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(Exact name of registrant as specified in its charter)
iNew York
i36-1124040
(State
of incorporation)
(I.R.S. Employer Identification No.)
i233 South Wacker Drive
iChicago,iIllinoisi60606-7147
(Address of principal executive offices, including zip code)
(i312) i621-6200
(Registrant's
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of Each Exchange on Which Registered
iCommon Stock
iGATX
iNew
York Stock Exchange
iGATX
iChicago Stock Exchange
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer,""accelerated filer,""smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☒
iLarge
accelerated filer
i☐
Smaller reporting company
☐
Non-accelerated filer
i☐
Emerging
growth company
☐
Accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. i☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No ☒
There were i35.6 million
common shares outstanding at March 31, 2024.
Statements in this report not based on historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. Forward-looking statements include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects, or future events. In some cases, forward-looking statements can be identified by the use of words such as "may,""could,""expect,""intend,""plan,""seek,""anticipate,""believe,""estimate,""predict,""potential,""outlook,""continue,""likely,""will,""would," and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.
The following factors, in addition to those discussed under "Risk Factors" and elsewhere in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023, could cause actual results to differ materially from our current expectations expressed in forward-looking statements:
•a
significant decline in customer demand for our transportation assets or services, including as a result of:
◦prolonged inflation or deflation
◦high interest rates
◦weak macroeconomic conditions and world trade policies
◦weak market conditions in our customers' businesses
◦adverse changes in the price of, or demand for, commodities
◦changes in railroad operations, efficiency, pricing and service offerings, including those related to "precision scheduled railroading" or labor strikes or shortages
◦changes
in, or disruptions to, supply chains
◦availability of pipelines, trucks, and other alternative modes of transportation
◦changes in conditions affecting the aviation industry, including global conflicts, geographic exposure and customer concentrations
◦customers' desire to buy, rather than lease, our transportation assets
◦other operational or commercial needs or decisions of our customers
•inability to maintain our transportation assets on lease at satisfactory rates due to oversupply of assets in the market or other changes in supply and demand
•competitive
factors in our primary markets, including competitors with significantly lower costs of capital
•higher costs associated with increased assignments of our transportation assets 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 purchase commitments for transportation assets
•reduced opportunities to generate asset remarketing income
•inability to successfully consummate and manage ongoing acquisition
and divestiture activities
•reliance on Rolls-Royce in connection with our aircraft spare engine leasing businesses, and the risks that certain factors that adversely affect Rolls-Royce could have an adverse effect on our businesses
•potential obsolescence of our assets
•risks related to our international operations and expansion into new geographic markets, including laws, regulations, tariffs, taxes, treaties or trade barriers affecting our activities in the countries where we do business
•failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion
of our employees
•inability to attract, retain, and motivate qualified personnel, including key management personnel
•inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business
•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 transportation assets
•changes in, or failure to comply with, laws, rules, and regulations
•environmental liabilities and remediation costs
•operational,
functional and regulatory risks associated with climate change, severe weather events and natural disasters, and other environmental, social and governance matters
•U.S. and global political conditions and the impact of increased geopolitical tension and wars, including the ongoing war between Russia and Ukraine and resulting sanctions and countermeasures, on domestic and global economic conditions in general, including supply chain challenges and disruptions
•prolonged inflation or deflation
•fluctuations in foreign exchange rates
•deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs
•the
emergence of new variants of COVID-19 or the occurrence of another widespread health crisis and the impact of measures taken in response
•inability to obtain cost-effective insurance
•changes in assumptions, increases in funding requirements or investment losses in our pension and post-retirement plans
•inadequate allowances to cover credit losses in our portfolio
•asset impairment charges we may be required to recognize
•inability to maintain effective internal control over financial reporting and disclosure controls and procedures
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. iDescription
of Business
As used herein, "GATX,""we,""us,""our," and similar terms refer to GATX Corporation and its subsidiaries, unless indicated otherwise.
We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through ithree primary business segments:
Rail North America, Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.
In the first quarter of 2024, we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of this business segment. Historically, this business segment included marine operations from our liquefied gas-carrying vessels (the "Specialized Gas Vessels"). As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations. The segment is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with
Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce") that lease aircraft spare engines, and GATX Engine Leasing ("GEL"), our business that directly owns aircraft spare engines that are leased to airline customers or employed in an engine capacity agreement.
NOTE 2. iBasis of Presentation
We
prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our unaudited condensed consolidated financial statements do not include all of the information and footnotes required for complete financial statements. We have included all of the normal recurring adjustments that we deemed necessary for a fair presentation.
Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2024. In particular, asset remarketing income does not occur evenly throughout the year. For more information,
refer to the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2023.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
New Accounting Pronouncements Not Yet Adopted
Standard/Description
Effective
Date and Adoption Considerations
Effect on Financial Statements or Other Significant Matters
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance disclosures for the effective rate reconciliation and income taxes paid.
The new guidance is effective for us beginning with our 2025 Form 10-K, with early adoption permitted.
We continue to assess the effect the new guidance will have on our disclosure. We expect the primary impact to be the level of disaggregation disclosed in the effective
rate reconciliation table and the addition of income taxes paid by jurisdiction.
Segment Reporting
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, particularly around the disclosure of segment expenses that are regularly reported to the chief operating decision maker ("CODM") and included within each reported measure of segment profit.
The new guidance is effective for us beginning with our 2024 Form 10-K, with early adoption permitted. We plan to adopt this standard for our 2024 Form 10-K.
We
are currently assessing whether additional disclosures around significant segment expenses will be required in our segment disclosures.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 3. iRevenue
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We disaggregate revenue into four categories as presented on our statement of comprehensive income:
Lease Revenue
Lease revenue, which includes operating lease revenue and finance lease revenue, is our primary source of revenue.
Operating Lease Revenue
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. We do not offer stand-alone maintenance service contracts. Operating lease revenue is within the scope of Accounting Standards Codification ("ASC") Topic 842 "Leases"("Topic 842"), and we have elected not to separate non-lease components from the associated lease component for qualifying leases. Operating lease revenue is recognized on a straight-line basis over the term of the underlying lease. As a result, lease revenue may not be recognized in the same period as maintenance and other costs, which we expense as incurred. Variable rents are recognized when applicable
contingencies are resolved. Revenue is not recognized if collectability is not reasonably assured. See "Note 5. Leases".
Finance Lease Revenue
In certain cases, we lease railcars and tank containers that, at lease inception, are classified as finance leases. In accordance with Topic 842, finance lease revenue is recognized using the effective interest method, using the interest rate implicit in the lease. See "Note 5. Leases".
Non-Dedicated Engine Revenue
Certain of our owned aircraft spare engines are part of a pool of non-dedicated spare engines managed under a capacity agreement with Rolls-Royce. Revenue is earned based
on our continued ability to meet engine capacity requirements under the agreement, which requires us to enroll a minimum number of engines in a pool of non-dedicated spare engines for short-term lease to Rolls-Royce customers. We recognize revenue based on our right to receive a portion of the revenue earned by the pool, which is calculated based on the average engine flight hours reported for each type of engine enrolled into the pool.
Marine Operating Revenue
Historically, we generated marine operating revenue through shipping services completed by our marine vessels. For vessels that operated in a pooling arrangement, we recognized pool revenue based on the right to receive our portion of net distributions reported by the pool, with net distributions being the net voyage revenue of the pool after deduction
of voyage expenses. For vessels that operated outside of a pooling arrangement, we recognized revenue over time as the performance obligation is satisfied, beginning when cargo is loaded through its delivery and discharge. As of the first quarter of 2024, we no longer have marine operating revenue, as all marine vessels were sold as of December 31, 2023.
Other Revenue
Other revenue is comprised of customer liability repair revenue, termination fees, interest income, and other miscellaneous revenues. Select components of other revenue are within the scope of ASC Topic 606, "Revenue from Contracts with Customers".
Revenue attributable to terms provided in our lease contracts are variable lease components that are recognized when earned, in accordance with Topic 842.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 4. Operating Assets and Facilities
The
following table shows the components of our operating assets and facilities (in millions):
March 31 2024
December 31 2023
Railcars and locomotives
$
i11,967.7
$
i11,700.8
Aircraft
spare engines
i769.7
i769.7
Tank containers
i237.8
i237.7
Buildings,
leasehold improvements, and other equipment
i250.7
i253.0
Other
i94.2
i120.7
$
i13,320.1
$
i13,081.9
Less:
allowance for depreciation
(i3,700.3)
(i3,670.7)
Net
operating assets and facilities
$
i9,619.8
$
i9,411.2
Total
depreciation expense was $i100.5 million for the three months ended March 31, 2024 and $i93.5 million for the three months ended March 31, 2023.
NOTE
5. iLeases
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.
ii
The
following table shows the components of our lease revenue (in millions):
Three Months Ended March 31
2024
2023
Operating lease revenue:
Fixed
lease revenue
$
i305.1
$
i276.8
Variable
lease revenue
i24.6
i22.5
Total
operating lease revenue
$
i329.7
$
i299.3
Finance
lease revenue
i3.6
i2.7
Total
lease revenue
$
i333.3
$
i302.0
//
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 $i28.7 million for the three months ended March 31, 2024 and $i23.9
million for the three months ended March 31, 2023.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE
6. iFair Value
The assets and liabilities that GATX records at fair value on a recurring basis consisted entirely of derivatives at March 31, 2024 and December 31, 2023.
In addition, we review long-lived assets, such as operating assets and facilities, investments in affiliates, and goodwill, for impairment whenever circumstances indicate that the carrying amount of these assets may not be recoverable
or when assets may be classified as held for sale. We determine the fair value of the respective assets using Level 3 inputs, including estimates of discounted future cash flows, independent appraisals, and market comparables, as applicable.
Derivative Instruments
Fair Value Hedges
We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting a portion of our fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. We had ifour
instruments outstanding with an aggregate notional amount of $i200.0 million as of March 31, 2024 with maturities ranging from 2025 to 2027 and ifour instruments outstanding with an aggregate
notional amount of $i200.0 million as of December 31, 2023 with maturities ranging from 2025 to 2027.
Cash Flow Hedges
We use Treasury rate locks and swap rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps, forwards, and put/call options to hedge our exposure to fluctuations in the exchange rates of foreign currencies for certain loans and operating
expenses denominated in non-functional currencies. We had inine instruments outstanding with an aggregate notional amount of $i19.7 million as of March 31, 2024 that mature in 2024 and ione
instrument outstanding with an aggregate notional amount of $i131.0 million as of December 31, 2023 that matured in 2024. Within the next 12 months, we expect to reclassify $i1.5
million ($i1.1 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive loss to interest expense. We reclassify these amounts when interest and operating lease expense on the related hedged transactions affect earnings.
Non-Designated Derivatives
We do not hold derivative financial instruments for purposes other than hedging, although
certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other income (expense) immediately.
Certain of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. The aggregate fair value of our derivative instruments with credit risk related contingent features that were in a liability position was $i8.4
million as of March 31, 2024 and $i8.0 million as of December 31, 2023. We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.
In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract,
our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.
We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data. As of March 31, 2024 and December 31, 2023, all derivatives were classified as Level 2 in the fair value hierarchy. There were no derivatives classified as Level 1 or Level 3.
i
The
following table shows the amounts recorded on the balance sheet related to cumulative basis adjustments for fair value hedges (in millions):
Carrying Amount of the Hedged Assets/(Liabilities)
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
Line
Item in the Balance Sheet in Which the Hedged Item is Included
Location
of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into Earnings
Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into Earnings
Three Months Ended March 31
2024
2023
Interest
expense
$
i0.4
$
i0.4
Other
income (expense)
(i3.7)
i1.6
Total
$
(i3.3)
$
i2.0
The
following tables show the impact of our fair value and cash flow hedge accounting relationships, as well as the impact of our non-designated derivatives, on the statements of comprehensive income (in millions):
Amount of Gain (Loss) Recognized in Interest Expense on Fair Value and Cash Flow Hedging Relationships
Amount of gain reclassified from accumulated other comprehensive loss into earnings (1)
i3.7
(i1.6)
Gain
(loss) on non-designated derivative contracts
(i0.9)
(i3.7)
_________
i
(1) These
amounts are substantially offset by foreign currency remeasurement adjustments on related hedged instruments, also recognized in other income (expense).
Other Financial Instruments
Except for derivatives, as disclosed above, GATX has no other assets and liabilities measured at fair value on a recurring basis. The carrying amounts of cash and cash equivalents, restricted cash, rent and other receivables, accounts payable, and commercial paper and borrowings under bank credit facilities with maturities under one year approximate fair value due to the short maturity of those instruments.
We estimate the fair values of fixed and floating rate debt using discounted cash flow analyses that are based on interest rates
currently offered for loans with similar terms to borrowers of similar credit quality. The inputs we use to estimate each of these values are classified in Level 2 of the fair value hierarchy because they are directly or indirectly observable inputs.
i
The following table shows the carrying amounts and fair values of our other financial instruments (in millions):
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 7. Pension and Other Post-Retirement Benefits
i
The following table shows the components of net periodic cost for the three months ended March 31, 2024 and 2023
(in millions):
2024 Pension Benefits
2023 Pension Benefits
2024 Retiree Health and Life
2023 Retiree Health and Life
Service
cost
$
i1.4
$
i1.3
$
i—
$
i—
Interest
cost
i4.0
i4.2
i0.2
i0.2
Expected
return on plan assets
(i5.4)
(i5.4)
i—
i—
Amortization
of (1):
Unrecognized prior service credit
i—
i—
(i0.1)
(i0.1)
Unrecognized
net actuarial loss (gain)
i0.2
i0.2
(i0.1)
(i0.1)
Net
periodic cost
$
i0.2
$
i0.3
$
i—
$
i—
_________
(1) Amounts
reclassified from accumulated other comprehensive loss.
/
The service cost component of net periodic cost was $i1.4 million for the three months ended March 31, 2024 and $i1.3 million
for the three months ended March 31, 2023 and is recorded in selling, general and administrative expense. The non-service components totaled income of $i1.2 million for the three months ended March 31, 2024 and income of $i1.0 million
for the three months ended March 31, 2023 and are recorded in other income (expense) in the statements of comprehensive income.
NOTE 8. iShare-Based Compensation
During the three months ended March 31, 2024, we
granted i194,100 non-qualified employee stock options, i31,970
restricted stock units, i38,940 performance shares, and i1,838
restricted stock units awarded to non-employee directors. For the three months ended March 31, 2024, total share-based compensation expense was $i5.4 million and the related tax benefits were $i1.4
million. For the three months ended March 31, 2023, total share-based compensation expense was $i3.5 million and the related tax benefits were $i0.9
million.
The estimated fair value of our 2024 non-qualified employee stock option awards and related underlying assumptions are shown in the table below:
2024
Weighted-average estimated fair value
$
i45.22
Quarterly
dividend rate
$
i0.58
Expected term of stock options, in years
i4.2
Risk-free
interest rate
i4.0
%
Dividend yield
i1.8
%
Expected
stock price volatility
i34.7
%
Present value of dividends
$
i8.87
NOTE
9. iIncome Taxes
The following table shows our effective income tax rate for the three months ended March 31:
2024
2023
Effective
income tax rate
i25.4
%
i26.3
%
The
decrease in the effective rate for the current year compared to the prior year was primarily due to the incremental benefits associated with equity awards vested or exercised during the year, as well as the mix of pre-tax income among domestic and foreign jurisdictions, which are taxed at different rates.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
i
NOTE
10. iCommercial Commitments
We have entered into various commercial commitments, including standby letters of credit and performance bonds. These commercial commitments require us to fulfill specific obligations in the event of third-party demands. Similar to our balance sheet investments, these commitments expose us to credit, market, and equipment risk. Accordingly, we evaluate these commitments and other contingent obligations using techniques similar to those we use to evaluate funded transactions.
The following
table shows our commercial commitments (in millions):
March 31 2024
December 31 2023
Standby letters of credit and performance bonds
$
i8.7
$
i8.7
Total
commercial commitments (1)
$
i8.7
$
i8.7
_________
(1) There
were no liabilities recorded on the balance sheet for commercial commitments at March 31, 2024 and December 31, 2023. As of March 31, 2024, our outstanding commitments expire in 2024 through 2026. We are not aware of any event that would require us to satisfy any of our commitments.
We are parties to standby letters of credit and performance bonds, which primarily relate to contractual obligations and general liability insurance coverages. No material claims have been made against these obligations, and no material losses are anticipated.
/
NOTE
11. iEarnings per Share
We compute basic and diluted earnings per share using the two-class method, which is an earnings allocation calculation that determines Earnings Per Share ("EPS") for each class of common stock and participating security. Our vested and exercisable stock options contain non-forfeitable rights to dividends or dividend equivalents and are classified as participating securities in the calculation of EPS. Our unvested stock options, restricted stock units, performance shares and non-employee director awards do not contain nonforfeitable rights to dividends
or dividend equivalents and are therefore not classified as participating securities.
i
The following table shows the computation of our basic and diluted earnings per common share (in millions, except per share amounts):
Three
Months Ended March 31
2024
2023
Basic earnings per share:
Net income
$
i74.3
$
i77.4
Less:
Net income allocated to participating securities
(i1.4)
i—
Net
income available to common shareholders
$
i72.9
$
i77.4
Weighted-average
shares outstanding - basic
i35.8
i35.3
Basic
earnings per share
$
i2.04
$
i2.19
Diluted
earnings per share:
Net income
$
i74.3
$
i77.4
Less:
Net income allocated to participating securities
(1) See
"Note 6. Fair Value" and "Note 7. Pension and Other Post-Retirement Benefits" for impacts of the reclassification adjustments on the statements of comprehensive income.
/
NOTE 13. iLegal Proceedings and Other Contingencies
Various
legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against GATX and certain of our subsidiaries. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely.
On June 30, 2023, a third-party complaint was filed by Norfolk Southern Railway Company and Norfolk Southern Corporation (collectively, “Norfolk Southern”) against GATX and several other parties in the Northern District of Ohio (Eastern Division) for contribution and recovery of environmental damages related to the derailment of a Norfolk Southern train in East Palestine, Ohio that included railcars owned by GATX Corporation. The
Company filed a motion to dismiss Norfolk Southern's third-party complaint on September 15, 2023. On March 6, 2024, the Court granted GATX's and the other third-party defendants’ motions and dismissed all Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") claims. The Court also dismissed all state law claims, declining to exercise supplemental jurisdiction over them in light of its dismissal of the CERCLA claims. On March 26, 2024, Norfolk Southern moved the Court for entry of partial final judgment as to the order dismissing the third-party complaint in order to appeal before final judgment the Court’s dismissal order as to GATX and the other third-party defendants.
On July
25, 2023, a separate third-party complaint was filed by Norfolk Southern against GATX and two other defendants in the Northern District of Ohio (Eastern Division) for contribution to personal injury and property damages class claims related to the derailment of the Norfolk Southern train in East Palestine, Ohio. The plaintiffs who had originally filed the complaint against Norfolk Southern ("Plaintiffs") themselves subsequently filed direct claims against GATX and the two other third-party defendants alleging many of the same facts as Norfolk Southern. On September 15, 2023, the Company filed a motion to dismiss Norfolk Southern's third-party complaint, and on September 26, 2023, filed a motion to dismiss the Plaintiffs' complaint. Briefing was completed on October
30, 2023, and the Court issued an order on March 13, 2024, denying in part, and granting in part, the Company’s motion against Norfolk Southern and Plaintiffs. The Court held that Norfolk Southern’s contribution action was premature and dismissed the claim without prejudice but otherwise allowed the remaining claims against GATX to proceed. The Court also dismissed Plaintiffs’ claim for medical monitoring but held that Plaintiffs could seek such damages through their other claims, which could proceed. The Court also consolidated an additional action filed against GATX and others titled Almasy, et al. v. Norfolk Southern Corp., et al. by over i40
individual residents, employees and property owners in East Palestine, Ohio. Plaintiffs and Norfolk Southern have announced a settlement in principle for $i600 million to resolve the consolidated class action claims of those within a 20-mile radius from the derailment, and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment. Norfolk Southern’s claims against GATX remain unchanged.
On December
8, 2023, GATX and three other defendants were named as additional defendants in a putative class action lawsuit originally filed in federal court in Pennsylvania against Norfolk Southern by Pennsylvania school districts and school children. The amended complaint seeks monetary damages for the Pennsylvania plaintiffs for personal injury and property damage allegedly related to the derailment. The Company filed a motion to dismiss on February 23, 2024.
The Company intends to vigorously defend itself against each of these lawsuits. At this time, the Company cannot reasonably estimate the loss
or range of loss, if any, that may ultimately be incurred in connection with any of these lawsuits and therefore has not established any accruals for potential liability related to this incident.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
For a full discussion of our other pending legal matters, please refer to "Note 23. Legal Proceedings and Other Contingencies" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.
NOTE
14. Financial Data of Business Segments
The financial data presented below depicts the profitability, financial position, and capital expenditures of each of our business segments.
We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through ithreeprimary business segments: Rail North America,
Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for Trifleet are reported in the Other segment.
Rail North America is composed of our operations in the United States, Canada, and Mexico. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services.
Rail International is composed of our operations in Europe ("GATX Rail Europe" or "GRE"), India ("Rail India"), and until January 31, 2023, our rail business in Russia ("Rail Russia"). On January 31, 2023, we completed the sale
of Rail Russia and recorded a gain of $i0.3 million, which is presented in net gain on asset dispositions in the statements of comprehensive income. GRE primarily leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides value-added services according to customer requirements. Rail India primarily leases railcars to customers in India pursuant to net leases, under which the lessee assumes responsibility for maintenance of the railcars.
As previously disclosed,
in the first quarter of 2024 we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of the segment. Historically, this business segment included marine operations from our Specialized Gas Vessels. As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations.
Engine Leasing is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce that lease aircraft spare engines, and GEL, our business that directly owns aircraft spare engines that are leased to airline customers or employed in engine capacity agreements. The RRPF affiliates manage all of GEL's aircraft spare engines, for which we paid them a fee of $i0.6 million
for the three months ended March 31, 2024 and $i0.5 million for the three months ended March 31, 2023.
Other includes Trifleet operations, as well as selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.
Segment profit is an internal performance measure used by the Chief Executive Officer to assess
the profitability of each segment. Segment profit includes all revenues, expenses, pre-tax earnings from affiliates, and net gains on asset dispositions that are directly attributable to each segment. We allocate interest expense to the segments based on what we believe to be the appropriate risk-adjusted borrowing costs for each segment. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.
(1) Includes
net gains (losses) from scrapping of railcars
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other information included elsewhere
in this Quarterly Report, Annual Report on Form 10-K for the year ended December 31, 2023, and in our other filings with the Securities and Exchange Commission ("SEC"). We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance with U.S. Generally Accepted Accounting Standards ("GAAP") and on certain other financial data that we prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see "Non-GAAP Financial Measures" at the end of this item. The discussion and analysis below includes forward-looking statements that are subject to risks, uncertainties and other factors described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2023 that could cause actual
results to differ materially from such forward-looking statements. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
OVERVIEW
We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through threeprimary business segments: Rail North America, Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.
In the first quarter of 2023, we sold
our rail business in Russia ("Rail Russia") within the Rail International segment.
In the first quarter of 2024, we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of this business segment. Historically, this business segment included marine operations from our liquefied gas-carrying vessels (the "Specialized Gas Vessels"). As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations. The segment is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce") that lease aircraft spare engines, and GATX Engine Leasing ("GEL"), our business that directly owns
aircraft spare engines that are leased to airline customers or employed in an engine capacity agreement.
Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2024. In particular, asset remarketing income does not occur evenly throughout the year. For more information, refer to the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2023.
DISCUSSION OF OPERATING RESULTS
Net
income for the three months ended March 31, 2024 was $74.3 million, or $2.03 per diluted share, compared to $77.4 million, or $2.16 per diluted share, for the same period in 2023. Results for the three months ended March 31, 2024 included a net positive impact of $0.6 million ($0.02 per diluted share) from tax adjustments and other items, compared to a net negative impact of $1.3 million ($0.04 per diluted share) from tax adjustments and other items for the three months ended March 31, 2023. See "Non-GAAP Financial Measures" at the end of this item for further details. Excluding the impact of these items, net income decreased $5.0 million compared to the prior year, largely due to lower asset disposition gains at Rail North America and higher interest expense, partially offset by higher revenue at Rail North America
and Rail International and higher non-dedicated engine revenue at Engine Leasing.
20
The following table shows a summary of our reporting segments and consolidated financial results (in millions, except per share data):
Three Months Ended March 31
2024
2023
Segment
Revenues
Rail North America
$
265.0
$
238.9
Rail International
83.7
73.3
Engine Leasing
21.3
16.3
Other
9.9
10.4
$
379.9
$
338.9
Segment
Profit
Rail North America
$
90.3
$
95.2
Rail International
28.8
23.5
Engine Leasing
25.7
28.3
Other
8.2
7.9
153.0
154.9
Less:
Selling,
general and administrative expense
55.9
50.4
Income taxes (includes $4.2 and $6.9 related to affiliates' earnings)
22.8
27.1
Net Income (GAAP)
$
74.3
$
77.4
Net
income, excluding tax adjustments and other items (non-GAAP) (1)
$
73.7
$
78.7
Diluted earnings per share (GAAP)
$
2.03
$
2.16
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP) (1)
$
2.01
$
2.20
Investment
Volume
$
378.6
$
387.0
The following table shows our return on equity for the trailing 12 months ended March 31:
2024
2023
Return on Equity (GAAP)
11.6
%
7.6
%
Return
on Equity, excluding tax adjustments and other items (non-GAAP) (1)
11.4
%
10.2
%
_________
(1) See "Non-GAAP Financial Measures" at the end of this item for further details.
Segment Operations
Segment profit is an internal performance measure used by the Chief Executive Officer to assess the profitability of each segment. Segment profit includes all revenues,
expenses, pre-tax earnings from affiliates, and net gains on asset dispositions that are directly attributable to each segment. We allocate interest expense to the segments based on what we believe to be the appropriate risk-adjusted borrowing costs for each segment. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.
21
RAIL NORTH AMERICA
Segment Summary
Demand
for existing railcars was solid for most railcar types and Rail North America continued to capitalize on current market conditions for both lease rates and lease terms. Utilization was 99.4% at the end of the quarter.
The following table shows Rail North America's segment results (in millions):
Three Months Ended March 31
2024
2023
Revenues
Lease
revenue
$
236.5
$
215.1
Other revenue
28.5
23.8
Total Revenues
265.0
238.9
Expenses
Maintenance
expense
72.9
66.9
Depreciation expense
65.1
65.5
Operating lease expense
9.0
9.0
Other operating expense
6.7
7.0
Total
Expenses
153.7
148.4
Other Income (Expense)
Net gain on asset dispositions
34.2
47.8
Interest expense, net
(53.3)
(42.3)
Other
expense
(2.1)
(0.4)
Share of affiliates' pre-tax earnings (losses)
0.2
(0.4)
Segment Profit
$
90.3
$
95.2
Investment
Volume
$
321.7
$
296.5
The following table shows the components of Rail North America's lease revenue (in millions):
Three Months Ended March 31
2024
2023
Railcars
$
213.7
$
194.8
Boxcars
16.2
13.8
Locomotives
6.6
6.5
Total
$
236.5
$
215.1
22
Rail
North America Fleet Data
The following table shows fleet activity and statistics for Rail North America railcars, excluding boxcars, for the quarter ended:
March 31 2023
June 30 2023
September
30 2023
December 31 2023
March 31 2024
Beginning balance
100,954
101,219
100,585
100,656
101,167
Railcars added
1,816
358
791
1,688
1,422
Railcars
scrapped
(324)
(316)
(292)
(354)
(375)
Railcars sold
(1,227)
(676)
(428)
(823)
(527)
Ending
balance
101,219
100,585
100,656
101,167
101,687
Utilization rate at quarter end (1)
99.3
%
99.3
%
99.3
%
99.3
%
99.4
%
Renewal
success rate (2)
77.9
%
85.3
%
83.6
%
87.1
%
83.4
%
Active railcars at quarter end (3)
100,475
99,871
99,933
100,498
101,106
Average
active railcars (4)
100,552
100,230
99,796
100,197
100,677
_________
(1) Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2) The renewal success rate represents the percentage of railcars on expiring leases that were renewed with the existing lessee. The renewal success rate is an important metric because railcars returned by
our customers may remain idle or incur additional maintenance and freight costs prior to being leased to new customers.
(3) Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of new railcars purchased from builders or in the secondary market and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(4) Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.
As of March 31, 2024, leases for approximately 16,400 tank and freight cars and approximately 1,800 boxcars were scheduled to expire over the remainder of 2024. These amounts exclude
railcars on leases expiring in 2024 that have already been renewed or assigned to a new lessee.
In 2022, we entered into a new long-term railcar supply agreement with a subsidiary of Trinity Industries, Inc. ("Trinity") to purchase 15,000 newly built railcars through 2028, with an option to order up to an additional 500 railcars each year from 2023 to 2028. The agreement enables us to order a broad mix of tank and freight cars. Trinity will deliver 6,000 tank cars (1,200 per year) from 2024 through 2028. The remaining 9,000 railcars, which can be a mix of freight and tank cars, will be ordered at a rate of 1,500 railcars per order year from 2023 to 2028 and delivered under a schedule to be determined. At March 31, 2024, 3,605 railcars have been ordered pursuant to the terms of the agreement, of which 1,600 railcars have been delivered.
In
2018, we amended a long-term supply agreement with Trinity to extend the term to December 2023, and we agreed to purchase 4,800 tank cars (1,200 per year) beginning in January 2020 and continuing through 2023. As of March 31, 2024, all 4,800 railcars have been ordered pursuant to the amended terms of the agreement, of which 4,621 railcars have been delivered. The remaining railcars covered under this agreement are expected to be delivered by the end of the second quarter of 2024.
In 2018, we entered into a multi-year railcar supply agreement with American Railcar Industries, Inc. ("ARI"), pursuant to which we agreed to purchase 7,650 newly built railcars. The order encompasses a mix of tank and freight cars to be delivered over a five-year period, beginning in April 2019 and ending in December 2023. ARI's railcar manufacturing business
was acquired by a subsidiary of The Greenbrier Companies, Inc. on July 26, 2019, and such subsidiary assumed all of ARI's obligations under our long-term supply agreement. As of March 31, 2024, all 7,650 railcars have been ordered, of which 7,634 railcars have been delivered. All railcars covered under this agreement are expected to be delivered by the end of the second quarter of 2024.
23
Lease Price Index
Our
Lease Price Index ("LPI") is an internally-generated business indicator that measures renewal activity for our North American railcar fleet, excluding boxcars. The average renewal lease rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate. The average renewal lease term is reported in months and reflects the average renewal lease term in the LPI.
During the first quarter of 2024, the renewal rate change of the LPI was positive 33.0%, compared to positive 33.5% in the prior quarter, and positive 28.3% in the first quarter of 2023. Lease terms on renewals for railcars in the LPI averaged 64months in the current quarter, compared to 65 months in the prior quarter, and 55 months in the first quarter of 2023.
24
The
following table shows fleet activity and statistics for Rail North America boxcars for the quarter ended:
March 31 2023
June 30 2023
September 30 2023
December
31 2023
March 31 2024
Beginning balance
8,663
8,789
8,959
9,087
9,311
Boxcars added
229
279
316
424
587
Boxcars
scrapped
(103)
(109)
(95)
(152)
(228)
Boxcars sold
—
—
(93)
(48)
—
Ending
balance
8,789
8,959
9,087
9,311
9,670
Utilization rate at quarter end (1)
100.0
%
99.8
%
99.7
%
100.0
%
99.8
%
Active
boxcars at quarter end (2)
8,788
8,942
9,062
9,310
9,651
Average active railcars (3)
8,720
8,855
8,985
9,207
9,583
_________
(1) Utilization
is calculated as the number of boxcars on lease as a percentage of total boxcars in the fleet.
(2) Active boxcars refers to the number boxcars on lease to customers. Changes in boxcars on lease compared to prior quarters are impacted by the utilization of new boxcars purchased from builders or in the secondary market and the disposition of boxcars that were sold or scrapped, as well as the fleet utilization rate.
(3) Average active boxcars is calculated using the number of active boxcars at the end of each month.
Comparison of Reported Results
Segment Profit
In the three months ended March 31, 2024, segment profit
of $90.3 million decreased 5.1% compared to $95.2 million for the same period in the prior year. The decrease was primarily due to lower net gain on asset dispositions and higher interest expense, partially offset by higher lease revenue. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from period to period.
25
Revenues
In the three months ended March 31, 2024, lease revenue increased $21.4 million, or 9.9%, driven by higher lease rates and more railcars on lease. Other revenue increased $4.7 million due to higher repair revenue.
Expenses
In
the three months ended March 31, 2024, maintenance expense increased $6.0 million, driven by higher costs of repairs and more regulatory compliance events. Depreciation expense decreased $0.4 million due to a change in the useful lives of certain railcars, partially offset by the timing of new railcar investments and dispositions. Other operating expense decreased $0.3 million primarily due to lower switching and freight costs.
Other Income (Expense)
In the three months ended March 31, 2024, net gain on asset dispositions decreased $13.6 million due to fewer railcars sold, lower gains on railcars converted to finance leases, and lower net scrapping gains. The amount and timing of disposition gains is dependent on a number of factors and
may vary materially from period to period. Net interest expense increased $11.0 million, driven by a higher average interest rate and a higher average debt balance.
Investment Volume
During the three months ended March 31, 2024, investment volume was $321.7 million compared to $296.5 million in the same period in 2023. We acquired 1,073 newly built railcars and purchased 822 railcars in the secondary market in the three months ended March 31, 2024, compared to 781 newly built railcars and 1,021 railcars in the secondary market in the same period in 2023.
Our investment volume is predominantly composed of acquired railcars,
but also includes certain capitalized repairs and improvements to owned railcars and our maintenance facilities. As a result, the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period. In addition, the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of railcars purchased, which may include tank cars and freight cars, as well as newly manufactured railcars or those purchased in the secondary market.
RAIL INTERNATIONAL
Segment Summary
Rail International, composed primarily of GATX
Rail Europe ("GRE"), produced solid operating results in the first three months of 2024 and continued to grow its fleet. GRE experienced renewal lease rate increases for most railcar types in the period. Utilization was 95.3% at the end of the quarter.
Our rail business in India ("Rail India") increased its fleet size in the first three months of 2024 and continued to focus on investment opportunities, diversification of its fleet, and developing relationships with customers, suppliers and the Indian Railways. Demand for railcars in India remained robust, driven by continued growth in the economy and infrastructure development. Utilization was 100.0% at the end of the quarter.
In the first quarter of 2023, we sold Rail Russia and recorded a gain of $0.3 million upon completion of the sale.
26
The
following table shows Rail International's segment results (in millions):
Three Months Ended March 31
2024
2023
Revenues
Lease
revenue
$
80.6
$
70.4
Other revenue
3.1
2.9
Total Revenues
83.7
73.3
Expenses
Maintenance
expense
17.5
15.9
Depreciation expense
18.9
15.7
Other operating expense
3.5
2.2
Total
Expenses
39.9
33.8
Other Income (Expense)
Net gain on asset dispositions
1.3
0.8
Interest
expense, net
(16.7)
(12.5)
Other income (expense)
0.4
(4.3)
Segment Profit
$
28.8
$
23.5
Investment
Volume
$
49.9
$
81.1
27
GRE Fleet Data
The following table shows fleet activity and statistics for GRE railcars for the quarter ended:
March
31 2023
June 30 2023
September 30 2023
December 31 2023
March 31 2024
Beginning balance
28,005
28,461
28,759
29,102
29,216
Railcars
added
502
376
446
371
322
Railcars scrapped or sold
(46)
(78)
(103)
(257)
(167)
Ending
balance
28,461
28,759
29,102
29,216
29,371
Utilization rate at quarter end (1)
98.5
%
96.9
%
96.0
%
95.9
%
95.3
%
Active
railcars at quarter end (2)
28,031
27,875
27,947
28,004
27,998
Average active railcars (3)
27,931
27,973
27,884
28,003
27,984
_________
(1) Utilization
is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2) Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of newly built railcars, railcars purchased in the secondary market, and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(3) Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.
The decline in GRE's fleet utilization was primarily due to weakness in the intermodal market. At March 31, 2024, GRE owned 2,159 intermodal railcars. As of March 31,
2024, leases for approximately 7,647 railcars were scheduled to expire over the remainder of 2024. This amount excludes railcars on leases expiring in 2024 that have already been renewed or assigned to a new lessee.
28
Rail India Fleet Data
The following table shows fleet activity and statistics for Rail India railcars for the quarter ended:
March
31 2023
June 30 2023
September 30 2023
December 31 2023
March 31 2024
Beginning balance
5,872
6,351
6,927
7,884
8,805
Railcars
added
479
576
957
921
696
Ending balance
6,351
6,927
7,884
8,805
9,501
Utilization
rate at quarter end (1)
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Active railcars at quarter end (2)
6,351
6,927
7,884
8,805
9,501
Average
active railcars (3)
6,038
6,584
7,366
8,321
9,089
_________
(1) Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2) Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of newly built railcars and the
disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(3) Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.
Comparison of Reported Results
Foreign Currency
Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar versus the foreign currencies in which it conducts business, primarily the euro. In the three months
ended March 31, 2024, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $1.0 million and negatively impacted segment profit, excluding other income (expense), by approximately $0.1 million compared to the same period in 2023.
29
Segment Profit
In the three months ended March 31, 2024, segment profit of $28.8 million increased 22.6% compared to $23.5 million for the same period in the prior year. Segment profit in 2023 included a $0.3 million disposition gain recorded as a result of the decision
to exit the Rail Russia business. Excluding these items, results for Rail International were $5.6 million higher compared to the same period in the prior year. The increase was primarily due to more railcars on lease and higher lease rates at both GRE and Rail India, partially offset by higher interest and maintenance expense at GRE.
Revenues
In the three months ended March 31, 2024, lease revenue increased $10.2 million, or 14.5%, due to more railcars on lease and higher lease rates at GRE and Rail India and the impact of foreign exchange rates. Other revenue increased $0.2 million, driven by higher repair revenue.
Expenses
In
the three months ended March 31, 2024, maintenance expense increased $1.6 million, primarily due to more repairs performed, higher costs for repairs, higher wheelset costs, and the impact of foreign exchange rates. Depreciation expense increased $3.2 million, due the impact of new railcars added to the fleet.
Other Income (Expense)
In the three months ended March 31, 2024, net gain on asset dispositions increased $0.5 million, driven by higher net scrapping gains due to more railcars scrapped at a higher scrap price per ton. Net interest expense increased $4.2 million, due to a higher average debt balance and a higher average interest rate. Other income (expense) was favorable by $4.7 million, driven by the positive impact of
changes in foreign exchange rates, primarily euro-zloty fluctuations.
Investment Volume
During the three months ended March 31, 2024, investment volume was $49.9 million compared to $81.1 million in the same period in 2023. In the three months ended March 31, 2024, GRE acquired 322 newly built railcars compared to 502 newly built railcars for the same period in 2023, and Rail India acquired 696 newly built railcars in the current year compared to 479 newly built railcars for the same period in 2023.
Our investment volume is predominantly composed of acquired railcars, but also includes certain capitalized repairs and improvements
to owned railcars. As a result, the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period. In addition, the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of the various car types acquired, as well as fluctuations in the exchange rates of the foreign currencies in which Rail International conducts business.
