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GATX (GATX)

Participants
Jennifer McManus IR
Brian Kenney President and CEO
Tom Ellman EVP and President of Rail North America
Bob Lyons EVP and CFO
Allison Poliniak-Cusic Wells Fargo
Justin Long Stephens
Matt Elkott Cowen
Matthew Brooklier Buckingham Research
Mike Baudendistel Stifel
Justin Bergner Gabelli & Company
Willard Milby Seaport Global
Steven O'Hara Sidoti and Company
Bascome Majors Susquehanna
DeForest Hinman Walthausen & Company
Call transcript
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Operator

Good day, and welcome to the GATX Third Quarter Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jennifer McManus. Please go ahead.

Jennifer McManus

Good morning, everyone, and thank you for joining GATX’s 2018 third quarter earnings call. Brian President and and by Ellman, and today Vice Executive CFO. joined Kenney, CEO; President Tom I’m Please note statements. that during our some of the today consist information will of forward-looking discussion you’ll hear from Actual trends results or could materially or forecasts. those differ statements

income gain Earlier the million third statement per income to $XX diluted $X.XX $XX For million XXXX factors GATX’s per share. third events to reported GATX million per or no reflect compares of discussed share. This $XXX.X XXXX. quarter diluted we This or update or circumstances. risk diluted $X.XX income XXXX obligation quarter are more XXXX of subsequent share. for XX for million our associated compares railcar of exit of negative same refer to approximately in the period XX-K of $X.XX or in million net today, revise in net to Germany. net XXXX please Year-to-date maintenance share, assumes or information, net $XXX.X GATX to results reported Form $X.X to any diluted or or earnings forward-looking diluted Management’s majority per of XXXX net These the a of per impact a results of associated page a included $X.XX a $X.X million planned investments. marine the Portfolio per closure detailed attributed diluted $X.XX include share share, on facility year-to-date year-to-date items or XXXX. with release. with $X.XX cost of

briefly will address I each Now, segment.

lessors loads rate fleet XX Index our Rail negative rail quarter. XX.X%, industry average metrics an America’s to in renewal pressure during Price velocity. a change of rate with continues. months. relative was improving increased the for environment rail utilization renewal was of GATX's North are Revenue Lease and XX.X% XX.X% renewal term The success North Rail America. of reflective third favorable including and Certain road, to XXXX, results continued quarter Our car are operating

However, most did lease in see rates across we in improvement types absolute car fleets. type quarter-to-quarter sequential our

release, maintenance than improving mandatory has anticipated, on earnings indicated customers railcar especially this environment their in in XXXX the utilizing as qualifications, and cars. lower holding resulted As are tank in to we originally for have expense

this a result will in in expect While only maintenance as has we in XXXX, deferred XXXX work benefit is not this this expense higher been eliminated.

continue orders with diverse customer to our supply We base. place cars successfully committed from a

deliveries is have over We already railcars meaning with have supply XXXX. from placed placed July our been in XXXX scheduled August agreement delivery our scheduled available X,XXX Trinity XX, through and customers earliest

XXX our ARI from placed railcars XXXX. delivery the agreement first in of XXXX have our supply scheduled quarter and under we agreement Additionally, earliest this available is

which remains active, remarketing quarter, income the expectations. slightly million, full market the secondary year The year total for is North to during approximately $XX.X income our $X.X remarketing above bringing America’s was Rail million

While in market petroleum Rail across we to quarter market, be expect leasing always to improvement modest Within railcar are in increasing utilization during due and Europe investments is demand quarter, to in $XX International’s a steady markets. across with XX.X%. over fleet, volume to this India. we fourth the size. the active European million of approximately was the International, gradual GATX with freight the Rail third chemical, seeing any experience in third Rail the investment continues activity the

by Rolls-Royce of year. India primarily Portfolio driven track Management’s the are performance fleet strong & in Partners Affiliates. Finance results count were on of by our We end the still double to the

second in Year-to-date earned by in segment experienced than is higher profit XX Our to earlier residual performance offset Portfolio activity perform XXXX, in RPS to due operating ore fee and $X.X remarketing levels increased results delays in were season. water iron million American Company vessels driven quarter Steamship primarily down currently XXXX. more from demand the ASC both Management for Higher continues the of the and well has XXXX. with the deployed. initial sharing

