GATX Corporation Reports 2013 Second Quarter Results

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GATX Corporation Reports 2013 Second Quarter Results

  • Record quarterly LPI renewal rate change of 36.0%
  • Earnings guidance raised to $3.20 - $3.30 per diluted share

CHICAGO--(BUSINESS WIRE)-- GATX Corporation (NYS: GMT) today reported 2013 second quarter net income of $35.1 million or $.74 per diluted share, compared to net income of $23.5 million or $.49 per diluted share in the second quarter of 2012. The 2013 second quarter results include a benefit from Tax Adjustments and Other Items of $3.0 million or $.06 per diluted share while the 2012 second quarter results include the negative impact from Tax Adjustments and Other Items of $15.3 million or $.31 per diluted share.

Net income for the first six months of 2013 was $62.2 million or $1.31 per diluted share, compared to $53.8 million or $1.13 per diluted share in the prior year period. The 2013 year-to-date results include the benefit from Tax Adjustments and Other Items of $1.7 million or $.04 per diluted share while the 2012 year-to-date results include the negative impact from Tax Adjustments and Other Items of $17.5 million or $.36 per diluted share. Details related to the Tax Adjustments and Other Items are provided in the attached Supplemental Information.


Brian A. Kenney, president and chief executive officer of GATX, said, "The demand for tank cars in North America continues at record levels, and we are capitalizing on this by increasing lease rates and lengthening lease terms. At the same time, we are keeping terms shorter for certain freight car types such as coal, where demand is weaker. This strategy resulted in an average renewal term of 58 months for cars in the LPI during the quarter, a shorter term than we have reported over the past year. During the quarter, the renewal rate change of GATX's Lease Price Index ("LPI") was a positive 36.0%, the highest quarterly result since we began calculating this statistic in 2005. Rail North America's utilization remained strong at 98.2% at the end of the second quarter.

"Within Rail International, the European tank car fleet continued to perform well in a weak market as we successfully placed new railcars with high-quality customers. Utilization was 95.8%, and we continued to invest in new tank cars."

Mr. Kenney continued, "American Steamship Company is currently sailing 13 vessels as planned, and customer demand remains consistent with our expectations coming into the year. Toward the end of the quarter, operating conditions on the Great Lakes improved as water levels rose, nearing 2012 levels.

"We successfully exited an ocean-going marine joint venture within Portfolio Management, taking 100% ownership of our share of the vessels. As a result, we enhanced our income profile and strategic flexibility with regard to these assets. The Rolls-Royce and Partners Finance affiliates continue to experience strong utilization across the portfolio of spare aircraft engines."

Mr. Kenney concluded, "Based on year-to-date performance, continued strength in North American rail, and our expectation that remarketing income will be strong during the second half of the year, we are increasing our 2013 full year earnings expectations to $3.20 - $3.30 per diluted share. This guidance excludes any impact from Tax Adjustments and Other Items."

RAIL NORTH AMERICA

Rail North America reported segment profit of $48.2 million in the second quarter of 2013, compared to $53.2 million in the second quarter of 2012. Year to date, Rail North America reported segment profit of $98.5 million, compared to $103.9 million in the same period of 2012. The decline in quarterly and year-to-date segment profit was primarily driven by an expected increase in maintenance expense related to regulatory compliance work and the timing of remarketing activity. Remarketing activity is expected to increase during the second half of the year.

At June 30, 2013, Rail North America's wholly-owned fleet totaled approximately 111,000 cars, and fleet utilization was 98.2% compared to 97.8% at the end of the first quarter and 98.3% at June 30, 2012. During the second quarter of 2013, GATX's Lease Price Index ("LPI"), a weighted average lease renewal rate for a group of railcars representative of Rail North America's fleet, increased 36.0% over the weighted average expiring lease rate. This compares to a 30.8% increase in the prior quarter and a 23.9% increase in the second quarter 2012. The average lease renewal term for cars included in the LPI during the second quarter was 58 months, down from 65 months in the first quarter and 59 months in the second quarter of 2012.

Rail North America's investment volume was $129.4 million during the second quarter.

RAIL INTERNATIONAL

Rail International reported segment profit of $24.4 million in the second quarter of 2013, compared to a segment loss of $3.6 million in the second quarter of 2012. The 2013 and 2012 second quarter results include the pre-tax benefit from Other Items of $3.3 million and the negative pre-tax impact from Other Items of $16.3 million, respectively. The increase in quarterly segment profit was driven by the performance of the European tank car fleet, with more cars on lease at higher rates and lower maintenance expense due to fewer repairs.

Rail International reported segment profit of $43.0 million year-to-date 2013, compared to $4.3 million in 2012. The 2013 and 2012 results include the pre-tax benefit from Other Items of $1.9 million and the negative pre-tax impact from Other Items of $18.8 million, respectively. Similar to the quarterly results, the increase in year-to-date segment profit was driven by higher lease income and lower maintenance expense at GATX Rail Europe.

Within Rail International, the wholly-owned fleet in Europe totaled approximately 22,000 railcars as of June 30, 2013 and utilization was 95.8%, compared to 95.5% at the end of the first quarter and 96.3% at June 30, 2012.

During the second quarter, Rail International's investment volume was $46.9 million, primarily for new tank cars in Europe.

Additional current and historical fleet and operating data as well as macroeconomic data related to Rail North America's and Rail International's businesses can be found on the last page of this press release.

AMERICAN STEAMSHIP COMPANY

American Steamship Company ("ASC") reported segment profit of $10.1 million in the second quarter of 2013 compared to $14.0 million in the second quarter 2012. The decline in quarterly segment profit was due to lower freight volume, operating delays and low water levels.

Segment profit year-to-date 2013 was $10.9 million, compared to $16.1 million year-to-date 2012. ASC carried 10.5 million net tons through the second quarter of 2013, consistent with the tonnage moved in the prior year period. The decline in year-to-date segment profit was due to operating delays, low water levels and the commodity mix of freight carried. In 2013, ASC moved less iron ore, a higher margin product.

PORTFOLIO MANAGEMENT

Portfolio Management reported segment profit of $17.3 million in the second quarter of 2013 compared to $14.6 million in the second quarter of 2012. The improvement in segment profit was primarily attributable to increased asset remarketing activity. During the second quarter, a marine joint venture comprised of ocean-going gas carriers was split, with GATX retaining sole ownership of five vessels. The assets continue to be managed by our previous joint venture partner.

Year to date, Portfolio Management reported segment profit of $29.8 million compared to $36.6 million in the same period of 2012. The decline in segment profit was driven primarily by the absence of loss provision reversals and warrant income recorded in the prior year.

The Portfolio Management segment currently consists of approximately $828.0 million of owned assets and third-party managed portfolios totaling approximately $129.1 million.

COMPANY DESCRIPTION

GATX Corporation (NYS: GMT) strives to be recognized as the finest railcar leasing company in the world by its customers, its shareholders, its employees and the communities where it operates. Controlling one of the largest railcar fleets in the world, GATX has been providing quality railcars and services to its customers for 115 years. GATX has been headquartered in Chicago, Illinois since its founding in 1898 and has traded on the New York Stock Exchange since 1916. For more information, visit the Company's website at www.gatx.com.

TELECONFERENCE INFORMATION

GATX Corporation will host a teleconference to discuss 2013 second quarter. Teleconference details are as follows:

Thursday, July 18th

11:00 A.M. Eastern Time

Domestic Dial-In: 1-888-437-9364
International Dial-In: 1-719-457-2644
Replay: 1-888-203-1112 or 1-719-457-0820 /Access Code: 3658950
 

Call-in details, a copy of this press release and real-time audio access are available at www.gatx.com. Please access the call 15 minutes prior to the start time. Following the call, a replay will be available on the same site.

FORWARD-LOOKING STATEMENTS

Certain statements in this document may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor provisions of those sections and the Private Securities Litigation Reform Act of 1995. These statements refer to information that is not purely historical, such as estimates, projections and statements relating to our business plans, objectives and expected operating results, and the assumptions on which those statements are based. Some of these statements may be identified by words like "anticipate," "believe," "estimate," "expect," "intend," "plan," "predict," "project" or other similar words. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in GATX's Annual Report on Form 10-K/A for the year ended December 31, 2012 and other filings with the SEC, and that actual results or events may differ materially from the forward-looking statements.

Specific risks and uncertainties that might cause actual results to differ from expectations include, but are not limited to, (1) general economic, market, regulatory and political conditions affecting the rail, marine and other industries served by GATX and its customers; (2) competitive factors in GATX's primary markets, including lease pricing and asset availability; (3) lease rates, utilization levels and operating costs in GATX's primary operating segments; (4) conditions in the capital markets or changes in GATX's credit ratings and financing costs; (5) risks related to GATX's international operations and expansion into new geographic markets; (6) risks related to compliance with, or changes to, laws, rules and regulations applicable to GATX and its rail, marine and other assets; (7) operational disruption and increased costs associated with compliance maintenance programs and other maintenance initiatives; (8) operational and financial risks associated with long-term railcar purchase commitments; (9) changes in loss provision levels within GATX's portfolio; (10) conditions affecting certain assets, customers or regions where GATX has a large investment; (11) impaired asset charges that may result from changing market conditions or portfolio management decisions implemented by GATX; (12) opportunities for remarketing income; (13) labor relations with unions representing GATX employees; and (14) the outcome of pending or threatened litigation.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis, judgment, belief or expectation only as of the date hereof. GATX has based these forward-looking statements on information currently available and disclaims any intention or obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

Investor, corporate, financial, historical financial, photographic and news release information may be found atwww.gatx.com.

(7/18/13)

--Tabular Follows-

  
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In millions, except per share data)
 
Three Months EndedSix Months Ended
June 30June 30
2013 20122013 2012
Revenues
Lease revenue$239.0$225.6$476.2$451.1
Marine operating revenue83.383.1101.8100.6
Other revenue16.6 14.4 33.2 27.9 
Total Revenues338.9323.1611.2579.6
 
Expenses
Maintenance expense74.367.8141.0128.7
Marine operating expense57.755.274.368.7
Depreciation expense63.159.5121.0115.2
Operating lease expense33.632.565.963.9
Other operating expense7.06.312.310.0
Selling, general and administrative expense45.8 38.9 87.8 77.0 
Total Expenses281.5260.2502.3463.5
 
Other Income (Expense)
Net gain on asset dispositions19.618.336.346.3
Interest expense, net(43.2)(41.6)(84.1)(84.2)
Other (expense) income(3.1)0.5 (4.2)(0.1)
Income before Income Taxes and Share of Affiliates' Earnings30.740.156.978.1
Income Taxes(9.1)(13.2)(16.6)(24.0)
Share of Affiliates' Earnings (net of tax)13.5 (3.4)21.9 (0.3)
Net Income$35.1 $23.5 $62.2 $53.8 
 
Share Data
Basic earnings per share$0.75$0.50$1.33$1.15
Average number of common shares46.546.846.746.8
Diluted earnings per share$0.74$0.49$1.31$1.13
Average number of common shares and common share equivalents47.147.547.447.5
Dividends declared per common share$0.31$0.30$0.62$0.60
  
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions)
 
June 30December 31
20132012
Assets
 
Cash and Cash Equivalents$96.7$234.2
Restricted Cash25.329.7
 
Receivables
Rent and other receivables83.888.4
Loans24.427.2
Finance leases222.7245.7
Less: allowance for losses(4.5)(4.6)
326.4356.7
 
Operating Assets and Facilities7,198.36,855.2
Less: allowance for depreciation(2,239.8)(2,200.8)
4,958.54,654.4
 
Investments in Affiliated Companies424.3502.0
Goodwill90.891.7
Other Assets197.2 186.7 
Total Assets$6,119.2 $6,055.4 
 
Liabilities and Shareholders' Equity
 
Accounts Payable and Accrued Expenses$167.2$177.4
 
Debt
Commercial paper and borrowings under bank credit facilities17.4273.6
Recourse3,546.43,152.4
Nonrecourse103.0130.6
Capital lease obligations10.1 11.3 
3,676.93,567.9
 
Deferred Income Taxes807.5783.0
Other Liabilities248.5 282.9 
Total Liabilities4,900.14,811.2
Total Shareholders' Equity1,219.1 1,244.2 
Total Liabilities and Shareholders' Equity$6,119.2 $6,055.4 
      
GATX CORPORATION AND SUBSIDIARIES
SEGMENT DATA (UNAUDITED)
Three Months Ended June 30, 2013
(In millions)
 
PortfolioGATX
Rail N.A.Rail Int'lASCManagementOtherConsolidated
Revenues
Lease revenue$187.3$43.6$1.0$7.1$$239.0
Marine operating revenue71.711.683.3
Other revenue13.8 1.7  1.1  16.6 
Total Revenues201.145.372.719.8338.9
 
Expenses
Maintenance expense57.69.67.174.3
Marine operating expense48.29.557.7
Depreciation expense42.710.6
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