Gatx Corporation · NYSE:GATX
Gatx — Debt Investor Presentation (May 2019)
48 slides from Gatx's debt investor presentation, May 30, 2019
Slide 1: Fixed Income Presentation | May 2019
FIXED INCOME PRESENTATION | MAY 2019
Slide 2: Table of Contents
TABLE OF CONTENTS History and Business Overview .................……………..………………….…………………...................................................… 4 Business Segment Overview …..…………...........................……………..……………………......……….................................... 14 Financial Profile ............…………
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
Slide 4: History and Business Overview
121 HISTORY AND YEARS OF BUSINESS OVERVIEW EXPERIENCE 4
Slide 5: GATX's 121-Year History
GATX’S 121-YEAR HISTORY 1898 Established as railcar lessor with 28 railcars 1919 Initiated quarterly dividend 1936 Began rail investment in Canada 1973 Acquired American Steamship Company (ASC) 1985 Began locomotive investment 1994 Began rail investment in Europe & Mexico 1998 Formed Rolls-Royce Par
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 ALLOCATION RETURNS TO STRATEGY SHAREHOLDERS 6
Slide 7: 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 manner the value of the economically attractive quality customer at that maximizes safety, railcar by selling or and competitively an attractive rate for in-use time and scrapping
Slide 8: GATX Today – Business Segments
GATX TODAY – BUSINESS SEGMENTS RAIL NORTH AMERICA NET BOOK VALUE OF ASSETS . Premier railcar lessor . Diversified fleet of approximately 122,000 wholly owned railcars 1% and more than 650 locomotives . Strong customer credit quality, diversification in car types and 4% commodities carried 8% . Over
Slide 9: GATX's Strong Global Presence
GATX’S STRONG GLOBAL PRESENCE GATX own approximately 148,000 railcars, over 650 locomotives, 11 vessels on the Great Lakes and has an interest in more than 450 aircraft spare engines. GATX Headquarter Locations • GATX Global Headquarters (Chicago, IL) • GATX Rail Europe (Vienna, Austria) • GATX Rail
Slide 10: Capital Allocation Framework: Invest in Core Assets
CAPITAL ALLOCATION FRAMEWORK PRIORITY 1 . Invest in core assets to maximize shareholder value . $9.4 billion* of investments over the period shown INVESTMENT VOLUME $1,031 $943 $860 $763 $781 $770 $715 $634 $615 $621 $603 $585 $480 $ $ MILLIONS 2006 2008 2010 2012 2014 2016 2018 *Investment Volume a
Slide 11: Capital Allocation Framework: Optimize the Balance Sheet
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 6.0x 50% 45% 5.0x 40% 4.0x 35% 30% 3.0x 25% 20% 2.0x 15% 1.0x 10% 5% 0.0x 0% 2002 2003
Slide 12: Capital Allocation Framework: Return Excess Cash
CAPITAL ALLOCATION FRAMEWORK PRIORITY 3 . In lockstep with Priorities 1 and 2, return excess cash to shareholders . Over the period shown below, $1.8 billion returned to shareholders CASH RETURNED TO SHAREHOLDERS $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $ $ MILLIONS $800 $600 $400 $200 $0 2006 2008
Slide 13: GATX Financial Highlights
GATX FINANCIAL HIGHLIGHTS EPS* $5.77 $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 ROE INVESTMENT VOLUME 18% 18% $1,031 $943 15% 14% $860 13% 13% $770 $715 11% $585 $615 $621 $603 9% 7% $ $ MILLIONS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011
Slide 14: Business Segment Overview
121 BUSINESS SEGMENT YEARS OF OVERVIEW EXPERIENCE 14
Slide 15: GATX Rail North America Overview
GATX RAIL NORTH AMERICA OVERVIEW 2018 OVERVIEW INDUSTRIES SERVED UTILIZATION* WHOLLY OWNED FLEET COUNT 100% 99% 99% 122,000 10% CAR TYPE COUNT 7% 26% 98% 160+ 98% AVERAGE FLEET AGE 96% 20 Years 13% 96% LOCOMOTIVE COUNT 94% 650+ NUMBER OF CUSTOMERS 24% 92% 20% 850+ 91% COUNTRIES OF OPERATIONS 90% US,
Slide 16: GATX Actively Manages Through Cycles
GATX ACTIVELY MANAGES THROUGH CYCLES GATX proactively manages changing market conditions by utilizing our strong customer relationships and diversity of our fleet to adjust rate and term. STRONG MARKET WEAK MARKET STRONG MARKET WEAK MARKET 70 67 63 66 50% 60 62 40% 60 54 39% 30% 50 45 35% 41 32% 20%
Slide 17: GATX Rail International Overview
GATX RAIL INTERNATIONAL OVERVIEW 2018 OVERVIEW INDUSTRIES SERVED BY GRE GRE FLEET UTILIZATION FLEET COUNT 5% 100% 23,000+ in Europe (GRE) 99% 99% 2,400+ in India and Russia 13% 98% CAR TYPE COUNT 97% 97% 97% 97% 97% 35+ 96% AVERAGE FLEET AGE (GRE) 96% 96% 95% 18 Years 55% 95% 95% 27% 94% NUMBER OF C
Slide 18: Portfolio Management Overview
PORTFOLIO MANAGEMENT OVERVIEW 2018 RRPF OVERVIEW OWNED PORTFOLIO RRPF ENGINE TYPES 3% SPARE ENGINE COUNT 450+ 10% AVERAGE FLEET AGE 5% 21% 11 Years 31% 10% RRPF JV PRE-TAX INCOME (GATX’s SHARE) 11% $100 76% 11% 22% $80 $60 76% Aircraft Spare Engine 31% Trent XWB (A350) 10% V2500 (A320) 22% Trent 700
Slide 19: American Steamship Company Overview
AMERICAN STEAMSHIP COMPANY OVERVIEW 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Net Tons Carried 37.2 37.3 35.7 21.2 28.0 28.4 29.7 28.8 30.5 26.5 25.4 27.8 26.2 by ASC (in millions) ASCVessels Operated 18 18 18 12 13 14 14 13 15 13 11 12 11 ASC COMMODITIES CARRIED 2% FLEE
Slide 20: Financial Profile
121 FINANCIAL PROFILE YEARS OF EXPERIENCE 20
Slide 21: Financial Profile: Overview
FINANCIAL PROFILE: OVERVIEW Strong, stable and predictable cash flow – Market leadership in railcar leasing business – High level of committed revenues – Credit strength of customer base Strong balance sheet – Long-lived railcar assets – Limited secured debt Excellent liquidity through cycles
Slide 22: GATX Is Well-Positioned with Strong Cash Flows
GATX IS WELL-POSITIONED WITH STRONG CASH FLOWS . GATX has nearly $3.4 billion in committed future lease receipts . Our strong operating cash flow provides tremendous capital allocation flexibility GATX COMMITTED FUTURE LEASE RECEIPTS OPERATING CASH FLOW & PORTFOLIO PROCEEDS (Continuing Operations) $
Slide 23: GATX Rail North America: Diverse Customer Portfolio
GATX RAIL NORTH AMERICA: DIVERSE CUSTOMER PORTFOLIO CREDIT RATINGS OF TOP 50 CUSTOMER FAMILIES Largest GATX serves more customer represents 18% than less than 6.0% 850 individual of total lease 30% customers revenue 14% Average Top 20 customers relationship tenure account for 38% of top ten customer
Slide 24: Financial Highlights: Strong Balance Sheet
FINANCIAL HIGHLIGHTS: STRONG BALANCE SHEET GATX primarily issues unsecured debt (leaving assets largely unencumbered), manages leverage, and balances debt maturity schedules LEVERAGE & REDUCTION OF SECURED ASSETS FUTURE DEBT OBLIGATIONS $2,710 6.0x Sold aircraft leasing 50% business & reduced 45% 5.
