FTAI Aviation Ltd. 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 Fortress Transportation and Infrastructure Investors LLC (the “Company,” “we,” “our” or “us”). 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” included elsewhere in this Quarterly Report on Form 10-Q. Overview We own and acquire high quality infrastructure and related equipment that is essential for the transportation of goods and people globally. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is 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, will allow us to take advantage of these opportunities. 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, 2021, we had total consolidated assets of $3.6 billion and total equity of $1.0 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. Market conditions due to the outbreak of COVID-19 resulted in asset impairment charges and a decline in our equipment leasing revenues during the six months ended June 30, 2021. 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 June 30, 2021; 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 $155.1 million as of June 30, 2021. 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 Part II, Item 1A. Risk Factors—“The COVID-19 pandemic 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 Our operations consist of two primary strategic business units – Infrastructure and Equipment Leasing. Our Infrastructure Business acquires long-lived assets that provide mission-critical services or functions to transportation networks and typically have high barriers to entry. We target or develop operating businesses with strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. Our Equipment Leasing Business acquires assets that are designed to carry cargo or people or provide functionality to transportation infrastructure. Transportation equipment assets are typically long-lived, moveable and leased by us on either operating leases or finance leases to companies that provide transportation services. Our leases generally provide for long-term contractual cash flow with high cash-on-cash yields and include structural protections to mitigate credit risk. Our reportable segments are comprised of interests in different types of infrastructure and equipment leasing assets. We currently conduct our business through the following three reportable segments: (i) Aviation Leasing, which is within the Equipment Leasing Business, and (ii) Jefferson Terminal and (iii) Ports and Terminals, which together comprise our Infrastructure Business. The Aviation Leasing segment consists of aircraft and aircraft engines held for lease and are typically held long-term. The Jefferson Terminal segment consists of a multi-modal crude and refined products terminal and other related assets which were acquired in 2014. The Ports and Terminals segment consists of Repauno, acquired in 2016, a 1,630-acre deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities. Additionally, Ports and Terminals includes an equity method investment (“Long Ridge”), which is a 1,660-acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development opportunities, including a power plant under construction. Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, and management fees. 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 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. Our reportable segments are comprised of investments in different types of transportation infrastructure and equipment. Each segment requires different investment strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations. 41 Our Manager On December 27, 2017, SoftBank Group Corp. (“SoftBank”) completed its acquisition of Fortress (the “SoftBank Merger”). In connection with the Softbank Merger, Fortress operates within SoftBank as an independent business headquartered in New York. Results of Operations Adjusted EBITDA (Non-GAAP) The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure. 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 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. 42 Comparison of the three and six months ended June 30, 2021 and 2020 The following table presents our consolidated results of operations: Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2021 2020 2021 2020 Revenues Equipment leasing revenues Lease income $ 42,902 $ 44,634 $ (1,732) $ 83,129 $ 94,447 $ (11,318) Maintenance revenue 32,003 27,105 4,898 47,511 59,100 (11,589) Finance lease income 443 413 30 846 842 4 Other revenue 6,223 7,682 (1,459) 6,692 11,894 (5,202) Total equipment leasing revenues 81,571 79,834 1,737 138,178 166,283 (28,105) Infrastructure revenues Lease income 432 287 145 862 407 455 Terminal services revenues 11,120 12,794 (1,674) 21,541 29,205 (7,664) Crude marketing revenues — — — — 8,210 (8,210) Other revenue 3,792 1,394 2,398 13,483 3,044 10,439 Total infrastructure revenues 15,344 14,475 869 35,886 40,866 (4,980) Total revenues 96,915 94,309 2,606 174,064 207,149 (33,085) Expenses Operating expenses 31,183 24,572 6,611 56,180 58,016 (1,836) General and administrative 3,655 4,388 (733) 7,907 9,051 (1,144) Acquisition and transaction expenses 4,399 3,661 738 6,042 6,855 (813) Management fees and incentive allocation to affiliate 4,113 4,756 (643) 8,103 9,522 (1,419) Depreciation and amortization 47,371 41,720 5,651 91,906 83,917 7,989 Asset impairment 89 10,476 (10,387) 2,189 10,476 (8,287) Interest expense 37,504 21,794 15,710 70,494 44,655 25,839 Total expenses 128,314 111,367 16,947 242,821 222,492 20,329 Other (expense) income Equity in losses of unconsolidated entities (7,152) (3,209) (3,943) (5,778) (2,944) (2,834) Gain (loss) on sale of assets, net 3,987 768 3,219 4,798 (1,051) 5,849 Loss on extinguishment of debt (3,254) — (3,254) (3,254) (4,724) 1,470 Interest income 454 22 432 739 63 676 Other (expense) income (884) (1) (883) (703) 32 (735) Total other expense (6,849) (2,420) (4,429) (4,198) (8,624) 4,426 Loss from continuing operations before income taxes (38,248) (19,478) (18,770) (72,955) (23,967) (48,988) Benefit from income taxes (1,640) (3,750) 2,110 (1,471) (3,848) 2,377 Net loss from continued operations (36,608) (15,728) (20,880) (71,484) (20,119) (51,365) Net income from discontinued operations, net of income taxes — — — — 1,331 (1,331) Net loss (36,608) (15,728) (20,880) (71,484) (18,788) (52,696) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (6,625) (4,112) (2,513) (11,586) (8,848) (2,738) Less: Dividends on preferred shares 6,551 4,079 2,472 11,176 8,618 2,558 Net loss attributable to shareholders $ (36,534) $ (15,695) $ (20,839) $ (71,074) $ (18,558) $ (52,516) 43 The following table sets forth a reconciliation of net loss attributable to shareholders from continuing operations to Adjusted EBITDA: Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2021 2020 2021 2020 Net loss attributable to shareholders from continuing operations $ (36,534) $ (15,695) $ (20,839) $ (71,074) $ (19,889) $ (51,185) Add: Benefit from income taxes (1,640) (3,750) 2,110 (1,471) (3,848) 2,377 Add: Equity-based compensation expense 1,439 411 1,028 2,553 