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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-25 · 310 added, 227 removed, 264 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand the infrastructure business of FTAI before giving effect to the spin-off (the “Company,” “FTAI Infrastructure,” “we,” “our” or “us”).

Our MD&A should be read in conjunction with our unaudited Combined Consolidated Financial Statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand FTAI Infrastructure Inc.

(the “Company,” “we,” “our” or “us”).

Our MD&A should be read in conjunction with our unaudited Consolidated and Combined Consolidated Financial Statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

We are in the business of acquiring, developing and operating assets and businesses that represent critical infrastructure for customers in the transportation and energy industries.

We were formed as FTAI Infrastructure LLC, a Delaware limited liability company and subsidiary of FTAI, on December 13, 2021.

Prior to the completion of the spin-off, as described below, we converted into FTAI Infrastructure Inc., a Delaware corporation, and hold all the material assets and investments that comprise FTAI's infrastructure business.

Prior to the spin-off, we were a subsidiary of FTAI, which is a Nasdaq-listed company that is externally managed and advised by our Manager.

Our operations consist of three primary business lines:

(i) Ports and Terminals, (ii) Railroads and (iii) companies and assets participating in global Energy Transition.

Our Ports and Terminals business develops or acquires industrial properties in strategic locations that store and handle for third parties a variety of energy products including crude oil, refined products and clean fuels.

In certain cases, we also develop and operate facilities, such as a 485 megawatt power plant at our Long Ridge terminal in Ohio through our equity method investment, that leverage the property’s location and key attributes to generate incremental value.

We were formed as FTAI Infrastructure LLC, a Delaware limited liability company and subsidiary of Fortress Transportation and Infrastructure Investors LLC (the “Former Parent” or “FTAI”), on December 13, 2021.

In connection with the spin-off, as described below, we converted into FTAI Infrastructure Inc., a Delaware corporation, and hold all the material assets and investments that comprise FTAI's infrastructure business.

Prior to the spin-off, we were a subsidiary of FTAI, which is a Nasdaq-listed company that is externally managed and advised by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”).

Our operations consist of four primary business lines:

(i) Railroad, (ii) Ports and Terminals, (iii) Power and Gas and (iv) Sustainability and Energy Transition.

Our Railroads business primarily invests in and operates short line and regional railroads in North America.

Our Energy Transition business focuses on investments in companies and assets that utilize green technology, produce sustainable fuels and products, or enable customers to reduce their carbon footprint.

Our Ports and Terminals business, consisting of our Jefferson Terminal and Repauno segments, develops or acquires industrial properties in strategic locations that store and handle for third parties a variety of energy products including crude oil, refined products and clean fuels.

Our Power and Gas business develops and operates facilities, such as a 485 megawatt power plant at our Long Ridge terminal in Ohio through our equity method investment, that leverage the property’s location and key attributes to generate incremental value.

Our Sustainability and Energy Transition business focuses on investments in companies and assets that utilize green technology, produce sustainable fuels and products or enable customers to reduce their carbon footprint.

We expect to continue to invest in such market sectors, and pursue additional investment opportunities in other infrastructure businesses and assets we believe to be attractive and meet our investment objectives.

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We believe that there are a large number of acquisition opportunities in our markets and that our Manager’s expertise and business and financing relationships, together with our access to capital and generally available capital for infrastructure projects in today’s marketplace, will allow us to take advantage of these opportunities.

As of June 30, 2022, we had total consolidated assets of $2.6 billion and total equity of $1.3 billion.

As of September 30, 2022, we had total consolidated assets of $2.5 billion and total temporary equity and equity of $0.8 billion.

Spin-Off of FTAI Infrastructure

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common stock for each FTAI common share held.

FTAI Infrastructure was spun out in an entity taxed as a corporation for U.S.

FTAI Infrastructure Inc.

was spun out in an entity taxed as a corporation for U.S.

federal income tax purposes and holds FTAI’s (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment (iv) Transtar business, (v) Aleon and Gladieux investment, (vi) KRS business, (vii) Clean Planet USA investment, (viii) FYX business, (ix) CarbonFree business, and (x) Containers business.

FTAI Infrastructure retained all related project-level debt of those entities.

In connection with the spin-off, FTAI Infrastructure entered into subscription agreements to issue $300.0 million of preferred stock and warrants and sold $500.0 million of 10.500% senior secured notes due 2027, the net proceeds of which were remitted to FTAI in connection with the separation.

FTAI Infrastructure is externally managed by the Manager.

In connection with the spin-off, FTAI Infrastructure entered into subscription agreements to issue $300.0 million of redeemable preferred stock and warrants and sold $500.0 million of 10.500% senior secured notes due 2027, the net proceeds of which were remitted to FTAI in connection with the separation.

FTAI Infrastructure Inc.

is externally managed by the Manager.

In connection with the spin-off, FTAI Infrastructure Inc.

entered into a management agreement with the Manager, an affiliate of Fortress, with substantially the same terms as the previously held management agreement between the Parent and the Manager.

entered into a management agreement with the Manager (the “Management Agreement”), with substantially the same terms as the previously held management agreement between the Former Parent and the Manager.

The Management Agreement has an initial term of six years.

The Manager will be entitled to a management fee, incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) and reimbursement of certain expenses on substantially similar terms as the existing arrangements with the Manager, except that all fees will be paid pursuant to the amended and restated management agreement rather than by one of FTAI Infrastructure’s subsidiaries.

The Manager will be entitled to a management fee, incentive fees (comprised of income incentive fees and capital gains incentive fees) and reimbursement of certain expenses on substantially similar terms as the previously held agreements with the Manager, except that all fees will be paid pursuant to the Management Agreement rather than by one of FTAI Infrastructure Inc.’s subsidiaries.

Tax Legislation

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022, which includes, among other provisions, changes to the U.S.

corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income” exceeding $1 billion.

We are continuing to evaluate the Inflation Reduction Act of 2022 and its requirements, as well as any potential impact on our business.

Impact of COVID-19

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In addition, we were unable to complete certain new customer contracts and certain of our existing customers did not increase volumes as anticipated which also adversely affected our revenues for those periods.

Recently, however, we have seen the activity starting to normalize and Jefferson Terminal crude throughput is expected to ramp back to pre-pandemic levels in 2022.

Recently, however, we have seen the activity starting to normalize and Jefferson Terminal crude throughput has ramped back up to pre-pandemic levels.

Due to the outbreak of COVID-19, we have taken measures to protect the health and safety of our employees, including having employees work remotely, where possible.

As COVID-19 continues to evolve, the extent to which COVID-19 impacts operations

will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to try and contain COVID-19 or treat its impact.

As COVID-19 continues to evolve, the extent to which COVID-19 impacts operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to try and contain COVID-19 or treat its impact.

We continue to monitor the pandemic and, the extent to which the continued spread of the virus adversely affects our customer base and therefore revenue.

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Operating Segments

Our reportable segments represent strategic business units comprised of investments in different types of transportation and infrastructure assets.

We have three reportable segments which operate in infrastructure businesses across several market sectors.

Our reportable segments are (i) Jefferson Terminal, (ii) Ports and Terminals and (iii) Transtar.

During the third quarter of 2022, we reorganized our historical operating segments into five operating segments as described below.

