Leases Lessor, Operating Leases (Notes)

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Lessee, Finance Leases [Text Block]

Leases

GATX as Lessor

We lease railcars, locomotives, aircraft spare engines, and tank containers under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. In accordance with applicable guidance, we do not separate lease and non-lease components when reporting revenue for our full-service operating leases. In some cases, we lease railcars and tank containers that, at commencement, are classified as finance leases. For certain operating leases, revenue is based on equipment usage and is recognized when earned. Typically, our leases do not provide customers with renewal options or options to purchase the asset. Our lease agreements do not generally have residual value guarantees. We collect reimbursements from customers for damage to our railcars, as well as additional rental payments for usage above specified levels, as provided in the lease agreements.

The following table shows the components of our lease revenue for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease revenue:
Fixed lease revenue	$	1,145.1	$	1,058.3	$	1,063.4
Variable lease revenue	93.7		86.5		70.1
Total operating lease revenue	$	1,238.8	$	1,144.8	$	1,133.5
Finance lease revenue	12.6		9.8		7.0
Total lease revenue	$	1,251.4	$	1,154.6	$	1,140.5

In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer liability repairs. This additional revenue is reported in other revenue in the statements of comprehensive income and was $94.6 million, $81.5 million and $74.8 million in 2023, 2022 and 2021.

The following table shows the components of our finance leases as of December 31 (in millions):

	2023		2022
Total contractual lease payments receivable	$	171.8	$	110.4
Estimated unguaranteed residual value of leased assets	17.2		18.1
Unearned income	(52.6)		(32.0)
Finance leases	$	136.4	$	96.5

The following table shows our future contractual receipts from our noncancelable operating and finance leases as of December 31, 2023 (in millions):

	Operating Leases (1)		Finance Leases		Total
2024	$	1,095.1	$	35.1	$	1,130.2
2025	829.2		33.8		863.0
2026	620.6		31.3		651.9
2027	468.4		21.4		489.8
2028	350.7		18.1		368.8
Thereafter	912.2		32.1		944.3
	$	4,276.2	$	171.8	$	4,448.0

__________

(1) The future contractual receipts due under our full-service operating leases include executory costs such as maintenance, car taxes, and insurance.

GATX as Lessee

We lease assets, including railcars at North America, as well as other assets such as offices, maintenance facilities, and other general purpose equipment. Railcars are subleased to customers as part of our normal course of operations. Certain leases have options to purchase the underlying assets early, renew the lease, or purchase the underlying assets at the end of the lease term. The specific terms of the renewal and purchase options vary, and we did not include these amounts in our future contractual rental payments. Additionally, the contractual rental payments do not include amounts we are required to pay for licenses, taxes, insurance, and maintenance. Our lease agreements do not contain any material residual value guarantees. At December 31, 2023, we leased 5,162 railcars at Rail North America, all of which are accounted for as operating leases.

To calculate the right-of-use asset and lease liability for our leases, we use the implicit rate if readily determinable or when the implicit rate is not readily determinable, we use our incremental borrowing rate. Our incremental borrowing rate is the interest rate we estimate we would have to pay to borrow on a collateralized basis over a similar term of the lease payments. The implicit rate was measurable for railcars leased at Rail North America. For our other operating leases, we used our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term.

The following table shows the components of lease expense for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease cost (1):
Fixed lease cost - operating leases	$	41.6	$	41.4	$	40.0
Finance lease cost:
Amortization of right-of-use assets	—		—		0.2
Total lease cost	$	41.6	$	41.4	$	40.2

________

(1) Total operating lease cost includes amounts recorded in operating lease expense and selling, general and administrative expense. Operating lease cost also includes short-term leases, which are immaterial.

Operating lease cost includes amounts attributable to sale lease-back financing transactions for railcars we lease to customers. Lease revenue of $41.3 million for 2023 was recognized in connection with these operating leases compared to $40.1 million for 2022 and $40.7 million for 2021.

The following table shows the maturities of our lease liabilities as of December 31, 2023 (in millions):

	Operating Leases
2024	$	39.4
2025	36.8
2026	45.2
2027	38.7
2028	25.4
Thereafter	72.8
Total undiscounted lease payments	$	258.3
Less: amounts representing interest	(31.5)
Total discounted lease liabilities	$	226.8

The following table shows the lease terms and discount rates related to leases as of December 31:

	2023		2022
Weighted-average remaining lease term (in years):
Operating leases	7.0		7.9
Weighted-average discount rate:
Operating leases	3.61	%	3.58	%

The following table shows other information related to leases for the years ended December 31 (in millions):

	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	41.2	$	42.4	$	40.5
Financing cash flows for finance leases	—		1.5		77.2
Total cash for leases	$	41.2	$	43.9	$	117.7
Non-cash financing lease transactions (1)	$	—	$	—	$	45.1

__________

(1) Non-cash financing lease transactions are a result of the reclassification from operating lease liability to finance lease liability upon notice of the intent to exercise an early buy-out option.

We did not exercise any options in 2023 to acquire railcars previously recorded on the balance sheet as a finance lease, compared to the exercise of options to acquire 21 railcars for $1.5 million in 2022 and 2,329 railcars for $77.2 million in 2021.

Lessor, Operating Leases [Text Block]

Leases

GATX as Lessor

We lease railcars, locomotives, aircraft spare engines, and tank containers under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. In accordance with applicable guidance, we do not separate lease and non-lease components when reporting revenue for our full-service operating leases. In some cases, we lease railcars and tank containers that, at commencement, are classified as finance leases. For certain operating leases, revenue is based on equipment usage and is recognized when earned. Typically, our leases do not provide customers with renewal options or options to purchase the asset. Our lease agreements do not generally have residual value guarantees. We collect reimbursements from customers for damage to our railcars, as well as additional rental payments for usage above specified levels, as provided in the lease agreements.

The following table shows the components of our lease revenue for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease revenue:
Fixed lease revenue	$	1,145.1	$	1,058.3	$	1,063.4
Variable lease revenue	93.7		86.5		70.1
Total operating lease revenue	$	1,238.8	$	1,144.8	$	1,133.5
Finance lease revenue	12.6		9.8		7.0
Total lease revenue	$	1,251.4	$	1,154.6	$	1,140.5

In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer liability repairs. This additional revenue is reported in other revenue in the statements of comprehensive income and was $94.6 million, $81.5 million and $74.8 million in 2023, 2022 and 2021.

The following table shows the components of our finance leases as of December 31 (in millions):

	2023		2022
Total contractual lease payments receivable	$	171.8	$	110.4
Estimated unguaranteed residual value of leased assets	17.2		18.1
Unearned income	(52.6)		(32.0)
Finance leases	$	136.4	$	96.5

The following table shows our future contractual receipts from our noncancelable operating and finance leases as of December 31, 2023 (in millions):

	Operating Leases (1)		Finance Leases		Total
2024	$	1,095.1	$	35.1	$	1,130.2
2025	829.2		33.8		863.0
2026	620.6		31.3		651.9
2027	468.4		21.4		489.8
2028	350.7		18.1		368.8
Thereafter	912.2		32.1		944.3
	$	4,276.2	$	171.8	$	4,448.0

__________

(1) The future contractual receipts due under our full-service operating leases include executory costs such as maintenance, car taxes, and insurance.

GATX as Lessee

We lease assets, including railcars at North America, as well as other assets such as offices, maintenance facilities, and other general purpose equipment. Railcars are subleased to customers as part of our normal course of operations. Certain leases have options to purchase the underlying assets early, renew the lease, or purchase the underlying assets at the end of the lease term. The specific terms of the renewal and purchase options vary, and we did not include these amounts in our future contractual rental payments. Additionally, the contractual rental payments do not include amounts we are required to pay for licenses, taxes, insurance, and maintenance. Our lease agreements do not contain any material residual value guarantees. At December 31, 2023, we leased 5,162 railcars at Rail North America, all of which are accounted for as operating leases.

