FTAI Infrastructure Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 26, 2024. This is an annual report, not a standalone fourth-quarter report. FTAI Infrastructure (Nasdaq: FIP) acquires, develops and operates transportation, energy and industrial infrastructure. Its businesses include railroads, terminals and ports, an equity-method power investment, and development-stage sustainability investments.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $320.5 million | $262.0 million |
| Net loss | $159.8 million | $187.5 million |
| Net loss attributable to stockholders, including preferred dividends and accretion | $183.7 million | $177.2 million |
| Adjusted EBITDA (non-GAAP) | $107.5 million | $61.0 million |
| Net cash from operating activities | $5.5 million | $(42.7) million |
| Net cash used in investing activities | $(147.1) million | $(267.3) million |
| Net cash from financing activities | $79.4 million | $157.7 million |
Revenue rose 22% year over year, driven mainly by rail, terminal throughput and a full year of FYX roadside-services revenue. Adjusted EBITDA increased 76%; its margin was approximately 33.5%, versus 23.3% in 2022, calculated using reported revenue and Adjusted EBITDA. Adjusted EBITDA is a company-defined non-GAAP measure and should not be viewed as a substitute for GAAP earnings or cash flow. The company’s GAAP net loss narrowed, but loss attributable to stockholders increased as preferred-stock dividends and accretion rose to $62.4 million from $23.7 million.
- Revenue mix: Railroad contributed 53% of 2023 revenue, Ports and Terminals 26%, and Corporate and Other 21%. Railroad revenue was $169.4 million; Jefferson Terminal revenue was $72.1 million; Repauno revenue was $10.7 million. Power and Gas and Sustainability and Energy Transition reported no segment revenue.
- Segment Adjusted EBITDA: Railroad $78.5 million; Jefferson Terminal $35.7 million; Repauno $(8.1) million; Power and Gas $34.8 million; Sustainability and Energy Transition $(7.3) million; Corporate and Other $(26.2) million.
- Interest and unusual items: Interest expense increased to $99.6 million from $53.2 million, reflecting higher average debt. Equity-method losses improved to $24.7 million from $67.4 million, principally because of unrealized gains on Long Ridge power swaps as power prices fell. Results also included a $6.9 million net gain on asset sales, a $2.0 million debt-extinguishment loss and $0.7 million of asset impairment.
Financial position and liquidity
- At December 31, 2023, total assets were $2.38 billion, debt net of issuance costs was $1.34 billion, redeemable preferred stock carrying value was $325.2 million, and total equity was $412.9 million.
- Cash and cash equivalents were $29.4 million; restricted cash was $58.1 million. The filing reports $87.5 million in combined cash and restricted cash, not all of which should be assumed available for general purposes.
- Debt principal totaled approximately $1.40 billion. The company reported $531.3 million of future interest obligations and $97.2 million of interest payments due within 12 months. No debt principal was scheduled within 12 months, but $79.1 million of Jefferson Terminal taxable bonds mature January 1, 2025. The 2027 Notes carry a 10.5% coupon; debt covenants were reported in compliance at year-end.
- Management concluded that existing liquidity and forecast operating cash flows alone were insufficient to cover the 2025 bond maturity, commitments and preferred dividends. Its mitigation plan includes refinancing those bonds, delaying capital expenditures, deferring management fees and reimbursements, accruing preferred dividends in kind, and eliminating future common dividends. Management judged the plan probable and said it expects adequate liquidity for the 12 months after issuance of the financial statements; potential asset sales and other financings under evaluation were not included in that assessment.
- Series A preferred stock has a 14% annual dividend rate, subject to increases under its terms. Cash dividends are required after August 1, 2024; the company’s plan is to continue PIK accrual. The board declared a $0.03-per-share common dividend for the quarter ended December 31, 2023, payable April 5, 2024, while management intends to eliminate subsequent common dividends to preserve liquidity.
Changes, outlook and material risks
Growth reflected higher rail carloads and rates, a full year of fuel surcharges, increased Jefferson Terminal throughput, Repauno’s butane throughput contract beginning in April 2023, and FYX’s expanded contribution. Capital spending was lower than in 2022; net cash used in investing fell to $147.1 million. FTAI issued an additional $100 million of 10.5% notes in July 2023 and used part of the proceeds to repay and terminate the Transtar Revolver and Credit Agreement. Repauno expanded its revolver to $50 million in December 2023.
The filing provides no quantified earnings or revenue guidance. Management describes prospective growth opportunities at Jefferson Terminal, Repauno and Long Ridge, but timing and returns depend on contracts, volumes, financing, permits and project execution. Jefferson Terminal completed a second ship dock and approximately 1.9 million barrels of refined-products storage in 2023; a new dock is under construction to handle ammonia under a 15-year throughput agreement. Repauno loaded 13 refrigerated LPG vessels in 2023. These opportunities are not assurances of future results.
- Customer concentration: One Railroad customer accounted for 51% of 2023 revenue and 30% of year-end receivables. The Railway Services Agreement with U.S. Steel has a 15-year initial term and minimum-volume commitments for its first five years. A Jefferson Terminal customer contributed approximately 12% of company revenue.
- Controls and financial reporting: Management identified a material weakness in review of Jefferson Terminal goodwill impairment cash-flow projections and assumptions. Management and the auditor concluded internal control over financial reporting was ineffective; the auditor issued an adverse opinion on internal controls. The financial-statement audit opinion was unqualified, and the weakness did not result in a 2023 financial-statement adjustment. Remediation remains in progress.
- Valuation sensitivity: Jefferson Terminal’s estimated fair value exceeded carrying value by more than 10% but less than 20% at October 1, 2023. The valuation depends on forecast volumes, contract execution, margins, capital spending and discount-rate assumptions. No goodwill impairment was recorded in 2023.
- Other risks: High debt and financing costs, the 2025 refinancing requirement, preferred-stock obligations and restrictive covenants; environmental remediation and permitting at Repauno and Long Ridge; construction and customer-contract execution; commodity, power-price and interest-rate volatility; and dependence on the external Manager, including affiliate conflicts. The filing also cites cybersecurity, regulatory, labor and hazardous-material risks.
Most important facts for investors to verify
- Progress, terms and timing of refinancing the $79.1 million bonds due January 2025, and the availability of liquidity after restricted cash and required debt service.
- Whether management’s liquidity measures are implemented, including preferred dividends paid in cash or PIK and any cessation of common dividends.
- Railroad customer exposure, contract minimums, customer credit quality and the ability to replace or retain concentrated business.
- Remediation and independent testing of the Jefferson Terminal goodwill-control weakness, and changes in its valuation headroom or projected volumes.
- Actual contract awards, throughput volumes, capital requirements and returns for Jefferson Terminal and Repauno development projects.
- Long Ridge power-swap effects and the underlying operating performance and debt position of the equity-method investment.