GATX CORP

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

Demand for railcars was stable, and the renewal success rate remained very strong. Rail North America continued to optimize its fleet by selectively selling railcars in the secondary market. Utilization was 99.2% 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):

Rail North America Fleet Data

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

(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 March 31, 2025, leases for approximately 17,300 tank and freight cars and approximately 1,000 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 new long-term railcar supply agreement with a subsidiary of Trinity Industries, Inc. ("Trinity") to purchase 15,000 newly built railcars through 2028, with an option to order up to an additional 500 railcars each year from 2023 to 2028. The agreement enables us to order a broad mix of tank and freight cars. Trinity will deliver 6,000 tank cars (1,200 per year) from 2024 through 2028. The remaining 9,000 railcars, which can be a mix of freight and tank cars, 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 March 31, 2025, 5,711 railcars have been ordered pursuant to the terms of the agreement, of which 4,060 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 first quarter of 2025, the renewal rate change of the LPI was positive 24.5%, compared to positive 26.7% in the prior quarter, and positive 33.0% in the first quarter of 2024. Lease terms on renewals for railcars in the LPI averaged 61 months in the current quarter, compared to 60 months in the prior quarter, and 64 months in the first 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.

In the three months ended March 31, 2025, segment profit of $88.8 million decreased 1.7% compared to $90.3 million for the same period in the prior year. The decrease was driven by higher interest and maintenance expenses and an impairment recorded on certain older flammable liquids railcars, offset by higher revenue.

In the three months ended March 31, 2025, lease revenue increased $23.5 million, or 9.9%, driven by more railcars on lease and higher lease rates. Other revenue increased $4.8 million, primarily due to higher repair revenue, partially offset by lower lease termination fees.

In the three months ended March 31, 2025, maintenance expense increased $10.8 million, driven by more repair events, including more repairs performed by the railroads, and higher costs of repairs. Depreciation expense increased $5.3 million, due to the timing of new railcar investments and dispositions.

In the three months ended March 31, 2025, net gain on asset dispositions decreased $2.1 million, driven by by an impairment related to older flammable liquids railcars and lower net gains on 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 $11.4 million, due to a higher average debt balance and higher average interest rate.

Investment Volume

During the three months ended March 31, 2025, investment volume was $227.7 million compared to $321.7 million in the same period in 2024. We acquired 642 newly built railcars and purchased 627 railcars in the secondary market in the three months ended March 31, 2025, compared to 1,073 newly built railcars and 822 railcars 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.

RAIL INTERNATIONAL

Rail International, composed primarily of GATX Rail Europe ("GRE"), produced solid operating results in the first three months of 2025 and continued to grow its fleet. GRE experienced renewal lease rate increases for most railcar types in the period. Utilization was 95.1% at the end of the current quarter.

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 robust, driven by continued growth in the economy and infrastructure development. Utilization was 99.6% at the end of the current quarter.

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

GRE Fleet Data

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

(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 March 31, 2025, leases for approximately 7,900 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:

(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.

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 March 31, 2025, fluctuations in the value of the euro, relative to the U.S. dollar, negatively impacted lease revenue by approximately $2.1 million and negatively impacted segment profit, excluding other (expense) income, by approximately $1.4 million compared to the same period in 2024.

In the three months ended March 31, 2025, segment profit of $25.7 million decreased 10.8% compared to $28.8 million for the same period in the prior year. The decrease was primarily due to higher maintenance and interest expense and changes in foreign currency exchange rates, partially offset by higher lease revenue.

In the three months ended March 31, 2025, lease revenue increased $3.0 million, or 3.7%, due to more railcars on lease and higher lease rates at GRE and Rail India, partially offset by the impact of foreign exchange rates.

In the three months ended March 31, 2025, maintenance expense increased $1.0 million, primarily due to more repair events and higher costs of repairs, partially offset by lower wheelset costs. Depreciation expense increased $1.2 million, due the impact of new railcars added to the fleet.

In the three months ended March 31, 2025, net interest expense increased $2.4 million, due to a higher average interest rate and a higher average debt balance. Other (expense) income was unfavorable by $2.2 million, driven by the negative impact of changes in foreign exchange rates, primarily euro-zloty fluctuations.

Investment Volume

During the three months ended March 31, 2025, investment volume was $62.7 million compared to $49.9 million in the same period in 2024. In the three months ended March 31, 2025, GRE acquired 446 newly built railcars compared to 322 newly built railcars for the same period in 2024, and Rail India acquired 312 newly built railcars in the current year compared to 696 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.

ENGINE LEASING

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 $33.4 million for three months ended March 31, 2025, compared to $23.7 million for the same period in 2024. The operating environment for the RRPF affiliates continued to be favorable as demand for aircraft spare engines remained robust.

Engine Leasing also includes GATX Engine Leasing ("GEL"), our wholly owned entity that invests directly in aircraft spare engines. As of March 31, 2025, 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 $1.4 million for the three months ended March 31, 2025 and $0.6 million for the same period in 2024.

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

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:

In the three months ended March 31, 2025, segment profit was $38.6 million, compared to segment profit of $25.7 million for the same period in the prior year. Segment profit included $0.6 million of gains in 2024 associated with the Specialized Gas Vessels. Excluding the impact of this item, results for Engine Leasing were $13.5 million higher than 2024. The increase was driven by higher earnings at the RRPF affiliates and GEL.

In the three months ended March 31, 2025, lease revenue was comparable to the same period in the prior year. Non-dedicated engine revenue increased $8.3 million, due to aircraft spare engines acquired in 2024 and utilized in the engine capacity agreement with Rolls-Royce.

In the three months ended March 31, 2025, depreciation expense increased $1.0 million, due to aircraft spare engines acquired in 2024.

In the three months ended March 31, 2025, income from our share of affiliates' earnings increased $9.7 million, driven by higher income from operations and higher remarketing income. 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.

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

Trifleet Summary

The tank container leasing market remained challenging with fluctuating market dynamics in the first quarter of 2025. Utilization was 84.9% 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 $0.7 million for the three months ended March 31, 2025 compared to the same period in the prior year driven by higher employee-related expenses, partially offset by lower information technology expense.

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.

Consolidated Income Taxes

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