To calculate the right-of-use asset and lease liability for our leases, we use the implicit rate if readily determinable or when the implicit rate is not readily determinable, we use our incremental borrowing rate. Our incremental borrowing rate is the interest rate we estimate we would have to pay to borrow on a collateralized basis over a similar term of the lease payments. The implicit rate was measurable for railcars leased at Rail North America. For our other operating leases, we used our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term.

The following table shows the components of lease expense for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease cost (1):
Fixed lease cost - operating leases	$	41.6	$	41.4	$	40.0
Finance lease cost:
Amortization of right-of-use assets	—		—		0.2
Total lease cost	$	41.6	$	41.4	$	40.2

________

(1) Total operating lease cost includes amounts recorded in operating lease expense and selling, general and administrative expense. Operating lease cost also includes short-term leases, which are immaterial.

Operating lease cost includes amounts attributable to sale lease-back financing transactions for railcars we lease to customers. Lease revenue of $41.3 million for 2023 was recognized in connection with these operating leases compared to $40.1 million for 2022 and $40.7 million for 2021.

The following table shows the maturities of our lease liabilities as of December 31, 2023 (in millions):

	Operating Leases
2024	$	39.4
2025	36.8
2026	45.2
2027	38.7
2028	25.4
Thereafter	72.8
Total undiscounted lease payments	$	258.3
Less: amounts representing interest	(31.5)
Total discounted lease liabilities	$	226.8

The following table shows the lease terms and discount rates related to leases as of December 31:

	2023		2022
Weighted-average remaining lease term (in years):
Operating leases	7.0		7.9
Weighted-average discount rate:
Operating leases	3.61	%	3.58	%

The following table shows other information related to leases for the years ended December 31 (in millions):

	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	41.2	$	42.4	$	40.5
Financing cash flows for finance leases	—		1.5		77.2
Total cash for leases	$	41.2	$	43.9	$	117.7
Non-cash financing lease transactions (1)	$	—	$	—	$	45.1

__________

(1) Non-cash financing lease transactions are a result of the reclassification from operating lease liability to finance lease liability upon notice of the intent to exercise an early buy-out option.

We did not exercise any options in 2023 to acquire railcars previously recorded on the balance sheet as a finance lease, compared to the exercise of options to acquire 21 railcars for $1.5 million in 2022 and 2,329 railcars for $77.2 million in 2021.

Lessee, Operating Leases [Text Block]

Leases

GATX as Lessor

We lease railcars, locomotives, aircraft spare engines, and tank containers under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. In accordance with applicable guidance, we do not separate lease and non-lease components when reporting revenue for our full-service operating leases. In some cases, we lease railcars and tank containers that, at commencement, are classified as finance leases. For certain operating leases, revenue is based on equipment usage and is recognized when earned. Typically, our leases do not provide customers with renewal options or options to purchase the asset. Our lease agreements do not generally have residual value guarantees. We collect reimbursements from customers for damage to our railcars, as well as additional rental payments for usage above specified levels, as provided in the lease agreements.

The following table shows the components of our lease revenue for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease revenue:
Fixed lease revenue	$	1,145.1	$	1,058.3	$	1,063.4
Variable lease revenue	93.7		86.5		70.1
Total operating lease revenue	$	1,238.8	$	1,144.8	$	1,133.5
Finance lease revenue	12.6		9.8		7.0
Total lease revenue	$	1,251.4	$	1,154.6	$	1,140.5

In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer liability repairs. This additional revenue is reported in other revenue in the statements of comprehensive income and was $94.6 million, $81.5 million and $74.8 million in 2023, 2022 and 2021.

