GATX FY/16 Rail North America Segment Profit Down 15.2%



GATX reported Q4/16 net income of $30.9 million compared to net income of $58.2 million in Q4/15. Net income for the full-year 2016 was $257.1 million compared to $205.3 million in the prior year.

Rail North America segment profit of $48.5 million in Q4/16, down 50.9% compared to $98.8 million in Q4/15. The decrease in quarterly segment profit was partially attributable to lower revenues resulting from fewer cars on lease. Additionally, in Q4/16, Rail North America reported a non-cash asset impairment loss of $29.8 million related to certain older cars in flammable service that have been permanently and negatively impacted by regulatory changes.

Full-year, Rail North America reported segment profit of $321.9 million, compared to $379.5 million in 2015. The decrease was the result of higher operating expenses, higher ownership costs, lower disposition gains on owned assets and the aforementioned non-cash asset impairment loss. This was partially offset by higher revenues due to new railcar additions.

At December 31, 2016, the Rail North America wholly owned fleet was approximately 122,000 cars, including more than 17,700 boxcars.

Full year highlights for 2015 include:

  • Fleet utilization was 98.9% for Rail North America, down from 99.1% at the end of 2015. Fleet utilization at GATX Rail Europe was 95.6%, down slightly from 94.8% at the end of 2015.
  • GATX Lease Price Index showed a negative 36.2% renewal rate change with an average renewal term of 29 months.
  • GATX Rail North America renewal success rate was 64.7%.
  • Investment volume was approximately $495.6 million for Rail North America in 2016.
  • Rail North America remarketing income of approximately $16.6 million in 2016 was down 75.3% on a year-over-year basis.
  • Rail North America lease revenue was $935.1 million in 2016, up 0.4% from the $930.9 million at the end of 2015.

Brian A. Kenney, president and CEO of GATX said, “GATX achieved record earnings per share again in 2016 despite the rail industry experiencing a second year of reduced carloadings and a large oversupply of railcars. Our well-diversified fleet, quality customer base and outstanding service helped Rail North America maintain high utilization of 98.9% at year end. We continued to optimize our fleet by selling railcars into a robust secondary market, with Rail North America remarketing income eclipsing $46 million in 2016. We also continued to improve the efficiency of our maintenance network, in part by successfully executing our strategy of servicing more of our railcars within our owned network.”

Kenney added, “Many of the market challenges we faced in 2016 continue as we move into 2017. As a result, we currently expect 2017 earnings to be in the range of $4.40 – $4.60 per diluted share. Our guidance represents a level of performance that is considerably higher than in prior downturns. This illustrates our success over the last several years of stretching lease terms to lock in attractive lease rates, optimizing the fleet through secondary market acquisitions and divestitures, improving the efficiency of our maintenance network and, ultimately, focusing our business on our core strengths.”


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