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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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|--------|----------------------------------------------------------------------------------------|
|   | QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For The Quarterly Period Ended March  31,2006or

|        |                                                                                         |
|--------|-----------------------------------------------------------------------------------------|
|   | TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the Transition Periodfrom                to                 

Commission file number- 001-32638

TALInternational Group, Inc.

(Exact nameof registrant as specified in the charter)

|                                                               |  |                                       |  |  |  |  |
|---------------------------------------------------------------|--|---------------------------------------|--|--|--|--|
| Delaware                                                      |  | 20-1796526                            |
| (State or other jurisdiction ofincorporation or organization) |  | (I.R.S.EmployerIdentification Number) |
| 100 Manhattanville Road, Purchase, New York                   |  | 10577-2135                            |
| (Address of principal executiveoffice)                        |  | (ZipCode)                             |
|                                                               |

(914) 251-9000

(Registrant's telephone numberincluding area code)

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

Indicate by checkmark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of‘‘accelerated filer and large acceleratedfiler’’ in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer                     Accelerated filer                     Non-accelerated filer 

Indicate by check mark whether the registrant is a shellcompany (as defined in the Exchange Act Rule 12b-2). Yes    No 

As of May  10,2006, there were 32,882,208 shares of the Registrant’s commonstock, $.001 par value outstanding.

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TALINTERNATIONAL GROUP, INC.INDEX

|                                    |  |                                                                                                  |    |        |        |        |  |  |  |  |
|------------------------------------|--|--------------------------------------------------------------------------------------------------|----|--------|--------|--------|--|--|--|--|
| PartI — FinancialInformation |  | PageNo.                                                                                          |
| Item1.                             |  | FinancialStatements (unaudited)                                                                  |    |   |   |   |
|                               |  | ConsolidatedBalance Sheets at March 31, 2006 and December31, 2005                                |    |   | 2      |   |
|                               |  | ConsolidatedStatements of Operations for the three months ended March31, 2006 and March 31, 2005 |    |   | 3      |   |
|                               |  | Consolidated Statements of Cash Flows for the threemonths ended March 31, 2006 and March 31,2005 |    |   | 4      |   |
|                               |  | Notes to ConsolidatedFinancial Statements                                                        |    |   | 5-12   |   |
| Item 2.                            |  | Management's Discussionand Analysis of Financial Condition and Results of Operations             |    |   | 13-23  |   |
| Item3.                             |  | Quantitative and Qualitative Disclosures About MarketRisk                                        |    |   | 23-25  |   |
| Item4.                             |  | Controls and Procedures                                                                          |    |   | 25     |   |
| Part II — OtherInformation   |
| Item1.                             |  | Legal Proceedings                                                                                |    |   | 26     |   |
| Item 1A.                           |  | Risk Factors                                                                                     |    |   | 26     |   |
| Item6.                             |  | Exhibits                                                                                         |    |   | 26     |   |
| Signature                          |  |                                                                                             | 27 |   |
|                                    |

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CAUTIONARYSTATEMENT FOR PURPOSES OF THE ‘‘SAFE HARBOR’’PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains certainforward-looking statements, including, without limitation, statementsconcerning the conditions in our industry, our operations, our economicperformance and financial condition, including, in particular,statements relating to our business and growth strategy and servicedevelopment efforts. The Private Securities Litigation Reform Act of1995 provides a ‘‘safe harbor’’ for certainforward-looking statements so long as such information is identified asforward-looking and is accompanied by meaningful cautionary statementsidentifying important factors that could cause actual results to differmaterially from those projected in the information. When used in thisQuarterly Report on Form 10-Q, the words‘‘may’’, ‘‘might’’,‘‘should’’,‘‘estimate’’,‘‘project’’, ‘‘plan’’,‘‘anticipate’’,‘‘expect’’, ‘‘intend’’,‘‘outlook’’,‘‘believe’’ and other similar expressions areintended to identify forward-looking statements and information. Youare cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of their dates. These forward-lookingstatements are based on estimates and assumptions by our managementthat, although we believe to be reasonable, are inherently uncertainand subject to a number of risks and uncertainties. These risks anduncertainties include, without limitation, those identified under‘‘Risk Factors’’ in our Annual Report onForm 10-K filed with the Securities and Exchange Commission(‘‘SEC’’), on March  20,  2006, andall of our other filings filed with the SEC from October11,  2005 through the current date pursuant to the SecuritiesExchange Act of 1934.

We undertake no obligation topublicly update or revise any forward-looking statement as a result ofnew information, future events or otherwise, except as otherwiserequired by law. Reference is also made to such risks and uncertaintiesdetailed from time to time in our filings with the SEC.

PART I— FINANCIAL INFORMATION

ITEM 1.    FINANCIALSTATEMENTS

The consolidated financial statements of TALInternational Group, Inc. (‘‘TAL’’ or the‘‘Company,’’) as of March  31,2006 (unaudited) and December  31,  2005 and for the threemonths ended March  31,  2006 (unaudited) and March31,  2005 (unaudited) included herein have been prepared by theCompany, without audit, pursuant to U.S. generally accepted accountingprinciples and the rules and regulations of the Securities and ExchangeCommission (the ‘‘SEC’’). However, certaininformation and note disclosures normally included in financialstatements prepared in accordance with U.S. generally acceptedaccounting principles have been condensed or omitted pursuant to suchrules and regulations, although the Company believes that thedisclosures are adequate to make the information presented notmisleading. These financial statements reflect, in the opinion ofmanagement, all adjustments (consisting only of normal recurringadjustments) necessary to present fairly the results for the interimperiods. The results of operations for such interim periods are notnecessarily indicative of the results for the full year. Thesefinancial statements should be read in conjunction with theconsolidated financial statements and the notes thereto included in theCompany’s Annual Report on Form 10-K filed with the Securitiesand Exchange Commission (‘‘SEC’’), onMarch  20,  2006, and all of our other filings filed withthe SEC from October 11, 2005 through the current date pursuantto the Securities Exchange Act of 1934.

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TAL INTERNATIONAL GROUP, INC.

Consolidated Balance Sheets(Dollars in thousands, except sharedata)

|                                                                                                                    |  |               |           |                 |  |        |           |         |  |  |
|--------------------------------------------------------------------------------------------------------------------|--|---------------|-----------|-----------------|--|--------|-----------|---------|--|--|
|                                                                                                               |  | March 31,2006 |           | December31,2005 |
|                                                                                                               |  | (Unaudited)   |           |            |
| Assets:                                                                                                            |  |          |      |            |  |   |      |    |
| Cashand cash equivalents                                                                                           |  | $             | 30,770    |            |  | $      | 27,259    |    |
| Accounts receivable, net of allowances of $1,288 and $820                                                          |  |          | 29,173    |            |  |   | 31,738    |    |
| Net investment infinance leases                                                                                    |  |          | 80,939    |            |  |   | 73,819    |    |
| Leasing equipment, net of accumulated depreciation andallowances of $145,502 and $124,543                          |  |          | 1,019,789 |            |  |   | 1,036,363 |    |
| Leasehold improvements and otherfixed assets, net of accumulated depreciation and amortization of$1,530 and $1,312 |  |          | 3,579     |            |  |   | 3,771     |    |
| Equipment held for sale                                                                                            |  |          | 25,657    |            |  |   | 24,844    |    |
| Goodwill                                                                                                           |  |          | 71,898    |            |  |   | 71,898    |    |
| Deferred financing costs                                                                                           |  |          | 3,732     |            |  |   | 3,540     |    |
| Other assets                                                                                                       |  |          | 27,437    |            |  |   | 26,304    |    |
| Total assets                                                                                                       |  | $             | 1,292,974 |            |  | $      | 1,299,536 |    |
| Liabilities and stockholders'equity:                                                                               |  |          |      |            |  |   |      |    |
| Accounts payable                                                                                                   |  | $             | 21,895    |            |  | $      | 7,524     |    |
| Accrued expenses                                                                                                   |  |          | 26,570    |            |  |   | 30,063    |    |
| Income taxes payable                                                                                               |  |          | 190       |            |  |   | 116       |    |
| Deferred income taxliability                                                                                       |  |          | 17,192    |            |  |   | 9,239     |    |
| Debt:                                                                                                              |  |          |      |            |  |   |      |    |
| Assetsecuritization facility                                                                                       |  |          | 697,000   |            |  |   | 710,000   |    |
| Senior secured credit facility                                                                                     |  |          | 121,000   |            |  |   | 148,000   |    |
| Capital lease obligations                                                                                          |  |          | 14,627    |            |  |   | 14,627    |    |
| Total liabilities                                                                                                  |  |          | 898,474   |            |  |   | 919,569   |    |
| Stockholders'equity:                                                                                               |  |          |      |            |  |   |      |    |
| Preferred stock, $.001 parvalue, 500,000 shares authorized, none issued                                            |  |          | —   |            |  |   | —   |    |
| Common stock, $.001 par value,100,000,000 shares authorized, 32,882,208 shares issued andoutstanding               |  |          | 33        |            |  |   | 33        |    |
| Additionalpaid-in capital                                                                                          |  |          | 394,389   |            |  |   | 394,389   |    |
| Accumulated deficit                                                                                                |  |          | (4,232    | )          |  |   | (13,737   | )  |
| Accumulated other comprehensive income(loss)                                                                       |  |          | 4,310     |            |  |   | (718      | )  |
| Total stockholders' equity                                                                                         |  |          | 394,500   |            |  |   | 379,967   |    |
| Total liabilities and stockholders' equity                                                                         |  | $             | 1,292,974 |            |  | $      | 1,299,536 |    |
|                                                                                                                    |

The accompanying notesto the unaudited consolidated financial statements are an integral partof these statements.

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TAL INTERNATIONAL GROUP, INC.

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

|                                                                                                |  |                             |         |        |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------------|--|-----------------------------|---------|--------|--|--------|---------|---------|--|--|
|                                                                                           |  | Three Months Ended March31, |
|                                                                                           |  | 2006                        |         | 2005   |
|                                                                                           |  | (Unaudited)                 |
| Revenues:                                                                                      |  |                        |    |   |  |   |    |    |
| Leasingrevenues, including income recognized on finance leases of $2,286 and$284, respectively |  | $                           | 66,875  |   |  | $      | 72,275  |    |
| Equipment trading revenue                                                                      |  |                        | 5,019   |   |  |   | 2,508   |    |
| Management fee income                                                                          |  |                        | 1,576   |   |  |   | 1,996   |    |
| Other revenues                                                                                 |  |                        | 477     |   |  |   | 753     |    |
| Total revenues                                                                                 |  |                        | 73,947  |   |  |   | 77,532  |    |
| Expenses:                                                                                      |  |                        |    |   |  |   |    |    |
| Equipmenttrading expenses                                                                      |  |                        | 4,225   |   |  |   | 2,065   |    |
| Direct operating expenses                                                                      |  |                        | 6,057   |   |  |   | 7,117   |    |
| Administrative expenses                                                                        |  |                        | 9,539   |   |  |   | 9,709   |    |
| Depreciation andamortization                                                                   |  |                        | 25,489  |   |  |   | 29,285  |    |
| Provision (reversal) for doubtful accounts                                                     |  |                        | 471     |   |  |   | (225    | )  |
| Net loss (gain) on sale of leasingequipment                                                    |  |                        | 108     |   |  |   | (4,375  | )  |
| Interestand debt expense                                                                       |  |                        | 12,456  |   |  |   | 21,114  |    |
| Unrealized loss (gain) on interest rate swaps                                                  |  |                        | 854     |   |  |   | (10,060 | )  |
| Management fees                                                                                |  |                        | — |   |  |   | 1,626   |    |
| Total expenses                                                                                 |  |                        | 59,199  |   |  |   | 56,256  |    |
| Income before income taxes                                                                     |  |                        | 14,748  |   |  |   | 21,276  |    |
| Income tax expense                                                                             |  |                        | 5,243   |   |  |   | 7,891   |    |
| Net income                                                                                     |  |                        | 9,505   |   |  |   | 13,385  |    |
| Preferred stock dividends                                                                      |  |                        | — |   |  |   | (6,028  | )  |
| Net income applicable to common stockholders                                                   |  | $                           | 9,505   |   |  | $      | 7,357   |    |
| Net income per common share: Basic                                                             |  | $                           | 0.29    |   |  | $      | 0.72    |    |
| Netincome per common share: Diluted                                                            |  | $                           | 0.28    |   |  | $      | 0.72    |    |
| Weighted average number of common shares outstanding —Basic                              |  |                        | 32,882  |   |  |   | 10,151  |    |
| Weightedaverage number of common shares outstanding — Diluted                            |  |                        | 33,459  |   |  |   | 10,151  |    |
|                                                                                                |

Theaccompanying notes to the unaudited consolidated financialstatementsare an integral part of these statements.

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TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Cash Flows (Dollars inthousands)

|                                                                                 |  |                             |         |         |  |        |         |         |  |  |
|---------------------------------------------------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--|
|                                                                            |  | Three months ended March31, |
|                                                                            |  | 2006                        |         | 2005    |
|                                                                            |  | (Unaudited)                 |
| Cashflows from operating activities:                                            |  |                        |    |    |  |   |    |    |
| Netincome                                                                       |  | $                           | 9,505   |    |  | $      | 13,385  |    |
| Adjustments to reconcile net income to net cashprovided by operatingactivities: |  |                        |    |    |  |   |    |    |
| Depreciation andamortization                                                    |  |                        | 25,489  |    |  |   | 29,285  |    |
| Net loss (gain) on sale of leasing equipment                                    |  |                        | 108     |    |  |   | (4,375  | )  |
| Unrealized loss(gain) on interest rate swaps                                    |  |                        | 854     |    |  |   | (10,060 | )  |
| Deferred income taxes                                                           |  |                        | 7,953   |    |  |   | 7,832   |    |
| Changes in operating assets andliabilities                                      |  |                        | 19,002  |    |  |   | 26,259  |    |
| Net cash provided by operatingactivities                                        |  |                        | 62,911  |    |  |   | 62,326  |    |
| Cash flows from investingactivities:                                            |  |                        |    |    |  |   |    |    |
| Purchases of leasingequipment                                                   |  |                        | (32,822 | )  |  |   | (53,529 | )  |
| Investment in finance leases                                                    |  |                        | (1,839  | )  |  |   | — |    |
| Proceeds from sale of equipment                                                 |  |                        | 12,269  |    |  |   | 43,463  |    |
| Cash collections onfinancing leases, net of unearned income                     |  |                        | 2,986   |    |  |   | 810     |    |
| Other                                                                           |  |                        | 6       |    |  |   | — |    |
| Net cash used in investingactivities                                            |  |                        | (19,400 | )  |  |   | (9,256  | )  |
| Cash flows from financingactivities:                                            |  |                        |    |    |  |   |    |    |
| Net payments under assetsecuritization facility                                 |  |                        | (13,000 | )  |  |   | — |    |
| Net payments under senior secured facility                                      |  |                        | (27,000 | )  |  |   | (45,000 | )  |
| Net cash used in financing activities                                           |  |                        | (40,000 | )  |  |   | (45,000 | )  |
| Net increase in cash and cash equivalents                                       |  |                        | 3,511   |    |  |   | 8,070   |    |
| Cash and cashequivalents, beginning of period                                   |  |                        | 27,259  |    |  |   | 17,668  |    |
| Cash and cash equivalents, end of period                                        |  | $                           | 30,770  |    |  | $      | 25,738  |    |
|                                                                                 |

The accompanying notes tothe unaudited consolidated financial statements are an integral part ofthese statements.

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TAL INTERNATIONALGROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIALSTATEMENTS

Note 1 — Description of the Business, Basisof Presentation, Recently Issued Accounting Pronouncements

A.    Description of the Business

TALInternational Group, Inc. (‘‘TAL,’’ or the‘‘Company’’) was formed on October26,  2004 and commenced operations on November  4,2004. TAL consists of the consolidated accounts of Trans  OceanLtd. (‘‘TOL’’) and TAL International ContainerCorporation (‘‘TALI’’), formerly known asTransamerica Leasing Inc., and their subsidiaries. EffectiveOctober  31,  2004, TAL acquired all of the outstandingcapital stock of TOL and TALI for approximately $1.2  billion incash (‘‘the Acquisition’’).

TheCompany provides long-term leases, service leases and finance leases ofmaritime containers and related equipment, along with maritimecontainer management services, through a worldwide network of offices,third party depots and other facilities. The Company operates in bothinternational and domestic markets. The majority of the Company'sbusiness is derived from leasing its containers to shipping linecustomers through a variety of long-term and short-term contractuallease arrangements. The Company also provides container sales andpositioning services. The Company also enters into managementagreements with third party container owners under which the Companymanages the leasing and selling of containers on behalf of the thirdparty owners. The Company also leases chassis used for thetransportation of containers domestically.

B.    Basis ofPresentation

The preparation of financial statements inconformity with U.S. generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the reported amounts of revenues andexpenses during the reporting period and disclosure of contingentassets and liabilities at the date of the financial statements. Actualresults could differ from those estimates.

Theconsolidated financial statements include the accounts of the Companyand its subsidiaries. All intercompany transactions and balances havebeen eliminated in consolidation. Certain reclassifications have beenmade to the accompanying prior period financial statements and notes toconform with the current year’s presentation.

C.    Recently Issued Accounting Pronouncements

In December  2004, the Financial Accounting StandardsBoard (‘‘FASB’’) issued Statement of FinancialAccounting Standards No.123R Share-Based Payment(‘‘SFAS No. 123R’’). This statement is arevision of SFAS No. 123, Accounting for Stock-BasedCompensation. SFAS No. 123R supercedes Accounting Principles BoardOpinion No. 25, Accounting for Stock Issued to Employees(‘‘APB No. 25’’), and its relatedimplementation guidance. SFAS No. 123R requires companies to recognizein the statement of operations the fair value of all employeeshare-based payments, including grants of employee stock options, aswell as compensatory employee stock purchase plans. The Company adoptedSFAS No. 123R on January  1,  2006. Based on the number ofoptions currently outstanding which are fully vested, the adoption ofSFAS No.123R did not have a significant impact on the financialposition, results of operations or cash flows of the Company. However,future grants of share-based compensation will result in therecognition of compensation expense.

Note 2 — InitialPublic Offering

On October  17,  2005, theCompany sold 11.5  million shares of common stock at a price of$18.00 per share in an initial public offering(‘‘IPO’’) which generated net proceeds ofapproximately $189.2  million, after deducting underwriterdiscounts and other offering expenses. The Company used 

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the net proceeds of this offering, togetherwith additional borrowings under the asset securitization facility andthe amended and restated senior secured credit facility and availablecash, to repay the entire outstanding principal and accrued cashinterest due on the senior unsecured credit agreement which wasapproximately $288.0  million on October  17,  2005.On October  21,  2005, the underwriters of TAL’s IPOexercised their over-allotment option in part and purchased 1.0million additional shares of common stock from certain of TAL’sstockholders. TAL did not receive any proceeds from the sale of theshares pursuant to the over-allotment option.

Note 3 —Capital Stock and Stock-Based Compensation Plans

PreferredStock Exchange

All 201,205 outstanding shares of theCompany’s Series A 12.0% cumulative senior preferredstock were converted into 11,178,035 shares of common stock onOctober  17,  2005, based on the IPO price of $18.00 percommon share. The Company paid the aggregate outstanding accrueddividends on the Series A 12.0% cumulative senior preferredstock of $23.6  million in November  2005.

2004Management Stock Plan

During 2004, the Companyadopted the 2004 Management Stock Plan (the ‘‘2004Plan’’), which provides for the issuance of awards in theform of stock options, stock appreciation rights, restricted stock andcertain other instruments to employees, consultants and members of theCompany's board of directors. A total of 534,425 shares werereserved for issuance under the 2004 Plan. During 2004, options topurchase a total of 400,945 shares were granted at an exercise price of$0.01 per share, which the board of directors believed equaled the fairvalue per share of the Company's common stock. All options grantedduring 2004 vested ratably over four years, except upon a change incontrol, as defined, in which case all outstanding unvested optionswould become fully vested and exercisable.

During 2005,options to purchase an additional 53,667 shares were granted at anexercise price of $0.01 per share. These options were to vest ratablyover four years, except upon a change in control, as defined, in whichcase all outstanding unvested options would become fully vested andexercisable.

Upon completion of the IPO on October17,  2005, all 454,612 options outstanding under the 2004 Planbecame fully vested. All options granted during 2004 and 2005 have acontractual life of ten years.

2005 Management OmnibusIncentive Plan

In October  2005, the Companyadopted the TAL International Group, Inc. 2005 Management OmnibusIncentive Plan (the ‘‘2005 Plan’’), whichprovided for the issuance of awards in the form of stock options, stockappreciation rights and restricted stock. A total of 2,500,000 sharesof common stock were reserved for issuance under the 2005 Plan. InOctober  2005, the board of directors approved the grant ofoptions under the 2005 Plan to purchase an aggregate of 612,195 sharesof the Company’s common stock upon consummation of the IPO withan exercise price equal to the IPO price of the common stock, and avesting period of four years. All options granted in 2005 have acontractual life of ten years. All 612,195 options granted on the IPOdate became fully vested as of December  30,  2005, thedate their acceleration was approved by the Compensation Committee ofthe Company’s board of directors. The purpose of the acceleratedvesting was to avoid future compensation expense associated with theseoptions that the Company would otherwise recognize in its consolidatedstatements of operations upon the adoption of SFAS No. 123(R).

Adoption of New Accounting Standard

EffectiveJanuary  1,  2006, the Company adopted the provisions ofStatement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment (SFAS No.123R) requiring that compensationcost relating to share-based payment transactions be recognized in thefinancial statements. The cost is measured at the grant date, based onthe calculated fair value of the award, and is recognized as an expenseover the employee’s requisite service period (generally thevesting period of the equity 

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award). Prior to January  1,2006, the Company accounted for share-based compensation to employeesin accordance with Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (APB No. 25), andrelated interpretations. The Company also followed the disclosurerequirements of Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation, as amended by Statementof Financial Accounting Standards No. 148, Accounting forStock-Based Compensation-Transition and Disclosure. The Companyadopted SFAS No. 123R using the modified prospective method and,accordingly, financial statement amounts for prior periods presented inthis Form 10-Q have not been restated to reflect the fair value methodof recognizing compensation cost relating to stock options.

There was no compensation cost related to theCompany’s stock-based compensation plans recognized in itsoperating results in the three months ended March  31,2006, as no new options were granted during the period, and allpreviously granted options were fully vested as of December30,  2005. For future grants of options, the Company will computethe estimated fair value of each option award on the date of grantusing the Black-Scholes or binomial option-pricing models. Expectedvolatility is based on implied volatilities from trading activity ofTAL stock and other similar companies prior to its IPO date. TheCompany derives an expected term for its options using an estimatedoption exercise date based on historical employee termination behavior.The expected term represents an estimate of the time options areexpected to remain outstanding. The risk-free rate for periods withinthe contractual life of the option is based on the U.S. treasury yieldcurve in effect at the time of grant.

