GATX CORP

The following table shows a summary of our reporting segments and consolidated financial results for the years ended December 31 (dollars in millions, except per share data):

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

2024 Summary

Net income was $284.2 million, or $7.78 per diluted share, for 2024 compared to $259.2 million, or $7.12 per diluted share, for 2023, and $155.9 million, or $4.35 per diluted share, for 2022. Results for 2024 included a net negative impact of $3.9 million ($0.11 per diluted share) from tax adjustments and other items, compared to a net positive impact of $1.6 million ($0.05 per diluted share) from tax adjustments and other items in 2023 and a net negative impact of $61.8 million ($1.72 per diluted share) from tax adjustments and other items in 2022 (see "Non-GAAP Financial Measures" at the end of this item for further details).

•At Rail North America, segment profit in 2024 was higher than prior year. The increase was primarily attributable to higher lease revenue, higher net gain on asset dispositions, and higher repair revenue, partially offset by higher interest and maintenance expense.

•At Rail International, segment profit in 2024 was higher than prior year, due to more railcars on lease and higher lease rates, partially offset by higher maintenance and interest expense.

•At Engine Leasing, segment profit in 2024 increased compared to prior year, a result of higher earnings at the RRPF affiliates, higher earnings from GEL operations, and the absence of impairments recorded in 2023 for the Specialized Gas Vessels, partially offset by the absence of the gain on the sale of natural gas holdings recorded in 2023.

•Within Other, Trifleet's segment profit decreased, largely due to lower lease revenue, resulting from lower utilization, as well as higher interest expense and higher bad debt expense resulting from a settlement and restructuring agreement with a customer in the current year.

Total investment volume was $1,674.4 million in 2024, compared to $1,665.0 million in 2023, and $1,255.8 million in 2022.

2025 Outlook

Conditions in the North American railcar leasing market remained strong in 2024, and we expect favorable conditions to continue in 2025. At Rail International, we expect favorable demand for our railcars in both our European and Indian businesses. The operating environment for our engine leasing businesses at RRPF and GEL is strong, as global air travel continues to recover to pre-pandemic levels and beyond. We have a strong balance sheet and adequate access to capital, which we believe positions us well to manage our transportation assets based on current market conditions.

•We expect Rail North America's segment profit in 2025 to increase slightly from 2024. Lease rates for railcars scheduled to renew in 2025 will likely be higher than expiring rates for most car types as the lease rate environment for existing railcars is expected to remain favorable. The increasing lease rates, along with new additions to the fleet, should generate higher lease revenue in 2025. We anticipate remarketing income to be slightly lower than 2024, but we continue to see a strong secondary market. We expect the impact of slightly higher regulatory compliance work, partially offset by a benefit from efficiencies in our owned maintenance network to result in modestly higher maintenance expense in 2025 compared to the prior year. Finally, we anticipate interest expense and depreciation to be higher in 2025 compared to 2024.

•Rail International's segment profit in 2025 is expected to increase from 2024, driven by continued growth of the fleet sizes in Europe and India. Demand for railcars in Europe should continue to be solid across most car types, and we plan to continue to invest in the fleet. Lease revenue is expected to be higher in 2025, resulting from more railcars on lease and higher lease rates. In India, we anticipate significant growth again in our fleet this coming year, which will also contribute to an increase in segment profit.

•We anticipate Engine Leasing's segment profit in 2025 to be higher than 2024. We expect an increase in segment profit from GEL as a result of additional aircraft spare engines acquired during 2024. In addition, RRPF results are expected to be higher as a result of continued improvement in global air travel.

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

The railcar leasing environment was favorable as demand for existing railcars remained steady. Rail North America continued to extend lease renewal terms at attractive rates while maintaining high fleet utilization and a strong renewal success rate. Utilization of our non-boxcar fleet was 99.1% at the end of the year.

The following table shows Rail North America's segment results for the years ended December 31 (in millions):

The following table shows the components of Rail North America's lease revenue for the years ended December 31 (in millions):

Rail North America Fleet Data

The following table shows fleet activity and statistics for Rail North America railcars, excluding boxcars, for the years ended December 31:

(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 years 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 year is calculated using the number of active railcars at the end of each month.

As of December 31, 2024, leases for approximately 21,500 tank and freight cars and approximately 1,200 boxcars are scheduled to expire in 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 is scheduled to 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 December 31, 2024, 5,392 railcars have been ordered pursuant to the terms of the agreement, of which 3,458 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 2024, the renewal rate change of the LPI was positive 26.7%, compared to positive 33.5% in 2023. Lease terms on renewals for railcars in the LPI averaged 60 months in 2024 compared to 65 months in 2023.

The following table shows fleet activity and statistics for Rail North America boxcars for the years ended December 31:

(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 years 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 for the year is calculated using the number of active boxcars at the end of each month.

The following table shows fleet activity and statistics for Rail North America locomotives for the years ended December 31:

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

(2) Active locomotives refers to the number of locomotives on lease to customers. Changes in locomotives on lease compared to prior years are impacted by locomotives that were sold or scrapped, as well as the fleet utilization rate.

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

In 2024, segment profit of $356.0 million increased 15.8% compared to $307.3 million in 2023. The increase was primarily due to higher lease revenue, higher net gain on asset dispositions, and higher repair revenue, partially offset by higher interest expense and higher maintenance expense. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from year to year.

In 2024, lease revenue increased $94.7 million, or 10.7%, driven by higher lease rates and more railcars on lease. Other revenue increased $21.6 million, primarily due to higher repair revenue.

In 2024, maintenance expense increased $30.3 million, driven by higher costs of repairs, more regulatory compliance events, and more repairs performed by the railroads. Depreciation expense increased $5.2 million, due to the timing of new railcar investments and dispositions, partially offset by a change in the useful lives of certain railcars. Other operating expense increased $0.5 million, due to higher insurance and storage costs, partially offset by lower switching and freight costs.

In 2024, net gain on asset dispositions increased $12.3 million, driven by higher net gains on railcars sold and higher net scrapping gains. The amount and timing of disposition gains is dependent on a number of factors and may vary materially from year to year. Net interest expense increased $49.2 million, due to a higher average interest rate and a higher average debt balance. Other expense was favorable $2.6 million, driven by lower legal costs, partially offset by lower customer settlement proceeds received in 2024.

During 2024, investment volume was $1,162.4 million compared to $976.9 million in 2023. We acquired 3,812 newly built railcars, purchased 2,279 railcars in the secondary market, and purchased 156 locomotives in the secondary market in 2024, compared to 3,835 newly built railcars, 1,934 railcars in the secondary market, and no locomotives in 2023.

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

RAIL INTERNATIONAL

Rail International, composed primarily of GATX Rail Europe ("GRE"), produced solid operating results in 2024 and continued to grow its fleet, exceeding 30,000 railcars during the current year. GRE experienced renewal lease rate increases for a majority of railcar types in 2024. Utilization was 96.1% at the end of the year.

The fleet size of our rail business in India ("Rail India") surpassed 10,000 railcars in 2024, and 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 year.

In 2023, we sold Rail Russia. Financial results were not material to Rail International's segment profit.

The following table shows Rail International's segment results for the years ended December 31 (in millions):

GRE Fleet Data

The following table shows fleet activity and statistics for GRE railcars for the years ended December 31:

(2) Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior years 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 year is calculated using the number of active railcars at the end of each month.

As of December 31, 2024, leases for approximately 10,300 railcars are scheduled to expire in 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 years ended December 31:

(2) Active railcars refers to the number of railcars on lease to customers. Changes in railcars on lease compared to prior years are impacted by the utilization of railcars purchased and the disposition of railcars that were sold or scrapped, as well as the fleet utilization rate.

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

Foreign Currency

Rail International's reported results of operations are impacted by fluctuations in the exchange rates of the U.S. dollar versus the foreign currencies in which it conducts business, primarily the euro. In 2024, fluctuations in the value of the euro, relative to the U.S. dollar, positively impacted lease revenue by approximately $0.6 million and negatively impacted segment profit, excluding other income (expense), by approximately $1.7 million compared to 2023.

In 2024, segment profit of $119.8 million increased 5.6% compared to $113.4 million in 2023. Segment profit in 2023 included a $0.3 million disposition gain recorded as a result of the decision to exit the Rail Russia business. Excluding this item, results for Rail International were $6.7 million higher than 2023. The increase was primarily due to more railcars on lease and higher lease rates at both GRE and Rail India, partially offset by higher interest expense and higher maintenance expense at GRE.

In 2024, lease revenue increased $37.0 million, or 12.5%, due to more railcars on lease and higher lease rates at GRE and Rail India.

In 2024, maintenance expense increased $6.6 million, primarily due to more repairs performed, and the impact of foreign exchange rates, partially offset by lower wheelset costs. Depreciation expense increased $10.5 million, due to the impact of new railcars added to the fleet and the impact of foreign exchange rates.

In 2024, net gain (loss) on asset dispositions decreased $2.5 million, driven by fewer railcars sold, partially offset by higher net scrapping gains due to more railcars scrapped. Net interest expense increased $15.2 million, due to a higher average interest rate and a higher average debt balance. Other income (expense) was favorable by $7.4 million, driven by the positive impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

During 2024, investment volume was $232.9 million, compared to $382.4 million in 2023. In 2024, GRE acquired 1,316 newly built railcars compared to 1,695 newly built railcars in 2023, and Rail India acquired 1,783 newly built railcars in 2024 compared to 2,933 newly built railcars in 2023.

Our investment volume is predominantly composed of acquired railcars, but may also include 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.

ENGINE LEASING

As disclosed previously, we had sold all of our marine assets as of December 31, 2023 and no longer have any marine operations. As a result, we have changed the name of this business segment from Portfolio Management to Engine Leasing to reflect the prospective operations of the segment.

Engine Leasing includes the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce, a leading manufacturer of commercial aircraft jet engines. Segment profit included earnings from the RRPF affiliates of $108.3 million for 2024, $98.7 million for 2023, and $45.4 million for 2022. In 2022, RRPF recorded an impairment charge associated with aircraft spare engines in Russia that RRPF does not expect to recover. GATX's 50% share of this net impairment was $15.3 million ($11.5 million after tax). GATX did not make any additional investment in the RRPF affiliates in 2024, 2023, or 2022. Dividend distributions from the RRPF affiliates totaled $50.0 million in 2024, $25.0 million in 2023, and $46.2 million in 2022. The operating environment for the RRPF affiliates was strong, as international air passenger travel was robust in 2024. High demand, combined with production and maintenance constraints in the aviation industry, resulted in a very strong market for aircraft spare engines.

Engine Leasing also includes GEL, our wholly owned entity that invests directly in aircraft spare engines. In 2024, GEL acquired 10 engines for approximately $261 million. As of December 31, 2024, GEL owned 39 aircraft spare engines, with 14 on long-term leases with airline customers and 25 that are employed in an engine capacity agreement with Rolls-Royce for use in its engine maintenance programs. All engines at GEL are managed by the RRPF affiliates, for which we paid them a fee of $4.1 million in 2024, $2.7 million in 2023 and $1.0 million in 2022.

Engine Leasing previously owned the Specialized Gas Vessels. In 2022, we made the decision to sell the Specialized Gas Vessels and recorded impairment losses totaling $34.3 million and sold two vessels. In 2023, we sold the remaining three vessels and recorded net losses of $4.0 million. In 2024, we recorded final gains of $0.6 million associated with the Specialized Gas Vessels.

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

The following table shows Engine Leasing’s segment results for the years ended December 31 (in millions):

The following table shows the net book value of Engine Leasing’s assets as of December 31 (in millions):

RRPF Affiliates Portfolio Data

The following table shows portfolio activity and statistics for the RRPF affiliates' aircraft spare engines for the years ended December 31:

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

(2) Average leased engines for the year 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 years ended December 31:

In 2024, segment profit was $117.3 million compared to $106.4 million in 2023. Segment profit included $0.6 million of gains in 2024 and $4.0 million of losses in 2023 associated with the Specialized Gas Vessels. Excluding the impact of these items, results for Engine Leasing were $6.3 million higher than 2023, driven by higher earnings at the RRPF affiliates and GEL, partially offset by the absence of the gain on the sale of natural gas holdings recorded in the prior year.

In 2024, lease revenue was comparable to the prior year. Non-dedicated engine revenue increased $27.0 million, primarily due to aircraft spare engines acquired in 2023 and 2024 and utilized in the engine capacity agreement with Rolls-Royce. Marine operating revenue decreased $6.9 million, driven by the final sales of the Specialized Gas Vessels in 2023.

In 2024, marine operating expense decreased $6.5 million, due to sale of the Specialized Gas Vessels in 2023. Depreciation expense increased $9.5 million, due to aircraft spare engines acquired in 2023 and 2024.

In 2024, net gain (loss) on asset dispositions was unfavorable by $1.6 million, driven by the absence of gains recorded in 2023 for the sale of natural gas holdings, partially offset by net gains in 2024 and net losses in 2023 associated with the Specialized Gas Vessels. Net interest expense increased $12.1 million, due to a higher average debt balance and a higher average interest rate.

In 2024, income from our share of affiliates' earnings increased $9.6 million, driven by higher income from operations, partially offset by lower remarketing income. The amount and timing of remarketing income is dependent on a number of factors and may vary materially from year to year.

Investment volume was $260.8 million in 2024, compared to $267.3 million in 2023. In both 2024 and 2023, GEL acquired ten aircraft spare engines.

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 2024, GATX recorded settlement expenses of $3.3 million for litigation claims arising out of legacy business operations and 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.

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

The following table shows components of Other for the years ended December 31 (in millions):

Trifleet Summary

The tank container leasing market remained challenging in 2024. Utilization was 84.7% at December 31, 2024.

Trifleet Tank Container Data

The following table shows fleet statistics for Trifleet's owned and managed tank containers for the years ended December 31:

(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 $23.6 million in 2024, driven by higher employee-related expenses, including higher share-based compensation expense, and higher information technology expenses.

Unallocated interest income (the difference between external interest expense and interest expense allocated to the reporting segments) in any year is affected by our consolidated leverage position, the timing of debt issuances and investing activities, and intercompany allocations.

Other (expense) income, including eliminations, was unfavorable by $11.3 million in 2024 compared to 2023. The variance was driven by environmental reserves recorded and expenses related to litigation claims settlements, as noted above, partially offset by the absence of pension settlement charges recorded in 2023.

Consolidated Income Taxes

See "Note 13. Income Taxes" in Part II, Item 8 of this Form 10-K for additional information on income taxes.