Additionally, during the third quarter of 2022, we modified our definition of Adjusted EBITDA to exclude the impact of interest costs on pension and other post-employment benefits (“OPEB”) liabilities and dividends and accretion expense of the redeemable preferred stock.

All segment data and related disclosures for earlier periods presented herein have been recast to reflect the new segment reporting structure.

Our reportable segments represent strategic business units comprised of investments in different types of infrastructure assets.

We have five reportable segments which operate in infrastructure businesses across several market sectors, all in North America.

Our reportable segments are (i) Railroad, (ii) Jefferson Terminal, (iii) Repauno, (iv) Power and Gas and (v) Sustainability and Energy Transition.

The Railroad segment is comprised of five freight railroads and one switching company that provide rail service to certain manufacturing and production facilities, in addition to KRS, a railcar cleaning operation.

The Jefferson Terminal segment consists of a multi-modal crude oil and refined products terminal and other related assets.

The Ports and Terminals segment consists of Repauno, which is a 1,630 acre deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities, and an equity method investment in Long Ridge, which is a 1,660 acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development opportunities, including a power plant.

The Transtar segment consists of five freight railroads and one switching company, of which two railroads are connected to US Steel's largest production facilities.

Corporate and Other primarily consists of corporate general and administrative expenses, and management fees, all allocated from the Parent.

Additionally, Corporate and Other currently includes (i) Containers, (ii) investments in Aleon, Gladieux, and Clean Planet USA, (iii) a note receivable from CarbonFree (iv) KRS and (v) an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries.

The Repauno segment consists of a 1,630-acre deep-water port located along the Delaware River with an underground storage cavern, a new multipurpose dock, a rail-to-ship transloading system and multiple industrial development opportunities.

The Power and Gas segment is comprised of an equity method investment in Long Ridge, which is a 1,660-acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development opportunities, including a power plant in operation.

The Sustainability and Energy Transition segment is comprised of Aleon/Gladieux, Clean Planet, and CarbonFree and all three investments are development stage businesses focused on sustainability and recycling, and all three investments are in development stages.

Corporate and Other primarily consists of unallocated corporate general and administrative expenses, management fees, debt and redeemable preferred stock.

Additionally, Corporate and Other includes an investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers and an investment in the majority stake of an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries.

On December 27, 2017, SoftBank Group Corp.

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We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational performance.

Adjusted EBITDA is defined as net income (loss) attributable to Parent, adjusted (a) to exclude the impact of provision for (benefit from) 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 our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

Comparison of the three and six months ended June 30, 2022 and 2021

The following table presents our combined consolidated results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Adjusted EBITDA is defined as net income (loss) attributable to stockholders and Former Parent, adjusted (a) to exclude the impact of provision for (benefit from) 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, interest expense, interest costs on pension and OPEB liabilities, and dividends and accretion expense related to redeemable preferred stock, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

Comparison of the three and nine months ended September 30, 2022 and 2021

The following table presents our results of operations:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

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Equity in losses of unconsolidated entities (12,080) (1,545) (10,535) (47,982) (8,810) (39,172)

Gain on sale of assets, net — 16 (16) — 16 (16)

(Loss) gain on sale of assets, net (134) — (134) (134) 16 (150)

Interest expense (19,161) (4,384) (14,777) (32,106) (9,396) (22,710)

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Net loss attributable to non-controlling interest in consolidated subsidiaries (8,381) (7,363) (1,018) (24,327) (18,949) (5,378)

Net loss attributable to Parent $ (29,480) $ (25,435) $ (4,045) $ (72,302) $ (34,763) $ (37,539)

The following table sets forth a reconciliation of net loss attributable to Parent to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Dividends and accretion on redeemable preferred stock 9,263 — 9,263 9,263 — 9,263

Net loss attributable to stockholders and Former Parent $ (44,076) $ (27,286) $ (16,790) $ (116,378) $ (62,050) $ (54,328)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net loss attributable to Parent $ (29,480) $ (25,435) $ (4,045) $ (72,302) $ (34,763) $ (37,539)

Net loss attributable to stockholders and Former Parent $ (44,076) $ (27,286) $ (16,790) $ (116,378) $ (62,050) $ (54,328)

Provision for (benefit from) income taxes 1,555 (1,634) 3,189 5,086 (2,755) 7,841

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Depreciation and amortization expense 18,136 17,131 1,005 52,451 38,900 13,551

17,319 11,686 5,633 34,315 21,769 12,546

Interest expense 19,161 4,384 14,777 32,106 9,396 22,710

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9,770 7,782 1,988 22,002 10,767 11,235

Dividends and accretion expense on redeemable preferred stock 9,263 — 9,263 9,263 — 9,263

Interest costs on pension and OPEB liabilities 896 — 896 896 — 896

Equity in losses of unconsolidated entities 12,080 1,545 10,535 47,982 8,810 39,172

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(1) Includes the following items for the three months ended June 30, 2022 and 2021:

(i) depreciation and amortization expense of $17,319 and $11,686, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

(i) depreciation and amortization expense of $34,315 and $21,769, respectively.

(2) Includes the following items for the three months ended June 30, 2022 and 2021:

(i) net loss of $(13,919) and $(7,010), (ii) interest expense of $6,795 and $288, (iii) depreciation and amortization expense of $6,349 and $1,845, (iv) acquisition and transaction expenses of $387 and $0 and (v) changes in fair value of non-hedge derivative instruments of $7,118 and $5,078, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

(i) net loss of $(36,007) and $(5,492), (ii) interest expense of $13,258 and $527, (iii) depreciation and amortization expense of $12,633 and $3,725, (iv) acquisition and transaction expenses of $391 and $—, (v) changes in fair value of non-hedge derivative instruments of $21,732 and $4,201 and (vi) asset impairment of $32 and $24, respectively.

(3) Includes the following items for the three months ended June 30, 2022 and 2021:

(i) equity-based compensation of $124 and $292, (ii) provision for income taxes of $14 and $13, (iii) interest expense of $1,319 and $732, (iv) depreciation and amortization expense of $2,321 and $2,172 and (v) changes in fair value of non-hedge derivative instruments of $(62) and $48, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

(i) equity based compensation of $250 and $490, (ii) provision for income taxes of $30 and $26, (iii) interest expense of $2,703 and $1,013, (iv) depreciation and amortization expense of $4,585 and $3,983, and (v) changes in fair value of non-hedge derivative instruments of $(36) and $(226), respectively.

Comparison of the three months ended June 30, 2022 and 2021

Total revenues increased $50.5 million primarily due to higher revenues of $38.1 million in the Transtar segment and $10.2 million in the Corporate segment, partially offset by lower revenues of $0.7 million in the Ports and Terminals segment.

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $(12,177) and $(3,794), (ii) interest expense of $7,551 and $300, (iii) depreciation and amortization expense of $7,883 and $2,953, (iv) acquisition and transaction expenses of $(16) and $—, (v) changes in fair value of non-hedge derivative instruments of $6,432 and $8,323, (vi) equity-based compensation of $95 and $— and (vii) asset impairment of $2 and $—, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $(48,184) and $(9,286), (ii) interest expense of $20,809 and $827, (iii) depreciation and amortization expense of $20,516 and $6,678, (iv) acquisition and transaction expenses of $375 and $—, (v) changes in fair value of non-hedge derivative instruments of $28,164 and $12,524, (vi) asset impairment of $34 and $24 and (vii) equity-based compensation of $288 and $—, respectively.

(2) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) equity-based compensation of $102 and $130, (ii) provision for income taxes of $464 and $11, (iii) interest expense of $1,326 and $926, (iv) depreciation and amortization expense of $2,507 and $2,195, (v) changes in fair value of non-hedge derivative instruments of $(15) and $158, (vi) acquisition and transaction expenses of $117 and $— and (vii) interest costs on pension and OPEB liabilities of $1 and $—, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) equity based compensation of $352 and $620, (ii) provision for income taxes of $494 and $37, (iii) interest expense of $4,029 and $1,939, (iv) depreciation and amortization expense of $7,091 and $6,178, (v) changes in fair value of non-hedge derivative instruments of $(50) and $(68), (vi) acquisition and transaction expenses of $117 and $— and (vii) interest costs on pension and OPEB liabilities of $1 and $—, respectively.

Comparison of the three months ended September 30, 2022 and 2021

Total revenues increased $41.8 million primarily due to higher revenues of $13.8 million in the Railroad segment, $5.3 million in the Jefferson Terminal segment and $20.3 million in the Corporate and Other segment.

Rail revenues increased $13.8 million due to our acquisition of Transtar in July 2021.

Other revenue increased $9.5 million, primarily due to the acquisition of a majority stake in and consolidation of FYX during the quarter.

Comparison of the six months ended June 30, 2022 and 2021

Total revenues increased $76.1 million, primarily due to higher revenues of $72.1 million in the Transtar segment, $10.2 million attributable to the acquisition and consolidation of FYX, partially offset by lower revenues of $10.8 million in the Ports and Terminals segment.

Terminal services revenues increased $5.5 million primarily due to higher volumes at Jefferson Terminal.

Other revenue increased $22.6 million, primarily due to the acquisition of a majority stake in and consolidation of FYX in May 2022.

Comparison of the nine months ended September 30, 2022 and 2021

Total revenues increased $117.9 million, primarily due to higher revenues of $85.3 million in the Railroad segment, $10.6 million in the Jefferson Terminal segme nt and $30.4 million in the Corporate and Other segment.

Rail revenues increased $84.3 million due to our acquisition of Transtar in July 2021.

Other revenue decreased $1.4 million, primarily due to a loss on butane forward purchase and sale contracts at Repauno, partially offset by the acquisition of a majority stake in and consolidation of FYX during the second quarter.

Comparison of the three months ended June 30, 2022 and 2021

Total expenses increased $44.0 million, primarily due to higher (i) operating expenses, (ii) depreciation and amortization and (iii) acquisition and transaction expenses.

Terminal services revenues increased $11.0 million primarily due to higher volumes at Jefferson Terminal.

Other revenue increased $21.8 million, primarily due to the acquisition of a majority stake in and consolidation of FYX in May 2022.

Comparison of the three months ended September 30, 2022 and 2021

Total expenses increased $26.8 million, primarily due to increased operating expenses, offset by lower acquisition and transaction expenses.

Operating expenses increased $28.8 million which primarily reflects:

• an increase of $12.3 million in compensation and benefits primarily due to the acquisition of Transtar in July 2021;

• an increase of $8.2 million in facility operating expense which primarily reflects (i) an increase of $6.9 million due to the acquisition of Transtar in July 2021 and (ii) an increase of $1.3 million in the Jefferson Terminal segment due to increased activity;

• an increase of $7.5 million in cost of sales primarily related to the consolidation of FYX during the second quarter of 2022;

• an increase of $3.2 million in repairs and maintenance expense primarily due to the acquisition of Transtar in July 2021.

Depreciation and amortization increased $5.6 million primarily due to (i) the acquisition of Transtar in July 2021 and (ii) assets placed into service at Jefferson Terminal.

Acquisition and transaction expenses increased $6.3 million primarily due to professional fees related to strategic transactions.

Comparison of the six months ended June 30, 2022 and 2021

• an increase of $15.6 million in cost of sales in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase of $6.1 million in compensation and benefits expense in the Railroad segment primarily due to the acquisition of Transtar in July 2021 and $2.8 million in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase in facility operating expense of $2.8 million in the Railroad segment due to the acquisition of Transtar in July 2021;

• an increase of $2.3 million in repairs and maintenance expense in the Railroad segment primarily due to the acquisition of Transtar in July 2021.

Acquisition and transaction expenses decreased $2.6 million primarily due to professional fees related to the Transtar transaction costs incurred in 2021.

Comparison of the nine months ended September 30, 2022 and 2021

Total expenses increased $103.2 million, primarily due to higher (i) operating expenses, (ii) depreciation and amortization and (iii) acquisition and transaction expenses.

Operating expenses increased $82.0 million which primarily reflects:

• an increase of $23.8 million in compensation and benefits primarily due to the acquisition of Transtar in July 2021;

• an increase of $14.5 million in facility operating expense which primarily reflects (i) an increase of $12.1 million due to the acquisition of Transtar in July 2021 and (ii) an increase of $2.7 million in the Jefferson Terminal segment due to increased activity;

• an increase of $7.5 million in cost of sales primarily related to the consolidation of FYX during the second quarter of 2022;

• an increase of $3.7 million in repairs and maintenance expense primarily due to the acquisition of Transtar in July 2021.

Depreciation and amortization increased $12.5 million primarily due to (i) assets placed into service at Repauno and Jefferson Terminal and (ii) the acquisition of Transtar in July 2021.

• an increase of $29.2 million in compensation and benefits expense in the Railroad segment primarily due to the acquisition of Transtar in July 2021 and $4.1 million in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase of $23.5 million in cost of sales in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase in facility operating expense of $14.6 million in the Railroad segment due to the acquisition of Transtar in July 2021 and $3.4 million in the Jefferson Terminal segment due to increased terminal activity;

• an increase of $5.9 million in repairs and maintenance expense in the Railroad segment primarily due to the acquisition of Transtar in July 2021.

Depreciation and amortization increased $13.6 million primarily due to (i) assets placed into service at Jefferson Terminal and (ii) the acquisition of Transtar in July 2021.

Acquisition and transaction expenses increased $7.0 million primarily due to professional fees related to strategic transactions.

Other expense

Total other expense increased $9.8 million during the three months ended June 30, 2022 which primarily reflects (i) an increase of $7.0 million in equity in losses of unconsolidated entities primarily due to unrealized losses on power swaps at Long Ridge and (ii) an increase of $3.0 million in interest expense primarily due to an increase of interest expense of $2.9 million at Jefferson Terminal due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB05 Loan Agreement.

Total other expense increased $37.0 million during the six months ended June 30, 2022, which primarily reflects (i) an increase of $28.6 million in equity in losses of unconsolidated entities primarily due to unrealized losses on power swaps at Long Ridge and (ii) an increase of $7.9 million in interest expense primarily due to an increase of interest expense of $7.8 million at Jefferson Terminal due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB05 Loan Agreement.

Net loss increased $5.9 million and $41.9 million during the three and six months ended June 30, 2022, respectively, primarily due to the changes noted above.

Total other expense increased $20.3 million during the three months ended September 30, 2022 which primarily reflects (i) an increase of $10.5 million in equity in losses of unconsolidated entities primarily due to realized and unrealized losses on power swaps at Long Ridge and (ii) an increase of $14.8 million in interest expense which reflects an increase in the average outstanding debt of approximately $317.6 million from the Senior Notes due 2027 (the "2027 Notes”) issued in July 2022.

Total other expense increased $57.3 million during the nine months ended September 30, 2022, which primarily reflects (i) an increase of $39.2 million in equity in losses of unconsolidated entities primarily due to realized and unrealized losses on power swaps at Long Ridge and (ii) an increase of $22.7 million in interest expense, which reflects an increase in the average outstanding debt of approximately $158.8 million from the 2027 Notes issued in July 2022.

Net loss increased $8.5 million and $50.4 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $23.3 million and $37.8 million during the three and six months ended June 30, 2022, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $16.9 million and $54.7 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Railroad Segment

The following table presents our results of operations:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Lease income $ 449 $ 358 $ 91 $ 1,490 $ 358 $ 1,132

Rail revenues 38,737 24,986 13,751 112,397 28,186 84,211

Total revenues 39,186 25,344 13,842 113,887 28,544 85,343

Operating expenses 22,003 14,374 7,629 63,933 18,065 45,868

Acquisition and transaction expenses 224 851 (627) 579 851 (272)

Depreciation and amortization 5,337 5,426 (89) 15,128 5,736 9,392

Total expenses 27,564 20,651 6,913 79,640 24,652 54,988

Other expense

Loss on sale of assets, net (134) — (134) (134) — (134)

Interest expense (64) (20) (44) (143) (42) (101)

Other expense (311) (197) (114) (976) (195) (781)

Total other expense (509) (217) (292) (1,253) (237) (1,016)

Income before income taxes 11,113 4,476 6,637 32,994 3,655 29,339

(Benefit from) provision for income taxes (942) 681 (1,623) 2,391 681 1,710

Net income 12,055 3,795 8,260 30,603 2,974 27,629

Net income attributable to non-controlling interest in consolidated subsidiaries 6 — 6 6 — 6

Net income attributable to stockholders and Former Parent $ 12,049 $ 3,795 $ 8,254 $ 30,597 $ 2,974 $ 27,623

The following table sets forth a reconciliation of net income attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net income attributable to stockholders and Former Parent $ 12,049 $ 3,795 $ 8,254 $ 30,597 $ 2,974 $ 27,623

(Benefit from) provision for income taxes (942) 681 (1,623) 2,391 681 1,710

Equity-based compensation expense 811 — 811 1,079 — 1,079

Acquisition and transaction expenses 224 851 (627) 579 851 (272)

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 5,337 5,426 (89) 15,128 5,736 9,392

Interest expense 64 20 44 143 42 101

Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — —

Dividends and accretion expense on redeemable preferred stock — — — — — —

Interest costs on pension and OPEB liabilities 896 — 896 896 — 896

Equity in earnings of unconsolidated entities — — — — — —

Non-controlling share of Adjusted EBITDA (1)

(20) — (20) (20) — (20)

Adjusted EBITDA $ 18,419 $ 10,773 $ 7,646 $ 50,793 $ 10,284 $ 40,509

________________________________________________________

(1) Includes the following items for the three months ended September 30, 2022:

(i) equity-based compensation of $1, (ii) provision for income taxes of $2, (iii) depreciation and amortization expense of $16, and (iv) interest costs on pension and OPEB liabilities of $1.

Includes the following items for the nine months ended September 30, 2022:

(i) equity-based compensation of $1, (ii) provision for income taxes of $2, (iii) depreciation and amortization expense of $16, and (iv) interest costs on pension and OPEB liabilities of $1.

Total revenues increased $13.8 million and $85.3 million for the three and nine months ended September 30, 2022, respectively, primarily due to the acquisition of Transtar on July 28, 2021.

Total expenses increased $6.9 million and $55.0 million during the three and nine months ended September 30, 2022, respectively, primarily due to the acquisition of Transtar on July 28, 2021.

Other expense

Total other expense increased $0.3 million and $1.0 million during the three and nine months ended September 30, 2022, respectively, primarily due to the acquisition of Transtar on July 28, 2021.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $7.6 million and $40.5 million during the three and nine months ended September 30, 2022, respectively, primarily due to the activity noted above.

Jefferson Terminal Segment

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

13 unchanged sentences

Net loss attributable to non-controlling interest in consolidated subsidiaries (8,002) (7,189) (813) (23,273) (18,742) (4,531)

Net loss attributable to Parent $ (8,823) $ (7,185) $ (1,638) $ (17,742) $ (11,967) $ (5,775)

The following table sets forth a reconciliation of net loss attributable to Parent to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Net loss attributable to stockholders and Former Parent $ (8,261) $ (8,974) $ 713 $ (26,003) $ (20,941) $ (5,062)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net loss attributable to Parent $ (8,823) $ (7,185) $ (1,638) $ (17,742) $ (11,967) $ (5,775)

Net loss attributable to stockholders and Former Parent $ (8,261) $ (8,974) $ 713 $ (26,003) $ (20,941) $ (5,062)

Provision for income taxes 2,114 48 2,066 2,251 163 2,088

8 unchanged sentences

Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — —

Dividends and accretion expense on redeemable preferred stock — — — — — —

Interest costs on pension and OPEB liabilities — — — — — —

Equity in earnings of unconsolidated entities — — — — — —

3 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2022 and 2021:

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) equity-based compensation of $94 and $124, (ii) provision for income taxes of $462 and $11, (iii) interest expense of $1,306 and $917 and (iv) depreciation and amortization expense of $2,129 and $2,115, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) equity-based compensation of $329 and $599, (ii) provision for income taxes of $492 and $37, (iii) interest expense of $3,979 and $1,910 and (iv) depreciation and amortization expense of $6,374 and $5,946, respectively.

Total revenues increased $3.0 million during the three months ended June 30, 2022 which reflects an increase in terminal services revenue of $3.1 million primarily due to higher volumes.

Total revenues increased $5.3 million during the six months ended June 30, 2022 which reflects an increase in terminal services revenue of $5.5 million primarily due to higher volumes.

Total expenses increased $2.9 million during the three months ended June 30, 2022, which reflects:

Total revenues increased $5.3 million during the three months ended September 30, 2022 which reflects an increase in terminal services revenue of $5.4 million primarily due to higher volumes.

Total revenues increased $10.6 million during the nine months ended September 30, 2022 which reflects an increase in terminal services revenue of $10.9 million primarily due to higher volumes.

Total expenses increased $2.1 million during the three months ended September 30, 2022, which reflects:

• an increase in operating expenses of $1.8 million primarily due to increased terminal activity;

• an increase in depreciation and amortization of $0.3 million due to additional assets being placed into service.

Total expenses increased $6.3 million during the six months ended June 30, 2022, which reflects:

Total expenses increased $8.4 million during the nine months ended September 30, 2022, which reflects:

• an increase in operating expenses of $5.6 million primarily due to increased terminal activity;

1 unchanged sentence

Other expense

Other expense increased $3.3 million during the three months ended June 30, 2022, which reflects an increase of $2.9 million due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB-5 Loan Agreement.

Other expense increased $8.5 million during the six months ended June 30, 2022, which reflects an increase of $7.8 million due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB-5 Loan Agreement.

Other expense increased $1.2 million during the three months ended September 30, 2022, which reflects an increase of $1.9 million due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB-5 Loan Agreement.

Other expense increased $9.7 million during the nine months ended September 30, 2022, which reflects an increase of $9.7 million due to the issuance of the Series 2021 Bonds in August 2021 and additional borrowings related to the EB-5 Loan Agreement.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $0.6 million and $1.6 million during the three and six months ended June 30, 2022, respectively, primarily due to the changes noted above.

Ports and Terminals

Adjusted EBITDA increased $4.1 million and $5.7 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Repauno Segment

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

7 unchanged sentences

Other expense

Equity in losses of unconsolidated entities (12,971) (9,183) (3,788) (34,352) (7,641) (26,711)

Gain on sale of equipment, net — 16 (16) — 16 (16)

Gain on sale of assets, net — — — — 16 (16)

Interest expense (432) (284) (148) (1,060) (858) (202)

Other income — 91 (91) — 91 (91)

Total other expense (432) (284) (148) (1,060) (842) (218)

Loss before income taxes (5,129) (8,296) 3,167 (18,846) (9,727) (9,119)

Benefit from income taxes — (774) 774 — (1,236) 1,236

Provision for income taxes — — — — — —

Net loss (5,129) (8,296) 3,167 (18,846) (9,727) (9,119)

Net loss attributable to non-controlling interest in consolidated subsidiaries (212) (174) (38) (862) (207) (655)

Net loss attributable to Parent $ (18,011) $ (12,211) $ (5,800) $ (47,587) $ (7,758) $ (39,829)

The following table sets forth a reconciliation of net loss attributable to Parent to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Net loss attributable to stockholders and Former Parent $ (4,917) $ (8,122) $ 3,205 $ (17,984) $ (9,520) $ (8,464)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net loss attributable to Parent $ (18,011) $ (12,211) $ (5,800) $ (47,587) $ (7,758) $ (39,829)

Benefit from income taxes — (774) 774 — (1,236) 1,236

Net loss attributable to stockholders and Former Parent $ (4,917) $ (8,122) $ 3,205 $ (17,984) $ (9,520) $ (8,464)

Provision for income taxes — — — — — —

Equity-based compensation expense 136 175 (39) 457 617 (160)

7 unchanged sentences

Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — —

7,472 246 7,226 13,567 2,951 10,616

Dividends and accretion expense on redeemable preferred stock — — — — — —

Interest costs on pension and OPEB liabilities — — — — — —

Equity in losses of unconsolidated entities — — — — — —

3 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2022 and 2021:

(i) net loss of $(12,972) and $(7,015), (ii) interest expense of $6,604 and $314, (iii) depreciation and amortization expense of $6,240 and $1,845, (iv) acquisition and transaction expenses of $387 and $—, (v) changes in fair value of non-hedge derivative instruments of $7,118 and $5,078, (vi) equity-based compensation of $95 and $—, and (vii) asset impairment of $— and $24, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

(i) net loss of $(34,352) and $(5,473), (ii) interest expense of $13,047 and $474, (iii) depreciation and amortization expense of $12,524 and $3,725, (iv) acquisition and transaction expenses of $391 and $—, (v) changes in fair value of non-hedge derivative instruments of $21,732 and $4,201 (vi) equity-based compensation of and $193 and $—, and (vii) asset impairment of $32 and $24, respectively.

(2) Includes the following items for the three months ended June 30, 2022 and 2021:

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) equity-based compensation of $7 and $6, (ii) interest expense of $20 and $9, (iii) depreciation and amortization expense of $110 and $80 and (iv) changes in fair value of non-hedge derivative instruments of $(15) and $158, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) equity-based compensation of $22 and $21, (ii) interest expense of $50 and $29, (iii) depreciation and amortization expense of $334 and $232 and (iv) changes in fair value of non-hedge derivative instruments of $(50) and $(68), respectively.

Total revenue decreased $0.7 million du ring the three months ended June 30, 2022 primarily due to a loss on butane forward purchase contracts at Repauno.

Total revenue decreased $10.8 million du ring the six months ended June 30, 2022 primarily due to a loss on butane forward purchase contracts at Repauno.

Total expenses increased $0.6 million du ring the three months ended June 30, 2022 which reflects (i) higher operating expenses of $0.5 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $0.2 million due to additional assets placed into service at Repauno.

Total expenses increased $1.6 million du ring the six months ended June 30, 2022 which reflects (i) higher operating expenses of $1.2 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $0.3 million due to additional assets placed into service at Repauno.

Total revenue increased $2.3 million du ring the three months ended September 30, 2022 primarily due to gains on butane forward purchase contracts, offset by a net decrease in sales from margin compression.

Total revenue decreased $8.4 million du ring the nine months ended September 30, 2022 primarily due to a loss on butane forward purchase contracts and margin compression.

Total expenses decreased $1.0 million during the three months ended September 30, 2022 which reflects lower operating expenses of $1.0 million due to decreased activity and sales from margin compression.

Total expenses increased $0.5 million du ring the nine months ended September 30, 2022 which reflects higher depreciation and amortization of $0.3 million due to additional assets placed into service.

Other expense

Total other expense increased $3.9 million and $26.9 million during the three and six months ended June 30, 2022, respectively, which reflects an increase in equity method losses in unconsolidated entities primarily due to unrealized and realized losses on power swaps at Long Ridge.

Total other expense increased $0.1 million and $0.2 million during the three and nine months ended September 30, 2022, respectively, which reflects an increase in interest expense due to an increase in the borrowing rate on the revolver.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $3.3 million and $4.5 million during the three and six months ended June 30, 2022, respectively, primarily due to the changes noted above.

Adjusted EBITDA decreased $1.4 million and $7.3 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Power and Gas Segment

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Lease income $ 553 $ — $ 553 $ 1,041 $ — $ 1,041

Rail revenues 37,507 — 37,507 71,089 — 71,089

Other revenue $ — $ — $ — $ — $ — $ —

Total revenues — — — — — —

1 unchanged sentence

Acquisition and transaction expenses 358 — 358 358 — 358

Depreciation and amortization 4,696 — 4,696 9,455 — 9,455

Total expenses 656 19 637 824 61 763

Other expense

Equity in losses of unconsolidated entities (9,222) (1,620) (7,602) (43,574) (9,262) (34,312)

Other expense (25) (3,955) 3,930 (25) (3,864) 3,839

Total other expense (9,247) (5,575) (3,672) (43,599) (13,126) (30,473)

Loss before income taxes (9,903) (5,594) (4,309) (44,423) (13,187) (31,236)

Benefit from income taxes — (2,363) 2,363 — (3,599) 3,599

Net loss (9,903) (3,231) (6,672) (44,423) (9,588) (34,835)

Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — —

Net loss attributable to stockholders and Former Parent $ (9,903) $ (3,231) $ (6,672) $ (44,423) $ (9,588) $ (34,835)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net loss attributable to stockholders and Former Parent $ (9,903) $ (3,231) $ (6,672) $ (44,423) $ (9,588) $ (34,835)

Benefit from income taxes — (2,363) 2,363 — (3,599) 3,599

Equity-based compensation expense — — — — — —

Acquisition and transaction expenses 358 — 358 358 — 358

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 — — — — — —

Interest expense — — — — — —

Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)

11,576 7,761 3,815 25,143 10,712 14,431

Dividends and accretion expense on redeemable preferred stock — — — — — —

Interest costs on pension and OPEB liabilities — — — — — —

Equity in losses of unconsolidated entities 9,222 1,620 7,602 43,574 9,262 34,312

Non-controlling share of Adjusted EBITDA — — — — — —

Adjusted EBITDA (non-GAAP) $ 11,253 $ 3,787 $ 7,466 $ 24,652 $ 6,787 $ 17,865

________________________________________________________

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $(9,222) and $(3,789), (ii) interest expense of $6,720 and $274, (iii) depreciation and amortization expense of $7,565 and $2,953, (iv) acquisition and transaction expenses of $(16) and $—, (v) changes in fair value of non-hedge derivative instruments of $6,432 and $8,323, (vi) equity-based compensation of $95 and $—, and (vii) asset impairment of $2 and $—, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $(43,574) and $(9,262), (ii) interest expense of $19,767 and $748, (iii) depreciation and amortization expense of $20,089 and $6,678, (iv) acquisition and transaction expenses of $375 and $—, (v) changes in fair value of non-hedge derivative instruments of $28,164 and $12,524, (vi) equity-based compensation of $288 and $—, and (vii) asset impairment of $34 and $24, respectively.

Other expense

Total other expense increased $3.7 million and $30.5 million during the three and nine months ended September 30, 2022, respectively, which reflects an increase in equity method losses in unconsolidated entities of $7.6 million and $34.3 million, respectively.

This is primarily due to realized and unrealized losses on power swaps at Long Ridge, offset by a decrease in other expense of $3.9 million and $3.8 million, respectively, mostly attributable to a write-off of an earn-out receivable on the Long Ridge investment during the three months ended September 30, 2021.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $7.5 million and $17.9 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Sustainability and Energy Transition Segment

The following table presents our results of operations:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Other revenue $ — $ — $ — $ — $ — $ —

Total revenues — — — — — —

Operating expenses — — — 10 — 10

Acquisition and transaction expenses — — — 29 — 29

Total expenses — — — 39 — 39

Other (expense) income

Equity in losses of unconsolidated entities (2,891) — (2,891) (4,529) — (4,529)

Other income 473 — 473 1,553 — 1,553

Total other expense (2,418) — (2,418) (2,976) — (2,976)

Income before income taxes 13,698 — 13,698 23,320 — 23,320

Provision for income taxes 1,818 — 1,818 3,333 — 3,333

Net income 11,880 — 11,880 19,987 — 19,987

Net income attributable to non-controlling interest in consolidated subsidiaries — — — — — —

Net income attributable to Parent $ 11,880 $ — $ 11,880 $ 19,987 $ — $ 19,987

The following table sets forth a reconciliation of net income attributable to Parent to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Loss before income taxes (2,418) — (2,418) (3,015) — (3,015)

Benefit from income taxes (61) — (61) — — —

Net loss (2,357) — (2,357) (3,015) — (3,015)

Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — —

Net loss attributable to stockholders and Former Parent $ (2,357) $ — $ (2,357) $ (3,015) $ — $ (3,015)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net income attributable to Parent $ 11,880 $ — $ 11,880 $ 19,987 $ — $ 19,987

Provision for income taxes 1,818 — 1,818 3,333 — 3,333

Net loss attributable to stockholders and Former Parent $ (2,357) $ — $ (2,357) $ (3,015) $ — $ (3,015)

Benefit from income taxes (61) — (61) — — —

Equity-based compensation expense — — — — — —

7 unchanged sentences

Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)

Equity in earnings of unconsolidated entities — — — — — —

(1,813) — (1,813) (3,186) — (3,186)

Dividends and accretion expense on redeemable preferred stock — — — — — —

Interest costs on pension and OPEB liabilities — — — — — —

Equity in losses of unconsolidated entities 2,891 — 2,891 4,529 — 4,529

Non-controlling share of Adjusted EBITDA — — — — — —

Adjusted EBITDA $ 18,826 $ — $ 18,826 $ 33,473 $ — $ 33,473

Total revenues were $38.1 million and $72.1 million for the three and six months ended June 30, 2022, respectively, which primarily consists of switching, interline, and ancillary rail services.

Total expenses were $24.0 million and $48.1 million during the three and six months ended June 30, 2022, respectively.

Expenses primarily consists of (i) operating expenses of $19.2 million and $38.3 million during the three and six months ended June 30, 2022, respectively, comprised mostly of compensation and benefits of $11.8 million and $23.6 million, respectively, and facility operating expense of $6.9 million and $12.1 million, respectively, and (ii) depreciation and amortization of $4.7 million and $9.5 million, respectively.

Adjusted EBITDA (non-GAAP) $ (1,340) $ — $ (1,340) $ (1,643) $ — $ (1,643)

Adjusted EBITDA was $18.8 million and $33.5 million during the three and six months ended June 30, 2022, respectively, primarily due to the activity noted above.

________________________________________________________

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $(2,937) and $—, (ii) interest expense of $806 and $— and (iii) depreciation and amortization expense of $318 and $—, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $(4,584) and $—, (ii) interest expense of $971 and $— and (iii) depreciation and amortization expense of $427 and $—, respectively.

Other expense

Total other expense increased $2.4 million and $3.0 million during the three and nine months ended September 30, 2022, respectively, which reflects an increase in equity method losses in unconsolidated entities primarily due to increased losses at GM-FTAI Holdco LLC.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $1.3 million and $1.6 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Corporate and Other

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

8 unchanged sentences

Other income (expense)

Equity in (losses) earnings of unconsolidated entities (888) 2,372 (3,260) (1,550) 377 (1,927)

Equity in earnings of unconsolidated entities 33 75 (42) 121 452 (331)

Interest expense (12,682) — (12,682) (12,683) — (12,683)

Other income 1,043 3 1,040 1,043 3 1,040

Total other income (expense) 152 2,354 (2,202) (512) 358 (870)

Other income (expense) 132 (1) 133 95 (1) 96

Total other (expense) income (12,517) 74 (12,591) (12,467) 451 (12,918)

Loss before income taxes (21,153) (10,754) (10,399) (46,041) (24,975) (21,066)

2 unchanged sentences

Net loss attributable to non-controlling interest in consolidated subsidiaries (173) — (173) (198) — (198)

Net loss attributable to Parent $ (14,526) $ (6,039) $ (8,487) $ (26,960) $ (15,038) $ (11,922)

The following table sets forth a reconciliation of net loss attributable to Parent to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Dividends and accretion on redeemable preferred shares 9,263 — 9,263 9,263 — 9,263

Net loss attributable to stockholders and Former Parent $ (30,687) $ (10,754) $ (19,933) $ (55,550) $ (24,975) $ (30,575)

The following table sets forth a reconciliation of net loss attributable to stockholders and Former Parent to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2022 2021 2022 2021

Net loss attributable to Parent $ (14,526) $ (6,039) $ (8,487) $ (26,960) $ (15,038) $ (11,922)

Net loss attributable to stockholders and Former Parent $ (30,687) $ (10,754) $ (19,933) $ (55,550) $ (24,975) $ (30,575)

Provision for income taxes 444 — 444 444 — 444

9 unchanged sentences

7 21 (14) 45 55 (10)

Dividends and accretion expense on redeemable preferred stock 9,263 — 9,263 9,263 — 9,263

Interest costs on pension and OPEB liabilities — — — — — —

Equity in losses (earnings) of unconsolidated entities (33) (75) 42 (121) (452) 331

3 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2022 and 2021:

(i) net loss of $(947) and $5, (ii) interest expense of $191 and $(26), and (iii) depreciation and amortization expense of $109 and $—, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

(i) net loss of $(1,655) and $(19), (ii) interest expense of $211 and $53, and (iii) depreciation and amortization expense of $109 and $—, respectively.

(2) Includes the following items for the three months ended June 30, 2022 and 2021:

depreciation and amortization expense of $115 and $—, respectively.

Includes the following items for the six months ended June 30, 2022 and 2021:

depreciation and amortization expense of $115 and $—, respectively.

Total revenues increased $10.2 million during the three months ended June 30, 2022 primarily due to an increase of $10.2 million in other revenues from the acquisition of a majority interest in and consolidation of FYX during the second quarter of 2022.

Total revenues increased $9.5 million during the six months ended June 30, 2022 primarily due to an increase of $10.2 million in other revenues from the acquisition of a majority interest in and consolidation of FYX during the second quarter of 2022.

Comparison of the six months ended June 30, 2022 and 2021

Total expenses increased $20.5 million primarily due to higher (i) operating expenses and (ii) acquisition and transaction expenses.

Operating expenses increased $9.8 million which reflects increases of (i) cost of sales of $7.8 million and (ii) compensation and benefits of $1.4 million primarily related to the consolidation of FYX during the second quarter of 2022.

Acquisition and transaction expense increased $6.2 million primarily due to professional fees related to strategic transactions.

Comparison of the three months ended June 30, 2022 and 2021

Total expenses increased $16.4 million primarily due to higher (i) operating expenses and (ii) acquisition and transaction expenses.

Acquisition and transaction expense increased $9.2 million primarily due to professional fees related to strategic transactions.

(1) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $(18) and $(5) and (ii) interest expense of $25 and $26, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $(26) and $(24) and (ii) interest expense of $71 and $79, respectively.

(2) Includes the following items for the three months ended September 30, 2022 and 2021:

(i) acquisition and transaction expenses of $117 and $— and (ii) depreciation and amortization expense of $252 and $—, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) acquisition and transaction expenses of $117 and $— and (ii) depreciation and amortization expense of $367 and $—, respectively.

Total revenues increased $20.3 million and $30.4 million for the three and nine months ended September 30, 2022, respectively, primarily due to the acquisition of a majority stake and consolidation of FYX in May 2022.

Total expenses increased $18.1 million and $38.6 million during the three and nine months ended September 30, 2022, respectively, primarily due to the acquisition of a majority stake and consolidation of FYX in May 2022.

Other expense

Total other expense decreased $2.2 million and $0.9 million during the three and six months ended June 30, 2022, respectively, primarily due to an increase of $3.3 million and $1.9 million in equity in losses of unconsolidated entities during the three and six

months ended June 30, 2022, respectively.

Total other expense increased $12.6 million during the three months ended September 30, 2022 primarily due to increased interest expense of $12.7 million, which reflects an increase in the average outstanding debt of approximately $317.6 million from the 2027 Notes issued in July 2022.

Total other expense increased $12.9 million during the nine months ended September 30, 2022, primarily due to increased interest expense of $12.7 million, which reflects an increase in the average outstanding debt of approximately $105.9 million from the 2027 Notes issued in July 2022.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $0.6 million and $1.8 million during the three and six months ended June 30, 2022, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $0.5 million and decreased $0.4 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Liquidity and Capital Resources

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This includes limiting discretionary spending across the organization and re-prioritizing our capital projects amid the COVID-19 pandemic.

Our principal uses of liquidity have been and continue to be (i) acquisitions of transportation infrastructure and equipment,(ii) expenses associated with our operating activities, and (iii) debt service obligations associated with our investments.

• Cash used for the purpose of making investments was $120.5 million and $73.7 million during the six months ended June 30, 2022 and 2021, respectively.

Our principal uses of liquidity have been and continue to be (i) acquisitions of and investments in infrastructure assets, (ii) expenses associated with our operating activities and (iii) debt service obligations associated with our investments.

• Cash used for the purpose of making investments was $180.5 million and $779.4 million during the nine months ended September 30, 2022 and 2021, respectively.

• Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities.

Uses of liquidity associated with our debt obligations are captured in our cash flows from financing activities.

Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our infrastructure business net of operating expenses, (ii) proceeds from borrowings and (iii) proceeds from asset sales.

• Cash flows used in operating activities were $55.4 million and $57.8 million during the six months ended June 30, 2022 and 2021, respectively.

• During the six months ended June 30, 2022, additional borrowings were obtained in connection with the EB-5 Loan Agreement of $9.5 million.

We did not make any principal repayments of debt during the six months ended June 30, 2022.

During the six months ended June 30, 2021, additional borrowings were obtained in connection with the EB-5 Loan Agreement of $21.6 million.

• Proceeds from the sale of assets were $4.3 million and $0.0 million during the six months ended June 30, 2022 and 2021, respectively.

We are currently evaluating several potential Infrastructure transactions and related financings, which could occur within the next 12 months.

None of these transactions or negotiations or financings are definitive or included within our planned liquidity needs.

Our principal sources of liquidity to fund these uses have been and continue to be (i) cash and restricted cash on hand as of September 30, 2022, (ii) revenues from our infrastructure business net of operating expenses, (iii) proceeds from borrowings and (iv) proceeds from asset sales.

• Cash flows used in operating activities were $37.7 million and $69.8 million during the nine months ended September 30, 2022 and 2021, respectively.

• During the nine months ended September 30, 2022, additional borrowings were obtained in connection with the (i) 2027 Notes of $473.8 million and (ii) EB-5 Loan Agreement of $9.5 million.

We did not make any principal repayments of debt during the nine months ended September 30, 2022.

During the nine months ended September 30, 2021, additional borrowings were obtained in connection with the EB-5 Loan Agreement of $26.1 million.

• Proceeds from the sale of assets were $5.7 million and $— during the nine months ended September 30, 2022 and 2021, respectively.

We are currently evaluating several potential transactions and related financings, which could occur within the next 12 months.

None of these transactions, negotiations or financings are definitive or included within our planned liquidity needs.

We cannot assure if or when any such transaction will be consummated or the terms of any such transaction.

Historical Cash Flow

Comparison of the six months ended June 30, 2022 and 2021

The following table compares the historical cash flow for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

Comparison of the nine months ended September 30, 2022 and 2021

The following table compares the historical cash flow for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

(in thousands) 2022 2021

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Net cash used in operating activities decreased $32.1 million, which primarily reflects (i) certain adjustments to reconcile net loss to cash used in operating activities including equity in losses of unconsolidated entities of $39.2 million and (ii) changes in working capital of $18.7 million, partially offset by (iii) an increase in our net loss of $50.4 million.

Net cash used in investing activities increased $47.5 million, primarily due to an increase in acquisitions of property, plant and equipment of $39.9 million.

Net cash provided by financing activities decreased $25.2 million, primarily due to (i) a decrease in contributions from Parent of $10.2 million, and (iii) a decrease in proceeds from debt of $16.7 million.

We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy.

FAD is not a financial measure in accordance with U.S.

GAAP measure most directly comparable to FAD is net cash provided by operating activities.

We believe FAD is a useful metric for investors and analysts for similar purposes.

We define FAD as:

net cash provided by operating activities, 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 excludes changes in working capital.

The following table sets forth a reconciliation of Net Cash (Used in) Provided by Operating Activities to FAD:

Six Months Ended June 30,

(in thousands) 2022 2021

Net Cash Used in Operating Activities $ (55,390) $ (57,780)

Principal Collections on Finance Leases — —

Proceeds from Sale of Assets 4,304 —

Return of Capital Distributions from Unconsolidated Entities — —

Required Payments on Debt Obligations (1)

Capital Distributions to Non-Controlling Interest — —

Changes in Working Capital 43,388 36,237

Funds Available for Distribution (FAD) $ (7,698) $ (21,543)

FAD is subject to a number of limitations and assumptions and there can be no assurance that we will generate FAD sufficient to meet our intended dividends.

FAD has material limitations as a liquidity measure because such measure excludes items that are required elements of our net cash provided by operating activities as described below.

FAD should not be considered in isolation nor as a substitute for analysis of our results of operations under U.S.

GAAP, and it is not the only metric that should be considered in evaluating our ability to meet our stated dividend policy.

Specifically:

• FAD does not include equity capital called from our existing limited partners, proceeds from any debt issuance or future equity offering, historical cash and cash equivalents and expected investments in our operations.

• FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified.

• While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as we rely on alternative sources of liquidity to fund such purchases.

• FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as we have multiple sources of liquidity and intend to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity.

• FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments.

• 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 our distribution decisions.

• Management has significant discretion to make distributions, and we are not bound by any contractual provision that requires us to use cash for distributions.

If such factors were included in FAD, there can be no assurance that the results would be consistent with our presentation of FAD.

Net cash used in investing activities decreased $584.5 million, primarily due to a decrease of $623.6 million in acquisition of a business due to the acquisition of Transtar in the prior year.

Net cash provided by financing activities decreased $1.0 billion, primarily due to (i) a decrease in net contributions from Former Parent of $1.3 billion, (ii) an increase in the proceeds from the issuance of Preferred Stock of $274.6 million and (iii) an increase in proceeds from debt of $31.3 million.

Debt Obligations

Refer to Note 8 of the Combined Consolidated Financial Statements for additional information.

Refer to Note 8 of the Consolidated and Combined Consolidated Financial Statements for additional information.

Contractual Obligations

Our material cash requirements include the following contractual and other obligations:

Debt Obligations — As of June 30, 2022, we had outstanding principal and interest payment obligations of $0.7 billion and $0.3 billion, respectively, of which, $— and $29.6 million, respectively, are due in the next twelve months.

See Note 8 to the Combined Consolidated Financial Statements for additional information about our debt obligations.

Lease Obligations —As of June 30, 2022, we had outstanding operating and finance lease obligations of $172.9 million, of which $6.0 million is due in the next twelve months.

Other Obligations —As of June 30, 2022, in connection with a pipeline capacity agreement at Jefferson Terminal, we had an obligation to pay a minimum of $9.2 million in marketing fees in the next twelve months.

Other Cash Requirements —In addition to our contractual obligations, we intend to pay quarterly cash dividends on our common and preferred stock, which are subject to change at the discretion of our Board of Directors.

Debt Obligations — As of September 30, 2022, we had outstanding principal and interest payment obligations of $1.2 billion and $0.6 billion, respectively, of which, $— and $89.6 million, respectively, are due in the next twelve months.

See Note 8 to the Consolidated and Combined Consolidated Financial Statements for additional information about our debt obligations.

Lease Obligations —As of September 30, 2022, we had outstanding operating and finance lease obligations of $171.5 million, of which $7.8 million is due in the next twelve months.

Redeemable Preferred Stock Obligations —We are required to make a $1.7 million cash dividend payment on our redeemable preferred stock by December 31, 2022.

Other Obligations —As of September 30, 2022, in connection with a pipeline capacity agreement at Jefferson Terminal, we had an obligation to pay a minimum of $6.4 million in marketing fees in the next twelve months.

Other Cash Requirements —In addition to our contractual obligations, we intend to pay quarterly cash dividends on our common stock, which are subject to change at the discretion of our Board of Directors.

We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current operations.

We expect that our operating subsidiaries will generate sufficient

cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due.

We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due.

We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future.

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Goodwill — Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisition of Jefferson Terminal, Transtar, and FYX.

The carrying amount of goodwill was approximately $262.8 million and $257.1 million as of June 30, 2022 and December 31, 2021, respectively.

The carrying amount of goodwill was approximately $263.1 million and $257.1 million as of September 30, 2022 and December 31, 2021, respectively.

We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized.

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If the estimated fair value of the reporting unit is less than the carrying amount, a goodwill impairment is recorded to the extent that the carrying value of the reporting unit exceeds its fair value.

We estimate the fair value of the Jefferson and Transtar reporting units using an income approach, specifically a discounted cash flow analysis.

We estimate the fair value of the reporting units using an income approach, specifically a discounted cash flow analysis.

This analysis requires us to make significant assumptions and estimates about the forecasted revenue growth rates, EBITDA margins, capital expenditures, the timing of future cash flows, and discount rates.

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If the forecasted cash flows or other key inputs are negatively revised in the future, the estimated fair value of the reporting unit could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results.

Due to the acquisition of Transtar in 2021, the estimated fair value of that reporting unit approximates the book value.

The Jefferson reporting unit had an estimated fair value that exceeded its carrying value by more than 10% but less than 20%.

The Jefferson Terminal reporting unit had an estimated fair value that exceeded its carrying value by more than 10% but less than 20%.

The Jefferson Terminal segment forecasted revenue is dependent on the ramp up of volumes under current and expected future contracts for storage and throughput of heavy and light crude and refined products and is subject to obtaining rail capacity for crude, expansion of refined product distribution to Mexico and movements in future oil spreads.

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Further delays in executing these contracts or achieving our projections could adversely affect the fair value of the reporting unit.

The impact of the COVID-19 global pandemic during 2020 and 2021 negatively affected refining volumes and therefore Jefferson Terminal crude throughput but we have seen the activity starting to normalize and are expected to ramp back to pre-pandemic levels during 2022.

The impact of the COVID-19 global pandemic during 2020 and 2021

negatively affected refining volumes and therefore Jefferson Terminal crude throughput but we have seen the activity starting to normalize and are expected to ramp back to pre-pandemic levels during 2022.

Furthermore, we anticipate strengthening macroeconomic demand for storage and the increasing spread between Western Canadian Crude and Western Texas Intermediate as Canadian crude pipeline apportionment increases.

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Recent Accounting Pronouncements

See Note 2 to our Combined Consolidated Financial Statements for recent accounting pronouncements.

See Note 2 to our Consolidated and Combined Consolidated Financial Statements for recent accounting pronouncements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis