Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand Fortress Transportation and Infrastructure Investors LLC. Our MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes, and with Part I, Item 1A, “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.
Overview
We own and acquire high quality infrastructure and related equipment that is essential for the transportation of goods and people globally. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there are a large number of acquisition opportunities in our markets, and that our Manager’s expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. We are externally managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), which has a dedicated team of experienced professionals focused on the acquisition of transportation and infrastructure assets since 2002. As of December 31, 2018, we had total consolidated assets of $2.6 billion and total equity of $1.1 billion.
At December 31, 2014, through their investment in us, the beneficial owners of the Fortress Worldwide Transportation and Infrastructure General Partnership were Fortress Worldwide Transportation and Infrastructure Investors LP (the “Onshore Fund”), with an 89.97% interest and Fortress Worldwide Transportation and Infrastructure Offshore LP (the “Offshore Fund”) with a 9.98% interest; in addition, Fortress Worldwide Transportation and Infrastructure Master GP LLP (the “Master GP”) held a 0.05% interest. The Master GP is owned by an affiliate of Fortress. The Onshore Fund and the Offshore Fund (collectively, the “Initial Shareholders”) were investment vehicles which were sponsored by Fortress. The general partner of the Onshore Fund and the Offshore Fund was an affiliate of Fortress.
In May 2015, the remaining capital commitments of the investors of the Onshore Fund, Offshore Fund and Master GP were called. Through a series of transactions, the Master GP contributed its rights to previously undistributed incentive allocations pursuant to the Partnership Agreement in exchange for the limited partnership interests in the Onshore Fund and the Offshore Fund equal to the amount of any such undistributed incentive allocations and 53,502,873 common shares were issued to the Onshore Fund and Offshore Fund based on their relative interests in us. In November 2015, the Onshore Fund and the Offshore Fund each distributed to their respective limited partners the common shares allocated to their limited partners in accordance with their respective limited partnership agreements.
On May 20, 2015, we completed an IPO of 20 million common shares at a price to the public of $17.00 per share. On June 15, 2015, the underwriters exercised their overallotment option, pursuant to which we issued an additional 2.2 million shares to such underwriters at the IPO price.
While our strategy permits us to acquire a broad array of transportation-related assets, we are currently active in five sectors where we believe there are meaningful opportunities to deploy capital to achieve attractive risk adjusted returns: aviation, energy, intermodal transport, rail and ports and terminals.
•Commercial air travel and air freight activity have historically been long-term growth sectors and are tied to the underlying demand for passenger and freight movement. We continue to see strong demand for aviation related assets.
•Offshore energy service equipment refers to vessels supporting the extraction, processing and transportation of oil and natural gas from deposits located beneath the sea floor. The recent oil price decline has led to oil and gas companies reducing and deferring spending decisions, creating an oversupply of offshore energy assets, and in turn, lower day-rates, utilization and earnings for offshore service companies.
•The intermodal transport market includes the efficient movement of goods throughout multiple modes of transportation, making it possible to move cargo from a point of origin to a final destination without repeated unpacking and repacking. Over the last year, new container prices have increased substantially, which has led to a rebound in lease rates and residual values from the lows of 2015 and 2016.
•Rail refers to the railroad industry, which has increased its share of freight ton-miles compared to other forms of freight transportation over the past quarter century. This infrastructure, most of which was originally established over 100 years ago, represents a limited supply of assets and a difficult-to-replicate network. We continue to see increased volumes and efficiencies on our network since our investment in CMQR in 2014.
•Land-based infrastructure refers to facilities that enable the storage, unloading, loading and movement of crude oil and refined products from producers to end users, such as refineries. Customers of land-based infrastructure typically purchase capacity on a take-or-pay basis, and the economics of these assets directly relate to the volume of throughput.
Operating Segments
Our operations consist of two primary strategic business units – Infrastructure and Equipment Leasing. Our Infrastructure Business acquires long-lived assets that provide mission-critical services or functions to transportation networks and typically have high barriers to entry. We target or develop operating businesses with strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. Our Equipment Leasing Business acquires assets that are designed to carry cargo or people or provide functionality to transportation infrastructure. Transportation equipment assets are typically long-lived, moveable and leased by us on either operating leases or finance leases to companies that provide transportation services. Our leases generally provide for long-term contractual cash flow with high cash-on-cash yields and include structural protections to mitigate credit risk.
Our reportable segments are comprised of interests in different types of infrastructure and equipment leasing assets. We currently conduct our business through our corporate operating segment and the following six reportable segments: i) Aviation Leasing, ii) Offshore Energy, iii) Shipping Containers, all of which are within Equipment Leasing Business, and iv) Jefferson Terminal, v) Railroad, and vi) Ports and Terminals which together comprise our Infrastructure Business. The Aviation Leasing segment consists of aircraft and aircraft engines held for lease and are typically held long-term. The Offshore Energy segment consists of vessels and equipment that support offshore oil and gas activities and are typically subject to long-term operating leases. The Shipping Containers segment consists of an investment in an unconsolidated entity engaged in the leasing of shipping containers on both an operating lease and finance lease basis. The Jefferson Terminal segment consists of a multi-modal crude and refined products terminal and other related assets which were acquired in 2014. The Railroad segment consists of our Central Maine and Quebec Railway (“CMQR”) short line railroad operations also acquired in 2014. Ports and Terminals consists of Repauno, acquired in 2016, a 1,630 acre deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities, and Long Ridge, acquired in June 2017, a 1,660 acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development opportunities. The Corporate operating segment primarily consists of unallocated corporate general and administrative expenses and management fees.
Our reportable segments are comprised of investments in different types of transportation infrastructure and equipment. Each segment requires different investment strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations.
Results of Operations
Adjusted Net Income (Loss) (Non-GAAP)
The Chief Operating Decision Maker (“CODM”) utilizes Adjusted Net Income (Loss) as the key performance measure. This performance measure provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation decisions.
Adjusted Net Income (Loss) is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, and equity in earnings of unconsolidated entities, (b) to include the impact of cash income tax payments, and our pro-rata share of the Adjusted Net Income from unconsolidated entities, and (c) to exclude the impact of the non-controlling share of Adjusted Net Income. We evaluate investment performance for each reportable segment primarily based on Adjusted Net Income. We believe that net income attributable to shareholders, as defined by GAAP, is the most comparable earnings measurement with which to reconcile Adjusted Net Income.
Adjusted EBITDA (Non-GAAP)
We view Adjusted EBITDA as a secondary measurement to Adjusted Net Income, which we believe serves as a useful supplement to investors, analysts and management to measure economic performance of deployed revenue generating assets between periods on a consistent basis, and which we believe measures our financial performance and helps identify operational factors that management can impact in the short-term, namely our cost structure and expenses. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA is defined as net income attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings of unconsolidated entities and the non-controlling share of Adjusted EBITDA.
Comparison of the year ended December 31, 2018 to the year ended December 31, 2017
The following table presents our consolidated results of operations and reconciliation of net income attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
157,190
|
|
$
|
99,536
|
|
$
|
57,654
|
Maintenance revenue
|
89,870
|
|
65,651
|
|
24,219
|
Finance lease income
|
3,349
|
|
1,536
|
|
1,813
|
Other revenue
|
2,630
|
|
3,277
|
|
(647)
|
Total equipment leasing revenues
|
253,039
|
|
170,000
|
|
83,039
|
Infrastructure revenues
|
|
|
|
|
|
Lease income
|
1,734
|
|
1,111
|
|
623
|
Rail revenues
|
38,410
|
|
32,607
|
|
5,803
|
Terminal services revenues
|
10,108
|
|
10,229
|
|
(121)
|
Other revenue
|
76,587
|
|
3,712
|
|
72,875
|
Total infrastructure revenues
|
126,839
|
|
47,659
|
|
79,180
|
Total revenues
|
379,878
|
|
217,659
|
|
162,219
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
167,514
|
|
92,385
|
|
75,129
|
General and administrative
|
17,126
|
|
14,570
|
|
2,556
|
Acquisition and transaction expenses
|
6,968
|
|
7,306
|
|
(338)
|
Management fees and incentive allocation to affiliate
|
15,726
|
|
15,732
|
|
(6)
|
Depreciation and amortization
|
136,354
|
|
88,110
|
|
48,244
|
Interest expense
|
57,854
|
|
38,827
|
|
19,027
|
Total expenses
|
401,542
|
|
256,930
|
|
144,612
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(1,008)
|
|
(1,601)
|
|
593
|
Gain on sale of assets, net
|
3,911
|
|
18,281
|
|
(14,370)
|
Loss on extinguishment of debt
|
—
|
|
(2,456)
|
|
2,456
|
|
|
|
|
|
|
Interest income
|
488
|
|
688
|
|
(200)
|
Other income
|
3,941
|
|
3,073
|
|
868
|
Total other income
|
7,332
|
|
17,985
|
|
(10,653)
|
Loss before income taxes
|
(14,332)
|
|
(21,286)
|
|
6,954
|
Provision for income taxes
|
1,372
|
|
1,954
|
|
(582)
|
Net loss
|
(15,704)
|
|
(23,240)
|
|
7,536
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(21,586)
|
|
(23,374)
|
|
1,788
|
Net income attributable to shareholders
|
$
|
5,882
|
|
$
|
134
|
|
$
|
5,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Add: Provision for income taxes
|
1,372
|
|
1,954
|
|
(582)
|
Add: Equity-based compensation expense
|
901
|
|
1,343
|
|
(442)
|
Add: Acquisition and transaction expenses
|
6,968
|
|
7,306
|
|
(338)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
2,456
|
|
(2,456)
|
Add: Changes in fair value of non-hedge derivative instruments
|
(5,523)
|
|
(1,022)
|
|
(4,501)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income (Loss) from unconsolidated entities(1)
|
(1,196)
|
|
(1,601)
|
|
405
|
Add: Incentive allocations
|
407
|
|
514
|
|
(107)
|
Less: Cash payments for income taxes
|
(721)
|
|
(1,726)
|
|
1,005
|
Less: Equity in losses of unconsolidated entities
|
1,008
|
|
1,601
|
|
(593)
|
Less: Non-controlling share of Adjusted Net Income (Loss) (2)
|
1,030
|
|
(558)
|
|
1,588
|
Adjusted Net Income
|
$
|
10,128
|
|
$
|
10,401
|
|
$
|
(273)
|
__________________________________________________
(1) Includes our proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above.
(2) Includes the following items for the years ended December 31, 2018 and 2017: (i) equity-based compensation of $131 and $169, (ii) provision for income tax of $(47) and $16, and (iii) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, less (vii) cash tax payments of $15 and $31, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net income attributable to shareholders
|
$
|
5,882
|
|
$
|
134
|
|
$
|
5,748
|
Add: Provision for income taxes
|
1,372
|
|
1,954
|
|
(582)
|
Add: Equity-based compensation expense
|
901
|
|
1,343
|
|
(442)
|
Add: Acquisition and transaction expenses
|
6,968
|
|
7,306
|
|
(338)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
2,456
|
|
(2,456)
|
Add: Changes in fair value of non-hedge derivative instruments
|
(5,523)
|
|
(1,022)
|
|
(4,501)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
407
|
|
514
|
|
(107)
|
Add: Depreciation and amortization expense (3)
|
163,013
|
|
96,417
|
|
66,596
|
Add: Interest expense
|
57,854
|
|
38,827
|
|
19,027
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4)
|
359
|
|
(243)
|
|
602
|
Less: Equity in losses of unconsolidated entities
|
1,008
|
|
1,601
|
|
(593)
|
Less: Non-controlling share of Adjusted EBITDA (5)
|
(10,004)
|
|
(12,763)
|
|
2,759
|
Adjusted EBITDA (non-GAAP)
|
$
|
222,237
|
|
$
|
136,524
|
|
$
|
85,713
|
__________________________________________________
(3) Includes the following items for the years ended December 31, 2018 and 2017: (i) depreciation and amortization expense of $136,354 and $88,110, (ii) lease intangible amortization of $8,588 and $4,716, and (iii) amortization for lease incentives of $18,071 and $3,591, respectively.
(4) Includes the following items for the years ended December 31, 2018 and 2017: (i) net loss of $1,196 and $1,786, (ii) interest expense of $477 and $785, and (iii) depreciation and amortization expense of $1,078 and $758, respectively.
(5) Includes the following items for the years ended December 31, 2018 and 2017: (i) equity based compensation of $131 and $169, (ii) provision for income taxes of $(47) and $16, (iii) interest expense of $4,722 and $5,030, (iv) depreciation and amortization expense of $6,297 and $7,144, and (v) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, respectively.
Revenues
Total revenues increased $162.2 million primarily due to higher revenues in the Aviation Leasing, Jefferson Terminal and Ports and Terminals segments.
Equipment Leasing
•Lease income increased $57.7 million driven by an increase in assets on lease in the Aviation Leasing segment.
•Maintenance revenue increased by $24.2 million as we increased the number of aircraft and engines subject to leases with maintenance arrangements.
Infrastructure
•Other revenue increased $72.9 million primarily due to crude marketing revenue of $60.6 million in the Jefferson Terminal segment. During the third quarter of 2018, Jefferson initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and marketing crude to third parties. These resulting crude sales and corresponding crude costs including logistics are reflected in Other revenue and Operating expenses, respectively. The additional increase in other revenue of $12.3 million is within the Ports and Terminals segment and is due to increased activity at Long Ridge and Repauno.
Expenses
Total expenses increased $144.6 million primarily due to increases in (i) operating expenses, (ii) depreciation and amortization and (iii) interest expense.
Operating expenses increased $75.1 million primarily due to increases in:
•cost of sales of $50.1 million primarily due to costs associated with crude marketing in the Jefferson Terminal segment;
•facility operations of $6.9 million primarily in the Jefferson Terminal and Ports and Terminals segments due to increases in volume;
•compensation and benefits of $5.4 million primarily due to an increase in headcount in the Jefferson Terminal, Ports and Terminals and Railroad segments; and
•repairs and maintenance of $3.8 million primarily in the Offshore Energy, Jefferson Terminal and Ports and Terminals segments.
Depreciation and amortization increased $48.2 million primarily due to additional assets acquired in the Aviation Leasing segment and assets placed into service in the Jefferson Terminal and Ports and Terminals segments.
Interest expense increased $19.0 million primarily due to an increase in our average outstanding debt of approximately $398.3 million, which primarily consists of increases in the (i) senior unsecured notes due 2022 ("2022 Notes") of $259.7 million, (ii) senior unsecured notes due 2025 ("2025 Notes") of $98.5 million, (iii) our subsidiary's revolving credit facility ("Jefferson Revolver") of $33.2 million and (iv) Revolving Credit Facility of $7.9 million.
Other Income
Total other income decreased $10.7 million due to a lower gain on the sale of assets, net of $14.4 million, primarily due to a gain on the sale of available-for-sale securities of $11.4 million in 2017 and fewer asset sales in the Aviation Leasing segment in 2018, partially offset by the loss on extinguishment of debt of $2.5 million in 2017.
Net Income Attributable to Shareholders
Net income attributable to shareholders increased $5.7 million primarily due to the changes discussed above.
Adjusted Net Income (Non-GAAP)
Adjusted Net Income decreased $0.3 million primarily due to the changes in revenue, expenses and other income noted above, and (i) changes in fair value of non-hedge derivatives and (ii) cash payments for income taxes, partially offset by the loss on extinguishment of debt.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $85.7 million primarily due to the changes in revenue, expenses and other income noted above, and (i) depreciation and amortization expense and (ii) interest expense.
Aviation Leasing Segment
As of December 31, 2018, in our Aviation Leasing segment, we own and manage 212 aviation assets, including 70 aircraft and 142 commercial engines.
As of December 31, 2018, 67 of our commercial aircraft and 109 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation equipment was approximately 91% utilized as of December 31, 2018, based on the equity value of our on-hire leasing equipment as a percentage of the total equity value of our aviation leasing equipment. Our aircraft currently have a weighted average remaining lease term of 34 months, and our engines currently on-lease have an average remaining lease term of 15 months. The table below provides additional information on the assets in our Aviation Leasing segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aviation Assets
|
Widebody
|
|
Narrowbody
|
|
Total
|
Aircraft
|
|
|
|
|
|
Assets at January 1, 2018
|
9
|
|
39
|
|
48
|
Purchases
|
5
|
|
24
|
|
29
|
Sales
|
—
|
|
(1)
|
|
(1)
|
Transfers
|
—
|
|
(6)
|
|
(6)
|
Assets at December 31, 2018
|
14
|
|
56
|
|
70
|
|
|
|
|
|
|
Engines
|
|
|
|
|
|
Assets at January 1, 2018
|
57
|
|
53
|
|
110
|
Purchases
|
21
|
|
13
|
|
34
|
Sales
|
(5)
|
|
(8)
|
|
(13)
|
Transfers
|
5
|
|
6
|
|
11
|
Assets at December 31, 2018
|
78
|
|
64
|
|
142
|
The following table presents our results of operations and reconciliation of net income attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
151,531
|
|
$
|
91,103
|
|
$
|
60,428
|
Maintenance revenue
|
89,870
|
|
65,651
|
|
24,219
|
Finance lease income
|
1,895
|
|
—
|
|
1,895
|
Other revenue
|
974
|
|
39
|
|
935
|
Total revenues
|
244,270
|
|
156,793
|
|
87,477
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
9,149
|
|
6,247
|
|
2,902
|
|
|
|
|
|
|
Acquisition and transaction expenses
|
315
|
|
441
|
|
(126)
|
|
|
|
|
|
|
Depreciation and amortization
|
102,419
|
|
61,795
|
|
40,624
|
|
|
|
|
|
|
Total expenses
|
111,883
|
|
68,483
|
|
43,400
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(743)
|
|
(1,276)
|
|
533
|
Gain on sale of assets, net
|
3,911
|
|
7,188
|
|
(3,277)
|
Interest income
|
202
|
|
297
|
|
(95)
|
|
|
|
|
|
|
Total other income
|
3,370
|
|
6,209
|
|
(2,839)
|
Income before income taxes
|
135,757
|
|
94,519
|
|
41,238
|
Provision for income taxes
|
2,280
|
|
1,966
|
|
314
|
Net income
|
133,477
|
|
92,553
|
|
40,924
|
Less: Net (loss) income attributable to non-controlling interest in consolidated subsidiaries
|
(24)
|
|
697
|
|
(721)
|
Net income attributable to shareholders
|
$
|
133,501
|
|
$
|
91,856
|
|
$
|
41,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Add: Provision for income taxes
|
2,280
|
|
1,966
|
|
314
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
315
|
|
441
|
|
(126)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities (1)
|
(743)
|
|
(1,276)
|
|
533
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
(668)
|
|
(1,626)
|
|
958
|
Less: Equity in losses of unconsolidated entities
|
743
|
|
1,276
|
|
(533)
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Income
|
$
|
135,428
|
|
$
|
92,637
|
|
$
|
42,791
|
__________________________________________________
(1) Includes Aviation’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.
The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net income attributable to shareholders
|
$
|
133,501
|
|
$
|
91,856
|
|
$
|
41,645
|
Add: Provision for income taxes
|
2,280
|
|
1,966
|
|
314
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
315
|
|
441
|
|
(126)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense (1)
|
129,078
|
|
70,102
|
|
58,976
|
Add: Interest expense
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)
|
(743)
|
|
(1,276)
|
|
533
|
Less: Equity in losses of unconsolidated entities
|
743
|
|
1,276
|
|
(533)
|
Less: Non-controlling share of Adjusted EBITDA (3)
|
(172)
|
|
(537)
|
|
365
|
Adjusted EBITDA (non-GAAP)
|
$
|
265,002
|
|
$
|
163,828
|
|
$
|
101,174
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2018 and 2017: (i) depreciation expense of $102,419 and $61,795, (ii) lease intangible amortization of $8,588 and $4,716, and (iii) amortization for lease incentives of $18,071 and $3,591, respectively.
(2) Includes net loss of $743 and $1,276 for the years ended December 31, 2018 and 2017, respectively.
(3) Includes depreciation and lease amortization expense of $172 and $537 for the years ended December 31, 2018 and 2017, respectively.
Revenues
Total revenues increased $87.5 million driven by higher lease income and maintenance revenue.
•Lease income increased $60.4 million mainly due to an increase in (i) aircraft lease income of $40.5 million primarily driven by the addition of 27 aircraft on lease and (ii) engine lease income of $19.9 million primarily driven by an additional 45 revenue generating engines in 2018 compared to 2017.
•Maintenance revenue increased $24.2 million due to an increase in the number of aircraft and engines on lease.
•Finance lease income increased $1.9 million due to income earned from aircraft classified as a finance lease.
Expenses
Total expenses increased $43.4 million primarily due to an increase in depreciation and amortization expense.
•Depreciation and amortization expense increased $40.6 million driven by additional aircraft and engines owned and on lease in 2018 compared to 2017.
•Operating expenses increased $2.9 million primarily as a result of increases in bad debt expense of $1.5 million related to receivables deemed uncollectible, professional fee expenses of $0.9 million and shipping and storage fees of $0.5 million due to the positioning of our assets for lease.
Other Income
Total other income decreased $2.8 million driven by lower gain on sale of assets due to fewer sales in 2018 in comparison to 2017, partially offset by lower losses incurred by the advanced engine repair JV of $0.5 million.
Adjusted Net Income
Adjusted Net Income increased $42.8 million primarily driven by the changes to net income attributable to shareholders noted above, and cash payments for income taxes due to our corporate subsidiaries subject to U.S. taxation.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $101.2 million primarily due to the changes in net income attributable to shareholders noted above, and higher depreciation and amortization expense for the additional aircraft and engines owned and on lease.
Offshore Energy Segment
In our Offshore Energy segment, we own one remotely operated vehicle (“ROV”) support vessel, one construction support vessel and one anchor handling tug supply (“AHTS”) vessel. The chart below describes the assets in our Offshore Energy segment as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Offshore Energy Assets
|
|
|
|
Asset Type
|
Year Built
|
Description
|
Economic Interest (%)
|
AHTS Vessel
|
2010
|
Anchor handling tug supply vessel with accommodation for 30 personnel and a total bollard pull of 68.5 tons
|
100%
|
|
Construction Support Vessel
|
2014
|
DP-3 construction support and well intervention vessel with
250-ton main crane, 2,000 square meter open deck space, moon pool and accommodation for 100 personnel
|
100%
|
|
ROV Support Vessel
|
2011
|
DP-2 dive and ROV support vessel with 50-ton crane, moon pool and accommodation for 120 personnel
|
100%
|
|
|
|
|
The following table presents our results of operations and reconciliation of net (loss) income attributable to shareholders to Adjusted Net (Loss) Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
5,659
|
|
$
|
8,433
|
|
$
|
(2,774)
|
|
|
|
|
|
|
Finance lease income
|
1,454
|
|
1,536
|
|
(82)
|
Other revenue
|
1,606
|
|
3,138
|
|
(1,532)
|
Total revenues
|
8,719
|
|
13,107
|
|
(4,388)
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
13,697
|
|
15,833
|
|
(2,136)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
6,481
|
|
6,427
|
|
54
|
Interest expense
|
3,687
|
|
3,670
|
|
17
|
Total expenses
|
23,865
|
|
25,930
|
|
(2,065)
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets, net
|
—
|
|
11,405
|
|
(11,405)
|
|
|
|
|
|
|
Interest income
|
16
|
|
15
|
|
1
|
Other income
|
—
|
|
1,093
|
|
(1,093)
|
Total other income
|
16
|
|
12,513
|
|
(12,497)
|
Loss before income taxes
|
(15,130)
|
|
(310)
|
|
(14,820)
|
Provision for income taxes
|
1
|
|
11
|
|
(10)
|
Net loss
|
(15,131)
|
|
(321)
|
|
(14,810)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
—
|
|
(526)
|
|
526
|
Net (loss) income attributable to shareholders
|
(15,131)
|
|
205
|
|
(15,336)
|
Add: Provision for income taxes
|
1
|
|
11
|
|
(10)
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
(7)
|
|
—
|
|
(7)
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net (Loss) Income
|
$
|
(15,137)
|
|
$
|
216
|
|
$
|
(15,353)
|
The following table sets forth a reconciliation of net (loss) income attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net (loss) income attributable to shareholders
|
$
|
(15,131)
|
|
$
|
205
|
|
$
|
(15,336)
|
Add: Provision for income taxes
|
1
|
|
11
|
|
(10)
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
6,481
|
|
6,427
|
|
54
|
Add: Interest expense
|
3,687
|
|
3,670
|
|
17
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (1)
|
—
|
|
(247)
|
|
247
|
Adjusted EBITDA (non-GAAP)
|
$
|
(4,962)
|
|
$
|
10,066
|
|
$
|
(15,028)
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2018 and 2017: (i) depreciation expense of $0 and $165, and (ii) interest expense of $0 and $82, respectively.
Revenues
Total revenues decreased $4.4 million primarily due to lower lease income and other revenue. Lease income decreased $2.8 million primarily due to our vessels on hire being on longer-term lease arrangements in 2017 compared to 2018. Other revenue decreased $1.5 million primarily due to the decrease of crew provisions reimbursement income.
Expenses
Total expenses decreased $2.1 million primarily due to operating expenses, which principally consists of decreases in (i) legal fees of $3.0 million, (ii) other operating expenses of $0.6 million and (iii) bad debt expense of $0.6 million, partially offset by increased repair and maintenance costs of $2.0 million.
Other Income (Expense)
Total other income decreased $12.5 million primarily due to:
•the sale of available-for-sale securities of an international oil and gas drilling contractor resulting in a gain of $11.4 million during 2017; and
•the transfer of interests from the non-controlling interest holder to us as settlement for a note receivable, resulting in a gain of $1.1 million in the third quarter of 2017.
Adjusted Net (Loss) Income
Adjusted Net Loss was $15.1 million in 2018, a decrease of $15.4 million compared to 2017, primarily due to the changes to net (loss) income attributable to shareholders described above.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $15.0 million due to a higher net loss attributable to shareholders of $15.3 million as noted above.
Shipping Containers Segment
In our Shipping Containers segment we own, through a joint venture, interests in approximately 8,000 maritime shipping containers and related equipment. The chart below describes the assets in our Shipping Containers segment as of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipping Containers Assets
|
|
|
|
|
|
Number of Containers
|
Type
|
Average Age
|
Lease Type
|
Customer Mix
|
Economic Interest (%)
|
8,000
|
20’ Dry
20’ Reefer
40’ Dry
40’ HC Dry
|
~11 Years
|
Direct Finance Lease/Operating Lease
|
2 Customers
|
51%
|
|
The following table presents our results of operations and reconciliation of net income attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue
|
$
|
50
|
|
$
|
100
|
|
$
|
(50)
|
Total revenues
|
50
|
|
100
|
|
(50)
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
—
|
|
9
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
—
|
|
9
|
|
(9)
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
Equity in earnings (losses) of unconsolidated entities
|
309
|
|
(4)
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
309
|
|
(4)
|
|
313
|
Income before income taxes
|
359
|
|
87
|
|
272
|
Benefit from income taxes
|
(94)
|
|
(65)
|
|
(29)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to shareholders
|
453
|
|
152
|
|
301
|
Add: Benefit from income taxes
|
(94)
|
|
(65)
|
|
(29)
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income (Loss) from unconsolidated entities (1)
|
121
|
|
(4)
|
|
125
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
—
|
|
—
|
Less: Equity in (losses) earnings of unconsolidated entities
|
(309)
|
|
4
|
|
(313)
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Income
|
$
|
171
|
|
$
|
87
|
|
$
|
84
|
__________________________________________________
(1) Includes the following items for the year ended December 31, 2018 and 2017: (i) our proportionate share of the unconsolidated entities’ net income (loss) of $121 and $(189) and (ii) interest expense of $0 and $185, respectively.
The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net income attributable to shareholders
|
$
|
453
|
|
$
|
152
|
|
$
|
301
|
Add: Benefit from income taxes
|
(94)
|
|
(65)
|
|
(29)
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
—
|
|
—
|
|
—
|
Add: Interest expense
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)
|
624
|
|
1,354
|
|
(730)
|
Less: Equity in earnings of unconsolidated entities
|
(309)
|
|
4
|
|
(313)
|
Less: Non-controlling share of Adjusted EBITDA
|
—
|
|
—
|
|
—
|
Adjusted EBITDA (non-GAAP)
|
$
|
674
|
|
$
|
1,445
|
|
$
|
(771)
|
__________________________________________________
(2) Includes the following items for the years ended December 31, 2018 and 2017: (i) net income (loss) of $121 and $(189), (ii) interest expense of $477 and $785, and (iii) depreciation and amortization expense of $26 and $758, respectively.
Other Income (Expense)
Total other income increased $0.3 million primarily driven by income earned from the sales of operating lease containers within our shipping container joint venture.
Adjusted Net Income (Non-GAAP)
Adjusted Net Income increased $0.1 million reflecting the increase in equity in earnings of unconsolidated entities.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $0.8 million primarily reflecting the entities' change in equity in unconsolidated entities and lower pro-rata share of Adjusted EBITDA from unconsolidated entities.
Jefferson Terminal Segment
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Infrastructure revenues
|
|
|
|
|
|
Lease income
|
$
|
272
|
|
$
|
—
|
|
$
|
272
|
|
|
|
|
|
|
Terminal services revenues
|
10,108
|
|
10,229
|
|
(121)
|
Other revenue
|
60,605
|
|
—
|
|
60,605
|
|
|
|
|
|
|
Total revenues
|
70,985
|
|
10,229
|
|
60,756
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
94,622
|
|
31,213
|
|
63,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
19,745
|
|
16,193
|
|
3,552
|
Interest expense
|
15,513
|
|
13,568
|
|
1,945
|
Total expenses
|
129,880
|
|
60,974
|
|
68,906
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(574)
|
|
(321)
|
|
(253)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
270
|
|
376
|
|
(106)
|
Other income
|
3,983
|
|
1,980
|
|
2,003
|
Total other income
|
3,679
|
|
2,035
|
|
1,644
|
Loss before income taxes
|
(55,216)
|
|
(48,710)
|
|
(6,506)
|
Provision for income taxes
|
261
|
|
42
|
|
219
|
Net loss
|
(55,477)
|
|
(48,752)
|
|
(6,725)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(21,801)
|
|
(22,991)
|
|
1,190
|
Net loss attributable to shareholders
|
(33,676)
|
|
(25,761)
|
|
(7,915)
|
Add: Provision for income taxes
|
261
|
|
42
|
|
219
|
Add: Equity-based compensation expense
|
359
|
|
318
|
|
41
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
(5,523)
|
|
(1,022)
|
|
(4,501)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities (1)
|
(574)
|
|
(321)
|
|
(253)
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
(46)
|
|
(79)
|
|
33
|
Less: Equity in losses of unconsolidated entities
|
574
|
|
321
|
|
253
|
Less: Non-controlling share of Adjusted Net (Income) Loss (2)
|
951
|
|
(514)
|
|
1,465
|
Adjusted Net Loss
|
$
|
(37,674)
|
|
$
|
(27,016)
|
|
$
|
(10,658)
|
__________________________________________________
(1) Includes Jefferson’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed above, for which there were no adjustments.
(2) Includes the following items for the years ended December 31, 2018 and 2017: (i) equity-based compensation of $106 and $125, (ii) provision for income tax of $57 and $16, and (iii) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, less (v) cash tax payments of $15 and $31, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net loss attributable to shareholders
|
$
|
(33,676)
|
|
$
|
(25,761)
|
|
$
|
(7,915)
|
Add: Provision for income taxes
|
261
|
|
42
|
|
219
|
Add: Equity-based compensation expense
|
359
|
|
318
|
|
41
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
(5,523)
|
|
(1,022)
|
|
(4,501)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
19,745
|
|
16,193
|
|
3,552
|
Add: Interest expense
|
15,513
|
|
13,567
|
|
1,946
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (3)
|
478
|
|
(321)
|
|
799
|
Less: Equity in losses of unconsolidated entities
|
574
|
|
321
|
|
253
|
Less: Non-controlling share of Adjusted EBITDA (4)
|
(9,376)
|
|
(11,751)
|
|
2,375
|
Adjusted EBITDA (non-GAAP)
|
$
|
(11,645)
|
|
$
|
(8,414)
|
|
$
|
(3,231)
|
__________________________________________________
(3) Includes (i) net loss of $574 and $321 and (ii) depreciation and amortization expense of $1,052 and $0 for the years ended December 31, 2018 and 2017, respectively.
(4) Includes the following items for the years ended December 31, 2018 and 2017: (i) equity-based compensation of $106 and $125, (ii) provision for income taxes of $57 and $16, (iii) interest expense of $4,465 and $4,886, (iv) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, and (v) depreciation and amortization expense of $5,847 and $6,320, respectively.
Revenues
Total revenues increased $60.8 million primarily due to an increase in crude marketing revenue of $60.6 million. During the third quarter of 2018, Jefferson initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and marketing crude to third parties. These resulting crude sales and corresponding crude costs including logistics are reflected in Other revenue and Operating expenses, respectively.
Expenses
Total expenses increased $68.9 million primarily reflecting higher operating expenses of $63.4 million. The increase in operating expenses reflected higher:
•cost of sales of $47.3 million, resulting from costs associated with crude marketing;
•facility operations expense of $5.7 million due to higher volume associated with crude marketing;
•professional fees of $3.8 million primarily consisting of legal fees;
•compensation and benefits expense of $2.4 million resulting from an increase in headcount; and
•repairs and maintenance of $0.9 million.
Additionally, the increase in expense reflected higher depreciation expense of $3.6 million due to additional assets placed into service, and interest expense of $1.9 million due to the entry into the Jefferson Revolver in March 2018.
Adjusted Net Loss
Adjusted Net Loss increased $10.7 million primarily due to the changes in net loss attributable to shareholders noted above and changes in fair value of non-hedge derivative instruments of $4.5 million, partially offset by a higher non-controlling share of Adjusted Net Income of $1.5 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $3.2 million primarily due to the changes in net loss attributable to shareholders noted above and changes in fair value of non-hedge derivative instruments of $4.5 million, partially offset by higher depreciation and amortization of $3.6 million, non-controlling share of Adjusted EBITDA of $2.4 million and interest expense of $1.9 million.
Railroad Segment
The following table presents our results of operations and reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
Rail revenues
|
$
|
38,410
|
|
$
|
32,607
|
|
$
|
5,803
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
38,410
|
|
32,607
|
|
5,803
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
31,734
|
|
29,966
|
|
1,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
2,570
|
|
2,037
|
|
533
|
Interest expense
|
1,009
|
|
1,029
|
|
(20)
|
Total expenses
|
35,313
|
|
33,032
|
|
2,281
|
|
|
|
|
|
|
Other loss
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of assets, net
|
—
|
|
(312)
|
|
312
|
|
|
|
|
|
|
Other expense
|
(42)
|
|
—
|
|
(42)
|
Total other loss
|
(42)
|
|
(312)
|
|
270
|
Income (loss) before income taxes
|
3,055
|
|
(737)
|
|
3,792
|
Benefit from income taxes
|
(1,077)
|
|
—
|
|
(1,077)
|
Net income (loss)
|
4,132
|
|
(737)
|
|
4,869
|
Less: Net income (loss) attributable to non-controlling interest in consolidated subsidiaries
|
339
|
|
(70)
|
|
409
|
Net income (loss) attributable to shareholders
|
3,793
|
|
$
|
(667)
|
|
4,460
|
Add: Benefit from income taxes
|
(1,077)
|
|
—
|
|
(1,077)
|
Add: Equity-based compensation expense
|
184
|
|
730
|
|
(546)
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income (1)
|
86
|
|
(44)
|
|
130
|
Adjusted Net Income
|
$
|
2,986
|
|
$
|
19
|
|
$
|
2,967
|
__________________________________________________
(1) Includes (i) equity-based compensation of $18 and $44, and (ii) provision for income taxes of $(104) and $0 for the years ended December 31, 2018 and December 31, 2017, respectively.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net income (loss) attributable to shareholders
|
$
|
3,793
|
|
$
|
(667)
|
|
$
|
4,460
|
Add: Benefit from income taxes
|
(1,077)
|
|
—
|
|
(1,077)
|
Add: Equity-based compensation expense
|
184
|
|
730
|
|
(546)
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
2,570
|
|
2,037
|
|
533
|
Add: Interest expense
|
1,009
|
|
1,029
|
|
(20)
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (1)
|
(260)
|
|
(228)
|
|
(32)
|
Adjusted EBITDA (non-GAAP)
|
$
|
6,219
|
|
$
|
2,901
|
|
$
|
3,318
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2018 and 2017: (i) equity-based compensation of $18 and $44, (ii) interest expense of $98 and $62, (iii) provision for income taxes of $(104) and $0, and (iv) depreciation and amortization expense of $248 and $122, respectively.
Revenues
Total revenues increased $5.8 million due to higher traffic and expanded service offerings to customers. The increase primarily reflects increases in freight transportation revenue of $5.4 million and switching and other rail service revenue of $0.4 million.
Expenses
Total expenses increased $2.3 million which primarily consists of increases in (i) operating expenses of $1.8 million and (ii) depreciation expense of $0.5 million related to property, plant and equipment.
The aforementioned increase in operating expenses of $1.8 million reflects higher (i) compensation and benefits of $0.8 million, (ii) fuel expense of $0.8 million, (iii) lease expense of $0.4 million, (iv) property insurance expense of $0.4 million, (v) other expenses of $0.3 million, (vi) materials and supplies expense of $0.3 million and (vii) bad debt of $0.1 million. Partially offsetting these increases were general operating expenses of $1.3 million due to certain tax benefits for the 2017 annual period that were taken in the current year as the legislation was passed during 2018.
Adjusted Net Income
Adjusted Net Income increased $3.0 million primarily due to the changes in net income (loss) attributable to shareholders noted above, including a benefit from income taxes of $0.9 million and a decrease in equity-based compensation expense of $0.5 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $3.3 million primarily due to the changes in net income (loss) attributable to shareholders noted above, a tax benefit of $0.9 million and lower equity-based compensation expense of $0.5 million.
Ports and Terminals
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Revenues
|
|
|
|
|
|
Infrastructure revenues
|
|
|
|
|
|
Lease income
|
$
|
1,462
|
|
$
|
1,111
|
|
$
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue
|
15,982
|
|
3,712
|
|
12,270
|
|
|
|
|
|
|
Total revenues
|
17,444
|
|
4,823
|
|
12,621
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
18,312
|
|
9,117
|
|
9,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
5,139
|
|
1,658
|
|
3,481
|
Interest expense
|
649
|
|
1,088
|
|
(439)
|
Total expenses
|
24,100
|
|
11,863
|
|
12,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
(6,656)
|
|
(7,040)
|
|
384
|
Provision for income taxes
|
1
|
|
—
|
|
1
|
Net loss
|
(6,657)
|
|
(7,040)
|
|
383
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(100)
|
|
(484)
|
|
384
|
Net loss attributable to shareholders
|
(6,557)
|
|
(6,556)
|
|
(1)
|
Add: Provision for income taxes
|
1
|
|
—
|
|
1
|
Add: Equity-based compensation expense
|
349
|
|
295
|
|
54
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
4
|
|
(4)
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net (Loss) Income(1)
|
(7)
|
|
—
|
|
(7)
|
Adjusted Net Loss
|
$
|
(6,214)
|
|
$
|
(6,257)
|
|
$
|
43
|
__________________________________________________
(1) Includes equity-based compensation of $7 and $0 for the years ended December 31, 2018 and 2017.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net loss attributable to shareholders
|
$
|
(6,557)
|
|
$
|
(6,556)
|
|
$
|
(1)
|
Add: Provision for income taxes
|
1
|
|
—
|
|
1
|
Add: Equity-based compensation expense
|
349
|
|
295
|
|
54
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
5,139
|
|
1,658
|
|
3,481
|
Add: Interest expense
|
649
|
|
1,089
|
|
(440)
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (2)
|
(196)
|
|
—
|
|
(196)
|
Adjusted EBITDA (non-GAAP)
|
$
|
(615)
|
|
$
|
(3,514)
|
|
$
|
2,899
|
__________________________________________________
(2) Includes (i) equity-based compensation of $7 and $0, (ii) interest expense of $159 and $0, and (iii) depreciation expense of $30 and $0 for the years ended December 31, 2018 and 2017.
Revenues
Total revenues increased $12.6 million due to an increase in butane sales at Repauno of $4.2 million, recorded in other revenue, as well as an increase in revenue at Long Ridge of $8.4 million primarily due to additional trans-loading revenue of $4.8 million and revenue related to oil and gas activities of $3.6 million, which began in 2018.
Expenses
Total expenses increased $12.2 million primarily due to increases in (i) operating expenses of $9.2 million and (ii) depreciation expense of $3.5 million related to property, plant and equipment.
The increase in operating expenses was primarily driven by higher (i) cost of sales of $2.8 million related to the sale of butane, (ii) compensation and benefits of $2.2 million due to increased headcount, (iii) facility operations of $1.8 million related to an increase in volumes for the trans-loading operation at Long Ridge, (iv) professional fees of $0.5 million, (v) insurance expense of $0.4 million and (vi) utilities expense of $0.4 million. The increase in depreciation expense is related to additional assets being placed into service, including the cavern at Repauno, and the depletion of gas reserves at Long Ridge.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $2.9 million primarily due to the changes in net loss attributable to shareholders noted above and an increase in depreciation and amortization of $3.5 million, partially offset by lower interest expense of $0.4 million.
Corporate
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
$
|
17,126
|
|
$
|
14,570
|
|
$
|
2,556
|
Acquisition and transaction expenses
|
6,653
|
|
6,865
|
|
(212)
|
Management fees and incentive allocation to affiliate
|
15,726
|
|
15,732
|
|
(6)
|
|
|
|
|
|
|
Interest expense
|
36,996
|
|
19,472
|
|
17,524
|
Total expenses
|
76,501
|
|
56,639
|
|
19,862
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
—
|
|
(2,456)
|
|
2,456
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
—
|
|
(2,456)
|
|
2,456
|
Loss before income taxes
|
(76,501)
|
|
(59,095)
|
|
(17,406)
|
Provision for income taxes
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
Net loss
|
(76,501)
|
|
(59,095)
|
|
(17,406)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
—
|
|
—
|
|
—
|
Net loss attributable to shareholders
|
(76,501)
|
|
$
|
(59,095)
|
|
$
|
(17,406)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
9
|
|
—
|
|
9
|
Add: Acquisition and transaction expenses
|
6,653
|
|
6,865
|
|
(212)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
2,456
|
|
(2,456)
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
407
|
|
514
|
|
(107)
|
Less: Cash payments for income taxes
|
—
|
|
(25)
|
|
25
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Loss
|
$
|
(69,432)
|
|
$
|
(49,285)
|
|
$
|
(20,147)
|
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2018
|
|
2017
|
|
|
Net loss attributable to shareholders
|
$
|
(76,501)
|
|
$
|
(59,095)
|
|
$
|
(17,406)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
9
|
|
—
|
|
9
|
Add: Acquisition and transaction expenses
|
6,653
|
|
6,865
|
|
(212)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
2,456
|
|
(2,456)
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
407
|
|
514
|
|
(107)
|
Add: Depreciation and amortization expense
|
—
|
|
—
|
|
—
|
Add: Interest expense
|
36,996
|
|
19,472
|
|
17,524
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA
|
—
|
|
—
|
|
—
|
Adjusted EBITDA
|
$
|
(32,436)
|
|
$
|
(29,788)
|
|
$
|
(2,648)
|
Expenses
Total expenses increased $19.9 million primarily due to increases in:
•interest expense of $17.5 million related to the 2022 Notes, Revolving Credit Facility and 2025 Notes; and
•general and administrative expenses of $2.6 million due to an increase in reimbursement expenses to our manager of $1.8 million primarily due to an increase in headcount and professional fees of $0.6 million primarily related to audit and SOX compliance.
Adjusted Net Loss
Adjusted Net Loss increased $20.1 million primarily due to the changes in net loss attributable to shareholders noted above and the loss on the extinguishment of debt of $2.5 million in 2017.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA decreased $2.6 million primarily due to the changes in net loss attributable to shareholders noted above and higher interest expense of $17.6 million.
Comparison of the year ended December 31, 2017 to the year ended December 31, 2016
The following table presents our consolidated results of operations and reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
99,536
|
|
$
|
69,736
|
|
$
|
29,800
|
Maintenance revenue
|
65,651
|
|
28,697
|
|
36,954
|
Finance lease income
|
1,536
|
|
2,723
|
|
(1,187)
|
Other revenue
|
3,277
|
|
793
|
|
2,484
|
Total equipment leasing revenues
|
170,000
|
|
101,949
|
|
68,051
|
Infrastructure revenues
|
|
|
|
|
|
Lease income
|
1,111
|
|
32
|
|
1,079
|
Rail revenues
|
32,607
|
|
30,837
|
|
1,770
|
Terminal services revenues
|
10,229
|
|
15,902
|
|
(5,673)
|
Other revenue
|
3,712
|
|
—
|
|
3,712
|
Total infrastructure revenues
|
47,659
|
|
46,771
|
|
888
|
Total revenues
|
217,659
|
|
148,720
|
|
68,939
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
92,385
|
|
66,169
|
|
26,216
|
General and administrative
|
14,570
|
|
12,314
|
|
2,256
|
Acquisition and transaction expenses
|
7,306
|
|
6,316
|
|
990
|
Management fees and incentive allocation to affiliate
|
15,732
|
|
16,742
|
|
(1,010)
|
Depreciation and amortization
|
88,110
|
|
60,210
|
|
27,900
|
Interest expense
|
38,827
|
|
18,957
|
|
19,870
|
Total expenses
|
256,930
|
|
180,708
|
|
76,222
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(1,601)
|
|
(5,992)
|
|
4,391
|
Gain on sale of assets, net
|
18,281
|
|
5,941
|
|
12,340
|
Loss on extinguishment of debt
|
(2,456)
|
|
(1,579)
|
|
(877)
|
Asset impairment
|
—
|
|
(7,450)
|
|
7,450
|
Interest income
|
688
|
|
136
|
|
552
|
Other income
|
3,073
|
|
602
|
|
2,471
|
Total other income (expense)
|
17,985
|
|
(8,342)
|
|
26,327
|
Loss before income taxes
|
(21,286)
|
|
(40,330)
|
|
19,044
|
Provision for income taxes
|
1,954
|
|
268
|
|
1,686
|
Net loss
|
(23,240)
|
|
(40,598)
|
|
17,358
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(23,374)
|
|
(20,534)
|
|
(2,840)
|
Net income (loss) attributable to shareholders
|
$
|
134
|
|
$
|
(20,064)
|
|
$
|
20,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Add: Provision for income taxes
|
1,954
|
|
268
|
|
1,686
|
Add: Equity-based compensation expense (income)
|
1,343
|
|
(3,672)
|
|
5,015
|
Add: Acquisition and transaction expenses
|
7,306
|
|
6,316
|
|
990
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
2,456
|
|
1,579
|
|
877
|
Add: Changes in fair value of non-hedge derivative instruments
|
(1,022)
|
|
3
|
|
(1,025)
|
Add: Asset impairment charges
|
—
|
|
7,450
|
|
(7,450)
|
Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities (1)
|
(1,601)
|
|
(2,905)
|
|
1,304
|
Add: Incentive allocations
|
514
|
|
—
|
|
514
|
Less: Cash payments for income taxes
|
(1,726)
|
|
(654)
|
|
(1,072)
|
Less: Equity in losses of unconsolidated entities
|
1,601
|
|
5,992
|
|
(4,391)
|
Less: Non-controlling share of Adjusted Net Income (Loss) (2)
|
(558)
|
|
(2,945)
|
|
2,387
|
Adjusted Net Income (Loss)
|
$
|
10,401
|
|
$
|
(8,632)
|
|
$
|
19,033
|
__________________________________________________
(1) Includes our proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above.
(2) Includes the following items for the years ended December 31, 2017 and 2016: (i) equity-based compensation of $169 and $(1,561), (ii) provision for income tax of $16 and $29, (iii) loss on extinguishment of debt of $0 and $616, (iv) asset impairment charges of $0 and $3,725, (v) acquisition and transaction expense of $0 and $156, (vi) changes in fair value of non-hedge derivative instruments of $404 and $0, less (vii) cash tax payments of $31 and $20, respectively.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net income (loss) attributable to shareholders
|
$
|
134
|
|
$
|
(20,064)
|
|
$
|
20,198
|
Add: Provision for income taxes
|
1,954
|
|
268
|
|
1,686
|
Add: Equity-based compensation expense (income)
|
1,343
|
|
(3,672)
|
|
5,015
|
Add: Acquisition and transaction expenses
|
7,306
|
|
6,316
|
|
990
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
2,456
|
|
1,579
|
|
877
|
Add: Changes in fair value of non-hedge derivative instruments
|
(1,022)
|
|
3
|
|
(1,025)
|
Add: Asset impairment charges
|
—
|
|
7,450
|
|
(7,450)
|
Add: Incentive allocations
|
514
|
|
—
|
|
514
|
Add: Depreciation and amortization expense (3)
|
96,417
|
|
65,656
|
|
30,761
|
Add: Interest expense
|
38,827
|
|
18,957
|
|
19,870
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4)
|
(243)
|
|
1,196
|
|
(1,439)
|
Less: Equity in losses of unconsolidated entities
|
1,601
|
|
5,992
|
|
(4,391)
|
Less: Non-controlling share of Adjusted EBITDA (5)
|
(12,763)
|
|
(14,653)
|
|
1,890
|
Adjusted EBITDA (non-GAAP)
|
$
|
136,524
|
|
$
|
69,028
|
|
$
|
67,496
|
__________________________________________________
(3) Includes the following items for the years ended December 31, 2017 and 2016: (i) depreciation and amortization expense of $88,110 and $60,210, (ii) lease intangible amortization of $4,716 and $4,979, and (iii) amortization for lease incentives of $3,591 and $467 of amortization, respectively.
(4) Includes the following items for the years ended December 31, 2017 and 2016: (i) net loss of $1,786 and $6,161, (ii) interest expense of $785 and $1,323, (iii) depreciation and amortization expense of $758 and $2,966, and (iv) asset impairment charges of $0 and $3,068, respectively.
(5) Includes the following items for the years ended December 31, 2017 and 2016: (i) equity based compensation of $169 and $(1,561), (ii) provision for income taxes of $16 and $29, (iii) interest expense of $5,030 and $5,124, (iv) depreciation and amortization expense of $7,144 and $6,564, (v) changes in fair value of non-hedge derivative instruments of $404 and $0, (vi) asset impairment charge of $0 and $3,725, (vii) loss on extinguishment of debt of $0 and $616, and (viii) transaction and acquisition expense of $0 and $156, respectively.
Revenues
Total revenues increased $68.9 million driven mainly by higher revenues in the Aviation, Offshore Energy and Ports and Terminals segments partially offset by lower revenues in the Jefferson Terminal segment.
Equipment Leasing
•Lease income increased $29.8 million driven by an increase in assets on lease in the Aviation Leasing segment coupled with vessels on hire in the Offshore Energy segment during 2017;
•Maintenance revenue increased $37.0 million as we increased the number of aircraft and engines subject to leases with maintenance arrangements and the redelivery of two aircraft with end of lease compensation payments totaling $6.3 million in 2017; and
•Other revenues increased $2.5 million mainly as a result of crew and insurance reimbursement income in the Offshore Energy segment.
Infrastructure
•Other revenue increased $3.7 million due to activity at Long Ridge, which was acquired in 2017;
•Rail revenues increased $1.8 million due to an increase in traffic and expanded service offerings by our Railroad segment; and
•Partially offsetting these increases was lower revenue of $5.7 million in the Jefferson Terminal segment due to a decrease in loading and unloading due to ongoing construction at the terminal and the conclusion of a long term take or pay contract.
Expenses
Total expenses increased $76.2 million primarily due to increases in (i) depreciation and amortization, (ii) operating expenses and (iii) interest expense.
Depreciation and amortization increased $27.9 million primarily due to additional assets acquired in the Aviation Leasing segment coupled with assets at Long Ridge and Repauno going into service.
Operating expenses increased $26.2 million primarily due to increases in:
•compensation and benefits of $8.9 million primarily reflecting an increase in equity-based compensation expense due to the reversal of an expense related to a forfeiture in 2016;
•facility operations of $5.8 million primarily in the Jefferson Terminal and Railroad segments due to increases in volume;
•operating expenses of $4.1 million related to the Offshore Energy segment;
•professional fees of $4.0 million related to an increase in activity; and
•cost of sales of $2.0 million reflecting the sale of butane in 2017.
Interest expense increased $19.9 million primarily due to the Senior Notes and Revolving Line of Credit entered into during 2017.
Other Income (Expenses)
Total other income (expense) increased $26.3 million primarily due to:
•a higher gain on the sale of assets, net of $12.3 million, reflecting the sale of available-for-sale securities of an international oil and gas drilling contractor in the Offshore Energy segment;
•an asset impairment charge in 2016 of $7.5 million, where there was no asset impairment charge in 2017; and
•a decrease in the equity in losses of unconsolidated entities of $4.4 million.
Provision for Income Taxes
The provision for income taxes increased $1.7 million primarily as a result of an increase in net income attributable to our corporate subsidiaries subject to U.S. taxation at regular corporate rates.
Net Loss Attributable to Shareholders
Net loss attributable to shareholders decreased $20.2 million primarily due to the changes discussed above.
Adjusted Net Income (Loss) (Non-GAAP)
Adjusted Net Income increased $19.0 million primarily due to the changes in revenue, expenses and other expenses noted above, and increases in (i) equity based compensation of $5.0 million, (ii) pro-rata share of Adjusted Net Income from unconsolidated entities of $1.3 million and (iii) non-controlling share of Adjusted Net income of $2.4 million. The increase was partially offset by a decrease in asset impairment charges of $7.5 million and equity in losses of unconsolidated entities of $4.4 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $67.5 million primarily due to the changes in revenue, expenses and other losses noted above, which resulted in a net income attributable to shareholders, and (i) depreciation and amortization expense, (ii) interest expense, (iii) the pro-rata share of Adjusted EBITDA from unconsolidated entities, (iv) lower equity-based compensation, (v) lower non-controlling share of Adjusted EBITDA and (vi) equity in earnings of unconsolidated entities.
Aviation Leasing Segment
As of December 31, 2017, in our Aviation Leasing segment, we own and manage 158 aviation assets, including 48 aircraft and 110 commercial engines.
As of December 31, 2017, 46 of our commercial aircraft and 76 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation equipment was approximately 86% utilized as of December 31, 2017, based on the equity value of our on-hire leasing equipment as a percentage of the total equity value of our aviation leasing equipment. Our aircraft currently have a weighted average remaining lease term of 32 months, and our engines currently on-lease have an average remaining lease term of 11 months. The table below provides additional information on the assets in our Aviation Leasing segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aviation Assets
|
Widebody
|
|
Narrowbody
|
|
Total
|
Aircraft
|
|
|
|
|
|
Assets at January 1, 2017
|
7
|
|
19
|
|
26
|
Purchases
|
3
|
|
22
|
|
25
|
Sales
|
(1)
|
|
(2)
|
|
(3)
|
Assets at December 31, 2017
|
9
|
|
39
|
|
48
|
|
|
|
|
|
|
Engines
|
|
|
|
|
|
Assets at January 1, 2017
|
38
|
|
28
|
|
66
|
Purchases
|
28
|
|
30
|
|
58
|
Sales
|
(9)
|
|
(5)
|
|
(14)
|
Assets at December 31, 2017
|
57
|
|
53
|
|
110
|
The following table presents our results of operations and reconciliation of net income attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
91,103
|
|
$
|
66,024
|
|
$
|
25,079
|
Maintenance revenue
|
65,651
|
|
28,697
|
|
36,954
|
|
|
|
|
|
|
Other revenue
|
39
|
|
687
|
|
(648)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
156,793
|
|
95,408
|
|
61,385
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
6,247
|
|
4,609
|
|
1,638
|
|
|
|
|
|
|
Acquisition and transaction expenses
|
441
|
|
80
|
|
361
|
|
|
|
|
|
|
Depreciation and amortization
|
61,795
|
|
36,369
|
|
25,426
|
|
|
|
|
|
|
Total expenses
|
68,483
|
|
41,058
|
|
27,425
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(1,276)
|
|
—
|
|
(1,276)
|
Gain on sale of assets, net
|
7,188
|
|
5,214
|
|
1,974
|
Interest income
|
297
|
|
142
|
|
155
|
|
|
|
|
|
|
Total other income
|
6,209
|
|
5,356
|
|
853
|
Income before income taxes
|
94,519
|
|
59,706
|
|
34,813
|
Provision for income taxes
|
1,966
|
|
267
|
|
1,699
|
Net income
|
92,553
|
|
59,439
|
|
33,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Less: Net income attributable to non-controlling interest in consolidated subsidiaries
|
697
|
|
435
|
|
262
|
Net income attributable to shareholders
|
$
|
91,856
|
|
$
|
59,004
|
|
$
|
32,852
|
Add: Provision for income taxes
|
1,966
|
|
267
|
|
1,699
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
441
|
|
80
|
|
361
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities (1)
|
(1,276)
|
|
—
|
|
(1,276)
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
(1,626)
|
|
(583)
|
|
(1,043)
|
Less: Equity in earnings of unconsolidated entities
|
1,276
|
|
—
|
|
1,276
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Income
|
$
|
92,637
|
|
$
|
58,768
|
|
$
|
33,869
|
__________________________________________________
(1) Includes Aviation’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.
The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net income attributable to shareholders
|
$
|
91,856
|
|
$
|
59,004
|
|
$
|
32,852
|
Add: Provision for income taxes
|
1,966
|
|
267
|
|
1,699
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
441
|
|
80
|
|
361
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense (1)
|
70,102
|
|
41,816
|
|
28,286
|
Add: Interest expense
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)
|
(1,276)
|
|
—
|
|
(1,276)
|
Less: Equity in earnings of unconsolidated entities
|
1,276
|
|
—
|
|
1,276
|
Less: Non-controlling share of Adjusted EBITDA (3)
|
(537)
|
|
(164)
|
|
(373)
|
Adjusted EBITDA (non-GAAP)
|
$
|
163,828
|
|
$
|
101,003
|
|
$
|
62,825
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2017 and 2016: depreciation expense of $61,795 and $36,369, lease intangible amortization of $4,716 and $4,979, and amortization for lease incentives of $3,591 and $468, respectively.
(2) Includes net loss of $1,276 and $0 for the years ended December 31, 2017 and 2016, respectively.
(3) Includes depreciation and lease amortization expense of $537 and $164 for the years ended December 31, 2017 and 2016, respectively.
Revenues
Total revenues increased $61.4 million driven by higher lease income and maintenance revenue partially offset by a decrease in other revenue.
•Lease income increased $25.1 million mainly due to an increase in (i) aircraft lease income of $9.4 million primarily driven by the addition of 26 aircraft on lease and (ii) engine lease income of $15.7 million primarily driven by an additional 45 revenue generating engines in 2017 compared to 2016.
•Maintenance revenue increased $37.0 million due to an increase in the number of aircraft and engines on lease, and the receipt of end-of-lease compensation for two aircraft.
•Other revenue decreased $0.6 million primarily due to fewer forfeited security deposits included in earnings in 2017 compared to 2016.
Expenses
Total expenses increased $27.4 million primarily due to an increase in depreciation and amortization expense.
•Depreciation and amortization expense increased $25.4 million driven by additional aircraft and engines owned and on lease in 2017 compared to 2016.
•Operating expenses increased $1.6 million primarily as a result of increases in professional fee expenses of $0.9 million, shipping and storage fees of $0.6 million due to the positioning of our assets for lease, and $0.2 million of other expenses due to growth of the Aviation Leasing segment.
•Acquisition and transaction expenses increased $0.4 million reflecting higher deal costs in the Aviation Leasing segment.
Other Income
Total other income increased $0.9 million driven by the gain on sale of assets, partially offset by losses incurred by the advanced engine repair JV of $1.3 million.
Provision for Income Taxes
Total provision for income taxes increased $1.7 million primarily as a result of an increase in net income attributable to our corporate subsidiaries subject to U.S. taxation at regular corporate rates.
Adjusted Net Income
Adjusted Net Income increased $33.9 million primarily driven by the changes to net income attributable to shareholders noted above and cash payments for income taxes due to our corporate subsidiaries subject to U.S. taxation at regular corporate rates.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $62.8 million primarily due to the changes in net income attributable to shareholders noted above,higher depreciation and amortization expense for the additional aircraft and engines owned and on lease, and higher provision for income taxes due to changes noted above, partially offset by an increase in the non-controlling interest share of Adjusted EBITDA.
Offshore Energy Segment
In our Offshore Energy segment, we own one remotely operated vehicle (“ROV”) support vessel, one construction support vessel and one anchor handling tug supply (“AHTS”) vessel. The chart below describes the assets in our Offshore Energy segment as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
Offshore Energy Assets
|
|
|
|
Asset Type
|
Year Built
|
Description
|
Economic Interest (%)
|
AHTS Vessel
|
2010
|
Anchor handling tug supply vessel with accommodation for 30 personnel and a total bollard pull of 68.5 tons
|
100%
|
|
Construction Support Vessel
|
2014
|
DP-3 construction support and well intervention vessel with
250-ton main crane, 2,000 square meter open deck space, moon pool and accommodation for 100 personnel
|
100%
|
|
ROV Support Vessel
|
2011
|
DP-2 dive and ROV support vessel with 50-ton crane, moon pool and accommodation for 120 personnel
|
100%*
|
|
|
|
|
_____________________________________________________
*The increase in economic interest in the third quarter of 2017 for the ROV support vessel reflects the transfer of the non-controlling interest to us as part of the settlement arrangement as more fully discussed in Note 2 of the Consolidated Financial Statements.
The following table presents our results of operations and reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
Lease income
|
$
|
8,433
|
|
$
|
3,712
|
|
$
|
4,721
|
|
|
|
|
|
|
Finance lease income
|
1,536
|
|
1,610
|
|
(74)
|
Other revenue
|
3,138
|
|
6
|
|
3,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
13,107
|
|
5,328
|
|
7,779
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
15,833
|
|
11,014
|
|
4,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
6,427
|
|
6,411
|
|
16
|
Interest expense
|
3,670
|
|
3,747
|
|
(77)
|
Total expenses
|
25,930
|
|
21,172
|
|
4,758
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets, net
|
11,405
|
|
—
|
|
11,405
|
Asset impairment
|
—
|
|
(7,450)
|
|
7,450
|
Interest income
|
15
|
|
13
|
|
2
|
Other income
|
1,093
|
|
—
|
|
1,093
|
Total other income (expense)
|
12,513
|
|
(7,437)
|
|
19,950
|
Loss before income taxes
|
(310)
|
|
(23,281)
|
|
22,971
|
Provision for income taxes
|
11
|
|
—
|
|
11
|
Net loss
|
(321)
|
|
(23,281)
|
|
22,960
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(526)
|
|
(4,368)
|
|
3,842
|
Net income (loss) attributable to shareholders
|
$
|
205
|
|
$
|
(18,913)
|
|
$
|
19,118
|
Add: Provision for income taxes
|
11
|
|
—
|
|
11
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
7,450
|
|
(7,450)
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income (1)
|
—
|
|
(3,725)
|
|
3,725
|
Adjusted Net Income (Loss)
|
$
|
216
|
|
$
|
(15,188)
|
|
$
|
15,404
|
__________________________________________________
(1) Includes asset impairment charges of $0 and $3,725 for the years ended December 31, 2017 and 2016, respectively.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net income (loss) attributable to shareholders
|
$
|
205
|
|
$
|
(18,913)
|
|
$
|
19,118
|
Add: Provision for income taxes
|
11
|
|
—
|
|
11
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
7,450
|
|
(7,450)
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
6,427
|
|
6,411
|
|
16
|
Add: Interest expense
|
3,670
|
|
3,747
|
|
(77)
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (2)
|
(247)
|
|
(4,084)
|
|
3,837
|
Adjusted EBITDA (non-GAAP)
|
$
|
10,066
|
|
$
|
(5,389)
|
|
$
|
15,455
|
__________________________________________________
(2) Includes the following items for the years ended December 31, 2017 and 2016: (i) depreciation expense of $165 and $245, (ii) interest expense of $82 and $114, and (iii) asset impairment charges of $0 and $3,725, respectively.
Revenues
Total revenues increased $7.8 million primarily due to higher lease income and other revenue. For the year ended December 31, 2017, the offshore construction support vessel was on hire with a long-term lease arrangement that terminated in November 2017, compared to the year ended December 31, 2016 when the vessel was subject to short-term lease arrangements. For the year ended December 31, 2017, the ROV support vessel was on hire with a long-term lease arrangement, as compared to year ended December 31, 2016 when the long-term lease arrangement for the ROV support vessel was terminated in February 2016 resulting in lower lease income from short-term lease arrangements for the remainder of the year. Other revenue increased $3.1 million primarily due to the crew provisions reimbursement income for the offshore construction support vessel.
Expenses
Total expenses increased $4.8 million primarily due to operating expenses, which principally consists of increases in (i) crew costs of $1.9 million, (ii) legal fees of $1.3 million, (iii) projects costs of $0.8 million, (iv) other operating expenses of $0.5 million and (v) mobilization and costs for spare parts of $0.3 million.
During both 2017 and 2016, there was depreciation expense of $4.8 million and $1.6 million related to the construction support vessel and ROV support vessel, respectively.
During both 2017 and 2016, there was interest expense of $3.6 million and $0.1 million primarily related to financing for the construction support vessel and ROV support vessel, respectively. The note relating to the ROV support vessel was settled during the third quarter of 2017 due to the transfer of interests from the non-controlling interest holder to us.
Other Income (Expense)
Total other income (expense) increased $20.0 primarily due to:
•the sale of available-for-sale securities of an international oil and gas drilling contractor resulting in a gain of $11.4 million;
•the transfer of interests from the non-controlling interest holder to us as settlement for a note receivable, resulting in a gain of $1.1 million in the third quarter of 2017; and
•an asset impairment of $7.5 million in 2016, while there was no impairment in 2017. In July 2016, the shipbuilder delivered a notice of termination of the ship building contract for MT6015 resulting in the impairment of the investment.
Adjusted Net Income (Loss)
Adjusted Net Income increased $15.4 million, primarily due to the changes to net income attributable to shareholders described above, partially offset by the net impact of the impairment recorded during 2016 for the MT6015 vessel.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $15.5 million due to an increase in net income attributable to shareholders of $19.1 million as noted above. This was offset by the asset impairment charge recorded during 2016 for the MT6015 vessel.
Shipping Containers Segment
In our Shipping Containers segment we own, through a joint venture, interests in approximately 34,000 maritime shipping containers and related equipment. The chart below describes the assets in our Shipping Containers segment as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shipping Containers Assets
|
|
|
|
|
|
Number of Containers
|
Type
|
Average Age
|
Lease Type
|
Customer Mix
|
Economic Interest (%)
|
34,000
|
20’ Dry
20’ Reefer
40’ Dry
40’ HC Dry
40’ HC Reefer
|
~10 Years
|
Direct Finance Lease/Operating Lease
|
5 Customers
|
51%
|
|
The following table presents our results of operations and reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease income
|
$
|
—
|
|
$
|
1,113
|
|
$
|
(1,113)
|
Other revenue
|
100
|
|
100
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
100
|
|
1,213
|
|
(1,113)
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
9
|
|
43
|
|
(34)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
—
|
|
410
|
|
(410)
|
Total expenses
|
9
|
|
453
|
|
(444)
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(4)
|
|
(5,974)
|
|
5,970
|
Gain on sale of assets, net
|
—
|
|
304
|
|
(304)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
(4)
|
|
(5,670)
|
|
5,666
|
Income (loss) before income taxes
|
87
|
|
(4,910)
|
|
4,997
|
Benefit from income taxes
|
(65)
|
|
(86)
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to shareholders
|
$
|
152
|
|
$
|
(4,824)
|
|
$
|
4,976
|
Add: Benefit from income taxes
|
(65)
|
|
(86)
|
|
21
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
3
|
|
(3)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities (1)
|
(4)
|
|
(2,905)
|
|
2,901
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
4
|
|
5,974
|
|
(5,970)
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Income (Loss)
|
$
|
87
|
|
$
|
(1,838)
|
|
$
|
1,925
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2017 and 2016: (i) our proportionate share of the unconsolidated entities’ net loss of $189 and $6,161 and (ii) interest expense of $185 and $188, adjusted for (iii) asset impairment charges of $0 and $3,068, respectively.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net income (loss) attributable to shareholders
|
$
|
152
|
|
$
|
(4,824)
|
|
$
|
4,976
|
Add: Benefit from income taxes
|
(65)
|
|
(86)
|
|
21
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
3
|
|
(3)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
—
|
|
—
|
|
—
|
Add: Interest expense
|
—
|
|
410
|
|
(410)
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)
|
1,354
|
|
1,196
|
|
158
|
Less: Equity in earnings of unconsolidated entities
|
4
|
|
5,974
|
|
(5,970)
|
Less: Non-controlling share of Adjusted EBITDA
|
—
|
|
—
|
|
—
|
Adjusted EBITDA (non-GAAP)
|
$
|
1,445
|
|
$
|
2,673
|
|
$
|
(1,228)
|
__________________________________________________
(2) Includes the following items for the years ended December 31, 2017 and 2016: (i) net loss of $189 and $6,161, (ii) interest expense of $785 and $1,323, (iii) depreciation and amortization expense of $758 and $2,966, and (iv) asset impairment charges of $0 and $3,068, respectively.
Revenues
Total revenues decreased $1.1 million primarily driven by the sale of 42,000 shipping containers that were subject to direct finance leases during the first quarter of 2016 and lower finance lease income as a result of the amortization of the underlying principal balances.
Expenses
Total expenses decreased $0.4 million primarily due to a decrease in interest expense of $0.4 million, due to the termination of the term loan sale of the shipping containers during the first quarter of 2016.
Other Expense
Total other expense decreased $5.7 million primarily driven by income earned from our shipping container joint venture due to the sale of containers in the portfolios for gains, and no impairment was taken during 2017. Partially offsetting the increase in equity income from unconsolidated entities was the gain on sale of direct finance leases of $0.3 million from the sale of 42,000 shipping containers during 2016.
Adjusted Net Income (Loss)
Adjusted Net Income was $0.9 million, an increase of $1.9 million, reflecting the changes noted above coupled with a decrease in the pro-rata share of Adjusted Net Loss from unconsolidated entities. These changes were mostly offset by the change in equity of losses of unconsolidated entities, due to the impairment recorded in 2016.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $1.2 million, primarily reflecting the change in equity in unconsolidated entities, a higher pro-rata share of Adjusted EBITDA from unconsolidated entities and finance lease income driven by the sale of 42,000 shipping containers during 2016.
Jefferson Terminal Segment
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal services revenues
|
$
|
10,229
|
|
$
|
15,902
|
|
$
|
(5,673)
|
|
|
|
|
|
|
Total revenues
|
10,229
|
|
15,902
|
|
(5,673)
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
31,213
|
|
21,886
|
|
9,327
|
|
|
|
|
|
|
Acquisition and transaction expenses
|
—
|
|
400
|
|
(400)
|
|
|
|
|
|
|
Depreciation and amortization
|
16,193
|
|
15,500
|
|
693
|
Interest expense
|
13,568
|
|
13,501
|
|
67
|
Total expenses
|
60,974
|
|
51,287
|
|
9,687
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(321)
|
|
(18)
|
|
(303)
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
—
|
|
(1,579)
|
|
1,579
|
Interest income (expense)
|
376
|
|
(19)
|
|
395
|
Other income
|
1,980
|
|
602
|
|
1,378
|
Total other income (expense)
|
2,035
|
|
(1,014)
|
|
3,049
|
Loss before income taxes
|
(48,710)
|
|
(36,399)
|
|
(12,311)
|
Provision for income taxes
|
42
|
|
74
|
|
(32)
|
Net loss
|
(48,752)
|
|
(36,473)
|
|
(12,279)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(22,991)
|
|
(16,456)
|
|
(6,535)
|
Net loss attributable to shareholders
|
$
|
(25,761)
|
|
$
|
(20,017)
|
|
$
|
(5,744)
|
Add: Provision for income taxes
|
42
|
|
74
|
|
(32)
|
Add: Equity-based compensation expense
|
318
|
|
(4,051)
|
|
4,369
|
Add: Acquisition and transaction expenses
|
—
|
|
400
|
|
(400)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
1,579
|
|
(1,579)
|
Add: Changes in fair value of non-hedge derivative instruments
|
(1,022)
|
|
—
|
|
(1,022)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities (1)
|
(321)
|
|
—
|
|
(321)
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
(79)
|
|
(52)
|
|
(27)
|
Less: Equity in losses of unconsolidated entities
|
321
|
|
18
|
|
303
|
Less: Non-controlling share of Adjusted Net (Income) Loss (2)
|
(514)
|
|
800
|
|
(1,314)
|
Adjusted Net Loss
|
$
|
(27,016)
|
|
$
|
(21,249)
|
|
$
|
(5,767)
|
__________________________________________________
(1) Includes Jefferson’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed above, for which there were no adjustments.
(2) Includes the following items for the years ended December 31, 2017 and 2016: (i) equity-based compensation of $125 and $(1,581), (ii) provision for income tax of $16 and $29, (iii) acquisition and transaction expenses of $0 and $156, (iv) changes in fair value of non-hedge derivative instruments of $404 and $0, and (v) loss on extinguishment of debt of $0 and $616 less (vi) cash tax payments of $31 and $20, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net loss attributable to shareholders
|
$
|
(25,761)
|
|
$
|
(20,017)
|
|
$
|
(5,744)
|
Add: Provision for income taxes
|
42
|
|
74
|
|
(32)
|
Add: Equity-based compensation expense
|
318
|
|
(4,051)
|
|
4,369
|
Add: Acquisition and transaction expenses
|
—
|
|
400
|
|
(400)
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
1,579
|
|
(1,579)
|
Add: Changes in fair value of non-hedge derivative instruments
|
(1,022)
|
|
—
|
|
(1,022)
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
16,193
|
|
15,500
|
|
693
|
Add: Interest expense
|
13,567
|
|
13,501
|
|
66
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (3)
|
(321)
|
|
—
|
|
(321)
|
Less: Equity in earnings of unconsolidated entities
|
321
|
|
18
|
|
303
|
Less: Non-controlling share of Adjusted EBITDA (4)
|
(11,751)
|
|
(10,184)
|
|
(1,567)
|
Adjusted EBITDA (non-GAAP)
|
$
|
(8,414)
|
|
$
|
(3,180)
|
|
$
|
(5,234)
|
__________________________________________________
(3) Includes net loss of $321 and $0 for the years ended December 31, 2017 and 2016, respectively.
(4) Includes the following items for the years ended December 31, 2017 and 2016: (i) equity-based compensation of $125 and $(1,581), (ii) provision for income taxes of $16 and $29, (iii) interest expense of $4,886 and $4,914, (iv) loss on extinguishment of debt of $0 and $616, (v) acquisition and transaction expenses of $0 and $156, (vi) changes in fair value of non-hedge derivative instruments of $404 and $0, and (vii) depreciation and amortization expense of $6,320 and $6,050, respectively.
Revenues
Total revenues decreased $5.7 million reflecting lower terminal services revenue due to lower throughput and volumes at the Terminal, as a result of increased construction and the conclusion of a long term contract.
Expenses
Total expenses increased $9.7 million primarily reflecting higher operating expenses. The increase in operating expenses reflected higher:
•compensation and benefits expense of $5.3 million resulting from the one-time reversal of stock based compensation expense incurred in 2016;
•facility operations expense of $1.8 million primarily due to higher volume from heavy crude oil trading;
•repairs and maintenance of $1.3 million;
•professional fees of $0.9 million;
•tax expense of $0.5 million;
•equipment storage of $0.3 million; and
•insurance expense of $0.2 million.
The above increases were partially offset by lower environmental expense of $0.9 million related to an oil spill in 2016 and other operating expenses of $0.1 million. Additionally, the increase in total expenses reflected higher depreciation expense of $0.7 million.
Adjusted Net Loss
Adjusted Net Loss increased $5.8 million, primarily due to the changes in net loss attributable to shareholders noted above and an increase in equity-based compensation of $4.4 million, offset by (i) loss on the extinguishment of debt of $1.6 million, (ii) non-controlling share of Adjusted Net Loss of $1.3 million, (iii) changes in fair value of non-hedge derivative instruments of $1.0 million and (iv) lower acquisition and transaction expenses of $0.4 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $5.2 million, primarily due to the changes in net loss attributable to shareholders noted above and an increase in (i) equity-based compensation of $4.4 million, (ii) non-controlling share of Adjusted EBITDA of $1.6 million, (iii) depreciation and amortization of $0.7 million and (iv) interest expense of $0.1 million, mostly offset by decreases in (i) a loss on extinguishment of debt of $1.6 million and (ii) changes in fair value of non-hedge derivative instruments of $1.0 million.
Railroad Segment
The following table presents our results of operations and reconciliation of net (loss) income attributable to shareholders to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
Rail revenues
|
$
|
32,607
|
|
$
|
30,837
|
|
$
|
1,770
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
32,607
|
|
30,837
|
|
1,770
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
29,966
|
|
27,975
|
|
1,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
2,037
|
|
1,926
|
|
111
|
Interest expense
|
1,029
|
|
754
|
|
275
|
Total expenses
|
33,032
|
|
30,655
|
|
2,377
|
|
|
|
|
|
|
Other (loss) income
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Gain on sale of assets, net
|
(312)
|
|
423
|
|
(735)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (loss) income
|
(312)
|
|
423
|
|
(735)
|
(Loss) Income before income taxes
|
(737)
|
|
605
|
|
(1,342)
|
Provision for income taxes
|
—
|
|
—
|
|
—
|
Net (loss) income
|
(737)
|
|
605
|
|
(1,342)
|
Less: Net (loss) income attributable to non-controlling interest in consolidated subsidiaries
|
(70)
|
|
23
|
|
(93)
|
Net (loss) income attributable to shareholders
|
$
|
(667)
|
|
$
|
582
|
|
$
|
(1,249)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
730
|
|
379
|
|
351
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income (1)
|
(44)
|
|
(20)
|
|
(24)
|
Adjusted Net Income
|
$
|
19
|
|
$
|
941
|
|
$
|
(922)
|
__________________________________________________
(1) Includes equity-based compensation of $44 and $20 for the years ended December 31, 2017 and December 31, 2016, respectively.
The following table sets forth a reconciliation of net (loss) income attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net (loss) income attributable to shareholders
|
$
|
(667)
|
|
$
|
582
|
|
$
|
(1,249)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
730
|
|
379
|
|
351
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
2,037
|
|
1,925
|
|
112
|
Add: Interest expense
|
1,029
|
|
754
|
|
275
|
|
|
|
|
|
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (1)
|
(228)
|
|
(166)
|
|
(62)
|
Adjusted EBITDA (non-GAAP)
|
$
|
2,901
|
|
$
|
3,474
|
|
$
|
(573)
|
__________________________________________________
(1) Includes the following items for the years ended December 31, 2017 and 2016: (i) equity-based compensation of $44 and $20, (ii) interest expense of $62 and $41, and (iii) depreciation and amortization expense of $122 and $105, respectively.
Revenues
Total revenues increased $1.8 million due to higher traffic and expanded service offerings to customers. The increase primarily reflects increases in freight transportation revenue of $1.5 million and switching and other rail service revenue of $0.5 million. Partially offsetting the increase was lower car hire income of $0.2 million.
Expenses
Total expenses increased $2.4 million which primarily consists of increases in (i) operating expenses of $2.0 million, (ii) depreciation expense of $0.1 million related to property, plant and equipment and (iii) interest expense of $0.3 million related to borrowings under the CMQR Credit Agreement used to finance the operations of the railroad.
The aforementioned increase in operating expenses of $2.0 million reflects higher (i) general operating expense of $2.1 million due to certain tax benefits that were taken in the prior year not available in 2017, (ii) compensation and benefits of $0.6 million and (iii) fuel expense of $0.5 million. Partially offsetting these increases were lower (i) professional fees of $0.5 million, (ii) bad debt of $0.1 million and (iii) other expenses of $0.6 million.
Adjusted Net Income
Adjusted Net Income decreased $0.9 million primarily due to the changes in net (loss) income attributable to shareholders noted above and higher equity-based compensation expense of $0.4 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $0.6 million primarily due to the changes in net (loss) income attributable to shareholders noted above, higher equity-based compensation expense of $0.4 million and an increase in interest expense of $0.3 million.
Ports and Terminals
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infrastructure revenues
|
|
|
|
|
|
Lease income
|
$
|
1,111
|
|
$
|
32
|
|
$
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue
|
3,712
|
|
—
|
|
3,712
|
|
|
|
|
|
|
Total revenues
|
4,823
|
|
32
|
|
4,791
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
9,117
|
|
628
|
|
8,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
1,658
|
|
4
|
|
1,654
|
Interest expense
|
1,088
|
|
545
|
|
543
|
Total expenses
|
11,863
|
|
1,177
|
|
10,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
(7,040)
|
|
(1,145)
|
|
(5,895)
|
Provision for income taxes
|
—
|
|
13
|
|
(13)
|
Net loss
|
(7,040)
|
|
(1,158)
|
|
(5,882)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
(484)
|
|
(157)
|
|
(327)
|
Net loss attributable to shareholders
|
$
|
(6,556)
|
|
$
|
(1,001)
|
|
$
|
(5,555)
|
Add: Provision for income taxes
|
—
|
|
13
|
|
(13)
|
Add: Equity-based compensation expense
|
295
|
|
—
|
|
295
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Less: Cash payments for income taxes
|
4
|
|
(5)
|
|
9
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Loss
|
$
|
(6,257)
|
|
$
|
(993)
|
|
$
|
(5,264)
|
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net loss attributable to shareholders
|
$
|
(6,556)
|
|
$
|
(1,001)
|
|
$
|
(5,555)
|
Add: Provision for income taxes
|
—
|
|
13
|
|
(13)
|
Add: Equity-based compensation expense
|
295
|
|
—
|
|
295
|
Add: Acquisition and transaction expenses
|
—
|
|
—
|
|
—
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
|
—
|
|
—
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
—
|
|
—
|
|
—
|
Add: Depreciation and amortization expense
|
1,658
|
|
4
|
|
1,654
|
Add: Interest expense
|
1,089
|
|
545
|
|
544
|
|
|
|
|
|
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA (1)
|
—
|
|
(55)
|
|
55
|
Adjusted EBITDA (non-GAAP)
|
$
|
(3,514)
|
|
$
|
(494)
|
|
$
|
(3,020)
|
__________________________________________________
(1) Includes interest expense of $0 and $55 for the years ended December 31, 2017 and 2016, respectively.
Revenues
Total revenues increased $4.8 million due to butane sales at Repauno of $3.0 million, recorded in other revenue, as well as the leases that were in place at Long Ridge upon the acquisition of $1.0 million, recorded in lease revenue.
Expenses
Total expenses in the Ports and Terminals segment increased $10.7 million primarily due to increases in operating expenses of $8.5 million, depreciation expense of $1.7 million related to property, plant and equipment, and interest expense of $0.5 million related to the payment obligation to the non-controlling interest holder as part of the Repauno purchase.
The increase in operating expenses was driven by higher (i) compensation and benefits of $2.6 million, (ii) cost of sales of $2.0 million related to the sale of butane, (iii) professional fees of $1.4 million, (iv) facility operations of $1.3 million and (v) other operating expenses of $1.2 million. The increase in depreciation expense is related to the cavern being put into service at Repauno and assets in service at Long Ridge.
Adjusted Net Loss
Adjusted Net Loss increased $5.3 million primarily due to the changes in net loss attributable to shareholders noted above and higher equity-based compensation expense of $0.3 million.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $3.0 million primarily due to (i) the changes in net loss attributable to shareholders noted above, (ii) higher equity-based compensation expense of $0.3 million, (iii) an increase in depreciation and amortization of $1.7 million and (iv) an increase in interest expense of $0.5 million.
Corporate
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Expenses
|
|
|
|
|
|
Operating expenses
|
$
|
—
|
|
$
|
14
|
|
$
|
(14)
|
General and administrative
|
14,570
|
|
12,314
|
|
2,256
|
Acquisition and transaction expenses
|
6,865
|
|
5,836
|
|
1,029
|
Management fees and incentive allocation to affiliate
|
15,732
|
|
16,742
|
|
(1,010)
|
|
|
|
|
|
|
Interest expense
|
19,472
|
|
—
|
|
19,472
|
Total expenses
|
56,639
|
|
34,906
|
|
21,733
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
(2,456)
|
|
—
|
|
(2,456)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
(2,456)
|
|
—
|
|
(2,456)
|
Loss before income taxes
|
(59,095)
|
|
(34,906)
|
|
(24,189)
|
Provision for income taxes
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
Net loss
|
(59,095)
|
|
(34,906)
|
|
(24,189)
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
|
—
|
|
(11)
|
|
11
|
Net loss attributable to shareholders
|
(59,095)
|
|
(34,895)
|
|
(24,200)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
6,865
|
|
5,836
|
|
1,029
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
2,456
|
|
—
|
|
2,456
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
514
|
|
—
|
|
514
|
Less: Cash payments for income taxes
|
(25)
|
|
(14)
|
|
(11)
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted Net Income
|
—
|
|
—
|
|
—
|
Adjusted Net Loss
|
$
|
(49,285)
|
|
$
|
(29,073)
|
|
$
|
(20,212)
|
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Change
|
(in thousands)
|
2017
|
|
2016
|
|
|
Net loss attributable to shareholders
|
$
|
(59,095)
|
|
$
|
(34,895)
|
|
$
|
(24,200)
|
Add: Provision for income taxes
|
—
|
|
—
|
|
—
|
Add: Equity-based compensation expense
|
—
|
|
—
|
|
—
|
Add: Acquisition and transaction expenses
|
6,865
|
|
5,836
|
|
1,029
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
2,456
|
|
—
|
|
2,456
|
Add: Changes in fair value of non-hedge derivative instruments
|
—
|
|
—
|
|
—
|
Add: Asset impairment charges
|
—
|
|
—
|
|
—
|
Add: Incentive allocations
|
514
|
|
—
|
|
514
|
Add: Depreciation and amortization expense
|
—
|
|
—
|
|
—
|
Add: Interest expense
|
19,472
|
|
—
|
|
19,472
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Equity in earnings of unconsolidated entities
|
—
|
|
—
|
|
—
|
Less: Non-controlling share of Adjusted EBITDA
|
—
|
|
—
|
|
—
|
Adjusted EBITDA
|
$
|
(29,788)
|
|
$
|
(29,059)
|
|
$
|
(729)
|
Expenses
Total expenses increased $21.7 million primarily due to increases in:
•interest expense of $19.5 million related to the Senior Notes entered into during 2017;
•general and administrative expenses of $2.3 million, consisting of (i) reimbursement expenses to our manager of $0.8 million, (ii) general corporate costs of $0.4 million and (iii) professional fees related to SOX expenses of $1.1 million; and
•acquisition and transaction costs of $1.0 million related to reimbursement expenses to our manager as we continue to evaluate new investments.
These increases were partially offset by lower management fees of $1.0 million due to a lower equity balance.
Adjusted Net Loss
Adjusted Net Loss increased $20.2 million primarily due to the (i) changes in net loss attributable to shareholders noted above, (ii) higher acquisition and transaction expenses of $1.0 million related to potential acquisition opportunities and (iii) a loss on the extinguishment of debt of $2.5 million.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA decreased $0.7 million primarily due to (i) the changes in net loss attributable to shareholders noted above, (ii) higher interest expense of $19.5 million related to the Senior Notes and Revolving Line of Credit, (iii) higher acquisition and transaction expenses of $1.0 million related to potential acquisition opportunities and (iv) a loss on the extinguishment of debt of $2.5 million.
Transactions with Affiliates and Affiliated Entities
We are managed by FIG LLC (the “Manager”), an affiliate of Fortress, pursuant to a management agreement (the “Management Agreement”) which provides for us to bear obligations for management fees and expense reimbursements payable to the Manager. Our Management Agreement requires our Manager to manage our business affairs in conformity with a broad asset acquisition strategy adopted and monitored by our board of directors. From time to time, we may engage (subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates or other affiliates of Fortress, which may include, but are not limited to, certain financing arrangements, acquisition of assets, acquisition of debt obligations, debt, co-investments, and other assets that present an actual, potential or perceived conflict of interest. Please see Note 13 to our consolidated financial statements included elsewhere in this filing for more information.
Liquidity and Capital Resources
Our principal uses of liquidity have been and continue to be (i) acquisitions or expansion of transportation infrastructure and equipment, (ii) distributions to our shareholders, (iii) expenses associated with our operating activities and (iv) debt service obligations associated with our investments.
•In the years ended December 31, 2018, 2017, and 2016, cash used for the purpose of making investments was $751.5 million, $594.6 million, and $308.1 million, respectively.
•In the years ended December 31, 2018, 2017 and 2016, distributions to shareholders, including cash dividends, were $110.6 million, $100.1 million and $100.0 million, respectively.
•Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our debt obligations are captured in our cash flows from financing activities.
Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our transportation infrastructure and equipment assets (including finance lease collections and maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales.
•During the years ended December 31, 2018, 2017, and 2016, cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $189.3 million, $96.0 million and $48.2 million, respectively.
•During the year ended December 31, 2018, additional borrowings were obtained in connection with (i) the 2025 Notes of $291.0 million, (ii) the Revolving Credit Facility of $275.0 million, (iii) the 2022 Notes of $100.0 million, (iv) the Jefferson Revolver of $49.5 million and (v) the CMQR Credit Agreement of $35.5 million. We made principal payments of $218.8 million primarily related to the Revolving Credit Facility and CMQR Credit Agreement.
During the year ended December 31, 2017, additional borrowings were obtained in connection with (i) the Term Loan of $97.2 million, net of deferred financing costs, (ii) the Revolving Credit Facility of $95.0 million, (iii) the CMQR Credit Agreement of $32.0 million and (iv) the Senior Notes of $343.0 million, net of deferred financing costs and repayment of the Term Loan. We made principal repayments of $125.2 million, primarily related to the FTAI Pride Credit Agreement, the Revolving Credit Facility and the CMQR Credit Agreement.
During year ended December 31, 2016, additional borrowings were obtained in connection with the Series 2016 Bonds of $99.9 million and the CMQR Credit Agreement of $10.8 million. We made total principal repayments of $160.2 million, primarily related to the termination of the Jefferson Terminal Credit Agreement, Container Loan #1, and Container Loan #2.
•During the years ended December 31, 2018, 2017, and 2016 proceeds from the sale of assets were $44.1 million, $121.4 million and $94.4 million, respectively.
•During the year ended December 31, 2018, proceeds from the issuance of common stock were $148.3 million, net of issuance costs of $0.8 million.
Our net cash provided by operating activities has been less than the amount of distributions to our shareholders. Our board of directors takes this and other factors into account as part of any decision to pay a dividend, and the timing and amount of any future dividend is subject to change at the discretion of our board of directors.
We are currently evaluating several potential Infrastructure and Equipment Leasing transactions, which could occur within the next 12 months. However, as of the date of this filing, none of these pipeline transactions or negotiations are definitive or included within our planned liquidity needs. We cannot assure you if or when any such transaction will be consummated or the terms of any such transaction.
We have a dividend reinvestment plan in place which allows shareholders to automatically reinvest dividends in our common shares. The plan became effective on February 24, 2017.
Historical Cash Flow
The following table compares the historical cash flow for the years ended December 31, 2018, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
Cash Flow Data:
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
133,697
|
|
$
|
68,497
|
|
$
|
30,903
|
Net cash used in investing activities
|
(703,533)
|
|
(472,265)
|
|
(210,749)
|
Net cash provided by (used in) financing activities
|
597,867
|
|
363,078
|
|
(89,971)
|
Comparison of the years ended December 31, 2018 and December 31, 2017
Net cash provided by operating activities increased $65.2 million primarily due to an increase in net income of $7.5 million and adjustments to reconcile net income which include increases in (i) depreciation and amortization of $48.2 million, (ii) amortization of lease intangibles and incentives of $18.4 million and (iii) a change in gain on sale of equipment of $14.4 million. These increases were partially offset by security deposits and maintenance claims included in earnings of $6.3 million and a change in fair value of non-hedge derivatives of $4.5 million. Also contributing to the offset were the changes in accounts receivable, other assets, and other liabilities due to the continued expansion of operations across all business segments.
Net cash used in investing activities increased $231.3 million primarily due to (i) the acquisition of property, plant and equipment of $113.9 million, (ii) the acquisition of leasing equipment and lease intangibles of $73.5 million in the Aviation Leasing segment and (iii) lower proceeds from the sale of leasing equipment and available-for-sale securities of $47.1 million and $30.2 million, respectively. Partially offsetting this increase was a change in cash used for investments of $30.4 million.
Net cash provided by financing activities increased $234.8 million primarily due to proceeds from borrowings under (i) the 2025 Notes of $291.0 million, (ii) a net increase in the Revolving Credit Facility of $180.0 million and (iii) the Jefferson Revolver of $49.5 million. Additionally, we received proceeds from the issuance of common stock, net of issuance costs of $147.5 million. Partially offsetting these increases were (i) a net decrease in proceeds from borrowings under the 2022 Notes of $340.2 million and (ii) a net increase in repayments of the Revolving Credit Facility and CMQR Credit Agreement of $80.0 million and $14.2 million, respectively.
Comparison of the years ended December 31, 2017 and December 31, 2016
Net cash provided by operating activities increased $37.6 million primarily due to an increase in net income of $17.4 million and adjustments to reconcile net income which include increases in (i) depreciation and amortization of $27.9 million, (ii) equity based compensation of $5.0 million and (iii) amortization of lease intangibles and incentives of $2.9 million. These increases were partially offset by asset impairment of $7.5 million in 2016 and a change in gain on sale of equipment of $12.3 million as compared to 2016. Also contributing to the offset were the changes in accounts receivable, other assets, and other liabilities due to the continued expansion of operations across all business segments.
Net cash used in investing activities increased $261.5 million primarily due to (i) the acquisition of leasing equipment and lease intangibles of $230.8 million in the Aviation Leasing segment, (ii) cash used for investments of $1.5 million and (iii) the acquisition of property, plant and equipment of $58.7 million mainly due to the acquisition of Long Ridge. Partially offsetting this increase were higher proceeds from the sale of leasing equipment and available-for-sale securities of $68.2 million and $30.2 million, respectively. Additionally, cash used in investing activities increased due to less cash received from the sale of two finance leases of $71.0 million.
Net cash provided by financing activities increased $453.0 million primarily due to proceeds from borrowings under (i) the Term Loan of $97.2 million, net of deferred financing costs, (ii) the Revolving Credit Facility of $95.0 million, (iii) the CMQR Credit Agreement of $32.0 million and (iv) the Senior Notes of $343.0 million, net of deferred financing costs and repayment of the Term Loan. Also contributing to the increase was a decrease in the repayment of debt related to the termination of the Jefferson Terminal Credit Agreement and loans associated with the sale of shipping containers in 2016, as well as an increase in receipt of maintenance deposits of $12.2 million, offset by a decrease in cash contributions from non-controlling interests of $11.4 million.
Funds Available for Distribution (Non-GAAP)
We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy. FAD is not a financial measure in accordance with GAAP. The GAAP measure most directly comparable to FAD is net cash provided by operating activities. We believe FAD is a useful metric for investors and analysts for similar purposes.
We define FAD as: net cash provided by operating activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and excluding changes in working capital. The following table sets forth a reconciliation of Net Cash Provided by Operating Activities to FAD:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
Net Cash Provided by Operating Activities
|
$
|
133,697
|
|
$
|
68,497
|
|
$
|
30,903
|
Add: Principal Collections on Finance Leases
|
1,981
|
|
473
|
|
2,513
|
Add: Proceeds from Sale of Assets
|
44,085
|
|
121,419
|
|
94,875
|
Add: Return of Capital Distributions from Unconsolidated Entities
|
2,085
|
|
—
|
|
432
|
Less: Required Payments on Debt Obligations (1)
|
(7,793)
|
|
(8,368)
|
|
(53,668)
|
Less: Capital Distributions to Non-Controlling Interest
|
—
|
|
(254)
|
|
—
|
Exclude: Changes in Working Capital
|
7,610
|
|
(4,515)
|
|
1,730
|
Funds Available for Distribution (FAD)
|
$
|
181,665
|
|
$
|
177,252
|
|
$
|
76,785
|
_____________________________________________________
(1) Required payments on debt obligations for the year ended December 31, 2018 exclude $175,000 repayment of the Revolving Credit Facility and $36,026 repayment of the CMQR Credit Agreement, and for the year ended December 31, 2017 exclude $100,000 repayment of the Term Loan, $95,000 repayment of the Revolving Credit Facility and $21,855 repayment of the CMQR Credit Agreement, and for the year ended December 31, 2016 exclude $98,750 repayment upon the termination of the Jefferson Terminal Credit Agreement and $7,748 repayment under the CMQR Credit Agreement which were voluntary refinancing as repayment of these amounts were not required at this time.
Limitations
FAD is subject to a number of limitations and assumptions and there can be no assurance that we will generate FAD sufficient to meet our intended dividends. FAD has material limitations as a liquidity measure because such measure excludes items that are required elements of our net cash provided by operating activities as described below. FAD should not be considered in isolation nor as a substitute for analysis of our results of operations under GAAP, and it is not the only metric that should be considered in evaluating our ability to meet our stated dividend policy. Specifically:
•FAD does not include equity capital called from our existing limited partners, proceeds from any debt issuance or future equity offering, historical cash and cash equivalents and expected investments in our operations.
•FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified.
•While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as we rely on alternative sources of liquidity to fund such purchases.
•FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as we have multiple sources of liquidity and intend to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity.
•FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments.
•FAD does not reflect changes in working capital balances as management believes that changes in working capital are primarily driven by short term timing differences, which are not meaningful to our distribution decisions.
•Management has significant discretion to make distributions, and we are not bound by any contractual provision that requires us to use cash for distributions.
If such factors were included in FAD, there can be no assurance that the results would be consistent with our presentation of FAD.
Debt Obligations
See Note 8 to the Consolidated Financial Statements for information related to our debt obligations.
Contractual Obligations
The following table summarizes our future obligations, by period due, as of December 31, 2018, under our various contractual obligations and commitments. We had no off-balance sheet arrangements as of December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Total
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
FTAI Pride Credit Agreement
|
$
|
47,743
|
|
$
|
47,743
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
CMQR Credit Agreement
|
22,265
|
|
22,265
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Jefferson Revolver
|
49,805
|
|
—
|
|
—
|
|
49,805
|
|
—
|
|
—
|
|
—
|
DRP Revolver
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Revolving Credit Facility
|
100,000
|
|
—
|
|
—
|
|
100,000
|
|
—
|
|
—
|
|
—
|
Series 2012 Bonds
|
41,220
|
|
1,670
|
|
1,810
|
|
1,960
|
|
2,120
|
|
2,295
|
|
31,365
|
Series 2016 Bonds
|
144,200
|
|
—
|
|
144,200
|
|
—
|
|
—
|
|
—
|
|
—
|
Senior Notes due 2022
|
550,000
|
|
—
|
|
—
|
|
—
|
|
550,000
|
|
—
|
|
—
|
Senior Notes due 2025
|
300,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
300,000
|
Total principal payments on loans and bonds payable
|
1,255,233
|
|
71,678
|
|
146,010
|
|
151,765
|
|
552,120
|
|
2,295
|
|
331,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total estimated interest payments (1)
|
309,134
|
|
80,304
|
|
67,624
|
|
62,396
|
|
30,098
|
|
22,182
|
|
46,530
|
Obligation to third-party
|
16,614
|
|
16,614
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Operating lease obligations
|
119,333
|
|
8,980
|
|
5,225
|
|
3,890
|
|
3,321
|
|
2,715
|
|
95,202
|
Capital lease obligations
|
1,096
|
|
380
|
|
365
|
|
232
|
|
110
|
|
9
|
|
—
|
|
446,177
|
|
106,278
|
|
73,214
|
|
66,518
|
|
33,529
|
|
24,906
|
|
141,732
|
Total contractual obligations
|
$
|
1,701,410
|
|
$
|
177,956
|
|
$
|
219,224
|
|
$
|
218,283
|
|
$
|
585,649
|
|
$
|
27,201
|
|
$
|
473,097
|
______________________________________________________________________________________
(1) Estimated interest payments based on rates as of December 31, 2018.
We expect to meet our future short-term liquidity requirements through cash on hand and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required.
Application of Critical Accounting Policies
Operating Leases—We lease equipment pursuant to net operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.
Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the amount paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.
Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues.
Finance Leases—From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, include a bargain purchase option, or provides for minimum lease payments with a present value of 90% or more of the fair value of the leased equipment at the date of lease inception. Net investment in finance lease represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases.
Variable Interest Entities—The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Maintenance Payments—Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the relevant work.
We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities on the Consolidated Balance Sheet. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability.
In certain leases, the lessee or us may be obligated to make a payment to the other party at lease termination based on redelivery conditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition. We recognize payments received as end-of-lease compensation adjustments, within lease revenue or as a reduction to the maintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability when we are obligated and can reasonably estimate such payment.
Property, Plant and Equipment, Leasing Equipment and Depreciation—Property, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to estimated residual values which are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
Range of Estimated Useful Lives
|
|
Residual Value Estimates
|
Aircraft
|
|
25 years from date of manufacture
|
|
Generally not to exceed 15% of manufacturer’s list price when new
|
Aircraft engines
|
|
2 - 6 years, based on maintenance adjusted service life
|
|
Sum of engine core salvage value plus the estimated fair value of life limited parts
|
Offshore energy vessels
|
|
25 years from date of manufacture
|
|
20% of new build cost
|
Railcars and locomotives
|
|
40 - 50 years from date of manufacture
|
|
Scrap value at end of useful life
|
Track and track related assets
|
|
15 - 50 years from date of manufacture
|
|
Scrap value at end of useful life
|
Buildings and site improvements
|
|
20 - 30 years
|
|
Scrap value at end of useful life
|
Railroad equipment
|
|
3 - 15 years from date of manufacture
|
|
Scrap value at end of useful life
|
Terminal machinery and equipment
|
|
15 - 25 years from date of manufacture
|
|
Scrap value at end of useful life
|
Vehicles
|
|
5 - 7 years from date of manufacture
|
|
Scrap value at end of useful life
|
Furniture and fixtures
|
|
3 - 6 years from date of purchase
|
|
None
|
Computer hardware and software
|
|
3 - 5 years from date of purchase
|
|
None
|
Impairment of Long-Lived Assets—We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination; significant traffic decline; or the introduction of newer technology aircraft, vessels, engines or railcars. When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows from currently contracted leases and terminal services contracts, future projected leases, terminal service and freight rail rates, transition costs, estimated down time and estimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge.
Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, terminal service, and freight rail rates, residual values, economic conditions, technology, demand for a particular asset type and other factors. With respect to our offshore segment, although we expect current market conditions to improve, if such conditions persist for an extended period of time, this could result in the impairment of some of our offshore vessels.
Goodwill—Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisitions of CMQR and Jefferson Terminal. The carrying amount of goodwill is approximately $116.6 million as of both December 31, 2018 and 2017.
We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as of October 1st of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment.
For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A qualitative analysis was not elected for the years ended December 31, 2018 or 2017.
The first step of an impairment assessment compares the fair value of a respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a second step must be completed in order to determine the amount of goodwill impairment that should be recorded, if any.
In performing the annual analysis, our two reporting units subject to the test are the Jefferson Terminal and Railroad reporting units. We estimate the fair value of the reporting units using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The estimates and assumptions used consider historical performance if indicative of future performance, and are consistent with the assumptions used in determining future profit plans for the reporting units. We also utilize market valuation models and other financial ratios, which require us to make certain assumptions and estimates regarding the applicability of those models to our assets and businesses.
Although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management’s judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. If the forecasted cash flows of the Jefferson Terminal and Railroad reporting units or other key inputs are negatively revised in the future, the estimated fair value of the Jefferson Terminal and Railroad reporting units could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results. Specifically, as it relates to the Jefferson Terminal segment, forecasted revenue is dependent on the ramp up of volumes under current contracts and the acquisition of additional storage contracts for the heavy and light crude and refined products during 2019 subject to obtaining rail capacity for crude, permits for pipeline and movements in future oil spreads. Jefferson Terminal was designed to reach a storage capacity of 21.7 million barrels, and 2.1 million of storage, or approximately 10% of capacity, is currently operational. If the Company strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting units would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Other assumptions utilized in our annual impairment analysis that are significant in determination of the fair value of the reporting unit include the discount rate utilized in our discounted cash flow analysis of 14% and our terminal growth rate of 3%.
Furthermore, development of both inbound and outbound pipelines to and from the Jefferson Terminal over the next two to three years will affect our forecasted growth and therefore our estimated fair value. We continue to expect the Jefferson Terminal segment to generate positive Adjusted EBITDA during 2019. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projected revenues are achievable and have not yet modified those projections based on ongoing negotiations with our customers and discussions with major pipeline companies. Further delays in executing these contracts or achieving our projections could adversely affect the fair value of the reporting unit. However, strengthening macroeconomic conditions such as increased oil prices and the increasing spread between Western Canadian Crude and Western Texas Intermediate are better than we anticipated, and we remain positive for the outlook of Jefferson Terminal’s earnings potential.
For the years ended December 31, 2018, 2017, and 2016 there was no impairment of goodwill.
Income Taxes—A portion of our income earned by our corporate subsidiaries is subject to U.S. federal and state income taxation, taxed at prevailing rates. The remainder of our income is allocated directly to our partners and is not subject to a corporate level of taxation. Certain subsidiaries of ours are subject to income tax in the foreign countries in which they conduct business.
We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized.
Recent Accounting Pronouncements
Please see Note 2 to our consolidated financial statements included elsewhere in this filing for recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.
Interest Rate Risk
Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive to many factors, including the U.S. government’s monetary and tax policies, global economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposure relates to our term loan arrangements.
Our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our finance leases. We manage our exposure to interest rate movements through the use of interest rate derivatives (interest rate swaps and caps). As a result, when market rates of interest change, there is generally not a material impact on our interest expense, future earnings or cash flows.
The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential interest expense impacts on our financial instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.
As of December 31, 2018, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would result in an interest expense increase/decrease of approximately $2.0 million over the next 12 months before the impact of interest rate derivatives.
Foreign Currency Exchange Risk
Our functional currency is U.S. dollars. All of our leasing arrangements are denominated in U.S. dollars. Currently, the majority of freight rail revenue is also denominated in U.S. dollars, but a portion is denominated in Canadian dollars. Although foreign exchange risk could arise from our operations in multiple jurisdictions, we do not have significant exposure to foreign currency risk as our leasing arrangements are denominated in U.S. dollars. All of our purchase agreements are negotiated in U.S. dollars, and we currently receive the majority of revenue in U.S. dollars. We pay substantially all of our expenses in U.S. dollars; however we pay some expenses in Canadian dollars. Because we currently receive the majority of our revenues in U.S. dollars and pay substantially all of our expenses in U.S. dollars, we do not expect a change in foreign exchange rates would have a significant impact on our results of operations or cash flows.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements:
|
|
|
|
|
|
|
|
|
Consolidated Financial Statements of Fortress Transportation and Infrastructure Investors LLC:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Statements of Intermodal Finance I Ltd:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with Regulation S-X 3-09, the consolidated financial statements of Intermodal Finance I Ltd. as of December 31, 2018 (unaudited) and December 31, 2017 and for the years ended December 31, 2018 (unaudited), 2017, and 2016, are presented herein.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Fortress Transportation and Infrastructure Investors LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Fortress Transportation and Infrastructure Investors LLC (“the Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss) changes in equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
New York, New York
February 28, 2019
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
December 31,
|
|
|
|
|
|
2018
|
|
2017
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
2
|
|
$
|
99,601
|
|
$
|
59,400
|
Restricted cash
|
2
|
|
21,236
|
|
33,406
|
Accounts receivable, net
|
|
|
53,789
|
|
31,076
|
Leasing equipment, net
|
3
|
|
1,432,210
|
|
1,074,130
|
Finance leases, net
|
4
|
|
18,623
|
|
9,244
|
Property, plant, and equipment, net
|
5
|
|
708,853
|
|
489,949
|
Investments
|
6
|
|
40,560
|
|
42,538
|
Intangible assets, net
|
7
|
|
38,513
|
|
40,043
|
Goodwill
|
|
|
116,584
|
|
116,584
|
Other assets
|
2
|
|
108,809
|
|
59,436
|
Total assets
|
|
|
$
|
2,638,778
|
|
$
|
1,955,806
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
$
|
112,188
|
|
$
|
68,226
|
Debt, net
|
8
|
|
1,237,347
|
|
703,264
|
Maintenance deposits
|
2
|
|
158,163
|
|
103,464
|
Security deposits
|
2
|
|
38,539
|
|
27,257
|
Other liabilities
|
|
|
38,759
|
|
18,520
|
Total liabilities
|
|
|
1,584,996
|
|
920,731
|
|
|
|
|
|
|
Commitments and contingencies
|
16
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 84,050,889 and 75,771,738 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively)
|
|
|
840
|
|
758
|
Additional paid in capital
|
|
|
1,029,376
|
|
985,009
|
Accumulated deficit
|
|
|
(32,817)
|
|
(38,699)
|
Accumulated other comprehensive income
|
|
|
—
|
|
—
|
Shareholders' equity
|
|
|
997,399
|
|
947,068
|
Non-controlling interest in equity of consolidated subsidiaries
|
|
|
56,383
|
|
88,007
|
Total equity
|
|
|
1,053,782
|
|
1,035,075
|
Total liabilities and equity
|
|
|
$
|
2,638,778
|
|
$
|
1,955,806
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
Notes
|
|
2018
|
|
2017
|
|
2016
|
Revenues
|
|
|
|
|
|
|
|
Equipment leasing revenues
|
|
|
$
|
253,039
|
|
$
|
170,000
|
|
$
|
101,949
|
Infrastructure revenues
|
|
|
126,839
|
|
47,659
|
|
46,771
|
Total revenues
|
10
|
|
379,878
|
|
217,659
|
|
148,720
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
167,514
|
|
92,385
|
|
66,169
|
General and administrative
|
|
|
17,126
|
|
14,570
|
|
12,314
|
Acquisition and transaction expenses
|
|
|
6,968
|
|
7,306
|
|
6,316
|
Management fees and incentive allocation to affiliate
|
13
|
|
15,726
|
|
15,732
|
|
16,742
|
Depreciation and amortization
|
3, 5, 7
|
|
136,354
|
|
88,110
|
|
60,210
|
Interest expense
|
|
|
57,854
|
|
38,827
|
|
18,957
|
Total expenses
|
|
|
401,542
|
|
256,930
|
|
180,708
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
6
|
|
(1,008)
|
|
(1,601)
|
|
(5,992)
|
Gain on sale of assets, net
|
|
|
3,911
|
|
18,281
|
|
5,941
|
Loss on extinguishment of debt
|
|
|
—
|
|
(2,456)
|
|
(1,579)
|
Asset impairment
|
|
|
—
|
|
—
|
|
(7,450)
|
Interest income
|
|
|
488
|
|
688
|
|
136
|
Other income
|
|
|
3,941
|
|
3,073
|
|
602
|
Total other income (expense)
|
|
|
7,332
|
|
17,985
|
|
(8,342)
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(14,332)
|
|
(21,286)
|
|
(40,330)
|
Provision for income taxes
|
12
|
|
1,372
|
|
1,954
|
|
268
|
Net loss
|
|
|
(15,704)
|
|
(23,240)
|
|
(40,598)
|
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries
|
|
|
(21,586)
|
|
(23,374)
|
|
(20,534)
|
Net income (loss) attributable to shareholders
|
|
|
$
|
5,882
|
|
$
|
134
|
|
$
|
(20,064)
|
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
Basic
|
15
|
|
$
|
0.07
|
|
$
|
—
|
|
$
|
(0.26)
|
Diluted
|
15
|
|
$
|
0.07
|
|
$
|
—
|
|
$
|
(0.26)
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
83,654,068
|
|
75,766,811
|
|
75,738,698
|
Diluted
|
|
|
83,664,833
|
|
75,766,811
|
|
75,738,698
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Net loss
|
$
|
(15,704)
|
|
$
|
(23,240)
|
|
$
|
(40,598)
|
Other comprehensive loss:
|
|
|
|
|
|
Cash Flow Hedge:
|
|
|
|
|
|
Change in fair value of cash flow hedge
|
—
|
|
—
|
|
(97)
|
Available-for-Sale Securities:
|
|
|
|
|
|
Unrealized gain in available-for-sale securities
|
—
|
|
4,276
|
|
7,130
|
Reclassification of gains included in net income
|
—
|
|
(11,406)
|
|
—
|
Comprehensive loss
|
(15,704)
|
|
(30,370)
|
|
(33,565)
|
Comprehensive loss attributable to non-controlling interest
|
(21,586)
|
|
(23,374)
|
|
(20,534)
|
Comprehensive income (loss) attributable to shareholders
|
$
|
5,882
|
|
$
|
(6,996)
|
|
$
|
(13,031)
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid In Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Income
|
|
Non-Controlling Interest in Equity of Consolidated Subsidiaries
|
|
Total Equity
|
Equity - December 31, 2015
|
$
|
757
|
|
$
|
1,184,198
|
|
$
|
(18,769)
|
|
$
|
97
|
|
$
|
124,403
|
|
$
|
1,290,686
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
|
|
(20,064)
|
|
|
|
(20,534)
|
|
(40,598)
|
Other comprehensive income
|
|
|
|
|
—
|
|
7,033
|
|
—
|
|
7,033
|
Total comprehensive income (loss)
|
|
|
|
|
(20,064)
|
|
7,033
|
|
(20,534)
|
|
(33,565)
|
Capital contributions
|
|
|
|
|
|
|
|
|
12,121
|
|
12,121
|
Settlement of equity-based compensation
|
|
|
|
|
|
|
|
|
(200)
|
|
(200)
|
Issuance of common shares
|
1
|
|
336
|
|
|
|
|
|
—
|
|
337
|
Dividends declared
|
|
|
(99,977)
|
|
|
|
|
|
(50)
|
|
(100,027)
|
Equity-based compensation
|
|
|
200
|
|
|
|
|
|
(3,872)
|
|
(3,672)
|
Equity - December 31, 2016
|
$
|
758
|
|
$
|
1,084,757
|
|
$
|
(38,833)
|
|
$
|
7,130
|
|
$
|
111,868
|
|
$
|
1,165,680
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
|
|
|
134
|
|
|
|
(23,374)
|
|
(23,240)
|
Other comprehensive loss
|
|
|
|
|
—
|
|
(7,130)
|
|
—
|
|
(7,130)
|
Total comprehensive income (loss)
|
|
|
|
|
134
|
|
(7,130)
|
|
(23,374)
|
|
(30,370)
|
Capital contributions
|
|
|
|
|
|
|
|
|
1,296
|
|
1,296
|
Capital distributions
|
|
|
|
|
|
|
|
|
(254)
|
|
(254)
|
Transfer of non-controlling interest
|
|
|
|
|
|
|
|
|
(2,798)
|
|
(2,798)
|
Settlement of equity-based compensation
|
|
|
|
|
|
|
|
|
(74)
|
|
(74)
|
Issuance of common shares
|
—
|
|
310
|
|
|
|
|
|
—
|
|
310
|
Dividends declared
|
|
|
(100,058)
|
|
|
|
|
|
—
|
|
(100,058)
|
Equity-based compensation
|
|
|
—
|
|
|
|
|
|
1,343
|
|
1,343
|
Equity - December 31, 2017
|
$
|
758
|
|
$
|
985,009
|
|
$
|
(38,699)
|
|
$
|
—
|
|
$
|
88,007
|
|
$
|
1,035,075
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
|
|
|
5,882
|
|
|
|
(21,586)
|
|
(15,704)
|
Other comprehensive income
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
Total comprehensive income (loss)
|
|
|
|
|
5,882
|
|
—
|
|
(21,586)
|
|
(15,704)
|
Purchase of non-controlling interest
|
|
|
7,225
|
|
|
|
|
|
(10,930)
|
|
(3,705)
|
Dividends declared
|
|
|
(110,584)
|
|
|
|
|
|
—
|
|
(110,584)
|
Issuance of common shares
|
82
|
|
147,717
|
|
|
|
|
|
—
|
|
147,799
|
Equity-based compensation
|
|
|
9
|
|
|
|
|
|
892
|
|
901
|
Equity - December 31, 2018
|
$
|
840
|
|
$
|
1,029,376
|
|
$
|
(32,817)
|
|
$
|
—
|
|
$
|
56,383
|
|
$
|
1,053,782
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Cash flows from operating activities:
|
|
|
|
|
|
Net loss
|
$
|
(15,704)
|
|
$
|
(23,240)
|
|
$
|
(40,598)
|
Adjustments to reconcile net loss to cash provided by operating activities:
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
1,008
|
|
1,601
|
|
5,992
|
Gain on sale of assets, net
|
(3,911)
|
|
(18,281)
|
|
(5,941)
|
Security deposits and maintenance claims included in earnings
|
(6,323)
|
|
(60)
|
|
(300)
|
Loss on extinguishment of debt
|
—
|
|
2,456
|
|
1,579
|
Equity-based compensation
|
901
|
|
1,343
|
|
(3,672)
|
Depreciation and amortization
|
136,354
|
|
88,110
|
|
60,210
|
Gain on settlement of liabilities
|
—
|
|
(1,093)
|
|
—
|
Asset impairment
|
—
|
|
—
|
|
7,450
|
Change in current and deferred income taxes
|
649
|
|
227
|
|
(387)
|
Change in fair value of non-hedge derivative
|
(5,523)
|
|
(1,022)
|
|
3
|
Amortization of lease intangibles and incentives
|
26,659
|
|
8,306
|
|
5,447
|
Amortization of deferred financing costs
|
5,430
|
|
4,202
|
|
2,576
|
Operating distributions from unconsolidated entities
|
—
|
|
—
|
|
30
|
Bad debt expense
|
1,771
|
|
701
|
|
158
|
Other
|
(4)
|
|
732
|
|
86
|
Change in:
|
|
|
|
|
|
Accounts receivable
|
(23,340)
|
|
(12,001)
|
|
(7,980)
|
Other assets
|
(26,212)
|
|
6,475
|
|
(8,584)
|
Accounts payable and accrued liabilities
|
30,471
|
|
10,266
|
|
7,726
|
Management fees payable to affiliate
|
1,820
|
|
899
|
|
457
|
Other liabilities
|
9,651
|
|
(1,124)
|
|
6,651
|
Net cash provided by operating activities
|
133,697
|
|
68,497
|
|
30,903
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in notes receivable
|
(912)
|
|
—
|
|
(3,066)
|
Investment in unconsolidated entities and available for sale securities
|
(1,115)
|
|
(30,309)
|
|
(28,784)
|
Principal collections on finance leases
|
1,981
|
|
473
|
|
2,513
|
Acquisition of leasing equipment
|
(497,988)
|
|
(425,769)
|
|
(200,640)
|
Acquisition of property plant and equipment
|
(229,963)
|
|
(116,031)
|
|
(57,371)
|
Acquisition of lease intangibles
|
(11,396)
|
|
(10,149)
|
|
(4,527)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase deposit for aircraft and aircraft engines
|
(10,150)
|
|
(12,299)
|
|
(13,681)
|
Proceeds from sale of finance leases
|
—
|
|
—
|
|
71,000
|
Proceeds from sale of leasing equipment
|
44,062
|
|
91,130
|
|
22,885
|
Proceeds from sale of available-for-sale securities
|
—
|
|
30,238
|
|
—
|
Proceeds from sale of property, plant and equipment
|
23
|
|
51
|
|
490
|
|
|
|
|
|
|
Proceeds from deposit on sale of leasing equipment
|
240
|
|
400
|
|
250
|
Return of deposit on sale of leasing equipment
|
(400)
|
|
—
|
|
(250)
|
|
|
|
|
|
|
Return of capital distributions from unconsolidated entities
|
2,085
|
|
—
|
|
432
|
Net cash used in investing activities
|
$
|
(703,533)
|
|
$
|
(472,265)
|
|
$
|
(210,749)
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from debt
|
$
|
750,980
|
|
$
|
567,191
|
|
$
|
152,140
|
Repayment of debt
|
(218,819)
|
|
(125,223)
|
|
(160,166)
|
Payment of other liabilities to non-controlling interest holder
|
—
|
|
—
|
|
(1,000)
|
Payment of deferred financing costs
|
(3,055)
|
|
(3,377)
|
|
(4,246)
|
Receipt of security deposits
|
9,264
|
|
7,290
|
|
3,815
|
Return of security deposits
|
(1,775)
|
|
(3,231)
|
|
(316)
|
Receipt of maintenance deposits
|
53,645
|
|
27,049
|
|
14,804
|
Release of maintenance deposits
|
(25,582)
|
|
(6,270)
|
|
(6,255)
|
Proceeds from issuance of common shares, net of underwriter's discount
|
148,318
|
|
—
|
|
—
|
Common shares issuance costs
|
(820)
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions from non-controlling interests
|
—
|
|
35
|
|
11,480
|
Capital distributions to non-controlling interests
|
—
|
|
(254)
|
|
—
|
Settlement of equity-based compensation
|
—
|
|
(74)
|
|
(200)
|
Purchase of non-controlling interest shares
|
(3,705)
|
|
—
|
|
—
|
Cash dividends
|
(110,584)
|
|
(100,058)
|
|
(100,027)
|
Net cash provided by (used in) financing activities
|
597,867
|
|
363,078
|
|
(89,971)
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents and restricted cash
|
28,031
|
|
(40,690)
|
|
(269,817)
|
Cash and cash equivalents and restricted cash, beginning of period
|
92,806
|
|
133,496
|
|
403,313
|
Cash and cash equivalents and restricted cash, end of period
|
$
|
120,837
|
|
$
|
92,806
|
|
$
|
133,496
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest
|
$
|
43,636
|
|
$
|
25,068
|
|
$
|
13,150
|
Cash paid for taxes
|
721
|
|
1,726
|
|
654
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings of debt
|
$
|
511
|
|
$
|
108,339
|
|
$
|
2,860
|
Repayment and settlement of debt
|
—
|
|
(102,352)
|
|
—
|
Acquisition of leasing equipment
|
(14,263)
|
|
(35,332)
|
|
(7,724)
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
(17,587)
|
|
(37,281)
|
|
(12,184)
|
Financing of property, plant and equipment
|
—
|
|
—
|
|
5,321
|
Settled and assumed security deposits
|
3,793
|
|
3,312
|
|
758
|
Billed, assumed and settled maintenance deposits
|
24,518
|
|
37,292
|
|
6,350
|
Deferred financing costs
|
(4,500)
|
|
(8,802)
|
|
(2,884)
|
Non-cash contribution of non-controlling interest
|
—
|
|
1,261
|
|
641
|
|
|
|
|
|
|
Equity compensation to non-controlling interest
|
892
|
|
1,343
|
|
(3,872)
|
Change in fair value of cash flow hedge
|
—
|
|
—
|
|
(97)
|
Transfer of non-controlling interest
|
7,225
|
|
(2,798)
|
|
—
|
Issuance of common shares
|
301
|
|
—
|
|
—
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
1. ORGANIZATION
Fortress Transportation and Infrastructure Investors LLC ("we", "us", "our" or the “Company”) is a Delaware limited liability company which, through its subsidiary, Fortress Worldwide Transportation and Infrastructure General Partnership (the “Partnership”), is engaged in the ownership and leasing of i) aviation equipment, ii) offshore energy equipment and iii) shipping containers. We also own and operate i) a short line railroad in North America, Central Maine and Québec Railway (“CMQR”), ii) a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”), iii) a deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities (“Repauno”), and iv) a multi-modal terminal located along the Ohio River with multiple industrial development opportunities (“Long Ridge”). We have six reportable segments, i) Aviation Leasing, ii) Offshore Energy, iii) Shipping Containers, iv) Jefferson Terminal, v) Railroad and vi) Ports and Terminals, which operate in two primary businesses, Equipment Leasing and Infrastructure (Note 14).
At December 31, 2014, through their investment in us, the beneficial owners of the Partnership were Fortress Worldwide Transportation and Infrastructure Investors LP (the “Onshore Fund”), with an 89.97% interest and Fortress Worldwide Transportation and Infrastructure Offshore LP (the “Offshore Fund”) with a 9.98% interest; in addition, Fortress Worldwide Transportation and Infrastructure Master GP LLP (the “Master GP”) holds a 0.05% interest. The Master GP is owned by an affiliate of Fortress. The Onshore Fund and the Offshore Fund (collectively, the “Initial Shareholders”) are investment vehicles which are sponsored by Fortress. The general partner of the Onshore Fund and the Offshore Fund is an affiliate of Fortress.
In May 2015, the remaining capital commitments of the investors of the Onshore Fund, Offshore Fund and Master GP were called. Through a series of transactions, the Master GP contributed its rights to previously undistributed incentive allocations pursuant to the partnership agreement in exchange for the limited partnership interests in the Onshore Fund and the Offshore Fund equal to the amount of any such undistributed incentive allocations and 53,502,873 common shares were issued to the Onshore Fund and Offshore Fund based on their relative interests in us.
On May 20, 2015, we completed our Initial Public Offering (“IPO”) of 20 million common shares at a price to the public of $17.00 per share. On June 15, 2015, the underwriters exercised their overallotment option, pursuant to which we issued an additional 2.2 million shares to such underwriters at the IPO price.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting—The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of us and our subsidiaries.
Principles of Consolidation—We consolidate all entities in which we have a controlling interest and in which we have control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.
We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities.
Variable Interest Entities—The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
WWTAI IES MT6015 Ltd
We previously held an interest in WWTAI IES MT6015 Ltd. (“MT6015”), an entity formed in 2014 which had entered into a contract with a shipbuilder for the construction of an offshore multi service / inspection, maintenance and repair vessel (the “Vessel”) for a price of approximately $75 million. Our subsidiary and a third party each held a 50% interest in MT6015 and had equal representation on its board of directors. In connection with the initial capitalization of MT6015, another subsidiary of ours provided the third party partner with a $3.7 million loan which was utilized by the third party partner to fund its equity contribution to MT6015. In addition, the agreement provided us with disproportionate voting rights, in certain situations, as defined in the agreement. Accordingly, we determined that MT6015 is a VIE and that we were the primary beneficiary; accordingly, MT6015 had been presented on a consolidated basis in the accompanying financial statements.
During 2016, we determined not to proceed with the purchase of the Vessel. The shipbuilder delivered a notice of termination of the shipbuilding contract to MT6015 in July 2016. Correspondingly, in the second quarter of 2016, we recorded an impairment in our MT6015 investment of $7.5 million. The shipbuilder has no further recourse to us.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
During 2017, we entered into a settlement arrangement whereby the holder of the non-controlling interest settled its $3.7 million loan due to us by transferring its interest in our subsidiary, and the note payable due to the holder of the non-controlling interest was extinguished. The settlement resulted in a net gain of $1.1 million recorded in other income.
JGP Energy Partners LLC
During the third quarter of 2016, we initiated activities in our 50% owned joint venture, JGP Energy Partners LLC (“JGP”). The other 50% member to the joint venture is a third party ethanol producer. The purpose of the venture is to build storage capacity with capabilities to receive and/or distribute ethanol via water, rail or truck. Each member agreed to contribute up to $27 million (for a total of $54 million) for the development and construction of the ethanol terminal facilities. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a VIE. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, we do not consolidate JGP and account for this investment in accordance with the equity method.
As of December 31, 2018 and 2017, our investment in JGP was $25.5 million and $24.9 million, respectively, which is included in investments on our balance sheet. Refer to Note 6 for further details.
Delaware River Partners LLC
On July 1, 2016, through Delaware River Partners LLC (“DRP”), a consolidated subsidiary, we purchased the assets of Repauno, which consisted primarily of land, a storage cavern, and riparian rights for the acquired land, site improvements and rights. Currently there are no operational processes that could be applied to these assets that would result in outputs without significant green field development. We currently hold a 90% economic interest and a 100% voting interest in DRP. DRP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we are the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying financial statements. We have the right to purchase an additional 8% economic interest from the non-controlling party prior to the fifth year anniversary of the acquisition of Repauno. At the time of the purchase, we concluded that 8% of the 10% interest held by the non-controlling party did not share in the risks or rewards of true equity; and, therefore upon acquisition $5.3 million was recorded in other liabilities on our Consolidated Balance Sheets. The remaining 2% economic non-controlling interest was valued at $0.6 million at the acquisition date.
Ohio River Partners LLC
On June 16, 2017, through Ohio River Partners Shareholders LLC (“ORP”), a consolidated subsidiary, we purchased the assets of Long Ridge which consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. We purchased 100% of the interests in these assets. ORP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we are the primary beneficiary; accordingly, ORP has been presented on a consolidated basis in the accompanying financial statements.
Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties—In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate which could adversely impact the pricing of our services or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. Through our subsidiaries, we also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements, terminal services revenue and the majority of freight rail revenue are denominated in U.S. dollars.
Cash and Cash Equivalents—We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.
Restricted Cash—Restricted cash consists of prepaid interest and principal pursuant to the requirements of certain of our debt agreements (Note 8), and funds set aside for qualifying constructions projects at Jefferson Terminal.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Available-For-Sale Securities—We consider listed equity securities as available-for-sale securities recorded at fair value with unrealized gains (losses) recorded in other comprehensive income (loss) and realized gains (losses) recorded in earnings. Our basis on which the cost of the security sold or the amount reclassified out of other comprehensive income into earnings is determined using specific identification. We realized a gain of $11.4 million on the sale of available-for-sale securities during the year ended December 31, 2017, recorded in Gain on sale of assets, net in our Consolidated Statements of Operations. We did not hold any available-for-sale securities as of December 31, 2018 or 2017.
Inventory—Commodities inventory is carried at the lower of cost or net realizable value on our balance sheet. Commodities are removed from inventory based on the average cost at the time of sale. As of December 31, 2018 and 2017, we had commodities inventory of $10.4 million and $8.9 million, respectively. We record our inventory as a component of other assets on the accompanying Consolidated Balance Sheets.
Property, Plant and Equipment, Leasing Equipment and Depreciation—Property, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to estimated residual values which are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
|
|
Range of Estimated Useful Lives
|
|
Residual Value Estimates
|
Aircraft
|
|
25 years from date of manufacture
|
|
Generally not to exceed 15% of manufacturer’s list price when new
|
Aircraft engines
|
|
2 - 6 years, based on maintenance adjusted service life
|
|
Sum of engine core salvage value plus the estimated fair value of life limited parts
|
Offshore energy vessels
|
|
25 years from date of manufacture
|
|
20% of new build cost
|
Railcars and locomotives
|
|
40 - 50 years from date of manufacture
|
|
Scrap value at end of useful life
|
Track and track related assets
|
|
15 - 50 years from date of manufacture
|
|
Scrap value at end of useful life
|
Buildings and site improvements
|
|
20 - 30 years
|
|
Scrap value at end of useful life
|
Railroad equipment
|
|
3 - 15 years from date of manufacture
|
|
Scrap value at end of useful life
|
Terminal machinery and equipment
|
|
15 - 25 years from date of manufacture
|
|
Scrap value at end of useful life
|
Vehicles
|
|
5 - 7 years from date of manufacture
|
|
Scrap value at end of useful life
|
Furniture and fixtures
|
|
3 - 6 years from date of purchase
|
|
None
|
Computer hardware and software
|
|
3 - 5 years from date of purchase
|
|
None
|
Major improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required to get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Costs of major additions and betterments are capitalized and depreciation commences once it is placed into service. Interest costs directly related to and incurred during the construction period of property, plant and equipment are capitalized. Significant spare parts are depreciated in conjunction with the underlying property, plant and equipment asset when placed in service.
We review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment or the assigned residual values is warranted.
For planned major maintenance or component overhaul activities for aviation equipment off lease, the cost of such major maintenance or component overhaul event is capitalized and depreciated on a straight-line basis over the period until the next maintenance or component overhaul event is required.
Our offshore energy vessels are required to be drydocked periodically for recertifications or major repairs and maintenance that cannot be performed while the vessels are operating. Normal repairs and maintenance are expensed as incurred. We capitalize the costs associated with the drydockings and amortize them on a straight-line basis over the period between drydockings, usually between 30 and 60 months.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
In accounting for leasing equipment, we make estimates about the expected useful lives, residual values and the fair value of acquired in-place leases and acquired maintenance liabilities (for aviation equipment). In making these estimates, we rely upon observable market data for the same or similar types of equipment and, in the case of aviation equipment, our own estimates with respect to a lessee’s anticipated utilization of the aircraft or engine. When we acquire leasing equipment subject to an in-place lease, determining the fair value of the in-place lease requires us to make assumptions regarding the current fair values of leases for identical or similar equipment, in order to determine if the in-place lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease.
In April 2018, through Ohio Gasco LLC, a consolidated subsidiary, we purchased a 40% working interest in approximately 21,000 acres of natural gas reserves located in southeastern Ohio. Our interest in this natural gas joint venture is consolidated on a proportionate basis in accordance with Accounting Standards Codification ("ASC") Topic 932 Extractive Activities – Oil and Gas. We follow the successful efforts method of accounting for costs incurred in oil and gas producing activities. Capitalized costs are amortized using the unit-of-production method based on total proved reserves.
Capitalized Interest—The interest cost associated with major development, construction projects and tax exempt bonds is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. We capitalized interest of $10.7 million, $2.6 million and $2.7 million during the years ended December 31, 2018, 2017 and 2016, respectively.
Repairs and Maintenance—Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Repairs and maintenance expense of $8.7 million, $5.0 million and $3.7 million were recorded in operating expenses in the accompanying Consolidated Statements of Operations during the years ended December 31, 2018, 2017 and 2016, respectively.
Impairment of Long-Lived Assets—We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination; significant traffic decline; or the introduction of newer technology aircraft, vessels, engines or railcars. When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows from currently contracted leases and terminal services contracts, future projected leases, terminal service and freight rail rates, transition costs, estimated down time and estimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge.
Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, terminal service, and freight rail rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.
Security Deposits—Our operating leases generally require the lessee to pay a security deposit or provide a letter of credit. Security deposits are held until specified return dates stipulated in the lease or lease expiration.
Maintenance Payments—Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the relevant work.
We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities on the Consolidated Balance Sheet. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability.
In certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition. We recognize payments received as end-of-lease compensation adjustments, within lease revenue or as a reduction to the maintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payment.
Lease Incentives and Amortization—Lease incentives, which include lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs, are capitalized and amortized as a reduction of lease income over the primary term of the lease, assuming no lease renewals.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Goodwill—Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisitions of CMQR and Jefferson Terminal. The carrying amount of goodwill is approximately $116.6 million as of both December 31, 2018 and 2017.
We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as of October 1st of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment.
For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A qualitative analysis was not elected for the years ended December 31, 2018 or 2017.
The first step of an impairment assessment compares the fair value of a respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a second step must be completed in order to determine the amount of goodwill impairment that should be recorded, if any.
In performing the annual analysis, our two reporting units subject to the test are the Jefferson Terminal and Railroad reporting units. We estimate the fair value of the reporting units using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The estimates and assumptions used consider historical performance if indicative of future performance, and are consistent with the assumptions used in determining future profit plans for the reporting units. We also utilize market valuation models and other financial ratios, which require us to make certain assumptions and estimates regarding the applicability of those models to our assets and businesses.
Although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management’s judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. If the forecasted cash flows of the Jefferson Terminal and Railroad reporting units or other key inputs are negatively revised in the future, the estimated fair value of the Jefferson Terminal and Railroad reporting units could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results. Specifically, as it relates to the Jefferson Terminal segment, forecasted revenue is dependent on the ramp up of volumes under current contracts and the acquisition of additional storage contracts for the heavy and light crude and refined products during 2019 subject to obtaining rail capacity for crude, permits for pipeline and movements in future oil spreads. Jefferson Terminal was designed to reach a storage capacity of 21.7 million barrels, and 2.1 million of storage, or approximately 10% of capacity, is currently operational. If our strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting units would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Other assumptions utilized in our annual impairment analysis that are significant in determination of the fair value of the reporting unit include the discount rate utilized in our discounted cash flow analysis of 14% and our terminal growth rate of 3%.
Furthermore, development of both inbound and outbound pipelines to and from the Jefferson Terminal over the next two to three years will affect our forecasted growth and therefore our estimated fair value. We continue to expect the Jefferson Terminal segment to generate positive Adjusted EBITDA during 2019. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projected revenues are achievable and have not yet modified those projections based on ongoing negotiations with our customers and discussions with major pipeline companies. Further delays in executing these contracts or achieving our projections could adversely affect the fair value of the reporting unit. However, due to strengthening macroeconomic conditions such as increased oil prices and projected increasing spreads between Western Canadian Crude and Western Texas Intermediate, we remain positive for the outlook of Jefferson Terminal’s earnings potential.
For the years ended December 31, 2018, 2017, and 2016 there was no impairment of goodwill.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Intangibles and amortization—Intangibles include the value of acquired favorable and unfavorable leases and existing customer relationships acquired in connection with the acquisitions of CMQR and Jefferson Terminal.
In accounting for acquired leasing equipment, we make estimates about the fair value of the acquired leases. In determining the fair value of these leases, we make assumptions regarding the current fair values of leases for identical or similar equipment in order to determine if the acquired lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into rental income over the remaining term of the lease. Acquired lease intangibles are amortized on a straight-line basis over the remaining lease terms, which collectively had a weighted-average remaining amortization period of approximately 33 months as of December 31, 2018, and are recorded as a component of equipment leasing revenues in the accompanying Consolidated Statements of Operations.
Customer relationship intangible assets are amortized on a straight-line basis over their useful lives as the pattern in which the asset’s economic benefits are consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 10 years, no estimated residual value, and amortization is recorded as a component of depreciation and amortization in the accompanying Consolidated Statements of Operations. The weighted-average remaining amortization period was approximately 68 months as of December 31, 2018.
Deferred Financing Costs—Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of $14.5 million and $11.4 million as of December 31, 2018 and December 31, 2017, respectively, are recorded as a component of debt in the accompanying Consolidated Balance Sheets. Amortization expense of $5.4 million, $4.2 million and $2.6 million for the years ended December 31, 2018, 2017 and 2016, respectively, are included as a component of interest expense in the accompanying Consolidated Statements of Operations.
Revenue Recognition
Effective January 1, 2018, we adopted FASB ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach. ASC 606 requires revenue to be recognized when we transfer promised services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those services. The adoption of the standard did not have a material impact on our consolidated financial statements. See below for a detailed description of revenue recognition by our two strategic business units, Equipment Leasing and Infrastructure.
Lease contracts within the scope of ASC 840, Leases (“ASC 840”) are specifically excluded from ASC 606, and lease contracts entered into by Equipment Leasing and Infrastructure are accounted for under ASC 840. However, Infrastructure revenues that do not qualify as leases or service arrangements embedded in lease contracts are accounted for under ASC 606. Payment terms are short term in nature and do not extend beyond one year. See Note 10 for additional details regarding the disaggregation of our revenues by segment.
Equipment Leasing Revenues
Operating Leases—We lease equipment pursuant to net operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.
Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the amount paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.
Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues.
Finance Leases—From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, include a bargain purchase option, or provides for minimum lease payments with a present value of 90% or more of the fair value of the leased equipment at the date of lease inception. Net investment in finance lease represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Infrastructure Revenues
Rail Revenues—Rail revenues generally consist of the following performance obligations: freight movement, demurrage, unloading and switching. Freight movement revenues are recognized proportionally based on distance as freight is transported from origin to destination. Accordingly, freight movement revenue is recognized over time with progress measured based on distance transpired, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time. Demurrage, unloading and switching are recognized in other miscellaneous rail revenues, for which demurrage progress is measured over time, and unloading and switching revenues are measured at a point in time as the service is rendered.
Terminal Services Revenues—Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.
Lease Income—Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement.
Other Revenue—Other revenue primarily consists of marketing revenue related to Canadian crude oil. Other revenue consists of two performance obligations: handling and storage of raw materials. The revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.
Payment terms for Infrastructure Revenues are generally short term in nature.
Concentration of Credit Risk—We are subject to concentrations of credit risk with respect to amounts due from customers on our finance leases and operating leases. We attempt to limit our credit risk by performing ongoing credit evaluations. During the years ended December 31, 2018 and 2016, we earned approximately 16% and 10%, respectively, of our revenue from one customer in the Jefferson Terminal segment. During the year ended December 31, 2017, no customer accounted for 10% of our revenue.
As of December 31, 2018, accounts receivable from two customers in the Jefferson Terminal segment each represented 17% and 15% of total accounts receivable, net. As of December 31, 2017, accounts receivable from two customers in the Offshore Segment each represented 17% and 10% of total accounts receivable, net.
We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.
Provision for Doubtful Accounts—We determine the provision for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. The provision for doubtful accounts at December 31, 2018 and December 31, 2017 was $1.1 million and $1.0 million, respectively. Bad debt expense was $1.8 million, $0.7 million, and $0.2 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Expense Recognition—Expenses are recognized on an accrual basis as incurred.
Acquisition and Transaction expenses—Acquisition and transaction expense is comprised of costs related to completed business combinations and terminated deal costs related to abandoned pursuits, including advisory, legal, accounting, valuation and other professional or consulting fees.
Comprehensive Income (Loss)—Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for fair value changes related to the available-for-sale securities and derivatives accounted for as cash flow hedges.
Derivative Financial Instruments—We enter into short-term and long-term crude forward contracts. Gains and losses related to our sales and purchase derivatives are recorded on a gross basis and are included in Other revenue and Operating expenses, respectively, in our Consolidated Statements of Operations. See Note 9 for additional details.
Foreign Currency—Our functional and reporting currency is the U.S. dollar. Purchases and sales of assets and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. Net realized foreign currency gains or losses relating to the differences between these recorded amounts and the U.S. dollar equivalent actually received or paid are reported as a component of operating expenses within the Consolidated Statement of Operations.
Income Taxes—A portion of our income earned by our corporate subsidiaries is subject to U.S. federal and state income taxation, taxed at prevailing rates. The remainder of our income is allocated directly to our partners and is not subject to a corporate level of taxation. Certain subsidiaries of ours are subject to income tax in the foreign countries in which they conduct business.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized.
We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in certain foreign jurisdictions. The income tax returns filed by us and our subsidiaries are subject to examination by the U.S. federal, state and foreign tax authorities. We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in the Consolidated Statements of Operations.
Other Assets—Other assets is primarily comprised of commodities inventory of $10.4 million and $8.9 million, leasing equipment purchase deposits of $10.2 million and $12.3 million, lease incentives of $51.0 million and $23.8 million, prepaid expenses of $8.2 million and $4.1 million and derivative assets of $7.5 million and $1.0 million as of December 31, 2018 and December 31, 2017, respectively.
Dividends—Dividends are recorded if and when declared by the Board of Directors. In both the fourth quarters ended December 31, 2018 and 2017, the Board of Directors declared a cash dividend of $0.33 per share, for a total of $1.32 of dividends per share for each of the years ended December 31, 2018 and 2017.
Recent Accounting Pronouncements—In January 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 requires (i) equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. ASU 2016-01 also eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. We adopted ASU 2016-01 as of January 1, 2018 and the adoption of this guidance did not have any impact on our consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses the following eight specific cash flow issues: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies (COLIs); (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; (viii) and separately identifiable cash flows and application of the predominance principle. We adopted ASU 2016-15 as of January 1, 2018 and the adoption of this guidance did not have a material impact on the presentation of our Statements of Cash Flows.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”). ASU 2016-16 prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments ASU 2016-16 require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in ASU 2016-16 do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, Consolidation, or for an intra-entity transfer of inventory. We adopted ASU 2016-16 as of January 1, 2018 and the adoption of this guidance did not have an impact on our consolidated financial statements.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 addresses the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. We adopted ASU 2016-18 as of January 1, 2018 and the adoption resulted in the following changes to our reported cash flows from investing and financing activities for the years ended December 31, 2017 and 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
As Previously Reported
|
|
Adjustment
|
|
As Reported
|
|
As Previously Reported
|
|
Adjustment
|
|
As Reported
|
Net cash used in investing activities
|
$
|
(440,230)
|
|
$
|
(32,035)
|
|
$
|
(472,265)
|
|
$
|
(213,098)
|
|
$
|
2,349
|
|
$
|
(210,749)
|
Net cash provided by (used in) financing activities
|
363,078
|
|
—
|
|
363,078
|
|
(131,453)
|
|
41,482
|
|
(89,971)
|
In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-05 amends the scope of the nonfinancial asset guidance in Subtopic 610-20. The amendments also clarify that the derecognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the derecognition and deconsolidation guidance in Subtopic 810-10. In addition, the amendments eliminate the exception in the financial asset guidance for transfers of investments (including equity method investments) in real estate entities and supersede the guidance in the Exchanges of a Nonfinancial Asset for a Noncontrolling Ownership Interest Subsection within Topic 845. The amendments in ASU 2017-05 also provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other noncontrolled investee. We adopted ASU 2017-05 as of January 1, 2018 and the adoption of this guidance did not have an impact on our consolidated financial statements.
In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is to be applied on a prospective basis to an award modified on or after the adoption date. We adopted ASU 2017-09 as of January 1, 2018 and the adoption of this guidance did not have an impact on our consolidated financial statements.
Unadopted Accounting Pronouncements—In February 2016, the FASB issued ASU 2016-02, Leases (as subsequently amended by ASU 2018-01, ASU 2018-11 and ASU 2018-20, collectively “ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. Additionally, ASU 2018-20 provides certain narrow-scope improvements as it relates to lessors. ASU 2016-02 will be effective beginning in the first quarter of 2019, with early adoption permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.
We will adopt ASC 842 on January 1, 2019 under the modified retrospective transition approach using the date of initial application as the effective date. Therefore, financial information and disclosures under ASC 842 will not be provided for periods prior to January 1, 2019. We will elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we will implement accounting policy elections to (i) not separate lease and non-lease components for both lessee and lessor relationships and (ii) not capitalize any leases with initial terms of less than twelve months on our balance sheet. Although our evaluation is ongoing, upon adoption of this ASU we expect to recognize right-of-use assets and lease liabilities, which primarily relate to a ground lease and railcar leases, of approximately $44 million to $49 million on our consolidated balance sheets. We do not expect this ASU to have a material impact on our results of operations or cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this ASU requires that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
contractual right to receive cash. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 addresses concerns over the cost and complexity of the two-step goodwill impairment test by removing the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-01 will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities in its financial statements and make certain improvements to simplify the application of the hedge accounting guidance. The amendments will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend the presentation and disclosure requirements and change how entities assess effectiveness. Entities are required to apply the amendments as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period after adoption. This ASU will be effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In June 2018, the FASB, issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods, and early adoption is permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The guidance is effective for all entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
3. LEASING EQUIPMENT, NET
Leasing equipment, net is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
|
|
|
Leasing equipment
|
$
|
1,672,156
|
|
$
|
1,217,862
|
Less: Accumulated depreciation
|
(239,946)
|
|
(143,732)
|
Leasing equipment, net
|
$
|
1,432,210
|
|
$
|
1,074,130
|
During the year ended December 31, 2018, we acquired 29 aircraft and 34 commercial engines, and sold one aircraft and 13 commercial engines. During the year ended December 31, 2017, we acquired 25 aircraft and 58 commercial engines, and sold three aircraft and 14 commercial engines. We recognized gains of $3.9 million, $7.2 million and $5.2 million related to the sale of these assets in the years ended December 31, 2018, 2017 and 2016, respectively, which were recorded in Gain on sale of assets, net in our Consolidated Statements of Operations.
Depreciation expense for leasing equipment is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Depreciation expense for leasing equipment
|
$
|
110,012
|
|
$
|
69,331
|
|
$
|
43,886
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
4. FINANCE LEASES, NET
Finance leases, net are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Finance leases
|
$
|
28,476
|
|
$
|
16,015
|
Unearned revenue
|
(9,853)
|
|
(6,771)
|
Finance leases, net
|
$
|
18,623
|
|
$
|
9,244
|
During the first quarter of 2016, we completed the sale of approximately 42,000 shipping containers that were subject to direct finance leases for a modest gain.
As of December 31, 2018, future minimum lease payments to be received under finance leases for the remainder of the lease terms are as follows:
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
$
|
8,231
|
2020
|
|
|
|
|
10,257
|
2021
|
|
|
|
|
2,008
|
2022
|
|
|
|
|
2,008
|
2023
|
|
|
|
|
5,972
|
Thereafter
|
|
|
|
|
—
|
Total
|
|
|
|
|
$
|
28,476
|
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
Land, site improvements and rights
|
|
|
|
|
|
$
|
75,028
|
|
$
|
74,268
|
Construction in progress (1)
|
|
|
|
|
|
253,239
|
|
100,420
|
Buildings and improvements
|
|
|
|
|
|
14,514
|
|
9,807
|
Terminal machinery and equipment
|
|
|
|
|
|
349,227
|
|
299,444
|
Proved oil and gas properties
|
|
|
|
|
|
20,099
|
|
—
|
Track and track related assets
|
|
|
|
|
|
42,349
|
|
35,371
|
Railroad equipment
|
|
|
|
|
|
5,383
|
|
1,057
|
Railcars and locomotives
|
|
|
|
|
|
4,513
|
|
3,429
|
Computer hardware and software
|
|
|
|
|
|
3,806
|
|
3,105
|
Furniture and fixtures
|
|
|
|
|
|
572
|
|
544
|
Vehicles
|
|
|
|
|
|
1,636
|
|
1,480
|
|
|
|
|
|
|
770,366
|
|
528,925
|
Less: Accumulated depreciation
|
|
|
|
|
|
(63,032)
|
|
(40,605)
|
Spare parts
|
|
|
|
|
|
1,519
|
|
1,629
|
Property, plant and equipment, net
|
|
|
|
|
|
$
|
708,853
|
|
$
|
489,949
|
______________________________________________________________________________________
(1) Includes unproved oil and gas properties of $59,930.
During the years ended December 31, 2018 and 2017, additional property, plant and equipment of $241.3 million and $152.3 million were acquired, respectively, primarily consisting of the purchase of construction in progress, terminal machinery and equipment, and oil and gas properties.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
On June 16, 2017, we purchased the assets of Long Ridge for $30.0 million through one of our consolidated subsidiaries. The assets acquired consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. As part of the transaction, additional amounts of $2.3 million were capitalized for costs directly related to the purchase, including costs for legal advice, exploratory diligence, and regulatory permitting. Long Ridge is part of the Ports and Terminals segment as of December 31, 2018.
Depreciation expense for property, plant and equipment is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Depreciation expense for property, plant and equipment
|
$
|
22,744
|
|
$
|
15,181
|
|
$
|
12,726
|
6. INVESTMENTS
The following table presents the ownership interests and carrying values of our investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
Investment
|
|
Ownership Percentage
|
|
December 31, 2018
|
|
December 31, 2017
|
Advanced Engine Repair JV
|
Equity method
|
|
|
25%
|
|
|
$
|
12,981
|
|
$
|
13,724
|
JGP Energy Partners LLC
|
Equity method
|
|
|
50%
|
|
|
25,461
|
|
24,920
|
Intermodal Finance I, Ltd.
|
Equity method
|
|
|
51%
|
|
|
2,118
|
|
3,894
|
|
|
|
|
|
$
|
40,560
|
|
$
|
42,538
|
We did not recognize any other-than-temporary impairments for the year ended December 31, 2018.
Equity Method Investments
Advanced Engine Repair JV
In December 2016, we invested $15.0 million for a 25% interest in an advanced engine repair joint venture. We focus on developing new costs savings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment. Our proportionate share of equity in losses was $0.7 million, $1.3 million and $0.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.
JGP
In 2016, we initiated activities in a 50% non-controlling interest in JGP, a joint venture. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a variable interest entity. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, we do not consolidate JGP and instead account for this investment in accordance with the equity method. Our proportionate share of equity in losses was $0.6 million, $0.3 million and $0.0 million for the years ended December 31, 2018, 2017 and 2016, respectively.
The tables below presents summarized financial information for our equity method investments, excluding Intermodal Finance I, Ltd:
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
December 31, 2018
|
|
December 31, 2017
|
Assets
|
|
|
|
Cash and cash equivalents
|
$
|
7,870
|
|
$
|
9,904
|
Prepaid expenses
|
433
|
|
1,181
|
Accounts receivable
|
905
|
|
1,282
|
Intangible asset
|
45,000
|
|
45,000
|
Property, plant and equipment
|
50,402
|
|
50,042
|
Total assets
|
$
|
104,610
|
|
$
|
107,409
|
|
|
|
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
2,255
|
|
$
|
2,736
|
Total liabilities
|
2,255
|
|
2,736
|
|
|
|
|
Equity
|
|
|
|
Shareholders’ equity
|
112,326
|
|
110,520
|
Retained loss
|
(9,971)
|
|
(5,847)
|
Total equity
|
102,355
|
|
104,673
|
Total liabilities and equity
|
$
|
104,610
|
|
$
|
107,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
Income Statement
|
2018
|
|
2017
|
|
2016
|
Revenue
|
$
|
8,209
|
|
$
|
1,220
|
|
$
|
—
|
Total Revenue
|
8,209
|
|
1,220
|
|
—
|
Expenses
|
|
|
|
|
|
Research and development cost
|
2,134
|
|
4,073
|
|
—
|
Operating expense
|
6,945
|
|
1,291
|
|
37
|
General and administrative expenses
|
1,255
|
|
1,328
|
|
—
|
Depreciation and amortization
|
2,105
|
|
336
|
|
—
|
Total Expenses
|
12,439
|
|
7,028
|
|
37
|
Loss before income taxes
|
(4,230)
|
|
(5,808)
|
|
(37)
|
Provision for income taxes
|
—
|
|
—
|
|
—
|
Net loss
|
$
|
(4,230)
|
|
$
|
(5,808)
|
|
$
|
(37)
|
Company’s share of loss
|
$
|
(1,317)
|
|
$
|
(1,228)
|
|
$
|
(16)
|
Intermodal Finance I, Ltd.
In 2012, we acquired a 51% non-controlling interest in Intermodal Finance I, Ltd. (“Intermodal”), a joint venture. Intermodal is governed by a board of directors, and its shareholders have voting rights through their equity interests. As such, Intermodal is not within the scope of ASC 810-20 and should be evaluated for consolidation under the voting interest model. Due to the existence of substantive participating rights of the 49% equity investor, including the joint approval of material operating and capital decisions, such as material contracts and capital expenditures consistent with ASC 810-10-25-11, we do not have unilateral rights over this investment; therefore, we do not consolidate Intermodal but account for this investment in accordance with the equity method. We do not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met.
As of December 31, 2018, Intermodal owns a portfolio of multiple finance leases, representing two customers and comprising approximately 3,000 shipping containers, as well as a portfolio of approximately 5,000 shipping containers subject to multiple operating leases. During the year ended December 31, 2016, Intermodal recorded an asset impairment charge of $6.0 million, which resulted from certain operating leases not being renewed and containers being returned at a faster pace than expected. Our proportionate share of the impairment charge was $3.1 million based on our 51% ownership percentage. Intermodal didn't have any impairment charges during the years ended December 31, 2018 and 2017. Our proportionate share of equity in earnings (losses) was $0.3 million, $(0.2) million, $(6.0) million for the years ended December 31, 2018, 2017, and 2016, respectively.
The consolidated financial statements of Intermodal as of and for the years ended December 31, 2018 (unaudited), 2017, and 2016, are presented herein.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
7. INTANGIBLE ASSETS AND LIABILITIES, NET
Our intangible assets and liabilities, net are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Jefferson Terminal
|
|
Railroad
|
|
Total
|
Intangible assets
|
|
|
|
|
|
|
|
Acquired favorable lease intangibles
|
$
|
48,143
|
|
$
|
—
|
|
$
|
—
|
|
$
|
48,143
|
Less: Accumulated amortization
|
(29,780)
|
|
—
|
|
—
|
|
(29,780)
|
Acquired favorable lease intangibles, net
|
18,363
|
|
—
|
|
—
|
|
18,363
|
|
|
|
|
|
|
|
|
Customer relationships
|
—
|
|
35,513
|
|
225
|
|
35,738
|
Less: Accumulated amortization
|
—
|
|
(15,378)
|
|
(210)
|
|
(15,588)
|
Acquired customer relationships, net
|
—
|
|
20,135
|
|
15
|
|
20,150
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
$
|
18,363
|
|
$
|
20,135
|
|
$
|
15
|
|
$
|
38,513
|
|
|
|
|
|
|
|
|
Intangible liabilities
|
|
|
|
|
|
|
|
Acquired unfavorable lease intangibles
|
$
|
3,736
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,736
|
Less: Accumulated amortization
|
(2,114)
|
|
—
|
|
—
|
|
(2,114)
|
Acquired unfavorable lease intangibles, net
|
$
|
1,622
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Jefferson Terminal
|
|
Railroad
|
|
Total
|
Intangible assets
|
|
|
|
|
|
|
|
Acquired favorable lease intangibles
|
$
|
36,747
|
|
$
|
—
|
|
$
|
—
|
|
$
|
36,747
|
Less: Accumulated amortization
|
(20,452)
|
|
—
|
|
—
|
|
(20,452)
|
Acquired favorable lease intangibles, net
|
16,295
|
|
—
|
|
—
|
|
16,295
|
|
|
|
|
|
|
|
|
Customer relationships
|
—
|
|
35,513
|
|
225
|
|
35,738
|
Less: Accumulated amortization
|
—
|
|
(11,825)
|
|
(165)
|
|
(11,990)
|
Acquired customer relationships, net
|
—
|
|
23,688
|
|
60
|
|
23,748
|
|
|
|
|
|
|
|
|
Total intangible assets, net
|
$
|
16,295
|
|
$
|
23,688
|
|
$
|
60
|
|
$
|
40,043
|
|
|
|
|
|
|
|
|
Intangible liabilities
|
|
|
|
|
|
|
|
Acquired unfavorable lease intangibles
|
$
|
2,732
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,732
|
Less: Accumulated amortization
|
(1,374)
|
|
—
|
|
—
|
|
(1,374)
|
Acquired unfavorable lease intangibles, net
|
$
|
1,358
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,358
|
Intangible liabilities relate to unfavorable lease intangibles and are included as a component of other liabilities in the accompanying Consolidated Balance Sheets.
Amortization of intangible assets and liabilities is recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification in Consolidated Statements of Operations
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Lease intangibles
|
Equipment leasing revenues
|
|
$
|
8,588
|
|
$
|
4,716
|
|
$
|
4,979
|
Customer relationships
|
Depreciation and amortization
|
|
3,598
|
|
3,598
|
|
3,598
|
Total
|
|
|
$
|
12,186
|
|
$
|
8,314
|
|
$
|
8,577
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
As of December 31, 2018, estimated net annual amortization of intangibles is as follows:
|
|
|
|
|
|
2019
|
$
|
11,244
|
2020
|
8,746
|
2021
|
6,472
|
2022
|
4,438
|
2023
|
3,612
|
Thereafter
|
2,379
|
Total
|
$
|
36,891
|
8. DEBT, NET
Our debt, net is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
December 31, 2017
|
|
Outstanding Borrowings
|
|
Stated Interest Rate
|
|
Maturity Date
|
|
Outstanding Borrowings
|
Loans payable
|
|
|
|
|
|
|
|
FTAI Pride Credit Agreement (1)
|
$
|
47,743
|
|
LIBOR + 4.50%
|
|
9/15/2019
|
|
$
|
53,993
|
CMQR Credit
Agreement
|
22,265
|
|
(i) Adjusted LIBOR + 2.50% or 4.50%; or
(ii) U.S. or Canadian Base Rate + 1.50% or 3.50%; or
(iii) Canadian Fixed Rate plus 2.50% or 4.50%
|
|
9/18/2019
|
|
22,800
|
Jefferson Revolver (2)
|
49,805
|
|
(i) Base Rate + 1.50%; or
(ii) Base Rate + 2.50% (Eurodollar)
|
|
3/7/2021
|
|
—
|
DRP Revolver (3)
|
—
|
|
(i) Base Rate + 1.50%; or
(ii) Base Rate + 2.50% (Eurodollar)
|
|
11/5/2021
|
|
—
|
Revolving Credit
Facility (2)
|
100,000
|
|
(i) Base Rate + 2.00%; or
(ii) Adjusted Eurodollar Rate + 3.00%
|
|
6/16/2021
|
|
—
|
Total loans payable
|
219,813
|
|
|
|
|
|
76,793
|
Bonds payable
|
|
|
|
|
|
|
|
Series 2012 Bonds (4)
|
42,797
|
|
8.25%
|
|
|
7/1/2032
|
|
44,404
|
Series 2016 Bonds (5)
|
144,200
|
|
7.25%
|
|
|
2/1/2036
|
|
144,200
|
Senior Notes due 2022 (6)
|
549,405
|
|
6.75%
|
|
|
3/15/2022
|
|
449,290
|
Senior Notes due 2025 (7)
|
295,642
|
|
6.50%
|
|
|
10/1/2025
|
|
—
|
Total bonds payable
|
1,032,044
|
|
|
|
|
|
637,894
|
|
|
|
|
|
|
|
|
Debt
|
1,251,857
|
|
|
|
|
|
714,687
|
Less: Debt issuance costs
|
(14,510)
|
|
|
|
|
|
(11,423)
|
Total debt, net
|
$
|
1,237,347
|
|
|
|
|
|
$
|
703,264
|
|
|
|
|
|
|
|
|
Total debt due within one year
|
$
|
71,678
|
|
|
|
|
|
$
|
7,795
|
______________________________________________________________________________________
(1) Secured on a first priority basis by the offshore construction vessel and charter.
(2) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.
(3) Requires a quarterly commitment fee at a rate of 0.875% on the average daily unused portion, as well as customary letter of credit fees and agency fees.
(4) Includes unamortized premium of $1,577 and $1,639 as of December 31, 2018 and 2017, respectively.
(5) These bonds have a stated maturity of February 1, 2036 but are subject to mandatory tender for purchase at par, by our subsidiary, on February 13, 2020 if they have not been repurchased from proceeds of a remarketing of the bonds or redeemed prior to such date.
(6) Includes unamortized discount of $5,154 and $6,506, respectively, and an unamortized premium of $4,559 and $5,796, respectively, as of December 31, 2018 and 2017.
(7) Includes unamortized discount of $4,358 and $0 as of December 31, 2018 and 2017, respectively.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
DRP Revolving Credit Facility—On November 5, 2018, our subsidiary entered into a revolving credit facility (the “DRP Revolver”) that provides for revolving loans in the aggregate amount of $25.0 million. The DRP Revolver is secured by the capital stock of certain of our direct subsidiaries as defined in the related credit agreement. Any amount borrowed may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of Eurodollar Rate borrowings.
In the event of a credit agreement default by our subsidiary, including bankruptcy or insolvency, financial covenant default, or the failure to make a capital call under the relevant agreement, we have agreed to contribute capital to satisfy up to 120% of the aggregate outstanding obligations.
Jefferson Revolving Credit Facility—On March 7, 2018, our subsidiary entered into a revolving credit facility (the “Jefferson Revolver”) that provides for revolving loans in the aggregate principal amount of $50.0 million. The Jefferson Revolver is secured by the capital stock of certain of our direct subsidiaries as defined in the related credit agreement. Any amount borrowed may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of Eurodollar Rate borrowings.
On December 20, 2018, our subsidiary entered into an amendment to the Jefferson Revolver which temporarily increases the aggregate revolving commitments by $25.0 million to $75.0 million, until August 1, 2019, after which the aggregate revolving commitment will revert back to $50.0 million.
In the event of a credit agreement default by our subsidiary, including bankruptcy or insolvency, financial covenant default, or the failure to make a capital call under the relevant agreement, we have agreed to contribute capital to satisfy up to 120% of the aggregate outstanding obligations.
Senior Notes due 2025—On September 18, 2018, we issued $300.0 million aggregate principal amount of senior unsecured notes due 2025 (the “2025 Notes”). The 2025 Notes bear interest at a rate of 6.50% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2019, to persons who are registered holders on the immediately preceding March 15 and September 15, respectively.
Prior to October 1, 2021, we may redeem some or all of the 2025 Notes at a redemption price equal to 100.000% of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date, plus a “make-whole” premium. On or after October 1, 2021, we may redeem some or all of the 2025 Notes at declining redemption prices equal to (i) 103.250% beginning on October 1, 2021, (ii) 101.625% beginning on October 1, 2022 and (iii) 100.000% beginning on October 1, 2023 and thereafter, plus, in each case, accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, at any time on or prior to October 1, 2021, we may redeem up to 40% of the aggregate principal amount of the 2025 Notes using net proceeds from certain equity offerings at a redemption price equal to 106.500% of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.
Revolving Credit Facility—On June 16, 2017, we entered into a revolving credit facility (the “Revolving Credit Facility”) with certain lenders. On August 2, 2018, we entered into an amendment to the Revolving Credit Facility which, among other things, (i) increases the aggregate revolving commitments by $50.0 million to $125.0 million (of which $25.0 million may be utilized for the issuance of letters of credit) and (ii) extends the maturity date of the revolving loans and commitments under the Existing Credit Agreement by one year from June 16, 2020 to June 16, 2021. The Revolving Credit Facility is secured by the capital stock of certain direct subsidiaries of ours as defined in the related credit agreement. Any amount borrowed may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of Eurodollar Rate borrowings.
CMQR Credit Agreement—On June 30, 2017, CMQR amended its credit agreement for a revolving line of credit increase in the aggregate amount from $20.0 million to $25.0 million and to extend the maturity date to September 18, 2019. The CMQR credit agreement is also indirectly supported by us. In the event of a default under the credit agreement, CMQR’s lenders can cause CMQR to call up to a total of $29.0 million in capital from us, and in the event of CMQR’s bankruptcy, the lenders can put the debt back to us.
Senior Notes due 2022—On March 15, 2017, we issued $250.0 million aggregate principal amount of senior unsecured notes due 2022 (the “2022 Notes”). On August 23, 2017, we issued an additional $100.0 million of 2022 Notes at an offering price of 102.75% of the principal amount plus accrued interest from March 15, 2017 to the date of issuance. On December 20, 2017, we issued an additional $100.0 million of 2022 Notes at an offering price of 103.25% of the principal amount plus accrued interest from September 15, 2017. On May 31, 2018, we issued an additional $100.0 million of 2022 Notes at an offering price of 100.00% of the principal amount plus accrued interest from March 15, 2018.
The 2022 Notes bear interest at a rate of 6.75% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2017, to persons who are registered holders of the 2022 Notes on the immediately preceding March 1 and September 1, respectively.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Prior to March 15, 2020, we may redeem some or all of the 2022 Notes at a redemption price equal to 100.00% of the principal amount of the 2022 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date, plus a “make-whole” premium. On or after March 15, 2020, we may redeem some or all of the 2022 Notes at any time at declining redemption prices equal to (i) 105.063% beginning on March 15, 2020, and (ii) 100.000% beginning on March 15, 2021 and thereafter, plus, in each case, accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, at any time on or prior to March 15, 2020, we may at any time redeem up to 40% of the aggregate principal amount of the 2022 Notes using net proceeds from certain equity offerings at a redemption price equal to 106.75% of the principal amount of the 2022 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.
We fully extinguished certain debt of $100.0 million and $98.8 million and recognized a loss on extinguishment of debt of $2.5 million and $1.6 million during the years ended December 31, 2017 and 2016, respectively. We did not fully extinguish any debt in 2018.
We were in compliance with all debt covenants as of December 31, 2018.
As of December 31, 2018, scheduled principal repayments under our debt agreements for the next five years and thereafter are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
FTAI Pride Credit Agreement
|
$
|
47,743
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
47,743
|
CMQR Credit Agreement
|
22,265
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
22,265
|
Jefferson Revolver
|
—
|
|
—
|
|
49,805
|
|
—
|
|
—
|
|
—
|
|
49,805
|
DRP Revolver
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Revolving Credit Facility
|
—
|
|
—
|
|
100,000
|
|
—
|
|
—
|
|
—
|
|
100,000
|
Series 2012 Bonds
|
1,670
|
|
1,810
|
|
1,960
|
|
2,120
|
|
2,295
|
|
31,365
|
|
41,220
|
Series 2016 Bonds
|
—
|
|
144,200
|
|
—
|
|
—
|
|
—
|
|
—
|
|
144,200
|
Senior Notes due 2022
|
—
|
|
—
|
|
—
|
|
550,000
|
|
—
|
|
—
|
|
550,000
|
Senior Notes due 2025
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
300,000
|
|
300,000
|
Total principal payments on loans and bonds payable
|
$
|
71,678
|
|
$
|
146,010
|
|
$
|
151,765
|
|
$
|
552,120
|
|
$
|
2,295
|
|
$
|
331,365
|
|
$
|
1,255,233
|
9. FAIR VALUE MEASUREMENTS
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
•Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.
•Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
•Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
•Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.
•Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following tables set forth our financial assets measured at fair value on a recurring basis as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
|
|
Fair Value Measurements Using Fair Value Hierarchy as of
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation Technique
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
99,601
|
|
$
|
99,601
|
|
$
|
—
|
|
$
|
—
|
|
Market
|
Restricted cash
|
21,236
|
|
21,236
|
|
—
|
|
—
|
|
Market
|
Derivative assets
|
7,470
|
|
—
|
|
—
|
|
7,470
|
|
Income
|
Total assets
|
$
|
128,307
|
|
$
|
120,837
|
|
$
|
—
|
|
$
|
7,470
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
(925)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(925)
|
|
Income
|
Total liabilities
|
$
|
(925)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(925)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of
|
|
Fair Value Measurements Using Fair Value Hierarchy as of
|
|
|
|
|
|
|
|
December 31, 2017
|
|
December 31, 2017
|
|
|
|
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation Technique
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
59,400
|
|
$
|
59,400
|
|
$
|
—
|
|
$
|
—
|
|
Market
|
Restricted cash
|
33,406
|
|
33,406
|
|
—
|
|
—
|
|
Market
|
Derivative assets
|
1,022
|
|
—
|
|
—
|
|
1,022
|
|
Income
|
Total
|
$
|
93,828
|
|
$
|
92,806
|
|
$
|
—
|
|
$
|
1,022
|
|
|
As of December 31, 2017, we had no liabilities that were measured at fair value on a recurring basis.
Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy.
Except as discussed below, our financial instruments other than cash and cash equivalents, restricted cash consist principally of accounts receivable, accounts payable and accrued liabilities, loans payable, bonds payable, security deposits, maintenance deposits and management fees payable, whose fair value approximates their carrying value based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.
The fair value of our bonds and notes payable reported as debt, net in the Consolidated Balance Sheets are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
Series 2012 Bonds (1)
|
$
|
42,633
|
|
$
|
45,691
|
Series 2016 Bonds (1)
|
149,582
|
|
150,329
|
Senior Notes due 2022
|
551,144
|
|
449,290
|
Senior Notes due 2025
|
283,965
|
|
—
|
______________________________________________________________________________________
(1) Fair value is based upon market prices for similar municipal securities.
The fair value of all other items reported as debt, net in the Consolidated Balance Sheet approximate their carrying values due to their bearing market rates of interest, and are classified as Level 2 within the fair value hierarchy.
We measure the fair value of certain assets and liabilities on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include goodwill, intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
10. REVENUES
We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue. Revenues attributed to our Equipment Leasing business unit are within the scope of ASC 840, while revenues attributed to our Infrastructure business unit are within the scope of ASC 606, unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
Revenues
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Equipment leasing revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
$
|
151,531
|
|
$
|
5,659
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
157,190
|
Maintenance revenue
|
89,870
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
89,870
|
Finance lease income
|
1,895
|
|
1,454
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,349
|
Other revenue
|
974
|
|
1,606
|
|
50
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,630
|
Total equipment leasing revenues
|
244,270
|
|
8,719
|
|
50
|
|
—
|
|
—
|
|
—
|
|
—
|
|
253,039
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
—
|
|
—
|
|
—
|
|
272
|
|
—
|
|
1,462
|
|
—
|
|
1,734
|
Rail revenues
|
—
|
|
—
|
|
—
|
|
—
|
|
38,410
|
|
—
|
|
—
|
|
38,410
|
Terminal services revenues
|
—
|
|
—
|
|
—
|
|
10,108
|
|
—
|
|
—
|
|
—
|
|
10,108
|
Other revenue
|
—
|
|
—
|
|
—
|
|
60,605
|
|
—
|
|
15,982
|
|
—
|
|
76,587
|
Total infrastructure revenues
|
—
|
|
—
|
|
—
|
|
70,985
|
|
38,410
|
|
17,444
|
|
—
|
|
126,839
|
Total revenues
|
$
|
244,270
|
|
$
|
8,719
|
|
$
|
50
|
|
$
|
70,985
|
|
$
|
38,410
|
|
$
|
17,444
|
|
$
|
—
|
|
$
|
379,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
Revenues
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Equipment leasing revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
$
|
91,103
|
|
$
|
8,433
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
99,536
|
Maintenance revenue
|
65,651
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
65,651
|
Finance lease income
|
—
|
|
1,536
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,536
|
Other revenue
|
39
|
|
3,138
|
|
100
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,277
|
Total equipment leasing revenues
|
156,793
|
|
13,107
|
|
100
|
|
—
|
|
—
|
|
—
|
|
—
|
|
170,000
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,111
|
|
—
|
|
1,111
|
Rail revenues
|
—
|
|
—
|
|
—
|
|
—
|
|
32,607
|
|
—
|
|
—
|
|
32,607
|
Terminal services revenues
|
—
|
|
—
|
|
—
|
|
10,229
|
|
—
|
|
—
|
|
—
|
|
10,229
|
Other revenue
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,712
|
|
—
|
|
3,712
|
Total infrastructure revenues
|
—
|
|
—
|
|
—
|
|
10,229
|
|
32,607
|
|
4,823
|
|
—
|
|
47,659
|
Total revenues
|
$
|
156,793
|
|
$
|
13,107
|
|
$
|
100
|
|
$
|
10,229
|
|
$
|
32,607
|
|
$
|
4,823
|
|
$
|
—
|
|
$
|
217,659
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
Revenues
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Equipment leasing revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
$
|
66,024
|
|
$
|
3,712
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
69,736
|
Maintenance revenue
|
28,697
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
28,697
|
Finance lease income
|
—
|
|
1,610
|
|
1,113
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,723
|
Other revenue
|
687
|
|
6
|
|
100
|
|
—
|
|
—
|
|
—
|
|
—
|
|
793
|
Total equipment leasing revenues
|
95,408
|
|
5,328
|
|
1,213
|
|
—
|
|
—
|
|
—
|
|
—
|
|
101,949
|
Infrastructure revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
32
|
|
—
|
|
32
|
Rail revenues
|
—
|
|
—
|
|
—
|
|
—
|
|
30,837
|
|
—
|
|
—
|
|
30,837
|
Terminal services revenues
|
—
|
|
—
|
|
—
|
|
15,902
|
|
—
|
|
—
|
|
—
|
|
15,902
|
Total infrastructure revenues
|
—
|
|
—
|
|
—
|
|
15,902
|
|
30,837
|
|
32
|
|
—
|
|
46,771
|
Total revenues
|
$
|
95,408
|
|
$
|
5,328
|
|
$
|
1,213
|
|
$
|
15,902
|
|
$
|
30,837
|
|
$
|
32
|
|
$
|
—
|
|
$
|
148,720
|
Presented below are the contracted minimum future annual revenues to be received under existing operating leases across several market sectors as of December 31, 2018:
|
|
|
|
|
|
2019
|
$
|
157,470
|
2020
|
102,337
|
2021
|
68,473
|
2022
|
43,484
|
2023
|
27,813
|
Thereafter
|
14,843
|
Total
|
$
|
414,420
|
11. EQUITY-BASED COMPENSATION
In 2015, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to award equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors.
As of December 31, 2018, the Incentive Plan provides for the issuance of up to 30 million shares. We account for equity-based compensation expense in accordance with ASC 718 Compensation-Stock Compensation (“ASC 718”) and is reported within operating expenses and general and administrative in the Consolidated Statements of Operations.
The Consolidated Statements of Operations includes the following expense (income) related to our stock-based compensation arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
Remaining Expense To Be Recognized, If All Vesting Conditions Are Met
|
|
2018
|
|
2017
|
|
2016
|
|
|
Stock Options
|
$
|
9
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Restricted Shares
|
359
|
|
318
|
|
(4,051)
|
|
642
|
Common Units
|
533
|
|
1,025
|
|
379
|
|
774
|
Total
|
$
|
901
|
|
$
|
1,343
|
|
$
|
(3,672)
|
|
$
|
1,416
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following tables present information for our stock options, restricted shares and common units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
Restricted Shares
|
|
|
|
Common Units
|
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Units
|
|
Weighted Average Exercise Price
|
Outstanding as of
December 31, 2017
|
15,000
|
|
$
|
16.98
|
|
70,721
|
|
$
|
19.06
|
|
572,525
|
|
$
|
1.42
|
Granted
|
836,342
|
|
18.22
|
|
—
|
|
N/A
|
|
670,000
|
|
1.00
|
Less: exercised / vested
|
—
|
|
N/A
|
|
20,955
|
|
17.14
|
|
232,927
|
|
1.33
|
Less: forfeited and canceled
|
—
|
|
N/A
|
|
—
|
|
N/A
|
|
—
|
|
N/A
|
Outstanding as of
December 31, 2018
|
851,342
|
|
|
|
49,766
|
|
|
|
1,009,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Restricted Shares
|
|
Common Units
|
As of December 31, 2018:
|
|
|
|
|
|
Weighted average exercise price (per share)
|
$
|
18.20
|
|
$
|
16.92
|
|
$
|
1.15
|
Aggregate intrinsic value (in thousands)
|
$
|
—
|
|
$
|
842
|
|
$
|
1,163
|
Weighted average remaining contractual term (in years)
|
9.1
|
|
1.2
|
|
1.0
|
Stock Options
During 2018, we granted equity-based compensation awards of 10,000 stock options, the grant date fair value of which was not material, to our two new independent directors (5,000 options each) pursuant to the Incentive Plan. These options immediately vested upon grant and expire after 10 years.
In connection with our equity offerings in January 2018 and December 2018 (see Note 15 for details), we granted options to the Manager related to 700,000 and 126,342 common shares, respectively, which had a fair value of $1.9 million and $0.2 million, respectively, as of the grant dates. The fair value of these options were recorded as an increase in equity with an offsetting reduction of capital proceeds received.
The following table presents the assumptions used in valuing the options for the equity offerings in January 2018 and December 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
December
|
Expected volatility
|
The expected stock volatility is based on an assessment of the volatility of our publicly traded common shares
|
27.73
|
%
|
|
18.71
|
%
|
Risk free interest rate
|
The risk-free rate is determined using the implied yield currently available on U.S. government bonds with a term consistent with the expected term on the date of grant.
|
2.52
|
%
|
|
2.98
|
%
|
Expected dividend yield
|
The expected dividend yield is based on management’s current expected dividend rate.
|
5.45
|
%
|
|
6.81
|
%
|
Expected term
|
Expected term used represents the period of time the options granted are expected to be outstanding.
|
10 years
|
|
10 years
|
Restricted Shares
In November 2016 and May 2017, we issued restricted shares of 52,388 and 31,340, respectively, with grant date fair values of $0.9 million and $0.5 million, respectively. The shares vest over four years, subject to continued employment, and the compensation expense is recognized ratably over the vesting periods. The fair value of these awards was based on the fair value of the operating subsidiary on each grant date, which was estimated using a discounted cash flow analysis which requires the application of discount factors and terminal multiples to projected cash flows. Discount factors and terminal multiples were based on market based inputs and transactions, as available at the measurement date.
During 2016, equity compensation expense of $4.4 million, related to 1.25 million restricted shares issued in 2014, that was previously recognized was reversed in operating expenses in the Consolidated Statements of Operations as the achievement of all performance conditions was deemed not probable. These shares expired in 2017.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
During 2016, an employee holding 42,000 restricted shares terminated his employment, at which time 50% of the award had vested. In lieu of delivering the vested shares, we paid $0.2 million in cash to the former employee in accordance with the amended terms of the agreement.
Common Units
In April 2018, we issued 670,000 common units that had a grant date fair value of $0.7 million and vest over three years.
In April 2017, we issued 520,000 common units that had a grant date fair value of $0.9 million and vest over a range of 6 to 48 months.
In November 2017, we issued 505,050 common units that had a grant date fair value of $0.5 million and vest over three years.
The above awards are subject to continued employment and compensation expense is recognized ratably over the vesting periods. The fair value was based on the fair value of the operating subsidiary on the grant date, which is estimated using a discounted cash flow analysis that requires the application of discount factors and terminal multiples to projected cash flows. Discount factors and terminal multiples were based on market-based inputs and transactions, as available at the measurement date.
12. INCOME TAXES
The current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Current:
|
|
|
|
|
|
Federal
|
$
|
75
|
|
$
|
1,551
|
|
$
|
355
|
State and local
|
250
|
|
145
|
|
112
|
Foreign
|
63
|
|
76
|
|
(176)
|
Total current provision
|
388
|
|
1,772
|
|
291
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
Federal
|
1,528
|
|
215
|
|
(50)
|
State and local
|
621
|
|
5
|
|
6
|
Foreign
|
(1,165)
|
|
(38)
|
|
21
|
Total deferred provision
|
984
|
|
182
|
|
(23)
|
|
|
|
|
|
|
Total provision for income taxes
|
$
|
1,372
|
|
$
|
1,954
|
|
$
|
268
|
We are taxed as a flow-through entity for U.S. income tax purposes and our taxable income or loss generated is the responsibility of our owners. Taxable income or loss generated by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business.
The difference between our reported provision for income taxes and the U.S. federal statutory rate of 21% is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
U.S. federal tax at statutory rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Income not subject to tax at statutory rate
|
121.9
|
%
|
|
98.2
|
%
|
|
7.9
|
%
|
|
|
|
|
|
|
State and local taxes
|
(6.1)
|
%
|
|
(0.5)
|
%
|
|
(0.2)
|
%
|
Foreign taxes
|
7.7
|
%
|
|
(0.2)
|
%
|
|
0.9
|
%
|
Branch profit tax
|
(0.5)
|
%
|
|
(2.6)
|
%
|
|
(0.3)
|
%
|
Change in tax rates
|
—
|
%
|
|
(6.9)
|
%
|
|
—
|
%
|
Other
|
(0.2)
|
%
|
|
1.0
|
%
|
|
(0.4)
|
%
|
Change in valuation allowance
|
(153.3)
|
%
|
|
(133.2)
|
%
|
|
(43.6)
|
%
|
Provision for income taxes
|
(9.5)
|
%
|
|
(9.2)
|
%
|
|
(0.7)
|
%
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
Significant components of our deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
64,034
|
|
$
|
46,564
|
Accrued expenses
|
1,241
|
|
1,684
|
Deferred revenue
|
132
|
|
—
|
Interest expense
|
19,380
|
|
9,727
|
Other
|
1,101
|
|
202
|
Total deferred tax assets
|
85,888
|
|
58,177
|
Less valuation allowance
|
(68,294)
|
|
(45,624)
|
Net deferred tax assets
|
17,594
|
|
12,553
|
Deferred tax liabilities:
|
|
|
|
Fixed assets and goodwill
|
(19,117)
|
|
(13,104)
|
Net deferred tax liabilities
|
$
|
(1,523)
|
|
$
|
(551)
|
Current and deferred tax assets and liabilities are reported net in other assets or other liabilities in the Consolidated Balance Sheet. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. We have analyzed our deferred tax assets and have determined, based on the weight of available evidence, that it is more likely than not that a significant portion will not be realized. Accordingly, valuation allowances have been recognized as of December 31, 2018 and December 31, 2017 of $68.3 million and $45.6 million, respectively, related to certain deductible temporary differences and net operating loss carryforwards.
A summary of the changes in the valuation allowance is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
Valuation allowance at beginning of period
|
$
|
45,624
|
|
$
|
42,270
|
Change due to current year losses and releases
|
22,670
|
|
27,549
|
Decrease due to change in tax rates
|
—
|
|
(24,195)
|
Valuation allowance at end of period
|
$
|
68,294
|
|
$
|
45,624
|
As of December 31, 2018, certain of our corporate subsidiaries had U.S. federal net operating loss carryforwards of approximately $240.9 million that are available to offset future taxable income. If not utilized, $180.8 million of these carryforwards will begin to expire in the year 2034, with $60.1 million of these carryforwards having no expiration date. As of December 31, 2018, we also had net operating loss carryforwards for Canadian federal and provincial income taxes of $5.2 million, which will begin to expire in the year 2034, $82.8 million of net operating loss carryforwards for Irish income tax purposes, which can be carried forward indefinitely against future business income, and $0.9 million of net operating loss carryforwards for Malaysian income tax purposes, which will begin to expire in the year 2025. The utilization of the net operating loss carryforwards to reduce future income taxes will depend on the relevant corporate subsidiary's ability to generate sufficient taxable income prior to the expiration of the carryforward period, if any. In addition, the maximum annual use of net operating loss carryforwards may be limited after certain changes in stock ownership.
The TCJA significantly revises the U.S. corporate income tax regime by, among other things, lowering corporate income tax rates. We have accounted for the effects of the TCJA for the year ended December 31, 2017 which relates to the re-measurement of deferred tax assets and liabilities due to the reduction in the corporate income tax rate. Due to the significant portion of our income that is not subject to entity level tax and the presence of a significant valuation allowance, the effects of the TCJA have had a minimal impact on the income tax provision for the year ended December 31, 2017.
As of and for the period ended December 31, 2018, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2015. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
13. MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS
The Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto. In addition, the Manager may be reimbursed for various expenses incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities. In May 2015, in connection with our IPO, we entered into the Management Agreement which replaced our then-existing management agreement as a private fund. Additionally, we have entered into certain incentive allocation arrangements with Master GP, which owns 0.05% of the Partnership and is the general partner of the Partnership.
The Manager is entitled to a management fee, incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below) and reimbursement of certain expenses. The post-IPO management fee is determined by taking the average value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with GAAP at the end of the two most recently completed months multiplied by an annual rate of 1.50%, and is payable monthly in arrears in cash.
The income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the immediately preceding calendar quarter (the “Income Incentive Allocation”). For this purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors. Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to the Master GP during the relevant quarter.
One of our subsidiaries allocates and distributes to the Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income in each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2% for such quarter (8% annualized); (2) 100% of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2% but does not exceed 2.2223% for such quarter; and (3) 10% of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223% for such quarter. These calculations will be prorated for any period of less than three months.
Capital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10% of our pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to the Master GP.
The following table summarizes the management fees, income incentive allocation and capital gains incentive allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Management fees
|
$
|
15,319
|
|
$
|
15,218
|
|
$
|
16,742
|
Income incentive allocation
|
—
|
|
—
|
|
—
|
Capital gains incentive allocation
|
407
|
|
514
|
|
—
|
We pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The expenses required to be paid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Manager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used by us, costs to obtain liability insurance to indemnify our directors and officers and the compensation and expenses of our transfer agent.
We will pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants. The Manager is responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses; we will not reimburse the Manager for these expenses.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following table summarizes our reimbursements to the Manager:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Classification in the Consolidated Statements of Operations:
|
|
|
|
|
|
General and administrative expenses
|
$
|
9,910
|
|
$
|
8,064
|
|
$
|
7,301
|
Acquisition and transaction expenses
|
6,653
|
|
6,295
|
|
4,783
|
Total
|
$
|
16,563
|
|
$
|
14,359
|
|
$
|
12,084
|
If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee. The termination fee is equal to the amount of the management fee during the 12 months immediately preceding the date of the termination. In addition, an Incentive Allocation Fair Value Amount will be distributable to the Master GP if the Master GP is removed due to the termination of the Management Agreement in certain specified circumstances. The Incentive Allocation Fair Value Amount is an amount equal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to the Master GP if our assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments).
Upon the successful completion of a post-IPO offering of our common shares or other equity securities (including securities issued as consideration in an acquisition), we will grant the Manager options to purchase common shares in an amount equal to 10% of the number of common shares being sold in the offering (or if the issuance relates to equity securities other than our common shares, options to purchase a number of common shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a common share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a common share as of the date of the equity issuance if it relates to equity securities other than our common shares). Any ultimate purchaser of common shares for which such options are granted may be an affiliate of Fortress.
The following table summarizes amounts due to the Manager, which are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
Accrued management fees
|
$
|
1,263
|
|
$
|
1,228
|
Other payables
|
3,965
|
|
2,073
|
As of December 31, 2018 and 2017, no amounts were recorded as a receivable from the Manager.
Other Affiliate Transactions
As of December 31, 2018 and 2017, an affiliate of our Manager owns an approximately 20% interest in Jefferson Terminal which has been accounted for as a component of non-controlling interest in consolidated subsidiaries in the accompanying consolidated financial statements. The carrying amount of this non-controlling interest at December 31, 2018 and 2017 was $51.1 million and $66.2 million, respectively.
The following table presents the amount of this non-controlling interest share of net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Non-controlling interest share of net loss
|
$
|
13,436
|
|
$
|
8,662
|
|
$
|
7,647
|
In connection with the Capital Call Agreement related to the Series 2016 Bonds, we entered into a Fee and Support Agreement with an affiliate of our Manager. The Fee and Support Agreement provides that the affiliate of the Manager is compensated for its guarantee of a portion of the obligations under the Standby Bond Purchase Agreement. This affiliate of the Manager received fees of $1.7 million, which will be amortized as interest expense to the earlier of the redemption date or February 13, 2020.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
On June 21, 2018, we, through a wholly owned subsidiary, completed a private offering with several third parties (the “Holders”) to tender their approximately 20% stake in Jefferson Terminal. We increased our majority interest in Jefferson Terminal in exchange for Class B Units of another wholly owned subsidiary, which provide the right to convert such Class B Units to a fixed amount of our shares, equivalent to approximately 1.9 million shares, at a Holder’s request. We have the option to satisfy any exchange request by delivering either common shares or cash. The Holders are entitled to receive distributions equivalent to the distributions paid to our shareholders. This transaction resulted in a purchase of non-controlling interest shares.
In the second quarter of 2018, we purchased all shares held by the non-controlling interest holder in our Aviation Leasing segment for a purchase price of $3.7 million.
14. SEGMENT INFORMATION
Our reportable segments represent strategic business units comprised of investments in different types of transportation and infrastructure assets. We have six reportable segments which operate in the Equipment Leasing and Infrastructure businesses across several market sectors. Our reportable segments are (i) Aviation Leasing, (ii) Offshore Energy, (iii) Shipping Containers, (iv) Jefferson Terminal, (v) Railroad and (vi) Ports and Terminals. Aviation Leasing consists of aircraft and aircraft engines held for lease and are typically held long-term. Offshore Energy consists of vessels and equipment that support offshore oil and gas drilling and production which are typically subject to operating leases. Shipping Containers consists of an investment in an unconsolidated entity engaged in the leasing of shipping containers (on both an operating lease and finance lease basis). Jefferson Terminal consists of a multi-modal crude oil and refined products terminal and other related assets. Railroad consists of our CMQR railroad operations. Ports and Terminals consists of Repauno, a 1,630 acre deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities, and Long Ridge, a 1,660 acre multi-modal port located along the Ohio River with rail, dock and multiple industrial development opportunities.
Corporate consists primarily of unallocated Company level general and administrative expenses and management fees. The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations. We evaluate investment performance for each reportable segment primarily based on net income attributable to shareholders and Adjusted Net Income.
Adjusted Net Income is defined as net income attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, and equity in earnings of unconsolidated entities; (b) to include the impact of cash income tax payments, our pro-rata share of the Adjusted Net Income from unconsolidated entities (collectively “Adjusted Net Income”), and (c) to exclude the impact of the non-controlling share of Adjusted Net Income.
We believe that net income attributable to shareholders, as defined by GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted Net Income. Adjusted Net Income should not be considered as an alternative to net income attributable to shareholders as determined in accordance with GAAP.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following tables set forth certain information for each reportable segment:
I. For the Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment leasing revenues
|
$
|
244,270
|
|
$
|
8,719
|
|
$
|
50
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
253,039
|
Infrastructure revenues
|
—
|
|
—
|
|
—
|
|
70,985
|
|
38,410
|
|
17,444
|
|
—
|
|
126,839
|
Total revenues
|
244,270
|
|
8,719
|
|
50
|
|
70,985
|
|
38,410
|
|
17,444
|
|
—
|
|
379,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
9,149
|
|
13,697
|
|
—
|
|
94,622
|
|
31,734
|
|
18,312
|
|
—
|
|
167,514
|
General and administrative
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
17,126
|
|
17,126
|
Acquisition and transaction expenses
|
315
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,653
|
|
6,968
|
Management fees and incentive allocation to affiliate
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,726
|
|
15,726
|
Depreciation and amortization
|
102,419
|
|
6,481
|
|
—
|
|
19,745
|
|
2,570
|
|
5,139
|
|
—
|
|
136,354
|
Interest expense
|
—
|
|
3,687
|
|
—
|
|
15,513
|
|
1,009
|
|
649
|
|
36,996
|
|
57,854
|
Total expenses
|
111,883
|
|
23,865
|
|
—
|
|
129,880
|
|
35,313
|
|
24,100
|
|
76,501
|
|
401,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in (losses) earnings of unconsolidated entities
|
(743)
|
|
—
|
|
309
|
|
(574)
|
|
—
|
|
—
|
|
—
|
|
(1,008)
|
Gain on sale of assets
|
3,911
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
202
|
|
16
|
|
—
|
|
270
|
|
—
|
|
—
|
|
—
|
|
488
|
Other income (expense)
|
—
|
|
—
|
|
—
|
|
3,983
|
|
(42)
|
|
—
|
|
—
|
|
3,941
|
Total other income (expense)
|
3,370
|
|
16
|
|
309
|
|
3,679
|
|
(42)
|
|
—
|
|
—
|
|
7,332
|
Income (loss) before income taxes
|
135,757
|
|
(15,130)
|
|
359
|
|
(55,216)
|
|
3,055
|
|
(6,656)
|
|
(76,501)
|
|
(14,332)
|
Provision (benefit) for income taxes
|
2,280
|
|
1
|
|
(94)
|
|
261
|
|
(1,077)
|
|
1
|
|
—
|
|
1,372
|
Net income (loss)
|
133,477
|
|
(15,131)
|
|
453
|
|
(55,477)
|
|
4,132
|
|
(6,657)
|
|
(76,501)
|
|
(15,704)
|
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries
|
(24)
|
|
—
|
|
—
|
|
(21,801)
|
|
339
|
|
(100)
|
|
—
|
|
(21,586)
|
Net income (loss) attributable to shareholders
|
$
|
133,501
|
|
$
|
(15,131)
|
|
$
|
453
|
|
$
|
(33,676)
|
|
$
|
3,793
|
|
$
|
(6,557)
|
|
$
|
(76,501)
|
|
$
|
5,882
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following table sets forth a reconciliation of Adjusted Net Income (Loss) to net loss attributable to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Adjusted Net Income (Loss)
|
$
|
135,428
|
|
$
|
(15,137)
|
|
$
|
171
|
|
$
|
(37,674)
|
|
$
|
2,986
|
|
$
|
(6,214)
|
|
$
|
(69,432)
|
|
$
|
10,128
|
Add: Non-controlling share of adjustments to Adjusted Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,030)
|
Add: Equity in losses of unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,008)
|
Add: Cash payments for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
721
|
Less: Incentive allocations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(407)
|
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,196
|
Less: Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Less: Changes in fair value of non-hedge derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,523
|
Less: Losses on the modification or extinguishment of debt and capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Less: Acquisition and transaction expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,968)
|
Less: Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(901)
|
Less: Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,372)
|
Net income attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,882
|
Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
$
|
10,053
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,053
|
Asia
|
78,374
|
|
7,265
|
|
50
|
|
—
|
|
—
|
|
—
|
|
—
|
|
85,689
|
Europe
|
121,546
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
121,546
|
North America
|
30,701
|
|
1,454
|
|
—
|
|
70,985
|
|
38,410
|
|
17,444
|
|
—
|
|
158,994
|
South America
|
3,596
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,596
|
Total revenues
|
$
|
244,270
|
|
$
|
8,719
|
|
$
|
50
|
|
$
|
70,985
|
|
$
|
38,410
|
|
$
|
17,444
|
|
$
|
—
|
|
$
|
379,878
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
II. For the Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment leasing revenues
|
$
|
156,793
|
|
$
|
13,107
|
|
$
|
100
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
170,000
|
Infrastructure revenues
|
—
|
|
—
|
|
—
|
|
10,229
|
|
32,607
|
|
4,823
|
|
—
|
|
47,659
|
Total revenues
|
156,793
|
|
13,107
|
|
100
|
|
10,229
|
|
32,607
|
|
4,823
|
|
—
|
|
217,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
6,247
|
|
15,833
|
|
9
|
|
31,213
|
|
29,966
|
|
9,117
|
|
—
|
|
92,385
|
General and administrative
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14,570
|
|
14,570
|
Acquisition and transaction expenses
|
441
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,865
|
|
7,306
|
Management fees and incentive allocation to affiliate
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
15,732
|
|
15,732
|
Depreciation and amortization
|
61,795
|
|
6,427
|
|
—
|
|
16,193
|
|
2,037
|
|
1,658
|
|
—
|
|
88,110
|
Interest expense
|
—
|
|
3,670
|
|
—
|
|
13,568
|
|
1,029
|
|
1,088
|
|
19,472
|
|
38,827
|
Total expenses
|
68,483
|
|
25,930
|
|
9
|
|
60,974
|
|
33,032
|
|
11,863
|
|
56,639
|
|
256,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
(1,276)
|
|
—
|
|
(4)
|
|
(321)
|
|
—
|
|
—
|
|
—
|
|
(1,601)
|
Gain (loss) on sale of assets
|
7,188
|
|
11,405
|
|
—
|
|
—
|
|
(312)
|
|
—
|
|
—
|
|
18,281
|
Loss on extinguishment of debt
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,456)
|
|
(2,456)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
297
|
|
15
|
|
—
|
|
376
|
|
—
|
|
—
|
|
—
|
|
688
|
Other income
|
—
|
|
1,093
|
|
—
|
|
1,980
|
|
—
|
|
—
|
|
—
|
|
3,073
|
Total other income (expense)
|
6,209
|
|
12,513
|
|
(4)
|
|
2,035
|
|
(312)
|
|
—
|
|
(2,456)
|
|
17,985
|
Income (loss) before income taxes
|
94,519
|
|
(310)
|
|
87
|
|
(48,710)
|
|
(737)
|
|
(7,040)
|
|
(59,095)
|
|
(21,286)
|
Provision (benefit) for income taxes
|
1,966
|
|
11
|
|
(65)
|
|
42
|
|
—
|
|
—
|
|
—
|
|
1,954
|
Net income (loss)
|
92,553
|
|
(321)
|
|
152
|
|
(48,752)
|
|
(737)
|
|
(7,040)
|
|
(59,095)
|
|
(23,240)
|
Less: Net income (loss) attributable to non-controlling interests in consolidated subsidiaries
|
697
|
|
(526)
|
|
—
|
|
(22,991)
|
|
(70)
|
|
(484)
|
|
—
|
|
(23,374)
|
Net income (loss) attributable to shareholders
|
$
|
91,856
|
|
$
|
205
|
|
$
|
152
|
|
$
|
(25,761)
|
|
$
|
(667)
|
|
$
|
(6,556)
|
|
$
|
(59,095)
|
|
$
|
134
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following table sets forth a reconciliation of Adjusted Net Income (Loss) to net loss attributable to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Adjusted Net Income (Loss)
|
$
|
92,637
|
|
$
|
216
|
|
$
|
87
|
|
$
|
(27,016)
|
|
$
|
19
|
|
$
|
(6,257)
|
|
$
|
(49,285)
|
|
$
|
10,401
|
Add: Non-controlling share of adjustments to Adjusted Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558
|
Add: Equity in losses of unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,601)
|
Add: Cash payments for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,726
|
Less: Incentive allocations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(514)
|
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,601
|
Less: Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Less: Changes in fair value of non-hedge derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,022
|
Less: Losses on the modification or extinguishment of debt and capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,456)
|
Less: Acquisition and transaction expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,306)
|
Less: Equity-based compensation income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,343)
|
Less: Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,954)
|
Net income attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
134
|
Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
$
|
9,993
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9,993
|
Asia
|
45,794
|
|
5,974
|
|
100
|
|
—
|
|
—
|
|
—
|
|
—
|
|
51,868
|
Europe
|
84,023
|
|
5,597
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
89,620
|
North America
|
16,278
|
|
1,536
|
|
—
|
|
10,229
|
|
32,607
|
|
4,823
|
|
—
|
|
65,473
|
South America
|
705
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
705
|
Total revenues
|
$
|
156,793
|
|
$
|
13,107
|
|
$
|
100
|
|
$
|
10,229
|
|
$
|
32,607
|
|
$
|
4,823
|
|
$
|
—
|
|
$
|
217,659
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
III. For the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment leasing revenues
|
$
|
95,408
|
|
$
|
5,328
|
|
$
|
1,213
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
101,949
|
Infrastructure revenues
|
—
|
|
—
|
|
—
|
|
15,902
|
|
30,837
|
|
32
|
|
—
|
|
46,771
|
Total revenues
|
95,408
|
|
5,328
|
|
1,213
|
|
15,902
|
|
30,837
|
|
32
|
|
—
|
|
148,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
4,609
|
|
11,014
|
|
43
|
|
21,886
|
|
27,975
|
|
628
|
|
14
|
|
66,169
|
General and administrative
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,314
|
|
12,314
|
Acquisition and transaction expenses
|
80
|
|
—
|
|
—
|
|
400
|
|
—
|
|
—
|
|
5,836
|
|
6,316
|
Management fees and incentive allocation to affiliate
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
16,742
|
|
16,742
|
Depreciation and amortization
|
36,369
|
|
6,411
|
|
—
|
|
15,500
|
|
1,926
|
|
4
|
|
—
|
|
60,210
|
Interest expense
|
—
|
|
3,747
|
|
410
|
|
13,501
|
|
754
|
|
545
|
|
—
|
|
18,957
|
Total expenses
|
41,058
|
|
21,172
|
|
453
|
|
51,287
|
|
30,655
|
|
1,177
|
|
34,906
|
|
180,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of unconsolidated entities
|
—
|
|
—
|
|
(5,974)
|
|
(18)
|
|
—
|
|
—
|
|
—
|
|
(5,992)
|
Gain on sale of assets
|
5,214
|
|
—
|
|
304
|
|
—
|
|
423
|
|
—
|
|
—
|
|
5,941
|
Loss on extinguishment of debt
|
—
|
|
—
|
|
—
|
|
(1,579)
|
|
—
|
|
—
|
|
—
|
|
(1,579)
|
Asset impairment
|
—
|
|
(7,450)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(7,450)
|
Interest income (expense)
|
142
|
|
13
|
|
—
|
|
(19)
|
|
—
|
|
—
|
|
—
|
|
136
|
Other income
|
—
|
|
—
|
|
—
|
|
602
|
|
—
|
|
—
|
|
—
|
|
602
|
Total other income (expense)
|
5,356
|
|
(7,437)
|
|
(5,670)
|
|
(1,014)
|
|
423
|
|
—
|
|
—
|
|
(8,342)
|
Income (loss) before income taxes
|
59,706
|
|
(23,281)
|
|
(4,910)
|
|
(36,399)
|
|
605
|
|
(1,145)
|
|
(34,906)
|
|
(40,330)
|
Provision (benefit) for income taxes
|
267
|
|
—
|
|
(86)
|
|
74
|
|
—
|
|
13
|
|
—
|
|
268
|
Net income (loss)
|
59,439
|
|
(23,281)
|
|
(4,824)
|
|
(36,473)
|
|
605
|
|
(1,158)
|
|
(34,906)
|
|
(40,598)
|
Less: Net income (loss) attributable to non-controlling interests in consolidated subsidiaries
|
435
|
|
(4,368)
|
|
—
|
|
(16,456)
|
|
23
|
|
(157)
|
|
(11)
|
|
(20,534)
|
Net income (loss) attributable to shareholders
|
$
|
59,004
|
|
$
|
(18,913)
|
|
$
|
(4,824)
|
|
$
|
(20,017)
|
|
$
|
582
|
|
$
|
(1,001)
|
|
$
|
(34,895)
|
|
$
|
(20,064)
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
The following table sets forth a reconciliation of Adjusted Net Income (Loss) to net loss attributable to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Adjusted Net Income (Loss)
|
$
|
58,768
|
|
$
|
(15,188)
|
|
$
|
(1,838)
|
|
$
|
(21,249)
|
|
$
|
941
|
|
$
|
(993)
|
|
$
|
(29,073)
|
|
$
|
(8,632)
|
Add: Non-controlling share of adjustments to Adjusted Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,945
|
Add: Equity in losses of unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,992)
|
Add: Cash payments for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
654
|
Less: Incentive allocations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,905
|
Less: Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,450)
|
Less: Changes in fair value of non-hedge derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Less: Losses on the modification or extinguishment of debt and capital lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,579)
|
Less: Acquisition and transaction expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,316)
|
Less: Equity-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,672
|
Less: Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(268)
|
Net loss attributable to shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(20,064)
|
Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
$
|
12,344
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
12,344
|
Asia
|
42,999
|
|
3,470
|
|
885
|
|
—
|
|
—
|
|
—
|
|
—
|
|
47,354
|
Europe
|
30,508
|
|
248
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
30,756
|
North America
|
8,184
|
|
1,610
|
|
328
|
|
15,902
|
|
30,837
|
|
32
|
|
—
|
|
56,893
|
South America
|
1,373
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,373
|
Total revenues
|
$
|
95,408
|
|
$
|
5,328
|
|
$
|
1,213
|
|
$
|
15,902
|
|
$
|
30,837
|
|
$
|
32
|
|
$
|
—
|
|
$
|
148,720
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
IV. Balance Sheet and location of long-lived assets
The following tables sets forth summarized balance sheet information and the geographic location of property, plant and equipment and leasing equipment, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Total assets
|
$
|
1,367,074
|
|
$
|
192,729
|
|
$
|
2,360
|
|
$
|
670,682
|
|
$
|
64,286
|
|
$
|
277,160
|
|
$
|
64,487
|
|
$
|
2,638,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net
|
—
|
|
47,570
|
|
—
|
|
234,862
|
|
22,239
|
|
—
|
|
932,676
|
|
1,237,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
234,449
|
|
51,125
|
|
6
|
|
288,256
|
|
37,207
|
|
16,615
|
|
957,338
|
|
1,584,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests in equity of consolidated subsidiaries
|
—
|
|
—
|
|
—
|
|
52,058
|
|
3,258
|
|
544
|
|
523
|
|
56,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
1,132,625
|
|
141,604
|
|
2,354
|
|
382,426
|
|
27,079
|
|
260,545
|
|
(892,851)
|
|
1,053,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
$
|
1,367,074
|
|
$
|
192,729
|
|
$
|
2,360
|
|
$
|
670,682
|
|
$
|
64,286
|
|
$
|
277,160
|
|
$
|
64,487
|
|
$
|
2,638,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Property, plant and equipment and leasing equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
$
|
47,353
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
47,353
|
Asia
|
383,648
|
|
34,667
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
418,315
|
Europe
|
592,670
|
|
121,950
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
714,620
|
North America
|
177,962
|
|
—
|
|
—
|
|
433,404
|
|
51,157
|
|
263,747
|
|
—
|
|
926,270
|
South America
|
34,505
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34,505
|
Total property, plant and equipment and leasing equipment, net
|
$
|
1,236,138
|
|
$
|
156,617
|
|
$
|
—
|
|
$
|
433,404
|
|
$
|
51,157
|
|
$
|
263,747
|
|
$
|
—
|
|
$
|
2,141,063
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Total assets
|
$
|
952,543
|
|
$
|
195,101
|
|
$
|
4,429
|
|
$
|
579,329
|
|
$
|
51,989
|
|
$
|
123,693
|
|
$
|
48,722
|
|
$
|
1,955,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net
|
—
|
|
53,590
|
|
—
|
|
184,942
|
|
22,513
|
|
—
|
|
442,219
|
|
703,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
145,882
|
|
56,853
|
|
100
|
|
210,159
|
|
36,560
|
|
14,229
|
|
456,948
|
|
920,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests in equity of consolidated subsidiaries
|
3,037
|
|
—
|
|
—
|
|
81,414
|
|
2,737
|
|
295
|
|
524
|
|
88,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
806,661
|
|
138,248
|
|
4,329
|
|
369,170
|
|
15,429
|
|
109,464
|
|
(408,226)
|
|
1,035,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
$
|
952,543
|
|
$
|
195,101
|
|
$
|
4,429
|
|
$
|
579,329
|
|
$
|
51,989
|
|
$
|
123,693
|
|
$
|
48,722
|
|
$
|
1,955,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment Leasing
|
|
|
|
|
|
Infrastructure
|
|
|
|
|
|
|
|
|
|
Aviation Leasing
|
|
Offshore Energy
|
|
Shipping Containers
|
|
Jefferson Terminal
|
|
Railroad
|
|
Ports and Terminals
|
|
Corporate
|
|
Total
|
Property, plant and equipment and leasing equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Africa
|
$
|
36,648
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
36,648
|
Asia
|
210,152
|
|
163,072
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
373,224
|
Europe
|
527,166
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
527,166
|
North America
|
96,525
|
|
—
|
|
—
|
|
371,687
|
|
40,512
|
|
118,317
|
|
—
|
|
627,041
|
South America
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Total property, plant and equipment and leasing equipment, net
|
$
|
870,491
|
|
$
|
163,072
|
|
$
|
—
|
|
$
|
371,687
|
|
$
|
40,512
|
|
$
|
118,317
|
|
$
|
—
|
|
$
|
1,564,079
|
15. EARNINGS PER SHARE AND EQUITY
Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of shares of common stock outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of shares of common stock outstanding, plus potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method.
The calculation of basic and diluted EPS is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
(in thousands, except share and per share data)
|
2018
|
|
2017
|
|
2016
|
Net income (loss) attributable to shareholders
|
$
|
5,882
|
|
$
|
134
|
|
$
|
(20,064)
|
Weighted Average Shares Outstanding - Basic
|
83,654,068
|
|
75,766,811
|
|
75,738,698
|
Weighted Average Shares Outstanding - Diluted
|
83,664,833
|
|
75,766,811
|
|
75,738,698
|
|
|
|
|
|
|
Basic EPS
|
$
|
0.07
|
|
$
|
—
|
|
$
|
(0.26)
|
Diluted EPS
|
$
|
0.07
|
|
$
|
—
|
|
$
|
(0.26)
|
For the years ended December 31, 2018, 2017 and 2016, 57,069, 438 and 8,082 shares have been excluded from the calculation of Diluted EPS, respectively, because the impact would be anti-dilutive.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
In January 2018, we issued 7,000,000 common shares, par value $0.01 per share, at a price of $18.35 per share. We received net proceeds of $128.5 million after deducting underwriting discounts and commissions and offering expenses.
In December 2018, we issued 1,263,423 common shares, par value $0.01 per share, at a price of $15.83 per share. We received net proceeds of $19.7 million after deducting estimated offering expenses.
See Note 11 for information related to options granted to the Manager in connection with both the January 2018 and December 2018 offerings.
16. COMMITMENTS AND CONTINGENCIES
In the normal course of business the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. Within our Offshore Energy segment, lessees have asserted that they are entitled to certain reimbursable expenses or adjustments per the terms of the related charter agreement. Although we believe that we have strong defenses against these claims, the range of potential damages is $0.0 million to $3.3 million. No amount has been recorded for this matter in our consolidated financial statements as of December 31, 2018, and we will continue to vigorously defend against these claims. Our maximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is remote.
We have also entered into an arrangement with our non-controlling interest holder of Repauno, whereby the non-controlling interest holder may receive additional payments contingent upon the achievement of certain service conditions, not to exceed $15.0 million. We will account for such amounts when and if such service conditions are achieved.
We have entered into an arrangement with the seller of Long Ridge, whereby the seller may receive additional payments contingent upon the achievement of certain conditions, not to exceed $5.0 million. We will account for such amounts when and if such conditions are achieved.
Several of our subsidiaries are lessees under various operating and capital leases. Total rent expense for operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
Rent expense
|
$
|
4,157
|
|
$
|
4,979
|
|
$
|
4,953
|
As of December 31, 2018, minimum future rental payments under operating and capital leases are as follows:
|
|
|
|
|
|
2019
|
$
|
9,360
|
2020
|
5,590
|
2021
|
4,122
|
2022
|
3,431
|
2023
|
2,724
|
Thereafter
|
95,202
|
Total
|
$
|
120,429
|
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents unaudited summary information for our quarterly operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
Year Ended December 31
|
(in thousands except share and per share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
|
Total revenues
|
$
|
68,844
|
|
$
|
71,979
|
|
$
|
101,155
|
|
$
|
137,900
|
|
$
|
379,878
|
Total expenses
|
78,128
|
|
83,870
|
|
100,549
|
|
138,995
|
|
401,542
|
Total other income
|
446
|
|
5,976
|
|
668
|
|
242
|
|
7,332
|
(Loss) income before income taxes
|
(8,838)
|
|
(5,915)
|
|
1,274
|
|
(853)
|
|
(14,332)
|
Provision for (benefit from) income taxes
|
495
|
|
534
|
|
551
|
|
(208)
|
|
1,372
|
Net (loss) income
|
(9,333)
|
|
(6,449)
|
|
723
|
|
(645)
|
|
(15,704)
|
Net loss attributable to non-controlling interests in consolidated subsidiaries
|
(8,761)
|
|
(7,288)
|
|
(3,855)
|
|
(1,682)
|
|
(21,586)
|
Net (loss) income attributable to shareholders
|
$
|
(572)
|
|
$
|
839
|
|
$
|
4,578
|
|
$
|
1,037
|
|
$
|
5,882
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.01)
|
|
$
|
0.01
|
|
$
|
0.05
|
|
$
|
0.01
|
|
$
|
0.07
|
Diluted
|
$
|
(0.01)
|
|
$
|
0.01
|
|
$
|
0.05
|
|
$
|
0.01
|
|
$
|
0.07
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
81,534,454
|
|
83,160,037
|
|
84,708,071
|
|
85,065,125
|
|
83,654,068
|
Diluted
|
81,534,454
|
|
83,160,047
|
|
84,709,656
|
|
85,068,966
|
|
83,664,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
Year Ended December 31
|
(in thousands except share and per share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31(1)
|
|
|
Total revenues
|
$
|
44,673
|
|
$
|
51,194
|
|
$
|
60,362
|
|
$
|
61,430
|
|
$
|
217,659
|
Total expenses
|
52,264
|
|
58,315
|
|
66,328
|
|
80,023
|
|
256,930
|
Total other (expense) income
|
(1,409)
|
|
1,776
|
|
5,204
|
|
12,414
|
|
17,985
|
Loss before income taxes
|
(9,000)
|
|
(5,345)
|
|
(762)
|
|
(6,179)
|
|
(21,286)
|
Provision for income taxes
|
212
|
|
464
|
|
909
|
|
369
|
|
1,954
|
Net loss
|
(9,212)
|
|
(5,809)
|
|
(1,671)
|
|
(6,548)
|
|
(23,240)
|
Net loss attributable to non-controlling interests in consolidated subsidiaries
|
(4,798)
|
|
(4,349)
|
|
(4,669)
|
|
(9,558)
|
|
(23,374)
|
Net (loss) income attributable to shareholders
|
$
|
(4,414)
|
|
$
|
(1,460)
|
|
$
|
2,998
|
|
$
|
3,010
|
|
$
|
134
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.06)
|
|
$
|
(0.02)
|
|
$
|
0.04
|
|
$
|
0.04
|
|
$
|
—
|
Diluted
|
$
|
(0.06)
|
|
$
|
(0.02)
|
|
$
|
0.04
|
|
$
|
0.04
|
|
$
|
—
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
75,762,283
|
|
75,762,674
|
|
75,770,529
|
|
75,771,738
|
|
75,766,811
|
Diluted
|
75,762,283
|
|
75,762,674
|
|
75,770,665
|
|
75,772,867
|
|
75,766,811
|
_____________________________________________________
(1) Results of operations for the three months ended December 31, 2017 include a $5.9 million out of period adjustment to interest expense, which relates to interest previously capitalized that should have been expensed ratably during the first nine months of 2017. The impact of the out of period adjustment for the three months ended December 31, 2017, was a decrease of $3.6 million to net (loss) income attributed to shareholders. We do not believe this out of period adjustment is material to our financial position, or results of operations for any prior periods.
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, unless otherwise noted)
18. SUBSEQUENT EVENTS
In January 2019, we issued 16,275 common shares to certain directors as compensation.
On February 8, 2019 we issued an additional $150 million of 2022 Notes that bear interest at a rate of 6.75% per annum at an offering price of 98.5% of the principal amount plus accrued interest from September 15, 2018.
On February 8, 2019, we entered into an amendment to the Revolving Credit Facility. The amendment, among other things, (i) increases the aggregate revolving commitments under the Revolving Credit Facility by $125 million to $250 million (ii) extends the maturity date of the revolving loans and commitments under the Revolving Credit Facility to January 31, 2022 and (iii) makes certain modifications to the financial covenants under the Revolving Credit Facility.
During the first quarter of 2019, certain Holders of Class B Units (see Note 13) converted 447,407 Class B Units in exchange for 331,348 common shares.
On February 27, 2019, our Board of Directors declared a cash dividend on our common shares and eligible participating securities of $0.33 per share for the quarter ended December 31, 2018, payable on March 27, 2019 to the holders of record on March 15, 2019.
Construction of Power Plant at Long Ridge
Construction Agreements
On February 15, 2019, Long Ridge Energy Generation LLC ("LREG"), a subsidiary of the Company, entered into an engineering, procurement and construction agreement with Kiewit Power Constructors Co. to construct a 485 megawatt natural gas fired, combined cycle power plant at Long Ridge Energy Terminal. Additionally, LREG entered into an agreement for the purchase and sale of certain power generation equipment and related services with General Electric Company. The aggregate value of both of these agreements is approximately $430 million.
Credit Agreements
On February 15, 2019, LREG and two other subsidiaries (collectively, "Co-Borrowers") entered into certain credit agreements establishing (i) a $445 million construction loan and term loan, (ii) a $154 million letter of credit facility and (iii) a $143 million construction loan and term loan, all of which will be used for the purposes of funding the development, construction and completion of the power plant. The borrowings under these agreements are secured by the assets of the Co-Borrowers, are not guaranteed by the Company and are non-recourse to the Company.
Fixed Price Power Agreements
In connection with the construction of the power plant, LREG entered into fixed price power agreements for 457 megawatts of electric power. The agreements become effective on February 1, 2022, with 207 megawatts having a term of ten years and 250 megawatts having a term of seven years. Under the terms of the agreements, LREG receives a weighted average fixed price of $27.30 per megawatt hour and pays a variable price equal to the ELECTRICITY-PJM-AEP/DAYTON HUB-DAY AHEAD price.
Report of Independent Auditors
To the Management of Intermodal Finance I Ltd.
We have audited the accompanying consolidated financial statements of Intermodal Finance I Ltd. , which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive loss, changes in members’ (deficit) equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Intermodal Finance I Ltd. at December 31, 2017 and 2016, and the consolidated results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying Other Financial Information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
/s/Ernst & Young LLP
New York, New York
March 1, 2018
INTERMODAL FINANCE I LTD.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
Assets
|
|
|
|
Cash and cash equivalents
|
$
|
111
|
|
$
|
1,648
|
Restricted cash
|
46
|
|
765
|
Accounts Receivable
|
131
|
|
1,123
|
Leasing assets, net of accumulated depreciation of $2,187 and $4,085, respectively
|
3,483
|
|
6,037
|
Finance Leases, net
|
1,479
|
|
7,115
|
Other assets
|
54
|
|
8
|
Total Assets
|
$
|
5,304
|
|
$
|
16,696
|
|
|
|
|
Liabilities and Deficit
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
15
|
|
$
|
35
|
Management fees payable
|
258
|
|
214
|
Accrued interest payable
|
2
|
|
346
|
Accrued interest payable to affiliates
|
2
|
|
332
|
Term loan payable, net
|
—
|
|
7,092
|
Loans payable to affiliates
|
14,364
|
|
18,080
|
|
|
|
|
Other liabilities
|
30
|
|
199
|
Total liabilities
|
14,671
|
|
26,298
|
Members’ deficit
|
(9,367)
|
|
(9,602)
|
Total liabilities and members’ deficit
|
$
|
5,304
|
|
$
|
16,696
|
See accompanying notes to consolidated financial statements.
INTERMODAL FINANCE I LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Year Ended December 31,
|
|
|
|
Year Ended December 31, 2018
|
|
2017
|
|
2016
|
Revenues
|
|
|
|
|
|
Equipment leasing revenue
|
$
|
807
|
|
$
|
2,291
|
|
$
|
7,506
|
Finance revenue
|
419
|
|
1,058
|
|
2,210
|
Total revenues
|
1,226
|
|
3,349
|
|
9,716
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Direct operating expenses
|
1,490
|
|
3,080
|
|
1,780
|
Management fee
|
400
|
|
1,022
|
|
1,225
|
Depreciation and amortization
|
53
|
|
1,763
|
|
5,815
|
Interest expense
|
561
|
|
899
|
|
2,227
|
Interest expense-affiliates
|
376
|
|
362
|
|
368
|
Impairment expense
|
—
|
|
—
|
|
6,016
|
General and administrative expense
|
181
|
|
260
|
|
233
|
Bad debt expense
|
—
|
|
—
|
|
105
|
Total expenses
|
3,061
|
|
7,386
|
|
17,769
|
|
|
|
|
|
|
Other income (loss)
|
|
|
|
|
|
Other income
|
253
|
|
925
|
|
1,197
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on disposal of equipment
|
1,817
|
|
2,742
|
|
(5,225)
|
Total other income (loss)
|
2,070
|
|
3,667
|
|
(4,028)
|
|
|
|
|
|
|
Net income (loss)
|
$
|
235
|
|
$
|
(370)
|
|
$
|
(12,081)
|
See accompanying notes to consolidated financial statements.
INTERMODAL FINANCE I LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Year Ended December 31,
|
|
|
|
Year Ended December 31, 2018
|
|
2017
|
|
2016
|
Net income (loss)
|
$
|
235
|
|
$
|
(370)
|
|
$
|
(12,081)
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
Comprehensive income (loss)
|
$
|
235
|
|
$
|
(370)
|
|
$
|
(12,081)
|
See accompanying notes to consolidated financial statements.
INTERMODAL FINANCE I LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Year Ended December 31,
|
|
|
|
Year Ended December 31, 2018
|
|
2017
|
|
2016
|
Cash flow from operating activities:
|
|
|
|
|
|
Net income (loss)
|
$
|
235
|
|
$
|
(370)
|
|
$
|
(12,081)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization of deferred financing costs
|
525
|
|
1,763
|
|
6,093
|
|
|
|
|
|
|
(Gain) loss on disposal of equipment
|
(1,817)
|
|
(2,742)
|
|
5,225
|
Impairment of equipment held for lease
|
—
|
|
—
|
|
6,016
|
Bad debt expense
|
—
|
|
—
|
|
105
|
Change in:
|
|
|
|
|
|
Accounts receivable
|
467
|
|
333
|
|
221
|
Other assets
|
(254)
|
|
538
|
|
(177)
|
Accounts payable and accrued liabilities
|
(20)
|
|
(11)
|
|
(14)
|
Accrued interest payable
|
(674)
|
|
356
|
|
309
|
Management fees payable
|
44
|
|
69
|
|
65
|
Other liabilities
|
(169)
|
|
(218)
|
|
(41)
|
Net cash (used in) provided by operating activities
|
(1,663)
|
|
(282)
|
|
5,721
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Principal collections on direct finance leases
|
5,636
|
|
10,155
|
|
16,886
|
Proceeds from disposal of equipment
|
5,051
|
|
14,047
|
|
11,051
|
Restricted cash
|
719
|
|
356
|
|
996
|
Net cash provided by investing activities
|
11,406
|
|
24,558
|
|
28,933
|
|
|
|
|
|
|
Cash used in financing activities:
|
|
|
|
|
|
Principal repayments on term loan
|
(7,549)
|
|
(25,655)
|
|
(32,360)
|
Principal repayments on loans payable to affiliates
|
(3,716)
|
|
—
|
|
(407)
|
Principal repayments on syndication liabilities
|
—
|
|
(1,207)
|
|
(1,994)
|
Deferred financing fee
|
(15)
|
|
(15)
|
|
—
|
Capital distributions
|
—
|
|
—
|
|
(440)
|
Net cash used in financing activities
|
(11,280)
|
|
(26,877)
|
|
(35,201)
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
(1,537)
|
|
(2,601)
|
|
(547)
|
Cash and cash equivalents, beginning of year
|
1,648
|
|
4,249
|
|
4,796
|
Cash and cash equivalents, end of year
|
$
|
111
|
|
$
|
1,648
|
|
$
|
4,249
|
|
|
|
|
|
|
Supplemental disclosure:
|
|
|
|
|
|
Cash paid for interest
|
$
|
1,138
|
|
$
|
627
|
|
$
|
2,009
|
See accompanying notes to consolidated financial statements.
INTERMODAL FINANCE I LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ (DEFICIT) EQUITY
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WWTAI
Container HoldCo Ltd
|
|
Deutsche
Bank AG
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members’ Deficit at December 31, 2016
|
$
|
(5,139)
|
|
$
|
(4,093)
|
|
$
|
(9,232)
|
Comprehensive loss:
|
|
|
|
|
|
Net loss for the period
|
(189)
|
|
(181)
|
|
(370)
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
Total comprehensive loss
|
(189)
|
|
(181)
|
|
(370)
|
Members’ Deficit at December 31, 2017
|
$
|
(5,328)
|
|
$
|
(4,274)
|
|
$
|
(9,602)
|
Comprehensive income:
|
|
|
|
|
|
Net income for the period
|
120
|
|
115
|
|
235
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
Total comprehensive income
|
120
|
|
115
|
|
235
|
Members’ Deficit at December 31, 2018 (Unaudited)
|
$
|
(5,208)
|
|
$
|
(4,159)
|
|
$
|
(9,367)
|
See accompanying notes to consolidated financial statements.
1. ORGANIZATION
Intermodal Finance I Ltd. (“Intermodal Finance”) is a Cayman Islands limited liability company which was formed on August 21, 2012 for the object and purpose of, directly or indirectly, investing in portfolios of shipping containers subject to operating leases or direct financing leases, and engaging in all activities incidental hereto.
The members of Intermodal Finance are WWTAI Container HoldCo Ltd., with a 51% interest, and Deutsche Bank AG, Cayman Islands Branch, with a 49% interest. Intermodal Finance shall continue in existence until such time as its members determine upon its winding up and dissolution. Intermodal Finance commenced operations on September 5, 2012.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting—The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Intermodal Finance and its subsidiaries. Intermodal Finance consolidates those entities which it has an investment of 50% or more and in which it has control over significant operating decisions, as well as variable interest entities in which Intermodal Finance is the primary beneficiary. All significant intercompany transactions and balances have been eliminated.
Intermodal Finance holds a variable interest in WWTAI Container 1 Ltd (“Container 1”), an entity which holds an investment in four direct finance leases, and has determined that it is the primary beneficiary of Container 1. Accordingly, Intermodal Finance consolidates Container 1 (collectively, the “Company”).
Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties—In the normal course of business, the Company may encounter two significant types of economic risk: credit risk and market risk. Credit risk is the risk of default on leases, loans, securities or derivatives, as applicable, which results from the inability or unwillingness of a lessee, borrower, or derivative counterparty to make required or expected payments. Market risk reflects changes in the value of leasing assets (including residual value estimates), loans, securities or derivatives, as applicable, due to changes in interest rates or other market factors, including the value of the collateral underlying loans and the valuation of equity and debt securities. The Company conducts operations outside of the United States; such international operations are subject to risks, such as unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws.
Cash and Cash Equivalents—The Company considers all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Substantially all of the Company’s amounts on deposit with major financial institutions exceed insured limits.
Restricted Cash—Restricted cash consists of cash held in segregated accounts pursuant to the requirements of the Company’s Term Loan agreement (Note 4).
Deferred Costs and Amortization—Deferred financing costs incurred in connection with the Term Loan are amortized over the seven year term of the underlying loan. Amortization expense for the years ended December 31, 2018, 2017 and 2016 was approximately $473 (unaudited), $278 and $278, respectively.
Deferred costs also include a commission paid to a third party in connection with the acquisition and leaseback of a portfolio of shipping containers. This commission is being amortized using the straight line method over the term of the underlying lease. Amortization expense for the years ended December 31, 2018, 2017 and 2016 was approximately $0 (unaudited), $0 and $63, respectively.
Direct Finance Leases—Direct finance leases are recorded at the aggregated future minimum lease payments, including any bargain or economically compelled purchase options granted to the customer, less unearned income.
Leasing Equipment—Shipping containers held for lease are stated at initial cost and are depreciated on a straight-line basis to an estimated residual value over a 15 year useful life from date of manufacture. The shipping containers owned by the Company are being depreciated over remaining useful lives of 6 months. Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was approximately $53 (unaudited), $1,485 and $5,752, respectively.
The Company recognizes repair and maintenance costs that do not extend the lives of the assets as incurred and includes them as a component of direct operating expenses in the consolidated statement of operations.
The Company performs a recoverability assessment of shipping container portfolios at least annually. In addition, a recoverability assessment is performed whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a decline in demand for the types of equipment owned by the Company, or other indicators of obsolescence. When performing a recoverability assessment, the Company measures whether the estimated future undiscounted net cash flows expected to be generated by the equipment exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted leases, future projected lease rates, transition costs, estimated down time and estimated residual or scrap values for the equipment. In the event that the equipment does not meet the recoverability test, the carrying value of the equipment will be adjusted to fair value resulting in an impairment charge.
Management of the Company develops the assumptions used in the recoverability analysis based on its knowledge of active lease contracts, current and future expectations of the global demand for a particular container type and historical experience in the container leasing market, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, residual values, economic conditions, technology, demand for a particular container type and other factors. In the event that the portfolio does not meet the recoverability test, the carrying value will be adjusted to fair value based on a discounted cash flow analysis, resulting in an impairment charge.
On December 31, 2016 Intermodal Finance I, Ltd. recorded an impairment charge of $6,016, which resulted from certain operating leases not being renewed and containers being returned at a faster pace than expected. Additionally, due to challenging market conditions for shipping containers, a limited number of the returned containers were sold at values lower than previously estimated. There was no impairment recorded for the years ended December 31, 2018 (unaudited) or 2017.
Revenue Recognition—The Company leases shipping containers pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals.
The Company determines the provision for doubtful accounts based on its assessment of the collectability of its receivables on a customer-by-customer basis and places a likelihood of default percentage on each delinquent account individually. Changes in economic conditions may require a re-assessment of the risk and could result in increases or decreases in the allowance for doubtful accounts. At December 31, 2018 (unaudited), 2017 and 2016, there were no provisions for doubtful accounts on the Company’s accounts receivable.
The Company also holds a portfolio of direct finance lease receivables. In most instances, the leases include a bargain purchase option to purchase the leased equipment at the end of the lease term. Net investment in direct finance leases represents the receivables due from lessees, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the life of the lease term and is recorded as finance revenue in the consolidated statement of operations. The principal component of the lease payment is reflected as a reduction to the net investment in direct finance leases.
Expense Recognition—The Company recognizes expenses as incurred on an accrual basis.
Comprehensive Income (Loss)—Comprehensive income (loss) consists of net income and other gains and losses, net of tax, if any, affecting shareholders’ equity that, under GAAP, are excluded from net income. Such amounts include the changes in the fair value of derivative instruments, reclassification into the earnings of amounts previously deferred relating to the derivative instruments and foreign currency translation gains and losses. For the years ended December 31, 2018 (unaudited), 2017 and 2016, there were no differences between the Company’s comprehensive income and the net income as presented in the consolidated statement of operations.
Foreign Currency—The Company’s functional and reporting currency is the U.S. dollar. Purchases and sales of assets and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. Differences between these recorded amounts and the U.S. dollar equivalent actually received or paid are reported as net realized foreign currency gains or losses.
Federal Income Taxes—No income taxes have been provided for in these consolidated financial statements as each investor in the Company is individually responsible for reporting income or loss based upon its respective share of the Company’s income and expenses as reported for income tax purposes.
There are no uncertain tax positions that would require recognition in the consolidated financial statements. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The income tax returns filed by the Company are subject to examination by the U.S. Federal and state tax authorities.
Distributions and Allocations to Members—Distributions to members are recorded when paid or, in the case of an in-kind distribution, when distributed. The character of distributions made during the reporting period may differ from their ultimate characterization for federal income tax purposes due to book/tax differences in the character of income and expense recognition. Distributions and allocations are determined with respect to each member, as defined by and in accordance with the operating agreement.
Concentration of Credit Risk—The Company is subject to concentrations of credit risk with respect to amounts due from customers on its direct finance leases and operating leases. The Company attempts to limit its credit risk by performing ongoing credit evaluations. The Company’s three largest customers represented approximately 20%, 14% (direct finance lease customers) and 66% (operating lease customer) of revenues for the year ended December 31, 2018 (unaudited); 23%, 8% (direct finance lease customers) and 68% (operating lease customer) of revenues for the year ended December 31, 2017; and 17%, 3% (direct finance lease customers) and 77% (operating lease customer) of revenues for the year ended December 31, 2016.
Based on the in-place operating lease contract, the maximum amount of loss the Company would incur if the operating lease customer failed completely to perform according to the terms of the lease was immaterial at December 31, 2018 (unaudited) and approximately $176 and $2,545 at December 31, 2017 and 2016, respectively. As it relates to the Company’s direct finance lease portfolio, one customer accounted for all of the outstanding principal at December 31, 2018 (unaudited) and the three largest customers accounted for approximately 58%, 39% and 25% of the outstanding principal at December 31, 2017. If any of these customers were to default, the Company would seek to recover the equipment securing the lease, with a view towards either selling or re-leasing the equipment. To date, the Company has not experienced any losses related to direct finance leases and does not expect future uncollectible amounts related to the principal balances receivable.
Deterioration in credit quality of several of the Company’s major customers could have an adverse effect on its consolidated financial position and operating results. Management does not believe significant risk exists in connection with the Company’s concentrations of credit as of December 31, 2018 (unaudited).
Recent Accounting Pronouncements—In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 requires (i) equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. ASU 2016-01 also eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
Unadopted Accounting Pronouncements—The FASB has recently issued or discussed a number of proposed standards on such topics as financial instruments and hedging. Some of the proposed changes are significant and could have a material impact on the Company’s financial reporting. The Company has not yet fully evaluated the potential impact of these proposals, but will make such an evaluation as the standards are finalized.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU-2014-09”) which provides a single comprehensive model for recognizing revenue from contracts with customers and supersedes existing revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of ASU 2014-09 by one year, making it effective for annual reporting periods beginning after December 15, 2018 while also providing for early adoption but not before the original effective date. The Company’s evaluation of the impact of the new guidance on its consolidated financial statements is ongoing. As the Company’s primary source of revenues is from its leasing contracts, subject to ASU 2016-02, Leases, management has concluded that the adoption of this ASU will not result in a material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of 2019, with early adoption permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
3. SHIPPING CONTAINER PORTFOLIOS
The components of the Company’s net investment in direct financing leases are comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
Minimum lease payments
|
|
$
|
1,527
|
|
$
|
7,529
|
Less: Unearned income
|
|
(48)
|
|
(414)
|
Net investment in direct finance leases
|
|
$
|
1,479
|
|
$
|
7,115
|
At December 31, 2018, future minimum lease payments to be received under direct finance leases were $1,527 (unaudited), all of which will be received during the year ended December 31, 2019.
Operating Lease Portfolio-As of December 31, 2018 (unaudited) and 2017 all operating leases had expired, and the assets continue to earn per diems until the point at which they are returned.
4. DEBT
Term Loan Payable
On September 5, 2012, the Company entered in to a Term Loan Agreement (the “Term Loan”) with Deutsche Bank AG, Cayman Islands Branch (the “Lender”) for an initial aggregate amount of $125,000 in connection with the acquisition of a portfolio of shipping containers subject to direct finance leases. On December 17, 2012 the Term Loan was amended to provide for an additional borrowing of $53,000 which was used in connection with the acquisition of a portfolio of shipping containers subject to operating leases. Borrowings under the Term Loan bear interest at either (i) LIBOR plus 3% or (ii) a Base Rate (equal to the higher of the Prime Rate or the Federal Funds Rate, plus 0.50%) plus a spread of 0.25%. In addition, an administrative agent fee calculated at a rate of 0.50% per annum is also payable. In April 2013, the administrative agent fee rate was reduced to 0.25%. Interest expense on the Term Loan for years ended December 31, 2018, 2017 and 2016 was $88 (unaudited), $736 and $1,643, respectively, exclusive of administrative agent fees of $5 (unaudited), $50 and $128, respectively. The Company repaid the Term Loan in full during 2018.
Class B Term Loan Payable to Affiliates
On September 5, 2012, the Company entered in to a Class B Term Loan Agreement (the "Class B Loan”) with its members, pursuant to which it borrowed an initial aggregate amount of $25,000 in connection with the acquisition of a portfolio of shipping containers subject to direct finance leases. On December 17, 2012 the Class B Loan was amended to provide for an additional borrowing of approximately $15,100 which was used in connection with the acquisition of a portfolio of shipping containers subject to operating leases. Borrowings under the Class B Loan are unsecured and bear interest at a rate of 2%. Interest expense on the Class B Loan for the years ended December 31, 2018, 2017 and 2016 was approximately $376 (unaudited), $362 and $368, respectively. During the years ended December 31, 2018 and 2017, repayments under the Class B Loan totaled $3,716 (unaudited) and $0, respectively.
5. SYNDICATION LIABILITIES
In connection with the acquisition of the DFL’s in September 2012, the Company assumed syndication liabilities to third parties relating to four of the acquired DFL contracts. At acquisition, the syndication liabilities had remaining terms equal to the remaining terms of the associated DFL contracts, which ranged from 28 months to 42 months. The acquisition date fair value ascribed to these obligations was approximately $19,500. Interest on the syndication liabilities is recognized using the effective interest method at rates which range from 2.30% to 4.44%. Interest expense recognized on the syndication liabilities amounted to approximately $164 and $305 during the years ended December 31, 2017 and 2016. The obligations pursuant to these arrangements are non-recourse to the Company and the sole source of payment for these obligations is the cash flows generated from the underlying DFL contracts. During the year ended December 31, 2017, the syndication liabilities were paid off.
6. MANAGEMENT AGREEMENT
The Company has engaged Container Leasing International LLC (the “Manager”) to manage and administer its DFL portfolio pursuant to a management agreement having an initial term of 10 years and providing for three additional extension terms of one-year each. Pursuant to the management agreement, the Manager receives (i) a base monthly fee equal to 1.5% of payments received on the DFL contracts and is entitled to receive additional fees, as applicable, equal to (a) 5% of the sum of net sales proceeds and casualty proceeds for containers which have been sold or lost and (b) a recovery fee of 25 dollars for each container recovered by the Manager following the occurrence of a lessee default under a DFL contract and (ii) a base monthly fee equal to (a) 4% of the Net Operating Income, as defined, of the containers subject to operating leases and an additional fee of 5% of the net sales proceeds from the sale or disposal of containers subject to operating leases.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
In assessing the fair value of financial instruments, the Company applies the provisions included in ASC 820 “Fair Value Measurements and Disclosures.” ASC 820 provides that fair value is a market-based measurement, not an entity-specific measurement. It further clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. ASC 820 requires the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
•Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Unobservable inputs for which there is little or no market data and which require internal development of assumptions about how market participants price the asset or liability.
The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, term loan payable and syndication liabilities. The fair value of cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued liabilities approximates their carrying values because of their short term nature.
The fair value of the term loan payable is based on inputs classified as Level 2 in the fair value hierarchy and approximates its carrying value because such loan bears interest at a floating market rate for similar types of loans.
8. SUBSEQUENT EVENTS
The Company has evaluated whether any material events have occurred subsequent to the balance sheet date through February 28, 2019, the date the consolidated financial statements were available to be issued.
OTHER FINANCIAL INFORMATION
Intermodal Finance I Ltd.
Consolidating Balance Sheet (Unaudited)
(dollar amounts in thousands)
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermodal
Finance I Ltd
|
|
WWTAI
Container I Ltd
|
|
Eliminations
|
|
Consolidated
Intermodal
Finance I Ltd
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
107
|
|
$
|
4
|
|
$
|
—
|
|
$
|
111
|
Restricted cash
|
|
46
|
|
—
|
|
—
|
|
46
|
Accounts receivable
|
|
131
|
|
—
|
|
—
|
|
131
|
Leasing equipment, net of accumulated depreciation of $2,187
|
|
3,483
|
|
—
|
|
—
|
|
3,483
|
Net investment in direct finance leases
|
|
1,479
|
|
—
|
|
—
|
|
1,479
|
Other assets
|
|
54
|
|
—
|
|
—
|
|
54
|
Due from affiliates
|
|
4
|
|
—
|
|
(4)
|
|
—
|
Total assets
|
|
$
|
5,304
|
|
$
|
4
|
|
$
|
(4)
|
|
$
|
5,304
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
15
|
|
$
|
—
|
|
$
|
—
|
|
$
|
15
|
Management fees payable
|
|
258
|
|
—
|
|
—
|
|
258
|
Accrued interest payable
|
|
2
|
|
—
|
|
—
|
|
2
|
Accrued interest payable to affiliates
|
|
2
|
|
—
|
|
—
|
|
2
|
|
|
|
|
|
|
|
|
|
Loans payable to affiliates
|
|
14,364
|
|
—
|
|
—
|
|
14,364
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
30
|
|
—
|
|
—
|
|
30
|
Due to affiliate
|
|
—
|
|
4
|
|
(4)
|
|
—
|
Total liabilities
|
|
14,671
|
|
4
|
|
(4)
|
|
14,671
|
Members’ deficit
|
|
(9,367)
|
|
—
|
|
—
|
|
(9,367)
|
Total liabilities and members’ equity
|
|
$
|
5,304
|
|
$
|
4
|
|
$
|
(4)
|
|
$
|
5,304
|
Intermodal Finance I Ltd.
Consolidating Balance Sheet
(dollar amounts in thousands)
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermodal
Finance I Ltd
|
|
WWTAI
Container I Ltd
|
|
Eliminations
|
|
Consolidated
Intermodal
Finance I Ltd
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
2
|
|
$
|
1,646
|
|
$
|
—
|
|
$
|
1,648
|
Restricted cash
|
765
|
|
—
|
|
—
|
|
765
|
Accounts receivable
|
1,123
|
|
—
|
|
—
|
|
1,123
|
Leasing equipment, net of accumulated depreciation of $7,305
|
6,037
|
|
—
|
|
—
|
|
6,037
|
Net investment in direct finance leases
|
3,097
|
|
4,018
|
|
—
|
|
7,115
|
Other assets
|
8
|
|
—
|
|
—
|
|
8
|
Due from affiliates
|
5,465
|
|
—
|
|
(5,465)
|
|
—
|
Total assets
|
$
|
16,497
|
|
$
|
5,664
|
|
$
|
(5,465)
|
|
$
|
16,696
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
35
|
|
$
|
—
|
|
$
|
—
|
|
$
|
35
|
Management fees payable
|
214
|
|
—
|
|
—
|
|
214
|
Accrued interest payable
|
346
|
|
—
|
|
—
|
|
346
|
Accrued interest payable to affiliates
|
332
|
|
—
|
|
—
|
|
332
|
Term loan payable
|
7,092
|
|
—
|
|
—
|
|
7,092
|
Loans payable to affiliates
|
18,080
|
|
—
|
|
—
|
|
18,080
|
Other liabilities
|
—
|
|
199
|
|
—
|
|
199
|
Due to affiliate
|
—
|
|
5,465
|
|
(5,465)
|
|
—
|
Total liabilities
|
26,099
|
|
5,664
|
|
(5,465)
|
|
26,298
|
Members’ equity
|
(9,602)
|
|
—
|
|
—
|
|
(9,602)
|
Total liabilities and members’ equity
|
$
|
16,497
|
|
$
|
5,664
|
|
$
|
(5,465)
|
|
$
|
16,696
|
Intermodal Finance I Ltd.
Consolidating Statement of Operations (Unaudited)
(dollar amounts in thousands)
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermodal
Finance
I Ltd
|
|
WWTAI
Container
I Ltd
|
|
Eliminations
|
|
Consolidated
Intermodal
Finance I Ltd
|
REVENUES
|
|
|
|
|
|
|
|
|
Equipment leasing revenue
|
|
$
|
807
|
|
$
|
—
|
|
$
|
—
|
|
$
|
807
|
Finance revenue
|
|
178
|
|
241
|
|
—
|
|
419
|
Participation income-affiliate
|
|
219
|
|
—
|
|
(219)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
1,204
|
|
241
|
|
(219)
|
|
1,226
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
|
1,468
|
|
22
|
|
—
|
|
1,490
|
Management fee
|
|
400
|
|
—
|
|
—
|
|
400
|
Depreciation and amortization
|
|
53
|
|
—
|
|
—
|
|
53
|
Interest expense
|
|
561
|
|
—
|
|
—
|
|
561
|
Interest expense-affiliates
|
|
376
|
|
—
|
|
—
|
|
376
|
General and administrative expense
|
|
181
|
|
—
|
|
—
|
|
181
|
|
|
|
|
|
|
|
|
|
Participation expense-affiliate
|
|
—
|
|
219
|
|
(219)
|
|
—
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
3,039
|
|
241
|
|
(219)
|
|
3,061
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Other income
|
|
253
|
|
—
|
|
—
|
|
253
|
Gain on disposal of equipment
|
|
1,817
|
|
—
|
|
—
|
|
1,817
|
Total other income
|
|
2,070
|
|
—
|
|
—
|
|
2,070
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
235
|
|
$
|
—
|
|
$
|
—
|
|
$
|
235
|
Intermodal Finance I Ltd.
Consolidating Statement of Operations
(dollar amounts in thousands)
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermodal
Finance
I Ltd
|
|
WWTAI
Container
I Ltd
|
|
Eliminations
|
|
Consolidated
Intermodal
Finance I Ltd
|
REVENUES
|
|
|
|
|
|
|
|
|
Equipment leasing revenue
|
|
$
|
2,291
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,291
|
Finance revenue
|
|
780
|
|
278
|
|
—
|
|
1,058
|
Participation income-affiliate
|
|
110
|
|
—
|
|
(110)
|
|
—
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
3,181
|
|
278
|
|
(110)
|
|
3,349
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
|
3,076
|
|
4
|
|
—
|
|
3,080
|
Management fee
|
|
1,022
|
|
—
|
|
—
|
|
1,022
|
Depreciation and amortization
|
|
1,485
|
|
—
|
|
—
|
|
1,485
|
Interest expense
|
|
1,013
|
|
164
|
|
—
|
|
1,177
|
Interest expense-affiliates
|
|
362
|
|
—
|
|
—
|
|
362
|
General and administrative expense
|
|
260
|
|
—
|
|
—
|
|
260
|
Participation expense-affiliate
|
|
—
|
|
110
|
|
(110)
|
|
—
|
Total expenses
|
|
7,218
|
|
278
|
|
(110)
|
|
7,386
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Other income
|
|
925
|
|
—
|
|
—
|
|
925
|
Loss on disposal of equipment
|
|
2,742
|
|
—
|
|
—
|
|
2,742
|
Total other income
|
|
3,667
|
|
—
|
|
—
|
|
3,667
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(370)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(370)
|
Intermodal Finance I Ltd.
Consolidating Statement of Operations
(dollar amounts in thousands)
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intermodal
Finance
I Ltd
|
|
WWTAI
Container
I Ltd
|
|
Eliminations
|
|
Consolidated
Intermodal
Finance I Ltd
|
REVENUES
|
|
|
|
|
|
|
|
|
Equipment leasing revenue
|
|
$
|
7,506
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,506
|
Finance revenue
|
|
602
|
|
1,608
|
|
—
|
|
2,210
|
Participation income-affiliate
|
|
1,109
|
|
—
|
|
(1,109)
|
|
—
|
Total revenues
|
|
9,217
|
|
1,608
|
|
(1,109)
|
|
9,716
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Direct operating expenses
|
|
1,691
|
|
89
|
|
—
|
|
1,780
|
Management fee
|
|
1,225
|
|
—
|
|
—
|
|
1,225
|
Depreciation and amortization
|
|
5,815
|
|
—
|
|
—
|
|
5,815
|
Interest expense
|
|
1,922
|
|
305
|
|
—
|
|
2,227
|
Interest expense-affiliates
|
|
368
|
|
—
|
|
—
|
|
368
|
General and administrative expense
|
|
233
|
|
—
|
|
—
|
|
233
|
Impairment expense
|
|
6,016
|
|
—
|
|
—
|
|
6,016
|
Participation expense-affiliate
|
|
—
|
|
1,109
|
|
(1,109)
|
|
—
|
Bad debt expense
|
|
—
|
|
105
|
|
—
|
|
105
|
Total expenses
|
|
17,270
|
|
1,608
|
|
(1,109)
|
|
17,769
|
|
|
|
|
|
|
|
|
|
OTHER LOSS
|
|
|
|
|
|
|
|
|
Other income
|
|
1,197
|
|
—
|
|
—
|
|
1,197
|
|
|
|
|
|
|
|
|
|
Loss on disposal of equipment
|
|
(5,225)
|
|
—
|
|
—
|
|
(5,225)
|
Total other loss
|
|
(4,028)
|
|
—
|
|
—
|
|
(4,028)
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(12,081)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(12,081)
|