GATX Corporation (GMT)’s Fourth Quarter 2014 Earnings Conference Call Transcript

Brian Kenney – Chairman, President and Chief Executive Officer
That’s a fair assessment, I would say. The other thing we look at it is the percentage of those cash flow that are beyond five year, and that number has gone up, that percentage has gone up over the course of the last few years as you would expect as we have been stretching term. So not only have we been able to gravitate to our highest quality customer and very long-term leases, we are putting cash flow in one of the business for an extended period of time, far more than at any point in our history.

Steve Barger – KeyBanc Capital Markets
Right. And I know this question requires a lot of assumptions, but when you think about how you will deploy that, just in broad numbers, how much goes to asset purchases? How much gets returned to shareholders? How do you think about being able to spend that embedded cash flow?

Robert C. Lyons – Executive Vice President and Chief Financial Officer

Sure, it’s a very good question and it’s something we actually spend a lot of time on. Brian and I and others around here thinking about what that cash flow profile looks like over the course of the next three to five years because it’s significant and as mentioned high quality. So it’s coming in the door. If you look over the course of the last few years just for an example, ’12, ’13 and ’14, we invested $2.6 billion during that time primarily in our rail business. At the same time, we paid dividends of about 180 million in terms of returning capital back to shareholders and about another 190 million in stock repurchase. So just under 400 million returned back to shareholders over the course of the last few years and 2.6 billion invested in assets and growing the balance sheet.

As I look out over the course of the next few years there is a significant number of assumptions that you mentioned that play into that. But all three of those will again be in the mix in a very material way. Looking to continue to grow our rail business both here and North America, Europe and elsewhere, the dividend is extremely important to our shareholders. Our board looks at the dividend very closely. And typically we’ll look at that in January which is the meeting we have every year which is next week.

They clearly recognized the strength of that cash flow and we’ll take that into consideration when we think about what we do with the dividends next week. And we still have 125 million of authorization left under the existing authorization of share repurchase and as I mentioned last year at this time we expected to do about 125 million to 250 million last year which we did and likely do another 125 million roughly in 2015 that is baked into the EPS guidance that I gave you. So we have a significant amount of leeway given the cash flow coming in the door to return some of that capital to shareholders and also invest very opportunistically in our rail business.

Brian Kenney – Chairman, President and Chief Executive Officer
And if I could get back to your first question where it looks like we’re trying to give you or giving you the base events on the percentage of our freight car fleet really isn’t the way we think about it. That’s why I always reluctantly talk about and generalize about the freight car fleet it’s really a variety of different markets and car types. So it wouldn’t necessarily be a good thing if I said there’s a very high percentage of our freight car fleet that is yet to reprice. For example, small cube covered hoppers we have term on that as I’ve said. It’s out there very long at very high rates.