GATX Reports Y/Y Increase in Q3 Net Income, Dip in Fleet Utilization



GATX reported Q3/20 net income from continuing operations was $48.2 million compared with net income from continuing operations of $37.2 million in Q3/19. Net income from continuing operations for the first nine months of 2020 was $132.4 million compared with $138.7 million in the prior year period. The third quarter and year-to-date results include a net negative impact of $12.3 million related to the elimination of a previously announced tax rate reduction in the United Kingdom. The 2019 year-to-date results include a net deferred tax benefit of $2.8 million related to an enacted foreign tax rate reduction in Alberta, Canada.

“Despite continued challenges in our markets, GATX performed well in the third quarter,” Brian A. Kenney, president and CEO of GATX, said. “Rail North America’s fleet utilization remained high at 98.2% and our renewal success rate was 58.1% during the quarter. While absolute lease rates were flat to slightly higher for most car types compared to the second quarter, the North American railcar leasing market remains negatively affected by a persistent oversupply of railcars and weakness in certain markets — exacerbated by COVID-19’s economic impact. Consequently, GATX’s Lease Price Index was negative 29.4% during the third quarter. Despite higher fleet churn as a result of our lower renewal success, our maintenance cost performance was better than expected due to continued efficiency gains and lower than anticipated railroad and boxcar repairs during the quarter.

“Rail International continues to perform well. GATX Rail Europe’s fleet utilization remained high at 98.2% and renewal lease rates for most car types increased slightly versus the expiring rates. GATX Rail India’s fleet utilization is 100% and its fleet growth trajectory is resuming absent further COVID-19 disruptions.

“In portfolio management, our Rolls-Royce and Partners Finance affiliates benefited from a large gain on a transaction involving the refinancing and sale of a group of aircraft spare engines. RRPF operations remain challenged by the severe drop in demand for global air travel, particularly on international and other long-haul routes.

“The global economic recovery remains tenuous due to a potential COVID-19 resurgence. In light of this uncertainty, we remain focused on keeping our employees safe, continuing our excellent commercial and operational execution, and pursuing attractively-priced growth opportunities for our shareholders.”

Rail North America

GATX reported that its Rail North America segment earned profit of $56.1 million in Q3/20 compared with $60.9 million in Q3/19. Lower segment profit was primarily a result of lower lease revenue, partially offset by higher gains on asset dispositions. Year to date, Rail North America reported segment profit of $178.1 million compared with $215.1 million in the same period of 2019. The decline in year-to-date 2020 results was predominantly driven by lower lease revenue.

At Sept. 30, 2020, Rail North America’s wholly-owned fleet consisted of more than 118,100 cars, including approximately 14,750 boxcars. The following fleet statistics and performance discussion exclude the boxcar fleet.

Fleet utilization was 98.2% at the end of the third quarter compared with 98.7% at the end of the prior quarter and 99.2% at the end of Q3/19. During the third quarter, the renewal lease rate change of the GATX Lease Price Index (LPI) was negative 29.4%. This compares with negative 28% in the prior quarter and negative 7.7% in Q3/19. The average lease renewal term for all cars included in the LPI during the third quarter was 29 months compared with 31 months in the prior quarter and 40 months in Q3/19. Rail North America’s investment volume during the third quarter was $204.1 million.

Rail International

GATX reported that the Rail International’s segment profit was $24 million in Q3/20 compared with $19.9 million in Q3/19. Higher segment profit was predominantly driven by more railcars on lease. Rail International reported segment profit of $57.9 million year-to-date in 2020 compared with $56 million for the same period of 2019. Year-to-date results were favorably impacted by more railcars on lease and negatively impacted by changes in foreign currency exchange rates.

At Sept. 30, 2020, GATX Rail Europe’s (GRE) fleet consisted of approximately 26,000 cars. Utilization was 98.2% compared with 98.4% at the end of the prior quarter and 99.4% at the end of Q3/19.

Portfolio Management

GATX reported its portfolio management segment recorded profit of $44.3 million in Q3/20 compared with $10.7 million in Q3/19. Segment profit year-to-date 2020 was $83.1 million compared with $34.9 million for the same period of 2019. Favorable results in the comparative periods were predominantly driven by higher remarketing income at the Rolls-Royce and Partners Finance affiliates, and in particular a large gain in Q3/20 from a transaction involving the refinancing and sale of a group of aircraft spare engines.

Discontinued Operations

In Q2/20, GATX completed the sale of American Steamship Company, which is accounted for as discontinued operations. In Q3/20, GATX recorded final post-closing adjustments of $0.3 million after-tax related to the sale.

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