GATX Corporation · NYSE:GATX
GATX — Investor Presentation (May 2023)
66 slides from GATX's investor presentation, May 11, 2023
Slide 1: 2023 Company Overview
CX Ine APY le UT at Psa wea cee se 2023 COMPANY OVERVIEW
Slide 2: Table of Contents
Table of Contents Section Slide No. History and Business Overview 4 Railcar Leasing Business Model 16 Rail North America 23 Rail International 39 Portfolio Management 49 Trifleet 54 Financial Highlights 58 Reconciliation of Non-GAAP Measures 63 2
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
History and Business Overview 4
Slide 5: Vision Statement: Empowering Our Customers to Propel the World Forward
V I S I O N S T A T E M E N T “ EMPOWERING OUR CUSTOMERS “ TO PROPEL THE WORLD FORWARD 5
Slide 6: GATX's History
GATX’s History Formed Rolls- Formed Began Began Exited Royce & Partners Began rail GATX Engine manufacturing listing on railcar Finance Affiliates investments Leasing railcars the NYSE manufacturing (RRPF) in India (GEL) Acquired 100% ownership in Began rail European rail joint Acquired Trifleet, $1
Slide 7: Celebrating Years of Excellence
CELEBRATING OF EXCELLENCE SAFETY ‘| INTEGRITY’ | SERVICE
Slide 8: GATX Business Segments
GATX Business Segments Rail North America Rail International Portfolio Management Trifleet ▪ One of the largest railcar lessors with ▪ GATX Rail Europe (GRE) is a leading ▪ Primarily composed of our 50% ▪ One of the largest tank container a diversified fleet of over 109,600 European tank car and fre
Slide 9: GATX's Strong Global Presence
GATX’s Strong Global Presence GATX Primary Rail Operations Footprint (excludes leasing footprint for RRPF and Trifleet Leasing) GATX Headquarters Locations ▪ GATX Global Headquarters (Chicago, IL) ▪ GATX Rail Europe (Vienna, Austria) ▪ GATX Rail India (Gurgaon, India) ▪ Trifleet (Dordrecht, Netherla
Slide 10: Capital Allocation Framework: Investment Volume
Capital Allocation Framework PRIORITY 1 Investment Volume $1,256 Invest in long-lived, $1,132 $1,064 widely used, service- $1,031 intensive assets to $860 $928 maximize $715 $723 shareholder value $621 $589 MILLIONS $8.9 billion of investments over the past decade 2013 2014 2015 2016 2017* 2018* 201
Slide 11: Capital Allocation Framework: Leverage & Reduction of Secured Assets
Capital Allocation Framework PRIORITY 2 Leverage & Reduction 6.0x of Secured Assets 50% Optimize the 5.0x balance sheet 40% 4.0x 3.1x 30% Maintain capacity 3.0x for opportunistic 20% investments 2.0x 10% 1.0x Maintain a solid 0.0x 0% investment grade 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Slide 12: Capital Allocation Framework: Cash Returned to Shareholders
Capital Allocation Framework PRIORITY 3 Cash Returned to Shareholders $1,500 Respecting Priorities 1 and 2, return excess cash to shareholders $1,000 MILLIONS $500 Over the past decade, more than $1.5 billion returned $0 to shareholders 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Cumulative Di
Slide 13: GATX Financial Highlights
GATX Financial Highlights Income Per Diluted Share, excluding tax adjustments and other items (non-GAAP) $6.07 $5.77 $5.37 $4.89 $5.06 $4.48 $4.41 $4.67 $4.59 $3.50 2013 2014 2015 2016 2017* 2018* 2019* 2020* 2021* 2022* Return on Equity, excluding tax adjustments and other items (non-GAAP)** Invest
Slide 14: Key ESG Initiatives and Accomplishments in 2022
Key ESG Initiatives and Accomplishments in 2022 INDEPENDENT BOARD OVERSIGHT Health and Human Capital Environmental Community Safety Management Impact Engagement ▪ Focused on further enhancing our ▪ Sought to foster a diverse and ▪ Continued to make significant ▪ Contributed to and participated in tr
Slide 15: GATX Investment Highlights
GATX Investment Highlights Disciplined Management Team Market Leadership in Essential Businesses Long-term focused and experienced in managing across business cycles across majority of the markets we operate globally Superior Asset Allocation Highly diversified portfolio of transportation Critical S
Slide 16: Railcar Leasing Business Model
Railcar Leasing Business Model 16
Slide 17: Proven Business Model
Proven Business Model LEASE MAXIMIZE the railcar to a the value of the quality customer at railcar by selling or an attractive rate for scrapping at the a term that reflects optimal time the business cycle BUY SERVICE the railcar at an the railcar in a economically attractive manner that and competi
Slide 18: Business Model: Buy
Business Model: BUY GATX North American Rail $800 Acquisition Source $600 MILLIONS $400 ADVANTAGE $200 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Committed Order Secondary Market Spot Order DISCIPLINED COMPETITIVE OPPORTUNISTIC BEST-IN-CLASS INVESTMENT APPROACH ASSET COST INVESTMENT TECHNI
Slide 19: Business Model: Buy – Railcar Supply Strategy
Business Model: BUY GATX’S RAILCAR Acquire railcars from a variety of sources SUPPLY STRATEGY versus manufacturing its own railcars GATX’s Sources of Benefits of Railcar Railcar Supply: Supply Strategy: Large, multi-year orders for Access to attractively priced new cars railcars Spot orders for new
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 HIGH FLEET UTILIZATION STRONG CUSTOMER ▪ Focus on utilization, adjusting rate and RELATIONSHIPS term to capture maximum value throughout cycles 98%+ 850+ ▪
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 utilize GATX to ▪ GATX’s engineering team ▪ GATX offers safety and ▪ MyGATXRail.com provides ▪ As a full-
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 the opportunity to realize significant r
Slide 23: Rail North America
Rail North America 23
Slide 24: GATX Rail North America Overview
GATX Rail North America Overview 2022 Wholly Owned Fleet Count Car Type Count Average Fleet Age Locomotive Count Number of Customers Countries of Operation 109,600+ 160+ 18 years 500+ 850+ U.S., Canada OVERVIEW & Mexico Fleet Utilization* 9% 100% 99% 5% Chemicals Refiners & Other 98% 31% Petroleum 2
Slide 25: Industry Ownership: North America
Industry Ownership: North America Approximately 1.63 million railcars RAILROADS LESSORS SHIPPERS TTX ▪ Ownership of railcars continues ▪ Shift from railroad- and shipper- ▪ Shipper ownership share has ▪ Railroad-owned equipment pool to decline owned railcars to lessors declined slightly focused on b
Slide 26: Industry Fleet and Ownership Mix: North America
Industry Fleet and Ownership Mix: North America Tank Car Ownership Share Railcars by Type 18% (Approximately 1.63M railcars) <1% Lessor 5% Shipper/Other 7% <1% Railroad Based on approximately 439K tank cars 8% 34% 82% 19% Freight Car Ownership Share 14% 27% Lessor Railroad 17% 47% Covered Hopper Fla
Slide 27: Lessor Market Share: North America
Lessor Market Share: North America Tank Car Lessor Ownership Share 17% Lessor Ownership Share 22% GATX (Based on approximately 920K lessor-owned railcars) Union Tank Car 17% Trinity 12% 10% GATX CIT 32% Other Based on approximately 360K lessor-owned tank cars 19% 33% 15% 12% GATX Freight Car Lessor
Slide 28: Industry Commodity Carloadings: North America
THOUSANDS 1,000 1,500 2,000 2,500 500 0 1Q08 2Q08 3Q08 4Q08 Source: Association of American Railroads 1Q09 2Q09 3Q09 4Q09 Core Carloads 1Q10 2Q10 3Q10 4Q10 North America 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Coal & Coke 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q1
Slide 29: Industry Backlog: North America
Industry Backlog: North America Cyclicality of the industry is illustrated by the backlog of orders at the railcar manufacturers 160,000 Industry Backlogs 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21
Slide 30: GATX Rail North America: Actively Managing Through Cycles
GATX Rail North America: Actively Managing 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 STRONG MARKET 70 67 63 62 66 50% 60
Slide 31: GATX Rail North America: Diverse Customer Portfolio
GATX Rail North America: Diverse Customer Portfolio Credit Ratings of the GATX serves Largest Top 50 Customer Families more than customer represents 850 individual less than 5% customers of total lease revenue 32% 60% Average Top 20 customers 8% relationship account for tenure of top less than 10 cu
Slide 32: GATX Rail North America: Diverse Fleet
GATX Rail North America: Diverse Fleet CAR TYPE COMMODITIES CARRIED % OF FLEET % OF NBV General Service Tank Cars: Ethanol & methanol, food-grade oils, lubricating oils, light chemicals, 18.0% 26.5% >25k gallon light petroleum products (crude oil, fuel oils, diesels, gasoline, etc.) TA N K C A R S G
Slide 33: GATX Rail North America: Maintenance Network
GATX Rail North America: Maintenance Network GATX is known for integrity, safety, and quality of our operations and superior execution Extensive Maintenance Customers Rely on GATX Range of Services Network ▪ In 2022, GATX performed ▪ Routine maintenance & ▪ Eight maintenance ~30,900 maintenance even
Slide 34: GATX Rail North America: Maintenance Network Investments
GATX Rail North America: Maintenance Network Investments made in recent years allowed GATX to increase the percentage of service events completed in our owned maintenance network, which we believe is the best maintenance network in the industry Net Maintenance Expense Since 2017, we have invested ov
Slide 35: GATX Rail North America: Engineering
GATX Rail North America: Engineering GATX’s engineering team, including experienced mechanical, structural, and chemical engineers, communicates regularly with customers and works with them to tailor solutions to meet their needs Custom/ Chemical Reliability Maintenance/ Optimized Engineering Engine
Slide 36: GATX Rail North America: Training and Regulatory Participation
GATX Rail North America: Training and Regulatory Participation Deep Knowledge on Industry Training and Safety Regulations Our employees are actively With our one-of-a-kind involved in numerous TankTrainer program, we’ve regulatory committees and provided training on tank car trade and supplier assoc
Slide 37: GATX Rail North America: Technology Focus
GATX Rail North America: Technology Focus RailPulse™ is a coalition of forward-thinking railcar owners who have joined together to facilitate and accelerate the adoption of GPS and other telematics technology across the North American railcar network. RailPulse™ is creating a new railcar telematics
Slide 38: GATX Rail North America: Locomotive Leasing
GATX Rail North America: Locomotive Leasing GATX owns more than 500 locomotives, over 90% of which are four-axle locomotives GATX Locomotive Key Attributes Fleet Mix ▪ Four-Axle Locomotives ▪ Six-Axle Locomotives 8% • Lower horsepower • Higher horsepower • Typically travel shorter distances • Able t
Slide 39: Rail International
Rail International 39
Slide 40: GATX Rail International Overview
GATX Rail International Overview Fleet Car Type Average Fleet Number of Primary Countries 2022 Count Count Age (GRE) Customers of Operation Germany, Poland, Austria, India, 28,000+ in Europe (GRE) OVERVIEW 5,800+ in India 50+ 17 years 260+ Switzerland, Hungary, France, Czech Republic GATX Rail Europ
Slide 41: Industry Snapshot: Europe
Industry Snapshot: Europe RELATIVELY LIMITED Railcar Ownership* MANUFACTURING CAPACITY (Based on approximately 680K railcars) ▪ Helps avoid creating an excess supply of industry railcars OLDER INDUSTRY FLEET 35% ▪ Key segments continue to demonstrate opportunity to replace aging, smaller, and less e
Slide 42: Industry and Fleet Ownership: Europe
Industry and Fleet Ownership: Europe Tank Car Ownership Share Railcars by Type (Approximately 680K railcars) 17% 5% Lessors Railroad & Privately Owned 9% Based on approximately 115K tank cars 33% 83% 16% Freight Car Ownership Share 18% 19% 25% Lessor Railroad & Privately Owned Open Wagons Intermodal
Slide 43: Lessor Market Share: Europe
Lessor Market Share: Europe Tank Car Lessor Ownership Share Lessor Ownership Share (Based on approximately 241K lessor-owned railcars) GRE 20% 24% VTG 2% 12% Ermewa 24% Wascosa 8% 26% GRE Touax 13% Other 33% 12% Based on approximately 96K lessor-owned tank cars 3% GRE 35% 6% Freight Car Lessor Owner
Slide 44: GATX Rail Europe: 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 3% 11% Countries Served Industries Served 4% 19% 4% 32% Germany Hungary Mineral Oil Poland France LPG 6% 14% 50% Austria Czech Republic Chemicals Swi
Slide 45: GATX Rail Europe: Diverse Customer Portfolio
GATX Rail Europe (GRE): Diverse Customer Portfolio GRE’s newer and higher capacity railcar fleet attracts top-tier customers Credit Ratings of Top 20 Customer Families 8 of top 10 customers Diverse customer have done business base with with us approximately >20 years, 30% 260 customers five for 30 y
Slide 46: GATX Rail Europe: Service Offerings
GATX Rail Europe (GRE): Service Offerings MAINTENANCE ENGINEERING ASSEMBLY SUPPORT MODERNIZATION ▪ GRE’s goal is maximum ▪ Decades of engineering ▪ Ability to assemble our ▪ Comprehensive customer ▪ Over the last 10 years, railcar availability for its experience own new railcars at our service GRE h
Slide 47: Industry Overview: India
Industry Overview: India State-Owned Indian Railways has a number of initiatives in progress to increase freight rail modal share in the country Rail Freight Transport Railcar Ownership (Based on approximately 310K railcars) SIGNIFICANT POTENTIAL ▪ Large railway network, historically dominated by pa
Slide 48: GATX Rail India Overview
GATX Rail India Overview GATX obtained the first-ever wagon leasing license in India in 2012 and is the largest private railcar lessor in India GATX’s Growth in India Key Attributes $220 $30 $200 Wholly Owned Fleet of Over $25 High Growth Opportunity $180 5,800 Railcars $160 Actively seeks attractiv
Slide 49: Portfolio Management
Portfolio Management 49
Slide 50: Portfolio Management Overview
Portfolio Management Overview Rolls-Royce & Partners Finance GATX Engine Leasing 2% 3% Affiliates (RRPF) (GEL) ▪ RRPF, our joint venture with Rolls-Royce plc, ▪ In January 2021, GATX commenced a leases aircraft spare engines to a group of direct investment program to commercial aircraft operators wo
Slide 51: Aircraft Spare Engine Leasing Industry
Aircraft Spare Engine Leasing Industry Aircraft spare engines are attractive and reliable leasing assets Percentage of leased vs. owned aircraft spare engines by ▪ Robust residual value characteristics airlines has increased over time ▪ Retain value better over the long term compared to air frames 2
Slide 52: RRPF Affiliates Overview
RRPF Affiliates Overview 2022 Spare Engine Count Average Fleet Age Estimated Useful Life Typical Lease Term Fleet Utilization OVERVIEW 398 12 years 20-25 years 3-12 years 94.2% 11% 3% 6% 37% 8% RRPF ENGINE TYPES 17% The RRPF affiliates 18% portfolio has contractual future Trent XWB (A350) V2500 (A32
Slide 53: RRPF Key Attributes
RRPF Key Attributes Strong Growth in NBV and Revenue Key Attributes since GATX’s First Partnership with Rolls-Royce in 1998 Balance Sheet and Liquidity Operating Flexibility $500 Long-dated debt maturity profile and commitment to Low operating cost base and full $5 CAGR since 1998 preserving cash an
Slide 54: Trifleet
Trifleet 54
Slide 55: Trifleet Overview
Trifleet Overview Fleet Average Estimated Typical Number of Primary Countries 2022 Count ~22,000 owned Fleet Age Useful Life Lease Term Customers of Operation Singapore, China, and managed tank OVERVIEW containers 7 years 15-25 years 1-5 years ~300 The Netherlands, Germany, United States 1% 6% Key A
Slide 56: Tank Container Industry Snapshot
Tank Container Industry Snapshot ▪ Tank containers transport a variety of Global Tank Container Fleet Growth* liquids and gases and can be transported and stored as standard dry 800,000 box containers for all ship, rail, and 600,000 road journeys 400,000 ▪ The tank container industry has grown signi
Slide 57: Industry Ownership and Market Share
Industry Ownership and Market Share Industry Ownership Top Lessors Ownership Share1 (Based on global tank container fleet of approximately 802K) (Based on approximately 361K tank containers in leasing company fleets) 6% 19% 24% 3% 45% 3% Trifleet 6% 6% 55% 8% 19% 12% Trifleet Peacock Container Opera
Slide 58: Financial Highlights
Financial Highlights 58
Slide 59: Financial Profile Summary
Financial Profile Summary FUNDING AND CAPITALIZATION EARNINGS AND ASSET LIQUIDITY AND LEVERAGE PROFITABILITY QUALITY ▪ Strong, stable, and ▪ Strong balance sheet with ▪ Track record of strong ▪ Market leader in railcar predictable cash flow limited secured debt returns through cycles leasing busines
Slide 60: Financial Highlights: High-Quality and Consistent Cash Flows
Financial Highlights: High-Quality and Consistent Cash Flows GATX Contractual Future Lease Receipts** Operating Cash Flow & Portfolio Proceeds $1,011 $482 $224 $270 $766 $385 $187 $234 $264 $250 MILLIONS $166 $289 MILLIONS $131 $573 $530 $156 $154 $84 $68 $359 $534 $507 $221 $364 $542 $629 $411 $458
Slide 61: Financial Highlights: Strong Balance Sheet
Financial Highlights: Strong Balance Sheet Leverage & Reduction of Secured Assets Future Debt Obligations $4,086 5.0x 50% Sold aircraft leasing business; reduced leverage 45% and % of secured assets 4.0x 40% 3.1x 35% 3.0x 30% MILLIONS 25% Stable leverage 2.0x post-2006 20% 15% 1.0x 10% $500 $520 $51
Slide 62: Financial Highlights: Focus on Funding Optimization
Financial Highlights: Focus on Funding Optimization Over the past 15 years, GATX has lowered borrowing costs while lengthening the average borrowing term Cost of Debt & Borrowing Term 7% 10 9 6% 6.1% 8.6 8 5% 7 6 4% 5 3.7% 3% 4 3.8 3 2% 2 1% 1 0% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 63: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 63
Slide 64: Reconciliation of Non-GAAP Measures: Net Income
Reconciliation of Non-GAAP Measures Net Income (in millions) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net income (GAAP) $ 169.3 $ 205.0 $ 205.3 $ 257.1 $ 502.0 $ 211.3 $ 211.2 $ 151.3 $ 143.1 $ 155.9 Less: Net income from discontinued operations (GAAP) n/a n/a n/a n/a 34.2 20.8 30.4 1.1 - -
Slide 65: Reconciliation of Non-GAAP Measures: Earnings per Share
Reconciliation of Non-GAAP Measures Earnings per Share 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Diluted earnings per share from continuing operations (GAAP) $ 3.59 $ 4.48 $ 4.69 $ 6.29 $ 11.88 $ 4.98 $ 4.97 $ 4.24 $ 3.98 $ 4.35 Diluted earnings per share from discontinued operations (GAAP)
Slide 66: Reconciliation of Non-GAAP Measures: Assets
Reconciliation of Non-GAAP Measures On- and Off-Balance Sheet Assets 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total assets (GAAP) $ 6,535.5 $ 6,919.9 $ 6,894.2 $ 7,105.4 $ 7,422.4 $ 7,616.7 $ 8,285.1 $ 8,937.6 $ 9,541.7 $ 10,072.0 Off-balance sheet assets (1): Rail North America 887.9 606.1