Use these links to rapidly review the document
TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---

FORM 10-Q

Commission file number- 001-32638

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

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

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

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

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

        As of October 19, 2012, there were 33,597,916 shares of the Registrant's common stock, $.001 par value outstanding.

   

---

Table of Contents

TAL International Group, Inc.

Index

2

---

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

        Forward-looking statements in this report are subject to a number of known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those described in the forward-looking statements, including, but not limited to, the risks and uncertainties described in the section entitled "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on February 22, 2012, in this report as well as in the other documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.

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

PART I—FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

        The consolidated financial statements of TAL International Group, Inc. ("TAL" or the "Company") as of September 30, 2012 and December 31, 2011 and for the three and nine months ended September 30, 2012 and September 30, 2011 included herein have been prepared by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the SEC. In addition, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the SEC, on February 22, 2012, from which the accompanying December 31, 2011 Balance Sheet information was derived, and all of our other filings filed with the SEC from October 11, 2005 through the current date pursuant to the Exchange Act.

3

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

   

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

4

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Operations

(Dollars and shares in thousands, except earnings per share)

(Unaudited)

   

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

5

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(Unaudited)

   

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

6

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

   

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

7

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of the Business, Basis of Presentation and Recently Adopted Accounting Pronouncements

A.    Description of the Business

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

B.    Basis of Presentation

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

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

C.    Recently Adopted Accounting Pronouncements

        In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standard No. 2011-04 ("ASU 2011-04"), Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 provides guidance to prospectively ensure common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. The Company has adopted ASU 2011-04 effective January 1, 2012. The Company's adoption of ASU 2011-04 had no impact on the Company's consolidated financial statements.

        In June 2011, the FASB issued Accounting Standards Update No. 2011-05 ("ASU 2011-05"), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 requires the presentation of the components of net income, other comprehensive income and total comprehensive income in a single continuous statement or in two separate but consecutive statements. Effective January 1, 2012, the Company has adopted the two consecutive statements approach. The Company's adoption of ASU 2011-05 had no impact on the Company's consolidated financial statements as it is presentation-only in nature.

Note 2—Fair Value of Financial Instruments

        The Company believes that the carrying amounts of cash and cash equivalents, accounts receivable, finance lease receivable and other assets approximate their fair value as of September 30, 2012.

8

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Fair Value of Financial Instruments (Continued)

        Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following fair value hierarchy when selecting inputs for its valuation techniques, with the highest priority given to Level 1:

•

Level 1—Financial assets and liabilities whose values are based on observable inputs such as quoted prices for identical instruments in active markets (unadjusted).



•

Level 2—Financial assets and liabilities whose values are based on observable inputs such as (i) quoted prices for similar instruments in active markets; (ii) quoted prices for identical or similar instruments in markets that are not active; or (iii) model-derived valuations in which all significant inputs are observable in active markets.



•

Level 3—Financial assets and liabilities whose values are derived from valuation techniques based on one or more significant unobservable inputs.

        The Company does not measure debt at fair value in its consolidated balance sheets. The fair value, which was measured using Level 2 inputs, and the carrying value of the Company's debt are listed in the table below as of the date indicated (in thousands).

        The Company estimated the fair value of its debt instruments based on the net present value of its future debt payments, using a discount rate which reflects the Company's estimate of current market interest rates and spreads as of the balance sheet date.

Note 3—Dividends

        The Company paid the following quarterly dividends during the nine months ended September 30, 2012 and 2011 on its issued and outstanding common stock:

Note 4—Stock-Based Compensation Plans

        The Company records compensation cost relating to stock-based payment transactions in accordance with FASB Accounting Standards Codification No. 718 (ASC 718) Compensation—Stock Compensation. The cost is measured at the grant date, based on the calculated fair value of the award,

9

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Stock-Based Compensation Plans (Continued)

and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity award).

        The Company incurred compensation costs related to the vesting of restricted shares granted in 2009, 2010, 2011 and 2012 under the Company's stock-based compensation plans of $0.8 million and $0.5 million for the three months ended September 30, 2012 and 2011, respectively, and $2.9 million and $1.7 million for the nine months ended September 30, 2012 and 2011, respectively. The Company reports these compensation costs in administrative expenses in its consolidated statements of operations.

        Total unrecognized compensation cost of approximately $5.0 million as of September 30, 2012 related to 353,250 restricted shares granted during 2010, 2011 and 2012 will be recognized over the remaining weighted average vesting period of approximately 1.9 years.

        The Company's stock option activity under the 2005 Management Omnibus Incentive Plan (the "Plan") for the nine months ended September 30, 2012 was as follows:

        Plan participants tendered 59,309 shares, all of which were subsequently retired by the Company, to satisfy payment of the exercise price and, in certain instances withholding taxes, for a portion of the shares exercised.

Note 5—Net Investment in Finance Leases

        The following table represents the components of the net investment in finance leases (in thousands):

        The Company evaluates potential losses in its finance lease portfolio by regularly reviewing the specific receivables in the portfolio and analyzing historical loss experience. The Company's historical loss experience on its gross finance lease receivables, after considering equipment recoveries, was less

10

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5—Net Investment in Finance Leases (Continued)

than 1%. Net investment in finance lease receivables is generally charged off after an analysis is completed which indicates that collection of the full balance is remote.

        In order to estimate its allowance for losses on its gross finance lease receivables, the Company categorizes the credit worthiness of the receivables in its portfolio based on internal customer credit ratings, which are reviewed and updated, as appropriate, on an ongoing basis. The internal customer credit ratings are developed based on a review of the financial performance and condition, operating environment, geographical location and trade routes of TAL's customers.

        The categories of gross finance lease receivables based on the Company's internal customer credit ratings can be described as follows:

        Tier 1—These customers are typically large international shipping lines who have been in business for many years and have world class operating capabilities and significant financial resources. In most cases, the Company has had a long commercial relationship with these customers and currently maintains regular communication with them at several levels of management which provides TAL with insight into the customers' current operating and financial performance. In the Company's view, these customers have the greatest ability to withstand cyclical downturns and would likely have greater access to needed capital than lower rated customers. The Company views the risk of default for Tier 1 customers to range from minimal to modest.

        Tier 2—These customers are typically either smaller shipping lines with less operating scale or shipping lines with a high degree of financial leverage, and accordingly the Company views these customers as subject to higher volatility in financial performance over the business cycle. The Company generally expects these customers to have less access to capital markets or other sources of financing during cyclical down turns. The Company views the risk of default for Tier 2 customers as moderate.

        Tier 3—Customers in this category exhibit volatility in payments on a regular basis, thus they are considered non-performing. The Company has initiated or implemented plans to recover equipment on lease to these customers and believes that default is likely, or has already occurred.

