Chris LaHurd - IR Brian Kenney - President & CEO Bob Lyons - EVP & CFO Tom Ellman - EVP and President of Rail North America.

Allison Poliniak - Wells Fargo Justin Long - Stephens James Bardowski - Axiom Capital Management Matt Brooklier - Longbow Research Justin Bergner - Gabelli & Company Steve O'Hara - Sidoti and Company Kristine Kubacki - CLSA Steve Barger - KeyBanc Capital Markets.

Good day. Welcome to the GATX Third Quarter Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Chris LaHurd. Please go ahead..

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

I’ll provide a brief overview of the results highlighted in our press release earlier this morning and then we'll open the call to your questions. First I’d like to remind you that some of the information you'll hear during our discussion today will consist of forward-looking statements.

Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in GATX's Form 10-K for 2015. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

Today, we reported 2016 third quarter net income of $95.7 million, or $2.36 per diluted share, and net income for the first nine months of 2016 of $226.2 million, or $5.49 per diluted share.

2016 third quarter results include a $49.1 million pretax residual sharing settlement fee or $30.3 million after-tax from the portfolio management segment or $0.75 per diluted share for the third quarter and $0.74 per diluted share to the first nine months of 2016.

Also the third quarter 2016 results include a net after-tax gain from the exit of portfolio management's marine investments and a change in statutory tax rates in the U.K. of $4.3 million or $0.11 per diluted share and year-to-date net after-tax gain of $6 million or $0.14 per diluted share.

Our third quarter results were excellent despite challenging market dynamics. Utilization for Rail North America increased to 99.0% and our renewal success rate was high at 74.1%.

Thanks to the diversity of our fleet, a high quality customer base, outstanding service and the diligence of our commercial and operations teams and placing new cars and competing – and keeping existing cars with our customers. In the third quarter GATX's lease price index decreased by 21.4% and the average renewal term was 29 months.

It’s also important to note that the sequential drop in lease rates, so third quarter compared to second quarter has decelerated with freight lease rates nearly flat and tank car lease rates down about 15%.

As we’ve stressed in prior quarters due to our efforts to extend lease terms over the last several years and sell near-term lease exposure of more volatile car types at attractive valuation, we have relatively fewer cars up for renewal in the coming quarters, which will help to buffer our fleet from these current market dynamics.

By stretching lease terms at very attractive lease rates we've also locked-in stable cash flow over $4.2 billion at rail North America alone positioning us well to manage through this cycle and capitalize on attractive investment opportunities. It's worth noting rail international.

ASC in our portfolio management segments are performing consistent with our expectations entering this year. Finally, GATX repurchased nearly 564,000 shares for approximately $25 million during the third quarter at an average price of $44.35 per share.

At the end of the quarter $205 million remains available under the $300 million repurchase authorization. Bob Lyons has a few brief comments at this time..

Thank you, Chris. Before we move to Q&A, I would like to make a quick comment on the sizeable fee that we reported and called out in the third quarter press release. As noted, GATX received a residual sharing settlement fee of $49 million. This was unusual in both size and origin and was a one-time event, thus we highlighted.

The settlement fee relates to a legacy transaction within portfolio management dating all the way back to the early 2000. At that time we provided a guarantee on a residual value of certain non-GATX on rail assets and in time other parties in this transaction disputed the value of our fee.

This dispute was argued arbitrated and mediated over many years and fortunately we reached a settlements that resulted in this one-time cash payment of $49 million.

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

[Operator Instructions] And we’ll go first to Allison Poliniak with Wells Fargo..

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

Yes. So one of the things we’ve highlighted when talking about the LPI in the past is that individual quarter moves are really hard to draw meaningful conclusions from, because it can be impacted by a few unique transactions.

What I would conclude looking at this quarter versus last quarter is that the rate environment from an LPI perspective is relatively consistent.

The more meaningful numbers what Chris highlighted at the beginning of the call which is the lease rates on incremental business compared to a quarter ago which was the 15% decline in tank cars and relative flatness in freight cars..

Okay. Great. And then I believe last quarter you talked about 15000 cars coming up for renewals in 2017, 13,000 of those were more from long-term lease.

You know the renewal terms come down, has that changed any – as we look to 2017 is that going to start to creep up a little bit?.

Allison, its Bob Lyons. At this point it hasn’t changed significantly. We’ll give you an update on that number in our January earnings release as its also partly dependent on what happened with some of the renewals here in the fourth quarter but we will give you full update on that in January..

Great. And just one last thing. Just a secondary market seems a bit more active than we would have thought just given all the volatility in the market.

Can you just give us your thoughts on that?.

Sure. It's actually been significant bright spot that the secondary market for routine transaction both the GATX is selling and others are selling in the marketplace.

The demand has continued to be very strong, and I would attribute that to the fact that the capital markets remain very strong, interest rates are very well and buyers are looking for yield/ So our assets from that standpoint remain very attractive and we see continued activity there.

And lot of those rates stay where they’re at and you get banks and other institutions looking to add yield assets to their portfolio. We think we will continue to see good demand/.

Great. Thanks so much..

And we’ll go next to Justin Long with Stephens..

Thanks, and good morning, guys.

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

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

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

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

And Justin with regard to the LPI for the fourth quarter, well I can't give you a specific number on that in a book and that for you.

It will be continue to be materially negative, and as you've seen over the last couple quarters and the rate pressure does continue or is continuing here and it will continue in the fourth quarter, we will see significant negative pressure on that LPI..

Okay. Fair enough. And secondly I wanted to ask about oil prices.

We’ve seen some recent strength, and I was curious, how you feel that could impact your business let's just say oil prices go to $60 to $70, do you think that would have a material impact on the railcar market or your business?.

Okay. So first talking about on North American rail and then Brian will have some additional comments. In the near-term particularly for our fleet it's just not that material. We only have 2100 cars and crude oil service, so and mostly put on long-term leases during the strong part of the market.

So what goes on in coal itself wouldn’t be very material for – I mean, I am sorry – crude oil itself wouldn’t be very material for our fleet.

What you would see in the industry with that kind of pick up, as you would probably see an almost immediate pickup in demand for small cube covered hoppers because drilling activity would likely increase and incrementally the industry would require more sand cars/ What it would do for the industry crude oil cars as a whole is difficult to say.

We’re certainly significantly oversupplied at this point and there have been improvements in pipeline capacity. so the degree to which you would see that actually results in incremental car demand is difficult to say. Directionally would be helpful but there would be some offsetting factors..

Right. And in Europe its going to have a more direct immediate impact because you might remember petroleum or mineral oil as referred to it in Europe comprises almost 65% of the fleet. Now that's not crude, most of it is refined product in fact almost all of it.

But it's an annual renewal business, so you would see a direct impact more quickly in Europe, since 65% of their fleet is in petroleum products..

Okay, great. That’s helpful. And one more from me. The AAR has started publishing data on railcars in storage again I think about 23% of the fleet is parked right now.

I wanted to get your opinion or ask you if you had a sense on how much of that fleet in storage is energy-related versus non-energy related?.

Yes, that's a great question, and in addition to reintroducing that statistic just two months, so it's very recent they started breaking it out by major car type, so there's actually some industry statistics on that and for what they don't do it provide energy related – they don’t do by commodities instead they do it by car type.

So of the cars that are in storage right now further definition which hasn’t moved in 60 days and they’ve also actually expanded that definition a little bit.

They've also excluded cars would the last move, the last recorded move was a loaded move, so they're trying to take out cars that just move slow/ We still don’t have perfect statistics but it's certainly trying to address that. Tank cars represented 32% of that number and covered hoppers represented a 29%.

Obviously within those the first one you had crude oil cars. The second one you have small cube covered hoppers but breaking out energy specifically is challenging just like the statistic overall though, we’re not going to be as focused on those absolute numbers but rather have a change period to period.

The delta will be more meaningful, and if you look at that delta in the first two months that the statistic is been around, you’ve seen a significant decrease in covered hoppers which is primarily related to the record grain harvest and you also have seen improvement in the open top hoppers and gondolas, which largely would be coal cars and that would be indicative of the improvement in coal that I’ve talked about earlier..

Okay, that's helpful color. I appreciate the time. I’ll leave it at that..

And we’ll now go to Gordon Johnson with Axiom Capital Management..

Hi, guys. This is James Bardowski in for Gordon. Thanks for taking the questions. I guess first of all, you guys reaffirm your full-year EPS guidance range excluding $0.74 per share portfolio management fee, so I guess, using the midpoint on this implies 4Q EPS $0.89. Of this $0.89 how much you guys are attributing to be marketing income as….

The marketing income right now we anticipated is going to be very light in the fourth quarter..

Very light. Okay. And then secondly, you guys have exited the third quarter with North American fleet at – it was close 205,000 railcars which is the lowest level since at least for 2008 presumably to manage the fleet utilization.

Are you guys are seeing any material downward pressure on the marketing prices basically in your attempt to manage the utilization?.

Yes. So I’ll take first part of that and then let others chime in. First of all I get 105,000 cars. I think you're probably missing the boxcars.

Yes..

Separately reported to – as noted earlier we absolutely are seeing rate pressure and we've seen that for quite some period of time.

It's not a of case of utilization been managed through the scrapping process because what we do in all markets is the same thing which is take a look at the anticipated earnings of the car over its remaining life when it comes in shop and compare that to current scrap prices and then you will do the economically most advantageous thing.

In this environment scrap prices are low and the prospects for the car are historically at low levels. So both of those factors to a large degree cancel out and you're not seeing any unusual scrapping activity..

I guess, I have one more and I’ll hand it off. More of a abstract question, but historically it's pretty well-known that railcar loadings have been a leading indicator of the industry, which they are down 85, 87 straight weeks now.

Does the signs – does the signs or mix that the slowdown is anticipating arguable in either direction but given that the GATX has a more normalized 15,000 or so pieces coming up for renewal in 2017, how is this factoring into your forward expectations?.

Yes. So first of all at least in the third quarter and in a couple of different areas you actually saw significant increases in railcar loadings, most notably coal and the grain cars that I mentioned earlier.

Overall though as far as expectations go, we've been talking for quite some time now about the oversupply situation in general and some of the areas where we've seen I decreased demand both those factors matter, but overall the more powerful is that supply statistic, how many excess cars there are.

Earlier we were talking about the AAR statistic and the questioner mentioned 23% of the cars being idle for the AAR definition.

So significantly too many cars already in the industry plus if you look at the backlog of new cars, unfortunately the third quarters statistics are not yet out but as of the second quarter there were 89,000 cars yet to be delivered and that number is bigger than the absolute peak of the last upcycle which was 88,000 cars.

So our expectations for quite a while has been built around the situation that the industry had to get back in the balance from a supply demand situation..

Understood. All right. Thank you very much..

We’ll go next to Matt Brooklier with Longbow Research..

Hi, thanks. Good morning.

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

Yes. There was several different car types contributed but the single biggest contributor was coal and very much related to the fact that loadings picked up. One of the things we try to do in all situations is being the first mover have cars ready to go and available and we are able to take advantage of that and put some coal cars to work.

Now importantly, again overall the industry still is seen way too many idle coal cars, so overall in the industry rates continue to be deprived and I would not view that uptick in utilization is indicative of a larger coal recovery/.

Okay.

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

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

Yes. I mean the drop in utilization earlier in the year was driven by coal and now the pickups been driven by coal everything else we had pretty good renewal success item.

Okay.

And the rates on coal cars are still trying to get kind of lower end levels?.

Yes. That’s correct..

Okay. I am trying to think out in the 2017 I think others have asked the question but just looking at the LPI, trying to get a sense or I guess if we bottomed here or is the potential for the LPI to be down incrementally in 2017.

I guess on thinking about it is even if rates were to hold moving forward I guess the comps are getting more difficult as we move out into 2017.

Am I thinking about that right or what are your thoughts and I know you don’t want to commit to anything but if you could just talk a little bit to the thinking about the LPI and where it could bottom?.

So you answered your own question, that’s exactly right. So we don’t know where absolute rates are going but even if they staid constant and they had bottomed out we’d still be under LPI pressure because that expiring rate is increasing due to the strong market over the last four prior to this downturn.

So yes, there is LPI pressure next year regardless of if rates have bottomed out or not..

Okay. And then you guys did a really good job on the maintenance expense side of things during 3Q. I think the guide for the year is expectations for that line to be flat to maybe up a little bit. Has that line of thought changed in terms of the all in maintenance expense in ’16 and then thoughts on ’17 if you have any..

Well in ’16 what we said coming into the year, you’re right. It would be flat to slightly up. We’ve a lower compliance especially tank compliance in 2016 versus ’15 but we anticipate there’d be more maintenance due to lower commercial success, you know, more churn in the feet, more cars coming into the network.

So we have had lower compliance but our commercial success as evidenced by the higher utilization rate has been better than we anticipated. A lot of those cars have entered the network as our renewal success especially for tank and maintenance intensive has hung in there very well.

So we are doing better in the North American maintenance line than we anticipated. As far as next year we’ll talk about in January but on the compliance side it is a lighter year in 2017 from a compliance perspective especially tank compliance but that’s scheduled. What we actually do depends on when we can get into the network..

