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Form 8-K TAL International Group, For: Jul 29

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July 29, 2015 4:30 PM EDT


 
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): July 29, 2015
 
TAL INTERNATIONAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
Delaware
 
333-126317
 
20-1796526
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
100 Manhattanville Road
Purchase, New York 10577-2135
(Address of Principal Executive Offices, including Zip Code)
 
Telephone: (914) 251-9000
(Registrant's Telephone Number, Including Area Code)
 
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant any of the following provisions:
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
 





Item 2.02. Results of Operations and Financial Condition.
 
On July 29, 2015, TAL International Group, Inc. issued a press release announcing its results of operations for the quarter ended June 30, 2015.  A copy of the press release is furnished with this report as Exhibit 99.1.
 
The information in this Current Report on Form 8-K, including the attached exhibit, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be set forth by specific reference in such filing.
 
Item 9.01. Financial Statements and Exhibits.
 
(d)   Exhibits
 
99.1        Press release issued by TAL International Group, Inc. dated July 29, 2015.


2
 





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 hereunto duly authorized.
 
 
TAL International Group, Inc.
 
 
Dated: July 29, 2015
By:
/s/ John Burns
 
 
Name:
John Burns
 
 
Title:
Senior Vice President and Chief Financial Officer

3
 



Exhibit 99.1


TAL INTERNATIONAL GROUP, INC. REPORTS SECOND QUARTER 2015 RESULTS

Purchase, New York, July 29, 2015 – TAL International Group, Inc. (NYSE: TAL), one of the world’s largest lessors of intermodal freight containers and chassis, today reported results for the second quarter ended June 30, 2015.

Highlights:
•
TAL reported Adjusted pre-tax income per fully diluted common share of $1.24 for the second quarter of 2015, an increase of 0.8% from the first quarter of 2015. TAL’s Adjusted pre-tax income per fully diluted common share decreased 14.5% from the second quarter of 2014.
•
TAL reported leasing revenues of $150.8 million for the second quarter of 2015, an increase of 1.2% from the first quarter of 2015, and an increase of 4.2% from the second quarter of 2014.
•
TAL continues to achieve strong operational performance. Utilization averaged 97.1% for the second quarter of 2015, and through July 29, 2015, we have invested over $420 million in new and sale-leaseback containers for delivery in 2015.
•
TAL announced a quarterly dividend of $0.72 per share payable on September 23, 2015 to shareholders of record as of September 2, 2015.

Financial Results

The following table depicts TAL’s selected key financial information for the three and six months ended June 30, 2015 and 2014 (dollars in millions, except per share data):

 
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 
2015
2014
% Change
2015
2014
% Change
Adjusted pre-tax income(1)
$40.9
$48.9
(16.4%)
$81.4
$96.4
(15.6%)
Adjusted pre-tax income(1) per share
$1.24
$1.45
(14.5%)
$2.47
$2.85
(13.3%)
Leasing revenues
$150.8
$144.7
4.2%
$299.8
$289.5
3.6%
Adjusted EBITDA(1)
$141.3
$142.1
(0.6%)
$279.9
$283.1
(1.1%)
Adjusted net income(1)
$26.4
$32.2
(18.0%)
$52.7
$63.2
(16.6%)
Adjusted net income(1) per share
$0.80
$0.95
(15.8%)
$1.60
$1.87
(14.4%)
Net income
$26.7
$29.4
(9.2%)
$52.4
$59.4
(11.8%)
Net income per share
$0.81
$0.87
(6.9%)
$1.59
$1.76
(9.7%)
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

“TAL achieved solid results in the second quarter of 2015,” commented Brian M. Sondey, President and CEO of TAL International. “We generated $40.9 million of Adjusted pre-tax income, representing $1.24 of Adjusted pre-tax income per share. We grew our leasing revenues 4.2% from the second quarter of 2014, and we continued to generate an attractive level of returns. In the second quarter of 2015, our annualized Adjusted pre-tax return on tangible equity(1) was 15.8%.”

“TAL’s solid results in the second quarter were achieved in a difficult market environment. TAL has been experiencing lease pricing pressure and decreasing disposal gains for several years due to falling steel and new container prices, widely available low-cost financing and aggressive competition. However, we have generally benefited from strong leasing demand driven by solid trade growth and a market share shift from owned to leased containers. In 2015, we are facing even heavier pricing pressures due to a 35% drop in steel prices since December of last year, and we are also facing unusually low demand this year. Our pick-up volumes usually ramp-up as we approach the summer peak season for shipping, but we did not see an increase in pick-up volumes in the second quarter this year. Trade volumes on the critical Asia to Europe trade lane have been weak in 2015, and overall global containerized trade growth now seems likely to fall below expectations.”

“Our utilization remains at a high level and continues to drive our solid profitability despite the difficult market conditions. Our utilization averaged 97.1% in the second quarter of 2015, and finished the quarter at 96.6%. Our utilization currently stands at 96.1%. The resiliency of our utilization reflects the underlying strength of our lease portfolio. As of June 30, 2015, 74.7% of our containers on-hire were covered by long-term or finance leases, and these leases have an average remaining duration of 41 months assuming no leases are renewed. Our lease portfolio is also protected by our lease structuring discipline, especially in ensuring the vast majority of our containers on lease must be returned to strong export locations.”

“We have purchased over $420 million of new and sale-leaseback containers for delivery this year. Most of this investment was placed early in the year and is supported by customer lease commitments. This solid level of investment in a challenging year reflects TAL’s strong supply capability and close customer relationships. Container pick-ups, however, on most of our committed leases are proceeding slower than expected, and we accordingly plan to slow the pace of investments in the second half of the year.”













2

Outlook

Mr. Sondey continued, “We typically expect our operating and financial performance to improve as we move into the traditional summer peak season for shipping. However, we have not seen leasing demand improve seasonally this year, and our average lease rates will continue to fall due to the large difference between the rates on our existing leases and lease rates available in the current market. Still, our pick-up volumes will be supported by the large number of containers covered by committed leases, and we expect our utilization to remain at a high level due to the strength of our lease portfolio. Overall, we expect our Adjusted pre-tax income to decrease slightly from the second quarter to the third quarter of 2015.”

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 September 23, 2015 to shareholders of record at the close of business on September 2, 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.

Investors’ Webcast

TAL will hold a Webcast at 9 a.m. (New York time) on Thursday, July 30, 2015 to discuss its second quarter results. An archive of the Webcast will be available one hour after the live call through Friday, September 11, 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 1,468,000 containers and related equipment representing approximately 2,419,000 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.

Contact

John Burns
Senior Vice President and Chief Financial Officer
Investor Relations
(914) 697-2900

3

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 19, 2015.

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





4


TAL INTERNATIONAL GROUP, INC.
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
 
June 30,
2015
December 31,
2014
ASSETS:
 

 

Leasing equipment, net of accumulated depreciation and allowances of $1,137,930 and $1,055,864
$
3,855,705

$
3,674,031

Net investment in finance leases, net of allowances of $846 and $1,056
205,525

219,872

Equipment held for sale
59,589

59,861

Revenue earning assets
4,120,819

3,953,764

Unrestricted cash and cash equivalents
72,161

79,132

Restricted cash
34,490

35,649

Accounts receivable, net of allowances of $1,003 and $978
85,269

85,681

Goodwill
74,523

74,523

Deferred financing costs
29,713

32,937

Other assets
12,852

11,400

Fair value of derivative instruments
3,209

1,898

Total assets
$
4,433,036

$
4,274,984

LIABILITIES AND STOCKHOLDERS' EQUITY:
 

 

Equipment purchases payable
$
34,760

$
88,336

Fair value of derivative instruments
6,781

10,394

Accounts payable and other accrued expenses
50,381

57,877

Net deferred income tax liability
441,898

411,007

Debt
3,223,630

3,040,842

Total liabilities
3,757,450

3,608,456

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, 37,167,134 and 37,006,283 shares issued respectively
37

37

Treasury stock, at cost, 3,911,843 and 3,829,928 shares
(75,310
)
(71,917
)
Additional paid-in capital
508,378

504,891

Accumulated earnings
251,307

246,766

Accumulated other comprehensive (loss)
(8,826
)
(13,249
)
Total stockholders' equity
675,586

666,528

Total liabilities and stockholders' equity
$
4,433,036

$
4,274,984



5


TAL INTERNATIONAL GROUP, INC.
Consolidated Statements of Income
(Dollars and shares in thousands, except earnings per share)
(Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
Leasing revenues:
 
 
 
 
 
 
 
Operating leases
$
146,569

 
$
139,489

 
$
291,137

 
$
278,819

Finance leases
3,887

 
4,724

 
7,911

 
9,677

Other revenues
382

 
510

 
765

 
994

Total leasing revenues
150,838

 
144,723

 
299,813

 
289,490

 
 
 
 
 
 
 
 
Equipment trading revenues
16,478

 
18,794

 
33,323

 
31,281

Equipment trading expenses
(14,957
)
 
(16,579
)
 
(30,388
)
 
(27,418
)
Trading margin
1,521

 
2,215

 
2,935

 
3,863

 
 
 
 
 
 
 
 
Net (loss) gain on sale of leasing equipment
(660
)
 
2,461

 
(2,109
)
 
5,557

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Depreciation and amortization
60,021

 
54,237

 
118,405

 
108,040

Direct operating expenses
10,011

 
8,267

 
18,833

 
16,949

Administrative expenses
11,367

 
11,128

 
23,349

 
22,960

(Reversal) provision for doubtful accounts
(165
)
 
5

 
(188
)
 
36

Total operating expenses
81,234

 
73,637

 
160,399

 
147,985

Operating income
70,465

 
75,762

 
140,240

 
150,925

Other expenses:
 
 
 
 
 
 
 
Interest and debt expense
29,602

 
26,888

 
58,845

 
54,507

Write-off of deferred financing costs
—

 
3,729

 
—

 
4,899

Net (gain) loss on interest rate swaps
(364
)
 
582

 
352

 
955

Total other expenses
29,238

 
31,199

 
59,197

 
60,361

Income before income taxes
41,227

 
44,563

 
81,043

 
90,564

Income tax expense
14,557

 
15,201

 
28,616

 
31,191

Net income
$
26,670

 
$
29,362

 
$
52,427

 
$
59,373

Net income per common share—Basic
$
0.81

 
$
0.87

 
$
1.60

 
$
1.77

Net income per common share—Diluted
$
0.81

 
$
0.87

 
$
1.59

 
$
1.76

Cash dividends paid per common share
$
0.72

 
$
0.72

 
$
1.44

 
$
1.44

Weighted average number of common shares outstanding—Basic
32,857

 
33,619

 
32,859

 
33,614

Dilutive stock options and restricted stock
151

 
178

 
149

 
168

Weighted average number of common shares outstanding—Diluted
33,008

 
33,797

 
33,008

 
33,782


6

TAL INTERNATIONAL GROUP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
 
Six Months Ended 
 June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
52,427

 
$
59,373

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
118,405

 
108,040

Amortization of deferred financing costs
3,941

 
3,861

Amortization of net loss on terminated derivative instruments designated as cash flow hedges
1,355

 
1,463

Amortization of lease premiums
1,047

 
—

Net loss (gain) on sale of leasing equipment
2,109

 
(5,557
)
Net loss on interest rate swaps
352

 
955

Write-off of deferred financing costs
—

 
4,899

Deferred income taxes
28,616

 
31,191

Stock compensation charge
3,449

 
3,419

Changes in operating assets and liabilities:
 
 
 
Net equipment purchased for resale activity
(4,809
)
 
(4,627
)
Net realized gain (loss) on interest rate swaps terminated prior to their contractual maturities 
—

 
(1,700
)
Other changes in operating assets and liabilities
(3,759
)
 
(23,109
)
Net cash provided by operating activities
203,133

 
178,208

Cash flows from investing activities:
 
 
 
Purchases of leasing equipment and investments in finance leases
(428,963
)
 
(289,766
)
Proceeds from sale of equipment, net of selling costs
66,026

 
83,503

Cash collections on finance lease receivables, net of income earned
21,289

 
24,100

Other
74

 
97

Net cash (used in) investing activities
(341,574
)
 
(182,066
)
Cash flows from financing activities:
 
 
 
Purchases of treasury stock
(4,446
)
 
—

Stock options exercised and stock related activity
38

 
(234
)
Financing fees paid under debt facilities
(717
)
 
(8,246
)
Borrowings under debt facilities
365,000

 
912,935

Payments under debt facilities and capital lease obligations
(182,251
)
 
(862,871
)
Decrease (increase) in restricted cash
1,159

 
(390
)
Common stock dividends paid
(47,313
)
 
(48,409
)
Net cash provided by (used in) financing activities
131,470

 
(7,215
)
Net (decrease) in unrestricted cash and cash equivalents
$
(6,971
)
 
$
(11,073
)
Unrestricted cash and cash equivalents, beginning of period
79,132

 
68,875

Unrestricted cash and cash equivalents, end of period
$
72,161

 
$
57,802

Supplemental non-cash investing activities:
 
 
 
Equipment purchases payable
$
34,760

 
$
61,579

   

7


The following table sets forth TAL’s equipment fleet utilization(2) as of and for the quarter ended June 30, 2015:
Average and Ending Utilization for the Quarter Ended June 30, 2015
Average Utilization
 
Ending Utilization
97.1
%
 
96.6
%

(2) Utilization is computed by dividing TAL’s total units on lease (in cost equivalent units, or "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 June 30, 2015 (in units, TEUs and CEUs):
 
