New York | 1-2328 | 36-1124040 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
o | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
GATX CORPORATION |
(Registrant) |
/s/ Thomas A. Ellman |
Thomas A. Ellman |
Executive Vice President and Chief Financial Officer |
• | Net income for the first quarter 2019 was $41.5 million or $1.12 per diluted share |
• | Company reiterates 2019 full year earnings guidance |
• | Rail North America fleet utilization remains at 99.4% |
• exposure to damages, fines, criminal and civil penalties, and reputational harm arising from a negative outcome in litigation, including claims arising from an accident involving our railcars • inability to maintain our assets on lease at satisfactory rates due to oversupply of railcars in the market or other changes in supply and demand• a significant decline in customer demand for our railcars or other assets or services, including as a result of:◦ weak macroeconomic conditions◦ weak market conditions in our customers' businesses◦ declines in harvest or production volumes◦ adverse changes in the price of, or demand for, commodities ◦ changes in railroad operations or efficiency◦ changes in supply chains◦ availability of pipelines, trucks, and other alternative modes of transportation◦ other operational or commercial needs or decisions of our customers• higher costs associated with increased railcar assignments following non-renewal of leases, customer defaults, and compliance maintenance programs or other maintenance initiatives• events having an adverse impact on assets, customers, or regions where we have a concentrated investment exposure• financial and operational risks associated with long-term railcar purchase commitments, including increased costs due to tariffs or trade disputes• reduced opportunities to generate asset remarketing income | • operational and financial risks related to our affiliate investments, including the Rolls-Royce & Partners Finance joint ventures • fluctuations in foreign exchange rates• failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees• asset impairment charges we may be required to recognize• deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs• uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021• competitive factors in our primary markets, including competitors with a significantly lower cost of capital than GATX• risks related to our international operations and expansion into new geographic markets, including the imposition of new or additional tariffs, quotas, or trade barriers• changes in, or failure to comply with, laws, rules, and regulations• inability to obtain cost-effective insurance • environmental remediation costs• inadequate allowances to cover credit losses in our portfolio• inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business |
Three Months Ended March 31 | |||||||
2019 | 2018 | ||||||
Revenues | |||||||
Lease revenue | $ | 274.4 | $ | 273.2 | |||
Marine operating revenue | 13.1 | 14.2 | |||||
Other revenue | 29.5 | 17.9 | |||||
Total Revenues | 317.0 | 305.3 | |||||
Expenses | |||||||
Maintenance expense | 81.2 | 81.2 | |||||
Marine operating expense | 12.1 | 12.5 | |||||
Depreciation expense | 79.9 | 77.4 | |||||
Operating lease expense | 13.7 | 13.0 | |||||
Other operating expense | 8.0 | 8.6 | |||||
Selling, general and administrative expense | 46.1 | 44.9 | |||||
Total Expenses | 241.0 | 237.6 | |||||
Other Income (Expense) | |||||||
Net gain on asset dispositions | 8.9 | 56.1 | |||||
Interest expense, net | (46.5 | ) | (39.9 | ) | |||
Other expense | (3.2 | ) | (1.3 | ) | |||
Income before Income Taxes and Share of Affiliates’ Earnings | 35.2 | 82.6 | |||||
Income taxes | (8.4 | ) | (20.6 | ) | |||
Share of affiliates’ earnings, net of taxes | 14.7 | 14.3 | |||||
Net Income | $ | 41.5 | $ | 76.3 | |||
Share Data | |||||||
Basic earnings per share | $ | 1.14 | $ | 2.02 | |||
Average number of common shares | 36.5 | 37.9 | |||||
Diluted earnings per share | $ | 1.12 | $ | 1.98 | |||
Average number of common shares and common share equivalents | 37.1 | 38.5 | |||||
Dividends declared per common share | $ | 0.46 | $ | 0.44 |
March 31 | December 31 | ||||||
2019 | 2018 | ||||||
Assets | |||||||
Cash and Cash Equivalents | $ | 248.4 | $ | 100.2 | |||
Restricted Cash | 6.2 | 6.5 | |||||
Receivables | |||||||
Rent and other receivables | 79.9 | 87.0 | |||||
Finance leases (as lessor) | 118.9 | 126.4 | |||||
Less: allowance for losses | (6.1 | ) | (6.4 | ) | |||
192.7 | 207.0 | ||||||
Operating Assets and Facilities | 9,587.9 | 9,545.9 | |||||
Less: allowance for depreciation | (3,062.0 | ) | (3,013.2 | ) | |||
6,525.9 | 6,532.7 | ||||||
Lease Assets (as lessee) | |||||||
Right of use assets, net of accumulated depreciation | 449.5 | — | |||||
Finance leases, net of accumulated depreciation | 16.7 | 16.8 | |||||
466.2 | 16.8 | ||||||
Investments in Affiliated Companies | 480.0 | 464.5 | |||||
Goodwill | 81.6 | 82.9 | |||||
Other Assets | 239.2 | 206.1 | |||||
Total Assets | $ | 8,240.2 | $ | 7,616.7 | |||
Liabilities and Shareholders’ Equity | |||||||
Accounts Payable and Accrued Expenses | $ | 155.8 | $ | 177.5 | |||
Debt | |||||||
Commercial paper and borrowings under bank credit facilities | 15.9 | 110.8 | |||||
Recourse | 4,768.1 | 4,429.7 | |||||
4,784.0 | 4,540.5 | ||||||
Lease Obligations (as lessee) | |||||||
Operating leases | 456.3 | — | |||||
Finance leases | 11.0 | 11.3 | |||||
467.3 | 11.3 | ||||||
Deferred Income Taxes | 891.7 | 877.8 | |||||
Other Liabilities | 132.2 | 221.5 | |||||
Total Liabilities | 6,431.0 | 5,828.6 | |||||
Total Shareholders’ Equity | 1,809.2 | 1,788.1 | |||||
Total Liabilities and Shareholders’ Equity | $ | 8,240.2 | $ | 7,616.7 |
Rail N.A. | Rail Int’l | Portfolio Management | ASC | Other | GATX Consolidated | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
Lease revenue | $ | 220.9 | $ | 52.2 | $ | 0.3 | $ | 1.0 | $ | — | $ | 274.4 | |||||||||||
Marine operating revenue | — | — | 2.4 | 10.7 | — | 13.1 | |||||||||||||||||
Other revenue | 27.4 | 2.0 | 0.1 | — | — | 29.5 | |||||||||||||||||
Total Revenues | 248.3 | 54.2 | 2.8 | 11.7 | — | 317.0 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Maintenance expense | 68.8 | 12.1 | — | 0.3 | — | 81.2 | |||||||||||||||||
Marine operating expense | — | — | 4.6 | 7.5 | — | 12.1 | |||||||||||||||||
Depreciation expense | 64.3 | 14.0 | 1.6 | — | — | 79.9 | |||||||||||||||||
Operating lease expense | 13.7 | — | — | — | — | 13.7 | |||||||||||||||||
Other operating expense | 6.4 | 1.5 | 0.1 | — | — | 8.0 | |||||||||||||||||
Total Expenses | 153.2 | 27.6 | 6.3 | 7.8 | — | 194.9 | |||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
Net gain on asset dispositions | 8.2 | 0.4 | 0.3 | — | — | 8.9 | |||||||||||||||||
Interest (expense) income, net | (34.2 | ) | (9.9 | ) | (2.7 | ) | (1.4 | ) | 1.7 | (46.5 | ) | ||||||||||||
Other expense | (0.7 | ) | (2.3 | ) | — | — | (0.2 | ) | (3.2 | ) | |||||||||||||
Share of affiliates’ pre-tax income | — | — | 18.2 | — | — | 18.2 | |||||||||||||||||
Segment profit | $ | 68.4 | $ | 14.8 | $ | 12.3 | $ | 2.5 | $ | 1.5 | $ | 99.5 | |||||||||||
Less: | |||||||||||||||||||||||
Selling, general and administrative expense | 46.1 | ||||||||||||||||||||||
Income taxes (includes $3.5 related to affiliates’ earnings) | 11.9 | ||||||||||||||||||||||
Net income | $ | 41.5 | |||||||||||||||||||||
Selected Data: | |||||||||||||||||||||||
Investment volume | $ | 99.0 | $ | 33.1 | $ | — | $ | 14.5 | $ | 0.7 | $ | 147.3 | |||||||||||
Net Gain on Asset Dispositions | |||||||||||||||||||||||
Asset Remarketing Income: | |||||||||||||||||||||||
Net gains on disposition of owned assets | $ | 9.7 | $ | — | — | $ | — | $ | — | $ | 9.7 | ||||||||||||
Residual sharing income | 0.1 | — | 0.3 | — | — | 0.4 | |||||||||||||||||
Non-remarketing net (loss) gains (1) | (1.6 | ) | 0.4 | — | — | — | (1.2 | ) | |||||||||||||||
$ | 8.2 | $ | 0.4 | 0.3 | $ | — | $ | — | $ | 8.9 |
Rail N.A. | Rail Int’l | Portfolio Management | ASC | Other | GATX Consolidated | ||||||||||||||||||
Revenues | |||||||||||||||||||||||
Lease revenue | $ | 219.5 | $ | 52.4 | $ | 0.3 | $ | 1.0 | $ | — | $ | 273.2 | |||||||||||
Marine operating revenue | — | — | 4.4 | 9.8 | — | 14.2 | |||||||||||||||||
Other revenue | 15.8 | 2.0 | 0.1 | — | — | 17.9 | |||||||||||||||||
Total Revenues | 235.3 | 54.4 | 4.8 | 10.8 | — | 305.3 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Maintenance expense | 68.1 | 12.5 | — | 0.6 | — | 81.2 | |||||||||||||||||
Marine operating expense | — | — | 4.3 | 8.2 | — | 12.5 | |||||||||||||||||
Depreciation expense | 61.5 | 14.1 | 1.8 | — | — | 77.4 | |||||||||||||||||
Operating lease expense | 13.0 | — | — | — | — | 13.0 | |||||||||||||||||
Other operating expense | 6.9 | 1.5 | 0.2 | — | — | 8.6 | |||||||||||||||||
Total Expenses | 149.5 | 28.1 | 6.3 | 8.8 | — | 192.7 | |||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
Net gain on asset dispositions | 54.1 | 1.6 | 0.3 | 0.1 | — | 56.1 | |||||||||||||||||
Interest (expense) income, net | (30.2 | ) | (8.7 | ) | (2.3 | ) | (1.3 | ) | 2.6 | (39.9 | ) | ||||||||||||
Other expense | (0.9 | ) | (0.2 | ) | — | — | (0.2 | ) | (1.3 | ) | |||||||||||||
Share of affiliates’ pre-tax income | 0.1 | — | 17.4 | — | — | 17.5 | |||||||||||||||||
Segment profit | $ | 108.9 | $ | 19.0 | $ | 13.9 | $ | 0.8 | $ | 2.4 | $ | 145.0 | |||||||||||
Less: | |||||||||||||||||||||||
Selling, general and administrative expense | 44.9 | ||||||||||||||||||||||
Income taxes (includes $3.2 related to affiliates’ earnings) | 23.8 | ||||||||||||||||||||||
Net income | $ | 76.3 | |||||||||||||||||||||
Selected Data: | |||||||||||||||||||||||
Investment volume | $ | 136.5 | $ | 29.5 | $ | — | $ | 11.7 | $ | 0.7 | $ | 178.4 | |||||||||||
Net Gain on Asset Dispositions | |||||||||||||||||||||||
Asset Remarketing Income: | |||||||||||||||||||||||
Net gains on disposition of owned assets | $ | 49.9 | $ | — | $ | — | $ | 0.1 | $ | — | $ | 50.0 | |||||||||||
Residual sharing income | 0.1 | — | 0.3 | — | — | 0.4 | |||||||||||||||||
Non-remarketing net gains (1) | 4.1 | 1.6 | — | — | — | 5.7 | |||||||||||||||||
$ | 54.1 | $ | 1.6 | $ | 0.3 | $ | 0.1 | $ | — | $ | 56.1 |
3/31/2019 | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | ||||||||||||||||
Assets by Segment, as adjusted (non-GAAP)* | ||||||||||||||||||||
Rail North America | $ | 5,646.7 | $ | 5,651.0 | $ | 5,418.2 | $ | 5,409.0 | $ | 5,362.2 | ||||||||||
Rail International | 1,315.6 | 1,309.7 | 1,294.5 | 1,266.6 | 1,329.0 | |||||||||||||||
Portfolio Management | 612.8 | 601.2 | 614.6 | 605.8 | 593.1 | |||||||||||||||
ASC | 311.1 | 297.7 | 303.4 | 313.6 | 298.2 | |||||||||||||||
Other | 99.4 | 80.6 | 60.7 | 61.1 | 59.8 | |||||||||||||||
Total Assets, excluding cash, as adjusted (non-GAAP) | $ | 7,985.6 | $ | 7,940.2 | $ | 7,691.4 | $ | 7,656.1 | $ | 7,642.3 | ||||||||||
Debt and Lease Obligations, Net of Unrestricted Cash* | ||||||||||||||||||||
Unrestricted cash | $ | (248.4 | ) | $ | (100.2 | ) | $ | (254.5 | ) | $ | (237.4 | ) | $ | (233.1 | ) | |||||
Commercial paper and bank credit facilities | 15.9 | 110.8 | — | 4.3 | 4.4 | |||||||||||||||
Recourse debt | 4,768.1 | 4,429.7 | 4,397.3 | 4,397.9 | 4,359.5 | |||||||||||||||
Operating lease obligations | 456.3 | — | — | — | — | |||||||||||||||
Finance lease obligations | 11.0 | 11.3 | 11.6 | 11.9 | 12.2 | |||||||||||||||
Total debt and lease obligations, net of unrestricted cash (GAAP) | 5,002.9 | 4,451.6 | 4,154.4 | 4,176.7 | 4,143.0 | |||||||||||||||
Off-balance sheet recourse debt (1) | — | 430.2 | 432.6 | 401.7 | 411.7 | |||||||||||||||
Total debt and lease obligations, net of unrestricted cash, as adjusted (non-GAAP) (2) | $ | 5,002.9 | $ | 4,881.8 | $ | 4,587.0 | $ | 4,578.4 | $ | 4,554.7 | ||||||||||
Shareholders’ Equity | $ | 1,809.2 | $ | 1,788.1 | $ | 1,838.0 | $ | 1,817.6 | $ | 1,839.7 | ||||||||||
Recourse Leverage (3) | 2.8 | 2.7 | 2.5 | 2.5 | 2.5 |
(1) | Under the new lease accounting standard, off-balance sheet recourse debt is no longer applicable beginning in 2019. |
(2) | Includes on- and off-balance sheet debt, commercial paper and bank credit facilities, and operating and finance lease obligations, net of unrestricted cash. |
(3) | Calculated as total recourse debt / shareholder's equity. |
Reconciliation of Total Assets, excluding cash (GAAP) to Total Assets, excluding cash, as adjusted (non-GAAP)* | ||||||||||||||||||||
Total Assets | $ | 8,240.2 | $ | 7,616.7 | $ | 7,517.4 | $ | 7,495.5 | $ | 7,468.0 | ||||||||||
Less: cash | (254.6 | ) | (106.7 | ) | (258.6 | ) | (241.1 | ) | (237.4 | ) | ||||||||||
Total Assets, excluding cash (GAAP) | 7,985.6 | 7,510.0 | 7,258.8 | 7,254.4 | 7,230.6 | |||||||||||||||
Add off-balance sheet assets: | ||||||||||||||||||||
Rail North America | — | 430.2 | 432.6 | 401.7 | 411.7 | |||||||||||||||
Total Assets, excluding cash, as adjusted (non-GAAP) | $ | 7,985.6 | $ | 7,940.2 | $ | 7,691.4 | $ | 7,656.1 | $ | 7,642.3 |
3/31/2019 | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | ||||||||||
Rail North America Statistics | ||||||||||||||
Lease Price Index (LPI) (1) | ||||||||||||||
Average renewal lease rate change | 5.2 | % | (0.9 | )% | (11.5 | )% | (16.1 | )% | (11.6 | )% | ||||
Average renewal term (months) | 39 | 43 | 33 | 41 | 34 | |||||||||
Fleet Rollforward (2) | ||||||||||||||
Beginning balance | 105,472 | 103,420 | 102,890 | 102,597 | 103,730 | |||||||||
Cars added | 617 | 3,120 | 1,381 | 1,231 | 1,226 | |||||||||
Cars scrapped | (662 | ) | (387 | ) | (431 | ) | (720 | ) | (673 | ) | ||||
Cars sold | (597 | ) | (681 | ) | (420 | ) | (218 | ) | (1,686 | ) | ||||
Ending balance | 104,830 | 105,472 | 103,420 | 102,890 | 102,597 | |||||||||
Utilization | 99.4 | % | 99.4 | % | 99.2 | % | 98.9 | % | 98.2 | % | ||||
Average active railcars | 104,613 | 103,387 | 102,056 | 101,330 | 101,208 | |||||||||
Boxcar Fleet | ||||||||||||||
Ending balance | 16,006 | 16,220 | 15,859 | 16,007 | 16,227 | |||||||||
Utilization | 95.2 | % | 94.2 | % | 94.7 | % | 92.8 | % | 93.5 | % | ||||
Rail Europe Statistics | ||||||||||||||
Fleet Rollforward | ||||||||||||||
Beginning balance | 23,412 | 23,234 | 23,124 | 23,004 | 23,166 | |||||||||
Cars added | 185 | 281 | 258 | 245 | 63 | |||||||||
Cars scrapped/sold | (66 | ) | (103 | ) | (148 | ) | (125 | ) | (225 | ) | ||||
Ending balance | 23,531 | 23,412 | 23,234 | 23,124 | 23,004 | |||||||||
Utilization | 98.9 | % | 98.8 | % | 98.4 | % | 97.8 | % | 96.7 | % | ||||
Average active railcars | 23,105 | 22,949 | 22,759 | 22,407 | 22,327 | |||||||||
Rail North America Industry Statistics | ||||||||||||||
Manufacturing Capacity Utilization Index (3) | 78.8 | % | 79.5 | % | 78.4 | % | 77.8 | % | 77.5 | % | ||||
Year-over-year Change in U.S. Carloadings (excl. intermodal) (4) | (3.1 | )% | 1.8 | % | 2.0 | % | 1.3 | % | (0.3 | )% | ||||
Year-over-year Change in U.S. Carloadings (chemical) (4) | (1.0 | )% | 3.8 | % | 4.5 | % | 3.8 | % | 3.1 | % | ||||
Year-over-year Change in U.S. Carloadings (petroleum) (4) | 22.0 | % | 18.2 | % | 14.7 | % | 6.8 | % | 3.3 | % | ||||
Production Backlog at Railcar Manufacturers (5) | n/a (6) | 80,223 | 73,812 | 65,161 | 55,216 | |||||||||
American Steamship Company Statistics | ||||||||||||||
Total Net Tons Carried (millions) | 1.2 | 8.5 | 8.7 | 8.1 | 0.9 |
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