Exhibit 99.1
TAL International Group, Inc. Reports Third Quarter 2006 Results and Increases
Quarterly Dividend
PURCHASE, N.Y.--(BUSINESS WIRE)--Nov. 7, 2006--TAL International
Group, Inc. (NYSE: TAL), one of the world's largest lessors of
intermodal freight containers and chassis, reported results for the
third quarter and nine months ended September 30, 2006 and announced
an increase in its quarterly dividend.
Pre-tax income for the third quarter of 2006 was $6.9 million
compared to a loss of $(8.8) million in the prior year quarter.
Adjusted pre-tax income (1) for the quarter, excluding unrealized
losses (gains) on interest rate swaps and other non-operating items,
was $19.1 million compared to $9.2 million in the third quarter of
2005. Please see page 8 for a detailed reconciliation of adjusted
pre-tax income. The company focuses on pre-tax results as it does not
expect to pay any significant income taxes for a number of years due
to the availability of accelerated tax depreciation on the existing
container and chassis fleet and planned future equipment purchases.
Total revenues for the third quarter of 2006 were $76.7 million
compared to $81.1 million in the third quarter of 2005. EBITDA (3) was
$45.2 million for the quarter versus $66.1 million in the prior year
period. Adjusted EBITDA (3) was $57.3 million for the quarter versus
$59.9 million in last year's third quarter. Please see page 8 for a
detailed reconciliation of EBITDA and adjusted EBITDA.
Net income for the third quarter of 2006 was $4.5 million, or
$0.13 per fully diluted common share, versus a loss of $(5.8) million
in the prior year quarter. Adjusted net income (2) for the quarter,
excluding unrealized losses (gains) on interest rate swaps and other
non-operational items was $12.3 million, or $0.37 per fully diluted
common share, compared to $6.0 million in the third quarter of 2005.
Please see page 8 for a detailed reconciliation of adjusted net
income.
"Our results for the third quarter were largely in-line with our
expectations as adjusted earnings per fully diluted share for the
third quarter of 2006 increased slightly from the prior quarter,"
commented Brian M. Sondey, President and CEO of TAL. "We experienced
continued good demand for dry and special containers with our overall
utilization increasing by 1.6% to 92.5% at the end of the quarter.
These benefits were partially offset by the revenue impact of the
lease extension transactions that were concluded during the second and
third quarters along with the effect of continued slow demand for
refrigerated containers that has existed throughout 2006."
Mr. Sondey continued, "While the performance of our refrigerated
container product line does not greatly influence our aggregate
utilization, our revenues are disproportionately impacted due to the
higher unit cost and lease rates associated with this equipment. We
are hopeful that our refrigerated container utilization will improve
during the fourth quarter, which is traditionally the peak demand
season for this container type."
Pre-tax income for the first nine months of 2006 was $42.4
million compared to $12.5 million for the same period last year.
Adjusted pre-tax income (1) for the first nine months of 2006 was
$53.4 million compared to $32.5 million in the comparable period of
2005.
Total revenues for the nine months ended September 30, 2006 were
$225.3 million as compared to $239.1 million in the first nine months
of 2005. EBITDA (3) for the nine month period ended September 30, 2006
was $157.8 million versus $188.8 million for the same period of 2005.
Adjusted EBITDA (3) for the first nine months of 2006 was $166.4
million compared to $184.4 million for the same period last year.
Net income for the first nine months of 2006 was $27.3 million,
or $0.82 per fully diluted common share, as compared to net income of
$7.9 million for the comparable prior year period. Adjusted net income
(2) for the period ended September 30, 2006 was $34.3 million, or
$1.03 per fully diluted common share, compared to $20.6 million in the
prior year period.
Mr. Sondey commented: "Year-to-date, we have been able to achieve
10% growth in revenue earning assets, which together with increasing
utilization of our dry and special containers is driving our quarter
on quarter profitability improvement. However, the slow start of the
year continues to weigh down our nine-month results and decreasing
average rental rates and soft refrigerated container demand have
limited the size of our profitability growth over the course of the
year. The lower rental rates we have experienced in 2006 are largely a
result of placing a significant portion of our new containers on
leases with average durations well in excess of five years and
negotiating lease extensions for existing equipment already on-hire.
While these transactions have reduced near-term profitability, we
believe they increase the long-term value of our fleet."
Outlook
Mr. Sondey added, "We expect that our major operating drivers
will hold fairly steady through the end of the year, which would allow
us to finish 2006 in a stronger position than we finished last year.
Our dry container utilization will face some pressure due to the end
of the summer peak season, but improved refrigerated container
performance should offset much of this impact. In addition, our
earnings will benefit from reduced depreciation of about $0.4 million
per month beginning in November when another vintage year of our
containers reaches the end of its depreciable life."
Dividend and Share Repurchases
TAL's board of directors has approved and declared a $0.25 per
share quarterly cash dividend on its issued and outstanding common
stock, payable on December 8, 2006 to shareholders of record at the
close of business on November 21, 2006. Based on the information
available today, we believe the dividend will qualify as a return of
capital rather than a taxable dividend for our shareholders. Investors
should consult with a tax advisor to determine the proper tax
treatment of this distribution.
Mr. Sondey commented, "We are pleased to increase the size of the
quarterly shareholder dividend. We continue to generate strong cash
flow, and estimate that, prior to the payment of dividends and share
repurchases, we have been generating excess cash in the range of $5
million per month beyond the amount required to support the growth of
our revenue earning assets. As we have now built a liquidity cushion
of roughly $50 million, we feel it is appropriate to expand the
dividend. We will continue to evaluate the size of the dividend
relative to our liquidity cushion on a quarterly basis to ensure that
we are returning an appropriate level of the cash generated by the
company to our investors."
The Company repurchased 136,250 shares of its outstanding common
stock in the open market during the quarter ended September 30, 2006
at a total cost of approximately $2.9 million in accordance with its
previously announced stock repurchase program.
Investors' Webcast
TAL will hold a Webcast at 9 a.m. (New York time) on Wednesday,
November 8th to discuss its fiscal third quarter and nine month
results. An archive of the Webcast will be available one hour after
the live call through Friday, December 1, 2006. To access the live
Webcast or archive, please visit the Company's Web site 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 20 offices in 12 countries and
approximately 190 third party container depot facilities in 41
countries. The Company's global operations include the acquisition,
leasing, re-leasing and subsequent sale of multiple types of
intermodal containers. TAL's fleet consists of approximately 646,000
containers and related equipment representing approximately 1,044,000
twenty-foot equivalent units (TEU). 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 March 20, 2006.
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 is a non-GAAP measurement we believe
is useful in evaluating our operating performance. The Company's
definition and calculation of adjusted pre-tax income is outlined in
the attached schedules.
(2) Adjusted net income is a non-GAAP measurement we believe is
useful in evaluating our operating performance. The Company's
definition and calculation of adjusted net income is outlined in the
attached schedules.
(3) EBITDA and Adjusted EBITDA are non-GAAP measurements we
believe are useful in evaluating our operating and liquidity
performance. The Company's definitions and calculations of EBITDA and
Adjusted EBITDA are outlined in the attached schedules.
TAL INTERNATIONAL GROUP, INC.
Consolidated Balance Sheets
(Dollars in thousands, except share data)
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
Assets:
Cash and cash equivalents (including
restricted cash of $13,274 and $0) $ 45,712 $ 27,259
Accounts receivable, net of allowances of
$295 and $820 35,724 36,470
Net investment in finance leases 129,163 73,819
Leasing equipment, net of accumulated
depreciation and allowances of $188,479
and $124,543 1,099,755 1,036,363
Leasehold improvements and other fixed
assets, net of accumulated depreciation
and amortization of $1,878 and $1,312 3,109 3,771
Equipment held for sale 17,559 24,844
Goodwill 71,898 71,898
Deferred financing costs 7,150 3,540
Other assets (including fair value of
derivative instruments) 22,484 26,304
------------- ------------
Total assets $ 1,432,554 $ 1,304,268
============= ============
Liabilities and stockholders' equity:
Accounts payable $ 24,442 $ 12,256
Accrued expenses 40,207 30,063
Income taxes payable 320 116
Deferred income tax liability 26,733 9,239
Debt:
Asset securitization facility -- 710,000
Asset backed securities (ABS):
Term notes 651,667 --
Warehouse facility 106,500 --
Revolving credit facilities 131,500 148,000
Finance lease facility 12,500 --
Other debt 11,798 --
Capital lease obligations 24,369 14,627
------------- ------------
Total liabilities 1,030,036 924,301
Stockholders' equity:
Preferred stock, $.001 par value, 500,000
shares authorized, none issued -- --
Common stock, $.001 par value, 100,000,000
shares authorized, 33,303,031 and
32,882,208 shares issued, respectively 33 33
Treasury stock, at cost, 136,250 shares
and 0 shares, respectively (2,862) --
Additional paid-in capital 394,434 394,389
Accumulated earnings (deficit) 6,901 (13,737)
Accumulated other comprehensive income
(loss) 4,012 (718)
------------- ------------
Total stockholders' equity 402,518 379,967
------------- ------------
Total liabilities and stockholders'
equity $ 1,432,554 $ 1,304,268
============= ============
TAL INTERNATIONAL GROUP, INC.
Consolidated Statements of Operations
(Dollars and shares in thousands, except earnings per share)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
-------- --------- --------- ---------
(Unaudited) (Unaudited)
Revenues:
Leasing revenues, including
income recognized on finance
leases of $3,399, $1,934,
$8,516 and $3,356,
respectively $67,827 $ 71,001 $201,523 $215,084
Equipment trading revenue 6,897 7,774 17,673 17,173
Management fee income 1,538 1,566 4,687 4,978
Other revenues 413 738 1,453 1,909
-------- --------- --------- ---------
Total revenues 76,675 81,079 225,336 239,144
-------- --------- --------- ---------
Expenses:
Equipment trading expenses 5,606 6,026 14,545 13,257
Direct operating expenses 6,311 6,410 19,734 20,707
Administrative expenses 9,350 9,411 28,009 28,362
Depreciation and amortization 26,590 29,418 77,782 88,076
(Reversal) provision for
doubtful accounts (58) 528 (500) 567
Net (gain) on sale of leasing
equipment (1,883) (1,178) (2,859) (8,133)
Write-off of deferred
financing costs - 24,313 2,367 24,313
Interest and debt expense 11,686 21,239 35,266 63,849
Unrealized loss (gain) on
interest rate swaps 12,174 (7,589) 8,584 (8,975)
Management fees - 1,346 - 4,598
-------- --------- --------- ---------
Total expenses 69,776 89,924 182,928 226,621
-------- --------- --------- ---------
Income (loss) before income
taxes 6,899 (8,845) 42,408 12,523
Income tax expense (benefit) 2,449 (3,090) 15,133 4,577
-------- --------- --------- ---------
Net income (loss) 4,450 (5,755) 27,275 7,946
Preferred stock dividends - (6,568) - (18,727)
-------- --------- --------- ---------
Net income (loss) applicable
to common stockholders $ 4,450 $(12,323) $ 27,275 $(10,781)
======== ========= ========= =========
Net income (loss) per common
share -- Basic $ 0.13 $ (1.21) $ 0.83 $ (1.06)
======== ========= ========= =========
Net income (loss) per common
share -- Diluted $ 0.13 $ (1.21) $ 0.82 $ (1.06)
======== ========= ========= =========
Weighted average number of
common shares outstanding
-- Basic 33,001 10,204 32,927 10,186
Weighted average number of
common shares outstanding
-- Diluted 33,421 10,204 33,450 10,186
Cash dividends paid per common
share $ 0.20 - $ 0.20 -
Non-GAAP Financial Measures
We use the terms "Adjusted Pre-tax Income", "Adjusted Net
Income", "EBITDA", and "Adjusted EBITDA", throughout this press
release. Adjusted Pre-tax Income is defined as income (loss) 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 the
unrealized loss (gain) on interest rate swaps, write-off of deferred
financing costs and management fees. Adjusted Net Income is defined as
net income further adjusted for the items discussed above, net of tax.
EBITDA is defined as net income (loss) before interest and debt
expense, write-off of deferred financing costs, income tax expense
(benefit) and depreciation and amortization. Adjusted EBITDA is
defined as EBITDA as further adjusted for certain items which are
described in more detail below, which management believes are not
representative of our operating performance. Adjusted EBITDA excludes
unrealized losses (gains) on interest rate swaps and management fees.
Adjusted Pre-tax Income, Adjusted Net Income, EBITDA, and
Adjusted EBITDA are not presentations made in accordance with GAAP,
and should not be considered as alternatives to, or more meaningful
than, amounts determined in accordance with GAAP, including net income
(loss) or net cash from operating activities.
We believe that Adjusted Pre-tax Income, Adjusted Net Income,
EBITDA, and Adjusted EBITDA 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
(benefit), depreciation and amortization and unrealized (gains)
losses on interest rate swaps, which can vary substantially from
company to company depending upon accounting methods and 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 (such as expenses related to management agreements which
terminated upon the closing of our IPO on October 17, 2005); 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 income (loss) before income
taxes and net income (loss), the most directly comparable GAAP
measures, to Adjusted Pre-tax Income and Adjusted Net Income in the
tables below for the three and nine months ended September 30, 2006
and 2005.
Additionally, we have provided reconciliations of net income
(loss), the most directly comparable GAAP measure, to EBITDA and
EBITDA to Adjusted EBITDA in the tables below for the three and nine
months ended September 30, 2006 and 2005.
TAL INTERNATIONAL GROUP, INC.
Non-GAAP Reconciliation of Adjusted Income Before Income Taxes and
Adjusted Net Income
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Income (loss) before income
taxes $ 6,899 $(8,845) $42,408 $12,523
Add (subtract):
Unrealized loss (gain) on
interest rate swaps 12,174 (7,589) 8,584 (8,975)
Write-off of deferred
financing costs - 24,313 2,367 24,313
Management fees - 1,346 - 4,598
--------- -------- -------- --------
Adjusted income before income
taxes $ 19,073 $ 9,225 $53,359 $32,459
========= ======== ======== ========
Net income (loss) (a) $ 4,450 $(5,755) $27,275 $ 7,946
Add (subtract):
Unrealized loss (gain) on
interest rate swaps 7,852 (4,940) 5,520 (5,699)
Write-off of deferred
financing costs - 15,828 1,522 15,439
Management fees - 876 - 2,920
--------- -------- -------- --------
Adjusted net income $ 12,302 $ 6,009 $34,317 $20,606
========= ======== ======== ========
(a) All net income adjustments are reflected net of income taxes.
TAL INTERNATIONAL GROUP, INC.
Non-GAAP Reconciliations of EBITDA and Adjusted EBITDA
(Dollars in Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Net income (loss) $ 4,450 $(5,755) $ 27,275 $ 7,946
Add (subtract):
Depreciation and
amortization 26,590 29,418 77,782 88,076
Write-off of deferred
financing costs - 24,313 2,367 24,313
Interest and debt expense 11,686 21,239 35,266 63,849
Income tax expense
(benefit) 2,449 (3,090) 15,133 4,577
--------- -------- --------- ---------
EBITDA 45,175 66,125 157,823 188,761
Add (subtract):
Unrealized loss (gain) on
interest rate swaps(a) 12,174 (7,589) 8,584 (8,975)
Management fees(b) - 1,346 - 4,598
--------- -------- --------- ---------
Adjusted EBITDA $ 57,349 $59,882 $166,407 $184,384
========= ======== ========= =========
(a) Reflects the reversal of unrealized losses (gains) on interest
rate swap contracts.
(b) Reflects the reversal of management fees of $1.3 million and $4.6
million in the three and nine months ended September 30, 2005 payable
to our affiliates pursuant to certain management agreements which
were terminated immediately prior to the consummation of our IPO.
CONTACT: TAL International Group, Inc.
Jeffrey Casucci, 914-697-2900
Vice President, Treasury and Investor Relations