GATX Corp (GATX) 2011 Q3 法說會逐字稿

Good day, and welcome to the GATX Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time I'd like to turn the call over to Jennifer Van Aken, Director of Investor Relations. Please go ahead.

Thank you, Tim, and good morning, everyone. Thanks for joining us for the third quarter conference cal. With me today are Brian Kenney, President and CEO of GATX Corporation, and Bob Lyons, Senior Vice President and Chief Financial Officer. I'll give a brief overview of the numbers provided in our press release this morning, and then we'll take questions.

First, I'll remind you any forward-looking statements made on this call represents our best judgment as to what may occur in the future. We have based these forward-looking statements on information currently available, and disclaim any intention or obligation to update or revise these statements to reflect subsequent events or circumstances. The Company's actual results will depend on a number of competitive and economic factors, some of which may be outside the control of the Company. For more information, refer to our 2010 Form 10-K and the second quarter 2011 10-Q filings.

Today we reported 2011 third quarter net income of $32.9 million or $0.70 per diluted share. This includes a net benefit of $1.3 million, or $0.03 per diluted share, related to a tax benefit from the reduction of statutory tax rates in the United Kingdom of $4.1 million or $0.09 per diluted share, partially offset by negative after tax fair value adjustments of certain interest rate swaps at our European rail affiliate, AAE Cargo, of $2.8 million or $0.06 per diluted share. This compares to 2010 third quarter net income of $21.1 million, or $0.45 per diluted share, which includes a net negative impact of $0.8 million, or $0.02 per diluted share, related to the negative after tax value adjustments of interest rate swaps at AAE of $2.7 million, or $0.06 per diluted share, partially offset by a tax benefit of $1.9 million, or $0.04 per diluted share, also from the reduction of statutory tax rates in the United Kingdom.

Year to date 2011, we reported net income of $79.2 million or $1.68 per diluted share. The year to date results include a net benefit of $13.9 million or $0.30 per diluted share related to the aforementioned tax benefit due to the change in tax rates. And positive after tax fair value adjustments of the interest rate swaps at AAE $9.8 million, or $0.21 per diluted share. Year to date 2010, we reported net income of $61.3 million or $1.31 per diluted share. The year to date results include a net benefit of $1.7 million, or $0.04 per diluted share related to the previously discussed tax benefit due to the change in tax rates, the favorable resolution of a litigation matter and tax accrual reversal that occurred in the second quarter of 2010, and negative after tax fair value adjustments of the AAE interest rate swaps of $8 million or $0.17 per diluted share.

Rails results are reflective of the favorable operating environment. GATX's North American fleet utilization was 98.2% at the end of the third quarter, consistent with the end of the second quarter. The renewal rates in the lease price index were 9.6% above expiring rates, and the average renewal term for cars in the LPI increased to 49 months. As noted during our second quarter call, we do not anticipate a strong result in the LPI in the fourth quarter, due to a limited number of renewals that are coming off very high rates. That said, we are pleased with the rate environment at present.

The success rate on renewals during the quarter was about 75%. In Europe, GATX's wholly owned tank car fleet utilization improved to 96% and we continue to achieve lease rate increases. In specialty, the spare aircraft engine leasing joint venture with Rolls-Royce continues to perform extremely well, while the ocean going marine joint ventures had mixed results. Rates have improved in the gas carrier market due to demand for ethylene in China. However, the bulker and chemical tanker markets continue to be weak.

As noted in the press release, we dissolved the Clipper Forth joint venture, in which GATX held a 45% interest. As a result of the dissolution, GATX incurred an impairment loss of $5.2 million, which is reflected in share of affiliate's earnings, and retained 6 of the 14 chemical parcel tankers. American Steamship Company's operations were interrupted during the quarter due to a brief strike by the American Maritime Officer's Union, which represents the licensed crew members aboard ASC's vessels. We expect customer demand to remain stable through the end of the year, and ASC is working to make up for the volumes lost during the work stoppage.

During the third quarter, asset re-marketing activities strengthened as anticipated. Also, we invested approximately $200 million, primarily in rail assets in North America and Europe. As we look toward the end of the year, we continue to expect 2011 full year earnings in the range of $1.85 to $1.95 per diluted share. This excludes the impact of the AAE interest rate swaps, tax benefits and strike effects at ASC. So, with that overview, let's go to your questions. Tim?

(Operator Instructions)We'll take our first question from Art Hatfield with Morgan Keegan.

Morning, everyone. Just real quick, a few questions here. On the comments about the guidance, the $1.85 to $1.95, I would assume that the third quarter number that would be comparable to that would be a $0.67 number.

That's correct. This is Bob, That's correct.

Just the other thing too, I noticed that in the quarter in the Rail group, maintenance expense dropped from where it had been the last three quarters. I know you had been working through a maintenance bubble. Is it fair to say that Q3 is the end of that, and we should see a lower number going forward, or it was just something unusual in Q3 that you didn't have a lot of maintenance events going on?

Well, if you look at maintenance in Q3 in North America and Europe, it's two different stories. North America is down slightly. You had generally a lower volume of repairs, we had more repairs that were the customer's responsibility. That was offset somewhat by higher railroad repairs and wheel replacements. But in general they were down just slightly. Europe really drove more of the favorable variance, they had higher wheel set capitalizations than in 2010.

In general, Art, if you look at what drives our maintenance costs, I mean, there's a lot of factors. It's the size of the fleet, and you've seen us grow our fleet over the last year, aggressively between acquisitions from the new railcar order. It depends on where your fleet is, on average, in the regulatory cycle. It depends on the level of railroad repairs. It depends on if there's industry wide fleet issues out there. But it also, and I think this is what people don't think about, it depends on commercial activity, in a very strong market like you see today, where we're having 75% renewal success, you're not going to have a lot of cars going into the shop, and there's going to be lower maintenance.

In a weaker market, like you saw in the last couple years, where there's a lot of customers returning cars, and a lot of assignments to new customers, you see a lot more shop business and higher maintenance. So, I would expect given the static fleet, where we are in the regulatory cycle, is relatively static 2010, 2011, 2012, and we're in a very strong commercial market. So I expect this kind of performance in North America in terms of the existing fleet. Once again, it depends on if there's any fleet issues that pop up and what happens with railroad repairs. But in general in our existing fleet, it's been relatively static lately.

In Europe, it's a little different story, there's been a lot going on in the wheel replacement that we've been talking about. And that activity will increase. A lot of that is capitalized. But there is just in general, in their revision cycle, it was higher this year.

Okay. That's very helpful. And then on ASC operating expenses, I know you've made the comment that you wouldn't be able to fully reflect the impact. If we eyeball it and think about the operating expenses year-over-year, is it fair to say that a vast majority if not all of the change year-over-year is related to the strike event?

Some of that is also, if you look, it's reflected both in marine operating revenue and marine operating expense. There's a fuel impact there as well. That moves around and gets passed through. That's one piece of it. But yes, we did incur higher operating expenses in the third quarter, both as we prepared the vessels to go for potential strike, and as we brought them back out. So we definitely incurred some incremental expense there, without a doubt. As is noted in the Press Release, we'll be able to better analyze the full impact of the strike as we get towards the end of the year, and we see what volume we can make up in the fourth quarter. A lot of that will be weather dependent.

Two more quick ones. Help me understand, make sure I understand what's going on with the Clipper 4th JV. That's been dissolved. You took a, approximately $5 million asset impairment. Where does that show up in the financials?

It's in the share of affiliates line, Art.

Okay, okay. And then you have taken -- is it -- did I understand this right? That you have taken possession of six of those vehicles?

Yes.

And so will that -- how will that report going forward? Do you have 100% ownership of those? How do we think about the P&L impact of that change or that dissolution of the JV?

We will have -- we do have 100% ownership of those six vessels now. So they'll be reflected on the balance sheet as owned assets, rather than an investment in an affiliate. From a P&L standpoint, whatever charter income will flow through our -- flow through specialties gross income line. But I wouldn't anticipate, Art, any material change in the P&L one way or the other.

Okay, and then finally, just a quick update. Brian, I think on the last call, I had asked you about -- you had mentioned something about competitive pricing in the Bakken. And that you guys only had 200 car exposure in the Bakken. Is that still the case, and if so, is anything changed, or is that kind of competitor pricing spread to anywhere else?

No, it seems to be a pretty rational market at this point as you saw. What happened to the [L Pan] in the quarter were pushing price aggressively, most of our car types are approaching full utilization. I think, given the dynamics of the industry with slow growth in car loadings, tight supply, and long manufacturing backlogs, and us pushing price hard and having success, it seems to be a pretty rational market at this point. As far as the Bakken, there's been some pullback in new car inquiries about carrying crude, and in (inaudible). In general, there's enough demand elsewhere to more than make up for any weakness there. In fact, if you look at our supply agreement, which we signed earlier this year, not only are we sold out for 2011, but hopefully in the next quarter, we'll be sold out for all of 2012 as well. It's a very strong market.

Okay. Thank you very much for your time. That's all I got today.

Thanks, Art.

And we'll take our next question from Steve Barger with KeyBanc Capital Markets.

Good morning, guys. You just talked about pricing being high and utilization being strong. Are you getting quotes for additional cars for fleet growth? And can you talk about what you've been seeing terms of pricing for the OEM's for the past couple of quarters.

Sure. We're taking cars beyond what we're obligated to take in our supply agreement, absolutely. So we are getting all kinds of new car inquiries. That's why we're sold out so far in advance. As far as new car pricing, probably the best way to look at that is this year, it's up from the beginning of the year around 10% or more. And in context of where we are in new car pricing in the cycle, if you look back in 2007, 2008, when car prices peaked the last time, they went down between 15% and 25% to the depths of the recession.

Right.

At the end of 2009, beginning of 2010. And I'll tell you, they're almost all the way back and in some car types are even higher than the peak last time. So I would say car costs have moved up, in conjunction with steel and component supply and all that to where they are at the prior peak.

Can you talk about that by car type. Where is the strongest? Is it tank or the small cube hoppers?

In terms of demand or car --

The pricing that's gotten back to prior peak.

We're talking car costs got back.

From the OEM side, cost to you.

I'd say it's across the board. In some cases, an example would be some of the pressure cars above the prior peak.

Interesting.

But overall, I'd say almost everything is back to the prior peak.

It's also driven too, I think as Brian mentioned, that backlog is pretty long.

Right, okay.

As far as rates, there are some car types which are close to prior peak. In general, we have a ways to go on pricing, on the lease side.

Got it. Your rail gross margin was higher than its been since 2008. And obviously, LPI has recovered really nicely. Are you thinking the current conditions are going to support that high 20% gross margin in the rail group into 2012? And is that why you extended lease terms?

Well, we're extending lease terms, I think I saw your note this morning, Steve. And you're correct, we have extended term a bit, and we are doing that on selective car types, because of the rate environment. And we feel comfortable, in certain car types, with where the rates are, and starting to move those terms out. That's a reflection of the commercial environment being very strong, as Brian mentioned. In terms of gross margins, I'm not exactly sure how you are calculating that, but you need to factor in that rail had a very strong quarter from a re-marketing standpoint, as did specialty.

Right.

We would not expect that to repeat again in the fourth quarter.

Okay. And so -- and I -- correct me if I'm wrong, but did I hear you say that the LPI -- will pricing continue to increase sequentially, but the LPI won't go up just because of comps, did I hear that correctly?

The fourth quarter LPI versus the 9.6 that we posted in the third quarter, we did not -- we anticipate being below that number in the fourth quarter. As we said at the end of the second quarter, here are some cars rolling over here at the end of the year that are coming off of relatively high rates. So the bar has been raised. And so we don't anticipate the fourth quarter LPI to be as strong as we just saw. That's not a reflection of the overall nominal lease rate market right now, which remains favorable.

Got it.

Absolutely, the lease rates are increasing. And the other thing to remember is the way we managed our fleet during the downturn, which was to take, really go short on renewals and take advantage of a recovery, which is happening now. That means as we sit here today, if you look at the average 2011 expiring rate, and what we anticipate it will be in 2012, the average expiring rate should come down. Without getting into forecasting whether lease rates will continue to march up on an absolute basis, the 2012 expiring rate being down will mean that lease rate increases will continue next year even if rates are flat.

Right, I understand. That's great color. Appreciate it. I'll get back in line.

We'll take our next question from Paul Bodnar with Longbow Research.

Good morning, guys.

Good morning.

Wanted to follow up here on -- we went over the tanker market a little bit and covered options. What are you seeing in coal cars? Are we seeing a little bit more strength there? Or what's the situation?

You're definitely seeing strength in the coal car market over the last year. At the depths of the recession, you had three hundred sets idle across the industry and now it's around 20 sets. That's less than 2% of the industry's aluminum capacity that's idle right now. I saw the other day that September 2011 car loadings in coal were up about 1% versus the prior year. The export markets continue to be strong this year. If you look at our fleet, we're approaching 100% utilization. Rates are going up nicely.

I think we are still for the most part, keeping terms short, because we think there's still some legs in this recovery. And if you talk to our fleet guys, and we just did, the statistics that really drive coal car demand and pricing are all favorable right now. It's not only industry utilization exports, you look at railroad velocity, terminal dwell, all of that is deteriorating which is favorable for coal car activity. And actually, there's a lot of noise in the industry about new builds as well. Yes, we think it will continue. Obviously, it's tied to the economy, but it looks good and looks like it will continue.

Okay. And do you expect your fleet to be expanding in terms of overall size? It seems that you're at a pretty flat fleet age. What are you thinking in terms of the number of cars you're scrapping and also selling out of the fleet versus what you're going to be bringing in?

Part of that, Paul, will really be driven by what we find opportunistically in the secondary market. The new car order that we had with Trinity, if you look at that as a 2500 cars a year, that's in the range of what we scrap in a given year. And as Brian mentioned, we are ordering on top of that. So we will see some incremental fleet growth. But then really the unknown is the opportunities we find in the secondary market to find -- to add used equipment to the fleet.

Okay. And another follow-up here. I think you mentioned that 2012, the average expiring lease rates should come down. What's the number of cars up for renewal this year? I think it goes up, but I'm just wondering what kind of magnitude?

It will be similar, up slightly from this year will be the expectation.

Okay. Thanks a lot. I'll jump back in queue.

Thank you.

And we'll take our next question from John Hecht with JMP Securities.

Good morning, guys, thanks for taking my questions. Bob, you talked about some additional or incremental expenses from the strike in Q4 and that you also mentioned there was a revenue impact. Are you able to quantify that revenue impact? It sounds like you're going to try to make up for it weather permitting in Q4?

That's correct. It's a little difficult to quantify right now, because we're working as hard as we can to recapture that. We have 14 vessels that are out in service. We're working with our customers as best we can to meet all of their volume expectations and needs through the balance of the year. It won't be a question of filling the vessels in demand because that will definitely be there. Some of the uncertainty really revolves around, as it always does, with American Steamship Company, the weather environment we get here during the last couple months of the year.

In a perfect situation here, you'd be able to make up all your volume and get your revenue and your expenses would be up because you had more trips and strike expenses. We don't know if that's going to be material or not until we get to the end of the year, for the reasons Bob mentioned.

Okay. And understanding the re-marketing specialty, and you're suggesting that we wouldn't expect a repeat in Q of the gains this quarter. Can you tell us what was the equipment that you sold and is there activity in that type of equipment? And do you have equipment that would be similar to that just to think about the potential for opportunities in the near term?

Sure. I'd say on the rail side, it's generally reflective of the fleet. We sold a diversified pool of cars during the course of the quarter. Demand is definitely there. There was a pretty active bidding process for what we had out in the marketplace. We see buyers of those car types in good numbers, and we think that will continue. That interest level would continue to the extent that we had equipment we wanted to pare from the fleet.

On the specialty side, probably the biggest driver, really was some activity on the barge side of the business. We own a number of inland barges. Demand there has been pretty strong. We realized some nice up side on some of that equipment. And we think that demand also appears that it will continue or hold in there. Fourth quarter not a lot happened. If you, and you have, John, followed us for years, a lot of the transactions that get done in the course of the year, they get done in the first three quarters.

Okay. So there's some seasonal implications there. Understood. You took on about a little over 1000 cars. You sold about -- end of life -- about 740. And I know you got the Trinity order. And I know you don't give guidance on this. But just on the cars added side is that a consistent rate given the intake on Trinity, and what you're doing above your required purchasing for the near term? Is that a reasonable goal respect to modeling?

It's probably go up a little bit. We actually haven't taken delivery of that many cars under the Trinity order yet. We're getting into the flow of that order right now. So that number will probably move up a bit.

Okay. And final question I guess is for you, Brian. We've got a lot of mixed if not negative trends we're getting on a macro basis. But it seems like you're somewhat confident in the industry. I think that's in a supply, demand basis with respect to capacity in the markets. If you just can give a reminder surrogate commentary, what segments are most sensitive to economic trends? And where do you think, from a defensive position, how is the industry position related to that potential sensitivity?

Are you talking our business or industry wide?

Industry wide. The transportation is obviously a sensitive sector. And it feels like you're a little bit more optimistic this time around because of supply demand relative to the last downturn.

You answered your own question there. When people ask me, would it be better with more economic growth, it seems like the obvious answer is yes. I actually like the way it is the right now, with carloads creeping up slowly, in a relatively tight supply situation, with backlogs the way they are. If economic growth were to really take off here, I'm almost more concerned. Because what happens then? When there's more car demand, and there's more economic growth, you might see manufacturers open up some lines, you might see some new entrance, you might see current competitors get more aggressive. And you could see lease pricing actually deteriorate.

I kind of like the way it is right now with solid demand, growing slowly, in a very tight supply situation. Because we can really drive price, and with the railcar order that we placed at the beginning of this year, we've locked in that supply. With the fleets that we've acquired at a relatively new cost. And we can put those to work on more attractive leases, I think we're very well positioned to take advantage of the current situation. I really don't know what happens if growth starts to take off. It could actually be negative for pricing. I like the way it is right now.

As far as the slowdown across our businesses, I'd say the most susceptible one continues to be our freight car joint venture in Europe. That's very tied to the European economy, very tied to container movements. It went down in a hurry in 2009 as container traffic dropped. It came back in 2010 and it's just bumping along in 2012. And with all the macroeconomic news you see out there, I would say the way, we look at that is that recovery is probably delayed indefinitely there. That seems to be the most sensitive to the economy.

On the own platform in Europe as far as what's going on in Europe, it's doing great commercially. And what it proved is that it was our most -- or our least volatile business during the downturn. They never really experienced what we did in North America. Although there's some noise on the chemical side about reduced transportation, we see no cars returned. We placed a thousand new cars this year, pricing strong, and they're doing a great job. Once again, I'd say if you look at the really the macro economic indicators continue to be at odds with the strong Railcar market. And that's true for most of our business.

Great. I really appreciate that color, thanks.

We'll take our next question from Steve O'Hara with Sidoti & Company.

Hi, good morning.

Good morning.

Can your just talk about the renewal success rate you've had in the last let's say three quarters?

Yes, Steve. It's Jennifer. This quarter we were at about 75% on the renewal success rate. The quarter just prior to that was actually a little bit higher. We were up closer to 80%. Looking back towards the end of 2010 and the early part of 2011, we were right around 70%. We've seen a lot of improvement this year, compared to prior years when we were running in the mid-50% to 60% range.

Okay, and does taking new cars affect that renewal rate --

No.

Because you might be scrapping more?

No, no. That renewal success rate is for existing cars staying on lease with the current customers.

Okay. And is there -- I mean, maybe you touched on this already, and I missed it. Are you sensing any hesitation or it seems like you still see a positive demand outlook for your cars, is that correct?

Yes. And that's reflected in our supply agreement being sold out a full year in advance.

Okay. Great. Thank you very much.

We'll take our next question from Zahid Siddique with Gabelli & Company.

Hi, good morning. I have a few questions. The first one is on the Rolls-Royce, the JV. Could you elaborate a little bit more on what it is, and what are the economics of it?

Rolls-Royce and Parkers Finance is a 50 - 50% owned Bear aircraft engine leasing joint venture with ourselves and Rolls-Royce. It's a diversified portfolio of engines. It's a sizable business. It's one of the largest Bear aircraft engines leaser's in the world. It's a fairly concentrated market. There's only a handful of leaser's that have any scale to speak of in that business. And Rolls-Royce is definitely one of them. We've been in that joint venture since 1998. It's been one of the strongest performers within the entire GATX portfolio. And we're optimistic that we'll see continued growth opportunities there as that portfolio continues to expand.

And how does the economics work? You just lease the engines and split the profitability and revenues?

You see -- our share of the income from the Rolls-Royce and Partners joint venture flows through Specialties share of affiliate line. But you don't see any impact on our revenue above that our lease income. We take our share of the income through the share of affiliate line as does Rolls. It's a business that at its core is very similar to what we do in the rail universe. We put assets out on long term leases for about 85% of the engines in the portfolio, Rolls-Royce provides a total care package or service package that underpins the equipment itself. So the assets are very consistent with what we like at GATX. Long lives, widely used, very intense asset knowledge, and a big service component.

Okay, great. Moving on to share buybacks, did you have any share buybacks in the quarter?

No, we were not active on the share buybacks in the third quarter.

What's the current authorization?

We had a $200 million program in place. We have about $70 million roughly left under that authorization.

Okay. And I think I heard you say that you bought roughly $2 million worth of asset? Is that correct? If so, what did you buy?

That's right. And it was mostly rail assets in North America, and we some in Europe as well.

Okay. The next question is on the portfolio. Is there anything out there that's available? I've heard in the past that GE was looking to sell, and I think maybe AIG was doing something. Is there anything going on out there? And would you be interested in increasing your portfolio that way?

We're always interested. We've taken advantage over the last three years and the downturn of taking out disadvantaged fleets. As far as what is available right now, I still think there are some fleets both large and small that will move eventually. I don't see anything happening in 2011. But we're interested in constant contact with every party that might be interested in selling.

GE indicated recently and publicly that they're going to hold their business, and AIG, which was about a 10,000 car portfolio actually, did sell a couple of quarters ago to a private equity firm. But we remain optimistic, as Brian said, that some others may come loose here over time.

Okay, great. And the last question, what's the idle cars in the industry? I think it used to be in recent quarters like 300,000, if I remember.

Yes, the last data point that we had is of October 1st and that's come down to 260,000.

Thank you so much.

Sure.

And we'll take our next question from Kristine Kubacki with Avondale Partners.

Good morning. Most of my questions have been answered. I just want to circle back to the LPI in the fourth quarter. Is there any chance it could be negative?

We anticipate the number will be positive in the fourth quarter, but less than what we just experienced in the third quarter.

Okay. That's helpful. And then I guess, if you were looking to place orders or up -- and you said you've been taking beyond commitments with the OEMs. If you were looking to place another sizable order, when would you expect delivery could be? Or would the OEMs potentially open up some build slots for you?

The back log currently for tank is out 15 months. Depending on the freight car type and the manufacturer, nine to 15 months. There's a long backlog.

Okay. That's all I had. Thank you very much.

Thank you.

And we'll take our next question from Gregory Macosko with Lord Abbott.

Thank you, nice quarter. Could you talk about the renewals? What on average what was the expiring rate in the say, second quarter, third quarter, and what you're expecting in the fourth quarter.

Greg, it's Bob. That's not a number that we disclose publicly.

Okay.

We try to give you the color and direction there off the LPI.

All right.

But that number is a little bit too commercially sensitive.

All right. Fine. But, what I heard is that the expiration rate is going -- even though there's a relatively smaller number of expirations in 4Q, that rate is going to kind of pick up and hit -- that rate will be at a higher -- will be above what it is in the third quarter. And then it tails off and goes back down in 2012?

That's correct. We have a limited number of cars, kind of an unusual situation in the fourth quarter where they're coming off of existing high rate leases.

Okay.

But as we said, that will push that LPI down in the fourth quarter, but it's not reflective of the nominal lease rate environment we're in right now, which remains very positive.

You are basically saying that at least for at least a number of quarters going forward you expect that rate to continue to as you said kind of creep up going forward maybe through the end of next year.

Well, we haven't given specific guidance on that yet. We will in January, when we wrap up the year. But as Brian said, if lease rates stay where they're at today, given the fact that the average expiring rate in 2012 comes down a bit. We would expect the LPI to be in positive territory. And we'll give you more color on that at year end.

Okay. And the increase in the renewal term, you know, it's 49 versus 41 and that's obviously creeping up as well. Where did it peak the last time around?

You know, it got up to well over 60 months, 67 months, almost 70.

Almost 70 at one point. Okay. And I assume you -- just in general terms, you see the same kind of overall cycle this time around as well?

Hopefully, yes. You try to push it as certain car types get well above their long term average and approach the last peak, you are going to try to push lease term out aggressively. You're seeing some cars get to that area. And that's why you saw a renewal term increase in the quarter.

And then finally in the asset re-marketing area, you said it was strong. Does that mean you sold a lot more or you got good prices?

Both. It was a good market. We anticipated if you recall back at the end of the second quarter, we thought re-marketing would be pretty strong in the third quarter. We had some transactions in the pipeline we felt good about. Demand was solid. We realized nice gains on that equipment.

And so basically, what you sold is kind of what you took on. Because the number was 109,000 sequentially, right?

It's in the same ballpark of cars sold during the quarter.

All right. Good. Thanks very much.

(Operator Instructions) We'll take our next question Kent Mortensen with Thrivent Asset Management

Good morning. You gave the impact for -- you gave the impact of two discrete items in the quarter that -- one positive, one negative. But you also called out for the year that your guidance didn't include American Steamship, the strike impact for the year. But it obviously had to have some sort of negative impact in the quarter that you overcame. Can you quantify that specifically what that was in terms of earnings per share, just in this specific quarter?

I wouldn't say American Steamship overcame it.

I meant GATX overall overcame it.

I think, yes, rail had obviously a very strong quarter. We had solid re-marketing during the quarter. We haven't broken out yet. The final impact from the strike because we really won't know as we try to continue to push the volume through the fourth quarter. The extent we get to the end of the year, we'll be in a better position to assess that. We can talk about it in more detail.

I understand that you might be able to offset the negative impact at least partially in Q3. But can you just quantify what the negative impact was in Q3?

If you look at last year, we had $12.5 million in segment profit, and similar tonnage to this year. And we generated $8.5 million of segment profit.

And most of that would be due to the cost of stoppage.

Okay. So in terms of where I'm getting a little confused then is that roughly $4 million was in effect, at least from the outsiders perspective looking at consensus. That was more than overcome by strong operations in rail. But yet you didn't increase guidance for the year. You maintained that and you gave some reasons behind that with fewer re-marketing's and not as many sales, but was this quarter then basically in line with internal expectations, that you're not increasing guidance for the year? That's where I'm getting a little confused. It seems natural to me that you'd be able to increase the upper in the guidance by a nickel or so.

What I'd point out Kent is whether or not ASC recovers $1 million or $2 million of that segment profit, is dwarfed by the re-marketing line. We had $16 million in re-marketing this quarter, last year in the fourth quarter, we had $3 million.

Okay.

That number moves around substantially. And as we already indicated. We don't expect a lot of re-marketing in the fourth quarter. So that's really the big driver to, I think to answer your question.

That's excellent. That helps. And you mentioned that the cost of buying rail cars or the average costs of cars are roughly back to peak levels. But that the lease renewal or the -- if I may call it the spot renewal lease price isn't back to those peak levels. What's the typical -- how long does it typically take for those lease renewals to catch up with the pricing of the rail cars?

I don't think there is a typical pattern for that. It's so car type specific over -- and this last recession was deeper than the prior one. And I really can't generalize like that. I would just say certain car types have recovered faster than others. So, I mentioned pressure cars earlier, grain cars, 30,000-gallon tank cars are approaching the prior peaks, while coal is a good example of one that hasn't probably -- I don't know, two-thirds of the way back. It's really car type specific.

Okay, okay. Great, thank you.

Thank you.

At this time there are no other questions in queue. I'll turn it back to our speakers for closing remarks.

Okay, thank you, Tim. And thanks everyone for your participation. I'll be available all afternoon to answer additional questions. Thanks.

Thank you.

That concludes today's conference call. We appreciate your participation.