Gatx Corporation · NYSE:GATX
Gatx — Stifel 2019 Transportation & Logistics Conference
36 slides from Gatx's conference presentation, Feb 12, 2019
Slide 1: Stifel 2019 Transportation & Logistics Conference
Stifel 2019 Transportation & Logistics Conference | February 12, 2019
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: History and Business Overview
HISTORY AND 121 BUSINESS YEARS OF OPERATIONAL OVERVIEW EXPERIENCE The following presentation contains unaudited financial information 3
Slide 4: 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 5: GATX Today – Business Segments
GATX Today – Business Segments RAIL NORTH AMERICA NET BOOK VALUE OF ASSETS One of the largest railcar lessors 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 carrie
Slide 6: Straightforward and Proven Business Model
Straightforward and Proven Business Model BUY LEASE SERVICE MAXIMIZE the railcar at an the railcar to a quality the railcar in a manner the value of the economically attractive customer at an that maximizes safety, railcar by selling or and competitively attractive rate for a in-use time and scrappi
Slide 7: GATX Rail North America Overview
GATX Rail North America Overview 2018 OVERVIEW INDUSTRIES SERVED UTILIZATION* WHOLLY OWNED FLEET COUNT 100% 99% 122,000 10% 99% CAR TYPE COUNT 7% 26% 98% 160+ 98% AVERAGE FLEET AGE 96% 20 Years 13% 96% LOCOMOTIVE COUNT 94% 650+ NUMBER OF CUSTOMERS 24% 20% 92% 850+ 91% COUNTRIES OF OPERATIONS 90% US,
Slide 8: Railcar Leasing Market Conditions
Railcar Leasing Market Conditions Railcar oversupply persists Approximately 17% of industry fleet remains idle 160,000 INDUSTRY BACKLOGS New railcar backlog still above 140,000 historical averages 120,000 Supply/demand imbalance exacerbated by speculative orders 100,000 from new market entra
Slide 9: North America: Commodity Carloads
North America: Commodity Carloads Quarterly Commodity Carload Traffic, North America (000s) 2,500 2,000 1,500 1,000 500 - 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 All Other Coal & Coke Sand, Stone, Minerals, & Related Products Grai
Slide 10: North America: Railroad Velocity
North America: Railroad Velocity 28 27 26 25 24 23 22 21 2015 2016 2017 2018 20 Wk1 Wk2 Wk3 Wk4 Wk5 Wk6 Wk7 Wk8 Wk9 Wk10 Wk11 Wk12 Wk13 Wk14 Wk15 Wk16 Wk17 Wk18 Wk19 Wk20 Wk21 Wk22 Wk23 Wk24 Wk25 Wk26 Wk27 Wk28 Wk29 Wk30 Wk31 Wk32 Wk33 Wk34 Wk35 Wk36 Wk37 Wk38 Wk39 Wk40 Wk41 Wk42 Wk43 Wk44 Wk45 Wk46
Slide 11: 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 67 66 70 63 50% 60 62 40% 60 54 39% 30% 50 45 35% 41 32% 20%
Slide 12: GATX Strategy in this Environment
GATX Strategy in this Environment Execute cyclically aware management of lease terms and assets by car-type – Some opportunities to increase lease rates Continue to practice a disciplined capital allocation strategy – Place new cars from long-term supply agreements – Pursue attractive incrementa
Slide 13: 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 14: 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% 76% $100 11% 22% $80 $60 76% Aircraft Spare Engine 31% Trent XWB (A350) 10% V2500 (A320) 22% Trent 700
Slide 15: 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) ASC Vessels Operated 18 18 18 12 13 14 14 13 15 13 11 12 11 2018 OVERVIEW ASC COMMODITIES
Slide 16: Financial Discussion
FINANCIAL 121 DISCUSSION YEARS OF OPERATIONAL EXPERIENCE 16
Slide 17: 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 18: Capital Allocation Framework: Invest in Value-Creating Assets
Capital Allocation Framework PRIORITY 1 Invest in value-creating assets whereby GATX can leverage strengths 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
Slide 19: Capital Allocation Framework: Manage the Balance Sheet
Capital Allocation Framework PRIORITY 2 Manage 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 20
Slide 20: Capital Allocation Framework: Return Cash to Shareholders
Capital Allocation Framework PRIORITY 3 In lockstep with Priorities 1 and 2, return 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 $800 $ $ MILLIONS $600 $400 $200 $0 2006 2008 2010 2
Slide 21: 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 22: Appendix
APPENDIX 121 YEARS OF OPERATIONAL EXPERIENCE 22
Slide 23: North America – Industry Railcar Ownership
North America – Industry Railcar Ownership Approximately 1.6 million railcars RAILROADS (18%) LESSORS (54%) NORTH AMERICAN FLEET BY CAR TYPE Ownership of railcars has been Shift from railroad- and shipper- declining owned railcars to lessor market share 5% Virtually no tank car ownership due
Slide 24: 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% 18% GATX 10% 18% 36% Union Tank Car 8% 17% Trinity 14% 9% CIT 23% 9% 8% SMBC 2% Wells Fargo Rail 36% 10% Other 16% 17% Based on approximately 332,000 6
Slide 25: Business Model: Buy
Business Model: BUY DISCIPLINED INVESTMENT COMPETITIVE GATX NORTH AMERICAN RAIL APPROACH ASSET COST ACQUISITION SOURCE GATX achieves lower new GATX recognizes that railcars car cost by placing large orders are long-lived assets and that $800 at appropriate points in the each investment is measured b
Slide 26: Business Model: Buy – Railcar Supply Strategy
Business Model: BUY Railcar Supply Strategy GATX’s strategy is to secure railcars from a variety of sources as opposed to also being a railcar manufacturer; combining railcar manufacturing with a railcar leasing business: o Adds significant volatility leading to a higher cost of capital o Can result
Slide 27: 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 leas
Slide 28: 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 o Customers rely on GATX GATX’s engineering GATX provides important MyGATXRail.com As a full-service railcar
Slide 29: 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 RailcarsThousands in Assets in $ Billions Assets $ in $4.0 70 $3.5 60 $3.0 50 2008 2009 2010 2011 2012 2013 2014
Slide 30: GATX Rail North America: Fleet Optimization
GATX Rail North America: Fleet Optimization GATX’s fleet of well-maintained modern railcars, leased to quality customers, allows us to realize significant remarketing income when we decide to sell cars in the secondary market. We also generate scrapping gains at the end of a railcar’s useful life. R
Slide 31: GATX Rail North America: Railcar Supply Strategy
GATX Rail North America: Railcar Supply Strategy GATX’s strategy is to secure railcars from a variety of sources as opposed to also being a railcar manufacturer; combining railcar manufacturing with a railcar leasing business: o Adds significant volatility leading to a higher cost of capital o Can r
Slide 32: GATX Rail North America: Summary
GATX Rail North America: Summary Attractive economic returns in railcar leasing are driven by: Access to efficiently priced capital and appropriate financial leverage Acquiring the right railcars at the right time at the right price Fleet diversification across railcar types, commodities carri
Slide 33: GRE: Major Rail Markets
GRE: Major Rail Markets Nearly 73% of GRE’s revenue is generated in Germany, Poland, and Austria – strong rail freight transport economies GEOGRAPHIES SERVED FLEET STRUCTURE 3% 11% 10% 4% 36% Germany 4% 36% 26% Poland 14% 59% Liquid 11% Austria Petroleum Products 5% 5% Switzerland 17% LPG 59% 4% The
Slide 34: Reconciliation of Non-GAAP Measures
RECONCILIATION 121 YEARS OF OF NON-GAAP OPERATIONAL MEASURES EXPERIENCE 34
Slide 35: Reconciliation of Non-GAAP Measures – Net Income Measures
Reconciliation of Non-GAAP Measures – Net Income Measures Net Income 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (in millions) Net income (GAAP)$ 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 36: 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
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