Gatx Corp 10-Q for FY2025 Q1
Gatx Corp (GATX)
10-Q
2025-04-25
For: 2025-03-31
View Original
Added on
April 09, 2026
About this 10-Q
Gatx Corp filed this 10-Q on April 25, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $421.6M
- up 11.0% from $379.9M a year earlier
- Net income
- $78.6M
- up 5.8% from net income of $74.3M a year earlier
- Diluted EPS
- $2.15
- up 5.9% from $2.03 a year earlier
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, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission File Number: 1-2328
(Exact name of registrant as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) | ||||
(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 Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
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.
| ☒ | 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 35.7 million common shares outstanding at March 31, 2025.
GATX CORPORATION
FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2025
INDEX
| Item No. | Page No. | |||||||
| Part I - FINANCIAL INFORMATION | ||||||||
| Item 1 | ||||||||
| 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, 2024, 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 the impact of global trade disruptions on us and our customers, including the impact of tariffs on inflation, supply chains and consumer sentiment ◦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 and term length due to reduced demand or oversupply of transportation assets in the market or other changes in supply and demand •competitive factors in our primary markets, including existing or new competitors with significantly greater financial resources, higher credit ratings or 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 matters, severe weather events and natural disasters •U.S. and global political conditions and the impact of increased geopolitical tension and wars 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 •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 •the occurrence of a widespread health crisis and the impact of measures taken in response | |||||||
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GATX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)
| March 31 | December 31 | ||||||||||
| 2025 | 2024 | ||||||||||
Assets | |||||||||||
Cash and Cash Equivalents | $ | $ | |||||||||
Restricted Cash | |||||||||||
Receivables | |||||||||||
Rent and other receivables | |||||||||||
Finance leases (as lessor) | |||||||||||
Less: allowance for losses | ( | ( | |||||||||
Operating Assets and Facilities | |||||||||||
Less: allowance for depreciation | ( | ( | |||||||||
Lease Assets (as lessee) | |||||||||||
Right-of-use assets, net of accumulated depreciation | |||||||||||
Investments in Affiliated Companies | |||||||||||
Goodwill | |||||||||||
Other Assets | |||||||||||
Total Assets | $ | $ | |||||||||
Liabilities and Shareholders’ Equity | |||||||||||
Accounts Payable and Accrued Expenses | $ | $ | |||||||||
Debt | |||||||||||
Borrowings under bank credit facilities | |||||||||||
Recourse | |||||||||||
Lease Obligations (as lessee) | |||||||||||
Operating leases | |||||||||||
Deferred Income Taxes | |||||||||||
Other Liabilities | |||||||||||
Total Liabilities | |||||||||||
Shareholders’ Equity | |||||||||||
Common stock, $ Authorized shares — Issued shares — Outstanding shares — | |||||||||||
Additional paid in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock at cost ( | ( | ( | |||||||||
Total Shareholders’ Equity | |||||||||||
Total Liabilities and Shareholders’ Equity | $ | $ | |||||||||
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 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||||||||
Lease revenue | $ | $ | |||||||||||||||||||||||||||||||||
Non-dedicated engine revenue | |||||||||||||||||||||||||||||||||||
Other revenue | |||||||||||||||||||||||||||||||||||
Total Revenues | |||||||||||||||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||||||||
Maintenance expense | |||||||||||||||||||||||||||||||||||
Depreciation expense | |||||||||||||||||||||||||||||||||||
Operating lease expense | |||||||||||||||||||||||||||||||||||
Other operating expense | |||||||||||||||||||||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||||||||||||||||||||
Total Expenses | |||||||||||||||||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||||||||||||
Net gain on asset dispositions | |||||||||||||||||||||||||||||||||||
Interest expense, net | ( | ( | |||||||||||||||||||||||||||||||||
Other (expense) income | ( | ||||||||||||||||||||||||||||||||||
Income before Income Taxes and Share of Affiliates’ Earnings | |||||||||||||||||||||||||||||||||||
Income taxes | ( | ( | |||||||||||||||||||||||||||||||||
Share of affiliates' earnings, net of taxes | |||||||||||||||||||||||||||||||||||
Net Income | $ | $ | |||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss), Net of Taxes | |||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | $ | $ | ( | ||||||||||||||||||||||||||||||||
Unrealized gain on derivative instruments | |||||||||||||||||||||||||||||||||||
Post-retirement benefit plans | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( | ||||||||||||||||||||||||||||||||||
Comprehensive Income | $ | $ | |||||||||||||||||||||||||||||||||
Share Data | |||||||||||||||||||||||||||||||||||
Basic earnings per share | $ | $ | |||||||||||||||||||||||||||||||||
Average number of common shares | |||||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | $ | |||||||||||||||||||||||||||||||||
Average number of common shares and common share equivalents | |||||||||||||||||||||||||||||||||||
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 | |||||||||||
| 2025 | 2024 | ||||||||||
Operating Activities | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Net gains on disposition of owned assets | ( | ( | |||||||||
| Asset impairments | |||||||||||
Deferred income taxes | |||||||||||
Share of affiliates’ earnings, net of dividends | ( | ( | |||||||||
Changes in working capital items | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
Investing Activities | |||||||||||
Portfolio investments and capital additions | ( | ( | |||||||||
Portfolio proceeds | |||||||||||
| Purchases of assets previously leased | ( | ||||||||||
Proceeds from sales of other assets | |||||||||||
Other | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing Activities | |||||||||||
Net proceeds from issuances of debt with original maturities longer than 90 days | |||||||||||
Repayments of debt with original maturities longer than 90 days | ( | ( | |||||||||
Net increase in debt with original maturities of 90 days or less | |||||||||||
Stock repurchases | ( | ( | |||||||||
Dividends | ( | ( | |||||||||
| Other | |||||||||||
Net cash provided by financing activities | |||||||||||
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash | ( | ||||||||||
Net increase in Cash, Cash Equivalents, and Restricted Cash during the period | |||||||||||
Cash, Cash Equivalents, and Restricted Cash at beginning of the period | |||||||||||
Cash, Cash Equivalents, and Restricted Cash at end of the period | $ | $ | |||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Dollars | Shares | Dollars | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of the period | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of the period | |||||||||||||||||||||||||||||||||||||||||||||||
Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of the period | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Stock repurchases | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Balance at end of the period | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Additional Paid In Capital | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of the period | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation effects | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of the period | |||||||||||||||||||||||||||||||||||||||||||||||
Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of the period | |||||||||||||||||||||||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Balance at end of the period | |||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of the period | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of the period | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Total Shareholders' Equity | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
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. Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.
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, 2025 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2025. 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, 2024.
New Accounting Pronouncements Not Yet Adopted
| Standard/Description | Effective Date and Adoption Considerations | Effect 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 will be effective for the Company's Annual Report on Form 10-K for the year-ended December 31, 2025. Early adoption is permitted. | We continue to assess the effect the new guidance will have on our disclosures. 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. | ||||||
Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures to require public companies to disclose a disaggregation of certain expenses that are presented on the face of the income statement including amounts of purchased inventory, employee compensation, depreciation, amortization, and other related costs and expenses. | The new guidance will be effective for the Company’s Annual Report on Form 10-K for the year ended December 31, 2027 and subsequent interim periods. Early adoption is permitted. | We are currently assessing the requirements and the level of disclosure that will be required for our income statement expenses. | ||||||
6
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 three 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, locomotives, 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 plc (or affiliates thereof, collectively "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.
Other Revenue
Other revenue is composed 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.
7
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 2025 | December 31 2024 | ||||||||||
| Railcars and locomotives | $ | $ | |||||||||
| Aircraft spare engines | |||||||||||
| Tank containers | |||||||||||
| Buildings, leasehold improvements, and other equipment | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
| Less: allowance for depreciation | ( | ( | |||||||||
| Net operating assets and facilities | $ | $ | |||||||||
Total depreciation expense was $108.4 million for the three months ended March 31, 2025 and $100.5 million for the three months ended March 31, 2024.
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, locomotives, 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 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
Operating lease revenue: | |||||||||||||||||||||||
Fixed lease revenue | $ | $ | |||||||||||||||||||||
Variable lease revenue | |||||||||||||||||||||||
Total operating lease revenue | $ | $ | |||||||||||||||||||||
Finance lease revenue | |||||||||||||||||||||||
Total lease revenue | $ | $ | |||||||||||||||||||||
In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer repairs. This additional revenue is reported in other revenue in the statements of comprehensive income and was $33.9 million for the three months ended March 31, 2025 and $28.7 million for the three months ended March 31, 2024.
8
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, 2025 and December 31, 2024.
