UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2016~~March 31, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-2328

GATX Corporation

(Exact name of registrant as specified in its charter)



New York	36-1124040
(State of incorporation)	(I.R.S. Employer Identification No.)
222 West Adams Street
Chicago, Illinois 60606-5314
(Address of principal executive offices, including zip code)
(312) 621-6200
(Registrant's telephone number, including area code)

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 requirements for the past 90 days. Yes x No ¨

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).



x	Large accelerated filer	¨	Accelerated filer
¨	Non-accelerated filer	¨	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

~~As of September 30, 2016, 39.9~~Common shares outstanding were 39.1 million ~~common shares were outstanding.~~at March 31, 2017.

GATX CORPORATION

FORM 10-Q

QUARTERLY REPORT FOR THE PERIOD ENDED ~~SEPTEMBER 30, 2016~~MARCH 31, 2017

INDEX



Item No.		Page No.
Part I –- FINANCIAL INFORMATION

	Forward-Looking Statements	1
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Comprehensive Income (Unaudited)	3
	Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to the Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Business Overview	2116
	Discussion of Operating Results	2117
	Segment Operations	2218
	Cash Flow and Liquidity	3429
	Critical Accounting Policies and Estimates	3631
	Non-GAAP Financial Measures	3732

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4235

Item 4.	Controls and Procedures	4235

Part II –- OTHER INFORMATION

Item 1.	Legal Proceedings	4336

Item 1A.	Risk Factors	4336

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4336

Item 6.	Exhibits	4336

SIGNATURE		4437

EXHIBIT INDEX		4538

FORWARD-LOOKING STATEMENTS

~~Forward looking statements~~Statements in this report ~~that are~~ not based on historical facts are ~~"forward-looking statements"~~“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of ~~1995.~~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 statements include statements ~~that reflect~~as to our ~~current views with respect to, among other things,~~ future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, ~~and market conditions.~~prospects, or future events. In some cases, ~~you~~forward-looking statements can ~~identify forward-looking statements~~be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” ~~“would”~~ and ~~variations of these terms~~“would”, and similar ~~expressions,~~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 ~~the negative of~~revise these ~~terms or similar expressions.~~forward-looking statements.

A detailed discussion of the known material risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, and in our other filings with the Securities and Exchange Commission ("SEC"). ~~Specific risks and uncertainties include, but are not limited~~The following factors, in addition to (1) inability to maintain our assets on lease at satisfactory rates, (2) weak economic conditions, financial market volatility, and other factors that may decrease demand for our assets and services, (3) decreased demand for portions of our railcar fleet due to adverse changes in commodity prices, including, but not limited to, sustained low crude oil prices, (4) events having an adverse impact on assets, customers, or regions where we have a large investment, (5) operational disruption and increased costs associated with increased railcar assignments following non-renewal of leases, compliance maintenance programs, and other maintenance initiatives, (6) financial and operational risks associated with long-term railcar purchase commitments, (7) reduced opportunities to generate asset remarketing income, (8) changes in railroad efficiency that could decrease demand for railcars, (9) operational and financial risks related to our affiliate investments, including the RRPF affiliates, (10) fluctuations in foreign exchange rates, (11) failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees, (12) the impact of new regulatory requirements for tank cars carrying crude, ethanol, and other flammable liquids, (13) deterioration of conditions in the capital markets, reductionsthose discussed under "Risk Factors", in our credit ratings, or increases in our financing costs, (14) asset impairment charges we may be required to recognize, (15) competitive factors in our primary markets, (16) risks related to international operations and expansion into new geographic markets, (17) exposure to damages, fines, and civil and criminal penalties arising from a negative outcome in our pending or threatened litigation, (18) changes in, or failure to comply with, laws, rules, and regulations (19) inability to obtain cost-effective insurance, (20) environmental remediation costs, (21) inadequate allowances to cover credit losses in our portfolio, and (22) other risks discussed in our filings with the SEC, including our formAnnual Report on Form 10-K for the year ended December 31, ~~2015, all of which are available on the SEC's website (www.sec.gov).~~2016, could cause actual results to differ materially from our current expectations expressed in forward looking statements:

Investors 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. The Company undertakes no obligation to publicly update or revise these forward-looking statements.



• 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 our railcars • inability to maintain our assets on lease at satisfactory rates due to oversupply of railcars in the market or other changes in supply and demand • weak economic conditions and other factors that may decrease demand for our assets and services • decreased demand for portions of our railcar fleet due to adverse changes in the price of, or demand for, commodities that are shipped in our railcars • higher costs associated with increased railcar assignments 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 railcar purchase commitments • reduced opportunities to generate asset remarketing income • operational and financial risks related to our affiliate investments, including the Rolls-Royce & Partners Finance joint ventures (collectively the “RRPF affiliates”) • fluctuations in foreign exchange rates		• failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees • changes in railroad operations that could decrease demand for railcars, either due to increased railroad efficiency or decreased attractiveness of rail service relative to other modes • the impact of regulatory requirements applicable to tank cars carrying crude, ethanol, and other flammable liquids • 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 a significantly lower cost of capital than GATX • risks related to international operations and expansion into new geographic markets • changes in, or failure to comply with, laws, rules, and regulations • inability to obtain cost-effective insurance • environmental remediation costs • inadequate allowances to cover credit losses in our portfolio • inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	September 30			December 31			March 31			December 31
	2016			2015			2017			2016
	(Unaudited)						(Unaudited)
Assets
Cash and Cash Equivalents	$	211.5		$	202.4		$	155.2		$	307.5
Restricted Cash	4.4			17.3			3.8			3.6
Receivables
Rent and other receivables	85.8			69.4			67.0			85.9
Loans	6.7			8.8
Finance leases	158.7			167.6			144.5			147.7
Less: allowance for losses	(14.2		)	(10.3		)	(5.7		)	(6.1		)
	237.0			235.5			205.8			227.5

Operating Assets and Facilities ($0 and $122.9 related to a consolidated VIE)	8,545.4			8,204.0
Less: allowance for depreciation ($0 and $39.7 related to a consolidated VIE)	(2,633.4		)	(2,505.6		)
Operating Assets and Facilities							8,631.1			8,446.4
Less: allowance for depreciation							(2,666.1		)	(2,641.7		)
	5,912.0			5,698.4			5,965.0			5,804.7
Investments in Affiliated Companies	376.8			348.5			396.9			387.0
Goodwill	81.7			79.7			78.7			78.0
Other Assets	265.9			312.4			291.5			297.1
Total Assets	$	7,089.3		$	6,894.2		$	7,096.9		$	7,105.4

Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses	$	146.4		$	170.9		$	143.3		$	174.8
Debt
Commercial paper and borrowings under bank credit facilities	5.1			7.4			3.0			3.8
Recourse	4,204.4			4,171.5			4,250.9			4,253.2
Nonrecourse ($0 and $6.9 related to a consolidated VIE)	—			6.9
Capital lease obligations	15.1			18.4			13.5			14.9
	4,224.6			4,204.2			4,267.4			4,271.9
Deferred Income Taxes	1,104.0			1,018.3			1,110.4			1,089.4
Other Liabilities	242.8			220.6			190.6			222.1
Total Liabilities	5,717.8			5,614.0			5,711.7			5,758.2

Shareholders’ Equity
Common stock, $0.625 par value: Authorized shares — 120,000,000 Issued shares — 66,891,983 and 66,776,290 Outstanding shares — 39,880,034 and 41,970,098	41.5			41.5
Common stock, $0.625 par value: Authorized shares — 120,000,000 Issued shares — 67,029,641 and 66,953,606 Outstanding shares — 39,093,265 and 39,442,893							41.6			41.5
Additional paid in capital	681.5			677.4			690.7			687.8
Retained earnings	1,813.6			1,639.0			1,868.0			1,828.0
Accumulated other comprehensive loss	(191.1		)	(198.8		)	(191.1		)	(211.1		)
Treasury stock at cost (27,011,949 and 24,806,192 shares)	(974.0		)	(878.9		)
Treasury stock at cost (27,936,376 and 27,510,713 shares)							(1,024.0		)	(999.0		)
Total Shareholders’ Equity	1,371.5			1,280.2			1,385.2			1,347.2
Total Liabilities and Shareholders’ Equity	$	7,089.3		$	6,894.2		$	7,096.9		$	7,105.4

See accompanying notes to consolidated financial statements.

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In millions, except per share data)


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2016			2015			2017			2016
Revenues
Lease revenue	$	281.8		$	286.2		$	847.5		$	845.1		$	272.7		$	284.5
Marine operating revenue	62.1			77.6			139.7			167.8			17.0			20.3
Other revenue	19.0			22.4			69.0			58.3			26.4			29.6
Total Revenues	362.9			386.2			1,056.2			1,071.2			316.1			334.4
Expenses
Maintenance expense	79.6			83.9			244.6			242.4			77.9			78.5
Marine operating expense	39.2			48.5			88.9			114.7			12.9			12.3
Depreciation expense	75.9			75.0			221.0			217.9			72.0			69.3
Operating lease expense	19.2			22.3			54.5			65.4			15.8			16.8
Other operating expense	10.1			8.3			33.7			23.4			9.6			8.8
Selling, general and administrative expense	48.1			44.4			127.8			134.7			42.9			38.8
Total Expenses	272.1			282.4			770.5			798.5			231.1			224.5
Other Income (Expense)
Net gain (loss) on asset dispositions	62.7			(4.5		)	122.8			49.5
Net gain on asset dispositions													24.9			23.2
Interest expense, net	(36.2		)	(37.7		)	(109.9		)	(117.1		)	(39.2		)	(37.2		)
Other income (expense)	4.3			(3.1		)	(2.9		)	(8.7		)
Other expense													(1.3		)	(3.3		)
Income before Income Taxes and Share of Affiliates’ Earnings	121.6			58.5			295.7			196.4			69.4			92.6
Income Taxes	(41.1		)	(20.3		)	(98.6		)	(68.1		)
Share of Affiliates’ Earnings, Net of Taxes	15.2			1.3			29.1			18.8
Income taxes													(20.6		)	(30.8		)
Share of affiliates’ earnings, net of taxes													8.7			7.5
Net Income	$	95.7		$	39.5		$	226.2		$	147.1		$	57.5		$	69.3
Other Comprehensive Income, Net of Taxes
Foreign currency translation adjustments	11.0			(2.9		)	16.2			(39.4		)	17.9			25.9
Unrealized gain (loss) on securities	1.3			(0.3		)	1.6			(0.4		)
Unrealized gain on securities													—			0.1
Unrealized gain (loss) on derivative instruments	0.5			2.5			(6.8		)	—			0.8			(2.5		)
Post-retirement benefit plans	(6.0		)	2.1			(3.3		)	6.3			1.3			1.4
Other comprehensive income (loss)	6.8			1.4			7.7			(33.5		)
Other comprehensive income													20.0			24.9
Comprehensive Income	$	102.5		$	40.9		$	233.9		$	113.6		$	77.5		$	94.2

Share Data
Basic earnings per share	$	2.39		$	0.92		$	5.55		$	3.38		$	1.46		$	1.67
Average number of common shares	40.1			42.8			40.7			43.5			39.4			41.4

Diluted earnings per share	$	2.36		$	0.91		$	5.49		$	3.33		$	1.44		$	1.66
Average number of common shares and common share equivalents	40.6			43.4			41.2			44.1			39.9			41.8

Dividends declared per common share	$	0.40		$	0.38		$	1.20		$	1.14		$	0.42		$	0.40

See accompanying notes to consolidated financial statements.

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)


	Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2017			2016
Operating Activities
Net income	$	226.2		$	147.1		$	57.5		$	69.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	230.6			227.4			75.2			72.5
Change in accrued operating lease expense	(11.0		)	(38.0		)	(26.9		)	(21.1		)
Net gains on sales of assets	(41.3		)	(69.7		)	(24.5		)	(21.4		)
Asset impairments	1.8			31.2
Deferred income taxes	83.6			55.8			16.5			25.8
Change in income taxes payable							(6.2		)	(9.0		)
Share of affiliates’ earnings, net of dividends	(29.0		)	(18.6		)	(8.7		)	(7.4		)
Other	(27.9		)	(23.2		)	(30.9		)	(28.8		)
Net cash provided by operating activities	433.0			312.0			52.0			79.9
Investing Activities
Portfolio investments and capital additions	(442.6		)	(498.3		)	(129.0		)	(140.2		)
Purchases of leased-in assets	(116.5		)	(118.4		)	(79.3		)	(92.8		)
Portfolio proceeds	170.6			298.2			44.0			98.4
Proceeds from sales of other assets	18.6			16.2			7.6			9.4
Proceeds from sale-leasebacks	82.5			—
Net decrease (increase) in restricted cash	12.9			(1.0		)
Other	—			9.7
Net cash used in investing activities	(274.5		)	(293.6		)	(156.7		)	(125.2		)
Financing Activities
Net proceeds from issuances of debt (original maturities longer than 90 days)	801.8			748.8			297.9			322.7
Repayments of debt (original maturities longer than 90 days)	(798.7		)	(649.4		)	(300.1		)	(202.3		)
Net decrease in debt with original maturities of 90 days or less	(2.5		)	(54.0		)
Net (decrease) increase in debt with original maturities of 90 days or less							(0.8		)	9.8
Stock repurchases	(95.1		)	(105.0		)	(25.0		)	(50.0		)
Dividends	(51.2		)	(51.9		)	(18.4		)	(18.1		)
Other	(3.5		)	3.7			(2.3		)	(4.0		)
Net cash used in financing activities	(149.2		)	(107.8		)
Net cash (used in) provided by financing activities							(48.7		)	58.1
Effect of Exchange Rate Changes on Cash and Cash Equivalents	(0.2		)	(4.5		)	1.3			1.0
Net increase (decrease) in Cash and Cash Equivalents	9.1			(93.9		)
Cash and Cash Equivalents, beginning of period	202.4			209.9
Cash and Cash Equivalents, end of period	$	211.5		$	116.0
Net (decrease) increase in Cash, Cash Equivalents, and Restricted Cash during the period							(152.1		)	13.8
Cash, Cash Equivalents, and Restricted Cash at beginning of period							311.1			219.7
Cash, Cash Equivalents, and Restricted Cash at end of period							$	159.0		$	233.5

See accompanying notes to consolidated financial statements.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. Description of Business

As used herein, "GATX," "we," "us," "our," and similar terms refer to GATX Corporation and its subsidiaries, unless indicated otherwise.

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail market. We ~~also invest in joint ventures that complement our existing business activities. We~~ report our financial results through four primary business segments: Rail North America, Rail International, American Steamship Company (“ASC”), and Portfolio Management.

NOTE 2. Basis of Presentation

We prepared the accompanying unaudited consolidated financial statements in accordance with US Generally Accepted Accounting Principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our unaudited consolidated financial statements do not include all of the information and footnotes required for complete financial statements. We have included all of the normal recurring adjustments that we deemed necessary for a fair presentation.

Operating results for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2017, are not necessarily indicative of the results we may achieve for the entire year ending December 31, ~~2016.~~2017. In particular, ASC's fleet is inactive for a significant portion of the first quarter of each year due to winter conditions on the Great Lakes. In addition, asset remarketing income does not occur evenly throughout the year. For more information, refer to the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

~~Accounting Changes~~

~~Change in Accounting Estimate~~

At the end of 2015, we changed the approach used to measure service and interest costs for pension and other postretirement benefits. In prior years, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe this approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. We have accounted for this change as a change in accounting estimate and, accordingly, have applied it on a prospective basis. Our adoption of the full yield curve approach will reduce 2016 service and interest cost by approximately $4.5 million ($2.8 million after-tax) as compared to the previous method.

New Accounting Pronouncements Adopted

~~Consolidation~~Equity Method and Joint Ventures

In ~~February 2015,~~March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2015-02,~~2016-07, ~~Consolidation~~Investments - Equity Method and Joint Ventures (Topic ~~810) Amendments~~323): Simplifying the Transition to the ~~Consolidation Analysis~~Equity Method of Accounting, which ~~amends~~eliminates the ~~analysis required~~requirement to ~~determine whether to consolidate certain types of legal entities such as limited partnerships, limited liability corporations, and certain securitization structures.~~retrospectively apply equity method accounting when an entity increases ownership or influence in a previously held investment. The new guidance was effective for us ~~beginning~~ in the first quarter of ~~2016.~~2017. Application of the new guidance did not impact our financial statements or related disclosures.

~~Business Combinations~~Stock Compensation

In ~~September 2015,~~March 2016, the FASB issued ASU ~~2015-16,~~2016-09, ~~Business Combinations~~Compensation - Stock Compensation (Topic ~~805), Simplifying the~~718): Improvements to Employee Share-Based Payment Accounting, ~~for Measurement-Period Adjustments,~~ which simplifies and clarifies certain aspects of share-based payment accounting and presentation. The update requires recognition of excess tax benefits and tax deficiencies, which arise due to differences between the ~~acquirer~~measure of compensation expense and the amount deductible for tax purposes, to be recorded directly through earnings as a component of income tax expense. Previously, these differences were generally recorded in ~~a business combination~~additional paid-in capital and thus had no impact on net income. The change in treatment of excess tax benefits and tax deficiencies also impacts the computation of diluted earnings per share, and the cash flows associated with those items are classified as operating activities on the consolidated statements of cash flows. The guidance also clarifies that all cash payments made to taxing authorities on the employees' behalf for withheld shares should be classified as financing activities on the consolidated statements of cash flows. Additionally, the guidance permits entities to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as allowed under the previous guidance, or recognized when they occur. We changed our accounting policy to recognize ~~measurement-period adjustments in the period in which it determines the amount~~forfeitures when they occur as part of ~~the adjustment. The new guidance was~~this adoption. These amendments became effective ~~for us~~ in the first quarter of ~~2016. Application~~2017, and we adopted this guidance as of ~~the~~January 1, 2017. Adoption of this new ~~guidance~~standard did not have a material impact on our financial statements or related disclosures.

Statement of Cash Flows

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the classification and presentation of changes in restricted cash on the statement of cash flows. We elected to early adopt the new guidance as of January 1, 2017, using the retrospective method. Application of the new guidance requires presentation of restricted cash together with cash and cash equivalents on the consolidated statements of cash flows and eliminates the disclosure of the related changes in restricted cash within investing activities.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

New Accounting Pronouncements Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes most current revenue recognition guidance, including industry-specific guidance. Subsequently, the FASB has issued updates which provide additional implementation guidance. The new guidance requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The FASB delayed the effective date of this guidance to the first quarter of 2018, with early adoption permitted as of the original effective date of the first quarter of 2017. We can adopt the new guidance using either the retrospective method or the cumulative effect transition method. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures and when we will electplan to adopt this ~~standard.~~guidance as of January 1, 2018 using the modified retrospective approach. Our primary source of revenue is lease revenue, which will continue to be within the scope of existing lease accounting guidance upon adoption of Topic 606. With respect to our other revenue elements, marine operating revenue is our biggest component. The new standard may modify the recognition timing of certain in-transit cargo revenue, but we do not expect such changes to have a material impact on our financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes most current lease guidance. The new guidance requires companies to recognize most leases on the balance sheet and modifies accounting, presentation, and disclosure for both lessors and lessees. The new guidance is effective for us in the first quarter of 2019 with early adoption permitted, using a modified retrospective transition method. We plan to adopt this guidance on January 1, 2019, using a modified retrospective transition method. We are evaluating the effect that the new guidance will have on our consolidated financial statements and related ~~disclosures and when we will elect to adopt this standard.~~disclosures.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - ~~Overall:~~Overall (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities, which modifies the accounting and reporting requirements for certain equity securities and financial liabilities. The new guidance is effective for us beginning in the first quarter of 2018 with certain provisions eligible for early adoption. We do not expect the new guidance to have a significant impact on ~~our financial statements or related disclosures.~~

~~Equity Method and Joint Ventures~~

~~In March 2016, the FASB issued ASU 2016-07,~~ ~~Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting~~, which eliminates the requirement to retrospectively apply equity method accounting when an entity increases ownership or influence in a previously held investment. The new guidance is effective for us in the first quarter of 2017 with early adoption permitted. We do not expect the new guidance to impact our financial statements or related disclosures.

~~Stock Compensation~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,~~ which simplifies and clarifies certain aspects of share-based payment accounting and presentation. The new guidance is effective for us in the first quarter of 2017 with early adoption permitted. We do not expect the guidance to impact our financial statements or related disclosures.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies how entities will measure credit losses. The new guidance is effective for us in the first quarter of 2020 with early adoption permitted. We are evaluating the effect that the new guidance will have on our financial statements and related disclosures.

Statement of Cash Flows ~~Classification~~

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for us in the first quarter of 2018 with early adoption permitted. We do not expect the new guidance to have a significant impact on our financial statements or related disclosures.

Income Taxes

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which modifies how an entity will recognize the income tax consequences of an intra-entity transfer of an asset when the transfer occurs. The new guidance is effective for us in the first quarter of 2018 with early adoption permitted. We are evaluating the effect that the new guidance will have on our financial statements and related disclosures.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Compensation

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost which modifies how an entity must present service costs and other components of net benefit cost. The new guidance is effective for us in the first quarter of 2018 with early adoption permitted. We are evaluating the effect the new guidance will have on our financial statements and related disclosures.

~~NOTE 3. Variable Interest Entities~~

In prior periods, we were the primary beneficiary of one of our variable interest entities, a structured lease financing of a portfolio of railcars, because we had the power to direct its significant activities. As a result, we consolidated this variable interest entity. During the third quarter of 2016, the Company took full ownership of all assets, repaid the associated debt, and dissolved this entity.

~~The following table shows the carrying amounts of assets and liabilities of the consolidated variable interest entity (in millions):~~

September 30
2016

December 31
2015
Operating assets, net of accumulated depreciation (1) $ —
$ 83.2
Nonrecourse debt —
6.9

~~_________~~


~~(1)~~	~~All operating assets were pledged as collateral on the nonrecourse debt.~~

We determined that we are not the primary beneficiary of our other variable interest entities, which are primarily investments in aircraft spare engine leasing affiliates that were financed through a variety of equity investments and third-party lending arrangements. We are not the primary beneficiary of these variable interest entities because we do not have the power to direct the activities that most significantly impact the entities’ economic performance. Rather, that power was shared by the affiliate partners based on the terms of the relevant joint venture agreements, which require approval of all partners for significant decisions regarding the variable interest entity.

~~The following table shows the carrying amounts and maximum exposure to loss for our unconsolidated variable interest entities (in millions):~~

September 30, 2016 December 31, 2015
Net Carrying Amount Maximum Exposure to Loss Net Carrying Amount Maximum Exposure to Loss
Investments in affiliates $ 176.4
$ 176.4
$ 161.2
$ 161.2
Other investment 0.1
0.1
0.2
0.2
Total $ 176.5
$ 176.5
$ 161.4
$ 161.4

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

NOTE 4.3. Fair Value Disclosure

The following tables show our assets and liabilities that are measured at fair value on a recurring basis (in millions):


Assets	September 30 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total March 31 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate derivatives (1)	$	4.8	$	—	$	4.8	$	—	$	0.2	$	—	$	0.2	$	—
Foreign exchange rate derivatives (1)	6.7		—		6.7		—		10.2		—		10.2		—
Available-for-sale equity securities	6.0		6.0		—		—
Foreign exchange rate derivatives (2)									0.3		—		0.3		—
Liabilities
Interest rate derivatives (1)	5.0		—		5.0		—		1.7		—		1.7		—
Foreign exchange rate derivatives (1)	9.4		—		9.4		—		0.3		—		0.3		—
Foreign exchange rate derivatives (2)	1.5		—		1.5		—		3.5		—		3.5		—


Assets	December 31 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total December 31 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate derivatives (1)	$	1.8	$	—	$	1.8	$	—	$	2.9	$	—	$	2.9	$	—
Foreign exchange rate derivatives (1)	10.2		—		10.2		—		12.2		—		12.2		—
Foreign exchange rate derivatives (2)	0.8		—		0.8		—		1.3		—		1.3		—
Available-for-sale equity securities	3.3		3.3		—		—

Liabilities
Interest rate derivatives (1)	1.2		—		1.2		—		0.1		—		0.1		—
Foreign exchange rate derivatives (1)	0.2		—		0.2		—
Foreign exchange rate derivatives (2)	2.4		—		2.4		—

_________

~~(1) Designated as hedges.~~

~~(2) Not designated as hedges.~~


(1)	Designated as hedges.


(2)	Not designated as hedges.

~~We base our valuations of available-for-sale equity securities on their quoted prices on an active exchange.~~ We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data.

Derivative instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting the fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. WeAs of March 31, 2017, we had eight instruments outstanding with an aggregate notional amount of $450.0 million and maturities ranging from

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2018 to 2022, compared to eight instruments outstanding, with an aggregate notional amount of $550.0 million ~~as of September 30, 2016~~ and ~~December 31, 2015 that mature~~maturities ranging from 2017 to ~~2020.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

2020, as of December 31, 2016.

Cash Flow Hedges

We use interest rate swaps to convert floating rate debt to fixed rate ~~debt, and we~~debt. We use Treasury rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps to hedge our exposure to fluctuations in the exchange rates of the foreign currencies in which we conduct business. We had ~~sixteen~~fifteen instruments outstanding with an aggregate notional amount of ~~$471.6~~$317.6 million as of ~~September 30, 2016~~March 31, 2017 that mature from ~~2016~~2017 to 2022 and ~~ten~~nine instruments outstanding with an aggregate notional amount of ~~$442.9~~$412.1 million as of December 31, ~~2015.~~2016 with maturities ranging from 2017 to 2022. Within the next 12 months, we expect to reclassify ~~$5.6~~$5.7 million ($3.5 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive income (loss) to interest expense or operating lease expense, as applicable. We reclassify these amounts when interest ~~expense~~ and operating lease expense on the related hedged transactions affect earnings.

Non-designated Derivatives

We do not hold derivative financial instruments for purposes other than hedging, although certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other (income) expense immediately.

Some of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. The aggregate fair value of our derivative instruments with credit risk related contingent features that are in a liability position as of ~~September 30, 2016,~~March 31, 2017, was ~~$14.4 million~~.$2.0 million. We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.

In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract, our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.

The following table shows the impacts of our derivative instruments on our ~~statements~~statement of comprehensive income (in millions):


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
Derivative Designation	Location of Loss (Gain) Recognized	2016			2015			2016			2015			Location of Loss (Gain) Recognized	2017			2016
Fair value hedges (1)	Interest expense	$	2.6		$	(4.4	)	$	(3.3	)	$	(5.3	)	Interest expense	$	2.1		$	(4.8	)
Cash flow hedges	Other comprehensive (income) loss (effective portion)	(2.8		)	(0.5		)	(26.8		)	2.0			Other comprehensive (income) loss (effective portion)	(5.1		)	(23.2		)
Cash flow hedges	Interest expense (effective portion reclassified from accumulated other comprehensive loss)	1.7			1.4			5.1			4.1			Interest expense (effective portion reclassified from accumulated other comprehensive loss)	1.7			1.7
Cash flow hedges	Operating lease expense (effective portion reclassified from accumulated other comprehensive loss)	0.7			0.1			1.1			0.3			Operating lease expense (effective portion reclassified from accumulated other comprehensive loss)	—			0.3
Cash flow hedges (2)	Other (income) expense (effective portion reclassified from accumulated other comprehensive loss)	3.3			0.8			13.6			5.0			Other (income) expense (effective portion reclassified from accumulated other comprehensive loss)	4.1			17.0
Non-designated ~~(3)~~	Other (income) expense	2.2			(0.6		)	(0.1		)	(6.4		)	Other (income) expense	4.8			1.3

_________

~~(1) The fair value adjustments related to the underlying debt equally offset amounts recognized in interest expense.~~

(2) Includes $4.2 million and $11.0 million of losses for the three and nine months ended September 30, 2016, and $0.8 million and $3.5 million of losses for the three and nine months ended September 30, 2015, on foreign currency derivatives which are substantially offset by gains from foreign currency remeasurement adjustments, also recognized in Other (income) expense.

(3) For the nine months ended September 30, 2015, includes $5.1 million of gains on foreign currency derivatives which are substantially offset by losses from foreign currency remeasurement adjustments on the outstanding AAE loan, also recognized in Other (income) expense.


(1)	The fair value adjustments related to the underlying debt equally offset the amounts recognized in interest expense.


(2)	Includes $4.1 million of losses in 2017 and $17.0 million of losses in 2016 on foreign currency derivatives which are substantially offset by gains from foreign currency remeasurement adjustments, also recognized in Other (income) expense.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Other Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, rent and other receivables, accounts payable, and commercial paper and bank credit facilities approximate fair value due to the short maturity of those instruments. We base the fair values of investment funds, which are accounted for under the cost method, on the best information available, which may include quoted investment fund values. We estimate the fair values of loans and fixed and floating rate debt using discounted cash flow analyses that are based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The ~~estimated fair~~inputs we use to estimate each of these values ~~for these investments~~ are classified in Level 2 of the fair value hierarchy because they are ~~based on~~ directly or indirectly observable inputs.

The following table shows the carrying amounts and fair values of our other financial instruments (in millions):

September 30, 2016 December 31, 2015

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value
Assets
Investment funds $ 0.6
$ 1.3
$ 0.6
$ 1.2
Loans 6.7
6.7
8.8
8.7
Liabilities
Recourse fixed rate debt (1) $ 3,868.2
$ 3,996.4
$ 3,915.0
$ 3,882.6
Recourse floating rate debt (1) 360.0
352.0
275.2
264.6
Nonrecourse debt —
—
6.9
7.1

~~_________~~

~~(1) Excludes related deferred financing costs.~~



	March 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Investment funds	$	0.6	$	1.1	$	0.6	$	1.2
Loans	5.7		5.7		6.2		6.2
Liabilities
Recourse fixed rate debt	$	3,857.0	$	3,902.9	$	3,858.5	$	3,852.6
Recourse floating rate debt	418.6		417.6		417.8		412.2

NOTE 5.4. Assets Held ~~For~~for Sale

~~During the third quarter of 2015,~~As previously disclosed, we have made the decision to ~~exit the majority~~sell certain of our assets, including marine investments ~~within~~in the Portfolio Management segment ~~including six chemical parcel tankers (the "Nordic Vessels"), most of the inland marine vessels,~~ and ~~our 50% interest~~railcars in the ~~Cardinal Marine joint venture. At that time,~~Rail North America segment. The following table summarizes the ~~Nordic Vessels and the inland marine vessels were classified as~~components of assets held for sale and adjusted to the lower of their respective carrying amounts or fair value less costs to dispose. Subsequently, certain of these marine investments were sold during the fourth quarter of 2015, including one of the Nordic Vessels.(in millions):



	March 31		December 31
	2017		2016
Rail North America	$	27.2	$	43.9
Portfolio Management	45.6		45.6
	$	72.8	$	89.5

In the first nine months of 2016, we sold additional marine assets, including three of the Nordic Vessels. Proceeds from the sales of Portfolio Management marine assets completed in the first nine months of 2016, including those designated as held for sale, were $49.4 million, resulting in a gain of $4.2 million. We also recognized a gain of $1.0 million resulting from additional proceeds received from the sale of the Cardinal Marine joint venture and recorded additional impairment losses of $1.8 million for certain of the remaining marine assets held for sale. We based the fair values of these assets on our estimate of the expected proceeds less costs to sell.

~~As of September 30, 2016 and December 31, 2015, we had $62.1 million and $106.0 million of~~All assets classified as held for sale ~~on the balance sheet, including $60.5 million and $103.4 million of marine assets held~~are expected to be sold in ~~the Portfolio Management segment.~~2017.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 6.5. Pension and Other Post-Retirement Benefits

The following table shows components of our pension and other post-retirement benefits expense for the three months ended ~~September 30,~~March 31, 2017 and 2016 ~~and 2015~~ (in millions):

2016 Pension
Benefits 2015 Pension
Benefits 2016 Retiree
Health
and Life 2015 Retiree
Health
and Life
Service cost $ 1.5
$ 1.9
$ 0.1
$ 0.1
Interest cost 3.9
4.9
0.2
0.3
Expected return on plan assets (6.5 ) (6.4 ) —
—
Settlement accounting adjustment 5.7
—
—
—
Amortization of (1):
Unrecognized prior service credit (0.2 ) (0.3 ) (0.1 ) (0.1 )
Unrecognized net actuarial loss 2.6
3.7
—
—
Net expense $ 7.0
$ 3.8
$ 0.2
$ 0.3

~~The following table shows components of our pension and other post-retirement benefits expense for the nine months ended September 30, 2016 and 2015 (in millions):~~


	2016 Pension Benefits			2015 Pension Benefits			2016 Retiree Health and Life			2015 Retiree Health and Life			2017 Pension Benefits			2016 Pension Benefits			2017 Retiree Health and Life			2016 Retiree Health and Life
Service cost	$	4.5		$	5.6		$	0.2		$	0.2		$	1.6		$	1.6		$	—		$	—
Interest cost	11.8			14.8			0.7			1.0			3.8			3.9			0.2			0.3
Expected return on plan assets	(19.5		)	(19.3		)	—			—			(6.0		)	(6.5		)	—			—
Settlement accounting adjustment	5.7			—			—			—
Amortization of (1):
Unrecognized prior service credit	(0.7		)	(0.8		)	(0.2		)	(0.2		)	—			(0.2		)	—			(0.1		)
Unrecognized net actuarial loss (gain)	7.7			11.1			(0.2		)	—			2.3			2.6			(0.1		)	—
Net expense	$	9.5		$	11.4		$	0.5		$	1.0		$	1.7		$	1.4		$	0.1		$	0.2

________

(1) Amounts reclassified from accumulated other comprehensive loss.

Pension expense in 2016 was positively impacted by a prospective change in accounting estimate. See "Note 2. Basis of Presentation" for further details about this change in accounting estimate. In addition, during the third quarter of 2016, we recorded a settlement accounting adjustment of $5.7 million attributable to lump sum payments elected by eligible retirees as part of a voluntary early retirement program offered in 2015.

NOTE 7. 6. Share-Based Compensation

During the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2017, we granted ~~466,900~~354,400 non-qualified employee stock options, ~~83,100~~49,840 restricted stock units, ~~95,100~~63,710 performance shares, and ~~22,052~~6,121 phantom stock units. For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2017, total share-based compensation expense was $3.2 million and ~~$9.1 million and~~ the related tax benefits were ~~$1.3 million and $3.5~~$1.2 million. For the three ~~and nine~~ months ended ~~September 30, 2015,~~March 31, 2016, total share-based compensation expense was ~~$2.8 million and $8.9~~$3.0 million and the related tax benefits were $1.1 ~~million and $3.4~~ million.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

The estimated fair value of our ~~2016~~2017 stock option awards and related underlying assumptions are shown in the table below.


	2016			2017
Estimated fair value	$	13.86
Estimated fair value, including present value of dividends				$	19.40
Quarterly dividend rate	$	0.40		$	0.42
Expected term of stock option awards, in years	4.7			4.7
Risk-free interest rate	1.4		%	1.9		%
Dividend yield	4.1		%	2.8		%
Expected stock price volatility	29.4		%	27.7		%
Present value of dividends	$	7.27		$	7.50

NOTE 8.7. Income Taxes

Our effective tax rate was 30% for the three months ended March 31, 2017, compared to 33% for ~~the nine~~three months ended ~~September 30, 2016, compared to 35% for the nine months ended September 30, 2015.~~March 31, 2016. The difference in the effective rates for the current year compared to prior year is primarily attributable to the mix of pretax income among domestic and foreign jurisdictions which are taxed at different rates. In addition, the effective tax rate reflects incremental benefits associated with equity awards in accordance with new accounting rules, as well as the impact on deferred taxes of reductions in the statutory tax rates in Quebec, Canada and India.

As of ~~September 30, 2016,~~March 31, 2017, our gross liability for unrecognized tax benefits was $4.3 million. If fully recognized, these tax benefits would decrease our income tax expense by $4.3 million ($2.8 million, net of federal tax). ~~During~~Based upon the ~~nine months ended September 30, 2016,~~status of current state income tax audits and our expectation of the ultimate resolution, we ~~reduced our unrecognized~~believe that it is reasonably possible that we will recognize a tax benefit ~~by $1.4~~of $4.3 million ~~based on a final determination ruling for a disputed state tax filing position. None~~($2.8 million, net of ~~this amount was recognized in net income. We do not anticipate the recognition of tax benefits that were previously unrecognized~~federal tax) within the next 12 months.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 9.8. Commercial Commitments

We have entered into various commercial commitments, such as guarantees, standby letters of credit, and performance bonds, related to certain transactions. These commercial commitments require us to fulfill specific obligations in the event of third-party demands. Similar to our balance sheet investments, these commitments expose us to credit, market, and equipment risk. Accordingly, we evaluate these commitments and other contingent obligations using techniques similar to those we use to evaluate funded transactions.

The following table shows our commercial commitments (in millions):


					March 31		December 31
	September 30 2016		December 31 2015		2017		2016
Lease payment guarantees	$	16.3	$	22.1	$	11.7	$	15.0
Standby letters of credit and performance bonds	8.9		8.9		8.9		8.9
Total commercial commitments (1)	$	25.2	$	31.0	$	20.6	$	23.9

~~_________~~_______

~~(1) The carrying value of liabilities on the balance sheet for commercial commitments was~~ ~~$3.3 million~~ ~~at September 30, 2016 and $4.1 million at December 31, 2015.~~


(1)	The carrying value of liabilities on the balance sheet for commercial commitments was $2.8 million at March 31, 2017 and $3.0 million at December 31, 2016. The expirations of these commitments range from 2017 to 2023. We are not aware of any event that would require us to satisfy any of our commitments.

Lease payment guarantees are commitments to financial institutions to make lease payments for a ~~third-party~~third party in the event they default. We reduce any liability that may result from these guarantees by the value of the underlying asset or group of assets.

We are also parties to standby letters of credit and performance bonds, which primarily relate to contractual obligations and general liability insurance coverages. No material claims have been made against these obligations, and no material losses are anticipated.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

NOTE ~~10.~~9. Earnings per Share

We compute basic earnings per share by dividing net income available to our common shareholders by the weighted average number of shares of our common stock outstanding. We appropriately weighted shares issued or reacquired during the period for the portion of the period that they were outstanding. Our diluted earnings per share reflect the impacts of our potentially dilutive securities, which include our equity compensation awards.

~~On January 29, 2016, our board of directors authorized a $300 million stock repurchase program. As of September 30, 2016, 2.2 million shares had been repurchased for $95.0 million~~. ~~In 2015, we completed our prior $250 million share repurchase authorization approved in 2014.~~

The following table shows the computation of our basic and diluted net income per common share (in millions, except per share amounts):


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended March 31
	2016		2015		2016		2015		2017		2016
Numerator:
Net income	$	95.7	$	39.5	$	226.2	$	147.1	$	57.5	$	69.3

Denominator:
Weighted average shares outstanding - basic	40.1		42.8		40.7		43.5		39.4		41.4
Effect of dilutive securities:
Equity compensation plans	0.5		0.6		0.5		0.6		0.5		0.4
Weighted average shares outstanding - diluted	40.6		43.4		41.2		44.1		39.9		41.8
Basic earnings per share	$	2.39	$	0.92	$	5.55	$	3.38	$	1.46	$	1.67
Diluted earnings per share	$	2.36	$	0.91	$	5.49	$	3.33	$	1.44	$	1.66

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

NOTE ~~11.~~10. Accumulated Other Comprehensive Income (Loss)

The following table shows the change in components for accumulated other comprehensive loss (in millions):

Foreign Currency Translation Gain (Loss) Unrealized Gain (Loss) on Securities Unrealized Gain (Loss) on Derivative Instruments Post-Retirement Benefit Plans Total
Balance at December 31, 2015 $ (77.7 ) $ (0.3 ) $ (20.9 ) $ (99.9 ) $ (198.8 )
Change in component 25.9
0.1
(23.2 ) —
2.8
Reclassification adjustments into earnings —
—
19.0
2.3
21.3
Income tax effect —
—
1.7
(0.9 ) 0.8
Balance at March 31, 2016 $ (51.8 ) $ (0.2 ) $ (23.4 ) $ (98.5 ) $ (173.9 )
Change in component (20.7 ) 0.4
(2.0 ) —
(22.3 )
Reclassification adjustments into earnings —
—
(4.9 ) 2.0
(2.9 )
Income tax effect —
(0.2 ) 2.1
(0.7 ) 1.2
Balance at June 30, 2016 $ (72.5 ) $ —
$ (28.2 ) $ (97.2 ) $ (197.9 )
Change in component 11.0
2.0
(3.4 ) (11.9 ) (2.3 )
Reclassification adjustments into earnings —
—
5.7
2.3
8.0
Income tax effect —
(0.7 ) (1.8 ) 3.6
1.1
Balance at September 30, 2016 $ (61.5 ) $ 1.3
$ (27.7 ) $ (103.2 ) $ (191.1 )

~~________~~



	Foreign Currency Translation Gain (Loss)			Unrealized Gain (Loss) on Securities		Unrealized Gain (Loss) on Derivative Instruments			Post-Retirement Benefit Plans			Total
Balance at December 31, 2016	(103.7		)	—		(20.3		)	(87.1		)	(211.1		)
Change in component	17.9			—		(5.1		)	—			12.8
Reclassification adjustments into earnings	—			—		5.8			2.2			8.0
Income tax effect	—			—		0.1			(0.9		)	(0.8		)
Balance at March 31, 2017	$	(85.8	)	$	—	$	(19.5	)	$	(85.8	)	$	(191.1	)

________

See "Note 4. 3. Fair Value ~~Disclosure~~"Disclosure" and "Note 6. 5. Pension and Other Post-Retirement ~~Benefits~~"Benefits" for impacts of the reclassification adjustments on the statement of comprehensive income.

NOTE ~~12.~~11. Legal Proceedings and Other Contingencies

Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against GATX and certain of our subsidiaries. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely. For a full discussion of our pending legal matters, please refer to "Note ~~24.~~22. Legal Proceedings and Other Contingencies" of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

~~Viareggio Derailment~~

In June 2009, a train consisting of fourteen liquefied petroleum gas (“LPG”) tank cars owned by GATX Rail Austria GmbH (an indirect subsidiary of the Company, "GATX Rail Austria") and its subsidiaries derailed while passing through the City of Viareggio, in the province of Lucca, Italy. Five tank cars overturned and one of the overturned cars was punctured by a peg or obstacle along the side of the track, resulting in a release of LPG, which subsequently ignited. Thirty-two people died and others were injured in the fire, which also resulted in property damage. The LPG tank cars were leased to FS Logistica S.p.A., a subsidiary of the Italian state-owned railway, Ferrovie dello Stato S.p.A (the “Italian Railway”).

On December 14, 2012, the Public Prosecutors of Lucca ("Public Prosecutors") formally charged GATX Rail Austria and two of its subsidiaries (collectively, "GRA"), as well as ten maintenance and supervisory employees (the "Employees"), with various negligence-based crimes related to the accident, all of which are punishable under Italian law by incarceration, damages, and fines. Similar charges were brought against four Italian Railway companies and eighteen of their employees, among others. The Public Prosecutors assert that the axle on a tank car broke, causing the derailment and resulting in a tank rupture and release of LPG, after the car hit an obstacle placed on the side of the track by the Italian Railway. The Public Prosecutors further allege that a crack in the axle was detectable at the time of final inspection but was overlooked by the Employees at the Jungenthal Waggon GmbH workshop (a subsidiary of GATX Rail Austria).

The trial in the Court of Lucca (the “Lucca Trial”) commenced on November 13, 2013. In July 2016, all parties finished presenting their evidentiary cases, and closing arguments began in September, 2016. The Public Prosecutors are seeking acquittals for two of the

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

Employees, incarceration of six to ten years for the other eight Employees, and fines of 1.0 million euros against each of GATX Rail Austria and its two defendant subsidiaries. GRA believes that it and its Employees acted diligently and properly, but we cannot predict the outcome of the Lucca Trial and, therefore, cannot reasonably estimate the possible range of loss, fines or penalties that may ultimately be incurred in connection with this matter. While we anticipate that the Lucca Trial will conclude in 2016, we also expect that further appeals will be filed.

With respect to civil claims, GRA’s insurers continue to work cooperatively with the insurer for the Italian Railway to adjust and settle personal injury and property damage claims. These joint settlement efforts have so far settled most of the significant civil claims related to the accident; however, approximately 55 civil claimants did not settle and are currently parties to the Lucca Trial. The Court of Lucca will determine both the civil and criminal liability of the defendants in the one proceeding. Final civil damage awards for each claimant will be determined at subsequent civil damage hearings. GRA expects that its insurers will cover virtually all civil damages, if awarded to the claimants in the Lucca Trial or at subsequent civil damage hearings, as well as defense costs for such damage hearings. However, in the event that the Court of Lucca awards any reputational damages claimed by certain labor unions and associations, GRA’s insurers will not cover those damages, which could range from €0.5 million to €2.0 million ($0.6 million to $2.2 million).

Since May 2012, one of the excess insurers providing coverage, Liberty Mutual Insurance Europe Limited (“Liberty”), has settled civil claims but refused to reimburse GRA for its ongoing legal defense fees and costs, taking a position contrary to our other insurers in the prior underlying layers that had provided coverage for such expenses. For the period from May 2012 to September 30, 2016, GRA incurred approximately $19.4 million in defense fees and costs, and GRA continues to incur costs in connection with the Lucca Trial. In October 2013, GRA filed an arbitration proceeding against Liberty seeking to recoup its unreimbursed defense fees and costs (the “Liberty Arbitration”), which was heard in November 2015. GRA received a partial arbitration award in its favor and subsequently settled with Liberty and all other insurers in the current coverage layer. Pursuant to this settlement and subject to certain terms and conditions therein, the insurers will provide reimbursement of approximately 40% of defense costs incurred to date and through the end of the Lucca Trial. As of October 31, 2016, insurance reimbursements for the Lucca Trial totaled approximately $6.4 million.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 1312. Financial Data of Business Segments

The financial data presented below depicts the profitability, financial position, and capital expenditures of each of our business segments.

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail market. We ~~also invest in joint ventures that complement our existing business activities. We~~ report our financial results through four primary business segments: Rail North America, Rail International, ~~ASC,~~American Steamship Company (“ASC”), and Portfolio Management.

Rail North America is composed of our wholly owned operations in the United States, Canada, and Mexico, as well as an affiliate investment. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services.

Rail International is composed of our wholly owned European operations ("GATX Rail Europe" or "GRE"), ~~and~~ a wholly owned railcar leasing business in India ("Rail India"), ~~as well as one development stage affiliate~~and our operations in ~~China.~~Russia. GRE leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides value-adding services according to customer requirements.

ASC operates the largest fleet of US-flagged vessels on the Great Lakes, providing waterborne transportation of dry bulk commodities such as iron ore, coal, limestone aggregates, and metallurgical limestone.

Portfolio Management ~~generates~~is composed primarily of our ownership in a group of joint ventures with Rolls-Royce plc that lease aircraft spare engines, as well as five liquefied gas carrying vessels and assorted other marine assets. In prior years, Portfolio Management generated leasing, marine operating, asset remarketing, and management fee income through a collection of diversified wholly owned assets and joint venture investments. We are in the process of disposing of the majority of the marine investments ~~and managed assets.~~in this segment.

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the performance of each segment in a given period. Segment profit includes all revenues, pretax earnings from affiliates, and net gains on asset dispositions that are attributable to the segments, as well as expenses that management believes are directly associated with the financing, maintenance, and operation of the revenue earning assets. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments. These amounts are included in Other.

We allocate debt balances and related interest expense to each segment based upon predetermined debt to equity leverage ratios. ~~Due to changes in the composition of our segments, we have modified segment leverage levels for 2016.~~ The leverage levels ~~for 2016~~ are 5:1 for Rail North America, 3:1 for Rail International, 1.5:1 for ASC, and 1:1 for Portfolio Management. ~~The leverage levels for 2015 were 5:1 for Rail North America, 2:1 for Rail International, 1.5:1 for ASC, and 3:1 for Portfolio Management.~~ We believe that by using this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing ~~costs~~.costs.

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables show certain segment data for each of our business segments (in millions):

Rail North America

Rail International

ASC

Portfolio Management
Other GATX Consolidated
Three Months Ended September 30, 2016
Profitability
Revenues
Lease revenue $ 233.0
$ 46.6
$ 1.0
$ 1.2
$ —
$ 281.8
Marine operating revenue —
—
51.8
10.3
—
62.1
Other revenue 17.3
1.6
—
0.1
—
19.0
Total Revenues
250.3
48.2
52.8
11.6
—
362.9
Expenses
Maintenance expense 62.8
10.7
6.1
—
—
79.6
Marine operating expense —
—
31.5
7.7
—
39.2
Depreciation expense 58.4
11.6
4.2
1.7
—
75.9
Operating lease expense 17.2
—
2.0
—
—
19.2
Other operating expense 8.6
1.2
—
0.3
—
10.1
Total Expenses 147.0
23.5
43.8
9.7
—
224.0
Other Income (Expense)
Net gain on asset dispositions 13.1
0.5
—
49.1
—
62.7
Interest (expense) income, net (27.1 ) (7.3 ) (1.1 ) (2.1 ) 1.4
(36.2 )
Other (expense) income (1.4 ) 5.5
(0.1 ) —
0.3
4.3
Share of affiliates' earnings (pretax) —
(0.1 ) —
15.2
—
15.1
Segment Profit $ 87.9
$ 23.3
$ 7.8
$ 64.1
$ 1.7
184.8
Selling, general and administrative expense 48.1
Income taxes (including $0.1 tax benefit related to affiliates' earnings) 41.0
Net Income $ 95.7

Net Gain on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets $ 11.9
$ —
$ —
$ (0.3 ) $ —
$ 11.6
Residual sharing income 0.3
—
—
49.4
—
49.7
Non-remarketing disposition gains (1) 0.9
0.5
—
—
—
1.4
$ 13.1
$ 0.5
$ —
$ 49.1
$ —
$ 62.7
Capital Expenditures
Portfolio investments and capital additions $ 108.4
$ 10.8
$ —
$ —
$ 1.2
$ 120.4

Selected Balance Sheet Data at September 30, 2016
Investments in affiliated companies $ 10.5
$ 1.3
$ —
$ 365.0
$ —
$ 376.8
Identifiable assets $ 4,792.7
$ 1,183.9
$ 285.6
$ 606.2
$ 220.9
$ 7,089.3

~~_____~~



	Rail North America			Rail International			ASC			Portfolio Management			Other			GATX Consolidated
Three Months Ended March 31, 2017
Profitability
Revenues
Lease revenue	$	227.2		$	43.3		$	1.0		$	1.2		$	—		$	272.7
Marine operating revenue	—			—			6.4			10.6			—			17.0
Other revenue	24.8			1.1			—			0.5			—			26.4
Total Revenues	252.0			44.4			7.4			12.3			—			316.1
Expenses
Maintenance expense	67.7			10.0			0.2			—			—			77.9
Marine operating expense	—			—			5.3			7.6			—			12.9
Depreciation expense	59.0			11.2			0.1			1.7			—			72.0
Operating lease expense	15.0			—			0.8			—			—			15.8
Other operating expense	8.1			1.2			—			0.3			—			9.6
Total Expenses	149.8			22.4			6.4			9.6			—			188.2
Other Income (Expense)
Net gain on asset dispositions	23.8			0.8			—			0.3			—			24.9
Interest (expense) income, net	(31.1		)	(7.9		)	(1.2		)	(2.2		)	3.2			(39.2		)
Other (expense) income	(2.0		)	(1.5		)	—			2.3			(0.1		)	(1.3		)
Share of affiliates' pretax income	0.1			—			—			11.6			—			11.7
Segment profit (loss)	$	93.0		$	13.4		$	(0.2	)	$	14.7		$	3.1		124.0
Selling, general and administrative expense																42.9
Income taxes (includes $3.0 related to affiliates' earnings)																23.6
Net income																$	57.5

Net Gain on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets	$	21.1		$	—		$	—		$	—		$	—		$	21.1
Residual sharing income	0.1			—			—			0.3			—			0.4
Non-remarketing disposition gains (1)	2.6			0.8			—			—			—			3.4
Asset impairments	—			—			—			—			—			—
	$	23.8		$	0.8		$	—		$	0.3		$	—		$	24.9

Capital Expenditures
Portfolio investments and capital additions	$	102.8		$	18.7		$	7.3		$	—		$	0.2		$	129.0

Selected Balance Sheet Data at March 31, 2017
Investments in affiliated companies	$	10.5		$	1.2		$	—		$	385.2		$	—		$	396.9
Identifiable assets	$	4,862.5		$	1,169.7		$	306.9		$	600.0		$	157.8		$	7,096.9

__________

(1) Includes scrapping gains.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

Rail North America

Rail International

ASC

Portfolio Management
Other GATX Consolidated
Three Months Ended September 30, 2015
Profitability
Revenues
Lease revenue $ 234.9
$ 44.1
$ 1.1
$ 6.1
$ —
$ 286.2
Marine operating revenue —
—
61.7
15.9
—
77.6
Other revenue 20.3
1.7
—
0.4
—
22.4
Total Revenues
255.2
45.8
62.8
22.4
—
386.2
Expenses
Maintenance expense 66.7
9.9
7.3
—
—
83.9
Marine operating expense —
—
36.7
11.8
—
48.5
Depreciation expense 54.5
11.1
4.7
4.7
—
75.0
Operating lease expense 20.6
(0.1 ) 1.8
—
—
22.3
Other operating expense 6.8
1.1
—
0.4
—
8.3
Total Expenses 148.6
22.0
50.5
16.9
—
238.0
Other Income (Expense)
Net gain (loss) on asset dispositions 11.5
0.5
—
(16.5 ) —
(4.5 )
Interest (expense) income, net (27.0 ) (7.0 ) (1.4 ) (4.7 ) 2.4
(37.7 )
Other expense (1.2 ) (1.8 ) —
—
(0.1 ) (3.1 )
Share of affiliates' earnings (pretax) (1) 0.1
—
—
(1.6 ) —
(1.5 )
Segment Profit (Loss) $ 90.0
$ 15.5
$ 10.9
$ (17.3 ) $ 2.3
101.4
Selling, general and administrative expense 44.4
Income taxes (including $2.8 tax benefit related to affiliates' earnings) 17.5
Net Income $ 39.5

Net Gain (Loss) on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets $ 10.2
$ —
$ —
$ 7.2
$ —
$ 17.4
Residual sharing income 0.3
—
—
7.3
—
7.6
Non-remarketing disposition gains (2) 1.0
0.6
—
—
—
1.6
Asset impairment —
(0.1 ) —
(31.0 ) —
(31.1 )
$ 11.5
$ 0.5
$ —
$ (16.5 ) $ —
$ (4.5 )
Capital Expenditures
Portfolio investments and capital additions $ 97.8
$ 40.9
$ 0.8
$ 1.9
$ 0.7
$ 142.1

Selected Balance Sheet Data at December 31, 2015
Investments in affiliated companies $ 12.0
$ 1.4
$ —
$ 335.1
$ —
$ 348.5
Identifiable assets $ 4,629.1
$ 1,117.6
$ 284.7
$ 636.5
$ 226.3
$ 6,894.2

~~_____~~

~~(1) Includes a $19.0 million impairment loss in the Portfolio Management segment.~~

~~(2) Includes scrapping gains.~~

GATX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Rail North America

Rail International

ASC

Portfolio Management
Other GATX Consolidated
Nine Months Ended September 30, 2016
Profitability
Revenues
Lease revenue $ 703.0
$ 136.8
$ 3.1
$ 4.6
$ —
$ 847.5
Marine operating revenue —
—
102.3
37.4
—
139.7
Other revenue 63.5
4.8
—
0.7
—
69.0
Total Revenues 766.5
141.6
105.4
42.7
—
1,056.2
Expenses
Maintenance expense 196.2
36.1
12.3
—
—
244.6
Marine operating expense —
—
64.0
24.9
—
88.9
Depreciation expense 173.0
34.2
8.6
5.2
—
221.0
Operating lease expense 50.6
—
4.0
—
(0.1 ) 54.5
Other operating expense 25.0
3.8
—
4.9
—
33.7
Total Expenses 444.8
74.1
88.9
35.0
(0.1 ) 642.7
Other Income (Expense)
Net gain on asset dispositions 36.4
1.5
—
84.9
—
122.8
Interest (expense) income, net (81.2 ) (21.9 ) (3.3 ) (6.4 ) 2.9
(109.9 )
Other (expense) income (3.8 ) 2.0
(0.3 ) —
(0.8 ) (2.9 )
Share of affiliates' earnings (pretax) 0.3
(0.2 ) —
33.0
—
33.1
Segment Profit $ 273.4
$ 48.9
$ 12.9
$ 119.2
$ 2.2
456.6
Selling, general and administrative expense 127.8
Income taxes (including $4.0 related to affiliates' earnings) 102.6
Net Income $ 226.2

Net Gain on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets $ 32.5
$ —
$ —
$ 4.2
$ —
$ 36.7
Residual sharing income 0.7
—
—
82.5
—
83.2
Non-remarketing disposition gains (1) 3.2
1.5
—
—
—
4.7
Asset impairment —
—
—
(1.8 ) —
(1.8 )
$ 36.4
$ 1.5
$ —
$ 84.9
$ —
$ 122.8
Capital Expenditures
Portfolio investments and capital additions $ 366.7
$ 63.2
$ 9.1
$ —
$ 3.6
$ 442.6

~~_____~~



	Rail North America			Rail International			ASC			Portfolio Management			Other		GATX Consolidated
Three Months Ended March 31, 2016
Profitability
Revenues
Lease revenue	$	236.6		$	44.9		$	1.0		$	2.0		$	—	$	284.5
Marine operating revenue	—			—			4.1			16.2			—		20.3
Other revenue	27.8			1.6			—			0.2			—		29.6
Total Revenues	264.4			46.5			5.1			18.4			—		334.4
Expenses
Maintenance expense	65.8			12.5			0.2			—			—		78.5
Marine operating expense	—			—			2.9			9.4			—		12.3
Depreciation expense	56.5			11.1			—			1.7			—		69.3
Operating lease expense	16.8			—			—			—			—		16.8
Other operating expense	6.9			1.4			—			0.5			—		8.8
Total Expenses	146.0			25.0			3.1			11.6			—		185.7
Other Income (Expense)
Net gain on asset dispositions	18.6			0.7			—			3.9			—		23.2
Interest (expense) income, net	(27.2		)	(7.3		)	(1.1		)	(2.2		)	0.6		(37.2		)
Other (expense) income	(1.3		)	(2.2		)	—			—			0.2		(3.3		)
Share of affiliates' pretax income (loss)	0.2			(0.1		)	—			10.1			—		10.2
Segment profit	$	108.7		$	12.6		$	0.9		$	18.6		$	0.8	141.6
Selling, general and administrative expense															38.8
Income taxes (includes $2.7 related to affiliates' earnings)															33.5
Net income															$	69.3

Net Gain on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets	$	17.6		$	—		$	—		$	2.4		$	—	$	20.0
Residual sharing income	0.3			—			—			1.5			—		1.8
Non-remarketing disposition gains (1)	0.7			0.7			—			—			—		1.4
Asset impairments	—			—			—			—			—		—
	$	18.6		$	0.7		$	—		$	3.9		$	—	$	23.2

Capital Expenditures
Portfolio investments and capital additions	$	112.9		$	22.0		$	4.7		$	—		$	0.6	$	140.2

Selected Balance Sheet Data at December 31, 2016
Investments in affiliated companies	$	10.5		$	1.2		$	—		$	375.3		$	—	$	387.0
Identifiable assets	$	4,775.6		$	1,128.7		$	278.8		$	593.5		$	328.8	$	7,105.4

__________

(1) Includes scrapping gains.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)~~

Rail North America

Rail International

ASC

Portfolio Management
Other GATX Consolidated
Nine Months Ended September 30, 2015
Profitability
Revenues
Lease revenue $ 694.3
$ 128.6
$ 3.1
$ 19.1
$ —
$ 845.1
Marine operating revenue —
—
119.7
48.1
—
167.8
Other revenue 51.8
5.3
—
1.2
—
58.3
Total Revenues
746.1
133.9
122.8
68.4
—
1,071.2
Expenses
Maintenance expense 199.7
28.2
14.5
—
—
242.4
Marine operating expense —
—
77.7
37.0
—
114.7
Depreciation expense 160.1
32.6
9.6
15.6
—
217.9
Operating lease expense 62.0
—
3.5
—
(0.1 ) 65.4
Other operating expense 18.1
3.5
—
1.8
—
23.4
Total Expenses 439.9
64.3
105.3
54.4
(0.1 ) 663.8
Other Income (Expense)
Net gain (loss) on asset dispositions 54.4
6.5
—
(11.4 ) —
49.5
Interest expense, net (76.1 ) (16.5 ) (4.0 ) (15.5 ) (5.0 ) (117.1 )
Other expense (4.2 ) (3.0 ) (0.1 ) —
(1.4 ) (8.7 )
Share of affiliates' earnings (pretax) (1) 0.4
(0.2 ) —
21.8
—
22.0
Segment Profit (Loss) $ 280.7
$ 56.4
$ 13.4
$ 8.9
$ (6.3 ) 353.1
Selling, general and administrative expense 134.7
Income taxes (including $3.2 related to affiliates' earnings) 71.3
Net Income $ 147.1

Net Gain (Loss) on Asset Dispositions
Asset Remarketing Income:
Disposition gains on owned assets $ 51.1
$ —
$ —
$ 9.3
$ —
$ 60.4
Residual sharing income 0.7
—
—
10.3
—
11.0
Non-remarketing disposition gains (2) 2.6
6.7
—
—
—
9.3
Asset impairment —
(0.2 ) —
(31.0 ) —
(31.2 )
$ 54.4
$ 6.5
$ —
$ (11.4 ) $ —
$ 49.5
Capital Expenditures
Portfolio investments and capital additions $ 362.8
$ 110.1
$ 20.3
$ 2.2
$ 2.9
$ 498.3

~~_____~~

~~(1) Includes a $19.0 million impairment loss in the Portfolio Management segment.~~

~~(2) Includes scrapping gains.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail market. ~~We also invest in joint ventures that complement our existing business activities.~~ We report our financial results through four primary business segments: Rail North America, Rail International, American Steamship Company (“ASC”), and Portfolio Management.

The following discussion and analysis should be read in conjunction with the MD&A in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance with ~~GAAP~~US Generally Accepted Accounting Standards ("GAAP") and on certain other financial data that we prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see “Non-GAAP Financial Measures” at the end of this item.

Operating results for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2017 are not necessarily indicative of the results we may achieve for the entire year ending December 31, ~~2016.~~ 2017. In particular, ASC's fleet is inactive for a significant portion of the first quarter of each year due to winter conditions on the Great Lakes. In addition, asset remarketing income does not occur evenly throughout the year. For more information about our business, refer to ourAnnual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

DISCUSSION OF OPERATING RESULTS

The following table shows a summary of our reporting segments and consolidated financial results for the three ~~and nine~~ months ended ~~September 30~~March 31 (in millions, except per share data):


	Three Months Ended September 30						Nine Months Ended September 30					Three Months Ended March 31
	2016			2015			2016			2015		2017			2016
Segment Revenues
Rail North America	$	250.3		$	255.2		$	766.5		$	746.1	$	252.0		$	264.4
Rail International	48.2			45.8			141.6			133.9		44.4			46.5
ASC	52.8			62.8			105.4			122.8		7.4			5.1
Portfolio Management	11.6			22.4			42.7			68.4		12.3			18.4
	$	362.9		$	386.2		$	1,056.2		$	1,071.2	$	316.1		$	334.4
Segment Profit
Rail North America	$	87.9		$	90.0		$	273.4		$	280.7	$	93.0		$	108.7
Rail International	23.3			15.5			48.9			56.4		13.4			12.6
ASC	7.8			10.9			12.9			13.4		(0.2		)	0.9
Portfolio Management	64.1			(17.3		)	119.2			8.9		14.7			18.6
	183.1			99.1			454.4			359.4		120.9			140.8
Less:
Selling, general and administrative expense	48.1			44.4			127.8			134.7		42.9			38.8
Unallocated interest (income) expense, net	(1.4		)	(2.4		)	(2.9		)	5.0
Unallocated interest expense, net												(3.2		)	(0.6		)
Other, including eliminations	(0.3		)	0.1			0.7			1.3		0.1			(0.2		)
Income taxes ($(0.1) and $(2.8) QTR and $4.0 and $3.2 YTD related to affiliates' earnings)	41.0			17.5			102.6			71.3
Income taxes ($3.0 and $2.7 related to affiliates' earnings)												23.6			33.5
Net Income	$	95.7		$	39.5		$	226.2		$	147.1	$	57.5		$	69.3

Net income, excluding tax adjustments and other items (non-GAAP)	$	91.4		$	66.1		$	220.2		$	173.7	$	57.5		$	67.8
Diluted earnings per share (GAAP)	$	2.36		$	0.91		$	5.49		$	3.33	$	1.44		$	1.66
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)	$	2.25		$	1.52		$	5.35		$	3.94	$	1.44		$	1.62

Investment Volume	$	120.4		$	142.1		$	442.6		$	498.3	$	129.0		$	140.2

The following table shows our return on equity ("ROE") for the trailing twelve months ended ~~September 30:~~March 31:


	2016		2015		2017		2016
ROE (GAAP)	21.5	%	15.8	%	18.2	%	16.4	%
ROE, excluding tax adjustments and other items (non-GAAP)	21.3	%	17.9	%	16.8	%	18.6	%

Net income was ~~$226.2~~$57.5 million, or ~~$5.49~~$1.44 per diluted share, for the first ~~nine months of 2016~~quarter 2017 compared to ~~$147.1~~$69.3 million, or ~~$3.33~~$1.66 per diluted share, in ~~2015.~~2016. Results ~~for~~in the ~~nine months ended September 30,~~first quarter 2016 ~~and 2015~~ included a ~~net~~ gain of ~~$6.0~~approximately $1.5 million, ~~and a~~ net ~~loss~~ of ~~$26.6 million~~tax, associated with the planned exit of the majority of Portfolio Management's marine investments ~~as well as certain tax adjustments~~ (see "Non-GAAP Financial Measures" at the end of this item for further details). Excluding the impact of ~~these items,~~the gain, net income ~~increased $46.5~~decreased $10.3 million ~~for the nine months ended September 30, 2016~~ compared to the prior year, ~~driven largely by~~the result of lower lease revenue, lower marine operating results, and higher ~~residual sharing income,~~selling, general, and administrative expenses, partially offset by ~~lower disposition gains and lower affiliate earnings.~~

Net income was $95.7 million, or $2.36 per diluted share, for the third quarter of 2016 compared to $39.5 million, or $0.91 per diluted share, in 2015. Results for the third quarter 2016 and 2015 included a net gain of $4.3 million and a net loss of $26.6 million associated with the planned exit of the majority of Portfolio Management's marine investments, as well as certain tax adjustments (see "Non-GAAP Financial Measures" at the end of this item for further details). Excluding the impact of these items, net income increased $25.3 million for the third quarter 2016 compared to the prior year, driven by higher ~~residual sharing income, partially offset by lower~~ disposition gains.

Segment Operations

We allocate debt balances and related interest expense to each segment based upon predetermined debt to equity leverage ratios. ~~Due to changes in the composition of our segments, we have modified segment leverage levels for 2016.~~ The leverage levels ~~for 2016~~ are 5:1 for Rail North America, 3:1 for Rail International, 1.5:1 for ASC, and 1:~~1 for Portfolio Management. The leverage levels for 2015 were 5:1 for Rail North America, 2:1 for Rail International, 1.5:1 for ASC, and 3:~~1 for Portfolio Management. We believe that by using this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing ~~costs.~~costs.

RAIL NORTH AMERICA

Segment Summary

~~Rail~~Continued railcar oversupply, a large manufacturing backlog, and low fleet utilization within the North America ~~continues~~market all combined to ~~face challenging conditions in the railcar leasing market. The oversupply of railcars, weakness in railcar loadings, and relatively high railroad velocity continue to place~~maintain pressure on lease rates ~~renewal success rate, and new car placements.~~across the fleet in the first quarter. Rail North America's strategy ~~in this difficult environment is~~ to compete aggressively on lease rates and lease terms in this difficult environment, coupled with attractive long-term leases it entered into during stronger market conditions, have combined to ~~protect~~allow it to maintain high utilization ~~and to reduce the length~~ of ~~lease term as rates decline.~~its railcars.

At ~~September 30, 2016,~~March 31, 2017, Rail North America's wholly owned fleet, excluding boxcars, consisted of approximately ~~104,900~~103,700 cars. Fleet utilization, excluding boxcars, was ~~99.0%~~99.1% at the end of ~~the third quarter of 2016~~March 31, 2017, compared to ~~98.1%~~98.9% at the end of prior quarter, and ~~99.2%~~98.9% at ~~September 30, 2015.~~March 31, 2016. Fleet utilization for approximately ~~18,100~~17,400 boxcars was ~~94.7%~~92.9% at the end of ~~the third quarter of 2016,~~March 31, 2017 compared to ~~97.1%~~93.8% at the end of the prior quarter and ~~96.6%~~97.1% at ~~September 30, 2015.~~March 31, 2016.

During the ~~third~~first quarter of ~~2016,~~2017, the Lease Price Index ~~on renewals~~ (the ~~“LPI”~~"LPI", see definition below) decreased ~~21.4%~~32.6%, compared to a decrease of ~~25.4%~~36.2% in the prior quarter and an increase of ~~25.6%~~6.4% in the ~~third~~first quarter of ~~2015. The impact of high expiring lease rates in combination with declining renewal rates will further pressure the LPI for the remainder of 2016, based on scheduled lease expirations.~~2016. Lease terms on renewals for cars in the LPI averaged 29 months in the current quarter, compared to 3429 months in the prior quarter, and

60 34 months in ~~the third~~first quarter of ~~2015.~~2016. Additionally, the renewal success rate was ~~74.1%~~72.4% in the current quarter, compared to ~~62.6%~~64.7% in the prior quarter and ~~68.1%~~67.5% in the ~~third~~first quarter of ~~2015.~~2016. As the challenging lease rate environment persists, we will continue to experience pressure on the LPI. For the ~~third~~first quarter of ~~2016,~~2017, an average of approximately ~~103,500~~103,000 railcars, excluding boxcars, were on lease, compared to ~~103,800~~103,700 in the prior quarter and ~~105,900~~104,500 in the ~~third~~first quarter of ~~2015.~~2016. The decrease in railcars on lease in the current year is largely due to railcars that were sold or scrapped in an effort to optimize the composition of our fleet.

As of ~~September 30, 2016,~~March 31, 2017, leases for approximately ~~4,650~~12,500 railcars in our term lease fleet and approximately ~~2,620~~4,550 boxcars are scheduled to expire over the remainder of ~~2016.~~2017. These amounts exclude railcars on leases that ~~were~~are scheduled to expire later in ~~2016~~2017 but have already been renewed or assigned to a new lessee.

The following table shows Rail North America's segment results (in millions):


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2016			2015			2017			2016
Revenues
Lease revenue	$	233.0		$	234.9		$	703.0		$	694.3		$	227.2		$	236.6
Other revenue	17.3			20.3			63.5			51.8			24.8			27.8
Total Revenues	250.3			255.2			766.5			746.1			252.0			264.4

Expenses
Maintenance expense	62.8			66.7			196.2			199.7			67.7			65.8
Depreciation expense	58.4			54.5			173.0			160.1			59.0			56.5
Operating lease expense	17.2			20.6			50.6			62.0			15.0			16.8
Other operating expense	8.6			6.8			25.0			18.1			8.1			6.9
Total Expenses	147.0			148.6			444.8			439.9			149.8			146.0

Other Income (Expense)
Net gain on asset dispositions	13.1			11.5			36.4			54.4			23.8			18.6
Interest expense, net	(27.1		)	(27.0		)	(81.2		)	(76.1		)	(31.1		)	(27.2		)
Other expense	(1.4		)	(1.2		)	(3.8		)	(4.2		)	(2.0		)	(1.3		)
Share of affiliates' earnings (pretax)	—			0.1			0.3			0.4
Share of affiliate's pretax income													0.1			0.2
Segment Profit	$	87.9		$	90.0		$	273.4		$	280.7		$	93.0		$	108.7

Investment Volume	$	108.4		$	97.8		$	366.7		$	362.8		$	102.8		$	112.9

The following table shows the components of Rail North America's lease revenue (in millions):


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended March 31
	2016		2015		2016		2015		2017		2016
Railcars (excluding boxcars)	$	202.7	$	204.7	$	613.6	$	604.1
Railcars									$	198.8	$	206.1
Boxcars	20.4		20.4		59.9		62.1		18.7		20.8
Locomotives	9.9		9.8		29.5		28.1		9.7		9.7
	$	233.0	$	234.9	$	703.0	$	694.3	$	227.2	$	236.6

Lease Price Index

Our LPI is an internally-generated business indicator that measures lease rate pricing on renewals for our North American railcar fleet, excluding boxcars. We calculate the index using the weighted average lease rate for a group of railcar types that we believe best represents our overall North American fleet, excluding boxcars. The average renewal lease rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate, weighted by fleet composition. The average renewal lease term is reported in months and reflects the average renewal lease term of railcar types in the LPI, weighted by fleet composition.

Rail North America Fleet Data

The following table shows fleet activity for Rail North ~~America's~~America railcars, excluding ~~boxcars:~~boxcars for the quarter ended:


	September 30 2015		December 31 2015		March 31 2016		June 30 2016		September 30 2016		March 31 2016		June 30 2016		September 30 2016		December 31 2016		March 31 2017
Beginning balance	106,984		106,392		106,146		105,422		105,368		106,146		105,422		105,368		104,874		104,522
Cars added	620		1,306		811		857		764		811		857		764		1,087		795
Cars scrapped	(396	)	(441	)	(743	)	(567	)	(590	)	(743	)	(567	)	(590	)	(579	)	(806	)
Cars sold	(816	)	(1,111	)	(792	)	(344	)	(668	)	(792	)	(344	)	(668	)	(860	)	(839	)
Ending balance	106,392		106,146		105,422		105,368		104,874		105,422		105,368		104,874		104,522		103,672
Utilization rate at quarter end	99.2	%	99.1	%	98.9	%	98.1	%	99.0	%	98.9	%	98.1	%	99.0	%	98.9	%	99.1	%
Average active railcars	105,896		105,294		104,505		103,824		103,479		104,505		103,824		103,479		103,702		102,976

The following table shows fleet statistics for Rail North ~~America's~~America boxcars:


	September 30 2015		December 31 2015		March 31 2016		June 30 2016		September 30 2016		March 31 2016		June 30 2016		September 30 2016		December 31 2016		March 31 2017
Ending balance	18,567		18,429		18,338		18,209		18,089		18,338		18,209		18,089		17,706		17,415
Utilization	96.6	%	97.7	%	97.1	%	97.1	%	94.7	%	97.1	%	97.1	%	94.7	%	93.8	%	92.9	%

Comparison of the First ~~Nine~~Three Months of ~~2016~~2017 to the First ~~Nine~~Three Months of ~~2015~~2016

Segment Profit

Segment profit was ~~$273.4~~$93.0 million in the first quarter of 2017, compared to ~~$280.7~~$108.7 million in the prior year. The decrease was driven by lower ~~asset disposition gains~~lease revenue and higher ~~switching, freight and storage~~maintenance expense, partially offset by higher ~~lease revenue and fee income.~~asset disposition gains.

Revenues

Lease revenue ~~increased $8.7~~decreased $9.4 million in ~~2016,~~the first quarter of 2017, primarily due to ~~higher average~~lower lease rates and ~~higher utilization revenue, partially offset by the impact of~~ fewer cars on lease. Other revenue ~~increased $11.7~~decreased $3.0 million ~~primarily~~ due to ~~higher fees~~due to lower repair revenue and ~~repair revenue.~~lower lease termination fees. Fees in 2016 included approximately $10.0 million for a penalty imposed by GATX for allowing a customer to return ~~200~~ crude oil ~~cars~~railcars prior to the contractual end of an existing lease. The ~~majority~~current year included $7.8 million for the reimbursement of damage on returned cars. The expenses to repair these cars ~~were subsequently placed with other GATX customers. On occasion, customers~~will be recognized over the course of the year as incurred. In some cases, we may ~~request relief from their lease commitments, particularly when underlying commodity markets turn down. However, our lease agreements~~scrap the railcar rather than incur these expenses if is not economical to do ~~not include provisions for payment relief and any such arrangement would be negotiated and dependent on achieving an optimal economic outcome for GATX.~~so.

Expenses

Maintenance expense ~~decreased $3.5~~increased $1.9 million in ~~2016,~~the first quarter of 2017, primarily ~~as a result of lower repair~~due to an increase in transition costs ~~for the base fleet and lower railroad repairs,~~associated with cars assigned to new lessees, partially offset by lower expenses for repairs performed by the ~~impact of a higher number of boxcars undergoing maintenance.~~railroads on the boxcar fleet. Depreciation expense increased ~~$12.9~~$2.5 million, largely due to new ~~railcar investments, including the purchase of railcars previously on operating leases.~~investments. Operating lease expense decreased ~~$11.4~~$1.8 million, resulting from the purchase of railcars previously on operating ~~leases.~~leases in both years. Other operating expense increased ~~$6.9 million, primarily due to higher switching, storage, and freight costs as a result of more cars being moved to storage.~~

~~Other Income (Expense)~~

Net gain on asset dispositions decreased $18.0 million in 2016, as fewer railcars were sold in the current year. The timing of remarketing income is dependent on a number of factors and will vary from quarter to quarter. Net interest expense increased $5.1 million, due to a higher average debt balance.

~~Investment Volume~~

During 2016, investment volume was $366.7 million compared to $362.8 million in 2015. We acquired 2,361 newly built railcars and purchased 25 railcars in the secondary market in the first nine months of 2016, compared to 2,224 newly built railcars and 293 railcars purchased in the secondary market in 2015.

~~Comparison of the Third Quarter of 2016 to the Third Quarter of 2015~~

~~Segment Profit~~

Segment profit was $87.9 million in the third quarter of 2016, compared to $90.0 million in the prior year. Decreases in equalization revenue and lease revenue were substantially offset by lower maintenance expense.

~~Revenues~~

Lease revenue decreased $1.9 million in the third quarter of 2016, primarily due to the impact of fewer cars on lease, partially offset by higher average lease rates. Other revenue decreased $3.0 million, primarily due to lower equalization revenue and lower fees.

~~Expenses~~

Maintenance expense decreased $3.9 million in the third quarter of 2016, primarily due to lower railroad repairs. Depreciation expense increased $3.9 million, largely due to new railcar investments. Operating lease expense decreased $3.4 million, resulting from the purchase of railcars previously on operating leases. Other operating expense increased $1.8$1.2 million, primarily due to higher switching and freight costs ~~as a result~~from the movement of ~~more cars being moved to storage.~~assigned railcars.

Other Income (Expense)

Net gain on asset dispositions increased ~~$1.6~~$5.2 million in the ~~third~~first quarter of ~~2016, as fewer~~2017, primarily due to higher disposition gains on railcars ~~were~~ sold in the current year, ~~but for a larger gain.~~as well as higher scrapping gains resulting from more railcars scrapped and higher scrap proceeds. Net interest expense increased ~~$0.1~~$3.9 million, ~~as the impact of~~due to a higher average interest rates and higher average debt ~~balance~~balances. Other expense was ~~substantially offset by lower average interest rates.~~comparable to prior year.

~~North American Rail Regulatory Matters~~Investment Volume

~~On May 1, 2015,~~During the ~~Pipeline and Hazardous Materials Safety Administration~~first quarter of ~~the US Department of Transportation (“PHMSA”) issued final rules that established new design standards for tank cars~~2017, investment volume was $102.8 million compared to $112.9 million in ~~flammable liquids service (the “PHMSA Rules”). The PHMSA Rules became effective on July 7, 2015, and all~~2016. We acquired 778 newly built ~~tank cars for use~~railcars and purchased 22 railcars in ~~certain flammable liquids service were required~~the secondary market in the first quarter of 2017, compared to comply with the new design standards commencing on October 1, 2015. The PHMSA Rules also established standards for modifications to existing tank cars in certain flammable liquids service and deadlines for modifying or removing those cars from service. The US Congress subsequently adopted the Fixing America’s Surface Transportation Act (“FAST Act”), which changed certain requirements of the PHMSA Rules. Key changes included revisions to the design standards for modified cars, amendments to the modification deadlines, and expansion

of the applicability of the new tank car design standards to all cars used in flammable liquids service. Under the FAST Act, the deadlines for modifying or removing existing tank cars from flammables service range from January 2018 to May 2029, depending on the type of car and the type of commodity carried.

On May 1, 2015, Transport Canada (“TC”) issued final rules establishing new design standards for tank cars carrying flammable liquids in Canada (the “Canadian Rules”). The Canadian Rules became effective on May 20, 2015, and all689 newly built ~~tank cars for use~~railcars and 20 railcars purchased in ~~flammable liquids service were required to comply with~~ the ~~new standards effective October 1, 2015. The Canadian Rules also established standards for modifications to existing tank cars~~secondary market in ~~flammable liquids service and deadlines for modifying or removing cars from service ranging from May 2017 to May 2025, depending on~~ the ~~type~~first quarter of car and the type of commodity carried. On July 25, 2016, Transport Canada announced that certain older tank cars, commonly referred to as "DOT 111" tank cars, must be removed from crude oil service effective October 31, 2016.

We have a fleet of approximately 123,000 railcars in North America, including approximately 13,300 tank cars currently used to transport flammable liquids that are affected by the new rules, of which approximately 4,000 are moving crude oil and ethanol. Over 90% of our affected tank cars have a compliance deadline of 2023 or later, and fewer than 25 tank cars in our fleet will be affected by Transport Canada's October 31, 2016 deadline for removal from crude oil service. We expect to modify some of the most modern of our affected tank cars to comply with the new standards. However, for the majority of the affected cars, we currently anticipate retiring, redeploying, or selling them rather than performing retrofits.

RAIL INTERNATIONAL

Segment Summary

Rail International, ~~particularly~~composed primarily of GATX Rail Europe ("~~GATX Rail Europe" or "GRE"~~GRE"), ~~continues~~continued to ~~experience stable demand for~~maintain high utilization of its ~~railcars.~~railcars and produced solid operating results in 2017. Railcar utilization for GRE was 95.0% at the end of the ~~third~~first quarter of ~~2016~~2017, compared to ~~94.8%~~95.6% at the end of the prior quarter and ~~95.7%~~95.1% at ~~September 30, 2015.~~March 31, 2016.

GRE's results in ~~the third quarter of~~ 2016 ~~continued to be~~were impacted by higher wheelset costs, primarily due to a refurbishment program enacted to address ~~anti-corrosion~~corrosion paint issues on certain ~~existing~~ wheelsets. ~~GRE is addressing this issue with the wheelset supplier and the potential pursuit of warranty remedies.~~

The following table shows Rail International's segment results (in millions):


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2016			2015			2017			2016
Revenues
Lease revenue	$	46.6		$	44.1		$	136.8		$	128.6		$	43.3		$	44.9
Other revenue	1.6			1.7			4.8			5.3			1.1			1.6
Total Revenues	48.2			45.8			141.6			133.9			44.4			46.5

Expenses
Maintenance expense	10.7			9.9			36.1			28.2			10.0			12.5
Depreciation expense	11.6			11.1			34.2			32.6			11.2			11.1
Operating lease expense	—			(0.1		)	—			—
Other operating expense	1.2			1.1			3.8			3.5			1.2			1.4
Total Expenses	23.5			22.0			74.1			64.3			22.4			25.0

Other Income (Expense)
Net gain on asset dispositions	0.5			0.5			1.5			6.5			0.8			0.7
Interest expense, net	(7.3		)	(7.0		)	(21.9		)	(16.5		)	(7.9		)	(7.3		)
Other income (expense)	5.5			(1.8		)	2.0			(3.0		)
Share of affiliates' earnings (pretax)	(0.1		)	—			(0.2		)	(0.2		)
Other expense													(1.5		)	(2.2		)
Share of affiliate's pretax loss													—			(0.1		)
Segment Profit	$	23.3		$	15.5		$	48.9		$	56.4		$	13.4		$	12.6

Investment Volume	$	10.8		$	40.9		$	63.2		$	110.1		$	18.7		$	22.0

The following table shows fleet activity for GRE ~~railcars:~~railcars for the quarter ended:


	September 30 2015		December 31 2015		March 31 2016		June 30 2016		September 30 2016		March 31 2016		June 30 2016		September 30 2016		December 31 2016		March 31 2017
Beginning balance	22,483		22,745		22,923		22,859		23,088		22,923		22,859		23,088		22,966		23,122
Cars added	412		459		191		323		78		191		323		78		287		207
Cars scrapped or sold	(150	)	(281	)	(255	)	(94	)	(200	)	(255	)	(94	)	(200	)	(131	)	(198	)
Ending balance	22,745		22,923		22,859		23,088		22,966		22,859		23,088		22,966		23,122		23,131
Utilization rate at quarter end	95.7	%	95.8	%	95.1	%	94.8	%	95.0	%	95.1	%	94.8	%	95.0	%	95.6	%	95.0	%
Average active railcars	21,630		21,861		21,854		21,747		21,830		21,854		21,747		21,830		22,002		22,012

Comparison of the First ~~Nine~~Three Months of ~~2016~~2017 to the First ~~Nine~~Three Months of ~~2015~~2016

Foreign Currency

Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the foreign currencies in which it conducts business, primarily the euro. In the first ~~nine~~three months of ~~2016, the value of the~~2017, a weaker euro ~~has fluctuated; however, in aggregate, the changes did not have a meaningful impact on~~negatively impacted lease revenue by approximately $1.5 million and segment profit, excluding other income (expense), by approximately $0.7 million compared to the first ~~nine~~three months of ~~2015.~~2016.

Segment Profit

Segment profit was ~~$48.9~~$13.4 million in ~~2016,~~the first quarter of 2017, compared to ~~$56.4~~$12.6 million in the prior year. ~~Higher~~The increase was largely due to lower maintenance expense, primarily as a result of lower wheelset costs, and ~~higher net interest expense in the current year, and a gain on the sale of a workshop in the prior year, were~~lower legal defense costs, partially offset by ~~higher~~lower lease ~~revenue and the receipt of insurance proceeds in the current year for previously expensed legal defense costs.~~revenue.

Revenues

Lease revenue ~~increased $8.2~~decreased $1.6 million in ~~2016,~~the first quarter of 2017, primarily due to ~~more cars on lease at higher rates in~~ the ~~current year.~~effects of a weaker euro, as noted above. Other revenue decreased $0.5 million, primarily due to ~~the absence of interest income on a loan that was repaid in 2015.~~lower compensation for damaged railcars and lower repair revenue.

Expenses

Maintenance expense ~~increased $7.9~~decreased $2.5 million in ~~2016,~~the first quarter of 2017, primarily due to ~~the~~lower wheelset costs, ~~of wheelset replacements,~~ as ~~discussed above,~~well as fewer railcar revisions and ~~the higher cost of railcar revisions.~~lower refurbishment costs. Depreciation expense ~~increased $1.6 million, driven by the impact of new cars added to the fleet. Other~~and other operating expense ~~increased $0.3 million, largely due~~were comparable to ~~higher switching and freight costs.~~

prior year.

Other Income (Expense)

Net gain on asset dispositions ~~decreased $5.0 million in 2016, primarily due~~was comparable to ~~a gain on the sale of a workshop in the~~ prior ~~year and lower railcar scrapping gains as a result of fewer railcars scrapped in the current~~ year. Net interest expense increased ~~$5.4~~$0.6 million, largely due to ahigher average interest rates and higher average debt ~~balance,~~balances. Other expense decreased $0.7 million, largely due to lower legal costs, partially offset by ~~lower average interest rates. Other expense decreased $5.0 million due to insurance proceeds received~~the unfavorable impact of changes in ~~the current year for previously expensed legal defense costs.~~foreign exchange rates on non-functional currency items and derivatives.

Investment Volume

During ~~2016,~~the first quarter of 2017, investment volume was ~~$63.2~~$18.7 million compared to ~~$110.1~~$22.0 million ~~in 2015. We acquired 592 railcars in GRE and 20 railcars in Russia~~ in the first ~~nine months~~quarter of ~~2016~~2016. We acquired approximately 207 railcars in the first quarter of 2017 compared to ~~962 railcars at GRE, 50~~191 railcars in ~~Russia, and 369 railcars in India, in 2015.~~

~~Comparison~~the first quarter of ~~the Third Quarter of 2016 to the Third Quarter of 2015~~2016.

~~Foreign Currency~~

In the third quarter of 2016, the value of the euro has fluctuated; however, in aggregate, the changes did not have a meaningful impact on revenue and segment profit compared to the third quarter of 2015.

~~Segment Profit~~

Segment profit was $23.3 million in the third quarter of 2016, compared to $15.5 million in the prior year. The increase was primarily due to insurance proceeds received in the current year for previously expensed legal defense costs and higher lease revenue.

~~Revenues~~

~~Lease revenue increased $2.5 million in the third quarter of 2016, primarily due to more cars on lease in the current year.~~

~~Expenses~~

Maintenance expense increased $0.8 million in the third quarter of 2016, primarily due to the costs of wheelset replacements, as discussed above. Depreciation expense increased $0.5 million, driven by the impact of new cars added to the fleet.

~~Other Income (Expense)~~

Net interest expense increased $0.3 million, largely due to a higher average debt balance. Other expense decreased $7.3 million due to insurance proceeds received in the current year for previously expensed legal defense costs.

ASC

Segment Summary

ASC's fleet is largely inactive for the first three months of each year due to winter conditions on the Great Lakes. Freight volume in the first quarter is largely attributable to prior year commitments completed in January of each period. Our 2017 sailing season began in late March. Because of the mild winter weather, there was less ice coverage on the Great Lakes, which will benefit early season operations. During the first ~~nine months~~quarter of ~~2016,~~2017, we carried ~~18.2~~1.0 million net tons of freight compared to ~~19.5~~0.6 million net tons during the first ~~nine months~~quarter of 2015. Despite favorable operating conditions, lower demand across all commodities, as well as fewer higher-margin, long-haul shipments, negatively impacted operating results. Eleven vessels were in operation, compared to thirteen vessels in the prior year.2016.

The following table shows ASC’s segment results (in millions):


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2016			2015			2017			2016
Revenues
Lease revenue	$	1.0		$	1.1		$	3.1		$	3.1		$	1.0		$	1.0
Marine operating revenue	51.8			61.7			102.3			119.7			6.4			4.1
Total Revenues	52.8			62.8			105.4			122.8			7.4			5.1

Expenses
Maintenance expense	6.1			7.3			12.3			14.5			0.2			0.2
Marine operating expense	31.5			36.7			64.0			77.7			5.3			2.9
Depreciation expense	4.2			4.7			8.6			9.6			0.1			—
Operating lease expense	2.0			1.8			4.0			3.5			0.8			—
Total Expenses	43.8			50.5			88.9			105.3			6.4			3.1

Other Income (Expense)
Interest expense, net	(1.1		)	(1.4		)	(3.3		)	(4.0		)	(1.2		)	(1.1		)
Other expense	(0.1		)	—			(0.3		)	(0.1		)
Segment Profit	$	7.8		$	10.9		$	12.9		$	13.4
Segment (Loss) Profit													$	(0.2	)	$	0.9

Investment Volume	$	—		$	0.8		$	9.1		$	20.3		$	7.3		$	4.7
Total Net Tons Carried (000's)	8,680			10,232			18,193			19,463			1,034			625

Comparison of the First ~~Nine~~Three Months of ~~2016~~2017 to the First ~~Nine~~Three Months of ~~2015~~2016

Segment (Loss) Profit

Segment ~~profit~~loss was ~~$12.9~~$0.2 million in ~~2016,~~the first quarter of 2017, compared to ~~$13.4~~segment profit of $0.9 million in the prior year. The decrease was ~~driven by lower volume and~~primarily due to costs related to the return of a ~~reduction~~leased vessel in ~~higher-margin, long-haul shipments of various commodities, partially offset by the impact of fewer vessels deployed.~~2017.

Revenues

Marine operating revenue ~~decreased $17.4~~increased $2.3 million in ~~2016,~~the first quarter of 2017, primarily due to ~~lower volume as a result of decreased demand, as well as fewer long-haul shipments of various commodities.~~higher volume. In addition, ~~lower~~higher fuel revenue, which is offset in marine operating expense, contributed to the variance. The terms of ASC's contracts provide that a substantial portion of fuel costs is passed on to customers.

Expenses

Marine operating expense ~~decreased $13.7~~increased $2.4 million in ~~2016~~the first quarter of 2017, largely driven by higher fuel costs and ~~reflects~~ the impact of ~~lower fuel~~more operating days. Operating lease expense increased $0.8 million, attributable to costs ~~more efficient operations, and two fewer vessels deployed~~related to the return of a leased vessel in ~~the current year.~~

2017.

Investment Volume

ASC's investments in each period consisted of structural and mechanical upgrades to our vessels.

~~Comparison of the Third Quarter of 2016 to the Third Quarter of 2015~~

~~Segment Profit~~

Segment profit was $7.8 million in the third quarter of 2016, compared to $10.9 million in the prior year. The decrease was primarily driven by lower volume as a result of decreased demand for commodities, partially offset by lower operating costs as a result of two fewer vessels deployed in the current year.

~~Revenues~~

Marine operating revenue decreased $9.9 million in the third quarter of 2016, primarily due to reduced volume of various commodities. In addition, lower fuel revenue, which is offset in marine operating expense, contributed to the variance.

~~Expenses~~

~~Marine operating expense decreased $5.2 million in the third quarter of 2016 and reflects the impact of lower fuel costs, more efficient operations, and two fewer vessels deployed in the current year.~~

PORTFOLIO MANAGEMENT

Segment Summary

InA significant portion of Portfolio Management's segment profit is generated by the ~~third~~Rolls-Royce & Partners Finance companies (collectively the "RRPF affiliates"). The RRPF affiliates are a group of fifteen 50% owned domestic and foreign joint ventures with Rolls-Royce plc (or affiliates thereof, collectively “Rolls-Royce”), a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $11.2 million for the first quarter of ~~2015, GATX management~~2017, compared to $10.1 million in 2016.

As we have disclosed previously, we made the decision to exit the majority of our marine investments, ~~within the Portfolio Management segment,~~ including six chemical parcel tankers (the "Nordic Vessels"), most of ~~the~~our inland marine vessels, and our 50% interest in the Cardinal Marine joint venture. ~~As a result,~~To date, we ~~sold certain~~completed the sales of ~~our marine investments during 2015, including~~all six of the Nordic Vessels, our 50% interest in the Cardinal Marine joint venture, and ~~one~~the majority of ~~the Nordic Vessels. In the first nine months of 2016, we sold additional~~our inland marine ~~assets, including three of the Nordic Vessels. Proceeds from~~assets. No sales were completed in the first ~~nine months~~quarter of ~~2016 were $49.4~~2017; in the prior year quarter, we sold marine assets for net proceeds of $36.7 million, resulting in a net gain of ~~$4.2~~$2.4 million. We also recognized a gain of $1.0 million resulting from additional proceeds received from the sale of the Cardinal Marine joint venture and recorded additional impairment losses of $1.8 million for certain of the remaining Portfolio Management marine assets held for sale. We expect to sell the remaining targeted inland marine ~~investments~~assets in ~~2016.~~2017. Upon completion of these sales, Portfolio Management will continue to own and operate other marine investments, consisting primarily of five liquefied gas carrying vessels (the "Norgas Vessels").

The Rolls-Royce & Partners Finance companies (collectively the "RRPF affiliates") continue to perform well operationally, which reflects continued strong demand for aircraft spare engines. The RRPF affiliates contributed $32.0 million and $14.2 million to segment profit for the first nine months and third quarter of 2016, compared to $41.6 million and $17.6 million in 2015.

For the nine months ended September 30, 2016, we realized residual sharing income of $82.5 million. Proceeds of $49.1 million were recorded as a result of the settlement of a residual sharing agreement. This agreement was originally entered into in 2001 and related to a residual guarantee we provided on certain rail assets. Receipt of the settlement fee concludes our participation in this transaction. Additionally, a customer sold its interest in two leased nuclear power plant facilities and, as manager of the leases, we received a portion of the sales proceeds.

Portfolio Management's total asset base was ~~$606.2~~$600.0 million at ~~September 30, 2016,~~March 31, 2017, compared to ~~$636.5~~$593.5 million at December 31, ~~2015,~~2016, and ~~$737.7~~$605.8 million at ~~September 30, 2015.~~March 31, 2016. Assets held for sale were ~~$60.5~~$45.6 million at ~~September 30,~~March 31, 2017 and December 31, 2016, and ~~$103.4~~$69.6 million at ~~December~~March 31, ~~2015.~~2016.

The following table shows Portfolio ~~Management's~~Management’s segment results (in millions):


	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2016			2015			2016			2015			2017			2016
Revenues
Lease revenue	$	1.2		$	6.1		$	4.6		$	19.1		$	1.2		$	2.0
Marine operating revenue	10.3			15.9			37.4			48.1			10.6			16.2
Other revenue	0.1			0.4			0.7			1.2			0.5			0.2
Total Revenues	11.6			22.4			42.7			68.4			12.3			18.4

Expenses
Marine operating expense	7.7			11.8			24.9			37.0			7.6			9.4
Depreciation expense	1.7			4.7			5.2			15.6			1.7			1.7
Other operating expense	0.3			0.4			4.9			1.8			0.3			0.5
Total Expenses	9.7			16.9			35.0			54.4			9.6			11.6

Other Income (Expense)
Net gain (loss) on asset dispositions	49.1			(16.5		)	84.9			(11.4		)
Net gain on asset dispositions													0.3			3.9
Interest expense, net	(2.1		)	(4.7		)	(6.4		)	(15.5		)	(2.2		)	(2.2		)
Share of affiliates' earnings (pretax)	15.2			(1.6		)	33.0			21.8
Segment Profit (Loss)	$	64.1		$	(17.3	)	$	119.2		$	8.9

Investment Volume	$	—		$	1.9		$	—		$	2.2
Other income													2.3			—
Share of affiliates' pretax income													11.6			10.1
Segment Profit													$	14.7		$	18.6

The following table shows the approximate net book values of Portfolio Management's assets (in millions):


	September 30 2015		December 31 2015		March 31 2016		June 30 2016		September 30 2016		March 31 2016		June 30 2016		September 30 2016		December 31 2016		March 31 2017
Net book value of owned assets	$	387.4	$	301.4	$	261.8	$	268.1	$	241.2	$	261.8	$	268.1	$	241.2	$	218.2	$	214.8
Affiliate investments	350.3		335.1		344.0		348.9		365.0		344.0		348.9		365.0		375.3		385.2
Net book value of managed assets	70.4		114.5		123.3		57.7		55.9		123.3		57.7		55.9		51.8		50.0

Comparison of the First ~~Nine~~Three Months of ~~2016~~2017 to the First ~~Nine~~Three Months of ~~2015~~2016

Comparisons of reported results for the current year and the prior year are impacted by the ~~sale~~sales of marine ~~investments and residual sharing income.~~investments.

Segment Profit

Segment profit was ~~$119.2~~$14.7 million ~~in 2016,~~for the first quarter of 2017, compared to ~~$8.9~~$18.6 million for the prior year. ~~The current year~~Segment profit for 2016 included a net ~~pre-tax~~ gain of approximately ~~$3.4~~$2.4 million associated with the ~~planned exit~~sale of certain marine investments. Excluding this gain, results for the ~~majority~~Portfolio Management segment were $1.5 million lower for the first quarter of marine investments, compared to a net pre-tax loss of approximately $42.5 million in the prior year. Excluding the impacts of the net gain and loss, segment profit was $64.4 million higher than the prior year2017, primarily due to ~~higher~~lower residual sharing ~~income and higher net operating income~~gains from the ~~Norgas Vessels, partially~~managed portfolio and lower aggregate marine operating results, offset by ~~the absence of contributions~~higher earnings from ~~sold assets~~affiliates and ~~lower RRPF affiliate~~other income.

Revenues

Lease revenue decreased ~~$14.5~~$0.8 million in ~~2016,~~the first quarter of 2017, primarily due to the impact of the sales of leased assets in ~~both years.~~2016. Marine operating revenue decreased ~~$10.7~~$5.6 million, largely due to lower revenue from the Norgas vessels, as well as the absence of revenue from the Nordic vessels that were sold ~~marine investments and lower inland marine revenue,~~

~~partially offset by higher revenue from the Norgas Vessels. Other revenue decreased $0.5 million primarily due to lower interest income and lower investment fund distributions in the current year.~~during 2016.

Expenses

Marine operating expense decreased ~~$12.1~~$1.8 million in ~~2016,~~the first quarter of 2017, primarily due to the ~~impact from~~absence of the Nordic vessels that were sold ~~and~~in 2016, as well as lower ~~expense~~expenses for the Norgas vessels, partially offset by higher inland marine ~~vessels and the Norgas Vessels.~~expenses. Depreciation expense ~~decreased $10.4 million, driven by the sale of assets in 2015~~ and ~~2016. Other~~other operating expense ~~increased $3.1 million, largely due~~were comparable to ~~an additional loss reserve recorded in 2016 in connection with one investment.~~prior year.

Other Income (Expense)

Net gain on asset dispositions ~~increased $96.3~~decreased $3.6 million in ~~2016.~~the first quarter of 2017. The ~~current~~prior year included a ~~net~~ pre-tax gain of ~~approximately~~ $2.4 million associated with the planned exit of marine ~~investments compared to a net pre-tax loss of approximately $23.5 million in the prior year.~~investments. Excluding ~~these net gains and losses,~~this gain, net gain on asset dispositions ~~increased $70.4~~decreased $1.2 million, primarily due to ~~proceeds~~lower residual sharing fees from the ~~settlement of a residual sharing agreement and fees for our share of~~ managed portfolio ~~sales~~ in ~~2016. Net interest expense decreased $9.1 million as~~the first quarter of 2017.

Other income in 2017 reflects conditional proceeds that we received related to the sale of certain aircraft assets completed in a ~~result of a lower average debt balance and lower average interest rates.~~prior year.

Share of affiliates' ~~earnings~~pretax income increased ~~$11.2~~$1.5 million in ~~2016,~~the first quarter of 2017, primarily due to an impairment charge of $19.0 million associated with the planned sale of our interest in the Cardinal Marine affiliate in 2015. Excluding the prior year charge, the share of affiliates' earnings decreased $7.8 million, primarily due to lower net disposition gains and lowerhigher operating results at the RRPF affiliates, ~~partially offset by an~~as well as additional ~~gain~~proceeds received in ~~2016 related~~the first quarter of 2017 attributable to the ~~sale of the Cardinal Marine joint venture.~~

~~Comparison of the Third Quarter of 2016 to the Third Quarter of 2015~~

~~Segment Profit~~

~~Segment profit was $64.1 million for the third quarter of 2016, compared to a loss of $17.3 million for the~~ prior year. The current year included a net pre-tax gain of approximately $0.7 million associated with the sale of marine investments compared to a net pre-tax loss of approximately $42.5 million in the prior year. Excluding the impacts of the net gain and loss, segment profit was $38.2 million higher than prior year due to higher residual sharing gains, partially offset by lower aggregate net operating income from our marine operations and lower RRPF affiliate income.

