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GATX (GATX)

Participants
Shari Hellerman Director-Investor Relations
Brian Kenney President and Chief Executive Officer
Tom Ellman Executive Vice President and Chief Financial Officer
Bob Lyons Executive Vice President and President of Rail North America
Allison Poliniak Wells Fargo
Justin Long Stephens
Matt Elkott Cowen
Bascome Majors Susquehanna
Justin Bergner Gabelli Funds
Call transcript
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Operator

Good day and welcome to the GATX 2021 Third Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shari Hellerman, Director of Investor Relations. Please go ahead, ma'am.

Shari Hellerman

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

compares in for XX refer of net from our million of are related diluted United third million in elimination XXXX earnings items to impact was a information, detailed circumstances. $X.XX attributed a XXXX or please diluted $X.XX an same negative $XX.X any negative share per of to to compares XXXX. the net extinguishment The XXXX GATX the in Kingdom a our associated or net million of rate United XX-K or announced earnings million GATX's or $XX.X rate These from on $X.XX XXXX and net with tax per increase reported results operations Kingdom. and to tax include an per diluted more debt share $XXX.X $X.X $XX.X diluted million diluted factors or share impact revise in third today quarter continuing the early Earlier obligation per For income net income enacted quarter impact $XX.X Page release. The included It costs period reflect $X.XX a include negative diluted no net reduction continuing share. for share operations discussed previously release to $XX.X and those million results of $X.XX Form or $X.XX or to of XXXX or income year-to-date the XXXX. year-to-date to redemption. share. assumes per per related or risk continuing per operations GATX Year-to-date in of the $X.XX This to third from quarter subsequent update events share. million statements diluted forward-looking

segment. Now, for North steadily XX.X% increased our and as third North operating The quarter. America's address at I'll rate America briefly utilization fleet gradually demand our improving most Rail continued the by in quarter was team to strong each the Rail car success improve renewal execution reflective XX%, type. end well as commercial to for of environment

in fifth increased lease a For the absolute the rates from quarter. row, quarter prior

of of negative Lease The average X.X% renewal was an renewal GATX's third Price change Index rate with term quarter XX months.

to continue our We've our Trinity Supply new agreements Agreement. XXXX Supply supply successfully railcars base. placed Agreement X,XXX We place X,XXX customer railcars with from cars our our from Trinity a over diverse from XXXX rail and committed

XXXX from Additionally, over we've our agreement. X,XXX placed cars Greenbrier supply rail

available in of second earliest XXXX. our delivery quarter Our schedule the under supply agreement is

Rail in International's quarter of delivery continue robust. at cars utilization to as quarter, investment grow remain India secondary Within The active. Rail the Europe both and America's $XX maintained Rail for remains new fleet demand and end the we bringing was take high approximately railcars for remarketing our International, GATX income during GATX to year income remarketing million, was North $XX.X million third and quarter market Rail $XX million. as total fleets India. volume Rail for railcars Europe

below volumes Partners Rolls-Royce has related impacted air remain Management as COVID-XX to as segment of regions level. XXXX this year by delays fleet The continue a negatively The in affiliates pace and been at expected. operate global is environment Portfolio railcar manufacturers. the in Finance growth performing However, both passenger significantly challenging

and up excluding full to open we Q&A. to other any continue items. per it range the of tax those in $X.XX so we release, year the in earnings share, $X.XX our back adjustments can it prepared to be remarks. hand for noted I'll as And expect diluted David Finally, XXXX impacts are to from

Operator

Thank take you. from [Operator Instructions] We'll Wells our with first Allison question Poliniak Fargo.

Allison Poliniak

the of absolute right portfolio, direction, lease lease a you percent obviously question good in Hi, is there the – like point? way kind trending is lease below your think you of just should know, of rates A recovery but be – still any to kind quantify morning. fleet what what's around there is what's and issues terms above in some where of or at this lagging with struggling the overcapacity you there of

Bob Lyons

It's Allison. morning, I'll Lyons. Bob that take Good one.

rates third digit row, quarter range, lease or the direction. the As improved Shari in little we tank than on a things referenced in wide quarter some fleet better probably had bit the but in a freight, in right moving the a general sequential in basis single for fifth mid better

I highly any you to particular skewed so think, yes, our know, as one is very, type. fleet not very we're diversified, car

about in or the coal and be Some types there covered it culprits whether the low. of challenged be the our small more past, talked continue car hoppers quite we've frankly would exposure to cube is

improve, So opportunity we'll continues more of turn the see into which march to to and take as and full positive the is, forward territory. we'll advantage it market we of our that fleet

Allison Poliniak

– that of there is relationship the railcars. into the of environment then and XXXX? – out maybe added And should have this through you Is of challenges, different is correlation be sort always – indicator we that doesn't between Thanks. just something guys being there in put something mindful to given or the that hold network that velocity

Bob Lyons

but yes, I need all uptick move and of Well, a fixed the an the tends the velocity freight. general, some supply cause chain to with to correlations broken amount being global think lower are map, over issues, all in

challenged but quarter the but relatively say is a fact mode to our What customers. is at front. for Xs overall are still significant congestion, that level, demand. better that that the that there's little second, can velocity uptick on does that want cars, somewhat So railroads problems, significant we Class an cause be some challenged of the for tends still the is tends Yes, uptick for the efficient very said, what cause to I short-lived. a And third yes, it that in bit in choice in that be short-term. If operated than the demand would so

Allison Poliniak

am Got – it. I go And then ahead. sorry, just

Tom Ellman

impact more manifest types is the that there car the the going mile rule thumb just service move is in was train bulk and note unit to is to you're service, is was about to car one important I GATX's that think than types hour I say move per but thing old fleet. of of referring going that XX,XXX to cars, the really which

a intermodal the specialty the tank normal, the terms make on be in are hoppers more active less than that by thinking would cars you're in less return car if rail of lines. much like that impacted to types that covered So trips

Allison Poliniak

it. that Got chains, JV GATX rethinking lot helpful. Any a at the mean given you That's where in And JV with terms just challenges. supply entered, RailPulse that this are just of update here of the I some then last question has one on those of point?

Tom Ellman

encouraged others, as about five in all partners, infrastructure Trinity made were the control get us between five the of interested continues progress plan venture. Sure. the by that who involvement of and The we the to use we output potential interest to ourselves, partners the involved from are XX% parties. you I Southern, us the are there there's American lot RailPulse, of We're gave seed the joint to fleet. today. data, ongoing know, us information, the platform of in we're Watco. continue five group. joining G&W, North and telematics, as we're Well, definitely, the gather Funding And very that the heavily and other broadly from encouraged a to identifying from Norfolk in of said, right our And by the tech

get will infrastructure So the dialogue little a Allison, there, platform place here, partnership to get good in to time up but in and and the it bit of place running. take the get really

Allison Poliniak

it pass I'll Understood. Thanks. along.

Operator

Justin We'll Stephens. Long question from our take with next

Justin Long

it change good moving to morning. for with from changed and start on And within a an specifically of for American I sustainability guidance. any in get versus strength didn't but XXXX, What's know wanted that that you pieces have guidance the XXXX? I confidence EPS your outlook what we then question expected the headed the remarketing, this Thanks we're like as potentially. quarter ago? year into a perspective maybe seems record North the on

Tom Ellman

– so, end of terms guidance. a where through the Yes, about guidance in went beginning our of areas the was when the of first all, the you'll at we of talked range guidance, positive year that, the series where of we recall was what

quarter broad put gains, in the we it, a say package, would those a but end end at XXXX, lease we the improvement of before, to expected, yes. point unchanged continued of strong our it about last remarketing of about and what a we people timing the we absolute response you continue. So buying, get very to of disposition our hence to was When this and that those that interested the strong. lot out expect When market hard we I significant we've talk was is the quarter. largely gains, would at say what guidance. the but specifically lower the expected, quarter continue a board that really variances would pinpoint range. in as expectations between the into high the remains to general, it's has across environment range. to When I Maintenance asset wouldn't given I a discussed But talk expense you rate expectations

Bob Lyons

out the a record in would be we remarketing too. income. And add Justin, for I We that strong of year January beginning year, year the and back anticipated near would this levels very at laid

as like to to that as remain into continue track underpin case you place do fundamentals on in going know, that and XXXX. we're mentioned Tom look that And the be that. – So

Justin Long

I and I opportunities you Okay, Are still pipeline can to active as confident if you on buybacks notable haven't in we've up pandemic deploy wanted elevated the different ask coming that while, continue we of might have in any that be that's that across capital the investment moving priority And list? this at of you changes or know something look out helpful. seen an secondly, been the is geographies? businesses a there to as been level

