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Executives

Jeff Casucci – VP, Treasury and IR

Brian Sondey – President and CEO

John Burns – SVP and CFO

Analysts

Art Hatfield – Morgan Keegan

Gregory Lewis – Credit Suisse

Brian Hogan – Piper Jaffray

TAL International Group, Inc. (TAL) Q2 2010 Earnings Conference Call July 29, 2010 9:00 AM ET

Operator

Good morning and welcome to the TAL International Group’s second quarter earnings conference call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Jeff Casucci, Vice President, Treasury and Investor Relations, please go ahead.

Jeff Casucci

Thank you. Good morning and thank you for joining us on today’s call. We are here to discuss TAL’s second quarter 2010 results, which were reported yesterday evening. Joining me on this morning’s call from TAL are Brian Sondey, President and Chief Executive Officer and John Burn, Senior Vice President and Chief Financial Officer.

Before I turn the call over to Brian and John, I would like to point out that this conference call may contain forward looking statements as that term is defined under the Private Securities Litigation Reform Act regarding expectations for future financial performance. It is possible that the company’s future financial performance may differ from expectations due to a variety of factors.

Any forward looking statements made on this call are based on certain assumptions and analysis made by the company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate.

Any such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.

Finally, the company’s views, estimates, plans and outlook as described within this call may change subsequent to this discussion. The company is under no obligation to modify or update any or all of the statements that is made herein despite any subsequent changes the company may make in its views, estimates, plans or outlook for the future. These statements involve risks and uncertainties, are only predictions and may differ materially from actual future events or results.

For a discussion of such risks and uncertainties, please see the risk factors listed in the company’s annual report filed with the SEC in March of this year.

With these formalities out of the way, I would now like to turn the call over to Brian Sondey. Brian?

Brian Sondey

Thanks Jeff. Welcome to TAL’s second quarter 2010 earnings conference call. We are very pleased with TAL’s operational and financial performance in the second quarter of 2010. Our market environment remained very strong during the quarter and we continue to capitalize on the strong environment to improve our operational performance and make substantial investments in our fleet.

Our utilization reached record levels in the second quarter. We are on track to achieve a record breaking level of investment and growth in 2010 and the improvement on our operating metrics together with the growth of our fleet lead to strong improvements in our financial performance and we generated pretax or cash earnings per share of $0.72 in the second quarter, up 37% sequentially in the first quarter of the year.

World trade continues to recover from the effects of the financial crisis. Containerized trade volumes are up sharply from 2009 levels and are generally reaching or exceeding pre-crisis volumes, especially in the Asian export markets that drive most of our leasing demand. At the same time global container capacity remains constrained due to a complete lack of buying in 2009, ongoing disposals, the impact of vessels flow steaming and lingering container factory production constraints. This combination of recovering trade volumes and restricted container capacity has resulted in a severe global shortage of containers and exceptional leasing demand.

The strong recovery in 2010 trade volumes and the exceptional leasing demand are helping us to achieve significant improvements in all of our key operating metrics. We achieved record on hire performance for our dry container product line in the second quarter and our core utilization increased 3.7% during the quarter to reach 97.1% as of June 30.

Our utilization has continued to climb in July reaching 97.8% as of July 28th. Our leasing rates are also improving as incentives provided in 2009 expired and as equipment goes on hire this year and reads well above our portfolio average due to the very high current cost for new containers.

Average dry container leasing rates increased 5% during the second quarter and we expect our average dry container rates to return to pre-crisis levels soon and significantly exceed pre-crisis levels by the end of 2010.

The increase in our utilization and average leasing rates together with the large investment we’re making in our fleet are leading to significant sequential growth in our revenue.

TAL’s leasing revenue in the second quarter increased 3.6% from the first quarter. The overall revenue growth was constrained by a $2 million reduction in ancillary fees due to a sharp decrease in the volume of containers being returned to us by our customers.

Our per diem leasing revenue, which typically represents 80% to 90% of our overall leasing revenue, increased 7.6% sequentially from the first quarter. As mentioned above, we are on track to achieve a record level of investment and growth in 2010.

So far this year, we’ve ordered over $675 million of new containers. This includes over 230,000 TEU of dry containers and 21,000 TEU of refrigerator containers. We have also made significant investments this year in our tank container product line as we’re seeing strong demand for this equipment as well.