30
ENGINE LEASING
Segment Summary
As
disclosed previously, as of December 31, 2023, we have sold all of our marine assets and no longer have any marine operations. As a result, we have changed the name of this business segment from Portfolio Management to Engine Leasing to reflect the prospective operations of the segment.
Engine Leasing's segment profit is attributable primarily to income from the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce, a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $23.7 million for the three months ended March 31, 2024, compared to $28.0 million for the same periods in 2023. The operating environment for the RRPF affiliates was robust, and demand for international air passenger travel
remained strong.
Engine Leasing also includes GEL, our wholly owned entity that invests directly in aircraft spare engines. As of March 31, 2024, GEL owned 29 aircraft spare engines, with 14 on long-term leases with airline customers and 15 that are employed in an engine capacity agreement with Rolls-Royce for use in its engine maintenance programs. All engines at GEL are managed by the RRPF affiliates, for which we paid them a fee of $0.6 million for the three months ended March 31, 2024 and $0.5 million for the three months ended March 31, 2023.
The following table shows Engine Leasing’s segment results (in millions):
Three
Months Ended March 31
2024
2023
Revenues
Lease revenue
$
8.1
$
8.3
Non-dedicated engine revenue
13.2
4.5
Marine
operating revenue
—
3.5
Total Revenues
21.3
16.3
Expenses
Marine operating expense
—
2.0
Depreciation
expense
8.4
5.4
Other operating expense
2.5
0.9
Total Expenses
10.9
8.3
Other Income (Expense)
Net
gain (loss) on asset dispositions
0.6
(1.5)
Interest expense, net
(9.3)
(5.7)
Other income (expense)
0.3
(0.5)
Share of affiliates' pre-tax earnings
23.7
28.0
Segment
Profit
$
25.7
$
28.3
31
The following table shows the net book values of Engine Leasing's assets (in millions):
March
31 2023
June 30 2023
September 30 2023
December 31 2023
March 31 2024
Investment in RRPF Affiliates
$
597.2
$
611.3
$
626.5
$
626.8
$
647.2
GEL
owned aircraft spare engines
469.6
702.5
722.4
714.0
705.6
Specialized Gas Vessels
15.2
8.9
11.4
—
—
Other
owned assets
41.8
48.9
9.1
14.3
23.3
Total assets
$
1,123.8
$
1,371.6
$
1,369.4
$
1,355.1
$
1,376.1
RRPF
Affiliates' Portfolio Data
The following table shows portfolio activity and statistics for the RRPF affiliates' aircraft spare engines for the quarter ended:
March 31 2023
June 30 2023
September
30 2023
December 31 2023
March 31 2024
Beginning balance
398
395
392
395
399
Engine acquisitions
1
3
5
5
8
Engine
dispositions
(4)
(6)
(2)
(1)
(2)
Ending balance
395
392
395
399
405
Utilization
rate at quarter end (1)
94.4
%
95.9
%
95.7
%
95.5
%
97.3
%
Average leased engines (2)
374
375
377
379
386
Net
book value of engines (in millions)
$
4,088.2
$
4,106.6
$
4,100.9
$
4,067.2
$
4,157.2
_________
(1) Utilization is calculated as the number of engines on lease as a percentage of total engines in the fleet.
(2) Average
leased engines is calculated using the number of leased engines at the end of each month.
32
GEL Portfolio Data
The following table shows portfolio activity for GEL's aircraft spare engines for the quarter ended:
March
31 2023
June 30 2023
September 30 2023
December 31 2023
March 31 2024
Beginning balance
19
19
28
29
29
Engines
added
—
9
1
—
—
Ending balance
19
28
29
29
29
Comparison
of Reported Results
Segment Profit
In the three months ended March 31, 2024, segment profit was $25.7 million, compared to segment profit of $28.3 million for the same period in the prior year. Segment profit included $0.6 million of gains in 2024 and $1.6 million of losses in 2023 associated with the Specialized Gas Vessels. Excluding the impact of these items, results for Engine Leasing were $4.8 million lower than 2023. Lower earnings at the RRPF affiliates, resulting from lower remarketing income, was partially offset by higher earnings from GEL operations.
Revenues
In the three months
ended March 31, 2024, lease revenue was comparable to the same period in the prior year. Non-dedicated engine revenue increased $8.7 million due to aircraft spare engines acquired in 2023 and utilized in the engine capacity agreement with Rolls-Royce. Marine operating revenue decreased $3.5 million, driven by the final sales of the Specialized Gas Vessels in 2023.
Expenses
In the three months ended March 31, 2024, marine operating expense decreased $2.0 million, due to the sale of the Specialized Gas Vessels in 2023. Depreciation expense increased $3.0 million, due to aircraft spare engines acquired in 2023.
Other
Income (Expense)
In the three months ended March 31, 2024, net gain (loss) on asset dispositions was favorable by $2.1 million, driven by the absence of losses recorded in 2023 and the gain recorded in 2024 related to post-closing adjustments on the sales of the Specialized Gas Vessels.
In the three months ended March 31, 2024, income from our share of affiliates' earnings decreased $4.3 million, driven by lower remarketing income, partially offset by higher income from operations.
33
OTHER
Other
comprises our Trifleet business, as well as selling, general and administrative expenses ("SG&A"), unallocated interest expense, miscellaneous income and expense not directly associated with the reporting segments, and certain eliminations.
The following table shows components of Other (in millions):
Three Months Ended March 31
2024
2023
Trifleet
revenue
$
9.9
$
10.4
Trifleet segment profit
$
2.7
$
3.7
Unallocated interest income
3.5
3.0
Other
income, including eliminations
2.0
1.2
Segment Profit
$
8.2
$
7.9
Selling, general and administrative expense
$
55.9
$
50.4
Investment
Volume
$
7.0
$
9.4
Trifleet Summary
The tank container leasing market continued to experience softer demand across certain regions in the first quarter of 2024. However, Trifleet continued to find opportunities to place its tank containers with customers. Utilization was 85.5% at the end of the quarter.
Trifleet Tank Container Data
The following table shows fleet statistics for Trifleet's tank containers
for the quarter ended:
March 31 2023
June 30 2023
September 30 2023
December 31 2023
March
31 2024
Ending balance - owned and managed
22,528
22,870
23,333
23,931
24,448
Utilization rate at quarter-end - owned and managed (1)
93.1
%
91.5
%
89.6
%
87.3
%
85.5
%
_________
(1) Utilization
is calculated as the number of tank containers on lease as a percentage of total tank containers in the fleet.
SG&A, Unallocated Interest and Other
SG&A increased $5.5 million for the three months ended March 31, 2024 compared to the same period in the prior year, driven by higher employee-related expenses, including higher share-based compensation expense.
Unallocated interest income (the difference between external interest expense and interest expense allocated to the reporting segments) in any year is affected by our consolidated leverage position, the timing of debt issuances and investing activities, and intercompany allocations.
Consolidated
Income Taxes
See "Note 9. Income Taxes" in Part I, Item 1 of this Quarterly Report on Form 10-Q.
34
CASH FLOW DISCUSSION
We generate a significant amount of cash from operating activities and investment portfolio proceeds. We also access domestic and international capital markets by issuing unsecured or secured debt and commercial paper. We use these resources, along with available cash balances, to fulfill our debt, lease, and dividend obligations,
to support our share repurchase programs, and to fund portfolio investments and capital additions. We primarily use cash from operations to fund daily operations. The timing of asset dispositions and changes in working capital impact cash flows from portfolio proceeds and operations. As a result, these cash flow components may vary materially from quarter to quarter and year to year.
As of March 31, 2024, we had an unrestricted cash balance of $479.1 million. We also have a $600 million, 5-year unsecured revolving credit facility in the United States that matures in 2028 and $250 million 3-year unsecured revolving credit facility in the United States that matures in 2026, both of which are fully available as of March 31, 2024.
The
following table shows our cash flows from operating, investing and financing activities for the three months ended March 31 (in millions):
2024
2023
Net cash provided by operating activities
$
97.6
$
95.0
Net
cash used in investing activities
(311.6)
(122.9)
Net cash provided by (used in) financing activities
245.0
(98.3)
Effect of exchange rate changes on cash and cash equivalents
(2.6)
(0.2)
Net
increase (decrease) in cash, cash equivalents, and restricted cash during the period
$
28.4
$
(126.4)
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2024 increased $2.6 million compared to the same period in 2023. Comparability among reporting periods is impacted by the timing of changes in working capital items. Specifically, higher cash receipts from revenue and lower payments
for income taxes and operating leases were partially offset by higher payments for maintenance and other operating expenses.
Net Cash Used in Investing Activities
The following table shows our principal sources and uses of cash flows from investing activities for the three months ended March 31 (in millions):
2024
2023
Portfolio
investments and capital additions (1)
$
(378.6)
$
(387.0)
Portfolio proceeds (2)
59.7
108.2
Proceeds from short-term investments (3)
—
150.0
Other
investing activity
7.3
5.9
Net cash used in investing activities
$
(311.6)
$
(122.9)
_________
(1) Portfolio investments and capital additions primarily consist of purchases of operating assets and capitalized asset improvements. See the discussions of segment operating results sections
in this Item for more detail.
(2) Portfolio proceeds primarily consist of proceeds from sales of operating assets.
(3) Short-term U.S. Treasury Obligations with an original maturity date of over 90 days.
The decrease in portfolio investments and capital additions of $8.4 million for the three months ended March 31, 2024 was primarily due to fewer railcars acquired at GRE and fewer tank containers acquired at Trifleet, partially offset by more railcars acquired at Rail North America. The timing of investments depends on purchase commitments, transaction opportunities, and market conditions.
Portfolio proceeds decreased by $48.5 million for the three months ended
March 31, 2024, resulting from fewer railcars sold at Rail North America in the current year and the absence of proceeds from the sale of Rail Russia at Rail International and one Specialized Gas Vessel at Engine Leasing in the prior year.
35
Net Cash Provided by (Used in) Financing Activities
The following table shows our principal sources and uses of cash flows from financing activities for the three months ended March 31 (in millions):
2024
2023
Net
proceeds from issuance of debt (original maturities longer than 90 days)
$
557.4
$
165.4
Repayments of debt (original maturities longer than 90 days)
(300.0)
(250.0)
Net increase in debt with original maturities of 90 days or less
—
2.8
Dividends
(22.0)
(20.9)
Stock
repurchases (1)
(4.6)
—
Other
14.2
4.4
Net cash provided by (used in) financing activities
$
245.0
$
(98.3)
_________
(1) In
the three months ended March 31, 2024 we repurchased 36,744 shares of common stock for $4.6 million. In the three months ended March 31, 2023, we did not repurchase any shares of common stock.
The following table shows the activity on our long-term debt principal in the three months ended March 31, 2024 (in millions):
December
31 2023
Issuances
Payments
Impact of Foreign Exchange Rates
March 31 2024
U.S. debt
$
6,450.0
$
350.0
$
(300.0)
$
—
$
6,500.0
Europe
debt (1)
899.6
186.4
—
(22.1)
1,063.9
India debt (2)
101.0
24.1
—
(0.4)
124.7
Total
debt principal
$
7,450.6
$
560.5
$
(300.0)
$
(22.5)
$
7,688.6
__________
(1) Denominated in euros, but presented in U.S. dollars in this table.
(2) Denominated in Indian rupees, but presented in U.S. dollars
in this table.
In the three months ended March 31, 2024, we issued $350.0 million of 3-year unsecured debt in the U.S. at a fixed rate of 5.430%, $132.0 million of 2-year unsecured debt at Trifleet at a floating rate of 3-month Euribor plus 162.5 basis points, $54.4 million of 7-year unsecured debt at GRE at a floating rate of 6-month Euribor plus 175.0 basis points, and drew $24.1 million in two tranches from a 5-year delayed draw term loan at Rail India at fixed rates of 8.43% and 8.55%.
LIQUIDITY AND CAPITAL RESOURCES
General
We
fund our investments and meet our debt, lease, and dividend obligations using our available cash balances, as well as cash generated from operating activities, sales of assets, commercial paper issuances, committed revolving credit facilities, distributions from affiliates, and issuances of secured and unsecured debt. We primarily use cash from operations to fund daily operations. We use both domestic and international capital markets and banks to meet our debt financing needs.
36
Material Cash Obligations
The following table shows our material cash obligations, including debt principal and related interest payments, lease payments, and purchase commitments at
March 31, 2024 (in millions):
Material Cash Obligations by Period
Total
2024
(1)
2025
2026
2027
2028
Thereafter
Recourse debt
$
7,688.6
$
221.2
$
646.4
$
608.5
$
805.6
$
733.7
$
4,673.2
Interest
on recourse debt (2)
2,753.3
254.7
317.4
296.8
264.8
231.4
1,388.2
Commercial paper and credit facilities
10.8
10.8
—
—
—
—
—
Operating
lease obligations
244.9
26.0
36.8
45.3
38.7
25.3
72.8
Purchase commitments (3)
2,365.9
636.5
427.0
527.5
396.2
378.7
—
Total
$
13,063.5
$
1,149.2
$
1,427.6
$
1,478.1
$
1,505.3
$
1,369.1
$
6,134.2
_________
(1) For
the remainder of the year.
(2) For floating rate debt, future interest payments are based on the applicable interest rate as of March 31, 2024.
(3) Primarily railcar purchase commitments. The amounts shown for all years are based on management's estimates of the timing, anticipated railcar types, and related costs of railcars to be purchased under its agreements. For additional details on our purchase agreements, refer to the discussion of Rail North America operating results within this item.
Short-Term Borrowings and Credit Lines and Facilities
We primarily use short-term borrowings as a source of working capital and to temporarily fund differences between our
operating cash flows and portfolio proceeds, and our capital investments and debt maturities. We do not maintain or target any particular level of short-term borrowings on a permanent basis. Rather, we will temporarily utilize short-term borrowings at levels we deem appropriate until we decide to pay down these balances.
We have a $600 million, 5-year unsecured revolving credit facility in the United States, expiring in May 2028. As of March 31, 2024, the full $600 million was available under this facility. Additionally, we have a $250 million 3-year unsecured revolving credit facility in the United States, expiring in May 2026. As of March 31, 2024, the full $250 million was available under this facility.
Our
European subsidiaries have unsecured credit facilities with an aggregate limit of €35.0 million. As of March 31, 2024, €25.0 million was available under these credit facilities. At March 31, 2024, we had $10.8 million of outstanding short-term borrowings under bank credit facilities at our European subsidiaries. The weighted average interest rate of these outstanding borrowings during the first three months ended March 31, 2024 was 4.5%.
Restrictive Covenants
Our $600 million and
$250 million revolving credit facilities contain various restrictive covenants, including requirements to maintain a fixed charge coverage ratio and an asset coverage test. Some of our bank term loans have the same financial covenants as these facilities.
The indentures for our public debt also contain various restrictive covenants, including limitations on liens provisions that restrict the amount of additional secured indebtedness that we may incur. Additionally, certain exceptions to the covenants permit us to incur an unlimited amount of purchase money and nonrecourse indebtedness.
At March 31, 2024, our European
rail subsidiaries had outstanding term loans, public debt, and private placement debt balances totaling €875.0 million. The loans are guaranteed by GATX Corporation and are subject to similar restrictive covenants as the revolving credit facility noted above.
At March 31, 2024, we were in compliance with all covenants and conditions of all of our credit agreements. We do not anticipate any covenant violations nor do we expect that any of these covenants will restrict our operations or our ability to obtain additional financing.
37
Credit
Ratings
The global capital market environment and outlook may affect our funding options and our financial performance. Our access to capital markets at competitive rates depends on our credit rating and rating outlook, as determined by rating agencies.
