GATX Corporation Reports 2023 Second-Quarter Results

GATX Corporation (NYSE: GATX) today reported 2023 second-quarter net income of $63.3 million, or $1.74 per diluted share, compared to net income of $2.6 million, or $0.07 per diluted share, in the second quarter of 2022. The 2023 second-quarter results include a net positive impact of $0.2 million, or $0.01 per diluted share, from Tax Adjustments and Other Items. The 2022 second-quarter results include a net negative impact of $35.9 million, or $1.00 per diluted share, from Tax Adjustments and Other Items.

Net income for the first six months of 2023 was $140.7 million, or $3.87 per diluted share, compared to $78.4 million, or $2.18 per diluted share, in the prior year period. The 2023 year-to-date results include a net negative impact of $1.1 million, or $0.03 per diluted share, from Tax Adjustments and Other Items. The 2022 year-to-date results include a net negative impact of $44.4 million, or $1.23 per diluted share, from Tax Adjustments and Other Items. Details related to these items are provided in the attached Supplemental Information under Tax Adjustments and Other Items.

"We see continued strong demand globally for the majority of railcar types in our existing fleets," said Robert C. Lyons, president and chief executive officer of GATX. "Rail North America’s fleet utilization was 99.3% at the end of the second quarter and our renewal success rate was 85.3%. The renewal lease rate change of GATX’s Lease Price Index was positive 33.1% for the quarter, with an average renewal term of 61 months. Our commercial team remains focused on improving renewal lease rates and lengthening lease terms on many car types.

"Rail International performed well and continued to experience higher renewal lease rates compared to expiring rates for most railcar types. For the second consecutive quarter, GATX Rail Europe and GATX Rail India expanded their fleets with a combined total of nearly 1,000 newly built railcars."

Mr. Lyons added, "In Portfolio Management, results were driven by improved performance at the Rolls-Royce and Partners Finance affiliates as international air passenger demand continues to recover. In addition, we identified attractive opportunities to increase our direct investment in aircraft spare engines, acquiring nine additional engines for $239 million during the quarter."

Mr. Lyons concluded, "Based on year-to-date performance and our outlook for the remainder of the year, we expect our 2023 full-year earnings to be at the upper end of or modestly exceed our previously announced guidance range of $6.50–$6.90 per diluted share, with variability around this guidance driven primarily by the timing of remarketing events. This guidance excludes any impact from Tax Adjustments and Other Items."

RAIL NORTH AMERICA

Rail North America reported segment profit of $79.3 million in the second quarter of 2023, compared to $53.1 million in the second quarter of 2022. Year to date 2023, Rail North America reported segment profit of $174.5 million, compared to $173.5 million in the same period of 2022. Higher 2023 second-quarter and year-to-date results were due to higher lease revenue and higher gains on asset dispositions, partially offset by higher interest and maintenance expenses.

At June 30, 2023, Rail North America’s wholly owned fleet was composed of approximately 109,500 cars, including approximately 9,000 boxcars. The following fleet statistics and performance discussion exclude the boxcar fleet. Fleet utilization was 99.3% at the end of the second quarter of 2023, compared to 99.3% at the end of the prior quarter and 99.4% at the end of the second quarter of 2022.

During the second quarter of 2023, the renewal lease rate change of the LPI was positive 33.1%. This compares to positive 28.3% in the prior quarter and positive 6.1% in the second quarter of 2022. The average lease renewal term for all cars included in the LPI during the second quarter of 2023 was 61 months, compared to 55 months in the prior quarter and 51 months in the second quarter of 2022. The 2023 second-quarter renewal success rate was 85.3%, compared to 77.9% in the prior quarter and 87.7% in the second quarter of 2022. Rail North America’s investment volume during the second quarter of 2023 was $161.3 million.

Additional fleet statistics, including information on the boxcar fleet, and macroeconomic data related to Rail North America’s business are provided on the last page of this press release.

RAIL INTERNATIONAL

Rail International’s segment profit was $27.3 million in the second quarter of 2023, compared to $28.3 million in the second quarter of 2022. Year to date 2023, Rail International reported segment profit of $50.8 million, compared to $53.2 million in the same period of 2022. Results in the comparative periods were favorably impacted by more railcars on lease and negatively impacted by changes in foreign currency exchange rates.

At June 30, 2023, GATX Rail Europe’s (GRE) fleet consisted of approximately 28,800 cars. Utilization was 96.9%, compared to 98.5% at the end of the prior quarter and 99.9% at the end of the second quarter of 2022. Demand for the majority of railcar types remains solid, with the decline in utilization driven primarily by weakness in the European intermodal sector. Additional fleet statistics for GRE are provided on the last page of this press release.

During the quarter, GATX Rail India took delivery of over 570 newly built cars, bringing its total fleet to over 6,900 railcars at the end of the second quarter. Demand for railcars in India remains robust, driven by continued growth in the economy and infrastructure development.

PORTFOLIO MANAGEMENT

Portfolio Management reported segment profit of $26.6 million in the second quarter of 2023, compared to segment loss of $15.7 million in the second quarter of 2022. Year to date 2023, segment profit was $54.9 million, compared to segment loss of $19.6 million in the same period of 2022.

2023 and 2022 second-quarter results include a net positive impact of $0.2 million and a net negative impact of $31.5 million, respectively, from Tax Adjustments and Other Items. 2023 and 2022 year-to-date results include net negative impacts of $1.4 million and $46.8 million, respectively, from Tax Adjustments and Other Items. Additional details are provided in the attached Supplemental Information under Tax Adjustments and Other Items.

Excluding these impacts, higher 2023 second-quarter and year-to-date segment results were driven primarily by increased earnings from the Rolls-Royce and Partners Finance (RRPF) affiliates and GATX Engine Leasing, the Company’s wholly owned engine portfolio. Higher affiliate earnings from RRPF was due to improved performance across the existing engine leasing portfolio and higher remarketing income.

COMPANY DESCRIPTION

At GATX Corporation (NYSE: GATX), we empower our customers to propel the world forward. GATX leases transportation assets including railcars, aircraft spare engines and tank containers to customers worldwide. Our mission is to provide innovative, unparalleled service that enables our customers to transport what matters safely and sustainably while championing the well-being of our employees and communities. Headquartered in Chicago, Illinois since its founding in 1898, GATX has paid a quarterly dividend, uninterrupted, since 1919.

TELECONFERENCE INFORMATION

GATX Corporation will host a teleconference to discuss 2023 second-quarter results. Call details are as follows:

Tuesday, July 25, 2023
11 a.m. Eastern Time
Domestic Dial-In: 1-888-660-6118
International Dial-In: 1-929-203-1802
Replay: 1-800-770-2030 or 1-647-362-9199 / Access Code: 2548217

Call-in details, a copy of this press release and real-time audio access are available at www.gatx.com. Please access the call 15 minutes prior to the start time. A replay will be available on the same site starting at 2 p.m. (Eastern Time), July 25, 2023.

AVAILABILITY OF INFORMATION ON GATX'S WEBSITE

Investors and others should note that GATX routinely announces material information to investors and the marketplace using SEC filings, press releases, public conference calls, webcasts and the GATX Investor Relations website. While not all of the information that the Company posts to the GATX Investor Relations website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media and others interested in GATX to review the information that it shares on www.gatx.com under the “Investors” tab.

FORWARD-LOOKING STATEMENTS

Statements in this Earnings Release not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. These include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects, or future events. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “outlook,” “continue,” “likely,” “will,” “would”, and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.

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 and in any subsequent reports on Form 10-Q, could cause actual results to differ materially from our current expectations expressed in forward-looking statements: