GATX Corporation

Ladies and gentlemen, good day and welcome to the GATX 2021 First Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sherry Hellerman, Director of Investor Relations. Please go ahead, ma'am.

Thank you, David. Good morning, everyone, and thank you for joining GATX's 2021 First Quarter Earnings Call. I'm joined today by Brian Kenney, President and CEO of and Tom Ellman, Executive Vice President and CFO. 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 earnings release and those discussed in GATX's Form 10-K for 2020. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Before I provide a quick recap of our first quarter results, I'd like to remind everyone that our annual shareholders meeting is scheduled on Friday, April 23rd, at 9 a.m. Central Time, and will be held in a virtual-only meeting format. Earlier today, GATX reported 2021 first quarter net income from continuing operations of $36.5 million, or $1.02 per diluted share. This compares to 2020 first quarter net income from continuing operations of $47.2 million, or $1.33 per diluted share. Our first quarter results are consistent with our expectations coming into the year. At Real North America, The operating environment remains competitive due to an ongoing market oversupply of rail cars. Rail North America's fleet utilization was 97.8% at quarter end, and our renewal success rate was 77.7%. During the quarter, the renewal rate change of GATX's lease price index was negative 18.1%, with an average renewal term of 30 months. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We have placed our 8,950 railcars from our 2014 Trinity Supply Agreement and over 2,300 railcars from our 2018 Trinity Supply Agreement. Additionally, we've placed nearly 5,900 railcars from our 2018 Greenbrier Supply Agreement. virtually all supply agreement deliveries for 2021 have been placed. As we indicated in our release, we continue to look for opportunities to grow our North American asset base in order to serve our customers with high-quality rail cars. To date, our commercial team has placed over 1,000 additional rail cars outside of the supply agreement to be delivered by mid-2022. We also capitalize on a healthy secondary market to optimize our fleet through rail car sales, generating remarketing income of approximately $16.4 million in the first quarter. Within Rail International, GATX Rail Europe continues to see steady demand across the fleet, with utilization remaining high at 98.2% at quarter end. Rail International's investment volume was over $44 million during the quarter, as GATX Rail Europe and GATX Rail India continue to expand and diversify their fleet. Turning to portfolio management. First quarter segment profit was down year over year, primarily driven by the Rolls-Royce and Partners finance affiliates. As COVID-19 continues to negatively impact global passenger air traffic, Capitalizing on challenging market conditions to acquire assets with promising growth opportunities, in January of this year, we commenced a program of direct investment in aircraft spare engines that will be managed by RRPF. Our year-to-date investment total in this program is approximately $350 million. All engines have been placed on long-term leases with strong airline customers. And those are our prepared remarks. I'll hand it back to the operator so we can open the line for Q&A.

Thank you. Ladies and gentlemen, at this time, the floor is open for your questions. If you would like to ask a question, you may do so now by pressing star 1 on your touchtone phones. If you are on a speakerphone, please make sure that your mute function is disabled to allow your signal to reach our equipment. Again, if you would like to ask a question, please press star 1 now. And our first question comes from Allison Paliniak with Wells Fargo.