Gatx Corporation · NYSE:GATX
Gatx — Investor Presentation (March 2021)
70 slides from Gatx's investor presentation, Mar 31, 2021
Slide 1: Company Overview 2021
COMPANY OVERVIEW 2021
Slide 2: Table of Contents
Table of Contents History and Business Overview................................................................................................... Railcar Leasing Business Model................................................................................................... Rail North America ....
Slide 3: Forward-looking statements
- Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. These include statements as to our future expectati
Slide 4: History and Business Overview
History and Business Overview 123 YEARS OF EXPERIENCE
Slide 5: Established as railcar lessor: company history
Established as railcar lessor with 28 railcars 5 *As of 12/31/2020 -Year History 1898 1907 1919 1920 1936 1984 1994 1998 2003 2012/ 2013 2020 2021 Began manufacturing railcars Initiated quarterly dividend Began listing on the NYSE Began rail investment in Canada Exited railcar manufacturing Began ra
Slide 6: GATX Today: Business Segments
GATX Today Business Segments 66% 21% 8% 5% PORTFOLIO MANAGEMENT Largely comprised of our 50% ownership of Rolls-Royce and Partners Finance Affiliates (RRPF), a leading worldwide lessor of aircraft spare engines RRPF has 445 aircraft spare engines with $4.8 billion of net book value In January 2021,
Slide 7: GATX Rail Operations Footprint
GATX owns approximately 149,000 railcars, over 625 locomotives, and has an interest in more than 440 aircraft spare engines. 7 (map excludes leasing footprint for RRPF and Trifleet) GATX Rail Operations Footprint GATX Headquarter Locations GATX Global Headquarters (Chicago, IL) GATX Rail Europe (Vie
Slide 8: Capital Allocation Framework: Investment Volume
PRIORITY 1 Invest in core, service-intensive assets to maximize shareholder value $9.8 billion** of investments over the period shown Capital Allocation Framework $781 $480 $585 $615 $770 $860 $1,031 $715 $621 $589 $928 $723 $1,064 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020*
Slide 9: Capital Allocation Framework: Leverage and Secured Assets
*Total Recourse Debt = On-Balance Sheet Recourse Debt + Off-Balance Sheet Recourse Debt + Capital Lease Obligations + Commercial Paper and Bank Credit Facilities, Net of Unrestricted Cash (In accordance with the new lease accounting standard, off-balance sheet assets and recourse debt are no longer
Slide 10: Cash Returned to Shareholders
$0 $500 $1,000 $1,500 $2,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* Cumulative Dividends Cumulative Share Repurchase CASH RETURNED TO SHAREHOLDERS Capital Allocation Framework $ M IL L IO N S PRIORITY 3 In lockstep with Priorities 1 and 2, return excess cash to shareholder
Slide 11: GATX Financial Highlights
GATX Financial Highlights $1.59 $2.01 $2.81 $3.50 $4.48 $5.37 $5.77 $4.41 $4.67 $4.89 $4.59 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020* 7% 9% 11% 13% 15% 18% 18% 13% 14% 14% 11% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $585 $615 $770 $860 $1,031 $715 $621 $589 $928 $723
Slide 12: Environmental, Social and Governance
12 Our ESG priorities center on four foundational pillars: *Association of American Railroads, Freight Railroads & Climate Change, March 2021 Environmental, Social and Governance OUR ETHICS & INTEGRITY OUR PEOPLE OUR ENVIRONMENT OUR COMMUNITIES Committing to operate our business consistent with the
Slide 13: Health & Safety, Environmental, Community
Health & Safety As participants in an essential industry, intense focus on COVID-19 prevention/response Engaged in Transportation Community Awareness and Emergency Response (TRANSCAER®): 30K-gallon tank car donated to CIAC for emergency responders training Environmental Initiated a project to calcul
Slide 14: GATX Investment Highlights
GATX Investment Highlights 14 Operational Excellence Strong track record of executing our strategy effectively and delivering best-in-class services to customers Full-Service Maintenance Capabilities valued by customers across North America and Europe Leading Market Position in majority of the marke
Slide 15: Railcar Leasing Business Model
Railcar Leasing Business Model
Slide 16: Straightforward and Proven Business Model
16 BUY the railcar at an economically attractive and competitively advantaged price at the right time LEASE the railcar to a quality customer at an attractive rate for a term that reflects the business cycle SERVICE the railcar in a manner that maximizes safety, in-use time, and customer satisfactio
Slide 17: GATX Advantage: Railcar Supply
EXPERIENCED INTERNAL CAPABILITIES DISCIPLINED INVESTMENT APPROACH COMPETITIVE ASSET COST OPPORTUNISTIC INVESTMENT GATX ADVANTAGE GATX achieves lower new car costs by placing large orders at appropriate points in the business cycle GATX uses multiple manufacturing sources to achieve economically attr
Slide 18: Business Model: BUY
18 of Railcar Supply Benefits of Railcar Supply Strategy Large, multi-year orders for new cars from manufacturers Spot orders for new cars to meet specific customer demand Fleet acquisitions of existing cars from other lessors and customers Ostróda, Poland workshop assembles new railcars Access to a
Slide 19: Business Model: LEASE
Customers prefer GATX because of its diverse fleet, technical expertise to meet unique needs, and superior ongoing service. 19 HIGH FLEET UTILIZATION Focus on utilization, adjusting rate and term to capture maximum value throughout cycles Maintenance service capabilities preferred by customers Utili
Slide 20: Business Model: SERVICE
GATX has built a strong market position by focusing on full-service leasing in North America and Europe. 20 MAINTENANCE Customers rely on GATX to manage the complex process of maintaining railcars Premium service minimizes railcar quality issues and unexpected downtime Extensive maintenance network:
Slide 21: Business Model: MAXIMIZE (Remarketing and Scrapping)
REMARKETING INCOME (Income from sale of owned assets) Helps to optimize a diversified, high-performing railcar fleet Over the last 10 years, GATX Rail North America generated an average of approximately $51 million of remarketing income per year SCRAPPING GAINS GATX typically realizes gains when rai
Slide 22: Rail North America
= = ie SY ee sake = a= eal = eaues hal ee RAIL NORTH AMERICA
Slide 23: GATX Rail North America Overview
28% 24% 19% 14% 6% 9% GATX Rail North America Overview *Excludes boxcar fleet Chemicals Refiners & Other Petroleum Railroads & Other Transports Food & Agriculture Mining, Minerals & Aggregates Other Based on 2020 Rail North America Revenue 88% 90% 92% 94% 96% 98% 100% 2002 2004 2006 2008 2010 2012 2
Slide 24: Industry Ownership: North America
RAILROADS (16%) Ownership of railcars continues decline Virtually no tank car ownership due to complexities and regulations Focus of capital investment on infrastructure LESSORS (56%) Shift from railroad- and shipper- owned railcars to lessors Lessors dominate the tank car segment due to complex ser
Slide 25: Industry Fleet & Ownership Mix: North America