$XX quarter. XXX,XXX the repurchase end for available aggregate approximately $XX $XXX the repurchased nearly of shares GATX for authorization. approximately At Year-to-date, the million million over we Finally, quarter, million. remains the during XXX,XXX $XXX under have shares million repurchased

those were So, the remarks. prepared

hand I’ll to can operator the and for up So, we over Q&A. open it it

Operator

Thank you. ahead. Wells Poliniak Allison question [Operator Please The will Instructions] first come go Fargo. with from

Allison Poliniak-Cusic

Hi, guys. Good morning.

expense, get On way any for pushed you to the XXXX what there expect is us? into quantify to XXXX help maintenance

Brian Kenney

to at as of this end cars not many Allison, before year it's Hi, point, the as trying the in get Brian. can. No we’re we

quarter. into obviously the expect both fourth But we’ll of the the year it materialized. at you much end an which So, than has tank is reduction work, not and qualification update really the lower we yet have for coming it it’s

they reluctant send Jennifer cars. to are said, in As really their

looking untenable roads are at now. are a where car slowing rail trucking velocity is right We increasing the in market loadings are and

So, customers their maintenance are really into reluctant give busy an network. to cars increasingly up

of that’s to in where a getting in but to happen, that not lot can get the them going tell sit we’re not not anticipate of quarter, fourth we all today time. to they’re due, we get just going backlog in, we this in, are So, going

happens some are facilities. to and them be by flood you the GATX, received what load commercial who with our with teams our if when unable they and and So, see teams embargoed customers cars point to legal them will at that’s get into eventually in, not work and these maintenance

not the of you to trying we many but tell due. we as before is can end get it’s we’re far now as XXXX, So, what to as happen right can going as

XXXX. expense So, that’s why we an maintenance can already in see increased coming

Allison Poliniak-Cusic

average perspective pretty lease of you still where you relative then give is the some improving across obviously rate are in I it’s bit rates, And to more say lease we maybe portfolio; little us Could terms probably low. talked term difficult? a your your Understood. sequentially know

Brian Kenney

depend in that quarter-over-quarter minute, for it car market you about always I get have a fleet trying on does look have internally But diversified with declined generic lease a quarter. XX% the increase that's because rate sequentially really few they lease we ignoring more, points really absolute pretty freight Yes, such too for it for to sizable or if XX%, absolute probably increased on in a small that, just I the quarter. a But tank and admonished over rates percentage to get tank type. average -- decrease cubes due such think and for for cars seriously having

in So we the strength significant are seeing market.

Allison Poliniak-Cusic

thank Great, you.

Operator

go The Thank will question. you Long Instructions] from come question for [Operator Please Stephens. with your Justin ahead. next

Justin Long

morning. Thanks and good

with your America expectations. in both you've the quarter this remarketing Thinking in I seen question it commentary to So wanted start like North income guidance. a expense outperform on seems maintenance about the and

the be was that range didn't are business So change. that that weaker little expected full trends us year of areas upside? you surprised might through help the guidance you offsetting Can some where than seeing the a and of just I think that

Tom Ellman

Yes, address so I'll Tom, that. this is and

you continue be the to year full range. mentioned, in we $X.XX $X.XX expect So earnings to as to

fourth North see key LTI. into be we continue Some challenging the we said, are the continue rates case. expect an still are most a we in It's from Rail negative even as to rates that absolute that America, below lease we important also the for expiring rates they drag note lease evidenced to to as increasing decline catching maintenance quarter service the income about. from from of some and remarketing in talked America The costs that a in more is the incremental ASC, North quarter-over-quarter maintenance have of the drivers expense putting be vessel mentioned. that just the and though Rail environment additional historically QX to will At lower operating up Brian will the Brian part by deferred

we and continue impact quarter to incremental of had the we quarter So see going drag renewals renewals negative that see on forward. drag on the a third we full

of the are those So some reasons.

Brian Kenney

know -- really in by to outperformance it's maintenance XXXX. I know thing there, maintenance, add to like of are I those The of really this meant because what from get it's due. in underperformance We'd our I only year they want but cars perspective you

So actually into It's we're a subsequent them not good deferring not not fact get just we we're thing. It's the in. year. maintenance a celebrating couldn't

Justin Long

question dollar different really to do That a of you that's know the And the do amount -- maybe way, you the earlier have number on in makes all know total deferred XXXX. or dollar maintenance actually sense, amount But be I ask that in or that total the you're deferred? was when was has materialized to what this tough deferred it's will been predict helpful. -- expense year-to-date.

Tom Ellman

it's cars because not is yet the too year. the now the know in just in maintenance the to further those more late network, the industry's than is busy. because coming cars to don't in coming quarter year fourth turn getting mid-November earlier were increasingly are problem they start Yes, network in maintenance our now But in they the

tank those into spillover able possible that I cars tank with cars be to in you given the are do reasons. you as to and for won’t XXX that but year them. you multiple per and the they a that tank a see qualifications work well be yet. $XX,XXX It have time to it other network could indication may on that maintenance attracts by other on over event. tell car to due that the you the for qual just soon generally in next as So customers give get to XXXX, an going load are how car maintenance may the that up times can't much work that goes in We be due year And all due, otherwise that

exact the yet. sizable number, amount a don't know just it's So I

Justin Long

Okay. and as UP’s leasing thoughts based the your maybe railcar becoming I broad have the operational September. secondly, rollout operating that the any more broader this of the then change model. U.S. And across announcement announcement in about and could ask Obviously to impact you Do wanted well. market business how it's just around PSR with

Tom Ellman

some have railroads So and past PSR implemented cars. in speaking other generally the shut they have

know manner that -- to to will which said that, their exact do look to this the So it's fleet. reasonable will we of UP assume implement the size PSR. will don't reduce UP the Having in look

railcar make it's predictions regarding their to So any the accurate changes needs. to difficult

achieve As with spent risk them effort balance. our all attractive optimizing customers, with exposure lot to an return we of fleet a

returned. profile. that boxcars, with a PSR example of a has five when historically have do if relationship The been they of majority implementation. a expire, is start and expiring even end useful our and years. A near life comfortable the another with our for exposed vast is UP boxcars We car-type most And which are strong great them have even to lease long the we're of terms their exploration don't

that PSR compete to have how with most concerned with implement is the market. item last will against is lessors general getting relates returned the GATX it biggest to UP, our that would we other compete in And that As railcars theme and is we that additional generally I having knowing railroads the think might how risk exactly say it about thing we're cars to and those idle cars in market.

Justin Long

I'll appreciate that's I it Okay, leave at time. helpful. that. the

Operator

Thank Please you come the from Matt question. next with The Elkott question will for ahead. Cowen. go

Matt Elkott

renewals Good we few that over to -- you. that improvements seen last Tom, through lease spot into if the XXXX? to we turn be rates mentioned Can you continues XXXX. a into and and a quarters despite drag. can spot rate lease morning. continue If tailwind this Thank sequential XXXX drag we've the expect in

Tom Ellman

Yes, to so earnings in thing continuing ahead but point to update difficult turn it's in the at about regard will moving that extremely January get constantly And asking will LTI this when XXXX. It's we something will you're too positive. coming call. far be not rate with online. on a answer, that at additional to basically see That renewals pressure difficult difficult the because it's that, target of that's an you

Matt Elkott

still it. future? But the sustainability the basis a rates believe lease the for Got you spot of foreseeable in on

Tom Ellman

to quarters positive as of row particularly in And would it relates mean, that rates. a I we incremental several continue. tank now expect cars, seen Yes, to lease we've

Matt Elkott

in would many and you you of you of add have newly Got supply. And plan you you it. or fleet turn thoughts built to DOT-XXX tell speaking are adding also cars us DOT-XXXJs -- more? tightness ones. the consider love able I'd hear if if in to you can tank And if on guys whether those your how retrofitted the would your add to cars, And

Tom Ellman

the I'll Yes, way and end if that the beginning. of start of I my missed know. at towards And so I'll me any it work let

the to cars. cars DOT-XXX I'll Jennifer, adding that are we number. built And have newly fleet, So

Jennifer McManus

We fleet. about our right now have in X,XXX

Tom Ellman

that of is car. not intend and we any retrofit, and not do As cars. it modify we've done to this intend know of do CPC-XXXX as to do just retrofit before, legacy said continue -- couple gallon the dollars to we to is XX,XXX What is a retrofit we thousand jacketed which the car, inexpensive we'll very have you relates

as were what's a on orders. a The net came far car there net XX,XXX As out going morning, on in information order tank basis, just this market. the and

portion are crude market. tank that a of expect to Canadian that the continue. expect And significant cars We those for we'd

how how As that we at as far will market. we'll invest and look

move of short will said to type, it's get it will which Just past invest pipelines in the The investments regarding oversupplied to predict, a not in overexposed length that take but we probably not being way of that enough is this, we've in come careful commodity. the overexposed that and a on measured like in will get car ultimately leasing scale we way ultimately the be will efficient most area. will railcar difficult because time it's to as to

Matt Elkott

you about a ethanol DOT-XXXs but way temptation very Got guys are there quick be to just has helpful, fleet believe opportunities in to DOT-XXXs, XXXX. to the one the ethanol in in, because conversion with resisting understand I it, on Tom. the replaced I big that's go I have follow-up,

certain crude Canadian of somewhat if investing by that's least can modify there case, rail ethanol? will that to even be conversion, by is a DOT-XXX of DOT-XXXs at the variety the would you of the rail, crude Are you stopgap if And in? be comes until pipe So more type online. measure a

Tom Ellman

on I configured do have want the some this, it's way. car the too not serves and ethanol. into the weeds ethanol that continue to The for same crude in the car particular DOT-XXXs Yes we don't -- and Canadian and that investment much serves get we’ll to but

So particular work, attractive doesn't us. non-jacketed to cars that but in opportunities place ethanol conversion to that -- really doesn't certainly is move

Brian Kenney

Canadian Yes, anyway fleet and -- carry do XX-X cars in into Matt, commodities. other I’d that the are that also added they our to are are are crude going XXX [ph] they that aligned

what ago. than So it's everybody years legacy XXs the in invested different

Matt Elkott

Great, thank very you Got it. much.

Operator

Matt next will The come Thank you question. from for ahead. with question Research. the go Buckingham that Brooklier Please

Matthew Brooklier

and morning. good thanks Hey,

assuming also it maybe non-flammable flammable we're bit fleet little it's market wanted things? flammable perspective could service of cars, to commentary from that talk tanks seeing your a side just I'm your tank dig the big of of is So from there? portion a on now the services or car improvement is service terms lease the all to right improvement rate of coming in kind a you deeper that things. in but on of Or side

Tom Ellman

saying average by as in I that on increased I was press legacy quarter, XX% said me let tank Yes, an the excluding when over XXs example.

its So that's not out. an investable car type obviously it's way on

probably all So car high broad and best be in performer would improvement across car tank quarter. were time market the the the the pressure

Matthew Brooklier

could the terms small of you Okay. sand specifically an covered currently? side Do in weakness -- on update giving mind is us market. the talk GATX's in And things, to hopper you then, you of exposures cube what what's happening some

Bob Lyons

sand. continue industry grow, why coming the the talked our is we and about Bob, Yes, what already and exposure the is X% Texas significant white sand to way fleet we'll service. Northern brown sand well. have of in fairly We've the which pretty up within has impacting This in from we move this our is and before to a do modest termed kept been it's

Matthew Brooklier

could expectations Maybe just what drove of just last think on rate our up a question in tax that some the little And thinking and the guidance. talk of the quarter? should fourth your ahead you was how Okay. components we think bit original about the I tax in I quarter, and of quarter, to rate here the up

Bob Lyons

Yes.

rate tax last year, So effective XX.X%. was our

And domestic bit international be to Tax We our than is XX.X%, business. Act. influenced percentage a are of different by those differences to the mix primarily which little expect it a

Matthew Brooklier

fourth Okay. think rough where guidance the falls on we tax for rate And quarter? then

Bob Lyons

full for that's with So can for the the fourth XX.X% the year a give about guidance we probably best quarter.

Matthew Brooklier

time. Appreciate the Okay.

Operator

question. your from come for with question you Thank Mike Stifel. will next The Baudendistel

Mike Baudendistel

you. Thank

the get that if of are XX Just is renewed only your of types of bit to being being wanted term to ask to railcars is in weaker like side? the But some just just rates average a months? back were during there you, anything into is you'd to I see. terms renewal quarter where lease there lease of on read to that anything mix the little

Tom Ellman

Yes.

types of but read Overall, much a those talked one things pretty past -- unique and been we in commercial of consistent one exception mentioned the earlier, is difficult single into So the driven with at couple rates we've it’s by that term at as overtime. that are terms. the long-term low push the much enough it's to that a the to is generally reasons about that last are to we’re for any quarter fleet car couple types quarter their number. quarter. if high where term, too of quarter, below really most go the to enough increase seen What kind broad There decline The short. term are averages, so the still we’re that pretty trying an still point starting the saw were to in The everybody of three sure has was not you try back unique third couple long this XX was were to transactions that but of second I'm transactions has in quarters go they you’ve mid-XXs. before across the good car all from

Mike Baudendistel

of that’s anything any significantly that market it ways, on agreement for any and change with now, it, different the term wanted is similar a additional longer XX there in Got also in seems the price like to looks year you anything to just conditions there why of sense. you terms the with details ARI those sort the there agreement things? in can makes signed just agreement just give of and is cars ask that use And but you of ARI, it lot then why

Tom Ellman

as Yes, them, know ARI. of supplier great with two capability. with it a Part did so point we diversification of they’re to and with in pursue the great Trinity cycle we the of definitely one thought in August agreement we strategy one builders in right supply did catalog May high the our was and you then the and quality

four can’t plus cars is ARI of is XXXX of agreement tell costs both lot as XXXX XXXX. details far cars disclose agreements, we there specifics you the X,XXX year from can and the over agreement what through the Trinity are that The a they XXX has As then agreements. years, in a X,XXX

As those placed. already XXXX Jennifer has already mentioned in been cars XXX have

Mike Baudendistel

thank it, Got you.

Operator

Thank you. question [Operator Justin Gabelli with & go ahead. Instructions] we’ll from next our take Company. Bergner Please

Justin Bergner

Good good morning, Brian. and morning, Tom,

Tom Ellman

morning. Good

Justin Bergner

repurchases of just First light question the had forward given of sort And was in transaction capital comments how just does adding high price curious announced that to on relates terms to was yesterday, pretty of if that. lease fleet? I you versus allocation effect the ARII, the any in going your that

Brian Kenney

Justin perspective, not That’s part a the it’s small take Really same definitely so valuation of from relatively question, that’s the a I’ll multi-part thing. that. it’s lessor a manufacturer,

of them. for a like went look good it price think I two so times books out

far the other as you As half of to? Tom want that

Tom Ellman

Yes, year was buyback in so in the million the targeted that provided stock guidance to $XXX range. be earlier our we

portion blacked and negotiations of As out our everybody supply for we I due knows QX a two of to think agreements. were QX

goal We $XXX by year in reach are and will that try end. million the market to we back

Justin Bergner

thank you. Okay,

how just and as And the another earlier clarification XXXX look rough tax into to rate tax compare that any the question guide? as long-term does follow-up to is out estimate what rate tax beyond? rate quick you guide, a Just your

Jennifer McManus

our would rate guide the for say XX% So year was that Justin, XXXX for the was I and changed. hasn’t effective

Justin Bergner

to to next sort safe rate is of a And assume out similar year? Okay. looking

Bob Lyons

to tax should go stay. let’s as the continues know recover We overtime. U.S. Well higher can directionally a you assuming U.S. business rate, but say so don’t quite yet, -- at the up it

Jennifer McManus

for Yes, rate. and the that provide our call we tax would guidance QX in XXXX

Justin Bergner

from it release you’re venture quarter-on-quarter, as as was With press with portfolio well the income Okay, looked in like the great. performance. down Rolls-Royce very affiliates to year-on-year respect but mentioned management you pleased the joint

true-up the any comments commentary? how decline positive on to the just versus So

Jennifer McManus

of share So Justin, million first, the is so up for $XX it’s to million would affiliates’ I income say year-over-year $XX year.

clear we're so Just that. on

Justin Bergner

That’s year-to-date.

Jennifer McManus

right. Quarter-over-quarter. That’s year-to-date,

Justin Bergner

Okay.

Jennifer McManus

last in we QX incomes higher we've Okay. operations, year had quarter but QX year the versus from had income. lower remarketing this this year,

very was that generally just past with North -- remarketing similar this extremely it’s lumpy. So with Rail income the It as to is Rail America overall we in performing well. said North is

in so QX And year. seeing we're that's this what

Justin Bergner

Okay. Thank in back you, I’ll the queue. hop

Operator

with Seaport Thank will you. come Global. Milby The question next from Willard

Willard Milby

Hey, good everybody. morning

know is you into non-boxcar mark bottom North this Looking fleet quarters that. the fleet being last at a -- to reading the the I over guess I'm Do market if of growing this the of don't railcars. I grow American two we fleet on could think the are this, much right too are for but and you disposer that all conditions kind and net to if tagging

As the are to versus ago you at open for acquire, maybe a year for fleet railcars now those additions? evaluations valuations what potentially market attractive look of and pools look like

Tom Ellman

orders this Yes, take mean, the we I forward. I why that. do to fleet intend the grow two we can going year placed that's

far market, in years. have haven't still capital in last have activity any has where secondary But rates cheap governor prices has that's relatively and far there is And there secondary and at that. healthy. all so traditionally the oversupplied As access were the historical as a markets very slowdown, levels. lease what strong to been the pricing I still cause are to In would seen as the very been as weak high our mean, hung the compared historical situation two market still to been over why on slowdown and it we

healthy. So increase But far it's see tightens if might credit rates a pullback. so you quite

you continue that income. to remarketing healthy generate think you'll as us to continue would long see it's see would -- I as so And

Willard Milby

Okay.

railcars most flip. if that Rail I'm I part, that's will with starting you So to and those in replacements rather than have disposer for be Trinity additions been orders strictly, of kind I net guess the the American multi-year curious the trend of guess just recent about

Tom Ellman

Yes.

scrap they around the be will So cars We X,XXX going somewhere get it about typically year. two a orders X,XXX. between when

to additional side spot that So car that. fleet on over the it's small acquisition mentioned, above a we is business have look and new where fleet interested been addition really certainly additional and net And of so the in pursuing add last challenging in but as business Brian we've Historically, just beyond acquisition the capital when those years. has great seen of it's market the been yield market. buying as we it been to valuation this seeking been around much there time harder that hit been down that It's opportunities, so have do that. couple

Willard Milby

Thanks for like this, as the have through could the sounds things of to you color maybe I if much to back too it that maintenance many get a go you on trying that. And get in maintenance harping in but you way on can Do here as from and you're the go step if cars QX, your cost up network the you're might sense planning? be what QX. cars

Brian Kenney

to seeing fourth are many Kind cars come is we in quarter. a definitely we in and than we get will than how that over the really avoiding answer, and how year. spill many Other it like be years. recent Unfortunately fourth it's through more don't into will we can the in the trend lot get next on answer know but sounds many cars how quarter going of more the it depends up I'm

Willard Milby

color Well the for all appreciate Okay, and right. time. thanks I the

Operator

and with Sidoti ahead. O'Hara Thank question you come The Steven Please for go Company. the from question. next will

Steven O’Hara

morning. good Hi,

Jennifer McManus

Good morning.

Steven O’Hara

was I -- good morning. curious about just

North it kind Is uptick like I within lease of maybe on there seen a more since the addition is basis, lease assuming point or cars fourth in sequentially I a America? -- mean you've the I mean, revenue of XXXX. your I wondering America are looks know you of have more think mean, of it that quarter the the do hit I'm seems think it first the I stable inflection kind you lease of revenue declining rates it positive. on from pretty mean just market North And I is Just it about was sequential here on kind we maybe fleet. you a And that the of in how a think like

Tom Ellman

Yes.

lease to still was rates. America lease The down downward that improvement the your rates, thrust So, Brian question despite numbers were lease lower list talked about, for for the the the but by cars. having than in actual because North was the primarily it’s the pressure provided revenue the more expiring sequential quarter,

So, still lease a rates negative revenue. net the on are

Steven O’Hara

get period that? time slower a or And to then don’t just on trying done that maintenance got guys call you by -- say get can’t you’ve you’re you the you start fourth current more you’ve certain with cars again. it cars the in piece doing a do in quarter. maybe of or it Are in them where to time demand as because just getting is it you have in, customers going have to is concerned When is in a coming the to at there cars Okay. if aren’t contract because you’re these period time a and

Brian Kenney

I right car. mean, size absolutely in the it’s of the

like right that eventually and it’s earlier, the to it’s it’s the it legal turns I year in, due and obviously team eventually if this -- don’t AAR tank as late next said works year. qualification now them working if is into the spills what into So, over Because next happens over they to when year. commercial to the get department generally and

in as out well, turned going coming It’s they’re and we’re avoid that’s lot that of sent higher going So, load get now the to quarter. fourth see year. cars in not a that they just so the this a to why want to

we because the So, spilling is can are to how not certainty -- with going what higher quarter it’s to fourth I much what’s been able over. to the of first I it’s say going know in in and yet how many just spillover. quarter be to much be higher going have don’t

them in the year. the to required end get before they So, are of

Steven O’Hara

with mean somewhat. on than lastly you there ticked call, looks but the have I not comfortable -- last are six today you But and up of XQ the just to like be are been I vocal backlog not that months about have it last would of added level better, in -- maybe like level today lower then call things maybe you And were more mean, -- guys backlog it Okay. for prior to but maybe I read yet? comfortable fairly XQ that, you is know you obviously given guys ago? a that

Tom Ellman

Yes.

So, that months the for approaching car things And rates the at about in car by. we the look trough size of cars something of most to talked of to and new and car the on is X backlog, any a that To the get above we’ve your you’re XX little come that a months reason now, increase backlog question amount still the addition a one looking tank that year, for in seen. types of at is harder in it’s between time. somewhere well alternatives incremental large the is to other Brian is a direct lease numbers

get for little by is being time we car we in backlog think bit. of room increase So, the in down there still full to to scenario, a a helped come length new recovery are that but a

Steven O’Hara

Okay, you very Thank all right. much.

Operator

go from next Thank ahead. will Susquehanna. Bascome question you for the come Majors Please question. The with

Bascome Majors

sales yet, know for not your you of thanks XXXX? taking in versus a might we’re XXXX how you have guys Yes, question. differently incentivizing sense my into be but I do force XXXX

Tom Ellman

Yes.

where the the So, bit we every at for and is tweaked a in sales something are look plan incentive we market. year is

right lease that Certainly, lease hit taking lengthening and process term. points, as more now. we interested we going in the through rates up in inflection of become We’re

car we’ll As get the not types I there. we and at mentioned, for see point length the lease yet, in term that fleet when most of we’re

Brian Kenney

it’s But few had that about early to and before. renewals I we that it’s things question, fleet all utilized. like these of trying been utilization keep years and one mean a great haven’t

we So, and once what incentivize rate Tom yet, really Not says, a once quite term there to next start that’s sign. hopefully we’ll there get but year. good

Bascome Majors

All right.

me feels suppliers dollars but guys. of for strategy PE them mean, own earnings we I I the changed the laid have I more hands high growing other this least So, quite last it marketplace, has that getting suppliers not heard lease and call week real one their there, could your since And key just here. color a like your ownership. a yet. fleet. I primary billions mean, there appreciate level changing at in your there to mean lot just investing out

for this all your Your the perhaps up How you think in business feels guys significant this these market With like to do that if years hardest industry. some of and capacity. or two what model sort may opportunities it certain strategically things not about the more happen, be to incremental the may or landscape create competitive changes, than been competitor strategy? be sale three versus today? of down and And for risks as road could different

Brian Kenney

both. -- ARI you there that change the heavily it's car just is supplied ARI. ARL had another but must fleet nothing was changing remember in been that by I split, that's aggressive the mean, so the but has new. for question lessor honestly to a of it's Trinity same. a an inter-shipments Ikan it's hands, time lease good more yes, And was long prior

us competing manufacturing So this supply against lessors who us for also is new nothing side. for

there a somebody changes Trinity is there. aggressive, in behavior long really I really dramatic like aggressive extremely time. for not and is more lessor change to concerning What's us an gets said, been aggressive. their So a has And

Bascome Majors

you quarters So less the in finance years. models captive the manufacturing last couple seen of become more or haven't aggressive versus the few last

Tom Ellman

it's it and aggressive mean, way as been Brian that out pointed been a while. has for I No,

we a try can't So to point recent really cars. as change to face more there out we what in place

Bascome Majors

color. the for you Thank

Operator

from The question. will the next Please with Company. DeForest question Walthausen come & the for ahead. you Thank go Hinman

DeForest Hinman

the remarketing would strength Hi, couple Any on strong. that been out you where areas demand of call activity. has questions of

Brian Kenney

most No, is in because with mean, especially I'd cars But of freight number the a remarketing buyers. I good our tank car is lease say board there just of for terms. credits limited healthy board, longer the it’s customer pretty across it's across

DeForest Hinman

lot really And generally scrapping cars be scrapping you year the expect year. of mentioned X,XXX our pace We're a there quarter year. fourth on scrapping lighter a or up, Okay. to that going activity been in earlier just side? prices have is own should not this at we Steel

Tom Ellman

scrapping get amount. The the and earn its projected car. repair costs scrap is into decisions to is it's over not We're versus we scarping shop of what it's to at look a cars. we the the What car looking amount remaining the the car likely what from to happens certain is the comes and as made flow life way not at are targeted cash

tend activity year-to-year. more target in naturally higher So something a get scrapping average. to is that more not it of scrap X,XXX The environment. a It's we multiyear

as As many we've how far scrapped?

