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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-37386

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

(Exact name of registrant as specified in its charter)



Delaware		32-0434238
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, 45th Floor	New York	NY	10105
(Address of principal executive offices)			(Zip Code)

(Registrant’s telephone number, including area code) (212) 798-6100

(Former name, former address and former fiscal year, if changed since last report) N/A



Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of exchange on which registered:
Class A common shares, $0.01 par value per share	FTAI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

There were 84,903,138 common shares representing limited liability company interests outstanding at July 30, 2019.

FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:


•	changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy;


•	reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed money;


•	our ability to take advantage of acquisition opportunities at favorable prices;


•	a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner;


•	the relative spreads between the yield on the assets we acquire and the cost of financing;


•	adverse changes in the financing markets we access affecting our ability to finance our acquisitions;


•	customer defaults on their obligations;


•	our ability to renew existing contracts and enter into new contracts with existing or potential customers;


•	the availability and cost of capital for future acquisitions;


•	concentration of a particular type of asset or in a particular sector;


•	competition within the aviation, energy, intermodal transport and rail sectors;


•	the competitive market for acquisition opportunities;


•	risks related to operating through joint ventures or partnerships or through consortium arrangements;


•	obsolescence of our assets or our ability to sell, re-lease or re-charter our assets;


•	exposure to uninsurable losses and force majeure events;


•	infrastructure operations may require substantial capital expenditures;


•	the legislative/regulatory environment and exposure to increased economic regulation;


•	exposure to the oil and gas industry’s volatile oil and gas prices;


•	difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems;


•	our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on our operations;


•	our ability to successfully utilize leverage in connection with our investments;


•	foreign currency risk and risk management activities;


•	effectiveness of our internal control over financial reporting;


•	exposure to environmental risks, including increasing environmental legislation and the broader impacts of climate change;


•	changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;


•	actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial performance or value of our assets;


•	our dependence on our Manager and its professionals and actual, potential or perceived conflicts of interest in our relationship with our Manager;


•	effects of the merger of Fortress Investment Group LLC with affiliates of SoftBank Group Corp.;


•	volatility in the market price of our common shares;


•	the inability to pay dividends to our shareholders in the future; and


•	other risks described in the “Risk Factors” section of this report.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

INDEX TO FORM 10-Q



	PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements of Fortress Transportation and Infrastructure Investors LLC:	5
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	5
	Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018	6
	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018	7
	Consolidated Statement of Changes in Equity for the three and six months ended June 30, 2019 and 2018	8
	Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	9
	Notes to Consolidated Financial Statements	11
	Note 1: Organization	11
	Note 2: Summary of Significant Accounting Policies	11
	Note 3: Leasing Equipment, net	15
	Note 4: Finance Leases, net	15
	Note 5: Property, Plant and Equipment, net	16
	Note 6: Investments	17
	Note 7: Intangible Assets and Liabilities, net	18
	Note 8: Debt, net	20
	Note 9: Fair Value Measurements	21
	Note 10: Derivative Financial Instruments	23
	Note 11: Revenues	24
	Note 12: Leases	27
	Note 13: Equity-Based Compensation	28
	Note 14: Income Taxes	28
	Note 15: Management Agreement and Affiliate Transactions	29
	Note 16: Segment Information	31
	Note 17: Earnings per Share and Equity	41
	Note 18: Commitments and Contingencies	41
	Note 19: Subsequent Events	42
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	61

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	83
Item 4.	Mine Safety Disclosures	83
Item 5.	Other Information	83
Item 6.	Exhibits	83

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)



		(Unaudited)
	Notes	June 30, 2019			December 31, 2018
Assets
Cash and cash equivalents	2	$	115,559		$	99,601
Restricted cash	2	58,817			21,236
Accounts receivable, net		61,878			53,789
Leasing equipment, net	3	1,509,848			1,432,210
Operating lease right-of-use assets, net	12	42,993			—
Finance leases, net	4	20,092			18,623
Property, plant, and equipment, net	5	855,013			708,853
Investments	6	38,727			40,560
Intangible assets, net	7	32,409			38,513
Goodwill		116,584			116,584
Other assets	2	236,589			108,809
Total assets		$	3,088,509		$	2,638,778

Liabilities
Accounts payable and accrued liabilities		$	117,280		$	112,188
Debt, net	8	1,631,136			1,237,347
Maintenance deposits		180,824			158,163
Security deposits		41,103			38,539
Operating lease liabilities	12	43,459			—
Other liabilities		36,474			38,759
Total liabilities		$	2,050,276		$	1,584,996

Commitments and contingencies	18

Equity
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 84,846,083 and 84,050,889 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively)		$	848		$	840
Additional paid in capital		972,836			1,029,376
Accumulated deficit		(18,865		)	(32,817		)
Accumulated other comprehensive income		34,058			—
Shareholders' equity		988,877			997,399
Non-controlling interest in equity of consolidated subsidiaries		49,356			56,383
Total equity		1,038,233			1,053,782
Total liabilities and equity		$	3,088,509		$	2,638,778

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Dollars in thousands, except share and per share data)



		Three Months Ended June 30,						Six Months Ended June 30,
	Notes	2019			2018			2019			2018
Revenues
Equipment leasing revenues		$	79,200		$	59,330		$	151,652		$	115,114
Infrastructure revenues		79,805			12,649			131,980			25,709
Total revenues	11	159,005			71,979			283,632			140,823

Expenses
Operating expenses		92,763			27,593			154,681			55,172
General and administrative		4,297			4,573			9,029			8,159
Acquisition and transaction expenses		2,308			1,508			3,782			3,274
Management fees and incentive allocation to affiliate	15	5,710			4,495			9,548			8,234
Depreciation and amortization	3, 5, 7	42,600			32,844			82,133			62,431
Interest expense		25,472			12,857			46,775			24,728
Total expenses		173,150			83,870			305,948			161,998

Other income (expense)
Equity in losses of unconsolidated entities	6	(169		)	(251		)	(553		)	(156		)
Gain on sale of equipment, net		22,630			4,996			24,355			4,991
Interest income		240			74			331			250
Other income		4,938			1,157			2,334			1,337
Total other income		27,639			5,976			26,467			6,422

Income (loss) before income taxes		13,494			(5,915		)	4,151			(14,753		)
(Benefit from) provision for income taxes	14	(2,299		)	534			(1,846		)	1,029
Net income (loss)		15,793			(6,449		)	5,997			(15,782		)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries		(4,539		)	(7,288		)	(7,955		)	(16,049		)
Net income attributable to shareholders		$	20,332		$	839		$	13,952		$	267

Earnings per share	17
Basic		$	0.24		$	0.01		$	0.16		$	—
Diluted		$	0.24		$	0.01		$	0.16		$	—

Weighted Average Shares Outstanding:
Basic		85,987,769			83,160,037			85,987,115			82,351,736
Diluted		85,989,029			83,160,047			85,987,115			82,351,858

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(Dollars in thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	15,793		$	(6,449	)	$	5,997		$	(15,782	)
Other comprehensive income (loss), net of deferred tax:
Change in fair value of cash flow hedge, net ⁽¹⁾	77,070			—			34,058			—
Comprehensive income (loss)	92,863			(6,449		)	40,055			(15,782		)
Comprehensive loss attributable to non-controlling interest	(4,539		)	(7,288		)	(7,955		)	(16,049		)
Comprehensive income attributable to shareholders	$	97,402		$	839		$	48,010		$	267

________________________________________________________

⁽¹⁾ Net of deferred tax expense of $6,186 for the three and six months ended June 30, 2019.

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)



	Three and Six Months Ended June 30, 2019
	Common Shares		Additional Paid In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Non-Controlling Interest in Equity of Consolidated Subsidiaries			Total Equity
Equity - December 31, 2018	$	840	$	1,029,376		$	(32,817	)	$	—		$	56,383		$	1,053,782
Net loss for the period						(6,380		)				(3,416		)	(9,796		)
Other comprehensive loss						—			(43,012		)	—			(43,012		)
Total comprehensive loss						(6,380		)	(43,012		)	(3,416		)	(52,808		)
Issuance of common shares	5		234									—			239
Conversion of participating securities			(4		)										(4		)
Dividends declared			(28,383		)							—			(28,383		)
Equity-based compensation			—									228			228
Equity - March 31, 2019	845		1,001,223			(39,197		)	(43,012		)	53,195			973,054
Net income (loss) for the period						20,332						(4,539		)	15,793
Other comprehensive income						—			77,070			—			77,070
Total comprehensive income (loss)						20,332			77,070			(4,539		)	92,863
Issuance of common shares	3		—									—			3
Conversion of participating securities			(3		)										(3		)
Dividends declared			(28,384		)							—			(28,384		)
Equity-based compensation			—									700			700
Equity - June 30, 2019	$	848	$	972,836