Covered Hopper Tank Open Top Flat Boxcar Intermodal Based on approximately 438K tank cars Lessor Shipper/Other <1% Railroad Based on approximately 1.2M freight cars 46% 22% 18% 14% Lessor Railroad Shipper/Other TTX 34% 27% 20% 8% 7% 4% 82% 0% 18% RAILCARS BY TYPE (Approximately 1.65M railcars) TANK
Slide 26: Lessor Market Share: North America
11% 24% 15%11%5% 34% 17% 33% 18% 10% 7% 15% 13% 16% 14% 14% 13% 6% 24% 13% GATX GATX Wells Fargo Rail Union Tank Car Trinity CIT SMBC Other 17% GATX GATX Union Tank Car Trinity CIT SMBC Other Based on approximately 358K lessor-owned tank cars 11% GATX GATX Wells Fargo Rail CIT Trinity SMBC Other Bas
Slide 27: Industry Shipments & Carloadings: North America
INDUSTRY SHIPMENT COMPOSITION* (Based on 2020 U.S and Canadian carloads of approximately 15.2M) 27 21.2 20.4 18.6 18.7 19.4 16.9 17.9 15.2 14 15 16 17 18 19 20 21 22 2006 2008 2010 2012 2014 2016 2018 2020 M IL L IO N S 23% 16% 15% 6% 6% 5% 3% 3% 22% Coal & Coke Farm Products Chemicals Petroleum Pro
Slide 28: Industry Commodity Carloadings: North America
28 0 500 1,000 1,500 2,000 2,500 1 Q 0 8 2 Q 0 8 3 Q 0 8 4 Q 0 8 1 Q 0 9 2 Q 0 9 3 Q 0 9 4 Q 0 9 1 Q 1 0 2 Q 1 0 3 Q 1 0 4 Q 1 0 1 Q 1 1 2 Q 1 1 3 Q 1 1 4 Q 1 1 1 Q 1 2 2 Q 1 2 3 Q 1 2 4 Q 1 2 1 Q 1 3 2 Q 1 3 3 Q 1 3 4 Q 1 3 1 Q 1 4 2 Q 1 4 3 Q 1 4 4 Q 1 4 1 Q 1 5 2 Q 1 5 3 Q 1 5 4 Q 1 5 1 Q 1 6 2 Q
Slide 29: Industry Backlog: North America
Number of Tank Number of Freight Cyclicality of the industry is illustrated by the backlog of orders at the railcar manufacturers The 2013 and 2014 spike in tank car backlog was primarily due to the crude boom Backlogs have moderated post-crude boom, with the recent decline attributable to Precision
Slide 30: Lease rates, renewal success and utilization
STRONG MARKETWEAK MARKET WEAK MARKET 67 63 41 35 45 60 62 66 54 32 33 38 39 31 14% 5% -11% -16% 7% 26% 35% 39% 32% -20% -28% -10% -4% -24% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 0 10 20 30 40 50 60 70 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Renewal Lease Term* (left
Slide 31: GATX Rail NA: Diverse Customer Portfolio
26% 40% 14% 20% As of 12/31/2020 Note: Customer families sometimes include more than one customer account; the S&P or equivalent ratings noted generally reflect the credit quality of the rated parent entity. Lease obligations of subsidiaries are not necessarily guaranteed by the rated parent entity.
Slide 32: Fleet by car type and commodities carried
CAR TYPE COMMODITIES CARRIED % OF FLEET % OF NBV T A N K C A R S F R E IG H T C A R S High-Pressure Tank Cars LPG, VCM, Propylene, Carbon dioxide General Service Tank Cars: Molten sulfur, Clay slurry, Caustic soda, Corn syrup 13k-19k gallon Other Specialty Tank Cars Acids (sulfuric, hydrochloric, ph
Slide 33: GATX Rail NA: Continuous Investment
$4.2 $4.4 $4.5 $4.6 $5.0 $5.1 $5.2 $5.4 $5.7 $5.6 $5.9 50 60 70 80 90 100 110 120 130 $3 $4 $5 $6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Assets** Railcars A S S E T S I N $ B IL L IO N S R A IL C A R S IN T H O U S A N D S Car count increased 6%* Assets increased 42%* 33 GATX Rail NA
Slide 34: GATX Rail NA: Maintenance Network
GATX is known for integrity, safety, and quality of our operations and superior execution. Services range from routine maintenance and regulatory programs to car modifications and rebuilds, including all mechanical repairs, interior cleaning, interior/exterior blasting, interior/exterior coatings, v
Slide 35: GATX Rail NA: Training & Regulatory Expertise
2010 First railcar lessor to be named Responsible Care Partner of the Year 2017 Repeat recipient of the Responsible Care Partner of the Year 35 GATX Rail NA: Training & Regulatory Expertise TankTrainer Since 1993, we have: Hosted Trained Regulatory Events people 310 >18K 2005 First railcar lessor to
