GATX (GATX) 20 Jul 212021 Q2 Earnings call transcript

Good day and welcome to the GATX 2021 Second Quarter Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Shari Hellerman, Director of Investor Relations. Please go ahead.

Thanks. Good morning, everyone. joining second for earnings you thank GATX's quarter XXXX call. And Vice President today CFO; Tom Senior Operating by joined North and of and and Rail Officer Brian Titterton, and I'm President Kenney, CEO; America. Chief Vice Ellman, Paul President Executive that information you'll some today our hear the forward-looking of consist statements. of note during discussion Please will results trends could or or differ statements Actual forecasts. materially from those

events for refer our in and to results. overview of And information, please any our guidance. decision to or GATX XX-K earnings comments GATX's and more factors to our year-to-date revise in turn the a I'll obligation additional and For over included to it reflect no discussed raise quarter circumstances. release I'll then, Brian those Form provide or performance to XXXX XXXX. our assumes risk subsequent update quick for statements second on forward-looking

and rate diluted Year-to-date results $XX.X share Following from million income of net from diluted or same year-to-date net million per Brian's GATX to XXXX we With compares associated early diluted period increase the to diluted and of of to second will or United $X.XX today compares the XX per that, open share. page debt diluted of range a income now diluted $X.XX turn on impact second are million events. $X.XX XXXX quarter our of raising related share to million per or over $XX.X for XXXX redemption. This per are to from up operations a noted share. to release, $XX And quarter detailed $X.XX include extinguishment operations The X.X $X.XX as operations enacted Earlier continuing questions. earnings This XXXX impact our XXXX, continuing Kingdom, year share. are related quarter or call second of reported items $X.XX diluted earnings the per the for share. to comments, call $XX non-cash per XXXX. adjustments $X.XX an negative costs full per in million in a tax we'll the net release. million an Both net with in continuing of share income reported net $X.XX or we negative $X.X These or guidance I Brian.

haven't I'll a why spend Shari. into expectations we even or guidance coming our from thanks, explaining year. EPS the Yes, really raised two changed minute though business our significantly conditions

America driving So, first of North that's all, outperformance. the Rail projected it's for the outlook

lease I'll expect last to profit as business are segments largely lower flat and XX million a because we originally get America, rates other pass. performing come expected, be the relatively to rationale in we expiring said expected we by XX minute. in million year rates XXXX Our segment revenue still XXXX, we Rail to but of to than would decrease was to that Within renewal those that's North compared and

our competitors due there market in risk created by fleets. also lower significantly competitive We the to been that's utilization the a said was small utilization hyper

in and scrap continue would down in expected $X improvements operating prediction XXXX. the we market maintenance realized, net the on $XX that we up strong that million we've Another as be optimize higher was and that to continue recent ability a our in or would remarketing expense to secondary to substantially range depending million income higher XXXX fleet in be prices

environment, consistent expectations as in at looking it's first current So, actual slow original operating those our the of the that with as pretty market half, results well recovery.

items be as expect I the positive for we most just described of the guidance to the range that provided. end is now So, higher the reasons at the we of

instance. for So,

predicted by range at not Shari have the He we our He's And Titterton, half and internally, maintenance the X revenue, means. the first and indicated Paul and at significantly as utilization factors. Rail North the the as the by for Maintenance through progress. spending Officer the any range expense Operating we higher of rates, responsibility are expect end safely is have we that And who questions answer but has way, we efficiently both end operated of they're the and last call provided. well now network lease you Looking as to America. the on higher lower then, any rail fleet. Chief may at can of be about

I to as is as $XXX but Our expectation no right higher of that's we said, per go expect we've increased frankly prices railcar the target. did would high scrap had and XXXX, recently. market ton seen idea on realize what secondary And as we they in sales in

- driving to you that's can that it's improved that's any So, pinpoint factor performance. see difficult the one

it commercial and a would the we characterize slightly better North and board strong as part. on performance So, operating Rail, I our anticipated across America market in than

