GATX Corp. (NYSE:GATX) Q4 2014 Earnings Conference Call - Final Transcript

Jan 22, 2015 • 11:00 am ET

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GATX Corp. (NYSE:GATX) Q4 2014 Earnings Conference Call - Final Transcript

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Executive
Jennifer Van Aken

of the inland marine barges improved due to strong grain shipments.

In the coming year, leases on approximately 17,000 railcars and on North American term lease fleet are scheduled for renewal. In addition, we have approximately 6,000 boxcars scheduled for renewal. As noted in the press release, we currently expect 2015 earnings to be in the range of $5.15 to $5.35 per diluted share, excluding any impact from tax adjustments or other items.

With that quick overview, I'll turn it over to Brian for additional color on 2014 and our outlook for the year ahead.

Executive
Brian Kenney

Okay, thanks Jennifer. Before we open up the call to questions, I want to address three topics very quickly. First, I'll provide some color around our 2015 earnings outlook; second, I'll give you a quick update on the tank car regulatory situation; and third, I'd like to address upfront some of the questions we've been receiving concerning the impact of historically lower crude prices on our lease fleet.

So let's start with that 2015 outlook. As the press stated, we've never been in a stronger position from a fleet perspective than we are entering 2015. I mean you see 99% utilization our renewal success rate in the mid-80s. We saw an average renewal rate increase as Jennifer said in our lease pricing index of close to 40%. We've had continued success at lengthening lease term. And in general, the team has done outstanding job of using the strong market of the past few years to position us for continued earnings and cash flow growth in the years ahead.

So in 2015, we project North American rail segment profit to increase close to

Executive
Brian Kenney

10% from last year to run down the income statement. Lease revenue should increase primarily due to renewing expiring leases at higher rates again in 2015. We'll also see a full year revenue contribution from the acquired boxcar fleet. We actually expect a smaller increase in 2015 maintenance expense than in recent years. We'll have a full year of impact once again of the boxcar fleet from a maintenance perspective, but that's going to be offset by a drop in our tank qualification compliance events compared to last year.

Asset remarketing should approximate 2014's level. And if you look at investment activity, it will still be robust in 2015. We expect to purchase close to 4,000 cars. But it will probably fall short of the investment activity we saw last year when we had that $340 million boxcar acquisition and unless of course we see another attractive opportunity.

In international rail, we expect a slight increase in segment profit. Lease rates and lease revenue is expected to increase again. They're going to have higher lease rates as they continue their fleet renewal program of the last few years where they've been adding new cars to scrapping older cars. But really Europe will be wrestling with another uneven year for tank car demand in 2015. So, we expect utilization to bounce around from quarter-to-quarter.