Company Quick10K Filing
Quick10K
Fortress Transportation & Infrastructure Investors
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$15.99 84 $1,350
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
8-K 2019-05-24 Shareholder Vote
8-K 2019-05-21 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-05-17 Other Events
8-K 2019-05-17 Other Events
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-02-15 Enter Agreement, Off-BS Arrangement
8-K 2019-02-08 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-08 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-06 Other Events
8-K 2019-02-06 Earnings, Other Events
8-K 2018-12-04 Other Events, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-09-18 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-09-14 Other Events
8-K 2018-09-11 Other Events
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-21 Sale of Shares
8-K 2018-06-01 Shareholder Vote
8-K 2018-05-31 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-29 Other Events
8-K 2018-02-28 Earnings, Exhibits
8-K 2018-01-10 Enter Agreement, Exhibits
8-K 2018-01-02 Officers
UBSI United Bankshares 3,960
PINC Premier 2,350
CHCO City Holding 1,310
KMDA Kamada 232
OTIC Otonomy 90
AIRI Air Industries Group 35
UEEC United Health Products 0
INIS International Isotopes 0
LUNG Prolung 0
ELRE Yinfu Gold 0
FTAI 2019-03-31
Part I-Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.17 epccontract-exhibit1017.htm
EX-10.18 geequipmentsupplyagreement.htm
EX-10.19 firstliencreditagreement-e.htm
EX-10.20 secondliencreditagreement-.htm
EX-31.1 ftai3312019exhibit311.htm
EX-31.2 ftai3312019exhibit312.htm
EX-32.1 ftai3312019exhibit321.htm
EX-32.2 ftai3312019exhibit322.htm

Fortress Transportation & Infrastructure Investors Earnings 2019-03-31

FTAI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ftai331201910-q.htm 10-Q Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2019
OR
 
¨ 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
logoa14.jpg
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
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
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 (NYSE)
There were 84,671,632 common shares representing limited liability company interests outstanding at April 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.

2



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.

3



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
INDEX TO FORM 10-Q

 
PART I - FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II - OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


4




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

March 31, 2019
 
December 31, 2018
Assets





Cash and cash equivalents
2

$
120,515


$
99,601

Restricted cash
2

108,058


21,236

Accounts receivable, net


50,586


53,789

Leasing equipment, net
3

1,471,794


1,432,210

Operating lease right-of-use assets, net
12
 
44,241

 

Finance leases, net
4

21,158


18,623

Property, plant, and equipment, net
5

788,668


708,853

Investments
6

39,778


40,560

Intangible assets, net
7

35,604


38,513

Goodwill


116,584


116,584

Other assets
2

150,714


108,809

Total assets


$
2,947,700


$
2,638,778







Liabilities





Accounts payable and accrued liabilities


$
97,415


$
112,188

Debt, net
8

1,540,017


1,237,347

Maintenance deposits
 

166,749


158,163

Security deposits
 

38,638


38,539

Operating lease liabilities
12
 
44,719

 

Other liabilities


87,108


38,759

Total liabilities


$
1,974,646


$
1,584,996







Commitments and contingencies
18










Equity





Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 84,477,791 and 84,050,889 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively)


$
845


$
840

Additional paid in capital


1,001,223


1,029,376

Accumulated deficit

 
(39,197
)
 
(32,817
)
Accumulated other comprehensive loss


(43,012
)


Shareholders' equity


919,859


997,399

Non-controlling interest in equity of consolidated subsidiaries


53,195


56,383

Total equity


973,054


1,053,782

Total liabilities and equity


$
2,947,700


$
2,638,778






See accompanying notes to consolidated financial statements.

5


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(Dollars in thousands, except share and per share data)


 


Three Months Ended March 31,
 
Notes

2019
 
2018
Revenues





Equipment leasing revenues


$
72,452


$
55,784

Infrastructure revenues


52,175


13,060

Total revenues
11

124,627


68,844







Expenses





Operating expenses


61,918


27,579

General and administrative


4,732


3,586

Acquisition and transaction expenses


1,474


1,766

Management fees and incentive allocation to affiliate
15

3,838


3,739

Depreciation and amortization
3, 5, 7

39,533


29,587

Interest expense


21,303


11,871

Total expenses


132,798


78,128







Other income (expense)





Equity in (losses) earnings of unconsolidated entities
6

(384
)

95

Gain (loss) on sale of equipment, net


1,725


(5
)
Interest income


91


176

Other (expense) income


(2,604
)

180

Total other (expense) income


(1,172
)

446







Loss before income taxes


(9,343
)

(8,838
)
Provision for income taxes
14

453


495

Net loss


(9,796
)

(9,333
)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries


(3,416
)

(8,761
)
Net loss attributable to shareholders


$
(6,380
)

$
(572
)








Loss per share
17

 

 
Basic


$
(0.07
)
 
$
(0.01
)
Diluted
 
 
$
(0.07
)
 
$
(0.01
)
 
 
 
 
 
 
Weighted Average Shares Outstanding:
 
 
 
 
 
Basic


85,986,453


81,534,454

Diluted
 
 
85,986,453

 
81,534,454














See accompanying notes to consolidated financial statements.

6


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(Dollars in thousands)


 
Three Months Ended March 31,
 
2019
 
2018
Net loss
$
(9,796
)
 
$
(9,333
)
Other comprehensive loss:
 
 
 
Change in fair value of cash flow hedge
(43,012
)
 

Comprehensive loss
(52,808
)
 
(9,333
)
Comprehensive loss attributable to non-controlling interest
(3,416
)
 
(8,761
)
Comprehensive loss attributable to shareholders
$
(49,392
)
 
$
(572
)
























































See accompanying notes to consolidated financial statements.

7


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
(Dollars in thousands)



 
Three Months Ended March 31, 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

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
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

 
230

 
 
 
 
 


 
235

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


 
Three Months Ended March 31, 2018

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, 2017
$
758

 
$
985,009

 
$
(38,699
)
 
$

 
$
88,007

 
$
1,035,075

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 

Net loss for the period
 
 


 
(572
)
 
 
 
(8,761
)
 
(9,333
)
Other comprehensive income
 
 
 
 

 

 

 

Total comprehensive loss
 
 
 
 
(572
)
 

 
(8,761
)
 
(9,333
)
Issuance of common shares
70

 
127,807

 
 
 
 
 

 
127,877

Dividends declared
 
 
(27,333
)
 
 
 
 
 

 
(27,333
)
Equity-based compensation
 
 
9

 
 
 
 
 
199

 
208

Equity - March 31, 2018
$
828


$
1,085,492


$
(39,271
)

$


$
79,445


$
1,126,494























See accompanying notes to consolidated financial statements.

8


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)


 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net loss
$
(9,796
)
 
$
(9,333
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Equity in losses (earnings) of unconsolidated entities
384

 
(95
)
(Gain) loss on sale of equipment, net
(1,725
)
 
5

Security deposits and maintenance claims included in earnings
(2,953
)
 
(383
)
Equity-based compensation
228

 
208

Depreciation and amortization
39,533

 
29,587

Change in current and deferred income taxes
338

 
504

Change in fair value of non-hedge derivative
3,220

 
(624
)
Amortization of lease intangibles and incentives
8,334

 
7,226

Amortization of deferred financing costs
2,025

 
1,151

Bad debt expense
2,950

 
1,441

Other
221

 
9

Change in:
 
 
 
 Accounts receivable
(1,127
)
 
(7,387
)
 Other assets
(5,295
)
 
1,176

 Accounts payable and accrued liabilities
(14,348
)
 
(9,768
)
 Management fees payable to affiliate
(1,158
)
 
(1,300
)
 Other liabilities
(561
)
 
(947
)
Net cash provided by operating activities
20,270

 
11,470

 
 
 
 
Cash flows from investing activities:
 
 
 
Investment in notes receivable

 
(912
)
Investment in unconsolidated entities and available for sale securities

 
(1,115
)
Principal collections on finance leases
1,289

 
129

Acquisition of leasing equipment
(108,919
)
 
(86,043
)
Acquisition of property, plant and equipment
(81,241
)
 
(23,641
)
Acquisition of lease intangibles
(589
)
 
(1,029
)
Purchase deposits for acquisitions
(4,625
)
 
(6,886
)
Proceeds from sale of leasing equipment
27,292

 
6,136

Proceeds from sale of property, plant and equipment
7

 
38

Return of capital distributions from unconsolidated entities
398

 

Return of purchase deposit for aircraft and aircraft engines

 
240

Return of deposit on sale of engine

 
(400
)
Net cash used in investing activities
$
(166,388
)
 
$
(113,483
)















See accompanying notes to consolidated financial statements.

9


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)


 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Proceeds from debt
$
352,680

 
$
18,600

Repayment of debt
(47,222
)
 
(12,612
)
Payment of deferred financing costs
(28,611
)
 
(71
)
Receipt of security deposits
1,935

 
1,864

Return of security deposits
(233
)
 
(700
)
Receipt of maintenance deposits
13,495

 
9,720

Release of maintenance deposits
(9,807
)
 
(1,840
)
Proceeds from issuance of common shares, net of underwriter's discount

 
128,450

Common shares issuance costs

 
(132
)
Cash dividends
(28,383
)
 
(27,333
)
Net cash provided by financing activities
$
253,854

 
$
115,946

 
 
 
 
Net increase in cash and cash equivalents and restricted cash
107,736

 
13,933

Cash and cash equivalents and restricted cash, beginning of period
120,837

 
92,806

Cash and cash equivalents and restricted cash, end of period
$
228,573

 
$
106,739

 
 
 
 
Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Proceeds from borrowings of debt
$

 
$
511

Acquisition of leasing equipment
(2,128
)
 
(2,938
)
Acquisition of property, plant and equipment
(11,210
)
 
(5,849
)
Settled and assumed security deposits
(1,604
)
 
500

Billed, assumed and settled maintenance deposits
5,405

 
(3,517
)
Change in fair value of cash flow hedge
(43,012
)
 

Issuance of common shares
235

 
150

Common share issuance costs

 
(591
)

























See accompanying notes to consolidated financial statements.

10


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)


1.
ORGANIZATION
Fortress Transportation and Infrastructure Investors LLC (the “Company,” “we,” “our” or “us”) is a Delaware limited liability company which, through its subsidiary, Fortress Worldwide Transportation and Infrastructure General Partnership (the “Partnership”), owns and leases aviation equipment and also owns and operates a short line railroad in North America, Central Maine and Québec Railway (“CMQR”), a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”), a deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities (“Repauno”), and a multi-modal terminal located along the Ohio River with multiple industrial development opportunities, including a power plant under construction (“Long Ridge”). Additionally, we own and lease offshore energy equipment and shipping containers. We have four reportable segments, (i) Aviation Leasing, (ii) Jefferson Terminal, (iii) Railroad, and (iv) Ports and Terminals, which operate in two primary businesses, Equipment Leasing and Infrastructure (Note 16).
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of AccountingThe accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of us and our subsidiaries.
Principles of ConsolidationWe consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.
We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities.
Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and UncertaintiesIn the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements and the majority of terminal services revenue and freight rail revenue are denominated in U.S. dollars.
Variable Interest EntitiesThe assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
JGP Energy Partners LLC
During the quarter ended September 30, 2016, we initiated activities in our 50% owned joint venture, JGP Energy Partners LLC (“JGP”). The other 50% member to the joint venture is a third party ethanol producer. The purpose of the venture is to build storage capacity with capabilities to receive and/or distribute ethanol via water, rail or truck. Each member contributed up to $27 million (for a total of $54 million) for the development and construction of the ethanol terminal facilities. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a VIE. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, we do not consolidate JGP and account for this investment in accordance with the equity method. Refer to Note 6 for details.

11


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Delaware River Partners LLC
On July 1, 2016, we, through Delaware River Partners LLC (“DRP”), a consolidated subsidiary, purchased the assets of Repauno, which consisted primarily of land, a storage cavern, and riparian rights for the acquired land, site improvements and rights. Upon acquisition there were no operational processes that could be applied to these assets that would result in outputs without significant green field development. We currently hold a 90% economic interest and a 100% voting interest in DRP. DRP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we were the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying financial statements.
Ohio River Partners LLC
On June 16, 2017, we, through Ohio River Partners Shareholder LLC (“ORP”), a consolidated subsidiary, purchased the assets of Long Ridge which consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. We purchased 100% of the interests in these assets. ORP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we were the primary beneficiary; accordingly, ORP has been presented on a consolidated basis in the accompanying financial statements.
Cash and Cash EquivalentsWe consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.
Restricted CashRestricted cash consists of prepaid interest and principal pursuant to the requirements of certain of our debt agreements (see Note 8), and funds set aside for the power plant construction at Long Ridge (see Note 5) and other qualifying construction projects at Jefferson Terminal.
InventoryCommodities inventory is carried at the lower of cost or net realizable value on our balance sheet. Commodities are removed from inventory based on the average cost at the time of sale. As of March 31, 2019 and December 31, 2018, we had commodities inventory of $11.0 million and $10.4 million, respectively, which is included in Other assets in the Consolidated Balance Sheets.
Deferred Financing CostsCosts incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of $17.5 million and $14.5 million as of March 31, 2019 and December 31, 2018, respectively, are recorded as a component of debt in the Consolidated Balance Sheets.
We also have unamortized deferred revolver fees related to our revolving debt of $25.6 million and $2.4 million as of March 31, 2019 and December 31, 2018, respectively, which are included in Other assets in the Consolidated Balance Sheets.
Amortization expense was $2.0 million and $1.2 million for the three months ended March 31, 2019 and 2018, respectively, and is included in interest expense in the Consolidated Statements of Operations.
Revenue Recognition
Equipment Leasing Revenues
Operating Leases—We lease equipment pursuant to net operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.
Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the amount paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.
Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues.
Finance Leases—From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value of 90% or more of the fair value of the leased equipment at the date of lease inception. Net investment in finance lease represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

12


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Infrastructure Revenues
Rail Revenues—Rail revenues generally consist of the following performance obligations: freight movement, demurrage, unloading and switching. Freight movement revenues are recognized proportionally based on distance as freight is transported from origin to destination. Accordingly, freight movement revenue is recognized over time with progress measured based on distance transpired, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time. Demurrage, unloading and switching are recognized in other miscellaneous rail revenues, for which demurrage progress is measured over time, and unloading and switching revenues are measured at a point in time as the service is rendered.
Terminal Services Revenues—Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.
Lease Income—Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement.
Crude Marketing Revenues—Crude marketing revenues consists of marketing revenue related to Canadian crude oil. The revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.
Other Revenue—Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Other revenue consists of two performance obligations: handling and storage of raw materials. The revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.
Payment terms for Infrastructure Revenues are generally short term in nature.
Leasing ArrangementsAt contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized in Operating lease right-of-use assets, net and Operating lease liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Property, plant and equipment, net and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets.
All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method.
Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs.
We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.
Concentration of Credit RiskWe are subject to concentrations of credit risk with respect to amounts due from customers on our finance leases and operating leases. We attempt to limit our credit risk by performing ongoing credit evaluations. During the three months ended March 31, 2019, one customer in the Jefferson Terminal segment accounted for approximately 22% of total revenue. There were no customers with a revenue concentration over 10% of total revenue during the three months ended March 31, 2018.
As of March 31, 2019, accounts receivable from one customer in the Jefferson Terminal segment represented 13% of total accounts receivable, net. As of December 31, 2018, accounts receivable from two customers in the Jefferson Terminal segment each represented 17% and 15% of total accounts receivable, net.
We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.
Provision for Doubtful AccountsWe determine the provision for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. The provision for doubtful accounts at March 31, 2019 and December 31, 2018 was $1.2 million and $1.1 million, respectively. Bad debt expense was $3.0 million and $1.4 million for the three months ended March 31, 2019 and 2018, respectively, and is included in operating expenses in the Consolidated Statements of Operations.
Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for fair value changes related to derivatives accounted for as cash flow hedges.

13


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Derivative Financial Instruments
Electricity Derivatives—We enter into derivative contracts as part of a risk management program to mitigate price risk associated with certain electricity price exposures. We primarily use swap derivative contracts, which are agreements to buy or sell a quantity of electricity at a predetermined future date and at a predetermined price.
Cash Flow Hedges
Certain of these derivative instruments are designated and qualify as cash flow hedges. The derivative's gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income in our Consolidated Balance Sheets. The gain or loss is subsequently reclassified into the income statement line item that is impacted by the forecasted transaction when the forecasted transaction affects net earnings.
Derivatives Not Designated As Hedging Instruments
Certain of these derivative instruments are not designated as hedging instruments for accounting purposes. The change in fair value of these contracts is recognized in Other income (expense) in the Consolidated Statements of Operations. The cash flow impact of derivative contracts that are not designated as hedging instruments is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.
Commodity Derivatives—We also enter into short-term and long-term crude forward contracts. Gains and losses related to our crude sales and purchase derivatives are recorded on a gross basis and are included in Crude marketing revenues and Operating expenses, respectively, in our Consolidated Statements of Operations. See Note 11 for additional details. The cash flow impact of these derivatives is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.
All of our outstanding derivatives are not used for speculative purposes. We record all derivative assets and liabilities on a gross basis at fair value and are included in Other assets and Other liabilities, respectively, in our Consolidated Balance Sheets.
Other Assets—Other assets is primarily comprised of commodities inventory of $11.0 million and $10.4 million, purchase deposits for acquisitions of $7.1 million and $10.2 million, lease incentives of $57.7 million and $51.0 million, deferred revolver fees, net of amortization of $25.6 million and $2.4 million, prepaid expenses of $12.9 million and $8.2 million and derivative assets of $7.6 million and $7.5 million as of March 31, 2019 and December 31, 2018, respectively.
Dividends—Dividends are recorded if and when declared by the Board of Directors. For both the three months ended March 31, 2019 and 2018, the Board of Directors declared a cash dividend of $0.33 per share.
Recent Accounting PronouncementsIn February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (and subsequently issued ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, collectively, “ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting.
On January 1, 2019, we adopted ASU 2016-02 using the modified retrospective approach. We utilized the effective date transition method and accordingly are not required to adjust our comparative period financial information for effects of ASU 2016-02. We have elected to adopt the ‘package of practical expedients’ which permits us not to reassess under the new standard our prior conclusions about lease identification (including land easements), lease classification and initial direct costs.
The adoption of ASU 2016-02 resulted in the recognition of ROU assets and lease liabilities of approximately $46 million in our Consolidated Balance Sheets as of January 1, 2019.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities in its financial statements and make certain improvements to simplify the application of the hedge accounting guidance. The amendments will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend the presentation and disclosure requirements and change how entities assess effectiveness. Entities are required to apply the amendments as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period after adoption. On January 1, 2019, we adopted this standard and it did not have an impact on our consolidated financial statements as we did not have any hedging relationships prior to adoption.
In June 2018, the FASB, issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of Accounting Standards Codification (“ASC”) 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. On January 1, 2019, we adopted this standard and it did not have an impact on our consolidated financial statements.

14


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Unadopted Accounting PronouncementsIn January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 addresses concerns over the cost and complexity of the two-step goodwill impairment test by removing the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-01 will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The guidance is effective for all entities in fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.
3.
LEASING EQUIPMENT, NET
Leasing equipment, net is summarized as follows:
 
March 31, 2019
 
December 31, 2018
Leasing equipment
$
1,727,864

 
$
1,672,156

Less: accumulated depreciation
(256,070
)
 
(239,946
)
Leasing equipment, net
$
1,471,794

 
$
1,432,210

During the three months ended March 31, 2019, we acquired five aircraft and eight commercial engines, and sold nine commercial engines.
Depreciation expense for leasing equipment is summarized as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Depreciation expense for leasing equipment
$
31,896

 
$
23,691

4. FINANCE LEASES, NET
Finance leases, net are summarized as follows:
 
March 31, 2019
 
December 31, 2018
Finance leases
$
30,299

 
$
28,476

Unearned revenue
(9,141
)
 
(9,853
)
Finance leases, net
$
21,158

 
$
18,623

We entered into two one-year sales-type lease agreements for the sale of two of our aircraft during the three months ended March 31, 2019.

15


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

5.
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is summarized as follows:
 
March 31, 2019
 
December 31, 2018
Land, site improvements and rights
$
75,046

 
$
75,028

Construction in progress (1)
309,366

 
253,239

Buildings and improvements
14,597

 
14,514

Terminal machinery and equipment
376,814

 
349,227

Proved oil and gas properties
22,305

 
20,099

Track and track related assets
42,358

 
42,349

Railroad equipment
5,754

 
5,383

Railcars and locomotives
4,592

 
4,513

Computer hardware and software
3,806

 
3,806

Furniture and fixtures
599

 
572

Vehicles
1,691

 
1,636

 
856,928

 
770,366

Less: accumulated depreciation
(69,779
)
 
(63,032
)
Spare parts
1,519

 
1,519

Property, plant and equipment, net
$
788,668

 
$
708,853

________________________________________________________
(1) Includes unproved oil and gas properties of $60,320 and $59,930 as of March 31, 2019 and December 31, 2018, respectively.
During the three months ended March 31, 2019, we added property, plant and equipment of $86.6 million, which primarily consists of terminal machinery and equipment placed in service or under development at Jefferson Terminal and Repauno, and assets under development at Jefferson Terminal and Long Ridge, including a power plant under construction.
Depreciation expense for property, plant and equipment is summarized as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Depreciation expense for property, plant and equipment
$
6,737

 
$
4,996

Construction of Power Plant at Long Ridge
Construction Agreements
On February 15, 2019, our subsidiary, Long Ridge Energy Generation LLC (“LREG”), entered into an engineering, procurement and construction agreement (the “EPC Agreement”) with Kiewit Power Constructors Co. to construct a 485 megawatt natural gas fired, combined cycle power plant at Long Ridge Energy Terminal.
Additionally, on February 15, 2019, LREG entered into an agreement for the purchase of power generation equipment and related services (the “PIE Agreement”) with General Electric Company (“GE”) to acquire equipment and related services to be utilized at the power plant, including one combustion turbine, one condensing steam turbine, one hydrogen-cooled generator, one heat-recovery steam generator and related items.
The aggregate value of the EPC Agreement and the PIE Agreement is approximately $430 million.
Credit Agreements
On February 15, 2019, LREG and two other subsidiaries (collectively, "Co-Borrowers") entered into certain credit agreements establishing (i) a $445 million construction loan and term loan, (ii) a $154 million letter of credit facility and (iii) a $143 million construction loan and term loan, all of which will be used for the purposes of funding the development, construction and completion of the power plant. The interest costs incurred under these credit agreements for qualifying expenditures under construction are capitalized and included in the cost of the asset. Interest capitalization ceases once the asset is substantially complete or no longer undergoing activities to prepare it for its intended use.
See Note 8 for additional information related to the credit agreements.

16


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Fixed Price Power Agreements
In connection with the construction of the power plant, LREG entered into fixed price power agreements for 457 megawatts of electric power. The agreements become effective on February 1, 2022, with 207 megawatts having a term of ten years and 250 megawatts having a term of seven years. Under the terms of the agreements, which are accounted for as derivatives, LREG receives a weighted average fixed price of $27.30 per megawatt hour and pays a variable price equal to the ELECTRICITY-PJM-AEP/DAYTON HUB-DAY AHEAD price. See Note 10 for additional information related to the fixed price power agreements.
6.
INVESTMENTS
The following table presents the ownership interests and carrying values of our investments:
 
 
 
 
 
Carrying Value
 
Investment
 
Ownership Percentage
 
March 31, 2019
 
December 31, 2018
Advanced Engine Repair JV
Equity method
 
25%
 
$
12,780

 
$
12,981

JGP Energy Partners LLC
Equity method
 
50%
 
25,241

 
25,461

Intermodal Finance I, Ltd.
Equity method
 
51%
 
1,757

 
2,118

Investments
 
 
 
 
$
39,778

 
$
40,560

We did not recognize any other-than-temporary impairments for the three months ended March 31, 2019 and 2018.
Equity Method Investments
The following table presents our proportionate share of equity in income (losses):
 
Three Months Ended March 31,
 
2019
 
2018
Advanced Engine Repair JV
$
(201
)
 
$
(224
)
JGP Energy Partners LLC
(220
)
 
148

Intermodal Finance I, Ltd.
37

 
171

Total
$
(384
)
 
$
95

Advanced Engine Repair JV
In December 2016, we invested $15 million for 25% interest in an advanced engine repair joint venture. We focus on developing new costs savings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment.
JGP
In 2016, we initiated activities in a 50% non-controlling interest in JGP, a joint venture. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a variable interest entity. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, we do not consolidate JGP and instead account for this investment in accordance with the equity method.
Intermodal Finance I, Ltd.
In 2012, we acquired a 51% non-controlling interest in Intermodal Finance I, Ltd. (“Intermodal”), a joint venture. Intermodal is governed by a board of directors, and its shareholders have voting rights through their equity interests. As such, Intermodal is not within the scope of ASC 810-20 and should be evaluated for consolidation under the voting interest model. Due to the existence of substantive participating rights of the 49% equity investor, including the joint approval of material operating and capital decisions, such as material contracts and capital expenditures consistent with ASC 810-10-25-11, we do not have unilateral rights over this investment; therefore, we do not consolidate Intermodal but account for this investment in accordance with the equity method. We do not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met.
As of March 31, 2019, Intermodal owns a portfolio of leases, representing one finance lease customer and comprises approximately 3,000 shipping containers, as well as a portfolio of approximately 5,000 shipping containers subject to multiple operating leases.

17


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

7.
INTANGIBLE ASSETS AND LIABILITIES, NET
Intangible assets and liabilities, net are summarized as follows:
 
March 31, 2019
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
48,731

 
$

 
$

 
$
48,731

Less: Accumulated amortization
(32,378
)
 

 

 
(32,378
)
Acquired favorable lease intangibles, net
16,353

 

 

 
16,353

Customer relationships

 
35,513

 
225

 
35,738

Less: Accumulated amortization

 
(16,266
)
 
(221
)
 
(16,487
)
Acquired customer relationships, net

 
19,247

 
4

 
19,251

Total intangible assets, net
$
16,353

 
$
19,247

 
$
4

 
$
35,604

 
 
 
 
 
 
 
 
Intangible liabilities
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
3,736

 
$

 
$

 
$
3,736

Less: Accumulated amortization
(2,249
)
 

 

 
(2,249
)
Acquired unfavorable lease intangibles, net
$
1,487

 
$

 
$

 
$
1,487

 
December 31, 2018
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
48,143

 
$

 
$

 
$
48,143

Less: Accumulated amortization
(29,780
)
 

 

 
(29,780
)
Acquired favorable lease intangibles, net
18,363

 

 

 
18,363

Customer relationships

 
35,513

 
225

 
35,738

Less: Accumulated amortization

 
(15,378
)
 
(210
)
 
(15,588
)
Acquired customer relationships, net

 
20,135

 
15

 
20,150

Total intangible assets, net
$
18,363

 
$
20,135

 
$
15

 
$
38,513

 
 
 
 
 
 
 
 
Intangible liabilities
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
3,736

 
$

 
$

 
$
3,736

Less: Accumulated amortization
(2,114
)
 

 

 
(2,114
)
Acquired unfavorable lease intangibles, net
$
1,622

 
$

 
$

 
$
1,622

Intangible liabilities relate to unfavorable lease intangibles and are included as a component of other liabilities in the Consolidated Balance Sheets.
Amortization of intangible assets and liabilities is as follows:
 
Classification in Consolidated Statements of Operations
 
Three Months Ended March 31,
 
 
2019
 
2018
Lease intangibles
Equipment leasing revenues
 
$
2,462

 
$
1,992

Customer relationships
Depreciation and amortization
 
900

 
900

Total
 
 
$
3,362

 
$
2,892


18


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

As of March 31, 2019, estimated net annual amortization of intangibles is as follows:
2019
$
8,463

2020
8,759

2021
5,317

2022
5,600

2023
3,600

Thereafter
2,378

Total
$
34,117


19


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

8.     DEBT, NET
Our debt, net is summarized as follows:
 
March 31, 2019
 
December 31, 2018
 
Outstanding Borrowings
 
Stated Interest Rate
 
Maturity Date
 
Outstanding Borrowings
Loans payable
 
 
 
 
 
 
 
FTAI Pride Credit Agreement (1)
$
46,181

 
LIBOR + 4.50%
 
9/15/2019
 
$
47,743

CMQR Credit
Agreement
22,540

 
(i) Adjusted LIBOR + 2.50% or 4.50%; or
(ii) U.S. or Canadian Base Rate + 1.50% or 3.50%; or
(iii) Canadian Fixed Rate + 2.50% or 4.50%
 
9/18/2019
 
22,265

Revolving Credit
Facility (2)
165,000

 
(i) Base Rate + 2.00%; or
(ii) Adjusted Eurodollar Rate + 3.00%
 
1/31/2022
 
100,000

Jefferson Revolver (2)
63,000

 
(i) Base Rate + 1.50%; or
(ii) Base Rate + 2.50% (Eurodollar)
 
3/7/2021
 
49,805

DRP Revolver (3)
9,300

 
(i) Base Rate + 1.50%; or
(ii) Base Rate + 2.50% (Eurodollar)
 
11/5/2021
 

LREG Credit
Agreement (4)
71,500

 
First Lien Credit Agreement: 7.30%
LC Facility: Base Rate + 2.50% to 3.50%
Second Lien Credit Agreement: 7.50%
 
2/15/2022 to 6/30/2028
 

Total loans payable
377,521

 
 
 
 
 
219,813

Bonds payable
 
 
 
 
 
 
 
Series 2012 Bonds (5)
42,781

 
8.25%
 
7/1/2032
 
42,797

Series 2016 Bonds (6)
144,200

 
7.25%
 
2/1/2036
 
144,200

Senior Notes due
2022 (7)
697,265

 
6.75%
 
3/15/2022
 
549,405

Senior Notes due
2025 (8)
295,770

 
6.50%
 
10/1/2025
 
295,642

Total bonds payable
1,180,016

 
 
 
 
 
1,032,044

 
 
 
 
 
 
 
 
Debt
1,557,537

 
 
 
 
 
1,251,857

Less: Debt issuance costs
(17,520
)
 
 
 
 
 
(14,510
)
Total debt, net
$
1,540,017

 
 
 
 
 
$
1,237,347

 
 
 
 
 
 
 
 
Total debt due within one year
$
227,591

 
 
 
 
 
$
71,678

________________________________________________________
(1) Secured on a first priority basis by the offshore vessel.
(2) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.
(3) Requires a quarterly commitment fee at a rate of 0.875% on the average daily unused portion, as well as customary letter of credit fees and agency fees.
(4) Requires a quarterly commitment fee on the average daily unused portion at a rate of 1.50% for the First Lien Credit Agreement and LC Facility and 1.00% for the Second Lien Credit Agreement, as well as customary letter of credit fees and agency fees.
(5) Includes unamortized premium of $1,561 and $1,577 at March 31, 2019 and December 31, 2018, respectively.
(6) These bonds have a stated maturity of February 1, 2036 but are subject to mandatory tender for purchase at par, by our subsidiary, on February 13, 2020 if they have not been repurchased from proceeds of a remarketing of the bonds or redeemed prior to such date.
(7) Includes unamortized discount of $6,972 and $5,154 at March 31, 2019 and December 31, 2018, respectively, and an unamortized premium of $4,237 and $4,559 at March 31, 2019 and December 31, 2018, respectively.
(8) Includes unamortized discount of $4,230 and $4,358 at March 31, 2019 and December 31, 2018, respectively.
Jefferson RevolverOn December 20, 2018, our subsidiary entered into an amendment to the Jefferson Revolver which temporarily increases the aggregate revolving commitments by $25 million from $50 million to $75 million, until August 1, 2019, after which the aggregate revolving commitment will revert back to $50 million.
Senior Notes due 2022On February 8, 2019, we issued an additional $150 million of Senior Notes (“2022 Notes”) at an offering price of 98.5% of the principal amount plus accrued interest from September 15, 2018.

20


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

Revolving Credit FacilityOn February 8, 2019, we entered into an amendment to the revolving credit facility (the “Revolving Credit Facility”). The amendment, among other things, (i) increases the aggregate revolving commitments by $125 million from $125 million to $250 million, (ii) extends the maturity date of the revolving loans and commitments to January 31, 2022 and (iii) makes certain modifications to the financial covenants, including an increase in the maximum ratio of debt to total equity from 1.65 to 1.00 to 2.00 to 1.00.
LREG Credit AgreementOn February 15, 2019, LREG and two other subsidiaries, Ohio Gasco LLC, (“GasCo” and, together with LREG, the “Co-Borrowers”), and Ohio PP Holdco LLC (“Holdings”), entered into a First Lien Credit Agreement establishing (i) a $445 million construction loan (the “First Lien Construction Loans”) and term loan (the “First Lien Term Loans” and, together with the First Lien Construction Loans, the “First Lien Loan Facility”) credit facility for the purposes of funding the development, construction and completion of the power plant and the associated development, production and drilling of hydrocarbon interests (cumulatively, the “Project”), and (ii) a $154 million letter of credit facility, which is available to the Co-Borrowers solely to support any collateral posting obligations of the Co-Borrowers under certain fixed price power agreements related to the Project (the “LC Facility”). The LC Facility may be increased up to $179 million under certain circumstances as set forth in the First Lien Credit Agreement, with such additional amounts of letters of credit available to LREG solely in support of any collateral posting obligations in connection with a bid in the PJM capacity auction. As of March 31, 2019, $128 million letters of credit have been provided to counterparties in accordance with the provisions of the LC Facility, leaving $26 million of remaining initial letter of credit capacity.
The First Lien Construction Loans are available until the date on which, among other things, substantial completion of the Project is achieved (which is required to occur on or prior to June 1, 2022), at which point the First Lien Construction Loans then outstanding shall automatically convert to Term Loans (“Term Conversion”). Following Term Conversion, the First Lien Term Loans will commence amortization on a quarterly basis and will mature on December 31, 2027. The LC Facility will mature upon the earlier of (a) February 15, 2022, (b) the date the loans under the First Lien Loan Facility are accelerated or (c) the date of Term Conversion.
Also on February 15, 2019, the Co-Borrowers and Holdings entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement” and, together with the First Lien Credit Agreement, the “Credit Agreements”) establishing a $143 million construction loan (the “Second Lien Construction Loans”) and term loan (the “Second Lien Term Loans” and, together with the Second Lien Construction Loans, the “Second Lien Loan Facility”) credit facility for the purposes of funding the development, construction and completion of the Project.
The Co-Borrowers were required to borrow $71.5 million in Second Lien Construction Loans on February 15, 2019, with the remaining Second Lien Construction Loans required to be borrowed no later than February 15, 2020. Following Term Conversion, the Second Lien Construction Loans then outstanding will automatically convert to Second Lien Term Loans and will commence amortization on a quarterly basis and mature on June 30, 2028.
The Co-Borrowers’ obligations under the First Lien Credit Agreement and the Second Lien Credit Agreement are guaranteed by the Co-Borrowers and Holdings and are secured by first priority security interests and second priority security interests, respectively, in all of the assets of the Co-Borrowers and Holdings. The borrowings under the Credit Agreements are not guaranteed by us and are non-recourse to us.
We were in compliance with all debt covenants as of March 31, 2019.
9.
FAIR VALUE MEASUREMENTS
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.
Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.
Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

21


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

The following tables set forth our financial assets measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
 
Fair Value as of
 
Fair Value Measurements Using Fair Value Hierarchy as of
 
 
 
March 31, 2019
 
March 31, 2019
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
120,515

 
$
120,515

 
$

 
$

 
Market
Restricted cash
108,058

 
108,058

 

 

 
Market
Derivative assets
7,590

 

 

 
7,590

 
Income
Total assets
$
236,163

 
$
228,573

 
$

 
$
7,590

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivative liabilities
$
(47,277
)
 
$

 
$

 
$
(47,277
)
 
Income
Total liabilities
$
(47,277
)
 
$

 
$

 
$
(47,277
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value as of
 
Fair Value Measurements Using Fair Value Hierarchy as of
 
 
 
December 31, 2018
 
December 31, 2018
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
99,601

 
$
99,601

 
$

 
$

 
Market
Restricted cash
21,236

 
21,236

 

 

 
Market
Derivative assets
7,470

 

 

 
7,470

 
Income
Total
$
128,307

 
$
120,837

 
$

 
$
7,470

 

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivative liabilities
$
(925
)
 
$

 
$

 
$
(925
)
 
Income
Total liabilities
$
(925
)
 
$

 
$

 
$
(925
)
 
 
The fair value of our electricity derivative liabilities and commodity derivative assets and liabilities classified as Level 3 measurements are estimated by applying the income approach, which is based on discounted projected future cash flows. The valuation of our electricity derivatives is based on management’s best estimate of certain key assumptions, which include extrapolated power forward curves for periods with unobservable market pricing, credit valuation adjustments utilizing estimated cash flows, estimated price volatility and probability of default, and the discount rate. The valuation of our commodity derivatives is based on management’s best estimate of certain key assumptions, which include an estimated differential factor for varying quality of commodity and the discount rate.
Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy.
Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, accounts payable and accrued liabilities, loans payable, bonds payable, security deposits, maintenance deposits and management fees payable, whose fair value approximates their carrying value based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.

22


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

The fair value of our bonds and notes payable reported as debt, net in the Consolidated Balance Sheets are presented in the table below:
 
March 31, 2019
 
December 31, 2018
Series 2012 Bonds (1)
$
43,141

 
$
42,633

Series 2016 Bonds (1)
148,683

 
149,582

Senior Notes due 2022
712,705

 
551,144

Senior Notes due 2025
296,235

 
283,965

________________________________________________________
(1) Fair value is based upon market prices for similar municipal securities.
The fair value of all other items reported as debt, net in the Consolidated Balance Sheet approximate their carrying values due to their bearing market rates of interest, and are classified as Level 2 within the fair value hierarchy.
We measure the fair value of certain assets and liabilities on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include goodwill, intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets.
10. DERIVATIVE FINANCIAL INSTRUMENTS
Electricity Derivatives
We are subject to electricity price volatility stemming from the anticipated sales of electricity from our Long Ridge power generation plant under construction. From time to time, we enter into electricity swap agreements to manage our exposure to electricity price fluctuations. Certain derivatives are designated as hedging instruments within cash flow hedging relationships and certain other derivatives are not designated as hedging instruments.
Commodity Derivatives
Depending on market conditions, we source crude oil from producers in Canada, arranging logistics to Jefferson Terminal and marketing crude oil to third parties. These crude oil forward purchase and sales contracts are not designated in hedging relationships.
The following table presents information related to our outstanding derivative contracts:
 
Notional Amount
 
Fair Value of Assets (1)
 
Fair Value of Liabilities (1)
 
Term
March 31, 2019
 
 
 
 
 
 
 
Derivatives Designated in Cash Flow Hedges:
 
 
 
 
 
 
 
Electricity swaps
$
29,278

 
$

 
$
(43,012
)
 
7 to 10 years
Non-hedge Derivative Instruments:
 
 
 
 
 
 
 
Electricity swaps
$
4,207

 
$

 
$
(2,370
)
 
7 to 10 years
Crude oil forwards
2,687

 
7,590

 
(1,895
)
 
1 to 9 months
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Derivatives Designated in Cash Flow Hedges:
 
 
 
 
 
 
 
Electricity swaps
$

 
$

 
$

 
N/A
Non-hedge Derivative Instruments:
 
 
 
 
 
 
 
Electricity swaps
$

 
$

 
$

 
N/A
Crude oil forwards
3,225

 
7,470

 
(925
)
 
1 to 12 months
________________________________________________________
(1) Included in Other assets and Other liabilities, respectively, in our Consolidated Balance Sheets.

23


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

The following table presents pretax gains and losses on our derivative contracts:
 
Three Months Ended March 31,
 
2019
 
2018
Electricity Swaps:
 
 
 
Losses recognized in other comprehensive loss before reclassifications
$
(43,012
)
 
$

Gains (losses) reclassified from accumulated other comprehensive income

 

Losses recognized in earnings
(2,370
)
 

Crude Oil Forwards:
 
 
 
(Losses) gains recognized in earnings
$
(850
)
 
$
624

As of March 31, 2019, we do not expect any gains or losses on our electricity swaps to be reclassified into revenue in the next 12 months. As of March 31, 2019, the maximum length of time over which we are hedging forecasted electricity sales is 13 years.
11. REVENUES
We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue. Revenues attributed to our Equipment Leasing business unit are within the scope of ASC 840 prior to January 1, 2019 and ASC 842 after January 1, 2019, while revenues attributed to our Infrastructure business unit are within the scope of ASC 606, unless otherwise noted. Under the provisions of ASC 842, we have elected to exclude sales and other similar taxes from lease payments in arrangements where we are a lessor.
 
Three Months Ended March 31, 2019
 
Equipment Leasing
 
Infrastructure
 
 
 
 
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Ports and Terminals
 
Corporate and Other
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
47,303

 
$

 
$

 
$

 
$
1,933

 
$
49,236

Maintenance revenue
21,777

 

 

 

 

 
21,777

Finance lease income
826

 

 

 

 

 
826

Other revenue
505

 

 

 

 
108

 
613

Total equipment leasing revenues
70,411

 

 

 

 
2,041

 
72,452

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income

 
308

 

 
355

 

 
663

Rail revenues

 

 
10,507

 

 

 
10,507

Terminal services revenues

 
4,867

 

 
1,818

 

 
6,685

Crude marketing revenues

 
30,779

 

 

 

 
30,779

Other revenue

 

 

 
3,541

 

 
3,541

Total infrastructure revenues

 
35,954

 
10,507

 
5,714

 

 
52,175

Total revenues
$
70,411

 
$
35,954

 
$
10,507

 
$
5,714

 
$
2,041

 
$
124,627


24


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

 
Three Months Ended March 31, 2018
 
Equipment Leasing
 
Infrastructure
 
 
 
 
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Ports and Terminals
 
Corporate and Other
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
33,250

 
$

 
$

 
$

 
$
2,249

 
$
35,499

Maintenance revenue
19,485

 

 

 

 

 
19,485

Finance lease income

 

 

 

 
367

 
367

Other revenue

 

 

 

 
433

 
433

Total equipment leasing revenues
52,735

 

 

 

 
3,049

 
55,784

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income

 

 

 
382

 

 
382

Rail revenues

 

 
11,047

 

 

 
11,047

Terminal services revenues

 
1,253

 

 

 

 
1,253

Crude marketing revenues

 

 

 

 

 

Other revenue

 

 

 
378

 

 
378

Total infrastructure revenues

 
1,253

 
11,047

 
760

 

 
13,060

Total revenues
$
52,735

 
$
1,253

 
$
11,0