International net profit that the now segment expect Rail for at is And in year. $XX International spare them our favorable meeting significantly slowed is investment venture, opportunities. they but aircraft joint relative other The increase air but are leasing Rail extremely in as so, in somewhat, expectations They're million engine in down last be international to touching in strong GATX market profit more operating wide-body businesses. Quickly of markets. rail difficult segment operating we travel. not our to America XXXX. an the than COVID is result resurgence higher India seeing North expected RRPF, At to we flat, has on general,

our although would seeing the profit originally increasing. say anticipated for sticking the their we're the there And, opportunities then are million lastly, And international little the as travel. Our obviously early estimate, than of on rates now, expectation And of will was and is returns trade I that will anticipate extremely until we see utilization fleet XXXX. strong acquisition XX most the favorable. the also recovery air helps we uncertain been guidance coming performances that remain investment to all component with segment we our will or That well. from into be in acquisition perform a start down performance likely prices, bit and more We're that fleet. now have container year. lease better way Tank existing

increase rationale in the behind that's So the guidance.

operator, go let's ahead and So, open to up it questions.

comes [Operator Poliniak with Instructions] first ahead. And our Wells from question Please Allison Fargo. go

I to you push brining ask I where maintenance but to do to you - seems of it Paul think be maybe area to want about to expense. It the continue and outperform this, an kind pushed right is at just changes and actually operational This that improvement. walk all, to making. us taking that maintenance the out pure of the this getting through I'm view you're the this some isn't

there. color any Just

things is to to Sure, for cost. thanks Allison, speaking structurally a invested done this Paul We've really our in We've maintenance question. try and technology. the improve few

on of which hour So, audit take measure per-car we're out one on we've of us wasted of amount is of place our spending we the reduce and scale our quality. shops. maintaining of a repairs create system, marginal that drive then use throughput allows and the processes more while dependence that's take contract course, shops each things to a been advantage able to result. example, to cost own able And allowed And low reduce we're an put as we've our basis to to us excess and dramatically, time production our shops shops. capacity of our in of in an safety and for economies in can thus, on, car through And benefit then

on changes capitalize we going forward. So, are I can continue those think to all to broadly that answer your question,

the So while from going maintenance year of to cost. to to change you're see different year level going that's maintenance demand

given we a have of For cost. our demand, reduced we level believe structurally

lease mix And point, on to term in of then, or it that the about see that I this of there? that sort that are sort limit improving towards expand people these that stabilizes, still of average lower that - of terms you kind lease time just an a when start at uncertainty a environment, is in term, of question terms of pushing the is think somewhat terms just and

through is to and pricing. philosophy what still keep pricing is a is There going lease in push So, above long lease expectation, with going lease market is run our we're pull. fleet ultimately, target Right run we the long rises terms terms. longer now, our we lease to target pricing general, happy demands there be; our below term short. term, are what as to of chunk - very for we expectations, our respect on to a target since the generally what and is And term relatively

Please Our Justin from next Long ahead. go question with comes Stephens.

the second any lease I XXXX? like on wanted on rates to follow sounds thoughts It you the the saw, more quarter. color some magnitude and in that around sequentially of you rates have North here give America. for lease absolute continued LPI that improvement Could to improve up updated in

So, I'll take it in reverse order.

firm. guidance reiterating a way talk really, to provided more changing we previously, we we're range is is from X%. the thinking For always LPI, which a negative much absolute how to they're quarter as about from rates XX% about, But negative and lease digits. increase the to quarter the really a instructive upward the market single last we market here see type. car Obviously, from momentum high from quarter that's to to think as quarter, a this out And to going about by And vary do the in sequential continues conditions. we've continued seen

quarter prior throughout the think year. mid-single digit guidance a each the I increase and sequential And assumed

So, think quarter is year be and in that fourth expectation that? we half fair would should that look the about So, the high it maybe to to higher? we as back forward single-digit say increase of how third pr the a

the it. know, to LPI which that I so single a to that why get of as Yes, trend is a high-single digits, see it's predict continue, we've correct. X% we you think in forward. mid-single we transactions small going Likewise, seen single but any goes, it conclusions that, far it's Justin, the Certainly, that somewhere digits. because there And hard XX% of in in think number we the It negative move directionally, been far hard still from really the quarter what as does to expect draw be range to to can quarter, as hard then, feel precise. will is negative any it's really like we've

in finally income remarketing America. on North then, the And

$XX I guidance an prior think $XX million. to for the million increase was of

still that you second as was at kind make more Brian, I on you're question, the the that part look best favorable and range is that right investment your just And adjusted opportunities? returns kind sure to to curious market risk even seeing that if you're expecting. of different where comment wanted maybe end what you could range, of the So, of acquisition

Yes.

Brian start same to it are range. the the opportunities. about So, thinking over for And that I'll with then we guidance kick and still

Rail in America sorry, factors were basically As comments disposition gains. the renewal a - in Brian North revenue his through in an went about increase for and revenue in opening talking decrease an expectation offsetting asset I'm of

asset doing We gain haven't the disposition and bit little really a better number revenue off is than that expected. moved

So, the offset. that's

high may the really quality said still not opportunities of for North what portfolios American out I likely but individual it's And on but it think there's rail, attempt due the probably to be the are that lower a depends least sale right there, obviously pay. a little to a or look that large at are up side, is; we've and that people region, to try some in of maintain I bit opportunities. the willing everything, seeking can't fact - our now, certainly at at fairly M&A discuss are the we're from to past look everything to In so mostly There change on we'll price unlikely discipline. come

that. So, I'm about not optimistic

you still opportunities so some of that agreement Rail, apparently international there coverage for fleets. sure and could the deal, SNCF with press the of entered an that CDPQ Ermewa. smaller the into DWS, On sale saw exclusive has with Outside be

their So, the spend portfolio and sellers as with away, but potential of the chime plugging but it's or a on much value terms we're so, acquisitions can last of to real coming still the as fleet. been competition over year Paul Tom in, case

issue. think the that's I real

comes question Please ahead. Matt next with Our go from Elkott Cowen.

for have haven't remarketing assumptions a you year your Does the guys the changed for do from towards but whole that a you of question, market in the trended know your income sales? general, coming lot bode well a of industry secondary scrapping range. the in isolated end valuations fundamentals the as market I secondary for year, income positive well for assumptions but had as guidance, the market improving a into bode and

that. So, on Matt, what to came market any strong We with sales, and can expecting thinking Paul it it be then and color for commentary secondary the I'll he is. environment start we're a provide additional market, year into has and if the

be the pretty the As predict sales individual of timing you know, can been to and though has lumpy. historically difficult

quarter proxy feel isn't whole. it's as a what to So, year a market. happens the going great really for given in like for We happen a a what's still strong

updated both guidance guidance, that reflect and our original Our expectation.

does activity. warrant viewed do then, with - conditions material Even And to close fleet are disposition? that fleet remarketing that to mean, it your be that asset Tom, any sales, could candidates could for I seems optimal of increased portions asset you utilization and market pretty be have if be your as sub-optimal, -

versus we're sale terms at this Paul. and what in So, is always our whole is the an of economically say looking of the and value dispositions, value. making evaluation in economic I'll jump fleet

asset of And more than as simply attractiveness the we can an true, be it's as could viewed as attractive, values that asset market And asset just an view so, play, that we an whether an not honestly, unattractive. otherwise that asset necessarily question it frankly, of we do. quite otherwise a it's highly be

So, into secondary sell to to the view. the us, really, market the relative view evaluating do whole valuation of versus processes has the just with GATX's what for and the markets

That just Tom. Paul makes one last sense. And question, then and

implementation. the this except have last rail dynamics - for last And above to All seem that's and bigger periods a question over the favor we've now. reversing declining be pretty - maybe brief builds couple had years, and because of the rates in these almost you a lease PSR had of leasing. Over traffic really industry a for decade picture larger been anemic five then,

period comps for unreasonable of years? it a is lease couple So, favorable to next rate of that the entering think we're

very seen some in lease time of So, over favorable underpinned higher with in what rates, a this to thing will manufacturing. in in long-term. all the lease industry, What And have recovery had car recovery you've to I is it's project and of demand. scrap cyclicality you've certainly within of boom seeing rates; talked the reasons say, various bit are will we've kinds higher talked we've difficult railcar out recovery say investors costs, entering about the carload we various some in prices, quite cycles of but as bust right now for about I some

depends now, seeing So, continues the lease to certainly, over positive obviously few factors on play in trend but what those a how we're years next out trend see right rates that degree. it all whether and to

comparing magnitude upturn, and be Yes. say something the the that particularly steady this Matt, the of we we time talked how to And other a catalyst because we We've I'd slow this by see more about rail. last before time. of last is expect to crude thing coming don't had along it increase additional of

slope we the So you directionally, steep expect that not but as last indicated, Paul probably saw time. improvement, continued

lease maybe the the more is you but think on were cars color type? outperforming freight improvement Thanks, tank Can Tom. still that any cars, final follow-up. just rate case? car one I And provide by

wave is, to freight get of cars during Yes, so, in I in that accompanied And going general, bills freight non-overbuilt when non-energy cars, not the built as describe would overbuilt, them huge in I I we're get by certainly into the been would the recovery. have rate cars [indiscernible]. say car specifics didn't type, the what the and not and certain the numbers leaders say related that but lease

of related are talked where we've really the really about. types the car more lease performance. laggards And rate that's seeing best the energy So, we're some that

Susquehanna. Bascome next Our comes with ahead. Please go from Majors question

of and of to long-term a inflection the of snapshot relative give to you lease your we're across getting us rates, you're that close point? tracking fleet average a how little Back where bit could to kind

some a car across some Sure. non-energy those kind that others long-term non-overbuilt, say, But to the it the I of I'll factors. and parts start levels. again overbuilding be that Those or XX% would to that lot referred freight XX% in. related run of be XX% is varies may levels level. of going below XX% fleet rule challenged rates, at in thumb long-term of those and energy by good car now. right still frankly are are above we're of fleet, below the to a I would because we But generally more but cars, types to And type. where historical are chime related a other contrast, of long and broadly below

Are surprised or able would you're that? seen we you're attractive aircraft the that business, quarter us to do manufacturers helpful. seeing with more your front work of deployment, Rolls the with most on returns? what last capital in leasing directly amount bit that on potentially to Anything other put in have you and of a you're capital to there risk-adjusted And compared some opportunities XQ be either with as to able

Bascome. Yes,

when about still we best it's going to appetite absolutely right, available for best indicated that terms. of to is for that the the we're we we you're for but the engine managed So, RRPF account, is to type that and attractive how products to being much deploy types to of continue lease by own talked pursue. capital that our remains able we be long talked about us that And on have investment. continue something seen It certainly but market, in to with

of lastly, Thank you needle inorganically? question that or owning before a acquisition. you the for get to business we in it? that this pockets similar Trifleet you need we stage Are be expand understand but opportunity to of of fleet Are you. on more mid-term still kind seeing that. mover the Thank And there aggressive Could long-term? can

up; Look, started timing is our I was at the beginning prices of of bought we investment volume year, immediately good part. it question that just should this on a a increasing. that's container almost lot question. say, picked There no has Well, the tank good

world production lease utilization saw it. good And has there. rates increased, economy You greater up; are picked the we just demand as to investment are seeing follow opportunities industrial starting really

this of that it year, it be this going outperform dilutive would that. will said So, we thought don't better - to investment than year. I would think originally $X.XX do we're we think anticipate I what I And

wins about excited a we're a we're on of very So, co-investment similar that. very we've And of There's lot it. had and customers excited opportunities. early also about the couple

pleased - far with So, just now. very yet. investment don't well But it's acquisition I right we're going there It's think organic investing as aggressively, far. as that so that's very

question And Please comes next ahead. our Bergner from go G. Research. Justin with

Couple of rate non-cash, my what business or on the but cleanup increase, been business? you most U.K. of for is economic of questions, effect in questions was indicate sort of asked. the have any the books the that there of assets, The the tax

Okay, Justin.

So, but of what would that the their that increase effective specifically, from XX% XX% not is tax U.K. statutory until to rate announced April XXXX.

even current increase will the So, tax rates. XXXX, new tax impact based tax operations we not though our on rate the until to deferred need liability

why So, non-cash a that's it's item.

to to the that to attractive business how change primary to approach is U.K. is doesn't that In be an and it. continues business related and it's strategic of joint affect terms to the us the our operation, going really the venture Rolls-Royce

materially, change like the sort that quarter-on-quarter was owned there looks your refinancing your directly? And debt stepped you stack mainly amount just pretty of sublease at of cars in expense, rates is down or lower that then, interest sequentially it's versus

Yes.

lease some the a at looking is So, had leasebacks? on expense, a maybe favorable buyout the which exercised sale because what we of variance operating you're

be might That Okay. it.

sequential expense whole? of as be major of sort business interest would that the a driver for So lower the the

also the $XXX Yes, over second debt the about of course paid of Justin, we down million quarter.

with is respect guess pleased operating to the I container business, with performance, the you're which great. very then, tank And

million how profit tank business in in loss, sort that loss performance second of business? I quarter? Just the do juxtapose understand segment of container sort segment And the in do the other the I $X your against strong the in how

cost. that's extinguishment the debt So, I think

embedded Okay, it's that in segment.

higher lease of Okay, driver great. lastly, of steel prices driving sort prices. sort higher started or about you rates and with off sequential the maybe major talked of costs And scrap about higher then, or different talked you and - factors you

correctly of So, to your were that current acceleration and you in point driven in operating rates asset considerations considerations at trying sort demand cost sequential sort being from value comments? more time? that the the Or than suggest by tightening of, by lease is inferring

There are multiple factors. actually

if rising that year-over-year at indicate So, demand can carloads and is look demand that clearly is you rising.

one, activity, you We benefiting really you of fleet scrapping from level also are new and has car see industry leave the price higher. see Number higher prices. a greater cars means steel It also more which two of the benefits.

car car. Class new a slow the higher, an X of traffic. slows, car goes there's been And alternative the down then, value - up for velocity of of all So, given at to given existing a the course, finally, an as that And is of existing raises we know level need then, the railroads. which bit a velocity cars for

those lease underpinning the So, are improvement things we've all in rates of that seen.

Please Next, Instructions] Asset Sage Management. ahead. Haimes go go with to will we Barry [Operator

you So, do car energy good that Thanks. but your earlier make car type following comments fair were levels? the second an update question still to Thanks if justify amount is, how guessing that just actually to so by alluded you related have of and other two. buying fleet I'm a rates go new update costs higher that the order back to taking then, to sort maybe normal higher for my guys? is, much is, would just so on to excess storage for And types of question car add to much car to One had to of up of And just lease I'm because a for steel. looking a probably in economics magnitude, the storage. and are we question, new cars,

color. let some add I'll So, start Paul and additional then

experience attractively in industry. The new that terms now. at doing cars, we lots of that in investing look we're right of this In new investment as way have we

the car to term that to We lease maintain happen the a good handle for cost have and for really over rates the car. what's to long going a

we're as a long-term looking at always So, investment. this

is we've in our environment, supply of there this to them. both attractively ability in of long-term invest, So, certainly outside and the inside done, which agreements

first we the of in reaching X,XXX railcars new supply commented on quarter, over the recall may on agreement a You outside agreement.

investment an been attractive it's So, environment.

energy take bulk cars I'll that certainly take are correct I'll the in then, of the the form And cars across some utilization the markets. some this to is of complete, would the the to there all certainly - the incorrect in liable energy or be industry that And of say markets. types, way It in that storage but car are speaking, is still tied full Paul tied of the the question. storage fashion significant industry majority are to you are

will this Hellerman, And and Ms. conclude question the today's closing you. Thank I remarks. will additional any conference answer or to turn session. for back time, you that at

the to participation to like questions. me everyone thank Please Thank I'd reach call today. with on for out their follow-up you. any

this participation. call. today’s your Thank you And for all concludes

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