GATX CORPORATION 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:
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 theRolls-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. OnDecember 29, 2020 , GATX acquiredTrifleet Leasing Holding B.V. ("Trifleet"), the fourth largest tank container lessor 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. OnMay 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 endedDecember 31, 2020 . We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance withU.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 six months endedJune 30, 2021 are not necessarily indicative of the results we may achieve for the entire year endingDecember 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 endedDecember 31, 2020 .
Coronavirus Disease 2019 ("COVID-19")
OnMarch 11, 2020 , theWorld Health Organization declared COVID-19 a pandemic and onMarch 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. We have a strong liquidity position, solid balance sheet, and access to capital which we expect will enable GATX to continue to effectively manage through the COVID-19 pandemic. The COVID-19 pandemic continues to evolve rapidly, 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.
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 industry railcar loadings and absolute lease rates continued to improve during the second quarter of 2021, the risk of ongoing volatility as a result of future COVID-19 disruptions persists.
While the initial impact of COVID-19 has dissipated,
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Rail
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. Railcar repair facilities continued to operate effectively during the second quarter of 2021, with minimal disruptions as a result of COVID-19. Although COVID-19 related delays decreased substantially during the second quarter of 2021, a resurgence could cause future disruptions.
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 some 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 second quarter of 2021, and 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 six months of 2021 was$42.0 million , or$1.17 per diluted share, compared to$84.2 million , or$2.38 per diluted share, in 2020. Results for the six months endedJune 30, 2021 included a net negative impact of$39.7 million related to an enacted tax rate increase in theUnited Kingdom and a net negative impact of$3.4 million attributable to debt extinguishment costs associated with an early redemption (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 increased$0.9 million compared to the prior year, largely due to higher asset disposition gains and lower maintenance expenses atRail North America , partially offset by lower share of affiliates' earnings. Net income from continuing operations for the second quarter of 2021 was$5.5 million , or$0.15 per diluted share, compared to$37.0 million , or$1.05 per diluted share, in 2020. Results for the three months endedJune 30, 2021 included a net negative impact of$39.7 million related to an enacted tax rate increase in theUnited Kingdom and a net negative impact of$3.4 million attributable to debt extinguishment costs associated with an early redemption (see "non-GAAP Financial Measures" at the end of this item for further details). Net income from continuing operations increased$11.6 million compared to the prior year, largely due to higher asset disposition gains and lower maintenance expenses atRail North America , partially offset by lower share of affiliates' earnings. 25
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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 Six Months Ended
June 30 June 30
2021 2020 2021 2020
Segment Revenues
Rail North America $ 223.4 $ 235.5 $ 448.0 $ 471.2
Rail International 71.7 61.2 141.1 121.3
Portfolio Management 13.6 3.8 20.7 7.4
Other 8.4 - 13.1 -
$ 317.1 $ 300.5 $ 622.9 $ 599.9
Segment Profit
Rail North America $ 77.6 $ 50.0 $ 143.3 $ 122.0
Rail International 27.3 20.0 49.1 33.9
Portfolio Management 12.2 19.3 18.3 38.8
Other 2.7 - 3.3 -
119.8 89.3 214.0 194.7
Less:
Selling, general and administrative expense 47.8 43.4 94.9 83.8
Unallocated interest expense 0.6 (1.6) 0.4 (2.9)
Other, including eliminations 7.3 1.0 7.9 2.7
Income taxes (includes $45.0 and $4.8 QTR and $46.8 58.6 9.5 68.8 26.9
and $9.1 YTD related to affiliates' earnings)
Net Income from Continuing Operations (GAAP) $ 5.5 Discontinued Operations, Net of Taxes Loss from discontinued operations, net of taxes $ -$ (1.3) $ -$ (2.2) Gain on sale of discontinued operations, net of taxes - 3.6 - 3.6 Total Discontinued Operations, Net of Taxes (GAAP) $ -$ 2.3 $ -$ 1.4 Net Income (GAAP)$ 5.5 $ 39.3 $ 42.0 $ 85.6
Net income from continuing operations, excluding tax adjustments and other items (non-GAAP) (1)
$ 48.6
- 2.3 - 1.4
Net income from consolidated operations, excluding
tax adjustments and other items (non-GAAP) (1)
Diluted earnings per share from continuing operations (GAAP)$ 0.15 $ 1.05 $ 1.17 $ 2.38 Diluted earnings per share from discontinued operations (GAAP) - 0.06 - 0.04 Diluted earnings per share from consolidated operations (GAAP)$ 0.15
Diluted earnings per share from continuing operations, excluding tax adjustments and other items (non-GAAP) (1)$ 1.35 $ 1.05 $ 2.37 $ 2.38 Diluted earnings per share from discontinued operations, excluding tax adjustments and other items (non-GAAP) (1) - 0.06 - 0.04 Diluted earnings per share from consolidated operations, excluding tax adjustments and other items (non-GAAP) (1)$ 1.35 $ 1.11 $ 2.37 $ 2.42 Investment Volume$ 153.9 $ 210.5 $ 663.4 $ 391.5 26
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The following table shows our return on equity ("ROE") for the trailing 12
months ended
2021 2020
Return on Equity (GAAP) 5.6 % 10.1 %
Return on Equity, excluding tax adjustments and other items
(non-GAAP) (1) 10.3 % 11.8 %
_________(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 second quarter, conditions in the North American railcar leasing
market improved as railroad car loadings increased, railroad velocity decreased,
and industry cars in storage decreased from last quarter and prior year.
Absolute lease rates increased across most of the fleet during the quarter and
fleet utilization increased to 98.5% at the end of the quarter.
COVID-19 had minimal impact on operating and financial results in the quarter,
and railcar repair facilities continued to operate effectively during the
quarter. However, the risk of ongoing volatility as a result of future COVID-19
disruptions persists.
The following table shows Rail North America's segment results (in millions):
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Revenues
Lease revenue $ 204.2 $ 210.0 $ 411.0 $ 422.1
Other revenue 19.2 25.5 37.0 49.1
Total Revenues 223.4 235.5 448.0 471.2
Expenses
Maintenance expense 61.5 70.4 119.9 143.3
Depreciation expense 65.2 64.4 130.9 128.0
Operating lease expense 10.2 12.5 21.1 25.8
Other operating expense 8.4 7.6 16.0 14.2
Total Expenses 145.3 154.9 287.9 311.3
Other Income (Expense)
Net gain on asset dispositions 33.1 5.2 54.6 32.0
Interest expense, net (32.6) (34.5) (69.6) (67.8)
Other expense (1.0) (1.3) (1.8) (2.1)
Segment Profit $ 77.6 $ 50.0 $ 143.3 $ 122.0
Investment Volume $ 106.4 $ 159.6 $ 215.5 $ 270.5
27-------------------------------------------------------------------------------- The following table shows the components ofRail North America's lease revenue (in millions): Three Months Ended Six Months Ended June 30 June 30 2021 2020 2021 2020 Railcars$ 180.8 $ 185.7 $ 363.5 $ 373.5 Boxcars 16.9 17.1 34.3 33.5 Locomotives 6.5 7.2 13.2 15.1 Total$ 204.2 $ 210.0 $ 411.0 $ 422.1
Rail North America Fleet Data
AtJune 30, 2021 ,Rail North America's wholly owned fleet, excluding boxcars, consisted of approximately 102,100 cars. Fleet utilization, excluding boxcars, was 98.5% atJune 30, 2021 , compared to 97.8% at the end of the prior quarter, and 98.7% atJune 30, 2020 . Fleet utilization for approximately 12,700 boxcars was 97.1% atJune 30, 2021 , compared to 97.1% at the end of the prior quarter, and 94.6% atJune 30, 2020 . Utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet. During the second quarter of 2021, an average of approximately 100,700 railcars, excluding boxcars, were on lease, compared to 101,100 in the prior quarter and 101,600 for the quarter endedJune 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 ofJune 30, 2021 , leases for approximately 11,100 tank cars and freight cars and approximately 1,200 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
June 30 September 30 December 31 March 31 June 30
2020 2020 2020 2021 2021
Beginning balance 102,558 102,891 103,363 103,745 102,903
Cars added 1,220 1,578 1,015 977 693
Cars scrapped (570) (623) (571) (1,002) (770)
Cars sold (317) (483) (62) (817) (682)
Ending balance 102,891 103,363 103,745 102,903 102,144
Utilization rate at quarter
end 98.7 % 98.2 % 98.1 % 97.8 % 98.5 %
Average active railcars 101,600 101,552 101,723 101,099 100,722
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The following table shows fleet statistics for
June 30 September 30 December 31 March 31 June 30
2020 2020 2020 2021 2021
Ending balance 14,936 14,753 14,315 13,880 12,659
Utilization 94.6 % 94.5 % 95.8 % 97.1 % 97.1 %
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 second quarter of 2021, the renewal rate change of the LPI was
negative 6.7%, compared to negative 18.1% in the prior quarter, and negative
28.0% in the second quarter of 2020. Lease terms on renewals for cars in the LPI
averaged 29 months in the current quarter, compared to 30 months in the prior
quarter, and 31 months in the second 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 77.5% in the current quarter,
compared to 77.7% in the prior quarter, and 71.8% in the second 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-20210630_g3.jpg]]Comparison of the First Six Months of 2021 to the First Six Months of 2020
Segment Profit
In the first six months of 2021, segment profit of$143.3 million increased 17.5% compared to$122.0 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 six months of 2021, lease revenue decreased$11.1 million , or 2.6%, resulting from fewer railcars and locomotives on lease. Other revenue decreased$12.1 million , driven by lower repair revenue.
Expenses
In the first six months of 2021, maintenance expense decreased$23.4 million , driven by fewer regulatory compliance events, fewer repairs performed by the railroads, and improved efficiency in our owned repair shops. Depreciation expense increased$2.9 million due to the timing of new railcar investments and dispositions. Operating lease expense decreased$4.7 million , resulting from the purchase of railcars previously on operating leases. Other operating expense increased$1.8 million due to higher switching, freight, and storage costs.
Other Income (Expense)
In the first six months of 2021 net gain on asset dispositions increased$22.6 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. Net interest expense increased$1.8 million , primarily driven by a higher average debt balance, partially offset by a lower average interest rate.
Investment Volume
During the first six months of 2021, investment volume was$215.5 million compared to$270.5 million in the same period in 2020. We acquired 1,515 newly built railcars and purchased 218 railcars in the secondary market in the first six months of 2021, compared 30 --------------------------------------------------------------------------------
to 1,917 newly built railcars and 156 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 Second Quarter of 2021 to the Second Quarter of 2020
Segment Profit
In the second quarter of 2021, segment profit of$77.6 million increased 55.2% compared to$50.0 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 second quarter of 2021, lease revenue decreased$5.8 million , or 2.8%, resulting from fewer railcars and locomotives on lease. Other revenue decreased$6.3 million , driven by lower repair revenue.
Expenses
In the second quarter of 2021, maintenance expense decreased$8.9 million , driven by fewer regulatory compliance events and fewer repairs performed by the railroads, as well as improved efficiency in our owned repair shops. Depreciation expense increased$0.8 million due to the timing of new railcar investments and dispositions. Operating lease expense decreased$2.3 million , resulting from the purchase of railcars previously on operating leases. Other operating expense increased$0.8 million due to higher insurance and storage costs, partially offset by lower switching and freight costs.
Other Income (Expense)
In the second quarter of 2021, net gain on asset dispositions increased$27.9 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 quarter to quarter. Higher net scrapping gains were impacted by a higher scrap price per ton in 2021. Net interest expense decreased$1.9 million , primarily driven by a lower average interest rate, partially offset by a higher average debt balance. RAIL INTERNATIONAL Segment SummaryRail International , composed primarily of GATX Rail Europe ("GRE"), continued to produce strong operating results in the first six months of 2021. Demand for railcars inEurope remained strong, and renewal lease rates for most car types increased slightly. AlthoughEurope experienced a resurgence of COVID-19 cases in the second quarter, COVID-19 did not have a material impact on GRE's financial results. However, the risk of ongoing volatility as a result of future COVID-19 disruptions persists. Our rail operations inIndia ("GRI") continued to focus on investment opportunities, diversification of its fleet, and developing relationships with customers, suppliers and theIndian Railways . Similar toEurope ,India also experienced a resurgence of COVID-19 cases in the second quarter, leading to railcar manufacturing and supply disruptions. Although COVID-19 did not have a material impact on GRI's financial results, the risk of ongoing volatility as a result of future COVID-19 disruptions persists. 31 -------------------------------------------------------------------------------- The following table showsRail International's segment results (in millions): Three Months Ended Six Months Ended June 30 June 30 2021 2020 2021 2020 Revenues Lease revenue$ 69.0 $ 59.1 $ 135.9 $ 117.4 Other revenue 2.7 2.1 5.2 3.9 Total Revenues 71.7 61.2 141.1 121.3 Expenses Maintenance expense 14.2 11.9 29.6 24.8 Depreciation expense 18.4 15.8 36.7 31.3
Other operating expense 1.7 1.5 3.7 3.3
Total Expenses 34.3 29.2 70.0 59.4
Other Income (Expense)
Net gain on asset dispositions 0.8 0.2
1.1 0.3
Interest expense, net (11.1) (11.5) (23.3) (22.1)
Other income (expense) 0.2 (0.7) 0.2 (6.2)
Segment Profit $ 27.3 $ 20.0 $ 49.1 $ 33.9
Investment Volume $ 40.8 $ 49.9 $ 85.2 $ 119.2
GRE Fleet Data
At June 30, 2021 , GRE's wholly owned fleet consisted of approximately 26,700
cars. Fleet utilization was 98.4% at June 30, 2021 , compared to 98.2% at the end
of the prior quarter and 98.4% at June 30, 2020 . Utilization is calculated as
the number of railcars on lease as a percentage of total railcars in the fleet.
During the second quarter of 2021, an average of approximately 26,200 railcars
were on lease, compared to 25,900 in the prior quarter and 25,100 for the
quarter ended June 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:
June 30 September 30 December 31 March 31 June 30
2020 2020 2020 2021 2021
Beginning balance 25,352 25,705 25,956 26,343 26,498
Cars added 423 331 446 226 359
Cars scrapped or sold (70)
(80) (59) (71) (130)
Ending balance 25,705 25,956 26,343 26,498 26,727
Utilization rate at quarter
end 98.4 % 98.2 % 98.1 % 98.2 % 98.4 %
Average active railcars 25,100 25,369 25,669 25,917 26,156
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GRI Fleet Data
The following table shows fleet activity for GRI railcars for the quarter ended:
June 30 September 30 December 31 March 31 June 30
2020 2020 2020 2021 2021
Beginning balance 3,908 3,908 4,032 4,156 4,292
Cars added - 124 124 136 -
Ending balance 3,908 4,032 4,156 4,292 4,292 Utilization rate at quarter end 100.0 % 100.0 % 99.0 % 99.0 % 99.0 %
Comparison of the First Six Months of 2021 to the First Six Months of 2020
Foreign Currency
Rail International's reported results of operations are impacted by fluctuations in the exchange rates of theU.S. dollar versus foreign currencies in which it conducts business, primarily the euro. In the first six months endedJune 30, 2021 , fluctuations in the value of the euro, relative to theU.S. dollar, positively impacted lease revenue by approximately$9.8 million and segment profit, excluding other income (expense), by approximately$5.4 million compared to the same period in 2020. Segment Profit In the first six months of 2021, segment profit of$49.1 million increased 44.8% compared to$33.9 million for the same period in the prior year. The increase was primarily due to lease revenue from more railcars on lease and the positive impacts of changes in foreign exchange rates.
Revenues
In the first six months of 2021, lease revenue increased
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In the first six months of 2021, maintenance expense increased$4.8 million , primarily due to higher wheelset costs, partially offset by lower costs for other repairs. Depreciation expense increased$5.4 million , resulting from the impact of new railcars added to the fleet.
Other Income (Expense)
In the first six months of 2021, net gain on asset dispositions increased$0.8 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$1.2 million , due to a higher average debt balance, partially offset by a lower average interest rate. Other expense decreased$6.4 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 six months of 2021, investment volume was$85.2 million compared to$119.2 million in the same period in 2020. In the first six months endedJune 30, 2021 , GRE acquired 585 newly built railcars (including 177 assembled at the GRE Ostróda,Poland facility) compared to 810 newly built railcars (including 181 assembled at the GRE Ostróda,Poland facility) and 484 railcars purchased in the secondary markets for the same period in 2020. In the first six months endedJune 30, 2021 , GRI acquired 136 newly built railcars, compared to 229 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 whichRail International conducts business.
Comparison of the Second Quarter of 2021 to the Second Quarter of 2020
Foreign Currency
Rail International's reported results of operations are impacted by fluctuations in the exchange rates of theU.S. dollar versus foreign currencies in which it conducts business, primarily the euro. In the second quarter of 2021, fluctuations in the value of the euro, relative to theU.S. dollar, positively impacted lease revenue by approximately$5.1 million and segment profit, excluding other income (expense), by approximately$2.9 million compared to the same period in 2020. Segment Profit In the second quarter of 2021, segment profit of$27.3 million increased 36.5% compared to$20.0 million for the same period in the prior year. The increase was primarily due to lease revenue from more railcars on lease and the positive impacts of changes in foreign exchange rates.
Revenues
In the second quarter of 2021, lease revenue increased$9.9 million , or 16.8%, due to more railcars on lease at GRE and GRI, as well as the impact of foreign exchange rates. Expenses
In the second quarter of 2021, maintenance expense increased
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--------------------------------------------------------------------------------Other Income (Expense)
In the second quarter of 2021, net gain on asset dispositions increased$0.6 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$0.4 million , due to a lower average interest rate, partially offset by a higher average debt balance. Other expense decreased$0.9 million , partially driven by lower litigation costs related to the Viareggio matter. 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 withRolls-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$22.4 million and$13.4 million for the six months and three months endedJune 30, 2021 , compared to$46.0 million and$22.6 million for the same periods in 2020. The operating environment for RRPF remained challenging during the second 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$1,039.5 million atJune 30, 2021 , compared to$706.1 million atDecember 31, 2020 , and$676.3 million atJune 30, 2020 . The increase in total assets during the six months endedJune 30, 2021 is primarily attributable to the acquisition of aircraft spare engines at GEL. 35 -------------------------------------------------------------------------------- The following table shows Portfolio Management's segment results (in millions): Three Months Ended Six Months Ended June 30 June 30 2021 2020 2021 2020 Revenues Lease revenue$ 8.3 $ 0.2 $ 11.6 $ 0.5 Marine operating revenue 5.1 3.3 8.7 6.6 Other revenue 0.2 0.3 0.4 0.3 Total Revenues 13.6 3.8 20.7 7.4 Expenses Marine operating expense 5.5 3.2 10.1 7.3 Depreciation expense 5.0 1.4 7.7 2.7 Other operating expense 0.4 0.1 0.6 0.2 Total Expenses 10.9 4.7 18.4 10.2 Other Income (Expense) Net gain on asset dispositions 0.5 0.6 1.1 1.1 Interest expense, net (4.4) (3.0)
(7.5) (5.9)
Share of affiliates' pre-tax income 13.4 22.6 22.4 46.4 Segment Profit$ 12.2 $ 19.3 $ 18.3 $ 38.8 Investment Volume$ 0.5 $ -$ 353.0 $ 0.3 The following table shows the net book values of Portfolio Management's assets (in millions): June 30 September 30 December 31 March 31 June 30 2020 2020 2020 2021 2021
Investment in RRPF Affiliates
- - 350.9 347.7
Other owned assets 125.1 127.4 121.4 123.9 130.8
Managed assets (1) 21.0 19.1 17.3 15.4 13.5
________(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 ofJune 30, 2021 , the RRPF affiliates' fleet consisted of 429 aircraft spare engines with a net book value of$4,552.1 million , compared to 445 aircraft spare engines with a net book value of$4,784.1 million atDecember 31, 2020 and 470 aircraft spare engines with a net book value of$4,897.9 million atJune 30, 2020 . Engine utilization for the RRPF affiliates was 93.5% atJune 30, 2021 , compared to 92.0% at the end of the prior quarter and 95.1% atJune 30, 2020 . Utilization is calculated as the number of engines on lease as a percentage of total engines in the fleet. 36 --------------------------------------------------------------------------------
The following table shows portfolio activity for the RRPF affiliates' aircraft spare engines for the quarter ended:
June 30 September 30
2020 2020 2020 2021 2021
Beginning balance 478 470 439 445 438
Engine acquisitions 2 - 10 2 -
Engine dispositions (10) (31) (4) (9) (9)
Ending balance 470 439 445 438 429
Utilization rate at quarter end 95.1 % 94.3 % 92.8 % 92.0 % 93.5 %
[[Image Removed: gmt-20210630_g5.jpg]]
Comparison of the First Six Months of 2021 to the First Six Months of 2020
Segment Profit
In the first six months of 2021, segment profit was$18.3 million , compared to$38.8 million for the same period in the prior year. Lower segment profit was primarily driven by lower financial results at the RRPF affiliates, partially offset by earnings from aircraft spare engines directly invested by GEL in the first quarter of 2021. Revenues In the first six months of 2021, lease revenue increased$11.1 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 six months of 2021, marine operating expense increased$2.8 million , due to higher bunker fuel expense and higher repairs and maintenance costs. Depreciation expense increased$5.0 million , due to the investment in new aircraft spare engines in the current year at GEL. 37 --------------------------------------------------------------------------------
Other Income (Expense)
In the first six months of 2021, income from our share of affiliates' earnings
decreased
Comparison of the Second Quarter of 2021 to the Second Quarter of 2020
Segment Profit
In the second quarter of 2021, segment profit was$12.2 million , compared to$19.3 million for the same period in the prior year. Lower segment profit was primarily driven by lower financial results at the RRPF affiliates, partially offset by earnings from GEL, our direct investment in aircraft spare engines.
Revenues
In the second 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 increased$1.8 million , driven by higher utilization and increased charter rates from the Specialized Gas Vessels.
Expenses
In the second quarter of 2021, marine operating expense increased
Other Income (Expense)
In the second quarter of 2021, income from our share of affiliates' earnings
decreased
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.
OnDecember 29, 2020 , GATX acquired Trifleet, the fourth largest tank container lessor 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 Six Months Ended
June 30 June 30
2021 2020 2021 2020
Other segment profit $ 2.7 $ - $ 3.3 $ -
Selling, general and administrative expense 47.8 43.4 94.9 83.8
Unallocated interest (income) expense 0.6 (1.6) 0.4 (2.9)
Other expense (income), including eliminations 7.3 1.0 7.9 2.7
Trifleet Summary
The tank container market improved in the second quarter of 2021. Trifleet experienced increased demand and utilization during the quarter. Overall, Trifleet's operating results are largely consistent with expectations.
38
--------------------------------------------------------------------------------Trifleet Tank Container Data
AtJune 30, 2021 , Trifleet's owned and managed fleet consisted of approximately 18,900 tank containers compared to 19,200 at the end of the prior quarter. Fleet utilization was 84.9% atJune 30, 2021 compared to 80.0% at the end of the prior quarter. 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: March 31 June 30 2021 2021 Ending balance - owned and managed 19,179 19,185
Utilization rate at quarter-end - owned and managed 80.0 % 84.9
%
SG&A, Unallocated Interest and Other
SG&A increased$11.1 million for the first six months of 2021 compared to the same period in the prior year. The increase was largely due to higher share-based compensation expenses, resulting from an increase in the GATX stock price during the current year, as well as the inclusion of Trifleet SG&A expenses in the current year, partially offset by lower discretionary travel and entertainment expenses. SG&A increased$4.4 million for the second 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, higher project-related costs, 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$5.2 million for the first six 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 and the positive impact of foreign exchange rates on a foreign pension plan. Other expense (income), including eliminations increased$6.3 million for the second quarter 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 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 Six Months Ended
June 30 June 30
2021 2020 2021 2020
Discontinued operations, net of taxes
Loss from discontinued operations, net of taxes $ - $ (1.3) $ - $ (2.2)
Gain on sale of discontinued operations, net of
taxes - 3.6 - 3.6
Discontinued operations, net of taxes $ - $ 2.3 $ -
As a result of the sale in the second quarter of 2020, there were no operations in the current year.
39
--------------------------------------------------------------------------------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. The risk of ongoing volatility as a result of future COVID-19 disruptions persists. This volatility from COVID-19 could have an ongoing negative impact on our customers, including their ability to make their lease payments timely, as well as their willingness to renew existing leases or enter into new lease contracts. We have a strong liquidity position, solid balance sheet, and access to capital that we expect will enable GATX to continue to effectively manage through the COVID-19 pandemic. As ofJune 30, 2021 , we had an unrestricted cash balance of$417.9 million . We also have a$250 million 3-year unsecured revolving credit facility in theU.S. that matures in 2024 and a$600 million , 5-year unsecured credit facility in theU.S. that matures in 2026, both of which are fully available as ofJune 30, 2021 .
The following table shows our principal sources and uses of cash from continuing
operations for the six months ended
2021 2020
Principal sources of cash
Net cash provided by operating activities $ 198.6 $ 199.3
Portfolio proceeds 124.1 89.6
Other asset sales 29.1 12.8
Proceeds from issuance of debt, commercial paper, and credit
facilities 1,072.6 1,348.0
Total $ 1,424.4 $ 1,649.7
Principal uses of cash
Portfolio investments and capital additions $
(663.4)
(1,110.1)
Purchases of assets previously leased - financing activities (33.3) (7.9)
Dividends (37.9) (36.4)
Total $ (1,323.8) $ (1,545.9) Net Cash Provided by Operating Activities
Net cash provided by operating activities for the first six months of 2021 was$198.6 million , a decrease of$0.7 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 payments for operating leases and other operating expenses were partially offset by higher cash payments for income taxes and interest expense.
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$124.1 million for the six months of 2021 increased by$34.5 million from the prior year, primarily due to higher proceeds from railcar and locomotive sales atRail North America .
Proceeds From Issuance of Debt
Proceeds from the issuance of debt for the first six months endedJune 30, 2021 were$1,072.6 million (net of hedges and debt issuance costs). In the first six months of 2021, we issued$400 million of 10-year unsecured debt,$300 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. 40 --------------------------------------------------------------------------------
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$663.4 million for the first six months of 2021 increased$271.9 million compared to 2020, primarily due to the acquisition of 14 aircraft spare engines at GEL, partially offset by fewer railcars acquired atRail North America andRail International .
Repayments of Debt
Debt repayments of$589.2 million for the first six months of 2021 were$520.9 million lower than prior year. In the first six 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 six months endedJune 30, 2021 , we exercised options to acquire 898 railcars previously recorded on the balance sheet as a finance lease for$33.3 million , compared to the exercise of options to acquire 166 railcars previously recorded on the balance sheet as a finance lease for$7.9 million in 2020.
Share Repurchase Program
OnJanuary 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. No share repurchases were completed during the six months endedJune 30, 2021 andJune 30, 2020 . As ofJune 30, 2021 ,$150.0 million remained available under the repurchase authorization. 41 --------------------------------------------------------------------------------
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
Payments Due by Period
Total 2021 (1) 2022 2023 2024 2025 Thereafter
Recourse debt $ 5,837.8 $ 300.0 $
368.6
95.4 182.7 171.0 155.5 141.2 1,055.7
Commercial paper and credit
facilities 17.9 17.9 - - - - -
Operating lease obligations 352.7 18.5 42.0 39.9 37.7 35.1 179.5
Purchase commitments (3) 1,366.6 481.1 545.7 339.8 - - -
Total $ 9,376.5 $ 912.9 $ 1,139.0 $ 1,050.7 $ 736.3 $ 713.5 $ 4,824.1
__________
(1) For the remainder of the year.
(2) For floating rate debt, future interest payments are based on the
applicable interest rate as of June 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. The amount shown
for 2021 includes $43.6 million related to options we exercised to purchase
1,431 railcars that are currently on lease.
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 June 30, 2021 , 2,524 railcars have been ordered, of which
1,785 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 June 30, 2021 , 5,894
railcars have been ordered, of which 3,026 have been delivered. The agreement
also includes an option to order up to an additional 4,400 railcars subject to
certain restrictions.
42
--------------------------------------------------------------------------------Short-Term Borrowings
The following table shows additional information regarding our short-term
borrowings for the six months ended
Europe (1)
Balance as of June 30 (in millions) $ 17.9
Weighted-average interest rate 0.8 %
Euro/dollar exchange rate 1.19
Average daily amount outstanding year to date (in millions) $ 20.8
Weighted-average interest rate 0.9 %
Average Euro/dollar exchange rate 1.21
Average daily amount outstanding during the second quarter (in millions)
$ 20.3 Weighted-average interest rate 0.9 % Average Euro/dollar exchange rate 1.21 Maximum daily amount outstanding (in millions)$ 34.2 Euro /dollar exchange rate 1.22 __________
(1)Short-term borrowings in
Credit Lines and Facilities During the second quarter of 2021, we entered into a new$600 million , 5-year unsecured revolving credit facility in theU.S. , expiring inMay 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 ofJune 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 theU.S. , expiring inMay 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 ofJune 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 ofJune 30, 2021 , €20.5 million was available under these credit facilities. Delayed Draw Term Loan OnDecember 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 fromDecember 14, 2020 throughApril 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 thanDecember 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 ofJune 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. AtJune 30, 2021 , our European rail subsidiaries had outstanding term loan and private placement debt balances totaling €580.0 million. The loans are guaranteed byGATX Corporation and are subject to similar restrictive covenants as the revolving credit facility noted above. 43 -------------------------------------------------------------------------------- AtJune 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 ofJune 30, 2021 , our long-term unsecured debt was rated BBB byStandard & Poor's and Baa2 by Moody's Investor Service and our short-term unsecured debt was rated A-2 byStandard & 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):
June 30 March 31 December 31 September 30 June 30
2021 2021 2020 2020 2020
Debt and lease obligations, net of
unrestricted cash:
Unrestricted cash $ (417.9) $ (958.9)
17.9 19.6 5.9
facilities 23.6 13.5
Recourse debt 5,803.1 6,374.6 5,329.0 5,183.0 5,047.5
Operating lease obligations 298.7 328.0 348.6 368.0 372.3
Finance lease obligations 43.6 - 33.3 - 31.8
Total debt and lease obligations, net
of unrestricted cash $ 5,745.4 $ 5,763.3 $ 5,442.3 $ 5,104.7 $ 4,964.6
Total recourse debt (1) $ 5,745.4 $ 5,763.3 $ 5,442.3 $ 5,104.7 $ 4,964.6
Shareholders' Equity $ 1,971.4 $ 1,960.0 $ 1,957.4 $ 1,930.0 $ 1,875.3
Recourse Leverage (2) 2.9 2.9 2.8 2.6 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 six months endedJune 30, 2021 . Refer to our Annual Report on Form 10-K for the year endedDecember 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 theSEC . 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.
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
44
--------------------------------------------------------------------------------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 million, except per share data):
Impact of Tax Adjustments and Other Items on Net
Income:
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Net income (GAAP) $ 5.5 $ 39.3 $ 42.0 $ 85.6
Less: Net income from discontinued operations
(GAAP) - 2.3 - 1.4
Net income from continuing operations (GAAP) $ 5.5 $ 37.0 $ 42.0 $ 84.2
Adjustments attributable to pre-tax income from
continuing operations:
Debt extinguishment costs (1) 4.5 - 4.5 -
Total adjustments attributable to pre-tax income
from continuing operations $ 4.5 $ - $ 4.5 $ -
Income taxes thereon, based on applicable
effective tax rate $ (1.1) $ - $ (1.1) $ -
Adjustments attributable to affiliates' earnings,
net of taxes:
Income tax rate change (2) 39.7 - 39.7 -
Total adjustments attributable to affiliates'
earnings, net of taxes $ 39.7 $ - $ 39.7 $ -
Net income from continuing operations, excluding
tax adjustments and other items (non-GAAP) $ 48.6 $ 37.0 $ 85.1 $ 84.2
Net income from discontinued operations,
excluding tax adjustments and other items
(non-GAAP) $ - $ 2.3 $ - $ 1.4
Net income from consolidated operations,
excluding tax adjustments and other items
(non-GAAP) $ 48.6 $ 39.3 $ 85.1 $ 85.6 Impact of Tax Adjustments and Other Items on Diluted Earnings per Share:
Three Months Ended Six Months Ended
June 30 June 30
2021 2020 2021 2020
Diluted earnings per share from consolidated
operations (GAAP) $ 0.15 $ 1.11 $ 1.17 $ 2.42 Less: Diluted earnings per share from discontinued operations (GAAP)
- 0.06 - 0.04
Diluted earnings per share from continuing
operations (GAAP) $ 0.15 $ 1.05 $ 1.17 $ 2.38 Adjustments attributable to income from continuing operations, net of taxes: Debt extinguishment costs (1)
0.09 - 0.09 -
Adjustments attributable to affiliates' earnings
from continuing operations, net of taxes:
Income tax rate change (2) 1.10 - 1.10 -
Diluted earnings per share from continuing
operations, excluding tax adjustments and other
items (non-GAAP) * $ 1.35 $ 1.05 $ 2.37 $ 2.38
Diluted earnings per share from discontinued
operations, excluding tax adjustments and other
items (non-GAAP) $ - $ 0.06 $ - $ 0.04
Diluted earnings per share from consolidated
operations, excluding tax adjustments and other
items (non-GAAP) * $ 1.35 $ 1.11 $ 2.37 $ 2.42 *bSum of individual components may not be additive due to rounding.
45
--------------------------------------------------------------------------------
The following table shows our net income and return on equity, excluding tax
adjustments and other items, for the trailing 12 months ended June 30 (in
millions):
2021 2020
Net income (GAAP) $ 107.7 $ 187.3
Less: Net income from discontinued operations (GAAP) (0.3) 23.8
Net income from continuing operations (GAAP) $
108.0
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
Adjustments attributable to affiliates' earnings, net of taxes: Income tax rate change (2)
39.7 -
Income tax rate change (3) 12.3 -
Total adjustments attributable to affiliates' earnings, net of taxes
$
163.4
Adjustments attributable to discontinued operations, net of taxes: Net casualty gain at ASC (4)
- (8.1)
Total adjustments attributable to discontinued operations, net of taxes
$
-
$
(0.3)
Net income from consolidated operations, excluding tax adjustments and other items (non-GAAP)$ 163.1 $ 179.2 Return on Equity (GAAP) 5.6 % 10.1 % Return on Equity, excluding tax adjustments and other items (non-GAAP) (5) 10.3 % 11.8 % _______ (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 adjustment due to an enacted corporate income tax rate increase in theUnited Kingdom in 2021. (3) Deferred income tax adjustment due to the elimination of a previously announced corporate income tax rate reduction in theUnited Kingdom in 2020. (4) Net casualty gain attributable to insurance recovery for a vessel at ASC. (5) Shareholders' equity used in this calculation excludes the increases resulting from the impact of the Tax Cuts and Jobs Act of 2017. 46
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