FTAI 2020 Q3 Form 10-Q Summary
Entity and 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, 2020. This differs from the requested company name, FTAI Aviation Ltd.; verify the intended issuer. FTAI operates aviation leasing and infrastructure businesses, including Jefferson Terminal, Repauno and an equity-method investment in Long Ridge.
Key financial metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $83.7m | $152.7m | $290.9m | $417.4m |
| Net income (loss), continuing operations | ($25.2m) | $19.7m | ($45.3m) | $24.8m |
| Net income (loss) attributable to shareholders | ($26.0m) | $25.7m | ($44.5m) | $39.6m |
| Adjusted EBITDA (non-GAAP) | $58.6m | $112.0m | $197.1m | $269.5m |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $28.4m | $92.7m |
At September 30, 2020, total assets were $3.38bn, total equity $1.20bn, and debt net of issuance costs $1.80bn, versus $1.42bn at December 31, 2019. Cash and cash equivalents were $119.8m; restricted cash was $43.6m. The company reported $250m of additional Revolving Credit Facility capacity following repayments. Management said it believed liquidity was sufficient, while noting it was limiting discretionary spending and reprioritizing capital projects.
Investing cash outflow was $407.2m for the first nine months, including $252.9m for leasing equipment and $209.7m for property and equipment. Financing cash inflow was $299.7m. Funds Available for Distribution (non-GAAP) was $183.2m, down from $277.8m; management cautioned that FAD excludes significant items, including capital expenditures and acquisitions, and is not a substitute for GAAP cash flow. Common dividends declared were $0.33 per share for the quarter; preferred dividends were also declared.
Material changes versus prior period
- Q3 revenue fell $69.0m year over year; nine-month revenue declined $126.6m. Much of the decline reflected Jefferson Terminal’s exit from crude marketing in late 2019, which reduced revenue and related operating costs.
- Aviation leasing revenue was pressured by aircraft redeliveries, lower engine leasing and utilization, and lessees placed on non-accrual status. Aviation utilization was approximately 71% in Q3.
- Adjusted EBITDA fell $53.4m in Q3 and $72.4m for the nine months. The prior-year comparison included materially higher asset-sale gains.
- Cash from operations decreased $64.3m for the nine months, reflecting lower earnings and timing-related working-capital movements.
Outlook, risks and unusual items
- Management said COVID-19 had not materially affected aviation operating results through the first nine months, but acknowledged lessee financial stress from sharply lower travel demand and non-accrual accounts. Maintenance and security deposits totaled $190.5m and were cited as protections against defaults.
- FTAI recorded $14.4m of aviation leasing asset impairment for the first nine months, including $3.9m in Q3, and a $4.7m loss on extinguishment of debt related to Jefferson’s refinancing.
- In July, FTAI issued $400m of 9.75% senior notes due 2027; proceeds partly repaid $220m of revolver borrowings. Jefferson issued approximately $264m of 2020 bonds in February to refinance prior bonds and its revolver. The company reported compliance with debt covenants at quarter-end.
- Debt principal due includes $25m in 2021 and $700m in 2022; estimated total interest payments under contractual obligations were $645.3m. Refinancing access, cash generation and the ability to meet maturities are key risks.
- Management continued to expect Jefferson Terminal to generate positive Adjusted EBITDA in 2020, but noted delays in anticipated contracts and volumes. Its outlook depends on contract execution, storage demand, permits and pipeline development.
- Other principal risks include pandemic-related demand and customer-credit effects, asset values and leasing rates, capital-market access, environmental and development obligations at Repauno and Long Ridge, interest-rate/LIBOR transition exposure, and conflicts associated with the external Manager. No material legal proceeding was expected by management, though ordinary-course claims remain possible.
Investor verification checklist
- Confirm whether this Fortress Transportation and Infrastructure Investors LLC filing is the intended issuer filing for FTAI Aviation Ltd.
- Review aviation lessee non-accruals, collections, lease renewals and utilization trends, and whether the $190.5m of deposits adequately protects against defaults.
- Assess operating cash generation against dividends, capital spending and the 2022 $700m note maturity; distinguish FAD from cash actually available after investment needs.
- Check progress on Jefferson Terminal contracts, storage utilization, pipeline permits and construction, alongside its goodwill valuation assumptions.
- Examine the effect of the 9.75% 2027 notes, debt covenants, remaining revolver availability and refinancing conditions.