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OFFON

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

(FTAI)
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Fortress Transportation and Infrastructure Investors LLC : & INFRASTRUCTURE INVESTORS LLC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/29/2021 | 04:14pm EDT
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help you understand Fortress
Transportation and Infrastructure Investors LLC (the "Company," "we," "our" or
"us"). Our MD&A should be read in conjunction with our unaudited consolidated
financial statements and the accompanying notes, and with Part II, Item 1A,
"Risk Factors" included elsewhere in this Quarterly Report on Form 10-Q.
Overview
We own and acquire high quality infrastructure and related equipment that is
essential for the transportation of goods and people globally. We target assets
that, on a combined basis, generate strong cash flows with potential for
earnings growth and asset appreciation. We believe that there is a large number
of acquisition opportunities in our markets and that our Manager's expertise and
business and financing relationships, together with our access to capital, will
allow us to take advantage of these opportunities. We are externally managed by
FIG LLC (the "Manager"), an affiliate of Fortress Investment Group LLC
("Fortress"), which has a dedicated team of experienced professionals focused on
the acquisition of transportation and infrastructure assets since 2002. As of
June 30, 2021, we had total consolidated assets of $3.6 billion and total equity
of $1.0 billion.
Impact of COVID-19
Due to the outbreak of COVID-19, we have taken measures to protect the health
and safety of our employees, including having employees work remotely, where
possible. Market conditions due to the outbreak of COVID-19 resulted in asset
impairment charges and a decline in our equipment leasing revenues during the
six months ended June 30, 2021. A number of our lessees continue to experience
increased financial stress due to the significant decline in travel demand,
particularly as various regions experience spikes in COVID-19 cases. A number of
these lessees have been placed on non-accrual status as of June 30, 2021;
however, we believe our overall portfolio exposure is limited by maintenance
reserves and security deposits which are secured against lessee defaults. The
value of these deposits was $155.1 million as of June 30, 2021. The extent of
the impact of the COVID-19 pandemic on our operational and financial performance
will depend on future developments, including the duration, severity and spread
of the pandemic, as well as additional waves of COVID-19 infections and the
ultimate impact of related restrictions imposed by the U.S. and international
governments, all of which remain uncertain. For additional detail, see Liquidity
and Capital Resources and Part II, Item 1A. Risk Factors-"The COVID-19 pandemic
has severely disrupted the global economy and may have, and the emergence of
similar crises could have, material adverse effects on our business, results of
operations or financial condition."
Operating Segments
Our operations consist of two primary strategic business units - Infrastructure
and Equipment Leasing. Our Infrastructure Business acquires long-lived assets
that provide mission-critical services or functions to transportation networks
and typically have high barriers to entry. We target or develop operating
businesses with strong margins, stable cash flows and upside from earnings
growth and asset appreciation driven by increased use and inflation. Our
Equipment Leasing Business acquires assets that are designed to carry cargo or
people or provide functionality to transportation infrastructure. Transportation
equipment assets are typically long-lived, moveable and leased by us on either
operating leases or finance leases to companies that provide transportation
services. Our leases generally provide for long-term contractual cash flow with
high cash-on-cash yields and include structural protections to mitigate credit
risk.
Our reportable segments are comprised of interests in different types of
infrastructure and equipment leasing assets. We currently conduct our business
through the following three reportable segments: (i) Aviation Leasing, which is
within the Equipment Leasing Business, and (ii) Jefferson Terminal and (iii)
Ports and Terminals, which together comprise our Infrastructure Business. The
Aviation Leasing segment consists of aircraft and aircraft engines held for
lease and are typically held long-term. The Jefferson Terminal segment consists
of a multi-modal crude and refined products terminal and other related assets
which were acquired in 2014. The Ports and Terminals segment consists of
Repauno, acquired in 2016, a 1,630-acre deep-water port located along the
Delaware River with an underground storage cavern and multiple industrial
development opportunities. Additionally, Ports and Terminals includes an equity
method investment ("Long Ridge"), which is a 1,660-acre multi-modal port located
along the Ohio River with rail, dock, and multiple industrial development
opportunities, including a power plant under construction.
Corporate and Other primarily consists of debt, unallocated corporate general
and administrative expenses, and management fees. Additionally, Corporate and
Other includes (i) offshore energy related assets which consist of vessels and
equipment that support offshore oil and gas activities and are typically subject
to operating leases, (ii) an investment in an unconsolidated entity engaged in
the leasing of shipping containers and (iii) railroad assets retained after the
December 2019 sale, which consists of equipment that support a railcar cleaning
business.
Our reportable segments are comprised of investments in different types of
transportation infrastructure and equipment. Each segment requires different
investment strategies. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies; however,
financial information presented by segment includes the impact of intercompany
eliminations.
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Our Manager
On December 27, 2017, SoftBank Group Corp. ("SoftBank") completed its
acquisition of Fortress (the "SoftBank Merger"). In connection with the Softbank
Merger, Fortress operates within SoftBank as an independent business
headquartered in New York.
Results of Operations
Adjusted EBITDA (Non-GAAP)
The chief operating decision maker ("CODM") utilizes Adjusted EBITDA as the key
performance measure. This performance measure provides the CODM with the
information necessary to assess operational performance, as well as make
resource and allocation decisions. We believe Adjusted EBITDA is a useful metric
for investors and analysts for similar purposes of assessing our operational
performance.
Adjusted EBITDA is defined as net income (loss) attributable to shareholders
from continuing operations, adjusted (a) to exclude the impact of provision for
(benefit from) income taxes, equity-based compensation expense, acquisition and
transaction expenses, losses on the modification or extinguishment of debt and
capital lease obligations, changes in fair value of non-hedge derivative
instruments, asset impairment charges, incentive allocations, depreciation and
amortization expense, and interest expense, (b) to include the impact of our
pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to
exclude the impact of equity in earnings (losses) of unconsolidated entities and
the non-controlling share of Adjusted EBITDA.

                                       42

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Comparison of the three and six months ended June 30, 2021 and 2020 The following table presents our consolidated results of operations:

                                                                                                              Six Months Ended
                                             Three Months Ended June 30,                                          June 30,
(in thousands)                                 2021                  2020              Change              2021               2020              Change
Revenues
Equipment leasing revenues
Lease income                             $       42,902          $  44,634          $  (1,732)         $  83,129          $  94,447          $ (11,318)
Maintenance revenue                              32,003             27,105              4,898             47,511             59,100            (11,589)
Finance lease income                                443                413                 30                846                842                  4
Other revenue                                     6,223              7,682             (1,459)             6,692             11,894             (5,202)
Total equipment leasing revenues                 81,571             79,834              1,737            138,178            166,283            (28,105)
Infrastructure revenues
Lease income                                        432                287                145                862                407                455
Terminal services revenues                       11,120             12,794             (1,674)            21,541             29,205             (7,664)
Crude marketing revenues                              -                  -                  -                  -              8,210             (8,210)
Other revenue                                     3,792              1,394              2,398             13,483              3,044             10,439
Total infrastructure revenues                    15,344             14,475                869             35,886             40,866             (4,980)
Total revenues                                   96,915             94,309              2,606            174,064            207,149            (33,085)

Expenses
Operating expenses                               31,183             24,572              6,611             56,180             58,016             (1,836)
General and administrative                        3,655              4,388               (733)             7,907              9,051             (1,144)
Acquisition and transaction expenses              4,399              3,661                738              6,042              6,855               (813)
Management fees and incentive allocation
to affiliate                                      4,113              4,756               (643)             8,103              9,522             (1,419)
Depreciation and amortization                    47,371             41,720              5,651             91,906             83,917              7,989
Asset impairment                                     89             10,476            (10,387)             2,189             10,476             (8,287)
Interest expense                                 37,504             21,794             15,710             70,494             44,655             25,839
Total expenses                                  128,314            111,367             16,947            242,821            222,492             20,329

Other (expense) income
Equity in losses of unconsolidated
entities                                         (7,152)            (3,209)            (3,943)            (5,778)            (2,944)            (2,834)
Gain (loss) on sale of assets, net                3,987                768              3,219              4,798             (1,051)             5,849
Loss on extinguishment of debt                   (3,254)                 -             (3,254)            (3,254)            (4,724)             1,470
Interest income                                     454                 22                432                739                 63                676
Other (expense) income                             (884)                (1)              (883)              (703)                32               (735)
Total other expense                              (6,849)            (2,420)            (4,429)            (4,198)            (8,624)             4,426
Loss from continuing operations before
income taxes                                    (38,248)           (19,478)           (18,770)           (72,955)           (23,967)           (48,988)
Benefit from income taxes                        (1,640)            (3,750)             2,110             (1,471)            (3,848)             2,377
Net loss from continued operations              (36,608)           (15,728)           (20,880)           (71,484)           (20,119)           (51,365)
Net income from discontinued operations,
net of income taxes                                   -                  -                  -                  -              1,331             (1,331)
Net loss                                        (36,608)           (15,728)           (20,880)           (71,484)           (18,788)           (52,696)

Less: Net loss attributable to
non-controlling interest in consolidated
subsidiaries                                     (6,625)            (4,112)            (2,513)           (11,586)            (8,848)            (2,738)

Less: Dividends on preferred shares               6,551              4,079              2,472             11,176              8,618              2,558

Net loss attributable to shareholders $ (36,534) $ (15,695)

        $ (20,839)         $ (71,074)         $ (18,558)         $ (52,516)



                                       43
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The following table sets forth a reconciliation of net loss attributable to shareholders from continuing operations to Adjusted EBITDA:

                                                                                                               Six Months Ended
                                              Three Months Ended June 30,                                          June 30,
(in thousands)                                  2021                  2020              Change              2021               2020              Change
Net loss attributable to shareholders
from continuing operations                $      (36,534)         $ 

(15,695) $ (20,839) $ (71,074) $ (19,889) $ (51,185) Add: Benefit from income taxes

                    (1,640)            (3,750)             2,110             (1,471)            (3,848)            

2,377

Add: Equity-based compensation expense             1,439                411              1,028              2,553                702              1,851
Add: Acquisition and transaction expenses          4,399              3,661                738              6,042              6,855               

(813)

Add: Losses on the modification or
extinguishment of debt and capital lease
obligations                                        3,254                  -              3,254              3,254              4,724            

(1,470)

Add: Changes in fair value of non-hedge
derivative instruments                             1,391                  -              1,391             (6,573)               181            

(6,754)

Add: Asset impairment charges                         89             10,476            (10,387)             2,189             10,476            

(8,287)

Add: Incentive allocations                             -                  -                  -                  -                  -                  -
Add: Depreciation and amortization
expense (1)                                       54,168             48,341              5,827            106,811             97,405              9,406
Add: Interest expense                             37,504             21,794             15,710             70,494             44,655             25,839
Add: Pro-rata share of Adjusted EBITDA
from unconsolidated entities (2)                     (11)               126               (137)             2,391               (287)             2,678
Less: Equity in losses of unconsolidated
entities                                           7,152              3,209              3,943              5,778              2,944              2,834
Less: Non-controlling share of Adjusted
EBITDA (3)                                        (3,257)            (2,101)            (1,156)            (5,286)            (5,451)            

165

Adjusted EBITDA (non-GAAP)                $       67,954          $  66,472 

$ 1,482 $ 115,108 $ 138,467 $ (23,359)

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2021 and
2020: (i) depreciation and amortization expense of $47,371 and $41,720, (ii)
lease intangible amortization of $1,198 and $931 and (iii) amortization for
lease incentives of $5,599 and $5,690, respectively. Includes the following
items for the six months ended June 30, 2021 and 2020: (i) depreciation and
amortization expense of $91,906 and $83,917, (ii) lease intangible amortization
of $1,950 and $2,063 and (iii) amortization for lease incentives of $12,955 and
$11,425, respectively.
(2) Includes the following items for the three months ended June 30, 2021 and
2020: (i) net loss of $(7,353) and $(3,226), (ii) interest expense of $340 and
$446, (iii) depreciation and amortization expense of $1,900 and $1,446, (iv)
acquisition and transaction expenses of $0 and $531, (v) changes in fair value
of non-hedge derivative instruments of $5,078 and $929 and (vi) asset impairment
of $24 and $0, respectively. Includes the following items for the six months
ended June 30, 2021 and 2020: (i) net loss of $(6,173) and $(3,003),
(ii) interest expense of $527 and $481, (iii) depreciation and amortization
expense of $3,812 and $2,408, (iv) acquisition and transaction expenses of $0
and $612, (v) changes in fair value of non-hedge derivative instruments of
$4,201 and $(785) and (vi) asset impairment of $24 and $0, respectively.
(3) Includes the following items for the three months ended June 30, 2021 and
2020: (i) equity-based compensation of $292 and $52, (ii) provision for income
taxes of $13 and $15, (iii) interest expense of $732 and $512, (iv) depreciation
and amortization expense of $2,172 and $1,522 and (v) changes in fair value of
non-hedge derivative instruments of $48 and $0, respectively. Includes the
following items for the six months ended June 30, 2021 and 2020: (i) equity
based compensation of $490 and $99, (ii) provision for income taxes of $26 and
$43, (iii) interest expense of $1,013 and $1,231, (iv) depreciation and
amortization expense of $3,983 and $3,048, (v) changes in fair value of
non-hedge derivative instruments of $(226) and $38 and (vi) loss on
extinguishment of debt of $0 and $992, respectively.
Revenues
Comparison of the three months ended June 30, 2021 and 2020
Total revenues increased $2.6 million primarily due to higher revenues of $3.2
million in the Aviation Leasing segment and $2.3 million in the Ports and
Terminals segment, partially offset by lower revenues of $1.6 million in the
Jefferson Terminal segment and $1.4 million in Corporate and Other.
Equipment Leasing
Lease income decreased $1.7 million, primarily due to an increase in aircraft
redelivered and an increase in the number of customers placed on non-accrual
status, partially offset by an increase in the number of aircraft and engines
placed on lease.
Maintenance revenue increased $4.9 million, primarily due to an increase in the
number of engines placed on lease and higher aircraft and engine utilization,
partially offset by a decrease in the recognition of maintenance deposits due to
the early redelivery of aircraft.
Other revenue decreased $1.5 million, which primarily reflects (i) a decrease of
$2.0 million in the offshore energy business primarily due to one of our vessels
being on hire longer in 2020 compared to 2021, partially offset by (ii) an
increase of $0.6 million in the Aviation Leasing segment primarily due to an
increase in engine parts sales, partially offset by lower end-of-lease
redelivery compensation.
                                       44

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Infrastructure

Terminal services revenues decreased $1.7 million which primarily reflects lower
volumes at Jefferson Terminal due to lower global oil demand related to
COVID-19.
Other revenue increased $2.4 million, primarily due to operations commencing at
the LPG facility at Repauno.
Comparison of the six months ended June 30, 2021 and 2020
Total revenues decreased $33.1 million, primarily due to lower revenues of $23.7
million in the Aviation Leasing segment, $15.6 million in the Jefferson Terminal
segment and $3.9 million in Corporate and Other, partially offset by higher
revenues of $10.1 million in the Ports and Terminals segment.
Equipment Leasing
Lease income decreased $11.3 million, primarily due to an increase in aircraft
redelivered and an increase in the number of customers placed on non-accrual
status, partially offset by an increase in the number of aircraft and engines
placed on lease.
Maintenance revenue decreased $11.6 million, primarily due to an increase in
aircraft and engines redelivered and a decrease in the recognition of
maintenance deposits due to the early redelivery of aircraft, partially offset
by an increase in aircraft and engine utilization and an increase in the number
of engines placed on lease.
Other revenue decreased $5.2 million, primarily due to (i) a decrease of $2.7
million in the Aviation Leasing segment primarily due to lower end-of-lease
redelivery compensation and the settlement of an engine loss during the six
months ended June 30, 2020, partially offset by an increase in engine parts
sales and (ii) a decrease of $2.5 million in the offshore energy business
primarily due to one of our vessels being on hire longer in 2020 compared to
2021.
Infrastructure
Crude marketing revenues decreased $8.2 million due to Jefferson Terminal
exiting the crude marketing strategy in the fourth quarter of 2019.
Terminal services revenues decreased $7.7 million which primarily reflects lower
volumes at Jefferson Terminal due to lower global oil demand related to
COVID-19.
Other revenue increased $10.4 million, primarily due to (i) an unrealized gain
of $6.6 million recorded on butane forward purchase and sale contracts at
Repauno and (ii) operations commencing at the LPG facility at Repauno.
Expenses
Comparison of the three months ended June 30, 2021 and 2020
Total expenses increased $16.9 million, primarily due to higher (i) interest
expense, (ii) operating expenses and (iii) depreciation and amortization,
partially offset by lower (iv) asset impairment charges.
Interest expense increased $15.7 million, primarily due to:
•an increase of $14.9 million in Corporate and Other which reflects an increase
in the average outstanding debt of approximately $652.1 million due to increases
in (i) the Senior Notes due 2028 of $500.0 million, (ii) the Senior Notes due
2025 of $407.1 million and (iii) the Senior Notes due 2027 of $400.0 million,
partially offset by decreases in (iv) the Senior Notes due 2022 of $565.0
million, which was redeemed in full in May 2021 and (v) the Revolving Credit
Facility (as defined below in Liquidity and Capital Resources) of $90.0 million;
and
•an increase of $0.9 million at Jefferson Terminal due to the EB-5 Loan
Agreement which commenced in January 2021.
Operating expenses increased $6.6 million which primarily reflects:
•an increase of approximately $4.0 million in costs associated with the sale of
inventory in the Aviation Leasing segment;
•an increase of $1.0 million in compensation and benefits primarily in the Ports
and Terminals segment and Corporate and Other; and
•an increase of $0.8 million in repairs and maintenance in our offshore energy
business.
Depreciation and amortization increased $5.7 million primarily due to assets
placed into service at Repauno and Jefferson Terminal and additional assets
acquired in the Aviation Leasing segment.
Asset impairment decreased $10.4 million due to higher impairment charges in
2020 compared to 2021 in the Aviation Leasing segment.
                                       45

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Comparison of the six months ended June 30, 2021 and 2020
Total expenses increased $20.3 million, primarily due to higher (i) interest
expense and (ii) depreciation and amortization, partially offset by lower (iii)
asset impairment charges, (iv) operating expenses and (v) management fees and
incentive allocation to affiliate.
Interest expense increased $25.8 million, primarily due to:
•an increase of $27.3 million in Corporate and Other which reflects an increase
in the average outstanding debt of approximately $586.8 million due to increases
in (i) the Senior Notes due 2025 of $407.3 million, (ii) the Senior Notes due
2027 of $400.0 million and (iii) the Senior Notes due 2028 of $250.0 million,
partially offset by decreases in (iv) the Senior Notes due 2022 of $431.9
million, which was redeemed in full in May 2021, (v) the Revolving Credit
Facility of $26.7 million and (vi) the FTAI Pride Credit Agreement of $12.0
million, which was repaid in full in March 2020; and
•a decrease of $1.3 million at Jefferson Terminal due to (i) a debt refinancing
in the first quarter of 2020 which lowered their average interest rate,
partially offset by (ii) the EB-5 Loan Agreement which commenced in January
2021.
Depreciation and amortization increased $8.0 million primarily due to assets
placed into service at Repauno and Jefferson Terminal and additional assets
acquired in the Aviation Leasing segment.
Asset impairment decreased $8.3 million due to higher impairment charges in 2020
compared to 2021 in the Aviation Leasing segment.
Operating expenses decreased $1.8 million which primarily reflects:
•a decrease in cost of sales of $8.2 million primarily due to Jefferson Terminal
exiting the crude marketing strategy in the fourth quarter of 2019; and
•a decrease in bad debt expense of $2.5 million primarily in the Aviation
Leasing segment; partially offset by
•an increase of approximately $4.0 million in costs associated with the sale of
inventory in the Aviation Leasing segment;
•an increase in repairs and maintenance of $1.9 million primarily in our
offshore energy business; and
•an increase of $1.8 million in compensation and benefits primarily in the Ports
and Terminals segment and Corporate and Other.
Management fees and incentive allocation to affiliate decreased $1.4 million,
which reflects a decrease in the base management fee as our average total equity
is lower in 2021 compared to 2020.
Other expense
Total other expense increased $4.4 million during the three months ended
June 30, 2021, which primarily reflects (i) an increase of $3.9 million in
equity in losses of unconsolidated entities primarily due to unrealized losses
on power swaps at Long Ridge and (ii) a loss on extinguishment of debt of $3.3
million related to the redemption of the Senior Notes due 2022, partially offset
by (iii) an increase of $3.2 million in gain on sale of assets, net in the
Aviation Leasing segment.
Total other expense decreased $4.4 million during the six months ended June 30,
2021, which primarily reflects (i) an increase of $5.8 million in gain on sale
of assets, net in the Aviation Leasing segment and (ii) a net decrease in loss
on extinguishment of debt of $1.5 million, partially offset by (iii) an increase
of $2.8 million in equity in losses in unconsolidated entities primarily due to
unrealized losses on power swaps at Long Ridge.
Net loss from continuing operations
Net loss from continuing operations increased $20.9 million and $51.4 million
during the three and six months ended June 30, 2021, respectively, primarily due
to the changes noted above.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $1.5 million and decreased $23.4 million during the
three and six months ended June 30, 2021, respectively, primarily due to the
changes noted above.
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Aviation Leasing Segment
As of June 30, 2021, in our Aviation Leasing segment, we own and manage 284
aviation assets, consisting of 77 commercial aircraft and 207 engines.
As of June 30, 2021, 68 of our commercial aircraft and 134 of our engines were
leased to operators or other third parties. Aviation assets currently off lease
are either undergoing repair and/or maintenance, being prepared to go on lease
or held in short term storage awaiting a future lease. Our aviation equipment
was approximately 74% utilized during the three months ended June 30, 2021,
based on the percent of days on-lease in the quarter weighted by the monthly
average equity value of our aviation leasing equipment, excluding airframes. Our
aircraft currently have a weighted average remaining lease term of 36 months,
and our engines currently on-lease have an average remaining lease term of 18
months. The table below provides additional information on the assets in our
Aviation Leasing segment:
Aviation Assets                Widebody        Narrowbody       Total
Aircraft
Assets at January 1, 2021         15               63            78
Purchases                          -                9             9
Sales                             (3)               -            (3)
Transfers                          -               (7)           (7)
Assets at June 30, 2021           12               65            77

Engines
Assets at January 1, 2021         88               98           186
Purchases                          6               26            32
Sales                            (12)              (8)          (20)
Transfers                          -                9             9
Assets at June 30, 2021           82              125           207



                                       47
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The following table presents our results of operations:

                                                                                                           Six Months Ended
                                             Three Months Ended June 30,                                       June 30,
(in thousands)                                 2021                 2020             Change             2021              2020              Change
Revenues
Equipment leasing revenues
Lease income                             $       40,208          $ 42,505          $ (2,297)         $ 79,997          $ 89,446          $  (9,449)
Maintenance revenue                              32,003            27,105             4,898            47,511            59,100            (11,589)
Finance lease income                                443               413                30               846               842                  4
Other revenue                                     5,789             5,236               553             6,190             8,863             (2,673)

Total revenues                                   78,443            75,259             3,184           134,544           158,251            (23,707)

Expenses
Operating expenses                                9,145             4,577             4,568            13,395             8,648              4,747

Acquisition and transaction expenses                836             2,061            (1,225)            2,032             4,785             (2,753)

Depreciation and amortization                    33,732            32,203             1,529            66,295            64,834              1,461
Asset impairment                                     89            10,476           (10,387)            2,189            10,476             (8,287)

Total expenses                                   43,802            49,317            (5,515)           83,911            88,743             (4,832)

Other income (expense)
Equity in losses of unconsolidated                                                      253                                                    504
entities                                           (341)             (594)                               (681)           (1,185)
Gain (loss) on sale of assets, net                3,971               775             3,196             4,782            (1,044)             5,826
Interest income                                     357                17               340               624                29                595

Total other income (expense)                      3,987               198             3,789             4,725            (2,200)             6,925
Income before income taxes                       38,628            26,140            12,488            55,358            67,308            (11,950)
Benefit from income taxes                            (4)           (3,427)            3,423               (46)           (3,382)             3,336
Net income                                       38,632            29,567             9,065            55,404            70,690            (15,286)
Less: Net loss attributable to
non-controlling interest in consolidated
subsidiaries                                          -                 -                 -                 -                 -                  -

Net income attributable to shareholders $ 38,632 $ 29,567

       $  9,065          $ 55,404          $ 70,690          $ (15,286)



                                       48
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The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:

                                                                                                              Six Months Ended
                                               Three Months Ended June 30,                                        June 30,
(in thousands)                                   2021                 2020             Change              2021               2020              Change

Net income attributable to shareholders $ 38,632 $ 29,567

$ 9,065 $ 55,404 $ 70,690 $ (15,286) Add: Benefit from income taxes

                         (4)           (3,427)            3,423                (46)            (3,382)             

3,336

Add: Equity-based compensation expense                  -                 -                 -                  -                  -                  -
Add: Acquisition and transaction expenses             836             2,061            (1,225)             2,032              4,785             (2,753)
Add: Losses on the modification or
extinguishment of debt and capital lease
obligations                                             -                 -                 -                  -                  -                  -
Add: Changes in fair value of non-hedge
derivative instruments                                  -                 -                 -                  -                  -                  -
Add: Asset impairment charges                          89            10,476           (10,387)             2,189             10,476             (8,287)
Add: Incentive allocations                              -                 -                 -                  -                  -                  -
Add: Depreciation and amortization expense
(1)                                                40,529            38,824             1,705             81,200             78,322              2,878
Add: Interest expense                                   -                 -                 -                  -                  -                  -
Add: Pro-rata share of Adjusted EBITDA
from unconsolidated entities (2)                     (286)             (594)              308               (594)            (1,185)               

591

Less: Equity in losses of unconsolidated
entities                                              341               594              (253)               681              1,185               (504)
Less: Non-controlling share of Adjusted
EBITDA                                                  -                 -                 -                  -                  -                  -
Adjusted EBITDA (non-GAAP)                 $       80,137          $ 77,501 

$ 2,636 $ 140,866 $ 160,891 $ (20,025)

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2021 and
2020: (i) depreciation expense of $33,732 and $32,203, (ii) lease intangible
amortization of $1,198 and $931 and (iii) amortization for lease incentives of
$5,599 and $5,690, respectively. Includes the following items for the six months
ended June 30, 2021 and 2020: (i) depreciation expense of $66,295 and $64,834,
(ii) lease intangible amortization of $1,950 and $2,063 and (iii) amortization
for lease incentives of $12,955 and $11,425, respectively.
(2) Includes the following items for the three months ended June 30, 2021 and
2020: (i) net loss of $(341) and $(594) and (ii) depreciation and amortization
of $55 and $0, respectively. Includes the following items for the six months
ended June 30, 2021 and 2020: (i) net loss of $(681) and $(1,185) and (ii)
depreciation and amortization of $87 and $0, respectively.
Revenues
Comparison of the three months ended June 30, 2021 and 2020
Total revenue increased $3.2 million driven by higher maintenance revenue and
other revenue, partially offset by lower lease income.
•Maintenance revenue increased $4.9 million primarily due to an increase in the
number of engines placed on lease and higher aircraft and engine utilization,
partially offset by a decrease in the recognition of maintenance deposits due to
the early redelivery of aircraft.
•Other revenue increased $0.6 million primarily due to an increase in engine
parts sales, partially offset by lower end-of-lease redelivery compensation.
•Lease income decreased $2.3 million primarily due to an increase in aircraft
redelivered and an increase in the number of customers placed on non-accrual
status, partially offset by an increase in the number of aircraft and engines
placed on lease.
Comparison of the six months ended June 30, 2021 and 2020
Total revenue decreased $23.7 million driven by lower lease income, maintenance
revenue and other revenue.
•Maintenance revenue decreased $11.6 million primarily due to an increase in
aircraft and engines redelivered and a decrease in the recognition of
maintenance deposits due to the early redelivery of aircraft, partially offset
by an increase in aircraft and engine utilization and an increase in the number
of engines placed on lease.
•Lease income decreased $9.4 million primarily due to an increase in aircraft
redelivered and an increase in the number of customers placed on non-accrual
status, partially offset by an increase in the number of aircraft and engines
placed on lease.
•Other revenue decreased $2.7 million primarily due to lower end-of-lease
redelivery compensation and the settlement of an engine loss during the six
months ended June 30, 2020, partially offset by an increase in engine parts
sales.
                                       49

--------------------------------------------------------------------------------

Expenses

Comparison of the three months ended June 30, 2021 and 2020
Total expenses decreased $5.5 million, primarily due to a decrease in asset
impairment and acquisition and transaction expenses, partially offset by an
increase in operating expenses and depreciation and amortization expense.
•Asset impairment decreased $10.4 million for the adjustment of the carrying
value of leasing equipment to fair value, net of redelivery compensation. See
Note 4 to the consolidated financial statements for additional information.
•Acquisition and transaction expense decreased $1.2 million driven by lower
compensation and related costs associated with the acquisition of aviation
leasing equipment.
•Operating expenses increased $4.6 million primarily as a result of an increase
in costs associated with the sale of engine parts, shipping and storage fees,
professional fees and other operating expenses, partially offset by a decrease
in bad debt expense.
•Depreciation and amortization expense increased $1.5 million driven by an
increase in the number of assets owned and on lease, partially offset by an
increase in the number of aircraft redelivered and parted out into our engine
leasing pool.
Comparison of the six months ended June 30, 2021 and 2020
Total expenses decreased $4.8 million, primarily due to a decrease in asset
impairment and acquisition and transaction expenses, partially offset by an
increase in operating expenses and depreciation and amortization expense.
•Asset impairment decreased $8.3 million for the adjustment of the carrying
value of leasing equipment to fair value, net of redelivery compensation. See
Note 4 to the consolidated financial statements for additional information.
•Acquisition and transaction expense decreased $2.8 million driven by lower
compensation and related costs associated with the acquisition of aviation
leasing equipment.
•Operating expenses increased $4.7 million primarily as a result of an increase
in costs associated with the sale of engine parts, shipping and storage fees,
professional fees and other operating expenses, partially offset by a decrease
in bad debt expense.
•Depreciation and amortization expense increased driven $1.5 million by an
increase in the number of assets owned and on lease, partially offset by an
increase in the number of aircraft redelivered and parted out into our engine
leasing pool.
Other income (expense)
Total other income increased $3.8 million during the three months ended June 30,
2021, primarily due to an increase of $3.2 million in gain on the sale of
leasing equipment in 2021, an increase of $0.3 million in interest income and a
decrease of $0.3 million in Aviation Leasing's proportionate share of the
unconsolidated entities' net loss.
Total other income increased $6.9 million during the six months ended June 30,
2021, primarily due to an increase of $5.8 million in gain on the sale of
leasing equipment in 2021, an increase of $0.6 million in interest income and a
decrease of $0.5 million in Aviation Leasing's proportionate share of the
unconsolidated entities' net loss.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $2.6 million and $20.0 million during the three and
six months ended June 30, 2021, respectively, primarily due to the changes noted
above.
                                       50

--------------------------------------------------------------------------------

Jefferson Terminal Segment
The following table presents our results of operations:
                                                                                                               Six Months Ended
                                                Three Months Ended June 30,                                        June 30,
(in thousands)                                    2021                 2020             Change              2021               2020              Change

Infrastructure revenues
Lease income                                $          432          $    287          $    145          $     862          $     407          $     455
Terminal services revenues                          11,095            12,794            (1,699)            21,384             29,205             (7,821)
Crude marketing revenues                                 -                 -                 -                  -              8,210             (8,210)

Total infrastructure revenues                       11,527            13,081            (1,554)            22,246             37,822            (15,576)
Total revenues                                      11,527            13,081            (1,554)            22,246             37,822            (15,576)

Expenses
Operating expenses                                  11,777            12,290              (513)            23,498             34,233            (10,735)

Depreciation and amortization                        9,315             7,160             2,155             17,033             14,386              2,647
Interest expense                                     3,213             2,310               903              4,416              5,738             (1,322)
Total expenses                                      24,305            21,760             2,545             44,947             54,357             (9,410)

Other (expense) income

Loss on sale of assets, net                              -                (7)                7                  -                 (7)                 7
Loss on extinguishment of debt                           -                 -                 -                  -             (4,724)             4,724
Interest income                                          -                 -                 -                  -                 22                (22)
Other (expense) income                                (886)               (1)             (885)              (705)                32               (737)
Total other expense                                   (886)               (8)             (878)              (705)            (4,677)             3,972
Loss before income taxes                           (13,664)           (8,687)           (4,977)           (23,406)           (21,212)            (2,194)
Provision for income taxes                              59                74               (15)               116                209                (93)
Net loss                                           (13,723)           (8,761)           (4,962)           (23,522)           (21,421)            (2,101)
Less: Net loss attributable to
non-controlling interest in consolidated
subsidiaries                                        (6,538)           (4,020)           (2,518)           (11,554)            (8,681)            

(2,873)

Net loss attributable to shareholders $ (7,185) $ (4,741) $ (2,444) $ (11,968) $ (12,740) $

  772


                                       51
--------------------------------------------------------------------------------

The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

                                                                                                              Six Months Ended
                                               Three Months Ended June 30,                                        June 30,
(in thousands)                                   2021                 2020             Change              2021               2020             Change

Net loss attributable to shareholders $ (7,185) $ (4,741) $ (2,444) $ (11,968) $ (12,740) $

772

Add: Provision for income taxes                        59                74               (15)               116                209               (93)
Add: Equity-based compensation expense              1,270               214             1,056              2,111                429             1,682
Add: Acquisition and transaction expenses               -                 -                 -                  -                  -                 -
Add: Losses on the modification or
extinguishment of debt and capital lease
obligations                                             -                 -                 -                  -              4,724            (4,724)
Add: Changes in fair value of non-hedge
derivative instruments                                  -                 -                 -                  -                181              (181)
Add: Asset impairment charges                           -                 -                 -                  -                  -                 -
Add: Incentive allocations                              -                 -                 -                  -                  -                 -
Add: Depreciation and amortization expense          9,315             7,160             2,155             17,033             14,386             2,647
Add: Interest expense                               3,213             2,310               903              4,416              5,738            (1,322)
Add: Pro-rata share of Adjusted EBITDA
from unconsolidated entities                            -                 -                 -                  -                  -                 -
Less: Equity in earnings of unconsolidated
entities                                                -                 -                 -                  -                  -                 -
Less: Non-controlling share of Adjusted
EBITDA (1)                                         (3,117)           (2,049)           (1,068)            (5,325)            (5,390)               65
Adjusted EBITDA (non-GAAP)                 $        3,555          $  2,968          $    587          $   6,383          $   7,537          $ (1,154)

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2021 and
2020: (i) equity-based compensation of $286 and $45, (ii) provision for income
taxes of $13 and $15, (iii) interest expense of $722 and $485 and (iv)
depreciation and amortization expense of $2,096 and $1,504, respectively.
Includes the following items for the six months ended June 30, 2021 and 2020:
(i) equity-based compensation of $475 and $90, (ii) provision for income taxes
of $26 and $43, (iii) interest expense of $993 and $1,205, (iv) changes in fair
value of non-hedge derivative instruments of $0 and $38, (v) depreciation and
amortization expense of $3,831 and $3,022 and (vi) loss on extinguishment of
debt of $0 and $992, respectively.
Revenues
Total revenues decreased $1.6 million during the three months ended June 30,
2021, primarily due to a decrease in terminal services revenue of $1.7 million
which primarily reflects lower volumes due to lower global oil demand related to
COVID-19.
Total revenues decreased $15.6 million during the six months ended June 30,
2021, primarily due to decreases in (i) crude marketing revenues of $8.2 million
due to Jefferson Terminal exiting the crude marketing strategy in the fourth
quarter of 2019 and (ii) terminal services revenue of $7.8 million which
primarily reflects lower volumes due to lower global oil demand related to
COVID-19.
Expenses
Total expenses increased $2.5 million during the three months ended June 30,
2021, which reflects:
•an increase in depreciation and amortization of $2.2 million due to additional
assets being placed into service; and
•an increase in interest expense of $0.9 million primarily due to the EB-5 Loan
Agreement which commenced in January 2021.
Total expenses decreased $9.4 million during the six months ended June 30, 2021,
which reflects:
•a decrease in operating expenses of $10.7 million, primarily due to (i)
Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of
2019 and (ii) a decrease in facility operations expense due to lower volumes;
•a decrease in interest expense of $1.3 million due to a debt refinancing in the
first quarter of 2020 which lowered the average interest rate, partially offset
by the EB-5 Loan Agreement which commenced in January 2021; and
•an increase in depreciation and amortization of $2.6 million due to additional
assets being placed into service.
Other expense
Total other expense increased $0.9 million during the three months ended
June 30, 2021, primarily due to losses related to crude oil forward
transactions.
Total other expense decreased $4.0 million during the six months ended June 30,
2021, which primarily reflects a loss on extinguishment of debt of $4.7 million
in 2020, partially offset by losses related to crude oil forward transactions.
                                       52

--------------------------------------------------------------------------------

Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $0.6 million and decreased $1.2 million during the
three and six months ended June 30, 2021, respectively, primarily due to the
changes noted above.
Ports and Terminals
The following table presents our results of operations:
                                                                                                            Six Months Ended
                                              Three Months Ended June 30,                                       June 30,
(in thousands)                                  2021                 2020             Change             2021              2020             Change

Infrastructure revenues

Terminal services revenues                $           25          $      -          $     25          $    157          $      -          $   157
Other revenue                                      2,319                 -             2,319            10,283               314            9,969

Total revenues                                     2,344                 -             2,344            10,440               314           10,126

Expenses
Operating expenses                                 3,828             1,875             1,953             6,930             3,875            3,055

Acquisition and transaction expenses                   -                19               (19)                -               801             (801)

Depreciation and amortization                      2,216               378             1,838             4,427               754            3,673
Interest expense                                     295               354               (59)              574               747             (173)
Total expenses                                     6,339             2,626             3,713            11,931             6,177            5,754

Other (expense) income
Equity in losses of unconsolidated
entities                                          (7,015)           (2,582)           (4,433)           (5,473)           (1,676)          (3,797)
Gain on sale of equipment, net                        16                 -                16                16                 -               16
Interest income                                       91                 -                91                91                 -               91

Total other expense                               (6,908)           (2,582)           (4,326)           (5,366)           (1,676)          (3,690)
Loss before income taxes                         (10,903)           (5,208)           (5,695)           (6,857)           (7,539)             682
Benefit from income taxes                         (1,621)             (597)           (1,024)           (1,467)             (878)            (589)
Net loss                                          (9,282)           (4,611)           (4,671)           (5,390)           (6,661)           1,271
Less: Net loss attributable to
non-controlling interest in consolidated
subsidiaries                                         (87)              (92)                5               (32)             (167)             135

Net loss attributable to shareholders $ (9,195) $ (4,519)

        $ (4,676)         $ (5,358)         $ (6,494)         $ 1,136


                                       53
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The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

                                                                                                             Six Months Ended
                                               Three Months Ended June 30,                                       June 30,
(in thousands)                                   2021                 2020             Change             2021              2020             Change

Net loss attributable to shareholders $ (9,195) $ (4,519) $ (4,676) $ (5,358) $ (6,494) $ 1,136 Add: Benefit from income taxes

                     (1,621)             (597)           (1,024)           (1,467)             (878)            

(589)

Add: Equity-based compensation expense                169               197               (28)              442               273              169
Add: Acquisition and transaction expenses               -                19               (19)                -               801             (801)
Add: Losses on the modification or
extinguishment of debt and capital lease
obligations                                             -                 -                 -                 -                 -                -
Add: Changes in fair value of non-hedge
derivative instruments                              1,391                 -             1,391            (6,573)                -           (6,573)
Add: Asset impairment charges                           -                 -                 -                 -                 -                -
Add: Incentive allocations                              -                 -                 -                 -                 -                -
Add: Depreciation and amortization expense          2,216               378             1,838             4,427               754            3,673
Add: Interest expense                                 295               354               (59)              574               747             (173)
Add: Pro-rata share of Adjusted EBITDA
from unconsolidated entities (1)                      246               753              (507)            2,951               981            1,970
Less: Equity in losses of unconsolidated
entities                                            7,015             2,582             4,433             5,473             1,676            3,797
Less: Non-controlling share of Adjusted
EBITDA (2)                                           (140)              (52)              (88)               39               (61)             100
Adjusted EBITDA (non-GAAP)                 $          376          $   (885)         $  1,261          $    508          $ (2,201)         $ 2,709

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2021 and
2020: (i) net loss of $(7,015) and $(2,570), (ii) interest expense of $314 and
$417, (iii) depreciation and amortization expense of $1,845 and $1,446, (iv)
acquisition and transaction expenses of $0 and $531, (v) changes in fair value
of non-hedge derivative instruments of $5,078 and $929 and (vi) asset impairment
of $24 and $0, respectively. Includes the following items for the six months
ended June 30, 2021 and 2020: (i) net loss of $(5,473) and $(1,676), (ii)
interest expense of $474 and $422, (iii) depreciation and amortization expense
of $3,725 and $2,408, (iv) acquisition and transaction expenses of $0 and $612,
(v) changes in fair value of non-hedge derivative instruments of $4,201 and
$(785) and (vi) asset impairment of $24 and $0, respectively.
(2) Includes the following items for the three months ended June 30, 2021 and
2020: (i) equity-based compensation of $6 and $7, (ii) interest expense of $10
and $27, (iii) depreciation and amortization expense of $76 and $18 and (iv)
changes in fair value of non-hedge derivative instruments of $48 and $0,
respectively. Includes the following items for the six months ended June 30,
2021 and 2020: (i) equity-based compensation of $15 and $9, (ii) interest
expense of $20 and $26, (iii) depreciation and amortization expense of $152 and
$26 and (iv) changes in fair value of non-hedge derivative instruments of $(226)
and $0, respectively.
Revenues
Total revenue increased $2.3 million during the three months ended June 30,
2021, primarily due to operations commencing at the LPG facility at Repauno.
Total revenue increased $10.1 million during the six months ended June 30, 2021,
primarily due to (i) an unrealized gain of $6.6 million recorded on butane
forward purchase and sale contracts at Repauno and (ii) operations commencing at
the LPG facility at Repauno.
Expenses
Total expenses increased $3.7 million during the three months ended June 30,
2021 which reflects (i) higher operating expenses of $2.0 million due to
increased activity at Repauno and (ii) higher depreciation and amortization of
$1.8 million due to operations commencing at the LPG facility and additional
assets placed into service at Repauno.
Total expenses increased $5.8 million during the six months ended June 30, 2021
which reflects (i) higher operating expenses of $3.1 million due to increased
activity at Repauno and (ii) higher depreciation and amortization of $3.7
million due to operations commencing at the LPG facility and additional assets
placed into service at Repauno, partially offset by (iii) lower acquisition and
transaction expense of $0.8 million at Long Ridge due to lower professional
fees.
Other expense
Total other expense increased $4.3 million and $3.7 million during the three and
six months ended June 30, 2021, respectively, which reflects an increase in
equity in losses primarily due to unrealized losses on power swaps at Long
Ridge.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $1.3 million and $2.7 million during the three and six
months ended June 30, 2021, respectively, primarily due to the changes noted
above.
                                       54

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Corporate and Other
The following table presents our results of operations:
                                                                                                               Six Months Ended
                                             Three Months Ended June 30,                                           June 30,
(in thousands)                                 2021                  2020              Change              2021                2020              Change
Revenues
Equipment leasing revenues
Lease income                             $        2,694          $   2,129          $     565          $    3,132          $   5,001          $  (1,869)

Other revenue                                       434              2,446             (2,012)                502              3,031             (2,529)
Total equipment leasing revenues                  3,128              4,575             (1,447)              3,634              8,032             (4,398)
Infrastructure revenues
Other revenue                                     1,473              1,394                 79               3,200              2,730                470
Total infrastructure revenues                     1,473              1,394                 79               3,200              2,730                470
Total revenues                                    4,601              5,969             (1,368)              6,834             10,762             (3,928)

Expenses
Operating expenses                                6,433              5,830                603              12,357             11,260              1,097
General and administrative                        3,655              4,388               (733)              7,907              9,051             (1,144)
Acquisition and transaction expenses              3,563              1,581              1,982               4,010              1,269              2,741
Management fees and incentive allocation
to affiliate                                      4,113              4,756               (643)              8,103              9,522            

(1,419)

Depreciation and amortization                     2,108              1,979                129               4,151              3,943                208
Interest expense                                 33,996             19,130             14,866              65,504             38,170             27,334
Total expenses                                   53,868             37,664             16,204             102,032             73,215             28,817

Other (expense) income
Equity in earnings (losses) of
unconsolidated entities                             204                (33)               237                 376                (83)               459

Loss on extinguishment of debt                   (3,254)                 -             (3,254)             (3,254)                 -             (3,254)
Interest income                                       6                  5                  1                  24                 12                 12
Other income                                          2                  -                  2                   2                  -                  2
Total other expense                              (3,042)               (28)            (3,014)             (2,852)               (71)            (2,781)
Loss before income taxes                        (52,309)           (31,723)           (20,586)            (98,050)           (62,524)           (35,526)
(Benefit from) provision for income
taxes                                               (74)               200               (274)                (74)               203               (277)
Net loss                                        (52,235)           (31,923)           (20,312)            (97,976)           (62,727)           (35,249)
Less: Net loss attributable to
non-controlling interest in consolidated
subsidiaries                                          -                  -                  -                   -                  -                  -
Less: Dividends on preferred shares               6,551              4,079              2,472              11,176              8,618              2,558

Net loss attributable to shareholders $ (58,786) $ (36,002)

        $ (22,784)         $ (109,152)         $ (71,345)         $ (37,807)


                                       55
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The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

                                                                                                                Six Months Ended
                                              Three Months Ended June 30,                                           June 30,
(in thousands)                                  2021                  2020              Change              2021                2020              Change
Net loss attributable to shareholders     $      (58,786)         $ (36,002)         $ (22,784)         $ (109,152)         $ (71,345)         $ (37,807)
Add: (Benefit from) provision for income
taxes                                                (74)               200               (274)                (74)               203               

(277)

Add: Equity-based compensation expense                 -                  -                  -                   -                  -                  -
Add: Acquisition and transaction expenses          3,563              1,581              1,982               4,010              1,269              

2,741

Add: Losses on the modification or
extinguishment of debt and capital lease
obligations                                        3,254                  -              3,254               3,254                  -              

3,254

Add: Changes in fair value of non-hedge
derivative instruments                                 -                  -                  -                   -                  -                  -
Add: Asset impairment charges                          -                  -                  -                   -                  -                  -
Add: Incentive allocations                             -                  -                  -                   -                  -                  -
Add: Depreciation and amortization
expense                                            2,108              1,979                129               4,151              3,943                208
Add: Interest expense                             33,996             19,130             14,866              65,504             38,170             27,334
Add: Pro-rata share of Adjusted EBITDA
from unconsolidated entities (1)                      29                (33)                62                  34                (83)              

117

Less: Equity in (earnings) losses of
unconsolidated entities                             (204)                33               (237)               (376)                83               

(459)

Less: Non-controlling share of Adjusted
EBITDA                                                 -                  -                  -                   -                  -                  -
Adjusted EBITDA (non-GAAP)                $      (16,114)         $ (13,112)         $  (3,002)         $  (32,649)         $ (27,760)         $  (4,889)

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2021 and
2020: (i) net income (loss) of $3 and $(62) and (ii) interest expense of $26 and
$29, respectively. Includes the following items for the six months ended June
30, 2021 and 2020: (i) net loss of $(19) and $(142) and (ii) interest expense of
$53 and $59, respectively.
Revenues
Total revenues decreased $1.4 million during the three months ended June 30,
2021, primarily due to one of our vessels being on hire longer in 2020 compared
to 2021 in the offshore energy business.
Total revenues decreased $3.9 million during the six months ended June 30, 2021,
primarily due to (i) a decrease of $4.4 million in the offshore energy business
primarily due to one of our vessels being on hire longer in 2020 compared to
2021, partially offset by (ii) an increase of $0.5 million in our railcar
cleaning business due to higher volumes.
Expenses
Comparison of the three months ended June 30, 2021 and 2020
Total expenses increased $16.2 million primarily due to higher (i) interest
expense and (ii) acquisition and transaction expense, partially offset by lower
(iii) general and administrative expense.
Interest expense increased $14.9 million, which reflects an increase in the
average outstanding debt of approximately $652.1 million due to increases in (i)
the Senior Notes due 2028 of $500.0 million, (ii) the Senior Notes due 2025 of
$407.1 million and (iii) the Senior Notes due 2027 of $400.0 million, partially
offset by decreases in (iv) the Senior Notes due 2022 of $565.0 million, which
was redeemed in full in May 2021 and (v) the Revolving Credit Facility (as
defined below in Liquidity and Capital Resources) of $90.0 million.
Acquisition and transaction expense increased $2.0 million, primarily due to
higher professional fees.
General and administrative expense decreased $0.7 million, primarily due to
lower professional fees.
Comparison of the six months ended June 30, 2021 and 2020
Total expenses increased $28.8 million primarily due to higher (i) interest
expense and (ii) acquisition and transaction expense, partially offset by lower
(iii) management fees and incentive allocation to affiliate and (iv) general and
administrative expense.
Interest expense increased $27.3 million, which reflects an increase in the
average outstanding debt of approximately $586.8 million due to increases in (i)
the Senior Notes due 2025 of $407.3 million, (ii) the Senior Notes due 2027 of
$400.0 million and (iii) the Senior Notes due 2028 of $250.0 million, partially
offset by decreases in (iv) the Senior Notes due 2022 of $431.9 million, which
was redeemed in full in May 2021, (v) the Revolving Credit Facility of $26.7
million and (vi) the FTAI Pride Credit Agreement of $12.0 million, which was
repaid in full in March 2020.
Acquisition and transaction expense increased $2.7 million, primarily due to
higher professional fees.
                                       56

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Management fees and incentive allocation to affiliate decreased $1.4 million,
which reflects a decrease in the base management fee as our average total equity
is lower in 2021 compared to 2020.
General and administrative expense decreased $1.1 million, primarily due to
lower professional fees.
Other expense
Total other expense increased $3.0 million and $2.8 million during the three and
six months ended June 30, 2021, respectively, primarily due to a loss on
extinguishment of debt of $3.3 million related to the redemption of the Senior
Notes due 2022 in May 2021.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $3.0 million and $4.9 million during the three and six
months ended June 30, 2021, respectively, primarily due to the changes noted
above.

Liquidity and Capital Resources
In April 2021, we issued $500 million aggregate principal amount of senior
unsecured notes due 2028 (see Note 20 to the consolidated financial statements).
On May 7, 2021, we used a portion of the net proceeds to redeem in full the
Senior Notes due 2022, which totaled $400 million aggregate principal plus
accrued and unpaid interest.
In June 2017, we entered in a revolving credit facility (the "Revolving Credit
Facility"). In July 2021, we drew down an additional $50 million under the
Revolving Credit Facility. Following the drawdown, we have additional borrowing
capacity of $100 million under the Revolving Credit Facility.
In July 2021, we entered into a senior unsecured bridge term loan facility (the
"Bridge Facility") in an aggregate principal amount of $650 million in order to
finance the acquisition of Transtar, LLC, which closed on July 28, 2021. The
Bridge Facility matures in one year and bears interest at the Adjusted
Eurodollar Rate (determined in accordance with the credit agreement) plus 5.50%
per annum (the "Initial Margin") for the first three-month period. The Initial
Margin will increase by an additional 50 basis points at the end of each
three-month period thereafter until maturity. During the third quarter of 2021
we plan to raise debt and/or equity to refinance the Bridge Facility.
We believe we have sufficient liquidity to satisfy our cash needs, however, we
continue to evaluate and take action, as necessary, to preserve adequate
liquidity and ensure that our business can continue to operate during these
uncertain times. This includes limiting discretionary spending across the
organization and re-prioritizing our capital projects amid the COVID-19
pandemic.
Our principal uses of liquidity have been and continue to be (i) acquisitions of
transportation infrastructure and equipment, (ii) dividends to our shareholders
and holders of eligible participating securities, (iii) expenses associated with
our operating activities, and (iv) debt service obligations associated with our
investments.
•Cash used for the purpose of making investments was $265.1 million and $341.5
million during the six months ended June 30, 2021 and 2020, respectively.
•Dividends to shareholders and holders of eligible participating securities were
$68.0 million and $65.4 million during the six months ended June 30, 2021 and
2020, respectively.
•Uses of liquidity associated with our operating expenses are captured on a net
basis in our cash flows from operating activities. Uses of liquidity associated
with our debt obligations are captured in our cash flows from financing
activities.
Our principal sources of liquidity to fund these uses have been and continue to
be (i) revenues from our transportation infrastructure and equipment assets
(including finance lease collections and maintenance reserve collections) net of
operating expenses, (ii) proceeds from borrowings or the issuance of securities
and (iii) proceeds from asset sales.
•Cash flows (used in) provided from operating activities, plus the principal
collections on finance leases and maintenance reserve collections were $(46.4)
million and $66.5 million during the six months ended June 30, 2021 and 2020,
respectively.
•During the six months ended June 30, 2021, additional borrowings were obtained
in connection with the (i) Senior Notes due 2028 of $500.0 million, (ii)
Revolving Credit Facility of $250.0 million and (iii) EB-5 Loan Agreement of
$26.1 million. We made total principal repayments of $552.7 million relating to
the Senior Notes due 2022 and Revolving Credit Facility. During the six months
ended June 30, 2020, additional borrowings were obtained in connection with the
(i) Series 2020 Bonds of $264.0 million and (ii) Revolving Credit Facility of
$195.0 million. We made total principal repayments of $276.0 million relating to
the Series 2016 Bonds, Series 2012 Bonds, Jefferson Revolver and FTAI Pride
Credit Agreement.
•Proceeds from the sale of assets were $57.2 million and $37.7 million during
the six months ended June 30, 2021 and 2020, respectively.
•Proceeds from the issuance of preferred shares, net of underwriter's discount
and issuance costs were $101.2 million during the six months ended June 30,
2021.
                                       57

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We are currently evaluating several potential Infrastructure and Equipment
Leasing transactions, which could occur within the next 12 months. However, as
of the date of this filing, other than the acquisition of Transtar, LLC, none of
these transactions or negotiations are definitive or included within our planned
liquidity needs. We cannot assure if or when any such transaction will be
consummated or the terms of any such transaction.
Historical Cash Flow
Comparison of the six months ended June 30, 2021 and 2020
The following table compares the historical cash flow for the six months ended
June 30, 2021 and 2020:
                                                                      Six Months Ended June 30,
(in thousands)                                                        2021                   2020
Cash Flow Data:
Net cash (used in) provided by operating activities             $      (63,924)         $    44,652
Net cash used in investing activities                                 (204,209)            (298,122)
Net cash provided by financing activities                              249,960              111,001


Net cash used in operating activities increased $108.6 million, which primarily
reflects (i) an increase in our net loss of $52.7 million primarily due to lower
revenues and higher interest expense and (ii) changes in working capital of
$30.6 million.
Net cash used in investing activities decreased $93.9 million, primarily due to
(i) a decrease in acquisitions of property, plant and equipment of $45.9
million, (ii) a decrease in acquisitions of leasing equipment of $36.2 million
and (ii) lower proceeds from the sale of leasing equipment of $19.5 million.
Net cash provided by financing activities increased $139.0 million, primarily
due to (i) an increase in proceeds from debt of $317.1 million, (ii) an increase
in proceeds from the issuance of preferred shares of $101.5 million, partially
offset by (iii) an increase in repayments of debt of $276.7 million.
We use Funds Available for Distribution ("FAD") in evaluating our ability to
meet our stated dividend policy. FAD is not a financial measure in accordance
with GAAP. The GAAP measure most directly comparable to FAD is net cash provided
by operating activities. We believe FAD is a useful metric for investors and
analysts for similar purposes.
We define FAD as: net cash provided by operating activities plus principal
collections on finance leases, proceeds from sale of assets, and return of
capital distributions from unconsolidated entities, less required payments on
debt obligations and capital distributions to non-controlling interest, and
excludes changes in working capital. The following table sets forth a
reconciliation of Net Cash (Used in) Provided by Operating Activities to FAD:
                                                                        Six Months Ended June 30,
(in thousands)                                                          2021                  2020
Net Cash (Used in) Provided by Operating Activities               $      (63,924)         $   44,652
Add: Principal Collections on Finance Leases                               1,269               3,320
Add: Proceeds from Sale of Assets                                         57,155              37,687

Add: Return of Capital Distributions from Unconsolidated Entities

    -                   -
Less: Required Payments on Debt Obligations (1)                                -                   -
Less: Capital Distributions to Non-Controlling Interest                        -                   -
Exclude: Changes in Working Capital                                       88,248              57,687
Funds Available for Distribution (FAD)                            $       

82,748 $ 143,346

________________________________________________________

(1) Required payments on debt obligations for the six months ended June 30, 2021
exclude repayments of $402,704 for the Senior Notes due 2022 and $150,000 for
the Revolving Credit Facility and for the six months ended June 30, 2020 exclude
repayments of $144,200 for the Series 2016 Bonds, $50,262 for the Jefferson
Revolver, $45,520 for the Series 2012 Bonds and $36,009 for the FTAI Pride
Credit Agreement.
Limitations
FAD is subject to a number of limitations and assumptions and there can be no
assurance that we will generate FAD sufficient to meet our intended dividends.
FAD has material limitations as a liquidity measure because such measure
excludes items that are required elements of our net cash provided by operating
activities as described below. FAD should not be considered in isolation nor as
a substitute for analysis of our results of operations under GAAP, and it is not
the only metric that should be considered in evaluating our ability to meet our
stated dividend policy. Specifically:
•FAD does not include equity capital called from our existing limited partners,
proceeds from any debt issuance or future equity offering, historical cash and
cash equivalents and expected investments in our operations.
•FAD does not give pro forma effect to prior acquisitions, certain of which
cannot be quantified.
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•While FAD reflects the cash inflows from sale of certain assets, FAD does not
reflect the cash outflows to acquire assets as we rely on alternative sources of
liquidity to fund such purchases.
•FAD does not reflect expenditures related to capital expenditures, acquisitions
and other investments as we have multiple sources of liquidity and intend to
fund these expenditures with future incurrences of indebtedness, additional
capital contributions and/or future issuances of equity.
•FAD does not reflect any maintenance capital expenditures necessary to maintain
the same level of cash generation from our capital investments.
•FAD does not reflect changes in working capital balances as management believes
that changes in working capital are primarily driven by short term timing
differences, which are not meaningful to our distribution decisions.
•Management has significant discretion to make distributions, and we are not
bound by any contractual provision that requires us to use cash for
distributions.
If such factors were included in FAD, there can be no assurance that the results
would be consistent with our presentation of FAD.
Debt Obligations
Refer to Note 9 of the Consolidated Financial Statements for additional
information.
Contractual Obligations
The following table summarizes our future obligations, by period due, as of
June 30, 2021, under our various contractual obligations and commitments. We had
no off-balance sheet arrangements as of June 30, 2021.
                                Remainder of
(in thousands)                      2021                2022               2023               2024                2025              Thereafter             Total
Series 2020 Bonds               $        -          $       -          $       -          $       -          $    79,060          $   184,920          $   263,980
DRP Revolver                        25,000                  -                  -                  -                    -                    -               25,000
EB-5 Loan Agreement                      -                  -                  -                  -                    -               26,100               26,100
Revolving Credit Facility                -            100,000                  -                  -                    -                    -              100,000
Senior Notes due 2025                    -                  -                  -                  -              850,000                    -              850,000
Senior Notes due 2027                    -                  -                  -                  -                    -              400,000              400,000
Senior Notes due 2028                    -                  -                  -                  -                    -              500,000              500,000
Total principal payments on
loans and bonds payable             25,000            100,000                  -                  -              929,060            1,111,020            2,165,080

Total estimated interest
payments (1)                        67,878            135,457            135,190            135,190              120,280              235,576              829,571

Third-party obligations (2)          5,152             10,220              3,220                  -                    -                    -               18,592

Operating lease obligations          2,645              5,143              5,254              5,004                4,852              145,874              168,772

                                    75,675            150,820            143,664            140,194              125,132              381,450            1,016,935
Total contractual obligations   $  100,675          $ 250,820          $ 143,664          $ 140,194          $ 1,054,192          $ 1,492,470          $ 3,182,015

________________________________________________________

(1) Estimated interest rates as of June 30, 2021.
(2) Relates to a two-year pipeline capacity agreement at Jefferson Terminal.
We expect to meet our future short-term liquidity requirements through cash on
hand, unused borrowing capacity or future financings and net cash provided by
our current operations. We expect that our operating subsidiaries will generate
sufficient cash flow to cover operating expenses and the payment of principal
and interest on our indebtedness as they become due. We may elect to meet
certain long-term liquidity requirements or to continue to pursue strategic
opportunities through utilizing cash on hand, cash generated from our current
operations and the issuance of securities in the future. Management believes
adequate capital and borrowings are available from various sources to fund our
commitments to the extent required.
                                       59

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Application of Critical Accounting Policies
Goodwill-Goodwill includes the excess of the purchase price over the fair value
of the net tangible and intangible assets associated with the acquisition of
Jefferson Terminal. The carrying amount of goodwill was approximately $122.7
million as of both June 30, 2021 and December 31, 2020.
We review the carrying values of goodwill at least annually to assess impairment
since these assets are not amortized. An annual impairment review is conducted
as of October 1st of each year. Additionally, we review the carrying value of
goodwill whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. The determination of fair value involves
significant management judgment.
For an annual goodwill impairment assessment, an optional qualitative analysis
may be performed. If the option is not elected or if it is more likely than not
that the fair value of a reporting unit is less than its carrying amount, then a
quantitative impairment test is performed to identify potential goodwill
impairment and measure an impairment loss. A qualitative analysis was not
elected for the year ended December 31, 2020.
Beginning in 2020, we adopted new guidance regarding the testing and recognition
of a goodwill impairment which prior to 2020 required two steps. A goodwill
impairment assessment compares the fair value of a respective reporting unit
with its carrying amount, including goodwill. The estimate of fair value of the
respective reporting unit is based on the best information available as of the
date of assessment, which primarily incorporates certain factors including our
assumptions about operating results, business plans, income projections,
anticipated future cash flows and market data. If the estimated fair value of
the reporting unit is less than the carrying amount, a goodwill impairment is
recorded to the extent of any goodwill recorded in the reporting unit.
We estimate the fair value of the reporting units using an income approach,
specifically a discounted cash flow analysis. This analysis requires us to make
significant assumptions and estimates about the extent and timing of future cash
flows (including forecasted revenue growth rates and EBITDA margins), capital
expenditures and discount rates. The estimates and assumptions used consider
historical performance if indicative of future performance, and are consistent
with the assumptions used in determining future profit plans for the reporting
units.
Although we believe the estimates of fair value are reasonable, the
determination of certain valuation inputs is subject to management's judgment.
Changes in these inputs, including as a result of events beyond our control,
could materially affect the results of the impairment review. If the forecasted
cash flows of the Jefferson Terminal reporting unit or other key inputs are
negatively revised in the future, the estimated fair value of the Jefferson
Terminal reporting unit could be adversely impacted, potentially leading to an
impairment in the future that could materially affect our operating results. The
Jefferson Terminal segment forecasted revenue is dependent on the ramp up of
volumes under current and expected future contracts for storage of heavy and
light crude and refined products during 2021 and beyond subject to obtaining
rail capacity for crude, expansion of refined product distribution to Mexico and
movements in future oil spreads. Jefferson Terminal was designed to reach a
storage capacity of 21.7 million barrels, and 4.4 million of storage, or
approximately 20.3% of capacity, is currently operational. If the Company
strategy changes from planned capacity downward due to an inability to source
contracts or expand volumes, the fair value of the reporting units would be
negatively affected, which could lead to an impairment. The expansion of
refineries in the Beaumont/Port Arthur area, as well as growing crude oil
production in the U.S. and Canada, are expected to result in increased demand
for storage on the U.S. Gulf Coast. Although we do not have significant direct
exposure to volatility of crude oil prices, changes in crude oil pricing that
effect long term refining planned output could impact Jefferson Terminal
operations. Other assumptions utilized in our annual impairment analysis that
are significant in determination of the fair value of the reporting unit include
the discount rate utilized in our discounted cash flow analysis of 13.5% and our
terminal growth rate of 2%.
Furthermore, both inbound and outbound pipelines projects are becoming fully
operational early in 2021 to and from the Jefferson Terminal and will affect our
forecasted growth and therefore our estimated fair value. We expect the
Jefferson Terminal segment to continue to generate positive Adjusted EBITDA
during 2021. Although certain of our anticipated contracts or expected volumes
from existing contracts for Jefferson Terminal have been delayed, we continue to
believe our projected revenues are achievable. Further delays in executing these
contracts or achieving our projections could adversely affect the fair value of
the reporting unit. The impact of the COVID-19 global pandemic during 2020
certainly negatively affected refining volumes and therefore Jefferson Terminal
crude throughput but we anticipate the impact to normalize over 2021 and ramp
back to normal levels by 2022. Furthermore, we anticipate strengthening
macroeconomic demand for storage and the increasing spread between Western
Canadian Crude and Western Texas Intermediate as Canadian crude pipeline
apportionment increases and our pipeline connections become fully operational
during 2021, we remain positive for the outlook of Jefferson Terminal's earnings
potential.
There was no impairment of goodwill for the year ended December 31, 2020.
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements for recent accounting
pronouncements.
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