FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
As of September 30, 2017, minimum future rental payments under operating and capital leases are as follows:NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
|
| | | |
2017 | $ | 2,047 |
|
2018 | 6,925 |
|
2019 | 6,514 |
|
2020 | 5,484 |
|
2021 | 4,166 |
|
Thereafter | 73,330 |
|
Total | $ | 98,466 |
|
17.20. SUBSEQUENT EVENTS
On October 3, 2017, the Company repaid the outstanding balance on the Revolving Credit Facility, including associated interest, for $60,489. The Company currently has no outstanding balance on the Revolving Credit Facility.
On November 2, 2017, the Company’sJuly 30, 2020, our Board of Directors declared a cash dividend on itsour common shares and eligible participating securities of $0.33 per share for the quarter ended SeptemberJune 30, 2017,2020, payable on November 27, 2017August 31, 2020 to the holders of record on NovemberAugust 17, 2017.2020.
Additionally, on July 30, 2020, our Board of Directors also declared a cash dividend on the Series A Preferred Shares and Series B Preferred Shares of $0.52 per share and $0.50 per share, respectively, payable on September 15, 2020 to the holders of record on September 1, 2020.
At the Market Program
On June 30, 2020, we entered into an At Market Issuance Sales Agreement with a third party to sell shares of our Series A Preferred Shares and Series B Preferred Shares (collectively, the “ATM Shares”), having an aggregate offering price of up to $100 million, from time to time, through an “at-the market” equity offering program (the “ATM Program”).
During July 2020, we sold 125,000 ATM Shares at an average price of $19.60 per share for net proceeds of $2.4 million. In connection with the shares sold under the ATM program, we granted options to the Manager relating to 17,265 shares of our common stock, the fair value of which was not material as of the grant date.
Senior Notes due 2027
On July 28, 2020, we issued $400 million aggregate principal amount of senior unsecured notes due 2027 (the “2027 Notes”). The 2027 Notes bear interest at a rate of 9.75% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2021.
We used a portion of the proceeds to repay $220 million of outstanding borrowings under the Revolving Credit Facility, and intend to use the remaining proceeds for general corporate purposes, which may include the repurchase or redemption of outstanding 2022 Notes and the funding of future acquisitions and investments, including aviation investments.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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”“Company,” “we,” “our” or “us”). The Company’sOur MD&A should be read in conjunction with itsour 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 are a large number of acquisition opportunities in our markets, and that our Manager’s expertise and business and financing relationships, together with our access to capital, 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 SeptemberJune 30, 2017,2020, we had total consolidated assets of $1.9$3.3 billion and total equity of $1.1$1.3 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. While the outbreak did not have a material impact on operating results on our Aviation Leasing business in the first half of 2020, and we have not yet seen a meaningful decline in the timing of lease payments, a number of our lessees are experiencing increased financial stress due to the significant decline in travel demand. A number of these lessees have been placed on non-accrual status as of June 30, 2020. 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 $224.1 million as of June 30, 2020. The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related restrictions put in place by the U.S. and international governments, all of which are uncertain and cannot be predicted. For additional detail, see Liquidity and Capital Resources and Item IA. Risk Factors—The current outbreak of the novel coronavirus (COVID-19) has severely disrupted the global economy and may have, and the emergence of other epidemic or pandemic 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. The Company targetsWe target or developsdevelop 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 our corporate operating segment and the following sixthree reportable segments: (i) Aviation Leasing, Offshore Energy, Shipping Containers, all of which areis within the Equipment Leasing Business, and (ii) Jefferson Terminal Railroad 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 Offshore Energy segment consists of vessels and equipment that support offshore oil and gas activities and are typically subject to long-term operating leases. The Shipping Containers segment consists of an investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers on both an operating lease and finance lease basis. The Jefferson Terminal segment consists of a multi-modal crude and refined products terminal and other related assets which were acquired in 2014. The Railroad segment consists of our Central Maine and Quebec Railway (“CMQR”) short line railroad operations also acquired in 2014. Ports and Terminals segment consists of Repauno, acquired in 2016, which is a 1,630 acre1,630-acre deep-water port located along the Delaware riverRiver with an underground storage cavern and multiple industrial development opportunities,opportunities. Additionally, Ports and Hannibal, acquired in June 2017,Terminals includes an equity method investment (“Long Ridge”), which is a 1,660 acre1,660-acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development opportunities.opportunities, including a power plant under construction.
The CorporateIn December 2019, we completed the sale of substantially all of our railroad business, which was formerly reported as our Railroad segment. Under ASC 205-20, this disposition met the criteria to be reported as discontinued operations and the assets, liabilities and results of operations have been presented as discontinued operations for all periods presented. Additionally, in accordance with ASC 280, we assessed our reportable segments. We determined that our retained investment of the railroad business no longer met the requirement as a reportable segment. Accordingly, we have presented this operating segment, along with Corporate results, within Corporate and Other effective in 2019. All prior periods have been restated for historical comparison across segments.
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 long-term 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.
Aviation Leasing Organizational Restructuring
We recently completed an organizational restructuring of the Aviation Leasing segment (“Aviation Restructuring”). Previously, Aviation Leasing’s employees were employed by the Manager and compensation and related costs associated with these employees were reimbursed to the Manager, per the Management Agreement. These costs were reported within Corporate and Other.
Effective in the first quarter of 2020, Aviation Leasing’s employees are employed by one of our subsidiaries. Compensation and related costs incurred by this subsidiary will be reported within the Aviation Leasing segment. Prior periods have been restated for historical comparison. See Note 16 to the consolidated financial statements for additional details.
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.
Our Manager
On February 14,December 27, 2017, FortressSoftBank Group Corp. (“SoftBank”) announced that it had entered into the Merger Agreement with SB Foundation Holdings LP, a Cayman Islands exempted limited partnership (“SoftBank Parent”) and an affiliatecompleted its previously announced acquisition of SoftBank, and Foundation Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“SoftBank Merger Sub”), pursuant to which SoftBank Merger Sub will merge with and into Fortress with Fortress surviving as a wholly owned subsidiary of SoftBank Parent. While Fortress’s senior investment professionals are expected to remain in place, including those individuals who perform services for us, there can be no assurance that the SoftBank merger will not have an impact on us or our relationship(the “SoftBank Merger”). In connection with the Manager.
Softbank Merger, Fortress informed the Company that it believes that under the Investment Advisers Act of 1940,operates within SoftBank as amended, the change of ownership resulting from the completion of the SoftBank merger will resultan independent business headquartered in a deemed assignment of the Management Agreement, and that as a result, the Manager is required to obtain the Company’s consent to the assignment. On May 22, 2017, the disinterested members of our board of directors unanimously approved the consent to the assignment. The disinterested members of our board of directors were advised by outside independent counsel.New York.
Results of Operations
Adjusted Net Income (Loss)EBITDA (Non-GAAP)
The Chief Operating Decision Maker (“CODM”)CODM utilizes Adjusted Net IncomeEBITDA 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.
Adjusted Net IncomeEBITDA is defined as net lossincome (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, and equity in earnings of unconsolidated entities, (b) to include the impact of cash income tax payments, and our pro-rata share of the Adjusted Net Income from unconsolidated entities, and (c) to exclude the impact of the non-controlling share of Adjusted Net Income. We evaluate investment performance for each reportable segment primarily based on Adjusted Net Income. We believe that net income attributable to shareholders, as defined by GAAP, is the most comparable earnings measurement with which to reconcile Adjusted Net Income.
Adjusted EBITDA (Non-GAAP)
We view Adjusted EBITDA as a secondary measurement to Adjusted Net Income, which we believe serves as a useful supplement to investors, analysts and management to measure economic performance of deployed revenue generating assets between periods on a consistent basis, and which we believe measures our financial performance and helps identify operational factors that management can impact in the short-term, namely our cost structure and expenses. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate Adjusted EBITDA in the same manner.
Adjusted EBITDA is defined as net loss attributable to shareholders, 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.
Comparison of the three and ninesix months ended SeptemberJune 30, 20172020 and September 30, 20162019
The following table presents our consolidated results of operations andoperations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Revenues | | | | | | | | | | | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 44,634 | | | $ | 51,888 | | | $ | (7,254) | | | $ | 94,447 | | | $ | 101,124 | | | $ | (6,677) | |
Maintenance revenue | 27,105 | | | 25,369 | | | 1,736 | | | 59,100 | | | 47,146 | | | 11,954 | |
Finance lease income | 413 | | | 881 | | | (468) | | | 842 | | | 1,707 | | | (865) | |
Other revenue | 7,682 | | | 1,062 | | | 6,620 | | | 11,894 | | | 1,675 | | | 10,219 | |
Total equipment leasing revenues | 79,834 | | | 79,200 | | | 634 | | | 166,283 | | | 151,652 | | | 14,631 | |
Infrastructure revenues | | | | | | | | | | | |
Lease income | 287 | | | 1,086 | | | (799) | | | 407 | | | 1,749 | | | (1,342) | |
Terminal services revenues | 12,794 | | | 8,565 | | | 4,229 | | | 29,205 | | | 15,250 | | | 13,955 | |
Crude marketing revenues | — | | | 59,204 | | | (59,204) | | | 8,210 | | | 89,983 | | | (81,773) | |
Other revenue | 1,394 | | | 1,793 | | | (399) | | | 3,044 | | | 6,108 | | | (3,064) | |
Total infrastructure revenues | 14,475 | | | 70,648 | | | (56,173) | | | 40,866 | | | 113,090 | | | (72,224) | |
Total revenues | 94,309 | | | 149,848 | | | (55,539) | | | 207,149 | | | 264,742 | | | (57,593) | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 24,572 | | | 85,783 | | | (61,211) | | | 58,016 | | | 140,093 | | | (82,077) | |
General and administrative | 4,388 | | | 3,551 | | | 837 | | | 9,051 | | | 7,735 | | | 1,316 | |
Acquisition and transaction expenses | 3,661 | | | 2,308 | | | 1,353 | | | 6,855 | | | 3,782 | | | 3,073 | |
Management fees and incentive allocation to affiliate | 4,756 | | | 5,710 | | | (954) | | | 9,522 | | | 9,548 | | | (26) | |
Depreciation and amortization | 41,720 | | | 42,052 | | | (332) | | | 83,917 | | | 80,915 | | | 3,002 | |
Asset impairment | 10,476 | | | — | | | 10,476 | | | 10,476 | | | — | | | 10,476 | |
Interest expense | 21,794 | | | 25,394 | | | (3,600) | | | 44,655 | | | 46,128 | | | (1,473) | |
Total expenses | 111,367 | | | 164,798 | | | (53,431) | | | 222,492 | | | 288,201 | | | (65,709) | |
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in losses of unconsolidated entities | (3,209) | | | (169) | | | (3,040) | | | (2,944) | | | (553) | | | (2,391) | |
Gain (loss) on sale of assets, net | 768 | | | 22,622 | | | (21,854) | | | (1,051) | | | 24,340 | | | (25,391) | |
Loss on extinguishment of debt | — | | | — | | | — | | | (4,724) | | | — | | | (4,724) | |
Interest income | 22 | | | 240 | | | (218) | | | 63 | | | 331 | | | (268) | |
Other (expense) income | (1) | | | 4,937 | | | (4,938) | | | 32 | | | 2,334 | | | (2,302) | |
Total other (expense) income | (2,420) | | | 27,630 | | | (30,050) | | | (8,624) | | | 26,452 | | | (35,076) | |
(Loss) income from continuing operations before income taxes | (19,478) | | | 12,680 | | | (32,158) | | | (23,967) | | | 2,993 | | | (26,960) | |
Benefit from income taxes | (3,750) | | | (2,328) | | | (1,422) | | | (3,848) | | | (2,061) | | | (1,787) | |
Net (loss) income from continued operations | (15,728) | | | 15,008 | | | (30,736) | | | (20,119) | | | 5,054 | | | (25,173) | |
Net income from discontinued operations, net of income taxes | — | | | 785 | | | (785) | | | 1,331 | | | 943 | | | 388 | |
Net (loss) income | (15,728) | | | 15,793 | | | (31,521) | | | (18,788) | | | 5,997 | | | (24,785) | |
Less: Net (loss) income attributable to non-controlling interest in consolidated subsidiaries: | | | | | | | | | | | |
Continuing operations | (4,112) | | | (4,580) | | | 468 | | | (8,848) | | | (7,940) | | | (908) | |
Discontinued operations | — | | | 41 | | | (41) | | | — | | | (15) | | | 15 | |
Dividends on preferred shares | 4,079 | | | — | | | 4,079 | | | 8,618 | | | — | | | 8,618 | |
Net (loss) income attributable to shareholders | $ | (15,695) | | | $ | 20,332 | | | $ | (36,027) | | | $ | (18,558) | | | $ | 13,952 | | | $ | (32,510) | |
The following table sets forth a reconciliation of net (loss) income (loss) attributable to shareholders from continuing operations to Adjusted Net Income (Loss)EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Net (loss) income attributable to shareholders from continuing operations | $ | (15,695) | | | $ | 19,588 | | | $ | (35,283) | | | $ | (19,889) | | | $ | 12,994 | | | $ | (32,883) | |
Add: Benefit from income taxes | (3,750) | | | (2,328) | | | (1,422) | | | (3,848) | | | (2,061) | | | (1,787) | |
Add: Equity-based compensation expense | 411 | | | 579 | | | (168) | | | 702 | | | 761 | | | (59) | |
Add: Acquisition and transaction expenses | 3,661 | | | 2,308 | | | 1,353 | | | 6,855 | | | 3,782 | | | 3,073 | |
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 | — | | | (3,470) | | | 3,470 | | | 181 | | | (250) | | | 431 | |
Add: Asset impairment charges | 10,476 | | | — | | | 10,476 | | | 10,476 | | | — | | | 10,476 | |
Add: Incentive allocations | — | | | 2,211 | | | (2,211) | | | — | | | 2,373 | | | (2,373) | |
Add: Depreciation and amortization expense (1) | 48,341 | | | 51,006 | | | (2,665) | | | 97,405 | | | 98,203 | | | (798) | |
Add: Interest expense | 21,794 | | | 25,394 | | | (3,600) | | | 44,655 | | | 46,128 | | | (1,473) | |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) | 126 | | | 24 | | | 102 | | | (287) | | | (94) | | | (193) | |
Less: Equity in losses of unconsolidated entities | 3,209 | | | 169 | | | 3,040 | | | 2,944 | | | 553 | | | 2,391 | |
Less: Non-controlling share of Adjusted EBITDA (3) | (2,101) | | | (2,785) | | | 684 | | | (5,451) | | | (4,938) | | | (513) | |
Adjusted EBITDA (non-GAAP) | $ | 66,472 | | | $ | 92,696 | | | $ | (26,224) | | | $ | 138,467 | | | $ | 157,451 | | | $ | (18,984) | |
(1) Includes the following items for the three and nine months ended SeptemberJune 30, 20172020 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 29,741 |
| | $ | 21,600 |
| | $ | 8,141 |
| | $ | 70,872 |
| | $ | 49,852 |
| | $ | 21,020 |
|
Maintenance revenue | 17,533 |
| | 7,646 |
| | 9,887 |
| | 46,778 |
| | 19,037 |
| | 27,741 |
|
Finance lease income | 385 |
| | 403 |
| | (18 | ) | | 1,156 |
| | 2,324 |
| | (1,168 | ) |
Other revenue | 1,957 |
| | 405 |
| | 1,552 |
| | 2,581 |
| | 767 |
| | 1,814 |
|
Total equipment leasing revenues | 49,616 |
| | 30,054 |
| | 19,562 |
| | 121,387 |
| | 71,980 |
| | 49,407 |
|
Infrastructure revenues | | | | | | | | | | | |
Lease income | 455 |
| | 16 |
| | 439 |
| | 594 |
| | 16 |
| | 578 |
|
Rail revenues | 8,258 |
| | 7,401 |
| | 857 |
| | 24,323 |
| | 23,107 |
| | 1,216 |
|
Terminal services revenues | 1,730 |
| | 4,255 |
| | (2,525 | ) | | 9,622 |
| | 11,271 |
| | (1,649 | ) |
Other revenue | 303 |
| | — |
| | 303 |
| | 303 |
| | — |
| | 303 |
|
Total infrastructure revenues | 10,746 |
| | 11,672 |
| | (926 | ) | | 34,842 |
| | 34,394 |
| | 448 |
|
Total revenues | 60,362 |
| | 41,726 |
| | 18,636 |
| | 156,229 |
| | 106,374 |
| | 49,855 |
|
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 23,688 |
| | 17,028 |
| | 6,660 |
| | 66,025 |
| | 48,937 |
| | 17,088 |
|
General and administrative | 3,439 |
| | 3,205 |
| | 234 |
| | 10,615 |
| | 9,154 |
| | 1,461 |
|
Acquisition and transaction expenses | 1,732 |
| | 1,688 |
| | 44 |
| | 5,064 |
| | 4,622 |
| | 442 |
|
Management fees and incentive allocation to affiliate | 3,771 |
| | 4,146 |
| | (375 | ) | | 11,529 |
| | 12,725 |
| | (1,196 | ) |
Depreciation and amortization | 24,784 |
| | 15,376 |
| | 9,408 |
| | 62,382 |
| | 43,294 |
| | 19,088 |
|
Interest expense | 8,914 |
| | 5,416 |
| | 3,498 |
| | 21,292 |
| | 15,839 |
| | 5,453 |
|
Total expenses | 66,328 |
| | 46,859 |
| | 19,469 |
| | 176,907 |
| | 134,571 |
| | 42,336 |
|
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in (losses) earnings of unconsolidated entities | 132 |
| | (1,161 | ) | | 1,293 |
| | (1,461 | ) | | (1,335 | ) | | (126 | ) |
Gain on sale of equipment and finance leases, net | 2,709 |
| | 40 |
| | 2,669 |
| | 6,726 |
| | 3,307 |
| | 3,419 |
|
Gain/(loss) on extinguishment of debt | — |
| | — |
| | — |
| | (2,456 | ) | | (1,579 | ) | | (877 | ) |
Asset impairment | — |
| | — |
| | — |
| | — |
| | (7,450 | ) | | 7,450 |
|
Interest income | 215 |
| | 206 |
| | 9 |
| | 582 |
| | 87 |
| | 495 |
|
Other income | 2,148 |
| | 485 |
| | 1,663 |
| | 2,180 |
| | 583 |
| | 1,597 |
|
Total other income (expense) | 5,204 |
| | (430 | ) | | 5,634 |
| | 5,571 |
| | (6,387 | ) | | 11,958 |
|
Loss before income taxes | (762 | ) | | (5,563 | ) | | 4,801 |
| | (15,107 | ) | | (34,584 | ) | | 19,477 |
|
Provision for income taxes | 909 |
| | 83 |
| | 826 |
| | 1,585 |
| | 195 |
| | 1,390 |
|
Net loss | (1,671 | ) | | (5,646 | ) | | 3,975 |
| | (16,692 | ) | | (34,779 | ) | | 18,087 |
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | (4,669 | ) | | (4,370 | ) | | (299 | ) | | (13,816 | ) | | (16,528 | ) | | 2,712 |
|
Net income (loss) attributable to shareholders | $ | 2,998 |
| | $ | (1,276 | ) | | $ | 4,274 |
| | $ | (2,876 | ) | | $ | (18,251 | ) | | $ | 15,375 |
|
Add: Provision for income taxes | 909 |
| | 83 |
| | 826 |
| | 1,585 |
| | 195 |
| | 1,390 |
|
Add: Equity-based compensation expense (income) | 165 |
| | 28 |
| | 137 |
| | 695 |
| | (3,818 | ) | | 4,513 |
|
Add: Acquisition and transaction expenses | 1,732 |
| | 1,688 |
| | 44 |
| | 5,064 |
| | 4,622 |
| | 442 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | 2,456 |
| | 1,579 |
| | 877 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Add: Changes in fair value of non-hedge derivative instruments | (1,036 | ) | | — |
| | (1,036 | ) | | (1,036 | ) | | 3 |
| | (1,039 | ) |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | 7,450 |
| | (7,450 | ) |
Add: Pro-rata share of Adjusted Net (Loss) Income from unconsolidated entities(1) | 86 |
| | (1,207 | ) | | 1,293 |
| | (1,599 | ) | | (1,444 | ) | | (155 | ) |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | (438 | ) | | (174 | ) | | (264 | ) | | (1,033 | ) | | (594 | ) | | (439 | ) |
Less: Equity in losses (earnings) of unconsolidated entities | (132 | ) | | 1,161 |
| | (1,293 | ) | | 1,461 |
| | 1,335 |
| | 126 |
|
Less: Non-controlling share of Adjusted Net (Loss) Income (2) | (447 | ) | | (170 | ) | | (277 | ) | | (503 | ) | | (2,891 | ) | | 2,388 |
|
Adjusted Net Income (Loss) | $ | 3,837 |
| | $ | 133 |
| | $ | 3,704 |
| | $ | 4,214 |
| | $ | (11,814 | ) | | $ | 16,028 |
|
______________________________________________________________________________________
(1) Pro-rata share2019: (i) depreciation and amortization expense of Adjusted Net Income from unconsolidated entities includes$41,720 and $42,052, (ii) lease intangible amortization of $931 and $2,202 and (iii) amortization for lease incentives of $5,690 and $6,752, respectively. Includes the Company’s proportionate share of the unconsolidated entities’ net income adjustedfollowing items for the excludedsix months ended June 30, 2020 and included items detailed in the table above.2019: (i) depreciation and amortization expense of $83,917 and $80,915, (ii) lease intangible amortization of $2,063 and $4,664 and (iii) amortization for lease incentives of $11,425 and $12,624, respectively.
(2) Non-controlling share of Adjusted Net (Loss) Income is comprised ofIncludes the following items for the threemonths endedSeptember June 30, 20172020 and 2016:2019: (i) equity-based compensationnet loss of $43$(3,226) and $6,$(276), (ii) provision for income taxinterest expense of $(1)$446 and $8,$34, (iii) depreciation and amortization expense of $1,446 and $266, (iv) acquisition and transaction expenses of $531 and $0 and (v) changes in fair value of non-hedge derivative instrumentsderivatives of $404$929 and $0, respectively. Includes the following items for the six months ended June 30, 2020 and 2019: (i) net loss of $(3,003) and $(696), (ii) interest expense of $481 and $70, (iii) depreciation and amortization expense of $2,408 and $532, (iv) acquisition and transaction expenses of $612 and $0 and $156, less (v) cash tax paymentschanges in fair value of $(1)non-hedge derivatives of $(785) and $0, respectively. Non-controlling share of Adjusted Net (Loss) Income is comprised of
(3) Includes the following items for the ninethree months endedSeptember June 30, 20172020 and 2016:2019: (i) equity-based compensation of $118$52 and $(1,608),$98, (ii) provision for income taxtaxes of $12$15 and $22,$8, (iii) loss on extinguishmentinterest expense of debt$512 and $1,100, (iv) depreciation and amortization expense of $0$1,522 and $616, (iv) acquisition$1,282 and transaction expenses of $0 and $156, (v) changes in fair value of non-hedge derivative instruments of $404 and $0 and (vi) asset impairment of $0 and $3,725, less (vii) cash tax payments of $31 and $20,$297, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA for the three and nine months ended September 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| 2017 | | 2016 | | | 2017 | | 2016 | |
| (in thousands) |
Net income (loss) attributable to shareholders | $ | 2,998 |
| | $ | (1,276 | ) | | $ | 4,274 |
| | $ | (2,876 | ) | | $ | (18,251 | ) | | $ | 15,375 |
|
Add: Provision for income taxes | 909 |
| | 83 |
| | 826 |
| | 1,585 |
| | 195 |
| | 1,390 |
|
Add: Equity-based compensation expense (income) | 165 |
| | 28 |
| | 137 |
| | 695 |
| | (3,818 | ) | | 4,513 |
|
Add: Acquisition and transaction expenses | 1,732 |
| | 1,688 |
| | 44 |
| | 5,064 |
| | 4,622 |
| | 442 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | 2,456 |
| | 1,579 |
| | 877 |
|
Add: Changes in fair value of non-hedge derivative instruments | (1,036 | ) | | — |
| | (1,036 | ) | | (1,036 | ) | | 3 |
| | (1,039 | ) |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | 7,450 |
| | (7,450 | ) |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense (3) | 26,686 |
| | 16,885 |
| | 9,801 |
| | 67,575 |
| | 48,076 |
| | 19,499 |
|
Add: Interest expense | 8,914 |
| | 5,416 |
| | 3,498 |
| | 21,292 |
| | 15,839 |
| | 5,453 |
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4) | 282 |
| | (287 | ) | | 569 |
| | (209 | ) | | 1,873 |
| | (2,082 | ) |
Less: Equity in losses of unconsolidated entities | (132 | ) | | 1,161 |
| | (1,293 | ) | | 1,461 |
| | 1,335 |
| | 126 |
|
Less: Non-controlling share of Adjusted EBITDA (5) | (2,753 | ) | | (3,379 | ) | | 626 |
| | (7,272 | ) | | (12,314 | ) | | 5,042 |
|
Adjusted EBITDA (non-GAAP) | $ | 37,765 |
| | $ | 20,319 |
| | $ | 17,446 |
| | $ | 88,735 |
| | $ | 46,589 |
| | $ | 42,146 |
|
(3) Depreciation and amortization expense includes $24,784 and $15,376 of depreciation and amortization expense, $1,147 and $1,403 of lease intangible amortization, and $755 and $106 of amortization for lease incentives in the three months ended September 30, 2017 and 2016, respectively. Depreciation and amortization expense includes $62,382 and $43,294 of depreciation and amortization expense, $3,494 and $4,557 of lease intangible amortization, and $1,699 and $225 of amortization for lease incentives in the nine months ended September 30, 2017 and 2016, respectively.
(4) Pro-rata share of Adjusted EBITDA from unconsolidated entities includes Includes the following items for the threesix months ended SeptemberJune 30, 20172020 and 2016: (i) net income (loss) of $86 and $(1,208), (ii) interest expense of $176 and $270, and (iii) depreciation and amortization expense
of $20 and $651, respectively. Pro-rata share of Adjusted EBITDA from unconsolidated entities includes the following items for the nine months ended September 30, 2017 and 2016: (i) net loss of $1,599 and $1,475, (ii) interest expense of $650 and $931, and (iii) depreciation and amortization expense of $740 and $2,417, respectively.
(5) Non-controlling share of Adjusted EBITDA is comprised of the following items for the three months ended September 30, 2017 and 2016:2019: (i) equity based compensation of $43$99 and $6,$119, (ii) provision for income taxes of $(1)$43 and $8,$26, (iii) interest expense of $485$1,231 and $1,538,$1,945, (iv) depreciation and amortization expense of $1,822$3,048 and $1,671,$2,372, (v) acquisition and transaction expenses of $0 and $156, and (vi) changes in fair value of non-hedge derivative instruments of $404$38 and $0, respectively. Non-controlling share of Adjusted EBITDA is comprised of the following items for the nine months ended September 30, 2017$476 and 2016: (i) equity based compensation of $118 and $(1,608), (ii) provision for income taxes of $12 and $22, (iii) interest expense of $1,489 and $4,494, (iv) depreciation and amortization expense of $5,249 and $4,909, (v)(vi) loss on extinguishment of debt of $0 and $616, (vi) changes in fair value of non-hedge derivative instruments of $404$992 and $0, (vii) acquisition and transaction expenses of $0 and $156, and (viii) asset impairment of $0 and $3,725, respectively.
Revenues
ForComparison of the three months ended SeptemberJune 30, 2017, total2020 and 2019
Total revenues increased $18,636 as compared to the three months ended September 30, 2016decreased $55.5 million primarily due to higher revenues across a majority of our segments, including Aviation Leasing, Offshore Energy, Railroad and Ports and Terminals. These increases were partially offset by lower revenues in ourthe Jefferson Terminal segment.
In Equipment Leasing
Other revenue increased $19,562 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016$6.6 million, which primarily due a greater numberreflects (i) an increase of assets on lease$5.2 million in the Aviation Leasing segment. Additionally, we continuedsegment due to an increase in end-of-lease redelivery compensation and (ii) an increase of $1.4 million in the offshore energy business primarily related to victualling income.
Maintenance revenue increased $1.7 million primarily due to the recognition of maintenance deposits due to the early redelivery of six aircraft offset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.
Lease income decreased $7.3 million primarily due to a decrease in the number of aircraftengines on lease and engines subject to leases with maintenance arrangements resulting in higher maintenance revenue of $9,887 and higher lease income of $8,141 compared to the three months ended September 30, 2016.
In Infrastructure, for the three months ended September 30, 2017, revenue was $926 lower than the three months ended September 30, 2016 primarily reflecting lower revenue from Jefferson Terminal of $2,525 resulting from a decrease in volume. This decrease was partially offset by increased revenue in our Ports and Terminal segment of $439 due to a lease contract at Hannibal, which was acquired in July of 2016, coupled with increased Railroad revenue of $857 reflecting an increase in traffic.
For the nine months ended September 30, 2017, total revenues increased $49,855 compared to the nine months ended September 30, 2016 due to higher revenues in our Aviation Leasing, Offshore Energy, Railroad and Ports and Terminals segments. Increases across the aforementioned segments were partially offset by decreases in the Jefferson Terminal and Shipping Containers segments.
In Equipment Leasing, lease income increased $21,020during the nine months endedSeptember 30, 2017 compared to the nine months ended September 30, 2016 primarily due to an increase in the number of assetscustomers placed on leasenon-accrual status offset by an increase in the number of aircraft on lease.
Infrastructure
Crude marketing revenue decreased $59.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019.
Terminal services revenue increased $4.2 million which primarily reflects (i) an increase of $5.3 million due to increased activity and storage capacity at Jefferson Terminal, partially offset by (ii) a decrease of $1.0 million at Long Ridge due to Long Ridge being accounted for as equity method investment starting in the fourth quarter of 2019 (“Long Ridge Transaction”).
Comparison of the six months ended June 30, 2020 and 2019
Total revenues decreased $57.6 million primarily due to lower revenues in the Jefferson Terminal and Ports and Terminals segments, partially offset by higher revenues in the Aviation Leasing segment. Additionally, we continuedsegment and Corporate and Other.
Equipment Leasing
Maintenance revenue increased $12.0 million primarily due to increase the numberrecognition of maintenance deposits due to the early redelivery of seven aircraft offset by lower aircraft and engines subject to leases with maintenance arrangements resulting inengine utilization as a result of the COVID-19 pandemic.
Other revenue increased $10.2 million, which primarily reflects (i) an increase to our maintenance revenue of $27,741. These increases were partially offset by a $1,168 decrease$8.4 million in finance lease income primarily driven by the sale of 42,000 shipping containers during the first quarter of 2016.
In Infrastructure, rail revenues increased $1,216 during the nine months endedSeptember 30, 2017 as compared to the nine months ended September 30, 2016Aviation Leasing segment due to an increase in trafficend-of-lease redelivery compensation and expanded service offeringssettlement of an engine loss and (ii) an increase of $1.9 million in the firstoffshore energy business primarily related to victualling income.
Lease income decreased $6.7 million primarily due to a decrease in the number of engines on lease and an increase in the number of customers placed on non-accrual status offset by an increase in the number of aircraft on lease.
Infrastructure
Crude marketing revenue decreased $81.8 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 20172019. Revenues in 2020 include contracts executed in 2019 but delivered in 2020.
Other revenue decreased $3.1 million, which reflects (i) a decrease of $3.1 million due to the Long Ridge Transaction, (ii) a decrease in butane sales of $1.1 million at Repauno, partially offset by (iii) an increase of $1.1 million due to higher volume in our Railroad segment. Lease incomerailcar cleaning business.
Terminal services revenue increased $14.0 million which primarily reflects (i) an increase of $16.8 million due to increased activity and storage capacity at Jefferson Terminal, partially offset by $578(ii) a decrease of $2.8 million due to the Long Ridge Transaction.
Expenses
Comparison of the three months ended June 30, 2020 and 2019
Total expenses decreased $53.4 million, primarily due to (i) lower operating expenses, (ii) lower interest expense, partially offset by (iii) an asset impairment.
Operating expenses decreased $61.2 million, primarily due to a decrease in cost of sales of $61.4 million primarily due to Jefferson Terminal exiting the crude marketing strategy in the nine months ended September 30, 2017 from fourth quarter of 2019.
Interest expense decreased $3.6 million, primarily due to:
•a lease contractdecrease of $2.2 million at Hannibal,Jefferson Terminal due to the Jefferson Refinancing; and
•a decrease of $1.4 million in Corporate and Other primarily due to a decrease in interest expense related to the FTAI Pride Credit Agreement, which was acquiredrepaid in June 2017. full in March 2020.
The increasesabove decreases were partially offset by lower Jefferson Terminal revenuean asset impairment charge of $1,649$10.5 million in 2020 in the Aviation Leasing segment.
Comparison of the six months ended June 30, 2020 and 2019
Total expenses decreased $65.7 million, primarily due to lower volumes(i) operating expenses and (ii) interest expense, partially offset by higher (iii) an asset impairment charge, (iv) depreciation and amortization and (v) acquisition and transaction expenses.
Operating expenses decreased $82.1 million, primarily due to:
•a decrease in the first nine monthscost of 2017 compared to the same periodsales of 2016.
Expenses
For the three months ended September 30, 2017 total expenses increased $19,469 compared to the three months ended September 30, 2016$81.9 million primarily due to higher: (i) depreciation expense, (ii) operating expensesJefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019;
•a decrease in bad debt of $1.2 million primarily in the Aviation Leasing segment, partially offset by
•an increase in compensation and (iii) interest expense.
Operating expenses increased $6,660 during the three months ended September 30, 2017 as compared to the three months ended September 30, 2016benefits of $2.9 million primarily due to higher (i) professional fees of $2,175, (ii) facility operations costs of $1,455 reflecting increased costsheadcount in our Ports & Terminal and Railroad segments, (iii) compensation of $947, including stock-based compensation and benefits at ourthe Jefferson Terminal and Railroad segments, coupled with non-stock-based compensation expensesAviation Leasing segments.
Interest expense decreased $1.5 million, primarily due to:
•a decrease of $2.7 million at Jefferson Terminal due to the Jefferson Refinancing, partially offset by
•an increase of $1.1 million in Corporate and Other which reflects an increase in our Ports and Terminals segmentaverage outstanding debt of approximately $64.0 million, which primarily consists of (i) an increase of $100.0 million for the 2025 Notes, (ii) an increase of $25.1 million for the 2022 Notes, (iii) a decrease of $26.7 million for the Revolving Credit Facility and (iv) operating expenditures related to Offshore Energy equipment.a decrease of $34.4 million for the FTAI Pride Credit Agreement, which was repaid in March 2020.
The above decreases were partially offset by an asset impairment charge of $10.5 million in 2020 in the Aviation Leasing segment.
Depreciation and amortization expenses increased $9,408 during the three months ended September 30, 2017 as compared$3.0 million, which reflects (i) an increase of $3.7 million primarily due to the three months ended September 30, 2016assets placed into service at Jefferson Terminal, (ii) an increase of $1.6 million primarily due to additional assets acquired and placed on leaseinto service in the Aviation Leasing segment.segment, partially offset by (iii) a decrease of $2.8 million due to the Long Ridge Transaction.
InterestAcquisition and transaction expenses increased $3.1 million due to additional compensation and related costs associated with the acquisition of aviation leasing equipment.
Other (expense) income
Total other expense increased $3,498$30.1 million during the three months ended SeptemberJune 30, 2017 as compared to the three months ended September 30, 20162020, which primarily due to the issuance of the Senior Notes in the first quarter of 2017 coupled with the drawdown of the Revolving Credit Facility in the third quarter of 2017. Refer to Note 8 of the Consolidated Financial Statements for further detail.
For the nine months ended September 30, 2017 total expenses increased $42,336 compared to the nine months ended September 30, 2016 mainly due to higherreflects (i) operating expenses, (ii) depreciation and amortization and (iii) interest expense.
Operating expenses increased $17,088 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to an increase in (i) compensation, including stock compensation and benefits, of $7,188 primarily due to a reversal of stock compensation in the first quarter of 2016 coupled with higher compensation costs in our Ports and Terminals and Jefferson segments, (ii) facility operations of $3,968 primarily in the Railroad segment due to higher volumes in the first quarter of 2017, and (iii) professional fees of $4,472 primarily due to legal costs related to our vessels in the Offshore Energy segment and our aircraft and engines on lease in the Aviation Leasing segment. Offsetting the increase were lower environmental and legal fees of $1,917, primarily in our Jefferson Terminal segment, coupled with lower general and administrative expenses of $1,050.
General and administrative expenses at the Corporate segment increased $1,461 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 attributable to higher professional fees including legal, tax consulting and audit fees as we continue to grow our business, coupled with higher reimbursements to our Manager.
Acquisitions and transaction expenses, including advisory, legal, accounting, valuation and other professional or consulting fees, increased $442 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 as we continue to pursue new business opportunities.
Depreciation and amortization increased $19,088 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to additional assets acquired and placed on lease in the Aviation Leasing segment.
Management fees decreased $1,196 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 due to a decrease in the average value of our total equity as compared to the first nine months of 2016.
Interest expense increased $5,453 during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to the issuance of the Senior Notes in the first quarter of 2017 and the draw down on the revolver in the third quarter of 2017. Partially offsetting this increase was lower interest expense in the Jefferson Terminal segment reflecting the capitalization of interest related to new projects in 2017. Refer to the Note 8 of the Consolidated Financial Statements for further detail.
Other (Expense) Income
For the three months ended September 30, 2017 compared to the three months ended September 30, 2016, total other income increased $5,634 primarily reflecting higher gains on sales of equipment of $2,669 reflecting opportunistic sales of Aviation assets coupled with equity in earnings of unconsolidated entities compared to losses in the same period of 2016.
For the nine months ended September 30, 2017, total other income increased $11,958 as compared to the nine months ended September 30, 2016. In 2016, an asset impairment charge of $7,450 was recorded for the MT 6015 vessel. In addition, during 2017, the Aviation Leasing segment had an increase of $3,419$21.9 million in gain on sale of equipmentassets, net as we had more asset sales in 2019 compared to 2020 and (ii) a decrease of $4.9 million in other income due to opportunisticthe Long Ridge Transaction.
Total other expense increased $35.1 million during the six months ended June 30, 2020, which primarily reflects (i) a decrease of $25.4 million in gain on sale of assets, net as we had more asset sales in 2019 compared to 2020, (ii) a loss on extinguishment of assets.debt of $4.7 million due to the Jefferson Refinancing, (iii) a decrease in other income of $2.3 million primarily due to the Long Ridge Transaction and (iv) an increase of $2.4 million in equity in losses of unconsolidated entities.
Net Loss(loss) income from continuing operations
Net loss attributable to shareholders forincome from continuing operations decreased $30.7 million and $25.2 million during the three and ninesix months ended SeptemberJune 30, 2017 decreased $4,274 and $15,375,2020, respectively, compared to the same periods in 2016, primarily due to the changes discussednoted above.
Adjusted Net Income/(Loss)
Adjusted net income increased $3,704 and $16,028 for the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016, primarily due to the changes in revenue, expenses and other income/(loss) noted above, and the increase in equity based compensation of $137 and $4,513 for the three and nine months ended September 30, 2017, respectively. Also contributing to the increase for the nine months ended September 30, 2017 was an increase in the equity in losses of unconsolidated entities of $126 and an increase in losses from the extinguishment of debt of $877 coupled with changes in the non-controlling share of Adjusted Net Income of $277 and $2,388 for the three and nine months ended September 30, 2017, respectively. Additionally, the change in the fair value of the non-hedge derivative instrument impacted Adjusted Net Income/(Loss) of $1,036 in both the three and nine months ended September 30, 2017.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA was $37,765 fordecreased $26.2 million and $19.0 million during the three and six months ended SeptemberJune 30, 2017, an increase of $17,446 compared to the same period of 2016. In addition2020, respectively, primarily due to the changes in revenue, expenses and income/(loss) noted above, which resulted in an increase in net income, the change was primarily due to increased depreciation and amortization expense from additional assets acquired and placed into service and increased interest expense. These changes were partially offset by the change in the fair value of the non-hedge derivative instrument.above.
Adjusted EBITDA was $88,735 for the nine months ended September 30, 2017, an increase of $42,146 compared to the same period of 2016. In addition to the changes in revenue, expenses and income/(loss) noted above, which resulted in a net decrease in loss attributable to shareholders, the change was primarily due to (i) increased depreciation and amortization expense from additional assets acquired and placed into service, (ii) decreased non-controlling share of Adjusted EBITDA, (iii) increased equity-based compensation and (iv) increased equity in losses of unconsolidated entities. Partially offsetting these changes was the change in the fair value of the non-hedge derivative instrument and the 2016 asset impairment charge. There was no impairment charge in the nine months ended September 30, 2017.
Aviation Leasing Segment
As of SeptemberJune 30, 2017,2020, in our Aviation Leasing segment, we own and manage 141272 aviation assets, consisting of 3880 commercial aircraftand 103 commercial jet192 engines.
As of SeptemberJune 30, 2017, 372020, 75 of our commercial aircraft and 7188 of our jet 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 88%73% utilized as of Septemberduring the three months ended June 30, 2017,2020, based on the equity valuepercent of our on-hire leasing equipment as a percentage ofdays on-lease in the totalquarter weighted by the monthly average equity value of our aviation leasing equipment.equipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 34 months, and our jet engines currently on-lease have an average remaining lease term of 1120 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, 2020 | 14 | | | 60 | | | 74 | |
Purchases | 1 | | | 18 | | | 19 | |
Sales | — | | | — | | | — | |
Transfers | — | | | (13) | | | (13) | |
Assets at June 30, 2020 | 15 | | | 65 | | | 80 | |
| | | | | |
Engines | | | | | |
Assets at January 1, 2020 | 92 | | | 72 | | | 164 | |
Purchases | 3 | | | 2 | | | 5 | |
Sales | (2) | | | (1) | | | (3) | |
Transfers | — | | | 26 | | | 26 | |
Assets at June 30, 2020 | 93 | | | 99 | | | 192 | |
|
| | | | | | | | |
Aviation Assets | Widebody | | Narrowbody | | Total |
Aircraft | | | | | |
Assets at January 1, 2017 | 7 |
| | 19 |
| | 26 |
|
Purchases | 3 |
| | 14 |
| | 17 |
|
Sales | (1 | ) | | (4 | ) | | (5 | ) |
Assets at September 30, 2017 | 9 |
| | 29 |
| | 38 |
|
| | | | | |
Jet Engines | | | | | |
Assets at January 1, 2017 | 38 |
| | 28 |
| | 66 |
|
Purchases | 22 |
| | 28 |
| | 50 |
|
Sales | (9 | ) | | (4 | ) | | (13 | ) |
Assets at September 30, 2017 | 51 |
| | 52 |
| | 103 |
|
The following table presents our results of operations andoperations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Revenues | | | | | | | | | | | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 42,505 | | | $ | 48,731 | | | $ | (6,226) | | | $ | 89,446 | | | $ | 96,034 | | | $ | (6,588) | |
Maintenance revenue | 27,105 | | | 25,369 | | | 1,736 | | | 59,100 | | | 47,146 | | | 11,954 | |
Finance lease income | 413 | | | 881 | | | (468) | | | 842 | | | 1,707 | | | (865) | |
Other revenue | 5,236 | | | — | | | 5,236 | | | 8,863 | | | 505 | | | 8,358 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total revenues | 75,259 | | | 74,981 | | | 278 | | | 158,251 | | | 145,392 | | | 12,859 | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 4,577 | | | 3,467 | | | 1,110 | | | 8,648 | | | 10,093 | | | (1,445) | |
| | | | | | | | | | | |
Acquisition and transaction expenses | 2,061 | | | 970 | | | 1,091 | | | 4,785 | | | 1,948 | | | 2,837 | |
| | | | | | | | | | | |
Depreciation and amortization | 32,203 | | | 33,267 | | | (1,064) | | | 64,834 | | | 63,272 | | | 1,562 | |
Asset impairment | 10,476 | | | — | | | 10,476 | | | 10,476 | | | — | | | 10,476 | |
| | | | | | | | | | | |
Total expenses | 49,317 | | | 37,704 | | | 11,613 | | | 88,743 | | | 75,313 | | | 13,430 | |
| | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | |
Equity in losses of unconsolidated entities | (594) | | | (242) | | | (352) | | | (1,185) | | | (443) | | | (742) | |
Gain (loss) on sale of assets, net | 775 | | | 22,610 | | | (21,835) | | | (1,044) | | | 24,328 | | | (25,372) | |
Interest income | 17 | | | 28 | | | (11) | | | 29 | | | 54 | | | (25) | |
| | | | | | | | | | | |
Total other income (expense) | 198 | | | 22,396 | | | (22,198) | | | (2,200) | | | 23,939 | | | (26,139) | |
Income before income taxes | 26,140 | | | 59,673 | | | (33,533) | | | 67,308 | | | 94,018 | | | (26,710) | |
Benefit from income taxes | (3,427) | | | (2,369) | | | (1,058) | | | (3,382) | | | (2,189) | | | (1,193) | |
Net income | 29,567 | | | 62,042 | | | (32,475) | | | 70,690 | | | 96,207 | | | (25,517) | |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | — | | | — | | | — | | | — | | | — | | | — | |
Net income attributable to shareholders | $ | 29,567 | | | $ | 62,042 | | | $ | (32,475) | | | $ | 70,690 | | | $ | 96,207 | | | $ | (25,517) | |
The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted Net Income forEBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Net income attributable to shareholders | $ | 29,567 | | | $ | 62,042 | | | $ | (32,475) | | | $ | 70,690 | | | $ | 96,207 | | | $ | (25,517) | |
Add: Benefit from income taxes | (3,427) | | | (2,369) | | | (1,058) | | | (3,382) | | | (2,189) | | | (1,193) | |
Add: Equity-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | |
Add: Acquisition and transaction expenses | 2,061 | | | 970 | | | 1,091 | | | 4,785 | | | 1,948 | | | 2,837 | |
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 | 10,476 | | | — | | | 10,476 | | | 10,476 | | | — | | | 10,476 | |
Add: Incentive allocations | — | | | — | | | — | | | — | | | — | | | — | |
Add: Depreciation and amortization expense (1) | 38,824 | | | 42,221 | | | (3,397) | | | 78,322 | | | 80,560 | | | (2,238) | |
Add: Interest expense | — | | | — | | | — | | | — | | | — | | | — | |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) | (594) | | | (242) | | | (352) | | | (1,185) | | | (443) | | | (742) | |
Less: Equity in losses of unconsolidated entities | 594 | | | 242 | | | 352 | | | 1,185 | | | 443 | | | 742 | |
Less: Non-controlling share of Adjusted EBITDA | — | | | — | | | — | | | — | | | — | | | — | |
Adjusted EBITDA (non-GAAP) | $ | 77,501 | | | $ | 102,864 | | | $ | (25,363) | | | $ | 160,891 | | | $ | 176,526 | | | $ | (15,635) | |
(1) Includes the Aviation Leasing segmentfollowing items for the three and nine months ended SeptemberJune 30, 20172020 and September2019: (i) depreciation expense of $32,203 and $33,267, (ii) lease intangible amortization of $931 and $2,202 and (iii) amortization for lease incentives of $5,690 and $6,752, respectively. Includes the following items for the six months ended June 30, 2016:2020 and 2019: (i) depreciation expense of $64,834 and $63,272, (ii) lease intangible amortization of $2,063 and $4,664 and (iii) amortization for lease incentives of $11,425 and $12,624, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 25,941 |
| | $ | 19,039 |
| | $ | 6,902 |
| | $ | 63,577 |
| | $ | 46,636 |
| | $ | 16,941 |
|
Maintenance revenue | 17,533 |
| | 7,646 |
| | 9,887 |
| | 46,778 |
| | 19,037 |
| | 27,741 |
|
Other revenue | — |
| | 375 |
| | (375 | ) | | 2 |
| | 687 |
| | (685 | ) |
Total revenues | 43,474 |
| | 27,060 |
| | 16,414 |
| | 110,357 |
| | 66,360 |
| | 43,997 |
|
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 1,706 |
| | 892 |
| | 814 |
| | 4,496 |
| | 2,875 |
| | 1,621 |
|
Acquisition and transaction expenses | 6 |
| | — |
| | 6 |
| | 276 |
| | — |
| | 276 |
|
Depreciation and amortization | 17,909 |
| | 9,376 |
| | 8,533 |
| | 43,284 |
| | 25,307 |
| | 17,977 |
|
Total expenses | 19,621 |
| | 10,268 |
| | 9,353 |
| | 48,056 |
| | 28,182 |
| | 19,874 |
|
| | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | |
Equity losses of unconsolidated entities | (203 | ) | | — |
| | (203 | ) | | (1,046 | ) | | — |
| | (1,046 | ) |
Gain on sale of equipment, net | 2,871 |
| | — |
| | 2,871 |
| | 6,932 |
| | 2,717 |
| | 4,215 |
|
Interest income | 51 |
| | 6 |
| | 45 |
| | 210 |
| | 9 |
| | 201 |
|
Total other income | 2,719 |
| | 6 |
| | 2,713 |
| | 6,096 |
| | 2,726 |
| | 3,370 |
|
Income before income taxes | 26,572 |
| | 16,798 |
| | 9,774 |
| | 68,397 |
| | 40,904 |
| | 27,493 |
|
Provision for income taxes | 927 |
| | 100 |
| | 827 |
| | 1,598 |
| | 188 |
| | 1,410 |
|
Net income | 25,645 |
| | 16,698 |
| | 8,947 |
| | 66,799 |
| | 40,716 |
| | 26,083 |
|
Less: Net income attributable to non-controlling interest in consolidated subsidiaries | 303 |
| | 60 |
| | 243 |
| | 445 |
| | 350 |
| | 95 |
|
Net income attributable to shareholders | $ | 25,342 |
| | $ | 16,638 |
| | $ | 8,704 |
| | $ | 66,354 |
| | $ | 40,366 |
| | $ | 25,988 |
|
Add: Provision for income taxes | 927 |
| | 100 |
| | 827 |
| | 1,598 |
| | 188 |
| | 1,410 |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | 6 |
| | — |
| | 6 |
| | 276 |
| | — |
| | 276 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities(1) | (203 | ) | | — |
| | (203 | ) | | (1,046 | ) | | — |
| | (1,046 | ) |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | (1 | ) | | (174 | ) | | 173 |
| | (1 | ) | | (538 | ) | | 537 |
|
Less: Equity in losses of unconsolidated entities | 203 |
| | — |
| | 203 |
| | 1,046 |
| | — |
| | 1,046 |
|
Less: Non-controlling share of Adjusted Net Income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted Net Income | $ | 26,274 |
| | $ | 16,564 |
| | $ | 9,710 |
| | $ | 68,227 |
| | $ | 40,016 |
| | $ | 28,211 |
|
(1)(2) Pro-rata share of Adjusted Net Income from unconsolidated entities includes Aviation’sIncludes Aviation Leasing’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.
Revenues
The following table sets forth a reconciliationComparison of net income attributable to shareholders to Adjusted EBITDA for the Aviation Leasing segment for the three and nine months ended September 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| 2017 | | 2016 | | | 2017 | | 2016 | |
(Dollar amounts in thousands)
|
|
Net income attributable to shareholders | $ | 25,342 |
| | $ | 16,638 |
| | $ | 8,704 |
| | $ | 66,354 |
| | $ | 40,366 |
| | $ | 25,988 |
|
Add: Provision for income taxes | 927 |
| | 100 |
| | 827 |
| | 1,598 |
| | 188 |
| | 1,410 |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | 6 |
| | — |
| | 6 |
| | 276 |
| | — |
| | 276 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense (2) | 19,811 |
| | 10,885 |
| | 8,926 |
| | 48,477 |
| | 30,089 |
| | 18,388 |
|
Add: Interest expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities(3) | (203 | ) | | — |
| | (203 | ) | | (1,046 | ) | | — |
| | (1,046 | ) |
Less: Equity in losses of unconsolidated entities | 203 |
| | — |
| | 203 |
| | 1,046 |
| | — |
| | 1,046 |
|
Less: Non-controlling share of Adjusted EBITDA(4) | (192 | ) | | (41 | ) | | (151 | ) | | (354 | ) | | (123 | ) | | (231 | ) |
Adjusted EBITDA (non-GAAP) | $ | 45,894 |
| | $ | 27,582 |
| | $ | 18,312 |
| | $ | 116,351 |
| | $ | 70,520 |
| | $ | 45,831 |
|
______________________________________________________________________________________
(2) Depreciation and amortization expense includes $17,909 and $9,376 of depreciation expense, $1,147 and $1,403 of lease intangible amortization, and $755 and $106 of amortization for lease incentives in the three months ended SeptemberJune 30, 20172020 and 2016, respectively. Depreciation and amortization expense includes $43,284 and $25,307 of depreciation expense, $3,494 and $4,557 of lease intangible amortization, and $1,699 and $225 of amortization for lease incentives in the nine months ended September 30, 2017 and 2016, respectively.
(3) Aviation Leasing's pro-rata share of Adjusted EBITDA from unconsolidated entities includes net loss of $203 and $0 for the three months ended September 30, 2017 and 2016, respectively. Aviation Leasing’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes net loss of $1,046 and $0 in the nine months ended September 30, 2017 and 2016, respectively.
(4) Non-controlling share of Adjusted EBITDA is comprised of depreciation and amortization expense of $192 and $41 for the three months ended September 30, 2017 and 2016, respectively. Non-controlling share of Adjusted EBITDA is comprised of depreciation and amortization expense of $354 and $123 for the nine months ended September 30, 2017 and 2016, respectively.
Revenues2019
Total revenues in the Aviation Leasing segmentrevenue increased $16,414 in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016, due to$0.3 million driven by higher lease income and maintenance revenue driven by newly acquired assets. Lease incomeand other revenue.
•Maintenance revenue increased $6,902$1.7 million primarily due to higherthe recognition of maintenance deposits due to the early redelivery of six aircraft leaseoffset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.
•Other revenue increased $5.2 million primarily due to the increase in end-of-lease redelivery compensation.
•Lease income decreased $6.2 million primarily due to a decrease in the number of $2,639 driven by the addition of 17 aircraftengines on lease partiallyand an increase in the number of customers placed on non-accrual status offset by the redelivery of two aircraft. Engine lease income increased $4,263 primarily driven by an increase in the number of engines which generated revenue from 34 inaircraft on lease.
Comparison of the threesix months ended SeptemberJune 30, 2016 to 76 in the three months ended September 30, 2017. 2020 and 2019
Total revenue increased $12.9 million driven by higher maintenance revenue and other revenue.
•Maintenance revenue increased $9,887 reflecting additional aircraft and engines on lease. Engine maintenance and aircraft maintenance revenue increased $7,646 and $2,241, respectively, in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016.
Total revenues in the Aviation Leasing segment increased $43,997 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, due to higher lease income and maintenance revenue reflecting newly acquired assets. Lease income increased $16,941$12.0 million primarily due to higherthe recognition of maintenance deposits due to the early redelivery of seven aircraft leaseoffset by lower aircraft and engine utilization as a result of the COVID-19 pandemic.
•Other revenue increased $8.4 million primarily due to the increase in end-of-lease redelivery compensation and settlement of an engine loss.
•Lease income decreased $6.6 million primarily due to a decrease in the number of $6,064 reflecting an additional 17 aircraftengines on lease partiallyand an increase in the number of customers placed on non-accrual status offset by the redelivery and sale of three aircraft. Engine lease income increased $10,877 primarily driven by an increase in the number of engines which generated revenue from 40 in the nine months ended September 30, 2016 to 79 in the nine months ended September 30, 2017. Maintenance revenue increased $27,741 due to a higher number of aircraft and engines on lease and the receipt of end-of-lease compensation for two aircraft. Engine maintenance and aircraft maintenance revenue increased $17,355 and $10,386, respectively, in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.
lease.
Expenses
Total expenses in the Aviation Leasing segment increased $9,353 inComparison of the three months ended SeptemberJune 30, 2017 as compared to the three months ended September 30, 20162020 and 2019
Total expenses increased $11.6 million primarily due to an increase in depreciation and amortization and an increase in operating expenses. Depreciation and amortization increased by $8,533 reflecting the depreciation of additional aircraft and engines owned or put on lease in the three months ended September 30, 2017. Operating expenses increased $814 primarily reflecting increases in (i) professional fees of $456 due to an increased number of assets on lease, (ii) aviation shipping expense of $246 due to the positioning of our assets for lease and (iii) other operating expense of $112 due to the overall growth of the aviation portfolio.
Total expenses in the Aviation Leasing segment increased $19,874 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to an increase in depreciation and amortization and an increase in operating expenses. Depreciation and amortization increased by $17,977 reflecting the depreciation of additional aircraft and engines owned or put on lease in the nine months ended September 30, 2017. Operating expenses increased $1,621 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily reflecting increases in (i) professional fees of $912 due to an increased number of assets on lease, (ii) aviation shipping expense of $593 due to the positioning of our assets for lease and (iii) other operating expense of $116 due to the overall growth of the aviation portfolio. Acquisitions and transaction expenses increased $276 in the nine months ended September 30, 2017 compared to the same period of 2016 as we continue to pursue new business opportunities.
Other Income
Total other income in the Aviation Leasing segment increased $2,713 and $3,370 in the three and nine months ended September 30, 2017 as compared to the three and ninemonths ended September 30, 2016, respectively, reflecting increases in the gain on sale of leasing equipment, partially offset by increases in the equity in losses of unconsolidated entities.
Adjusted Net Income
Adjusted Net Income in the Aviation Leasing segment was $26,274 and $68,227 for the three and ninemonths ended September 30, 2017, respectively, increasing $9,710 and $28,211 as compared to the three and ninemonths ended September 30, 2016, respectively, primarily reflecting the changes to net income attributable to shareholders noted above, adjusted for the provision for income taxes,asset impairment, acquisition and transaction expenses and cash payments for income taxes.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA in the Aviation Leasing segment was $45,894 and $116,351 for the three and ninemonths ended September 30, 2017, respectively, decreasing $18,312and$45,831 as compared to the three and ninemonths ended September 30, 2016, respectively. In addition to the changes in net income attributable to shareholders noted above, this movement was primarily due to (i) higher depreciation and amortization expense for the additional aircraft and engines owned and on lease in the three and ninemonths ended September 30, 2017, (ii) higher provision for income tax, and (iii) an increase in the acquisition and transaction expenses.
Offshore Energy Segment
In our Offshore Energy segment, we own one remotely operated vehicle (“ROV”) support vessel, one construction support vessel and one anchor handling tug supply (“AHTS”) vessel. The chart below describes the assets in our Offshore Energy segment as of September 30, 2017:
|
| | | |
Offshore Energy Assets |
Asset Type | Year Built | Description | Economic Interest (%) |
AHTS Vessel | 2010 | Anchor handling tug supply vessel with accommodation for 30 personnel and a total bollard pull of 68.5 tons | 100% |
Construction Support Vessel | 2014 | DP-3 construction support and well intervention vessel with 250-ton main crane, 2,000 square meter open deck space, moon pool and accommodation for 100 personnel | 100% |
ROV Support Vessel | 2011 | DP-2 dive and ROV support vessel with 50-ton crane, moon pool and accommodation for 120 personnel | 100%* |
* The increase in the economic interest in the third quarter of 2017 for the ROV support vessel reflects the transfer of the non-controlling interest to the Company as part of the settlement arrangement as more fully discussed in Note 2 and Note 8 of the Consolidated Financial Statements.
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss for the Offshore Energy segment for the three and nine months ended September 30, 2017 and September 30, 2016: |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 3,800 |
| | $ | 2,561 |
| | $ | 1,239 |
| | $ | 7,295 |
| | $ | 3,216 |
| | $ | 4,079 |
|
Finance lease income | 385 |
| | 403 |
| | (18 | ) | | 1,156 |
| | 1,212 |
| | (56 | ) |
Other revenue | 1,932 |
| | 5 |
| | 1,927 |
| | 2,504 |
| | 5 |
| | 2,499 |
|
Total revenues | 6,117 |
| | 2,969 |
| | 3,148 |
| | 10,955 |
| | 4,433 |
| | 6,522 |
|
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 5,103 |
| | 2,408 |
| | 2,695 |
| | 12,661 |
| | 8,410 |
| | 4,251 |
|
Depreciation and amortization | 1,607 |
| | 1,669 |
| | (62 | ) | | 4,820 |
| | 4,927 |
| | (107 | ) |
Interest expense | 946 |
| | 934 |
| | 12 |
| | 2,800 |
| | 2,805 |
| | (5 | ) |
Total expenses | 7,656 |
| | 5,011 |
| | 2,645 |
| | 20,281 |
| | 16,142 |
| | 4,139 |
|
| | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | |
Asset impairment | — |
| | — |
| | — |
| | — |
| | (7,450 | ) | | 7,450 |
|
Interest income | 4 |
| | 4 |
| | — |
| | 11 |
| | 9 |
| | 2 |
|
Other income | 1,093 |
| | — |
| | 1,093 |
| | 1,093 |
| | — |
| | 1,093 |
|
Total other income (expense) | 1,097 |
| | 4 |
| | 1,093 |
| | 1,104 |
| | (7,441 | ) | | 8,545 |
|
Loss before income taxes | (442 | ) | | (2,038 | ) | | 1,596 |
| | (8,222 | ) | | (19,150 | ) | | 10,928 |
|
Benefit from income taxes | (5 | ) | | — |
| | (5 | ) | | — |
| | — |
| | — |
|
Net loss | (437 | ) | | (2,038 | ) | | 1,601 |
| | (8,222 | ) | | (19,150 | ) | | 10,928 |
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | (62 | ) | | (131 | ) | | 69 |
| | (526 | ) | | (4,289 | ) | | 3,763 |
|
Net loss attributable to shareholders | $ | (375 | ) | | $ | (1,907 | ) | | $ | 1,532 |
| | $ | (7,696 | ) | | $ | (14,861 | ) | | $ | 7,165 |
|
Add: Benefit from income taxes | (5 | ) | | — |
| | (5 | ) | | — |
| | — |
| | — |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | 7,450 |
| | (7,450 | ) |
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted Net Income (1) | — |
| | — |
| | — |
| | — |
| | (3,725 | ) | | 3,725 |
|
Adjusted Net Loss | $ | (380 | ) | | $ | (1,907 | ) | | $ | 1,527 |
| | $ | (7,696 | ) | | $ | (11,136 | ) | | $ | 3,440 |
|
(1)Non-controlling share of Adjusted Net Loss is comprised of asset impairment of $0 and $3,725 for the nine months ended September 30, 2017 and 2016, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA for the Offshore Energy segment for the three and nine months ended September 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
| 2017 | | 2016 | | | 2017 | | 2016 | |
(Dollar amounts in thousands)
|
|
Net loss attributable to shareholders | $ | (375 | ) | | $ | (1,907 | ) | | $ | 1,532 |
| | $ | (7,696 | ) | | $ | (14,861 | ) | | $ | 7,165 |
|
Add: Benefit from income taxes | (5 | ) | | — |
| | (5 | ) | | — |
| | — |
| | — |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | 7,450 |
| | (7,450 | ) |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense | 1,607 |
| | 1,669 |
| | (62 | ) | | 4,820 |
| | 4,927 |
| | (107 | ) |
Add: Interest expense | 946 |
| | 934 |
| | 12 |
| | 2,800 |
| | 2,805 |
| | (5 | ) |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted EBITDA (2) | (61 | ) | | (91 | ) | | 30 |
| | (247 | ) | | (3,992 | ) | | 3,745 |
|
Adjusted EBITDA (non-GAAP) | $ | 2,112 |
| | $ | 605 |
| | $ | 1,507 |
| | $ | (323 | ) | | $ | (3,671 | ) | | $ | 3,348 |
|
(2) Non-controlling share of Adjusted EBITDA is comprised of the following items for the three months ended September 30, 2017 and 2016: (i) depreciation expense of $42 and $62, and (ii) interest expense of $19 and $29, respectively. Non-controlling share of Adjusted EBITDA is comprised of the following items for the nine months ended September 30, 2017 and 2016: (i) depreciation expense of $165 and $183, (ii) interest expense of $82 and $84, and (iii) asset impairment of $0 and $3,725, respectively.
Revenues
Total revenues in the Offshore Energy segment increased $3,148 and $6,522 in the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016, respectively, primarily due to higher lease income and other revenue. Other revenue increased $1,927 and $2,499 in the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016, respectively, relate to the crew and insurance reimbursement income for the offshore construction vessel. In the three and nine months ended September 30, 2017 both the offshore construction vessel and the ROV support vessel were on hire compared to the prior year periods when both the offshore construction vessel and ROV support vessel were subject to short term charter arrangements.
Expenses
Total expenses in the Offshore Energy segment increased $2,645 in the three months ended September 30, 2017 compared to the prior period primarily due to increases in operating expenses.
Operating expenses increased $2,695 in the three months ended September 30, 2017 compared to the prior year. The increase reflected higher (i) project costs of $673, (ii) mobilization costs of $524 (iii) crew costs of $516 (iv) legal fees of $403 and (vi) other operating expenses of $579.
During the three months ended September 30, 2017, there was $1,195 and $412 of depreciation expense related to the construction support vessel and ROV support vessel, respectively, flat compared to the prior period.
During the three months ended September 30, 2017, there was $916 and $30 of interest expense primarily related to financing for the construction support vessel and ROV support vessel, respectively, flat compared to the prior period.
For the nine months ended September 30, 2017, total expenses increased $4,139 compared to the prior period primarily due to increases in operating expenses.
Operating expenses increased $4,251 in the nine months ended September 30, 2017 compared to the prior period reflecting higher (i) legal fees of $1,839, (ii) crew costs of $1,370 (iii) project costs of $927 and (iv) other operating expenses of $115.
During the nine months ended September 30, 2017, there was $3,586 and $1,234 of depreciation expense related to the construction support vessel and ROV support vessel, respectively, flat compared to the prior period.
During the nine months ended September 30, 2017, there was $2,708 and $92 of interest expense primarily related to financing for the construction support vessel and ROV support vessel, respectively, flat compared to the prior period.
Other Income
Other Income in the Offshore Energy segment increased $1,093 and $8,545 in the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016, respectively, primarily due to transfer of interests from the non-controlling interest holder to the Company as settlement for a note receivable, resulting in a gain of $1,093 in the third quarter of 2017. Also, contributing to the change in the nine months ended was the net impact of the asset impairment recorded in the second quarter of 2016.
Adjusted Net Loss
Adjusted Net Loss decreased $1,527 and $3,440 in the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016, respectively. The decrease in both periods is primarily due to the changes to net loss attributable to shareholders described above, with the addition of the net impact of the impairment recorded in the second quarter of 2016 contributing to the decrease in the nine months ended September 30, 2017.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $1,507 and $3,348 in the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016, respectively. The increase in both periods is primarily due to lower net loss attributable to shareholders of $1,532 and $7,165 in the three and nine months ended September 30, 2017, respectively, compared to the three months ended September 30, 2017. The increase in both periods was partially offset by a decrease in depreciation and amortization expense.
•Asset impairment increased $10.5 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation.
•Acquisition and transaction expense increased $1.1 million driven by additional compensation and related costs associated with the acquisition of $62aviation leasing equipment.
•Operating expenses increased $1.1 million primarily as a result of an increase in bad debt expense.
•Depreciation and $107amortization expense decreased $1.1 million driven by a decrease in the threenumber of engines on lease and nine months ended September 30, 2017, respectively. Thean increase in the nine months ended September 30, 2017 was alsonumber of aircraft redelivered and parted out into our engine leasing pool, partially offset by additional aircraft owned and on lease.
Comparison of the six months ended June 30, 2020 and 2019
Total expenses increased $13.4 million primarily due to an increase in asset impairment, charge recorded during 2016, there was no assetdepreciation and amortization expense and acquisition and transaction expenses partially offset by a decrease in operating expenses.
•Asset impairment in 2017.increased $10.5 million for the adjustment of the carrying value of leasing equipment to fair value, net of redelivery compensation.
Shipping Containers Segment
In our Shipping Containers segment, we own, through a joint venture, interest in approximately 36,000 maritime shipping containers•Acquisition and transaction expense increased $2.8 million driven by additional compensation and related equipment through one portfolio. The chart below describescosts associated with the assetsacquisition of aviation leasing equipment.
•Depreciation and amortization expense increased $1.6 million driven by additional aircraft owned and on lease, partially offset by a decrease in the number of engines on lease and additional aircraft redelivered and parted out into our Shipping Containers segmentengine leasing pool.
•Operating expenses decreased $1.4 million primarily as a result of September 30, 2017:a decrease in bad debt expense.
|
| | | | | |
Shipping Containers Assets |
Number of Containers | Type | Average Age | Lease Type | Customer Mix | Economic Interest (%) |
36,000 | 20’ Dry 20’ Reefer 40’ Dry 40’ HC Dry 40’ HC Reefer
| ~9 Years | Direct Finance Lease/Operating Lease | 5 Customers | 51% |
The following table presents our results of operations and reconciliation of Net (loss)Total other income attributable to shareholders to Adjusted Net (Loss) Income for the Shipping Containers segment fordecreased $22.2 million during the three and nine months ended SeptemberJune 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Equipment leasing revenues | | | | | | | | | | | |
Finance lease income | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,112 |
| | $ | (1,112 | ) |
Other revenue | 25 |
| | 25 |
| | — |
| | 75 |
| | 75 |
| | — |
|
Total revenues | 25 |
| | 25 |
| | — |
| | 75 |
| | 1,187 |
| | (1,112 | ) |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 8 |
| | 1 |
| | 7 |
| | 8 |
| | 43 |
| | (35 | ) |
Interest expense | — |
| | — |
| | — |
| | — |
| | 410 |
| | (410 | ) |
Total expenses | 8 |
| | 1 |
| | 7 |
| | 8 |
| | 453 |
| | (445 | ) |
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in earnings / (losses) of unconsolidated entities | 359 |
| | (1,161 | ) | | 1,520 |
| | (316 | ) | | (1,335 | ) | | 1,019 |
|
Gain on sale of finance leases, net | — |
| | — |
| | — |
| | — |
| | 304 |
| | (304 | ) |
Other expense | — |
| | — |
| | — |
| | — |
| | (2 | ) | | 2 |
|
Total other income (expense) | 359 |
| | (1,161 | ) | | 1,520 |
| | (316 | ) | | (1,033 | ) | | 717 |
|
Income (loss) before income taxes | 376 |
| | (1,137 | ) | | 1,513 |
| | (249 | ) | | (299 | ) | | 50 |
|
Benefit from income taxes | (10 | ) | | (41 | ) | | 31 |
| | (44 | ) | | (54 | ) | | 10 |
|
Net (loss) income attributable to shareholders | $ | 386 |
| | $ | (1,096 | ) | | $ | 1,482 |
| | $ | (205 | ) | | $ | (245 | ) | | $ | 40 |
|
Add: Benefit from income taxes | (10 | ) | | (41 | ) | | 31 |
| | (44 | ) | | (54 | ) | | 10 |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | 3 |
| | (3 | ) |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Income (Loss) from unconsolidated entities (1) | 313 |
| | (1,207 | ) | | 1,520 |
| | (454 | ) | | (1,444 | ) | | 990 |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings / (losses) of unconsolidated entities | (359 | ) | | 1,161 |
| | (1,520 | ) | | 316 |
| | 1,335 |
| | (1,019 | ) |
Less: Non-controlling share of Adjusted Net Income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted Net Income (Loss) | $ | 330 |
| | $ | (1,183 | ) | | $ | 1,513 |
| | $ | (387 | ) | | $ | (405 | ) | | $ | 18 |
|
(1) Pro-rata share2020, primarily due to a decrease of Adjusted Net Income from unconsolidated entities includes Shipping’s$21.8 million in gain on the sale of leasing equipment in 2020, partially offset by an increase of $0.4 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA for the Shipping Containers segment for the three and nine months ended September 30, 2017 and September 30, 2016: |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands) | 2017 | | 2016 | | | 2017 | | 2016 | |
Net (loss) income attributable to shareholders | $ | 386 |
| | $ | (1,096 | ) | | $ | 1,482 |
| | $ | (205 | ) | | $ | (245 | ) | | $ | 40 |
|
Add: Benefit from income taxes | (10 | ) | | (41 | ) | | 31 |
| | (44 | ) | | (54 | ) | | 10 |
|
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | 3 |
| | (3 | ) |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Interest expense | — |
| | — |
| | — |
| | — |
| | 410 |
| | (410 | ) |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) | 509 |
| | (287 | ) | | 796 |
| | 936 |
| | 1,873 |
| | (937 | ) |
Less: Equity in earnings / (losses) of unconsolidated entities | (359 | ) | | 1,161 |
| | (1,520 | ) | | 316 |
| | 1,335 |
| | (1,019 | ) |
Less: Non-controlling share of Adjusted EBITDA | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted EBITDA (non-GAAP) | $ | 526 |
| | $ | (263 | ) | | $ | 789 |
| | $ | 1,003 |
| | $ | 3,322 |
| | $ | (2,319 | ) |
(2) The Company’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes the following items for the three months ended September 30, 2017 and 2016: (i) net income (loss) of $313 and $(1,208), (ii) interest expense of $176 and $270, and (iii) depreciation and amortization expense of $20 and $651, respectively. The Company’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes the following items for the nine months ended September 30, 2017 and 2016: net loss of $454 and $1,475, offset by interest expense of $650 and $931, and depreciation and amortization expense of $740 and $2,417, respectively.
Revenues
Total revenues in the Shipping Containers segment were flat and decreased $1,112 in the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016, respectively. The decrease for the nine months ended September 30, 2017 compared to September 30, 2016 is primarily driven by the sale of 42,000 shipping containers that were subject to direct finance leases during the first quarter of 2016.
Expenses
Total expenses in the Shipping Containers segment increased $7 and decreased $445, in the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016, respectively. The decrease in the nine months ended September 30, 2017, primarily reflects lower interest expense of $410 due to lower principal balances on the term loans along with the termination of the term loan in conjunction with the sale of the shipping containers during the first quarter of 2016. Additionally, the sale of the 42,000 shipping containers resulted in a decrease in operating expense of $35 in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016.
Other (Expense) Incomeloss.
Total other income decreased $26.1 million during the six months ended June 30, 2020, primarily due to a decrease of $25.4 million in gain on the Shipping Containers segment increased $1,520sale of leasing equipment in 2020, partially offset by an increase of $0.7 million in Aviation Leasing’s proportionate share of the unconsolidated entities’ net loss.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA decreased $25.4 million and $717 in$15.6 million during the three and ninesix months ended SeptemberJune 30, 2017 as compared to the three and nine months ended September 30, 2016, respectively. This was primarily driven by income earned from our shipping container joint venture. Also contributing to the decrease in the nine months ended September 30, 2017 period was the gain on sale of direct finance leases of $304 from the sale of 42,000 shipping containers during the first quarter of 2016.
Adjusted Net (Loss) Income
Adjusted Net Income increased $1,513 in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016,2020, respectively, primarily due to the changes noted above.
Adjusted Net Loss decreased $18 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, reflecting the changes noted above coupled with a decrease in the pro-rata share of Adjusted Net Loss from unconsolidated entities. These changes were mostly offset by the change in equity of losses of unconsolidated entities.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA was $526 and $1,003 in the three and nine months ended September 30, 2017, respectively, an increase of $789 and decrease of $2,319 as compared to the three and nine months ended September 30, 2016, respectively. The increase in the three months ended September 30, 2017 primarily reflects a higher net income partially offset by the change in equity in unconsolidated entities. The decrease in the nine months ended September 30, 2017 primarily reflects the change in equity in unconsolidated entities coupled with a lower pro-rata share of Adjusted EBITDA from unconsolidated entities. Also contributing to the decrease was finance lease income in the nine months ended September 30, 2016 driven by the sale of 42,000 shipping containers during the first quarter of 2016.
Jefferson Terminal Segment
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss for the Jefferson Terminal segment for the three and nine months ended September 30, 2017 and September 30, 2016:operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
| | | | | | | | | | | |
Infrastructure revenues | | | | | | | | | | | |
Lease income | $ | 287 | | | $ | 821 | | | $ | (534) | | | $ | 407 | | | $ | 1,129 | | | $ | (722) | |
Terminal services revenues | 12,794 | | | 7,537 | | | 5,257 | | | 29,205 | | | 12,404 | | | 16,801 | |
Crude marketing revenues | — | | | 59,204 | | | (59,204) | | | 8,210 | | | 89,983 | | | (81,773) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total revenues | 13,081 | | | 67,562 | | | (54,481) | | | 37,822 | | | 103,516 | | | (65,694) | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 12,290 | | | 74,393 | | | (62,103) | | | 34,233 | | | 113,634 | | | (79,401) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Depreciation and amortization | 7,160 | | | 5,519 | | | 1,641 | | | 14,386 | | | 10,675 | | | 3,711 | |
Interest expense | 2,310 | | | 4,524 | | | (2,214) | | | 5,738 | | | 8,448 | | | (2,710) | |
Total expenses | 21,760 | | | 84,436 | | | (62,676) | | | 54,357 | | | 132,757 | | | (78,400) | |
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in earnings (losses) of unconsolidated entities | — | | | 92 | | | (92) | | | — | | | (128) | | | 128 | |
(Loss) gain on sale of assets, net | (7) | | | 12 | | | (19) | | | (7) | | | 12 | | | (19) | |
Loss on extinguishment of debt | — | | | — | | | — | | | (4,724) | | | — | | | (4,724) | |
Interest income | — | | | 33 | | | (33) | | | 22 | | | 71 | | | (49) | |
Other (expense) income | (1) | | | 50 | | | (51) | | | 32 | | | (183) | | | 215 | |
Total other (expense) income | (8) | | | 187 | | | (195) | | | (4,677) | | | (228) | | | (4,449) | |
Loss before income taxes | (8,687) | | | (16,687) | | | 8,000 | | | (21,212) | | | (29,469) | | | 8,257 | |
Provision for income taxes | 74 | | | 38 | | | 36 | | | 209 | | | 124 | | | 85 | |
Net loss | (8,761) | | | (16,725) | | | 7,964 | | | (21,421) | | | (29,593) | | | 8,172 | |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | (4,020) | | | (4,558) | | | 538 | | | (8,681) | | | (7,854) | | | (827) | |
Net loss attributable to shareholders | $ | (4,741) | | | $ | (12,167) | | | $ | 7,426 | | | $ | (12,740) | | | $ | (21,739) | | | $ | 8,999 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Infrastructure revenues | | | | | | | | | | | |
Terminal services revenues | $ | 1,730 |
| | $ | 4,255 |
| | $ | (2,525 | ) | | $ | 9,622 |
| | $ | 11,271 |
| | $ | (1,649 | ) |
Total revenues | 1,730 |
| | 4,255 |
| | (2,525 | ) | | 9,622 |
| | 11,271 |
| | (1,649 | ) |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 7,039 |
| | 6,796 |
| | 243 |
| | 21,919 |
| | 16,182 |
| | 5,737 |
|
Acquisition and transaction expenses | — |
| | 109 |
| | (109 | ) | | — |
| | 400 |
| | (400 | ) |
Depreciation and amortization | 3,978 |
| | 3,920 |
| | 58 |
| | 11,885 |
| | 11,589 |
| | 296 |
|
Interest expense | 1,408 |
| | 4,016 |
| | (2,608 | ) | | 4,283 |
| | 11,804 |
| | (7,521 | ) |
Total expenses | 12,425 |
| | 14,841 |
| | (2,416 | ) | | 38,087 |
| | 39,975 |
| | (1,888 | ) |
| | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | |
Equity in losses of unconsolidated entities | (24 | ) | | — |
| | (24 | ) | | (99 | ) | | — |
| | (99 | ) |
Loss on extinguishment of debt | — |
| | — |
| | — |
| | — |
| | (1,579 | ) | | 1,579 |
|
Interest income (expense) | 160 |
| | 196 |
| | (36 | ) | | 361 |
| | 69 |
| | 292 |
|
Other income | 1,055 |
| | 485 |
| | 570 |
| | 1,087 |
| | 585 |
| | 502 |
|
Total other income (expense) | 1,191 |
| | 681 |
| | 510 |
| | 1,349 |
| | (925 | ) | | 2,274 |
|
Loss before income taxes | (9,504 | ) | | (9,905 | ) | | 401 |
| | (27,116 | ) | | (29,629 | ) | | 2,513 |
|
(Benefit from) provision for income taxes | (3 | ) | | 20 |
| | (23 | ) | | 31 |
| | 55 |
| | (24 | ) |
Net loss | (9,501 | ) | | (9,925 | ) | | 424 |
| | (27,147 | ) | | (29,684 | ) | | 2,537 |
|
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | (4,806 | ) | | (4,241 | ) | | (565 | ) | | (13,209 | ) | | (12,522 | ) | | (687 | ) |
Net loss attributable to shareholders | $ | (4,695 | ) | | $ | (5,684 | ) | | $ | 989 |
| | $ | (13,938 | ) | | $ | (17,162 | ) | | $ | 3,224 |
|
Add: (Benefit from) provision for income taxes | (3 | ) | | 20 |
| | (23 | ) | | 31 |
| | 55 |
| | (24 | ) |
Add: Equity-based compensation expense | 90 |
| | — |
| | 90 |
| | 228 |
| | (4,168 | ) | | 4,396 |
|
Add: Acquisition and transaction expenses | — |
| | 109 |
| | (109 | ) | | — |
| | 400 |
| | (400 | ) |
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | 1,579 |
| | (1,579 | ) |
Add: Changes in fair value of non-hedge derivative instruments | (1,036 | ) | | — |
| | (1,036 | ) | | (1,036 | ) | | — |
| | (1,036 | ) |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities (1) | (24 | ) | | — |
| | (24 | ) | | (99 | ) | | — |
| | (99 | ) |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | 3 |
| | — |
| | 3 |
| | (79 | ) | | (52 | ) | | (27 | ) |
Less: Equity in losses of unconsolidated entities | 24 |
| | — |
| | 24 |
| | 99 |
| | — |
| | 99 |
|
Less: Non-controlling share of Adjusted Net Loss(2) | (440 | ) | | (164 | ) | | (276 | ) | | (475 | ) | | 853 |
| | (1,328 | ) |
Adjusted Net Loss | $ | (6,081 | ) | | $ | (5,719 | ) | | $ | (362 | ) | | $ | (15,269 | ) | | $ | (18,495 | ) | | $ | 3,226 |
|
54
(1) Pro-rata share of Adjusted Net Loss from unconsolidated entities includes Jefferson’s proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above, for which there were no adjustments.
(2) Jefferson Terminal’s non-controlling share of Adjusted Net Loss is comprised of the following for the three months ended September 30, 2017 and 2016: (i) equity-based compensation of $36 and $0, (ii) provision for income taxes of $(1) and $8, (iii) acquisition and transaction expenses of $0 and $156 and (iv) changes in fair value of non-hedge derivative instruments of $404 and $0, less (v) cash tax payments of $(1) and $0, respectively. Jefferson Terminal’s non-controlling share of Adjusted Net Loss is comprised of the following for the nine months
ended September 30, 2017 and 2016: (i) equity-based compensation of $90 and $(1,627), (ii) provision for income taxes of $12 and $22, (iii) acquisition and transaction expenses of $0 and $156, (iv) changes in fair value of non-hedge derivative instruments of $404 and $0, and (v) loss on extinguishment of debt of $0 and $616, less (iv) cash paid for income taxes of $31 and $20, respectively.
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA for the Jefferson Terminal segment for the three and nine months ended September 30, 2017 and September 30, 2016: EBITDA:
| | | | | | | | | | | | | | | | Three Months Ended June 30, | | | Change | | Six Months Ended June 30, | | | Change |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | |
(Dollar amounts in thousands) | 2017 | | 2016 | | 2017 | | 2016 | | |
(in thousands) | | (in thousands) | 2020 | | 2019 | | | | Change | 2020 | | 2019 | | | Change |
Net loss attributable to shareholders | $ | (4,695 | ) | | $ | (5,684 | ) | | $ | 989 |
| | $ | (13,938 | ) | | $ | (17,162 | ) | | $ | 3,224 |
| Net loss attributable to shareholders | $ | (4,741) | | | $ | (12,167) | | | $ | 7,426 | | | $ | (21,739) | | | $ | 8,999 | |
Add: Provision for income taxes | (3 | ) | | 20 |
| | (23 | ) | | 31 |
| | 55 |
| | (24 | ) | Add: Provision for income taxes | 74 | | | 38 | | | 36 | | | 209 | | | 124 | | | 85 | |
Add: Equity-based compensation expense | 90 |
| | — |
| | 90 |
| | 228 |
| | (4,168 | ) | | 4,396 |
| Add: Equity-based compensation expense | 214 | | | 456 | | | (242) | | | 429 | | | 546 | | | (117) | |
Add: Acquisition and transaction expenses | — |
| | 109 |
| | (109 | ) | | — |
| | 400 |
| | (400 | ) | Add: Acquisition and transaction expenses | — | | | — | | | — | | | — | | | — | | | — | |
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | 1,579 |
| | (1,579 | ) | 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 | (1,036 | ) | | — |
| | (1,036 | ) | | (1,036 | ) | | — |
| | (1,036 | ) | Add: Changes in fair value of non-hedge derivative instruments | — | | | 1,417 | | | (1,417) | | | 181 | | | 2,267 | | | (2,086) | |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Asset impairment charges | — | | | — | | | — | | | — | | | — | | | — | |
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Incentive allocations | — | | | — | | | — | | | — | | | — | | | — | |
Add: Depreciation and amortization expense | 3,978 |
| | 3,920 |
| | 58 |
| | 11,885 |
| | 11,589 |
| | 296 |
| Add: Depreciation and amortization expense | 7,160 | | | 5,519 | | | 1,641 | | | 14,386 | | | 10,675 | | | 3,711 | |
Add: Interest expense | 1,408 |
| | 4,016 |
| | (2,608 | ) | | 4,283 |
| | 11,804 |
| | (7,521 | ) | Add: Interest expense | 2,310 | | | 4,524 | | | (2,214) | | | 5,738 | | | 8,448 | | | (2,710) | |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (3) | (24 | ) | | — |
| | (24 | ) | | (99 | ) | | — |
| | (99 | ) | |
Less: Equity in losses of unconsolidated entities | 24 |
| | — |
| | 24 |
| | 99 |
| | — |
| | 99 |
| |
Less: Non-controlling share of Adjusted EBITDA (4) | (2,439 | ) | | (3,160 | ) | | 721 |
| | (6,509 | ) | | (8,043 | ) | | 1,534 |
| |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) | | Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) | — | | | 285 | | | (285) | | | — | | | 331 | | | (331) | |
Less: Equity in (earnings) losses of unconsolidated entities | | Less: Equity in (earnings) losses of unconsolidated entities | — | | | (92) | | | 92 | | | — | | | 128 | | | (128) | |
Less: Non-controlling share of Adjusted EBITDA (2) | | Less: Non-controlling share of Adjusted EBITDA (2) | (2,049) | | | (2,543) | | | 494 | | | (5,390) | | | (4,633) | | | (757) | |
Adjusted EBITDA (non-GAAP) | $ | (2,697 | ) | | $ | (779 | ) | | $ | (1,918 | ) | | $ | (5,056 | ) | | $ | (3,946 | ) | | $ | (1,110 | ) | Adjusted EBITDA (non-GAAP) | $ | 2,968 | | | $ | (2,563) | | | $ | 5,531 | | | $ | 7,537 | | | $ | (3,853) | | | $ | 11,390 | |
(3)(1) Jefferson Terminal's pro-rata share of Adjusted EBITDA from unconsolidated entities includes net loss of $24 and $0 for the three months ended September 30, 2017 and 2016, respectively. Jefferson Terminal’s pro-rata share of Adjusted EBITDA from unconsolidated entities includes net loss of $99 and $0 for the nine months ended September 30, 2017 and 2016, respectively.
(4) Non-controlling share of Adjusted EBITDA is comprised ofIncludes the following items for the three months ended SeptemberJune 30, 20172020 and 2016:2019: (i) net income of $0 and $19 and (ii) depreciation and amortization expense of $0 and $266, respectively. Includes the following items for the six months ended June 30, 2020 and 2019: (i) net loss of $0 and $(201) and (ii) depreciation and amortization expense of $0 and $532, respectively.
(2) Includes the following items for the three months ended June 30, 2020 and 2019: (i) equity-based compensation of $36$45 and $0,$96, (ii) provision for income taxes of $(1)$15 and $8, (iii) interest expense of $447$485 and $1,466,$983, (iv) acquisition and transaction expenses of $0 and $156, (v) changes in fair value of non-hedge derivative instruments of $404 and $0 and (vi)$297 and (v) depreciation and amortization expense of $1,553$1,504 and $1,530,$1,159, respectively. Non-controlling share of Adjusted EBITDA is comprised ofIncludes the following items for the ninesix months ended SeptemberJune 30, 20172020 and 2016:2019: (i) equity-based compensation of $90 and $(1,627),$115, (ii) provision for income taxes of $12$43 and $22,$26, (iii) interest expense of $1,364$1,205 and $4,353,$1,774, (iv) loss on extinguishment of debt of $0 and $616, (v) acquisition and transaction expenses of $0 and $156, (vi) changes in fair value of non-hedge derivative instruments of $404$38 and $0, and (vii)$476, (v) depreciation and amortization expense of $4,639$3,022 and $4,523,$2,242 and (vi) loss on extinguishment of debt of $992 and $0, respectively.
Revenues
Total revenues decreased $54.5 million during the three months ended June 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $59.2 million due to Jefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, partially offset by (ii) an increase in terminal services of $5.3 million due to increased activity and storage capacity.
Total revenues decreased $65.7 million during the six months ended June 30, 2020, primarily due to (i) a decrease in crude marketing revenue of $81.8 million due to Jefferson Terminal segment decreased $2,525 and $1,649exiting the crude marketing strategy in the three and nine months ended September 30, 2017 as compared to the three and nine months ended September 30, 2016, respectively, reflecting lower volumes,fourth quarter of 2019, partially offset by the realization(ii) an increase in terminal services of deferred revenues.$16.8 million due to increased activity and storage capacity.
Expenses
Total expenses in the Jefferson Terminal segment decreased $2,416 in$62.7 million during the three months ended SeptemberJune 30, 2017 as compared to the three months ended September 30, 2016. The2020, which reflects (i) a decrease isin operating expenses of $62.1 million primarily due to lowerJefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $2,608 reflecting$2.2 million due to the capitalization of interest related to new construction projects in 2017. Partially offsetting the decrease was higher operating expenses of $243, which consisted of higher (i) compensation and benefit expense of $295, (ii) repairs and maintenance expense of $263, (iii) facility operations expense of $13, and (iv) other operating expenses of $82. These increases wereJefferson Refinancing, partially offset by lower environmental expense(iii) an increase in depreciation and amortization of $410 reflecting remediation expense of an oil spill.$1.6 million due to additional assets being placed into service.
Total expenses decreased $1,888 in$78.4 million during the ninesix months ended SeptemberJune 30, 2017 as compared to the nine months ended September 30, 2016,2020, which reflects (i) a decrease in operating expenses of $79.4 million primarily due to lowerJefferson Terminal exiting the crude marketing strategy in the fourth quarter of 2019, (ii) a decrease in interest expense of $7,521 reflecting$2.7 million due to the capitalization of interest related to new construction projects in 2017. Partially offsetting the decrease was higher operating expenses of $5,737. The increase reflects higher (i) compensation and benefits expense of $5,262, (ii) facility operations expense of $995, (iii) repairs and maintenance of $587, (iv) professional fees of $451, and (v) other operating expenses of $288. These increases wereJefferson Refinancing, partially offset by $1,845(iii) an increase in depreciation and amortization of $3.7 million due to additional assets being placed into service.
Other (expense) income
lower environmental expenses which was the result of remediationTotal other expense relating to an oil spill that occurredincreased $4.4 million during the ninesix months ended SeptemberJune 30, 2016.
Adjusted Net Loss
Adjusted Net Loss was $6,081 in the three months ended September 30, 2017, increasing $362 as compared to the three months ended September 30, 2016. The increase2020, which primarily reflects the changes in neta loss attributable to shareholders noted above, mostly offset by the change in the fair value of the non-hedge derivative instrument of $1,036.
Adjusted Net Loss was $15,269 in the nine months ended September 30, 2017, decreasing $3,226 as compared to the nine months ended September 30, 2016. The decrease reflects the changes in net loss attributable to shareholders noted above coupled with the increase in equity-based compensation of $4,396. This was partially offset by a decrease in losses on modification or extinguishment of debt of $1,579 coupled with a change in$4.7 million due to the fair value of the non-hedge derivative instrument of $1,036.Jefferson Refinancing.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA was $(2,697) in the three months ended September 30, 2017, a decrease of $1,918 as compared to the three months ended September 30, 2016. The decrease primarily reflects lower interest expense of $2,608increased $5.5 million and the change in fair value of the non-hedge derivative instrument of $1,036. Partially offsetting these decreases was an increase in the non-controlling share of Adjusted EBITDA of $721 coupled with the changes in net loss attributable to shareholders noted above.
Adjusted EBITDA was $(5,056) in the nine months ended September 30, 2017, a decrease of $1,110 as compared to the nine months ended September 30, 2016. The decrease reflects (i) lower interest expense of $7,521, (ii) losses on modification or extinguishment of debt of $1,579 and (iii) the change in the fair value of the non-hedge derivative instrument of $1,036. Partially offsetting these changes was an increase in equity-based compensation of $4,396 coupled with lower net loss attributable to shareholders of $3,224.
Railroad Segment
The following table presents our results of operations and reconciliation of net income attributable to shareholders to Adjusted Net Income for the Railroad segment for$11.4 million during the three and ninesix months ended SeptemberJune 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues | |
Infrastructure revenues | | | | | | | | | | | |
Rail revenues | $ | 8,258 |
| | $ | 7,401 |
| | $ | 857 |
| | $ | 24,323 |
| | $ | 23,107 |
| | $ | 1,216 |
|
Total revenues | 8,258 |
| | 7,401 |
| | 857 |
| | 24,323 |
| | 23,107 |
| | 1,216 |
|
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 6,980 |
| | 6,514 |
| | 466 |
| | 22,431 |
| | 21,004 |
| | 1,427 |
|
Depreciation and amortization | 507 |
| | 411 |
| | 96 |
| | 1,525 |
| | 1,471 |
| | 54 |
|
Interest expense | 264 |
| | 182 |
| | 82 |
| | 710 |
| | 536 |
| | 174 |
|
Total expenses | 7,751 |
| | 7,107 |
| | 644 |
| | 24,666 |
| | 23,011 |
| | 1,655 |
|
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
(Loss) Gain on sale of equipment, net | (162 | ) | | 40 |
| | (202 | ) | | (206 | ) | | 286 |
| | (492 | ) |
Total other (expense) income | (162 | ) | | 40 |
| | (202 | ) | | (206 | ) | | 286 |
| | (492 | ) |
Income (loss) before income taxes | 345 |
| | 334 |
| | 11 |
| | (549 | ) | | 382 |
| | (931 | ) |
Provision for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) | 345 |
| | 334 |
| | 11 |
| | (549 | ) | | 382 |
| | (931 | ) |
Less: Net income attributable to non-controlling interest in consolidated subsidiaries | (104 | ) | | 14 |
| | (118 | ) | | (43 | ) | | 11 |
| | (54 | ) |
Net income (loss) attributable to shareholders | $ | 449 |
| | $ | 320 |
| | $ | 129 |
| | $ | (506 | ) | | $ | 371 |
| | $ | (877 | ) |
Add: Provision for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Equity-based compensation expense | 75 |
| | 28 |
| | 47 |
| | 467 |
| | 350 |
| | 117 |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted Net Income (1) | (7 | ) | | (6 | ) | | (1 | ) | | (28 | ) | | (19 | ) | | (9 | ) |
Adjusted Net Income (Loss) | $ | 517 |
| | $ | 342 |
| | $ | 175 |
| | $ | (67 | ) | | $ | 702 |
| | $ | (769 | ) |
(1) Non-controlling share of Adjusted Net Income is comprised of equity-based compensation of $7 and $6 for the three months ended September 30, 2017 and 2016, respectively. Non-controlling share of Adjusted Net Income is comprised of equity-based compensation of $28 and $19 for the nine months ended September 30, 2017 and 2016, respectively.
The following table sets forth a reconciliation of net income (loss) attributable to shareholders to Adjusted EBITDA for the Railroad segment for the three and nine months ended September 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Net income (loss) attributable to shareholders | $ | 449 |
| | $ | 320 |
| | $ | 129 |
| | $ | (506 | ) | | $ | 371 |
| | $ | (877 | ) |
Add: Provision for income taxes | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Equity-based compensation expense | 75 |
| | 28 |
| | 47 |
| | 467 |
| | 350 |
| | 117 |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense | 507 |
| | 411 |
| | 96 |
| | 1,525 |
| | 1,471 |
| | 54 |
|
Add: Interest expense | 264 |
| | 182 |
| | 82 |
| | 710 |
| | 536 |
| | 174 |
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted EBITDA (2) | (61 | ) | | (59 | ) | | (2 | ) | | (162 | ) | | (128 | ) | | (34 | ) |
Adjusted EBITDA (non-GAAP) | $ | 1,234 |
| | $ | 882 |
| | $ | 352 |
| | $ | 2,034 |
| | $ | 2,600 |
| | $ | (566 | ) |
(2) Non-controlling share of Adjusted EBITDA is comprised of the following items for the three months ended September 30, 2017 and 2016: (i) equity-based compensation of $7 and $6, (ii) interest expense of $19 and $15, and (iii) depreciation and amortization expense of $35 and $38, respectively. Non-controlling share of Adjusted EBITDA is comprised of the following items for the nine months ended September 30, 2017 and 2016: (i) equity-based compensation of $28 and $19, (ii) interest expense of $43 and $29, and (iii) depreciation and amortization expense of $91 and $80, respectively.
Revenues
Total revenues in the Railroad segment increased $857 in the three months ended September 30, 2017 compared to the same period of 2016 due to higher transportation revenue per car and the seasonal volume shift to energy products. The increase reflects $625 of higher freight transportation revenue and $284 in higher switching and other rail service revenue. Partially offsetting the increase was lower car hire income of $52.
Total revenues in the Railroad segment increased by $1,216 in the nine months ended September 30, 2017 compared to the same period of 2016 due to higher traffic and expanded service offerings to customers. The increase reflects $897 of higher freight transportation revenue and $495 in higher switching and other rail service revenue. Partially offsetting the increase was lower car hire income of $176.
Expenses
Total expenses in the Railroad segment increased $644 in the three months ended September 30, 2017 as compared to the three months ended September 30, 20162020, respectively, primarily due to higher operating expenses. The increase in operating expenses of $466 reflects higher (i) general operating expense of $516 due to certain tax benefits taken in the three months ended September 30, 2016 not available in the three months ended September 30, 2017, (ii) compensation and benefits of $291 and (iii) fuel expense of $87. Partially offsetting these increases was lower (i) professional fees of $89, (ii) bad debt of $79 and (iii) other expenses of $260.
Total expenses in the Railroad segment increased $1,655 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to higher operating expenses. The increase in operating expenses of $1,427 reflects (i) general operating expense of $1,562 due to certain tax benefits taken in the nine months ended September 30, 2016 not available in the nine months ended September 30, 2017, (ii) an increase in compensation and benefits of $534 and (iii) fuel expense of $425. Partially offsetting these increases was lower (i) professional fees of $369, (ii) bad debt of $71 and (iii) other expenses of $654. Also contributing to the increase was $174 of increased interest expense related to borrowings under the CMQR Credit Agreement used to finance construction and improvements to the railroad.
Adjusted Net Income (Loss)
Adjusted Net Income increased $175 in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. In addition to the changes in net loss attributable to shareholders noted above, Adjusted Net Loss was impacted by higher equity-based compensation expense of $47.above.
Adjusted Net Income decreased $769 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. In addition to the changes in net income (loss) attributable to shareholders noted above, Adjusted Net Income was impacted by higher equity-based compensation expense of $117.55
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA was $1,234 and $2,034 in the three and nine months ended September 30, 2017, respectively, increasing $352 and decreasing $566 as compared to the three and nine months ended September 30, 2016, respectively. In addition to the changes in net income (loss) attributable to shareholders noted above, Adjusted EBITDA was also impacted primarily by higher equity-based compensation expense of $47 and $117, and an increase in interest expense of $82 and $174, in the three and nine months ended September 30, 2017, respectively, as compared to the three and nine months ended September 30, 2016.
Ports and Terminals
The following table presents our results of operations andoperations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
| | | | | | | | | | | |
Infrastructure revenues | | | | | | | | | | | |
Lease income | $ | — | | | $ | 265 | | | $ | (265) | | | $ | — | | | $ | 620 | | | $ | (620) | |
Terminal services revenues | — | | | 1,028 | | | (1,028) | | | — | | | 2,846 | | | (2,846) | |
Other revenue | — | | | 973 | | | (973) | | | 314 | | | 4,514 | | | (4,200) | |
| | | | | | | | | | | |
Total revenues | — | | | 2,266 | | | (2,266) | | | 314 | | | 7,980 | | | (7,666) | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 1,875 | | | 4,757 | | | (2,882) | | | 3,875 | | | 9,659 | | | (5,784) | |
| | | | | | | | | | | |
Acquisition and transaction expenses | 19 | | | — | | | 19 | | | 801 | | | — | | | 801 | |
| | | | | | | | | | | |
Depreciation and amortization | 378 | | | 1,560 | | | (1,182) | | | 754 | | | 3,553 | | | (2,799) | |
Interest expense | 354 | | | 348 | | | 6 | | | 747 | | | 644 | | | 103 | |
Total expenses | 2,626 | | | 6,665 | | | (4,039) | | | 6,177 | | | 13,856 | | | (7,679) | |
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in losses of unconsolidated entities | (2,582) | | | — | | | (2,582) | | | (1,676) | | | — | | | (1,676) | |
| | | | | | | | | | | |
Interest income | — | | | 173 | | | (173) | | | — | | | 194 | | | (194) | |
Other income | — | | | 4,887 | | | (4,887) | | | — | | | 2,517 | | | (2,517) | |
Total other (expense) income | (2,582) | | | 5,060 | | | (7,642) | | | (1,676) | | | 2,711 | | | (4,387) | |
(Loss) income before income taxes | (5,208) | | | 661 | | | (5,869) | | | (7,539) | | | (3,165) | | | (4,374) | |
Benefit from income taxes | (597) | | | — | | | (597) | | | (878) | | | — | | | (878) | |
Net (loss) income | (4,611) | | | 661 | | | (5,272) | | | (6,661) | | | (3,165) | | | (3,496) | |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | (92) | | | (22) | | | (70) | | | (167) | | | (86) | | | (81) | |
Net (loss) income attributable to shareholders | $ | (4,519) | | | $ | 683 | | | $ | (5,202) | | | $ | (6,494) | | | $ | (3,079) | | | $ | (3,415) | |
The following table sets forth a reconciliation of net loss(loss) income attributable to shareholders to Adjusted Net Loss for Ports and TerminalsEBITDA:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Net (loss) income attributable to shareholders | $ | (4,519) | | | $ | 683 | | | $ | (5,202) | | | $ | (6,494) | | | $ | (3,079) | | | $ | (3,415) | |
Add: Benefit from income taxes | (597) | | | — | | | (597) | | | (878) | | | — | | | (878) | |
Add: Equity-based compensation expense | 197 | | | 123 | | | 74 | | | 273 | | | 215 | | | 58 | |
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 | — | | | (4,887) | | | 4,887 | | | — | | | (2,517) | | | 2,517 | |
Add: Asset impairment charges | — | | | — | | | — | | | — | | | — | | | — | |
Add: Incentive allocations | — | | | — | | | — | | | — | | | — | | | — | |
Add: Depreciation and amortization expense | 378 | | | 1,560 | | | (1,182) | | | 754 | | | 3,553 | | | (2,799) | |
Add: Interest expense | 354 | | | 348 | | | 6 | | | 747 | | | 644 | | | 103 | |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) | 753 | | | — | | | 753 | | | 981 | | | — | | | 981 | |
Less: Equity in losses of unconsolidated entities | 2,582 | | | — | | | 2,582 | | | 1,676 | | | — | | | 1,676 | |
Less: Non-controlling share of Adjusted EBITDA (2) | (52) | | | (68) | | | 16 | | | (61) | | | (131) | | | 70 | |
Adjusted EBITDA (non-GAAP) | $ | (885) | | | $ | (2,241) | | | $ | 1,356 | | | $ | (2,201) | | | $ | (1,315) | | | $ | (886) | |
(1) Includes the following items for the three and nine months ended SeptemberJune 30, 20172020 and September2019: (i) net loss of $(2,570) and $0, (ii) interest expense of $417 and $0, (iii) depreciation and amortization expense of $1,446 and $0, (iv) acquisition and transaction expenses of $531 and $0 and (v) changes in fair value of non-hedge derivative instruments of $929 and $0, respectively. Includes the following items for the six months ended June 30, 2016:2020 and 2019: (i) net loss of $(1,676) and $0, (ii) interest expense of $422 and $0, (iii) depreciation and amortization expense of $2,408 and $0, (iv) acquisition and transaction expenses of $612 and $0 and (v) changes in fair value of non-hedge derivative instruments of $(785) and $0, respectively. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Revenues |
|
Infrastructure revenues |
|
| | | | | | | | | | |
Lease income | $ | 455 |
| | $ | 16 |
| | $ | 439 |
| | $ | 594 |
| | $ | 16 |
| | $ | 578 |
|
Other revenue | 303 |
| | — |
| | 303 |
| | 303 |
| | — |
| | 303 |
|
Total revenues | 758 |
| | 16 |
| | 742 |
| | 897 |
| | 16 |
| | 881 |
|
|
|
| | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 2,852 |
|
| 417 |
| | 2,435 |
| | 4,510 |
| | 417 |
| | 4,093 |
|
Depreciation and amortization | 783 |
| | — |
| | 783 |
| | 868 |
| | — |
| | 868 |
|
Interest expense | 273 |
| | 284 |
| | (11 | ) | | 817 |
| | 284 |
| | 533 |
|
Total expenses | 3,908 |
| | 701 |
| | 3,207 |
| | 6,195 |
| | 701 |
| | 5,494 |
|
Loss before income taxes | (3,150 | ) | | (685 | ) | | (2,465 | ) | | (5,298 | ) | | (685 | ) | | (4,613 | ) |
Provision for income taxes | — |
| | 4 |
| | (4 | ) | | — |
| | 5 |
| | (5 | ) |
Net loss | (3,150 | ) | | (689 | ) | | (2,461 | ) | | (5,298 | ) | | (690 | ) | | (4,608 | ) |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | — |
| | (69 | ) | | 69 |
| | (483 | ) | | (69 | ) | | (414 | ) |
Net loss attributable to shareholders | $ | (3,150 | ) | | $ | (620 | ) | | $ | (2,530 | ) | | $ | (4,815 | ) | | $ | (621 | ) | | $ | (4,194 | ) |
Add: Provision for income taxes | — |
| | 4 |
| | (4 | ) | | — |
| | 5 |
| | (5 | ) |
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | — |
| | — |
| | — |
| | — |
| | (5 | ) | | 5 |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted Net Income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted Net Loss | $ | (3,150 | ) | | $ | (616 | ) | | $ | (2,534 | ) | | $ | (4,815 | ) | | $ | (621 | ) | | $ | (4,194 | ) |
(2) Includes the following items for the three months ended June 30, 2020 and 2019: (i) equity-based compensation of $7 and $2, (ii) interest expense of $27 and $58 and (iii) depreciation and amortization expense of $18 and $8, respectively. Includes the following items for the six months ended June 30, 2020 and 2019: (i) equity-based compensation of $9 and $4, (ii) interest expense of $26 and $112 and (iii) depreciation and amortization expense of $26 and $15, respectively.
Revenues
Total revenue decreased $2.3 million during the three months ended June 30, 2020, primarily due to the Long Ridge Transaction.
Total revenue decreased $7.7 million during the six months ended June 30, 2020, primarily due to (i) the Long Ridge Transaction and (ii) a decrease of $1.2 million in butane sales at Repauno.
Expenses
Total expenses decreased $4.0 million during the three months ended June 30, 2020, primarily due to lower operating expenses of $2.9 million and depreciation and amortization of $1.2 million.
The decrease in operating expenses and depreciation and amortization is primarily due to the Long Ridge Transaction.
Total expenses decreased $7.7 million during the six months ended June 30, 2020, primarily due to lower operating expenses of $5.8 million and depreciation and amortization of $2.8 million. This was offset by an increase in acquisition and transaction expenses relating to the Long Ridge joint venture of $0.8 million.
The decrease in operating expenses and depreciation and amortization is primarily due to the Long Ridge Transaction.
Other (expense) income
Total other income decreased $7.6 million during the three months ended June 30, 2020, primarily due to an equity method loss of $2.6 million from Long Ridge and a decrease of $4.9 million in unrealized gain on power swap derivatives that was deconsolidated after the Long Ridge Transaction.
Total other income decreased $4.4 million during the six months ended June 30, 2020, respectively, primarily due to an equity method loss of $1.7 million from Long Ridge and a decrease of $2.5 million in unrealized gain on power swap derivatives that was deconsolidated after the Long Ridge Transaction.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA increased $1.4 million and decreased $0.9 million during the three and six months ended June 30, 2020, respectively, primarily due to the changes noted above.
Corporate and Other
The following table presents our results of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Change | | Six Months Ended June 30, | | | | Change |
(in thousands) | 2020 | | 2019 | | | | 2020 | | 2019 | | |
Revenues | | | | | | | | | | | |
Equipment leasing revenues | | | | | | | | | | | |
Lease income | $ | 2,129 | | | $ | 3,157 | | | $ | (1,028) | | | $ | 5,001 | | | $ | 5,090 | | | $ | (89) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other revenue | 2,446 | | | 1,062 | | | 1,384 | | | 3,031 | | | 1,170 | | | 1,861 | |
Total equipment leasing revenues | 4,575 | | | 4,219 | | | 356 | | | 8,032 | | | 6,260 | | | 1,772 | |
Infrastructure revenues | | | | | | | | | | | |
Other revenue | 1,394 | | | 820 | | | 574 | | | 2,730 | | | 1,594 | | | 1,136 | |
Total infrastructure revenues | 1,394 | | | 820 | | | 574 | | | 2,730 | | | 1,594 | | | 1,136 | |
Total revenues | 5,969 | | | 5,039 | | | 930 | | | 10,762 | | | 7,854 | | | 2,908 | |
| | | | | | | | | | | |
Expenses | | | | | | | | | | | |
Operating expenses | 5,830 | | | 3,166 | | | 2,664 | | | 11,260 | | | 6,707 | | | 4,553 | |
General and administrative | 4,388 | | | 3,551 | | | 837 | | | 9,051 | | | 7,735 | | | 1,316 | |
Acquisition and transaction expenses | 1,581 | | | 1,338 | | | 243 | | | 1,269 | | | 1,834 | | | (565) | |
Management fees and incentive allocation to affiliate | 4,756 | | | 5,710 | | | (954) | | | 9,522 | | | 9,548 | | | (26) | |
Depreciation and amortization | 1,979 | | | 1,706 | | | 273 | | | 3,943 | | | 3,415 | | | 528 | |
Interest expense | 19,130 | | | 20,522 | | | (1,392) | | | 38,170 | | | 37,036 | | | 1,134 | |
Total expenses | 37,664 | | | 35,993 | | | 1,671 | | | 73,215 | | | 66,275 | | | 6,940 | |
| | | | | | | | | | | |
Other (expense) income | | | | | | | | | | | |
Equity in (losses) earnings of unconsolidated entities | (33) | | | (19) | | | (14) | | | (83) | | | 18 | | | (101) | |
| | | | | | | | | | | |
Interest income | 5 | | | 6 | | | (1) | | | 12 | | | 12 | | | — | |
| | | | | | | | | | | |
Total other (expense) income | (28) | | | (13) | | | (15) | | | (71) | | | 30 | | | (101) | |
Loss before income taxes | (31,723) | | | (30,967) | | | (756) | | | (62,524) | | | (58,391) | | | (4,133) | |
Provision for income taxes | 200 | | | 3 | | | 197 | | | 203 | | | 4 | | | 199 | |
Net loss | (31,923) | | | (30,970) | | | (953) | | | (62,727) | | | (58,395) | | | (4,332) | |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | — | | | — | | | — | | | — | | | — | | | — | |
Dividends on preferred shares | 4,079 | | | — | | | 4,079 | | | 8,618 | | | — | | | 8,618 | |
Net loss attributable to shareholders | $ | (36,002) | | | $ | (30,970) | | | $ | (5,032) | | | $ | (71,345) | | | $ | (58,395) | | | $ | (12,950) | |
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA for Ports and Terminals for the three and nine months ended September 30, 2017 and September 30, 2016:EBITDA:
| | | | | | | | | | | | | | | | Three Months Ended June 30, | | | Change | | Six Months Ended June 30, | | | Change |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change | |
(Dollar amounts in thousands) | 2017 | | 2016 | | 2017 | | 2016 | | |
(in thousands) | | (in thousands) | 2020 | | 2019 | | | | Change | 2020 | | 2019 | | | Change |
Net loss attributable to shareholders | $ | (3,150 | ) | | $ | (620 | ) | | $ | (2,530 | ) | | $ | (4,815 | ) | | $ | (621 | ) | | $ | (4,194 | ) | Net loss attributable to shareholders | $ | (36,002) | | | $ | (30,970) | | | $ | (5,032) | | | $ | (58,395) | | | $ | (12,950) | |
Add: Benefit from income taxes | — |
| | 4 |
| | (4 | ) | | — |
| | 5 |
| | (5 | ) | |
Add: Provision for income taxes | | Add: Provision for income taxes | 200 | | | 3 | | | 197 | | | 203 | | | 4 | | | 199 | |
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Equity-based compensation expense | — | | | — | | | — | | | — | | | — | | | — | |
Add: Acquisition and transaction expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Acquisition and transaction expenses | 1,581 | | | 1,338 | | | 243 | | | 1,269 | | | 1,834 | | | (565) | |
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Losses on the modification or extinguishment of debt and capital lease obligations | — | | | — | | | — | | | — | | | — | | | — | |
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Changes in fair value of non-hedge derivative instruments | — | | | — | | | — | | | — | | | — | | | — | |
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Add: Asset impairment charges | — | | | — | | | — | | | — | | | — | | | — | |
Add: Incentive allocations | | Add: Incentive allocations | — | | | 2,211 | | | (2,211) | | | — | | | 2,373 | | | (2,373) | |
Add: Depreciation and amortization expense | 783 |
| | — |
| | 783 |
| | 868 |
| | — |
| | 868 |
| Add: Depreciation and amortization expense | 1,979 | | | 1,706 | | | 273 | | | 3,943 | | | 3,415 | | | 528 | |
Add: Interest expense | 273 |
| | 284 |
| | (11 | ) | | 817 |
| | 284 |
| | 533 |
| Add: Interest expense | 19,130 | | | 20,522 | | | (1,392) | | | 38,170 | | | 37,036 | | | 1,134 | |
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities(1) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| (33) | | | (19) | | | (14) | | | (83) | | | 18 | | | (101) | |
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Less: Equity in losses (earnings) of unconsolidated entities | | Less: Equity in losses (earnings) of unconsolidated entities | 33 | | | 19 | | | 14 | | | 83 | | | (18) | | | 101 | |
Less: Non-controlling share of Adjusted EBITDA (1)(2) | — |
| | (28 | ) | | 28 |
| | — |
| | (28 | ) | | 28 |
| — | | | (174) | | | 174 | | | — | | | (174) | | | 174 | |
Adjusted EBITDA | $ | (2,094 | ) | | $ | (360 | ) | | $ | (1,734 | ) | | $ | (3,130 | ) | | $ | (360 | ) | | $ | (2,770 | ) | |
Adjusted EBITDA (non-GAAP) | | Adjusted EBITDA (non-GAAP) | $ | (13,112) | | | $ | (5,364) | | | $ | (7,748) | | | $ | (27,760) | | | $ | (13,907) | | | $ | (13,853) | |
(1) Non-controlling share of Adjusted EBITDA is comprised ofIncludes the following items for the three months ended SeptemberJune 30, 20172020 and 2016:2019: (i) net loss of $(62) and $(53) and (ii) interest expense of $0$29 and $28,$34, respectively. Non-controlling share of Adjusted EBITDA is comprised ofIncludes the following items for the ninesix months ended SeptemberJune 30, 20172020 and 2016:2019: (i) net loss of $(142) and $(52) and (ii) interest expense of $59 and $70, respectively.
(2) Includes the following items for the three and six months ended June 30, 2019: (i) interest expense of $0$59 and $28, respectively.(ii) depreciation and amortization expense of $115.
Revenues
ForTotal revenues increased $0.9 million during the three and nine months ended SeptemberJune 30, 2017, there was $455 and $594, respectively,2020, which primarily reflects (i) an increase of $1.4 million in other revenue in the offshore energy business primarily related to victualling income, (ii) an increase of $0.6 million due to higher volume in our railcar cleaning business, partially offset by (iii) a decrease of $1.0 million in lease income from existing lease agreements acquired withas one of our vessels was off-hire in the acquisitionssecond quarter of Repauno2020 while it was on-hire in the second quarter of 2019.
Total revenues increased $2.9 million during the six months ended June 30, 2020, which primarily reflects (i) an increase of $1.9 million in other revenue in the offshore energy business primarily related to victualling income and Hannibal. For(ii) an increase of $1.1 million due to higher volume in our railcar cleaning business.
Expenses
Comparison of the three and nine months ended SeptemberJune 30, 2017, there was $303 of other revenue, relating to the reimbursement of costs from leases at Hannibal.
Expenses2020 and 2019
Total expenses increased $1.7 million primarily due to higher (i) operating expenses and (ii) general and administrative expenses, partially offset by $3,207 forlower (iii) interest expense and (iv) management fees and incentive allocation to affiliate.
Total operating expenses increased $2.7 million which primarily reflects higher (i) vessel operating and general and administrative expenses of approximately $1.1 million in the threeoffshore energy business and (ii) repairs and maintenance of $1.1 million in the offshore energy business.
Total general and administrative expense increased $0.8 million which primarily reflects higher professional fees related to audit and legal services.
Total interest expense decreased $1.4 million primarily due to a decrease in interest expense related to the FTAI Pride Credit Agreement which was repaid in full in March 2020.
Total management fees and incentive allocation to affiliate decreased $1.0 million due to (i) a decrease of $2.2 million in incentive fees due to lower gains on sale in 2020 compared to 2019, partially offset by (ii) an increase of $1.3 million in base management fees as our equity offerings in 2019 increased our average total equity.
Comparison of the six months ended SeptemberJune 30, 2017 as compared2020 and 2019
Total expenses increased $6.9 million primarily due to the three months ended September 30, 2016. The increase in expenses for the three months ended September 30, 2017 primarily consisted of increases inhigher (i) operating expenses, (ii) interest expense and (iii) general and administrative expense.
Total operating expenses increased $4.6 million which primarily reflects higher (i) project costs of $2,435 , which consisted$1.9 million in our offshore energy business, (ii) repairs and maintenance of (i) professional fees of $1,173 , (ii) facility operations of $772,$1.1 million in our offshore energy business and (iii) compensation and benefits of $306,approximately $0.4 million related to our railcar cleaning business.
Total interest expense increased $1.1 million which reflects an increase in our average outstanding debt of approximately $64.0 million, which primarily consists of (i) an increase of $100.0 million for the 2025 Notes, (ii) an increase of $25.1 million for the 2022 Notes, (iii) a decrease of $26.7 million for the Revolving Credit Facility and (iv) insurancea decrease of $34.4 million for the FTAI Pride Credit Agreement, which was repaid in March 2020.
Total general and administrative expense of $79, and (v) other operating expenses of $105. There was depreciation expense of $783,increased $1.3 million primarily due to the acquisition of Hannibal in the second quarter, as well as the placement of assets into service at Repauno during the third quarter of 2017.
Total expenses increased by $5,494 for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The increase in expenses primarily consisted of increases in operating expenses of $4,093, which consisted ofhigher (i) professional fees of $1,323,related to audit and legal services, (ii) facility operations of $879,regulatory filing expenses and (iii) compensationmarket data and benefits of $1,248, (iv) insurance expense of $159, and (v) other operating expenses of $484. There was depreciation expense of $868, due to the acquisition of Hannibal in the second quarter, as well as the placement of assets into service at Repauno during the third quarter of 2017. Interest expense increased by $533 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 due to the payment obligation to the non-controlling interest holder as part of the Repauno purchase.services.
Adjusted Net LossEBITDA (Non-GAAP)
Adjusted Net Loss increased by $2,534EBITDA decreased $7.7 million and $4,194 for$13.9 million during the three and ninesix months ended SeptemberJune 30, 2017,2020, respectively, primarily due to the changes in net loss attributable to shareholders noted above.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA was $(2,094) and $(3,130) for the three and nine months ended September 30, 2017, respectively. In addition to the changes in net loss attributable to shareholders noted above, Adjusted EBITDA for the three and nine months ended September 30, 2017 includes the impact of depreciation expense of $783 and $868, as well as interest expense of $273 and $817 as a result of interest expense related to an obligation payable to the non-controlling interest as part of the Repauno purchase, respectively.
Corporate
The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss for Corporate for the three and nine months ended September 30, 2017 and September 30, 2016: |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands)
| 2017 | | 2016 | | | 2017 | | 2016 | |
Expenses | | | | | | | | | | | |
Operating expenses | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 6 |
|
| $ | (6 | ) |
General and administrative | 3,439 |
| | 3,205 |
| | 234 |
| | 10,615 |
| | 9,154 |
| | 1,461 |
|
Acquisition and transaction expenses | 1,726 |
| | 1,579 |
| | 147 |
| | 4,788 |
| | 4,222 |
| | 566 |
|
Management fees and incentive allocation to affiliate | 3,771 |
| | 4,146 |
| | (375 | ) | | 11,529 |
| | 12,725 |
| | (1,196 | ) |
Interest expense | 6,023 |
| | — |
| | 6,023 |
| | 12,682 |
| | — |
| | 12,682 |
|
Total expenses | 14,959 |
| | 8,930 |
| | 6,029 |
| | 39,614 |
| | 26,107 |
| | 13,507 |
|
| | | | | | | | | | | |
Other expense | | | | | | | | | | | |
Loss on extinguishment of debt | — |
| | — |
| | — |
| | (2,456 | ) | | — |
| | (2,456 | ) |
Total other expense | — |
| | — |
| | — |
| | (2,456 | ) | | — |
| | (2,456 | ) |
Loss before income taxes | (14,959 | ) | | (8,930 | ) | | (6,029 | ) | | (42,070 | ) | | (26,107 | ) | | (15,963 | ) |
Provision for income taxes | — |
| | — |
| | — |
| | — |
| | 1 |
| | (1 | ) |
Net loss | (14,959 | ) | | (8,930 | ) | | (6,029 | ) | | (42,070 | ) | | (26,108 | ) | | (15,962 | ) |
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries | — |
| | (3 | ) | | 3 |
| | — |
| | (9 | ) | | 9 |
|
Net loss attributable to shareholders | $ | (14,959 | ) | | $ | (8,927 | ) | | $ | (6,032 | ) | | $ | (42,070 | ) | | $ | (26,099 | ) | | $ | (15,971 | ) |
Add: Provision for income taxes | — |
| | — |
| | — |
| | — |
| | 1 |
| | (1 | ) |
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| �� | — |
| | — |
|
Add: Acquisition and transaction expenses | 1,726 |
| | 1,579 |
| | 147 |
| | 4,788 |
| | 4,222 |
| | 566 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | 2,456 |
| | — |
| | 2,456 |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Pro-rata share of Adjusted Net Income from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Cash payments for income taxes | (440 | ) | | — |
| | (440 | ) | | (953 | ) | | 1 |
| | (954 | ) |
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted Net Income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted Net Loss | $ | (13,673 | ) | | $ | (7,348 | ) | | $ | (6,325 | ) | | $ | (35,779 | ) | | $ | (21,875 | ) | | $ | (13,904 | ) |
The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA for Corporate for the three and nine months ended September 30, 2017 and September 30, 2016:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Change | | Nine Months Ended September 30, | | Change |
(Dollar amounts in thousands) | 2017 | | 2016 | | | 2017 | | 2016 | |
Net loss attributable to shareholders | $ | (14,959 | ) | | $ | (8,927 | ) | | $ | (6,032 | ) | | $ | (42,070 | ) | | $ | (26,099 | ) | | $ | (15,971 | ) |
Add: Provision for income taxes | — |
| | — |
| | — |
| | — |
| | 1 |
| | (1 | ) |
Add: Equity-based compensation expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Acquisition and transaction expenses | 1,726 |
| | 1,579 |
| | 147 |
| | 4,788 |
| | 4,222 |
| | 566 |
|
Add: Losses on the modification or extinguishment of debt and capital lease obligations | — |
| | — |
| | — |
| | 2,456 |
| | — |
| | 2,456 |
|
Add: Changes in fair value of non-hedge derivative instruments | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Asset impairment charges | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Incentive allocations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Depreciation and amortization expense | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Add: Interest expense | 6,023 |
| | — |
| | 6,023 |
| | 12,682 |
| | — |
| | 12,682 |
|
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Equity in earnings of unconsolidated entities | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Less: Non-controlling share of Adjusted EBITDA | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Adjusted EBITDA | $ | (7,210 | ) | | $ | (7,348 | ) | | $ | 138 |
| | $ | (22,144 | ) | | $ | (21,876 | ) | | $ | (268 | ) |
Expenses
Total expenses increased $6,029 in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. The increase primarily consists of interest expense of $6,023 on the Senior Notes issued in 2017 and an increase in acquisition and transaction expenses of $147 due to deal related expenses incurred. These increases were partially offset by a decrease in management fees to affiliate of $375 as the average value of total equity decreased during the period.
Total expenses increased $13,507 in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. The increase primarily consists of interest expense of $12,682 on the Senior Notes issued in 2017. General and administrative costs increased $1,461 and reflected (i) $508 in higher reimbursement expenses to our Manager, (ii) $703 of higher professional fees, (iii) $270 of higher general corporate costs, and (iv) $20 of lower other general and administrative expenses. Partially offsetting these increases was lower management fees of $1,196 due to a decrease in the average value of total equity during the period.
Other Expenses
Total other expenses increased $2,456 in the nine months ended September 30, 2017 compared to the same period in 2016. The increase is due to a loss on extinguishment of debt.
Adjusted Net Loss
Adjusted Net Loss was $13,673 in the three months ended September 30, 2017, increasing by $6,325 as compared to the three months ended September 30, 2016. In addition to the changes in net loss attributable to shareholders noted above, Adjusted Net Loss was increased by acquisition and transaction expenses incurred for potential acquisition opportunities less cash payments for income taxes.
Adjusted Net Loss was $35,779 in the nine months ended September 30, 2017, increasing by $13,904, as compared to the nine months ended September 30, 2016. In addition to the changes in net loss attributable to shareholders noted above, Adjusted Net Loss was increased by the loss on extinguishment of debt, acquisition and transaction expenses incurred for potential acquisition opportunities less cash payments for income taxes.
Adjusted EBITDA (non-GAAP)
Adjusted EBITDA was $(7,210) for the three months ended September 30, 2017, increasing $138 compared to the same period in 2016. In addition to the changes in net loss attributable to shareholders noted above, Adjusted EBITDA was increased by acquisition and transaction expenses incurred for potential acquisition opportunities and interest expense of $6,023 related to the Senior Notes issued in March 2017.
Adjusted EBITDA was $(22,144) for the nine months ended September 30, 2017, decreasing $268 compared to the same period in 2016. In addition to the changes in net loss attributable to shareholders noted above, Adjusted EBITDA includes the impact of interest expense of $12,682 related to the Senior Notes issued in March 2017, $2,456 of a loss on extinguishment of debt and acquisition and transaction expenses incurred for potential acquisition opportunities.
Liquidity and Capital Resources
On July 28, 2020, we issued $400 million aggregate principal amount of senior unsecured notes due 2027 (see Note 20 to the consolidated financial statements). We used a portion of the proceeds to repay $220 million of outstanding borrowings under the Revolving Credit Facility, and intend to use the remaining proceeds for general corporate purposes, which may include the repurchase or redemption of outstanding 2022 Notes and the funding of future acquisitions and investments, including aviation investments. Following the repayment, we have additional borrowing capacity of $250 million under the Revolving Credit Facility.
Additionally, on June 30, 2020, we entered into an At Market Issuance Sales Agreement with a third party to sell shares of our Series A Preferred Shares and Series B Preferred Shares (collectively, the “ATM Shares”), having an aggregate offering price of up to $100 million, from time to time, through an “at-the market” equity offering program. During July 2020, we sold 125,000 ATM Shares for net proceeds of approximately $2.4 million.
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) distributionsdividends 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 (all dollar amounts are expressed in thousands).investments.
In the nine months endedSeptember 30, 2017 and 2016, cash•Cash used for the purpose of making investments was $392,177$341.5 million and $177,323, respectively.
In$401.4 million during the ninesix months ended SeptemberJune 30, 20172020 and 2016, distributions2019, respectively.
•Dividends to shareholders and holders of eligible participating securities were $75,041$65.4 million and $75,017, respectively,$56.8 million during the six months ended June 30, 2020 and no distributions were made to non-controlling interests.2019, 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 debt securities and (iii) distributions received from unconsolidated investees, (iv) proceeds from asset sales and (v) proceeds from the issuance of common shares.sales.
During the nine months ended September 30, 2017 and 2016, cash•Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $71,574$66.5 million and $28,874,$90.0 million during the six months ended June 30, 2020 and 2019, respectively.
•During the ninesix months ended SeptemberJune 30, 2017,2020, additional borrowings were obtained in connection with the Term Loan(i) Series 2020 Bonds of $97,163, net of deferred financing costs, the$264.0 million and (ii) Revolving Credit Facility of $60,000, the CMQR Credit Agreement of $20,030 and the Senior Notes of $239,998, net of deferred financing costs and repayment of the Term Loan.$195.0 million. We made total principal repayments of $22,623, primarily$276.0 million relating to the Series 2016 Bonds, Series 2012 Bonds, Jefferson Revolver and FTAI Pride Credit Agreement and the CMQR Credit Agreement. During ninethe six months ended SeptemberJune 30, 2016,2019, additional borrowings were obtained in connection with the Series 2016 Bonds(i) 2025 Notes of $99,858$148.7 million, (ii) 2022 Notes of $147.8 million, (iii) Revolving Credit Facility of $105.0 million, (iv) LREG Credit Agreement of $71.5 million, (v) Jefferson Revolver of $23.2 million, (vi) DRP Revolver of $21.6 million and the(vii) CMQR Credit Agreement of $10,800.$11.7 million. We made total principal repayments of $157,603$128.8 million, primarily relatedrelating to the termination of the Jefferson TerminalRevolving Credit Agreement,Facility and the pay down of loans associated with the sale of our shipping container portfolios in Q1 2016.CMQR Credit Agreement.
During the nine months ended September 30, 2017 and 2016, we received $0 and $462 in cash distributions from our unconsolidated investees, respectively, of which $0, and $30 was included in cash flows from operating activities, respectively.
During the nine months ended September 30, 2017 and 2016, proceeds•Proceeds from the sale of assets were $87,144$37.7 million and $87,030, respectively.
During$71.5 million during the ninesix months ended SeptemberJune 30, 20172020 and 2016, there were no capital contributions from shareholders and capital contributions from non-controlling interests were $0 and $7,433,2019, respectively.
Our net cash provided by operating activities has been less than the amount of distributions to our shareholders. Our board of directors takes this and other factors into account as part of any decision to pay a dividend, and the timing and amount of any future dividend is subject to change at the discretion of our board of directors.
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, none of these pipeline transactions or negotiations are definitive or included within theour planned liquidity needs of the Company.needs. We cannot assure you if or when any such transaction will be consummated or the terms of any such transaction.
The Company hasWe have a dividend reinvestment plan in place which allows shareholders to automatically reinvest dividends in the Company’sour common shares. The plan became effective on February 24, 2017.
Historical Cash Flow
Comparison of the ninesix months endedSeptember June 30, 20172020 and September 30, 20162019
The following table compares the historical cash flow for the ninesix months ended SeptemberJune 30, 20172020 and September 30, 2016:2019:
| | | | | | | | | | | |
| Six Months Ended June 30, | | |
(in thousands) | 2020 | | 2019 |
Cash Flow Data: | | | |
Net cash provided by operating activities | $ | 44,652 | | | $ | 58,112 | |
Net cash used in investing activities | (298,122) | | | (325,657) | |
Net cash provided by financing activities | 111,001 | | | 321,084 | |
|
| | | | | | | |
| Nine Months Ended |
(Dollar amounts in thousands)
| September 30, 2017 | | September 30, 2016 |
Cash Flow Data: | | | |
Net cash provided by operating activities | $ | 52,443 |
| | $ | 15,662 |
|
Net cash used in investing activities | $ | (275,703 | ) | | $ | (88,004 | ) |
Net cash provided by (used in) financing activities | $ | 331,562 |
| | $ | (111,487 | ) |
Net cash provided by operating activities was $52,443decreased $13.5 million, which primarily reflects (i) changes in accounts payable, management fees payable, other assets, other liabilities and accounts receivable of $31.4 million, primarily due to the nine months ended September 30, 2017 as compared to $15,662 in the nine months ended September 30, 2016, representingtiming of payments and (ii) a $36,781 increase. Net loss was $16,692 for the nine months ended September 30, 2017, compared $34,779 for the nine months endedSeptember 30, 2016, an increasedecrease in net income of $18,087. The increase was also attributable to adjustments to reconcile net income which include an increase of (i) $4,513 of equity based compensation, (ii) $19,088 relating to depreciation and amortization, and$24.8 million. These decreases were partially offset by changes in (iii) $3,419 of gainsgain on the sale of leasing equipment, offset by a decreaseassets, net of $7,450 of$25.4 million and (iv) asset impairment charges. The increase also includes the impact of the change in other assets of $14,665 due to cash receipts in the nine months ended September 30, 2017 for a maintenance right asset that was settled upon the redelivery of an aircraft and other receivables, offset by a decrease in other liabilities of $6,922 due to a decrease in deferred revenue.$10.5 million.
Net cash used in investing activities was $275,703 in the nine months ended September 30, 2017 as compared to $88,004 in the nine months ended September 30, 2016, representing a $187,699 increase. Cash used in investing activities increaseddecreased $27.5 million primarily due to the acquisition of leasing equipment and lease intangibles of $154,210(i) a decrease in the Aviation Leasing segment, cash used for investments of $23,149, and the acquisitionacquisitions of property, plant and equipment of $39,001 mainly due to the acquisition$29.2 million, (ii) a decrease in purchase deposits for acquisitions of Hannibal,$29.0 million, partially offset by an increase in(iii) lower proceeds from the sale of leasing equipment of $71,188 and change in restricted cash of $29,782 in nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Additionally, cash used in investing activities increased due to a decrease in cash received for the sale of two finance leases, resulting in proceeds of $71,000 in the nine months ended September 30, 2016, as compared to the nine months ended September 30, 2017.$33.8 million.
Net cash provided by financing activities was $331,562 in the nine months ended September 30, 2017 as compared to cash used in financing activities of $111,487 in the nine months ended September 30, 2016, representing a $443,049 increase. Such increase was attributabledecreased $210.1 million primarily due to (i) proceeds from borrowings under the Term Loanan increase in repayments of $97,163, netdebt of deferred financing costs, the Revolving Credit Facility of $60,000, the CMQR Credit Agreement of $20,030$147.2 million and the Senior Notes of $239,998, net of deferred financing costs and repayment of the Term Loan, (ii) a decrease in the repaymentproceeds from debt of debt related to the termination of the Jefferson Terminal Credit Agreement and loans associated with the sale of our shipping containers in the nine months ended September 30, 2016, and (iii) an increase in receipt of maintenance deposits of $7,978, offset by a decrease in cash contributions from non-controlling interests of $7,433.$70.5 million.
Funds Available for Distribution (Non-GAAP)
The Company usesWe use Funds Available for Distribution (“FAD”) in evaluating itsour ability to meet itsour 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. The Company believesWe believe FAD is a useful metric for investors and analysts for similar purposes.
The Company definesWe 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 excludingexcludes changes in working capital. The following table sets forth a reconciliation of Net Cash Provided by Operating Activities to FAD:
| | | | | | | | Six Months Ended June 30, | |
| Nine Months Ended | |
(Dollar amounts in thousands) | September 30, 2017 | | September 30, 2016 | |
(in thousands) | | (in thousands) | 2020 | | 2019 |
Net Cash Provided by Operating Activities | $ | 52,443 |
|
| $ | 15,662 |
| Net Cash Provided by Operating Activities | $ | 44,652 | | | $ | 58,112 | |
Add: Principal Collections on Finance Leases | 347 |
|
| 2,406 |
| Add: Principal Collections on Finance Leases | 3,320 | | | 2,996 | |
Add: Proceeds from sale of assets (1) | 87,144 |
|
| 87,530 |
| |
Add: Proceeds from Sale of Assets | | Add: Proceeds from Sale of Assets | 37,687 | | | 71,504 | |
Add: Return of Capital Distributions from Unconsolidated Entities | �� |
|
| 432 |
| Add: Return of Capital Distributions from Unconsolidated Entities | — | | | 1,280 | |
Less: Required Payments on Debt Obligations (2) | (8,368 | ) |
| (52,105 | ) | |
Less: Required Payments on Debt Obligations (1) | | Less: Required Payments on Debt Obligations (1) | — | | | (3,125) | |
Less: Capital Distributions to Non-Controlling Interest | — |
|
| — |
| Less: Capital Distributions to Non-Controlling Interest | — | | | — | |
Exclude: Changes in Working Capital | (1,563 | ) |
| 2,370 |
| Exclude: Changes in Working Capital | 57,687 | | | 26,310 | |
Funds Available for Distribution (FAD) | $ | 130,003 |
|
| $ | 56,295 |
| Funds Available for Distribution (FAD) | $ | 143,346 | | | $ | 157,077 | |
FAD is subject to a number of limitations and assumptions and there can be no assurance that the Companywe will generate FAD sufficient to meet itsour intended dividends. FAD has material limitations as a liquidity measure of the Company because such measure excludes items that are required elements of the Company’sour net cash provided by operating activities as described below. FAD should not be considered in isolation nor as a substitute for analysis of the Company’sour results of operations under GAAP, and it is not the only metric that should be considered in evaluating the Company’sour ability to meet itsour stated dividend policy. Specifically:
If such factors were included in FAD, there can be no assurance that the results would be consistent with the Company’sour presentation of FAD.