Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For The Quarterly Period Ended March 31, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Transition Period
from                             to


Commission file number- 001-32638

TAL International Group, Inc.(Exact name of registrant as specified in the charter)

Delaware(State or other jurisdiction of
incorporation or organization)

20-1796526(I.R.S. Employer
Identification Number)100 Manhattanville Road, Purchase, New York(Address of principal executive office)

10577-2135(Zip Code)


(914) 251-9000(Registrant's telephone number including area code)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past
90 days. Yes þ    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o

Accelerated Filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)


Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange
Act). YES o    NO þ

As of April 30, 2010, there were 30,709,104 shares of the Registrant's common stock, $.001 par value outstanding.



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TAL International Group, Inc.

Index



Page No.PART I  FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited)

3Consolidated Balance Sheets at March 31, 2010 and December 31, 2009

4Consolidated Statements of Operations for the three months ended March 31, 2010 and March 31,
2009

5Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and March 31,
2009

6Notes to Consolidated Financial Statements

7Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

16Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33Item 4.

Controls and Procedures

34PART II  OTHER INFORMATIONItem 1.

Legal Proceedings

35Item 1A.

Risk Factors

35Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35Item 6.

Exhibits

35Signature

37


2

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Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and
uncertainties. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the Securities and Exchange
Commission, or SEC, or in connection with oral statements made to the press, potential investors or others. All statements, other than statements of historical facts, including statements regarding
our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "expect,"
"estimate," "anticipate," "predict," "believe," "think," "plan," "will," "should," "intend," "seek," "potential" and similar expressions and variations are intended to identify forward-looking
statements, although not all forward-looking statements contain these identifying words.

Forward-looking
statements in this report are subject to a number of known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ
materially from those described in the forward-looking statements, including, but not limited to, the risks and
uncertainties described in the section entitled "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 1, 2010, in this report as well as in the other
documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.

Forward-looking
statements speak only as of the date the statements are made. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no
obligation to update or revise forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. We caution you not to
unduly rely on the forward-looking statements when evaluating the information presented in this report.

PART I  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

The consolidated financial statements of TAL International Group, Inc. ("TAL" or the "Company") as of
March 31, 2010 (unaudited) and December 31, 2009 and for the three months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited) included herein have been prepared
by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the SEC. In addition, certain information and note disclosures normally
included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information presented not misleading. These financial statements reflect, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the
full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on
Form 10-K filed with the SEC, on March 1, 2010, from which the accompanying December 31, 2009 Balance Sheet information was derived, and all of our other filings filed
with the SEC from October 11, 2005 through the current date pursuant to the Exchange Act.

3

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TAL INTERNATIONAL GROUP, INC.

Consolidated Balance Sheets
(Dollars in thousands, except share data)

March 31,
2010

December 31,
2009(Unaudited)ASSETS:Leasing equipment, net of accumulated depreciation and allowances of $440,720 and $420,517

$
1,452,208

$
1,357,539Net investment in finance leases, net of allowances of $1,566 and $1,618


193,011


199,989Equipment held for sale


42,989


46,291Revenue earning assets


1,688,208


1,603,819Cash and cash equivalents (including restricted cash of $14,075 and $13,714)


56,173


73,604Accounts receivable, net of allowances of $680 and $757


38,871


33,086Leasehold improvements and other fixed assets, net of accumulated depreciation and amortization of $5,199 and $5,142


932


972Goodwill


71,898


71,898Deferred financing costs


9,014


8,882Other assets


5,500


6,043Fair value of derivative instruments


1,931


2,674Total assets

$
1,872,527

$
1,800,978LIABILITIES AND STOCKHOLDERS' EQUITY:Equipment purchases payable

$
69,858

$
3,312Fair value of derivative instruments


67,635


61,799Accounts payable and other accrued expenses


37,659


42,845Net deferred income tax liability


116,326


112,895Debt


1,164,102


1,161,298Total liabilities


1,455,580


1,382,149Stockholders' equity:Preferred stock, $.001 par value, 500,000 shares authorized, none issued





Common stock, $.001 par value, 100,000,000 shares authorized, 33,720,066 and 33,592,066 shares issued respectively


33


33Treasury stock, at cost, 3,010,962 and 3,009,171 shares, respectively


(37,512
)

(37,489
)Additional paid-in capital


398,416


398,016Accumulated earnings


56,473


58,253Accumulated other comprehensive (loss) income


(463
)

16Total stockholders' equity


416,947


418,829Total liabilities and stockholders' equity

$
1,872,527

$
1,800,978


The
accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

4

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TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Operations
(Dollars and shares in thousands, except earnings per share)

Three Months Ended
March 31,2010

2009(Unaudited)Revenues:Leasing revenues:Operating leases

$
67,993

$
78,047Finance leases


4,870


5,055Total leasing revenues


72,863


83,102Equipment trading revenue


5,738


16,088Management fee income


768


669Other revenues


229


296Total revenues


79,598


100,155Operating expenses (income):Equipment trading expenses


5,178


14,775Direct operating expenses


8,180


9,825Administrative expenses


10,555


11,622Depreciation and amortization


26,966


29,109(Reversal) provision for doubtful accounts


(68
)

321Net (gain) on sale of leasing equipment


(4,468
)

(3,596
)Total operating expenses


46,343


62,056Operating income


33,255


38,099Other expenses (income):Interest and debt expense


17,042


17,361Unrealized loss (gain) on interest rate swaps


6,784


(5,063
)Total other expenses


23,826


12,298Income before income taxes


9,429


25,801Income tax expense


3,530


9,185Net income

$
5,899

$
16,616Net income per common share  Basic

$
0.19

$
0.52Net income per common share  Diluted

$
0.19

$
0.52Weighted average number of common shares outstanding  Basic


30,429


31,970Weighted average number of common shares outstanding  Diluted


30,534


31,981Cash dividends paid per common share

$
0.25

$
0.01


The
accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

5

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TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

Three months ended
March 31,2010

2009(Unaudited)Cash flows from operating activities:Net income

$
5,899

$
16,616Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


26,966


29,109Amortization of deferred financing costs


369


288Net (gain) on sale of leasing equipment


(4,468
)

(3,596
)Unrealized loss (gain) on interest rate swaps


6,784


(5,063
)Deferred income taxes


3,444


9,149Stock compensation charge


400


287Equipment purchased for resale


(2,081
)

2,863Changes in operating assets and liabilities


(13,500
)

6,443Net cash provided by operating activities


23,813


56,096Cash flows from investing activities:Purchases of leasing equipment


(61,990
)

(24,383
)Investments in finance leases


(330
)

(17,902
)Proceeds from sale of equipment , net of selling costs


17,483


16,291Cash collections on finance lease receivables, net of income earned


8,357


7,410Other


(27
)

(83
)Net cash used in investing activities


(36,507
)

(18,667
)Cash flows from financing activities:Common stock dividends paid


(7,609
)

(320
)Purchases of treasury stock


(23
)

(8,179
)Financing fees paid under debt facilities


(501
)

Borrowings under debt facilities


71,500


Payments under debt facilities


(62,397
)

(31,289
)Payments under capital lease obligations


(5,707
)

(5,807
)(Increase) decrease in restricted cash


(361
)

980Net cash used in financing activities


(5,098
)

(44,615
)Net decrease in cash and cash equivalents


(17,792
)

(7,186
)Unrestricted cash and cash equivalents, beginning of period


59,890


40,798Unrestricted cash and cash equivalents, end of period

$
42,098

$
33,612Supplemental non-cash investing activities:Accrued and unpaid purchases of equipment

$
69,858

$
5,810


The
accompanying notes to the unaudited consolidated financial statements are an integral part of these statements.

6

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Description of the Business, Basis of Presentation, Recently Issued Accounting Pronouncements

A.    Description of the Business

TAL International Group, Inc. ("TAL"or the "Company") was formed on October 26, 2004 and commenced operations on November 4,
2004, when it acquired all of the outstanding capital stock of TAL International Container Corporation ("the Acquisition").

The
Company leases intermodal transportation equipment, primarily maritime containers, and provides maritime container management services, through a worldwide network of offices, third
party depots and other facilities. The Company operates in both international and domestic markets. The majority of the Company's business is derived from leasing its containers to shipping line
customers through a variety of long-term and short-term contractual lease arrangements. The Company also sells its own containers and containers purchased from third parties
for resale. TAL also
enters into management agreements with third party container owners under which the Company manages the leasing and selling of containers on behalf of the third party owners.

B.    Basis of Presentation

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.

The
consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain
reclassifications have been made to the accompanying prior period financial statements and notes to conform with the current year's presentation.

C.    Recently Issued Accounting Pronouncements

The FASB has issued Accounting Standards Update No. 2010-06 ("ASU 2010-06"),Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which is effective for interim and annual reporting periods beginning after December 15,
2009. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB's
objective is to improve these disclosures and, thus, increase the transparency in financial reporting. A reporting entity should provide disclosures about the valuation techniques and inputs used to
measure fair value for both recurring and nonrecurring fair value measurements.

The
Company adopted the provisions of ASU 2010-06 effective January 1, 2010, and it did not impact the consolidated financial results as it is
disclosure-only in nature. Refer to Note 6 for more information.

Note 2  Fair Value of Financial Instruments

The Company believes the carrying amounts of cash and cash equivalents, accounts receivable and other financial assets approximated
fair value at March 31, 2010.

7

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The
interest rates charged on the majority of the Company's various credit facilities are based on variable interest rates. The Company estimates that at March 31, 2010 the
carrying value of the Company's debt instruments was approximately $108.5 million higher than its fair value. The Company estimated the fair value of its debt instruments based on the net
present value of its future debt payments, using a discount rate which reflected the Company's estimate of market interest spreads at March 31, 2010.

Note 3  Dividends

The Company paid the following quarterly dividends during the quarter ended March 31, 2010 and 2009 on its issued and
outstanding common stock:

Record
Date

Payment Date

Aggregate
Payment

Per Share
PaymentMarch 11, 2010


March 25, 2010

$
7.6 million

$
0.25March 12, 2009


March 26, 2009

$
0.3 million

$
0.01


Note 4  Stock-Based Compensation Plans

The Company records compensation cost relating to share-based payment transactions in accordance with FASB Accounting Standards
Codification No. 718 (ASC 718)Compensation  Stock Compensation. The cost is measured at the grant date, based on the calculated
fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity award).

The
following compensation costs were reported in administrative expenses in the Company's statements of operations related to the Company's stock-based compensation plans as a result of
stock options granted in 2006 and restricted shares granted during the years 2007, 2009 and 2010 (dollars in thousands):

Three Months Ended March 31,2010

2009Stock options

$
5

$
5Restricted stock


395


282Total

$
400

$
287


Total
unrecognized compensation cost related to 18,000 remaining options granted during the year ended December 31, 2006 of approximately $6,500 as of March 31, 2010 will
be recognized over the remaining vesting period of approximately three months.

Total
unrecognized compensation cost of approximately $2.7 million as of March 31, 2010 related to 277,750 restricted shares granted during 2007, 2009 and 2010 will be
recognized over the remaining weighted average vesting period of approximately 2.0 years.

8

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 5  Debt

Debt consisted of the following (amounts in thousands):

March 31,
2010

December 31,
2009Asset backed securitization (ABS)Term notes  Series 2006-1

$
343,708

$
357,833Term notes  Series 2005-1


330,556


342,3612008 Asset backed credit facility


185,500


209,5002009 Asset backed credit facility


50,000


50,000Revolving credit facility


63,500


Finance lease facility


36,474


38,5052007 Term loan facility


25,413


26,6882009 Term loan facilities


31,515


32,175Port equipment facility


9,453


10,547Capital lease obligations


87,983


93,689Total

$
1,164,102

$
1,161,298


2009 Asset Backed Credit Facility

On February 16, 2010, TAL Advantage III, LLC, an indirect wholly owned subsidiary of TAL International
Group, Inc., increased the size of its asset backed credit facility from $100 million to $150 million.

Note 6  Derivative Instruments

Interest Rate Swaps

The Company has entered into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreements
utilized by the Company effectively modify the Company's exposure to interest rate risk by converting a portion of its floating rate debt to a fixed rate basis, thus reducing the impact of interest
rate changes on future interest expense. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the lives of the agreements without an exchange
of the underlying principal amounts. The
counterparties to these agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of the interest rate swap agreements, the Company's
exposure is limited to the interest rate differential on the notional amount at each monthly settlement period over the life of the agreements. The Company does not anticipate any
non-performance by the counterparties. Substantially all of the assets of TAL Advantage I LLC, TAL Advantage II LLC and TAL Advantage III LLC are pledged as collateral
for the underlying indebtedness and the amounts payable under the interest rate swap agreements for each of these entities. In addition, certain assets of TAL International Container Corporation, a
wholly owned subsidiary of TAL International Group, Inc. are pledged as collateral for the Revolving Credit Facility and the amounts payable under certain interest rate swap agreements.

9

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

As
of March 31, 2010, the Company had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under its debt facilities as
summarized below:

Total Notional
Amount at
March 31, 2010

Weighted Average Fixed Leg
Interest Rate at March 31, 2010

Weighted Average
Remaining Term$
1,156 million


4.18%

3.3 years


All
interest rate swap contracts entered into since April 12, 2006 are not accounted for as hedging instruments under FASB Accounting Standards Codification No. 815 (ASC
815)Derivatives and Hedging, and changes in the fair value of the interest rate swap contracts are reflected in the statements of operations as
unrealized (gains)/ losses on interest rate swaps. Prior to April 12, 2006, the Company had designated all existing swap contracts as cash flow hedges and then de-designated these
contracts on April 12, 2006. As of March 31, 2010, the unamortized pre tax balance reflected in accumulated other comprehensive income (loss) of these previously designated swap
contracts was approximately $1.0 million, of which $0.7 million will be amortized to income over the next 12 months.

Under
the criteria established by FASB Accounting Standards Codification No. 820 (ASC 820)Fair Value Measurements and Disclosures,
the fair value measurements of the interest rate swap contracts are based on significant other observable inputs other than quoted prices, either on a direct or indirect basis (Level 2), using
valuation techniques the Company believes are appropriate.

The
Company has elected to use the income approach to value the interest rate swap contracts, using observable Level 2 market expectations at the measurement date and standard
valuation techniques to convert future amounts to a single present amount (discounted) assuming that participants are motivated, but not compelled to transact. Level 2 inputs for the swap
valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts through three years) and inputs other than quoted prices that are observable
for the asset or liability (specifically LIBOR cash rates in the very short term, LIBOR swap rates from four years and beyond , basis swap adjustments, and credit risk at commonly quoted intervals).

Foreign Currency Rate Swaps

In April 2008, the Company entered into foreign currency rate swap agreements to manage foreign currency rate risk exposure by
exchanging Euros for U.S. Dollars based on expected payments under its Euro denominated finance lease receivables. The Company will pay a total of approximately 5.7 million Euros and receive
approximately $8.7 million over the remaining term of foreign currency rate swap agreements which expire in April 2015. The Company does not account for the foreign currency rate swap
agreements as hedging instruments under ASC 815, and therefore changes in the fair value of the foreign currency rate swap agreements are reflected in the statements of operations in administrative
expenses.

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Under the criteria established by ASC 820, the fair value measurement of the foreign currency rate swap contracts are based on significant other observable inputs
other than quoted prices, either on a direct or indirect basis (Level 2), using valuation techniques the Company believes are appropriate.

The
Company has elected to use the income approach to value the foreign currency rate swap contracts, using observable Level 2 market expectations at the measurement date and
standard valuation techniques to convert future amounts to a single present amount (discounted) assuming that participants are motivated, but not compelled to transact. Level 2 inputs for the
forward valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically spot currency rates) and inputs other than quoted prices that are observable for the
asset or liability (specifically forward currency points, LIBOR cash and swap rates, and credit risk at commonly quoted intervals).

Location of Derivative Instruments in Financial Statements

Fair Value of Derivative Instruments  Derivatives Not Designated as Hedging Instruments Under ASC 815  $ in Millions

Asset Derivatives

Liability DerivativesMarch 31, 2010

December 31, 2009

March 31, 2010

December 31, 2009Derivative
Instrument

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance Sheet
Location

Fair
ValueInterest rate contracts

Fair Value of Derivative Instruments

$
1.1

Fair Value of Derivative Instruments

$
2.2

Fair Value of Derivative Instruments

$
67.6

Fair Value of Derivative Instruments

$
61.8Foreign exchange contracts

Fair Value of Derivative Instruments

$
0.8

Fair Value of Derivative Instruments

$
0.5

Fair Value of Derivative Instruments

$


Fair Value of Derivative Instruments

$
Total Derivatives



$
1.9



$
2.7



$
67.6



$
61.8


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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Derivatives Not Designated as Hedging Instruments Under ASC 815  Effect of Derivative Instruments on Statement of Operations  $ in Millions

Amount of (Gain) Loss Recognized
in Income on DerivativesThree months ended March 31,Location of (Gain) Loss
Recognized in
Income on DerivativesDerivative
Instrument

2010

2009Interest rate contracts

Unrealized loss (gain) on interest rate swaps

$
6.8

$
(5.1
)Foreign exchange
contracts

Administrative Expenses

$
(0.4
)
$
(0.2
)Total



$
6.4

$
(5.3
)


Note 7  Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share for the three months ended March 31, 2010
and 2009 (in thousands, except earnings per share):

Three Months Ended
March 31,2010

2009Numerator:Net income applicable to common stockholders for basic and diluted earnings per share

$
5,899

$
16,616Denominator:Weighted average shares outstanding for basic earnings per share


30,429


31,970Dilutive stock options


105


11Weighted average shares for diluted earnings per share


30,534


31,981Earnings per share:Basic

$
0.19

$
0.52Diluted

$
0.19

$
0.52


For
the quarters ended March 31, 2010 and 2009, options to purchase shares of common stock and restricted stock shares of 597,191 and 683,692, respectively, were not included in
the calculation of weighted average shares for diluted earnings per share because their effects were antidilutive.

Note 8  Segment and Geographic Information

Industry Segment Information

The Company conducts its business activities in one industry, intermodal transportation equipment, and has two
segments:



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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)



The
following tables show segment information for the three months ended March 31, 2010 and March 31, 2009, and the consolidated totals reported (dollars in thousands):

2010

Equipment
Leasing

Equipment
Trading

TotalsTotal revenues

$
73,196

$
6,402

$
79,598Equipment trading expenses





5,178


5,178Depreciation and amortization expense


26,837


129


26,966Net (gain) on sale of leasing equipment


(4,468
)




(4,468
)Interest and debt expense


16,671


371


17,042Income before income taxes(1)


15,662


551


16,213Goodwill at March 31


70,898


1,000


71,898Total assets at March 31


1,852,152


20,375


1,872,527Purchases of leasing equipment(2)


46,217


15,773


61,990Investments in finance leases(2)


330





330


---

2009

Equipment
Leasing

Equipment
Trading

TotalsTotal revenues

$
83,941

$
16,214

$
100,155Equipment trading expenses





14,775


14,775Depreciation and amortization expense


29,075


34


29,109Net (gain) on sale of leasing equipment


(3,596
)




(3,596
)Interest and debt expense


17,180


181


17,361Income before income taxes(3)


20,111


627


20,738Goodwill at March 31


70,898


1,000


71,898Total assets at March 31


1,892,014


16,524


1,908,538Purchases of leasing equipment(4)


24,383





24,383Investments in finance leases(4)


17,902





17,902


---

Note:    There
are no intercompany revenues or expenses between segments. Additionally, certain administrative expenses have been allocated between
segments based on an estimate of services provided to each segment. Beginning in the fourth quarter of 2009, certain equipment purchased for resale was purchased through sale leaseback transactions
with our shipping line customers, and the

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TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

containers
are being returned exceptionally slowly primarily due to the current worldwide shortage of containers. Due to the expected longer term nature of these transactions, these purchases are
reflected as leasing equipment as opposed to assets held for sale and the cash flows associated with these transactions are and will be reflected as purchases of leasing equipment and proceeds from
sale of equipment in investing activities.

Geographic Segment Information

The Company's customers use TAL's containers across their many worldwide trade routes. Substantially all of the
Company's leasing related revenues are denominated in U.S. dollars. The following table represents the allocation of domestic and international revenues for the periods indicated based on the
customers' primary domicile (in thousands):

Three Months Ended
March 31,2010

2009Total revenues:United States of America

$
6,496

$
11,029Asia


30,899


38,195Europe


37,289


42,749Other International


4,914


8,182Total

$
79,598

$
100,155


As
all of the Company's containers are used internationally, where no one container is domiciled in one particular place for a prolonged period of time, substantially all of the
Company's long-lived assets are considered to be international.

Note 9  Commitments and Contingencies

Residual Value Guarantees

During 2008, the Company entered into commitments for equipment residual value guarantees in connection with certain finance leases
that were sold or brokered to financial institutions. The guarantees represent the Company's commitment that these assets will be worth a specified amount at the end of lease terms (if the lessee does
not default on the lease) which expire in 2016. At March 31, 2010, the maximum potential amount of the guarantees under which the Company could be required to perform was approximately
$27.1 million. The carrying values of the guarantees of $1.1 million have been deferred and are included in accounts payable and accrued expenses. The Company accounts for the residual
value guarantees under FASB Accounting Standards Codification No. 450Contingencies,and expects the market value of the equipment covered by the
guarantees will equal or exceed the value of the guarantees. Under the criteria established by ASC 820, the Company performed fair value measurements of the guarantees at origination, using
Level 2 inputs, which were based on significant other observable inputs other than quoted prices, either on a direct or indirect basis.

Purchase Commitments

At March 31, 2010, commitments for capital expenditures totaled approximately $130.3 million.

14

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 10  Income Taxes

The consolidated income tax expense for the three month periods ended March 31, 2010 and 2009 was determined based upon
estimates of the Company's consolidated effective income tax rates for the years ending December 31, 2010 and 2009, respectively. The higher effective tax rate reported for the three months
ended March 31, 2010 was mainly attributed to additional tax expense related to stock compensation on restricted stock that vested on January 1, 2010. The difference between the
consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, foreign income taxes and the effect of certain permanent differences.

Note 11  Comprehensive Income and Other

The following table provides a reconciliation of the Company's net income to comprehensive income (in thousands):

Three Months Ended
March 31,2010

2009Net income

$
5,899

$
16,616Other comprehensive income:Foreign currency translation adjustments


(356
)

(99
)Amortization of net unrealized gains on derivative instruments previously designated as cash flow hedges (net of tax expense of $(68) and $(80),
respectively)


(123
)

(144
)Total

$
5,420

$
16,373


The
balance included in accumulated other comprehensive (loss) income for cumulative translation adjustments as of March 31, 2010 and December 31, 2009 was $(1,102) and
$(746), respectively.

The
Company recorded $0.4 million and $0.3 million of unrealized foreign currency exchange losses which are reported in administrative expenses in the Company's statement
of operations in the quarters ended March 31, 2010 and March 31, 2009, respectively, which resulted primarily from fluctuations in exchange rates related to its Euro and Pound Sterling
transactions and related assets.

Note 12  Subsequent Events

Amendments to 2009 Asset Backed Credit Facility

In April 2010, TAL Advantage III, LLC, an indirect wholly owned subsidiary of TAL International Group, Inc., increased
the size of its asset backed credit facility from $150 million to $295 million.

Quarterly Dividend

On April 29, 2010 the Company's Board of Directors approved and declared a $0.30 per share quarterly cash dividend on its issued
and outstanding common stock, payable on June 24, 2010 to shareholders of record at the close of business on June 3, 2010.

15

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Table of Contents

ITEM 2:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations of TAL
International Group, Inc. and its subsidiaries should be read in conjunction with related consolidated financial data and our annual audited consolidated financial statements and related notes
thereto included in our Annual Report on Form 10-K filed with the SEC on March 1, 2010. The statements in this discussion regarding industry outlook, our expectations
regarding our future performance, liquidity and capital resources and other non-historical statements are subject to numerous risks and uncertainties, including, but not limited to, the
risks and uncertainties described under "Risk Factors" and "Forward-Looking Statements" in our Form 10-K. Our actual results may differ materially from those contained in or implied
by any forward-looking statements.

Our Company

We are one of the world's largest and oldest lessors of intermodal containers and chassis. Intermodal containers are large,
standardized steel boxes used to transport freight by ship, rail or truck. Because of the handling efficiencies they provide, intermodal containers are the primary means by which many goods and
materials are shipped internationally. Chassis are used for the transportation of containers domestically.

We
operate our business in one industry, intermodal transportation equipment, and have two business segments:



Operations

Our operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers
and chassis. As of March 31, 2010, our total fleet consisted of 735,232 containers and chassis, including 30,119 containers under management for third parties, representing 1,190,335
twenty-foot equivalent units (TEUs). We have an extensive global presence, offering leasing services through 18 offices in 11 countries and 202 third party container depot facilities in 37
countries as of March 31, 2010. Our customers are among the largest shipping lines in the world. For the three months ended March 31, 2010, our twenty largest customers accounted for 75%
of our leasing revenues, our five largest customers accounted for 51% of our leasing revenues, and our largest customer accounted for18% of our leasing revenues.

We
primarily lease three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples,
electronics and apparel,
(2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and (3) special containers, which are used for heavy and oversized cargo such as marble
slabs, building products and machinery. We also lease chassis, which are generally used for the transportation of containers domestically, and tank containers, which are used to transport bulk liquid
products such as chemicals. We also finance port equipment, which includes container cranes, reach stackers and other related equipment. Our in-house equipment sales group manages the sale
process for our used containers and chassis from our equipment leasing fleet and buys and sells used and new containers and chassis acquired from third parties.

16

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Table of Contents

As
of March 31, 2010, the percentages of our equipment fleet and leasing revenues by equipment type are as follows:

Equipment Type

Percent of total
fleet units

Percent of
leasing revenueDry


82
%

58
%Refrigerated


5


27Special


7


11Chassis


1


3Tank





1Equipment leasing fleet


95


100Equipment trading fleet


5


Total


100
%

100
%


The
following tables provide the composition of our equipment fleet as of the dates indicated below (in both units and TEUs):

Equipment Fleet in UnitsMarch 31, 2010

December 31, 2009

March 31, 2009Owned

Managed

Total

Owned

Managed

Total

Owned

Managed

TotalDry


574,774


27,274


602,048


564,885


28,068


592,953


601,337


29,636


630,973Refrigerated


38,337


411


38,748


35,611


450


36,061


37,826


598


38,424Special


44,567


2,434


47,001


45,238


2,619


47,857


47,328


2,806


50,134Tank


1,497





1,497


1,350





1,350


1,350





1,350Chassis


8,773





8,773


8,778





8,778


8,790





8,790Equipment leasing fleet


667,948


30,119


698,067


655,862


31,137


686,999


696,631


33,040


729,671Equipment trading fleet


37,165





37,165


14,947





14,947


13,383





13,383Total


705,113


30,119


735,232


670,809


31,137


701,946


710,014


33,040


743,054Percentage


95.9
%

4.1
%

100.0
%

95.6
%

4.4
%

100.0
%

95.6
%

4.4
%

100.0
%




Equipment Fleet in TEUsMarch 31, 2010

December 31, 2009

March 31, 2009Owned

Managed

Total

Owned

Managed

Total

Owned

Managed

TotalDry


913,784


49,100


962,884


899,599


50,426


950,025


954,178


52,953


1,007,131Refrigerated


68,245


4,020


72,265


65,971


758


66,729


69,581


985


70,566Special


79,757


698


80,455


77,617


4,255


81,872


81,092


4,566


85,658Tank


1,547





1,547


1,400





1,400


1,400





1,400Chassis


15,602





15,602


15,612





15,612


15,633





15,633Equipment leasing fleet


1,078,935


53,818


1,132,753


1,060,199


55,439


1,115,638


1,121,884


58,504


1,180,388Equipment trading fleet


57,582





57,582


23,885





23,885


22,305





22,305Total


1,136,517


53,818


1,190,335


1,084,084


55,439


1,139,523


1,144,189


58,504


1,202,693Percentage


95.5
%

4.5
%

100.0
%

95.1
%

4.9
%

100.0
%

95.1
%

4.9
%

100.0
%


We generally lease our equipment on a per diem basis to our customers under three types of leases: long-term leases, finance leases
and service leases. Long-term leases, typically with initial

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contractual
terms of three to eight years, provide us with stable cash flow and low transaction costs by requiring customers to maintain specific units on-hire for the duration of the
lease. Finance leases, which are typically structured as full payout leases, provide for a predictable recurring revenue stream with the lowest daily cost to the customer because customers are
generally required to retain the equipment for the duration of its useful life. Service leases command a premium per diem rate in exchange for providing customers with a greater level of operational
flexibility by allowing the pick-up and drop-off of units during the lease term. We also have expired long-term leases whose fixed terms have ended but for which
the related units remain on-hire and for which we continue to receive rental payments pursuant to the terms of the initial contract. Some leases have contractual terms that have features
reflective of both long-term and service leases and we classify such leases as either long-term or service leases, depending upon which features are more predominant.

The
following table provides a summary of our equipment leasing fleet portfolio by lease type, based on total on-hire units as of the dates indicated below:

Lease Portfolio

March 31,
2010

December 31,
2009

March 31,
2009Long-term leases


61.3
%

68.7
%

63.5
%Finance leases


11.4


11.7


10.9Service leases


16.0


15.2


15.3Expired long-term leases (units on hire)


11.3


4.4


10.3Total


100.0
%

100.0
%

100.0
%


During
2009, we reached agreements with several of our customers that limit the total number of containers that could be returned from expired leases. During the redelivery limitation
period we have included the maximum number of containers that can be returned as expired term leases, while the balance of the affected units are included in current term leases. During the first
quarter of 2010 several of these agreements expired, and accordingly, all the units covered by those agreements are included in expired long-term leases at March 31, 2010.

As
of March 31, 2010, our long-term leases had an average remaining contract term of approximately 49 months, assuming no leases are renewed.

Operating Performance

Our profitability is primarily determined by the extent to which our leasing and other revenues exceed our ownership, operating and
administrative expenses. Our profitability is also impacted by the gain or loss that we realize on the sale of our used equipment and the net sales margins on our equipment trading activities.

Our
leasing revenue is primarily driven by our owned fleet size, utilization and average rental rates.

As
of March 31, 2010, our owned fleet included 1,136,517 TEUs, an increase of 4.8% from December 31, 2009, but down approximately 1% from March 31, 2009. The
increase in fleet size during the first quarter of 2010 was due to several factors, including an increase in new container purchases, the completion of several sale-leaseback transactions
for middle age containers, and the completion of several sale-leaseback transactions for trading containers. While the increase in fleet size should lead to increased leasing revenue and
trading margins over time, the increase in fleet size had a limited impact on leasing revenue in the first quarter of 2010 since many of the new containers were delivered toward the end of the
quarter, and since the lease rates on the containers purchased through sale-leaseback transactions are much lower than our average leasing rates as a result of the discounted purchase
prices for middle age and older trading containers.

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Table of Contents

In
the first quarter of 2010, TAL began to receive delivery of new containers that were ordered in response to the recovery in trade volumes and leasing demand we have experienced since
the last few months of 2009. Trade volumes decreased precipitously from the end of 2008 through the middle of 2009, and leasing demand was exceptionally weak for much of last year. In response to
this, leasing companies and shipping lines effectively ceased purchasing containers in 2009 due to a build-up of excess container inventories, and we estimate that global container
capacity decreased five percent or more from September 2008 through the end of 2009 as containers aged out of service and were not replaced. However, trade volumes began to recover in the second half
of 2009, and they continued to improve through the first quarter of 2010. The combination of reduced global container capacity and recovering trade volumes caused the global container supply / demand
balance to rapidly shift from excess supply to a shortage situation during the end of 2009 and early 2010, and TAL has started to place large orders for new containers to meet the resurgence in
leasing demand.

TAL's
purchases of new containers in 2010 have also been supported by a shift in the mix of shipping-line owned vs. leased containers. Historically, shipping
lines have purchased and owned 55% to 60% of containers directly, and leased 40% to 45% of their operated containers from leasing companies like TAL. Recently however, shipping lines have been
purchasing a much smaller portion of their containers due to financial constraints they are facing due to reduced profitability and increased capital outlays associated with aggressive ship building
programs. Through the end of April 2010, TAL has ordered or is in discussion to order 175,000 TEU of dry containers and 9,000 TEU of refrigerated containers, though we will accept most of the dry
containers in the second and third quarters.

In
the first quarter of 2010, we sold approximately 19,632 TEUs of our owned containers, or 1.85% of our equipment leasing fleet as of the beginning of the quarter. This annualized
disposal rate of approximately 7.41% is similar to the 6 to 8% annual disposal rate we have been experiencing for the last few years, and is generally consistent with our expected
long-term average disposal rate given the 12 - 14 year expected useful life of our containers. For much of 2009, our disposal rate did not keep pace at the
rate at which older containers were being returned to us and our inventory of disposal containers increased throughout the year. However, drop-off volumes have decreased sharply in 2010
due to the global shortage of containers, and our disposal rate in the first quarter of 2010 was much higher than the rate at which older containers were returned to us. As a result, our inventory of
disposal containers has been decreasing this year and we expect it to return to a normal level within the next few quarters.

Our
average utilization was 91.8% in the first quarter of 2010, an increase of 1.7% from the first quarter of 2009, and an increase of 3.1% from the fourth quarter of 2009. Ending
utilization increased 3.1% from 90.3% as of December 31, 2009 to 93.4% as of March 31, 2010. The increase in our utilization in the first quarter of 2010 was mainly the result of strong
leasing demand for our dry containers due to the combination of recovering containerized trade volumes and the 2009 decrease in global container capacity. We expect utilization to continue to trend up
in the second quarter and remain strong throughout 2010.

Utilization
and leasing demand for our refrigerated containers remained strong in the first quarter of 2010. The utilization of our refrigerated containers does not heavily influence our
overall utilization since they represent only approximately 5% of the units in our fleet. However, these container types
are significantly more expensive than dry containers, generate higher per diem lease rates and currently represent approximately 27% of our leasing revenue.

Leasing
demand for special containers was moderate in the first quarter of 2010 while demand for our chassis product line remained weak due to lingering weakness in U.S. import growth
and an oversupply of chassis in the marketplace.

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Table of Contents

The
following tables set forth our equipment fleet utilization(1) for the periods indicated below:

Quarter Ended
March 31,
2010

Quarter Ended
December 31,
2009

Quarter Ended
September 30,
2009

Quarter Ended
June 30,
2009

Quarter Ended
March 31,
2009Average Utilization


91.8%


88.7%


86.2%


87.0%


90.1%




March 31,
2010

December 31,
2009

September 30,
2009

June 30,
2009

March 31,
2009Ending Utilization


93.4%


90.3%


87.6%


85.9%


88.5%


(1)Utilization
is computed by dividing our total units on lease by the total units in our fleet excluding new units not yet leased.


