GATX Corp (GATX) 2016 Q3 法說會逐字稿

Good day. Welcome to the GATX third-quarter conference call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Chris LaHurd. Please go ahead.

Thank you. Good morning, everyone, and thanks for listening to our third-quarter earnings call. With me today are Brian Kenney, President and CEO; Bob Lyons, Executive Vice President and CFO; and Tom Ellman, Executive Vice President and President of Rail North America.

I will provide a brief overview of the results highlighted in our press release earlier this morning, and then we will open the call to your questions. First, I would like to remind you that some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in GATX's Form 10-K for 2015. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Today, we reported 2016 third-quarter net income of $95.7 million or $2.36 per diluted share, and net income for the first nine months of 2016 of $226.2 million or $5.49 per diluted share. 2016 third-quarter results include a $49.1 million pretax residual sharing settlement fee for $30.3 million after-tax from the portfolio management segment, or $0.75 per diluted share for the third quarter and $0.74 per diluted share for the first nine months of 2016. Also, the third-quarter 2016 results include a net after-tax gain from the exit of portfolio management's marine investments and a change in statutory tax rates in the UK of $4.3 million or $0.11 per diluted share, and a year-to-date net after-tax gain of $6 million or $0.14 per diluted share.

Our third-quarter results were excellent despite challenging market dynamics. Utilization for Rail North America increased to 99.0%, and our renewal success rate was high at 74.1%, thanks to the diversity of our fleet, the high-quality customer base, outstanding service, and the diligence of our commercial and operations teams in placing new cars, and competing and keeping existing cars with our customers.

In the third quarter, GATX's lease price index decreased by 21.4%, and the average renewal term was 29 months. It is also important to note that the sequential drop in lease rates, so third quarter compared to second quarter, has decelerated. With freight to lease rates nearly flat, and tank car lease rates down about 15%.

As we have stressed in prior quarters, due to our efforts to extend lease terms over the last several years, and sell near-term lease exposure of more volatile car types at attractive valuations, we have relatively fewer cars up for renewal in the coming quarters, which will help to buffer our fleet from these current market dynamics. By stretching these terms at very attractive lease rates, we have also locked in stable cash flow.

Over $4.2 billion at Rail North America alone, positioning us well to manage through this cycle, and capitalize on attractive investment opportunities. It is worth noting Rail International, ASC and our portfolio management segments are performing consistent with our expectations entering this year.

Finally, GATX repurchased nearly 564,000 shares, for approximately $25 million during the third quarter, at an average price of $44.35 per share. At the end of the quarter, $205 million remains available under the $300 million repurchase authorization. Bob Lyons has a few brief comments at this time.

Thank you, Chris. Before we move to Q&A, I would like to make a quick comment on the sizable fee that we reported, and called out in the third-quarter press release. As noted, GATX received a residual sharing settlement fee of $49 million. This was unusual in both size and origin, and was a one-time event, thus we highlighted it. The settlement fee relates to a legacy transaction within portfolio management, dating all the way back to the early 2000s.

At that time, we provided a guarantee on the residual value of certain non-GATX owned rail assets and in time, other parties in this transaction disputed the value of our fee. This dispute was argued, arbitrated and mediated over many years. Unfortunately, we reached a settlement that resulted in this one-time cash payment of $49 million.

Given the size of the settlement fee, the fact that this emanated from a legacy activity in which we no longer participate, and the fact that we have no other transactions like this within GATX, we felt it appropriate to call it out separately in the press release and exclude it from earnings guidance. With that, we will go to questions.

(Operator Instructions)

Allison Poliniak, Wells Fargo.

Just wanted to touch on, the renewal success rate obviously jumped up here and you noted that freight, lease rates had flattened out here. Has there been any notable trends, maybe in the commodity type or specific car that reversed recently, or looks to be getting a little more better, or looks to be getting better, sorry?

Yes. So one of the things we have highlighted in talking about the LPI in the past is that individual quarter moves are really hard to draw meaningful conclusions from, because it can be impacted by a few unique transactions. What I would conclude, looking at this quarter versus last quarter, is that the rate environment from an LPI perspective is relatively consistent. The more meaningful numbers, what Chris highlighted at the beginning of the call, which is the lease rates on incremental business compared to a quarter ago, which was the 15% decline in tank cars and relative flatness in freight cars.

Okay. Great. I believe last quarter when we talked, you talked about 15,000 cars coming up for renewal in 2017. 13,000 of those were more for a long-term lease. As they enter, the renewal terms come down, has that changed any as we look to 2017, is that going to start to creep up a little bit?

Allison, it is Bob Lyons. At this point, it has not changed significantly. We will give you an update on that number in our January earnings release, as it is also partly dependent on what happens with some of the renewals here in the fourth quarter. But we will give you a full update on that in January.

Great. One last thing. Just the secondary market seems a little -- a bit more active than we would have thought, just given all the volatility in the market. Could you just give us your thoughts on that?

Sure. It has actually been a significant bright spot at the secondary market for routine transactions, both that GATX is selling and others are selling in the marketplace. The demand has continued to be very strong, and I would attribute that to the fact that the capital markets remain very strong, interest rates are very low, and buyers are looking for yield. So our assets from that standpoint remain very attractive, and we see continued activity there. As long as those rates stay where they are at, and you get banks and other institutions looking to add yield assets to their portfolio, we think we will continue to see good demand.

Great. Thanks so much.

Justin Long, Stephens.

I was wondering first if you could give us a little bit more color on the LPI, specifically as it relates to any impact you saw from coal car renewals in the quarter, with the coal environment picking up a little bit over the last few months. I am wondering if that had a positive impact on the LPI in the quarter, and if you could comment on that? Secondly, do you have any expectation for how LPI could look in the fourth quarter, and into next year?

This is Tom. I will take the first part of that, and then let Bob take the second part. So as far as what is going on in coal, you are absolutely correct that we saw an increase in coal loadings during the course of the quarter, primarily driven by a hot summer and a little bit of an uptick in the price of natural gas.

But, what is important to note is the oversupply of coal cars remains extreme. It might have come down from a high of 400 sets in the industry sitting idle, down to about 250 sets sitting idle.

So, I would not view this as a coal recovery at this point in time. Again, going back to the first question on quarter over quarter LPI, I really wouldn't draw conclusions about a material change in what is going on in the lease rate environment, inclusive or exclusive of coal, just because of what happened for a one-quarter move.

Justin, with regards to the LPI for the fourth quarter, I can't give you a specific number on that, and bookend that for you. It will be -- continue to be materially negative, and as you have seen over the last couple of quarters, and the rate pressure does continue or is continuing here, and it will continue in the fourth quarter, we will see significant negative pressure on that LPI.

Okay. Fair enough. Secondly, I wanted to ask about oil prices. We have seen some recent strengths. I was curious how you feel that could impact your business, let's just say oil prices go to $60 to $70. Do you think that would have a material impact on the railcar market, or your business?

Okay. First, talking about North American rail, and then Brian will have some additional comments. In the near term, particularly for our fleet, it is just not that material.

We only have 2,100 cars in crude oil service, and mostly put on long-term leases during the strong part of the market. So, what goes on in coal itself wouldn't be very material -- I'm sorry, crude oil itself, wouldn't be very material for our fleet. What you would see in the industry with that kind of pick up, is you probably would see an almost immediate pickup in demand for small cube covered hoppers, because drilling activity would likely increase, and incrementally the industry would require more sand cars.

What it would do for the industry crude oil cars as a whole is difficult to say. We are certainly significantly oversupplied at this point, and there have been improvements in pipeline capacity, so the degree to which you would see that actually result in incremental car demand is difficult to say. Directionally, it would be helpful, but there would be some offsetting factors.

Right. In Europe, it will have a more direct and immediate impact. Because you might remember petroleum or mineral oil, as we refer to it in Europe, comprises almost 65% of the fleet. Now, that is not crude. Most of it is refined product, in fact, almost all of it. It is an annual renewal business, so you would see a direct impact more quickly in Europe, since 65% of their fleet is in petroleum products.

Okay. Great. That is helpful. One more from me.

The AAR has started publishing data on railcars and storage again. I think about 23% of the fleet is parked right now. I wanted to get your opinion, or ask you if you had a sense on how much of that fleet in storage is energy related versus non-energy related?

That is a great question. In addition to reintroducing that statistic, in just two months, so it is very recent, they have started breaking it out by major car type. So there is actually some industry statistics on that. What they don't do is provide energy, they don't do it by commodities. Instead they do it by car type.

So of the cars that are in storage right now, per their definition, which hasn't moved in 60 days, and they have also actually expanded that definition a little bit. They have also excluded cars where the last move, the last recorded move was a loaded move. So they are trying to take out cars that just move slow. We still don't know if it is a perfect statistic, but it's certainly is trying to address that.

Tank cars represented 32% of that number, and covered hoppers represented 29%. Obviously, within those, the first one you have crude oil cars, the second one you have small cube covered hoppers, but breaking out energy specifically is challenging. Just like the statistic overall, though, we are not going to be as focused on those absolute numbers, but rather how they change period to period, the delta will be more meaningful. If you look at the delta in the first two months that this statistic has been around, you have seen a significant decrease in covered hoppers, which is primarily related to the record grain harvest, and you also have seen improvement in the open top hoppers and gondolas, which largely would be coal cars, and be indicative of the improvement in coal that I talked about earlier.

Okay. That is helpful color. I appreciate the time. I will leave it at that.

Gordon Johnson, Axiom Capital Management.

This is James Bardowski in for Gordon. First of all, you reaffirmed your full-year EPS guidance range, excluding the $0.74 per share portfolio management fee. Using the midpoint on this implies 4Q EPS is $0.89. Of this $0.89, how much are you attributing to remarketing income as opposed to --

Remarketing income right now we anticipate is going to be very light in the fourth quarter.

Very light. Okay. That definitely helps. Then, secondly, you exited the third quarter with the North American fleet at close to 105,000 railcars, which is the lowest level since at least before 2008, presumably to manage the fleet utilization. Are you seeing any material downward pressure on remarketing prices, basically in your attempt to manage the fleet utilization?

Yes. I will take the first part of that and let others chime in. First of all, your 105,000 cars, I think you are probably missing the boxcars. We separately report that too.

Right. Those only.

As noted earlier, we absolutely are seeing rate pressure. We have seen that for quite some period of time. It is not a case of utilization being managed through the scrapping process, because what we do in all markets is the same thing, which is take a look at the anticipated earnings of the car over its remaining life, when it comes into shop, and compare that to current scrap prices.

And then, you will do the economically most advantageous thing. In this environment, scrap prices are low and the prospects for the car are historically at low levels. Both of those factors to a large degree cancel out, and you are not seeing any unusual scrapping activity.

One more, and I will hand it off. More of an abstract question. Historically, it is pretty well known that railcar loadings have been the leading indicator of the industry, which clearly are down, I think 85, 87 straight weeks right now. Signs are mixed that the slowdown is abating, arguable in either direction. Given that GATX has a more normalized 15,000 or so leases coming up for renewal in 2017, how is this factoring into your forward expectations?

So first of all, at least in the third quarter, in a couple of different areas, we've actually saw significant increases in railcar loadings, most notably coal and the grain cars that I mentioned earlier. Overall, as far as expectations go, we have been talking for quite some time now about the oversupply situation in general, and some of the areas where we have seen decreased demand. Both of those factors matter, but overall, the more powerful is that supply statistic, how many excess cars there are.

Earlier, we were talking about the AAR statistic, and the questioner mentioned 23% of the cars being idle, per the AAR definition. So significantly too many cars already in the industry. Plus, if you look at the backlog of new cars, unfortunately, the third-quarter statistics are not yet out, but as of the second quarter, there were 89,000 cars yet to be delivered. And that number is bigger than the absolute peak of the last up cycle, which was 88,000 cars. Our expectations for quite a while have been built around the situation that the industry had to get back into balance, from a supply-demand situation.

All right. Thank you very much.

Matt Brooklier, Longbow Research.

I wanted to just dig in a little bit, in terms of the improvement in utilization on the fleet in 3Q. Tom may have touched on it a little bit earlier, but I am trying to get a sense for specific car types, that enabled you to get the fleet a little more busy here in 3Q versus 2Q.

There was several different car types contributed, but the single biggest contributor was coal, and very much related to the fact that loadings ticked up. One of the things we tried to do in all situations is be the first mover, and have cars ready to go and available, and we were able to take advantage of that, and put some coal cars to work. Importantly, again, overall, the industry still is seeing way too many idle coal cars, so overall in the industry, rates continue to be depressed, and I would not view that uptick in utilization as indicative of a larger coal recovery.

Okay. And other car types that may have helped lift utilization I guess, was grain one of them, and any other that stood out? If you could talk to them.

If we would have had idle grain cars, they would have helped, but our grain fleet was 100% utilized going into it. We didn't have cars to contribute in that area.

The drop in utilization earlier in the year was driven by coal, and now the pickup has been driven by coal. Everything else, we have had pretty good renewal success on.

And the rates on coal cars are still trending at lower end levels?

Yes. That is correct.

Okay. I am trying to think out into 2017. I think others have asked the question, but just looking at the LPI, trying to get a sense for, I guess, if we have bottomed here, or is the potential for the LPI to be down incrementally in 2017? How I am thinking about it is even if rates were to hold moving forward, the comps are getting more difficult as we move out into 2017. Am I thinking about that right, or what are your thoughts? I know you don't want to commit to anything, but if you could just talk a little bit to thinking about the LPI, and where it could bottom?

You answered your own question. That is exactly right. We don't know where absolute rates are going, but even if they stayed constant and they had bottomed out, we would still be under LPI pressure, because that expiring rate is increasing due to the strong market over the last four years, prior to this downturn. So yes, there is LPI pressure next year, regardless of if rates have bottomed out, or not.

Okay. And then you did a really good job on the maintenance expense side of things during 3Q. I think the guide for the year is expectations for that line to be flat, to maybe up a little bit. Has that line of thought changed in terms of you all in maintenance expense in 2016? And then thoughts on 2017, if you have any?

In 2016, what we set coming into the year, you're right. It would be flat to slightly up. We have a lower compliance, especially tank compliance in 2016, versus 2015. We anticipated there would be more maintenance, due to lower commercial success, more churn in the fleet, more cars coming into the network. We have had lower compliance, but our commercial success, as evidenced by the higher utilization rate, has been better than we anticipated.

A lot of those cars have not entered the network, as our renewal success, especially for tank, which is maintenance intensive, has hung in there very well. We are doing better in the North American maintenance line than we anticipated. As far as next year, we will talk about that in January, but on the compliance side, it is a lighter year in 2017 from a compliance perspective, especially tank compliance. But, that is scheduled. What we actually do depends on what we can get into the network.

Okay. Just one last quick one. The $5.5 million of other income at Rail International, what was that?

Sure. I think many of you are familiar with a long-running legal case we have been involved with, within GATX Rail Europe, emanating out of Italy. Over the last many quarters, we have absorbed legal expense associated with that case, and here in the third quarter, we were reimbursed by our insurers for a portion of that legal expense, that we had previously incurred and expensed, so that was a catch-up.

Okay. Are there further catch-ups as we are thinking about fourth quarter?

Matt, no, not really. It was about $6.5 million, $7 million roughly.

Got you. Okay. Appreciate the time.

Justin Bergner, Gabelli & Company.

First question relates to the tank car lease rates. You mentioned that they were down about 15% sequentially in the third quarter. Was that a consistent down 15%, or do you see the decline taper and then flatten off toward the end of the quarter?

Even quarter to quarter is challenging to draw significant conclusions. Certainly within a quarter, that is just too precise.

Okay. Understood. I think I might have joined late and missed the renewal rate for the quarter. Could you remind me what that was?

The renewal success rate was 74.1%.

Okay. Are you optimistic you can keep it at the level going forward? Or is that more of a one quarter snap back from the 60s?

We are certainly confident we will be able to keep the rate north of historical lows. We have been down into the 50s in a more challenging market environment. Over the last several quarters, we have been well north of that. We will continue to be north of that. It is going to be a challenging environment, and that number will bump around a bit from quarter to quarter, depending on the types of cars that come up for renewal.

Okay. Understood. And then just two more detailed questions. The other revenue in North American rail was $17 million versus $20 million year on year. Is there any helpful detail on that decline?

There is nothing significant there. That number is really a compilation of both scrap income, railroad repair, or railroad reimbursements, mileage reimbursements. So, nothing significant there, Justin.

Okay. So there is no step down I should worry about there?

No. No single line item.

All right. In regards to this legal cost which you received some reimbursement from in third quarter, were these anticipated at the start of the year when you gave guidance, and if not, how many cents is this taking away on a net basis from 2016 earnings, if the year were to end today?

Actually, they were anticipated and baked into our guidance coming into the year.

Okay. So is it sort of trending as you anticipated, or little bit better for the reimbursement?

It came in very close to what we thought it would, in terms of the reimbursement for expenses we had already incurred and expensed.

Okay. Thanks for taking all my questions this morning.

Steve O'Hara, Sidoti & Company.

Just going to the backlog and where it stands, I guess there is no update yet, but it seems like -- it seems high. Do you have a sense for what the maybe the time weighted backlog is. Do you think some of these deliveries are getting pushed out? Is it more acute of a problem, or less acute maybe than it seems?

The way the backlog gets reported by the builders and aggregated, so we are not a builder. Actually, it is one of the things that we struggle with, and try to get a real sense on what is going on in the backlog. We will be very interested to see the third-quarter numbers. I am told that they should be out tomorrow.

We mentioned this on the last couple of calls. One of the challenges, one of the things you try to do is take the beginning backlog plus orders, minus deliveries, and then you should get the ending backlog. That hasn't exactly worked for the past couple quarters.

What is going on, why are cars coming into or out of the backlog, that is something we don't have great insight into. The other thing we don't have great insight into is how long out is that backlog. For instance, when we do our long-term supply agreements, typically that all goes into the backlog, but obviously some of those don't deliver for quite some time. We don't know what the original length of the backlog was, and then we don't know how it might have changed if people are deferring or switching orders.

Okay. Great. And then just on ASC, it seems -- I thought the commentary coming into the year was that I think you had trimmed capacity, selling fleet for the year, and it seemed like there was going to be, there was an expectation that things were going to be, I think, up year-over-year there. I thought fairly materially, maybe you have updated that and I missed it throughout the year. Is it just a matter of the fact that things are a little bit weaker than you expected coming in, or maybe you could just discuss that? Thank you.

Sure. From a tonnage perspective, we expect to move almost the same amount of volume this year as we were going to move last year. Really, any incremental benefits was going to come from running the fleet more efficiently, with fewer vessels. We are only operating 11 vessels this year. Segment profit is expected to be in the range, or up a little bit from where we had been last year.

So we weren't anticipating any significant material change at ASC. It has turned out to be that kind of year. It remains a pretty challenging market when you're moving iron ore and coal.

Yes. Okay, lastly, within portfolio management, I think in the share of affiliate earnings, it was a pretty good jump sequentially and the best of the year at 15.2. Was there anything else in there that maybe you shouldn't read into going forward, or is it just a very good quarter there?

It was a good quarter from Rolls-Royce. That is really the big driver of that share of affiliate earnings line. We would expect fourth-quarter to be in that range or even higher, as we close the year out, and have a little bit more of an active remarketing calendar here in the third quarter and fourth quarter within Rolls.

Okay. Okay. So I guess, was more of it due to the ongoing operations, or more of the remarketing?

The timing of remarketing we see somewhat of a similar, or lack of a pattern, as you may see in Rail North America, depending on when we are in the market with assets, and when we are not. It can move around a bit, for sure.

Okay. Thank you very much.

Kristine Kubacki, CLSA.

Bob, you may have just answered my question, but you mentioned, and I am focused here on the rail side of remarketing income. You said it would be light in the fourth quarter, and I get it is really lumpy, but can we infer anything? I know obviously the market is under stress, but it seems like the secondary market is still holding up. As we move into 2017 and we think about our models there, are we thinking about the same kind of lumpiness? It won't be a fourth-quarter run rate, correct?

Correct. The fourth quarter won't be indicative of what we anticipate in 2017, and in fact, Kristine, I had mentioned the secondary market has really held up extremely well, and better than what we anticipated coming into the year from a number of bidders, volume, what folks are willing to pay for assets on lease. So, it has been a more solid area of activity than we anticipated really, coming into the year. Given where interest rates are, and where it looks like they will continue to be in 2017, we are optimistic we will have a pretty solid year in 2017. We will give you more guidance on a range of that, as we get into January, with the year-end numbers.

Okay. That is helpful. The second part of that question then would be, you talked a little bit about asset opportunities at some point in the cycle. Does that mean, given where asset prices still are and given the secondary market activity, does that make it more challenging for you to find opportunities, or do you think things will be coming to market maybe later in 2017?

That is exactly right. It is Brian. That is the problem with the secondary market hanging in there, and the capital markets hanging in there. It's great for financial results, because we are always optimizing our fleet, but it makes things very difficult woman investment perspective.

Having said that, I know that capital markets are strong and the market is hanging in there, but I think across the leasing industry, we have seen utilization drop, and that obviously results in financial degradation a little more quickly than rate drops. If that trend continues, you would expect to see some financial playing out there in the leasing industry in 2017, and then I would expect asset prices to come down. That is the way it has worked in prior downturns. This one has been a little unique because the capital markets have been so strong, but I think as utilization drops, you will start to see less incentive to pick up new assets, as people try to deal with their idle fleet.

Okay. That is helpful. One last one, and forgive me if you've already answered this. But just noticing the utilization on the boxcar fleet went down a little bit sequentially. Is there anything there was that more seasonal in nature?

Actually, the biggest single mover in the boxcar is the railroad efficiency. Because that has been better through the course of the year, it has popped around a little bit, but it does been largely better. People need a few less cars.

Okay. Perfect. Thank you very much.

Steve Barger, KeyBanc Capital Markets.

Just curious, when is the last time renewal terms have been down to 29 months? Do you think that contracts more from here?

Yes. From a general scale standpoint, both the terms and the rates that you are seeing now are similar to what they were during the last downturn.

You mean in 2009 and 2010?

Correct.

Steve, I think we got down into the low 30 month range back at that timeframe.

Just based on conditions right now, because things rebounded fairly quickly back then, do you expect that 29 months is the trough, or does that get shorter?

So overall, what we try to do all the time is take terms shorter in low rate environments. Exactly how low the number goes, it is difficult to project. Generally speaking, there is a minimum term that both we and the customers would like, just to make the whole transaction worthwhile. I wouldn't expect it to go materially lower, but certainly in this environment, we are open to one and two-year leases.

Sure.

I will also say that quarter to quarter that number bounces around as much as the lease prices index bounces around, for the same reasons.

Right. And just broadly speaking, do you have historical data for conditions like this, where railcar traffic levels are bleeding down for multiple years in a row? There is a car oversupply. If there has been a situation like this in the past, how long, how many years did it take for the industry to balance out?

I would say there has not been an environment exactly like this one. If you look at the last downturn of second half of 2008, 2009 and 2010, that was an economic-driven financial market driven collapse, that then bled into a decline in commodity movements. So, that downturn was very different, as was the prior one back from 2002 and 2003. There is no exact comp on that front.

Well, I guess just more prospectively, when you think about the current conditions economically, and the overcapacity, would you take a stab at how long it takes to balance out supply and demand?

I would say this time around, the issue, the challenges in our industry are more rail specific and unique, given the overcapacity and oversupply, the inventory, the backlog, is really -- outweighs some of the other factors at play here.

I mean, we are not trying to duck the question. To be more specific, Tom answered a question earlier about the nature of the backlog and our answer was, we don't really know him a time-weighted perspective what is that like and what is happening. If we had more knowledge there, we could be more definitive about how long we think this would last.

A lot of things could happen in that backlog. Orders could be canceled, orders could be deferred, which we hear anecdotally is already happening. In the industry, there could be a lot more scrapping, as well, for just general economic reasons as well as regulatory reasons, as those cars bump up against the deadline. There are other things that could affect that industry capacity, but it is hard to determine exactly how long this will last, unless we know more about that backlog.

Understood. To your point on cancellation and deferral, last quarter you modified a contract for somebody, I think you got a fee and some other concessions. Are you seeing more customers looking for changes?

Steve, that was in the first quarter. We did the large one, where we collected a sizable fee for that one, and we highlighted that one because of the size of the fee, and the fact that it was a bit unusual. We continue to receive some lease modification requests from time to time, but it is not a material flow or significant flow.

Got it. Last question. Obviously, your utilization rate remains high, because cars are under contract. What I think about those AAR idle car statistics, is your fleet similar, in terms of effective utilization, or are you outperforming that idle car stat?

The answer is, we like, similarly, exactly what is going on with our cars. The customer use of our cars, it is difficult to say. If you look at the mix of our fleet compared to the mix of the industry as a whole, I would say it is highly likely that our cars are more utilized in the industry, just as a whole. Most specifically, relatively low weightings on coal cars, on crude oil cars, on small cube covered hoppers.

Right. Okay. Thanks so much.

Justin Long, Stephens.

I just had a quick one I wanted to clarify on the guidance. What is the year-to-date EPS number you are using in the guidance? I know you are excluding the charge this quarter, but there were a couple of other moving pieces. I wanted to make sure we were using the same numbers as you.

Sure. If you remove the marine related and other items at portfolio management and the settlement fee, you back down to a number year to date of about $4.60 a share, versus the guidance for the full year of $5.55 to $5.75.

That is helpful. At the midpoint of that, it implies $1.05 or so for the fourth quarter. I know you are not giving details on 2017 yet, but just from a high level, does that seem like a ballpark run rate for next year, maybe with the exception of remarketing income being a little bit higher, as you talked about before?

I would not read too much into that fourth-quarter number on a standalone basis, because of the remarketing piece and because of the fact that American Steamship really winds down operations in the fourth quarter. I wouldn't look at that as a run rate number. Obviously, when we come back to you in January, we will give you the full-year guidance, and the variables that all went into that.

Okay. Great. I will leave it at that. Thanks again for the time.

It appears there are no further questions at this time. I would now like to turn the conference over to Mr. LaHurd for any additional or closing remarks.

I just want to thank everyone for their participation on the call. If you have any questions, you can give me a call directly. Thank you.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation.