Business context and reporting period
The supplied filing is Fortress Transportation and Infrastructure Investors LLC’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. This does not match the requested company name, FTAI Aviation Ltd.; verify the issuer before relying on this summary. The registrant operates aviation equipment leasing and infrastructure businesses, including Jefferson Terminal, Ports and Terminals, and Transtar.
Transtar was acquired on July 28, 2021, and its results are included from that date. The acquisition expanded the company’s infrastructure business with five freight railroads and one switching company.
Financial performance and position
Amounts below are approximately in millions of U.S. dollars unless noted.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $136.0 | $83.7 | $310.0 | $290.9 |
| Net loss attributable to shareholders | $(38.9) | $(26.0) | $(109.9) | $(44.5) |
| Adjusted EBITDA (non-GAAP) | $96.4 | $58.6 | $211.5 | $197.1 |
| Net cash from operating activities | Not presented by quarter | $(20.7) | $28.4 |
- Q3 revenue increased 62% year over year, reflecting Transtar revenue and stronger aviation leasing revenue. Nine-month revenue rose 6.6%.
- Q3 shareholder loss widened by $12.9 million; the nine-month loss widened by $65.4 million. Higher interest expense and operating costs were significant factors. Nine-month 2020 results included $1.3 million of discontinued-operations income.
- Interest expense was $54.5 million in Q3 and $125.0 million for the nine months, versus $26.9 million and $71.6 million, respectively, in the comparable 2020 periods.
- Adjusted EBITDA increased 64% for Q3 and 7% for the nine-month period. It is a company-defined non-GAAP measure and should not be treated as a substitute for GAAP earnings or cash flow.
- At September 30, total assets were $4.68 billion, total equity $1.20 billion, and debt, net of issuance costs, $2.98 billion, up from $1.90 billion at December 31, 2020. Cash and cash equivalents were $176.1 million; restricted cash was $283.4 million.
- Cash used in investing activities was $1.03 billion, including $627.4 million for Transtar, $299.6 million for leasing equipment, and $109.4 million for property and equipment. Financing activities provided $1.35 billion. Cash, including restricted cash, increased by $298.0 million to $459.5 million.
- The company reported $122.1 million of Funds Available for Distribution (FAD) for the nine months, down from $183.2 million. FAD is non-GAAP and excludes working-capital changes and significant acquisition and capital spending, among other items.
Material changes versus the prior comparable period
- Transtar contributed $24.5 million of revenue and $11.5 million of Adjusted EBITDA in the period from acquisition through September 30. The purchase consideration was approximately $636 million; purchase-price allocations were preliminary.
- Aviation leasing revenue increased $27.4 million in Q3, including higher maintenance revenue, engine-parts sales, and redelivery compensation. For the nine months, aviation lease income fell $7.6 million, partly because more aircraft were redelivered and more customers were placed on non-accrual status.
- Infrastructure revenue increased $22.9 million in Q3, primarily from Transtar. Nine-month Jefferson Terminal revenue declined $15.4 million, reflecting lower terminal volumes related to COVID-19 and the discontinued crude-marketing strategy.
- Depreciation and amortization rose to $145.3 million for the nine months from $126.5 million. Asset impairment fell to $3.0 million from $14.4 million.
- Common shares outstanding increased to 97.9 million at September 30 from 85.6 million at year-end. A September offering of 12 million common shares generated approximately $291.7 million net proceeds; an additional 1.28 million shares were sold in October.
Outlook, commentary, risks, and unusual items
- Management said it believed liquidity was sufficient, while noting continued review of liquidity needs, limits on discretionary spending, and reprioritization of capital projects. It gave no specific earnings or revenue guidance.
- The company cited continued COVID-19 uncertainty, reduced travel demand, customer financial stress, and aviation lessees on non-accrual status. It said maintenance reserves and security deposits provided protection; their reported value was $134.4 million.
- Transtar’s exclusive rail partnership with U.S. Steel has an initial 15-year term and minimum volume commitments for the first five years. Risks include customer concentration, integration, transition services, and rail-sector regulation.
- Financing included an additional $500 million of 5.50% notes due 2028, $425 million of Jefferson Terminal bonds, and $26.1 million under an EB-5 loan. Bridge loans used for Transtar were repaid in September. The company reported compliance with debt covenants at September 30.
- Other notable items include a $12.7 million Q3 gain on asset sales, an $8.1 million Q3 “other expense” that included a Long Ridge earn-out receivable write-off and crude-oil transaction losses, and Long Ridge equity-method losses associated in part with power swaps.
- Contingencies include an offshore lessee claim with potential losses stated as $0 to $3.3 million; Repauno contingent payments of up to $15 million, of which a $5 million condition was resolved and recorded as payable; and a Jefferson Terminal pipeline capacity agreement requiring minimum fees of $10.2 million annually for two years.
- Other key risks include refinancing and interest-rate exposure, customer defaults, asset values and utilization, environmental and development obligations, and reliance on the external manager. Management said disclosure controls were effective; Transtar was being integrated and excluded from the annual internal-control assessment as permitted by regulation.
Important facts for investors to verify
- Confirm issuer identity: the filing is for Fortress Transportation and Infrastructure Investors LLC, not FTAI Aviation Ltd.
- Review the drivers of negative operating cash flow and the assumptions and exclusions underlying FAD and Adjusted EBITDA.
- Assess debt service, maturities, refinancing capacity, and the distinction between unrestricted cash and restricted cash.
- Track Transtar integration, performance under its U.S. Steel agreement, customer concentration, and final purchase-price allocation.
- Monitor aviation non-accrual customers, asset utilization, maintenance reserves, and ongoing COVID-19 effects.
- Evaluate Jefferson Terminal volume and contract assumptions, development plans, and the Long Ridge power-swap and environmental exposures.
- Consider the dilution from equity issuance and the company’s ability to sustain distributions given operating cash flow and debt requirements.