UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): November 1, 2018
Fortress Transportation and Infrastructure Investors LLC
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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001-37386
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32-0434238
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(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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1345 Avenue of the Americas, 45th Floor, New York, New York 10105
(Address of Principal Executive Offices) (Zip Code)
(212) 798-6100
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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| ☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company ☐
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If an emerging growth company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 2.02.
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Results of Operations and Financial Condition.
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On November 1, 2018, the Company issued a press release announcing the Company’s results for its fiscal quarter ended September 30, 2018. A copy of the
Company’s press release is attached to this Current Report on Form 8-K (the “Current Report”) as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.
This Current Report, including the exhibit attached hereto, is being furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange
Act, unless expressly set forth as being incorporated by reference into such filing.
| Item 9.01 |
Financial Statements and Exhibits.
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(d) Exhibits.
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Exhibit
Number
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Description
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Press release, dated November 1, 2018, issued by Fortress Transportation and Infrastructure Investors LLC
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
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||
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By:
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/s/ Scott Christopher
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Name:
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Scott Christopher
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Title:
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Chief Financial Officer
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Date: November 1, 2018
Exhibit 99.1
PRESS RELEASE
FTAI Reports Third Quarter 2018 Results, Dividend of $0.33 per Common Share
NEW YORK, November 1, 2018 – Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) (the “Company”) today reported financial results for the
three months ended September 30, 2018. The Company’s consolidated comparative financial statements and key performance measures are attached as an exhibit to this press release.
Financial Overview
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(in thousands, except per share data)
|
||||
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Selected Financial Results(1)
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Q3’18
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|||
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Net Cash Provided by Operating Activities
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$
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27,263
|
||
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Net Income Attributable to Shareholders
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$
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4,578
|
||
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Basic and Diluted Earnings per Share
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$
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0.05
|
||
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Funds Available for Distribution (“FAD”)
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$
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43,581
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||
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Adjusted Net Income
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$
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6,505
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||
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Adjusted Net Income per Share
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$
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0.08
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||
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Adjusted EBITDA
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$
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58,771
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||
________________________________
(1) For definitions and reconciliations of Non-GAAP
measures, please refer to the exhibit to this press release.
For the third quarter of 2018, our total FAD was $43.6 million. This amount includes $71.6 million from equipment leasing activities, offset by $(10.0)
million and $(18.0) million from infrastructure and corporate activities, respectively.
Joe Adams, CEO of FTAI, said “We just completed an excellent quarter with strong net income and record adjusted EBITDA. In addition, we set a record for
return on equity in our aviation business along with record adjusted EBITDA yield while expecting total new aviation investments in 2018 of over $500 million, another record.”(2)
Adams continued, “Strong macro factors are driving increased revenues and long term value creation in our infrastructure segment comprised of four North
American port and rail terminals. The dramatic growth in North American energy infrastructure continues to drive new business at our key strategic locations.”
Third Quarter 2018 Dividend
On November 1, 2018, the Company’s Board of Directors declared a cash dividend of $0.33 per common share for the quarter ended September 30, 2018, payable on
November 27, 2018 to the holders of record on November 16, 2018.
Additional Information
For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of
the Company’s website, www.ftandi.com, and the Company’s Quarterly Report on Form 10-Q, when available on the Company’s website. Nothing on the Company’s website is included or incorporated by reference herein.
1
Conference Call
The Company will host a conference call on Friday, November 2, 2018 at 8:00 A.M. Eastern Time. The conference call may be accessed by dialing 1-877-447-5636
(from within the U.S.) or 1-615-247-0080 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “FTAI Third Quarter Earnings Call.” A simultaneous webcast of the conference call will be available to the
public on a listen-only basis at www.ftandi.com.
Following the call, a replay of the conference call will be available after 12:00 P.M. on Friday, November 2, 2018 through midnight Friday, November 9, 2018
at 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.), Passcode: 6094136.
About Fortress Transportation and Infrastructure Investors LLC
Fortress Transportation and Infrastructure Investors LLC owns and acquires high quality infrastructure and equipment that is essential for the transportation
of goods and people globally. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation. FTAI is externally managed by an affiliate of Fortress Investment Group
LLC, a leading, diversified global investment firm.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, including expected new aviation investments in 2018 and creation of long term value in our infrastructure segment. These statements are based on management’s current expectations and beliefs and are subject to a number of trends and
uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond the Company’s control. The Company can give no assurance that its expectations will be attained and
such differences may be material. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking
statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are
available on the Company’s website (www.ftandi.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ
from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. This release shall not constitute an offer to sell
or the solicitation of an offer to buy any securities.
(2) Aviation “return on equity” and “adjusted EBITDA yield” are non-GAAP measures. For definitions and reconciliations of these non-GAAP measures, please refer to the investor presentation for the period ended September 30,
2018, posted to our website.
For further information, please contact:
Alan Andreini
Investor Relations
Fortress Transportation and Infrastructure Investors LLC
(212) 798-6128
aandreini@fortress.com
2
Withholding Information for Withholding Agents
This announcement is intended to be a qualified notice as provided in the Internal Revenue Code (the “Code”) and the Regulations thereunder. For U.S. federal
income tax purposes, the dividend declared in November 2018 will be treated as a partnership distribution. For tax withholding purposes, the per share distribution components are as follows:
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Distribution Components
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||||
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Non-U.S. Long Term Capital Gain
|
$
|
—
|
||
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U.S. Portfolio Interest Income(1)
|
$
|
0.2650
|
||
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U.S. Dividend Income(2)
|
$
|
—
|
||
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Income Not from U.S. Sources(3)
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$
|
0.0650
|
||
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Distribution Per Share
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$
|
0.3300
|
||
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(1)
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Eligible for the U.S. portfolio interest exemption for any holder not considered a 10-percent shareholder under §871(h)(3)(B) of the Code.
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(2)
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This income is subject to withholding under §1441 of the Code.
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(3)
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This income is not subject to withholding under §1441 or §1446 of the Code.
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For U.S. shareholders: In computing your U.S. federal taxable
income, you should not rely on this qualified notice, but should generally take
into account your allocable share of the Company’s taxable income as reported to you on your Schedule K-1.
3
Exhibit - Financial Statements
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
|
Three Months Ended September 30,
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Nine Months Ended September 30,
|
||||||||||||||
| (Dollar amounts in thousands, except share and per share data) |
2018
|
2017
|
2018
|
2017
|
||||||||||||
|
Revenues
|
||||||||||||||||
|
Equipment leasing revenues
|
$
|
70,890
|
$
|
49,616
|
$
|
186,004
|
$
|
121,387
|
||||||||
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Infrastructure revenues
|
30,265
|
10,746
|
55,974
|
34,842
|
||||||||||||
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Total revenues
|
101,155
|
60,362
|
241,978
|
156,229
|
||||||||||||
|
Expenses
|
||||||||||||||||
|
Operating expenses
|
41,667
|
23,688
|
96,839
|
66,025
|
||||||||||||
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General and administrative
|
4,012
|
3,439
|
12,171
|
10,615
|
||||||||||||
|
Acquisition and transaction expenses
|
1,460
|
1,732
|
4,734
|
5,064
|
||||||||||||
|
Management fees and incentive allocation to affiliate
|
3,846
|
3,771
|
12,080
|
11,529
|
||||||||||||
|
Depreciation and amortization
|
34,422
|
24,784
|
96,853
|
62,382
|
||||||||||||
|
Interest expense
|
15,142
|
8,914
|
39,870
|
21,292
|
||||||||||||
|
Total expenses
|
100,549
|
66,328
|
262,547
|
176,907
|
||||||||||||
|
Other income (expense)
|
||||||||||||||||
|
Equity in (losses) earnings of unconsolidated entities
|
(442
|
)
|
132
|
(598
|
)
|
(1,461
|
)
|
|||||||||
|
Gain on sale of equipment, net
|
262
|
2,709
|
5,253
|
6,726
|
||||||||||||
|
Loss on extinguishment of debt
|
—
|
—
|
—
|
(2,456
|
)
|
|||||||||||
|
Interest income
|
111
|
215
|
361
|
582
|
||||||||||||
|
Other income
|
737
|
2,148
|
2,074
|
2,180
|
||||||||||||
|
Total other income
|
668
|
5,204
|
7,090
|
5,571
|
||||||||||||
|
Income (loss) before income taxes
|
1,274
|
(762
|
)
|
(13,479
|
)
|
(15,107
|
)
|
|||||||||
|
Provision for income taxes
|
551
|
909
|
1,580
|
1,585
|
||||||||||||
|
Net income (loss)
|
723
|
(1,671
|
)
|
(15,059
|
)
|
(16,692
|
)
|
|||||||||
|
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries
|
(3,855
|
)
|
(4,669
|
)
|
(19,904
|
)
|
(13,816
|
)
|
||||||||
|
Net income (loss) attributable to shareholders
|
$
|
4,578
|
$
|
2,998
|
$
|
4,845
|
$
|
(2,876
|
)
|
|||||||
|
Earnings (loss) per share
|
||||||||||||||||
|
Basic
|
$
|
0.05
|
$
|
0.04
|
$
|
0.06
|
$
|
(0.04
|
)
|
|||||||
|
Diluted
|
$
|
0.05
|
$
|
0.04
|
$
|
0.06
|
$
|
(0.04
|
)
|
|||||||
|
Weighted Average Shares Outstanding:
|
||||||||||||||||
|
Basic
|
84,708,071
|
75,770,529
|
83,178,546
|
75,765,144
|
||||||||||||
|
Diluted
|
84,709,656
|
75,770,665
|
83,179,181
|
75,765,144
|
||||||||||||
4
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED BALANCE SHEETS
|
(Dollar amounts in thousands, except share and per share data)
|
(Unaudited)
September 30,
2018
|
December 31,
2017
|
||||||
|
Assets
|
||||||||
|
Cash and cash equivalents
|
$
|
163,145
|
$
|
59,400
|
||||
|
Restricted cash
|
22,355
|
33,406
|
||||||
|
Accounts receivable, net
|
50,002
|
31,076
|
||||||
|
Leasing equipment, net
|
1,284,057
|
1,074,130
|
||||||
|
Finance leases, net
|
16,950
|
9,244
|
||||||
|
Property, plant, and equipment, net
|
659,460
|
489,949
|
||||||
|
Investments
|
42,183
|
42,538
|
||||||
|
Intangible assets, net
|
35,653
|
40,043
|
||||||
|
Goodwill
|
116,584
|
116,584
|
||||||
|
Other assets
|
82,772
|
59,436
|
||||||
|
Total assets
|
$
|
2,473,161
|
$
|
1,955,806
|
||||
|
Liabilities
|
||||||||
|
Accounts payable and accrued liabilities
|
$
|
83,648
|
$
|
68,226
|
||||
|
Debt, net
|
1,137,867
|
703,264
|
||||||
|
Maintenance deposits
|
128,877
|
103,464
|
||||||
|
Security deposits
|
33,921
|
27,257
|
||||||
|
Other liabilities
|
26,528
|
18,520
|
||||||
|
Total liabilities
|
$
|
1,410,841
|
$
|
920,731
|
||||
|
Commitments and contingencies
|
||||||||
|
Equity
|
||||||||
|
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 82,787,466 and 75,771,738 shares issued and outstanding
as of September 30, 2018 and December 31, 2017, respectively)
|
828
|
758
|
||||||
|
Additional paid in capital
|
1,037,513
|
985,009
|
||||||
|
Accumulated deficit
|
(33,854
|
)
|
(38,699
|
)
|
||||
|
Accumulated other comprehensive income
|
—
|
—
|
||||||
|
Shareholders’ equity
|
1,004,487
|
947,068
|
||||||
|
Non-controlling interest in equity of consolidated subsidiaries
|
57,833
|
88,007
|
||||||
|
Total equity
|
1,062,320
|
1,035,075
|
||||||
|
Total liabilities and equity
|
$
|
2,473,161
|
$
|
1,955,806
|
||||
5
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
Nine Months Ended September 30,
|
||||||||
|
(Dollar amounts in thousands)
|
2018
|
2017
|
||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(15,059
|
)
|
$
|
(16,692
|
)
|
||
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||
|
Equity in losses of unconsolidated entities
|
598
|
1,461
|
||||||
|
Gain on sale of equipment, net
|
(5,253
|
)
|
(6,726
|
)
|
||||
|
Security deposits and maintenance claims included in earnings
|
(4,325
|
)
|
(60
|
)
|
||||
|
Loss on extinguishment of debt
|
—
|
2,456
|
||||||
|
Equity-based compensation
|
669
|
695
|
||||||
|
Depreciation and amortization
|
96,853
|
62,382
|
||||||
|
Gain on settlement of liabilities
|
—
|
(1,093
|
)
|
|||||
|
Change in current and deferred income taxes
|
670
|
551
|
||||||
|
Change in fair value of non-hedge derivative
|
(567
|
)
|
(1,036
|
)
|
||||
|
Amortization of lease intangibles and incentives
|
17,629
|
5,193
|
||||||
|
Amortization of deferred financing costs
|
4,164
|
3,120
|
||||||
|
Bad debt expense
|
1,586
|
63
|
||||||
|
Other
|
51
|
566
|
||||||
|
Change in:
|
||||||||
|
Accounts receivable
|
(19,024
|
)
|
(7,984
|
)
|
||||
|
Other assets
|
(9,757
|
)
|
10,595
|
|||||
|
Accounts payable and accrued liabilities
|
15,198
|
862
|
||||||
|
Management fees payable to affiliate
|
(774
|
)
|
(554
|
)
|
||||
|
Other liabilities
|
3,756
|
(1,356
|
)
|
|||||
|
Net cash provided by operating activities
|
86,415
|
52,443
|
||||||
|
Cash flows from investing activities:
|
||||||||
|
Investment in notes receivable
|
(912
|
)
|
—
|
|||||
|
Investment in unconsolidated entities and available for sale securities
|
(1,115
|
)
|
(24,903
|
)
|
||||
|
Principal collections on finance leases
|
658
|
347
|
||||||
|
Acquisition of leasing equipment
|
(330,492
|
)
|
(267,451
|
)
|
||||
|
Acquisition of property, plant and equipment
|
(178,555
|
)
|
(86,455
|
)
|
||||
|
Acquisition of lease intangibles
|
(5,039
|
)
|
(1,583
|
)
|
||||
|
Purchase deposits for acquisitions
|
(17,350
|
)
|
(11,785
|
)
|
||||
|
Proceeds from sale of leasing equipment
|
30,409
|
87,093
|
||||||
|
Proceeds from sale of property, plant and equipment
|
78
|
51
|
||||||
|
Return of purchase deposit for aircraft and aircraft engines
|
240
|
—
|
||||||
|
Return of deposit on sale of engine
|
(400
|
)
|
—
|
|||||
|
Return of capital distributions from unconsolidated entities
|
872
|
—
|
||||||
|
Net cash used in investing activities
|
$
|
(501,606
|
)
|
$
|
(304,686
|
)
|
||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from debt
|
$
|
615,239
|
$
|
417,191
|
||||
|
Repayment of debt
|
(181,856
|
)
|
(22,623
|
)
|
||||
|
Payment of deferred financing costs
|
(2,686
|
)
|
(3,232
|
)
|
||||
|
Receipt of security deposits
|
7,084
|
5,826
|
||||||
|
Return of security deposits
|
(1,520
|
)
|
(3,232
|
)
|
||||
|
Receipt of maintenance deposits
|
41,808
|
18,784
|
||||||
|
Release of maintenance deposits
|
(11,518
|
)
|
(6,111
|
)
|
||||
|
Proceeds from issuance of common shares, net of underwriter’s discount
|
128,451
|
—
|
||||||
|
Common shares issuance costs
|
(789
|
)
|
—
|
|||||
|
Purchase of non-controlling interest shares
|
(3,705
|
)
|
—
|
|||||
|
Cash dividends
|
(82,623
|
)
|
(75,041
|
)
|
||||
|
Net cash provided by financing activities
|
$
|
507,885
|
$
|
331,562
|
||||
|
Net increase in cash and cash equivalents and restricted cash
|
92,694
|
79,319
|
||||||
|
Cash and cash equivalents and restricted cash, beginning of period
|
92,806
|
133,496
|
||||||
|
Cash and cash equivalents and restricted cash, end of period
|
$
|
185,500
|
$
|
212,815
|
||||
6
Key Performance Measures
The Chief Operating Decision Maker (“CODM”) utilizes Adjusted Net Income and Adjusted EBITDA as performance measures.
Adjusted Net Income (Loss) is our key performance measure and provides the CODM with the information necessary to assess operational performance, as well as
make resource and allocation decisions. Adjusted Net Income (Loss) is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for 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, and equity in earnings (losses) of
unconsolidated entities, (b) to include the impact of cash income tax payments, and our pro-rata share of the Adjusted Net Income (Loss) from unconsolidated entities, and (c) to exclude the impact of the non-controlling share of Adjusted Net Income
(Loss). We evaluate investment performance for each reportable segment primarily based on Adjusted Net Income (Loss). We believe that net income (loss) attributable to shareholders, as defined by GAAP, is the most comparable earnings measurement with
which to reconcile Adjusted Net Income (Loss).
The following table presents our consolidated reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income for the three and nine
months ended September 30, 2018 and 2017:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30, |
|||||||||||||||
|
(Dollar amounts in thousands)
|
2018
|
2017
|
2018
|
2017
|
||||||||||||
|
Net income (loss) attributable to shareholders
|
$
|
4,578
|
$
|
2,998
|
$
|
4,845
|
$
|
(2,876
|
)
|
|||||||
|
Add: Provision for income taxes
|
551
|
909
|
1,580
|
1,585
|
||||||||||||
|
Add: Equity-based compensation expense
|
232
|
165
|
669
|
695
|
||||||||||||
|
Add: Acquisition and transaction expenses
|
1,460
|
1,732
|
4,734
|
5,064
|
||||||||||||
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
—
|
—
|
2,456
|
||||||||||||
|
Add: Changes in fair value of non-hedge derivative instruments
|
385
|
(1,036
|
)
|
567
|
(1,036
|
)
|
||||||||||
|
Add: Asset impairment charges
|
—
|
—
|
—
|
—
|
||||||||||||
|
Add: Pro-rata share of Adjusted Net Income (Loss) from unconsolidated entities (1)
|
(437
|
)
|
86
|
(593
|
)
|
(1,599
|
)
|
|||||||||
|
Add: Incentive allocations
|
(20
|
)
|
—
|
553
|
—
|
|||||||||||
|
Less: Cash payments for income taxes
|
(445
|
)
|
(438
|
)
|
(910
|
)
|
(1,033
|
)
|
||||||||
|
Less: Equity in losses (earnings) of unconsolidated entities
|
442
|
(132
|
)
|
598
|
1,461
|
|||||||||||
|
Less: Non-controlling share of Adjusted Net Income (Loss) (2)
|
(241
|
)
|
(447
|
)
|
(241
|
)
|
(503
|
)
|
||||||||
|
Adjusted Net Income
|
$
|
6,505
|
$
|
3,837
|
$
|
11,802
|
$
|
4,214
|
||||||||
______________________________________________________________________________________
|
(1)
|
Includes our proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table
above.
|
|
(2)
|
Includes the following items for the three months ended September 30, 2018 and 2017: (i) equity-based compensation of $19 and $43, (ii) provision
for income tax of $2 and $(1), and (iii) changes in fair value of non-hedge derivative instruments of $221 and $404 less (iv) cash tax payments of $1 and $(1), respectively. Includes the following items for the nine months ended
September 30, 2018 and 2017: (i) equity-based compensation of $96 and $118, (ii) provision for income tax of $10 and $12, and (iii) changes in fair value of non-hedge derivative instruments of $149 and $404, less (iv) cash tax payments of
$14 and $31, respectively.
|
We view Adjusted EBITDA as a secondary measurement to Adjusted Net Income (Loss), which we believe serves as a useful supplement to investors, analysts and
management to measure economic performance of deployed revenue generating assets between periods on a consistent basis, and which we believe measures our financial performance and helps identify operational factors that management can impact in the
short-term, namely our cost structure and expenses. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate Adjusted EBITDA in the same manner.
7
Adjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based
compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive
allocations, depreciation and amortization expense, and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated
entities and the non-controlling share of Adjusted EBITDA.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA for the three and nine months ended
September 30, 2018 and 2017:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
(Dollar amounts in thousands)
|
2018
|
2017
|
2018
|
2017
|
||||||||||||
|
Net income (loss) attributable to shareholders
|
$
|
4,578
|
$
|
2,998
|
$
|
4,845
|
$
|
(2,876
|
)
|
|||||||
|
Add: Provision for income taxes
|
551
|
909
|
1,580
|
1,585
|
||||||||||||
|
Add: Equity-based compensation expense
|
232
|
165
|
669
|
695
|
||||||||||||
|
Add: Acquisition and transaction expenses
|
1,460
|
1,732
|
4,734
|
5,064
|
||||||||||||
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations
|
—
|
—
|
—
|
2,456
|
||||||||||||
|
Add: Changes in fair value of non-hedge derivative instruments
|
385
|
(1,036
|
)
|
567
|
(1,036
|
)
|
||||||||||
|
Add: Asset impairment charges
|
—
|
—
|
—
|
—
|
||||||||||||
|
Add: Incentive allocations
|
(20
|
)
|
—
|
553
|
—
|
|||||||||||
|
Add: Depreciation and amortization expense (3)
|
39,162
|
26,686
|
114,482
|
67,575
|
||||||||||||
|
Add: Interest expense
|
15,142
|
8,914
|
39,870
|
21,292
|
||||||||||||
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4)
|
402
|
282
|
385
|
(209
|
)
|
|||||||||||
|
Less: Equity in losses (earnings) of unconsolidated entities
|
442
|
(132
|
)
|
598
|
1,461
|
|||||||||||
|
Less: Non-controlling share of Adjusted EBITDA (5)
|
(3,563
|
)
|
(2,753
|
)
|
(9,175
|
)
|
(7,272
|
)
|
||||||||
|
Adjusted EBITDA (non-GAAP)
|
$
|
58,771
|
$
|
37,765
|
$
|
159,108
|
$
|
88,735
|
||||||||
________________________________________________________
|
(3)
|
Includes the following items for the three months ended September 30, 2018 and 2017: (i) $34,422 and $24,784 of depreciation and amortization
expense, (ii) $1,911 and $1,147 of lease intangible amortization, and (iii) $2,829 and $755 of amortization for lease incentives, respectively. Includes the following items for the nine months ended September 30, 2018 and 2017: (i) $96,853
and $62,382 of depreciation and amortization expense, (ii) $5,913 and $3,494 of lease intangible amortization, and (iii) $11,716 and $1,699 of amortization for lease incentives, respectively.
|
|
(4)
|
Includes the following items for the three months ended September 30, 2018 and 2017: (i) net (loss) income of $(483) and $86, (ii) interest expense
of $97 and $176, and (iii) depreciation and amortization expense of $788 and $20, respectively. Includes the following items for the nine months ended September 30, 2018 and 2017: (i) net loss of $(734) and $(1,599), (ii) interest expense
of $303 and $650, and (iii) depreciation and amortization expense of $816 and $740, respectively.
|
|
(5)
|
Includes the following items for the three months ended September 30, 2018 and 2017: (i) equity based compensation of $19 and $43, (ii) provision
for income taxes of $2 and $(1), (iii) interest expense of $1,512 and $485, (iv) depreciation and amortization expense of $1,809 and $1,822, and (v) changes in fair value of non-hedge derivative instruments of $221 and $404, respectively.
Includes the following items for the nine months ended September 30, 2018 and 2017: (i) equity based compensation of $96 and $118, (ii) provision for income taxes of $10 and $12, (iii) interest expense of $3,823 and $1,489, (iv)
depreciation and amortization expense of $5,097 and $5,249, and (v) changes in fair value of non-hedge derivative instruments of $149 and $404, respectively.
|
We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy. FAD is not a financial measure in accordance
with GAAP. The GAAP measure most directly comparable to FAD is net cash provided by operating activities. We believe FAD is a useful metric for investors and analysts for similar purposes.
We define FAD as net cash provided by operating activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital
distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and excluding changes in working capital.
8
The following table sets forth a reconciliation of FAD to Cash from Operating Activities for the nine months ended September 30, 2018 and 2017:
|
Nine Months Ended September 30,
|
||||||||
|
(Dollar amounts in thousands)
|
2018
|
2017
|
||||||
|
Net Cash Provided by Operating Activities
|
$
|
86,415
|
$
|
52,443
|
||||
|
Add: Principal Collections on Finance Leases
|
658
|
347
|
||||||
|
Add: Proceeds from sale of assets
|
30,487
|
87,144
|
||||||
|
Add: Return of Capital Distributions from Unconsolidated Entities
|
872
|
—
|
||||||
|
Less: Required Payments on Debt Obligations (1)
|
(6,231
|
)
|
(8,368
|
)
|
||||
|
Less: Capital Distributions to Non-Controlling Interest
|
—
|
—
|
||||||
|
Exclude: Changes in Working Capital
|
10,601
|
(1,563
|
)
|
|||||
|
Funds Available for Distribution (FAD)
|
$
|
122,802
|
$
|
130,003
|
||||
_____________________________________________________
|
(1)
|
Required payments on debt obligations for the nine months ended September 30, 2018 exclude $25,625 repayment of the Central Maine Québec Railway
(“CMQR”) Credit Agreement and $150,000 repayment of the Revolving Credit Facilities, and for the nine months ended September 30, 2017 exclude $100,000 repayment of the Term Loan and $14,255 repayment of the CMQR loan, both of which were
voluntary refinancings as repayments of these amounts were not required at such time.
|
The following tables set forth a reconciliation of FAD to Cash from Operating Activities for the three and nine months ended September 30, 2018:
|
Three Months Ended September 30, 2018
|
||||||||||||||||
|
(Dollar amounts in thousands)
|
Equipment
Leasing
|
Infrastructure
|
Corporate
|
Total
|
||||||||||||
|
Funds Available for Distribution (FAD)
|
$
|
71,609
|
$
|
(10,005
|
)
|
$
|
(18,023
|
)
|
$
|
43,581
|
||||||
|
Less: Principal Collections on Finance Leases
|
(119
|
)
|
||||||||||||||
|
Less: Proceeds from sale of assets
|
(3,957
|
)
|
||||||||||||||
|
Less: Return of Capital Distributions from Unconsolidated Entities
|
(872
|
)
|
||||||||||||||
|
Add: Required Payments on Debt Obligations (1)
|
3,107
|
|||||||||||||||
|
Add: Capital Distributions to Non-Controlling Interest
|
—
|
|||||||||||||||
|
Include: Changes in Working Capital
|
(14,477
|
)
|
||||||||||||||
|
Net Cash provided by Operating Activities
|
$
|
27,263
|
||||||||||||||
_____________________________________________________
|
(1)
|
Required payments on debt obligations for the three months ended September 30, 2018 exclude $7,875 repayment of the CMQR loan and $125,000
repayment of the Revolving Credit Facilities, both of which were voluntary refinancings as repayments of these amounts were not required at such time.
|
9
| Nine Months Ended September 30, 2018 | ||||||||||||||||
|
(Dollar amounts in thousands)
|
Equipment
Leasing
|
Infrastructure
|
Corporate
|
Total
|
||||||||||||
|
Funds Available for Distribution (FAD)
|
$
|
206,853
|
$
|
(33,542
|
)
|
$
|
(50,509
|
)
|
$
|
122,802
|
||||||
|
Less: Principal Collections on Finance Leases
|
(658
|
)
|
||||||||||||||
|
Less: Proceeds from sale of assets
|
(30,487
|
)
|
||||||||||||||
|
Less: Return of Capital Distributions from Unconsolidated Entities
|
(872
|
)
|
||||||||||||||
|
Add: Required Payments on Debt Obligations (2)
|
6,231
|
|||||||||||||||
|
Add: Capital Distributions to Non-Controlling Interest
|
—
|
|||||||||||||||
|
Include: Changes in Working Capital
|
(10,601
|
)
|
||||||||||||||
|
Net Cash provided by Operating Activities
|
$
|
86,415
|
||||||||||||||
_____________________________________________________
|
(2)
|
Required payments on debt obligations for the nine months ended September 30, 2018 exclude $25,625 repayment of the CMQR loan and $150,000
repayment of the Revolving Credit Facilities, both of which were voluntary refinancings as repayments of these amounts were not required at such time.
|
FAD is subject to a number of limitations and assumptions and there can be no assurance that the Company will generate FAD sufficient to meet its intended
dividends. FAD has material limitations as a liquidity measure of the Company because such measure excludes items that are required elements of the Company’s net cash provided by operating activities as described below. FAD should not be considered
in isolation nor as a substitute for analysis of the Company’s results of operations under GAAP, and it is not the only metric that should be considered in evaluating the Company’s ability to meet its stated dividend policy. Specifically:
|
•
|
FAD does not include equity capital called from the Company’s existing limited partners, proceeds from any debt issuance or future equity offering,
historical cash and cash equivalents and expected investments in the Company’s operations.
|
|
•
|
FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified.
|
|
•
|
While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as the Company relies on alternative sources of liquidity to fund such purchases.
|
|
•
|
FAD does not reflect expenditures related to capital
expenditures, acquisitions and other investments as the Company has multiple sources of liquidity and intends to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of
equity.
|
|
•
|
FAD does not reflect any maintenance capital expenditures
necessary to maintain the same level of cash generation from our capital investments.
|
|
•
|
FAD does not reflect changes in working capital balances
as management believes that changes in working capital are primarily driven by short term timing differences, which are not meaningful to the Company’s distribution decisions.
|
|
•
|
Management has significant discretion to make distributions, and the Company is not bound by any contractual provision that requires it to use cash
for distributions.
|
If such factors were included in FAD, there can be no assurance that the results would be consistent with the Company’s presentation of FAD.
10