# Gatx Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [Gatx Corp](/companies/gatx.md) (CIK 40211)
- Form: 10-Q
- Filed: 2023-10-26
- Accepted by EDGAR: Oct 26, 2023, 15:02 ET
- Period: 2023-09-30
- Accession: 0000040211-23-000162
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/40211/000004021123000162/gmt-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/40211/000004021123000162/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $360.1m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.04bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $51.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $153.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $68.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $190.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $14.5m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $52.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $52.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $193.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.44 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.30 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.44 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $5.32 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 35,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 35,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $400.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $60.7m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $203.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $10.65bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $8.47bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $2.17bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2023-09-30 | 35,500,000 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 64,313 characters.

### 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 Portfolio Management. Financial results for our tank container leasing business ("Trifleet Leasing") are reported in the Other segment.

In the first quarter of 2023, we sold our rail business in Russia ("Rail Russia") within the Rail International segment. The net assets of Rail Russia had been reported as held for sale since the third quarter of 2022.

In 2023, we sold two of our liquefied gas-carrying vessels (the "Specialized Gas Vessels") within the Portfolio Management segment. We had previously sold two vessels in the third quarter of 2022. The one remaining vessel continues to be classified as held for sale as of September 30, 2023.

In 2023, GATX Engine Leasing ("GEL") acquired ten aircraft spare engines for $267.3 million. Financial results for this business are reported in the Portfolio Management segment.

The following discussion and analysis should be read in conjunction with the Management's Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2022. We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance with U.S. Generally Accepted Accounting Standards ("GAAP") and on certain other financial data that we prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see "Non-GAAP Financial Measures" at the end of this item.

Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2023. 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, 2022.

### Russia/Ukraine Conflict

On February 24, 2022, Russian military forces launched a military action in Ukraine. In response to this action, the United States and other countries imposed various economic sanctions and measures against Russia, Belarus, certain sections of Ukraine, and related persons and entities. Russia subsequently enacted countermeasures. Additional sanctions and countermeasures have continued to be imposed as the conflict continues. We continue to closely monitor developments and potential impacts from enacted sanctions and countermeasures and will take mitigating actions as appropriate. This conflict and resulting response have impacted the global economy, financial markets, and supply chains and could adversely affect our business, financial condition, and results of operations.

To date, the conflict has not had a material impact on business operations at our global railcar, aircraft spare engine, and tank container leasing businesses outside of Russia. Furthermore, the nature of the impact on financial results varies across our business units, including the Rolls-Royce & Partners Finance joint ventures (collectively the "RRPF affiliates" or "RRPF"). Initially, an increase in steel prices led to higher new asset costs across our rail and tank container leasing businesses, a trend that supports higher lease rates on many existing assets but makes new investments more challenging. Steel prices continue to be volatile. Supply chain disruptions, slower new railcar deliveries, and limited access to key components such as wheelsets have been more impactful in Europe and India. We continue to monitor the nature and magnitude of these impacts across our railcar and tank container leasing businesses.

In 2022, after a thorough strategic review, we made the decision to exit Rail Russia. This decision was due to the impacts of the Russia/Ukraine conflict on our business and the business risks associated with the geopolitical environment resulting from that conflict. In the first quarter of 2023, we completed the sale of Rail Russia.

### DISCUSSION OF OPERATING RESULTS

Net income for the first nine months of 2023 was $193.2 million, or $5.30 per diluted share, compared to $107.5 million, or $2.99 per diluted share, for the same period in 2022. Results for the nine months ended September 30, 2023 included a net negative impact of $1.1 million ($0.03 per diluted share) from tax adjustments and other items, compared to a net negative impact of $55.2 million ($1.54 per diluted share) from tax adjustments and other items for the nine months ended September 30, 2022. See "Non-GAAP Financial Measures" at the end of this item for further details. Excluding the impact of these items, net income increased $31.6 million compared to the prior year, largely due to higher share of affiliates' earnings at the RRPF affiliates, higher lease revenue and asset disposition gains at Rail North America and higher results from GEL operations.

Net income for the third quarter of 2023 was $52.5 million, or $1.44 per diluted share, compared to $29.1 million, or $0.81 per diluted share, for the same period in 2022. Results for the three months ended September 30, 2022 included a net negative impact of $10.8 million ($0.31 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 $12.6 million compared to the prior year, largely due to higher share of affiliates' earnings at the RRPF affiliates, higher lease revenue and asset disposition gains at Rail North America, and higher results from GEL operations.

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

| Segment Revenues | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Rail North America | $247.9 | $231.3 | $727.2 | $676.8 |
| Rail International | 79.2 | 67.6 | 228.7 | 205.9 |
| Portfolio Management | 22.4 | 13.1 | 55.2 | 41.1 |
| Other | 10.6 | 9.0 | 31.1 | 26.5 |
|  | $360.1 | $321.0 | $1,042.2 | $950.3 |
| **Segment Profit** |  |  |  |  |
| Rail North America | $66.1 | $64.3 | $240.6 | $237.8 |
| Rail International | 28.2 | 14.5 | 79.0 | 67.7 |
| Portfolio Management | 20.2 | 11.2 | 75.1 | (8.4) |
| Other | 8.0 | 2.9 | 21.9 | (2.1) |
|  | 122.5 | 92.9 | 416.6 | 295.0 |
| Less: |  |  |  |  |
| Selling, general and administrative expense | 51.0 | 47.6 | 153.4 | 142.7 |
| Income taxes (includes $4.5 and $2.5 QTR and $17.7 and $6.0 YTD related to affiliates' earnings) | 19.0 | 16.2 | 70.0 | 44.8 |
| **Net Income (GAAP)** | $52.5 | $29.1 | $193.2 | $107.5 |
| Net income, excluding tax adjustments and other items (non-GAAP) (1) | $52.5 | $39.9 | $194.3 | $162.7 |
| Diluted earnings per share (GAAP) | $1.44 | $0.81 | $5.30 | $2.99 |
| Diluted earnings per share, excluding tax adjustments and other items (non-GAAP) (1) | $1.44 | $1.12 | $5.33 | $4.53 |
| Investment Volume | $363.9 | $203.4 | $1,237.5 | $887.9 |

The following table shows our return on equity for the trailing 12 months ended September 30:

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Return on Equity (GAAP) | 11.7% | 8.6% |
| Return on Equity, excluding tax adjustments and other items (non-GAAP) (1) | 12.1% | 11.2% |

(1) See "Non-GAAP Financial Measures" at the end of this item for further details.

### Segment Operations

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

### RAIL NORTH AMERICA

### Segment Summary

Demand for existing railcars continued to be robust for most railcar types and Rail North America continued to capitalize on current market conditions by increasing renewal lease rates and lengthening lease terms. Utilization was 99.3% at the end of the quarter.

The following table shows Rail North America's segment results (in millions):

| Revenues | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Lease revenue | $225.2 | $211.3 | $659.2 | $615.0 |
| Other revenue | 22.7 | 20.0 | 68.0 | 61.8 |
| **Total Revenues** | 247.9 | 231.3 | 727.2 | 676.8 |
| **Expenses** |  |  |  |  |
| Maintenance expense | 69.4 | 62.4 | 203.1 | 180.1 |
| Depreciation expense | 66.9 | 65.3 | 198.5 | 193.7 |
| Operating lease expense | 9.0 | 9.0 | 27.0 | 27.1 |
| Other operating expense | 6.5 | 6.0 | 20.2 | 19.2 |
| **Total Expenses** | 151.8 | 142.7 | 448.8 | 420.1 |
| **Other Income (Expense)** |  |  |  |  |
| Net gain on asset dispositions | 15.5 | 13.3 | 97.4 | 90.0 |
| Interest expense, net | (46.6) | (36.5) | (133.4) | (105.8) |
| Other income (expense) | 1.2 | (1.4) | (1.3) | (3.4) |
| Share of affiliates' pre-tax losses (earnings) | (0.1) | 0.3 | (0.5) | 0.3 |
| **Segment Profit** | $66.1 | $64.3 | $240.6 | $237.8 |
| **Investment Volume** | $197.0 | $142.5 | $654.8 | $676.6 |

The following table shows the components of Rail North America's lease revenue (in millions):

|  | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Railcars | $204.0 | $190.0 | $597.0 | $549.2 |
| Boxcars | 14.6 | 14.8 | 42.6 | 46.5 |
| Locomotives | 6.6 | 6.5 | 19.6 | 19.3 |
| Total | $225.2 | $211.3 | $659.2 | $615.0 |

25

### Rail North America Fleet Data

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

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 101,272 | 101,289 | 100,954 | 101,219 | 100,585 |
| Railcars added | 772 | 583 | 1,816 | 358 | 791 |
| Railcars scrapped | (506) | (486) | (324) | (316) | (292) |
| Railcars sold | (249) | (432) | (1,227) | (676) | (428) |
| Ending balance | 101,289 | 100,954 | 101,219 | 100,585 | 100,656 |
| Utilization rate at quarter end (1) | 99.6% | 99.5% | 99.3% | 99.3% | 99.3% |
| Renewal success rate (2) | 87.2% | 85.7% | 77.9% | 85.3% | 83.6% |
| Active railcars at quarter end (3) | 100,834 | 100,396 | 100,475 | 99,871 | 99,933 |
| Average active railcars (4) | 100,783 | 100,618 | 100,552 | 100,230 | 99,796 |

(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 September 30, 2023, leases for approximately 5,400 tank and freight cars and approximately 800 boxcars were scheduled to expire over the remainder of 2023. These amounts exclude railcars on leases expiring in 2023 that have already been renewed or assigned to a new lessee.

In 2022, we entered into a new long-term railcar supply agreement with a subsidiary of Trinity Industries, Inc. ("Trinity") to purchase 15,000 newly built railcars through 2028, with an option to order up to an additional 500 railcars each year from 2023 to 2028. The agreement enables us to order a broad mix of tank and freight cars. Trinity will deliver 6,000 tank cars (1,200 per year) from 2024 through 2028. The remaining 9,000 railcars, which can be a mix of freight and tank cars, will be ordered at a rate of 1,500 railcars per order year from 2023 to 2028 and delivered under a schedule to be determined. At September 30, 2023, 2,416 railcars have been ordered pursuant to the terms of the agreement, of which 35 railcars have been delivered.

In 2018, we amended a long-term supply agreement with Trinity to extend the term to December 2023, and we agreed to purchase 4,800 tank cars (1,200 per year) beginning in January 2020 and continuing through 2023. At September 30, 2023, all 4,800 railcars have been ordered pursuant to the amended terms of the agreement, of which 4,512 railcars have been delivered.

In 2018, we entered into a multi-year railcar supply agreement with American Railcar Industries, Inc. ("ARI"), pursuant to which we agreed to purchase 7,650 newly built railcars. The order encompasses a mix of tank and freight cars to be delivered over a five-year period, beginning in April 2019 and ending in December 2023. ARI's railcar manufacturing business was acquired by a subsidiary of The Greenbrier Companies, Inc. on July 26, 2019, and such subsidiary assumed all of ARI's obligations under our long-term supply agreement. As of September 30, 2023, all 7,650 railcars have been ordered, of which 7,006 railcars have been delivered. All railcars covered under this agreement are expected to be delivered by early 2024.

### Lease Price Index

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

In the second quarter of 2023, we modified the methodology of the LPI calculation to more consistently reflect actual trends in renewal lease rates and renewal lease terms across the North American non-boxcar fleet. Under the modified methodology, 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 during the reporting period. We believe this modification will provide investors and other constituents with a more complete representation of lease rate and term performance. The LPI metrics presented below reflect the revised calculation.

During the third quarter of 2023, the renewal rate change of the LPI was positive 33.4%, compared to positive 33.1% in the prior quarter, and positive 18.8% in the third quarter of 2022. Lease terms on renewals for cars in the LPI averaged 65 months in the current quarter, compared to 61 months in the prior quarter, and 52 months in the third quarter of 2022.

