GATX Corporation (GATX)

[Enterprising Investor]

GATX Corporation Reports 2016 Second-Quarter Results (10/20/16)

CHICAGO, July 21, 2016 (GLOBE NEWSWIRE) -- GATX Corporation (NYSE:GATX) today reported 2016 second quarter net income of $61.2 million or $1.49 per diluted share, compared to net income of $45.4 million or $1.03 per diluted share in the second quarter of 2015. Net income for the first six months of 2016 was $130.5 million or $3.15 per diluted share, compared to $107.6 million or $2.42 per diluted share in the prior year period. The 2016 results include a second quarter net gain of approximately $0.2 million, with no effect on per diluted share income, and a year-to-date net gain of approximately $1.7 million, or $0.04 per diluted share, associated with the planned exit of the majority of Portfolio Management’s marine investments.

“Despite continued deterioration of conditions in the railcar leasing market, GATX produced excellent financial results in the second quarter,” said Brian A. Kenney, president and chief executive officer at GATX. “The combination of productivity improvements in our maintenance network, tight management of SG&A, higher than anticipated railcar scrap prices, and continued low interest rates more than offset the market pressure on lease revenue during the quarter. However, revenue pressure is increasing as the year progresses due to the growing oversupply of railcars, fewer car loadings, and improved railroad velocity. Thus, the renewal lease rate change of GATX’s Lease Price Index decreased by 25.4% during the quarter, the average renewal term was 34 months, and the renewal success rate was 62.6%. While lease rate pressure is most significant in cars serving the energy markets, the majority of car types across our fleet and the industry are experiencing various levels of lease rate pressure. Fleet utilization for Rail North America was 98.1% at the end of the quarter with the quarter-over-quarter decline predominantly driven by coal cars.

“Our strategy in this environment remains unchanged: continue to compete aggressively on lease rates to protect utilization and reduce the length of lease term where possible.

“GATX Rail Europe continues to experience stable demand for existing tank cars. At American Steamship Company, 11 vessels continued to sail as favorable operating conditions helped to offset soft demand for iron ore on the Great Lakes. In the Portfolio Management segment, remarketing income during the quarter was approximately $20 million higher than originally anticipated on a pre-tax basis, or approximately $0.30 per diluted share.”

Mr. Kenney concluded, “Incorporating the higher than anticipated remarketing income in the second quarter in our Portfolio Management segment as noted above, we are increasing our 2016 full-year expectations to a range $5.55 to $5.75 per diluted share.”

RAIL NORTH AMERICA

Rail North America reported segment profit of $76.8 million in the second quarter of 2016, compared to $84.9 million in the second quarter of 2015. Year-to-date, Rail North America reported segment profit of $185.5 million, compared to $190.7 million in the same period of 2015. While railcars were on lease at higher average rates, lower gains on asset dispositions contributed to the year-over-year variance in segment profit.

At June 30, 2016, Rail North America’s wholly owned fleet comprised approximately 124,000 railcars, including approximately 18,200 boxcars. The following fleet statistics and performance discussion exclude the boxcar fleet.

Fleet utilization was 98.1% at the end of the second quarter, compared to 98.9% at the end of the prior quarter and 99.3% at the end of the second quarter of 2015. During the second quarter of 2016, the GATX Lease Price Index (LPI), a weighted-average lease renewal rate for a group of railcars representative of Rail North America’s fleet, decreased 25.4% over the weighted-average expiring lease rate. This compares to a 6.4% increase in the prior quarter and a 36.3% increase in the second quarter of 2015. The average lease renewal term for cars included in the LPI during the second quarter was 34 months, compared to 34 months in the prior quarter and 54 months in the second quarter of 2015. Rail North America’s investment volume during the second quarter was $145.4 million.

Additional fleet statistics, including information about the boxcar fleet, and macroeconomic data related to Rail North America’s business are provided on the last page of this press release.

RAIL INTERNATIONAL

Rail International’s segment profit was $13.0 million in the second quarter of 2016, compared to $19.1 million in the second quarter of 2015. Rail International reported segment profit of $25.6 million year-to-date 2016, compared to $40.9 million for the same period of 2015. While more railcars were on lease, higher maintenance expenses and lower gains on asset dispositions negatively impacted segment profit in comparison to the prior year’s quarter and year-to-date results.

At June 30, 2016, GATX Rail Europe’s (GRE) fleet consisted of approximately 23,000 cars and utilization was 94.8%, compared to 95.1% at the end of the prior quarter and 95.5% at the end of the second quarter of 2015. Additional fleet statistics for GRE are provided on the last page of this press release.

AMERICAN STEAMSHIP COMPANY

American Steamship Company (ASC) reported segment profit of $4.2 million in the second quarter of 2016, compared to a segment profit of $2.9 million in the second quarter of 2015. Segment profit year-to-date 2016 was $5.1 million, compared to $2.5 million year-to-date 2015. ASC carried 9.5 million net tons of cargo through the second quarter of 2016, compared to 9.2 million net tons in the prior year period. The improvement in segment profit was primarily driven by lower operating costs due to fewer vessels in operation.

PORTFOLIO MANAGEMENT

Portfolio Management reported segment profit of $36.5 million in the second quarter of 2016, compared to $10.3 million in the second quarter of 2015. Segment profit year-to-date 2016 was $55.1 million, compared to $26.2 million year-to-date 2015. The improvement in segment profit was predominantly driven by residual sharing fees from the managed portfolio.

Second quarter 2016 segment profit includes a net pre-tax gain of approximately $0.3 million, and year-to-date net pre-tax gain of approximately $2.7 million associated with the planned exit of the majority of the marine investments.

COMPANY DESCRIPTION

GATX Corporation (NYSE:GATX) 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. As the largest global railcar lessor, GATX has been providing quality railcars and services to its customers for more than 117 years. GATX has been headquartered in Chicago, Illinois, since its founding in 1898. For more information, please visit the Company’s website at www.gatx.com.

TELECONFERENCE INFORMATION

GATX Corporation will host a teleconference to discuss 2016 second-quarter results. Call details are as follows:

Thursday, July 21st
11:00 A.M. Eastern Time
Domestic Dial-In: 1-888-500-6974
International Dial-In: 1-719-325-2100
Replay: 1-888-203-1112 or 1-719-457-0820 /Access Code: 9450036

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.

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https://globenewswire.com/news-release/2016/07/21/857913/0/en/GATX-Corporation-Reports-2016-Second-Quarter-Results.html