GATX Q3 Earnings Reflect “Challenging Conditions”



GATX reported Q3/17 net income of $49.0 million compared to net income of $95.7 million in Q3/16. Year-to-date 2017 net income was $159.9 million compared to $226.2 million in the prior year period.

2017 year-to-date results include a net after-tax gain from the exit of Portfolio Management’s marine investments and other items of $1.1 million recorded in the second quarter of 2017. The 2016 third quarter and year-to-date results include net after-tax gains of $34.6 million and $36.3 million, respectively, related to the exit of marine investments and other items.

Brian A. Kenney, president and chief executive officer of GATX stated, “Challenging conditions continue in the North American railcar leasing market due to the oversupply of existing railcars and a large railcar manufacturing backlog. In the third quarter, the renewal lease rate change of GATX’s Lease Price Index was a negative 27.0%, the average renewal term was 35 months, and our renewal success rate was 74.9%. GATX’s fleet utilization decreased slightly to 98.5% in the quarter.”

“Utilization at GATX Rail Europe remains stable at 95.6%. At American Steamship Company, 12 vessels continue to sail under favorable operating conditions on the Great Lakes. The Rolls-Royce and Partners Finance affiliates are performing well as originally expected.”

Kenney concluded, “Our year-to-date fleet performance in North American Rail has exceeded our expectations due to the excellent performance of our commercial team in keeping cars on lease despite the difficult market. GATX International and American Steamship have also performed ahead of expectations due to stronger short term demand than anticipated.

Therefore, we expect our 2017 full-year earnings to be at the high end or slightly above our range of $4.40 to $4.60 per diluted share. This guidance excludes any impact from Tax Adjustments and Other Items.”

Rail North America reported segment profit of $70.2 million in the third quarter of 2017, compared to $87.9 million in the third quarter of 2016. Lower segment profit was a result of lower revenues and higher maintenance expenses. Year to date, Rail North America reported segment profit of $238.1 million, compared to $273.4 million in the same period of 2016. Lower revenues and higher maintenance expenses were partially offset by higher gains on asset dispositions.

At September 30, 2017, Rail North America’s wholly owned fleet comprised approximately 120,000 railcars, including approximately 16,600 boxcars. The following fleet statistics and performance discussion exclude the boxcar fleet.

Fleet utilization was 98.5% at the end of the third quarter, compared to 98.8% at the end of the prior quarter and 99.0% at the end of the third quarter of 2016. During the third quarter of 2017, the GATX Lease Price Index (LPI), a weighted-average lease renewal rate for a group of railcars representative of Rail North America’s fleet, was a negative 27.0%. This compares to an LPI of negative 21.4% in the prior quarter and the third quarter of 2016. The average lease renewal term for railcars included in the LPI during the third quarter was 35 months, compared to 32 months in the prior quarter and 29 months in the third quarter of 2016. Rail North America’s investment volume during the third quarter was $103.3 million.

Rail International’s segment profit was $20.1 million in the third quarter of 2017, compared to $23.3 million in the third quarter of 2016. Higher revenues were more than offset by lower insurance proceeds in the quarter. Rail International reported segment profit of $50.1 million year-to-date 2017, compared to $48.9 million for the same period of 2016. Higher segment profit was a result of higher revenues and lower maintenance costs.

At September 30, 2017, GATX Rail Europe’s (GRE) fleet consisted of approximately 23,000 railcars and utilization was 95.6%, compared to 95.7% at the end of the prior quarter and 95.0% at the end of the third quarter of 2016. Additional fleet statistics for GRE are provided on the last page of this press release.

American Steamship Company (ASC) reported segment profit of $12.1 million in the third quarter of 2017, compared to $7.8 million in the third quarter of 2016. Segment profit year-to-date 2017 was $18.4 million, compared to $12.9 million year-to-date 2016. ASC carried 9.8 million net tons of cargo in the third quarter of 2017, compared to 8.7 million net tons in the prior year period. Higher segment profit was a result of more tonnage transported on the Great Lakes, partially offset by higher operating costs due to more vessels in operation.

Portfolio Management reported segment profit of $12.8 million in the third quarter of 2017, compared to a segment profit of $64.1 million in the third quarter of 2016. Segment profit year-to-date 2017 was $47.3 million, compared to $119.2 million year-to-date 2016. The decrease in third quarter and year-to-date segment profit was predominantly driven by a residual sharing fee settlement of $49.1 million received in 2016.

Year-to-date segment profit in 2017 includes a net pre-tax gain of approximately $1.8 million associated with the planned exit of the majority of the marine investments compared with $3.4 million for the prior year period.


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