GATX Corporation

If you would like to withdraw your question, again, press the star 1. Thank you. Sherry Hellerman, Head of Investor Relations, you may begin your conference.

Thank you, Rob. Good morning, and thank you for joining GATX's 2023 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 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 our earnings release and those discussed in GATX's Form 10-K for 2022 and in our other filings for the SEC. GATX assumes no obligation to update or revise any four looking statements to reflect subsequent events or circumstances. Earlier today, GATX reported 2023 third quarter net income of $52.5 million, or $1.44 per doula share. This compares to 2022 third quarter net income of $29.1 million, or $0.81 per doula share. The 2022 third quarter results include a net negative impact of $10.8 million, or $0.31 per doula share from tax adjustments and other items. Year-to-date 2023 net income was $193.2 million or $5.30 per diluted share. This compares to $107.5 million or $2.99 per diluted share for the same period in 2022. The 2023 year-to-date results include a net negative impact of $1.1 million or $0.03 per diluted share from tax adjustments and other items. The 2022 year-to-date results include a net negative impact of $55.2 million, or $1.54 per doula share, from tax adjustments and other items. These items are detailed in the supplemental information pages of our earnings release. Now I'll briefly address each of our business segments. At Rail North America, fleet utilization was 99.3% at the end of the quarter. Demand for the majority of car types in our existing fleet remains strong, and we continue to extend renewals at higher rates. The third quarter renewal rate change of GATX's lease price index was positive 33.4%, with an average renewal term of 65 months. Our renewal success rate remained very high, at nearly 84% in the quarter. We continue to successfully place new railcars from our community supply agreements with a diverse customer base. We've placed all 4,800 railcars from our 2018 Trinity Supply Agreement. And we've placed all 7,650 railcars from our 2018 Greenbrier Supply Agreement. In addition, we've placed over 2,400 railcars from our 2022 Trinity Supply Agreement. Our earliest available scheduled delivery under our supply agreements is in the third quarter of 2024. The secondary market for rail cars in North America remains active. We generated remarketing income of approximately $13 million in the third quarter and over $88 million year to date. Within Rail International, Rail Europe continued to experience increases in renewal lease rates versus expiring rates. Driven by stable demand for most car types, Rail Europe fleet utilization remained healthy at 96%, although there is continuing softness in the European intermodal sector, which is the primary driver for the utilization dip at Rail Europe. During the quarter, Rail Europe and Rail India continue to take delivery of new cars and grow the fleet. Rail Europe's third quarter investment volume was nearly $130 million. Turning to portfolio management, third quarter results were driven primarily by the solid performance of the Rolls-Royce and Partners finance affiliates. Our wholly owned aircraft engines portfolio also contributed to higher earnings. Global demand for aircraft spare engines is robust, as international air passenger traffic continues to recover. As noted in the release, we continue to identify attractive investment opportunities across our global businesses in today's environment. Total investment volume was over $360 million in the third quarter and over $1.2 billion year to date. Finally. reflecting favorable operating performance to date and our outlook for the remainder of the year. We expect 2023 full year earnings to modestly exceed the high end of our previously announced guidance range of 650 to 690 per dollar share, excluding any impact from tax adjustments and other items. And those are our prepared remarks. I'll hand it back to the operator so we can open it up for Q&A.

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