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ftai-20210930

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 September 30, 2021


☐			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

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

8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares

FTAI PR A

New York Stock Exchange

8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares

FTAI PR B

New York Stock Exchange

8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares

FTAI PR C

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

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 99,180,385 common shares outstanding representing limited liability company interests at October 26, 2021.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY

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. The following is a summary of the principal risk factors that make investing in our securities risky and may materially adversely affect our business, financial condition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in Part II, Item 1A. “Risk Factors” of this report. 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, including, but not limited to, the ongoing COVID-19 pandemic and other public health crises, and any related responses or actions by businesses and governments;

•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;

•changes in our asset composition, investment strategy and liquidity as a result of a potential spin-off of our infrastructure business or other factors;

•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 and intermodal transport sectors;

•the competitive market for acquisition opportunities;

•risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties;

•our ability to successfully integrate acquired businesses;

•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 and maintenance 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 natural disasters, 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 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 September 30, 2021 and December 31, 2020	5
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	6
	Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2021 and 2020	7
	Consolidated Statement of Changes in Equity for the three and nine months ended September 30, 2021 and 2020	8
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	9
	Notes to Consolidated Financial Statements	11
	Note 1: Organization	11
	Note 2: Summary of Significant Accounting Policies	11
	Note 3: Discontinued Operations	15
	Note 4: Acquisition of Transtar, LLC	15
	Note 5: Leasing Equipment, net	17
	Note 6: Finance Leases, net	18
	Note 7: Property, Plant and Equipment, net	18
	Note 8: Investments	19
	Note 9: Intangible Assets and Liabilities, net	20
	Note 10: Debt, net	21
	Note 11: Fair Value Measurements	23
	Note 12: Derivative Financial Instruments	25
	Note 13: Revenues	25
	Note 14: Leases	28
	Note 15: Equity-Based Compensation	29
	Note 16: Retirement Benefit Plans	29
	Note 17: Income Taxes	30
	Note 18: Management Agreement and Affiliate Transactions	30
	Note 19: Segment Information	33
	Note 20: Earnings per Share and Equity	43
	Note 21: Commitments and Contingencies	44
	Note 22: Subsequent Events	44
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	67

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	90

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	September 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	2	$	176,052	$	121,703
Restricted cash	2	283,398		39,715
Accounts receivable, net		205,680		91,691
Leasing equipment, net	5	1,696,594		1,635,259
Operating lease right-of-use assets, net	14	74,643		62,355
Finance leases, net	6	13,795		6,927
Property, plant, and equipment, net	7	1,527,770		964,363
Investments	8	110,963		146,515
Intangible assets, net	9	80,737		18,786
Goodwill		239,941		122,735
Other assets	2	272,944		177,928
Total assets		$	4,682,517	$	3,387,977

Liabilities
Accounts payable and accrued liabilities		$	213,441	$	113,185
Debt, net	10	2,983,989		1,904,762
Maintenance deposits		100,700		148,293
Security deposits		35,167		37,064
Operating lease liabilities	14	74,134		62,001
Other liabilities		71,044		23,351
Total liabilities		$	3,478,475	$	2,288,656

Commitments and contingencies	21

Equity
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 97,896,522 and 85,617,146 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)		$	979	$	856
Preferred shares ($0.01 par value per share; 200,000,000 shares authorized; 13,320,000 and 9,120,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)		133		91
Additional paid in capital		1,420,247		1,130,106
Accumulated deficit		(120,136)		(28,158)
Accumulated other comprehensive loss		(103,755)		(26,237)
Shareholders' equity		1,197,468		1,076,658
Non-controlling interest in equity of consolidated subsidiaries		6,574		22,663
Total equity		1,204,042		1,099,321
Total liabilities and equity		$	4,682,517	$	3,387,977

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 September 30,				Nine Months Ended September 30,
	Notes	2021		2020		2021		2020
Revenues
Equipment leasing revenues		$	99,174	$	69,799	$	237,352	$	236,082
Infrastructure revenues		36,788		13,910		72,674		54,776
Total revenues	13	135,962		83,709		310,026		290,858
Expenses
Operating expenses		52,793		23,128		108,973		81,144
General and administrative		4,422		4,241		12,329		13,292
Acquisition and transaction expenses		7,130		2,442		13,172		9,297
Management fees and incentive allocation to affiliate	18	3,845		4,591		11,948		14,113
Depreciation and amortization	5, 7, 9	53,368		42,626		145,274		126,543
Asset impairment		859		3,915		3,048		14,391
Interest expense		54,500		26,904		124,994		71,559
Total expenses		176,917		107,847		419,738		330,339
Other income (expense)
Equity in losses of unconsolidated entities	8	(4,082)		(2,501)		(9,860)		(5,445)
Gain (loss) on sale of assets, net		12,685		(1,114)		17,483		(2,165)
Loss on extinguishment of debt	10	—		—		(3,254)		(4,724)
Interest income		483		58		1,222		121
Other (expense) income		(8,068)		—		(8,771)		32
Total other income (expense)		1,018		(3,557)		(3,180)		(12,181)
Loss from continuing operations before income taxes		(39,937)		(27,695)		(112,892)		(51,662)
Benefit from income taxes	17	(494)		(2,486)		(1,965)		(6,334)
Net loss from continuing operations		(39,443)		(25,209)		(110,927)		(45,328)
Net income from discontinued operations, net of income taxes		—		—		—		1,331
Net loss		(39,443)		(25,209)		(110,927)		(43,997)

Less: Net loss attributable to non-controlling interests in consolidated subsidiaries		(7,363)		(3,876)		(18,949)		(12,724)

Less: Dividends on preferred shares		6,791		4,625		17,967		13,243
Net loss attributable to shareholders		$	(38,871)	$	(25,958)	$	(109,945)	$	(44,516)

(Loss) earnings per share:	20
Basic
Continuing operations		$	(0.44)	$	(0.30)	$	(1.27)	$	(0.53)
Discontinued operations		$	—	$	—	$	—	$	0.02
Diluted
Continuing operations		$	(0.44)	$	(0.30)	$	(1.27)	$	(0.53)
Discontinued operations		$	—	$	—	$	—	$	0.02
Weighted average shares outstanding:
Basic		88,277,897		86,022,302		86,787,072		86,013,485
Diluted		88,277,897		86,022,302		86,787,072		86,013,485

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)

(Dollars in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(39,443)	$	(25,209)	$	(110,927)	$	(43,997)
Other comprehensive loss:
Other comprehensive loss related to equity method investees, net (1)	(54,640)		(13,468)		(77,518)		(16,822)

Comprehensive loss	(94,083)		(38,677)		(188,445)		(60,819)

Comprehensive loss attributable to non-controlling interest	(7,363)		(3,876)		(18,949)		(12,724)

Comprehensive loss attributable to shareholders	$	(86,720)	$	(34,801)	$	(169,496)	$	(48,095)

________________________________________________________

(1) Net of deferred tax expense (benefit) of $1,798 and $(3,580) for the three months ended September 30, 2021 and 2020, respectively, and $(2,674) and $(4,474) for the nine months ended September 30, 2021 and 2020, respectively.

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 Nine Months Ended September 30, 2021
	Common Shares		Preferred Shares		Additional Paid In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest in Equity of Consolidated Subsidiaries		Total Equity
Equity - December 31, 2020	$	856	$	91	$	1,130,106	$	(28,158)	$	(26,237)	$	22,663	$	1,099,321
Net loss							(59,898)				(11,586)		(71,484)
Other comprehensive income							—		(22,878)		—		(22,878)
Total comprehensive (loss) income							(59,898)		(22,878)		(11,586)		(94,362)
Settlement of equity-based compensation											(183)		(183)
Issuance of common shares	—				455								455

Dividends declared - common shares					(56,795)								(56,795)
Issuance of preferred shares			42		101,158								101,200
Dividends declared - preferred shares					(11,176)								(11,176)
Equity-based compensation											2,553		2,553
Equity - June 30, 2021	$	856	$	133	$	1,163,748	$	(88,056)	$	(49,115)	$	13,447	$	1,041,013
Net loss							(32,080)				(7,363)		(39,443)
Other comprehensive loss							—		(54,640)		—		(54,640)
Total comprehensive loss							(32,080)		(54,640)		(7,363)		(94,083)
Settlement of equity-based compensation											(238)		(238)
Issuance of common shares	123				291,701								291,824
Conversion of participating securities					(2)								(2)
Dividends declared - common shares					(28,409)								(28,409)

Dividends declared - preferred shares					(6,791)								(6,791)
Equity-based compensation											728		728
Equity - September 30, 2021	$	979	$	133	$	1,420,247	$	(120,136)	$	(103,755)	$	6,574	$	1,204,042


	Three and Nine Months Ended September 30, 2020
	Common Shares		Preferred Shares		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Non-Controlling Interest in Equity of Consolidated Subsidiaries		Total Equity
Equity - December 31, 2019	$	849	$	81	$	1,110,122	$	190,453	$	372	$	36,980	$	1,338,857
Net loss							(9,940)				(8,848)		(18,788)
Other comprehensive loss							—		(3,354)		—		(3,354)
Total comprehensive loss							(9,940)		(3,354)		(8,848)		(22,142)
Settlement of equity-based compensation											(42)		(42)
Issuance of common shares	7				304								311
Conversion of participating securities					(7)								(7)
Dividends declared - common shares							(56,782)						(56,782)
Issuance costs of preferred shares					(788)								(788)
Dividends declared - preferred shares							(8,618)						(8,618)
Equity-based compensation											702		702
Equity - June 30, 2020	$	856	$	81	$	1,109,631	$	115,113	$	(2,982)	$	28,792	$	1,251,491
Net loss							(21,333)				(3,876)		(25,209)
Other comprehensive loss							—		(13,468)		—		(13,468)
Total comprehensive loss							(21,333)		(13,468)		(3,876)		(38,677)
Settlement of equity-based compensation											(68)		(68)


Dividends declared - common shares							(28,395)						(28,395)
Issuance of preferred shares			10		20,490								20,500
Dividends declared - preferred shares							(4,625)						(4,625)
Equity-based compensation											621		621
Equity - September 30, 2020	$	856	$	91	$	1,130,121	$	60,760