FTAI Infrastructure Inc. 10-Q

Item 2. 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 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. Overview 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 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 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. Our team focuses on acquiring a diverse group of long-lived assets or operating businesses that provide mission-critical services or functions to infrastructure networks and typically have high barriers to entry, strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. 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 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 On August 1, 2022, FTAI distributed to the holders of FTAI common shares as of July 21, 2022 one share of FTAI Infrastructure Inc. common stock for each FTAI common share held. 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 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 (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 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. Recent U.S. 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. 46 Impact of COVID-19 The ongoing COVID-19 pandemic has adversely affected our Jefferson Terminal business in several material ways since 2020. In particular, although difficult to quantify the impact, the pandemic adversely affected macro trends in refinery utilization rates in the United States and the global consumption of petroleum and liquid fuels in 2020 and part of 2021, which adversely affected our revenues for our Jefferson Terminal business. 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 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. 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. As the COVID-19 pandemic is complex and rapidly evolving, our plans as described above may change. At this point, we cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact on our business, results of operations, financial position and cash flows. For additional detail, see “Risk Factors—A pandemic, including COVID-19, could have an adverse impact on our business, financial condition, and results of operations.” Operating Segments 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 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. Our Manager On December 27, 2017, SoftBank Group Corp. (“SoftBank”) completed its acquisition of Fortress (the “SoftBank Merger”). In connection with the Softbank Merger, Fortress operates within SoftBank as an independent business headquartered in New York. Results of Operations Adjusted EBITDA (Non-GAAP) The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). This performance measure provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational performance. 47 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 Revenues Lease income $ 758 $ 791 $ (33) $ 2,465 $ 1,653 $ 812 Rail revenues 38,737 24,986 13,751 112,483 28,186 84,297 Terminal services revenues 16,964 11,469 5,495 43,975 33,010 10,965 Other revenue 22,100 (458) 22,558 31,652 9,825 21,827 Total revenues 78,559 36,788 41,771 190,575 72,674 117,901 Expenses Operating expenses 60,934 32,088 28,846 148,231 66,206 82,025 General and administrative 3,208 2,508 700 8,136 6,173 1,963 Acquisition and transaction expenses 2,754 5,342 (2,588) 15,862 8,860 7,002 Management fees and incentive allocation to affiliate 2,659 3,829 (1,170) 9,885 11,244 (1,359) Depreciation and amortization 18,136 17,131 1,005 52,451 38,900 13,551 Total expenses 87,691 60,898 26,793 234,565 131,383 103,182 Other expense Equity in losses of unconsolidated entities (12,080) (1,545) (10,535) (47,982) (8,810) (39,172) (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) Other expense (1,132) (6,244) 5,112 (2,144) (6,855) 4,711 Total other expense (32,507) (12,173) (20,334) (82,366) (25,045) (57,321) Loss from before income taxes (41,639) (36,283) (5,356) (126,356) (83,754) (42,602) Provision for (benefit from) income taxes 1,555 (1,634) 3,189 5,086 (2,755) 7,841 Net loss (43,194) (34,649) (8,545) (131,442) (80,999) (50,443) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (8,381) (7,363) (1,018) (24,327) (18,949) (5,378) Less: 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) 48 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 $ (44,076) $ (27,286) $ (16,790) $ (116,378) $ (62,050) $ (54,328) Add: Provision for (benefit from) income taxes 1,555 (1,634) 3,189 5,086 (2,755) 7,841 Add: Equity-based compensation expense 1,377 728 649 3,042 3,281 (239) Add: Acquisition and transaction expenses 2,754 5,342 (2,588) 15,862 8,860 7,002 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments (310) 4,594 (4,904) (1,058) (1,979) 921 Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 18,136 17,131 1,005 52,451 38,900 13,551 Add: Interest expense 19,161 4,384 14,777 32,106 9,396 22,710 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 9,770 7,782 1,988 22,002 10,767 11,235 Add: Dividends and accretion expense on redeemable preferred stock 9,263 — 9,263 9,263 — 9,263 Add: Interest costs on pension and OPEB liabilities 896 — 896 896 — 896 Less: Equity in losses of unconsolidated entities 12,080 1,545 10,535 47,982 8,810 39,172 Less: Non-controlling share of Adjusted EBITDA (2) (4,502) (3,420) (1,082) (12,034) (8,706) (3,328) Adjusted EBITDA (non-GAAP) $ 26,104 $ 9,166 $ 16,938 $ 59,220 $ 4,524 $ 54,696 ________________________________________________________ (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. Revenue 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. 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. 49 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. 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. Expenses 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 $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; and • 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 $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; and • 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 $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. 50 Net loss 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 $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 Revenues 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 Expenses 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 Less: 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 51 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 Add: (Benefit from) provision for income taxes (942) 681 (1,623) 2,391 681 1,710 Add: Equity-based compensation expense 811 — 811 1,079 — 1,079 Add: Acquisition and transaction expenses 224 851 (627) 579 851 (272) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 5,337 5,426 (89) 15,128 5,736 9,392 Add: Interest expense 64 20 44 143 42 101 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Add: Dividends and accretion expense on redeemable preferred stock — — — — — — Add: Interest costs on pension and OPEB liabilities 896 — 896 896 — 896 Less: Equity in earnings of unconsolidated entities — — — — — — Less: 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. Revenues 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. Expenses 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. 52 Jefferson Terminal 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 Revenues Lease income $ 309 $ 433 $ (124) $ 975 $ 1,295 $ (320) Terminal services revenues 16,868 11,469 5,399 43,776 32,853 10,923 Total revenues 17,177 11,902 5,275 44,751 34,148 10,603 Expenses Operating expenses 14,194 12,441 1,753 41,578 35,939 5,639 Depreciation and amortization 9,748 9,405 343 29,187 26,438 2,749 Total expenses 23,942 21,846 2,096 70,765 62,377 8,388 Other expense Interest expense (5,983) (4,080) (1,903) (18,220) (8,496) (9,724) Other expense (1,401) (2,091) 690 (2,791) (2,795) 4 Total other expense (7,384) (6,171) (1,213) (21,011) (11,291) (9,720) Loss before income taxes (14,149) (16,115) 1,966 (47,025) (39,520) (7,505) Provision for income taxes 2,114 48 2,066 2,251 163 2,088 Net loss (16,263) (16,163) (100) (49,276) (39,683) (9,593) Less: 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 stockholders and Former Parent $ (8,261) $ (8,974) $ 713 $ (26,003) $ (20,941) $ (5,062) 53 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 $ (8,261) $ (8,974) $ 713 $ (26,003) $ (20,941) $ (5,062) Add: Provision for income taxes 2,114 48 2,066 2,251 163 2,088 Add: Equity-based compensation expense 430 553 (123) 1,506 2,664 (1,158) Add: Acquisition and transaction expenses — — — — — — Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 9,748 9,405 343 29,187 26,438 2,749 Add: Interest expense 5,983 4,080 1,903 18,220 8,496 9,724 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Add: Dividends and accretion expense on redeemable preferred stock — — — — — — Add: Interest costs on pension and OPEB liabilities — — — — — — Less: Equity in earnings of unconsolidated entities — — — — — — Less: Non-controlling share of Adjusted EBITDA (1) (3,991) (3,167) (824) (11,174) (8,492) (2,682) Adjusted EBITDA (non-GAAP) $ 6,023 $ 1,945 $ 4,078 $ 13,987 $ 8,328 $ 5,659 ________________________________________________________ (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 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. Revenues 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. Expenses 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; and • an increase in depreciation and amortization of $0.3 million due to additional assets being placed into service. 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; and • an increase in depreciation and amortization of $2.7 million due to additional assets being placed into service. Other expense 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. 54 Adjusted EBITDA (Non-GAAP) 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 September 30, Change Nine Months Ended September 30, Change (in thousands) 2022 2021 2022 2021 Revenues Rail revenues $ — $ — $ — $ 86 $ — $ 86 Terminal services revenues 96 — 96 199 157 42 Other revenue 1,783 (458) 2,241 1,248 9,825 (8,577) Total revenues 1,879 (458) 2,337 1,533 9,982 (8,449) Expenses Operating expenses 4,266 5,254 (988) 12,264 12,141 123 Depreciation and amortization 2,310 2,300 10 7,055 6,726 329 Total expenses 6,576 7,554 (978) 19,319 18,867 452 Other expense Gain on sale of assets, net — — — — 16 (16) Interest expense (432) (284) (148) (1,060) (858) (202) 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) Provision for income taxes — — — — — — Net loss (5,129) (8,296) 3,167 (18,846) (9,727) (9,119) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (212) (174) (38) (862) (207) (655) Net loss attributable to stockholders and Former Parent $ (4,917) $ (8,122) $ 3,205 $ (17,984) $ (9,520) $ (8,464) 55 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 $ (4,917) $ (8,122) $ 3,205 $ (17,984) $ (9,520) $ (8,464) Add: Provision for income taxes — — — — — — Add: Equity-based compensation expense 136 175 (39) 457 617 (160) Add: Acquisition and transaction expenses — — — — — — Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments (310) 4,594 (4,904) (1,058) (1,979) 921 Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 2,310 2,300 10 7,055 6,726 329 Add: Interest expense 432 284 148 1,060 858 202 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Add: Dividends and accretion expense on redeemable preferred stock — — — — — — Add: Interest costs on pension and OPEB liabilities — — — — — — Less: Equity in losses of unconsolidated entities — — — — — — Less: Non-controlling share of Adjusted EBITDA (1) (122) (253) 131 (356) (214) (142) Adjusted EBITDA (non-GAAP) $ (2,471) $ (1,022) $ (1,449) $ (10,826) $ (3,512) $ (7,314) ________________________________________________________ (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 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. Revenues 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. Expenses 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 $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 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. 56 Power and Gas 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 Revenues Other revenue $ — $ — $ — $ — $ — $ — Total revenues — — — — — — Expenses Operating expenses 298 19 279 466 61 405 Acquisition and transaction expenses 358 — 358 358 — 358 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) Less: 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) 57 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) Add: Benefit from income taxes — (2,363) 2,363 — (3,599) 3,599 Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 358 — 358 358 — 358 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense — — — — — — Add: Interest expense — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 11,576 7,761 3,815 25,143 10,712 14,431 Add: Dividends and accretion expense on redeemable preferred stock — — — — — — Add: Interest costs on pension and OPEB liabilities — — — — — — Less: Equity in losses of unconsolidated entities 9,222 1,620 7,602 43,574 9,262 34,312 Less: 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. 58 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 Revenues Other revenue $ — $ — $ — $ — $ — $ — Total revenues — — — — — — Expenses 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) 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) Less: 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) 59 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 $ (2,357) $ — $ (2,357) $ (3,015) $ — $ (3,015) Add: Benefit from income taxes (61) — (61) — — — Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses — — — 29 — 29 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense — — — — — — Add: Interest expense — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (1,813) — (1,813) (3,186) — (3,186) Add: Dividends and accretion expense on redeemable preferred stock — — — — — — Add: Interest costs on pension and OPEB liabilities — — — — — — Less: Equity in losses of unconsolidated entities 2,891 — 2,891 4,529 — 4,529 Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ (1,340) $ — $ (1,340) $ (1,643) $ — $ (1,643) ________________________________________________________ (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. 60 Corporate and Other 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 Revenues Other revenue $ 20,317 $ — $ 20,317 $ 30,404 $ — $ 30,404 Total revenues 20,317 — 20,317 30,404 — 30,404 Expenses Operating expenses 20,173 — 20,173 29,980 — 29,980 General and administrative 3,208 2,508 700 8,136 6,173 1,963 Acquisition and transaction expenses 2,172 4,491 (2,319) 14,896 8,009 6,887 Management fees and incentive allocation to affiliate 2,659 3,829 (1,170) 9,885 11,244 (1,359) Depreciation and amortization 741 — 741 1,081 — 1,081 Total expenses 28,953 10,828 18,125 63,978 25,426 38,552 Other income (expense) Equity in earnings of unconsolidated entities 33 75 (42) 121 452 (331) Interest expense (12,682) — (12,682) (12,683) — (12,683) 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) Provision for income taxes 444 — 444 444 — 444 Net loss (21,597) (10,754) (10,843) (46,485) (24,975) (21,510) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (173) — (173) (198) — (198) Less: 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) 61 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 $ (30,687) $ (10,754) $ (19,933) $ (55,550) $ (24,975) $ (30,575) Add: Provision for income taxes 444 — 444 444 — 444 Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 2,172 4,491 (2,319) 14,896 8,009 6,887 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 741 — 741 1,081 — 1,081 Add: Interest expense 12,682 — 12,682 12,683 — 12,683 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 7 21 (14) 45 55 (10) Add: Dividends and accretion expense on redeemable preferred stock 9,263 — 9,263 9,263 — 9,263 Add: Interest costs on pension and OPEB liabilities — — — — — — Less: Equity in losses (earnings) of unconsolidated entities (33) (75) 42 (121) (452) 331 Less: Non-controlling share of Adjusted EBITDA (2) (369) — (369) (484) — (484) Adjusted EBITDA (non-GAAP) $ (5,780) $ (6,317) $ 537 $ (17,743) $ (17,363) $ (380) ________________________________________________________ (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. Revenues 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. Expenses 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 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 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. 62 Liquidity and Capital Resources We believe we have sufficient liquidity to satisfy our cash needs; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. 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 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) 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 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 Cash Flow Data: Net cash used in operating activities $ (37,691) $ (69,796) Net cash used in investing activities (194,870) (779,403) Net cash provided by financing activities 127,337 1,132,420 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 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 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 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. 63 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 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. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required. Critical Accounting Estimates and Policies 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 $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. An annual impairment review is conducted as of October 1 of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment. For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A qualitative analysis was not elected for the year ended December 31, 2021. A goodwill impairment assessment compares the fair value of the respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. 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 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. The estimates and assumptions used consider historical performance if indicative of future performance and are consistent with the assumptions used in determining future profit plans for the reporting units. In connection with our impairment analysis, although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management's judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. 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. 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. At October 31, 2021, approximately 4.3 million barrels of storage was currently operational with 1.9 million barrels currently under construction for new contracts which will complete our storage development for our main terminal. Our discount rate for our 2021 goodwill impairment analysis was 9.0% and our assumed terminal growth rate was 2.0%. If our strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting unit would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Although we do not have significant direct exposure to volatility of crude oil prices, changes in crude oil pricing that affect long term refining planned output could impact Jefferson Terminal operations. We expect the Jefferson Terminal segment to continue to generate positive Adjusted EBITDA in future years. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projected revenues are achievable. 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 64 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. Also, as our pipeline connections became fully operational during 2021, we remain positive for the outlook of Jefferson Terminal's earnings potential. There was no impairment of goodwill for the year ended December 31, 2021. Recent Accounting Pronouncements See Note 2 to our Consolidated and Combined Consolidated Financial Statements for recent accounting pronouncements.