The following table shows our credit rating and rating outlook as of March 31, 2024:
Rating
Agency
Standard & Poor's
Moody's Investor Service
Fitch Ratings, Inc
Long-term unsecured debt
BBB
Baa2
BBB+
Short-term unsecured debt
A-2
P-2
F2
Rating
outlook
Stable
Positive
Stable
Leverage
Leverage is expressed as a ratio of debt (including debt and lease obligations, net of unrestricted cash) to equity. The following table shows the components of recourse leverage (in millions, except recourse leverage ratio):
March
31 2024
December 31 2023
September 30 2023
June 30 2023
March 31 2023
Debt and lease obligations, net of unrestricted cash:
Unrestricted cash
$
(479.1)
$
(450.7)
$
(203.1)
$
(317.5)
$
(177.4)
Commercial
paper and bank credit facilities
10.8
11.0
12.3
10.9
20.3
Recourse debt
7,624.5
7,388.1
6,835.6
6,785.6
6,360.9
Operating
lease obligations
215.2
226.8
233.2
241.1
246.2
Total debt and lease obligations, net of unrestricted cash
$
7,371.4
$
7,175.2
$
6,878.0
$
6,720.1
$
6,450.0
Total
recourse debt (1)
$
7,371.4
$
7,175.2
$
6,878.0
$
6,720.1
$
6,450.0
Shareholders' Equity
$
2,324.3
$
2,273.0
$
2,174.5
$
2,178.9
$
2,101.5
Recourse
Leverage (2)
3.2
3.2
3.2
3.1
3.1
_________
(1) Includes recourse debt, commercial paper and bank credit facilities, and operating and finance lease obligations, net of unrestricted cash.
(2) Calculated as total recourse debt / shareholder's equity.
GATX Common Stock Repurchases
On
January 25, 2019, our board of directors approved a $300.0 million share repurchase program, pursuant to which we are authorized to purchase shares of our common stock in the open market, in privately negotiated transactions, or otherwise, including pursuant to Rule 10b5-1 plans. The share repurchase authorization does not have an expiration date, does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time. The timing of repurchases will be dependent on market conditions and other factors. During the three months ended March 31, 2024, we repurchased 36,744 shares of common stock for $4.6 million, excluding commissions. No share repurchases were completed during the same period in 2023. As of March 31,
2024, $82.5 million remained available under the repurchase authorization.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes to our critical accounting policies during the three months ended March 31, 2024. Refer to our Annual Report on Form 10-K for the year ended December 31, 2023, for a summary of our policies.
38
NON-GAAP
FINANCIAL MEASURES
In addition to financial results reported in accordance with GAAP, we compute certain financial measures using non-GAAP components, as defined by the SEC. These measures are not in accordance with, or a substitute for, GAAP, and our financial measures may be different from non-GAAP financial measures used by other companies. We have provided a reconciliation of our non-GAAP components to the most directly comparable GAAP components.
Reconciliation of Non-GAAP Components Used in the Computation of Certain Financial Measures
We exclude the effects of certain tax adjustments and other items for purposes of presenting net income, diluted earnings per share, and return on equity because we believe
these items are not attributable to our business operations. Management utilizes net income, excluding tax adjustments and other items, when analyzing financial performance because such amounts reflect the underlying operating results that are within management’s ability to influence. Accordingly, we believe presenting this information provides investors and other users of our financial statements with meaningful supplemental information for purposes of analyzing year-to-year financial performance on a comparable basis and assessing trends.
The following tables show our net income and diluted earnings per share, excluding tax adjustments and other items (in millions, except per share data):
Impact
of Tax Adjustments and Other Items on Net Income:
Three Months Ended March 31
2024
2023
Net income (GAAP)
$
74.3
$
77.4
Adjustments attributable to consolidated pre-tax income:
(Gain)
loss on Specialized Gas Vessels at Engine Leasing (1)
$
(0.6)
$
1.6
Net gain on Rail Russia at Rail International (2)
—
(0.3)
Total adjustments attributable to consolidated pre-tax income
$
(0.6)
$
1.3
Net
income, excluding tax adjustments and other items (non-GAAP)
$
73.7
$
78.7
Impact of Tax Adjustments and Other Items on Diluted Earnings per Share:
Three Months Ended March 31
2024
2023
Diluted
earnings per share (GAAP)
$
2.03
$
2.16
Adjustments attributable to consolidated income, net of taxes:
(Gain) loss on Specialized Gas Vessels at Engine Leasing (1)
(0.02)
0.05
Net gain on Rail Russia at Rail International (2)
—
(0.01)
Diluted
earnings per share, excluding tax adjustments and other items (non-GAAP)*
$
2.01
$
2.20
_________
* Sum of individual components may not be additive due to rounding.
39
The following tables show our net income and return on equity, excluding tax adjustments and other items, for the trailing 12 months ended March 31 (in millions):
2024
2023
Net
income (GAAP)
$
256.1
$
157.5
Adjustments attributable to consolidated pre-tax income:
Net loss on Specialized Gas Vessels at Engine Leasing (1)
$
1.8
$
35.9
Net
loss on Rail Russia at Rail International (2)
—
14.3
Environmental remediation costs (3)
—
5.9
Total adjustments attributable to consolidated pre-tax income
$
1.8
$
56.1
Income
taxes thereon, based on applicable effective tax rate
$
—
$
(1.5)
Other income tax adjustments attributable to consolidated income:
Income tax rate change (4)
$
(3.0)
$
—
Net
operating loss valuation allowance adjustment (5)
(2.3)
—
Total other income tax adjustments attributable to consolidated income
$
(5.3)
$
—
Net
income, excluding tax adjustments and other items (non-GAAP)
$
252.6
$
212.1
_________
(1) In 2022, we made the decision to sell the Specialized Gas Vessels. We have recorded gains and losses associated with the subsequent impairments and sales of these assets. As of December 31, 2023, all vessels had been sold.
(2) In 2022, we made the decision to exit Rail Russia and recorded losses in 2022 associated with the impairment of the net assets. In the first quarter of 2023, we sold Rail Russia and recorded a gain on the final sale of this business.
(3) Reserve
recorded as part of an executed agreement for anticipated remediation costs at a previously owned property, sold in 1974.
(4) Deferred income tax adjustment attributable to state tax rate reductions in 2023.
(5) Valuation allowance adjustment associated with the realizability of state net operating losses in future tax years.
2024
2023
Return on Equity
(GAAP)
11.6
%
7.6
%
Return on Equity, excluding tax adjustments and other items (non-GAAP)
11.4
%
10.2
%
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Since
December 31, 2023, there have been no material changes in our interest rate and foreign currency exposures or types of derivative instruments used to hedge these exposures. For a discussion of our exposure to market risk, refer to "Item 7A. Quantitative and Qualitative Disclosure about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the
participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended March 31, 2024, that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
40
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information concerning litigation and other contingencies is described in "Note 13. Legal Proceedings and Other Contingencies" in Part I, Item 1 of this Quarterly Report on Form 10-Q and is
incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes in our risk factors since December 31, 2023. For a discussion of our risk factors, refer to "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities,
Use of Proceeds, and Issuer Purchases of Equity Securities
On January 25, 2019, our board of directors approved a $300.0 million share repurchase program, pursuant to which we are authorized to purchase shares of our common stock in the open market, in privately negotiated transactions, or otherwise, including pursuant to Rule 10b5-1 plans. The share repurchase authorization does not have an expiration date, does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time. The timing of share repurchases will be dependent on market conditions and other factors.
During the first quarter of
2024, we repurchased 36,744 shares of common stock for $4.6 million under the share repurchase program compared to no share repurchases completed during the first quarter of 2023. As of March 31, 2024, $82.5 million remained available under the repurchase authorization.
The following is a summary of common stock repurchases completed by month during the first quarter of 2024:
Issuer
Purchases of Equity Securities
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
None of the Company's directors or officers iiadopted/
or iiterminated/ a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement", as each term is defined in Item 408(a) of Regulation S-K, during the quarter ended March 31, 2024.
The following materials from GATX Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, are formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, (ii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024
and 2023, (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2024 and 2023, and (v) Notes to Condensed Consolidated Financial Statements.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
Certain instruments evidencing long-term indebtedness
of GATX Corporation are not being filed as exhibits to this Report because the total amount of securities authorized under any such instrument does not exceed 10% of GATX Corporation's total assets. GATX Corporation will furnish copies of any such instruments upon request of the Securities and Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.