FTAI Infrastructure Inc. (Nasdaq: FIP) — FY 2022 Form 10-K
Reporting period: Year ended December 31, 2022. This is the company’s first year as an independent public company following its August 1, 2022 spin-off. The 2021 and 2020 comparative financial statements are combined historical results from the former parent, so they may not reflect the costs or results of a standalone company.
Business context
FTAI Infrastructure acquires, develops and operates transportation, energy and industrial infrastructure. Its businesses include short-line railroads, ports and terminals, an equity-method investment in Long Ridge’s power and gas operations, and development-stage recycling and sustainability investments. Railroad generated 57% of 2022 revenue, Ports and Terminals 25%, and Corporate and Other 18%. The company reported $2.5 billion of consolidated assets at year-end.
Key financial results
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total revenue | $262.0 million | $120.2 million |
| Net loss | $187.5 million | $106.3 million |
| Net loss attributable to stockholders and Former Parent | $177.2 million | $79.9 million |
| Adjusted EBITDA (non-GAAP) | $61.0 million | $33.7 million |
| Net cash used in operating activities | $42.7 million | $61.7 million |
| Net cash used in investing activities | $267.3 million | $828.7 million |
| Net cash provided by financing activities | $157.7 million | $1,136.9 million |
Revenue increased 118%, principally reflecting the full-year contribution from Transtar, higher Jefferson Terminal volumes and FYX roadside-services revenue after its consolidation in May 2022. Adjusted EBITDA increased, but the company remained loss-making under GAAP. The filing does not provide a single consolidated GAAP operating-margin measure.
Railroad reported $64.3 million of Adjusted EBITDA, up from $26.4 million; Jefferson Terminal reported $18.5 million, up from $10.6 million. Repauno’s Adjusted EBITDA loss widened to $12.7 million from $4.1 million. Power and Gas Adjusted EBITDA declined to $18.0 million from $25.5 million, while Sustainability and Energy Transition and Corporate and Other reported losses of $2.3 million and $24.7 million, respectively. Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for net income or cash flow.
Debt, liquidity and capital structure
- At December 31, 2022, debt was $1.261 billion before issuance costs ($1.230 billion net), compared with $740.1 million gross a year earlier. Debt includes $500 million face amount of 10.5% senior notes due 2027, issued at a discount, as well as project-level bonds and loans.
- Cash and cash equivalents were $36.5 million; restricted cash was $113.2 million. Current assets were $277.8 million and current liabilities $159.6 million. Restricted cash may not be freely available for general corporate purposes.
- Management reported compliance with debt covenants and said it believed liquidity was sufficient. There was no principal payment due within the next 12 months; scheduled interest payments over that period were $83.6 million. The filing reports $1.3 billion of principal and $569.6 million of interest obligations in total.
- The company issued $300 million of preferred stock for $291 million net proceeds. Its carrying value was $264.6 million, but its stated redemption amount was $448.2 million at year-end. The preferred stock carries a 14% annual dividend rate, with specified increases if dividends are not paid in cash.
- On March 1, 2023, the board declared a $0.03-per-share common dividend for the fourth quarter, payable March 28, 2023. Common dividends remain discretionary and subject to liquidity and contractual restrictions.
Material changes, outlook and risks
- Interest expense rose to $53.2 million from $16.0 million, reflecting higher debt, including the 2027 Notes and Jefferson Terminal borrowing. Equity-method losses rose to $67.4 million, primarily due to Long Ridge power-swap losses; Long Ridge also experienced an unexpected power-plant outage near year-end.
- Long Ridge’s power-swap exposure and plant performance are significant uncertainties. The company is pursuing hydrogen blending and other development projects, but its plan to transition the plant to 100% green hydrogen is a longer-term objective, not a forecast or commitment.
- Jefferson Terminal’s revenue and goodwill valuation depend on contract execution and volume growth. Management disclosed delayed anticipated contracts or volumes; its year-end goodwill analysis showed estimated fair value only 10%–20% above carrying value. No goodwill impairment was recorded.
- Customer concentration is material: one customer accounted for 51% of 2022 revenue and 31% of year-end receivables; three customers represented 55% of net receivables. Transtar’s long-term rail-services agreement with U.S. Steel includes minimum commitments for its first five years.
- Other risks include substantial leverage and high-cost notes, the preferred stock’s accumulating dividend and redemption terms, reliance on the external Manager and related-party conflicts, development and environmental exposures at Repauno and Long Ridge, and volatile energy, interest-rate and financing markets. Management provided no numerical earnings or revenue guidance.
- The auditor issued an unqualified opinion on the financial statements and internal controls. Management’s control assessment excluded FYX, which represented 18% of revenue, while FYX controls were being integrated.
Important facts for investors to verify
- Whether operating cash generation improves enough to fund investment, debt service and common dividends, particularly given negative operating cash flow in 2022.
- Debt maturities, refinancing capacity, covenant headroom and the availability of cash after accounting for restricted balances.
- Preferred-stock dividend accruals, cash-payment requirements after the second anniversary, redemption terms and potential governance consequences of noncompliance.
- Progress toward Jefferson Terminal’s contracted volumes and storage utilization, and the sensitivity of its goodwill valuation to delays or lower forecasts.
- Long Ridge’s power-swap exposure, outage recovery and the financial condition and funding needs of the equity-method investment.
- Customer concentration, FYX integration and controls, and any material environmental remediation, permitting or litigation developments.