Brian Kenney

business, Justin, to be question. second Yes, repetitive investing capital your but in on too I to is and to timely returning is don't That's one third the Brian. priorities: the capital our because there capital three excess is shareholders are want that access great and ensuring it's question for allocation, a

our So, rail the very finding this markets. on businesses, investment engine year, organic side, across beginning of really rail great some opportunities successful at our across and Trifleet the direct investments investing year,

the and have table getting again new on if by and weakened across can return COVID, more we've are prices that the last been for given is So pretty assure investment. a willingness capital but to right good in and to an that think have over it I inflection we speculative our where difficult think far and the capital, that existing obviously you has run-up economically return businesses that I in But this we way understand helps priority approaching we we're now, a you years. share market XXXX. share proven the That's year, billion over point XX invest And we as it's justify repurchase the dividends really new we'll to the repurchase three asset still anticipate $X I do as over years hundred a authority. where

investment always of works. asset been that's the continue, and likelihood repurchase these our model if becomes investment prices our philosophy mean, greater. share the way So I

for scales asset So tip are but giving going stay price. starting the we're opportunities evaluate both, Obviously, to in the to run-up tuned. the

Justin Long

Brian. I Great. Very helpful. it, appreciate

Operator

question our We'll Elkott Cowen. with next Matt from take

Matt Elkott

question. good my improvement. consecutive fifth see the Good morning. taking Thank It's spot straight for to absolutely you

it I mean, before high single digits, in digits single up the was think was in from XQ, XQ in I digits. the mid-single it high in that.

it, but in third quantify did magnitude the missed guys quarter? I you if Sorry the

Brian Kenney

of Matt, there's digits. said I mix in single that, come again, sure. Yes, was that play And it mid for elements into

linear. it's not So

Matt Elkott

indicative it. any of not demand But deceleration Got of pullback? then type is Okay.

Brian Kenney

expected we place at and not would look basic recovery remain to what in the forward I the as say gradual No, be case. be absolutely tenants in a to we our that market continues And all. of

Matt Elkott

broader promising been the very And India Okay. to have you but market. fleet investment there, a just then back it's front, I want go a to small high-level

you coming some is of a and seeing years, bill. seeing the pullback on – couple Are election XXXX they Are rough you grow was opportunities fleet XXXX India and then think now economic trillion to the $X.X India have further broader of in COVID. infrastructure a meaningfully? I – off

Brian Kenney

what’s at next Yes, that. we I just with placed committed with we’ll you take the grow if fleet right Yes, XX% do. the over can year or it’s And by customers our Brian, look so. and manufacturers now,

we’ve them some environment earlier situation is down up, investment there significantly and they this shut due already were opportunities are but yes, that improving. to improved. macro strong So COVID, the has wrapped Obviously, year

our As you did management a remember, approaching their it in utilized, rail are the it manufacturers are India their long-term shut because I results, fleets for team have normal, doesn’t would down said, but period. say really conditions XXX% leases, impact they

there. seeing are traffic, we So with interest investment is face traffic, so year growth, macro due environment a and in growth in coming well mostly opportunities in the nicely, anticipated lower to into as of COVID are conversations But than coming the container COVID. reasonable, it’s and rates back some we’re India, delays the recovery freight improving, got stalled customer traffic, strong GDP the

Matt Elkott

sense. may of but tankers looking a compelling and to like investment America, makes other guys or are assets? more with That America, maybe on you in highway front share elevated, continue And to non-railcar assets be the of strong future assets the types components North in service North flexible Okay. bit repurchases be that valuations consider

Brian Kenney

we’re think America, like away see in lease and right Yes. was it. our the from North with be see wide America, an we component that’s We’ll that example North long rail. service – but business. the in – consider acquisition life Trifleet to don’t extend I of, willing we asset Yes, I to now but I willing mean, a

Matt Elkott

very you Thank Got much. it.

Operator

our from question We’ll with Bascome Majors Susquehanna. next take

Bascome Majors

you. Yes. the as has into maybe stabilized Thanks you whether delta, looks far JV? the What and Can headwind what drove my up into like the renewal a pick RRPF and taking Thank question. down there? And for income sequential as thoughts drill XXXX? that your situation on any

Brian Kenney

Yes.

going we the were our that accurately what So in or businesses predict was of for that are into we $XX RRPF, versus the million the expected the into portfolio that of earnings course about JV came we coming When more. year. year the pre-tax the year-to-date was was last or part And noted million year-to-date mentioned to earnings down $XX year of happen $XX the we going year, to throughout million be from on difficult – that most to period.

with about the we discussed Rolls care them year was we million third Now, That had a that lease but Royce, transaction unique been note group to it’s using long-term investors a – to affiliate support last important of to where that share party on put which $XX that our we’re sold the program. of total unique engines earnings. contributed pre-tax transaction to had

and million of the business about on is two-thirds it to that changes total lease, So market was and it the which bad a versus rates to it engines of look increase, you other if about debt secondary number that due transaction. is one-third in the decrease earning it’s operating of about unique year-to-date the million of year-to-date, $XX to another, we’re for remainder due at transaction, them, the the $XX expense is due

Bascome Majors

Okay.

feel as lease the going forward. As – a market. the rate about I has value far I mean, at that in had all it and stabilized business

different Just directions. trying nine ago to today a that that move noted you in uncertainty degree it what couple think of feels versus and that laid guidance about of when could six, out like months

Brian Kenney

Yes.

was continue the would I down. So on guidance that $XX say more focus same to overall, we or which million

of asset earn what’s We’ve collections largely so disposition. monthly money on able been about cash In as billing to are collecting going expected. that happened, been some the we expected coming to terms of we’ve XX% the in,

is our is continue But the take to coming going time as to we year. the is a – with largely we’re Obviously, line this business recover. trajectory some in fully So that expected. things into expectations

Bascome Majors

aircraft some non-rail pretty Trifleet you platform? and were to valuations pretty point pretty if lastly, those the or asset where acquisitive on stock that maybe any did challenging, Thanks. your look of potential direct made deals the starting getting you the expanding values engines thoughts attractive. And the and in additional are include comments transparently Just to that investment investments making did like assets these

Brian Kenney

on are I costs are and same there backlog. of costs new another reasons good manufacturer is component mean, asset so increasing that steel example, Yes, Trifleet, the Rail, in prices and for which increasing

container example container the So for a really businesses. expensive beginning looking as tank was more year, at it at standard an so tank at it’s Trifleet, across XX% recently the than same the the

difficult talk to and values. think purchases let New are I I’ll don’t speculative more getting there’s asset aircraft Tom exception, or any about justify, but purchases

Tom Ellman

Yes.

a we’re countercyclical So investor.

the that’s account we investment which be first those. engines for we partner. quarter the venture opportunities, make what continue joint the for to by in were types continuing, in those joint So which of our own are happened look lookout certainly managed venture those to our like We’ll when engines able are on for

were lease that of those reminder, to engine it’s much difficult types a we’ll for predict kind As investment, look that to credits exactly best of to the and continue the that available. on best is how

Brian Kenney

think Right. pretty year. in earlier have spreads when airline safe come investment But it’s dramatically in to did their peak, we from which the that that say I is

Bob Lyons

done lease different a channels, to point volume, as I’ll North out agreement And primarily we that that basically with you do it’s in opportunities supply with generate with long-term conjunction our outside know, investments of want the we Bob. supply see to the that customer. go, agreement, to do And American rail, a but number add through Bascome, also just are just of they regards I are through investment

but – transactions the winning car very the have as on accordingly. going asset have mentioned that a number We rising with of on number front. prices, solid And customer. to really type price them a you year Brian be about need We’re transaction, underlying of to of a you to selective successful were

some So rates the and some made we’ve also business the taken been a in asset successful and that on haven’t we’ve pass price winning of because sense.

Brian Kenney

Yes.

is to very Another investments. talk pushes you the great asset been of Tom a it And example, we’ve before through acquisition about ago. actually was high with prices, this few type years which different at boxcar drill Tom

Tom Ellman

Yes.

back portfolio value. largely really which at high our would type the diem assets overall find some as rate to – given asset we that was twice be as leases that purchased something, fixed in – an boxcar asset what’s were on much looked competitors opposed buy assets things handle, those one we that may at recognize from our attractive those in the we’ve particular, the that didn’t were to to prices XXXX, of So not per were of others And infrastructure place in GE, value. able so we leases, scrap was have really that,

attractive return So, most largely leases convert very them overlooking. then, And that an relatively two nice rate on asset earn quickly prices. for and the a others were class fixed part,

we of the are to little So when that’s kind thing do bit prices higher. try asset

Bascome Majors

It Thanks to really appreciated. there. everyone the is for answer

Operator

from Funds. next Bergner take question our Gabelli We’ll Justin with

Justin Bergner

Good Shari. morning, Good Good Tom. morning, morning, Brian. morning, Good Bob.

Shari Hellerman

morning. Good

Brian Kenney

Good morning.

Justin Bergner

following gains on there number? terms that’s something that represent number weighing the disposition maybe sale? else on new first a an income joint off, up Or usual in something affiliate Rolls-Royce down of on Just ex-portfolio maybe, million would that that of of venture. sort of or sort losses is income Is $X actually

Tom Ellman

Yes.

both includes or from its the at remarketing earnings from out Justin, share the those we lines, it our So as from and sell it the of operations, along end in includes part or earnings of both. earnings – something where engines engine life leasing it as the the all joint the an includes of so venture well that

Justin Bergner

can quarter. would number Okay. speak there weighed that’s that I to down is mean, that have the unusual in you But anything

Tom Ellman

Yes.

is a both party fashion. operating the chance the first The selling So the first income third remarketing year, are to compared the that half regularly out remarketing engines to to year, are line lumpy in of of line the either and inconsistent. line the half a part happens versus down that

is are wouldn’t operating I there’s two a tend so so each that to that take anything have the number been into line down. selling down read income revenue, less few driving So engines engines, perspective, that. we’ve From that’s things you particular some to that going really quarter that take income are – in a One bit. earning operating

which bad we for when airlines, reserve the of expenses some there, all for the second elevated. so is the The an has of issue receivables challenges debt airline an

Justin Bergner

some factors of With provide Great. sort just impact, the very that of you. the That’s of you down? may caused to actually quarter that a weaker car what to or that little say lot Was respect Thank the the able a can renew cars of helpful. there there? are that sort LPI, speak of types anything for perspective to in sort just nudge have to mix you to is

Bob Lyons

Sure.

XXXX a that some those it’s types. lot is linear renewal try for is Justin, Nothing’s and the I equation car talked outcome. we’ve as a those skew of really out third sequential renewals back coming whether that on it’s mix renewed And quarter, of in cars, rate. occasionally a lease high the income Bob. a all about are had couple put and – And or LPI quarter, rates the The the designed LPI. in are XXXX, remarketing were There a possible. the news market few extremely customers to there third of but When good off today, we at to few so challenged the metrics look the were of that rates, again, take in at as while can much like did the we – LPI our business.

breakeven to an And outsized the on LPI they had the have the transactions, few been impact would But quarter. in third for LPI. so closer those

Justin Bergner

sold. the the Thank seemingly car The couple transaction fleet cars of then helpful. an seen recently did peers? to you opportunities. selectively of of mean, any competitors fleet investment there you was older railcars, older boxcar view of guess referred Andersons’ you. of boxcar one and had a Maybe a years type, that investment of opportunities investment, as do of back, I buy scrap you would just the in value a I are an number guess, times something is I that on with railcars the your portfolio mentioned you or in lastly versus made to a That’s different like question you and your at like very sort Okay.

Tom Ellman

always, a things lot type, was that GE. it of one out boxcar transactions Well other lot of ones assets, the at. carved we’re particular the that the the that in that from the all was of was a That look out, transaction doesn’t in exist car with portfolios look of we’ve market. the We you unique at transaction occur familiar – size, all cars, we in of about a all could really almost be those. referenced, secondary that The carved

assets a for at right the have We voracious price. quality appetite

at from And nothing went a so and quality been have at and portfolio attractive has we certainly they worked evaluations, this standpoint off look GATX everything, at. not do for changed, past that would have at hence all year

Bob Lyons

Yes. there. be current selling fact And but unlikely are to they’re North that are seek in prices high the for the to lot going it’s reason, think the And up and significant mostly America, transaction in lower out that that to fleet from likely that’s GATX larger that may environment cars those quality, sale due of come the you’re still Andersons. of portfolios the M&A specifically to, I them a to and for Rail came fairly that that referring

pay. willing to probably So, not

Justin Bergner

you. Thank understood. Okay,

updated. gain you was Just remind North us the for just in last quickly, America asset dispositions what on as the I guess guidance could

Tom Ellman

a $XX to million Yes. we’re I the still think came in holds. $XX guidance which low-XXs, we Year-to-date, that the level be we’ve million that we the $XX – probably saying into year million record so range. at been would

Justin Bergner

Great. Thank you.

Operator

[Operator at conference remarks. Instructions] for the Shari in time, I additional more turn Hellerman, to We back will this any have questions or you no queue. the closing

Shari Hellerman

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

Operator

participation. for Thank today’s This your concludes you call.

You may now disconnect.