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Item 9A. Controls and Procedures

2024-03-27 compared with 2023-03-09 · 30 added, 16 removed, 145 unchanged (24% of the section changed)

2 unchanged sentences

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of and for the period covered by this report.

Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were not effective as of and for the period covered by this report due to the material weakness described below.

Notwithstanding the existence of the material weakness, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated and combined consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in this report in conformity with GAAP.

Management's Annual Report on Internal Control over Financial Reporting

7 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

On May 16, 2022, we completed the acquisition of a majority stake in FYX.

Our management is in the process of reviewing the operations of FYX and integrating its controls into our internal control structure.

In accordance with SEC guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded FYX from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022.

FYX represented approximately 1% of our total assets, 18% of our total revenues and 1% of our net loss as of and for the year ended December 31, 2022.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013).

Based on management’s assessment using this framework, management concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report included herein.

Based on management’s assessment using this framework, management concluded that, as of December 31, 2023, our internal control over financial reporting was not effective due to a material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company did not maintain effective controls to review on a timely basis and in sufficient detail the cash flow projections and certain key assumptions used in the goodwill impairment analysis as of October 1, 2023, relating to the Jefferson Terminal reporting unit.

The material weakness did not result in an adjustment of the consolidated financial statements as of and for the year ended December 31, 2023, or any interim period in 2023, nor did the material weakness affect the Company’s compliance with its debt covenants.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, which contains an adverse opinion on the effectiveness of our internal control over financial reporting, as stated in their report included herein.

Remediation Efforts to Address Material Weakness

The Company is committed to maintaining a strong internal control environment, and implemented a comprehensive plan to remediate the material weakness.

The plan is focused on more rigorous procedures and enhanced precision levels of review over its cash flow projections and related key assumptions in the Company’s evaluation of goodwill for impairment.

The plan also includes involvement of additional key stakeholders in reviews, and active engagement with valuation consultants.

We will not be able to conclude whether these efforts will fully remediate the material weakness until the updated process has operated for a sufficient period of time and management has concluded, through testing, that such controls are operating effectively.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Except for the actions intended to remediate the material weakness as described above, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

We have audited FTAI Infrastructure Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, FTAI Infrastructure Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

As indicated in the accompanying Management's Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of FYX Trust Holdco LLC, which is included in the 2022 consolidated and combined consolidated financial statements of the Company and constituted 1% of total assets as of December 31, 2022 and 18% and 1% of revenues and net loss, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of FYX Trust Holdco LLC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated and combined consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated and combined consolidated statements of operations, comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 8, 2023 expressed an unqualified opinion thereon.

In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, FTAI Infrastructure Inc.

(the Company) has not maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment:

Management has identified a material weakness in the Company’s goodwill impairment process relating to the Jefferson Terminal reporting unit.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated and combined consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated March 26, 2024, which expressed an unqualified opinion thereon.

Basis for Opinion

25 unchanged sentences

Executive Compensation

The information required by this Item 11 is incorporated by reference to our Definitive Proxy Statement under the headings “Executive and Manager Compensation” and “Compensation Committee Report.”

1 Election of Directors—Compensation of Directors.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

15 unchanged sentences

(incorporated by reference to Exhibit 3.4 of the Company’s Current Report on Form 8-K, filed August 1, 2022).

Certificate of Amendment to the Certificate of Designations of Series A Senior Preferred Stock of FTAI Infrastructure Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed July 5, 2023).

Indenture, dated as of July 7, 2022, between FTAI Infra Escrow Holdings, LLC and U.S.

5 unchanged sentences

Bank Trust Company, National Association, as trustee and as notes collateral agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed August 1, 2022).

Third Supplemental Indenture, dated as of July 5, 2023, between FTAI Infrastructure Inc.

Bank Trust Company, National Association, as trustee and notes collateral agent (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed July 5, 2023).

Description of Securities Registered under Section 12 of the Exchange Act.

39 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

FTAI Infrastructure Inc.

Clawback Policy effective as of December 1, 2023.

101 The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language):

(i) Consolidated and Combined Consolidated Balance Sheets;

(i) Consolidated Balance Sheets;

(ii) Consolidated and Combined Consolidated Statements of Operations;

(iii) Consolidated and Combined Consolidated Statements of Comprehensive Loss;

(iii) Consolidated and Combined Consolidated Statements of Comprehensive Income (Loss);

(iv) Consolidated and Combined Consolidated Statements of Changes in Equity;

31 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-K

Item 9A. Controls and Procedures