Average
lease rates for our dry container product line in the first quarter of 2010 were 9.0% lower compared to the average level of the first quarter of 2009 and 1.5% lower than the
fourth quarter of 2009. The decrease in average lease rates in 2010 primarily reflects the impact of lease extension transactions and other incentives provided to our customers during 2009 to
encourage them to keep units on-hire. The decrease in average lease rates from the fourth quarter to the first quarter 2010 reflects a significant number of units picked up on incentive
leases providing initial free rental periods. We expect our average lease rates for dry containers to gradually increase throughout the remainder of 2010 as these incentives expire and as containers
are supplied to lessees at higher rates.

Average
lease rates for refrigerated containers in the first quarter of 2010 were 5.3% lower compared to the first quarter of 2009, and 0.3% lower than the fourth quarter of 2009, while
average rental rates for our special containers were 2.1% lower during the first quarter of 2010 compared to the first quarter of 2009, but 0.5% higher compared to the fourth quarter of 2009. The
decrease in average lease rates for our refrigerated containers was primarily due to lease rate concessions provided to certain customers in 2009 for lease extension transactions. In addition, market
leasing rates for new refrigerated containers are still below our portfolio average rates due to lower container prices, so we generally expect our average rates for refrigerated containers to
continue to trend down. The decrease in average leasing rates from the first quarter of 2009 for special containers was primarily due to discounts associated with lease extension transactions
completed in 2009.

During
the first quarter of 2010, we recognized a $4.5 million gain on the sale of our used containers compared to a $3.6 million gain in the first quarter of 2009 and
$2.2 million in the fourth quarter 2009. The increase compared to the first quarter of 2009 mainly resulted from an increase in the number of units sold, while the increase from the fourth
quarter is a result of higher selling prices. In addition, in the fourth quarter of 2009 we recorded a $0.7 million loss on new units placed on a finance lease, while in the first quarter of
2010, we recorded a $0.8 million gain on older equipment placed on a finance lease. We recognize an upfront gain or loss when we place existing equipment on finance leases and the current
market value of the equipment is different from our book value. We do not incur up-front gains or losses when we place existing equipment on operating leases. Looking forward, we expect
used container selling prices to continue to improve due to the global shortage of containers capacity and decreasing inventories of disposal containers, though the size of our gains may start to be
constrained by lower selling volumes if drop-off volumes remain exceptionally low.

During
the first quarter of 2010, we recognized a net equipment trading margin of $0.6 million on the sale of equipment purchased for resale, compared to a $1.3 million
margin in the first quarter of 2009 and a $0.4 million margin in the fourth quarter 2009. In 2009, our trading margins decreased from the high levels achieved in previous years as we decreased
our purchase volumes due to concerns about future selling prices, and as we experienced low per-unit margins from selling containers that had been purchased in prior years at relatively
high prices. In 2010, we expect our per unit trading margins to

20

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improve
as disposal prices recover, though we expect our trading volumes and overall trading margin to remain historically low. Beginning in the fourth quarter of 2009, we started to significantly
increase our purchases of trading containers, and our equipment trading inventory increased to 57,582 TEU as of March 31, 2010 compared to only 16,590 TEU as of September 30, 2009.
However, most of these trading containers were purchased through sale-leaseback transactions with our shipping line customers, and the containers are being returned to us exceptionally
slowly primarily due to the current worldwide shortage of containers.

Our
ownership expenses, principally depreciation and interest expense, decreased by $2.5 million, or 5.3% in the first quarter of 2010 as compared to the first quarter of 2009.
Although we started to invest heavily in containers in the first quarter of 2010, most of these containers have not yet been delivered and the impact of these new purchases has not yet been fully
reflected in our depreciation and interest expense.

For
the first quarter of 2010, we reversed a portion of our provision for doubtful accounts amounting to $0.1 million, down from a provision of $0.3 million in the first
quarter of 2009. In the first quarter of 2010, our provision for doubtful accounts reflected the reversal of various provisions for certain customers recorded in 2009 that were no longer needed.

While
our credit performance remained strong in the first quarter of 2010, we remain generally concerned with credit risk. Profitability in the shipping industry has improved
significantly from the large losses most shipping lines recorded in 2009, but shipping lines continue to face excess vessel capacity, and recent improvements in freight rates and shipping line
profitability may be pressured if trade volumes drop from their current level or if a large portion of currently-idled vessels are brought back into service. Several of our customers, including a few
major shipping lines, missed contractual payment dates during 2009. In addition, several major shipping lines, including our largest customer, are currently involved in comprehensive financial
restructuring negotiations with their major creditors.

If
one of our major customers defaulted on our leases and ceased operations because of deterioration in its financial performance, we would face reduced revenues and we would likely
incur significant write-offs due to lost units and recovery expenses. While the current shortage of container capacity and resulting strong current leasing demand would help our recovery
and re-marketing efforts in a default situation, we still expect that the financial impact of a major customer default would be significant. We do not maintain an equipment reserve for
units on
lease to performing customers, so a major customer default would have a significant impact on our financial statements at the time the major customer defaulted. To mitigate this impact from potential
defaults, we entered into a credit insurance policy in the third quarter of 2009 that in certain circumstances covers losses and costs incurred in default situations. However, this policy has
significant deductibles, exclusions and payment and other limitations, and therefore may not protect us from losses arising from customer defaults.

Our
direct operating expenses were $8.2 million in the first quarter of 2010, compared to $9.8 million in the first quarter of 2009. We incurred significantly less repair
and storage costs in the first quarter of 2010 due to less redeliveries and fewer units off-hire during the period.

Treasury Stock

We repurchased the following amounts of Treasury Stock during the three months ended March 31, 2010 and March 31, 2009:

Quarter ended

Shares Purchased

Amount PaidMarch 31, 2010


1,791

$
23 thousandMarch 31, 2009


1,021,918

$
8.2 million


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Table of Contents

Dividends

We paid the following quarterly dividends during the quarter ended March 31, 2010 and 2009 on our issued and outstanding common
stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentMarch 11, 2010


March 25, 2010

$
7.6 million

$
0.25March 12, 2009


March 26, 2009

$
0.3 million

$
0.01


Results of Operations

The following table summarizes our results of operations for the three months ended March 31, 2010 and 2009 in thousands of
dollars and as a percentage of total revenues:

Three Months Ended March 31,2010

2009Dollars

Percent

Dollars

PercentLeasing revenues

$
72,863


91.5
%
$
83,102


83.0
%Equipment trading revenue


5,738


7.2


16,088


16.0Management fee income


768


1.0


669


0.7Other revenues


229


0.3


296


0.3Total revenues


79,598


100.0


100,155


100.0Operating expenses (income):Equipment trading expenses


5,178


6.5


14,775


14.8Direct operating expenses


8,180


10.3


9,825


9.8Administrative expenses


10,555


13.2


11,622


11.6Depreciation and amortization


26,966


33.9


29,109


29.1(Reversal) provision for doubtful accounts


(68
)

(0.1
)

321


0.3Net (gain) on sale of leasing equipment


(4,468
)

(5.6
)

(3,596
)

(3.6
)Total operating expenses


46,343


58.2


62,056


62.0Operating income


33,255


41.8


38,099


38.0Other expenses (income):Interest and debt expense


17,042


21.4


17,361


17.3Unrealized loss (gain) on interest rate swaps


6,784


8.5


(5,063
)

(5.1
)Total other expenses


23,826


29.9


12,298


12.2Income before income taxes


9,429


11.9


25,801


25.8Income tax expense


3,530


4.5


9,185


9.2Net income

$
5,899


7.4
%
$
16,616


16.6
%


Comparison of Three Months Ended March 31, 2010 to Three Months Ended March 31, 2009.

Leasing revenues.The principal components of our leasing revenues are presented in the following table. Per diem revenue
represents revenue earned
under operating lease contracts; fee and ancillary lease revenue represent fees billed for the pick-up and drop-off of containers in certain geographic

22

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Table of Contents

locations
and billings of certain reimbursable operating costs such as repair and handling expenses; and finance lease revenue represents interest income earned under finance lease contracts.

Three Months Ended March 31,2010

2009(in thousands)Leasing revenues:Operating lease revenues:Per diem revenue

$
62,265

$
68,216Fee and ancillary lease revenue


5,728


9,831Total operating lease revenue


67,993


78,047Finance lease revenue


4,870


5,055Total leasing revenues

$
72,863

$
83,102


Total
leasing revenues were $72.9 million for the three months ended March 31, 2010, compared to $83.1 million for the three months ended March 31, 2009, a
decrease of $10.2 million, or 12.3%.

Per
diem revenue decreased by $6.0 million compared to 2009. The primary reasons for the decrease are as follows:



Fee
and ancillary lease revenue decreased by $4.1 million as compared to the prior year primarily due to a decrease in repair and handling revenue resulting from a decrease in
drop off volume.

Finance
lease revenue decreased by $0.2 million in 2010, primarily due to a decrease in the average size of our finance lease portfolio.

Equipment Trading Activities.Equipment trading revenue represents the proceeds on the sale of equipment purchased for resale.
Equipment trading
expenses represent the cost of equipment sold, including costs associated with the acquisition, maintenance and selling of trading inventory, such as positioning, repairs, handling and storage costs,
and estimated direct selling and administrative costs.

Three Months Ended March 31,2010

2009(in thousands)Equipment trading revenues

$
5,738

$
16,088Equipment trading expenses


(5,178
)

(14,775
)Equipment trading margin

$
560

$
1,313


The
equipment trading margin decreased $0.8 million for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The trading margin
decreased primarily due to a decrease in sales volume.

Direct operating expenses.Direct operating expenses primarily consist of our costs to repair equipment returned off lease, to
store the equipment
when it is not on lease, and to reposition equipment that has been returned to locations with weak leasing demand.

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Table of Contents

Direct
operating expenses were $8.2 million for the three months ended March 31, 2010, compared to $9.8 million for the three months ended March 31, 2009, a
decrease of $1.6 million. The primary reasons for the decrease are outlined below:



Administrative expenses.Administrative expenses were $10.6 million for the three months ended March 31, 2010, compared
to
$11.6 million for the three months ended March 31, 2009, a decrease of $1.0 million or 9.2%. The decrease was primarily due to lower employee salary and benefit costs. In the
first quarter of 2009 we recorded a one-time charge for certain severance benefits of $0.9 million.

Depreciation and amortization.Depreciation and amortization was $27.0 million for the three months ended March 31,
2010, compared to
$29.1 million for the three months ended March 31, 2009, a decrease of $2.1 million or 7.2%. Depreciation decreased by $1.6 million due to another vintage year of older
equipment becoming fully depreciated in the fourth quarter of 2009 and by $0.4 million due to a smaller depreciable fleet.

Net (gain) on sale of leasing equipment.Gain on sale of equipment was $4.5 million for the three months ended
March 31, 2010, compared
to a gain of $3.6 million for the three months ended March 31, 2009, an increase of $0.9 million. Gain on sale increased by $1.2 million due to higher volume of units sold.

Interest and debt expense.Interest and debt expense was $17.0 million for the three months ended March 31, 2010,
compared to
$17.4 million for the three months ended March 31, 2009, a decrease of $0.4 million. The decrease was primarily due to lower consolidated debt outstanding during the quarter,
partially offset by higher effective interest rates.

Unrealized loss (gain) on interest rate swaps.Unrealized loss on interest rate swaps was $6.8 million for the three months
ended
March 31, 2010, compared to an unrealized gain of $5.1 million for the three months ended March 31, 2009. The net fair value of the interest rate swap contracts was a net
liability of $66.5 million at March 31, 2010, compared to a net liability of $59.6 million at December 31, 2009. The increase in the liability resulted from a decrease in
long-term interest rates in 2010.

Income tax expense.Income tax expense was $3.5 million for the three months ended March 31, 2010, compared to
$9.2 million for
the three months ended March 31, 2009.The effective tax rates were 37.4% for the three months ended March 31, 2010 and 35.6% for the three months ended March 31, 2009. The higher
effective tax rate reported for the three months ended March 31, 2010 was mainly attributed to additional tax expense related to stock compensation on restricted stock that vested on
January 1, 2010. We anticipate that our annual effective tax rate will be approximately 35.5%.

While
we record income tax expense we do not pay any significant federal, state or foreign income taxes due to the availability of net operating loss carryovers and accelerated tax
depreciation for our equipment. The majority of the expense recorded for income taxes is recorded as a deferred tax liability on the balance sheet. We anticipate that the deferred income tax liability
will continue to grow for the foreseeable future.

Business Segments

We operate our business in one industry, intermodal transportation equipment, and in two business segments, Equipment leasing and
Equipment trading.

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Table of Contents

Equipment leasing

We own, lease and ultimately dispose of containers and chassis from our lease fleet, as well as manage leasing activities for
containers owned by third parties. Equipment leasing segment revenues represent leasing revenues from operating and finance leases, fees earned on managed container leasing activities, as well as
other revenues. Expenses related to equipment leasing include direct operating expenses, administrative expenses, depreciation expense, and interest expense. The Equipment leasing segment also
includes gains and losses on the sale of owned leasing equipment.

The
following table lists selected revenue and expense items for our Equipment leasing segment for the three months ended March 31, 2010 and 2009:

Three Months Ended March 31,2010

2009(in thousands)Equipment leasing segment:Total revenues

$
73,196

$
83,941Depreciation and amortization expense


26,837


29,075Interest and debt expense


16,671


17,180Net (gain) on sale of leasing equipment


(4,468
)

(3,596
)Income before income taxes(1)

$
15,662

$
20,111


---

Segment Comparison of Quarter Ended March 31, 2010 to Quarter Ended March 31, 2009

Equipment leasing revenue.Total revenue for the Equipment leasing segment was $73.2 million in the three months ended
March 31, 2010
compared to $83.9 million in the three months ended March 31, 2009, a decrease of $10.7 million, or 12.8%. The primary reasons for the decrease are as
follows:



Equipment leasing income before income taxes.Income before income taxes for the Equipment leasing
segment was $15.7 million in the three months ended March 31, 2010 compared to $20.1 million in the three months ended March 31, 2009, a decrease of $4.4 million, or
21.9%. The primary reasons for the decrease in income before income taxes are as follows:



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Table of Contents



Equipment trading

We purchase containers from shipping line customers and other sellers of containers, and resell these containers to container traders
and users of containers for storage or one-way shipment. Equipment trading segment revenues primarily represent the proceeds on the sale of containers purchased for resale. Also included
in Equipment trading segment revenues are leasing revenues from equipment purchased for resale that is currently on lease until containers are dropped off. Equipment trading expenses represent the
cost of equipment sold, including costs associated with the acquisition, maintenance and selling of trading inventory, such as positioning, repairs, handling and storage costs, and estimated direct
selling and administrative costs. Other expenses in this segment include administrative overhead expenses, depreciation expense, provision for doubtful accounts and interest expense.

The
following table lists selected revenue and expense items for our Equipment trading segment for the three months ended March 31, 2010 and 2009:

Three Months Ended March 31,2010

2009(in thousands)Equipment trading segment:Total leasing revenues

$
664

$
126Equipment trading revenues


5,738


16,088Equipment trading expense


(5,178
)

(14,775
)Equipment trading margin


560


1,313Interest and debt expense


371


181Income before income taxes(1)


551


627


---

Segment Comparison of Quarter Ended March 31, 2010 to Quarter Ended March 31, 2009

Equipment trading margin.The equipment trading margin, the difference between Equipment trading revenue and expenses, decreased
$0.8 million
in 2010 compared to 2009 primarily due to a lower volume of units sold.

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Table of Contents

Equipment trading income before income taxes.Income before income taxes for the Equipment trading segment was $0.6 million in the
three
months ended March 31, 2010, relatively unchanged compared to the three months ended March 31, 2009. The decrease in the equipment trading margin was partially offset by an increase in
leasing revenue resulting from several sale leaseback transactions completed in the first quarter of 2010 and a decrease in administrative expenses due to lower allocated corporate expenses. Corporate
expenses are allocated to the equipment trading segment primarily based on the number of units sold in the equipment trading fleet relative to total units sold from both the equipment trading and
equipment leasing fleets.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows provided by operating activities, proceeds from the sale of our leasing equipment,
principal payments on finance lease receivables and borrowings under our credit facilities. Our cash in-flows and borrowings are used to finance capital expenditures, meet debt service
requirements and pay dividends.

We
continue to have sizable cash in-flows. For the quarter ended March 31, 2010, cash provided by operating activities, together with the proceeds from the sale of our
leasing equipment and principal payments on our finance leases, was $49.7 million. In addition, as of March 31, 2010 we had $42.1 million of unrestricted cash and
$176.0 million of additional borrowing capacity under our current credit facilities.

As
of March 31, 2010, major committed cash outflows in the next 12 months include $200.2 million of committed but unpaid capital expenditures and
$167.2 million of scheduled principal payments on our existing debt facilities.

We
believe that cash provided by operating activities and existing cash, proceeds from the sale of our leasing equipment and principal payments on our finance lease receivables will be
sufficient to meet our committed obligations over the next 12 months. In addition, we have further increased our asset backed credit facility by $145 million in April and we expect that
we will be able to secure additional financing in 2010 to support additional investment in our fleet.

At
March 31, 2010, our outstanding indebtedness was comprised of the following (amounts in millions):

Current
Amount
Outstanding

Current
Maximum
Borrowing
LevelAsset backed securitization (ABS)Term notes  Series 2006-1

$
343.7

$
343.7Term notes  Series 2005-1


330.5


330.52008 Asset backed credit facility


185.5


225.02009 Asset backed credit facility


50.0


150.0Revolving credit facility


63.5


100.0Finance lease facility


36.5


36.52007 Term loan facility


25.4


25.42009 Term loan facilities


31.5


31.5Port equipment facility


9.5


9.5Capital lease obligations


88.0


88.0Total Debt

$
1,164.1


1,340.1


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Table of Contents

The
maximum commitment levels depicted in the chart above may not reflect the actual availability under all of the credit facilities. Certain of these facilities are governed by
borrowing bases that limit borrowing capacity to an established percentage of relevant assets.

Interest
rates on the majority of our debt obligations are based on floating rate indices (such as LIBOR). We economically hedge the risks associated with fluctuations in interest rates
on our long-term borrowings by entering into interest rate swap contracts.

Debt Covenants

We are subject to certain financial covenants under our debt facilities. At March 31, 2010, we were in compliance with all such covenants. Below are the
primary financial covenants to which we are subject:



Non-GAAP Measures

We rely primarily on our results measured in accordance with generally accepted accounting principles ("GAAP") in evaluating our business. EBIT, Cash Interest,
TNW, and Indebtedness are non-GAAP financial measures used to determine our compliance with certain covenants contained in our debt agreements and should not be used as a substitute for
analysis of our results as reported under GAAP. However, we believe that the inclusion of this non-GAAP information provides additional information to investors regarding our debt covenant
compliance.

Minimum EBIT to Cash Interest Expense

For the purpose of this covenant, EBIT is calculated based on the cumulative sum of our earnings for the last four quarters (excluding income taxes, interest
expense, amortization / write off of deferred financing charges, unrealized gain or loss on interest rate swaps and certain non-cash charges). Cash Interest Expense is calculated based on
interest expense adjusted to exclude interest income, amortization of deferred financing costs, and the difference between current and prior period interest expense accruals.

Minimum
EBIT to Cash Interest Expense is calculated at the consolidated level and for TAL Advantage I LLC, TAL Advantage II LLC and TAL Advantage III LLC, wholly
owned special purpose entities whose primary activity is to issue asset backed notes. The Consolidated Minimum EBIT to Cash Interest Expense ratio is fixed at 1.10 to 1.00 for our Asset backed
securitization (ABS), 2008 Asset backed facility and Revolving credit facility and at 1.05 to 1.00 for the Finance lease facility. The TAL Advantage I LLC and the TAL Advantage II LLC
Minimum EBIT to Cash Interest Expense ratio is fixed at 1.10 to 1.00 for the Asset backed securitization and the Asset backed credit facilities. The TAL Advantage III LLC Minimum EBIT to Cash
Interest Expense ratio is fixed at 1.30 to 1.00 for the 2009 Asset Backed Credit Facility.

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Table of Contents

Below
is the calculation of EBIT to Cash Interest Expense (based on the last four quarters) as of March 31, 2010 (in thousands):

EBIT to Cash Interest Expense:

Consolidated(1)

TAL Adv I

TAL Adv II

TAL Adv III(2)Net income (loss)

$
60,869

$
36,167

$
7,655

$
(110
)Plus: Income tax expense (benefit)


33,613


14,804


4,230


(60
)Interest expense including write-off of deferred financing costs


68,488


37,647


13,136


1,564Unrealized losses (gains) on interest rate swaps


(23,305
)

(12,907
)

(6,489
)

576All other non-cash expenses


1,830


153


6


62EBIT

$
141,495

$
75,864

$
18,538

$
2,032Interest expense (excluding interest income of $92, $35, $1 and $0 respectively)

$
68,580

$
37,682

$
13,137

$
1,564Amortization and write-off of deferred financing costs


(1,251
)

(599
)

(294
)

(85
)Accrued interest (represents 2010 interest expense not paid)


(1,973
)

(949
)

(360
)

(124
)Cash payments of prior period accrued interest


2,716


1,307


443


Cash Interest Expense

$
68,072

$
37,441

$
12,926

$
1,355EBIT to Cash Interest Expense Ratio


2.08


2.03


1.43


1.50Required Minimum EBIT to Cash Interest Expense Ratio


1.10 / 1.05


1.10


1.10


1.30


(1)The
consolidated amounts shown above include all consolidated subsidiaries of TAL International Group, Inc., including TAL Advantage I, LLC,
TAL Advantage II, LLC and TAL Advantage III, LLC.(2)TAL
Advantage III, LLC commenced operations effective November 1, 2009, therefore the calculation of EBIT to Cash Interest Expense
represents the period from November 1, 2009 to March 31, 2010.


Minimum TNW and Maximum Indebtedness to TNW Covenants

We are required to meet consolidated Minimum TNW and Maximum Indebtedness to TNW covenants. For the purposes of calculating these covenants, all amounts are based
on the consolidated balance sheet of TAL International Group, Inc.

For
the ABS and Asset backed credit facilities, the required minimum TNW is calculated as $321.4 million plus 50% of cumulative net income or loss since January 1, 2006. At
March 31, 2010, the required minimum TNW for the ABS facilities was $418.5 million. For the Finance lease facility the required minimum TNW is fixed at $300 million.

The
Maximum Indebtedness to TNW ratio is fixed at 4.75 to 1.00 for the ABS, 2008 and 2009 Asset backed credit facilities, 2007 Term loan and Revolving credit facility and 5.00 to 1.00
for the Finance lease and Port equipment facilities.

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Table of Contents

Below
is the calculation of the covenant compliance for the consolidated Minimum TNW and consolidated Maximum Indebtedness to TNW as of March 31, 2010 for the ABS, Asset backed
credit facilities and other facilities (in thousands):

Other Facilities*

ABS

2008/2009 Asset
Backed
Credit FacilitiesMinimum TNW:Tangible AssetsTotal Assets

$
1,872,527

$
1,872,527

$
1,872,527Deferred Financing Costs


(9,014
)

(9,014
)

(9,014
)Goodwill


(71,898
)

(71,898
)

(71,898
)Intangibles


(1,542
)

(1,542
)

(1,542
)Fair value of derivative instruments (asset)


(1,931
)

(1,931
)

(1,931
)Total Tangible Assets

$
1,788,142

$
1,788,142

$
1,788,142All indebtedness:Total debt

$
1,164,102

$
1,164,102

$
1,164,102Accrued interest


1,973


1,973


1,973Fair value of derivative instruments (liability)


67,635


N/A


N/AEquipment purchases payable


69,858


69,858


69,858Total Indebtedness

$
1,303,568

$
1,235,933

$
1,235,933TNW (Total Tangible Assets less Total Indebtedness)

$
484,574

$
552,209

$
552,209Required Minimum TNW

$
300,000

$
418,454

$
418,454Maximum Indebtedness to TNW:Total Indebtedness

$
1,303,568

$
1,235,933

$
1,235,933Fair value of derivative instruments (liability)


N/A


67,635


N/ATotal Indebtedness for Maximum Indebtedness to TNW

$
1,303,568

$
1,303,568

$
1,235,933TNW

$
484,574

$
552,209

$
552,209Total Indebtedness / TNW


2.69


2.36


2.24Maximum Allowable Indebtedness to TNW


4.75 / 5.00


4.75


4.75


*The
Minimum TNW covenant only applies to the Finance lease facility. The Maximum Indebtedness to TNW covenant applies to the Finance lease facility, Revolving
credit facility, 2007 Term loan facility and Port equipment facility.
N/A 
Not applicable for calculation purposes.


Failure
to comply with these covenants would result in a default under the related credit agreements and could result in the acceleration of our outstanding debt if we were unable to
obtain a waiver from the creditors.

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Table of Contents

Treasury Stock

We repurchased the following amounts of Treasury Stock during the three months ended March 31, 2010 and March 31, 2009:

Quarter ended

Shares Purchased

Amount PaidMarch 31, 2010


1,791

$
23 thousandMarch 31, 2009


1,021,918

$
8.2 million


Dividends

We paid the following quarterly dividends during the quarter ended March 31, 2010 and 2009 on our issued and outstanding common
stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentMarch 11, 2010


March 25, 2010

$
7.6 million

$
0.25March 12, 2009


March 26, 2009

$
0.3 million

$
0.01


Cash Flow

The following table sets forth certain cash flow information for the three months ended March 31, 2010 and 2009 (in thousands):

Three Months Ended March 31,2010

2009Net cash provided by operating activities

$
23,813

$
56,096Net cash used in investing activities:Purchases of leasing equipment

$
(61,990
)
$
(24,383
)Investment in finance leases


(330
)

(17,902
)Proceeds from sale of equipment, net of selling costs


17,483


16,291Cash collections on finance lease receivables, net of income earned


8,357


7,410Other


(27
)

(83
)Net cash used in investing activities

$
(36,507
)
$
(18,667
)Net cash used in financing activities

$
(5,098
)
$
(44,615
)


Operating Activities

Net cash provided by operating activities decreased by $32.3 million to $23.8 million in the three months ended
March 31, 2010, compared to $56.1 million in the three months ended March 31, 2009 primarily due to decrease in the level of operating income of $7.8 million, the timing of
cash collections on our accounts receivables, and an increase in purchases of trading containers.

In
the first quarter of 2009, we experienced collections in excess of our billings of $8.7 million, versus the first quarter of 2010, when billings exceeded collections by
$5.8 million. In addition, during the first quarter of 2010, we had net purchases of trading equipment of $2.1 million, while we had net disposals of trading equipment of
$2.9 million in the first quarter of 2009.

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Table of Contents

Investing Activities

Net cash used in investing activities increased by $17.9 million to $36.5 million in the three months ended
March 31, 2010 compared to $18.7 million in 2009. Major reasons for the increase were as follows:



Financing Activities

Net cash used in financing activities was $5.1 million in the three months ended March 31, 2010 compared to
$44.6 million for the same period in 2009.

During
the three months ended March 31, 2010, we had net borrowings of $3.4 million under our various credit facilities and capital lease obligations, primarily used to
finance the purchase of new equipment, as compared to net payments of $37.1 million under our various credit facilities and capital lease obligations during the three months ended
March 31, 2009. We also paid $7.6 million in dividends during the three months ended March 31, 2010, as compared to $0.3 million in dividends paid during the three months
ended March 31, 2009.

Contractual Obligations

We are party to various operating and capital leases and are obligated to make payments related to our long term borrowings. We are
also obligated under various commercial commitments, including obligations to our equipment manufacturers. Our equipment manufacturer obligations are in the form of conventional accounts payable, and
are satisfied by cash flows from operating and long term financing activities.

The
following table summarizes our contractual obligations and commercial commitments as of March 31, 2010:

Contractual Obligations by Period(dollars in millions)Contractual Obligations:

Total

Remaining
2010

2011

2012

2013

2014 and
thereafterTotal debt obligations(1)

$
1,292.2

$
170.9

$
194.3

$
250.0

$
171.7

$
505.3Capital lease obligations(2)


106.4


4.3


13.0


13.2


11.2


64.7Operating leases (mainly facilities)


4.9


2.0


2.0


0.8


0.1


Purchase obligations:Equipment purchases payable


69.9


69.9











Equipment purchase commitments


130.3


130.3











Total contractual obligations

$
1,603.7

$
377.4

$
209.3

$
264.0

$
183.0

$
570.0


(1)Amounts
include actual and estimated interest for floating-rate debt based on March 31, 2010 rates and the net effect of the interest
rate swaps.(2)Amounts
include interest.


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Table of Contents

Off-Balance Sheet Arrangements

At March 31, 2010, we did not have any relationships with unconsolidated entities or financial partnerships, such entities which
are often referred to as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements. We are, therefore, not
exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles,
which require us to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Our estimates are based on
historical experience and currently available information. Actual results could differ from such estimates. Our critical accounting policies are discussed in our 2009 Form 10-K
filed with the SEC on March 1, 2010.

Recently Issued Accounting Pronouncements

The FASB has issued Accounting Standards Update No. 2010-06 ("ASU 2010-06"), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements, which is effective for interim and annual
reporting periods beginning after December 15, 2009. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. The FASB's objective is to improve these disclosures and,
thus, increase the transparency in financial reporting. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and
nonrecurring fair value measurements.

ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in results of our operations and cash flows. In the ordinary course of
business, we are exposed to interest rate and foreign currency exchange rate risks.

Interest Rate Risk

We enter into interest rate swap contracts to fix the interest rates on a portion of our debt. We assess and manage the external and
internal risk associated with these derivative instruments in accordance with the overall operating goals. External risk is defined as those risks outside of our direct control, including counterparty
credit risk, liquidity risk, systemic risk and legal risk. Internal risk relates to those operational risks within the management oversight structure and includes actions taken in contravention of our
policy.

The
primary external risk of our interest rate swap contracts is in derivative asset positions counterparty credit exposure, which is defined as the ability of a counterparty to perform
its financial obligations under a derivative contract. All derivative agreements are with highly rated financial institutions. Credit exposures are measured based on the market value of outstanding
derivative instruments. Both current exposures and potential exposures are calculated for each derivative contract to monitor counterparty credit exposure.

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Table of Contents

As
of March 31, 2010, we had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under our debt facilities as summarized
below:

Total Notional Amount at
March 31, 2010

Weighted Average
Fixed Leg
Interest Rate at
March 31, 2010

Weighted Average
Remaining Term$1,156 million


4.18%


3.3 years


Changes
in the fair value on these interest rate swap contracts will be recognized in the consolidated statements of operations as unrealized gains or losses on interest rate swaps.

Since
approximately 99% of our debt is hedged using interest rate swaps, our interest expense is not significantly affected by changes in interest rates. However, our earnings are
impacted by changes in interest rate swap valuations which cause gains or losses to be recorded. During the quarter ended March 31, 2010, unrealized losses on interest rate swaps totaled
$6.8 million, compared to unrealized gains on interest rate swaps of $5.1 million for the quarter ended March 31, 2009.

Foreign Currency Exchange Rate Risk

Although we have significant foreign-based operations, the U.S. dollar is the operating currency for the large majority of our leases
and company obligations, and most of our revenues and expenses in 2010 and 2009 were denominated in U.S. dollars. However we pay our non-U.S. staff in local currencies, and our certain of
direct operating expenses and
disposal transactions for our older containers are structured in foreign currencies. We recorded $0.4 million and $0.3 million of unrealized foreign currency exchange losses in the
quarters ended March 31, 2010 and March 31, 2009, respectively, which resulted primarily from fluctuations in exchange rates related to our Euro and Pound Sterling transactions and
related assets.

In
April 2008, we entered into a foreign currency rate swap agreement to exchange Euros for U.S. Dollars based on expected payments under our Euro denominated finance lease receivables.
The foreign currency rate swap agreement expires in April 2015. The fair value of this derivative contract was approximately $0.8 million at March 31, 2010, and is reported as an asset
in Fair Value of Derivative Instruments on the consolidated balance sheet.

ITEM 4.    CONTROLS AND PROCEDURES.

Based upon the required evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Vice
President and Chief Financial Officer concluded that as of March 31, 2010 our disclosure controls and procedures were adequate and effective to ensure that information was gathered, analyzed
and disclosed on a timely basis.

There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended March 31, 2010, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table of Contents

PART II  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

From time to time, we are a party to litigation matters arising in connection with the normal course of our business. While we cannot
predict the outcome of these matters, in the opinion of our management, based on information presently available to us, we believe that we have adequate legal defenses, reserves or insurance coverage
and any liability arising from these matters will not have a material adverse effect on our business. Nevertheless, unexpected adverse future events, such as an unforeseen development in our existing
proceedings, a significant increase in the number of new cases or changes in our current insurance arrangements could result in liabilities that have a material adverse impact on our business.

ITEM 1A.    RISK FACTORS.

For a complete listing of our risk factors, refer to our 2009 Form 10-K filed with the Securities and Exchange
Commission on March 1, 2010.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On March 13, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of our common stock. The
stock repurchase program, as amended, authorizes us to repurchase up to 4.0 million shares of our common stock. Our share purchase activity during the quarter ended March 31, 2010 is
summarized in the following table:

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or ProgramsJanuary 1  31, 2010


1,791

$
13.23


1,791


989,038February 1  28, 2010











989,038March 1  31, 2010











989,038


ITEM 6.    EXHIBITS.

Exhibit
Number

Exhibit Description4.39*

Amendment No. 2 dated April 9, 2010 to Series 2009-1 Supplement dated as of October 23, 2009 between TAL Advantage III LLC and Wells Fargo Bank, National Association.4.40*

Amendment No. 3 dated April 9, 2010 to Series 2009-1 Note Purchase Agreement dated as of October 23, 2009 between TAL Advantage III, LLC, Wells Fargo Securities, LLC, Wells Fargo Bank, National Association,
the other Noteholders from time to time party thereto and the other financial institutions from time to time party thereto.4.41*

Amendment No. 1 dated April 23, 2010 to the Indenture dated as of October 23, 2010, between TAL Advantage III LLC and Wells Fargo Bank, National Association.4.42*

Amendment No. 3 dated April 23, 2010 to Series 2009-1 Supplement dated as of October 23, 2009 between TAL Advantage III LLC and Wells Fargo Bank, National Association.4.43*

Amendment No. 4 dated April 23, 2010 to Series 2009-1 Note Purchase Agreement dated as of October 23, 2009 between TAL Advantage III, LLC, Wells Fargo Securities, LLC, Wells Fargo Bank, National Association,
the other Noteholders from time to time party thereto and the other financial institutions from time to time party thereto.


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Table of Contents

Exhibit
Number

Exhibit Description31.1*

Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended31.2*

Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended32.1*

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 135032.2*

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350


*Filed
herewith.


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Table of Contents

SIGNATURE

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 thereunto duly authorized.

TAL International Group, Inc.May 6, 2010

By:

/s/ John BurnsJohn Burns Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)


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