Slide 36: GATX Rail NA: Regulatory Environment Participation
36 GATX Rail NA: Regulatory Environment Participation Deep Knowledge on Industry Regulations Our employees are actively involved in numerous regulatory committees and trade and supplier associations: Tank Qualification Interval Extension GATX is the only tank car owner to get FRA/Transport Canada ap
Slide 37: Engineering support and projects
engineers, communicates regularly with customers and tailors solutions to meet their needs. Examples of engineering support include: Preventative Maintenance Inspection Plans Car Design / Specifications Chemical Engineering Customer-Specific Enhancements AUTO CARRIER CONVERSION PROJECT GATX Engineer
Slide 38: GATX Rail NA: Technology Focus
Shop Portal Provides repair instructions to maintenance network shops Provides car and event-specific forms to assure that required inspection points and mandatory repair items are documented and addressed MyGATXRail.com Provides real-time maintenance data and fleet- management capability to our cus
Slide 39: GATX Rail NA: Locomotive Leasing
39 Locomotive customers include: Regional and short-line railroads Industrial users Class I railroads $32 $35 $38 $39 $39 $39 $36 $29 2013 2014 2015 2016 2017 2018 2019 2020 $ M IL L IO N S GATX owns, manages or has an interest in more than 625 Locomotives, 96% of which are four-axle locomotives. LO
Slide 40: Rail International
RAIL INTERNATIONAL
Slide 41: GATX Rail International Overview
95% 97% 96% 99% 98% 90% 91% 92% 93% 94% 95% 96% 97% 98% 99% 100% 2008 2010 2012 2014 2016 2018 2020 GATX Rail International Overview FLEET COUNT 26,300+ in Europe (GRE) 4,500+ in India and Russia CAR TYPE COUNT 50+ AVERAGE FLEET AGE (GRE) 17 Years NUMBER OF CUSTOMERS 250+ COUNTRIES OF OPERATIONS Pol
Slide 42: Industry Snapshot: Europe
32% 68% (Based on approximately 728K railcars) RAILCAR OWNERSHIP* Railroads and Shippers Lessors 42 Industry Snapshot: Europe Relatively limited manufacturing capacity Helps avoid an industry oversupply of railcars Older industry fleet in need of replacement Key segments continue to demonstrate need
Slide 43: Industry Fleet and Ownership Mix: Europe
24% 76% 70% 30% 31% 19% 35% 11% 4% Flat Wagons Tank Wagons Dry Bulk Wagons Covered Wagons Other Based on approximately 136K tank cars Lessors Railroad & Privately Owned Based on approximately 592K freight cars Lessor Railroad & Privately Owned RAILCARS BY TYPE (Approximately 728K railcars) TANK CAR
Slide 44: Lessor Market Share: Europe
3% 39% 21% 7% 5% 25% 23% 33%13% 8% 2% 21% 11% 36% 18% 6% 5% 24% 11% GRE 23% GRE Based on approximately 95K lessor-owned tank cars 3% GRE Based on approximately 141K lessor-owned freight cars LESSOR OWNERSHIP SHARE (Based on approximately 236K lessor-owned railcars) TANK CAR LESSOR OWNERSHIP SHARE FR
Slide 45: Railcar types and commodities carried (GRE)
CAR TYPE COMMODITIES CARRIED Mineral Oil Light mineral oil (gasoline, jet fuel, diesel oils, light heating oils), Dark mineral oil (heavy heating oils, lubricating oils, coal tar, bitumen, asphalt), Crude oil, Bio diesel, Styrene, Acetone, Methanol, Ethanol Liquefied Petroleum Gas (LPG) Propane, But
Slide 46: GRE: Diverse Customer Portfolio & Fleet
70% 5% 25% -tier customers. 46 Top 20 customers based on 2020 revenue Investment Grade Speculative (BB+ or lower) Private/Not Rated 46 GRE: Diverse Customer Portfolio & Fleet As of 12/31/2020 2010 2020 GRE Car Count 20,400+ 26,300+ GRE Average Fleet Age (years) 24 17 GRE Fleet Capacity (thousand m³)
Slide 47: GRE modernization, support, engineering and maintenance
MODERNIZATION With an average age of 17 years, GRE has one of the youngest and most modern railcar fleets in Europe Customer-specific adaptations and additional equipment can be implemented in many railcar types SUPPORT Comprehensive customer service Deep industry-specific know- how combined with un
Slide 48: Industry Overview: India
Indian Railways has a number of initiatives in progress to increase freight rail modal share in the country. 48 Industry Overview: India As of 12/31/2020 Significant Potential Large railway network, dominated by passenger service today Commodities move long distances Developing manufacturing and imp
Slide 49: GATX Rail India Overview
$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $0 $20 $40 $60 $80 $100 $120 $140 $160 NBV (left axis) Lease Income (right axis) $ M IL L IO N S $ M IL L IO N S GATX obtained the first-ever wagon leasing license in 2012 and is the largest private railcar lessor in India. KEY ATTRIBUTES Local Technical and Op
Slide 50: GATX Russia
Russia has one of the largest privately- owned railcar fleets in the world GATX Russia owns a small fleet of timber flatcars, woodchip gondolas, boxcars, and tank cars Approximately $20 million of investment since inception Leverages GATX Rail North America and establish local competitive advantages
Slide 51: Portfolio Management
51 PORTFOLIO MANAGEMENT
Slide 52: Portfolio Management Overview: RRPF
83% 16% 1% $706.1M NBV Spare Engine Count: 445 Average Fleet Age: 12 Years 2020 RRPF OVERVIEW Aircraft Spare Engine Leasing Affiliates (RRPF) Marine Equipment Other $0 $20 $40 $60 $80 $100 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 RRPF JV PRE-TAX INCOME $ M IL L IO N S ASSET MIX 36% 17% 17%
Slide 53: Aircraft Spare Engine Leasing Industry Overview
1% 10% 40% 50% 1990 1998 2016 2019* ENGINES LEASED 53 *Based on management estimates Aircraft Spare Engine Leasing Industry Overview Aircraft spare engines are attractive and reliable leasing assets Robust residual value characteristics Retain value better over the long term compared to aircraft Air
Slide 54: Aircraft Spare Engine Leasing Industry Overview: Air Traffic
Aircraft Spare Engine Leasing Industry Overview 0 1 2 3 4 5 1980 1985 1990 1995 2000 2005 2010 2015 2020 World Air Passenger Traffic Evolution, 1980-2020 Total Domestic International 54 Most industry experts anticipate global air travel to fully recover by 2024 or earlier. C O V ID -1 9 F in a n cia
Slide 55: RRPF Affiliates Overview
The RRPF affiliates portfolio has contractual future lease receipts of over $2.7B. GATX established its first partnership with Rolls-Royce plc in 1998 Total NBV of engines has grown at a establishment; today the NBV is nearly $4.8B RRPF affiliates lease aircraft spare engines to commercial airlines
Slide 56: RRPF Joint Venture: Balance Sheet and Liquidity
56 RRPF Affiliates entered the COVID-19 crisis from a position of strength. Balance Sheet and Liquidity Long-dated debt maturity profile and commitment to preserving cash and maintaining strong liquidity Renewal Schedule Consistent effort to ladder lease maturities by volume and engine type Customer
Slide 57: Trifleet
- TRIFLEET
Slide 58: Trifleet Overview
72% 12% 9% 6% Trifleet Overview FLEET COUNT Over 19,000* (54% owned/46% managed) AVERAGE FLEET AGE Owned: Approx. 7 Years Managed: Approx. 10 Years ESTIMATED USEFUL LIFE 15 25 Years TYPICAL LEASE TERM 1 5 Years NUMBER OF CUSTOMERS Approx. 300 MAJOR COUNTRIES OF OPERATION The Netherlands, U.S., Singa
Slide 59: Tank Container Industry Snapshot
Tank containers transport a variety of liquids as well as gases in bulk Tank container fleet growth has increased steadily alongside consistent growth of global liquid trade volumes in recent decades Benefits of tank containers relative to other global liquid transport asset types (e.g. drums and fl
Slide 60: Industry Ownership Mix & Lessor Market Share
INDUSTRY OWNERSHIP (Based on global tank container fleet of approximately 686K) Source: International Tank Container Organization, 2021 Global Tank Container Fleet Survey 1Includes owned and managed tank containers 2Includes Raffles Leasing 46% 54% Lessors1 TOP LESSORS OWNERSHIP SHARE1 (Based on app
Slide 61: Main Commodities by Tank Type
61 Main Commodities by Tank Type STANDARD Capacity: 14.5K to 26K liters SEMI-STANDARD (Swap Bodies, Heated & Cooled, Baffled) GAS Capacity: 20K to 24.5K SPECIALITY (Coated, U-Stamp, Multi- compartment, Dedicated use) CRYOGENIC Capacity: ~22K liters for 20ft containers ~46K liters for 40ft container
Slide 62: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 63: Financial Profile Summary
FUNDING AND LIQUIDITY Strong, stable, and predictable cash flow Contractual future lease receipts from strong and diversified customer base Consistent access to capital markets through cycles Robust contingent funding plan with diverse sources Capital spending flexibility Financial Profile Summary 6
Slide 64: GATX: Well Positioned with Strong Cash Flows
GATX has nearly $3 billion in contractual future lease receipts. $ 2 6 7 $ 2 4 4 $ 3 0 7 $ 3 7 0 $ 4 1 1 $ 4 5 8 $ 5 4 2 $ 6 2 9 $ 4 5 4 $ 4 8 5 $ 4 2 6 $ 4 3 7 $ 6 8 $ 8 4 $ 1 5 4 $ 2 8 9 $ 3 8 5 $ 2 6 4 $ 4 8 2 $ 2 2 4 $ 1 6 6 $ 2 3 4 $ 2 5 0 $ 1 3 1 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2
Slide 65: Financial Highlights: Strong Balance Sheet
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 2003 2005 2007 2009 2011 2013 2015 2018 2020 % of Assets that are Secured *Total Recourse Debt = On-Balance Sheet Recourse Debt + Off-Balance Sheet Recourse Debt + Capital Lease Obligations + Commercial Paper and Bank Credit Fac
Slide 66: Cost of Debt & Borrowing Term
6.1% 3.8 0 1 2 3 4 5 6 7 8 9 10 0% 1% 2% 3% 4% 5% 6% 7% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Effective Cost of Debt (left axis) Average Life in Years (right axis) Over the past decade, GATX has lowered borrowing costs while lengthening the average borrowing term. COST OF
Slide 67: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES
Slide 68: Reconciliation of Non-GAAP Measures: Net Income
68 Reconciliation of Non-GAAP Measure Net Income Measures Net Income (in millions) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net income (GAAP) 110.8$ 137.3$ 169.3$ 205.0$ 205.3$ 257.1$ 502.0$ 211.3$ 211.2$ 151.3$ Less: Net income from discontinued operations (GAAP) n/a n/a n/a n/a n/a n/a 34
Slide 69: Net Income Measures (cont.) and Earnings Per Share
69 Reconciliation of Non-GAAP Measures Net Income Measures (cont.) and Earnings Per Share Net Income (in millions) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Adjustments attributable to discontinuing operations, net of taxes: Net casualty gain at ASC n/a n/a n/a n/a n/a n/a - - (8.1) - Impact
Slide 70: Balance Sheet Measures: On- and Off-Balance Sheet Assets
70 Reconciliation of Non-GAAP Measures Balance Sheet Measures On- and Off-Balance Sheet Assets 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total assets (GAAP) 5,846.0$ 6,044.7$ 6,535.5$ 6,919.9$ 6,894.2$ 7,105.4$ 7,422.4$ 7,616.7$ 8,285.1$ 8,937.6$ Off-balance sheet assets (1): Rail North Amer