Gatx Corporation · NYSE:GATX
Gatx — Wells Fargo Industrials Conference 2021
55 slides from Gatx's conference presentation, May 5, 2021
Slide 1: Wells Fargo Industrials Conference 2021
WELLS FARGO INDUSTRIALS CONFERENCE 2021
Slide 2: 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 3: GATX's 123-Year History
GATX’s 123-Year History $8.9B in assets Began Began Exited Formed Rolls-Royce Began rail & ~149K wholly manufacturing listing on railcar & Partners Finance investments in owned railcars railcars the NYSE manufacturing Affiliates (RRPF) India & Russia worldwide* Acquired 100% ownership in European Ac
Slide 4: GATX Today – Business Segments
GATX Today – Business Segments RAIL NORTH AMERICA 5% Premier railcar lessor 8% Diversified fleet of over 118,000 railcars Strong customer credit quality, diversification in car types and commodities carried $2.4 billion of contractual lease receipts as of 12/31/2020 21% NET BOOK VALUE OF RAI
Slide 5: GATX Rail North America Overview
GATX Rail North America Overview 2020 OVERVIEW FLEET UTILIZATION* WHOLLY OWNED FLEET COUNT 118,000+ 9% 100% 99% 6% CAR TYPE COUNT 28% 98% 160+ 98% 14% AVERAGE FLEET AGE INDUSTRIES 96% SERVED 96% 20 Years 94% LOCOMOTIVE COUNT 625+ 19% 92% 24% NUMBER OF CUSTOMERS 90% 90% 850+ 88% COUNTRIES OF OPERATIO
Slide 6: 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
Slide 7: Industry Commodity Carloadings: North America
Industry Commodity Carloadings: North America QUARTERLY COMMODITY CARLOAD TRAFFIC 2,500 2,000 THOUSANDS 1,500 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 2Q16 3Q16 4Q1
Slide 8: Industry Backlog: North America
Industry Backlog: North America INDUSTRY BACKLOGS 160,000 Cyclicality of the industry is 140,000 illustrated by the backlog of orders at the railcar manufacturers 120,000 The 2013 and 2014 100,000 spike in tank car backlog was primarily due to the crude boom 80,000 Backlogs have moderated 60,0
Slide 9: 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%
Slide 10: GATX Strategy in Today's Environment
GATX Strategy in Today’s Environment Practice a Disciplined Operate the Business Outperform the Capital Allocation Safely and Efficiently Competition Strategy • Maintain focus on utilization; • Maintain a safe and healthy highest reported utilization • Place new cars from long- in North America work
Slide 11: GATX Rail International Overview
GATX Rail International Overview 2020 OVERVIEW FLEET UTILIZATION* FLEET COUNT 26,300+ in Europe (GRE) 100% 99% 4,500+ in India and Russia 29% 99% CAR TYPE COUNT 98% 97% 98% 50+ INDUSTRIES 44% 97% AVERAGE FLEET AGE (GRE) SERVED 96% 96% 17 Years 95% 95% 12% 94% NUMBER OF CUSTOMERS 93% 250+ 15% 92% COU
Slide 12: 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 $160 $20 Wholly Owned Fleet of over High Growth Opportunity $140 $18 4,100 railcars $16 Actively seeks attractive Serving cust
Slide 13: Portfolio Management Overview
Portfolio Management Overview 1% 2020 RRPF OVERVIEW 9% Spare Engine Count: 445 16% 4% Average Fleet Age: 12 Years 8% 36% RRPF ASSET RRPF JV PRE-TAX INCOME 9% ENGINE MIX (GATX’s SHARE) TYPES $100 17% 83% $80 17% $60 Aircraft Spare Engine $ MILLIONS Trent XWB (A350) V2500 (A320) Leasing Affiliates (RR
Slide 14: RRPF & GATX's Direct Investment of Engines
RRPF & GATX’s Direct Investment of Engines RRPF Affiliates entered the COVID-19 crisis from a position of strength. RRPF KEY ATTRIBUTES RRPF Joint Venture Balance Sheet and Liquidity Operating Flexibility Focus on maintaining a strong balance sheet and liquidity position Long-dated debt maturity p
Slide 15: Trifleet Overview
Trifleet Overview Trifleet is the 4TH largest global tank container lessor with a young and diversified fleet. 2020 OVERVIEW 1% FLEET COUNT Why Tank Containers 6% Over 19,000* (54% owned/46% managed) 9% Consistent growth AVERAGE FLEET AGE Long-lived, widely used – similar to GATX’s other Owned:
