GATX Corp. (
Q3 2010 Earnings Conference Call
October 21, 2010 11 AM ET
Jennifer Van Aken – Director of IR
Bob Lyons – SVP and CFO
Brian Kenney – Chairman, President and CEO
John Hecht – JMP Securities
Art Hatfield – Morgan Keegan
Mike Grondahl – Northland Capital Markets
Bob Napoli – Piper Jaffray
Steve Barger – KeyBanc Capital Markets
Daniel Fertata [ph] – Jefferies
Brad Evans – Heartland
Sahid City [ph] – Scabelli [ph] & Co.
Mario Gabelli – Gabelli & Co.
Previous Statements by GMT
» GATX Corp. Q2 2010 Earnings Call Transcript
» GATX Corp. Q1 2010 Earnings Call Transcript
» GATX Corp. Q2 2009 Earnings Call Transcript
» GATX Corporation Q1 2009 Earnings Call Transcript
Good day, ladies and gentlemen, welcome to the GATX Third Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn things over to Ms. Jennifer Van Aken, Director of Investor Relations, please go ahead, ma’am.
Jennifer Van Aken
Thank you, Erin, and good morning, everyone. Thank you for joining us for the third quarter conference call. With me today are Brian Kenney, President and CEO of GATX Corporation; and Bob Lyons, Senior Vice President and Chief Financial Officer.
I will give a brief overview of the results provided in our press release earlier this morning and then we’ll open up for your questions. First, I’d like to remind you that any forward-looking statements made on this call represents our best judgment as to what may occur in the future.
We have based these forward-looking statements on information currently available and disclaim any intention or obligation to update or revise these statements to reflect subsequent events or circumstances.
The company’s actual results will depend on a number of competitive and economic factors, some of which may be outside the control of the company. For more information refer to our 2009, Form 10-K and the second quarter 2010 10-Q filings.
Today we reported 2010 third quarter net income of $21.1 million or $0.45 per diluted share. This includes a net impact of negative $0.06 per diluted share related to the fair value adjustments of certain interest rate swaps at our European Rail Affiliate AAE Cargo, partially offset by a tax benefit of $0.04 per diluted share from a reduction of statutory tax rates in the UK. This compares to 2009 third quarter net income of $19.6 million or $0.42 per diluted share.
Year-to-date 2010, we reported net income of $61.3 million or $1.31 per diluted share. The year-to-date results include a net benefit of $0.04 per diluted share related to a combination of the aforementioned tax benefits due to a change in tax rate, the favorable resolution of a litigation matter and tax accrual reversal that occurred in the second quarter, and the negative fair value adjustments of the interest swaps at AAE.
These results compared to net income year-to-date 2009 of $59.9 million or $1.24 per diluted share, which included a negative impact of $0.38 per diluted share and fair value adjustments of the AAE interest rate swap.
The third quarter results are reflective of our slowly improving operating environment. The North American fleet utilization ended the third quarter at 96.8%. The renewal rates in the lease price index was 15.7% below expiring lease rates and lease terms remained relatively short at an average of 36 months for renewals in the quarter. The success rate on renewals improved to approximately 61% during the quarter.
The marine environment for a joint venture and specialty remains challenging as charter rates persist at low levels. However, we are experiencing year-over-year improvement in tonnage volumes at American Steamship Company.
Solid demand for iron ore shipment continues as steel manufacturing production is relatively strong. While we expect shipping volumes to remain stable through the end of the year, carry over into 2011 is unclear, as our customers are in the early stages of formulating their forecasts.
We’re seeing more opportunities to purchase assets resulting in increased investment activity. Investment volume was approximately a $113 million during the quarter, our highest quarterly volume year-to-date.
Given our year-to-date results and the current operating environment, we continue to expect 2010 full-year earnings in the range of $1.50 to $1.70. This guidance excludes the impact from items I laid out earlier.
On a final note, last week, we announced the transaction that makes GATX the manager and part owner of approximately 5,353 cars. The cars are owned by a new company called Adler Funding LLC, which GATX owns with a group of financial institutions. This transaction is reflective of our strategy to use GATX’s market leadership position and strong balance sheet to grow our North American rail fleet at attractive evaluations. It also enables GATX to fully lever its management capabilities and earning attractive return for our shareholders and our partners in Adler.
And, with that overview, we’ll open up the call for your questions. Erin?
Thank you. (Operator Instructions). And we’ll hear first from John Hecht with JMP Securities.
John Hecht – JMP Securities
Good morning and thanks for taking my questions. Real quick, with respect to the earnings in the affiliate revenue line it is $5.7 million, were there any one-time nonrecurring losses at some of your affiliates? And, if so, can you give us a sense of what maybe the core run rate excluding that type of event would have been in the affiliate line item?
John, its Bob Lyons. The main item in the third quarter was the AAE derivative for $2.8 million as a negative that would flow through that line. So that would be the only adjustment.