Gatx Corp: Form 10-Q for the period ended Sep 30, 2025

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 nine months ended September 30, 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.

On May 29, 2025 GATX entered into a definitive agreement to acquire approximately 105,000 railcars from Wells Fargo Bank, N.A. ("Wells Fargo") for $4.4 billion through a newly formed joint venture with Brookfield Infrastructure Partners L.P. and its institutional partners (collectively, “Brookfield”). Initially, GATX's ownership share in the joint venture will be 30%, with Brookfield's share at 70%. GATX will have the option to acquire up to 100% of the joint venture equity over time. A portion of the purchase price will be financed by the joint venture in the form of debt financing. GATX will also directly purchase approximately 223 locomotives from Wells Fargo, and Brookfield will directly acquire Wells Fargo’s rail finance lease portfolio. GATX will serve as manager of the railcars in the joint venture as well as the finance lease portfolio directly owned by Brookfield.

On September 16, 2025, GATX announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with the transaction, which followed clearance from the European Commission under the EU merger regulation in August 2025. Additionally, the legal mandatory waiting period under the Canadian Competition Act expired on September 24, 2025 and, on October 9, 2025, the parties received a no-action letter from the Commissioner of Competition indicating that he does not intend to challenge the transaction under the merger provisions of the Canadian Competition Act. Transaction approval is pending with additional regulatory agencies, following which the transaction is anticipated to close in the first quarter of 2026 or sooner, subject to customary closing conditions.

On September 23, 2025, GATX Rail Europe entered into a definitive agreement to acquire approximately 6,000 railcars from DB Cargo AG. The transaction is subject to customary closing conditions, including required regulatory approvals and clearances, and is expected to close in the fourth quarter of 2025.

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 nine months 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 nine months ended September 30, 2025 was $236.3 million, or $6.46 per diluted share, compared to $207.7 million, or $5.68 per diluted share, for the same period in 2024. Results for the nine months ended September 30, 2025, included a net positive impact of $5.3 million ($0.15 per diluted share) from tax adjustments and other items. Results for the nine months ended September 30, 2024 included a net negative impact of $9.9 million ($0.27 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 $13.4 million compared to the prior year, largely due to higher revenue at Rail North America and Rail International, higher dedicated and 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 lower net gain on asset dispositions and higher maintenance expense at Rail North America, and higher interest and depreciation expense.

Net income for the three months ended September 30, 2025 was $82.2 million, or $2.25 per diluted share, compared to $89.0 million, or $2.43 per diluted share, for the same period in 2024. Results for the three months ended September 30, 2025, included a net positive impact of $5.3 million ($0.15 per diluted share) from tax adjustments and other items. Results for the three months ended September 30, 2024 included a net negative impact of $2.5 million ($0.07 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 decreased $14.6 million compared to the prior year, largely due to lower net gain on asset dispositions and higher maintenance expense at Rail North America, and higher interest expense, partially offset by higher revenue at Rail North America and Rail International, higher dedicated and non-dedicated engine revenue at Engine Leasing, and higher earnings at the RRPF affiliates.

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

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

(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.

RAIL NORTH AMERICA

Segment Summary

Demand for most railcars was stable despite ongoing macroeconomic uncertainty and the renewal success rate remained strong. Utilization was 98.9% at the end of the current quarter.

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

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

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Rail North America Fleet Data

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

(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, 2025, leases for approximately 6,900 tank and freight cars and approximately 600 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 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 September 30, 2025, 7,901 railcars have been ordered pursuant to the terms of the agreement, of which 5,223 railcars have been delivered.

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 third quarter of 2025, the renewal rate change of the LPI was positive 22.8%, compared to positive 24.2% in the prior quarter, and positive 26.6% in the third quarter of 2024. Lease terms on renewals for railcars in the LPI averaged 60 months in the current quarter, compared to 60 months in the prior quarter, and 59 months in the third quarter of 2024.

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

(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 Nine Months of 2025 to the First Nine Months of 2024

Segment Profit

In the nine months ended September 30, 2025, segment profit of $256.1 million decreased 5.7% compared to $271.5 million for the same period in the prior year. The decrease was driven by lower net gains on asset dispositions and higher maintenance and interest expense, partially offset by higher revenue.

Revenues

In the nine months ended September 30, 2025, lease revenue increased $59.1 million, or 8.1%, driven by more railcars on lease and higher lease rates. Other revenue increased $12.5 million primarily due to higher repair revenue, partially offset by lower lease termination fees.

Expenses

In the nine months ended September 30, 2025, maintenance expense increased $33.1 million, driven by more repair events, including more repairs performed by the railroads, and a mix of repairs that resulted in higher costs per repair. Depreciation expense increased $13.1 million, due to the timing of new railcar investments and dispositions.

Other Income (Expense)

In the nine months ended September 30, 2025, net gain on asset dispositions decreased $13.3 million, driven by lower net gains on asset dispositions, 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 $24.1 million, due to a higher average debt balance and higher average interest rate.

Investment Volume

During the nine months ended September 30, 2025, investment volume was $502.5 million compared to $955.7 million in the same period in 2024. We acquired 1,805 newly built railcars and purchased 849 railcars in the secondary market in the nine months ended September 30, 2025, compared to 2,987 newly built railcars, 2,005 railcars in the secondary market, and 156 locomotives 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.

Comparison of Reported Results for the Third Quarter of 2025 to the Third Quarter of 2024

Segment Profit

In the three months ended September 30, 2025, segment profit of $70.7 million decreased 31.0% compared to $102.4 million for the same period in the prior year. The decrease was driven by lower net gains on asset dispositions and higher interest and maintenance expense, partially offset by higher revenue.

Revenues

In the three months ended September 30, 2025, lease revenue increased $14.9 million, or 6.0%, driven by higher lease rates. Other revenue increased $3.1 million, primarily due to higher repair revenue.

Expenses

In the three months ended September 30, 2025, maintenance expense increased $15.4 million, driven by more repair events and a mix of repairs that resulted in higher costs per repair. Depreciation expense increased $2.9 million, due to the timing of new railcar investments and dispositions.

Other Income (Expense)

In the three months ended September 30, 2025, net gain on asset dispositions decreased $25.4 million, driven by lower net gains on asset 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 $4.7 million, due to a higher average debt balance and higher average interest rate.

RAIL INTERNATIONAL

Segment Summary

Rail International, composed primarily of GATX Rail Europe ("GRE"), experienced a challenging railcar leasing market as GRE faced ongoing macroeconomic headwinds, including weak GDP results. This uncertain environment continued to cause some customers to take a cautionary approach to rail fleet planning, thereby tempering demand across certain car types. Despite pressure on utilization, GRE experienced renewal lease rate increases for most railcar types in the period. Utilization was 93.7% at the end of the current quarter.

On September 23, 2025, GATX Rail Europe entered into a definitive agreement to acquire approximately 6,000 railcars from DB Cargo AG. The transaction is subject to customary closing conditions, including required regulatory approvals and clearances, and is expected to close in the fourth quarter of 2025.

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 strong, driven by continued growth in the economy and infrastructure development. Utilization was 100.0% at the end of the current quarter.

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

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GRE Fleet Data

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

(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 September 30, 2025, leases for approximately 4,500 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.

Rail India Fleet Data

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

(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 Nine Months of 2025 to the First Nine Months 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 nine months ended September 30, 2025, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $6.5 million and positively impacted segment profit, excluding other income (expense), by approximately $3.2 million compared to the same period in 2024.

Segment Profit

In the nine months ended September 30, 2025, segment profit of $92.3 million increased 3.5% compared to $89.2 million for the same period in the prior year. The increase was primarily due to higher lease revenue and changes in foreign currency exchange rates, partially offset by higher interest expense.

Revenues

In the nine months ended September 30, 2025, lease revenue increased $18.5 million, or 7.4%, due to more railcars on lease and higher lease rates at GRE and Rail India and the impact of foreign exchange rates.

Expenses

In the nine months ended September 30, 2025, maintenance expense increased $2.8 million, primarily due to more repair events, higher costs of repairs, and the impact of foreign exchange rates, partially offset by lower wheelset costs. Depreciation expense increased $6.2 million, due the impact of new railcars added to the fleet.

Other Income (Expense)

In the nine months ended September 30, 2025, net interest expense increased $7.1 million, due to a higher average interest rate and a higher average debt balance. Other (expense) income was unfavorable by $2.3 million, driven by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

Investment Volume

During the nine months ended September 30, 2025, investment volume was $209.9 million compared to $190.1 million in the same period in 2024. In the nine months ended September 30, 2025, GRE acquired 1,353 newly built railcars compared to 1,120 newly built railcars for the same period in 2024, and Rail India acquired 1,129 newly built railcars compared to 1,561 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.

Comparison of Reported Results for the Third Quarter of 2025 to the Third 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 September 30, 2025, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $4.8 million and positively impacted segment profit, excluding other income (expense), by approximately $2.6 million compared to the same period in 2024.

Segment Profit

In the three months ended September 30, 2025, segment profit of $34.4 million increased 1.5% compared to $33.9 million for the same period in the prior year. The increase was primarily due to higher lease revenue and changes in foreign currency exchange rates, partially offset by higher interest expense.

Revenues

In the three months ended September 30, 2025, lease revenue increased $7.9 million, or 9.2%, driven by more railcars on lease at Rail India and higher lease rates at GRE and Rail India, as well as the impact of foreign exchange rates.

Expenses

In the three months ended September 30, 2025, maintenance expense increased $1.1 million, primarily due to more repair events, higher costs of repairs, and the impact of foreign exchange rates. Depreciation expense increased $2.7 million, due the impact of new railcars added to the fleet.

Other Income (Expense)

In the three months ended September 30, 2025, net interest expense increased $2.2 million, due to a higher average debt balance and a higher average interest rate. Other (expense) income was unfavorable by $1.3 million, driven by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

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 $109.4 million and $53.4 million for the nine months and three months ended September 30, 2025, compared to $75.8 million and $35.2 million for the same periods in 2024. In the third quarter of 2025, the RRPF affiliates recorded income from insurance recoveries related to aircraft spare engines. GATX's 50% share of this recovery was $10.9 million ($8.2 million after tax). The operating environment for the RRPF affiliates continued to be favorable as robust global passenger air travel continued to drive strong demand for aircraft spare engines.

Engine Leasing also includes GATX Engine Leasing ("GEL"), our wholly owned entity that invests directly in aircraft spare engines. GEL acquired seven aircraft spare engines for $147.1 million in the third quarter of 2025, all of which were placed on long-term leases directly with a customer. As of September 30, 2025, GEL owned 46 aircraft spare engines, with 21 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 $4.1 million and $1.4 million for the nine months and three months ended September 30, 2025 and $2.9 million and $1.1 million for the same periods in 2024.

The following table shows Engine Leasing’s segment results (in millions):

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

RRPF Affiliates' Portfolio Data

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

(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:

Comparison of Reported Results for the First Nine Months of 2025 to the First Nine Months of 2024

Segment Profit

In the nine months ended September 30, 2025, segment profit was $126.3 million, compared to segment profit of $81.6 million for the same period in the prior year. Segment profit in 2025 included $10.9 million from insurance recoveries at the RRPF affiliates, as noted above. Segment profit in 2024 included $0.6 million of gains associated with the sale of the Specialized Gas Vessels. Excluding the impact of these items, results for Engine Leasing were $34.4 million higher than 2024. The increase was driven by higher earnings at the RRPF affiliates and GEL.

Revenues

In the nine months ended September 30, 2025, lease revenue increased $2.3 million, driven by aircraft spare engines acquired in 2025 and placed on leases directly with airline customers. Non-dedicated engine revenue increased $19.5 million, due to aircraft spare engines acquired in 2024 and utilized in the engine capacity agreement with Rolls-Royce.

Expenses

In the nine months ended September 30, 2025, depreciation expense increased $2.1 million, due to aircraft spare engines acquired in 2024 and 2025, partially offset by the impact of an increase in the useful lives of certain engines.

Other Income (Expense)

In the nine months ended September 30, 2025, income from our share of affiliates' earnings increased $33.6 million, driven by higher income from operations, partially offset by lower remarketing income. Higher income from operations was primarily due to more aircraft spare engines in the fleet and the income from insurance recoveries, as noted above, partially offset by higher interest expense. The amount and timing of remarketing income is dependent on a number of factors and may vary materially from period to period.

Investment Volume

In the nine months ended September 30, 2025, investment volume was $147.1 million, compared to $166.1 million in the same period in 2024. GEL acquired seven aircraft spare engines in the nine months ended September 30, 2025 that were placed on long-term leases directly with a customer and seven aircraft spare engines in the same period of 2024 that were employed in the engine capacity agreement with Rolls-Royce.

Comparison of Reported Results for the Third Quarter of 2025 to the Third Quarter of 2024

Segment Profit

In the three months ended September 30, 2025, segment profit of $60.4 million increased $22.9 million compared to segment profit of $37.5 million for the same period in the prior year. Segment profit in 2025 included $10.9 million of insurance recoveries at the RRPF affiliates, as noted above. Excluding the impact of this item, results for Engine Leasing were $12.0 million higher than 2024. The higher result was driven by higher earnings at the RRPF affiliates and GEL.

Revenues

In the three months ended September 30, 2025, lease revenue increased $2.3 million, driven by aircraft spare engines acquired and placed on leases directly with airline customers. Non-dedicated engine revenue increased $4.4 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 September 30, 2025, depreciation expense increased $0.2 million, due to aircraft spare engines acquired in 2024 and 2025.

Other Income (Expense)

In the three months ended September 30, 2025, income from our share of affiliates' earnings increased $18.2 million, driven by higher income from operations, partially offset by lower remarketing income. Higher income from operations was primarily due to more aircraft spare engines in the fleet and the income from insurance recoveries, as noted above, partially offset by higher interest expense. The amount and timing of remarketing income is dependent on a number of factors and may vary materially from period to period.

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.

In the third quarter of 2025, GATX recorded $3.8 million of expenses associated with the potential acquisition of Wells Fargo's rail assets. These expenses were recorded in SG&A.

In addition, a customer sold its interest in a nuclear power plant facility for which GATX previously managed the lease, and GATX received $7.4 million of residual sharing proceeds as part of a previously agreed upon residual sharing arrangement. This income was recorded in Other income (expense), including eliminations.

In the third quarter of 2024, GATX recorded settlement expenses of $3.3 million for litigation claims arising out of legacy business operations. In the second quarter of 2024, GATX recorded reserves of $10.7 million for its share of anticipated environmental remediation costs arising out of prior operations and legacy businesses. The majority of the recorded reserves relate to a facility that GATX sold in 1974, while the remainder of the amount relates to a landfill that GATX entities previously utilized, which was closed in 1986. These items were recorded in Other income (expense), including eliminations.

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

Trifleet Summary

The tank container leasing market remained challenging in the third quarter of 2025 due to macro-economic headwinds, causing some customers to postpone procurement decisions. Utilization was 83.9% 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:

(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 $9.3 million for the nine months ended September 30, 2025 compared to the same period in the prior year. The variance was driven by higher employee-related expenses, including higher share-based compensation expense and the expenses associated with the potential acquisition of Wells Fargo's rail assets noted above, partially offset by lower information technology expense.

SG&A increased $9.0 million for the three months ended September 30, 2025 compared to the same period in the prior year. The variance was primarily due to higher employee-related expenses, including higher share-based compensation expense and the expenses associated with the potential acquisition of Wells Fargo's rail assets noted above.

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 $20.7 million for the nine months ended September 30, 2025 compared to the same period in the prior year. The variance was driven by the absence of environmental reserves and expenses related to litigation claims settlements recorded in the prior year and residual sharing proceeds received in the current year, as noted above.

Other income (expense), including eliminations was favorable by $9.9 million for the three months ended September 30, 2025 compared to the same period in the prior year. The variance was primarily a result of the absence of expenses related to the settlements of litigation claims recorded in the prior year and residual sharing proceeds received in the current year, as noted above.

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 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 September 30, 2025, we had an unrestricted cash balance of $696.1 million. We also have a $632 million, 5-year unsecured revolving credit facility in the United States that matures in 2030 and a $368 million, 3-year unsecured revolving credit facility in the United States that matures in 2028, both of which were fully available as of September 30, 2025. In addition, we have a €210 million, 3-year unsecured revolving credit facility in Europe that matures in 2027, of which €120 million was available as of September 30, 2025.

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

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2025 increased $107.7 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, 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 nine months ended September 30 (in millions):

(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 $448.1 million for the nine months ended September 30, 2025 was primarily due to fewer railcars and locomotives acquired at Rail North America and Rail India, the cost of aircraft spare engines acquired at GEL, 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.

Portfolio proceeds increased by $39.7 million for the nine months ended September 30, 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 nine months ended September 30 (in millions):

(1) In the nine months ended September 30, 2025, we repurchased 125,709 shares of common stock for $18.6 million. In the nine months ended September 30, 2024, we repurchased 166,400 shares of common stock for $21.8 million.

(2) In the nine months ended September 30, 2024, we purchased 728 railcars that were previously leased.

The following table shows the activity on our long-term debt principal in the nine months ended September 30, 2025 (in millions):

(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 during the nine months ended September 30, 2025:

U.S. debt

• $500.0 million of 10-year unsecured 5.50% fixed rate debt.
• $300.0 million of 30-year unsecured 6.05% fixed rate debt.

Europe debt

• €120 million ($140.8 million) of 7-year term loan at GRE in two tranches:
• €80 million ($93.9 million) of floating rate debt, currently 3.485%.*
• €40 million ($46.9 million) of 3.88% fixed rate debt.

(*) Floating rates are based on the applicable interest rate as of September 30, 2025.

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 September 30, 2025 (in millions):

(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, 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.

In the second quarter, we increased our existing $600 million, 5-year unsecured revolving credit facility in the United States to $632 million and extended the maturity on this facility by one year from May 2029 to May 2030. This facility contains one additional one-year extension option. As of September 30, 2025, the full $632 million was available under this facility. Additionally, in the second quarter, we increased our existing $350 million, 3-year unsecured revolving credit facility in the United States to $368 million and extended the maturity on this facility by one year from May 2027 to May 2028. This facility contains one additional one-year extension option. As of September 30, 2025, the full $368 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 September 30, 2025, €120 million was available under this credit facility. In addition, our European subsidiaries have smaller unsecured credit facilities with an aggregate limit of €25.0 million. As of September 30, 2025, €15.0 million was available under these credit facilities, as €10.0 million ($11.7 million) was drawn. The weighted average interest rate of these outstanding borrowings during the nine months ended September 30, 2025 was 3.4%.

Delayed Draw Term Loans

As of September 30, 2025, we had INR 2.0 billion ($22.5 million) available under an outstanding delayed draw term loan in India.

Restrictive Covenants

Our $632 million and $368 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 September 30, 2025, our European rail subsidiaries had outstanding term loans, public debt, and private placement debt balances totaling €790.0 million, and Trifleet had an outstanding term loan of €116.0 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 ($139.7 million) that are subject to certain restrictive covenants.

At September 30, 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 September 30, 2025:

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):

(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 nine months ended September 30, 2025, we repurchased 125,709 shares of common stock for $18.6 million, excluding commissions. We repurchased 166,400 shares of common stock for $21.8 million during the same period in 2024. As of September 30, 2025, $46.5 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, 2025. Refer to our Annual Report on Form 10-K for the year ended December 31, 2024, 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 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):

(*) 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):

(1) Non-recurring expenses associated with the potential acquisition of Wells Fargo's rail assets.

(2) Expenses recorded for the settlements of litigation claims arising out of legacy business operations.

(3) Reserves recorded in 2024 for our share of anticipated environmental remediation costs arising out of prior operations and legacy businesses.

(4) 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.

(5) Insurance recoveries related to aircraft spare engines at RRPF for which it had previously recorded impairment losses.

(6) Deferred income tax adjustment attributable to state tax rate reductions in 2024 and 2023.

(7) Valuation allowance adjustment associated with the realizability of state net operating losses in future tax years.

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.

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 September 30, 2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.