Gatx Corporation · NYSE:GATX

Gatx — Investor Presentation (June 2020)

67 slides from Gatx's investor presentation, Jun 26, 2020

  1. Slide 1: Company Overview Presentation 2020

    COMPANY OVERVIEW PRESENTATION 2020 Revised June 26, 2020

  2. Slide 2: Table of Contents

    Table of Contents History and Business Overview ....................................................................................................................... 4 Business Model ...................................................................................................................

  3. Slide 3: Forward-Looking Statements

    Forward-Looking Statements Statements in this presentation not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and c

  4. Slide 4: History and Business Overview

    History and Business Overview 122 YEARS OF EXPERIENCE 4

  5. Slide 5: GATX's 122-Year History

    GATX’s 122-Year History 1898 Established as railcar lessor with 28 railcars 1907 1919 Began manufacturing railcars Initiated quarterly dividend 1936 Began rail investment in Canada 1984 Exited railcar manufacturing 1985 Began locomotive investment 1994 Began rail investment in Europe & Mexico 1998 F

  6. Slide 6: Disciplined and Proven

    Disciplined and Proven We strive to be recognized as the finest railcar leasing VISION company in the world by our customers, our shareholders, our employees, and the communities where we operate. FOCUSED DISCIPLINED PROVEN BUSINESS CAPITAL RETURNS TO STRATEGY ALLOCATION SHAREHOLDERS 6

  7. Slide 7: Capital Allocation Framework

    Capital Allocation Framework PRIORITY 1  Invest in core, service-intensive assets to maximize shareholder value  $9.4 billion* of investments over the period shown INVESTMENT VOLUME $1,031 $943 $860 $781 $770 $715 $742 $ MILLIONS $634 $621 $585 $615 $603 $480 2007 2009 2011 2013 2015 2017 2019 *In

  8. Slide 8: Capital Allocation Framework

    Capital Allocation Framework PRIORITY 2  Optimize the balance sheet  Maintain a solid investment grade rating of BBB/Baa2  Maintain capacity for opportunistic investments LEVERAGE & REDUCTION OF SECURED ASSETS 5.0x 50% 4.5x 45% 4.0x 40% 3.5x 35% 3.0x 30% 2.5x 25% 2.0x 20% 1.5x 15% 1.0x 10% 0.5x 5

  9. Slide 9: Capital Allocation Framework

    Capital Allocation Framework PRIORITY 3  In lockstep with Priorities 1 and 2, return excess cash to shareholders  Over the period shown below, $2.0 billion returned to shareholders CASH RETURNED TO SHAREHOLDERS $2,500 $2,000 $ MILLIONS $1,500 $1,000 $500 $0 2007 2009 2011 2013 2015 2017 2019 Cumul

  10. Slide 10: Areas of Focus in Response to COVID-19

    Areas of Focus in Response to COVID-19 Rail transportation is an “essential industry” across North America and our international markets. Employees & Customers Balance Sheet Communities  Prioritizing employee health  Executing business  Over $1 billion of liquidity and safety continuity plans to

  11. Slide 11: GATX Financial Highlights

    GATX Financial Highlights Income Per Diluted Share, Adjusted* $5.77 $5.51 $5.37 $5.22 $4.48 $4.70 $3.50 $2.81 $2.01 $1.59 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Return on Equity, Adjusted* Investment Volume 18% 18% $1,031 $943 15% 14% 14% $860 13% 13% $770 $742 $ MILLIONS $715 11% $585 $6

  12. Slide 12: GATX Today – Business Segments

    GATX Today – Business Segments RAIL NORTH AMERICA  Premier railcar lessor 10%  Diversified fleet of approximately 118,000 railcars and more than 625 locomotives  Strong customer credit quality, diversification in car types and commodities carried 8%  $2.7 billion of committed lease receipts NET