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 one instrument outstanding with an aggregate notional amount of $50.0 million as of March 31, 2025 that matures in 2027 and four instruments outstanding with an aggregate notional amount of $200.0 million as of December 31, 2024 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 a notional amount of $21.2 million as of March 31, 2025 that mature in 2025 and zero instruments outstanding as of December 31, 2024. Within the next 12 months, we expect to reclassify $1.0 million ($0.8 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive loss to interest expense. We reclassify these amounts when interest 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 (expense) income 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 $2.6 million as of March 31, 2025 and $4.0 million as of December 31, 2024. 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.
9
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 Location | Fair Value March 31, 2025 | Fair Value December 31, 2024 | |||||||||||||||||||||
| Derivative Assets | |||||||||||||||||||||||
| Foreign exchange contracts (1) | Other assets | $ | $ | ||||||||||||||||||||
| Foreign exchange contracts (2) | Other assets | ||||||||||||||||||||||
| Total derivative assets | $ | $ | |||||||||||||||||||||
| Derivative Liabilities | |||||||||||||||||||||||
| Interest rate contracts (1) | Other liabilities | $ | $ | ||||||||||||||||||||
| Foreign exchange contracts (2) | Other liabilities | ||||||||||||||||||||||
| Total derivative liabilities | $ | $ | |||||||||||||||||||||
(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, 2025 and December 31, 2024, 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 Included | March 31 2025 | December 31 2024 | March 31 2025 | December 31 2024 | ||||||||||||||||||||||
| Recourse debt | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The following tables show the impacts of our derivative instruments on our statements of comprehensive income (in millions):
| Amount of (Gain) Loss Recognized in Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||
| Three Months Ended March 31 | ||||||||||||||||||||||||||
| Derivative Designation | 2025 | 2024 | ||||||||||||||||||||||||
| Derivatives in cash flow hedging relationships: | ||||||||||||||||||||||||||
| Foreign exchange contracts | $ | ( | $ | ( | ||||||||||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||||||||
| Location of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into Earnings | Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss into Earnings | ||||||||||||||||||||||||||||||||||
| Three Months Ended March 31 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Interest expense | $ | $ | |||||||||||||||||||||||||||||||||
Other (expense) income | ( | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | ||||||||||||||||||||||||||||||||
10
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
The following tables show the impacts 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 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Total interest expense | $ | ( | $ | ( | |||||||||||||||||||
| Gain (loss) on fair value hedging relationships | |||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||
Hedged items | ( | ||||||||||||||||||||||
Derivatives designated as hedging instruments | ( | ||||||||||||||||||||||
| Gain (loss) on cash flow hedging relationships | |||||||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||
| Amount of loss reclassified from accumulated other comprehensive loss into earnings | ( | ( | |||||||||||||||||||||
| Amount of Gain (Loss) Recognized in Other Expense on Cash Flow Hedging Relationships and Non-Designated Derivative Contracts | |||||||||||||||||||||||
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Total other (expense) income | $ | ( | $ | ||||||||||||||||||||
| Gain on cash flow hedging relationships | |||||||||||||||||||||||
Foreign exchange contracts: | |||||||||||||||||||||||
| Amount of gain reclassified from accumulated other comprehensive loss into earnings (1) | |||||||||||||||||||||||
| Loss on non-designated foreign exchange derivative contracts (2) | ( | ( | |||||||||||||||||||||
_________
(1) These amounts are substantially offset by foreign currency remeasurement adjustments on related hedged instruments, also recognized in other expense.
(2) Foreign exchange contracts.
11
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
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 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, 2025 | December 31, 2024 | ||||||||||||||||||||||
| | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Recourse fixed rate debt | $ | $ | $ | $ | |||||||||||||||||||
| Recourse floating rate debt | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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, 2025 and 2024 (in millions):
| 2025 Pension Benefits | 2024 Pension Benefits | 2025 Retiree Health and Life | 2024 Retiree Health and Life | ||||||||||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||||||||||
Interest cost | |||||||||||||||||||||||
Expected return on plan assets | ( | ( | |||||||||||||||||||||
Amortization of (1): | |||||||||||||||||||||||
Unrecognized prior service credit | ( | ||||||||||||||||||||||
Unrecognized net actuarial loss (gain) | ( | ( | |||||||||||||||||||||
Net periodic cost | $ | $ | $ | $ | |||||||||||||||||||
_________
(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, 2025, and $1.4 million for the three months ended March 31, 2024 and is recorded in selling, general and administrative expense. The non-service components totaled income of $1.1 million for the three months ended March 31, 2025, and $1.2 million for the three months ended March 31, 2024, and are recorded in other (expense) income in the statements of comprehensive income.
12
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 8. Share-Based Compensation
During the three months ended March 31, 2025, we granted 198,300 non-qualified employee stock options, 25,680 restricted stock units, 32,680 performance shares, and 1,268 restricted stock units awarded to non-employee directors. For the three months ended March 31, 2025, total share-based compensation expense was $6.1 million and the related tax benefits were $1.5 million. 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.
The estimated fair value of our 2025 non-qualified employee stock option awards and related underlying assumptions are shown in the table below:
| 2025 | |||||
| Weighted-average estimated fair value | $ | ||||
| Quarterly dividend rate | $ | ||||
| Expected term of stock options, in years | |||||
| Risk-free interest rate | % | ||||
| Dividend yield | % | ||||
| Expected stock price volatility | % | ||||
| Present value of dividends | $ | ||||
NOTE 9. Income Taxes
The following table shows our effective income tax rate for the three months ended March 31:
| 2025 | 2024 | ||||||||||
| Effective income tax rate | % | % | |||||||||
The decrease in the effective rate for the current year compared to the prior year was primarily due to an increase in the incremental benefits associated with equity awards vested or exercised during the current year and the mix of pre-tax income among domestic and foreign jurisdictions, which are taxed at different rates.
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.
As of March 31, 2025 and December 31, 2024, we had commercial commitments of $8.7
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.
13
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
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 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
Basic earnings per share: | |||||||||||||||||||||||
Net income | $ | $ | |||||||||||||||||||||
| Less: Net income allocated to participating securities | ( | ( | |||||||||||||||||||||
| Net income available to common shareholders | $ | $ | |||||||||||||||||||||
Weighted-average shares outstanding - basic | |||||||||||||||||||||||
Basic earnings per share | $ | $ | |||||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
Net income | $ | $ | |||||||||||||||||||||
| Less: Net income allocated to participating securities | ( | ( | |||||||||||||||||||||
| Net income available to common shareholders | $ | $ | |||||||||||||||||||||
Weighted-average shares outstanding - basic | |||||||||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||||
| Equity compensation plans | |||||||||||||||||||||||
Weighted-average shares outstanding - diluted | |||||||||||||||||||||||
Diluted earnings per share | $ | $ | |||||||||||||||||||||
NOTE 12. Accumulated Other Comprehensive Loss
The following table shows the change in components for accumulated other comprehensive loss (in millions):
| Foreign Currency Translation Adjustments | Unrealized Loss on Derivative Instruments | Post-Retirement Benefit Plans Adjustments | Total | ||||||||||||||||||||||||||
| Accumulated other comprehensive loss at December 31, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Change in component | ( | ||||||||||||||||||||||||||||
| Reclassification adjustments into earnings (1) | |||||||||||||||||||||||||||||
| Income tax effect | ( | ( | |||||||||||||||||||||||||||
| Accumulated other comprehensive loss at March 31, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
_________
(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.
14
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
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.
Norfolk Southern Train Derailment in East Palestine, Ohio
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. The Court has not yet ruled on Norfolk Southern’s motion. In the interim, on May 23, 2024, Norfolk Southern entered into a Consent Decree settling claims with the United States Department of Justice and Environmental Protection Agency (but not the State of Ohio) to which GATX is not a party.
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 reached a settlement 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. On September 25, 2024, the Court held a final approval hearing and two days later issued its final approval order for the settlement. To date, a handful of appeals challenging the fairness, reasonableness and adequacy of the settlement have been filed with the Sixth Circuit Court of Appeals. On October 9, 2024, all parties to the litigation filed motions for summary judgment for the pending claims, which were denied in part and granted in part on February 21, 2025. Norfolk Southern requested and was granted leave to reinstate its contribution claims against GATX and others. Trial regarding Norfolk Southern's contribution claim against GATX and others began on March 31, 2025, and on April 23, 2025, the jury returned a verdict in favor of GATX finding no negligence by GATX and 0% liability.
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 four Pennsylvania school districts and their students. The allegations largely mirror those in the action filed in federal court in Ohio. The amended complaint seeks monetary damages for the Pennsylvania plaintiffs for personal injury and property damage allegedly related to the derailment. The Company and other defendants filed a motion to dismiss on February 23, 2024. Briefing has been completed and the motions remain pending and undecided. The Court has not set any further deadlines.
GATX was named in two new lawsuits filed on February 3, 2025, in The Court of Common Plea, Franklin County, Ohio on behalf of approximately 750 plaintiffs of whom approximately 184 have opted out of the prior settlement agreements with Norfolk Southern or were not included and are now suing GATX and approximately 60 other defendants. The remaining plaintiffs who opted into the settlement with Norfolk Southern (approximately 550 ) are not suing GATX.