        Based on the above categories, the Company's gross finance lease receivables were as follows as of the dates presented (in thousands):

        The Company considers an account past due when a payment has not been received in accordance with the terms of the related lease agreement. As of September 30, 2012, approximately $0.1 million of the Company's Tier 1 gross finance lease receivables and $0.3 million of the Company's Tier 2 gross finance lease receivables were past due, substantially all of which were aged approximately 31 days. As of September 30, 2012, none of the Company's gross finance lease receivables were in non-accrual

11

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5—Net Investment in Finance Leases (Continued)

status. The Company recognizes income on gross finance lease receivables in non-accrual status as collections are made.

        The following table represents the activity of the Company's allowance on gross finance lease receivables for the periods presented (in thousands):

Note 6—Debt

        Debt consisted of the following (amounts in thousands):

        As of September 30, 2012 the Company had $1,315.0 million of debt outstanding on facilities with fixed interest rates and $1,316.8 million of debt outstanding on facilities with interest rates based on floating rate indices (primarily LIBOR). The Company economically hedges the risks associated with fluctuations in interest rates on a portion of its floating rate borrowings by entering into interest rate swap agreements that convert a portion of its floating rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. As of September 30, 2012, the Company had interest rate swaps in place with a total notional value of $738.1 million to fix the floating interest rates on a portion of its floating rate debt obligations.

        The Company is subject to certain financial covenants under its debt facilities, and as of September 30, 2012, was in compliance with all such covenants.

Asset Backed Securitization Term Notes

        In May 2012, the Company issued $250 million of fixed rate secured notes under the Asset Backed Securitization ("ABS") facilities.

Asset Backed Warehouse Facility

        During 2012, the Company increased the size of its asset backed warehouse facility from $400 million to $600 million.

12

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6—Debt (Continued)

Term Loan Facilities

        In April 2012, the Company completed a private placement of notes for $153 million and used the proceeds to repay amounts outstanding under the asset backed warehouse facility.

Note 7—Derivative Instruments

Interest Rate Swaps

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

        As of September 30, 2012, the Company had in place total interest rate swap agreements to fix the floating interest rates on a portion of the borrowings under its debt facilities as summarized below:

        The Company's net interest expense on its interest rate swap agreements was $5.4 million and $7.8 million for the three months ended September 30, 2012 and 2011, respectively, and $18.2 million and $23.8 million for the nine months ended September 30, 2012 and 2011, respectively. The Company records net interest on its interest rate swap agreements in interest and debt expense in its consolidated statements of operations.

        Most of the Company's interest rate swap agreements have not been accounted for as hedging instruments under FASB Accounting Standards Codification No. 815 (ASC 815) Derivatives and Hedging, and therefore changes in the fair value of the interest rate swap agreements are reflected in the consolidated statements of operations as net loss on interest rate swaps.

        In April 2012, the Company entered into a 5-year forward starting interest rate swap agreement with a notional value of $200 million to fix interest rates on future borrowings expected to be issued before the end of June 2012. In connection with the closing of the fixed rate secured notes issued in May 2012 under the ABS facilities, the Company terminated this swap agreement and paid $1.8 million to its counterparty. Since this swap was designated as a cash flow hedge, the loss recorded in accumulated other comprehensive loss as of the date the contract was terminated will be amortized to

13

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7—Derivative Instruments (Continued)

interest expense over the 10-year scheduled term of the fixed rate secured notes. There was no material ineffectiveness during the period the hedge was designated.

        For the three and nine months ended September 30, 2012, the Company recognized $0.9 million and $2.5 million, respectively, in interest and debt expense related to the amortization of accumulated other comprehensive loss attributable to terminated interest rate swap agreements that had been designated as cash flow hedges. As of September 30, 2012, the unamortized pre-tax balance in accumulated other comprehensive loss attributable to terminated interest rate swap agreements that had been designated as cash flow hedges was approximately $12.4 million, of which $3.2 million is expected to be amortized to interest and debt expense over the next 12 months. Amounts recorded in accumulated other comprehensive loss attributable to these terminated interest rate swap agreements would be recognized in earnings immediately in conjunction with a termination of the related debt agreements.

        During the nine months ended September 30, 2012, the Company terminated interest rate swap agreements with a notional value of $250 million and an average remaining term of approximately 1.8 years as of the date they were terminated. The Company partially replaced them with a non-amortizing interest rate swap with a notional value of $75 million that expires in 2018. The Company paid $17.6 million to its interest rate swap counterparties to terminate these agreements. As these interest rate swap agreements were non-designated, the entire amount has been previously recognized in the Company's statements of operations as net loss on interest rate swaps.

Foreign Currency Exchange Rate Swaps

        In April 2008, the Company entered into foreign currency rate swap agreements to manage foreign currency rate risk exposure by exchanging Euros for U.S. dollars based on expected payments under its Euro denominated finance lease receivables. The Company will pay a total of approximately 2.8 million Euros and receive approximately $4.2 million over the remaining term of the foreign currency rate swap agreements, which expire in April 2015. The Company does not account for the foreign currency rate swap agreements as hedging instruments under ASC 815, and therefore changes in the fair value of the foreign currency rate swap agreements are reflected in the consolidated statements of operations in administrative expenses.

Fair Value of Derivative Instruments

        Under the criteria established by ASC 820, the Company has elected to use the income approach to value its interest rate swap and foreign currency rate swap agreements, using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted) assuming that participants are motivated, but not compelled to transact. The Level 2 inputs for the interest rate swap and forward valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts and spot currency rates) and inputs other than quoted prices that are observable for the asset or liability (specifically forward currency points, LIBOR cash and swap rates, basis swap adjustments and credit risk at commonly quoted intervals).

14

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7—Derivative Instruments (Continued)

Location of Derivative Instruments in Financial Statements

Fair Value of Derivative Instruments
(in millions)

Derivatives Not Designated as Hedging Instruments under ASC 815
Effect of Derivative Instruments on Consolidated Statements of Operations
(in millions)

Note 8—Segment and Geographic Information

Industry Segment Information

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

•

Equipment leasing—the Company owns, leases and ultimately disposes of containers and chassis from its lease fleet, as well as manages leasing activities for containers owned by third parties.



•

Equipment trading—the Company purchases containers from shipping line customers, and other sellers of containers, and resells these containers to container retailers and users of containers for storage or one-way shipment. Included in the Equipment trading segment revenues are leasing revenues from equipment purchased for resale that is currently on lease until the containers are dropped off.

15

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Segment and Geographic Information (Continued)

        The following tables show segment information for the periods indicated and the consolidated totals reported (dollars in thousands):

16

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Segment and Geographic Information (Continued)

        There are no intercompany revenues or expenses between segments. Additionally, certain administrative expenses have been allocated between segments based on an estimate of services provided to each segment. A portion of the Company's equipment purchased for resale was purchased through certain sale-leaseback transactions with our shipping line customers. Due to the expected longer term nature of these transactions, these purchases are reflected as leasing equipment as opposed to equipment held for sale and the cash flows associated with these transactions are and will be reflected as purchases of leasing equipment and proceeds from the sale of equipment in investing activities in the Company's consolidated statements of cash flows.

Geographic Segment Information

        The Company earns its revenues from international containers which are deployed by its customers in a wide variety of global trade routes. Substantially all of the Company's leasing related revenue is denominated in U.S. dollars. The following table represents the geographic allocation of revenues for the periods indicated based on customers' primary domicile and allocates equipment trading revenue based on the location of sale (in thousands):

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

Note 9—Commitments and Contingencies

Residual Value Guarantees

        During 2008, the Company entered into commitments for equipment residual value guarantees in connection with certain finance leases that were sold or brokered to financial institutions. The guarantees represent the Company's commitment that these assets will be worth a specified amount at the end of certain lease terms (if the lessee does not default on the lease) which expire in 2016. At September 30, 2012, the maximum potential amount of the guarantees under which the Company could be required to perform was approximately $27.1 million. The carrying values of the guarantees of $1.1 million have been deferred, are included in accounts payable and accrued expenses and approximate fair value as of September 30, 2012. Under the criteria established by ASC 820, the Company performed fair value measurements of the guarantees at origination using Level 2 inputs, which were based on significant other observable inputs other than quoted prices, either on a direct or indirect basis. The Company accounts for the residual value guarantees under Accounting Standards

17

---

Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9—Commitments and Contingencies (Continued)

Codification 460, Guarantees. The Company expects that the market value of the equipment covered by the guarantees will equal or exceed the value of the guarantees and therefore, no contingent loss has been provided as of September 30, 2012.

Purchase Commitments

        At September 30, 2012, commitments for capital expenditures totaled approximately $70.4 million.

Note 10—Income Taxes

        The consolidated income tax expense for the three and nine months ended September 30, 2012 and 2011 was determined based upon estimates of the Company's consolidated effective income tax rates for the year ending December 31, 2012 and the year ended December 31, 2011, respectively. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, foreign income taxes and the effect of certain permanent differences.

Note 11—Subsequent Events

Quarterly Dividend

        On October 23, 2012, the Company's Board of Directors approved and declared a $0.62 per share quarterly cash dividend on its issued and outstanding common stock, payable on December 27, 2012 to shareholders of record at the close of business on December 6, 2012.

18

---

Table of Contents

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

        The following discussion and analysis of the consolidated financial condition and results of operations of TAL International Group, Inc. and its subsidiaries should be read in conjunction with related consolidated financial data and our annual audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 22, 2012. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" and "Forward-Looking Statements" in our Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Our Company

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

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

•

Equipment leasing—we own, lease and ultimately dispose of containers and chassis from our lease fleet, as well as manage containers owned by third parties.



•

Equipment trading—we purchase containers from shipping line customers, and other sellers of containers, and resell these containers to container retailers and users of containers for storage or one-way shipment.

Operations

        Our consolidated operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis. As of September 30, 2012, our total fleet consisted of 1,185,308 containers and chassis, including 23,921 containers under management for third parties, representing 1,932,901 twenty-foot equivalent units (TEU). We have an extensive global presence, offering leasing services through 17 offices in 11 countries and approximately 225 third party container depot facilities in 39 countries as of September 30, 2012. Our customers are among the largest shipping lines in the world. For the nine months ended September 30, 2012, our twenty largest customers accounted for 81% of our leasing revenues, our five largest customers accounted for 48% of our leasing revenues, and our largest customer, CMA CGM, accounted for 16% of our leasing revenues.

19

---

Table of Contents

        The following tables provide the composition of our equipment fleet as of the dates indicated (in units, TEUs and cost-equivalent units, or "CEU"):

 

 

        In the equipment fleet tables above, we have included total fleet count information based on CEU. CEU is a ratio used to convert the actual number of containers in our fleet to a figure based on the relative purchase prices of our various equipment types to that of a 20 foot dry container. For example, the CEU ratio for a 40 foot standard height dry container is 1.6, and a 40 foot high cube refrigerated container is 10.0. The CEU ratios used in this calculation are from our debt agreements and may differ slightly from CEU ratios used by others in the industry.

20

---

Table of Contents

        We lease five types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples, electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, (3) special containers, which are used for heavy and oversized cargo such as marble slabs, building products and machinery, (4) chassis, which are used for the transportation of containers domestically, and (5) tank containers, which are used to transport bulk liquid products such as chemicals. Our in-house equipment sales group manages the sale process for our used containers and chassis from our equipment leasing fleet and buys and sells used and new containers and chassis acquired from third parties.

        As of September 30, 2012, the percentages of our equipment fleet and leasing revenues by equipment type are as follows:

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

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

        The increase in our service lease portfolio over the last year reflects the completion of several large sale-lease back transactions which are usually structured to provide customers with significant

21

---

Table of Contents

flexibility to redeliver units. Due to the age of this equipment, we expect to sell these units after they have been redelivered.

        As of September 30, 2012, December 31, 2011 and September 30, 2011, our long-term and finance leases had average remaining contract terms of approximately 45 months, 48 months, and 50 months, respectively, assuming no leases are renewed.

Operating Performance

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

        Our leasing revenues are primarily driven by the size of our owned fleet, our equipment utilization and the average lease rates in our lease portfolio. Our leasing revenues also include ancillary fees driven by container pick-up and drop-off volumes. Leasing revenues for the third quarter of 2012 increased 11.8% from the third quarter of 2011.

        Owned fleet size.    As of September 30, 2012, our owned fleet included 2,330,486 CEUs, an increase of 16.5% from December 31, 2011 and 17.8% from September 30, 2011. The increase in fleet size over both periods was primarily due to the purchases of new containers and the completion of several large sale-leaseback transactions. We continued to have significant opportunities to grow our fleet in 2012 due to the ongoing combination of moderate growth in global containerized trade volumes and the continued shift to leasing from container ownership by our shipping line customers. Historically, our shipping line customers have generally purchased 55%-60% of the containers they operate and leased 40%-45% from leasing companies like TAL. However, since 2010, our customers have relied on leasing for the majority of the containers added to their fleets, and they have become increasingly interested in selling portions of their existing fleets of owned containers to leasing companies through sale-leaseback transactions. This increased reliance on leasing has been mainly driven by the financial challenges facing our customers due to persistent excess vessel capacity and the resulting pressure on freight rates, high fuel prices, and reduced access to financing.

        As of October 24, 2012, we have purchased over $800 million of containers through new orders and sale-leaseback transactions. Roughly three quarters of this equipment (together with our beginning inventory of factory units as of January 1, 2012) is either on-hire or committed to lease transactions. As in 2011, the pick-up of new containers committed to leases has been slower than anticipated, and growth in our leasing revenue has lagged growth in our container fleet. In both 2011 and 2012, expectations for trade growth diminished during the year as peak-season shipping volumes were lighter than expected. Clarkson's Research Services is currently estimating that global containerized trade growth will be 4.8% in 2012, down from their estimate of 7.1% at the beginning of the year. Many of our customers responded to the lower growth level by extending the time they take in completing pick-ups of containers committed to lease.

        A significant portion of our new dry containers committed to lease were picked up in the third quarter and a large portion of the sale-lease back transactions were completed and placed on-hire between June and August. As a result, we had solid growth in our leasing revenues during the third quarter and we expect further growth in our leasing revenue during the fourth quarter as we benefit from a full period of revenue from equipment placed on-hire in the third quarter and the pick-up of additional containers already committed to leases.

        Utilization.    Our average utilization was 97.7% during the third quarter of 2012, a decrease of 0.9% from the third quarter of 2011. Our utilization remains quite high due to the general tight supply / demand balance for containers and our customers' reluctance to order large volumes of new

22

---

Table of Contents

containers directly. We expect dry container redeliveries to increase in the fourth quarter, and our utilization to decrease slightly, as the peak season for dry containers passes.

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

 

        Effective for our 2011 10-K filing, we changed our utilization calculation to be based on CEUs and to exclude off-hire units designated for sale. This method provides a better indicator of the performance of our leasable fleet because it gives greater weight to more expensive equipment types and it does not include those off-hire containers that have been designated for sale. In addition, we believe our utilization calculated under this methodology more closely conforms to those used by our publicly traded competitors. Utilization for all of the periods shown above has been recalculated using this methodology.

        Average lease rates.    Average lease rates for our dry container product line decreased 3.7% in the third quarter of 2012 from the third quarter of 2011. This decrease was primarily due to the completion of a large sale-leaseback transaction for older dry containers. These older containers were purchased for prices well below the current cost of new containers, and therefore, the leaseback rate is substantially below our current portfolio average. Excluding the effects of this sale-leaseback transaction, average lease rates on our dry container product line remained relatively unchanged in the third quarter of 2012 compared to the third quarter of 2011.

        Average lease rates for refrigerated containers were 3.2% lower in the third quarter of 2012 compared to the third quarter of 2011. Our average lease rates for refrigerated containers continue to be negatively impacted by the addition of new refrigerated containers placed on lease at rates lower than our portfolio average. The cost of the refrigeration machines included in refrigerated containers has trended down over the last few years, which has led to lower refrigerated container prices and lease rates. This year, lease rates for new refrigerated containers have also been negatively impacted by aggressive pricing from new entrants seeking to build market share.

        The average lease rates for special containers were 1.8% higher compared to the third quarter of 2011 due to relatively high prices and lease rates for new special containers added to our fleet, and the drop-off and sale of older special containers on leases with rates well below current market levels.

        Equipment disposals.    During the third quarter of 2012, we recognized a $11.3 million gain on the sale of our used containers compared to $14.9 million in the third quarter of 2011. Gain on sale decreased primarily due to lower average sale prices, partially offset by higher sales volumes and a decrease in the cost of equipment sold. The cost of equipment sold in the third quarter of 2011 was higher than in the third quarter of 2012 due to the substantial number of sale leaseback containers with higher book values sold in 2011. Those sale leaseback containers had been purchased in the latter part of 2011 for prices higher than the typical book value of our older containers.

        Used container sale prices reached record levels during the summer of 2011 due to the general tight supply / demand balance for containers and the high price for new containers at that time. Used

23

---

Table of Contents

container disposal prices trended down roughly 20% from the 2011 peak to March 2012 as shipping line customers redelivered older containers after the peak season and the shortage of sale containers eased. In the second and third quarters of 2012, disposal prices stabilized, and they remain quite high compared to historical averages and in relation to new container prices. We continue to expect that used container sale prices will trend down further toward historical levels, but this may take some time if the container supply / demand balance remains tight.

        Equipment ownership expenses.    Our ownership expenses, which consist of depreciation and interest expense, increased by $12.2 million or 17.3% compared to the third quarter of 2011. TAL purchased a large volume of new containers in 2011 and so far in 2012, and our average revenue earning assets increased by approximately 17% from the third quarter of 2011 to the third quarter of 2012.

        Depreciation expense increased $10.3 million or 24.6% compared to the third quarter 2011. Over the past year, depreciation expense increased faster than our revenue earning assets mainly due to our fleet demographics. The portion of our fleet that is fully depreciated has decreased significantly as we have invested in a large number of new containers over the last several years and as a large volume of fully depreciated containers purchased in the mid-1990's has been returned by customers and sold. Additionally, we purchased relatively few containers in the late 1990's, so relatively few containers have reached the end of their depreciable lives in 2011 and 2012. We expect the percentage of our containers that are fully depreciated in our fleet to stabilize next year.

        Interest expense increased $1.9 million or 6.7% compared to the third quarter of 2011. The increase from the third quarter of 2011 was due to an increase in our average outstanding debt, partially offset by a decrease in our average effective interest rate. Our average debt balance increased mainly due to new equipment purchases in 2011 and year to date in 2012. Our average effective interest rate decreased by 0.34% in the third quarter of 2012 compared to the third quarter of 2011 mainly due to the issuance of new debt at interest rates lower than those on our existing debt facilities and the termination of several interest rate swap agreements. We use interest rate swap agreements to synthetically convert a portion of our floating rate debt to a fixed rate basis to match the duration of our interest rates to the duration of our lease portfolio.

        Credit performance.    Our credit performance remained strong during the third quarter of 2012, and we recorded a small reversal of our provision for doubtful accounts. However, our concern about credit risk remains heightened due to the difficult market conditions facing our shipping line customers. During 2011, excess vessel capacity placed severe pressure on freight rates on the major East/West trade lanes. Higher fuel prices combined with the drop in freight rates to squeeze the profitability of our customers, and many reported large losses in 2011 and the first quarter of 2012.

        While freight rates improved significantly during the second quarter of 2012, and shipping lines reported improved operating performance in the second quarter, freight rates began to fall again in the third quarter as the dry container peak season was weaker than expected and as excess vessel capacity continued to weigh on the industry. It is anticipated that the volume of new vessels entering service over the next several years will be in excess of trade growth, and freight rates and our customers' financial performance are expected to remain under pressure.

        Operating expenses.    Our direct operating expenses were $6.2 million in the third quarter of 2012, compared to $5.1 million in the third quarter of 2011. Our direct operating expenses increased during the third quarter of 2012 mainly due to higher storage and handling costs resulting from a higher volume of redeliveries and slightly lower utilization, and increased inspection costs due to a higher volume of new units built and accepted.

        Our administrative expenses were $10.7 million in the third quarter of 2012 compared to $11.0 million in the third quarter of 2011. The limited change in our administrative expenses over the last several years highlights the leverage we have over our fixed costs. TAL has existing business

24

---

Table of Contents

relationships with essentially all of the world's major shipping lines, and our global operating infrastructure covers most of the world's major export and import locations. As a result, we have not needed to significantly grow our organization as we have rapidly grown our business. Over the last three years, the ratio of our administrative expenses to our leasing revenues decreased from 14.5% in 2008 to 9.5% in 2011 and 8.5% year to date in 2012.

Dividends

        We paid the following quarterly dividends during the nine months ended September 30, 2012 and 2011 on our issued and outstanding common stock:

        Historically, most of our dividends have been treated as a non-taxable return of capital, and based on our current estimates we believe that our dividends paid in 2012 will also be treated as a non-taxable return of capital to TAL shareholders. The taxability of the dividends to TAL shareholders does not impact TAL's corporate tax position. Investors should consult with a tax advisor to determine the proper tax treatment of these distributions.

25

---

Table of Contents

Results of Operations

        The following table summarizes our results of operations for the three and nine months ended September 30, 2012 and 2011 (in thousands of dollars):

Comparison of Three Months Ended September 30, 2012 to Three Months Ended September 30, 2011

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

26

---

Table of Contents

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

        Total leasing revenues were $135.2 million in the three months ended September 30, 2012, compared to $120.9 million in the same period in 2011, an increase of $14.3 million, or 11.8%.

        Per diem revenue increased by $15.2 million, or 13.7%, compared to the three months ended September 30, 2011. The primary reasons for this increase are as follows:

•

$17.9 million increase due to an increase in the average number of units on hire. This reflects an increase in the average number of units on hire from approximately 838,000 in the third quarter of 2011 to approximately 969,000 in the third quarter of 2012; and



•

$3.6 million decrease due to lower average per diem rates primarily due to a large number of units placed on hire at the end of the second quarter of 2012 on a sale-leaseback transaction. These older containers were purchased for prices well below the current cost of new containers, and therefore, the leaseback rate is substantially below our current portfolio average.

        Fee and ancillary lease revenue were relatively flat in the three months ended September 30, 2012 compared to the same period in 2011.

        Finance lease revenue decreased by $0.7 million in the three months ended September 30, 2012, compared to the same period in 2011, primarily due to a decrease in the average size of our finance lease portfolio.

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

        The equipment trading margin decreased $0.5 million in the three months ended September 30, 2012 compared to the same period in 2011. The trading margin decreased primarily due to lower sales volumes.

27

---

Table of Contents

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

        Direct operating expenses were $6.2 million in the three months ended September 30, 2012, compared to $5.1 million in the same period in 2011, an increase of $1.1 million. This increase was primarily driven by increased storage and handling costs due to an increase in the number of idle units and increased inspection costs due to a higher volume of new units built and accepted during the three months ended September 30, 2012.

        Administrative expenses.    Administrative expenses were $10.7 million in the three months ended September 30, 2012 compared to $11.0 million in the same period in 2011, a decrease of $0.3 million. This decrease was primarily due to foreign exchange losses on our Euro denominated assets and liabilities incurred in the three months ended September 30, 2011 as compared to a small gain in the three months ended September 30, 2012.

        Depreciation and amortization.    Depreciation and amortization was $52.2 million in the three months ended September 30, 2012, compared to $41.9 million in the same period in 2011, an increase of $10.3 million or 24.6%. This increase was primarily due to a net increase in the size of our depreciable fleet. Our average revenue earning assets increased by approximately 17% from the third quarter of 2011 to the third quarter of 2012 due to the large investments we have made in our business. In addition, depreciation expense increased faster than our revenue earning assets mainly due to our fleet demographics. The percentage of our fleet that is fully depreciated has decreased significantly as we have grown the fleet rapidly over the last several years. This increases our depreciation expense relative to our revenue earning assets.

        (Reversal) provision for doubtful accounts.    The reversal of our provision for doubtful accounts in the three months ended September 30, 2012 and our provision for doubtful accounts in the same period in 2011 were negligible. In general, our credit losses remain low due to the absence of any major customer defaults.

        Net (gain) on sale of leasing equipment.    Gain on sale of equipment was $11.3 million in the three months ended September 30, 2012 compared to $14.9 million in the same period in 2011, a decrease of $3.6 million. Gain on sale decreased by $6.3 million due to lower selling prices, partially offset by an increase of $2.9 million due to higher sales volumes and a $1.2 million decrease in the cost of equipment sold during the third quarter of 2012. The cost of equipment sold in the third quarter of 2011 was higher than in the third quarter of 2012 due to the substantial number of sale leaseback containers with higher book values sold in 2011. Those sale lease back containers had been purchased in the latter part of 2011 for prices higher than the typical book value of our older containers.

        Interest and debt expense.    Interest and debt expense was $30.4 million in the three months ended September 30, 2012, compared to $28.5 million in the same period in 2011, an increase of $1.9 million. Interest and debt expense increased by $4.6 million due to a higher average debt balance of $2,486.8 million in the third quarter of 2012 compared to $2,179.8 million in the third quarter of 2011, mostly resulting from our substantial equipment purchases so far this year and during 2011. This was partially offset by a $2.7 million decrease due to a lower effective interest rate of 4.78% in the third quarter of 2012 compared to 5.12% in the third quarter of 2011.

        Net loss on interest rate swaps.    Net loss on interest rate swaps was $1.3 million in the three months ended September 30, 2012, compared to $23.2 million in the same period in 2011. The fair value of our interest rate swap agreements decreased during the third quarter of 2012 due to a decrease in long term interest rates. Under our interest rate swap agreements, we make interest payments based on fixed interest rates and receive payments based on the applicable prevailing variable interest rate. As

28

---

Table of Contents

long term interest rates decreased during the third quarter of 2012, the current market rate on interest rate swap agreements with similar terms decreased relative to our existing interest rate swap agreements, which caused their fair value to decrease during the quarter.

        Income tax expense.    Income tax expense was $17.2 million in the three months ended September 30, 2012, compared to $9.9 million in the same period in 2011. The effective tax rates for the three months ended September 30, 2012 and 2011 were 35.6% and 35.4%, respectively.

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

Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

        Leasing revenues.    The principal components of our leasing revenues are presented in the following table. Per diem revenue represents revenue earned under operating lease contracts; fee and ancillary lease revenue represent fees billed for the pick-up and drop-off of containers in certain geographic locations and billings of certain reimbursable operating costs such as repair and handling expenses; and finance lease revenue represents interest income earned under finance lease contracts.