  13. Slide 13: GATX's Strong Global Presence

    GATX’s Strong Global Presence GATX owns approximately 147,000 railcars, over 625 locomotives, and has an interest in more than 475 aircraft spare engines. GATX Rail Operations Footprint (map excludes leasing footprint for RRPF) GATX Headquarter Locations  GATX Global Headquarters (Chicago, IL)  GA

  14. Slide 14: Environmental, Social, and Governance Efforts

    Environmental, Social, and Governance Efforts ENVIRONMENTAL, SOCIAL GOVERNANCE HEALTH & SAFETY (EHS) Efficient Transportation People Board Leadership  Moving freight via rail is three to four  Policies and programs in place to  Eight of our nine directors are independent times more efficient comp

  15. Slide 15: GATX Investment Highlights

    GATX Investment Highlights Disciplined Management Team focused on the long-term and experienced in Leading Market Position managing the business across market cycles in most of the major rail markets globally Highly Diversified Railcar Fleet Full-Service Maintenance Capabilities with approximately 1

  16. Slide 16: Business Model

    Business Model 122 YEARS OF EXPERIENCE 16

  17. Slide 17: Straightforward and Proven Business Model

    Straightforward and Proven Business Model BUY LEASE SERVICE MAXIMIZE the railcar at an the railcar to a the railcar in a the value of the economically attractive quality customer at manner that railcar by selling or and competitively an attractive rate for maximizes safety, scrapping at the advantag

  18. Slide 18: Business Model: BUY

    Business Model: BUY DISCIPLINED INVESTMENT COMPETITIVE ASSET COST GATX NORTH AMERICAN RAIL APPROACH ACQUISITION SOURCE GATX achieves lower new car costs by placing large orders at $800 GATX recognizes that railcars are long- lived assets and that each investment appropriate points in the is measured

  19. Slide 19: Business Model: BUY

    Business Model: BUY GATX’s Railcar Supply Strategy is to acquire railcars from a variety of sources versus manufacturing its own railcars. Combining Railcar  Adds significant volatility leading to a higher cost of capital Manufacturing with a  Can result in poor asset allocation within the lease f

  20. Slide 20: Business Model: LEASE

    Business Model: LEASE Customers prefer GATX because of its diverse fleet, technical expertise to meet unique needs, and superior ongoing service. This results in high fleet utilization and strong lease renewal success. CAR AVAILABILITY DELIVERY  Utilize multi-year committed orders with  Develop le

  21. Slide 21: Business Model: SERVICE

    Business Model: SERVICE GATX has built a strong market position by focusing on full- service leasing in North America and Europe. MAINTENANCE ENGINEERING TRAINING TECHNOLOGY REGULATORY  Customers rely on GATX to  GATX’s engineering team  GATX provides important  MyGATXRail.com provides  As a fu

  22. Slide 22: Business Model: MAXIMIZE

    Business Model: MAXIMIZE GATX optimizes its fleet partly through selling railcars in the secondary market or scrapping them at the end of their useful lives. Our fleet of cost-advantaged, well-maintained modern railcars, leased to quality customers, allows us to realize significant remarketing incom

  23. Slide 23: Business Segments Overview

    Business Segments Overview 122 YEARS OF EXPERIENCE 23

  24. Slide 24: GATX Rail North America Overview

    GATX Rail North America Overview 2019 OVERVIEW FLEET UTILIZATION* WHOLLY OWNED FLEET COUNT 118,000+ 11% 100% 99% CAR TYPE COUNT 7% 26% 98% 160+ 98% AVERAGE FLEET AGE 13% INDUSTRIES 96% SERVED 20 Years 96% 94% LOCOMOTIVE COUNT 23% 92% 625+ 20% NUMBER OF CUSTOMERS 90% 90% 850+ 88% COUNTRIES OF OPERATI

  25. Slide 25: GATX Rail International Overview

    GATX Rail International Overview 2019 OVERVIEW FLEET COUNT GRE FLEET UTILIZATION 24,500+ in Europe (GRE) 100% 25% 99% 4,000+ in India and Russia 99% CAR TYPE COUNT 98% 97% 97% 97% 97% 35+ INDUSTRIES 97% 48% SERVED 96% AVERAGE FLEET AGE (GRE) 96% 96% 12% 95% 18 Years 95% 95% 94% NUMBER OF CUSTOMERS 9