GATX was named in one new lawsuit (Tsai) filed by the same plaintiffs in three different jurisdictions: Philadelphia (Pennsylvania state court), Cuyahoga (Ohio state court), and Lawrence (Pennsylvania state court). The allegations are similar to the allegations originally filed against GATX in the Ohio Personal Injury Litigation. Plaintiffs filed a Praecipe to Dismiss the action filed in Lawrence County in order to pursue the same action in Philadelphia. The current deadline for responding to the Philadelphia action is April 28, 2025.
15
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
The Company is vigorously defending 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 has not established any accruals for potential liability related to this incident.
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, 2024.
16
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
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. 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 provides other ancillary services.
Rail International is an aggregation of our operating segments in Europe ("GATX Rail Europe" or "GRE") and India ("Rail India"). 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.
Engine Leasing is almost entirely composed of our engine leasing operations, which include our ownership interest in the Rolls-Royce & Partners Finance joint ventures (collectively, the "RRPF affiliates"), a group of joint ventures with 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 engine capacity agreements. All engines at GEL are managed by the RRPF affiliates, for which we paid them a fee of $1.4 million for the three months ended March 31, 2025 and $0.6 million for the three months ended March 31, 2024.
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 reported to GATX's President and Chief Executive Officer, our chief operating decision maker ("CODM"), for purposes of assessing performance and allocating capital and resources to 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. We have disclosed in each segment the significant expense categories that are reviewed by the CODM, and there are no additional significant expenses within the expense categories presented in the segment tables. The CODM uses segment profit during the annual budget and forecasting processes and considers comparisons of actual segment profit against budget, forecast, and prior periods to assess current period performance and when making decisions about allocating capital and resources to each segment.
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 | Other | GATX Consolidated | |||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
Lease revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-dedicated engine revenue | — | — | — | ||||||||||||||||||||||||||
Other revenue | |||||||||||||||||||||||||||||
Total Revenues | |||||||||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
Maintenance expense | |||||||||||||||||||||||||||||
Depreciation expense | |||||||||||||||||||||||||||||
Operating lease expense | |||||||||||||||||||||||||||||
Other operating expense | |||||||||||||||||||||||||||||
Total Expenses | |||||||||||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||||||
Net gain on asset dispositions | |||||||||||||||||||||||||||||
Interest (expense) income, net | ( | ( | ( | ( | |||||||||||||||||||||||||
Other (expense) income | ( | ( | ( | ||||||||||||||||||||||||||
Share of affiliates' pre-tax earnings | |||||||||||||||||||||||||||||
Segment profit | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Less: | |||||||||||||||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||||||||||||||
Income taxes (includes $ | |||||||||||||||||||||||||||||
Net income | $ | ||||||||||||||||||||||||||||
Net Gain on Asset Dispositions | |||||||||||||||||||||||||||||
Asset Remarketing Income: | |||||||||||||||||||||||||||||
Net gains on disposition of owned assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Residual sharing income | |||||||||||||||||||||||||||||
Non-remarketing net gains (1) | |||||||||||||||||||||||||||||
Asset impairments | ( | ( | |||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Capital Expenditures | |||||||||||||||||||||||||||||
Portfolio investments and capital additions | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Selected Balance Sheet Data at March 31, 2025 | |||||||||||||||||||||||||||||
Investments in affiliated companies | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Identifiable assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
_________
(1) Includes net gains from scrapping of railcars.
18
GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Rail North America | Rail International | Engine Leasing | Other | GATX Consolidated | |||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||||||
Lease revenue | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-dedicated engine revenue | — | — | — | ||||||||||||||||||||||||||
Other revenue | |||||||||||||||||||||||||||||
Total Revenues | |||||||||||||||||||||||||||||
Expenses | |||||||||||||||||||||||||||||
Maintenance expense | |||||||||||||||||||||||||||||
Depreciation expense | |||||||||||||||||||||||||||||
Operating lease expense | |||||||||||||||||||||||||||||
Other operating expense | |||||||||||||||||||||||||||||
Total Expenses | |||||||||||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||||||||
Net gain on asset dispositions | |||||||||||||||||||||||||||||
Interest (expense) income, net | ( | ( | ( | ( | |||||||||||||||||||||||||
Other (expense) income | ( | ||||||||||||||||||||||||||||
Share of affiliates' pre-tax earnings | |||||||||||||||||||||||||||||
Segment profit | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Less: | |||||||||||||||||||||||||||||
Selling, general and administrative expense | |||||||||||||||||||||||||||||
Income taxes (includes $ | |||||||||||||||||||||||||||||
| Net income | $ | ||||||||||||||||||||||||||||
Net Gain on Asset Dispositions | |||||||||||||||||||||||||||||
Asset Remarketing Income: | |||||||||||||||||||||||||||||
Net gains on disposition of owned assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Residual sharing income | |||||||||||||||||||||||||||||
Non-remarketing net gains (1) | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Capital Expenditures | |||||||||||||||||||||||||||||
Portfolio investments and capital additions | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Selected Balance Sheet Data at December 31, 2024 | |||||||||||||||||||||||||||||
Investments in affiliated companies | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Identifiable assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
_________
(1) Includes net gains 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, 2024, 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 principles ("GAAP") and on certain other financial data that we prepared using non-GAAP components. For a reconciliation of these non-GAAP measures to the most comparable GAAP measures, 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, 2024 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. Financial results for our tank container leasing business ("Trifleet") are reported in the Other segment.
Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2025. 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, 2024.
Economic Conditions
GATX, and markets more broadly, are facing uncertainty around tariffs and economic conditions. These conditions did not have a significant impact on our business and financial results during the first quarter of 2025. However, a sustained slowdown in economic growth as a result of tariffs or global tensions could have a more significant impact on GATX’s financial results in the future. If this were to occur, GATX could be impacted directly and indirectly across all segments. Such conditions could lead to specific costs and inflationary pressures that directly impact GATX, including the impact of rising costs of new railcars and other transportation assets, increased maintenance expense, and general increases in other administrative expenses. GATX could also be indirectly impacted by factors such as softening demand for our products and services if customers within the markets or commodities we serve are impacted by tariffs or economic conditions. Management continues to monitor the macroeconomic environment to identify potential risks and to manage our business accordingly. However, we believe we are in a strong position to manage these risks. Our diverse fleet, broad global customer base, and long-term nature of our lease contracts provide substantial operating flexibility. In addition, our strong balance sheet position, credit ratings, and access to capital provide us adequate cash flow availability as needed.
DISCUSSION OF OPERATING RESULTS
Net income for the three months ended March 31, 2025 was $78.6 million, or $2.15 per diluted share, compared to $74.3 million, or $2.03 per diluted share, for the same period in 2024. 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. See "Non-GAAP Financial Measures" at the end of this item for further details. Excluding the impact of these items, net income increased $4.9 million compared to the prior year, largely due to higher revenue at Rail North America and Rail International, higher non-dedicated engine revenue at Engine Leasing, and higher earnings at the Rolls-Royce & Partners Finance joint ventures (collectively, the "RRPF affiliates"), partially offset by higher maintenance expense at Rail North America and Rail International and higher interest expense.
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 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Segment Revenues | |||||||||||||||||||||||
| Rail North America | $ | 293.3 | $ | 265.0 | |||||||||||||||||||
| Rail International | 88.5 | 83.7 | |||||||||||||||||||||
| Engine Leasing | 29.6 | 21.3 | |||||||||||||||||||||
| Other | 10.2 | 9.9 | |||||||||||||||||||||
| $ | 421.6 | $ | 379.9 | ||||||||||||||||||||
| Segment Profit | |||||||||||||||||||||||
| Rail North America | $ | 88.8 | $ | 90.3 | |||||||||||||||||||
| Rail International | 25.7 | 28.8 | |||||||||||||||||||||
| Engine Leasing | 38.6 | 25.7 | |||||||||||||||||||||
| Other | 7.0 | 8.2 | |||||||||||||||||||||
| 160.1 | 153.0 | ||||||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Selling, general and administrative expense | 56.6 | 55.9 | |||||||||||||||||||||
Income taxes (includes $8.3 and $4.2 related to affiliates' earnings) | 24.9 | 22.8 | |||||||||||||||||||||
| Net Income (GAAP) | $ | 78.6 | $ | 74.3 | |||||||||||||||||||
| Net income, excluding tax adjustments and other items (non-GAAP) (1) | $ | 78.6 | $ | 73.7 | |||||||||||||||||||
| Diluted earnings per share (GAAP) | $ | 2.15 | $ | 2.03 | |||||||||||||||||||
| Diluted earnings per share, excluding tax adjustments and other items (non-GAAP) (1) | $ | 2.15 | $ | 2.01 | |||||||||||||||||||
| Investment Volume | $ | 296.3 | $ | 378.6 | |||||||||||||||||||
The following table shows our return on equity for the trailing 12 months ended March 31:
| 2025 | 2024 | ||||||||||
| Return on Equity (GAAP) | 11.8 | % | 11.6 | % | |||||||
| Return on Equity, excluding tax adjustments and other items (non-GAAP) (1) | 12.0 | % | 11.4 | % | |||||||
_________
(1) See "Non-GAAP Financial Measures" at the end of this item for further details.
Segment Operations
Segment profit is an internal performance measure reported to GATX's President and Chief Executive Officer for purposes of assessing performance and allocating capital and resources to 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 railcars was stable, and the renewal success rate remained very strong. Rail North America continued to optimize its fleet by selectively selling railcars in the secondary market. Utilization was 99.2% at the end of the current quarter.
The following table shows Rail North America's segment results (in millions):
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Lease revenue | $ | 260.0 | $ | 236.5 | |||||||||||||||||||
| Other revenue | 33.3 | 28.5 | |||||||||||||||||||||
| Total Revenues | 293.3 | 265.0 | |||||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Maintenance expense | 83.7 | 72.9 | |||||||||||||||||||||
| Depreciation expense | 70.4 | 65.1 | |||||||||||||||||||||
| Operating lease expense | 7.6 | 9.0 | |||||||||||||||||||||
| Other operating expense | 7.5 | 6.7 | |||||||||||||||||||||
| Total Expenses | 169.2 | 153.7 | |||||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Net gain on asset dispositions | 32.1 | 34.2 | |||||||||||||||||||||
| Interest expense, net | (64.7) | (53.3) | |||||||||||||||||||||
| Other expense | (2.7) | (2.1) | |||||||||||||||||||||
| Share of affiliates' pre-tax earnings | — | 0.2 | |||||||||||||||||||||
| Segment Profit | $ | 88.8 | $ | 90.3 | |||||||||||||||||||
| Investment Volume | $ | 227.7 | $ | 321.7 | |||||||||||||||||||
The following table shows the components of Rail North America's lease revenue (in millions):
| Three Months Ended March 31 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Railcars | $ | 236.0 | $ | 213.7 | |||||||||||||||||||||||||||||||
| Boxcars | 15.1 | 16.2 | |||||||||||||||||||||||||||||||||
| Locomotives | 8.9 | 6.6 | |||||||||||||||||||||||||||||||||
| Total | $ | 260.0 | $ | 236.5 | |||||||||||||||||||||||||||||||
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 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 101,167 | 101,687 | 102,086 | 102,697 | 102,966 | ||||||||||||||||||||||||
| Railcars added | 1,422 | 1,337 | 1,474 | 1,126 | 1,464 | ||||||||||||||||||||||||
| Railcars scrapped | (375) | (389) | (360) | (309) | (316) | ||||||||||||||||||||||||
| Railcars sold | (527) | (549) | (503) | (548) | (804) | ||||||||||||||||||||||||
| Ending balance | 101,687 | 102,086 | 102,697 | 102,966 | 103,310 | ||||||||||||||||||||||||
| Utilization rate at quarter end (1) | 99.4 | % | 99.3 | % | 99.3 | % | 99.1 | % | 99.2 | % | |||||||||||||||||||
| Renewal success rate (2) | 83.4 | % | 84.1 | % | 82.0 | % | 89.1 | % | 85.1 | % | |||||||||||||||||||
| Active railcars at quarter end (3) | 101,106 | 101,401 | 101,939 | 102,003 | 102,529 | ||||||||||||||||||||||||
| Average active railcars (4) | 100,677 | 101,181 | 101,629 | 102,150 | 102,367 | ||||||||||||||||||||||||
(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, 2025, leases for approximately 17,300 tank and freight cars and approximately 1,000 boxcars are scheduled to expire over the remainder of 2025. These amounts exclude railcars on leases expiring in 2025 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, are expected to 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, 2025, 5,711 railcars have been ordered pursuant to the terms of the agreement, of which 4,060 railcars have been delivered.
23
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 LPI calculation includes all renewal activity based on a 12-month trailing average, and the renewals are weighted by the count of all renewals over the 12-month period. 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 2025, the renewal rate change of the LPI was positive 24.5%, compared to positive 26.7% in the prior quarter, and positive 33.0% in the first quarter of 2024. Lease terms on renewals for railcars in the LPI averaged 61 months in the current quarter, compared to 60 months in the prior quarter, and 64 months in the first quarter of 2024.
24
The following table shows fleet activity and statistics for Rail North America boxcars for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 9,311 | 9,670 | 8,990 | 8,779 | 8,395 | ||||||||||||||||||||||||
| Boxcars added | 587 | — | — | — | — | ||||||||||||||||||||||||
| Boxcars scrapped | (228) | (555) | (211) | (349) | (405) | ||||||||||||||||||||||||
| Boxcars sold | — | (125) | — | (35) | — | ||||||||||||||||||||||||
| Ending balance | 9,670 | 8,990 | 8,779 | 8,395 | 7,990 | ||||||||||||||||||||||||
| Utilization rate at quarter end (1) | 99.8 | % | 99.8 | % | 99.8 | % | 99.8 | % | 99.8 | % | |||||||||||||||||||
| Active boxcars at quarter end (2) | 9,651 | 8,971 | 8,760 | 8,376 | 7,971 | ||||||||||||||||||||||||
| Average active boxcars (3) | 9,583 | 9,304 | 8,848 | 8,552 | 8,163 | ||||||||||||||||||||||||
_________
(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 of 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 for the First Quarter of 2025 to the First Quarter of 2024
Segment Profit
In the three months ended March 31, 2025, segment profit of $88.8 million decreased 1.7% compared to $90.3 million for the same period in the prior year. The decrease was driven by higher interest and maintenance expenses and an impairment recorded on certain older flammable liquids railcars, offset by higher revenue.
Revenues
In the three months ended March 31, 2025, lease revenue increased $23.5 million, or 9.9%, driven by more railcars on lease and higher lease rates. Other revenue increased $4.8 million, primarily due to higher repair revenue, partially offset by lower lease termination fees.
Expenses
In the three months ended March 31, 2025, maintenance expense increased $10.8 million, driven by more repair events, including more repairs performed by the railroads, and higher costs of repairs. Depreciation expense increased $5.3 million, due to the timing of new railcar investments and dispositions.
Other Income (Expense)
In the three months ended March 31, 2025, net gain on asset dispositions decreased $2.1 million, driven by by an impairment related to older flammable liquids railcars and lower net gains on dispositions and railcars converted to finance leases, partially offset by higher 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 $11.4 million, due to a higher average debt balance and higher average interest rate.
25
Investment Volume
During the three months ended March 31, 2025, investment volume was $227.7 million compared to $321.7 million in the same period in 2024. We acquired 642 newly built railcars and purchased 627 railcars in the secondary market in the three months ended March 31, 2025, compared to 1,073 newly built railcars and 822 railcars in the secondary market in the same period in 2024.
Our investment volume is predominantly composed of acquired railcars, but also includes the acquisition of locomotives and 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 2025 and continued to grow its fleet. GRE experienced renewal lease rate increases for most railcar types in the period. Utilization was 95.1% at the end of the current quarter.
The fleet size of our rail business in India ("Rail India") continued to grow during the current quarter, as Rail India 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 99.6% at the end of the current quarter.
The following table shows Rail International's segment results (in millions):
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Lease revenue | $ | 83.6 | $ | 80.6 | |||||||||||||||||||
| Other revenue | 4.9 | 3.1 | |||||||||||||||||||||
| Total Revenues | 88.5 | 83.7 | |||||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Maintenance expense | 18.5 | 17.5 | |||||||||||||||||||||
| Depreciation expense | 20.1 | 18.9 | |||||||||||||||||||||
| Other operating expense | 4.6 | 3.5 | |||||||||||||||||||||
| Total Expenses | 43.2 | 39.9 | |||||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Net gain on asset dispositions | 1.3 | 1.3 | |||||||||||||||||||||
| Interest expense, net | (19.1) | (16.7) | |||||||||||||||||||||
| Other (expense) income | (1.8) | 0.4 | |||||||||||||||||||||
| Segment Profit | $ | 25.7 | $ | 28.8 | |||||||||||||||||||
| Investment Volume | $ | 62.7 | $ | 49.9 | |||||||||||||||||||
26
GRE Fleet Data
The following table shows fleet activity and statistics for GRE railcars for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 29,216 | 29,371 | 29,649 | 29,953 | 30,027 | ||||||||||||||||||||||||
| Railcars added | 322 | 388 | 410 | 196 | 446 | ||||||||||||||||||||||||
| Railcars scrapped or sold | (167) | (110) | (106) | (122) | (250) | ||||||||||||||||||||||||
| Ending balance | 29,371 | 29,649 | 29,953 | 30,027 | 30,223 | ||||||||||||||||||||||||
| Utilization rate at quarter end (1) | 95.3 | % | 95.8 | % | 95.9 | % | 96.1 | % | 95.1 | % | |||||||||||||||||||
| Active railcars at quarter end (2) | 27,998 | 28,417 | 28,737 | 28,849 | 28,749 | ||||||||||||||||||||||||
| Average active railcars (3) | 27,984 | 28,198 | 28,626 | 28,812 | 28,823 | ||||||||||||||||||||||||
_________
(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.