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

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 10,315 | 10,224 | 8,663 | 8,789 | 8,959 |
| Boxcars added | — | 106 | 229 | 279 | 316 |
| Boxcars scrapped | (91) | (94) | (103) | (109) | (95) |
| Boxcars sold | — | (1,573) | — | — | (93) |
| Ending balance | 10,224 | 8,663 | 8,789 | 8,959 | 9,087 |
| Utilization rate at quarter end (1) | 100.0% | 99.9% | 100.0% | 99.8% | 99.7% |
| Active boxcars at quarter end (2) | 10,220 | 8,657 | 8,788 | 8,942 | 9,062 |
| Average active railcars (3) | 10,267 | 9,032 | 8,720 | 8,855 | 8,985 |

(1) Utilization is calculated as the number of boxcars on lease as a percentage of total boxcars in the fleet.

(2) Active boxcars refers to the number boxcars on lease to customers. Changes in boxcars on lease compared to prior quarters are impacted by the utilization of new boxcars purchased from builders or in the secondary market and the disposition of boxcars that were sold or scrapped, as well as the fleet utilization rate.

(3) Average active boxcars is calculated using the number of active boxcars at the end of each month.

### Comparison of the First Nine Months of 2023 to the First Nine Months of 2022

### Segment Profit

In the first nine months of 2023, segment profit of $240.6 million increased 1.2% compared to $237.8 million for the same period in the prior year. The increase was primarily driven by higher lease revenue and net gain on asset dispositions, partially offset by higher interest and maintenance expenses. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from year to year.

### Revenues

In the first nine months of 2023, lease revenue increased $44.2 million, or 7.2%, driven by higher lease rates. Other revenue increased $6.2 million due to higher repair revenue.

### Expenses

In the first nine months of 2023, maintenance expense increased $23.0 million, driven by more repair events, general inflationary pressures, and more repairs performed by the railroads. Depreciation expense increased $4.8 million due to the timing of new railcar investments and dispositions. Other operating expense increased $1.0 million due to higher switching and freight costs, partially offset by lower storage costs.

### Other Income (Expense)

In the first nine months of 2023, net gain on asset dispositions increased $7.4 million due to higher gains per railcar sold in the current year, partially offset by fewer railcars sold and lower net scrapping gains. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from year to year. Interest expense increased $27.6 million, driven by a higher average debt balance and a higher average interest rate.

### Investment Volume

During the first nine months of 2023, investment volume was $654.8 million compared to $676.6 million in the same period in 2022. We acquired 2,506 newly built railcars and purchased 1,266 railcars in the secondary market in the first nine months of 2023, compared to 3,529 newly built railcars and 420 railcars in the secondary market in the same period in 2022.

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

### Comparison of the Third Quarter of 2023 to the Third Quarter of 2022

### Segment Profit

In the third quarter of 2023, segment profit of $66.1 million increased 2.8% compared to $64.3 million for the same period in the prior year. The increase was primarily driven by higher lease revenue and higher net gain on asset dispositions, partially offset by higher interest and maintenance expenses. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from year to year.

### Revenues

In the third quarter of 2023, lease revenue increased $13.9 million, or 6.6%, driven by higher lease rates. Other revenue increased $2.7 million, primarily due to higher repair revenue.

### Expenses

In the third quarter of 2023, maintenance expense increased $7.0 million. The increase was largely due to more repair events, more regulatory compliance events, general inflationary pressures, and more repairs performed by the railroads. Depreciation expense increased $1.6 million due to the timing of new railcar investments and dispositions. Other operating expense increased $0.5 million due to higher switching, freight, and insurance costs.

In the third quarter of 2023, net gain on asset dispositions increased $2.2 million largely due to more railcars sold, partially offset by lower net scrapping gains. The amount and timing of disposition gains is dependent on a number of factors and will vary from quarter to quarter. Net interest expense increased $10.1 million, driven by a higher average debt balance and a higher average interest rate.

### RAIL INTERNATIONAL

### Segment Summary

Rail International, composed primarily of GATX Rail Europe ("GRE"), produced solid operating results in the first nine months of 2023 and continued to grow its fleet. GRE experienced renewal lease rate increases for most railcar types in the period.

Our rail business in India ("Rail India") increased its fleet size in the first nine months of 2023 and continued to focus on investment opportunities, diversification of its fleet, and developing relationships with customers, suppliers and the Indian Railways. Demand for railcars in India remained robust, driven by continued growth in the economy and infrastructure development.

In the first quarter of 2023, we sold Rail Russia and recorded a gain of $0.3 million upon completion of the sale. The net assets of Rail Russia had been classified as held for sale, and we recorded impairment losses of $14.6 million in 2022. See "Note 6. Asset Impairments and Assets Held for Sale " in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

The following table shows Rail International's segment results (in millions):

| Revenues | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Lease revenue | $75.6 | $65.3 | $219.1 | $199.4 |
| Other revenue | 3.6 | 2.3 | 9.6 | 6.5 |
| **Total Revenues** | 79.2 | 67.6 | 228.7 | 205.9 |
| **Expenses** |  |  |  |  |
| Maintenance expense | 17.1 | 12.8 | 47.6 | 39.0 |
| Depreciation expense | 17.5 | 16.8 | 49.8 | 52.0 |
| Other operating expense | 2.7 | 1.5 | 7.2 | 6.0 |
| **Total Expenses** | 37.3 | 31.1 | 104.6 | 97.0 |
| **Other Income (Expense)** |  |  |  |  |
| Net gain (loss) on asset dispositions | 0.9 | (10.3) | 2.4 | (7.9) |
| Interest expense, net | (14.5) | (11.2) | (40.5) | (33.5) |
| Other (expense) income | (0.1) | (0.5) | (7.0) | 0.2 |
| **Segment Profit** | $28.2 | $14.5 | $79.0 | $67.7 |
| **Investment Volume** | $129.6 | $50.1 | $288.0 | $177.8 |

30

### GRE Fleet Data

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

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 27,470 | 27,701 | 28,005 | 28,461 | 28,759 |
| Railcars added | 277 | 362 | 502 | 376 | 446 |
| Railcars scrapped or sold | (46) | (58) | (46) | (78) | (103) |
| Ending balance | 27,701 | 28,005 | 28,461 | 28,759 | 29,102 |
| Utilization rate at quarter end (1) | 99.4% | 99.3% | 98.5% | 96.9% | 96.0% |
| Active railcars at quarter end (2) | 27,534 | 27,801 | 28,031 | 27,875 | 27,947 |
| Average active railcars (3) | 27,489 | 27,658 | 27,931 | 27,973 | 27,884 |

(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.