702 1,851 Add: Acquisition and transaction expenses 4,399 3,661 738 6,042 6,855 (813) Add: Losses on the modification or extinguishment of debt and capital lease obligations 3,254 — 3,254 3,254 4,724 (1,470) Add: Changes in fair value of non-hedge derivative instruments 1,391 — 1,391 (6,573) 181 (6,754) Add: Asset impairment charges 89 10,476 (10,387) 2,189 10,476 (8,287) Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense (1) 54,168 48,341 5,827 106,811 97,405 9,406 Add: Interest expense 37,504 21,794 15,710 70,494 44,655 25,839 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (11) 126 (137) 2,391 (287) 2,678 Less: Equity in losses of unconsolidated entities 7,152 3,209 3,943 5,778 2,944 2,834 Less: Non-controlling share of Adjusted EBITDA (3) (3,257) (2,101) (1,156) (5,286) (5,451) 165 Adjusted EBITDA (non-GAAP) $ 67,954 $ 66,472 $ 1,482 $ 115,108 $ 138,467 $ (23,359) ________________________________________________________ (1) Includes the following items for the three months ended June 30, 2021 and 2020: (i) depreciation and amortization expense of $47,371 and $41,720, (ii) lease intangible amortization of $1,198 and $931 and (iii) amortization for lease incentives of $5,599 and $5,690, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) depreciation and amortization expense of $91,906 and $83,917, (ii) lease intangible amortization of $1,950 and $2,063 and (iii) amortization for lease incentives of $12,955 and $11,425, respectively. (2) Includes the following items for the three months ended June 30, 2021 and 2020: (i) net loss of $(7,353) and $(3,226), (ii) interest expense of $340 and $446, (iii) depreciation and amortization expense of $1,900 and $1,446, (iv) acquisition and transaction expenses of $0 and $531, (v) changes in fair value of non-hedge derivative instruments of $5,078 and $929 and (vi) asset impairment of $24 and $0, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) net loss of $(6,173) and $(3,003), (ii) interest expense of $527 and $481, (iii) depreciation and amortization expense of $3,812 and $2,408, (iv) acquisition and transaction expenses of $0 and $612, (v) changes in fair value of non-hedge derivative instruments of $4,201 and $(785) and (vi) asset impairment of $24 and $0, respectively. (3) Includes the following items for the three months ended June 30, 2021 and 2020: (i) equity-based compensation of $292 and $52, (ii) provision for income taxes of $13 and $15, (iii) interest expense of $732 and $512, (iv) depreciation and amortization expense of $2,172 and $1,522 and (v) changes in fair value of non-hedge derivative instruments of $48 and $0, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) equity based compensation of $490 and $99, (ii) provision for income taxes of $26 and $43, (iii) interest expense of $1,013 and $1,231, (iv) depreciation and amortization expense of $3,983 and $3,048, (v) changes in fair value of non-hedge derivative instruments of $(226) and $38 and (vi) loss on extinguishment of debt of $0 and $992, respectively. Revenues Comparison of the three months ended June 30, 2021 and 2020 Total revenues increased $2.6 million primarily due to higher revenues of $3.2 million in the Aviation Leasing segment and $2.3 million in the Ports and Terminals segment, partially offset by lower revenues of $1.6 million in the Jefferson Terminal segment and $1.4 million in Corporate and Other. Equipment Leasing Lease income decreased $1.7 million, primarily due to an increase in aircraft redelivered and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft and engines placed on lease. Maintenance revenue increased $4.9 million, primarily due to an increase in the number of engines placed on lease and higher aircraft and engine utilization, partially offset by a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft. Other revenue decreased $1.5 million, which primarily reflects (i) a decrease of $2.0 million in the offshore energy business primarily due to one of our vessels being on hire longer in 2020 compared to 2021, partially offset by (ii) an increase of $0.6 million in the Aviation Leasing segment primarily due to an increase in engine parts sales, partially offset by lower end-of-lease redelivery compensation. 44 Infrastructure Terminal services revenues decreased $1.7 million which primarily reflects lower volumes at Jefferson Terminal due to lower global oil demand related to COVID-19. Other revenue increased $2.4 million, primarily due to operations commencing at the LPG facility at Repauno. Comparison of the six months ended June 30, 2021 and 2020 Total revenues decreased $33.1 million, primarily due to lower revenues of $23.7 million in the Aviation Leasing segment, $15.6 million in the Jefferson Terminal segment and $3.9 million in Corporate and Other, partially offset by higher revenues of $10.1 million in the Ports and Terminals segment. Equipment Leasing Lease income decreased $11.3 million, primarily due to an increase in aircraft redelivered and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft and engines placed on lease. Maintenance revenue decreased $11.6 million, primarily due to an increase in aircraft and engines redelivered and a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft, partially offset by an increase in aircraft and engine utilization and an increase in the number of engines placed on lease. Other revenue decreased $5.2 million, primarily due to (i) a decrease of $2.7 million in the Aviation Leasing segment primarily due to lower end-of-lease redelivery compensation and the settlement of an engine loss during the six months ended June 30, 2020, partially offset by an increase in engine parts sales and (ii) a decrease of $2.5 million in the offshore energy business primarily due to one of our vessels being on hire longer in 2020 compared to 2021. Infrastructure Crude marketing revenues decreased $8.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019. Terminal services revenues decreased $7.7 million which primarily reflects lower volumes at Jefferson Terminal due to lower global oil demand related to COVID-19. Other revenue increased $10.4 million, primarily due to (i) an unrealized gain of $6.6 million recorded on butane forward purchase and sale contracts at Repauno and (ii) operations commencing at the LPG facility at Repauno. Expenses Comparison of the three months ended June 30, 2021 and 2020 Total expenses increased $16.9 million, primarily due to higher (i) interest expense, (ii) operating expenses and (iii) depreciation and amortization, partially offset by lower (iv) asset impairment charges. Interest expense increased $15.7 million, primarily due to: • an increase of $14.9 million in Corporate and Other which reflects an increase in the average outstanding debt of approximately $652.1 million due to increases in (i) the Senior Notes due 2028 of $500.0 million, (ii) the Senior Notes due 2025 of $407.1 million and (iii) the Senior Notes due 2027 of $400.0 million, partially offset by decreases in (iv) the Senior Notes due 2022 of $565.0 million, which was redeemed in full in May 2021 and (v) the Revolving Credit Facility (as defined below in Liquidity and Capital Resources) of $90.0 million; and • an increase of $0.9 million at Jefferson Terminal due to the EB-5 Loan Agreement which commenced in January 2021. Operating expenses increased $6.6 million which primarily reflects: • an increase of approximately $4.0 million in costs associated with the sale of inventory in the Aviation Leasing segment; • an increase of $1.0 million in compensation and benefits primarily in the Ports and Terminals segment and Corporate and Other; and • an increase of $0.8 million in repairs and maintenance in our offshore energy business. Depreciation and amortization increased $5.7 million primarily due to assets placed into service at Repauno and Jefferson Terminal and additional assets acquired in the Aviation Leasing segment. Asset impairment decreased $10.4 million due to higher impairment charges in 2020 compared to 2021 in the Aviation Leasing segment. 45 Comparison of the six months ended June 30, 2021 and 2020 Total expenses increased $20.3 million, primarily due to higher (i) interest expense and (ii) depreciation and amortization, partially offset by lower (iii) asset impairment charges, (iv) operating expenses and (v) management fees and incentive allocation to affiliate. Interest expense increased $25.8 million, primarily due to: • an increase of $27.3 million in Corporate and Other which reflects an increase in the average outstanding debt of approximately $586.8 million due to increases in (i) the Senior Notes due 2025 of $407.3 million, (ii) the Senior Notes due 2027 of $400.0 million and (iii) the Senior Notes due 2028 of $250.0 million, partially offset by decreases in (iv) the Senior Notes due 2022 of $431.9 million, which was redeemed in full in May 2021, (v) the Revolving Credit Facility of $26.7 million and (vi) the FTAI Pride Credit Agreement of $12.0 million, which was repaid in full in March 2020; and • a decrease of $1.3 million at Jefferson Terminal due to (i) a debt refinancing in the first quarter of 2020 which lowered their average interest rate, partially offset by (ii) the EB-5 Loan Agreement which commenced in January 2021. Depreciation and amortization increased $8.0 million primarily due to assets placed into service at Repauno and Jefferson Terminal and additional assets acquired in the Aviation Leasing segment. Asset impairment decreased $8.3 million due to higher impairment charges in 2020 compared to 2021 in the Aviation Leasing segment. Operating expenses decreased $1.8 million which primarily reflects: • a decrease in cost of sales of $8.2 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019; and • a decrease in bad debt expense of $2.5 million primarily in the Aviation Leasing segment; partially offset by • an increase of approximately $4.0 million in costs associated with the sale of inventory in the Aviation Leasing segment; • an increase in repairs and maintenance of $1.9 million primarily in our offshore energy business; and • an increase of $1.8 million in compensation and benefits primarily in the Ports and Terminals segment and Corporate and Other. Management fees and incentive allocation to affiliate decreased $1.4 million, which reflects a decrease in the base management fee as our average total equity is lower in 2021 compared to 2020. Other expense Total other expense increased $4.4 million during the three months ended June 30, 2021, which primarily reflects (i) an increase of $3.9 million in equity in losses of unconsolidated entities primarily due to unrealized losses on power swaps at Long Ridge and (ii) a loss on extinguishment of debt of $3.3 million related to the redemption of the Senior Notes due 2022, partially offset by (iii) an increase of $3.2 million in gain on sale of assets, net in the Aviation Leasing segment. Total other expense decreased $4.4 million during the six months ended June 30, 2021, which primarily reflects (i) an increase of $5.8 million in gain on sale of assets, net in the Aviation Leasing segment and (ii) a net decrease in loss on extinguishment of debt of $1.5 million, partially offset by (iii) an increase of $2.8 million in equity in losses in unconsolidated entities primarily due to unrealized losses on power swaps at Long Ridge. Net loss from continuing operations Net loss from continuing operations increased $20.9 million and $51.4 million during the three and six months ended June 30, 2021, respectively, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $1.5 million and decreased $23.4 million during the three and six months ended June 30, 2021, respectively, primarily due to the changes noted above. 46 Aviation Leasing Segment As of June 30, 2021, in our Aviation Leasing segment, we own and manage 284 aviation assets, consisting of 77 commercial aircraft and 207 engines. As of June 30, 2021, 68 of our commercial aircraft and 134 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 74% utilized during the three months ended June 30, 2021, 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 36 months, and our engines currently on-lease have an average remaining lease term of 18 months. The table below provides additional information on the assets in our Aviation Leasing segment: Aviation Assets Widebody Narrowbody Total Aircraft Assets at January 1, 2021 15 63 78 Purchases — 9 9 Sales (3) — (3) Transfers — (7) (7) Assets at June 30, 2021 12 65 77 Engines Assets at January 1, 2021 88 98 186 Purchases 6 26 32 Sales (12) (8) (20) Transfers — 9 9 Assets at June 30, 2021 82 125 207 47 The following table presents our results of operations: Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2021 2020 2021 2020 Revenues Equipment leasing revenues Lease income $ 40,208 $ 42,505 $ (2,297) $ 79,997 $ 89,446 $ (9,449) Maintenance revenue 32,003 27,105 4,898 47,511 59,100 (11,589) Finance lease income 443 413 30 846 842 4 Other revenue 5,789 5,236 553 6,190 8,863 (2,673) Total revenues 78,443 75,259 3,184 134,544 158,251 (23,707) Expenses Operating expenses 9,145 4,577 4,568 13,395 8,648 4,747 Acquisition and transaction expenses 836 2,061 (1,225) 2,032 4,785 (2,753) Depreciation and amortization 33,732 32,203 1,529 66,295 64,834 1,461 Asset impairment 89 10,476 (10,387) 2,189 10,476 (8,287) Total expenses 43,802 49,317 (5,515) 83,911 88,743 (4,832) Other income (expense) Equity in losses of unconsolidated entities (341) (594) 253 (681) (1,185) 504 Gain (loss) on sale of assets, net 3,971 775 3,196 4,782 (1,044) 5,826 Interest income 357 17 340 624 29 595 Total other income (expense) 3,987 198 3,789 4,725 (2,200) 6,925 Income before income taxes 38,628 26,140 12,488 55,358 67,308 (11,950) Benefit from income taxes (4) (3,427) 3,423 (46) (3,382) 3,336 Net income 38,632 29,567 9,065 55,404 70,690 (15,286) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — — Net income attributable to shareholders $ 38,632 $ 29,567 $ 9,065 $ 55,404 $ 70,690 $ (15,286) 48 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 (in thousands) 2021 2020 2021 2020 Net income attributable to shareholders $ 38,632 $ 29,567 $ 9,065 $ 55,404 $ 70,690 $ (15,286) Add: Benefit from income taxes (4) (3,427) 3,423 (46) (3,382) 3,336 Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 836 2,061 (1,225) 2,032 4,785 (2,753) 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 89 10,476 (10,387) 2,189 10,476 (8,287) Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense (1) 40,529 38,824 1,705 81,200 78,322 2,878 Add: Interest expense — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (286) (594) 308 (594) (1,185) 591 Less: Equity in losses of unconsolidated entities 341 594 (253) 681 1,185 (504) Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ 80,137 $ 77,501 $ 2,636 $ 140,866 $ 160,891 $ (20,025) ________________________________________________________ (1) Includes the following items for the three months ended June 30, 2021 and 2020: (i) depreciation expense of $33,732 and $32,203, (ii) lease intangible amortization of $1,198 and $931 and (iii) amortization for lease incentives of $5,599 and $5,690, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) depreciation expense of $66,295 and $64,834, (ii) lease intangible amortization of $1,950 and $2,063 and (iii) amortization for lease incentives of $12,955 and $11,425, respectively. (2) Includes the following items for the three months ended June 30, 2021 and 2020: (i) net loss of $(341) and $(594) and (ii) depreciation and amortization of $55 and $0, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) net loss of $(681) and $(1,185) and (ii) depreciation and amortization of $87 and $0, respectively. Revenues Comparison of the three months ended June 30, 2021 and 2020 Total revenue increased $3.2 million driven by higher maintenance revenue and other revenue, partially offset by lower lease income. • Maintenance revenue increased $4.9 million primarily due to an increase in the number of engines placed on lease and higher aircraft and engine utilization, partially offset by a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft. • Other revenue increased $0.6 million primarily due to an increase in engine parts sales, partially offset by lower end-of-lease redelivery compensation. • Lease income decreased $2.3 million primarily due to an increase in aircraft redelivered and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft and engines placed on lease. Comparison of the six months ended June 30, 2021 and 2020 Total revenue decreased $23.7 million driven by lower lease income, maintenance revenue and other revenue. • Maintenance revenue decreased $11.6 million primarily due to an increase in aircraft and engines redelivered and a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft, partially offset by an increase in aircraft and engine utilization and an increase in the number of engines placed on lease. • Lease income decreased $9.4 million primarily due to an increase in aircraft redelivered and an increase in the number of customers placed on non-accrual status, partially offset by an increase in the number of aircraft and engines placed on lease. • Other revenue decreased $2.7 million primarily due to lower end-of-lease redelivery compensation and the settlement of an engine loss during the six months ended June 30, 2020, partially offset by an increase in engine parts sales. 49 Expenses Comparison of the three months ended June 30, 2021 and 2020 Total expenses decreased $5.5 million, primarily due to a decrease in asset impairment and acquisition and transaction expenses, partially offset by an increase in operating expenses and depreciation and amortization expense. • Asset impairment decreased $10.4 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation. See Note 4 to the consolidated financial statements for additional information. • Acquisition and transaction expense decreased $1.2 million driven by lower compensation and related costs associated with the acquisition of aviation leasing equipment. • Operating expenses increased $4.6 million primarily as a result of an increase in costs associated with the sale of engine parts, shipping and storage fees, professional fees and other operating expenses, partially offset by a decrease in bad debt expense. • Depreciation and amortization expense increased $1.5 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool. Comparison of the six months ended June 30, 2021 and 2020 Total expenses decreased $4.8 million, primarily due to a decrease in asset impairment and acquisition and transaction expenses, partially offset by an increase in operating expenses and depreciation and amortization expense. • Asset impairment decreased $8.3 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation. See Note 4 to the consolidated financial statements for additional information. • Acquisition and transaction expense decreased $2.8 million driven by lower compensation and related costs associated with the acquisition of aviation leasing equipment. • Operating expenses increased $4.7 million primarily as a result of an increase in costs associated with the sale of engine parts, shipping and storage fees, professional fees and other operating expenses, partially offset by a decrease in bad debt expense. • Depreciation and amortization expense increased driven $1.5 million by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool. Other income (expense) Total other income increased $3.8 million during the three months ended June 30, 2021, primarily due to an increase of $3.2 million in gain on the sale of leasing equipment in 2021, an increase of $0.3 million in interest income and a decrease of $0.3 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss. Total other income increased $6.9 million during the six months ended June 30, 2021, primarily due to an increase of $5.8 million in gain on the sale of leasing equipment in 2021, an increase of $0.6 million in interest income and a decrease of $0.5 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $2.6 million and $20.0 million during the three and six months ended June 30, 2021, respectively, primarily due to the changes noted above. 50 Jefferson Terminal Segment The following table presents our results of operations: Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2021 2020 2021 2020 Infrastructure revenues Lease income $ 432 $ 287 $ 145 $ 862 $ 407 $ 455 Terminal services revenues 11,095 12,794 (1,699) 21,384 29,205 (7,821) Crude marketing revenues — — — — 8,210 (8,210) Total infrastructure revenues 11,527 13,081 (1,554) 22,246 37,822 (15,576) Total revenues 11,527 13,081 (1,554) 22,246 37,822 (15,576) Expenses Operating expenses 11,777 12,290 (513) 23,498 34,233 (10,735) Depreciation and amortization 9,315 7,160 2,155 17,033 14,386 2,647 Interest expense 3,213 2,310 903 4,416 5,738 (1,322) Total expenses 24,305 21,760 2,545 44,947 54,357 (9,410) Other (expense) income Loss on sale of assets, net — (7) 7 — (7) 7 Loss on extinguishment of debt — — — — (4,724) 4,724 Interest income — — — — 22 (22) Other (expense) income (886) (1) (885) (705) 32 (737) Total other expense (886) (8) (878) (705) (4,677) 3,972 Loss before income taxes (13,664) (8,687) (4,977) (23,406) (21,212) (2,194) Provision for income taxes 59 74 (15) 116 209 (93) Net loss (13,723) (8,761) (4,962) (23,522) (21,421) (2,101) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (6,538) (4,020) (2,518) (11,554) (8,681) (2,873) Net loss attributable to shareholders $ (7,185) $ (4,741) $ (2,444) $ (11,968) $ (12,740) $ 772 51 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 (in thousands) 2021 2020 2021 2020 Net loss attributable to shareholders $ (7,185) $ (4,741) $ (2,444) $ (11,968) $ (12,740) $ 772 Add: Provision for income taxes 59 74 (15) 116 209 (93) Add: Equity-based compensation expense 1,270 214 1,056 2,111 429 1,682 Add: Acquisition and transaction expenses — — — — — — Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — 4,724 (4,724) Add: Changes in fair value of non-hedge derivative instruments — — — — 181 (181) Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 9,315 7,160 2,155 17,033 14,386 2,647 Add: Interest expense 3,213 2,310 903 4,416 5,738 (1,322) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Less: Equity in earnings of unconsolidated entities — — — — — — Less: Non-controlling share of Adjusted EBITDA (1) (3,117) (2,049) (1,068) (5,325) (5,390) 65 Adjusted EBITDA (non-GAAP) $ 3,555 $ 2,968 $ 587 $ 6,383 $ 7,537 $ (1,154) ________________________________________________________ (1) Includes the following items for the three months ended June 30, 2021 and 2020: (i) equity-based compensation of $286 and $45, (ii) provision for income taxes of $13 and $15, (iii) interest expense of $722 and $485 and (iv) depreciation and amortization expense of $2,096 and $1,504, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) equity-based compensation of $475 and $90, (ii) provision for income taxes of $26 and $43, (iii) interest expense of $993 and $1,205, (iv) changes in fair value of non-hedge derivative instruments of $0 and $38, (v) depreciation and amortization expense of $3,831 and $3,022 and (vi) loss on extinguishment of debt of $0 and $992, respectively. Revenues Total revenues decreased $1.6 million during the three months ended June 30, 2021, primarily due to a decrease in terminal services revenue of $1.7 million which primarily reflects lower volumes due to lower global oil demand related to COVID-19. Total revenues decreased $15.6 million during the six months ended June 30, 2021, primarily due to decreases in (i) crude marketing revenues of $8.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019 and (ii) terminal services revenue of $7.8 million which primarily reflects lower volumes due to lower global oil demand related to COVID-19. Expenses Total expenses increased $2.5 million during the three months ended June 30, 2021, which reflects: • an increase in depreciation and amortization of $2.2 million due to additional assets being placed into service; and • an increase in interest expense of $0.9 million primarily due to the EB-5 Loan Agreement which commenced in January 2021. Total expenses decreased $9.4 million during the six months ended June 30, 2021, which reflects: • a decrease in operating expenses of $10.7 million, primarily due to (i) Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019 and (ii) a decrease in facility operations expense due to lower volumes; • a decrease in interest expense of $1.3 million due to a debt refinancing in the first quarter of 2020 which lowered the average interest rate, partially offset by the EB-5 Loan Agreement which commenced in January 2021; and • an increase in depreciation and amortization of $2.6 million due to additional assets being placed into service. Other expense Total other expense increased $0.9 million during the three months ended June 30, 2021, primarily due to losses related to crude oil forward transactions. Total other expense decreased $4.0 million during the six months ended June 30, 2021, which primarily reflects a loss on extinguishment of debt of $4.7 million in 2020, partially offset by losses related to crude oil forward transactions. 52 Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $0.6 million and decreased $1.2 million during the three and six months ended June 30, 2021, 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 (in thousands) 2021 2020 2021 2020 Infrastructure revenues Terminal services revenues $ 25 $ — $ 25 $ 157 $ — $ 157 Other revenue 2,319 — 2,319 10,283 314 9,969 Total revenues 2,344 — 2,344 10,440 314 10,126 Expenses Operating expenses 3,828 1,875 1,953 6,930 3,875 3,055 Acquisition and transaction expenses — 19 (19) — 801 (801) Depreciation and amortization 2,216 378 1,838 4,427 754 3,673 Interest expense 295 354 (59) 574 747 (173) Total expenses 6,339 2,626 3,713 11,931 6,177 5,754 Other (expense) income Equity in losses of unconsolidated entities (7,015) (2,582) (4,433) (5,473) (1,676) (3,797) Gain on sale of equipment, net 16 — 16 16 — 16 Interest income 91 — 91 91 — 91 Total other expense (6,908) (2,582) (4,326) (5,366) (1,676) (3,690) Loss before income taxes (10,903) (5,208) (5,695) (6,857) (7,539) 682 Benefit from income taxes (1,621) (597) (1,024) (1,467) (878) (589) Net loss (9,282) (4,611) (4,671) (5,390) (6,661) 1,271 Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (87) (92) 5 (32) (167) 135 Net loss attributable to shareholders $ (9,195) $ (4,519) $ (4,676) $ (5,358) $ (6,494) $ 1,136 53 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 (in thousands) 2021 2020 2021 2020 Net loss attributable to shareholders $ (9,195) $ (4,519) $ (4,676) $ (5,358) $ (6,494) $ 1,136 Add: Benefit from income taxes (1,621) (597) (1,024) (1,467) (878) (589) Add: Equity-based compensation expense 169 197 (28) 442 273 169 Add: Acquisition and transaction expenses — 19 (19) — 801 (801) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments 1,391 — 1,391 (6,573) — (6,573) Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 2,216 378 1,838 4,427 754 3,673 Add: Interest expense 295 354 (59) 574 747 (173) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 246 753 (507) 2,951 981 1,970 Less: Equity in losses of unconsolidated entities 7,015 2,582 4,433 5,473 1,676 3,797 Less: Non-controlling share of Adjusted EBITDA (2) (140) (52) (88) 39 (61) 100 Adjusted EBITDA (non-GAAP) $ 376 $ (885) $ 1,261 $ 508 $ (2,201) $ 2,709 ________________________________________________________ (1) Includes the following items for the three months ended June 30, 2021 and 2020: (i) net loss of $(7,015) and $(2,570), (ii) interest expense of $314 and $417, (iii) depreciation and amortization expense of $1,845 and $1,446, (iv) acquisition and transaction expenses of $0 and $531, (v) changes in fair value of non-hedge derivative instruments of $5,078 and $929 and (vi) asset impairment of $24 and $0, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) net loss of $(5,473) and $(1,676), (ii) interest expense of $474 and $422, (iii) depreciation and amortization expense of $3,725 and $2,408, (iv) acquisition and transaction expenses of $0 and $612, (v) changes in fair value of non-hedge derivative instruments of $4,201 and $(785) and (vi) asset impairment of $24 and $0, respectively. (2) Includes the following items for the three months ended June 30, 2021 and 2020: (i) equity-based compensation of $6 and $7, (ii) interest expense of $10 and $27, (iii) depreciation and amortization expense of $76 and $18 and (iv) changes in fair value of non-hedge derivative instruments of $48 and $0, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) equity-based compensation of $15 and $9, (ii) interest expense of $20 and $26, (iii) depreciation and amortization expense of $152 and $26 and (iv) changes in fair value of non-hedge derivative instruments of $(226) and $0, respectively. Revenues Total revenue increased $2.3 million during the three months ended June 30, 2021, primarily due to operations commencing at the LPG facility at Repauno. Total revenue increased $10.1 million during the six months ended June 30, 2021, primarily due to (i) an unrealized gain of $6.6 million recorded on butane forward purchase and sale contracts at Repauno and (ii) operations commencing at the LPG facility at Repauno. Expenses Total expenses increased $3.7 million during the three months ended June 30, 2021 which reflects (i) higher operating expenses of $2.0 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $1.8 million due to operations commencing at the LPG facility and additional assets placed into service at Repauno. Total expenses increased $5.8 million during the six months ended June 30, 2021 which reflects (i) higher operating expenses of $3.1 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $3.7 million due to operations commencing at the LPG facility and additional assets placed into service at Repauno, partially offset by (iii) lower acquisition and transaction expense of $0.8 million at Long Ridge due to lower professional fees. Other expense Total other expense increased $4.3 million and $3.7 million during the three and six months ended June 30, 2021, respectively, which reflects an increase in equity in losses primarily due to unrealized losses on power swaps at Long Ridge. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $1.3 million and $2.7 million during the three and six months ended June 30, 2021, respectively, primarily due to the changes noted above. 54 Corporate and Other The following table presents our results of operations: Three Months Ended June 30, Change Six Months Ended June 30, Change (in thousands) 2021 2020 2021 2020 Revenues Equipment leasing revenues Lease income $ 2,694 $ 2,129 $ 565 $ 3,132 $ 5,001 $ (1,869) Other revenue 434 2,446 (2,012) 502 3,031 (2,529) Total equipment leasing revenues 3,128 4,575 (1,447) 3,634 8,032 (4,398) Infrastructure revenues Other revenue 1,473 1,394 79 3,200 2,730 470 Total infrastructure revenues 1,473 1,394 79 3,200 2,730 470 Total revenues 4,601 5,969 (1,368) 6,834 10,762 (3,928) Expenses Operating expenses 6,433 5,830 603 12,357 11,260 1,097 General and administrative 3,655 4,388 (733) 7,907 9,051 (1,144) Acquisition and transaction expenses 3,563 1,581 1,982 4,010 1,269 2,741 Management fees and incentive allocation to affiliate 4,113 4,756 (643) 8,103 9,522 (1,419) Depreciation and amortization 2,108 1,979 129 4,151 3,943 208 Interest expense 33,996 19,130 14,866 65,504 38,170 27,334 Total expenses 53,868 37,664 16,204 102,032 73,215 28,817 Other (expense) income Equity in earnings (losses) of unconsolidated entities 204 (33) 237 376 (83) 459 Loss on extinguishment of debt (3,254) — (3,254) (3,254) — (3,254) Interest income 6 5 1 24 12 12 Other income 2 — 2 2 — 2 Total other expense (3,042) (28) (3,014) (2,852) (71) (2,781) Loss before income taxes (52,309) (31,723) (20,586) (98,050) (62,524) (35,526) (Benefit from) provision for income taxes (74) 200 (274) (74) 203 (277) Net loss (52,235) (31,923) (20,312) (97,976) (62,727) (35,249) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — — Less: Dividends on preferred shares 6,551 4,079 2,472 11,176 8,618 2,558 Net loss attributable to shareholders $ (58,786) $ (36,002) $ (22,784) $ (109,152) $ (71,345) $ (37,807) 55 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 (in thousands) 2021 2020 2021 2020 Net loss attributable to shareholders $ (58,786) $ (36,002) $ (22,784) $ (109,152) $ (71,345) $ (37,807) Add: (Benefit from) provision for income taxes (74) 200 (274) (74) 203 (277) Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 3,563 1,581 1,982 4,010 1,269 2,741 Add: Losses on the modification or extinguishment of debt and capital lease obligations 3,254 — 3,254 3,254 — 3,254 Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 2,108 1,979 129 4,151 3,943 208 Add: Interest expense 33,996 19,130 14,866 65,504 38,170 27,334 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 29 (33) 62 34 (83) 117 Less: Equity in (earnings) losses of unconsolidated entities (204) 33 (237) (376) 83 (459) Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ (16,114) $ (13,112) $ (3,002) $ (32,649) $ (27,760) $ (4,889) ________________________________________________________ (1) Includes the following items for the three months ended June 30, 2021 and 2020: (i) net income (loss) of $3 and $(62) and (ii) interest expense of $26 and $29, respectively. Includes the following items for the six months ended June 30, 2021 and 2020: (i) net loss of $(19) and $(142) and (ii) interest expense of $53 and $59, respectively. Revenues Total revenues decreased $1.4 million during the three months ended June 30, 2021, primarily due to one of our vessels being on hire longer in 2020 compared to 2021 in the offshore energy business. Total revenues decreased $3.9 million during the six months ended June 30, 2021, primarily due to (i) a decrease of $4.4 million in the offshore energy business primarily due to one of our vessels being on hire longer in 2020 compared to 2021, partially offset by (ii) an increase of $0.5 million in our railcar cleaning business due to higher volumes. Expenses Comparison of the three months ended June 30, 2021 and 2020 Total expenses increased $16.2 million primarily due to higher (i) interest expense and (ii) acquisition and transaction expense, partially offset by lower (iii) general and administrative expense. Interest expense increased $14.9 million, which reflects an increase in the average outstanding debt of approximately $652.1 million due to increases in (i) the Senior Notes due 2028 of $500.0 million, (ii) the Senior Notes due 2025 of $407.1 million and (iii) the Senior Notes due 2027 of $400.0 million, partially offset by decreases in (iv) the Senior Notes due 2022 of $565.0 million, which was redeemed in full in May 2021 and (v) the Revolving Credit Facility (as defined below in Liquidity and Capital Resources) of $90.0 million. Acquisition and transaction expense increased $2.0 million, primarily due to higher professional fees. General and administrative expense decreased $0.7 million, primarily due to lower professional fees. Comparison of the six months ended June 30, 2021 and 2020 Total expenses increased $28.8 million primarily due to higher (i) interest expense and (ii) acquisition and transaction expense, partially offset by lower (iii) management fees and incentive allocation to affiliate and (iv) general and administrative expense. Interest expense increased $27.3 million, which reflects an increase in the average outstanding debt of approximately $586.8 million due to increases in (i) the Senior Notes due 2025 of $407.3 million, (ii) the Senior Notes due 2027 of $400.0 million and (iii) the Senior Notes due 2028 of $250.0 million, partially offset by decreases in (iv) the Senior Notes due 2022 of $431.9 million, which was redeemed in full in May 2021, (v) the Revolving Credit Facility of $26.7 million and (vi) the FTAI Pride Credit Agreement of $12.0 million, which was repaid in full in March 2020. Acquisition and transaction expense increased $2.7 million, primarily due to higher professional fees. 56 Management fees and incentive allocation to affiliate decreased $1.4 million, which reflects a decrease in the base management fee as our average total equity is lower in 2021 compared to 2020. General and administrative expense decreased $1.1 million, primarily due to lower professional fees. Other expense Total other expense increased $3.0 million and $2.8 million during the three and six months ended June 30, 2021, respectively, primarily due to a loss on extinguishment of debt of $3.3 million related to the redemption of the Senior Notes due 2022 in May 2021. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $3.0 million and $4.9 million during the three and six months ended June 30, 2021, respectively, primarily due to the changes noted above. Liquidity and Capital Resources In April 2021, we issued $500 million aggregate principal amount of senior unsecured notes due 2028 (see Note 20 to the consolidated financial statements). On May 7, 2021, we used a portion of the net proceeds to redeem in full the Senior Notes due 2022, which totaled $400 million aggregate principal plus accrued and unpaid interest. In June 2017, we entered in a revolving credit facility (the “Revolving Credit Facility”). In July 2021, we drew down an additional $50 million under the Revolving Credit Facility. Following the drawdown, we have additional borrowing capacity of $100 million under the Revolving Credit Facility. In July 2021, we entered into a senior unsecured bridge term loan facility (the “Bridge Facility”) in an aggregate principal amount of $650 million in order to finance the acquisition of Transtar, LLC, which closed on July 28, 2021. The Bridge Facility matures in one year and bears interest at the Adjusted Eurodollar Rate (determined in accordance with the credit agreement) plus 5.50% per annum (the “Initial Margin”) for the first three-month period. The Initial Margin will increase by an additional 50 basis points at the end of each three-month period thereafter until maturity. During the third quarter of 2021 we plan to raise debt and/or equity to refinance the Bridge Facility. 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. This includes limiting discretionary spending across the organization and re-prioritizing our capital projects amid the COVID-19 pandemic. 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 $265.1 million and $341.5 million during the six months ended June 30, 2021 and 2020, respectively. • Dividends to shareholders and holders of eligible participating securities were $68.0 million and $65.4 million during the six months ended June 30, 2021 and 2020, 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) 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 (used in) provided from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $(46.4) million and $66.5 million during the six months ended June 30, 2021 and 2020, respectively. • During the six months ended June 30, 2021, additional borrowings were obtained in connection with the (i) Senior Notes due 2028 of $500.0 million, (ii) Revolving Credit Facility of $250.0 million and (iii) EB-5 Loan Agreement of $26.1 million. We made total principal repayments of $552.7 million relating to the Senior Notes due 2022 and Revolving Credit Facility. 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. • Proceeds from the sale of assets were $57.2 million and $37.7 million during the six months ended June 30, 2021 and 2020, respectively. • Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs were $101.2 million during the six months ended June 30, 2021. 57 We are currently evaluating several potential Infrastructure and Equipment Leasing transactions, which could occur within the next 12 months. However, as of the date of this filing, other than the acquisition of Transtar, LLC, none of these transactions or negotiations are definitive or included within our planned liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction. Historical Cash Flow Comparison of the six months ended June 30, 2021 and 2020 The following table compares the historical cash flow for the six months ended June 30, 2021 and 2020: Six Months Ended June 30, (in thousands) 2021 2020 Cash Flow Data: Net cash (used in) provided by operating activities $ (63,924) $ 44,652 Net cash used in investing activities (204,209) (298,122) Net cash provided by financing activities 249,960 111,001 Net cash used in operating activities increased $108.6 million, which primarily reflects (i) an increase in our net loss of $52.7 million primarily due to lower revenues and higher interest expense and (ii) changes in working capital of $30.6 million. Net cash used in investing activities decreased $93.9 million, primarily due to (i) a decrease in acquisitions of property, plant and equipment of $45.9 million, (ii) a decrease in acquisitions of leasing equipment of $36.2 million and (ii) lower proceeds from the sale of leasing equipment of $19.5 million. Net cash provided by financing activities increased $139.0 million, primarily due to (i) an increase in proceeds from debt of $317.1 million, (ii) an increase in proceeds from the issuance of preferred shares of $101.5 million, partially offset by (iii) an increase in repayments of debt of $276.7 million. We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy. FAD is not a financial measure in accordance with GAAP. The GAAP measure most directly comparable to FAD is net cash provided by operating activities. We believe FAD is a useful metric for investors and analysts for similar purposes. We define FAD as: net cash provided by operating activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and excludes changes in working capital. The following table sets forth a reconciliation of Net Cash (Used in) Provided by Operating Activities to FAD: Six Months Ended June 30, (in thousands) 2021 2020 Net Cash (Used in) Provided by Operating Activities $ (63,924) $ 44,652 Add: Principal Collections on Finance Leases 1,269 3,320 Add: Proceeds from Sale of Assets 57,155 37,687 Add: Return of Capital Distributions from Unconsolidated Entities — — Less: Required Payments on Debt Obligations (1) — — Less: Capital Distributions to Non-Controlling Interest — — Exclude: Changes in Working Capital 88,248 57,687 Funds Available for Distribution (FAD) $ 82,748 $ 143,346 ________________________________________________________ (1) Required payments on debt obligations for the six months ended June 30, 2021 exclude repayments of $402,704 for the Senior Notes due 2022 and $150,000 for the Revolving Credit Facility and 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. Limitations 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. FAD has material limitations as a liquidity measure because such measure excludes items that are required elements of our net cash provided by operating activities as described below. FAD should not be considered in isolation nor as a substitute for analysis of our results of operations under GAAP, and it is not the only metric that should be considered in evaluating our ability to meet our stated dividend policy. Specifically: • FAD does not include equity capital called from our existing limited partners, proceeds from any debt issuance or future equity offering, historical cash and cash equivalents and expected investments in our operations. • FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified. 58 • While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as we rely on alternative sources of liquidity to fund such purchases. • FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as we have multiple sources of liquidity and intend to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity. • FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments. • FAD does not reflect changes in working capital balances as management believes that changes in working capital are primarily driven by short term timing differences, which are not meaningful to our distribution decisions. • Management has significant discretion to make distributions, and we are not bound by any contractual provision that requires us to use cash for distributions. If such factors were included in FAD, there can be no assurance that the results would be consistent with our presentation of FAD. Debt Obligations Refer to Note 9 of the Consolidated Financial Statements for additional information. Contractual Obligations The following table summarizes our future obligations, by period due, as of June 30, 2021, under our various contractual obligations and commitments. We had no off-balance sheet arrangements as of June 30, 2021. (in thousands) Remainder of 2021 2022 2023 2024 2025 Thereafter Total Series 2020 Bonds $ — $ — $ — $ — $ 79,060 $ 184,920 $ 263,980 DRP Revolver 25,000 — — — — — 25,000 EB-5 Loan Agreement — — — — — 26,100 26,100 Revolving Credit Facility — 100,000 — — — — 100,000 Senior Notes due 2025 — — — — 850,000 — 850,000 Senior Notes due 2027 — — — — — 400,000 400,000 Senior Notes due 2028 — — — — — 500,000 500,000 Total principal payments on loans and bonds payable 25,000 100,000 — — 929,060 1,111,020 2,165,080 Total estimated interest payments (1) 67,878 135,457 135,190 135,190 120,280 235,576 829,571 Third-party obligations (2) 5,152 10,220 3,220 — — — 18,592 Operating lease obligations 2,645 5,143 5,254 5,004 4,852 145,874 168,772 75,675 150,820 143,664 140,194 125,132 381,450 1,016,935 Total contractual obligations $ 100,675 $ 250,820 $ 143,664 $ 140,194 $ 1,054,192 $ 1,492,470 $ 3,182,015 ________________________________________________________ (1) Estimated interest rates as of June 30, 2021. (2) Relates to a two-year pipeline capacity agreement at Jefferson Terminal. 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. 59 Application of Critical Accounting 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. The carrying amount of goodwill was approximately $122.7 million as of both June 30, 2021 and December 31, 2020. 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 quantitative impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A qualitative analysis was not elected for the year ended December 31, 2020. Beginning in 2020, we adopted new guidance regarding the testing and recognition of a goodwill impairment which prior to 2020 required two steps. 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 of any goodwill recorded in the reporting unit. We estimate the fair value of the reporting units using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the extent and timing of future cash flows (including forecasted revenue growth rates and 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. 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 of the Jefferson Terminal reporting unit or other key inputs are negatively revised in the future, the estimated fair value of the Jefferson Terminal reporting unit could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results. The Jefferson Terminal segment forecasted revenue is dependent on the ramp up of volumes under current and expected future contracts for storage of heavy and light crude and refined products during 2021 and beyond subject to obtaining rail capacity for crude, expansion of refined product distribution to Mexico and movements in future oil spreads. Jefferson Terminal was designed to reach a storage capacity of 21.7 million barrels, and 4.4 million of storage, or approximately 20.3% of capacity, is currently operational. If the Company strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting units would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Although we do not have significant direct exposure to volatility of crude oil prices, changes in crude oil pricing that effect long term refining planned output could impact Jefferson Terminal operations. Other assumptions utilized in our annual impairment analysis that are significant in determination of the fair value of the reporting unit include the discount rate utilized in our discounted cash flow analysis of 13.5% and our terminal growth rate of 2%. Furthermore, both inbound and outbound pipelines projects are becoming fully operational early in 2021 to and from the Jefferson Terminal and will affect our forecasted growth and therefore our estimated fair value. We expect the Jefferson Terminal segment to continue to generate positive Adjusted EBITDA during 2021. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projected revenues are achievable. Further delays in executing these contracts or achieving our projections could adversely affect the fair value of the reporting unit. The impact of the COVID-19 global pandemic during 2020 certainly negatively affected refining volumes and therefore Jefferson Terminal crude throughput but we anticipate the impact to normalize over 2021 and ramp back to normal levels by 2022. Furthermore, we anticipate strengthening macroeconomic demand for storage and the increasing spread between Western Canadian Crude and Western Texas Intermediate as Canadian crude pipeline apportionment increases and our pipeline connections become fully operational during 2021, we remain positive for the outlook of Jefferson Terminal’s earnings potential. There was no impairment of goodwill for the year ended December 31, 2020. Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements. 60