TAL International Group, Inc. Reports Fourth Quarter and Full Year 2014 Results and Declares $0.72 Quarterly Dividend

PURCHASE, N.Y.--()--TAL International Group, Inc. (NYSE:TAL), one of the world’s largest lessors of intermodal freight containers and chassis, today reported results for the fourth quarter and full year ended December 31, 2014.

“We generated Adjusted pre-tax income of $195.5 million in 2014, representing $5.81 per share. TAL also grew leasing revenue over 4.2% from 2013, and continued to achieve a high level of returns. In 2014, we generated an Adjusted pre-tax return on tangible equity(1) of 19.9%.”

Highlights:

  • TAL reported Adjusted pre-tax income of $5.81 per fully diluted common share for the year ended December 31, 2014, a decrease of 9.4% from 2013. TAL reported leasing revenues of $594.0 million for the year ending December 31, 2014, an increase of 4.2% from 2013.
  • TAL reported Adjusted pre-tax income of $1.48 per fully diluted common share for the fourth quarter of 2014, a decrease of 2.6% from the fourth quarter of 2013. TAL reported leasing revenues of $154.0 million for the fourth quarter of 2014, an increase of 4.5% from the fourth quarter of 2013.
  • TAL continued to achieve outstanding operational performance. Utilization averaged 98.1% for the fourth quarter of 2014 and averaged 97.6% for the full year.
  • TAL announced a quarterly dividend of $0.72 per share payable on March 24, 2015 to shareholders of record as of March 3, 2015.
  • TAL completed the stock repurchase plan that it implemented on September 1, 2014 under its stock repurchase program. Since September 1, 2014, TAL repurchased 900,000 shares of its stock at an average price of $41.95. As of February 10, 2015, there were 88,157 shares authorized for purchase under TAL's stock repurchase program.
  • On February 11, 2015, TAL's Board of Directors authorized a new share repurchase program of up to 3 million of its outstanding shares. These shares augment the remaining 88,157 shares authorized for purchase under TAL's existing stock repurchase program. Repurchases will be made from time to time at TAL's discretion, based on ongoing assessments of the capital needs of the business, the market price of TAL's common stock and general market and other conditions. No time limit was set for the completion of the repurchase program.

Financial Results

The following table depicts TAL’s selected key financial information for the fourth quarter and full year ended December 31, 2014 and 2013 (dollars in millions, except per share data):

           
Three Months Ended
December 31,
Twelve Months Ended
December 31,

2014

 

2013

 

% Change

2014

 

2013

 

% Change

Adjusted pre-tax income(1) $49.5 $51.5 (3.9%) $195.5 $215.9 (9.4%)
Adjusted pre-tax income(1) per share $1.48 $1.52 (2.6%) $5.81 $6.41 (9.4%)
Leasing revenues $154.0 $147.4 4.5% $594.0 $569.9 4.2%
Adjusted EBITDA(1) $148.4 $142.9 3.8% $577.1 $572.2 0.9%
Adjusted net income(1) $32.4 $33.5 (3.3%) $128.0 $140.0 (8.6%)
Adjusted net income(1) per share $0.97 $0.99 (2.0%) $3.80 $4.15 (8.4%)
Net income $32.1 $33.1 (3.0%) $124.0 $143.2 (13.4%)
Net income per share $0.96   $0.98   (2.0%) $3.68   $4.25   (13.4%)
Note: All per share data is per fully diluted common share.
 

The Company focuses on adjusted pre-tax results since it considers gains and losses on interest rate swaps and the write-off of deferred financing costs to be unrelated to operating performance and since it does not expect to pay any significant income taxes for a number of years due to the availability of accelerated tax depreciation on its existing container fleet and anticipated future equipment purchases.

Operating Performance

“We are very pleased that 2014 was another solid year for TAL," commented Brian M. Sondey, President and CEO of TAL International. "We generated Adjusted pre-tax income of $195.5 million in 2014, representing $5.81 per share. TAL also grew leasing revenue over 4.2% from 2013, and continued to achieve a high level of returns. In 2014, we generated an Adjusted pre-tax return on tangible equity(1) of 19.9%.”

“Our solid profitability and excellent returns continued to be driven by very high container utilization. Our utilization averaged 97.6% in 2014, and finished the year at 98.1%. Our utilization currently stands at 98.0%. Demand for leased containers was strong in 2014. Trade volumes generally outperformed our customers’ expectations, and the market share shift from owned to leased containers continued. Our utilization was also supported by our high quality lease portfolio. As of December 31, 2014, 76.9% of our containers on-hire were under long-term or finance leases, with an average remaining duration of 41 months assuming no leases are renewed.”

“While we continued to achieve solid operating and financial performance, our Adjusted pre-tax income per share decreased 9.4% from 2013 to 2014. The decrease in our earnings in 2014 primarily reflected a decrease in our disposal gains. Our average used container selling prices in 2014 were down nearly 23% from 2013, reflecting the ongoing moderation of used container sale prices from the extreme peak levels reached in 2011. Our disposal gains also continue to be impacted by the shift in the mix of our disposals from original TAL containers to containers acquired from our customers through sale-leaseback transactions. There are relatively few original TAL containers currently reaching sale age due to our low level of procurement in the late 1990’s and early 2000’s, and we have supplemented our older fleet with sale-leaseback containers. These containers typically have been acquired for prices higher than the net book values of similarly-aged original TAL containers.”

“Our profitability in 2014 was also negatively impacted by very low market lease rates. New container prices have decreased significantly over the last few years, and long-term interest rates remain exceptionally low. Low-cost financing for leasing companies also remains widely available and continues to fuel aggressive competition for every deal. The low market lease rates limited the profitability of our new investments in 2014 and increased the rate pressure we faced as we renegotiated expiring leases and remarketed containers that had been returned to us. In 2014, our average lease rates for dry containers decreased 5.8% from 2013, excluding the impact of sale-leaseback transactions, and our average lease rates for refrigerated containers decreased 4.2%. We were able to offset some of this lease rate pressure by taking advantage of low interest rates to refinance existing borrowing facilities and lower the cost of our debt while at the same time extending the duration of our fixed interest rates. We lowered our average effective interest rate to 3.69% in 2014 from 4.01% in 2013, increased the average duration of our fixed interest rates to 68 months, and increased the portion of our debt with fixed interest rates to 90% as of year-end.”

“We passed on an unusually large number of lease opportunities in 2014 due to pricing and lease structuring concerns. But we also continued to actively invest in our fleet to ensure we remain our core customers’ supplier of choice and to take advantage of the reasonable lease transactions that came to us due to our extensive supply capability, strong reputation for reliability and deep customer relationships. We purchased over $638 million of containers for delivery in 2014.”

Outlook

Mr. Sondey continued, “As we begin 2015, we see a mix of positive and negative market factors, and we expect our operating performance to continue to reflect a combination of high utilization and decreasing average lease rates.”

“The supply and demand balance for containers remains favorable. Utilization for the leasing industry is high overall, and depot inventories for leasing companies are low in key Asian export locations. We also expect container leasing to continue to take share from ownership as many customers remain cautious about purchasing large volumes of new containers and continue to be interested in concluding sale-leaseback transactions for older containers in their fleets. Market forecasters also expect trade volume to be solid in 2015. Alphaliners, for example, is projecting container throughput to increase 5.4% in 2015.”

“On the other hand, we expect that we will continue to face very low market lease rates. Steel prices in China have decreased roughly 15% over the last few months, which will likely lead to further decreases in new container prices. Long-term interest rates remain exceptionally low, and we continue to see aggressive competition for every leasing transaction. Used container sale prices are also likely to drift lower if new container prices decrease further.”

“In 2015, we will also start to face the expiration of high rate leases that were originated from 2010 through 2012, and we expect the decrease in our average portfolio lease rates to accelerate. The bulk of expirations for leases covering our 2010-2012 containers stretch through 2019, and we will continue to face lease rate and profitability pressure through this period if market lease rates remain low. It will also be more difficult to offset the profitability impact of decreasing lease rates by lowering our average borrowing costs since our average effective interest rate is now approaching the current market level.”

“The first quarter is typically our weakest quarter of the year since it represents the slow season for our dry container product line. In addition, the first quarter has the fewest number of days, which reduces our per diem revenue, and we typically incur extra expenses in the first quarter from share grants. As a result of these factors, we expect our Adjusted pre-tax income to decrease from the fourth quarter of 2014 to the first quarter of 2015. After the first quarter, we expect improving seasonality and ongoing fleet growth will offset much of the pressure caused by decreasing average lease rates. For the full year, we expect our Adjusted pre-tax income in 2015 will decrease from our 2014 level, but we also expect our profitability will remain strong and expect to continue to generate attractive returns that are at the upper end of our industry.”

Dividend

TAL’s Board of Directors has approved and declared a $0.72 per share quarterly cash dividend on its issued and outstanding common stock, payable on March 24, 2015 to shareholders of record at the close of business on March 3, 2015. Based on the information available today, we believe this distribution will qualify as a return of capital rather than a taxable dividend for U.S. tax purposes. Investors should consult with a tax adviser to determine the proper tax treatment of this distribution.

Stock Buyback Program

On February 11, 2015, TAL's Board of Directors authorized a new share repurchase program of up to 3 million of its outstanding shares. These shares augment the remaining 88,157 shares authorized for purchase under TAL's existing stock repurchase program. Repurchases will be made in the future at TAL's discretion, based on ongoing assessments of the capital needs of the business, the market price of TAL's common stock and general market and other conditions. No time limit was set for the completion of the repurchase program.

Mr. Sondey concluded, “Investing in our container fleet to support our customers and build our franchise remains our top cash flow priority, and we continue to view our dividend as the primary means by which we share our strong cash flow with our shareholders. However, our fleet growth was constrained in 2014 due to the difficult investment environment, and we viewed share repurchases as an attractive use of excess cash flow. We repurchased 900,000 shares since September 1, 2014, and we will consider repurchasing additional shares in the future if, among other things, investment returns and our fleet growth remained constrained.”

Investors’ Webcast

TAL will hold a Webcast at 9 a.m. (New York time) on Thursday, February 12, 2015 to discuss its fourth quarter and full year results. An archive of the Webcast will be available one hour after the live call through Friday, March 27, 2015. To access the live Webcast or archive, please visit the Company’s website at http://www.talinternational.com.

About TAL International Group, Inc.

TAL is one of the world's largest lessors of intermodal freight containers and chassis with 17 offices in 11 countries and approximately 230 third-party container depot facilities in 40 countries. The Company's global operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis. TAL's fleet consists of approximately 1,372,000 containers and related equipment representing approximately 2,250,000 twenty-foot equivalent units (TEUs). This places TAL among the world's largest independent lessors of intermodal containers and chassis as measured by fleet size.

Important Cautionary Information Regarding Forward-Looking Statements

Statements in this press release regarding TAL International Group, Inc.'s business that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that 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, see "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2014.

The Company’s views, estimates, plans and outlook as described within this document may change subsequent to the release of this statement. The Company is under no obligation to modify or update any or all of the statements it has made herein despite any subsequent changes the Company may make in its views, estimates, plans or outlook for the future.

(1) Adjusted pre-tax income, Adjusted EBITDA, Adjusted net income, and Adjusted pre-tax return on tangible equity are non-GAAP measurements we believe are useful in evaluating our operating performance. The Company’s definition and calculation of Adjusted pre-tax income, Adjusted EBITDA, Adjusted net income, and Adjusted pre-tax return on tangible equity are outlined in the attached schedules.

Please see Financial Tables below for a detailed reconciliation of these financial measurements.
-Financial Tables Follow-

       
TAL INTERNATIONAL GROUP, INC.

Consolidated Balance Sheets

(Dollars in thousands, except share data)
 
December 31,
2014
  December 31,
2013
ASSETS:
Leasing equipment, net of accumulated depreciation and allowances of $1,055,864 and $910,713 $ 3,674,031 $ 3,414,904
Net investment in finance leases, net of allowances of $1,056 and $1,057 219,872 257,176
Equipment held for sale 59,861     58,042  
Revenue earning assets 3,953,764 3,730,122
Unrestricted cash and cash equivalents 79,132 68,875
Restricted cash 35,649 29,126
Accounts receivable, net of allowances of $978 and $948 85,681 74,174
Goodwill 74,523 74,523
Deferred financing costs 32,937 29,087
Other assets 11,400 11,898
Fair value of derivative instruments 1,898     27,491  
Total assets $ 4,274,984     $ 4,045,296  
LIABILITIES AND STOCKHOLDERS' EQUITY:
Equipment purchases payable $ 88,336 $ 112,268
Fair value of derivative instruments 10,394 1,900
Accounts payable and other accrued expenses 57,877 63,022
Net deferred income tax liability 411,007 358,255
Debt 3,040,842     2,817,933  
Total liabilities 3,608,456 3,353,378
Stockholders' equity:
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued
Common stock, $0.001 par value, 100,000,000 shares authorized, 37,006,283 and 36,858,778 shares issued respectively 37 37
Treasury stock, at cost, 3,829,928 and 3,011,843 shares (71,917

)

(37,535 )
Additional paid-in capital 504,891 498,854
Accumulated earnings 246,766 220,492
Accumulated other comprehensive (loss) income (13,249 )   10,070  
Total stockholders' equity 666,528     691,918  
Total liabilities and stockholders' equity $ 4,274,984     $ 4,045,296  
 
       
TAL INTERNATIONAL GROUP, INC.
Consolidated Statements of Income
(Dollars and shares in thousands, except earnings per share)
 
Three Months Ended
December 31,
  Twelve Months Ended
December 31,
2014   2013   2014   2013
Leasing revenues:    
Operating leases $ 149,346 $ 142,288 $ 573,778 $ 552,640
Finance leases 4,237 4,610 18,355 14,728
Other revenues 409     541     1,873     2,485  
Total leasing revenues 153,992     147,439     594,006     569,853  
 
Equipment trading revenues 11,410 8,953 56,436 73,004
Equipment trading expenses (9,796 )   (7,644 )   (49,246 )   (62,726 )
Trading margin 1,614     1,309     7,190     10,278  
 
Net gain on sale of leasing equipment 560 4,171 6,987 26,751
 
Operating expenses:
Depreciation and amortization 59,515 53,603 224,753 205,073
Direct operating expenses 7,840 8,108 33,076 27,142
Administrative expenses 11,122 11,247 45,399 44,197
Provision for doubtful accounts 154     1,068     212     2,827  
Total operating expenses 78,631     74,026     303,440     279,239  
Operating income 77,535 78,893 304,743 327,643
Other expenses:
Interest and debt expense 28,063 27,434 109,265 111,725
Write-off of deferred financing costs 120 1,422 5,192 4,000
Net loss (gain) on interest rate swaps 370     (822

)

  780     (8,947 )
Total other expenses 28,553     28,034     115,237     106,778  
Income before income taxes 48,982 50,859 189,506 220,865
Income tax expense 16,927     17,750     65,461     77,699  
Net income $ 32,055     $ 33,109     $ 124,045     $ 143,166  
Net income per common share—Basic $ 0.97     $ 0.99     $ 3.70     $ 4.28  
Net income per common share—Diluted $ 0.96     $ 0.98     $ 3.68     $ 4.25  
Cash dividends paid per common share $ 0.72 $ 0.70 $ 2.88 $ 2.68
Weighted average number of common shares outstanding—Basic 33,110 33,491 33,482 33,483
Dilutive stock options and restricted stock 228     265     182     211  
Weighted average number of common shares outstanding—Diluted

33,338

    33,756     33,664     33,694  
 
       
TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

 
Year Ended December 31,
2014   2013

 

2012

Cash flows from operating activities:
Net income $ 124,045 $ 143,166 $ 130,132
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 224,753 205,073 193,466
Amortization of deferred financing costs 7,729 7,260 5,827
Amortization of net loss on terminated derivative instruments designated as cash flow hedges 2,479 3,020 3,290

Net (gain) on sale of leasing equipment

(6,987 ) (26,751 ) (44,509 )
Net loss (gain) on interest rate swaps 780 (8,947 ) 2,469
Write-off of deferred financing costs 5,192 4,000
Deferred income taxes 65,461 77,699 70,428
Stock compensation charge 5,984 5,216 3,706
Changes in operating assets and liabilities:
Net equipment (purchased) sold for resale activity (6,671 ) (11,186 ) 7,832
Net realized loss on interest rate swaps terminated prior to their contractual maturities (4,953 ) (24,235 ) (49,124 )
Accounts receivable (11,507 ) (2,811 ) (14,872 )
Net (deferred revenue) (4,462 ) (1,572 ) (9,048 )
Accounts payable and other accrued expenses (720 ) (3,982 ) 3,145
Income taxes payable 67 (220 ) (119 )
Other assets (2,383 ) 958   7,587  
Net cash provided by operating activities 398,807   366,688  

 

310,210  
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases (670,529 ) (660,492 ) (831,826 )
Proceeds from sale of equipment, net of selling costs 165,990 140,724 133,367
Cash collections on finance lease receivables, net of income earned 47,607 39,470 35,326
Other (253 ) 84   219  
Net cash (used in) investing activities (457,185 ) (480,214 ) (662,914 )
Cash flows from financing activities:
Purchases of treasury stock (34,382 )
Stock options exercised, related activity, and excess tax benefits from stock compensation (234 ) (235 ) (2,930 )
Financing fees paid under debt facilities (16,702 ) (13,897 ) (8,249 )
Borrowings under debt facilities and proceeds under capital lease obligations 1,828,545 1,206,735 672,404
Payments under debt facilities and capital lease obligations (1,605,666 ) (993,011 ) (304,094 )
(Increase) decrease in restricted cash (6,523 ) 6,711 (1,371 )
Common stock dividends paid (96,403 ) (89,745 ) (78,090 )
Net cash provided by financing activities 68,635   116,558   277,670  
Net increase in unrestricted cash and cash equivalents $ 10,257 $ 3,032

 

$

(75,034 )
Unrestricted cash and cash equivalents, beginning of period 68,875   65,843   140,877  
Unrestricted cash and cash equivalents, end of period $ 79,132   $ 68,875  

 

$ 65,843  
Supplemental disclosures:
Interest paid $ 99,895 $ 101,535 $ 104,834
Income taxes (refunded) paid $ (67 ) $ 225 $ (147 )
Supplemental non-cash investing activities:
Accrued and unpaid purchases of equipment $ 88,336 $ 112,268 $ 111,176
 

The following table sets forth TAL’s equipment fleet utilization(2) as of and for the quarter and year ended December 31, 2014:

Average and Ending Utilization for the
Quarter Ended December 31, 2014

Average Utilization   Ending Utilization
98.1 %   98.1 %
(2)   Utilization is computed by dividing TAL’s total units on lease (in CEUs) by the total units in TAL’s fleet (in CEUs) excluding new units not yet leased and off-hire units designated for sale.
 

The following table provides the composition of TAL’s equipment fleet as of December 31, 2014 (in units, TEUs and cost equivalent units, or “CEUs”):

     
December 31, 2014
Equipment Fleet in Units   Equipment Fleet in TEUs
Owned   Managed   Total   Owned   Managed   Total
Dry 1,174,154   15,553   1,189,707   1,901,299   27,183   1,928,482
Refrigerated 64,977 33 65,010 123,288 54 123,342
Special 55,388 792 56,180 100,680 1,385 102,065
Tank 9,282 9,282 9,282 9,282
Chassis 19,116         19,116     33,877    

    33,877  
Equipment leasing fleet 1,322,917 16,378 1,339,295 2,168,426 28,622 2,197,048
Equipment trading fleet 32,448         32,448     52,571         52,571  
Total 1,355,365     16,378     1,371,743     2,220,997     28,622     2,249,619  
Percentage 98.8

%

  1.2 %   100.0 %   98.7

%

  1.3 %   100.0 %
 
December 31, 2014
Equipment Fleet in CEUs
Owned Managed Total
Operating leases 2,451,007 24,511 2,475,518
Finance leases 196,712 825 197,537
Equipment trading fleet 105,229     0     105,229  
Total 2,752,948     25,336     2,778,284  
Percentage 99.1 %   0.9 %   100.0 %
 

Non-GAAP Financial Measures

We use the terms "EBITDA", “Adjusted EBITDA”, "Adjusted pre-tax income", "Adjusted net income", and "Adjusted pre-tax return on tangible equity" throughout this press release.

EBITDA is defined as net income before interest and debt expense, income tax expense, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding gains and losses on interest rate swaps, plus principal payments on finance leases.

Adjusted pre-tax income is defined as income before income taxes as further adjusted for certain items which are described in more detail below, which management believes are not representative of our operating performance. Adjusted pre-tax income excludes gains and losses on interest rate swaps and the write-off of deferred financing costs. Adjusted net income is defined as net income further adjusted for the items discussed above, net of income tax.

Adjusted pre-tax return on tangible equity is defined as the current quarter's Annualized adjusted pre-tax income divided by the average adjusted tangible equity. Adjusted tangible equity is defined as total stockholders' equity plus net deferred income tax liability and the net fair value of derivative instruments less goodwill.

EBITDA, Adjusted EBITDA, Adjusted pre-tax income, Adjusted net income, and Adjusted pre-tax return on tangible equity are not presentations made in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Adjusted pre-tax income, Adjusted net income, and Adjusted pre-tax return on tangible equity should not be considered as alternatives to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income, or net cash from operating activities.

We believe that EBITDA, Adjusted EBITDA, Adjusted pre-tax income, Adjusted net income, and Adjusted pre-tax return on tangible equity are useful to an investor in evaluating our operating performance because:

-- these measures are widely used by securities analysts and investors to measure a company's operating performance without regard to items such as interest and debt expense, income tax expense, depreciation and amortization, and gains and losses on interest rate swaps, which can vary substantially from company to company depending upon accounting methods and the book value of assets, capital structure and the method by which assets were acquired;

-- these measures help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure, our asset base and certain non-routine events which we do not expect to occur in the future; and

-- these measures are used by our management for various purposes, including as measures of operating performance to assist in comparing performance from period to period on a consistent basis, in presentations to our board of directors concerning our financial performance and as a basis for strategic planning and forecasting.

We have provided reconciliations of net income, the most directly comparable U.S. GAAP measure, to EBITDA and Adjusted EBITDA in the tables below for the three and twelve months ended December 31, 2014 and 2013. We have also provided reconciliations of income before income taxes and net income, the most directly comparable U.S. GAAP measures, to Adjusted pre-tax income and Adjusted net income in the tables below for the three and twelve months ended December 31, 2014 and 2013.

We have also provided a reconciliation of Adjusted pre-tax return on tangible equity in the tables below for the current quarter.

 
TAL INTERNATIONAL GROUP, INC.

Non-GAAP Reconciliations of EBITDA and Adjusted EBITDA

(Dollars in Thousands)
 
     

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2014   2013   2014   2013
Net income $ 32,055   $ 33,109   $ 124,045   $ 143,166
Add:
Depreciation and amortization 59,515 53,603 224,753 205,073
Interest and debt expense 28,063 27,434 109,265 111,725
Write-off of deferred financing costs 120 1,422 5,192 4,000
Income tax expense 16,927   17,750     65,461   77,699  
EBITDA 136,680 133,318 528,716 541,663
Add:
Net loss (gain) on interest rate swaps 370 (822 ) 780 (8,947 )
Principal payments on finance lease 11,338   10,387     47,607   39,470  
Adjusted EBITDA $ 148,388   $ 142,883     $ 577,103   $ 572,186  
 
TAL INTERNATIONAL GROUP, INC.
Non-GAAP Reconciliations of Adjusted Pre-tax Income and Adjusted Net Income
(Dollars and Shares in Thousands, Except Per Share Data)
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2014   2013   2014   2013
Income before income taxes $ 48,982 $ 50,859 $ 189,506 $ 220,865
Add:
Write-off of deferred financing costs 120 1,422 5,192 4,000
Net loss (gain) on interest rate swaps 370   (822 )   780   (8,947 )
Adjusted pre-tax income $ 49,472   $ 51,459     $ 195,478   $ 215,918  
Adjusted pre-tax income per fully diluted common share $1.48   $1.52     $5.81   $6.41  
Weighted average number of common shares outstanding—Diluted 33,338 33,756 33,664 33,694
 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2014   2013   2014   2013
Net income $ 32,055 $ 33,109 $ 124,045 $ 143,166
Add:
Write-off of deferred financing costs, net of tax(a) 78 921 3,398 2,592
Net loss (gain) on interest rate swaps, net of tax(a) 242   (537 )   511   (5,799 )
Adjusted net income(a) $ 32,375   $ 33,493     $ 127,954   $ 139,959  
Adjusted net income per fully diluted common share $0.97   $0.99     $3.80   $4.15  
Weighted average number of common shares outstanding—Diluted

33,338

33,756 33,664 33,694
 

(a) The differences between Adjusted net income and reported net income in the twelve months ended December 31, 2014 and 2013 were due to net losses and gains on non-designated interest rate swaps, and the write-off of deferred financing costs. TAL uses interest rate swaps to synthetically fix the interest rates for most of its floating rate debt so that the duration of the fixed interest rates more closely matches the expected duration of TAL's lease portfolio.

TAL INTERNATIONAL GROUP, INC.
Non-GAAP Reconciliations of Adjusted Pre-tax Return on Tangible Equity
(Dollars in Thousands)
     

 

Balance as of
December 31, 2014

 

Balance as of
December 31, 2013

Total stockholders' equity $ 666,528   $ 691,918
Net deferred income tax liability

 

411,007

358,255
Net fair value of derivative instruments liability (asset)

 

8,496

(25,591 )
Goodwill

 

(74,523

)   (74,523 )
Total adjusted tangible equity $ 1,011,508     $ 950,059  
Average adjusted tangible equity(a) $ 980,784
Adjusted pre-tax income

$

195,478

Adjusted pre-tax return on tangible equity

 

19.9

%
 

(a) Calculated by taking the average of the current year's and the prior year's ending total adjusted tangible equity.

Contacts

TAL International Group, Inc.
John Burns, (914) 697-2900
Senior Vice President and Chief Financial Officer
Investor Relations

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