Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): August 12, 2015 (August 11, 2015)

 

 

Fortress Transportation and Infrastructure Investors LLC

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-37386   32-0434238

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

1345 Avenue of the Americas, 46th Floor, New York, New York 10105

(Address of Principal Executive Offices) (Zip Code)

(212) 798-6100

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 11, 2015, Fortress Transportation and Infrastructure Investors LLC (the “Company”) issued a press release announcing the Company’s results for its fiscal quarter ended June 30, 2015. A copy of the Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly set forth as being incorporated by reference into such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

  

Description

99.1    Press release, dated August 11, 2015, issued by Fortress Transportation and Infrastructure Investors LLC


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
By:  

/s/ Jonathan G. Atkeson

Name:   Jonathan G. Atkeson
Title:   Chief Financial Officer and Chief Operating Officer

Date: August 12, 2015


EXHIBIT INDEX

 

Exhibit

Number

  

Description

99.1    Press release, dated August 11, 2015, issued by Fortress Transportation and Infrastructure Investors LLC
EX-99.1

Exhibit 99.1

 

LOGO

PRESS RELEASE

FTAI Announces Second Quarter 2015 Results and Prorated Dividend of $0.15 per Common Share

 

 

NEW YORK, August 11, 2015 - Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) (the “Company”) today reported financial results for the period ended June 30, 2015. The Company’s consolidated comparative financial statements and key performance measures are attached as an exhibit to this press release.

Financial Overview

 

($ in 000s, except per share data)       

Selected Financial Results(1)

   Q2’15  

Funds Available for Distribution (“FAD”)

   $ 8,525   

Adjusted Net Income

   $ 1,569   

Adjusted Net Income per Share

   $ 0.02   

Adjusted EBITDA

   $ 23,815   

Net Income (Loss) Attributable to Shareholders

   $ (837

Basic and Diluted Earnings (Loss) per Share

   $ (0.01

Net Cash Provided by Operating Activities

   $ 8,409   

 

1) For definitions and reconciliations of Non-GAAP measures, please refer to the exhibit to this press release.

For the second quarter of 2015, our total FAD was $8.5 million. This amount includes $23.4 million from equipment leasing activities, offset by $(7.9) million and $(7.0) million from infrastructure and corporate activities, respectively. Separately, we have acquired or committed to acquire approximately $150 million of aviation assets subsequent to our IPO. We believe that this acquisition activity will generate an additional $7.5 million of quarterly FAD after assuming a 20% return, and our equipment leasing activities will therefore have the potential to generate approximately $23.9 million of quarterly FAD (net of ($7.0) million impact from corporate), or $95.5 million on an annualized basis.

Second Quarter 2015 Dividend

The Company’s Board of Directors declared a cash dividend of $0.15 per common share, payable on August 31, 2015, to holders of record on August 21, 2015. The $0.15 per share represents a prorated quarterly dividend of $0.33 per share, or $1.32 per share on an annualized basis, calculated from May 20, 2015 through June 30, 2015.

Additional Information

For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of the Company’s website, www.ftandi.com, and the Company’s Quarterly Report on Form 10-Q, when available on the Company’s website. Nothing on the Company’s website is included or incorporated by reference herein.

Conference Call

The Company will host a conference call on August 12, 2015 at 8:00 A.M. Eastern Time. The conference call may be accessed by dialing 1-855-548-8666 (from within the U.S.) or 1-412-455-6183 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “FTAI Second Quarter Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.ftandi.com.

 

1


Following the call, a replay of the conference call will be available after 12:00 P.M. on August 12, 2015 through midnight Tuesday, August 18, 2015 at 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.), Passcode: 88067036.

About Fortress Transportation and Infrastructure Investors LLC

Fortress Transportation and Infrastructure Investors LLC owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation. FTAI is externally managed by an affiliate of Fortress Investment Group LLC, a leading, diversified global investment firm.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements regarding commitments to acquire aviation assets, assumed rates of return and expectations regarding additional FAD. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond the Company’s control. The Company can give no assurance that its expectations will be attained and such differences may be material. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference in the Company’s Quarterly Reports on Form 10-Q, which are available on the Company’s website (www.ftandi.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

For further information, please contact:

Alan Andreini

Investor Relations

Fortress Transportation and Infrastructure Investors LLC

(212) 798-6128

aandreini@fortress.com

 

2


U.S. FEDERAL INCOME TAX IMPLICATIONS OF DIVIDEND

This announcement is intended to be a qualified notice as provided in the Internal Revenue Code (the “Code”) and the Regulations thereunder. For U.S. federal income tax purposes, the dividend declared in August 2015 will be treated as a partnership distribution. The per share distribution components are as follows:

 

Distribution Components

      

U.S. Long Term Capital Gain (1)

   $ 0.0000   

Non-U.S. Long Term Capital Gain

   $ 0.0000   

U.S. Portfolio Interest Income (2)

   $ 0.0700   

U.S. Dividend Income (3)

   $ 0.0000   

Income Not from U.S. Sources(4) / Return of Capital

   $ 0.0800   
  

 

 

 

Distribution Per Share

   $ 0.1500   

 

1) U.S. Long Term Capital Gain realized on the sale of a United States Real Property Holding Corporation. As a result, the gain from the sale will be treated as income that is effectively connected with a U.S. trade or business.
2) Eligible for the U.S. portfolio interest exemption for any holder not considered a 10-Percent shareholder under §871(h)(3)(B) of the Code.
3) This income is subject to withholding under §1441 of the Code.
4) This income is not subject to withholding under §1441 or §1446 of the Code.

It is possible that a common shareholder’s allocable share of FTAI’s taxable income may differ from the distribution amounts reflected above.

 

3


Exhibit - Financial Statements

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollar amounts in thousands, except share and per share data)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     2015     2014  

Revenues

        

Equipment leasing revenues

   $ 22,633      $ 9,751      $ 45,671      $ 17,447   

Infrastructure revenues

     10,931        984        21,866        984   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     33,564        10,735        67,537        18,431   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Operating expenses

     17,600        2,808        32,319        3,345   

General and administrative

     1,989        721        2,337        948   

Acquisition and transaction expenses

     1,598        7,140        1,966        10,473   

Management fees and incentive allocation to affiliate

     3,485        1,086        5,899        1,837   

Depreciation and amortization

     10,765        2,792        21,327        4,623   

Interest expense

     4,757        755        9,572        1,572   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     40,194        15,302        73,420        22,798   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income

        

Equity in earnings of unconsolidated entities

     1,225        1,527        2,466        3,131   

Gain on sale of equipment, net

     288        2,255        291        2,215   

Interest income

     116        8        303        14   

Other expense, net

     (3     (11     (9     (20
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     1,626        3,779        3,051        5,340   
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) Income before income taxes

     (5,004     (788     (2,832     973   

Provision for income taxes

     266        399        496        558   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (5,270     (1,187     (3,328     415   
  

 

 

   

 

 

   

 

 

   

 

 

 

Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries

     (4,433     165        (7,939     341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to shareholders

   $ (837   $ (1,352   $ 4,611      $ 74   
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) Earnings per Share:

        

Basic and Diluted

   $ (0.01   $ (0.03   $ 0.08      $ —     

Weighted Average Shares Outstanding:

        

Basic

     62,879,023        53,502,873        58,216,849        53,502,873   

Diluted

     62,879,023        53,502,873        58,216,918        53,502,873   

 

4


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands, except share and per share data)

 

     June 30,
2015
    December 31,
2014
 

Assets

    

Cash and cash equivalents

   $ 571,314      $ 22,125   

Restricted cash

     17,750        21,084   

Accounts receivable, net

     13,274        9,588   

Leasing equipment, net

     521,517        509,379   

Finance leases, net

     96,671        102,813   

Property, plant, and equipment, net

     282,026        228,328   

Investments in and advances to unconsolidated entities

     22,147        21,569   

Tendered bonds

     298,000        298,000   

Intangible assets, net

     46,408        52,041   

Goodwill

     115,616        115,616   

Other assets

     25,819        24,048   
  

 

 

   

 

 

 

Total assets

   $ 2,010,542      $ 1,404,591   
  

 

 

   

 

 

 

Liabilities

    

Accounts payable and accrued liabilities

   $ 29,263      $ 43,174   

Debt

     584,274        592,867   

Maintenance deposits

     35,208        35,575   

Security deposits

     13,065        13,622   

Other liabilities

     6,283        5,856   
  

 

 

   

 

 

 

Total liabilities

     668,093        691,094   
  

 

 

   

 

 

 

Equity

    

Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 75,718,183 and 53,502,873 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively)

     757        535   

Additional paid in capital

     1,220,629        613,683   

Accumulated deficit

     (2,332     —     

Accumulated other comprehensive income

     78        214   
  

 

 

   

 

 

 

Shareholders’ equity

     1,219,132        614,432   

Non-controlling interest in equity of consolidated subsidiaries

     123,317        99,065   
  

 

 

   

 

 

 

Total equity

     1,342,449        713,497   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 2,010,542      $ 1,404,591   
  

 

 

   

 

 

 

 

5


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollar amounts in thousands, unless otherwise noted)

 

     Six Months Ended June 30,  
     2015     2014  

Cash flows from operating activities:

    

Net (loss) income

   $ (3,328   $ 415   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Equity in earnings of unconsolidated entities

     (2,466     (3,131

Gain on sale of equipment

     (291     (2,215

Income from forfeiture of security deposit

     (1,120     —     

Equity-based compensation

     2,600        —     

Depreciation and amortization

     21,327        4,623   

Change in current and deferred income taxes

     (14     558   

Change in fair value of non-hedge derivative

     9        20   

Amortization of lease intangibles and incentives

     3,913        856   

Amortization of deferred financing costs

     733        73   

Operating distributions from unconsolidated entities

     604        4,358   

Bad debt expense

     159        43   

Other

     (159     —     

Change in:

    

Accounts receivable

     (3,926     (1,982

Other assets

     60        (9,399

Accounts payable and accrued liabilities

     (1,762     11,836   

Management fees payable to affiliate

     (2,138     573   

Other liabilities

     430        (52
  

 

 

   

 

 

 

Net cash provided by operating activities

     14,631        6,576   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Change in restricted cash

     3,334        —     

Acquisition of other investment

     —          (51,939

Principal collections on finance leases

     6,142        5,665   

Acquisition of leasing equipment

     (26,234     (58,331

Acquisition of property plant and equipment

     (70,621     (300

Acquisition of lease intangibles

     —          (3,745

Acquisition of CMQR

     —          (11,308

Purchase deposit for aircraft and aircraft engines

     (4,756     —     

Proceeds from sale of leasing equipment

     1,500        14,132   

Proceeds from sale of property, plant and equipment

     125        93   

Proceeds from sale of equipment held for sale

     —          135   

Return of capital distributions from unconsolidated entities

     1,284        2,403   
  

 

 

   

 

 

 

Net cash used in investing activities 

   $ (89,226   $ (103,195
  

 

 

   

 

 

 

 

6


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollar amounts in thousands, unless otherwise noted)

 

     Six Months Ended June 30,  
     2015     2014  

Cash flows from financing activities:

    

Proceeds from debt

   $ 200      $ —     

Repayment of debt

     (8,633     (4,761

Receipt of security deposits

     1,025        1,074   

Return of security deposits

     (219     (350

Receipt of maintenance deposits

     4,330        1,174   

Release of maintenance deposits

     (5,842     —     

Proceeds from issuance of common shares

     354,057        —     

Common shares issuance costs

     (1,711     —     

Capital contributions from shareholders

     295,879        159,100   

Capital distributions to shareholders

     (44,917     (8,410

Capital contributions from non-controlling interests

     29,869        —     

Capital distributions to non-controlling interests

     (254     (233
  

 

 

   

 

 

 

Net cash provided by financing activities

     623,784        147,594   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     549,189        50,975   

Cash and cash equivalents, beginning of period

     22,125        7,236   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 571,314      $ 58,211   
  

 

 

   

 

 

 

 

7


Key Performance Measures

Management utilizes Adjusted Net Income and Adjusted EBITDA as performance measures. Adjusted Net Income is the key performance measure and reflects the current management of our businesses and provides us with information necessary to assess operational performance as well as make resource and allocation decisions. Adjusted Net Income should not be considered as an alternative to net income attributable to shareholders as determined in accordance with Generally Accepted Accounting Principles (“GAAP”).

Adjusted Net Income is defined as net income attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, and equity in earnings of unconsolidated entities; (b) to include the impact of cash income tax payments, our pro-rata share of the Adjusted Net Income from unconsolidated entities (collectively “Adjusted Net Income”), and (c) to exclude the impact of the non-controlling share of Adjusted Net Income. We evaluate investment performance for each reportable segment primarily based on Adjusted Net Income. We believe that net income attributable to shareholders as defined by GAAP is the most appropriate earnings measurement with which to reconcile Adjusted Net Income.

The following table presents our consolidated reconciliation of Net Income attributable to shareholders to Adjusted Net Income for the three and six months ended June 30, 2015 and June 30, 2014:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
     (in thousands)  

Net (Loss) income attributable to shareholders

   $ (837    $ (1,352    $ 4,611       $ 74   
  

 

 

    

 

 

    

 

 

    

 

 

 

Add: Provision for income taxes

     266         399         496         558   

Add: Equity-based compensation expense

     1,180         —           2,600         —     

Add: Acquisition and transaction expenses

     1,598         7,140         1,966         10,473   

Add: Losses on the modification or extinguishment of debt and capital lease obligations

     —           —           —           —     

Add: Changes in fair value of non-hedge derivative instruments

     1         11         9         20   

Add: Asset impairment charges

     —                   —           —     

Add: Pro-rata share of Adjusted Net Income from unconsolidated entities (1)

     1,225         1,527         2,466         3,131   

Add: Incentive allocations

     —           —           —           —     

Less: Cash payments for income taxes

     (313      —           (510      —     

Less: Equity in earnings of unconsolidated entities

     (1,225      (1,527      (2,466      (3,131

Less: Non-controlling share of Adjusted Net Income (2)

     (326      —           (680      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Net Income

   $ 1,569       $ 6,198       $ 8,492       $ 11,125   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1) Pro-rata share of Adjusted Net Income from unconsolidated entities includes the Company’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.
2) Non-controlling share of Adjusted Net Income is comprised of the following for the three months ended June 30, 2015: (i) equity-based compensation of $(377), (ii) provision for income tax of $(20), and (iii) cash tax payments of $71. Non-controlling share of Adjusted Net Income is comprised of the following for the six months ended June 30, 2015: (i) equity-based compensation of $(731), (ii) provision for income tax of $(20), and (iii) cash tax payments of $71.

In addition, we view Adjusted EBITDA as a secondary measurement to Adjusted Net Income, which serves as a useful supplement to investors, analysts and management to measure operating performance of deployed assets and to compare the Company’s operating results to the operating results of our peers and between periods on a consistent basis. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate Adjusted EBITDA in the same manner.

 

8


Adjusted EBITDA is defined as net income attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, and interest expense; (b) to include the impact of principal collections on direct finance leases (collectively, “Adjusted EBITDA”) and our pro-rata share of Adjusted EBITDA from unconsolidated entities; and (c) to exclude the impact of equity in earnings of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

The following table sets forth a reconciliation of Net Income attributable to shareholders to Adjusted EBITDA for the three and six months ended June 30, 2015 and June 30, 2014:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2015      2014      2015      2014  
     (in thousands)  

Net (loss) income attributable to shareholders

   $ (837    $ (1,352    $ 4,611       $ 74   

Add: Provision for income taxes

     266         399         496         558   

Add: Equity-based compensation expense

     1,180         —           2,600         —     

Add: Acquisition and transaction expenses

     1,598         7,140         1,966         10,473   

Add: Losses on the modification or extinguishment of debt and capital lease obligations

     —           —           —           —     

Add: Changes in fair value of non-hedge derivative instruments

     1         11         9         20   

Add: Asset impairment charges

     —           —           —           —     

Add: Incentive allocations

     —           —           —           —     

Add: Depreciation & amortization expense (3)

     12,522         3,496         25,240         5,479   

Add: Interest expense

     4,757         755         9,572         1,572   

Add: Principal collections on direct finance leases

     3,201         2,967         6,142         5,665   

Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4)

     5,406         8,337         10,831         16,595   

Less: Equity in earnings of unconsolidated entities

     (1,225      (1,527      (2,466      (3,131

Less: Non-controlling share of Adjusted EBITDA (5)

     (3,054      (91      (6,037      (183
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 23,815       $ 20,135       $ 52,964       $ 37,122   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

3) Depreciation and amortization expense includes $10,765 and $2,792 of depreciation and amortization expense, $1,697 and $704 of lease intangible amortization, and $60 and $0 of amortization for lease incentives in the three months ended June 30, 2015 and 2014, respectively. Depreciation and amortization expense includes $21,327 and $4,623 of depreciation and amortization expense, $3,793 and $856 of lease intangible amortization, and $120 and $0 of amortization for lease incentives in the six months ended June 30, 2015 and 2014, respectively.
4) The Company’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes the following items for the three months ended June 30, 2015 and 2014: (i) net income of $1,172 and $1,454, (ii) interest expense of $415 and $641, (iii) depreciation and amortization expense of $307 and $343, and (iv) principal collections of finance leases of $3,512 and $5,899, respectively. The Company’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes the following items for the six months ended June 30, 2015 and 2014: (i) net income of $2,357 and $2,981, (ii) interest expense of $948 and $1,273, (iii) depreciation and amortization expense of $611 and $682, and (iv) principal collections of finance leases of $6,915 and $11,659, respectively.
5) Non-controlling share of Adjusted EBITDA is comprised of the following items for the three months ended June 30, 2015 and 2014: (i) equity based compensation of $377 and $0, (ii) provision for income taxes of $20 and $0, (iii) interest expense of $1,207 and $35, and (iv) depreciation and amortization expense of $1,450 and $56, respectively. Non-controlling share of Adjusted EBITDA is comprised of the following items for the six months ended June 30, 2015 and 2014: (i) equity based compensation of $731 and $0, (ii) provision for income taxes of $20 and $0, (iii) interest expense of $2,445 and $71, and (iv) depreciation and amortization expense of $2,841 and $112, respectively.

The Company uses Funds Available for Distribution (“FAD”) in evaluating its ability to meet its stated dividend policy. FAD is not a financial measure in accordance with GAAP. The GAAP measure most directly comparable to FAD is net cash provided by operating activities. The Company believes FAD will be a useful metric for investors and analysts for similar purposes. The Company defines FAD as: net cash provided by (used in) operating activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and excluding changes in working capital.

 

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The following table sets forth a reconciliation of net cash provided by operating activities to FAD for the six months ended June 30, 2015 and 2014:

 

     Six Months
Ended June 30,
2015
     Six Months
Ended June 30,
2014
 
     (in thousands)  

Net Cash Provided by Operating Activities

   $ 14,631       $ 6,576   

Add: Principal Collections on Finance Leases

     6,142         5,665   

Add: Proceeds from sale of assets

     1,625         14,360   

Add: Return of Capital Distributions from Unconsolidated Entities

     1,284         2,403   

Less: Required Payments on Debt Obligations

     (8,633      (4,761

Less: Capital Distributions to Non-Controlling Interest

     (254      (233

Exclude: Changes in Working Capital

     7,336         (976
  

 

 

    

 

 

 

Funds Available for Distribution (FAD)

   $ 22,131       $ 23,034   
  

 

 

    

 

 

 

The following tables set forth a reconciliation of net cash provided by operating activities to FAD for the three and six months ended June 30, 2015:

 

     Three Months Ended June 30, 2015  
     (in thousands)  
     Equipment
Leasing
     Infrastructure      Corporate      Total  

Funds Available for Distribution (FAD)

   $ 23,433       $ (7,860    $ (7,048    $ 8,525   
  

 

 

    

 

 

    

 

 

    

 

 

 

Less: Principal Collections on Finance Leases

              (3,201

Less: Proceeds from sale of assets

              (1,504

Less: Return of Capital Distributions from Unconsolidated Entities

              (351

Add: Required Payments on Debt Obligations

              4,378   

Add: Capital Distributions to Non-Controlling Interest

              143   

Include: Changes in Working Capital

              419   
           

 

 

 

Net Cash Provided by Operating Activities

            $ 8,409   
           

 

 

 

 

     Six Months Ended June 30, 2015  
     (in thousands)  
     Equipment
Leasing
     Infrastructure      Corporate      Total  

Funds Available for Distribution (FAD)

   $ 44,809       $ (12,501    $ (10,177    $ 22,131   
  

 

 

    

 

 

    

 

 

    

 

 

 

Less: Principal Collections on Finance Leases

              (6,142

Less: Proceeds from sale of assets

              (1,625

Less: Return of Capital Distributions from Unconsolidated Entities

              (1,284

Add: Required Payments on Debt Obligations

              8,633   

Add: Capital Distributions to Non-Controlling Interest

              254   

Include: Changes in Working Capital

              (7,336
           

 

 

 

Net Cash Provided by Operating Activities

            $ 14,631   
           

 

 

 

FAD is subject to a number of limitations and assumptions and there can be no assurance that the Company will generate FAD sufficient to meet its intended dividends. FAD has material limitations as a liquidity measure of the Company because such measure excludes items that are required elements of the Company’s net cash provided by operating activities as described

 

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below. FAD should not be considered in isolation nor as a substitute for analysis of the Company’s results of operations under GAAP and it is not the only metric that should be considered when evaluating the Company’s ability to meet its stated dividend policy. Specifically: (i) FAD does not include equity capital raised, proceeds from any debt issuance or future equity offering, historical cash and cash equivalents and expected investments in the Company’s operations; (ii) FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified; (iii) While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as the Company relies on alternative sources of liquidity to fund such purchases; (iv) FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as the Company has multiple sources of liquidity and intends to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity; (v) FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments; (vi) FAD does not reflect changes in working capital balances as management believes that changes in working capital are primarily driven by short term timing differences which are not meaningful to the Company’s distribution decisions; and (vii) Management has significant discretion to make distributions and the Company is not bound by any contractual provision that requires it to use cash for distributions. If such factors were included in FAD, there can be no assurance that the results would be consistent with the Company’s presentation of FAD.

 

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