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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________ 
FORM 10-Q
__________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-2328
image0a04a01a44.jpg
GATX Corporation
(Exact name of registrant as specified in its charter)
New York36-1124040
(State of incorporation)(I.R.S. Employer Identification No.)

233 South Wacker Drive
Chicago, Illinois 60606-7147
(Address of principal executive offices, including zip code)
(312) 621-6200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockGATXNew York Stock Exchange
GATXChicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Smaller reporting company
Non-accelerated filer 
Emerging growth company
Accelerated filer 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

There were 35.6 million common shares outstanding at March 31, 2024.



GATX CORPORATION
FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2024

INDEX
Item No.Page No.
Part I - FINANCIAL INFORMATION
Item 1
 
 
 
 17
Item 2
Item 3
Item 4
Part II - OTHER INFORMATION
Item 1
Item 1A
Item 2
Item 5
Item 6



FORWARD-LOOKING STATEMENTS

Statements in this report not based on historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. Forward-looking statements include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects, or future events. In some cases, forward-looking statements can be identified by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "outlook," "continue," "likely," "will," "would," and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.

The following factors, in addition to those discussed under "Risk Factors" and elsewhere in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023, could cause actual results to differ materially from our current expectations expressed in forward-looking statements:

a significant decline in customer demand for our transportation assets or services, including as a result of:
prolonged inflation or deflation
high interest rates
weak macroeconomic conditions and world trade policies
weak market conditions in our customers' businesses
adverse changes in the price of, or demand for, commodities
changes in railroad operations, efficiency, pricing and service offerings, including those related to "precision scheduled railroading" or labor strikes or shortages
changes in, or disruptions to, supply chains
availability of pipelines, trucks, and other alternative modes of transportation
changes in conditions affecting the aviation industry, including global conflicts, geographic exposure and customer concentrations
customers' desire to buy, rather than lease, our transportation assets
other operational or commercial needs or decisions of our customers
inability to maintain our transportation assets on lease at satisfactory rates due to oversupply of assets in the market or other changes in supply and demand
competitive factors in our primary markets, including competitors with significantly lower costs of capital
higher costs associated with increased assignments of our transportation assets following non-renewal of leases, customer defaults, and compliance maintenance programs or other maintenance initiatives
events having an adverse impact on assets, customers, or regions where we have a concentrated investment exposure
financial and operational risks associated with long-term purchase commitments for transportation assets
reduced opportunities to generate asset remarketing income
inability to successfully consummate and manage ongoing acquisition and divestiture activities
reliance on Rolls-Royce in connection with our aircraft spare engine leasing businesses, and the risks that certain factors that adversely affect Rolls-Royce could have an adverse effect on our businesses
potential obsolescence of our assets

risks related to our international operations and expansion into new geographic markets, including laws, regulations, tariffs, taxes, treaties or trade barriers affecting our activities in the countries where we do business
failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees
inability to attract, retain, and motivate qualified personnel, including key management personnel
inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business
exposure to damages, fines, criminal and civil penalties, and reputational harm arising from a negative outcome in litigation, including claims arising from an accident involving transportation assets
changes in, or failure to comply with, laws, rules, and regulations
environmental liabilities and remediation costs
operational, functional and regulatory risks associated with climate change, severe weather events and natural disasters, and other environmental, social and governance matters
U.S. and global political conditions and the impact of increased geopolitical tension and wars, including the ongoing war between Russia and Ukraine and resulting sanctions and countermeasures, on domestic and global economic conditions in general, including supply chain challenges and disruptions
prolonged inflation or deflation
fluctuations in foreign exchange rates
deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs
the emergence of new variants of COVID-19 or the occurrence of another widespread health crisis and the impact of measures taken in response
inability to obtain cost-effective insurance
changes in assumptions, increases in funding requirements or investment losses in our pension and post-retirement plans
inadequate allowances to cover credit losses in our portfolio
asset impairment charges we may be required to recognize
inability to maintain effective internal control over financial reporting and disclosure controls and procedures


1


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GATX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)

March 31December 31
20242023
Assets
Cash and Cash Equivalents
$479.1 $450.7 
Restricted Cash
0.1 0.1 
Receivables
Rent and other receivables
96.3 87.9 
Finance leases (as lessor)
137.3 136.4 
Less: allowance for losses
(6.1)(5.9)
227.5 218.4 
Operating Assets and Facilities
13,320.1 13,081.9 
Less: allowance for depreciation
(3,700.3)(3,670.7)
9,619.8 9,411.2 
Lease Assets (as lessee)
Right-of-use assets, net of accumulated depreciation
203.5 212.0 
203.5 212.0 
Investments in Affiliated Companies
647.6 627.0 
Goodwill
118.0 120.0 
Other Assets (includes $1.8 and $0.8 related to assets held for sale)
283.5 286.6 
Total Assets
$11,579.1 $11,326.0 
Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses
$208.2 $239.6 
Debt
Commercial paper and borrowings under bank credit facilities
10.8 11.0 
Recourse
7,624.5 7,388.1 
7,635.3 7,399.1 
Lease Obligations (as lessee)
Operating leases
215.2 226.8 
215.2 226.8 
Deferred Income Taxes
1,096.2 1,081.1 
Other Liabilities
99.9 106.4 
Total Liabilities
9,254.8 9,053.0 
Shareholders’ Equity
Common stock, $0.625 par value:
Authorized shares — 120,000,000
Issued shares — 68,946,287 and 68,797,027
Outstanding shares — 35,577,357 and 35,464,841
42.6 42.5 
Additional paid in capital
828.8 816.1 
Retained earnings
3,062.4 3,009.5 
Accumulated other comprehensive loss
(177.4)(167.6)
Treasury stock at cost (33,368,930 and 33,332,186 shares)
(1,432.1)(1,427.5)
Total Shareholders’ Equity
2,324.3 2,273.0 
Total Liabilities and Shareholders’ Equity
$11,579.1 $11,326.0 

See accompanying notes to condensed consolidated financial statements.
2


GATX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)
Three Months Ended
March 31
20242023
Revenues
Lease revenue
$333.3 $302.0 
Non-dedicated engine revenue
13.2 4.5 
Marine operating revenue
 3.5 
Other revenue
33.4 28.9 
Total Revenues
379.9 338.9 
Expenses
Maintenance expense
91.4 83.9 
Marine operating expense
 2.0 
Depreciation expense
96.0 89.8 
Operating lease expense
9.0 9.0 
Other operating expense
13.6 11.0 
Selling, general and administrative expense
55.9 50.4 
Total Expenses
265.9 246.1 
Other Income (Expense)
Net gain on asset dispositions
36.2 47.1 
Interest expense, net
(77.8)(59.0)
Other income (expense)
0.8 (4.0)
Income before Income Taxes and Share of Affiliates’ Earnings
73.2 76.9 
Income taxes
(18.6)(20.2)
Share of affiliates' earnings, net of taxes
19.7 20.7 
Net Income
$74.3 $77.4 
Other Comprehensive (Loss) Income, Net of Taxes
Foreign currency translation adjustments
$(14.4)$8.8 
Unrealized gain on derivative instruments
0.1 0.8 
Post-retirement benefit plans
4.5 (0.1)
Other comprehensive (loss) income
(9.8)9.5 
Comprehensive Income
$64.5 $86.9 
Share Data
Basic earnings per share
$2.04 $2.19 
Average number of common shares
35.8 35.3 
Diluted earnings per share
$2.03 $2.16 
Average number of common shares and common share equivalents
35.9 35.8 

See accompanying notes to condensed consolidated financial statements.
3


GATX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
Three Months Ended
March 31
20242023
Operating Activities
Net income
$74.3 $77.4 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense
100.6 93.6 
Net gains on disposition of owned assets
(36.1)(48.1)
Asset impairments 1.2 
Deferred income taxes
15.9 14.1 
Share of affiliates’ earnings, net of dividends
(19.7)(20.7)
Changes in working capital items
(37.4)(22.5)
Net cash provided by operating activities
97.6 95.0 
Investing Activities
Portfolio investments and capital additions
(378.6)(387.0)
Portfolio proceeds
59.7 108.2 
Proceeds from sales of other assets
7.1 5.2 
Proceeds from short-term investments
 150.0 
Other
0.2 0.7 
Net cash used in investing activities
(311.6)(122.9)
Financing Activities
Net proceeds from issuances of debt (original maturities longer than 90 days)
557.4 165.4 
Repayments of debt (original maturities longer than 90 days)
(300.0)(250.0)
Net increase in debt with original maturities of 90 days or less
 2.8 
Stock repurchases
(4.6) 
Dividends
(22.0)(20.9)
 Other14.2 4.4 
Net cash provided by (used in) financing activities
245.0 (98.3)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(2.6)(0.2)
Net increase (decrease) in Cash, Cash Equivalents, and Restricted Cash during the period
28.4 (126.4)
Cash, Cash Equivalents, and Restricted Cash at beginning of the period
450.8 304.0 
Cash, Cash Equivalents, and Restricted Cash at end of the period
$479.2 $177.6 

See accompanying notes to condensed consolidated financial statements.
4


GATX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(In millions, except per share data)
Three Months Ended
March 31
20242023
SharesDollarsSharesDollars
Common Stock
Balance at beginning of the period68.8 $42.5 68.6 $42.4 
Issuance of common stock
0.1 0.1 0.1  
Balance at end of the period
68.9 42.6 68.7 42.4 
Treasury Stock
Balance at beginning of the period(33.3)(1,427.5)(33.3)(1,424.9)
Stock repurchases
(0.1)(4.6)  
Balance at end of the period
(33.4)(1,432.1)(33.3)(1,424.9)
Additional Paid In Capital
Balance at beginning of the period816.1 792.2 
Share-based compensation effects
12.7 5.3 
Balance at end of the period
828.8 797.5 
Retained Earnings
Balance at beginning of the period3,009.5 2,831.5 
Net income
74.3 77.4 
Dividends declared ($0.58 and $0.55 per share)
(21.4)(20.3)
Balance at end of the period
3,062.4 2,888.6 
Accumulated Other Comprehensive Loss
Balance at beginning of the period(167.6)(211.6)
Other comprehensive loss(9.8)9.5 
Balance at end of the period
(177.4)(202.1)
Total Shareholders' Equity
$2,324.3 $2,101.5 

See accompanying notes to condensed consolidated financial statements.


5

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1. Description of Business

As used herein, "GATX," "we," "us," "our," and similar terms refer to GATX Corporation and its subsidiaries, unless indicated otherwise.

We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through three primary business segments: Rail North America, Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.

In the first quarter of 2024, we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of this business segment. Historically, this business segment included marine operations from our liquefied gas-carrying vessels (the "Specialized Gas Vessels"). As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations. The segment is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce") that lease aircraft spare engines, and GATX Engine Leasing ("GEL"), our business that directly owns aircraft spare engines that are leased to airline customers or employed in an engine capacity agreement.

NOTE 2. Basis of Presentation

We prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our unaudited condensed consolidated financial statements do not include all of the information and footnotes required for complete financial statements. We have included all of the normal recurring adjustments that we deemed necessary for a fair presentation.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2024. In particular, asset remarketing income does not occur evenly throughout the year. For more information, refer to the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2023.
6

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


New Accounting Pronouncements Not Yet Adopted
Standard/DescriptionEffective Date and Adoption ConsiderationsEffect on Financial Statements or Other Significant Matters
Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance disclosures for the effective rate reconciliation and income taxes paid.


The new guidance is effective for us beginning with our 2025 Form 10-K, with early adoption permitted.


We continue to assess the effect the new guidance will have on our disclosure. We expect the primary impact to be the level of disaggregation disclosed in the effective rate reconciliation table and the addition of income taxes paid by jurisdiction.
Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, particularly around the disclosure of segment expenses that are regularly reported to the chief operating decision maker ("CODM") and included within each reported measure of segment profit.



The new guidance is effective for us beginning with our 2024 Form 10-K, with early adoption permitted. We plan to adopt this standard for our 2024 Form 10-K.


We are currently assessing whether additional disclosures around significant segment expenses will be required in our segment disclosures.

7

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 3. Revenue

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We disaggregate revenue into four categories as presented on our statement of comprehensive income:

Lease Revenue

Lease revenue, which includes operating lease revenue and finance lease revenue, is our primary source of revenue.

Operating Lease Revenue

We lease railcars, locomotives, aircraft spare engines, and tank containers under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. We do not offer stand-alone maintenance service contracts. Operating lease revenue is within the scope of Accounting Standards Codification ("ASC") Topic 842 "Leases" ("Topic 842"), and we have elected not to separate non-lease components from the associated lease component for qualifying leases. Operating lease revenue is recognized on a straight-line basis over the term of the underlying lease. As a result, lease revenue may not be recognized in the same period as maintenance and other costs, which we expense as incurred. Variable rents are recognized when applicable contingencies are resolved. Revenue is not recognized if collectability is not reasonably assured. See "Note 5. Leases".

Finance Lease Revenue

In certain cases, we lease railcars and tank containers that, at lease inception, are classified as finance leases. In accordance with Topic 842, finance lease revenue is recognized using the effective interest method, using the interest rate implicit in the lease. See "Note 5. Leases".

Non-Dedicated Engine Revenue

Certain of our owned aircraft spare engines are part of a pool of non-dedicated spare engines managed under a capacity agreement with Rolls-Royce. Revenue is earned based on our continued ability to meet engine capacity requirements under the agreement, which requires us to enroll a minimum number of engines in a pool of non-dedicated spare engines for short-term lease to Rolls-Royce customers. We recognize revenue based on our right to receive a portion of the revenue earned by the pool, which is calculated based on the average engine flight hours reported for each type of engine enrolled into the pool.

Marine Operating Revenue

Historically, we generated marine operating revenue through shipping services completed by our marine vessels. For vessels that operated in a pooling arrangement, we recognized pool revenue based on the right to receive our portion of net distributions reported by the pool, with net distributions being the net voyage revenue of the pool after deduction of voyage expenses. For vessels that operated outside of a pooling arrangement, we recognized revenue over time as the performance obligation is satisfied, beginning when cargo is loaded through its delivery and discharge. As of the first quarter of 2024, we no longer have marine operating revenue, as all marine vessels were sold as of December 31, 2023.

Other Revenue

Other revenue is comprised of customer liability repair revenue, termination fees, interest income, and other miscellaneous revenues. Select components of other revenue are within the scope of ASC Topic 606, "Revenue from Contracts with Customers". Revenue attributable to terms provided in our lease contracts are variable lease components that are recognized when earned, in accordance with Topic 842.


8

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 4. Operating Assets and Facilities

The following table shows the components of our operating assets and facilities (in millions):

March 31
2024
December 31
2023
Railcars and locomotives$11,967.7 $11,700.8 
Aircraft spare engines769.7 769.7 
Tank containers237.8 237.7 
Buildings, leasehold improvements, and other equipment250.7 253.0 
Other94.2 120.7 
$13,320.1 $13,081.9 
Less: allowance for depreciation(3,700.3)(3,670.7)
Net operating assets and facilities$9,619.8 $9,411.2 

Total depreciation expense was $100.5 million for the three months ended March 31, 2024 and $93.5 million for the three months ended March 31, 2023.

NOTE 5. Leases

GATX as Lessor

We lease railcars, locomotives, aircraft spare engines, and tank containers under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. In accordance with applicable guidance, we do not separate lease and non-lease components when reporting revenue for our full-service operating leases. In some cases, we lease railcars and tank containers that, at commencement, are classified as finance leases. For certain operating leases, revenue is based on equipment usage and is recognized when earned. Typically, our leases do not provide customers with renewal options or options to purchase the asset. Our lease agreements do not generally have residual value guarantees. We collect reimbursements from customers for damage to our railcars, as well as additional rental payments for usage above specified levels, as provided in the lease agreements.

The following table shows the components of our lease revenue (in millions):
Three Months Ended
March 31
20242023
Operating lease revenue:
Fixed lease revenue
$305.1 $276.8 
Variable lease revenue
24.6 22.5 
Total operating lease revenue
$329.7 $299.3 
Finance lease revenue
3.6 2.7 
Total lease revenue
$333.3 $302.0 

In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer liability repairs. This additional revenue is reported in other revenue in the statements of comprehensive income and was $28.7 million for the three months ended March 31, 2024 and $23.9 million for the three months ended March 31, 2023.









9

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 6. Fair Value

The assets and liabilities that GATX records at fair value on a recurring basis consisted entirely of derivatives at March 31, 2024 and December 31, 2023.

In addition, we review long-lived assets, such as operating assets and facilities, investments in affiliates, and goodwill, for impairment whenever circumstances indicate that the carrying amount of these assets may not be recoverable or when assets may be classified as held for sale. We determine the fair value of the respective assets using Level 3 inputs, including estimates of discounted future cash flows, independent appraisals, and market comparables, as applicable.

Derivative Instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting a portion of our fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. We had four instruments outstanding with an aggregate notional amount of $200.0 million as of March 31, 2024 with maturities ranging from 2025 to 2027 and four instruments outstanding with an aggregate notional amount of $200.0 million as of December 31, 2023 with maturities ranging from 2025 to 2027.

Cash Flow Hedges

We use Treasury rate locks and swap rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps, forwards, and put/call options to hedge our exposure to fluctuations in the exchange rates of foreign currencies for certain loans and operating expenses denominated in non-functional currencies. We had nine instruments outstanding with an aggregate notional amount of $19.7 million as of March 31, 2024 that mature in 2024 and one instrument outstanding with an aggregate notional amount of $131.0 million as of December 31, 2023 that matured in 2024. Within the next 12 months, we expect to reclassify $1.5 million ($1.1 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive loss to interest expense. We reclassify these amounts when interest and operating lease expense on the related hedged transactions affect earnings.

Non-Designated Derivatives

We do not hold derivative financial instruments for purposes other than hedging, although certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other income (expense) immediately.

Certain of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. The aggregate fair value of our derivative instruments with credit risk related contingent features that were in a liability position was $8.4 million as of March 31, 2024 and $8.0 million as of December 31, 2023. We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.

In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract, our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.

10

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
The following table shows our derivative assets and liabilities that are measured at fair value (in millions):
Significant Observable Inputs (Level 2)
Balance Sheet LocationFair Value
March 31, 2024
Fair Value
December 31, 2023
Derivative Assets
Foreign exchange contracts (1)Other assets$ $0.5 
Foreign exchange contracts (2)Other assets0.2  
Total derivative assets$0.2 $0.5 
Derivative Liabilities
Interest rate contracts (1)
Other liabilities
$8.4 $8.0 
Foreign exchange contracts (2)
Other liabilities
11.2 10.5 
Total derivative liabilities$19.6 $18.5 
_________
(1)    Designated as hedges.
(2)    Not designated as hedges.

We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data. As of March 31, 2024 and December 31, 2023, all derivatives were classified as Level 2 in the fair value hierarchy. There were no derivatives classified as Level 1 or Level 3.

The following table shows the amounts recorded on the balance sheet related to cumulative basis adjustments for fair value hedges (in millions):
Carrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
Line Item in the Balance Sheet in Which the Hedged Item is IncludedMarch 31
2024
December 31
2023
March 31
2024
December 31
2023
Recourse debt$(196.9)$(196.8)$(8.4)$(8.0)

11

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
The following tables show the impacts of our derivative instruments on our statements of comprehensive income (in millions):
Amount of Loss (Gain) Recognized in Other Comprehensive (Loss) Income
Three Months
Ended March 31
Derivative Designation20242023
Derivatives in cash flow hedging relationships:
Foreign exchange contracts$(3.4)$1.5 
Total$(3.4)$1.5 

Location of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into EarningsAmount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into Earnings
Three Months
Ended March 31
20242023
Interest expense$0.4 $0.4 
Other income (expense)(3.7)1.6 
Total$(3.3)$2.0 

The following tables show the impact of our fair value and cash flow hedge accounting relationships, as well as the impact of our non-designated derivatives, on the statements of comprehensive income (in millions):

Amount of Gain (Loss) Recognized in Interest Expense on Fair Value and Cash Flow Hedging Relationships
Three Months
Ended March 31
20242023
Total interest expense$(77.8)$(59.0)
Gain (loss) on fair value hedging relationships
Interest rate contracts:
Hedged items
0.4 (2.3)
Derivatives designated as hedging instruments
(0.4)2.3 
Gain (loss) on cash flow hedging relationships
Interest rate contracts:
Amount of loss reclassified from accumulated other comprehensive loss into earnings(0.4)(0.4)

12

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Amount of Gain (Loss) Recognized in Other Income (Expense) on Cash Flow Hedging Relationships and Non-Designated Derivative Contracts
Three Months
Ended March 31
20242023
Total other income (expense)$0.8 $(4.0)
Gain (loss) on cash flow hedging relationships
Foreign exchange contracts:
Amount of gain reclassified from accumulated other comprehensive loss into earnings (1)3.7 (1.6)
Gain (loss) on non-designated derivative contracts(0.9)(3.7)
_________
(1)    These amounts are substantially offset by foreign currency remeasurement adjustments on related hedged instruments, also recognized in other income (expense).

Other Financial Instruments

Except for derivatives, as disclosed above, GATX has no other assets and liabilities measured at fair value on a recurring basis. The carrying amounts of cash and cash equivalents, restricted cash, rent and other receivables, accounts payable, and commercial paper and borrowings under bank credit facilities with maturities under one year approximate fair value due to the short maturity of those instruments.

We estimate the fair values of fixed and floating rate debt using discounted cash flow analyses that are based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The inputs we use to estimate each of these values are classified in Level 2 of the fair value hierarchy because they are directly or indirectly observable inputs.

The following table shows the carrying amounts and fair values of our other financial instruments (in millions):
March 31, 2024December 31, 2023
 
 
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Liabilities
Recourse fixed rate debt$7,082.7 $6,637.3 $7,026.6 $6,614.6 
Recourse floating rate debt541.8 545.8 361.5 362.9 
Total$7,624.5 $7,183.1 $7,388.1 $6,977.5 

13

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 7. Pension and Other Post-Retirement Benefits

The following table shows the components of net periodic cost for the three months ended March 31, 2024 and 2023 (in millions):

 
 
 
 
2024
Pension
Benefits
2023
Pension
Benefits
2024
Retiree
Health and Life
2023
Retiree
Health and Life
Service cost
$1.4 $1.3 $ $ 
Interest cost
4.0 4.2 0.2 0.2 
Expected return on plan assets
(5.4)(5.4)  
Amortization of (1):
Unrecognized prior service credit
  (0.1)(0.1)
Unrecognized net actuarial loss (gain)
0.2 0.2 (0.1)(0.1)
Net periodic cost
$0.2 $0.3 $ $ 
_________
(1)    Amounts reclassified from accumulated other comprehensive loss.

The service cost component of net periodic cost was $1.4 million for the three months ended March 31, 2024 and $1.3 million for the three months ended March 31, 2023 and is recorded in selling, general and administrative expense. The non-service components totaled income of $1.2 million for the three months ended March 31, 2024 and income of $1.0 million for the three months ended March 31, 2023 and are recorded in other income (expense) in the statements of comprehensive income.

NOTE 8. Share-Based Compensation

During the three months ended March 31, 2024, we granted 194,100 non-qualified employee stock options, 31,970 restricted stock units, 38,940 performance shares, and 1,838 restricted stock units awarded to non-employee directors. For the three months ended March 31, 2024, total share-based compensation expense was $5.4 million and the related tax benefits were $1.4 million. For the three months ended March 31, 2023, total share-based compensation expense was $3.5 million and the related tax benefits were $0.9 million.

The estimated fair value of our 2024 non-qualified employee stock option awards and related underlying assumptions are shown in the table below:
2024
Weighted-average estimated fair value$45.22 
Quarterly dividend rate$0.58 
Expected term of stock options, in years4.2
Risk-free interest rate4.0 %
Dividend yield1.8 %
Expected stock price volatility34.7 %
Present value of dividends$8.87 

NOTE 9. Income Taxes

The following table shows our effective income tax rate for the three months ended March 31:
20242023
Effective income tax rate25.4 %26.3 %

The decrease in the effective rate for the current year compared to the prior year was primarily due to the incremental benefits associated with equity awards vested or exercised during the year, as well as the mix of pre-tax income among domestic and foreign jurisdictions, which are taxed at different rates.

14

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 10. Commercial Commitments

We have entered into various commercial commitments, including standby letters of credit and performance bonds. These commercial commitments require us to fulfill specific obligations in the event of third-party demands. Similar to our balance sheet investments, these commitments expose us to credit, market, and equipment risk. Accordingly, we evaluate these commitments and other contingent obligations using techniques similar to those we use to evaluate funded transactions.

The following table shows our commercial commitments (in millions):
March 31
2024
December 31
2023
Standby letters of credit and performance bonds$8.7 $8.7 
Total commercial commitments (1)$8.7 $8.7 
_________
(1)    There were no liabilities recorded on the balance sheet for commercial commitments at March 31, 2024 and December 31, 2023. As of March 31, 2024, our outstanding commitments expire in 2024 through 2026. We are not aware of any event that would require us to satisfy any of our commitments.

We are parties to standby letters of credit and performance bonds, which primarily relate to contractual obligations and general liability insurance coverages. No material claims have been made against these obligations, and no material losses are anticipated.

NOTE 11. Earnings per Share

We compute basic and diluted earnings per share using the two-class method, which is an earnings allocation calculation that determines Earnings Per Share ("EPS") for each class of common stock and participating security. Our vested and exercisable stock options contain non-forfeitable rights to dividends or dividend equivalents and are classified as participating securities in the calculation of EPS. Our unvested stock options, restricted stock units, performance shares and non-employee director awards do not contain nonforfeitable rights to dividends or dividend equivalents and are therefore not classified as participating securities.

The following table shows the computation of our basic and diluted earnings per common share (in millions, except per share amounts):
Three Months Ended
March 31
20242023
Basic earnings per share:
Net income
$74.3 $77.4 
Less: Net income allocated to participating securities(1.4) 
Net income available to common shareholders$72.9 $77.4 
Weighted-average shares outstanding - basic
35.8 35.3 
Basic earnings per share
$2.04 $2.19 
Diluted earnings per share:
Net income
$74.3 $77.4 
Less: Net income allocated to participating securities(1.4) 
Net income available to common shareholders$72.9 $77.4 
Weighted-average shares outstanding - basic
35.8 35.3 
Effect of dilutive securities:
Equity compensation plans0.1 0.5 
Weighted-average shares outstanding - diluted
35.9 35.8 
Diluted earnings per share
$2.03 $2.16 

15

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 12. Accumulated Other Comprehensive Loss

The following table shows the change in components for accumulated other comprehensive loss (in millions):

 
 
 
 Foreign Currency Translation AdjustmentsUnrealized Loss on Derivative InstrumentsPost-Retirement Benefit Plans AdjustmentsTotal
Accumulated other comprehensive loss at December 31, 2023$(106.3)$(9.9)$(51.4)$(167.6)
Change in component(14.4)3.4 6.0 (5.0)
Reclassification adjustments into earnings (1) (3.3) (3.3)
Income tax effect  (1.5)(1.5)
Accumulated other comprehensive loss at March 31, 2024$(120.7)$(9.8)$(46.9)$(177.4)
_________
(1)    See "Note 6. Fair Value" and "Note 7. Pension and Other Post-Retirement Benefits" for impacts of the reclassification adjustments on the statements of comprehensive income.

NOTE 13. Legal Proceedings and Other Contingencies

Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against GATX and certain of our subsidiaries. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely.

On June 30, 2023, a third-party complaint was filed by Norfolk Southern Railway Company and Norfolk Southern Corporation (collectively, “Norfolk Southern”) against GATX and several other parties in the Northern District of Ohio (Eastern Division) for contribution and recovery of environmental damages related to the derailment of a Norfolk Southern train in East Palestine, Ohio that included railcars owned by GATX Corporation. The Company filed a motion to dismiss Norfolk Southern's third-party complaint on September 15, 2023. On March 6, 2024, the Court granted GATX's and the other third-party defendants’ motions and dismissed all Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") claims. The Court also dismissed all state law claims, declining to exercise supplemental jurisdiction over them in light of its dismissal of the CERCLA claims. On March 26, 2024, Norfolk Southern moved the Court for entry of partial final judgment as to the order dismissing the third-party complaint in order to appeal before final judgment the Court’s dismissal order as to GATX and the other third-party defendants.

On July 25, 2023, a separate third-party complaint was filed by Norfolk Southern against GATX and two other defendants in the Northern District of Ohio (Eastern Division) for contribution to personal injury and property damages class claims related to the derailment of the Norfolk Southern train in East Palestine, Ohio. The plaintiffs who had originally filed the complaint against Norfolk Southern ("Plaintiffs") themselves subsequently filed direct claims against GATX and the two other third-party defendants alleging many of the same facts as Norfolk Southern. On September 15, 2023, the Company filed a motion to dismiss Norfolk Southern's third-party complaint, and on September 26, 2023, filed a motion to dismiss the Plaintiffs' complaint. Briefing was completed on October 30, 2023, and the Court issued an order on March 13, 2024, denying in part, and granting in part, the Company’s motion against Norfolk Southern and Plaintiffs. The Court held that Norfolk Southern’s contribution action was premature and dismissed the claim without prejudice but otherwise allowed the remaining claims against GATX to proceed. The Court also dismissed Plaintiffs’ claim for medical monitoring but held that Plaintiffs could seek such damages through their other claims, which could proceed. The Court also consolidated an additional action filed against GATX and others titled Almasy, et al. v. Norfolk Southern Corp., et al. by over 40 individual residents, employees and property owners in East Palestine, Ohio. Plaintiffs and Norfolk Southern have announced a settlement in principle for $600 million to resolve the consolidated class action claims of those within a 20-mile radius from the derailment, and, for those residents who choose to participate, personal injury claims within a 10-mile radius from the derailment. Norfolk Southern’s claims against GATX remain unchanged.

On December 8, 2023, GATX and three other defendants were named as additional defendants in a putative class action lawsuit originally filed in federal court in Pennsylvania against Norfolk Southern by Pennsylvania school districts and school children. The amended complaint seeks monetary damages for the Pennsylvania plaintiffs for personal injury and property damage allegedly related to the derailment. The Company filed a motion to dismiss on February 23, 2024.

The Company intends to vigorously defend itself against each of these lawsuits. At this time, the Company cannot reasonably estimate the loss or range of loss, if any, that may ultimately be incurred in connection with any of these lawsuits and therefore has not established any accruals for potential liability related to this incident.

16

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
For a full discussion of our other pending legal matters, please refer to "Note 23. Legal Proceedings and Other Contingencies" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.

NOTE 14. Financial Data of Business Segments

The financial data presented below depicts the profitability, financial position, and capital expenditures of each of our business segments.

We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through three primary business segments: Rail North America, Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for Trifleet are reported in the Other segment.

Rail North America is composed of our operations in the United States, Canada, and Mexico. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services.

Rail International is composed of our operations in Europe ("GATX Rail Europe" or "GRE"), India ("Rail India"), and until January 31, 2023, our rail business in Russia ("Rail Russia"). On January 31, 2023, we completed the sale of Rail Russia and recorded a gain of $0.3 million, which is presented in net gain on asset dispositions in the statements of comprehensive income. GRE primarily leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides value-added services according to customer requirements. Rail India primarily leases railcars to customers in India pursuant to net leases, under which the lessee assumes responsibility for maintenance of the railcars.

As previously disclosed, in the first quarter of 2024 we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of the segment. Historically, this business segment included marine operations from our Specialized Gas Vessels. As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations.

Engine Leasing is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce that lease aircraft spare engines, and GEL, our business that directly owns aircraft spare engines that are leased to airline customers or employed in engine capacity agreements. The RRPF affiliates manage all of GEL's aircraft spare engines, for which we paid them a fee of $0.6 million for the three months ended March 31, 2024 and $0.5 million for the three months ended March 31, 2023.

Other includes Trifleet operations, as well as selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the profitability of each segment. Segment profit includes all revenues, expenses, pre-tax earnings from affiliates, and net gains on asset dispositions that are directly attributable to each segment. We allocate interest expense to the segments based on what we believe to be the appropriate risk-adjusted borrowing costs for each segment. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.

17

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
The following tables show certain segment data for each of our business segments (in millions):


Rail North America
Rail International
Engine Leasing
OtherGATX Consolidated
Three Months Ended March 31, 2024
Revenues
Lease revenue
$236.5 $80.6 $8.1 $8.1 $333.3 
Non-dedicated engine revenue— — 13.2 — 13.2 
Other revenue
28.5 3.1  1.8 33.4 
Total Revenues
265.0 83.7 21.3 9.9 379.9 
Expenses
Maintenance expense
72.9 17.5  1.0 91.4 
Depreciation expense
65.1 18.9 8.4 3.6 96.0 
Operating lease expense
9.0    9.0 
Other operating expense
6.7 3.5 2.5 0.9 13.6 
Total Expenses
153.7 39.9 10.9 5.5 210.0 
Other Income (Expense)
Net gain on asset dispositions
34.2 1.3 0.6 0.1 36.2 
Interest (expense) income, net
(53.3)(16.7)(9.3)1.5 (77.8)
Other (expense) income
(2.1)0.4 0.3 2.2 0.8 
Share of affiliates' pre-tax earnings
0.2  23.7  23.9 
Segment profit
$90.3 $28.8 $25.7 $8.2 $153.0 
Less:
Selling, general and administrative expense
55.9 
Income taxes (includes $4.2 related to affiliates' earnings)
22.8 
Net income
$74.3 
Net Gain on Asset Dispositions
Asset Remarketing Income:
Net gains on disposition of owned assets
$32.9 $0.1 $0.6 $0.1 $33.7 
Residual sharing income
0.1    0.1 
Non-remarketing net gains (1)
1.2 1.2   2.4 
$34.2 $1.3 $0.6 $0.1 $36.2 
Capital Expenditures
Portfolio investments and capital additions
$321.7 $49.9 $ $7.0 $378.6 
Selected Balance Sheet Data at March 31, 2024
Investments in affiliated companies
$0.4 $ $647.2 $ $647.6 
Identifiable assets
$7,245.6 $2,215.1 $1,376.1 $742.3 $11,579.1 
_________
(1)    Includes net gains (losses) from scrapping of railcars.




18

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


Rail North America

Rail International

Engine Leasing
OtherGATX Consolidated
Three Months Ended March 31, 2023
Revenues
Lease revenue
$215.1 $70.4 $8.3 $8.2 $302.0 
Non-dedicated engine revenue— — 4.5 — 4.5 
Marine operating revenue
  3.5  3.5 
Other revenue
23.8 2.9  2.2 28.9 
Total Revenues
238.9 73.3 16.3 10.4 338.9 
Expenses
Maintenance expense
66.9 15.9  1.1 83.9 
Marine operating expense
  2.0  2.0 
Depreciation expense
65.5 15.7 5.4 3.2 89.8 
Operating lease expense
9.0    9.0 
Other operating expense
7.0 2.2 0.9 0.9 11.0 
Total Expenses
148.4 33.8 8.3 5.2 195.7 
Other Income (Expense)
Net gain (loss) on asset dispositions
47.8 0.8 (1.5) 47.1 
Interest (expense) income, net
(42.3)(12.5)(5.7)1.5 (59.0)
Other (expense) income
(0.4)(4.3)(0.5)1.2 (4.0)
Share of affiliates' pre-tax (losses) earnings
(0.4) 28.0  27.6 
Segment profit
$95.2 $23.5 $28.3 $7.9 $154.9 
Less:
Selling, general and administrative expense
50.4 
Income taxes (includes $6.9 related to affiliates' earnings)
27.1 
Net income$77.4 
Net Gain (Loss) on Asset Dispositions
Asset Remarketing Income:
Net gains (losses) on disposition of owned assets
$44.7 $0.4 $(0.4)$ $44.7 
Residual sharing income
0.1  0.1  0.2 
Non-remarketing net gains (1)
3.0 0.4   3.4 
Asset impairments
  (1.2) (1.2)
$47.8 $0.8 $(1.5)$ $47.1 
Capital Expenditures
Portfolio investments and capital additions
$296.5 $81.1 $ $9.4 $387.0 
Selected Balance Sheet Data at December 31, 2023
Investments in affiliated companies
$0.2 $— $626.8 $— $627.0 
Identifiable assets
$6,993.8 $2,175.2 $1,355.1 $801.9 $11,326.0 
_________
(1)    Includes net gains (losses) from scrapping of railcars


19


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and other information included elsewhere in this Quarterly Report, Annual Report on Form 10-K for the year ended December 31, 2023, and in our other filings with the Securities and Exchange Commission ("SEC"). We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance with U.S. Generally Accepted Accounting Standards ("GAAP") and on certain other financial data that we prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see "Non-GAAP Financial Measures" at the end of this item. The discussion and analysis below includes forward-looking statements that are subject to risks, uncertainties and other factors described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2023 that could cause actual results to differ materially from such forward-looking statements. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

OVERVIEW

We lease, operate, manage, and remarket long-lived, widely used assets, primarily in the rail market. We report our financial results through three primary business segments: Rail North America, Rail International, and Engine Leasing (previously named Portfolio Management). Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.

In the first quarter of 2023, we sold our rail business in Russia ("Rail Russia") within the Rail International segment.

In the first quarter of 2024, we changed the name of our Portfolio Management business segment to Engine Leasing to reflect the prospective operations of this business segment. Historically, this business segment included marine operations from our liquefied gas-carrying vessels (the "Specialized Gas Vessels"). As of December 31, 2023, we had sold all of our marine assets and no longer have any marine operations. The segment is now almost entirely comprised of our engine leasing operations, which include our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce") that lease aircraft spare engines, and GATX Engine Leasing ("GEL"), our business that directly owns aircraft spare engines that are leased to airline customers or employed in an engine capacity agreement.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2024. In particular, asset remarketing income does not occur evenly throughout the year. For more information, refer to the consolidated financial statements and footnotes in our Annual Report on Form 10-K for the year ended December 31, 2023.

DISCUSSION OF OPERATING RESULTS

Net income for the three months ended March 31, 2024 was $74.3 million, or $2.03 per diluted share, compared to $77.4 million, or $2.16 per diluted share, for the same period in 2023. Results for the three months ended March 31, 2024 included a net positive impact of $0.6 million ($0.02 per diluted share) from tax adjustments and other items, compared to a net negative impact of $1.3 million ($0.04 per diluted share) from tax adjustments and other items for the three months ended March 31, 2023. See "Non-GAAP Financial Measures" at the end of this item for further details. Excluding the impact of these items, net income decreased $5.0 million compared to the prior year, largely due to lower asset disposition gains at Rail North America and higher interest expense, partially offset by higher revenue at Rail North America and Rail International and higher non-dedicated engine revenue at Engine Leasing.

20


The following table shows a summary of our reporting segments and consolidated financial results (in millions, except per share data):

Three Months Ended
March 31
20242023
Segment Revenues
Rail North America$265.0 $238.9 
Rail International83.7 73.3 
Engine Leasing21.3 16.3 
Other9.9 10.4 
$379.9 $338.9 
Segment Profit
Rail North America$90.3 $95.2 
Rail International28.8 23.5 
Engine Leasing25.7 28.3 
Other8.2 7.9 
 153.0 154.9 
Less:
Selling, general and administrative expense55.9 50.4 
Income taxes (includes $4.2 and $6.9 related to affiliates' earnings)
22.8 27.1 
Net Income (GAAP)$74.3 $77.4 
Net income, excluding tax adjustments and other items (non-GAAP) (1)$73.7 $78.7 
Diluted earnings per share (GAAP)$2.03 $2.16 
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP) (1)$2.01 $2.20 
Investment Volume$378.6 $387.0 

The following table shows our return on equity for the trailing 12 months ended March 31:
20242023
Return on Equity (GAAP)11.6 %7.6 %
Return on Equity, excluding tax adjustments and other items (non-GAAP) (1)11.4 %10.2 %
_________
(1)    See "Non-GAAP Financial Measures" at the end of this item for further details.

Segment Operations

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the profitability of each segment. Segment profit includes all revenues, expenses, pre-tax earnings from affiliates, and net gains on asset dispositions that are directly attributable to each segment. We allocate interest expense to the segments based on what we believe to be the appropriate risk-adjusted borrowing costs for each segment. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.

21


RAIL NORTH AMERICA

Segment Summary

Demand for existing railcars was solid for most railcar types and Rail North America continued to capitalize on current market conditions for both lease rates and lease terms. Utilization was 99.4% at the end of the quarter.

The following table shows Rail North America's segment results (in millions):
Three Months Ended
March 31
20242023
Revenues
Lease revenue$236.5 $215.1 
Other revenue28.5 23.8 
Total Revenues265.0 238.9 
Expenses
Maintenance expense72.9 66.9 
Depreciation expense65.1 65.5 
Operating lease expense9.0 9.0 
Other operating expense6.7 7.0 
Total Expenses153.7 148.4 
Other Income (Expense)
Net gain on asset dispositions34.2 47.8 
Interest expense, net(53.3)(42.3)
Other expense(2.1)(0.4)
Share of affiliates' pre-tax earnings (losses)0.2 (0.4)
Segment Profit$90.3 $95.2 
Investment Volume$321.7 $296.5 

The following table shows the components of Rail North America's lease revenue (in millions):
Three Months Ended
March 31
20242023
Railcars$213.7 $194.8 
Boxcars16.2 13.8 
Locomotives6.6 6.5 
Total$236.5 $215.1 

22


Rail North America Fleet Data

The following table shows fleet activity and statistics for Rail North America railcars, excluding boxcars, for the quarter ended:
March 31
2023
June 30
2023
September 30
2023
December 31
2023
March 31
2024
Beginning balance100,954 101,219 100,585 100,656 101,167 
Railcars added1,816 358 791 1,688 1,422 
Railcars scrapped(324)(316)(292)(354)(375)
Railcars sold(1,227)(676)(428)(823)(527)
Ending balance101,219 100,585 100,656 101,167 101,687 
Utilization rate at quarter end (1)99.3 %99.3 %99.3 %99.3 %99.4 %
Renewal success rate (2)77.9 %85.3 %83.6 %87.1 %83.4 %
Active railcars at quarter end (3)100,475 99,871 99,933 100,498 101,106 
Average active railcars (4)100,552 100,230 99,796 100,197 100,677 
_________
(1)    Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2)    The renewal success rate represents the percentage of railcars on expiring leases that were renewed with the existing lessee. The renewal success rate is an important metric because railcars returned by our customers may remain idle or incur additional maintenance and freight costs prior to being leased to new customers.
(3)    Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of new railcars purchased from builders or in the secondary market and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(4)    Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.

As of March 31, 2024, leases for approximately 16,400 tank and freight cars and approximately 1,800 boxcars were scheduled to expire over the remainder of 2024. These amounts exclude railcars on leases expiring in 2024 that have already been renewed or assigned to a new lessee.

In 2022, we entered into a new long-term railcar supply agreement with a subsidiary of Trinity Industries, Inc. ("Trinity") to purchase 15,000 newly built railcars through 2028, with an option to order up to an additional 500 railcars each year from 2023 to 2028. The agreement enables us to order a broad mix of tank and freight cars. Trinity will deliver 6,000 tank cars (1,200 per year) from 2024 through 2028. The remaining 9,000 railcars, which can be a mix of freight and tank cars, will be ordered at a rate of 1,500 railcars per order year from 2023 to 2028 and delivered under a schedule to be determined. At March 31, 2024, 3,605 railcars have been ordered pursuant to the terms of the agreement, of which 1,600 railcars have been delivered.

In 2018, we amended a long-term supply agreement with Trinity to extend the term to December 2023, and we agreed to purchase 4,800 tank cars (1,200 per year) beginning in January 2020 and continuing through 2023. As of March 31, 2024, all 4,800 railcars have been ordered pursuant to the amended terms of the agreement, of which 4,621 railcars have been delivered. The remaining railcars covered under this agreement are expected to be delivered by the end of the second quarter of 2024.

In 2018, we entered into a multi-year railcar supply agreement with American Railcar Industries, Inc. ("ARI"), pursuant to which we agreed to purchase 7,650 newly built railcars. The order encompasses a mix of tank and freight cars to be delivered over a five-year period, beginning in April 2019 and ending in December 2023. ARI's railcar manufacturing business was acquired by a subsidiary of The Greenbrier Companies, Inc. on July 26, 2019, and such subsidiary assumed all of ARI's obligations under our long-term supply agreement. As of March 31, 2024, all 7,650 railcars have been ordered, of which 7,634 railcars have been delivered. All railcars covered under this agreement are expected to be delivered by the end of the second quarter of 2024.

23


3619
Lease Price Index

Our Lease Price Index ("LPI") is an internally-generated business indicator that measures renewal activity for our North American railcar fleet, excluding boxcars. The average renewal lease rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate. The average renewal lease term is reported in months and reflects the average renewal lease term in the LPI.

During the first quarter of 2024, the renewal rate change of the LPI was positive 33.0%, compared to positive 33.5% in the prior quarter, and positive 28.3% in the first quarter of 2023. Lease terms on renewals for railcars in the LPI averaged 64 months in the current quarter, compared to 65 months in the prior quarter, and 55 months in the first quarter of 2023.

24


5035
The following table shows fleet activity and statistics for Rail North America boxcars for the quarter ended:

March 31
2023
June 30
2023
September 30
2023
December 31
2023
March 31
2024
Beginning balance8,663 8,789 8,959 9,087 9,311 
Boxcars added229 279 316 424 587 
Boxcars scrapped(103)(109)(95)(152)(228)
Boxcars sold— — (93)(48)— 
Ending balance8,789 8,959 9,087 9,311 9,670 
Utilization rate at quarter end (1)100.0 %99.8 %99.7 %100.0 %99.8 %
Active boxcars at quarter end (2)8,788 8,942 9,062 9,310 9,651 
Average active railcars (3)8,720 8,855 8,985 9,207 9,583 
_________
(1)    Utilization is calculated as the number of boxcars on lease as a percentage of total boxcars in the fleet.
(2)    Active boxcars refers to the number boxcars on lease to customers. Changes in boxcars on lease compared to prior quarters are impacted by the utilization of new boxcars purchased from builders or in the secondary market and the disposition of boxcars that were sold or scrapped, as well as the fleet utilization rate.
(3)    Average active boxcars is calculated using the number of active boxcars at the end of each month.

Comparison of Reported Results

Segment Profit

In the three months ended March 31, 2024, segment profit of $90.3 million decreased 5.1% compared to $95.2 million for the same period in the prior year. The decrease was primarily due to lower net gain on asset dispositions and higher interest expense, partially offset by higher lease revenue. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from period to period.

25


Revenues

In the three months ended March 31, 2024, lease revenue increased $21.4 million, or 9.9%, driven by higher lease rates and more railcars on lease. Other revenue increased $4.7 million due to higher repair revenue.

Expenses

In the three months ended March 31, 2024, maintenance expense increased $6.0 million, driven by higher costs of repairs and more regulatory compliance events. Depreciation expense decreased $0.4 million due to a change in the useful lives of certain railcars, partially offset by the timing of new railcar investments and dispositions. Other operating expense decreased $0.3 million primarily due to lower switching and freight costs.

Other Income (Expense)

In the three months ended March 31, 2024, net gain on asset dispositions decreased $13.6 million due to fewer railcars sold, lower gains on railcars converted to finance leases, and lower net scrapping gains. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from period to period. Net interest expense increased $11.0 million, driven by a higher average interest rate and a higher average debt balance.

Investment Volume

During the three months ended March 31, 2024, investment volume was $321.7 million compared to $296.5 million in the same period in 2023. We acquired 1,073 newly built railcars and purchased 822 railcars in the secondary market in the three months ended March 31, 2024, compared to 781 newly built railcars and 1,021 railcars in the secondary market in the same period in 2023.

Our investment volume is predominantly composed of acquired railcars, but also includes certain capitalized repairs and improvements to owned railcars and our maintenance facilities. As a result, the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period. In addition, the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of railcars purchased, which may include tank cars and freight cars, as well as newly manufactured railcars or those purchased in the secondary market.

RAIL INTERNATIONAL

Segment Summary

Rail International, composed primarily of GATX Rail Europe ("GRE"), produced solid operating results in the first three months of 2024 and continued to grow its fleet. GRE experienced renewal lease rate increases for most railcar types in the period. Utilization was 95.3% at the end of the quarter.

Our rail business in India ("Rail India") increased its fleet size in the first three months of 2024 and continued to focus on investment opportunities, diversification of its fleet, and developing relationships with customers, suppliers and the Indian Railways. Demand for railcars in India remained robust, driven by continued growth in the economy and infrastructure development. Utilization was 100.0% at the end of the quarter.

In the first quarter of 2023, we sold Rail Russia and recorded a gain of $0.3 million upon completion of the sale.

26


The following table shows Rail International's segment results (in millions):
Three Months Ended
March 31
20242023
Revenues
Lease revenue$80.6 $70.4 
Other revenue3.1 2.9 
Total Revenues83.7 73.3 
Expenses
Maintenance expense17.5 15.9 
Depreciation expense18.9 15.7 
Other operating expense3.5 2.2 
Total Expenses39.9 33.8 
Other Income (Expense)
Net gain on asset dispositions1.3 0.8 
Interest expense, net(16.7)(12.5)
Other income (expense) 0.4 (4.3)
Segment Profit$28.8 $23.5 
Investment Volume$49.9 $81.1 

27


GRE Fleet Data

The following table shows fleet activity and statistics for GRE railcars for the quarter ended:
March 31
2023
June 30
2023
September 30
2023
December 31
2023
March 31
2024
Beginning balance28,005 28,461 28,759 29,102 29,216 
Railcars added502 376 446 371 322 
Railcars scrapped or sold(46)(78)(103)(257)(167)
Ending balance28,461 28,759 29,102 29,216 29,371 
Utilization rate at quarter end (1)98.5 %96.9 %96.0 %95.9 %95.3 %
Active railcars at quarter end (2)28,031 27,875 27,947 28,004 27,998 
Average active railcars (3)27,931 27,973 27,884 28,003 27,984 
_________
(1)    Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2)    Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of newly built railcars, railcars purchased in the secondary market, and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(3)    Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.

The decline in GRE's fleet utilization was primarily due to weakness in the intermodal market. At March 31, 2024, GRE owned 2,159 intermodal railcars. As of March 31, 2024, leases for approximately 7,647 railcars were scheduled to expire over the remainder of 2024. This amount excludes railcars on leases expiring in 2024 that have already been renewed or assigned to a new lessee.

2048

28


Rail India Fleet Data

The following table shows fleet activity and statistics for Rail India railcars for the quarter ended:

March 31
2023
June 30
2023
September 30
2023
December 31
2023
March 31
2024
Beginning balance5,872 6,351 6,927 7,884 8,805 
Railcars added479 576 957 921 696 
Ending balance6,351 6,927 7,884 8,805 9,501 
Utilization rate at quarter end (1)100.0 %100.0 %100.0 %100.0 %100.0 %
Active railcars at quarter end (2)6,351 6,927 7,884 8,805 9,501 
Average active railcars (3)6,038 6,584 7,366 8,321 9,089 
_________
(1)    Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet.
(2)    Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior quarters are impacted by the utilization of newly built railcars and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.
(3)    Average active railcars for the quarter is calculated using the number of active railcars at the end of each month.

549755822186

Comparison of Reported Results

Foreign Currency

Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar versus the foreign currencies in which it conducts business, primarily the euro. In the three months ended March 31, 2024, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $1.0 million and negatively impacted segment profit, excluding other income (expense), by approximately $0.1 million compared to the same period in 2023.
29



Segment Profit

In the three months ended March 31, 2024, segment profit of $28.8 million increased 22.6% compared to $23.5 million for the same period in the prior year. Segment profit in 2023 included a $0.3 million disposition gain recorded as a result of the decision to exit the Rail Russia business. Excluding these items, results for Rail International were $5.6 million higher compared to the same period in the prior year. The increase was primarily due to more railcars on lease and higher lease rates at both GRE and Rail India, partially offset by higher interest and maintenance expense at GRE.

Revenues

In the three months ended March 31, 2024, lease revenue increased $10.2 million, or 14.5%, due to more railcars on lease and higher lease rates at GRE and Rail India and the impact of foreign exchange rates. Other revenue increased $0.2 million, driven by higher repair revenue.

Expenses

In the three months ended March 31, 2024, maintenance expense increased $1.6 million, primarily due to more repairs performed, higher costs for repairs, higher wheelset costs, and the impact of foreign exchange rates. Depreciation expense increased $3.2 million, due the impact of new railcars added to the fleet.

Other Income (Expense)

In the three months ended March 31, 2024, net gain on asset dispositions increased $0.5 million, driven by higher net scrapping gains due to more railcars scrapped at a higher scrap price per ton. Net interest expense increased $4.2 million, due to a higher average debt balance and a higher average interest rate. Other income (expense) was favorable by $4.7 million, driven by the positive impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

Investment Volume

During the three months ended March 31, 2024, investment volume was $49.9 million compared to $81.1 million in the same period in 2023. In the three months ended March 31, 2024, GRE acquired 322 newly built railcars compared to 502 newly built railcars for the same period in 2023, and Rail India acquired 696 newly built railcars in the current year compared to 479 newly built railcars for the same period in 2023.

Our investment volume is predominantly composed of acquired railcars, but also includes certain capitalized repairs and improvements to owned railcars. As a result, the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period. In addition, the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of the various car types acquired, as well as fluctuations in the exchange rates of the foreign currencies in which Rail International conducts business.

30


ENGINE LEASING

Segment Summary

As disclosed previously, as of December 31, 2023, we have sold all of our marine assets and no longer have any marine operations. As a result, we have changed the name of this business segment from Portfolio Management to Engine Leasing to reflect the prospective operations of the segment.

Engine Leasing's segment profit is attributable primarily to income from the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce, a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $23.7 million for the three months ended March 31, 2024, compared to $28.0 million for the same periods in 2023. The operating environment for the RRPF affiliates was robust, and demand for international air passenger travel remained strong.

Engine Leasing also includes GEL, our wholly owned entity that invests directly in aircraft spare engines. As of March 31, 2024, GEL owned 29 aircraft spare engines, with 14 on long-term leases with airline customers and 15 that are employed in an engine capacity agreement with Rolls-Royce for use in its engine maintenance programs. All engines at GEL are managed by the RRPF affiliates, for which we paid them a fee of $0.6 million for the three months ended March 31, 2024 and $0.5 million for the three months ended March 31, 2023.


The following table shows Engine Leasing’s segment results (in millions):
Three Months Ended
March 31
20242023
Revenues
Lease revenue$8.1 $8.3 
Non-dedicated engine revenue13.2 4.5 
Marine operating revenue— 3.5 
Total Revenues21.3 16.3 
Expenses
Marine operating expense— 2.0 
Depreciation expense8.4 5.4 
Other operating expense2.5 0.9 
Total Expenses10.9 8.3 
Other Income (Expense)
Net gain (loss) on asset dispositions0.6 (1.5)
Interest expense, net(9.3)(5.7)
Other income (expense) 0.3 (0.5)
Share of affiliates' pre-tax earnings23.7 28.0 
Segment Profit$25.7 $28.3 
31



The following table shows the net book values of Engine Leasing's assets (in millions):
March 31
2023
June 30
2023
September 30
2023
December 31
2023
March 31
2024
Investment in RRPF Affiliates$597.2