GATX's CEO Discusses Q2 2012 Results - Earnings Call Transcript

GATX Corp. (GMT)

Q2 2012 Results Earnings Call

July 19, 2012 11:00 AM ET

Executives

Jennifer Van Aken – Director, Investor Relations

Brian Kenney – President and CEO

Bob Lyons – Executive Vice President and CFO

Analysts

Art Hatfield – Raymond James

Steve O’Hara – Sidoti

Steve Barger – KeyBanc Capital Markets

Matt Brooklier – Longbow Research

John Reilly – South Ferry Capital

Barry Haimes – Sage Asset Management

Kristine Kubacki – Avondale Partners

Presentation

Operator

Please standby, we are about to begin. Good day, everyone. And welcome to the GATX Second Quarter Conference Call. Today’s call is being recorded.

At this time, I’d like to turn the conference over to Jennifer Van Aken, Director, Investor Relations. Please go ahead.

Jennifer Van Aken

Thank you, Ann, and good morning, everyone. Thanks for joining us for the second quarter conference call. With me today are Brian Kenney, President and CEO of GATX Corporation; and Bob Lyons, Executive Vice President and Chief Financial Officer. I’ll give a brief overview of the results provided in our press release earlier this morning, and then we’ll take questions.

As a reminder, any forward-looking statement 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 maybe outside the control of the company. For more information, refer to our 2011 Form 10-K for a discussion of these factors. You can find these reports, as well as other information about the company on our website www.gatx.com.

Today we reported 2012 second quarter net income of $23.5 million or $0.49 per diluted share. This includes the negative impact of $15.3 million or $0.31 per diluted share from tax adjustments and other items which are detailed on page 12 of the press release.

This compares to 2011 second quarter net income of $26.4 million or $0.56 per diluted share, which includes the positive impact from tax adjustments and other items of $6.2 million or $0.13 per diluted share.

Year-to-date 2012, we reported net income of $53.8 million or $1.13 per diluted share, including the negative impact of $17.5 million or $0.36 per diluted share from tax adjustments and other items. Again, these items are detailed on page 12 of the press release.

Year-to-date 2011, we reported net income of $46.3 million or $0.98 per diluted share, including the positive impact from tax adjustments and other items of $12.6 million or $0.27 per diluted share.

At the end of the second quarter, GATX’s North American fleet utilization was 98.3%, and utilization in Europe was 96.3%. The renewal rates for railcars in the lease price index were 23.9% above expiring lease rates and lease terms were 59 months on average for renewals in the quarter.

The renewal success rate in North America remains strong in the mid 70% range, which is reflective of the continued strong demand for many car types in the GATX fleet. In particular, we continued to see strong demand across our tank car fleet. We are seeing ample opportunity to lock in attractive rates on long-term leases and will continue to pursue this objective.

American Steamship Company has moved more tonnage year-to-date 2012, compared to the same period of 2011, driven by increased demand for iron ore shipments by steel manufacturers. ASC expects to move modestly more volume in 2012 than in the prior year.

Portfolio Management had another solid quarter, benefiting from strong results at Rolls-Royce and Partners Finance, and improving charter rates for the ocean-going marine joint ventures operating in the ethylene market.

During the second quarter, investment volume was nearly $240 million, primarily in rail and inland marine assets. Rising asset prices make it more challenging to find economically attractive investments in secondary market assets, but our team is doing an excellent job of executing on select opportunities.

In addition, rail cars delivering under our multi-year order program are insignificant demand and we will continue allocating these cars on long-term leases to some of our strongest customers.

As we noted in the press release, we are raising our full year 2012 earnings guidance to a range of $2.65 to $2.75 per diluted share. The increase is based on the continued strength in rail and excludes any impact from tax adjustments or other item.

So, with that overview, we’ll go to your questions. Ann?

Question-and-Answer Session

Operator

Thank you very much. (Operator Instructions) We’ll take our first question from Art Hatfield with Raymond James.

Art Hatfield – Raymond James

Good morning, everyone.

Jennifer Van Aken

Good morning.

Art Hatfield – Raymond James

Hey. Just a couple quick questions and I want to see if I understand that, but I want to start with the American Steamship. It looks like I think the numbers that I had calculated in the quarter that roughly revenue year-over-year was up about 34% ballpark and it looks like in your stats, tonnage was up about 17%. So is it fair to say that pricing is kind of the difference there and that you’re pricing mid-teens type pricing increases at American Steamship this year?

Bob Lyons

Art, it’s Bob. We have seen favorable pricing environment at American Steamship. I can’t comment specifically on the percentage rate increases, but it has been a very good environment for us.

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