GATX - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by. Good day and welcome to the GATX 2020 Second Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shari Hellerman. Please go ahead.

Shari Hellerman

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

results quarter benefit $X.X share deferred page on or earnings net XXXX from and our release. its income Year-to-date refer compares our Earlier circumstances. XXXX operations forward-looking please of rate information or or to the million operations to second This in diluted diluted per for and release Form million or those income XXXX. or more factors $X.XX inactive update include million related of in of from items the $X.XX diluted tax assumes XXXX operations For $X.XX per share today, $XXX.X share. foreign of included events income an second detailed or statements GATX are GATX's quarter second compared net and continuing discussing million XX-K to to share GATX tax quarter reported subsequent year-to-date million no XXXX, XX-Qs XXXX. reported These share same per risk to $XX.X $X.XX from a $X.XX diluted obligation XXXX. $XX reduction. period the $XX.X of reflect per continuing or per diluted XX in for net The we any revise continuing net to of

and Despite segment. impact downturn discontinued the operations a our Steamship negative quarter, discontinued completed environment, the fleet, high this the at We During been segment XX.X% our briefly now prior And I'll recast the from lease utilization with XX.X%. earnings all rate was address our very our across difficult was have had Accordingly segments. all out that the was and team. car Company. been associated in North environment detailed considerable and operation periods reported economic pressure America's release. conform In lease The business fleet as built renewal Rail execution rate to business are second each second Income operating sale of by end. commercial capabilities, success has well-diversified and at GATX excellent And quarter of American challenging a types commodities. rates all full-service presentation. COVID-XX on across and remained quarter,

the negative lease change quarter, rate average was index XX ALPI GATX's renewal of price the months. with renewal the associated During XX% term and with

nearly successfully supply We place base. railcars supply railcars and XXXX agreements XXXX placed from Trinity a Trinity diverse X,XXX our supply continue new We agreement X,XXX our with from customer agreement. our from railcars to committed

We Greenbrier agreement. placed railcars to have also close supply X,XXX from our XXXX

quarter, mentioned the agreement million. XXXX supply America's income North was As $X.X quarter bringing placed. remarketing year total Rail all Remarketing have income last the been for $XX.X in to million deliveries for

in remained strong Europe International's remarketing GATX during Management, the volume the the approximately by In $XX to utilization investment steady across interruptions was new and experienced due at International. Portfolio both Turning see quarter and million. XX.X% demand in Rail due railcar results Europe driven were to with second Partners end. to Europe & lease solid deliveries The of Rail Rolls-Royce in quarter delays quarter. predominantly COVID-XX-related Rail activity Rail In at manufacturing environment Finance India quarter Affiliate, of rate the performance continued facilities. the the Rail fleet GATX primarily GATX to

and to asset pressure now it our operator shape the of expect COVID-XX our back on And uncertain. renewal prepared continue remains I'll to are all the as in noted Finally, as evolves, hand utilization release, activity the remarks. across the recovery Those we of Q&A. the business impact for earnings lease of economic segments. rate,

Operator

Fargo. Thank you. Allison [Operator Instructions] And our Wells Poliniak will come first question from with

Allison Poliniak

you obviously, should rates, but there's morning. to, you a I Could And Hi, in on just this rates of? guys. the lease pressure mentioned, you mindful that know within LPI significant trends lease mix of, experienced quarter? talk maybe Good sort any, that if financial we issues be

Bob Lyons

say This Sure, I pressure was would tank Good and Allison. Bob shared sequentially morning. The freight. is between equally Lyons.

QX at it to lease freight look were you and if tank X% rates X% down both QX. QX to call So between QX and

second the car year the LPI quarter. types LPI We XX%. we we impacting So negative and at the the between the anywhere no between would into - down expected negative said, be significant came in year XX% real differential of beginning the

XX% that for the quarter of negative but going everything band, band. and the the outside impact not far given that obviously on economic COVID-XX that's So outside impact with the

Allison Poliniak

Understood.

the over or would Just years, loss have the that to the just I fall might certainly of they -- a it that these past terms second, there'll of be in inflation a want. take market suspect they to in with short market what few secondary of amount what

fruition one? before through secondary some months? obviously of there next Or opportunities -- would the cycles to been Is different? and the market. place few different some one feel over come structurally there's with these you You've Does to these this this expect

Bob Lyons

the capitulation. Great the did for it point while it say, the point kind equate I a take in thing XXXX that at time feel asset XXXX only XXXX, really would reach Recession I where some of can a be little Well, of to would and owners to -- of the

Again, So yet feel whether a on. a will their again, whether We not pain found you that have there opportunities, number they're that control. not interest. did they're for portfolio. sellers of some there's move willing And We they you would point to that, people a recoverable. and that's realization prices the be of – high they of the as happen of XXXX do of XXXX, there the pay there take run not And lot in not of do relatively that, occur or in some cars willing issue be that point significant out, into out do again. portfolios to that certainly, or out we opportunities and XXXX. But are that may

Brian Kenney

Brian. this Allison, is

in in add other I'd Recession, the as The XXXX I Great there there access is capital – same to thing would the is say today. wasn't

we of hit. back So those lot in were a portfolio that to our added situations we then

have Now access everybody capital. it could seems more competitive to be to since

we'll to So have see.

Allison Poliniak

Thanks. I’ll Understood. it. pass it Got along.

Operator

And moving go Stephens. with we'll Long Justin on, to

Justin Long

Thanks, and good morning.

seen start here in month year-over-year, If in at anticipating So railcar Also, FTR's or maybe to if the sequential commentary rate we you at while delivery we rail some lease two. improvement last have supply on America. contracting. follow-up volumes, North look they're to down the look forecasts, substantially

environment. So XXXX? in hit you you that trends rate how XXXX, the trends, do lease kind Would some a think before think that possible you as in outlook. can something those to get have those we love just that to bottom long or is feel is of about that Is continue around like your point at thoughts

Bob Lyons

Sure.

into environment, here of it, second time Bob. into to issues, whether things on come And a put I'd COVID-XX of a frame this that Justin, a it's play. the very wave factors play, the of the that whole economic all it's say, given could difficult for come host potential is

the it. while that hesitant of I What So to frame to back years. the backlog numbers time and into fact will try years building think, that can't FTR That more I below output you reduction with delivery for the down dramatic schedule oversupplied in or the a sight to bring view was put a year I'm this more, on market balance. has come correct not down, market tell have level. be in and will it is you the our come the replacement There a help two to of of a has lose itself

Justin Long

in there the that was quarter And what Is slightly forward then seen maybe the forward? going million In only of remarketing down market anticipated. $XX.X remarks way came the expect to mention prepared there much held better it RRPF, a way lot sense. of Okay. you shifting and than a to item contribution basis, remarketing? far we deferrals help thus sequential that line on that us about you've from think there going about for a in up a think any on And Makes remarketing. impact how based the to the was

Tom Ellman

Justin, hi, is Tom. this

And about residual so quarter, in two-thirds to for the second of was gains that realization. related

So as we be significant commented in all In markets, the tends remarks, a that lumpy. pretty prepared to portion.

to there going gains to the worth because in both the then $XX market on any noting how of But in about quarter realization. we've what difficult million predict was exactly to it's come number that related year-to-date million even based and that's it's $XX in. and year-to-date second residual the seen So

of we see something going but it's challenge. is year, more of throughout So the seen to the we've and magnitude always expect it that a that forward, would quantifying

Justin Long

Understood. the Okay. on SG&A. last And maybe question

As in opportunity rate the cutting how have is think and divestiture XQ? business continue of pro And on to SG&A announced, costs run front? a forma the that you that we Tom, that there the you about for think about ability the much an way on to

Tom Ellman

yes. Yes,

expected coming that was which noted we number, roughly to million. into we with year, $XXX SG&A XXXX's the be So flat

spending cost wake like in result ASC If implemented additional projected we travel operations compensation entertainment. Together, million course of million almost reduction $XXX and of you also year, of savings. been the these consulting from sale, expect the to be for and measures hiring areas expect in $XX would we the eliminated have the over some In then measures SG&A $XX to certain discretionary continuing And adjust incentive savings. we million. COVID, to

in So see substantial year. you savings of we more expect second the the that half can SG&A

Justin Long

Appreciated that. really helpful Its Great. Okay. color.

Tom Ellman

Thanks.

Operator

Majors with go Financial next, Group. And Bascome we'll to Susquehanna

Bascome Majors

it's out taking you when you're had bidders versus a depth looked see access big I looking And and evolving? alluded a on wanted take to being today saw to M&A that back. in when what difference it to maybe seeing maybe opportunities, the you're market? for any talk the there over question some anything the When you the last as it like typically Thanks processes you. the an go XX books the of out side, pretty fleets is the acquirer seller, is few of back same years? you Yes. to versus ample that can a buy earlier that ago acquire or you're questions Is step putting about depth what you And as about as to and Thank my market? evolving environment years maybe capital here.

Bob Lyons

call Sure, would somebody are it who's else XXX two And in market separate types between buckets. is sales on leases into activity, many packages those go many Lyons. XXXX The GATX market, riders. you very to the different ordinary I the or different to distinct cars cars secondary Bascome. as Bob it's This of be whether going anywhere typically

And different large so those, market. a more a it's sale. sell very secondary it it very or ongoing railcars going of out XX,XXX different us the it's a than an as somebody buyer sell common universe whether in to to or magnitude. that as sell of from to for portfolio and X,XXX see business, That's others That's asset something

impact. secondary side, the kind see of, core sales. we the sales coronavirus just from remarketing second can of quarter you of in in in did market, that we some reduction and agreed had first a those We million transactions ordinary income numbers some remarketing have $X were On the the in quarter, the second as sales we post activity had, the did see the to in roughly

general is and in they've economy we biggest hear looking of depth the the at the the rail packages, would sidelines. making to issue market, There breadth the of North activity. the the buyers materially. uncertainty buyer opportunities. those moved But whether looking hesitant I is still or were has universe at But is the pretty declined, just it's American some marketplace, and people there So say,

assets pretty invest interested that is limited. there, to They're rail own. near Now, the to investors said, remain The assets. but ability in term is great appetite

investors lot is second we underlying pretty of the may some very And The because come income a those the to mentioned in going of it's And the the assets. economy estimate if on difficult a issues attractive we half second back And to If see have of cheap. of or of the really things stay could it's at is year. kind COVID-related remains so, solid. you predict as where wave remarketing today, base some of sidelines. the capital see quickly, earlier, Brian customer investors are they're improve, really and

good buying for the you'll get in come so, position. out way, And a people we're market see and assets. back back Either into

Our little of puts the doing in point organization doing of it make and lean, we're hold and now happen. capable tends that and a And selling we that. analysis if more, and sell in holding bit times direction more we're fine to to like to the be the to portfolio begins that have us

So a spot in we're good there.

On so buyer it's work going interest. is capital, universe, given any a sizable I the of be the the different But, challenge. bit think, a cheap valuation larger -- doing portfolios, again, to environment again, portfolio, generate can

Bascome Majors

private Thank delight cheaper you in mean, anything just to comprehensive historically size lower these answer to return processes, you. requirements? capital kind are portfolio attract an are for questions, of the that's seeing. who's And Is these I in money? investors you is fine. bidding? and if in transparency that we interest haven't it understand tag equity And you large just Thank seen on it that what answer. want seeing have I of guys the more the side, infrastructure in of and evolution is, that

Brian Kenney

funding Yes, like but to what entering as That's investments, They a seen necessarily the perceive It's the market. yield. over they financial low they have cost, don't that. for five railcars six seek I'll take players because years you've passive Brian. or last

market that You've our the both in have low beyond by and an when healthy lease big very financial oversupply be And seen needed pull rates few now. the cost back industry. of especially some excess the last look years, market now. those in what industry players low also statement the bank in opinion platforms investment and at the would build and the for That's the funding obvious the over in you players is spurred -- categories

that if show are these portfolios about it's not. of they'll some just hit data there out or there the as I So market. interest. to suggest access the hard there's up, that be still to if we've excellent they'll there's lately suspect tell not to some talked capital. And There's already troubled

Bascome Majors

you. Thank

Operator

on, And with to Elkott go Cowen. moving Matt we'll

Matt Elkott

North the Thanks pretty morning. declines for down on average last question flat looks car Good America. year-over-year on LPI lease guys. basis quarter-to-quarter over My only accelerating And a few despite the and held slightly it's it is much revenue per like, quarters.

that mean that renewal coming to? how that about had guys for For fewer QX, does you do Or the in cars quarter? up you think reconciling

Bob Lyons

it's Bob. Matt, Well,

quarter-to-quarter. a time. it's car much per of the too to hesitant a all, from First I to difficult changes revenue be the would look that, say, conclusion of draw at I'd little average mix kind of because the all

year, If just example over X,XXX of the to we've to close cars. that course for another you last last of of scrapped year. last on in the top sold over look We've the – X,XXX close the course X,XXX the

new to want customers renewal, of seeing on every a fairly revenue competition. on routinely. placement And That the changes hard general impact car we're but mix the very of per and tank cars Every car. side, said, that that have negotiating average rate. holding can in are hold seeing up So an in they're lot on those terms to demand well cars, is

Our the trying freight been reason, they're that going customers know to for market term. time. freight in to on you a saw have are short Hence to use – as smart. their They conditions and the long the stay advantage. challenged The have cars we're rates been rates very

state, depressed down and well. into went a relatively this they've rates market in pretty those already So stayed

Matt Elkott

it, Got insights, Bob, that. thanks helpful for

to traffic thing the lease guys for What a bottoming inflecting do potentially Is to it for maybe downward to out and lease look the question and follow-up of on to side. that spot for? more end momentum rates? one rail Is the first positive? rates see Just needs lease happen think you rates us

Bob Lyons

North biggest certainly I economic this I say, coming would help. of and marketplace. sheer activity, be will the in also the industrial the for I'd say, would And That America But activity touched the the indicator is cars just already sure. on supply into thing second

still now dropped, felt and there has for case that's backlog being years. of have number too view for but cars a is been very strongly, market, many this our the While produced are the

that spicket also help back that need rates lease going will dial forward. we to So, see

Tom Ellman

and of done we just in potential to increase that see a system what the for uptick if is of an demand in really a demand because cars, down terms that, add have bit Matt the cutting traffic in back, a an did given would to there railroads and have you'd slow follow-on that.

Matt Elkott

industry-wide seen very an environment are I Yes important the that's a we've the all growing PSR, time. think rail implemented I while traffic Class Tom. at same also is don't where point

test think. So I that a for remains insight. Thanks the so much to be

Tom Ellman

you. Thank

Operator

O'Hara on with Moving to & [Operator we'll Steve Sidoti Instructions] go Company.

Steve O'Hara

from for morning. in the could in -- about a lease kind as the all talk in how just And if that marked well? may then guess touch I Can good have you RRPS question. to change you terms income what XQ? Thanks Hi, various Thank was XQ you. of of you within received portfolios taking there maybe deferrals that quarter, the at on the impacted had

Brian Kenney

since you America call, with let's tell Rail cover and we'll what let on Bob start I'd it. him Yes. the the North rest we have of

Bob Lyons

Yes.

So of the went granted dramatically as any nonexistent slowed part thanks the And because the straight deferral most The request revenue is deferrals of the for the the financial quarter impact Brian. that lined. -- we've -- any really has is of along. pace pretty

half are timing tends restructuring XXX a base anything of of other a it's MTV-positive and We've some some commercial or those. either get approximately relatively the We've GATX So for than small. type we customer requests a very it's XX do of numbers approved deferral, to be had or issue cash flow on less for we benefit.

will has sand some customers been that the deferrals relatively So number and not market small significantly particularly straightforward. the add a service had pressured. cube in I been we've have significant

are customers a the of lot of there Some strain. under

we've fewer bit a I I'd either so an impact more And think probably a as sand talk to there And the customers. about with restructurings over of dealt seen RRPF. of then, little to it on -- Tom we've to turn

Brian Kenney

I'd do International well, first. Rail I'll say

we've So received Rail Europe customers. from XX about requests

in the would the is you the of you've it seeking expect majority are customers fleet customers As because relief XX% drop of seen and the oil mineral prices.

requests at similar months those few about a granting between rate have with were So payment deferrals. holidays other America for with GATX half no split has request of modification of reductions North rate extended Europe closed those Rail the were temporary those after who closed the all. And half terms.

little one It's very $XXX,XXX. most I'd really say Rail And customers no deferrals, And they've a So same generally closed with at less rate a well. economic their look few pattern months. than I know similar, effect, a looking rent for it's timing for reached just with rent change number of of. some India of agreement few as all, reductions temporary cancellation received requests they've of most the deferrals. minor

I think delivery case. there one was canceled

economic of under the actions well again those is impact So $XXX,XXX.

and there restarted, So what good about rail good and so RRPF? spike pretty both COVID they're Tom closures hanging in getting a international far. absent think, it's I jurisdictions pretty related in in

Tom Ellman

Yes.

So from a trend perspective, Bob RRPF both what and it's really the same story mentioned. is at Brian

more course, many with deferral started Of RRPF requests.

same does situation went, eye just now, aviation an first but keeping made to really far deferral show at of on On those rent. thing is global obviously, which And customers and the in long -- we six down mentioned as really quarter We've it's was the keep deferral, request, typically the level is The that slowing a with a call, that, as on, it accrue quarter like change? noted of deferral. second to really the our you that the similarly, the as that call, have doesn't it's as little quarter. three seen impact the that over between we're the that first rent half up, for accounting at was slowed it requests, we as And dramatically business. COVID some of because looking as as -- sort on continue continues eye rail months airline a to

Steve O'Hara

guys I there's kind utilization. of things very end no like Okay. noted fighting environment guess No, in that the the competitive for of -- change really Is was that Can quickly? competition have that's now talk of kind environment you -- there? that increased that terms or And the that improved been the Or you helpful of towards color. just about right XQ? is everybody

Bob Lyons

a whether a on for to been it's new would Sure. it's quarter. I diversified number going going business. going that hasn't change or very renewal be car month-over-month GATX you of any is the highly that we when to after be And the competitive. in have second It's competitive you way extremely there that A lessors say, fact Key look replacement, front, it, competitive, a are significant slice a fleet.

flexibility terms number lessors We the we order see have, in of customer that can that have we consolidating base of the cars of of a type in lot that we the on them place our with. book dealing they're

and time displace we're a position again, able where competitors. to So we're in

placements we reason renewal and utilization customer get it's organization lot it. we've plus. well X,XXX base that is and and hence to We've commercial business, success and the the it. competitive are displacing are going small. Any well we example for you stayed So done relatively that's we're the XXX-car-type of deals bidding happen. car on industry where and car XX- a order the done that the order winning look has the any and new everybody winning to at in very have make on XX% is And competitors way But on relationships

Brian Kenney

rate to competition increased it I quarter. And quarter. in we relative International, in shape first as in better increases I'd America. -- But Rail that half much including year the of second things started the realized probably market in continued in lease the with out mean, North say fact the during

will pressure of a restarted, As anticipate be year the second little we in get half some perhaps this tougher continues and it certain the in things markets.

other And I there some lease So think increases. there I certain out expect markets. be wouldn't in idle healthy cars rate will

bit of little half Europe. tougher in a the the be year probably second in will competition So

Steve O'Hara

there how kind sounds range think Is just, or range are about restarting, the that? like a maybe of, And a things of outside asset us give volume given like purchases about do for then could any anything to, think it year? investment maybe you there Okay. for you is

Tom Ellman

Yeah.

to you purchases, of volume spot new side from from rail then acquisition predict. investment We've car we the the several would call on in our And that's on talked So our the and it's year. the mid investment times company, comes hardest that that loose. that $XXX as, one course both stuff about agreements know, But whole for the for fleet the volume on shakes when expect from opportunities. to supply be last probably million

Steve O'Hara

Okay. Thank much. you very

Operator

And Haimes next Asset Management. with we'll hear from Sage Barry

Barry Haimes

my in of normal to for just get on number question. growing many of, rough you And to get a kind it levels Could just if Thanks Hi. at GDP, the view your would normally review back take back that will to moment? the got get track love storage and feel? storage to just started Thanks. taking cars how again, quarters

Bob Lyons

Yeah.

talking the you are fleet idle clear, be to about industry-wide Just count?

Barry Haimes

Yes, yes, Exactly.

Bob Lyons

Yeah.

So it's obviously sharply first in all. have cars are that of is all loaded a Not cars in move storage XX of those not moved that up to Those had number are XX.X%. days. --

back normalized in a history, in everybody number the probably XX% low is storage. the of. very industry are it's overstates it solid definitely but and or too I'd at was far point that work doesn't of market. XX% go thing those one that around But actually point it off what calibrate that cars So the in can data data

ways to down to So go have before you can a get you that level. quite back

again. and weeds of aren't the going are You that in need to scrapping up you some need those activity cars GDP a and go number move really to material on

to down time low to XXs back So XX% quite number pre-coronavirus. level to the only I some wouldn't for was XX% look the in for it get that and

plenty done bring there's of to down. back there be number So that to work

Barry Haimes

And quick increase then use incremental you role is Is X% every just of for cars? demand GDP follow-up. x guys number one in of a there

Bob Lyons

There's created not of of really the because types it hundreds necessarily are cars in different equally. fleet. Not cars all

We have the alone. in over GATX XXX fleet

on is no that it So -- really math there easy number.

Barry Haimes

Okay. Thank insight. Appreciate you. the

Bob Lyons

Sure.

Operator

from And a Financial follow-up Susquehanna Majors with we'll go Group. to Bascome

Bascome Majors

and reach years taking for how Thanks wanted long-term you about thinking two new the to just you scheduled supply. I car Yeah. out ask have my another from guys your I X.X new extensions are deliveries would just realize XX, car curious will strategic GATX typically suppliers. that look But in markets. there the things something if XX at six, that you. over Thank like and I'm months? be that's next some down follow-up.

Bob Lyons

Sure. Bascome, Trinity that both Greenbrier through run it's Yes, agreements and the Bob. we XXXX. have

and on for for cut good manufacturers extending how we think in the and with that works when a it. approach or opportunities, markets detail on new timing we approach won't obviously how timing much get about to to into in that we're But really we So And specific as those. regards I always ourselves deal best for in those deal either we're the of well. I shape putting wouldn't get looking too But challenged agreements place. into

Bascome Majors

Thank you.

Operator

any to comments. back conclude additional that the turn over our I'd And question-and-answer to Ms. conference for will like session. or Hellerman closing

Shari Hellerman

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

Operator

And We'd today's you. for does conference. to like that Thank conclude their thank participation. everyone

disconnect. now may You

GATX (GATX) 21 Jul 202020 Q2 Earnings call transcript