Okay. And then just one last quick one. The 55 of other income at Rail International what was that..

Sure. I think many of you are familiar with a long running legal case we’ve been involved within GATX Rail Europe emanating out of Italy.

Over the last many quarter we’ve absorbed legal expense associated with that case and here in the third quarter we were reimbursed by our insurers for a portion of that legal expense that we had previously incurred and expenses so there was catch up..

Okay. And are there further catch ups as we’re thinking about fourth quarter..

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

Got you. Okay, I appreciate the time..

And we’ll next to Justin Bergner with Gabelli & Company..

Hi, good morning Brian and good morning Bob. The first question relates to the tank car lease rates. You mentioned that they were down about 15% sequentially in the third quarter, was that a consistent down 15% or did you see sort of the decline taper and then flatten off towards the end of the quarter..

Yes, even quarter to quarter is challenging to draw a significant conclusion certainly within a quarter that’s just too precise..

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

The renewal success rate was 74.1%..

Okay. And are you optimistic you can keep at that level going forward or is that more of a lined quarter snap back from the 60s..

Well we’re certainly confident we’ll be able to keep the rate north of historical low, we’ve been down into the 50s in a more challenging market environment. Over the last several quarters we’ve been well north of that.

We’ll continue to be north of that but it’s going to be a challenging environment and that number will bump around a bit from quarter to quarter depending on the types of cars that come up for renewal..

Okay, understood. And then just two more detailed questions. The other revenue in North America in rail I guess was 17 million versus 20 million year-on-year.

Is there any helpful detail on that decline?.

No, there is nothing significant there. That number is really compilation of both scrap income, railroad repair, railroad reimbursements, mileage reimbursements so nothing significant there Justin..

Okay. There is no step down I should worry about there..

No single line item..

All right. And then in regards to this legal I guess kind of cost which you received some reimbursement from the third quarter, were these anticipated sort of at the start of the year when gave guidance and if not like how many expense is this taking away on net basis from 2016 earnings the year would end today..

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

Okay.

So this was trending as you anticipated or little bit better for the reinvestment or?.

No, it came in very close to what we thought it would. In terms of the reimbursement for expenses we had already incurred and expensed..

Okay. Thanks for taking all my questions, this morning. .

We'll go next to Steve O'Hara with Sidoti and Company..

Hi, good morning.

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

So the way the backlog is reported by the builders and aggregated. So we are not a builder so actually it's one of the things that we struggled with and try to get real sense on what's going on in the backlog. We'll be very interested to see the third quarter numbers. I am told that they should be out tomorrow.

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

So what's going in, why are cars coming into or out of the backlog that's something we don’t have great insight into and then the other thing we don’t have great insight into is how long out is that backlog.

For instance when we do our long term supply agreement typically that all goes into the backlog, but obviously some of those don’t deliver for quite some time. We don’t know what the original length of the backlog was and then we don’t know how it might have changed if people are deferring or switching orders..

Okay, great. And then just on ASC, I thought kind of the commentary coming into the year was that I think your term capacity selling fleet for the year.

I mean it seems like there was going to be - there is expectation that things are going to be - I think year-over-year there, I thought further material, it maybe you have updated that, I missed it throughout the year.

But I mean is it just a matter of the fact that things are little bit weaker than you expected kind of coming in or maybe you can just discuss that. Thank you..

Sure. From a tonnage perspective we expected to move almost the same amount of volume next year as we were going to move last year. So really any incremental benefit was going to be -- it was going to come from running the fleet more efficiently with fewer vessels. We are only operating a 11 vessels this year.

Segment profit is expected to be in the range or up a little bit from where we had been last year. So we won't anticipate any significant material change at ASC and it's turned out to be that kind of year. It remains a pretty challenging market when you are moving iron ore and coal..

Yes, okay. And then lastly just on the within portfolio management I think there were in the share affiliate earnings was pretty good jump I guess sequentially and best of the year at 15.2. Was anything also there that maybe you shouldn’t read into going forward, or it was just very good quarter there. .

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

Okay.

So I guess it was more of a due to the ongoing operations are more of the remarketing?.

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

Okay. All right. Thank you very much..

And we'll go next to Kristine Kubacki with CLSA..

Good morning, guys. Bob, you can may have just sort of answered my question, but you mentioned and I'm focused little bit here on the rail side of remarketing income.

You said it's going to light in the fourth quarter and I get it's really lumpy, but is it - can we infer anything? I know obviously the market under stress, but it seem like the secondary market still holding up.

But as we move into 2017, we think about our models there, I mean are we thinking about the same kind of lumpiness, it won't kind of the fourth quarter run rate, correct?.

Correct. The fourth quarter won't be indicative of what we anticipate in 2017. And in fact Kristine I'd mentioned the secondary market really held up extremely well and better than what we anticipated coming into the year from a number of better volume, what folks are willing to pay for assets on lease.

So it's been a more solid area of activity than we anticipated really coming into the year. And given where interest rates are and it looks like they will continue to be in 2017, we are optimistic we'll have pretty solid year in 2017. We'll give you more guidance on a range of that as we get into January with the yearend numbers..

Okay. That's helpful.

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

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

Having said that, I know the capital markets are strong and market hanging in there, but I think across the leasing industry we've seen utilization drop and that obviously results in I'd say financial degradation little more quickly than rate drops.

So if that trend continues you'd expect to see some financial playing out there in the leasing industry in 2017 and then I would expect asset prices to come down. That's the way it worked in prior downturn..

That's one have been little unique because the capital market have been so strong, but I think as utilization drops you'll start to see less incentive to pick up new assets as people try to deal with their ideal fleet..

Okay. That's helpful. And then just one last one, forgive me if you already answered this, but just noticing that utilization on the boxcar fleet went down a little bit sequentially.

Is there anything there is that more seasonal in nature?.

Yes, actually the biggest single move around the boxcar is the railroad efficiency, because of that has been better through the course of the year it's popped around a little bit, but it's been largely better. People need a few boxcars..

Okay. Perfect. Thank you very much. .

And we'll go now to Steve Barger with KeyBanc Capital Markets..

Hi, good morning.

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

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

You mean in 2009 and 2010?.

Correct..

I think Steve we get down in the low 30 month range back at that time frame..

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

So overall what we try to do all the time is take terms shorter in low rate environment. Exactly how low the number goes it's difficult to project. Generally speaking there is a minimum term that both we and the customers would like just to make the whole transaction worthwhile.

So I wouldn't expect it to go materially lower, but certainly in this kind of environment we're open to one and two year leases..

Sure..

And I'll say that quarter to quarter that number bounces around as much as lease price index bounces around for the same reason..

Right.

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

Well, I'd say there hasn't been an environment exactly like that's one. If you look at the last downturn of second half of 2008, 2009 and 2010 that, that was an economic driven, financial market driven collapse, that then bleed into a decline in commodity movements. So that downturn was very different as was the prior one back from 2002 and 2003.

So there is no exact comp on that front..

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

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

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

A lot of things could happen to the backlog or it could be cancelled or it can be deferred which we hear anecdotally is already happening. And in industry there could be a lot more scrapping as well for just general economic reasons as well as regulatory reasons as those cars bump up against the deadline.

So there is other things that can affect that industry capacity, but it's hard to determine exactly how long this will last unless we know more about that backlog..

Understood.

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

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

Got it. And last question.

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

The answer is we like similarly exactly what's going on with our cars is that the customer use of our cars that's difficult to say.

But if you look at the mix of our fleet compared to the mix of the industry as a whole, I would say it's highly likely that our cars are more utilizing the industry statistic as a whole, most specifically relatively low ratings on coal cars and crude oil cars, on small cube covered hoppers..

Right. Okay. Thanks so much..

And we’ll now to go to Justin Long with Stephens..

Hi, guys. Thanks for taking the follow up.

Just had a quick one I wanted to clarify on the guidance, what's the year-to-date EPS number you're using in the guidance? I know you are excluding the charge this quarter, but there were a couple other moving pieces I wanted to make sure we were using the same number as you give that?.

Sure. If you remove the marine related other items that portfolio management and the settlement fee you back down to a number year-to-date of about $4.60 a share versus guidance for the full year of 555 to 575..

Okay, that's helpful.

So I guess the midpoint of that implies $1.5 or so for the fourth quarter, I know you're not giving details on 2017 yet, but just from a high level does that seem like a ballpark run rate for next year maybe with the exception of remarketing income being a little bit higher as you talked about before?.

Well I wouldn’t read too much into that, fourth quarter number on a standalone basis because of the remarketing piece and because of the fact that American Steamship really winds down operations in the fourth quarter. So I wouldn't look at that as a run rate number.

Obviously, when we come back to you in January we'll give you the full year guidance and the variables that all went into that..

Okay, great. I'll leave at that. Thanks again for the time..

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

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

And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation..