FTAI Infrastructure Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand FTAI Infrastructure Inc. (“we”, “us”, “our”, or the “Company”). Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. Overview We are in the business of acquiring, developing and operating assets and businesses that represent critical infrastructure for customers in the transportation, energy and industrial products industries. We were formed on December 13, 2021 as FTAI Infrastructure LLC, a Delaware limited liability company and subsidiary of FTAI Aviation Ltd. (previously Fortress Transportation and Infrastructure Investors LLC; “FTAI” or “Former Parent”). We are a publicly-traded company trading on The Nasdaq Global Select Market under the symbol “FIP.” Our operations consist of four primary business lines: (i) Railroad, (ii) Ports and Terminals, (iii) Power and Gas and (iv) Sustainability and Energy Transition. Our Railroad business primarily invests in and operates short line and regional railroads in North America. Our Ports and Terminals business, consisting of our Jefferson Terminal and Repauno segments, develops or acquires industrial properties in strategic locations that store and handle for third parties a variety of energy products, including crude oil, refined products and clean fuels. Through an equity method investment, our Power and Gas business develops and operates facilities, such as a 485 megawatt power plant at the Long Ridge terminal in Ohio, that leverage the property’s location and key attributes to generate incremental value. Our Sustainability and Energy Transition business focuses on investments in companies and assets that utilize green technology, produce sustainable fuels and products or enable customers to reduce their carbon footprint. We expect to continue to invest in such market sectors, and pursue additional investment opportunities in other infrastructure businesses and assets we believe to be attractive and meet our investment objectives. Our team focuses on acquiring a diverse group of long-lived assets or operating businesses that provide mission-critical services or functions to infrastructure networks and typically have high barriers to entry, strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. We believe that there are a large number of acquisition opportunities in our markets and that our Manager’s expertise and business and financing relationships, together with our access to capital and generally available capital for infrastructure projects in today’s marketplace, will allow us to take advantage of these opportunities. As of March 31, 2024, we had total consolidated assets of $2.3 billion and redeemable preferred stock and equity of $0.7 billion. Operating Segments 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 six 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, Jefferson Terminal South 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 terminal 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 investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers and an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries. Our Manager 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. 37 Results of Operations Adjusted EBITDA (Non-GAAP) The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). This performance measure provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational performance. Adjusted EBITDA is defined as net income (loss) attributable to stockholders, 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 of 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 March 31, 2024 and 2023 The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 1,208 $ 743 $ 465 Rail revenues 45,901 40,568 5,333 Terminal services revenues 21,897 19,148 2,749 Roadside services revenues 13,528 17,850 (4,322) Other revenue 1 (1,815) 1,816 Total revenues 82,535 76,494 6,041 Expenses Operating expenses 64,575 65,162 (587) General and administrative 4,861 3,201 1,660 Acquisition and transaction expenses 926 269 657 Management fees and incentive allocation to affiliate 3,001 2,982 19 Depreciation and amortization 20,521 20,135 386 Asset impairment — 141 (141) Total expenses 93,884 91,890 1,994 Other (expense) income Equity in (losses) earnings of unconsolidated entities (11,902) 4,366 (16,268) Loss on sale of assets, net (13) (124) 111 Interest expense (27,593) (23,250) (4,343) Other income 2,365 221 2,144 Total other expense (37,143) (18,787) (18,356) Loss from before income taxes (48,492) (34,183) (14,309) Provision for income taxes 1,805 1,729 76 Net loss (50,297) (35,912) (14,385) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (10,690) (9,893) (797) Less: Dividends and accretion of redeemable preferred stock 16,975 14,570 2,405 Net loss attributable to stockholders $ (56,582) $ (40,589) $ (15,993) 38 The following table sets forth a reconciliation of net loss attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to stockholders $ (56,582) $ (40,589) $ (15,993) Add: Provision for income taxes 1,805 1,729 76 Add: Equity-based compensation expense 2,340 895 1,445 Add: Acquisition and transaction expenses 926 269 657 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — 1,125 (1,125) Add: Asset impairment charges — 141 (141) Add: Incentive allocations — — — Add: Depreciation & amortization expense (1) 21,097 20,135 962 Add: Interest expense 27,593 23,250 4,343 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) 6,257 8,190 (1,933) Add: Dividends and accretion of redeemable preferred stock 16,975 14,570 2,405 Add: Interest and other costs on pension and OPEB liabilities 600 480 120 Add: Other non-recurring items (3) — 1,288 (1,288) Less: Equity in losses (earnings) of unconsolidated entities 11,902 (4,366) 16,268 Less: Non-controlling share of Adjusted EBITDA (4) (5,682) (5,221) (461) Adjusted EBITDA (non-GAAP) $ 27,231 $ 21,896 $ 5,335 ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) depreciation and amortization expense of $20,521 and $20,135 and (ii) capitalized contract costs amortization of $576 and $—. (2) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net (loss) income of $(11,942) and $4,318, (ii) interest expense of $10,893 and $8,032, (iii) depreciation and amortization expense of $5,130 and $5,666, (iv) acquisition and transaction expenses of $19 and $20, (v) changes in fair value of non-hedge derivative instruments of $2,053 and $(9,847), (vi) equity-based compensation of $1 and $1, (vii) asset impairment of $87 and $— and (viii) equity method basis adjustments of $16 and $—, respectively. (3) Includes the following item for the three months ended March 31, 2023: Railroad severance expense of $1,288. (4) Includes the following items for the three months ended March 31, 2024 and 2023: (i) equity-based compensation of $431 and $110, (ii) (benefit from) provision for income taxes of $(134) and $53, (iii) interest expense of $2,189 and $1,857, (iv) depreciation and amortization expense of $3,194 and $3,136, (v) changes in fair value of non-hedge derivative instruments of $— and $61, (vi) interest and other costs on pension and OPEB liabilities of $2 and $1 and (vii) other non-recurring items of $— and $3, respectively. Revenue Comparison of the three months ended March 31, 2024 and 2023 Total revenues increased $6.0 million due to higher revenues of $5.3 million in the Railroad segment and $5.5 million in the Repauno segment, offset by lower revenues of $4.3 million in the Corporate and Other segment and $0.5 million in the Jefferson Terminal segment. Roadside services revenue decreased $4.3 million due to the decline of roadside services for FYX. Terminal services revenues increased $2.7 million primarily due to the commencement of a butane throughput contract at Repauno in April 2023. Rail revenues increased $5.3 million primarily due to an increase in both carloads and rates per car. Expenses Comparison of the three months ended March 31, 2024 and 2023 Total expenses increased $2.0 million, primarily due to an increase in (i) acquisition and transaction expenses, (ii) general and administrative expenses and (iii) depreciation and amortization, partially offset by a decrease in operating expenses. Acquisition and transaction expenses increased $0.7 million associated with professional fees for a potential acquisition in the Corporate and Other segment. 39 General and administrative expenses increased $1.7 million primarily due to higher professional fees in the Corporate and Other segment. Depreciation and amortization increased $0.4 million primarily due to additional assets placed in service in the Jefferson Terminal segment. Operating expenses decreased $0.6 million which primarily reflects: • a decrease of $4.4 million due to decreased roadside services at FYX; and • a decrease of $0.5 million in fuel costs in the Railroad segment; partially offset by • an increase of $2.7 million primarily due to costs associated with stock-based compensation, insurance, higher labor and other costs associated with increased terminal throughput activity in the Jefferson Terminal segment; and • an increase of $1.2 million in the Repauno segment which primarily reflects higher operating expenses due to costs associated with stock-based compensation, and an increase in labor costs and professional fees related to the continued development of the site. Other expense Total other expense increased $18.4 million during the three months ended March 31, 2024 which primarily reflects: • an increase in interest expense of $4.3 million primarily due to an increase in the average outstanding debt of approximately $71.0 million which consists of (i) $100.6 million for the Senior Notes due 2027, (ii) $19.3 million for the DRP Revolver and (iii) $1.1 million for the EB-5 Loan Agreement, offset by the full repayment of the Transtar Revolver in July 2023 for $50.0 million; and • an increase of $16.3 million in equity in losses of unconsolidated entities primarily due to a decrease in unrealized gains on power swaps at Long Ridge; partially offset by • an increase of $2.1 million in Other income due to interest income from increased loan balance on the loan agreement between the Company and Long Ridge Energy & Power LLC. Net loss Net loss increased $14.4 million during the three months ended March 31, 2024 primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $5.3 million during the three months ended March 31, 2024 primarily due to the changes noted above. 40 Railroad Segment The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 411 $ 437 $ (26) Rail revenues 45,901 40,568 5,333 Total revenues 46,312 41,005 5,307 Expenses Operating expenses 24,842 25,235 (393) Acquisition and transaction expenses 184 183 1 Depreciation and amortization 5,012 5,101 (89) Asset impairment — 141 (141) Total expenses 30,038 30,660 (622) Other expense Loss on sale of assets, net (13) (124) 111 Interest expense (69) (955) 886 Other expense (603) (552) (51) Total other expense (685) (1,631) 946 Income before income taxes 15,589 8,714 6,875 Provision for income taxes 1,092 598 494 Net income 14,497 8,116 6,381 Less: Net income attributable to non-controlling interest in consolidated subsidiaries 61 18 43 Net income attributable to stockholders $ 14,436 $ 8,098 $ 6,338 41 The following table sets forth a reconciliation of net income attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net income attributable to stockholders $ 14,436 $ 8,098 $ 6,338 Add: Provision for income taxes 1,092 598 494 Add: Equity-based compensation expense 290 325 (35) Add: Acquisition and transaction expenses 184 183 1 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — 141 (141) Add: Incentive allocations — — — Add: Depreciation and amortization expense 5,012 5,101 (89) Add: Interest expense 69 955 (886) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — Add: Dividends and accretion of redeemable preferred stock — — — Add: Interest and other costs on pension and OPEB liabilities 600 480 120 Add: Other non-recurring items (1) — 1,288 (1,288) Less: Equity in earnings of unconsolidated entities — — — Less: Non-controlling share of Adjusted EBITDA (2) (25) (18) (7) Adjusted EBITDA $ 21,658 $ 17,151 $ 4,507 ________________________________________________________ (1) Includes the following item for the three months ended March 31, 2023: Railroad severance expense of $1,288. (2) Includes the following items for the three months ended March 31, 2024 and 2023: (i) equity-based compensation of $1 and $1, (ii) provision for income taxes of $4 and $1, (iii) interest expense of $— and $2, (iv) depreciation and amortization expense of $18 and $10, (v) interest and other costs on pension and OPEB liabilities of $2 and $1 and (vi) other non-recurring items of $— and $3, respectively. Revenues Total revenues increased $5.3 million during the three months ended March 31, 2024 primarily due to both an increase in carloads and rates per car. Expenses Total expenses decreased $0.6 million during the three months ended March 31, 2024, which primarily reflects a decrease in operating expenses of $0.4 million mainly due to lower fuel costs. Other expense Total other expense decreased $0.9 million during the three months ended March 31, 2024, which primarily reflects a decrease in interest expense related to the revolver entered into in the fourth quarter of 2022 and paid off in the third quarter of 2023. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $4.5 million during the three months ended March 31, 2024 primarily due to the activity noted above. 42 Jefferson Terminal Segment The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 797 $ 306 $ 491 Terminal services revenues 17,819 18,786 (967) Total revenues 18,616 19,092 (476) Expenses Operating expenses 19,132 16,425 2,707 Acquisition and transaction expenses 2 — 2 Depreciation and amortization 12,330 11,869 461 Total expenses 31,464 28,294 3,170 Other (expense) income Interest expense (9,297) (7,884) (1,413) Other income (expense) 6 (1,063) 1,069 Total other expense (9,291) (8,947) (344) Loss before income taxes (22,139) (18,149) (3,990) (Benefit from) provision for income taxes (554) 198 (752) Net loss (21,585) (18,347) (3,238) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (10,465) (9,185) (1,280) Net loss attributable to stockholders $ (11,120) $ (9,162) $ (1,958) 43 The following table sets forth a reconciliation of net loss attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to stockholders $ (11,120) $ (9,162) $ (1,958) Add: (Benefit from) provision for income taxes (554) 198 (752) Add: Equity-based compensation expense 1,759 444 1,315 Add: Acquisition and transaction expenses 2 — 2 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive allocations — — — Add: Depreciation and amortization expense (1) 12,906 11,869 1,037 Add: Interest expense 9,297 7,884 1,413 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — Add: Dividends and accretion of redeemable preferred stock — — — Add: Interest and other costs on pension and OPEB liabilities — — — Add: Other non-recurring items — — — Less: Equity in earnings of unconsolidated entities — — — Less: Non-controlling share of Adjusted EBITDA (2) (5,489) (4,715) (774) Adjusted EBITDA (non-GAAP) $ 6,801 $ 6,518 $ 283 ________________________________________________________ (1) Includ es the following items for the three months ended March 31, 2024 and 2023: (i) depreciation and amortization expense of $12,330 and $11,869 and (ii) capitalized contract costs amortization of $576 and $—. (2) Includes the following items for the three months ended March 31, 2024 and 2023: (i) equity-based compensation of $412 and $102, (ii) (benefit from) provision for income taxes of $(130) and $46, (iii) interest expense of $2,180 and $1,823 and (iv) depreciation and amortization expense of $3,027 and $2,744, respectively. Revenues Total revenues decreased $0.5 million during the three months ended March 31, 2024 due to a decrease in average crude oil throughput volumes. Expenses Total expenses increased $3.2 million during the three months ended March 31, 2024 which primarily reflects: • an increase in operating expenses of $2.7 million primarily due to costs associated with stock-based compensation, insurance, higher labor and other costs associated with increased terminal throughput activity; and • an increase in depreciation and amortization of $0.5 million due to additional assets being placed into service. Other expense Total other expense increased $0.3 million during the three months ended March 31, 2024, which primarily reflects an increase in interest expense of $1.4 million due to a reduction in capitalized interest, partially offset by a benefit of $1.1 million from the decrease in prior period losses related to the termination of a pipeline contract. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $0.3 million during the three months ended March 31, 2024 primarily due to the changes noted above. 44 Repauno Segment The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Terminal services revenues $ 4,078 $ 362 $ 3,716 Other revenue 1 (1,815) 1,816 Total revenues 4,079 (1,453) 5,532 Expenses Operating expenses 6,171 4,929 1,242 Depreciation and amortization 2,444 2,245 199 Total expenses 8,615 7,174 1,441 Other expense Interest expense (146) (588) 442 Total other expense (146) (588) 442 Loss before income taxes (4,682) (9,215) 4,533 (Benefit from) provision for income taxes (136) 114 (250) Net loss (4,546) (9,329) 4,783 Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (286) (498) 212 Net loss attributable to stockholders $ (4,260) $ (8,831) $ 4,571 The following table sets forth a reconciliation of net loss attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to stockholders $ (4,260) $ (8,831) $ 4,571 Add: (Benefit from) provision for income taxes (136) 114 (250) Add: Equity-based compensation expense 291 126 165 Add: Acquisition and transaction expenses — — — Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — 1,125 (1,125) Add: Asset impairment charges — — — Add: Incentive allocations — — — Add: Depreciation and amortization expense 2,444 2,245 199 Add: Interest expense 146 588 (442) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — Add: Dividends and accretion of redeemable preferred stock — — — Add: Interest and other costs on pension and OPEB liabilities — — — Add: Other non-recurring items — — — Less: Equity in earnings of unconsolidated entities — — — Less: Non-controlling share of Adjusted EBITDA (1) (168) (228) 60 Adjusted EBITDA (non-GAAP) $ (1,683) $ (4,861) $ 3,178 ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 an d 2023: (i) equity-based compensation of $18 and $7, (ii) (benefit from) provision for income taxes of $(8) and $6, (iii) interest expense of $9 and $32, (iv) depreciation and amortization expense of $149 and $122 and (v) changes in fair value of non-hedge derivative instruments of $— and $61, respectively. 45 Revenues Total revenue increased $5.5 million during the three months ended March 31, 2024 primarily due to (i) the commencement of a butane throughput contract at Repauno in April 2023, as well as (ii) losses in the prior year related to the sale of butane inventory as the terminal prepared for the new throughput contract. Expenses Total expenses increased $1.4 million during the three months ended March 31, 2024, which primarily reflects higher operating expenses due to costs associated with stock-based compensation, and an increase in labor costs and professional fees related to the continued development of the site. Other expense Total other expense decreased $0.4 million during the three months ended March 31, 2024, which reflects an increase in capitalized interest, partially offset by an increase in interest expense due to an increase in the borrowing amount on the revolver, amended in December 2023. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $3.2 million during the three months ended March 31, 2024 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 (in thousands) 2024 2023 Revenues Other revenue $ — $ — $ — Total revenues — — — Expenses Operating expenses 692 424 268 Acquisition and transaction expenses — 22 (22) Total expenses 692 446 246 Other (expense) income Equity in (losses) earnings of unconsolidated entities (7,037) 7,761 (14,798) Interest expense — (2) 2 Other income 2,302 1,229 1,073 Total other (expense) income (4,735) 8,988 (13,723) Net (loss) income attributable to stockholders $ (5,427) $ 8,542 $ (13,969) 46 The following table sets forth a reconciliation of net (loss) income attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net (loss) income attributable to stockholders $ (5,427) $ 8,542 $ (13,969) Add: Provision for income taxes — — — Add: Equity-based compensation expense — — — Add: Acquisition and transaction expenses — 22 (22) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive allocations — — — Add: Depreciation and amortization expense — — — Add: Interest expense — 2 (2) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 8,782 10,509 (1,727) Add: Dividends and accretion of redeemable preferred stock — — — Add: Interest and other costs on pension and OPEB liabilities — — — Add: Other non-recurring items — — — Less: Equity in losses (earnings) of unconsolidated entities 7,037 (7,761) 14,798 Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ 10,392 $ 11,314 $ (922) ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net (loss) income of $(7,053) and $7,761, (ii) interest expense of $9,210 and $7,234, (iii) depreciation and amortization expense of $4,449 and $5,340, (iv) acquisition and transaction expenses of $19 and $20, (v) changes in fair value of non-hedge derivative instruments of $2,053 and $(9,847), (vi) equity-based compensation of $1 and $1, (vii) asset impairment of $87 and $— and (viii) equity method basis adjustments of $16 and $—, respectively. Expenses Total expenses increased $0.2 million during the three months ended March 31, 2024, which primarily relates to an increase in professional fees. Other (expense) income Total other expense increased $13.7 million during the three months ended March 31, 2024 which reflects: • an increase in equity in losses of unconsolidated entities of $14.8 million, primarily due to decrease in unrealized gains on power swaps at Long Ridge; partially offset by • an increase in other income of $1.1 million due to interest income from an increased loan balance under the loan agreement between the Company and Long Ridge Energy & Power LLC. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $0.9 million during the three months ended March 31, 2024 due to a decrease in the pro-rata share of adjusted EBITDA from unconsolidated entities of $1.7 million and the changes noted above. 47 Sustainability and Energy Transition Segment The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Other revenue $ — $ — $ — Total revenues — — — Expenses Operating expenses — 1 (1) Acquisition and transaction expenses — 1 (1) Total expenses — 2 (2) Other (expense) income Equity in losses of unconsolidated entities (4,874) (3,416) (1,458) Other income 660 607 53 Total other expense (4,214) (2,809) (1,405) Net loss attributable to stockholders $ (4,214) $ (2,811) $ (1,403) The following table sets forth a reconciliation of net loss attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to stockholders $ (4,214) $ (2,811) $ (1,403) Add: Provision for income taxes — — — Add: Equity-based compensation expense — — — Add: Acquisition and transaction expenses — 1 (1) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive Allocations — — — Add: Depreciation and amortization expense — — — Add: Interest expense — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (2,519) (2,316) (203) Add: Dividends and accretion of redeemable preferred stock — — — Add: Interest and other costs on pension and OPEB liabilities — — — Add: Other non-recurring items — — — Less: Equity in losses of unconsolidated entities 4,874 3,416 1,458 Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ (1,859) $ (1,710) $ (149) ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net loss of $(4,874) and $(3,419), (ii) interest expense of $1,674 and $777 and (iii) depreciation and amortization expense of $681 and $326, respectively . Other expense Total other expense increased $1.4 million during the three months ended March 31, 2024, which reflects changes in equity in losses of unconsolidated entities primarily due to higher operating losses at GM-FTAI Holdco LLC. 48 Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $0.1 million during the three months ended March 31, 2024 primarily due to the changes noted above. Corporate and Other The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Roadside services revenues $ 13,528 $ 17,850 $ (4,322) Total revenues 13,528 17,850 (4,322) Expenses Operating expenses 13,738 18,148 (4,410) General and administrative 4,861 3,201 1,660 Acquisition and transaction expenses 740 63 677 Management fees and incentive allocation to affiliate 3,001 2,982 19 Depreciation and amortization 735 920 (185) Total expenses 23,075 25,314 (2,239) Other income (expense) Equity in earnings of unconsolidated entities 9 21 (12) Interest expense (18,081) (13,821) (4,260) Total other expense (18,072) (13,800) (4,272) Loss before income taxes (27,619) (21,264) (6,355) Provision for income taxes 1,403 819 584 Net loss (29,022) (22,083) (6,939) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — (228) 228 Less: Dividends and accretion of redeemable preferred stock 16,975 14,570 2,405 Net loss attributable to stockholders $ (45,997) $ (36,425) $ (9,572) 49 The following table sets forth a reconciliation of net loss attributable to stockholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to stockholders $ (45,997) $ (36,425) $ (9,572) Add: Provision for income taxes 1,403 819 584 Add: Equity-based compensation expense — — — Add: Acquisition and transaction expenses 740 63 677 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive allocations — — — Add: Depreciation and amortization expense 735 920 (185) Add: Interest expense 18,081 13,821 4,260 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (6) (3) (3) Add: Dividends and accretion of redeemable preferred stock 16,975 14,570 2,405 Add: Interest and other costs on pension and OPEB liabilities — — — Add: Other non-recurring items — — — Less: Equity in earnings of unconsolidated entities (9) (21) 12 Less: Non-controlling share of Adjusted EBITDA (2) — (260) 260 Adjusted EBITDA (non-GAAP) (8,078) (6,516) (1,562) ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net loss of $(15) and $(24) and (ii) interest expense of $9 and $21, respectively. (2) Includes the following item for the three months ended March 31, 2024 and 2023: (i) depreciation and amortization expense of $— and $260. Revenues Total revenues decreased $4.3 million during the three months ended March 31, 2024 primarily due to a decrease in roadside services at FYX. Expenses Total expenses decreased $2.2 million during the three months ended March 31, 2024 which primarily reflects: • a decrease in operating expenses of $4.4 million due to a decrease in roadside services at FYX; and • a decrease in depreciation and amortization expense of $0.2 million due to assets that became fully depreciated; partially offset by • an increase in general and administrative expenses of $1.7 million primarily due to higher professional fees; and • an increase in acquisition and transaction expenses of $0.7 million associated with professional fees for a potential acquisition. Other expense Total other expense increased $4.3 million during the three months ended March 31, 2024, which primarily reflects an increase in interest expense due to the additional issuance of the Senior Notes due 2027 in July 2023. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $1.6 million during the three months ended March 31, 2024 primarily due to the changes noted above. Liquidity and Capital Resources The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows and external debt financing. On April 2, 2024, Jefferson Terminal entered into a credit agreement, providing for a $75.0 million term loan facility, which matures at the earlier of (i) December 13, 2024 or (ii) 30 days prior to the date on which the first cash dividend payment on 50 preferred equity is paid, and bears interest at the Applicable Margin of 4.00% plus Adjusted Term SOFR. The proceeds will be used for general corporate purposes. As discussed in Note 2 to the consolidated financial statements, in performing the first step of the evaluation under ASC 205-40, management concluded that the Company’s current liquidity and forecasted cash flows from operations are not sufficient to support, in full, the repayments of Jefferson Terminal’s $75.0 million credit agreement due on December 13, 2024 and Taxable Series 2020B Bonds totaling $79.1 million that mature on January 1, 2025 and dividend payments on Series A Preferred Stock. In performing the second step of this assessment, the Company evaluated whether it is probable that the Company’s plans will be effectively implemented within one year after the financial statements are issued and whether it is probable that those plans will alleviate the liquidity risk raised in the first step of the evaluation. Management has approved and began implementing a plan to alleviate liquidity risk by: (i) refinancing the Taxable Series 2020B Bonds and issuing new long-term, low-cost municipal bonds, including contributing additional unencumbered assets as collateral; and (ii) continuing to accrue paid-in-kind dividends on its Series A Senior Preferred Stock. On May 10, 2024, Jefferson Terminal announced an approximately $276 million municipal bond offering, and expects to close the offering in the coming weeks. If fully implemented, the Company will have sufficient liquidity to meet its obligations as they become due over the next twelve months from the date that the consolidated financial statements were issued. In addition to the plans discussed above, we are currently evaluating several potential transactions and related financings, including, but not limited to, asset sales, debt refinancing, equity refinancing, and providing for increased debt capacity at certain of our subsidiaries, which could occur within the next 12 months. None of these transactions, negotiations or financings are definitive or included within our assessment of our planned liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction. We continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. This includes limiting discretionary spending across the organization and re-prioritizing our capital projects. 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 $18.9 million and $66.9 million during the three months ended March 31, 2024 and 2023, 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, 2024, (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 $3.9 million and $12.1 million during the three months ended March 31, 2024 and 2023, respectively. • During the three months ended March 31, 2024, no additional borrowings were obtained and we did not make any principal repayments of debt. 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. • Proceeds from the sale of assets were $— million a nd $0.1 million during the three months ended March 31, 2024 and 2023, respectively. Historical Cash Flow Comparison of the three months ended March 31, 2024 and 2023 The following table compares the historical cash flow for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, (in thousands) 2024 2023 Cash Flow Data: Net cash used in operating activities $ (3,883) $ (12,144) Net cash used in investing activities (18,846) (66,842) Net cash (used in) provided by financing activities (454) 37,777 Net cash used in operating activities decreased $8.3 million, which primarily reflects certain adjustments to reconcile net loss to cash used in operating activities including (i) equity in losses of unconsolidated entities of $16.3 million, (ii) changes in working capital of $4.9 million, (iii) changes in depreciation and amortization of $0.4 million, (iv) changes in equity-based compensation of $1.4 million and (v) changes in amortization of deferred financing costs of $0.5 million, partially offset by (i) an increase in our net loss of $14.4 million and (ii) changes in fair value of non-hedge derivatives of $1.1 million. 51 Net cash used in investing activities decreased $48.0 million, primarily due to (i) a decrease in the acquisition of property, plant and equipment of $27.0 million and (ii) a decrease in the investment in promissory notes and loans of $20.5 million. Net cash used in financing activities increased $38.2 million, primarily due to (i) a decrease in proceeds from debt of $41.6 million and (ii) a decrease in settlement of equity-based compensation of $0.1 million, partially offset by (i) a decrease in cash dividends paid of $3.1 million and (ii) a decrease in payment of deferred financing costs of $0.4 million. Debt Obligations Refer to Note 7 of the consolidated financial statements for additional information. Contractual Obligations Our material cash requirements include the following contractual and other obligations: Debt Obligations — As of March 31, 2024, we had outstanding principal and interest payment obligations of $1.4 billion and $0.5 billion, respectively, of which, $79.1 million and $90.1 million, respectively, are due within the next twelve months. See Note 7 to the consolidated financial statements for additional information about our debt obligations. Lease Obligations —As of March 31, 2024, we had outstanding operating and finance lease obligations of $166.5 million, of which $8.2 million is due within the next twelve months. Redeemable Preferred Stock Obligations —We have dividend payments of $38.6 million due on our redeemable preferred stock within the next twelve months with an option to paid-in-kind dividends at a higher interest rate and to defer payment for twelve months. See Note 15 for additional information related to our preferred stock obligations. Other Cash Requirements —In addition to our contractual obligations, we intend to pay quarterly cash dividends on our common stock, which are subject to change at the discretion of our board of directors. We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required. See Note 2 for additional information related to other cash requirements. Critical Accounting Estimates and Policies Goodwill — Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisition of Jefferson Terminal, Transtar and FYX. As of December 31, 2023, the carrying amount of goodwill within the Jefferson Terminal, Railroad and Corporate and Other segments was $122.7 million, $147.2 million, and $5.4 million, 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, 2023, 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, capital expenditures 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 52 estimated fair value that exceeded its carrying value by more than 10% but less than 20% as of October 1, 2023. 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, expansion of volumes and execution of contracts related to sustainable fuels and movements in future oil spreads. At October 1, 2023, approximately 6.2 million barrels of storage was operational. Our discount rate for our 2023 goodwill impairment analysis was 10.3% and our assumed terminal growth rate was 2.5%. 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 and natural gas production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Although we do not have significant direct exposure to volatility of crude oil prices, changes in crude oil pricing that affect long term refining planned output could impact Jefferson Terminal operations. We expect the Jefferson Terminal reporting unit to continue to generate positive Adjusted EBITDA in future years. Further delays in executing anticipated contracts or achieving our projected volumes could adversely affect the fair value of the reporting unit. There was no impairment of goodwill for the year ended December 31, 2023. Recent Accounting Pronouncements The Company has reviewed recently issued accounting pronouncements and concluded that such pronouncements are either not applicable to the Company or no material impact is expected in the consolidated financial statements as a result of future adoption.