The following table shows the components of our finance leases as of December 31 (in millions):

	2023		2022
Total contractual lease payments receivable	$	171.8	$	110.4
Estimated unguaranteed residual value of leased assets	17.2		18.1
Unearned income	(52.6)		(32.0)
Finance leases	$	136.4	$	96.5

The following table shows our future contractual receipts from our noncancelable operating and finance leases as of December 31, 2023 (in millions):

	Operating Leases (1)		Finance Leases		Total
2024	$	1,095.1	$	35.1	$	1,130.2
2025	829.2		33.8		863.0
2026	620.6		31.3		651.9
2027	468.4		21.4		489.8
2028	350.7		18.1		368.8
Thereafter	912.2		32.1		944.3
	$	4,276.2	$	171.8	$	4,448.0

__________

(1) The future contractual receipts due under our full-service operating leases include executory costs such as maintenance, car taxes, and insurance.

GATX as Lessee

We lease assets, including railcars at North America, as well as other assets such as offices, maintenance facilities, and other general purpose equipment. Railcars are subleased to customers as part of our normal course of operations. Certain leases have options to purchase the underlying assets early, renew the lease, or purchase the underlying assets at the end of the lease term. The specific terms of the renewal and purchase options vary, and we did not include these amounts in our future contractual rental payments. Additionally, the contractual rental payments do not include amounts we are required to pay for licenses, taxes, insurance, and maintenance. Our lease agreements do not contain any material residual value guarantees. At December 31, 2023, we leased 5,162 railcars at Rail North America, all of which are accounted for as operating leases.

To calculate the right-of-use asset and lease liability for our leases, we use the implicit rate if readily determinable or when the implicit rate is not readily determinable, we use our incremental borrowing rate. Our incremental borrowing rate is the interest rate we estimate we would have to pay to borrow on a collateralized basis over a similar term of the lease payments. The implicit rate was measurable for railcars leased at Rail North America. For our other operating leases, we used our incremental borrowing rate. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Operating lease expense is recognized on a straight-line basis over the lease term.

The following table shows the components of lease expense for the years ended December 31 (in millions):

	2023		2022		2021
Operating lease cost (1):
Fixed lease cost - operating leases	$	41.6	$	41.4	$	40.0
Finance lease cost:
Amortization of right-of-use assets	—		—		0.2
Total lease cost	$	41.6	$	41.4	$	40.2

________

(1) Total operating lease cost includes amounts recorded in operating lease expense and selling, general and administrative expense. Operating lease cost also includes short-term leases, which are immaterial.

Operating lease cost includes amounts attributable to sale lease-back financing transactions for railcars we lease to customers. Lease revenue of $41.3 million for 2023 was recognized in connection with these operating leases compared to $40.1 million for 2022 and $40.7 million for 2021.

The following table shows the maturities of our lease liabilities as of December 31, 2023 (in millions):

	Operating Leases
2024	$	39.4
2025	36.8
2026	45.2
2027	38.7
2028	25.4
Thereafter	72.8
Total undiscounted lease payments	$	258.3
Less: amounts representing interest	(31.5)
Total discounted lease liabilities	$	226.8

The following table shows the lease terms and discount rates related to leases as of December 31:

	2023		2022
Weighted-average remaining lease term (in years):
Operating leases	7.0		7.9
Weighted-average discount rate:
Operating leases	3.61	%	3.58	%

The following table shows other information related to leases for the years ended December 31 (in millions):

	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	41.2	$	42.4	$	40.5
Financing cash flows for finance leases	—		1.5		77.2
Total cash for leases	$	41.2	$	43.9	$	117.7
Non-cash financing lease transactions (1)	$	—	$	—	$	45.1

__________

(1) Non-cash financing lease transactions are a result of the reclassification from operating lease liability to finance lease liability upon notice of the intent to exercise an early buy-out option.

We did not exercise any options in 2023 to acquire railcars previously recorded on the balance sheet as a finance lease, compared to the exercise of options to acquire 21 railcars for $1.5 million in 2022 and 2,329 railcars for $77.2 million in 2021.