Slide 25: Financial Highlights: Strong Balance Sheet – Cost of Debt
FINANCIAL HIGHLIGHTS: STRONG BALANCE SHEET GATX has decreased borrowing costs and increased borrowing term. GATX issued $700 million of public unsecured debt in 2018 DECLINING COST OF DEBT & INCREASING BORROWING TERM 7.0% 10.0 9.0 6.0% 6.4% 9.2 8.9 8.0 5.0% 7.0 6.0 4.0% 4.0% 5.0 3.7% 3.0% 5.0 4.0 3.
Slide 26: Financial Profile: Diversified Access to Capital
FINANCIAL PROFILE: DIVERSIFIED ACCESS TO CAPITAL GATX will continue to utilize its traditional sources to meet its financing needs: – Commercial paper – Unsecured debt offerings – Unsecured private placements – Unsecured bank term loans – Secured rail debt 26
Slide 27: Financial Profile: Sources of Financing
FINANCIAL PROFILE: SOURCES OF FINANCING 1400 1200 1000 800 600 $ $ in millions 400 200 0 2013 2014 2015 2016 2017 2018 Unsecured Notes (US) Term Loans (US) Term Loans (Europe) Sale Leasebacks Private Placements (US) Retail Bonds (US) 27
Slide 28: Financial Profile: Summary
FINANCIAL PROFILE: SUMMARY SOLID AND STRONG BALANCE EXCELLENT PREDICTABLE SHEET LIQUIDITY POSITION CASH FLOW Primarily long-lived, $850 million committed availability under primary Market leader in widely used railcar credit facilities railcar leasing assets Strong and efficient CP program b
Slide 29: Appendix
121 APPENDIX YEARS OF EXPERIENCE 29
Slide 30: Rail North America
RAIL NORTH AMERICA 30
Slide 31: North America – Industry Railcar Ownership
NORTH AMERICA – INDUSTRY RAILCAR OWNERSHIP Approximately 1.6 million railcars NORTH AMERICAN FLEET RAILROADS (18%) LESSORS (54%) BY CAR TYPE . Ownership of railcars has been . Shift from railroad- and shipper- declining owned railcars to lessor market 5% . Virtually no tank car ownership due share 7
Slide 32: North America – Tank & Freight Industry Ownership
NORTH AMERICA – TANK & FREIGHT INDUSTRY OWNERSHIP RAILCARS BY TYPE TANK CAR OWNERSHIP SHARE (Based on approximately 1.6 million railcars) 19% 5% 81% Lessor 7% 19% Shipper/Other 25% <1% Railroad 8% Based on approximately 410,000 tank cars 81% 21% FREIGHT CAR OWNERSHIP SHARE 34% 13% 45% Lessor 18% 45%
Slide 33: North America – Lessor Market Share
NORTH AMERICA – LESSOR MARKET SHARE LESSOR OWNERSHIP SHARE TANK CAR LESSOR OWNERSHIP SHARE (Based on approximately 876,000 lessor-owned railcars) 2% 10% 18% 18% GATX 8% 36% Union Tank Car 14% 17% Trinity 23% 9% 9% CIT 8% SMBC 2% Wells Fargo Rail 17% 36% 16% 10% Other 6% Based on approximately 332,00
Slide 34: North America – Industry Backlog
NORTH AMERICA – INDUSTRY BACKLOG INDUSTRY BACKLOGS 160,000 . Cyclicality of the industry is illustrated 140,000 by the backlog of orders at the railcar manufacturers 120,000 . The 2013 and 2014 spike in tank car 100,000 backlog was primarily due to the crude/ 80,000 fracking boom . Backlogs have 60,
Slide 35: 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 15.1% 14.0% General Service Tank Cars: Ethanol & methanol, Food-grade oils, Lu
Slide 36: GATX Rail North America: Continuous Investment
GATX RAIL NORTH AMERICA: CONTINUOUS INVESTMENT $6.0 130 Car count increased 8% $5.7 Assets increased 36% 120 $5.5 $5.4 $5.2 $5.1 110 $5.0 $5.0 100 $4.6 $4.5 $4.5 $4.4 90 $4.2 $4.2 $4.1 80 ASSETS IN $ $ BILLIONS IN ASSETS $4.0 RAILCARS IN THOUSANDS IN RAILCARS 70 $3.5 60 $3.0 50 2008 2009 2010 2011 2
Slide 37: Rail International
RAIL INTERNATIONAL 37
Slide 38: International – European Industry Snapshot
INTERNATIONAL – EUROPEAN INDUSTRY SNAPSHOT . Lease rate volatility is lower RAILCAR OWNERSHIP INDUSTRY CAR TYPES (Based on approximately 705,000 railcars in relative to North American standard-gauge countries) market . Key segments continue to 9% demonstrate need to replace 29% aging equipment for 3
Slide 39: Europe – Tank & Freight Industry Ownership
EUROPE – TANK & FREIGHT INDUSTRY OWNERSHIP RAILCARS BY TYPE TANK CAR OWNERSHIP SHARE (Based on approximately 705,000 railcars in standard-gauge countries) 9% 25% 75% Lessor 25% Railroad & Privately 29% Owned 15% Based on approximately 113,000 tank cars 75% FREIGHT CAR OWNERSHIP SHARE 16% 31% 21% 21%
Slide 40: Europe – Lessor Market Share
EUROPE – LESSOR MARKET SHARE LESSOR OWNERSHIP SHARE TANK CAR LESSOR OWNERSHIP SHARE (Based on approximately 212,000 lessor-owned railcars) 25% GRE 16% 36% VTG 11% 2% 16% 25% 14% Ermewa 7% 7% Wascosa 2% Touax 5% 14% 16% Other Based on approximately 85,000 7% 36% lessor-owned tank cars 40% FREIGHT CAR
Slide 41: Portfolio Management
PORTFOLIO MANAGEMENT 41
Slide 42: RRPF Affiliates Overview
RRPF AFFILIATES OVERVIEW The RRPF affiliates portfolio has committed future lease receipts of more than $2.9 billion. RRPF OVERVIEW RRPF ENGINE TYPES . GATX established its first partnership with Rolls-Royce 10% plc in 1998 5% . Total NBV of engines upon 31% RRPF establishment was $350 10% million;
Slide 43: RRPF – Growth in Revenue & Net Book Value
RRPF - GROWTH IN REVENUE & NET BOOK VALUE CAGRs of 15.6% and 14.4% for NBV and Total Annual Revenue, respectively, since 1998. 2018 NBV: $4,429M Rev: $433M $5,000 $500 $4,500 $450 $4,000 $400 $3,500 1998 $350 $3,000 $300 $2,500 NBV: $243M $250 NBV (MILLIONS) NBV Rev: $29M $2,000 $200 REVENUE (MILLIO
Slide 44: American Steamship Company
AMERICAN STEAMSHIP COMPANY 44
Slide 45: Great Lakes Industry Overview
GREAT LAKES INDUSTRY OVERVIEW US-FLAGGED DRY BULK CARGO CARRIAGE CAPACITY OF US-FLAG VESSEL OPERATORS 120 7% 100 7% 27% 80 12% 60 22% 25% 40 20 27% ASC 12% Grand River Navigation 25% Interlake Steamship Company 7% Central Marine Logistics 0 22% Great Lakes Fleet, Inc. 7% Other 2007 2009 2011 2014 20
Slide 46: Reconciliation of Non-GAAP Measures
RECONCILIATION 121 OF NON-GAAP YEARS OF EXPERIENCE MEASURES 46
Slide 47: Reconciliation of Non-GAAP Measures – Net Income Measures
RECONCILIATION OF NON-GAAP MEASURES – NET INCOME MEASURES Net Income 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (in millions) Net income (GAAP)$ 81.4 $ 80.8 $ 110.8 $ 137.3 $ 169.3 $ 205.0 $ 205.3 $ 257.1 $ 502.0 $ 211.3 Adjustments attributable to consolidated pre-tax income: Cost attributab
Slide 48: Reconciliation of Non-GAAP Measures – Balance Sheet Measures
RECONCILIATION OF NON-GAAP MEASURES – BALANCE SHEET MEASURES On- and Off-Balance Sheet Assets 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total assets (GAAP)$ 5,206.4 $ 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 Off-balance sheet assets: Rail North