TAL International At Bank of America Conference Notes

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“TAL is one of the oldest and largest container leasing companies in the world.”

“We manage a fleet of over 2 million TEU or 20 foot equivalent units of containers, which represents about 13% market share and puts us in a number two or number three position depending on how you look at the market.”

“roughly 75% to 80% of our fleet is currently on long-term leases that are non-cancelable by our customers with an average remaining term approaching four years.”

“the shipping industry is a very volatile industry, but you’ve got probably 80% of the capacity is represented by the top 20 shipping lines and those top 20 shipping lines whilst some of them are in the news quite often. I would say probably two-thirds, three-quarters of them are all either parts of larger diversified industrial transportation groups or actually has at least inside, if not explicit links to various different foreign governments. And the governmental links are largely driven by a lot of export driven economies that are on the world, find it very important to have national flag carriers that are there to support their export business.

So we’ve seen over time for example in 2009 where many of these governments came out and actually provided capital or at least provided the basis for the existing stakeholders to provide additional capital or new stakeholders to provide additional capital to split the businesses through difficult periods.”

“Container supply is relatively tight. Our utilization was north of 97%.”

“the shipping lines’ inability to turn off supply has resulted in for long period of excess capacity, that’s required them to go out and try and scrap vessels, idle vessels and do whatever they could do to try and positively impact freight rates as they continue to deal with this.

I think on the shipping line side, they probably are looking at another 7 plus percent growth in capacity this year, as well as probably next year as the vessels have been pushed. So, continued excess supply in their market leads to strained capital for them at the same time that they have to pay for vessels and sets the stage for us to continue to have a period of strong performance over the course in next couple of years.”

“If you consider labor in China to be variable, which it generally is, it’s probably 85%, 90% of the cost of variable, these are high-tech production facilities. So there is not really any need to keep the factory running in order to cover anything.

So I think they’ve preferred and recognized particularly since 2009 that by closing, by not producing for a period of time and not chasing volume that actually through the cycles will do better because we’ll be able to maintain higher price levels that will provide them with better returns to the cycle.”