June 30, 2015
 
Equipment Fleet in Units
Equipment Fleet in TEUs
 
Owned
Managed
Total
Owned
Managed
Total
Dry   
1,273,097

14,706

1,287,803

2,072,780

25,649

2,098,429

Refrigerated   
66,051

29

66,080

125,428

46

125,474

Special   
55,517

698

56,215

101,406

1,232

102,638

Tank   
9,852

—

9,852

9,852

—

9,852

Chassis   
20,293

—

20,293

36,325

—

36,325

Equipment leasing fleet   
1,424,810

15,433

1,440,243

2,345,791

26,927

2,372,718

Equipment trading fleet
28,256

—

28,256

46,614

—

46,614

Total   
1,453,066

15,433

1,468,499

2,392,405

26,927

2,419,332

Percentage   
98.9
%
1.1
%
100.0
%
98.9
%
1.1
%
100.0
%
 


 
 
 
 
 
 
June 30, 2015
 
 
 
 
Equipment Fleet in CEUs
 
 
 
 
Owned
Managed
Total
 
 
 
Operating leases
2,625,942

23,022

2,648,964

 
 
 
Finance leases
195,005

794

195,799

 
 
 
Equipment trading fleet
119,226

—

119,226

 
 
 
Total   
2,940,173

23,816

2,963,989

 
 
 
Percentage   
99.2
%
0.8
%
100.0
%
 
 
 
 
 
 
 
 
 
 

8

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, and the write-off of deferred financing costs. 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 six months ended June 30, 2015 and 2014. We have 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 six months ended June 30, 2015 and 2014.

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

9

TAL INTERNATIONAL GROUP, INC.
Non-GAAP Reconciliations of EBITDA and Adjusted EBITDA 
(Dollars in Thousands)
 
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 
2015
2014
2015
2014
Net income
$
26,670

$
29,362

$
52,427

$
59,373

Add:
 
 
 
 
Depreciation and amortization
60,021

54,237

118,405

108,040

Interest and debt expense
29,602

26,888

58,845

54,507

Write-off of deferred financing costs
—

3,729

—

4,899

Income tax expense
14,557

15,201

28,616

31,191

EBITDA
130,850

129,417

258,293

258,010

Add:
 
 
 
 
Net (gain) loss on interest rate swaps
(364
)
582

352

955

Principal payments on finance lease
10,815

12,096

21,289

24,100

Adjusted EBITDA
$
141,301

$
142,095

$
279,934

$
283,065

 
 
 
 
 
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 
 June 30,
Six Months Ended 
 June 30,
 
2015
2014
2015
2014
Income before income taxes
$
41,227

$
44,563

$
81,043

$
90,564

Add:
 
 
 
 
Write-off of deferred financing costs
—

3,729

—

4,899

Net (gain) loss on interest rate swaps
(364
)
582

352

955

Adjusted pre-tax income
$
40,863

$
48,874

$
81,395

$
96,418

Adjusted pre-tax income per fully diluted common share

$1.24


$1.45


$2.47


$2.85

Weighted average number of common shares outstanding—Diluted
33,008

33,797

33,008

33,782

 
 
 
 
 
 
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 
2015
2014
2015
2014
Net income
$
26,670

$
29,362

$
52,427

$
59,373

Add:
 
 
 
 
Write-off of deferred financing costs, net of tax(a)
—

2,450

—

3,212

Net (gain) loss on interest rate swaps, net of tax(a)
(235
)
382

228

626

Adjusted net income(a)
$
26,435

$
32,194

$
52,655

$
63,211

Adjusted net income per fully diluted common share

$0.80


$0.95


$1.60


$1.87

Weighted average number of common shares outstanding—Diluted
33,008

33,797

33,008

33,782

 
 
 
 
 
(a) The differences between Adjusted net income and reported net income in the three and six months ended June 30, 2015 and 2014 were due to net gains and losses on 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.

10


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

 
Balance as of June 30, 2015
Balance as of March 31, 2015
Total stockholders' equity
$
675,586

$
654,554

Net deferred income tax liability
441,898

418,298

Net fair value of derivative instruments liability
3,572

28,781

Goodwill
(74,523
)
(74,523
)
Total adjusted tangible equity
$
1,046,533

$
1,027,110

Average adjusted tangible equity(a)
$
1,036,822

 
Adjusted pre-tax income (for the current three months ended)
$
40,863

 
Annualized adjusted pre-tax income (Adjusted pre-tax income * 4)
$
163,452

 
Adjusted pre-tax return on tangible equity
15.8
%
 
 
 
 
(a) Calculated by taking the average of the current quarter's and the prior quarter's ending total adjusted tangible equity.


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