Good day, and welcome to the GATX Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jennifer Van Aken, Director of Investor Relations. Please go ahead.

Thank you, Josh, and good morning, everyone. Thanks for joining us for the second quarter conference call. With me today are Brian Kenney, President and CEO of GATX Corporation; and Bob Lyons, Senior Vice President and Chief Financial Officer. I'll give a brief overview of the numbers provided in our press release this morning, and then we'll take questions. First, I'll remind you that any forward-looking statement made on this call represents our best judgment as to what may occur in the future. We have based these forward-looking statements on information currently available and disclaim any intention or obligation to update or revise these statements to reflect subsequent events or circumstances. The company’s actual results will depend on a number of competitive and economic factors, some of which may be outside the control of the company. For more information, refer to our 2010 Form 10-K filing. Today we reported 2011 second quarter net income of $26.4 million, or $0.56 per diluted share. This includes a benefit of $6.2 million, or $0.13 per diluted share, related to fair value adjustments of certain interest rate swaps at our European Rail affiliate, AAE Cargo. This compares to 2010 second quarter net income of $21.5 million, or $0.46 per diluted share, which includes a net benefit of $3.3 million, or $0.07 per diluted share related to the favorable resolution of a litigation matter and the tax accrual reversal, partially offset by the negative impact of fair value adjustment related to the AAE interest rate swap. Year-to-date 2011, we reported net income of $46.3 million, or $0.98 per diluted share. The year-to-date results included benefit of $12.6 million, or $0.27 per diluted share related to the interest rate swaps at AAE. Year-to-date 2010, we reported net income of $40.2 million, or $0.86 per diluted share,…

[Operator Instructions] We will take our first question from the side of John Hecht with JMP Securities.

Real quick just to make sure I'm apples-to-apples. Is the $1.85 to $1.95 guidance you're giving, if you exclude all the nonrecurring items for the first half of the year, am I hearing it right that you're at -- you would be at $0.77 thus far into year, so the $1.85 to $1.95 is just the second half of what you'd earn on the first half would have been $0.77?

Yes. It would actually, John, it's $0.71 on a normalized basis in the first half of the year and that would equate to the $1.85 to $1.95 for the full year.

And what tax rate for the second half of the year would we -- is it then similar to about the 30% tax rate you've had thus far?

It's right around actually around 28%, John. And that moves around a bit just solely due to the different geographies that contribute to pretax income.

And where did you recognize the swap gain this quarter? Is part of it in a lower tax rate and part of it in the shared affiliate earnings?

Well, it occurs at AAE, which is taxed at a very low rate and then just normally at a very low rate. The switch rate of 12.5%, 13%. But the main item flow through on the share of affiliate line.

Okay. So moving on to operating conditions. Your first one is, you follow some of the general rail trends and the second part of the quarter at a macro basis. There appear to be some slowing of traffic in certain segments. You're clearly not seeing that. I'm wondering if you can kind of characterize, is it really just the strength of your core tank car market that's holding it together or is it more of just the way you structure leases and how you work with your clients? But how are you able to show price increases, strong utilization rates when we're seeing some offsetting trends elsewhere in the market?

John, it's Brian. You're right that the rail statistics have slowed down somewhat. Car loanings are only up 1%, I think, in the second quarter versus 2010, and still down actually 9% from the second quarter of 2008. But we are seeing lease rate increases. It's widespread across the fleet, and I think to your point, our pricing success is due to a couple of things: One is the composition of our fleet. You've heard us say on past calls we focused really hard during the upturn to optimize the fleet in terms of car type, age, customer, et cetera, and that helped us stay highly utilized during the downturn. And now that the market has strengthened, it's resulted in a fleet that is -- it's comprised of cars with a very limited availability in the market and consequently, we've been able to push price aggressively. The other thing, if you look at the alternatives, as a car comes up for renewal, there are increasingly long production times at the manufacturer's production lead time, and they haven't added a lot of new capacities, so that helps well. So those dynamics have allowed us to really push lease rate hard.

Okay. And the maintenance expense in Europe was high, is that a seasonal or an ongoing item?

Well, we knew coming into the year, John, as we had indicated, that maintenance expense in Europe would be a challenge this year, just given the regulatory environment over there industrywide. So the second quarter activity was consistent with what we would have anticipated coming into the year, maintenance expense -- maintenance costs there are up.

And was part of that driven by just sort of expiring and renewing leases that you have to do some maintenance during that interim period, or is this just ongoing maintenance that we should see?

It was driven both by that and standard under frame revision which is scheduled every few years and that's happen to be a higher year for that.

Okay. And then last question would be, can you just give us a very brief update on the $800 million of owned assets at the Specialty division, excuse me? Can you just characterize and what are the bigger kind of exposures there and what are the trends you see?

I think it's broken down on our -- actually on our website where we have a full presentation on GATX. There's a real detailed breakdown of that $800 million in assets. But almost half of that really is in the marine area, half on oceangoing, half in the inland side. The inland side is doing very well, and as we've talked about before, on the oceangoing investments that we have, those are primarily joint ventures. Most of those have continued to face some pretty challenging market conditions. There's a lot of excess capacity in some of the sectors in which we deal and that's continuing. We expected that coming into the year and that has played out as we thought. The balance of the portfolio is in our industrial equipment side and in our investment in Rolls-Royce, the AF [Adler Funding] portfolio is performing fine. And I would say the performance at Rolls-Royce, our joint venture which is in the aircraft, spare aircraft engine leasing business has been excellent and the outlook remains extremely positive through the balance of this year and beyond for our JV with Rolls-Royce.

Is that JVs, the Spare Engine business is that mostly European or is that elsewhere?

It's fairly well diverse around the globe, but there is definitely European, probably 30% of the portfolio in Europe. But in general, we've seen that business, and we've been in that joint venture for 12 or 13 years and it performed extremely well regardless of cycle.

Our next question comes from the side of Art Hatfield with Morgan Keegan. Arthur Hatfield - Morgan Keegan & Company, Inc.: Brian, real quick. Looking at the fleet statistics in the back, the first 2 quarters of the year, the fleet shrunk a little bit from where it was at the end of last year. And seeing what pricing is doing now, is it time to start -- and I know you've made some commitments with some of the builders out there for some long-term deliveries on cars, but are you kind of getting to the point now where you really want to more aggressively grow the fleet or is it still too early from where we're at in the pricing cycle?

Well there was -- the fleet will grow for the remainder of the year because the order we placed with Trinity is starting to deliver as we speak, Art. So we ordered 12,500 cars over 5 years and as far as that order -- it's 2,500 cars per year. The first order here and there is going really well. We've ordered and placed all the cars with customers that were required order on the contract. That's almost 1,000 and we've placed -- ordered and placed, all cars we're allowed to order under the contract, and that's almost 1,700. So we're running almost at 17,000 in that first order here in terms of cars that have been ordered in place. They're just now starting to deliver however, so you'll see them hit the numbers as we go through the year. Arthur Hatfield - Morgan Keegan & Company, Inc.: And do we see anything as we go forward, is pricing dynamics changing enough where you may be more beneficial to keep cars on longer as opposed to scrap, or how can we think about scrap rates going forward?

We're over 98% utilized. So there's not a lot of idle cars. So I don't think you'll see us, this rate of scrap pick up at all, it should abate. Arthur Hatfield - Morgan Keegan & Company, Inc.: And is it normal, I guess -- when I think historically that kind of 3,000 to 4,000 number of normal retirements is about the normal level of scrap that you see on an average year?

That is a normal level of scrap number. We also sell cars and try to stay active in the secondary market to optimize the fleet, and that continues as the market strengthens especially if you see opportunities in less optimal car types. So there's always that activity as well. Arthur Hatfield - Morgan Keegan & Company, Inc.: I missed part of the upfront commentary, and I apologize if you went over this, and I can go back and listen, but obviously, the LPI is doing much better the last couple of quarters. Can you talk about kind of the competition in the marketplace and what you're seeing from a competitive standpoint with regards to pricing?

It seems to be pretty rational out there, Art. I don't see any irrational behavior, but we're constantly worried about that. If you see some of the activity in the Bakkens as an example on those crude oil move out of the Bakkens, which are 30,000-gallon tank cars. That's starting to feel a little speculative in nature. Ironically, it's the same car that is used to carry ethanol, and that's the last time we saw that kind of aggressive ordering. And so we're watching that pretty carefully. We're using the same strategy we did back in the ethanol boom, which is only to deal with very credit-worthy customers that value our service to try and to put the appropriate lease terms on. As far as our exposure there, it's actually less than 200 cars right now, but it will grow -- but we're going to grow it very carefully. A little worried about what other people are doing there, for instance, you saw an order by CIT the other day. And so we're watching it carefully. Arthur Hatfield - Morgan Keegan & Company, Inc.: And when you say, is that from existing leasing companies? I know you don't want to put a name on it, but are you seeing new entrants kind of pop up trying to get into that business in that area?

No, not really.

Our next question comes from the side of Zahid Siddique with Gabelli & Company. Zahid Siddique - Gabelli & Company, Inc.: My first question is on the your portfolio within Rail. Is there anything out there that is available, maybe becoming available that you maybe interested in? A while ago, we had heard about GE. So could you also comment on that within the same context?

Sure. It's Bob Lyons. As we've indicated, the GE portfolio was for sale. They have pulled that portfolio off the market and are opting to keep it and operate it going forward. That was announced within the last couple of weeks. We have previously indicated that we were not participating in that process for a variety of reasons. We never signed a confidentiality agreement. It's not a portfolio we opted to pursue. We'll put resources against going after it. We're always looking at other acquisition opportunities in the secondary market. There's nothing of that scale that we're aware of out there right now. But from time to time, there are smaller portfolios that are rumored to be available and we're a known buyer. We've closed down a lot of those transactions over the course of the last few years, and we'll continue to be very active in going after those. Zahid Siddique - Gabelli & Company, Inc.: Within the rail car industry, what is the idle cars, number of idle cars, how has that been trending?

The last number that came out by the AAR was as of July 1, and that was at 276,000. So that hasn't moved around too much the past several months. Zahid Siddique - Gabelli & Company, Inc.: And how does that compare against last year?

It was probably in the 350,000 range last year, about this time. It is peaked at over 500,000 cars and now its come down to 275 range, and it appears to have flattened out there. Nobody really knows what ultimately that low point will be because it's a relatively new data point, but it seems to have flattened out here at about 275,000 cars. Zahid Siddique - Gabelli & Company, Inc.: Okay, and my last question is on the composition of fleet. You mentioned that, that has helped you withstand the movement in the market. Could you comment on what is it in the composition that has helped of your fleet?

Sure. Remember, it's largely tank cars. Well, it's tank and freight its particular strength in some of the car types such as general service tank. 30,000 gallon in 235 so large and medium-size general service tanks. Small and medium covered hopper [ph] cars, large pressure cars are another example of a strong market right now. So it's pretty widespread across our fleet. Zahid Siddique - Gabelli & Company, Inc.: And just to follow up, what industries have done well? What end markets have done well?

Well I'd say, as Brian had mentioned, on the chemical side, for general service tank cars, we've seen pretty solid demand. We've seen good demand on the small cube covered hoppers from the energy sector,frac-sand service. Green cars, from -- actually demand for coal cars is picked up nicely and some of that idle inventory is being worked down. But overall, what we're seeing right now in the marketplace is pretty solid demand on a broad-based level. Other than I would say cars related to construction activity, where -- and we don't have very much exposure at all there, but where we do for on center main [ph] cars, for example, but still a lot of excess inventory out there of those in the industry. Fortunately, we don't own too many.

Our next question comes from the side of Rich Fitzgerald with Jefferies Assets.

Last quarter there was a pretty meaningful improvement in the LPI where you were almost breaking even on your rollovers. It was a little too early to call that a trend. Now with the increasing guidance, what is the new outlook with respect to LPI for the rest of the year?

Sure. Obviously, the rate environment improved faster than we anticipated. And we're optimistic, given some of the market environment factors that Brian already touched on, that, that positive environment is going to be with us here for a while, which is encouraging. And the LPI is a good trend indicator, but it can bump around from quarter-to-quarter. For example, in the fourth quarter of this year, we have some cars that are coming off of a -- up for renewal that are coming off very high rates. So the bar is going to be higher Q4. And as a result, the LPI could move around a bit and maybe not hit the levels we've seen in this most recent quarter. So overall, we're still -- we feel very optimistic about the rate environment and the most relevant fact is that it's accelerated at a pace beyond what we anticipated, and we feel that, that will continue.

And just a quick follow-up. With the increased guidance, it would appear that the second half is expected to be a lot more robust in terms of earnings generation in the first half? And just as we think of in terms of modeling that out, how much of that should we think about in terms of the top line benefiting from the LPI trends as well as new cars coming online, versus anything you guys are doing on the cost structure side of the business?

Well it's going to be more driven by utilization rate activity and also remarketing during the second half of the year. As we mentioned, we expect to be -- particularly in the Specialty area, significantly higher in the second half of the year than we saw on the first half. The LPI, because the cars roll evenly during the course of the year, the cars we're renewing today, you get a half year's benefit from that pick up. So you don't get the full impact until 2012. So it's encouraging, it's positive, but it doesn't have a huge impact right in the near term. So it's going to be a mix of really those 3 things.

One more last one, if I could. If my addition is correct, I think you guys did a little over $17 million of asset remarketing revenues in the first half of the year. Are you -- do I correctly understand that, that number should move up pretty significantly in the second half and that, that's part of the revised earnings guidance?

That's right, Rich. That was $17 million year-to-date and we do expect more in the second half.

[Operator Instructions] At this time there are no further questions, so I'd like to turn the call back over to our speakers for any closing remarks.

Thank you, Josh, and thank you everyone for participating. I will be available all afternoon to answer any additional questions. Thanks.

Thank you.

This does conclude your teleconference. Thank you for your participation. You may now disconnect.