GATX Corporation

Please stand by. We're about to begin. Ladies and gentlemen, thank you for standing by. Good day and welcome to the GATX 2020 Second Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sherry Hallerman. Please go ahead.

Thank you, Paula. Good morning, everyone, and thank you for joining GATX's 2020 Second Quarter Earnings Call. I'm joined today by Brian Kenney, President and CEO of Tom Ellman, Executive Vice President and CFO, and Bob Lyons, Executive Vice President and President of Railwalks America. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our release and those discussed in GATX's 2019 Form 10-K, and 10 Qs for 2020. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2020 second quarter net income from continuing operations of $37 million, or $1.05 per diluted share, compared to net income from continuing operations of $60.3 million, or $1.65 per diluted share, in the second quarter of 2019. Year-to-date 2020, we reported net income from continuing operations of $84.2 million or $238 per diluted share. This compares to $101.5 million or $275 per diluted share for the same period in 2019. The 2019 second quarter and year-to-date results include a net deferred tax benefit of $2.8 million. or $0.08 per diluted share related to an inactive foreign tax rate reduction. These items are detailed on page 13 of our earnings release. During the second quarter, GATX completed the sale of American Steamship Company. Accordingly, this business segment has been reported as a discontinued operation and all prior periods have been recast to conform to that presentation. Income from discontinued operations are detailed in our earnings release. And now I'll briefly address each segment. In the second quarter, COVID-19 and the associated economic downturn had a negative impact across all of our business segments. Despite the difficult operating environment, Real North America's fleet utilization remained high at 98.7% at quarter end. and renewal success rate was 71.8%. We built up our well-diversified fleet, full service capabilities, and excellent execution by our commercial team. The lease rate environment was very challenging, and pressure on lease rates was considerable across all car types and commodities. During the quarter, the renewal rate change of GATX's lease price index was negative 28%, and the average renewal term associated with ALPI was 31 months. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We've placed all 8,950 railcars from our 2014 Trinity supply agreements and nearly 1,450 railcars from our 2018 Trinity supply agreements. We've also placed close to 3,400 rail cars from our 2018 Greenbrier Supply Agreement. As mentioned last quarter, all supply agreement deliveries for 2020 have been placed. Remarketing income in a quarter was $4.5 million, bringing Rail North America's total remarketing income for the year to $31.5 million. Turning to Rail International, the lease rate environment in Europe remains strong, and GHX Rail Europe continued to see steady demand cost of fleet with utilization of 98.4% at quarter end. Rail International's investment volume during the second quarter was approximately $50 million. In the quarter, both GHX Rail Europe and GHX Rail India experienced delays in new rail car deliveries, primarily due to COVID-19-related interruptions at manufacturing facilities. In portfolio management, results were driven by the solid performance of the Rolls-Royce and Partners finance affiliates, predominantly due to remarketing activity in the quarter. Finally, as noted in the earnings release, the shape of the economic recovery remains uncertain. And as the impacts of COVID-19 evolve, we expect pressure on lease rate, renewal activity, and asset utilization to continue across all of our business segments. Those are our prepared remarks. I'll now hand it back to the operator for Q&A.

Thank you. To signal for a question, please press star 1 on your telephone keypad. Also, if you are using a speakerphone, please make sure your mute button is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. Once again, it is Star 1 at this time for questions.