As of March 31, 2025, leases for approximately 7,900 railcars are scheduled to expire over the remainder of 2025. This amount excludes railcars on leases expiring in 2025 that have already been renewed or assigned to a new lessee.
27
Rail India Fleet Data
The following table shows fleet activity and statistics for Rail India railcars for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 8,805 | 9,501 | 9,904 | 10,361 | 10,583 | ||||||||||||||||||||||||
| Railcars added | 696 | 408 | 457 | 222 | 312 | ||||||||||||||||||||||||
| Railcars scrapped or sold | — | (5) | — | — | — | ||||||||||||||||||||||||
| Ending balance | 9,501 | 9,904 | 10,361 | 10,583 | 10,895 | ||||||||||||||||||||||||
| Utilization rate at quarter end (1) | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 99.6 | % | |||||||||||||||||||
| Active railcars at quarter end (2) | 9,501 | 9,904 | 10,361 | 10,583 | 10,849 | ||||||||||||||||||||||||
| Average active railcars (3) | 9,089 | 9,711 | 10,165 | 10,460 | 10,711 | ||||||||||||||||||||||||
_________
(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.
Comparison of Reported Results for the First Quarter of 2025 to the First Quarter of 2024
Foreign Currency
Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar against the foreign currencies in which it conducts business, primarily the euro. In the three months ended March 31, 2025, fluctuations in the value of the euro, relative to the U.S. dollar, negatively impacted lease revenue by approximately $2.1 million and negatively impacted segment profit, excluding other (expense) income, by approximately $1.4 million compared to the same period in 2024.
28
Segment Profit
In the three months ended March 31, 2025, segment profit of $25.7 million decreased 10.8% compared to $28.8 million for the same period in the prior year. The decrease was primarily due to higher maintenance and interest expense and changes in foreign currency exchange rates, partially offset by higher lease revenue.
Revenues
In the three months ended March 31, 2025, lease revenue increased $3.0 million, or 3.7%, due to more railcars on lease and higher lease rates at GRE and Rail India, partially offset by the impact of foreign exchange rates.
Expenses
In the three months ended March 31, 2025, maintenance expense increased $1.0 million, primarily due to more repair events and higher costs of repairs, partially offset by lower wheelset costs. Depreciation expense increased $1.2 million, due the impact of new railcars added to the fleet.
Other Income (Expense)
In the three months ended March 31, 2025, net interest expense increased $2.4 million, due to a higher average interest rate and a higher average debt balance. Other (expense) income was unfavorable by $2.2 million, driven by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.
Investment Volume
During the three months ended March 31, 2025, investment volume was $62.7 million compared to $49.9 million in the same period in 2024. In the three months ended March 31, 2025, GRE acquired 446 newly built railcars compared to 322 newly built railcars for the same period in 2024, and Rail India acquired 312 newly built railcars in the current year compared to 696 newly built railcars for the same period in 2024.
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 railcar types acquired, as well as fluctuations in the exchange rates of the foreign currencies in which Rail International conducts business.
29
ENGINE LEASING
Segment Summary
Engine Leasing includes the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce"), a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $33.4 million for three months ended March 31, 2025, compared to $23.7 million for the same period in 2024. The operating environment for the RRPF affiliates continued to be favorable as demand for aircraft spare engines remained robust.
Engine Leasing also includes GATX Engine Leasing ("GEL"), our wholly owned entity that invests directly in aircraft spare engines. As of March 31, 2025, GEL owned 39 aircraft spare engines, with 14 on long-term leases with airline customers and 25 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 $1.4 million for the three months ended March 31, 2025 and $0.6 million for the same period in 2024.
The following table shows Engine Leasing’s segment results (in millions):
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Lease revenue | $ | 8.1 | $ | 8.1 | |||||||||||||||||||
| Non-dedicated engine revenue | 21.5 | 13.2 | |||||||||||||||||||||
| Total Revenues | 29.6 | 21.3 | |||||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Depreciation expense | 9.4 | 8.4 | |||||||||||||||||||||
| Other operating expense | 2.8 | 2.5 | |||||||||||||||||||||
| Total Expenses | 12.2 | 10.9 | |||||||||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Net gain on asset dispositions | — | 0.6 | |||||||||||||||||||||
| Interest expense, net | (12.2) | (9.3) | |||||||||||||||||||||
| Other income | — | 0.3 | |||||||||||||||||||||
| Share of affiliates' pre-tax earnings | 33.4 | 23.7 | |||||||||||||||||||||
| Segment Profit | $ | 38.6 | $ | 25.7 | |||||||||||||||||||
The following table shows the net book values of Engine Leasing's assets (in millions):
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Investment in RRPF Affiliates | $ | 647.2 | $ | 660.6 | $ | 690.0 | $ | 663.1 | $ | 688.7 | |||||||||||||||||||
| GEL owned aircraft spare engines | 705.6 | 768.4 | 853.0 | 937.0 | 927.5 | ||||||||||||||||||||||||
| Other owned assets | 23.3 | 13.0 | 33.7 | 53.3 | 36.9 | ||||||||||||||||||||||||
| Total assets | $ | 1,376.1 | $ | 1,442.0 | $ | 1,576.7 | $ | 1,653.4 | $ | 1,653.1 | |||||||||||||||||||
30
RRPF Affiliates' Portfolio Data
The following table shows portfolio activity and statistics for the RRPF affiliates' aircraft spare engines for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 399 | 405 | 408 | 415 | 427 | ||||||||||||||||||||||||
| Engine acquisitions | 8 | 6 | 8 | 25 | 28 | ||||||||||||||||||||||||
| Engine dispositions | (2) | (3) | (1) | (13) | (19) | ||||||||||||||||||||||||
| Ending balance | 405 | 408 | 415 | 427 | 436 | ||||||||||||||||||||||||
| Utilization rate at quarter end (1) | 97.3 | % | 97.3 | % | 97.1 | % | 97.4 | % | 97.9 | % | |||||||||||||||||||
| Average leased engines (2) | 386 | 395 | 399 | 411 | 415 | ||||||||||||||||||||||||
| Net book value of engines (in millions) | $ | 4,157.2 | $ | 4,170.0 | $ | 4,256.1 | $ | 4,716.0 | $ | 5,186.7 | |||||||||||||||||||
_________
(1) Utilization is calculated as the number of engines on lease as a percentage of total engines in the fleet.
(2) Average leased engines is calculated using the number of leased engines at the end of each month.
GEL Portfolio Data
The following table shows portfolio activity for GEL's aircraft spare engines for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Beginning balance | 29 | 29 | 32 | 36 | 39 | ||||||||||||||||||||||||
| Engines added | — | 3 | 4 | 3 | — | ||||||||||||||||||||||||
| Ending balance | 29 | 32 | 36 | 39 | 39 | ||||||||||||||||||||||||
31
Comparison of Reported Results for the First Quarter of 2025 to the First Quarter of 2024
Segment Profit
In the three months ended March 31, 2025, segment profit was $38.6 million, compared to segment profit of $25.7 million for the same period in the prior year. Segment profit included $0.6 million of gains in 2024 associated with the Specialized Gas Vessels. Excluding the impact of this item, results for Engine Leasing were $13.5 million higher than 2024. The increase was driven by higher earnings at the RRPF affiliates and GEL.
Revenues
In the three months ended March 31, 2025, lease revenue was comparable to the same period in the prior year. Non-dedicated engine revenue increased $8.3 million, due to aircraft spare engines acquired in 2024 and utilized in the engine capacity agreement with Rolls-Royce.
Expenses
In the three months ended March 31, 2025, depreciation expense increased $1.0 million, due to aircraft spare engines acquired in 2024.
Other Income (Expense)
In the three months ended March 31, 2025, income from our share of affiliates' earnings increased $9.7 million, driven by higher income from operations and higher remarketing income. The amount and timing of remarketing income is dependent on a number of factors and may vary materially from period to period.
32
OTHER
Other comprises our Trifleet business, as well as selling, general and administrative expenses ("SG&A"), unallocated interest expense, miscellaneous income and expense not directly associated with the reporting segments, and certain eliminations.
The following table shows components of Other (in millions):
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Trifleet revenue | $ | 10.2 | $ | 9.9 | |||||||||||||||||||
| Trifleet segment profit | $ | 2.1 | $ | 2.7 | |||||||||||||||||||
| Unallocated interest income | 3.3 | 3.5 | |||||||||||||||||||||
| Other income, including eliminations | 1.6 | 2.0 | |||||||||||||||||||||
| Segment Profit | $ | 7.0 | $ | 8.2 | |||||||||||||||||||
| Selling, general and administrative expense | $ | 56.6 | $ | 55.9 | |||||||||||||||||||
| Investment Volume | $ | 5.9 | $ | 7.0 | |||||||||||||||||||
Trifleet Summary
The tank container leasing market remained challenging with fluctuating market dynamics in the first quarter of 2025. Utilization was 84.9% at the end of the current quarter.
Trifleet Tank Container Data
The following table shows fleet statistics for Trifleet's owned and managed tank containers for the quarter ended:
| March 31 2024 | June 30 2024 | September 30 2024 | December 31 2024 | March 31 2025 | |||||||||||||||||||||||||
| Ending balance | 24,448 | 24,663 | 24,755 | 25,041 | 25,202 | ||||||||||||||||||||||||
| Utilization rate at quarter-end (1) | 85.5 | % | 86.0 | % | 85.6 | % | 84.7 | % | 84.9 | % | |||||||||||||||||||
(1) Utilization is calculated as the number of tank containers on lease as a percentage of total tank containers in the fleet.
SG&A, Unallocated Interest and Other
SG&A increased $0.7 million for the three months ended March 31, 2025 compared to the same period in the prior year driven by higher employee-related expenses, partially offset by lower information technology expense.
Unallocated interest income (the difference between external interest expense and interest expense allocated to the reporting segments) in any year is affected by our consolidated leverage position, the timing of debt issuances and investing activities, and intercompany allocations.
Consolidated Income Taxes
See "Note 9. Income Taxes" in Part I, Item 1 of this Quarterly Report on Form 10-Q.
33
CASH FLOW DISCUSSION
We generate a significant amount of cash from operating activities and investment portfolio proceeds. We also access domestic and international capital markets by issuing debt. We use these resources, along with available cash balances, to fulfill our debt, lease, and dividend obligations, to support our share repurchase programs, and to fund portfolio investments and capital additions. We primarily use cash from operations to fund daily operations. The timing of asset dispositions and changes in working capital impact cash flows from portfolio proceeds and operations. As a result, these cash flow components may vary materially from quarter to quarter and year to year.
As of March 31, 2025, we had an unrestricted cash balance of $757.2 million. We also have a $600 million, 5-year unsecured revolving credit facility in the United States that matures in 2029 and a $350 million, 3-year unsecured revolving credit facility in the United States that matures in 2027, both of which were fully available as of March 31, 2025. In addition, we have a €210 million, 3-year unsecured revolving credit facility in Europe that matures in 2027, of which €130 million was available as of March 31, 2025.
The following table shows our cash flows from operating, investing and financing activities for the three months ended March 31 (in millions):
| 2025 | 2024 | ||||||||||||||||
Net cash provided by operating activities | $ | 124.2 | $ | 97.6 | |||||||||||||
Net cash used in investing activities | (234.7) | (311.6) | |||||||||||||||
Net cash provided by financing activities | 461.6 | 245.0 | |||||||||||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 4.7 | (2.6) | |||||||||||||||
Net increase in cash, cash equivalents, and restricted cash during the period | $ | 355.8 | $ | 28.4 | |||||||||||||
Net Cash Provided by Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2025 increased $26.6 million compared to the same period in 2024. Comparability among reporting periods is impacted by the timing of changes in working capital items. Specifically, higher cash receipts from revenue, lower payments for operating leases, and lower payments for taxes, were partially offset by higher payments for interest expense, maintenance, and other operating expenses.
Net Cash Used in Investing Activities
The following table shows our principal sources and uses of cash flows from investing activities for the three months ended March 31 (in millions):
| 2025 | 2024 | ||||||||||||||||
Portfolio investments and capital additions (1) | $ | (296.3) | $ | (378.6) | |||||||||||||
Portfolio proceeds (2) | 68.3 | 59.7 | |||||||||||||||
| Purchases of assets previously leased (3) | (15.0) | — | |||||||||||||||
| Proceeds from sales of other assets (4) | 7.1 | 7.1 | |||||||||||||||
Other investing activity | 1.2 | 0.2 | |||||||||||||||
Net cash used in investing activities | $ | (234.7) | $ | (311.6) | |||||||||||||
_________
(1) Portfolio investments and capital additions primarily consist of purchases of operating assets and capitalized asset improvements. See the discussions of segment operating results sections in this Item for more detail.
(2) Portfolio proceeds primarily consist of proceeds from sales of operating assets.
(3) In 2025, we purchased 802 railcars that were previously on operating leases, compared to zero railcars in 2024.
(4) Proceeds from sales of other assets were primarily related to railcar scrapping.
The decrease in portfolio investments and capital additions of $82.3 million for the three months ended March 31, 2025 was primarily due to fewer railcars and locomotives acquired at Rail North America and Rail India and fewer tank containers acquired at Trifleet, partially offset by more railcars acquired at GRE. The timing of investments depends on purchase commitments, transaction opportunities, and market conditions.
34
Portfolio proceeds increased by $8.6 million for the three months ended March 31, 2025, primarily due to more railcars and locomotives sold at Rail North America.
Net Cash Provided by Financing Activities
The following table shows our principal sources and uses of cash flows provided by financing activities for the three months ended March 31 (in millions):
| 2025 | 2024 | ||||||||||||||||
Net proceeds from issuance of debt with original maturities longer than 90 days | $ | 879.8 | $ | 557.4 | |||||||||||||
| Repayments of debt with original maturities longer than 90 days | (406.6) | (300.0) | |||||||||||||||
| Net increase in debt with original maturities of 90 days or less | 4.2 | — | |||||||||||||||
| Dividends | (23.5) | (22.0) | |||||||||||||||
| Stock repurchases (1) | (1.9) | (4.6) | |||||||||||||||
| Other | 9.6 | 14.2 | |||||||||||||||
Net cash provided by financing activities | $ | 461.6 | $ | 245.0 | |||||||||||||
_________
(1) In the three months ended March 31, 2025, we repurchased 12,046 shares of common stock for $1.9 million. In the three months ended March 31, 2024, we repurchased 36,744 shares of common stock for $4.6 million.
The following table shows the activity on our long-term debt principal in the three months ended March 31, 2025 (in millions):
| December 31 2024 | Issuances | Payments | Impact of Foreign Exchange Rates | March 31 2025 | |||||||||||||||||||||||||
| U.S. debt | $ | 7,100.0 | $ | 800.0 | $ | (300.0) | $ | — | $ | 7,600.0 | |||||||||||||||||||
| Europe debt (1) | 1,026.1 | — | (106.6) | 44.2 | 963.7 | ||||||||||||||||||||||||
| India debt (2) | 144.8 | — | — | 0.3 | 145.1 | ||||||||||||||||||||||||
Total debt principal | $ | 8,270.9 | $ | 800.0 | $ | (406.6) | $ | 44.5 | $ | 8,708.8 | |||||||||||||||||||
__________
(1) Denominated in euros, but presented in U.S. dollars in this table.
(2) Denominated in Indian rupees, but presented in U.S. dollars in this table.
The following provides detail of the long-term debt issued in the U.S. during the three months ended March 31, 2025:
•$500.0 million of 10-year unsecured 5.50% fixed rate debt.
•$300.0 million of 30-year unsecured 6.05% fixed rate debt.
35
LIQUIDITY AND CAPITAL RESOURCES
General
We fund our investments and meet our debt, lease, and dividend obligations using our available cash balances, as well as cash generated from operating activities, sales of assets, distributions from affiliates, issuances of debt, commercial paper issuances, and committed revolving credit facilities. We primarily use cash from operations to fund daily operations. We use both domestic and international capital markets and banks to meet our debt financing needs.
Material Cash Obligations
The following table shows our material cash obligations, including debt principal and related interest payments, lease payments, and purchase commitments at March 31, 2025 (in millions):
| Material Cash Obligations by Period | |||||||||||||||||||||||||||||||||||||||||
| Total | 2025 (1) | 2026 | 2027 | 2028 | 2029 | Thereafter | |||||||||||||||||||||||||||||||||||
Recourse debt | $ | 8,708.8 | $ | 239.0 | $ | 608.5 | $ | 842.8 | $ | 733.2 | $ | 677.9 | $ | 5,607.4 | |||||||||||||||||||||||||||
Interest on recourse debt (2) | 4,095.8 | 311.5 | 385.4 | 352.5 | 320.9 | 282.5 | 2,443.0 | ||||||||||||||||||||||||||||||||||
Borrowings under bank credit facilities | 101.5 | 101.5 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Operating lease obligations | 196.4 | 26.1 | 36.2 | 33.4 | 26.2 | 18.9 | 55.6 | ||||||||||||||||||||||||||||||||||
Purchase commitments (3) | 1,974.7 | 507.4 | 506.9 | 437.3 | 396.8 | 126.3 | — | ||||||||||||||||||||||||||||||||||
Total | $ | 15,273.6 | $ | 1,211.6 | $ | 1,573.2 | $ | 1,699.4 | $ | 1,503.3 | $ | 1,124.5 | $ | 8,161.6 | |||||||||||||||||||||||||||
_________
(1) For the remainder of the year.
(2) For floating rate debt, future interest payments are based on the applicable interest rate as of March 31, 2025.
(3) Primarily railcar purchase commitments. The amounts shown for all years are based on management's estimates of the timing, anticipated railcar types, and related costs of railcars to be purchased under its agreements. For additional details on our purchase agreements, refer to the discussion of Rail North America operating results within this item.
Short-Term Borrowings and Credit Lines and Facilities
We use short-term borrowings as a source of working capital and to temporarily fund differences between our operating cash flows and portfolio proceeds, and our capital investments and debt maturities. We do not maintain or target any particular level of short-term borrowings on a permanent basis. Rather, we will temporarily utilize short-term borrowings at levels we deem appropriate until we decide to pay down these balances.
We have a $600 million, 5-year unsecured revolving credit facility in the United States, expiring in May 2029. The facility contains two one-year extension options. As of March 31, 2025, the full $600 million was available under this facility. Additionally, we have a $350 million, 3-year unsecured revolving credit facility in the United States, expiring in May 2027. This facility contains two one-year extension options. As of March 31, 2025, the full $350 million was available under this facility.
In Europe, we have a €210 million, 3-year unsecured revolving credit facility, expiring in December 2027. As of March 31, 2025, €130 million was available under this credit facility. In addition, our European subsidiaries have smaller unsecured credit facilities with an aggregate limit of €35.0 million. As of March 31, 2025, €21.1 million was available under these credit facilities, as €13.9 million ($15.0 million) was drawn. The weighted average interest rate of these outstanding borrowings during the three months ended March 31, 2025 was 3.6%.
Delayed Draw Term Loans
As of March 31, 2025, we had INR 2.0 billion ($23.4 million) available under an outstanding delayed draw term loan in India.
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Restrictive Covenants
Our $600 million and $350 million revolving credit facilities in the United States, and our €210 million revolving credit facility in Europe, contain various restrictive covenants, including requirements to maintain a fixed charge coverage ratio and an asset coverage test. Some of our bank term loans and other loan agreements have the same financial covenants as these facilities.
The indentures for our public debt also contain various restrictive covenants, including limitations on liens provisions that restrict the amount of additional secured indebtedness that we may incur. Additionally, certain exceptions to the covenants permit us to incur an unlimited amount of purchase money and nonrecourse indebtedness.
At March 31, 2025, our European rail subsidiaries had outstanding term loans, public debt, and private placement debt balances totaling €770.0 million, and Trifleet had an outstanding term loan of €121.0 million. The loans are guaranteed by GATX Corporation and are subject to similar restrictive covenants as the revolving credit facility noted above. In addition, Rail India had outstanding term loans of INR 12.4 billion ($145.1 million) that are subject to certain restrictive covenants.
At March 31, 2025, we were in compliance with all covenants and conditions of all of our credit agreements, indentures, and loans. We do not anticipate any covenant violations nor do we expect that any of these covenants will restrict our operations or our ability to obtain additional financing.
Credit Ratings
The global capital market environment and outlook may affect our funding options and our financial performance. Our access to capital markets at competitive rates depends on our credit rating and rating outlook, as determined by rating agencies.
The following table shows our credit rating and rating outlook as of March 31, 2025:
| Rating Agency | |||||||||||||||||
| Standard & Poor's | Moody's Investor Service | Fitch Ratings, Inc | |||||||||||||||
| Long-term unsecured debt | BBB | Baa2 | BBB+ | ||||||||||||||
| Short-term unsecured debt | A-2 | P-2 | F2 | ||||||||||||||
| Rating outlook | Stable | Positive | Stable | ||||||||||||||
37
Leverage
Leverage is expressed as a ratio of debt (including debt and lease obligations, net of unrestricted cash) to equity. The following table shows the components of recourse leverage (in millions, except recourse leverage ratio):
| March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | |||||||||||||||||||||||||
| Debt and lease obligations, net of unrestricted cash: | |||||||||||||||||||||||||||||
| Unrestricted cash | $ | (757.2) | $ | (401.6) | $ | (503.7) | $ | (823.6) | $ | (479.1) | |||||||||||||||||||
| Borrowings under bank credit facilities | 101.5 | 10.4 | 11.1 | 10.7 | 10.8 | ||||||||||||||||||||||||
Recourse debt | 8,653.1 | 8,215.3 | 8,293.5 | 8,235.7 | 7,624.5 | ||||||||||||||||||||||||
Operating lease obligations | 174.4 | 180.0 | 187.5 | 209.3 | 215.2 | ||||||||||||||||||||||||
| Total debt and lease obligations, net of unrestricted cash | $ | 8,171.8 | $ | 8,004.1 | $ | 7,988.4 | $ | 7,632.1 | $ | 7,371.4 | |||||||||||||||||||
| Total recourse debt (1) | $ | 8,171.8 | $ | 8,004.1 | $ | 7,988.4 | $ | 7,632.1 | $ | 7,371.4 | |||||||||||||||||||
| Shareholders' Equity | $ | 2,549.4 | $ | 2,438.9 | $ | 2,436.7 | $ | 2,343.4 | $ | 2,324.3 | |||||||||||||||||||
| Recourse Leverage (2) | 3.2 | 3.3 | 3.3 | 3.3 | 3.2 | ||||||||||||||||||||||||
_________
(1) Includes recourse debt, borrowings under bank credit facilities, and operating and finance lease obligations, net of unrestricted cash.
(2) Calculated as total recourse debt / shareholder's equity.
GATX Common Stock Repurchases
On January 25, 2019, our board of directors approved a $300.0 million share repurchase program, pursuant to which we are authorized to purchase shares of our common stock in the open market, in privately negotiated transactions, or otherwise, including pursuant to Rule 10b5-1 plans. The share repurchase authorization does not have an expiration date, does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time. The timing of repurchases will be dependent on market conditions and other factors.
During the three months ended March 31, 2025, we repurchased 12,046 shares of common stock for $1.9 million, excluding commissions. We repurchased 36,744 shares of common stock for $4.6 million during the same period in 2024. As of March 31, 2025, $63.2 million remained available under the repurchase authorization.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no changes to our critical accounting policies during the three months ended March 31, 2025. Refer to our Annual Report on Form 10-K for the year ended December 31, 2024, for a summary of our policies.
38
NON-GAAP FINANCIAL MEASURES
In addition to financial results reported in accordance with GAAP, we compute certain financial measures using non-GAAP components, as defined by the SEC. These measures are not in accordance with, or a substitute for, GAAP, and our financial measures may be different from non-GAAP financial measures used by other companies. We have provided a reconciliation of our non-GAAP measures to the most directly comparable GAAP measures.
Reconciliation of Non-GAAP Components Used in the Computation of Certain Financial Measures
We exclude the effects of certain tax adjustments and other items for purposes of presenting net income, diluted earnings per share, and return on equity because we believe these items are not attributable to our business operations. Management utilizes net income, excluding tax adjustments and other items, when analyzing financial performance because such amounts reflect the underlying operating results that are within management’s ability to influence. Accordingly, we believe presenting this information provides investors and other users of our financial statements with meaningful supplemental information for purposes of analyzing year-to-year financial performance on a comparable basis and assessing trends.
The following tables show our net income and diluted earnings per share, excluding tax adjustments and other items (in millions, except per share data):
| Impact of Tax Adjustments and Other Items on Net Income: | |||||||||||||||||||||||
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Net income (GAAP) | $ | 78.6 | $ | 74.3 | |||||||||||||||||||
| Adjustments attributable to consolidated pre-tax income: | |||||||||||||||||||||||
| Net gain on Specialized Gas Vessels at Engine Leasing (1) | — | (0.6) | |||||||||||||||||||||
| Total adjustments attributable to consolidated pre-tax income | $ | — | $ | (0.6) | |||||||||||||||||||
| Net income, excluding tax adjustments and other items (non-GAAP) | $ | 78.6 | $ | 73.7 | |||||||||||||||||||
| Impact of Tax Adjustments and Other Items on Diluted Earnings per Share: | |||||||||||||||||||||||
| Three Months Ended March 31 | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Diluted earnings per share (GAAP) | $ | 2.15 | $ | 2.03 | |||||||||||||||||||
| Adjustments attributable to consolidated income, net of taxes: | |||||||||||||||||||||||
| Net gain on Specialized Gas Vessels at Engine Leasing (1) | — | (0.02) | |||||||||||||||||||||
| Diluted earnings per share, excluding tax adjustments and other items (non-GAAP) | $ | 2.15 | $ | 2.01 | |||||||||||||||||||
39
The following tables show our net income and return on equity, excluding tax adjustments and other items, for the trailing 12 months ended March 31 (in millions):
| 2025 | 2024 | ||||||||||
| Net income (GAAP) | $ | 288.5 | $ | 256.1 | |||||||
| Adjustments attributable to consolidated pre-tax income: | |||||||||||
| Environmental reserves (2) | $ | 10.7 | $ | — | |||||||
| Litigation claims settlements (3) | 3.3 | — | |||||||||
| Net loss on Specialized Gas Vessels at Engine Leasing (1) | — | 1.8 | |||||||||
| Total adjustments attributable to consolidated pre-tax income | $ | 14.0 | $ | 1.8 | |||||||
| Income taxes thereon, based on applicable effective tax rate | $ | (3.5) | $ | — | |||||||
| Other income tax adjustments attributable to consolidated income: | |||||||||||
| Income tax rate changes (4) | $ | (6.0) | $ | (3.0) | |||||||
| Net operating loss valuation allowance adjustment (5) | — | (2.3) | |||||||||
| Total other income tax adjustments attributable to consolidated income | $ | (6.0) | $ | (5.3) | |||||||
| Net income, excluding tax adjustments and other items (non-GAAP) | $ | 293.0 | $ | 252.6 | |||||||
(1) In 2022, we made the decision to sell the Specialized Gas Vessels. We have recorded gains and losses associated with the subsequent impairments and sales of these assets. As of December 31, 2023, all vessels had been sold.
(2) Reserves recorded in 2024 for our share of anticipated environmental remediation costs arising out of prior operations and legacy businesses.
(3) Expenses recorded for the settlements of litigation claims arising out of legacy business operations.
(4) Deferred income tax adjustment attributable to state tax rate reductions in 2024 and 2023.
(5) Valuation allowance adjustment associated with the realizability of state net operating losses in future tax years.
| 2025 | 2024 | ||||||||||
| Return on Equity (GAAP) | 11.8 | % | 11.6 | % | |||||||
| Return on Equity, excluding tax adjustments and other items (non-GAAP) | 12.0 | % | 11.4 | % | |||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Since December 31, 2024, there have been no material changes in our interest rate and foreign currency exposures or types of derivative instruments used to hedge these exposures. For a discussion of our exposure to market risk, refer to "Item 7A. Quantitative and Qualitative Disclosure about Market Risk" of our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
40
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information concerning litigation and other contingencies is described in "Note 13. Legal Proceedings and Other Contingencies
" in Part I, Item 1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Item 1A. Risk Factors
There have been no material changes in our risk factors since December 31, 2024. For a discussion of our risk factors, refer to "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 25, 2019, our board of directors approved a $300.0 million share repurchase program, pursuant to which we are authorized to purchase shares of our common stock in the open market, in privately negotiated transactions, or otherwise, including pursuant to Rule 10b5-1 plans. The share repurchase authorization does not have an expiration date, does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time. The timing of share repurchases will be dependent on market conditions and other factors.
During the first quarter of 2025, we repurchased 12,046 shares of common stock for $1.9 million under the share repurchase program compared to 36,744 share repurchases for $4.6 million completed during the first quarter of 2024. As of March 31, 2025, $63.2 million remained available under the repurchase authorization.
The following is a summary of common stock repurchases completed by month during the first quarter of 2025:
| Issuer Purchases of Equity Securities | ||||||||||||||||||||||||||||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | ||||||||||||||||||||||||||||||||||
| January 1, 2025 - January 31, 2025 | 100 | $ | 149.77 | 100 | $ | 65.1 | ||||||||||||||||||||||||||||||||
| February 1, 2025 - February 28, 2025 | — | $ | — | — | $ | 65.1 | ||||||||||||||||||||||||||||||||
| March 1, 2025 - March 31, 2025 | 11,946 | $ | 156.05 | 11,946 | $ | 63.2 | ||||||||||||||||||||||||||||||||
| Total | 12,046 | $ | 156.00 | 12,046 | ||||||||||||||||||||||||||||||||||
Item 5. Other Information
Insider Trading Plans
None of the Company's directors or officers adopted terminated
41
Item 6. Exhibits
Exhibit Number | Exhibit Description | |||||||
Filed with this Report: | ||||||||
| 10.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32 | ||||||||
| 101 | The following materials from GATX Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, are formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024, (ii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2025 and 2024, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024, (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2025 and 2024, and (v) Notes to Condensed Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
| Incorporated by Reference: | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
_______
(*) Compensatory Plans or Arrangements.
Certain instruments evidencing long-term indebtedness of GATX Corporation are not being filed as exhibits to this Report because the total amount of securities authorized under any such instrument does not exceed 10% of GATX Corporation's total assets. GATX Corporation will furnish copies of any such instruments upon request of the Securities and Exchange Commission.
42
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GATX CORPORATION (Registrant) | ||
| /s/ Thomas A. Ellman | ||
| Thomas A. Ellman | ||
| Executive Vice President and Chief Financial Officer | ||
| (Duly Authorized Officer) | ||
Date: April 25, 2025
43
US-DOCS\157230907.1 AMENDMENT TO AMENDED AND RESTATED AGREEMENT FOR EMPLOYMENT FOLLOWING A CHANGE IN CONTROL This Amendment to the Amended and Restated Agreement for Employment Following a Change in Control dated as of January 1, 2009 , by and between GATX Corporation, a New York ), and Robert C. Lyons is made and entered into effective as of February 18, 2025 (the Amendment Effective Date nt and not otherwise defined herein shall have the meanings ascribed to such terms in the Existing Agreement. In consideration of the good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Section 9 of the Existing Agreement. Section 9 of the Existing Agreement is hereby amended and restated to read as follows: 9. Section 280G. (a) Parachute Payments. In the event that any payment or benefit received or to be received by you pursuant to this Agreement or the terms of any plan, arrangement or agreement (including any payment or benefit received in connection with a change of control or the termination of your employment) (all such payments and benefits being hereinafter referred to as the t Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (A) reduction of any cash severance payments otherwise payable to the Executive that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to the Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with (C) reduction of any other payments or benefits otherwise payable to the Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to the Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to the
US-DOCS\157230907.1 ction 409A of the Code; provided, in case of clauses (B), (C) and (D), that reduction of any payments or benefits attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to the Executive on an after-tax basis and, to the extent economically equivalent payments or benefits are subject to reduction, in a pro rata manner. (b) Determinations. All determinations regarding the application of this Section 9 shall be made by an independent accounting firm or consulting group with nationally recognized standing and substantial expertise and experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax retained by the Company prior to the date of the applicable Change of Control (the 280G will be subject to the Excise Tax, (i) no portion of the Total Payments shall be taken into account which, in the written opinion of the 280G Firm, (A) does not constitute a parachute payment within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, or (B) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, (ii) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a payment within the meaning of Section 280G(b) of the Code shall be taken into account, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. All determinations related to the calculations to be performed pursuant to this Section 9 shall be done by the 280G Firm. (c) Cooperation and Expenses. The 280G Firm will be directed to submit its determination and detailed supporting calculations to both the Executive and the Company within fifteen (15) days after notification from either the Company or the Executive that the Executive may receive payments which may be parachute payments. The Executive and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Section 9. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Section 9 will be borne solely by the Company. 2. Miscellaneous. Except as modified above, all other provisions of the Existing Agreement shall remain in full force and effect according to their respective terms. This Amendment and the Existing Agreement, as amended herein, shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to principles of conflict of laws. This Amendment may be executed in any number of counterparts, each of which when so executed
US-DOCS\157230907.1 and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document. [Signature Page Follows]
US-DOCS\157230907.1 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as an agreement as of the Amendment Effective Date above. COMPANY: GATX Corporation By: ________________________________ Name: Title: EXECUTIVE: Robert C. Lyons
Exhibit 31.1
Certification
I, Robert C. Lyons, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of GATX Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Robert C. Lyons | ||
| Robert C. Lyons | ||
| President and Chief Executive Officer | ||
April 25, 2025
Exhibit 31.2
Certification
I, Thomas A. Ellman, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of GATX Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ Thomas A. Ellman | ||
| Thomas A. Ellman | ||
| Executive Vice President and Chief Financial Officer | ||
April 25, 2025
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GATX Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Robert C. Lyons | /s/ Thomas A. Ellman | |||||||
| Robert C. Lyons | Thomas A. Ellman | |||||||
| President and Chief Executive Officer | Executive Vice President and Chief Financial Officer | |||||||
April 25, 2025
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by GATX Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to GATX Corporation and will be retained by GATX Corporation and furnished to the Securities and Exchange Commission or its staff upon request.