Slide 16: 2020 Key ESG Initiatives and Accomplishments
2020 Key ESG Initiatives and Accomplishments Independent Board Oversight Health & Safety Human Capital Environmental Community As participants in an essential Management Initiated a project to calculate Engagement industry, intense focus on Continued to increase female Scope 1 and 2 greenhouse
Slide 17: GATX: Well Positioned with Strong Cash Flows
GATX: Well Positioned with Strong Cash Flows GATX has nearly $3 billion in Our strong operating cash flow provides contractual future lease receipts. tremendous capital allocation flexibility. GATX CONTRACTUAL FUTURE LEASE RECEIPTS OPERATING CASH FLOW & PORTFOLIO PROCEEDS $942 $725 $482 $224 $533 $
Slide 18: Capital Allocation Framework
Capital Allocation Framework PRIORITY 1 Invest in core, service-intensive assets to maximize shareholder value $9.8 billion** of investments over the period shown INVESTMENT VOLUME $1,064 $1,031 $928 $860 $781 $770 $ MILLIONS $715 $723 $615 $621 $585 $589 $480 2008 2009 2010 2011 2012 2013 2014
Slide 19: 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% 4.0x 40% 2.8x 3.0x 30% 2.0x 20% 1.0x 10% 0.0x 0% 2003 2004 2005 2006 2007 2008
Slide 20: 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, $1.7 billion returned to shareholders CASH RETURNED TO SHAREHOLDERS $2,000 $1,500 $ MILLIONS $1,000 $500 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 20
Slide 21: GATX Financial Highlights
GATX Financial Highlights Income Per Diluted Share, Adjusted** $5.77 $5.37 $4.67 $4.89 $4.48 $4.41 $4.59 $3.50 $2.81 $2.01 $1.59 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020* Return on Equity, Adjusted** Investment Volume 18% 18% $1,031 $1,064 15% $928 14% 14% $860 13% 13% $770 $723 $ M
Slide 22: Appendix
APPENDIX
Slide 23: GATX Investment Highlights
GATX Investment Highlights Disciplined Management Team Leading Market Position Long-term focused and experienced in in majority of the markets we operate managing across business cycles globally Superior Asset Allocation Full-Service Maintenance Capabilities Highly diversified railcar fleet with ~16
Slide 24: Business Model: BUY
Business Model: BUY DISCIPLINED INVESTMENT COMPETITIVE ASSET COST GATX NORTH AMERICAN RAIL APPROACH ACQUISITION SOURCE GATX achieves lower new car costs GATX recognizes that railcars are long- by placing large orders at $800 lived assets and that each investment appropriate points in the is measured
Slide 25: 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. Large, multi-year orders for new cars from manufacturers GATX’s Sources of Spot orders for new cars to meet specific customer demand Railcar Supply Fleet a
Slide 26: Business Model: LEASE
Business Model: LEASE Customers prefer GATX because of its diverse fleet, technical expertise to meet unique needs, and superior ongoing service. HIGH FLEET UTILIZATION STRONG CUSTOMER RELATIONSHIPS Focus on utilization, adjusting rate and term to High-quality and diverse base of over 850 captur
Slide 27: 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 ful
Slide 28: 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
Slide 29: Industry Ownership: North America
Industry Ownership: North America Approximately 1.65 million railcars RAILROADS (16%) LESSORS (56%) Ownership of railcars continues decline Shift from railroad- and shipper- owned Virtually no tank car ownership due railcars to lessors to complexities and regulations Lessors dominate the tan
Slide 30: Industry Fleet & Ownership Mix: North America
Industry Fleet & Ownership Mix: North America RAILCARS BY TYPE TANK CAR OWNERSHIP SHARE (Approximately 1.65M railcars) 18% 0% 4% 7% Lessor Shipper/Other 8% <1% Railroad 34% Based on approximately 438K tank cars 82% 20% FREIGHT CAR OWNERSHIP SHARE 27% 14% Lessor Railroad 18% Covered Hopper Flat Shipp
Slide 31: Lessor Market Share: North America
Lessor Market Share: North America LESSOR OWNERSHIP SHARE TANK CAR LESSOR OWNERSHIP SHARE (Based on approximately 919K lessor-owned railcars) 15% 17% GATX Union Tank Car 13% 7% Trinity 24% 17% CIT 10% GATX SMBC 33% Other 13% 16% 18% Based on approximately 358K lessor-owned tank cars 6% GATX 13% 14%
Slide 32: Industry Shipments & Carloadings: North America
Industry Shipments & Carloadings: North America INDUSTRY SHIPMENT COMPOSITION* CARLOADS ORIGINATED (Based on 2020 U.S and Canadian carloads of approximately 15.2M) (United States and Canada) 22 21.2 22% 23% 21 20.4 20 19.4 3% 19 18.6 18.7 3% MILLIONS 5% 16% 17.9 18 6% 16.9 17 6% 15% 16 15.2 Coal & C
Slide 33: North America – Industry Railcar Deliveries
North America – Industry Railcar Deliveries 25,000 20,000 15,000 10,000 1Q21 Total: 6k 5,000 - ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ‘21 Number of Tank Number of Freight 33 Railway Supply Institute as of April 2021
Slide 34: North America – Industry Railcar Orders
North America – Industry Railcar Orders 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 1Q21 Total: 6.2k 10,000 5,000 - ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ‘21 Number of Tank Number of Freight 34 Railway Supply Institute as of April 2021
Slide 35: GATX Rail NA: Diverse Customer Portfolio
GATX Rail NA: Diverse Customer Portfolio CREDIT RATINGS OF TOP 50 CUSTOMER FAMILIES GATX serves Largest more than customer represents 850 individual less than 5% 20% 26% customers of total lease revenue 14% Average Top 20 customers relationship account for 40% tenure of top less than 10 customers 35
Slide 36: GATX Rail NA: Diverse Fleet
GATX Rail NA: Diverse Fleet CAR TYPE COMMODITIES CARRIED % OF FLEET % OF NBV General Service Tank Cars: Ethanol & methanol, Food-grade oils, Lubricating oils, Light chemicals, 16.1% 23.6% >25k gallon Light petroleum products (crude oil, fuel oils, diesels, gasoline, etc.) General Service Tank Cars:
Slide 37: GATX Rail NA: Continuous Investment
GATX Rail NA: Continuous Investment Car count increased 6%* $5.9 $6 130 Assets increased 42%* $5.7 $5.6 120 $5.4 $5.2 $5.1 110 RAILCARS IN THOUSANDS $5.0 ASSETS IN $ BILLIONS $5 100 $4.6 $4.4 $4.5 90 $4.2 80 $4 70 60 $3 50 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Assets** Railcars 37 *
Slide 38: GATX Rail NA: Maintenance Network
GATX Rail NA: Maintenance Network GATX is known for integrity, safety, and quality of our operations and superior execution. EXTENSIVE MAINTENANCE NETWORK MAINTENANCE CUSTOMERS RELY ON GATX Eight maintenance facilities In 2020, performed approximately 48,000 maintenance events in its owned and thi
Slide 39: Industry Snapshot: Europe
Industry Snapshot: Europe Relatively limited manufacturing capacity RAILCAR OWNERSHIP* (Based on approximately 728K railcars) Helps avoid an industry oversupply of railcars Older industry fleet in need of replacement Key segments continue to demonstrate 32% need to replace aging, smaller, and le
Slide 40: Industry Fleet and Ownership Mix: Europe
Industry Fleet and Ownership Mix: Europe RAILCARS BY TYPE TANK CAR OWNERSHIP SHARE (Approximately 728K railcars) 4% 11% 30% Lessors Railroad & Privately Owned 31% 70% Based on approximately 136K tank cars 35% FREIGHT CAR OWNERSHIP SHARE 19% 24% Lessor Flat Wagons Covered Wagons Railroad & Privately
Slide 41: Lessor Market Share: Europe
Lessor Market Share: Europe LESSOR OWNERSHIP SHARE TANK CAR LESSOR OWNERSHIP SHARE (Based on approximately 236K lessor-owned railcars) GRE 21% 23% VTG 11% 2% Ermewa 24% 23% Wascosa 8% GRE Touax Other 11% 13% 33% Based on approximately 95K lessor-owned tank cars 5% GRE 36% 6% FREIGHT CAR LESSOR OWNER
Slide 42: GATX Rail Europe (GRE): Major Rail Markets
GATX Rail Europe (GRE): Major Rail Markets 71% of GRE’s revenue is generated in Germany, Poland, and Austria – strong rail freight transport economies. 4% 12% 17% 4% 30% GEOGRAPHIES SERVED FLEET STRUCTURE 4% Germany The Netherlands 14% Mineral Oil Poland Czech Republic LPG 5% Austria Hungary 52% Che
Slide 43: GRE: Diverse Customer Portfolio & Fleet
GRE: Diverse Customer Portfolio & Fleet GRE’s newer and higher capacity railcar fleet attracts top-tier customers. TOP 20 CUSTOMER GRE HAS INVESTED >$1.3B CREDIT RATING OVER THE LAST 10 YEARS Today, the average remaining lease term for GRE is 22 months 25% • Renewal success rates for GRE fleet hav
Slide 44: 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 17 maximum railcar availability experience facility, combined with service years, GRE has one of t
Slide 45: Industry Overview: India
Industry Overview: India Indian Railways has a number of initiatives in progress to increase freight rail modal share in the country. FREIGHT RAIL TRANSPORT RAILCAR OWNERSHIP (Based on approximately 300K railcars) Significant Potential Large railway network, dominated by passenger service today 10
Slide 46: Aircraft Spare Engine Leasing Industry Overview
Aircraft Spare Engine Leasing Industry Overview Aircraft spare engines are Percentage of leased vs. owned attractive and reliable leasing aircraft spare engines by airlines assets has increased over time Robust residual value characteristics Retain value better over the long term compared to air
Slide 47: Aircraft Spare Engine Leasing Industry Overview
Aircraft Spare Engine Leasing Industry Overview Most industry experts anticipate global air travel to fully recover by 2024 or earlier. World Air Passenger Traffic Evolution, 1980-2020 5 Gulf War Asian Financial Crisis 9/11 Attacks SARS Financial Crisis COVID-19 4 Billion passengers 3 2 1 0 1980 198
Slide 48: RRPF Affiliates Overview
RRPF Affiliates Overview The RRPF affiliates portfolio has contractual future lease receipts of over $2.7B. OVERVIEW RRPF Growth in Revenue & NBV $5 $500 GATX established its first partnership with Rolls-Royce plc in 1998 CAGR since 1998 NBV: 14.5% Total NBV of engines has grown at a $4 Rev: 13.
Slide 49: Tank Container Industry Snapshot
Tank Container Industry Snapshot GLOBAL TANK CONTAINER FLEET GROWTH* Tank containers transport a variety of liquids 800,000 as well as gases in bulk CAGR of 9.3% 600,000 Tank container fleet growth has increased steadily alongside consistent growth of global 400,000 liquid trade volumes in recen
Slide 50: Industry Ownership Mix & Lessor Market Share
Industry Ownership Mix & Lessor Market Share INDUSTRY OWNERSHIP TOP LESSORS OWNERSHIP SHARE1 (Based on global tank container fleet of approximately 686K) (Based on approximately 316.7K tank containers in leasing company fleets) 6% 20% 21% 2% 46% 2% Trifleet 54% 4% 6% 4% 6% 21% 14% Trifleet Triton In
Slide 51: Main Commodities by Tank Type
Main Commodities by Tank Type STANDARD SEMI-STANDARD GAS SPECIALITY CRYOGENIC Capacity: Capacity: (Swap Bodies, Heated & Capacity: (Coated, U-Stamp, Multi- ~22K liters for 20ft containers 14.5K to 26K liters Cooled, Baffled) 20K to 24.5K compartment, Dedicated use) ~46K liters for 40ft container P
Slide 52: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES
Slide 53: Reconciliation of Non-GAAP Measure
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
Slide 54: Reconciliation of Non-GAAP Measures
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 of
Slide 55: Reconciliation of Non-GAAP Measures
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 Nor