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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________ 
FORM 10-Q
__________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-2328
GATX Corporation
(Exact name of registrant as specified in its charter)
New York36-1124040
(State of incorporation)(I.R.S. Employer Identification No.)

233 South Wacker Drive
Chicago, Illinois 60606-7147
(Address of principal executive offices, including zip code)
(312) 621-6200
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockGATXNew York Stock Exchange
Chicago Stock Exchange
5.625% Senior Notes due 2066GMTANew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Smaller reporting company
Non-accelerated filer 
Emerging growth company
Accelerated filer 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

There were 35.4 million common shares outstanding at March 31, 2021.



GATX CORPORATION
FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2021

INDEX
Item No.Page No.
Part I - FINANCIAL INFORMATION
Item 1
 
 
 
 16
Item 2
Item 3
Item 4
Part II - OTHER INFORMATION
Item 1
Item 1A
Item 2
Item 6



FORWARD-LOOKING STATEMENTS

Statements in this report not based on historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. These include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects, or future events. In some cases, forward-looking statements can be identified by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "outlook," "continue," "likely," "will," "would", and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.

A detailed discussion of the known material risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our Annual Report on Form 10-K for the year ended December 31, 2020, and in our other filings with the Securities and Exchange Commission ("SEC"). The following factors, in addition to those discussed under "Risk Factors", in our Annual Report on Form 10-K for the year ended December 31, 2020 could cause actual results to differ materially from our current expectations expressed in forward looking statements:


the duration and effects of the global COVID-19 pandemic, including adverse impacts on our business, personnel, operations, commercial activity, supply chain, the demand for our transportation assets, the value of our assets, our liquidity, and macroeconomic conditions
exposure to damages, fines, criminal and civil penalties, and reputational harm arising from a negative outcome in litigation, including claims arising from an accident involving our transportation assets
inability to maintain our transportation assets on lease at satisfactory rates due to oversupply of assets in the market or other changes in supply and demand
a significant decline in customer demand for our transportation assets or services, including as a result of:
weak macroeconomic conditions
weak market conditions in our customers' businesses
adverse changes in the price of, or demand for, commodities
changes in railroad operations, efficiency, pricing and service offerings, including those related to "precision scheduled railroading"
changes in supply chains
availability of pipelines, trucks, and other alternative modes of transportation
changes in conditions affecting the aviation industry, including reduced demand for air travel, geographic exposure and customer concentrations
other operational or commercial needs or decisions of our customers
customers' desire to buy, rather than lease, our transportation assets
higher costs associated with increased assignments of our transportation assets following non-renewal of leases, customer defaults, and compliance maintenance programs or other maintenance initiatives
events having an adverse impact on assets, customers, or regions where we have a concentrated investment exposure

financial and operational risks associated with long-term purchase commitments for transportation assets
reduced opportunities to generate asset remarketing income
inability to successfully consummate and manage ongoing acquisition and divestiture activities
reliance on Rolls-Royce in connection with our aircraft spare engine leasing businesses, and the risks that certain factors that adversely affect Rolls-Royce could have an adverse effect on those businesses
fluctuations in foreign exchange rates
failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees
asset impairment charges we may be required to recognize
deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs
changes in banks' inter-lending rate reporting practices and the phasing out of LIBOR
competitive factors in our primary markets, including competitors with significantly lower costs of capital
risks related to our international operations and expansion into new geographic markets, including laws, regulations, tariffs, taxes, treaties or trade barriers affecting our activities in the countries where we do business
changes in, or failure to comply with, laws, rules, and regulations
inability to obtain cost-effective insurance
environmental liabilities and remediation costs
potential obsolescence of our assets
inadequate allowances to cover credit losses in our portfolio
operational, functional and regulatory risks associated with severe weather events, climate change and natural disasters
inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business

1


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)

March 31December 31
20212020
Assets
Cash and Cash Equivalents
$958.9 $292.2 
Restricted Cash
0.2 0.4 
Receivables
Rent and other receivables
81.8 74.7 
Finance leases (as lessor)
73.3 74.0 
Less: allowance for losses
(6.4)(6.5)
148.7 142.2 
Operating Assets and Facilities
10,835.0 10,484.0 
Less: allowance for depreciation
(3,311.8)(3,313.3)
7,523.2 7,170.7 
Lease Assets (as lessee)
Right-of-use assets, net of accumulated depreciation
326.5 335.9 
Finance leases, net of accumulated depreciation
 37.5 
326.5 373.4 
Investments in Affiliated Companies
592.2 584.7 
Goodwill
139.0 143.7 
Other Assets
226.6 230.3 
Total Assets
$9,915.3 $8,937.6 
Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses
$143.6 $147.3 
Debt
Commercial paper and borrowings under bank credit facilities
19.6 23.6 
Recourse
6,374.6 5,329.0 
6,394.2 5,352.6 
Lease Obligations (as lessee)
Operating leases
328.0 348.6 
Finance leases
 33.3 
328.0 381.9 
Deferred Income Taxes
960.4 962.8 
Other Liabilities
129.1 135.6 
Total Liabilities
7,955.3 6,980.2 
Shareholders’ Equity
Common stock, $0.625 par value:
Authorized shares — 120,000,000
Issued shares — 68,089,687 and 67,751,074
Outstanding shares — 35,385,930 and 35,047,317
42.1 41.9 
Additional paid in capital
753.1 735.4 
Retained earnings
2,700.3 2,682.1 
Accumulated other comprehensive loss
(171.0)(137.5)
Treasury stock at cost (32,703,757 and 32,703,757 shares)
(1,364.5)(1,364.5)
Total Shareholders’ Equity
1,960.0 1,957.4 
Total Liabilities and Shareholders’ Equity
$9,915.3 $8,937.6 

See accompanying notes to consolidated financial statements.
2


GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per share data)
Three Months Ended
March 31
20212020
Revenues
Lease revenue
$280.6 $270.7 
Marine operating revenue
3.6 3.3 
Other revenue
21.6 25.4 
Total Revenues
305.8 299.4 
Expenses
Maintenance expense
74.3 85.8 
Marine operating expense
4.6 4.1 
Depreciation expense
88.6 80.4 
Operating lease expense
10.9 13.3 
Other operating expense
10.2 8.5 
Selling, general and administrative expense
47.1 40.4 
Total Expenses
235.7 232.5 
Other Income (Expense)
Net gain on asset dispositions
22.5 27.4 
Interest expense, net
(53.6)(45.5)
Other expense
(1.3)(8.0)
Income before Income Taxes and Share of Affiliates’ Earnings
37.7 40.8 
Income taxes
(8.4)(13.1)
Share of affiliates’ earnings, net of taxes
7.2 19.5 
Net Income from Continuing Operations
36.5 47.2 
Income from Discontinued Operations, Net of Taxes
 (0.9)
Net Income
$36.5 $46.3 
Other Comprehensive Income, Net of Taxes
Foreign currency translation adjustments
(36.6)(39.6)
Unrealized gain (loss) on derivative instruments
0.6 (0.7)
Post-retirement benefit plans
2.5 2.2 
Other comprehensive loss
(33.5)(38.1)
Comprehensive Income
$3.0 $8.2 
Share Data
Basic earnings per share from continuing operations
$1.04 $1.35 
Basic earnings per share from discontinued operations
 (0.02)
Basic earnings per share from consolidated operations
$1.04 $1.33 
Average number of common shares
35.2 34.9 
Diluted earnings per share from continuing operations
$1.02 $1.33 
Diluted earnings per share from discontinued operations
 (0.02)
Diluted earnings per share from consolidated operations
$1.02 $1.31 
Average number of common shares and common share equivalents
35.9 35.4 

See accompanying notes to consolidated financial statements.
3


GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
Three Months Ended
March 31
20212020
Operating Activities
Net income
$36.5 $46.3 
Income from discontinued operations, net of taxes
 (0.9)
Net income from continuing operations
36.5 47.2 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense
92.0 83.2 
Net gains on sales of assets
(21.8)(26.8)
Deferred income taxes
2.5 5.0 
Share of affiliates’ earnings, net of dividends
(7.2)(19.5)
Changes in working capital items
(25.6)(34.7)
Net cash provided by operating activities of continuing operations
76.4 54.4 
Investing Activities
Portfolio investments and capital additions
(509.5)(181.0)
Portfolio proceeds
47.0 63.6 
Proceeds from sales of other assets
15.3 6.7 
Other
0.4 0.3 
Net cash used in investing activities of continuing operations
(446.8)(110.4)
Financing Activities
Net proceeds from issuances of debt (original maturities longer than 90 days)
1,074.1 861.2 
Repayments of debt (original maturities longer than 90 days)
 (350.0)
Net decrease (increase) in debt with original maturities of 90 days or less
(3.2)9.5 
Dividends
(19.7)(19.0)
Purchases of assets previously leased(33.3)(7.9)
 Other20.8 (15.4)
Net cash provided by financing activities of continuing operations
1,038.7 478.4 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(1.8)(2.8)
Net cash used in operating activities from discontinued operations
 (1.4)
Net cash used in investing activities from discontinued operations
 (13.7)
Net cash provided by financing activities from discontinued operations
 15.2 
Cash provided by discontinued operations, net
 0.1 
Net increase in Cash, Cash Equivalents, and Restricted Cash during the period
666.5 419.7 
Cash, Cash Equivalents, and Restricted Cash at beginning of the period
292.6 151.0 
Cash, Cash Equivalents, and Restricted Cash at end of the period
$959.1 $570.7 

See accompanying notes to consolidated financial statements.
4


GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(In millions)
Three Months Ended
March 31
20212020
SharesDollarsSharesDollars
Common Stock
Balance at beginning of the period
67.8 $41.9 67.5 $41.8 
Issuance of common stock
0.3 0.2 0.1  
Balance at end of the period
68.1 42.1 67.6 41.8 
Treasury Stock
Balance at beginning of the period
(32.7)(1,364.5)(32.7)(1,364.5)
Stock repurchases
    
Balance at end of the period
(32.7)(1,364.5)(32.7)(1,364.5)
Additional Paid In Capital
Balance at beginning of the period
735.4 720.1 
Share-based compensation effects
17.7 5.3 
Balance at end of the period
753.1 725.4 
Retained Earnings
Balance at beginning of the period
2,682.1 2,601.3 
Net income
36.5 46.3 
Dividends declared ($0.50 and $0.48 per share)
(18.3)(17.6)
Balance at end of the period
2,700.3 2,630.0 
Accumulated Other Comprehensive Loss
Balance at beginning of the period
(137.5)(163.6)
 Other comprehensive loss(33.5)(38.1)
Balance at end of the period
(171.0)(201.7)
Total Shareholders’ Equity
$1,960.0 $1,831.0 

See accompanying notes to consolidated financial statements.


5

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1. Description of Business

As used herein, "GATX," "we," "us," "our," and similar terms refer to GATX Corporation and its subsidiaries, unless indicated otherwise.

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 Portfolio Management. Historically, we also reported financial results for American Steamship Company ("ASC") as a fourth segment.

In the first quarter of 2021, GATX began investing directly in aircraft spare engines through its new entity, GATX Engine Leasing ("GEL"). During the first quarter of 2021, GEL acquired 14 aircraft spare engines for approximately $352 million, including 4 engines for $120 million from the Rolls-Royce & Partners Finance joint ventures (collectively the “RRPF affiliates” or "RRPF"). Financial results for this business are reported in the Portfolio Management segment.

On December 29, 2020, GATX acquired Trifleet Leasing Holding B.V. ("Trifleet"), the fourth largest tank container lessor in the world. Financial results for this business are reported in the Other segment. See "Note 3. Business Combinations" for additional information.

On May 14, 2020, we completed the sale of our ASC business, subject to customary post-closing adjustments. As a result, ASC is now reported as discontinued operations, and financial data for the ASC segment has been segregated and presented as discontinued operations for all periods presented. See "Note 16. Discontinued Operations" of this Form 10-Q for additional information.

NOTE 2. Basis of Presentation

We prepared the accompanying unaudited consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our unaudited consolidated financial statements do not include all of the information and footnotes required for complete financial statements. We have included all of the normal recurring adjustments that we deemed necessary for a fair presentation. Certain prior year amounts have been reclassified to conform to the 2021 presentation, including the separate presentation and reporting of discontinued operations.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2021. 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, 2020.

New Accounting Pronouncements Adopted
Standard/DescriptionEffective Date and Adoption ConsiderationsEffect on Financial Statements or Other Significant Matters
Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates exceptions for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.


We adopted the new guidance in the first quarter of 2021.


The application of this guidance did not impact our financial statements and had an immaterial impact on related disclosures.

6

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

New Accounting Pronouncements Not Yet Adopted
Standard/DescriptionEffective Date and Adoption ConsiderationsEffect on Financial Statements or Other Significant Matters
Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional practical expedients and exceptions in the application of GAAP principles to contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates being discontinued as a result of reference rate reform.



Optional expedients are available for adoption from March 12, 2020 through December 31, 2022.


For any contracts that reference LIBOR, we are currently assessing how this standard may be applied to specific contract modifications.

NOTE 3. Business Combinations

On December 29, 2020, GATX acquired Trifleet Leasing Holding B.V. ("Trifleet"), the fourth largest tank container lessor in the world, for approximately €165 million ($203.2 million) in cash. Transaction costs associated with this acquisition were approximately $2.7 million. Headquartered in the Netherlands with offices worldwide, Trifleet owns and manages a fleet of over 19,000 tank containers leased to a diverse customer base in the chemical, industrial gas, energy, food, cryogenic and pharmaceutical industries, as well as to tank container operators.

We initially allocated $146.2 million and $57.0 million to tangible net assets and goodwill in the preliminary purchase accounting for the acquisition. The initial allocation of the purchase price is incomplete with respect to certain assets and liabilities acquired. The purchase price allocation will be finalized during the measurement period, which will not exceed 12 months from the acquisition date. The acquisition was not significant in relation to our financial results and, therefore, pro-forma financial information has not been presented.

NOTE 4. Revenue

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We disaggregate revenue into three categories as presented on our income statement:

Lease Revenue

Lease revenue, which includes operating lease revenue and finance lease revenue, is our primary source of revenue.

Operating Lease Revenue

We lease railcars, tank containers, aircraft spare engines, and other operating assets under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. We do not offer stand-alone maintenance service contracts. Operating lease revenue is within the scope of Topic 842, and we have elected not to separate non-lease components from the associated lease component for qualifying leases. Operating lease revenue is recognized on a straight-line basis over the term of the underlying lease. As a result, lease revenue may not be recognized in the same period as maintenance and other costs, which we expense as incurred. Variable rents are recognized when applicable contingencies are resolved. Revenue is not recognized if collectability is not reasonably assured. See "Note 5. Leases".

Finance Lease Revenue

In certain cases, we lease railcars, tank containers, and other operating assets that, at lease inception, are classified as finance leases. In accordance with Topic 842, finance lease revenue is recognized using the interest method, which produces a constant
7

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

yield over the lease term. Initial unearned income is the amount by which the original lease payment receivable and the estimated residual value of the leased asset exceeds the original cost or carrying value of the leased asset. See "Note 5. Leases".

Marine Operating Revenue

We generate marine operating revenue through shipping services completed by our marine vessels. For vessels operating in a pooling arrangement, we recognize pool revenue based on the right to receive our portion of net distributions reported by the pool, with net distributions being the net voyage revenue of the pool after deduction of voyage expenses. For vessels operating out of the pool, we recognize revenue over time as the performance obligation is satisfied, beginning when cargo is loaded through its delivery and discharge.

Other Revenue

Other revenue is comprised of customer liability repair revenue, termination fees, utilization income, fee income, and other miscellaneous revenues. Select components of other revenue are within the scope of Topic 606. Revenue attributable to terms provided in our lease contracts are variable lease components that are recognized when earned, in accordance with Topic 842.

NOTE 5. Leases

GATX as Lessor

We lease railcars, tank containers, aircraft spare engines, and other operating assets under full-service and net operating leases. We price full-service leases as an integrated service that includes amounts related to maintenance, insurance, and ad valorem taxes. In accordance with applicable guidance, we do not separate lease and non-lease components when reporting revenue for our full-service operating leases. In some cases, we lease railcars and tank containers that, at commencement, are classified as finance leases. For certain operating leases, revenue is based on equipment usage and is recognized when earned. Typically, our leases do not provide customers with renewal options or options to purchase the asset. Our lease agreements do not generally have residual value guarantees. We collect reimbursements from customers for damage to our railcars, as well as additional rental payments for usage above specified levels, as provided in the lease agreements.

The following table shows the components of our lease income (in millions):
Three Months Ended
March 31
20212020
Operating lease income:
Fixed lease income
$262.1 $254.1 
Variable lease income
16.8 14.8 
Total operating lease income
$278.9 $268.9 
Finance lease income
1.7 1.8 
Total lease income
$280.6 $270.7 

In accordance with the terms of our leases with customers, we may earn additional revenue, primarily for customer liability repairs. These amounts are reported in other revenue in the statements of comprehensive income and were $16.8 million and $22.7 million for three months ended March 31, 2021 and 2020.
NOTE 6. Investments in Affiliated Companies

Our affiliate investments primarily include interests in each of the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures with Rolls-Royce plc, a leading manufacturer of commercial aircraft jet engines.

In accordance with Regulation S-X, we must assess if any of our investments in affiliated companies is a “significant subsidiary”. Although we determined that Alpha Partners Leasing Limited, which is part of the RRPF affiliates, did not trigger any of the significance tests as of March 31, 2021, we determined that at least one of the significance tests was triggered as of March 31, 2020. As a result, and in accordance with Rule 10-01(b) of Regulation S-X, the following table shows summarized unaudited financial information for Alpha Partners Leasing Limited (in millions):
8

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Three Months Ended
March 31
20212020
Total revenue$93.8 $104.0 
Total expenses(87.3)(86.4)
Other income, including net gains on sales of assets9.0 22.3 
Net income12.6 32.3 

NOTE 7. Fair Value Disclosure

The assets and liabilities that GATX records at fair value on a recurring basis consisted entirely of derivatives at March 31, 2021 and December 31, 2020.

In addition, we review long-lived assets, such as operating assets and facilities, investments in affiliates, and goodwill, for impairment whenever circumstances indicate that the carrying amount of these assets may not be recoverable or when assets may be classified as held for sale. We considered COVID-19 as part of our assessment during the quarter and determined there were no material impacts on our final conclusions. We will continue to monitor our long-lived assets, investments in affiliates, and goodwill for indicators of impairment as COVID-19 continues to impact the global economy.

Derivative Instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting a portion of our fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. We had five instruments outstanding with an aggregate notional amount of $300.0 million as of March 31, 2021 with maturities ranging from 2021 to 2022 and five instruments outstanding with an aggregate notional amount of $300.0 million as of December 31, 2020 with maturities ranging from 2021 to 2022.

Cash Flow Hedges

We use Treasury rate locks and swap rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps, forwards, and put/call options to hedge our exposure to fluctuations in the exchange rates of foreign currencies for certain loans and operating expenses denominated in non-functional currencies. We had eleven instruments outstanding with an aggregate notional amount of $135.1 million as of March 31, 2021 that mature in 2021 and one instrument outstanding with an aggregate notional amount of $105.7 million as of December 31, 2020 that matures in 2021. Within the next 12 months, we expect to reclassify $1.8 million ($1.3 million after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive income (loss) to interest expense or operating lease expense, as applicable. We reclassify these amounts when interest and operating lease expense on the related hedged transactions affect earnings.

Non-Designated Derivatives

We do not hold derivative financial instruments for purposes other than hedging, although certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other (income) expense immediately.

Certain of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. We had no derivative instruments with credit risk related contingent features that were in a liability position as of March 31, 2021. We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.

In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract, our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.

9

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables show our derivative assets and liabilities that are measured at fair value (in millions):
Balance Sheet LocationFair Value
March 31, 2021
Quoted
Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Observable Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Derivative Assets
Interest rate contracts (1)
Other assets$4.6 $ $4.6 $ 
Foreign exchange contracts (1)
Other assets4.8  4.8  
Foreign exchange contracts (2)
Other assets2.6  2.6  
Total derivative assets$12.0 $ $12.0 $ 
Balance Sheet LocationFair Value
December 31, 2020
Quoted
Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Observable Inputs
(Level 2)
Significant Unobservable
Inputs
(Level 3)
Derivative Assets
Interest rate contracts (1)
Other assets$5.6 $ $5.6 $ 
Foreign exchange contracts (1)
Other assets0.4  0.4  
Foreign exchange contracts (2)
Other assets0.4  0.4  
Total derivative assets$6.4 $ $6.4 $ 
_________
(1)     Designated as hedges.
(2)     Not designated as hedges.

We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data. As of March 31, 2021 and December 31, 2020, all derivatives were classified as Level 2 in the fair value hierarchy. There were no derivatives classified as Level 1 or Level 3.


10

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table shows the amounts recorded on the balance sheet related to cumulative basis adjustments for fair value hedges as of March 31, 2021 and December 31, 2020 (in millions):
Carrying Amount of the Hedged Assets/(Liabilities)Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)
Line Item in the Balance Sheet in Which the Hedged Item is IncludedMarch 31
2021
December 31
2020
March 31
2021
December 31
2020
Recourse debt
$(302.9)$(303.6)$4.6 $5.6 

The following tables show the impacts of our derivative instruments on our statement of comprehensive income for the three months ended March 31, 2021 and 2020 (in millions):
Amount of Loss (Gain) Recognized in Other Comprehensive IncomeLocation of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income into Income
Three Months Ended March 31Three Months Ended March 31
Derivative Designation2021202020212020
Derivatives in cash flow hedging relationships:
Interest rate contracts
$ $(0.1)Interest expense$0.6 $0.4 
Foreign exchange contracts
(4.8)(3.8)Other (income) expense(4.7)(5.3)
Total
$(4.8)$(3.9)Total$(4.1)$(4.9)


11

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables show the impact of our fair value and cash flow hedge accounting relationships, as well as the impact of our non-designated derivatives, on the statement of comprehensive income for the three months ended March 31, 2021 and 2020 (in millions):
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
Three Months Ended
March 31
Three Months Ended
March 31
20212020
 
 
Interest (expense), netOther income (expense)Interest (expense), netOther income (expense)
Total amounts of income and expense presented in the statements of comprehensive income in which the effects of fair value or cash flow hedges are recorded$(53.6)$(1.3)$(45.5)$(8.0)
Gain (loss) on fair value hedging relationships
Interest rate contracts:
Hedged items
1.3  (6.9) 
Derivatives designated as hedging instruments
(1.3) 6.9  
Gain (loss) on cash flow hedging relationships
Interest rate contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
(0.6) (0.4) 
Foreign exchange contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income (1)
 4.7  5.3 
Gain (loss) on non-designated derivative contracts 2.0  6.9 
_(1) These amounts are substantially offset by foreign currency remeasurement adjustments on related hedged instruments, also recognized in other income (expense).

Other Financial Instruments

Except for derivatives, as disclosed above, GATX has no other assets and liabilities measured at fair value on a recurring basis. The carrying amounts of cash and cash equivalents, rent and other receivables, accounts payable, and commercial paper and borrowings under bank credit facilities with maturities under one year approximate fair value due to the short maturity of those instruments. We estimate the fair values of fixed and floating rate debt using discounted cash flow analyses that are based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The inputs we use to estimate each of these values are classified in Level 2 of the fair value hierarchy because they are directly or indirectly observable inputs.

The following table shows the carrying amounts and fair values of our other financial instruments (in millions):
March 31, 2021December 31, 2020
 
 
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Liabilities
Recourse fixed rate debt$5,724.1 $6,111.4 $5,056.3 $5,696.9 
Recourse floating rate debt683.9 684.2 299.9 300.4 

12

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 8. Pension and Other Post-Retirement Benefits

The following table shows the components of net periodic cost for the three months ended March 31, 2021 and 2020 (in millions):

 
 
 
 
2021
Pension
Benefits
2020
Pension
Benefits
2021
Retiree Health and Life
2020
Retiree Health and Life
Service cost
$2.2 $2.0 $ $ 
Interest cost
2.0 3.1 0.1 0.1 
Expected return on plan assets
(4.7)(5.1)  
Amortization of (1):
Unrecognized prior service credit
 —   
Unrecognized net actuarial loss (gain)
3.4 3.1 (0.1) 
Net periodic cost
$2.9 $3.1 $ $0.1 
_______
(1) Amounts reclassified from accumulated other comprehensive loss.

The service cost component of net periodic cost is recorded in selling, general and administrative expense in the statements of comprehensive income, and the non-service components are recorded in other expense.

NOTE 9. Share-Based Compensation

During the three months ended March 31, 2021, we granted 276,600 non-qualified employee stock options, 34,020 restricted stock units, 54,650 performance shares, and 4,696 phantom stock units. For the three months ended March 31, 2021, total share-based compensation expense was $6.0 million, and the related tax benefits were $1.5 million. For the three months ended March 31, 2020, total share-based compensation expense was $2.2 million, and the related tax benefits were $0.5 million.

The estimated fair value of our 2021 non-qualified employee stock option awards and related underlying assumptions are shown in the table below.
2021
Weighted-average estimated fair value$29.56
Quarterly dividend rate$0.50
Expected term of stock options, in years4.3
Risk-free interest rate0.3%
Dividend yield2.2%
Expected stock price volatility34.4%
Present value of dividends
$8.61

NOTE 10. Income Taxes

The following table shows our effective income tax rate for continuing operations for the three months ended March 31:
20212020
Effective income tax rate for continuing operations22.2 %32.2 %

The difference in the effective rate for the current year compared to the prior year is primarily due to incremental benefits associated with share-based compensation in the current year, as well as the mix of pre-tax income among domestic and foreign jurisdictions, which are taxed at different rates.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes modifications to the interest expense limitation threshold and net operating loss carryback period and utilization limitation, the acceleration of payments for alternative minimum tax credit refunds, and the deferral of employer payroll tax payments. The CARES Act did not have a material impact on our effective tax rate.
13

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)



NOTE 11. Commercial Commitments

We have entered into various commercial commitments, such as guarantees, standby letters of credit, performance bonds, and guarantees related to certain transactions. These commercial commitments require us to fulfill specific obligations in the event of third-party demands. Similar to our balance sheet investments, these commitments expose us to credit, market, and equipment risk. Accordingly, we evaluate these commitments and other contingent obligations using techniques similar to those we use to evaluate funded transactions.

The following table shows our commercial commitments (in millions):
March 31
2021
December 31
2020
Standby letters of credit and performance bonds$9.0 $9.1 
Derivative guarantees1.0 1.5 
Total commercial commitments (1)$10.0 $10.6 
_______
(1) There were no liabilities recorded on the balance sheet for commercial commitments at March 31, 2021 and December 31, 2020. As of March 31, 2021, our outstanding commitments expire in 2021 through 2023. We are not aware of any event that would require us to satisfy any of our commitments.

We are parties to standby letters of credit and performance bonds, which primarily relate to contractual obligations and general liability insurance coverages. No material claims have been made against these obligations, and no material losses are anticipated. We also guarantee payment by an affiliate for final settlement of certain derivatives if they are in a liability position at expiration. The amount of the payment is ultimately determined by the value of the derivative upon final settlement.

NOTE 12. Earnings per Share

We compute basic earnings per share by dividing net income available to our common shareholders by the weighted-average number of shares of our common stock outstanding. We weight shares issued or reacquired for the portion of the period that they were outstanding. Our diluted earnings per share reflect the impacts of our potentially dilutive securities, which include our equity compensation awards.

14

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table shows the computation of our basic and diluted net income per common share (in millions, except per share amounts):
Three Months Ended
March 31
20212020
Numerator:
Net income from continuing operations
$36.5 $47.2 
Net loss from discontinued operations
 (0.9)
Net income
$36.5 $46.3 
Denominator:
Weighted-average shares outstanding - basic
35.2 34.9 
Effect of dilutive securities:
Equity compensation plans0.7 0.5 
Weighted-average shares outstanding - diluted
35.9 35.4 
Basic earnings per share from continuing operations
$1.04 $1.35 
Basic earnings per share from discontinued operations
 (0.02)
Basic earnings per share from consolidated operations
$1.04 $1.33 
Diluted earnings per share from continuing operations
$1.02 $1.33 
Diluted earnings per share from discontinued operations
 (0.02)
Diluted earnings per share from consolidated operations
$1.02 $1.31 

NOTE 13. Accumulated Other Comprehensive Income (Loss)

The following table shows the change in components for accumulated other comprehensive loss (in millions):

 
 
 
 Foreign Currency Translation Gain (Loss)Unrealized Loss on Derivative InstrumentsPost-Retirement Benefit Plans Total
Balance at December 31, 2020 $(43.7)$(14.6)$(79.2)$(137.5)
Change in component(36.6)4.8  (31.8)
Reclassification adjustments into earnings (1) (4.1)3.3 (0.8)
Income tax effect (0.1)(0.8)(0.9)
Balance at March 31, 2021$(80.3)$(14.0)$(76.7)$(171.0)
________
(1)     See "Note 7. Fair Value Disclosure" and "Note 8. Pension and Other Post-Retirement Benefits" for impacts of the reclassification adjustments on the statement of comprehensive income.

NOTE 14. Legal Proceedings and Other Contingencies

Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against GATX and certain of our subsidiaries. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely. For a full discussion of our pending legal matters, please refer to the notes included with our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
15

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


NOTE 15. Financial Data of Business Segments

The financial data presented below depicts the profitability, financial position, and capital expenditures of each of our business segments.

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 Portfolio Management. Historically, we also reported financial results for American Steamship Company ("ASC") as a fourth segment.

In the first quarter of 2021, GATX began investing directly in aircraft spare engines through its new entity, GEL. During the first quarter of 2021, GEL acquired 14 aircraft spare engines for approximately $352 million, including 4 engines for $120 million from the RRPF affiliates. Financial results for this business are reported in the Portfolio Management segment.

On December 29, 2020, GATX acquired Trifleet Leasing Holding B.V. ("Trifleet"), the fourth largest tank container lessor in the world. Financial results for this business are reported in the Other segment. See "Note 3. Business Combinations" for additional information.

On May 14, 2020, we completed the sale of our ASC business, subject to customary post-closing adjustments. As a result, ASC is now reported as discontinued operations, and financial data for the ASC segment has been segregated and presented as discontinued operations for all periods presented. See "Note 16. Discontinued Operations" of this Form 10-Q for additional information.

Rail North America is composed of our operations in the United States, Canada, and Mexico. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services.

Rail International is composed of our operations in Europe ("GATX Rail Europe" or "GRE"), India ("GRI"), and Russia ("Rail Russia"). GRE leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides value-adding services according to customer requirements.

Portfolio Management is composed primarily of our ownership in the RRPF affiliates, a group of joint ventures with Rolls-Royce plc that lease aircraft spare engines, direct ownership of aircraft spare engines that we lease, as well as five liquefied gas carrying vessels (the "Specialized Gas Vessels") and assorted other marine assets.

Other includes Trifleet operations, as well as selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments.

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the profitability of 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.



16

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables show certain segment data for each of our business segments (in millions):


Rail
North America

Rail International

Portfolio Management
OtherGATX Consolidated
Three Months Ended March 31, 2021
Revenues
Lease revenue
$206.8 $66.9 $3.3 $3.6 $280.6 
Marine operating revenue
  3.6  3.6 
Other revenue
17.8 2.5 0.2 1.1 21.6 
Total Revenues
224.6 69.4 7.1 4.7 305.8 
Expenses
Maintenance expense
58.4 15.4  0.5 74.3 
Marine operating expense
  4.6  4.6 
Depreciation expense
65.7 18.3 2.7 1.9 88.6 
Operating lease expense
10.9    10.9 
Other operating expense
7.6 2.0 0.2 0.4 10.2 
Total Expenses
142.6 35.7 7.5 2.8 188.6 
Other Income (Expense)
Net gain on asset dispositions
21.5 0.3 0.6 0.1 22.5 
Interest expense, net
(37.0)(12.2)(3.1)(1.3)(53.6)
Other expense
(0.8)  (0.5)(1.3)
Share of affiliates' pre-tax income
  9.0  9.0 
Segment profit
$65.7 $21.8 $6.1 $0.2 $93.8 
Less:
Selling, general and administrative expense
47.1 
Income taxes (includes $1.8 related to affiliates' earnings)
10.2 
Net income
$36.5 
Net Gain on Asset Dispositions
Asset Remarketing Income:
Net gains on disposition of owned assets
$16.3 $ $ $ $16.3 
Residual sharing income
0.1  0.6  0.7 
Non-remarketing net gains (1)
5.1 0.3  0.1 5.5 
$21.5 $0.3 $0.6 $0.1 $22.5 
Capital Expenditures
Portfolio investments and capital additions
$109.1 $44.4 $352.5 $3.5 $509.5 
Selected Balance Sheet Data at March 31, 2021
Investments in affiliated companies
$ $— $592.2 $— $592.2 
Identifiable assets
$5,932.0 1,698.9 $1,067.0 $1,217.4 $9,915.3 
__________
(1) Includes net gains (losses) from scrapping of railcars.
17

GATX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)



Rail
North America

Rail International

Portfolio Management
OtherGATX Consolidated
Three Months Ended March 31, 2020
Revenues
Lease revenue
$212.1 $58.3 $0.3 $ $270.7 
Marine operating revenue
  3.3  3.3 
Other revenue
23.6 1.8   25.4 
Total Revenues
235.7 60.1 3.6  299.4 
Expenses
Maintenance expense
72.9 12.9   85.8 
Marine operating expense
  4.1