UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________ 
FORM 10-Q
__________________________________________  
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-2328
GATX Corporation
(Exact name of registrant as specified in its charter)
New York
36-1124040
(State of incorporation)
(I.R.S. Employer Identification No.)
222 West Adams Street
Chicago, Illinois 60606-5314
(Address of principal executive offices, including zip code)
(312) 621-6200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
 
x
Large accelerated filer
 
  ¨  
Accelerated filer
 
  ¨  
Non-accelerated filer
 
  ¨  
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes   ¨     No   x
As of March 31, 2015 , 43.9 million common shares were outstanding.
 
 
 
 
 




GATX CORPORATION
FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2015

INDEX

Item No.
 
Page No.
 
 
 
 
Forward-Looking Statements
Item 1.
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 6.
 
 
 
 



FORWARD-LOOKING STATEMENTS

Forward looking statements in this report that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that reflect our current views with respect to, among other things, future events, financial performance and market conditions. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “likely,” “will,” “would” and variations of these terms and similar expressions, or the negative of these terms or similar expressions.
A detailed discussion of the known material risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our Annual Report on Form 10-K for the year ended December 31, 2014, and in our other filings with the Securities and Exchange Commission. Specific risks and uncertainties include, but are not limited to, (1) changes in regulatory requirements for tank cars carrying crude, ethanol, and other flammable liquids, (2) competitive factors in our primary markets, (3) weak economic conditions, financial market volatility, and other factors that may decrease demand for our assets and services, (4) inability to maintain our assets on lease at satisfactory rates, (5) changes to, or failure to comply with, laws, rules, and regulations applicable to our assets and operations, (6) operational disruption and increased costs associated with compliance maintenance programs and other maintenance initiatives, (7) financial and operational risks associated with long-term railcar purchase commitments, (8) deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs, (9) events having an adverse impact on assets, customers, or regions where we have a large investment, (10) decreased demand for certain railcars used in the petroleum industry due to sustained low crude oil prices, (11) risks related to international operations and expansion into new geographic markets, (12) inadequate allowances to cover credit losses in our portfolio, (13) asset impairment charges we may be required to recognize, (14) environmental remediation costs or a negative outcome in pending or threatened litigation, (15) inability to obtain cost-effective insurance, (16) fluctuations in foreign exchange rates, (17) operational and financial risks related to our affiliate investments, (18) reduced opportunities to generate asset remarketing income, (19) failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees and (20) other risks discussed in our filings with the US Securities and Exchange Commission ("SEC"), including our Form 10-K for the year ended December 31, 2014, all of which are available on the SEC's website (www.sec.gov). You should not place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

1

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In millions, except share data)
 
March 31
 
December 31
 
2015
 
2014
Assets
 
 
 
Cash and Cash Equivalents
$
351.4

 
$
209.9

Restricted Cash
15.6

 
14.5

Receivables
 
 
 
Rent and other receivables
64.1

 
86.0

Loans
13.4

 
97.3

Finance leases
175.4

 
174.7

Less: allowance for losses
(5.6
)
 
(5.7
)
 
247.3

 
352.3

 
 
 
 
Operating Assets and Facilities  ($123.1 and $123.1 related to a consolidated VIE)
8,194.2

 
8,143.5

Less: allowance for depreciation ($36.2 and $35.0 related to a consolidated VIE)
(2,434.9
)
 
(2,455.5
)
 
5,759.3

 
5,688.0

Investments in Affiliated Companies    
359.7

 
357.7

Goodwill    
79.1

 
86.1

Other Assets    
244.0

 
229.0

Total Assets    
$
7,056.4

 
$
6,937.5

 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
Accounts Payable and Accrued Expenses    
$
163.8

 
$
165.9

Debt
 
 
 
Commercial paper and borrowings under bank credit facilities
2.8

 
72.1

Recourse
4,443.8

 
4,179.9

Nonrecourse ($13.7 and $15.9 related to a consolidated VIE)
13.7

 
15.9

Capital lease obligations
5.0

 
6.3

 
4,465.3

 
4,274.2

Deferred Income Taxes    
952.1

 
937.3

Other Liabilities    
192.7

 
246.1

Total Liabilities    
5,773.9

 
5,623.5

 
 
 
 
Shareholders’ Equity
 
 
 
Common stock, $0.625 par value:
Authorized shares — 120,000,000
Issued shares — 66,724,418 and 66,600,984
Outstanding shares — 43,900,464 and 44,198,850
41.5

 
41.4

Additional paid in capital
671.2

 
672.8

Retained earnings
1,547.2

 
1,501.7

Accumulated other comprehensive loss
(196.9
)
 
(148.4
)
Treasury stock at cost (22,823,954 and 22,402,134 shares)
(780.5
)
 
(753.5
)
Total Shareholders’ Equity    
1,282.5

 
1,314.0

Total Liabilities and Shareholders’ Equity
$
7,056.4

 
$
6,937.5


See accompanying notes to consolidated financial statements.

2

GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In millions, except per share data)
 
Three Months Ended
March 31
 
2015
 
2014
Revenues
 
 
 
Lease revenue
$
278.3

 
$
250.6

Marine operating revenue
24.2

 
17.7

Other revenue
17.2

 
18.3

Total Revenues
319.7

 
286.6

Expenses
 
 
 
Maintenance expense
78.3

 
73.1

Marine operating expense
18.9

 
15.0

Depreciation expense
68.5

 
58.7

Operating lease expense
20.7

 
26.9

Other operating expense
7.3

 
6.6

Selling, general and administrative expense
45.7

 
42.7

Total Expenses
239.4

 
223.0

Other Income (Expense)
 
 
 
Net gain on asset dispositions
45.3

 
28.1

Interest expense, net
(40.9
)
 
(42.0
)
Other expense
(4.0
)
 
(3.4
)
Income before Income Taxes and Share of Affiliates’ Earnings    
80.7

 
46.3

Income Taxes
(27.0
)
 
(14.1
)
Share of Affiliates’ Earnings, Net of Taxes
8.5

 
9.9

Net Income    
$
62.2

 
$
42.1

Other Comprehensive Income, Net of Taxes
 
 
 
Foreign currency translation adjustments
(48.0
)
 
0.7

Unrealized loss on securities
—

 
(0.2
)
Unrealized (loss) gain on derivative instruments
(2.6
)
 
0.7

Post-retirement benefit plans
2.1

 
1.4

Other comprehensive (loss) income
(48.5
)
 
2.6

Comprehensive Income    
$
13.7

 
$
44.7

 
 
 
 
Share Data
 
 
 
Basic earnings per share
$
1.41

 
$
0.92

Average number of common shares
44.1

 
46.0

 
 
 
 
Diluted earnings per share
$
1.39

 
$
0.90

Average number of common shares and common share equivalents
44.8

 
46.8

 
 
 
 
Dividends declared per common share
$
0.38

 
$
0.33


See accompanying notes to consolidated financial statements.

3

GATX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
 
Three Months Ended
March 31
 
2015
 
2014
Operating Activities
 
 
 
Net income
$
62.2

 
$
42.1

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation expense
71.7

 
62.1

Gains on sales of assets
(43.7
)
 
(26.9
)
Deferred income taxes
24.0

 
11.0

Share of affiliates’ earnings, net of dividends
(8.5
)
 
1.9

Change in accrued operating lease expense
(47.4
)
 
(39.8
)
Other
(2.5
)
 
1.0

Net cash provided by operating activities
55.8

 
51.4

Investing Activities
 
 
 
Portfolio investments and capital additions
(180.9
)
 
(445.5
)
Purchases of leased-in assets
(99.5
)
 
(150.5
)
Portfolio proceeds
176.8

 
66.6

Proceeds from sales of other assets
8.6

 
7.0

Net (increase) decrease in restricted cash
(1.1
)
 
5.5

Other
9.7

 
—

Net cash used in investing activities
(86.4
)
 
(516.9
)
Financing Activities
 
 
 
Net proceeds from issuances of debt (original maturities longer than 90 days)
667.7

 
842.5

Repayments of debt (original maturities longer than 90 days)
(381.1
)
 
(307.1
)
Net (decrease) increase in debt with original maturities of 90 days or less
(69.1
)
 
14.5

Stock repurchases
(25.3
)
 
—

Dividends
(18.0
)
 
(16.9
)
Other
2.9

 
(1.2
)
Net cash provided by financing activities
177.1

 
531.8

Effect of Exchange Rate Changes on Cash and Cash Equivalents
(5.0
)
 
1.0

Net increase in Cash and Cash Equivalents
141.5

 
67.3

Cash and Cash Equivalents, beginning of period
209.9

 
379.7

Cash and Cash Equivalents, end of period
$
351.4

 
$
447.0

Noncash Investing Transactions
 
 
 
Distributions from affiliates (1)
$
—

 
$
1.1

_________
(1) In 2014, we received distributions of 62 railcars from our Southern Capital affiliate.



See accompanying notes to consolidated financial statements.


4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



NOTE 1. Description of Business

As used herein, "GATX," "we," "us," "our," and similar terms refer to GATX Corporation and its subsidiaries, unless indicated otherwise.

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail and marine markets. We also invest in joint ventures that complement our existing business activities. We report our financial results through four primary business segments: Rail North America, Rail International, American Steamship Company (“ASC”), and Portfolio Management.

NOTE 2 . Basis of Presentation

We prepared the accompanying unaudited consolidated financial statements in accordance with US Generally Accepted Accounting Principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our unaudited consolidated financial statements do not include all of the information and footnotes required for complete financial statements. We have included all of the normal recurring adjustments that we deemed necessary for a fair presentation.

Operating results for the three months ended March 31, 2015 , are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2015. In particular, ASC's fleet is inactive for a significant portion of the first quarter of each year due to winter conditions on the Great Lakes. In addition, 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, 2014.

Accounting Changes

Discontinued Operations

In April 2014, the Financial Accounting Standards Board ("FASB") issued amendments to authoritative guidance for reporting discontinued operations and disposals of components of an entity. The amendments require that disposals representing strategic shifts that have (or will have) a major effect on an entity’s operations or financial results should be reported as discontinued operations. The amendments also expand the disclosure requirements for both discontinued operations and significant dispositions that do not qualify as discontinued operations.

The amendments were effective for us beginning in the first quarter of 2015. Adoption of the new guidance did not impact the amount or timing of net income or the presentation and disclosures of our financial statements.

New Accounting Pronouncements

Debt Issue Costs

In April 2015, the FASB issued authoritative guidance that requires presentation of debt issue costs as a deduction from the carrying amount of the related debt liability on the balance sheet, rather than as a deferred charge. The new guidance is effective for us beginning in the first quarter of 2016, with early adoption permitted. Adoption of the new guidance is not expected to impact the amount or timing of net income but may result in changes to the presentation and disclosures of our financial statements.

Consolidation

In February 2015, the FASB issued authoritative guidance amending the analysis required to determine whether to consolidate certain types of legal entities such as limited partnerships, limited liability corporations, and certain securitization structures. The new guidance is effective for us beginning in the first quarter of 2016, with early adoption permitted. We are currently evaluating the effect, if any, the new guidance will have on our financial statements and related disclosures.


5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Revenue from Contracts with Customers

In May 2014, the FASB issued authoritative accounting guidance that supersedes most current revenue recognition guidance, including industry-specific guidance. The new guidance requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

The guidance is effective for us beginning in the first quarter of 2017, and early adoption is not permitted. We can adopt the new guidance using either the retrospective method or the cumulative effect transition method. We are still evaluating the effect that the new guidance will have on our consolidated financial statements and related disclosures, including which transition method we will use.

NOTE 3 . Variable Interest Entities

We are the primary beneficiary of one of our variable interest entities, a structured lease financing of a portfolio of railcars, because we have the power to direct its significant activities. As a result, we consolidate this variable interest entity. The risks associated with it are similar to those of our wholly owned railcar leasing activities.

The following table shows the carrying amounts of assets and liabilities of the consolidated variable interest entity (in millions):
 
March 31
2015
 
December 31
2014
Operating assets, net of accumulated depreciation (1)
$
86.9

 
$
88.1

Nonrecourse debt
13.7

 
15.9

_________
(1)
All operating assets are pledged as collateral on the nonrecourse debt.

We determined that we are not the primary beneficiary of our other variable interest entities, which are primarily investments in equipment leasing affiliates that were financed through a variety of equity investments and third party lending arrangements. We are not the primary beneficiary of these variable interest entities because we do not have the power to direct the activities that most significantly impact the entities’ economic performance. For investments in affiliates we determined were variable interest entities, we concluded that power was shared by the affiliate partners based on the terms of the relevant joint venture agreements, which require approval of all partners for significant decisions regarding the variable interest entity.