The following tableillustrates the effect on net income and earnings per share had thefair value method of accounting been applied consistent with therequirements of SFAS No. 123 to the Company's stock compensationplans for the three months ended March  31,  2005 (inthousands, except earnings per share):

|                                                                                |  |                                 |        |         |  |  |
|--------------------------------------------------------------------------------|--|---------------------------------|--------|---------|--|--|
|                                                                           |  | Three months endedMarch 31,2005 |
| Net income applicable to commonstockholders:                                   |  |                            |   |    |
| As reported                                                                    |  | $                               | 7,357  |    |
| Deduct: Stock-based compensation expensedetermined under the fair value method |  |                            | (3     | )  |
| Pro forma net incomeapplicable to common stockholders                          |  | $                               | 7,354  |    |
| Earningsper common share:                                                      |  |                            |   |    |
| As reported — Basicand Diluted                                           |  | $                               | 0.72   |    |
| Pro forma — Basicand Diluted                                             |  | $                               | 0.72   |    |
| Weighted average numberof common shares outstanding — Basic and Diluted  |  |                            | 10,151 |    |
|                                                                                |

These pro-forma disclosures takeinto account options to purchase common shares granted atNovember  4,  2004. There were no options granted by theCompany prior to that time. The fair value of options was estimatedusing the Black Scholes pricing model based on the market price at thegrant date of $0.01 per share and the following assumptions: risk freeinterest rate of 3.52%, expected life of 4 years, volatility of50%, and no dividends. The maximium contractual life of theoptions granted was 10 years.

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Stock option activity under thePlans from January  1,  2006 to March  31,2006 was as follows:

|                               |  |         |           |                                |  |                                    |         |                                         |  |        |        |        |  |        |        |        |  |  |
|-------------------------------|--|---------|-----------|--------------------------------|--|------------------------------------|---------|-----------------------------------------|--|--------|--------|--------|--|--------|--------|--------|--|--|
|                          |  | Options |           | Weighted-Average ExercisePrice |  | WeightedAverageRemainingLife (Yrs) |         | AggregateIntrinsicValue$ in 000’s |
| Outstanding January  1,  2006 |  |    | 1,066,807 |                           |  | $                                  | 10.33   |                                    |  |   | 9.4    |   |  |   |   |   |
| Granted                       |  |    | —   |                           |  |                               | — |                                    |  |   |   |   |  |   |   |   |
| Exercised                     |  |    | —   |                           |  |                               | — |                                    |  |   |   |   |  |   |   |   |
| Canceled                      |  |    | —   |                           |  |                               | — |                                    |  |   |   |   |  |   |   |   |
| Outstanding March  31,2006    |  |    | 1,066,807 |                           |  | $                                  | 10.33   |                                    |  |   | 9.1    |   |  | $      | 14,701 |   |
| Exercisable:                  |  |    |      |                           |  |                               |    |                                    |  |   |   |   |  |   |   |   |
| March31,  2006                |  |    | 1,066,807 |                           |  | $                                  | 10.33   |                                    |  |   | 9.1    |   |  | $      | 14,701 |   |
|                               |

The aggregate intrinsic valuecalculated at March  31,  2006 is based on the differencebetween the March  31,  2006 closing stock price of $24.11and the weighted average exercise price of the options at March31,  2006 of $10.33.

Note 4 — Debt

Asset Securitization Facility 

EffectiveAugust  1,  2005, the Company entered into an assetsecuritization facility pursuant to which it contributed, and may fromtime to time in the future continue to contribute, certain eligiblecontainers, together with the related leases, to TAL Advantage I LLC, aspecial purpose entity (the ‘‘SPE’’) which is awholly-owned consolidated subsidiary of the Company, whose primarybusiness activity is to issue asset backed notes under theCompany’s asset securitization facility. On August1,  2005, the Company made its initial transfer of eligiblecontainers to the SPE, which then issued an initial series of assetbacked notes with a maximum aggregate principal amount of $875.0million, (the ‘‘Series 2005-1 Notes’’), theterms of which are more fully described below. As of March31,  2006 and December  31,  2005, the outstandingbalances under the facility were $697.0  million and$710.0  million, respectively.

The SPE'sborrowing capacity under the Series 2005-1 Notes is determined byreference to a variable advance rate percentage of the net book values,as calculated in the asset securitization facility documents of theSPE's eligible containers, subject to certain adjustments. Basedon the applicable advance rate of 82%, the SPE’sborrowing capacity was $697.8  million at March  31,2006. At March  31,  2006, the applicable commitment feeand interest rate were 0.25% and LIBOR plus 1.50%,respectively. The weighted average interest rate on this facility forthe quarter ended March  31,  2006 was 6.0%. TheCompany is subject to various covenant requirements under thisfacility. At March  31,  2006, the Company was incompliance with all covenants.

Senior Secured CreditFacility 

In connection with the Acquisition, theCompany entered into an $875.0  million senior secured creditfacility. Upon the closing of the asset securitization facility onAugust  1,  2005, the Company amended and restated thesenior secured credit facility to, among other things, reduce themaximum aggregate commitments thereunder to $175.0  million. Thefinal maturity date of this facility is August  1,  2008.At March  31,  2006, and December  31,  2005,the outstanding balances under the facility were $121.0  millionand $148.0  million, respectively.

TheCompany’s borrowing capacity under this facility is based upon avariable advance rate percentage of the net book values, as calculatedin the credit agreement, of the Company’s eligible containersand eligible chassis, subject to certain adjustments. At March31,  2006, the variable advance rate percentage was 85%,but is subject to annual decreases of 1% for each full calendaryear following the IPO until a minimum advance rate of 82% isreached. At March  31,  2006, the borrowing 

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capacity was $154.5  million. TheCompany’s eligible containers for the purposes of determiningborrowing capacity under this facility does not include any containerstransferred to the SPE in connection with the asset securitizationfacility described above. The senior secured credit facility is securedby a first priority lien on the Company’s eligible containers,eligible chassis, related leases and lease rights and a pledge of theequity interests of the SPE.

At March  31,2006, the senior secured credit facility applicable commitment fee andinterest rate were 0.375% and LIBOR plus 2.125%,respectively. This rate will remain in place until such time as thevariable advance rate percentage decreases to 82%, at which timethe interest rate will further decrease to LIBOR plus 2.00% perannum. Interest and fees and a portion of the outstanding principalamount of the loans under this facility, together with certain otheramounts, are payable on a quarterly basis. The portion of theoutstanding principal amount of the loans, if any, payable on any suchpayment date will be equal to the amount by which the outstandingprincipal amount of the loans exceeds the Company’s theneffective borrowing capacity. The weighted average interest rate underthis facility for the quarter ended March  31,  2006 was6.6%. The Company is subject to various covenant requirementsunder this facility. At March  31,  2006, the Company wasin compliance with all covenants.

Capital Lease Obligations

Effective December  23,  2005, theCompany entered into a capital lease with a financial institution tofinance the purchase of $14.6  million of chassis. Thelease agreement is structured as a ten year Terminal Rental AdjustmentClause (‘‘TRAC’’) lease with a purchase optionat the end of the lease term equal to the TRAC amount as defined in thelease. For income tax purposes, this lease is treated as an operatinglease. Payments include interest at the rate of 5.46%. As ofMarch  31,  2006 and December  31,  2005, thelease obligation totaled $14.6  million.

InterestRate Swaps 

To hedge the risk associated withfluctuations in interest rates on long-term borrowings, the Companyentered into three interest rate swap contracts on December14,  2004 with a financial institution to fix the floatinginterest rates on a portion of the borrowings under its senior securedcredit facility. The interest rate swap contracts had a fixed rate ofapproximately 3.82%, an initial notional amount of $500.0million and an amortizing term of seven years.

Inconnection with the refinancing transaction in August  2005,these interest rate swap contracts were modified to reflect the termsof the asset securitization facility. The revised contracts becameeffective on September  20,  2005. No terminationsettlements were made as the fixed rate, notional amounts and maturitydate remained the same.

On October  28,2005, the Company entered into two additional interest rate swapcontracts with the same financial institution to fix the floatinginterest rates on additional borrowings under its asset securitizationfacility and its senior secured credit facility. The first interestrate swap contract has a notional amount of $100.0  million, anon-amortizing term of 6 years, and a fixed rate of approximately4.82%, to hedge a portion of the interest rate exposure underits asset securitization facility. The second interest rate swapcontract has a notional amount of $25.0  million, anon-amortizing term of approximately 2.75 years and a fixed rate ofapproximately 4.71%, to hedge a portion of the interest rateexposure under its senior secured credit facility.

OnNovember  1,  2005, the Company designated all interestrate swap contracts as cash flow hedges, in accordance with Statementof Financial Accounting Standards No.133, "Accounting forDerivative Instruments and Hedging Activities", at whichtime the fair value of the interest rate swaps was $15.3million. The contracts are recorded at fair value on the consolidatedbalance sheets, with the effective portion of their change in fairvalue from the designation date being reflected in accumulated othercomprehensive income (loss) and reclassified into earnings in the sameperiod or periods during which the hedged transaction affects earnings.The ineffective portion, if any, is calculated as the excess of thefair value of the hedge contracts over the change in expected cashoutflows of interest 

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for the underlying debt instrument and isincluded in the unrealized loss (gain) on interest rate swaps in theconsolidated statements of operations. In addition, the fair value of$15.3  million at the date the interest rate swap contracts weredesignated as cash flow hedges will be recognized in income using theinterest method over the remaining life of the contracts and will beincluded in unrealized loss (gain) on interest rate swaps in theconsolidated statements of operations. Amounts recorded in accumulatedother comprehensive income (loss) would be reclassified into earningsupon termination of these interest rate swap agreements and relateddebt instruments prior to their contractual maturity.

Thefair value of the interest rate swaps was $20.8  million and$13.9  million at March  31,  2006 andDecember  31,  2005, respectively, which is included inother assets in the consolidated balance sheets. In its consolidatedstatements of operations, the Company recognized a net unrealized lossof $0.9  million and a net unrealized gain of $10.1million for the three months ended March  31,  2006 andMarch  31,  2005, respectively, which represents theamortization of the fair value upon designation as described above andthe change in fair value of the swaps prior to designation as cash flowhedges.

The counterparty to these agreements is a highlyrated financial institution. In the unlikely event that thecounterparty fails to meet the terms of the interest rate swapagreements, the Company’s exposure is limited to the interestrate differential on the notional amount at each monthly settlementperiod over the life of the agreements. The Company does not anticipateany non-performance by the counterparty.

