GATX - GATX Corporation Reports 2023 First-Quarter Results

• The following factors, in addition to those discussed in our other filings with the SEC, including our Form 10-K for the year ended December 31, 2022, could cause actual results to differ materially from our current expectations expressed in forward-looking statements: the impact of the ongoing military action between Russia and Ukraine, including sanctions and countermeasures, on domestic and global economic and geopolitical conditions in general, including supply chain challenges and disruptions

• the duration and effects of the global COVID-19 pandemic and measures taken in response, including adverse impacts on our operations, commercial activity, supply chain, the demand for our transportation assets, the value of our assets, our liquidity, and macroeconomic conditions

• exposure to damages, fines, criminal and civil penalties, and reputational harm arising from a negative outcome in litigation, including claims arising from an accident involving transportation assets

• inability to maintain our transportation assets on lease at satisfactory rates due to oversupply of assets in the market or other changes in supply and demand

• a significant decline in customer demand for our transportation assets or services, including as a result of:

• weak macroeconomic conditions or increased interest rates

• weak market conditions in our customers' businesses

• adverse changes in the price of, or demand for, commodities

• changes in railroad operations, efficiency, pricing and service offerings, including those related to "precision scheduled railroading" or labor strikes or shortages

• changes in, or disruptions to, supply chains

• availability of pipelines, trucks, and other alternative modes of transportation

• changes in conditions affecting the aviation industry, including reduced demand for air travel, geographic exposure and customer concentrations

• other operational or commercial needs or decisions of our customers

• customers' desire to buy, rather than lease, our transportation assets

• higher costs associated with increased assignments of our transportation assets following non-renewal of leases, customer defaults, and compliance maintenance programs or other maintenance initiatives

• events having an adverse impact on assets, customers, or regions where we have a concentrated investment exposure

• financial and operational risks associated with long-term purchase commitments for transportation assets

• reduced opportunities to generate asset remarketing income

• inability to successfully consummate and manage ongoing acquisition and divestiture activities

• reliance on Rolls-Royce in connection with our aircraft spare engine leasing businesses, and the risks that certain factors that adversely affect Rolls-Royce could have an adverse effect on our businesses

• fluctuations in foreign exchange rates

• prolonged inflation or deflation

• inability to attract, retain, and motivate qualified personnel, including key management personnel

• failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees

• asset impairment charges we may be required to recognize

• deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs

• competitive factors in our primary markets, including competitors with significantly lower costs of capital

• risks related to our international operations and expansion into new geographic markets, including laws, regulations, tariffs, taxes, treaties or trade barriers affecting our activities in the countries where we do business

• changes in, or failure to comply with, laws, rules, and regulations

• U.S. and global political conditions

• inability to obtain cost-effective insurance

• environmental liabilities and remediation costs

• potential obsolescence of our assets

• inadequate allowances to cover credit losses in our portfolio

• operational, functional and regulatory risks associated with climate change, severe weather events and natural disasters, and other environmental, social and governance matters

• inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business

• changes in assumptions, increases in funding requirements or investment losses in our pension and post-retirement plans

• inability to maintain effective internal control over financial reporting and disclosure controls and procedures

GATX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In millions, except per share data)

Three Months Ended
March 31

2023

2022

Revenues

Lease revenue

$

302.0

$

283.3

Marine operating revenue

3.5

6.2

Other revenue

33.4

27.1

Total Revenues

338.9

316.6

Expenses

Maintenance expense

83.9

74.6

Marine operating expense

2.0

4.2

Depreciation expense

89.8

89.5

Operating lease expense

9.0

9.1

Other operating expense

11.0

10.7

Selling, general and administrative expense

50.4

47.2

Total Expenses

246.1

235.3

Other Income (Expense)

Net gain on asset dispositions

47.1

73.7

Interest expense, net

(59.0

)

(51.2

)

Other expense

(4.0

)

(2.0

)

Income before Income Taxes and Share of Affiliates’ Earnings

76.9

101.8

Income taxes

(20.2

)

(22.4

)

Share of affiliates’ earnings (losses), net of taxes

20.7

(3.6

)

Net Income

$

77.4

$

75.8

Share Data

Basic earnings per share

$

2.19

$

2.13

Average number of common shares

35.3

35.5

Diluted earnings per share

$

2.16

$

2.10

Average number of common shares and common share equivalents

35.8

36.0

Dividends declared per common share

$

0.55

$

0.52

GATX CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions)

March 31

December 31

2023

2022

Assets

Cash and Cash Equivalents

$

177.4

$

303.7

Restricted Cash

0.2

0.3

Short-Term Investments

—

148.5

Receivables

Rent and other receivables

70.8

71.4

Finance leases (as lessor)

116.3

96.5

Less: allowance for losses

(6.0

)

(5.9

)

181.1

162.0

Operating Assets and Facilities

11,961.9

11,675.0

Less: allowance for depreciation

(3,470.0

)

(3,424.7

)

8,491.9

8,250.3

Lease Assets (as lessee)

Right-of-use assets, net of accumulated depreciation

235.4

243.5

235.4

243.5

Investments in Affiliated Companies

597.6

575.1

Goodwill

118.3

117.2

Other Assets ($16.2 and $40.0 related to assets held for sale)

246.2

271.4

Total Assets

$

10,048.1

$

10,072.0

Liabilities and Shareholders’ Equity

Accounts Payable and Accrued Expenses

$

174.7

$

202.2

Debt

Commercial paper and borrowings under bank credit facilities

20.3

17.3

Recourse

6,360.9

6,431.5

6,381.2

6,448.8

Lease Obligations (as lessee)

Operating leases

246.2

257.9

246.2

257.9

Deferred Income Taxes

1,049.1

1,031.5

Other Liabilities

95.4

102.0

Total Liabilities

7,946.6

8,042.4

Total Shareholders’ Equity

2,101.5

2,029.6

Total Liabilities and Shareholders’ Equity

$

10,048.1

$

10,072.0

GATX CORPORATION AND SUBSIDIARIES

SEGMENT DATA (UNAUDITED)

Three Months Ended March 31, 2023

(In millions)

Rail
North America

Rail
International

Portfolio
Management

Other

GATX
Consolidated

Revenues

Lease revenue

$

215.1

$

70.4

$

8.3

$

8.2

$

302.0

Marine operating revenue

—

—

3.5

—

3.5

Other revenue

23.8

2.9

4.5

2.2

33.4

Total Revenues

238.9

73.3

16.3

10.4

338.9

Expenses

Maintenance expense

66.9

15.9

—

1.1

83.9

Marine operating expense

—

—

2.0

—

2.0

Depreciation expense

65.5

15.7

5.4

3.2

89.8

Operating lease expense

9.0

—

—

—

9.0

Other operating expense

7.0

2.2

0.9

0.9

11.0

Total Expenses

148.4

33.8

8.3

5.2

195.7

Other Income (Expense)

Net gain (loss) on asset dispositions

47.8

0.8

(1.5

)

—

47.1

Interest (expense) income, net

(42.3

)

(12.5

)

(5.7

)

1.5

(59.0

)

Other (expense) income

(0.4

)

(4.3

)

(0.5

)

1.2

(4.0

)

Share of affiliates' pre-tax (losses) earnings

(0.4

)

—

28.0

—

27.6

Segment profit

$

95.2

$

23.5

$

28.3

$

7.9

$

154.9

Less:

Selling, general and administrative expense

50.4

Income taxes (includes $6.9 related to affiliates' earnings)

27.1

Net income

$

77.4

Selected Data:

Investment volume

$

296.5

$

81.1

$

—

$

9.4

$

387.0

Net Gain (Loss) on Asset Dispositions

Asset Remarketing Income:

Net gains (losses) on disposition of owned assets

$

44.7

$

0.4

$

(0.4

)

$

—

$

44.7

Residual sharing income

0.1

—

0.1

—

0.2

Non-remarketing net gains (1)

3.0

0.4

—

—

3.4

Asset impairments

—

—

(1.2

)

—

(1.2

)

$

47.8

$

0.8

$

(1.5

)

$

—

$

47.1

__________

(1) Includes net gains (losses) from scrapping of railcars.

GATX CORPORATION AND SUBSIDIARIES

SEGMENT DATA (UNAUDITED)

Three Months Ended March 31, 2022

(In millions)

Rail
North America

Rail
International

Portfolio
Management

Other

GATX
Consolidated

Revenues

Lease revenue

$

200.7

$

67.6

$

8.3

$

6.7

$

283.3

Marine operating revenue

—

—

6.2

—

6.2

Other revenue

23.0

2.3

—

1.8

27.1

Total Revenues

223.7

69.9

14.5

8.5

316.6

Expenses

Maintenance expense

59.9

14.0

—

0.7

74.6

Marine operating expense

—

—

4.2

—

4.2

Depreciation expense

63.5

18.0

5.0

3.0

89.5

Operating lease expense

9.1

—

—

—

9.1

Other operating expense

7.3

2.4

0.5

0.5

10.7

Total Expenses

139.8

34.4

9.7

4.2

188.1

Other Income (Expense)

Net gain on asset dispositions

71.6

1.0

0.9

0.2

73.7

Interest expense, net

(34.4

)

(11.2

)

(4.7

)

(0.9

)

(51.2

)

Other expense

(0.7

)

(0.4

)

(0.1

)

(0.8

)

(2.0

)

Share of affiliates' pre-tax losses

—

—

(4.8

)

—

(4.8

)

Segment profit (loss)

$

120.4

$

24.9

$

(3.9

)

$

2.8

$

144.2

Less:

Selling, general and administrative expense

47.2

Income taxes (includes $1.2 of income tax benefit related to affiliates' losses)

21.2

Net income

$

75.8

Selected Data:

Investment volume

$

280.4

$

78.9

$

—

$

11.1

$

370.4

Net Gain on Asset Dispositions

Asset Remarketing Income:

Net gains on disposition of owned assets

$

64.4

$

0.4

$

—

$

0.1

$

64.9

Residual sharing income

2.0

—

0.9

—

2.9

Non-remarketing net gains (1)

5.2

0.6

—

0.1

5.9

$

71.6

$

1.0

$

0.9

$

0.2

$

73.7

__________

(1) Includes net gains (losses) from scrapping of railcars.

GATX CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

(In millions, except per share data)

Impact of Tax Adjustments and Other Items on Net Income ⁽¹⁾

Three Months Ended
March 31

2023

2022

Net income (GAAP)

$

77.4

$

75.8

Adjustments attributable to consolidated pre-tax income:

Gain on sale of Rail Russia at Rail International (2)

$

(0.3

)

$

—

Loss on Specialized Gas Vessels at Portfolio Management (3)

1.6

—

Total adjustments attributable to consolidated pre-tax income

$

1.3

$

—

Income taxes thereon, based on applicable effective tax rate

$

—

$

—

Other income tax adjustments attributable to consolidated income:

Income tax rate change (4)

—

(3.0

)

Total other income tax adjustments attributable to consolidated income

$

—

$

(3.0

)

Adjustments attributable to affiliates' earnings, net of taxes:

Aircraft spare engine impairment at RRPF (5)

—

11.5

Total adjustments attributable to affiliates' earnings, net of taxes

$

—

$

11.5

Net income, excluding tax adjustments and other items (non-GAAP)

$

78.7

$

84.3

Impact of Tax Adjustments and Other Items on Diluted Earnings per Share ⁽¹⁾

Three Months Ended
March 31

2023

2022

Diluted earnings per share (GAAP)

$

2.16

$

2.10

Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)

$

2.20

$

2.34

(1)

In addition to financial results reported in accordance with GAAP, we compute certain financial measures using non-GAAP components. Specifically, we exclude the effects of certain tax adjustments and other items for purposes of presenting net income and diluted earnings per share because we believe these items are not attributable to our business operations. Management utilizes net income, excluding tax adjustments and other items, when analyzing financial performance because such amounts reflect the underlying operating results that are within management’s ability to influence. Accordingly, we believe presenting this information provides investors and other users of our financial statements with meaningful supplemental information for purposes of analyzing year-to-year financial performance on a comparable basis and assessing trends.

(2)

In the third quarter of 2022, we made the decision to exit our rail business in Russia ("Rail Russia). In the first quarter of 2023, we sold Rail Russia and recorded a gain on the final sale of this business.

(3)

In the second quarter of 2022, we made the decision to sell the Specialized Gas Vessels. In the first quarter of 2023, we recorded losses associated with these assets.

(4)

Deferred income tax adjustment due to an enacted corporate income tax rate reduction in Austria in 2022.

(5)

Impairment losses related to aircraft spare engines in Russia that RRPF does not expect to recover.

GATX CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

(In millions, except leverage)

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

Total Assets, Excluding Cash and Short-Term Investments, by Segment

Rail North America

$

6,610.8

$

6,439.1

$

6,405.4

$

6,347.2

$

6,183.7

Rail International

1,801.2

1,731.3

1,554.3

1,634.5

1,677.9

Portfolio Management

1,089.6

1,084.8

970.9

1,010.3

1,031.5

Other

368.9

364.3

348.2

351.7

366.0

Total Assets, excluding cash and short-term investments

$

9,870.5

$

9,619.5

$

9,278.8

$

9,343.7

$

9,259.1

Debt and Lease Obligations, Net of Unrestricted Cash and Short-Term Investments

Unrestricted cash and short-term investments

$

(177.4

)

$

(452.2

)

$

(596.3

)

$

(180.3

)

$

(649.3

)

Commercial paper and bank credit facilities

20.3

17.3

16.3

20.0

18.6

Recourse debt

6,360.9

6,431.5

6,353.1

5,964.4

6,256.9

Operating lease obligations

246.2

257.9

259.0

266.7

273.4

Total debt and lease obligations, net of unrestricted cash and short-term investments

$

6,450.0

$

6,254.5

$

6,032.1

$

6,070.8

$

5,899.6

Total recourse debt (1)

$

6,450.0

$

6,254.5

$

6,032.1

$

6,070.8

$

5,899.6

Shareholders’ Equity

$

2,101.5

$

2,029.6

$

1,940.5

$

1,981.5

$

2,060.8

Recourse Leverage (2)

3.1

3.1

3.1

3.1

2.9

(1)

Includes recourse debt, commercial paper and bank credit facilities, and operating and finance lease obligations, net of unrestricted cash and short-term investments.

(2)

Calculated as total recourse debt / shareholder's equity.

Reconciliation of Total Assets to Total Assets, Excluding Cash and Short-Term Investments

Total Assets

$

10,048.1

$

10,072.0

$

9,875.4

$

9,524.2

$

9,908.6

Less: cash and short-term investments

(177.6

)

(452.5

)

(596.6

)

(180.5

)

(649.5

)

Total Assets, excluding cash and short-term investments

$

9,870.5

$

9,619.5

$

9,278.8

$

9,343.7

$

9,259.1

GATX CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION (UNAUDITED)

(Continued)

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

Rail North America Statistics

Lease Price Index (LPI) (1)

Average renewal lease rate change

34.3

%

29.7

%

37.5

%

18.3

%

9.3

%

Average renewal term (months)

37

34

33

34

30

Renewal Success Rate (2)

77.9

%

85.7

%

87.2

%

87.7

%

80.0

%

Fleet Rollforward (3)

Beginning balance

100,954

101,289

101,272

100,452

101,570

Cars added

1,816

583

772

1,414

943

Cars scrapped

(324

)

(486

)

(506

)

(594

)

(547

)

Cars sold

(1,227

)

(432

)

(249

)

—

(1,514

)

Ending balance

101,219

100,954

101,289

101,272

100,452

Utilization

99.3

%

99.5

%

99.6

%

99.4

%

99.3

%

Average active railcars

100,552

100,618

100,783

100,079

100,253

Boxcar Fleet Rollforward

Beginning balance

8,663

10,224

10,315

10,283

12,946

Cars added

229

106

—

85

352

Cars scrapped

(103

)

(94

)

(91

)

64

(109

)

Cars sold

—

(1,573

)

—

(117

)

(2,906

)

Ending balance

8,789

8,663

10,224

10,315

10,283

Utilization

100.0

%

99.9

%

100.0

%

99.9

%

99.8

%

Average active railcars

8,720

9,032

10,267

10,239

10,856

Rail Europe Statistics

Fleet Rollforward

Beginning balance

28,005

27,701

27,470

27,192

27,109

Cars added

502

362

277

347

225

Cars scrapped/sold

(46

)

(58

)

(46

)

(69

)

(142

)

Ending balance

28,461

28,005

27,701

27,470

27,192

Utilization