Over 90% of the equipment we have ordered including the equipment that has not yet been produced has already been firmly committed to leases. The vast majority of these containers have been placed on long term leases with the average duration of about six and half years for new dry containers and about five and a half years for new refrigerator containers.

Our aggressive investment this year has been supported both by recovering trade volumes and by a shift in the balance of owned versus leased containers.

Historically, shipping lines have owned 55% to 60% of the containers they operate and leased 40% to 45% from leasing companies like TAL. This year shipping lines have been reluctant to commit to large new container orders even as cargo volumes and the financial performance have improved. Many of the major shipping lines faced large losses in 2009 and many have significant vessel expansion programs that require large ongoing capital outlets. As a result, most of the major shipping lines have been happy to avoid making large investments in new containers this year even our willingness and ability to step in and make the investments for them.

Large investments we have made this year have not yet been full reflected in our financial results. Roughly half of the equipment we have ordered was delivered by the end of the second quarter but we generally benefited from only a partial period of revenue from this equipment.

We expect our revenue growth to accelerate in the third quarter as we benefit from a full quarter’s worth of leased revenue from a large amount of equipment leased out during the second quarter and as large volumes of new units continue to be delivered and placed on hire.

As indicated in the press release, we’ve increased our dividend to $0.35 per share this quarter. This increase reflects our improved financial performance and our current expectation that our market environment will remain favorable for some time. We will continue to re-evaluate the size of the dividend as our performance and expectations for future market conditions evolve.

I’ll now hand the call over to John Burns, our CFO who will review our financial performance in more detail.

John Burns

Thank you, Brian. As we noted in our earnings release and prior calls, we focus on adjusted pretax results rather than net income since we consider unrealized gains or losses on interest rate swaps to be unrelated to operating performance and since we do not currently pay any meaningful U.S. income tax and do not expect to for the foreseeable future due to accelerated tax depreciation on our leasing equipment.

As Brian noted, adjusted pretax income jumped 37% in the second quarter to $22.2 million or $0.72 per share from $16.2 million or $0.53 per share in the first quarter. These solid results reflect improvements in all of our key operating metrics.

Leasing revenue for the second quarter increased $2.6 million or 3.6% from the first quarter, reflecting a $4.6 million or 7.6% increase in per diem revenue from the first quarter. This improvement in per diem revenue was partially offset by $2 million reduction in fee revenue due to a significant reduction in container redeliveries and related fees.

We expect per diem leasing revenue to continue to grow sequentially as the third quarter benefits from the full impact of peak utilization levels, higher per diem rates, the over 115,000 TEU of new containers placed on hire during the second quarter and the continued acceptance and on hire new containers already ordered and committed to lease.

The $2 million drop in fee and ancillary lease revenue from the first quarter was largely driven by a significant reduction in redelivery related fees as the shortage of containers lead to historically low levels of container drop-offs.

Fee and ancillary lease revenue is largely made up of fees charged at redelivery for logistical costs, damage and depot handling, and historically these fees represent the equivalent of approximately one year’s rental revenue per unit.

To put the changes in drop-off volume in perspective, over the last five years second quarter redeliveries have averaged approximately 20,000 units. But during the economic crisis of 2009, second quarter redeliveries ballooned to 40,000 units as customers reduced their container fleets, as trade declined for the first time ever.

In the second quarter of 2010 the container shortage lead to customers holding containers to ensure they were able to meet their customer demands, and accordingly redeliveries dropped to a historically low 7000 units for the quarter. This drop in redeliveries drove the $2 million or 33% drop in fees and ancillary lease revenue from the first quarter, and the $8.4 million or 47% drop in fee revenue for the six months ended June 30, 2010 compared to the same period in 2009.

It should be remembered that because a substantial portion of redeliveries of units that have reached the end of the marine serviceable life and will be sold into the aftermarket that this reduction in redeliveries is simply a deferral of the activity and the related revenue to the point in time when containers supplying demand is more balanced and redeliveries increase.

The container shortage has also had a positive impact on our gain on sale of containers, which increased $2.8 million over the first quarter largely due to rapidly increasing sale prices.

We anticipate used container sale prices will remain strong as long as existing shortage of containers persist. However, sales volume may be curtailed by the end of the year if low levels of redeliveries we are currently experiencing continue. However, like the redelivery fee revenue this would mean that the container sales volume and related gains are deferred to a point when supply and demand return to more normal levels and redeliveries increase.

We continue to be pleased with our strong collection performance and recorded a net credit to bad debt expense of $500,000 reflecting better than anticipated recovery and resolution of provisions recorded in 2009. Most of our customers are reporting normal levels of operating profitability in the second quarter of 2010 and forecasting strong results for the remainder of the year.

Accordingly, our view of customer credit has much improved over the last several quarters. However, these lines need several years of strong profitability to rebuild their balance sheets after a very difficult year in 2009 and accordingly we remain watchful on the credit front.

As Brian noted, we’ve invested aggressively with over $675 million of new container orders, approximately half of which will be accepted into our fleet during the second half of 2010. This aggressive level of investment is funded by continued strong operational cash flows and over $600 million of new financing facilities.

We are particularly pleased with our recent issuance of $197 million term note securitization, which was rated single A by S&P. The strong rating demonstrates the strength and stability of our portfolio and confidence in our fleet management capabilities.

I will now return it to Brian for some additional comments.

Brian Sondey

Thanks John. I’ll now finish the prepared part of the call with some thoughts on our outlook.

In general, we expect our market environment to remain favorable and expect to achieve further top and bottom line growth in 2010. We expect our revenue growth to accelerate in the third quarter as we benefit from a full quarter of lease revenue and a large amount of equipment we leased out in the second quarter and as new units continue to be delivered and placed on hire.

We also expect our bottom line growth to continue, so the rate of sequential growth will likely flow in the third quarter from a very high rate we’ve achieved so far this year.

Our adjusted pretax income has been increasing over 35% per quarter since the end of 2009 as our business had recovered from the effects of the very challenging market we faced last year. But our major operating metrics have now mostly returned to pre-crisis levels so that further improvement in our bottom line results will need to come from fleet growth.

Our disposal volumes and gains may also start to become constrained later this year if drop-off volumes remain exceptionally low but this would boost future profitability. Overall, we expect our adjusted pretax income in the third quarter to increase 5% to 15% from the second quarter level.

In summary, we are very pleased with our operational and financial performance in the second quarter of 2010 and remain optimistic about the opportunities we will see over the rest of the year.

Our adjusted pretax income increased 37% sequentially from the first quarter as our utilization and other key operating metrics returned to pre-crisis levels. We have invested very heavily in new containers and expect our revenue growth to accelerate in the second half of the year and drive continued improvement in our bottom line results.

We expect our favorable market environment to continue for some time and expect to continue to see strong leasing demand driven by solid trade volumes and reduced direct volume by our customers and we have increased our dividend due to our improving performance and expectations for sustained favorable market conditions.

I would now like to open up the discussion for any questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question comes from Art Hatfield with Morgan Keegan.

Art Hatfield – Morgan Keegan

Hey Brian, I’m sorry, I’ve been kind of in and out but I missed your commentary on pricing. I’ve heard your comments throughout the year how things have gone sequentially but can you talk about where pricing is today kind of relative to where your existing book of business is.

Brian Sondey

We talked in the prepared part of the call about a relatively rapid recovery in our leasing rates. Over the course of the second quarter our average rates were up about 5% and that was driven by two things, one of which is that some of the incentives we provided last year to customers to encourage them to keep containers on hire during the difficult market environment, those are now expiring or at least a lot of them are now expiring and that’s pushing our average rates up.

In addition to that, we are bringing new equipment into our fleet at very high rates relative to our portfolio average. New containers right now are very expensive driven partially by recovery in material prices at the beginning part of this year but mostly now just by an extreme shortage of containers and container production capacity to the point where container prices are up, something around 40% or so over the course of this year. That drives obviously higher lease rates for us but our lease rates have been increasing more quickly than the container prices as we look to recover the premium we pay for those units starting their first lease.

And so if you look at, say the comparison of what we’re currently asking for in terms of lease rates for new containers relative to the average in our portfolio, there’s probably literally 75% to 80% higher than the average.

Art Hatfield – Morgan Keegan

Then just you had made comments about reduced drop-offs in the future and how that may impact your equipment trading gains and what not. But can you talk to us, isn’t there a situation where the customer has time to bring it back after the end of the lease but if they don’t at some point in time, do you have the right to unilaterally raise price at some point in time?

Brian Sondey

Typically our leases are set up so that there’s a period after the lease expires and usually it’s six months to 12 months that the customer can take to bring the containers back to us. When our leases expire, the customers have to bring the containers back to specified locations and the containers are spread across their fleets and across their operating networks, and so it does take them some time and that’s acknowledged in the lease. But typically when that period expires again after six or 12 months, usually there’s a requirement that the lease rate on those containers goes up substantially typically 50% or more, to the extent drop-offs remained as low as they are now we would find ourself in that situation on a lot of our leases. But our current thinking is that right now drop-offs are exceptionally low just because the shortage right now is exceptionally extreme and that probably as we get past this peak season for containers that we will start seeing container returns come back to more normal levels especially for the older containers.

And so while the sharp reduction in drop-off volumes had a relatively significant impact on our second quarter revenue in terms of limiting the fees we get for those drop-offs, we don’t think that’s going to linger for too many quarters.

In general we do think overall leasing demand and utilization will likely remain strong even past this peak season into next year, but we don’t think that the extreme situation that we’re seeing right now should last forever.

Art Hatfield – Morgan Keegan

Finally as we look out a couple or three quarters, four quarters and we think about industry supply-demand balances and you’re basically at full utilization right now, what is your estimate of what the industry is going to deliver in new TEUs this year?

Brian Sondey

Yes, the most recent numbers, I’ve seen really come from estimates we get from the factories and the last numbers I saw were something in the range of 1.7 to 2 million TEU depending on how many containers were ordered in the fourth quarter. Even that is probably compared to maybe around a million TEU of disposals and so some element of fleet growth but lagging the amount of trade growth we’ve seen this year. And so in general we do expect to finish the year with container capacity remaining in the short supply and so our utilization remaining quite high as well as the utilization for our competitors also remaining fairly high.

Then heading into next year, obviously a lot of it depends on the health of the world economy and if we see a severe double dip recession, that might change our outlook. But in general we do think that container capacity is likely to remain fairly tight and utilization remain high into 2011 for a few reasons, one is just that utilization is going to finish very high in 2010, and so there won’t be much slack in the system heading into next year. And then on top of that, we do think that the shipping lines which again historically purchased more than half the containers, we think they’ll remain relatively cautious next year about new buying driven by again the significant challenge that they faced in ‘09, the large outlays they still have to make on their vessels. And then quite frankly some of the economic uncertainty is actually benefiting us by keeping the shipping lines cautious about how they spend their money.

Art Hatfield – Morgan Keegan

Just a couple of quick follow-ups on that. Do you know off the top of your head with the average new deliveries in TEUs have been over the last 10 to 15 years?

Brian Sondey

I’m not sure I can quote every single year but say back in the middle of the 2000s when trade volumes were growing rapidly and both the shipping lines and leased codes (ph) were adding lots of equipments, we had a number of years where deliveries were in the 3 million to 4 million range TEU. In 2009, again it was almost zero but if you look at say, 2006, 2007 in the 3 million to 4 million range.

Operator

The next question is from Gregory Lewis of Credit Suisse.

Gregory Lewis – Credit Suisse

Brian, could you provide a little bit of update or color on what you’re seeing from the container manufacturers? I think last time we spoke on the last call the factories had just been coming online and weren’t really running at full capacity. Where do they stand currently?

Brian Sondey

The container manufacturers have certainly been adding capacity back, I’d say. We started ordering containers at least from the fourth quarter of 2009 for delivery in the first quarter, which pretty much opened up the factories in the first quarter of 2010. And then I’d say general buying interest really I’d say got going in earnest during the second quarter at which point the factories then really tried to start bringing back workers and ramping up production as fast as they could. That process is ongoing. Our expectation at least is that as we get into the fourth quarter of this year, we’ll see production capacity getting back toward where the factories are trying to get to. It’s probably still going to be lower than it was during those sort of big years of 2006 and 2007. But I think the factories will be getting to again their target level of production capacity at some point during the fourth quarter.

Gregory Lewis – Credit Suisse

Just a follow-up on that. Typically, it seems to me that leasing companies order boxes, take delivery of them in Q2, Q3 and then put them out on long-term leases. Are you taking delivery of boxes in Q4 and are those boxes already seeing demands, lease demand?

Brian Sondey

Most of the orders, as you know that we placed are for delivery during the second and third quarters as a really – delivery has kind of really kicked into high gear in May and continues through September. We are right now thinking about how much we want to buy in the fourth quarter. Typically, we don’t buy a lot in the fourth quarter as the peak season for dry containers usually tails off in sort of end of September, early October and then we typically start loading up for the following year in the first quarter of the year.

This year we may order more containers than we usually do in the fourth quarter just because container capacity is extremely tight and usually say the weakness we see in demand and the drop-offs because of that that we get in October and November and December help us then satisfy the little mini rush that we sometimes see before Chinese New Year.

This year we don’t really expect to see significant slack while we do think drop-off volumes will increase over the incredibly low place they are now, we don’t think they’re going to be that typical just because boxes remain very expensive, the shipping lines have an incentive to keep the existing containers on hire at lower rates, and so we think they’ll be cautious about bringing containers back. And partially for that reason we may do a little bit early restocking this year compared to other years. That said we don’t expect our ordering volumes to stay at the same pace that they are in the second and third quarters.

Gregory Lewis – Credit Suisse

You mentioned at the start of the call that you placed orders for around 230,000 TEU of dry containers. As Q2 ended, how many of those had actually been delivered?

Brian Sondey

Something around a little less than half had been delivered but one of the points we tried to make in the fall was that even though about half of the containers had been delivered, the impact of that on our revenue was less than that would imply as the containers went on hire say, middle of the second quarter to end of the second quarter, and so you didn’t even get a full quarter’s worth of benefit out of those deliveries.

Gregory Lewis – Credit Suisse

Okay, and it sounds like we should expect the other half to be sprinkled out through the third quarter.

Brian Sondey

Mostly, mostly, that’s right.

Gregory Lewis – Credit Suisse

You mentioned the gains from container sales and you mentioned clearly your concern going forward about maybe maintaining that high level of container sales. Were you surprised at the amount of container sales you were actually able to generate in Q2 just given the fact that there is this sort of shortage of containers out there?

Brian Sondey

Certainly as we mentioned, John mentioned, drop-off volumes were exceptionally low in Q2 something like a third of the typical rate of containers being returned to us, and so that level of drop-offs wasn’t high enough to sustain the level of selling that we did. The reason that our disposals actually were fairly reasonably normal in the second quarter in terms of volume was because of the inventory that we built up over the course of 2009.

During 2009 our containers were coming back to us at a rate faster than we were selling them. We had a view even in the worst of the worst last year that the downturn wouldn’t last much beyond mid 2010 just as containers exited the fleet. We did think that market would find stability. And so we were very reluctant to take sharp discounts on selling containers last year to try to push them into the teeth of the bad market, and so we did accumulate some volume of sale inventory last year.

This year we’ve been working that sale inventory down fairly rapidly as our sales volumes have maintained a sort of normal clip and drop-offs have been exceptionally low. And so what we’re seeing is that if drop-offs remain as low as they have been that that sale inventory is going to be fully worked off at some point in the third quarter.

John Burns

I would add to that Greg that, our sales inventory has an average age of about 16 years old still our ability to move – despite the shortage to move those into a leasable service is very difficult.

Brian Sondey

Yes, there is just some physical constraint on how old the containers can be when you rent them out.

Operator

The next question comes from Brian Hogan of Piper Jaffray.

Brian Hogan – Piper Jaffray

You mentioned that container prices were up 40% from the beginning of the year I think and lease rates up a little more than that. So a couple of questions around that. Have the high container prices change your view on purchases, I mean have you pulled back a little bit than –

Brian Sondey

It hasn’t changed our view of our purchases but it changes the equation on how we price our leases. Typically whenever we price our leases we look at it explicitly in three different phases. The first phase is the initial lease and that we know the duration of the lease, we know the rate, we know the logistics of that lease, which drive how expensive it’s going to be to re-lease it a second time. And we modeled our whole first phase based upon the known actual. We then in our models we used sort of long-term averages for container utilization re-leasing rates as we release the container. And then the final part of the equation is the disposal value of the container and again we tended to use very long-term averages for those values.

And so what you find is that as container prices change we do adjust the front end which is the initial lease assumptions but we don’t adjust the re-leasing assumptions or the disposal assumptions, so that any change in sort of container prices from long-term averages, we end up fully recapturing in the first lease. And so that’s why the lease rates are up a larger percentage than the container prices because we’re not spreading that increase in price over the full 13 or 14 year life of the asset, we’re recapturing the whole thing during the five to eight year duration of the initial lease.

Brian Hogan – Piper Jaffray

What is the going (ph) container price today?

Brian Sondey

It’s something in the range of $2700 for or maybe a little bit more than that for a 20-foot container.

Brian Hogan – Piper Jaffray

Have you tried to receive any pushback from the shipping lines on the lease rates, (inaudible) that’s too much and are they starting to look into more buying? I know they are constrained from a balance sheet perspective and profitability for the last several years but are they –

Brian Sondey

I wouldn’t say that the high container prices are pushing them to more buying, instead I’d say it’s actually the other way that the high current price of containers is limiting their interest in buying containers. Certainly the lines – they realize they’re paying this current premium for the container shortage, and so the freight rates that they need to charge their customers need to reflect that premium. And so one of the reasons why freight rates have been so strong through the summer despite the fact that there still is some excess vessel capacity out there is that container capacity is in short supply and that the lines have to pay a premium to get the containers, and so they have to pass that premium along to the shippers.

Brian Hogan – Piper Jaffray

On utilization, what is your view of the long term normal utilization?

Brian Sondey

We always look at our utilization in two parts. The first being what portion of our containers are on hire under long-term refinance leases and that by definition is a 100% utilized, and that’s part one; and the second part is for the portion not on hire on long-term leases or finance leases what portion of that is utilized. Typically for that second portion, it might have a low point and a really bad year in the worst part of the season of 50% to 60% utilization on that second component and a high of 85% to 90% in a strong year at the good season. For us we have right now almost 70% or 75% of our containers on hire under long-term refinance leases, which creates then the base and then on top of that you add then a 60% to 90% of the second piece. If you do the math that adds up to sort of a normal utilization band for us in the high 80s to low to mid 90s. Right now we’re kind of above that normal band at almost 98% just because the market is just exceptionally tight right now.

Brian Hogan – Piper Jaffray

How long do you think that’s going to last?

Brian Sondey

It’s hard to have a lot of confidence on looking forward, obviously the world is a little bit unstable right now. But we do think, as I mentioned, that while we may not see the exceptionally tight market last much beyond this peak season, we do think that at least the outlook for ‘11 is relatively healthy, probably more healthy than normal just because we’re going to be starting with such a tight market for containers and then also we do think that the shipping lines will remain cautious on how they approach their new building next year, which will keep the tightness in the market.

Brian Hogan – Piper Jaffray

On operating expenses, with the high utilization and lower drop-offs, you are obviously seeing lower operating expenses, I think it can drop quarter to quarter from 8.2 to 6.6, and the 6.6, is that like the bottom or you suspect further improvement there?

Brian Sondey

We don’t like to forecast in too much detail through subline items in our income statement. That said, we do think that operating expenses should remain historically low for a while driven not just by the one by the lower off-hire volumes because we do – one of the big items in our OpEx is repair costs and to the extent that we’re not getting container returned to us, we’re not repairing them at the same rate we usually do.

The other big item is storage. And so even if we see off-hire volumes increase, which will drive higher ancillary fees, as long as we maintain very high utilization, the storage cost should stay quite low. And so we do think that OpEx will remain fairly low for a little while here.

Brian Hogan – Piper Jaffray

On the reefer market, last year I mean it held up very well through the downturn and from what I understand, there is a reefer roots coming into the market and there’s been a little bit of pressure on that kind of this year. What are you seeing in the reefer market today?

Brian Sondey

Yes, to us a little bit opposite of that. The reefers did hold up much better than the dry containers in 2009 as I think for a few reasons, I think this consumption of food items weren’t impacted as much as consumer discretionary items in 2009, also I think by their nature food items are inventoried (ph) at the same extent, and so we didn’t see the inventory correction like we did on the consumer goods that go in dry containers. And so that sort of maintained a more healthy level of utilization and sort of changes in trade flows and reefers than we saw in drys.

That said because of that leasing companies and shipping lines actually built reefers in 2009 and so the reefer factories did not close. So, where we saw a better market for reefers in ‘09 we haven’t seen the extreme shortage of reefers that we see in dry containers because we don’t have the same manufacturing production constraints in reefers that we currently have in drys.

That said we’ve leased a very large pile of reefers this year probably ordering more than two times our previous record of reefers not driven by the extreme shortage like in dry containers, but driven by the reluctance of shipping lines to invest in container equipment and so we are leasing very large volumes of reefers to very large shipping lines that usually buy them but this year have chosen to lease.

Operator

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Brian Sondey

Thank you. I’d just like again to thank everybody for your interest and participation in the call and your interest in TAL and I look forward to catching up with you again soon, thank you.

Operator

Thank you for participating in the TAL International Group conference call. This concludes today’s event. You may now disconnect your phone lines.

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Source: TAL International Group, Inc. Q2 2010 Earnings Call Transcript
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