Note 5 —Earnings Per Share

The following table sets forth thecalculation of basic and diluted earnings per share for the threemonths ended March  31,  2006 and 2005 (in thousands,except earnings per share ):

|                                                                                     |  |                                 |        |                                  |  |        |         |        |  |  |
|-------------------------------------------------------------------------------------|--|---------------------------------|--------|----------------------------------|--|--------|---------|--------|--|--|
|                                                                                |  | Three months endedMarch 31,2006 |        | Three months endedMarch 31, 2005 |
| Numerator:                                                                          |  |                            |   |                             |  |   |    |   |
| Netincome applicable to common stockholders for basic and diluted earningsper share |  | $                               | 9,505  |                             |  | $      | 7,357   |   |
| Denominator:                                                                        |  |                            |   |                             |  |   |    |   |
| Weightedaverage shares outstanding for basic earnings per share                     |  |                            | 32,882 |                             |  |   | 10,151  |   |
| Dilutive stockoptions                                                               |  |                            | 577    |                             |  |   | — |   |
| Weighted average shares for diluted earnings per share                              |  |                            | 33,459 |                             |  |   | 10,151  |   |
| Earnings pershare:                                                                  |  |                            |   |                             |  |   |    |   |
| Basic                                                                               |  | $                               | 0.29   |                             |  | $      | 0.72    |   |
| Diluted                                                                             |  | $                               | 0.28   |                             |  | $      | 0.72    |   |
|                                                                                     |

Note 6 — Related PartyTransactions

The Company recognized $1.6  millionfor the three months ended March  31,  2005 of managementfees and expenses relating to the management consulting agreements withcertain of the Company’s stockholders. The management consultingagreements were terminated as of the effective date of the IPO,October  17,  2005.

Note 7 — Segment andGeographic Information

Industry SegmentInformation

The Company operates in one industrysegment, intermodal container leasing.

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Geographic SegmentInformation

The Company's customers use thecontainers for their global trade utilizing many worldwide traderoutes. The following table represents the allocation of domestic(U.S.) and international revenues for the periods indicated based onthe customers' primary domicile (in thousands):

|                     |  |                            |        |        |  |        |        |        |  |  |
|---------------------|--|----------------------------|--------|--------|--|--------|--------|--------|--|--|
|                |  | Three Months EndedMarch31, |
|                |  | 2006                       |        | 2005   |
| Totalrevenues:      |  |                       |   |   |  |   |   |   |
| Domestic            |  | $                          | 7,294  |   |  | $      | 7,487  |   |
| Asia                |  |                       | 34,072 |   |  |   | 34,169 |   |
| Europe              |  |                       | 27,879 |   |  |   | 31,750 |   |
| Other international |  |                       | 4,702  |   |  |   | 4,126  |   |
| Total               |  | $                          | 73,947 |   |  | $      | 77,532 |   |
|                     |

As all of the Company'scontainers are used internationally, where no one container isdomiciled in one particular place for a prolonged period of time, allof the Company's containers are considered to beinternational.

Note 8 — Commitments andContingencies

At March  31,  2006,commitments for capital expenditures totaled approximately$130.6  million, principally through the remainder of 2006.

Note 9 — Income Taxes

The consolidated incometax expense for the three month periods ended March  31,2006 and 2005 was determined based upon estimates of the Company'sconsolidated effective income tax rates for the years endingDecember  31,  2006 and 2005, respectively. The differencebetween the consolidated effective income tax rate and the U.S. federalstatutory rate is primarily attributable to state income taxes, foreignincome taxes and the effect of certain permanent differences.

Note 10 — Comprehensive Income

The followingtable provides a reconciliation of the Company’s net income tocomprehensive income (dollars in thousands):

|                                                                                                  |  |                            |        |        |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------|--|----------------------------|--------|--------|--|--------|---------|---------|--|--|
|                                                                                             |  | Three Months EndedMarch31, |
|                                                                                             |  | 2006                       |        | 2005   |
| Net income                                                                                       |  | $                          | 9,505  |   |  | $      | 13,385  |    |
| Other comprehensiveincome:                                                                       |  |                       |   |   |  |   |    |    |
| Foreign currencytranslation adjustments                                                          |  |                       | 6      |   |  |   | (9      | )  |
| Unrealized gain on derivative instruments designated ascash flow hedges (net of taxes of $2,782) |  |                       | 5,022  |   |  |   | — |    |
| Total                                                                                            |  | $                          | 14,533 |   |  | $      | 13,376  |    |
|                                                                                                  |

Note 11 — SubsequentEvents

Private Placement Debt Offering

On April  12,  2006, the SPE issued $680.0million of asset backed notes under an Asset Backed Security(‘‘ABS’’) program designed to reduce borrowingcosts and enhance financing resources for the Company's equipmentfleet. The proceeds from the issuance, along with available cash, wereused to repay the outstanding borrowings under the Company’sasset securitization facility. All debt issued 

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under the ABS program is collateralized bythe assets of the SPE consisting of the revenue earning containers usedin the Company’s leasing business, restricted cash and certainreceivables related to revenue earning equipment. Under this ABSprogram, a committed revolving facility (the‘‘Warehouse’’) was also arranged to provide upto $300.0  million of borrowing capacity to support future fleetexpansion.

De-designation of Interest Rate Swaps

As of April  12,  2006, in conjuction with theissuance of the asset backed notes described above, the Companyde-designated all of its existing interest rate swap agreements, andtherefore, future changes in the fair value of these interest rateswaps will be recognized in the consolidated statements of operationsas unrealized losses or gains on interest rateswaps.

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|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| ITEM2:  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

Thefollowing discussion and analysis of the consolidated financialcondition and results of operations of TAL International Group, Inc.and its subsidiaries should be read in conjunction with relatedconsolidated financial data and our annual audited consolidatedfinancial statements and related notes thereto included in our AnnualReport on Form 10-K filed with the Securities and Exchange Commissionon March  20,  2006. The statements in this discussionregarding industry outlook, our expectations regarding our futureperformance, liquidity and capital resources and other non-historicalstatements 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 Form10-K. Our actual results may differ materially from those contained inor implied by any forward-looking statements.

OurCompany

We are one of the world's largest and oldestlessors of intermodal freight containers. Intermodal freight containersare large, standardized steel boxes used to transport freight by ship,rail or truck. Because of the handling efficiencies they provide,intermodal freight containers are the primary means by which many goodsand materials are shipped internationally.

Our operationsinclude the acquisition, leasing, re-leasing and subsequent sale ofmultiple types of intermodal containers, as well as chassis used forthe transportation of containers domestically via rail and roads. As ofMarch  31,  2006, our fleet consisted of 612,185containers and chassis, including 75,507 containers under managementfor third parties, representing approximately 987,000 twenty-footequivalent units (TEU). We have an extensive global presence, offeringleasing services through 19 offices in 12 countries and approximately193 third party container depot facilities in 42 countries as ofMarch  31,  2006. Our customers are among theworld's largest shipping lines and include, among others, APL-NOL,CMA-CGM, Hanjin Shipping, Maersk Line, Mediterranean Shipping Companyand NYK Line.

We lease three principal types of containers: (1)dry freight containers, which are used for general cargo such asmanufactured component parts, consumer staples, electronics andapparel, (2)  refrigerated containers, which are used forperishable items such as fresh and frozen foods, and (3)  specialcontainers, which are used for heavy and oversized cargo such as marbleslabs, building products and machinery. We also manage our owncontainer disposals, act as the disposal agent for a number of ourshipping line customers, and buy and sell used containers through ourTrader group. As of March  31,  2006, dry, refrigerated,special containers and Trader represented approximately 86%,6%, 7% and 1% of our fleet on a unit basis,respectively. Our chassis equipment business, which commenced in thefourth quarter of 2005, represented under 1% of our fleet on aunit basis as of March  31,  2006.

The followingtables provide the composition of our equipment fleet as of the datesindicated below (in both units and TEU’s):

|              |  |                         |         |                   |  |                |         |        |  |         |         |        |  |        |         |         |  |        |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------|--|-------------------------|---------|-------------------|--|----------------|---------|--------|--|---------|---------|--------|--|--------|---------|---------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|         |  | Equipment Fleet inUnits |
|         |  | March 31,2006           |         | December 31, 2005 |  | March 31, 2005 |
|         |  | Owned                   |         | Managed           |  | Total          |         | Owned  |  | Managed |         | Total  |  | Owned  |         | Managed |  | Total  |
| Dry          |  |                    | 466,503 |              |  |           | 58,355  |   |  |    | 524,858 |   |  |   | 464,353 |    |  |   | 59,180  |   |  |   | 523,533 |   |  |   | 468,899 |   |  |   | 63,130  |   |  |   | 532,029 |   |
| Refrigerated |  |                    | 33,371  |              |  |           | 1,534   |   |  |    | 34,905  |   |  |   | 34,006  |    |  |   | 1,625   |   |  |   | 35,631  |   |  |   | 33,929  |   |  |   | 1,694   |   |  |   | 35,623  |   |
| Special      |  |                    | 26,555  |              |  |           | 15,618  |   |  |    | 42,173  |   |  |   | 27,389  |    |  |   | 16,025  |   |  |   | 43,414  |   |  |   | 28,465  |   |  |   | 17,207  |   |  |   | 45,672  |   |
| Chassis      |  |                    | 2,790   |              |  |           | — |   |  |    | 2,790   |   |  |   | 1,210   |    |  |   | — |   |  |   | 1,210   |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Subtotal     |  |                    | 529,219 |              |  |           | 75,507  |   |  |    | 604,726 |   |  |   | 526,958 |    |  |   | 76,830  |   |  |   | 603,788 |   |  |   | 531,293 |   |  |   | 82,031  |   |  |   | 613,324 |   |
| Trader       |  |                    | 7,459   |              |  |           | — |   |  |    | 7,459   |   |  |   | 10,123  |    |  |   | — |   |  |   | 10,123  |   |  |   | 23,209  |   |  |   | — |   |  |   | 23,209  |   |
| Total        |  |                    | 536,678 |              |  |           | 75,507  |   |  |    | 612,185 |   |  |   | 537,081 |    |  |   | 76,830  |   |  |   | 613,911 |   |  |   | 554,502 |   |  |   | 82,031  |   |  |   | 636,533 |   |
|              |

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|              |  |                               |  |                  |         |               |  |        |         |         |  |         |  |        |         |         |  |        |         |        |  |         |  |        |         |        |  |        |           |        |  |  |  |  |  |  |  |  |
|--------------|--|-------------------------------|--|------------------|---------|---------------|--|--------|---------|---------|--|---------|--|--------|---------|---------|--|--------|---------|--------|--|---------|--|--------|---------|--------|--|--------|-----------|--------|--|--|--|--|--|--|--|--|
|         |  | Equipment Fleet inTEU’s |
|         |  | March31, 2006                 |  | December31, 2005 |         | March 31,2005 |
|         |  | Owned                         |  | Managed          |         | Total         |  | Owned  |         | Managed |  | Total   |  | Owned  |         | Managed |  | Total  |
| Dry          |  | 742,377                       |  |             | 99,455  |          |  |   | 841,832 |    |  | 737,802 |  |   | 100,759 |    |  |   | 838,561 |   |  | 741,083 |  |   | 107,160 |   |  |   | 848,243   |   |
| Refrigerated |  | 59,714                        |  |             | 2,217   |          |  |   | 61,931  |    |  | 60,674  |  |   | 2,394   |    |  |   | 63,068  |   |  | 59,626  |  |   | 2,515   |   |  |   | 62,141    |   |
| Special      |  | 41,050                        |  |             | 25,644  |          |  |   | 66,694  |    |  | 42,249  |  |   | 26,179  |    |  |   | 68,428  |   |  | 43,636  |  |   | 27,880  |   |  |   | 71,516    |   |
| Chassis      |  | 4,930                         |  |             | — |          |  |   | 4,930   |    |  | 2,270   |  |   | — |    |  |   | 2,270   |   |  | — |  |   | — |   |  |   | —   |   |
| Subtotal     |  | 848,071                       |  |             | 127,316 |          |  |   | 975,387 |    |  | 842,995 |  |   | 129,332 |    |  |   | 972,327 |   |  | 844,345 |  |   | 137,555 |   |  |   | 981,900   |   |
| Trader       |  | 11,398                        |  |             | — |          |  |   | 11,398  |    |  | 15,968  |  |   | — |    |  |   | 15,968  |   |  | 37,916  |  |   | — |   |  |   | 37,916    |   |
| Total        |  | 859,469                       |  |             | 127,316 |          |  |   | 986,785 |    |  | 858,963 |  |   | 129,332 |    |  |   | 988,295 |   |  | 882,261 |  |   | 137,555 |   |  |   | 1,019,816 |   |
|              |

Welease our containers on a per diem basis to our customers under threetypes of leases: long-term leases, service leases and finance leases.Long-term leases, typically with terms of three to eight years, provideus with stable cash flow and low transaction costs by requiringcustomers to maintain specific containers on-hire for the duration ofthe lease. Service leases command a premium per diem rate in exchangefor providing customers with a greater level of operational flexibilityby allowing the pick-up and drop-off of containers during the leaseterm. Finance leases, which are typically structured as full payoutleases, provide for a predictable recurring revenue stream with thelowest daily cost to the customer because customers are generallyrequired to retain the container for the duration of its useful life.As of March  31,  2006, approximately 89% of ourcontainers were on-hire to customers, with approximately 58% ofour containers on long-term leases, approximately 26% on serviceleases or long-term leases whose fixed terms have expired but for whichthe related units remain on-hire and for which we continue to receiverental payments, and approximately 5% on finance leases. Inaddition, approximately 7% of our containers were available forlease and approximately 4% were available for sale.

Thefollowing table provides a summary of our lease portfolio, based onunits in the fleet as of the dates indicated below:

|                                    |  |                |       |                   |  |                |       |         |  |        |       |         |  |  |
|------------------------------------|--|----------------|-------|-------------------|--|----------------|-------|---------|--|--------|-------|---------|--|--|
| LeasePortfolio                     |  | March 31, 2006 |       | December 31, 2005 |  | March 31, 2005 |
| Finance lease                      |  |           | 5.1   | %            |  |           | 4.6   | %  |  |   | 2.3   | %  |
| Long-term lease                    |  |           | 57.7  |              |  |           | 59.0  |    |  |   | 59.5  |    |
| Service lease                      |  |           | 25.9  |              |  |           | 25.6  |    |  |   | 29.8  |    |
| Total leased                       |  |           | 88.7  |              |  |           | 89.2  |    |  |   | 91.6  |    |
| Existing units available for lease |  |           | 5.2   |              |  |           | 5.1   |    |  |   | 3.9   |    |
| New unitsavailable for lease       |  |           | 2.3   |              |  |           | 2.6   |    |  |   | 2.6   |    |
| Available for sale                 |  |           | 3.8   |              |  |           | 3.1   |    |  |   | 1.9   |    |
| Total portfolio                    |  |           | 100.0 | %            |  |           | 100.0 | %  |  |   | 100.0 | %  |
|                                    |

Operating Performance

Our profitability is primarily determined by the extent towhich our leasing and other revenues exceed our ownership, operatingand administrative expenses. Our profitability is also impacted by thegain or loss that we realize on the sale of our used containers. Duringthe first quarter of 2006, seasonal factors and market conditionsplaced pressure on our profitability. The first quarter typicallyrepresents the low point for both our leasing and disposal activity,while a large drop in container prices toward the end of 2005 and thelingering impacts of an over-supply of new containers in 2005 added tothe seasonal pressure.

Our leasing revenue is primarilydriven by our owned container fleet size, utilization and averagerental rates. As of March  31,  2006, our owned containerfleet included 859,469 TEU, which was relatively unchanged fromDecember  31,  2005, but down 2.6% fromMarch  31,  2005. The decrease in fleet size relative tothe first quarter of 2006 was mainly due to low procurement volumes inthe second half of 2005. In the latter half of 2005, we limited ourinvestment in new containers due to a 

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temporary surplus of new containers in China.Many leasing companies and shipping companies placed large orders ofcontainers in the first half of 2005 due to expectations for continuedstrong growth in world trade. While growth in container liftings in2005 was estimated to be over 10%, it is our understanding thatmany shipping lines achieved unexpected improvements in operatingefficiencies which allowed them to accommodate much of their volumegrowth with minimal increases in their operated container fleets.

In response to the oversupply of new containers, and in orderto match customer demand, we reduced our level of container orders inthe second half of 2005. Our owned container fleet decreased frommid-year as we sold more containers than we purchased. The oversupplyof new containers was mainly resolved by the end of 2005, and in fact,new dry and special containers are currently in short supply due todelays in the production of new containers. We are expecting toincrease our investment level in 2006 despite the current supplydisruptions since we placed relatively large new container orders atthe beginning of the year, though our rate of growth may beconstrained. Our new container deliveries are centered on the secondand third quarters since this typically represents the peak shippingseason.

Our average container utilization was88.7% in the first quarter of 2006, down 1.1% from thefourth quarter of 2005, and down 3.9% from the first quarter of2005. The first quarter typically represents our weakest quarter of theyear. The peak shipping season typically runs from the middle of thesecond quarter to the early part of the fourth quarter, and wetypically achieve most of our pick-ups during this period, while wegenerally see considerably more container redeliveries than containerpick-ups during the fourth and first quarters. As a result, ourcontainer utilization generally trends down from the end of the thirdquarter and reaches a low point near the end of the first quarter ofthe year. We experienced the typical seasonal pattern this year, andour utilization trended down for most of the first quarter. However,customer demand and lease-out activity for dry and special containerspicked up strongly at the at the end of the first quarter due tostronger than expected cargo volumes and delays in the production ofnew containers, and our utilization for dry and special containers hasbegun to increase. Utilization for our refrigerated containerscontinues to trend downward.

Our quarterly utlilzation in2005 did not follow the traditional seasonal pattern. Utilization in2005 peaked in the first quarter. Utilization at the end of 2004 wasexceptionally high, so that while we experienced the typical downwardtrend during the first quarter of 2005, the high starting point ensuredthat the average utilization for the first quarter was exceptionallystrong. In addition, the surplus of new containers that developedmid-year in 2005 created a drag on our utilization, so we did notexperience the typical seasonal increase during the peak summermonths.

The following table sets forth our averagecontainer fleet utilization for the periods indicated below:

|                    |  |                |      |                |  |                   |      |                   |  |        |      |         |  |        |      |         |  |  |
|--------------------|--|----------------|------|----------------|--|-------------------|------|-------------------|--|--------|------|---------|--|--------|------|---------|--|--|
|               |  | March 31, 2006 |      | March 31, 2005 |  | December 31, 2005 |      | December 31, 2005 |
|               |  | 3 months       |      | 3 months       |  | 3 months          |      | 12 months         |
| AverageUtilization |  |           | 88.7 | %         |  |              | 92.6 | %            |  |   | 89.8 | %  |  |   | 90.7 | %  |
|                    |

Average lease rates forour dry and refrigerated container product lines decreased slightlyduring the first quarter of 2006, while average rates for our specialcontainer product line have increased slightly. The decrease in ouraverage dry container lease rates mainly resulted from a decrease inmarket leasing rates due to a steady decrease in steel and containerprices in China from mid-year 2005 to the early first quarter in 2006.Average dry and refrigerated container lease rates in the first quarterof 2006 were also negatively impacted by the completion of a largelease extension transaction that provided a large customer withup-front reductions in rental rates in return for longer leasedurations. We expect that this transaction will have a positive impacton the net present value of the remaining lease streams.

Steel and container prices increased substantially toward theend of the first quarter and market leasing rates for new drycontainers are currently in excess of our portfolio averages. If newcontainer prices and market lease rates remain at their current level,rate momentum for dry containers should turn positive, though it maytake several quarters for us to see the benefit in our average rates.We 

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purchased a large number of containers atrelatively low prices at the beginning of the year, and committed thesecontainers to leases with rates reflective of the container cost atthat time. Customers are still in the process of picking up thesecontainers.

During the first quarter of 2006, werecognized a $0.1  million loss on the sale of our usedcontainers compared to a $4.4  million gain in the first quarterof 2005. The first quarter 2006 results were impacted by lower sellingprices for used containers and low volumes of disposals. In addition,the gain in the first quarter of 2005 included $2.9  millionfrom the sale of existing containers on-hire to one of our shippingline customers and a sale of equipment to an investor as part of ourmanaged equipment program. Used container selling prices decreased inthe fourth quarter of 2005 and the first quarter of 2006 due to anincrease in the number of containers available for sale, particularlyin North America and Europe, and the decrease in the price of newcontainers. Disposal volumes were low in the first quarter of 2006 forseasonal reasons, and this low disposal volume caused our containersavailable for sale to increase from 3.1% of our total fleet atthe beginning of the quarter to 3.8% of our fleet at the end ofthe quarter. An increase in the number of containers available for saletends to negatively impact our disposal results since we recordcontainers available for sale at the lower of cost or market so that werecognize expected losses, but not expected gains, for units added tothis category. However, we expect that disposal volumes will increasein the second and third quarter peak season, and we are hopeful thatour disposal prices will benefit from the recent increase in the priceof new containers as well as from the shortage of containers that hasrecently developed in Asia.

In the first quarter of 2006,our operating costs continued to be low as a result of the highpercentage of our containers on long term leases and our focus on leasecontract logistics. Additionally, our credit costs continue to be lowdue to the general health of our customer base and our focus on creditmanagement and collections.

Our ownership expenses,principally depreciation and interest expense, were much lower in thefirst quarter of 2006 than they were for the first quarter of 2005. Ourlower depreciation expense in 2006 reflects the slight reduction of ourowned container fleet size relative to the first quarter of 2005, aswell as the termination of depreciation expense for containers thatreached the end of their accounting useful life at the end of 2005 butremain in our fleet. The significant reduction in interest expense inthe first quarter of 2006 was due to the large reduction in the amountof outstanding debt and interest rates that we achieved as a result ofour initial public offering in the fourth quarter of last year.

In our continuous effort to improve our capital structure,and following our refinancing efforts in August  2005 and ourIPO in October  2005, we recently completed the refinancing ofour Asset Securitization Facility. On April  12,  2006,we successfully completed the placement of our $680.0  millionSeries 2006-1 Floating Rate Secured Notes (‘‘Series 2006-1Notes’’). The net proceeds from this offering, togetherwith cash on hand, were used to repay all principal and interest thatwas owed under the Asset Securitization Facility. At the closing of theSeries 2006-1 notes offering, we also decreased the maximum committmentunder the Asset Securitization Facility from $875.0  million to$300.0  million. Through this transaction we have been able tosubstantially reduce our effective interest rate and positively impactour future operating performance. We will incur a write-off of certaindeferred financing fees in the second quarter associated with thisre-financing.

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Results of Operations

Thefollowing table summarizes our results of operations for the threemonths ended March  31,  2006 and 2005 in dollars and asa percentage of total revenues:

|                                               |  |                             |         |         |  |        |         |         |  |        |         |         |  |        |       |         |  |  |
|-----------------------------------------------|--|-----------------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|-------|---------|--|--|
|                                          |  | Three months ended March31, |
|                                          |  | 2006                        |         | 2005    |
|                                          |  | $000's                      |         | Percent |  | $000's |         | Percent |
| Leasing revenues                              |  | $                           | 66,875  |    |  |   | 90.4    | %  |  | $      | 72,275  |    |  |   | 93.2  | %  |
| Equipment tradingrevenue                      |  |                        | 5,019   |    |  |   | 6.8     |    |  |   | 2,508   |    |  |   | 3.2   |    |
| Management fee income                         |  |                        | 1,576   |    |  |   | 2.2     |    |  |   | 1,996   |    |  |   | 2.6   |    |
| Otherrevenues                                 |  |                        | 477     |    |  |   | 0.6     |    |  |   | 753     |    |  |   | 1.0   |    |
| Total revenues                                |  |                        | 73,947  |    |  |   | 100.0   |    |  |   | 77,532  |    |  |   | 100.0 |    |
| Equipment trading expenses                    |  |                        | 4,225   |    |  |   | 5.7     |    |  |   | 2,065   |    |  |   | 2.7   |    |
| Direct operatingexpenses                      |  |                        | 6,057   |    |  |   | 8.2     |    |  |   | 7,117   |    |  |   | 9.2   |    |
| Administrative expenses                       |  |                        | 9,539   |    |  |   | 12.9    |    |  |   | 9,709   |    |  |   | 12.5  |    |
| Depreciationand amortization                  |  |                        | 25,489  |    |  |   | 34.5    |    |  |   | 29,285  |    |  |   | 37.8  |    |
| Provision (reversal) for doubtfulaccounts     |  |                        | 471     |    |  |   | 0.6     |    |  |   | (225    | )  |  |   | (0.3  | )  |
| Net loss (gain) on sale of leasingequipment   |  |                        | 108     |    |  |   | 0.2     |    |  |   | (4,375  | )  |  |   | (5.6  | )  |
| Interest and debt expense                     |  |                        | 12,456  |    |  |   | 16.8    |    |  |   | 21,114  |    |  |   | 27.2  |    |
| Unrealized loss (gain) on interest rate swaps |  |                        | 854     |    |  |   | 1.2     |    |  |   | (10,060 | )  |  |   | (13.0 | )  |
| Management fees                               |  |                        | — |    |  |   | — |    |  |   | 1,626   |    |  |   | 2.1   |    |
| Totalexpenses                                 |  |                        | 59,199  |    |  |   | 80.1    |    |  |   | 56,256  |    |  |   | 72.6  |    |
| Income before incometaxes                     |  |                        | 14,748  |    |  |   | 19.9    |    |  |   | 21,276  |    |  |   | 27.4  |    |
| Income tax expense                            |  |                        | 5,243   |    |  |   | 7.1     |    |  |   | 7,891   |    |  |   | 10.2  |    |
| Net income                                    |  | $                           | 9,505   |    |  |   | 12.8    | %  |  | $      | 13,385  |    |  |   | 17.2  | %  |
|                                               |

Comparison of ThreeMonths Ended March  31,  2006 to Three Months EndedMarch  31,  2005.

Leasingrevenues.    The principal components of our leasing revenuesare presented in the following table. Per diem revenue representsrevenue earned under operating lease contracts; finance lease revenuerepresents interest income earned under finance lease contracts; andfee and ancillary lease revenue represent fees billed for the pick-upand drop-off of containers in certain geographic locations and billingsof certain reimbursable operating costs such as repair and handlingexpenses.

|                                |  |                              |        |        |  |        |        |        |  |  |
|--------------------------------|--|------------------------------|--------|--------|--|--------|--------|--------|--|--|
|                           |  | Three Months Ended March 31, |
|                           |  | 2006                         |        | 2005   |
| Leasingrevenues:               |  |                         |   |   |  |   |   |   |
| Per diemrevenue                |  | $                            | 56,364 |   |  | $      | 64,240 |   |
| Finance lease revenue          |  |                         | 2,286  |   |  |   | 284    |   |
| Fee and ancillary leaserevenue |  |                         | 8,225  |   |  |   | 7,751  |   |
| Total leasing revenues         |  | $                            | 66,875 |   |  | $      | 72,275 |   |
|                                |

Total leasing revenues were$66.9  million for the three months ended March31,  2006, compared to $72.3  million for the threemonths ended March  31,  2005, a decrease of $5.4million, or 7.5%. The decrease primarily resulted from adecrease in our owned container fleet size, utilization and per diemrates, partially offset by an increase in finance lease revenue and anincrease in fee and ancillary lease revenue related to higherreimbursable operating costs.

Equipment tradingrevenues.    Equipment trading revenues were $5.0million for the three months ended March  31,  2006,compared to $2.5  million for the three months endedMarch  31,  2005, an increase of $2.5  million,resulting from more units sold.

Equipment tradingexpenses.    Equipment trading expenses were $4.2million for the three months ended March  31,  2006,compared to $2.1  million for the three months endedMarch  31,  2005, an increase of $2.1  million,resulting from more units sold.

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Direct operatingexpenses.    Direct operating expenses were $6.1million for the three months ended March  31,  2006,compared to $7.1  million for the three months endedMarch  31,  2005, a decrease of $1.0  million or14.1%. During the three months ended March  31,2006, positioning costs declined by $0.6  million compared tothe same period of 2005, and repairs were $1.6  million lower inthe three months ended March  31,  2006 compared to thesame period of 2005 due to a decrease in the number of units repaired.These declines were partially offset by an increase in storage costs of$1.1  million due to a decrease in utilization.

Administrative expenses.    Administrative expenses were$9.5  million for the three months ended March31,  2006, compared to $9.7  million for the three monthsended March  31,  2005, a decrease of $0.2million or 2.1%.

Depreciation andamortization.    Depreciation and amortization was$25.5  million for the three months ended March31,  2006, compared to $29.3  million for the threemonths ended March  31,  2005, a decrease of $3.8million or 13.0%. The decrease was primarily due to certainequipment becoming fully depreciated prior to the first quarter of2006, as well as a reduction in our owned container fleet size.

Provision (reversal) for doubtful accounts.    Provision(reversal) for doubtful accounts was $0.5  million for the threemonths ended March  31,  2006, compared to a reversal of$(0.2) million for the three months ended March  31,2005. In the first quarter of 2005, there were non-recurring reversalsof previously recorded provisions due to customer collections.

Net loss (gain) on sale of leasing equipment.    Loss onsale of equipment was $0.1  million for the three months endedMarch  31,  2006, compared to a gain of $4.4million for the three months ended March  31,  2005, adecrease of $4.5  million. The gain recorded in 2005 included a$2.9  million benefit from the sale of on-hire containers to oneof our customers and a sale of equipment to an investor as part of ourmanaged equipment program. In addition, results in 2006 were impactedby a decrease in selling prices for used containers and an increase inthe number of containers identified as available for sale. Whencontainers are identified as available for sale we are required torecognize expected losses, but not expected gains.

Interestand debt expense.    Interest and debt expense was$12.5  million for the three months ended March31,  2006, compared to $21.1  million for the threemonths ended March  31,  2005, a decrease of $8.6million. The decrease was primarily due to changes in our capitalstructure resulting from the IPO, which decreased our debt level andeffective interest rate.

Unrealized loss (gain) on interestrate swaps.    Unrealized loss on interest rate swaps was$0.9  million for the three months ended March31,  2006, compared to unrealized gain of $10.1  millionfor the three months ended March  31,  2005. The interestrate swap contracts were accounted for on a mark-to-market basis untiltheir designation as cash flow hedges at November  1,2005. While the fair market value of the swap contracts increased toapproximately $20.8  million at March  31,  2006due to an increase in interest rates, this increase in value was notrecognized into income due to the designation of the interest rate swapcontracts as interest rate hedges. The $0.9  million unrealizedloss incurred in the three months ended March  31,  2006represented the amortization of the fair value of the interest rateswap contracts at the time of designation.

Managementfees.    Management fees were zero for the three months endedMarch  31,  2006, compared to $1.6  million forthe three months ended March  31,  2005. Management feesof $1.6  million for the period ended March  31,2005 were payable pursuant to certain management agreements whichterminated upon the completion of the IPO in October  2005.

Income tax expense.    Income tax expense was$5.2  million for the three months ended March31,  2006, compared to income tax expense of $7.9million for the three months ended March  31,  2005, andthe effective tax rates for the periods were 35.6% and37.1% respectively. The state tax rate was reduced from3% to 1% in the quarter ended June  30,2005 as a result of a favorable change in New York State tax law. Thischange results in the effective rate being reduced from 37.1% to35.7%. The remaining difference in the rate between 35.7%and 35.6% is due to the effect of lower foreign income tax ratesapplied to non-US operations.

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We do not expect to pay anysignificant U.S. federal or state or local income taxes for a number ofyears, although we will be recording income tax expense, due to theavailability of accelerated U.S. tax depreciation to the existingcontainer fleet and our future purchases of containers.

Liquidity and CapitalResources    

Our principalsources of liquidity are cash flows generated from operations andborrowings under our senior secured credit facility and our assetsecuritization facility. Our cash flows will be used to finance capitalexpenditures, provide working capital and meet debt servicerequirements. We believe that cash from operations and existing cash,together with available borrowings under our senior secured creditfacility and our asset securitization facility will be sufficient tomeet our liquidity requirements for at least the next twelve months.However, our future operating performance and ability to extend orrefinance our indebtedness will be dependent on future economicconditions and financial, business and other factors that are beyondour control.

As of March  31,  2006, ourdebt structure consisted of an $875.0  million assetsecuritization facility and a $175.0  million senior securedcredit facility. As of March  31,  2006, we hadoutstanding borrowings under our asset securitization facility of$697.0  million. Based on the applicable advance rate of82%, our total borrowing capacity under our asset securitizationfacility was $697.8  million. As of March  31,2006, we had outstanding borrowings under our senior secured creditfacility of $121.0  million. Based on the applicable advancerate of 85%, our total borrowing capacity under our seniorsecured credit facility was $154.5  million.

OnApril  12,  2006, we issued $680.0  million ofasset backed notes under an Asset Backed Security(‘‘ABS’’) program designed to reduce ourborrowing costs and enhance financing resources for our equipmentfleet. The proceeds from the issuance were used to repay outstandingborrowings under our asset securitization facility. All debt to beissued under the ABS program is collateralized by the assets of TALAdvantage I LLC, a special purpose entity (‘‘theSPE’’) consisting of revenue earning containers we use inour leasing business, restricted cash and certain receivables relatedto revenue earning equipment. These notes were issued by the SPE. Underthis ABS program, a committed revolving facility (the‘‘Warehouse’’) was also arranged to provide upto $300.0  million of borrowing availability to support futurefleet expansion.

The Company is subject to variouscovenant requirements under its various debt facilities. AtMarch  31,  2006, the Company was in compliance with allcovenants.

Cash Flow

The following table setsforth certain cash flow information for the three months endedMarch  31,  2006 and 2005 ($ in thousands):

|                                                             |  |                                  |         |                                   |  |        |         |         |  |  |
|-------------------------------------------------------------|--|----------------------------------|---------|-----------------------------------|--|--------|---------|---------|--|--|
|                                                        |  | Three Months Ended March 31,2006 |         | Three Months Ended March 31, 2005 |
| Net cash provided by operating activities                   |  | $                                | 62,911  |                              |  | $      | 62,326  |    |
| Net cash used in investingactivities:                       |  |                             |    |                              |  |   |    |    |
| Purchases ofleasing equipment                               |  | $                                | (32,822 | )                            |  | $      | (53,529 | )  |
| Investment in finance leases                                |  |                             | (1,839  | )                            |  |   | — |    |
| Proceeds from sale ofequipment                              |  |                             | 12,269  |                              |  |   | 43,463  |    |
| Cash collections on financing leases, net ofunearned income |  |                             | 2,986   |                              |  |   | 810     |    |
| Other                                                       |  |                             | 6       |                              |  |   | — |    |
| Net cash used in investingactivities                        |  | $                                | (19,400 | )                            |  | $      | (9,256  | )  |
| Net cash used in financingactivities                        |  | $                                | (40,000 | )                            |  | $      | (45,000 | )  |
|                                                             |

Operating Activities 

Net cash provided by operating activities increased by$0.6  million to $62.9  million in the three months endedMarch  31,  2006, compared to $62.3  million inthe three months ended March  31,  2005.

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Investing Activities 

Net cash used in investing activities was $19.4million in the three months ended March  31,  2006, ascompared to $9.3  million in the three months endedMarch  31,  2005. Capital expenditures were $34.7million, including investments in finance leases of $1.8million, in the three months ended March  31,  2006,compared to $53.5  million in the three months endedMarch  31,  2005. During the first quarter of 2005, weelected to exercise purchase options of approximately $17.5million for containers we formerly leased-in on operating leases.Excluding these purchases, capital expenditures decreased by$1.3  million primarily due to a decrease in new equipmentprices, partially offset by an increase in the number of containerspurchased. Sales proceeds from the disposal of equipment decreased$31.2  million to $12.3  million in the three monthsended March  31,  2006, compared to $43.5  millionin the three months ended March  31,  2005. Included insales proceeds in the first quarter of 2005 were $26.4  millionof sale proceeds related to the sale of on-hire containers to one ofour customers and the sale of containers to an investor as part of ourmanaged equipment program. The remaining decrease in sales proceeds isprimarily due to a decrease in equipment selling prices. Cashcollections on financing leases, net of unearned income increased by$2.2 million to $3.0  million for the three months endedMarch  31,  2006, compared to $0.8  million forthe three months ended March  31,  2005 as a result of anincrease in our finance lease portfolio.

FinancingActivities 

Net cash used in financing activitieswas $40.0  million for the three months ended March31,  2006, compared to net cash used in financing activities of$45.0  million for the three months ended March31,  2005. In the three months ended March  31,2006, net cash used in financing activities was primarily used to paydown borrowings under our asset securitization facility and our seniorsecured credit facility. In the three months ended March31,  2005, net cash used in financing activities was primarilyused to pay down borrowings under our senior secured creditfacility.

Contractual Obligations

We are partiesto various operating and capital leases and are obligated to makepayments related to our long term borrowings. We are also obligatedunder various commercial commitments, including obligations to ourequipment manufacturers. Our equipment manufacturer obligations are inthe form of conventional accounts payable, and are satisfied from cashflows from operating and long term financing activities.

The following table summarizes our contractual obligationsand commercial commitments as of March  31,  2006:

|                                      |  |                       |         |                        |  |                     |        |                      |  |                                        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------------------------------|--|-----------------------|---------|------------------------|--|---------------------|--------|----------------------|--|----------------------------------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                 |  | Payments Due byPeriod |
|                                 |  | (dollars in millions) |
| Contractual Obligations:             |  | Total                 |         | Less than 1year (2006) |  | 1-3years(2007-2009) |        | 3-5 years(2010-2012) |  | More than 5 years (2013and thereafter) |
| Total debtobligations(1):            |  |                  |    |                   |  |                |   |                 |  |                                   |    |   |  |   |    |   |  |   |    |   |
| Assetsecuritization facility         |  | $                     | 1,012.4 |                   |  | $                   | 30.3   |                 |  | $                                      | 219.4   |   |  | $      | 302.9   |   |  | $      | 459.8   |   |
| Senior secured credit facility       |  |                  | 141.4   |                   |  |                | 6.6    |                 |  |                                   | 134.8   |   |  |   | — |   |  |   | — |   |
| Capital lease obligations            |  |                  | 19.9    |                   |  |                | 2.0    |                 |  |                                   | 4.4     |   |  |   | 4.6     |   |  |   | 8.9     |   |
| Operating leases (mainly facilities) |  |                  | 6.2     |                   |  |                | 1.2    |                 |  |                                   | 2.4     |   |  |   | 2.6     |   |  |   | — |   |
| Equipment purchase obligations       |  |                  | 130.6   |                   |  |                | 130.6  |                 |  |                                   | — |   |  |   | — |   |  |   | — |   |
| Total contractualobligations         |  | $                     | 1,310.5 |                   |  | $                   | 170.7  |                 |  | $                                      | 361.0   |   |  | $      | 310.1   |   |  | $      | 468.7   |   |
|                                      |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Amountsinclude actual and estimated interest for floating-rate debt based onMarch  31,  2006 rates and the net effect of the interestrate swaps. |

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As a result of the repayment of thetotal outstanding amount of our asset securitization facility inconnection with the issuance of $680.0 million of asset backed notes,the following table summarizes the new debt obligations as of April 12,2006:

|                          |  |                       |       |                        |  |                     |      |                      |  |                                       |       |        |  |   |       |        |  |   |       |        |  |  |
|--------------------------|--|-----------------------|-------|------------------------|--|---------------------|------|----------------------|--|---------------------------------------|-------|--------|--|---|-------|--------|--|---|-------|--------|--|--|
|                     |  | Payments Due byPeriod |
|                     |  | (dollars inmillions)  |
| Contractual Obligations: |  | Total                 |       | Less than 1year (2006) |  | 1-3years(2007-2009) |      | 3-5 years(2010-2012) |  | More than 5years (2013and thereafter) |
| Asset Backed Notes       |  | $                     | 853.0 |                   |  | $                   | 69.0 |                 |  | $                                     | 281.2 |   |  | $ | 255.6 |   |  | $ | 247.2 |   |
|                          |

Off-Balance Sheet Arrangements

At March  31,  2006, we did not have anyrelationships with unconsolidated entities or financial partnerships,such entities which are often referred to as structured finance orspecial purpose entities, which would have been established for thepurpose of facilitating off-balance sheet arrangements. We are,therefore, not materially exposed to any financing, liquidity, marketor credit risk that could arise if we had engaged in suchrelationships.

Recent Events

On May4,  2006 the United States House of Representatives passedlegislation intending to improve port security in the United States.This legislation has not yet been addressed in the United StatesSenate. The Company is currently assessing what impact, if any, theproposed legislation might have on the Company’s future businessprospects or financial condition if it becomes law.

CriticalAccounting Policies

Our consolidated financial statements havebeen prepared in conformity with accounting principles generallyaccepted in the United States, which require us to make estimates andassumptions that affect the amounts and disclosures reported in theconsolidated financial statements and accompanying notes. Our estimatesare based on historical experience and currently available information.Actual results could differ from such estimates. The followingparagraphs summarize our critical accounting policies. Additionalaccounting policies are discussed in the notes to our historicalfinancial statements contained elsewhere in this Form 10-Q.

Revenue Recognition

Operating Leases withCustomers

We enter into long-term leases and service leaseswith ocean carriers and other parties, principally as lessor inoperating leases, for marine cargo containers. Long-term leases providethe ocean carriers with specified container equipment for a specifiedterm. Our leasing revenues are based upon the number of containersleased, the applicable per diem rate and the length of the lease.Long-term leases typically range for a period of three to eight years.Revenues are recognized on a straight-line basis over the life of therespective lease. Advanced billings are deferred and recognized in theperiod earned. Service leases do not specify the exact number ofcontainers to be leased or the term that each container will remainon-hire but allow the lessee to pick up and drop off containers atvarious locations specified in the lease agreement. Under a servicelease, rental revenue is based on the number of containers utilized atcontracted per diem rates. Revenue for customers where collection isnot assured is deferred and recognized when the amounts are received.Also, in accordance with FASB EITF No. 99-19, Reporting RevenueGross as a Principal versus Net as an Agent, we recognize billingsto customers for damages incurred and certain other pass through costsas leasing revenue based on the terms of the contractual agreementswith the customer.

Finance Leases with Customers

Weenter into finance leases as lessor for container equipment that weown. The net investment in finance leases represents the receivablesdue from lessees, net of unearned income. Unearned 

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income is recognized on a level yield basisover the lease term and is recorded as leasing revenue. Finance leasesare usually long-term in nature, typically ranging for a period of fiveto ten years and may include a bargain purchase option to purchase theequipment at the end of the lease term.

Equipment TradingRevenue

Equipment trading revenue represents the proceeds onthe sale of equipment purchased for resale. The related expensesrepresent the cost of equipment sold as well as other selling coststhat are recognized as incurred and are disclosed as equipment tradingexpense in the consolidated statements of operations.

Management Fee Income

We manage equipment, which is ownedby third parties and we earn management fees based on the income earnedby the leasing and sales of such equipment. Amounts we collect as agenton behalf of third parties that own such equipment are not included inrevenue and costs paid for managed equipment are not included inexpense.

Other Revenues

Other revenues include feeincome for third party positioning of equipment.

DirectOperating Expenses

Direct operating expenses are directlyrelated to our equipment under and available for lease. These expensesprimarily consist of our costs to repair and maintain the equipment, tostore the equipment when it is not on lease, to re-position theequipment and a provision for equipment lost or not expected to bereturned. These costs are recognized when incurred. In limitedsituations, certain positioning costs may be capitalized.

Leasing Equipment

Leasing equipment is recorded atcost and depreciated to an estimated residual value on a straight-linebasis over the estimated useful life. We will continue to review ourdepreciation policies on a regular basis to determine whether changeshave taken place that would suggest that a change in our depreciationpolicies, useful lives of our equipment or the assigned residual valuesis warranted. In addition, periodically a determination is made, ifindicators of impairment are present, as to whether the carrying valueof our fleet exceeds its estimated future undiscounted cash flows. Theestimated useful lives for our leasing equipment ranges from 10 to 20years from the date of manufacture. Estimated useful lives have beenbased on independent appraisals and will be adjusted if necessary basedon actual experience. Costs incurred to place new equipment intoservice, including costs to transport the equipment to its initialon-hire location, are capitalized. We charge repair and maintenancecosts as incurred and include these costs in direct operatingexpenses.

An allowance is provided through direct operatingexpenses based on the net book value of a percentage of the units onlease to certain customers that are considered to be non-performingwhich we believe we will not ultimately recover. The percentage isdeveloped based on historical experience.

Equipment Heldfor Sale

In accordance with the Financial AccountingStandards Board (‘‘FASB’’) Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets(‘‘SFAS No. 144’’), container equipment heldfor sale is carried at the lower of its fair value, based on currenttransactions, less costs to sell or carrying value; depreciation onsuch assets is halted and disposals generally occur within ninety days.Subsequent changes to the asset's fair value, either increases ordecreases, are recorded as adjustments to the carrying value of theequipment held for sale; however, any such adjustments would not exceedthe equipment's carrying value at the time it was initiallyclassified as 

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held for sale. Initial write-downs of assetsheld for sale are recorded as an impairment charge and are included innet loss (gain) on sale of leasing equipment. Realized gains and lossesresulting from the sale of equipment held for sale are recorded as anet loss (gain) on sale of leasing equipment.

Allowance forDoubtful Accounts

Our allowance for doubtful accounts isupdated on a regular basis and is based upon a review of thecollectibility of our receivables. This review considers the riskprofile of the customer, credit quality indicators such as the level ofpast-due amounts and economic conditions. An account is considered pastdue when a payment has not been received in accordance with thecontractual terms. Accounts are generally charged off after an analysisis completed which indicates that collection of the full principalbalance is in doubt. Changes in economic conditions or other events maynecessitate additions or deductions to the allowance for doubtfulaccounts. The allowance for doubtful accounts is intended to providefor losses inherent in the accounts receivable, and requires theapplication of estimates and judgments as to the outcome of collectionefforts and the realization of collateral, among other things. Webelieve our allowance for doubtful accounts is adequate to provide forcredit losses inherent in our accounts receivable. However, actuallosses could exceed the amounts provided for in certain periods.

Income Taxes

We account for income taxes inaccordance with Statement of Financial Accounting Standards No. 109,Accounting for Income Taxes, (‘‘SFAS No.109’’). Under SFAS No. 109, deferred tax assets andliabilities are determined based on the difference between ourfinancial statements and the tax basis of assets and liabilities usingenacted tax rates in effect for the year in which the differences areexpected to reverse.

Goodwill

In accordancewith Statement of Financial Accounting Standards No. 142, Goodwilland Other Intangibles we evaluate our goodwill balance for possibleimpairment annually, in the fourth quarter of each year. A review ofgoodwill may also be initiated if events or circumstances indicate thecarrying value may be impaired. In the future, in performing thisevaluation, management will consider many factors including projectedfuture operating results and cash flows, economic trends and othermarket place data.

Recently Issued AccountingPronouncements

In December  2004, the FinancialAccounting Standards Board (‘‘FASB’’) issuedStatement of Financial Accounting Standards No.123R Share-BasedPayment (‘‘SFAS No. 123R’’). This statementis a revision of SFAS No. 123, Accounting for Stock-BasedCompensation. SFAS No. 123R supercedes Accounting Principles BoardOpinion No. 25, Accounting for Stock Issued to Employees(‘‘APB No. 25’’), and its relatedimplementation guidance. SFAS No. 123R requires companies to recognizein the statement of operations the fair value of all employeeshare-based payments, including grants of employee stock options, aswell as compensatory employee stock purchase plans. The Company adoptedSFAS No. 123R on January  1,  2006. Based on the numberof options currently outstanding which are fully vested, the adoptionof SFAS No.123R did not have a significant impact on the financialposition, results of operations or cash flows of the Company. However,future grants of share-based compensation will result in therecognition of compensation expense.

ITEM3:    Quantitative and QualitativeDisclosures About Market Risk

Market risk represents therisk of changes in value of a financial instrument, derivative ornon-derivative, caused by fluctuations in interest rates, foreignexchange rates and equity prices. Changes in these factors could causefluctuations in results of our operations and cash flows. In theordinary course of business, we are exposed to foreign currency,interest rate, and credit risks.

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Foreign Currency Exchange Rate Risk

Although we have significant foreign-basedoperations, the U.S. dollar is the operating currency for the majorityof our leases (both customers obligations and company obligations), andmost of our revenues and expenses in 2006 and 2005 were denominated inU.S. dollars. As a result, foreign currency fluctuations did notmaterially impact our financial results in those periods.

Interest Rate Risk 

We enter into interestrate swap contracts to fix the interest rates on a portion of our debt.We assess and manage the external and internal risk associated withthese derivative instruments in accordance with the overall operatinggoals. External risk is defined as those risks outside of our directcontrol, including counterparty credit risk, liquidity risk, systemicrisk and legal risk. Internal risk relates to those operational riskswithin the management oversight structure and includes actions taken incontravention of our policy.

The primary external risk ofour interest rate swap contracts is counterparty credit exposure, whichis defined as the ability of a counterparty to perform its financialobligations under a derivative contract. All derivative agreements arewith a major money center financial institution rated investment gradeby nationally recognized rating agencies, with our counterparty rated‘‘AA’’ or better. Credit exposures are measuredbased on the market value of outstanding derivative instruments. Bothcurrent exposures and potential exposures are calculated for eachderivative contract to monitor counterparty credit exposure.

On December  14,  2004, we entered into threeinterest rate swap contracts with a financial institution to fix thefloating interest rates on a portion of our debt facilities. Theinterest rate swap contracts have an initial notional amount of$500.0  million, amortize over a 7 year term and have a fixedrate of approximately 3.82%.

In addition, onOctober  28,  2005, we entered into two interest rateswap contracts with a financial institution to fix the floatinginterest rates on a portion of our debt facilities. One interest rateswap contract has a notional amount of $100.0  million, anon-amortizing term of 6 years and a fixed rate of approximately4.82%. The second interest rate swap contract has a notionalamount of $25.0  million, a non-amortizing term of approximately2.75 years and a fixed rate of approximately 4.71%.

While we utilize interest rate swap contracts to manage themarket risk associated with fluctuations in interest rates on a largeportion of our variable rate indebtedness, our earnings are affected bychanges in interest rates. If market interest rates for our variablerate indebtedness averaged 50 basis points more than the weightedaverage interest rate actually paid during the first quarter of 2006,our interest expense, after considering the effects of our interestrate swap agreements, would have increased, and income before incomestaxes would have decreased, by $0.3  million for the threemonths ended March  31,  2006. These amounts aredetermined by considering the impact of the hypothetical interest rateson our borrowings and interest rate swap agreements. This analysis doesnot consider the effects of the reduced level of overall economicactivity that could exist in such an environment.

CreditRisk 

We maintain detailed credit records regardingour customers and set maximum exposure limits for our significantcustomers based on our review of these records. Credit criteriainclude, but are not limited to, customer payment history, customerfinancial position and performance (e.g., net worth leverage,profitability, trade routes, country of domicile, social and politicalclimate, and the type of, and location of, containers that are to besupplied.) We diligently monitor our customers' performance andour lease exposures on an ongoing basis, and our credit managementprocesses are aided by the long payment experience we have with most ofour customers and our broad network of long-standing relationships inthe shipping industry that provide current information about ourcustomers.

Industry factors that provide incrementalcredit protection include the strong growth in the container industry,effective collection tools, our high recovery rate for containers indefault situations and the 

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re-marketability of our container fleet. Thestrong growth in the container industry helps minimize the risk ofcustomer defaults since the core assets of a poorly performing shippingline, its ships and containers, are generally needed to meet worldcontainerized trade demand. As a result, poorly performing shippinglines are often acquired by others. In addition, the law in certainmajor port locations is highly favorable to creditors and many of ourlarge customers call on ports that will allow us to arrest, or seize,the customer’s ships or bunkers, or repossess our containers ifthe customer is in default under our container leases. We havehistorically recovered approximately 90% of our containers thatwere the subject of defaulted contracts and we are able to successfullyre-market these repossessed containers through our worldwide salesinfrastructure. However, we typically incur operating expenses such asrepairs and positioning when containers are recovered after a customerdefault.

For the three months ended March31,  2006, our five largest customers accounted forapproximately 48% of our leasing revenues, with our largestcustomer accounting for approximately 19% of our leasingrevenues. As of March  31,  2006, approximately73% of our containers were on-hire to our 20 largestcustomers.

The allowance for doubtful accounts is anestimate of allowances necessary for receivables on our operating leasereceivables.

ITEM 4.    CONTROLSAND PROCEDURES.

Based upon the required evaluation ofour disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) under the Securities and ExchangeAct of 1934, as amended (the ‘‘ExchangeAct’’)), our President and Chief Executive Officer and ourVice President and Chief Financial Officer concluded that as ofMarch 31, 2006 our disclosure controls and procedures wereadequate and effective to ensure that information was gathered,analyzed and disclosed on a timely basis.

There has beenno change in our internal control over financial reporting (as definedin Rules 13a-15(f) and 15d-15(f) under the Exchange Act) thatoccurred during our fiscal quarter ended March 31, 2006, thathas materially affected, or is reasonably likely to materially affect,our internal control over financialreporting.

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PART II —OTHER INFORMATION

|               |                   |
|---------------|-------------------|
| ITEM 1.  | LEGALPROCEEDINGS. |

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

|                |               |
|----------------|---------------|
| ITEM 1A.  | RISK FACTORS. |

For acomplete listing of our risk factors, refer to our 2005 Form 10-K filedwith the Securities and Exchange Commission on March  20,2006.

|               |           |
|---------------|-----------|
| ITEM 6.  | EXHIBITS. |

|                |  |                                                                                                                                                                                                                                                                                                                                             |  |  |  |  |
|----------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| Exhibit Number |  | Exhibit Description                                                                                                                                                                                                                                                                                                                         |
| 10.35*         |  | Amended and Restated Indenture dated as of April  12,2006 by and between TAL Advantage I LLC(‘‘Issuer’’) and U. S. Bank NationalAssociation (‘‘IndentureTrustee’’)                                                                                                                     |
| 10.36*         |  | Amended and Restated Management Agreement dated as of April12, 2006  by and between TAL International Container Corporation(‘‘Manager’’) and TAL Advantage I LLC(‘‘Owner’’)                                                                                                            |
| 10.37*         |  | Amended and Restated Contribution and Sale Agreement dated as ofApril  12,  2006 by and between TAL International ContainerCorporation (‘‘Seller’’) and TAL Advantage ILLC (‘‘Issuer’’)                                                                                                     |
| 10.38*         |  | Series 2006-1 Supplement dated as ofApril  12,  2006 by and between TAL Advantage I LLC(‘‘Issuer’’) and U. S. Bank NationalAssociation (‘‘IndentureTrustee’’)                                                                                                                     |
| 10.39*         |  | Series 2006-1 Note Purchase Agreement dated as of April  7,2006  by and between TAL Advantage I LLC(‘‘Issuer’’), TAL International ContainerCorporation (‘‘Manager’’), and FortisSecurities LLC and Credit Suisse Securities (USA) LLC(‘‘Initial Purchasers’’) |
| 10.40*         |  | Amended and Restated Series 2005-1 Supplementdated as of April  12,  2006 between Advantage I LLC(‘‘Issuer’’) and U. S. Bank NationalAssociation (‘‘IndentureTrustee’’)                                                                                                           |
| 10.41*         |  | Amended and Restated Series 2005-1 Note Purchase Agreement dated asof April  7, 2006  by and between TAL Advantage I LLC(‘‘Issuer’’), the Noteholders From Time to TimeParty Thereto and the Other Financial Institutions From Time to TimeParty Thereto                                                       |
| 31.1*          |  | Certification of theChief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) ofthe Securities Exchange Act of 1934, as amended                                                                                                                                                                                                     |
| 31.2*          |  | Certification of the Chief Financial Officerpursuant to Rules 13a-14(a) and 15d-14(a) of the Securities ExchangeAct of 1934, as amended                                                                                                                                                                                                     |
| 32.1*          |  | Certification by Chief Executive Officer pursuant to 18 U.S.C.Section 1350                                                                                                                                                                                                                                                                  |
| 32.2*          |  | Certification by ChiefFinancial Officer pursuant to 18 U.S.C. Section1350                                                                                                                                                                                                                                                                   |
|                |

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|--|
|  |  |
|  |

|   |                |
|---|----------------|
| * | Filedherewith. |

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.

|                |  |                                                                                 |  |  |  |  |
|----------------|--|---------------------------------------------------------------------------------|--|--|--|--|
|           |  | TAL International Group, Inc.                                                   |
| May  10,  2006 |  |                                                                            |
|           |  | /s/Chand Khan                                                                   |
|           |  | Chand KhanVice PresidentandChief Financial Officer(Principal AccountingOfficer) |
|                |

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