        Total leasing revenues were $386.2 million in the nine months ended September 30, 2012, compared to $327.0 million in the same period in 2011, an increase of $59.2 million, or 18.1%.

        Per diem revenue increased by $57.9 million, or 19.3%, compared to 2011. The primary reasons for this increase are as follows:

•

$52.1 million increase due to an increase in the average number of units on hire. This reflects an increase in the average number of units on hire from approximately 775,000 in the nine months ended September 30, 2011 to approximately 892,000 in the nine months ended September 30, 2012;



•

$1.4 million increase due to higher average per diem rates. New dry container prices reached peak levels during the first half of 2011, and our average dry container lease rates increased throughout the year as new containers and sale-leaseback containers were placed on lease and as certain existing leases were re-priced. The effects of this general increase in average per diem rates in 2011 was partially offset in 2012 by the completion of a large sale-leaseback transaction for older dry containers at the end of the second quarter. These older containers were purchased for prices well below the current cost of new containers, and therefore, the leaseback rate is substantially below our current portfolio average; and

29

---

Table of Contents

•

$3.3 million increase due to the recognition of revenue during the second quarter of 2012 for the early termination of certain lease contracts.

        Fee and ancillary lease revenue increased $3.2 million as compared to the prior year primarily due to an increase in repair revenue and fees resulting from increased redeliveries.

        Finance lease revenue decreased by $1.9 million primarily due to a decrease in the average size of our finance lease portfolio.

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

        The equipment trading margin decreased $4.0 million in the nine months ended September 30, 2012 compared to the same period in 2011. The trading margin decreased by $2.6 million due to lower per unit sales margins and by $1.5 million due to lower sales volumes.

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

        Direct operating expenses were $17.8 million in the nine months ended September 30, 2012, compared to $13.6 million in the same period in 2011, an increase of $4.2 million. The primary reasons for the increase are as follows:

•

$2.3 million increase in storage and handling costs due to an increase in the number of idle units; and



•

$1.5 million increase in repair costs due to a higher volume of repairs, primarily for our dry and refrigerated containers.

        Administrative expenses.    Administrative expenses were $32.9 million in the nine months ended September 30, 2012 compared to $32.1 million in the same period in 2011, an increase of $0.8 million or 2.5%, primarily due to increased compensation cost and costs related to two secondary share offerings by our major shareholders.

        Depreciation and amortization.    Depreciation and amortization was $144.5 million in the nine months ended September 30, 2012, compared to $109.3 million in the same period in 2011, an increase of $35.2 million or 32.2%. This increase in depreciation expense was primarily due to a net increase in the size of our depreciable fleet. Our average revenue earning assets in the nine months ended September 30, 2012 increased by approximately 17% from the average for the same period in 2011 due to the large investments we have made in our business. In addition, depreciation expense increased faster than our revenue earning assets mainly due to our fleet demographics. The percentage of our fleet that is fully depreciated has decreased significantly as we have grown the fleet rapidly over the last several years. This increases our depreciation expense relative to our revenue earning assets.

30

---

Table of Contents

        (Reversal) provision for doubtful accounts.    The reversal of our provision for doubtful accounts was $0.2 million in the nine months ended September 30, 2012, compared to a provision for doubtful accounts of $0.2 million in the same period in 2011. In general, our credit losses remain low due to the absence of any major customer defaults.

        Net (gain) on sale of leasing equipment.    Gain on sale of equipment was $35.2 million in the nine months ended September 30, 2012, compared to $39.7 million in the same period in 2011, a decrease of $4.5 million. Gain on sale decreased by $13.4 million due to lower selling prices and $5.3 million due to the higher cost of equipment sold, partially offset by an increase of $15.6 million due to higher sales volumes. The higher cost of equipment sold was driven by the large portion of units sold that had been purchased in sale leaseback transactions in the latter half of 2011 for prices higher than the typical book value of our older containers.

        Interest and debt expense.    Interest and debt expense was $85.1 million in the nine months ended September 30, 2012, compared to $78.0 million in the same period in 2011, an increase of $7.1 million. Interest and debt expense increased by $13.0 million due to a higher average debt balance of $2,293.1 million in the nine months ended September 30, 2012, compared to $1,987.3 million in the same period in 2011, resulting from our substantial new equipment purchases so far this year and during 2011. This was partially offset by a $5.9 million decrease due to a lower effective interest rate of 4.88% in the nine months ended September 30, 2012 compared to 5.17% in the same period in 2011.

        Net loss on interest rate swaps.    Net loss on interest rate swaps was $5.0 million in the nine months ended September 30, 2012, compared to $30.4 million in the same period in 2011. The fair value of our interest rate swap agreements decreased during the nine months ended September 30, 2012 due to a decrease in long-term interest rates. Under our interest rate swap agreements, we make interest payments based on fixed interest rates and receive payments based on the applicable prevailing variable interest rate. As long-term interest rates decreased during 2012, the current market rate on interest rate swap agreements with similar terms decreased relative to our existing interest rate swap agreements, which caused their fair value to decline.

        Income tax expense.    Income tax expense was $51.2 million in the nine months ended September 30, 2012, compared to $40.5 million in the same period in 2011. The effective tax rate in the nine months ended September 30, 2012 and 2011 was 35.4%.

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

Business Segments

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

Equipment leasing

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

31

---

Table of Contents

Segment Comparison of Three Months Ended September 30, 2012 to Three Months Ended September 30, 2011

        The following table lists selected revenue and expense items for our Equipment leasing segment in the three months ended September 30, 2012 and 2011:

        Equipment leasing revenue.    Total revenues for the Equipment leasing segment were $134.0 million in the three months ended September 30, 2012 compared to $119.6 million in the same period in 2011, an increase of $14.4 million, or 12.0%. The primary reasons for the increase are as follows:

•

$17.9 million increase due to an increase in the average number of units on hire. This reflects an increase in the average number of units on hire in our fleet;



•

$3.6 million decrease due to lower average per diem rates primarily due to a large number of units placed on hire at the end of the second quarter of 2012 on a sale-leaseback transaction. These older containers were purchased for prices well below the current cost of new containers, and therefore, the leaseback rate is substantially below our current portfolio average; and



•

$0.7 million decrease in finance lease revenue primarily due to a decrease in the average size of our finance lease portfolio.

        Equipment leasing income before income taxes.    Income before income taxes for the Equipment leasing segment was $47.8 million in the three months ended September 30, 2012 compared to $49.9 million in the same period in 2011, a decrease of $2.1 million. The primary reasons for this decrease in income before income taxes are as follows:

•

$14.4 million increase in Equipment leasing revenues in the three months ended September 30, 2012;



•

$10.3 million increase in depreciation and amortization primarily due to a net increase in the size of the depreciable fleet;



•

$3.6 million decrease in net gain on sale of leasing equipment primarily due to lower selling prices, partially offset by higher sales volumes and the lower cost of equipment sold in the three months ended September 30, 2012;



•

$1.9 million increase in interest and debt expense due to a higher average debt balance mostly due to equipment purchases so far this year and during 2011, partially offset by a lower effective interest rate; and

32

---

Table of Contents

•

$1.1 million increase in direct operating expense primarily due to higher storage and handling costs due to an increase in the number of idle units and higher inspection costs due to a higher volume of new units built and accepted.

Segment Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

        The following table lists selected revenue and expense items for our Equipment leasing segment in the nine months ended September 30, 2012 and 2011:

        Equipment leasing revenue.    Total revenues for the Equipment leasing segment were $382.6 million in the nine months ended September 30, 2012 compared to $325.4 million in the same period in 2011, an increase of $57.2 million, or 17.6%. The primary reasons for this increase are as follows:

•

$52.1 million increase due to an increase in the average number of units on hire. This reflects an increase in the average number of units on hire in our fleet;



•

$3.3 million increase due to the recognition of revenue during the second quarter of 2012 for the early termination of certain lease contracts;



•

$3.2 million increase in fee and ancillary lease revenue primarily due to an increase in repair revenue and fees resulting from increased redeliveries;



•

$1.9 million decrease in finance lease revenue primarily due to a decrease in the average size of our finance lease portfolio; and



•

$1.4 million increase due to higher average per diem rates resulting from a significant number of units placed on-hire during 2011 at lease rates exceeding our portfolio average. The effects of this general increase in average per diem rates in 2011 was partially offset in 2012 by the completion of a large sale-leaseback transaction for older dry containers at the end of the second quarter. These older containers were purchased for prices well below the current cost of new containers, and therefore, the leaseback rate is substantially below our current portfolio average.

        Equipment leasing income before income taxes.    Income before income taxes for the Equipment leasing segment was $143.7 million in the nine months ended September 30, 2012 compared to

33

---

Table of Contents

$135.6 million in the same period in 2011, an increase of $8.1 million. The primary reasons for the increase in income before income taxes are as follows:

•

$57.2 million increase in Equipment leasing revenue in the nine months ended September 30, 2012;



•

$33.5 million increase in depreciation expense, primarily due to a net increase in the size of the depreciable fleet;



•

$6.5 million increase in interest and debt expense due to a higher average debt balance mostly due to equipment purchases so far this year and during 2011, partially offset by a lower effective interest rate;



•

$4.4 million decrease in net gain on the sale of leasing equipment primarily due to lower selling prices and the higher cost of equipment sold, partially offset by higher sales volumes; and



•

$4.3 million increase in direct operating expense primarily due to higher storage and handling costs due to an increase in the number of idle units, and higher repair costs due to an increase in the volume of repairs.

Equipment trading

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

Segment Comparison of Three Months Ended September 30, 2012 to Three Months Ended September 30, 2011

        The following table lists selected revenue and expense items for our Equipment trading segment in the three months ended September 30, 2012 and 2011:

34

---

Table of Contents

        Equipment trading margin.    The Equipment trading margin, the difference between Equipment trading revenues and expenses, decreased $0.5 million in the three months ended September 30, 2012 compared to the same period in 2011. The trading margin decreased primarily due to lower sales volumes.

        Equipment trading income before income taxes.    Income before income taxes for the Equipment trading segment was $1.9 million in the three months ended September 30, 2012 compared to $2.3 million in the same period in 2011. Income before income taxes decreased primarily due to lower sales volumes.

Segment Comparison of Nine months Ended September 30, 2012 to Nine months Ended September 30, 2011

        The following table lists selected revenue and expense items for our Equipment trading segment in the nine months ended September 30, 2012 and 2011:

        Equipment trading margin.    The Equipment trading margin, the difference between Equipment trading revenues and expenses, decreased $4.0 million in the nine months ended September 30, 2012 compared to the same period in 2011. The trading margin decreased primarily due to lower per unit sales margins and lower sales volumes.

        Equipment trading income before income taxes.    Income before income taxes for the Equipment trading segment was $5.9 million in the nine months ended September 30, 2012 compared to $10.2 million in the same period in 2011. Income before income taxes decreased primarily due to lower per unit sales margins and lower sales volumes.

Liquidity and Capital Resources

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

        We continue to have sizable cash in-flows. For the twelve months ended September 30, 2012, cash provided by operating activities, together with the proceeds from the sale of our leasing equipment and principal payments on our finance leases, was $488.5 million. In addition, as of September 30, 2012, we

35

---

Table of Contents

had $52.8 million of unrestricted cash and $320.0 million of additional borrowing capacity under our current credit facilities.

        During the nine months ended September 30, 2012, we issued $250 million of fixed rate secured notes and issued $76 million of subordinated term notes under the ABS facilities, completed a private placement of term notes for $153 million, and increased the size of our asset backed warehouse facility by $200 million to bring its maximum availability to $600 million.

        As of September 30, 2012, major committed cash outflows in the next 12 months include $327.6 million of scheduled principal payments on our existing debt facilities and $100.2 million of committed but unpaid capital expenditures.

        We believe that cash provided by operating activities and existing cash, proceeds from the sale of our leasing equipment, principal payments on our finance lease receivables and availability under our borrowing facilities will be sufficient to meet our obligations over the next 12 months.

        At September 30, 2012, our outstanding indebtedness was comprised of the following (amounts in millions):

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

        As of September 30, 2012, we had $1,315.0 million of debt outstanding on facilities with fixed interest rates and $1,316.8 million of debt outstanding on facilities with interest rates based on floating rate indices (primarily LIBOR). We economically hedge the risks associated with fluctuations in interest rates on our floating rate borrowings by entering into interest rate swap agreements that convert a portion of our floating rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. As of September 30, 2012, we had interest rate swaps in place with a total notional value of $738.1 million to fix the floating interest rates on a portion of our floating rate debt obligations.

Debt Covenants

        We are subject to certain financial covenants under our debt agreements. At September 30, 2012, we were in compliance with all such covenants. Below are the primary financial covenants to which we are subject:

•

Minimum Earnings Before Interest and Taxes ("Covenant EBIT") to Cash Interest Expense;



•

Minimum Tangible Net Worth ("TNW"); and



•

Maximum Indebtedness to TNW.

36

---

Table of Contents

Non-GAAP Measures

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

Minimum Covenant EBIT to Cash Interest Expense

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

        Minimum Covenant EBIT to Cash Interest Expense is calculated on a consolidated basis and for certain of our wholly-owned special purpose entities ("SPEs"), whose primary activity is to issue asset backed notes. Covenant EBIT for each of our SPEs is calculated based on the net earnings generated by the assets pledged as collateral for the underlying debt issued. The actual Covenant EBIT to Cash Interest Expense ratio for each SPE may differ depending on the specific net earnings associated with those pledged assets. As of September 30, 2012, the minimum and actual Consolidated Covenant EBIT to Cash Interest Expense ratio and Covenant EBIT to Cash Interest Expense ratio for each of the issuers of our debt facilities whose initial borrowing capacity was approximately $200 million or greater were as follows:

Minimum TNW and Maximum Indebtedness to TNW Covenants

        We are required to meet consolidated Minimum TNW and Maximum Indebtedness to TNW covenants. For the purpose of calculating these covenants, all amounts are based on the consolidated balance sheet of TAL International Group, Inc. TNW is calculated as total tangible assets less total indebtedness, which includes equipment purchases payable and, in certain cases, the fair value of derivative instruments liability.

        For the majority of our debt facilities, the Minimum TNW is calculated as $321.4 million plus 50% of cumulative net income or loss since January 1, 2006. As of September 30, 2012, the minimum and actual TNWs for each of our SPEs were $545.9 million and $871.4 million, respectively. As of

37

---

Table of Contents

September 30, 2012, the maximum and actual Indebtedness to TNW ratios for each of our debt facilities whose initial borrowing capacity was approximately $200 million or greater was as follows:

        As of September 30, 2012, our outstanding debt on facilities whose initial borrowing capacity was approximately $200 million or greater was approximately $1,850.1 million.

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

Cash Flow

        The following table sets forth certain cash flow information for the nine months ended September 30, 2012 and 2011 (in thousands):

Operating Activities

        Net cash provided by operating activities increased by $54.4 million to $233.6 million in the nine months ended September 30, 2012, compared to $179.2 million in the same period in 2011 primarily due to an increase in earnings excluding depreciation, net loss on interest rate swaps and taxes of $40.6 million. In addition, we had net sales of trading equipment of $8.3 million in the nine months ended September 30, 2012, compared to net purchases of trading equipment of $12.9 million in the same period in 2011 resulting in an increase in operating cash flows of $21.2 million. A significant portion of the trading equipment sold during the nine months ended September 30, 2012 had been purchased in 2011. Partially offsetting these increases were payments of $19.4 million in the nine months ended September 30, 2012 to our interest rate swap counterparties for the termination of certain interest rate swap agreements compared to payments of $12.5 million in the same period in 2011.

38

---

Table of Contents

Investing Activities

        Net cash used in investing activities increased by $9.3 million to $648.7 million in the nine months ended September 30, 2012 compared to $639.4 million in the same period in 2011. This increase was primarily due to a $14.0 million net increase in purchases of leasing equipment and other long-lived assets and investments in finance lease, partially offset by an increase in proceeds from the sale of equipment primarily due to higher sales volumes.

Financing Activities

        Net cash provided by financing activities decreased by $133.9 million to $327.1 million in the nine months ended September 30, 2012 compared to $461.0 million in the same period in 2011. This decrease was due to a decrease in our net borrowings under our various debt facilities of $45.3 million and an increase in dividends paid of $10.0 million in the nine months ended September 30, 2012, compared to the same period in 2011. In addition, we sold 2,500,000 shares of common stock for net proceeds of $85.7 million in the nine months ended September 30, 2011, and had no similar stock issuances during the nine months ended September 30, 2012.

Contractual Obligations

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

        The following table summarizes our contractual obligations and commercial commitments as of September 30, 2012:

Off-Balance Sheet Arrangements

        As of September 30, 2012, we did not have any relationships with unconsolidated entities or financial partnerships, such entities which are often referred to as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

39

---

Table of Contents

Critical Accounting Policies

        Our consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, which require us to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Our estimates are based on historical experience and currently available information. Actual results could differ from such estimates. Our critical accounting policies are discussed in our 2011 Form 10-K filed with the SEC on February 22, 2012.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

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

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

        As of September 30, 2012, we had in place total interest rate swap agreements to fix interest rates on a portion of our borrowings under debt facilities with floating interest rates as summarized below:

        Changes in the fair value of these interest rate swap agreements are recognized in the consolidated statements of operations as net gains or losses on interest rate swaps as we do not apply hedge accounting treatment for these agreements. For the three months ended September 30, 2012 and 2011, our net loss on interest rate swaps was $1.3 million and $23.2 million, respectively. For the nine months ended September 30, 2012 and 2011, our net loss on interest rate swaps was $5.0 million and $30.4 million, respectively.

        Since 56% of our floating rate debt is economically hedged using interest rate swaps, our interest expense is not significantly affected by changes in interest rates. However, a 100 basis point increase in the interest rates on our floating rate debt (primarily LIBOR) would result in an increase of approximately $5.2 million in interest expense over the next 12 months.

Foreign Currency Exchange Rate Risk

        Although we have significant foreign based operations, the U.S. dollar is the operating currency for the large majority of our leases and obligations, and most of our revenues and expenses in the nine

40

---

Table of Contents

months ended September 30, 2012 and 2011 were denominated in U.S. dollars. However, we pay our non-U.S. staff in local currencies, and certain of our direct operating expenses and disposal transactions for our older containers are structured in foreign currencies.

        For the three months ended September 30, 2012 we recorded a net foreign currency exchange gain of approximately ten thousand dollars compared to a net foreign currency exchange loss of $0.3 million in the same period in 2011. For the nine months ended September 30, 2012 and 2011, we recorded net foreign currency exchange losses of $0.2 million. These gains and losses resulted primarily from fluctuations in exchange rates related to our Euro and Pound Sterling transactions and related assets and liabilities.

        In April 2008, we entered into foreign currency rate swap agreements to exchange Euros for U.S. dollars based on expected payments under our Euro denominated finance lease receivables. The foreign currency rate swap agreements expire in April 2015. The fair value of these derivative agreements was $0.7 million as of September 30, 2012, and is reported as an asset in fair value of derivative instruments on our consolidated balance sheet.

ITEM 4.    CONTROLS AND PROCEDURES.

        Based upon the required evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that as of September 30, 2012 our disclosure controls and procedures were adequate and effective to ensure that information was gathered, analyzed and disclosed on a timely basis.

        There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

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

ITEM 1A.    RISK FACTORS.

        For a detailed discussion of our risk factors, refer to our 2011 Form 10-K filed with the Securities and Exchange Commission on February 22, 2012.

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

        On March 13, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of our common stock. The stock repurchase program, as amended, authorizes us to repurchase up to 4.0 million shares of our common stock. There were no material repurchases of stock during the three months ended September 30, 2012.

41

---

Table of Contents

ITEM 6.    EXHIBITS.

42

---

Table of Contents

SIGNATURE

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

43

---