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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation We provide equity awards to our employees under the GATX Corporation 2012 Incentive Award Plan, including grants of non-qualified employee stock options, restricted stock units, performance shares, and phantom stock awards and restricted stock units to non-employee directors. As of December 31, 2024, 4.9 million shares were authorized under the 2012 Plan and 1.7 million shares were available for future issuance. We recognize compensation expense for our equity awards in selling, general and administrative expenses over the applicable service period of each award. Share-based compensation expense was $23.0 million for 2024, $18.3 million for 2023, and $12.7 million for 2022, and the related tax benefits were $5.8 million for 2024, $4.6 million for 2023, and $3.2 million for 2022. Stock Options Stock options entitle the holder to purchase shares of common stock for periods up to seven years from the grant date. Stock options entitle the holder to purchase shares of our common stock at a specified exercise price. The dividends that accrue on all stock options are paid upon vesting and continue to be paid until the stock options are exercised, canceled, or expire. The exercise price for stock options is equal to the average of the high and low trading prices of our common stock on the date of grant. We recognize compensation expense on a straight-line basis over the vesting period of the award, which is generally three years. The estimated fair value of a stock option is the sum of the value we derive using the Black-Scholes option pricing model and the present value of dividends we expect to pay over the expected term of the award. The Black-Scholes valuation incorporates various assumptions, including expected term, expected volatility, and risk free interest rates. We base the expected term on historical exercise patterns and post-vesting terminations, and we base the expected volatility on the historical volatility of our stock price over a period equal to the expected term. We use risk-free interest rates that are based on the implied yield on recently-issued U.S. Treasury zero-coupon bonds with a term comparable to the expected term. The following table shows the weighted-average fair value for our stock options and the assumptions we used to estimate fair value:
| 2024 |  | 2023 |  | 2022
Weighted-average estimated fair value | $ | 45.22 |  |  | $ | 41.06 |  |  | $ | 34.77 |
Quarterly dividend rate | $ | 0.58 |  |  | $ | 0.55 |  |  | $ | 0.52 |
Expected term of stock options, in years | 4.2 |  | 4.2 |  | 4.3
Risk-free interest rate | 4.0 | % |  | 3.7 | % |  | 1.6 | %
Dividend yield | 1.8 | % |  | 1.9 | % |  | 2.0 | %
Expected stock price volatility | 34.7 | % |  | 35.4 | % |  | 35.0 | %
Present value of dividends | $ | 8.87 |  |  | $ | 8.57 |  |  | $ | 8.58 |
The following table shows information about outstanding stock options for the year ended December 31, 2024:
|  | Number of Stock Options (in thousands) |  | Weighted-Average Exercise Price
Outstanding at beginning of the year |  | 997 |  | $ | 89.85 |
Granted |  | 194 |  | 126.47 |
Exercised |  | (241) |  | 78.61 |
Forfeited/Cancelled |  | (2) |  | 122.15 |
Outstanding at end of the year |  | 948 |  | 100.13 |
Vested and exercisable at end of the year |  | 569 |  | 87.98 |
The following table shows the aggregate intrinsic value of stock options exercised in 2024, 2023, and 2022, and the weighted-average remaining contractual term and aggregate intrinsic value of stock options outstanding and vested as of December 31, 2024:
Stock Options |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in millions)
Exercised in 2022 |  |  |  | $ | 13.4
Exercised in 2023 |  |  |  | 9.0 |
Exercised in 2024 |  |  |  | 13.6 |
Outstanding at December 31, 2024 (a) |  | 3.8 |  | 52.0
Vested and exercisable at December 31, 2024 |  | 2.8 |  | 38.1 |
_______ (a) As of December 31, 2024, 948,100 stock options were outstanding. Total cash received from employees for exercises of stock options during the years ended December 31, 2024, 2023, and 2022 was $32.1 million, $22.3 million, and $30.9 million. As of December 31, 2024, we had $8.8 million of unrecognized compensation expense related to nonvested stock options, which we expect to recognize over a weighted-average period of 1.7 years. Restricted Stock Units and Performance Shares Restricted stock units entitle the recipient to receive a specified number of restricted shares of common stock upon vesting. Restricted stock units do not carry voting rights and are not transferable prior to the expiration of a specified restriction period, which is generally three years, as determined by the Compensation Committee of the Board of Directors ("Compensation Committee"). We accrue dividends on all restricted stock units and pay those dividends when the awards vest. We recognize compensation expense for these awards over the applicable vesting period. Performance shares are restricted shares that we grant to key employees for achieving certain strategic objectives. The shares convert to common stock at the end of a specified performance period if predetermined performance goals are achieved, as determined by the Compensation Committee. We estimate the number of shares we expect will vest as a result of actual performance against the performance criteria at the time of grant to determine total compensation expense to be recognized. We reevaluate the estimate annually and adjust total compensation expense for any changes to the estimate of the number of shares we expect to vest. The performance shares granted include an option to settle shares earned in cash upon vesting for certain eligible employees. As a result, these awards are accounted for as liability awards and recorded in other liabilities. The liability and related compensation expense is adjusted to reflect the fair value of the underlying shares at the end of each reporting period. We recognize compensation expense for these awards over the applicable vesting period, which is generally three years. We value our restricted stock units and performance share awards using the average of the high and low values of our common stock on the grant date of the awards. As of December 31, 2024, there was $10.9 million of unrecognized compensation expense related to these awards, which we expect to be recognized over a weighted-average period of 1.7 years. The following table shows information about restricted stock units and performance shares for the year ended December 31, 2024:
| Number of Share Units Outstanding (in thousands) |  | Weighted-Average Grant-Date Fair Value
Restricted Stock Units: |  |  |
Nonvested at beginning of the year | 100 |  |  | $ | 103.19 |
Granted | 32 |  |  | 126.52 |
Vested | (30) |  |  | 91.52 |
Forfeited | — |  |  | 124.41 |
Nonvested at end of the year | 102 |  |  | 113.79 |
Performance Shares: |  |  |
Nonvested at beginning of the year | 97 |  |  | $ | 106.89 |
Granted | 39 |  |  | 126.47 |
Net increase due to estimated performance | 5 |  |  | 115.81 |
Vested | (52) |  |  | 101.03 |
Nonvested at end of the year | 89 |  |  | 119.39 |
The total fair value of restricted stock units and performance shares that vested during the year was $11.9 million in 2024, $9.7 million in 2023, and $7.7 million in 2022. Cash paid to settle performance share awards was $4.7 million in 2024, $4.1 million in 2023, and $5.5 million in 2022. Non-Employee Director Awards We grant awards to non-employee directors as a component of their compensation for service on our board of directors. Currently, these awards are in the form of restricted stock units. Previously, these awards were in the form of phantom stock, which are units that equate to, but are not common shares. Restricted stock unit awards and phantom stock awards are both dividend participating and, for awards that are deferred, dividends are reinvested in additional shares at the average of the high and low trading prices of our stock on the dividend payment date. At the expiration of each director’s service on the board of directors, or in accordance with the deferral election, whole units of both restricted stock units and phantom stock will be settled with shares of common stock, and fractional units will be paid in cash. In 2024, we granted 14,213 units of restricted stock and there were a total of 250,464 restricted stock units and phantom stock outstanding as of December 31, 2024.

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