The following table shows the carrying amounts and maximum exposure to loss for our unconsolidated variable interest entities (in millions):
 
March 31, 2015
 
December 31, 2014
 
Net Carrying Amount
 
Maximum Exposure to Loss
 
Net Carrying Amount
 
Maximum Exposure to Loss
Investments in affiliates
$
148.5

 
$
148.5

 
$
143.9

 
$
143.9

Other investment
0.4

 
0.4

 
0.4

 
0.4

Total
$
148.9

 
$
148.9

 
$
144.3

 
$
144.3



6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 4 . Fair Value Disclosure

The following tables show our assets and liabilities that are measured at fair value on a recurring basis (in millions):
Assets
March 31,
2015
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
   (Level 3)
Interest rate derivatives (1)
$
2.9

 
$
—

 
$
2.9

 
$
—

Foreign exchange rate derivatives
18.4

 
—

 
18.4

 
—

Available-for-sale equity securities
4.4

 
4.4

 
—

 
—

Liabilities


 
 
 
 
 
 
Foreign exchange rate derivatives (2)
5.4

 
—

 
5.4

 
—

Assets
December 31,
2014
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
 
Significant Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Interest rate derivatives (1)
$
1.8

 
$
—

 
$
1.8

 
$
—

Foreign exchange date derivatives (2)
9.7

 
—

 
9.7

 
—

Available-for-sale equity securities
4.4

 
4.4

 
—

 
—

Liabilities
 
 
 
 
 
 
 
Interest rate derivatives (1)
5.9

 
—

 
5.9

 
—

Foreign exchange rate derivatives (2)
1.6

 
—

 
1.6

 
—

_________
(1) Designated as hedges.
(2) Not designated as hedges.

We base our valuations of available-for-sale equity securities on their quoted prices on an active exchange. We value derivatives using a pricing model with inputs (such as yield curves and foreign currency rates) that are observable in the market or that can be derived principally from observable market data.

Derivative instruments

Fair Value Hedges

We use interest rate swaps to manage the fixed-to-floating rate mix of our debt obligations by converting the fixed rate debt to floating rate debt. For fair value hedges, we recognize changes in fair value of both the derivative and the hedged item as interest expense. We had eight instruments outstanding with an aggregate notional amount of $600.0 million as of March 31, 2015 and December 31, 2014. These derivatives have maturities ranging from 2015 to 2020 .

Cash Flow Hedges

We use interest rate swaps to convert floating rate debt to fixed rate debt. We use Treasury rate locks to hedge our exposure to interest rate risk on anticipated transactions. We also use currency swaps to hedge our exposure to fluctuations in the exchange rates of the foreign currencies in which we conduct business. We had six instruments outstanding with an aggregate notional amount of $312.6 million as of March 31, 2015 , and seven instruments outstanding with an aggregate notional amount of $281.5 million as of December 31, 2014. These derivatives had maturities ranging from 2015 to 2022 . Within the next 12 months, we expect to reclassify $5.9 million ( $3.7 million

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

after-tax) of net losses on previously terminated derivatives from accumulated other comprehensive loss. We reclassify these amounts when interest and operating lease expense on the related hedged transactions affect earnings.

Non-designated Derivatives

We do not hold derivative financial instruments for purposes other than hedging, although certain of our derivatives are not designated as accounting hedges. We recognize changes in the fair value of these derivatives in other (income) expense immediately.

Some of our derivative instruments contain credit risk provisions that could require us to make immediate payment on net liability positions in the event that we default on certain outstanding debt obligations. The aggregate fair value of our derivative instruments with credit risk related contingent features that are in a liability position as of March 31, 2015 , was zero . We are not required to post any collateral on our derivative instruments and do not expect the credit risk provisions to be triggered.

In the event that a counterparty fails to meet the terms of an interest rate swap agreement or a foreign exchange contract, our exposure is limited to the fair value of the swap, if in our favor. We manage the credit risk of counterparties by transacting with institutions that we consider financially sound and by avoiding concentrations of risk with a single counterparty. We believe that the risk of non-performance by any of our counterparties is remote.

The following table shows the impacts of our derivative instruments on our statements of comprehensive income (in millions):
 
 
 
 
Three Months Ended
March 31
Derivative Designation
 
Location of Loss (Gain) Recognized
 
2015
 
2014
Fair value hedges (1)
 
Interest expense
 
$
(2.3
)
 
$
2.1

Cash flow hedges
 
Other comprehensive (income) loss (effective portion)
 
(8.4
)
 
1.8

Cash flow hedges
 
Interest expense (effective portion reclassified from accumulated other comprehensive loss)
 
1.3

 
1.2

Cash flow hedges
 
Operating lease expense (effective portion reclassified from accumulated other comprehensive loss)
 
0.1

 
0.2

Cash flow hedges (2)
 
Other (income) expense (effective portion reclassified from accumulated other comprehensive loss)
 
(8.4
)
 
2.2

Non-designated (3)
 
Other (income) expense
 
(4.2
)
 
0.1

_________
(1) The fair value adjustments related to the underlying debt equally offset the amounts recognized in interest expense.
(2) For 2015, includes $9.9 million of gains on foreign currency derivatives which are substantially offset by losses from foreign currency remeasurement adjustments, also recognized in Other (income) expense.
(3) For 2015, includes $5.1 million of gains on foreign currency derivatives which are substantially offset by losses from foreign currency remeasurement adjustments on the AAE loan, also recognized in Other (income) expense.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, rent and other receivables, accounts payable, and commercial paper and bank credit facilities approximate fair value due to the short maturity of those instruments. We base the fair values of investment funds, which are accounted for under the cost method, on the best information available, which may include quoted investment fund values. We estimate the fair values of loans and fixed and floating rate debt using discounted cash flow analyses based on interest rates currently offered for loans with similar terms to borrowers of similar credit quality. The estimated fair values for these investments are classified in Level 2 of the fair value hierarchy because they are based on directly or indirectly observable inputs.


8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table shows the carrying amounts and fair values of our other financial instruments as of (in millions):
 
March 31, 2015
 
December 31, 2014
 
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Assets
 
 
 
 
 
 
 
Investment funds
$
1.3

 
$
2.1

 
$
1.5

 
$
2.4

Loans
13.4

 
13.4

 
97.3

 
97.4

Liabilities
 
 
 
 
 
 
 
Recourse fixed rate debt
$
4,068.8

 
$
4,219.1

 
$
3,639.9

 
$
3,775.0

Recourse floating rate debt
375.1

 
376.0

 
540.0

 
540.0

Nonrecourse debt
13.7

 
14.3

 
15.9

 
16.6


NOTE 5 . Pension and Other Post-Retirement Benefits

The following table shows components of our pension and other post-retirement benefits expense for the three months ended March 31, 2015 and 2014 (in millions):
 
2015 Pension
Benefits
 
2014 Pension
Benefits
 
2015 Retiree
Health
and Life
 
2014 Retiree
Health
and Life
Service cost
$
1.7

 
$
1.4

 
$
—

 
$
—

Interest cost
4.9

 
5.1

 
0.4

 
0.4

Expected return on plan assets
(6.5
)
 
(7.2
)
 
—

 
—

Amortization of (1):
 
 
 
 
 
 
 
Unrecognized prior service credit
(0.2
)
 
(0.2
)
 
—

 
—

Unrecognized net actuarial loss
3.5

 
2.6

 
—

 
—

Net expense
$
3.4

 
$
1.7

 
$
0.4

 
$
0.4

_________
(1) Amounts reclassified from accumulated other comprehensive loss.

NOTE 6 . Share-Based Compensation

During the first three months of 2015 , we granted 341,100 stock appreciation rights (“SARs”), 65,640 restricted stock units, 61,740 performance shares, and 5,091 phantom stock units. For the three months ended March 31, 2015 , total share-based compensation expense was $ 2.9 million and the related tax benefit was $ 1.1 million . For the three months ended March 31, 2014 , total share-based compensation expense was $ 3.1 million and the related tax benefit was $ 1.2 million .
The estimated fair value of our 2015 SARs awards and related underlying assumptions are shown in the table below.
 
2015
Estimated fair value
$
18.16

Quarterly dividend rate
$
0.38

Expected term of stock appreciation rights, in years
4.7

Risk-free interest rate
1.2
%
Dividend yield
2.6
%
Expected stock price volatility
29.2
%
Present value of dividends
$
6.90



9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 7 . Income Taxes

Our effective tax rate was 33% for the three months ended March 31, 2015 , compared to 30% for the three months ended March 31, 2014. The difference in the effective rates for each period, compared to the statutory rate of 35% , is primarily attributable to the mix of pretax income in each year among domestic and foreign jurisdictions which are taxed at different rates. The current year reflects a higher contribution from domestic source income, which is taxed at a higher rate.

As of March 31, 2015 , our gross liability for unrecognized tax benefits was $5.6 million . If fully recognized, these tax benefits would decrease our income tax expense by $5.6 million ( $3.6 million , net of federal tax). We do not anticipate the recognition of any tax benefits that were previously unrecognized within the next 12 months.

NOTE 8 . Commercial Commitments

We have entered into various commercial commitments, such as guarantees and standby letters of credit, related to certain transactions. These commercial commitments require us to fulfill specific obligations in the event of third party demands. Similar to our balance sheet investments, these commitments expose us to credit, market, and equipment risk. Accordingly, we evaluate these commitments and other contingent obligations using techniques similar to those we use to evaluate funded transactions.

The following table shows our commercial commitments (in millions):
 
March 31
2015
 
December 31
2014
Lease payment guarantees
$
26.8

 
$
28.5

Standby letters of credit
8.6

 
8.7

Performance bonds
0.4

 
0.4

Total commercial commitments (1)
$
35.8

 
$
37.6

_________
(1) The carrying value of liabilities on the balance sheet for commercial commitments was $4.9 million at March 31, 2015 and $5.1 million at December 31, 2014. The expirations of these commitments range from 2017 to 2023 . We are not aware of any event that would require us to satisfy any of our commitments.

Lease payment guarantees are commitments to financial institutions to make lease payments for a third party in the event they default. We reduce any liability that may result from these guarantees by the value of the underlying asset or group of assets.

We are also parties to standby letters of credit and performance bonds, which primarily relate to contractual obligations and general liability insurance coverages. No material claims have been made against these obligations, and no material losses are anticipated.

NOTE 9 . Earnings per Share

We compute basic earnings per share by dividing net income available to our common shareholders by the weighted average number of shares of our common stock outstanding. We appropriately weighted shares issued or reacquired during the period that they were outstanding. Our diluted earnings per share reflect the impacts of our potentially dilutive securities and our equity compensation awards.

In the first quarter of 2014, our board of directors authorized a $250 million share repurchase program. During the first quarter of 2015, 0.5 million shares were acquired for $27.0 million . As of March 31, 2015 , 2.4 million shares had been repurchased for $151.6 million and $98.4 million was available under the repurchase authorization.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table shows the computation of our basic and diluted net income per common share (in millions, except per share amounts):
 
Three Months Ended
March 31
 
2015
 
2014
Numerator:
 
 
 
Net income
$
62.2

 
$
42.1

Denominator:
 
 
 
Weighted average shares outstanding - basic
44.1

 
46.0

Effect of dilutive securities:
 
 
 
Equity compensation plans
0.7

 
0.8

Weighted average shares outstanding - diluted
44.8

 
46.8

Basic earnings per share
$
1.41

 
$
0.92

Diluted earnings per share
$
1.39

 
$
0.90


NOTE 10 . Accumulated Other Comprehensive Loss

The following table shows the change in components for accumulated other comprehensive loss (in millions):

 
 
 
 Foreign Currency Translation Gain (Loss)
 
Unrealized Gain (Loss) on Securities
 
Unrealized Gain (Loss) on Derivative Instruments
 
Post-Retirement Benefit Plans
 
Total
Balance at December 31, 2014
$
(21.9
)
 
$
0.3

 
$
(19.1
)
 
$
(107.7
)
 
$
(148.4
)
Change in component
(48.0
)
 
—

 
6.0

 
—

 
(42.0
)
Reclassification adjustments into earnings
—

 
—

 
(7.0
)
 
3.3

 
(3.7
)
Income tax effect
—

 
—

 
(1.6
)
 
(1.2
)
 
(2.8
)
Balance at March 31, 2015
$
(69.9
)
 
$
0.3

 
$
(21.7
)
 
$
(105.6
)
 
$
(196.9
)
________
See "Note 4 . Fair Value Disclosure " and "Note 5 . Pension and Other Post-Retirement Benefits " for impacts of the reclassification adjustments on the statement of comprehensive income.

NOTE 11 . Legal Proceedings and Other Contingencies

Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against GATX and certain of our subsidiaries. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely. For a full discussion of our pending legal matters, please refer to "Note 23. Legal Proceedings and Other Contingencies" of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014.

Viareggio Derailment

In June 2009, a train consisting of fourteen liquefied petroleum gas (“LPG”) tank cars owned by GATX Rail Austria GmbH (an indirect subsidiary of the Company, "GATX Rail Austria") and its subsidiaries derailed while passing through the City of Viareggio, in the province of Lucca, Italy. Five tank cars overturned and one of the overturned cars was punctured by a peg or obstacle along the side of the track, resulting in a release of LPG, which subsequently ignited. Thirty-two people died and others were injured in the fire, which also resulted in property damage. The LPG tank cars were leased to FS Logistica S.p.A., a subsidiary of the Italian state-owned railway, Ferrovie dello Stato S.p.A (the “Italian Railway”).


11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

On December 14, 2012, the Public Prosecutors of Lucca ("Public Prosecutors") formally charged GATX Rail Austria and two of its subsidiaries (collectively, "GRA"), as well as ten maintenance and supervisory employees (the "Employees"), with various negligence-based crimes related to the accident, all of which are punishable under Italian law by incarceration, damages and fines. Similar charges were brought against four Italian Railway companies and eighteen of their employees, among others. The Public Prosecutors assert that the axle on a tank car broke, causing the derailment and resulting in a tank rupture and release of LPG, after the car hit an obstacle placed on the side of the track by the Italian Railway. The Public Prosecutors further allege that a crack in the axle was detectable at the time of final inspection but was overlooked by the Employees at the Jungenthal Waggon GmbH workshop (a subsidiary of GATX Rail Austria). The trial in the Court of Lucca (the “Lucca Trial”) commenced on November 13, 2013.

With respect to civil claims, GRA’s insurers continue to work cooperatively with the insurer for the Italian Railway to adjust and settle personal injury and property damage claims. These joint settlement efforts have so far settled most of the significant civil claims related to the accident; however, approximately 90 civil claimants did not settle and are currently parties to the Lucca Trial. The Court of Lucca will determine both the civil and criminal liability of the defendants in the one proceeding. GRA expects that its insurers will cover any civil damages if awarded to the claimants in the Lucca trial.

Since May 2012, one of the excess insurers providing coverage, Liberty Mutual Insurance Europe Limited (“Liberty”), has settled civil claims but has refused to reimburse GRA for its ongoing legal defense fees and costs, taking a position contrary to our other insurers in the prior underlying layers who had provided coverage for such expenses. As of March 31, 2015, GRA had incurred approximately $7.8 million in unreimbursed defense fees and costs, and GRA continues to incur costs in connection with the Lucca Trial. Consequently, in October 2013, GRA filed an arbitration proceeding against Liberty seeking to recoup its unreimbursed defense fees and costs (the “Liberty Arbitration”), which is set for hearing in November 2015. GRA is also negotiating issues of reimbursement for outstanding defense costs with the three other insurers in the current coverage layer, which includes a 25% share held by Liberty. GRA cannot predict the outcome of the Liberty Arbitration or the amount of defense fees and costs that ultimately may not be reimbursed by Liberty or the other excess insurers in the current coverage layer.

GRA believes that it and its Employees acted diligently and properly, but we cannot predict the outcome of the Lucca Trial or what other legal proceedings or claims, if any, may be initiated against GRA or its personnel, and, therefore, cannot reasonably estimate the possible amount or range of loss that may ultimately be incurred in connection with this accident. Accordingly, we have not established any accruals with respect to this matter.

NOTE 12 . Financial Data of Business Segments

The financial data presented below depicts the profitability, financial position, and capital expenditures of each of our business segments.

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail and marine markets. We also invest in joint ventures that complement our existing business activities. We report our financial results through four primary business segments: Rail North America, Rail International, ASC, and Portfolio Management.

Rail North America comprises our wholly owned operations in the United States, Canada, and Mexico, as well as an affiliate investment. Rail North America primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services.

Rail International comprises our wholly owned European operations ("GATX Rail Europe" or "GRE"), a railcar leasing business in India ("GATX India Pte. Ltd." or "GIPL"), and a recently established railcar leasing business in Russia ("GATX Rail Vostok LLC" or "GRV"), as well as one development stage affiliate in China. GRE leases railcars to customers throughout Europe pursuant to full-service leases under which it maintains the railcars and provides insurance and other ancillary services.

ASC operates the largest fleet of US-flagged vessels on the Great Lakes, providing waterborne transportation of dry bulk commodities such as iron ore, coal, limestone aggregates, and metallurgical limestone.

Portfolio Management generates leasing, marine operating, asset remarketing and management fee income through a collection of diversified wholly owned assets and joint venture investments.


12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the performance of each segment in a given period. Segment profit includes all revenues, pretax earnings from affiliates, and net gains on asset dispositions that are attributable to the segments, as well as expenses that management believes are directly associated with the financing, maintenance, and operation of the revenue earning assets. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments. These amounts are included in Other.

We allocate debt balances and related interest expense to each segment based upon a predetermined fixed recourse leverage level expressed as a ratio of recourse debt (including off-balance-sheet debt) to equity. The leverage levels are 5:1 for Rail North America, 2:1 for Rail International, 1.5:1 for ASC, and 3:1 for Portfolio Management. We believe that by using this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing costs .


13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables show certain segment data for each of our business segments (in millions):



Rail North America
 

Rail International
 

ASC
 

Portfolio Management
 
Other
 
GATX Consolidated
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
Profitability
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
Lease revenue
$
228.5

 
$
42.1

 
$
1.0

 
$
6.7

 
$
—

 
$
278.3

Marine operating revenue
—

 
—

 
7.0

 
17.2

 
—

 
24.2

Other revenue
14.7

 
1.9

 
—

 
0.6

 
—

 
17.2

Total Revenues    
243.2

 
44.0

 
8.0

 
24.5

 
—

 
319.7

Expenses
 
 
 
 
 
 
 
 
 
 
 
Maintenance expense
69.2

 
8.9

 
0.2

 
—

 
—

 
78.3

Marine operating expense
—

 
—

 
6.9

 
12.0

 
—

 
18.9

Depreciation expense
52.3

 
10.7

 
—

 
5.5

 
—

 
68.5

Operating lease expense
20.7

 
—

 
—

 
—

 
—

 
20.7

Other operating expense
5.5

 
0.9

 
—

 
0.9

 
—

 
7.3

Total Expenses
147.7

 
20.5

 
7.1

 
18.4

 
—

 
193.7

Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
Net gain on asset dispositions
36.8

 
4.9

 
—

 
3.6

 
—

 
45.3

Interest expense, net
(24.5
)
 
(6.5
)
 
(1.3
)
 
(5.2
)
 
(3.4
)
 
(40.9
)
Other expense
(2.2
)
 
—

 
—

 
—

 
(1.8
)
 
(4.0
)
Share of affiliates' earnings (pretax)
0.2

 
(0.1
)
 
—

 
11.4

 
—

 
11.5

Segment Profit (Loss)
$
105.8

 
$
21.8

 
$
(0.4
)
 
$
15.9

 
$
(5.2
)
 
137.9

Selling, general and administrative expense
45.7

Income taxes (including $3.0 related to affiliates' earnings)
30.0

Net Income
$
62.2

 
 
 
 
 
 
 
 
 
 
 
 
Net Gain on Asset Dispositions
 
 
 
 
 
 
 
 
 
 
 
Asset Remarketing Income:
 
 
 
 
 
 
 
 
 
 
 
Disposition gains on owned assets
$
35.9

 
$
—

 
$
—

 
$
2.0

 
$
—

 
$
37.9

Residual sharing income
0.2

 
—

 
—

 
1.6

 
—

 
1.8

Non-remarketing disposition gains (1)
0.7

 
5.0

 
—

 
—

 
—

 
5.7

Asset impairment
—

 
(0.1
)
 
—

 
—

 
—

 
(0.1
)
 
$
36.8

 
$
4.9

 
$
—

 
$
3.6

 
$
—

 
$
45.3

Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
Portfolio investments and capital additions
$
129.8

 
$
41.4

 
$
9.3

 
$
—

 
$
0.4

 
$
180.9

 
 
 
 
 
 
 
 
 
 
 
 
Selected Balance Sheet Data at March 31, 2015
 
 
 
 
 
 
 
 
Investments in affiliated companies
$
13.9

 
$
1.6

 
$
—

 
$
344.2

 
$
—

 
$
359.7

Identifiable assets
$
4,518.9

 
$
1,161.0

 
$
273.5

 
$
794.4

 
$
308.6

 
$
7,056.4

_____
(1) Includes scrapping gains.


14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)




Rail North America
 

Rail International
 

ASC
 

Portfolio Management
 
Other
 
GATX Consolidated
Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
 
 
Profitability
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
 
Lease revenue
$
194.9

 
$
47.2

 
$
1.1

 
$
7.4

 
$
—

 
$
250.6

Marine operating revenue
—

 
—

 
3.1

 
14.6

 
—

 
17.7

Other revenue
14.6

 
2.0

 
—

 
1.7

 
—

 
18.3

Total Revenues    
209.5

 
49.2

 
4.2

 
23.7

 
—

 
286.6

Expenses
 
 
 
 
 
 
 
 
 
 
 
Maintenance expense
61.4

 
11.5

 
0.2

 
—

 
—

 
73.1

Marine operating expense
—

 
—

 
3.4

 
11.6

 
—

 
15.0

Depreciation expense
41.5

 
11.7

 
—

 
5.5

 
—

 
58.7

Operating lease expense
26.9

 
—

 
—

 
—

 
—

 
26.9

Other operating expense
4.8

 
1.4

 
—

 
0.4

 
—

 
6.6

Total Expenses
134.6

 
24.6

 
3.6

 
17.5

 
—

 
180.3

Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
Net gain on asset dispositions
24.8

 
2.4

 
(0.4
)
 
1.3

 
—

 
28.1

Interest expense, net
(24.6
)
 
(6.2
)
 
(1.4
)
 
(6.8
)
 
(3.0
)
 
(42.0
)
Other (expense) income
(3.4
)
 
—

 
—

 
0.3

 
(0.3
)
 
(3.4
)
Share of affiliates' earnings (pretax)
3.3

 
(0.1
)
 
—

 
10.9

 
—

 
14.1

Segment Profit (Loss)
$
75.0

 
$
20.7

 
$
(1.2
)
 
$
11.9

 
$
(3.3
)
 
103.1

Selling, general and administrative expense
42.7

Income taxes (including $4.2 related to affiliates' earnings)
18.3

Net Income
$
42.1

 
 
 
 
 
 
 
 
 
 
 
 
Net Gain on Asset Dispositions
 
 
 
 
 
 
 
 
 
 
 
Asset Remarketing Income:
 
 
 
 
 
 
 
 
 
 
 
Disposition gains on owned assets
$
21.6

 
$
—

 
$
—

 
$
—

 
$
—

 
$
21.6

Residual sharing income
0.6

 
—

 
—

 
1.2

 
—

 
1.8

Non-remarketing disposition gains (1)
2.6

 
2.4

 
—

 
—

 
—

 
5.0

Asset impairment
—

 
—

 
(0.4
)
 
0.1

 
—

 
(0.3
)
 
$
24.8

 
$
2.4

 
$
(0.4
)
 
$
1.3

 
$
—

 
$
28.1

Capital Expenditures
 
 
 
 
 
 
 
 
 
 
 
Portfolio investments and capital additions
$
396.0

 
$
39.3

 
$
8.3

 
$
—

 
$
1.9

 
$
445.5

 
 
 
 
 
 
 
 
 
 
 
 
Selected Balance Sheet Data at December 31, 2014
 
 
 
 
 
 
 
 
Investments in affiliated companies
$
17.2

 
$
1.8

 
$
—

 
$
338.7

 
$
—

 
$
357.7

Identifiable assets
$
4,358.3

 
$
1,229.4

 
$
286.7

 
$
813.3

 
$
249.8

 
$
6,937.5

_____
(1) Includes scrapping gains.


15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

We lease, operate, manage, and remarket long-lived, widely-used assets, primarily in the rail and marine markets. We also invest in joint ventures that complement our existing business activities. We report our financial results through four primary business segments: Rail North America, Rail International, American Steamship Company (“ASC”), and Portfolio Management.

The following discussion and analysis should be read in conjunction with the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2014. We based the discussion and analysis that follows on financial data we derived from the financial statements prepared in accordance with 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. In prior periods, we reported net income excluding certain items that we believe are not necessarily reflective of our ongoing business activities. No such adjustments occurred in the first quarter of 2015 or 2014, however, certain of these adjustments occurred in 2013 and impacted the computation of return on equity for the trailing twelve months earnings as disclosed in this report.

Operating results for the three months ended March 31, 2015 , are not necessarily indicative of the results we may achieve for the entire year ending December 31, 2015. For more information about our business, refer to our Annual Report on Form 10-K for the year ended December 31, 2014.

DISCUSSION OF OPERATING RESULTS

The following table shows a summary of our reporting segments and consolidated financial results for the three months ended March 31 (in millions, except per share data and percentages):
 
2015
 
2014
Segment Revenues
 
 
 
Rail North America
$
243.2

 
$
209.5

Rail International
44.0

 
49.2

ASC
8.0

 
4.2

Portfolio Management
24.5

 
23.7

 
$
319.7

 
$
286.6

Segment Profit (Loss)
 
 
 
Rail North America
$
105.8

 
$
75.0

Rail International
21.8

 
20.7

ASC
(0.4
)
 
(1.2
)
Portfolio Management
15.9

 
11.9

 
143.1

 
106.4

Less:
 
 
 
Selling, general and administrative expense
45.7

 
42.7

Unallocated interest expense, net
3.4

 
3.0

Other, including eliminations
1.8

 
0.3

Income taxes ($3.0 and $4.2 related to affiliates' earnings)
30.0

 
18.3

    Net Income    
$
62.2

 
$
42.1

 
 
 
 
Diluted earnings per share
$
1.39

 
$
0.90

Investment Volume
$
180.9

 
$
445.5


16


The following table shows our return on equity ("ROE") for the trailing twelve months ended March 31 :
 
2015
 
2014
ROE
16.6
%
 
13.9
%
ROE, excluding tax adjustments and other items
16.6
%
 
13.5
%

Net income was $62.2 million , or $ 1.39 per diluted share, for the first quarter of 2015 compared to $42.1 million, or $0.90 per diluted share, in 2014. Net income increased $20.1 million compared to the prior year, driven by a positive income contribution from the acquisition of boxcars discussed in more detail in the "Rail North America" section of the MD&A, higher lease rates and asset remarketing, partially offset by higher depreciation and maintenance expense.

Segment Operations

Segment profit is an internal performance measure used by the Chief Executive Officer to assess the performance of each segment in a given period. Segment profit includes all revenues, pretax earnings from affiliates, and net gains on asset dispositions that are attributable to the segments, as well as expenses that management believes are directly associated with the financing, maintenance, and operation of the revenue earning assets. Segment profit excludes selling, general and administrative expenses, income taxes, and certain other amounts not allocated to the segments. These amounts are included in Other.

We allocate debt balances and related interest expense to each segment based upon a predetermined fixed recourse leverage level expressed as a ratio of recourse debt (including off-balance-sheet debt) to equity. The leverage levels are 5:1 for Rail North America, 2:1 for Rail International, 1.5:1 for ASC, and 3:1 for Portfolio Management. We believe that by using this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing costs .


RAIL NORTH AMERICA

Segment Summary

At the end of the first quarter of 2014, we acquired a fleet of more than 18,500 boxcars for approximately $340 million (the "Boxcar Fleet"). At March 31, 2015 , Rail North America's wholly owned fleet consisted of approximately 126,000 cars, including approximately 19,000 boxcars. Fleet utilization, excluding boxcars, was 99.3% at the end of the first quarter of 2015 compared to 99.2% at the end of the prior quarter and 98.5% at March 31, 2014 . Fleet utilization for boxcars was 92.8% at the end of the first quarter of 2015 , compared to 92.7% at the end of the prior quarter and 80.7% at March 31, 2014 as we successfully leased idle cars from the Boxcar Fleet and scrapped older boxcars.

During the first quarter of 2015 , the Lease Price Index on renewals (the “LPI,” see definition below) increased 43.2% , compared to an increase of 39.2% in the prior quarter and 33.9% in the first quarter of 2014. Lease terms on renewals for cars in the LPI averaged 59 months in the current quarter, compared to 67 months in the prior quarter and 62 months in the first quarter of 2014. During the first quarter of 2015 , an average of approximately 106,500 railcars, excluding boxcars, were on lease, compared to 106,600 in the prior quarter and 105,300 in the first quarter of 2014.

For the remainder of 2015 , we expect the LPI renewal rate change to be in the mid-30% range; however, the pricing environment for some car types is uncertain which may create some volatility in the LPI measure. In addition, new railcar order activity has declined as our customers assess the impact of low crude oil prices and impending tank car regulations on their businesses. Leases for approximately 14,000 railcars in our term lease fleet and approximately 4,300 boxcars will expire over the balance of the year.


17

The following table shows Rail North America's segment results (in millions):

2015

2014
Revenues





Lease revenue
$
228.5


$
194.9

Other revenue
14.7


14.6

   Total Revenues
243.2


209.5

Expenses
 



Maintenance expense
69.2

 
61.4

Depreciation expense
52.3


41.5

Operating lease expense
20.7


26.9

Other operating expense
5.5


4.8

   Total Expenses
147.7


134.6

Other Income (Expense)
 



Net gain on asset dispositions
36.8

 
24.8

Interest expense, net
(24.5
)

(24.6
)
Other expense
(2.2
)
 
(3.4
)
Share of affiliates' earnings (pretax)
0.2


3.3

Segment Profit    
$
105.8


$
75.0

 
 
 
 
Investment Volume
$
129.8


$
396.0


The following table shows the components of Rail North America's lease revenue (in millions):
 
2015
 
2014
Railcars (excluding boxcars)
$
198.4

 
$
185.4

Boxcars
21.1

 
1.3

Locomotives
9.0

 
8.2

 
$
228.5

 
$
194.9


Lease Price Index

Our 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.

18


Rail North America Fleet Data

The following table shows fleet activity for Rail North America's railcars, excluding boxcars:
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Beginning balance
107,004

 
106,804

 
106,894

 
107,387

 
107,343

Cars added
486

 
1,174

 
958

 
835

 
1,013

Cars scrapped
(368
)
 
(387
)
 
(440
)
 
(202
)
 
(261
)
Cars sold
(318
)
 
(697
)
 
(25
)
 
(677
)
 
(1,146
)
Ending balance
106,804

 
106,894

 
107,387

 
107,343

 
106,949

Utilization rate at quarter end
98.5
%
 
98.6
%
 
98.8
%
 
99.2
%
 
99.3
%
Average active railcars
105,287

 
105,366

 
105,755

 
106,569

 
106,541



19


The following table shows fleet activity for Rail North America's boxcars:
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Ending balance
19,630

 
19,254

 
19,146

 
19,021

 
18,912

Utilization
80.7
%
 
90.7
%
 
91.3
%
 
92.7
%
 
92.8
%

The following table shows fleet activity for Rail North America's locomotives:
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Beginning balance
595

 
600

 
602

 
603

 
603

Locomotives added
6

 
9

 
1

 
7

 
7

Locomotives scrapped or sold
(1
)
 
(7
)
 
—

 
(7
)
 
(2
)
Ending balance
600

 
602

 
603

 
603

 
608

Utilization rate at quarter end
98.8
%
 
99.2
%
 
97.7
%
 
99.3
%
 
98.8
%
Average active locomotives
586

 
594

 
591

 
592

 
599


Comparison of the First Three Months of 2015 to the First Three Months of 2014

Segment Profit

Segment profit was $105.8 million, compared to $75.0 million in the prior year. The increase was driven by a positive contribution from the Boxcar Fleet, higher lease rates, additional cars on lease and an increase in asset remarketing income, partially offset by higher depreciation and maintenance expense.
 

20

Revenues

Lease revenue increased $33.6 million in 2015, primarily due to additional revenue from the Boxcar Fleet and additional cars on lease, combined with higher lease rates across the non-boxcar fleet.

Expenses

Maintenance expense increased $7.8 million in 2015, primarily due to additional costs attributable to the Boxcar Fleet. Depreciation expense increased $10.8 million, largely due to depreciation on new investments, including the Boxcar Fleet. Operating lease expense decreased $6.2 million, resulting from the purchase of railcars previously on operating leases in each year. Other operating expense increased $0.7 million, primarily due to higher storage and switching costs related to the Boxcar Fleet.

Other Income (Expense)

Net gain on asset dispositions increased $12.0 million in 2015, driven by a higher number of cars sold partially offset by lower scrapping gains. Other expense decreased $1.2 million, primarily due to lower termination costs associated with the early buyouts of operating leases, which occurred in each period, compared to the prior year. Share of affiliates' earnings decreased $3.1 million, primarily due to gains on dispositions of railcars at our Southern Capital affiliate in the prior year.

Investment Volume

During 2015 , investment volume was $129.8 million compared to $396.0 million in 2014. We acquired 796 newly built railcars and 143 railcars purchased in the secondary market in the first quarter of 2015 , compared to 464 newly built railcars in the first quarter of 2014. Additionally, the first quarter of 2014 investments included the purchase of the Boxcar Fleet of approximately 18,500 boxcars.

North American Rail Regulatory Matters

On July 23, 2014, the Pipeline and Hazardous Materials Safety Administration of the US Department of Transportation (“PHMSA”) issued a Notice of Proposed Rulemaking (the “NPRM”) intended to improve the safety of trains that transport large volumes of flammable liquids, primarily crude and ethanol. In addition to proposed rail operating requirements and standards for the classification of mined gases and liquids, the NPRM proposed new design standards for tank cars operating in “high hazard flammable trains” (“HHFT”), which are trains that include 20 or more carloads of any type of flammable liquid. Under the proposed rules, newly built tank cars for use in HHFT service would have to comply with the new standards beginning on October 1, 2015. The NPRM requested public comments on three different options for the new tank car standards, which vary primarily based on differences in tank thickness, braking systems, and design of top fitting protection. The NPRM also proposed standards for modifications to existing tank cars in HHFT service intended to ensure that their performance meets the same standards applicable to newly built cars. Under the NPRM, existing tank cars in HHFT service would have to be modified or removed from that service between October, 2017, and October, 2020, depending on the type of commodity carried by such cars. The NPRM was published in the Federal Register on August 1, 2014, and the public comment period expired on September 30, 2014. GATX participated in the rulemaking process through the Railway Supply Institute, a rail industry trade association which submitted comments on the NPRM. While we cannot predict the content of the final rules, the US Department of Transportation is projecting that final rules will be issued in the second quarter of 2015.

On July 2, 2014, Transport Canada ("TC") adopted regulations requiring that newly built tank cars ordered on or after July 15, 2014, and used to transport certain dangerous goods, including all types of crude oil and ethanol, comply with the design standards voluntarily adopted by the rail industry in 2011. In addition, on July 18, 2014, TC announced it had commenced a review of the design standards for newly built cars used to transport flammable liquids in Canada, and on March 11, 2015, TC issued an update providing additional information about a new design standard under consideration by TC.  The new standard would require tank cars utilized in flammable liquids service to be manufactured with thicker steel tanks, exterior jackets, full height head shields, top fitting protection, and improved bottom outlet valves and thermal protection systems. Following adoption of final rules, TC would require existing tank cars used to transport flammable liquids to be retrofitted within a period ranging from 2 to 10 years depending on the type of tank car and the commodity being carried. The new standard will not be effective until TC adopts new rules, and TC indicated that it continues to work in close collaboration with US regulators to develop tank car design requirements for North America. TC is expected to issue its final rule during the second quarter of 2015.


21

We are currently awaiting the promulgation of final regulations to evaluate their potential impact on our tank car fleet utilized in flammable liquids service. We have a fleet of approximately 126,000 railcars in North America, including approximately 13,700 tank cars currently used to transport flammable liquids, of which approximately 4,900 are moving crude oil and ethanol. Until PHMSA and TC release final rules establishing the new tank car standards, we will be unable to assess how any new regulations will impact GATX or what changes may be required to our tank cars utilized in flammable liquids service, including the number of cars that could be repurposed or retired and the scope and cost of any retrofit program.

RAIL INTERNATIONAL

Segment Summary
 
Despite the unsettled European economy, Rail International's performance was consistent with our expectations and we continue to invest in new railcars. Railcar utilization for our wholly owned European operations ("GATX Rail Europe" or "GRE") was 95.9% at the end of the first quarter of 2015 compared to 95.9% at the end of the prior quarter and 96.0% at March 31, 2014 .

The following table shows Rail International's segment results (in millions):
 
2015
 
2014
Revenues
 
 
 
Lease revenue
$
42.1

 
$
47.2

Other revenue
1.9

 
2.0

   Total Revenues
44.0

 
49.2

Expenses
 
 
 
Maintenance expense
8.9

 
11.5

Depreciation expense
10.7

 
11.7

Other operating expense
0.9

 
1.4

   Total Expenses
20.5

 
24.6

Other Income (Expense)
 
 
 
Net gain on asset dispositions
4.9

 
2.4

Interest expense, net
(6.5
)
 
(6.2
)
Share of affiliates' earnings (pretax)
(0.1
)
 
(0.1
)
Segment Profit    
$
21.8

 
$
20.7

 
 
 
 
Investment Volume
$
41.4

 
$
39.3


The following table shows fleet activity for GRE railcars:
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Beginning balance
21,836

 
21,591

 
21,684

 
21,960

 
22,451

Cars added
125

 
409

 
481

 
657

 
249

Cars scrapped or sold
(370
)
 
(316
)
 
(205
)
 
(166
)
 
(203
)
Ending balance
21,591

 
21,684

 
21,960

 
22,451

 
22,497

Utilization rate at quarter end
96.0
%
 
95.6
%
 
95.1
%
 
95.9
%
 
95.9
%
Average active railcars
20,913

 
20,706

 
20,833

 
21,111

 
21,479



22

\

Comparison of the First Three Months of 2015 to the First Three Months of 2014

Foreign Currency

Rail International's operations are impacted by fluctuations in the exchange rates of the foreign currencies in which it conducts business, primarily the euro. In the first quarter of 2015, a weaker euro negatively impacted lease revenue by approximately $8.4 million and segment profit by approximately $0.7 million compared to the first quarter of 2014.

Segment Profit

Segment profit was $21.8 million , compared to $20.7 million in the prior year and was positively impacted by higher lease revenue from more cars on lease, lower maintenance expense and a gain on the sale of a workshop in the current year. These favorable items were partially offset by the negative effects of foreign exchange.

Revenues

Lease revenue decreased $5.1 million in 2015, primarily due to the effects of a weaker euro, as noted above. The decrease was partially offset by additional cars on lease in the current year.


23

Expenses

Maintenance expense decreased $2.6 million in 2015, primarily due to a lower unit cost for railcar revisions and the effects of foreign exchange. Depreciation expense decreased $1.0 million, largely due to the effects of foreign exchange partially offset by the impact of new cars added to the fleet. Other operating expense decreased $0.5 million primarily due to lower switching and freight expenses.

Other Income (Expense)

Net gain on asset dispositions increased $2.5 million in 2015, primarily due to a gain on the sale of a workshop, partially offset by fewer railcars scrapped in the current quarter.

Investment Volume

During 2015, investment volume, which includes progress payments on scheduled deliveries of new railcars and car improvements, was $41.4 million compared to $39.3 million in 2014. During 2015, we took delivery of 249 railcars at GRE, 186 railcars at Rail India and 50 railcars at Rail Russia, compared to 48 railcars at GRE in 2014.


ASC

Segment Summary

Our fleet is largely inactive for first three months of each year due to winter conditions on the Great Lakes; the first quarter freight volume is largely attributable to prior year commitments completed in January of each period. During the first quarter of 2015, we carried 0.8 million net tons of freight compared to 0.4 million net tons during the first quarter of 2014. In 2015, extended winter weather conditions on the Great Lakes resulted in significant ice coverage and thickness, consistent with 2014. In an effort to avoid operational inefficiencies, ASC delayed the deployment of its vessels until mid-April. ASC's 2015 operating activity relates to January only, as no vessels were in service at the end of the quarter, compared to two vessels in the prior year period.

The following table shows ASC’s segment results (in millions):
 
2015
 
2014
Revenues
 
 
 
Lease revenue
$
1.0

 
$
1.1

Marine operating revenue
7.0

 
3.1

   Total Revenues
8.0

 
4.2

Expenses
 
 
 
Maintenance expense
0.2

 
0.2

Marine operating expense
6.9

 
3.4

   Total Expenses
7.1

 
3.6

Other Income (Expense)
 
 
 
Net loss on asset dispositions
—

 
(0.4
)
Interest expense, net
(1.3
)
 
(1.4
)
Segment Loss
$
(0.4
)
 
$
(1.2
)
 
 
 
 
Investment Volume
$
9.3

 
$
8.3



24

Comparison of the First Three Months of 2015 to the First Three Months of 2014

Segment Loss

Segment loss was $0.4 million, compared to a loss of $1.2 million in the prior period. Severe ice coverage on the Great Lakes negatively impacted results in each period.

Revenues

Marine operating revenue increased $3.9 million in 2015, primarily due to higher volume and a favorable mix of commodities carried.

Expenses

Marine operating expense increased $3.5 million in 2015, largely driven by more operating days and related costs. Inefficiencies associated with extended winter conditions negatively impacted operations in both periods.

Other Income (Expense)

Net loss on asset dispositions of $0.4 million in 2014 was attributable to the ultimate disposal of an older, idle vessel.

Investment Volume

ASC's investments in each period consisted of structural and mechanical upgrades to our vessels.


PORTFOLIO MANAGEMENT

Segment Summary

Portfolio Management's total asset base was $ 794.4 million at March 31, 2015 , compared to $813.3 million at December 31, 2014, and $854.6 million at March 31, 2014 .

The Rolls-Royce & Partners Finance companies (collectively the "RRPF affiliates") reported solid results, which reflect continued strong demand for spare aircraft engines. The RRPF affiliates contributed $11.6 million to segment profit for the first quarter of 2015, compared to $10.5 million in 2014.

The outlook for the inland marine market continues to be favorable for 2015, but an increase in industry-wide available fleet capacity may pressure barge rates later in 2015. In addition, the ocean-going vessels have experienced some improvement in their markets and contributed higher income to our segment profit for the first quarter of 2015 compared to 2014.



25

The following table shows Portfolio Management's segment results (in millions):
 
2015
 
2014
Revenues
 
 
 
Lease revenue
$
6.7

 
$
7.4

Marine operating revenue
17.2

 
14.6

Other revenue
0.6

 
1.7

   Total Revenues
24.5

 
23.7

Expenses
 
 
 
Marine operating expense
12.0

 
11.6

Depreciation expense
5.5

 
5.5

Other operating expense
0.9

 
0.4

   Total Expenses
18.4

 
17.5

Other Income (Expense)
 
 
 
Net gain on asset dispositions
3.6

 
1.3

Interest expense, net
(5.2
)
 
(6.8
)
Other income
—

 
0.3

Share of affiliates' earnings (pretax)
11.4

 
10.9

Segment Profit    
$
15.9

 
$
11.9

 
 
 
 
Investment Volume    
$
—

 
$
—

The following table shows the approximate net book values of Portfolio Management's assets (in millions):
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Net book value of owned assets
$
529.9

 
$
523.0

 
$
488.5

 
$
474.6

 
$
450.2

Affiliate investments
324.7

 
336.3

 
327.9

 
338.7

 
344.2

Net book value of managed portfolio
110.5

 
85.1

 
77.4

 
64.1

 
107.8

Comparison of the First Three Months of 2015 to the First Three Months of 2014

Segment Profit

Segment profit was $ 15.9 million , compared to $11.9 million in the prior year. This increase was attributable to higher income from marine operations and higher net gain on asset dispositions.

Revenues

Lease revenue decreased $0.7 million in 2015, primarily due to the sale of leased assets. Marine operating revenue increased $2.6 million, largely due to higher revenue from each of the inland marine and ocean-going fleets. Other revenue decreased $1.1 million, primarily due to lower distributions from investment funds and lower interest income due to the early payoff of loans in the prior year.

Expenses
    
Marine operating expense increased $0.4 million in 2015, primarily driven by higher expenses for inland marine operations partially offset by an insurance claim reimbursement in the current year related to a vessel.


26

Other Income (Expense)

Net gain on asset dispositions increased $2.3 million in 2015, primarily due to the sale of an inland marine asset in the current year. Net interest expense decreased $1.6 million as a result of lower average debt balance and lower average rates.

Share of affiliates' earnings increased $0.5 million in 2015, primarily due to improved operating results and gains on engine disposals at the RRPF affiliates in the current year partially offset by the absence of earnings from two joint ventures that were sold in 2014.

Investment Volume

There were no investments in the first quarter of 2015 and 2014.

OTHER
Other comprises selling, general and administrative expense (“SG&A”), unallocated interest expense, and miscellaneous income and expense not directly associated with the reporting segments and eliminations.

The following table shows components of Other for the three months ended March 31 (in millions):
 
2015
 
2014
Selling, general and administrative expense
$
45.7

 
$
42.7

Unallocated interest expense, net
3.4

 
3.0

Other expense (including eliminations)
1.8

 
0.3


SG&A, Unallocated Interest and Other

SG&A increased $3.0 million in 2015 compared to the prior year, primarily due to higher salaries and pension expense. Unallocated interest expense (the difference between external interest expense and interest expense allocated to the reporting segments in accordance with assigned leverage targets) in any period is affected by our consolidated leverage position as well as the timing of debt issuances and investing activities. Other expense and eliminations increased $1.5 million , largely due to higher costs in the current year related to the prepayment of debt and the impact of foreign exchange on a foreign pension plan.

Consolidated Income Taxes

See "Note 7. Income Taxes" in Part I, Item 1 of this Form 10-Q.

CASH FLOW AND LIQUIDITY

We generate a significant amount of cash from operating activities and from our investment portfolio. We also access domestic and international capital markets by issuing unsecured or secured debt and commercial paper. We use these sources of cash, along with our available cash balances, to fulfill our debt, lease, and dividend obligations and to fund portfolio investments and capital additions. We primarily use cash from operations and commercial paper issuances to fund daily operations.

The timing of asset dispositions and changes in working capital impacts cash flows from operations and portfolio proceeds. As a result, these cash flow components may vary materially from quarter to quarter and year to year. As of March 31, 2015 , we had an unrestricted cash balance of $351.4 million , of which approximately $211.0 million was used in April to fund a debt maturity and to prepay a loan, including related accrued interest for both.


27

The following table shows our principal sources and uses of cash for the three months ended March 31 (in millions):
 
2015
 
2014
Principal sources of cash
 
 
 
Net cash provided by operating activities
$
55.8

 
$
51.4

Portfolio proceeds
176.8

 
66.6

Other asset sales
8.6

 
7.0

Proceeds from issuance of debt, commercial paper, and credit facilities
667.7

 
857.0

 
$
908.9

 
$
982.0

Principal uses of cash
 
 
 
Portfolio investments and capital additions
$
(180.9
)
 
$
(445.5
)
Repayments of debt, commercial paper, and credit facilities
(450.2
)
 
(307.1
)
Purchases of leased-in assets
(99.5
)
 
(150.5
)
Payments on capital lease obligations
(1.3
)
 
(1.3
)
Cash dividends
(18.0
)
 
(16.9
)
Stock repurchases
(25.3
)
 
—

 
$
(775.2
)
 
$
(921.3
)

Net cash provided by operating activities of $ 55.8 million increased $4.4 million compared to 2014. The increase was driven by higher lease revenue and marine operating income partially offset by a decrease in distributions from joint ventures, increased maintenance expense and other net changes in certain working capital items.
Portfolio proceeds for the first three months of 2015 of $176.8 million increased by $110.2 million compared to 2014, driven by a loan repayment and higher asset sales. In January 2015, Ahaus Alstätter Eisenbahn Cargo AG (“AAE”) repaid its outstanding loan in the amount of €67.5 million ($76.4 million).
Proceeds from the issuance of debt for the first quarter of 2015 were $ 667.7 million (net of hedges and debt issuance costs). In North America, $650 million of unsecured debt was issued, which included $100 million of 2.60% senior notes due in 2020, $300 million of 3.25% senior notes due in 2025, and $250 million of 4.50% senior notes due in 2045. In Europe, $34.9 million of unsecured debt was issued. Debt repayments of $ 450.2 million for the first three months of 2015 were $143.1 million higher than prior year and included debt repayments of $129.0 million in Europe. Each year included scheduled maturities in addition to the early retirement of higher cost debt.
Portfolio investments and capital additions primarily consist of purchases of operating assets, investments in affiliates, loans, and capitalized asset improvements. See individual segment discussions for further information on investment volume. In the first quarter of 2014, we acquired a fleet of approximately 18,500 boxcars for $330.7 million.
In the first quarter of 2014, our board of directors authorized a $250 million share repurchase program. As of March 31, 2015, 2.4 million shares had been acquired for $151.6 million and $98.4 million remains available under the repurchase authorization.


28

Short-Term Borrowings
The following table provides additional information regarding our short-term borrowings for the three months ended March 31, 2015 :
 
North
America (1)
 
Europe (2)
Balance as of March 31 (in millions)
$
—

 
$
2.8

Weighted average interest rate
—
%
 
1.4
%
Euro/Dollar exchange rate
n/a

 
1.07

 
 
 
 
Average amount outstanding during the quarter (in millions)
$
21.9

 
$
3.9

Weighted average interest rate
0.5
%
 
1.3
%
Average Euro/Dollar exchange rate
n/a

 
1.13

 
 
 
 
Maximum month-end amount outstanding during the quarter (in millions)
$
35.0

 
$
3.8

Applicable month-end Euro/Dollar exchange rate
n/a

 
1.13

_________
(1) Short-term borrowings in North America consist solely of commercial paper issued in the US.
(2) Short-term borrowings in Europe are comprised of borrowings under bank credit facilities.
Revolving Credit Facility
As of March 31, 2015 , we had a $575 million 5-year unsecured credit facility in the US that matures on April 30, 2019. As of March 31, 2015, the full $575 million was available under the facility.
Restrictive Covenants
Our $575 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 limitation on liens provisions that limit 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.
The loan agreements for our European rail subsidiaries (collectively, "GRE") also contain restrictive covenants, including leverage and cash flow covenants specific to those subsidiaries, restrictions on making loans, and limitations on the ability of those subsidiaries to repay loans or to distribute capital to certain related parties (including GATX, the US parent company). These covenants effectively limit GRE's ability to transfer funds to us.
We do not anticipate any covenant violations nor do we anticipate that any of these covenants will restrict our operations or our ability to obtain additional financing. At March 31, 2015 , we were in compliance with all covenants and conditions of all of our credit agreements.
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 ratings outlook, as determined by rating agencies. As of March 31, 2015 , our long-term unsecured debt was rated BBB by Standard & Poor's and Baa2 by Moody’s Investors 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.

29

Contractual Commitments
The following table shows our contractual commitments, including debt principal amounts, lease payments, and portfolio investments at March 31, 2015 , (in millions):
 
Payments Due by Period
 
Total
 
2015 (1)
 
2016
 
2017
 
2018
 
2019
 
Thereafter
Recourse debt
$
4,452.0

 
$
228.2

 
$
594.0

 
$
430.6

 
$
513.5

 
$
567.9

 
$
2,117.8

Nonrecourse debt
13.7

 
6.8

 
6.9

 
—

 
—

 
—

 
—

Commercial paper and credit facilities
2.8

 
2.8

 
—

 
—

 
—

 
—

 
—

Capital lease obligations
5.4

 
1.5

 
2.7

 
1.2

 
—

 
—

 
—

Operating leases — recourse
707.8

 
40.7

 
90.3

 
95.3

 
86.7

 
82.7

 
312.1

Operating leases — nonrecourse
63.2

 
8.2

 
8.1

 
9.5

 
9.0

 
9.7

 
18.7

Portfolio investments (2)
1,871.6

 
342.5

 
476.2

 
347.0

 
313.8

 
392.1

 
—

 
$
7,116.5

 
$
630.7

 
$
1,178.2

 
$
883.6

 
$
923.0

 
$
1,052.4

 
$
2,448.6

_________
(1) For remainder of the year.
(2) 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. Amount shown for 2017 also includes $24.0 million related to an option we exercised to purchase a vessel that is currently on lease.

In 2014, we entered into a long-term supply agreement with Trinity Rail Group, LLC (“Trinity”), a subsidiary of Trinity Industries, Inc., to take effect upon the scheduled expiration of the current railcar supply agreement in 2016. Under terms of the agreement, we will purchase up to a total of 8,950 newly built railcars over a four-year period from March, 2016 through March, 2020. We may order both tank and freight cars; however, we expect that the majority of the order will be for tank cars. Except to the extent the parties otherwise agree, railcar pricing will be on an agreed upon or cost-plus basis subject to certain specified adjustments and surcharges throughout the term of the agreement. In addition, in January, 2017, either party may initiate a review of the cost-plus basis pricing if it is not reflective of then-current market prices. If the parties cannot agree on revised cost-plus pricing (or otherwise agree that no changes are necessary), either party may, at its election, deliver to the other party a notice of its intent to terminate, and in such case, the agreement will automatically terminate 30 days thereafter unless the non-terminating party agrees to a specified revised margin as set forth in the agreement.

CRITICAL ACCOUNTING POLICIES

There have been no changes to our critical accounting policies during the three months ended March 31, 2015 . Refer to our Annual Report on Form 10-K for the year ended December 31, 2014, for a summary of our policies.


30

NON-GAAP FINANCIAL MEASURES
    
We compute some 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. We include these non-GAAP financial measures to provide additional information and insight into our operating results and financial position. We use these measures in analyzing our financial performance from period to period and when making compensation decisions.
Glossary of Key Terms
•
Non-GAAP financial measures — Numerical or percentage-based measures of a company’s historical performance, financial position, or liquidity calculated using a component different from that presented in the financial statements as prepared in accordance with GAAP.
•
Net income excluding tax adjustments and other items — Net income excluding certain items that we believe are not necessarily related to our ongoing business activities.
•
Off-balance-sheet assets — Assets, primarily railcars, that are financed with operating leases and therefore not recorded on the balance sheet. We estimate the off-balance-sheet asset amount by calculating the present value of committed future operating lease payments using the interest rate implicit in each lease.
•
On-balance-sheet assets — Total assets reported on the balance sheet.
•
Return on equity — Net income divided by average shareholders’ equity.
•
Return on equity excluding tax adjustments and other items — Net income excluding tax adjustments and other items divided by average shareholders’ equity.

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

Balance Sheet Measures

We disclose total on- and off-balance-sheet assets because a portion of our North America railcar fleet has been financed through sale-leasebacks that are accounted for as operating leases and the assets are not recorded on the balance sheet. Additionally, ASC utilizes a tug and barge unit that is accounted for as an operating lease and the assets are not recorded on the balance sheet. We believe this information provides investors with a better representation of the assets deployed in our businesses.

The following table shows total on- and off-balance-sheet assets (in millions):
 
March 31
2014
 
June 30
2014
 
September 30
2014
 
December 31
2014
 
March 31
2015
Consolidated on-balance-sheet assets
$
7,119.0

 
$
6,921.1

 
$
6,816.3

 
$
6,937.5

 
$
7,056.4

Off-balance-sheet assets:
 
 
 
 
 
 
 
 
 
Rail North America
680.8

 
683.2

 
602.9

 
606.1

 
566.1

ASC
15.3

 
14.1

 
12.9

 
11.7

 
10.5

Total On- and Off-Balance-Sheet Assets
$
7,815.1

 
$
7,618.4

 
$
7,432.1

 
$
7,555.3

 
$
7,633.0

Shareholders’ Equity
$
1,423.2

 
$
1,374.4

 
$
1,331.2

 
$
1,314.0

 
$
1,282.5


31


Net Income Measures

We report net income excluding certain items that we believe are not necessarily reflective of our ongoing business activities. No such adjustments occurred in the first quarter of 2015 or 2014, however, certain of these adjustments occurred in 2013 and impacted the computation of return on equity for the trailing twelve months earnings as disclosed in this report. The following table shows our net income, excluding tax adjustments and other items, for the trailing twelve months ended March 31 (in millions):
 
2015
 
2014
Net income
$
225.1

 
$
184.3

Adjustments attributable to consolidated income:
 
 
 
GATX income taxes on sale of AAE (1)
—

 
23.2

Foreign tax credit carryforward (1)(2)
—

 
(3.9
)
Adjustments attributable to affiliates' earnings:
 
 
 
Pretax gain on sale of AAE (1)
—

 
(9.3
)
Gains on interest rate swaps at AAE, net of taxes (3)
—

 
(8.2
)
Income tax rate changes (4)
—

 
(7.6
)
Net income excluding tax adjustments and other items
$
225.1

 
$
178.5

________
(1) Aggregate after-tax impact of the AAE sale, including the $3.9 million foreign credit carryforward, was a net loss of $10.0
million.
(2) Represents benefits attributable to the utilization of foreign tax credit carryforwards.
(3) Represents unrealized gains on AAE interest rate swaps.
(4) Deferred tax adjustments due to an enacted statutory rate decrease in the United Kingdom.


32

Item 3. Quantitative and Qualitative Disclosures about Market Risk
Since December 31, 2014, there have been no material changes in our interest rate and foreign currency exposures or types of derivative instruments used to hedge these exposures. For a discussion of our exposure to market risk, refer to "Item 7A. Quantitative and Qualitative Disclosure about Market Risk" of our Annual Report on Form 10-K f or the year ended December 31, 2014.
Item 4. Controls and Procedures
We have conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)), with the participation of our Chief Executive Officer and Chief Financial Officer. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective.
No change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended March 31, 2015 , that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

33

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Information concerning litigation and other contingencies is described in "Note 11 . Legal Proceedings and Other Contingencies " in Part I, Item 1 of this Form 10-Q and is incorporated herein by reference.

Item 1A.   Risk Factors

Since December 31, 2014, there have been no material changes in our risk factors. For a discussion of our risk factors, refer to "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) On January 23, 2014, our board of directors authorized a $250 million share repurchase program. The following is a summary of stock repurchases for the quarter ended March 31, 2015 . As of March 31, 2015 , $98.4 million was available under the repurchase authorization.
Issuer Purchases of Equity Securities
 
 
(a)
 
(b)
 
(c)
 
(d)
Total
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
February 1, 2015 - February 28, 2015
 
185,771

 
$60.81
 
185,771

 
$114.1 million
March 1, 2015 - March 31, 2015
 
266,349

 
$59.03
 
266,349

 
$98.4 million
Total
 
452,120

 
$59.76
 
452,120

 
 
_________
(1) Does not include commissions paid to repurchase shares.

Item 6.   Exhibits

Exhibits:
Reference is made to the exhibit index which is included herewith and is incorporated by reference hereto.


34

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
GATX CORPORATION
(Registrant)
 
/s/ Robert C. Lyons
Robert C. Lyons
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer)


Date: April 28, 2015


35

EXHIBIT INDEX
 
Exhibit
Number
  
Exhibit Description
 
 
 
 
  
Filed with this Report :
 
 
 
10.1
 
Form of Agreement for Employment Following a Change of Control between GATX Corporation and James M. Conniff (dated as of February 1, 2015) and Thomas A. Ellman (dated as of January 1, 2014)*
 
 
 
10.2
 
Form of Agreement for Employment Following a Change of Control between GATX Corporation and Eric D. Harkness (dated as of February 1, 2015), Jeffery R. Young (dated as of February 1, 2015) and Paul F. Titterton (dated as of January 1, 2014)*
 
 
 
31A.
  
Certification Pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a) (CEO Certification).
 
 
 
31B.
  
Certification Pursuant to Exchange Act Rule 13a-14(a) and Rule 15d-14(a) (CFO Certification).
 
 
 
32.
  
Certification Pursuant to 18 U.S.C. Section 1350 (CEO and CFO Certification).
 
 
 
101.
  
The following materials from GATX Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, (ii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, and (iv) Notes to the Consolidated Financial Statements.
__________

(*) Compensatory Plans or Arrangements


36
AGREEMENT FOR EMPLOYMENT FOLLOWING A CHANGE OF CONTROL AGREEMENT by and between GATX Corporation, a New York corporation (the "Company") and ____________ (the "Executive") dated as of the ___ day of ___________ , 20__ [Note: Insert date agreement is signed]. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs, and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on ___________ ___, 20__ [Note: Insert date agreement is signed], and ending on the second anniversary of the date thereof; provided, however, that commencing on January 1, 20__ [Note: Insert the first January 1 following date agreement is signed], and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the

 
2 then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition (including, without limitation, a disposition occurring by merger, consolidation, sale, or other similar transactions of one or more subsidiaries of the Company) of all or substantially all of the assets of the Company (a "Business Combination"), in each case unless, following such Business Combination (other than a Business Combination of the type referred to in the first parenthetical of this subsection (c) which results in the disposition of all or substantially all of the assets of the Company), (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) Consummation of a reorganization, merger or consolidation or sale or other disposition of any subsidiary or of all or substantially all of the assets of any subsidiary of the Company or a disposition (in a single transaction or series of integrated transactions) of all or

 
3 substantially all of the assets of an operating segment of the Company as identified in the financial statements included in the Company’s most recent Annual Report on Form 10-K (each a “Business Segment”) that is, in either case, the primary employer of the Executive or to which the Executive’s responsibilities primarily relate immediately prior thereto, and which does not constitute a Business Combination as defined in Section 2(c), unless immediately thereafter the Company, either directly or indirectly, owns (i) at least 50% of the voting stock of any such subsidiary disposed of or, (ii) in the case of the disposition of all or substantially all of the assets of a subsidiary or Business Segment, at least 50% of both the voting power over and the equity in any entity holding title to such assets. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned by or to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its Affiliates during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than twelve months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “Affiliates” means all persons with whom the Company is considered to be a single employer under section

 
4 414(b) of the Internal Revenue Code (the “Code”) and all persons with whom the Company would be considered a single employer under section 414(c) of the Code. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash that is not less than the Executive’s target level of bonus for the year in which the Change of Control occurs. Each such Annual Bonus shall be paid no later than the 15th day of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded. (iii) Long-Term Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all long-term incentive, stock compensation, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with long-term incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), stock compensation opportunities, savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its Affiliates for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliates. (iv) Welfare Benefits. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under the plans, practices, policies and programs provided by the Company and its Affiliates that provide Welfare Benefits to the extent applicable generally to other peer executives of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliates. The term “Welfare Benefits” means medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance benefits. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates. (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, in accordance with the most favorable plans, practices, programs and policies of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates.

 
5 (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its Affiliates at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its Affiliates. (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its Affiliates as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates. 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), the Company may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment no sooner than 30 days following such notice. In such event, the Executive's employment with the Company shall terminate effective on the date specified in such notice (the "Disability Effective Date"), provided that the Executive shall not have returned to full-time performance of the Executive's duties prior thereto. For purposes of this Agreement, "Disability" shall mean any disability that (a) entitles the Executive to disability income benefits under the GATX Long Term Disability Income Plan as in effect on the day prior to the Effective Date, and (b) prevents the Executive, for the duration of the Employment Period, from engaging in the same or comparable type of employment as that in which the Executive was engaged on the day prior to the Effective Date. (b) Cause. The Company may terminate the Executive's employment during the Employment Period only for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions or concurrence of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best

 
6 interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence of one or more of the following conditions without the consent of the Executive: (i) A material diminution in the Executive’s base compensation, compared with the base compensation required to be provided to the Executive in accordance with Section 4(b). (ii) A material diminution in the Executive’s authority, duties, or responsibilities, compared with the authority, duties, and responsibilities of the Executive provided in Section 4(a). (iii) The Executive is required to report to a supervisor with materially less authority, duties, or responsibilities than the authority, duties, and responsibilities of the supervisor who had the greatest such authority, duties, and responsibilities at the time the Executive was required to report to such supervisor during the 120-day period immediately preceding the Effective Date. (iv) A material diminution in the budget over which the Executive retains authority, compared with the most significant budget over which the Executive had authority at any time during the 120-day period immediately preceding the Effective Date. (v) A material change in the geographic location at which the Executive must perform the services. (vi) Any other action or inaction by the Company that constitutes a material breach of this Agreement. If (I) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time (not more than 90 days) after the Executive has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Executive believes constitute Good Reason; (II) the Company fails to notify the Executive of the Company's intended method of correction within a reasonable period of time (not less than 30 days) after the Company receives the notice, or the Company fails to correct the circumstances within a reasonable period of time after such notice (except that no such opportunity to correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph (v) above, relating to relocation); and (III) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances, or within a reasonable time after the Company fails to correct such circumstances (provided that in no event may such termination occur more than two

 
7 years after the initial existence of the condition constituting Good Reason); then the Executive shall be considered to have terminated for Good Reason. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. Notwithstanding the foregoing, references in the Agreement to the Executive's Date of Termination, and the Executive’s termination of employment (including references to the Executive's employment termination, and to the Executive terminating employment) shall mean the Executive ceasing to be employed by the Company and its Affiliates, subject to the following: (i) The employment relationship will be deemed to have ended at the time the Executive and his employer reasonably anticipate that the level of bona fide services the Executive would perform for the Company and its Affiliates after such date (whether as an employee or independent contractor, but not as a director) would permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36 month period (or the full period of service to the Company and its Affiliates if the Executive has performed services for the Company and its Affiliates for less than 36 months). In the absence of an expectation that the Executive will perform at the above-described level, the Date of Termination will not be delayed solely by reason of the Executive continuing to be on the Company's and its Affiliates' payroll after such date. (ii) The employment relationship will be treated as continuing intact while the Executive is on a bona fide leave of absence (determined in accordance with Treas. Reg. §1.409A-1(h)). (iii) If, pursuant to Section 11, the Agreement is assumed by a successor, the substitution of the successor for the Company shall not be treated as a termination of employment. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the

 
8 Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: (i) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Executive’s Annual Bonus as defined in Section 4(b)(ii) of the Agreement (annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) three and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Executive’s target bonus under the Company’s Management Incentive Plan, or any comparable bonus plan in which the Executive participates and which has a target bonus generally similar to that in the Company’s Management Incentive Plan (the “Target Bonus”), less amounts, if any, paid to the Executive in accordance with the Company’s severance pay policies; and C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") and any excess or supplemental retirement plan in which the Executive participates (together, the "SERP") (utilizing in each case actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), which the Executive would receive if the Executive's employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the three years is equal to the Annual Base Salary as required by Section 4(b)(i) and plus the Executive’s Target Bonus as described in Section 6(i)(B) for the most recent fiscal year (or other bonus amount considered pensionable under the Retirement Plan), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; D. an amount equal to the present value of the benefits to which the Executive is entitled under the SERP as of the Date of Termination, utilizing (a) as a discount rate the rate of return on 10-year Treasury Securities in effect for the month prior to the month in which the Change of Control occurs, and (b) mortality assumptions based on the Applicable Mortality Table defined in Section 417(e)(3)(A)(1) of the Code; such amount shall be paid on the Executive’s Date of Termination; provided, however, that this paragraph (D) shall be without effect if the Executive has elected to receive distribution of benefits under the SERP in a form other than a lump sum upon the Date of Termination. (ii) for three years after the Executive's Date of Termination, or such longer period as

 
9 may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide the Welfare Benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies providing Welfare Benefits that are described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other Welfare Benefits under another employer provided plan, the medical and other Welfare Benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period. The Company shall continue to make available to the Executive those health, medical, dental, and prescription drug benefits that are Welfare Benefits at the Executive’s own cost until the Executive is eligible for coverage under Medicare; (iii) the Company shall, at a maximum cost of 10% of the Executive’s Annual Base Salary, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; provided that in no event shall the services covered by this paragraph (iii) be provided later than the last day of the second calendar year following the calendar year in which the Date of Termination occurred, with the reimbursement for such expenses to be paid no later than the end of the third calendar year following the calendar year in which the Date of Termination occurred; and (iv) to the extent not otherwise paid or provided pursuant to this Agreement, the Company shall pay or provide to the Executive the Other Benefits that may be due to him in accordance with the terms of the arrangement providing for such amounts or benefits. The term “Other Benefits” shall mean amounts or benefits to the extent that they are required to be provided with respect to the Executive after termination of the Executive’s employment in accordance with the terms of a plan, program, policy, practice, contract, agreement or other arrangement; provided that “Other Benefits” will include only amounts and benefits that would be required to be provided in the absence of this Agreement, except as otherwise expressly provided in paragraphs (b) and (c) below with respect to Other Benefits. Except as otherwise provided in paragraph (iv), in no event shall the Executive be entitled to receive any benefits under this paragraph (a) (including amounts and rights provided under this paragraph (a)) unless the Executive executes a release of claims against the Company and Affiliates prepared by the Company and such release is not revoked. The Executive shall be eligible for benefits under this paragraph (a) only if the release is returned by such time as is established by the Company; provided that to the extent benefits provided pursuant to this paragraph (a) would constitute Deferred Compensation, such benefits shall be paid or provided to the Executive only if the release is returned in time to permit the distribution of such benefits to satisfy the requirements of section 409A of the Code and further provided that to the extent that benefits are intended to satisfy the short-term deferral exception to treatment as Deferred Compensation (as provided in Treas. Reg. §1.409A-1(b)(4)), such benefits shall be paid to the Executive only if the release is returned in time to permit distribution of benefits no later than the deadline for satisfying the requirements applicable to the short-term deferral exception.

 
10 (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and Affiliates to the estates and beneficiaries of peer executives of the Company and such Affiliates under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its Affiliates and their beneficiaries, with such death benefits to be made at the time and otherwise in accordance with the terms specified by such plan, program, policy, or practice. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its Affiliates to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its Affiliates and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (e) Specified Employee. If the Executive is a Specified Employee at the time of termination of employment: (i) Payments of cash benefits under this Agreement that constitute Deferred Compensation may not be paid before the date that is six months after the date of termination of employment or, if earlier, the date of death of the Executive. At the end of the six-month period described in the preceding sentence, amounts that could not be paid by reason of the limitation in this paragraph

 
11 (i) shall be paid on the first day of the seventh month following the date of termination of employment. (ii) The provision of non-cash benefits (including, without limitation, life insurance, if any, that is not treated as a “death benefit” under Treas. Reg. §1.409A-1) that constitute Deferred Compensation will be provided to the Executive during the period ending six months after the date of termination of employment or, if earlier, the date of death of the Executive only if the Executive pays the cost of such coverage to the Company for that six month period; provided that the Executive shall be reimbursed by the Company for the amount of such payment during the seventh month after termination of employment. For purposes of this Agreement, the term “Specified Employee” shall be defined in accordance with Treas. Reg. §1.409A-1(i) and such rules as may be established by the Chief Executive Officer of the Company or his or her delegate from time to time. For purposes of this Agreement, the term “Deferred Compensation” means payments or benefits that would be considered to be provided under a nonqualified deferred compensation plan as that term is defined in Treas. Reg. §1.409A-1. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice (other than those providing severance benefits) provided by the Company or any of its Affiliates and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its Affiliates at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. If, however, following the conclusion of such contest, the court before whom such contest was held determines that under the circumstances it was unjust for the Company to have paid all or any part of the legal fees and expenses of the Executive pursuant to the immediately preceding sentence, the Executive shall repay any such payments to the Company in accordance with the order of the court. (b) The right of the Executive (including the estate of the Executive) to amounts under this Section 8 shall continue during the life of the Executive (and the life of any beneficiary claiming with respect to the Executive by reason of this Section 8). Payment by the Company

 
12 under this Section 8 shall be made promptly after the Executive submits reasonable evidence of his having incurred the amounts subject to payment, provided that the Executive shall be required to provide such evidence no later than October 31 of the calendar year following the year in which such expenses are incurred (or such later date permitted by the Company that is not later than the end of the calendar year following the year in which such expenses are incurred), and shall be paid by the Company not later than the last day of the calendar year following the year in which such expenses are incurred. The foregoing provisions of this Section (b) are intended to conform the payments under this Section 8 to the requirements of Code section 409A, and shall not be construed to permit delay by the Company of payment of amounts due earlier in accordance with in this Section 8. 9. Parachute Payments. If any payment or benefit, Executive would receive from the Company or otherwise (“Payment”), would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s stock awards. No such reduction shall be made in a manner which violates the requirements of Code section 409A. 10. Post-Termination Protections for Company. (a) Confidentiality. The Executive acknowledges that in the course of the Executive’s involvement in the activities of the Company and its Affiliates, the Executive will have access to confidential and proprietary information including, but not limited to, the Company’s business affairs, financial and strategic plans, customers, vendors, finances, methods of operation, proprietary computer programs, business dealings, assets, capabilities, and all other planning, pricing, customer or client lists of the Company and its Affiliates whether written, oral or otherwise. The Executive agrees that, before, on, and after the Effective Date, the Executive shall keep confidential all information, knowledge or data relating to the Company or any of its Affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its Affiliates and which shall have been identified and held by the Company as proprietary and confidential and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During and after termination of the Executive's employment with the Company, the Executive shall not, without the express written consent of the Lead Director of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

 
13 (b) Competition. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, without the express written consent of the Lead Director of the Company be employed by, serve as a consultant to, or otherwise assist or directly or indirectly provide services to a Competitor in any location in the United States. The term "Competitor" means any enterprise (including a person, firm, business, division, or other unit, whether or not incorporated) during any period in which it is engaged in the business of leasing railcar assets. Nothing contained herein will prevent the Executive from engaging in an activity otherwise prohibited by this paragraph (b) for or with respect to any subsidiary, division or affiliate or unit (each, a “Unit”) of an entity if that Unit is not engaged in railcar leasing irrespective of whether another Unit of such entity engages in such competition (as long as the Executive does not engage in prohibited activity for such other Unit). (c) Solicitation of Customers or Suppliers. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, without the express written consent of the Lead Director of the Company call on, service or solicit any party who is then or, during the twelve-month period prior to such solicitation by the Executive was a customer or supplier of the Company or Affiliate, provided that the restriction in this paragraph (c) shall not apply to any activity on behalf of a business that is not a Competitor. (d) Solicitation of Employees. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, solicit, entice, persuade or induce any individual who is employed by the Company or the Affiliates (or was so employed within 90 days prior to the Executive's action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Affiliates, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. (e) Judicial Amendment. It is expressly understood and agreed that although the Executive and the Company consider the restrictions contained in this paragraph 10 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. (f) Equitable Remedies. The Executive acknowledges that the Company would be irreparably injured by a violation of this paragraph 10, and agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of paragraph 10. If a bond is required to be

 
14 posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. (g) Duty of Loyalty. Nothing in this paragraph 10 shall be construed as limiting the Executive's duty of loyalty to the Company, or any other duty the Executive may otherwise have to the Company, while is employed by the Company. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Company agrees that it will not effect the sale or other disposition of all or substantially all of its assets unless either (1) the person or entity acquiring the assets or a substantial portion of the assets shall expressly assume by an instrument in writing all duties and obligations of the Company under this Agreement or (2) the Company shall provide through the establishment of a separate reserve for the payment in full of all amounts that are or may be reasonably expected to become payable to the Executive under this Agreement. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. No amendment, modification, or termination of this Agreement shall be adopted or effective if it would result in accelerated recognition of income or imposition of additional tax under Code section 409A. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive:

 
15 ____________________ ____________________ _____________________ If to the Company: GATX Corporation 222 West Adams Street Chicago, IL 60606-5314 Attention: Executive Vice President, General Counsel & Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(vi) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement.

 
16 IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the Execution Date set forth below. Executive Date GATX CORPORATION By: Its Chairman of the Board Date

 
AGREEMENT FOR EMPLOYMENT FOLLOWING A CHANGE OF CONTROL AGREEMENT by and between GATX Corporation, a New York corporation (the "Company") and ____________ (the "Executive") dated as of the ___ day of ___________ , 20__ [Note: Insert date agreement is signed]. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below). The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs, and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on ___________ ___, 20__ [Note: Insert date agreement is signed], and ending on the second anniversary of the date thereof; provided, however, that commencing on January 1, 20__ [Note: Insert the first January 1 following date agreement is signed], and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the

 
2 then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition (including, without limitation, a disposition occurring by merger, consolidation, sale, or other similar transactions of one or more subsidiaries of the Company) of all or substantially all of the assets of the Company (a "Business Combination"), in each case unless, following such Business Combination (other than a Business Combination of the type referred to in the first parenthetical of this subsection (c) which results in the disposition of all or substantially all of the assets of the Company), (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; or (e) Consummation of a reorganization, merger or consolidation or sale or other disposition of any subsidiary or of all or substantially all of the assets of any subsidiary of the Company or a disposition (in a single transaction or series of integrated transactions) of all or

 
3 substantially all of the assets of an operating segment of the Company as identified in the financial statements included in the Company’s most recent Annual Report on Form 10-K (each a “Business Segment”) that is, in either case, the primary employer of the Executive or to which the Executive’s responsibilities primarily relate immediately prior thereto, and which does not constitute a Business Combination as defined in Section 2(c), unless immediately thereafter the Company, either directly or indirectly, owns (i) at least 50% of the voting stock of any such subsidiary disposed of or, (ii) in the case of the disposition of all or substantially all of the assets of a subsidiary or Business Segment, at least 50% of both the voting power over and the equity in any entity holding title to such assets. 3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned by or to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its Affiliates during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than twelve months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “Affiliates” means all persons with whom the Company is considered to be a single employer under section

 
4 414(b) of the Internal Revenue Code (the “Code”) and all persons with whom the Company would be considered a single employer under section 414(c) of the Code. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash that is not less than the Executive’s target level of bonus for the year in which the Change of Control occurs. Each such Annual Bonus shall be paid no later than the 15th day of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded. (iii) Long-Term Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all long-term incentive, stock compensation, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with long-term incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), stock compensation opportunities, savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its Affiliates for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliates. (iv) Welfare Benefits. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under the plans, practices, policies and programs provided by the Company and its Affiliates that provide Welfare Benefits to the extent applicable generally to other peer executives of the Company and its Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliates. The term “Welfare Benefits” means medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance benefits. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates. (vi) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its Affiliates as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates.

 
5 5. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), the Company may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment no sooner than 30 days following such notice. In such event, the Executive's employment with the Company shall terminate effective on the date specified in such notice (the "Disability Effective Date"), provided that the Executive shall not have returned to full-time performance of the Executive's duties prior thereto. For purposes of this Agreement, "Disability" shall mean any disability that (a) entitles the Executive to disability income benefits under the GATX Long Term Disability Income Plan as in effect on the day prior to the Effective Date, and (b) prevents the Executive, for the duration of the Employment Period, from engaging in the same or comparable type of employment as that in which the Executive was engaged on the day prior to the Effective Date. (b) Cause. The Company may terminate the Executive's employment during the Employment Period only for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions or concurrence of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean the occurrence of one or more of the following conditions without the consent of the Executive:

 
6 (i) A material diminution in the Executive’s base compensation, compared with the base compensation required to be provided to the Executive in accordance with Section 4(b). (ii) A material diminution in the Executive’s authority, duties, or responsibilities, compared with the authority, duties, and responsibilities of the Executive provided in Section 4(a). (iii) The Executive is required to report to a supervisor with materially less authority, duties, or responsibilities than the authority, duties, and responsibilities of the supervisor who had the greatest such authority, duties, and responsibilities at the time the Executive was required to report to such supervisor during the 120-day period immediately preceding the Effective Date. (iv) A material diminution in the budget over which the Executive retains authority, compared with the most significant budget over which the Executive had authority at any time during the 120-day period immediately preceding the Effective Date. (v) A material change in the geographic location at which the Executive must perform the services. (vi) Any other action or inaction by the Company that constitutes a material breach of this Agreement. If (I) the Executive provides written notice to the Company of the occurrence of Good Reason within a reasonable time (not more than 90 days) after the Executive has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Executive believes constitute Good Reason; (II) the Company fails to notify the Executive of the Company's intended method of correction within a reasonable period of time (not less than 30 days) after the Company receives the notice, or the Company fails to correct the circumstances within a reasonable period of time after such notice (except that no such opportunity to correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph (v) above, relating to relocation); and (III) the Executive resigns within a reasonable time after receiving the Company's response, if such notice does not indicate an intention to correct such circumstances, or within a reasonable time after the Company fails to correct such circumstances (provided that in no event may such termination occur more than two years after the initial existence of the condition constituting Good Reason); then the Executive shall be considered to have terminated for Good Reason. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company,

 
7 respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. Notwithstanding the foregoing, references in the Agreement to the Executive's Date of Termination, and the Executive’s termination of employment (including references to the Executive's employment termination, and to the Executive terminating employment) shall mean the Executive ceasing to be employed by the Company and its Affiliates, subject to the following: (i) The employment relationship will be deemed to have ended at the time the Executive and his employer reasonably anticipate that the level of bona fide services the Executive would perform for the Company and its Affiliates after such date (whether as an employee or independent contractor, but not as a director) would permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36 month period (or the full period of service to the Company and its Affiliates if the Executive has performed services for the Company and its Affiliates for less than 36 months). In the absence of an expectation that the Executive will perform at the above-described level, the Date of Termination will not be delayed solely by reason of the Executive continuing to be on the Company's and its Affiliates' payroll after such date. (ii) The employment relationship will be treated as continuing intact while the Executive is on a bona fide leave of absence (determined in accordance with Treas. Reg. §1.409A-1(h)). (iii) If, pursuant to Section 11, the Agreement is assumed by a successor, the substitution of the successor for the Company shall not be treated as a termination of employment. 6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason: (i) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Executive’s Annual Bonus as defined in Section 4(b)(ii) of the Agreement (annualized for any fiscal year consisting of less than twelve full months or during which the Executive was employed for less than twelve full months) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described

 
8 in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) two and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Executive’s target bonus under the Company’s Management Incentive Plan, or any comparable bonus plan in which the Executive participates and which has a target bonus generally similar to that in the Company’s Management Incentive Plan (the “Target Bonus”), less amounts, if any, paid to the Executive in accordance with the Company’s severance pay policies; and C. an amount equal to the excess of (a) the actuarial equivalent of the benefit under the Company's qualified defined benefit retirement plan (the "Retirement Plan") and any excess or supplemental retirement plan in which the Executive participates (together, the "SERP") (utilizing in each case actuarial assumptions no less favorable to the Executive than those in effect under the Company's Retirement Plan immediately prior to the Effective Date), which the Executive would receive if the Executive's employment continued for two years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that the Executive's compensation in each of the two years is equal to the Annual Base Salary as required by Section 4(b)(i) and plus the Executive’s Target Bonus as described in Section 6(i)(B) for the most recent fiscal year (or other bonus amount considered pensionable under the Retirement Plan), over (b) the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination; D. an amount equal to the present value of the benefits to which the Executive is entitled under the SERP as of the Date of Termination, utilizing (a) as a discount rate the rate of return on 10-year Treasury Securities in effect for the month prior to the month in which the Change of Control occurs, and (b) mortality assumptions based on the Applicable Mortality Table defined in Section 417(e)(3)(A)(1) of the Code; such amount shall be paid on the Executive’s Date of Termination; provided, however, that this paragraph (D) shall be without effect if the Executive has elected to receive distribution of benefits under the SERP in a form other than a lump sum upon the Date of Termination. (ii) for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide the Welfare Benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies providing Welfare Benefits that are described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliates and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other Welfare Benefits under another employer provided plan, the medical and other Welfare Benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years

 
9 after the Date of Termination and to have retired on the last day of such period. The Company shall continue to make available to the Executive those health, medical, dental, and prescription drug benefits that are Welfare Benefits at the Executive’s own cost until the Executive is eligible for coverage under Medicare; (iii) the Company shall, at a maximum cost of 10% of the Executive’s Annual Base Salary, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in his sole discretion; provided that in no event shall the services covered by this paragraph (iii) be provided later than the last day of the second calendar year following the calendar year in which the Date of Termination occurred, with the reimbursement for such expenses to be paid no later than the end of the third calendar year following the calendar year in which the Date of Termination occurred; and (iv) to the extent not otherwise paid or provided pursuant to this Agreement, the Company shall pay or provide to the Executive the Other Benefits that may be due to him in accordance with the terms of the arrangement providing for such amounts or benefits. The term “Other Benefits” shall mean amounts or benefits to the extent that they are required to be provided with respect to the Executive after termination of the Executive’s employment in accordance with the terms of a plan, program, policy, practice, contract, agreement or other arrangement; provided that “Other Benefits” will include only amounts and benefits that would be required to be provided in the absence of this Agreement, except as otherwise expressly provided in paragraphs (b) and (c) below with respect to Other Benefits. Except as otherwise provided in paragraph (iv), in no event shall the Executive be entitled to receive any benefits under this paragraph (a) (including amounts and rights provided under this paragraph (a)) unless the Executive executes a release of claims against the Company and Affiliates prepared by the Company and such release is not revoked. The Executive shall be eligible for benefits under this paragraph (a) only if the release is returned by such time as is established by the Company; provided that to the extent benefits provided pursuant to this paragraph (a) would constitute Deferred Compensation, such benefits shall be paid or provided to the Executive only if the release is returned in time to permit the distribution of such benefits to satisfy the requirements of section 409A of the Code and further provided that to the extent that benefits are intended to satisfy the short-term deferral exception to treatment as Deferred Compensation (as provided in Treas. Reg. §1.409A-1(b)(4)), such benefits shall be paid to the Executive only if the release is returned in time to permit distribution of benefits no later than the deadline for satisfying the requirements applicable to the short-term deferral exception. (b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and Affiliates to the estates and beneficiaries of peer executives of the Company and such Affiliates under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the

 
10 Executive's death with respect to other peer executives of the Company and its Affiliates and their beneficiaries, with such death benefits to be made at the time and otherwise in accordance with the terms specified by such plan, program, policy, or practice. (c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its Affiliates to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its Affiliates and their families. (d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. (e) Specified Employee. If the Executive is a Specified Employee at the time of termination of employment: (i) Payments of cash benefits under this Agreement that constitute Deferred Compensation may not be paid before the date that is six months after the date of termination of employment or, if earlier, the date of death of the Executive. At the end of the six-month period described in the preceding sentence, amounts that could not be paid by reason of the limitation in this paragraph (i) shall be paid on the first day of the seventh month following the date of termination of employment. (ii) The provision of non-cash benefits (including, without limitation, life insurance, if any, that is not treated as a “death benefit” under Treas. Reg. §1.409A-1) that constitute Deferred Compensation will be provided to the Executive during the period ending six months after the date of termination of employment or, if earlier, the date of death of the Executive only if the Executive pays the cost of such coverage to the Company for that six month period; provided that the Executive shall be reimbursed by the Company for the amount of such payment during the seventh month after termination of employment. For purposes of this Agreement, the term “Specified Employee” shall be defined in accordance with Treas. Reg. §1.409A-1(i) and such rules as may be established by the Chief Executive Officer of the Company or his or her delegate from time to time. For purposes of this Agreement, the

 
11 term “Deferred Compensation” means payments or benefits that would be considered to be provided under a nonqualified deferred compensation plan as that term is defined in Treas. Reg. §1.409A-1. 7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice (other than those providing severance benefits) provided by the Company or any of its Affiliates and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its Affiliates at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Code. If, however, following the conclusion of such contest, the court before whom such contest was held determines that under the circumstances it was unjust for the Company to have paid all or any part of the legal fees and expenses of the Executive pursuant to the immediately preceding sentence, the Executive shall repay any such payments to the Company in accordance with the order of the court. (b) The right of the Executive (including the estate of the Executive) to amounts under this Section 8 shall continue during the life of the Executive (and the life of any beneficiary claiming with respect to the Executive by reason of this Section 8). Payment by the Company under this Section 8 shall be made promptly after the Executive submits reasonable evidence of his having incurred the amounts subject to payment, provided that the Executive shall be required to provide such evidence no later than October 31 of the calendar year following the year in which such expenses are incurred (or such later date permitted by the Company that is not later than the end of the calendar year following the year in which such expenses are incurred), and shall be paid by the Company not later than the last day of the calendar year following the year in which such expenses are incurred. The foregoing provisions of this Section (b) are intended to conform the payments under this Section 8 to the requirements of Code section 409A, and shall not be construed to permit delay by the Company of payment of amounts due earlier in accordance with in this Section 8. 9. Parachute Payments. If any payment or benefit, Executive would receive from the Company or otherwise (“Payment”), would (i) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),

 
12 and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order: reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s stock awards. No such reduction shall be made in a manner which violates the requirements of Code section 409A. 10. Post-Termination Protections for Company. (a) Confidentiality. The Executive acknowledges that in the course of the Executive’s involvement in the activities of the Company and its Affiliates, the Executive will have access to confidential and proprietary information including, but not limited to, the Company’s business affairs, financial and strategic plans, customers, vendors, finances, methods of operation, proprietary computer programs, business dealings, assets, capabilities, and all other planning, pricing, customer or client lists of the Company and its Affiliates whether written, oral or otherwise. The Executive agrees that, before, on, and after the Effective Date, the Executive shall keep confidential all information, knowledge or data relating to the Company or any of its Affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its Affiliates and which shall have been identified and held by the Company as proprietary and confidential and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During and after termination of the Executive's employment with the Company, the Executive shall not, without the express written consent of the Lead Director of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (b) Competition. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, without the express written consent of the Lead Director of the Company be employed by, serve as a consultant to, or otherwise assist or directly or indirectly provide services to a Competitor in any location in the United States. The term "Competitor" means any enterprise (including a person, firm, business, division, or other unit, whether or not incorporated) during any period in which it is engaged in the business of leasing railcar assets. Nothing contained herein will prevent the Executive from engaging in an activity otherwise prohibited by this paragraph (b) for or with respect to any subsidiary, division or affiliate or unit (each, a “Unit”) of an entity if that Unit is not engaged in railcar leasing irrespective of whether another Unit of such entity engages in such competition (as long as the Executive does not engage in prohibited activity for such other Unit). (c) Solicitation of Customers or Suppliers. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the

 
13 Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, without the express written consent of the Lead Director of the Company call on, service or solicit any party who is then or, during the twelve-month period prior to such solicitation by the Executive was a customer or supplier of the Company or Affiliate, provided that the restriction in this paragraph (c) shall not apply to any activity on behalf of a business that is not a Competitor. (d) Solicitation of Employees. The Executive agrees that, while employed by the Company and, if the Executive’s Date of Termination occurs during the Employment Period for any reason, during the twelve month period after the Executive’s Date of Termination, the Executive shall not, solicit, entice, persuade or induce any individual who is employed by the Company or the Affiliates (or was so employed within 90 days prior to the Executive's action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Affiliates, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity. (e) Judicial Amendment. It is expressly understood and agreed that although the Executive and the Company consider the restrictions contained in this paragraph 10 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against the Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. (f) Equitable Remedies. The Executive acknowledges that the Company would be irreparably injured by a violation of this paragraph 10, and agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of paragraph 10. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. (g) Duty of Loyalty. Nothing in this paragraph 10 shall be construed as limiting the Executive's duty of loyalty to the Company, or any other duty the Executive may otherwise have to the Company, while is employed by the Company. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the

 
14 Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Company agrees that it will not effect the sale or other disposition of all or substantially all of its assets unless either (1) the person or entity acquiring the assets or a substantial portion of the assets shall expressly assume by an instrument in writing all duties and obligations of the Company under this Agreement or (2) the Company shall provide through the establishment of a separate reserve for the payment in full of all amounts that are or may be reasonably expected to become payable to the Executive under this Agreement. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. No amendment, modification, or termination of this Agreement shall be adopted or effective if it would result in accelerated recognition of income or imposition of additional tax under Code section 409A. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: _____________________ _____________________ _____________________ If to the Company: GATX Corporation 222 West Adams Street Chicago, IL 60606-5314 Attention: Executive Vice President, General Counsel & Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate

 
15 employment for Good Reason pursuant to Section 5(c)(i)-(vi) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the Execution Date set forth below. Executive Date GATX CORPORATION By: Its Chairman of the Board Date

 


Exhibit 31A
Certification of Principal Executive Officer

I, Brian A. Kenney, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GATX Corporation (the "Company");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
 

/s/ Brian A. Kenney
Brian A. Kenney
Chairman, President and Chief Executive Officer


April 28, 2015





Exhibit 31B
Certification of Principal Financial Officer

I, Robert C. Lyons, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GATX Corporation (the "Company");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 
/s/ Robert C. Lyons
Robert C. Lyons
Executive Vice President and Chief Financial Officer


April 28, 2015





Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GATX Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian A. Kenney
 
/s/ Robert C. Lyons
Brian A. Kenney
 
Robert C. Lyons
Chairman, President and Chief Executive Officer
 
Executive Vice President and Chief Financial Officer

April 28, 2015
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by GATX Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been provided to GATX Corporation and will be retained by GATX Corporation and furnished to the Securities and Exchange Commission or its staff upon request.