The decline in GRE's fleet utilization was primarily due to weakness in the intermodal market. As of September 30, 2023, leases for approximately 769 railcars were scheduled to expire over the remainder of 2023. These amounts exclude railcars on leases expiring in 2023 that have already been renewed or assigned to a new lessee.

### Rail India Fleet Data

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

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 5,503 | 5,564 | 5,872 | 6,351 | 6,927 |
| Railcars added | 61 | 308 | 479 | 576 | 957 |
| Ending balance | 5,564 | 5,872 | 6,351 | 6,927 | 7,884 |
| Utilization rate at quarter end (1) | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| Active railcars at quarter end (2) | 5,564 | 5,872 | 6,351 | 6,927 | 7,884 |
| Average active railcars (3) | 5,518 | 5,703 | 6,038 | 6,584 | 7,366 |

(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 the First Nine Months of 2023 to the First Nine Months of 2022

### Foreign Currency

Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar versus foreign currencies in which it conducts business, primarily the euro. In the first nine months of 2023, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $3.7 million and segment profit, excluding other income (expense), by approximately $1.5 million compared to the same period in 2022.

### Segment Profit

In the first nine months of 2023, segment profit of $79.0 million increased 16.7% compared to $67.7 million for the same period in the prior year. Segment profit in 2023 included a $0.3 million disposition gain recorded as a result of the decision to exit the Rail Russia business. Segment profit in 2022 included a $10.8 million impairment charge recorded as a result of the decision to exit the Rail Russia business. Excluding these items, results for Rail International were $0.2 million higher than 2022. The increase was primarily due to more railcars on lease and higher lease rates, offset by changes in foreign exchange rates, including the impact of euro-zloty fluctuations.

### Revenues

In the first nine months of 2023, lease revenue increased $19.7 million, or 9.9%, due to more railcars on lease and higher lease rates at GRE and Rail India and the impact of foreign exchange rates. Other revenue increased $3.1 million, driven by higher repair revenue.

### Expenses

In the first nine months of 2023, maintenance expense increased $8.6 million, primarily due to more repairs performed, higher costs for repairs, and the impact of foreign exchange rates. Depreciation expense decreased $2.2 million, due to certain operating assets at GRE becoming fully depreciated in the prior year, partially offset by the impact of new railcars added to the fleet.

In the first nine months of 2023, net gain on asset dispositions increased $10.3 million, driven by impairment losses recorded in the prior year as a result of the decision to exit the Rail Russia business. Net interest expense increased $7.0 million, due to a higher average interest rate and a higher average debt balance. Other (expense) income was unfavorable by $7.2 million, driven by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations, partially offset by lower litigation costs.

### Investment Volume

During the first nine months of 2023, investment volume was $288.0 million compared to $177.8 million in the same period in 2022. In the first nine months ended September 30, 2023, GRE acquired 1,324 railcars compared to 849 railcars for the same period in 2022, and Rail India acquired 2,012 railcars in the current year compared to 734 railcars for the same period in 2022.

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

### Comparison of the Third Quarter of 2023 to the Third Quarter of 2022

### Foreign Currency

Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar versus foreign currencies in which it conducts business, primarily the euro. In the third quarter of 2023, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $5.1 million and segment profit, excluding other income (expense), by approximately $2.3 million compared to the same period in 2022.

### Segment Profit

In the third quarter of 2023, segment profit of $28.2 million increased 94.5% compared to $14.5 million for the same period in the prior year. Segment profit in 2022 included a $10.8 million impairment charge recorded as a result of the decision to exit the Rail Russia business. Excluding this impairment, results for Rail International were $2.9 million higher than 2022. The increase was primarily due to more railcars on lease and higher lease rates, partially offset by higher maintenance expense and interest expense.

### Revenues

In the third quarter of 2023, lease revenue increased $10.3 million, or 15.8%, due to more railcars on lease and higher lease rates at GRE and Rail India, as well as the impact of foreign exchange rates. Other revenue increased $1.3 million, driven by higher repair revenue.

### Expenses

In the third quarter of 2023, maintenance expense increased $4.3 million, due to more repairs performed, higher costs for repairs, and the impact of foreign exchange rates. Depreciation expense increased $0.7 million, due to the impact of new railcars added to the fleet and the impact of foreign exchange rates, partially offset by certain operating assets at GRE becoming fully depreciated in the prior year.

In the third quarter of 2023, net gain on asset dispositions increased $11.2 million, driven by the absence of impairment losses recorded in the prior year as a result of the decision to exit the Rail Russia business and higher net scrapping gains. Net interest expense increased $3.3 million due to a higher average debt balance and a higher average interest rate. Other (expense) income was favorable by $0.4 million, driven by lower litigation costs, partially offset by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

### PORTFOLIO MANAGEMENT

### Segment Summary

Portfolio Management's segment profit is attributable primarily to income from the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce"), a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $66.3 million and $18.0 million for the nine months and three months ended September 30, 2023, compared to $20.5 million and $9.7 million for the same periods in 2022. In the first quarter of 2022, RRPF recorded an impairment charge associated with aircraft spare engines in Russia that RRPF does not expect to recover. GATX's 50% share of that net impairment was $15.3 million ($11.5 million after tax).

The operating environment for the RRPF affiliates was strong, as demand for international air passenger travel continued to improve.

Portfolio Management also includes GEL, our wholly owned entity that invests directly in aircraft spare engines. In 2023, GEL acquired ten aircraft spare engines for $267.3 million. As of September 30, 2023, GEL owned 29 aircraft spare engines, with 14 on long-term leases with airline customers and 15 that are employed in an engine capacity agreement with Rolls-Royce for use in its engine maintenance programs. All engines at GEL are managed by the RRPF affiliates.

