GATX Corporation

Good morning. My name is Colby, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX 2022 third quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star, then the number one. Thank you. I will now turn the call over to the Head of Investor Relations, Sherry Hellerman.

Thank you, Colby. Good morning, and thank you for joining GATX's 2022 Third Quarter Earnings Call. I'm joined today by Bob Lyons, President and CEO, 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 2021 and in our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2022 third quarter net income of 29.1 million or 81 cents per diluted share. This compares to 2021 third quarter net income of 40.1 million or $1.11 per diluted share. The 2022 third quarter results include an impairment charge of 10.8 million or 30 cents per diluted share associated with our decision to exit the rail business in Russia. Year-to-date 2022, net income was $107.5 million, or $299 per diluted share. This compares to $82.1 million, or $228 per diluted share, for the same period in 2021. The 2022 year-to-date results include net negative impacts of $55.2 million, or $1.54 per diluted share, from tax adjustments and other items. The 2021 year-to-date results included net negative impacts of $43.1 million, or $1.20 per diluted share from tax adjustments and other items. These items are detailed on page 13 of our earnings release. And now I'll briefly address each segment. Rail North America's fleet utilization was 99.6% at quarter end, and the renewal success rate was 87.2%, reflective of the continued strong demand for rail cars across our fleet. Once again, we saw sequential improvement in absolute lease rate during the third quarter. The renewal rate change of GATX's lease price index was positive 37.5%, with an average renewal term of 33 months. We continue to successfully place new railcars from our committed supply agreements with a diverse customer base. We've placed over 4,000 railcars from our 2018 Trinity supply agreements. Additionally, we've placed over 7,650 railcars from our 2018 Greenbrier supply agreements. Our earliest available scheduled delivery under our supply agreements is in the second quarter of 2023. Earlier this month, we announced the new multi-year agreement to purchase 15,000 newly built cars, the largest committed rail car order in our history. We are pleased to have the new agreement in place, as these new cars will continue to strengthen our competitive position. The secondary market for rail cars in North America remains active. Rail North America's marketing income was $9 million in the quarter, and 76.7 million year-to-date. Turning to Irel International, the rail car leasing markets in Europe and India remain very strong, and fleet utilization was above 99% at quarter end. Furthermore, GATX Rail Europe continues to experience increases in renewal lease rates versus the expiring rates. In portfolio management, the Rolls-Royce and Partners Finance Affiliate is performing as expected in an uncertain environment. As borders reopen this year, global passenger air traffic has improved, but remains below 2019 levels. We continue to identify opportunities to make attractive investments in today's environment. Total investment volume across our businesses was $203.4 million in the quarter and $887.9 million year-to-date, primarily focused on rail assets globally. As noted in the earnings release, reflecting strong operating performance to date and our outlook for the remainder of the year, We expect 2022 four-year earnings to be in the upper end of the previously announced guidance range of $560 to $6 per diluted share, excluding any impact from tax adjustments and other items. Those are our prepared remarks. I'll hand it back to Colby so we can open it up for Q&A.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause just for a moment to compile the Q&A roster. Your first question comes from the line of Allison Poliniak from Wells Fargo. Your line is open.