GATX Corporation

Good day, ladies and gentlemen, and welcome to the GATX 2022 Second Quarter Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sherry Hellerman, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Kyle. Good morning, and thank you for joining GATX's 2022 Second Quarter Earnings Call. I'm joined today by Bob Lyons, President and CEO Tom Ellman, Executive Vice President and CFO, and Paul Titterton, Executive Vice President and President of Rail North America. Please note that some of the information you'll hear during our discussion today will consist of four 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 the earnings release and those discussed in GATX's Form 10-K for 2021 and in our other filings with the SEC. GATX assumes no obligation to update or revise any forelooking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2022 second quarter net income of $2.6 million or $0.07 per diluted share. The 2022 second quarter results include a net negative impact of $31.5 million or 87 cents per diluted share related to an impairment associated with our decision to sell five marine vessels. These vessels represent the remainder of a legacy business that is not core to our operations. The 2022 second quarter results also include a net negative impact of 4.4 million, or 12 cents per diluted share, related to an environmental remediation reserve associated with a previously owned property that GATX sold nearly 50 years ago. This reserve also marks the end of what has been a small but long environmental tail at the site. Year-to-date 2022, we reported net income of $78.4 million, or $2.18 per diluted share. The 2022 year-to-date results include net negative impacts of $44.4 million, or $1.23 per diluted share from tax adjustments and other items. In 2021, second quarter net income was $5.5 million or $0.15 per diluted share and year-to-date net income was $42 million or $1.17 per diluted share. The 2021 second quarter and year-to-date results include net negative impacts of $43.1 million or $1.20 per diluted share from tax adjustments and other items. These items are detailed in the supplemental information of our earnings release. Now, I'll briefly address each segment. Real North America's fleet utilization was 99.4% at quarter end, and the renewal success rate was 87.7%, reflective of continued strong demand for the majority of car types within our fleet. The renewal rate change of GATX's lease price index with positive 18.3% for the quarter, with an average renewal term of 34 months. For the eighth quarter in a row, absolute lease rates increased from the prior quarter. We're seeing increasing opportunities to lock in attractive lease rates on extended terms, and we'll focus on pursuing this objective. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We've placed over 3,600 rail cars from our 2018 Trinity Supply Agreement. Additionally, we've placed all 7,650 rail cars from our 2018 Greenbrier Supply Agreement. All supply agreement deliveries for 2022 have been placed. Turning to Rail International, demand for rail cars serving a variety of end markets remains high, and we continue to experience increases in renewal lease rates, At the end of the second quarter, GATX Rail Europe fleet utilization reached a historic high of 99.9%. Year-to-date, Rail International's investment volume was approximately $128 million as we continue to take delivery of new cars and grow our fleets in Europe and India. Within portfolio management, second quarter performance was consistent with our expectations entering this year. In the second quarter, GATX repurchased nearly 330,000 shares for approximately $33 million. At quarter end, about $95 million remained available under the repurchase authorization. Finally, as we noted in the release, reflecting year-to-date performance and the expectation of a favorable operating environment in the second half, we are raising our 2022 full-year earnings guidance to a range of $5.60 to $6 per diluted share. This guidance excludes any impact from tax adjustments and other items. Those are prepared remarks. I'll hand it back to the operator so we can open it up for questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We pause just for a moment to assemble the queue. We take our first question from Alison Polignac with Wells Fargo.