Portfolio Management also owns the Specialized Gas Vessels. In 2022, we made the decision to sell the Specialized Gas Vessels and recorded impairment losses totaling $34.3 million. We sold two Specialized Gas Vessels in the third quarter of 2022. In 2023, we recorded net losses of $1.4 million on the sale of two of the remaining vessels. The one remaining vessel continues to be classified as held for sale as of September 30, 2023.

In 2023, Portfolio Management sold its natural gas holdings and recorded a gain of $5.7 million.

Portfolio Management's total asset base was $1,369.4 million at September 30, 2023, compared to $1,371.6 million at June 30, 2023, and $991.1 million at September 30, 2022.

The following table shows Portfolio Management’s segment results (in millions):

| Revenues | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Lease revenue | $8.1 | $8.3 | $24.5 | $24.8 |
| Marine operating revenue | 0.6 | 4.8 | 6.1 | 16.2 |
| Other revenue | 13.7 | — | 24.6 | 0.1 |
| **Total Revenues** | 22.4 | 13.1 | 55.2 | 41.1 |
| **Expenses** |  |  |  |  |
| Marine operating expense | 1.0 | 3.6 | 5.4 | 11.7 |
| Depreciation expense | 8.4 | 3.7 | 19.9 | 13.6 |
| Other operating expense | 2.1 | 0.6 | 4.4 | 1.7 |
| **Total Expenses** | 11.5 | 7.9 | 29.7 | 27.0 |
| **Other Income (Expense)** |  |  |  |  |
| Net gain (loss) on asset dispositions | 0.2 | 0.8 | 4.7 | (29.1) |
| Interest expense, net | (8.7) | (4.6) | (20.9) | (13.9) |
| Other (expense) income | (0.2) | 0.1 | (0.5) | — |
| Share of affiliates' pre-tax earnings | 18.0 | 9.7 | 66.3 | 20.5 |
| **Segment Profit (Loss)** | $20.2 | $11.2 | $75.1 | $(8.4) |
| **Investment Volume** | $28.3 | $— | $267.3 | $— |

34

The following table shows the net book values of Portfolio Management's assets (in millions):

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Investment in RRPF Affiliates | $603.7 | $574.3 | $597.2 | $611.3 | $626.5 |
| GEL owned aircraft spare engines | 329.5 | 475.0 | 469.6 | 702.5 | 722.4 |
| Specialized Gas Vessels | 28.4 | 25.1 | 15.2 | 8.9 | 11.4 |
| Other owned assets | 29.5 | 32.2 | 41.8 | 48.9 | 9.1 |
| Managed assets (1) | 4.1 | 2.3 | 1.4 | 1.0 | 0.5 |

(1) Amounts shown represent the estimated net book value of assets managed for third parties and are not included in our consolidated balance sheets.

### RRPF Affiliates Portfolio Data

As of September 30, 2023, the RRPF affiliates' portfolio consisted of 395 aircraft spare engines with a net book value of $4,100.9 million, compared to 392 aircraft spare engines with a net book value of $4,106.6 million at the end of the prior quarter and 394 aircraft spare engines with a net book value of $4,178.6 million at September 30, 2022.

The following table shows portfolio activity and statistics for the RRPF affiliates' aircraft spare engines for the quarter ended:

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Beginning balance | 396 | 394 | 398 | 395 | 392 |
| Engine acquisitions | 3 | 5 | 1 | 3 | 5 |
| Engine dispositions | (5) | (1) | (4) | (6) | (2) |
| Ending balance | 394 | 398 | 395 | 392 | 395 |
| Utilization rate at quarter end (1) | 93.7% | 94.2% | 94.4% | 95.9% | 95.7% |
| Average leased engines (2) | 365 | 373 | 374 | 375 | 377 |

(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.

### Comparison of the First Nine Months of 2023 to the First Nine Months of 2022

### Segment Profit

In the first nine months of 2023, segment profit was $75.1 million, compared to segment loss of $8.4 million for the same period in the prior year. Segment profit in 2023 included $1.4 million of losses associated with the Specialized Gas Vessels. Segment loss in 2022 included a $31.5 million impairment charge recorded as a result of the decision to sell the Specialized Gas Vessels and a $15.3 million net impairment charge (GATX's 50% share) for aircraft spare engines in Russia that RRPF does not expect to recover. Excluding these losses, results for Portfolio Management were $38.1 million higher than 2022, primarily driven by higher earnings at the RRPF affiliates and higher results from GEL operations.

### Revenues

In the first nine months of 2023, lease revenue was comparable to the same period in the prior year. Marine operating revenue decreased $10.1 million, driven by the absence of revenue from the Specialized Gas Vessels sold in 2022 and 2023. Other revenue increased $24.5 million as a result of revenue from aircraft spare engines acquired in 2022 and 2023 and utilized in the engine capacity agreement with Rolls-Royce.

### Expenses

In the first nine months of 2023, marine operating expense decreased $6.3 million, due to the absence of expense from the Specialized Gas Vessels sold in 2022 and 2023. Depreciation expense increased $6.3 million, due to new aircraft spare engines acquired in 2022 and 2023, offset by the absence of depreciation expense on the Specialized Gas Vessels classified as held for sale in 2022.

In the first nine months of 2023, net gain (loss) on asset dispositions was favorable by $33.8 million, driven by impairment losses recorded in the prior year primarily due to the decision to sell the Specialized Gas Vessels and the sale of the natural gas holdings in the current year.

In the first nine months of 2023, income from our share of affiliates' earnings increased $45.8 million, driven by the absence of the $15.3 million net impairment charge recorded in the prior year, higher income from operations, and higher remarketing income.

### Investment Volume

In the first nine months of 2023, investment volume was $267.3 million, compared to zero in the same period in 2022. During 2023, GEL acquired ten aircraft spare engines.

### Comparison of the Third Quarter of 2023 to the Third Quarter of 2022

### Segment Profit

In the third quarter of 2023, segment profit was $20.2 million, compared to $11.2 million for the same period in the prior year. The increase was driven by higher earnings at the RRPF affiliates and higher results from GEL operations.

### Revenues

In the third quarter of 2023, lease revenue was comparable to the same period in the prior year. Marine operating revenue decreased $4.2 million, driven by the absence of revenue from the Specialized Gas Vessels sold in 2022 and 2023. Other revenue increased $13.7 million due to revenue from aircraft spare engines purchased in 2022 and 2023 and utilized in the engine capacity agreement with Rolls-Royce.

### Expenses

In the third quarter of 2023, marine operating expense decreased $2.6 million, due to the absence of expense from the Specialized Gas Vessels sold in 2022 and 2023. Depreciation expense increased $4.7 million, due to new aircraft spare engines acquired in 2022 and 2023, offset by the absence of depreciation expense on the Specialized Gas Vessels classified as held for sale in 2022.

In the third quarter of 2023, net gain (loss) on asset dispositions was unfavorable by $0.6 million, driven by lower residual sharing fees from the managed portfolio.

In the third quarter of 2023, income from our share of affiliates' earnings increased $8.3 million, driven by higher income from operations and higher remarketing income.

### OTHER

Other comprises our Trifleet Leasing business, as well as selling, general and administrative expenses ("SG&A"), unallocated interest expense, and miscellaneous income and expense not directly associated with the reporting segments and certain eliminations.

In the second quarter of 2022, GATX executed a multi-party amended and restated settlement agreement related to its share of estimated environmental remediation costs to be incurred at a previously owned facility that was sold in 1974. As a result, GATX recorded $5.9 million of expense to establish a reserve for its share of the remaining anticipated remediation and related costs.

The following table shows components of Other (in millions):

|  | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Trifleet Leasing revenue | $10.6 | $9.0 | $31.1 | $26.5 |
| Trifleet Leasing segment profit | $3.4 | $3.8 | $10.6 | $10.2 |
| Unallocated interest income | 3.6 | 0.2 | 9.3 | 0.8 |
| Other income (expense), including eliminations | 1.0 | (1.1) | 2.0 | (13.1) |
| Segment Profit (Loss) | $8.0 | $2.9 | $21.9 | $(2.1) |
| Selling, general and administrative expense | $51.0 | $47.6 | $153.4 | $142.7 |

### Trifleet Leasing Summary

The tank container leasing market continued to experience softer demand across certain regions, with some companies postponing investment decisions. Utilization was 89.6% at the end of the quarter.

### Trifleet Leasing Tank Container Data

The following table shows fleet statistics for Trifleet Leasing's tank containers for the quarter ended:

|  | September 30 2022 | December 31 2022 | March 31 2023 | June 30 2023 | September 30 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Ending balance - owned and managed | 21,187 | 21,999 | 22,528 | 22,870 | 23,333 |
| Utilization rate at quarter-end - owned and managed (1) | 93.1% | 93.1% | 93.1% | 91.5% | 89.6% |

(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 $10.7 million for first nine months of 2023 compared to the same period in the prior year, driven by higher employee-related expenses, including the impacts of share-based compensation expenses, higher legal costs, and higher information technology expenses.

SG&A increased $3.4 million for the third quarter of 2023 compared to the same period in the prior year, driven by higher employee-related expenses and higher legal costs, partially offset by the impacts of share-based compensation expenses.

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.

Other income (expense), including eliminations was favorable by $15.1 million for first nine months of 2023 compared to the same period in the prior year. The variance was driven by the absence of environmental remediation costs recorded in the prior year, lower pension-related expenses, the absence of make whole payments associated with the early repayment of debt in the prior year, and the impact of foreign exchange rates on a foreign pension plan.

Other income (expense), including eliminations was favorable by $2.1 million in the third quarter of 2023 compared to the same period in the prior year. The variance was driven by lower pension-related expenses.

### Consolidated Income Taxes

See "Note 9. Income Taxes" in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### 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 unsecured or secured debt and commercial paper. 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 September 30, 2023, we had an unrestricted cash balance of $203.1 million. We also have a $250 million 3-year unsecured revolving credit facility in the United States that matures in 2026 and a $600 million, 5-year unsecured revolving credit facility in the United States that matures in 2028, both of which are fully available as of September 30, 2023.

The following table shows our cash flows from operating, investing and financing activities for the nine months ended September 30 (in millions):

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $400.1 | $352.6 |
| Net cash used in investing activities | (860.6) | (606.5) |
| Net cash provided by financing activities | 359.9 | 512.8 |
| Effect of exchange rate changes on cash and cash equivalents | (0.2) | (6.8) |
| Net (decrease) increase in cash, cash equivalents, and restricted cash during the period | $(100.8) | $252.1 |

### Net Cash Provided by Operating Activities

Net cash provided by operating activities for the first nine months of 2023 of $400.1 million increased $47.5 million compared to the same period in 2022. 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 income taxes were partially offset by higher payments for interest and higher cash payments for 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 nine months ended September 30 (in millions):

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Portfolio investments and capital additions (1) | $(1,237.5) | $(887.9) |
| Portfolio proceeds (2) | 208.2 | 224.9 |
| Proceeds from short-term investments (3) | 150.0 | — |
| Other investing activity | 18.7 | 56.5 |
| Net cash used in investing activities | $(860.6) | $(606.5) |

(1) Portfolio investments and capital additions primarily consist of purchases of operating assets and capitalized asset improvements.

(2) Portfolio proceeds primarily consist of proceeds from sales of operating assets.

(3) Proceeds from short-term U.S. Treasury Obligations with an original maturity date of over 90 days.

The increase in portfolio investments and capital additions of $349.6 million for the first nine months of 2023 was primarily due to more aircraft spare engines acquired at GEL and more railcars acquired at Rail International, partially offset by fewer railcars acquired at Rail North America and fewer tank containers acquired at Trifleet Leasing. The timing of investments depends on purchase commitments, transaction opportunities, and market conditions.

Portfolio proceeds decreased by $16.7 million for the first nine months of 2023, resulting largely from lower proceeds received from the sales of the Specialized Gas Vessels in 2023 compared to 2022, partially offset by proceeds from the sale of Rail Russia in 2023 and higher proceeds from railcars sold at Rail North America.

### Net Cash Provided by Financing Activities

The following table shows our principal sources and uses of cash flows from financing activities for the nine months ended September 30 (in millions):

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Net proceeds from issuance of debt (original maturities longer than 90 days (1) | $909.2 | $837.8 |
| Repayments of debt (original maturities longer than 90 days) (2) | (500.0) | (250.0) |
| Net (decrease) increase in debt with original maturities of 90 days or less | (5.0) | 0.7 |
| Dividends | (60.7) | (57.9) |
| Purchases of assets previously leased (3) | — | (1.5) |
| Stock repurchases (4) | — | (47.2) |
| Other | 16.4 | 30.9 |
| Net cash provided by financing activities | $359.9 | $512.8 |

(1) In the first nine months of 2023, proceeds from the issuance of debt were $909.2 million (net of debt issuance costs). We issued $400 million of 10-year unsecured debt at a 5.474% yield, $300 million of 10-year unsecured debt at a 6.092% yield, and drew $217.4 million from four delayed draw bank term loans.

(2) In the first nine months of 2023, repayments of debt consisted of the scheduled maturity of unsecured notes and the prepayment of an outstanding bank term loan.

(3) We did not purchase any railcars that were previously leased in the first nine months of 2023, compared to 21 railcars in the first nine months of 2022.

(4) We did not repurchase any shares of common stock in the first nine months of 2023, compared to 472,609 shares of common stock repurchased for $47.2 million during the same period in 2022.

### 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, commercial paper issuances, committed revolving credit facilities, distributions from affiliates, and issuances of secured and unsecured debt. 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 September 30, 2023 (in millions):

|  | Material Cash Obligations by Period Total | 2023 (1) | 2024 | 2025 | 2026 | 2027 | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Recourse debt | $6,899.3 | $— | $516.7 | $511.5 | $563.4 | $445.7 | $4,862.0 |
| Interest on recourse debt (2) | 2,462.2 | 72.8 | 265.4 | 250.8 | 237.8 | 217.5 | 1,417.9 |
| Commercial paper and credit facilities | 12.3 | 12.3 | — | — | — | — | — |
| Operating lease obligations | 266.8 | 8.5 | 39.2 | 36.5 | 45.1 | 38.8 | 98.7 |
| Purchase commitments (3) | 2,733.3 | 373.1 | 647.5 | 418.2 | 519.6 | 396.2 | 378.7 |
| Total | $12,373.9 | $466.7 | $1,468.8 | $1,217.0 | $1,365.9 | $1,098.2 | $6,757.3 |

(1) For the remainder of the year.

(2) For floating rate debt, future interest payments are based on the applicable interest rate as of September 30, 2023.

(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

We primarily 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.

The following table shows additional information regarding our short-term borrowings for the nine months ended September 30, 2023:

|  | Europe (1) |
| --- | ---: |
| Balance as of September 30 (in millions) | $12.3 |
| Weighted-average interest rate | 4.6% |
| Euro/dollar exchange rate | 1.06 |
| Average daily amount outstanding year to date (in millions) | $16.9 |
| Weighted-average interest rate | 3.6% |
| Average Euro/dollar exchange rate | 1.08 |
| Average daily amount outstanding during the third quarter (in millions) | $15.1 |
| Weighted-average interest rate | 4.3% |
| Average Euro/dollar exchange rate | 1.09 |

(1) Short-term borrowings in Europe are composed of borrowings under bank credit facilities.

### Credit Lines and Facilities

We have a $600 million, 5-year unsecured revolving credit facility in the United States. In the second quarter of 2023, we entered into an amendment to this facility to extend the maturity by one year from May 2027 to May 2028. As of September 30, 2023, the full $600 million was available under this facility. Additionally, we have a $250 million 3-year unsecured revolving credit facility in the United States. In the second quarter of 2023, we also entered into an amendment to this facility, which extended the maturity by one year from May 2025 to May 2026. As of September 30, 2023, the full $250 million was available under this facility.

Our European subsidiaries have unsecured credit facilities with an aggregate limit of €35.0 million. As of September 30, 2023, €23.4 million was available under these credit facilities.

### Restrictive Covenants

Our $250 million and $600 million revolving credit facilities contain various restrictive covenants, including requirements to maintain a fixed charge coverage ratio and an asset coverage test. Some of our bank term loans 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 September 30, 2023, our European rail subsidiaries ("GATX Rail Europe" or "GRE") had outstanding term loans, public debt, and private placement debt balances totaling €740.0 million. The loans are guaranteed by GATX Corporation and are subject to similar restrictive covenants as the revolving credit facility noted above.

At September 30, 2023, we were in compliance with all covenants and conditions of all of our credit agreements. 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. As of September 30, 2023, our long-term unsecured debt was rated BBB by Standard & Poor's, Baa2 by Moody’s Investor Service and BBB+ by Fitch Ratings, Inc., and our short-term unsecured debt was rated A-2 by Standard & Poor's, P-2 by Moody’s Investor Service and F2 by Fitch Ratings, Inc. Our rating outlook from all agencies was stable.

### Leverage

Leverage is expressed as a ratio of debt (including debt and lease obligations, net of unrestricted cash and short-term investments) to equity. The following table shows the components of recourse leverage (in millions, except recourse leverage ratio):

| Debt and lease obligations, net of unrestricted cash and short-term investments: | September 30 2023 | June 30 2023 | March 31 2023 | December 31 2022 | September 30 2022 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Unrestricted cash and short-term investments | $(203.1) | $(317.5) | $(177.4) | $(452.2) | $(596.3) |
| Commercial paper and bank credit facilities | 12.3 | 10.9 | 20.3 | 17.3 | 16.3 |
| Recourse debt | 6,835.6 | 6,785.6 | 6,360.9 | 6,431.5 | 6,353.1 |
| Operating lease obligations | 233.2 | 241.1 | 246.2 | 257.9 | 259.0 |
| Total debt and lease obligations, net of unrestricted cash and short-term investments | $6,878.0 | $6,720.1 | $6,450.0 | $6,254.5 | $6,032.1 |
| Total recourse debt (1) | $6,878.0 | $6,720.1 | $6,450.0 | $6,254.5 | $6,032.1 |
| Shareholders' Equity | $2,174.5 | $2,178.9 | $2,101.5 | $2,029.6 | $1,940.5 |
| Recourse Leverage (2) | 3.2 | 3.1 | 3.1 | 3.1 | 3.1 |

(1) Includes recourse debt, commercial paper and bank credit facilities, and operating and finance lease obligations, net of unrestricted cash and short-term investments.

(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. No share repurchases were completed during the nine months ended September 30, 2023, compared to 472,609 shares of common stock repurchased for $47.2 million, excluding commissions, during the same period in 2022. As of September 30, 2023, $89.6 million remained available under the repurchase authorization.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no changes to our critical accounting policies during the nine months ended September 30, 2023. Refer to our Annual Report on Form 10-K for the year ended December 31, 2022, for a summary of our policies.

### 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 Securities and Exchange Commission ("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 components to the most directly comparable GAAP components.

### Reconciliation of Non-GAAP Components Used in the Computation of Certain Financial Measures

### Net Income 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 September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (GAAP) | $52.5 | $29.1 | $193.2 | $107.5 |
| Adjustments attributable to consolidated pre-tax income: |  |  |  |  |
| Loss on Specialized Gas Vessels at Portfolio Management (1) | $— | $— | $1.4 | $31.5 |
| Net loss (gain) on Rail Russia at Rail International (2) | — | 10.8 | (0.3) | 10.8 |
| Environmental remediation costs (3) | — | — | — | 5.9 |
| Total adjustments attributable to consolidated pre-tax income | $— | $10.8 | $1.1 | $48.2 |
| Income taxes thereon, based on applicable effective tax rate | $— | $— | $— | $(1.5) |
| Other income tax adjustments attributable to consolidated income: |  |  |  |  |
| Income tax rate change (4) | — | — | — | (3.0) |
| Total other income tax adjustments attributable to consolidated income | $— | $— | $— | $(3.0) |
| Adjustments attributable to affiliates' earnings, net of taxes: |  |  |  |  |
| Aircraft spare engine impairment at RRPF (5) | $— | $— | $— | $11.5 |
| Total adjustments attributable to affiliates' earnings, net of taxes | $— | $— | $— | $11.5 |
| Net income, excluding tax adjustments and other items (non-GAAP) | $52.5 | $39.9 | $194.3 | $162.7 |

44

| Impact of Tax Adjustments and Other Items on Diluted Earnings per Share: | Three Months Ended September 30 2023 | 2022 | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Diluted earnings per share (GAAP) | $1.44 | $0.81 | $5.30 | $2.99 |
| Adjustments attributable to consolidated income, net of taxes: |  |  |  |  |
| Loss on Specialized Gas Vessels at Portfolio Management (1) | — | — | 0.04 | 0.88 |
| Net loss (gain) on Rail Russia at Rail International (2) | — | 0.30 | (0.01) | 0.30 |
| Environmental remediation costs (3) | — | — | — | 0.12 |
| Other income tax adjustments attributable to consolidated income: |  |  |  |  |
| Income tax rate change (4) | — | — | — | (0.08) |
| Adjustments attributable to affiliates' earnings, net of taxes: |  |  |  |  |
| Aircraft spare engine impairment at RRPF (5) | — | — | — | 0.32 |
| Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)\* | $1.44 | $1.12 | $5.33 | $4.53 |

\* Sum of individual components may not be additive due to rounding.

The following tables show our net income and return on equity, excluding tax adjustments and other items, for the trailing 12 months ended September 30 (in millions):

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Net income (GAAP) | $241.6 | $168.5 |
| Adjustments attributable to consolidated pre-tax income: |  |  |
| Net loss on Specialized Gas Vessels at Portfolio Management (1) | $4.2 | $31.5 |
| Net loss on Rail Russia at Rail International (2) | 3.5 | 10.8 |
| Environmental remediation costs (3) | — | 5.9 |
| Net insurance proceeds (6) | — | (5.3) |
| Total adjustments attributable to consolidated pre-tax income | $7.7 | $42.9 |
| Income taxes thereon, based on applicable effective tax rate | $— | $(0.2) |
| Other income tax adjustments attributable to consolidated income: |  |  |
| Income tax rate change (4) | — | (3.0) |
| Total other income tax adjustments attributable to consolidated income | $— | $(3.0) |
| Adjustments attributable to affiliates' earnings, net of taxes: |  |  |
| Aircraft spare engine impairment at RRPF (5) | $— | $11.5 |
| Total adjustments attributable to affiliates' earnings, net of taxes | $— | $11.5 |
| Net income, excluding tax adjustments and other items (non-GAAP) | $249.3 | $219.7 |

(1) In the second quarter of 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.

(2) In the third quarter of 2022, we made the decision to exit Rail Russia and recorded losses in 2022 associated with the impairment of the net assets. In the first quarter of 2023, we sold Rail Russia and recorded a gain on the final sale of this business.

(3) Reserve recorded as part of an executed agreement for anticipated remediation costs at a previously owned property, sold in 1974.

(4) Deferred income tax adjustment due to an enacted corporate income tax rate reduction in Austria in 2022.

(5) Impairment losses related to aircraft spare engines in Russia that RRPF does not expect to recover.

(6) Net gain from insurance recoveries for storm damage to a maintenance facility at Rail North America.

|  | 2023 | 2022 |
| --- | ---: | ---: |
| Return on Equity (GAAP) | 11.7% | 8.6% |
| Return on Equity, excluding tax adjustments and other items (non-GAAP) | 12.1% | 11.2% |

## Market risk

As filed, 377 characters.

Since December 31, 2022, 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, 2022.

## Controls and procedures

As filed, 788 characters.

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.

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 September 30, 2023, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 223 characters.

There have been no material changes in our risk factors since December 31, 2022. 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, 2022.

Filed Oct 26, 2023.
Source: SEC EDGAR, the filing index for accession 0000040211-23-000162. Last ingested by Listed: Nov 2, 2026, 20:08 ET. No prices; not investment advice.