GATX - Earnings call transcript Q1 2019

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Operator

Good day. Welcome to the GATX First Quarter Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jennifer McManus. Please go ahead.

Jennifer McManus

thank earnings joining conference and and fourth everyone, year-end XXXX call. morning, you GATX’s for quarter Good I’m joined Bob forward-looking consist today America you’ll Tom President Ellman, hear by President statements. Please Brian Kenney, Vice and discussion of and President note President during that CFO the Rail our of and of Lyons, some Vice Executive Executive North and information CEO; will today from statements results or Actual differ or could materially trends forecasts.

Form risk more any XXXX. XX-K information, subsequent GATX’s please discussed For to forward-looking revise circumstances. reflect for the assumes or factors obligation to to no events GATX or in refer update statements

will provide I in the at net Earlier Tower $XX.X will a or at reported to to from like Slides Downtown $X.XX XXXX on to our and our This of Meeting share. quarter Willis begins Brian website XXXX diluted share. at the everyone Time. quarter per of that or It Annual will Central posted Before compares be Monday, the first Kenney's net today, GATX be XX:XX be quarter, per diluted I'd on PM income Shareholders Chicago income brief commentary held www.gatx.com. million $XX.X presentation meeting first remind XXth. $X.XX million April

America's Our first North was rate the consistent fleet are in our of utilization with XX.X% first environment high the the reflective and America, end Rail quarter remained results Rail renewal our into XX.X%. North of operating an year. expectations at quarter coming success at

renewal term with of Lease months. Index average X.X% renewal positive with change rate the XX an the GATX's quarter, During of Price

base. with for railcars the new place diverse committed our successfully to supply continue agreements customer We

over supply from railcars XXXX Trinity XXX XXXX supply over from We Trinity have agreement placed X,XXX agreement. railcars already our our and

agreement. Additionally, our over ARI railcars from XXX supply XXXX we've placed

our scheduled the available agreements under earliest delivery first of quarter is XXXX. in supply Our

income North America's the Rail million. remarketing was $X.X During approximately quarter,

Rail with guidance. unchanged International, leasing market expectations across fleet our Europe As remained full year the approximately the the Rail affiliates. the driven release, quarter. were was Rail prior and demand excellent volume strong. noted of performance historic Partners XX.X%. in railcar during XXXX results Portfolio from steady million remarketing primarily Finance utilization GATX Within remain Management's high of operating first the Rolls-Royce earnings at seeing European is by investment International's the $XX

to our the Company's on We XX in start sailing Steamship excellent late expecting vessels quarter off $XX was were million. for are during and up are investment Those investment in active approximately American XXXX quarter, GATX We shares Lakes. we remarks. prepared be volume. Great over operator, We also it we I'll the to season back anticipate hand can it in under million. open XXXX. for the so started $XXX in for XXX,XXX volume than approximately another a March to the share year good the service buying are Q&A. repurchase more authorization

Operator

our Thank question We'll Fargo. Instructions] Wells Poliniak of Allison you. [Operator from take first

Allison Poliniak

should what still high Good that for on few the quarters? trend you morning. we we your know, and how are the expectation touch that next guys. Hi, year, on maintenance the single-digits quarter, throughout is, Can

Robert Lyons

Allison. And Sure, It's Bob good morning. Lyons.

compliance up was now, we scheduled quarter activity year. XX% for and combination that Through XXXX intact. for Tom XXXX a laid first that maintenance we and X% activity January, Jen back the the have out and into year, in of to guidance and remains plus would that expense XXXX. That believe of to So due over came I Brian in be net to the X% increased increased XX% also

of terms the the fairly docket that's a full of some we're and I that for good for tackling year. on track think in on work had compliance we quarter the

Allison Poliniak

up was that could other the trying this there, us pretty sizably ago? to remind figure year you Rail that what American North out quarter? what's a drove then from And it revenue, Just in

Tom Ellman

then that over that Tom two I'll on comment relates turn I'll separate that and it - increase relate This to Ellman to additional Bob Hi. items. is and color. for Primarily some

which came scrapping caused back that costs. that actually of with is part considerable customer recover had we to some the our the cars. ended first lease by of The ability cars damage the provides and us - We with up those those

in unusual was look that for a if you'll down So scrap that is and actually the by quarter, those driven net cars. for line, you loss see us the which

The the of maintenance. we other half that to receive increase revenue other part related - increase of some to that that is due

that either accurately lease service to maintenance quarter-to-quarter. customer as very on part not can able do the we're asks rebill that that and that that is you of of customer. the our comes to customer in or comes a predict something full responsibility And to shops something basis, lumpy into Some the us

Robert Lyons

Yeah.

the covered think very I really and content. on liability - it Tom or volume is work of customer well. dependent revenue repair the revenue That

can comment quarter-to-quarter. it the only I'd bump so, scrap was offset Tom received, make around largely our penalty by mentioned, loss. other the to regards it And with as And payment

had on So line on EPS a for activity, no at impact real unusual two profit of no from material quarter. really, but segment with segment - an level impact the all profit separate items net-net, standpoint, you or

Allison Poliniak

car well. the LPI skewed Great, it as number? turning can Is anything there there you positive, down us? helpful. give I term mix? that then Any average that last, color And good know that came thanks. That's type a Was just news. that

Brian Kenney

can I Brian, that it's one. Allison, Actually take

LPI the I car expect measure the really given and the in a the change what types past, said in we quarter. renew depends because again, it the that that So, happened in frequently volatility the did great LPI LPI volume during And first exhibits exactly not the first of on that's quarterly the positive a quarter-to-quarter quarter. But quarter. various in change is in once as

very huge LPI, dollars weight the month, increase. off rate it of that example, a renewals, But couple was hundred came of very gets put in So a renewals renew an coal some it even leases renewals a cars as low had coal small - which of to is of a a at number according number percentage course that we our into coal fleet. small that gets though the of

So look better we're because we where we we be at it disregarded always why the will of It's into that's right say quarter. the to numbers annually the I'd say law of year. for larger and said coming

Allison Poliniak

helpful. Great, thanks. That's

Operator

Thank you.

next Justin We of question will from take Stephens. our Long

Justin Long

Thanks morning. and good

in with freight the a I cars So, as and and - seen lease to you've what like start rates then on sequential trend looks in question that tank versus trend well. overall wanted

at was environment rate year in for a the I think of the the stable XXXX. guidance start

your that curious, changed? if just front So, outlook on has

Brian Kenney

Hey. positive flat, Good were overall morning, to it take Justin. Tank was lease QX essentially QX QX. separately. QX we'll to rates but

For we we which made occur, our stable that from customers on had to side. the car demand, tank

cars a in We built. terms of tank relatively to be extended backlog also have

space available XXXX, new So tank somebody early is the next if in the industry. cars really wants that's across

customers coming fleet, broad-based we So tank a long. to QX for leverage We car nearly that renewal, or more I across challenging. hesitancy we've spend, up in cars the say, see backlogs as little bit in cautiousness, among and seen - to are down bit and rate particular and a aren't been more car little the tank any Freight little not one in QX concentrated would a freight really pricing have more have movement type. QX Rates lease car bit. for the QX positive

have leverage don't you you side. on car might that So tank same that the

Justin Long

change. mentioned outlook would outlook guidance, XX%. within Okay. there didn't significantly you've note I know know the be that expected And that that's remarketing, that to But I were kind you the of there year? the maintenance there is changed pieces still if unchanged that XXXX changed then That's you've the versus you'd I should X% up at anything any helpful. of start EPS outlook to the back Is highlight. and what was curious going moving

Tom Ellman

Justin, for but this Tom. no, the quarter-to-quarter overall is year expect our expectation unchanged. items, is, the question short remains that answer to that in And variation several we

Justin Long

ARI's that then will with about business. Greenbrier that placed purchasing just impact you last Does that to Okay. after order because I And week if we lastly, ARI in the option that alter announcement agreement control? that to any an transfer last or long-term to year? you with commitment the ask change have on I'm wanted have manufacturing the just Greenbrier curious of all closes deal if got

Brian Kenney

Yeah.

we Justin, that negotiate were I supply Tom and when can let the agreement. negotiating But that change of did it's a Brian, since ARI handle might agreement. chime possible be he anticipated control transaction we in,

So possibility in perspective change with from a us that a the supply of would protect thought event of we cost mind, and control. in terms that

if the So covered contractually I consummated. in would is we're say, deal Greenbrier those areas just

Tom Ellman

Brian really to add, I Nothing covered it. think

Justin Long

time. the appreciate I helpful. That's great. Okay,

Operator

you. Thank

from our take Baudendistel will We next Stifel. question of Mike

Mike Baudendistel

Thank you.

to be or Just the so, maybe the that's you is the the thing now of type about on business? accessorials enough hearing railroads if holding that cracking a have in year being meaningful of aggressive Is STP has more wanted on - on down on equipment pieces that accessorials, imposing and that. - ask to last for your impactful to

Tom Ellman

change. to no customers, there any seen about consternation really certain car the as implementation that some for users of come among through demand of our rails, from haven't PSR, customer base. our of of relates the We dissatisfaction impact some challenges but is Clearly, it significant business, significant in have terms

Mike Baudendistel

you sheet, quarter And ask since just to assets what this it. Got are wanted those you, listed have a of explain on leasing. new your thing? you use balance that then Can you are right that’s

Jennifer McManus

Yeah, of lease, that's as adoption the accounting Mike. X/X/XX. new actually the of Hi, lease related standard to the

the there asset all those should operating of a we our lessee, as represents leasebacks of use is right historically that disclosing note our And been in the that a sale of you had as is lessee. what our So, balance disclosures. all sheet leases there off are it leases majority of

we leases. from see now use flip balance really is you'll little of also what a a bit with difference a sheet. now other our right of So, on assets There's to because for have that

headquarter on lease well. For there be as would example, corporate office

Mike Baudendistel

you. makes Got Thank it. That sense.

Operator

Thank our Elkott you. from of We'll Matt take Cowen. next question

Matt Elkott

you. thank morning, Good

deeper Just wanted to on front. car tank the dig a little

that you how I about or add you is the the or like time last have a you next good wondering, plans lease if part capacity, future? couple maybe couple secured outlook or positions Trinity thousand the to And if of you've the few DOT-XXX it tank you looking with foreseeable agreements guys a talked your any added this looks as is for years, the those. of rate for we over guys since was think any of just cars I had ARI?

Robert Lyons

it's Bob Matt, Lyons.

state-of-the-art So will of, the we DOT-XXXJs. for any they take delivery will cars tank be

predict new We we and any specific commodities and nor types, spread car of We our customers. go be deliveries will into to continue would by car well and end served heavily weight different anticipate a market one number and commodity to type. particular trying development across don't car

in think not anybody years. the know over you our that's it's strategy, served the I industry well not

to running remains through highly with tank And are fleet lots again, diversified, we Trinity the will the ARI orders continue add car in and of types. Our good both shape, we XXXX. different

access order put real us ample need have freight two on will We with year tank flexibility. between cars, position that, a cars roughly in X,XXX plus a some of delivery to ARI top those of lot good the a orders, we the

Matt Elkott

Okay, that's helpful.

fleet can it - give around… right still that number the you in you you Is now, DOT-XXXJs? us the have So the

Jennifer McManus

We have Matt. about X,XXX,

Matt Elkott

not something And that two DOT-XXXJs? that cost really $X,XXX. doesn't that you retrofit, you only $X,XXX or okay. to will much, Yeah, know I CPC-XXXX, the will stick guys the Is it consider, X,XXX.

Brian Kenney

And Our Matt. been sure you're so - for yeah, fairly what limited. retrofit about be talking want the know to activity there, just has we

that to have - for times our we car, have we plans retrofit the legacy for no stated So those. several

jacketed those, The do situation. the plan the The individual differentiate inexpensive commented between on we we are done For car. jacketed only depends that you car got CPC-XXXX, to expensive at and And non-jacketed those. a have that, retrofit is a retrofit. look the non-jacketed not cars relatively take car do we've and more much to we'll

Matt Elkott

Okay. And…

Tom Ellman

I’d also add…

Matt Elkott

ahead. go Yeah,

Tom Ellman

there where going mentioned, legacy I'm I add cars have was been as been, have to the relative Matt. say, just Tom I'd sorry, there actually – we industry, to retrofit.

none We by done done have those compared others. to of XX,XXX roughly

Matt Elkott

don't cars give freight you could Got last many breakout of you've don't provided before, many know off you I just if this think those have, at year? it. it you coming you how a tank? are And question. but one Can if And of us how have lease us remind versus I

Tom Ellman

very particular have XX,XXX of renew tank the car concentration a Through sand challenge left crude add numbers categories. to or split such or exposure, cars freight. within of type relatively And those and types, the any very ethanol, of either And more low. balance one some the roughly year, low the whether I'd are about in evenly it's no very, it'd we as significant and be between car

Matt Elkott

much. very you Thank Perfect.

Operator

you. Thank

Sidoti We will next Steve question from our and take O'Hara of Company.

Steve O'Hara

morning. Hi, good Yeah.

Brian Kenney

Good morning.

Steve O'Hara

Just to fall about being utilization on to comments - I'm and utilization that's you your just extremely to expect the related I expecting higher maintenance mean, go the little curious, the year? high, do throughout maybe

Tom Ellman

relatively utilization No, remain to high. we would expect

You XX% high the the maintenance been for overall what the maintenance depending the balance might expense, to on net about coming the already of how take off we going factored full here but year, that, see that's X.X basis it in of X.X% - second happens would into it and half we in the year. have X% XXs, anticipate year. has remain Utilization up expense into or thought

Steve O'Hara

Okay.

level the there and to guess, I reading I wrong? in in I items. would on mean, up. in those that relative downbeat I demand commentary your order just that were around on about the - and ticking comfort about ago, pretty much book a which guys the year out like cars mean, it's seem that was been feelings you then And heard, XXX mean, pretty think then I've storage, storage, seems around that in front Is the maybe I I'm fairly it positive. relative the just order book that of - am terms mean, out cars I wondering your that's a to Okay. that's there I

Tom Ellman

it's sure. be course in believe That last into to Yeah. storage, have bit. the say again, rail be number net there. to this And or would really the the the XXX. there, slows and we've just six I extended year. a been quarter those course in get a despite relatively little quarter, of lease an up of years, of this they also if big traffic, necessarily in been number weather the tick sand I seven the environment at if in out the of it concern to quarter, number always some every they're lease are it storage the cars and challenging because impacts again, at We and been fleet exposure for terms that you has the a a difficult even mean, have continued those a backlog carload first continues lot we of little we during can here the related where our traffic cars idle of which over of down on good category, wouldn't cars And it look to growth flat, has look movement ticked cars could makes market, that don't in use. of a industry bit of

Steve O'Hara

maybe Okay, all then just Thank right. you. And one. last

change in is the On outlook disposition gains, no there your there. asset

it? to the about think I it level, approaching way is think still that was XXXX's right

Brian Kenney

Yes.

very And to assets lot good high-quality continuing see especially that. has a of fortunately, remains if lot market a on of good with customers. leases active, interest. We're Secondary have GATX you

in assets putting And good see to market. so secondary we interest continue the the very we're in out

Steve O'Hara

Okay, all you right. much. very Thank

Operator

you. Instructions] next Buckingham question Matt Brooklier will We Thank our Research. [Operator take from of

Matt Brooklier

Hey, relatively thanks, your sales. expectations here on Bob, morning. mentioned is you healthy and the for good gains secondary railcar that and guys reiterated you market

little it know to And gains, through a the this are bit the are depends get remainder us any potentially give asset when I you can they year? in as the year, those portfolios is market this out sense But difficult, disposition the acquired. of when obviously For of when color? on booked

Robert Lyons

quarters other in to look our buyers. at it quarterly market, can interest on would activity of on and fairly some of But level next a from are the depending three basis. that close desire, basis. our I around move difficult portfolios ratable on to expediency a It's predict the and the

three ratably You the over I think move about that quarters - reasonable. little a probably around bit, is think next trying to but

Matt Brooklier

right Okay. kind trends tank say now? freight things are other on is cars, the interest of given Is side it versus of more the to that happening fair just there

Robert Lyons

We cars freight side. be those the buyer than tend a normally bigger more complicated, more so freight sell to cars. necessarily. universe And not have No, buyers have No. you universe and to of service-oriented do we more bigger for you tend tank cars tank a on cars,

Matt Brooklier

And in helpful. maybe and first any I the that's quarter, the now would weather considering in any in then Midwest? Okay, weather impact the have second impact quarter? in right press have out think you called but likely it most that we the flooding quarter release, in

Robert Lyons

to and - whether then rail if tremendous the the on and nothing had it'd listen first the reports, weather if cold in clearly, particular. record Railroads they their side, in snow flooding. Class answer I'll be you Well, and X challenges read But quarter,

of are So down. that sequential where a challenges the we no. change. the year-over-year basis we Class enhancing feel lot for quarter, the feels where specifically, of like a in significant very business Xs there environment, with But fourth carloads demand underlying A our Even no were were portion in weather-related. to basis relates or it is that as good with on consistent

side, the ASC. I'll on Brian let rail comment On

Brian Kenney

Yeah.

Eastern The this Eastern have with impacts spring. you delays, experienced you other especially seven April. March American some vessels out in and went the weather in got out They in Steamship, ice, especially Lake see at is out come Erie, Lake place as Superior rest but and in

So we're in good shape now.

Matt Brooklier

appreciate time. the to Good hear, Okay.

Operator

you. Thank

of our G.research. We Justin will Bergner last take question from

Justin Bergner

Brian, Bob and morning, Tom. Good

Brian Kenney

Justin. Hey,

Justin Bergner

that's is if key allow stay this level? railcar what in to utilization driver that of to loadings for Just to the going start, anaemic XX% year, remain sort somewhat

Robert Lyons

back stable in as Justin The on carload XXs fairly high least having for our you fleet type utilization - in high benign lease market. given renewals. roll us expectation already than to for philosophy, car put car know, continues and activity, at no we really any long-term but challenging the placements, good quarter key, have position. market, exposure baked commercial a on maintenance still, you to in commodity over you one And have to into it guiding strong have always came standpoint so expecting the car from work and fairly our utilization a us particular or to has enabled and utilization organization a we customer across as success we so highly great is relationships our While - keep case. renewals the It's type to those on new having work carload they be year year that of hard the hard, diversified to very up. that very on have been has service less That's and customer it significant high. or our our It's

Justin Bergner

XXXX, That's helpful. at the with most least you good before climbing even sequentially? set rates have needs? already lease the XXXX rates, lease who people more until can't and respect of car GATX, are tank lease sort tank why kind needs Okay. With quarter very a of with to of those up first car new if Are line

Brian Kenney

car clarify, new want for to just that's placement. I a

next and car early new of of Our March availability is XXXX, in XXXX. the part April

alternatives. no can't have new a cars of there's go least existing to industry rolling If to don't of are near they at also term we car cars because get They new replace that's car. are somebody rolling for new phenomenon renewal, an because over of anybody over lot that today, availability. bit is that allocate too, an that a So, up can't Cars and today.

So bit on more you discussion. rate leverage get a the lease little

Justin Bergner

sequentially even of But with wouldn't got lease tank that increase rates? sort it. an in Okay, higher car jive

Brian Kenney

yeah, lease are are their pretty they also and They our savvy own from our others. own cars. customers customers While - may pretty

customer, to they don't beholden be type one any hostage we or to one held like Just don't be to want by any lessor. want typically car

maturities So, they their they're smart their about pretty how and suppliers. diversify they ladder how

rate doing taking raise So to some go or we reps. go don't damage without have raise utilization unfettered right rate some to or ability

Justin Bergner

last repurchases, of higher or year any of quarter. blackout respect the anything Was the for With rate run periods was sort number healthy it to the catch of a repurchases? understood. of Okay, driving up sort that pretty this some

Tom Ellman

Yeah.

into our it coming ended $XXX to year, last guidance somewhere up in million expect we $XXX for at So is million. XXXX. for the And in going we be range. was XXXX This

are year, You're blacked catch correct the middle that. that more the of but to in the of we at out for up the we end did year

somewhere million range. For the XXXX, expect in to we be $XXX

our the quarter And that in first that on million so did of right $XX is with line we sort expectation.

Justin Bergner

comments sort any with of dynamic ARI? deal outside how longer-term? it Greenbrier-ARI Okay, if sort comments for change the contract great. And the goes then might on through, the specific - Any industry of lastly, leasing assuming how, the your

Brian Kenney

week, the now, trying there Really, it was on Yeah, determine long-term so if at looking it any. just effect numbers announced Justin, it we're last at is it's just GATX, and the would Brian. have what looking to

be it's early too tell, if let deal is the to come. know - to So consummated, so don't we going more to

Justin Bergner

thanks. right, All

Operator

Thank Jennifer At it closing time, have no to this I'll further back turn you. McManus remarks. questions, we for

Jennifer McManus

this morning. I'd thank participation the Thank call everyone to me with any their questions. follow-up like contact on Please you. for

Operator

concludes Thank you. today's This conference.

now may disconnect. You

GATX (GATX) 24 Apr 192019 Q1 Earnings call transcript