GATX Corporation (GATX) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of GATX Corporation. [Operator Instructions] It is now my pleasure to turn today's meeting over to Brian Kenney, Chairman of the Board, President and CEO of GATX Corporation. Mr. Kenney, the floor is yours.

Thank you, operator, and good morning, everyone. As she said, my name is Brian Kenney. I'm the Chairman and Chief Executive Officer of GATX. Welcome to our 2022 Annual Meeting of Shareholders. Due to the public health impact of COVID-19 and to protect the health and well-being of our employees, shareholders and the community, we're conducting this meeting solely in a virtual format as a live webcast. Links to the proxy statement and our 2021 annual report to shareholders are provided on the screen. And we hope that this virtual meeting will maximize the participation of our shareholders regardless of their location. In addition to myself, joining today's virtual meeting are the independent members of our Board: Diana Aigotti, Anne Arvia, James Ream, Adam Stanley, David Sutherland, Stephen Wilson and Paul Yovovich. Also in attendance today are Dan Hoffenkamp and [ Huang Lee ], representatives from our independent registered accountants, Ernst & Young; and from Computershare, the inspector of election, Abby Cowart. Now I'd like to turn the meeting over to Deb Golden, our General Counsel and Corporate Secretary, who will discuss the conduct of the meeting today. Deb?

Thank you, Brian, and good morning all. We will conduct this meeting in accordance with the bylaws of GATX Corporation and the rules of conduct posted on the meeting site. All shareholders of record on February 25, 2022, are entitled to vote at the meeting, and I have been advised that a quorum for the conduct of business is present. Shareholders who wish to vote at this meeting may do so now or at any time until we declare the polls closed by using the Vote link on the meeting website. Any shareholder who has already voted and does not wish to change their vote need not take any further action. Questions may be submitted now by clicking on the Q&A dialogue box at the top of the screen. If you submitted a question prior to the start of the annual meeting, there is no need to submit it again. Nonshareholder guests will not be permitted to submit questions. We will now proceed with the formal business of the meeting. There are 3 items of business to be considered by shareholders. The first is the election of the 9 nominees named in the proxy statement to serve on the Board of Directors until the next Annual Meeting of Shareholders or until their successors are elected and duly qualified, although Mr. Kenney intends to retire as a director effective October 31, 2022, as previously disclosed. The second item is to approve the compensation of the company's named executive officers. This proposal is a nonbinding shareholder advisory vote. The third item is a proposal to ratify the Audit Committee's appointment of Ernst & Young LLP as the company's independent registered public accounting firm for 2022. The company recommends that shareholders vote for each of the director nominees named in the company's proxy statement and for Proposals 2 and 3. Voting is now being conducted on the 3 items that we presented. If you have already voted by proxy or by Internet or by telephone, you do not need to vote at this meeting unless you want to change your vote. [Voting]

With that said, I now declare the polls closed and return the meeting to Brian.

Okay. Thanks, Deb. Deb just alluded to my retirement as a Director in October, but this is also my 18th and last Annual Shareholders Meeting as the CEO as I'm retiring effective today. I want to say I'm proud of what GATX has accomplished over the last 17 years. Put simply, we exited businesses that we didn't belong in. We grew in businesses and geographies where we had a competitive advantage, and we earned an excellent return for our shareholders while also adding value to the communities where we operate. And we truly became the global leader in what we do. But before you get the impression that I'm trying to take credit for that performance, please know that I consider myself incredibly lucky to have worked with all the employees of GATX. I have always understood that the real value at this company is created by the members of our team who interact with customers, who manage the fleet, who turn the wrenches and those who make sure that all that happens in a safe, efficient and transparent manner. They are the best, and I've been honored to have worked alongside them. This morning, Bob Lyons takes the role as your new CEO. As I said on the earnings call Wednesday, Bob is more than ready for this role. We have worked together closely for 25 years, and he has a deep understanding of both the business and how the value is created. So I'm excited to see where he takes GATX in the years ahead, and let me turn it over to Bob.

Thank you, Brian. And first, I want to thank you for 25 years of service, 25-plus years of service at GATX, including 17 as CEO. You changed the direction and the culture of this company in a very positive way, and I'm honored for the opportunity to succeed you. Thank you to all of our online participants this morning. We appreciate your interest and support, and I'd like to give a very brief overview of our business. First, at Rail North America, our largest business and the one we were founded on over 120 years ago, the market is positive after several years of challenging conditions. While carload traffic has been limited, the supply and demand dynamics of the railcars themselves has improved, and we are moving closer to balance. High steel prices are also supporting a rising -- ability to raise lease rates on the existing fleet. It does, however, make new investments more challenging. We'll continue to look for those, but we'll be very disciplined in that pursuit. Our focus has not changed. We will be commercially nimble and we're going to operate our maintenance network efficiently and safely. Looking at Rail International, there's very strong demand for railcars in both Europe and India. While the geopolitical issues are causing market uncertainty, our existing fleet remains in very high demand in Europe. And we're seeing excellent opportunities to place new wagons into service in India. We'll continue to diversify our fleet while navigating supply challenges that will likely arise due to the geopolitical risk. Within portfolio management, which is largely comprised of our spare aircraft engine leasing business with Rolls-Royce, we have seen over 20 years of outstanding results in that joint venture. But the pandemic, followed by the geopolitical issues, have caused a drop in international air travel and demand for engines, as one would expect. That said, we believe has been the case throughout history, international air travel will recover. It has through every shock over the course of the last 50 years, and we believe it will do so again. Rolls-Royce is a valued partner. We think we have an outstanding platform to continue to grow this business in the future. Trifleet is our tank container leasing business that we acquired in late 2020. The business is integrated well into GATX due to the outstanding team in place at Trifleet and the hard work of a lot of employees here at GATX. We are seeing consistent growth in global container demand. And with the team we have in place and the macro dynamics affecting that business, again, I'm very excited about where we sit and our ability to grow that business in the future. The business imperatives at GATX remain very clear. These are very consistent with what Brian has laid out over the years, the strategy we will continue to pursue going forward. We're going to -- we will capitalize on opportunities to increase lease rates, both in our global rail markets and at Trifleet. We're going to continue to drive for efficiencies in our maintenance network, but doing so to ensure the well-being and safety of our employees. Data analytics is a growing part of GATX, and it's an important part of GATX. We literally have thousands of touch points every day, whether that be with customers or in our maintenance network. All of those touch points allow us to continue to provide additional benefits, operate more safely and efficiently for our customers. And you'll see increased emphasis in this area going forward. We are very focused on diversity, equity and inclusion and developing our employees at GATX. I want GATX to continue to be a very open, welcoming environment for all where everybody can contribute. And lastly, a hallmark of Brian's tenure, we will remain very disciplined in allocating capital across our businesses. Lastly, we have a slide here on shareholder return. Not many CEOs have the tenure that Brian has had. And he's been able to do that because his commitment to the shareholders was unwavering. The table below shows the results, total shareholder return on an annualized basis since Brian assumed the role of CEO. And you can see from the chart, we have far outstripped any relevant indices or competitor during that time frame. As a shareholder myself, I'll thank you again for all you've done. And as the next CEO, I'm committed to delivering outstanding results for our shareholders as well. Thank you. Turning back over to Deb.

Thanks, Bob. I have the report of the inspector of elections. She has tabulated the votes and her preliminary report indicates that each of the director nominees named in the company's proxy statement has been elected. The nonbinding advisory resolution approving the compensation of the company's named executive officers has been approved. And the appointment of Ernst & Young as the company's independent registered public accounting firm for 2022 has been ratified. The final report of the inspector of election will be filed with the minutes of this meeting. I would now like to turn the meeting back to Brian.

Okay. Thanks, Deb. So now it's the time we take questions from shareholders. And at this point, there have been no questions submitted online from shareholders. So with that, that concludes our annual meeting, ladies and gentlemen. In closing, I would like to thank our employees again for their continued work and our Board and shareholders for their continued support. And thank you all for participating in our virtual annual meeting and for your interest in GATX.

This concludes the meeting. You may now disconnect.