this morning’s call from TAL are Brian Sondey, President and Chief Executive Officer and John Burn, Senior Vice President and Chief Financial Officer.

Before I turn the call over to Brian and John, I would like to point out that this conference call may contain forward looking statements as that term is defined under the Private Securities Litigation Reform Act regarding expectations for future financial performance. It is possible that the company’s future financial performance may differ from expectations due to a variety of factors.

Any forward looking statements made on this call are based on certain assumptions and analysis made by the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate.

Any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.

Finally, the company’s views, estimates, plans and outlook as described within this call may change subsequent to this discussion. The company is under no obligation to modify or update any or all of the statements that is made herein despite any subsequent changes the company may make in its views, estimates, plans or outlook for the future. These statements involve risks and uncertainties, are only predictions and may differ materially from actual future events or results.

For a discussion of such risks and uncertainties, please see the risk factors listed in the company’s annual report filed with the SEC in March of this year.

With these formalities out of the way, I would now like to turn the call over to Brian Sondey. Brian?

Brian Sondey

Thanks Jeff. Welcome to TAL’s second quarter 2010 earnings conference call. We are very pleased with TAL’s operational and financial performance in the second quarter of 2010. Our market environment remained very strong during the quarter and we continue to capitalize on the strong environment to improve our operational performance and make substantial investments in our fleet.

Our utilization reached record levels in the second quarter. We are on track to achieve a record breaking level of investment and growth in 2010 and the improvement on our operating metrics together with the growth of our fleet lead to strong improvements in our financial performance and we generated pretax or cash earnings per share of $0.72 in the second quarter, up 37% sequentially in the first quarter of the year.

World trade continues to recover from the effects of the financial crisis. Containerized trade volumes are up sharply from 2009 levels and are generally reaching or exceeding pre-crisis volumes, especially in the Asian export markets that drive most of our leasing demand. At the same time global container capacity remains constrained due to a complete lack of buying in 2009, ongoing disposals, the impact of vessels flow steaming and lingering container factory production constraints. This combination of recovering trade volumes and restricted container capacity has resulted in a severe global shortage of containers and exceptional leasing demand.

The strong recovery in 2010 trade volumes and the exceptional leasing demand are helping us to achieve significant improvements in all of our key operating metrics. We achieved record on hire performance for our dry container product line in the second quarter and our core utilization increased 3.7% during the quarter to reach 97.1% as of June 30.

Our utilization has continued to climb in July reaching 97.8% as of July 28th. Our leasing rates are also improving as incentives provided in 2009 expired and as equipment goes on hire this year and reads well above our portfolio average due to the very high current cost for new containers.

Average dry container leasing rates increased 5% during the second quarter and we expect our average dry container rates to return to pre-crisis levels soon and significantly exceed pre-crisis levels by the end of 2010.

The increase in our utilization and average leasing rates together with the large investment we’re making in our fleet are leading to significant sequential growth in our revenue.

TAL’s leasing revenue in the second quarter increased 3.6% from the first quarter. The overall revenue growth was constrained by a $2 million reduction in ancillary fees due to a sharp decrease in the volume of containers being returned to us by our customers.

Our per diem leasing revenue, which typically represents 80% to 90% of our overall leasing revenue, increased 7.6% sequentially from the first quarter. As mentioned above, we are on track to achieve a record level of investment and growth in 2010.

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