FTAI—Q1 2020 Form 10-Q Summary
Entity and period: The supplied filing is for Fortress Transportation and Infrastructure Investors LLC (NYSE: FTAI), not an entity named FTAI Aviation Ltd. It reports the unaudited quarter ended March 31, 2020, compared with Q1 2019. The company owns and leases aviation equipment and operates or invests in transportation infrastructure, including Jefferson Terminal, Repauno and Long Ridge.
Financial performance
Dollar amounts are in millions unless stated otherwise.
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $112.8 | $114.9 |
| Net loss from continuing operations | $(4.4) | $(10.0) |
| Net loss attributable to shareholders | $(2.9) | $(6.4) |
| Adjusted EBITDA (non-GAAP) | $72.0 | $64.8 |
| Net cash from operating activities | $(11.8) | $20.3 |
| Net cash used in investing activities | $(91.1) | $(166.4) |
- Equipment leasing revenue rose $14.0 million to $86.4 million, led by higher maintenance revenue as more aircraft and engines were leased. Infrastructure revenue fell $16.1 million to $26.4 million, mainly because Jefferson Terminal exited crude marketing in late 2019; increased terminal-services revenue partly offset the decline.
- Total expenses declined $12.3 million to $111.1 million, principally from lower crude-marketing costs. Interest expense increased $2.1 million to $22.9 million. Other expense included a $4.7 million debt-extinguishment loss and a $1.8 million net loss on asset sales.
- Adjusted EBITDA increased $7.2 million. It is a company-defined non-GAAP measure and is not a substitute for GAAP earnings or cash flow.
- Operating cash flow was negative, with management attributing the year-over-year change chiefly to timing-related working-capital movements. Investing cash outflow included $57.6 million for leasing equipment and $60.4 million for property and equipment.
Financial position and liquidity
- At March 31, cash and cash equivalents were $45.1 million and restricted cash was $78.3 million, totaling $123.4 million. Total assets were $3.18 billion; total equity was $1.31 billion.
- Debt, net of issuance costs, was $1.45 billion, compared with $1.42 billion at year-end 2019. Principal includes $700 million of senior notes due 2022 and $450 million of senior notes due 2025. The 2020 refinancing issued approximately $264 million of Jefferson Terminal bonds, including fixed-rate tax-exempt bonds maturing in 2035 and 2050 and taxable bonds maturing in 2025.
- The Jefferson refinancing repaid the prior Jefferson bonds and revolver; the company also repaid the FTAI Pride Credit Agreement. It reported compliance with debt covenants at quarter-end.
- The company reported $40 million drawn on its revolving credit facility at March 31. It drew a further $40 million in April and said $170 million remained available afterward. Management stated it believed liquidity was sufficient, while emphasizing spending controls and reprioritization of capital projects.
- Cash dividends declared for Q1 were $0.33 per common share; preferred dividends were $0.52 per Series A share and $0.50 per Series B share. The company’s FAD measure was $96.0 million versus $70.2 million a year earlier, but excludes working-capital changes and has other limitations disclosed by the company.
Changes, outlook and risks
- COVID-19: Management reported no material Q1 operating impact on Aviation Leasing and no meaningful decline in lease-payment timing to date, but said airline lessees were experiencing increased financial stress amid falling travel demand. Management cited $240.9 million of maintenance and security deposits as protection against lessee defaults; future effects remained uncertain.
- Segment developments: Aviation Leasing revenue increased, and the segment reported approximately 79% asset utilization for the quarter. Jefferson Terminal terminal-services revenue grew with increased activity and storage capacity, while crude-marketing revenue fell after the strategy’s exit. Long Ridge became an equity-method investment after the 2019 transaction.
- Outlook: No company-wide financial guidance was provided in the supplied filing. Management continued to expect Jefferson Terminal to generate positive Adjusted EBITDA in 2020, while noting delays in anticipated contracts or volumes and the risk that further delays could impair its outlook. The company was evaluating potential transactions, none definitive at filing date.
- Distributions and cash generation: The filing cautions that operating cash flow has been below distributions and that dividends may be changed or suspended at the board’s discretion. Management’s long-term stated payout-ratio goal was 50%–60% of FAD.
- Other notable exposures: A lessee’s failure to meet an offshore charter obligation gives rise to a claimed potential loss range of $0–$3.3 million. Repauno has a contingent-payment arrangement capped at $15 million. Jefferson Terminal’s development, contract ramp-up, storage utilization, permits and pipeline access are important to its valuation; the filing warns of potential goodwill impairment if forecasts weaken.
- The company identified risks from COVID-19, customer defaults, aviation demand, commodity and energy markets, capital access and refinancing, leverage, construction and permitting, environmental obligations, and the LIBOR transition. Disclosure controls were concluded effective for the quarter.
Key facts for investors to verify
- Whether airline lessees’ financial stress translated into late payments, defaults, non-accrual leases or lower utilization after March 31.
- Cash availability after the April revolver draw, restrictions on cash, covenant headroom and the funding plan for upcoming debt maturities—especially the $700 million due in 2022.
- Whether Jefferson Terminal achieved contracted volume and storage targets, advanced pipeline and permitting plans, and maintained the expected positive 2020 Adjusted EBITDA outlook.
- How much of reported FAD depends on asset-sale proceeds and the exclusion of working-capital changes, and whether recurring operating cash flow supports dividends and capital spending.
- Potential environmental, legal and contingent-payment exposures at Repauno, Long Ridge and offshore operations, together with any impairment indicators.