Q4 2021 GATX Corp Earnings Call
Please standby were about to begin.
Good day and welcome to the J E T X 2021 fourth quarter Conference call. Today's conference is being recorded at this time I would like to turn the conference over to MS. Shari Hellerman director of Investor Relations. Please go ahead.
Thank you Jim.
Good morning, everyone.
Thank you for joining Gatx's fourth quarter, and 2021 yearend earnings conference call.
I'm joined today by Brian Kenney, President and CEO .
Tom Ellman Executive Vice President and CFO .
Bob Lyons Executive Vice President and President of rail North America.
Please note that some of the information you'll hear during our discussion today will consist of forward looking statements.
Actual results or trends could differ materially from those statements or forecast.
For more information please.
First to the risk factors included in our release.
As discussed in Gatx's 'twenty 'twenty Form 10-K in 2020 , one Form 10-Q .
G. A T X assumes no obligation to update or revise any forward looking statements to reflect subsequent events or circumstances.
I'll provide a quick overview of our 2021 fourth quarter and full year results.
And then Brian will provide additional comments on 2020 one.
Well as our outlook for 2022.
After that well open the call up for questions.
Earlier today <unk>.
T X reported 2021 fourth quarter net income from continuing operations of $61 million or $1 69 per diluted share.
This compares to 2024th quarter net income from continuing operations of $17 8 million or 50 cents per diluted share.
The 2021 fourth quarter results include a net positive impact of $4 million or 11 cents per diluted share related to tax adjustments and other items.
For the full year 2021, G. H T X reported net income from continuing operations of $143 1 million or $3 98 per diluted share.
This compares to net income from continuing operations of $150 2 million or $4.24 per diluted share in 2020.
The 2021 and 'twenty 'twenty full year results, including that negative impact of $1.08 per diluted share and 35 per diluted share respectively associated with various tax adjustments and other items.
These items are detailed on page 13 of our earnings release.
Total 2021 investment volume was $1.1 billion as we continue to find attractive opportunities to invest in our businesses across the globe.
Additionally in 2021.
G H T X, we purchased about 131000 shares for approximately $13 million.
As of December 31st 'twenty, 'twenty, one we have approximately $137 million remaining under our existing repurchase authorization.
Lastly, as noted in the earnings release.
We currently expect 2022 earnings to be in the range of $5.50.
So $5 80 per diluted share.
With that I will now turn the call over to Brian .
Yeah. Thanks, Jerry Good morning, everyone. Shari said I'll give you some brief color on our 2021 performance, but more importantly get you some more detail underpinning our 2022 guidance so let.
Let me get started Sherri gave you the numbers so I won't repeat them here, but I will say that we increasingly outperformed our expectations as we move through the year that was especially true at rail North America.
You saw in the press release absolute lease rates have increased now for six consecutive quarters.
And that drove our lease pricing index to be virtually flat in the quarter is negative 0.7%, but I'll give you more on where we think lease pricing is going in 2022 in just a minute.
So the pricing strength was driven by solid demand driven.
Driven by our diversified fleet composition and was driven by excellent execution by our commercial team.
The year progressed.
It took more risk as they push lease rates harder and they succeeded and they enjoyed high lease renewal success, which drove lower fleet churn than we expected coming into the year and combined with lower railroad repairs and our ongoing efforts to drive more repairs into our own network.
With us experience much lower maintenance costs than we originally expected.
<unk> factor to talk about for 2021 around North America was high asset values.
Not only did the railcars that we sold in the secondary market realize the values that we originally planned.
But continued high scrap prices also drove strap gains through 2021 as well. So it was a very strong year for rail North America versus our expectations and the team really did take advantage of an improving market.
Turning to international rail, we expected significant increase in profitability in 2021, and they delivered they increased their segment profit by over $21 million from 'twenty to 'twenty that was about 25% increase.
That performance was driven by continuing strong underlying markets.
<unk> earnings from the significant investments that we've made over the last few years.
In addition, they didn't have to deal with the foreign exchange headwinds that they dealt with in 2020.
Within portfolio management profit in a rolls Royce and partners Finance joint ventures was down $40 million from the prior year, but that was just as we anticipated and.
And that JV can change to operate in a difficult market for a long haul air travel and the drop in segment profit was driven by much lower asset remarketing gains relative to the prior year.
Considering our acquisition of Tri fleet, our tank container leasing business, they too outperformed our expectations of.
Worldwide tank container market strengthened throughout the year.
As you might remember we originally expected try fleet to be 10 cents dilutive to earnings in 2021 and that was due to the accounting.
Associated with purchase price hold backs that retention agreements in connection with the acquisition, but truthfully. It actually ended up 2021 being slightly accretive. So in summary, 2021 showed very strong financial performance versus our expectations really across our businesses.
Before I close the discussion on 2021, I want to point out as Sheri indicated we invested over $1 billion again in 2021.
$360 million of that total was for railcar deliveries that we were obligated to take coming into the year. That's from our committed supply agreements of rail North America.
But that means we were able to close over $770 million of other attractive investment opportunities in 2021 with our customers.
And that was accomplished despite asset prices steadily increasing throughout the year and from my perspective.
That's extraordinary performance by the team as I said in the last earnings call.
Getting tough to economically justify speculative investment due to the extremely high asset prices president in todays market, so to close to that level of investment in 2021.
Our team had to secure the customers in advance.
Have them commit the higher lease rates and in many cases longer lease terms all in order to amortize that increase at asset costs and their success in doing so it's why these investments be attractive financially to us despite the higher cost so.
It points to a couple of things.
Access is a sign that not only does our team has strong customer relationships. It's also a sign that there's good demand for our new assets across our markets. So a really good job by the team to secure that levels of investment and still maintain our investment discipline.
So let me turn to the 2022 outlook I'll start by saying that we enjoy a strong balance sheet excellent access to capital.
Continued favorable market conditions, and our growing international rail businesses and for the first time in years the market for our largest business rail North America.
<unk> turned the corner and has recovered to the point that the Gatx's fleet can experience some pricing leverage so some detail on that point.
As you know rail North America has been operating in a market with an oversupply situation for years really since the crude by rail boom collapsed in early 2015.
Over the last two years, you've heard us say that this market is gradually recovering and that was due to natural industry fleet attrition. So spurred by the combination of reduced railcar manufacturing output combined.
Combined with the scrapping of older cars. So for our fleet is well constructed and is well diversified as the Gatx's fleet.
We think that market conditions have recovered to the point that we expect to see on average positive lease rate changes upon renewal in 2022. In fact, we currently expect our lease price index to show a positive 5% to 15% change this year.
So that's a noteworthy development at the last time, we saw a positive change in the lease pricing index for a full year.
It was a 2015.
We also anticipate continued high renewal success slightly lower utilization this year with a net effect of all these factors being that we expect a small revenue increase for rail North America versus last year.
Looking at net maintenance expense, it's been a good news story, we've outperformed our expectations for this the last three years.
2021, we continue to aggressively move more work from third party facilities into our own network and thus, we realized lower than expected cost, but with over 90% of our tank car I covered hopper maintenance events now being performed at our own network.
Further efficiency gains from that strategy will slow in 2022 and with the labor disruptions were currently saving from Covid waves.
And the inflationary pressures on material costs. We currently expect will be doing well to have net maintenance expense to be relatively flat in 2022.
The last factor I wanted to discuss for rail North America's asset disposition income.
Secondary Mark for railcar sales in 2021 was very strong as we said and as expected we realize much higher gains on asset dispositions versus the prior year.
And asset prices remain high and Investor appetite is strong and that's due to the widespread access to low cost capital.
And high scrap steel prices are well, we'll expect another strong year for asset gains in rail North America. In fact, I'd say, we anticipate a level similar to or somewhat higher than 2021, as we continue to optimize our fleet. So.
As always if the secondary market changes will change our disposition plans they will act economically.
So the net effect of all this is that we expect 2022 segment profit at rail North America to be up in the $15 million to $25 million range from 2021.
Let me move to international rail and I'll start with Gatx's rail Europe .
As we've discussed in recent years, the European rail wagon leasing market.
As robust as we've seen since we entered the market in the early 19 nineties and we expect that favorable market to continue and we are investing more into that market. In 2022, we anticipate adding more than 2500 wagons at attractive lease rates, all while continuing to realize small renewal rate increases on the existing fleet so that car.
The nation of new investment and strong performance on the existing fleet.
As expected to result in an increase in real Europe's profit of $4 million to $6 million in 2022.
And rail India. There are 2021 fleet growth as you know was curtailed yet again by a manufacturing shutdown due to another COVID-19 wave in the spring of last year that risk, obviously still remains but absent another COVID-19 shutdown, we anticipate significant growth in our Indian fleet this year.
Expecting to add over 200 wagons to our fleet in 2022.
They also continue to diversify their car types the customer mix.
And their growth is expected to increase their profit in the range of $3 million to $5 million. This year. So combined with <unk> rail Europe that means the expected segment profit growth for rail international in total is expected to be in that $7 million to $11 million range in 2022.
Our portfolio management as I said earlier, the RPF joint venture, that's our partnership with Rolls Royce.
To be hampered by the reduction in long haul global Air travel honestly, we've given up trying to estimate the timing of a full recovery of air travel because it appears to be so dependent on the ebbs and flows of the pandemic.
But we strongly believe in the ultimate recovery of that market. So in the meantime, we will continue to focus on improving the JCB Jv's performance.
And finding attractive investment opportunities such as the $350 million of direct engine investment that <unk> made in 2021.
So in 2022, we expect lower segment profit of $5 million to $7 million in portfolio management, and Thats due primarily to lower asset remarketing activity at Rps.
And lastly, I try fleet as I said that tank container leasing market improved throughout 2021 remained strong as we entered 2022.
We did increase try fleets investment in that business due to the strong market combined with Jackson's more efficient access to low cost capital.
And thus and I also think we're just starting to realize the customer synergies, we anticipated before we purchased that business.
And we currently expect try fleet profit to increase in the $2 million to $3 million range in 2022.
Quickly SG&A other corporate costs, we are experiencing the same cost pressures that everyone is experiencing these days related to employee wage inflation, but also judas of growth related to head count of rail international.
That should be offset by some 2021 corporate costs that won't occur again this year. So.
Right now, we expect the SG&A and corporate costs will be essentially flat in 2022.
The last item is our tax rate is projected to be a point or two lower this year due to some tax adjustments in 2021 that should not reoccur this year.
The net effect of the increase in segment profit flat SG&A corporate costs, and a slightly lower tax rate and the assumption of resume share repurchases in 2022.
Results in our expectation that earnings per share will be in the range of $5 50 to $5 80 per diluted share this year.
All of this assumes no significant COVID-19 related disruption again in 2022.
I want to close by reminding you that as always.
2022 will mark our 104th consecutive year of paying a dividend.
Track record that very few can match the GH ex board meets this Friday, they will discuss our 2022 plans for the dividend. So we'll announce that decision at that time, obviously the board understands the importance of the dividend and I think our century long streak is a great example of our long term record of success and commitment to our share.
Our holders so once again I want to stress the GH ex employees executed our plan very well yet again in 2021.
And I'm really confident that between the investments, we're making and the expectation that our largest business. We will see positive revenue trends for the first time in over six years.
That will continue to reward our shareholders confidence in us for years to come so.
That's all I had operator, you can open it up to questions.
Thank you.
Question. Please signal by pressing star one on your telephone keypad.
Make sure your mute function is turned off.
No.
Matt again press Star one to ask a question we'll pause for.
For just a moment.
No further questions.
Okay.
And we'll go first to Allison.
Wells Fargo.
Okay.
Okay.
And I guess, the the L. P. I you know obviously a positive direction here could you maybe give a little color in terms of you know obviously absolute lease rates are gonna be redoing higher than what's being renewed but relative to what you guys view as normal could you give us any like perspective, it's kind of where we are with that at this point.
Yeah.
Allison, It's Bob I'm happy to take that question for you as Brian mentioned in his opening comments for the sixth consecutive quarter, we saw absolute lease rates move up.
And as we look into 2022 with regards to the L. P. I, we have for the first time in a very long time, both elements working in our favor which is the average expiring rate is actually ticking down a little bit and the average expected renewal rate is going up so that puts us in that positive 5% to 15% range.
We are with regards to normalize the long run lease rates.
Particularly with regards to the tank car fleet, where we're getting closer.
Two two that equilibrium line still some to go when the variability in freight as is Tim.
Much higher than it is in tank.
But all signs moving in the right direction.
Great and then Brian I wanted to go back to a comment that you would be.
With some of your your color and outlook.
You mentioned the high renewal rate, obviously positive lease rate, but you said the renewal the lease rate renewals is gonna be lower meaning I guess your percentage I know, it's been high the past two quarters, I guess any thoughts there and why you're thinking that and then on top of that maintenance flat if that was going to be lower I thought that would be higher or are those just cars that are getting retired at this point.
Just any thoughts around that.
Well, what I said was renewal success would be similar in 2022, I did say, we might have a slight drop in fleet utilization honestly. It's the only way you can go down when youre at 99, 2% so that could be a slight drop there, but we expect similar renewal success in 2022 as we had in 2021 on the maintenance side, but do you want to.
Sure I think.
Couple of things going on on the maintenance side, and then again to reiterate what Brian said in his opening comments overall, we expect then that maintenance line to be relatively flat with where we were in 2021. So while we are facing some pressures with regards to both.
Labor rates material costs, many of the things that other folks in our industry are in all industries are facing.
We will be able to hold the line overall on cost because a lot of because of the number of efficiencies that we've been able to realize the number of cars were running through our own network relative to where we were in years past.
So we're essentially offsetting some of those macro pressures with the things we've been able to do in our network over the course of the last few years.
Understood. Thank you.
Okay.
We'll go next to Justin long with Stephens.
Thanks, and good morning.
Wanted to circle back to Allison's question about absolute lease rates are you able to share the percent increase that we saw in the fourth quarter in absolute lease rates and then circling back to the assumption on remarketing income just because thats something that can swing results around so significantly in.
North America any color you can give us on the cadence quarterly of that remarketing income that we should expect in 2022.
Yeah.
Sure Justin It's Bob I'll I'll take the first one with regards to absolute lease rates between third quarter and fourth quarter.
Tank and freight combined you're looking at that number about 7% or 8%.
With sequent sequel.
Sequential increase.
And again, what's most powerful there.
Six quarters in a row with a positive number in front of it.
That's what it takes in this industry is consistent performance like that overall to turn rates and turn the tide.
We're definitely seeing that.
With regards to remarketing income always difficult to predict.
Order to corner.
Just because of the way the timing of transactions work the number of transactions we have in the secondary market.
Yeah, where we sit today I think we will get the year off to a pretty good start in the first and second quarter.
So it may be a little bit more weighted towards the front end, but again always hard to predict.
Understood and secondly, I wanted to follow up on capital allocation you, Brian you alluded to the over 1 billion dollar investment in each of the last two years any thoughts around what that number could look like in 2022, just based on what youre seeing in the market and valuations.
And maybe you could touch on buybacks as well and it sounds like we're restarting things on that Brian . So curious how much that's factored into the guidance.
Yes, what we currently see in the market in terms of investment opportunities and this would not necessarily be spec of the investment.
I think we can have another $1 billion a year in 2022.
Justin and as I said.
We've been able to realize without doing it speculative we've had customers lined up in advance.
And we've been able to do that especially rail North American fact, I think rail North America in 2021 had over $200 million outside of their committed supply agreement.
We closed that they raised in customer investment, so and we didn't take our spec position and those cars. So they're doing a really nice job of identifying those opportunities. That's also outside of some strength in the underlying market.
So I think we can do $1 billion again this year.
On the share repurchase side, Tom do you want to.
Yes, so just to reiterate what both Sherry and Brian talked about we have $137 million remaining on our authorization from the board.
We purchased about $13 million worth of stock in 2021 as Brian indicated in his openings, we were able to find considerable amounts of attractive investment and we expect to be able to continue to do so going forward as evidenced by the $1 billion number Brian just talked about.
But it is something where in 2021, we repurchased the stock on volatile trading days and we would look to continue to do that going forward. Our capital allocation framework always calls for us to prioritize those investment opportunities and we consistently talk with our board of directors about stock.
Buyback decisions in terms of our guidance.
We have over the last few years purchased anywhere between $0 of buyback and $150 million and the range that we've provided.
Allow us for being somewhere within that historical framework.
Okay. That's helpful. I appreciate the time.
Okay.
We'll go next to Matt <unk>.
Alcott with Cowen.
Good morning, Thank you.
Good to see the average term go up to its highest in two years.
I think it's still on the lower side relative to previous recoveries.
My question is you guys.
Given the continued rate strength over the last six quarters, you think terms could keep rising throughout this year and.
Any insights on where we could end the year.
Could we be well into about 40, a month range.
B would be appreciated.
Sure Matt its Bob.
Does it tend to put a number on that because it also can move around from quarter to quarter and in 2000.
'twenty one it moved anywhere from 29 months up to 37 as you saw in the fourth quarter now anytime you have a renewal success rate close to 90% and you have lease rates going.
Finally in the right direction in certain car types, we will push term.
But broadly speaking we're still in the phase, where we're really trying to.
Focus more attention on making sure we're getting rates up to the right level.
And then we will concentrate more on term, but with a fleet as diverse as ours. There are certainly pockets of car types, where we're already.
Trying to stretch those terms out.
That's very helpful. Bob.
A year and a half into this recovery is it looking like it does it feel like a prolonged recovery year earnings cycle kind of lagged the actual recovery in lease rates.
<unk>.
It is this starting to feel more like a multiyear earnings recovery to you guys.
Speaker 1: feel more like a multi-year earnings recovery to you guys.
Speaker 1: Well, it does and the feeling of this recovery, quite frankly, is better than ones we've felt before because when you look back to 2013 or 14 or even the mid 2000s, some of the accelerants in the market, the spikes that we saw an incredible demand for very small pockets of card types, the crude boom, what have you.
Alright.
Does.
The feeling of this recovery quite frankly is better than ones we've felt.
Felt before because when you look back to 2013 or 14 or even the mid two thousands some of the.
Accelerant in the market the spikes that we saw an incredible demand for very small pockets of car types. The crude boom what have you.
There are real beneficial in the short term, but long term they can cause some damage.
Speaker 1: They're real beneficial in the short term, but long term they can cause some damage.
Speaker 1: And this recovery seems very different, more fundamental. And I think hopefully we'll have much longer, much more legs to it than prior ones.
And this recovery seems very different more fundamental.
And I think hopefully we will have much longer.
Much more legs to it than prior ones.
Okay, and then I think Brian mentioned that the segment profit for rail North America should be up in the $15 million to $20 million range, if I got it correctly.
Speaker 1: Okay, and then I think Brian mentioned that the segment profit for rail North America should be up in the 15 to 20 million dollar range if I got it correctly.
Speaker 1: Um, and you guys are not expecting you're expecting gains to be in line or slightly up from this year. So I guess the 15 to 20Million dollar improvement is mostly. Uh, from.
And you guys are not expecting you're expecting gains to be in line or slightly up from this year. So I guess, the $15 million to $20 million improvement is mostly.
From a lease rate.
Speaker 1: improvement as well as cost controls based on your assumptions.
Improvement as well as cost controls.
Based on your assumptions.
Yes, I think Thats, a fair assessment Matt.
Okay, and just one last question if I could.
Speaker 1: Okay, and just one last question if I could, can you guys remind us of your existing supply agreements with manufacturers and what needs to happen this year for you guys to consider significant manufacturing orders or have orders become somewhat of a necessity at this point in order to be able to serve your customers given the near full utilization.
Can you guys remind us of your existing supply agreements with manufacturers and what needs to happen. This year for you guys to consider significant manufacturing orders or.
Have orders become somewhat of a necessity at this point you know in order to be able to serve your customers given the near full utilization.
Sure we have two supply agreements totaling 3000 cars a year.
Speaker 1: Sure. We have two supply agreements totaling 3,000 cars a year. That runs through the end of 2023. So we're very well covered on the supply agreements. And just for reference, currently, the nearest available supply agreement availability is into the third quarter of 2022. So our commercial team has done a real nice job of placing those cars well in advance of when they're scheduled to deliver.
That runs through the end of 2023.
So we're very well covered on the supply agreements and just for reference currently the nearest available supply agreement availability has ended the third quarter of 2022. So our commercial team has done a real nice job of placing those cars well in advance of when they are scheduled to deliver.
Speaker 1: And no real comment yet, Matt, on where we'll go with the supply agreement post-2023. We'll be looking at that as the year progresses. It's important for us to have a supply agreement in place for a base load, particularly on the tank car side. But no determination has been made yet on an extension beyond 2023.
No real comment yet Matt on where we'll go with the supply agreement post 2023, we will be working at that as the year progresses. It's important for us to have a supply agreement in place for our Baseload, particularly on the tank car side.
But no determination has been made yet.
Alright extension beyond 2023.
Got it thank you very much.
We'll go next to Bhaskar <unk> with Susquehanna.
Yes, I wanted to follow up on the earlier question about term versus rate can you talk about how you structure. Your sales incentives for 2022 in North American rail to balance those and is there any historic corollary of if you look back at your X or your y.
Speaker 2: Yeah, I wanted to follow up on the earlier question about term versus rate. Can you talk about how you've structured your sales incentives for 2022 and North American rail to balance those? And is there any historic corollary of if you look back at that year X or year Y, it would look a lot like we've structured.
Look a lot like we've structured those for this year. Thank you.
Yeah.
Alright, Baskin, it's Bob I'll take that question before I won't get into a tremendous amount of detail other than to tell you. Our sales incentive plans provide with regards to our commercial organization and the flexibility to adjust on an annual basis.
Speaker 1: I'll take that question for you. We'll get into a tremendous amount of detail other than to tell you our sales incentive plans provide with regards to our commercial organization the flexibility to adjust on an annual basis so we can drive towards the out...
So we can drive towards the outcome we want.
Speaker 3: In very difficult times, obviously, we focus on utilization. And when the market is really strong, we focus on trying to make sure our sales folks are incentivized to get termed.
And in very difficult times, obviously, we focus on utilization.
And when the market is really strong we focus on trying to make sure our sales folks or folks are incentivized to get term.
Speaker 3: You know, we're fairly early on in the process here of finally getting some leverage with regards to lease rate. So I think we're in the early innings of that type of recovery, not one yet where you would be going very, very hard on term, as I mentioned earlier. Certainly pockets of car types, that's possible.
We're fairly early on in the process here of finally, getting some leverage with regards to lease rates.
So I think we are in the early innings of that type of recovery that one yet where you would be going very very hard on term as I mentioned earlier certainly pockets of car types, if that's possible.
Speaker 3: But overall, it's really much more right now our focus is on trying to move those rates up consistent with what others in the market are doing.
But overall, it's really much more right now our focus is on trying to move those rates up consistent with what.
Others in the market are doing.
Speaker 3: and we'll lead the effort there. So we'll have our sales force aligned accordingly.
And we will lead the effort there so.
We'll have our sales force aligned accordingly.
Speaker 2: I'm sorry, I think you had a second question. No, you addressed it. Yeah. To your other comments about the investment volume, you know, hopefully being another billion dollar year, you kind of made some directional comments about North American rail and that response. It's been a while since you've grown that fleet, at least in unit terms. Could this be a year where that happens if the investments do manifest as hoped for?
I'm, sorry, I think you had a second question.
No you can be trusted.
Yes, okay.
Other comments about the investment volume hopefully being another $1 billion a year you kind of made some directional comments about north American rail in that response.
It's been a while since you've grown that fleet at least in unit terms could this be a year where that happens if the investments do.
Manifest as as hope for.
Speaker 3: Yeah, I think overall, you know, where we look today, the secondary market has been so strong the last couple years that there's been some, I'd say, above normal sales activities in 2021 and likely again in 2022. And again, I want to be very clear about the fact that we are not chasing a car count.
Yes.
I think overall, we're we look today that the secondary market has been so strong in the last couple of years that there's been some.
I would say above normal sales activities in 'twenty, 'twenty, one and likely again in 2022.
And again I want to be.
Very clear about the fact that we are not chasing a car count.
Speaker 3: That can be a dangerous pursuit and we've seen over the years of some other folks in the industry who've gone that route. You can always add cars, but can you do it economically? That's the most important factor we're looking at.
That can be a dangerous pursuit and we've seen over the years or some other.
The folks in the industry, who have gone that route.
You can always add cars, but can you do it economically that's the most important factor were looking at.
Speaker 3: So I wouldn't rule out the possibility that net fleet growth could occur in 2022, but in the end we're going to do the right thing, Bascom, in terms of adding cars and in terms of optimizing the portfolio. We have massive scale in this business.
So I wouldn't rule out the possibility that net fleet growth could occur in 2022.
But in the end, we're going to do the right thing Bascom in terms of adding cars and in terms of optimizing the portfolio.
We have massive scale in this business.
Speaker 3: and whether the fleet's 113,000 cars or 112,500 or 114,000 is less of a concern to me than generating the best possible return out of that portfolio.
And whether the fleet of 113000 cars or 112500 or 114000 is less of a concern to me then generating the best possible return out of that portfolio.
Okay.
Okay. Thanks for that Bob and if I could ask one more I know you don't take over as CEO for another three months here.
Speaker 2: Thanks for that, Bob. And if I could ask one more, I know you don't take over as CEO for another three months here. And you've been with the company for a long time. The company is remarkably consistent over a very long time, but is there anything that we should expect to see emphasized or focused on a little more under your leadership? If you could just give a preview of where your head is.
And you've been with the company for a long time that the company is remarkably consistent.
For a very long time, but is there anything that we should expect to see emphasized are focused on a little more under your leadership. If you could just give a preview of where your head is.
I think that would be helpful. Thanks.
Speaker 3: Sure, and I appreciate the question.
Sure and I appreciate the question.
Speaker 3: As you noted, I've worked at GATX for 25 years, and the management team has been together here a very long time. I've had the benefit of working side by side with Brian for 25 years.
As you noted I've worked at <unk> for 25 years.
And the management team has been together here a very long time I've had the benefit of working side by side with Brian for.
Speaker 3: that 25 years. A lot of strategies that you've seen in place and you've seen deployed here at GATX.
That 25 years.
A lot of the strategies that you've seen in place and you've seen deployed here at gtx over those years, particularly particularly in the last 17 years under Brian's leadership.
Speaker 3: Over those years, particularly the last 17 years under Brian's leadership, I've been involved in a lot of those.
I've been involved in a lot of those decisions.
Speaker 3: extremely supportive of the direction and the philosophy that we deploy.
Extremely.
Supportive of the direction and the philosophy that we deploy.
Speaker 3: So I wouldn't endeavor to make any significant substantial changes in the way we think about how we deploy capital or the strengths in the markets that we have.
So.
I wouldnt endeavor to make any significant substantial changes in the way, we think about how we deploy capital or the strength in the markets that we have.
Speaker 3: I am a firm believer in GATX is at its best when we're in long live widely used assets with a service component and where we have asset knowledge that's truly unique.
I'm a firm believer in Gatx's at its best when we're in long live widely used assets, where the service component and where we have asset knowledge that is truly unique.
Speaker 3: That won't change, and you're going to continue to see that, and you're going to continue to see us try to leverage the expertise in the markets we have and to do so more broadly and globally.
That won't change.
And youre going to continue to see that youre going to continue to see us try to leverage the expertise and the markets, we have and to do so more broadly and globally.
Thank you.
Okay.
And once again, if you'd like to ask a question on today's call that is star one on your telephone keypad.
Speaker 4: ask a question on today's call, that is star 1 on your telephone keypad. And we'll go next to Justin Bergner with Gabelli Funds. Good morning, Brian . Good morning, Bob. Congratulations on the award.
And we will go next to Justin Bergner with Gabelli funds.
Good morning, Brian Good morning, Bob Congratulations on the appointment good morning, Tom Good morning Sherri.
Good morning, good morning.
Just to start a couple of quick.
Sure detail oriented questions.
There appear to be a good chunk of other income in both rail North American rail international in the fourth quarter.
And that will that curves at one time.
Yes, so I'll take that so in rail North America.
Speaker 5: Yeah, so I'll take that. So in rail North America, the primary uptick you saw was due to some insurance proceeds that came from a storm at one of our service centers, and that was described on. It was one of the items described on page 13 of the press release that cherry mentioned.
Primary uptick you saw was due to some insurance proceeds that came from a storm at one of our service centers and that was described.
It was one of the items described on page 13 of the press release that Sheri mentioned.
Speaker 5: In Rail International, there's really the key driver there was what Brian mentioned about some of the FX issues we had between the Zladi and the Euro last year that didn't occur this year. And we also had some savings in our V-regio expenses this year versus last year. Scriptures Barring
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Rail international theirs.
Really the key driver there was what Brian mentioned about some of the FX issues, we had between the zloty and the Euro last year that didn't occur this year and we also had some savings in our <unk> ratio expenses this year versus last year.
Okay, and then maybe a second.
Speaker 4: Okay, and then maybe a second somewhat detailed question. Within RRPF, I mean the absolute profit was still strong in the fourth quarter. I assume there were some asset gains.
Somewhat detailed question within our RPF I mean, the absolute profit was still strong in the fourth quarter I assume there are some asset gains in that number and are you expecting asset gains to continue.
The joint venture as you look into <unk>.
2022.
Speaker 5: So as Brian mentioned in his opening comments, we would expect next year maybe to see a little bit less in terms of some of those gains relative to this year. As far as how the quarter went, the big driver of the uptick in earnings from affiliates at Portfolio Management was due to gains on asset remarketing and residual realization.
So as Brian mentioned in his opening comments.
We would expect next year, maybe maybe to see a little bit less in terms of some of those gains relative to this year as far as how the quarter went.
The big driver of the uptick in earnings from affiliates that portfolio management was due to.
Gains in the second and gains on asset remarketing of residual realization.
Okay and then.
Speaker 4: OK. And then as you look at your gains on asset disposition.
As you look at your gains on asset disposition outlook for 2022 should I expect sort of it will look fairly similar in terms of the split between gains on scrappage in gains on railcar sold or do you expect it to tilt EBIT more towards Scrappage versus.
Speaker 4: Should I expect sort of it will look fairly similar?
Sales of railcars.
Speaker 5: Yeah, so one thing to keep in mind is that when it comes to scrap prices, it's really difficult to predict. The rail industry as a whole is not really a key driver of what happens there. But as far as a baseline expectation, assuming something similar to this year is a reasonable assumption, but that scrap price can move around quite a bit.
Yeah. So one thing to keep in mind is that when it comes to scrap prices.
Really difficult to predict the rail industry as a whole is not really a key driver of what happens there.
But as far as a baseline expectation assuming something similar to this year is a reasonable assumption, but but that scrap price can move around quite a bit.
Okay. Thank you and then just lastly.
Should I be surprised that the guidance for other and sort of try fleet. There in is.
Speaker 4: Should I be surprised that the guidance for other and sort of tri-fleet therein is not...
Not for more than a 2 million to $3 million increase looking into 2022.
The divestments, that's flowing through the P&L.
Or how should I think about that $2 million to $3 million increase.
Yes, I can take that just it's Brian .
Speaker 6: I can take that, Justice Bryan. It's a healthy increase. Remember, the size of this business is actually pretty small. They have around $30 million in revenue. And in 2021, about $10 million in segment profits. So you think about it like a 20% increase.
Healthy increase and remember the size of this business is actually pretty small they are around $30 million in revenue.
And that in 2021 about $10 million of segment profit.
Think about it like a 20% increase.
Yes.
Okay. That's helpful.
Thank you.
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At this time there are no further questions I will turn the call back to Shari hellerman for closing remarks.
Speaker 7: I'd like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Thank you.
I would like to thank everyone for their participation on the call. This morning. Please contact me with any follow up questions. Thank you.
This does conclude today's conference. Thank you for your participation.
Speaker 8: does conclude today's conference. Thank you for your participation.
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