What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-05-03 · 177 added, 107 removed, 400 unchanged (42% of the section changed)

18 unchanged sentences

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

As of March 31, 2023, we had total consolidated assets of $2.4 billion and total temporary equity and equity of $0.8 billion.

As of June 30, 2023, we had total consolidated assets of $2.4 billion and redeemable preferred equity and equity of $0.8 billion.

Operating Segments

14 unchanged sentences

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.

On December 27, 2017, SoftBank Group Corp.

(“SoftBank”) completed its acquisition of Fortress (the “SoftBank Merger”).

In connection with the Softbank Merger, Fortress operates within SoftBank as an independent business headquartered in New York.

On May 22, 2023, Fortress and Mubadala announced that they have entered into definitive agreements pursuant to which, among other things, certain members of Fortress management and affiliates of Mubadala will acquire 100% of the equity of Fortress that is currently indirectly held by SoftBank.

After the closing of the transaction, Fortress will continue to operate as an independent investment manager under the Fortress brand, with autonomy over investment processes and decision making, personnel and operations.

Results of Operations

6 unchanged sentences

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 .

Comparison of the three months ended months ended March 31, 2023 and 2022

Comparison of the three and six months ended June 30, 2023 and 2022

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

13 unchanged sentences

Other expense

Equity in earnings (losses) of unconsolidated entities 4,366 (22,043) 26,409

Loss on sale of assets, net (124) — (124)

Equity in (losses) earnings of unconsolidated entities (1,625) (13,859) 12,234 2,741 (35,902) 38,643

Gain on sale of assets, net 647 — 647 523 — 523

Interest expense (24,182) (6,486) (17,696) (47,432) (12,945) (34,487)

8 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

7 unchanged sentences

Incentive allocations — — — — — —

Depreciation and amortization expense 20,135 16,996 3,139

Depreciation & amortization expense 20,292 17,319 2,973 40,427 34,315 6,112

Interest expense 24,182 6,486 17,696 47,432 12,945 34,487

5 unchanged sentences

51 — 51 1,339 — 1,339

Equity in losses of unconsolidated entities (4,366) 22,043 (26,409)

Equity in losses (earnings) of unconsolidated entities 1,625 13,859 (12,234) (2,741) 35,902 (38,643)

Non-controlling share of Adjusted EBITDA (3)

2 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net loss of $(1,660) and $(13,919), (ii) interest expense of $8,304 and $6,795, (iii) depreciation and amortization expense of $7,967 and $6,349, (iv) acquisition and transaction expenses of $237 and $387, (v) changes in fair value of non-hedge derivative instruments of $(7,963) and $7,118 and (vi) equity-based compensation of $1 and $95, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net income (loss) of $2,658 and $(36,007), (ii) interest expense of $16,336 and $13,258, (iii) depreciation and amortization expense of $13,633 and $12,633, (iv) acquisition and transaction expenses of $257 and $391, (v) changes in fair value of non-hedge derivative instruments of $(17,810) and $21,732, (vi) equity-based compensation of $2 and $193 and (vii) asset impairment of $— and $32, respectively.

(2) Includes the following items for the three months ended March 31, 2023:

subsidiary severance expense of $1,288.

(3) Includes the following items for the three months ended March 31, 2023 and 2022:

(i) equity-based compensation of $110 and $127, (ii) provision for income taxes of $53 and $15, (iii) interest expense of $1,857 and $1,384, (iv) depreciation and amortization expense of $3,136 and $2,263, (v) changes in fair value of non-hedge derivative instruments of $61 and $27, (vi) other non-recurring items of $3 and $— and (vii) interest and other costs on pension and OPEB liabilities of $1 and $—, respectively.

Comparison of the three months ended March 31, 2023 and 2022

Total revenues increased $30.3 million primarily due to higher revenues of $5.9 million in the Railroad segment, $6.0 million in the Jefferson Terminal segment and $17.9 million in the Corporate and Other segment.

Rail revenues increased $5.9 million due to an increase in car loads as well as the implementation of a fuel surcharge that went into effect beginning March 2022.

Terminal services revenues increased $6.4 million primarily due to higher volumes at Jefferson Terminal.

Roadside services revenue increased $17.9 million primarily due to the acquisition of a majority stake in and consolidation of FYX in May 2022.

Comparison of the three months ended March 31, 2023 and 2022

Total expenses increased $26.0 million, primarily due to increased operating expenses and depreciation and amortization, offset by lower acquisition and transaction expenses and management fees and incentive allocations to affiliate.

(2) Includes the following items for the three and six months ended June 30, 2023:

subsidiary severance expense of $51 and $1,339, respectively.

(3) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) equity-based compensation of $76 and $124, (ii) provision for income taxes of $35 and $14, (iii) interest expense of $1,880 and $1,319, (iv) depreciation and amortization expense of $2,944 and $2,321, (v) changes in fair value of non-hedge derivative instruments of $— and $(62), (vi) acquisition and transaction expense of $8 and $—, (vii) interest and other costs on pension and OPEB liabilities of $1 and $— and (viii) asset impairment of $2 and $—, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) equity-based compensation of $186 and $250, (ii) provision for income taxes of $88 and $30, (iii) interest expense of $3,737 and $2,703, (iv) depreciation and amortization expense of $6,080 and $4,585, (v) changes in fair value of non-hedge derivative instruments of $61 and $(36), (vi) other non-recurring items of $3 and $—, (vii) acquisition and transaction expense of $8 and $—, (viii) interest and other costs on pension and OPEB liabilities of $2 and $— and (ix) asset impairment of $2 and $—, respectively.

Comparison of the three months ended June 30, 2023 and 2022

Total revenues increased $16.0 million due to higher revenues of $8.1 million in the Corporate and Other segment, $2.9 million in the Railroad segment, $2.6 million in the Jefferson Terminal segment and $2.3 million in the Repauno segment.

Roadside services revenue increased $8.1 million due to the acquisition of a majority stake in and consolidation of FYX in May 2022.

Terminal services revenues increased $6.6 million primarily due to higher throughput volumes at Jefferson Terminal and the commencement of a butane throughput contract at Repauno in April 2023.

Rail revenues increased $3.1 million primarily due to an increase in both carloads and rates per car.

Comparison of the six months ended June 30, 2023 and 2022

Total revenues increased $46.3 million due to higher revenues of $26.0 million in the Corporate and Other segment, $8.9 million in the Railroad segment, $8.6 million in the Jefferson Terminal segment and $2.8 million in the Repauno segment.

Roadside services revenue increased $26.0 million due to the acquisition of a majority stake in and consolidation of FYX in May 2022.

Terminal services revenues increased $13.0 million primarily due to higher throughput volumes at Jefferson Terminal and the commencement of a butane throughput contract at Repauno in April 2023.

Rail revenues increased $9.0 million primarily due to (i) an increase in both carloads and rates per car and (ii) the implementation of a fuel surcharge that went into effect in March 2022.

Comparison of the three months ended June 30, 2023 and 2022

Total expenses increased $10.1 million, primarily due to an increase in (i) operating expenses, (ii) depreciation and amortization and (iii) general and administrative expense, partially offset by a decrease in (iv) acquisition and transaction expenses.

Operating expenses increased $13.5 million which primarily reflects:

• an increase of $13.8 million in cost of sales in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase of $4.6 million in compensation and benefits expense in the Railroad segment primarily due to severance costs and additional employees hired at Transtar and $2.7 million in the Corporate and Other segment primarily related to the acquisition of FYX in May 2022;

• an increase in facility operating expense of $3.1 million in the Railroad segment due increased rail activity;

• an increase of $2.2 million in repairs and maintenance expense in the Railroad segment also primarily due to increased rail activity.

Depreciation and amortization increased $3.1 million due to additional assets placed in service at Jefferson as well as a result of the acquisition of a majority stake in and consolidation of FYX in May 2022.

Acquisition and transaction expenses decreased $4.0 million primarily due to higher acquisition and transaction expenses incurred in 2022 relating to the Spin-off of the Company.

Management fees and incentive allocations to affiliate decreased $1.2 million due to a lower equity base and losses during the period.

• an increase of $6.2 million in compensation and benefits primarily due to (i) an increase of $4.2 million in the Railroad segment primarily related to an increase in labor and other costs associated with higher carload activity and (ii) an increase of $2.1 million in the Corporate and Other segment due to the acquisition and consolidation of FYX in May 2022;

• an increase of $5.7 million in cost of sales in the Corporate and Other segment due to the acquisition and consolidation of FYX in May 2022.

Depreciation and amortization increased $3.0 million primarily due to (i) additional assets placed in service at Jefferson Terminal and (ii) the acquisition and consolidation of FYX in May 2022.

General and administrative expense increased $1.2 million primarily due to higher professional fees in the Corporate and Other segment.

Acquisition and transaction expenses decreased $8.2 million primarily due to expenses incurred in 2022 related to the Spin-off.

Comparison of the six months ended June 30, 2023 and 2022

Total expenses increased $36.1 million, primarily due to an increase in (i) operating expenses, (ii) depreciation and amortization and (iii) general and administrative expense, partially offset by a decrease in (iv) acquisition and transaction expenses and (v) management fees and incentive allocation to affiliate.

Operating expenses increased $40.6 million which primarily reflects:

• an increase of $19.5 million in cost of sales in the Corporate and Other segment due to the acquisition and consolidation of FYX in May 2022;

• an increase of $13.7 million in compensation and benefits primarily due to (i) an increase of $8.6 million in the Railroad segment primarily related to (a) an increase in labor and other costs associated with higher carload activity and (b) severance costs at Transtar and (ii) an increase of $4.8 million in the Corporate and Other segment due to the acquisition and consolidation of FYX in May 2022;

• an increase of $3.8 million in repairs and maintenance expense due to increased activity at Transtar and Jefferson Terminal.

Depreciation and amortization increased $6.1 million primarily due to (i) additional assets placed in service at Jefferson Terminal and (ii) the acquisition and consolidation of FYX in May 2022.

Acquisition and transaction expenses decreased $12.2 million primarily due to expenses incurred in 2022 related to the Spin-off.

Management fees and incentive allocations to affiliate decreased $1.2 million due to a lower average equity base compared to the Former Parent in 2022.

Other expense

Total other expense decreased $10.2 million during the three months ended March 31, 2023 which primarily reflects an increase of $26.4 million in equity in earnings of unconsolidated entities primarily due to realized and unrealized gains on power swaps at Long Ridge, offset by an increase of $16.8 million in interest expense which reflects an increase in the average outstanding debt of approximately $475.5 million from the Senior Notes due 2027 (the "2027 Notes”) issued in July 2022.

Net loss decreased $14.4 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Total other expense increased $2.9 million during the three months ended June 30, 2023 which primarily reflects:

• an increase in interest expense of $17.7 million primarily due to an increase in the average outstanding debt of approximately $571.2 million which consists of (i) $476.6 million for the Senior Notes due 2027, (ii) $50.0 million for the Transtar Revolver, (iii) $28.3 million for the EB-5 Loan Agreement and (iv) $16.3 million for the Credit Agreement, partially offset by

• an increase of $12.2 million in equity in earnings of unconsolidated entities primarily due to unrealized gains on power swaps at Long Ridge;

• an increase of $1.9 million in Other income due to interest income from a loan agreement entered into at the end of 2022 between the Company and Long Ridge Energy and Power LLC.

Total other expense decreased $7.3 million during the six months ended June 30, 2023 which primarily reflects:

• an increase of $38.6 million in equity in earnings of unconsolidated entities primarily due to unrealized gains on power swaps at Long Ridge;

• an increase of $2.6 million in Other income due to interest income from a loan agreement entered into at the end of 2022 between the Company and Long Ridge Energy and Power LLC, partially offset by

• an increase in interest expense of $34.5 million primarily due to an increase in the average outstanding debt of approximately $565.1 million which consists of (i) $476.1 million for the Senior Notes due 2027, (ii) $50.0 million for the Transtar Revolver, (iii) $30.9 million for the EB-5 Loan Agreement and (iv) $8.2 million for the Credit Agreement.

Net loss decreased $4.1 million and $18.5 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $10.3 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Adjusted EBITDA increased $6.1 million and $16.5 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Railroad Segment

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

18 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

16 unchanged sentences

Non-controlling share of Adjusted EBITDA (2)

(18) — (18) (36) — (36)

Adjusted EBITDA $ 20,304 $ 18,708 $ 1,596 $ 37,455 $ 32,374 $ 5,081

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023:

Transtar severance expense of $1,288.

(2) Includes the following items for the three months ended March 31, 2023:

(i) equity-based compensation of $1, (ii) provision for income taxes of $1, (iii) depreciation and amortization expense of $10, (iv) interest expense of $2, (v) other non-recurring items of $3 and (vi) interest and other costs on pension and OPEB liabilities of $1.

Total revenues increased $5.9 million for the three months ended March 31, 2023 due to an increase in car loads as well as the implementation of a fuel surcharge that went into effect beginning March 2022.

Total expenses increased $4.5 million during the three months ended March 31, 2023 primarily due to an increase in operating expenses caused by an increase in compensation and benefits related to severance costs and additional employees hired.

(1) Includes the following items for the three and six months ended June 30, 2023:

Transtar severance expense of $51 and $1,339, respectively.

(2) Includes the following items for the three and six months ended June 30, 2023:

(i) equity-based compensation of $— and $1, (ii) provision for income taxes of $— and $1, (iii) depreciation and amortization expense of $12 and $22, (iv) interest expense of $3 and $5, (v) other non-recurring items of $— and $3, (vi) interest and other costs on pension and OPEB liabilities of $1 and $2 and (vii) asset impairment of $2 and $2, respectively.

Total revenues increased $2.9 million during the three months ended June 30, 2023 primarily due to both an increase in carloads and rates per car.

Total revenues increased $8.9 million during the six months ended June 30, 2023 due to (i) both an increase in carloads and rates per car and (ii) the implementation of a fuel surcharge that went into effect in March 2022.

Total expenses increased $2.3 million during the three months ended June 30, 2023 which primarily reflects (i) an increase in operating expense of $1.4 million due to an increase in labor and other costs associated with higher carload activity and (ii) impairment of $0.6 million for certain scrap assets.

Total expenses increased $6.8 million during the six months ended June 30, 2023 which primarily reflects (i) an increase in operating expense of $5.6 million due to (a) an increase in labor and other costs associated with higher carload activity and (b) repairs and maintenance and (ii) impairment of $0.7 million for certain scrap assets.

Other expense

Total other expense increased $1.2 million during the three months ended March 31, 2023 which primarily reflects an increase in interest expense due to draw downs made on the new revolver entered into in the fourth quarter of 2022.

Total other expense increased $1.5 million and $2.7 million during the three and six months ended June 30, 2023, respectively, which primarily reflects an increase in interest expense related to the revolver entered into in the fourth quarter of 2022.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $3.5 million during the three months ended March 31, 2023 primarily due to the activity noted above.

Adjusted EBITDA increased $1.6 million and $5.1 million during the three and six months ended June 30, 2023, respectively, primarily due to the activity noted above.

Jefferson Terminal Segment

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

Operating expenses 15,990 14,261 1,729 32,415 27,384 5,031

Acquisition and transaction expenses 36 — 36 36 — 36

Depreciation and amortization 12,144 9,739 2,405 24,013 19,439 4,574

1 unchanged sentence

Other expense

Gain on sale of assets, net 732 — 732 732 — 732

Interest expense (7,978) (6,127) (1,851) (15,862) (12,237) (3,625)

7 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

18 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(i) equity-based compensation of $102 and $121, (ii) provision for income taxes of $46 and $15, (iii) interest expense of $1,823 and $1,374 and (iv) depreciation and amortization expense of $2,744 and $2,182, respectively.

Total revenues increased $6.0 million during the three months ended March 31, 2023 which reflects an increase in terminal services revenue of $6.1 million primarily due to higher volumes.

Total expenses increased $5.5 million during the three months ended March 31, 2023, which reflects:

• an increase in operating expenses of $3.3 million primarily due to increased terminal throughput activity;

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) equity-based compensation of $71 and $115, (ii) provision for income taxes of $35 and $14, (iii) interest expense of $1,844 and $1,299, (iv) depreciation and amortization expense of $2,808 and $2,063 and (v) acquisition and transaction expense of $8 and $—, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) equity-based compensation of $173 and $235, (ii) provision for income taxes of $81 and $30, (iii) interest expense of $3,667 and $2,673, (iv) depreciation and amortization expense of $5,552 and $4,245 and (v) acquisition and transaction expense of $8 and $—, respectively.

Total revenues increased $2.6 million and $8.6 million during the three and six months ended June 30, 2023, respectively, primarily due to an increase in average refined products throughput volumes.

Total expenses increased $4.2 million during the three months ended June 30, 2023 which primarily reflects:

• an increase in operating expenses of $1.7 million primarily due to higher labor and other costs associated with increased terminal throughput activity;

• an increase in depreciation and amortization of $2.4 million due to additional assets being placed into service.

Total expenses increased $9.6 million during the six months ended June 30, 2023, which reflects:

• an increase in operating expenses of $5.0 million primarily due to higher labor and other costs associated with increased terminal throughput activity;

• an increase in depreciation and amortization of $4.6 million due to additional assets being placed into service.

Other expense

Other expense increased $2.7 million during the three months ended March 31, 2023, which reflects an increase of $1.8 million in interest expense due to additional borrowings related to the EB-5 Loan Agreement.

Other expense increased $2.9 million during the six months ended June 30, 2023, which primarily reflects (i) an increase in interest expense of $3.6 million due to additional borrowings for the EB-5 Loan Agreement, partially offset by (ii) a gain on sale for land of $0.7 million.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $2.7 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Adjusted EBITDA increased $2.9 million and $5.6 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Repauno Segment

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

15 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

18 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) equity-based compensation of $5 and $9, (ii) interest expense of $33 and $20, (iii) depreciation and amortization expense of $124 and $143 and (iv) changes in fair value of non-hedge derivative instruments of $— and $(62), respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) equity-based compensation of $12 and $15, (ii) interest expense of $65 and $30, (iii) depreciation and amortization expense of $246 and $225, (iv) provision for income taxes of $6 and $—, and (v) changes in fair value of non-hedge derivative instruments of $61 and $(36), respectively.

Total revenue during the three months ended March 31, 2022 of $(2.0) million primarily includes losses on butane forward purchase contracts, offset by ordinary trading margins.

Total revenue during the three months ended March 31, 2023 of $(1.5) million primarily includes losses on butane forward purchase contracts and product margin losses due to the removal and sale of inventory in advance of commencing a throughput, fee-based business model.

Total expenses increased $1.0 million during the three months ended March 31, 2023 which reflects higher operating expenses of $1.1 million caused by an increase in professional fees and repairs and maintenance expense related to the continued development of the site.

Total revenue increased $2.3 million and $2.8 million during the three and six months ended June 30, 2023, respectively, primarily due to (i) the commencement of a butane throughput contract at Repauno in April 2023, partially offset by (ii) losses on the sale of butane inventory as the terminal prepared for the new throughput contract.

Total expenses increased $1.5 million and $2.5 million during the three and six months ended June 30, 2023, respectively, which primarily reflects higher operating expenses due to an increase in labor costs and professional fees related to the continued development of the site.

Other expense

Total other expense increased $0.3 million during the three months ended March 31, 2023 which reflects an increase in interest expense due to an increase in the borrowing rate on the revolver.

Total other expense increased $0.3 million and $0.6 million during the three and six months ended June 30, 2023, respectively, which reflects an increase in interest expense due to an increase in the borrowing rate on the revolver.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $0.2 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Adjusted EBITDA increased $2.1 million and $1.9 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Power and Gas Segment

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

9 unchanged sentences

Total other income (expense) 3,281 (12,971) 16,252 12,269 (34,352) 46,621

Income (loss) before income taxes 8,542 (21,456) 29,998

Benefit from income taxes — — —

Loss before income taxes 3,059 (13,064) 16,123 11,601 (34,520) 46,121

Provision for income taxes — — — — — —

Net income (loss) 3,059 (13,064) 16,123 11,601 (34,520) 46,121

2 unchanged sentences

The following table sets forth a reconciliation of net income (loss) attributable to stockholders or Former Parent to Adjusted EBITDA:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

Net income (loss) attributable to stockholders/Former Parent $ 3,059 $ (13,064) $ 16,123 $ 11,601 $ (34,520) $ 46,121

Benefit from income taxes — — —

Provision for income taxes — — — — — —

Equity-based compensation expense — — — — — —

11 unchanged sentences

Other non-recurring items — — — — —

Equity in losses of unconsolidated entities (7,761) 21,381 (29,142)

Equity in losses (earnings) of unconsolidated entities (1,639) 12,971 (14,610) (9,400) 34,352 (43,752)

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

1 unchanged sentence

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net income (loss) of $1,639 and $(12,972), (ii) interest expense of $7,378 and $6,604, (iii) depreciation and amortization expense of $7,641 and $6,240, (iv) acquisition and transaction expenses of $237 and $387, (v) changes in fair value of non-hedge derivative instruments of $(7,963) and $7,118 and (vi) equity-based compensation of $1 and $95, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net income (loss) of $9,400 and $(34,352), (ii) interest expense of $14,612 and $13,047, (iii) depreciation and amortization expense of $12,981 and $12,524, (iv) acquisition and transaction expenses of $257 and $391, (v) changes in fair value of non-hedge derivative instruments of $(17,810) and $21,732, (vi) equity-based compensation of $2 and $193, and (vii) asset impairment of $— and $32, respectively.

Other income (expense)

Total other income (expense) increased $30.4 million during the three months ended March 31, 2023 which reflects an increase in equity method earnings in unconsolidated entities of $29.1 million.

This is primarily due to unrealized gains on power swaps at Long Ridge, in conjunction with an increase in other income of $1.2 million due to an increase in interest income from a loan agreement entered into at the end of 2022 between the Company and Long Ridge Energy and Power LLC.

Total other income (expense) increased $16.3 million during the three months ended June 30, 2023 which reflects:

• an increase in equity in earnings in unconsolidated entities of $14.6 million, primarily due to unrealized gains on power swaps at Long Ridge;

• an increase in other income of $1.6 million due to interest income from a loan agreement entered into at the end of 2022 between the Company and Long Ridge Energy and Power LLC.

Total other income (expense) increased $46.6 million during the six months ended June 30, 2023 which reflects:

• an increase in equity in earnings in unconsolidated entities of $43.8 million, primarily due to unrealized gains on power swaps at Long Ridge;

• an increase in other income of $2.9 million due to interest income from a loan agreement entered into at the end of 2022 between the Company and Long Ridge Energy and Power LLC.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $5.3 million during the three months ended March 31, 2023 due to an increase in the pro-rata share of adjusted EBITDA from unconsolidated entities of $4.4 million and the changes noted above.

Adjusted EBITDA increased $3.0 million and $8.3 million during the three and six months ended June 30, 2023, respectively, due to an increase in the pro-rata share of adjusted EBITDA from unconsolidated entities of $1.5 million and $5.9 million, respectively, and the changes noted above.

Sustainability and Energy Transition Segment

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

Total expenses 28 39 (11) 30 39 (9)

Other (expense) income

Other income (expense)

Equity in losses of unconsolidated entities (3,277) (933) (2,344) (6,693) (1,638) (5,055)

7 unchanged sentences

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

14 unchanged sentences

Other non-recurring items — — — — —

Equity in losses of unconsolidated entities 3,416 705 2,711

Equity in losses (earnings) of unconsolidated entities 3,277 933 2,344 6,693 1,638 5,055

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

1 unchanged sentence

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net loss of $(3,280) and $(941), (ii) interest expense of $914 and $165 and (iii) depreciation and amortization expense of $326 and $109, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net loss of $(6,699) and $(1,647), (ii) interest expense of $1,691 and $165 and (iii) depreciation and amortization expense of $652 and $109, respectively.

Other expense

Total other expense increased $2.6 million during the three months ended March 31, 2023 which reflects an increase in equity method losses in unconsolidated entities primarily due to increased losses at GM-FTAI Holdco LLC.

Total other expense increased $2.3 million and $4.9 million during the three and six months ended June 30, 2023, respectively, which reflects an increase in equity in losses in unconsolidated entities primarily due to operating losses at GM-FTAI Holdco LLC.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $1.5 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Adjusted EBITDA decreased $1.3 million and $2.9 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Corporate and Other

The following table presents our results of operations:

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

10 unchanged sentences

Interest expense (14,373) (1) (14,372) (28,194) (1) (28,193)

Other expense — (528) 528

Total other expense (13,800) (485) (13,315)

Other income (expense) — 491 (491) — (37) 37

Total other (expense) income (14,360) 535 (14,895) (28,160) 50 (28,210)

Loss before income taxes (22,571) (13,782) (8,789) (43,835) (24,888) (18,947)

2 unchanged sentences

Net loss attributable to non-controlling interest in consolidated subsidiaries (1) (25) 24 (229) (25) (204)

Dividends and accretion on redeemable preferred shares 14,570 — 14,570

Dividends and accretion on redeemable preferred stock 15,257 — 15,257 29,827 — 29,827

Net loss attributable to stockholders/Former Parent $ (37,738) $ (13,757) $ (23,981) $ (74,163) $ (24,863) $ (49,300)

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

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended

June 30, Change

(in thousands) 2023 2022 2023 2022

10 unchanged sentences

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

(7) 20 (27) (10) 38 (48)

Dividends and accretion on redeemable preferred stock 15,257 — 15,257 29,827 — 29,827

6 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended March 31, 2023 and 2022:

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net loss of $(19) and $(6) and (ii) interest expense of $12 and $26, respectively.

(2) Includes the following items for the three months ended March 31, 2023 and 2022:

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net loss of $(43) and $(8) and (ii) interest expense of $33 and $46, respectively.

(2) Includes the following items for the three months ended June 30, 2023 and 2022:

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

Total revenues increased $17.9 million for the three months ended March 31, 2023 primarily due to the acquisition of a majority stake and consolidation of FYX in May 2022.

Total expenses increased $14.7 million during the three months ended March 31, 2023 primarily due to the acquisition of a majority stake and consolidation of FYX in May 2022.

Includes the following items for the six months ended June 30, 2023 and 2022:

depreciation and amortization expense of $260 and $115, respectively.

Total revenues increased $8.1 million and $26.0 million during the three and six months ended June 30, 2023, respectively, primarily due to the acquisition and consolidation of FYX in May 2022.

Total expenses increased $2.0 million during the three months ended June 30, 2023 which primarily reflects:

• an increase in operating expenses of $8.7 million due to the acquisition and consolidation of FYX in May 2022;

• an increase in general and administrative expense of $1.2 million primarily due to higher professional fees;

• a decrease in acquisition and transaction expenses of $8.3 million primarily due to expenses incurred in 2022 related to the Spin-off.

Total expenses increased $16.7 million during the six months ended June 30, 2023 which primarily reflects:

• an increase in operating expenses of $26.9 million due to the acquisition and consolidation of FYX in May 2022;

• an increase in general and administrative expense of $2.0 million primarily due to higher professional fees;

• a decrease in acquisition and transaction expenses of $12.3 million primarily due to expenses incurred in 2022 related to the Spin-off.

Other expense

Total other expense increased $13.3 million during the three months ended March 31, 2023 primarily due to increased interest expense of $13.8 million, which reflects an increase in the average outstanding debt of approximately $475.5 million from the 2027 Notes issued in July 2022.

Total other expense increased $14.9 million and $28.2 million during the three and six months ended June 30, 2023, respectively, which primarily reflects an increase in interest expense due to the issuance of the Senior Notes due 2027 in July 2022.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $0.6 million during the three months ended March 31, 2023 primarily due to the changes noted above.

Adjusted EBITDA decreased $2.2 million and $1.6 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Liquidity and Capital Resources

2 unchanged sentences

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

• Cash used for the purpose of making investments was $66.9 million and $53.4 million during the three months ended March 31, 2023 and 2022, respectively.

• Cash used for the purpose of making investments was $91.0 million and $116.7 million during the six months ended June 30, 2023 and 2022, respectively.

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

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

Our principal sources of liquidity to fund these uses have been and continue to be (i) cash and restricted cash on hand as of March 31, 2023, (ii) revenues from our infrastructure business net of operating expenses, (iii) proceeds from borrowings and (iv) proceeds from asset sales.

• Cash flows used in operating activities were $12.1 million and $14.1 million during the three months ended March 31, 2023 and 2022, respectively.

• During the three months ended March 31, 2023, additional borrowings were obtained in connection with the (i) Transtar revolver of $40.0 million and (ii) EB-5 Loan Agreement of $1.6 million.

We did not make any principal repayments of debt during the three months ended March 31, 2023.

During the three months ended March 31, 2022, additional borrowings were obtained in connection with the EB-5 Loan Agreement of $26.1 million.

• Proceeds from the sale of assets were $0.1 million and $2.1 during the three months ended March 31, 2023 and 2022, respectively.

Our principal sources of liquidity to fund these uses have been and continue to be (i) cash and restricted cash on hand as of June 30, 2023, (ii) revenues from our infrastructure business net of operating expenses, (iii) proceeds from borrowings and (iv) proceeds from asset sales.

• Cash flows used in operating activities were $16.9 million and $55.4 million during the six months ended June 30, 2023 and 2022, respectively.

• During the six months ended June 30, 2023, additional borrowings were obtained in connection with the (i) Transtar revolver of $40.0 million, (ii) Credit Agreement of $25.0 million and (ii) EB-5 Loan Agreement of $1.6 million.

We did not make any principal repayments of debt during the six months ended June 30, 2023.

During the six months ended June 30, 2022, additional borrowings were obtained in connection with the EB-5 Loan Agreement of $26.1 million.

• Proceeds from the sale of assets were $1.1 million and $4.3 million during the six months ended June 30, 2023 and 2022, respectively.

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

2 unchanged sentences

Historical Cash Flow

Comparison of the three months ended March 31, 2023 and 2022

The following table compares the historical cash flow for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Comparison of the six months ended June 30, 2023 and 2022

The following table compares the historical cash flow for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

(in thousands) 2023 2022

4 unchanged sentences

Net cash used in operating activities decreased $38.5 million, which primarily reflects (i) certain adjustments to reconcile net loss to cash used in operating activities including equity in losses of unconsolidated entities of $(38.6) million and (ii) changes in working capital of $48.4 million, partially offset by (iii) a decrease in our net loss of $18.5 million.

Net cash used in investing activities increased $15.6 million, primarily due to (i) an investment of promissory notes and loans of $20.5 million, (ii) a decrease in the acquisition of property, plant and equipment of $11.9 million, and (iii) an increase of $4.4 million in acquisition of a business due to the acquisition of the remaining non-controlling interest in FYX during this period.

Net cash provided by financing activities decreased $5.7 million, primarily due to (i) a decrease in net contributions from Former Parent of $34.3 million, (ii) an increase in cash dividends paid of $3.1 million and (iii) an increase in proceeds from debt of $32.2 million.

Net cash used in investing activities decreased $26.8 million, primarily due to (i) a decrease in the acquisition of property, plant and equipment of $48.2 million, partially offset by (ii) an investment of promissory notes and loans of $22.0 million.

Net cash provided by financing activities decreased $62.0 million, primarily due to (i) a decrease in net contributions from Former Parent of $111.4 million, partially offset by (ii) an increase in proceeds from debt of $57.2 million and (iii) an increase in cash dividends paid of $6.2 million.

Debt Obligations

2 unchanged sentences

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

Debt Obligations — As of March 31, 2023, we had outstanding principal and interest payment obligations of $1.3 billion and $0.6 billion, respectively, of which, $— and $108.7 million, respectively, are due in the next twelve months.

Debt Obligations — As of June 30, 2023, we had outstanding principal and interest payment obligations of $1.4 billion and $0.5 billion, respectively, of which, $25.0 million and $90.2 million, respectively, are due in the next twelve months.

See Note 7 to the consolidated and combined consolidated financial statements for additional information about our debt obligations.

Lease Obligations —As of March 31, 2023, we had outstanding operating and finance lease obligations of $171.4 million, of which $8.5 million is due in the next twelve months.

Redeemable Preferred Stock Obligations —We are required to make a $1.8 million cash dividend payment on our redeemable preferred stock by December 31, 2023.

Other Obligations —As of March 31, 2023, in connection with a pipeline capacity agreement at Jefferson Terminal, we have an obligation to pay a minimum of $0.9 million in marketing fees in the next twelve months.

Lease Obligations —As of June 30, 2023, we had outstanding operating and finance lease obligations of $169.9 million, of which $8.3 million is due in the next twelve months.

Redeemable Preferred Stock Obligations —We are required to make a $1.8 million cash dividend payment on our redeemable preferred stock in the next twelve months.

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

We expect to meet our future short-term liquidity requirements through cash on hand or future financings and net cash provided

by our current operations.

On July 5, 2023, we issued an additional $100.0 million aggregate principal amount of 10.500% senior secured notes due 2027, at an issue price equal to 95.50% of principal, plus accrued interest from and including June 1, 2023.

These notes have identical terms as the original notes, other than with respect to the date of issuance and the issue price, and bear interest at a rate of 10.500% per annum, payable semi-annually in arrears on June 1 and December 1 of each year.

We used a portion of the net proceeds from the offering to repay in full the amount outstanding under the Transtar Revolver and Credit Agreement and the commitments thereunder were terminated in connection with the closing of the offering.

We intend to use the remainder of net proceeds for general corporate purposes.

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

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

22 unchanged sentences

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.

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 which 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%.

11 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis