FTAI Aviation Ltd. (FTAI) — Filing summary
Filing-name note: The supplied filing is for Fortress Transportation and Infrastructure Investors LLC, not an entity named FTAI Aviation Ltd. It covers the quarter ended March 31, 2019 and was signed May 3, 2019. Amounts below are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Business context and reporting period
The company owns and operates aviation leasing assets and transportation infrastructure, including Jefferson Terminal, Central Maine and Quebec Railway, Repauno, and Long Ridge. It reports Aviation Leasing, Jefferson Terminal, Railroad, and Ports and Terminals segments. Offshore Energy and Shipping Containers were moved into Corporate and Other for segment reporting; prior segment periods were restated.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Total revenue | $124.6 | $68.8 |
| Net loss attributable to shareholders | $6.4 loss; diluted loss per share $0.07 | $0.6 loss; diluted loss per share $0.01 |
| Adjusted EBITDA (non-GAAP) | $66.3 | $48.1 |
| Net cash provided by operating activities | $20.3 | $11.5 |
| Cash and cash equivalents | $120.5 | $99.6 at Dec. 31, 2018 |
| Restricted cash | $108.1 | $21.2 at Dec. 31, 2018 |
| Debt, net | $1,540.0 | $1,237.3 at Dec. 31, 2018 |
| Total equity | $973.1 | $1,053.8 at Dec. 31, 2018 |
Total expenses were $132.8 million, exceeding revenue by approximately $8.2 million before other income and expense. Interest expense was $21.3 million, up from $11.9 million. Operating cash flow less investing cash flow was negative; investing used $166.4 million, largely for leasing equipment and infrastructure projects. Financing provided $253.9 million. The company reported $228.6 million in cash and restricted cash combined at quarter-end, but restricted funds are not necessarily available for general use.
Material changes versus the prior comparable period
- Revenue rose $55.8 million, led by a $30.8 million increase in Jefferson Terminal crude-marketing revenue, higher aviation lease income, and increased terminal-services activity. Crude marketing also drove higher costs; operating expenses increased $34.3 million.
- Shareholder net loss widened by $5.8 million. Adjusted EBITDA increased $18.2 million, but this non-GAAP measure excludes significant costs and should be considered alongside GAAP results.
- Investing cash outflow increased to $166.4 million from $113.5 million, while borrowing proceeds supported the company’s expansion. Debt rose approximately $302.7 million from year-end.
- Q1 included a $43.0 million fair-value loss on designated electricity cash-flow hedges in other comprehensive loss, not net income. Non-hedge derivative changes contributed $3.2 million of expense.
- The company adopted the new lease accounting standard on January 1, 2019, recognizing about $46 million of right-of-use assets and lease liabilities at adoption.
Guidance, outlook, risks and unusual items
- No numerical company-wide earnings or revenue guidance was provided. Management said it expected Jefferson Terminal to generate positive Adjusted EBITDA in 2019, while noting contract and volume delays and dependence on new contracts, rail capacity, permits, pipelines, and oil-market spreads.
- Long Ridge began development of a 485-megawatt gas-fired power plant. The EPC and equipment agreements total approximately $430 million. Project financing agreements provide construction/term loans and a letter-of-credit facility; $128 million of letters of credit had been issued by quarter-end. The company disclosed a potential $11.5 million termination fee if it terminates the equipment agreement.
- Liquidity and leverage merit attention: $227.6 million of debt was classified as due within one year, including borrowings with 2019 maturities; Series 2016 bonds of $144.2 million face value are subject to mandatory tender in February 2020 if not remarketed or redeemed earlier. Management said it expected to meet short-term needs with cash, operations, or financing and reported compliance with debt covenants at March 31.
- The company declared a $0.33-per-share quarterly dividend after quarter-end, payable May 28, 2019. Management cautioned that FAD is a non-GAAP measure with material limitations; operating cash flow was below distributions paid in the quarter. Dividend payment remains at the board’s discretion.
- One Jefferson Terminal customer accounted for approximately 22% of quarterly revenue. Aviation Leasing reported 88% utilization by equity value; an engine-loss receivable associated with bankruptcy contributed to bad-debt expense.
- Other disclosed exposures include construction and permitting delays, environmental remediation at Repauno and Long Ridge, customer defaults, asset-market and commodity volatility, floating-rate debt, and dependence on the external Manager. Management said current and threatened legal proceedings were not expected to have a material adverse effect, while acknowledging uncertain outcomes.
Important facts for investors to verify
- Confirm the registrant identity: the filing is for Fortress Transportation and Infrastructure Investors LLC, despite the request metadata naming FTAI Aviation Ltd.
- Review debt maturities, refinancing capacity, covenant terms, and the use and availability of restricted cash.
- Track Jefferson Terminal contract ramp-up, crude-marketing economics, customer concentration, and management’s 2019 positive-Adjusted-EBITDA expectation.
- Assess Long Ridge construction progress, total project funding and letter-of-credit needs, permits, and potential cost or schedule changes.
- Reconcile dividend distributions with operating cash generation and the limitations of the company’s FAD calculation.
- Examine the electricity hedge valuation and the assumptions underlying its substantial fair-value liability and accumulated comprehensive loss.