  26. Slide 26: Portfolio Management Overview

    Portfolio Management Overview 2019 RRPF OVERVIEW 3% Spare Engine Count: 475+ 6% 4% 18% Average Fleet Age: 11 Years 4% 31% 9% RRPF JV PRE-TAX INCOME RRPF ASSET (GATX’s SHARE) ENGINE MIX 9% TYPES $100 79% $80 16% 21% $ MILLIONS $60 Aircraft Spare Engine Trent XWB (A350) V2500 (A320) Leasing Affiliates

  27. Slide 27: Rail North America

    RAIL NORTH AMERICA 27

  28. Slide 28: North America – Industry Ownership

    North America – Industry Ownership Approximately 1.6 million railcars RAILROADS (16%) LESSORS (55%)  Ownership of railcars has been  Shift from railroad- and shipper- owned declining railcars to lessors  Virtually no tank car ownership due  Lessors dominate the tank car segment to complexities a

  29. Slide 29: North America – Industry Fleet and Ownership Mix

    North America – Industry Fleet and Ownership Mix RAILCARS BY TYPE TANK CAR OWNERSHIP SHARE (Approximately 1.6 million railcars) 18% 4% 0% 7% Lessor Shipper/Other 8% <1% Railroad 34% Based on approximately 431,000 tank cars 81% 20% FREIGHT CAR OWNERSHIP SHARE 27% 14% Lessor Railroad Covered Hopper Fl

  30. Slide 30: North America – Lessor Market Share

    North America – Lessor Market Share LESSOR OWNERSHIP SHARE TANK CAR LESSOR OWNERSHIP SHARE (Based on approximately 895,000 lessor-owned railcars) 2% 11% GATX 18% Union Tank Car 8% 14% Trinity 24% 18% CIT 9% GATX SMBC 15% 34% Wells Fargo Rail 14% 18% Other 6% GATX Based on approximately 351,000 lesso

  31. Slide 31: North America – Industry Shipments & Carloadings

    North America – Industry Shipments & Carloadings INDUSTRY SHIPMENT COMPOSITION CARLOADS ORIGINATED (Based on 2019 U.S and Canadian carloads of approximately 17.2 millions) (United States and Canada) 22 21.1 21.0 22% 21 27% 20 3% 3% 19.1 MILLIONS 5% 19 18.7 14% 18.2 6% 18 7% 17.5 13% 17.2 17.1 17 Coa

  32. Slide 32: North America – Industry Commodity Carloads

    North America – Industry Commodity Carloads QUARTERLY COMMODITY CARLOAD TRAFFIC (North America) 2,500 2,000 1,500 THOUSANDS 1,000 500 0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16

  33. Slide 33: North America – Industry Backlog

    North America – Industry Backlog INDUSTRY BACKLOGS  Cyclicality of the industry 160,000 is illustrated by the backlog of 140,000 orders at the railcar manufacturers 120,000  The 2014 and 2015 spike in tank car 100,000 backlog was primarily due to the crude boom 80,000  Backlogs have moderated pos

  34. Slide 34: GATX Actively Manages Through Cycles

    GATX Actively Manages Through Cycles GATX proactively manages changing market conditions by utilizing our strong customer relationships and the diversity of our fleet to adjust rate and term. STRONG MARKET WEAK MARKET STRONG MARKET WEAK MARKET 70 67 63 66 50% 60 62 54 40% 60 39% 30% 50 45 35% 41 20%

  35. Slide 35: GATX Rail North America: Diverse Customer Portfolio

    GATX Rail North America: Diverse Customer Portfolio CREDIT RATINGS OF TOP 50 CUSTOMER FAMILIES GATX serves Largest more than customer represents 16% 850 individual less than 6% customers of total lease revenue 30% 14% Average Top 20 customers relationship account for 40% tenure of top less than 10 c

  36. Slide 36: GATX Rail North America: Diverse Fleet

    GATX Rail North America: Diverse Fleet CAR TYPE COMMODITIES CARRIED % OF FLEET % OF NBV General Service Tank Cars: Liquid fertilizers, Fuel oils, Asphalt, Food-grade oils, Chemicals (styrene, glycols, etc.) 20k-25k gallon 15.3% 14.3% General Service Tank Cars: Ethanol & methanol, Food-grade oils, Lu

  37. Slide 37: GATX Rail North America: Continuous Investment

    GATX Rail North America: Continuous Investment $6.0 130 Car count increased 7% $5.7 Assets increased 37% $5.6 120 $5.5 $5.4 $5.2 $5.1 110 RAILCARS IN THOUSANDS ASSETS IN $ BILLIONS $5.0 $5.0 100 $4.6 $4.4 $4.5 $4.5 90 $4.2 $4.1 80 $4.0 70 $3.5 60 $3.0 50 2009 2010 2011 2012 2013 2014 2015 2016 2017

  38. Slide 38: GATX Rail North America: Maintenance Network

    GATX Rail North America: Maintenance Network GATX is known for its integrity, safety, and quality of our operations and superior execution. EXTENSIVE MAINTENANCE NETWORK MAINTENANCE CUSTOMERS RELY ON GATX  Eight maintenance facilities In 2019, GATX Rail North America performed approximately 47,000

  39. Slide 39: GATX Rail North America: Training & Regulatory Expertise

    GATX Rail North America: Training & Regulatory Expertise 2005 First railcar lessor to achieve Partner certification 2010 First railcar lessor to be named Responsible Care Partner of the Year 2017 Repeat recipient of the Responsible Care Partner of the Year 39

  40. Slide 40: GATX Rail North America: Regulatory Environment Participation

    GATX Rail North America: Regulatory Environment Participation DEEP KNOWLEDGE ON INDUSTRY REGULATIONS TANK QUALIFICATION INTERVAL EXTENSION GATX is the only tank car owner to FROM get FRA/Transport Canada approval 10 to 15 to extend first tank qualification YEARS inspection from 10 to 15 years for ge

  41. Slide 41: GATX Rail North America: Engineering Expertise

    GATX Rail North America: Engineering Expertise GATX’s engineering team, including experienced mechanical, structural, and chemical engineers, communicates regularly with customers and tailors solutions to meet their needs. AUTO CARRIER CONVERSION PROJECT  GATX Engineering successfully converted old

  42. Slide 42: GATX Rail North America: Technology Focus

    GATX Rail North America: Technology Focus GATX continues to innovate for our customers: 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 My

  43. Slide 43: GATX Rail North America: Locomotive Leasing

    GATX Rail North America: Locomotive Leasing GATX owns, manages or has an interest in more than 625 Locomotives. LOCOMOTIVE LEASE REVENUE $39 $39 $39 $38 $36 $35 $34 $32 $ MILLIONS 96% are four-axle locomotives leased to:  Regional and short-line railroads  Industrial users  Class I railroads 2012

  44. Slide 44: Rail International

    RAIL INTERNATIONAL 44

  45. Slide 45: Europe – Industry Snapshot

    Europe – Industry Snapshot  Relatively limited manufacturing capacity RAILCAR OWNERSHIP − Helps avoid an industry oversupply of railcars (Based on approximately 705,000 railcars in standard-gauge countries)  Older industry fleet in need of replacement − Key segments continue to demonstrate need to

  46. Slide 46: Europe – Industry Fleet and Ownership Mix

    Europe – Industry Fleet and Ownership Mix TANK CAR OWNERSHIP SHARE RAILCAR OWNERSHIP (Based on approximately 705,000 railcars in standard-gauge countries) 25% 9% Lessors Railroad & Privately Owned 29% 15% Based on approximately 113,000 tank cars 75% FREIGHT CAR OWNERSHIP SHARE 16% 31% 21% Lessors Fl

  47. Slide 47: Europe – Lessor Market Share

    Europe – Lessor Market Share TANK CAR LESSOR OWNERSHIP SHARE LESSOR OWNERSHIP SHARE (Based on approximately 212,000 lessor-owned railcars) 16% 2% GRE 25% VTG 11% 16% 7% 25% Ermewa GRE Wascosa 14% Touax 5% Other 7% 11% 36% Based on approximately 85,000 lessor-owned tank cars GRE 40% FREIGHT CAR LESSO

  48. Slide 48: GATX Rail Europe (GRE): Major Rail Markets

    GATX Rail Europe (GRE): Major Rail Markets 72% of GRE’s revenue is generated in Germany, Poland, and Austria – strong rail freight transport economies. GEOGRAPHIES SERVED 4% 11% 13% Germany 4% FLEET STRUCTURE Poland 32% 4% Austria 14% Mineral Oil 5% Switzerland LPG 56% The Netherlands Chemicals 11%

  49. Slide 49: GRE: Diverse Customer Portfolio and Fleet

    GRE: Diverse Customer Portfolio and Fleet GRE’s newer and higher capacity railcar fleet attracts top-tier customers. GRE HAS INVESTED MORE THAN $1 BILLION OVER THE LAST 10 YEARS  Today, the average remaining lease term for GRE is 2 years 25% • Renewal success rates have been consistently high • GRE

  50. Slide 50: GRE: Service Offerings

    GRE: Service Offerings MAINTENANCE ENGINEERING ASSEMBLY SUPPORT MODERNIZATION  GRE’s goal is to ensure  Decades of engineering  GRE’s own production  Comprehensive customer  With an average age of 18 maximum railcar experience facility, combined with service years, GRE has one of the availabili

  51. Slide 51: India – Industry Overview

    India – Industry Overview Indian Railways has a number of initiatives in progress to increase freight rail modal share in the country. RAILCAR OWNERSHIP FREIGHT RAIL TRANSPORT (Based on approximately 300,000)  Significant Potential − Large railway network, dominated by passenger 10% service today −

  52. Slide 52: GATX Rail India Overview

    GATX Rail India Overview GATX obtained the first-ever wagon leasing license in 2012 and is the largest private railcar lessor in India. GATX’s GROWTH IN INDIA KEY ATTRIBUTES $140 $15 Wholly Owned Fleet of $14 High Growth Opportunity $120 $13 ~3,700 railcars $12 Actively seeks attractive Serving cust

  53. Slide 53: GATX Russia

    GATX Russia GATX started developing business operations in Russia in 2013.  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 incep

  54. Slide 54: Portfolio Management

    PORTFOLIO MANAGEMENT 54

  55. Slide 55: Aircraft Spare Engine Leasing Industry Overview

    Aircraft Spare Engine Leasing Industry Overview  Aircraft spare engines are very attractive and reliable leasing assets − Robust residual value characteristics − Retain value better over the long term compared to aircraft  Aircraft engines need regular scheduled maintenance (3-5 year intervals) wh

  56. Slide 56: RRPF Affiliates Overview

    RRPF Affiliates Overview The RRPF affiliates portfolio has committed future lease receipts of nearly $3.0 billion. OVERVIEW 4% 6%  GATX established its first 4% partnership with Rolls-Royce plc in 31% 1998 9% RRPF  Total NBV of engines upon RRPF ENGINE establishment was $350 million; 9% TYPES toda

  57. Slide 57: RRPF: Key Attributes

    RRPF: Key Attributes RRPF AFFILIATES ENTERED THE COVID-19 CRISIS FROM A 2019 OVERVIEW POSITION OF STRENGTH. ENGINE COUNT 478 Revenue Operating Flexibility ENGINE TYPE COUNT Lease revenues in a strong Low operating cost base and full 10+ contractual position due to non- discretion on capital expendit

  58. Slide 58: RRPF: Growth in Revenue & Net Book Value

    RRPF: Growth in Revenue & Net Book Value CAGRs of 15.5% and 14.2% for NBV and Total Annual Revenue, respectively, since 1998. 2019 NBV: $5,016M Rev: $470M $6,000 $500 $450 1998 $5,000 $400 NBV: $243M REVENUE (MILLIONS) $350 NBV (MILLIONS) $4,000 Rev: $29M $300 $3,000 $250 $200 $2,000 $150 $100 $1,00

  59. Slide 59: Financial Highlights

    Financial Highlights 122 YEARS OF EXPERIENCE 59

  60. Slide 60: GATX Financial Highlights

    GATX Financial Highlights Income Per Diluted Share, Adjusted* $5.77 $5.51 $5.37 $5.22 $4.48 $4.70 $3.50 $2.81 $2.01 $1.59 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Return on Equity, Adjusted* Investment Volume 18% 18% $1,031 $943 15% 14% 14% $860 13% 13% $770 $742 $ MILLIONS $715 11% $585 $6

  61. Slide 61: Financial Profile Summary

    Financial Profile Summary FUNDING AND CAPITALIZATION ASSET QUALITY EARNINGS AND LIQUIDITY AND LEVERAGE  Market leader in PROFITABILITY  Strong, stable, and  Strong balance sheet railcar leasing  Track record of strong predictable cash flow with limited issuance business with deep returns through

  62. Slide 62: GATX is Well Positioned with Strong Cash Flows

    GATX is Well Positioned with Strong Cash Flows GATX has nearly $3.2 billion in Our strong operating cash flow provides committed future lease receipts. tremendous capital allocation flexibility. $958 $740 $482 $224 $ MILLIONS $ MILLIONS $234 $385 $555 $166 $264 $250 $154 $289 $407 $84 $68 $304 $269

  63. Slide 63: Financial Highlights: Strong Balance Sheet

    Financial Highlights: Strong Balance Sheet LEVERAGE & REDUCTION OF SECURED ASSETS FUTURE DEBT OBLIGATIONS Sold aircraft leasing 5.0x business; reduced leverage 50% $3,442 4.5x and % of secured assets 45% 4.0x 40% 3.5x 35% $ MILLIONS 3.0x 30% 2.5x 25% 2.0x Stable leverage 20% 1.5x post-2006 15% 1.0x

  64. Slide 64: Financial Highlights: Strong Balance Sheet

    Financial Highlights: Strong Balance Sheet Over the past decade, GATX has lowered borrowing costs while lengthening the average borrowing term. COST OF DEBT & BORROWING TERM 7.0% 10.0 9.0 6.0% 6.4% 8.7 8.0 5.0% 7.0 6.0 4.0% 4.1% 5.0 3.0% 4.0 4.0 3.0 2.0% 3.3 2.0 1.0% 1.0 0.0% - 2007 2008 2009 2010 2

  65. Slide 65: Reconciliation of Non-GAAP Measures

    Reconciliation of Non-GAAP Measures 122 YEARS OF EXPERIENCE 65

  66. Slide 66: Reconciliation of Non-GAAP Measures: Net Income Measures

    Reconciliation of Non-GAAP Measures: Net Income Measures Net Income 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (in millions) Net income (GAAP) $ 80.8 $ 110.8 $ 137.3 $ 169.3 $ 205.0 $ 205.3 $ 257.1 $ 502.0 $ 211.3 $ 211.2 Adjustments attributable to consolidated pre-tax income: Net casualty g

  67. Slide 67: Reconciliation of Non-GAAP Measures: Balance Sheet Measures

    Reconciliation of Non-GAAP Measures: Balance Sheet Measures On- and Off-Balance Sheet Assets 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total assets (GAAP) $ 5,442.4 $ 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 Off-balance sheet assets (1): Rail No

GATX — Investor Presentation (June 2020) on 6ix