Business context and reporting period
This is an unaudited Form 10-Q for the quarter and nine months ended September 30, 2015. The filing registrant is Fortress Transportation and Infrastructure Investors LLC, not “FTAI Aviation Ltd.” as stated in the request metadata; verify the intended issuer before relying on this summary. The company owns and leases aviation, offshore energy and shipping-container equipment, and operates Jefferson Terminal and the Central Maine and Quebec Railway (CMQR). It completed its IPO in May 2015 at $17 per share, including an additional 2.2 million shares issued through the underwriters’ option. At quarter-end, public shareholders held 29.3% and the initial shareholders held 70.7%.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data. The filing presents no standard operating-margin measure.
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $35.2 | $16.1 | $102.8 | $34.5 |
| Net income (loss) attributable to shareholders | $(11.7) | $4.0 | $(7.1) | $4.1 |
| Basic and diluted EPS | $(0.16) | $0.08 | $(0.11) | $0.08 |
| Adjusted Net Income (non-GAAP) | $1.9 | $5.1 | $10.4 | $16.2 |
| Adjusted EBITDA (non-GAAP) | $32.6 | $29.8 | $85.6 | $66.9 |
- Cash flow: Nine-month operating cash flow was $26.9, versus cash used of $27.8 in 2014. Investing used $203.7, compared with $374.7; financing provided $603.0, compared with $438.1. Cash and cash equivalents ended the period at $448.3.
- Balance sheet: Total assets were $1,682.1 and total equity $1,320.8. Debt was $274.9, down from $592.9 at December 31, 2014; $23.9 was due within one year. Restricted cash was $16.2. The filing does not provide a clear current-ratio figure.
- Distributions: The board declared a $0.33-per-share quarterly dividend on November 3, payable November 30, 2015. Management’s long-term goal was a payout ratio of 50–60% of Funds Available for Distribution (FAD), a non-GAAP measure; nine-month FAD was $38.0 versus $19.7.
Material changes versus the prior comparable period
- Revenue rose 119% in Q3 and 198% for the nine months, primarily reflecting aviation and offshore equipment acquisitions and the fuller-period contribution of Jefferson Terminal and CMQR, both acquired in 2014.
- Despite higher revenue, the company moved from shareholder-attributable income to a loss. Expenses increased, including depreciation and amortization, interest, operating costs and post-IPO management fees. Other income also deteriorated sharply, principally because of a shipping-container joint venture impairment.
- Adjusted EBITDA increased year over year, but Adjusted Net Income declined in both comparison periods. These are non-GAAP measures and should be considered alongside GAAP results.
- Debt fell substantially after the Series 2010 Bonds, previously held as both a balance-sheet asset and corresponding debt, were cancelled during Q3. The filing’s presentation should be reviewed to distinguish this cancellation from repayment of third-party borrowing.
Outlook, commentary, risks and unusual items
- The company said it was evaluating more than $1.5 billion of potential transactions, but none was definitive or included in planned liquidity needs. The filing provides no quantified earnings guidance.
- A $20.6 million impairment was recorded by the shipping-container joint venture after lease non-renewals, faster container returns and weaker resale values. FTAI’s proportionate share of the impairment was $10.5 million; its investment carrying value declined to $11.4 million from $21.6 million.
- The offshore construction support vessel Pride’s charter expired, and the company disclosed it expected redelivery in Q4 2015 without a replacement lessee then under contract. A new inspection, maintenance and repair vessel was under construction, with estimated delivery in Q1 2016.
- An offshore lessee asserted claims for reimbursable expenses; the potential range was $0 to $4.0 million, with no liability recorded. For the MT6015 vessel venture, the partner was required to contribute further equity and secure a charter before FTAI’s matching $11.9 million contribution would be due.
- Jefferson Terminal extended its Port of Beaumont lease from 30 to 50 years on October 27, 2015. The company also noted continuing development and capital spending at the terminal.
- Key risks include customer defaults and lease renewals, asset oversupply and residual values, oil-and-gas industry weakness, access to capital and interest-rate exposure, rail regulation and environmental liabilities, and conflicts and fees arising from the Fortress-affiliated external manager. A 100-basis-point rate increase was estimated to add about $2.2 million to annual interest expense before hedging effects; swaps and caps partially mitigate exposure.
Most important facts for investors to verify
- Confirm that the intended issuer is the 2015 registrant named in the filing, rather than the entity identified in the request metadata.
- Assess whether growth in revenue and Adjusted EBITDA translates into durable GAAP earnings and cash generation, given the reported losses and increased costs.
- Review the shipping-container joint venture’s impairment assumptions, lease renewals, container returns and remaining investment value.
- Check the Pride vessel’s re-leasing status and the IMR vessel’s construction, charter and funding milestones.
- Evaluate debt maturities, covenants, interest-rate exposure, development spending and the limits of FAD as a dividend-capacity measure.
- Review the unrecorded offshore claim, MT6015 contingent funding, rail and environmental exposures, and the terms of the manager’s fees and potential conflicts.