~~Revenues~~

Lease revenue decreased $4.9 million in the third quarter of 2016, primarily due to the impact of the sales of leased assets in both years. Marine operating revenue decreased $5.6 million, largely due to the absence of revenue from the sold marine investments.

~~Expenses~~

Marine operating expense decreased $4.1 million in the third quarter of 2016, primarily due to the impact from the vessels that were sold and lower expense for the Norgas Vessels. Depreciation expense decreased $3.0 million, driven by the sale of assets in 2015 and 2016.

~~Other Income (Expense)~~

Net gain on asset dispositions increased $65.6 million in the third quarter of 2016. The current year included a net pre-tax loss of approximately $0.3 million associated with the sale of marine investments compared to a net pre-tax loss of approximately $23.5 million in the prior year. Excluding these items, net gain on asset dispositions increased $42.4 million primarily due to proceeds from the settlement of a residual sharing agreement in the current year. Net interest expense decreased $2.6 million as a result of a lower average debt balance and lower average interest rates.

~~Share of affiliates' earnings increased $16.8 million in the third quarter of 2016, primarily due to an impairment charge of $19.0 million associated with the planned sale of our interest in the~~ Cardinal Marine affiliate ~~in 2015. Excluding the prior year charge, the share of~~

affiliates' earnings decreased $2.2 million, primarily due to lower net disposition gains and lower operating results at the RRPF affiliates, partially offset by an additional gain in 2016 related to the sale of the Cardinal Marine joint venture.sale.

OTHER

Other ~~is comprised of~~comprises selling, general and administrative ~~expense~~expenses (“SG&A”), unallocated interest expense, and miscellaneous income and expense not directly associated with the reporting segments and eliminations.

The following table shows components of ~~Other~~other (in millions):


	Three Months Ended September 30						Nine Months Ended September 30					Three Months Ended March 31
	2016			2015			2016			2015		2017			2016
Selling, general and administrative expense	$	48.1		$	44.4		$	127.8		$	134.7	$	42.9		$	38.8
Unallocated interest (income) expense, net	(1.4		)	(2.4		)	(2.9		)	5.0		(3.2		)	(0.6		)
Other expense (income) (including eliminations)	(0.3		)	0.1			0.7			1.3
Other expense (income), including eliminations												0.1			(0.2		)

SG&A, Unallocated Interest and Other

SG&A ~~was $6.9~~increased $4.1 million ~~lower for~~in the first ~~nine months~~quarter of ~~2016 compared to the prior year,~~2017. The increase was primarily due to ~~lower pension,~~higher compensation and information technology expenses. The decrease in pension expense was driven by the change in accounting estimate discussed in "Note 2. Basis of Presentation" in Part I, Item 1 of this Form 10-Q. This was partially offset by a settlement accounting adjustment in the current year attributable to lump sum payments elected by eligible retirees as part of a voluntary early retirement program offered in 2015. The decrease in compensation expense was driven by fewer employees, resulting from the closure of the San Francisco office in the prior year and the impact of the early retirement program taking effect in the current year. IT costs were lower due to timing of purchases. SG&A was $3.7 million higher for the third quarter of 2016 compared to the prior year, largely due to the pension settlement accounting adjustment noted above.costs.

Unallocated interest expense (the difference between external interest expense and interest expense allocated to the reporting segments in accordance with assigned leverage targets) in any ~~period~~year is affected by our consolidated leverage position, the timing of debt issuances and investing activities, and intercompany allocations.

Other (income) expense, ~~and~~including eliminations, was ~~$0.6 million lower for the first nine months of 2016 and $0.4 million lower for the third quarter of 2016 compared~~comparable to ~~the~~ prior ~~year, both largely due to the impacts of foreign exchange on a foreign pension plan.~~year.

Consolidated Income Taxes

See "Note 8.7. Income ~~Taxes~~"Taxes" in Part I, Item 1 of this Form 10-Q.

CASH FLOW AND LIQUIDITY

We generate a significant amount of cash from operating activities and from our investment portfolio proceeds. We also access domestic and international capital markets by issuing unsecured or secured debt and commercial paper. We use these sources of cash, along with our available cash balances, to fulfill our debt, lease, and dividend obligations, to support our share repurchase program, and to fund portfolio investments and capital additions. We primarily use cash from operations and commercial paper issuances to fund daily operations.

The timing of asset dispositions and changes in working capital impacts cash flows from portfolio proceeds and operations. As a result, these cash flow components may vary materially from quarter to quarter and year to year. As of ~~September 30, 2016,~~March 31, 2017, we had an unrestricted cash balance of ~~$211.5~~$155.2 million.

The following table shows our principal sources and uses of cash for the ~~nine~~three months ended ~~September 30~~March 31, 2017 (in millions):


	2016			2015			2017			2016
Principal sources of cash
Net cash provided by operating activities	$	433.0		$	312.0		$	52.0		$	79.9
Portfolio proceeds	170.6			298.2			44.0			98.4
Other asset sales	18.6			16.2			7.6			9.4
Proceeds from sale-leasebacks	82.5			—
Proceeds from issuance of debt, commercial paper, and credit facilities	801.8			748.8			297.9			332.5
	$	1,506.5		$	1,375.2		$	401.5		$	520.2
Principal uses of cash
Portfolio investments and capital additions	$	(442.6	)	$	(498.3	)	$	(129.0	)	$	(140.2	)
Repayments of debt, commercial paper, and credit facilities	(801.2		)	(703.4		)	(300.9		)	(202.3		)
Purchases of leased-in assets	(116.5		)	(118.4		)	(79.3		)	(92.8		)
Payments on capital lease obligations	(3.4		)	(2.7		)	(1.4		)	(1.6		)
Stock repurchases	(95.1		)	(105.0		)	(25.0		)	(50.0		)
Dividends	(51.2		)	(51.9		)	(18.4		)	(18.1		)
	$	(1,510.0	)	$	(1,479.7	)	$	(554.0	)	$	(505.0	)

Net cash provided by operating activities of ~~$433.0~~$52.0 million ~~increased $121.0~~decreased $27.9 million compared to ~~2015.~~2016. The ~~increase~~decrease was ~~driven by higher fee income,~~ primarily ~~residual sharing income,~~due to lower lease revenue and lower contributions from our marine operations at Portfolio Management and higher operating lease payments, partially offset by lower interest payments and lower income tax payments. In addition, the net impact of changes in the balances of certain working capital items negatively impacted cash provided from operating activities.

Portfolio proceeds ~~for the first nine months~~primarily consist of loan and finance lease receipts, proceeds from sales of operating assets, proceeds from sales of securities, and capital distributions from affiliates. In 2016, portfolio proceeds included net proceeds of ~~$170.6~~$36.7 million ~~decreased by $127.6 million compared to 2015, primarily due to proceeds received in the prior year~~ from the ~~repayment~~sales of ~~a loan. In January 2015, AAE Cargo AG repaid its outstanding loan in~~marine investments as part of our decision to exit the ~~amount~~majority of ~~€67.5 million ($76.4 million). In addition, portfolio proceeds were lower as a result of fewer railcars sold.~~the marine assets at our Portfolio Management segment.

~~Rail North America completed a sale-leaseback financing for 574 railcars in the first nine months of 2016.~~

Proceeds from the issuance of debt for the first ~~nine~~three months of ~~2016~~2017 were ~~$801.8~~$297.9 million (net of ~~discount,~~ hedges and debt issuance costs). In ~~2016, $700~~2017, a $300-million, 10-year unsecured financing was completed. Additionally, we extended the maturity on $180 million of ~~unsecured debt was issued, including~~ a $350 million 10-year unsecured offering, a $200 million 5-year unsecured financing, and a $150 million 50-year unsecured offering. Additionally, $125 million was drawn and subsequently repaid on a new $250 million railcar facility.$200-million term loan by one year to May 2022. Debt repayments of ~~$801.2~~$300.9 million for the first ~~nine~~three months of ~~2016~~2017 were ~~$97.8~~$98.6 million higher than prior year. Each year ~~included~~consisted of scheduled ~~maturities and early retirements of debt. In 2015, repayments included $292.7 million in Europe.~~maturity payments.

Portfolio investments and capital additions primarily consist of purchases of operating assets, investments in affiliates, and capitalized asset improvements. ~~See individual segment discussions for further information on investment volume.~~Portfolio investments and capital additions of $129.0 million decreased $11.2 million compared to 2016, largely due to lower railcar purchases at Rail North America.

Purchases of leased-in assets of $79.3 million decreased $13.5 million compared to 2016. The decrease was a result of fewer leased railcars purchased at Rail North America, partially offset by the purchase of a previously leased vessel at ASC.

In the first quarter of 2016, our board of directors authorized a $300 million share repurchase program. During the three months ended March 31, 2017, we acquired 0.4 million shares of stock for $25.0 million, compared to 1.2 million shares for $50.0 million during the same period in 2016. As of ~~September 30,~~March 31, 2017, $155.0 million remained available under the repurchase authorization.

Contractual and Other Commercial Commitments

The following table shows our contractual commitments, including debt principal and related interest payments, lease payments, and purchase commitments at March 31, 2017 (in millions):



	Payments Due by Period
	Total		2017 (1)		2018		2019		2020		2021		Thereafter
Recourse debt	$	4,287.9	$	2.7	$	516.6	$	550.0	$	350.0	$	378.6	$	2,490.0
Interest on recourse debt (2)	1,767.6		97.7		150.1		133.1		118.5		102.6		1,165.6
Commercial paper and credit facilities	3.0		3.0		—		—		—		—		—
Capital lease obligations, including interest	14.5		1.4		1.6		11.5		—		—		—
Recourse operating leases	565.9		36.9		76.5		79.5		73.2		60.6		239.2
Purchase commitments (3)	1,075.5		402.6		350.2		322.7		—		—		—
	$	7,714.4	$	544.3	$	1,095.0	$	1,096.8	$	541.7	$	541.8	$	3,894.8

__________


(1)	For the remainder of the year.


(2)	For floating rate debt, future interest payments are based on the applicable interest rate as of March 31, 2017.


(3)	Primarily railcar purchase commitments. The amounts shown for all years are based on management's estimates of the timing, anticipated car types, and related costs of railcars to be purchased under its agreements.

In 2014, we entered into a long-term supply agreement with Trinity Rail Group, LLC ("Trinity"), a subsidiary of Trinity Industries that took effect in mid-2016. Under the terms of that agreement, we may order up to 8,950 newly built railcars over a four-year period from March, 2016 ~~2.2 million shares had been acquired~~through March, 2020. We may order either tank or freight cars; however, we expect that the majority of the order will be for ~~$95.0 million, excluding commissions paid.~~tank cars. Pursuant to the terms of the agreement, the parties conducted a review of the contract pricing in January 2017 as it no longer reflected market rates. Based on this review, the parties agreed to reduce contract pricing for future orders pursuant to the terms of the agreement.

Short-Term Borrowings

The following table provides additional information regarding our short-term borrowings for the ~~nine~~three months ended ~~September 30, 2016:~~March 31, 2017:

North
America (1)
Europe (2)
Balance as of September 30 (in millions) $ —
$ 5.1
Weighted average interest rate n/a
0.9 %
Euro/dollar exchange rate n/a
1.12

Average daily amount outstanding year to date (in millions) $ 0.7
$ 15.5
Weighted average interest rate 0.7 % 0.6 %
Average euro/dollar exchange rate n/a
1.12

Average daily amount outstanding during 3rd quarter (in millions) $ 0.7
$ 12.5
Weighted average interest rate 0.8 % 0.6 %
Average euro/dollar exchange rate n/a
1.12

Maximum daily amount outstanding year to date (in millions) $ 20.0
$ 31.2
Applicable euro/dollar exchange rate n/a
1.11



	Europe (1)
Balance as of March 31 (in millions)	$	3.0
Weighted average interest rate	1.0		%
Euro/Dollar exchange rate	1.07

Average daily amount outstanding during the quarter (in millions)	$	3.4
Weighted average interest rate	1.0		%
Average Euro/Dollar exchange rate	1.07

Maximum daily amount outstanding (in millions)	$	8.5
Euro/Dollar exchange rate	1.06

_________

(1) Short-term borrowings in ~~North America are comprised of commercial paper issued in the US.~~

~~(2) Short-term borrowings in~~ Europe are ~~comprised~~composed of borrowings under bank credit facilities.

~~Revolving~~ Credit ~~Facility~~Lines and Facilities

~~In the second quarter of 2016, we entered into~~We have a ~~new~~ $600 million, 5-year unsecured credit facility ~~with terms and conditions similar to~~in the ~~prior $575 million facility, which was terminated.~~US that matures in May 2021. As of ~~September 30, 2016,~~March 31, 2017, the full $600 million was available under the facility. Additionally, we have a $250 million 5-year secured railcar facility with a 3-year revolving period in the US that matures in February 2021. As of March 31, 2017, the full $250 million was available under this facility.

Restrictive Covenants

Our $600 million revolving credit facility contains various restrictive covenants, including requirements to maintain a fixed charge coverage ratio and an asset coverage test. Certain of our other financings have the same financial covenants as the facility.

The indentures for our public debt also contain various restrictive covenants, including ~~limitation~~limitations on liens provisions that limit the amount of additional secured indebtedness that we may incur. Additionally, certain exceptions to the covenants permit us to incur an unlimited amount of purchase money and nonrecourse indebtedness.

The loan agreements for certain of our European rail subsidiaries ~~("GATX Rail Europe" or "GRE")~~ also contain restrictive covenants, including leverage and cash flow covenants specific to those subsidiaries, restrictions on making loans, and limitations on the ability of those subsidiaries to repay loans or to distribute capital to certain related parties (including GATX, the US parent company). These covenants effectively limit GRE's ability to transfer funds to us.

We do not anticipate any covenant violations nor do we anticipate that any of these covenants will restrict our operations or our ability to obtain additional financing. At ~~September 30, 2016,~~March 31, 2017, we were in compliance with all covenants and conditions of all of our credit agreements.

Credit Ratings

The global capital market environment and outlook may affect our funding options and our financial performance. Our access to capital markets at competitive rates depends on our credit rating and ratings outlook, as determined by rating agencies. As of ~~September 30, 2016,~~March 31, 2017, our long-term unsecured debt was rated BBB by Standard & Poor's and Baa2 by Moody’s Investors Service and our short-term unsecured debt was rated A-2 by Standard & Poor's and P-2 by Moody’s Investors Service. Our rating outlook from both agencies was stable.

~~Contractual Commitments~~

~~The following table shows our contractual commitments, including debt principal amounts, lease payments, and portfolio investments at September 30, 2016 (in millions):~~

Payments Due by Period
Total 2016 (1) 2017 2018 2019 2020 Thereafter
Recourse debt $ 4,234.4
$ 1.4
$ 302.8
$ 520.2
$ 550.0
$ 350.0
$ 2,510.0
Commercial paper and credit facilities 5.1
5.1
—
—
—
—
—
Capital lease obligations 16.4
0.4
2.8
1.6
11.6
—
—
Operating leases 633.1
7.0
90.4
82.8
79.7
74.3
298.9
Portfolio investments (2) 1,322.1
148.5
506.7
344.8
322.1
—
—
$ 6,211.1
$ 162.4
$ 902.7
$ 949.4
$ 963.4
$ 424.3
$ 2,808.9

~~_________~~

~~(1) For remainder of the year.~~

(2) Primarily railcar purchase commitments. The amounts shown for all years are based on management's estimates of the timing, anticipated car types, and related costs of railcars to be purchased under its agreements. The amount shown for 2017 includes $14.8 million related to an option we exercised to purchase 556 railcars that are currently on lease and $24.0 million related to an option we exercised to purchase a vessel that is currently on lease.

In 2014, we entered into a long-term supply agreement with Trinity Rail Group, LLC, a subsidiary of Trinity Industries, Inc., to take effect in 2016. Under terms of the agreement, we will purchase up to 8,950 newly built railcars over a four-year period from March, 2016 through March, 2020. We may order either tank or freight cars; however, we expect that the majority of the order will be for tank cars. Except to the extent the parties otherwise agree, railcar pricing will be on an agreed upon or cost-plus basis subject to certain specified adjustments and surcharges throughout the term of the agreement. In addition, in January, 2017, either party may initiate a review of the cost-plus basis pricing if it is not reflective of then-current market prices. If the parties cannot agree on revised cost-plus pricing (or otherwise agree that no changes are necessary), either party may, at its election, deliver to the other party a notice of its intent to terminate, and in such case, the agreement will automatically terminate 30 days thereafter, unless the non-terminating party agrees to a specified revised margin as set forth in the agreement.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2017. Refer to our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, for a summary of our policies.

NON-GAAP FINANCIAL MEASURES

In addition to financial results reported in accordance with GAAP, we compute certain financial measures using non-GAAP components, as defined by the SEC. These measures are not in accordance with, or a substitute for, GAAP and our financial measures may be different from non-GAAP financial measures used by other companies. We have provided a reconciliation of our non-GAAP components to the most directly comparable GAAP components.

Reconciliation of Non-GAAP Components ~~used~~Used in the Computation of Certain Financial Measures

Balance Sheet Measures

We include total on- and off-balance sheet assets because a portion of our North American railcar fleet has been financed through sale-leasebacks that are accounted for as operating leases and are not recorded on the balance sheet. Similarly, ASC utilizes vessels that are accounted for as operating leases and are not recorded on the balance sheet. We include these leased-in assets in our calculation of total assets (as adjusted) because we believe it gives investors a more comprehensive representation of the magnitude of the assets we operate and that drive our financial performance. In addition, this calculation of total assets (as adjusted) provides consistency with other non-financial information we disclose about our fleet, including the number of railcars in the fleet, average number of cars on lease, and utilization. We also provide information regarding our leverage ratios, which are expressed as a ratio of debt (including off-balance sheet debt) to equity. The off-balance sheet debt amount in this calculation is the equivalent of the off-balance sheet asset amount. ~~Reporting~~We believe reporting this corresponding off-balance sheet debt amount provides investors and other users of our financial statements with a more comprehensive representation of our debt obligations, leverage, and capital structure.

The following table shows total balance sheet assets (in millions):


	September 30 2015		December 31 2015		March 31 2016		June 30 2016		September 30 2016		March 31 2016		June 30 2016		September 30 2016		December 31 2016		March 31 2017
Total assets (GAAP)	$	6,884.9	$	6,894.2	$	7,062.0	$	7,090.6	$	7,089.3	$	7,062.0	$	7,090.6	$	7,089.3	$	7,105.4	$	7,096.9
Off-balance sheet assets:
Rail North America	530.9		488.7		447.3		443.3		478.9		447.3		443.3		478.9		456.5		423.9
ASC	8.0		6.8		7.1		5.7		4.2		7.1		5.7		4.2		2.6		0.7
Total off-balance sheet assets	$	538.9	$	495.5	$	454.4	$	449.0	$	483.1	$	454.4	$	449.0	$	483.1	$	459.1	$	424.6

Total assets, as adjusted (non-GAAP)	$	7,423.8	$	7,389.7	$	7,516.4	$	7,539.6	$	7,572.4	$	7,516.4	$	7,539.6	$	7,572.4	$	7,564.5	$	7,521.5

Shareholders’ Equity	$	1,269.0	$	1,280.2	$	1,305.3	$	1,308.5	$	1,371.5	$	1,305.3	$	1,308.5	$	1,371.5	$	1,347.2	$	1,385.2

The following table shows the components of recourse leverage (in millions, except recourse leverage ratio):


	September 30 2015			December 31 2015			March 31 2016			June 30 2016			September 30 2016			March 31 2016			June 30 2016			September 30 2016			December 31 2016			March 31 2017
Debt, net of unrestricted cash:
Unrestricted cash	$	(116.0	)	$	(202.4	)	$	(216.2	)	$	(177.6	)	$	(211.5	)	$	(216.2	)	$	(177.6	)	$	(211.5	)	$	(307.5	)	$	(155.2	)
Commercial paper and bank credit facilities	18.1			7.4			17.9			28.5			5.1			17.9			28.5			5.1			3.8			3.0
Recourse debt	4,251.4			4,171.5			4,304.3			4,298.8			4,204.4			4,304.3			4,298.8			4,204.4			4,253.2			4,250.9
Nonrecourse debt	9.2			6.9			4.7			2.3			—			4.7			2.3			—			—			—
Capital lease obligations	3.6			18.4			16.9			16.6			15.1			16.9			16.6			15.1			14.9			13.5
Total debt, net of unrestricted cash (GAAP)	4,166.3			4,001.8			4,127.6			4,168.6			4,013.1			4,127.6			4,168.6			4,013.1			3,964.4			4,112.2
Off-balance sheet recourse debt	493.5			495.5			454.4			449.0			483.1			454.4			449.0			483.1			459.1			424.6
Off-balance sheet nonrecourse debt	45.4			—			—			—			—
Total debt, net of unrestricted cash, as adjusted (non-GAAP)	$	4,705.2		$	4,497.3		$	4,582.0		$	4,617.6		$	4,496.2		$	4,582.0		$	4,617.6		$	4,496.2		$	4,423.5		$	4,536.8
	��
Total recourse debt (1)	$	4,650.6		$	4,490.4		$	4,577.3		$	4,615.3		$	4,496.2		$	4,577.3		$	4,615.3		$	4,496.2		$	4,423.5		$	4,536.8
Shareholders' Equity	$	1,269.0		$	1,280.2		$	1,305.3		$	1,308.5		$	1,371.5		$	1,305.3		$	1,308.5		$	1,371.5		$	1,347.2		$	1,385.2
Recourse Leverage (2)	3.7			3.5			3.5			3.5			3.3			3.5			3.5			3.3			3.3			3.3

________


(1)	Includes on- and off-balance sheet recourse debt, capital lease obligations, and commercial paper and bank credit facilities, net of ~~restricted~~unrestricted cash.


(2)	Calculated as total recourse debt / shareholder's equity.

Net Income Measures

We exclude the effects of certain tax adjustments and other items for purposes of presenting net income, diluted earnings per share, and return on equity, because we believe these items are not attributable to our business operations. Management utilizes ~~this information~~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.

The following tables show our net income and diluted earnings per share, ~~and return on equity,~~ excluding tax adjustments and other items (in millions, except per share data):

Impact of Tax Adjustments and Other Items on Net Income:

Three Months Ended
September 30 Nine Months Ended
September 30
2016 2015 2016 2015
Net income (GAAP) $ 95.7
$ 39.5
$ 226.2
$ 147.1

Adjustments attributable to consolidated income, pretax:
Net loss (gain) on wholly owned Portfolio Management marine investments (1) 0.3
23.5
(2.4 ) 23.5
Total adjustments attributable to consolidated income, pretax $ 0.3
$ 23.5
$ (2.4 ) $ 23.5
Income taxes, thereon based on applicable effective tax rate $ (0.1 ) $ (8.8 ) $ 0.9
$ (8.8 )

Adjustments attributable to affiliates' earnings, net of taxes:
Net (gain) loss on Portfolio Management marine affiliate (1) (0.6 ) 11.9
(0.6 ) 11.9
Income tax rate change (2) (3.9 ) —
(3.9 ) —
Total adjustments attributable to affiliates' earnings, net of taxes $ (4.5 ) $ 11.9
$ (4.5 ) $ 11.9

Net income, excluding tax adjustments and other items (non-GAAP) $ 91.4
$ 66.1
$ 220.2
$ 173.7



	Three Months Ended March 31
	2017		2016
Net income (GAAP)	$	57.5	$	69.3

Adjustments attributable to consolidated income, pretax:
Net gain on wholly owned Portfolio Management marine investments (1)	—		(2.4		)
Total adjustments attributable to consolidated income, pretax	$	—	$	(2.4	)
Income taxes thereon, based on applicable effective tax rate	—		0.9
Net income, excluding tax adjustments and other items (non-GAAP)	$	57.5	$	67.8

~~________~~

Impact of Tax Adjustments and Other Items on Diluted Earnings per Share:



	Three Months Ended March 31
	2017		2016
Diluted earnings per share (GAAP)	$	1.44	$	1.66
Adjustments attributable to consolidated income, net of taxes:
Net gain on wholly owned Portfolio Management marine investments (1)	—		(0.04		)
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)	$	1.44	$	1.62

The following table shows our net income and return on equity, excluding tax adjustments and other items, for the trailing twelve months ended March 31 (in millions):



	2017			2016
Net income (GAAP)	$	245.3		$	212.4
Adjustments attributable to consolidated income, pretax:
Net loss on wholly owned Portfolio Management marine investments (1)	4.9			6.8
Railcar impairment at Rail North America (2)	29.8			—
Residual sharing settlement at Portfolio Management (3)	(49.1		)	—
Early retirement program (4)	—			9.0
Total adjustments attributable to consolidated income, pretax	$	(14.4	)	$	15.8
Income taxes thereon, based on applicable effective tax rate	$	6.3		$	(6.0	)

Other income tax adjustments attributable to consolidated income:
Foreign tax credit utilization (5)	(7.1		)	—
Income tax rate changes (6)	—			14.1
Total other income tax adjustments attributable to consolidated income	$	(7.1	)	$	14.1

Adjustments attributable to affiliates' earnings, net of taxes:
Net (gain) loss on Portfolio Management marine affiliate (1)	(0.6		)	11.9
Income tax rate changes (7)	(3.9		)	(7.7		)
Total adjustments attributable to affiliates' earnings, net of taxes	$	(4.5	)	$	4.2

Net income, excluding tax adjustments and other items (non-GAAP)	$	225.6		$	240.5
Return on Equity (GAAP)	18.2		%	16.4		%
Return on Equity, excluding tax adjustments and other items (non-GAAP)	16.8		%	18.6		%

_______


(1)	In 2015, we made the decision to exit the majority of our non-core, marine investments within our Portfolio Management segment. As a result, we recorded losses and gains associated with the impairments and sales of certain investments.


(2)	~~Deferred income tax adjustment due to an enacted statutory rate decrease in the United Kingdom in the third quarter of 2016.~~

~~Impact of Tax Adjustments and Other Items on Diluted Earnings per Share:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2016 2015 2016 2015
Diluted earnings per share (GAAP) $ 2.36
$ 0.91
$ 5.49
$ 3.33
Adjustments attributable to consolidated income, net of taxes:
Net loss (gain) on wholly owned Portfolio Management marine investments —
0.34
(0.04 ) 0.34
Adjustments attributable to affiliates' earnings, net of taxes:
Net (gain) loss on Portfolio Management marine affiliate (0.02 ) 0.27
(0.01 ) 0.27
Income tax rate change (0.10 ) —
(0.10 ) —
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)* $ 2.25
$ 1.52
$ 5.35
$ 3.94

~~________~~

~~(*) Sum of individual components may not be additive due to rounding.~~

~~Impact of Tax Adjustments and Other Items on Return on Equity:~~

Three Months Ended
September 30 Nine Months Ended
September 30
2016 2015 2016 2015
Return on Equity (GAAP) 7.1 % 3.1 % 17.1 % 11.4 %
Return on Equity, excluding tax adjustments and other items (non-GAAP) 6.8 % 5.2 % 16.6 % 13.4 %

~~The following table show our net income and return on equity, excluding tax adjustments and other items for the trailing twelve months ended September 30 (in millions):~~

2016 2015
Net income (GAAP) $ 284.4
$ 205.6
Adjustments attributable to consolidated income, pretax:
Net (gain) loss on wholly owned Portfolio Management marine investments (1) (16.7 ) 23.5
Early retirement program (2) 9.0
—
Total adjustments attributable to consolidated income, pretax $ (7.7 ) $ 23.5
Income taxes, thereon based on applicable effective tax rate $ 2.8
$ (8.8 )

Other income tax adjustments attributable to consolidated income:
Income tax rate changes (3) 14.1
—
Total other income tax adjustments attributable to consolidated income $ 14.1
$ —

Adjustments attributable to affiliates' earnings, net of taxes:
Net (gain) loss on Portfolio Management marine affiliate (1)(4) (0.6 ) 11.9
Income tax rate changes (5) (11.6 ) —
Total adjustments attributable to affiliates' earnings, net of taxes $ (12.2 ) $ 11.9

Net income, excluding tax adjustments and other items (non-GAAP) $ 281.4
$ 232.2

~~________~~

~~(1)~~

In ~~2015, we made the decision to exit the majority of our non-core, marine investments within our Portfolio Management segment. As a result,~~2016, we recorded impairment losses related specifically to certain railcars in flammable service that we believe have been permanently and ~~gains associated with the impairments and sales of certain investments.~~negatively impacted by regulatory changes.


~~(2)~~(3)	Proceeds were recorded as a result of the settlement of a residual sharing agreement related to a residual guarantee we provided on certain rail assets.


(4)	Expenses associated with an early retirement program offered to certain eligible employees.


~~(3)~~(5)	Benefits attributable to the utilization of foreign tax credit carryforwards.


(6)	Deferred income tax ~~adjustment~~adjustments attributable to an increase of our effective state income tax ~~rate.~~


~~(4)~~	~~Pre-tax loss of $19.0 million, net of a tax benefit of $7.1 million, based on the affiliate's effective tax~~ rate in 2015.


~~(5)~~(7)	Deferred income tax adjustments due to enacted statutory rate decreases in the United ~~Kingdom.~~Kingdom for each of 2017 and 2016.

2016 2015
Return on Equity (GAAP) 21.5 % 15.8 %
Return on Equity, excluding tax adjustments and other items (non-GAAP) 21.3 % 17.9 %

Item 3.Quantitative and Qualitative Disclosures ~~about~~About Market Risk

Since December 31, ~~2015,~~2016, there have been no material changes in our interest rate and foreign currency exposures or types of derivative instruments used to hedge these exposures. For a discussion of our exposure to market risk, refer to "Item 7A. Quantitative and Qualitative Disclosure about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Item 4. Controls and Procedures

~~We have~~Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”))~~, with the participation of our Chief Executive Officer and Chief Financial Officer.~~. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective.

No change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended ~~September 30, 2016,~~March 31, 2017, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Information concerning litigation and other contingencies is described in "Note 12. 11. Legal Proceedings and Other ~~Contingencies~~"Contingencies" in Part I, Item 1 of this Form 10-Q and is incorporated herein by reference.

Item 1A. Risk Factors

Since December 31, ~~2015,~~2016, there have been no material changes in our risk factors. For a discussion of our risk factors, refer to "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(c) On January 29, 2016, our board of directors authorized a $300 million share repurchase program. As of March 31, 2017, $155.0 million remained available under the repurchase authorization.

The following is a summary of common stock repurchases completed by month ~~for~~during the first quarter ~~ended September 30, 2016. As~~ of ~~September 30, 2016, $205.0 million remains available under the repurchase authorization.~~2017:

Issuer Purchases of Equity Securities
(a) (b) (c) (d)
Total Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 2016 178,000
$44.17 178,000
$222.1 million
August 2016 385,731
$44.43 385,731
$205.0 million
Total 563,731
$44.35 563,731

~~_________~~

~~(1) Does not include commissions paid to repurchase shares.~~



Issuer Purchases of Equity Securities
	(a)	(b)		(c)	(d)
Total	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
February 1, 2017 - February 28, 2017	78,622	$	58.85	78,622	$	175.4
March 1, 2017 - March 31, 2017	347,041	$	58.71	347,041	$	155.0
Total	425,663	$	58.73	425,663

Item 6. Exhibits

Exhibits:

Reference is made to the exhibit index which is included herewith and is incorporated by reference hereto.

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.

GATX CORPORATION

(Registrant)

/s/ Robert C. Lyons

Robert C. Lyons

Executive Vice President and Chief Financial Officer

(Duly Authorized Officer)

Date: ~~October 31, 2016~~May 5, 2017

EXHIBIT INDEX



Exhibit Number		Exhibit Description

		Filed with this Report:

31A.		Certification Pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a) (CEO Certification).

31B.		Certification Pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a) (CFO Certification).

32.		Certification Pursuant to 18 U.S.C. Section 1350 (CEO and CFO Certification).

101.		The following materials from GATX Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2016,~~March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at ~~September 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, (ii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2017 and 2016, ~~and 2015,~~ (iii) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2017 and 2016, ~~and 2015,~~ and (iv) Notes to the Consolidated Financial Statements.



	September 30 2016		December 31 2015
Operating assets, net of accumulated depreciation (1)	$	—	$	83.2
Nonrecourse debt	—		6.9



	September 30, 2016				December 31, 2015
	Net Carrying Amount		Maximum Exposure to Loss		Net Carrying Amount		Maximum Exposure to Loss
Investments in affiliates	$	176.4	$	176.4	$	161.2	$	161.2
Other investment	0.1		0.1		0.2		0.2
Total	$	176.5	$	176.5	$	161.4	$	161.4



	North America (1)			Europe (2)
Balance as of September 30 (in millions)	$	—		$	5.1
Weighted average interest rate	n/a			0.9		%
Euro/dollar exchange rate	n/a			1.12

Average daily amount outstanding year to date (in millions)	$	0.7		$	15.5
Weighted average interest rate	0.7		%	0.6		%
Average euro/dollar exchange rate	n/a			1.12

Average daily amount outstanding during 3rd quarter (in millions)	$	0.7		$	12.5
Weighted average interest rate	0.8		%	0.6		%
Average euro/dollar exchange rate	n/a			1.12

Maximum daily amount outstanding year to date (in millions)	$	20.0		$	31.2
Applicable euro/dollar exchange rate	n/a			1.11



	Payments Due by Period
	Total		2016 (1)		2017		2018		2019		2020		Thereafter
Recourse debt	$	4,234.4	$	1.4	$	302.8	$	520.2	$	550.0	$	350.0	$	2,510.0
Commercial paper and credit facilities	5.1		5.1		—		—		—		—		—
Capital lease obligations	16.4		0.4		2.8		1.6		11.6		—		—
Operating leases	633.1		7.0		90.4		82.8		79.7		74.3		298.9
Portfolio investments (2)	1,322.1		148.5		506.7		344.8		322.1		—		—
	$	6,211.1	$	162.4	$	902.7	$	949.4	$	963.4	$	424.3	$	2,808.9