What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-30 compared with 2020-07-31 · 174 added, 181 removed, 428 unchanged (45% of the section changed)

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We are externally managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), which has a dedicated team of experienced professionals focused on the acquisition of transportation and infrastructure assets since 2002.

As of June 30, 2020, we had total consolidated assets of $3.3 billion and total equity of $1.3 billion.

As of September 30, 2020, we had total consolidated assets of $3.4 billion and total equity of $1.2 billion.

Impact of COVID-19

Due to the outbreak of COVID-19, we have taken measures to protect the health and safety of our employees, including having employees work remotely, where possible.

While the outbreak did not have a material impact on operating results on our Aviation Leasing business in the first half of 2020, and we have not yet seen a meaningful decline in the timing of lease payments, a number of our lessees are experiencing increased financial stress due to the significant decline in travel demand.

A number of these lessees have been placed on non-accrual status as of June 30, 2020.

While the outbreak did not have a material impact on operating results on our Aviation Leasing business during the nine months ended September 30, 2020, and we have not yet seen a meaningful decline in the timing of lease payments, a number of our lessees continue to experience increased financial stress due to the significant decline in travel demand, particularly as various regions experience spikes in COVID-19 cases.

A number of these lessees have been placed on non-accrual status as of September 30, 2020.

However, we believe our overall portfolio exposure is limited by maintenance reserves and security deposits which are secured against lessee defaults.

The value of these deposits was $224.1 million as of June 30, 2020.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related restrictions put in place by the U.S.

and international governments, all of which are uncertain and cannot be predicted.

The value of these deposits was $190.5 million as of September 30, 2020.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration, severity and spread of the pandemic, as well as additional waves of COVID-19 infections and the ultimate impact of related restrictions imposed by the U.S.

and international governments, all of which remain uncertain.

For additional detail, see Liquidity and Capital Resources and Item IA.

Risk Factors—The current outbreak of the novel coronavirus (COVID-19) has severely disrupted the global economy and may have, and the emergence of other epidemic or pandemic crises could have, material adverse effects on our business, results of operations or financial condition.

Risk Factors—The current outbreak of the novel coronavirus (COVID-19) has severely disrupted the global economy and may have, and the emergence of similar crises could have, material adverse effects on our business, results of operations or financial condition.

Operating Segments

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Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, and management fees.

unconsolidated entity engaged in the leasing of shipping containers and (iii) railroad assets retained after the December 2019 sale, which consists of equipment that support a railcar cleaning business.

Additionally, Corporate and Other includes (i) offshore energy related assets which consist of vessels and equipment that support offshore oil and gas activities and are typically subject to long-term operating leases, (ii) an investment in an unconsolidated entity engaged in the leasing of shipping containers and (iii) railroad assets retained after the December 2019 sale, which consists of equipment that support a railcar cleaning business.

Aviation Leasing Organizational Restructuring

We recently completed an organizational restructuring of the Aviation Leasing segment (“Aviation Restructuring”).

In early 2020, we completed an organizational restructuring of the Aviation Leasing segment (“Aviation Restructuring”).

Previously, Aviation Leasing’s employees were employed by the Manager and compensation and related costs associated with these employees were reimbursed to the Manager, per the Management Agreement.

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Adjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, 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, and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

Comparison of the three and six months ended June 30, 2020 and 2019

Comparison of the three and nine months ended September 30, 2020 and 2019

The following table presents our consolidated results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

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Equity in losses of unconsolidated entities (2,501) (974) (1,527) (5,445) (1,527) (3,918)

Gain (loss) on sale of assets, net 768 22,622 (21,854) (1,051) 24,340 (25,391)

(Loss) gain on sale of assets, net (1,114) 37,060 (38,174) (2,165) 61,400 (63,565)

Loss on extinguishment of debt — — — (4,724) — (4,724)

Interest income 58 121 (63) 121 452 (331)

Other (expense) income (1) 4,937 (4,938) 32 2,334 (2,302)

Other income — 1,131 (1,131) 32 3,465 (3,433)

Total other (expense) income (3,557) 37,338 (40,895) (12,181) 63,790 (75,971)

(Loss) income from continuing operations before income taxes (27,695) 20,608 (48,303) (51,662) 23,601 (75,263)

Benefit from income taxes (3,750) (2,328) (1,422) (3,848) (2,061) (1,787)

(Benefit from) provision for income taxes (2,486) 872 (3,358) (6,334) (1,189) (5,145)

Net (loss) income from continued operations (25,209) 19,736 (44,945) (45,328) 24,790 (70,118)

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The following table sets forth a reconciliation of net (loss) income attributable to shareholders from continuing operations to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

Net (loss) income attributable to shareholders from continuing operations $ (25,958) $ 24,847 $ (50,805) $ (45,847) $ 37,841 $ (83,688)

Benefit from income taxes (3,750) (2,328) (1,422) (3,848) (2,061) (1,787)

(Benefit from) provision for income taxes (2,486) 872 (3,358) (6,334) (1,189) (5,145)

Equity-based compensation expense 621 405 216 1,323 1,166 157

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________________________________________________________

(1) Includes the following items for the three months ended June 30, 2020 and 2019:

(1) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) depreciation and amortization expense of $42,626 and $43,265, (ii) lease intangible amortization of $953 and $1,072 and (iii) amortization for lease incentives of $8,953 and $5,648, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) depreciation and amortization expense of $126,543 and $124,180, (ii) lease intangible amortization of $3,016 and $5,736 and (iii) amortization for lease incentives of $20,378 and $18,272, respectively.

(2) Includes the following items for the three months ended June 30, 2020 and 2019:

(2) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) net loss of $(2,590) and $(1,096), (ii) interest expense of $367 and $30, (iii) depreciation and amortization expense of $1,389 and $265, (iv) acquisition and transaction expenses of $(79) and $0 and (v) changes in fair value of non-hedge derivatives of $1,033 and $0, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) net loss of $(5,593) and $(1,793), (ii) interest expense of $848 and $101, (iii) depreciation and amortization expense of $3,797 and $797, (iv) acquisition and transaction expenses of $533 and $0 and (v) changes in fair value of non-hedge derivatives of $248 and $0, respectively.

(3) Includes the following items for the three months ended June 30, 2020 and 2019:

(3) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) equity-based compensation of $97 and $57, (ii) provision for income taxes of $1 and $12, (iii) interest expense of $322 and $813, (iv) depreciation and amortization expense of $1,535 and $1,261 and (v) changes in fair value of non-hedge derivative instruments of $0 and $785, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) equity based compensation of $196 and $176, (ii) provision for income taxes of $44 and $38, (iii) interest expense of $1,553 and $2,758, (iv) depreciation and amortization expense of $4,583 and $3,633, (v) changes in fair value of non-hedge derivative instruments of $38 and $1,261 and (vi) loss on extinguishment of debt of $992 and $0, respectively.

Comparison of the three months ended June 30, 2020 and 2019

Total revenues decreased $55.5 million primarily due to lower revenues in the Jefferson Terminal segment.

Comparison of the three months ended September 30, 2020 and 2019

Total revenues decreased $69.0 million primarily due to lower revenues of $48.8 million in the Jefferson Terminal segment and $19.8 million in the Aviation Leasing segment.

Equipment Leasing

Other revenue increased $6.6 million, which primarily reflects (i) an increase of $5.2 million in the Aviation Leasing segment due to an increase in end-of-lease redelivery compensation and (ii) an increase of $1.4 million in the offshore energy business primarily related to victualling income.

Maintenance revenue increased $1.7 million primarily due to the recognition of maintenance deposits due to the early redelivery of six aircraft offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

Lease income decreased $7.3 million primarily due to a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status offset by an increase in the number of aircraft on lease.

Lease income decreased $10.4 million primarily due to an increase in aircraft redelivered and a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft placed on lease.

Maintenance revenue decreased $9.8 million primarily due to lower aircraft and engine utilization as a result of the COVID-19 pandemic, partially offset by the recognition of maintenance deposits due to the early redelivery of four aircraft.

Other revenue increased $2.7 million, which primarily reflects (i) an increase of $1.5 million in the Aviation Leasing segment due to an increase in end-of-lease redelivery compensation and (ii) an increase of $1.1 million in the offshore energy business related to victualling income as one of our vessels was on-hire in 2020 while it was off-hire in 2019.

Infrastructure

Crude marketing revenue decreased $50.4 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019.

Terminal services revenue increased $4.2 million which primarily reflects (i) an increase of $5.3 million due to increased activity and storage capacity at Jefferson Terminal, partially offset by (ii) a decrease of $1.0 million at Long Ridge due to Long Ridge being accounted for as equity method investment starting in the fourth quarter of 2019 (“Long Ridge Transaction”).

Comparison of the six months ended June 30, 2020 and 2019

Total revenues decreased $57.6 million primarily due to lower revenues in the Jefferson Terminal and Ports and Terminals segments, partially offset by higher revenues in the Aviation Leasing segment and Corporate and Other.

Comparison of the nine months ended September 30, 2020 and 2019

Total revenues decreased $126.6 million due to lower revenues of $114.5 million in the Jefferson Terminal segment, $10.6 million in the Ports and Terminals segment and $7.0 million in the Aviation Leasing segment, partially offset by higher revenues of $5.5 million in Corporate and Other.

Equipment Leasing

Maintenance revenue increased $12.0 million primarily due to the recognition of maintenance deposits due to the early redelivery of seven aircraft offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

Other revenue increased $10.2 million, which primarily reflects (i) an increase of $8.4 million in the Aviation Leasing segment due to an increase in end-of-lease redelivery compensation and settlement of an engine loss and (ii) an increase of $1.9 million in the offshore energy business primarily related to victualling income.

Lease income decreased $6.7 million primarily due to a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status offset by an increase in the number of aircraft on lease.

Lease income decreased $17.1 million primarily due to an increase in aircraft redelivered and the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft placed on lease.

Other revenue increased $12.9 million, which primarily reflects (i) an increase of $9.9 million in the Aviation Leasing segment due to an increase in end-of-lease redelivery compensation and settlement of an engine loss and (ii) an increase of $3.0 million in the offshore energy business related to victualling income as our vessels were on-hire longer in 2020 compared to 2019.

Maintenance revenue increased $2.1 million primarily due to the recognition of maintenance deposits due to the early redelivery of eleven aircraft, partially offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

Infrastructure

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Revenues in 2020 include contracts executed in 2019 but delivered in 2020.

Other revenue decreased $3.1 million, which reflects (i) a decrease of $3.1 million due to the Long Ridge Transaction, (ii) a decrease in butane sales of $1.1 million at Repauno, partially offset by (iii) an increase of $1.1 million due to higher volume in our railcar cleaning business.

Other revenue decreased $3.2 million, which primarily reflects (i) a decrease of $4.2 million at Long Ridge due to Long Ridge being accounted for as an equity method investment starting in the fourth quarter of 2019 (the “Long Ridge Transaction”), partially offset by (ii) an increase of $1.4 million in our railcar cleaning business due to higher volumes.

Terminal services revenue increased $13.4 million which primarily reflects (i) an increase of $18.6 million due to increased activity and storage capacity at Jefferson Terminal, partially offset by (ii) a decrease of $5.2 million due to the Long Ridge Transaction.

Comparison of the three months ended June 30, 2020 and 2019

Total expenses decreased $53.4 million, primarily due to (i) lower operating expenses, (ii) lower interest expense, partially offset by (iii) an asset impairment.

Comparison of the three months ended September 30, 2020 and 2019

Total expenses decreased $61.6 million, primarily due to lower (i) operating expenses, (ii) acquisition and transaction expense, (iii) management fees and incentive allocation to affiliate and (iv) general and administrative expense, partially offset by higher (v) asset impairment and (vi) interest expense.

Operating expenses decreased $59.6 million, primarily due to a decrease in cost of sales of $55.6 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019.

Interest expense decreased $3.6 million, primarily due to:

Acquisition and transaction expense decreased $2.9 million which primarily reflects a lower reimbursement to the Manager of $2.5 million due to fewer acquisitions in 2020 compared to 2019.

Management fees and incentive allocation to affiliate decreased $2.8 million, which reflects (i) lower incentive fees of $3.7 million due to the decrease in gains on sale of assets, net, partially offset by (ii) an increase of $0.9 million in the base management fee as our average total equity is higher in 2020 compared to 2019.

General and administrative expenses decreased $1.3 million primarily due to a lower reimbursement to the Manager.

Asset impairment increased $3.9 million due to an impairment charge in 2020 in the Aviation Leasing segment.

Interest expense increased $1.7 million, primarily due to:

• an increase of $4.3 million in Corporate and Other which primarily reflects (i) an increase in our average outstanding debt due to the issuance of the 2027 Notes, partially offset by (ii) a decrease in interest expense related to the FTAI Pride Credit Agreement, which was repaid in full in March 2020;

• a decrease of $2.4 million at Jefferson Terminal due to the Jefferson Refinancing.

• a decrease of $1.4 million in Corporate and Other primarily due to a decrease in interest expense related to the FTAI Pride Credit Agreement, which was repaid in full in March 2020.

The above decreases were partially offset by an asset impairment charge of $10.5 million in 2020 in the Aviation Leasing segment.

Comparison of the six months ended June 30, 2020 and 2019

Total expenses decreased $65.7 million, primarily due to lower (i) operating expenses and (ii) interest expense, partially offset by higher (iii) an asset impairment charge, (iv) depreciation and amortization and (v) acquisition and transaction expenses.

Operating expenses decreased $82.1 million, primarily due to:

• a decrease in cost of sales of $81.9 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019;

• a decrease in bad debt of $1.2 million primarily in the Aviation Leasing segment, partially offset by

• an increase in compensation and benefits of $2.9 million primarily due to increased headcount in the Jefferson Terminal and Aviation Leasing segments.

Interest expense decreased $1.5 million, primarily due to:

• a decrease of $2.7 million at Jefferson Terminal due to the Jefferson Refinancing, partially offset by

• an increase of $1.1 million in Corporate and Other which reflects an increase in our average outstanding debt of approximately $64.0 million, which primarily consists of (i) an increase of $100.0 million for the 2025 Notes, (ii) an increase of $25.1 million for the 2022 Notes, (iii) a decrease of $26.7 million for the Revolving Credit Facility and (iv) a decrease of $34.4 million for the FTAI Pride Credit Agreement, which was repaid in March 2020.

Comparison of the nine months ended September 30, 2020 and 2019

Total expenses decreased $127.3 million, primarily due to lower (i) operating expenses and (ii) management fees and incentive allocation to affiliate, partially offset by (iii) an asset impairment charge.

Operating expenses decreased $141.7 million, primarily due to decreases in:

• cost of sales of $137.5 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019;

• facility operations of $4.1 million primarily due to the Long Ridge Transaction.

Management fees and incentive allocation to affiliate decreased $2.8 million, which reflects (i) lower incentive fees of $6.1 million due to the decrease in gains on sale of assets, net, partially offset by (ii) an increase of $3.3 million in the base management fee as our average total equity is higher in 2020 compared to 2019.

The above decreases were partially offset by an asset impairment charge of $14.4 million in 2020 in the Aviation Leasing segment.

Depreciation and amortization increased $3.0 million, which reflects (i) an increase of $3.7 million primarily due to assets placed into service at Jefferson Terminal, (ii) an increase of $1.6 million primarily due to additional assets acquired and placed into service in the Aviation Leasing segment, partially offset by (iii) a decrease of $2.8 million due to the Long Ridge Transaction.

Acquisition and transaction expenses increased $3.1 million due to additional compensation and related costs associated with the acquisition of aviation leasing equipment.

Other (expense) income

Total other expense increased $30.1 million during the three months ended June 30, 2020, which primarily reflects (i) a decrease of $21.9 million in gain on sale of assets, net as we had more asset sales in 2019 compared to 2020 and (ii) a decrease of $4.9 million in other income due to the Long Ridge Transaction.

Total other expense increased $35.1 million during the six months ended June 30, 2020, which primarily reflects (i) a decrease of $25.4 million in gain on sale of assets, net as we had more asset sales in 2019 compared to 2020, (ii) a loss on extinguishment of debt of $4.7 million due to the Jefferson Refinancing, (iii) a decrease in other income of $2.3 million primarily due to the Long Ridge Transaction and (iv) an increase of $2.4 million in equity in losses of unconsolidated entities.

Total other expense increased $40.9 million during the three months ended September 30, 2020, which primarily reflects (i) a decrease of $38.2 million in gain on sale of assets, net as we had more asset sales in 2019 compared to 2020 and (ii) an increase of $1.5 million in equity in losses of unconsolidated entities.

Total other expense increased $76.0 million during the nine months ended September 30, 2020, which primarily reflects (i) a decrease of $63.6 million in gain on sale of assets, net as we had more asset sales in 2019 compared to 2020, (ii) a loss on extinguishment of debt of $4.7 million due to the Jefferson Refinancing, (iii) an increase of $3.9 million in equity in losses of unconsolidated entities and (iv) a decrease in other income of $3.4 million primarily due to the Long Ridge Transaction.

Net (loss) income from continuing operations

Net income from continuing operations decreased $30.7 million and $25.2 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Net income from continuing operations decreased $44.9 million and $70.1 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $26.2 million and $19.0 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA decreased $53.4 million and $72.4 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Aviation Leasing Segment

As of June 30, 2020, in our Aviation Leasing segment, we own and manage 272 aviation assets, consisting of 80 commercial aircraft and 192 engines.

As of June 30, 2020, 75 of our commercial aircraft and 88 of our engines were leased to operators or other third parties.

As of September 30, 2020, in our Aviation Leasing segment, we own and manage 272 aviation assets, consisting of 79 commercial aircraft and 193 engines.

As of September 30, 2020, 70 of our commercial aircraft and 110 of our engines were leased to operators or other third parties.

Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease.

Our aviation equipment was approximately 73% utilized during the three months ended June 30, 2020, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes.

Our aviation equipment was approximately 71% utilized during the three months ended September 30, 2020, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes.

Our aircraft currently have a weighted average remaining lease term of 35 months, and our engines currently on-lease have an average remaining lease term of 22 months.

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Transfers — (14) (14)

Assets at June 30, 2020 15 65 80

Assets at September 30, 2020 15 64 79

Assets at January 1, 2020 92 72 164

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Transfers (1) 28 27

Assets at June 30, 2020 93 99 192

Assets at September 30, 2020 93 100 193

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

12 unchanged sentences

Equity in losses of unconsolidated entities (247) (885) 638 (1,432) (1,328) (104)

Gain (loss) on sale of assets, net 775 22,610 (21,835) (1,044) 24,328 (25,372)

(Loss) gain on sale of assets, net (1,114) 37,060 (38,174) (2,158) 61,388 (63,546)

Interest income 41 31 10 70 85 (15)

Total other income (expense) 198 22,396 (22,198) (2,200) 23,939 (26,139)

Total other (expense) income (1,320) 36,206 (37,526) (3,520) 60,145 (63,665)

Income before income taxes 21,667 84,320 (62,653) 88,975 178,338 (89,363)

Benefit from income taxes (3,427) (2,369) (1,058) (3,382) (2,189) (1,193)

(Benefit from) provision for income taxes (1,873) 816 (2,689) (5,255) (1,373) (3,882)

Net income 23,540 83,504 (59,964) 94,230 179,711 (85,481)

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The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

Net income attributable to shareholders $ 23,540 $ 83,504 $ (59,964) $ 94,230 $ 179,711 $ (85,481)

Benefit from income taxes (3,427) (2,369) (1,058) (3,382) (2,189) (1,193)

(Benefit from) provision for income taxes (1,873) 816 (2,689) (5,255) (1,373) (3,882)

Equity-based compensation expense — — — — — —

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________________________________________________________

(1) Includes the following items for the three months ended June 30, 2020 and 2019:

(1) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) depreciation expense of $33,014 and $33,911, (ii) lease intangible amortization of $953 and $1,072 and (iii) amortization for lease incentives of $8,953 and $5,648, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) depreciation expense of $97,848 and $97,183, (ii) lease intangible amortization of $3,016 and $5,736 and (iii) amortization for lease incentives of $20,378 and $18,272, respectively.

(2) Includes Aviation Leasing’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.

Comparison of the three months ended June 30, 2020 and 2019

Total revenue increased $0.3 million driven by higher maintenance revenue and other revenue.

• Maintenance revenue increased $1.7 million primarily due to the recognition of maintenance deposits due to the early redelivery of six aircraft offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

Comparison of the three months ended September 30, 2020 and 2019

Total revenue decreased $19.8 million driven by lower lease income and maintenance revenue.

• Lease income decreased $11.6 million primarily due to an increase in aircraft redelivered and a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft placed on lease.

• Maintenance revenue decreased $9.8 million primarily due to lower aircraft and engine utilization as a result of the COVID-19 pandemic, partially offset the recognition of maintenance deposits due to the early redelivery of four aircraft.

• Other revenue increased $1.5 million primarily due to the increase in end-of-lease redelivery compensation.

• Lease income decreased $6.2 million primarily due to a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status offset by an increase in the number of aircraft on lease.

Comparison of the six months ended June 30, 2020 and 2019

Total revenue increased $12.9 million driven by higher maintenance revenue and other revenue.

• Maintenance revenue increased $12.0 million primarily due to the recognition of maintenance deposits due to the early redelivery of seven aircraft offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

Comparison of the nine months ended September 30, 2020 and 2019

Total revenue decreased $7.0 million driven by lower lease income.

• Lease income decreased $18.2 million primarily due to an increase in aircraft redelivered and the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft placed on lease.

• Maintenance revenue increased $2.1 million primarily due to the recognition of maintenance deposits due to the early redelivery of eleven aircraft, partially offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.

• Other revenue increased $9.9 million primarily due to the increase in end-of-lease redelivery compensation and settlement of an engine loss.

• Lease income decreased $6.6 million primarily due to a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status offset by an increase in the number of aircraft on lease.

Comparison of the three months ended June 30, 2020 and 2019

Comparison of the three months ended September 30, 2020 and 2019

Total expenses increased $5.3 million primarily due to an increase in asset impairment, acquisition and transaction expenses and operating expenses partially offset by a decrease in depreciation and amortization expense.

1 unchanged sentence

• Acquisition and transaction expense increased $1.0 million driven by additional compensation and related costs associated with the acquisition of aviation leasing equipment.

• Operating expenses increased $1.1 million primarily as a result of an increase in bad debt expense.

• Depreciation and amortization expense decreased $0.9 million driven by a decrease in the number of engines on lease and an increase in the number of aircraft redelivered and parted out into our engine leasing pool, partially offset by additional aircraft owned and on lease.

Comparison of the six months ended June 30, 2020 and 2019

• Operating expenses increased $1.3 million primarily as a result of an increase in professional fees, shipping and storage fees, partially offset by a decrease in other operating expenses.

Comparison of the nine months ended September 30, 2020 and 2019

Total expenses increased $18.7 million primarily due to an increase in asset impairment, depreciation and amortization expense and acquisition and transaction expenses, partially offset by a decrease in operating expenses.

2 unchanged sentences

• Depreciation and amortization expense increased $0.7 million driven by additional aircraft owned and on lease, partially offset by a decrease in the number of engines on lease and additional aircraft redelivered and parted out into our engine leasing pool.

• Operating expenses decreased $1.4 million primarily as a result of a decrease in bad debt expense.

• Operating expenses decreased $0.2 million primarily as a result of a decrease in bad debt expense and repairs and maintenance expenses, partially offset by an increase in professional fees, compensation and benefit and other operating expenses.

Other (expense) income

Total other income decreased $22.2 million during the three months ended June 30, 2020, primarily due to a decrease of $21.8 million in gain on the sale of leasing equipment in 2020, partially offset by an increase of $0.4 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss.

Total other income decreased $26.1 million during the six months ended June 30, 2020, primarily due to a decrease of $25.4 million in gain on the sale of leasing equipment in 2020, partially offset by an increase of $0.7 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss.

Total other income decreased $37.5 million during the three months ended September 30, 2020, primarily due to a decrease of $38.2 million in gain on the sale of leasing equipment in 2020, partially offset by a decrease of $0.6 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss.

Total other income decreased $63.7 million during the nine months ended September 30, 2020, primarily due to a decrease of $63.5 million in gain on the sale of leasing equipment in 2020 and an increase of $0.1 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $25.4 million and $15.6 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA decreased $55.4 million and $71.1 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Jefferson Terminal Segment

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

9 unchanged sentences

Other (expense) income

Equity in earnings (losses) of unconsolidated entities — 92 (92) — (128) 128

Equity in losses of unconsolidated entities — (162) 162 — (290) 290

(Loss) gain on sale of assets, net — — — (7) 12 (19)

1 unchanged sentence

Interest income — 26 (26) 22 97 (75)

Other (expense) income (1) 50 (51) 32 (183) 215

Total other (expense) income (8) 187 (195) (4,677) (228) (4,449)

Other income — 772 (772) 32 589 (557)

Total other income (expense) — 636 (636) (4,677) 408 (5,085)

Loss before income taxes (6,701) (18,183) 11,482 (27,913) (47,652) 19,739

4 unchanged sentences

The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

16 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2020 and 2019:

(i) net income of $0 and $19 and (ii) depreciation and amortization expense of $0 and $266, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

(1) Includes the following items for the three and nine months ended September 30, 2019:

(i) net loss of $(162) and $(363) and (ii) depreciation and amortization expense of $265 and $797, respectively.

(2) Includes the following items for the three months ended June 30, 2020 and 2019:

(2) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) equity-based compensation of $90 and $57, (ii) provision for income taxes of $1 and $12, (iii) interest expense of $312 and $825, (iv) changes in fair value of non-hedge derivative instruments of $0 and $785 and (v) depreciation and amortization expense of $1,522 and $1,199, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) equity-based compensation of $180 and $172, (ii) provision for income taxes of $44 and $38, (iii) interest expense of $1,517 and $2,599, (iv) changes in fair value of non-hedge derivative instruments of $38 and $1,261, (v) depreciation and amortization expense of $4,544 and $3,441 and (vi) loss on extinguishment of debt of $992 and $0, respectively.

Total revenues decreased $54.5 million during the three months ended June 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $59.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in terminal services of $5.3 million due to increased activity and storage capacity.

Total revenues decreased $65.7 million during the six months ended June 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $81.8 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in terminal services of $16.8 million due to increased activity and storage capacity.

Total expenses decreased $62.7 million during the three months ended June 30, 2020, which reflects (i) a decrease in operating expenses of $62.1 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $2.2 million due to the Jefferson Refinancing, partially offset by (iii) an increase in depreciation and amortization of $1.6 million due to additional assets being placed into service.

Total expenses decreased $78.4 million during the six months ended June 30, 2020, which reflects (i) a decrease in operating expenses of $79.4 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $2.7 million due to the Jefferson Refinancing, partially offset by (iii) an increase in depreciation and amortization of $3.7 million due to additional assets being placed into service.

Total revenues decreased $48.8 million during the three months ended September 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $50.4 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in terminal services of $1.8 million due to increased activity and storage capacity.

Total revenues decreased $114.5 million during the nine months ended September 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $132.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in terminal services of $18.6 million due to increased activity and storage capacity.

Total expenses decreased $61.0 million during the three months ended September 30, 2020, which reflects (i) a decrease in operating expenses of $60.1 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $2.4 million due to the Jefferson Refinancing, partially offset by (iii) an increase in depreciation and amortization of $1.5 million due to additional assets being placed into service.

Total expenses decreased $139.4 million during the nine months ended September 30, 2020, which reflects (i) a decrease in operating expenses of $139.5 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $5.2 million due to the Jefferson Refinancing, partially offset by (iii) an increase in depreciation and amortization of $5.2 million due to additional assets being placed into service.

Other (expense) income

Total other expense increased $4.4 million during the six months ended June 30, 2020, which primarily reflects a loss on extinguishment of debt of $4.7 million due to the Jefferson Refinancing.

Total other expense increased $5.1 million during the nine months ended September 30, 2020, which primarily reflects a loss on extinguishment of debt of $4.7 million due to the Jefferson Refinancing.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $5.5 million and $11.4 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $6.5 million and $17.9 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Ports and Terminals

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

12 unchanged sentences

Interest income — 47 (47) — 241 (241)

Other income — 4,887 (4,887) — 2,517 (2,517)

Other (expense) income — (644) 644 — 1,873 (1,873)

Total other (expense) income (2,285) (597) (1,688) (3,961) 2,114 (6,075)

(Loss) income before income taxes (5,208) 661 (5,869) (7,539) (3,165) (4,374)

Loss before income taxes (4,433) (3,983) (450) (11,972) (7,148) (4,824)

Benefit from income taxes (656) — (656) (1,534) — (1,534)

Net (loss) income (4,611) 661 (5,272) (6,661) (3,165) (3,496)

Net loss (3,777) (3,983) 206 (10,438) (7,148) (3,290)

Net loss attributable to non-controlling interest in consolidated subsidiaries (67) (80) 13 (234) (166) (68)

Net (loss) income attributable to shareholders $ (4,519) $ 683 $ (5,202) $ (6,494) $ (3,079) $ (3,415)

The following table sets forth a reconciliation of net (loss) income attributable to shareholders to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Net loss attributable to shareholders $ (3,710) $ (3,903) $ 193 $ (10,204) $ (6,982) $ (3,222)

The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

Net (loss) income attributable to shareholders $ (4,519) $ 683 $ (5,202) $ (6,494) $ (3,079) $ (3,415)

Net loss attributable to shareholders $ (3,710) $ (3,903) $ 193 $ (10,204) $ (6,982) $ (3,222)

Benefit from income taxes (656) — (656) (1,534) — (1,534)

14 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2020 and 2019:

(i) net loss of $(2,570) and $0, (ii) interest expense of $417 and $0, (iii) depreciation and amortization expense of $1,446 and $0, (iv) acquisition and transaction expenses of $531 and $0 and (v) changes in fair value of non-hedge derivative instruments of $929 and $0, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

(1) Includes the following items for the three and nine months ended September 30, 2020:

(i) net loss of $(2,285) and $(3,961), (ii) interest expense of $337 and $759, (iii) depreciation and amortization expense of $1,389 and $3,797, (iv) acquisition and transaction expenses of $(79) and $533 and (v) changes in fair value of non-hedge derivative instruments of $1,033 and $248, respectively.

(2) Includes the following items for the three months ended June 30, 2020 and 2019:

(2) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) equity-based compensation of $7 and $0, (ii) interest expense of $10 and $(41) and (iii) depreciation and amortization expense of $13 and $(3), respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) equity-based compensation of $16 and $4, (ii) interest expense of $36 and $71 and (iii) depreciation and amortization expense of $39 and $12, respectively.

Total revenue decreased $2.3 million during the three months ended June 30, 2020, primarily due to the Long Ridge Transaction .

Total revenue decreased $7.7 million during the six months ended June 30, 2020, primarily due to (i) the Long Ridge Transaction and (ii) a decrease of $1.

2 million in butane sales at Repauno.

Total expenses decreased $4.0 million during the three months ended June 30, 2020, primarily due to lower operating expenses of $2.9 million and depreciation and amortization of $1.2 million.

The decrease in operating expenses and depreciation and amortization is primarily due to the Long Ridge Transaction.

Total expenses decreased $7.7 million during the six months ended June 30, 2020, primarily due to lower operating expenses of $5.8 million and depreciation and amortization of $2.8 million.

Total revenue decreased $2.9 million during the three months ended September 30, 2020, primarily due to the Long Ridge Transaction .

Total revenue decreased $10.6 million during the nine months ended September 30, 2020, primarily due to (i) the Long Ridge Transaction and (ii) a decrease of $0.4 million in butane sales at Repauno.

Total expenses decreased $4.2 million during the three months ended September 30, 2020, which primarily reflects lower operating expenses of $2.7 million and depreciation and amortization of $1.3 million, primarily due to the Long Ridge Transaction.

Total expenses decreased $11.8 million during the nine months ended September 30, 2020, which primarily reflects lower operating expenses of $8.5 million and depreciation and amortization of $4.1 million, primarily due to the Long Ridge Transaction.

This was offset by an increase in acquisition and transaction expenses relating to the Long Ridge joint venture of $0.8 million.

The decrease in operating expenses and depreciation and amortization is primarily due to the Long Ridge Transaction.

Other (expense) income

Total other income decreased $7.6 million during the three months ended June 30, 2020, primarily due to an equity method loss of $2.6 million from Long Ridge and a decrease of $4.9 million in unrealized gain on power swap derivatives that was deconsolidated after the Long Ridge Transaction.

Total other income decreased $4.4 million during the six months ended June 30, 2020, respectively, primarily due to an equity method loss of $1.7 million from Long Ridge and a decrease of $2.5 million in unrealized gain on power swap derivatives that was deconsolidated after the Long Ridge Transaction.

Total other income decreased $1.7 million during the three months ended September 30, 2020, primarily due to equity in losses of $2.3 million from Long Ridge and $0.6 million in unrealized losses on power swap derivatives in 2019, which was deconsolidated with the Long Ridge Transaction in 2020.

Total other income decreased $6.1 million during the nine months ended September 30, 2020, respectively, primarily due to equity in losses of $3.9 million from Long Ridge and $1.9 million in unrealized gains on power swap derivatives in 2019, which was deconsolidated with the Long Ridge Transaction in 2020.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $1.4 million and decreased $0.9 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $0.1 million and decreased $0.8 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Corporate and Other

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

14 unchanged sentences

Total expenses 42,555 44,323 (1,768) 115,770 110,598 5,172

Other (expense) income

Equity in (losses) earnings of unconsolidated entities (33) (19) (14) (83) 18 (101)

Other income (expense)

Equity in earnings (losses) of unconsolidated entities 31 73 (42) (52) 91 (143)

Interest income 17 17 — 29 29 —

Total other (expense) income (28) (13) (15) (71) 30 (101)

Other income — 1,003 (1,003) — 1,003 (1,003)

Total other income (expense) 48 1,093 (1,045) (23) 1,123 (1,146)

Loss before income taxes (38,228) (41,546) 3,318 (100,752) (99,937) (815)

5 unchanged sentences

The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2020 2019 2020 2019

16 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2020 and 2019:

(1) Includes the following items for the three months ended September 30, 2020 and 2019:

(i) net loss of $(58) and $(49) and (ii) interest expense of $30 and $30, respectively.

Includes the following items for the six months ended June 30, 2020 and 2019:

Includes the following items for the nine months ended September 30, 2020 and 2019:

(i) net loss of $(200) and $(102) and (ii) interest expense of $89 and $101, respectively.

(2) Includes the following items for the three and six months ended June 30, 2019:

(i) interest expense of $59 and (ii) depreciation and amortization expense of $115.

Total revenues increased $0.9 million during the three months ended June 30, 2020, which primarily reflects (i) an increase of $1.4 million in other revenue in the offshore energy business primarily related to victualling income, (ii) an increase of $0.6 million due to higher volume in our railcar cleaning business, partially offset by (iii) a decrease of $1.0 million in lease income as one of our vessels was off-hire in the second quarter of 2020 while it was on-hire in the second quarter of 2019.

Total revenues increased $2.9 million during the six months ended June 30, 2020, which primarily reflects (i) an increase of $1.9 million in other revenue in the offshore energy business primarily related to victualling income and (ii) an increase of $1.1 million due to higher volume in our railcar cleaning business.

Comparison of the three months ended June 30, 2020 and 2019

Total expenses increased $1.7 million primarily due to higher (i) operating expenses and (ii) general and administrative expenses, partially offset by lower (iii) interest expense and (iv) management fees and incentive allocation to affiliate.

Total operating expenses increased $2.7 million which primarily reflects higher (i) vessel operating and general and administrative expenses of approximately $1.1 million in the offshore energy business and (ii) repairs and maintenance of $1.1 million in the offshore energy business.

Total general and administrative expense increased $0.8 million which primarily reflects higher professional fees related to audit and legal services.

Total interest expense decreased $1.4 million primarily due to a decrease in interest expense related to the FTAI Pride Credit Agreement which was repaid in full in March 2020.

Total management fees and incentive allocation to affiliate decreased $1.0 million due to (i) a decrease of $2.2 million in incentive fees due to lower gains on sale in 2020 compared to 2019, partially offset by (ii) an increase of $1.3 million in base management fees as our equity offerings in 2019 increased our average total equity.

Comparison of the six months ended June 30, 2020 and 2019

Total expenses increased $6.9 million primarily due to higher (i) operating expenses, (ii) interest expense and (iii) general and administrative expense.

Total operating expenses increased $4.6 million which primarily reflects higher (i) project costs of $1.9 million in our offshore energy business, (ii) repairs and maintenance of $1.1 million in our offshore energy business and (iii) compensation and benefits of approximately $0.4 million related to our railcar cleaning business.

Total interest expense increased $1.1 million which reflects an increase in our average outstanding debt of approximately $64.0 million, which primarily consists of (i) an increase of $100.0 million for the 2025 Notes, (ii) an increase of $25.1 million for the 2022 Notes, (iii) a decrease of $26.7 million for the Revolving Credit Facility and (iv) a decrease of $34.4 million for the FTAI Pride Credit Agreement, which was repaid in March 2020.

Total general and administrative expense increased $1.3 million primarily due to higher (i) professional fees related to audit and legal services, (ii) regulatory filing expenses and (iii) market data and other services.

(2) Includes the following items for the three and nine months ended September 30, 2019:

(i) interest expense of $29 and $88 and (ii) depreciation and amortization expense of $65 and $180, respectively.

Total revenues increased $2.6 million during the three months ended September 30, 2020, which primarily reflects an increase of $1.2 million and $1.1 million in lease income and other revenue, respectively, as one of our vessels was on-hire in 2020 while it was off-hire in 2019.

Total revenues increased $5.5 million during the nine months ended September 30, 2020, which primarily reflects (i) an increase of $3.0 million in other revenue related to victualling income in the offshore energy business as our vessels were on-hire longer in 2020 compared to 2019, (ii) an increase of $1.4 million in other revenue due to higher volume in our railcar cleaning business and (iii) an increase of $1.1 million in lease income as our vessels were on-hire longer in 2020 compared to 2019.

Comparison of the three months ended September 30, 2020 and 2019

Total expenses decreased $1.8 million primarily due to lower (i) acquisition and transaction expense, (ii) management fees and incentive allocation to affiliate and (iii) general and administrative expenses, partially offset by higher (iv) interest expense and (v) operating expenses.

Acquisition and transaction expense decreased $3.9 million which primarily reflects a lower reimbursement to the Manager of $2.5 million and lower professional fees of $1.2 million due to fewer acquisitions in 2020 compared to 2019.

Management fees and incentive allocation to affiliate decreased $2.8 million due to (i) a decrease of $3.7 million in incentive fees due to lower gains on sale in 2020 compared to 2019, partially offset by (ii) an increase of $0.9 million in base management fees as our average total equity is higher in 2020 compared to 2019.

General and administrative expense decreased $1.3 million which primarily reflects a lower reimbursement to the Manager.

Interest expense increased $4.3 million which reflects an increase in our average outstanding debt of approximately $287.4 million, which primarily consists of (i) an increase of $400.0 million for the 2027 Notes, (ii) a decrease of $70.0 million for the Revolving Credit Facility and (iii) a decrease of $44.1 million for the FTAI Pride Credit Agreement, which was repaid in full in March 2020.

Operating expenses increased $1.9 million which primarily reflects higher (i) project costs of $1.0 million in our offshore energy business and (ii) facility operations and compensation and benefits of $0.6 million in our railcar cleaning business due to higher volumes.

Comparison of the nine months ended September 30, 2020 and 2019

Total expenses increased $5.2 million primarily due to higher (i) operating expenses and (ii) interest expense, partially offset by lower (iii) acquisition and transaction expense and (iii) management fees and incentive allocation to affiliate.

Operating expenses increased $6.4 million which primarily reflects higher (i) project costs of $2.5 million in our offshore energy business, (ii) repairs and maintenance of $1.1 million in our offshore energy business, (iii) compensation and benefits of $0.7 million in our railcar cleaning business due to higher volumes and (iv) vessel operating and general and administrative expenses of $0.7 million.

Interest expense increased $5.5 million which reflects an increase in our average outstanding debt of approximately $138.4 million, which primarily consists of (i) an increase of $133.3 million for the 2027 Notes, (ii) an increase of $66.7 million for the 2025 Notes, (iii) an increase of $17.2 million for the 2022 Notes, (iv) a decrease of $41.1 million for the Revolving Credit Facility and (v) a decrease of $37.7 million for the FTAI Pride Credit Agreement, which was repaid in March 2020.

Acquisition and transaction expense decreased $4.5 million which primarily reflects a lower reimbursement to the Manager of $3.3 million and lower professional fees of $1.0 million due to fewer acquisitions in 2020 compared to 2019.

Management fees and incentive allocation to affiliate decreased $2.8 million due to (i) a decrease of $6.1 million in incentive fees due to lower gains on sale in 2020 compared to 2019, partially offset by (ii) an increase of $3.3 million in base management fees as our average total equity is higher in 2020 compared to 2019.

Other income (expense)

Other income decreased $1.0 million and $1.1 million during the three and nine months ended September 30, 2020, respectively, primarily due to a gain of approximately $1.0 million from casualty insurance proceeds received in 2019 on one of our vessels.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $7.7 million and $13.9 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.

Adjusted EBITDA decreased $4.5 million and $18.3 million during the three and nine months ended September 30, 2020, respectively, primarily due to the changes noted above.

Liquidity and Capital Resources

On July 28, 2020, we issued $400 million aggregate principal amount of senior unsecured notes due 2027 (see Note 20 to the consolidated financial statements).

We used a portion of the proceeds to repay $220 million of outstanding borrowings under the Revolving Credit Facility, and intend to use the remaining proceeds for general corporate purposes, which may include the repurchase or redemption of outstanding 2022 Notes and the funding of future acquisitions and investments, including aviation investments.

On July 28, 2020, we issued $400 million aggregate principal amount of senior unsecured notes due 2027 (the “2027 Notes”).

We used a portion of the proceeds to repay $220 million of outstanding borrowings under the Revolving Credit Facility, and intend to use the remaining proceeds for general corporate purposes, and the funding of future acquisitions and investments, including aviation investments.

Following the repayment, we have additional borrowing capacity of $250 million under the Revolving Credit Facility.

Additionally, on June 30, 2020, we entered into an At Market Issuance Sales Agreement with a third party to sell shares of our Series A Preferred Shares and Series B Preferred Shares (collectively, the “ATM Shares”), having an aggregate offering price of up to $100 million, from time to time, through an “at-the market” equity offering program.

During July 2020, we sold 125,000 ATM Shares for net proceeds of approximately $2.4 million.

During the third quarter of 2020, we sold 1,070,000 ATM Shares for net proceeds of approximately $20.6 million.

We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times.

1 unchanged sentence

Our principal uses of liquidity have been and continue to be (i) acquisitions of transportation infrastructure and equipment, (ii) dividends to our shareholders and holders of eligible participating securities, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments.

• Cash used for the purpose of making investments was $341.5 million and $401.4 million during the six months ended June 30, 2020 and 2019, respectively.

• Dividends to shareholders and holders of eligible participating securities were $65.4 million and $56.8 million during the six months ended June 30, 2020 and 2019, respectively.

• Cash used for the purpose of making investments was $470.3 million and $590.7 million during the nine months ended September 30, 2020 and 2019, respectively.

• Dividends to shareholders and holders of eligible participating securities were $98.4 million and $85.2 million during the nine months ended September 30, 2020 and 2019, respectively.

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

1 unchanged sentence

Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our transportation infrastructure and equipment assets (including finance lease collections and maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales.

• Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $66.5 million and $90.0 million during the six months ended June 30, 2020 and 2019, respectively.

• During the six months ended June 30, 2020, additional borrowings were obtained in connection with the (i) Series 2020 Bonds of $264.0 million and (ii) Revolving Credit Facility of $195.0 million.

We made total principal repayments of $276.0 million relating to the Series 2016 Bonds, Series 2012 Bonds, Jefferson Revolver and FTAI Pride Credit Agreement.

During the six months ended June 30, 2019, additional borrowings were obtained in connection with the (i) 2025 Notes of $148.7 million, (ii) 2022 Notes of $147.8 million, (iii) Revolving Credit Facility of $105.0 million, (iv) LREG Credit Agreement of $71.5 million, (v) Jefferson Revolver of $23.2 million, (vi) DRP Revolver of $21.6 million and (vii) CMQR Credit Agreement of $11.7 million.

We made total principal repayments of $128.8 million, primarily relating to the Revolving Credit Facility and CMQR Credit Agreement.

• Proceeds from the sale of assets were $37.7 million and $71.5 million during the six months ended June 30, 2020 and 2019, respectively.

• Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $60.5 million and $155.2 million during the nine months ended September 30, 2020 and 2019, respectively.

• During the nine months ended September 30, 2020, additional borrowings were obtained in connection with the (i) 2027 Notes of $400.0 million, (ii) Series 2020 Bonds of $264.0 million and (iii) Revolving Credit Facility of $220.0 million.

We made total principal repayments of $496.0 million relating to the Revolving Credit Facility, Series 2016 Bonds, Series 2012 Bonds, Jefferson Revolver and FTAI Pride Credit Agreement.

During the nine months ended September 30, 2019, additional borrowings were obtained in connection with the (i) 2025 Notes of $148.7 million, (ii) 2022 Notes of $147.8 million, (iii) Revolving Credit Facility of $105.0 million, (iv) LREG Credit Agreement of $104.4 million, (v) DRP Revolver of $25.0 million, (vi) Jefferson Revolver of $23.2 million and (vii) CMQR Credit Agreement of $15.6 million.

We made total principal repayments of $218.9 million, primarily relating to the Revolving Credit Facility, Jefferson Revolver and CMQR Credit Agreement.

• Proceeds from the sale of assets were $53.7 million and $166.3 million during the nine months ended September 30, 2020 and 2019, respectively.

• Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs were $20.2 million and $82.9 million during the nine months ended September 30, 2020 and 2019, respectively.

We are currently evaluating several potential Infrastructure and Equipment Leasing transactions, which could occur within the next 12 months.

1 unchanged sentence

We cannot assure if or when any such transaction will be consummated or the terms of any such transaction.

We have a dividend reinvestment plan in place which allows shareholders to automatically reinvest dividends in our common shares.

The plan became effective on February 24, 2017.

Historical Cash Flow

Comparison of the six months ended June 30, 2020 and 2019

The following table compares the historical cash flow for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

Comparison of the nine months ended September 30, 2020 and 2019

The following table compares the historical cash flow for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

(in thousands) 2020 2019

3 unchanged sentences

Net cash provided by financing activities 299,689 346,887

Net cash provided by operating activities decreased $13.5 million, which primarily reflects (i) changes in accounts payable, management fees payable, other assets, other liabilities and accounts receivable of $31.4 million, primarily due to the timing of payments and (ii) a decrease in net income of $24.8 million.

Net cash provided by operating activities decreased $64.3 million, which primarily reflects (i) changes in accounts payable and accrued liabilities, management fees payable, accounts receivable, and other assets and other liabilities of $60.3 million, primarily due to the timing of payments and (ii) a decrease in net income of $70.7 million.

These decreases were partially offset by changes in (iii) gain on sale of assets, net of $63.6 million and (iv) asset impairment of $14.4 million.

Net cash used in investing activities decreased $27.5 million primarily due to (i) a decrease in acquisitions of property, plant and equipment of $29.2 million, (ii) a decrease in purchase deposits for acquisitions of $29.0 million, partially offset by (iii) lower proceeds from the sale of leasing equipment of $33.8 million.

Net cash provided by financing activities decreased $210.1 million primarily due to (i) an increase in repayments of debt of $147.2 million and (ii) a decrease in proceeds from debt of $70.5 million.

Net cash used in investing activities decreased $2.7 million primarily due to (i) a decrease in purchase deposits for acquisitions of $40.5 million, (ii) a decrease in acquisitions of property, plant and equipment of $34.0 million and (iii) a decrease in acquisitions of leasing equipment of $34.6 million, partially offset by (iv) lower proceeds from the sale of leasing equipment of $112.6 million.

Net cash provided by financing activities decreased $47.2 million primarily due to (i) an increase in repayments of debt of $277.1 million, (ii) a decrease in proceeds from the issuance of preferred shares of $62.7 million and (iii) a decrease in receipt of maintenance deposits of $24.3 million, partially offset by (iv) an increase in proceeds from debt of $315.3 million.

We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy.

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The following table sets forth a reconciliation of Net Cash Provided by Operating Activities to FAD:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

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(1) Required payments on debt obligations for the six months ended June 30, 2020 exclude repayments of $144,200 for the Series 2016 Bonds, $50,262 for the Jefferson Revolver, $45,520 for the Series 2012 Bonds and $36,009 for the FTAI Pride Credit Agreement and for the six months ended June 30, 2019 exclude repayments of $115,000 for the Revolving Credit Facility and $10,710 for the CMQR Credit Agreement.

(1) Required payments on debt obligations for the nine months ended September 30, 2020 exclude repayments of $220,000 for the Revolving Credit Facility, $144,200 for the Series 2016 Bonds, $50,262 for the Jefferson Revolver, $45,520 for the Series 2012 Bonds and $36,009 for the FTAI Pride Credit Agreement and for the nine months ended September 30, 2019 exclude repayments of $175,000 for the Revolving Credit Facility and $14,421 for the CMQR Credit Agreement.

FAD is subject to a number of limitations and assumptions and there can be no assurance that we will generate FAD sufficient to meet our intended dividends.

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Contractual Obligations

The following table summarizes our future obligations, by period due, as of June 30, 2020, under our various contractual obligations and commitments.

We had no off-balance sheet arrangements as of June 30, 2020.

The following table summarizes our future obligations, by period due, as of September 30, 2020, under our various contractual obligations and commitments.

We had no off-balance sheet arrangements as of September 30, 2020.

(in thousands) Remainder of 2020 2021 2022 2023 2024 Thereafter Total

Series 2020 Bonds $ — $ — $ — $ — $ — $ 263,980 $ 263,980

Revolving Credit Facility — — 195,000 — — — 195,000

DRP Revolver — 25,000 — — — — 25,000

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Senior Notes due 2025 — — — — — 450,000 450,000

Senior Notes due 2027 — — — — — 400,000 400,000

Total principal payments on loans and bonds payable — 25,000 700,000 — — 1,113,980 1,838,980

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(1) Estimated interest rates as of June 30, 2020.

(1) Estimated interest rates as of September 30, 2020.

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.

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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.

The carrying amount of goodwill was approximately $122.7 million and $122.6 million as of June 30, 2020 and December 31, 2019, respectively.

The carrying amount of goodwill was approximately $122.7 million and $122.6 million as of September 30, 2020 and December 31, 2019, respectively.

We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized.

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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