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OFFON

GATX CORPORATION

(GATX)
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GATX CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

10/29/2021 | 02:51pm EST

OVERVIEW

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"). All
engines are on long-term leases with airline customers and are managed by 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"),
one of the largest tank container lessors in the world. Financial results for
this business are reported in the Other segment. See "Note 3. Business
Combinations" in Part I, Item 1 of this Form 10-Q 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" in Part I, Item 1 of this Form 10-Q for additional
information.

The following discussion and analysis should be read in conjunction with the
Management's Discussion and Analysis in our Annual Report on Form 10-K for the
year ended December 31, 2020. We based the discussion and analysis that follows
on financial data we derived from the financial statements prepared in
accordance with U.S. Generally Accepted Accounting Standards ("GAAP") and on
certain other financial data that we prepared using non-GAAP components. For a
reconciliation of these non-GAAP components to the most comparable GAAP
components, see "Non-GAAP Financial Measures" at the end of this item.

Operating results for the three and nine months ended September 30, 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.

Coronavirus Disease 2019 ("COVID-19")


On March 11, 2020, the World Health Organization declared COVID-19 a pandemic
and on March 13, 2020, the United States declared a national emergency related
to COVID-19. Across our operating segments, we have implemented business
continuity and crisis management plans. The COVID-19 pandemic continues to
evolve, including the scope and duration of disruptions and the pace and timing
of the eventual recovery. The global economic recovery remains uncertain due to
potential COVID-19 resurgences. Our top priorities continue to be ensuring the
health and safety of our global workforce and serving our various stakeholders
with minimal disruptions.

Rail North America

The initial impact of COVID-19 resulted in a decline in industry railcar
loadings, had a negative impact on lease rates, and led to a reduction in the
purchase and sale of railcars in the secondary market. Although North America
saw a resurgence in COVID-19 cases during 2021, the operating environment has
continued to improve, and the initial resurgence had minimal impact to our
operating and financial results during the third quarter of 2021. The risk of
ongoing volatility due to future COVID-19 disruptions persists.

Rail International

While the initial impact of COVID-19 has dissipated, Europe and India saw a resurgence in COVID-19 cases during 2021. Although the resurgence had a minimal impact to our operations in Europe, it did cause disruptions to railcar manufacturers in Europe and India, and the risk of ongoing volatility as a result of future COVID-19 disruptions persists.

                                       23
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Rail North America & Rail International Maintenance Operations


Rail freight transportation and railcar repair have been deemed essential
businesses globally. Our rail operations teams have implemented COVID-19
preparation and response programs to ensure the health and safety of our
employees while continuing to provide critical railcar maintenance services. As
a result of the resurgence in cases from the Delta variant, disruptions at our
railcar repair facilities increased during the third quarter of 2021, and future
disruptions could occur.

Rolls-Royce & Partners Finance Joint Ventures ("RRPF affiliates")


Global air travel continues to be significantly impacted by COVID-19. In
response to the drastic decline in demand, airlines have reduced system-wide
capacity and grounded large portions or all of their fleets. Although flight
operations have resumed, air travel remains below pre-COVID-19 levels. Many
airlines are currently focused on managing their liquidity positions,
restructuring operations, and obtaining government financial support. The major
reduction in global air travel and the disruption across the aviation industry
continued to adversely impact the profitability of our aircraft spare engine
leasing business and operating results in the third quarter of 2021. We expect
that it will continue to have a negative impact on our near-term operating
results, the magnitude and duration of which are still uncertain.

DISCUSSION OF OPERATING RESULTS


Net income from continuing operations for the first nine months of 2021 was
$82.1 million, or $2.28 per diluted share, compared to $132.4 million, or $3.74
per diluted share, in 2020. Results for the nine months ended September 30, 2021
included a net negative impact of $39.7 million related to an enacted tax rate
increase in the United Kingdom and a net negative impact of $3.4 million
attributable to debt extinguishment costs associated with an early redemption.
Results for the nine months ended September 30, 2020 included a net negative
impact of $12.3 million related to the elimination of a previously announced
corporate income tax rate reduction in the United Kingdom (see "Non-GAAP
Financial Measures" at the end of this item for further details). Excluding the
impact of these items, net income from continuing operations decreased $19.5
million compared to the prior year, largely due to lower share of affiliates'
earnings, partially offset by higher asset disposition gains and lower
maintenance expenses at Rail North America.

Net income from continuing operations for the third quarter of 2021 was $40.1
million, or $1.11 per diluted share, compared to $48.2 million, or $1.36 per
diluted share, in 2020. Results for the three months ended September 30, 2020
included a net negative impact of $12.3 million related to the elimination of a
previously announced corporate income tax rate reduction in the United Kingdom
(see "Non-GAAP Financial Measures" at the end of this item for further details).
Net income from continuing operations decreased $20.4 million compared to the
prior year, largely due to lower share of affiliates' earnings, partially offset
by higher asset disposition gains and lower maintenance expenses at Rail North
America.


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The following table shows a summary of our reporting segments and consolidated financial results (in millions, except per share data):

                                                            Three Months Ended                     Nine Months Ended
                                                               September 30                           September 30
                                                           2021                2020              2021               2020
Segment Revenues
Rail North America                                   $    219.8             $ 232.1          $    667.8          $ 703.3
Rail International                                         71.5                67.1               212.6            188.4
Portfolio Management                                       13.3                 5.2                34.0             12.6
Other                                                       8.9                   -                22.0                -
                                                     $    313.5             $ 304.4          $    936.4          $ 904.3
Segment Profit
Rail North America                                   $     66.5             $  56.1          $    209.8          $ 178.1
Rail International                                         27.0                24.0                76.1             57.9
Portfolio Management                                        6.2                44.3                24.5             83.1
Other                                                       3.0                   -                 6.3                -
                                                          102.7               124.4               316.7            319.1
Less:
Selling, general and administrative expense                45.9                42.0               140.8            125.8
Unallocated interest expense                                0.2                (2.2)                0.6             (5.1)
Other, including eliminations                               1.1                 0.6                 9.0              3.3
Income taxes (includes $1.0 and $24.0 QTR and $47.8        15.4                35.8                84.2             62.7
and $33.1 YTD related to affiliates' earnings)
Net Income from Continuing Operations (GAAP)         $     40.1             

$ 48.2 $ 82.1 $ 132.4


Discontinued Operations, Net of Taxes
Loss from discontinued operations, net of taxes      $        -             

$ - $ - $ (2.2) (Loss) gain on sale of discontinued operations, net of taxes

                                                      -                (0.3)                  -              3.3
Total Discontinued Operations, Net of Taxes (GAAP)   $        -             $  (0.3)         $        -          $   1.1

Net Income (GAAP)                                    $     40.1             $  47.9          $     82.1          $ 133.5

Net income from continuing operations, excluding tax adjustments and other items (non-GAAP) (1)

           $     40.1             

$ 60.5 $ 125.2 $ 144.7 Net loss from discontinued operations, excluding tax adjustments and other items (non-GAAP) (1)

                    -                (0.3)                  -              1.1

Net income from consolidated operations, excluding tax adjustments and other items (non-GAAP) (1) $ 40.1

$ 60.2 $ 125.2 $ 145.8


Diluted earnings per share from continuing
operations (GAAP)                                    $     1.11             $  1.36          $     2.28          $  3.74
Diluted earnings per share from discontinued
operations (GAAP)                                             -               (0.01)                  -             0.03
Diluted earnings per share from consolidated
operations (GAAP)                                    $     1.11             

$ 1.35 $ 2.28 $ 3.77


Diluted earnings per share from continuing
operations, excluding tax adjustments and other
items (non-GAAP) (1)                                 $     1.11             $  1.71          $     3.48          $  4.09
Diluted earnings per share from discontinued
operations, excluding tax adjustments and other
items (non-GAAP) (1)                                          -               (0.01)                  -             0.03
Diluted earnings per share from consolidated
operations, excluding tax adjustments and other
items (non-GAAP) (1)                                 $     1.11             $  1.70          $     3.48          $  4.12

Investment Volume                                    $    229.8             $ 249.9          $    893.2          $ 641.4


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The following table shows our return on equity ("ROE") for the trailing 12 months ended September 30:

                                                                       2021                   2020
Return on Equity (GAAP)                                                    5.1  %                10.2  %
Return on Equity, excluding tax adjustments and other items
(non-GAAP) (1)                                                             8.8  %                12.7  %


_________

(1) See "Non-GAAP Financial Measures" at the end of this item for further details.

Segment Operations


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.

                               RAIL NORTH AMERICA

Segment Summary

During the third quarter, conditions in the North American railcar leasing
market continued to improve as railroad car loadings increased, railroad
velocity decreased, and industry cars in storage decreased from prior year.
Demand for most car types increased and absolute lease rates increased across
most of the fleet during the quarter. Utilization increased to 99.2% at the end
of the quarter.

While COVID-19 had minimal impact on operating and financial results in the quarter, disruptions at our maintenance facilities increased as a result of the Delta variant, and the risk of ongoing volatility due to future COVID-19 disruptions persists.


The following table shows Rail North America's segment results (in millions):
                                          Three Months Ended              Nine Months Ended
                                             September 30                   September 30
                                           2021            2020           2021          2020
Revenues
Lease revenue                        $    200.4          $ 208.7      $    611.4      $ 630.8
Other revenue                              19.4             23.4            56.4         72.5
  Total Revenues                          219.8            232.1           667.8        703.3

Expenses
Maintenance expense                        58.9             63.2           178.8        206.5
Depreciation expense                       64.8             65.0           195.7        193.0
Operating lease expense                     9.0             12.3            30.1         38.1
Other operating expense                     6.6              6.6            22.6         20.8
  Total Expenses                          139.3            147.1           427.2        458.4

Other Income (Expense)
Net gain on asset dispositions             20.2              7.9            74.8         39.9
Interest expense, net                     (32.9)           (35.7)         (102.5)      (103.5)
Other expense                              (1.1)            (1.1)           (2.9)        (3.2)
Share of affiliates' pre-tax loss          (0.2)               -            (0.2)           -
Segment Profit                       $     66.5          $  56.1      $    209.8      $ 178.1

Investment Volume                    $    178.9          $ 204.1      $    394.4      $ 474.6


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The following table shows the components of Rail North America's lease revenue
(in millions):
                   Three Months Ended              Nine Months Ended
                      September 30                   September 30
                    2021            2020           2021          2020
Railcars      $    177.1          $ 184.8      $    540.6      $ 558.3
Boxcars             16.7             16.5            51.0         50.0
Locomotives          6.6              7.4            19.8         22.5
Total         $    200.4          $ 208.7      $    611.4      $ 630.8



Rail North America Fleet Data

At September 30, 2021, Rail North America's wholly owned fleet, excluding
boxcars, consisted of approximately 101,300 railcars. Fleet utilization,
excluding boxcars, was 99.2% at September 30, 2021, compared to 98.5% at the end
of the prior quarter, and 98.2% at September 30, 2020. Fleet utilization for
approximately 12,800 boxcars was 98.4% at September 30, 2021, compared to 97.1%
at the end of the prior quarter, and 94.5% at September 30, 2020. Utilization is
calculated as the number of railcars on lease as a percentage of total railcars
in the fleet.

During the third quarter of 2021, an average of approximately 100,500 railcars,
excluding boxcars, were on lease, compared to 100,700 in the prior quarter and
101,600 for the quarter ended September 30, 2020. Changes in railcars on lease
compared to prior periods are impacted by the timing of deliveries of new
railcars purchased under our supply agreements, the number and timing of
railcars acquired in the secondary market, and the disposition of railcars that
were sold or scrapped, as well as the fleet utilization rate.

As of September 30, 2021, leases for approximately 5,000 tank cars and freight
cars and approximately 800 boxcars are scheduled to expire over the remainder of
2021. These amounts exclude railcars on leases expiring in 2021 that have
already been renewed or assigned to a new lessee.

The following table shows fleet activity for Rail North America railcars, excluding boxcars, for the quarter ended:

                                    September 30                 December 31                 March 31                   June 30                  September 30
                                        2020                        2020                       2021                      2021                        2021
Beginning balance                          102,891                     103,363                   103,745                   102,903                      102,144
Cars added                                   1,578                       1,015                       977                       693                          742
Cars scrapped                                 (623)                       (571)                   (1,002)                     (770)                        (947)
Cars sold                                     (483)                        (62)                     (817)                     (682)                        (598)
Ending balance                             103,363                     103,745                   102,903                   102,144                      101,341
Utilization rate at quarter
end                                           98.2  %                     98.1  %                   97.8  %                   98.5  %                      99.2  %
Average active railcars                    101,552                     101,723                   101,099                   100,722                      100,467



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                     [[Image Removed: gmt-20210930_g2.jpg]]

The following table shows fleet statistics for Rail North America boxcars for the quarter ended:

                   September 30      December 31      March 31      June 30       September 30
                       2020             2020            2021          2021            2021
Ending balance         14,753           14,315        13,880        12,659            12,809
Utilization              94.5  %          95.8  %       97.1  %       97.1  %           98.4  %



Lease Price Index

Our Lease Price Index ("LPI") is an internally-generated business indicator that
measures lease rate pricing on renewals for our North American railcar fleet,
excluding boxcars. We calculate the index using the weighted-average lease rate
for a group of railcar types that we believe best represents our overall North
American fleet, excluding boxcars. The average renewal lease rate change is
reported as the percentage change between the average renewal lease rate and the
average expiring lease rate, weighted by fleet composition. The average renewal
lease term is reported in months and reflects the average renewal lease term of
railcar types in the LPI, weighted by fleet composition.

During the third quarter of 2021, the renewal rate change of the LPI was
negative 8.1%, compared to negative 6.7% in the prior quarter, and negative
29.4% in the third quarter of 2020. Lease terms on renewals for cars in the LPI
averaged 32 months in the current quarter, compared to 29 months in the prior
quarter, and 29 months in the third quarter of 2020. Additionally, the renewal
success rate, which represents the percentage of railcars on expiring leases
that were renewed with the existing lessee, was 84.0% in the current quarter,
compared to 77.5% in the prior quarter, and 58.1% in the third quarter of 2020.
The renewal success rate is an important metric because railcars returned by our
customers may remain idle or incur additional maintenance and freight costs
prior to being leased to new customers.

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                     [[Image Removed: gmt-20210930_g3.jpg]]

Comparison of the First Nine Months of 2021 to the First Nine Months of 2020

Segment Profit


In the first nine months of 2021, segment profit of $209.8 million increased
17.8% compared to $178.1 million for the same period in the prior year. The
increase was primarily driven by higher net gains on asset dispositions and
lower maintenance expense, partially offset by lower revenue. The amount and
timing of disposition gains is dependent on a number of factors and may vary
materially from year to year.

Revenues

In the first nine months of 2021, lease revenue decreased $19.4 million, or 3.1%, resulting from fewer railcars and locomotives on lease. Other revenue decreased $16.1 million, driven by lower repair revenue, as a result of mix of repairs, and lower lease termination fees.

Expenses


In the first nine months of 2021, maintenance expense decreased $27.7 million,
driven by fewer regulatory compliance events, fewer repairs performed by the
railroads, improved efficiency in our owned repair shops, and a higher share of
repairs being performed in GATX's owned shops versus contract shops.
Depreciation expense increased $2.7 million due to the timing of new railcar
investments and dispositions. Operating lease expense decreased $8.0 million,
resulting from the purchase of railcars previously on operating leases. Other
operating expense increased $1.8 million due to higher insurance and storage
costs.

Other Income (Expense)

In the first nine months of 2021 net gain on asset dispositions increased $34.9
million, due to higher asset remarketing gains and higher net scrapping gains.
The amount and timing of disposition gains is dependent on a number of factors
and may vary materially from year to year. Higher net scrapping gains were
impacted by a higher scrap price per ton in 2021 and more railcars scrapped. Net
interest expense decreased $1.0 million, primarily driven by a lower average
interest rate, partially offset by a higher average debt balance.

                                       29
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Investment Volume


During the first nine months of 2021, investment volume was $394.4 million
compared to $474.6 million in the same period in 2020. We acquired 2,560 newly
built railcars and purchased 309 railcars in the secondary market in the first
nine months of 2021, compared to 3,533 newly built railcars and 355 railcars
purchased in the secondary market in the same period in 2020.

Our investment volume is predominantly composed of acquired railcars, but also
includes certain capitalized repairs and improvements to owned railcars and our
maintenance facilities. As a result, the dollar value of investment volume does
not necessarily correspond to the number of railcars acquired in any given
period. In addition, the comparability of amounts invested and the number of
railcars acquired in each period is impacted by the mix of railcars purchased,
which may include tank cars and freight cars, as well as newly manufactured
railcars or those purchased in the secondary market.

Comparison of the Third Quarter of 2021 to the Third Quarter of 2020

Segment Profit


In the third quarter of 2021, segment profit of $66.5 million increased 18.5%
compared to $56.1 million for the same period in the prior year. The increase
was primarily driven by higher net gains on asset dispositions and lower
maintenance expense, partially offset by lower revenue. The amount and timing of
disposition gains is dependent on a number of factors and may vary materially
from quarter to quarter.

Revenues

In the third quarter of 2021, lease revenue decreased $8.3 million, or 4.0%,
resulting from fewer railcars and locomotives on lease. Other revenue decreased
$4.0 million, driven by lower lease termination fees and lower repair revenue.

Expenses


In the third quarter of 2021, maintenance expense decreased $4.3 million, driven
by fewer regulatory compliance events, fewer repairs performed by the railroads,
improved efficiency in our owned repair shops, and a higher share of repairs
being performed in GATX's owned shops versus contract shops. Depreciation
expense decreased $0.2 million due to the timing of new railcar investments and
dispositions. Operating lease expense decreased $3.3 million, resulting from the
purchase of railcars previously on operating leases. Other operating expense was
comparable to prior year.

Other Income (Expense)

In the third quarter of 2021, net gain on asset dispositions increased $12.3
million, due to higher asset remarketing gains and higher net scrapping gains.
The amount and timing of disposition gains is dependent on a number of factors
and may vary materially from quarter to quarter. Higher net scrapping gains were
impacted by a higher scrap price per ton in 2021 and more railcars scrapped. Net
interest expense decreased $2.8 million, primarily driven by a lower average
interest rate, partially offset by a higher average debt balance.

                               RAIL INTERNATIONAL

Segment Summary
Rail International, composed primarily of GATX Rail Europe ("GRE"), continued to
produce strong operating results in the first nine months of 2021. Demand for
railcars in Europe remained strong, and renewal lease rates for most car types
continued to increase modestly. GRE continued to grow and diversify its fleet
during the quarter. However, the pace of fleet growth in 2021 has been
negatively impacted by new car delivery delays. COVID-19 did not have a material
impact on GRE's financial results, but the risk of ongoing volatility as a
result of future COVID-19 disruptions persists.

Our rail operations in India ("GRI") continued to focus on investment
opportunities, diversification of its fleet, and developing relationships with
customers, suppliers and the Indian Railways. Similar to Europe, the pace of
fleet growth in 2021 has been negatively impacted by railcar manufacturing and
supply disruptions as a result of COVID-19. Although COVID-19 did not have a
material impact on GRI's financial results, the risk of ongoing volatility as a
result of future COVID-19 disruptions persists.

                                       30
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The following table shows Rail International's segment results (in millions):
                                            Three Months Ended              Nine Months Ended
                                               September 30                   September 30
                                             2021             2020          2021          2020
     Revenues
     Lease revenue                    $     68.8            $ 64.5      $    204.7      $ 181.9
     Other revenue                           2.7               2.6             7.9          6.5
       Total Revenues                       71.5              67.1           212.6        188.4

     Expenses
     Maintenance expense                    14.0              13.5            43.6         38.3
     Depreciation expense                   18.5              17.1            55.2         48.4
     Other operating expense                 1.8               1.6             5.5          4.9
       Total Expenses                       34.3              32.2           104.3         91.6

     Other Income (Expense)
     Net gain on asset dispositions          0.9               0.5         
   2.0          0.8
     Interest expense, net                 (10.9)            (11.9)          (34.2)       (34.0)
     Other (expense) income                 (0.2)              0.5               -         (5.7)

     Segment Profit                   $     27.0            $ 24.0      $     76.1      $  57.9

     Investment Volume                $     40.9            $ 45.3      $    126.1      $ 164.5



GRE Fleet Data

At September 30, 2021, GRE's wholly owned fleet consisted of approximately
26,800 railcars. Fleet utilization was 98.1% at September 30, 2021, compared to
98.4% at the end of the prior quarter and 98.2% at September 30, 2020.
Utilization is calculated as the number of railcars on lease as a percentage of
total railcars in the fleet.

During the third quarter of 2021, an average of approximately 26,300 railcars
were on lease, compared to 26,200 in the prior quarter and 25,400 for the
quarter ended September 30, 2020. Changes in railcars on lease compared to prior
periods are impacted by the number and timing of new railcars purchased or
acquired in the secondary market and the disposition of railcars that were sold
or scrapped, as well as the fleet utilization rate.

The following table shows fleet activity for GRE railcars for the quarter ended:
                                    September 30                 December 31                 March 31                 June 30                  September 30
                                        2020                        2020                       2021                     2021                       2021
Beginning balance                           25,705                      25,956                   26,343                   26,498                       26,727
Cars added                                     331                         446                      226                      359                          213
Cars scrapped or sold                          (80)                        (59)                     (71)                    (130)                        (100)
Ending balance                              25,956                      26,343                   26,498                   26,727                       26,840
Utilization rate at quarter
end                                           98.2  %                     98.1  %                  98.2  %                  98.4  %                      98.1  %
Average active railcars                     25,369                      25,669                   25,917                   26,156                       26,310


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                     [[Image Removed: gmt-20210930_g4.jpg]]

GRI Fleet Data


The following table shows fleet activity for GRI railcars for the quarter ended:
                                    September 30                 December 31                 March 31                 June 30                 September 30
                                        2020                        2020                       2021                    2021                       2021
Beginning balance                            3,908                       4,032                    4,156                   4,292                        4,292
Cars added                                     124                         124                      136                       -                          125
Ending balance                               4,032                       4,156                    4,292                   4,292                        4,417
Utilization rate at quarter
end                                          100.0  %                     99.0  %                  99.0  %                 99.0  %                      99.1  %


Comparison of the First Nine Months of 2021 to the First Nine Months of 2020

Foreign Currency


Rail International's reported results of operations are impacted by fluctuations
in the exchange rates of the U.S. dollar versus foreign currencies in which it
conducts business, primarily the euro. In the first nine months ended September
30, 2021, fluctuations in the value of the euro, relative to the U.S. dollar,
positively impacted lease revenue by approximately $10.2 million and segment
profit, excluding other income (expense), by approximately $5.8 million compared
to the same period in 2020.

Segment Profit

In the first nine months of 2021, segment profit of $76.1 million increased 31.4% compared to $57.9 million for the same period in the prior year. The increase was primarily due to more railcars on lease and the positive impacts of changes in foreign exchange rates.

Revenues


In the first nine months of 2021, lease revenue increased $22.8 million, or
12.5%, due to more railcars on lease at GRE and GRI and the impact of foreign
exchange rates. Other revenue increased $1.4 million, driven by higher repair
revenue.

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Expenses


In the first nine months of 2021, maintenance expense increased $5.3 million,
primarily due to higher wheelset costs and higher costs for railcars leased to
new customers, partially offset by lower costs for other repairs. Depreciation
expense increased $6.8 million, resulting from the impact of new railcars added
to the fleet.

Other Income (Expense)

In the first nine months of 2021, net gain on asset dispositions increased $1.2
million, attributable to higher asset remarketing gains and higher net scrapping
gains. Net scrapping gains were positively impacted by a higher scrap price per
ton in 2021. Net interest expense increased $0.2 million, due to a higher
average debt balance, partially offset by a lower average interest rate. Other
expense decreased $5.7 million, driven by the positive impact of changes in
foreign exchange rates on non-functional currency items and lower litigation
costs related to the Viareggio matter.

Investment Volume


During the first nine months of 2021, investment volume was $126.1 million
compared to $164.5 million in the same period in 2020. In the first nine months
ended September 30, 2021, GRE acquired 798 newly built railcars (including 253
assembled at the GRE Ostróda, Poland facility) compared to 1,194 newly built
railcars (including 282 assembled at the GRE Ostróda, Poland facility) and 431
railcars purchased in the secondary markets for the same period in 2020. In the
first nine months ended September 30, 2021, GRI acquired 261 newly built
railcars, compared to 353 newly built railcars for the same period in 2020.

Our investment volume is predominantly composed of acquired railcars, but may
also include certain capitalized repairs and improvements to owned railcars. As
a result, the dollar value of investment volume does not necessarily correspond
to the number of railcars acquired in any given period. In addition, the
comparability of amounts invested and the number of railcars acquired in each
period is impacted by the mix of the various car types acquired, as well as
fluctuations in the exchange rates of the foreign currencies in which Rail
International conducts business.

Comparison of the Third Quarter of 2021 to the Third Quarter of 2020

Foreign Currency


Rail International's reported results of operations are impacted by fluctuations
in the exchange rates of the U.S. dollar versus foreign currencies in which it
conducts business, primarily the euro. In the third quarter of 2021,
fluctuations in the value of the euro, relative to the U.S. dollar, positively
impacted lease revenue by approximately $0.4 million and segment profit,
excluding other income (expense), by approximately $0.4 million compared to the
same period in 2020.

Segment Profit

In the third quarter of 2021, segment profit of $27.0 million increased 12.5%
compared to $24.0 million for the same period in the prior year. The increase
was primarily due to more railcars on lease and the positive impacts of changes
in foreign exchange rates.

Revenues

In the third quarter of 2021, lease revenue increased $4.3 million, or 6.7%, due to more railcars on lease at GRE and GRI and the impact of foreign exchange rates.

Expenses


In the third quarter of 2021, maintenance expense increased $0.5 million,
primarily due to higher costs for railcars leased to new customers and higher
wheelset costs, partially offset by lower costs for other repairs. Depreciation
expense increased $1.4 million, resulting from the impact of new railcars added
to the fleet.

Other Income (Expense)

In the third quarter of 2021, net gain on asset dispositions increased $0.4
million, attributable to higher net scrapping gains. Net scrapping gains were
positively impacted by a higher scrap price per ton in 2021. Net interest
expense decreased $1.0 million, due to a lower average interest rate, partially
offset by a higher average debt balance. Other expense increased $0.7 million,
driven by the impact of changes in foreign exchange rates on non-functional
currency items.
                                       33
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                              PORTFOLIO MANAGEMENT

Segment Summary

Portfolio Management's segment profit is attributable primarily to income from
the RRPF affiliates, a group of 50% owned domestic and foreign joint ventures
with Rolls-Royce plc (or affiliates thereof, collectively "Rolls-Royce"), a
leading manufacturer of commercial aircraft jet engines. Segment profit included
earnings from the RRPF affiliates of $26.4 million and $4.0 million for the nine
months and three months ended September 30, 2021, compared to $92.8 million and
$46.8 million for the same periods in 2020. Financial results for the prior year
included a transaction involving the refinancing and sale of a group of aircraft
spare engines at the RRPF affiliates, which impacted both quarterly and
full-year results. In this transaction, the RRPF affiliates sold 21 aircraft
spare engines for total proceeds of $233.0 million in the nine months ended
September 30, 2020. 18 of these aircraft spare engines were sold in the three
months ended September 30, 2020 for total proceeds of $216.0 million. GATX's 50%
share of the resulting pre-tax net gains were $35.3 million and $32.1 million
for the nine months and three months ended September 30, 2020, respectively.

The operating environment for RRPF continued to be challenging during the third
quarter of 2021 due to the ongoing adverse impact of COVID-19 on air travel.
RRPF continues to face pressure on both utilization and lease rates as a result
of rent deferral requests that have been granted in the past, as well as the
impact from a number of its customers having declared bankruptcy or undertaken
restructuring processes. RRPF remains focused on preserving a strong liquidity
position in the current environment. The risk of ongoing volatility as a result
of future COVID-19 disruptions persists.

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. All engines are on long-term
leases with airline customers and are managed by RRPF.

Portfolio Management also owns marine assets, consisting of five liquefied gas-carrying vessels (the "Specialized Gas Vessels"). The Specialized Gas Vessels are utilized to transport pressurized gases and chemicals, such as liquefied petroleum gas, liquefied natural gas, and ethylene, primarily on short-term spot contracts for major oil and chemical customers worldwide.


Portfolio Management's total asset base was $1,030.1 million at September 30,
2021, compared to $706.1 million at December 31, 2020, and $709.7 million at
September 30, 2020. The increase in total assets during the nine months ended
September 30, 2021 is primarily attributable to the acquisition of aircraft
spare engines at GEL.

                                       34
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The following table shows Portfolio Management's segment results (in millions):
                                            Three Months Ended               Nine Months Ended
                                               September 30                     September 30
                                             2021             2020            2021            2020
Revenues
Lease revenue                         $     8.2             $  0.1      $     19.8          $  0.6
Marine operating revenue                    5.0                5.0            13.7            11.6
Other revenue                               0.1                0.1             0.5             0.4
  Total Revenues                           13.3                5.2            34.0            12.6

Expenses
Marine operating expense                    3.7                3.6            13.8            10.9
Depreciation expense                        4.9                1.3            12.6             4.0
Other operating expense                     0.6                0.1             1.2             0.3
  Total Expenses                            9.2                5.0            27.6            15.2

Other Income (Expense)
Net gain on asset dispositions              0.6                0.5             1.7             1.6
Interest expense, net                      (4.5)              (3.2)          (12.0)           (9.1)
Other income                                2.0                  -             2.0               -
Share of affiliates' pre-tax income         4.0               46.8            26.4            93.2
Segment Profit                        $     6.2             $ 44.3      $     24.5          $ 83.1

Investment Volume                     $       -             $    -      $    353.0          $  0.3



The following table shows the net book values of Portfolio Management's assets
(in millions):
                                        September 30           December 31          March 31          June 30           September 30
                                            2020                  2020                2021              2021                2021

Investment in RRPF Affiliates $ 582.3 $ 584.7

$ 592.2 $ 561.0 $ 564.2 GEL owned aircraft spare engines

                  -                     -             350.9            347.7                  344.1
Other owned assets                            127.4                 121.4             123.9            130.8                  121.8
Managed assets (1)                             19.1                  17.3              15.4             13.5                   11.6


________

(1) Amounts shown represent the estimated net book value of assets managed for third parties and are not included in our consolidated balance sheets.

RRPF Affiliates Engine Portfolio Data


As of September 30, 2021, the RRPF affiliates' fleet consisted of 428 aircraft
spare engines with a net book value of $4,478.4 million, compared to 445
aircraft spare engines with a net book value of $4,784.1 million at December 31,
2020 and 439 aircraft spare engines with a net book value of $4,641.4 million at
September 30, 2020.

Engine utilization for the RRPF affiliates was 92.1% at September 30, 2021, compared to 93.5% at the end of the prior quarter and 94.3% at September 30, 2020. Utilization is calculated as the number of engines on lease as a percentage of total engines in the fleet.

                                       35
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The following table shows portfolio activity for the RRPF affiliates' aircraft spare engines for the quarter ended:

                                          September 30                December 31               March 31               June 30               September 30
                                              2020                       2020                     2021                  2021                     2021
Beginning balance                                    470                       439                    445                   438                         429
Engine acquisitions                                    -                        10                      2                     -                           -
Engine dispositions                                  (31)                       (4)                    (9)                   (9)                         (1)
Ending balance                                       439                       445                    438                   429                         428
Utilization rate at quarter end                     94.3  %                   92.8  %                92.0  %               93.5  %                     92.1  %



                     [[Image Removed: gmt-20210930_g5.jpg]]

Comparison of the First Nine Months of 2021 to the First Nine Months of 2020

Segment Profit


In the first nine months of 2021, segment profit was $24.5 million, compared to
$83.1 million for the same period in the prior year. Lower segment profit
reflects lower financial results at the RRPF affiliates, primarily driven by
lower net disposition gains and operating income, partially offset by earnings
from GEL, our direct investment in aircraft spare engines.

Revenues


In the first nine months of 2021, lease revenue increased $19.2 million, due to
GEL's new investment in aircraft spare engines on lease in the current year.
Marine operating revenue increased $2.1 million, driven by higher utilization
and increased charter rates from the Specialized Gas Vessels.

Expenses


In the first nine months of 2021, marine operating expense increased $2.9
million, due to higher bunker fuel expense and higher repairs and maintenance
costs. Depreciation expense increased $8.6 million, due to the investment in new
aircraft spare engines in the current year at GEL.

                                       36
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Other Income (Expense)


In the first nine months of 2021, income from our share of affiliates' earnings
decreased $66.8 million, driven by lower asset remarketing income and residual
realization, including $35.3 million of gains in 2020 from a transaction at RRPF
involving the refinancing and sale of a group of aircraft spare engines, and
lower income from operations at RRPF.

Comparison of the Third Quarter of 2021 to the Third Quarter of 2020

Segment Profit


In the third quarter of 2021, segment profit was $6.2 million, compared to $44.3
million for the same period in the prior year. Lower segment profit reflects
lower financial results at the RRPF affiliates, primarily driven by lower net
disposition gains, partially offset by earnings from GEL, our direct investment
in aircraft spare engines.

Revenues

In the third quarter of 2021, lease revenue increased $8.1 million, due to GEL's
new investment in aircraft spare engines on lease in the current year. Marine
operating revenue was comparable to the prior year.

Expenses


In the third quarter of 2021, marine operating expense was comparable to the
prior year. Depreciation expense increased $3.6 million, due to the investment
in new aircraft spare engines in the current year at GEL.

Other Income (Expense)


In the third quarter of 2021, income from our share of affiliates' earnings
decreased $42.8 million, driven by lower asset remarketing income and residual
realization, including $32.1 million of gains in 2020 from a transaction at RRPF
involving the refinancing and sale of a group of aircraft spare engines, and
lower income from operations at RRPF.

                                     OTHER

Other comprises Trifleet operations, as well as selling, general and administrative expenses ("SG&A"), unallocated interest expense, and miscellaneous income and expense not directly associated with the reporting segments and certain eliminations.


On December 29, 2020, GATX acquired Trifleet, one of the largest tank container
lessors in the world. Financial results for this business are reported in the
Other segment. See "Note 3. Business Combinations" in Part I, Item 1 of this
Form 10-Q for additional information.

The following table shows components of Other (in millions):

                                                             Three Months Ended                       Nine Months Ended
                                                                September 30                            September 30
                                                           2021                2020                2021                2020
Other segment profit                                  $        3.0          $      -          $        6.3          $      -
Selling, general and administrative expense                   45.9              42.0                 140.8             125.8
Unallocated interest (income) expense                          0.2              (2.2)                  0.6              (5.1)
Other expense (income), including eliminations                 1.1               0.6                   9.0               3.3



Trifleet Summary

The tank container market continued to improve in the third quarter of 2021. Trifleet experienced increased demand and utilization during the quarter.

Trifleet Tank Container Data


At September 30, 2021, Trifleet's owned and managed fleet consisted of
approximately 19,700 tank containers compared to 19,200 at the end of the prior
quarter. Fleet utilization was 87.5% at September 30, 2021 compared to 84.9% at
the end of the prior quarter.
                                       37
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Utilization is calculated as the number of tank containers on lease as a percentage of total tank containers in the fleet.


The following table shows fleet statistics for Trifleet's tank containers for
the quarter ended:
                                                                                         June 30                September 30
                                                           March 31 2021                  2021                      2021
Ending balance - owned and managed                                  19,179                  19,185                      19,703
Utilization rate at quarter-end - owned and managed                   80.0  %                 84.9  %                     87.5  %



SG&A, Unallocated Interest and Other


SG&A increased $15.0 million for the first nine months of 2021 compared to the
same period in the prior year. The increase was largely due to higher employee
compensation expenses, largely due to higher share-based compensation expenses
resulting from an increase in the GATX stock price during the current year, and
the inclusion of Trifleet SG&A expenses in the current year, partially offset by
lower discretionary travel and entertainment expenses.

SG&A increased $3.9 million for the third quarter of 2021 compared to the same period in the prior year. The increase was largely due to the inclusion of Trifleet SG&A expenses in the current year and higher employee compensation expenses.


Unallocated interest expense (the difference between external interest expense
and interest expense allocated to the reporting segments) in any year is
affected by our consolidated leverage position, the timing of debt issuances and
investing activities, and intercompany allocations.

Other expense (income), including eliminations increased $5.7 million for the
first nine months of 2021 compared to the same period in the prior year, driven
by debt extinguishment costs resulting from the early redemption of debt,
partially offset by lower non-service pension expense.

Other expense (income), including eliminations increased $0.5 million for the
third quarter of 2021 compared to the same period in the prior year, driven by
the negative impact of foreign exchange rates on a foreign pension plan,
partially offset by lower non-service pension expense in the current year.

Consolidated Income Taxes

See "Note 10. Income Taxes" in Part I, Item 1 of this Form 10-Q.

                            DISCONTINUED OPERATIONS

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" in Part I, Item 1 of this Form 10-Q for additional
information. The ASC business comprises the entirety of GATX's discontinued
operations.

The following table shows the components of discontinued operations, net of taxes (in millions):

                                                        Three Months Ended               Nine Months Ended
                                                           September 30                     September 30
                                                       2021            2020             2021            2020
Discontinued operations, net of taxes
Loss from discontinued operations, net of taxes     $     -          $    - 

$ - $ (2.2) (Loss) gain on sale of discontinued operations, net of taxes

                                                  -            (0.3)               -             3.3
Discontinued operations, net of taxes               $     -          $ 

(0.3) $ - $ 1.1

As a result of the sale in the second quarter of 2020, there were no operations in the current year.





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CASH FLOW AND LIQUIDITY


We generate a significant amount of cash from operating activities and
investment portfolio proceeds. We also access domestic and international capital
markets by issuing unsecured or secured debt and commercial paper. We use these
resources, along with available cash balances, to fulfill our debt, lease, and
dividend obligations, to support our share repurchase programs, and to fund
portfolio investments and capital additions. We primarily use cash from
operations to fund daily operations. The timing of asset dispositions and
changes in working capital impact cash flows from portfolio proceeds and
operations. As a result, these cash flow components may vary materially from
quarter to quarter and year to year.

As of September 30, 2021, we had an unrestricted cash balance of $566.0 million.
We also have a $250 million 3-year unsecured revolving credit facility in the
U.S. that matures in 2024 and a $600 million, 5-year unsecured credit facility
in the U.S. that matures in 2026, both of which are fully available as of
September 30, 2021.

The following table shows our principal sources and uses of cash from continuing operations for the nine months ended September 30 (in millions):

                                                                      2021                2020
Principal sources of cash
Net cash provided by operating activities                         $    340.0          $    302.1

Portfolio proceeds                                                     159.0               120.2
Other asset sales                                                       43.7                17.5

Proceeds from issuance of debt, commercial paper, and credit
facilities                                                           1,319.1             1,465.8
Total                                                             $  1,861.8          $  1,905.6

Principal uses of cash
Portfolio investments and capital additions                       $   

(893.2) $ (641.4) Repayments of debt, commercial paper, and credit facilities (585.9)

           (1,103.1)

Purchases of assets previously leased - financing activities           (77.2)              (40.0)
Stock repurchases                                                       (0.4)                  -
Dividends                                                              (56.2)              (53.7)
Total                                                             $ (1,612.9)         $ (1,838.2)



Net Cash Provided by Operating Activities


Net cash provided by operating activities for the first nine months of 2021 was
$340.0 million, an increase of $37.9 million compared to the same period in
2020. Comparability among reporting periods is impacted by the timing of changes
in working capital items. Specifically, lower cash payments for operating leases
and income taxes were partially offset by higher payments for other operating
expenses.

Portfolio Proceeds

Portfolio proceeds primarily consist of proceeds from sales of operating assets
and finance lease receipts, as well as capital distributions from affiliates.
Portfolio proceeds of $159.0 million for the first nine months of 2021 increased
by $38.8 million from the prior year, primarily due to higher proceeds from
railcar and locomotive sales at Rail North America.

Proceeds From Issuance of Debt


Proceeds from the issuance of debt for the first nine months ended September 30,
2021 were $1,319.1 million (net of hedges and debt issuance costs). In the first
nine months of 2021, we issued $400 million of 10-year unsecured debt, $550
million of 30-year unsecured debt, and drew $384 million from our 3-year
unsecured delayed draw bank term loan. Of the $384 million originally drawn on
the delayed draw term loan, $134 million was subsequently repaid.

                                       39
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Portfolio Investments and Capital Additions


Portfolio investments and capital additions primarily consist of purchases of
operating assets and capitalized asset improvements. Portfolio investments and
capital additions of $893.2 million for the first nine months of 2021 increased
$251.8 million compared to 2020, primarily due to the acquisition of 14 aircraft
spare engines at GEL and tank containers at Trifleet, partially offset by fewer
railcars acquired at Rail North America and Rail International.

Repayments of Debt


Debt repayments of $585.9 million for the first nine months of 2021 were $517.2
million lower than prior year. In the first nine months of 2021, repayments
included the $150 million early redemption of our 5.625% Senior Notes due 2066,
$300 million redemption of Senior Notes, and $134 million pay-down on the 3-year
delayed draw bank term loan.

Purchases of Assets Previously Leased


In the nine months ended September 30, 2021, we exercised options to acquire
2,329 railcars previously recorded on the balance sheet as a finance lease for
$77.2 million, compared to the exercise of options to acquire 732 railcars
previously recorded on the balance sheet as a finance lease for $40.0 million in
2020.

Share Repurchase Program

On January 25, 2019, our board of directors approved a $300.0 million share
repurchase program, pursuant to which we are authorized to purchase shares of
our common stock in the open market, in privately negotiated transactions, or
otherwise, including pursuant to Rule 10b5-1 plans. The share repurchase program
does not have an expiration date, does not obligate the Company to repurchase
any dollar amount or number of shares of common stock, and may be suspended or
discontinued at any time. The timing of repurchases will be dependent on market
conditions and other factors. During the nine months ended September 30, 2021,
we repurchased 4,228 shares of common stock for $0.4 million compared to no
share repurchases during the same period in 2020. As of September 30, 2021,
$149.6 million remained available under the repurchase authorization.


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Contractual and Other Commercial Commitments

The following table shows our contractual commitments, including debt principal and related interest payments, lease payments, and purchase commitments at September 30, 2021 (in millions):

Payments Due by Period

                                   Total            2021 (1)             2022               2023              2024             2025           Thereafter
Recourse debt                   $ 6,071.6          $  300.0          $  

365.8 $ 500.0 $ 537.4 $ 531.6 $ 3,836.8 Interest on recourse debt (2) 1,793.5

              49.7              190.0              178.2            163.1            148.9             1,063.6
Commercial paper and credit
facilities                           20.7              20.7                  -                  -                -                -                   -

Operating lease obligations         343.4               8.5               42.1               40.0             37.9             35.3               179.6
Purchase commitments (3)          1,287.5             279.0              655.4              353.1                -                -                   -
Total                           $ 9,516.7          $  657.9          $ 1,253.3          $ 1,071.3          $ 738.4          $ 715.8          $  5,080.0


__________
(1)  For the remainder of the year.
(2)  For floating rate debt, future interest payments are based on the
applicable interest rate as of September 30, 2021.
(3)  Primarily railcar purchase commitments. The amounts shown for all years are
based on management's estimates of the timing, anticipated car types, and
related costs of railcars to be purchased under its agreements.

In 2014, we entered into a long-term supply agreement with Trinity Rail Group,
LLC ("Trinity"), a subsidiary of Trinity Industries. Under the terms of that
agreement, we agreed to order 8,950 newly built railcars. As of December 31,
2020, all 8,950 railcars have been ordered and delivered. On May 24, 2018, we
amended our long-term supply agreement with Trinity to extend the term to
December 2023, and we agreed to purchase an additional 4,800 tank cars (1,200
per year) beginning in January 2020 and continuing through the expiration of the
extended term. At September 30, 2021, 2,826 railcars have been ordered, of which
2,120 railcars have been delivered, pursuant to the amended terms of the
agreement.

In 2018, we entered into a multi-year railcar supply agreement with American
Railcar Industries, Inc. ("ARI"), pursuant to which we will purchase 7,650 newly
built railcars. The order encompasses a mix of tank and freight cars that are to
be delivered over a five-year period, beginning in April 2019. ARI's railcar
manufacturing business was subsequently acquired by The Greenbrier Companies,
Inc. ("Greenbrier") on July 26, 2019, and Greenbrier assumed all of ARI's
obligations under our long-term supply agreement. Under this agreement 450
railcars were to be delivered in 2019, with the remaining 7,200 to be delivered
ratably over the four-year period of 2020 to 2023. As of September 30, 2021,
6,141 railcars have been ordered, of which 3,401 have been delivered. The
agreement also includes an option to order up to an additional 4,400 railcars
subject to certain restrictions.


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Short-Term Borrowings

The following table shows additional information regarding our short-term borrowings for the nine months ended September 30, 2021:

                                                                                     Europe (1)
Balance as of September 30 (in millions)                                            $     20.7
Weighted-average interest rate                                                             0.9  %
Euro/dollar exchange rate                                                                 1.16

Average daily amount outstanding year to date (in millions)                         $     20.3
Weighted-average interest rate                                                             0.9  %
Average Euro/dollar exchange rate                                                         1.20

Average daily amount outstanding during the third quarter (in millions)

         $     19.5
Weighted-average interest rate                                                             0.9  %
Average Euro/dollar exchange rate                                                         1.18

Maximum daily amount outstanding (in millions)                                      $     25.9
Euro/dollar exchange rate                                                                 1.19


__________

(1)Short-term borrowings in Europe are composed of borrowings under bank credit facilities.


Credit Lines and Facilities

During the second quarter of 2021, we entered into a new $600 million, 5-year
unsecured revolving credit facility in the U.S., expiring in May 2026. The new
credit facility contains two extension options. This replaced our prior $600
million, 5-year unsecured revolving credit facility, which was terminated upon
our entry into the new credit facility. As of September 30, 2021, the full $600
million was available under this facility. Additionally we entered into a new
$250 million 3-year unsecured revolving credit facility in the U.S., expiring in
May 2024. This facility also has two one-year extension options. This replaced
our prior $250 million 3-year unsecured revolving credit facility, which was
terminated upon our entry into the new credit facility. As of September 30,
2021, the full $250 million was available on this facility.

Our European subsidiaries have unsecured credit facilities with an aggregate
limit of €35.0 million. As of September 30, 2021, €17.1 million was available
under these credit facilities.

Delayed Draw Term Loan


On December 14, 2020, we executed a delayed draw term loan agreement ("Term
Loan") which provides for a 3-year term loan in the aggregate principal amount
of up to $500 million. Advances could have been made from December 14, 2020
through April 17, 2021 pursuant to the terms of the agreement and may not be
re-borrowed. The amounts borrowed under the Term Loan agreement are required to
be repaid no later than December 14, 2023. In the first quarter of 2021, we drew
$384 million on the Term Loan and terminated the remaining unused commitment of
$116 million. In the second quarter of 2021, we paid down $134 million of the
outstanding amount. As of September 30, 2021, $250 million was drawn on the Term
Loan.

Restrictive Covenants

Our $600 million revolving credit facility contains various restrictive
covenants, including requirements to maintain a fixed charge coverage ratio and
an asset coverage test. Some of our bank term loans have the same financial
covenants as the facility.
The indentures for our public debt also contain various restrictive covenants,
including limitations on liens provisions that restrict the amount of additional
secured indebtedness that we may incur. Additionally, certain exceptions to the
covenants permit us to incur an unlimited amount of purchase money and
nonrecourse indebtedness.

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At September 30, 2021, our European rail subsidiaries had outstanding term loan
and private placement debt balances totaling €580.0 million. The loans are
guaranteed by GATX Corporation and are subject to similar restrictive covenants
as the revolving credit facility noted above.

At September 30, 2021, we were in compliance with all covenants and conditions
of all of our credit agreements. We do not anticipate any covenant violations
nor do we expect that any of these covenants will restrict our operations or our
ability to obtain additional financing.

Credit Ratings


The global capital market environment and outlook may affect our funding options
and our financial performance. Our access to capital markets at competitive
rates depends on our credit rating and rating outlook, as determined by rating
agencies. As of September 30, 2021, our long-term unsecured debt was rated BBB
by Standard & Poor's and Baa2 by Moody's Investor Service and our short-term
unsecured debt was rated A-2 by Standard & Poor's and P-2 by Moody's Investor
Service. Our rating outlook from both agencies was stable.

Leverage


Leverage is expressed as a ratio of debt (including debt and lease obligations,
net of unrestricted cash) to equity. The following table shows the components of
recourse leverage (in millions, except recourse leverage ratio):
                                          September 30           June 30            March 31           December 31           September 30
                                              2021                 2021               2021                2020                   2020
Debt and lease obligations, net of
unrestricted cash:
Unrestricted cash                       $      (566.0)         $  (417.9)   

$ (958.9) $ (292.2) $ (459.8) Commercial paper and bank credit

                 20.7               17.9               19.6
facilities                                                                                                   23.6                   13.5
Recourse debt                                 6,029.8            5,803.1            6,374.6               5,329.0                5,183.0

Operating lease obligations                     292.1              298.7              328.0                 348.6                  368.0
Finance lease obligations                           -               43.6                  -                  33.3                      -
Total debt and lease obligations, net
of unrestricted cash                    $     5,776.6          $ 5,745.4          $ 5,763.3          $    5,442.3          $     5,104.7

Total recourse debt (1)                 $     5,776.6          $ 5,745.4          $ 5,763.3          $    5,442.3          $     5,104.7
Shareholders' Equity                    $     1,976.9          $ 1,971.4          $ 1,960.0          $    1,957.4          $     1,930.0
Recourse Leverage (2)                             2.9                2.9                2.9                   2.8                    2.6


________

(1) Includes recourse debt, commercial paper and bank credit facilities, and operating and finance lease obligations, net of unrestricted cash. (2) Calculated as total recourse debt / shareholder's equity.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


There have been no changes to our critical accounting policies during the nine
months ended September 30, 2021. Refer to our Annual Report on Form 10-K for the
year ended December 31, 2020, for a summary of our policies.

NON-GAAP FINANCIAL MEASURES


In addition to financial results reported in accordance with GAAP, we compute
certain financial measures using non-GAAP components, as defined by the SEC.
These measures are not in accordance with, or a substitute for, GAAP, and our
financial measures may be different from non-GAAP financial measures used by
other companies. We have provided a reconciliation of our non-GAAP components to
the most directly comparable GAAP components.


                                       43
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Reconciliation of Non-GAAP Components Used in the Computation of Certain Financial Measures

Net Income Measures


We exclude the effects of certain tax adjustments and other items for purposes
of presenting net income, diluted earnings per share, and return on equity
because we believe these items are not attributable to our business operations.
Management utilizes net income, excluding tax adjustments and other items, when
analyzing financial performance because such amounts reflect the underlying
operating results that are within management's ability to influence.
Accordingly, we believe presenting this information provides investors and other
users of our financial statements with meaningful supplemental information for
purposes of analyzing year-to-year financial performance on a comparable basis
and assessing trends.

The following tables show our net income and diluted earnings per share,
excluding tax adjustments and other items (in millions, except per share data):
Impact of Tax Adjustments and Other Items on Net
Income:
                                                          Three Months Ended                      Nine Months Ended
                                                             September 30                            September 30
                                                         2021                 2020              2021               2020
Net income (GAAP)                                 $     40.1               $  47.9          $     82.1          $ 133.5
Less: Net income from discontinued operations
(GAAP)                                                     -                  (0.3)                  -              1.1
Net income from continuing operations (GAAP)      $     40.1               

$ 48.2 $ 82.1 $ 132.4


Adjustments attributable to pre-tax income from
continuing operations:
Debt extinguishment costs (1)                              -                     -                 4.5                -
Total adjustments attributable to pre-tax income
from continuing operations                        $        -               $     -          $      4.5          $     -
Income taxes thereon, based on applicable
effective tax rate                                $        -               

$ - $ (1.1) $ -


Adjustments attributable to affiliates' earnings,
net of taxes:
Income tax rate change (2)                                 -                  12.3                39.7             12.3
Total adjustments attributable to affiliates'
earnings, net of taxes                            $        -               $  12.3          $     39.7          $  12.3
Net income from continuing operations, excluding
tax adjustments and other items (non-GAAP)        $     40.1               $  60.5          $    125.2          $ 144.7
Net income from discontinued operations,
excluding tax adjustments and other items
(non-GAAP)                                                 -                  (0.3)                  -              1.1
Net income from consolidated operations,
excluding tax adjustments and other items
(non-GAAP)                                        $     40.1               $  60.2          $    125.2          $ 145.8


Impact of Tax Adjustments and Other Items on Diluted Earnings per Share:

                                                           Three Months Ended                        Nine Months Ended
                                                              September 30                              September 30
                                                          2021                 2020                2021                 2020
Diluted earnings per share from consolidated
operations (GAAP)                                  $     1.11               $  1.35          $     2.28              $  3.77

Less: Diluted earnings per share from discontinued operations (GAAP)

                                           -                 (0.01)                  -                 0.03
Diluted earnings per share from continuing
operations (GAAP)                                  $     1.11               $  1.36          $     2.28              $  3.74

Adjustments attributable to income from continuing operations, net of taxes: Debt extinguishment costs (1)

                               -                     -                0.09                    -

Adjustments attributable to affiliates' earnings
from continuing operations, net of taxes:
 Income tax rate change (2)                                 -                  0.35                1.10                 0.35
Diluted earnings per share from continuing
operations, excluding tax adjustments and other
items (non-GAAP) *                                 $     1.11               $  1.71          $     3.48              $  4.09
Diluted earnings per share from discontinued
operations, excluding tax adjustments and other
items (non-GAAP)                                            -                 (0.01)                  -                 0.03
Diluted earnings per share from consolidated
operations, excluding tax adjustments and other
items (non-GAAP) *                                 $     1.11               $  1.70          $     3.48              $  4.12


*bSum of individual components may not be additive due to rounding.

                                       44
--------------------------------------------------------------------------------

The following table shows our net income and return on equity, excluding tax
adjustments and other items, for the trailing 12 months ended September 30 (in
millions):
                                                                         2021              2020
Net income (GAAP)                                                     $   99.9          $  190.1
Less: Net income from discontinued operations (GAAP)                         -              15.6
Net income from continuing operations (GAAP)                          $   

99.9 $ 174.5

Adjustments attributable to pre-tax income from continuing operations: Debt extinguishment costs (1)

                                              4.5                 -

Total adjustments attributable to pre-tax income from continuing operations

                                                            $    

4.5 $ - Income taxes thereon, based on applicable effective tax rate $ (1.1) $ -

Adjustments attributable to affiliates' earnings, net of taxes: Income tax rate changes (2)

                                               39.7              12.3

Total adjustments attributable to affiliates' earnings, net of taxes $ 39.7 $ 12.3 Net income from continuing operations, excluding tax adjustments and other items (non-GAAP)

                                                $  

143.0 $ 186.8

Adjustments attributable to discontinued operations, net of taxes: Net casualty gain at ASC (3)

                                                 -              (8.1)

Total adjustments attributable to discontinued operations, net of taxes

                                                                 $     

- $ (8.1) Net income from discontinued operations, excluding tax adjustments and other items (non-GAAP)

                                            $     

- $ 7.5


Net income from consolidated operations, excluding tax adjustments
and other items (non-GAAP)                                            $  143.0          $  194.3

Return on Equity (GAAP)                                                    5.1  %           10.2  %
Return on Equity, excluding tax adjustments and other items
(non-GAAP) (4)                                                             8.8  %           12.7  %


_______
(1)  Write-off of unamortized deferred financing costs associated with the early
redemption of our $150 million 5.625% Senior Notes due 2066.
(2)  Deferred income tax adjustments due to an enacted corporate income tax rate
increase in the United Kingdom in 2021 and the elimination of a previously
announced corporate income tax rate reduction in 2020.
(3)   Net casualty gain attributable to insurance recovery for a vessel at ASC.
(4)   Shareholders' equity used in this calculation excludes the increases
resulting from the impact of the Tax Cuts and Jobs Act of 2017.

© Edgar Online, source Glimpses

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