FTAI Aviation Ltd. 10-Q

Item 1. Financial Statements FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED BALANCE SHEETS ( unaudited) (Dollars in thousands, except share and per share data) Notes September 30, 2022 December 31, 2021 Assets Cash and cash equivalents 2 $ 72,742 $ 138,206 Accounts receivable, net 94,867 124,924 Leasing equipment, net 4 1,692,182 1,855,637 Property, plant, and equipment, net 5 47,669 38,263 Investments 6 22,280 22,917 Intangible assets, net 7 29,416 30,962 Inventory, net 2 160,019 100,307 Other assets 2 158,810 110,337 Assets of discontinued operations 3 — 2,442,301 Total assets $ 2,277,985 $ 4,863,854 Liabilities Accounts payable and accrued liabilities $ 102,506 $ 87,035 Debt, net 8 2,024,549 2,501,587 Maintenance deposits 51,430 106,836 Security deposits 27,409 40,149 Other liabilities 46,043 23,892 Liabilities of discontinued operations 3 — 980,255 Total liabilities $ 2,251,937 $ 3,739,754 Commitments and contingencies 15 Equity Common shares ($ 0.01 par value per share; 2,000,000,000 shares authorized; 99,378,771 and 99,180,385 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively) $ 994 $ 992 Preferred shares ($ 0.01 par value per share; 200,000,000 shares authorized; 13,320,000 and 13,320,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively) 133 133 Additional paid in capital 376,800 1,411,940 Accumulated deficit ( 352,403 ) ( 132,392 ) Accumulated other comprehensive loss — ( 156,381 ) Shareholders' equity 25,524 1,124,292 Non-controlling interest in equity of consolidated subsidiaries 524 ( 192 ) Total equity 26,048 1,124,100 Total liabilities and equity $ 2,277,985 $ 4,863,854 See accompanying notes to consolidated financial statements. 5 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENTS OF OPERATIONS ( unaudited) (Dollars in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, Notes 2022 2021 2022 2021 Revenues 10 $ 230,365 $ 99,174 $ 434,120 $ 237,352 Expenses Operating expenses 2 27,393 15,339 108,197 34,191 Cost of sales 2 95,948 5,367 120,139 8,577 General and administrative 3,354 3,679 11,821 9,618 Acquisition and transaction expenses 2,848 6,583 8,340 12,626 Management fees and incentive allocation to affiliate 12 4 16 4 704 Depreciation and amortization 4, 5 34,853 36,237 115,461 106,374 Asset impairment 4,495 859 128,171 3,048 Interest expense 40,171 50,096 132,197 115,598 Total expenses 209,066 118,176 624,330 290,736 Other (expense) income Equity in losses of unconsolidated entities 6 ( 358 ) ( 369 ) ( 125 ) ( 1,050 ) Gain on sale of assets, net — 12,685 79,933 17,467 Loss on extinguishment of debt ( 19,861 ) — ( 19,861 ) ( 3,254 ) Other (expense) income ( 1,038 ) ( 1,341 ) 208 ( 717 ) Total other (expense) income ( 21,257 ) 10,975 60,155 12,446 Income (loss) from continuing operations before income taxes 42 ( 8,027 ) ( 130,055 ) ( 40,938 ) Provision for income taxes 11 4,189 485 7,357 824 Net loss from continuing operations ( 4,147 ) ( 8,512 ) ( 137,412 ) ( 41,762 ) Net loss from discontinued operations, net of income taxes 3 ( 14,782 ) ( 30,931 ) ( 101,416 ) ( 69,165 ) Net loss ( 18,929 ) ( 39,443 ) ( 238,828 ) ( 110,927 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries: Continuing operations — — — — Discontinued operations 3 ( 2,871 ) ( 7,363 ) ( 18,817 ) ( 18,949 ) Less: Dividends on preferred shares 6,791 6,791 20,373 17,967 Net loss attributable to shareholders $ ( 22,849 ) $ ( 38,871 ) $ ( 240,384 ) $ ( 109,945 ) Loss per share: 14 Basic Continuing operations $ ( 0.11 ) $ ( 0.17 ) $ ( 1.59 ) $ ( 0.69 ) Discontinued operations $ ( 0.12 ) $ ( 0.27 ) $ ( 0.83 ) $ ( 0.58 ) Diluted Continuing operations $ ( 0.11 ) $ ( 0.17 ) $ ( 1.59 ) $ ( 0.69 ) Discontinued operations $ ( 0.12 ) $ ( 0.27 ) $ ( 0.83 ) $ ( 0.58 ) Weighted average shares outstanding: Basic 99,378,771 88,277,897 99,372,016 86,787,072 Diluted 99,378,771 88,277,897 99,372,016 86,787,072 See accompanying notes to consolidated financial statements. 6 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net loss $ ( 18,929 ) $ ( 39,443 ) $ ( 238,828 ) $ ( 110,927 ) Other comprehensive loss: Other comprehensive loss related to equity method investees, net (1) in discontinued operations ( 40,470 ) ( 54,640 ) ( 182,963 ) ( 77,518 ) Comprehensive loss ( 59,399 ) ( 94,083 ) ( 421,791 ) ( 188,445 ) Comprehensive loss attributable to non-controlling interest: Continuing operations — — — — Discontinued operations ( 2,871 ) ( 7,363 ) ( 18,817 ) ( 18,949 ) Comprehensive loss attributable to shareholders $ ( 56,528 ) $ ( 86,720 ) $ ( 402,974 ) $ ( 169,496 ) ________________________________________________________ (1) Net of deferred tax expense (benefit) of $ — and $ 1,798 for the three months ended September 30, 2022 and 2021, respectively, and $ — and $( 2,674 ) for the nine months ended September 30, 2022 and 2021, respectively. See accompanying notes to consolidated financial statements. 7 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (Dollars in thousands) Three and Nine Months Ended September 30, 2022 Common Shares Preferred Shares Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2021 $ 992 $ 133 $ 1,411,940 $ ( 132,392 ) $ ( 156,381 ) $ ( 192 ) $ 1,124,100 Net loss ( 203,953 ) ( 15,946 ) ( 219,899 ) Other comprehensive loss ( 142,493 ) ( 142,493 ) Total comprehensive loss ( 203,953 ) ( 142,493 ) ( 15,946 ) ( 362,392 ) Acquisition of consolidated subsidiary 3,054 3,054 Contributions from non-controlling interest 1,187 1,187 Issuance of common shares 399 399 Dividends declared - common shares ( 65,789 ) ( 65,789 ) Dividends declared - preferred shares ( 13,582 ) ( 13,582 ) Equity-based compensation 2,294 2,294 Equity - June 30, 2022 $ 992 $ 133 $ 1,332,968 $ ( 336,345 ) $ ( 298,874 ) $ ( 9,603 ) $ 689,271 Net loss ( 16,058 ) ( 2,871 ) ( 18,929 ) Other comprehensive loss ( 40,470 ) ( 40,470 ) Total comprehensive loss ( 16,058 ) ( 40,470 ) ( 2,871 ) ( 59,399 ) Spin-off of FTAI Infrastructure, Inc., net of distributions ( 916,582 ) 339,344 12,817 ( 564,421 ) Settlement of equity-based compensation ( 148 ) ( 148 ) Issuance of common shares 2 2 Dividends declared - common shares ( 32,795 ) ( 32,795 ) Dividends declared - preferred shares ( 6,791 ) ( 6,791 ) Equity-based compensation 329 329 Equity - September 30, 2022 $ 994 $ 133 $ 376,800 $ ( 352,403 ) $ — $ 524 $ 26,048 8 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (Dollars in thousands) See accompanying notes to consolidated financial statements. Three and Nine Months Ended September 30, 2021 Common Shares Preferred Shares Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2020 $ 856 $ 91 $ 1,130,106 $ ( 28,158 ) $ ( 26,237 ) $ 22,663 $ 1,099,321 Net loss ( 59,898 ) ( 11,586 ) ( 71,484 ) Other comprehensive loss ( 22,878 ) ( 22,878 ) Total comprehensive loss ( 59,898 ) ( 22,878 ) ( 11,586 ) ( 94,362 ) Settlement of equity-based compensation ( 183 ) ( 183 ) Issuance of common shares 455 455 Dividends declared - common shares ( 56,795 ) ( 56,795 ) Issuance of preferred shares 42 101,158 101,200 Dividends declared - preferred shares ( 11,176 ) ( 11,176 ) Equity-based compensation 2,553 2,553 Equity - June 30, 2021 $ 856 $ 133 $ 1,163,748 $ ( 88,056 ) $ ( 49,115 ) $ 13,447 $ 1,041,013 Net loss ( 32,080 ) ( 7,363 ) ( 39,443 ) Other comprehensive loss ( 54,640 ) ( 54,640 ) Total comprehensive loss ( 32,080 ) ( 54,640 ) ( 7,363 ) ( 94,083 ) Settlement of equity-based compensation ( 238 ) ( 238 ) Issuance of common shares 123 291,701 291,824 Conversion of participating securities ( 2 ) ( 2 ) Dividends declared - common shares ( 28,409 ) ( 28,409 ) Dividends declared - preferred shares ( 6,791 ) ( 6,791 ) Equity-based compensation 728 728 Equity - September 30, 2021 $ 979 $ 133 $ 1,420,247 $ ( 120,136 ) $ ( 103,755 ) $ 6,574 $ 1,204,042 9 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) (Dollars in thousands) See accompanying notes to consolidated financial statements. 10 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 238,828 ) $ ( 110,927 ) Adjustments to reconcile net loss to net cash used in operating activities: Equity in losses of unconsolidated entities 46,727 9,860 Gain on sale of assets, net ( 106,427 ) ( 17,483 ) Security deposits and maintenance claims included in earnings ( 31,558 ) ( 30,866 ) Loss on extinguishment of debt 19,861 3,254 Equity-based compensation 2,623 3,281 Depreciation and amortization 155,780 145,274 Asset impairment 128,171 3,048 Change in deferred income taxes 14,923 ( 2,311 ) Change in fair value of non-hedge derivative ( 1,567 ) ( 1,979 ) Amortization of lease intangibles and incentives 30,315 21,348 Amortization of deferred financing costs 17,142 18,853 Provision for credit losses 47,226 817 Other ( 693 ) ( 240 ) Change in: Accounts receivable ( 61,892 ) ( 100,821 ) Other assets ( 23,576 ) ( 34,499 ) Inventory ( 13,370 ) — Accounts payable and accrued liabilities 4,329 71,285 Management fees payable to affiliate ( 2,530 ) ( 844 ) Other liabilities ( 7,955 ) 2,242 Net cash used in operating activities ( 21,299 ) ( 20,708 ) Cash flows from investing activities: Investment in unconsolidated entities ( 7,344 ) ( 54,499 ) Principal collections on finance leases 2,165 1,707 Acquisition of business, net of cash acquired ( 3,819 ) ( 627,399 ) Acquisition of leasing equipment ( 360,642 ) ( 299,564 ) Acquisition of property, plant and equipment ( 138,750 ) ( 109,405 ) Acquisition of lease intangibles ( 6,542 ) ( 7,403 ) Purchase deposits for acquisitions ( 28,621 ) ( 13,790 ) Proceeds from sale of leasing equipment 262,096 78,463 Proceeds from sale of property, plant and equipment 5,289 — Proceeds for deposit on sale of aircraft and engine 7,801 600 Return of purchase deposits — 1,010 Net cash used in investing activities $ ( 268,367 ) $ ( 1,030,280 ) See accompanying notes to consolidated financial statements. 11 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 Cash flows from financing activities: Proceeds from debt $ 503,980 $ 2,553,600 Repayment of debt ( 984,529 ) ( 1,452,704 ) Payment of deferred financing costs ( 18,151 ) ( 45,123 ) Receipt of security deposits 2,636 1,390 Return of security deposits ( 941 ) ( 1,034 ) Receipt of maintenance deposits 37,586 23,075 Release of maintenance deposits ( 878 ) ( 19,615 ) Capital contributions from non-controlling interests 1,187 — Proceeds from issuance of common shares, net of underwriter's discount — 291,822 Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs — 101,201 Dividend from spin-off of FTAI Infrastructure, net of cash transferred 500,562 — Settlement of equity-based compensation ( 148 ) ( 421 ) Cash dividends - common shares ( 98,584 ) ( 85,204 ) Cash dividends - preferred shares ( 20,373 ) ( 17,967 ) Net cash (used in) provided by financing activities ( 77,653 ) 1,349,020 Net (decrease) increase in cash and cash equivalents and restricted cash ( 367,319 ) 298,032 Cash and cash equivalents and restricted cash, beginning of period 440,061 161,418 Cash and cash equivalents and restricted cash, end of period $ 72,742 $ 459,450 Supplemental disclosure of non-cash investing and financing activities: Acquisition of leasing equipment $ 124,932 $ 66,988 Acquisition of property, plant and equipment ( 762 ) ( 1,062 ) Settled and assumed security deposits ( 12,161 ) ( 1,909 ) Billed, assumed and settled maintenance deposits ( 73,808 ) ( 30,302 ) Non-cash change in equity method investment ( 182,963 ) ( 77,518 ) Conversion of interests in unconsolidated entities ( 21,302 ) — Issuance of common shares 399 455 See accompanying notes to consolidated financial statements. 12 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 1. ORGANIZATION Fortress Transportation and Infrastructure Investors LLC (“we”, “us”, “our” or the “Company”) is a Delaware limited liability company which, through its subsidiary, Fortress Worldwide Transportation and Infrastructure General Partnership (the “Partnership”), owns and leases aviation equipment and also develops, manufactures, repairs and sells aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 13). On August 1, 2022, the Company completed the spin-off of its infrastructure business into an independent publicly traded company. Accordingly, the operating results of, and costs to separate, the infrastructure business are reported in Net loss from discontinued operations, net of income taxes in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities held prior to the spin-off are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets. All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted. For additional information, see Note 3, "Discontinued Operations." 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting — The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of us and our subsidiaries. Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest. We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive income (loss). Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks and Uncertainties — In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are denominated in U.S. dollars. Variable Interest Entities — The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Cash and Cash Equivalents — We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Inventory — We hold aircraft engine modules, spare parts and used material inventory for trading and to support operations. Inventory is carried at the lower of cost or net realizable value on our balance sheet. 13 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Deferred Financing Costs — Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of $ 30.9 million and $ 43.0 million as of September 30, 2022 and December 31, 2021, respectively, are recorded as a component of debt in the Consolidated Balance Sheets. We also have unamortized deferred revolver fees related to our revolving debt of $ 5.6 million and $ 2.4 million as of September 30, 2022 and December 31, 2021, respectively, which are included in Other assets in the Consolidated Balance Sheets. Amortization expense was $ 3.5 million an d $ 13.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 15.2 million and $ 17.1 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in Interest expense in the Consolidated Statements of Operations. Revenues Operating Leases —We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received. Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee. Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues. Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period. For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable lease intangible. Finance Leases —From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the date of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received. Asset sales revenue —Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From time to time, the Company may assign the related lease agreements to the customer as part of the sale of these asset s. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. See Note 10 for additional information. Aerospace Products revenue —Aerospace Products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. Leasing Arrangements — At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are included in Other assets and Other liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Other assets and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets. 14 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets , for both operating and finance leases , are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method. Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs. We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred . Concentration of Credit Risk — We are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing ongoing credit evaluations and, when deemed necessary, enter into collateral arrangements. During the three and nine months ended September 30, 2022, no customer accounted for more than 10% of total revenue. During the three and nine months ended September 30, 2021, one customer in the Aviation Leasing segment accounted for approximately 14 % and 14 % of total revenue, respectively. As of September 30, 2022, there were two customers in the Aviation Leasing segment that represented 28 % and 12 % of total Accounts receivable, net. As of December 31, 2021, Accounts receivable from two customers in the Aviation Leasing segment represented 51 % and 18 % of total Accounts receivable, net. As of September 30, 2022 and December 31, 2021, no other customers in other segments represented more than 10% of total Accounts receivable, net. We maintain cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts. Allowance for Doubtful Accounts — We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. The allowance for doubtful accounts was $ 55.0 million and $ 16.9 million as of September 30, 2022 and December 31, 2021, respectively. There was no provision for credit losses and $ 1.5 million of provision for credit losses for the three months ended September 30, 2022 and 2021, respectively. There were provisions for credit losses of $ 47.1 million and $ 0.8 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in Operating expenses in the Consolidated Statements of Operations. Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the first quarter of 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines during the first quarter of 2022 and recognized approximately $ 47.1 million in provision for credit losses during the nine months ended September 30, 2022. Our allowance for doubtful accounts at September 30, 2022 includes all accounts receivable exposure to Russian and Ukrainian customers. Comprehensive Income (Loss) — Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for fair value changes for pensions and other postretirement benefits of discontinued operations, and other comprehensive income related to cash flow hedges of our equity method investees of discontinued operations. These changes are also recorded in Accumulated other comprehensive loss in our Consolidated Balance Sheets. The cash flow impact of derivative contracts held by the equity method investees that are not designated as hedging instruments is recognized in Equity in losses (earnings) in unconsolidated entities in our Consolidated Statements of Cash Flows, and the cash flow impact of commodity derivatives held by our consolidated subsidiaries is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows. Other Assets— Other assets is primarily comprised of lease incentives of $ 35.5 million and $ 46.9 million, purchase deposits of $ 28.6 million and $ 13.7 million, prepaid expenses of $ 3.5 million and $ 4.0 million, notes receivable of $ 56.0 million and $ 22.4 million, maintenance right assets of $ 12.4 million and $ 5.1 million, operating lease right-of-use assets, net of $ 3.2 million and $ 3.8 million, and finance leases, net of $ 7.1 million and $ 7.6 million as of September 30, 2022 and December 31, 2021, respectively. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and recognized approximately $ 7.5 million in amortization for the remaining lease incentives during the three and nine months ended September 30, 2022. Dividends— Dividends are recorded if and when declared by the Board of Directors. For the three months ended September 30, 2022 and 2021, the Board of Directors declared cash dividends of $ 0.30 and $ 0.33 per common share, respectively. For the nine months ended September 30, 2022 and 2021, the Board of Directors declared cash dividends of $ 0.96 and $ 0.99 per common share, respectively. 15 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Additionally, in the quarters ended September 30, 2022 and 2021, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares of $ 0.52 , $ 0.50 and $ 0.52 per share, respectively. Recent Accounting Pronouncements — In July 2021, the FASB issued ASU 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments . This ASU requires lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if (i) the lease would have been classified as a sales-type lease or a direct financing lease under Topic 842 and (ii) the lessor would have otherwise recognized a day-one loss. This standard is effective for all reporting periods beginning after December 15, 2021. We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements. 3. DISCONTINUED OPERATIONS FTAI Infrastructure Inc. (“FTAI Infrastructure”) Spin-Off On April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company’s infrastructure business held by FTAI Infrastructure (a wholly owned subsidiary of the Company). The spin-off was effected as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company’s common shares as of July 21, 2022. The distribution was completed on August 1, 2022. Under ASC 205-20, Presentation of Financial Statements – Discontinued Operations , the spin-off met the criteria to be reported as a discontinued operation. Therefore, FTAI Infrastructure is presented as a discontinued operation within FTAI’s financial statements for all periods prior to August 1, 2022. FTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company’s previously held interests in the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-level debt of those entities. In connection with the spin-off, FTAI Infrastructure paid a dividend of $ 730.3 million to the Company. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $ 200.0 million of its 6.50 % senior unsecured notes due 2025, and approximately $ 175.0 million of the outstanding borrowings under its revolving credit facility. FTAI retained the aviation business and certain other assets, and FTAI’s remaining outstanding corporate indebtedness. In connection with the spin-off, the Company and FIG LLC (the “Manager”) assigned the Company’s then-existing management agreement to FTAI Infrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement. The Company and certain of its subsidiaries executed a new management agreement with the Manager. The new management agreement has an initial term of six years. The Manager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements with the Manager, which were assigned to FTAI Infrastructure. Prior to the merger described below, our Manager will remain entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they exist today. Following the merger, the Company will enter into a Services and Profit Sharing Agreement (the “Services and Profit Sharing Agreement”), with a subsidiary of the Company and Fortress Worldwide Transportation and Infrastructure Master GP LLC (“Master GP”), pursuant to which Master GP will be entitled to incentive allocations on substantially similar terms as the previous arrangements. The Company is pursuing a merger transaction with a subsidiary of the Company pursuant to which the Company will become a wholly-owned subsidiary of a company organized under the laws of the Cayman Islands and shareholders of the Company would become shareholders of the Cayman Islands entity. This merger transaction will be subject to approval by holders of the Company’s common shares. Critical Accounting Policies Revenue Recognition Revenues of discontinued operations consist of the following revenue streams: Terminal Services Revenues —Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. The Company’s performance of service and right to invoice corresponds with the value delivered to our customers. Revenues are typically invoiced and paid on a monthly basis. Rail Revenues —Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and storage. Switching revenues are derived from the performance of switching services, which involve the movement of cars from one point to another within the limits of an individual plant, industrial area, or a rail yard. Switching revenues are recognized as the services are performed, and the services are generally completed on the same day they are initiated. Interline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other carriers. We record revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned or controlled by us on a net basis. Interline revenues are recognized as the transportation movements occur. 16 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Ancillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the detention of cars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue is earned for the provision of storage of shippers’ railcars and is generally recognized on a per day, per car basis, as the storage services are provided. Lease Income —Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement. Other Revenue —Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the handling and storage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. Our performance of service and right to invoice corresponds with the value delivered to our customers. Revenues for the sale of raw materials relate to contracts that contain performance obligations to deliver the product over the term of the contract. The revenues are recognized when the control of the product is transferred to the customer, based on the volume delivered and the price within the contract. Other revenues are typically invoiced and paid on a monthly basis. Additionally, other revenue consists of revenue related to derivative trading activities and also includes revenue related to providing roadside assistance services to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance obligation is satisfied by completing a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day payment terms. Variable Interest Entity At December 31, 2021, we held an approximately 98 % economic interest, and a 100 % voting interest in Delaware River Partners LLC (“DRP”). DRP was solely reliant on us to finance its activities and therefore was a VIE. We concluded that we were the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the tables below. Total VIE assets of DRP were $ 316.5 million and total VIE liabilities were $ 32.6 million as of December 31, 2021. Financial Information of Discontinued Operations The following table summarizes the significant line items pertaining to discontinued operations included in Net loss attributable to shareholders for the three and nine months ended September 30, 2022 and 2021, respectively, in the Consolidated Statements of Operations: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenues Total revenues $ 27,993 $ 36,788 $ 140,009 $ 72,674 Expenses Operating expenses 12,365 30,865 92,478 64,747 Cost of sales 4,920 1,222 12,732 1,459 General and administrative expenses 466 743 2,694 2,711 Acquisition and transaction expenses 3,813 547 13,971 546 Management fees and incentive allocation to affiliate 908 3,829 8,134 11,244 Depreciation and amortization 6,004 17,131 40,319 38,900 Interest expense 2,160 4,404 15,105 9,396 Other expense 7,641 9,957 47,765 15,625 Losses before income taxes ( 10,284 ) ( 31,910 ) ( 93,189 ) ( 71,954 ) Provision for (benefit from) income taxes 4,498 ( 979 ) 8,227 ( 2,789 ) Net loss from discontinued operations, net of income taxes ( 14,782 ) ( 30,931 ) ( 101,416 ) ( 69,165 ) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries ( 2,871 ) ( 7,363 ) ( 18,817 ) ( 18,949 ) Net loss attributable to shareholders ( 11,911 ) ( 23,568 ) ( 82,599 ) ( 50,216 ) The following table summarizes the carrying value of the major classes of assets and liabilities of discontinued operations as of December 31, 2021: 17 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) December 31, 2021 Assets Cash and cash equivalents $ 49,872 Restricted cash 251,983 Accounts receivable, net 50,301 Leasing equipment, net 36,012 Operating lease right-of-use assets, net 71,547 Property, plant and equipment, net 1,517,594 Investments 54,408 Intangible assets, net 67,737 Goodwill 257,137 Other assets 85,710 Total assets of discontinued operations 2,442,301 Liabilities Accounts payable and accrued liabilities 115,634 Debt, net 718,624 Operating lease liabilities 70,404 Other liabilities 75,593 Total liabilities of discontinued operations 980,255 The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for all periods presented. The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items of discontinued operations for each period presented: Nine Months Ended September 30, 2022 2021 Operating activities: Equity in losses of unconsolidated entities $ 46,601 $ 8,810 Depreciation and amortization 40,319 38,900 Equity-based compensation 2,623 3,281 Investing activities: Acquisition of property, plant and equipment $ ( 129,920 ) $ ( 97,506 ) Acquisition of business, net of cash acquired ( 3,819 ) ( 627,399 ) Investment in unconsolidated entities 7,954 ( 54,499 ) Proceeds from sale of property, plant and equipment 5,289 — Non-cash change in equity method investment ( 182,963 ) ( 77,518 ) Conversion of interests in unconsolidated entities ( 21,302 ) — The Company accounted for Long Ridge Terminal LLC, included in liabilities of discontinued operations at December 31, 2021 included above, using the equity method of accounting. Summarized financial data for Long Ridge Terminal LLC are shown in the following tables for the periods in which the Company held the equity investment. 18 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) December 31, 2021 Balance Sheet Assets Cash and cash equivalents $ 2,932 Restricted cash 32,469 Accounts receivable, net 17,896 Property, plant, and equipment, net 764,607 Intangible assets, net 4,940 Goodwill 89,390 Inventory, net 1,691 Other assets 12,750 Total assets $ 926,675 Liabilities Accounts payable and accrued liabilities $ 16,121 Debt, net 604,261 Derivative liabilities 339,033 Other liabilities 2,246 Total liabilities 961,661 Equity Shareholders’ equity ( 1,035 ) Accumulated deficit ( 33,951 ) Total equity ( 34,986 ) Total liabilities and equity $ 926,675 Three Months Ended September 30, Nine Months Ended September 30, Income Statement 2022 2021 2022 2021 Total revenues $ 156 $ 21,071 $ 15,199 $ 38,341 Expenses Operating expenses 4,337 5,581 36,693 16,568 Depreciation and amortization 4,383 5,891 29,381 13,327 Interest expense 4,580 547 30,622 1,493 Total expenses 13,300 12,019 96,696 31,388 Total other expense ( 21 ) ( 16,614 ) ( 234 ) ( 25,440 ) Net loss $ ( 13,165 ) $ ( 7,562 ) $ ( 81,731 ) $ ( 18,487 ) 19 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 4. LEASING EQUIPMENT, NET Leasing equipment, net is summarized as follows: September 30, 2022 December 31, 2021 Leasing equipment $ 2,179,728 $ 2,312,040 Less: Accumulated depreciation ( 487,546 ) ( 456,403 ) Leasing equipment, net $ 1,692,182 $ 1,855,637 Economic sanctions and export controls against Russia and Russia’s aviation industry have been imposed due to its invasion of Ukraine during the nine months ended September 30, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. As of September 30, 2022, four aircraft and two engines were still located in Ukraine and eight aircraft and seventeen engines were still located in Russia. We determined that it is unlikely that we will regain possession of the aircraft that have not yet been recovered from Ukraine and Russia. As a result, we recognized an impairment charge totaling $ 120.0 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we do not expect to recover from Ukraine and Russia. Additionally, we identified certain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $ 8.2 million, net of redelivery compensation during the nine months ended September 30, 2022. The following table presents information related to our acquisitions and dispositions of aviation leasing equipment during the nine months ended September 30, 2022: Acquisitions: Aircraft 23 Engines 45 Dispositions: Aircraft 5 Engines 50 Depreciation expense for leasing equipment is summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Depreciation expense for leasing equipment $ 34,704 $ 36,130 $ 115,074 $ 106,172 5. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net is summarized as follows: September 30, 2022 December 31, 2021 Construction in progress 45,621 36,777 Furniture and fixtures 1,445 1,374 Other 1,410 533 48,476 38,684 Less: Accumulated depreciation ( 807 ) ( 421 ) Property, plant and equipment, net $ 47,669 $ 38,263 During the nine months ended September 30, 2022, we added property, plant and equipment of $ 9.8 million, primarily consisting of $ 8.8 million for the build out of the well intervention tower for the Pride vessel and $ 0.9 million for the purchase of additional aviation module containers. Depreciation expense for property, plant and equipment is summarized as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Depreciation expense $ 149 $ 107 $ 387 $ 202 20 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 6. INVESTMENTS The following table presents the ownership interests and carrying values of our investments: Carrying Value Investment Ownership Percentage September 30, 2022 December 31, 2021 Advanced Engine Repair JV Equity method 25 % $ 20,439 $ 21,317 Falcon MSN 177 LLC Equity method 50 % 1,841 1,600 $ 22,280 $ 22,917 We did not recognize any other-than-temporary impairments for the three and nine months ended September 30, 2022 and 2021. The following table presents our proportionate share of equity in income (losses): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Advanced Engine Repair JV $ ( 314 ) $ ( 369 ) $ ( 879 ) $ ( 1,050 ) Falcon MSN 177 LLC ( 44 ) — 754 — Total $ ( 358 ) $ ( 369 ) $ ( 125 ) $ ( 1,050 ) Equity Method Investments Advanced Engine Repair JV In December 2016, we invested $ 15 million for a 25% interest in an advanced engine repair joint venture. We focus on developing new cost savings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment. In August 2019, we expanded the scope of our joint venture and invested an additional $ 13.5 million and maintained a 25% interest. Falcon MSN 177 LLC In November 2021, we invested $ 1.6 million for a 50 % interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000 aircraft. Falcon MSN 177 LLC leases the aircraft to charter operators on aircraft, crew, maintenance and insurance contracts. We account for our investment in Falcon as an equity method investment as we have significant influence through our interest. 7. INTANGIBLE ASSETS AND LIABILITIES, NET Intangible assets and liabilities, net are summarized as follows: September 30, 2022 December 31, 2021 Intangible assets Acquired favorable lease intangibles $ 59,789 $ 67,013 Less: Accumulated amortization ( 30,373 ) ( 36,051 ) Total intangible assets, net $ 29,416 $ 30,962 Intangible liabilities Acquired unfavorable lease intangibles $ 13,114 $ 14,795 Less: Accumulated amortization ( 2,216 ) ( 6,068 ) Acquired unfavorable lease intangibles, net $ 10,898 $ 8,727 Intangible assets and liabilities are all held within the Aviation Leasing segment. Intangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities in the Consolidated Balance Sheets. 21 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Amortization of intangible assets and liabilities is as follows: Classification in Consolidated Statements of Operations Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Lease intangibles Revenues $ 3,291 $ 1,266 $ 10,259 $ 3,216 As of September 30, 2022, estimated net annual amortization of intangible assets and liabilities is as follows: Remainder of 2022 $ 3,323 2023 8,398 2024 4,848 2025 1,962 2026 519 Thereafter ( 532 ) Total $ 18,518 8. DEBT, NET Our debt, net is summarized as follows: September 30, 2022 December 31, 2021 Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings Loans payable Revolving Credit Facility (1) $ — (i) Base Rate + 1.75 %; or (ii) Adjusted Term SOFR Rate + 2.75 % 9/20/25 $ 189,473 2021 Bridge Loans — (i) Base Rate + 1.75 %; or (ii) Adjusted Term SOFR Rate + 2.75 % 12/15/22 100,527 Total loans payable — 290,000 Bonds payable Senior Notes due 2025 (2) 653,269 6.50 % 10/1/25 852,198 Senior Notes due 2027 400,000 9.75 % 8/1/27 400,000 Senior Notes due 2028 (3) 1,002,174 5.50 % 5/1/28 1,002,416 Total bonds payable 2,055,443 2,254,614 Debt 2,055,443 2,544,614 Less: Debt issuance costs ( 30,894 ) ( 43,027 ) Total debt, net $ 2,024,549 $ 2,501,587 Total debt due within one year $ — $ 100,527 ________________________________________________________ (1) Requires a quarterly commitment fee at a rate of 0.50 % on the average daily unused portion, as well as customary letter of credit fees and agency fees. (2) Includes an unamortized discount of $ 1,431 and $ 3,509 at September 30, 2022 and December 31, 2021, respectively, and an unamortized premium of $ 4,700 and $ 5,707 at September 30, 2022 and December 31, 2021, respectively. (3) Includes an unamortized premium of $ 2,174 and $ 2,416 at September 30, 2022 and December 31, 2021, respectively. On September 20, 2022, the Company amended its Revolving Credit Facility by executing a Second Amended and Restated Credit Agreement (the “Amendment”) to the Amended and Restated Credit Agreement, dated as of December 2, 2021 (as amended by Amendment No. 1, dated as of April 28, 2022). The Amendment provides for revolving loans to be made available to the Company in an aggregate principal amount of up to $ 225.0 million, of which up to $ 25.0 million may be utilized for the issuance of letters of credit. In conjunction with the spin-off of FTAI Infrastructure, the Company repaid all outstanding borrowings under its 2021 bridge loans and $ 200.0 million of its 6.50 % senior unsecured notes due 2025, and approximately $ 175.0 million of the outstanding 22 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) borrowings under its revolving credit facility. The Company recorded a loss on extinguishment of debt of $ 19.9 million as a result of these paydowns. We were in compliance with all debt covenants as of September 30, 2022. 9. FAIR VALUE MEASUREMENTS Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs. • Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability. The valuation techniques that may be used to measure fair value are as follows: • Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. • Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts. • Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Our cash and cash equivalents consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy. Except as discussed below, our financial instruments other than cash and cash equivalents consist principally of accounts receivable, notes receivable, accounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles. The fair values of our notes payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified as Level 2 within the fair value hierarchy: September 30, 2022 December 31, 2021 Senior Notes due 2025 611,806 881,408 Senior Notes due 2027 391,920 448,848 Senior Notes due 2028 805,430 1,019,470 The fair values of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy. We measure the fair value of certain assets on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets, property, plant and equipment, leasing equipment and inventory. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets. 10. REVENUES We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue. Revenues are within the scope of ASC 842, Leases and ASC 606, Revenue from contracts with customers , unless otherwise noted. We have elected to exclude sales and other similar taxes from revenues. 23 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) During the three months ended September 30, 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in Revenues in the Consolidated Statement of Operations for the three months ended September 30, 2022 and are accounted for in accordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations for the three months ended September 30, 2022. Sales transactions of aircraft and engines prior to the three months ended September 30, 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets. Generally, assets sold were under leasing arrangements with customers prior to sales and are included in Leasing equipment, net, on the Consolidated Balance Sheets. Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 40,273 $ — $ 9,806 $ 50,079 Maintenance revenue 35,507 — — 35,507 Finance lease income 119 — — 119 Asset sales revenue 85,488 — — 85,488 Aerospace products revenue — 53,401 — 53,401 Other revenue 3,461 — 2,310 5,771 Total revenues $ 164,848 $ 53,401 $ 12,116 $ 230,365 Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 40,392 $ — $ 2,386 $ 42,778 Maintenance revenue 40,252 — — 40,252 Finance lease income 439 — — 439 Aerospace products revenue — 7,730 — 7,730 Other revenue 5,125 — 2,850 7,975 Total revenues $ 86,208 $ 7,730 $ 5,236 $ 99,174 Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 111,316 $ — $ 17,515 $ 128,831 Maintenance revenue 112,171 — — 112,171 Finance lease income 332 — — 332 Asset sales revenue 85,488 — — 85,488 Aerospace products revenue — 94,211 — 94,211 Other revenue 8,687 — 4,400 13,087 Total revenues $ 317,994 $ 94,211 $ 21,915 $ 434,120 24 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 120,389 $ — $ 5,518 $ 125,907 Maintenance revenue 87,763 — — 87,763 Finance lease income 1,285 — — 1,285 Aerospace products revenue — 13,284 — 13,284 Other revenue 5,761 — 3,352 9,113 Total revenues $ 215,198 $ 13,284 $ 8,870 $ 237,352 Presented below are the contracted minimum future annual revenues to be received under existing operating and finance leases: September 30, 2022 Remainder of 2022 $ 37,708 2023 111,850 2024 70,428 2025 43,890 2026 24,835 Thereafter 65,820 Total $ 354,531 11. INCOME TAXES The current and deferred components of the income tax provision (benefit) included in the Consolidated Statements of Operations are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Current: Federal $ 247 $ 368 $ 582 $ 808 State and local ( 442 ) 95 69 213 Foreign 106 31 174 ( 25 ) Total current provision ( 89 ) 494 825 996 Deferred: Federal 2,915 — 4,517 — State and local 304 — 610 — Foreign 1,059 ( 9 ) 1,405 ( 172 ) Total deferred provision (benefit) 4,278 ( 9 ) 6,532 ( 172 ) Provision for income taxes $ 4,189 $ 485 $ 7,357 $ 824 We are taxed as a flow-through entity for U.S. income tax purposes and our taxable income or loss generated is the responsibility of our owners. Taxable income or loss generated by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business. Our effective tax rate differs from the U.S. federal tax rate of 21 % primarily due to a significant portion of our income not being subject to U.S. corporate tax rates, or being deemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates. As of and for the nine months ended September 30, 2022, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2018. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date of September 30, 2022. 25 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 12. MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS In connection with the spin-off of FTAI Infrastructure on August 1, 2022, we assigned our then-existing management and advisory agreement, dated as of May 20, 2015, with our Manager to FTAI Infrastructure. On July 31, 2022, we entered into a new management and advisory agreement (the “Management Agreement”), by and among FTAI, FTAI Finance Holdco Ltd. (a wholly owned subsidiary of the Company), and each of the subsidiaries that are party thereto and the Manager, with substantially similar terms and conditions as the existing management and advisory agreement. The Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto. In addition, the Manager may be reimbursed for various expenses incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities. Additionally, we have entered into certain incentive allocation arrangements with Master GP, which owns approximately 0.05 % of the Partnership and is the general partner of the Partnership. The Manager is entitled to a management fee, incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below) and reimbursement of certain expenses. The management fee is determined by taking the average value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with GAAP at the end of the two most recently completed months multiplied by an annual rate of 1.50 % and is payable monthly in arrears in cash. The income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the immediately preceding calendar quarter (the “Income Incentive Allocation”). For this purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors. Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to the Master GP during the relevant quarter. One of our subsidiaries allocates and distributes to the Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income in each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2 % for such quarter ( 8 % annualized); (2) 100 % of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2 % but does not exceed 2.2223 % for such quarter; and (3) 10 % of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223 % for such quarter. These calculations will be prorated for any period of less than three months. Capital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10% of our pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to the Master GP. The following table summarizes the management fees, income incentive allocation and capital gains incentive allocation from continuing operations: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Management fees $ 4 $ 16 $ 4 $ 704 Income incentive allocation — — — — Capital gains incentive allocation — — — — Total $ 4 $ 16 $ 4 $ 704 We pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The expenses required to be paid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Manager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used for us, costs to obtain liability insurance to indemnify our directors and officers and the compensation and expenses of our transfer agent. 26 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) We pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants. The Manager is responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses; we do not reimburse the Manager for these expenses. The following table summarizes our reimbursements to the Manager from continuing operations: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Classification in the Consolidated Statements of Operations: General and administrative $ 1,466 $ 1,184 $ 4,933 $ 3,427 Acquisition and transaction expenses 154 617 883 1,588 Total $ 1,620 $ 1,801 $ 5,816 $ 5,015 If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee. The termination fee is equal to the amount of the management fee during the 12 months immediately preceding the date of the termination. In addition, an Incentive Allocation Fair Value Amount will be distributable to the Master GP if the Master GP is removed due to the termination of the Management Agreement in certain specified circumstances. The Incentive Allocation Fair Value Amount is an amount equal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to the Master GP if our assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments). Upon the successful completion of an offering of our common shares or other equity securities (including securities issued as consideration in an acquisition), we grant the Manager options to purchase common shares in an amount equal to 10% of the number of common shares being sold in the offering (or if the issuance relates to equity securities other than our common shares, options to purchase a number of common shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a common share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a common share as of the date of the equity issuance if it relates to equity securities other than our common shares). Any ultimate purchaser of common shares for which such options are granted may be an affiliate of Fortress Investment Group LLC (“Fortress”). The following table summarizes amounts due to the Manager, which are included within Accounts payable and accrued liabilities in the Consolidated Balance Sheets: September 30, 2022 December 31, 2021 Accrued management fees $ 386 $ 1,495 Other payables 1,020 2,283 13. SEGMENT INFORMATION During the third quarter of 2022, as a result of the spin-off of FTAI Infrastructure effective on August 1, 2022, the Company reevaluated its operating segments. The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment develops, manufactures, repairs, and sells aircraft engines and aftermarket components for aircraft engines. The interim periods will disclose the reportable segments under this basis with prior periods restated to reflect the change in accordance with the requirements of ASC 280. Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases. Additionally, during the third quarter of 2022, the Company changed its measure of segment profit to include the add back of dividends on preferred shares in Adjusted EBITDA. Prior period Adjusted EBITDA amounts and the reconciliation to net income (loss) attributable to shareholders from continuing operations have been recast to reflect this change in the measure of segment profit. 27 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 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 Chief Executive Officer is our CODM. Segment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources. The CODM evaluates performance for each reportable segment primarily based on Adjusted EBITDA. Historically, the CODM’s assessment of segment performance included asset information. During the third quarter of 2022, the CODM determined that segment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the tables below as it is not provided to or reviewed by our CODM. 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, dividends on preferred shares 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. We believe that net income (loss) attributable to shareholders from continuing operations, as defined by GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with GAAP. 28 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following tables set forth certain information for each reportable segment: I. For the Three Months Ended September 30, 2022 Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 164,848 $ 53,401 $ 12,116 $ 230,365 Expenses Operating expenses 10,533 3,491 13,369 27,393 Cost of sales 64,855 31,093 — 95,948 General and administrative — — 3,354 3,354 Acquisition and transaction expenses 247 15 2,586 2,848 Management fees and incentive allocation to affiliate — — 4 4 Depreciation and amortization 32,728 77 2,048 34,853 Asset impairment 4,495 — — 4,495 Interest expense — — 40,171 40,171 Total expenses 112,858 34,676 61,532 209,066 Other income (expense) Equity in losses of unconsolidated entities ( 45 ) ( 313 ) — ( 358 ) Gain on sale of assets, net — — — — Loss on extinguishment of debt — — ( 19,861 ) ( 19,861 ) Other income (expense) 42 — ( 1,080 ) ( 1,038 ) Total other expense ( 3 ) ( 313 ) ( 20,941 ) ( 21,257 ) Income (loss) from continuing operations before income taxes 51,987 18,412 ( 70,357 ) 42 Provision for income taxes 926 2,586 677 4,189 Net income (loss) from continuing operations 51,061 15,826 ( 71,034 ) ( 4,147 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 6,791 6,791 Net income (loss) attributable to shareholders from continuing operations $ 51,061 $ 15,826 $ ( 77,825 ) $ ( 10,938 ) 29 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 95,994 $ 18,560 $ ( 5,691 ) $ 108,863 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities ( 358 ) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 241 Less: Interest expense and dividends on preferred shares ( 46,962 ) Less: Depreciation and amortization expense ( 41,329 ) Less: Incentive allocations — Less: Asset impairment charges ( 4,495 ) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations ( 19,861 ) Less: Acquisition and transaction expenses ( 2,848 ) Less: Equity-based compensation expense — Less: Provision for income taxes ( 4,189 ) Net loss attributable to shareholders from continuing operations $ ( 10,938 ) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 250 $ — $ — $ 250 Asia 23,496 1,200 12,116 36,812 Europe 41,869 15,511 — 57,380 North America 90,183 36,690 — 126,873 South America 9,050 — — 9,050 Total $ 164,848 $ 53,401 $ 12,116 $ 230,365 30 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) II. For the Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 317,994 $ 94,211 $ 21,915 $ 434,120 Expenses Operating expenses 72,135 8,094 27,968 108,197 Cost of sales 64,855 55,284 — 120,139 General and administrative — — 11,821 11,821 Acquisition and transaction expenses 624 15 7,701 8,340 Management fees and incentive allocation to affiliate — — 4 4 Depreciation and amortization 109,147 178 6,136 115,461 Asset impairment 128,171 — — 128,171 Interest expense — — 132,197 132,197 Total expenses 374,932 63,571 185,827 624,330 Other income (expense) Equity in earnings (losses) of unconsolidated entities 753 ( 878 ) — ( 125 ) Gain on sale of assets, net 61,371 18,562 — 79,933 Loss on extinguishment of debt — — ( 19,861 ) ( 19,861 ) Other income (expense) 245 — ( 37 ) 208 Total other income (expense) 62,369 17,684 ( 19,898 ) 60,155 Income (loss) before income taxes 5,431 48,324 ( 183,810 ) ( 130,055 ) Provision for income taxes 2,116 5,055 186 7,357 Net income (loss) 3,315 43,269 ( 183,996 ) ( 137,412 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 20,373 20,373 Net income (loss) attributable to shareholders from continuing operations $ 3,315 $ 43,269 $ ( 204,369 ) $ ( 157,785 ) 31 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 273,788 $ 48,685 $ ( 17,915 ) $ 304,558 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities ( 125 ) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 165 ) Less: Interest expense and dividends on preferred shares ( 152,570 ) Less: Depreciation and amortization expense ( 145,754 ) Less: Incentive allocations — Less: Asset impairment charges ( 128,171 ) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations ( 19,861 ) Less: Acquisition and transaction expenses ( 8,340 ) Less: Equity-based compensation expense — Less: Provision for income taxes ( 7,357 ) Net loss attributable to shareholders from continuing operations $ ( 157,785 ) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 250 $ 850 $ — $ 1,100 Asia 60,111 2,601 21,915 84,627 Europe 94,751 26,410 — 121,161 North America 130,362 64,350 — 194,712 South America 32,520 — — 32,520 Total $ 317,994 $ 94,211 $ 21,915 $ 434,120 32 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) III. For the Three Months Ended September 30, 2021 Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 86,208 $ 7,730 $ 5,236 $ 99,174 Expenses Operating expenses 7,282 1,774 6,283 15,339 Cost of sales — 5,367 — 5,367 General and administrative — — 3,679 3,679 Acquisition and transaction expenses 234 — 6,349 6,583 Management fees and incentive allocation to affiliate — — 16 16 Depreciation and amortization 34,181 40 2,016 36,237 Asset impairment 859 — — 859 Interest expense — — 50,096 50,096 Total expenses 42,556 7,181 68,439 118,176 Other income (expense) Equity in losses of unconsolidated entities — ( 369 ) — ( 369 ) Gain on sale of assets, net 10,961 1,724 — 12,685 Other expense ( 1,341 ) — — ( 1,341 ) Total other income 9,620 1,355 — 10,975 Income (loss) before income taxes 53,272 1,904 ( 63,203 ) ( 8,027 ) Provision for (benefit from) income taxes 595 ( 110 ) — 485 Net income (loss) 52,677 2,014 ( 63,203 ) ( 8,512 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 6,791 6,791 Net income (loss) attributable to shareholders from continuing operations $ 52,677 $ 2,014 $ ( 69,994 ) $ ( 15,303 ) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders: 33 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 94,990 $ 2,001 $ ( 4,742 ) $ 92,249 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in income of unconsolidated entities ( 369 ) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 312 Less: Interest expense and dividends on preferred shares ( 56,887 ) Less: Depreciation and amortization expense ( 42,681 ) Less: Incentive allocations — Less: Asset impairment charges ( 859 ) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations — Less: Acquisition and transaction expenses ( 6,583 ) Less: Equity-based compensation expense — Less: Provision for income taxes ( 485 ) Net loss attributable to shareholders from continuing operations $ ( 15,303 ) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Asia $ 36,420 $ — $ 5,236 $ 41,656 Europe 35,709 — — 35,709 North America 10,422 7,730 — 18,152 South America 3,657 — — 3,657 Total $ 86,208 $ 7,730 $ 5,236 $ 99,174 34 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) IV. For the Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 215,198 $ 13,284 $ 8,870 $ 237,352 Expenses Operating expenses 14,177 3,519 16,495 34,191 Cost of sales — 8,577 — 8,577 General and administrative — — 9,618 9,618 Acquisition and transaction expenses 804 — 11,822 12,626 Management fees and incentive allocation to affiliate — — 704 704 Depreciation and amortization 100,381 40 5,953 106,374 Asset impairment 3,048 — — 3,048 Interest expense — — 115,598 115,598 Total expenses 118,410 12,136 160,190 290,736 Other income (expense) Equity in losses of unconsolidated entities — ( 1,050 ) — ( 1,050 ) Gain on sale of assets, net 15,751 1,716 — 17,467 Loss on extinguishment of debt — — ( 3,254 ) ( 3,254 ) Other expense ( 717 ) — — ( 717 ) Total other income (expense) 15,034 666 ( 3,254 ) 12,446 Income (loss) before income taxes 111,822 1,814 ( 154,574 ) ( 40,938 ) Provision for (benefit from) income taxes 909 ( 11 ) ( 74 ) 824 Net income (loss) 110,913 1,825 ( 154,500 ) ( 41,762 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 17,967 17,967 Net income (loss) attributable to shareholders from continuing operations $ 110,913 $ 1,825 $ ( 172,467 ) $ ( 59,729 ) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 237,404 $ 1,998 $ ( 17,947 ) $ 221,455 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities ( 1,050 ) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 906 Less: Interest expense and dividends on preferred shares ( 133,565 ) Less: Depreciation and amortization expense ( 127,723 ) Less: Incentive allocations — Less: Asset impairment charges ( 3,048 ) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations ( 3,254 ) Less: Acquisition and transaction expenses ( 12,626 ) Less: Equity-based compensation expense — Less: Provision for income taxes ( 824 ) Net loss attributable to shareholders from continuing operations $ ( 59,729 ) 35 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 235 $ — $ — $ 235 Asia 93,925 — 8,870 102,795 Europe 88,296 812 — 89,108 North America 26,630 12,472 — 39,102 South America 6,112 — — 6,112 Total $ 215,198 $ 13,284 $ 8,870 $ 237,352 V. Location of Long-Lived Assets The following tables sets forth summarized geographic location of property, plant and equipment and leasing equipment, net: September 30, 2022 Total Property, plant and equipment and leasing equipment, net Africa $ 17,776 Asia 401,057 Europe 602,833 North America 393,268 South America 324,917 Total $ 1,739,851 December 31, 2021 Total Property, plant and equipment and leasing equipment, net Asia $ 543,610 Europe 839,555 North America 265,203 South America 245,532 Total $ 1,893,900 36 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 14. EARNINGS PER SHARE AND EQUITY Basic earnings per common share (“EPS”) is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of common shares outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding, plus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method. The calculation of basic and diluted EPS is presented below: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2022 2021 2022 2021 Net loss from continuing operations $ ( 4,147 ) $ ( 8,512 ) $ ( 137,412 ) $ ( 41,762 ) Net loss from discontinued operations, net of income taxes ( 14,782 ) ( 30,931 ) ( 101,416 ) ( 69,165 ) Net loss $ ( 18,929 ) $ ( 39,443 ) $ ( 238,828 ) ( 110,927 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries: Continuing operations — — — — Discontinued operations ( 2,871 ) ( 7,363 ) ( 18,817 ) ( 18,949 ) Less: Dividends on preferred shares 6,791 6,791 20,373 17,967 Net loss attributable to shareholders $ ( 22,849 ) $ ( 38,871 ) $ ( 240,384 ) $ ( 109,945 ) Weighted Average Common Shares Outstanding - Basic (1) 99,378,771 88,277,897 99,372,016 86,787,072 Weighted Average Common Shares Outstanding - Diluted (1) 99,378,771 88,277,897 99,372,016 86,787,072 Loss per share: Basic Continuing operations $ ( 0.11 ) $ ( 0.17 ) $ ( 1.59 ) $ ( 0.69 ) Discontinued operations $ ( 0.12 ) $ ( 0.27 ) $ ( 0.83 ) $ ( 0.58 ) Diluted Continuing operations $ ( 0.11 ) $ ( 0.17 ) $ ( 1.59 ) $ ( 0.69 ) Discontinued operations $ ( 0.12 ) $ ( 0.27 ) $ ( 0.83 ) $ ( 0.58 ) ________________________________________________________ (1) Three and nine months ended September 30, 2022 and 2021 include participating securities which can be converted into a fixed amount of our shares. For the three months ended September 30, 2022 and 2021, 326,747 and 950,524 shares, respectively, and for the nine months ended September 30, 2022 and 2021, 654,693 and 940,254 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive. During the nine months ended September 30, 2022, we issue d 19,811 common shares to certain directors as compensation. 15. COMMITMENTS AND CONTINGENCIES In the normal course of business we, and our subsidiaries, may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. Within our offshore energy business, a lessee did not fulfill its obligation under its charter arrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $ 0.0 million to $ 3.3 million. Our maximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is remote. 16. SUBSEQUENT EVENTS On October 27, 2022, our Board of Directors declared a cash dividend on our common shares and eligible participating securities of $ 0.30 per share for the quarter ended September 30, 2022, payable on November 28, 2022 to the holders of record on November 14, 2022. 37 FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Additionally, on October 27, 2022, our Board of Directors also declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares of $ 0.52 , $ 0.50 and $ 0.52 per share, respectively, payable on December 15, 2022 to the holders of record on December 1, 2022. 38