FTAI INFRASTRUCTURE INC.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help you understand FTAI
Infrastructure Inc. (the "Company," "we," "our" or "us"). Our MD&A should be
read in conjunction with our unaudited consolidated and combined consolidated
financial statements and the accompanying notes, and with Part II, Item 1A,
"Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are in the business of acquiring, developing and operating assets and businesses that represent critical infrastructure for customers in the transportation and energy industries. We were formed onDecember 13, 2021 asFTAI Infrastructure LLC , aDelaware limited liability company and subsidiary ofFTAI Aviation Ltd. (previously Fortress Transportation and Infrastructure Investors LLC, "FTAI" or "Former Parent"). In connection with the spin-off,FTAI Infrastructure LLC converted intoFTAI Infrastructure Inc. , aDelaware corporation, and acquired all of the material assets and investments that comprised FTAI's infrastructure business ("FTAI Infrastructure"). OnAugust 1, 2022 (the "Spin-off Date"), FTAI distributed to the holders of FTAI common shares, one share ofFTAI Infrastructure Inc. common stock for each FTAI common share held by such shareholder at the close of business onJuly 21, 2022 and we became an independent, publicly-traded company trading on The Nasdaq Global Select Market under the symbol "FIP." Our operations consist of four primary business lines: (i) Railroad, (ii) Ports and Terminals, (iii) Power and Gas and (iv) Sustainability and Energy Transition. Our Railroad business primarily invests in and operates short line and regional railroads inNorth America . Our Ports and Terminals business, consisting of ourJefferson Terminal and Repauno segments, develops or acquires industrial properties in strategic locations that store and handle for third parties a variety of energy products, including crude oil, refined products and clean fuels. Through an equity method investment, our Power and Gas business develops and operates facilities, such as a 485 megawatt power plant at theLong Ridge terminal inOhio , that leverage the property's location and key attributes to generate incremental value. Our Sustainability and Energy Transition business focuses on investments in companies and assets that utilize green technology, produce sustainable fuels and products or enable customers to reduce their carbon footprint. We expect to continue to invest in such market sectors, and pursue additional investment opportunities in other infrastructure businesses and assets we believe to be attractive and meet our investment objectives. Our team focuses on acquiring a diverse group of long-lived assets or operating businesses that provide mission-critical services or functions to infrastructure networks and typically have high barriers to entry, strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. We believe that there are a large number of acquisition opportunities in our markets and that our Manager's expertise and business and financing relationships, together with our access to capital and generally available capital for infrastructure projects in today's marketplace, will allow us to take advantage of these opportunities. As ofMarch 31, 2023 , we had total consolidated assets of$2.4 billion and total temporary equity and equity of$0.8 billion . Operating Segments Prior to the third quarter of 2022, we operated as three reportable segments. During the third quarter of 2022, we reorganized our historical operating segments into five operating segments as described below. Additionally, during the third quarter of 2022, we modified our definition of Adjusted EBITDA to exclude the impact of interest costs on pension and other post-employment benefits ("OPEB") liabilities and dividends and accretion on redeemable preferred stock. During the first quarter of 2023 we modified our definition of Adjusted EBITDA to exclude the impact of other non-recurring items, such as severance expense. All segment data and related disclosures for earlier periods presented herein have been recast to reflect the new segment reporting structure. Our reportable segments represent strategic business units comprised of investments in different types of infrastructure assets. We have five reportable segments which operate in infrastructure businesses across several market sectors, all inNorth America . Our reportable segments are (i) Railroad, (ii)Jefferson Terminal , (iii) Repauno, (iv) Power and Gas and (v) Sustainability and Energy Transition. The Railroad segment is comprised of five freight railroads and one switching company that provide rail service to certain manufacturing and production facilities, in addition to KRS, a railcar cleaning operation.The Jefferson Terminal segment consists of a multi-modal crude oil and refined products terminal and other related assets. The Repauno segment consists of a 1,630-acre deep-water port located along theDelaware River with an underground storage cavern, a new multipurpose dock, a rail-to-ship transloading system and multiple industrial development opportunities. The Power and Gas segment is comprised of an equity method investment inLong Ridge , which is a 1,660-acre multi-modal terminal located along theOhio River with rail, dock, and multiple industrial development opportunities, including a power plant in operation. The Sustainability and Energy Transition segment is comprised of Aleon/Gladieux, Clean Planet, andCarbonFree , and all three investments are development stage businesses focused on sustainability and recycling. Corporate and Other primarily consists of unallocated corporate general and administrative expenses, management fees, debt and redeemable preferred stock. Additionally, Corporate and Other includes an operating company that provides roadside assistance services for the intermodal and over-the-road trucking industries and an investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers. 37 --------------------------------------------------------------------------------
Our Manager
On
Results of Operations
Adjusted EBITDA (Non-GAAP)
The chief operating decision maker ("CODM") utilizes Adjusted EBITDA as the key
performance measure. Adjusted EBITDA is not a financial measure in accordance
with U.S. generally accepted accounting principles ("U.S.GAAP"). This
performance measure provides the CODM with the information necessary to assess
operational performance, as well as make resource and allocation decisions. We
believe Adjusted EBITDA is a useful metric for investors and analysts for
similar purposes of assessing our operational performance.
Adjusted EBITDA is defined as net income (loss) attributable to stockholders or
Former Parent, adjusted (a) to exclude the impact of provision for (benefit
from) income taxes, equity-based compensation expense, acquisition and
transaction expenses, losses on the modification or extinguishment of debt and
capital lease obligations, changes in fair value of non-hedge derivative
instruments, asset impairment charges, incentive allocations, depreciation and
amortization expense, interest expense, interest and other costs on pension and
OPEB liabilities, dividends and accretion on redeemable preferred stock, and
other non-recurring items, (b) to include the impact of our pro-rata share of
Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of
equity in earnings (losses) of unconsolidated entities and the non-controlling
share of Adjusted EBITDA.
38
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Comparison of the three months ended months ended
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Lease income $ 743 $ 840 $ (97)
Rail revenues 40,568 34,686 5,882
Terminal services revenues 19,148 12,784 6,364
Roadside services revenues 17,850 - 17,850
Other revenue (1,815) (2,162) 347
Total revenues 76,494 46,148 30,346
Expenses
Operating expenses 65,162 38,068 27,094
General and administrative 3,201 2,430 771
Acquisition and transaction expenses 269 4,236 (3,967)
Management fees and incentive allocation to affiliate 2,982 4,161 (1,179)
Depreciation and amortization 20,135 16,996 3,139
Asset impairment 141 - 141
Total expenses 91,890 65,891 25,999
Other expense
Equity in earnings (losses) of unconsolidated entities 4,366 (22,043) 26,409
Loss on sale of assets, net (124) - (124)
Interest expense (23,250) (6,459) (16,791)
Other income (expense) 221 (459) 680
Total other expense (18,787) (28,961) 10,174
Loss from before income taxes (34,183) (48,704) 14,521
Provision for income taxes 1,729 1,584 145
Net loss (35,912) (50,288) 14,376
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
(9,893) (7,466) (2,427)
Less: Dividends and accretion on redeemable preferred stock 14,570 - 14,570
Net loss attributable to stockholders/Former Parent $ (40,589) $ (42,822) $ 2,233
39
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The following table sets forth a reconciliation of net loss attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net loss attributable to stockholders/Former Parent $ (40,589) $ (42,822) $ 2,233
Add: Provision for income taxes 1,729 1,584 145
Add: Equity-based compensation expense 895 709 186
Add: Acquisition and transaction expenses 269 4,236 (3,967)
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments 1,125 766 359
Add: Asset impairment charges 141 - 141
Add: Incentive allocations - - -
Add: Depreciation and amortization expense 20,135 16,996 3,139
Add: Interest expense 23,250 6,459 16,791
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)
8,190 5,407 2,783
Add: Dividends and accretion on redeemable preferred stock 14,570 - 14,570
Add: Interest and other costs on pension and OPEB liabilities 480 - 480
Add: Other non-recurring items (2) 1,288 - 1,288
Less: Equity in losses of unconsolidated entities (4,366) 22,043 (26,409)
Less: Non-controlling share of Adjusted EBITDA (3) (5,221) (3,816) (1,405)
Adjusted EBITDA (non-GAAP) $ 21,896 $ 11,562 $ 10,334 ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) net income (loss) of$4,318 and$(22,088) , (ii) interest expense of$8,032 and$6,463 , (iii) depreciation and amortization expense of$5,666 and$6,284 , (iv) acquisition and transaction expenses of$20 and$3 , (v) changes in fair value of non-hedge derivative instruments of$(9,847) and$14,615 , (vi) equity-based compensation of$1 and$98 and (vii) asset impairment of $- and$32 , respectively.
(2) Includes the following items for the three months ended
(3) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) equity-based compensation of$110 and$127 , (ii) provision for income taxes of$53 and$15 , (iii) interest expense of$1,857 and$1,384 , (iv) depreciation and amortization expense of$3,136 and$2,263 , (v) changes in fair value of non-hedge derivative instruments of$61 and$27 , (vi) other non-recurring items of$3 and $- and (vii) interest and other costs on pension and OPEB liabilities of$1 and $-, respectively.
Revenue
Comparison of the three months ended
Total revenues increased$30.3 million primarily due to higher revenues of$5.9 million in the Railroad segment,$6.0 million in theJefferson Terminal segment and$17.9 million in the Corporate and Other segment. Rail revenues increased$5.9 million due to an increase in car loads as well as the implementation of a fuel surcharge that went into effect beginningMarch 2022 .
Terminal services revenues increased
Roadside services revenue increased
Expenses
Comparison of the three months ended
Total expenses increased
Operating expenses increased
•an increase of
•an increase of
40
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•an increase in facility operating expense of
•an increase of
Depreciation and amortization increased
Acquisition and transaction expenses decreased$4.0 million primarily due to higher acquisition and transaction expenses incurred in 2022 relating to the Spin-off of the Company.
Management fees and incentive allocations to affiliate decreased
Other expense
Total other expense decreased$10.2 million during the three months endedMarch 31, 2023 which primarily reflects an increase of$26.4 million in equity in earnings of unconsolidated entities primarily due to realized and unrealized gains on power swaps atLong Ridge , offset by an increase of$16.8 million in interest expense which reflects an increase in the average outstanding debt of approximately$475.5 million from the Senior Notes due 2027 (the "2027 Notes") issued inJuly 2022 . Net loss
Net loss decreased
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased
Railroad Segment
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Lease income $ 437 $ 488 $ (51)
Rail revenues 40,568 34,600 5,968
Total revenues 41,005 35,088 5,917
Expenses
Operating expenses 25,235 21,062 4,173
Acquisition and transaction expenses 183 206 (23)
Depreciation and amortization 5,101 4,927 174
Asset impairment 141 - 141
Total expenses 30,660 26,195 4,465
Other expense
Loss on sale of assets, net (124) - (124)
Interest expense (955) (62) (893)
Other expense (552) (360) (192)
Total other expense (1,631) (422) (1,209)
Income before income taxes 8,714 8,471 243
Provision for income taxes 598 1,515 (917)
Net income 8,116 6,956 1,160
Less: Net income attributable to non-controlling interest in consolidated subsidiaries
18 - 18
Net income attributable to stockholders/Former Parent $ 8,098 $ 6,956 $ 1,142
41
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The following table sets forth a reconciliation of net income attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net income attributable to stockholders/Former Parent $ 8,098 $ 6,956 $ 1,142
Add: Provision for income taxes 598 1,515 (917)
Add: Equity-based compensation expense 325 - 325
Add: Acquisition and transaction expenses 183 206 (23)
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments - - -
Add: Asset impairment charges 141 - 141
Add: Incentive allocations - - -
Add: Depreciation and amortization expense 5,101 4,927 174
Add: Interest expense 955 62 893
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities -
- -
Add: Dividends and accretion on redeemable preferred stock - - -
Add: Interest and other costs on pension and OPEB liabilities 480 - 480
Add: Other non-recurring items (1) 1,288 - 1,288
Less: Equity in earnings of unconsolidated entities - - -
Less: Non-controlling share of Adjusted EBITDA (2) (18) - (18)
Adjusted EBITDA $ 17,151 $ 13,666 $ 3,485 ________________________________________________________
(1) Includes the following items for the three months ended
(2) Includes the following items for the three months endedMarch 31, 2023 : (i) equity-based compensation of$1 , (ii) provision for income taxes of$1 , (iii) depreciation and amortization expense of$10 , (iv) interest expense of$2 , (v) other non-recurring items of$3 and (vi) interest and other costs on pension and OPEB liabilities of$1 . Revenues
Total revenues increased
Expenses
Total expenses increased$4.5 million during the three months endedMarch 31, 2023 primarily due to an increase in operating expenses caused by an increase in compensation and benefits related to severance costs and additional employees hired. Other expense
Total other expense increased
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased
42
--------------------------------------------------------------------------------Jefferson Terminal Segment
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Lease income $ 306 $ 352 $ (46)
Terminal services revenues 18,786 12,694 6,092
Total revenues 19,092 13,046 6,046
Expenses
Operating expenses 16,425 13,123 3,302
Depreciation and amortization 11,869 9,700 2,169
Total expenses 28,294 22,823 5,471
Other expense
Interest expense (7,884) (6,110) (1,774)
Other expense (1,063) (99) (964)
Total other expense (8,947) (6,209) (2,738)
Loss before income taxes (18,149) (15,986) (2,163)
Provision for income taxes 198 69 129
Net loss (18,347) (16,055) (2,292)
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
(9,185) (7,136) (2,049)
Net loss attributable to stockholders/Former Parent $ (9,162) $ (8,919) $ (243)
43
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The following table sets forth a reconciliation of net loss attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net loss attributable to stockholders/Former Parent $ (9,162) $ (8,919) $ (243)
Add: Provision for income taxes 198 69 129
Add: Equity-based compensation expense 444 538 (94)
Add: Acquisition and transaction expenses - - -
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments - - -
Add: Asset impairment charges - - -
Add: Incentive allocations - - -
Add: Depreciation and amortization expense 11,869 9,700 2,169
Add: Interest expense 7,884 6,110 1,774
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities -
- -
Add: Dividends and accretion on redeemable preferred stock - - -
Add: Interest and other costs on pension and OPEB liabilities - - -
Add: Other non-recurring items - - -
Less: Equity in earnings of unconsolidated entities - - -
Less: Non-controlling share of Adjusted EBITDA (1) (4,715) (3,692) (1,023)
Adjusted EBITDA (non-GAAP) $ 6,518 $ 3,806 $ 2,712 ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) equity-based compensation of$102 and$121 , (ii) provision for income taxes of$46 and$15 , (iii) interest expense of$1,823 and$1,374 and (iv) depreciation and amortization expense of$2,744 and$2,182 , respectively.
Revenues
Total revenues increased$6.0 million during the three months endedMarch 31, 2023 which reflects an increase in terminal services revenue of$6.1 million primarily due to higher volumes.
Expenses
Total expenses increased
•an increase in operating expenses of
•an increase in depreciation and amortization of
Other expense
Other expense increased
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased
44
--------------------------------------------------------------------------------Repauno Segment
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Rail revenues $ - $ 86 (86)
Terminal services revenues 362 90 272
Other revenue (1,815) (2,162) 347
Total revenues (1,453) (1,986) 533
Expenses
Operating expenses 4,929 3,808 1,121
Depreciation and amortization 2,245 2,369 (124)
Total expenses 7,174 6,177 997
Other expense
Interest expense (588) (287) (301)
Total other expense (588) (287) (301)
Loss before income taxes (9,215) (8,450) (765)
Provision for income taxes 114 - 114
Net loss (9,329) (8,450) (879)
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
(498) (330) (168)
Net loss attributable to stockholders/Former Parent $
(8,831)
The following table sets forth a reconciliation of net loss attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net loss attributable to stockholders/Former Parent $ (8,831) $ (8,120) $ (711)
Add: Provision for income taxes 114 - 114
Add: Equity-based compensation expense 126 171 (45)
Add: Acquisition and transaction expenses - - -
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments 1,125
766 359
Add: Asset impairment charges - - -
Add: Incentive allocations - - -
Add: Depreciation and amortization expense 2,245 2,369 (124)
Add: Interest expense 588 287 301
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities -
- -
Add: Dividends and accretion on redeemable preferred stock - - -
Add: Interest and other costs on pension and OPEB liabilities - - -
Add: Other non-recurring items - - -
Less: Equity in losses of unconsolidated entities - - -
Less: Non-controlling share of Adjusted EBITDA (1) (228) (124) (104)
Adjusted EBITDA (non-GAAP) $ (4,861) $ (4,651) $ (210) ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) equity-based compensation of$7 and$6 , (ii) interest expense of$32 and$10 , (iii) depreciation and amortization expense of$122 and$81 , (iv) provision for income taxes of$6 and $-, and (v) changes in fair value of non-hedge derivative instruments of$61 and$27 , respectively. 45 --------------------------------------------------------------------------------
Revenues
Total revenue during the three months endedMarch 31, 2022 of$(2.0) million primarily includes losses on butane forward purchase contracts, offset by ordinary trading margins. Total revenue during the three months endedMarch 31, 2023 of$(1.5) million primarily includes losses on butane forward purchase contracts and product margin losses due to the removal and sale of inventory in advance of commencing a throughput, fee-based business model.
Expenses
Total expenses increased$1.0 million during the three months endedMarch 31, 2023 which reflects higher operating expenses of$1.1 million caused by an increase in professional fees and repairs and maintenance expense related to the continued development of the site.
Other expense
Total other expense increased
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased
Power and Gas Segment
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Other revenue $ - $ - $ -
Total revenues - - -
Expenses
Operating expenses 424 75 349
Acquisition and transaction expenses 22 - 22
Total expenses 446 75 371
Other income (expense)
Equity in earnings (losses) of unconsolidated entities 7,761 (21,381) 29,142
Interest expense (2) - (2)
Other income 1,229 - 1,229
Total other income (expense) 8,988 (21,381) 30,369
Income (loss) before income taxes 8,542 (21,456) 29,998
Benefit from income taxes - - -
Net income (loss) 8,542 (21,456) 29,998Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
- - -
Net income (loss) attributable to stockholders/Former Parent
46
--------------------------------------------------------------------------------The following table sets forth a reconciliation of net income (loss) attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net income (loss) attributable to stockholders/Former Parent $
8,542$ (21,456) $ 29,998 Add: Benefit from income taxes - - - Add: Equity-based compensation expense - - - Add: Acquisition and transaction expenses 22 - 22
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments - - -
Add: Asset impairment charges - - -
Add: Incentive allocations - - -
Add: Depreciation and amortization expense - - -
Add: Interest expense 2 - 2
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)
10,509 6,095 4,414
Add: Dividends and accretion on redeemable preferred stock - - -
Add: Interest and other costs on pension and OPEB liabilities - - -
Add: Other non-recurring items - - -
Less: Equity in losses of unconsolidated entities (7,761) 21,381 (29,142)
Less: Non-controlling share of Adjusted EBITDA - - -
Adjusted EBITDA (non-GAAP) $ 11,314 $ 6,020 $ 5,294 ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) net income (loss) of$7,761 and$(21,380) , (ii) interest expense of$7,234 and$6,443 , (iii) depreciation and amortization expense of$5,340 and$6,284 , (iv) acquisition and transaction expenses of$20 and$3 , (v) changes in fair value of non-hedge derivative instruments of$(9,847) and$14,615 , (vi) equity-based compensation of$1 and$98 , and (vii) asset impairment of $- and$32 , respectively. Other income (expense) Total other income (expense) increased$30.4 million during the three months endedMarch 31, 2023 which reflects an increase in equity method earnings in unconsolidated entities of$29.1 million . This is primarily due to unrealized gains on power swaps atLong Ridge , in conjunction with an increase in other income of$1.2 million due to an increase in interest income from a loan agreement entered into at the end of 2022 between the Company andLong Ridge Energy and Power LLC . Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased
47
--------------------------------------------------------------------------------Sustainability and Energy Transition Segment
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Other revenue $ - $ - $ -
Total revenues - - -
Expenses
Operating expenses 1 - 1
Acquisition and transaction expenses 1 - 1
Total expenses 2 - 2
Other (expense) income
Equity in losses of unconsolidated entities (3,416) (705) (2,711)
Other income 607 528 79
Total other expense (2,809) (177) (2,632)
Loss before income taxes (2,811) (177) (2,634)
Provision for income taxes - - -
Net loss (2,811) (177) (2,634)Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
- - -
Net loss attributable to stockholders/Former Parent $
(2,811)
The following table sets forth a reconciliation of net loss attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net loss attributable to stockholders/Former Parent $ (2,811) $ (177) $ (2,634)
Add: Provision for income taxes - - -
Add: Equity-based compensation expense - - -
Add: Acquisition and transaction expenses 1 - 1
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments - - -
Add: Asset impairment charges - - -
Add: Incentive allocations - - -
Add: Depreciation and amortization expense - - -
Add: Interest expense - - -
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)
(2,316) (706) (1,610)
Add: Dividends and accretion on redeemable preferred stock - - -
Add: Interest and other costs on pension and OPEB liabilities - - -
Add: Other non-recurring items - - -
Less: Equity in losses of unconsolidated entities 3,416 705 2,711
Less: Non-controlling share of Adjusted EBITDA - - -
Adjusted EBITDA (non-GAAP) $ (1,710) $ (178) $ (1,532) ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) net loss of$(3,419) and$(706) , (ii) interest expense of$777 and $- and (iii) depreciation and amortization expense of$326 and $-, respectively.
Other expense
Total other expense increased
48
--------------------------------------------------------------------------------Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased
Corporate and Other
The following table presents our results of operations:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Revenues
Roadside services revenues $ 17,850 $ - $ 17,850
Total revenues 17,850 - 17,850
Expenses
Operating expenses 18,148 - 18,148
General and administrative 3,201 2,430 771
Acquisition and transaction expenses 63 4,030 (3,967)
Management fees and incentive allocation to affiliate 2,982 4,161 (1,179)
Depreciation and amortization 920 - 920
Total expenses 25,314 10,621 14,693
Other income (expense)
Equity in earnings of unconsolidated entities 21 43 (22)
Interest expense (13,821) - (13,821)
Other expense - (528) 528
Total other expense (13,800) (485) (13,315)
Loss before income taxes (21,264) (11,106) (10,158)
Provision for income taxes 819 - 819
Net loss (22,083) (11,106) (10,977)Less: Net loss attributable to non-controlling interest in consolidated subsidiaries
(228) - (228)
Less: Dividends and accretion on redeemable preferred shares 14,570 - 14,570
Net loss attributable to stockholders/Former Parent $ (36,425) $ (11,106) $ (25,319)
49
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The following table sets forth a reconciliation of net loss attributable to stockholders or Former Parent to Adjusted EBITDA:
Three Months Ended March 31,
(in thousands) 2023 2022 Change
Net loss attributable to stockholders/Former Parent $ (36,425) $ (11,106) $ (25,319)
Add: Provision for income taxes 819 - 819
Add: Equity-based compensation expense - - -
Add: Acquisition and transaction expenses 63 4,030 (3,967)
Add: Losses on the modification or extinguishment of debt and capital lease obligations
- - -
Add: Changes in fair value of non-hedge derivative instruments - - -
Add: Asset impairment charges - - -
Add: Incentive allocations - - -
Add: Depreciation and amortization expense 920 - 920
Add: Interest expense 13,821 - 13,821
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)
(3) 18 (21)
Add: Dividends and accretion on redeemable preferred stock 14,570 - 14,570
Add: Interest and other costs on pension and OPEB liabilities - - -
Add: Other non-recurring items - - -
Less: Equity in losses (earnings) of unconsolidated entities (21) (43) 22
Less: Non-controlling share of Adjusted EBITDA (2) (260) - (260)
Adjusted EBITDA (non-GAAP) $ (6,516) $ (7,101) $ 585 ________________________________________________________
(1) Includes the following items for the three months endedMarch 31, 2023 and 2022: (i) net loss of$(24) and$(2) and (ii) interest expense of$21 and$20 , respectively.
(2) Includes the following items for the three months ended
Revenues
Total revenues increased$17.9 million for the three months endedMarch 31, 2023 primarily due to the acquisition of a majority stake and consolidation of FYX inMay 2022 . Expenses Total expenses increased$14.7 million during the three months endedMarch 31, 2023 primarily due to the acquisition of a majority stake and consolidation of FYX inMay 2022 . Other expense
Total other expense increased
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased
Liquidity and Capital Resources
We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times. This includes limiting discretionary spending across the organization and re-prioritizing our capital projects.
Our principal uses of liquidity have been and continue to be (i) acquisitions of and investments in infrastructure assets, (ii) expenses associated with our operating activities and (iii) debt service obligations associated with our investments.
•Cash used for the purpose of making investments was
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•Uses of liquidity associated with our operating expenses are captured on a net
basis in our cash flows from operating activities. Uses of liquidity associated
with our debt obligations are captured in our cash flows from financing
activities.
Our principal sources of liquidity to fund these uses have been and continue to
be (i) cash and restricted cash on hand as of March 31, 2023 , (ii) revenues from
our infrastructure business net of operating expenses, (iii) proceeds from
borrowings and (iv) proceeds from asset sales.
•Cash flows used in operating activities were
•During the three months endedMarch 31, 2023 , additional borrowings were obtained in connection with the (i) Transtar revolver of$40.0 million and (ii) EB-5 Loan Agreement of$1.6 million . We did not make any principal repayments of debt during the three months endedMarch 31, 2023 . During the three months endedMarch 31, 2022 , additional borrowings were obtained in connection with the EB-5 Loan Agreement of$26.1 million .
•Proceeds from the sale of assets were
We are currently evaluating several potential transactions and related financings, which could occur within the next 12 months. None of these transactions, negotiations or financings are definitive or included within our planned liquidity needs. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction.
Historical Cash Flow
Comparison of the three months ended
The following table compares the historical cash flow for the three months endedMarch 31, 2023 and 2022: Three Months Ended March 31, (in thousands) 2023 2022 Cash Flow Data: Net cash used in operating activities$ (12,144) $ (14,149) Net cash used in investing activities (66,842)
(51,273)
Net cash provided by financing activities 37,777
43,443
Net cash used in operating activities decreased$2.0 million , which primarily reflects (i) certain adjustments to reconcile net loss to cash used in operating activities including equity in losses of unconsolidated entities of$(26.4) million and (ii) changes in working capital of$8.6 million , partially offset by (iii) a decrease in our net loss of$14.4 million . Net cash used in investing activities increased$15.6 million , primarily due to (i) an investment of promissory notes and loans of$20.5 million , (ii) a decrease in the acquisition of property, plant and equipment of$11.9 million , and (iii) an increase of$4.4 million in acquisition of a business due to the acquisition of the remaining non-controlling interest in FYX during this period. Net cash provided by financing activities decreased$5.7 million , primarily due to (i) a decrease in net contributions from Former Parent of$34.3 million , (ii) an increase in cash dividends paid of$3.1 million and (iii) an increase in proceeds from debt of$32.2 million .
Debt Obligations
Refer to Note 7 of the consolidated and combined consolidated financial statements for additional information.
Contractual Obligations
Our material cash requirements include the following contractual and other obligations:
Debt Obligations-As ofMarch 31, 2023 , we had outstanding principal and interest payment obligations of$1.3 billion and$0.6 billion , respectively, of which, $- and$108.7 million , respectively, are due in the next twelve months. See Note 7 to the consolidated and combined consolidated financial statements for additional information about our debt obligations. Lease Obligations-As ofMarch 31, 2023 , we had outstanding operating and finance lease obligations of$171.4 million , of which$8.5 million is due in the next twelve months.
Redeemable Preferred Stock Obligations-We are required to make a
Other Obligations-As of
Other Cash Requirements-In addition to our contractual obligations, we intend to pay quarterly cash dividends on our common stock, which are subject to change at the discretion of our board of directors.
We expect to meet our future short-term liquidity requirements through cash on hand or future financings and net cash provided
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by our current operations. We expect that our operating subsidiaries will
generate sufficient cash flow to cover operating expenses and the payment of
principal and interest on our indebtedness as they become due. We may elect to
meet certain long-term liquidity requirements or to continue to pursue strategic
opportunities through utilizing cash on hand, cash generated from our current
operations and the issuance of securities in the future. Management believes
adequate capital and borrowings are available from various sources to fund our
commitments to the extent required.
Critical Accounting Estimates and Policies
Goodwill-Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisition ofJefferson Terminal , Transtar and FYX. As ofDecember 31, 2022 , the carrying amount of goodwill within theJefferson Terminal , Railroad and Corporate and Other segments was$122.7 million ,$132.1 million , and$5.4 million , respectively. We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as ofOctober 1st of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment. For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A goodwill impairment assessment compares the fair value of a respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a goodwill impairment is recorded to the extent that the carrying value of the reporting unit exceeds the fair value. As ofOctober 1, 2022 , for ourJefferson Terminal reporting unit, we completed a quantitative analysis. We estimate the fair value ofJefferson Terminal using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the forecasted revenue growth rates, EBITDA margins and discount rates. The estimates and assumptions used consider historical performance if indicative of future performance and are consistent with the assumptions used in determining future profit plans for the reporting units. In connection with our impairment analysis, although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management's judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. If the forecasted cash flows or other key inputs are negatively revised in the future, the estimated fair value of the reporting unit could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results.The Jefferson Terminal reporting unit had an estimated fair value that exceeded its carrying value by more than 10% but less than 20% as ofOctober 1, 2022 .The Jefferson Terminal reporting unit forecasted revenue is dependent on the ramp up of volumes under current and expected future contracts for storage and throughput of heavy and light crude and refined products, expansion of refined product distribution toMexico and movements in future oil spreads. AtOctober 1, 2022 , approximately 4.3 million barrels of storage was operational with 1.9 million barrels under construction for new contracts that came online inDecember 2022 and completed our storage development for our main terminal. Our discount rate for our 2022 goodwill impairment analysis was 9.5% and our assumed terminal growth rate was 2.0%. If our strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting unit would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in theU.S. andCanada , are expected to result in increased demand for storage on theU.S. Gulf Coast . Although we do not have significant direct exposure to volatility of crude oil prices, changes in crude oil pricing that affect long term refining planned output could impactJefferson Terminal operations. We expect theJefferson Terminal reporting unit to continue to generate positive Adjusted EBITDA in future years. InDecember 2022 , our multi-year refined products contract withExxon Mobil Oil Corporation commenced. Although certain of our anticipated contracts or expected volumes from existing contracts forJefferson Terminal have been delayed, we continue to believe our projections are achievable. Further delays in executing anticipated contracts or achieving our projected volumes could adversely affect the fair value of the reporting unit.
There was no impairment of goodwill for the year ended
Recent Accounting Pronouncements
The Company has reviewed recently issued accounting pronouncements and concluded
that such pronouncements are either not applicable to the Company or no material
impact is expected in the consolidated financial statements as a result of
future adoption.
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