Jennifer McManus

Yes…

Brian Kenney

XX% than did last price. average quarter at about higher a We've scrapped year, through less third but we the

are the number few this by higher year a though scrapped million lower cars. we of a even So gains

DeForest Hinman

question, Okay. thing And of generally period there has any any when about even kind talked for that? that's the been that about go high discussions more elsewhere internally as party and we're time starting capital a at just a Board discussions thoughts moving to about good class. thoughts see for or a But we a long third up rates level on now different money asset had of or level you've of at Have look and us. does

Tom Ellman

time, that's because one Yes, has shipper in say that's this we direct market the party oversupply the the it we all things relationship I a should really without customer. the and discuss think money of driven been with third been

has financial when been talk traditional investments the near it’s I mean is the to to But stable railcar higher entered talk when of especially one because in they've far asset you they As reasons market achieve all of maybe their of the and banking market them, exiting, been it's the class it's able yield the that. to really been about as -- in the been yield zero to they've yield. described in

rates, made fleet. into types. the interest getting best underperformance were were of lot the of driven do that what investments car would the then as as you necessarily that's and market not them too So I think these Because price out higher far a higher them at

start happens So and as to increase, underperform rates generally, is people exit. fleets interest what

haven't fleet. to of lease majority out like other their getting than of the seen was just I on So, their want that they the stayed just they business. think core perhaps reason concentrate a element exiting really of yet lot But I know don't

out. available. there's than what more But and as yield our the of of heard, business as think reasons I alternative and we've far in number people the get been is So it's that traditionally higher was a

see we'll or said as it's their what interest underperforms Traditionally fleet out rates I drives go So overtime. been them when up.

DeForest Hinman

Okay, thank you.

Operator

Thank you. The & Gabelli from Company. next Bergner question come Justin with will

Justin Bergner

follow-up enough, the in market given fourth shop With positive rates sort in sequentially a the for the that seeing on quarter? in to Thanks effect have third service for respect is actually the the to and my car qualifications periods car that tank into long tightness the you're question here. of lease the or quarter that

Tom Ellman

isn't. really it Yes,

on just it's first experiences a when draw in So enough it all, shop what not the cars rate. market happens the rental number at revenue it's as as drive a so far time, for But us. shop, TQ of cars a [ph] in to lease given getting abatement, of total the

Justin Bergner

mentioned railcar that the truck of And about to on and expound you the which now? the those velocity great. Okay, leasing tightening of tightening the a and factors in we're if little then of significant you and tight could the sort your question seeing those on just a overall market. think a is each nature Maybe demand the market I market of comments most just market,

Tom Ellman

would of say on driving accelerate in meaningful Brian certainly the impactful, help think difficulty in quarter performance are I in more been here. maintenance talked particular, uptick Uptick in for railroad getting already third a demand. the the are it's truck the what cars few impactful about in those things and And and the I those to-date the help But actually in first the the has two. that are is times. supply and bed demand and a railroad so the has trucking more to tightness Yes, shortage than

Brian Kenney

it’s Yes, on just one tank [indiscernible] couple those And out I Mountain as I come demand demand a for ending line that's of pipelines repeatedly driven it's for next really years pipeline. in we've there guess Canadian over think the Like lot and said X, Trans the cars. the years. the side crude isn’t of of online there that

You XL out got Keystone there.

that's So when very why in happens that careful crude. been we've investing

Justin Bergner

Thanks for follow-up.

Operator

come Seaport from The question the will Global. question. for Willard Please with Milby next you ahead. go Thank

Willard Milby

had offline. Thanks those of And value that step research? for car if maybe of the gets I I to data this is I recertification that tank XX,XXX for Does this -- from tank small going about down minor follow-up. cars peak levels. the XX,XXX a XXXX. kind you. stepping on might have in don't accurate car industry levels? is of in wide think But to and XXXX industry sound know we're data about half in And was front a just XXXX taken wide he maybe XXXX down XXXX the And

Tom Ellman

from pretty is in it far XXXX As year what a as there. then up and trends due are given XXXX for over similar, us

certain So purchased was or owner all tank ago. on it when depends pattern XX purchasing years car a what their XX

it pretty to take-off XXXX that and after and XXXX similar scheduled. us for starts are then So

Willard Milby

Okay, follow-up. thanks the for

Operator

to turn for I'd remarks. closing the you at question. the like for are no this to time. Thank questions conference further McManus There back Jennifer over

Jennifer McManus

morning. you. me Thank their to participation up contact any questions. call Please thank on like with this everyone for the I'd follow

Operator

This Thank concludes you, gentlemen. today's ladies and call.

a day. You disconnect great Have your lives.