TAL International Group, Inc. (NYSE: TAL), one of the
world’s largest lessors of intermodal freight containers and
chassis, today reported results for the first quarter ended
March 31, 2015.
Highlights:
- TAL reported Adjusted pre-tax income of
$1.23 per fully diluted common share for the first quarter of 2015,
a decrease of 12.8% from the first quarter of 2014.
- TAL reported leasing revenues of $149.0
million for the first quarter of 2015, an increase of 2.9% from the
first quarter of 2014.
- TAL continues to achieve strong
operational performance. Utilization averaged 97.9% for the first
quarter of 2015, and through April 28, 2015, we have invested $344
million in new and sale-leaseback containers for delivery in
2015.
- TAL announced a quarterly dividend of
$0.72 per share payable on June 24, 2015 to shareholders of
record as of June 3, 2015.
Financial Results
The following table depicts TAL’s selected key financial
information for the three months ended March 31, 2015 and 2014
(dollars in millions, except per share data):
Three Months Ended March 31,
2015
2014
%
Change
Adjusted pre-tax income(1) $40.5 $47.5 (14.7%)
Adjusted
pre-tax income(1) per share $1.23 $1.41 (12.8%)
Leasing
revenues $149.0 $144.8 2.9%
Adjusted EBITDA(1) $138.6
$141.0 (1.7%)
Adjusted net income(1) $26.2 $31.0 (15.5%)
Adjusted net income(1) per share $0.79 $0.92 (14.1%)
Net
income $25.8 $30.0 (14.0%)
Net income per share $0.78
$0.89 (12.4%) 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
“TAL achieved solid results in the first quarter of 2015,”
commented Brian M. Sondey, President and CEO of TAL International.
“We generated $40.5 million of Adjusted pre-tax income,
representing $1.23 of Adjusted pre-tax income per share. We grew
our leasing revenues 2.9% from the first quarter of 2014, and we
continued to generate an attractive level of returns. In the first
quarter of 2015, our annualized Adjusted pre-tax return on tangible
equity(1) was 15.9%.”
“Our financial performance continues to be supported by strong
utilization. Our utilization averaged 97.9% in the first quarter of
2015, and finished the quarter at 97.7%. Our utilization currently
stands at 97.3%. While the first quarter represents the slow season
for dry containers, the global supply / demand balance for
containers remains generally favorable and most forecasters expect
global containerized trade growth to remain in the five percent
range in 2015. Our utilization is also supported by our high
quality lease portfolio. As of March 31, 2015, 75.6% of our
containers on-hire were covered by long-term or finance leases,
with an average remaining duration of 42 months assuming no leases
are renewed.”
“While our financial performance remained solid in the first
quarter, our Adjusted pre-tax income per share decreased 12.8% from
the first quarter of 2014. The decrease in our earnings in the
first quarter of 2015 primarily reflects ongoing pressure on
leasing rates and used container sale prices. Market leasing rates
have been well below the average lease rates in our portfolio for
several years, and lease rates have reached new lows in 2015 due to
decreases in the price of steel and new containers. Our average
lease rate fell 5.4% from the first quarter of 2014 to the first
quarter of 2015 on a CEU basis, excluding the impact of
sale-leaseback transactions.”
“The drop in new container prices has also added pressure to our
used container selling prices, which were further impacted by the
general appreciation of the U.S. dollar against most major foreign
currencies. Average used container sale prices were down roughly
25% from the first quarter of 2014, and we recorded a $1.4 million
loss on disposals in the first quarter of 2015. Most of the loss on
disposals was attributable to containers purchased through
sale-leaseback transactions. Sale-leaseback containers typically
are purchased for prices above the net book value of like-age TAL
equipment. Our sale-leaseback portfolio remains profitable despite
the disposal losses due to lease revenues received under the terms
of the leasebacks.”
“Our first quarter results were also negatively impacted by a
large transaction combining an early lease extension with a sizable
pre-committed lease for new containers. While we believe the
transaction will be attractive for TAL over the long term, it had a
negative impact on our first quarter results. The early lease
extension reduced our first quarter revenue by roughly $0.6
million, while long-term interest rate hedging associated with the
pick-up commitment contributed to the increase in our average
effective interest rate in the first quarter, which added roughly
$1.5 million to our interest expense. The financial impact of the
deal will improve as the committed containers are picked up and
placed on-hire.”
Outlook
Mr. Sondey continued, “We currently expect our operating and
financial performance to improve as we move into the seasonally
stronger part of the year. We expect our utilization to remain at a
high level and continue to be supported by solid trade growth and a
market share shift from owned to leased containers. We also have
over 100,000 TEU of containers pre-committed to leases, which will
help drive on-hire growth as seasonal demand ramps-up. We also
expect used container selling prices to stabilize due to seasonal
demand. However, we expect our average lease rates will continue to
be pulled down by very low market lease rates and that aggressive
competition for new deals will continue to limit the profitability
of our new investments and growth. Overall, we expect our Adjusted
pre-tax income to increase slightly from the first quarter of 2015
to the second, and we currently expect that our financial
performance will improve from the second quarter through the rest
of the year.”
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 June 24, 2015 to shareholders of record at
the close of business on June 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.
Investors’ Webcast
TAL will hold a Webcast at 9 a.m. (New York time) on Thursday,
April 30, 2015 to discuss its first quarter results. An
archive of the Webcast will be available one hour after the live
call through Friday, June 5, 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 1,444,000 containers and related equipment
representing approximately 2,372,000 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 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-
TAL INTERNATIONAL GROUP, INC. Consolidated
Balance Sheets (Dollars in thousands, except share data)
(Unaudited) March 31, 2015
December 31, 2014 ASSETS: Leasing equipment,
net of accumulated depreciation and allowances of $1,095,975 and
$1,055,864 $ 3,822,885 $ 3,674,031 Net investment in finance
leases, net of allowances of $1,056 and $1,056 210,200 219,872
Equipment held for sale 58,195 59,861
Revenue earning assets 4,091,280 3,953,764 Unrestricted cash
and cash equivalents 71,709 79,132 Restricted cash 35,042 35,649
Accounts receivable, net of allowances of $955 and $978 84,368
85,681 Goodwill 74,523 74,523 Deferred financing costs 31,582
32,937 Other assets 13,482 11,400 Fair value of derivative
instruments 224 1,898
Total assets $
4,402,210 $ 4,274,984
LIABILITIES AND
STOCKHOLDERS' EQUITY: Equipment purchases payable $ 67,380 $
88,336 Fair value of derivative instruments 29,005 10,394 Accounts
payable and other accrued expenses 52,173 57,877 Net deferred
income tax liability 418,298 411,007 Debt 3,180,800
3,040,842
Total liabilities 3,747,656 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, 37,165,033 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 506,893 504,891 Accumulated earnings
248,581 246,766 Accumulated other comprehensive (loss) (25,647 )
(13,249
)
Total stockholders' equity 654,554 666,528
Total liabilities and stockholders' equity $
4,402,210 $ 4,274,984
TAL
INTERNATIONAL GROUP, INC. Consolidated Statements of
Income (Dollars and shares in thousands, except earnings per
share) (Unaudited) Three Months Ended
March 31, 2015 2014 Leasing revenues:
Operating leases $ 144,568 $ 139,330 Finance leases 4,024 4,953
Other revenues 383 484
Total leasing revenues
148,975 144,767 Equipment trading revenues
16,845 12,487 Equipment trading expenses (15,431 ) (10,839 )
Trading margin 1,414 1,648 Net (loss)
gain on sale of leasing equipment (1,449 ) 3,096
Operating expenses: Depreciation and amortization 58,384
53,803 Direct operating expenses 8,822 8,682 Administrative
expenses 11,982 11,832 (Reversal) provision for doubtful accounts
(23 ) 31 Total operating expenses 79,165 74,348
Operating income 69,775 75,163
Other expenses:
Interest and debt expense 29,243 27,619 Write-off of deferred
financing costs — 1,170 Net loss on interest rate swaps 716
373
Total other expenses 29,959 29,162
Income before income taxes 39,816 46,001 Income tax expense 14,059
15,990
Net income $ 25,757 $ 30,011
Net income per common share—Basic $ 0.78 $ 0.89
Net income per common share—Diluted $ 0.78 $ 0.89
Cash dividends paid per common share $ 0.72 $ 0.72 Weighted
average number of common shares outstanding—Basic 32,861 33,608
Dilutive stock options and restricted stock 149 168
Weighted average number of common shares outstanding—Diluted
33,010 33,776
TAL INTERNATIONAL
GROUP, INC. Consolidated Statements of Cash Flows
(Dollars in thousands) (Unaudited) Three
Months Ended March 31, 2015 2014
Cash flows from operating activities: Net income $ 25,757 $
30,011 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 58,384 53,803
Amortization of deferred financing costs
1,979
1,922 Amortization of net loss on terminated derivative instruments
designated as cash flow hedges 687 715 Net loss (gain) on sale of
leasing equipment 1,449 (3,096 ) Net loss on interest rate swaps
716 373 Write-off of deferred financing costs — 1,170 Deferred
income taxes 14,059 15,990 Stock compensation charge 2,002 1,808
Changes in operating assets and liabilities: Net equipment
purchased for resale activity (10,554 ) (8,677 ) Net realized gain
(loss) on interest rate swaps terminated prior to their contractual
maturities — (1,670 ) Other changes in operating assets and
liabilities
(3,231
) (17,918 )
Net cash provided by operating activities 91,248
74,431
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases
(258,552 ) (148,622 ) Proceeds from sale of equipment, net of
selling costs 37,661 39,461 Cash collections on finance lease
receivables, net of income earned 10,474 12,004 Other (74 ) 25
Net cash (used in) investing activities (210,491 )
(97,132 )
Cash flows from financing activities: Purchases of
treasury stock (4,446 ) — Stock options exercised and stock related
activity — (51 ) Financing fees paid under debt facilities (624 )
(3,276 ) Borrowings under debt facilities 230,000 356,017 Payments
under debt facilities and capital lease obligations (90,061 )
(302,231 ) Decrease (increase) in restricted cash 607 (2,109 )
Common stock dividends paid (23,656 ) (24,201 )
Net cash
provided by financing activities 111,820 24,149
Net (decrease) increase in unrestricted cash and cash
equivalents $ (7,423 ) $ 1,448 Unrestricted cash and cash
equivalents, beginning of period 79,132 68,875
Unrestricted cash and cash equivalents, end of period $
71,709 $ 70,323
Supplemental non-cash investing
activities: Equipment purchases payable $ 67,380 $ 95,068
The following table sets forth TAL’s equipment fleet
utilization(2) as of and for the quarter ended March 31,
2015:
Average and Ending Utilization for
the Quarter Ended March 31, 2015
Average Utilization Ending Utilization 97.9%
97.7% (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 March 31, 2015 (in units, TEUs and CEUs):
March 31,
2015 Equipment Fleet in Units
Equipment Fleet in TEUs Owned
Managed Total
Owned Managed
Total Dry 1,244,482
15,151 1,259,633
2,019,040 26,440
2,045,480
Refrigerated 66,048 30 66,078 125,441 48 125,489
Special 56,797 747 57,544 103,619 1,312 104,931
Tank
9,555 — 9,555 9,555 — 9,555
Chassis 19,885
— 19,885 35,443
— 35,443
Equipment
leasing fleet 1,396,767 15,928 1,412,695 2,293,098 27,800
2,320,898
Equipment trading fleet 31,264
— 31,264 50,865
— 50,865
Total
1,428,031 15,928
1,443,959 2,343,963
27,800 2,371,763
Percentage 98.9%
1.1% 100.0%
98.8% 1.2% 100.0%
March 31, 2015 Equipment Fleet in CEUs
Owned Managed
Total Operating leases 2,574,642 23,767
2,598,409
Finance leases 196,914 825 197,739
Equipment
trading fleet 114,614 —
114,614
Total 2,886,170 24,592
2,910,762
Percentage 99.2%
0.8% 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, 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 months ended
March 31, 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 months ended
March 31, 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.
TAL INTERNATIONAL GROUP, INC. Non-GAAP
Reconciliations of EBITDA and Adjusted EBITDA (Dollars in
Thousands) Three Months Ended March
31, 2015 2014 Net income $ 25,757 $
30,011 Add: Depreciation and amortization 58,384 53,803 Interest
and debt expense 29,243 27,619 Write-off of deferred financing
costs — 1,170 Income tax expense 14,059 15,990 EBITDA
127,443 128,593 Add: Net loss on interest rate swaps 716 373
Principal payments on finance lease 10,474 12,004
Adjusted EBITDA $ 138,633 $ 140,970
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 March 31, 2015 2014
Income before income taxes $ 39,816 $ 46,001 Add: Write-off of
deferred financing costs — 1,170 Net loss on interest rate swaps
716 373 Adjusted pre-tax income $ 40,532
$ 47,544 Adjusted pre-tax income per fully diluted common
share $1.23 $1.41 Weighted average number of common
shares outstanding—Diluted 33,010 33,776
Three Months
Ended March 31, 2015 2014 Net
income $ 25,757 $ 30,011 Add: Write-off of deferred financing
costs, net of tax(a) — 763 Net loss on interest rate swaps, net of
tax(a) 463 243 Adjusted net income(a) $ 26,220
$ 31,017 Adjusted net income per fully diluted common share
$0.79 $0.92 Weighted average number of common shares
outstanding—Diluted 33,010 33,776 (a) The differences
between Adjusted net income and reported net income in the three
months ended March 31, 2015 and 2014 were due to net 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.
TAL INTERNATIONAL GROUP,
INC. Non-GAAP Reconciliations of Adjusted Pre-tax Return on
Tangible Equity (Dollars in Thousands)
Balance as of March 31,
2015
Balance as of December 31,
2014
Total stockholders' equity $ 654,554 $ 666,528 Net deferred
income tax liability 418,298 411,007 Net fair value of derivative
instruments liability 28,781 8,496 Goodwill (74,523 )
(74,523 ) Total adjusted tangible equity $ 1,027,110
$ 1,011,508 Average adjusted tangible equity(a) $ 1,019,309
Adjusted pre-tax income (for the current three months ended) $
40,532 Annualized adjusted pre-tax income (Adjusted pre-tax income
* 4) $ 162,128 Adjusted pre-tax return on tangible equity 15.9 %
(a) Calculated by taking the average of
the current quarter's and the prior quarter's ending total adjusted
tangible equity.
TAL International Group, Inc.John Burns, 914-697-2900Senior Vice
President and Chief Financial OfficerInvestor Relations
Tal Education (NYSE:TAL)
Historical Stock Chart
From Sep 2024 to Oct 2024
Tal Education (NYSE:TAL)
Historical Stock Chart
From Oct 2023 to Oct 2024