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 September 30, 2021, we had total consolidated assets of $4.7 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. Market conditions due to the outbreak of COVID-19 resulted in asset impairment charges and a decline in our equipment leasing revenues during the nine months ended September 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 September 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 $134.4 million as of September 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 four reportable segments: (i) Aviation Leasing, which is within the Equipment Leasing Business, and (ii) Jefferson Terminal, (iii) Ports and Terminals and (iv) Transtar, 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. In July 2021, we acquired Transtar and it operates as a separate reportable segment. Transtar is comprised of five freight railroads and one switching company that provide rail service to certain manufacturing and production facilities. See Note 4 to the consolidated financial statements for additional information. 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 which consist of equipment that support a railcar cleaning business. 45 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. 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. 46 Comparison of the three and nine months ended September 30, 2021 and 2020 The following table presents our consolidated results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Revenues Equipment leasing revenues Lease income $ 42,778 $ 40,440 $ 2,338 $ 125,907 $ 134,887 $ (8,980) Maintenance revenue 40,252 25,609 14,643 87,763 84,709 3,054 Finance lease income 439 591 (152) 1,285 1,433 (148) Other revenue 15,705 3,159 12,546 22,397 15,053 7,344 Total equipment leasing revenues 99,174 69,799 29,375 237,352 236,082 1,270 Infrastructure revenues Lease income 791 368 423 1,653 775 878 Rail revenues 24,182 — 24,182 24,182 — 24,182 Terminal services revenues 11,469 11,329 140 33,010 40,534 (7,524) Crude marketing revenues — — — — 8,210 (8,210) Other revenue 346 2,213 (1,867) 13,829 5,257 8,572 Total infrastructure revenues 36,788 13,910 22,878 72,674 54,776 17,898 Total revenues 135,962 83,709 52,253 310,026 290,858 19,168 Expenses Operating expenses 52,793 23,128 29,665 108,973 81,144 27,829 General and administrative 4,422 4,241 181 12,329 13,292 (963) Acquisition and transaction expenses 7,130 2,442 4,688 13,172 9,297 3,875 Management fees and incentive allocation to affiliate 3,845 4,591 (746) 11,948 14,113 (2,165) Depreciation and amortization 53,368 42,626 10,742 145,274 126,543 18,731 Asset impairment 859 3,915 (3,056) 3,048 14,391 (11,343) Interest expense 54,500 26,904 27,596 124,994 71,559 53,435 Total expenses 176,917 107,847 69,070 419,738 330,339 89,399 Other (expense) income Equity in losses of unconsolidated entities (4,082) (2,501) (1,581) (9,860) (5,445) (4,415) Gain (loss) on sale of assets, net 12,685 (1,114) 13,799 17,483 (2,165) 19,648 Loss on extinguishment of debt — — — (3,254) (4,724) 1,470 Interest income 483 58 425 1,222 121 1,101 Other (expense) income (8,068) — (8,068) (8,771) 32 (8,803) Total other income (expense) 1,018 (3,557) 4,575 (3,180) (12,181) 9,001 Loss from continuing operations before income taxes (39,937) (27,695) (12,242) (112,892) (51,662) (61,230) Benefit from income taxes (494) (2,486) 1,992 (1,965) (6,334) 4,369 Net loss from continued operations (39,443) (25,209) (14,234) (110,927) (45,328) (65,599) Net income from discontinued operations, net of income taxes — — — — 1,331 (1,331) Net loss (39,443) (25,209) (14,234) (110,927) (43,997) (66,930) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (7,363) (3,876) (3,487) (18,949) (12,724) (6,225) Less: Dividends on preferred shares 6,791 4,625 2,166 17,967 13,243 4,724 Net loss attributable to shareholders $ (38,871) $ (25,958) $ (12,913) $ (109,945) $ (44,516) $ (65,429) 47 The following table sets forth a reconciliation of net loss attributable to shareholders from continuing operations to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Net loss attributable to shareholders from continuing operations $ (38,871) $ (25,958) $ (12,913) $ (109,945) $ (45,847) $ (64,098) Add: Benefit from income taxes (494) (2,486) 1,992 (1,965) (6,334) 4,369 Add: Equity-based compensation expense 728 621 107 3,281 1,323 1,958 Add: Acquisition and transaction expenses 7,130 2,442 4,688 13,172 9,297 3,875 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — 3,254 4,724 (1,470) Add: Changes in fair value of non-hedge derivative instruments 4,594 — 4,594 (1,979) 181 (2,160) Add: Asset impairment charges 859 3,915 (3,056) 3,048 14,391 (11,343) Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense (1) 59,811 52,532 7,279 166,622 149,937 16,685 Add: Interest expense 54,500 26,904 27,596 124,994 71,559 53,435 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) 7,470 120 7,350 9,861 (167) 10,028 Less: Equity in losses of unconsolidated entities 4,082 2,501 1,581 9,860 5,445 4,415 Less: Non-controlling share of Adjusted EBITDA (3) (3,420) (1,955) (1,465) (8,706) (7,406) (1,300) Adjusted EBITDA (non-GAAP) $ 96,389 $ 58,636 $ 37,753 $ 211,497 $ 197,103 $ 14,394 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2021 and 2020: (i) depreciation and amortization expense of $53,368 and $42,626, (ii) lease intangible amortization of $1,266 and $953 and (iii) amortization for lease incentives of $5,177 and $8,953, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) depreciation and amortization expense of $145,274 and $126,543, (ii) lease intangible amortization of $3,216 and $3,016 and (iii) amortization for lease incentives of $18,132 and $20,378, respectively. (2) Includes the following items for the three months ended September 30, 2021 and 2020: (i) net loss of $(4,163) and $(2,590), (ii) interest expense of $300 and $367, (iii) depreciation and amortization expense of $3,009 and $1,389, (iv) acquisition and transaction expenses of $0 and $(79) and (v) changes in fair value of non-hedge derivative instruments of $8,324 and $1,033, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) net loss of $(10,336) and $(5,593), (ii) interest expense of $827 and $848, (iii) depreciation and amortization expense of $6,821 and $3,797, (iv) acquisition and transaction expenses of $0 and $533, (v) changes in fair value of non-hedge derivative instruments of $12,525 and $248 and (vi) asset impairment of $24 and $0, respectively. (3) Includes the following items for the three months ended September 30, 2021 and 2020: (i) equity-based compensation of $130 and $97, (ii) provision for income taxes of $10 and $1, (iii) interest expense of $927 and $322, (iv) depreciation and amortization expense of $2,194 and $1,535 and (v) changes in fair value of non-hedge derivative instruments of $159 and $0, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) equity based compensation of $620 and $196, (ii) provision for income taxes of $36 and $44, (iii) interest expense of $1,940 and $1,553, (iv) depreciation and amortization expense of $6,177 and $4,583, (v) changes in fair value of non-hedge derivative instruments of $(67) and $38 and (vi) loss on extinguishment of debt of $0 and $992, respectively. Revenues Comparison of the three months ended September 30, 2021 and 2020 Total revenues increased $52.3 million primarily due to higher revenues of $24.5 million in the Transtar segment and $27.4 million in the Aviation Leasing segment. Equipment Leasing Maintenance revenue increased $14.6 million, primarily due to an increase in the number of engines placed on lease and higher aircraft and engine utilization. Other revenue increased $12.5 million, which primarily reflects (i) an increase of $11.1 million in the Aviation Leasing segment primarily due to an increase in engine parts sales and higher end-of-lease redelivery compensation and (ii) an increase of $1.4 million in the offshore energy business which reflects higher victualling income on one of our vessels. Lease income increased $2.3 million, primarily due to an increase in the number of aircraft and engines placed on lease, partially offset by an increase in aircraft redelivered. Infrastructure Rail revenues increased $24.2 million due to our acquisition of Transtar in July 2021. 48 Other revenue decreased $1.9 million, primarily due to a loss on butane forward purchase contracts at Repauno. Comparison of the nine months ended September 30, 2021 and 2020 Total revenues increased $19.2 million, primarily due to higher revenues of $24.5 million in the Transtar segment, $8.4 million in the Ports and Terminals segment and $3.7 million in the Aviation Leasing segment, partially offset by lower revenues of $15.4 million in the Jefferson Terminal segment. Equipment Leasing Lease income decreased $9.0 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 increased $7.3 million, primarily due to an increase in engine parts sales, partially offset by lower end-of-lease redelivery compensation and the settlement of an engine loss during the nine months ended September 30, 2020. Maintenance revenue increased $3.1 million, primarily due to an increase in aircraft and engine utilization, partially offset by an increase in aircraft and engines redelivered and a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft. Infrastructure Rail revenues increased $24.2 million due to our acquisition of Transtar in July 2021. Other revenue increased $8.6 million, primarily due to (i) a gain on butane forward purchase and sale contracts at Repauno and (ii) operations commencing at the LPG facility at Repauno. 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 $7.5 million which primarily reflects lower volumes at Jefferson Terminal due to lower global oil demand related to COVID-19. Expenses Comparison of the three months ended September 30, 2021 and 2020 Total expenses increased $69.1 million, primarily due to higher (i) interest expense, (ii) operating expenses, (iii) depreciation and amortization and (iv) acquisition and transaction expenses, partially offset by lower (v) asset impairment charges. Interest expense increased $27.6 million, primarily due to: • an increase of $25.0 million in Corporate and Other which reflects an increase in the average outstanding debt of approximately $892.7 million due to increases in (i) the Senior Notes due 2028 of $667.5 million, (ii) the Bridge Loans (as defined below in Liquidity and Capital Resources) of $433.3 million, (iii) the Senior Notes due 2025 of $406.8 million and (iv) the Revolving Credit Facility (as defined below in Liquidity and Capital Resources) of $83.3 million, partially offset by a decrease in (v) the Senior Notes due 2022 of $698.3 million, which was redeemed in full in May 2021. • an increase of $2.6 million at Jefferson Terminal due to the issuance of the Series 2021 Bonds in August 2021 and EB-5 Loan Agreement which commenced in January 2021. Operating expenses increased $29.7 million which primarily reflects: • an increase in compensation and benefits of $8.9 million primarily due to the acquisition of Transtar in July 2021; • an increase of $8.2 million in facility operating expense which primarily reflects (i) an increase of $3.2 million due to the acquisition of Transtar in July 2021, (ii) an increase of $2.6 million in the Aviation Leasing segment primarily due to shipping and storage costs and (iii) an increase of $1.3 million in the Jefferson Terminal segment primarily due to an increase in third-party services; • an increase of $6.4 million in costs associated with the sale of inventory in the Aviation Leasing segment; • an increase of $1.5 million in repairs and maintenance primarily due to (i) the acquisition of Transtar in July 2021 and (ii) increases in the Aviation Leasing segment and our offshore energy business; and • an increase of $1.3 million in bad debt expense in the Aviation Leasing segment. Depreciation and amortization increased $10.7 million primarily due to (i) the acquisition of Transtar in July 2021 and (ii) assets placed into service at Repauno and Jefferson Terminal. Acquisition and transaction expenses increased $4.7 million primarily due to professional fees related to the acquisition of Transtar in July 2021. Asset impairment decreased $3.1 million due to higher impairment charges in 2020 compared to 2021 in the Aviation Leasing segment. 49 Comparison of the nine months ended September 30, 2021 and 2020 Total expenses increased $89.4 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 $53.4 million, primarily due to: • an increase of $52.3 million in Corporate and Other which reflects an increase in the average outstanding debt of approximately $688.8 million primarily due to increases in (i) the Senior Notes due 2025 of $407.1 million, (ii) the Senior Notes due 2028 of $389.2 million, (iii) the Senior Notes due 2027 of $266.7 million, (iv) the Bridge Loans of $144.4 million and (v) the Revolving Credit Facility of $10.0 million, partially offset by a decrease in (vi) the Senior Notes due 2022 of $520.7 million, which was redeemed in full in May 2021. • an increase of $1.3 million at Jefferson Terminal due to (i) the issuance of the Series 2021 Bonds in August 2021 and the EB-5 Loan Agreement which commenced in January 2021, partially offset by (ii) a debt refinancing in the first quarter of 2020 which lowered their average interest rate. Operating expenses increased $27.8 million which primarily reflects: • an increase of $10.7 million in compensation and benefits primarily due to (i) the acquisition of Transtar in July 2021 and (ii) increases at Repauno and our railcar cleaning business due to an increase in headcount; • an increase of $7.0 million in facility operating expense which primarily reflects (i) an increase of $4.1 million in the Aviation Leasing segment primarily due to shipping and storage costs, (ii) an increase of $3.2 million due to the acquisition of Transtar in July 2021 and (iii) an increase of $1.1 million at Repauno primarily due to increased activity; • an increase of $3.4 million in repairs and maintenance primarily due to (i) our offshore energy business and (ii) the acquisition of Transtar in July 2021; and • an increase of $2.2 million in insurance costs in the Jefferson Terminal segment due to build out of new assets. Depreciation and amortization increased $18.7 million primarily due to (i) assets placed into service at Repauno and Jefferson Terminal, (ii) the acquisition of Transtar in July 2021 and (iii) additional assets acquired in the Aviation Leasing segment. Asset impairment decreased $11.3 million due to higher impairment charges in 2020 compared to 2021 in the Aviation Leasing segment. Other income (expense) Total other income increased $4.6 million during the three months ended September 30, 2021, which primarily reflects (i) an increase of $13.8 million in gain on sale of assets, net in the Aviation Leasing segment, partially offset by (ii) an increase of $8.1 million in other expense primarily due to (a) a write-off of an earn-out receivable at Long Ridge and (b) losses related to crude oil forward transactions at Jefferson Terminal and (iii) an increase of $1.6 million in equity in losses of unconsolidated entities primarily due to an unrealized loss on power swaps at Long Ridge. Total other expense decreased $9.0 million during the nine months ended September 30, 2021, which primarily reflects (i) an increase of $19.6 million in gain on sale of assets, net in the Aviation Leasing segment, partially offset by (ii) an increase of $8.8 million in other expense primarily due to (a) a write-off of an earn-out receivable at Long Ridge and (b) losses related to crude oil forward transactions at Jefferson Terminal and (iii) an increase of $4.4 million in equity in losses in unconsolidated entities primarily due to an unrealized loss on power swaps at Long Ridge. Net loss from continuing operations Net loss from continuing operations increased $14.2 million and $65.6 million during the three and nine months ended September 30, 2021, respectively, primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $37.8 million and $14.4 million during the three and nine months ended September 30, 2021, respectively, primarily due to the changes noted above. 50 Aviation Leasing Segment As of September 30, 2021, in our Aviation Leasing segment, we own and manage 294 aviation assets, consisting of 90 commercial aircraft and 204 engines. As of September 30, 2021, 77 of our commercial aircraft and 127 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 September 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 — 24 24 Sales (4) — (4) Transfers 1 (9) (8) Assets at September 30, 2021 12 78 90 Engines Assets at January 1, 2021 88 98 186 Purchases 8 36 44 Sales (19) (12) (31) Transfers (2) 7 5 Assets at September 30, 2021 75 129 204 51 The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Equipment leasing revenues Lease income $ 40,392 $ 38,537 $ 1,855 $ 120,389 $ 127,983 $ (7,594) Maintenance revenue 40,252 25,609 14,643 87,763 84,709 3,054 Finance lease income 439 591 (152) 1,285 1,433 (148) Other revenue 12,855 1,754 11,101 19,045 10,617 8,428 Total revenues 93,938 66,491 27,447 228,482 224,742 3,740 Expenses Operating expenses 15,411 4,515 10,896 28,806 13,163 15,643 Acquisition and transaction expenses 858 2,060 (1,202) 2,890 6,845 (3,955) Depreciation and amortization 34,288 33,014 1,274 100,583 97,848 2,735 Asset impairment 859 3,915 (3,056) 3,048 14,391 (11,343) Total expenses 51,416 43,504 7,912 135,327 132,247 3,080 Other income (expense) Equity in losses of unconsolidated entities (369) (247) (122) (1,050) (1,432) 382 Gain (loss) on sale of assets, net 12,685 (1,114) 13,799 17,467 (2,158) 19,625 Interest income 339 41 298 963 70 893 Other expense (1,680) — (1,680) (1,680) — (1,680) Total other income (expense) 10,975 (1,320) 12,295 15,700 (3,520) 19,220 Income before income taxes 53,497 21,667 31,830 108,855 88,975 19,880 Provision for (benefit from) income taxes 129 (1,873) 2,002 83 (5,255) 5,338 Net income 53,368 23,540 29,828 108,772 94,230 14,542 Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — — Net income attributable to shareholders $ 53,368 $ 23,540 $ 29,828 $ 108,772 $ 94,230 $ 14,542 52 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Net income attributable to shareholders $ 53,368 $ 23,540 $ 29,828 $ 108,772 $ 94,230 $ 14,542 Add: Provision for (benefit from) income taxes 129 (1,873) 2,002 83 (5,255) 5,338 Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 858 2,060 (1,202) 2,890 6,845 (3,955) 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 859 3,915 (3,056) 3,048 14,391 (11,343) Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense (1) 40,731 42,920 (2,189) 121,931 121,242 689 Add: Interest expense — — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (312) (247) (65) (906) (1,432) 526 Less: Equity in losses of unconsolidated entities 369 247 122 1,050 1,432 (382) Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ 96,002 $ 70,562 $ 25,440 $ 236,868 $ 231,453 $ 5,415 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2021 and 2020: (i) depreciation expense of $34,288 and $33,014, (ii) lease intangible amortization of $1,266 and $953 and (iii) amortization for lease incentives of $5,177 and $8,953, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) depreciation expense of $100,583 and $97,848, (ii) lease intangible amortization of $3,216 and $3,016 and (iii) amortization for lease incentives of $18,132 and $20,378, respectively. (2) Includes the following items for the three months ended September 30, 2021 and 2020: (i) net loss of $(369) and $(247) and (ii) depreciation and amortization of $57 and $0, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) net loss of $(1,050) and $(1,432) and (ii) depreciation and amortization of $144 and $0, respectively. Revenues Comparison of the three months ended September 30, 2021 and 2020 Total revenue increased $27.4 million driven by higher maintenance revenue, other revenue and lease income. • Maintenance revenue increased $14.6 million primarily due to an increase in the number of engines placed on lease and higher aircraft and engine utilization. • Other revenue increased $11.1 million primarily due to an increase in engine parts sales and higher end-of-lease redelivery compensation. • Lease income increased $1.9 million primarily due to an increase in the number of aircraft and engines placed on lease, partially offset by an increase in aircraft redelivered. Comparison of the nine months ended September 30, 2021 and 2020 Total revenue increased $3.7 million driven by higher other revenue and maintenance revenue, partially offset by lower lease income. • Other revenue increased $8.4 million primarily due to an increase in engine parts sales, partially offset by lower end-of-lease redelivery compensation and the settlement of an engine loss during the nine months ended September 30, 2020. • Maintenance revenue increased $3.1 million primarily due to an increase in aircraft and engine utilization, partially offset by an increase in aircraft and engines redelivered and a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft. • Lease income decreased $7.6 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. 53 Expenses Comparison of the three months ended September 30, 2021 and 2020 Total expenses increased $7.9 million primarily due to an increase in operating expenses and depreciation and amortization expense, partially offset by a decrease in asset impairment and acquisition and transaction expenses. • Operating expenses increased $10.9 million primarily as a result of an increase in costs associated with the sale of engine parts, shipping and storage fees, bad debt expense and other operating expenses. • Depreciation and amortization expense increased $1.3 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. • Asset impairment decreased $3.1 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation. See Note 5 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. Comparison of the nine months ended September 30, 2021 and 2020 Total expenses increased $3.1 million primarily due to an increase in operating expenses and depreciation and amortization expense, partially offset by a decrease in asset impairment and acquisition and transaction expenses. • Operating expenses increased $15.6 million primarily as a result of an increase in costs associated with the sale of engine parts, shipping and storage fees and other operating expense. • Depreciation and amortization expense increased $2.7 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. • Asset impairment decreased $11.3 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation. See Note 5 to the consolidated financial statements for additional information. • Acquisition and transaction expense decreased $4.0 million driven by lower compensation and related costs associated with the acquisition of aviation leasing equipment. Other income (expense) Total other income increased $12.3 million during the three months ended September 30, 2021, primarily due to an increase of $13.8 million in gain on the sale of leasing equipment in 2021 and an increase of $0.3 million in interest income, partially offset by an increase of $1.7 million in other expenses and an increase of $0.1 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss. Total other income increased $19.2 million during the nine months ended September 30, 2021, primarily due to an increase of $19.6 million in gain on the sale of leasing equipment in 2021, an increase of $0.9 million in interest income and a decrease of $0.4 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss, partially offset by an increase of $1.7 million in other expenses. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $25.4 million and $5.4 million during the three and nine months ended September 30, 2021, respectively, primarily due to the changes noted above. 54 Jefferson Terminal Segment The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Infrastructure revenues Lease income $ 433 $ 368 $ 65 $ 1,295 $ 775 $ 520 Terminal services revenues 11,469 11,329 140 32,853 40,534 (7,681) Crude marketing revenues — — — — 8,210 (8,210) Total revenues 11,902 11,697 205 34,148 49,519 (15,371) Expenses Operating expenses 12,441 9,661 2,780 35,939 43,894 (7,955) Depreciation and amortization 9,405 7,250 2,155 26,438 21,636 4,802 Interest expense 4,080 1,487 2,593 8,496 7,225 1,271 Total expenses 25,926 18,398 7,528 70,873 72,755 (1,882) Other (expense) income Loss on sale of assets, net — — — — (7) 7 Loss on extinguishment of debt — — — — (4,724) 4,724 Interest income — — — — 22 (22) Other (expense) income (2,090) — (2,090) (2,795) 32 (2,827) Total other expense (2,090) — (2,090) (2,795) (4,677) 1,882 Loss before income taxes (16,114) (6,701) (9,413) (39,520) (27,913) (11,607) Provision for income taxes 47 3 44 163 212 (49) Net loss (16,161) (6,704) (9,457) (39,683) (28,125) (11,558) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (7,189) (3,809) (3,380) (18,743) (12,490) (6,253) Net loss attributable to shareholders $ (8,972) $ (2,895) $ (6,077) $ (20,940) $ (15,635) $ (5,305) 55 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) 2021 2020 2021 2020 Net loss attributable to shareholders $ (8,972) $ (2,895) $ (6,077) $ (20,940) $ (15,635) $ (5,305) Add: Provision for income taxes 47 3 44 163 212 (49) Add: Equity-based compensation expense 553 428 125 2,664 857 1,807 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 9,405 7,250 2,155 26,438 21,636 4,802 Add: Interest expense 4,080 1,487 2,593 8,496 7,225 1,271 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) (3,167) (1,925) (1,242) (8,492) (7,315) (1,177) Adjusted EBITDA (non-GAAP) $ 1,946 $ 4,348 $ (2,402) $ 8,329 $ 11,885 $ (3,556) ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2021 and 2020: (i) equity-based compensation of $124 and $90, (ii) provision for income taxes of $10 and $1, (iii) interest expense of $918 and $312 and (iv) depreciation and amortization expense of $2,115 and $1,522, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) equity-based compensation of $599 and $180, (ii) provision for income taxes of $36 and $44, (iii) interest expense of $1,911 and $1,517, (iv) changes in fair value of non-hedge derivative instruments of $0 and $38, (v) depreciation and amortization expense of $5,946 and $4,544 and (vi) loss on extinguishment of debt of $0 and $992, respectively. Revenues Total revenues decreased $15.4 million during the nine months ended September 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 $7.7 million which primarily reflects lower volumes due to lower global oil demand related to COVID-19. Expenses Total expenses increased $7.5 million during the three months ended September 30, 2021, which reflects: • an increase in interest expense of $2.6 million due to the issuance of the Series 2021 Bonds in August 2021 and EB-5 Loan Agreement which commenced in January 2021; • an increase in operating expenses of $2.8 million primarily due to increases in (i) facility operations expense of $1.3 million due to an increase in third-party services, (ii) insurance expense of $0.8 million due to build out of new assets and (iii) compensation and benefits of $0.6 million due to increased headcount; and • an increase in depreciation and amortization of $2.2 million due to additional assets being placed into service. Total expenses decreased $1.9 million during the nine months ended September 30, 2021, which reflects: • a decrease in operating expenses of $8.0 million, primarily due to (i) Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in facility operations expense; • an increase in depreciation and amortization of $4.8 million due to additional assets being placed into service; and • an increase in interest expense of $1.3 million due to (i) the issuance of the Series 2021 Bonds in August 2021 and the EB-5 Loan Agreement which commenced in January 2021, partially offset by (ii) a debt refinancing in the first quarter of 2020 which lowered their average interest rate. Other expense Total other expense increased $2.1 million during the three months ended September 30, 2021, primarily due to losses related to crude oil forward transactions. 56 Total other expense decreased $1.9 million during the nine months ended September 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. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $2.4 million and $3.6 million during the three and nine months ended September 30, 2021, respectively, primarily due to the changes noted above. Ports and Terminals The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Infrastructure revenues Terminal services revenues $ — $ — $ — $ 157 $ — $ 157 Other revenue (458) 1,242 (1,700) 9,825 1,556 8,269 Total revenues (458) 1,242 (1,700) 9,982 1,556 8,426 Expenses Operating expenses 5,272 2,704 2,568 12,202 6,579 5,623 Acquisition and transaction expenses — 20 (20) — 821 (821) Depreciation and amortization 2,299 368 1,931 6,726 1,122 5,604 Interest expense 283 298 (15) 857 1,045 (188) Total expenses 7,854 3,390 4,464 19,785 9,567 10,218 Other (expense) income Equity in losses of unconsolidated entities (3,789) (2,285) (1,504) (9,262) (3,961) (5,301) Gain on sale of equipment, net — — — 16 — 16 Interest income 145 — 145 236 — 236 Other expense (4,100) — (4,100) (4,100) — (4,100) Total other expense (7,744) (2,285) (5,459) (13,110) (3,961) (9,149) Loss before income taxes (16,056) (4,433) (11,623) (22,913) (11,972) (10,941) Benefit from income taxes (1,798) (656) (1,142) (3,265) (1,534) (1,731) Net loss (14,258) (3,777) (10,481) (19,648) (10,438) (9,210) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (174) (67) (107) (206) (234) 28 Net loss attributable to shareholders $ (14,084) $ (3,710) $ (10,374) $ (19,442) $ (10,204) $ (9,238) 57 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) 2021 2020 2021 2020 Net loss attributable to shareholders $ (14,084) $ (3,710) $ (10,374) $ (19,442) $ (10,204) $ (9,238) Add: Benefit from income taxes (1,798) (656) (1,142) (3,265) (1,534) (1,731) Add: Equity-based compensation expense 175 193 (18) 617 466 151 Add: Acquisition and transaction expenses — 20 (20) — 821 (821) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments 4,594 — 4,594 (1,979) — (1,979) Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 2,299 368 1,931 6,726 1,122 5,604 Add: Interest expense 283 298 (15) 857 1,045 (188) Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 7,761 395 7,366 10,712 1,376 9,336 Less: Equity in losses of unconsolidated entities 3,789 2,285 1,504 9,262 3,961 5,301 Less: Non-controlling share of Adjusted EBITDA (2) (253) (30) (223) (214) (91) (123) Adjusted EBITDA (non-GAAP) $ 2,766 $ (837) $ 3,603 $ 3,274 $ (3,038) $ 6,312 ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2021 and 2020: (i) net loss of $(3,789) and $(2,285), (ii) interest expense of $274 and $337, (iii) depreciation and amortization expense of $2,952 and $1,389, (iv) acquisition and transaction expenses of $0 and $(79) and (v) changes in fair value of non-hedge derivative instruments of $8,324 and $1,033, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) net loss of $(9,262) and $(3,961), (ii) interest expense of $748 and $759, (iii) depreciation and amortization expense of $6,677 and $3,797, (iv) acquisition and transaction expenses of $0 and $533, (v) changes in fair value of non-hedge derivative instruments of $12,525 and $248 and (vi) asset impairment of $24 and $0, respectively. (2) Includes the following items for the three months ended September 30, 2021 and 2020: (i) equity-based compensation of $6 and $7, (ii) interest expense of $9 and $10, (iii) depreciation and amortization expense of $79 and $13 and (iv) changes in fair value of non-hedge derivative instruments of $159 and $0, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) equity-based compensation of $21 and $16, (ii) interest expense of $29 and $36, (iii) depreciation and amortization expense of $231 and $39 and (iv) changes in fair value of non-hedge derivative instruments of $(67) and $0, respectively. Revenues Total revenue decreased $1.7 million during the three months ended September 30, 2021, primarily due to a loss on butane forward purchase contracts at Repauno. Total revenue increased $8.4 million during the nine months ended September 30, 2021, primarily due to (i) a gain on butane forward purchase and sale contracts at Repauno and (ii) operations commencing at the LPG facility at Repauno. Expenses Total expenses increased $4.5 million during the three months ended September 30, 2021 which reflects (i) higher operating expenses of $2.6 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $1.9 million due to operations commencing at the LPG facility and additional assets placed into service at Repauno. Total expenses increased $10.2 million during the nine months ended September 30, 2021 which reflects (i) higher operating expenses of $5.6 million due to increased activit y at Repauno and (ii) higher depreciation and amortization of $5.6 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 $5.5 million and $9.1 million during the three and nine months ended September 30, 2021, respectively, which reflects an increase in other expense and equity in losses in unconsolidated entities primarily due to unrealized losses on power swaps at Long Ridge. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $3.6 million and $6.3 million during the three and nine months ended September 30, 2021, respectively, primarily due to the changes noted above. 58 Transtar The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Infrastructure revenues Lease income $ 358 $ — $ 358 $ 358 $ — $ 358 Rail revenues 24,182 — 24,182 24,182 — 24,182 Total revenues 24,540 — 24,540 24,540 — 24,540 Expenses Operating expenses 12,877 — 12,877 12,877 — 12,877 Acquisition and transaction expenses 851 — 851 851 — 851 Depreciation and amortization 5,270 — 5,270 5,270 — 5,270 Interest expense 37 — 37 37 — 37 Total expenses 19,035 — 19,035 19,035 — 19,035 Other expense Other expense (197) — (197) (197) — (197) Total other expense (197) — (197) (197) — (197) Income before income taxes 5,308 — 5,308 5,308 — 5,308 Provision for income taxes 1,128 — 1,128 1,128 — 1,128 Net income 4,180 — 4,180 4,180 — 4,180 Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — — Net income attributable to shareholders $ 4,180 $ — $ 4,180 $ 4,180 $ — $ 4,180 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) 2021 2020 2021 2020 Net income attributable to shareholders $ 4,180 $ — $ 4,180 $ 4,180 $ — $ 4,180 Add: Provision for income taxes 1,128 — 1,128 1,128 — 1,128 Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 851 — 851 851 — 851 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — — Add: Asset impairment charges — — — — — — Add: Incentive allocations — — — — — — Add: Depreciation and amortization expense 5,270 — 5,270 5,270 — 5,270 Add: Interest expense 37 — 37 37 — 37 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — — Less: Equity in earnings of unconsolidated entities — — — — — — Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA $ 11,466 $ — $ 11,466 $ 11,466 $ — $ 11,466 All variances during the three and nine months ended September 30, 2021 reflect our acquisition of Transtar in July 2021. 59 Corporate and Other The following table presents our results of operations: Three Months Ended September 30, Change Nine Months Ended September 30, Change (in thousands) 2021 2020 2021 2020 Revenues Equipment leasing revenues Lease income $ 2,386 $ 1,903 $ 483 $ 5,518 $ 6,904 $ (1,386) Other revenue 2,850 1,405 1,445 3,352 4,436 (1,084) Total equipment leasing revenues 5,236 3,308 1,928 8,870 11,340 (2,470) Infrastructure revenues Other revenue 804 971 (167) 4,004 3,701 303 Total infrastructure revenues 804 971 (167) 4,004 3,701 303 Total revenues 6,040 4,279 1,761 12,874 15,041 (2,167) Expenses Operating expenses 6,792 6,248 544 19,149 17,508 1,641 General and administrative 4,422 4,241 181 12,329 13,292 (963) Acquisition and transaction expenses 5,421 362 5,059 9,431 1,631 7,800 Management fees and incentive allocation to affiliate 3,845 4,591 (746) 11,948 14,113 (2,165) Depreciation and amortization 2,106 1,994 112 6,257 5,937 320 Interest expense 50,100 25,119 24,981 115,604 63,289 52,315 Total expenses 72,686 42,555 30,131 174,718 115,770 58,948 Other (expense) income Equity in earnings (losses) of unconsolidated entities 76 31 45 452 (52) 504 Loss on extinguishment of debt — — — (3,254) — (3,254) Interest income (1) 17 (18) 23 29 (6) Other (expense) income (1) — (1) 1 — 1 Total other income (expense) 74 48 26 (2,778) (23) (2,755) Loss before income taxes (66,572) (38,228) (28,344) (164,622) (100,752) (63,870) Provision for (benefit from) income taxes — 40 (40) (74) 243 (317) Net loss (66,572) (38,268) (28,304) (164,548) (100,995) (63,553) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — — Less: Dividends on preferred shares 6,791 4,625 2,166 17,967 13,243 4,724 Net loss attributable to shareholders $ (73,363) $ (42,893) $ (30,470) $ (182,515) $ (114,238) $ (68,277) 60 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) 2021 2020 2021 2020 Net loss attributable to shareholders $ (73,363) $ (42,893) $ (30,470) $ (182,515) $ (114,238) $ (68,277) Add: Provision for (benefit from) income taxes — 40 (40) (74) 243 (317) Add: Equity-based compensation expense — — — — — — Add: Acquisition and transaction expenses 5,421 362 5,059 9,431 1,631 7,800 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — 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 2,106 1,994 112 6,257 5,937 320 Add: Interest expense 50,100 25,119 24,981 115,604 63,289 52,315 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 21 (28) 49 55 (111) 166 Less: Equity in (earnings) losses of unconsolidated entities (76) (31) (45) (452) 52 (504) Less: Non-controlling share of Adjusted EBITDA — — — — — — Adjusted EBITDA (non-GAAP) $ (15,791) $ (15,437) $ (354) $ (48,440) $ (43,197) $ (5,243) ________________________________________________________ (1) Includes the following items for the three months ended September 30, 2021 and 2020: (i) net loss of $(5) and $(58) and (ii) interest expense of $26 and $30, respectively. Includes the following items for the nine months ended September 30, 2021 and 2020: (i) net loss of $(24) and $(200) and (ii) interest expense of $79 and $89, respectively. Revenues Total revenues increased $1.8 million during the three months ended September 30, 2021, primarily due to an increase of $1.9 million in the offshore energy business which reflects higher victualling income on one of our vessels. Total revenues decreased $2.2 million during the nine months ended September 30, 2021, primarily due to a decrease of $2.5 million in the offshore energy business as one of our vessels was on hire longer in 2020 compared to 2021. Expenses Comparison of the three months ended September 30, 2021 and 2020 Total expenses increased $30.1 million primarily due to higher (i) interest expense and (ii) acquisition and transaction expenses. Interest expense increased $25.0 million, which reflects an increase in the average outstanding debt of approximately $892.7 million due to increases in (i) the Senior Notes due 2028 of $667.5 million, (ii) the Bridge Loans (as defined in Note 8) of $433.3 million, (iii) the Senior Notes due 2025 of $406.8 million and (iv) the Revolving Credit Facility (as defined below in Liquidity and Capital Resources) of $83.3 million, partially offset by a decrease in (v) the Senior Notes due 2022 of $698.3 million, which was redeemed in full in May 2021. Acquisition and transaction expense increased $5.1 million, primarily due to professional fees related to the acquisition of Transtar in July 2021. Comparison of the nine months ended September 30, 2021 and 2020 Total expenses increased $58.9 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. Interest expense increased $52.3 million, which reflects an increase in the average outstanding debt of approximately $688.8 million primarily due to increases in (i) the Senior Notes due 2025 of $407.1 million, (ii) the Senior Notes due 2028 of $389.2 million, (iii) the Senior Notes due 2027 of $266.7 million, (iv) the Bridge Loans of $144.4 million and (v) the Revolving Credit Facility of $10.0 million, partially offset by a decrease in (vi) the Senior Notes due 2022 of $520.7 million, which was redeemed in full in May 2021. Acquisition and transaction expense increased $7.8 million, primarily due to professional fees related to the acquisition of Transtar in July 2021. 61 Management fees and incentive allocation to affiliate decreased $2.2 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 $2.8 million during the nine months ended September 30, 2021, primarily due to (i) a loss on extinguishment of debt of $3.3 million related to the redemption of the Senior Notes due 2022 in May 2021, partially offset by (ii) an increase of $0.5 million in equity in earnings of unconsolidated entities. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $0.4 million and $5.2 million during the three and nine months ended September 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 10 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 July 2021, we entered into a senior unsecured bridge term loan facility (the “Bridge Loans”) in an aggregate principal amount of $650 million in order to finance the acquisition of Transtar, which closed on July 28, 2021. We issued new equity and debt in September 2021, as described below, and repaid in full the Bridge Loans. In August 2021, Jefferson issued $425 million aggregate principal amount of Series 2021 Bonds (see Note 10 to the consolidated financial statements). Jefferson used a portion of the net proceeds from the Series 2021 Bonds to repay certain indebtedness, and intend to use a portion of the net proceeds to pay for or reimburse the cost of development, construction and acquisition of certain facilities. In September 2021, we issued 12,000,000 common shares and received net proceeds of approximately $291.7 million after deducting underwriting discounts and offering expenses (see Note 20 to the consolidated financial statements). The proceeds were used to repay a portion of the Bridge Loans. Additionally, in October 2021, the underwriters exercised an option to purchase an additional 1,283,863 common shares and we received net proceeds of approximately $31 million. In September 2021, we issued an additional $500 million aggregate principal amount of the Senior Notes due 2028 (see Note 10 to the consolidated financial statements). We used a portion of the net proceeds to repay in full the Bridge Loans. 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 $484.7 million and $470.3 million during the nine months ended September 30, 2021 and 2020, respectively. • Cash used for the acquisition of a business, net of cash acquired was $627.4 million during the nine months ended September 30, 2021. • Dividends to shareholders and holders of eligible participating securities were $103.2 million and $98.4 million during the nine months ended September 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 provided from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $4.1 million and $60.5 million during the nine months ended September 30, 2021 and 2020, respectively. • During the nine months ended September 30, 2021, additional borrowings were obtained in connection with the (i) Senior Notes due 2028 of $1,002.5 million, (ii) Bridge Loans of $650.0 million, (iii) Revolving Credit Facility of $450.0 million, (iv) Series 2021 Bonds of $425.0 million and (v) EB-5 Loan Agreement of $26.1 million. We made total principal repayments of $1,452.7 million relating to the Bridge Loans, Senior Notes due 2022 and Revolving Credit Facility. 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 62 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. • Proceeds from the sale of assets were $78.5 million and $53.7 million during the nine months ended September 30, 2021 and 2020, respectively. • Proceeds from the issuance of common shares, net of underwriter’s discount and issuance costs were $291.8 million during the nine months ended September 30, 2021. • Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs were $101.2 million and $20.2 million during the nine months ended September 30, 2021 and 2020, respectively. 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 nine months ended September 30, 2021 and 2020 The following table compares the historical cash flow for the nine months ended September 30, 2021 and 2020: Nine Months Ended September 30, (in thousands) 2021 2020 Cash Flow Data: Net cash (used in) provided by operating activities $ (20,708) $ 28,393 Net cash used in investing activities (1,030,280) (407,193) Net cash provided by financing activities 1,349,020 299,689 Net cash used in operating activities increased $49.1 million, which primarily reflects (i) an increase in our net loss of $66.9 million primarily due to higher interest expense and operating expenses and (ii) changes in working capital of $31.5 million. Net cash used in investing activities increased $623.1 million, primarily due to (i) our acquisition of Transtar, (ii) an increase in investments in unconsolidated entities of $50.1 million, (iii) an increase in acquisitions of leasing equipment of $46.7 million, partially offset by (iv) a decrease in acquisitions of property, plant and equipment of $100.3 million and (v) lower proceeds from the sale of leasing equipment of $24.8 million. Net cash provided by financing activities increased $1,049.3 million, primarily due to (i) an increase in proceeds from debt of $1,669.6 million, (ii) an increase in proceeds from the issuance of common shares of $291.8 million and (iii) an increase in proceeds from the issuance of preferred shares of $81.0 million, partially offset by (iv) an increase in repayments of debt of $956.7 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. 63 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: Nine Months Ended September 30, (in thousands) 2021 2020 Net Cash (Used in) Provided by Operating Activities $ (20,708) $ 28,393 Add: Principal Collections on Finance Leases 1,707 7,001 Add: Proceeds from Sale of Assets 78,463 53,707 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 62,637 94,101 Funds Available for Distribution (FAD) $ 122,099 $ 183,202 ________________________________________________________ (1) Required payments on debt obligations for the nine months ended September 30, 2021 exclude repayments of $650,000 for the Bridge Loans, $400,000 for the Revolving Credit Facility and $402,704 for the Senior Notes due 2022 and 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. 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. • 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 10 of the Consolidated Financial Statements for additional information. 64 Contractual Obligations The following table summarizes our future obligations, by period due, as of September 30, 2021, under our various contractual obligations and commitments. We had no off-balance sheet arrangements as of September 30, 2021. (in thousands) Remainder of 2021 2022 2023 2024 2025 Thereafter Total Series 2020 Bonds $ — $ — $ — $ — $ 79,060 $ 184,920 $ 263,980 Series 2021 Bonds — — — — — 425,000 425,000 DRP Revolver 25,000 — — — — — 25,000 EB-5 Loan Agreement — — — — — 26,100 26,100 Revolving Credit Facility — 50,000 — — — — 50,000 Senior Notes due 2025 — — — — 850,000 — 850,000 Senior Notes due 2027 — — — — — 400,000 400,000 Senior Notes due 2028 — — — — — 1,000,000 1,000,000 Total principal payments on loans and bonds payable 25,000 50,000 — — 929,060 2,036,020 3,040,080 Total estimated interest payments (1) 37,651 175,427 174,894 177,186 162,275 441,064 1,168,497 Third-party obligations (2) 2,576 10,220 3,220 — — — 16,016 Operating lease obligations 4,224 9,589 7,875 6,901 6,677 148,455 183,721 Capital lease obligations 223 890 763 237 21 — 2,134 44,674 196,126 186,752 184,324 168,973 589,519 1,370,368 Total contractual obligations $ 69,674 $ 246,126 $ 186,752 $ 184,324 $ 1,098,033 $ 2,625,539 $ 4,410,448 ________________________________________________________ (1) Estimated interest rates as of September 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. 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 $239.9 million and $122.7 million as of September 30, 2021 and December 31, 2020. The increase in goodwill was due to our acquisition of Transtar in July 2021. 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. 65 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.