e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009


o		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 þ No o

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 o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a 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 o No þ

As of September 30, 2009, 46.1 million common shares were outstanding.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)


	September 30			December 31
	2009			2008
Assets

Cash and Cash Equivalents	$	83.6		$	102.2
Restricted Cash		37.4			41.1

Receivables
Rent and other receivables		57.8			79.5
Finance leases		317.5			331.8
Loans		1.0			4.9
Less: allowance for possible losses		(12.1	)		(18.6	)

		364.2			397.6

Operating Assets and Facilities
Rail		5,378.1			5,232.3
Specialty		243.8			271.4
ASC		380.0			373.1
Less: allowance for depreciation		(1,974.2	)		(1,955.2	)

		4,027.7			3,921.6

Investments in Affiliated Companies		450.6			399.3
Goodwill		99.2			95.7
Other Assets		195.2			232.9

Total Assets	$	5,257.9		$	5,190.4

Liabilities and Shareholders’ Equity

Accounts Payable and Accrued Expenses	$	114.7		$	146.6
Debt
Commercial paper and borrowings under bank credit facilities		83.9			125.1
Recourse		2,627.7			2,376.2
Nonrecourse		236.9			243.3
Capital lease obligations		56.1			64.7

		3,004.6			2,809.3

Deferred Income Taxes		728.2			710.9
Other Liabilities		298.2			399.1

Total Liabilities		4,145.7			4,065.9

Shareholders’ Equity
Preferred stock ($1.00 par value, 5,000,000 shares authorized, 17,071 and 17,428 shares of Series A and B $2.50 Cumulative Convertible Preferred Stock issued and outstanding as of September 30, 2009 and December 31, 2008, respectively, aggregate liquidation preference of $1.0 million)		*			*
Common stock ($0.625 par value, 120,000,000 authorized, 65,227,113 and 65,051,639 shares issued and 46,103,727 and 48,725,953 shares outstanding as of September 30, 2009 and December 31, 2008, respectively)		40.6			40.6
Additional paid in capital		615.7			611.7
Retained earnings		1,081.7			1,062.6
Accumulated other comprehensive loss		(65.5	)		(85.2	)
Treasury stock at cost (19,123,386 shares at September 30, 2009 and 16,325,686 at December 31, 2008)		(560.3	)		(505.2	)

Total Shareholders’ Equity		1,112.2			1,124.5

Total Liabilities and Shareholders’ Equity	$	5,257.9		$	5,190.4


*		Less than $0.1 million.

The accompanying notes are an integral part of these consolidated financial statements.

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in millions, except per share data)


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Gross Income
Lease income	$	223.0	$	233.6	$	678.9	$	703.4
Marine operating revenue		36.3		98.4		75.7		200.7
Asset remarketing income		3.1		14.5		25.2		44.6
Other income		14.1		33.9		42.4		80.1

Revenues		276.5		380.4		822.2		1,028.8
Share of affiliates’ earnings		15.6		40.1		23.0		81.1

Total Gross Income		292.1		420.5		845.2		1,109.9

Ownership Costs
Depreciation		55.3		54.4		161.8		156.5
Interest expense, net		40.3		36.0		125.0		107.8
Operating lease expense		34.2		35.1		101.7		110.8

Total Ownership Costs		129.8		125.5		388.5		375.1

Other Costs and Expenses
Maintenance expense		65.8		65.4		195.3		193.9
Marine operating expense		25.8		73.6		51.0		153.5
Selling, general and administrative		35.0		48.1		102.1		129.1
Other		8.8		7.8		22.2		31.0

Total Other Costs and Expenses		135.4		194.9		370.6		507.5


Income before Income Taxes		26.9		100.1		86.1		227.3
Income Taxes		7.3		26.2		26.2		61.4

Net Income	$	19.6	$	73.9	$	59.9	$	165.9


Per Share Data
Basic	$	0.43	$	1.52	$	1.28	$	3.51
Average number of common shares (in millions)		45.9		48.6		46.8		47.3

Diluted		0.42		1.46		1.24		3.31
Average number of common shares and common share equivalents (in millions)		48.0		50.9		48.9		51.1

Dividends declared per common share	$	0.28	$	0.27	$	0.84	$	0.81

The accompanying notes are an integral part of these consolidated financial statements.

GATX CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)


	Nine Months Ended
	September 30
	2009			2008
Operating Activities
Net income	$	59.9		$	165.9

Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets and securities		(16.9	)		(64.1	)
Depreciation		168.4			164.1
Asset impairment charges		7.7			4.5
Deferred income taxes		18.2			60.7
Share of affiliates’ earnings, net of dividends		(10.9	)		(44.3	)
Change in income taxes payable		(9.6	)		(14.1	)
Change in accrued operating lease expense		(34.6	)		(35.2	)
Employee benefit plans		(43.7	)		0.3
Other		(6.5	)		(21.8	)

Net cash provided by operating activities		132.0			216.0

Investing Activities
Additions to operating assets and facilities		(315.0	)		(383.7	)
Investments in affiliates		(61.2	)		(55.3	)
Other		(0.3	)		(5.8	)

Portfolio investments and capital additions		(376.5	)		(444.8	)
Purchases of leased-in assets		(10.7	)		(70.1	)
Portfolio proceeds		55.2			103.4
Proceeds from sales of other assets		50.1			58.8
Proceeds from sale-leaseback		45.7			—
Net decrease in restricted cash		3.7			5.6
Other		—			(42.1	)

Net cash used in investing activities		(232.5	)		(389.2	)

Financing Activities
Net proceeds from issuances of debt (original maturities longer than 90 days)		636.5			339.8
Repayments of debt (original maturities longer than 90 days)		(409.9	)		(21.5	)
Net decrease in debt with original maturities of 90 days or less		(43.0	)		(87.1	)
Payments on capital lease obligations		(8.6	)		(6.4	)
Stock repurchases		(55.1	)		(76.5	)
Employee exercises of stock options		—			7.4
Cash dividends		(39.4	)		(38.5	)
Other		0.7			—

Net cash provided by financing activities		81.2			117.2

Effect of Exchange Rate Changes on Cash and Cash Equivalents		0.7			(1.3	)

Net decrease in Cash and Cash Equivalents during the period		(18.6	)		(57.3	)
Cash and Cash Equivalents at beginning of period		102.2			104.4

Cash and Cash Equivalents at end of period	$	83.6		$	47.1


Non-Cash Transaction
Assumption of nonrecourse debt	$	—		$	74.7

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. Description of Business

GATX Corporation (“GATX” or the “Company”) leases, operates and manages long-lived, widely used assets in the rail, marine and industrial equipment markets. GATX also invests in joint ventures that complement existing business activities. Headquartered in Chicago, Illinois, GATX has three financial reporting segments: Rail, Specialty and American Steamship Company (“ASC”).

NOTE 2. Basis of Presentation

The accompanying unaudited consolidated financial statements of GATX Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by these accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. We have evaluated subsequent events through October 27, 2009, which is the date that these financial statements were issued. Operating results for the three and nine months ended September 30, 2009, are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2009. In particular, ASC’s fleet is generally inactive for a significant portion of the first quarter of each year due to the winter conditions on the Great Lakes. In addition, the timing of asset remarketing income is dependent on market conditions and, therefore, does not occur evenly from period to period. For further information, refer to the consolidated financial statements and footnotes for the year ended December 31, 2008, as set forth in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on May 8, 2009 (“GATX’s May 8th Current Report”). Certain reclassifications have been made to the 2008 consolidated financial statements to conform to the 2009 presentation.

Accounting Changes

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2009-1, Topic 105, Generally Accepted Accounting Principles (formerly Statement of Financial Accounting Standard (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles), which identifies the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative U.S. generally accepted accounting principles (“GAAP”). The Codification supersedes all non-SEC accounting and reporting standards. All future accounting standards will be issued in the form of Accounting Standards Updates. Generally, the Codification is not expected to change GAAP. GATX adopted the provisions of the Codification as of September 30, 2009, and other than revisions to GATX’s references to applicable accounting guidance, the adoption had no impact on GATX’s financial position, results of operations or cash flows.

As of January 1, 2009, GATX adopted authoritative guidance issued by the FASB regarding certain convertible debt instruments (formerly Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)). The new guidance amended the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion and requires issuers of such convertible debt instruments to account separately for the liability (debt) and equity (conversion option) components in a manner that reflects the issuer’s nonconvertible debt borrowing rate. See Note 11 for additional details regarding GATX’s convertible debt.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

GATX applied the convertible debt guidance on a retrospective basis for all periods presented. The effects of the application on GATX’s previously issued financial statements were as follows ($ in millions, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30, 2008				September 30, 2008
Consolidated Statements of	As		As		As		As
Income	Reported		Adjusted		Reported		Adjusted
Interest expense, net	$	35.8	$	36.0	$	106.3	$	107.8
Total Ownership Costs		125.3		125.5		373.6		375.1
Other		7.8		7.8		30.5		31.0
Total Other Costs and Expenses		194.9		194.9		507.0		507.5
Income before Income Taxes		100.3		100.1		229.3		227.3
Income Taxes		26.3		26.2		62.2		61.4
Net Income		74.0		73.9		167.1		165.9
Basic Earnings per share		1.52		1.52		3.53		3.51
Diluted Earnings per share		1.46		1.46		3.31		3.31


	Nine Months Ended September 30, 2008
Consolidated Statement of Cash Flows	As Reported			As Adjusted
Net income	$	167.1		$	165.9
Deferred income taxes		61.5			60.7
Other		(23.8	)		(21.8	)

As of January 1, 2009, GATX adopted authoritative guidance issued by the FASB on business combinations (formerly SFAS No. 141(R), Business Combinations). The guidance requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree at their respective fair values as of the acquisition date; the immediate expense recognition of transaction costs; and the accounting for restructuring costs separately from the business combination. This Statement also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values. The application of this guidance had no impact on GATX’s financial position, results of operations or cash flows.

As of January 1, 2009, GATX adopted authoritative guidance issued by the FASB on noncontrolling interests (formerly SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51). The guidance requires entities to report noncontrolling (minority) interests of consolidated subsidiaries as a component of shareholders’ equity on the balance sheet, include all earnings of a consolidated subsidiary in consolidated results of operations, and treat all transactions between an entity and the noncontrolling interest as equity transactions between the parties. GATX does not consolidate any partially owned subsidiaries and therefore the application of this guidance had no impact on its financial position, results of operations or cash flows.

As of January 1, 2009, GATX adopted authoritative guidance issued by the FASB on derivative disclosures (formerly SFAS 161, Disclosures about Derivative Instruments and Hedging Activities). The guidance requires enhanced disclosures about a company’s use of derivative instruments, its applicable accounting policies related to derivatives, and the effect of those derivatives on its financial position, results of operations and cash flows. See Note 4 for enhanced disclosures related to derivative transactions.

In the second quarter of 2009, GATX adopted three revisions to the authoritative guidance as issued by the FASB covering a number of issues, including fair value measurements, other than temporary impairments and related interim disclosures (formerly FSP FAS No. 157-4, Determining Fair Value when the Volume and Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, FSP FAS No. 115-2 and FSP FAS 124-2, Recognition and Presentation of Other-than-Temporary Impairments, and FSP FAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments). The application of this guidance had no impact on GATX’s financial position, results of operations or cash flows. See Note 4 for enhanced fair value disclosure.

As of June 30, 2009, GATX adopted authoritative guidance issued by the FASB on subsequent events (formerly SFAS No. 165, Subsequent Events). The guidance addresses the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. See Basis of Presentation for the disclosures required by this guidance.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

New Accounting Pronouncements

In June 2009, the FASB issued authoritative guidance, which revises the accounting for and reporting of transfers of financial assets and eliminates the concept of a qualifying special-purpose entity (formerly SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140). The guidance, which also requires enhanced disclosures about an entity’s involvement with transfers of financial assets, is effective for annual reporting periods beginning after November 15, 2009. GATX does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

In June 2009, the FASB issued authoritative guidance which revises the accounting for and reporting of variable interest entities (“VIEs”) (formerly SFAS No. 167, Amendments to FASB Interpretation No. 46). The guidance, which is effective for annual reporting periods beginning after November 15, 2009, requires an entity to perform a qualitative analysis each reporting period to determine whether a VIE must be consolidated and further requires additional disclosures related to significant judgments and assumptions considered in the analysis, the nature of risks associated with an entity’s involvement with a VIE, and how that involvement affects the entity’s financial position, financial performance and cash flows. GATX is currently evaluating what effect, if any, the adoption of this guidance will have on its financial position, results of operations or cash flows.

NOTE 3. Investments in Affiliated Companies

Investments in affiliated companies represent investments in, and loans to and from, domestic and foreign companies and joint ventures that are in businesses similar to those of GATX, such as lease financing and related services for customers operating rail, marine and industrial equipment assets, as well as other business activities, including ventures that provide asset residual value guarantees in both domestic and foreign markets.

Operating results for all affiliated companies, assuming GATX held a 100% interest, would be (in millions):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Revenues	$	160.8	$	195.4	$	489.5	$	530.0
Pre-tax income reported by affiliates		30.2		87.2		40.1		168.3

NOTE 4. Fair Value Disclosure

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurements are classified according to a three level hierarchy based on management’s judgment about the reliability of the inputs. The fair value measurement hierarchy and the inputs used for those measurements are as follows:

Level 1 — Quoted prices that are available in active markets for identical assets or liabilities.

Level 2 — Pricing inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Measurement techniques such as pricing models and discounted cash flow methodologies are typically used and significant management judgment is required.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

At September 30, 2009, the fair values of GATX’s assets and liabilities that are remeasured on a recurring basis are summarized below (in millions):


	Total		Level 1		Level 2		Level 3
Assets
Interest rate derivatives (a)	$	14.8		—	$	14.8		—
Warrants and foreign exchange rate derivatives (b)	$	1.5		—	$	1.5		—
Available for sale equity securities	$	2.8	$	2.8		—		—

Liabilities
Interest rate derivatives (a)	$	5.0		—	$	5.0		—
Foreign exchange rate derivatives (b)	$	0.3		—	$	0.3		—


(a)		Designated as hedges

(b)		Not designated as hedges

In 2009, GATX performed nonrecurring fair value measurements for $19.6 million (carrying value of $25.2 million) of certain long-lived assets, including railcars and other industrial equipment, and recognized impairment losses of $5.6 million, which were included in other costs and expenses. The fair values were determined using discounted cash flow methodologies and third party valuation data, as applicable. The measurements were largely performed in connection with the restructuring of leases with a bankrupt customer.

Derivative instruments

As of September 30, 2009, GATX had 20 derivative instruments outstanding with an aggregate notional amount of $540.7 million. GATX enters into derivative transactions for purposes of hedging specific financial exposures, primarily movements in foreign currency exchange rates and changes in benchmark interest rates. GATX does not hold or issue derivative financial instruments for purposes other than hedging, except for warrants, which are held for investment purposes and are not hedges. Certain derivatives may not meet the established criteria to be designated as qualifying accounting hedges, even though GATX believes they are effective economic hedges. For the three and nine months ended September 30, 2009 and 2008, amounts recognized in earnings for derivatives that did not qualify as accounting hedges were immaterial.

Fair Value Hedges — GATX uses interest rate swaps to convert fixed rate debt to floating rate debt and to manage the fixed to floating rate mix of its debt obligations. For fair value hedges, changes in fair value of both the derivative and the hedged item attributable to the hedged risk are recognized in earnings as interest expense. As of September 30, 2009, maturities for fair value hedges range from 2010-2015.

Cash Flow Hedges — GATX uses interest rate swaps to convert floating rate debt to fixed rate debt and to manage the fixed to floating rate mix of its debt obligations. GATX also uses interest rate swaps and Treasury rate locks to hedge its exposure to interest rate risk on existing and anticipated transactions. As of September 30, 2009, maturities for qualifying cash flow hedges ranged from 2010-2015. Within the next 12 months, GATX expects to reclassify $5.8 million ($3.6 million after tax) of net losses on cash flow hedges from accumulated other comprehensive loss to earnings. Amounts are reclassified when interest and operating expense related to the hedged risks affect earnings. Changes in the fair value of the ineffective portion of cash flow hedges are immediately recognized in earnings. For the three and nine months ended September 30, 2009 and 2008, amounts recognized in earnings for ineffectiveness were immaterial.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The income statement and other comprehensive income impacts of GATX’s derivative instruments for the three and nine months ended September 30 were as follows (in millions):


		Three Months			Nine Months
		Ended			Ended
Derivative		September 30			September 30
Designation	Location of Gain (Loss) Recognized	2009			2009
Fair value hedges (a)	Interest expense	$	1.6		$	(6.1	)
Cash flow hedges	Amount recognized in other comprehensive (loss) income (effective portion)	$	(2.4	)	$	12.6
Cash flow hedges	Amount reclassified from accumulated other comprehensive loss to interest expense (effective portion)	$	(2.2	)	$	(4.4	)
Cash flow hedges	Amount reclassified from accumulated other comprehensive loss to operating lease expense (effective portion)	$	(0.8	)	$	(1.2	)


(a)		Offsetting the loss in interest expense was a gain relating to the fair value adjustment to the underlying debt.

Certain of GATX’s derivative instruments contain credit risk provisions that could require GATX to make immediate payment on derivative instruments in net liability positions in the event that GATX defaulted on a certain portion of its outstanding debt obligations. The aggregate fair value of all derivative instruments with credit risk related contingent features that are in a liability position as of September 30, 2009, was $5.3 million. GATX is not required to post any collateral on its derivative instruments and does not expect the credit risk provisions to be triggered.

Additionally, in the event that a counterparty fails to meet the terms of the interest rate swap agreement or a foreign exchange contract, GATX’s exposure is limited to the fair value of the swap if in GATX’s favor. GATX manages the credit risk of counterparties by transacting only with institutions that the Company considers financially sound and by avoiding concentrations of risk with a single counterparty. GATX considers the risk of non-performance by a counterparty to be remote.

For further information on GATX’s accounting policy with respect to derivatives, see Note 3 to the Company’s consolidated financial statements included in GATX’s May 8th Current Report.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, money market funds, rent receivables, accounts payable, commercial paper and bank credit facilities approximate fair value due to the short maturity of those instruments. The fair value of investment funds is based on the best information available and may include quoted investment fund values. The fair values of fixed and floating rate debt, excluding convertible notes, were estimated based on discounted cash flow analyses using interest rates currently offered for loans with similar terms to borrowers of similar credit quality. Convertible notes were valued using third party quotes.

The following table sets forth the carrying amounts and fair values of GATX’s other financial instruments as of September 30, 2009 (in millions):


	Carrying		Fair
	Amount		Value
Assets
Investment Funds	$	10.4	$	11.0

Liabilities
Convertible notes	$	41.9	$	49.6
Recourse debt-fixed rate		2,197.8		2,260.2
Recourse debt-floating rate		388.0		377.5
Nonrecourse debt		236.9		249.3

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 5. Commercial Commitments

In connection with certain investments or transactions, GATX has entered into various commercial commitments, such as guarantees and standby letters of credit, which could potentially require performance in the event of demands by third parties. Similar to GATX’s balance sheet investments, these guarantees expose GATX to credit, market and equipment risk; accordingly, GATX evaluates its commitments and other contingent obligations using techniques similar to those used to evaluate funded transactions.

The following table sets forth GATX’s commercial commitments as of (in millions):


	September 30		December 31
	2009		2008
Affiliate guarantees	$	38.1	$	47.6
Asset residual value guarantees		53.6		52.1
Lease payment guarantees		59.0		63.9
Other		77.8		77.8

Total guarantees (a)		228.5		241.4
Standby letters of credit and bonds		13.4		13.6

	$	241.9	$	255.0


(a)		At September 30, 2009, the recorded value of GATX’s guarantees was a liability of $8.3 million. The expirations of these guarantees range from 2009 to 2019.

Affiliate guarantees generally involve guaranteeing repayment of the financing utilized by an affiliate to acquire or lease-in assets, which are subsequently leased-out to third parties, and are in lieu of making direct equity investments in the affiliate. GATX is not aware of any event of default which would require it to satisfy these guarantees and expects the affiliates to generate sufficient cash flow to satisfy their lease and loan obligations.

Asset residual value guarantees represent GATX’s commitment to third parties that an asset or group of assets will be worth a specified amount at the end of a lease term. Revenue is earned for providing these guarantees in the form of an initial fee (which is amortized into income over the guarantee period) and by sharing in any proceeds received upon disposition of the assets to the extent such proceeds are in excess of the amount guaranteed (which is recognized when realized). Any liability resulting from GATX’s performance pursuant to these guarantees will be reduced by the value realized from the underlying asset or group of assets. Historically, gains associated with the settlement of residual value guarantees have exceeded any losses and were recorded in asset remarketing income in the consolidated statements of income. Based on known facts and current market conditions, management does not believe that the asset residual value guarantees will result in any significant adverse financial impact to the Company. GATX believes these asset residual value guarantees will likely generate future income in the form of fees and residual sharing proceeds.

Lease payment guarantees represent GATX’s guarantees to financial institutions of finance and operating lease payments of unrelated parties in exchange for a fee.

Other consists of GATX’s potential reimbursement obligation to Airbus S.A.S. (“Airbus”) for amounts Airbus may be required to pay under certain specified circumstances to GATX Flightlease Aircraft Ltd. (“GFAC”), a joint venture partially owned by GATX, in connection with an aircraft purchase contract entered into by GFAC and Airbus in 2001. GATX’s potential reimbursement obligation is capped at $77.8 million. No liability has been recorded with respect to this potential reimbursement as GATX believes that the likelihood of any required payment is remote.

GATX and its subsidiaries are also parties to standing letters of credit and bonds primarily related to workers’ compensation and general liability insurance coverages. No material claims have been made against these obligations. At September 30, 2009, management does not expect any material losses to result from these off balance sheet instruments since performance is not expected to be required.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 6. Variable Interest Entities

GATX has investments that are considered VIEs, primarily consisting of leveraged leases and certain investments in affiliates that were acquired or entered into between 1994 and 2002. These VIEs are involved in railcar and equipment leasing activities and are typically financed through a mix of equity investments, debt from equity investors and third party lending arrangements. GATX determined that it is not the primary beneficiary of these VIEs because it does not absorb the majority of expected losses or receive the majority of expected residual returns associated with them. As a result, GATX does not consolidate these VIEs.

At September 30, 2009, the carrying amount and maximum exposure to loss with respect to GATX’s VIEs was as follows (in millions):


	Net		Maximum
	Carrying		Exposure
	Amount		to Loss
Investments in affiliates (a)	$	30.9	$	39.0
Leveraged leases		83.4		83.4

Total	$	114.3	$	122.4


(a)		The difference between the carrying value and maximum loss exposure relates to GATX’s guarantee of an affiliate’s lease obligation that runs through 2018.

NOTE 7. Comprehensive Income

The components of comprehensive income were as follows (in millions):


	Three Months Ended					Nine Months Ended
	September 30					September 30
	2009		2008			2009			2008
Net income	$	19.6	$	73.9		$	59.9		$	165.9
Other comprehensive income, net of tax:
Foreign currency translation gain (loss)		33.9		(56.1	)		17.1			(3.9	)
Unrealized loss on securities		—		(0.8	)		(0.5	)		(0.3	)
Unrealized gain on derivative instruments		—		9.9			2.5			0.2
Post retirement benefit plans		0.3		0.1			0.6			0.3

Comprehensive Income	$	53.8	$	27.0		$	79.6		$	162.2

NOTE 8. Share-Based Compensation

In the first nine months of 2009, GATX granted 393,700 stock appreciation rights (“SAR”), 84,280 restricted stock units, 91,570 performance shares, and 29,006 phantom stock units. For the three and nine months ended September 30, 2009, total share-based compensation expense was $1.9 million ($1.2 million after tax) and $5.0 million ($3.1 million after tax), respectively. For the three and nine months ended September 30, 2008, total share-based compensation expense was $2.3 million ($1.4 million after tax) and $6.5 million ($4.0 million after tax), respectively.

The weighted average estimated fair value of GATX’s 2009 SAR awards and underlying assumptions thereof are noted in the table below. The vesting period for the 2009 SAR grant is three years, with 1/3 vesting after each year.


	2009
Weighted average fair value of SAR award	$	7.35
Annual dividend	$	1.12
Expected life of the SAR, in years		4.3
Risk free interest rate		1.72	%
Dividend yield		6.6	%
Expected stock price volatility		35.98	%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 9. Income Taxes

GATX’s effective tax rate was 30% for the nine months ended September 30, 2009, compared to 27% for the nine months ended September 30, 2008. In the current year, a change in the functional currency tax election of a foreign wholly-owned subsidiary resulted in the recognition of a $2.4 million deferred tax benefit. In 2008, the statute of limitations on a state income tax position taken in a prior period expired, resulting in the recognition of previously unrecognized tax benefits of $6.8 million. Excluding the effect of the tax benefits from each year, GATX’s effective tax rate for the first nine months of 2009 and 2008 was 33% and 30%, respectively. The difference in effective rates is driven by the variability in domestic and foreign sourced pre-tax income, including share of affiliates’ earnings, which are taxed at different income tax rates.

As of September 30, 2009, GATX’s gross liability for unrecognized tax benefits totaled $54.4 million, which, if fully recognized, would decrease income tax expense by $36.6 million ($34.5 million net of federal tax).

NOTE 10. Pension and Other Post-Retirement Benefits

The components of pension and other post-retirement benefit costs for the three months ended September 30, 2009 and 2008, were as follows (in millions):


							2009 Retiree			2008 Retiree
	2009 Pension			2008 Pension			Health and			Health and
	Benefits			Benefits			Life			Life
Service cost	$	1.2		$	1.2		$	0.1		$	0.1
Interest cost		5.8			5.9			0.8			0.8
Expected return on plan assets		(7.9	)		(8.0	)		—			—
Amortization of:
Unrecognized prior service credit		(0.2	)		(0.3	)		(0.1	)		—
Unrecognized net loss (gain)		0.7			0.4			(0.1	)		—

Net costs (a)	$	(0.4	)	$	(0.8	)	$	0.7		$	0.9

The components of pension and other post-retirement benefit costs for the nine months ended September 30, 2009 and 2008, were as follows (in millions):


							2009 Retiree			2008 Retiree
	2009 Pension			2008 Pension			Health and			Health and
	Benefits			Benefits			Life			Life
Service cost	$	3.6		$	3.7		$	0.1		$	0.2
Interest cost		17.6			17.6			2.2			2.4
Expected return on plan assets		(23.1	)		(24.0	)		—			—
Amortization of:
Unrecognized prior service credit		(0.8	)		(0.8	)		(0.1	)		—
Unrecognized net loss (gain)		2.1			1.1			(0.3	)		0.2

Net costs (a)	$	(0.6	)	$	(2.4	)	$	1.9		$	2.8


(a)		The amounts reported herein are based on estimated annual costs. Actual annual costs for the year ending December 31, 2009, may differ from these estimates.

GATX expects to contribute approximately $47 million to its pension plans (domestic and foreign) and approximately $4 million to its other post-retirement benefit plans in 2009. Through September 30, 2009, contributions of $46.6 million have been made to the pension plans and contributions of $3.1 million have been made to the other post-retirement benefit plans. Additional contributions to the domestic funded pension plans will be dependent on several factors including investment returns on plan assets and actuarial experience.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

NOTE 11. Convertible Debt

In August 2003, GATX issued $125.0 million of 5.0% senior unsecured notes due in August 2023 (the “2003 Notes”). The 2003 Notes are contingently convertible into GATX common stock upon the resolution of any of five contingencies, as described in Note 13 to the Company’s consolidated financial statements included in GATX’s May 8th Current Report. At the time of issuance, GATX separated the convertible notes into liability and equity components based on the fair value of the liability component. The resulting debt discount was amortized over five years and was fully amortized by August 2008. Interest expense of $1.6 million and $4.3 million, was recorded for the nine months ended September 30, 2009 and 2008, respectively.

The following table sets forth certain information relating to the 2003 notes as of:


	September 30		December 31
	2009		2008
Principal balance (in millions)	$	41.9	$	41.9
Carrying amount of equity component (in millions)	$	4.3	$	4.3
Intrinsic value (in millions)	$	5.3	$	10.4
GATX common stock price	$	27.95	$	30.97
Conversion price	$	24.81	$	24.81

Potential number of shares issued upon conversion (in millions)		1.7		1.7

NOTE 12. Capital Structure and Earnings Per Share

On January 23, 2008, the Company’s Board of Directors authorized a $200 million share repurchase program. As of September 30, 2009, an aggregate of 4.9 million shares have been repurchased for $131.6 million, of which 2.8 million shares were acquired in 2009 for $55.1 million. The repurchased shares were recorded as treasury stock under the cost method.

Basic earnings per share were computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during each period. Shares issued or reacquired during the period, if applicable, were weighted for the portion of the period that they were outstanding. Diluted earnings per share give effect to the impact of potentially dilutive securities, including convertible preferred stock, stock options, SARs, restricted stock and convertible debt.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table sets forth the computation of basic and diluted net income per common share (in millions, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Numerator:
Net income	$	19.6	$	73.9	$	59.9	$	165.9
Less: Dividends paid and accrued on preferred stock		*		*		*		*

Numerator for basic earnings per share — income available to common shareholders	$	19.6	$	73.9	$	59.9	$	165.9
Effect of dilutive securities:
Add: Dividends paid and accrued on preferred stock		*		*		*		*
After tax interest expense on convertible securities		0.3		0.5		1.0		2.9

Numerator for diluted earnings per share — income available to common shareholders	$	19.9	$	74.4	$	60.9	$	168.8
Denominator:
Denominator for basic earnings per share — weighted average shares		45.9		48.6		46.8		47.3
Effect of dilutive securities:
Equity compensation plans		0.3		0.5		0.3		0.5
Convertible preferred stock		0.1		0.1		0.1		0.1
Convertible securities		1.7		1.7		1.7		3.2

Denominator for diluted earnings per share — adjusted weighted average and assumed conversion		48.0		50.9		48.9		51.1

Basic earnings per share	$	0.43	$	1.52	$	1.28	$	3.51


Diluted earnings per share	$	0.42	$	1.46	$	1.24	$	3.31


*		Less than $0.1 million.

NOTE 13. 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 its 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 discussion of these matters, please refer to Note 18 to the Company’s consolidated financial statements as set forth in GATX’s May 8^th Current Report. Except as noted below, there have been no material changes or developments in these matters.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Polskie Koleje Panstwowe S.A. v. DEC sp. z o.o.

In December 2005, Polskie Koleje Panstwowe S.A. (“PKP”) filed a complaint, Polskie Koleje Panstwowe S.A. v. DEC sp. z o.o., in the Regional Court in Warsaw, Poland against DEC sp. z o.o. (“DEC”), an indirect wholly owned subsidiary of the Company currently named GATX Rail Poland, sp. z o.o. The complaint alleges that, prior to GATX’s acquisition of DEC in 2001, DEC breached a Conditional Sales Agreement (the “Agreement”) to purchase shares of Kolsped S.A. (“Kolsped”), an indirect subsidiary of PKP. The allegedly breached condition required DEC to obtain a release of Kolsped’s ultimate parent company, PKP, from its guarantee of Kolsped’s promissory note securing a $9.8 million bank loan. Pursuant to an amendment to the Agreement, DEC satisfied this condition by providing PKP with a blank promissory note (the “DEC Note”) and a promissory note declaration which allowed PKP to fill in the DEC Note up to $10 million in the event a demand was made upon it as guarantor of Kolsped’s note to the bank (the “Kolsped Note”). In May 1999, the then current holder of the Kolsped Note, a bank (“Bank”), sued PKP under its guarantee. PKP lost the DEC Note and therefore did not use it to satisfy the guarantee, and the Bank ultimately secured a judgment against PKP in 2002. PKP also failed to notify DEC of the Bank’s lawsuit while the lawsuit was pending.

After exhausting its appeals of the judgment entered against it, PKP filed suit against DEC in December 2005, alleging that DEC failed to fulfill its obligation to release PKP as a guarantor of the Kolsped Note and is purportedly liable to PKP, as a third party beneficiary of the Agreement. DEC has filed an answer to the complaint denying the material allegations and raising numerous defenses, including, among others, that: (i) the Agreement did not create an actionable obligation, but rather was a

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

condition precedent to the purchase of shares in Kolsped; (ii) DEC fulfilled that condition by issuing the DEC Note, which was subsequently lost by PKP and declared invalid by a Polish court; (iii) PKP was not a third party beneficiary of the Agreement; and (iv) the action is barred by the governing limitations period. The first day of trial was held on March 5, 2008, and the second day, which had previously been scheduled for September 16, 2008, was adjourned to allow time for the parties to discuss a settlement but no settlement agreement was reached. A trial date previously scheduled for September 9, 2009, was postponed, and the next trial date has not yet been set. GATX Rail Poland intends to vigorously defend this lawsuit.

As of September 30, 2009, PKP claims damages in the amount of PLN 126.4 million or $44.0 million, which consists of the principal amount, interest and costs allegedly paid by it to the Bank and statutory interest. Statutory interest would be assessed only if the court awards damages to PKP, in which case interest would be assessed on the amount of the award from the date of filing of the claim in December 2005 to the date of the award. The Company has recorded an accrual of $15.5 million. While the ultimate resolution of this matter for an amount in excess of this accrual is possible, the Company believes that any such excess would not be material to its financial position or liquidity. However, such resolution could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

Viareggio Derailment

On June 29, 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, Italy. Five tank cars overturned and one of the overturned cars was punctured, resulting in a release of LPG, which subsequently ignited. Thirty-one 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 cause of the accident is currently under investigation. Due to the ongoing nature of the investigation, many of the facts about the accident have not been made available to GATX Rail Austria. GATX Rail Austria and its subsidiaries have offered their cooperation to the authorities who are investigating the accident. GATX Rail Austria has received notices of claims from a small number of persons and companies who allegedly suffered damages as a result of the accident. The Company and its subsidiaries maintain insurance for losses related to property damage and personal injury as is customary for railcar owners and lessors. At this time, the Company cannot predict either the outcome of the investigation or what legal proceedings, if any, may be initiated against GATX Rail Austria, its subsidiaries or personnel, and therefore the Company cannot reasonably estimate the loss or range of loss (including defense costs), if any, that may ultimately be incurred in connection with this accident. The Company has not established any accruals for potential liability related to this accident.

NOTE 14. Financial Data of Business Segments

The financial data presented below depicts the profitability, financial position and capital expenditures of each of GATX’s continuing business segments.

GATX leases, operates and manages long-lived, widely used assets in the rail, marine and industrial equipment markets. GATX also invests in joint ventures that complement existing business activities. Headquartered in Chicago, Illinois, GATX has three financial reporting segments: Rail, Specialty and ASC.

Rail is principally engaged in leasing tank and freight railcars and locomotives. Rail provides railcars primarily pursuant to full-service leases, under which it maintains the railcars, pays ad valorem taxes and insurance, and provides other ancillary services. Rail also offers net leases for railcars and most of its locomotives, in which case the lessee is responsible for maintenance, insurance and taxes.

Specialty provides leasing, asset remarketing and asset management services to the marine and industrial equipment markets. Specialty offers operating leases, direct finance leases and loans, and extends its market reach through joint venture investments.

ASC owns and operates the largest fleet of U.S. flagged self-unloading vessels on the Great Lakes, providing waterborne transportation of dry bulk commodities for a range of industrial customers.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

earning assets. Other costs and expenses include, but are not limited to, maintenance, marine operating costs, asset impairment charges, litigation, provisions for losses, environmental costs and asset storage costs. 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.

GATX allocates debt balances and related interest expense to each segment based upon a pre-determined fixed recourse leverage level expressed as a ratio of recourse debt (including off balance sheet debt) to equity. The leverage levels for Rail, Specialty and ASC are set at 4:1, 3:1 and 1.5:1, respectively. Management believes that by utilizing this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing costs.

The following tables present certain segment data for the three and nine months ended September 30, 2009 and 2008 (in millions):


	Rail		Specialty		ASC			Other			Total
Three Months Ended September 30, 2009
Profitability
Revenues	$	222.6	$	16.4	$	37.3		$	0.2		$	276.5
Share of affiliates’ earnings		3.6		12.0		—			—			15.6

Total gross income		226.2		28.4		37.3			0.2			292.1
Ownership costs		112.0		11.8		5.4			0.6			129.8
Other costs and expenses		66.4		3.4		30.6			—			100.4

Segment profit		47.8		13.2		1.3			(0.4	)		61.9
SG&A												35.0

Income before income taxes												26.9
Capital Expenditures
Portfolio investments and capital additions		105.3		78.3		0.3			2.2			186.1
Selected Balance Sheet Data at September 30, 2009
Investments in affiliated companies		124.9		325.7		—			—			450.6
Identifiable assets		4,159.0		672.7		262.2			164.0			5,257.9

Three Months Ended September 30, 2008
Profitability
Revenues	$	262.9	$	21.6	$	99.5		$	(3.6	)	$	380.4
Share of affiliates’ earnings		14.2		25.9		—			—			40.1

Total gross income		277.1		47.5		99.5			(3.6	)		420.5
Ownership costs		109.0		9.5		6.7			0.3			125.5
Other costs and expenses		61.8		6.1		78.9			—			146.8

Segment profit		106.3		31.9		13.9			(3.9	)		148.2
SG&A												48.1

Income before income taxes												100.1
Capital Expenditures
Portfolio investments and capital additions		138.7		89.0		(1.4	)		1.9			228.2
Selected Balance Sheet Data at December 31, 2008
Investments in affiliated companies		149.7		249.6		—			—			399.3
Identifiable assets		4,113.3		649.7		275.3			152.1			5,190.4

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Rail			Specialty		ASC		Other			Total
Nine Months Ended September 30, 2009
Profitability
Revenues	$	685.4		$	57.0	$	78.8	$	1.0		$	822.2
Share of affiliates’ earnings		(8.8	)		31.8		—		—			23.0

Total gross income		676.6			88.8		78.8		1.0			845.2
Ownership costs		337.6			35.0		13.1		2.8			388.5
Other costs and expenses		203.8			10.3		55.6		(1.2	)		268.5

Segment profit		135.2			43.5		10.1		(0.6	)		188.2
SG&A												102.1

Income before income taxes												86.1
Capital Expenditures
Portfolio investments and capital additions		277.3			85.9		6.9		6.4			376.5
Selected Balance Sheet Data at September 30, 2009
Investments in affiliated companies		124.9			325.7		—		—			450.6
Identifiable assets		4,159.0			672.7		262.2		164.0			5,257.9

Nine Months Ended September 30, 2008
Profitability
Revenues	$	759.0		$	69.1	$	203.9	$	(3.2	)	$	1,028.8
Share of affiliates’ earnings		19.1			62.0		—		—			81.1

Total gross income		778.1			131.1		203.9		(3.2	)		1,109.9
Ownership costs		330.2			26.5		15.9		2.5			375.1
Other costs and expenses		197.5			12.2		168.2		0.5			378.4

Segment profit		250.4			92.4		19.8		(6.2	)		356.4
SG&A												129.1

Income before income taxes												227.3
Capital Expenditures
Portfolio investments and capital additions		266.7			158.6		6.4		13.1			444.8
Selected Balance Sheet Data at December 31, 2008
Investments in affiliated companies		149.7			249.6		—		—			399.3
Identifiable assets		4,113.3			649.7		275.3		152.1			5,190.4

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

Forward Looking Statements

This document contains statements that may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor provisions of those sections and the Private Securities Litigation Reform Act of 1995. Some of these statements may be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” or other words and terms of similar meaning. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in GATX’s Annual Report on Form 10-K for the year ended December 31, 2008, Quarterly Report on Form 10-Q for the period ended June 30, 2009, and other filings with the SEC, and that actual results or developments may differ materially from those in the forward-looking statements. Specific factors that might cause actual results to differ from expectations include, but are not limited to, general economic, market, regulatory and political conditions in the rail, marine, industrial and other industries served by GATX and its customers; lease rates, utilization levels and operating costs in GATX’s primary asset segments; conditions in the capital markets; changes in GATX’s credit ratings and financing costs; regulatory rulings that may impact the economic value and operating costs of assets; costs associated with maintenance initiatives; competitive factors in GATX’s primary markets including lease pricing and asset availability; changes in loss provision levels within GATX’s portfolio; impaired asset charges that may result from changing market conditions or portfolio management decisions implemented by GATX; the opportunity for remarketing income; the outcome of pending or threatened litigation; and other factors. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as of the date hereof. GATX has based these forward-looking statements on information currently available and disclaims any intention or obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

Business Overview

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on financial data derived from the financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) and certain other financial data that is 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.

GATX Corporation leases, operates and manages long-lived, widely used assets in the rail, marine and industrial equipment markets. GATX also invests in joint ventures that complement existing business activities. Headquartered in Chicago, Illinois, GATX has three financial reporting segments: Rail, Specialty and American Steamship Company (“ASC”).

Operating results for the nine months ended September 30, 2009, are not necessarily indicative of the results that may be achieved for the entire year ending December 31, 2009. For further information, refer to the Company’s Current Report on Form 8-K, containing the consolidated financial statements for the year ended December 31, 2008, filed with the Securities and Exchange Commission (“SEC”) on May 8, 2009 (“GATX’s May 8^th Current Report”).

DISCUSSION OF OPERATING RESULTS

Net income was $59.9 million or $1.24 per diluted share for the first nine months of 2009 compared to net income of $165.9 million or $3.31 per diluted share for the first nine months of 2008. The 2009 results include after tax unrealized losses of $18.5 million or $0.38 per diluted share related to certain interest rate swaps at GATX’s AAE Cargo A.G. affiliate (AAE). Results for the first nine months of 2008 include $26.4 million or $0.52 per diluted share in aggregate after tax income from the reversal of an income tax accrual, a gain on the sale of real estate and the reversal of environmental reserves, both in Europe, and net unrealized gains related to AAE interest rate swaps.

Net income was $19.6 million or $0.42 per diluted share for the third quarter of 2009 compared to net income of $73.9 million or $1.46 per diluted share for the third quarter of 2008. Third quarter 2008 results include after tax income of $24.4 million or $0.48 per diluted share in income from a gain on the sale of real estate and the reversal of environmental reserves as well as unrealized gains from AAE interest rate swaps.

Total investment volume was $376.5 million for the first nine months of 2009 compared to $444.8 million for the first nine months of 2008.

The following table presents a financial summary of GATX’s operating segments (in millions, except per share data):


	Three Months Ended						Nine Months Ended
	September 30						September 30
	2009			2008			2009			2008
Gross Income
Rail	$	226.2		$	277.1		$	676.6		$	778.1
Specialty		28.4			47.5			88.8			131.1
ASC		37.3			99.5			78.8			203.9

Total segment gross income		291.9			424.1			844.2			1,113.1
Other income		0.2			(3.6	)		1.0			(3.2	)

Consolidated Gross Income		292.1			420.5			845.2			1,109.9


Segment Profit
Rail		47.8			106.3			135.2			250.4
Specialty		13.2			31.9			43.5			92.4
ASC		1.3			13.9			10.1			19.8

Total Segment Profit		62.3			152.1			188.8			362.6
Less:
Selling, general and administrative expenses		35.0			48.1			102.1			129.1
Unallocated interest expense, net		0.6			0.3			3.0			2.7
Other, including eliminations		(0.2	)		3.6			(2.4	)		3.5
Income taxes		7.3			26.2			26.2			61.4

Net Income	$	19.6		$	73.9		$	59.9		$	165.9


Basic earnings per share	$	0.43		$	1.52		$	1.28		$	3.51
Diluted earnings per share	$	0.42		$	1.46		$	1.24		$	3.31

Return on Equity

GATX’s return on equity (“ROE”) is shown for the trailing twelve months ended September 30:


	2009			2008
ROE		7.4	%		17.5	%

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 and affiliates’ earnings attributable to the segments, as well as ownership costs and other costs that management believes are directly associated with the maintenance or operation of the revenue earning assets. Other costs and expenses include, but are not limited to, maintenance, marine operating costs, asset impairment charges, litigation, provisions for losses, environmental costs and asset storage costs. Segment profit excludes selling, general and administrative expenses, income taxes and certain other amounts not allocated to the segments. These amounts are discussed below in Other.

GATX allocates debt balances and related interest expense to each segment based upon a pre-determined, fixed recourse leverage level expressed as a ratio of recourse debt (including off balance sheet debt) to equity. The leverage levels for Rail, Specialty and ASC are set at 4:1, 3:1 and 1.5:1, respectively. Management believes that by utilizing this leverage and interest expense allocation methodology, each operating segment’s financial performance reflects appropriate risk-adjusted borrowing costs.

Rail

Segment Summary

During 2009, continued economic weakness in North America has negatively affected lease pricing and demand for railcars. While Rail continued to re-lease the majority of its cars whose leases expired, new lease rates are generally lower. Utilization, after holding steady at approximately 98% throughout 2008, has trended down in 2009, as expected. At the end of the third quarter, North American fleet utilization was 95.9%, compared to 96.0% at the end of the second quarter and 96.5% at the end of the first quarter. The GATX Lease Price Index (the “LPI”) (see definition below) declined 8.5% in the third quarter of 2009, compared to a decline of 9.8% for the second quarter of 2009 and a decline of 0.3% for the third quarter of 2008. Lease terms on renewals for LPI cars averaged 39 months in the third quarter of 2009, compared to 36 months for the second quarter of 2009 and 57 months in the third quarter of 2008. The decrease in the length of lease renewals in 2009 reflects GATX’s desire to shorten term in anticipation of an eventual market recovery. Rail entered 2009 with leases on approximately 15,000 cars scheduled to expire. As of September 30, 2009, leases on approximately 4,000 cars are scheduled to expire in the fourth quarter. Additionally, leases covering approximately 16,500 cars are scheduled to expire in 2010. Renewal success and rental rates associated with these scheduled expirations, in light of current market conditions, are expected to have a dampening effect on lease income in the near term.

In Europe, economic weakness is also having a negative impact on rail operations, most significantly in the freight car sector. Rail’s wholly-owned European tank car fleet has a high concentration of cars deployed in the petroleum market, which had exhibited relatively stable demand compared to other car types. However, the severity of the current economic downturn has started to negatively affect demand for cars serving this market as well. Utilization of the wholly-owned tank car fleet declined to 94.7% at the end of the third quarter, compared to 95.6% at the end of the second quarter and 96.5% at the end of the first quarter. AAE is experiencing substantial market pressure due to its concentration in freight cars, particularly intermodal cars.

During the first nine months of 2009, Rail’s investments, which consisted primarily of new railcars acquired pursuant to existing commitments and portfolio acquisitions, were $277.3 million compared to $266.7 million in 2008. At September 30, 2009, Rail had total assets of $5.2 billion, including $1.0 billion of off balance sheet assets, compared to $5.0 billion, including $1.0 billion of off balance sheet assets, at September 30, 2008.

Components of Rail’s operating results are outlined below (in millions):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009			2008
Gross Income
Lease income	$	208.8	$	218.5	$	634.3		$	658.5
Asset remarketing income		0.2		8.5		11.4			21.7
Other income		13.6		35.9		39.7			78.8

Revenues		222.6		262.9		685.4			759.0
Affiliates’ earnings		3.6		14.2		(8.8	)		19.1

		226.2		277.1		676.6			778.1

Ownership Costs
Depreciation		47.4		45.9		141.0			135.7
Interest expense, net		30.6		28.4		95.7			84.8
Operating lease expense		34.0		34.7		100.9			109.7

		112.0		109.0		337.6			330.2

Other Costs and Expenses
Maintenance expense		61.0		60.0		185.1			182.0
Other		5.4		1.8		18.7			15.5

		66.4		61.8		203.8			197.5

Segment profit	$	47.8	$	106.3	$	135.2		$	250.4

GATX Lease Price Index

The LPI is an internally generated business indicator that measures general lease rate pricing on renewals within Rail’s North American fleet. The index reflects the weighted average lease rate for a select group of railcar types that GATX believes to be representative of its overall North American fleet. The LPI measures the percentage change between the weighted average expiring lease rate and the weighted average renewal lease rate. Average renewal term reflects the weighted average renewal lease term in months.

The following table summarizes Rail’s average active cars for the three and nine months ended September 30:


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
North America		106,136		107,565		107,867		108,502
Europe		19,045		19,074		19,104		19,009

Rail’s Lease Income

Components of Rail’s lease income for the three and nine months ended September 30 are outlined below (in millions):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
North America	$	164.2	$	169.4	$	506.2	$	513.0
Europe		36.6		40.3		104.0		119.5
Locomotives		8.0		8.8		24.1		26.0

	$	208.8	$	218.5	$	634.3	$	658.5

Comparison of the First Nine Months of 2009 to the First Nine Months of 2008

Segment Profit

Rail’s segment profit in 2009 was impacted by $22.0 million of unrealized losses due to changes in the fair value of certain interest rate swaps at AAE. Segment profit in 2008 reflected a $12.0 million gain on the sale of an office building and the reversal of $8.2 million of reserves due to the settlement of an environmental liability, both in Europe, and a $3.7 million unrealized gain on the interest rate swaps at AAE. Excluding these items, Rail’s segment profit decreased $69.3 million, primarily due to lower lease, scrapping and asset remarketing income.

Gross Income

Lease income in North America decreased $6.8 million, primarily due to fewer cars on lease and $5.2 million of reduced rents on restructured leases resulting from customer bankruptcies and non-performing leases. These items were partially offset by higher lease rates on leases renewed in the prior year. On average during the first nine months of 2009, there were approximately 600 fewer railcars on lease as compared to the first nine months of 2008, primarily due to lease-end returns. The current year includes 3,650 active cars that were acquired in December 2008 from Allco Finance Group Limited (“Allco”), largely offsetting the impact of lease-end returns on 2009 lease income. In Europe, a $15.5 million decrease in lease income was driven by the unfavorable foreign exchange effects of a stronger U.S. Dollar and was partially offset by higher lease rates and an average of 95 more cars on lease. Asset remarketing income decreased $10.3 million due to fewer asset sales in the current period. Other income was $39.1 million lower, primarily due to lower scrap income (driven by significantly lower steel prices), a $12.0 million gain on the sale of an office building recorded in 2008 and the receipt in the prior year of a lease termination fee. Affiliates’ earnings were lower due to the $22.0 million unrealized loss at AAE compared to the $3.7 million unrealized gain in 2008. Excluding the unrealized loss and gain, 2009 affiliates’ earnings were lower primarily due to a casualty gain recognized by an affiliate in the prior year and lower operating results at AAE due to fewer cars on lease.

AAE holds multiple derivative instruments to hedge interest rate risk associated with forecasted floating rate debt issuances. These instruments do not qualify for hedge accounting and as a result, changes in their fair values are recognized currently in income. The unrealized loss recognized in 2009 was primarily driven by the significant decline in benchmark interest rates. AAE’s earnings may be impacted by future unrealized gains or losses associated with these instruments.

Ownership Costs

Ownership costs increased $7.4 million, net of a $7.0 million reduction due to the favorable foreign exchange effects of a stronger U.S. Dollar. The increase in ownership costs was largely driven by interest and depreciation expense associated with investment volume over the last 12 months, particularly the acquisition of the Allco fleet. The mix of ownership costs was

impacted by the sale and lease-back of railcars in 2009 and the purchases of previously leased-in railcars in 2009 and 2008.

Other Costs and Expenses

In North America, maintenance costs increased $12.2 million, largely due to higher car volumes, increased lessee turnover activity and increased repairs performed by railroads. In Europe, maintenance costs were $9.1 million lower, primarily due to the favorable foreign exchange effects of a stronger U.S. Dollar and the receipt of a manufacturer’s reimbursement for the cost of certain warranty repairs performed by GATX.

Other in 2009 included a $2.8 million insurance recovery related to a fire at a GATX repair facility in Europe, a $6.9 million reversal of provision for losses and a $4.8 million asset impairment charge. Both the provision reversal and impairment were recorded in connection with the restructuring of leases with a customer who had declared bankruptcy. Other in 2008 included the aforementioned reversal of $8.2 million of environmental reserves. Excluding these items, Other in 2009 was comparable to the prior year.

Comparison of the Third Quarter 2009 to the Third Quarter 2008

Segment Profit

Rail’s segment profit for the third quarter of 2008 reflected a $12.0 million gain on the sale of an office building and the reversal of $8.2 million of reserves due to the settlement of an environmental liability, both in Europe, and a $9.2 million unrealized gain on interest rate swaps at AAE. Excluding these items, Rail’s segment profit decreased $29.1 million in the third quarter of 2009, primarily due to lower lease, scrapping and asset remarketing income.

Gross Income

Lease income in North America decreased $5.2 million, primarily due to fewer cars on lease and $2.5 million of reduced rents on restructured leases resulting from customer bankruptcies. On average during the third quarter of 2009, there were approximately 1,400 fewer railcars on lease as compared to the third quarter of 2008, primarily due to lease-end returns. The current year includes 3,650 active cars that were acquired in December 2008 from Allco, largely offsetting the impact of lease-end returns on 2009 lease income. In Europe, a $3.7 million decrease in lease income due to the unfavorable foreign exchange effects of a stronger U.S. Dollar was partially offset by higher renewal rates in 2009. Asset remarketing income decreased $8.3 million due to fewer asset sales in the current period. Other income was $22.3 million lower, primarily due to lower scrap income largely resulting from significantly lower steel prices and a $12.0 million gain on the sale of an office building recorded in 2008. Affiliates’ earnings were lower due to a $9.2 million unrealized gain recorded by AAE in 2008. Excluding the unrealized gain, 2009 affiliates’ earnings were lower primarily due to a casualty gain recognized by an affiliate in the prior year, unfavorable foreign exchange and lower operating results at AAE due to fewer cars on lease.

Ownership Costs

Ownership costs increased $3.0 million, primarily due to interest and depreciation associated with investment volume over the last 12 months, particularly the acquisition of the Allco fleet. The mix of ownership costs was impacted by the sale and lease-back of railcars in 2009 and the purchases of previously leased-in railcars in 2009 and 2008.

Other Costs and Expenses

In North America, maintenance costs were $1.8 million higher largely due to base fleet maintenance due to increased lessee turnover and higher regulatory compliance costs. In Europe, maintenance costs were $0.8 million lower, primarily due to the favorable foreign exchange effects of a stronger U.S. Dollar, partially offset by higher repair and revision expenses.

Other increased $3.6 million, primarily due to the reversal of $8.2 million of reserves in 2008 resulting from the settlement of an environmental liability in Europe, partially offset by a $2.8 million insurance recovery related to a GATX repair facility in Europe and a $1.2 million reversal of bad debt provision in the current period.

Rail Regulatory Update

Rules Affecting TIH Cars. On January 13, 2009, the U.S. Pipeline and Hazardous Materials Safety Administration, in coordination with the Federal Railroad Administration (“FRA”) issued final interim rules (the “FRA Interim Rules”) that, among other things, establish new interim design standards for pressurized tank cars that transport toxic-by-inhalation hazardous materials (“TIH cars”). The designation “final interim” indicates that the FRA intends to continue to research enhanced design standards for TIH cars and will issue additional rulemaking in the future that will prescribe final design requirements. Under the FRA Interim Rules, TIH cars manufactured after the effective date of the rules must be built to a higher pressure class rating relative to U.S Department of Transportation specifications for tank cars. Unlike the original version of the rules proposed in April 2008, the FRA Interim Rules as adopted do not include a retirement schedule for TIH cars manufactured prior to effective date of the rules. However, the FRA Interim Rules require that existing TIH cars receive appropriate certification from the Association of American Railroads (“AAR”) in order to remain in TIH service. The certification requirements are currently being developed by the AAR and, depending on the final certification requirements adopted, it is possible that some existing TIH cars will need to be removed from TIH service. Until these certification procedures are finalized, GATX cannot reasonably conclude precisely what impact, if any, the FRA Interim Rules may have on GATX’s tank car fleet. Once final certification standards are adopted, GATX will evaluate the technical requirements of the final design standards to determine the effect on its fleet.

As of September 30, 2009, approximately 2,100 TIH cars remained in service in GATX’s fleet (approximately 1.9% of its North American fleet) and, based upon management’s review, GATX does not expect that the FRA Interim Rules will have a material impact on the Company’s financial position or results of operations.

European Regulatory Developments. An immaterial number of railcars owned by GATX Rail Austria GmbH (an indirect subsidiary of the Company, “GATX Rail Austria”) and its subsidiaries, have been affected by restrictions on their movement imposed by the Italian rail safety authorities. Similar restrictions on movement of these cars imposed by the French rail safety authorities were lifted in September, 2009. The restrictions are focused on certain wheelsets of the type installed on one of the railcars involved in the June 29, 2009, accident in the city of Viareggio, Italy. (See Note 13 to the consolidated financial statements for further information on the accident.) GATX Rail Austria and its subsidiaries are in the process of implementing a modified wheelset inspection program that is consistent with recent enhancements to European railcar industry practices. Future industry actions in response to the Viareggio accident may require further modifications of the maintenance and inspection practices of GATX Rail Austria and its subsidiaries. The scope and cost of any potential future maintenance initiatives by GATX Rail Austria and its subsidiaries are not known at this time. The Company does not currently expect that any costs associated with these potential initiatives will be material to the Company’s financial position or liquidity. However, any such costs could have a material adverse effect on the results of operations in a particular quarter or fiscal year.

Specialty

Segment Summary

Capital market volatility continues to create investment uncertainty for Specialty’s industrial equipment customers, which has resulted in limited investment opportunities in 2009. Specialty’s total asset base, including off balance sheet assets, was $676.9 million at September 30, 2009, compared to $654.4 million at December 31, 2008, and $681.5 million at September 30, 2008. During the first nine months of 2009, Specialty invested $85.9 million, compared to $158.6 million in the first nine months of 2008. Included in Specialty’s 2009 investment volume was a $54.3 million scheduled repayment of an affiliate loan. Specialty continues to pursue investment opportunities; however, realization of these opportunities will be dependent on a number of factors, including market conditions and expected returns.

Components of Specialty’s operating results are outlined below (in millions):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009		2008
Gross Income
Lease income	$	13.2	$	14.0	$	41.5	$	41.7
Asset remarketing income		2.9		6.0		13.8		22.9
Other income		0.3		1.6		1.7		4.5

Revenues		16.4		21.6		57.0		69.1
Affiliates’ earnings		12.0		25.9		31.8		62.0

		28.4		47.5		88.8		131.1

Ownership Costs
Depreciation		4.7		4.2		14.5		12.2
Interest expense, net		6.9		4.9		19.5		13.0
Operating lease expense		0.2		0.4		1.0		1.3

		11.8		9.5		35.0		26.5

Other Costs and Expenses		3.4		6.1		10.3		12.2

Segment profit	$	13.2	$	31.9	$	43.5	$	92.4

Specialty’s Portfolio Data

The following table summarizes information on the owned and managed Specialty portfolio (in millions):


	September 30		December 31		March 31		June 30		September 30
	2008		2008		2009		2009		2009

Net book value of owned assets (a)		681.5		654.4		641.3		611.4		676.9
Net book value of managed portfolio		315.2		285.9		274.1		269.2		262.3


(a)		Includes off balance sheet assets

Comparison of the First Nine Months of 2009 to the First Nine Months of 2008

Segment Profit

Specialty’s segment profit was $48.9 million lower, primarily due to lower marine affiliates’ earnings, lower asset remarketing income and higher ownership costs.

Gross Income

Lease income was slightly lower, primarily due to lower usage rents from pooled barges and a non-performing lease investment, partially offset by current year income from new investments. Asset remarketing income decreased $9.1 million, reflective of reduced secondary market activity. The current year included $10.6 million in residual sharing income and $3.2 million from the sale of assets, while the prior year included $14.1 million of residual sharing income and $8.8 million from the sale of assets. Other income was $2.8 million lower, primarily due to $2.4 million of fees received in the prior year from the termination of residual value guarantee (RVG) contracts. Affiliates’ earnings decreased $30.2 million due to a combination of factors in the marine joint ventures, including lower charter rates and shipping volumes attributable to the slowdown in the global economy and several out of service vessels undergoing repairs. Affiliates’ earnings also included $2.4 million of remarketing gains in 2009 compared to $4.6 million in 2008.

Ownership Costs

Ownership costs were $8.5 million higher, primarily due to interest and depreciation expense related to investments made in 2008.

Other Costs and Expenses

Other costs and expenses decreased $1.9 million, primarily due to lower pooled barge operating costs, partially offset by an

increase in provision for losses.

Comparison of Third Quarter 2009 to Third Quarter 2008

Segment Profit

Specialty’s segment profit was $18.7 million lower, primarily due to lower marine affiliates’ earnings and lower asset remarketing income.

Gross Income

Lease income was $0.8 million lower, primarily due to lower usage rents from pooled barges and a non-performing lease investment, partially offset by current year income from new investments. Asset remarketing income decreased $3.1 million, primarily due to a residual sharing fee received in the prior year. Other income was $1.3 million lower, primarily due to $2.4 million of fees received in the prior year from the termination of RVG contracts. Affiliates’ earnings decreased $13.9 million due to a combination of factors in the marine joint ventures, including lower charter rates and shipping volumes attributable to the slowdown in the global economy and out of service vessels undergoing repairs. Affiliates’ earnings also included $2.0 million of remarketing gains in 2009 compared to $4.6 million in 2008.

Ownership Costs

Ownership costs were $2.3 million higher, primarily due to increased interest and depreciation expense related to investments made in 2008.

Other Costs and Expenses

Other costs and expenses decreased $2.7 million, primarily due to lower pooled barge operating costs and lower asset impairment charges.

ASC

Segment Summary

The Great Lakes transportation market is severely depressed, primarily due to the downturn in the steel industry. As a result, ASC’s customers have significantly reduced freight volume requirements for 2009. For the first nine months of 2009, ASC carried 12.6 million net tons of freight, compared to 26.6 million net tons for the prior year period. Late in the third quarter, certain steel manufacturers restarted a small number of idle facilities, and demand for iron ore shipments increased accordingly. At the end of the third quarter of 2009, ASC had eight vessels in service compared to its full fleet of 18 vessels at September 30, 2008. In the fourth quarter, ASC may return certain of its laid-up vessels into service to meet this increase in customer demand. There is no indication at this time, however, that this moderate level of increased demand will continue into the 2010 sailing season.

Components of ASC’s operating results are outlined below (in millions):


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2009		2008		2009			2008
Gross Income
Marine operating revenues	$	36.3	$	98.4	$	75.7		$	200.7
Lease income		1.0		1.1		3.1			3.2

		37.3		99.5		78.8			203.9

Ownership costs
Depreciation		3.2		4.3		6.3			8.6
Interest expense, net		2.2		2.4		6.8			7.3

		5.4		6.7		13.1			15.9

Other Costs and Expenses
Maintenance expense		4.8		5.2		10.2			11.7
Marine operating expense		25.8		73.6		51.0			153.5
Other		—		0.1		(5.6	)		3.0

		30.6		78.9		55.6			168.2

Segment profit	$	1.3	$	13.9	$	10.1		$	19.8

Comparison of the First Nine Months of 2009 to the First Nine Months of 2008.

Segment Profit

ASC’s segment profit was $9.7 million lower, primarily due to significantly lower freight volume in 2009, partially offset by lower depreciation expense due to an increase in the estimated depreciable lives of certain of ASC’s vessels. Additionally, segment profit was impacted by a $5.6 million litigation recovery recorded in the current year compared to a $2.9 million charge for litigation recorded in the prior year.

Gross Income

Gross income decreased $125.1 million, primarily due to significantly lower freight volume and a reduction in fuel surcharges (the effect of which is largely offset in operating costs) in 2009.

Ownership Costs

Ownership costs decreased $2.8 million, primarily due to $2.3 million lower depreciation expense resulting from an increase in the estimated useful lives of 12 of ASC’s 18 vessels.

Other Costs and Expenses

Maintenance costs were $1.5 million lower, primarily due to fewer vessels in service. Marine operating expenses decreased $102.5 million, primarily due to reduced shipping activity and lower fuel costs in 2009. Other in 2009 includes the receipt of a $5.6 million litigation settlement and in 2008 includes a charge for an adverse legal judgment.

Comparison of Third Quarter 2009 to Third Quarter 2008

Segment Profit

ASC’s segment profit was $12.6 million lower, primarily due to significantly lower freight volume in the third quarter of 2009, partially offset by lower depreciation expense due to the aforementioned change in estimated depreciable lives.

Gross Income

Gross income decreased $62.2 million, primarily due to significantly lower freight volume and reduced fuel surcharges (the effect of which is largely offset in operating costs) in 2009.

Ownership Costs

Ownership costs were $1.3 million lower, primarily due to $1.1 million lower depreciation expense resulting from an increase in the estimated useful lives of 12 of ASC’s 18 vessels.

Other Costs and Expenses

Maintenance costs were $0.4 million lower, primarily due to fewer vessels in service. Marine operating expenses decreased $47.8 million, primarily due to reduced shipping activity and lower fuel costs in 2009.

ASC Regulatory Issues

During 2008, the United States Environmental Protection Agency (“EPA”) and various states that border the Great Lakes initiated rulemaking or proposed legislation to address discharges incidental to the normal operation of ships, including ballast water. The EPA, in response to a successful challenge to the exemption of such incidental discharges from the permitting requirements of the Clean Water Act (“CWA”), adopted, effective December 19, 2008, a new Vessel General Permit (“VGP”) to regulate these discharges. In addition, many states have imposed state-specific limitations and monitoring requirements which have become enforceable conditions of the VGP pursuant to Section 401(d) of the CWA. Some of these additional conditions are being challenged in the courts or in administrative proceedings. ASC will comply with the VGP, including additional conditions imposed by the states, by implementing the best management practices required by the VGP through revised vessel management plans, operational procedures and recordkeeping. New York and Minnesota will require the installation of a ballast treatment system on existing vessels by 2012 and 2016, respectively. To date no treatment systems have been approved that are capable of effectively treating ballast in the volumes and pumping rates for Great Lakes ships. Accordingly, at this time ASC cannot determine the impact on its operations of the installation of such systems. ASC is working with federal regulators to test ship-board delivery systems for ballast water treatment and continues to offer its fleet to assist in educating state regulators on Great Lakes ship design and systems.

Other

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

Components of Other are outlined below (in millions):


	Three Months Ended					Nine Months Ended
	September 30					September 30
	2009			2008		2009			2008
Selling, general and administrative expenses	$	35.0		$	48.1	$	102.1		$	129.1
Unallocated interest expense, net		0.6			0.3		3.0			2.7
Other income and expense, including eliminations		(0.2	)		3.6		(2.4	)		3.5
Income taxes		7.3			26.2		26.2			61.4

SG&A for the first nine months of 2009 was $27.0 million lower than the prior year. 2008 included $5.2 million of business development costs and a $2.2 million write-off of previously capitalized costs related to an internal software development project. Excluding these items, SG&A was lower primarily due to lower compensation expense and other SG&A spending and $3.4 million of favorable foreign exchange effects of a stronger U.S. dollar. Unallocated interest expense, which is the difference between actual external interest expense incurred (net of interest income earned on certain cash balances) and amounts allocated to the reporting segments in accordance with assigned leverage targets, was slightly higher in the current year. Other income and expense for the first nine months of 2009 was favorable compared to the prior year, primarily due to a reduction of a non-income tax accrual in the current year and the absence of a $3.8 million write-down of a money market fund investment recorded in the prior year.

Income Taxes

tax position taken in a prior period expired, resulting in the recognition of previously unrecognized tax benefits of $6.8 million. Excluding the effect of the tax benefits from each year, GATX’s effective tax rate for the first nine months of 2009 and 2008 was 33% and 30%, respectively. The difference in effective rates is driven by the variability in domestic and foreign sourced pre-tax income, including share of affiliates’ earnings, which are taxed at different income tax rates.

Cash Flow and Liquidity

Over the course of a full year, GATX expects to generate significant cash flow from a combination of operating activities and investment portfolio proceeds. This cash flow is used to service debt, pay dividends, and fund portfolio investments and capital additions. Cash flow from operations and portfolio proceeds are impacted by changes in working capital and the timing of asset dispositions. As a result, cash flow components will vary quarter to quarter.

Net cash provided by operating activities for the first nine months of 2009 was $132.0 million, a decrease of $84.0 million from the prior year. The decrease was primarily driven by significantly higher contributions to GATX’s pension plans, reduced joint venture distributions, lower lease income and other changes in working capital.

Portfolio investments and capital additions for the first nine months of 2009 totaled $376.5 million, a decrease of $68.3 million from the prior year. Rail investments in 2009 were $277.3 million and Specialty investments were $85.9 million. Specialty’s investments include the $54.3 million scheduled repayment of a loan from an affiliate. The timing of investments is dependent on transaction opportunities and market conditions. Portfolio proceeds totaled $55.2 million for the first nine months of 2009, a decrease of $48.2 million from the prior year. The decrease was primarily due to lower asset remarketing proceeds, reflective of lower asset prices in the current economic environment and reduced secondary market activity.

GATX acquired 571 previously leased-in railcars for $10.7 million in the first nine months of 2009, and 3,628 previously leased-in railcars for $70.1 million in 2008. Additionally, in 2009, GATX completed a sale-leaseback for 597 railcars (net book value $40.4 million) for net proceeds of $45.7 million. Other proceeds of $50.1 million for the first nine months of 2009 primarily consisted of $33.1 million received from the partial liquidation of a money market fund investment and $16.2 million from the scrapping of railcars. Other proceeds for the first nine months of 2008 primarily consisted of $35.9 million from the scrapping of railcars and $22.2 million from the sale of an office building in Europe. Other investing activity of $42.1 million in 2008 reflects the Balance Sheet reclassification of a money market fund investment balance from Cash and Cash Equivalents to Other Assets.

In addition to cash from operations, GATX expects to meet debt, lease and dividend obligations through commercial paper issuances, committed revolving credit facilities and the issuance of secured and unsecured debt. GATX utilizes both domestic and international banks and capital markets.

Proceeds from the issuance of debt for the first nine months of 2009 were $636.5 million (net of hedges and debt issuance costs). Debt issuances consisted of $300 million of three-year unsecured notes with a yield of 4.77%, $300 million of five-year unsecured notes with a yield of 9.0% and $50 million of five-year floating rate secured bank debt with an initial floating rate of 4.91%. Debt repayments for the first nine months of 2009 were $409.9 million, consisting of scheduled maturities and principal payments.

In the first nine months of 2009, 2.8 million shares of GATX common stock were repurchased for $55.1 million. In the first nine months of 2008, 2.1 million shares were repurchased for $76.5 million. These purchases were made under the Company’s $200 million share repurchase program and as of September 30, 2009, $68.6 million of authorization remains.

GATX has a $550 million unsecured revolving credit facility that matures in May 2012. As of September 30, 2009, availability under the facility was $494.3 million, with $43.4 million of commercial paper issued and $12.3 million of letters of credit issued, both backed by the facility. GATX terminated a $100 million, 364-day, unsecured revolving credit facility, at the end of the third quarter of 2009.

The $550 million revolving credit facility contains various restrictive covenants, including requirements to maintain a fixed charge coverage ratio and an asset coverage test. The indentures for GATX’s public debt also contain limitation on lien provisions that limit the amount of secured indebtedness that GATX may incur, subject to several exceptions, including those permitting an unlimited amount of purchase money indebtedness and nonrecourse indebtedness. The loan agreements for certain of GATX’s wholly-owned European 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 these subsidiaries to repay loans to certain related parties (including GATX) and to pay dividends to GATX. The covenants relating to loans and dividends effectively limit the ability of GRE to transfer funds to GATX. GATX does not anticipate any covenant violations nor

does it anticipate that any of these covenants will restrict its operations or its ability to procure additional financing. As of September 30, 2009, GATX was in compliance with all covenants and conditions of its credit facilities, bank term loans, public debt indentures and European subsidiary loan agreements.

The availability of GATX’s funding options may be affected by certain factors, including the global capital market environment and outlook as well as GATX’s financial performance. GATX’s access to capital markets at competitive rates is dependent on its credit rating and rating outlook, as determined by rating agencies such as Standard & Poor’s (“S&P”) and Moody’s Investor Service (“Moody’s”). As of September 30, 2009, GATX’s long-term unsecured debt was rated BBB+ by S&P and Baa1 by Moody’s. GATX’s short-term unsecured debt was rated A-2 by S&P and P-2 by Moody’s. During the second quarter, Moody’s revised its rating outlook on GATX from stable to negative. During the third quarter, S&P removed GATX from credit watch negative, affirmed GATX’s long term unsecured debt credit rating at BBB+ and changed GATX’s rating outlook from stable to negative. GATX does not expect these actions or potential subsequent actions to have a material impact on GATX’s access to the capital markets or to its future debt financing costs.

Contractual Commitments

At September 30, 2009, GATX’s unconditional obligations of $ 103.4 million were as follows (in millions):


	Payments Due by Period
	Total		2009		2010		2011		2012		2013		Thereafter
Unconditional purchase obligations (a)	$	97.2	$	63.1	$	33.2	$	0.9	$	—	$	—	$	—
Loan from affiliate		6.2		—		6.2		—		—		—		—

	$	103.4	$	63.1	$	39.4	$	0.9	$	—	$	—	$	—


(a)		Primarily contractual railcar commitments.

Defined Benefit Plan Contributions

GATX contributed $45 million to its domestic funded pension plans in 2009. These contributions combined with year-to-date investment returns in 2009 have resulted in an aggregate funding position in excess of 90% for GATX’s domestic funded pension plans as of September 30, 2009. Additional contributions will be dependent on a number of factors including plan asset investment returns and actuarial experience.

Critical Accounting Policies

There have been no changes to GATX’s critical accounting policies during the nine months ending September 30, 2009. For a summary of GATX’s policies, refer to Note 3 to the Company’s consolidated financial statements for the year ended December 31, 2008, as set forth in GATX’s May 8^th Current Report.

Non-GAAP Financial Information

This report includes certain financial performance measures computed using non-Generally Accepted Accounting Principles (“GAAP”) components as defined by the SEC. As required under SEC rules, GATX has provided a reconciliation of these non-GAAP components to the most directly comparable GAAP components. Financial performance measures disclosed in this report are meant to provide additional information and insight into the historical operating results and financial position of the business. Management uses these performance measures to assist in analyzing GATX’s underlying financial performance from period to period and to establish criteria for compensation decisions. These measures are not in accordance with, or a substitute for, GAAP and may be different from, or inconsistent with, non-GAAP financial measures used by other companies.

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.

	•		Off Balance Sheet Assets — Assets, primarily railcars, which are financed with operating leases and therefore not recorded on the balance sheet. GATX estimates 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 as reported on the balance sheet.

Reconciliation of non-GAAP financial information (in millions):


	September 30		December 31		March 31		June 30		September 30
	2008		2008		2009		2009		2009
Consolidated On Balance Sheet Assets	$	5,093.1	$	5,190.4	$	5,049.8	$	5,091.2	$	5,257.9
Off Balance Sheet Assets		1,052.2		1,061.2		992.4		993.6		1,008.4

Total On and Off Balance Sheet Assets	$	6,145.3	$	6,251.6	$	6,042.2	$	6,084.8	$	6,266.3

Shareholders’ Equity	$	1,274.6	$	1,124.5	$	1,069.7	$	1,069.8	$	1,112.2

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Since December 31, 2008, there have been no material changes in GATX’s interest rate and foreign currency exposures or types of derivative instruments used to hedge these exposures. For a discussion of the Company’s exposure to market risk, refer to Part II: Item 7A, Quantitative and Qualitative Disclosure about Market Risk reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Item 4. Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the Company’s 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”)). Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, the Company’s disclosure controls and procedures were effective.

No change in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the quarter ended September 30, 2009, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

Information concerning litigation and other contingencies is described in Note 13 to the consolidated financial statements and is incorporated herein by reference.

Item 1A. Risk Factors

Since June 30, 2009, there have been no material changes in GATX’s Risk Factors. For a discussion of GATX’s risk factors, refer to Part 1: Item 1A, Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and to Part II: Item 1A, Risk Factors of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2009.


	September 30			December 31			March 31			June 30			September 30
	2008			2008			2009			2009			2009

Beginning balance		110,195			109,874			112,976			112,326			111,154
Cars added		1,535			4,411			354			711			1,478
Cars scrapped		(1,078	)		(970	)		(855	)		(1,056	)		(1,302	)
Cars sold		(778	)		(339	)		(149	)		(827	)		(124	)

Ending balance		109,874			112,976			112,326			111,154			111,206
Utilization rate at quarter end		97.8	%		97.9	%		96.5	%		96.0	%		95.9	%


	GATX CORPORATION (Registrant)
	/s/ Robert C. Lyons
	Robert C. Lyons
	Senior Vice President and Chief Financial Officer (Duly Authorized Officer)


Exhibit
Number		Exhibit Description

		*Filed with this Report*:

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).

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Item No.	Page No.
Part I — FINANCIAL INFORMATION

Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)		1
Consolidated Statements of Income (Unaudited)		2
Consolidated Statements of Cash Flows (Unaudited)		3
Notes to the Consolidated Financial Statements (Unaudited)		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements		18
Business Overview		18
Discussion of Operating Results		19
Segment Operations		20
Cash Flow and Liquidity		30
Critical Accounting Policies		31
Non-GAAP Financial Information		31

Item 3. Quantitative and Qualitative Disclosures about Market Risk		32

Item 4. Controls and Procedures		32

Part II — OTHER INFORMATION

Item 1. Legal Proceedings		32

Item 1A. Risk Factors		32

Item 6. Exhibits		33

SIGNATURE		34

EXHIBIT INDEX		35
EX-31.A
EX-31.B
EX-32