FTAI Infrastructure Inc. 10-Q

Item 1. Financial Statements FTAI INFRASTRUCTURE INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) (Unaudited) Notes March 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents 2 $ 39,963 $ 36,486 Restricted cash 2 68,470 113,156 Accounts receivable, net 2 71,798 60,807 Other current assets 2 58,820 67,355 Total current assets 239,051 277,804 Leasing equipment, net 3 34,631 34,907 Operating lease right-of-use assets, net 70,163 71,015 Property, plant, and equipment, net 4 1,685,242 1,673,808 Investments 5 72,320 73,589 Intangible assets, net 6 58,309 60,195 Goodwill 2 260,252 260,252 Other assets 2 27,094 26,829 Total assets $ 2,447,062 $ 2,478,399 Liabilities Current liabilities: Accounts payable and accrued liabilities 2 $ 132,654 $ 136,048 Operating lease liabilities 7,124 7,045 Other current liabilities 2 14,905 16,488 Total current liabilities 154,683 159,581 Debt, net 7 1,274,149 1,230,157 Operating lease liabilities 62,644 63,147 Other liabilities 156,001 236,130 Total liabilities 1,647,477 1,689,015 Commitments and contingencies 17 Redeemable preferred stock ($ 0.01 par value per share; 200,000,000 shares authorized; 300,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022; redemption amount of $ 448.2 million at March 31, 2023 and December 31, 2022) 15 279,160 264,590 Equity Common stock ($ 0.01 par value per share; 2,000,000,000 shares authorized; 99,445,074 shares issued and outstanding as of March 31, 2023 and December 31, 2022) 994 994 Additional paid in capital 892,992 911,599 Accumulated deficit ( 86,856 ) ( 60,837 ) Accumulated other comprehensive loss ( 247,293 ) ( 300,133 ) Stockholders' equity 559,837 551,623 Non-controlling interest in equity of consolidated subsidiaries ( 39,412 ) ( 26,829 ) Total equity 520,425 524,794 Total liabilities, redeemable preferred stock and equity $ 2,447,062 $ 2,478,399 See accompanying notes to consolidated and combined consolidated financial statements. 5 FTAI INFRASTRUCTURE INC. CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Dollars in thousands, except share and per share data) Three Months Ended March 31, Notes 2023 2022 Revenues Total revenues 9 $ 76,494 $ 46,148 Expenses Operating expenses 2 65,162 38,068 General and administrative 3,201 2,430 Acquisition and transaction expenses 269 4,236 Management fees and incentive allocation to affiliate 13 2,982 4,161 Depreciation and amortization 3, 4, 6 20,135 16,996 Asset impairment 141 — Total expenses 91,890 65,891 Other income (expense) Equity in earnings (losses) of unconsolidated entities 5 4,366 ( 22,043 ) Loss on sale of assets, net ( 124 ) — Interest expense ( 23,250 ) ( 6,459 ) Other income (expense) 221 ( 459 ) Total other expense ( 18,787 ) ( 28,961 ) Loss before income taxes ( 34,183 ) ( 48,704 ) Provision for income taxes 12 1,729 1,584 Net loss ( 35,912 ) ( 50,288 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries ( 9,893 ) ( 7,466 ) Less: Dividends and accretion on redeemable preferred stock 14,570 — Net loss attributable to stockholders/Former Parent $ ( 40,589 ) $ ( 42,822 ) Loss per share: 16 Basic $ ( 0.39 ) $ ( 0.43 ) Diluted $ ( 0.40 ) $ ( 0.43 ) Weighted average shares outstanding: Basic 102,787,640 99,387,467 Diluted 102,787,640 99,387,467 See accompanying notes to consolidated and combined consolidated financial statements. 6 FTAI INFRASTRUCTURE INC. CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 2022 Net loss $ ( 35,912 ) $ ( 50,288 ) Other comprehensive income (loss): Other comprehensive income (loss) related to equity method investees, net 52,852 ( 96,948 ) Change in pension and other employee benefit accounts ( 12 ) — Comprehensive income (loss) 16,928 ( 147,236 ) Comprehensive loss attributable to non-controlling interest ( 9,893 ) ( 7,466 ) Comprehensive income (loss) attributable to stockholders/Former Parent $ 26,821 $ ( 139,770 ) See accompanying notes to consolidated and combined consolidated financial statements. 7 FTAI INFRASTRUCTURE INC. CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 Common Stock Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2022 $ 994 $ 911,599 $ ( 60,837 ) $ ( 300,133 ) $ ( 26,829 ) $ 524,794 Net loss ( 26,019 ) ( 9,893 ) ( 35,912 ) Other comprehensive income 52,840 52,840 Total comprehensive (loss) income — — ( 26,019 ) 52,840 ( 9,893 ) 16,928 Settlement of equity-based compensation ( 90 ) ( 90 ) Acquisition of consolidated subsidiary ( 953 ) ( 3,495 ) ( 4,448 ) Dividends declared on common stock ( 3,084 ) ( 3,084 ) Dividends and accretion on redeemable preferred stock ( 14,570 ) ( 14,570 ) Equity-based compensation 895 895 Equity - March 31, 2023 $ 994 $ 892,992 $ ( 86,856 ) $ ( 247,293 ) $ ( 39,412 ) $ 520,425 Three Months Ended March 31, 2022 Net Former Parent Investment Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2021 $ 1,617,601 $ ( 155,464 ) $ ( 91 ) $ 1,462,046 Net loss ( 42,822 ) ( 7,466 ) ( 50,288 ) Other comprehensive loss ( 96,948 ) ( 96,948 ) Total comprehensive loss ( 42,822 ) ( 96,948 ) ( 7,466 ) ( 147,236 ) Net transfers from Former Parent 34,270 34,270 Equity-based compensation 709 709 Equity - March 31, 2022 $ 1,609,049 $ ( 252,412 ) $ ( 6,848 ) $ 1,349,789 See accompanying notes to consolidated and combined consolidated financial statements. 8 FTAI INFRASTRUCTURE INC. CONSOLIDATED AND COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 35,912 ) $ ( 50,288 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity in (earnings) losses of unconsolidated entities ( 4,366 ) 22,043 Loss on sale of assets, net 124 — Equity-based compensation 895 709 Depreciation and amortization 20,135 16,996 Asset impairment 141 — Change in deferred income taxes 1,547 1,512 Change in fair value of non-hedge derivative 1,125 766 Amortization of deferred financing costs 1,429 841 Amortization of bond discount 1,045 — (Benefit from) provision for credit losses ( 165 ) 25 Change in: Accounts receivable ( 10,825 ) 13,744 Other assets 8,140 ( 2,315 ) Accounts payable and accrued liabilities 1,812 ( 19,488 ) Management fees payable to affiliate 4,888 — Other liabilities ( 2,157 ) 1,306 Net cash used in operating activities ( 12,144 ) ( 14,149 ) Cash flows from investing activities: Investment in unconsolidated entities ( 2,126 ) ( 1,637 ) Acquisition of consolidated subsidiary ( 4,448 ) — Acquisition of property, plant and equipment ( 39,861 ) ( 51,728 ) Investment in promissory notes and loans ( 20,500 ) — Proceeds from sale of property, plant and equipment 93 2,092 Net cash used in investing activities ( 66,842 ) ( 51,273 ) Cash flows from financing activities: Proceeds from debt 41,600 9,450 Payment of deferred financing costs ( 649 ) ( 277 ) Cash dividends - common stock ( 3,084 ) — Net transfers from Former Parent, net — 34,270 Settlement of equity-based compensation ( 90 ) — Net cash provided by financing activities 37,777 43,443 Net decrease in cash and cash equivalents and restricted cash ( 41,209 ) ( 21,979 ) Cash and cash equivalents and restricted cash, beginning of period 149,642 301,855 Cash and cash equivalents and restricted cash, end of period $ 108,433 $ 279,876 Supplemental disclosure of non-cash investing and financing activities: Acquisition of property, plant and equipment $ ( 2,245 ) $ — Dividends and accretion on redeemable preferred stock ( 14,570 ) — Non-cash change in equity method investment 52,852 ( 96,948 ) See accompanying notes to consolidated and combined consolidated financial statements. 9 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 1. ORGANIZATION FTAI Infrastructure Inc. (“we”, “us”, “our”, or the “Company”) is a Delaware corporation and was originally formed as a limited liability company on December 13, 2021 in connection with the spin-off of the infrastructure business (“FTAI Infrastructure”) of FTAI Aviation Ltd. (previously Fortress Transportation and Infrastructure Investors LLC, “FTAI” or “Former Parent”). The Company owns and operates (i) five freight railroads and one switching company that provide rail service to certain manufacturing and production facilities (“Transtar”), (ii) a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”), (iii) a deep-water port located along the Delaware River with an underground storage cavern, a multipurpose dock, a rail-to-ship transloading system and multiple industrial development opportunities (“Repauno”), (iv) an equity method investment in a multi-modal terminal located along the Ohio River with multiple industrial development opportunities, including a power plant (“Long Ridge”), and (v) an equity method investment in two ventures developing battery and metal recycling technology (“Aleon” and “Gladieux”). Additionally, we own and lease shipping containers (“Containers”) and operate a railcar cleaning business (“KRS”) as well as an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries (“FYX”). We have five reportable segments: (i) Railroad, (ii) Jefferson Terminal, (iii) Repauno, (iv) Power and Gas, and (v) Sustainability and Energy Transition, which all operate in the infrastructure sector (see Note 14). On August 1, 2022 (the “Spin-off Date”), FTAI distributed to the holders of FTAI common shares, one share of FTAI Infrastructure Inc. common stock for each FTAI common share held by such shareholder at the close of business on July 21, 2022 and we became an independent, publicly-traded company trading on The Nasdaq Global Select Market under the symbol “FIP.” The Company is headquartered in New York, New York. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation: Unaudited Consolidated and Combined Consolidated Financial Statements The Company’s financial statements for the periods through the Spin-off Date are combined consolidated financial statements. The Company’s financial statements for the period after the Spin-off Date are consolidated financial statements based on the reported results of FTAI Infrastructure Inc. as a standalone company. The historical results of operations, financial position, and cash flows of FTAI Infrastructure represented in the combined consolidated financial statements may not be indicative of what they would have been had FTAI Infrastructure actually been a separate standalone entity during such periods, nor are they necessarily indicative of our future results of operations, financial position, and cash flows. Basis of Presentation: Prior to spin-off The Company’s financial statements for the periods through the Spin-off Date were prepared on a standalone basis as if the operations had been conducted independently from the Former Parent and have been derived from the consolidated financial statements and accounting records of the Former Parent. Accordingly, Former Parent’s net investment in our operations (Net Former Parent investment) was shown in lieu of stockholders’ equity in the accompanying combined consolidated financial statements, which include the historical operations comprising the infrastructure business of FTAI. Prior to the Spin-off Date, the combined consolidated financial statements include certain assets and liabilities that have historically been held by the Former Parent but are specifically identifiable or otherwise attributable to FTAI Infrastructure. All significant intercompany transactions between Former Parent and FTAI Infrastructure have been included as components of Net Former Parent investment in the combined consolidated financial statements, as they are to be considered effectively settled upon effectiveness of the spin-off. The combined consolidated financial statements are presented as if our businesses had been combined for all periods presented. Principles of Combination —FTAI Infrastructure has elected the principles of combined consolidated financial statements as the basis of presentation for the periods through the Spin-off Date due to common ownership and management of the entities, which includes the financial results of the Railroad, Jefferson Terminal, Repauno, Power and Gas, and Sustainability and Energy Transition segments. Cash and Cash Equivalents —The Cash and Cash Equivalents reflected in the financial statements through the Spin-off Date are Cash and Cash Equivalents that were legally held by FTAI Infrastructure during the periods presented in the financial statements and are directly attributed to and used in the operations of FTAI Infrastructure. Debt and the Corresponding Interest Expense — The Debt reflected in the financial statements through the Spin-off Date was debt that was directly attributable to, and legally incurred by, FTAI Infrastructure. The corresponding interest expense presented in the financial statements was derived solely from the Debt directly attributed to FTAI Infrastructure. 10 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Corporate Function —For the periods through the Spin-off Date, the combined consolidated financial statements include all revenues and costs directly attributable to FTAI Infrastructure and an allocation of certain expenses. The Former Parent was externally managed by the Manager, which performed the Former Parent’s corporate function, and incurred a variety of expenses including, but not limited to, information technology, accounting, treasury, tax, legal, corporate finance and communications. For purposes of the Combined Consolidated Statements of Operations, an allocation of these expenses was included to reflect our portion of such corporate overhead from the Former Parent. The charges reflected have either been specifically identified or allocated based on an estimate of time spent on FTAI Infrastructure. These allocated costs were recorded in general and administrative, and acquisition and transaction expenses in the Combined Consolidated Statements of Operations. We believe the assumptions regarding allocations of the Former Parent’s Corporate expenses are reasonable. Nevertheless, the allocations may not be indicative of the actual expense that would have been incurred had FTAI Infrastructure operated as an independent, standalone public entity, nor are they indicative of the Company’s future expenses. Actual costs that may have been incurred if FTAI Infrastructure had been a standalone company would depend on a number of factors, including the organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. The Former Parent funded FTAI Infrastructure’s operating and investing activities as needed. Cash transfers to and from the Former Parent are reflected in the Combined Consolidated Statements of Cash Flows as “Net transfers from Former Parent”. Refer to Note 13 for additional discussion on corporate costs allocated from the Former Parent that are included in these combined consolidated financial statements . Subsequent to the Spin-off Date, the Company operated as a standalone company based on actual expenses incurred. Unaudited Interim Financial Information —The accompanying interim Consolidated Balance Sheet as of March 31, 2023, and the Consolidated and Combined Consolidated Statements of Operations, Comprehensive Income (Loss), Changes in Equity and Cash Flows for the three months ended March 31, 2023 and 2022 are unaudited. These unaudited interim consolidated and combined consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In the opinion of our management, the unaudited interim consolidated and combined consolidated financial statements include all adjustments necessary for the fair presentation of our financial position as of March 31, 2023, the results of operations, comprehensive income (loss), changes in equity and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other period. Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest. We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive income (loss). Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated and combined consolidated financial statements and the reported amounts of revenues and expenses during the reporting period, including allocations from the Former Parent during the period prior to the spin-off. Actual results could differ from those estimates. Risks and Uncertainties — In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We do not have significant exposure to foreign currency risk as all of our leasing and revenue arrangements are denominated in U.S. dollars. Variable Interest Entities — The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. 11 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Delaware River Partners LLC During 2016, through Delaware River Partners LLC (“DRP”), a consolidated subsidiary, we purchased the assets of Repauno, which consisted primarily of land, a storage cavern, and riparian rights for the acquired land, site improvements and rights. Upon acquisition there were no operational processes that could be applied to these assets that would result in outputs without significant green field development. We currently hold an approximately 98 % economic interest, and a 100 % voting interest in DRP. DRP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we are the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying consolidated and combined consolidated financial statements. Total VIE assets of DRP were $ 302.6 million and $ 306.0 million, and total VIE liabilities of DRP were $ 34.9 million and $ 34.1 million as of March 31, 2023 and December 31, 2022, respectively. Cash and Cash Equivalents — We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Restricted Cash — Restricted cash consists of prepaid interest and principal pursuant to the requirements of certain of our debt agreements (see Note 7) and other qualifying construction projects at Jefferson Terminal. Property, Plant, and Equipment, Leasing Equipment and Depreciation — Property, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over their estimated useful lives, to estimated residual values which are summarized as follows: Asset Range of Estimated Useful Lives Residual Value Estimates Railcars and locomotives 40 - 50 years from date of manufacture Scrap value at end of useful life Track and track related assets 15 - 50 years from date of manufacture Scrap value at end of useful life Land, site improvements and rights N/A N/A Bridges and tunnels 15 - 55 years Scrap value at end of useful life Buildings and site improvements 20 - 30 years Scrap value at end of useful life Railroad equipment 3 - 15 years from date of manufacture Scrap value at end of useful life Terminal machinery and equipment 15 - 25 years from date of manufacture Scrap value at end of useful life Vehicles 5 - 7 years from date of manufacture Scrap value at end of useful life Furniture and fixtures 3 - 6 years from date of purchase None Computer hardware and software 2 - 5 years from date of purchase None Construction in progress N/A N/A Major improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required to get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Project costs of major additions and betterments, including capitalizable engineering costs and other costs directly related to the development or construction of project, are capitalized and depreciation commences once it is placed into service. Interest costs directly related to and incurred during the construction period of property, plant and equipment are capitalized. Significant spare parts are depreciated in conjunction with the underlying property, plant and equipment asset when placed in service. We review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment or the assigned residual values is warranted. Capitalized Interest —The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. We capitalized interest of $ 1.4 million and $ 2.1 million during the three months ended March 31, 2023 and 2022, respectively. Repairs and Maintenance —Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Our repairs and maintenance expenses were $ 4.3 million and $ 1.3 million during the three months ended March 31, 2023 and 2022, respectively, and are included in Operating expenses in the Consolidated and Combined Consolidated Statements of Operations. Impairment of Long-Lived Assets —We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant change in market conditions; or the introduction of newer technology. When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows from terminal services contracts and currently contracted leases, future projected leases, terminal service and freight rail rates, 12 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) transition costs, and estimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge. Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the demand for a particular asset and historical experience, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, terminal service, and freight rail rates, residual values, economic conditions, technology, demand for a particular asset type and other factors. Other Current Assets —Other current assets is primarily comprised of commodities inventory of $ 0.9 million and $ 3.6 million, deposits of $ 21.6 million and $ 22.8 million, note receivable of $ 20.0 million and $ 20.0 million, prepaid expenses of $ 10.9 million and $ 16.4 million, and other assets of $ 5.5 million and $ 4.5 million as of March 31, 2023 and December 31, 2022, respectively. Other Assets —Other Assets primarily consists of a note receivable of $ 10.8 million as of both March 31, 2023 and December 31, 2022 from CarbonFree, a business that develops technologies to capture carbon dioxide from industrial emissions sources. Accounts Payable and Accrued Liabilities —Accounts payable and accrued liabilities primarily include payables relating to construction projects, interline payables to other railroads, accrued compensation, interest and payables to Manager. Other Current Liabilities —Other current liabilities primarily include environmental liabilities of $ 4.1 million and $ 4.1 million, and insurance premium liabilities of $ 4.1 million and $ 6.2 million as of March 31, 2023 and December 31, 2022, respectively. 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 within the Jefferson Terminal, Railroad and Corporate and Other segments was $ 122.7 million, $ 132.1 million, and $ 5.4 million as of both March 31, 2023 and December 31, 2022, 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 1st 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 goodwill impairment assessment compares the fair value of a 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 the fair value. As of October 1, 2022, for our Jefferson Terminal reporting unit, we completed a quantitative analysis. We estimate the fair value of Jefferson Terminal 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 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% as of October 1, 2022. The Jefferson Terminal reporting unit 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, expansion of refined product distribution to Mexico and movements in future oil spreads. At October 1, 2022, approximately 4.3 million barrels of storage was operational with 1.9 million barrels under construction for new contracts that came online in December 2022 and completed our storage development for our main terminal. Our discount rate for our 2022 goodwill impairment analysis was 9.5 % 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. 13 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) We expect the Jefferson Terminal reporting unit to continue to generate positive Adjusted EBITDA in future years. In December 2022, our multi-year refined products contract with Exxon Mobil Oil Corporation commenced. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projections are achievable. Further delays in executing anticipated contracts or achieving our projected volumes could adversely affect the fair value of the reporting unit. There were no impairments of goodwill for the three months ended March 31, 2023 and 2022. Intangibles and Amortization —Intangible assets include the value of existing customer relationships acquired in connection with the acquisition of Jefferson Terminal and Transtar. Customer relationship intangible assets are amortized on a straight-line basis over their useful lives as the pattern in which the asset’s economic benefits are consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 15 years, no estimated residual value, and amortization is recorded as a component of Depreciation and amortization in the Consolidated and Combined Consolidated Statements of Operations. The weighted-average remaining amortization period for customer relationships was 147 months and 148 months as of March 31, 2023 and December 31, 2022, respectively. Redeemable Preferred Stock —We classify the Series A Senior Preferred Stock ("Redeemable Preferred Stock") as temporary equity in the Consolidated Balance Sheets due to certain contingent redemption clauses that are at the election of the holders. The carrying value of the Redeemable Preferred Stock is accreted to the redemption value at the earliest redemption date, which has been determined to be August 1, 2030. We use the interest method to accrete to the redemption value. Deferred Financing Costs —Costs incurred in connection with obtaining long-term financing are capitalized and amortized to interest expense over the term of the underlying loans . Unamortized deferred financing costs of $ 29.5 million and $ 30.9 million as of March 31, 2023 and December 31, 2022, respectively, are included in Debt, net in the Consolidated Balance Sheets. Amortization expense was $ 1.4 million and $ 0.8 million for the three months ended March 31, 2023 and 2022, respectively, and is included in Interest expense in the Consolidated and Combined Consolidated Statements of Operations. Terminal Services Revenues —Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. The Company’s performance of service and right to invoice corresponds with the value delivered to our customers. Revenues are typically invoiced and paid on a monthly basis. Rail Revenues —Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and storage. Switching revenues are derived from the performance of switching services, which involve the movement of cars from one point to another within the limits of an individual plant, industrial area, or a rail yard. Switching revenues are recognized as the services are performed, and the services are generally completed on the same day they are initiated. Interline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other carriers. For interline traffic, one railroad typically invoices a customer on behalf of all railroads participating in the route directed by the customer. The invoicing railroad then pays the other railroads its portion of the total amount invoiced on a monthly basis. We record revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned or controlled by us on a net basis. Interline revenues are recognized as the transportation movements occur. Our ancillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the detention of cars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue is earned for the provision of storage of shippers’ railcars and is generally recognized on a per day, per car basis, as the storage services are provided. Lease Income —Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement. Roadside Services Revenues — Roadside services revenue is revenue related to providing roadside assistance services to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance obligation is satisfied by completing a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day payment terms. 14 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Other Revenue —Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the handling and storage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. Our performance of service and right to invoice corresponds with the value delivered to our customers. Revenues for the sale of raw materials relate to contracts that contain performance obligations to deliver the product over the term of the contract. The revenues are recognized when the control of the product is transferred to the customer, based on the volume delivered and the price within the contract. Other revenues are typically invoiced and paid on a monthly basis. Additionally, other revenue includes revenue related to derivative trading activities. Payment terms for revenues are generally short term in nature . Leasing Arrangements — At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized in Operating lease right-of-use assets, net and Operating lease liabilities within current liabilities and non-current liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Property, plant and equipment, net and lease liabilities are recognized in Other current liabilities and Other liabilities in our Consolidated Balance Sheets. All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets , for both operating and finance leases , are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method. Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs. We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets and lease liabilities; lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred. Concentration of Credit Risk —We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing ongoing credit evaluations. During the three months ended March 31, 2023, one customer in the Railroad segment accounted for approximately 48 % of total revenue. Additionally, we earned approximately 12 % of our revenue for the three months ended March 31, 2023 from one customer in the Jefferson Terminal segment. For the three months ended March 31, 2022, we earned 70 % and 12 % of our revenues from one customer in the Railroad segment and one customer in the Jefferson Terminal segment, respectively. As of March 31, 2023 accounts receivable from three customers from the Jefferson Terminal and Railroad segments represented 50 % of total accounts receivable, net. As of December 31, 2022, accounts receivable from three customers from the Jefferson Terminal and Railroad segments represented 55 % of total accounts receivable, net. We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts. Allowance for Doubtful Accounts — We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. We also consider current and future economic conditions over the expected lives of the receivables, the amount of receivables in dispute, and the current receivables aging. Expense Recognition —Expenses are recognized on an accrual basis as incurred. Acquisition and Transaction expenses —Acquisition and transaction expense is comprised of costs related to business combinations, dispositions and terminated deal costs related to asset acquisitions, including advisory, legal, accounting, valuation and other professional or consulting fees. Comprehensive Income (Loss) — Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net loss, as presented in the Consolidated and Combined Consolidated Statements of Operations, adjusted for fair value changes recorded in other comprehensive income (loss) related to cash flow hedges of our equity method investees and pension and other employee benefit accounts. 15 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Derivative Financial Instruments Electricity Derivatives — Our equity method investee, Long Ridge, enters into derivative contracts as part of a risk management program to mitigate price risk associated with certain electricity price exposures. Long Ridge primarily uses swap derivative contracts, which are agreements to buy or sell a quantity of electricity at a predetermined future date and at a predetermined price. Cash Flow Hedges Certain of these derivative instruments are designated and qualify as cash flow hedges. Our share of the derivative's gain or loss is reported as Other comprehensive income (loss) related to equity method investees, net in our Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss) and recorded in Accumulated other comprehensive loss in our Consolidated Balance Sheets. The change in our equity method investment balance related to derivative gains or losses on cash flow hedges is disclosed as a Non-cash change in equity method investment in our Consolidated and Combined Consolidated Statements of Cash Flows. Derivatives Not Designated As Hedging Instruments Certain of these derivative instruments are not designated as hedging instruments for accounting purposes. Our share of the change in fair value of these contracts is recognized in Equity in earnings (losses) of unconsolidated entities in the Consolidated and Combined Consolidated Statements of Operations. The cash flow impact of derivative contracts that are not designated as hedging instruments is recognized in Equity in earnings (losses) of unconsolidated entities in our Consolidated and Combined Consolidated Statements of Cash Flows. Income Taxes —Prior to the spin-off, we were taxed as a disregarded entity for U.S. federal income tax purposes and our taxable income or loss generated was allocated to investors by our Former Parent, which was treated as a partnership for U.S. federal income tax purposes. In addition, certain of our subsidiaries were taxed as separate corporations for U.S. federal income tax purposes. The income tax provision included in the consolidated and combined consolidated financial statements prior to the spin-off was prepared on a separate return method. Post spin-off, FTAI Infrastructure’s tax structure, certain return elections and assertions are different, including a single consolidated federal tax filing in the U.S., and therefore the income taxes presented prior to the spin-off in the consolidated and combined consolidated financial statements are not expected to be indicative of the Company’s future income taxes. We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized. Some of our entities file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in certain foreign jurisdictions. The income tax returns filed by us and our subsidiaries are subject to examination by the U.S. federal, state and foreign tax authorities. We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable based on its technical merits. Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in the Consolidated and Combined Consolidated Statements of Operations. Pension and Other Postretirement Benefits —We have obligations for a pension and a postretirement benefit plan in connection with the acquisition of Transtar for certain eligible Transtar employees. The pension and other postretirement obligations and the related net periodic costs are based on, among other things, assumptions regarding the discount rate, salary increases, the projected mortality of participants and the current level and future escalation of health care costs. Actuarial gains and losses occur when actual experience differs from any of the many assumptions used to value the benefit plans, or when assumptions change. We will recognize into income on an annual basis a portion of unrecognized actuarial net gains or losses that exceed 10 percent of the greater of the projected benefit obligations or the market-related value of plan assets (the corridor). This excess is amortized over the average remaining service period of active employees expected to receive benefits under the plan. Refer to Note 11 for additional discussion on the pension and postretirement benefit plans. 3. LEASING EQUIPMENT, NET Leasing equipment, net is summarized as follows: March 31, 2023 December 31, 2022 Leasing equipment $ 44,179 $ 44,179 Less: Accumulated depreciation ( 9,548 ) ( 9,272 ) Leasing equipment, net $ 34,631 $ 34,907 Depreciation expense for leasing equipment is summarized as follows: 16 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Three Months Ended March 31, 2023 2022 Depreciation expense for leasing equipment $ 276 $ 276 4. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net is summarized as follows: March 31, 2023 December 31, 2022 Land, site improvements and rights $ 183,526 $ 183,640 Construction in progress 145,544 127,941 Buildings and improvements 19,356 19,356 Bridges and Tunnels 173,868 173,868 Terminal machinery and equipment 1,152,592 1,141,505 Track and track related assets 100,068 100,068 Railroad equipment 9,007 8,463 Railcars and locomotives 99,983 100,200 Computer hardware and software 12,118 11,733 Furniture and fixtures 1,793 1,745 Other 11,407 11,336 1,909,262 1,879,855 Less: Accumulated depreciation ( 224,020 ) ( 206,047 ) Property, plant and equipment, net $ 1,685,242 $ 1,673,808 During the three months ended March 31, 2023, we added property, plant and equipment of $ 29.4 million, which primarily consisted of terminal machinery and equipment placed in service or under development at Jefferson Terminal and Repauno. Depreciation expense for property, plant and equipment is summarized as follows: Three Months Ended March 31, 2023 2022 Depreciation expense $ 17,973 $ 14,845 5. INVESTMENTS The following table presents the ownership interests and carrying values of our investments: Carrying Value Investment Ownership Percentage March 31, 2023 December 31, 2022 Intermodal Finance I, Ltd. Equity method 51 % $ — $ — Long Ridge Energy & Power LLC (1) Equity method 50 % — — GM-FTAI Holdco LLC Equity method See below 65,684 68,025 Clean Planet Energy USA LLC Equity method 50 % 6,636 5,564 $ 72,320 $ 73,589 ________________________________________________________ (1) The carrying value of $ 104.8 million and $ 187.2 million as of March 31, 2023 and December 31, 2022 is included in Other liabilities in the Consolidated Balance Sheets. We did not recognize any other-than-temporary impairments for the three months ended March 31, 2023 and 2022. 17 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table presents our proportionate share of equity in income (losses): Three Months Ended March 31, 2023 2022 Intermodal Finance I, Ltd. $ 21 $ 43 Long Ridge Energy & Power LLC 7,761 ( 21,381 ) GM-FTAI Holdco LLC ( 2,341 ) ( 433 ) Clean Planet Energy USA LLC ( 1,075 ) ( 272 ) Total $ 4,366 $ ( 22,043 ) Equity Method Investments Intermodal Finance I, Ltd. In 2012, we acquired a 51 % non-controlling interest in Intermodal Finance I, Ltd. (“Intermodal”). Intermodal is governed by a board of directors, and its shareholders have voting rights through their equity interests. As such, Intermodal is not within the scope of ASC 810-20 and should be evaluated for consolidation under the voting interest model. Due to the existence of substantive participating rights of the 49 % equity investor, including the joint approval of material operating and capital decisions, such as material contracts and capital expenditures consistent with ASC 810-10-25-11, we do not have unilateral rights over this investment and, therefore, we do not consolidate Intermodal but account for this investment in accordance with the equity method. We do not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met. As of March 31, 2023, Intermodal owns a portfolio of approximately 239 shipping containers subject to multiple operating leases. Long Ridge Energy & Power LLC In December 2019, Ohio River Shareholder LLC (“ORP”), a wholly owned subsidiary, contributed its equity interests in Long Ridge into Long Ridge Energy & Power LLC and sold a 49.9 % interest (the “Long Ridge Transaction”) for $ 150 million in cash, plus an earn out. We no longer have a controlling interest in Long Ridge but still maintain significant influence through our retained interest and, therefore, now account for this investment in accordance with the equity method. Following the sale, we deconsolidated ORP, which held the assets of Long Ridge. In addition to our equity method investment, in October 2022 we entered into a shareholder loan agreement maturing on October 15, 2023 and accruing paid-in-kind (“PIK”) interest at a 13 % rate. The Company made an additional $ 20.5 million of investment in Long Ridge as part of the shareholder loan agreement in Q1 2023. As of March 31, 2023, the balance of the note receivable was $ 49.2 million recorded as part of the Long Ridge investment in Other liabilities on the Consolidated Balance Sheet. 18 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The tables below present summarized financial information for Long Ridge Energy & Power LLC: (Unaudited) March 31, 2023 December 31, 2022 Balance Sheet Assets Current assets: Cash and cash equivalents $ 2,349 $ 2,192 Restricted cash 28,237 20,732 Accounts receivable 9,575 31,727 Other current assets 4,418 5,732 Total current assets 44,579 60,383 Property plant & equipment 834,903 827,886 Intangible assets 4,465 4,560 Goodwill 86,460 86,460 Other assets 8,346 8,540 Total assets $ 978,753 $ 987,829 Liabilities Current liabilities: Accounts payable and accrued liabilities $ 65,232 $ 87,498 Debt, net 60,446 38,526 Derivative liabilities 54,031 125,134 Other current liabilities 860 913 Total current liabilities 180,569 252,071 Debt, net 598,387 599,499 Derivative liabilities 500,957 557,708 Other liabilities 6,238 6,932 Total liabilities 1,286,151 1,416,210 Equity Shareholders' equity ( 168,105 ) ( 273,597 ) Accumulated deficit ( 139,293 ) ( 154,784 ) Total equity ( 307,398 ) ( 428,381 ) Total liabilities and equity $ 978,753 $ 987,829 Three Months Ended March 31, Income Statement 2023 2022 Total revenue $ 56,405 $ 24,411 Expenses Operating expenses 13,214 12,448 Depreciation and amortization 13,364 12,544 Interest expense 14,440 12,861 Total expenses 41,018 37,853 Total other income (expense) 105 ( 29,234 ) Net income (loss) $ 15,492 $ ( 42,676 ) 19 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) GM-FTAI Holdco LLC In September 2021, we acquired 1 % of the Class A shares and 50 % of the Class B shares of GM-FTAI Holdco LLC for $ 52.5 million. GM-FTAI Holdco LLC owns 100 % interest in Gladieux Metals Recycling (“GMR”) and Aleon Renewable Metals LLC (“Aleon”). GMR specializes in recycling spent catalyst produced in the petroleum refining industry. Aleon plans to develop a lithium-ion battery recycling business across the United States. Each planned location will collect, discharge and disassemble lithium-ion batteries to extract various metals in high-purity form for resale into the lithium-ion battery production market. Aleon and GMR are governed by separate boards of directors. Our ownership of Class A and B shares in GM-FTAI Holdco LLC provides us with 1 % and 50 % economic interest in GMR and Aleon, respectively. We account for our investment in GM-FTAI Holdco LLC as an equity method investment as we have significant influence through our ownership of Class A and Class B shares of GM-FTAI Holdco LLC. On June 15, 2022, we exchanged our Class B shares which gave us economic interest in Aleon for an additional 20 % interest in Class A shares. In addition, we also terminated our credit agreements with GMR and Aleon in exchange for an approximate 8.5 % of additional interest in Class A shares. As a result of these exchange transactions, we own approximately 27 % of GM-FTAI Holdco LLC, which owns 100 % of both GMR and Aleon. Clean Planet Energy USA LLC In November 2021, we acquired 50 % of the Class A shares of Clean Planet Energy USA LLC (“Clean Planet” or “CPE”) with an initial investment of $ 1.0 million. CPE intends on building waste plastic-to-fuel plants in the United States. The plants will convert various grades of non-recyclable waste plastic to renewable diesel in the form of jet fuel, diesel, naphtha, and low sulfur fuel oil. We account for our investment in CPE as an equity method investment as we have significant influence through our ownership of Class A shares. Equity Investments FYX Trust Holdco LLC In July 2020, we invested $ 1.3 million for a 14 % interest in an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries. FYX Trust Holdco LLC (“FYX”) has developed a mobile and web-based application that connects fleet managers, owner-operators, and drivers with repair vendors to efficiently and reliably quote, dispatch, monitor, and bill roadside repair services. In May 2022, we purchased an additional 51 % interest in FYX from an unrelated third party for a purchase price of $ 4.6 million, which resulted in our ownership of a majority stake in the entity. In March 2023, we purchased the remaining non-controlling interest of FYX from an affiliate of our Manager for a purchase price of $ 4.4 million. This resulted in 100 % ownership in FYX and the elimination of any non-controlling interest. From the initial consolidation date in May 2022 through and as of March 31, 2023, FYX is presented on a consolidated basis in the Consolidated and Combined Consolidated Statements of Operations and the Consolidated Balance Sheets. 6. INTANGIBLE ASSETS, NET Intangible assets, net are summarized as follows: March 31, 2023 Jefferson Terminal Railroad Total Intangible assets Customer relationships $ 35,513 $ 60,000 $ 95,513 Less: Accumulated amortization ( 30,480 ) ( 6,724 ) ( 37,204 ) Intangible assets, net $ 5,033 $ 53,276 $ 58,309 December 31, 2022 Jefferson Terminal Railroad Total Intangible assets Customer relationships $ 35,513 $ 60,000 $ 95,513 Less: Accumulated amortization ( 29,591 ) ( 5,727 ) ( 35,318 ) Intangible assets, net $ 5,922 $ 54,273 $ 60,195 20 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Amortization of intangible assets is as follows: Classification in Consolidated and Combined Consolidated Statements of Operations Three Months Ended March 31, 2023 2022 Customer relationships Depreciation and amortization $ 1,886 $ 1,875 As of March 31, 2023, estimated net annual amortization of intangibles is as follows: Remainder of 2023 $ 5,664 2024 6,370 2025 4,000 2026 4,000 2027 4,000 Thereafter 34,275 Total $ 58,309 7. DEBT, NET Our debt, net is summarized as follows: Outstanding Borrowings Stated Interest Rate Maturity Date March 31, 2023 December 31, 2022 Loans payable DRP Revolver (1) (i) Base Rate + 2.75 %; or (ii) Base Rate + 3.75 % (Term SOFR) 11/5/24 $ 25,000 $ 25,000 EB-5 Loan Agreement 5.75 % (i) 1/25/26 (ii) 11/26/27 63,800 62,200 Transtar Revolver (2) (i) Base Rate + 2.00 %; or (ii) Adjusted Term SOFR + 3.00 % 12/27/25 50,000 10,000 Total loans payable 138,800 97,200 Bonds payable Series 2020 Bonds (i) Tax Exempt Series 2020A Bonds: 3.625 % (ii) Tax Exempt Series 2020A Bonds: 4.00 % (iii) Taxable Series 2020B Bonds: 6.00 % (i) 1/1/35 (ii) 1/1/50 (iii) 1/1/25 263,980 263,980 Series 2021 Bonds (i) Series 2021A Bonds: 1.875 % to 3.000 % (ii) Series 2021B Bonds: 4.100 % (i) 1/1/26 to 1/1/50 (ii) 1/1/28 425,000 425,000 Senior Notes due 2027 (3) 10.500 % 6/1/27 475,873 474,828 Total bonds payable 1,164,853 1,163,808 Total Debt 1,303,653 1,261,008 Less: Debt issuance costs ( 29,504 ) ( 30,851 ) Total debt, net $ 1,274,149 $ 1,230,157 Total debt due within one year $ — $ — ________________________________________________________ (1) Requires a quarterly commitment fee at a rate of 1.000 % on the average daily unused portion, as well as customary letter of credit fees and agency fees. (2) Requires a quarterly commitment fee at a rate of 0.500 % on the average daily unused portion, as well as customary letter of credit fees and agency fees. (3) Includes an unamortized discount of $ 24,127 and $ 25,172 at March 31, 2023 and December 31, 2022, respectively. Transtar Revolver Amendment —In January 2023, our subsidiary entered into an amendment to an existing revolving credit facility (the “Transtar Revolver”) that provides for revolving loans in the aggregate amount of an additional $ 25.0 million, for a total facility of $ 50.0 million. The terms of the amendment are substantially the same as the original agreement. We were in compliance with all debt covenants as of March 31, 2023. 21 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 8. FAIR VALUE MEASUREMENTS Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs. • Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability. The valuation techniques that may be used to measure fair value are as follows: • Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. • Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts. • Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). The following tables set forth our financial assets measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Fair Value as of Fair Value Measurements Using Fair Value Hierarchy as of March 31, 2023 March 31, 2023 Total Level 1 Level 2 Level 3 Valuation Technique Assets Cash and cash equivalents $ 39,963 $ 39,963 $ — $ — Market Restricted cash 68,470 68,470 — — Market Total assets $ 108,433 $ 108,433 $ — $ — Fair Value as of Fair Value Measurements Using Fair Value Hierarchy as of December 31, 2022 December 31, 2022 Total Level 1 Level 2 Level 3 Valuation Technique Assets Cash and cash equivalents $ 36,486 $ 36,486 $ — $ — Market Restricted cash 113,156 113,156 — — Market Derivative assets 1,125 — 1,125 — Income Total $ 150,767 $ 149,642 $ 1,125 $ — Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy. The fair value of our commodity derivative assets that are classified as Level 2 measurements are estimated by applying the income and market approaches, based on quotes of observable market transactions, and adjusted for estimated differential factors based on quality and delivery locations. Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable, accounts payable and accrued liabilities, loans payable, and management fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles. 22 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The fair value of our bonds and notes payable reported as debt, net in the Consolidated Balance Sheets are presented in the table below: March 31, 2023 December 31, 2022 Series 2020 A Bonds (1) $ 140,143 $ 139,101 Series 2020 B Bonds (1) 74,418 74,543 Series 2021 A Bonds (1) 152,990 152,848 Series 2021 B Bonds (1) 160,396 163,238 Senior Notes due 2027 496,575 498,035 ________________________________________________________ (1) Fair value is based upon market prices for similar municipal securities. The fair value of all other items reported as debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy. We measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include goodwill, intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the underlying businesses. 9. REVENUES We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue. Revenues are within the scope of ASC 606, Revenue from Contracts with Customers , unless otherwise noted. We have elected to exclude sales and other similar taxes from revenues. Three Months Ended March 31, 2023 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Lease income $ 437 $ 306 $ — $ — $ — $ — $ 743 Rail revenues 40,568 — — — — — 40,568 Terminal services revenues — 18,786 362 — — — 19,148 Roadside services revenues — — — — — 17,850 17,850 Other revenue — — ( 1,815 ) — — — ( 1,815 ) Total revenues $ 41,005 $ 19,092 $ ( 1,453 ) $ — $ — $ 17,850 $ 76,494 Three Months Ended March 31, 2022 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Lease income $ 488 $ 352 $ — $ — $ — $ — $ 840 Rail revenues 34,600 — 86 — — — 34,686 Terminal services revenues — 12,694 90 — — — 12,784 Other revenue — — ( 2,162 ) — — — ( 2,162 ) Total revenues $ 35,088 $ 13,046 $ ( 1,986 ) $ — $ — $ — $ 46,148 23 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Presented below are the contracted minimum future annual revenues to be received under existing operating leases within the Jefferson Terminal segment as of March 31, 2023: Operating Leases Remainder of 2023 $ 9,572 2024 12,629 2025 12,595 2026 12,557 2027 12,136 Thereafter — Total $ 59,489 10. EQUITY-BASED COMPENSATION On August 1, 2022, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to grant equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the board of directors. As of March 31, 2023, the Incentive Plan provides for the issuance of up to 30.0 million shares. We account for equity-based compensation expense in accordance with ASC 718, Compensation-Stock Compensation and report within operating expenses and general and administrative expenses in the Consolidated and Combined Consolidated Statements of Operations. Options During the three months ended March 31, 2023, the Manager transferred 2,173,914 of its options to certain employees of the Manager. Subsidiary stock-based compensation The following table presents the expense related to our subsidiary stock-based compensation arrangements: Expense Recognized During the Three Months Ended March 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years) 2023 2022 Restricted Shares $ 444 $ 538 $ 1,068 0.9 Common Units 451 171 2,572 1.0 Total $ 895 $ 709 $ 3,640 11. RETIREMENT BENEFIT PLANS In connection with the acquisition of Transtar, we established a defined benefit pension plan as well as a postretirement benefit plan to assume certain retirement benefit obligations related to eligible Transtar employees. Defined Benefit Pensions Our underfunded pension plan is a tax qualified plan. Our pension plan covers certain eligible Transtar employees. These plans are noncontributory. Pension benefits earned are generally based on years of service and compensation during active employment. Postretirement Benefits Our unfunded postretirement plan provides healthcare and life insurance benefits for eligible retirees and dependents of Transtar. Depending on retirement date and employee classification, certain healthcare plans contain contribution and cost-sharing features such as deductibles and co-insurance. The remaining healthcare and life insurance plans are non-contributory. 24 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table summarizes our retirement benefit plan costs for the three months ended March 31, 2023 and 2022. Service costs are recorded in Operating expenses, while interest and amortization costs are recorded in Other (expense) income within the Consolidated and Combined Consolidated Statements of Operations. Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Pension Benefits Postretirement Benefits Pension Benefits Postretirement Benefits Service costs $ 348 $ 446 $ 438 $ 537 Interest costs 117 374 74 225 Amortization of prior service costs — 34 — — Amortization of actuarial gains ( 46 ) — — — Total $ 419 $ 854 $ 512 $ 762 The total employer contributions for the three months ended March 31, 2023 was $ 0.3 million, and the expected remaining scheduled employer contributions for the year ending December 31, 2023 is $ 1.2 million. 12. INCOME TAXES The current and deferred components of the income tax provision included in the Consolidated and Combined Consolidated Statements of Operations are as follows: Three Months Ended March 31, 2023 2022 Current: Federal $ — $ — State and local 182 72 Foreign — — Total current provision 182 72 Deferred: Federal 817 1,058 State and local 730 454 Foreign — — Total deferred provision 1,547 1,512 Provision for income taxes $ 1,729 $ 1,584 Prior to the spin-off, we were taxed as a disregarded entity for U.S. federal income tax purposes and our taxable income or loss generated was allocated to investors by our Former Parent, which was treated as a partnership for U.S. federal income tax purposes. In addition, certain of our subsidiaries were taxed as separate corporations for U.S. federal income tax purposes. Taxable income or loss generated by us and our corporate subsidiaries following the spin-off and by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business. A valuation allowance has been established against our net U.S. federal and state deferred tax assets, including net operating loss carryforwards. As a result, our income tax provision is primarily related to separate company state taxes, deferred taxes for tax deductible goodwill, and deferred taxes for certain long-lived assets. Our effective tax rate differs from the U.S. federal tax rate of 21% primarily due to state taxes and the valuation allowances against a significant portion of the deferred tax assets of our corporate subsidiaries. As of and for the three months ended March 31, 2023, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2018. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date of March 31, 2023. 25 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 13. MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS We are externally managed by the Manager. The Manager is paid annual fees and incentive fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto. In addition, the Manager may be reimbursed for various expenses incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities. On July 31, 2022, in connection with the spin-off, we and the Manager entered into the Management Agreement with an initial term of six years . The Manager is entitled to a management fee, incentive fees (comprised of an Income Incentive Fee and a Capital Gains Incentive Fee described below) and reimbursement of certain expenses. The management fee is determined by taking the average value of total equity (including redeemable preferred stock and excluding non-controlling interests) of the Company determined on a consolidated basis in accordance with U.S. GAAP at the end of the two most recently completed months multiplied by an annual rate of 1.50 %, and is payable monthly in arrears in cash. The Income Incentive Fee is calculated and distributable quarterly in arrears based on the pre-incentive fee net income for the immediately preceding calendar quarter (the “Income Incentive Fee”). For this purpose, pre-incentive fee net income means, with respect to a calendar quarter, net income attributable to stockholders during such quarter calculated in accordance with U.S. GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by the independent directors. Pre-incentive allocation net income does not include any Income Incentive Fee or Capital Gains Incentive Fee (described below) paid to the Manager during the relevant quarter. The Manager is entitled to an Income Incentive Fee with respect to its pre-incentive fee net income in each calendar quarter as follows: (1) no Income Incentive Fee in any calendar quarter in which pre-incentive fee net income, expressed as a rate of return on the average value of the Company’s net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2 % for such quarter ( 8 % annualized); (2) 100 % of pre-incentive fee net income of the Company with respect to that portion of such pre-incentive fee net income, if any, that equals or exceeds 2 % but does not exceed 2.2223 % for such quarter; and (3) 10 % of pre-incentive fee net income of the Company, if any, that exceeds 2.2223 % for portions of such quarter. These calculations will be prorated for any periods of less than three months. Capital Gains Incentive Fee is calculated and paid in arrears as of the end of each calendar year and is equal to 10 % of our pro rata share of cumulative realized gains from the date of the spin-off through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Fee payments were made to the Manager. The management fee, Income Incentive Fee, and Capital Gains Incentive Fee that are attributable to the operations of FTAI Infrastructure is recorded in the Management fees and incentive allocation to affiliate on the Consolidated and Combined Consolidated Statements of Operations. These amounts are allocated on the following basis: Management fee —Management fee is allocated to FTAI Infrastructure by applying the calculation methodology described above to the equity of FTAI Infrastructure included in these consolidated and combined consolidated financial statements. Income Incentive Allocation and Capital Gains Incentive Allocation —The Income Incentive Allocation and Capital Gains Incentive Allocation are allocated to FTAI Infrastructure by applying the allocation calculation methodology described above to FTAI Infrastructure’s financial results in each respective period. The following table summarizes the management fees, income incentive allocation and capital gains incentive allocation included in these consolidated and combined consolidated financial statements: Three Months Ended March 31, 2023 2022 Management fee $ 2,982 $ 4,161 Income Incentive Fee — — Capital Gains Incentive Fee — — Total $ 2,982 $ 4,161 26 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) For periods post-spin, we pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. For periods pre-spin, the Former Parent paid all of its operating expenses, except those specifically required to be borne by the Manager under the management agreement between the Former Parent and the Manager. The expenses required to be paid by the Company include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of its assets, legal and auditing fees and expenses, the compensation and expenses of the Company’s independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to the stockholders, costs incurred by the Manager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used by the Company, costs to obtain liability insurance to indemnify the Company’s directors and officers and the compensation and expenses of the transfer agent. We pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants. The Manager is responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses; we do not reimburse the Manager for these expenses. The following table summarizes our reimbursements to the Manager: Three Months Ended March 31, 2023 2022 Classification in the Consolidated and Combined Consolidated Statements of Operations: General and administrative $ 1,863 $ 1,130 Acquisition and transaction expenses 43 412 Total $ 1,906 $ 1,542 If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee. The termination fee is equal to the amount of the management fee during the 12 months immediately preceding such termination and an amount equal to the Income Incentive Fee and the Capital Gains Incentive Fee that would be paid to the Manager if the Company’s assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments). Upon the successful completion of an offering of our common stock or other equity securities (including securities issued as consideration in an acquisition), we grant the Manager options to purchase common stock in an amount equal to 10 % of the number of common stock being sold in the offering (or if the issuance relates to equity securities other than our common stock, options to purchase a number of common stock equal to 10 % of the gross capital raised in the equity issuance divided by the fair market value of a common stock as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of our common stock as of the date of the equity issuance if it relates to equity securities other than our common stock). Any ultimate purchaser of common stock for which such options are granted may be an affiliate of Fortress. In connection with the spin-off, we issued 10.9 million options to purchase common stock to the Manager, with a term of 10 years as compensation to the Manager for services rendered in connection with the Redeemable Preferred Stock raise, as discussed in Note 15. The following table summarizes amounts due to the Manager, which are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheets: March 31, 2023 December 31, 2022 Accrued management fees $ 2,982 $ 3,092 Other payables 1,906 — As of March 31, 2023 and December 31, 2022, there were no receivables from the Manager. Other Affiliate Transactions As of March 31, 2023 and December 31, 2022, affiliates of our Manager and their related parties collectively own an approximately 20 % interest in Jefferson Terminal which has been accounted for as a component of non-controlling interest in consolidated subsidiaries in the consolidated and combined consolidated financial statements. The carrying amount of this non-controlling interest at March 31, 2023 and December 31, 2022 was $( 50.3 ) million and $( 41.1 ) million, respectively. 27 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table presents the amount of this non-controlling interest share of net loss: Three Months Ended March 31, 2023 2022 Non-controlling interest share of net loss $ ( 9,185 ) $ ( 7,466 ) In July 2020, we purchased a 14 % interest in FYX from an affiliate of our Manager, which retained a non-controlling interest in FYX subsequent to the transaction. In May 2022, we purchased an additional 51 % interest in FYX from an unrelated third party for a purchase price of $ 4.6 million, which resulted in our ownership of a majority stake in the entity. In March 2023, we purchased the remaining non-controlling interest of FYX from an affiliate of our Manager for a purchase price of $ 4.4 million. This resulted in 100 % ownership in FYX and the elimination of any non-controlling interest in FYX. In October 2022, we entered into a shareholder loan agreement with our equity method investee, Long Ridge. Refer to Note 5 for additional information. The Company subleases a portion of office space from an entity controlled by certain principals of Fortress since February 2023. For the three months ended March 31, 2023, the Company incurred approximately $ 0.1 million of rent and office related expenses. 14. SEGMENT INFORMATION 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 benefit (“OPEB”) liabilities and dividends and accretion expense of redeemable preferred stock. During the first quarter of 2023 we modified our definition of Adjusted EBITDA to exclude the impact of other non-recurring items, such as severance expense. 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. 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 operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries and an investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision maker (“CODM”) evaluates investment performance for each reportable segment primarily based on Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) attributable to stockholders or 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 and other costs on pension and OPEB liabilities, dividends and accretion on redeemable preferred stock, and other non-recurring items, (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. We believe that net income (loss) attributable to stockholders or Former Parent, as defined by U.S. GAAP, is the most appropriate earnings measure with which to reconcile Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to stockholders or Former Parent as determined in accordance with U.S. GAAP. 28 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following tables set forth certain information for each reportable segment: I. For the Three Months Ended March 31, 2023 Three Months Ended March 31, 2023 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Revenues Total revenues $ 41,005 $ 19,092 $ ( 1,453 ) $ — $ — $ 17,850 $ 76,494 Expenses Operating expenses 25,235 16,425 4,929 424 1 18,148 65,162 General and administrative — — — — — 3,201 3,201 Acquisition and transaction expenses 183 — — 22 1 63 269 Management fees and incentive allocation to affiliate — — — — — 2,982 2,982 Depreciation and amortization 5,101 11,869 2,245 — — 920 20,135 Asset impairment 141 — — — — — 141 Total expenses 30,660 28,294 7,174 446 2 25,314 91,890 Other (expense) income Equity in earnings (losses) of unconsolidated entities — — — 7,761 ( 3,416 ) 21 4,366 Loss on sale of assets, net ( 124 ) — — — — — ( 124 ) Interest expense ( 955 ) ( 7,884 ) ( 588 ) ( 2 ) — ( 13,821 ) ( 23,250 ) Other (expense) income ( 552 ) ( 1,063 ) — 1,229 607 — 221 Total other (expense) income ( 1,631 ) ( 8,947 ) ( 588 ) 8,988 ( 2,809 ) ( 13,800 ) ( 18,787 ) Income (loss) before income taxes 8,714 ( 18,149 ) ( 9,215 ) 8,542 ( 2,811 ) ( 21,264 ) ( 34,183 ) Provision for income taxes 598 198 114 — — 819 1,729 Net income (loss) 8,116 ( 18,347 ) ( 9,329 ) 8,542 ( 2,811 ) ( 22,083 ) ( 35,912 ) Less: Net income (loss) attributable to non-controlling interests in consolidated subsidiaries 18 ( 9,185 ) ( 498 ) — — ( 228 ) ( 9,893 ) Less: Dividends and accretion on redeemable preferred stock — — — — — 14,570 14,570 Net income (loss) attributable to stockholders $ 8,098 $ ( 9,162 ) $ ( 8,831 ) $ 8,542 $ ( 2,811 ) $ ( 36,425 ) $ ( 40,589 ) 29 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to stockholders: Three Months Ended March 31, 2023 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Adjusted EBITDA $ 17,151 $ 6,518 $ ( 4,861 ) $ 11,314 $ ( 1,710 ) $ ( 6,516 ) $ 21,896 Add: Non-controlling share of Adjusted EBITDA 5,221 Add: Equity in earnings of unconsolidated entities 4,366 Less: Interest and other costs on pension and OPEB liabilities ( 480 ) Less: Dividends and accretion on redeemable preferred stock ( 14,570 ) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 8,190 ) Less: Interest expense ( 23,250 ) Less: Depreciation and amortization expense ( 20,135 ) Less: Incentive allocations — Less: Asset impairment charges ( 141 ) Less: Changes in fair value of non-hedge derivative instruments ( 1,125 ) Less: Losses on the modification or extinguishment of debt and capital lease obligations — Less: Acquisition and transaction expenses ( 269 ) Less: Equity-based compensation expense ( 895 ) Less: Provision for income taxes ( 1,729 ) Less: Other non-recurring items ( 1,288 ) Net loss attributable to stockholders $ ( 40,589 ) 30 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) II. For the Three Months Ended March 31, 2022 Three Months Ended March 31, 2022 Port and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Revenues Total revenues $ 35,088 $ 13,046 $ ( 1,986 ) $ — $ — $ — $ 46,148 Expenses Operating expenses 21,062 13,123 3,808 75 — — 38,068 General and administrative — — — — — 2,430 2,430 Acquisition and transaction expenses 206 — — — — 4,030 4,236 Management fees and incentive allocation to affiliate — — — — — 4,161 4,161 Depreciation and amortization 4,927 9,700 2,369 — — — 16,996 Total expenses 26,195 22,823 6,177 75 — 10,621 65,891 Other (expense) income Equity in (losses) earnings of unconsolidated entities — — — ( 21,381 ) ( 705 ) 43 ( 22,043 ) Interest expense ( 62 ) ( 6,110 ) ( 287 ) — — ( 6,459 ) Other expense ( 360 ) ( 99 ) — — 528 ( 528 ) ( 459 ) Total other (expense) income ( 422 ) ( 6,209 ) ( 287 ) ( 21,381 ) ( 177 ) ( 485 ) ( 28,961 ) Income (loss) before income taxes 8,471 ( 15,986 ) ( 8,450 ) ( 21,456 ) ( 177 ) ( 11,106 ) ( 48,704 ) Provision for income taxes 1,515 69 — — — — 1,584 Net income (loss) 6,956 ( 16,055 ) ( 8,450 ) ( 21,456 ) ( 177 ) ( 11,106 ) ( 50,288 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — ( 7,136 ) ( 330 ) — — — ( 7,466 ) Net income (loss) attributable to Former Parent $ 6,956 $ ( 8,919 ) $ ( 8,120 ) $ ( 21,456 ) $ ( 177 ) $ ( 11,106 ) $ ( 42,822 ) 31 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to Former Parent: Three Months Ended March 31, 2022 Port and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Adjusted EBITDA $ 13,666 $ 3,806 $ ( 4,651 ) $ 6,020 $ ( 178 ) $ ( 7,101 ) $ 11,562 Add: Non-controlling share of Adjusted EBITDA 3,816 Add: Equity in income of unconsolidated entities ( 22,043 ) Less: Interest and other costs on pension and OPEB liabilities — Less: Dividends and accretion on redeemable preferred stock — Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 5,407 ) Less: Interest expense ( 6,459 ) Less: Depreciation and amortization expense ( 16,996 ) Less: Incentive allocations — Less: Asset impairment charges — Less: Changes in fair value of non-hedge derivative instruments ( 766 ) Less: Losses on the modification or extinguishment of debt and capital lease obligations — Less: Acquisition and transaction expenses ( 4,236 ) Less: Equity-based compensation expense ( 709 ) Less: Provision for income taxes ( 1,584 ) Less: Other non-recurring items — Net loss attributable to Former Parent $ ( 42,822 ) 32 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) V. Balance Sheet The following tables sets forth the summarized balance sheet. All property, plant and equipment and leasing equipment are located in North America. March 31, 2023 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Current assets $ 72,999 $ 123,433 $ 9,930 $ 657 $ 21,355 $ 10,677 $ 239,051 Non-current assets 667,949 1,144,612 292,650 9,513 83,122 10,165 2,208,011 Total assets 740,948 1,268,045 302,580 10,170 104,477 20,842 2,447,062 Debt, net 50,000 734,609 25,000 — — 464,540 1,274,149 Current liabilities 54,805 58,145 6,597 1,630 1 33,505 154,683 Non-current liabilities 100,662 792,990 28,295 104,824 — 466,023 1,492,794 Total liabilities 155,467 851,135 34,892 106,454 1 499,528 1,647,477 Redeemable preferred stock — — — — — 279,160 279,160 Non-controlling interests in equity of consolidated subsidiaries 1,703 ( 41,790 ) 675 — — — ( 39,412 ) Total equity 585,481 416,910 267,688 ( 96,284 ) 104,476 ( 757,846 ) 520,425 Total liabilities, redeemable preferred stock and equity $ 740,948 $ 1,268,045 $ 302,580 $ 10,170 $ 104,477 $ 20,842 $ 2,447,062 December 31, 2022 Ports and Terminals Railroad Jefferson Terminal Repauno Power and Gas Sustainability and Energy Transition Corporate and Other Total Current assets $ 56,631 $ 166,252 $ 16,888 $ 396 $ 20,747 $ 16,890 $ 277,804 Non-current assets 672,275 1,136,095 289,132 8,142 84,390 10,561 2,200,595 Total assets 728,906 1,302,347 306,020 8,538 105,137 27,451 2,478,399 Debt, net 10,000 732,145 25,000 — — 463,012 1,230,157 Current liabilities 51,902 81,147 5,958 906 — 19,668 159,581 Non-current liabilities 59,698 790,687 28,163 187,165 — 463,721 1,529,434 Total liabilities 111,600 871,834 34,121 188,071 — 483,389 1,689,015 Redeemable preferred stock — — — — — 264,590 264,590 Non-controlling interests in equity of consolidated subsidiaries 1,403 ( 33,048 ) 1,093 — — 3,723 ( 26,829 ) Total equity 617,306 430,513 271,899 ( 179,533 ) 105,137 ( 720,528 ) 524,794 Total liabilities, redeemable preferred stock and equity $ 728,906 $ 1,302,347 $ 306,020 $ 8,538 $ 105,137 $ 27,451 $ 2,478,399 33 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 15. REDEEMABLE PREFERRED STOCK On August 1, 2022, the Company issued and sold 300,000 shares of Redeemable Preferred Stock at a price of $ 1,000 per share and $ 0.01 par value. The shares were issued at a 3 % discount for net proceeds of $ 291.0 million. The Company also issued two classes of warrants to the preferred stockholders. The fair value of the Redeemable Preferred Stock and the warrants at issuance were determined to be $ 242.7 million and $ 13.8 million, respectively . The Company incurred $ 16.4 million of issuance costs related to the Redeemable Preferred Stock and warrants. Additionally, the Company issued options to the Manager with a total fair value of $ 18.1 million (see Note 13). The Redeemable Preferred Stock has the following rights, preferences and restrictions: Voting Each holder of the Redeemable Preferred Stock will have one vote per share on any matter on which holders of the Redeemable Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent. The holders of shares of the Redeemable Preferred Stock do not otherwise have any voting rights. Liquidation Preference The Redeemable Preferred Stock ranks senior to the common stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Upon a liquidation, dissolution or winding up of the affairs of the Company, each share of Redeemable Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the purchase price, plus $ 150.0 million of cash Dividends (the ”Base Preferred Return Amount”). Dividends Dividends on the Redeemable Preferred Stock are payable at a rate equal to 14.0 % per annum subject to increase in accordance with the terms of the Redeemable Preferred Stock. Specifically, the rate will be increased by 2.0 % per annum for any periods during the first two years following closing of the issuance of the Redeemable Preferred Stock, where the dividend is not paid in cash. Prior to the second anniversary of the issuance date, such dividends will automatically accrue and accumulate on each share of Redeemable Preferred Stock, whether or not declared and paid, or they may be paid in cash at our discretion. After the second anniversary of the issuance date, we are required to pay such dividends in cash. Failure to pay such dividends will result in a dividend rate equal to 18.0 % per annum, and a failure to pay cash dividends for 12 monthly dividend periods (whether or not consecutive) following the second anniversary of the issuance date will constitute an event of noncompliance. The dividend rate on the Preferred Stock will increase by 1.0 % per annum beginning on the fifth anniversary of the issuance date of the Redeemable Preferred Stock. As of March 31, 2023, the Company has $ 32.1 million of dividends PIK increasing our Redeemable Preferred Stock balance. Dividends recorded in Dividends and accretion on redeemable preferred stock on the Consolidated and Combined Consolidated Statement of Operations totaled $ 12.9 million for the three months ended March 31, 2023. The Company has presented the Redeemable Preferred Stock in temporary equity and is accreting the discount and debt issuance costs using the interest method to the earliest redemption date of August 1, 2030. Such accretion, recorded in Dividends and accretion on redeemable preferred stock on the Consolidated and Combined Consolidated Statement of Operations, totaled $ 1.6 million for the three months ended March 31, 2023. Redemption Mandatory Redemption : The Redeemable Preferred Stock is not mandatorily redeemable at the option of the holders, except upon the occurrence of any (i) bankruptcy event, (ii) any change of control event, or (iii) any debt acceleration event (together with any bankruptcy event and change of control event) (each a “Mandatory Redemption Event”). Upon the occurrence of a Mandatory Redemption Event, to the extent not prohibited by law, we will be required to redeem all preferred stock in cash at the greater of the (i) Liquidation Preference, and (ii) the Base Preferred Return Amount at the date of redemption. Optional Redemption: The Redeemable Preferred Stock is optionally redeemable at the option of the Company, at any time, at the greater of the (i) Liquidation Preference, and (ii) the Base Preferred Return Amount at the date of redemption. Upon certain contingent events or events of noncompliance, the preferred stockholders have the right to a majority of the board seats of the Company. If the Redeemable Preferred Stock were redeemed as of March 31, 2023, it would be redeemable for $ 448.2 million. 34 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 16. EARNINGS PER SHARE AND EQUITY Basic loss per share of common stock (“LPS”) is calculated by dividing net loss attributable to stockholders and Former Parent by the weighted average number of common stock outstanding, plus any participating securities. Diluted LPS is calculated by dividing net loss attributable to stockholders or Former Parent by the weighted average number of common stock outstanding, plus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method. The calculation of basic and diluted LPS is presented below: Three Months Ended March 31, (in thousands, except per share data) 2023 2022 Net loss $ ( 35,912 ) $ ( 50,288 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries ( 9,893 ) ( 7,466 ) Less: Dividends and accretion on redeemable preferred stock 14,570 — Net loss attributable to stockholders/Former Parent $ ( 40,589 ) $ ( 42,822 ) Weighted Average Common Stock Outstanding - Basic (1) 102,787,640 99,387,467 Weighted Average Common Stock Outstanding - Diluted (1) 102,787,640 99,387,467 Loss per share: Basic $ ( 0.39 ) $ ( 0.43 ) Diluted (2) $ ( 0.40 ) $ ( 0.43 ) ________________________________________________________ (1) Three months ended March 31, 2023 includes penny warrants which can be converted into a fixed amount of our stock. (2) Diluted LPS for the three months ended March 31, 2023 includes the dilutive effect of subsidiary earnings per share . For the three months ended March 31, 2023, 1,647,839 shares have been excluded from the calculation of Diluted LPS because the impact would be anti-dilutive. On the Spin-off Date, FTAI distributed one share of FTAI Infrastructure, Inc. common stock for each FTAI common share held by FTAI’s shareholders of record as of the record date. As of that date, 99,387,467 shares were distributed. This number of shares is utilized for the calculation of basic and diluted loss per share for all periods presented prior to the spin-off. For the three months ended March 31, 2022, these shares are treated as issued and outstanding for purposes of calculating historical earnings per share. For periods prior to the spin-off, it is assumed that there are no dilutive equity instruments as there were no equity awards of FTAI Infrastructure, Inc. outstanding prior to the spin-off. Common Stock Warrants A summary of the status of the Company’s outstanding stock warrants and changes during the three months ended March 31, 2023 is as follows: Number of Warrants Weighted Average Exercise Price Outstanding as of December 31, 2022 6,685,132 $ 5.01 Issued — — Expired — — Exercised — — Outstanding as of March 31, 2023 6,685,132 $ 5.01 Warrants exercisable as of March 31, 2023 6,685,132 $ 5.01 The weighted average remaining contractual term of the outstanding warrants as of March 31, 2023 is 7.3 years. The aggregate intrinsic value of the warrants as of March 31, 2023 is $ 9.5 million. 17. COMMITMENTS AND CONTINGENCIES 35 FTAI INFRASTRUCTURE INC. NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) In the normal course of business we, and our subsidiaries, may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. We have entered into an arrangement with our non-controlling interest holder of Repauno, as part of the initial acquisition, whereby the non-controlling interest holder may receive additional payments contingent upon the achievement of certain conditions, not to exceed $ 15.0 million. We will account for such amounts when and if such conditions are achieved. The contingency related to $ 5.0 million of the total $ 15.0 million was resolved during the year ended December 31, 2021, and the contingency related to an additional $ 5.0 million of the total $ 15.0 million was resolved during year ended December 31, 2022. Jefferson Terminal entered into a two-year pipeline capacity agreement for a recently completed pipeline. Under the agreement, which took effect in the second quarter of 2021, Jefferson Terminal is obligated to pay fixed marketing fees over the two-year agreement, which totals a minimum of $ 0.9 million for the next twelve months as of March 31, 2023. 18. SUBSEQUENT EVENTS On April 3, 2023, our equity method investee, Long Ridge, entered into an agreement to sell certain of its assets to our subsidiary, Transtar, for $ 5.0 million. Dividends On May 2, 2023, our board of directors declared a cash dividend on our common stock of $ 0.03 per share for the quarter ended March 31, 2023, payable on May 26, 2023 to the holders of record on May 15, 2023. 36