FTAI 06.30.2015 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2015
OR
 
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____
 
Commission file number 001-37386
FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
(Exact name of registrant as specified in its charter)

Delaware
 
32-0434238
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1345 Avenue of the Americas, 46th Floor,
New York, NY
 
10105
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant’s telephone number, including area code) (212) 798-6100
 
_______________________________________________
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨ 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer  þ
Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No  þ
There were 75,718,183 common shares representing limited liability company interests outstanding at August 12, 2015.




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
INDEX TO FORM 10-Q
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

2






FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands, except share and per share data)

 
Notes
 
June 30,
2015
 
December 31, 2014
 
 
 
Assets
 
 
 
 
 
Cash and cash equivalents

 
$
571,314

 
$
22,125

Restricted cash
2
 
17,750

 
21,084

Accounts receivable, net

 
13,274

 
9,588

Leasing equipment, net
4
 
521,517

 
509,379

Finance leases, net
5
 
96,671

 
102,813

Property, plant, and equipment, net
6
 
282,026

 
228,328

Investments in and advances to unconsolidated entities
7
 
22,147

 
21,569

Tendered bonds

 
298,000

 
298,000

Intangible assets, net
8
 
46,408

 
52,041

Goodwill
3
 
115,616

 
115,616

Other assets

 
25,819

 
24,048

Total assets
 
 
$
2,010,542

 
$
1,404,591

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accounts payable and accrued liabilities

 
$
29,263

 
$
43,174

Debt
9
 
584,274

 
592,867

Maintenance deposits

 
35,208

 
35,575

Security deposits

 
13,065

 
13,622

Other liabilities

 
6,283

 
5,856

Total liabilities

 
668,093

 
691,094

 
 
 
 
 
 
Commitments and contingencies
17
 

 

 
 
 
 
 
 
Equity
 
 
 
 
 
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 75,718,183 and 53,502,873 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively)

 
757

 
535

Additional paid in capital

 
1,220,629

 
613,683

Accumulated deficit


(2,332
)


Accumulated other comprehensive income

 
78

 
214

Shareholders' equity

 
1,219,132

 
614,432

Non-controlling interest in equity of consolidated subsidiaries

 
123,317

 
99,065

Total equity

 
1,342,449

 
713,497

Total liabilities and equity

 
$
2,010,542

 
$
1,404,591






See accompanying notes to consolidated financial statements.


3




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollar amounts in thousands, except share and per share data)

 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
Notes
 
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
 
 
Equipment leasing revenues
 
 
$
22,633

 
$
9,751

 
$
45,671

 
$
17,447

Infrastructure revenues
 
 
10,931

 
984

 
21,866

 
984

Total revenues
11
 
33,564

 
10,735

 
67,537

 
18,431

 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
17,600

 
2,808

 
32,319

 
3,345

General and administrative
 
 
1,989

 
721

 
2,337

 
948

Acquisition and transaction expenses

 
1,598

 
7,140

 
1,966

 
10,473

Management fees and incentive allocation to affiliate
14
 
3,485

 
1,086

 
5,899

 
1,837

Depreciation and amortization
4, 6, 8
 
10,765

 
2,792

 
21,327

 
4,623

Interest expense

 
4,757

 
755

 
9,572

 
1,572

Total expenses
 
 
40,194

 
15,302

 
73,420

 
22,798

 
 
 
 
 
 
 
 
 
 
Other income
 
 
 
 
 
 
 
 
 
Equity in earnings of unconsolidated entities
7
 
1,225

 
1,527

 
2,466

 
3,131

Gain on sale of equipment, net
 
 
288

 
2,255

 
291

 
2,215

Interest income
 
 
116

 
8

 
303

 
14

Other expense, net
 
 
(3
)
 
(11
)
 
(9
)
 
(20
)
Total other income
 
 
1,626

 
3,779

 
3,051

 
5,340

 
 
 
 
 
 
 
 
 
 
(Loss) Income before income taxes
 
 
(5,004
)
 
(788
)
 
(2,832
)
 
973

Provision for income taxes
13
 
266

 
399

 
496

 
558

Net (loss) income
 
 
(5,270
)
 
(1,187
)
 
(3,328
)
 
415

Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries
 
 
(4,433
)
 
165

 
(7,939
)
 
341

Net (loss) income attributable to shareholders
 
 
$
(837
)
 
$
(1,352
)
 
$
4,611

 
$
74

 
 
 
 
 
 
 
 
 
 
(Loss) Earnings per Share:
16
 
 
 
 
 
 
 
 
Basic and Diluted

 
$
(0.01
)
 
$
(0.03
)
 
$
0.08

 
$

Weighted Average Shares Outstanding:

 
 
 
 
 
 
 
 
Basic

 
62,879,023

 
53,502,873

 
58,216,849

 
53,502,873

Diluted


62,879,023


53,502,873


58,216,918


53,502,873



See accompanying notes to consolidated financial statements.


4




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net (loss) income
$
(5,270
)
 
$
(1,187
)
 
$
(3,328
)
 
$
415

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Change in fair value of cash flow hedge
3

 
(124
)
 
(136
)
 
(141
)
Comprehensive (loss) income
$
(5,267
)
 
$
(1,311
)
 
$
(3,464
)
 
$
274

Comprehensive (loss) income attributable to non-controlling interest
$
(4,433
)
 
$
165

 
$
(7,939
)
 
$
341

Comprehensive (loss) income attributable to shareholders
$
(834
)
 
$
(1,476
)
 
$
4,475

 
$
(67
)












































See accompanying notes to consolidated financial statements.

5




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)


Common Stock
 
Additional Paid In Capital
 
Accumulated Deficit
 
 Accumulated Other Comprehensive Income
 
 Non-Controlling Interest in Equity of Consolidated Subsidiaries
 
Total Equity
Equity - December 31, 2014
$
535

 
$
613,683

 
$

 
$
214

 
$
99,065

 
$
713,497


 
 
 
 
 
 
 
 
 
 

Comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 

Net (loss) income for the period

 
6,943

 
(2,332
)
 

 
(7,939
)
 
(3,328
)
Other comprehensive (loss) income

 

 

 
(136
)
 

 
(136
)
Total comprehensive (loss) income
 
 
 
 
 
 
 
 
(7,939
)
 
(3,464
)
Capital contributions

 
295,879

 

 

 
29,869

 
325,748

Capital distributions

 
(44,917
)
 

 

 
(254
)
 
(45,171
)
Issuance of common shares
222

 
349,017

 

 

 

 
349,239

Equity-based compensation

 
24

 

 

 
2,576

 
2,600

Equity - June 30, 2015
$
757

 
$
1,220,629

 
$
(2,332
)
 
$
78

 
$
123,317

 
$
1,342,449







































See accompanying notes to consolidated financial statements.

6




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)

 
Six Months Ended June 30,
 
2015
 
2014
 Cash flows from operating activities:
 
 
 
 Net (loss) income
$
(3,328
)
 
$
415

 Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 Equity in earnings of unconsolidated entities
(2,466
)
 
(3,131
)
 Gain on sale of equipment
(291
)
 
(2,215
)
 Income from forfeiture of security deposit
(1,120
)
 

 Equity-based compensation
2,600

 

 Depreciation and amortization
21,327

 
4,623

 Change in current and deferred income taxes
(14
)
 
558

 Change in fair value of non-hedge derivative
9

 
20

 Amortization of lease intangibles and incentives
3,913

 
856

 Amortization of deferred financing costs
733

 
73

 Operating distributions from unconsolidated entities
604

 
4,358

 Bad debt expense
159

 
43

 Other
(159
)
 

 Change in:
 
 
 
 Accounts receivable
(3,926
)
 
(1,982
)
 Other assets
60

 
(9,399
)
 Accounts payable and accrued liabilities
(1,762
)
 
11,836

 Management fees payable to affiliate
(2,138
)
 
573

 Other liabilities
430

 
(52
)
 Net cash provided by operating activities
14,631

 
6,576

 
 
 
 
 Cash flows from investing activities:
 
 
 
 Change in restricted cash
3,334

 

 Acquisition of other investment

 
(51,939
)
 Principal collections on finance leases
6,142

 
5,665

 Acquisition of leasing equipment
(26,234
)
 
(58,331
)
 Acquisition of property plant and equipment
(70,621
)
 
(300
)
 Acquisition of lease intangibles

 
(3,745
)
 Acquisition of CMQR

 
(11,308
)
 Purchase deposit for aircraft and aircraft engines
(4,756
)
 

 Proceeds from sale of leasing equipment
1,500

 
14,132

 Proceeds from sale of property, plant and equipment
125

 
93

 Proceeds from sale of equipment held for sale

 
135

 Return of capital distributions from unconsolidated entities
1,284

 
2,403

 Net cash used in investing activities
$
(89,226
)
 
$
(103,195
)




See accompanying notes to consolidated financial statements.

7




FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)

 
Six Months Ended June 30,
 
2015
 
2014
 Cash flows from financing activities:
 
 
 
 Proceeds from debt
$
200

 
$

 Repayment of debt
(8,633
)
 
(4,761
)
 Receipt of security deposits
1,025

 
1,074

 Return of security deposits
(219
)
 
(350
)
 Receipt of maintenance deposits
4,330

 
1,174

 Release of maintenance deposits
(5,842
)
 

 Proceeds from issuance of common shares, net of underwriter's discount
354,057

 

 Common shares issuance costs
(1,711
)
 

 Capital contributions from shareholders
295,879

 
159,100

 Capital distributions to shareholders
(44,917
)
 
(8,410
)
 Capital contributions from non-controlling interests
29,869

 

 Capital distributions to non-controlling interests
(254
)
 
(233
)
 Net cash provided by financing activities
623,784

 
147,594

 
 
 
 
 Net increase in cash and cash equivalents
549,189

 
50,975

 Cash and cash equivalents, beginning of period
22,125

 
7,236

 Cash and cash equivalents, end of period
$
571,314

 
$
58,211

 
 
 
 
 Supplemental disclosure of non-cash investing and financing activities:
 
 
 
 Acquisition of leasing equipment
$
(1,302
)
 
$
(22,020
)
 Acquisition of CMQR

 
(2,991
)
 Acquisition of property, plant and equipment
(59
)
 

 In-kind redemption of other investment

 
2,250

 Acquisition of other investment

 
(600
)
 Settled and assumed security deposits
(243
)
 
940

 Billed and assumed maintenance deposits
1,144

 
13,042

 Common share issuance costs
(3,107
)
 

 Change in fair value of cash flow hedge
(136
)
 
(141
)











See accompanying notes to consolidated financial statements.

8


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)




1.
ORGANIZATION
Fortress Transportation and Infrastructure Investors LLC (the “Company”) is a Delaware limited liability company which, through its subsidiary, Fortress Transportation and Infrastructure General Partnership (the “Partnership”), is engaged in the ownership and leasing of aviation equipment, offshore energy equipment and shipping containers, and also owns and operates a short line railroad in North America, Central Maine and Québec Railway (“CMQR”), and a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”). The Company has five reportable segments, Aviation Leasing, Offshore Energy, Shipping Containers, Jefferson Terminal and Railroad, which operate in two primary businesses, Equipment Leasing and Infrastructure (Note 15).
The Company is managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), pursuant to a management agreement (the “Management Agreement”) which provides for the Company to bear obligations for management fees and expense reimbursements payable to the Manager (Note 14).
At December 31, 2014, through their investment in the Company, the beneficial owners of the Partnership were Fortress Worldwide Transportation and Infrastructure Investors LP (the “Onshore Fund”), with an 89.97% interest and Fortress Worldwide Transportation and Infrastructure Offshore LP (the “Offshore Fund”) with a 9.98% interest; in addition, Fortress Worldwide Transportation and Infrastructure Master GP LLP (the “Master GP”) holds a 0.05% interest. The Master GP is owned by an affiliate of Fortress. The Onshore Fund and the Offshore Fund (collectively, the “Initial Shareholders”) are investment vehicles which are sponsored by Fortress. The general partner of the Onshore Fund and the Offshore Fund is owned by an affiliate of Fortress.
Initial Public Offering (“IPO”)
In May 2015, the remaining capital commitments of the investors of the Onshore Fund, Offshore Fund and Master GP were called.  Through a series of transactions, (i) the Master GP contributed its rights to previously undistributed incentive allocations pursuant to the Partnership Agreement in exchange for the limited partnership interests in the Onshore Fund and the Offshore Fund equal to the amount of any such undistributed incentive allocations and (ii) 53,502,873 common shares were issued to the Onshore Fund and Offshore Fund based on their relative interests in the Company.       
On May 20, 2015, the Company completed an IPO of 20 million common shares at a price to the public of $17.00 per share. On June 15, 2015, the underwriters exercised their overallotment option, pursuant to which the Company issued an additional 2.2 million shares to such underwriters at the IPO price. At June 30, 2015, the Company was owned 29.3% by public shareholders and 70.7% by the Initial Shareholders.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting—-The unaudited consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The consolidated balance sheet at December 31, 2014 has been derived from audited financial statements but does not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The interim financial information contained herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014 included in Amendment No. 7 to the Company’s Registration Statement on Form S-1, filed with the SEC on May 14, 2015.
Principles of Consolidation—The Company consolidates all entities in which it has a controlling financial interest and in which it has control over significant operating decisions, as well as variable interest entities (“VIEs”) in which the Company is the primary beneficiary. All significant intercompany transactions and balances have been eliminated. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.

9


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



The Company uses the equity method of accounting for investments in entities in which the Company exercises significant influence but which do not meet the requirements for consolidation. Under the equity method, the Company records its proportionate share of the underlying net income (loss) of these entities.
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.
The VIE in which the Company has an interest is WWTAI IES MT6015 Ltd. (“MT6015”), an entity formed in 2014 which has entered into a contract with a shipbuilder for the construction of an offshore multi service / inspection, maintenance and repair vessel (the “Vessel”) for a price of approximately $75 million. A subsidiary of the Company and a third party each hold a 50% interest in MT6015 and have equal representation on its board of directors. In connection with the initial capitalization of MT6015, another subsidiary of the Company provided the partner with a $3,725 loan which was utilized by the partner to fund its equity contribution to MT6015. In addition, the agreement provides the Company with disproportionate voting rights, in certain situations, as defined in the agreement. Accordingly, the Company determined that MT6015 is a VIE and that it was the primary beneficiary; accordingly, MT6015 has been presented on a consolidated basis in the accompanying financial statements.
At June 30, 2015 and December 31, 2014, MT6015 had total assets of $7,533 and $7,450, respectively, which are available only to settle the obligations of MT6015. Other than entering into the above commitment, MT6015 has conducted no operations, and no creditors of MT6015 have recourse to any assets or to the general credit of the Company.
Reclassifications—Certain prior period amounts have been reclassified to conform to current period presentation.
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, the Company encounters 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 the Company operates which could adversely impact the pricing of the services offered by the Company 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 the Company’s leasing equipment or operating assets. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its business or to refinance existing debt facilities. The Company, through its subsidiaries, also conducts operations outside of the United States; such international operations are subject to the same risks as those associated with its 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. The Company does not have significant exposure to foreign currency risk as all of its leasing arrangements, terminal services revenue and the majority of freight rail revenue are denominated in U.S. dollars.
Restricted Cash—Restricted cash of $17,750 and $21,084 at June 30, 2015 and December 31, 2014, respectively, consists of cash held in segregated accounts pursuant to the requirements of the Company’s debt agreements (Note 9).
Goodwill —The Company reviews the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as of October 1st of each year. Additionally, the Company reviews 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. Impairment is expensed when incurred. During the six months ended June 30, 2015, there was no impairment of goodwill.
Concentration of Credit Risk—The Company is subject to concentrations of credit risk with respect to amounts due from customers on its finance leases and operating leases. The Company attempts to limit its credit risk by performing ongoing credit evaluations. During the three and six months ended June 30, 2015, the Company earned approximately

10


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



25.6% and 24.4%, respectively, of its revenue from two customers in the following segments; one each in offshore energy and Jefferson Terminal. During the three and six months ended June 30, 2014, the Company earned approximately 58.7% and 59.1%, respectively, of its revenue from four customers in the following segments; two in aviation leasing, one in shipping containers, and one in offshore energy.
The Company maintains cash and restricted cash balances, which generally exceed federally insured limits, and subject the Company to credit risk, in high credit quality financial institutions. The Company monitors the financial condition of these institutions and has not experienced any losses associated with these accounts.
Provision for Doubtful Accounts—The Company determines the provision for doubtful accounts based on its assessment of the collectability of its receivables on a customer-by-customer basis. The provision for doubtful accounts at June 30, 2015 and December 31, 2014 was $39 and $111, respectively. Bad debt expense for the three and six months ended June 30, 2015 was $155 and $159, respectively. Bad debt expense for the three and six months ended June 30, 2014 was $0 and $43, respectively.
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. The Company’s comprehensive income (loss) represents net income (loss), as presented in the consolidated Statements of Operations, adjusted for fair value changes related to derivatives accounted for as cash flow hedges and the Company’s pro-rata share of items of comprehensive income derived from investments in unconsolidated entities.
The Company had reclassification adjustments of $35 and $72, which impacted accumulated other comprehensive income during the three and six months ended June 30, 2015, respectively. During the three and six months ended June 30, 2014, the Company had reclassification adjustments of $44 and $88, respectively.
Derivative Financial Instruments—In the normal course of business the Company may utilize interest rate derivatives to manage its exposure to interest rate risks, principally related to the hedging of variable rate interest payments on various debt facilities. If certain conditions are met, an interest rate derivative may be specifically designated as a cash flow hedge. In connection with its debt obligations (Note 9), the Company has entered into one interest rate derivative designated as a cash flow hedge and one non-hedge derivative. The Company does not enter into speculative derivative transactions. Derivative assets of $87 and $232, as of June 30, 2015 and December 31, 2014, respectively, were recorded within other assets in the Consolidated Balance Sheets.
On the date that the Company enters into an interest rate derivative, its designation as a cash flow hedge is formally documented. On an ongoing basis, an assessment is made as to whether the interest rate derivative has been highly effective in offsetting changes in the cash flows of the variable rate interest payments on the associated debt and whether the interest rate derivative is expected to remain highly effective in future periods. If it were to be determined that the interest rate derivative is not (or has ceased to be) highly effective as a cash flow hedge, the use of hedge accounting would be discontinued prospectively.
All interest rate derivatives are recognized on the balance sheet at their fair value. For interest rate derivatives designated as cash flow hedges, the effective portion of the interest rate derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the interest payments on the debt are recorded in earnings. The ineffective portion of the interest rate derivative, if any, is calculated and recorded in interest expense. Changes in fair value of non-hedge derivatives are recorded in earnings on a current basis. The estimated net amount of existing gains/losses reported in accumulated other comprehensive income at June 30, 2015 expected to be reclassified into earnings within the next 12 months is approximately $70.
In the event of a termination of an interest rate derivative prior to its contracted maturity, any related net gains or losses in accumulated other comprehensive income at the date of termination would be reclassified into earnings, unless it remains probable that interest payments on the debt will continue to occur, in which case the amount in accumulated other comprehensive income would be reclassified into earnings as the interest payments on the debt affect earnings.
Recent Accounting Pronouncements— In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08 (ASU 2014-08), Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The standard states that a strategic shift should include a disposal of (i) major geographical area of operations, (ii) a

11


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. ASU 2014-08 is effective prospectively for new disposals (or classifications as held for sale) that occur within annual periods beginning on or after December 14, 2014, and interim periods within those annual periods. The Company adopted ASU 2014-08 beginning January 1, 2015, which had no impact to the Company’s consolidated financial statements.
Unadopted Accounting Pronouncements—In May 2013, the FASB issued a revised exposure draft, Leases (the “Lease ED”), which would replace the existing guidance in the Accounting Standards Codification 840 (“ASC 840”), Leases. Pursuant to the Lease ED, leases would be classified as either leases of property or leases of assets other than property. Leases of property will continue to use operating lease accounting. Leases of assets other than property would use the receivable residual approach. Under the receivable residual approach, a lease receivable would be recognized for the lessor’s right to receive lease payments, a portion of the carrying amount of the underlying asset would be allocated between the right of use granted to the lessee and the lessor’s residual value and profit or loss would only be recognized at commencement if it is reasonably assured. It is anticipated that the final standard would have an effective date no earlier than 2017. When and if the proposed guidance becomes effective, it may have a significant impact on the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU-2014-09”) which provides a single comprehensive model for recognizing revenue from contracts with customers and supersedes existing revenue recognition guidance. The new standard requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. In July 2015, the FASB approved a one year deferral of ASU 2014-09 making it effective for annual reporting periods beginning on or after December 15, 2017 while also providing for early adoption but not before the original effective date. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 amends the consolidation guidance for VIEs and general partners’ investments in limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for reporting periods beginning after December 15, 2015 and interim periods within those fiscal years with early adoption permitted. ASU 2015-03 should be applied on a retrospective basis, wherein the balance sheet of each period presented should be adjusted to reflect the effects of adoption. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
3.
ACQUISITIONS
JEFFERSON TERMINAL
The Company, through its subsidiaries, acquired certain assets and assumed certain liabilities of Jefferson Refinery, LLC, Port of Beaumont Petroleum Transload Terminal I, LLC, and Port of Beaumont Petroleum Transload Terminal II, LLC (collectively “Jefferson Terminal”). Jefferson Terminal is comprised of complementary energy logistics assets and is headquartered in The Woodlands, Texas. Its principal operations are to engage in the business of terminalling, storage, throughput and transloading of crude oil and petroleum products. The acquisition of Jefferson Terminal was consummated on August 27, 2014.
Jefferson Terminal was purchased for an aggregate purchase price of approximately $607.8 million, including assumed liabilities of $522.0 million (of which $97.6 million relates to pre-existing debt relationships) and equity consideration of $38.2 million. The Company owns a 60% interest in Jefferson Terminal. The remaining 40% interest in Jefferson Terminal is owned by a portion of the retaining shareholders and a private equity fund sponsored by Fortress, each holding an interest of 20% and accounted for as non-controlling interests in the accompanying consolidated financial statements. In connection with the acquisition, a $100 million loan was also obtained (Note 9). The acquisition was

12


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



accounted for as a business combination under ASC 805 Business Combinations and the results of operations of the acquired business of Jefferson Terminal have been included in the consolidated financial statements since the date of acquisition. The Company’s acquisition accounting for Jefferson Terminal is still preliminary, pending the final determination of certain estimated amounts for property, plant, and equipment, construction in progress, and accrued liabilities. Subsequent to the acquisition, measurement period adjustments as of the acquisition date were made to increase both goodwill and estimated liabilities assumed by $390.
4.
LEASING EQUIPMENT, NET
Leasing equipment, net is summarized as follows:
 
June 30, 2015
Equipment
Aviation Leasing
 
Offshore Energy
 
Jefferson Terminal
 
Total
Leasing equipment:
$
324,525

 
$
182,355

 
$
44,327

 
$
551,207

Less: Accumulated depreciation
(21,983
)
 
(6,715
)
 
(992
)
 
(29,690
)
Leasing equipment, net
$
302,542

 
$
175,640

 
$
43,335

 
$
521,517

 
December 31, 2014
Equipment
Aviation Leasing
 
Offshore Energy
 
Jefferson Terminal
 
Total
Leasing equipment:
$
298,204

 
$
182,355

 
$
44,326

 
$
524,885

Less: Accumulated depreciation
(11,331
)
 
(3,737
)
 
(438
)
 
(15,506
)
Leasing equipment, net
$
286,873

 
$
178,618

 
$
43,888

 
$
509,379

During the six months ended June 30, 2015, the Company acquired ten commercial jet engines and sold one commercial jet engine. Depreciation expense for leasing equipment for the three and six months ended June 30, 2015 was $7,162 and $14,184 respectively. Depreciation expense for leasing equipment for the three and six months ended June 30, 2014 was $2,666 and $4,497, respectively.
5.
FINANCE LEASES, NET
Finance leases, net are summarized as follows:
 
June 30, 2015
 
Offshore Energy
 
Shipping Containers
 
Total
Finance leases
$
21,049

 
$
99,706

 
$
120,755

Unearned revenue
(10,747
)
 
(13,337
)
 
(24,084
)
Finance leases, net
$
10,302

 
$
86,369

 
$
96,671

 
December 31, 2014
 
Offshore Energy
 
Shipping Containers
 
Total
Finance leases
$
22,045

 
$
109,492

 
$
131,537

Unearned revenue
(11,580
)
 
(17,144
)
 
(28,724
)
Finance leases, net
$
10,465

 
$
92,348

 
$
102,813


13


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



At June 30, 2015, future minimum lease payments to be received under finance leases for the remainder of the lease terms are as follows:
 
Offshore Energy
 
Shipping Containers
 
Total
2015
$
1,012

 
$
17,374

 
$
18,386

2016
2,013

 
25,680

 
27,693

2017
2,008

 
51,308

 
53,316

2018
2,008

 
5,344

 
7,352

2019
2,008

 

 
2,008

Thereafter
12,000

 

 
12,000

Total
$
21,049

 
$
99,706

 
$
120,755

6.
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is summarized as follows:
 
June 30, 2015
 
Railroad
 
Jefferson Terminal
 
Total
Land and improvements
$
5,484

 
$
14,014

 
$
19,498

Construction in progress
2,921

 
60,976

 
63,897

Buildings and improvements
436

 
2,193

 
2,629

Crude oil terminal machinery and equipment

 
187,692

 
187,692

Track and track related assets
12,302

 

 
12,302

Railroad equipment
1,157

 

 
1,157

Railcars and locomotives
1,307

 

 
1,307

Computer hardware and software
19

 
34

 
53

Furniture and fixtures

 
317

 
317

Vehicles
379

 
258

 
637

 
24,005

 
265,484

 
289,489

Less: accumulated depreciation
(1,871
)
 
(5,592
)
 
(7,463
)
Property, plant and equipment, net
$
22,134

 
$
259,892

 
$
282,026

 
December 31, 2014
 
Railroad
 
Jefferson Terminal
 
Total
Land and improvements
$
5,484

 
$
9,573

 
$
15,057

Construction in progress

 
146,663

 
146,663

Buildings and improvements
436

 
2,139

 
2,575

Crude oil terminal machinery and equipment

 
50,627

 
50,627

Track and track related assets
12,022

 

 
12,022

Railroad equipment
1,268

 

 
1,268

Railcars and locomotives
1,293

 

 
1,293

Computer hardware and software

 
34

 
34

Furniture and fixtures

 
317

 
317

Vehicles
321

 
258

 
579


20,824

 
209,611

 
230,435

Less: accumulated depreciation
(962
)
 
(1,145
)
 
(2,107
)
Property, plant and equipment, net
$
19,862

 
$
208,466

 
$
228,328


14


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



During six months ended June 30, 2015 additional property, plant and equipment of $59,170 was acquired, and is mainly related to land and improvements and crude oil machinery and equipment. During the six months ended June 30, 2015, disposals of railroad equipment totaled $116. Depreciation expense for property, plant and equipment was $2,705 and $5,350, for the three and six months ended June 30, 2015, respectively. Depreciation expense for property, plant and equipment was $120 and $120, for the three and six months ended June 30, 2014, respectively.
7.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
The following table presents the ownership interest and carrying values of the Company’s investment in unconsolidated entities:
 
 
 
 
 
Carrying Value
 
Date Acquired
 
Ownership Percentage
 
June 30, 2015
 
December 31, 2014
Intermodal Finance I, Ltd.
September 2012
 
51%
 
$
22,147

 
$
21,569

Intermodal Finance I, Ltd.
The Company owns a 51% non-controlling interest in Intermodal Finance I, Ltd., a joint venture. Intermodal Finance I, Ltd owns a portfolio of multiple finance leases, representing 6 customers and comprising approximately 66,000 shipping containers as well as a portfolio of approximately 38,000 shipping containers subject to multiple operating leases.
Summary financial information for Intermodal Finance I, Ltd. is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Revenue


 


 


 


Total revenues
$
4,176

 
$
5,305

 
$
8,494

 
$
10,817

 
 
 
 
 
 
 
 
Expenses


 


 


 


Operating expenses
233

 
315

 
426

 
722

General and administrative
212

 
208

 
373

 
416

Depreciation and amortization
602

 
673

 
1,199

 
1,337

Interest expense
815

 
1,256

 
1,858

 
2,496

Loss on disposal of equipment
51

 

 
51

 

Total expenses
1,913

 
2,452

 
3,907

 
4,971

 
 
 
 
 
 
 
 
Other income
34

 

 
34

 

Total other income
34

 

 
34

 

Net income
2,297

 
2,853

 
4,621

 
5,846

 

 

 

 

Comprehensive income
$
2,297

 
$
2,853

 
$
4,621

 
$
5,846

 
 
 
 
 
 
 
 
Company's equity in earnings
$
1,225

 
$
1,527

 
$
2,466

 
$
3,131


15


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



 
June 30,
 
December 31,
 
2015
 
2014
Assets
 
 
 
Cash and cash equivalents
$
4,203

 
$
5,214

Restricted cash
1,968

 
2,320

Accounts receivable
932

 
1,051

Other receivables
1,061

 

Leasing assets, net of accumulated depreciation of $5,505 and $4,449, respectively
72,850

 
74,045

Finance leases, net
48,885

 
62,393

Deferred costs, net of accumulated amortization of $724 and $602, respectively
1,277

 
1,524

Other assets
2

 
8

Total assets
$
131,178

 
$
146,555

 
 
 
 
Liabilities
 
 
 
Accounts payable and accrued liabilities
182

 
157

Syndication liabilities
4,182

 
5,152

Debt
102,181

 
120,303

Other liabilities
424

 
383

Total liabilities
106,969

 
125,995

 
 
 
 
Members’ Equity
 
 
 
Members’ equity
24,209

 
20,560

Total members’ equity
24,209

 
20,560

Total liabilities and members’ equity
$
131,178

 
$
146,555

 
 
 
 
Company’s investment in and advances to unconsolidated entities
$
22,147

 
$
21,569


16


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)




8.
INTANGIBLE ASSETS AND LIABILITIES, NET
The Company’s intangible assets and liabilities, net are summarized as follows:
 
June 30, 2015
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets:
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
20,435

 
$

 
$

 
$
20,435

Accumulated amortization
(6,636
)
 

 

 
(6,636
)
Total acquired favorable lease intangibles, net
13,799

 

 

 
13,799

 
 
 
 
 
 
 
 
Customer relationships

 
35,385

 
225

 
35,610

Accumulated amortization

 
(2,948
)
 
(53
)
 
(3,001
)
Total acquired customer relationships, net

 
32,437

 
172

 
32,609

 
 
 
 
 
 
 
 
Total intangible assets, net
$
13,799

 
$
32,437

 
$
172

 
$
46,408

 
 
 
 
 
 
 
 
Intangible liabilities:
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
261

 
$

 
$

 
$
261

Accumulated amortization
(71
)
 

 

 
(71
)
Total acquired unfavorable lease intangibles, net
$
190

 
$

 
$

 
$
190

 
December 31, 2014
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets:
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
20,435

 
$

 
$

 
$
20,435

Accumulated amortization
(2,796
)
 

 

 
(2,796
)
Total acquired favorable lease intangibles, net
17,639

 

 

 
17,639

 
 
 
 
 
 
 
 
Customer relationships

 
35,385

 
225

 
35,610

Accumulated amortization

 
(1,180
)
 
(28
)
 
(1,208
)
Total acquired customer relationships, net

 
34,205

 
197

 
34,402

 
 
 
 
 
 
 
 
Total intangible assets, net
$
17,639

 
$
34,205

 
$
197

 
$
52,041

 
 
 
 
 
 
 
 
Intangible liabilities:
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
261

 
$

 
$

 
$
261

Accumulated amortization
(24
)
 

 

 
(24
)
Total acquired unfavorable lease intangibles, net
$
237

 
$

 
$

 
$
237


17


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)




Intangible liabilities relate to unfavorable lease intangibles and are included as a component of other liabilities in the accompanying Consolidated Balance Sheets. Amortization recorded in the Consolidated Statements of Operations is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Classification in Consolidated Statements of Operations
 
2015
 
2014
 
2015
 
2014
 
Lease intangibles
$
1,697

 
$
704

 
$
3,793

 
$
856

Equipment leasing revenues
Customer relationships
898

 
6

 
1,793

 
6

Depreciation and amortization
Total
$
2,595

 
$
710

 
$
5,586

 
$
862

 
As of June 30, 2015, estimated net annual amortization of intangibles is as follows:
 
June 30, 2015
2015
$
4,380

2016
8,093

2017
6,491

2018
6,142

2019
4,568

Thereafter
16,544

Total
$
46,218

9.
DEBT
Debt is summarized as follows:
 
June 30, 2015
 
December 31, 2014
Loans payable
 
 
 
Container Loan #1
$
38,400

 
$
42,040

Container Loan #2
17,947

 
19,115

FTAI Pride Credit Agreement
70,313

 
73,438

CMQR Credit Agreement
9,473

 
9,416

Jefferson Terminal Credit Agreement
99,250

 
99,750

Total loans payable
235,383

 
243,759

Bonds payable
 
 
 
Series 2010 Bonds
298,000

 
298,000

Series 2012 Bonds (including unamortized premium of $1,776 and $1,791 at June 30, 2015 and December 31, 2014, respectively)
48,506

 
48,521

Total bonds payable
346,506

 
346,521

Note payable to non-controlling interest
 
 
 
Note payable to non-controlling interest
2,385

 
2,587

Total note payable to non-controlling interest
2,385

 
2,587

 
 
 
 
Total debt
$
584,274

 
$
592,867

 
 
 
 
Total debt due within one year
$
23,508

 
$
23,915


10.
FAIR VALUE MEASUREMENTS

18


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



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 the Company to develop its 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).
The following tables set forth the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014, by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
 
Fair Value as of
 
Fair Value Measurements Using Fair Value Hierarchy as of
 
 
 
June 30, 2015
 
June 30, 2015
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets:

 

 

 

 

Cash and cash equivalents
$
571,314

 
$
571,314

 
$

 
$

 
Market
Restricted cash
17,750

 
17,750

 

 

 
Market
Derivative assets
87

 

 
87

 

 
Income
Total
$
589,151

 
$
589,064

 
$
87

 
$

 

 
 
 
 
 
 
 
 
 
 
 
Fair Value as of
 
Fair Value Measurements Using Fair Value Hierarchy as of
 
 
 
December 31, 2014
 
December 31, 2014
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets:

 

 

 

 

Cash and cash equivalents
$
22,125

 
$
22,125

 
$

 
$

 
Market
Restricted cash
21,084

 
21,084

 

 

 
Market
Derivative assets
232

 

 
232

 

 
Income
Total
$
43,441

 
$
43,209

 
$
232

 
$

 

At June 30, 2015 and December 31, 2014, the Company had no liabilities that were measured at fair value on a recurring basis.
The Company’s cash and cash equivalents and restricted cash consist largely of demand deposit accounts with initial maturities of 90 days or less that are considered to be highly liquid and easily tradable. 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. The Company’s derivatives are valued using discounted cash flow models with observable market inputs (i.e., cash rates, futures rates, swap rates and contractual cash flows) that can be verified and do not involve significant judgments and are therefore classified as Level 2 within the fair value hierarchy.
Except as discussed below, the Company’s financial instruments other than cash and cash equivalents, restricted cash, and derivatives consist principally of accounts receivable, tendered bonds, accounts payable and accrued liabilities, bonds payable, security deposits, maintenance deposits and management fees payable, whose fair value approximates

19


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



their carrying value based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.
The Company’s note receivable at June 30, 2015 and December 31, 2014, which is included as a component of other assets in the accompanying Consolidated Balance Sheet, consists of a $3,725 loan bearing interest at 12.0% made to the Company’s joint venture partner in MT 6015 (Note 2) which is collateralized by other property owned by the joint venture partner. The fair value of this note receivable approximates its carrying value due to it bearing a market rate of interest for similar types of loans and is classified as Level 2 within the fair value hierarchy.
The fair values of Container Loan #1 and Container Loan #2, reported in Debt in the Consolidated Balance Sheet at June 30, 2015 and December 31, 2014, was approximately $38,773 and $42,515, respectively, and $18,090 and $19,129, respectively, based upon current market interest rates for similar types of loans . The fair value of Series 2012 bonds, reported in Debt in the Consolidated Balance Sheet, was approximately $49,178 at June 30, 2015 and approximated carrying value at December 31, 2014, based upon market prices for similar municipal securities. The fair values of all other items reported as Debt in the Consolidated Balance Sheet approximate their carrying values due to their bearing market rates of interest, and are classified as Level 2 within the fair value hierarchy.
The Company measures the fair value of certain assets and liabilities 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 goodwill, intangible assets, property, plant and equipment and equipment held for lease owned by the Company. The Company records 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 the Company’s assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets.
During the six months ended June 30, 2015 and 2014, no impairment charges were recognized.
11.
REVENUES
Components of revenue are as follows:
 
Three Months Ended June 30, 2015
 
Equipment Leasing
 
Infrastructure
 
 
Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Total
Equipment leasing revenues

 

 

 

 

 

Lease income
$
9,808

 
$
6,337

 
$

 
$

 
$

 
$
16,145

Maintenance revenue
3,999

 

 

 

 

 
3,999

Finance lease income

 
419

 
1,869

 

 

 
2,288

Other revenue

 
176

 
25

 

 

 
201

Total equipment leasing revenues
$
13,807

 
$
6,932

 
$
1,894

 
$

 
$

 
$
22,633

Infrastructure revenues

 

 

 

 

 

 Lease income

 

 

 
1,410

 

 
1,410

 Rail revenues

 

 

 

 
5,558

 
5,558

 Terminal services revenues

 

 

 
3,963

 

 
3,963

Total infrastructure revenues
$

 
$

 
$

 
$
5,373

 
$
5,558

 
$
10,931

Total revenues
$
13,807

 
$
6,932

 
$
1,894

 
$
5,373

 
$
5,558

 
$
33,564


20


FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollar amounts in thousands, unless otherwise noted)



 
Three Months Ended June 30, 2014
 
Equipment Leasing
 
Infrastructure
 
 
Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
3,947

 
$
1,866

 
$

 
$

 
$

 
$
5,813

Maintenance revenue
1,377

 

 

 

 

 
1,377

Finance lease income

 
438

 
2,099

 

 

 
2,537

Other revenue

 

 
24

 

 

 
24

Total equipment leasing revenues
$
5,324

 
$
2,304

 
$
2,123

 
$

 
$

 
$
9,751

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
 Lease income

 

 

 

 

 

 Rail revenues

 

 

 

 
984

 
984

 Terminal services revenues

 

 

 

 

 

Total infrastructure revenues
$

 
$

 
$

 
$

 
$
984

 
$
984

Total revenues
$
5,324

 
$
2,304

 
$
2,123

 
$

 
$
984

 
$
10,735

 
Six Months Ended June 30, 2015
 
Equipment Leasing

Infrastructure


Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
19,547

 
$
12,603

 
$

 
$

 
$

 
$
32,150

Maintenance revenue
7,385

 

 

 

 

 
7,385

Finance lease income

 
829

 
3,770

 

 

 
4,599

Other revenue
1,120

 
367

 
50

 

 

 
1,537

Total equipment leasing revenues
$
28,052

 
$
13,799

 
$
3,820

 
$

 
$